<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 10, 1998
REGISTRATION NO. 333-66971
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
AND THE GUARANTORS NAMED IN THE ATTACHED TABLE OF CO-REGISTRANTS
(Exact name of Co-Registrants as specified in their charters)
---------------------
<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>
---------------------
<TABLE>
<S> <C>
(FOR CO-REGISTRANTS, PLEASE SEE "TABLE OF CO-REGISTRANTS" ON THE FOLLOWING PAGE)
JEFFREY A. MARCUS
PRESIDENT AND CHIEF FINANCIAL OFFICER
300 CRESCENT COURT, SUITE 600 300 CRESCENT COURT, SUITE 600
DALLAS, TEXAS 75201 DALLAS, TEXAS 75201
(214) 922-8700 (214) 922-8700
(Address, including zip code, and telephone number, (Name, address, including zip code, telephone
including area code, of Co-Registrant's principal executive offices) number, including area code, of agent for service)
</TABLE>
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Copies To:
<TABLE>
<S> <C>
MICHAEL A. SASLAW, ESQ. RICHARD A. B. GLEINER, ESQ.
WEIL, GOTSHAL & MANGES LLP SENIOR VICE PRESIDENT AND
100 CRESCENT COURT, SUITE 1300 GENERAL COUNSEL
DALLAS, TEXAS 75201 CHANCELLOR MEDIA CORPORATION
(214) 746-7700 OF LOS ANGELES
300 CRESCENT COURT, SUITE 600
DALLAS, TEXAS 75201
(214) 746-7700
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ------------------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ------------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM OFFERING MAXIMUM AMOUNT OF
TITLE OF SHARES TO BE PRICE PER AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED NOTE OFFERING PRICE(1) FEE(2)
<S> <C> <C> <C> <C>
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9% Senior Subordinated Notes Due
2008.............................. $750,000,000 100% $750,000,000 $208,500.00
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Guarantees of the 9% Senior
Subordinated Notes due 2008(3).... -- -- -- --
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) The registration fee was previously paid in connection with the original
filing.
(3) The 9% Subordinated Notes due 2008 are guaranteed by the Co-Registrants on a
senior subordinated basis. No separate consideration will be paid in respect
of the guarantees.
THE CO-REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE CO-REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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<PAGE> 2
TABLE OF CO-REGISTRANTS
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION
OF PRIMARY STANDARD IRS
INCORPORATION INDUSTRIAL EMPLOYER
OR CLASSIFICATION IDENTIFICATION
NAME FORMATION CODE NUMBER NUMBER
---- -------------- ---------------- --------------
<S> <C> <C> <C>
Chancellor Media Corporation of the Lone Star State...... Delaware 4832 99-0248294
KZPS/KDGE License Corp. ................................. Delaware 4832 75-2449662
Chancellor Media Corporation of California............... Delaware 4832 59-2312787
KIOI License Corp. ...................................... Delaware 4832 75-2449654
Chancellor Media Corporation of Illinois................. Delaware 4832 75-2490925
Chancellor Media Illinois License Corp. ................. Delaware 4832 75-2528716
Chancellor Media Corporation of Dade County.............. Delaware 4832 59-2312792
WVCG License Corp. ...................................... Delaware 4832 75-2449668
Chancellor Media Corporation of Massachusetts............ Delaware 4832 04-3216274
Chancellor Media Pennsylvania License Corp. ............. Delaware 4832 04-3221375
Chancellor Media Corporation of Miami.................... Delaware 4832 04-3216285
WEDR License Corp. ...................................... Delaware 4832 04-3216278
Chancellor Media Corporation of Houston Limited
Partnership............................................ Delaware 4832 75-2486577
Chancellor Media Corporation of Houston.................. Delaware 4832 75-2486583
Chancellor Media Corporation of the Keystone State....... Delaware 4832 04-3221374
Chancellor Media Corporation of New York................. Delaware 4832 54-1475267
Chancellor Media Corporation of Charlotte................ Delaware 4832 62-1364794
WIOQ License Corp. ...................................... Delaware 4832 36-3906002
Chancellor Media Corporation of Washington, D.C. ........ Delaware 4832 75-2432561
Chancellor Media Corporation of St. Louis................ Delaware 4832 75-2449637
Chancellor Media Corporation of Michigan................. Delaware 4832 75-2666017
Chancellor Media/WAXQ Inc. .............................. Delaware 4832 13-3387794
WAXQ License Corp. ...................................... Delaware 4832 75-2788524
Chancellor Media/KCMG Inc. .............................. Delaware 4832 13-3930133
Chancellor Media/Riverside Broadcasting Co., Inc. ....... Delaware 4832 13-2688382
WLTW License Corp. ...................................... Delaware 4832 75-2788528
Chancellor Media Corporation of the Capital City......... Delaware 4832 75-2647157
Chancellor Media D.C. License Corp. ..................... Delaware 4832 75-2647158
Chancellor Media Licensee Company........................ Delaware 4832 75-2544625
Chancellor Media/Trefoil Communications, Inc. ........... Delaware 4832 95-3278846
Chancellor Media/Shamrock Broadcasting, Inc. ............ Delaware 4832 95-4068583
Chancellor Media/Shamrock Radio Licenses, Inc. .......... Delaware 4832 95-4501833
Chancellor Media/Shamrock Broadcasting Licenses of
Denver, Inc. .......................................... Delaware 4832 75-2688376
Chancellor Media/Shamrock Broadcasting of Texas, Inc. ... Texas 4832 71-0527506
Chancellor Media/Shamrock Radio Licenses, LLC............ Delaware 4832 75-2779594
Chancellor Media Outdoor Corporation..................... Delaware 7319 75-2779605
Chancellor Media Nevada Sign Corporation................. Delaware 7319 75-2788530
Chancellor Media MW Sign Corporation..................... Delaware 7319 75-2779602
Chancellor Media Martin Corporation...................... Delaware 7319 75-2779598
Western Poster Service, Inc. ............................ Texas 7319 75-2084318
The AMFM Radio Networks, Inc. ........................... Delaware 4832 52-2100851
Chancellor Media Air Services Corporation................ Delaware 7319 75-2771440
</TABLE>
<PAGE> 3
TABLE OF CO-REGISTRANTS -- (CONTINUED)
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION
OF PRIMARY STANDARD IRS
INCORPORATION INDUSTRIAL EMPLOYER
OR CLASSIFICATION IDENTIFICATION
NAME FORMATION CODE NUMBER NUMBER
---- -------------- ---------------- --------------
<S> <C> <C> <C>
Chancellor Media Whiteco Outdoor Corporation............. Delaware 7319 75-2783296
Chancellor Merger Corp. ................................. Delaware 7319 75-2771441
Broadcast Architecture, Inc. ............................ Massachusetts 4832 04-3096275
Martin Media............................................. California 7319 77-0058488
Dowling Company Incorporated............................. Virginia 7319 54-0787845
Nevada Outdoor Systems, Inc. ............................ Nevada 7319 88-0267411
MW Sign Corp. ........................................... California 7319 95-4334859
Martin & MacFarlane, Inc. ............................... California 7319 95-2743749
Katz Media Corporation................................... Delaware 7319 13-3779266
Katz Communications, Inc. ............................... Delaware 7319 13-0904500
Katz Millennium Marketing, Inc. ......................... Delaware 7319 13-3894491
Amcast Radio Sales, Inc. ................................ Delaware 7319 13-3406436
Christal Radio Sales, Inc. .............................. Delaware 7319 13-2618663
Eastman Radio Sales, Inc. ............................... Delaware 7319 13-3581043
Seltel Inc. ............................................. Delaware 7319 06-0963166
Katz Cable Corporation................................... Delaware 7319 13-3814104
The National Payroll Company, Inc. ...................... Delaware 7319 13-3744365
Chancellor Media Radio Licenses, LLC..................... Delaware 4832 75-2779589
KLOL License Limited Partnership......................... Delaware 4832 75-2486580
WTOP License Limited Partnership......................... Delaware 4832 75-2528718
Radio 100, L.L.C. ....................................... Delaware 4832 75-2759570
</TABLE>
<PAGE> 4
PROSPECTUS
OFFER TO EXCHANGE ALL OUTSTANDING
9% SENIOR SUBORDINATED NOTES DUE 2008
FOR
9% SENIOR SUBORDINATED NOTES DUE 2008
OF
CHANCELLOR MEDIA CORPORATION
OF LOS ANGELES
We hereby offer, upon the terms and conditions described in this Prospectus, to
exchange all of our outstanding 9% Senior Subordinated Notes due 2008 ("Old
Notes") for our registered 9% Senior Subordinated Notes due 2008 ("New Notes").
The Old Notes and New Notes are sometimes collectively referred to as the
"Notes." The Old Notes were issued on September 25, 1998 and, as of the date of
this Prospectus, an aggregate principal amount of $750.0 million is outstanding.
The terms of the New Notes are identical to the terms of the Old Notes except
that the New Notes are registered under the Securities Act of 1933, as amended,
and will not contain any legends restricting their transfer.
INFORMATION ABOUT THE NOTES:
<TABLE>
<S> <C>
- The Notes will mature on October 1, 2008.
- -----------------------------------------------------
* PLEASE CONSIDER THE FOLLOWING: - We will pay interest on the Notes semi-annually on April 1
and October 1 of each year beginning April 1, 1999, at the
- You should carefully review the Risk Factors rate of 9% per annum.
beginning on page 13 of this Prospectus.
- We have the option to redeem all or a portion of the Notes
- Our offer to exchange Old Notes for New Notes on or after October 1, 2003 at certain rates set forth on
will be open until 5:00 p.m., New York City page 101 of this Prospectus.
time, on January 9, 1999, unless we extend the
offer. - We also have the option to redeem up to 25% of the original
aggregate principal amount of the Notes on or prior to
- You should also carefully review the procedures October 1, 2000 with the net cash proceeds from a public
for tendering the Old Notes beginning on page 94 equity offering.
of this Prospectus.
- The Notes are unsecured obligations and are of equal ranking
- If you fail to tender your Old Notes, you will in right of payment to our other outstanding senior
continue to hold unregistered securities and subordinated notes. The Notes are subordinated to our senior
your ability to transfer them could be adversely indebtedness. Please be advised that, as of September 30,
affected. 1998, we had $1.3 billion of senior indebtedness and $1.0
billion of indebtedness of equal ranking in right of
- No public market currently exists for the Notes. payment to the Notes.
We do not intend to list the New Notes on any
securities exchange and, therefore, no active - The Notes are fully and unconditionally guaranteed on an
public market is anticipated. unsecured senior subordinated basis by all of our direct
and indirect subsidiaries on the date the Old Notes were
- ----------------------------------------------------- issued (the "Guarantors").
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------
THE DATE OF THIS PROSPECTUS IS DECEMBER 10, 1998
<PAGE> 5
WHERE YOU CAN FIND MORE INFORMATION
We, together with Chancellor Media Corporation ("Chancellor Media"), our
indirect parent corporation, file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission
(the "SEC"). You may read and copy any reports, statements and other information
we file at the SEC's public reference rooms in Washington, D.C., New York, New
York, and Chicago, Illinois. Please call 1-800-SEC-0330 for further information
on the public reference rooms. Our filings are also available to the public from
commercial document retrieval services and at the web site maintained by the SEC
at http://www.sec.gov.
We, together with the Guarantors, have filed a Registration Statement on Form
S-4 to register with the SEC the New Notes to be issued in exchange for the Old
Notes. This Prospectus is part of that Registration Statement. As allowed by the
SEC's rules, this Prospectus does not contain all of the information you can
find in the Registration Statement or the exhibits to the Registration
Statement.
WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS ABOUT THE TRANSACTIONS WE DISCUSS IN THIS PROSPECTUS OTHER THAN
THOSE CONTAINED HEREIN OR IN THE DOCUMENTS WE INCORPORATE HEREIN BY REFERENCE.
IF YOU ARE GIVEN ANY INFORMATION OR REPRESENTATIONS ABOUT THESE MATTERS THAT IS
NOT DISCUSSED OR INCORPORATED IN THIS PROSPECTUS, YOU MUST NOT RELY ON THAT
INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY SECURITIES ANYWHERE OR TO ANYONE WHERE OR TO WHOM WE ARE NOT
PERMITTED TO OFFER OR SELL SECURITIES UNDER APPLICABLE LAW. THE DELIVERY OF THIS
PROSPECTUS OFFERED HEREBY DOES NOT, UNDER ANY CIRCUMSTANCES, MEAN THAT THERE HAS
NOT BEEN A CHANGE IN OUR AFFAIRS SINCE THE DATE HEREOF. IT ALSO DOES NOT MEAN
THAT THE INFORMATION IN THIS PROSPECTUS OR IN THE DOCUMENTS WE INCORPORATE
HEREIN BY REFERENCE IS CORRECT AFTER THIS DATE.
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements about our financial
condition, results of operations and business. These statements may be made
expressly in this document, or may be "incorporated by reference" to other
documents we have filed with the SEC. You can find many of these statements by
looking for words such as "believes," "expects," "anticipates," "estimates," or
similar expressions used in this Prospectus or incorporated herein.
These forward-looking statements are subject to numerous assumptions, risks and
uncertainties. Factors which may cause our actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by us in those statements include, among
others, the following:
- - our ability to pay interest and principal on a very large amount of debt;
- - the competitive nature of the radio broadcasting, outdoor advertising and
media representation businesses;
- - our ability to successfully integrate our completed and pending acquisitions;
(i)
<PAGE> 6
- - our ability to successfully compete in our new business platforms, including
outdoor advertising and media representation;
- - changes in governmental regulation of radio broadcasting by the Federal
Communications Commission (the "FCC");
- - increased antitrust scrutiny of the broadcasting industry by the Antitrust
Division of the Department of Justice (the "DOJ") and the Federal Trade
Commission (the "FTC"), including limitations on future acquisition
opportunities and possible radio divestiture requirements; and
- - increased competition from new technologies, including satellite radio
programming and the Internet.
Because such statements are subject to risks and uncertainties, actual results
may differ materially from those expressed or implied by the forward-looking
statements. You are cautioned not to place undue reliance on such statements,
which speak only as of the date of this Prospectus or, in the case of documents
incorporated by reference, the date of such document.
We do not undertake any responsibility to release publicly any revisions to
these forward-looking statements to take into account events or circumstances
that occur after the date of this Prospectus. Additionally, we don't undertake
any responsibility to update you on the occurrence of any unanticipated events
which may cause actual results to differ from those expressed or implied by the
forward-looking statements contained or incorporated by reference in this
Prospectus.
(ii)
<PAGE> 7
PROSPECTUS SUMMARY
This brief summary highlights selected information from the Prospectus. It does
not contain all of the information that is important to you. We urge you to
carefully read and review the entire Prospectus and the other documents to which
it refers to fully understand the terms of the New Notes and the exchange offer.
Chancellor Media Corporation of Los Angeles is sometimes referred to herein as
"CMCLA" and, together with its subsidiaries as the "Company."
THE COMPANY
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
300 Crescent Court, Suite 600
Dallas, Texas 75201
(214) 922-8700
The Company, an indirect wholly-owned subsidiary of Chancellor Media, is a
diversified multi-media company that (i) owns and/or operates a radio station
portfolio consisting of 118 radio stations (including 13 stations currently
operated under time brokerage agreements) in 22 of the largest U.S. markets and
Puerto Rico, (ii) provides national media sales representation through Katz
Media Group, Inc., a wholly-owned subsidiary, and (iii) has a significant and
growing outdoor (billboard) advertising presence. After completing all of our
announced transactions, we will own or operate 123 radio stations in 25 markets
and over 37,000 outdoor advertising displays in 37 states.
On a pro forma basis, after giving effect to the transactions described in the
"Pro Forma Financial Information" beginning on page P-1, we would have had net
revenue of $1.1 billion and broadcast cash flow of $512.8 million for the nine
months ended September 30, 1998. Also, our pro forma broadcast cash flow margin
for the same period would have been 46%, and approximately 65% of pro forma net
revenue for the period would have been generated in "superduopoly" markets
(markets in which we own four or five FM stations). Furthermore, we would have
generated approximately 75% of our net revenue from radio operations,
approximately 11% from our media representation operations and approximately 14%
from our outdoor advertising operations.
BUSINESS STRATEGY
Our strategy is to create a leading multi-media company with an overlapping
presence in radio and outdoor advertising markets. To this end, we have built a
diversified portfolio of media assets which allows us to present more options
and greater value to our advertising clients. We believe that the multi-media
platform creates significant growth opportunities through cross-selling,
cross-promotion and cross-savings in markets where our radio and advertising
operations overlap.
Radio Broadcast Strategy. The business strategy of our radio group is to
assemble and operate radio station clusters in order to maximize the broadcast
cash flow generated in each market. We believe that radio station clusters
attract increased revenues in a particular market by delivering larger combined
audiences to advertisers and by engaging in joint marketing and promotional
activities.
1
<PAGE> 8
Media Representation Strategy. The business strategy of our media representation
business is to create a leading national representation firm serving all types
of electronic media. We believe we can continue to generate revenue and cash
flow growth in the media representation business by expanding our market share
and improving our national sales effort.
Outdoor Advertising Strategy. The business strategy of our outdoor advertising
group is to create and develop one of the leading outdoor advertising companies
in the country through acquisitions that complement our existing outdoor and
radio markets. We will focus on strengthening our operating results by
increasing market penetration, maximizing rates and occupancy levels in each of
our markets and capitalizing on technological advancements to improve quality
and reduce costs.
RECENT DEVELOPMENTS
Completed Transactions. Since January 1, 1997, we have completed a number of
transactions. Through these various transactions, we have:
- - added 72 radio stations to our portfolio;
- - acquired a full service media representation firm; and
- - entered into the outdoor advertising business by acquiring over 37,000
billboards.
Pending Transactions. We also currently have a number of significant pending
transactions.
- - On February 20, 1998, we entered into an agreement with Capstar Broadcasting
Corporation to acquire certain of its stations through a series of purchases
and exchanges over a period of three years.
- - On April 8, 1998, we entered into an agreement to acquire Petry Media
Corporation, a leading independent television representation firm. We are
currently negotiating with the DOJ about their antitrust review of this
transaction. Accordingly, we cannot be sure the transaction will be completed
on its terms or at all.
- - On August 11, 1998, we entered into agreements to acquire four FM and two AM
stations in Cleveland. We recently began operating one of the FM stations in
Cleveland under a time brokerage agreement.
- - On August 20, 1998, we entered into an agreement to sell WMVP-AM in Chicago to
ABC, Inc. ABC recently began operating WMVP-AM under a time brokerage
agreement.
- - On September 3, 1998, we entered into an agreement to acquire Pegasus
Broadcasting of San Juan, L.L.C., a television broadcasting company which owns
a television station in Puerto Rico.
2
<PAGE> 9
- - On September 15, 1998, we entered into an agreement to acquire KKFR-FM and
KFYI-AM in Phoenix from The Broadcast Group, Inc. We recently began operating
KKFR-FM and KFYI-AM under a time brokerage agreement.
For a more detailed explanation of the terms of the foregoing pending
transactions, we advise you to review "Business -- Recent
Developments -- Pending Transactions of CMCLA," beginning on page 42.
Pending Transactions of Chancellor Media Corporation. Chancellor Media, our
indirect parent corporation, has also recently entered into some significant
transactions.
- - On July 7, 1998, Chancellor Media entered into an agreement by which the
ultimate parent corporation of LIN Television Corporation will merge into
Chancellor Media. Upon consummation of the merger, it is expected that LIN
will own or operate 12 television stations in eight markets in the United
States.
- - On August 26, 1998, Chancellor Media and Capstar Broadcasting Corporation
entered into an agreement to merge in a stock-for-stock transaction that will
create the nation's largest radio broadcasting entity.
For a more detailed explanation of the terms of the foregoing pending
transactions of Chancellor Media, we advise you to review "Business -- Recent
Developments -- Pending Transactions of Chancellor Media," beginning on page 43.
3
<PAGE> 10
THE EXCHANGE OFFER
SECURITIES TO BE EXCHANGED... On September 25, 1998, we issued $750.0 million
aggregate principal amount of Old Notes to the
initial purchaser (the "Original Offering") in a
transaction exempt from the registration
requirements of the Securities Act of 1933, as
amended (the "Securities Act"). The terms of the
New Notes and the Old Notes are substantially
identical in all material respects, except that
the New Notes will be freely transferable by the
holders thereof except as otherwise provided
herein. See "Description of New Notes."
THE EXCHANGE OFFER........... $1,000 principal amount of New Notes in exchange
for each $1,000 principal amount of Old Notes.
As of the date hereof, Old Notes representing
$750.0 million aggregate principal amount are
outstanding.
Based on interpretations by the staff of the
SEC, as set forth in no-action letters issued to
certain third parties unrelated to us, we,
together with the Guarantors believe that New
Notes issued pursuant to the exchange offer in
exchange for Old Notes may be offered for
resale, resold or otherwise transferred by
holders thereof (other than any holder which is
an "affiliate" of the Company or the Guarantors
within the meaning of Rule 405 promulgated under
the Securities Act, or a broker-dealer who
purchased Old Notes directly from us to resell
pursuant to Rule 144A or any other available
exemption promulgated under the Securities Act),
without compliance with the registration and
prospectus delivery requirements of the
Securities Act, provided that such New Notes are
acquired in the ordinary course of such holders'
business and such holders have no arrangement
with any person to engage in a distribution of
New Notes.
However, the SEC has not considered the exchange
offer in the context of a no-action letter and
we cannot be sure that the staff of the SEC
would make a similar determination with respect
to the exchange offer as in such other
circumstances. Furthermore, each holder, other
than a broker-dealer, must acknowledge that it
is not engaged in, and does not intend to engage
in, a distribution of such New Notes and has no
arrangement or understanding to participate in a
distribution of New Notes. Each broker-dealer
that receives New Notes for its own account
pursuant to the exchange offer must acknowledge
that it will comply with the prospectus delivery
requirements of the Securities Act in connec-
4
<PAGE> 11
tion with any resale of such New Notes. Broker-dealers who acquired Old Notes
directly from us and not as a result of market-making activities or other
trading activities may not rely on the staff's interpretations discussed above
or participate in the exchange offer and must comply with the prospectus
delivery requirements of the Securities Act in order to resell the Old Notes.
REGISTRATION RIGHTS
AGREEMENT.................. We sold the Old Notes on September 25, 1998, in
a private placement in reliance on Section 4(2)
of the Securities Act. The Old Notes were
immediately resold by the initial purchaser in
reliance on Rule 144A promulgated under the
Securities Act. In connection with the sale, we,
together with the Guarantors, entered into a
Registration Rights Agreement with the initial
purchaser (the "Registration Rights Agreement")
requiring us to make the exchange offer. The
Registration Rights Agreement further provides
that we, together with the Guarantors, must use
our reasonable best efforts to (i) cause the
Registration Statement with respect to the
exchange offer to be declared effective within
180 days of the date on which we issued the Old
Notes and (ii) consummate the exchange offer on
or before the 225th business day following the
date on which we issued the Old Notes. See "The
Exchange Offer -- Purpose and Effect."
EXPIRATION DATE.............. The exchange offer will expire at 5:00 p.m., New
York City time, January 9, 1999 or such later
date and time to which it is extended.
WITHDRAWAL................... The tender of the Old Notes pursuant to the
exchange offer may be withdrawn at any time
prior to 5:00 p.m., New York City time, on
January 9, 1999, or such later date and time to
which we extend the offer. Any Old Notes not
accepted for exchange for any reason will be
returned without expense to the tendering holder
thereof as soon as practicable after the
expiration or termination of the exchange offer.
INTEREST ON THE NEW NOTES AND
THE OLD NOTES.............. Interest on the New Notes will accrue from the
date of the original issuance of the Old Notes
or from the date of the last periodic payment of
interest on the Old Notes, whichever is later.
No additional interest will be paid on Old Notes
tendered and accepted for exchange.
5
<PAGE> 12
CONDITIONS TO THE EXCHANGE
OFFER...................... The exchange offer is subject to certain
customary conditions, certain of which may be
waived by us. See "The Exchange Offer -- Certain
Conditions to Exchange Offer."
PROCEDURES FOR TENDERING OLD
NOTES...................... Each holder of the Old Notes wishing to accept
the exchange offer must complete, sign and date
the letter of transmittal, or a copy thereof, in
accordance with the instructions contained
herein and therein, and mail or otherwise
deliver the letter of transmittal, or the copy,
together with the Old Notes and any other
required documentation, to the exchange agent at
the address set forth herein. Persons holding
the Old Notes through the Depository Trust
Company ("DTC") and wishing to accept the
exchange offer must do so pursuant to the DTC's
Automated Tender Offer Program, by which each
tendering participant will agree to be bound by
the letter of transmittal. By executing or
agreeing to be bound by the letter of
transmittal, each holder will represent to us
and the Guarantors that, among other things, (i)
the New Notes acquired pursuant to the exchange
offer are being obtained in the ordinary course
of business of the person receiving such New
Notes, whether or not such person is the
registered holder of the Old Notes, (ii) the
holder is not engaging in and does not intend to
engage in a distribution of such New Notes,
(iii) the holder does not have an arrangement or
understanding with any person to participate in
the distribution of such New Notes, and (iv) the
holder is not an "affiliate," as defined under
Rule 405 promulgated under the Securities Act,
of the Company or the Guarantors.
Pursuant to the Registration Rights Agreement if
(i) we determine that we are not permitted to
effect the exchange offer as contemplated hereby
because of any change in applicable law or SEC
policy, or (ii) any holder of Transfer
Restricted Securities (as defined on page 91)
notifies us prior to the 20th day following
consummation of the exchange offer (a) that it
is prohibited by law or SEC policy from
participating in the exchange offer, (b) that it
may not resell the New Notes acquired by it in
the exchange offer to the public without
delivering a prospectus and that this Prospectus
is not appropriate or available for such resales
or (c) that it is a broker-dealer and owns Old
Notes acquired directly from us or an affiliate
of ours, we are
6
<PAGE> 13
required to file a "shelf" registration statement for a continuous offering
pursuant to Rule 415 under the Securities Act in respect of the Old Notes.
We will accept for exchange any and all Old
Notes which are properly tendered (and not
withdrawn) in the exchange offer prior to 5:00
p.m., New York City time, on January 9, 1999.
The New Notes issued pursuant to the exchange
offer will be delivered promptly following the
expiration date. See "The Exchange
Offer -- Terms of the Exchange Offer."
EXCHANGE AGENT............... The Bank of New York is serving as Exchange
Agent (the "Exchange Agent") in connection with
the exchange offer.
FEDERAL INCOME TAX
CONSIDERATIONS............. The exchange of Old Notes for New Notes pursuant
to the exchange offer should not constitute a
sale or an exchange for federal income tax
purposes. See "Certain Federal Income Tax
Considerations."
EFFECT OF NOT TENDERING...... Old Notes that are not tendered or that are
tendered but not accepted will, following the
completion of the exchange offer, continue to be
subject to the existing restrictions upon
transfer thereof. We will have no further
obligation to provide for the registration under
the Securities Act of such Old Notes.
7
<PAGE> 14
THE NEW NOTES
Issuer....................... Chancellor Media Corporation of Los Angeles.
Securities Offered........... $750.0 million aggregate principal amount of 9%
Senior Subordinated Notes due 2008.
Maturity Date................ October 1, 2008.
Interest..................... The New Notes will bear interest at a rate of 9%
per annum. Interest on the New Notes will accrue
from the date of issuance and will be payable
semi-annually on each April 1 and October 1,
commencing April 1, 1999.
Sinking Fund................. None.
Optional Redemption.......... The New Notes will be redeemable, in whole or in
part, at our option on or after October 1, 2003
at the redemption prices set forth herein, plus
accrued and unpaid interest to the date of
redemption. In addition, on or prior to October
1, 2000, we may, at our option, redeem the New
Notes, in part, with the net cash proceeds of
one or more Public Equity Offerings (as defined
on page 126), at the redemption price set forth
herein, plus accrued and unpaid interest, if
any, to the date of redemption; provided,
however, that after any such redemption the
aggregate principal amount of New Notes
outstanding must equal at least 75% of the
aggregate principal amount of Old Notes
originally issued on September 25, 1998. See
"Description of New Notes -- Optional
Redemption."
Change of Control............ If a Change of Control (as defined on page 119)
occurs, (i) we will have the option, at any time
on or prior to October 1, 2000, to redeem the
New Notes in whole but not in part at a
redemption price equal to 100% of the principal
amount thereof plus the Applicable Premium, plus
accrued and unpaid interest, if any, to the date
of redemption, and (ii) if we do not so redeem
the Exchange Notes or if such Change of Control
occurs after October 1, 2000, we will be
required to offer to repurchase all outstanding
New Notes at a price equal to 101% of their
principal amount, plus accrued and unpaid
interest, if any, to the date of repurchase.
There can be no assurance that we will have
sufficient funds to purchase all the New Notes
in the event of a Change of Control or that we
would be able to obtain financing for such
purpose on favorable terms, if at all. In
addition, our senior loan agreement restricts
our ability to repurchase the New Notes,
including pursuant to a Change of Control Offer
(as defined on page 102). The
8
<PAGE> 15
senior loan agreement also contains certain other provisions relating to a
change of control of the Company. These provisions are generally broader than
the Change of Control provisions of the indenture governing the Notes (the
"Indenture"). Consequently, certain events that may give rise to a change of
control under the senior loan agreement may not give rise to a Change of Control
under the Indenture. See "Risk Factors -- Change of Control," "Description of
New Notes -- Change of Control" and "Description of Certain
Indebtedness -- Senior Credit Facility -- Events of Default."
Guarantees................... The New Notes will be fully and unconditionally
guaranteed (the "Guarantees") on a senior
subordinated basis by the Guarantors. The
obligation of the Guarantors with respect to the
Guarantees will be subordinated in right of
payment, to the same extent as the obligations
of the Company in respect of the New Notes are
subordinated to all existing and future senior
indebtedness, to all existing and future
Guarantor senior indebtedness (which includes
the guarantee by the Guarantors of the Company's
borrowings under the senior loan agreement), and
will be of equal ranking in right of payment to
the Guarantors' guarantees of our other senior
subordinated notes. See "Description of New
Notes -- Guarantees."
Offers to Purchase........... In the event of certain asset sales, we will be
required to offer to repurchase the New Notes
(to the extent of any net proceeds remaining
following our offer to purchase our other senior
subordinated notes) at a price equal to 100% of
their principal amount, plus accrued and unpaid
interest, if any, to the date of repurchase. See
"Description of New Notes -- Certain
Covenants -- Limitation on Asset Sales."
Ranking...................... The New Notes will be our general unsecured
obligations and will be of equal ranking in
right of payment to our other senior
subordinated notes and will be subordinated in
right of payment to all existing and future
senior indebtedness. As of September 30, 1998,
on a pro forma basis after giving effect to the
transactions described in the "Pro Forma
Financial Information" beginning on page P-1,
approximately $3.1 billion of senior
indebtedness (represented by borrowings under
the senior loan agreement and the 8% Senior
Notes (as defined on page 45)) would have been
outstanding and approximately $1.0 billion of
debt of equal ranking in right of payment to the
New Notes would have been
9
<PAGE> 16
outstanding. See "Description of New
Notes -- Subordination."
Restrictive Covenants........ The Indenture will impose certain limitations on
our ability and the ability of our subsidiaries
to, among other things, incur additional
indebtedness, incur liens, pay dividends or make
certain other restricted payments, consummate
certain asset sales, enter into certain
transactions with affiliates, engage in certain
asset swaps, incur indebtedness that is
subordinate in right of payment to any senior
indebtedness and senior in right of payment to
the New Notes, impose restrictions on the
ability of a subsidiary to pay dividends or make
certain payments to us, 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 our assets. See
"Description of New Notes -- Certain Covenants."
Use of Proceeds.............. The Company will not receive any cash proceeds
from the issuance of the New Notes pursuant to
this Prospectus.
RISK FACTORS
We urge you to carefully review the Risk Factors beginning on page 13 for a
discussion of factors you should consider before exchanging your Old Notes for
New Notes.
10
<PAGE> 17
SUMMARY PRO FORMA FINANCIAL INFORMATION
We have summarized below the unaudited combined pro forma financial information
of the Company for the year ended December 31, 1997 and for the nine months
ended September 30, 1998. The information should be read in conjunction with the
unaudited pro forma condensed financial statements included on Pages P-1 through
P-26 of this Prospectus and in conjunction with our historical financial
statements and related notes included on Pages F-1 through F-139 of this
Prospectus.
You should be aware that this pro forma information may not be indicative of
what actual results will be in the future or would have been for the periods
presented.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1997 SEPTEMBER 30, 1998
-------------------------------------- --------------------------------------
COMPANY AS COMPANY AS
ADJUSTED FOR ADJUSTED FOR
THE THE
COMPANY COMPLETED COMPANY COMPANY COMPLETED COMPANY
HISTORICAL TRANSACTIONS PRO FORMA HISTORICAL TRANSACTIONS PRO FORMA
---------- ------------ ---------- ---------- ------------ ----------
(IN THOUSANDS EXCEPT MARGIN DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net revenues....................... $582,078 $1,227,083 $1,308,652 $ 899,096 $1,059,774 $1,103,242
Operating expenses excluding
depreciation and amortization.... 316,248 688,503 733,677 491,924 571,272 590,454
Operating income (loss)............ 58,406 18,833 (5,735) 10,865 5,979 (13,192)
Interest expense, net.............. 83,095 327,008 375,440 135,709 236,668 273,332
Net loss........................... (18,844) (187,203) (230,179) (123,227) (131,291) (165,249)
Preferred stock dividends.......... 12,901 -- -- 17,601 -- --
Net loss attributable to common
stock............................ (31,745) (187,203) (230,179) (140,828) (131,291) (165,249)
OTHER DATA:
Broadcast cash flow(1)............. $265,830 $ 538,580 $ 574,975 $ 407,172 $ 488,502 $ 512,788
Broadcast cash flow margin......... 46% 44% 44% 45% 46% 46%
EBITDA(1).......................... $244,388 $ 495,588 $ 531,502 $ 381,984 $ 457,339 $ 481,625
Ratio of earnings to fixed
charges(2)....................... -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1998
-----------------------------------------
COMPANY
AS ADJUSTED
FOR THE
COMPANY COMPLETED COMPANY
HISTORICAL TRANSACTIONS PRO FORMA
---------- ------------ ----------
(IN THOUSANDS EXCEPT MARGIN DATA)
<S> <C> <C> <C>
BALANCE SHEET DATA (END OF PERIOD):
Working capital............................................. $ 199,325 $ 223,546 $ 234,423
Intangible assets, net...................................... 4,916,533 5,889,764 6,768,514
Total assets................................................ 5,905,378 7,037,617 7,789,523
Long-term debt.............................................. 3,018,000 4,145,280 4,844,407
Stockholder's equity........................................ 2,336,772 2,336,772 2,346,365
</TABLE>
- -------------------------
(1) Broadcast cash flow consists of operating income excluding depreciation,
amortization, corporate general and administrative expense, and other
non-cash and non-recurring
11
<PAGE> 18
charges. EBITDA consists of operating income before depreciation and
amortization, and other non-cash and non-recurring charges. Although
broadcast cash flow and EBITDA are not calculated in accordance with
generally accepted accounting principles, the Company believes that
broadcast cash flow and EBITDA are widely used as a measure of 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 the Company'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 the Company's debt service requirements and other commitments
and, accordingly, broadcast cash flow and EBITDA are not necessarily
indicative of amounts that may be available for reinvestment in the
Company's business or other discretionary uses. Not all companies calculate
broadcast cash flow and EBITDA in the same fashion and therefore the
information presented may not be comparable to other similarly titled
information of other companies.
(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 fixed charges by $6,692 and $91,518 for
the year ended December 31, 1997 and the nine months ended September 30,
1998, respectively. On a pro forma basis after giving effect to the
Completed Transactions (as defined on page 41), financing transactions
undertaken by the Company and Chancellor Radio Broadcasting Company ("CRBC")
during 1997 and the 1998 Financing Transactions (as defined on page 45),
earnings were insufficient to cover fixed charges by $290,821 and $202,406
for the year ended December 31, 1997 and the nine months ended September 30,
1998, respectively. On a pro forma basis after giving effect to the
transactions described in "Pro Forma Financial Information" beginning on
page P-1, earnings were insufficient to cover fixed charges by $362,464 and
$259,114 for the year ended December 31, 1997 and the nine months ended
September 30, 1998, respectively.
12
<PAGE> 19
RISK FACTORS
In addition to the other information set forth in this Prospectus, you should
carefully consider the following information about our business before
exchanging your Old Notes for New Notes.
SUBSTANTIAL INDEBTEDNESS OF THE COMPANY
We have a large amount of consolidated indebtedness when compared to the equity
of our stockholders. We are subject to the terms of a senior loan agreement and
various indentures relating to our outstanding senior subordinated notes. The
terms of the senior loan agreement and the various indentures limit, but do not
prohibit, the incurrence of additional indebtedness by us. Please be aware of
the following:
- - As of September 30, 1998, we had outstanding long-term indebtedness of
approximately $3.0 billion, an accumulated deficit of $317.5 million and
stockholder's equity of $2.3 billion.
- - As of September 30, 1998, on a pro forma basis after giving effect to the
transactions described in the "Pro Forma Financial Information" beginning on
page P-1, we would have had outstanding long-term debt of approximately $4.8
billion, an accumulated deficit of $307.9 million and stockholder's equity of
$2.3 billion. See "Pro Forma Financial Information" and "Capitalization."
- - In addition to the long-term indebtedness referred to above, we expect to
finance the acquisition of Petry Media Corporation (the "Petry Acquisition")
and the acquisition of Pegasus Broadcasting of San Juan, L.L.C. (the "Pegasus
Acquisition") through the incurrence of up to approximately $199.1 million in
additional long-term indebtedness.
Such a large amount of indebtedness could have negative consequences for us,
including without limitation, the following:
- - our ability to obtain financing in the future could be limited;
- - much of our cash flow will be dedicated to interest obligations and
unavailable for other purposes;
- - the high level of indebtedness limits our flexibility to deal with changing
economic, business and competitive conditions;
- - some of our borrowings are at variable rates of interest which makes us
vulnerable to increases in interest rates; and
- - certain of our agreements have many restrictive operating and financial
covenants with which we must comply.
Our failure to comply with the covenants could be an event of default and could
accelerate our payment obligations and, in some cases, could affect other
obligations with cross-default or cross-acceleration provisions.
Our ability to satisfy our payment obligations will depend, in large part, on
our performance. Our performance will ultimately be affected by general economic
and business factors, many of which will be outside of our control. We believe
that our cash
13
<PAGE> 20
flow combined with borrowings under our senior credit facility will be enough to
meet our expenses and interest obligations. However, if we cannot satisfy our
payment obligations, we will be forced to find alternative sources of funds by
selling assets, restructuring, refinancing debt or seeking additional equity
capital. There can be no assurance that any of these alternative sources would
be available on satisfactory terms or at all.
RESTRICTIONS IMPOSED ON THE COMPANY BY AGREEMENTS GOVERNING DEBT INSTRUMENTS
Our senior loan agreement and the various indentures relating to our outstanding
senior subordinated notes contain certain covenants that restrict (or will
restrict), among other things, our ability to incur additional debt, incur
liens, pay dividends or make certain types of payments, sell certain assets,
enter into certain transactions with affiliates, enter into sale and leaseback
transactions, conduct businesses other than the ownership and operation of radio
and television broadcast stations and businesses related thereto, merge or
consolidate with any other person or dispose of all or substantially all of our
assets. Also, our senior loan agreement requires us to maintain certain
financial ratios and satisfy financial condition tests. Our ability to comply
with the ratios and the tests will be affected by events outside of our control
and there can be no assurance that we will meet those tests. A breach of any of
the covenants or failure to meet the tests could result in an event of default
which would allow the lenders to declare all amounts outstanding immediately due
and payable. In the case of our senior loan agreement, if we were unable to pay
the amounts due, the lenders could, subject to compliance with applicable FCC
rules, proceed against the collateral securing the indebtedness. If the amounts
outstanding under the loan agreement were accelerated, there can be no assurance
that our assets would be sufficient to repay the amount in full.
HISTORY OF NET LOSSES AND INSUFFICIENCY OF EARNINGS TO COVER FIXED CHARGES
In the past, we have experienced net losses as a result of significant interest
charges, non-recurring expenses and amortization charges relating to
acquisitions. Our net loss attributable to common stock for the years ended
December 31, 1995, 1996 and 1997 and the nine months ended September 30, 1998
was $5.9 million, $16.2 million, $31.7 million and $123.2 million, respectively.
On a pro forma basis, after giving effect to the transactions described in "Pro
Forma Financial Information" beginning on Page P-1, the net loss attributable to
common stock for the year ended December 31, 1997 and the nine months ended
September 30, 1998 would have been $230.1 million and $165.2 million,
respectively. Since acquisitions are a central focus of our operating strategy,
we expect the charges and expenses to have a negative impact on our results.
DIFFICULTY OF INTEGRATING ACQUISITIONS AND ENTERING NEW LINES OF BUSINESS
We have recently acquired or are in the process of acquiring a number of
entities in various lines of business. Consequently, management's focus will be
on integrating many
14
<PAGE> 21
new acquisitions, learning new industries and conducting its operations on a
much larger scale. For the immediate future, management's focus will be on the
following:
- - Outdoor Advertising. Through our recent acquisitions of Martin Media and the
Outdoor Advertising division of Whiteco Industries, Inc. (the "Whiteco
Acquisition"), we have entered into billboard and other outdoor advertising.
Although management believes this new business is complementary to the
broadcasting business, management will be operating a business not previously
undertaken by it as well as integrating new employees.
- - Media Representation. Through our recent acquisition of Katz Media Group,
Inc., we have entered into the media representation business, and if we
complete the Petry Acquisition, we will expand this line of business. Although
management has experience in this line of business at the local level, it must
focus on operating the business and managing personnel on a national level.
- - New National Radio Network. Through The AMFM Radio Networks, we are operating
a new national radio network. Some of our stations have syndicated programs
created locally in the past, but we have never undertaken a radio network at a
national level. Management will focus on competing with other established
state and national radio networks in this regard.
We intend to continue to consider strategic acquisitions to expand or complement
our current businesses. The need for management to focus on acquisitions and the
integration of new businesses could divert the attention of management from
other general business concerns. We cannot be sure that management will be
successful in integrating acquisitions or new lines of business with its
existing businesses.
Our acquisition strategy involves other risks, including without limitation,
increasing our debt payment obligations and the potential loss of valuable
employees. The availability of additional financing cannot be assured and,
depending on the terms of the potential acquisitions, may be restricted by the
terms of our senior loan agreement and the various indentures relating to our
outstanding senior subordinated notes. There can be no assurance that any future
acquisitions will not have a material adverse effect on our financial condition
and results of operations.
COMPETITIVE NATURE OF RADIO BROADCASTING, OUTDOOR ADVERTISING AND MEDIA
REPRESENTATION
The radio broadcasting industry is very competitive. The success of each of our
stations is dependent, in large part, upon its audience rating and our share of
advertising revenue within each market. Our stations compete with other radio
stations in each market, as well as with other media. We also compete with other
companies for acquisition opportunities, and prices for stations have increased
dramatically in recent periods. Some of the other broadcasting companies may
have greater access to capital resources than we do. Also, if the trend towards
consolidation in the radio industry continues, certain competitors may emerge
with more stations and the ability to deliver larger audiences to potential
advertisers. Our audience ratings and market share are and will be subject to
change, and any adverse change in a particular market could have a material
adverse effect on the revenue of the stations located in that market. There can
be no assurance that any one of
15
<PAGE> 22
our radio stations will be able to maintain or increase its current audience
ratings or advertising market share.
Each of the radio broadcasting, outdoor advertising and media representation
industries are subject to competition from a variety of sources.
Radio Broadcasting Competition. The radio broadcasting industry is subject to
competition from new media technologies that are being developed and introduced
such as the following:
- - The delivery of audio programming by cable television systems, direct
broadcasting satellite ("DBS") systems and other digital audio broadcasting
formats to local and national audiences.
- - 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 satellite radio services with sound quality equivalent to compact
discs.
- - The introduction of 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.
Outdoor Advertising Competition. Our outdoor advertising business faces
competition from various advertising companies and other media such as the
following:
- - radio and television advertising;
- - print media;
- - direct mail marketing; and
- - other "out-of-home" advertising media, which includes displays in shopping
malls, supermarkets, airports, sports stadia and arenas, movie theaters, and
on taxis, buses, subways and other forms of public transportation.
Media Representation Competition. The success of our media representation
operations depends on our ability to maintain and acquire representation
contracts with radio and television stations and cable systems, the inventory of
time it represents and the experience of our management and personnel. We
compete to gain client stations with other independent and network media
representatives and direct national advertising. We then compete to sell air
time to advertisers with the following:
- - newspapers;
- - magazines;
- - outdoor advertising;
- - transit advertising;
- - yellow page directories; and
- - point of sale advertising.
POTENTIAL DELAY IN CONSUMMATION OF PENDING TRANSACTIONS DUE TO ANTITRUST REVIEW
As a result of the concentration of ownership in the radio broadcast industry,
the DOJ has been looking closely at acquisitions in the industry, including
certain of our transactions. The consummation of each of our pending
transactions is, and any of the future
16
<PAGE> 23
transactions contemplated by us will likely be, subject to the notification
filing requirements, applicable waiting periods and possible review by the DOJ
or the FTC under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"HSR Act"). DOJ review of certain transactions has caused, and may continue to
cause, delays in anticipated closings of certain transactions and, in some
cases, may result in attempts by the DOJ to enjoin such transactions or
negotiate modifications to the proposed terms. Such delays, injunctions or
modifications could have a negative effect on us and result in the abandonment
of some otherwise attractive opportunities.
The DOJ has stated publicly that it will look at some radio station acquisitions
more closely when they exceed established benchmarks. However, to date, the DOJ
has investigated transactions falling below the benchmarks and has cleared
transactions exceeding the benchmarks. Although we do not believe that our
acquisition strategy as a whole will be negatively affected in any material way
by antitrust review or by additional divestitures we may have to make as a
result of such review, there can be no assurance that this will be the case.
We have been dealing with the DOJ on the following pending acquisition:
- - Petry Acquisition. On June 3, 1998, the DOJ issued a second request for
additional information under the HSR Act to which we have responded. The
Company and Petry are still negotiating with the DOJ regarding this
transaction and have agreed to extend the waiting period under the HSR Act
pending completion of these discussions. Accordingly, at this time, we cannot
be sure of the terms on which this transaction will be completed, if at all.
LICENSING AND OWNERSHIP ISSUES RELATING TO FEDERAL REGULATION OF THE RADIO
BROADCASTING INDUSTRY
Licenses. The radio broadcasting industry is subject to extensive regulation by
the FCC under the Communications Act of 1934, as amended (the "Communications
Act"). Approval of the FCC is required for the issuance, renewal or transfer of
radio broadcast station operating licenses, including licenses involved in many
of our Pending Transactions. Our business is dependent upon its ability to hold
radio broadcasting licenses from the FCC that are issued for terms of up to
eight years. FCC regulation of licenses presents the following issues for us:
- - There can be no assurance that any of the stations' licenses will be renewed
at their expiration dates; and
- - if granted, the licenses may include conditions and qualifications that could
adversely affect our operations.
Moreover, the laws, policies and regulations of the FCC may change significantly
over time and we cannot be sure whether those changes will have a negative
effect on our business.
Ownership. The Communications Act and the FCC rules impose specific limits on
the number of stations an entity can own in a single market. Compliance with the
FCC's multiple ownership rules is expected to cause us, as well as other
companies, to pass on certain acquisition opportunities we might otherwise
pursue. Compliance with these rules by third parties may also have a significant
impact on us as, for example, in precluding the
17
<PAGE> 24
consummation of swap transactions that would cause such third parties to violate
the multiple ownership rules. The multiple ownership rules are as follows:
- - In markets with 45 or more stations, ownership is limited to eight stations,
no more than five of which can be AM or FM;
- - in markets with 30 to 44 stations, ownership is limited to seven stations, no
more than four of which can be AM or FM;
- - in markets with 15 to 29 stations, ownership is limited to six stations, no
more than four of which can be AM or FM; 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 stations.
In addition to our radio broadcast interests, the ownership interests of certain
of our directors may be attributed to us. For example, three of our directors
(Thomas O. Hicks, Lawrence D. Stuart, Jr. and Michael J. Levitt) are also among
the directors of Capstar, an entity Chancellor Media has agreed to acquire (the
"Capstar Merger"). Capstar presently owns or proposes to acquire over 355
stations serving 83 mid-sized markets throughout the United States. Because of
those directors' positions on the Capstar board of directors, if any such
broadcast interests overlap with our directly-held radio broadcast interests in
our markets, such interests are combined with our interests in those markets
when determining whether we comply with the multiple ownership rules. Also, LIN
Television Corporation ("LIN Television"), the indirect operating subsidiary of
Ranger Equity Holdings Corporation ("LIN") (which has agreed to merge with
Chancellor Media (the "LIN Merger")), owns or operates twelve television
stations in eight markets. Two of LIN's directors (Messrs. Hicks and Levitt) are
also our directors and, accordingly, LIN's television broadcast interests are
combined with our broadcast interests for determining our compliance with
multiple ownership rules. In addition, Hicks, Muse, Tate & Furst, Incorporated
("Hicks Muse") and four of our directors (Thomas O. Hicks, Lawrence D. Stuart,
Jr., Michael J. Levitt and John H. Massey) also have attributable interests in
Sunrise Broadcasting, Inc. ("Sunrise"), which owns or proposes to acquire a
number of television stations in several markets. Under the FCC's
one-to-a-market rules, a party may not have attributable interests in more than
one television station or radio stations and a television station in the same
market unless a waiver is granted by the FCC. As a result of these attributable
interests, our future acquisition strategy may be negatively affected. There can
be no assurance that these additional attributable interests will not have a
negative effect on our future acquisition strategy or on our business, financial
condition and results of operations.
In addition to its multiple ownership rules, the FCC has recently issued public
notices suggesting that it may examine and impose limits upon the advertising
revenue share acquired by one entity in a single market. It is not clear how the
FCC will proceed in this area or how any policy it may adopt will interact with
the review of similar issues by the DOJ or the FTC.
POTENTIAL LOSS OF ADVERTISING SPACE TO REGULATION OF OUTDOOR ADVERTISING
Outdoor advertising displays are subject to regulation at the federal, state and
local levels. These regulations, in some cases, limit the height, size, location
and operation of billboards and, in limited circumstances, regulate the content
of the advertising copy displayed on the
18
<PAGE> 25
billboards. Some governmental regulations prohibit the construction of new
billboards or the replacement, relocation, enlargement or upgrading of existing
structures. Some cities have adopted amortization ordinances under which, after
the expiration of a certain period of time, billboards must be removed at the
owner's expense and without the payment of consideration. Ordinances requiring
the removal of billboards without compensation, whether through amortization or
otherwise, are being challenged in various state and federal courts with
conflicting results.
Although we believe that our operations will not be materially affected by the
amortization ordinances even if they are enforced, we cannot be sure that we
will be successful in negotiating acceptable arrangements if our displays are
subject to removal or amortization, and what effect, if any, such regulations
may have on our operations. In addition, we are unable to predict what
additional regulations may be imposed on outdoor advertising in the future.
Legislation regulating the content of billboard advertisements has been
introduced in Congress in the past. Changes in laws and regulations affecting
outdoor advertising at any level of government could have a negative effect on
our outdoor advertising business. See "-- Potential Loss of Advertisers due to
Tobacco Industry Regulation" and "Business -- Government Regulation."
POTENTIAL LOSS OF ADVERTISERS DUE TO TOBACCO INDUSTRY REGULATION
Outdoor advertising of tobacco products is affected by federal, state and local
legislation and various regulations. Local and state governments have passed
ordinances or statutes to limit outdoor advertising of tobacco products.
Increasing political pressure will likely lead to the passage of additional
legislation and the adoption of additional regulations to limit the content and
placement of outdoor advertising relating to the sale of tobacco products. In
addition, it has been reported that certain cigarette manufacturers who are
defendants in numerous class action suits throughout the United States have
proposed out of court settlements with respect to such suits that is likely to
include restrictions on billboard advertising by these and other cigarette
manufacturers.
We cannot determine the effect of these regulations or any legislation on our
outdoor advertising business and its overall financial position at this time. A
reduction in billboard advertising by the tobacco industry would cause an
immediate reduction in direct revenue from tobacco advertisers and
simultaneously increase the available space on the inventory of billboards in
the outdoor advertising industry. This could in turn result in a lowering of
rates in each of our markets or limit the ability of the industry as a whole to
increase rates for some period of time. Such a development could have an adverse
effect on our business.
CONTROL OF THE-COMBINED COMPANY BY HICKS MUSE
Prior to the LIN Merger and the Capstar Merger, Thomas O. Hicks and affiliates
of Hicks Muse hold approximately 11.9% of the outstanding shares of Chancellor
Media common stock. Affiliates of Hicks Muse have a controlling interest in
Capstar and LIN and a large investment in Chancellor Media. Immediately
following the LIN Merger and the Capstar Merger and the issuance of Chancellor
Media common stock, it is expected that Mr. Hicks and affiliates of Hicks Muse
will control approximately 30.5% of the outstanding shares (26.1% on a
fully-diluted basis) of Chancellor Media common stock. Additionally, Messrs.
Hicks, Lawrence D. Stuart, Jr., and Michael J. Levitt, each directors
19
<PAGE> 26
of Chancellor Media, are also principals or executive officers of Hicks Muse.
Accordingly, Mr. Hicks and Hicks Muse will continue to have a great deal of
influence over the management policies of Chancellor Media and all matters
submitted to a vote of the holders of Chancellor Media common stock. Also, the
combined voting power of Mr. Hicks and Hicks Muse may have the effect of
discouraging certain types of transactions involving an actual or potential
change of control of Chancellor Media.
POTENTIAL ADVERSE CONSEQUENCES TO HOLDERS OF THE NOTES IF A COURT FINDS A
FRAUDULENT CONVEYANCE
Various fraudulent conveyance laws have been passed for the protection of
creditors. These laws may be applied by a court to subordinate or avoid the
Notes or the Guarantees in favor of our other existing or future creditors or
those of the Guarantors.
If a court in a lawsuit on behalf of one of our unpaid creditors or a
representative of one of our creditors were to find that, at the time we issued
the Notes, we:
- - intended to hinder, delay or defraud any existing or future creditor or
considered insolvency with the intent to favor one or more creditors over
others; or
- - did not receive fair consideration or reasonably equivalent value for issuing
the Notes and we,
- were insolvent;
- were made insolvent by issuing the Notes;
- were engaged or about to engage in a business or transaction for which our
remaining assets would be unreasonably small to carry on our business; or
- intended to take on, or believed that we would take on, more debts than we
could pay,
such court could void our obligations under the Notes and void such
transactions. On the other hand, in such event, claims of holders of such Notes
could be subordinated to claims of our other creditors.
Our obligations under the Notes are guaranteed by each of the Guarantors. If a
court were to find that:
- - the Guarantee was taken on by the Guarantor with the intent to hinder, delay
or defraud any existing or future creditor or the Guarantor considered
insolvency with the intent to favor one or more creditors over others; or
- - the Guarantor did not receive fair consideration or reasonably equivalent
value for issuing the Guarantee and the Guarantor,
- was insolvent;
- was made insolvent by issuing the Guarantee;
- was engaged or about to engage in a business or transaction for which its
remaining assets of the Guarantor would be unreasonably small to carry on
its business; or
20
<PAGE> 27
- intended to take on, or believed that it would take on, more debts than it
could pay,
the court could void or subordinate the Guarantee in favor of the Guarantor's
creditors. Among other things, a legal challenge to any of the Guarantees based
on fraudulent conveyance grounds may focus on the benefit, if any, realized by a
Guarantor as a result our issuance of the Notes.
If any Guarantee is avoided or deemed to be unenforceable, holders of the Notes
would not have any claim against that Guarantor. Such holders would only be our
creditors and creditors of the remaining Guarantors, if any. In such event, the
claims of the holders of the Notes against such Guarantor would be subject to
the prior payment of all liabilities and preferred stock claims of the
Guarantor. The Guarantors cannot be sure that there would be enough assets to
satisfy the claims of the holders of the Notes relating to any voided portion of
a Guarantee.
Based upon information currently available to us, we believe that the Notes and
the Guarantees are being incurred for proper purposes and in good faith. Also,
we, and each of the Guarantors:
- - are solvent and will continue to be solvent after giving effect to the
issuance of the Notes and the Guarantees, as the case may be;
- - will have enough capital for carrying on its business after the issuance of
the Notes and the Guarantees, as the case may be; and
- - will be able to pay our debts.
DIFFICULTY OF SATISFYING PAYMENT OBLIGATIONS UPON A CHANGE OF CONTROL
If a Change of Control occurs, we may be required to make an offer to purchase
all of the Notes then outstanding. We would be required to purchase the Notes at
101% of their principal amount, plus accrued interest to the date of repurchase.
If a Change of Control occurs, we cannot be sure that we would have enough funds
to pay for all of the Notes. If we are required to purchase the Notes, we would
need to secure third-party financing if we do not have available funds to meet
our purchase obligations. However, we cannot be sure that we would be able to
secure such financing on favorable terms, if at all.
Also, our financing arrangements may restrict our ability to repurchase the
notes, including pursuant to a Change of Control Offer. Furthermore, a Change of
Control will result in an event of default under the senior loan agreement and
may lead to an acceleration of other senior indebtedness, if any. In such event,
the subordination provisions of the Notes would require us to pay our senior
loan agreement and any other senior indebtedness in full before repurchasing the
Notes. In addition, a Change of Control could require us to repurchase our
existing notes and Chancellor Media could be required to offer to redeem the 7%
Convertible Preferred Stock of Chancellor Media (the "7% Convertible Preferred
Stock") and the $3.00 Convertible Exchangeable Preferred Stock of Chancellor
Media (the "$3.00 Convertible Preferred Stock"). See "Description of New
Notes -- Change of Control," "-- Subordination," and "Description of Certain
Indebtedness." The inability to repay senior indebtedness, if accelerated, and
to purchase all of the tendered Notes or tendered existing notes, would
constitute an event of default under the Indenture.
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<PAGE> 28
LACK OF AN ESTABLISHED MARKET FOR THE NOTES
Since the Offering, there has been no public market for the Notes. We do not
plan on listing the Notes on any securities exchange. The initial purchaser has
told us that it plans on making a market in the Notes, but it does not have to
do so, and may discontinue such activities at any time. Accordingly, we cannot
determine:
- - the likelihood that an active market for the Notes will develop;
- - the liquidity of any such market;
- - the ability of holders to sell their Notes; or
- - the prices that they may obtain for their Notes if sold.
Future trading prices for the Notes will depend upon many factors, including,
among others, our operating results, the market for similar securities and
changing interest rates.
22
<PAGE> 29
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the New Notes. In
consideration for issuing the New Notes as contemplated in this Prospectus, we
will receive in exchange Old Notes in like principal amount, which will be
cancelled and as such will not result in any increase in our indebtedness.
CAPITALIZATION
The following table sets forth the (i) actual capitalization of the Company at
September 30, 1998, (ii) such pro forma capitalization as adjusted to give
effect to the Completed Transactions and the 8% Senior Notes Offering and (iii)
such pro forma capitalization as further adjusted to give effect to the Pending
Transactions (excluding the Petry Acquisition and the Pegasus Acquisition). See
"Pro Forma Financial Information" on page P-1.
<TABLE>
<CAPTION>
COMPANY AS ADJUSTED
COMPANY FOR THE COMPLETED COMPANY
HISTORICAL TRANSACTIONS PRO FORMA
---------- ------------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt:
Senior Credit Facility(1)................... $1,268,000 $1,645,280 $2,344,407(2)
8% Senior Notes due 2008.................... -- 750,000 750,000
9 3/8% Senior Subordinated Notes due 2004... 200,000 200,000 200,000
8 3/4% Senior Subordinated Notes due 2007... 200,000 200,000 200,000
10 1/2% Senior Subordinated Notes due
2007...................................... 100,000 100,000 100,000
8 1/8% Senior Subordinated Notes due 2007... 500,000 500,000 500,000
9% Senior Subordinated Notes due 2008....... 750,000 750,000 750,000
---------- ---------- ----------
Total long-term debt................. 3,018,000 4,145,280 4,844,407(2)
Stockholder's equity:
Common stock................................ 1 1 1
Additional paid-in capital.................. 2,654,273 2,654,273 2,654,273
Accumulated deficit......................... (317,502) (317,502) (307,909)
---------- ---------- ----------
Total stockholder's equity................ 2,336,772 2,336,772 2,346,365
---------- ---------- ----------
Total capitalization................. $5,354,772 $6,482,052 $7,190,772(2)
========== ========== ==========
</TABLE>
23
<PAGE> 30
- -------------------------
(1) The Senior Credit Facility (as defined on page 130) currently provides for a
total commitment of $2.50 billion, consisting of a $1.60 billion reducing
revolving credit facility and a $900.0 million term loan facility. The
Company expects to engage in negotiations with its bankers regarding the
establishment of a new, expanded credit facility that would replace the
Senior Credit Facility. Although there can be no assurance, the Company
believes that amounts available under the Senior Credit Facility and amounts
potentially available under a new, expanded credit facility will be used to
finance the remaining Pending Transactions as well as future acquisitions.
Other potential sources of financing for the Pending Transactions and future
acquisitions include cash flow from operations, additional debt or equity
financings, the sale of non-core assets or a combination of those methods.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Liquidity and Capital Resources."
(2) Consistent with the presentation of the Company's pro forma financial
information included elsewhere herein, the pro forma capitalization does not
give effect to borrowings that the Company expects to make in order to
finance the Petry Acquisition and the Pegasus Acquisition. If the pro forma
capitalization is further adjusted to give effect to the Petry Acquisition
and the Pegasus Acquisition, the long-term debt amount reflected above under
the Senior Credit Facility would be approximately $2.5 billion, the total
long-term debt would be $5.0 billion and the total capitalization would be
$7.4 billion. The total cash financing required to consummate the Petry
Acquisition and the Pegasus Acquisition is expected to be approximately
$199.1 million.
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<PAGE> 31
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
We are providing the following financial information to aid you in your analysis
of the Company and an investment in the Notes. We derived this information from
our audited financial statements for 1993 through 1997 and our unaudited
financial statements for the nine months ended September 30, 1997 and 1998. The
information is only a summary and you should read it in conjunction with our
historical financial statements and related notes included on page F-1 through
F-139 of this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------------- -----------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- --------- ---------- ----------- ---------- ----------
(IN THOUSANDS, EXCEPT RATIO AND MARGIN DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Gross revenues.......................... $106,813 $125,478 $ 186,365 $ 337,405 $ 663,804 $ 382,994 $1,015,562
Net revenues............................ 93,504 109,516 162,931 293,850 582,078 333,283 899,096
Operating expenses excluding
depreciation and amortization......... 60,656 68,852 97,674 174,344 316,248 184,713 491,924
Depreciation and amortization........... 33,524 30,596 47,005 93,749 185,982 104,386 311,644
Corporate general and administrative.... 2,378 2,672 4,475 7,797 21,442 11,646 25,188
Other nonrecurring costs(1)............. 7,002 -- -- -- -- -- 59,475
-------- -------- --------- ---------- ----------- ---------- ----------
Operating income (loss)................. (10,056) 7,396 13,777 17,960 58,406 32,538 10,865
Interest expense, net................... 13,730 13,718 19,144 37,050 83,095 45,036 135,709
Other (income) expense, net(2).......... (3,037) (6,361) 291 -- (17,997) (18,380) (33,326)
-------- -------- --------- ---------- ----------- ---------- ----------
Income (loss) before income taxes and
extraordinary item.................... (20,749) 39 (5,658) (19,090) (6,692) 5,882 (91,518)
Income tax expense (benefit)............ -- -- 192 (2,896) 7,802 5,244 (15,380)
-------- -------- --------- ---------- ----------- ---------- ----------
Income (loss) before extraordinary
item.................................. (20,749) 39 (5,850) (16,194) (14,494) 638 (76,138)
Extraordinary loss, net of tax
benefit(3)............................ -- 3,585 -- -- 4,350 4,350 47,089
-------- -------- --------- ---------- ----------- ---------- ----------
Net loss................................ (20,749) (3,546) (5,850) (16,194) (18,844) (3,712) (123,227)
Preferred stock dividends(4)............ -- -- -- -- 12,901 2,779 17,601
-------- -------- --------- ---------- ----------- ---------- ----------
Net loss attributable to common stock... $(20,749) $ (3,546) $ (5,850) $ (16,194) $ (31,745) $ (6,491) $ (140,828)
======== ======== ========= ========== =========== ========== ==========
CONSOLIDATED BALANCE SHEET DATA (END OF
PERIOD):
Working capital......................... $ 7,873 $ 15,952 $ 30,556 $ 41,421 $ 112,644 $ 123,805 $ 199,325
Intangible assets, net.................. 212,517 233,494 458,787 853,643 4,404,443 3,828,014 4,916,533
Total assets............................ 283,505 297,990 552,347 1,020,959 4,961,477 4,213,376 5,905,378
Long-term debt (including current
portion)(5)........................... 152,000 174,000 201,000 358,000 2,573,000 1,857,000 3,018,000
Redeemable preferred stock.............. -- -- -- -- 331,208 338,566 --
Stockholder's equity.................... 120,968 112,353 304,577 549,411 1,480,207 1,508,666 2,336,772
OTHER FINANCIAL DATA:
Broadcast cash flow(6).................. $ 32,848 $ 40,664 $ 65,257 $ 119,506 $ 265,830 $ 148,570 $ 407,172
Ratio of earnings to fixed charges(7)... -- 1.0x -- -- -- -- --
</TABLE>
- -------------------------
(1) Consists of a non-cash charge resulting from the grant of employee stock
options prior to Chancellor Media's initial public offering in 1993 and of a
one-time executive severance charge related to the resignation of Scott K.
Ginsburg as President and Chief Executive Officer of Chancellor Media,
Chancellor Mezzanine Holdings Corporation ("CMHC") and the Company in 1998
and new employment agreements entered into with certain members of executive
management.
25
<PAGE> 32
(2) Includes gain on the dispositions of assets of $3,392, $6,991, $18,380 and
$18,380 in 1993, 1994, 1997 and the nine months ended September 30, 1997,
respectively. Includes a gain on the disposition of representation contracts
of $29,767 and a gain from the WFLN Settlement (as defined on page 40) of
$3,559 for the nine months ended September 30, 1998.
(3) In connection with its debt refinancing in 1994, 1997 and the nine months
ended September 30, 1997, the Company wrote off the unamortized balance of
deferred debt issuance costs of $3,585, $4,350 and $4,350, respectively, as
an extraordinary charge. For the nine months ended September 30, 1998, the
Company recorded an extraordinary charge of $47,089 (net of a tax benefit of
$25,357) consisting of premiums, estimated transaction costs and the
unamortized balance of deferred debt issuance costs related to the 12%
Debentures Tender Offer (as defined on page 44) and the 12 1/4% Debentures
Tender Offer (as defined on page 44).
(4) For the year ended December 31, 1997, represents preferred stock dividends
on the 12% Preferred Stock (as defined on page 29) and the 12 1/4% Preferred
Stock (as defined on page 29) for the period September 5, 1997 to December
31, 1997. For the nine months ended September 30, 1998, represents preferred
stock dividends on the 12% Preferred Stock for the period from January 1,
1998 through May 13, 1998 and on the 12 1/4% Preferred Stock for the period
from January 1, 1998 through July 23, 1998. Such preferred stock was issued
by the Company on September 5, 1997 in exchange for the substantially
identical securities of CRBC, which was merged into CMCLA.
(5) The current portion of the Company's long-term debt was $10,625, $4,000,
$4,000, $26,500, $0, $0 and $0 at December 31, 1993, 1994, 1995, 1996 and
1997 and September 30, 1997 and 1998, respectively.
(6) Broadcast cash flow consists of operating income excluding depreciation and
amortization, corporate general and administrative expense and other
non-cash and non-recurring charges. Although broadcast cash flow is not
calculated in accordance with generally accepted accounting principles, the
Company believes that broadcast cash flow is widely used as a measure of
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 the Company's
operating performance or liquidity that is calculated in accordance with
generally accepted accounting principles. Broadcast cash flow does not take
into account the Company's debt service requirements and other commitments
and, accordingly, broadcast cash flow is not necessarily indicative of
amounts that may be available for reinvestment in the Company's business or
other discretionary uses. Not all companies calculate broadcast cash flow
and EBITDA in the same fashion and therefore the information presented may
not be comparable to other similarly titled information of other companies.
(7) 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 $20,749, $5,658,
$19,090 and $6,692 for the years ended December 31, 1993, 1995, 1996 and
1997, respectively, and by $91,518 for the nine months ended September 30,
1998.
26
<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's results of operations from period to period have not historically
been comparable because of the impact of the various acquisitions and
dispositions that the Company has completed. For a description of the
transactions completed by the Company during 1997 and to date in 1998, see
"Business -- Recent Developments -- Transactions Completed Since January 1,
1997."
In the following analysis, management discusses the Company's broadcast cash
flow. 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 and non-recurring charges). The primary source of revenues
is the sale of broadcasting time for advertising. The Company'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. The Company strives to control these expenses by working
closely with local station management. The Company's revenues vary throughout
the year. As is typical in the radio broadcasting industry, the Company's first
calendar quarter generally produces the lowest revenues, and the fourth quarter
generally produces the highest revenues.
Although broadcast cash flow is not calculated in accordance with generally
accepted accounting principles, the Company believes that it is widely used as a
measure of 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 the Company's
operating performance or liquidity that is calculated in accordance with
generally accepted accounting principles. Broadcast cash flow does not take into
account the Company's debt service requirements and other commitments and,
accordingly, broadcast cash flow is not necessarily indicative of amounts that
may be available for dividends, reinvestment in the Company's business or other
discretionary uses. Not all companies calculate broadcast cash flow in the same
fashion and therefore the Company's broadcast cash flow information may not be
comparable to similarly titled information of other companies.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997
The Company's results of operations for the nine months ended September 30, 1998
are not comparable to the results of operations for the nine months ended
September 30, 1997 due to the impact of the Chancellor Merger (as defined on
page 39), the Viacom Acquisition (as defined on page 37), the Katz Acquisition
(as defined on page 39), the Martin Acquisition (as defined on page 41) and
various other acquisitions and dispositions discussed in "Business -- Recent
Developments."
Net revenues for the nine months ended September 30, 1998 increased 169.8% to
$899.1 million compared to $333.3 million for the nine months ended September
30, 1997. Operating expenses excluding depreciation and amortization for the
nine months ended
27
<PAGE> 34
September 30, 1998 increased 166.3% to $491.9 million compared to $184.7 million
for the nine months ended September 30, 1997. Operating income excluding
depreciation and amortization, corporate general and administrative expense and
other non-cash and non-recurring charges (broadcast cash flow) for the nine
months ended September 30, 1998 increased 174.1% to $407.2 million compared to
$148.6 million for the nine months ended September 30, 1997. The increase in net
revenues, operating expenses, and broadcast cash flow for the nine months ended
September 30, 1998 was primarily attributable to the net impact of the
Chancellor Merger, the Viacom Acquisition, the Katz Acquisition, the Martin
Acquisition and the various acquisitions and dispositions discussed elsewhere
herein, in addition to the overall net operational improvements realized by the
Company.
Depreciation and amortization for the nine months ended September 30, 1998
increased 198.5% to $311.6 million compared to $104.4 million for the nine
months ended September 30, 1997. The increase is primarily due to the impact of
the Chancellor Merger, the Viacom Acquisition, the Katz Acquisition and the
Martin Acquisition, as well as other acquisitions completed during 1997 and to
date in 1998.
Corporate general and administrative expenses for the nine months ended
September 30, 1998 increased 116.3% to $25.2 million compared to $11.6 million
for the nine months ended September 30, 1997. The increase is due to the growth
of the Company, and the related increase in properties and staff, primarily due
to recent acquisitions.
The executive severance charge of $59.5 million for the nine months ended
September 30, 1998 represents a one-time charge incurred in connection with the
resignation of Scott K. Ginsburg as President and Chief Executive Officer of the
Company.
As a result of the above factors, the Company realized operating income of $10.9
million for the nine months ended September 30, 1998 compared to $32.5 million
of operating income for the nine months ended September 30, 1997.
For the nine months ended September 30, 1998, the Company recorded a gain on
disposition of representation contracts of $29.8 million related to its media
representation operations. The Company entered into the media representation
business with the Katz Acquisition on October 28, 1997.
Interest expense, net for the nine months ended September 30, 1998 increased
201.3% to $135.7 million compared to $45.0 million for the same period in 1997.
The net increase in interest expense was primarily due to (i) additional bank
borrowings under the Senior Credit Facility required to finance the various
acquisitions discussed elsewhere herein offset by repayment of borrowings from
the net proceeds of the Company's various radio station dispositions and the
1998 Equity Offering (as defined on page 44), (ii) the assumption of CRBC's
9 3/8% Senior Subordinated Notes due 2004 (the "9 3/8% Notes") and 8 3/4% Senior
Subordinated Notes due 2007 (the "8 3/4% Notes") upon consummation of the
Chancellor Merger on September 5, 1997, (iii) the assumption of Katz' 10 1/2%
Senior Subordinated Notes due 2007 (the "10 1/2% Notes") upon consummation of
the Katz Acquisition on October 28, 1997 and (iv) the issuance of the 8 1/8%
Senior Subordinated Notes due 2007 (the "8 1/8% Notes") by the Company on
December 22, 1997.
For the nine months ended September 30, 1997, other income of $18.4 million
represents a gain on the disposition of assets related to the dispositions of
WNKS-FM in Charlotte ($3.5 million), WPNT-FM in Chicago ($0.5 million), WEJM-FM
in Chicago ($9.3 million), the FCC authorizations and certain transmission
equipment previously used
28
<PAGE> 35
in the operation of KYLD-FM in San Francisco ($1.7 million) and WEJM-AM in
Chicago ($3.4 million). For the nine months ended September 30, 1998, other
income represents a gain from the WFLN Settlement of $3.6 million.
The income tax benefit for the nine months ended September 30, 1998 is comprised
of current state tax expense and a deferred federal income tax benefit.
Dividends on preferred stock of CMCLA were $17.6 million for the nine months
ended September 30, 1998, which represent dividends on CMCLA's 12% Exchangeable
Preferred Stock (the "12% Preferred Stock") for the period from January 1, 1998
through May 13, 1998 and on CMCLA's 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock (the "12 1/4% Preferred Stock") for the period from
January 1, 1998 to July 23, 1998, each issued in September 1997 as part of the
Chancellor Merger. On May 13, 1998, CMCLA exchanged all shares of the 12%
Preferred Stock for its 12% Debentures (as defined on page 44) and on July 23,
1998, CMCLA exchanged all shares of the 12 1/4% Preferred Stock for its 12 1/4%
Debentures. The 12% Debentures and 12 1/4% Debentures (as defined on page 44)
were subsequently repurchased by CMCLA.
For the nine months ended September 30, 1997, the Company recorded an
extraordinary charge of $4.4 million (net of a tax benefit of $2.3 million)
consisting of the write-off of the unamortized balance of deferred debt issuance
costs related to the amendment and restatement of the Company's Senior Credit
Facility on April 25, 1997. For the nine months ended September 30, 1998, the
Company recorded an extraordinary charge of $47.1 million (net of a tax benefit
of $25.4 million) consisting of the premiums, estimated transaction costs and
the write-off of the unamortized balance of deferred debt issuance costs in
connection with the 12% Debentures Tender Offer and 12 1/4% Debentures Tender
Offer.
Dividends on Chancellor Media's preferred stock were $19.3 million for the nine
months ended September 30, 1998 compared to $5.7 million for the same period in
1997. The increase is due to dividends on the $3.00 Convertible Preferred Stock
issued in June 1997 and dividends on the 7% Convertible Preferred Stock issued
in September 1997 as part of the Chancellor Merger.
As a result of the above factors, the Company incurred a $160.1 million net loss
attributable to common stockholders for the nine months ended September 30, 1998
compared to a net loss attributable to common stockholders of $12.2 million for
the nine months ended September 30, 1997.
The basic and diluted loss per common share for the nine months ended September
30, 1998 was $1.17 compared to $0.14 for the nine months ended September 30,
1997.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
The Company's results of operations for the year ended December 31, 1997 are not
comparable to the results of operations for the year ended December 31, 1996 due
to the impact of the Chancellor Merger, the Viacom Acquisition, the Katz
Acquisition and various other station acquisitions and dispositions discussed in
"Business -- Recent Developments."
Net revenues for the year ended December 31, 1997 increased 98.1% to $582.1
million compared to $293.9 million for the year ended December 31, 1996.
Operating expenses excluding depreciation and amortization for 1997 increased
81.4% to $316.2 million
29
<PAGE> 36
compared to $174.3 million in 1996. Operating income excluding depreciation and
amortization, corporate general and administrative expense and other non-cash
and non-recurring charges (broadcast cash flow) for 1997 increased 122.4% to
$265.8 million compared to $119.5 million in 1996. The increase in net revenues,
operating expenses, and broadcast cash flow was primarily attributable to the
net impact of the various acquisitions and dispositions discussed elsewhere
herein, in addition to the overall net operational improvements realized by the
Company.
Depreciation and amortization for 1997 increased 98.4% to $186.0 million
compared to $93.7 million in 1996. The increase is primarily due to the impact
of the various acquisitions and dispositions discussed elsewhere herein.
Corporate general and administrative expenses for 1997 increased 175.0% to $21.4
million compared to $7.8 million in 1996. The increase is due to the growth of
the Company, and related increase in properties and staff, primarily due to
recent acquisitions.
As a result of the above factors, operating income for 1997 increased 225.2% to
$58.4 million compared to $18.0 million in 1996.
Interest expense for 1997 increased 126.6% to $85.0 million compared to $37.5
million in 1996. The net increase in interest expense was primarily due to (i)
additional bank borrowings under the Senior Credit Facility required to finance
the various acquisitions discussed elsewhere herein offset by repayment of
borrowings from the net proceeds of the Company's various radio station
dispositions, (ii) the assumption of the 9 3/8% Notes and the 8 3/4% Notes upon
consummation of the Chancellor Merger on September 5, 1997 and (iii) the
assumption of the 10 1/2% Notes upon consummation of the Katz Acquisition on
October 28, 1997.
The Company recorded a gain on disposition of assets of $18.4 million in 1997
related to the dispositions of WNKS-FM in Charlotte ($3.5 million), WPNT-FM in
Chicago ($0.5 million), WEJM-FM in Chicago ($9.3 million), WEJM-AM in Chicago
($3.4 million) and the FCC authorizations and certain transmission equipment
previously used in the operation of KYLD-FM in San Francisco ($1.7 million).
The provision for income tax expense of $7.8 million for the year ended December
31, 1997 is comprised of current federal and state income taxes of $6.8 million
and $4.8 million, respectively, and a deferred federal income tax benefit of
$3.8 million.
The Company recorded an extraordinary charge of $4.4 million (net of a tax
benefit of $2.3 million) in 1997, consisting of the write-off of the unamortized
balance of deferred debt issuance costs related to the amendment and restatement
of the Company's Senior Credit Facility on April 25, 1997.
Dividends on preferred stock were $12.9 million in 1997, representing dividends
on the 12 1/4% Preferred Stock and 12% Preferred Stock issued in September 1997
as part of the Chancellor Merger.
As a result of the above factors, the Company incurred a $31.7 million net loss
attributable to common stock in 1997 compared to a $16.2 million net loss in
1996.
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YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
The Company'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 Company's acquisition of Pyramid Communications, Inc. on
January 17, 1996 (the "Pyramid Acquisition") and various other station
acquisitions and dispositions.
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.
Operating expenses excluding depreciation and amortization for 1996 increased
78.5% to $174.3 million compared to $97.7 million in 1995. Operating income
excluding depreciation and amortization, corporate general and administrative
expense and other non-cash and non-recurring charges (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, operating expenses, and broadcast
cash flow was primarily attributable to the impact of various station
acquisitions and dispositions, in addition to the overall net operational
improvements realized by the Company'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
the Company, 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 95.4% 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 Pyramid Acquisition as well
as the other station acquisitions, offset by repayment of borrowings under the
Company's prior senior credit facility from the net proceeds of the offering in
October 1996 by Chancellor Media of 18,000,000 shares of its Common Stock, the
net proceeds of which Chancellor Media contributed to the Company, and an
overall decrease in the Company'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.
As a result of the above factors, the Company incurred a $16.2 million net loss
attributable to common stockholders in 1996 compared to a $5.9 million net loss
in 1995.
LIQUIDITY AND CAPITAL RESOURCES
Overview. The Company historically has generated sufficient cash flow from
operations to finance its existing operational requirements and debt service
requirements, and the Company anticipates that this will continue to be the
case. The Company historically has used the proceeds of bank debt and private
and public debt and equity offerings,
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supplemented by cash flow from operations not required to fund operational
requirements and debt service, to fund implementation of the Company's
acquisition strategy.
The total cash financing required to consummate the Pending Transactions is
expected to be $919.2 million. The Company expects to receive $21.0 million in
cash from the completion of the Chicago Disposition. Accordingly, the Company
will require at least $898.2 million in additional financing to consummate the
Pending Transactions. Although there can be no assurance, the Company expects
that $355.4 million will be required to be borrowed during the first quarter of
1999 (for the Cleveland Acquisitions, as defined on page 42, and Pegasus
Acquisition), $90.0 million will be required to be borrowed during the second
quarter of 1999 (for the Phoenix Acquisition, as defined on page 43) and the
remaining $344.3 million will be required to be borrowed for the Capstar/SFX
Transaction (as defined on page 42) over the three year period in which the
Capstar/SFX Stations (as defined on page 42) will be acquired. In addition,
financing of $129.5 million will be required if the Petry Acquisition is
consummated. Depending on the timing of the consummation of the Pending
Transactions, the Company may need to obtain additional financing.
The Company believes that amounts available under the Senior Credit Facility and
the $250.0 million potentially available under the Additional Facility
Indebtedness will be used to finance the remaining Pending Transactions as well
as future acquisitions. The Senior Credit Facility currently provides for a
total commitment of $2.50 billion, consisting of $1.60 billion reducing
revolving credit facility and a $900.0 million term loan facility. Other
potential sources of financing for the Pending Transactions and future
acquisitions include cash flow from operations, additional debt or equity
financings, the sale of non-core assets or a combination of those sources.
In addition to debt service requirements under the Senior Credit Facility, the
Company is required to pay interest on the existing senior subordinated notes.
Interest payment requirements of the Company on the existing senior subordinated
notes are $87.4 million per year. Interest payment requirements of the Company
on the 8% Senior Notes are $60.0 million per year. Cash dividend requirements of
Chancellor Media on its $3.00 Convertible Preferred Stock and its 7% Convertible
Preferred Stock are $25.7 million per year. Because Chancellor Media is a
holding company with no significant assets other than the common stock of CMHC,
Chancellor Media will rely solely on dividends from CMHC, which in turn is
expected to distribute dividends paid to it by the Company and other
subsidiaries to Chancellor Media, to permit Chancellor Media to pay cash
dividends on the $3.00 Convertible Preferred Stock and the 7% Convertible
Preferred Stock. The Senior Credit Facility and the indentures governing the
existing senior subordinated notes limit, but do not prohibit, the Company from
paying such dividends to CMHC.
RECENTLY-ISSUED ACCOUNTING PRINCIPLES
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information. This
Statement establishes standards for reporting information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial reports issued to
stockholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers.
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SFAS No. 131 is effective for fiscal years beginning after December 15, 1997.
Management does not anticipate that this Statement will have a significant
effect on the Company's consolidated financial statements.
In February 1998, the Financial Accounting Standards Board issued SFAS No. 132,
Employers' Disclosure about Pensions and Other Postretirement Benefits. This
Statement revises employers' disclosures about pensions and other postretirement
benefit plans. It does not change the measurement or recognition of those plans.
SFAS No. 132 is effective for fiscal years beginning after December 15, 1997.
Management does not anticipate that this Statement will have a significant
effect on the Company's consolidated financial statements.
In April 1998, Accounting Standards Executive Committee ("ACSEC") issued
Statement of Position ("SOP") No. 98-5, "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5") effective for fiscal years beginning after December 15,
1998. This SOP provides guidance on the financial reporting of start-up costs
and organization costs. It requires costs of start-up activities and
organization costs to be expensed as incurred. Initial application of SOP 98-5
should be reported as the cumulative effect of a change in accounting principle,
as described in Accounting Principles Board (APB) Opinion No. 20, "Accounting
Changes." When adopting this SOP, entities are not required to report the pro
forma effects of retroactive application. Management does not believe the
implementation of SOP 98-5 will have a material impact on the Company's
consolidated financial statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. This Statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts,
(collectively referred to as derivatives) and for hedging activities. SFAS No.
133 is effective for all fiscal quarters of all fiscal years beginning after
June 15, 1999. Management does not anticipate that this Statement will have a
material impact on the Company's consolidated financial statements.
YEAR 2000 ISSUE
The "Year 2000 Issue" is whether the Company's computer systems will properly
recognize date sensitive information when the year changes to 2000, or "00."
Systems that do not properly recognize such information could generate erroneous
data or cause a system to fail. The Company has conducted a comprehensive review
of its computer systems to identify the systems that could be affected by the
Year 2000 Issue and has developed an implementation plan. The Company uses
purchased software programs for a variety of functions, including general
ledger, accounts payable and accounts receivable accounting packages. The
companies providing these software programs are Year 2000 compliant, and the
Company has received Year 2000 compliance certificates from these software
vendors. The Company's Year 2000 implementation plan also includes ensuring that
all individual work stations and other equipment with embedded chips or
processors are Year 2000 compliant. The Company is in the process of reviewing
various modification and replacement plans related to the recent Whiteco
Acquisition and expects to complete its review by early 1999. Costs associated
with ensuring that the Company's existing systems are Year 2000 compliant and
replacing certain existing systems are currently expected to be approximately
$5.1 million, of which $0.3 million has been incurred to date. These cost
estimates are subject to change based on further analysis, and any change in
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such costs may be material. The Company believes that the Year 2000 Issue will
not pose significant operational problems for the Company's computer systems
and, therefore, will not have a material impact on the operations of the
Company.
In addition, the Company reviews the computer systems of companies it intends to
acquire in order to assess whether such systems are Year 2000 compliant. To the
extent such systems are not Year 2000 compliant, the Company will develop an
implementation plan to ensure such systems are Year 2000 compliant or will
convert such systems to the Company's computer systems which are Year 2000
compliant. There is no guarantee that the systems of companies to be acquired by
the Company in the future will be timely converted and would not have an adverse
effect on the operations of the Company.
The ability of third parties with whom the Company transacts business to
adequately address their Year 2000 issues is outside of the Company's control.
Therefore, there can be no assurance that the failure of such third parties to
adequately address their Year 2000 issues will not have a material adverse
effect on the Company's business, financial condition, cash flows and results of
operations. The Company expects to develop contingency plans intended to
mitigate any possible disruption in business that may result from certain of the
Company's systems or the systems of third parties that are not Year 2000
compliant.
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BUSINESS
The Company, an indirect wholly owned subsidiary of Chancellor Media, is a
diversified multi-media company that (i) owns and/or operates Chancellor Radio
Group ("CRG") which consists of 118 radio stations (including 13 stations
currently operated under time brokerage agreements) in 22 of the largest U.S.
markets and Puerto Rico, (ii) provides national media sales representation
("Media Representation") through Katz Media Group, Inc. ("Katz"), a wholly owned
subsidiary and (iii) has a significant and growing outdoor advertising presence
through Chancellor Outdoor Group ("COG"). Chancellor Media will also have a
meaningful presence in the television broadcasting sector through its recently
announced acquisition of LIN and an expanded presence in mid-sized markets
through its pending acquisition of Capstar. See "-- Recent Developments" and
"-- Pending Transactions of Chancellor Media."
CHANCELLOR RADIO GROUP
The Company's current radio station portfolio (including 13 stations currently
operated under time brokerage agreements) consists of 118 stations (89 FM and 29
AM), including a total of 15 markets in which the Company owns four or five FM
stations ("superduopolies"). The Company owns superduopolies in 11 of the
nation's 15 largest radio markets -- Los Angeles, New York, Chicago, San
Francisco, Dallas/Ft. Worth, Philadelphia, Washington, D.C., Houston, Detroit,
Denver and Minneapolis-St. Paul and in four other large markets -- Phoenix,
Pittsburgh, Orlando and Puerto Rico. Upon consummation of the Pending
Transactions, the Company will own 123 stations (92 FM and 31 AM) and will
increase its number of superduopolies to 16 with the addition of four FM and two
AM stations in Cleveland.
As a complement to its radio broadcasting operations, the Company formed a
national radio network, The AMFM Radio Networks, which began broadcasting
advertising over the Company's portfolio of stations and stations owned by
Capstar in January 1998. Management believes that The AMFM Radio Networks will
allow the Company to further leverage this broad station base, personalities and
advertising inventory by delivering a national audience of approximately 66
million listeners (including approximately 45 million listeners from the
Company's portfolio of stations) to network advertisers. The AMFM Radio Networks
has expanded through the acquisition of syndicated programming shows including
American Top 40 with Casey Kasem, Rockline, Modern Rock Live, Reelin' in the
Years and Live from the Pit.
The Company's radio station 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 the Company's radio 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 radio station portfolio, the Company is not unduly reliant on
the performance of any one station or market. No single market to be served by
the Company represented more than 9% of the Company's pro forma broadcast cash
flow for the nine months ended September 30, 1998 (excluding the Petry
Acquisition and the Pegasus Acquisition).
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MEDIA REPRESENTATION
The Company entered into the media representation business with the acquisition
of Katz on October 28, 1997. Katz is a full-service media representation firm
serving multiple types of electronic media, with leading market share in the
representation of radio and television stations and cable television systems.
Katz is retained on an exclusive basis by radio stations, television stations
and cable television systems in over 200 designated market areas throughout the
United States, including at least one radio or television station in each of the
50 largest designated market areas, to sell national spot advertising air time.
If the Petry Acquisition is consummated, the Company will expand its presence in
the television representation business.
CHANCELLOR OUTDOOR GROUP
In July 1998, the Company entered the outdoor advertising business with the
acquisition of Martin Media, an outdoor advertising company with over 14,500
billboards and outdoor displays in 12 states. As a result of the consummation of
the Whiteco Acquisition, the Chancellor Outdoor Group now owns and operates over
37,000 outdoor advertising display faces in 37 states and ranks among the top
five outdoor companies in the United States.
CONSOLIDATED COMPANY
On a pro forma basis after giving effect to the transactions described in "Pro
Forma Financial Information" beginning on page P-1, the Company would have had
net revenue and broadcast cash flow of approximately $1.1 billion and $512.8
million, respectively, for the nine months ended September 30, 1998, its pro
forma broadcast cash flow margin for such period would have been 46%, and
approximately 65% of pro forma net revenue for such period would have been
generated by markets in which the Company owns superduopolies. Furthermore, the
Company would have generated approximately 75% of its net revenue from radio
operations, approximately 11% from media representation operations and
approximately 14% from outdoor advertising operations. The Petry Acquisition and
the Pegasus Acquisition are excluded from the pro forma information included in
this Prospectus for a number of reasons including (a) uncertainties regarding on
what terms, and in some cases, whether such transaction will be consummated, (b)
whether such acquisition will be consummated by the Company or another
stand-alone entity formed by Chancellor Media, or (c) the availability of
appropriate financial information. In the opinion of management of the Company,
such information is not material to such pro forma presentations, either
individually or in the aggregate.
RECENT DEVELOPMENTS
TRANSACTIONS COMPLETED SINCE JANUARY 1, 1997
On January 31, 1997, the Company acquired WWWW-FM and WDFN-AM in Detroit from
affiliates of CRBC for $30.0 million 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 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 Company had previously been
operating KKSF-FM and
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KDFC-FM/AM under a time brokerage agreement since November 1, 1996. On July 21,
1997, the Company sold KDFC-FM to Bonneville International Corporation
("Bonneville") for $50.0 million in cash. The assets of KDFC-FM were classified
as assets held for sale in connection with the purchase price allocation of the
acquisition of KKSF-FM and KDFC-FM/AM and no gain or loss was recognized by the
Company upon consummation of the sale.
On April 1, 1997, the Company acquired WJLB-FM and WMXD-FM in Detroit from
Secret Communications, L.P. ("Secret") for $168.0 million in cash plus various
other direct acquisition costs. The Company had previously been operating
WJLB-FM and WMXD-FM under time brokerage agreements since September 1, 1996.
On April 3, 1997, the Company exchanged WQRS-FM in Detroit (which the Company
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. (now known as
WTEM-AM) and $9.5 million in cash. The net purchase price to the Company of
WWRC-AM was therefore $22.5 million. The Company had previously been operating
WWRC-AM under a time brokerage agreement since June 17, 1996.
On May 1, 1997, the Company acquired WDAS-FM/AM in Philadelphia from affiliates
of Beasley FM Acquisition Corporation for $103.0 million in cash plus various
other direct acquisition costs.
On May 15, 1997, the Company exchanged five of its six stations in Charlotte,
North Carolina (WPEG-FM, WBAV-FM/AM, WRFX-FM and WFNZ-AM) for two FM stations in
Philadelphia (WIOQ-FM and WUSL-FM) owned by EZ Communications, Inc. ("EZ") in
Philadelphia (the "Charlotte Exchange"), and also sold the Company's sixth radio
station in Charlotte, WNKS-FM, to EZ for $10.0 million in cash and recognized a
gain of $3.5 million.
On May 30, 1997, the Company acquired WPNT-FM in Chicago from affiliates of
Century Broadcasting Company for $75.7 million in cash (including $2.0 million
for the purchase of the station's accounts receivable) plus various other direct
acquisition costs. On June 19, 1997, the Company sold WPNT-FM in Chicago to
Bonneville for $75.0 million in cash and recognized a gain of $0.5 million.
On June 3, 1997, the Company sold WEJM-FM in Chicago to affiliates of Crawford
Broadcasting for $14.8 million in cash and recognized a gain of $9.3 million.
On July 2, 1997, the Company 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 $612.4 million in cash
including various other direct acquisition costs (the "Viacom Acquisition"). The
Viacom Acquisition was financed with (i) bank borrowings under the Senior Credit
Facility of $552.6 million; (ii) $53.8 million in escrow funds paid by the
Company on February 19, 1997 and (iii) $6.1 million financed through working
capital. In June 1997, Chancellor Media issued 5,990,000 shares of $3.00
Convertible Preferred Stock for net proceeds of $287.8 million which were
contributed to the Company and used to repay borrowings under the Senior Credit
Facility and subsequently were reborrowed on July 2, 1997 as part of the
financing of the Viacom Acquisition. On July 7, 1997, the Company sold WJZW-FM
in Washington, D.C. to affiliates of Capital Cities/ABC Radio for $68.0 million
in cash. The
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assets of WJZW-FM, as well as the assets of WZHF-AM and WBZS-AM, which were also
sold on August 13, 1997, were accounted for as assets held for sale in
connection with the purchase price allocation of the Viacom Acquisition and no
gain or loss was recognized by the Company upon consummation of the sales.
On July 7, 1997, the Company sold the FCC authorizations and certain
transmission equipment previously used in the operation of KYLD-FM in San
Francisco to Susquehanna Radio Corporation ("Susquehanna") for $44.0 million in
cash and recognized a gain of $1.7 million. Simultaneously therewith, CRBC sold
the call letters "KSAN-FM" (which CRBC previously used in San Francisco) to
Susquehanna. On July 7, 1997, the Company and CRBC entered into a time brokerage
agreement to enable the Company to operate KYLD-FM on the frequency previously
assigned to KSAN-FM, and on July 7, 1997, CRBC changed the call letters of
KSAN-FM to KYLD-FM. Upon the consummation of the Chancellor Merger, the Company
changed the format of the new KYLD-FM to the format previously operated on the
old KYLD-FM.
On July 14, 1997, the Company completed the disposition of WLUP-FM in Chicago to
Bonneville for net proceeds of $80.0 million which were held by a qualified
intermediary pending the completion of the deferred exchange of WLUP-FM for
KZPS-FM and KDGE-FM in Dallas. On October 7, 1997, the Company applied the net
proceeds from the disposition of WLUP-FM of $80.0 million in cash, plus an
additional $3.5 million and various other direct acquisition costs, in a
deferred exchange of WLUP-FM for KZPS-FM and KDGE-FM in Dallas. The Company had
previously operated KZPS-FM and KDGE-FM under time brokerage agreements
effective August 1, 1997.
On July 21, 1997, the Company entered into a time brokerage agreement with CRBC
whereby the Company began managing certain limited functions of CRBC's stations
KBGG-FM, KNEW-AM and KABL-FM in San Francisco pending the consummation of the
Chancellor Merger (as defined herein), which occurred on September 5, 1997.
On August 13, 1997, the Company sold WBZS-AM and WZHF-AM in Washington, D.C.
(acquired as part of the Viacom Acquisition) and KDFC-AM in San Francisco to
affiliates of Douglas Broadcasting ("Douglas") for $18.0 million in the form of
a promissory note. The promissory note, as amended on May 1, 1998, bears
interest at 7 3/4% from the closing date through February 28, 1998 and at 10.0%
from March 1, 1998 through the remainder of the term of the note, with a balloon
principal payment due four years after closing. At closing, Douglas posted a
$1.0 million letter of credit for the benefit of the Company that will remain
outstanding until all amounts due under the promissory note are paid.
On August 27, 1997, the Company sold WEJM-AM in Chicago to Douglas for $7.5
million in cash and recognized a gain of $3.3 million.
On September 5, 1997, pursuant to an Amended and Restated Agreement and Plan of
Merger, dated as of February 19, 1997 and amended and restated on July 31, 1997
(the "Chancellor Merger Agreement"), among Chancellor Broadcasting, CRBC,
Evergreen Media Corporation ("Evergreen"), Evergreen Mezzanine Holdings
Corporation ("EMHC") and Evergreen Media Corporation of Los Angeles ("EMCLA"),
(i) Chancellor was merged (the "Parent Merger") with and into EMHC, a direct,
wholly-owned subsidiary of Evergreen, with EMHC remaining as the surviving
corporation and (ii) CRBC was merged (the "Subsidiary Merger") with and into
EMCLA, a direct, wholly-owned subsidiary of EMHC, with EMCLA remaining as the
surviving corporation
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(collectively, the "Chancellor Merger"). Upon consummation of the Parent Merger,
Evergreen was renamed Chancellor Media Corporation and EMHC was renamed CMHC.
Upon consummation of the Subsidiary Merger, EMCLA was renamed CMCLA.
Consummation of the Chancellor Merger added 52 radio stations (36 FM and 16 AM)
to the Company's portfolio of stations, including 13 stations in markets in
which the Company previously operated. The total purchase price allocated to net
assets acquired was approximately $2.0 billion which included (i) the conversion
of each outstanding share of Chancellor Common Stock into 0.9091 shares of
Chancellor Media's Common Stock, resulting in the issuance of 34,617,460 shares
of Chancellor Media's Common Stock at $15.50 per share, (ii) the assumption of
long-term debt of CRBC of $949.0 million which included $549.0 million of
borrowings outstanding under the CRBC senior credit facility, $200.0 million of
CRBC's 9 3/8% Notes and $200.0 million of CRBC's 8 3/4% Notes, (iii) the
issuance of 2,117,629 shares of CMCLA's 12% Preferred Stock in exchange for
CRBC's substantially identical securities with a fair value of $215.6 million
including accrued and unpaid dividends of $3.8 million, (iv) the issuance of
1,000,000 shares of CMCLA's 12 1/4% Preferred Stock in exchange for CRBC's
substantially identical securities with a fair value of $120.2 million including
accrued and unpaid dividends of $0.8 million, (v) the issuance of 2,200,000
shares of Chancellor Media's 7% Convertible Preferred Stock in exchange for
Chancellor's substantially identical securities with a fair value of $111.1
million including accrued and unpaid dividends of $1.1 million, (vi) the
assumption of stock options issued to Chancellor stock option holders with a
fair value of $35.0 million and (vii) estimated acquisition costs of $31.0
million.
On October 28, 1997, Chancellor Media and the Company acquired Katz, a
full-service media representation firm, in a tender offer transaction for a
total purchase price of approximately $379.1 million which included (i) the
conversion of each outstanding share of Katz Common Stock into the right to
receive $11.00 in cash, resulting in total cash payments of $149.6 million, (ii)
the assumption of long-term debt of Katz and its subsidiaries of $222.0 million
which included $122.0 million of borrowings outstanding under the Katz senior
credit facility and $100.0 million of 10 1/2% Notes of Katz Media Corporation (a
subsidiary of Katz) and (iii) estimated acquisition costs of $7.5 million (the
"Katz Acquisition").
On December 29, 1997, the Company acquired five radio stations from Pacific and
Southern Company, Inc., a subsidiary of Gannett Co., Inc., consisting of
WGCI-FM/AM in Chicago for $140.0 million, KKBQ-FM/AM in Houston for $110.0
million and KHKS-FM in Dallas for $90.0 million, for an aggregate purchase price
of $340.0 million in cash plus various other direct acquisition costs.
On January 30, 1998, the Company acquired KXPK-FM in Denver from Ever Green
Wireless LLC (which is unrelated to the Company) for $26.0 million in cash plus
various other direct acquisition costs, of which $1.7 million was previously
paid by CRBC as escrow funds and are classified as other assets at December 31,
1997. The Company had previously operated KXPK-FM under a time brokerage
agreement since September 1, 1997.
On April 3, 1998, the Company exchanged WTOP-AM in Washington, KZLA-FM in Los
Angeles and WGMS-FM in Washington plus $63.0 million in cash (including $3.0
million paid by the Company in escrow and classified as other assets at December
31, 1997) to Bonneville for WBIX-FM in New York, KLDE-FM in Houston and KBIG-FM
in Los
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Angeles (the "Bonneville Exchange"). The Company had previously operated KLDE-FM
and KBIG-FM under time brokerage agreements since October 1, 1997 and WBIX-FM
since October 10, 1997, and had sold substantially all of the broadcast time of
WTOP-AM, KZLA-FM and WGMS-FM to Bonneville since October 1, 1997.
On April 13, 1998, the Company and Secret entered into a settlement agreement
regarding WFLN-FM in Philadelphia. Previously in August 1996, the Company and
Secret had entered into an agreement under which the Company would acquire
WFLN-FM from Secret for $37.8 million in cash. In April 1997, the Company
entered into an agreement to sell WFLN-FM to Greater Media for $41.8 million in
cash. On July 16, 1997, Secret purported to terminate the sale of WFLN-FM to the
Company. The Company subsequently brought suit against Secret to enforce its
rights to acquire WFLN-FM. Pursuant to a court settlement entered in August 1997
and the settlement agreement between the Company and Secret entered on April 13,
1998, (i) Secret sold WFLN-FM directly to Greater Media for $37.8 million, (ii)
Greater Media deposited $4.1 million (the difference between the Company's
proposed acquisition price for WFLN-FM from Secret and the Company's proposed
sale price for WFLN-FM to Greater Media) with the court and (iii) the Company
received $3.5 million of such amount deposited by Greater Media with the court,
plus interest earned during the period which the court held such amounts (the
"WFLN Settlement"), and Secret received the balance of such amounts.
On May 29, 1998, as part of the Capstar/SFX Transaction, the Company exchanged
WAPE-FM and WFYV-FM in Jacksonville (valued for purposes of the Capstar/SFX
Transaction at $53.0 million) plus $90.3 million in cash to Capstar in return
for KODA-FM in Houston (the "Houston Exchange"). Furthermore, on May 29, 1998,
Capstar sold KKPN-FM in Houston (acquired by Capstar as part of Capstar's
acquisition of SFX Broadcasting, Inc. ("SFX")) due to the attributable ownership
of Hicks Muse in both Capstar and the Company in order to comply with the FCC's
multiple ownership limits. In connection with Capstar's sale of KKPN-FM, the
Company received a commission from Capstar of $1.7 million. On May 29, 1998, the
Company also provided a loan (the "Capstar Loan") to Capstar in the principal
amount of $150.0 million as part of the Capstar/SFX Transaction. The Capstar
Loan bears interest at the rate of 12% per annum (subject to increase in certain
circumstances), and is secured by a senior pledge of common stock of Capstar's
direct subsidiary. A portion of the Capstar Loan will be prepaid by Capstar in
connection with the Company's acquisition of, and the proceeds of such
prepayment would be used by the Company as a portion of the purchase price for,
each Capstar/SFX Station. Hicks Muse, which is a substantial shareholder of the
Company, controls Capstar, and certain officers and directors of the Company are
directors and/or executive officers of Capstar and/or Hicks Muse.
On June 1, 1998, the Company acquired WWDC-FM/AM in Washington, D.C. from
Capitol Broadcasting Company and its affiliates for $74.1 million in cash
(including $2.1 million for the purchase of the stations' accounts receivable)
plus various other direct acquisition costs, of which $4.0 million was
previously paid by the Company as escrow funds and are classified as other
assets at December 31, 1997 (the "Capitol Broadcasting Acquisition").
On May 1, 1998, the Company formed a new marketing group division in an effort
to enhance the revenues the Company derives from its sales promotion activities.
On June 1, 1998, the Company acquired Global Sales Development, Inc., a
consulting firm based in
40
<PAGE> 47
Richmond, Virginia, for $0.7 million in cash plus various other direct
acquisition costs to lead its marketing efforts for this new division.
On June 15, 1998, the Company's national radio network, The AMFM Radio Networks,
acquired the syndicated programming shows of Global Satellite Network for $14.0
million in cash plus various other direct acquisition costs. The syndicated
programming shows acquired include "Rockline", "Modern Rock Live", "Reelin' in
the Years" and the concert series "Live from the Pit".
On July 31, 1998, the Company acquired Martin Media and certain affiliated
companies ("Martin Media"), an outdoor advertising company with over 14,500
billboards and outdoor displays in 12 states serving 23 markets, for $591.7
million in cash plus working capital of $19.4 million subject to certain
adjustments and various other direct acquisition costs of approximately $10.0
million (the "Martin Acquisition").
On August 28, 1998, the Company acquired various syndicated programming shows of
Casey Kasem and the related programming libraries for $7.2 million in cash and
$7.0 million in the form of a note due August 2000 (the "Kasem Acquisition").
In September and November 1998, the Company acquired approximately 600
additional billboards and outdoor displays in various markets for approximately
$23.1 million in cash (the "Other Outdoor Acquisitions").
On October 9, 1998, the Company acquired approximately a 22.4% non-voting equity
interest in Z-Spanish Media Corporation ("Z Spanish Media") for approximately
$25.0 million in cash. Z Spanish Media, which is headquartered in Sacramento,
California, is the owner and operator of 22 Hispanic format radio stations in
California, Texas, Arizona and Illinois.
On October 23, 1998, the Company acquired Primedia Broadcast Group, Inc. and
certain of its affiliates, which own and operate eight FM stations in Puerto
Rico, for approximately $76.1 million in cash less working capital deficit of
$1.3 million plus various other direct acquisition costs.
On November 13, 1998, the Company acquired approximately 1,000 display faces
from Kunz & Company for $33.3 million in cash plus various other direct
acquisition costs (the "Kunz Option"). Martin had previously paid $6.0 million
in cash to Kunz & Company on July 31, 1997. Martin began operating these 1,000
display faces under a management agreement effective July 31, 1997. In
connection with the acquisition of the Kunz & Company display faces, Chancellor
Media entered into a consent decree with the DOJ pursuant to which the Company
has agreed to divest approximately 130 display faces in the near future.
On December 1, 1998, the Company acquired the assets of the Outdoor Advertising
division of Whiteco Industries, Inc., an outdoor advertising company with over
22,000 billboards and outdoor displays in 34 states, for $930.0 million in cash
plus working capital and various other direct acquisition costs. In connection
with the Whiteco Acquisition, Chancellor Media entered into a consent decree
with the DOJ pursuant to which the Company has agreed to divest approximately
250 billboards in the near future.
The foregoing transactions (excluding the Other Outdoor Acquisitions and the
Kasem Acquisition) are collectively referred to herein as the "Completed
Transactions."
41
<PAGE> 48
PENDING TRANSACTIONS OF CMCLA
On February 20, 1998, the Company entered into an agreement to acquire from
Capstar KTXQ-FM and KBFB-FM in Dallas/Ft. Worth, KODA-FM, KKRW-FM and KQUE-AM in
Houston, KPLN-FM and KYXY-FM in San Diego and WDRV-FM, WJJJ-FM, WXDX-FM and
WDVE-FM in Pittsburgh (collectively, the "Capstar/SFX Stations") for an
aggregate purchase price of approximately $637.5 million in a series of
purchases and exchanges over a period of three years (the "Capstar/SFX
Transaction"). The Capstar/SFX Stations were acquired by Capstar as part of
Capstar's acquisition of SFX on May 29, 1998. On May 29, 1998, the Company
completed the Houston Exchange and began operating the remaining ten Capstar/SFX
Stations under time brokerage agreements. The purchase price for the remaining
ten Capstar/SFX Stations will be approximately $494.3 million. The Company is
currently assessing whether the terms of the Capstar/SFX Transaction will be
modified upon the consummation of the Capstar Merger by Chancellor Media.
On April 8, 1998, the Company entered into an agreement to acquire Petry Media
Corporation, a leading independent television representation firm. The agreement
currently provides for a purchase price of $129.5 million in cash. On June 3,
1998, the DOJ issued a second request for additional information under the HSR
Act in connection with the Petry Acquisition to which the Company has responded.
The Company and Petry are still negotiating with the DOJ regarding this
transaction and have agreed to extend the waiting period under the HSR Act
pending completion of these discussions. Accordingly, at this time, the Company
cannot be sure of the terms on which this transaction will be completed, if at
all.
On August 11, 1998, the Company entered into agreements to acquire four FM and
two AM radio stations in Cleveland for an aggregate purchase price of
approximately $275.0 million in cash plus various other direct acquisition costs
(the "Cleveland Acquisitions"). The Cleveland Acquisitions consist of the
purchase by the Company of (i) WDOK-FM and WRMR-AM from Independent Group
Limited Partnership, (ii) WZAK-FM from Zapis Communications, (iii) Zebra
Broadcasting Corporation which owns WZJM-FM and WJMO-AM and (iv) Wincom
Broadcasting Corporation which owns WQAL-FM. The consummation of each of the
Cleveland Acquisitions (other than the Wincom Acquisition) is contingent upon
the consummation of each of the other Cleveland Acquisitions (other than the
Wincom Acquisition). The Company began operating WQAL-FM under a time brokerage
agreement effective October 1, 1998. Although there can be no assurance, the
Company expects that the Cleveland Acquisitions will be consummated in the first
quarter of 1999.
On August 20, 1998, the Company entered into an agreement to sell WMVP-AM in
Chicago to ABC, Inc. for $21.0 million in cash (the "Chicago Disposition"). The
Company entered into a time brokerage agreement to sell substantially all of the
broadcast time of WMVP-AM effective September 10, 1998. Although there can be no
assurance, the Company expects that the Chicago Disposition will be consummated
in the fourth quarter of 1998.
On September 3, 1998, the Company entered into an agreement to acquire Pegasus,
a television broadcasting company which owns a television station in Puerto
Rico, for approximately $69.6 million in cash. Although there can be no
assurance, the Company expects that the Pegasus Acquisition will be consummated
in the first quarter of 1999. In
42
<PAGE> 49
connection with the LIN Merger, the Company may assign its rights under its
agreement with Pegasus to LIN.
On September 15, 1998, the Company entered into an agreement to acquire KKFR-FM
and KFYI-AM in Phoenix from The Broadcast Group, Inc. for $90.0 million in cash
(the "Phoenix Acquisition"). The Company began operating KKFR-FM and KFYI-AM
under a time brokerage agreement effective November 5, 1998. Although there can
be no assurance, the Company expects that the Phoenix Acquisition will be
consummated in the second quarter of 1999.
The foregoing transactions are collectively referred to herein as the "Pending
Transactions." Consummation of each of the Pending Transactions discussed above
is subject to various conditions, including, in certain cases, approval from the
FCC and the expiration or early termination of any waiting period required under
the HSR Act. Except as described above, 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.
PENDING TRANSACTIONS OF CHANCELLOR MEDIA
On July 7, 1998, Chancellor Media entered into an agreement whereby the ultimate
parent of LIN will merge into Chancellor Media. Pursuant to this agreement,
Chancellor Media will issue .0300 shares of Chancellor Media common stock for
each share of LIN's common stock resulting in the issuance of approximately 17.7
million shares (comprised of approximately 16.2 million newly issued shares, the
assumption of LIN phantom stock units representing approximately 0.4 million
shares and the assumption of LIN options representing the right to purchase
approximately 1.1 million shares). Upon consummation of the LIN Merger, it is
expected that LIN will own or operate 12 television stations in eight markets in
the United States. Upon consummation of the LIN Merger, LIN will be operated as
a separate, stand-alone company from CMCLA. Accordingly, the assets, liabilities
and results of operations of LIN will not be reflected in the consolidated
financial statements of the Company. Although there can be no assurance,
Chancellor Media expects that the LIN Merger will be consummated in the first
quarter of 1999.
On August 26, 1998, Chancellor Media and Capstar entered into an agreement to
merge in a stock-for-stock transaction that will create the nation's largest
radio broadcasting entity. Pursuant to this agreement, Chancellor Media will
acquire Capstar in a reverse merger in which Capstar will be renamed Chancellor
Media Corporation. Each share of Chancellor Media Common Stock will represent
one share in the combined entity. Each share of Capstar Common Stock will
represent 0.480 shares of common stock in the combined entity, subject to an
upward adjustment not to exceed 0.025 shares to the extent that Capstar's 1998
cash flow from specified assets exceeds certain specified targets. Upon
consummation of its pending transactions, Capstar will own and operate more than
355 radio stations serving 83 mid-sized markets nationwide. Upon consummation of
the Capstar Merger, Capstar's radio stations will be operated by stand-alone
companies which are separate from CMCLA and its subsidiaries. Accordingly, the
assets, liabilities, and results of operations of Capstar will not be reflected
in the consolidated financial statements of the Company. Although there can be
no assurance, Chancellor Media expects that the Capstar Merger will be
consummated in the second quarter of 1999.
43
<PAGE> 50
1998 FINANCING TRANSACTIONS
On March 13, 1998, Chancellor Media completed an offering of 21,850,000 shares
of its common stock (the "1998 Equity Offering"). The net proceeds from the 1998
Equity Offering of approximately $994.6 million were contributed to the Company
and were used to reduce bank borrowings under the revolving credit portion of
the Senior Credit Facility and the excess proceeds were initially invested in
short-term investment grade securities. The Company subsequently used the excess
proceeds for general corporate purposes, including the financing of the
Bonneville Exchange, the Capstar Loan and a portion of the Houston Exchange.
On May 8, 1998, the Company completed a consent solicitation (the "12% Preferred
Stock Consent Solicitation") to modify certain timing restrictions on its
ability to exchange all shares of its 12% Preferred Stock for its 12%
Subordinated Exchange Debentures due 2009 (the "12% Debentures"). Consenting
holders of 12% Preferred Stock received payments of $0.05 per share of 12%
Preferred Stock. On May 13, 1998, the Company exchanged the shares of 12%
Preferred Stock for 12% Debentures (the "12% Exchange"). In connection with the
12% Preferred Stock Consent Solicitation and 12% Exchange, the Company incurred
approximately $0.3 million in transaction costs which were recorded as deferred
debt issuance costs.
On June 10, 1998, the Company completed a cash tender offer (the "12% Debentures
Tender Offer") for all of its 12% Debentures for an aggregate repurchase cost of
$262.5 million which included (i) the principal amount of the 12% Debentures of
$211.8 million, (ii) premiums on the repurchase of the 12% Debentures of $47.8
million, (iii) accrued and unpaid interest on the 12% Debentures from May 14,
1998 through June 10, 1998 of $2.0 million and (iv) estimated transaction costs
of $1.0 million. In connection with the 12% Debentures Tender Offer, the Company
recorded an extraordinary charge of $31.9 million (net of a tax benefit of $17.2
million) consisting of the premiums, estimated transaction costs and the
write-off of the unamortized balance of deferred debt issuance costs.
On July 20, 1998, the Company completed a consent solicitation (the "12 1/4%
Preferred Stock Consent Solicitation") to modify certain timing restrictions on
its ability to exchange all shares of its 12 1/4% Preferred Stock for its
12 1/4% Subordinated Exchange Debentures due 2008 (the "12 1/4% Debentures").
Consenting holders of 12 1/4% Preferred Stock received payments of $0.05 per
share of 12 1/4% Preferred Stock. On July 23, 1998, the Company exchanged the
shares of 12 1/4% Preferred Stock for 12 1/4% Debentures (the "12 1/4%
Exchange"). In connection with the 12 1/4% Preferred Stock Consent Solicitation
and 12 1/4% Exchange, the Company incurred approximately $0.2 million in
transaction costs which were recorded as deferred debt issuance costs.
On August 19, 1998, the Company completed a cash tender offer (the "12 1/4%
Debentures Tender Offer") for all of its 12 1/4% Debentures for an aggregate
repurchase cost of $144.5 million which included (i) the principal amount of the
12 1/4% Debentures of $119.4 million, (ii) premiums on the repurchase of the
12 1/4% Debentures of $22.7 million, (iii) accrued and unpaid interest on the
12 1/4% Debentures from August 16, 1998 through August 19, 1998 of $1.8 million
and (iv) estimated transaction costs of $0.6 million. In connection with the
12 1/4% Debentures Tender Offer, the Company recorded an extraordinary charge of
$15.2 million (net of a tax benefit of $8.2 million) consisting of
44
<PAGE> 51
the premiums, estimated transaction costs and the write-off of the unamortized
balance of deferred debt issuance costs.
On September 30, 1998, the Company issued $750.0 million aggregate principal
amount of the Old Notes for estimated net proceeds of $730.0 million. The net
proceeds from the Original Offering will be used to finance a portion of the
Company's Pending Transactions. Prior to consummation of the Pending
Transactions, the Company used the net proceeds to temporarily reduce borrowings
outstanding under the revolving credit portion of the Senior Credit Facility.
On November 17, 1998, the Company issued $750.0 million aggregate principal
amount of 8% Senior Notes due 2008 (the "8% Senior Notes"), net of deferred debt
issuance costs of $20.0 million (the "8% Senior Notes Offering") for estimated
net proceeds of $730.0 million. The net proceeds from the 8% Senior Notes
Offering will be used to reduce bank borrowings under the revolving credit
portion of the Senior Credit Facility and the excess proceeds will be invested
in short-term investment grade securities, pending use for general corporate
purposes.
The foregoing transactions are referred to herein as the "1998 Financing
Transactions."
OTHER TRANSACTIONS
On July 10, 1998, Chancellor Media entered into an agreement to acquire a 50%
economic interest in Grupo Radio Centro, S.A. de C.V. ("GRC"), an owner and
operator of radio stations in Mexico, for approximately $120.5 million in cash
and $116.5 million in Chancellor Media Common Stock. On October 15, 1998,
Chancellor Media announced that it had provided notice to GRC that it was
terminating the acquisition agreement in accordance with its terms. Chancellor
Media has received notice from GRC requesting arbitration under the terms of the
acquisition agreement of allegations that Chancellor Media wrongfully terminated
that agreement. Chancellor Media believes that it had a proper basis for
terminating the agreement in accordance with its terms and intends to contest
these allegations vigorously.
45
<PAGE> 52
RADIO BROADCASTING
The following table sets forth selected information with respect to the
portfolio of radio stations that are owned by the Company as of November 30,
1998 or would be owned upon consummation of the Pending Transactions (subject to
any divestitures required by the FCC and/or the DOJ as a condition to approving
any of the Pending Transactions).
<TABLE>
<CAPTION>
RANKING OF
STATION STATION RANKING
MARKET BY AUDIENCE TARGET IN TARGET
MARKET(1) REVENUE(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(4)
--------- ---------- ------- ----------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Los Angeles, CA..... 1 KKBT-FM 4.0 Urban Contemporary Women 18-34 4
KYSR-FM 3.1 Modern Adult Contemporary Persons 25-54 8
KBIG-FM 2.6 Adult Contemporary Persons 25-54 9
KLAC-AM 2.1 Adult Standards/Sports Persons 35-64 22
KCMG-FM(5) 3.2 Rhythmic Adult Women 25-54 4
Contemporary
New York, NY........ 2 WLTW-FM 5.5 Soft Adult Contemporary Persons 25-54 2
WKTU-FM 3.9 Rhythmic Contemporary Persons 25-54 6
Hits
WHTZ-FM 4.6 Contemporary Hit Radio Persons 18-34 4
WBIX-FM(6) 1.6 Hot Adult Contemporary Women 25-49 13
WAXQ-FM 1.7 Classic Rock Persons 25-54 15
Chicago, IL......... 3 WGCI-FM 8.0 Urban Contemporary Persons 18-34 1
WNUA-FM 4.3 Smooth Jazz Persons 25-54 3
WLIT-FM 3.8 Soft Adult Contemporary Persons 25-54 7
WVAZ-FM 4.9 Adult Urban Contemporary Persons 25-54 1
WRCX-FM 2.0 Jamming Oldies Women 25-54 25
WGCI-AM 1.2 Gospel Persons 25-54 23
WMVP-AM+ 0.7 Sports/Talk, Comedy Men 25-54 23
San Francisco, CA... 4 KYLD-FM 4.4 Contemporary Hits Persons 18-34 1
Radio/Dance
KMEL-FM 2.9 Contemporary Hits Persons 18-34 4
KKSF-FM 3.0 Smooth Jazz Persons 25-54 4
KABL-AM 3.6 Adult Standards Persons 35-64 14
KISQ-FM 3.4 Hit Base R&B Adult Persons 25-54 2
Contemporary
KIOI-FM 2.9 Adult Contemporary Women 25-54 3
KNEW-AM 0.7 Adult Contemporary Women 25-54 46
Dallas, TX.......... 5 KHKS-FM 7.7 Top 40 Women 18-34 1
KZPS-FM 4.0 Classic Rock Persons 25-54 4
KDGE-FM 2.3 Alternative Rock Persons 18-34 6
KSKY-AM N/M Southern Gospel N/M N/M
Music/Religious
KBFB-FM* 2.4 Soft Rock Persons 25-54 16
KTXQ-FM* 2.1 Jamming Oldies Persons 25-49 19
Philadelphia, PA.... 6 WDAS-FM 5.8 Urban Contemporary Persons 25-54 1
WUSL-FM 4.7 Urban Contemporary Women 18-34 1
WJJZ-FM 4.1 Smooth Jazz Persons 35-54 4
WIOQ-FM 4.0 Contemporary Hit Radio Persons 18-34 3
WYXR-FM 3.1 Hot Adult Contemporary Women 18-49 5
WDAS-AM 1.0 Gospel N/M N/M
</TABLE>
46
<PAGE> 53
<TABLE>
<CAPTION>
RANKING OF
STATION STATION RANKING
MARKET BY AUDIENCE TARGET IN TARGET
MARKET(1) REVENUE(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(4)
--------- ---------- ------- ----------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Washington, D.C..... 7 WMZQ-FM 4.2 Country Persons 25-54 8
WASH-FM 4.0 Adult Contemporary Women 25-54 3
WBIG-FM 4.5 Oldies Persons 25-54 3
WGAY-FM 3.2 Adult Contemporary Persons 35-64 10
WTEM-AM 1.1 Sports/Talk Men 18-49 17
WWRC-AM 0.4 Talk Persons 35-64 28
WWDC-FM 3.3 Album Oriented Rock Persons 18-34 6
WWDC-AM 1.0 Music of Your Life Persons 55+ 6
Houston, TX......... 8 KKBQ-FM 3.7 Fresh Country Persons 25-54 10
KLDE-FM 4.3 Oldies Persons 25-54 5
KLOL-FM 3.5 Rock Men 18-34 3
KTRH-AM 4.1 News/Sports Men 25-54 9
KBME-AM(7) 1.8 Popular Standards Persons 35-64 16
KODA-FM 6.4 Adult Contemporary Persons 25-54 1
KKRW-FM*(8) 3.3 Classic Rock Persons 25-54 8
KQUE-AM*(8) 0.1 Classic Rock Persons 25-54 35
Atlanta, GA......... 9 WFOX-FM 4.0 Oldies Persons 25-54 10
Boston, MA.......... 10 WJMN-FM 6.9 Contemporary Hits Persons 18-34 2
Radio/Rhythmic
WXKS-FM 5.6 Contemporary Hits Women 25-34 1
Radio/Top 40
WXKS-AM 2.3 Bloomberg News/Music Women 45-54 10
Memory
Detroit, MI......... 11 WJLB-FM 7.1 Urban Contemporary Persons 18-34 1
WNIC-FM 8.0 Adult Contemporary Women 25-54 1
WKQI-FM 4.6 Hot Adult Contemporary Women 25-54 4
WMXD-FM 3.6 Adult Urban Contemporary Persons 25-54 8
WWWW-FM 4.0 Country Women 25-54 6
WDFN-AM 1.5 Sports Men 25-49 8
WYUR-AM 0.4 Nostalgic N/M N/M
Miami/Ft.
Lauderdale, FL..... 12 WEDR-FM 6.1 Urban Contemporary Persons 25-54 1
WVCG-AM N/M Brokered(9) N/M N/M
Denver, CO.......... 14 KXKL-FM 4.9 Oldies Persons 25-54 5
KALC-FM 5.1 Hot Adult Contemporary Persons 18-34 1
KIMN-FM 3.5 70's Oldies Persons 25-54 11
KXPK-FM 2.9 Adult Modern Rock Persons 18-49 12
KVOD-FM 1.7 Classical Persons 25-54 20
KRRF-AM 0.8 Talk Men 25-54 18
</TABLE>
47
<PAGE> 54
<TABLE>
<CAPTION>
RANKING OF
STATION STATION RANKING
MARKET BY AUDIENCE TARGET IN TARGET
MARKET(1) REVENUE(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(4)
--------- ---------- ------- ----------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Minneapolis/St.
Paul, MN........... 15 KEEY-FM 6.7 Country Persons 25-54 3
KDWB-FM 7.9 Contemporary Hit Radio Persons 18-34 2
KQQL-FM 5.1 Oldies Persons 25-54 6
KTCZ-FM 4.7 Progressive Album Rock Men 25-49 2
WRQC-FM 3.2 Active Rock Men 18-34 3
KFAN-AM 2.3 Sports Men 18-49 7
KXBR-AM 0.5 Classic Country Persons 35-64 14
Phoenix, AZ......... 16 KOY-AM 3.9 Adult Standards Persons 35-64 14
KMLE-FM 5.3 Country Persons 25-54 2
KOOL-FM 4.0 Oldies Persons 25-54 6
KYOT-FM 4.3 Contemporary Jazz Persons 25-54 7
KZON-FM 3.8 Alternative Rock Persons 18-34 4
KISO-AM 0.8 Country Persons 35-54 24
KFYI-AM* 5.3 News/Talk Persons 25-54 11
KKFR-FM* 5.2 Urban Contemporary Hit Persons 18-34 3
Radio
San Diego, CA....... 17 KYXY-FM* 6.3 Soft Adult Contemporary Persons 25-54 2
KPLN-FM* 2.5 Classic Rock Persons 25-54 10
Cincinnati, OH...... 19 WUBE-FM(10) 8.7 Country Persons 25-54 1
WYGY-FM(10) 2.6 Young Country Men 18-34 9
WBOB-AM 0.9 Sports/Talk Men 18-49 14
WUBE-AM N/M Sports/Talk Men 25-49 N/M
Cleveland, OH....... 23 WZAK-FM* 8.7 Urban Contemporary Women 25-54 2
WDOK-FM* 6.1 Soft Adult Contemporary Women 25-54 2
WRMR-AM* 5.8 Adult Standard Men 25-54 21
WZJM-FM* 5.6 Contemporary Hits Radio Women 18-34 2
WQAL-FM* 4.5 Hot Adult Contemporary Persons 25-54 8
WJMO-AM* 2.2 Oldies Persons 25-54 12
Pittsburgh, PA...... 24 WWSW-FM 5.9 Oldies Persons 25-54 3
WWSW-AM(11) 0.4 Oldies Persons 25-54 22
WDVE-FM* 9.7 Rock Persons 25-54 1
WXDX-FM* 5.0 Alternative Rock Persons 18-34 2
WJJJ-FM* 3.0 Smooth Jazz Persons 25-54 12
WDRV-FM*(12) 3.6 Modern Hit Women 25-49 7
Orlando, FL......... 26 WJHM-FM 6.4 Urban Contemporary Persons 18-34 2
WOCL-FM 4.4 Oldies Persons 25-54 16
WXXL-FM 7.3 Contemporary Hit Radio Persons 18-34 1
WOMX-FM 7.0 Adult Contemporary Persons 25-54 1
Sacramento, CA...... 28 KFBK-AM 10.0 News/Talk Persons 25-54 1
KHYL-FM 4.1 Oldies Persons 25-54 5
KGBY-FM 4.5 Adult Contemporary Women 25-54 3
KSTE-AM 3.2 Talk Persons 25-54 14
Nassau/Suffolk
(Long Island) 45 WALK-FM 5.8 Adult Contemporary Persons 25-54 1
NY(13)...........
WALK-AM N/M Adult Contemporary Persons 35-64 N/M
</TABLE>
48
<PAGE> 55
<TABLE>
<CAPTION>
RANKING OF
STATION STATION RANKING
MARKET BY AUDIENCE TARGET IN TARGET
MARKET(1) REVENUE(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(4)
--------- ---------- ------- ----------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Riverside/San 64 KGGI-FM 5.9 Contemporary Hit Radio Persons 18-34 1
Bernardino, CA.....
KKDD-AM 0.5 Radio Disney Persons 12+ N/M
Puerto Rico......... N/A WZNT-FM N/A Oldies/Classic Music Men 18-49/ Men N/A
25-54
WOYE-FM N/A Top 40 Persons 12-24/ N/A
18-34
WCOM-FM N/A Top 40 Persons 12-24/ N/A
18-34
WOQI-FM N/A Top 40 Persons 12-24/ N/A
18-34
WCTA-FM N/A Oldies/Classic Music Men 18-49/ Men N/A
25-54
WIOA-FM N/A Continuous Favorite Women 18-49/ N/A
Ballads/ Today's Hits Women 25-54
WIOB-FM N/A Continuous Favorite Women 18-49/ N/A
Ballads/ Today's Hits Women 25-54
WIOC-FM N/A Continuous Favorite Women 18-49/ N/A
Ballads/ Today's Hits Women 25-54
</TABLE>
- -------------------------
N/A: Not available
N/M: Not meaningful
+ Indicates station to be disposed of in a pending transaction.
* Indicates station to be acquired in a pending transaction.
(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 1997 gross radio broadcasting revenue
as reported by James H. Duncan, Duncan's Radio Market Guide (1998 ed.).
(3) Information derived from The Arbitron Company, Summer 1998, Local Market
Reports in the specified markets for listeners age 12 and over, Monday to
Sunday, 6:00 a.m. to Midnight. Copyright, The Arbitron Company.
(4) Information derived from The Arbitron Company, Summer 1998, 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) The station ranking in the target demographic for KCMG-FM (formerly
KIBB-FM) for Summer, 1998 was changed from persons 25-54 to a target
demographic of Women 25-54 effective November 19, 1997.
(6) The format of WBIX-FM (formerly WNSR-FM) was changed from Modern Adult
Contemporary with a target demographic of Women 25-44 to Hot Adult
Contemporary with a target demographic of Women 25-49 effective January
21, 1998. The station ranking in the target demographic for WBIX-FM for
Summer 1998 is based on the new target demographic of Women 25-49.
(7) The format of KBME-AM (formerly KKBQ-AM) was changed from Country with
a target demographic of Persons 25-54 to Popular Standards with a target
demographic of Persons 35-64 effective January 15, 1998. The station
ranking in the
49
<PAGE> 56
target demographic for KBME-AM for Summer 1998 is based on the new target
demographic of Persons 35-64.
(8) Programming provided to KQUE-AM via simulcast of programming broadcast on
KKRW-FM.
(9) The Company sells airtime on WVCG-AM to third parties for broadcast of
specialty programming on a variety of topics.
(10) WUBE-FM and WYGY-FM are sold in combination.
(11) Programming provided to WWSW-AM via simulcast of programming broadcast on
WWSW-FM.
(12) The format of WDRV-FM (formerly WVTY-FM) was changed from Adult
Contemporary with a target demographic of Persons 25-54 to Modern Hit with
a target demographic of Women 25-49 effective February 27, 1998. The
station ranking in the target demographic of WDRV-FM for Summer 1998 is
based on the new target demographic of Women 25-49.
(13) Nassau/Suffolk (Long Island) may be considered part of the greater New
York market, although it is reported separately as a matter of convention.
OUTDOOR ADVERTISING
The following table sets forth selected information with respect to the
portfolio of outdoor displays that are owned by the Company as of December 1,
1998 (subject to divestitures required by the DOJ described below).
<TABLE>
<CAPTION>
TOTAL
DISPLAYS
--------
<S> <C>
MARTIN MEDIA:
Los Angeles (North), CA..................................... 877
Washington, D.C............................................. 297
San Diego, CA............................................... 275
Pittsburgh, PA.............................................. 3,564
Cincinnati, OH.............................................. 811
Kansas City, MO............................................. 167
Riverside/San Bernardino, CA................................ 357
Hartford, CT................................................ 413
Las Vegas, NV............................................... 985
Scranton/Wilkes-Barre, PA................................... 980
Bakersfield/Visalia, CA..................................... 1,584
Lubbock, TX................................................. 677
Odessa/Midland, TX.......................................... 704
Topeka, KS.................................................. 843
Amarillo, TX................................................ 1,064
Charlottesville, VA......................................... 43
San Angelo, TX.............................................. 252
Bullhead/Laughlin, NV....................................... 355
Roanoke, VA................................................. 255
</TABLE>
50
<PAGE> 57
<TABLE>
<CAPTION>
TOTAL
DISPLAYS
--------
<S> <C>
Yuma, AZ.................................................... 221
Abilene, TX................................................. 432
Sharon, PA.................................................. 218
Lawrence, KS................................................ 56
------
Total............................................. 15,430
======
WHITECO:
Central (Terre Haute, IN)................................... 1,750
Southwestern (Dallas, TX)................................... 1,701
Southeastern (Atlanta, GA).................................. 858
Providence, RI.............................................. 729
Western (St. Joseph, MO).................................... 2,855
Ohio (Columbus, OH)......................................... 1,292
Florida (Ocala, FL)......................................... 2,799
Milwaukee, WI............................................... 1,195
South Atlantic (Rocky Mt., NC).............................. 1,604
Harrisburg, PA.............................................. 1,303
Tyler, TX................................................... 1,753
Chicago, IL/Northwest, IN................................... 2,916
Evansville, IN.............................................. 1,032
Albany, NY.................................................. 682
------
Total............................................. 22,469
======
Grand Total....................................... 37,899+
======
</TABLE>
- -------------------------
+ In connection with the Whiteco Acquisition and the Kunz Option, Chancellor
Media and the DOJ entered into consent decrees whereby the Company has agreed
to divest approximately 380 billboards in certain of the markets described in
these tables. The Company expects to try to enter into swap transactions with
billboards in other markets to effect such divestitures and, as a result, does
not anticipate the grand total of displays to change materially at this time.
COMPANY STRATEGY
The Company's overall strategy is to create a leading multi-media company with a
significant overlapping presence in radio and outdoor advertising markets. In
this regard, the Company has built a diversified portfolio of media assets which
enables the Company to deliver more options and greater value to its advertising
clients. The Company believes the multi-media platform creates significant
growth opportunities and synergies through cross selling, cross promotion and
cost savings in markets where radio and outdoor advertising operations overlap.
The Company plans on leveraging the extensive operating experience of its senior
management team to continue to enhance revenue and cash flow growth.
51
<PAGE> 58
Radio Broadcast Strategy. The CRG senior management team, led by James E. de
Castro, President of CRG, has extensive experience in acquiring and operating
radio station groups. The CRG business strategy is to assemble and operate radio
station clusters in order to maximize the broadcast cash flow generated in each
market.
CRG seeks to capitalize on revenue growth and expense savings opportunities
through the successful integration of station cluster groups. Management
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.
CRG also seeks to maximize station operating performance through intensive
market research, innovative programming and unique marketing campaigns to
establish strong listener loyalty and ensure steady long-term audience share
ratings. Management believes its ratings growth in many of its markets is driven
by CRG's ability to attract talented people and to continue delivering quality
programming to the listeners.
CRG also seeks to leverage its radio expertise and platform and enhance revenue
and cash flow growth through the continued expansion of its national radio
network, The AMFM Radio Networks, as well as through the development of
non-traditional revenues derived from radio sales promotion activities.
Media Representation Strategy. The Company's overall strategy for its media
representation business is to create a leading national representation firm
serving all types of electronic media. The Company believes it can continue to
generate revenue and cash flow growth in the media representation business by
expanding its market share and improving its national sales effort. Management
will seek to increase market share by developing new clients, expanding
operations in existing and new markets and acquiring representation contracts of
its competitors. The Company will continue to provide the highest level of
quality service to its clients by offering comprehensive advertisement, planning
and placement services, as well as a broad range of value added benefits,
including marketing, research, consulting and programming advisory services. The
Company will also have the ability to expand its level of service to advertisers
through the growth of its unwired network of radio and television stations which
provides advertisers with greater flexibility and the ability to target specific
demographic groups or markets.
Outdoor Advertising Strategy. The Chancellor Outdoor Group is led by James A.
McLaughlin, President of COG, an outdoor advertising industry veteran with over
25 years of experience. The COG strategy is to create and develop one of the top
five outdoor advertising companies in the United States through the
consolidation of Martin Media, acquired in July 1998, and the recent acquisition
of Whiteco, and additional acquisitions that complement the Company's existing
outdoor and radio markets. As a result of the recent acquisition of Whiteco, COG
now ranks as one of the top five outdoor advertising companies in the United
States. COG believes there are opportunities to generate significant revenue
growth and cost savings through the successful integration of the combined
operations of Martin Media and Whiteco.
COG's strategy is to realize revenue and expense synergies through the
consolidation of certain sales management, leasing management, marketing, and
accounting and administra-
52
<PAGE> 59
tive support functions. Additionally, COG will focus on strengthening its
operating results by increasing market penetration, maximizing rates and
occupancy levels in each of its markets and capitalizing on technological
advances such as computer vinyl technology to enhance the attractiveness and
flexibility of the outdoor medium while reducing costs. COG also seeks to
realize incremental benefits in markets where outdoor and radio operations
overlap by introducing radio advertisers to outdoor advertising which provides
an additional low cost medium to advertisers with local marketing needs.
Management believes its newly acquired outdoor advertising portfolio combined
with the strength of its broad radio platform, national radio network and
national representation business will solidify the Company's position as a
leading multi-media company with the ability to effectively respond to customers
needs through a variety of advertising solutions and mediums.
ADVERTISING
The primary source of the Company's revenues is the sale of broadcasting time
for local, regional and national advertising. On a pro forma basis approximately
65% of the Company's gross radio revenues would have been generated from the
sale of local advertising for the nine months ended September 30, 1998. The
Company believes that radio is one of the most efficient, cost-effective means
for advertisers to reach specific demographic groups. The advertising rates
charged by the Company's radio stations are 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. The Company 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, the Company 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.
The Company's Katz media representation operations generate revenues primarily
through contractual commissions realized through the sale of national spot
advertising air time. National spot advertising air time is commercial air time
sold to advertisers on behalf of radio and television stations and cable systems
located outside the local markets of those stations and systems. Katz represents
its media clients pursuant to media representation contracts. Media
representation contracts typically have terms of up to ten years in initial
length. In connection with the substantial consolidation that has occurred in
the broadcast industry in recent years and the concomitant development of large
client station groups, the frequency of representation contract "buyouts" has
increased. These buyouts occur because station groups have tended to negotiate
exclusive, long-term representation contracts with a single media representation
firm covering all of the station group's
53
<PAGE> 60
stations, including stations acquired after the date of the initial
representation contract. In the event that one of the station group's stations
is sold to an owner represented by a different firm, representation contracts
are frequently bought out by the successor representation firm. Katz generally
amortizes the cost of acquiring new representation contracts associated with a
buyout over the expected benefit period, and also generally recognizes a gain on
disposition of representation contracts associated with a buyout of an existing
client's contract.
The Company's outdoor advertising business generates revenues by contracting
with advertising agencies for the display of the advertising campaigns of their
clients. The Company pays commissions to the agencies for contracts procured
through those agencies. The advertising rates are based on a particular
display's exposure or number of "impressions" delivered. The number of
"impressions" delivered by a display is determined by considering a number of
factors such as proximity to other displays, the speed and viewing angle of
approaching traffic, the national average of adults riding in vehicles and
whether the display is illuminated.
COMPETITION
The radio broadcasting industry is a highly competitive business. The success of
each of the Company's stations is dependent, to a significant degree, upon its
audience ratings and share of the overall advertising revenue within its market.
The Company'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, the Company is 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 the Company's stations for advertising
revenues. The Company also competes 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 does the Company. The audience ratings and market share for the
Company 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 the Company'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, DBS systems, streaming and other
audio systems that use the Internet for delivery and other digital audio
broadcasting and narrowcasting formats to local and national audiences. In
addition, the FCC has auctioned spectrum for a new satellite-delivered 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 IBOC digital radio. IBOC could
provide multi-channel, multi-format digital radio services in the same band
width currently
54
<PAGE> 61
occupied by traditional AM and FM radio services. The Company cannot predict at
this time the effect, if any, that any such new technologies may have on the
radio broadcasting industry.
The success of the Company's Katz media representation operations depends on
Katz' ability to maintain and acquire representation contracts with radio and
television stations and cable systems, the inventory of time Katz represents and
the experience of Katz' executive management and sales personnel. The media
representation business is highly competitive, both in terms of competition to
gain client stations and to sell air time to advertisers. Katz competes not only
with other independent and network media representatives but also with direct
national advertising. Katz also competes on behalf of its clients for
advertising dollars with other media such as newspapers and magazines, outdoor
advertising, transit advertising, direct response advertising, yellow page
directories and point of sale advertising.
The Company's outdoor advertising business also faces competition from a variety
of sources, including other outdoor advertising companies and other media such
as radio, television, print media and direct mail marketing. Additionally, the
Company must also compete with other "out-of-home" advertising media, which
includes advertising displays in shopping malls, supermarkets, airports, sports
stadiums and arenas, movie theaters, and on taxis, buses, subways and other
public transportation. Because the Company's outdoor advertising is a new
endeavor for the Company and its management and due to the fact that many of the
Company's competitors in the outdoor advertising business are larger and have
more experience and resources in the business, there can be no assurance that
the Company will be able to compete successfully within the outdoor advertising
industry.
REGULATION OF RADIO AND OUTDOOR ADVERTISING
RADIO BROADCASTING
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.
The ownership, operation and sale of radio broadcast stations (including those
licensed to the Company) are subject to the jurisdiction of the FCC, which acts
under authority granted by the Communications Act. The Communications Act
prohibits the assignment or transfer of control of an FCC license 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.
55
<PAGE> 62
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 the date of acquisition by the Company of the
radio stations that are actually owned by the Company as of November 30, 1998 or
would be owned upon consummation of the Pending Transactions (subject to any
divestitures required by the FCC and/or the DOJ as a condition to approving any
of the Pending Transactions), the frequency of each such station, and the date
of expiration of such station's main FCC broadcast license:
<TABLE>
<CAPTION>
DATE OF EXPIRATION DATE
STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE
------- --------- ----------- --------- ---------------
<S> <C> <C> <C> <C>
KKBT-FM................ Los Angeles, CA 5/89 92.3 MHz 12/05
KYSR-FM................ Los Angeles, CA 9/97 98.7 MHz 12/05
KBIG-FM................ Los Angeles, CA 4/98 104.3 MHz 12/05
KLAC-AM................ Los Angeles, CA 9/97 570 kHz 12/05
KCMG-FM................ Los Angeles, CA 9/97 100.3 MHz 12/05
WLTW-FM................ New York, NY 7/97 106.7 MHz 6/06
WKTU-FM................ New York, NY 5/95 103.5 MHz 6/06
WHTZ-FM................ New York, NY 9/97 100.3 MHz 6/06
WBIX-FM................ New York, NY 4/98 105.1 MHz 6/06
WAXQ-FM................ New York, NY 7/97 104.3 MHz 6/06
WGCI-FM................ Chicago, IL 12/97 107.5 MHz 12/04
WNUA-FM................ Chicago, IL 1/96 95.5 MHz 12/04
WLIT-FM................ Chicago, IL 9/97 93.9 MHz 12/04
WVAZ-FM................ Chicago, IL 5/95 102.7 MHz 12/04
WRCX-FM................ Chicago, IL 12/93 103.5 MHz 12/04
WGCI-AM................ Chicago, IL 12/97 1390 kHz 12/04
WMVP-AM+............... Chicago, IL 5/84 1000 kHz 12/04
KYLD-FM................ San Francisco, CA 9/97 94.9 MHz 12/05
KMEL-FM................ San Francisco, CA 11/92 106.1 MHz 12/05
KKSF-FM................ San Francisco, CA 1/97 103.7 MHz 12/05
KABL-AM................ San Francisco, CA 9/97 960 kHz 12/05
KISQ-FM................ San Francisco, CA 9/97 98.1 MHz 12/97*
</TABLE>
56
<PAGE> 63
<TABLE>
<CAPTION>
DATE OF EXPIRATION DATE
STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE
------- --------- ----------- --------- ---------------
<S> <C> <C> <C> <C>
KIOI-FM................ San Francisco, CA 4/94 101.3 MHz 12/05
KNEW-AM................ San Francisco, CA 9/97 910 kHz 12/05
KHKS-FM................ Dallas, TX 12/97 106.1 MHz 8/05
KZPS-FM................ Dallas, TX 10/97 92.5 MHz 8/05
KDGE-FM................ Dallas, TX 10/97 94.5 MHz 8/05
KSKY-AM................ Dallas, TX 5/95 660 kHz 8/05
KBFB-FMS............... Dallas, TX Pending 97.9 MHz 8/05
KTXQ-FMS............... Dallas, TX Pending 102.1 MHz 8/05
WDAS-FM................ Philadelphia, PA 5/97 105.3 MHz 8/06
WUSL-FM................ Philadelphia, PA 5/97 98.9 MHz 8/06
WJJZ-FM................ Philadelphia, PA 1/96 106.1 MHz 8/06
WIOQ-FM................ Philadelphia, PA 5/97 102.1 MHz 8/06
WYXR-FM................ Philadelphia, PA 1/96 104.5 MHz 8/98*
WDAS-AM................ Philadelphia, PA 5/97 1480 kHz 8/06
WMZQ-FM................ Washington, D.C. 7/97 98.7 MHz 10/03
WASH-FM................ Washington, D.C. 11/92 97.1 MHz 10/03
WBIG-FM................ Washington, D.C. 9/97 100.3 MHz 10/03
WGAY-FM................ Washington, D.C. 11/96 99.5 MHz 10/03
WTEM-AM(2)............. Washington, D.C. 4/97 980 kHz(2) 10/03
WWRC-AM(2)............. Washington, D.C. 9/97 570 kHz(2) 10/03
WWDC-FM................ Washington, D.C. 6/98 101.1 MHz 10/03
WWDC-AM................ Washington, D.C. 6/98 1260 kHz 10/03
KKBQ-FM................ Houston, TX 12/97 92.9 MHz 8/05
KLDE-FM................ Houston, TX 4/98 94.5 MHz 8/05
KLOL-FM................ Houston, TX 6/93 101.1 MHz 8/97*
KTRH-AM................ Houston, TX 6/93 740 kHz 8/05
KBME-AM................ Houston, TX 12/97 790 kHz 8/05
KODA-FM................ Houston, TX Pending 99.1 MHz 8/05
KKRW-FMS............... Houston, TX Pending 93.7 MHz 8/05
KQUE-AMS............... Houston, TX Pending 1230 kHz 8/05
WFOX-FM................ Atlanta, GA 9/97 97.1 MHz 4/04
WJMN-FM................ Boston, MA 1/96 94.5 MHz 4/06
WXKS-FM................ Boston, MA 1/96 107.9 MHz 4/06
WXKS-AM................ Boston, MA 1/96 1430 kHz 4/06
WJLB-FM................ Detroit, MI 4/97 97.9 MHz 10/04
WNIC-FM................ Detroit, MI 5/95 100.3 MHz 10/04
WKQI-FM................ Detroit, MI 5/95 95.5 MHz 10/04
WMXD-FM................ Detroit, MI 4/97 92.3 MHz 10/04
WWWW-FM................ Detroit, MI 1/97 106.7 MHz 10/04
WDFN-AM................ Detroit, MI 1/97 1130 kHz 10/04
WYUR-AM................ Detroit, MI 5/95 1310 kHz 10/04
WEDR-FM................ Miami/Ft. Lauderdale, FL 10/96 99.1 MHz 2/04
WVCG-AM................ Miami/Ft. Lauderdale, FL 7/83 1080 kHz 2/04
KXKL-FM................ Denver, CO 9/97 105.1 MHz 4/05
KALC-FM................ Denver, CO 9/97 105.9 MHz 4/05
</TABLE>
57
<PAGE> 64
<TABLE>
<CAPTION>
DATE OF EXPIRATION DATE
STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE
------- --------- ----------- --------- ---------------
<S> <C> <C> <C> <C>
KIMN-FM................ Denver, CO 9/97 100.3 MHz 4/05
KXPK-FM................ Denver, CO 1/98 96.5 MHz 4/05
KVOD-FM................ Denver, CO 9/97 92.5 MHz 4/05
KRRF-AM................ Denver, CO 9/97 1280 kHz 4/05
KEEY-FM................ Minneapolis/St. Paul, MN 9/97 102.1 MHz 4/05
KDWB-FM................ Minneapolis/St. Paul, MN 9/97 101.3 MHz 4/05
KQQL-FM................ Minneapolis/St. Paul, MN 9/97 107.9 MHz 4/05
KTCZ-FM................ Minneapolis/St. Paul, MN 9/97 97.1 MHz 4/05
WRQC-FM................ Minneapolis/St. Paul, MN 9/97 100.3 MHz 4/05
KFAN-AM................ Minneapolis/St. Paul, MN 9/97 1130 kHz 4/05
KXBR-AM................ Minneapolis/St. Paul, MN 9/97 690 kHz 4/05
KOY-AM................. Phoenix, AZ 9/97 550 kHz 10/05
KMLE-FM................ Phoenix, AZ 9/97 107.9 MHz 10/05
KOOL-FM................ Phoenix, AZ 9/97 94.5 MHz 10/05
KYOT-FM................ Phoenix, AZ 9/97 95.5 MHz 10/05
KZON-FM................ Phoenix, AZ 9/97 101.5 MHz 10/05
KISO-AM................ Phoenix, AZ 9/97 1230 kHz 10/05
KFYI-AMS............... Phoenix, AZ Pending 910 kHz 10/05
KKFR-FMS............... Phoenix, AZ Pending 92.3 MHz 10/05
KYXY-FMS............... San Diego, CA Pending 96.5 MHz 12/05
KPLN-FMS............... San Diego, CA Pending 103.7 MHz 12/97*
WUBE-FM................ Cincinnati, OH 9/97 105.1 MHz 10/04
WYGY-FM................ Cincinnati, OH 9/97 96.5 MHz 10/04
WBOB-AM................ Cincinnati, OH 9/97 1160 kHz 8/04
WUBE-AM................ Cincinnati, OH 9/97 1230 kHz 10/04
WZAK-FMS............... Cleveland, OH Pending 93.1 MHz 10/04
WDOK-FMS............... Cleveland, OH Pending 102.1 MHz 10/04
WRMR-AMS............... Cleveland, OH Pending 850 kHz 10/04
WZJM-FMS............... Cleveland, OH Pending 92.3 MHz 10/04
WQAL-FMS............... Cleveland, OH Pending 104.1 MHz 10/04
WJMO-AMS............... Cleveland, OH Pending 1490 kHz 10/04
WWSW-FM................ Pittsburgh, PA 9/97 94.5 MHz 8/06
WWSW-AM................ Pittsburgh, PA 9/97 970 kHz 8/98*
WDVE-FMS............... Pittsburgh, PA Pending 102.5 MHz 8/98*
WXDX-FMS............... Pittsburgh, PA Pending 105.9 MHz 8/98*
WJJJ-FMS............... Pittsburgh, PA Pending 104.7 MHz 8/98*
WDRV-FMS............... Pittsburgh, PA Pending 96.1 MHz 8/06
WJHM-FM................ Orlando, FL 9/97 101.9 MHz 2/04
WOCL-FM................ Orlando, FL 9/97 105.9 MHz 2/04
WXXL-FM................ Orlando, FL 9/97 106.7 MHz 2/04
WOMX-FM................ Orlando, FL 9/97 105.1 MHz 2/04
KFBK-AM................ Sacramento, CA 9/97 1530 kHz 12/05
KHYL-FM................ Sacramento, CA 9/97 101.1 MHz 12/05
KGBY-FM................ Sacramento, CA 9/97 92.5 MHz 12/05
KSTE-AM................ Sacramento, CA 9/97 650 kHz 12/05
</TABLE>
58
<PAGE> 65
<TABLE>
<CAPTION>
DATE OF EXPIRATION DATE
STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE
------- --------- ----------- --------- ---------------
<S> <C> <C> <C> <C>
WALK-FM................ Nassau/Suffolk
(Long Island), NY 9/97 97.5 MHz 6/98*
WALK-AM................ Nassau/Suffolk
(Long Island), NY 9/97 1370 kHz 6/06
KGGI-FM................ Riverside/San Bernardino, CA 9/97 99.1 MHz 12/05
KKDD-AM................ Riverside/San Bernardino, CA 9/97 1290 kHz 12/05
WZNT-FM................ Puerto Rico 10/98 93.7 MHz 2/04
WOYE-FM................ Puerto Rico 10/98 94.1 MHz 2/04
WCOM-FM................ Puerto Rico 10/98 94.7 MHz 2/04
WOQI-FM................ Puerto Rico 10/98 93.3 MHz 2/04
WCTA-FM................ Puerto Rico 10/98 95.1 MHz 2/04
WIOA-FM................ Puerto Rico 10/98 99.9 MHz 2/04
WIOB-FM................ Puerto Rico 10/98 97.5 MHz 2/04
WIOC-FM................ Puerto Rico 10/98 105.1 MHz 2/04
</TABLE>
- -------------------------
* Indicates pending renewal application.
+ Indicates station to be disposed of in a pending transaction.
S Indicates station to be acquired in a pending transaction.
(1) Actual city of license may differ from metropolitan market served in
certain cases.
(2) On March 9, 1998, the Company exchanged the call signs and formats of
WWRC-AM and WTEM-AM such that beginning on such date the call sign and
format of WWRC-AM were used on the 570 kHz frequency and the call sign and
format of WTEM-AM were used on the 980 kHz frequency.
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. The
Company 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. The Company, 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 respective Certificates of
Incorporation of Chancellor Media and CMCLA contain prohibitions on alien
ownership and control that are intended to facilitate compliance with the
provisions of the Communications Act applicable to alien ownership. The Company
believes that in light of current levels of alien ownership of the Company's
capital stock, the foregoing restrictions are not likely to have a material
impact on Chancellor Media or CMCLA.
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
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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 Company 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. In connection with the LIN Merger, the Capstar Merger and the Pegasus
Acquisition, Chancellor Media and the Company have requested or will request
certain waivers of the cross-ownership and one-to-a-market rules. The Company
expects that the FCC will grant such waivers in due course, however there can be
no assurance that this will be the result.
The Communications Act places the following limits on the numbers of stations in
the same market that can be under common ownership: in markets with 45 or more
stations, ownership is limited to eight stations, no more than five of which can
be in the same service (AM and FM each being a separate service); in markets
with 30-44 stations, ownership is limited to seven stations, no more than four
of which can be in the same service; in markets with 15-29 stations, ownership
is limited to six stations, no more than four of which can be in the same
service; and in markets with 14 or fewer stations, ownership is limited to no
more than 50% of the market's total with no more than three stations in the same
service.
Recently, the FCC has adopted a practice of including in the public notices of
certain applications a separate notice stating that the FCC intends to conduct
an analysis of the degree of market concentration that would result from a grant
of those applications, and inviting public comment on the issue of such
concentration and its effect on competition and diversity in the broadcast
markets affected. The FCC has not formally adopted changes to its rules
regarding assignments of radio licenses or limits on radio station ownership
that reflect the factors to be used in such an analysis of market concentration.
Informally, the FCC has stated that it intends to invite such comment when its
preliminary analysis of an application reveals that, following consummation of
the assignment in question, fifty percent or more of the radio advertising
revenue generated in the market would be concentrated in stations licensed to a
single licensee, or seventy percent or more of the revenue would be concentrated
in the combined stations of any two licensees in that market. The FCC has not
thus far issued any decisions with respect to assignment applications regarding
which it has included such requests for comment, and it is not certain what
actions the FCC might take with regard to such applications, what specific
factors the FCC would rely on in taking such actions, or whether such action by
the FCC would withstand judicial review under the Communications Act or other
applicable laws. The FCC has included such a request with its public notice of
the Company's pending applications for the Cleveland Acquisitions. Because of
these multiple ownership rules and the cross-interest policy described below, a
purchaser of the Common Stock of Chancellor Media or CMCLA who acquires an
attributable interest in the Company 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 the Company
violates
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any of these ownership rules, the Company 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.
In addition to the Company's radio broadcast interests, the ownership interests
of certain of the Company's directors may be attributed to the Company. For
example, three of the Company's directors (Thomas O. Hicks, Lawrence D. Stuart,
Jr. and Michael J. Levitt) are also among the directors of Capstar, an entity
Chancellor Media has agreed to acquire. Capstar presently owns or proposes to
acquire over 355 radio stations serving 83 mid-sized markets throughout the
United States. Because of those directors' positions on the Capstar board of
directors, if any such broadcast interests overlap with the Company's
directly-held radio broadcast interests in the Company's markets, such interests
are combined with the Company's interests in those markets when determining
compliance with the multiple ownership rules. Also, LIN Television, the indirect
operating subsidiary of LIN (which has agreed to merge with Chancellor Media),
owns or operates twelve television stations. Two of LIN's directors (Messrs.
Hicks and Levitt) are also the Company's directors and, accordingly, LIN's
television broadcast interests are combined with the Company's broadcast
interests for determining the Company's compliance with multiple ownership
rules. In addition, Hicks Muse and four of the Company's directors (Thomas O.
Hicks, Lawrence D. Stuart, Jr., Michael J. Levitt and John H. Massey) also have
attributable interests in Sunrise, which owns or proposes to acquire a number of
television stations in several markets. Under the FCC's one-to-a-market rules, a
party may not have attributable interests in more than one television station or
radio stations and a television station in the
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same market unless a waiver is granted by the FCC. As a result of these
attributable interests, the Company's acquisition strategy may be adversely
affected. There can be no assurance that these attributable interests will not
have a material adverse effect on the Company's future acquisition strategy or
on the business, financial condition and results of operations of the Company.
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"
non-attributable 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 the Company may
make or hold. If the FCC determines that a stockholder of the Company has
violated this cross-interest policy, the Company 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.
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. In recent years, a number of radio stations,
including certain of the Company's stations, have entered into what commonly are
referred to as "Time Brokerage Agreements," or "TBAs" (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
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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. The Phoenix Acquisition and the Cleveland Acquisitions agreements
provide that certain stations being acquired will be operated pursuant to TBAs
following termination of the waiting period under the HSR Act.
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 the Company's radio broadcast stations, result in the loss of
audience share and advertising revenues for the Company's radio broadcast
stations, and affect the ability of the Company 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 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
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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 the Company's radio stations.
The FCC has taken initial steps to authorize the use of a new technology, DARS,
to deliver audio programming by satellite. See "-- Competition." 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.
The Company 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 these benchmarks.
Although the Company does not believe that its 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 the
Company may have to make as a result of antitrust review, there can be no
assurance that this will be the case. The Company is currently in discussions
with the DOJ relating to the Petry Acquisition. There can be no assurance that
the Company will be able to consummate the Petry Acquisition in accordance with
its terms or at all.
OUTDOOR ADVERTISING
The outdoor advertising industry is subject to governmental regulation at the
federal, state and local level. Federal law, principally the Highway
Beautification Act of 1965, encourages states, by the threat of withholding 10%
of the federal appropriations for the construction and improvement of highways
within such states, to implement legislation to prohibit billboards located
within 660 feet of, or visible from, interstate and primary highways except in
commercial or industrial areas where off-site signage is permitted provided it
meets spacing and size restrictions. All of the states have implemented
regulations at least as restrictive as the Highway Beautification Act, including
the prohibition on the construction of new billboards adjacent to
federally-aided highways and the removal at the owner's expense and without any
compensation of any illegal signs on
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such highways. The Highway Beautification Act, and the various state statutes
implementing it, require the payment of just compensation whenever governmental
authorities require legally erected and maintained billboards to be removed from
areas adjacent to federally-aided highways.
The states and local jurisdictions have, in some cases, passed additional and
more restrictive regulations which limit the construction, repair, upgrading,
height, size, location and/or operation of outdoor advertising structures. Such
regulations, often in the form of municipal building, sign or zoning ordinances,
specify minimum standards for the height, size and location of billboards. In
some cases, the construction of new billboards or relocation of existing
billboards is prohibited. Some jurisdictions also have restricted the ability to
enlarge or upgrade existing billboards, such as converting from wood to steel or
from nonilluminated to illuminated structures, and/or restrict the
reconstruction or repair of billboards which are substantially destroyed as a
result of storms or other causes. From time to time, governmental authorities
order the removal of billboards by the exercise of eminent domain. Thus far, the
Company believes it has been able to obtain satisfactory compensation for any of
its structures removed at the direction of governmental authorities, although
there is no assurance that it will be able to continue to do so in the future.
Amortization of billboards has also been adopted in varying forms in certain
jurisdictions. In theory, amortization permits the billboard owner to operate
its billboard as a non-conforming use for a specified period of time until it
has recouped its investment, after which it must remove or otherwise conform its
billboard to the applicable regulations at its own cost without any
compensation. Amortization and other regulations requiring the removal of
billboards without compensation have been subject to vigorous litigation in the
state and federal courts and cases have reached differing conclusions as to the
constitutionality of these regulations. Several municipalities in the Company's
markets currently have amortization ordinances or regulations. Ordinances
requiring the removal of a billboard without compensation, whether through
amortization or otherwise, are being challenged in various state and federal
courts with conflicting results. In some cities, amortization ordinances or
regulations are not being enforced or have been held unconstitutional. However,
no assurance can be given as to the effect on the Company of the enforcement of
existing laws or regulations, or of new laws and regulations that may be adopted
in the future.
In recent years, there have been efforts to restrict billboard advertising of
certain products, including tobacco and alcohol. Congress has passed no
legislation at the federal level except legislation requiring health hazard
warnings similar to those on cigarette packages and print advertisements. In
1996, the Food and Drug Administration promulgated rules which, among other
things, would limit certain types of outdoor advertising by tobacco companies.
While certain of these regulations have been declared invalid by a lower court
ruling, appeals are likely and there can be no assurance that further
developments resulting in a validation or implementation of these or similar
regulations will not occur. Outdoor advertising of tobacco products also may be
affected by city or state regulations. For example, in 1995, the Court of
Appeals for the Fourth Circuit upheld the validity of a Baltimore city ordinance
restricting the placement of outdoor advertisements of cigarettes and alcohol in
publicly visible locations, such as billboards, signboards and sides of
buildings. Subsequently, the United States Supreme Court declined to review an
appeal of the case. Restrictions similar to the Baltimore ordinance are also
being contemplated or introduced in other states or municipalities around the
country, including New Jersey, New
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York City and Los Angeles. There can be no assurance that additional local or
state governments will not enact similar ordinances or statutes to limit outdoor
advertising of tobacco in the future in markets in which the Company operates.
Certain states in which the Company operates have historically prohibited the
outdoor advertising of distilled spirits. In California, transit shelter
advertising posters are maintained on public rights of way, and most of the
contracts prohibit tobacco and/or alcohol advertising. San Francisco has adopted
an ordinance banning all tobacco and alcohol advertising on public property, but
has "grandfathered" existing sales contracts through 2002. For each of the past
three years, the California legislature has considered proposed legislation
which would ban, or substantially limit, all outdoor advertising of tobacco.
While that legislation has not been passed, the proponents have publicly stated
they will continue to attempt to have such proposal enacted. It is uncertain
whether additional legislation of this type will be enacted on the national
level or in any of the markets in which the Company operates.
It also recently has been reported that certain cigarette manufacturers who are
defendants in numerous class action suits throughout the United States have
reached agreement with Attorneys General of various states for an out of court
settlement with respect to such suits that would, among other things, prohibit
outdoor advertising by the tobacco industry. The settlement is subject to
various conditions including approval and implementing legislation by the United
States Congress. There can be no assurance as to the effect of this settlement
agreement and potential legislation on the Company's business and on its net
revenues and financial position. A reduction in billboard advertising by the
tobacco industry would cause an immediate reduction in the Company's direct
revenue from such advertisers and would simultaneously increase the available
space on the existing inventory of billboards in the outdoor advertising
industry. This could in turn result in a lowering of outdoor advertising rates
in each of the Company's outdoor advertising markets or limit the ability of
industry participants to increase rates for some period of time. Any such
consequence could have a material adverse effect on the Company.
To date, regulations in the Company's markets have not materially adversely
affected its operations. However, the outdoor advertising industry is heavily
regulated and at various times and in various markets can be expected to be
subject to varying degrees of regulatory pressure affecting the operation of
advertising displays. Accordingly, although the Company's experience to date is
that the regulatory environment can be managed, no assurance can be given that
existing or future laws or regulations will not materially adversely affect the
Company. See "Risk Factors -- Regulation of Outdoor Advertising."
EMPLOYEES
The Company has approximately 5,200 full-time employees and approximately 850
part-time employees. Certain of the Company's employees in New York, Los
Angeles, Chicago, San Francisco, Washington, D.C., Philadelphia, Detroit,
Pittsburgh and Cincinnati (approximately 360 employees) are represented by
unions. The Company believes that it has good relations with its employees and
these unions.
The Company employs several high-profile on-air personalities who have large,
loyal audiences in their respective markets. The Company believes that its
relationships with its on-air talent are valuable, and it generally enters into
employment agreements with these individuals.
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PROPERTIES
The Company's corporate headquarters is in Dallas, Texas. The types of
properties required to support each of the Company's existing or to be acquired
radio stations include offices, studios, transmitter sites and antenna sites. A
radio 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 the Company's radio stations and its corporate
headquarters are located in leased or owned facilities. The terms of these
leases expire generally in one to ten years. The Company either owns or leases
its transmitter and antenna sites. These leases have expiration dates that range
generally from one to eight years.
The Company does not anticipate any difficulties in renewing those leases that
expire within the next several years or in leasing other space, if required.
Katz operates out of approximately 54 separate locations throughout the United
States.
Martin Media operates out of approximately 19 separate locations throughout the
United States.
No one property is material to the Company's overall operations. The Company
believes that its properties are in good condition and suitable for its
operations. The Company owns substantially all of the equipment used in its
radio broadcasting business.
LEGAL PROCEEDINGS
In July 1998, a stockholder derivative action was commenced in the Delaware
Court of Chancery by a stockholder purporting to act on behalf of Chancellor
Media. The defendants in the case include Hicks Muse, LIN and certain of
Chancellor Media's directors. The plaintiff alleges that, among other things,
(1) Hicks Muse allegedly caused the Company to pay too high of a price for LIN
because Hicks Muse had allegedly paid too high of a price for LIN when
affiliates of Hicks Muse acquired it in March 1998, and (2) the transaction
therefore constitutes a breach of fiduciary duty and a waste of corporate assets
by Hicks Muse (which is alleged to control Chancellor Media) and the directors
of Chancellor Media named as defendants. The plaintiff seeks to enjoin
consummation or rescission of the transaction, compensatory damages, an order
requiring that the directors named as defendants "carry out their fiduciary
duties," and attorneys' fees and other costs.
Although not final, plaintiff, defendants and Chancellor Media have tentatively
agreed to settle the Chancellor/LIN Stockholder Lawsuit. Such settlement is
subject to a number of conditions, including, but not limited to, preparing and
finalizing definitive documentation and approval by the court. Pursuant to this
settlement, (1) Hicks Muse and its affiliates agreed to vote all shares of
Chancellor Media common stock that they control in favor of and opposed to the
approval and adoption of the merger agreement in the same percentage as the
other stockholders of Chancellor Media vote at the special meeting of
stockholders called for that purpose, and (2) legal fees and documented expenses
will be paid to plaintiff's counsel. In connection with settlement discussions,
Chancellor Media and LIN provided counsel for the plaintiff an opportunity to
review and comment on the disclosure in the joint proxy statement/prospectus
relating to the LIN Merger. There can be no assurance that a settlement of the
Chancellor/LIN Stockholder Lawsuit can be reached on these terms or any other
terms.
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In September 1998, a stockholder class action complaint was filed in the
Delaware Court of Chancery by a stockholder purporting to act individually and
on behalf of all other persons (other than defendants) who own securities of
Chancellor Media and are similarly situated. The defendants in the case are
named as Chancellor Media, Hicks Muse, Thomas O. Hicks, Jeffrey A. Marcus, James
E. de Castro, Eric C. Neuman, Lawrence D. Stuart, Jr., Steven Dinetz, Thomas J.
Hodson, Perry Lewis, John H. Massey and Vernon E. Jordan, Jr. The plaintiff
alleges breach of fiduciary duties, gross mismanagement, gross negligence or
recklessness, and other matters relating to the defendants' actions in
connection with the proposed Capstar Merger. The plaintiff seeks to certify the
complaint as a class action, enjoin consummation of the Capstar Merger, order
defendants to account to plaintiff and other alleged class members for damages,
and award attorneys' fees and other costs. The Company believes that the lawsuit
is without merit and intends to vigorously defend the action.
The Company is 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 or results of
operations.
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MANAGEMENT AND BOARD OF DIRECTORS
The directors and executive officers of Chancellor Media, CMHC and the Company
are:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Thomas O. Hicks........................... 52 Chairman of the Board and Director
Jeffrey A. Marcus......................... 51 President, Chief Executive Officer and
Director
James E. de Castro........................ 45 President of Chancellor Radio Group and
Director
Matthew E. Devine......................... 49 Senior Vice President and Chief
Financial Officer
Eric C. Neuman............................ 52 Senior Vice President -- Strategic
Development
James A. McLaughlin....................... 48 President of Chancellor Outdoor Group
Kenneth J. O'Keefe........................ 43 Executive Vice President -- Operations
Thomas P. McMillin........................ 37 Senior Vice President
Richard A. B. Gleiner..................... 45 Senior Vice President and General
Counsel
Thomas J. Hodson.......................... 54 Director
Perry J. Lewis............................ 59 Director
John H. Massey............................ 57 Director
Lawrence D. Stuart, Jr.................... 52 Director
Steven Dinetz............................. 51 Director
Vernon E. Jordan, Jr...................... 62 Director
J. Otis Winters........................... 65 Director
Michael J. Levitt......................... 39 Director
</TABLE>
THOMAS O. HICKS
Mr. Hicks was elected Chairman of the Board and a director of Chancellor Media,
CMHC and the Company upon the consummation of the Chancellor Merger. He had been
Chairman and a director of Chancellor and CRBC prior to the Chancellor Merger,
since April 1996. Mr. Hicks is Chairman of the Board and Chief Executive Officer
of Hicks Muse, a private investment firm located in Dallas, St. Louis, New York,
Mexico City and London 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 Capstar, Sybron International Corporation, Inc., Cooperative
Computing, Inc., International Home Foods, Triton Energy, D.A.C. Vision Inc. and
Olympus Real Estate Corporation.
JEFFREY A. MARCUS
Mr. Marcus became the President and Chief Executive Officer of Chancellor Media,
CMHC and the Company on June 1, 1998, and Mr. Marcus became a director of
Chancellor Media, CMHC and the Company upon consummation of the Chancellor
Merger. Prior to the Chancellor Merger, Mr. Marcus served as a director of
Chancellor and CRBC. Prior to joining the Company on June 1, 1998, Mr. Marcus
served as the Chairman and Chief Executive Officer of Marcus Cable Properties,
Inc. and Marcus Cable
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Company, L.L.C. (collectively "Marcus Cable"), the ninth largest cable
television multiple system operator (MSO) in the United States, which Mr. Marcus
formed in 1990. Mr. Marcus continues to serve as Chairman of Marcus Cable and as
a director of Marcus Cable Properties, Inc. 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 of Brinker International, Inc. and a
director or trustee of several charitable and civic organizations.
JAMES E. DE CASTRO
Mr. de Castro served as Chief Operating Officer of Chancellor Media, CMHC and
the Company from September 22, 1997 to August 19, 1998, and on August 19, 1998,
Mr. de Castro was named President of Chancellor Radio Group. From September 5,
1997 to September 22, 1997, Mr. de Castro served as Co-Chief Operating Officer
of Chancellor Media, CMHC and the Company. Mr. de Castro was elected Co-Chief
Operating Officer and a director of Chancellor Media, CMHC and the Company upon
the consummation of the Chancellor Merger. Mr. de Castro was previously
President of Evergreen since 1993 and Chief Operating Officer and a director of
Evergreen since 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.
MATTHEW E. DEVINE
Mr. Devine became Senior Vice President and Chief Financial Officer of
Chancellor Media, CMHC and the Company upon consummation of the Chancellor
Merger. Prior thereto, Mr. Devine had been an Executive Vice President of
Evergreen since 1993, Chief Financial Officer, Treasurer and Secretary of
Evergreen since 1988 and a director of Evergreen from 1989 through the
Chancellor Merger.
ERIC C. NEUMAN
Mr. Neuman became a Senior Vice President -- Strategic Development of Chancellor
Media and the Company on July 1, 1998. From September 5, 1997 to May 19, 1998,
Mr. Neuman served as a director of Chancellor Media, CMHC and the Company. Mr.
Neuman became a director of Chancellor Media, CMHC and the Company upon
consummation of the Chancellor Merger. Mr. Neuman previously served as a
director of Chancellor and CRBC since April 1996. From May 1993 to July 1, 1998,
Mr. Neuman had been an officer of Hicks Muse and was most recently 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. Mr. Neuman currently serves as a
director of Capstar.
JAMES A. MCLAUGHLIN
Mr. McLaughlin became the President of Chancellor Outdoor Group effective on
August 18, 1998. Mr. Laughlin most recently served as Chief Executive Officer of
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privately-held Triumph Outdoor Holdings, LLC. Prior to forming Triumph, Mr.
McLaughlin served as President and Chief Executive Officer of POA Acquisition
Corporation, the successor to Peterson Outdoor Advertising. Prior to joining
POA, Mr. McLaughlin was the Managing Partner of Turner Outdoor Advertising which
was purchased from Ted Turner in 1983. Mr. McLaughlin began his outdoor
advertising career in 1974 with Creative Displays, holding various management
positions as the company grew to become the fourth largest outdoor advertising
company in the United States.
KENNETH J. O'KEEFE
Mr. O'Keefe became an Executive Vice President of Chancellor Media, CMHC and the
Company upon the consummation of the Chancellor Merger. Mr. O'Keefe had been an
Executive Vice President of Evergreen since February of 1996 and served as a
director of Evergreen from May of 1996 until the consummation of the Chancellor
Merger. Prior to joining Evergreen in 1996, Mr. O'Keefe was a director, Chief
Financial Officer and Executive Vice President of Pyramid Communications, Inc.
from March 1994 until Evergreen's acquisition of Pyramid Communications, Inc. on
January 17, 1996. Mr. O'Keefe served in various capacities with Pyramid
Communications, Inc. or predecessor entities during the five-year period prior
to his joining Evergreen in 1996.
THOMAS P. MCMILLIN
Mr. McMillin became a Senior Vice President of Chancellor Media, CMHC and the
Company on October 1, 1998. Mr. McMillin previously served as Executive Vice
President and Chief Financial Officer of Marcus Cable. Mr. McMillin joined
Marcus Cable in 1994 as Vice President -- Finance & Development. Mr. McMillin
continues to serve as a director of Marcus Cable Properties, Inc. Prior to
joining Marcus Cable, Mr. McMillin served for three years as Vice
President -- Corporate Development for Crown Media, Inc., then a cable
television subsidiary of Hallmark Cards. From 1987 to 1992, Mr. McMillin served
in various financial and corporate development positions, including Vice
President Finance & Acquisitions, with Cencom Cable Associates, Inc. From 1983
to 1987, Mr. McMillin was a member of the audit practice of Arthur Andersen &
Co.
RICHARD A. B. GLEINER
Mr. Gleiner became a Senior Vice President and General Counsel of Chancellor
Media, CMHC and the Company on October 1, 1998. Mr. Gleiner has most recently
served as Senior Vice President, Secretary and General Counsel of Marcus Cable,
with responsibility for overseeing all of the legal affairs of Marcus Cable. Mr.
Gleiner continues to serve as a director of Marcus Cable Properties, Inc. Prior
to joining Marcus Cable in 1994, Mr. Gleiner had been of counsel to Dow, Lohnes
& Albertson, New York, New York from 1988 to 1991, primary outside counsel to
Marcus Cable.
THOMAS J. HODSON
Mr. Hodson became a director of Chancellor Media, CMHC and the Company upon
consummation of the Chancellor Merger. Mr. Hodson had previously served as a
director of Evergreen since 1992. Mr. Hodson is President of TJH Capital, Inc.,
a private investment company. He had been the President and a director of
Columbia Falls Aluminum Company from January 1994 to March 1998. He had been a
Vice President of Stephens, Inc. from 1986 through 1993.
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PERRY J. LEWIS
Mr. Lewis became a director of Chancellor Media, CMHC and the Company upon
consummation of the Chancellor Merger. Mr. Lewis had previously served as a
director of Evergreen since Evergreen acquired Broadcasting Partners, Inc.
("BPI") in 1995. Mr. Lewis was the Chairman of BPI from its inception in 1988
until its merger with Evergreen, and was Chief Executive Officer of BPI from
1993 to 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 director of Aon Corporation, ITI Technologies, Inc., Gradall
Industries, Inc. and Stuart Entertainment, Inc.
JOHN H. MASSEY
Mr. Massey became a director of Chancellor Media, CMHC and the Company upon
consummation of the Chancellor Merger. Prior to the Chancellor Merger, Mr.
Massey served as a director of Chancellor and CRBC. Until August 2, 1996, Mr.
Massey served as the 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. Since 1986, Mr. Massey has served as a director of Gulf-California
Broadcast Company. 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. Mr. Massey currently serves as a director of Central Texas Bankshare
Holdings, Inc., Colorado Investment Holdings, Inc., Hill Bancshares Holdings,
Inc., Bank of The Southwest of Dallas, Texas, Columbus State Bank, Columbine JDS
Systems, Inc., The Paragon Group, Inc., the Brazos Fund Group Inc. and Sunrise
Television Group, Inc.
LAWRENCE D. STUART, JR.
Mr. Stuart became a director of Chancellor Media, CMHC and the Company upon
consummation of the Chancellor Merger. Mr. Stuart previously served as a
director of Chancellor and CRBC since 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. Mr. Stuart serves as a
director of Capstar.
STEVEN DINETZ
Mr. Dinetz was elected Co-Chief Operating Officer and a director of Chancellor
Media, CMHC and the Company upon the consummation of the Chancellor Merger. As
of September 22, 1997, Mr. Dinetz no longer serves as Co-Chief Operating Officer
of Chancellor Media, CMHC and the Company, but continues to serve as a director
for each such entity. Prior to consummation of the Chancellor Merger, Mr. Dinetz
served as President, Chief Executive Officer and a director of Chancellor and
CRBC since their formation and prior thereto was the President and Chief
Executive Officer and a director of Chancellor Communications, a predecessor
entity of Chancellor.
VERNON E. JORDAN, JR.
Mr. Jordan became a director of Chancellor Media, CMHC and the Company on
October 14, 1997. Mr. Jordan currently serves as a senior partner in the
Washington, D.C.
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office of the law firm of Akin, Gump, Strauss, Hauer & Feld, L.L.P. Mr. Jordan
serves as a director of American Express Company, Bankers Trust Company, Bankers
Trust Corporation, Dow Jones & Company, Inc., the Ford Foundation, Howard
University, J.C. Penney Company, Inc., Revlon Group, Revlon, Inc., Ryder System,
Inc., Sara Lee Corporation, Union Carbide Corporation, Xerox Corporation, LBJ
Foundation, National Academy Foundation and the Roy Wilkins Foundation.
J. OTIS WINTERS
Mr. Winters became a director of Chancellor Media, CMHC and the Company on May
19, 1998. Mr. Winters currently serves as the non-executive Chairman for The PWS
Group (formerly Pate, Winters & Stone, Inc.). Mr. Winters was Co-founder,
President and director of Avanti Energy Corporation. Mr. Winters also served as
Executive Vice President and a member of the board of directors of the First
National Bank and Trust Company of Tulsa. Mr. Winters was Executive Vice
President and a member of the board of directors of The Williams Companies,
where he served as Chairman of two major subsidiaries and was responsible for
the corporate administrative department. Mr. Winters also serves as a director
and Chairman of the audit and compensation committee of AMX Corporation,
director and Chairman of the audit committee for Arena Brands, Inc., director
and Chairman of the finance and audit committees for Dynegy, Inc. (formerly NGC
Corporation), director for OmniAmerica, Inc. and director and Chairman of the
executive committee for Walden Residential Properties, Inc.
MICHAEL J. LEVITT
Michael J. Levitt became a director of Chancellor Media, CMHC and the Company on
May 19, 1998. Mr. Levitt is a Managing Director and Principal of Hicks Muse.
Before joining Hicks Muse, Mr. Levitt was a Managing Director and Deputy Head of
Investment Banking with Smith Barney Inc. from 1993 through 1995. From 1986
through 1993, Mr. Levitt was with Morgan Stanley & Co. Incorporated, most
recently as a Managing Director responsible for the New York-based Financial
Entrepreneurs Group. Mr. Levitt also serves as a director of LIN Television
Corporation, Capstar, STC Broadcasting, Inc., Atrium Companies, Inc. and
International Home Foods, Inc.
COMPENSATION OF DIRECTORS
Directors who are also officers of Chancellor Media, CMHC and the Company
receive no additional compensation for their services as directors. Effective
following the Chancellor Merger, directors of Chancellor Media, CMHC and the
Company who are not officers receive (i) a fee of $36,000 per annum, (ii) a
$1,000 fee for attendance at meetings or, if applicable, a $500 fee for
attendance at meetings by telephone and (iii) a $2,000 fee for service as
chairman of a board committee, a $1,000 fee for attendance at committee meetings
or, if applicable, a $500 fee for attendance at committee meetings by telephone.
Directors of Chancellor Media, CMHC and the Company are also reimbursed for
travel expenses and other out-of-pocket costs incurred in connection with such
meetings. Additionally, all non-employee directors of Chancellor Media, CMHC and
the Company in office on the day of Chancellor Media's annual stockholders
meeting are entitled to an award of options to purchase 25,000 shares of Common
Stock at an exercise price equal to the fair market value of such shares on the
date of grant.
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COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation. The following table sets forth all compensation, including
bonuses, stock option awards and other payments, paid or accrued by the Company
for the three fiscal years ending December 31, 1997, to the Company's Chief
Executive Officer and each of the Company'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,
1997.
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM
---------------------------------------- COMPENSATION
OTHER ------------ SECURITIES
NAME AND ANNUAL RESTRICTED UNDERLYING LTIP
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(2) STOCK AWARDS OPTIONS PAYOUTS
------------------ ---- -------- ---------- --------------- ------------ ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Scott K. Ginsburg........... 1997 $850,000 $3,615,000 -- -- 500,000 --
Former President 1996 750,000 956,000 -- -- 375,000 --
and Chief 1995 650,000 -- -- -- --
Executive Officer
James E. de Castro.......... 1997 $825,000 $2,581,000 -- -- 425,000 --
Chief Operating 1996 750,000 704,000 -- -- 75,000 --
Officer 1995 650,000 125,000 -- -- 300,000 --
Matthew E. Devine........... 1997 $375,000 $1,205,000 -- -- 262,500 --
Senior Vice 1996 300,000 352,000 -- -- 37,500 --
President, 1995 275,000 63,000 -- -- 150,000 --
Chief Financial
Officer and
Secretary
Kenneth J. O'Keefe.......... 1997 $320,000 $1,205,000 -- -- -- --
Executive Vice 1996 210,000(4) 210,000 -- -- 300,000 --
President- 1995 -- -- -- -- -- --
Operations
<CAPTION>
NAME AND ALL OTHER
PRINCIPAL POSITION COMPENSATION(3)
------------------ ---------------
<S> <C>
Scott K. Ginsburg........... $9,101
Former President 9,776
and Chief 7,663
Executive Officer
James E. de Castro.......... 2,630
Chief Operating 2,455
Officer 2,455
Matthew E. Devine........... --
Senior Vice --
President, --
Chief Financial
Officer and
Secretary
Kenneth J. O'Keefe.......... --
Executive Vice --
President- --
Operations
</TABLE>
- -------------------------
(1) No information is set forth herein regarding Steven Dinetz, who served as
the Company's Co-Chief Operating Officer from September 5, 1997 through
September 22, 1997, as amounts paid by the Company to Mr. Dinetz during 1997
for total annual salary and bonus did not exceed $100,000. On September 22,
1997, as part of the Chancellor Merger, Mr. Dinetz resigned from his
position as Co-Chief Operating Officer of the Company, but retained his
position as a director of the Company. Upon Mr. Dinetz' resignation, the
Company accelerated the exercisability of all of Mr. Dinetz' stock options
previously granted by Chancellor Broadcasting Company. In February 1998, the
Company made certain additional cash payments to Mr. Dinetz. Both the
acceleration of the exercisability of the stock options and the cash payment
were part of Mr. Dinetz' severance package which he elected to receive after
a change in job responsibilities directly related to the Chancellor Merger.
(2) The aggregate annual amount of perquisites and other personal benefits,
securities or property does not exceed $50,000 or 10% of the total of the
annual salary and bonus for the named officer.
(3) Represents payments of term life insurance policies.
(4) Represents compensation for the period beginning March 1, 1996, when Mr.
O'Keefe joined the Company.
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Option Grants in Last Fiscal Year. The following table sets forth information
regarding options to purchase Common Stock granted by the Company to its Chief
Executive Officer and the other executive officers named in the Summary
Compensation Table during the 1997 fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------
NUMBER OF
SECURITIES % OF TOTAL GRANT DATE VALUE
UNDERLYING OPTIONS --------------------------
OPTIONS GRANTED TO EXERCISE OR GRANT DATE
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME (#)(1)(2) FISCAL YEAR ($/SHARE)(2) DATE $(3)
---- ---------- ------------ ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
Scott K. Ginsburg....... 500,000 8.0% $23.25 9/5/07 $6,155,000
James E. de Castro...... 425,000 6.8% 23.25 9/5/07 5,231,750
Matthew E. Devine....... 262,500 4.2% 23.25 9/5/07 3,231,375
Kenneth J. O'Keefe...... -- -- -- -- --
</TABLE>
- -------------------------
(1) Represents options to purchase shares of Common Stock granted under the
Company's 1995 Stock Option Plan for Executive Officers and Key Employees
(the "1995 Stock Option Plan"). The options awarded to Mr. Ginsburg, Mr. de
Castro and Mr. Devine during the last fiscal year are exercisable in whole
or part beginning on September 5, 1997, and expire on September 5, 2007. The
options may expire earlier upon the occurrence of certain merger or
consolidation transactions involving the Company. The Company is not
required to issue and deliver any certificate for shares of 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 Common Stock under federal or state
securities laws and the payment to the Company 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 Common Stock purchasable upon exercise of the
options unless and until certificates representing such shares shall have
been issued by the Company 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 or pursuant to a QDRO.
(2) Represents the estimated fair value of Common Stock on September 5, 1997,
the date of grant, as adjusted for the two-for-one stock split of the
Company's Common Stock effected in the form of a stock dividend, paid on
January 12, 1998.
(3) 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
41.88%; risk-free interest rate of 5.38%, and expected life of seven years.
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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, 1997 by the Company'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, 1997.
<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....... -- -- 500,000 375,000 7,034,000 9,873,000
James E. de Castro...... 300,000 6,979,000 1,220,000 375,000 34,830,250 9,873,000
Matthew E. Devine....... -- -- 562,500 187,500 14,082,000 4,936,500
Kenneth J. O'Keefe...... -- -- -- 300,000 -- 7,992,000
</TABLE>
- -------------------------
(1) Based upon a per share price for Common Stock of $37.31. This price
represents the closing price for the Common Stock on the Nasdaq National
Market System on December 31, 1997, as adjusted for the two-for-one stock
split of the Company's Common Stock, effected in the form of a stock
dividend, paid on January 12, 1998.
EMPLOYMENT AGREEMENTS
GINSBURG EMPLOYMENT AGREEMENT
Prior to April 14, 1998, Scott K. Ginsburg served as the President and Chief
Executive Officer of Chancellor Media, CMHC and CMCLA. On September 4, 1997, the
Company entered into a new employment agreement (the "Ginsburg Employment
Agreement") with Mr. Ginsburg, to be effective on the closing date of the
Chancellor Merger. The Ginsburg Employment Agreement, which had a term that
extends through September 5, 2002, provided for an initial annual base salary of
$1,000,000 for the first year of the employment agreement, 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 Ginsburg Employment Agreement
provided for an annual bonus based upon the financial performance of the Company
in relation to certain annual performance targets which are defined in the
Ginsburg Employment Agreement. The Ginsburg Employment Agreement provided that,
on the closing date of the Chancellor Merger and on each of the first four
anniversaries thereof on which Mr. Ginsburg remained employed by the Company,
Mr. Ginsburg would be granted options to purchase 200,000 shares of Common
Stock. If Mr. Ginsburg's employment was terminated without "cause" (as defined
in the Ginsburg Employment Agreement) or if Mr. Ginsburg terminated his
employment for "good reason" (as defined in the Ginsburg Employment Agreement)
prior to the fifth annual anniversary of the consummation of the Chancellor
Merger, Mr. Ginsburg would receive on such termination date a number of options
equal to 1,000,000 minus the number of options previously granted to Mr.
Ginsburg pursuant to the preceding sentence prior to such date. In addition, in
recognition of Mr. Ginsburg's rights under his prior employment agreement, the
Company granted Mr. Ginsburg an option to acquire an additional 300,000 shares
of Common Stock on the closing date of the Chancellor Merger. The Ginsburg
Employment Agreement provided that all options granted pursuant to the Ginsburg
Employment Agreement would be exercisable for ten years from the date of grant
of the option (notwithstanding any termination of employment), at a price per
share equal to the
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<PAGE> 83
market price for Common Stock at the close of trading on the day immediately
preceding the date of the grant. The Ginsburg Employment Agreement provided
that, in the event of termination of Mr. Ginsburg's employment by the Company
without "cause" or by Mr. Ginsburg with "good reason," the Company would make a
one-time cash payment to Mr. Ginsburg in a gross amount such that the net
payments retained by Mr. Ginsburg shall equal $20,000,000. The Ginsburg
Employment Agreement further provided that, in the event of termination of Mr.
Ginsburg's employment by reason of expiration or non-renewal of the Ginsburg
Employment Agreement, the Company would make a one-time cash payment to Mr.
Ginsburg equal to two times the amount of his annual base salary for the
contract year in which his employment terminates. The Ginsburg Employment
Agreement provided that Mr. Ginsburg would have registration rights with respect
to all Common Stock acquired by Mr. Ginsburg at any time which rights were no
less favorable to Mr. Ginsburg as the registration rights held by Hicks Muse and
its affiliates with respect to the common stock of Chancellor immediately prior
to the consummation of the Chancellor Merger. Under the Ginsburg Employment
Agreement, the Company 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 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 April 15, 1998, Mr. Ginsburg has borrowed
$3,500,000 under the loan.
On April 14, 1998, Mr. Ginsburg resigned as President and Chief Executive
Officer of Chancellor Media, CMHC and CMCLA, and on April 20, 1998, Mr. Ginsburg
resigned as director of Chancellor Media, CMHC and CMCLA and from all
appointments and positions with their respective subsidiaries. On April 20, 1998
(the "Agreement Date"), the Company entered into a separation and consulting
agreement (the "Ginsburg Separation and Consulting Agreement") with Mr.
Ginsburg. The Ginsburg Separation and Consulting Agreement, provides for (a) a
lump sum severance payment of $20,000,000 net of applicable employee withholding
taxes, which is the same amount Mr. Ginsburg would have been entitled to under
the Ginsburg Employment Agreement based upon a termination of his employment by
him for "good reason" or by the Company "without cause," and (b) a grant to Mr.
Ginsburg of stock options to acquire 800,000 shares of Common Stock of
Chancellor Media, subject to the approval of Chancellor Media's stockholders (at
the 1998 annual meeting of stockholders) of a 1998 Chancellor Media Corporation
Employee Stock Option Plan, which is the same number of stock options to which
Mr. Ginsburg would have been entitled based upon a termination of his employment
by him for "good reason" or by the Company "without cause," except that the
Ginsburg Separation and Consulting Agreement provides that the exercise price
for such stock options is $23.25 per share and shall become exercisable as
follows: (i) options for 266,666 shares shall be exercisable beginning on the
Agreement Date for a period of seven years thereafter, (ii) options for 266,667
shares shall be exercisable beginning one year from the Agreement Date for a
period of six years thereafter, and (iii) options for 266,667 shares shall be
exercisable beginning two years from the Agreement Date for a period of five
years thereafter. Previously granted stock options were unaffected by the
Ginsburg Separation and Consulting Agreement. The Ginsburg Separation and
Consulting Agreement also provides that Chancellor Media, CMHC and CMCLA shall
retain Mr. Ginsburg as a consultant through April 13, 2003, Mr. Ginsburg to be
compensated for such consulting services in an amount equal to $2,500,000 for
each full year of consulting
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services. The Ginsburg Separation and Consulting Agreement further provides for
three-year non-solicitation and non-hire covenants by Mr. Ginsburg, as well as
other mutual releases and other provisions typically found in an employment
termination agreement, but does not provide for a noncompetition agreement from
Mr. Ginsburg.
DE CASTRO EMPLOYMENT AGREEMENT
Effective as of April 17, 1998, Chancellor Media and the Company entered into a
new employment agreement (the "de Castro Employment Agreement") with Mr. de
Castro. The de Castro Employment Agreement, which has a term that extends
through April 17, 2003, provides for an initial annual base salary of $900,000
for the first year of the employment agreement, 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 de Castro Employment Agreement provides for an
annual bonus based upon a percentage of the amount by which the Company exceeds
an annual performance target which is defined in the de Castro Employment
Agreement. The de Castro Employment Agreement provides that, on the effective
date thereof and on each of the first four anniversaries thereof on which Mr. de
Castro remains employed by the Company, Mr. de Castro shall be granted options
to purchase 160,000 shares of Common Stock. If Mr. de Castro's employment is
terminated without "cause" (as defined in the de Castro Employment Agreement) or
if Mr. de Castro terminates his employment for "good reason" (as defined in the
de Castro Employment Agreement) prior to the fifth annual anniversary of the
effective date of the de Castro Employment Agreement, Mr. de Castro will receive
on such termination date a number of options equal to 800,000 minus the number
of options previously granted to Mr. de Castro pursuant to the preceding
sentence prior to such date. The de Castro Employment Agreement provides (i) for
a signing bonus in the gross amount of $1,000,000, (ii) that the Company shall
make a one-time cash payment to Mr. de Castro in the gross amount of $5,000,000
less applicable employee withholding taxes and (iii) that the Company shall
grant to Mr. de Castro stock options to purchase 800,000 shares of Chancellor
Media Common Stock at a price of $42.125. All options granted pursuant to the de
Castro Employment Agreement will be exercisable for ten years from the date of
grant of the option (notwithstanding any termination of employment). The annual
option grant shall be at a price per share equal to the market price for Common
Stock at the close of trading on the day immediately preceding the date of the
grant. The de Castro Employment Agreement provides that, in the event of
termination of Mr. de Castro's employment by the Company without "cause" or by
Mr. de Castro with "good reason," the Company shall make a one-time cash payment
to Mr. de Castro in a gross amount such that the net payments retained by Mr. de
Castro shall equal $5,000,000 less applicable employee withholding taxes. The de
Castro Employment Agreement further provides that, in the event of termination
of Mr. de Castro's employment by Mr. de Castro for other than "good reason," in
exchange for Mr. de Castro's agreement not to induce any employee of any radio
station owned by the Company to terminate such employment or to become employed
by any other radio station, the Company shall continue to pay Mr. de Castro his
applicable base salary through the fifth anniversary of the effective date of
the de Castro Employment Agreement. In such event, the Company also has the
right, in exchange for the payment at the end of each calendar year through
December 31, 2002, of an annual amount equal to the product of Mr. de Castro's
average bonus multiplied by the fraction of each such calendar year which
precedes the fifth anniversary of the effective date of the de Castro Employment
Agreement, to require that Mr. de Castro not be
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employed by or perform activities on behalf of or have ownership interest in any
radio broadcasting station serving the same market as any radio station owned by
the Company. The de Castro Employment Agreement further provides that if Mr. de
Castro's employment is terminated by reason of expiration or non-renewal of the
de Castro Employment Agreement, the Company shall make a one-time cash payment
to Mr. de Castro equal to two times the amount of his annual base salary for the
contract year in which such employment terminates. The de Castro Employment
Agreement provides that if the Company provides employment related benefits in
an aggregate amount greater than or on more favorable terms as are granted to
any other senior executives (except for benefits and Employment Inducements (as
defined therein) provided to the Chief Executive Officer), Mr. de Castro would
be provided such benefits in substantially comparable amount and/or under
substantially comparable terms, on an aggregate basis.
DEVINE EMPLOYMENT AGREEMENT
In May 1998, the Company entered into a new employment agreement (the "Devine
Employment Agreement") with Mr. Devine. The Devine Employment Agreement, which
has a term that extends through April 17, 2003, provides for an initial annual
base salary of $500,000 for the first year of the employment agreement, to be
increased each year by $25,000. In addition, the Devine Employment Agreement
provides for an annual bonus based upon a percentage of the amount by which the
Company exceeds an annual performance target which is defined in the Devine
Employment Agreement. The Devine Employment Agreement provides that, on the
effective date thereof and on each of the first four anniversaries thereof on
which Mr. Devine remains employed by the Company, Mr. Devine shall be granted
options to purchase 120,000 shares of Common Stock. If Mr. Devine's employment
is terminated without "cause" (as defined in the Devine Employment Agreement) or
if Mr. Devine terminates his employment for "good reason" (as defined in the
Devine Employment Agreement) prior to the fifth annual anniversary of the
effective date of the Devine Employment Agreement, Mr. Devine will receive on
such termination date a number of options equal to 600,000 minus the number of
options previously granted to Mr. Devine pursuant to the preceding sentence
prior to such date. In addition, the Devine Employment Agreement provides (a)
for a signing bonus in the gross amount of $1,000,000, (b) that the Company
shall make a one-time cash payment to Mr. Devine of $2,000,000 less applicable
employee withholding taxes and (c) that the Company shall grant to Mr. Devine
stock options to purchase 600,000 shares of Chancellor Media Common Stock at a
price of $42.125 per share. The Devine Employment Agreement provides that all
options granted pursuant to the Devine Employment Agreement will be exercisable
for ten years from the date of grant of the option (notwithstanding any
termination of employment). The annual option grant shall be at a price per
share equal to the market price for Common Stock at the close of trading on the
day immediately preceding the date of the grant. The Devine Employment Agreement
provides that, in the event of termination of Mr. Devine's employment by the
Company without "cause" or by Mr. Devine with "good reason," the Company shall
make a one-time cash payment to Mr. Devine in a gross amount such that the net
payments retained by Mr. Devine shall equal $2,000,000 less applicable employee
withholding taxes. The Devine Employment Agreement further provides that, in the
event of termination of Mr. Devine's employment by Mr. Devine for other than
"good reason," in exchange for Mr. Devine's agreement not to induce any employee
of any radio station owned by the Company to terminate such employment or to
become employed by any other radio
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<PAGE> 86
station, the Company shall continue to pay Mr. Devine his applicable base salary
through the earlier of the fifth anniversary of the effective date of the Devine
Employment Agreement or the second anniversary of the termination of employment
(the "Cessation Date"). In such event, the Company also has the right, in
exchange for the payment at the end of each calendar year through the year which
includes the Cessation Date of an annual amount equal to the product of Mr.
Devine's average bonus multiplied by the fraction of each such calendar year
which precedes the Cessation Date, to require that Mr. Devine not be employed by
or perform activities on behalf of or have an ownership interest in any radio
broadcasting station serving the same market as any radio station owned by the
Company. The Devine Employment Agreement further provides that if Mr. Devine's
employment is terminated by reason of expiration or non-renewal of the Devine
Employment Agreement, the Company shall make a one-time cash payment to Mr.
Devine equal to two times the amount of his annual base salary for the contract
year in which such employment terminates. The Devine Employment Agreement
provides that if the Company provides employment related benefits in an
aggregate amount greater than or on more favorable terms as are granted to any
other senior executives (except for benefits and Employment Inducements (as
defined therein) provided to the Chief Executive Officer or Chief Operating
Officer), Mr. Devine would be provided such benefits in substantially comparable
amount and/or substantially comparable terms, on an aggregate basis.
O'KEEFE EMPLOYMENT AGREEMENT
In February of 1996, the Company entered into an employment agreement (the
"O'Keefe 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. The O'Keefe Employment
Agreement provides for Mr. O'Keefe to receive an annual incentive bonus based
upon a percentage of the amount by which the Company 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 Common Stock.
Pursuant to the agreement, Mr. O'Keefe was awarded options to purchase 300,000
shares of Common Stock. The stock options vest and become exercisable subject to
Mr. O'Keefe's continued employment by the Company 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 the Company, termination without cause and a
material breach of the employment agreement by the Company leading to the
resignation of Mr. O'Keefe. The agreement terminates upon the death of Mr.
O'Keefe and may be terminated by the Company 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 the Company. However, with the approval of the
Company, Mr. O'Keefe may engage in activities not directly competitive with the
business of the Company as long as such activities do not materially interfere
with Mr. O'Keefe's employment obligations. On March 1, 1997, Evergreen and Mr.
O'Keefe amended the O'Keefe Employment Agreement in order to make certain
provisions of the O'Keefe Employment Agreement comparable to those contained in
Mr. de Castro's and Mr. Devine's former employment agreement.
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<PAGE> 87
On September 4, 1997, the Company amended its employment agreement (the "O'Keefe
Amendment") with Mr. O'Keefe. As a result of the O'Keefe Amendment, the O'Keefe
Employment Agreement is to expire as of December 31, 1997, and the O'Keefe
Amendment is effective on January 1, 1998. The O'Keefe Amendment, which has a
term through December 31, 2000, provides for an initial annual base salary of
$500,000 for the first year of the employment agreement, to be increased each
year by $25,000. In addition, the O'Keefe Amendment provides for an annual bonus
based upon the financial performance of the Company in relation to certain
annual performance targets which are defined in the O'Keefe Amendment. The
O'Keefe Amendment provides that, on January 1, 1998 and 1999, assuming that Mr.
O'Keefe remains employed by the Company on such dates, Mr. O'Keefe shall be
granted options to purchase 100,000 shares of Common Stock. Furthermore, with
respect to the option to purchase 300,000 shares of Common Stock granted under
the O'Keefe Employment Agreement, (i) all such options will become exercisable
on February 28, 1999 if Mr. O'Keefe remains employed by the Company on such
date, (ii) if Mr. O'Keefe's employment is terminated as a result of Mr.
O'Keefe's death or disability or resignation by Mr. O'Keefe following a material
breach of the O'Keefe Amendment by the Company, a prorated portion of such
options will become exercisable and (iii) if Mr. O'Keefe's employment is
terminated without "cause" (as defined in the O'Keefe Amendment) or there is a
"change of control" (as defined in the O'Keefe Amendment), all such options
shall become exercisable. The O'Keefe Amendment provides that all options
described in the O'Keefe Amendment will be exercisable for seven years from the
date of grant of the option, and that all options granted pursuant to the
O'Keefe Amendment will be granted at a price per share equal to the market price
for Common Stock on the date of the grant. The O'Keefe Amendment provides that,
in the event of termination of Mr. O'Keefe's employment by the Company without
"cause," the Company shall pay Mr. O'Keefe his base salary and a prorated annual
bonus and provide health and life insurance coverage until the earlier of the
expiration of the term of the O'Keefe Amendment or the date on which Mr. O'Keefe
becomes employed in a position providing similar compensation.
MARCUS EMPLOYMENT AGREEMENT
The Company entered into an employment agreement (the "Marcus Employment
Agreement") with Jeffrey A. Marcus which is effective as of June 1, 1998. The
Marcus Employment Agreement, which has a term that extends through May 31, 2003,
provides for an initial annual base salary of $1,125,000 for the first year of
the employment agreement, to be increased each year by a percentage equal to the
percentage change in the consumer price index during the preceding year. The
Marcus Employment Agreement provides for a one-time execution bonus in the gross
amount of $1,000,000. In addition, the Marcus Employment Agreement provides for
an annual bonus in an amount to be determined by the Compensation Committee in
its reasonable discretion; provided, however, the annual bonus shall in no event
be less than $2,000,000 nor greater than $4,000,000. The Marcus Employment
Agreement provides that, on the effective date thereof and on each of the four
anniversaries thereof on which Mr. Marcus remains employed by the Company, Mr.
Marcus shall be granted options to purchase 200,000 shares of Common Stock. If
Mr. Marcus' employment is terminated without "cause" (as defined in the Marcus
Employment Agreement) or if Mr. Marcus terminates his employment for "good
reason" (as defined in the Marcus Employment Agreement) prior to the fourth
annual anniversary of the effective date of the Marcus Employment
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<PAGE> 88
Agreement, Mr. Marcus will receive on such termination date a number of options
equal to 1,000,000 minus the number of options previously granted to Mr. Marcus
pursuant to the preceding sentence prior to such date. The Marcus Employment
Agreement provides that all options granted pursuant to the Marcus Employment
Agreement will be exercisable for ten years from the date of grant of such
options (notwithstanding any termination of employment), at a price per share
equal to the market price for Common Stock at the close of trading on the day
immediately preceding the date of the grant. Under the Marcus Employment
Agreement, Mr. Marcus shall also be granted options to purchase 1,250,000 shares
of Common Stock, one-half of which will vest on the date of the grant and
one-half of which will vest on the 18th month anniversary of the date of the
grant, with each option exercisable for ten years from the date of grant of such
options (notwithstanding any termination of employment), at a price of $42.125
per share. The Marcus Employment Agreement provides that, in the event of
termination of Mr. Marcus's employment by the Company without "cause" or by Mr.
Marcus with "good reason," the Company shall make a one-time cash payment to Mr.
Marcus in a gross amount such that the net payments retained by Mr. Marcus
(after payment by the Company of excise taxes imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended, with respect to such payment, to the
extent applicable) shall equal $6,250,000.
The Marcus Employment Agreement further provides that, in the event of
termination of Mr. Marcus's employment by Mr. Marcus for other than "good
reason," in exchange for Mr. Marcus's agreement not to induce any employee of
any radio station owned by the Company to terminate such employment or to become
employed by any other radio station, the Company shall continue to pay Mr.
Marcus his applicable base salary through the fifth anniversary of the effective
date thereof. In such event, the Company also has the right, in exchange for the
payment at the end of each calendar year until each calendar year ending
December 31, 2003, of an annual amount equal to the product of Mr. Marcus's
average bonus multiplied by the fraction of each such calendar year which
precedes the fifth anniversary of the effective date of the Marcus Employment
Agreement, to require that Mr. Marcus not be employed by or perform activities
on behalf of or have ownership interest in any radio or television broadcasting
station serving the same market as any radio station owned by the Company, or in
connection with any business enterprise that is directly or indirectly engaged
in any of the business activities in which any business owned by the Company has
significant involvement, subject to certain exceptions. The Marcus Employment
Agreement further provides that if Mr. Marcus's employment is terminated by
reason of expiration or non-renewal of the Marcus Employment Agreement, the
Company shall make a one-time cash payment to Mr. Marcus equal to two times the
amount of his annual base salary for the contract year in which such employment
terminates. The Marcus Employment Agreement also provides that Mr. Marcus shall
be entitled to receive personal security services, to be paid for by the
Company, and certain other customary benefits and perquisites.
MCLAUGHLIN EMPLOYMENT AGREEMENT
On August 18, 1998, the Company entered into an employment agreement with Mr.
McLaughlin (the "McLaughlin Employment Agreement"), that has a term that extends
through August 18, 2003, and provides for an annual base salary of $500,000 for
the first year of the employment agreement, to be increased each year by a
percentage equal to the percentage change in the consumer price index during the
preceding year. The
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<PAGE> 89
McLaughlin Employment Agreement provides for Mr. McLaughlin to receive an annual
bonus as determined by the Compensation Committee, based upon the recommendation
of the Chief Executive Officer. The McLaughlin Employment Agreement also
provides that on the agreement date and on each of the first four anniversaries
thereof on which Mr. McLaughlin remains employed by the Company, Mr. McLaughlin
shall be granted options to purchase 60,000 shares of Common Stock of the
Company. If Mr. McLaughlin's employment is terminated without "cause" (as
defined in the McLaughlin Employment Agreement) or if Mr. McLaughlin terminates
his employment for "good reason" (as defined in the McLaughlin Employment
Agreement) prior to the fifth anniversary of the effective date of the
McLaughlin Employment Agreement, Mr. McLaughlin will receive on such termination
date a number of options equal to 300,000 minus the number of options previously
granted to Mr. McLaughlin pursuant to the preceding sentence prior to such date.
In addition, as an execution bonus, the Company will grant to Mr. McLaughlin
options to purchase 300,000 shares of Common Stock of the Company at a price of
$48.375 per share 25% of which shall vest on the effective date thereof and 25%
of which will vest on each of the three anniversaries of the date of grant. The
Company also paid to Mr. McLaughlin a one-time execution bonus in the gross
amount of $1,000,000. The McLaughlin Employment Agreement provides that all
options granted pursuant to the McLaughlin Employment Agreement will be
exercisable for ten years from the date of grant of the option (notwithstanding
any termination of employment). The annual option grant shall be at a price per
share equal to the market price for Common Stock at the close of trading on the
day immediately preceding the date of the grant. The McLaughlin Employment
Agreement provides that, in the event of termination of Mr. McLaughlin's
employment by the Company without "cause" or by Mr. McLaughlin with "good
reason," the Company shall make a one-time cash payment to Mr. McLaughlin in a
gross amount such that the net payments retained by Mr. McLaughlin (after
payment by the Company of any excise taxes imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended, with respect to such payment) shall
equal $1,000,000. The McLaughlin Employment Agreement further provides that, in
the event of termination of Mr. McLaughlin's employment by Mr. McLaughlin for
other than "good reason," in exchange for Mr. McLaughlin's agreement not to
induce any employee of any media company owned by the Company to terminate such
employment or to become employed by any other media company, the Company shall
continue to pay Mr. McLaughlin his applicable base salary though the earlier of
the fifth anniversary of the effective date thereof or the second anniversary of
the termination of employment (the "Cessation Date"). In such event, the Company
also has the right, in exchange for the payment at the end of each calendar year
through the year which includes the Cessation Date of an annual amount equal to
the product of Mr. McLaughlin's average bonus multiplied by the fraction of each
such calendar year which precedes the Cessation Date, to require that Mr.
McLaughlin not be employed by or perform activities on behalf of or have an
ownership interest in any media company serving the same market as any media
company owned by the Company.
NEUMAN EMPLOYMENT AGREEMENT
On June 1, 1998, the Company entered into an employment agreement with Mr.
Neuman, to be effective July 1, 1998 (the "Neuman Employment Agreement"), that
has a term that extends through July 1, 2003, and provides for an annual base
salary of $500,000 for the first year of the employment agreement, to be
increased each year by $25,000. The
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<PAGE> 90
Neuman Employment Agreement provides for Mr. Neuman to receive an annual bonus
as determined by the Compensation Committee, based upon the recommendation of
the Chief Executive Officer; provided, however, that the bonus shall in no event
be less than $500,000 nor greater than $1,500,000. The Neuman Employment
Agreement provides that on the agreement date and on each of the first four
anniversaries of the effective date thereof on which Mr. Neuman remains employed
by the Company, Mr. Neuman shall be granted options to purchase 100,000 shares
of Common Stock of the Company. If Mr. Neuman's employment is terminated without
"cause" (as defined in the Neuman Employment Agreement) or if Mr. Neuman
terminates his employment for "good reason" (as defined in the Neuman Employment
Agreement) prior to the fifth anniversary of the effective date of the Neuman
Employment Agreement, Mr. Neuman will receive on such termination date a number
of options equal to 500,000 minus the number of options previously granted to
Mr. Neuman pursuant to the preceding sentence prior to such date. In addition,
as an execution bonus, the Company will grant to Mr. Neuman options to purchase
300,000 shares of Common Stock of the Company at a price of $42.3125 per share.
The Neuman Employment Agreement provides that all options granted pursuant to
the Neuman Employment Agreement will be exercisable for ten years from the date
of grant of the option (notwithstanding any termination of employment). The
annual option grant shall be at a price per share equal to the market price for
Common Stock at the close of trading on the day immediately preceding the date
of the grant. The Neuman Employment Agreement provides that, in the event of
termination of Mr. Neuman's employment by the Company without "cause" or by Mr.
Neuman with "good reason," the Company shall make a one-time cash payment to Mr.
Neuman in a gross amount such that the net payments retained by Mr. Neuman
(after payment by the Company of any excise taxes imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended, with respect to such payment) shall
equal $2,000,000. The Neuman Employment Agreement further provides that, in the
event of termination of Mr. Neuman's employment by Mr. Neuman for other than
"good reason," in exchange for Mr. Neuman's agreement not to induce any employee
of any media company owned by the Company to terminate such employment or to
become employed by any other media company, the Company shall continue to pay
Mr. Neuman his applicable base salary through the earlier of the fifth
anniversary of the effective date thereof or the second anniversary of the
termination of employment (the "Cessation Date"). In such event, the Company
also has the right, in exchange for the payment at the end of each calendar year
through the year which includes the Cessation Date of an annual amount equal to
the product of Mr. Neuman's average bonus multiplied by the fraction of each
such calendar year which precedes the Cessation Date, to require that Mr. Neuman
not be employed by or perform activities on behalf of or have an ownership
interest in any media company serving the same market as any media company owned
by the Company. The Neuman Employment Agreement further provides that if Mr.
Neuman's employment is terminated by reason of expiration or non-renewal of the
Neuman Employment Agreement, the Company shall make a one-time cash payment to
Mr. Neuman equal to two times the amount of his annual base salary for the
contract year in which such employment terminates. The Neuman Employment
Agreement provides that if the Company provides employment related benefits in
an aggregate amount greater than or on more favorable terms as are granted to
any other senior executives (except for benefits and Employment Inducements (as
defined therein) provided to the Chief Executive Officer or Chief Operating
Officer), Mr. Neuman would
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be provided such benefits in a substantially comparable amount and/or under
substantially comparable terms, on an aggregate basis.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The members of the compensation committee of Chancellor Media, CMHC and the
Company are Messrs. Hicks, Massey, Jordan, Marcus and Lewis. Mr. Hicks serves as
chairman of the compensation committee, and also serves as the Chairman of the
Board of Chancellor Media, CMHC and the Company. Messrs. Massey and Marcus
previously served on the compensation committee of Chancellor, and Mr. Lewis
previously served on the compensation committee of Evergreen.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists information concerning the beneficial ownership of the
Common Stock of Chancellor Media on November 30, 1998 by (i) each director and
executive officer of Chancellor Media and their affiliates on November 30, 1998,
(ii) all directors and executive officers as a group and (iii) each person known
to the Company to own beneficially more than 5% of the Common Stock of
Chancellor Media. As of November 30, 1998, 1,000 shares of the common stock of
CMCLA are held beneficially and of record by CMHC, and 40 shares are held
beneficially and of record by a wholly-owned subsidiary of CMHC. As of November
30, 1998, all of the common stock of CMHC is held beneficially and of record by
Chancellor Media Corporation.
<TABLE>
<CAPTION>
NAME OF STOCKHOLDER SHARES PERCENT(1)
- ------------------- ---------- ----------
<S> <C> <C>
Hicks Muse Parties(2)........................ 16,944,371 11.9%
c/o Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Putnam Investments, Inc.(3).................. 16,956,556 11.9%
One Post Office Square
Boston, Massachusetts 02109
Janus Capital Corporation(4)................. 14,507,490 10.2%
100 Fillmore Street
Denver, Colorado 80206-4923
Thomas O. Hicks.............................. 16,944,371(5) 11.9%
Jeffrey A. Marcus............................ 1,018,402(6) *
James E. de Castro........................... 2,405,000(7) 1.7%
Matthew E. Devine............................ 1,470,000(8) 1.0%
Eric C. Neuman............................... 406,356(9) *
James A. McLaughlin.......................... 75,000(10) *
Kenneth J. O'Keefe........................... 104,000(11) *
Thomas P. McMillin........................... 54,500(12) *
Richard A. B. Gleiner........................ 40,500(13) *
Thomas J. Hodson............................. 37,500(14) *
Perry J. Lewis............................... 140,715(15) *
Lawrence D. Stuart, Jr....................... 11,292 *
John H. Massey............................... 53,524(16) *
Steven Dinetz................................ 1,443,954(17) *
Vernon E. Jordan, Jr......................... 12,500(18) *
J. Otis Winters.............................. -- *
Michael J. Levitt............................ -- *
All directors and executive officers as a
group (17 persons)......................... 24,217,614(19) 16.2%
</TABLE>
- -------------------------
* Less than one percent (1%).
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(1) Assumes that 142,724,983 shares of Chancellor Media Common Stock were
issued and outstanding as of November 30, 1998.
(2) Consists of 1,278,969 shares owned of record by Thomas O. Hicks, 346,736
shares owned of record by Mr. Hicks as trustee for certain trusts of which
his children are beneficiaries and 20,816 shares owned of record by Mr.
Hicks as co-trustee of a trust for the benefit of unrelated parties. Also
includes 15,297,850 shares owned of record by three 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, Chief Executive 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, David B. Deniger and Dan H. Blanks 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
held by such partnerships. Messrs. Hicks, Muse, Tate, Furst, Stuart,
Levitt, Deniger and Blanks disclaim the existence of a group and each of
them disclaims beneficial ownership of shares not owned of record by him.
(3) Based solely upon information contained in such person's filing on
September 18, 1998 of Schedule 13G under the Exchange Act.
(4) Includes 7,747,315 shares owned by Janus Fund, an investment company
registered under the Investment Company Act of 1940, as amended. Based
solely upon information contained in such person's filing on September 10,
1998 of Schedule 13G under the Exchange Act.
(5) Consists of 1,278,969 shares owned of record by Mr. Hicks, 346,736 shares
owned of record by Mr. Hicks as trustee for certain trusts of which his
children are beneficiaries and 20,816 shares owned of record by Mr. Hicks
as co-trustee of a trust for the benefit of unrelated parties. Also
includes 15,297,850 shares owned of record by three limited partnerships of
which the ultimate general partners are entities controlled by Mr. Hicks
and Hicks Muse. Mr. Hicks is the controlling stockholder of Hicks Muse and
serves as Chairman of the Board, Chief Executive 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 shares not owned
of record by him.
(6) Includes options that are exercisable within 60 days of the date hereof to
purchase 849,242 shares, 825,000 of which are subject to options to be
granted pursuant to the Marcus Employment Agreement.
(7) Consists of options that are exercisable within 60 days of the date hereof
to purchase 2,405,000 shares, 960,000 of which are subject to options to be
granted pursuant to the de Castro Employment Agreement.
(8) Consists of options that are exercisable within 60 days of the date hereof
to purchase 1,470,000 shares, 720,000 of which are subject to options to be
granted pursuant to the Devine Employment Agreement.
(9) Includes options that are exercisable within 60 days of the date hereof to
purchase 400,000 shares to be granted pursuant to the Newman Employment
Agreement.
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<PAGE> 94
(10) Consists of options that are exercisable within 60 days of the date hereof
to purchase 75,000 shares to be granted pursuant to the McLaughlin
Employment Agreement.
(11) Includes options that are exercisable within 60 days of the date hereof to
purchase 100,000 shares.
(12) Includes options that are exercisable within 60 days of the date hereof to
purchase 50,000 shares.
(13) Includes options that are exercisable within 60 days of the date hereof to
purchase 37,500 shares.
(14) Consists of options that are exercisable within 60 days of the date hereof
to purchase 37,500 shares.
(15) Includes options that are exercisable within 60 days of the date hereof to
purchase 37,500 shares.
(16) Consists of options that are exercisable within 60 days of the date hereof
to purchase 36,742 shares and 16,782 shares held by Mr. Massey's wife as
her separate property.
(17) Includes (i) options that are exercisable within 60 days of the date hereof
to purchase 1,310,956 shares, (ii) 1,090 shares held by an individual
retirement account for the benefit of Mr. Dinetz and (iii) 1,000 shares
held by Mr. Dinetz' daughter. Mr. Dinetz disclaims beneficial ownership of
the shares of Chancellor Media Common Stock that are not owned by him of
record.
(18) Consists of options that are exercisable within 60 days of the date hereof
to purchase 12,500 shares.
(19) Includes options to purchase 6,821,940 shares.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is subject to a financial monitoring and oversight agreement, dated
April 1, 1996, as amended on September 4, 1997 (the "Financial Monitoring and
Oversight Agreement"), with Hicks, Muse & Co. Partners, L.P. ("Hicks Muse
Partners"), an affiliate of Hicks Muse. Pursuant to the Financial Monitoring and
Oversight Agreement, the Company pays to Hicks Muse Partners an annual fee of
not less than $1.0 million, subject to increase or decrease (but not below $1.0
million), based upon changes in the Consumer Price Index. Hicks Muse Partners is
also entitled to reimbursement for any out-of-pocket expenses incurred in
connection with rendering services under the Financial Monitoring and Oversight
Agreement. The Financial Monitoring and Oversight Agreement provides 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 Common Stock beneficially owned by them, collectively, at the
effective time of the Chancellor Merger. The Company and Chancellor paid Hicks
Muse Partners a total of $0.7 million in 1997 pursuant to the Financial
Monitoring and Oversight Agreement of which $0.3 million was paid by the Company
following the Chancellor Merger and which is included in corporate general and
administrative expense in the accompanying consolidated statement of operations.
In connection with the consummation of the Chancellor Merger, a Financial
Advisory Agreement among Chancellor, CRBC and HM2/Management Partners, L.P.
("HM2/Management"), an affiliate of Hicks Muse, was terminated. 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 Chancellor
Merger, HM2/Management was paid a fee of $10.0 million in cash upon consummation
of the Chancellor Merger which was accounted for as a direct acquisition cost.
As part of the termination of the Financial Advisory Agreement, the Company paid
Hicks Muse Partners $1.5 million for financial advisory services in connection
with the Katz Acquisition which was accounted for as a direct acquisition cost.
Upon the consummation of the Capstar Merger, the Company will become subject to
a Financial Advisory Agreement pursuant to which Hicks Muse will be entitled to
be financial advisor on certain transactions of the Company and its subsidiaries
as follows: (a) on any acquisition, disposition or exchange transaction (an "M&A
Transaction") for which the Company or any such subsidiaries retain any
Financial Advisor (as hereinafter defined), Hicks Muse shall be entitled to
serve as a co-financial advisor on such transaction and shall have the right to
mutually agree with the Company's indirect parent upon the selection of any such
Financial Advisor or Financial Advisors so retained and, unless mutually agreed
to otherwise by Hicks Muse and the Company's indirect parent, Hicks Muse would
be entitled to receive a "market fee" for its services in connection therewith
of no less than 50% of the aggregate fees paid to all such advisors (including
Hicks Muse), (b) on any M&A Transaction of the Company or any of its
subsidiaries for which a Financial Advisor is not retained by the Company or any
of its subsidiaries but has a transaction value in excess of $500 million, Hicks
Muse would be the exclusive financial advisor of the Company and its
subsidiaries and receive a "market fee" for its services in connection
therewith, and (c) on any underwriting, loan syndication, equity placement or
other financing transaction (a "Financing Transaction") in which the Company or
any of its subsidiaries retain one or more Financial Advisors, Hicks Muse would
have the right to mutually agree with the Company's parent on the selection of
each
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such Financial Advisor in connection with such Financing Transaction. "Financial
Advisor" shall mean any investment bank, commercial bank, underwriter, arranging
or syndication agent or other person or entity that provides investment banking,
underwriting, financial advice, valuation or other similar services with respect
to any M&A Transaction or Financing Transaction; provided, however, that a
Financial Advisor shall not include ordinary business brokers.
Vernon E. Jordan, Jr., a director of the Company, also serves on the board of
directors of Bankers Trust Company and Bankers Trust Corporation. BT Alex. Brown
Incorporated is an affiliate of Bankers Trust Company and Bankers Trust
Corporation and is serving as an Initial Purchaser of the Notes in this Offering
and will receive a customary underwriting discount in connection therewith. See
"Private Placement." In addition, affiliates of Bankers Trust Company and
Bankers Trust Corporation have in the past provided a variety of commercial
banking, investment banking and financial advisory services to the Company, and
expect to continue to provide such services to the Company in the future.
Chancellor Media is subject to that certain Amended and Restated Stockholders
Agreement, dated as of February 14, 1996, as amended on September 4, 1997 (the
"Chancellor Stockholders Agreement"), among Chancellor and certain holders of
the Common Stock held by former stockholders of Chancellor, which provides for
certain registration rights for the shares of Common Stock held by such holders.
The Chancellor Stockholders Agreement relates to shares of Common Stock held by
certain affiliates of Hicks Muse.
As part of the Chancellor Merger, the Company has made certain cash payments and
accelerated the vesting of certain stock options previously granted by
Chancellor to Steven Dinetz, a director of the Company. For a description of
these transactions, see "Executive Compensation -- Compensation of Executive
Officers."
The Company has entered into an agreement relating to the Capstar/SFX
Transaction and Chancellor Media has entered into an agreement relating to the
Capstar Merger, each with Capstar, which is affiliated with the Company. In
addition, Chancellor Media has entered into an agreement relating to the LIN
Merger. Affiliates of Hicks Muse have a controlling interest in Capstar and LIN
and a substantial investment in Chancellor Media. For a description of these
transactions, see "Business -- Recent Developments."
Certain radio stations owned by Capstar have engaged Katz to sell national spot
advertising air time, and such stations pay customary commissions to Katz for
such services. Additionally, Capstar's radio stations are affiliated with the
AMFM Radio Networks and receive a portion of advertising revenues generated by
the network.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were sold by the Company on September 25, 1998. In connection with
that placement, the Company entered into the Registration Rights Agreement,
which requires that the Company file the Registration Statement under the
Securities Act with respect to the New Notes and, upon the effectiveness of that
Registration Statement, offer to the holders of the Old Notes the opportunity to
exchange their Old Notes for a like principal amount of New Notes, which will be
issued without a restrictive legend and which generally may be reoffered and
resold by the holder without registration under the Securities Act. The
Registration Rights Agreement further provides that the Company must use its
reasonable best efforts to (i) cause the Registration Statement with respect to
the exchange offer to be declared effective within 180 days of the date on which
the Company issued the Old Notes and (ii) consummate the exchange offer on or
before the 225th day following the date on which the Company issued the Old
Notes. Except as provided below, upon the completion of the exchange offer, the
Company's obligations with respect to the registration of the Old Notes and the
New Notes will terminate. A copy of the Registration Rights Agreement has been
filed as an exhibit to the Registration Statement, of which this Prospectus is a
part, and the summary herein of the material provisions thereof does not purport
to be complete and is qualified in its entirety by reference thereto. As a
result of the timely filing and the effectiveness of the Registration Statement,
certain liquidated damages provided for in the Registration Rights Agreement
will not become payable by the Company. Following the completion of the exchange
offer (except as set forth in the paragraph immediately below), holders of Old
Notes not tendered will not have any further registration rights and those Old
Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for the Old Notes could be adversely
affected upon consummation of the exchange offer.
In order to participate in the exchange offer, a holder must represent to the
Company and the Guarantors, among other things, that (i) the New Notes acquired
pursuant to the exchange offer are being obtained in the ordinary course of
business of the holder, (ii) the holder is not engaging in and does not intend
to engage in a distribution of the New Notes, (iii) the holder does not have an
arrangement or understanding with any person to participate in the distribution
of the New Notes and (iv) the holder is not an "affiliate," as defined under
Rule 405 promulgated under the Securities Act, of the Company and the
Guarantors. Pursuant to the Registration Rights Agreement if (i) the Company
determines that it is not permitted to effect the exchange offer as contemplated
hereby because of any change in applicable law or Commission policy, or (ii) any
Holder of Transfer Restricted Securities notifies the Company prior to the 20th
day following consummation of the exchange offer (a) that it is prohibited by
law or SEC policy from participating in the exchange offer, (b) that it may not
resell the New Notes acquired by it in the exchange offer to the public without
delivering a prospectus and that this Prospectus is not appropriate or available
for such resales or (c) that it is a broker-dealer and owns Old Notes acquired
directly from the Company or an affiliate of the Company, the Company is
required to file a "shelf" registration statement for a continuous offering
pursuant to Rule 415 under the Securities Act in respect of the Old Notes. For
purposes of the foregoing, "Transfer Restricted Securities" means each Old Note
until (i) the date on which such Note has been exchanged by a person other than
a broker-dealer for a New
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Note in the exchange offer, (ii) following the exchange by a broker-dealer in
the Exchange Offer of an Old Note for a New Note, the date on which such New
Note is sold to a purchaser who receives from such broker-dealer on or prior to
the date of such sale a copy of this Prospectus, (iii) the date on which such
Old Note has been electively registered under the Securities Act and disposed of
in accordance with such "shelf" registration statement or (iv) the date on which
such Old Note is distributed to the public pursuant to Rule 144 under the Act or
may be distributed to the public pursuant to Rule 144(k) under the Act. Other
than as set forth in this paragraph, no holder will have the right to
participate in the "shelf" registration statement nor otherwise require that the
Company register such holder's shares of Old Notes under the Securities Act. See
"-- Procedures for Tendering."
Based on an interpretation by the SEC's staff set forth in no-action letters
issued to third parties unrelated to the Company and the Guarantors, the Company
believes that, with the exceptions set forth below, New Notes issued pursuant to
the exchange offer in exchange for Old Notes may be offered for resale, resold
and otherwise transferred by holders thereof (other than any holder which is an
"affiliate" of the Company or the Guarantors within the meaning of Rule 405
promulgated under the Securities Act, or a broker-dealer who purchased Old Notes
directly from us to resell pursuant to Rule 144A or any other available
exemption promulgated under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that the New Notes are acquired in the ordinary course of business of the holder
and the holder does not have an arrangement or understanding with any person to
participate in the distribution of such New Notes. Any holder who tenders in the
exchange offer for the purpose of participating in a distribution of the New
Notes cannot rely on this interpretation by the SEC's staff and must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. Each broker-dealer that receives
New Notes for its own account in exchange for Old Notes, where such Old Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See "Plan of Distribution."
Broker-dealers who acquired Old Notes directly from us and not as a result of
market-making activities or other trading activities may not rely on the staff's
interpretations discussed above or participate in the exchange offer and must
comply with the prospectus delivery requirements of the Securities Act in order
to sell the Old Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Following the completion of the exchange offer (except as set forth in the
second paragraph under "-- Purpose and Effect" above), holders of Old Notes not
tendered will not have any further registration rights and those Old Notes will
continue to be subject to certain restrictions on transfer. Accordingly, the
liquidity of the market for a holder's Old Notes could be adversely affected
upon completion of the exchange offer if the holder does not participate in the
exchange offer.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus and in
the letter of transmittal, the Company will accept any and all Old Notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on January 9,
1999, or such date and
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time to which we extend the offer. The Company will issue $1,000 principal
amount of New Notes in exchange for each $1,000 principal amount of outstanding
Old Notes accepted in the exchange offer. Holders may tender some or all of
their Old Notes pursuant to the exchange offer. However, Old Notes may be
tendered only in integral multiples of $1,000 in principal amount.
The form and terms of the New Notes are substantially the same as the form and
terms of the Old Notes except that the New Notes have been registered under the
Securities Act and will not bear legends restricting their transfer. The New
Notes will evidence the same debt as the Old Notes and will be issued pursuant
to, and entitled to the benefits of, the Indenture pursuant to which the Old
Notes were issued.
As of November 1, 1998, Old Notes representing $750.0 million aggregate
principal amount were outstanding and there was one registered holder, a nominee
of the DTC. This Prospectus, together with the letter of transmittal, is being
sent to such registered holder and to others believed to have beneficial
interests in the Old Notes. The Company intends to conduct the exchange offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes when,
as, and if the Company has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering holders for the
purpose of receiving the New Notes from the Company. If any tendered Old Notes
are not accepted for exchange because of an invalid tender, the occurrence of
certain other events set forth herein or otherwise, certificates for any such
unaccepted Old Notes will be returned, without expense, to the tendering holder
thereof as promptly as practicable after January 9, 1998, unless the exchange
offer is extended.
Holders who tender Old Notes in the exchange offer will not be required to pay
brokerage commissions or fees or, subject to the instructions in the letter of
transmittal, transfer taxes with respect to the exchange of Old Notes pursuant
to the exchange offer. The Company will pay all charges and expenses, other than
certain applicable taxes, in connection with the exchange offer. See "-- Fees
and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The expiration date shall be 5:00 p.m., New York City time, on January , 1999,
unless the Company, in its sole discretion, extends the exchange offer, in which
case the expiration date shall mean the latest date and time to which the
exchange offer is extended. In order to extend the exchange offer, the Company
will notify the Exchange Agent and each registered holder of any extension by
oral or written notice prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date. The Company
reserves the right, in its sole discretion, (i) to delay accepting any Old
Notes, to extend the exchange offer or, if any of the conditions set forth under
"-- Conditions to Exchange Offer" shall not have been satisfied, to terminate
the exchange offer, by giving oral or written notice of such delay, extension or
termination to the Exchange Agent, or (ii) to amend the terms of the exchange
offer in any manner. In the event that the Company makes a material or
fundamental change to the terms of the exchange offer, the Company will file a
post-effective amendment to the Registration Statement.
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PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender the Old Notes in the exchange offer.
Except as set forth under "-- Book Entry Transfer," to tender in the exchange
offer a holder must complete, sign, and date the Letter of Transmittal, or a
copy thereof, have the signatures thereon guaranteed if required by the Letter
of Transmittal, and mail or otherwise deliver the Letter of Transmittal or copy
to the Exchange Agent prior to the expiration date. In addition, (i)
certificates for such Old Notes must be received by the Exchange Agent along
with the Letter of Transmittal prior to the expiration date, (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old
Notes, if that procedure is available, into the Exchange Agent's account at DTC
(the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
expiration date or (iii) the holder must comply with the guaranteed delivery
procedures described below. To be tendered effectively, the letter of
transmittal and other required documents must be received by the Exchange Agent
at the address set forth under "-- Exchange Agent" prior to the expiration date.
The tender by a holder that is not withdrawn before the expiration date will
constitute an agreement between that holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the letter of
transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
NOMINEES TO EFFECT THESE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company, or other nominee and who wishes to
tender should contact the registered holder promptly and instruct the registered
holder to tender on the beneficial owner's behalf. If the beneficial owner
wishes to tender on the owner's own behalf, the owner must, prior to completing
and executing the letter of transmittal and delivering the owner's Old Notes,
either make appropriate arrangements to register ownership of the Old Notes in
the beneficial owner's name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may take considerable
time.
Signatures on a letter of transmittal or a notice of withdrawal, as the case may
be, must be guaranteed by an Eligible Institution (as defined) unless Old Notes
tendered pursuant thereto are tendered (i) by a registered holder who has not
completed the box entitled "Special Registration Instruction" or "Special
Delivery Instructions" on the letter of transmittal or (ii) for the account of
an Eligible Institution. If signatures on a letter of transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, the guarantee
must be by any eligible guarantor institution that is a member of or participant
in the Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution").
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If the letter of transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, the Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by the registered holder
as that registered holder's name appears on the Old Notes.
If the letter of transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the letter of
transmittal unless waived by the Company.
All questions as to the validity, form, eligibility (including time of receipt),
acceptance, and withdrawal of tendered Old Notes will be determined by the
Company in its sole discretion, which determination will be final and binding.
The Company reserves the absolute right to reject any and all Old Notes not
properly tendered or any Old Notes the Company's acceptance of which would, in
the opinion of counsel for the Company, be unlawful. The Company also reserves
the right to waive any defects, irregularities or conditions of tender as to
particular Old Notes. The Company's interpretation of the terms and conditions
of the exchange offer (including the instructions in the letter of transmittal)
will be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be cured within such
time as the Company shall determine. Although the Company intends to notify
holders of defects or irregularities with respect to tenders of Old Notes,
neither the Company, the Exchange Agent, nor any other person shall incur any
liability for failure to give such notification. Tenders of Old Notes will not
be deemed to have been made until such defects or irregularities have been cured
or waived. Any Old Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holders, unless
otherwise provided in the letter of transmittal, as soon as practicable
following January 9, 1999, unless the exchange offer is extended.
In addition, the Company reserves the right in its sole discretion to purchase
or make offers for any Old Notes that remain outstanding after the expiration
date or, as set forth under "-- Conditions to the exchange offer," to terminate
the exchange offer and, to the extent permitted by applicable law, purchase Old
Notes in the open market, in privately negotiated transactions, or otherwise.
The terms of any such purchases or offers could differ from the terms of the
exchange offer.
By tendering, each holder will represent to the Company and the Guarantors that,
among other things, (i) the New Notes acquired pursuant to the exchange offer
are being obtained in the ordinary course of business of the person receiving
such New Notes, whether or not such person is the registered holder, (ii) the
holder is not engaging in and does not intend to engage in a distribution of
such New Notes, (iii) the holder does not have an arrangement or understanding
with any person to participate in the distribution of such New Notes and (iv)
the holder is not an "affiliate," as defined under Rule 405 of the Securities
Act, of the Company and the Guarantors.
In all cases, issuance of New Notes for Old Notes that are accepted for exchange
pursuant to the exchange offer will be made only after timely receipt by the
Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly
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completed and duly executed letter of transmittal (or, with respect to the DTC
and its participants, electronic instructions in which the tendering holder
acknowledges its receipt of and agreement to be bound by the letter of
transmittal), and all other required documents. If any tendered Old Notes are
not accepted for any reason set forth in the terms and conditions of the
exchange offer or if Old Notes are submitted for a greater principal amount than
the holder desires to exchange, such unaccepted or non-exchanged Old Notes will
be returned without expense to the tendering Holder thereof (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described below, such nonexchanged Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility) as promptly as practicable
after the expiration or termination of the exchange offer.
Each broker-dealer that receives New Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
See "Plan of Distribution."
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect to
the Old Notes at the Book-Entry Transfer Facility for purposes of the exchange
offer within two business days after the date of this Prospectus, and any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes being tendered by
causing the Book-Entry Transfer Facility to transfer such Old Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the Book-
Entry Transfer Facility, the letter of transmittal or copy thereof, with any
required signature guarantees and any other required documents, must, in any
case other than as set forth in the following paragraph, be transmitted to and
received by the Exchange Agent at the address set forth under "-- Exchange
Agent" on or prior to the expiration date or the guaranteed delivery procedures
described below must be complied with.
DTC's Automated Tender Offer Program ("ATOP") is the only method of processing
exchange offers through DTC. To accept the exchange offer through ATOP,
participants in DTC must send electronic instructions to DTC through DTC's
communication system in lieu of sending a signed, hard copy letter of
transmittal. DTC is obligated to communicate those electronic instructions to
the Exchange Agent. To tender Old Notes through ATOP, the electronic
instructions sent to DTC and transmitted by DTC to the Exchange Agent must
contain the character by which the participant acknowledges its receipt of and
agrees to be bound by the letter of transmittal.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes and the
Old Notes are not immediately available, or time will not permit such holder's
Old Notes or other required documents to reach the Exchange Agent before the
expiration date, or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if (i) the tender is made through an
Eligible Institution, (ii) prior to the expiration date, the Exchange Agent
receives from such Eligible Institution a properly
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completed and duly executed letter of transmittal (or a facsimile thereof) and
notice of guaranteed delivery, substantially in the form provided by the Company
(by telegram, telex, facsimile transmission, mail or hand delivery), setting
forth the name and address of the holder of Old Notes and the amount of Old
Notes tendered, stating that the tender is being made thereby and guaranteeing
that within three New York Stock Exchange, Inc. ("NYSE") trading days after the
date of execution of the notice of guaranteed delivery, the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, will be deposited by the Eligible Institution
with the Exchange Agent and (iii) the certificates for all physically tendered
Old Notes, in proper form for transfer, or a Book-Entry Confirmation, as the
case may be, are received by the Exchange Agent within three NYSE trading days
after the date of execution of the notice of guaranteed delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the expiration date.
For a withdrawal of a tender of Old Notes to be effective, a written or (for DTC
participants) electronic ATOP transmission notice of withdrawal must be received
by the Exchange Agent at its address set forth under "-- Exchange Agent" prior
to 5:00 p.m., New York City time, on the expiration date. Any such notice of
withdrawal must (i) specify the name of the person having deposited the Old
Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be
withdrawn (including the certificate number or numbers and principal amount of
such Old Notes), (iii) be signed by the holder in the same manner as the
original signature on the letter of transmittal by which such Old Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee register the transfer of
such Old Notes into the name of the person withdrawing the tender, and (iv)
specify the name in which any such Old Notes are to be registered, if different
from that of the Depositor. All questions as to the validity, form, and
eligibility (including time of receipt) of such notices will be determined by
the Company, whose determination shall be final and binding on all parties. Any
Old Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the exchange offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender, or termination of the
exchange offer. Properly withdrawn Old Notes may be retendered by following one
of the procedures under "-- Procedures for Tendering" at any time on or prior to
the expiration date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the exchange offer, the Company shall not
be required to accept for exchange, or to issue New Notes in exchange for, any
Old Notes and may terminate or amend the exchange offer if at any time before
the acceptance of such Old Notes for exchange or the exchange of the New Notes
for such Old Notes, the Company determines that the exchange offer violates
applicable law, any applicable interpretation of the staff of the Commission or
any order of any governmental agency or court of competent jurisdiction.
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The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes tendered,
and no New Notes will be issued in exchange for any such Old Notes, if at such
time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended. In any such event the Company is required to use every reasonable
effort to obtain the withdrawal of any stop order at the earliest possible time.
EXCHANGE AGENT
All executed letters of transmittal should be directed to the Exchange Agent.
The Bank of New York has been appointed as Exchange Agent for the exchange
offer. Questions, requests for assistance and requests for additional copies of
this Prospectus or of the letter of transmittal should be directed to the
Exchange Agent addressed as follows:
THE BANK OF NEW YORK
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand or Overnight Delivery:
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street
Floor 7-E Corporate Trust Services Window
New York, New York 10286 Ground Level
Attention: Chris Brown New York, New York 10286
Attention: Chris Brown
</TABLE>
By Facsimile:
(Eligible Institutions Only)
(212) 815-6339
For Information or
Confirmation by Telephone:
(212) 815-4997
Originals of all documents sent by facsimile should be sent promptly
by registered or certified mail, by hand or by overnight delivery service.
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. The principal solicitation is being made by
mail; however, additional solicitations may be made in person or by telephone by
officers and employees of the Company.
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The estimated cash expenses to be incurred in connection with the exchange offer
will be paid by the Company and are estimated in the aggregate to be $700,000,
which includes fees and expenses of the Exchange Agent, accounting, legal,
printing, and related fees and expenses.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay any
transfer taxes in connection therewith, except that holders who instruct the
Company to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the exchange offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
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DESCRIPTION OF NEW NOTES
The New Notes will be issued under an indenture, to be dated as of September 30,
1998 (the "Indenture"), by and among the Company, the Guarantors named therein
and The Bank of New York, as trustee (the "Trustee"). A copy of the Indenture
may be obtained from the Company upon written request. The following summary of
all of the provisions of the Indenture considered by the Company to be material
to a prospective investor in the Notes does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the Trust
Indenture Act of 1939, as amended (the "TIA"), and to all of the provisions of
the Indenture, including the definitions of certain terms therein, and those
terms made a part of the Indenture by reference to the TIA as in effect on the
date of the Indenture. The definitions of certain terms used in the following
summary are set forth below under "-- Certain Definitions." The Trustee also
serves as the Transfer Agent and Registrar for the Common Stock of Chancellor
Media and for all of the preferred stock of Chancellor Media and the Company. In
addition, the Trustee serves as trustee under the Indenture, dated June 16,
1997, governing Chancellor Media's 6% Convertible Subordinated Exchange
Debentures due 2012. Finally, the Trustee serves as a lender and as a
co-syndication agent under the Senior Credit Facility.
The Notes will be unsecured obligations of the Company and will rank pari passu
in right of payment to the 9 3/8% Notes, the 8 3/4% Notes, the 10 1/2% Notes and
the 8 1/8% Notes, and will be subordinated in right of payment to all Senior
Debt of the Company. The Notes will be guaranteed on a senior subordinated basis
by the Guarantors.
The New Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Initially, the Trustee
will act as paying agent and registrar for the New Notes. The New Notes may be
presented for registration or transfer and exchange at the offices of the
registrar, which initially will be the Trustee's principal corporate trust
office. The Company may change any paying agent and registrar without notice to
the holders. The Company will pay principal (and premium, if any) on the New
Notes at the Trustee's principal corporate trust office in New York, New York.
At the Company's option, such amounts may be paid at the Trustee's principal
corporate trust office or by check mailed to the registered address of the
holders.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited to $750,000,000 aggregate principal amount and will mature
on October 1, 2008. Interest on the Notes will accrue at the rate of 9% per
annum and will be payable semiannually on each April 1 and October 1, commencing
on April 1, 1999, to the persons who are registered holders at the close of
business on March 15 and September 15 immediately preceding the applicable
interest payment date. Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
Issue Date. Interest will be computed on the basis of a 360-day year comprised
of twelve 30-day months.
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OPTIONAL REDEMPTION
The Notes will be redeemable, at the Company's option, in whole at any time or
in part from time to time, on and after October 1, 2003, at the following
redemption prices (expressed as percentages of the principal amount) if redeemed
during the twelve-month period commencing on October 1 of the years set forth
below, plus, in each case, accrued and unpaid interest thereon to the date of
redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003........................................................ 106.50%
2004........................................................ 105.50%
2005........................................................ 104.50%
2006........................................................ 103.50%
2007........................................................ 102.00%
2008........................................................ 100.00%
</TABLE>
In addition, on or prior to October 1, 2000, the Company may, at its option, use
the net cash proceeds of one or more Public Equity Offerings (as defined) to
redeem the Notes, in part, at a redemption price equal to 109% of the principal
amount thereof plus accrued and unpaid interest thereon to the date of
redemption; provided, however, that after any such redemption the aggregate
principal amount of the Notes outstanding must equal at least 75% of the
aggregate principal amount of the Notes originally issued in the Offering. In
order to effect a redemption with proceeds of a Public Equity Offering, the
Company shall send the redemption notice in the manner specified in the
Indenture not later than 30 days after the consummation of such Public Equity
Offering and effect such redemption not later than 90 days after the
consummation of such Public Equity Offering.
In addition, at any time on or prior to October 1, 2000, the Notes may also be
redeemed as a whole at the option of the Company upon the occurrence of a Change
of Control (as defined below), upon not less than 30 nor more than 60 days prior
notice (but in no event more than 90 days after the occurrence of such Change of
Control) mailed by first-class mail to each holder's registered address, at a
redemption price equal to 100% of the principal amount thereof plus the
Applicable Premium (as defined below) as of, and accrued and unpaid interest, if
any, to, the date of redemption (the "Redemption Date") (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date in respect of then outstanding Notes).
"Applicable Premium" means, with respect to a Note at any Redemption Date, the
greater of (i) 1.0% of the principal amount of such Note and (ii) (a) the
present value of all remaining required interest and principal payments due on
such Note and all premium payments relating thereto assuming a redemption date
of October 1, 2003, computed using a discount rate equal to the Treasury Rate
(as defined below) plus 100 basis points minus (b) the then outstanding
principal amount of such Note minus (c) accrued interest paid on the redemption
date.
"Treasury Rate" means the yield to maturity at the time of computation of United
States Treasury securities with a constant maturity (as compiled and published
in the most recent Federal Reserve Statistical Release H.15 (519) ("Statistical
Release") which has become publicly available at least two business days prior
to the Redemption Date (or, if such Statistical Release is no longer published,
any publicly available source or similar market
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data)) most nearly equal to the period from the Redemption Date to October 1,
2003; provided, however, that if the period from the Redemption Date to October
1, 2003 is not equal to the constant maturity of a United States Treasury
security for which a weekly average yield is given, the Treasury Rate shall be
obtained by linear interpolation (calculated to the nearest one-twelfth of a
year) from the weekly average yields of United States Treasury securities for
which such yields are given, except that if the period from the Redemption Date
to October 1, 2003 is less than one year, the weekly average yield on actually
traded United States Treasury securities adjusted to a constant maturity of one
year shall be used.
Selection. In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Note of $1,000 in original principal amount or less
will be redeemed in part. If any Note is to be redeemed in part only, the notice
of redemption relating to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the holder thereof upon
cancellation of the original Note.
The Senior Credit Facility restricts the Company's ability to optionally redeem
the Notes.
CHANGE OF CONTROL
The Indenture will provide that upon the occurrence of a Change of Control, each
holder may have the right to require that the Company repurchase all or a
portion of such holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the principal
amount thereof plus accrued interest, if any, to the date of repurchase.
The Indenture will provide that, prior to the mailing of the notice referred to
below, but in any event within 30 days following the date on which a Change of
Control occurs, the Company covenants to (i) repay in full all Indebtedness
under the Senior Credit Facility (and terminate all commitments thereunder) or
offer to repay in full all such Indebtedness (and terminate all such
commitments) and to repay the Indebtedness owed to (and terminate the
commitments of) each lender which has accepted such offer or (ii) obtain the
requisite consents under the Senior Credit Facility to permit the repurchase of
the Notes as provided below. The Company will first comply with the covenant in
the preceding sentence before it will be required to repurchase Notes pursuant
to the provisions described below; provided that the Company's failure to comply
with the covenant described in the preceding sentence shall constitute an Event
of Default described under clause (iii) under "-- Events of Default."
Within 30 days following the date upon which a Change of Control occurs, the
Company must send, by first class mail, a notice to each holder, with a copy to
the Trustee, which notice shall govern the terms of the Change of Control Offer.
Such notice will state, among other things, the purchase date, which must 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").
Upon compliance by the Company with the covenant described in the immediately
preceding paragraph, the Company's failure to make a Change of Control Offer in
accordance with this "Change of Control" covenant, and, upon the making of a
Change of Control Offer, the failure of the Company to pay, on
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or before the Change of Control Payment Date, the purchase price for the Notes
validly tendered pursuant to the Change of Control Offer, shall constitute an
Event of Default described under clauses (iii) and (ii), respectively, under
"-- Events of Default." Holders electing to have a Note purchased pursuant to a
Change of Control Offer will be required to surrender the Note, properly
endorsed for transfer together with such other customary documents as the
Company may reasonably request, to the paying agent at the address specified in
the notice prior to the close of business on the business day prior to the
Change of Control Payment Date.
The Company will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the purchase of Notes
pursuant to a Change of Control Offer.
This "Change of Control" covenant will not apply in the event of (i) certain
transactions with Permitted Holders (as defined below) and (ii) changes in a
majority of the Board of Directors of Chancellor Media, CMHC or the Company so
long as a majority of each such Board of Directors continues to consist of
Continuing Directors (as defined below). In addition, this covenant is not
intended to afford holders of the Notes protection in the event of certain
highly leveraged transactions, reorganizations, restructurings, mergers and
other similar transactions that might adversely affect the holders of the Notes
but would not constitute a Change of Control. However, the Indenture will
contain limitations on the ability of the Company to incur additional
Indebtedness and to engage in certain mergers, consolidations and sales of
assets, whether or not a Change of Control is involved. See "-- Certain
Covenants -- Limitation on Incurrence of Additional Indebtedness," "-- Certain
Covenants -- Limitation on Asset Sales," "-- Certain Covenants -- Limitation on
Asset Swaps" and "-- Certain Covenants -- Merger, Consolidation and Sale of
Assets."
If a Change of Control were to occur, there can be no assurance that the Company
would have sufficient funds to pay the purchase price for all Notes that the
Company might be required to purchase. In the event that the Company were
required to purchase Notes pursuant to a Change of Control Offer, the Company
expects that it would need to seek third-party financing to the extent it does
not have available funds to meet its purchase obligations. However, there can be
no assurance that the Company would be able to obtain such financing on
favorable terms, if at all. In addition, the Senior Credit Facility restricts
the Company's ability to repurchase the Notes, including pursuant to a Change of
Control Offer. See "Description of Certain Indebtedness -- Senior Credit
Facility."
With respect to the sale of assets, the phrase "all or substantially all" as
used in the Indenture 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 a person and therefore it may be unclear whether a Change of Control
has occurred and whether the Notes are subject to a Change of Control Offer.
Without the consent of each holder of the Notes affected thereby, after the
mailing of the notice of the Change of Control Offer, no amendment to the
Indenture may, directly or indirectly, affect the Company's obligation to
purchase the Notes or amend, modify or change the obligation of the Company to
consummate a Change of Control Offer or waive any default in the performance
thereof or modify any of the provisions or definitions with
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respect to any such offer. In addition, the Trustee may not waive the right of
any holder of the Notes to require the repurchase of his or her Notes upon a
Change of Control.
SUBORDINATION
The payment of all Obligations on the Notes will be subordinated and junior in
right of payment to the prior payment in full in cash or Cash Equivalents (or
such payment duly provided for to the satisfaction of the holders of Senior
Debt) of all Obligations on Senior Debt. Upon any payment or distribution of
assets of the Company of any kind or character, whether in cash, property or
securities, to creditors upon any liquidation, dissolution, winding up,
reorganization, assignment for the benefit of creditors or marshalling of assets
of the Company or in a bankruptcy, reorganization, insolvency, receivership or
other similar proceeding relating to the Company or its property, whether
voluntary or involuntary, all Obligations due or to become due upon all Senior
Debt will first be paid in full in cash or Cash Equivalents (or such payment
duly provided for to the satisfaction of the holders of Senior Debt) before any
payment or distribution of any kind or character is made on account of any
Obligations on the Notes, or for the acquisition of any of the Notes for cash or
property or otherwise. If any default occurs and is continuing in the payment
when due, whether at maturity, upon any redemption, by declaration or otherwise,
of any principal of, or interest on, or any other amounts owing with respect to
any Senior Debt, no payment of any kind or character (except (i) in Qualified
Capital Stock issued by the Company to pay interest on the Notes or issued in
exchange for the Notes, (ii) in securities substantially identical to the Notes
issued by the Company in payment of interest accrued thereon or (iii) in
securities issued by the Company which are subordinated to the Senior Debt at
least to the same extent as the Notes and having a Weighted Average Life to
Maturity at least equal to the remaining Weighted Average Life to Maturity of
the Notes (the issuance of such subordinated securities to be consented to by
the holders of at least a majority of the outstanding amount of Senior Debt
consisting of each class of Designated Senior Debt then outstanding, which
subordinated securities will be issued in exchange for outstanding Notes or to
pay interest accrued on outstanding Notes)), will be made by the Company or any
other Person on behalf of the Company with respect to any Obligations on the
Notes or to acquire any of the Notes for cash or property or otherwise. In
addition, if any other event of default occurs and is continuing (or if such an
event of default would occur upon any payment with respect to the Notes or would
arise upon the passage of time as a result of such payment) with respect to any
Designated Senior Debt (as such event of default is defined in the instrument
creating or evidencing such Designated Senior Debt) and such event of default
permits the holders of such Designated Senior Debt then outstanding to
accelerate the maturity thereof and if the Representative for the respective
issue of Designated Senior Debt gives written notice of the event of default to
the Trustee (a "Default Notice"), then, unless and until all such events of
default have been cured or waived or have ceased to exist or the Company and the
Trustee receive notice from the Representative for the respective issue of
Designated Senior Debt terminating the Blockage Period (as defined below),
during the 180 days after the delivery of such Default Notice (the "Blockage
Period"), neither the Company nor any other Person on behalf of the Company will
make any payment of any kind or character (except (i) in Qualified Capital Stock
issued by the Company to pay interest on the Notes or issued in exchange for the
Notes, (ii) in securities substantially identical to the Notes issued by the
Company in payment of interest accrued thereon or (iii) in securities issued by
the Company which are subordinated to the Senior Debt at least to the
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same extent as the Notes and having a Weighted Average Life to Maturity at least
equal to the remaining Weighted Average Life to Maturity of the Notes (the
issuance of such subordinated securities to be consented to by the holders of at
least a majority of the outstanding amount of Senior Debt consisting of each
class of Designated Senior Debt then outstanding, which subordinated securities
will be issued in exchange for outstanding Notes or to pay interest accrued on
outstanding Notes)) with respect to any Obligations on the Notes or to acquire
any of the Notes for cash or property or otherwise. Notwithstanding anything
herein to the contrary, in no event will a Blockage Period extend beyond 180
days from the date the payment on the Notes was due and only one such Blockage
Period may be commenced within any 360 consecutive days. No event of default
which existed or was continuing on the date of the commencement of any Blockage
Period with respect to the Designated Senior Debt initiating such Blockage
Period shall be, or be made, the basis for commencement of a second Blockage
Period by the Representative of such Designated Senior Debt whether or not
within a period of 360 consecutive days, unless such event of default has been
cured or waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action, or any breach of any financial
covenants for a period commencing after the date of commencement of such
Blockage Period that, in either case, would give rise to an event of default
pursuant to any provision under which an event of default previously existed or
was continuing, shall constitute a new event of default for this purpose).
By reason of such subordination, in the event of the insolvency of the Company,
creditors of the Company who are not holders of Senior Debt, including the
holders of the Notes, may recover less, ratably, than holders of Senior Debt.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants.
Limitation on Incurrence of Additional Indebtedness. The Indenture will provide
that neither the Company nor any of its Subsidiaries will, 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 limitations, the Company
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 Company's Leverage
Ratio is less than 7.0 to 1.
Limitation on Restricted Payments. The Indenture will provide that neither the
Company nor any of its Subsidiaries will, directly or indirectly, (a) declare or
pay any dividend or make any distribution (other than dividends or distributions
payable in Qualified Capital Stock of the Company) on shares of the Company's
Capital Stock, (b) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any warrants, rights or options to acquire
shares of any class of such Capital Stock, other than the exchange of such
Capital Stock or any warrants, rights or options to acquire shares of any class
of such Capital Stock for Qualified Capital Stock or warrants, rights or options
to acquire Qualified Capital Stock, (c) make any principal payment on, purchase,
defease, redeem, prepay, decrease or otherwise acquire or retire for value,
prior to any scheduled final maturity, scheduled repayment or scheduled sinking
fund payment, any Indebtedness of the Company or its Subsidiaries that is
subordinate or junior in right of payment to the Notes, or (d) make any
Investment (other than Permitted Investments) (each of the
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foregoing prohibited actions set forth in clauses (a), (b), (c) and (d) being
referred to as a "Restricted Payment"), if, at the time of such Restricted
Payment or immediately after giving effect thereto, (i) a Default or an Event of
Default has occurred and is continuing, (ii) the Company is not able to incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional Indebtedness"
covenant, or (iii) the aggregate amount of Restricted Payments made by the
Company on or after the Merger Date, together with the aggregate amount of
Restricted Payments made by CRBC subsequent to the 9 3/8% Notes Issue Date and
through September 4, 1997 (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: (A) (x)100% of
the aggregate Consolidated EBITDA of CRBC from the 9 3/8% Notes Issue Date
through September 4, 1997, plus 100% of the aggregate Consolidated EBITDA of the
Company from and after the Merger 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 Company, taken
as one accounting period, less (y) 1.4 times Consolidated Interest Expense for
the same entities and for the same periods, plus (B) 100% of the aggregate net
proceeds, including the fair market value of property other than cash as
determined by the Board of Directors in good faith, received by the Company from
any Person (other than a Subsidiary of the Company) from the issuance and sale
on or subsequent to the Merger Date of Qualified Capital Stock of the Company,
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
CRBC in good faith, previously received by CRBC from any Person (other than a
Subsidiary of CRBC) from the issuance and sale on or subsequent to the 9 3/8%
Notes Issue Date of Qualified Capital Stock of CRBC (excluding any net proceeds
from issuances and sales financed directly or indirectly using funds borrowed
from the Company or any Subsidiary of the Company or from CRBC or any Subsidiary
of CRBC, 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 Company or CRBC, respectively, upon such conversion or exchange), plus (C)
without duplication of any amount included in clause (iii)(B) above, 100% of the
aggregate net proceeds, including the fair market value of property other than
cash (valued as provided in clause (iii)(B) above), received by the Company as a
capital contribution on or subsequent to the Merger Date, plus 100% of the
aggregate net proceeds, including the fair market value of property other than
cash (valued as provided in clause (iii)(B) above), previously received by CRBC
as a capital contribution on or subsequent to the 9 3/8% Notes Issue Date
(excluding the net proceeds from one or more Public Equity Offerings by
Chancellor Media or CMHC to the extent used to redeem the Notes on or after the
date of the Indenture).
Notwithstanding the foregoing, these provisions do not prohibit: (1) the payment
of any dividend or the making of any distribution within 60 days after the date
of its declaration if the dividend or distribution would have been permitted on
the date of declaration; (2) the acquisition of Capital Stock or warrants,
options or other rights to acquire Capital Stock either (i) solely in exchange
for shares of Qualified Capital Stock or warrants, options 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
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Company) of shares of Qualified Capital Stock or warrants, options or other
rights to acquire Qualified Capital Stock; (3) the acquisition of Indebtedness
of the Company that is subordinate or junior in right of payment to the Notes,
either (i) solely in exchange for shares of Qualified Capital Stock (or
warrants, options or other rights to acquire Qualified Capital Stock) or for
Indebtedness of the Company which is subordinate or junior in right of payment
to the Notes, at least to the extent that the Indebtedness being acquired is
subordinated to the Notes and has a Weighted Average Life to Maturity no less
than that of the Indebtedness being acquired or (ii) through the application of
the net proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of the Company) of shares of Qualified Capital Stock (or warrants,
options or other rights to acquire Qualified Capital Stock) or Indebtedness of
the Company which is subordinate or junior in right of payment to the Notes, at
least to the extent that the Indebtedness being acquired is subordinated to the
Notes and has a Weighted Average Life to Maturity no less than that of the
Indebtedness being refinanced; (4) payments by CRBC to fund the operating
expenses of Chancellor Broadcasting from the 9 3/8% Notes Issue Date through
September 4, 1997 and by the Company to fund the operating expenses of CMHC from
and after the Merger Date, in each case in an amount not to exceed $500,000 per
annum; (5) payments by CRBC to Chancellor Broadcasting from the 9 3/8% Notes
Issue Date through September 4, 1997 and by the Company to CMHC from and after
the Merger Date, respectively, in each case to make payments pursuant to (a) the
Financial Monitoring and Oversight Agreements or (b) the Tax Sharing Agreement;
(6) payments by (a) CRBC to repurchase or to enable Chancellor Broadcasting to
repurchase Capital Stock or other securities of Chancellor Broadcasting from
employees of Chancellor Broadcasting or CRBC in each case, from the 9 3/8% Notes
Issue Date through September 4, 1997, and (b) by the Company to repurchase or to
enable CMHC to repurchase Capital Stock or other securities of CMHC from
employees of CMHC or the Company, in each case, after the Merger Date, in an
aggregate amount not to exceed $5,000,000; (7) payments by CRBC to Chancellor
Broadcasting from the 9 3/8% Notes Issue Date through September 4, 1997, or by
the Company to CMHC from and after the Merger Date, in each case, to enable
Chancellor Broadcasting or CMHC, respectively, to redeem or repurchase stock
purchase or similar rights in an aggregate amount not to exceed $500,000; (8)
payments, not to exceed $100,000 in the aggregate, by CRBC to Chancellor
Broadcasting from the 9 3/8% Notes Issue Date through September 4, 1997,
together with payments by the Company to CMHC after the Merger Date, in each
case, to enable Chancellor Broadcasting or CMHC, respectively, to make cash
payments to holders of its Capital Stock in lieu of the issuance of fractional
shares of its Capital Stock; (9) payments made pursuant to any merger,
consolidation or sale of assets effected in accordance with the "Merger,
Consolidation and Sale of Assets" covenant; provided, however, that no such
payment may be made pursuant to this clause and (9) unless, after giving effect
to such transaction (and the incurrence of any Indebtedness in connection
therewith and the use of the proceeds thereof), the Company would be able to
incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional Indebtedness"
covenant such that after incurring that $1.00 of additional Indebtedness, the
Leverage Ratio would be less than 5.5 to 1; provided, however, that in the case
of clauses (5)(a), (6), (7), (8) and (9), no Default or Event of Default shall
have occurred or be continuing at the time of such payment or as a result
thereof. In determining the aggregate amount of Restricted Payments made by the
Company on or subsequent to the Merger Date and the aggregate amount of
Restricted
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Payments made by CRBC subsequent to the 9 3/8% Notes Issue Date and through
September 4, 1997, amounts expended pursuant to clauses (1), (2), (3) (but only
to the extent that Indebtedness is acquired in exchange for, or with the net
proceeds from, the issuance of Qualified Capital Stock or warrants, options or
other rights to acquire Qualified Capital Stock), (5)(a), (6), (7), (8) and (9)
(including any amounts previously expended by CRBC pursuant to clauses (1), (2)
(3) (but only to the extent that Indebtedness is acquired in exchange for, or
with the net proceeds from, the issuance of Qualified Capital Stock or warrants,
options or other rights to acquire Qualified Capital Stock), (5)(a), (6), (7),
(8) and (9) under the 'Limitation on Restricted Payments' section of the 9 3/8%
Indenture) shall be included in such calculation.
Limitation on Asset Sales. The Indenture will provide that neither the Company
nor any of its Subsidiaries will consummate an Asset Sale unless (i) the Company
or the applicable Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the fair market value of the assets
sold or otherwise disposed of (as determined in good faith by management of the
Company or, if such Asset Sale involves consideration in excess of $2,500,000 by
the Board of Directors, as evidenced by a board resolution), (ii) at least 75%
of the consideration received by the Company or the Subsidiary, as the case may
be, from such Asset Sale is cash or Cash Equivalents (other than in the case
where the Company is exchanging all or substantially all the assets of one or
more broadcast businesses operated by the Company (including by way of the
transfer of capital stock) for all or substantially all the assets (including by
way of the transfer of capital stock) constituting one or more broadcast
businesses operated by another Person, in which event the foregoing requirement
with respect to the receipt of cash or Cash Equivalents shall not apply) and is
received at the time of such disposition and (iii) upon the consummation of an
Asset Sale, the Company applies, or causes such Subsidiary to apply, such Net
Cash Proceeds within 180 days of receipt thereof either (A) to repay the
principal of any Senior Debt (and, to the extent such Senior Debt relates to
principal under a revolving credit or similar facility, to obtain a
corresponding reduction in the commitments thereunder), (B) to reinvest, or to
be contractually committed to reinvest pursuant to a binding agreement, in
Productive Assets and, in the latter case, to have so reinvested within 360 days
of the date of receipt of such Net Cash Proceeds, or (C) to purchase Notes (pro
rata among the holders of Notes tendered to the Company for purchase, based upon
the aggregate principal amount of the Notes so tendered) tendered to the Company
for purchase at a price equal to 100% of the principal amount thereof, plus
accrued interest thereon to the date of purchase, pursuant to an offer to
purchase made by the Company as set forth below (a "Net Proceeds Offer");
provided, however, that, prior to making any Net Proceeds Offer, the Company
shall, to the extent required pursuant to the 9 3/8% Indenture as in effect on
the Issue Date, offer to use such Net Proceeds to repurchase and use all or a
portion of such Net Proceeds to repurchase 9 3/8% Notes and then, to the extent
required pursuant to the 8 3/4% Indenture as in effect on the Issue Date, offer
to use the remaining Net Proceeds to repurchase 8 3/4% Notes and then, to the
extent required pursuant to the 10 1/2% Indenture as in effect on the Issue
Date, offer to use the remaining Net Proceeds to repurchase 10 1/2% Notes, and
then, to the extent required pursuant to the 8 1/8% Indenture as in effect on
the Issue Date, offer to use the remaining Net Proceeds to repurchase 8 1/8%
Notes; in which event the Company shall be required to use only the Net Proceeds
remaining after such repurchases to make the Net Proceeds Offer contemplated by
this covenant, provided further, that if at any time any non-cash consideration
received by the Company or any Subsidiary of the Company,
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as the case may be, in connection with any Asset Sale is converted into or sold
or otherwise disposed of for cash, then such conversion or disposition shall be
deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof
shall be applied in accordance with clause (iii) above; provided, further that
the Company may defer making a Net Proceeds Offer until the aggregate Net Cash
Proceeds from Asset Sales (taking into account any Net Cash Proceeds used to
repurchase 9 3/8% Notes, 8 3/4% Notes, 10 1/2% Notes and 8 1/8% Notes pursuant
to the second immediately preceding proviso) to be applied equals or exceeds
$5,000,000.
Subject to the deferral right set forth in the final proviso of the preceding
paragraph, each notice of a Net Proceeds Offer will be mailed, by first class
mail, to holders of Notes as shown on the applicable register of holders of
Notes not more than 180 days after the relevant Asset Sale or, in the event the
Company or a Subsidiary has entered into a binding agreement as provided in (B)
above, within 180 days following the termination of such agreement but in no
event later than 360 days after the relevant Asset Sale. Such notice will
specify, among other things, the purchase date (which will be no earlier than 30
days nor later than 45 days from the date such notice is mailed, except as
otherwise required by law) and will otherwise comply with the procedures set
forth in the Indenture. Upon receiving notice of the Net Proceeds Offer, holders
of Notes may elect to tender their Notes in whole or in part in integral
multiples of $1,000. To the extent holders properly tender Notes in an amount
exceeding the Net Proceeds Offer, subject to the limitations set forth in the
immediately preceding paragraph, the Company shall select the Notes to be
repurchased on a pro rata basis (based upon the aggregate principal amount of
Notes tendered). To the extent that the aggregate principal amount of Notes
tendered pursuant to any Net Proceeds Offer is less than the amount of Net Cash
Proceeds subject to such Net Proceeds Offer, the Company may use any remaining
portion of such Net Cash Proceeds not required to fund the repurchase of
tendered Notes for any purposes otherwise permitted by the Indenture. Upon the
consummation of any Net Proceeds Offer, the amount of Net Cash Proceeds subject
to any future Net Proceeds Offer from the Asset Sales giving rise to such Net
Cash Proceeds shall be deemed to be zero.
The Company will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the repurchase of Notes
pursuant to a Net Proceeds Offer.
Limitation on Asset Swaps. The Indenture will provide that the Company will not,
and will not permit any Subsidiary to, engage in any Asset Swaps, unless: (i) at
the time of entering into the agreement to swap assets and immediately after
giving effect to the proposed Asset Swap, no Default or Event of Default shall
have occurred and be continuing or would occur as a consequence thereof; (ii)
the Company would, after giving pro forma effect to the proposed Asset Swap,
have been permitted to incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) in compliance with the "Limitation on Incurrence of
Additional Indebtedness" covenant; (iii) the respective fair market values of
the assets being purchased and sold by the Company or any of its Subsidiaries
(as determined in good faith by the management of the Company or, if such Asset
Swap includes consideration in excess of $2,500,000, by the Board of Directors,
as evidenced by a board resolution) are substantially the same at the time of
entering into the agreement to swap assets; and (iv) at the time of the
consummation of the proposed Asset Swap, the percentage of any decline in the
fair market value (determined as aforesaid) of
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the asset or assets being acquired by the Company and its Subsidiaries shall not
be significantly greater than the percentage of any decline in the fair market
value (determined as aforesaid) of the assets being disposed of by the Company,
calculated from the time the agreement to swap assets was entered into;
provided, however, that this covenant shall not apply to any of the transactions
of the Company and its subsidiaries pending as of the date of this Prospectus.
Limitations on Transactions with Affiliates. The Indenture will provide that
neither the Company nor any of its Subsidiaries will, directly or indirectly,
enter into or permit to exist any transaction (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with or for the benefit of any of its Affiliates (other than
transactions between the Company and a Wholly-Owned Subsidiary of the Company or
among Wholly-Owned Subsidiaries of the Company) (an "Affiliate Transaction"),
other than Affiliate Transactions on terms that are no less favorable than those
that might reasonably have been obtained in a comparable transaction on an
arm's-length basis from a person that is not an Affiliate; provided, however,
that for a transaction or series of related transactions involving value of
$1,000,000 or more, such determination will be made in good faith by a majority
of members of the Board of Directors of the Company and by a majority of the
disinterested members of the Board of Directors of the Company, if any;
provided, further, that for a transaction or series of related transactions
involving value of $5,000,000 or more, the Board of Directors of the Company has
received an opinion from a nationally recognized investment banking firm that
such Affiliate Transaction is fair, from a financial point of view, to the
Company or such Subsidiary. The foregoing restrictions will not apply to
reasonable and customary directors' fees, indemnification and similar
arrangements and payments thereunder, or to any obligations of the Company under
the Financial Monitoring and Oversight Agreements, the Tax Sharing Agreement or
any employment agreement with any officer of the Company (provided that each
amendment of any of the foregoing agreements shall be subject to the limitations
of this covenant).
Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Indenture will provide that neither the Company nor any of its Subsidiaries
will, directly or indirectly, create or otherwise cause or permit to exist or
become effective any encumbrance or restriction on the ability of any Subsidiary
to (a) pay dividends or make any other distributions on its Capital Stock; (b)
make loans or advances or pay any Indebtedness or other obligation owed to the
Company or any of its Subsidiaries; or (c) transfer any of its property or
assets to the Company, except for such encumbrances or restrictions existing
under or by reason of: (1) applicable law, (2) the Indenture, (3) customary
non-assignment provisions of any lease governing a leasehold interest of the
Company or any Subsidiary, (4) any instrument governing Acquired Indebtedness,
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property or
assets of the Person, so acquired, (5) agreements permitted under the 9 3/8%
Indenture, the 8 3/4% Indenture, the 10 1/2% Indenture and the 8 1/8% Indenture
existing on the Issue Date (including the Credit Agreement and Senior Credit
Facility, as applicable), as such agreements are from time to time in effect;
provided, however, that any amendments or modifications of such agreements which
affect the encumbrances or restrictions of the types subject to this covenant
shall not result in such encumbrances or restrictions being less favorable to
the Company in any material respect, as determined in good faith by the Board of
Directors of the Company, than the
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provisions as in effect before giving effect to the respective amendment or
modification, (6) an agreement effecting a refinancing, replacement or
substitution of Indebtedness issued, assumed or incurred pursuant to an
agreement referred to in clause (2), (4) or (5) above or any other agreement
evidencing Indebtedness permitted under the Indenture; provided, however, that
the provisions relating to such encumbrance or restriction contained in any such
refinancing, replacement or substitution agreement or any such other agreement
are not less favorable to the Company in all material respects as determined in
good faith by the Board of Directors of the Company than the provisions relating
to such encumbrance or restriction contained in agreements referred to in such
clause (2), (4) or (5), or (7) restrictions on the transfer of assets subject to
any Lien permitted under the Indenture imposed by the holder of such Lien.
Prohibition on Incurrence of Senior Subordinated Debt. The Indenture will
prohibit the Company from incurring or suffering to exist Indebtedness that is
senior in right of payment to the Notes and is expressly subordinate in right of
payment to any other Indebtedness of the Company.
Limitation on Preferred Stock of Subsidiaries. The Indenture will provide that
the Company will not permit any of its Subsidiaries to issue any Preferred Stock
(other than to the Company or to a Wholly-Owned Subsidiary of the Company) or
permit any Person (other than the Company or a Wholly-Owned Subsidiary of the
Company) to own any Preferred Stock of a Subsidiary (other than Acquired
Preferred Stock; provided that at the time the issuer of such Acquired Preferred
Stock becomes a Subsidiary of the Company or merges with the Company or any of
its Subsidiaries, and after giving effect to such transaction, the Company shall
be able to incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with the "Limitation on Incurrence of Additional
Indebtedness" covenant).
Limitation on Liens. The Indenture will provide that neither the Company nor any
of its Subsidiaries will create, incur, assume or suffer to exist any Liens upon
any of their respective assets, except for (a) Permitted Liens, (b) Liens to
secure Senior Debt or guarantees thereof permitted under the Indenture, (c)
Liens permitted under the 9 3/8% Indenture, the 8 3/4% Indenture, the 10 1/2%
Indenture and the 8 1/8% Indenture existing on the Issue Date, (d) Liens in
favor of the Trustee, (e) Liens to secure Guarantor Senior Debt permitted under
the Indenture, and (f) any Lien to secure the replacement, refunding, extension
or renewal, in whole or in part, of any Indebtedness described in the foregoing
clauses; provided that, to the extent any such clause limits the amount secured
or the asset subject to such Liens, no extension or renewal will increase the
assets subject to such Liens or the amount secured thereby beyond the assets or
amounts set forth in such clauses.
Limitation on Sale and Leaseback Transactions. The Indenture will provide that
neither the Company nor any of its Subsidiaries will enter into any Sale and
Leaseback Transaction, except that the Company or any Subsidiary may enter into
a Sale and Leaseback Transaction if, immediately prior thereto, and after giving
effect to such Sale and Leaseback Transaction (the Indebtedness thereunder being
equivalent to the Attributable Value thereof) the Company could incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional Indebtedness"
covenant.
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Guarantees of Certain Indebtedness. The Indenture will provide that the Company
will not permit any of its Subsidiaries, directly or indirectly, to incur,
guarantee or secure through the granting of Liens, the payment of any
Indebtedness under the Senior Credit Facility or any refunding or refinancing
thereof, in each case, unless such Subsidiary, the Company and the Trustee
execute and deliver a supplemental indenture pursuant to which such Subsidiary
becomes a Guarantor of the Notes and which evidences such Subsidiary's Guarantee
of the Notes, such Guarantee to be a senior subordinated unsecured obligation of
such Subsidiary. Neither the Company nor any such Guarantor shall be required to
make a notation on the Notes or its Guarantee to reflect any such subsequent
Guarantee. Nothing in this covenant shall be construed to permit any Subsidiary
of the Company to incur Indebtedness otherwise prohibited by the "Limitation of
Incurrence of Additional Indebtedness" covenant.
Limitation on Line of Business. The Indenture will provide that for so long as
any Notes are outstanding, the Company and its Subsidiaries will engage solely
in the ownership and operation of broadcast businesses or businesses related
thereto, including, without limitation, media representation, sale of
advertising and such other activities as are incidental or similar or related
thereto.
Merger, Consolidation and Sale of Assets. The Indenture will provide that the
Company may not, in a single transaction or a series of related transactions,
consolidate with or merge with or into, or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its assets to, another
Person or adopt a plan of liquidation unless (i) either (A) the Company is the
survivor of such merger or consolidation or (B) the surviving or transferee
Person is a corporation, partnership or trust organized and existing under the
laws of the United States, any state thereof or the District of Columbia and
such surviving or transferee Person expressly assumes by supplemental indenture
all of the obligations of the Company under the Notes and the Indenture; (ii)
immediately after giving effect to such transaction and the use of proceeds
therefrom (on a pro forma basis, including any Indebtedness incurred or
anticipated to be incurred in connection with such transaction), the Company or
the surviving or transferee Person is able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant; (iii)
immediately after giving effect to such transaction (including any Indebtedness
incurred or anticipated to be incurred in connection with the transaction) no
Default or Event of Default has occurred and is continuing; and (iv) the Company
has delivered to the Trustee an Officers' Certificate and Opinion of Counsel,
each stating that such consolidation, merger or transfer complies with the
Indenture, that the surviving Person agrees by supplemental indenture to be
bound thereby, and that all conditions precedent in the Indenture relating to
such transaction have been satisfied. For purposes of the foregoing, the
transfer (by lease, assignment, sale or otherwise, in a single transaction or
series of related transactions) of all or substantially all of the properties
and assets of one or more Subsidiaries, the Capital Stock of which constitutes
all or substantially all of the properties and assets of the Company, will be
deemed to be the transfer of all or substantially all of the properties and
assets of the Company.
GUARANTEES
Each Guarantor will fully and unconditionally guarantee, jointly and severally,
to each holder and the Trustee, subject to subordination provisions
substantially the same as those
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described above, the full and prompt payment of principal of and interest on the
Notes, and of all other obligations under the Indenture.
The Indebtedness evidenced by each Guarantee (including the payment of principal
of, premium, if any, and interest on the Notes) is subordinated to Guarantor
Senior Debt (defined with respect to the Indebtedness of a Guarantor in the same
manner as Senior Debt is defined with respect to the Company) on the same terms
as the Notes are subordinated to Senior Debt and will rank pari passu to the
Guarantor's guarantees of the 9 3/8% Notes, the 8 3/4% Notes, the 10 1/2% Notes
and the 8 1/8% Notes. See "-- Subordination." In addition, the Guarantors have
substantial additional Guarantor Senior Debt (relating to guarantees of the
borrowings under the Senior Credit Facility).
The obligations of each Guarantor are limited to the maximum amount as will,
after giving effect to all other contingent and fixed liabilities of such
Guarantor (including, without limitation, any guarantees under the Senior Credit
Facility) and after giving effect to any collections from or payments made by or
on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Guarantee or pursuant to its contribution obligations under
the Indenture, result in the obligations of the Guarantor under the Guarantee
not constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. Each Guarantor that makes a payment or distribution under a Guarantee
are entitled to a contribution from each other Guarantor in a pro rata amount
based on the Adjusted Net Assets of each Guarantor.
Each Guarantor may consolidate with or merge into or sell its assets to the
Company or to another Guarantor without limitation. Each Guarantor may
consolidate with or merge into or sell all or substantially all its assets to a
corporation, partnership or trust other than the Company or another Guarantor
(whether or not affiliated with the Guarantor). Upon the sale or disposition of
a Guarantor (or all or substantially all of its assets) to a Person (whether or
not an Affiliate of such Guarantor) which is not a Subsidiary of the Company,
which is otherwise in compliance with the Indenture, such Guarantor shall be
deemed released from all its obligations under the Indenture and its Guarantee
and such Guarantee shall terminate; provided, however, that any such termination
shall occur only to the extent that all obligations of such Guarantor under the
Credit Agreement or the Senior Credit Facility, as applicable, and all of its
guarantees of, and under all of its pledges of assets or other security
interests which secure, Indebtedness of the Company shall also terminate upon
such release, sale or transfer; provided, further, that the consideration
received by the Company in connection with such sale or other disposition shall
be applied in accordance with the covenant. See "-- Certain
Covenants -- Limitation on Asset Sales."
EVENTS OF DEFAULT
The following events will be defined in the Indenture as "Events of Default":
(i) the failure to pay interest on the Notes when the same becomes due and
payable and the Default continues for a period of 30 days (whether or not such
payment is prohibited by the subordination provisions of the Indenture); (ii)
the failure to pay the principal on any Notes, when such principal becomes due
and payable, at maturity, upon redemption or otherwise (whether or not such
payment is prohibited by the subordination provisions of the Indenture); (iii) a
default in the observance or performance of any other covenant or agreement
contained in the Notes or the Indenture which default continues for a period of
30 days after the Company receives written notice thereof specifying the default
from the
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Trustee or holders of at least 25% in aggregate principal amount of outstanding
Notes; (iv) the failure to pay at the final stated maturity (giving effect to
any extensions thereof) the principal amount of any Indebtedness of the Company
or any Subsidiary of the Company, or the acceleration of the final stated
maturity of any such Indebtedness, if the aggregate principal amount of such
Indebtedness, together with the aggregate principal amount of any other such
Indebtedness in default for failure to pay principal at the final stated
maturity (giving effect to any extensions thereof) or which has been
accelerated, aggregates $5,000,000 or more at any time, in each case after a
10-day period during which such default shall not have been cured or such
acceleration rescinded; (v) one or more judgments in an aggregate amount in
excess of $5,000,000 (which are not covered by insurance as to which the insurer
has not disclaimed coverage) being rendered against the Company or any of its
Significant Subsidiaries and such judgments remain undischarged or unstayed for
a period of 60 days after such judgment or judgments become final and non-
appealable; and (vi) certain events of bankruptcy, insolvency or reorganization
affecting the Company or any of its Significant Subsidiaries.
Upon the happening of any Event of Default specified in the Indenture, the
Trustee may, and the Trustee upon the request of holders of 25% in principal
amount of the Notes shall, or the holders of at least 25% in principal amount of
outstanding Notes may, declare the principal of and accrued but unpaid interest,
if any, on all the Notes to be due and payable by notice in writing to the
Company and the Trustee specifying the respective Event of Default and that it
is a "notice of acceleration" (the "Acceleration Notice"), and the same (i)
shall become immediately due and payable or (ii) if there are any amounts
outstanding under the Credit Agreement or the Senior Credit Facility, as
applicable, will become due and payable upon the first to occur of an
acceleration under the Credit Agreement or the Senior Credit Facility, as
applicable, or five Business Days after receipt by the Company and the
Representative under the Credit Agreement or the Senior Credit Facility, as
applicable of such Acceleration Notice (unless all Events of Default specified
in such Acceleration Notice have been cured or waived). If an Event of Default
with respect to bankruptcy proceedings relating to the Company occurs and is
continuing, then such amount will ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
holder of the Notes.
The Indenture will provide that, at any time after a declaration of acceleration
with respect to the Notes as described in the preceding paragraph, the holders
of a majority in principal amount of the Notes then outstanding (by notice to
the Trustee) may rescind and cancel such declaration and its consequences if (i)
the rescission would not conflict with any judgment or decree of a court of
competent jurisdiction, (ii) all existing Events of Default have been cured or
waived except nonpayment of principal or interest on the Notes that has become
due solely by such declaration of acceleration, (iii) to the extent the payment
of such interest is lawful, interest (at the same rate specified in the Notes)
on overdue installments of interest and overdue payments of principal which has
become due otherwise than by such declaration of acceleration, has been paid,
(iv) the Company has paid the Trustee its reasonable compensation and reimbursed
the Trustee for its expenses, disbursements and advances and (v) in the event of
the cure or waiver of a Default or Event of Default of the type described in
clause (vi) of the description of Events of Default in the first paragraph
above, the Trustee has received an Officers' Certificate and an Opinion of
Counsel that such Default or Event of Default has been cured or waived. The
holders of a majority in principal amount of the Notes may waive any existing
Default
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or Event of Default under the Indenture, and its consequences, except a default
in the payment of the principal of or interest on any Notes.
The Company is required to deliver to the Trustee, within 120 days after the end
of the Company's fiscal year, a certificate indicating whether the signing
officers know of any Default or Event of Default that occurred during the
previous year and whether the Company has complied with its obligations under
the Indenture. In addition, the Company will be required to notify the Trustee
of the occurrence and continuation of any Default or Event of Default within
five business days after the Company becomes aware of the same.
Subject to the provisions of the Indenture relating to the duties of the Trustee
in case an Event of Default thereunder should occur and be continuing, the
Trustee will be under no obligation to exercise any of the rights or powers
under the Indenture at the request or direction of any of the holders of the
Notes unless such holders have offered to the Trustee reasonable indemnity or
security against any loss, liability or expense. Subject to such provision for
security or indemnification and certain limitations contained in the Indenture,
the holders of a majority in principal amount of the outstanding Notes have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee.
SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
The Company may terminate its obligations under the Indenture at any time, and
the obligations of the Guarantors with respect thereto shall terminate, by
delivering all outstanding Notes to the Trustee for cancellation and paying all
sums payable by it thereunder. The Company, at its option, (i) will be
discharged from any and all obligations with respect to the Notes, and each
Guarantor will be discharged from any and all obligations with respect to its
Guarantee (except for certain obligations of the Company to register the
transfer or exchange of such Notes, replace stolen, lost or mutilated Notes,
maintain paying agencies and hold moneys for payment in trust) or (ii) need not
comply with certain of the restrictive covenants with respect to the Indenture,
if the Company deposits with the Trustee, in trust, U.S. Legal Tender or U.S.
Government Obligations or a combination thereof which, through the payment of
interest thereon and principal in respect thereof in accordance with their
terms, will be sufficient to pay all the principal of and interest on the Notes
on the dates such payments are due in accordance with the terms of such Notes as
well as the Trustee's fees and expenses. To exercise either such option, the
Company is required to deliver to the Trustee (A) an Opinion of Counsel or a
private letter ruling issued to the Company by the IRS to the effect that the
holders of the Notes will not recognize income, gain or loss for federal income
tax purposes as a result of the deposit and related defeasance and will be
subject to federal income tax on the same amount and in the same manner and at
the same times as would have been the case if such option had not been exercised
and, in the case of an Opinion of Counsel furnished in connection with a
Discharge pursuant to clause (i) above, accompanied by a private letter ruling
issued to the Company by the IRS to such effect, (B) subject to certain
qualifications, an Opinion of Counsel to the effect that funds so deposited will
not be subject to avoidance under applicable Bankruptcy Law, and (C) an
Officers' Certificate and an Opinion of Counsel to the effect that the Company
has complied with all conditions precedent to the defeasance. Notwithstanding
the foregoing, the Opinion of Counsel required by clause (A) above need not be
delivered if all Notes not therefore delivered to the Trustee for cancellation
(i) have become due and payable, (ii) will
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become due and payable on the maturity date within one year, or (iii) are to be
called for redemption within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name, and
at the expense, of the Company.
REPORTS TO HOLDERS
The Company will file with the Trustee and provide to the holders of the Notes,
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 Company files with the Commission pursuant to Section 13 or
15(d) of the Exchange Act. In the event the Company is no longer required to
furnish such reports to its securityholders pursuant to the Exchange Act, the
Company 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 the Notes.
MODIFICATION OF THE INDENTURE
From time to time, the Company and the Trustee, together, without the consent of
the holders of the Notes, may amend or supplement the Indenture for certain
specified purposes, including curing ambiguities, defects or inconsistencies.
Other modifications and amendments of the Indenture may be made with the consent
of the holders of a majority in principal amount of the then outstanding Notes,
except that, without the consent of each holder of the Notes affected thereby,
no amendment may, directly or indirectly: (i) reduce the amount of Notes whose
holders must consent to an amendment; (ii) reduce the rate of or change the time
for payment of interest, including defaulted interest, on any Notes; (iii)
reduce the principal of or change the fixed maturity of any Notes, or change the
date on which any Notes may be subject to redemption or repurchase, or reduce
the redemption or repurchase price therefor; (iv) make any Notes payable in
money other than that stated in the Notes; (v) make any change in provisions of
the Indenture protecting the right of each holder of an Exchange Note to receive
payment of principal of and interest on such Exchange Note on or after the due
date thereof or to bring suit to enforce such payment or permitting holders of a
majority in principal amount of the Notes to waive Defaults or Events of
Default; or (vi) after the Company's obligation to purchase the Notes arises
under the Indenture, amend, modify or change the obligation of the Company to
make or consummate a Change of Control Offer or a Net Proceeds Offer or waive
any default in the performance thereof or modify any of the provisions or
definitions with respect to any such offers.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"8 1/8% Notes" means the $500 million aggregate principal amount of 8 1/8%
Senior Subordinated Notes due 2007 of the Company, used pursuant to an indenture
dated as of December 22, 1997, as the same may be modified or amended from time
to time and future refinancings thereof.
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"8 3/4% Notes" means the $200.0 million aggregate principal amount of 8 3/4%
Senior Subordinated Notes due 2007 of the Company, issued pursuant to an
indenture, dated as of June 24, 1997, as amended, as the same may be modified or
amended from time to time and future refinancings thereof.
"9 3/8% Notes" means the $200.0 million aggregate principal amount of 9 3/8%
Senior Subordinated Notes due 2004 of the Company, issued pursuant to an
indenture, dated as of February 14, 1996, as amended, as the same may be
modified or amended from time to time and future refinancings thereof.
"9 3/8% Notes Issue Date" means February 14, 1996.
"10 1/2% Notes" means the $100.0 million aggregate principal amount of 10 1/2%
Senior Subordinated Notes due 2007 of the Company, issued pursuant to an amended
and restated indenture, dated as of December 19, 1996 and amended and restated
as of October 28, 1997, as amended, as the same may be modified or amended from
time to time and future refinancings thereof.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Subsidiary of the
Company or at the time it merges or consolidates with the Company or any of its
Subsidiaries or assumed in connection with the acquisition of assets from such
Person and not incurred by such Person in connection with, or in anticipation or
contemplation of, such Person becoming a Subsidiary of the Company or such
acquisition, merger or consolidation.
"Acquired Preferred Stock" means Preferred Stock of any Person at the time such
Person becomes a Subsidiary of the Company or at the time it merges or
consolidates with the Company or any of its Subsidiaries and not issued by such
Person in connection with, or in anticipation or contemplation of, such
acquisition, merger or consolidation.
"Adjusted Net Assets" of a Guarantor at any date shall mean the lesser of the
amount by which (x) the fair value of the property of such Guarantor exceeds the
total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date), but excluding liabilities under the Guarantee
of such Guarantor at such date, and (y) the present fair salable value of the
assets of such Guarantor at such date exceeds the amount that will be required
to pay the probable liability of such Guarantor on its debts (after giving
effect to all other fixed and contingent liabilities incurred or assumed on such
date and after giving effect to any collection from any Subsidiary of such
Guarantor in respect of the obligations of such Subsidiary under the Guarantee),
excluding debt in respect of the Guarantee, as they become absolute and matured.
"Affiliate" of any Person means any other Person who, directly or indirectly,
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such Person. 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 Company or any Subsidiary of
the Company in any other Person pursuant to which such Person shall become a
Subsidiary of the Company or shall be consolidated or merged with the Company or
any Subsidiary of the Company or (ii) the acquisition by the Company or any
Subsidiary of the Company of assets of any Person comprising a division or line
of business of such Person.
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"Asset Sale" means any direct or indirect sale, issuance, conveyance, transfer,
lease (other than operating leases entered into in the ordinary course of
business), assignment or other transfer for value by the Company or any of its
Subsidiaries (excluding any Sale and Leaseback Transaction or any pledge of
assets or stock by the Company or any of its Subsidiaries) to any Person other
than the Company or a Wholly-Owned Subsidiary of the Company of (i) any Capital
Stock of any Subsidiary of the Company or (ii) any other property or assets of
the Company or any Subsidiary of the Company other than in the ordinary course
of business; provided, however, that for purposes of the "Limitation on Asset
Sales" covenant, Asset Sales shall not include (a) a transaction or series of
related transactions for which the Company or its Subsidiaries receive aggregate
consideration of less than $500,000, (b) transactions permitted under the
"Limitation on Asset Swaps" covenant, (c) transactions permitted under the
"Merger, Consolidation and Sale of Assets" covenant or (d) any Contract Buy Out.
"Asset Swap" means the execution of a definitive agreement, subject only to FCC
approval and other customary closing conditions, that the Company in good faith
believes will be satisfied, for a substantially concurrent purchase and sale, or
exchange, of Productive Assets between the Company or any of its Subsidiaries
and another Person or group of affiliated Persons; provided that any amendment
to or waiver of any closing condition which individually or in the aggregate is
material to the Asset Swap shall be deemed to be a new Asset Swap.
"Attributable Value" in respect of a sale and leaseback arrangement of any
property means, as at the time of determination, the greater of (i) the fair
market value of the property subject to such arrangement (as determined in good
faith by the Board of Directors of the Company) or (ii) the present value
(discounted at the interest rate borne by the Notes, compounded annually) of the
total obligations of the lessee for rental payments during the remaining term of
the lease included in such arrangement.
"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.
"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, including each class of common stock and Preferred
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.
"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
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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, on the Merger Date.
"Chancellor Media" means Chancellor Media Corporation, a Delaware corporation
formerly known as Evergreen Media 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
Company to any Person or group of related Persons for purposes of Section 13(d)
of the Exchange Act (a "Group") (whether or not otherwise in compliance with the
provisions of the Indenture), other than to Hicks Muse or any of its Affiliates,
officers and directors (the "Permitted Holders"); or (ii) a majority of the
Board of Directors of Chancellor Media, CMHC or the Company shall consist of
Persons who are not Continuing Directors; or (iii) the acquisition by any Person
or Group (other than the Permitted Holders) of the power, directly or
indirectly, to vote or direct the voting of securities having more than 50% of
the ordinary voting power for the election of directors of Chancellor Media,
CMHC or the Company.
"CMHC" means Chancellor Mezzanine Holdings Corporation, a Delaware corporation
formerly known as Evergreen Mezzanine Holdings Corporation, and its successors.
"Commodity Agreement" means any commodity futures contract, commodity option or
other similar agreement or arrangement entered into by the Company or any of its
Subsidiaries designed to protect the Company or any of its Subsidiaries against
fluctuations in the price of commodities actually used in the ordinary course of
business of the Company and its Subsidiaries.
"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
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deferred payment obligation, (d) all commissions, discounts and other fees and
charges owed with respect to letters of credit, bankers' acceptance financing or
similar facilities, and (e) all accrued interest and (ii) the interest component
of Capitalized Lease Obligations paid or accrued by such person and its
Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Income" of any Person means, for any period, the aggregate net
income (or loss) of such Person and its Subsidiaries for such period on a
consolidated basis, determined in accordance with GAAP; provided that there
shall be excluded therefrom, without duplication, (a) gains and losses from
Asset Sales (without regard to the $500,000 limitation set forth in the
definition thereof) or abandonments or reserves relating thereto and the related
tax effects, (b) items classified as extraordinary or nonrecurring gains and
losses, and the related tax effects according to GAAP, (c) the net income (or
loss) of any Person acquired in a pooling of interests transaction accrued prior
to the date it becomes a Subsidiary of such first referred to Person or is
merged or consolidated with it or any of its Subsidiaries, (d) the net income of
any Subsidiary to the extent that the declaration of dividends or similar
distributions by that Subsidiary of that income is restricted by contract,
operation of law or otherwise and (e) the net income of any Person, other than a
Subsidiary, except to the extent of the lesser of (x) dividends or distributions
paid to such first referred to Person or its Subsidiary by such Person and (y)
the net income of such Person (but in no event less than zero), and the net loss
of such Person shall be included only to the extent of the aggregate Investment
of the first referred to Person or a 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 Media, CMHC or the Company
on the date of the Indenture, (ii) was nominated for election or elected to the
Board of Directors of Chancellor Media, CMHC or the Company with the affirmative
vote of a majority of the Continuing Directors who were members of such Board of
Directors at the time of such nomination or election, or (iii) is a
representative of a Permitted Holder.
"Contract Buy Out" means the involuntary disposition or termination (including,
without limitation, pursuant to a buy out) of a contract between a media
representation company and a client station.
"CRBC" means Chancellor Radio Broadcasting Company, a Delaware corporation that
was merged with and into CMCLA on the Merger Date.
"Credit Agreement" means the Credit Agreement, dated on or about February 14,
1996, among Chancellor Broadcasting, CRBC, the lenders thereto and Bankers Trust
Company as managing agent, as such agreement 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
CRBC as additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor
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or replacement agreement and whether by the same or any other agent, 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
Company or any of its Subsidiaries against fluctuations in currency values.
"Default" means an event or condition the occurrence of which is, or with the
lapse of time or the giving of notice or both would be, an Event of Default.
"Designated Guarantor Senior Debt" means (i) Indebtedness guaranteed by a
Guarantor under or in respect of the Senior Credit Facility and (ii) any other
Indebtedness constituting Guarantor Senior Debt which, at the time of
determination, has an aggregate principal amount of at least $25,000,000 and is
specifically designated in the instrument evidencing such Guarantor Senior Debt
as "Designated Guarantor Senior Debt" by the Guarantor.
"Designated Senior Debt" means (i) Indebtedness under or in respect of the
Senior Credit Facility and (ii) any other Indebtedness constituting Senior Debt
which, at the time of determination, has an aggregate principal amount of at
least $25,000,000 and is specifically designated in the instrument evidencing
such Senior Debt as "Designated Senior Debt" by the Company.
"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
the final maturity date of the Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Financial Monitoring and Oversight Agreements" means the Financial Monitoring
and Oversight Agreement among Hicks, Muse & Co. Partners, L.P., CRBC and
Chancellor Broadcasting, as in effect on the 9 3/8% Notes Issue Date, and the
Financial Advisory Agreement among HM2/Management Partners, L.P., CRBC and
Chancellor Broadcasting, as in effect on the 9 3/8% Notes Issue Date, or as each
is amended in connection with the merger of Chancellor Broadcasting, CRBC,
Chancellor Media, CMHC and the Company on the Merger Date.
"GAAP" means generally accepted accounting principles as in effect in the United
States of America as of the Issue Date.
"Guarantors" mean (i) initially, all of the Company's subsidiaries on the Issue
Date except Katz International Limited, Katz Television Sales Limited, Katz
Radio Sales Limited and National Cable Communications, L.P. and (ii) each of the
Company's Subsidiaries that, subsequent to the Issue Date, executes a
supplemental indenture in which such Subsidiary agrees to be bound by the terms
of the Indenture as a Guarantor; provided that any Person constituting a
Guarantor as described above shall cease to constitute a Guarantor when its
respective Guarantee is released in accordance with the terms thereof.
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"Guarantor Senior Debt" means any Indebtedness of a Guarantor (including any
interest accruing subsequent to the filing of a petition of bankruptcy at the
rate provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law), whether outstanding on the
Issue Date or thereafter created, incurred or assumed, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Guarantees. Without
limiting the generality of the foregoing, "Guarantor Senior Debt" shall also
include the principal of, premium, if any, interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, and all other amounts
owing in respect of, and all monetary obligations of every nature under, (x) the
Senior Credit Facility, including, without limitation, obligations to pay
principal and interest, reimbursement obligations under letters of credit, fees,
expenses and indemnities, and (y) all Interest Swap Obligations. Notwithstanding
the foregoing, "Guarantor Senior Debt" shall not include any of the following
amounts (whether or not constituting Indebtedness as defined in this Indenture):
(i) any Indebtedness of a Guarantor to a Subsidiary of such Guarantor; (ii)
Indebtedness and other amounts owing to trade creditors incurred in connection
with obtaining goods, materials or services; (iii) Indebtedness represented by
Disqualified Capital Stock; (iv) any liability for federal, state, local or
other taxes owed or owing by a Guarantor; (v) any Indebtedness which is, by its
express terms, subordinated in right of payment to any other Indebtedness of
such Guarantor; and (vi) guarantees of each of the 9 3/8% Notes, the 8 3/4%
Notes, the 10 1/2% Notes and the 8 1/8% Notes.
"Hicks Muse" means Hicks, Muse, Tate & Furst Incorporated.
"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 are 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.
"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
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way of loan, advance, capital contribution, guarantee or otherwise and (ii) an
investment deemed to have been made by the Company at the time any entity which
was a Subsidiary of the Company ceases to be such a Subsidiary in an amount
equal to the value of the loans and advances made, and any remaining ownership
interest in, such entity immediately following such entity ceasing to be a
Subsidiary of the Company. The amount of any non-cash Investment shall be the
fair market value of such Investment, as determined conclusively in good faith
by management of the Company unless the fair market value of such Investment
exceeds $1.0 million, in which case the fair market value shall be determined
conclusively in good faith by the Board of Directors of the Company at the time
such Investment is made.
"Issue Date" means the date of original issuance of the Original Notes.
"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 who 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
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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).
"Merger Date" means September 5, 1997.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in the
form of cash or Cash Equivalents (including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents)
received by the Company or any of its Subsidiaries from such Asset Sale net of
(i) reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales commissions, recording fees, title insurance premiums, appraisers fees
and costs reasonably incurred in preparation of any asset or property for sale),
(ii) taxes paid or reasonably estimated to be payable (calculated based on the
combined state, federal and foreign statutory tax rates applicable to the
Company or the Subsidiary engaged in such Asset Sale) and (iii) repayment of
Indebtedness secured by assets subject to such Asset Sale; provided that if the
instrument or agreement governing such Asset Sale requires the transferor to
maintain a portion of the purchase price in escrow (whether as a reserve for
adjustment of the purchase price or otherwise) or to indemnify the transferee
for specified liabilities in a maximum specified amount, the portion of the cash
or Cash Equivalents that is actually placed in escrow or segregated and set
aside by the transferor for such indemnification obligation shall not be deemed
to be Net Cash Proceeds until the escrow terminates or the transferor ceases to
segregate and set aside such funds, in whole or in part, and then only to the
extent of the proceeds released from escrow to the transferor or that are no
longer segregated and set aside by the transferor.
"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.
"Permitted Indebtedness" means, without duplication, (i) the Notes; (ii) the
Guarantees; (iii) Indebtedness of the Company incurred pursuant to the Credit
Agreement in an aggregate principal amount at any time outstanding not to exceed
the sum of the aggregate commitments pursuant to the Credit Agreement as
initially in effect on the 9 3/8% Notes Issue Date; (iv) the 9 3/8% Notes, the
8 3/4% Notes, the 10 1/2% Notes and the 8 1/8% Notes and Guarantees thereof; (v)
Interest Swap Obligations; provided that such Interest Swap Obligations are
entered into to protect the Company from fluctuations in interest rates of its
Indebtedness; (vi) additional Indebtedness of the Company 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 Senior Credit
Facility); (vii) Refinancing Indebtedness; (viii) Indebtedness owed by the
Company to any Wholly-Owned Subsidiary or by any Subsidiary to the Company or
any Wholly-Owned Subsidiary of the Company; and (ix) guarantees by Subsidiaries
of any Indebtedness permitted to be incurred pursuant to the Indenture.
"Permitted Investments" means (i) Investments by the Company 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
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Company) engaged in the broadcast business or businesses reasonably related
thereto, including, without limitation, media representation, sale of
advertising and such other activities as are incidental or similar or related
thereto; provided that if any such Investment or series of related Investments
involves an Investment by the Company in excess of $5,000,000, the Company is
able, at the time of such Investment and immediately after giving effect
thereto, to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with the "Limitation on Incurrence of
Additional Indebtedness" covenant, (ii) Investments received by the Company or
its Subsidiaries as consideration for a sale of assets, including an Asset Sale
effected in compliance with the "Limitation on Asset Sales" covenant, (iii)
Investments by the Company or any Wholly-Owned Subsidiary of the Company in any
Wholly-Owned Subsidiary of the Company (whether existing on the Issue Date or
created thereafter) or any Person that after such Investments, and as a result
thereof, becomes a Wholly-Owned Subsidiary of the Company and Investments in the
Company by any Wholly-Owned Subsidiary of the Company, (iv) cash and Cash
Equivalents, (v) Investments in securities of trade 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.
"Permitted Liens" means (i) Liens for taxes, assessments and governmental
charges to the extent not required to be paid under the Indenture, (ii)
statutory Liens of landlords and carriers, warehousemen, mechanics, suppliers,
materialmen, repairmen or other like Liens to the extent not required to be paid
under the Indenture, (iii) pledges or deposits to secure lease obligations or
nondelinquent obligations under workers' compensation, unemployment insurance or
similar legislation, (iv) Liens to secure the performance of public statutory
obligations that are not delinquent, performance bonds or other obligations of a
like nature (other than for borrowed money), in each case incurred in the
ordinary course of business, (v) easements, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or encumbrances
incurred in the ordinary course of business not interfering in any material
respect with the business of the Company or its Subsidiaries, (vi) Liens upon
specific items of inventory or other goods and proceeds of any Person securing
such Person's obligations in respect of letters of credit or bankers'
acceptances issued or created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods in the ordinary
course of business, (vii) judgment and attachment Liens not giving rise to an
Event of Default, (viii) leases or subleases granted to others in the ordinary
course of business consistent with past practice not interfering in any material
respect with the business of the Company or its Subsidiaries, (ix) any interest
or title of a lessor in the property subject to any lease, whether characterized
as capitalized or operating other than any such interest or title resulting from
or arising out of a default by the Company or its Subsidiaries of its
obligations under such lease and (x) Liens arising from filing UCC financing
statements for precautionary purposes in connection with true leases of personal
property that are otherwise permitted under the Indenture and under which the
Company or any of its Subsidiaries is a lessee.
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
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"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.
"Productive Assets" means assets of a kind used or usable by the Company and its
Subsidiaries in broadcast businesses or businesses reasonably related thereto,
including, without limitation, media representation, sale of advertising and
such other activities as are incidental or similar or related thereto, and
specifically includes assets acquired through Asset Acquisitions.
"Public Equity Offering" means an underwritten, fully registered public offering
of Capital Stock (other than Disqualified Capital Stock) of the Company,
Chancellor Media, CMHC or upon the consummation of the Capstar Merger, Capstar
Broadcasting Corporation, or any of their respective successors, pursuant to an
effective registration statement filed with the Commission in accordance with
the Securities Act, the gross proceeds of which are at least $150 million;
provided, however, that in the case of a Public Equity Offering by Chancellor
Media, CMHC or upon the consummation of the Capstar Merger, Capstar Broadcasting
Corporation, or any of their respective successors, the issuer of the public
equity must contribute to the capital of the Company an amount sufficient to
redeem the 9 3/8% Notes, 8 3/4% Notes, 10 1/2% Notes, 8 1/8% Notes and Notes, if
any, called for redemption in accordance with the terms thereof.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Refinancing Indebtedness" means any refinancing by the Company of Indebtedness
of the Company or any of its Subsidiaries incurred in accordance with the
"Limitation on Incurrence of Additional Indebtedness" covenant (other than
pursuant to clause (iii) 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.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt.
"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 Company or a Subsidiary of any property, whether owned by the Company or any
Subsidiary at the Issue Date or later acquired, which has been or is to be sold
or transferred by the Company 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 of the Commission promulgated thereunder.
"Senior Credit Facility" means the Second Amended and Restated Loan Agreement,
dated April 25, 1997, as amended from time to time, among the Company, the
lenders
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from time to time named party thereto, Toronto Dominion (Texas), Inc., 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, stock pledge agreements and other 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 Company 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.
"Senior Debt" means any Indebtedness of the Company (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law), whether outstanding on the
Issue Date or thereafter created, incurred or assumed, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes. Without
limiting the generality of the foregoing, "Senior Debt" shall also include the
principal of, premium, if any, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on, and all other amounts owing in respect
of, and all monetary obligations of every nature under, (x) the Senior Credit
Facility, including, without limitation, obligations to pay principal and
interest, reimbursement obligations under letters of credit, fees, expenses and
indemnities, and (y) all Interest Swap Obligations. Notwithstanding the
foregoing, Senior Debt shall not include any of the following amounts (whether
or not constituting Indebtedness as defined in the Indenture): (i) any
Indebtedness of the Company to a Subsidiary of the Company, (ii) Indebtedness
and other amounts owing to trade creditors incurred in connection with obtaining
goods, materials or services, (iii) Indebtedness represented by Disqualified
Capital Stock, (iv) any liability for federal, state, local or other taxes owed
or owing by the Company, (v) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of the Company,
including the 9 3/8% Notes, the 8 3/8% Notes, the 10 1/2% Notes and the 8 1/8%
Notes.
"Significant Subsidiary" means for any Person each Subsidiary of such Person
which (i) for the most recent fiscal year of such Person accounted for more than
5% of the consolidated net income of such Person or (ii) as at the end of such
fiscal year, was the owner of more than 5% of the consolidated assets of such
Person.
"Subsidiary," with respect to any Person, means (i) any corporation of which the
outstanding Capital Stock having at least a majority of the votes entitled to be
cast in the election of directors under ordinary circumstances shall at the time
be owned, directly or indirectly, by such Person or (ii) any other Person of
which at least a majority of the voting interest under ordinary circumstances is
at the time, directly or indirectly, owned by such Person. Notwithstanding
anything in the Indenture to the contrary, all references to the Company and its
consolidated Subsidiaries or to financial information prepared on a consolidated
basis in accordance with GAAP shall be deemed to include the Company and
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<PAGE> 134
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 in the Indenture to the contrary, an
Unrestricted Subsidiary shall not be deemed to be a Subsidiary for purposes of
the Indenture.
"Tax Sharing Agreement" means the Tax Sharing Agreement between CRBC and
Chancellor Broadcasting, as in effect on the 9 3/8% Notes Issue Date.
"Unrestricted Subsidiary" means a Subsidiary of the Company created after the
9 3/8% Notes Issue Date and so designated by a resolution adopted by the Board
of Directors of the Company, provided that (a) neither the Company nor any of
its other Subsidiaries (other than Unrestricted Subsidiaries) (1) provides any
credit support for any Indebtedness of such Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness) or (2) is
directly or indirectly liable for any Indebtedness of such Subsidiary, (b) 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 Company or any other
Subsidiary of the Company (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 (c) 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 of the Company shall
be evidenced to the Trustee by the filing with the Trustee of a certified copy
of the resolution of the Company's Board of Directors giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions. Until otherwise designated by the Board
of Directors of the Company, National Cable Communications, L.P., a Delaware
limited partnership, shall be an Unrestricted Subsidiary.
"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.
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth below, the New Notes initially will be represented by one or
more permanent global certificates in definitive, fully registered form (the
"Global Certificate"). The Global Certificate will be deposited with, or on
behalf of, DTC and registered in the name of a nominee of DTC.
The Global Certificate. The Company expects that pursuant to procedures
established by DTC (i) upon the issuance of the Global Certificate, DTC or its
custodian will credit, on its internal system, the aggregate principal amount of
New Notes of the individual beneficial interests represented by such global
securities to the respective accounts of persons who have accounts with such
depositary and (ii) ownership of beneficial interests in the Global Certificate
will be shown on, and the transfer of such ownership will be effected only
through, records maintained by DTC or its nominee (with respect to interests
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<PAGE> 135
of participants) and the records of participants (with respect to interests of
persons other than participants). Ownership of beneficial interests in the
Global Certificate will be limited to persons who have accounts with DTC
("participants") or persons who hold interests through participants.
So long as DTC, or its nominee, is the registered owner or holder of the New
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the New Notes represented by such Global Certificate for all
purposes. No beneficial owner of an interest in the Global Certificate will be
able to transfer that interest except in accordance with DTC's procedures, in
addition to those procedures provided for in the Indenture.
Payments of the principal of, premium, if any, and interest on the Global
Certificate will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. None of the Company, the Trustee nor the Paying Agent
and Registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Certificate or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interest.
The Company expects that DTC, or its nominee, upon receipt of any payment of
principal, premium, if any, and interest in respect of the Global Certificate,
will credit participants' accounts with payments in amounts proportionate to
their respective beneficial interests in the principal amount of the Global
Certificate as shown on the records of DTC or its nominee. The Company also
expects that payments by participants to owners of beneficial interests in the
Global Certificate held through such participants will be governed by standing
instructions and customary practice, as is now the case with securities held for
the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way in
accordance with DTC rules and will be settled in clearinghouse funds. If a
holder requires physical delivery of a Certificated Security for any reason,
including to sell New Notes to persons in states that require physical delivery
of the Certificate, or to pledge such securities, such holder must transfer its
interest in the Global Certificate, in accordance with the normal procedures of
DTC and with the procedures set forth in the Indenture.
DTC has advised the Company that it will take any action permitted to be taken
by a holder of New Notes (including the presentation of New Notes for exchange
as described below) only at the direction of one or more participants to whose
account the DTC interests in the Global Certificate are credited and only in
respect of such New Notes as to which such participant or participants has or
have given such direction.
DTC has advised the Company as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "Clearing Agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust
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companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Certificate among participants of DTC, it
is under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
obligations under the rules and procedures governing their operations.
Certificated Securities. If DTC is at any time unwilling or unable to continue
as a depositary for the Global Certificate and a successor depositary is not
appointed by the Company within 90 days, Certificated Securities will be issued
in exchange for the Global Certificate.
DESCRIPTION OF CERTAIN INDEBTEDNESS
SENIOR CREDIT FACILITY
On April 25, 1997, the Company closed its Second Amended and Restated Loan
Agreement (as amended from time to time, the "Senior Credit Facility") with TD
Securities (USA) 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, Toronto Dominion (Texas), Inc., as
administrative agent (the "Administrative Agent"), and the financial
institutions party thereto (the "Lenders"). The Senior Credit Facility initially
provided for a maximum commitment of $1.75 billion, and upon consummation of the
Chancellor Merger, the aggregate commitment under the Senior Credit Facility was
increased to $2.50 billion. Loans under the Senior Credit Facility consist of
(i) a $900.0 million term loan facility (the "Term Loan Facility") and (ii) a
$1.60 billion revolving loan facility (the "Revolving Loan Facility" and,
collectively with the Term Loan Facility, the "Loans").
The following description of certain provisions of the Senior Credit Facility
does not purport to be complete and is qualified in its entirety by reference to
the full text of the Senior Credit Facility, a copy of which is available from
the Company on request.
TERM LOAN FACILITY
The Term Loan Facility matures on June 30, 2005. The Term Loan Facility requires
scheduled annual reductions of the principal balance of the Term Loan Facility
outstanding on June 30, 2000, payable quarterly in equal quarterly amounts,
commencing on September 30, 2000 in the following percentages: (i) from 9/30/00
through and including 6/30/01, 15.00%; (ii) from 9/30/01 through and including
6/30/02, 20.00%; (iii) from 9/30/02 through and including 6/30/03, 20.00%; (iv)
from 9/30/03 through and including 6/30/04, 20.00%; and (v) from 9/30/04 through
and including 6/30/05, 25.00%. Mandatory or optional prepayments made by the
Company against the Term Loan Facility will not affect the reduction percentages
set forth above.
REVOLVING LOAN FACILITY
The Revolving Loan Facility matures on June 30, 2005. The Revolving Loan
Facility requires scheduled annual reductions of the Revolving Loan Commitment
(as defined in
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the Senior Credit Facility) as of June 30, 2000, payable quarterly in equal
quarterly amounts, commencing on September 30, 2000 in the following
percentages: (i) from 9/30/00 through and including 6/30/01, 15.00%; (ii) from
9/30/01 through and including 6/30/02, 20.00%; (iii) from 9/30/02 through and
including 6/30/03, 20.00%; (iv) from 9/30/03 through and including 6/30/04,
20.00%; and (v) from 9/30/04 through and including 6/30/05, 25.00%. Voluntary
reductions of the Revolving Loan Commitment made by the Company shall not affect
the reduction percentages set forth above.
ADDITIONAL FACILITY INDEBTEDNESS
The Company has the ability to incur additional indebtedness ("Additional
Facility Indebtedness") in a principal amount not to exceed $250.0 million from
one or more of the Lenders or any other institution acceptable to the
Administrative Agent that agrees to extend such credit, provided that certain
conditions under the Senior Credit Facility are complied with. As of the date
hereof, the Company has not requested, and no Lender has issued, any commitment
to extend such Additional Facility Indebtedness to the Company.
INTEREST RATE
The Loans bear interest at a rate equal to, at the Company's option, (i) the
Prime Rate (as defined in the Senior Credit Facility) in effect from time to
time plus the Applicable Margin (as defined) (a "Prime Rate Loan") or (ii) the
Eurodollar Rate (as defined in the Senior Credit Facility) as determined by the
Administrative Agent for the respective interest period plus the Applicable
Margin (a "Eurodollar Loan"). The Applicable Margin is calculated based on the
Company's Total Leverage Ratio (as defined in the Senior Credit Facility)
according to the table set forth below:
<TABLE>
<CAPTION>
PRIME RATE EURODOLLAR RATE
APPLICABLE APPLICABLE
TOTAL LEVERAGE RATIO MARGIN MARGIN
-------------------- ----------------- -----------------
<S> <C> <C>
Greater than 6.75................................. 1.625% 2.625%
Greater than 6.50 but less than or equal to
6.75............................................ 1.375% 2.375%
Greater than 6.00 but less than or equal to
6.50............................................ 1.125% 2.125%
Greater than 5.50 but less than or equal to
6.00............................................ 0.750% 1.750%
Greater than 5.00 but less than or equal to
5.50............................................ 0.375% 1.375%
Greater than 4.50 but less than or equal to
5.00............................................ 0.250% 1.250%
Greater than 4.00 but less than or equal to
4.50............................................ 0.125% 1.125%
Less than or equal to 4.00........................ 0.000% 1.000%
</TABLE>
FEES
The Company is required to pay commitment fees on the aggregate unused amount of
the Available Revolving Loan Commitment (as defined in the Senior Credit
Facility) based on the Total Leverage Ratio for the most recent fiscal quarter
end. If the Total Leverage Ratio is greater than or equal to 5.50, the
corresponding commitment fee is 0.375%; if the Total Leverage Ratio is less than
5.50, the corresponding commitment fee is 0.250%. The Administrative Agent will
also receive such other customary fees as have been separately agreed upon with
the Company. The Company also is required to pay fees for outstanding letters of
credit drawn under the Senior Credit Facility at a rate per annum on the amount
of the Letter of Credit Obligations (as defined in the Senior Credit Facility)
equal to the
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Applicable Margin for Eurodollar Loans plus an issuing bank fee of $2,000 for
issuing, amending or renewing any letter of credit.
SECURITY AND GUARANTEES
The Senior Credit Facility is secured by (i) a pledge of all capital stock owned
by CMCLA and its subsidiaries, (ii) a pledge of all capital stock of CMCLA,
(iii) a non-recourse pledge of all capital stock of CMHC owned by Chancellor
Media, (iv) a pledge of all debt and equity securities of persons engaged in any
Non-Core Business (as defined in the Senior Credit Facility) purchased by the
Company, (v) a collateral assignment of all partnership interests held by the
subsidiaries of CMCLA, (vi) a collateral assignment of all trust interests held
by the subsidiaries of CMCLA, (vii) a collateral assignment of all limited
liability company interests held by CMCLA, (viii) a downstream guarantee
provided by CMHC and its wholly owned subsidiary and (ix) upstream guarantees
provided by the subsidiaries of CMCLA.
COVENANTS
The Senior Credit Facility contains customary restrictive covenants, which,
among other things and with certain exceptions, limit the ability of the Company
to incur additional indebtedness and liens in connection therewith, enter into
certain transactions with affiliates, pay dividends, consolidate, merge or
effect certain asset sales, issue additional stock, effect an asset swap, make
acquisitions and make capital expenditures and enter new lines of business.
Under the Senior Credit Facility, the Company is required to maintain specified
financial ratios, based on its Senior Leverage Ratio and Total Leverage Ratio
(in each case, as defined in the Senior Credit Facility), for specified periods
of time. Under the Senior Credit Facility, the Company must not exceed the
following ratios during the following periods of time:
<TABLE>
<CAPTION>
PERIOD ENDING SENIOR LEVERAGE RATIO TOTAL LEVERAGE RATIO
------------- --------------------- --------------------
<S> <C> <C>
1/1/98 through 12/31/99................... 6.00 to 1.00 7.00 to 1.00
1/1/00 through 12/31/00................... 5.50 to 1.00 6.00 to 1.00
1/1/01 through 12/31/01................... 3.75 to 1.00 5.25 to 1.00
1/1/02 and thereafter..................... 3.50 to 1.00 5.25 to 1.00
</TABLE>
Under the Senior Credit Facility, the Company may not, as of the end of any
fiscal quarter, allow its ratio of the sum of Operating Cash Flow plus the
Available Revolving Commitment (in each case, as defined in the Senior Credit
Facility) during the last fiscal four-quarter period to Pro Forma Fixed Changes
(as defined in the Senior Credit Facility) for the four-quarter period beginning
on the day following that fiscal quarter end, to be less than 1.05 to 1.00.
Under the Senior Credit Facility, the Company also is required to comply with
certain other financial tests, such as a specified ratio of Operating Cash Flow
to Cash Interest Expense (as each such term is defined in the Senior Credit
Facility).
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USE OF PROCEEDS
The Senior Credit Facility requires that the Net Proceeds from any Permitted
Asset Sale (in each case, as defined in the Senior Credit Facility) be applied,
at the Company's election, to the Term Loan Facility or the Revolving Loan
Facility or any combination thereof. In the alternative, the Company may elect
to make an acquisition with the Net Proceeds, so long as the Company has entered
into a contract for such acquisition within 12 months from the date of such
Permitted Asset Sale and has concluded the purchase with 18 months from the date
of such Permitted Asset Sale. In addition, 50% of Net Proceeds from any
Subordinated Indebtedness issued by the Company, other than the assumption or
refinancing of the 9 3/8% Notes and the 8 3/4% Notes, may be applied, at the
Company's election, to the Term Loan Facility or the Revolving Loan Facility or
any combination thereof. To the extent that the Company elects to apply any
amounts described in this paragraph to the Revolving Loan Facility, the
commitments under such facility will not be permanently reduced and will be
available for subsequent borrowing by the Company.
EVENTS OF DEFAULT
The Senior Credit Facility contains customary events of default, including (i)
the default in the payment of any interest, reimbursement amounts with respect
to letters of credit, or fees or other amounts payable to the Lenders (other
than principal) when due which is not cured within five days from the date that
such payment was due, (ii) the default in the payment of any principal amount
when due, (iii) the default in the performance or observance of certain
representations, warranties, covenants and agreements contained in the Senior
Credit Facility, (iv) a Senior Credit Facility Change of Control (as defined
below), (v) the entry of an order for relief, winding-up or liquidation under
Title 11 of the United States Code or similar federal or state laws against
Chancellor Media, CMHC or the Company, (vi) the voluntary commencement by the
Company of bankruptcy proceedings under Title 11 of the United States Code or
similar federal or state laws, or the commencement of involuntary bankruptcy
proceedings against the Company, which are not diligently contested or which
continue undismissed for a period of 45 consecutive days, (vii) the entry of a
judgment against the Company which, individually or when aggregated with other
such judgments, exceeds $10 million, (viii) the failure to satisfy certain
minimum employee benefit funding standards, (ix) the acceleration of the
maturity of (a) Subordinated Indebtedness of the Company or (b) any other
indebtedness of the Company in an aggregate principal amount exceeding $3
million, (x) any event which would permit the acceleration of such subordinated
indebtedness or such other indebtedness which has not been cured or waived in
writing within any applicable cure period, (xi) any event which does not permit
acceleration of such Subordinated Indebtedness or such other indebtedness but
requires the Company to purchase or acquire such Subordinated Indebtedness or
such other indebtedness, (xii) any material default under any Interest Hedge
Agreement (as defined in the Senior Credit Facility) with a notional principal
amount of $6 million or more, (xii) the issuance by the FCC of a revocation
order based on alleged alien ownership of the Company, (xiii) the final,
non-appealable termination or revocation of any material FCC license or failure
to renew any such license, (xiv) the failure of any security document or note
under the Senior Credit Facility to be in effect, or (xv) the breach by CMHC of
the guarantee or stock pledge made by it pursuant to the Senior Credit Facility.
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<PAGE> 140
A "Senior Credit Facility Change of Control" will be deemed to have occurred
under the Senior Credit Facility if (i) any Person (as defined in the Senior
Credit Facility), other than Scott K. Ginsburg, Matthew Devine, Kenneth J.
O'Keefe, James de Castro and Hicks Muse and its affiliates, shall individually
or collectively control more than 51% on a fully diluted basis of the voting
power of Chancellor Media or (ii) CMHC shall, directly or indirectly, cease to
own all of the issued and outstanding common stock of CMCLA.
9 3/8% NOTES
The 9 3/8% Notes mature on October 1, 2004. Interest on the 9 3/8% Notes accrues
at the rate of 9 3/8% per annum and is payable semiannually. The 9 3/8% Notes
are unsecured obligations of the Company, ranking subordinate in right of
payment to all Senior Debt (as defined in the indenture governing the 9 3/8%
Notes (the "9 3/8% Indenture")) of the Company and pari passu with the 8 3/4%
Notes and the 10 1/2% Notes, and will rank pari passu with the New Notes.
Substantially all of the Company's subsidiaries fully and unconditionally
guarantee the full and prompt payment of principal of all interest on the 9 3/8%
Notes, and of all other obligations under the 9 3/8% Indenture. The indebtedness
evidenced by each such guarantee is subordinated to each Guarantor's Senior Debt
on the same terms as the 9 3/8% Notes are subordinated to the Company's Senior
Debt.
The 9 3/8% Notes are redeemable, at the Company's option, in whole at any time
or in part from time to time, on and after February 1, 2000, at the following
redemption prices (expressed as percentages of the principal amount) if redeemed
during the twelve month period commencing on February 1 of the year set forth
below, plus, in each case, accrued and unpaid interest thereon to the date of
redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2000........................................................ 104.688%
2001........................................................ 103.125
2002........................................................ 101.563
2003 and thereafter......................................... 100.000
</TABLE>
In addition, on or prior to January 31, 1999, the Company may redeem the 9 3/8%
Notes with the net cash proceeds of one or more Public Equity Offerings (as
defined in the 9 3/8% Indenture) at a redemption price of 108.203% or 107.031%
of the principal amount thereof, plus, in each case, accrued and unpaid interest
to the redemption date, during the respective 12-month periods commencing on
February 1, 1997 and 1998; provided, however, that after any such redemption at
least 75% of the aggregate principal amount of the 9 3/8% Notes originally
issued must be outstanding. The Company's ability to optionally redeem the
9 3/8% Notes are subject to restrictions contained in the Senior Credit
Facility, which limits the amount of debt subordinate to the indebtedness under
the Senior Credit Facility that may be redeemed by the Company.
Under the 9 3/8% Indenture, in the event of a change of control (as defined in
the 9 3/8% Indenture) of the Company, each holder of 9 3/8% Notes will have the
right to require the Company to repurchase, in whole or in part, such holder's
9 3/8% Notes at a purchase price equal to 101% of their principal amount, plus
accrued and unpaid interest, if any to the date of repurchase.
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<PAGE> 141
The 9 3/8% Indenture contains certain restrictive covenants which, among other
things, impose limitations (subject to certain exceptions) on the Company with
respect to (i) the payment of dividends or other distributions on capital stock
and the purchase, redemption or retirement for value of shares of capital stock
as any warrants, options or other rights for shares of capital stock; (ii) the
incurrence of additional indebtedness; (iii) the incurrence of subsidiary
indebtedness; (iv) the repayment of redemption of subordinated indebtedness
other than in accordance with its scheduled repayment; (v) sales of assets by
the Company; (vi) asset swaps; (vii) transactions with stockholders and
affiliates; (viii) the restriction of certain payments by subsidiaries to their
respective parents; (ix) the creation of liens on the assets of the Company or
its subsidiaries; (x) the incurrence of indebtedness senior to the 9 3/8% Notes
and subordinate to other indebtedness of the Company; (xi) investments by the
Company or its subsidiaries; (xii) the issuance of preferred stock by any of the
Company's subsidiaries; (xiii) sales and leasebacks by the Company or its
subsidiaries; (xiv) the guarantee of indebtedness; (xv) the conduct of business
other than the ownership and operation of radio broadcast stations and
businesses reasonably related thereto; and (xvi) the merger or sale of all or
substantially all the assets of the Company. Upon the happening of certain
events of default specified in the 9 3/8% Indenture, the trustee for the 9 3/8%
Notes may, and the trustee upon the request of holders of 25% in principal
amount then outstanding of the 9 3/8% Notes shall, or the holders of at least
25% in principal amount of outstanding 9 3/8% Notes may, declare the principal
amount then outstanding of and accrued but unpaid interest, if any, on all of
such 9 3/8% Notes to be due and payable. Upon the happening of certain other
events of default specified in the 9 3/8% Notes Indenture, the unpaid principal
of and accrued but unpaid interest on all outstanding 9 3/8% Notes will
automatically become due and payable without any action by the trustee or the
holders of the 9 3/8% Notes.
The Company may terminate its obligations under the 9 3/8% Indenture at any
time, and the obligations of the Guarantors with respect thereto shall
terminate, by delivering all outstanding 9 3/8% Notes of the appropriate series
to the appropriate trustee for cancellation and paying all sums payable by it
thereunder. The Company, at its option, (i) will be discharged from any and all
obligations with respect to the 9 3/8% Notes delivered, and the guarantor will
be discharged from any and all obligations with respect to its guarantee of such
9 3/8% Notes, (except for certain obligations of the Company to register the
transfer or exchange of such 9 3/8% Notes, replace stolen, lost or mutilated
9 3/8% Notes, maintain paying agencies and hold moneys for payment in trust) or
(ii) need not comply with certain of the restrictive covenants with respect to
the 9 3/8% Indenture, in each case, if the Company, in addition to satisfying
certain other obligations, deposits with the appropriate trustee, in trust, U.S.
legal tender or U.S. Government Obligations (in each case, as defined in the
9 3/8% Indenture) or a combination thereof which, through the payment of
interest thereon and principal in respect thereof in accordance with their
terms, will be sufficient to pay all the principal of and interest on 9 3/8%
Notes to be defeased on the dates such payments are due in accordance with the
terms of 9 3/8% Notes as well as the trustee's fees and expenses.
8 3/4% NOTES
The 8 3/4% Notes mature on June 15, 2007. Interest on the 8 3/4% Notes accrues
at the rate of 8 3/4% per annum and is payable semiannually. The 8 3/4% Notes
are unsecured obligations of the Company, ranking subordinate in right of
payment to all Senior Debt (as defined in
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<PAGE> 142
the indenture governing the 8 3/4% Notes (the "8 3/4% Indenture")) of the
Company and pari passu with the 9 3/8% Notes and the 10 1/2% Notes, and will
rank pari passu with the Notes.
Substantially all of the Company's subsidiaries fully and unconditionally
guarantee the full and prompt payment of principal of all interest on the 8 3/4%
Notes, and of all other obligations under the 8 3/4% Indenture. The indebtedness
evidenced by each such guarantee is subordinated to each Guarantor's Senior Debt
on the same terms as the 8 3/4% Notes are subordinated to the Company's Senior
Debt.
The 8 3/4% Notes are redeemable, at the Company's option, in whole at any time
or in part from time to time, on and after June 15, 2002, at the following
redemption prices (expressed as percentages of the principal amount) if redeemed
during the twelve month period commencing on June 15 of the year set forth
below, plus, in each case, accrued and unpaid interest thereon to the date of
redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002........................................................ 104.375%
2003........................................................ 102.917
2004........................................................ 101.458
2005 and thereafter......................................... 100.000
</TABLE>
In addition, on or prior to June 15, 2000, the Company may redeem the 8 3/4%
Notes with the net cash proceeds of one or more Public Equity Offerings (as
defined in the 8 3/4% Indenture) at a redemption price of 108.75% of the
principal amount thereof, plus accrued and unpaid interest to the redemption
date; provided, however, that after any such redemption at least 75% of the
aggregate principal amount of the 8 3/4% Notes originally issued must be
outstanding. The Company's ability to optionally redeem the 8 3/4% Notes are
subject to restrictions contained in the Senior Credit Facility, which limits
the amount of debt subordinate to the indebtedness under the Senior Credit
Facility that may be redeemed by the Company.
Under the 8 3/4% Indenture, in the event of a change of control (as defined in
the 8 3/4% Indenture) of the Company, each holder of 8 3/4% Notes will have the
right to require the Company to repurchase, in whole or in part, such holder's
8 3/4% Notes at a purchase price equal to 101% of their principal amount, plus
accrued and unpaid interest, if any to the date of repurchase.
The 8 3/4% Indenture contains certain restrictive covenants which, among other
things, impose limitations (subject to certain exceptions) on the Company with
respect to (i) the payment of dividends or other distributions on capital stock
and the purchase, redemption or retirement for value of shares of capital stock
as any warrants, options or other rights for shares of capital stock; (ii) the
incurrence of additional indebtedness; (iii) the incurrence of subsidiary
indebtedness; (iv) the repayment or redemption of subordinated indebtedness
other than in accordance with its scheduled repayment; (v) sales of assets by
the Company; (vi) asset swaps; (vii) transactions with stockholders and
affiliates; (viii) the restriction of certain payments by subsidiaries to their
respective parents; (ix) the creation of liens on the assets of the Company or
its subsidiaries; (x) the incurrence of indebtedness senior to the 8 3/4% Notes
and subordinate to other indebtedness of the Company; (xi) investments by the
Company or its subsidiaries; (xii) the issuance of preferred stock by any of the
Company's subsidiaries; (xiii) sales and leasebacks by the Company or its
subsidiaries; (xiv) the guarantee of indebtedness; (xv) the conduct of
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business other than the ownership and operation of radio broadcast stations and
businesses reasonably related thereto; and (xvi) the merger or sale of all or
substantially all the assets of the Company. Upon the happening of certain
events of default specified in the 8 3/4% Indenture, the trustee for the 8 3/4%
Notes may, and the trustee upon the request of holders of 25% in principal
amount then outstanding of the 8 3/4% Notes shall, or the holders of at least
25% in principal amount of outstanding 8 3/4% Notes may, declare the principal
amount then outstanding of and accrued but unpaid interest, if any, on all of
such 8 3/4% Notes to be due and payable. Upon the happening of certain other
events of default specified in the 8 3/4% Indenture, the unpaid principal of and
accrued but unpaid interest on all outstanding 8 3/4% Notes will automatically
become due and payable without any action by the trustee or the holders of the
8 3/4% Notes.
The Company may terminate its obligations under the 8 3/4% Indenture at any
time, and the obligations of the Guarantors with respect thereto shall
terminate, by delivering all outstanding 8 3/4% Notes of the appropriate series
to the appropriate trustee for cancellation and paying all sums payable by it
thereunder. The Company, at its option, (i) will be discharged from any and all
obligations with respect to the 8 3/4% Notes delivered, and the guarantor will
be discharged from any and all obligations with respect to its guarantee of such
8 3/4% Notes, (except for certain obligations of the Company to register the
transfer or exchange of such 8 3/4% Notes, replace stolen, lost or mutilated
8 3/4% Notes, maintain paying agencies and hold moneys for payment in trust) or
(ii) need not comply with certain of the restrictive covenants with respect to
the 8 3/4% Indenture, in each case, if the Company, in addition to satisfying
certain other obligations, deposits with the appropriate trustee, in trust, U.S.
legal tender or U.S. Government Obligations (in each case, as defined in the
8 3/4% Indenture) or a combination thereof which, through the payment of
interest thereon and principal in respect thereof in accordance with their
terms, will be sufficient to pay all the principal of and interest on 8 3/4%
Notes to be defeased on the dates such payments are due in accordance with the
terms of 8 3/4% Notes as well as the trustee's fees and expenses.
10 1/2% NOTES
The 10 1/2% Notes mature on January 15, 2007. Interest on the 10 1/2% Notes
accrues at the rate of 10 1/2% per annum and is payable semiannually. The
10 1/2% Notes are unsecured obligations of the Company, ranking subordinate in
right of payment to all Senior Debt (as defined in the indenture governing the
10 1/2% Notes (the "10 1/2% Indenture")) of the Company and pari passu with the
9 3/8% Notes and the 8 3/4% Notes, and will rank pari passu with the Notes.
Substantially all of the Company's subsidiaries fully and unconditionally
guarantee the full and prompt payment of principal of all interest on the
10 1/2% Notes, and of all other obligations under the 10 1/2% Indenture. The
indebtedness evidenced by each such guarantee is subordinated to each
Guarantor's Senior Debt on the same terms as the 10 1/2% Notes are subordinated
to the Company's Senior Debt.
Except as described in the immediately following paragraph, the 10 1/2% Notes
may not be redeemed at the option of the Company prior to January 15, 2002.
During the twelve month period beginning January 15 of the years indicated
below, the 10 1/2% Notes are redeemable at the option of the Company, in whole
or in part, on at least 30 but not more than 60 days' notice to each holder of
10 1/2% Notes to be redeemed, at the redemption prices (expressed as percentages
of the principal amount) set forth below, plus any
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<PAGE> 144
accrued and unpaid interest and Liquidated Damages (as defined in the 10 1/2%
Indenture), if any, to the applicable date of redemption.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002........................................................ 105.250%
2003........................................................ 103.938
2004........................................................ 102.625
2005........................................................ 101.313
2006 and thereafter......................................... 100.000
</TABLE>
In addition, on or prior to January 15, 2000, the Company may redeem the 10 1/2%
Notes with the net cash proceeds of one or more offerings of Equity Interests
(as defined in the 10 1/2% Indenture) at a redemption price of 109.5% of the
principal amount thereof, plus accrued and unpaid interest to the redemption
date; provided, however, that after any such redemption at least 65% of the
aggregate principal amount of the 10 1/2% Notes originally issued must be
outstanding. The Company's ability to optionally redeem the 10 1/2% Notes are
subject to restrictions contained in the Senior Credit Facility, which limits
the amount of debt subordinate to the indebtedness under the Senior Credit
Facility that may be redeemed by the Company.
Under the 10 1/2% Indenture, in the event of a change of control (as defined in
the 10 1/2% Indenture) of the Company, the Company shall be obligated to make an
offer to repurchase all outstanding 10 1/2% Notes at a purchase price equal to
101% of their principal amount, plus accrued and unpaid interest, if any to the
date of repurchase.
The 10 1/2% Indenture contains certain restrictive covenants which, among other
things, impose limitations (subject to certain exceptions) on the Company with
respect to (i) the payment of dividends or other distributions on capital stock
and the purchase, redemption or retirement for value of shares of capital stock
as any warrants, options or other rights for shares of capital stock; (ii) the
incurrence of additional indebtedness; (iii) the incurrence of subsidiary
indebtedness; (iv) the repayment or redemption of subordinated indebtedness
other than in accordance with its scheduled repayment; (v) sales of assets by
the Company; (vi) asset swaps; (vii) transactions with stockholders and
affiliates; (viii) the restriction of certain payments by subsidiaries to their
respective parents; (ix) the creation of liens on the assets of the Company or
its subsidiaries; (x) the incurrence of indebtedness senior to the 10 1/2% Notes
and subordinate to other indebtedness of the Company; (xi) investments by the
Company or its subsidiaries; (xii) the issuance of preferred stock by any of the
Company's subsidiaries; (xiii) sales and leasebacks by the Company or its
subsidiaries; (xiv) the guarantee of indebtedness; (xv) the conduct of business
other than the ownership and operation of broadcast businesses or businesses
related thereto, including media representation and sale of advertising; and
(xvi) the merger or sale of all or substantially all the assets of the Company.
Upon the happening of certain events of default specified in the 10 1/2%
Indenture, the trustee for the 10 1/2% Notes may, and the trustee upon the
request of holders of 25% in principal amount then outstanding of the 10 1/2%
Notes shall, or the holders of at least 25% in principal amount of outstanding
10 1/2% Notes may, declare the principal amount then outstanding of and accrued
but unpaid interest, if any, on all of such 10 1/2% Notes to be due and payable.
Upon the happening of certain other events of default specified in the 10 1/2%
Indenture, the unpaid principal of and accrued but unpaid interest on all
outstanding 10 1/2% Notes will
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<PAGE> 145
automatically become due and payable without any action by the trustee or the
holders of the 10 1/2% Notes.
The Company may terminate its obligations under the 10 1/2% Indenture at any
time, and the obligations of the Guarantors with respect thereto shall
terminate, by delivering all outstanding 10 1/2% Notes of the appropriate series
to the appropriate trustee for cancellation and paying all sums payable by it
thereunder. The Company, at its option, (i) will be discharged from any and all
obligations with respect to the 10 1/2% Notes delivered, and the guarantor will
be discharged from any and all obligations with respect to its guarantee of such
10 1/2% Notes, (except for certain obligations of the Company to register the
transfer or exchange of such 10 1/2% Notes, replace stolen, lost or mutilated
10 1/2% Notes, maintain paying agencies and hold moneys for payment in trust) or
(ii) need not comply with certain of the restrictive covenants with respect to
the 10 1/2% Indenture, in each case, if the Company, in addition to satisfying
certain other obligations, deposits with the appropriate trustee, in trust, U.S.
cash or Government Securities (as defined in the 10 1/2% Indenture) or a
combination thereof which, through the payment of interest thereon and principal
in respect thereof in accordance with their terms, will be sufficient to pay all
the principal of and interest on 10 1/2% Notes to be defeased on the dates such
payments are due in accordance with the terms of 10 1/2% Notes as well as the
trustee's fees and expenses.
8 1/8% NOTES
The 8 1/8% Notes mature on December 15, 2007. Interest on the 8 1/8% Notes
accrues at the rate of 8 1/8% per annum and is payable semiannually. The 8 1/8%
Notes are unsecured obligations of the Company, ranking subordinate in right of
payment to all Senior Debt (as defined in the indenture governing the 8 1/8%
Notes (the "8 1/8% Indenture")) of the Company and pari passu with the 9 3/8%
Notes, the 10 1/2% Notes and the 8 3/4% Notes.
Substantially all of the Company's subsidiaries fully and unconditionally
guarantee the full and prompt payment of principal of all interest on the 8 1/8%
Notes, and of all other obligations under the 8 1/8% Indenture. The indebtedness
evidenced by each such guarantee is subordinated to each Guarantor's Senior Debt
on the same terms as the 8 1/8% Notes are subordinated to the Company's Senior
Debt.
The 8 1/8% Notes are redeemable, at the Company's option, in whole at any time
or in part from time to time, on and after December 15, 2002, at the following
redemption prices (expressed as percentages of the principal amount) if redeemed
during the twelve month period commencing on December 15 of the year set forth
below, plus, in each case, accrued and unpaid interest thereon to the date of
redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2002........................................................ 104.063%
2003........................................................ 102.708
2004........................................................ 101.354
2005 and thereafter......................................... 100.000
</TABLE>
In addition, on or prior to December 15, 2000, the Company may redeem the 8 1/8%
Notes with the net cash proceeds of one or more Public Equity Offerings (as
defined in the 8 1/8% Indenture) at a redemption price of 108.125% of the
principal amount thereof, plus accrued and unpaid interest to the redemption
date; provided, however, that after any such
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redemption at least 75% of the aggregate principal amount of the 8 1/8% Notes
originally issued must be outstanding. The Company's ability to optionally
redeem the 8 1/8% Notes are subject to restrictions contained in the Senior
Credit Facility, which limits the amount of debt subordinate to the indebtedness
under the Senior Credit Facility that may be redeemed by the Company.
Under the 8 1/8% Indenture, in the event of a change of control (as defined in
the 8 1/8% Indenture) of the Company, (i) the Company will have the option, at
any time on or prior to December 15, 2000, to redeem the 8 1/8% Notes, in whole
but not in part, at a redemption price equal to 100% of the principal amount
thereof plus the Applicable Premium (as defined in the 8 1/8% Indenture),
together with accrued and unpaid interest, if any, to the date of redemption,
and (ii) if the Company does not so redeem the 8 1/8% Notes or if such change of
control occurs after December 15, 2000, each holder of 8 1/8% Notes will have
the right to require the Company to repurchase, in whole or in part, such
holder's 8 1/8% Notes at a purchase price equal to 101% of their principal
amount, plus accrued and unpaid interest, if any, to the date of repurchase.
The 8 1/8% Indenture contains certain restrictive covenants which, among other
things, impose limitations (subject to certain exceptions) on the Company with
respect to (i) the payment of dividends or other distributions on capital stock
and the purchase, redemption or retirement for value of shares of capital stock
as any warrants, options or other rights for shares of capital stock; (ii) the
incurrence of additional indebtedness; (iii) the incurrence of subsidiary
indebtedness; (iv) the repayment or redemption of subordinated indebtedness
other than in accordance with its scheduled repayment; (v) sales of assets by
the Company; (vi) asset swaps; (vii) transactions with stockholders and
affiliates; (viii) the restriction of certain payments by subsidiaries to their
respective parents; (ix) the creation of liens on the assets of the Company or
its subsidiaries; (x) the incurrence of indebtedness senior to the 8 1/8% Notes
and subordinate to other indebtedness of the Company; (xi) investments by the
Company or its subsidiaries; (xii) the issuance of preferred stock by any of the
Company's subsidiaries; (xiii) sales and leasebacks by the Company or its
subsidiaries; (xiv) the guarantee of indebtedness; (xv) the conduct of business
other than the ownership and operation of broadcast businesses or businesses
reasonably related thereto; and (xvi) the merger or sale of all or substantially
all the assets of the Company. Upon the happening of certain events of default
specified in the 8 1/8% Indenture, the trustee for the 8 1/8% Notes may, and the
trustee upon the request of holders of 25% in principal amount then outstanding
of the 8 1/8% Notes shall, or the holders of at least 25% in principal amount of
outstanding 8 1/8% Notes may, declare the principal amount then outstanding of
and accrued but unpaid interest, if any, on all of such 8 1/8% Notes to be due
and payable. Upon the happening of certain other events of default specified in
the 8 1/8% Indenture, the unpaid principal of and accrued but unpaid interest on
all outstanding 8 1/8% Notes will automatically become due and payable without
any action by the trustee or the holders of the 8 1/8% Notes.
The Company may terminate its obligations under the 8 1/8% Indenture at any
time, and the obligations of the guarantors with respect thereto shall
terminate, by delivering all outstanding 8 1/8% Notes of the appropriate series
to the appropriate trustee for cancellation and paying all sums payable by it
thereunder. The Company, at its option, (i) will be discharged from any and all
obligations with respect to the 8 1/8% Notes delivered, and the guarantor will
be discharged from any and all obligations with respect to its guarantee of such
8 1/8% Notes, (except for certain obligations of the Company to register the
transfer or
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<PAGE> 147
exchange of such 8 1/8% Notes, replace stolen, lost or mutilated 8 1/8% Notes,
maintain paying agencies and hold moneys for payment in trust) or (ii) need not
comply with certain of the restrictive covenants with respect to the 8 1/8%
Indenture, in each case, if the Company, in addition to satisfying certain other
obligations, deposits with the appropriate trustee, in trust, U.S. legal tender
or U.S. Government Obligations (in each case, as defined in the 8 1/8%
Indenture) or a combination thereof which, through the payment of interest
thereon and principal in respect thereof in accordance with their terms, will be
sufficient to pay all the principal of and interest on 8 1/8% Notes to be
defeased on the dates such payments are due in accordance with the terms of
8 1/8% Notes as well as the trustee's fees and expenses.
8% SENIOR NOTES
The 8% Senior Notes mature on November 1, 2008. Interest on the 8% Senior Notes
accrues at the rate of 8% per annum and is payable semiannually. The 8% Senior
Notes are senior unsecured obligations of the Company, ranking equal in right of
payment to the Company's existing and future Senior Debt, including borrowings
under the Senior Credit Facility, and rank senior in right of payment to all of
the Company's existing and future subordinated debt.
Substantially all of the Company's subsidiaries fully and unconditionally
guarantee the full and prompt payment of principal of and interest on the 8%
Senior Notes, and of all other obligations under the indenture governing the 8%
Senior Notes (the "8% Indenture"). The indebtedness evidenced by each such
guarantee ranks equal in right of payment to the Guarantor's guarantees of the
Senior Credit Facility and senior in right of payment to the Guarantor's
guarantees of the 9 3/8% Notes, the 8 3/4% Notes, the 10 1/2% Notes, the 8 1/8%
Notes and the 9% Notes.
The 8% Senior Notes are redeemable, at the Company's option, in whole at any
time or in part from time to time, upon not less than 30 nor more than 60 days
prior notice to each holder, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium (as defined in the 8%
Indenture) as of, and accrued and unpaid interest, if any, to, the date of
redemption.
In addition, on or prior to November 1, 2001, the Company may redeem the 8%
Senior Notes with the net cash proceeds of one or more Public Equity Offerings
(as defined in the 8% Indenture) at a redemption price of 108% of the principal
amount thereof, plus accrued and unpaid interest to the redemption date;
provided, however, that after any such redemption at least 75% of the aggregate
principal amount of the 8% Senior Notes originally issued must be outstanding.
Under the 8% Indenture, in the event of a Change of Control (as defined in the
8% Indenture) of the Company, each holder of 8% Senior Notes may have the right
to require the Company to repurchase, in whole or in part, such holder's 8%
Senior Notes at a purchase price equal to 101% of their principal amount, plus
accrued and unpaid interest, if any, to the date of repurchase.
The 8% Indenture contains certain restrictive covenants which, among other
things, impose limitations (subject to certain exceptions) on the Company with
respect to (i) the payment of dividends or other distributions on capital stock
and the purchase, redemption or retirement for value of shares of capital stock
or any warrants, options or other rights for shares of capital stock; (ii) the
incurrence of additional indebtedness; (iii) the incurrence
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<PAGE> 148
of subsidiary indebtedness; (iv) the repayment or redemption of subordinated
indebtedness other than in accordance with its scheduled repayment; (v) sales of
assets by the Company; (vi) asset swaps; (vii) transactions with stockholders
and affiliates; (viii) the restriction of certain payments by subsidiaries to
their respective parents; (ix) the creation of liens on the assets of the
Company or its subsidiaries; (x) investments by the Company or its subsidiaries;
(xi) the issuance of preferred stock by any of the Company's subsidiaries; (xii)
sales and leasebacks by the Company or its subsidiaries; (xiii) the guarantee of
indebtedness; (xiv) the conduct of business other than the ownership and
operation of broadcast businesses or businesses reasonably related thereto; and
(xv) the merger or sale of all or substantially all the assets of the Company.
Upon the happening of certain events of default specified in the 8% Indenture,
the trustee for the 8% Senior Notes may, and the trustee upon the request of
holders of 25% in principal amount then outstanding of the 8% Senior Notes
shall, or the holders of at least 25% in principal amount of outstanding 8%
Senior Notes may, declare the principal amount then outstanding of and accrued
but unpaid interest, if any, on all of such 8% Senior Notes to be due and
payable. Upon the happening of certain other events of default specified in the
8% Indenture, the unpaid principal of and accrued but unpaid interest on all
outstanding 8% Senior Notes will automatically become due and payable without
any action by the trustee or the holders of the 8% Senior Notes.
The Company may terminate its obligations under the 8% Indenture at any time,
and the obligations of the Guarantors with respect thereto shall terminate, by
delivering all outstanding 8% Senior Notes to the trustee for cancellation and
paying all sums payable by it thereunder. The Company, at its option, (i) will
be discharged from any and all obligations with respect to the 8% Senior Notes
delivered, and the Guarantor will be discharged from any and all obligations
with respect to its Guarantee of such 8% Senior Notes, (except for certain
obligations of the Company to register the transfer or exchange of such 8%
Senior Notes, replace stolen, lost or mutilated 8% Senior Notes, maintain paying
agencies and hold moneys for payment in trust) or (ii) need not comply with
certain of the restrictive covenants with respect to the 8% Indenture, in each
case, if the Company, in addition to satisfying certain other obligations,
deposits with the appropriate trustee, in trust, U.S. legal tender or U.S.
Government Obligations (in each case, as defined in the 8% Indenture) or a
combination thereof which, through the payment of interest thereon and principal
in respect thereof in accordance with their terms, will be sufficient to pay all
the principal of and interest on the 8% Senior Notes on the dates such payments
are due in accordance with the terms of 8% Senior Notes as well as the trustee's
fees and expenses.
6% EXCHANGE DEBENTURES
For a description of the 6% Convertible Subordinated Exchange Debentures due
2012 issuable by Chancellor Media from time to time upon exchange of the $3.00
Convertible Preferred Stock, see "Description of Capital Stock -- Chancellor
Media -- $3.00 Convertible Exchangeable Preferred Stock -- Exchange."
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<PAGE> 149
DESCRIPTION OF CAPITAL STOCK
CHANCELLOR MEDIA
COMMON STOCK
Chancellor Media's authorized common stock consists of 200,000,000 shares of
Common Stock, par value $0.01 per share (the "Common Stock"), approximately
142,724,983 of which were issued and outstanding as of November 30, 1998 and
75,000,000 shares of Class A Common Stock, par value $0.01 per share (the "Class
A Common Stock"), none of which were issued and outstanding as of November 30,
1998.
The shares of Common Stock currently outstanding are validly issued, fully paid
and nonassessable.
It is not contemplated that any shares of Class A Common Stock will be issued at
any time. The Amended and Restated Certificate of Incorporation of Chancellor
Media (the "Chancellor Media Certificate") provides that the issuance of any
shares of Class A Common Stock will require the unanimous affirmative vote of
the Board of Directors of Chancellor Media.
Dividends
Holders of shares of Common Stock and Class A Common Stock are entitled to
receive such dividends as may be declared by the Board of Directors of
Chancellor Media out of funds legally available for such purpose. The Senior
Credit Facility and the certificates of designation governing the $3.00
Convertible Preferred Stock and the 7% Convertible Preferred Stock each directly
restrict, and the 9 3/8% Indenture, the 8 3/4% Indenture, the 10 1/2% Indenture,
8 1/8% Indenture each indirectly restrict, and, assuming completion of the
Offering, the Notes Indenture will indirectly restrict, Chancellor Media's
ability to pay cash dividends on the Common Stock and Class A Common Stock.
Chancellor Media has not declared or paid any dividends on the Common Stock and
Class A Common Stock in the past, and it is not anticipated that Chancellor
Media will pay any cash dividends on the Common Stock and Class A Common Stock
in the foreseeable future.
Voting Rights
Holders of shares of Common Stock and Class A Common Stock, each voting as a
separate class, shall be entitled to vote on all matters submitted to a vote of
the stockholders, except as otherwise provided by law. Each share of Common
Stock and Class A Common Stock is entitled to one vote per share. Holders of
Common Stock and Class A Common Stock are not entitled to cumulative votes in
the election of directors.
Under Delaware law, the affirmative vote of the holders of a majority of the
outstanding shares of any class of capital stock of Chancellor Media is required
to approve any amendment to the Chancellor Media Certificate that would increase
or decrease the aggregate number of authorized shares of any class, increase or
decrease the par value of the shares of any class, or modify or change the
powers, preferences or special rights of the shares of any class so as to affect
such class adversely.
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<PAGE> 150
Liquidation Rights
Upon liquidation, dissolution, or winding-up of Chancellor Media, the holders of
Common Stock and Class A Common Stock are entitled to share ratably in all
assets available for distribution after payment in full of creditors and the
holders of preferred stock of Chancellor Media.
Transfer Agent
The Bank of New York serves as the Transfer Agent and Registrar for the Common
Stock.
Alien Ownership
The Chancellor Media Certificate restricts the ownership and voting of
Chancellor Media's capital stock, including its Common Stock, in accordance with
the Communications Act and the rules of the FCC, to prohibit ownership of more
than 25% of Chancellor Media's outstanding capital stock (or control of more
than 25% of the voting power it represents) by or for the account of aliens,
foreign governments, or non-U.S. corporations or corporations otherwise subject
to control by such persons or entities. The Chancellor Media Certificate also
prohibits any transfer of Chancellor Media's capital stock that would cause
Chancellor Media to violate this prohibition. In addition, the Chancellor Media
Certificate authorizes the Board of Directors of Chancellor Media to adopt such
provisions as its deems necessary to enforce these prohibitions.
Other Provisions
The holders of Common Stock and Class A Common Stock are not entitled to
preemptive or similar rights. The shares of Common Stock are not subject to
redemption or a sinking fund.
No single shareholder of Chancellor Media holds more than 50.0% of the combined
voting power of Chancellor Media. See "Risk Factors -- Control of the Company."
As a result, a holder of an "attributable" interest in Chancellor Media may
violate the FCC's multiple ownership rules or cross interest rules if such
holder also has an "attributable" interest (or, in some cases, a "meaningful"
nonattributable 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 stockholder may also be restricted in the
companies in which such stockholder may invest. See "Business -- Federal
Regulation of Radio Broadcasting Industry -- Ownership Matters."
$3.00 CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
Dividends
Holders of $3.00 Convertible Preferred Stock are entitled to receive, when, as
and if declared by the Board of Directors out of legally available funds, cash
dividends at an annual rate of $3.00 per share, payable quarterly in arrears on
March 15, June 15, September 15 and December 15 of each year (each a "Dividend
Payment Date"), beginning September 15, 1997. Dividends will accrue and be
cumulative from the most recent date to which dividends have been paid or, if
none have been paid, from the date of first issuance of the $3.00 Convertible
Preferred Stock and will be payable to holders of record on the March 1, June 1,
September 1 and December 1 immediately preceding the
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<PAGE> 151
relevant Dividend Payment Date. No interest, or sum of money in lieu of
interest, will be payable in respect of any accrued and unpaid dividends.
The $3.00 Convertible Preferred Stock has priority as to dividends over the
Common Stock and any other series or class of the Company's stock that ranks
junior to the $3.00 Convertible Preferred Stock as to dividends. Notwithstanding
the foregoing, the $3.00 Convertible Preferred Stock shall rank junior as to
dividends and rights upon a liquidation, dissolution or winding-up of the
Company to any and all classes or series of capital stock (other than Common
Stock) of the Company, whether currently issued or issued in the future, that
does not by its terms expressly provide that it ranks on a parity with or junior
to the $3.00 Convertible Preferred Stock as to dividends and rights upon a
liquidation, dissolution or winding-up of the Company.
Liquidation Rights
Upon liquidation, dissolution or winding-up of Chancellor Media, subject to the
payment in full, or until provision has been made for the payment in full, of
all claims of creditors of Chancellor Media, holders of $3.00 Convertible
Preferred Stock are entitled to receive the liquidation preference of $50.00 per
share, plus an amount equal to any accrued and unpaid dividends, whether or not
declared, to the payment date, before any payment or distribution is made to the
holders of Common Stock or any other series or class of stock hereafter issued
that ranks junior as to liquidation rights to the $3.00 Convertible Preferred
Stock.
Voting Rights
The holders of $3.00 Convertible Preferred Stock have no voting rights except as
described below or as required by law. In exercising any voting rights, each
outstanding share of $3.00 Convertible Preferred Stock will be entitled to one
vote, although shares held by Chancellor Media or any entity controlled by
Chancellor Media will have no voting rights.
Whenever dividends on the $3.00 Convertible Preferred Stock are in arrears in an
aggregate amount equal to at least six quarterly dividends (whether or not
consecutive), the size of Chancellor Media's board of directors will be
increased by two, and the holders of $3.00 Convertible Preferred Stock, will be
entitled to elect two additional directors to the Board of Directors at, subject
to certain limitations, any annual meeting of stockholders at which directors
are to be elected held during the period when the dividends remain in arrears
or, under certain circumstances, at a special meeting of stockholders. These
voting rights will terminate when all dividends in arrears and for the current
quarterly period have been paid in full or declared and set apart for payment.
The term of office of the additional directors so elected will terminate
immediately upon that payment or provision for payment.
Under Delaware law, holders of the $3.00 Convertible Preferred Stock will be
entitled to vote as a class upon a proposed amendment to the Chancellor Media
Certificate, whether or not entitled to vote thereon by the Chancellor Media
Certificate, if the amendment would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class, or alter or change the powers, preferences, or special
rights of the shares of such class so as to affect them adversely.
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<PAGE> 152
Optional Redemption
The $3.00 Convertible Preferred Stock may not be redeemed prior to June 16,
1999. Thereafter, the $3.00 Convertible Preferred Stock may be redeemed by
Chancellor Media, at its option, in whole or in part at any time, if redeemed
during the 12-month period beginning June 15 of any year specified below (June
16 in the case of 1999) at the following redemption prices (expressed as
percentages of the liquidation preference thereof):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1999........................................................ 104.80%
2000........................................................ 104.20
2001........................................................ 103.60
2002........................................................ 103.00
2003........................................................ 102.40
2004........................................................ 101.80
2005........................................................ 101.20
2006........................................................ 100.60
2007 and thereafter......................................... 100.00
</TABLE>
plus in each case accrued and unpaid dividends, whether or not declared, to the
redemption date.
The foregoing is subject to the proviso that on or prior to June 15, 2000 the
$3.00 Convertible Preferred Stock may not be redeemed at the option of
Chancellor Media unless the closing price of Chancellor Media's Common Stock has
equalled or exceeded 150% of the conversion price at such time for at least 20
out of any 30 consecutive trading days ending within 15 days before the notice
of redemption is first mailed.
Conversion Rights
Each holder of $3.00 Convertible Preferred Stock will have the right at any time
at the holder's option to convert any and all shares of $3.00 Convertible
Preferred Stock into Common Stock at a conversion price (subject to adjustment
as described below) of $50.00 per share of underlying Common Stock (equivalent
to a conversion rate of 1.00 share of Common Stock per share of $3.00
Convertible Preferred Stock). If the $3.00 Convertible Preferred Stock is called
for redemption, the conversion right will terminate at the close of business on
the redemption date fixed by the Board of Directors.
Change of Control. If there occurs a Change of Control (as defined in the
certificate of designation for the $3.00 Convertible Preferred Stock) with
respect to Chancellor Media, then shares of the $3.00 Convertible Preferred
Stock may be converted, at the option of the holder thereof at any time from the
date of such Change of Control until the expiration of 45 days after the date of
a note by the Company to all holders of the $3.00 Convertible Preferred Stock of
the occurrence of the Change of Control, into the number of shares of Common
Stock determined by dividing (i) the redemption price for the $3.00 Convertible
Preferred Stock (see "-- Optional Redemption") in effect on the date of the
Change of Control by (ii) the adjusted conversion price.
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<PAGE> 153
Exchange
Shares of $3.00 Convertible Preferred Stock will be exchangeable at the option
of Chancellor Media, in whole but not in part, on any March 15, June 15,
September 15 or December 15, commencing September 15, 2000, through the issuance
of Chancellor Media's 6% Subordinated Exchange Debentures due 2012 (the "6%
Exchange Debentures") in redemption of and in exchange for shares of $3.00
Convertible Preferred Stock, provided certain conditions are met. Holders of the
$3.00 Convertible Preferred Stock will be entitled to receive 6% Exchange
Debentures at the rate of $50.00 principal amount of 6% Exchange Debentures for
each share of $3.00 Convertible Preferred Stock.
7% CONVERTIBLE PREFERRED STOCK
Dividends
Holders of 7% Convertible Preferred Stock are entitled to receive, when, as and
if declared by the Board of Directors of Chancellor Media out of legally
available funds, cash dividends at an annual rate equal to 7% of the liquidation
preference per share, payable quarterly.
The 7% Convertible Preferred Stock has priority as to dividends over the Common
Stock and Class A Common Stock of Chancellor Media and any other series or class
of Chancellor Media's stock that ranks junior to the 7% Convertible Preferred
Stock as to dividends (the "Junior Dividend Stock"). Notwithstanding the
foregoing, the 7% Convertible Preferred Stock shall rank junior as to dividends,
redemption payments and rights upon a liquidation, dissolution or winding-up of
Chancellor Media to any and all classes or series of capital stock (other than
common stock) of Chancellor Media, issued in the future, that does not by its
terms expressly provide that it ranks on a parity with or junior to the 7%
Convertible Preferred Stock as to dividends and rights upon a liquidation,
dissolution or winding-up of Chancellor Media.
No dividend (other than dividends payable solely in common stock, any Junior
Dividend Stock or warrants or other rights to acquire such common stock or
Junior Dividend Stock) may be paid or declared and set apart for payment on, and
no purchase, redemption or other acquisition shall be made by Chancellor Media
of, the Common Stock of Chancellor Media or Junior Dividend Stock unless all
accrued and unpaid dividends on the 7% Convertible Preferred Stock, including
the full dividend for the then-current quarterly dividend period, shall have
been paid or declared and set apart for payment without interest.
Except as provided below, Chancellor Media may not pay dividends on any class or
series of stock issued in the future having parity with the 7% Convertible
Preferred Stock as to dividends ("Parity Dividend Stock") unless it has paid or
declared and set apart for payment or contemporaneously pays or declares and
sets apart for payment all accrued and unpaid dividends for all prior dividend
payment periods on the 7% Convertible Preferred Stock. In addition, except as
provided below, Chancellor Media may not pay dividends on the 7% Convertible
Preferred Stock unless it has paid or declared and set apart for payment or
contemporaneously pays or declares and sets apart for payment all accrued and
unpaid dividends for all prior dividend payment periods on the Parity Dividend
Stock. Whenever all accrued dividends in respect of prior dividend payment
periods are not paid in full on 7% Convertible Preferred Stock and on any Parity
Dividend Stock, all dividends declared on the 7% Convertible Preferred Stock and
the Parity Dividend Stock will be
147
<PAGE> 154
declared and made pro rata so that the amount of dividends declared on the 7%
Convertible Preferred Stock and the Parity Dividend Stock will bear the same
ratio that accrued and unpaid dividends in respect of prior dividend payment
periods on the 7% Convertible Preferred Stock and the Parity Dividend Stock bear
to each other. The $3.00 Convertible Preferred Stock constitutes "Parity
Dividend Stock" for purposes of the 7% Convertible Preferred Stock.
Chancellor Media may not purchase any shares of the 7% Convertible Preferred
Stock or any Parity Dividend Stock (except for consideration payable in common
stock or Junior Dividend Stock) or redeem fewer than all the shares of the 7%
Convertible Preferred Stock and Parity Dividend Stock then outstanding if
Chancellor Media has failed to pay any accrued dividend on the 7% Convertible
Preferred Stock or on any Parity Dividend Stock on a stated payment date.
Notwithstanding the foregoing, in such event, Chancellor Media may purchase or
redeem fewer than all the shares of the 7% Convertible Preferred Stock and
Parity Dividend Stock if such repurchase or redemption is made pro rata so that
the amounts purchased or redeemed bear to each other the same ratio that the
required redemption payments on the shares of the 7% Convertible Preferred Stock
and any Parity Dividend Stock then outstanding bear to each other.
If Chancellor Media issues any series or class of stock that ranks senior as to
dividends to the 7% Convertible Preferred Stock ("Senior Dividend Stock") and
fails to pay or declare and set apart for payment accrued and unpaid dividends
on any Senior Dividend Stock (except to the extent allowed by the terms of the
Senior Dividend Stock), Chancellor Media may not pay or declare and set apart
for payment any dividend on the 7% Convertible Preferred Stock unless and until
all accrued and unpaid dividends on the Senior Dividend Stock, including the
full dividends for the then current dividend period, have been paid or declared
and set apart for payment without interest.
Liquidation Rights
In the case of the voluntary or involuntary liquidation, dissolution or winding
up of Chancellor Media, subject to the payment in full, or until provision has
been made for the payment in full, of all claims of creditors of Chancellor
Media, holders of 7% Convertible Preferred Stock are entitled to receive the
liquidation preference of the 7% Convertible Preferred Stock, plus an amount
equal to any accrued and unpaid dividends, whether or not declared, to the
payment date, before any payment or distribution is made to the holders of
common stock or any other series or class of stock issued in the future that
ranks junior as to liquidation rights to the 7% Convertible Preferred Stock
("Junior Liquidation Stock"). Holders of 7% Convertible Preferred Stock will not
be entitled to receive the liquidation preference of their shares until the
liquidation preference of any other series or class of stock that ranks senior
as to liquidation rights to the 7% Convertible Preferred Stock ("Senior
Liquidation Stock"), if any, and any creditors of Chancellor Media have been
paid in full. The holders of 7% Convertible Preferred Stock and any series or
class of stock that ranks on a parity as to liquidation rights with the 7%
Convertible Preferred Stock ("Parity Liquidation Stock") are entitled to share
ratably, in accordance with the respective preferential amounts payable on their
stock, in any distribution (after payment of the liquidation preference on any
Senior Liquidation Stock) that is not sufficient to pay in full the aggregate
liquidation preference on both the 7% Convertible Preferred Stock and on any
Parity Liquidation Stock. The $3.00 Convertible
148
<PAGE> 155
Preferred Stock constitutes "Parity Liquidation Stock" for purposes of the 7%
Convertible Preferred Stock.
Voting Rights
The holders of 7% Convertible Preferred Stock have no voting rights except as
described below or as required by law.
Whenever dividends on the 7% Convertible Preferred Stock are in arrears in
aggregate amount equal to at least six quarterly dividends (whether or not
consecutive), the size of Chancellor Media's Board of Directors will be
increased by two, and the holders of 7% Convertible Preferred Stock, voting
separately as a class together with holders of any Parity Dividend Stock of
Chancellor Media then having voting rights, will be entitled to elect two
additional directors to the Board of Directors of Chancellor Media at, subject
to certain limitations, any annual meeting of stockholders at which directors
are to be elected held during the period when the dividends remain in arrears
or, under certain circumstances, at a special meeting of stockholders. These
voting rights will terminate when all dividends in arrears and for the current
quarterly period have been paid in full or declared and set apart for payment.
The term of office of the additional directors so elected will terminate
immediately upon that payment or provision for payment.
In addition, so long as any 7% Convertible Preferred Stock is outstanding,
Chancellor Media may not, without the affirmative vote or consent of the holders
of at least 66 2/3% of all outstanding shares of 7% Convertible Preferred Stock
and outstanding Parity Dividend Stock, voting as a single class (i) amend, alter
or repeal (by merger or otherwise) any provision of the certificate of
designation for the 7% Convertible Preferred Stock, the Chancellor Media
Certificate or the bylaws of Chancellor Media so as to affect adversely the
relative rights, preferences, qualifications, limitations of restrictions of the
7% Convertible Preferred Stock or (ii) effect any reclassification of the 7%
Convertible Preferred Stock.
Change of Control
The certificate of designation for the 7% Convertible Preferred Stock provides
that, upon the occurrence of a change of control (as defined in such certificate
of designation), each holder will have the right to require that Chancellor
Media purchase all or a portion of such holder's 7% Convertible Preferred Stock
in cash at a purchase price equal to 101% of the liquidation preference thereof,
plus, without duplication, all accumulated and unpaid dividends per share to the
date of repurchase. If the repurchase of the 7% Preferred Stock would violate or
constitute a default under the Senior Credit Facility or other indebtedness of
Chancellor Media, then, pursuant to the certificate of designation for the 7%
Convertible Preferred Stock, Chancellor Media will either (A) repay in full all
such indebtedness or (B) obtain the requisite consents, if any, under such
indebtedness required to permit the repurchase of the 7% Convertible Preferred
Stock.
Redemption at Option of Chancellor Media
The 7% Convertible Preferred Stock may not be redeemed prior to January 19,
2000. Thereafter, the 7% Convertible Preferred Stock may be redeemed by
Chancellor Media, at its option (subject to contractual and other restrictions
with respect thereto, including limitations under the Senior Credit Facility,
the 9 3/8% Indenture, the 8 3/4% Indenture, the
149
<PAGE> 156
10 1/2% Indenture, and, assuming completion of the Offering, the Indenture, and
to the legal availability of funds therefor), in whole or in part at any time,
if redeemed during the 12-month period beginning January 15 (January 19 in the
case of 2000), of any year specified below at the following redemption prices
(expressed as percentages of the liquidation preference thereof):
<TABLE>
<CAPTION>
YEAR DIVIDEND
---- --------
<S> <C>
2000........................................................ 104.90%
2001........................................................ 104.20
2002........................................................ 103.50
2003........................................................ 102.80
2004........................................................ 102.10
2005........................................................ 101.40
2006........................................................ 100.70
2007 and thereafter......................................... 100.00
</TABLE>
plus in each case accrued and unpaid dividends, whether or not declared, to the
redemption date.
Conversion Rights
Each holder of 7% Convertible Preferred Stock will have the right, at the
holder's option, to convert any or all shares of 7% Convertible Preferred Stock
into Common Stock at any time at a conversion price (subject to adjustment) of
$36.19 per share of underlying Common Stock. If the 7% Convertible Preferred
Stock is called for redemption, the conversion right, with respect to the called
shares of 7% Convertible Preferred Stock, will terminate at the close of
business on the redemption date fixed by the Board of Directors of Chancellor
Media.
CMCLA
The authorized capital stock of CMCLA as of November 30, 1998 consists of 1,040
shares of common stock, par value $.01 per share, 1,000 of which are owned of
record and beneficially by CMHC and 40 of which are owned of record and
beneficially by a subsidiary of CMHC, and 10,000,000 shares of preferred stock,
par value $.01 per share, none of which shares are issued and outstanding.
150
<PAGE> 157
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of the material federal income tax considerations
relevant to the exchange of Old Notes for New Notes. The discussion is based
upon the Internal Revenue Code of 1986, as amended, Treasury regulations,
Internal Revenue Service rulings and pronouncements, and judicial decisions now
in effect, all of which are subject to change at any time by legislative,
judicial or administrative action. Any such changes may be applied retroactively
in a manner that could adversely affect a holder of the New Notes. The
description does not consider the effect of any applicable foreign, state, local
or other tax laws or estate or gift tax considerations.
EACH HOLDER SHOULD CONSULT HIS OWN TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO IT OF EXCHANGING OLD NOTES FOR NEW NOTES, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
EXCHANGE OF OLD NOTES FOR NEW NOTES
The exchange of Old Notes for New Notes pursuant to the exchange offer should
not constitute a sale or an exchange for federal income tax purposes. The holder
will have a basis for the New Notes equal to the basis of the Old Notes and the
holder's holding period for the New Notes will include the period during which
the Old Notes were held. Accordingly, such exchange should have no federal
income tax consequences to holders of Old Notes.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account in exchange for
Old Notes pursuant to the exchange offer, where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
consummation of the exchange offer, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until March 9, 1999, all dealers effecting transactions in
the New Notes may be required to deliver a Prospectus.
The Company and the Guarantors will not receive any proceeds from any sale of
New Notes by broker-dealers. New Notes received by broker-dealers for their own
account pursuant to the exchange offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such methods
of resale, at market prices prevailing at the time of resale, at prices related
to such prevailing market prices or negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
exchange offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed
151
<PAGE> 158
to be an "underwriter" within the meaning of the Securities Act, and any profit
on any such resale of New Notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Registration Statement is declared effective,
the Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal or otherwise. The Company has agreed
to pay all expenses incident to the Exchange Offer (including the expenses of
one counsel for the holders of the Notes) other than commissions or concessions
of any broker-dealers and will indemnify holders of the Old Notes (including any
broker-dealers) against certain liabilities, including certain liabilities under
the Securities Act.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for the Company
by Weil, Gotshal & Manges LLP, Dallas, Texas and New York, New York.
EXPERTS
The consolidated financial statements of Chancellor Media Corporation of Los
Angeles and Subsidiaries as of December 31, 1997 and for the year then ended
included in this Registration Statement, have been included herein in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of that firm as experts in accounting and auditing.
The consolidated financial statements of Chancellor Media Corporation of Los
Angeles and subsidiaries, the combined financial statements of WMZQ Inc. and
Viacom Broadcasting East 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. and the financial
statements of WDAS-AM/FM (station owned and operated by Beasley FM Acquisition
Corp.), included herein 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 herein in
reliance upon the reports of KPMG Peat Marwick LLP included herein and upon the
authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Chancellor Radio Broadcasting Company
and Subsidiaries as of December 31, 1996 and 1995 and for each of the three
years in the period ended December 31, 1996 included in this Registration
Statement, have been included herein in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
152
<PAGE> 159
The combined financial statements of Colfax Communications, Inc. Radio Group as
of December 31, 1996, 1995, and 1994 and for each of the three years in the
period ended December 31, 1996, included in this Prospectus, have been audited
by Arthur Andersen 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 financial statements of the Outdoor Advertising Division of Whiteco
Industries, Inc. included in this Registration Statement have been audited by
BDO Seidman, LLP, independent certified public accountants, to the extent and
for the periods set forth in their report appearing elsewhere in the
Registration Statement, and are included in reliance upon such reports given
upon the authority of said firm as experts in auditing and accounting.
153
<PAGE> 160
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial statements of
Chancellor Media Corporation of Los Angeles ("CMCLA" and, together with its
subsidiaries, the "Company") are presented using the purchase method of
accounting for all acquisitions and reflect the combination of consolidated
historical financial data of the Company and each of the companies acquired in
the transactions completed by the Company during 1997 and 1998 and the
elimination of the consolidated historical data of the stations disposed in the
transactions completed by the Company during 1997 and 1998 (the "Completed
Transactions"). The unaudited pro forma condensed combined balance sheet data at
September 30, 1998 presents adjustments for the Completed Transactions, the
offering of $750,000,000 aggregate principal amount of 8% Senior Notes due 2008
which was completed on November 17, 1998 (the "8% Senior Notes Offering")and the
Pending Transactions (excluding the Petry Acquisition and the Pegasus
Acquisition), as if each such transaction had occurred at September 30, 1998.
The unaudited pro forma condensed combined statement of operations data for the
twelve months ended December 31, 1997 and the nine months ended September 30,
1998 presents adjustments for the Completed Transactions, financing transactions
undertaken by the Company and CRBC during 1997, the 1998 Financing Transactions
and the Pending Transactions (excluding the Petry Acquisition and the Pegasus
Acquisition), as if each such transaction occurred on January 1, 1997. The Petry
Acquisition, the Pegasus Acquisition, the Kasem Acquisition and the Other
Outdoor Acquisitions are excluded from the pro forma information included in
this Offering Memorandum for a number of reasons including: (a) uncertainties
regarding on what terms, and in some areas, whether such transactions will be
consummated, (b) whether such acquisition will be consummated by the Company or
another stand-alone entity formed by Chancellor Media, or (c) the availability
of appropriate financial information. In the opinion of management of the
Company, such information is not material to such pro forma 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 assets acquired in the Completed Transactions have been allocated based
primarily on information furnished by management of the acquired or to be
acquired assets. The final allocation of the respective purchase prices of the
assets acquired in the Completed Transactions 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; however,
such allocations are not expected to differ materially from the preliminary
amounts.
In the opinion of the Company'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 the Company which have previously been reported. 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> 161
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
UNAUDITED PRO FORMA BALANCE SHEET
AT SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA COMPANY PRO FORMA
ADJUSTMENTS AS ADJUSTED ADJUSTMENTS
COMPANY FOR THE FOR THE FOR THE
HISTORICAL COMPLETED COMPLETED PENDING COMPANY
AT 9/30/98 TRANSACTIONS TRANSACTIONS TRANSACTIONS(3) PRO FORMA
---------- ------------ ------------ --------------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets.................................... $ 376,797 $ 29,180(1) $ 405,977 $ 11,006 $ 416,983
Note receivable from affiliate.................... 150,000 -- 150,000 (150,000) --
Property and equipment, net....................... 299,906 88,664(1) 388,570 12,150 400,720
Intangible assets, net............................ 4,916,533 973,231(1) 5,889,764 878,750 6,768,514
Other assets...................................... 162,142 27,164(1) 203,306 203,306
(6,000)(1)
20,000(2)
---------- ---------- ---------- --------- ----------
Total assets.............................. $5,905,378 $1,132,239 $7,037,617 $ 751,906 $7,789,523
========== ========== ========== ========= ==========
LIABILITIES AND STOCKHOLDER'S EQUITY:
LIABILITIES:
Current liabilities............................... $ 177,472 $ 4,959(1) $ 182,431 $ 129 $ 182,560
Long-term debt.................................... 3,018,000 1,107,280(1) 4,145,280 699,127 4,844,407
750,000(2)
(730,000)(2)
Deferred tax liabilities.......................... 312,731 312,731 42,223 354,954
Other liabilities................................. 60,403 60,403 834 61,237
---------- ---------- ---------- --------- ----------
Total liabilities......................... 3,568,606 1,132,239 4,700,845 742,313 5,443,158
STOCKHOLDER'S EQUITY:
Common stock...................................... 1 -- 1 -- 1
Additional paid in capital........................ 2,654,273 -- 2,654,273 -- 2,654,273
Accumulated deficit............................... (317,502) -- (317,502) 9,593 (307,909)
---------- ---------- ---------- --------- ----------
Total stockholder's equity................ 2,336,772 -- 2,336,772 9,593 2,346,365
---------- ---------- ---------- --------- ----------
Total liabilities and stockholder's
equity.................................. $5,905,378 $1,132,239 $7,037,617 $ 751,906 $7,789,523
========== ========== ========== ========= ==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
P-2
<PAGE> 162
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS COMPANY AS
COMPLETED FOR THE ADJUSTED FOR PENDING
COMPANY TRANSACTIONS COMPLETED COMPLETED TRANSACTIONS
YEAR ENDED DECEMBER 31, 1997 HISTORICAL HISTORICAL(4) TRANSACTIONS TRANSACTIONS HISTORICAL(16)
---------------------------- ---------- ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Gross revenues...................................... $663,804 $732,122 $ (17,651)(5) $1,377,432 $ 92,994
(843)(6)
Less: agency commissions............................ (81,726) (68,623) -- (150,349) (11,425)
-------- -------- --------- ---------- --------
Net revenues........................................ 582,078 663,499 (18,494) 1,227,083 81,569
Operating expenses excluding depreciation and
amortization...................................... 316,248 386,650 (14,395)(5) 688,503 45,174
Depreciation and amortization....................... 185,982 74,227 (2,677)(5) 457,714 7,829
200,182(7) --
Corporate general and administrative................ 21,442 23,392 (1,842)(9) 42,992 481
Merger expense...................................... -- 6,124 (6,124)(10) -- --
Restructuring charge................................ -- 15,958 -- 15,958 --
Stock option compensation........................... -- 3,083 -- 3,083 --
Profit participation fee............................ -- 2,322 (2,322)(11) --
-------- -------- --------- ---------- --------
Operating income (loss)............................. 58,406 151,743 (191,316) 18,833 28,085
Interest expense.................................... 85,017 88,372 (579)(5) 329,683 724
156,873(12)
Interest income..................................... (1,922) (753) -- (2,675) (513)
Gain on disposition of assets....................... (18,380) -- -- (18,380) --
Other (income) expense.............................. 383 (242) 885(13) 1,026 (1,357)
-------- -------- --------- ---------- --------
Income (loss) before income taxes................... (6,692) 64,366 (348,495) (290,821) 29,231
Income tax expense (benefit)........................ 7,802 18,700 (130,120)(14) (103,618) 1,825
-------- -------- --------- ---------- --------
Net income (loss)................................... (14,494) 45,666 (218,375) (187,203) 27,406
Preferred stock dividends........................... 12,901 27,321 (40,222)(15) -- --
-------- -------- --------- ---------- --------
Income (loss) attributable to common stock.......... $(27,395) $ 18,345 $(178,153) $ (187,203) $ 27,406
======== ======== ========= ========== ========
Broadcast cash flow............................... $265,830 $276,849 $ (4,099) $ 538,580 $ 36,395
======== ======== ========= ========== ========
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR THE
PENDING COMPANY
YEAR ENDED DECEMBER 31, 1997 TRANSACTIONS PRO FORMA
---------------------------- ------------ ----------
<S> <C> <C>
Gross revenues...................................... $ -- $1,470,426
Less: agency commissions............................ -- (161,774)
--------- ----------
Net revenues........................................ -- 1,308,652
Operating expenses excluding depreciation and
amortization...................................... -- 733,677
Depreciation and amortization....................... 52,653(17) 518,196
--
Corporate general and administrative................ -- 43,473
Merger expense...................................... -- --
Restructuring charge................................ -- 15,958
Stock option compensation........................... -- 3,083
Profit participation fee............................ --
--------- ----------
Operating income (loss)............................. (52,653) (5,735)
Interest expense.................................... 48,221(18) 378,628
--
Interest income..................................... -- (3,188)
Gain on disposition of assets....................... -- (18,380)
Other (income) expense.............................. -- (331)
--------- ----------
Income (loss) before income taxes................... (100,874) (362,464)
Income tax expense (benefit)........................ (30,492)(19) (132,285)
--------- ----------
Net income (loss)................................... (70,382) (230,179)
Preferred stock dividends........................... -- --
--------- ----------
Income (loss) attributable to common stock.......... $ (70,382) $ (230,179)
========= ==========
Broadcast cash flow............................... $ -- $ 574,975
========= ==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
P-3
<PAGE> 163
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS COMPANY AS ADJUSTMENTS
COMPLETED FOR THE ADJUSTED FOR PENDING FOR THE
COMPANY TRANSACTIONS COMPLETED COMPLETED TRANSACTIONS PENDING
NINE MONTHS ENDED SEPTEMBER 30, 1998 HISTORICAL HISTORICAL(4) TRANSACTIONS TRANSACTIONS HISTORICAL(16) TRANSACTIONS
- ------------------------------------ ---------- ------------- ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues..................... $1,015,562 $177,971 $ -- $1,193,533 $49,769 $ --
Less: agency commissions........... (116,466) (17,293) -- (133,759) (6,301) --
---------- -------- --------- ---------- ------- --------
Net revenues....................... 899,096 160,678 -- 1,059,774 43,468 --
Operating expenses excluding
depreciation and amortization.... 491,924 79,348 -- 571,272 19,182 --
Depreciation and amortization...... 311,644 26,887 53,354(7) 391,885 3,054 40,403(17)
Corporate general and
administrative................... 25,188 6,545 (570)(8) 31,163 --
Executive severance charge......... 59,475 -- -- 59,475 -- --
Profit participation fee........... -- 1,756 (1,756)(11) --
---------- -------- --------- ---------- ------- --------
Operating income (loss)............ 10,865 46,142 (51,028) 5,979 21,232 (40,403)
Interest expense................... 145,992 12,896 88,374(12) 247,262 435 36,274(18)
Interest income.................... (10,283) (311) -- (10,594) (45) --
Gain on disposition of
representation contracts......... (29,767) -- -- (29,767) -- --
Other (income) expense............. (3,559) 4,615 428(13) 1,484 873 --
---------- -------- --------- ---------- ------- --------
Income (loss) before income taxes... (91,518) 28,942 (139,830) (202,406) 19,969 (76,677)
Income tax expense (benefit)....... (15,380) -- (55,735)(14) (71,115) 1,271 (24,021)(19)
---------- -------- --------- ---------- ------- --------
Net income (loss).................. (76,138) 28,942 (84,095) (131,291) 18,698 (52,656)
Preferred stock dividends.......... 17,601 -- (17,601)(15) -- -- --
---------- -------- --------- ---------- ------- --------
Income (loss) attributable to common
stock............................ $ (93,739) $ 28,942 $ (66,494) $ (131,291) $18,698 $(52,656)
========== ======== ========= ========== ======= ========
Broadcast cash flow.............. $ 407,172 $ 81,330 $ -- $ 488,502 $24,286 $ --
========== ======== ========= ========== ======= ========
<CAPTION>
COMPANY
NINE MONTHS ENDED SEPTEMBER 30, 1998 PRO FORMA
- ------------------------------------ ----------
<S> <C>
Gross revenues..................... $1,243,302
Less: agency commissions........... (140,060)
----------
Net revenues....................... 1,103,242
Operating expenses excluding
depreciation and amortization.... 590,454
Depreciation and amortization...... 435,342
Corporate general and
administrative................... 31,163
Executive severance charge......... 59,475
Profit participation fee........... --
----------
Operating income (loss)............ (13,192)
Interest expense................... 283,971
Interest income.................... (10,639)
Gain on disposition of
representation contracts......... (29,767)
Other (income) expense............. 2,357
----------
Income (loss) before income taxes... (259,114)
Income tax expense (benefit)....... (93,865)
----------
Net income (loss).................. (165,249)
Preferred stock dividends.......... --
----------
Income (loss) attributable to common
stock............................ $ (165,249)
==========
Broadcast cash flow.............. $ 512,788
==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
P-4
<PAGE> 164
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE COMPLETED TRANSACTIONS
(1) Reflects the Completed Transactions that were completed after September 30,
1998 as follows:
<TABLE>
<CAPTION>
PURCHASE PRICE ALLOCATION FINANCING
------------------------------------------------------------------------ -----------------------
PROPERTY AND INTANGIBLE DECREASE INCREASE IN
COMPLETED PURCHASE CURRENT EQUIPMENT, ASSETS, OTHER CURRENT IN OTHER LONG-TERM
TRANSACTIONS PRICE ASSETS NET(A) NET(B) ASSETS LIABILITIES ASSETS DEBT
------------ ---------- ------- ------------ ---------- ------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Z Spanish Acquisition(c)..... $ 25,000 $ -- $ -- $ -- $25,000 $ -- $ -- $ 25,000
Primedia Acquisition(d)...... 74,770 -- 4,323 70,447 -- -- -- 74,770
Kunz Option(e)............... 39,289 -- 9,822 29,467 -- -- 6,000 33,289
Whiteco Acquisition(f)....... 974,221 29,180 74,519 873,317 2,164 (4,959) -- 974,221
---------- ------- ------- -------- ------- ------- ------ ----------
$1,113,280 $29,180 $88,664 $973,231 $27,164 $(4,959) $6,000 $1,107,280
========== ======= ======= ======== ======= ======= ====== ==========
</TABLE>
- ---------------
(a) The Company has assumed that the historical balances of net property and
equipment acquired approximate fair value for the preliminary allocation of
the purchase price. Such amounts are based on information provided by
management of the respective companies acquired in the Completed
Transactions.
(b) The Company, on a preliminary basis, has allocated the intangible assets of
the radio acquisitions to broadcast licenses with an estimated average life
of 15 years and has allocated the intangible assets of the outdoor
acquisitions to goodwill and customer contract value with estimated average
lives of 40 years and five years, respectively. The amounts allocated to
net intangible assets are preliminary and are based upon historical
information from prior radio and outdoor acquisitions.
(c) On October 9, 1998, the Company acquired approximately a 22.4% non-voting
equity interest in Z-Spanish Media Corporation ("Z Spanish Media") for
$25,000 in cash (the "Z Spanish Acquisition"). Z Spanish Media, which is
headquartered in Sacramento, California, is the owner and operator of 22
Hispanic format radio stations in California, Texas, Arizona and Illinois.
(d) On October 23, 1998, the Company acquired Primedia Broadcast Group, Inc.
("Primedia") and certain of its affiliates, which own and operate eight FM
stations in Puerto Rico, for approximately $76,050 in cash less working
capital deficit of $1,280 plus various other direct acquisition costs (the
"Primedia Acquisition").
(e) On November 13, 1998, the Company acquired approximately 1,000 display
faces from Kunz & Company for $33,289 in cash plus various other direct
acquisition costs (the "Kunz Option"). Martin had previously paid $6,000 in
cash to Kunz & Company on July 31, 1997. Martin began operating these 1,000
display faces under a management agreement effective July 31, 1997.
(f) On December 1, 1998, the Company acquired the assets of the Outdoor
Advertising division of Whiteco Industries, Inc., an outdoor advertising
company with over 22,000 billboards and outdoor displays in 34 states, for
$930,000 in cash plus working capital of $24,221 subject to certain
adjustments and various other direct acquisition costs of approximately
$20,000.
(2) Reflects the proceeds of approximately $730,000 received on November 17,
1998 from the issuance of $750,000 of 8% Senior Notes due 2008 (the "8%
Senior Notes"), net of deferred debt issuance costs of $20,000 (the "8%
Senior Notes Offering"). The net proceeds from the 8% Senior Notes Offering
will be used to reduce bank borrowings under the revolving credit portion of
the Senior Credit Facility and the excess proceeds will be invested in
short-term investment grade securities.
P-5
<PAGE> 165
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE PENDING TRANSACTIONS
(3) Reflects the Pending Transactions as follows:
<TABLE>
<CAPTION>
PURCHASE PRICE ALLOCATION
-------------------------------------------------------------
PURCHASE/ PROPERTY AND INTANGIBLE
(SALES) CURRENT EQUIPMENT, ASSETS, CURRENT
PENDING TRANSACTIONS PRICE ASSETS NET(a) NET(b) LIABILITIES
-------------------- --------- ------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Capstar/SFX Acquisition(e)....... $494,250 $ -- $10,415 $483,835 $ --
Cleveland Acquisitions(f)........ 285,877 11,006 2,114 309,547 (129)
Chicago Disposition(g)........... (21,000) -- (2,167) (2,844) --
Phoenix Acquisition(h)........... 90,000 -- 1,788 88,212 --
-------- ------- ------- -------- -----
Total...................... $849,127 $11,006 $12,150 $878,750 $(129)
======== ======= ======= ======== =====
<CAPTION>
FINANCING
-------------------------
PURCHASE PRICE ALLOCATION DECREASE INCREASE
------------------------------------------ IN NOTES (DECREASE)
DEFERRED RECEIVABLE IN
TAX OTHER ACCUMULATED FROM LONG-TERM
PENDING TRANSACTIONS LIABILITIES(c) LIABILITIES DEFICIT(d) AFFILIATE DEBT
-------------------- -------------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Capstar/SFX Acquisition(e)....... $ -- $ -- $ -- $150,000 $344,250
Cleveland Acquisitions(f)........ (35,827) (834) -- -- 285,877
Chicago Disposition(g)........... (6,396) -- (9,593) -- (21,000)
Phoenix Acquisition(h)........... -- -- -- -- 90,000
-------- ----- ------- -------- --------
Total...................... $(42,223) $(834) $(9,593) $150,000 $699,127
======== ===== ======= ======== ========
</TABLE>
- ---------------
(a) The Company 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 companies to be
acquired in the Pending Transactions.
(b) The Company, on a preliminary basis, has allocated the intangible assets of
the radio acquisitions to broadcast licenses with an estimated average life
of 15 years. The amounts allocated to net intangible assets are preliminary
and are based upon historical information from prior radio acquisitions.
(c) Reflects the tax effect upon consummation of the transaction.
(d) Reflects the gain on sale, net of tax, upon consummation of the
transaction.
(e) On February 20, 1998, the Company entered into an agreement to acquire from
Capstar KTXQ-FM and KBFB-FM in Dallas/Ft. Worth, KODA-FM, KKRW-FM and
KQUE-FM in Houston, KPLN-FM and KYXY-FM in San Diego and WDRV-FM, WJJJ-FM,
WXDX-FM and WDVE-FM in Pittsburgh (collectively, the "Capstar/SFX
Stations") for an aggregate purchase price of approximately $637,500 in a
series of purchases and exchanges over a period of three years (the
"Capstar/SFX Transaction"). The Capstar/SFX Stations were acquired by
Capstar as part of Capstar's acquisition of SFX on May 29, 1998. On May 29,
1998, the Company completed the Houston Exchange (as defined) and began
operating the remaining ten Capstar/SFX Stations under time brokerage
agreements. The Company also provided a loan to Capstar in the principal
amount of $150,000 (the "Capstar Loan") as part of the Capstar/SFX
Transaction. A portion of the Capstar Loan will be prepaid by Capstar in
connection with the Company's acquisition of, and the proceeds of such
prepayment would be used by the Company as a portion of the purchase price
for, each Capstar/SFX Station. The purchase price for the remaining ten
Capstar/SFX Stations will be approximately $494,250. The Company is
currently assessing whether the terms of the Capstar/SFX Transaction will
be modified upon the consummation of the Capstar Merger by Chancellor
Media.
(f) On August 11, 1998, the Company entered into an agreement to acquire four
FM and two AM radio stations in Cleveland for an aggregate purchase price
of approximately $275,000 in cash plus working capital of $10,877 plus
various other direct acquisition costs (the "Cleveland Acquisitions"). The
Cleveland Acquisitions consist of the purchase by the Company of (i)
WDOK-FM and WRMR-AM from Independent Group Limited Partnership, (ii)
WZAK-FM from Zapis Communications, (iii) Zebra Broadcasting Corporation
which owns WZJM-FM and WJMO-AM and (iv) Wincom Broadcasting Corporation
which owns WQAL-FM (the "Wincom Acquisition"). The Company began operating
WQAL-FM under a time brokerage agreement effective October 1, 1998. The
consummation of each of the Cleveland Acquisitions (other than the Wincom
Acquisition) is contingent upon the consummation of each of the other
Cleveland Acquisitions (other than the Wincom Acquisition). The Company
began operating WQAL-FM under a time brokerage agreement effective October
1, 1998.
P-6
<PAGE> 166
(g) On August 20, 1998, the Company entered into an agreement to sell WMVP-AM
in Chicago to ABC, Inc. for $21,000 in cash (the "Chicago Disposition").
The Company entered into a time brokerage agreement to sell substantially
all of the broadcast time of WMVP-AM effective September 10, 1998.
(h) On September 15, 1998, the Company entered into an agreement to acquire
KKFR-FM and KFYI-AM in Phoenix from The Broadcast Group, Inc. for $90,000
in cash plus various other direct acquisition costs (the "Phoenix
Acquisition"). The Company began operating KKFR-FM and KFYI-AM under a time
brokerage agreement effective November 5, 1998.
P-7
<PAGE> 167
ADJUSTMENTS TO UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS RELATED TO
THE COMPLETED TRANSACTIONS
(4) The detail of the historical financial data of the companies acquired or
disposed of in the Completed Transactions for the year ended December 31,
1997 and for the nine months ended September 30, 1998 has been obtained from
the historical financial statements of the respective companies and is
summarized below:
<TABLE>
<CAPTION>
ACQUISITIONS
------------------------------------------------------------------------------------------------------------
CRBC AS
EVERGREEN ADJUSTED FOR
WUSL-FM VIACOM COMPLETED KDGE-FM KATZ
WDAS-FM/AM WIOQ-FM ACQUISITION CRBC KZPS-FM ACQUISITION GANNETT
YEAR ENDED HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS HISTORICAL HISTORICAL HISTORICAL
DECEMBER 31, 1997 1/1 - 5/1(a) 1/1 - 5/15(b) 1/1 - 7/2(c) 1/1 - 9/5(d) 1/1 - 7/31(e) 1/1 - 10/28(f) 1/1 - 12/29(g)
- ----------------- ------------ ------------- ------------ ------------ ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross revenues....... $5,028 $7,088 $38,972 $241,481 $7,616 $144,886 $61,057
Less: agency
commissions......... (680) (829) (5,470) (30,754) (929) -- (8,052)
------ ------ ------- -------- ------ -------- -------
Net revenues......... 4,348 6,259 33,502 210,727 6,687 144,886 53,005
Operating expenses
excluding
depreciation and
amortization........ 2,533 3,649 14,936 119,328 5,293 109,341 26,303
Depreciation and
amortization........ 875 -- 2,279 30,505 280 141 1,736
Corporate general and
administrative...... 172 141 682 7,226 -- 8,105
Merger expense....... -- -- -- 6,124 -- -- --
Restructuring
charge.............. -- -- -- -- -- 15,958 --
Stock option
compensation........ -- -- -- 3,083 -- -- --
Profit participation
fee................. -- -- -- -- -- -- --
------ ------ ------- -------- ------ -------- -------
Operating income
(loss).............. 768 2,469 15,605 44,461 1,114 11,341 24,966
Interest expense..... 19 990 -- 49,812 -- 18,310 --
Interest income...... (21) -- -- (218) -- (170) --
Other (income)
expense............. 884 -- -- (584) 12 -- (375)
------ ------ ------- -------- ------ -------- -------
Income (loss) before
income taxes........ (114) 1,479 15,605 (4,549) 1,102 (6,799) 25,341
Income tax expense
(benefit)........... -- -- 5,892 1,180 -- 1,912 10,127
------ ------ ------- -------- ------ -------- -------
Net income (loss).... (114) 1,479 9,713 (5,729) 1,102 (8,711) 15,214
Preferred stock
dividends........... -- -- -- 27,321 -- -- --
------ ------ ------- -------- ------ -------- -------
Income (loss)
attributable to
common stock........ $ (114) $1,479 $ 9,713 $(33,050) $1,102 $ (8,711) $15,214
====== ====== ======= ======== ====== ======== =======
Broadcast cash
flow................ $1,815 $2,610 $18,566 $ 91,399 $1,394 $ 35,545 $26,702
====== ====== ======= ======== ====== ======== =======
<CAPTION>
ACQUISITIONS
--------------------------------------------------------------------------------------------------
MARTIN AS
ADJUSTED FOR
KBIG-FM COMPLETED PRIMEDIA
KXPK-FM KLDE-FM MARTIN ACQUISITION
YEAR ENDED HISTORICAL WBIX-FM KODA-FM WWDC-FM/AM TRANSACTIONS HISTORICAL
DECEMBER 31, 1997 1/1 - 8/31(h) 1/1 - 10/10(i) 1/1 - 12/31(j) 1/1 - 12/31(k) 1/1 - 12/31(l) 1/1 - 12/31(m)
- ----------------- ------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues....... $3,460 $33,125 $20,869 $11,416 $84,882 $15,732
Less: agency
commissions......... (458) (4,636) (2,889) (1,430) (8,983) (3,482)
------ ------- ------- ------- ------- -------
Net revenues......... 3,002 28,489 17,980 9,986 75,899 12,250
Operating expenses
excluding
depreciation and
amortization........ 2,816 18,277 7,535 5,597 38,836 7,986
Depreciation and
amortization........ 198 -- 1,848 90 25,326 2,916
Corporate general and
administrative...... 1,080 --
Merger expense....... -- -- -- -- -- --
Restructuring
charge.............. -- -- -- -- -- --
Stock option
compensation........ -- -- -- -- -- --
Profit participation
fee................. -- -- -- -- -- --
------ ------- ------- ------- ------- -------
Operating income
(loss).............. (12) 10,212 8,597 4,299 10,657 1,348
Interest expense..... -- -- -- 123 17,013 2,102
Interest income...... -- -- -- (36) (293) (25)
Other (income)
expense............. (81) -- -- (98) 1,767 66
------ ------- ------- ------- ------- -------
Income (loss) before
income taxes........ 69 10,212 8,597 4,310 (7,830) (795)
Income tax expense
(benefit)........... -- -- -- -- -- (53)
------ ------- ------- ------- ------- -------
Net income (loss).... 69 10,212 8,597 4,310 (7,830) (742)
Preferred stock
dividends........... -- -- -- -- -- --
------ ------- ------- ------- ------- -------
Income (loss)
attributable to
common stock........ $ 69 $10,212 $ 8,597 $ 4,310 $(7,830) $ (742)
====== ======= ======= ======= ======= =======
Broadcast cash
flow................ $ 186 $10,212 $10,445 $ 4,389 $37,063 $ 4,264
====== ======= ======= ======= ======= =======
<CAPTION>
WHITECO
ACQUISITION
YEAR ENDED HISTORICAL
DECEMBER 31, 1997 1/1-12/31(n)
- ----------------- --------------
<S> <C>
Gross revenues....... $126,801
Less: agency
commissions......... (8,703)
--------
Net revenues......... 118,098
Operating expenses
excluding
depreciation and
amortization........ 63,984
Depreciation and
amortization........ 11,525
Corporate general and
administrative...... 6,074
Merger expense....... --
Restructuring
charge.............. --
Stock option
compensation........ --
Profit participation
fee................. 2,322
--------
Operating income
(loss).............. 34,193
Interest expense..... 4
Interest income...... --
Other (income)
expense............. (1,833)
--------
Income (loss) before
income taxes........ 36,022
Income tax expense
(benefit)........... --
--------
Net income (loss).... 36,022
Preferred stock
dividends........... --
--------
Income (loss)
attributable to
common stock........ $ 36,022
========
Broadcast cash
flow................ $ 54,114
========
</TABLE>
P-8
<PAGE> 168
<TABLE>
<CAPTION>
DISPOSITIONS
--------------------------------------------------------------------------------------------
WPEG-FM SAN
WBAV-FM/AM FRANCISCO
WRFX-FM WPNT-FM FREQUENCY
WFNZ-FM WNKS-FM HISTORICAL WEJM-FM/AM WJZW-FM HISTORICAL
HISTORICAL HISTORICAL 5/30 - HISTORICAL HISTORICAL 1/1 -
1/1 - 5/15(b) 1/1 - 5/15(o) 6/19(p) 1/1 - 8/26(q) 1/1 - 7/7(r) 7/7(s)
------------- ------------- -------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues.................... $(7,788) $(1,332) $(567) $(1,279) $(4,137) $(1,370)
Less: agency commissions.......... 1,029 142 93 135 567 178
------- ------- ----- ------- ------- -------
Net revenues...................... (6,759) (1,190) (474) (1,144) (3,570) (1,192)
Operating expenses excluding
depreciation and amortization.... (3,569) (994) (285) (1,276) (2,161) (1,738)
Depreciation and amortization..... -- (212) (279) (305) (315) (84)
Corporate general and
administrative................... -- -- -- -- (70) --
Merger expense.................... -- -- -- -- -- --
Restructuring charge.............. -- -- -- -- -- --
Stock option compensation......... -- -- -- -- -- --
Profit participation fee.......... -- -- -- -- -- --
------- ------- ----- ------- ------- -------
Operating income (loss)........... (3,190) 16 90 437 (1,024) 630
Interest expense.................. -- -- -- -- -- --
Interest income................... -- -- -- -- -- --
Other (income) expense............ -- -- -- -- -- --
------- ------- ----- ------- ------- -------
Income (loss) before income
taxes............................ (3,190) 16 90 437 (1,024) 630
Income tax benefit................ -- -- -- -- (260) --
------- ------- ----- ------- ------- -------
Net income (loss)................. (3,190) 16 90 437 (764) 630
Preferred stock dividends......... -- -- -- -- -- --
------- ------- ----- ------- ------- -------
Income (loss) attributable to
common stock..................... $(3,190) $ 16 $ 90 $ 437 $ (764) $ 630
======= ======= ===== ======= ======= =======
Broadcast cash flow............... $(3,190) $ (196) $(189) $ 132 $(1,409) $ 546
======= ======= ===== ======= ======= =======
<CAPTION>
DISPOSITIONS
-------------------------------------------------------------------------------
WBZS-AM
WZHF-AM BONNEVILLE
KDFC-FM KDFC-AM WLUP-FM OPTION WFLN-FM
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
1/1 - 1/31(t) 1/1 - 8/13(u) 1/1 - 7/14(e) 1/1 - 10/1(i) 1/1 - 4/30(v)
------------- --------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Gross revenues.................... $(278) $(1,091) $(6,928) $(31,429) $(1,298)
Less: agency commissions.......... 26 23 935 3,951 134
----- ------- ------- -------- -------
Net revenues...................... (252) (1,068) (5,993) (27,478) (1,164)
Operating expenses excluding
depreciation and amortization.... (224) (665) (5,642) (14,434) (728)
Depreciation and amortization..... -- (54) (1,443) -- (800)
Corporate general and
administrative................... -- (18) -- -- --
Merger expense.................... -- -- -- -- --
Restructuring charge.............. -- -- -- -- --
Stock option compensation......... -- -- -- -- --
Profit participation fee.......... -- -- -- -- --
----- ------- ------- -------- -------
Operating income (loss)........... (28) (331) 1,092 (13,044) 364
Interest expense.................. -- -- -- (1) --
Interest income................... -- -- -- 10 --
Other (income) expense............ -- -- -- -- --
----- ------- ------- -------- -------
Income (loss) before income
taxes............................ (28) (331) 1,092 (13,053) 364
Income tax benefit................ -- (98) -- -- --
----- ------- ------- -------- -------
Net income (loss)................. (28) (233) 1,092 (13,053) 364
Preferred stock dividends......... -- -- -- -- --
----- ------- ------- -------- -------
Income (loss) attributable to
common stock..................... $ (28) $ (233) $ 1,092 $(13,053) $ 364
===== ======= ======= ======== =======
Broadcast cash flow............... $ (28) $ (403) $ (351) $(13,044) $ (436)
===== ======= ======= ======== =======
<CAPTION>
DISPOSITIONS
---------------
WBAB-FM
WBLI-FM
WGBB-AM
WHFM-FM
HISTORICAL COMPLETED
1/1 - TRANSACTIONS
12/31(w) HISTORICAL
--------------- ------------
<S> <C> <C>
Gross revenues.................... $(12,794) $732,122
Less: agency commissions.......... 1,459 (68,623)
-------- --------
Net revenues...................... (11,335) 663,499
Operating expenses excluding
depreciation and amortization.... (8,048) 386,650
Depreciation and amortization..... -- 74,227
Corporate general and
administrative................... -- 23,392
Merger expense.................... -- 6,124
Restructuring charge.............. -- 15,958
Stock option compensation......... -- 3,083
Profit participation fee.......... -- 2,322
-------- --------
Operating income (loss)........... (3,287) 151,743
Interest expense.................. -- 88,372
Interest income................... -- (753)
Other (income) expense............ -- (242)
-------- --------
Income (loss) before income
taxes............................ (3,287) 64,366
Income tax benefit................ -- 18,700
-------- --------
Net income (loss)................. (3,287) 45,666
Preferred stock dividends......... -- 27,321
-------- --------
Income (loss) attributable to
common stock..................... $ (3,287) $ 18,345
======== ========
Broadcast cash flow............... $ (3,287) $276,849
======== ========
</TABLE>
P-9
<PAGE> 169
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
-------------------------------------------------------------------- ------------
MARTIN AS WBAB-FM
ADJUSTED FOR WBLI-FM
COMPLETED PRIMEDIA WHITECO WGBB-AM
NINE MONTHS KODA-FM WWDC-FM/AM MARTIN ACQUISITION ACQUISITION WHFM-FM COMPLETED
ENDED HISTORICAL HISTORICAL TRANSACTIONS HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS
SEPTEMBER 30, 1998 1/1-5/29(j) 1/1-6/1(k) 1/1-7/31(l) 1/1-9/30(m) 1/1-9/30(n) 1/1-5/29(w) HISTORICAL
- --------------------- ----------- ---------- ------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross revenues....... $ 9,132 $4,273 $54,186 $11,749 $103,694 $(5,063) $177,971
Less: agency
commissions........ (1,250) (528) (5,768) (3,070) (7,191) 514 (17,293)
------- ------ ------- ------- -------- ------- --------
Net revenues......... 7,882 3,745 48,418 8,679 96,503 (4,549) 160,678
Operating expenses
excluding
depreciation and
amortization....... 2,771 2,158 23,171 4,954 49,625 (3,331) 79,348
Depreciation and
amortization....... 841 45 15,083 2,158 8,760 -- 26,887
Corporate general and
administrative..... -- -- 1,035 317 5,193 -- 6,545
Profit participation
fee................ -- -- -- -- 1,756 -- 1,756
------- ------ ------- ------- -------- ------- --------
Operating income
(loss)............. 4,270 1,542 9,129 1,250 31,169 (1,218) 46,142
Interest expense..... -- 62 11,057 1,679 98 -- 12,896
Interest income...... -- (18) (261) -- (32) -- (311)
Other expense
(income)........... -- (49) 5,461 23 (820) -- 4,615
------- ------ ------- ------- -------- ------- --------
Net income (loss).... $ 4,270 $1,547 $(7,128) $ (452) $ 31,923 $(1,218) $ 28,942
======= ====== ======= ======= ======== ======= ========
Broadcast cash
flow............... $ 5,111 $1,587 $25,247 $ 3,725 $ 46,878 $(1,218) $ 81,330
======= ====== ======= ======= ======== ======= ========
</TABLE>
- ---------------
(a) On May 1, 1997, the Company acquired, in the Beasley Acquisition,
WDAS-FM/AM in Philadelphia for $103,000 in cash.
(b) On May 15, 1997, the Company 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.
(c) On July 2, 1997, the Company acquired, in the Evergreen Viacom Acquisition,
WLTW-FM and WAXQ-FM in New York and WMZQ-FM, WJZW-FM, WZHF-AM, and WBZS-AM
in Washington, D.C. for approximately $612,388 in cash including various
other direct acquisition costs. The Evergreen Viacom Acquisition was
financed with (i) bank borrowings under the Senior Credit Facility (as
defined) of $552,559; (ii) $53,750 in escrow funds paid by the Company on
February 19, 1997 and (iii) $6,079 financed through working capital. In
June 1997, Chancellor Media issued 5,990,000 shares of $3.00 Convertible
Exchangeable Preferred Stock (the "$3.00 Convertible Preferred Stock") for
net proceeds of approximately $287,800 which were contributed to the
Company by Evergreen and used to repay borrowings under the Senior Credit
Facility and subsequently were reborrowed on July 2, 1997 as part of the
financing of the Evergreen Viacom Acquisition. On July 7, 1997, the Company
sold WJZW-FM in Washington, D.C. to affiliates of Capital Cities/ABC Radio
for $68,000 in cash. The assets of WJZW-FM, as well as the assets of
WZHF-AM and WBZS-AM, which were sold on August 13, 1997, were accounted for
as assets held for sale in connection with the purchase price allocation of
the Viacom Acquisition and no gain or loss was recognized by the Company
upon consummation of the sales (see 4(r) and 4(u)).
(d) On September 5, 1997, pursuant to an Amended and Restated Agreement and
Plan of Merger, dated as of February 19, 1997 and amended and restated on
July 31, 1997 (the "Chancellor Merger Agreement"), among Chancellor
Broadcasting Company ("Chancellor"), CRBC, Evergreen Media Corpora-
P-10
<PAGE> 170
tion ("Evergreen"), Evergreen Mezzanine Holdings Corporation ("EMHC") and
Evergreen Media Corporation of Los Angeles ("EMCLA"), (i) Chancellor was
merged with and into EMHC, a direct, wholly-owned subsidiary of Evergreen,
with EMHC remaining as the surviving corporation and (ii) CRBC was merged
with and into EMCLA, a direct, wholly-owned subsidiary of EMHC, with EMCLA
remaining as the surviving corporation (collectively, the "Chancellor
Merger"). Upon consummation of the Chancellor Merger, Evergreen was renamed
Chancellor Media Corporation, EMHC was renamed Chancellor Mezzanine
Holdings Corporation ("CMHC") and the Company was renamed Chancellor Media
Corporation of Los Angeles ("CMCLA"). Consummation of the Chancellor Merger
added 52 radio stations (36 FM and 16 AM) to the Company's portfolio of
stations, including 13 stations in markets in which the Company previously
operated. The total purchase price allocated to net assets acquired was
approximately $1,998,383 which included (i) the conversion of each
outstanding share of Chancellor Common Stock into 0.9091 shares of
Chancellor Media Common Stock, resulting in the issuance of 34,617,460
shares of Chancellor Media Common Stock at $15.50 per share, (ii) the
assumption of long-term debt of CRBC of $949,000 which included $549,000 of
borrowings outstanding under the CRBC senior credit facility, $200,000 of
CRBC's 9 3/8% Senior Subordinated Notes due 2004 and $200,000 of CRBC's
8 3/4% Senior Subordinated Notes due 2007, (iii) the issuance of 2,117,629
shares of the Company's 12% Exchangeable Preferred Stock (the "12%
Preferred Stock") in exchange for CRBC's substantially identical securities
with a fair value of $215,570 including accrued and unpaid dividends of
$3,807, (iv) the issuance of 1,000,000 shares of the Company's 12 1/4%
Series A Senior Cumulative Exchangeable Preferred Stock (the "12 1/4%
Preferred Stock") in exchange for CRBC's substantially identical securities
with a fair value of $120,217 including accrued and unpaid dividends of
$772, (v) the issuance of 2,200,000 shares of Chancellor Media's 7%
Convertible Preferred Stock (the "7% Convertible Preferred Stock") in
exchange for Chancellor's substantially identical securities with a fair
value of $111,048 including accrued and unpaid dividends of $1,048, (vi)
the assumption of stock options issued to Chancellor stock option holders
with a fair value of $34,977 and (vii) estimated acquisition costs of
$31,000.
P-11
<PAGE> 171
CRBC's historical condensed combined statement of operations for the year
ended December 31, 1997 and pro forma adjustments related to the
transactions completed by CRBC prior to the Chancellor Merger (the
"Completed Chancellor Transactions") is summarized below:
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
------------------------- ------------- PRO FORMA
CHANCELLOR ADJUSTMENTS CRBC AS
VIACOM FOR THE ADJUSTED FOR
CRBC COLFAX ACQUISITION WDRQ-FM COMPLETED COMPLETED
HISTORICAL HISTORICAL HISTORICAL HISTORICAL CHANCELLOR CHANCELLOR
YEAR ENDED DECEMBER 31, 1997 1/1-9/5 1/1-1/23(i) 1/1-7/2(ii) 1/1-8/11(iii) TRANSACTIONS TRANSACTIONS
---------------------------- ---------- ----------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues...................... $215,018 $3,183 $29,214 $(2,395) $ (3,539)(iv) $241,481
Less: agency commissions............ (26,575) (384) (4,046) 251 -- (30,754)
-------- ------ ------- ------- -------- --------
Net revenues........................ 188,443 2,799 25,168 (2,144) (3,539) 210,727
Operating expenses excluding
depreciation and amortization..... 110,548 1,872 13,326 (1,986) (4,432)(iv) 119,328
Depreciation and amortization....... 23,919 -- 2,370 (186) 4,484(v) 30,505
(82)(vi)
Corporate general and
administrative.................... 7,102 -- 520 (42) (354)(vii) 7,226
Merger expense...................... 6,124 -- -- -- -- 6,124
Stock option compensation........... 3,083 -- -- -- -- 3,083
-------- ------ ------- ------- -------- --------
Operating income (loss)............. 37,667 927 8,952 70 (3,155) 44,461
Interest expense.................... 37,978 -- 3,178 -- 8,656 (viii 49,812
Interest income..................... (218) -- -- -- -- (218)
Other income........................ (584) -- -- -- -- (584)
-------- ------ ------- ------- -------- --------
Income (loss) before income taxes... 491 927 5,774 70 (11,811) (4,549)
Income tax expense (benefit)........ 2,196 -- 1,558 18 (2,592)(ix) 1,180
-------- ------ ------- ------- -------- --------
Net income (loss)................... (1,705) 927 4,216 52 (9,219) (5,729)
Preferred stock dividends........... 25,817 -- -- -- 1,504(x) 27,321
-------- ------ ------- ------- -------- --------
Income (loss) attributable to common
stock............................. $(27,522) $ 927 $ 4,216 $ 52 $(10,723) $(33,050)
======== ====== ======= ======= ======== ========
Broadcast cash flow................. $ 77,895 $ 927 $11,842 $ (158) $ 893 $ 91,399
======== ====== ======= ======= ======== ========
</TABLE>
- ---------------
(i) On January 23, 1997, CRBC acquired, in the Colfax Acquisition, 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 $200,000 of 12% Exchangeable Preferred Stock for net
proceeds of $191,817; (ii) a private placement by Chancellor of $110,000 of
7% 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. 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 year ended December 31, 1997.
(ii) On July 2, 1997, CRBC acquired, in the Chancellor Viacom Acquisition,
KIBB-FM and KYSR-FM in Los Angeles, WLIT-FM in Chicago and WDRQ-FM in
Detroit for approximately $500,789 in cash including various other direct
acquisition costs. The Chancellor Viacom Acquisition was financed with (i)
bank borrowings of $273,159 under CRBC's restated senior credit agreement,
dated July 2, 1997 (the "CRBC Restated Credit Agreement"); (ii) borrowings
under an interim loan of Chancellor (the "Chancellor Broadcasting/Viacom
Interim Financing") of $168,300 which were contributed to CRBC by
Chancellor; (iii) escrow funds of $53,750 paid by CRBC on February 19, 1997
and (iv) $5,580 financed through working capital. The assets of WDRQ-FM in
Detroit are classified as assets held for sale in connection with the
purchase price allocation of the Chancellor Viacom Acquisition (see (iii)
below).
P-12
<PAGE> 172
(iii)On August 11, 1997, CRBC sold, in the ABC/Detroit Disposition, WDRQ-FM in
Detroit for $37,000 in cash. The assets of WDRQ-FM were classified as
assets held for sale in connection with the purchase price allocation of
the Chancellor Viacom Acquisition (see 4(d)(ii)). Accordingly, WDRQ-FM net
income for the period July 2, 1997 to August 11, 1997 has been excluded
from CRBC's historical condensed statement of operations.
(iv) Reflects the elimination of time brokerage agreement fees received and paid
by CRBC as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 MARKET PERIOD REVENUE EXPENSE
---------------------------- ------ ------ ------- -------
<S> <C> <C> <C> <C>
WWWW-FM/WDFN-AM(1)...................... Detroit 1/1-1/31 $ (235) $ (16)
WOMX-FM, WXXL-FM, WJHM-FM(2)............ Orlando 1/1-2/13 -- (911)
WEAT-FM/AM, WOLL-FM(2).................. West Palm Beach 1/1-3/28 (593) (304)
WAPE-FM, WFYV-FM(3)..................... Jacksonville 1/1-9/5 (2,711) (490)
WBAB-FM, WBLI-FM, WGBB-AM, WHFM-FM(3)... Long Island 1/1-9/5 -- (2,711)
------- -------
Total adjustment for decrease in
gross revenues and expenses...... $(3,539) $(4,432)
======= =======
</TABLE>
- ---------------
(1)On January 31, 1997, CRBC sold WWWW-FM and WDFN-AM in Detroit to the
Company 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 the
Company pending the completion of the sale.
(2)On February 13, 1997, CRBC acquired, in the Omni Acquisition,
substantially all of the assets and assumed certain liabilities of the
OmniAmerica Group including WOMX-FM, WXXL-FM and WJHM-FM in Orlando,
WEAT-FM/AM and WOLL-FM in West Palm Beach, Florida and WAPE-FM AND
WFYV-FM in Jacksonville. The total purchase price, including
acquisition costs, allocated to net assets acquired was approximately
$181,046. 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 the
consummation of CRBC's exchange of WEAT-FM/AM and WOLL-FM in West Palm
Beach for KSTE-FM in Sacramento and $33,000 in cash on March 28, 1997,
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.
(3)On July 1, 1996, CRBC entered into an agreement to exchange, in the SFX
Exchange, WAPE-FM and WFYV-FM in Jacksonville, Florida, and $11,000 in
cash to SFX for WBAB-FM, WBLI-FM, WGBB-AM, and WHFM-FM in Long Island.
CRBC entered into time brokerage agreements to operate WBAB-FM,
WBLI-FM, WGBB-AM, and WHFM-FM effective July 1, 1996 and entered into
time brokerage agreements to sell substantially all of the broadcast
time of WAPE-FM and WFYV-FM effective July 1, 1996. On November 6,
1997, the DOJ filed suit against the Company seeking to enjoin under
the HSR Act the acquisition of the four Long Island properties under
the SFX Exchange. On March 30, 1998, the Company and SFX entered into a
Consent Decree under which the Company and SFX agreed that the SFX
Exchange would not be consummated and that the time brokerage
agreements under which the Company operated the Long Island properties
would be terminated as soon as possible but no later than August 1,
1998. On May 29, 1998, the Company's time brokerage agreements
regarding the Long Island properties were terminated as part of the
Capstar Transaction (as defined). Furthermore, on May 29, 1998, the
Company exchanged WAPE-FM and WFYV-FM in Jacksonville plus $90,250 in
cash to Capstar in return for KODA-FM in Houston.
P-13
<PAGE> 173
(v) Reflects incremental amortization related to the Completed Chancellor
Transactions and is based on the following allocation to intangible assets:
<TABLE>
<CAPTION>
COMPLETED CHANCELLOR INCREMENTAL HISTORICAL ADJUSTMENT
TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1997 PERIOD ASSETS, NET EXPENSE(1) 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)
Chancellor Viacom Acquisition............. 1/1-7/2 451,690 5,709 2,060 3,649
-------- ------ ------ ------
Total............................. $908,946 $6,544 $2,060 $4,484
======== ====== ====== ======
</TABLE>
- ---------------
(1) Intangible assets were amortized on a straight-line basis over an
estimated average 40 year life by CRBC. In connection with purchase
accounting for the Chancellor Merger, intangible assets are amortized
over an estimated average life of 15 years in accordance with the
Company'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.
(vi) Reflects the elimination of disposed stations' historical depreciation and
amortization expense of $82 for the year ended December 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.
(vii)Reflects the elimination of duplicate corporate expenses of $354 for the
year ended December 31, 1997 related to the Completed Chancellor
Transactions.
(viii)
Reflects the adjustment to interest expense in connection with the
consummation of the Completed Chancellor Transactions, the issuance by CRBC
of its 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock, the
refinancing of CRBC's previous senior credit agreement on January 23, 1997
and the offering on June 24, 1997 by CRBC of $200.0 million aggregate
principal amount of its 8 3/4% Senior Notes due 2007 (the "8 3/4% Notes"):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
Additional bank borrowings related to:
Completed Chancellor Acquisitions......................... $558,892
Completed Chancellor Dispositions......................... (104,253)
New Loan Fees............................................. 6,873
--------
Total additional bank borrowings............................ $461,512
========
Interest expense on additional bank borrowings at 7.5%...... $ 11,376
Less: historical interest expense of the stations acquired
in the Completed Chancellor Transactions.................. (3,178)
--------
Net increase in interest expense............................ 8,198
Reduction in interest expense on bank debt related to the
application of net proceeds of the following at 7.5%:
CRBC 8 3/4% Notes proceeds of $194,083 for the period
January 1, 1997 to June 24, 1997.......................... (7,036)
</TABLE>
P-14
<PAGE> 174
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
Reduction in interest expense resulting from the redemption
of CRBC's 12.5% Senior Subordinated Notes of $60,000 on
June 5, 1997.............................................. (3,229)
Interest expense on $70,133 additional bank borrowings at
7.5% related to the redemption of CRBC's 12.5% Senior
Subordinated Notes on June 5, 1997........................ 2,265
Interest expense on $200,000 8 3/4% Notes issued June 24,
1997...................................................... 8,458
--------
Total adjustment for net increase in interest expense....... $ 8,656
========
</TABLE>
(ix) 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.
(x) Reflects incremental dividends and accretion of $1,504 on the 12%
Exchangeable Preferred Stock for the period January 1, 1997 to January 23,
1997:
(e) On July 14, 1997, the Company completed the disposition of WLUP-FM in
Chicago to Bonneville for net proceeds of $80,000 which were held by a
qualified intermediary pending the completion of the deferred exchange of
WLUP-FM for KZPS-FM and KDGE-FM in Dallas. On October 7, 1997, the Company
applied the net proceeds from the disposition of WLUP-FM of $80,000 in
cash, plus an additional $3,500 and various other direct acquisition costs,
in a deferred exchange of WLUP-FM for KZPS-FM and KDGE-FM in Dallas. The
exchange was accounted for as a like-kind exchange and no gain or loss was
recognized upon consummation of the transaction. The Company had previously
operated KZPS-FM and KDGE-FM under time brokerage agreements effective
August 1, 1997.
(f) On October 28, 1997, the Company and Chancellor Media acquired Katz Media
Group, Inc. ("KMG"), a full-service media representation firm, in a tender
offer transaction for a total purchase price of approximately $379,101 (the
"Katz Acquisition") which included (i) the conversion of each outstanding
share of KMG Common Stock into the right to receive $11.00 in cash,
resulting in total cash payments of $149,601, (ii) the assumption of
long-term debt of KMG and its subsidiaries of $222,000 which included
$122,000 of borrowings outstanding under the KMG senior credit facility and
$100,000 of the 10 1/2% Notes and (iii) estimated acquisition costs of
$7,500.
(g) On December 29, 1997, the Company acquired, 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 in cash.
(h) On January 30, 1998, the Company acquired, in the Denver Acquisition,
KXPK-FM in Denver from Ever Green Wireless LLC for $26,000 in cash
(including $1,650 paid by Chancellor in escrow). The Company had previously
been operating KXPK-FM under a time brokerage agreement since September 1,
1997.
(i) On April 3, 1998, the Company exchanged WTOP-FM in Washington, KZLA-FM in
Los Angeles and WGMS-FM in Washington plus $57,000 in cash for Bonneville's
stations WBIX-FM in New York, KLDE-FM in Houston and KBIG-FM in Los Angeles
(the "Bonneville Option"). The Company had previously paid $3,000 in cash
to Bonneville on August 6, 1997. The Company had previously entered into
time brokerage agreements to operate KLDE-FM and KBIG-FM effective October
1, 1997 and WBIX-FM effective October 10, 1997 and had entered into time
brokerage agreements to sell substantially all of the broadcast time of
WTOP-AM, KZLA-FM and WGMS-FM effective October 1, 1997.
(j) On February 20, 1998, the Company entered into an agreement to acquire from
Capstar Broadcasting Corporation (together with its subsidiaries,
"Capstar") KTXQ-FM and KBFB-FM in Dallas/ Ft. Worth, KODA-FM, KKRW-FM and
KQUE-AM in Houston, KPLN-FM and KYXY-FM in San Diego and WVTY-FM, WJJJ-FM,
WXDX-FM and WDVE-FM in Pittsburgh (collectively, the "Capstar/SFX
Stations") for an aggregate purchase price of approximately $637,500 in a
series of purchases and exchanges over a period of three years (the
"Capstar/SFX Transaction"). The Capstar/
P-15
<PAGE> 175
SFX Stations were acquired by Capstar as part of Capstar's acquisition of
SFX on May 29, 1998. On May 29, 1998, as part of the Capstar/SFX
Transaction, the Company exchanged WAPE-FM and WFYV-FM in Jacksonville
(valued for purposes of the Capstar/SFX Transaction at $53,000) plus
$90,250 in cash to Capstar in return for KODA-FM in Houston (the "Houston
Exchange"). CRBC entered into a time brokerage agreement to sell
substantially all of the broadcast time of WAPE-FM and WFYV-FM effective
July 1, 1996 (see 4 (d) (iv) (3)). Therefore, the results of operations of
WAPE-FM and WFYV-FM are not included in the Company's historical condensed
statements of operations for the year ended December 31, 1997 and the nine
months ended September 30, 1998.
(k) On June 1, 1998, the Company acquired WWDC-FM/AM in Washington, D.C. from
Capitol Broadcasting Company and its affiliates for $74,062 in cash
(including $2,062 for the purchase of the stations' accounts receivable)
plus various other direct acquisition costs, of which $4,000 was previously
paid by the Company as escrow funds (the "Capitol Broadcasting
Acquisition").
(l) On July 31, 1998, the Company acquired Martin Media and certain affiliated
companies ("Martin"), an outdoor advertising company with over 14,500
billboards and outdoor displays in 12 states serving 23 markets, for
$591,674 in cash plus working capital of $19,443 subject to certain
adjustments and direct acquisition costs of approximately $10,000.
Martin's historical condensed combined statements of operations for the
year ended December 31, 1997 and the nine months ended September 30, 1998
and pro forma adjustments related to the significant transactions completed
by Martin prior to the Martin Acquisition (the "Completed Martin
Transactions") are summarized below. The pro forma adjustments for the
Martin Acquisition do not reflect certain acquisitions of assets by Martin
with an aggregate purchase price of approximately $17,000 which, in the
opinion of the Company's management is not material to such pro forma
presentations either individually or in the aggregate.
P-16
<PAGE> 176
<TABLE>
<CAPTION>
LAS VEGAS NEWMAN
MARTIN KUNZ CONNELL OUTDOOR OUTDOOR POA
ACQUISITION ACQUISITION ACQUISITION ACQUISITION ACQUISITION ACQUISITION
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
YEAR ENDED DECEMBER 31, 1997 1/1-12/31 1/1-7/31(i) 1/1-12/23(ii) 1/1-12/31(iii) 1/1-12/31(iv) 1/1-12/31(v)
---------------------------- ----------- ------------ ------------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues.................... $70,044 $5,569 $3,459 $1,840 $2,400 $1,570
Less: agency commissions.......... (7,894) -- (413) (181) (180) (315)
------- ------ ------ ------ ------ ------
Net revenues...................... 62,150 5,569 3,046 1,659 2,220 1,255
Operating expenses excluding
depreciation and amortization... 31,196 2,318 1,553 1,353 1,628 788
Depreciation and amortization..... 12,084 281 518 30 279 --
Corporate general and
administrative.................. 2,334 80 91 -- -- --
------- ------ ------ ------ ------ ------
Operating income (loss)........... 16,536 2,890 884 276 313 467
Interest expense.................. 10,507 -- -- -- 243 --
Interest income................... (293) -- -- -- -- --
Other expense..................... 1,737 -- -- -- 30 --
------- ------ ------ ------ ------ ------
Net income (loss)................. $ 4,585 $2,890 $ 884 $ 276 $ 40 $ 467
======= ====== ====== ====== ====== ======
Broadcast cash flow............. $30,954 $3,251 $1,493 $ 306 $ 592 $ 467
======= ====== ====== ====== ====== ======
<CAPTION>
PRO FORMA
ADJUSTMENTS MARTIN AS
FOR THE ADJUSTED
COMPLETED FOR COMPLETED
MARTIN MARTIN
YEAR ENDED DECEMBER 31, 1997 TRANSACTIONS TRANSACTIONS
---------------------------- ------------- -------------
<S> <C> <C>
Gross revenues.................... $ -- $84,882
Less: agency commissions.......... -- (8,983)
--------- -------
Net revenues...................... -- 75,899
Operating expenses excluding
depreciation and amortization... -- 38,836
Depreciation and amortization..... 12,134(vi) 25,326
Corporate general and
administrative.................. (1,425)(vii) 1,080
--------- -------
Operating income (loss)........... (10,709) 10,657
Interest expense.................. 6,263(viii) 17,013
Interest income................... -- (293)
Other expense..................... -- 1,767
--------- -------
Net income (loss)................. $ (16,972) $(7,830)
========= =======
Broadcast cash flow............. $ -- $37,063
========= =======
</TABLE>
P-17
<PAGE> 177
<TABLE>
<CAPTION>
PRO FORMA MARTIN AS
ADJUSTMENTS ADJUSTED
MARTIN POA FOR THE FOR
ACQUISITION ACQUISITION COMPLETED COMPLETED
HISTORICAL HISTORICAL MARTIN MARTIN
NINE MONTHS ENDED SEPTEMBER 30, 1998 1/1-7/31 1/1-7/9(v) TRANSACTIONS TRANSACTIONS
------------------------------------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Gross revenues................................ $53,285 $ 901 $ -- $54,186
Less: agency commissions...................... (5,612) (156) -- (5,768)
------- ----- ------- -------
Net revenues.................................. 47,673 745 -- 48,418
Operating expenses excluding depreciation and
amortization................................ 22,671 500 -- 23,171
Depreciation and amortization................. 14,694 88 301(vi) 15,083
Corporate general and administrative.......... 3,030 -- (1,995)(vii) 1,035
------- ----- ------- -------
Operating income.............................. 7,278 157 1,694 9,129
Interest expense.............................. 10,781 1 275(viii) 11,057
Interest income............................... (261) -- -- (261)
Other expense................................. 5,448 13 -- 5,461
------- ----- ------- -------
Net income(loss).............................. $(8,690) $ 143 $ 1,419 $(7,128)
======= ===== ======= =======
Broadcast cash flow........................... $25,002 $ 245 $ -- $25,247
======= ===== ======= =======
</TABLE>
- ---------------
(i) On July 31, 1997, Martin acquired approximately 500 display faces of the
Kunz Outdoor Advertising division from Kunz & Company, an outdoor
advertising company with approximately 1,500 billboards and outdoor
displays in five markets, for $20,500 in cash plus various other direct
acquisition costs (the "Kunz Acquisition").
(ii) On December 23, 1997, Martin acquired Connell Outdoor Advertising Co., an
outdoor advertising company with 88 billboards and outdoor displays in the
Las Vegas market, for $30,000 in cash plus various other direct acquisition
costs (the "Connell Acquisition").
(iii)On January 2, 1998, Martin acquired Las Vegas Outdoor Advertising, Inc., an
outdoor advertising company with 90 billboards and outdoor displays in the
Las Vegas market, for $16,800 in cash plus various other direct acquisition
costs (the "Las Vegas Outdoor Acquisition").
(iv) On January 2, 1998, Martin acquired Newman Outdoor of Texas, Inc., an
outdoor advertising company with over 1,200 billboards and outdoor displays
in three markets, for $12,500 in cash plus various other direct acquisition
costs (the "Newman Acquisition").
(v) On July 9, 1998, Martin acquired POA, an outdoor advertising company with
over 1,240 billboards and outdoor displays in the Pittsburgh market, for
$5,867 in cash plus various other direct acquisition costs (the "POA
Acquisition").
(vi) Reflects incremental amortization related to the Completed Martin
Transactions and is based on the following allocation to intangible assets:
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1997 PERIOD ASSETS, NET EXPENSE(1) EXPENSE INCREASE
- ---------------------------- ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Kunz Acquisition................. 1/1-7/31 $17,260 $ 2,014 $ 42 $ 1,972
Connell Acquisition.............. 1/1-12/23 25,650 5,030 373 4,657
Las Vegas Outdoor Acquisition.... 1/1-12/31 14,408 2,882 -- 2,882
Newman Acquisition............... 1/1-12/31 10,249 2,050 -- 2,050
POA Acquisition.................. 1/1-12/31 2,867 573 -- 573
------- ------- ---- -------
Total.................. $70,434 $12,549 $415 $12,134
======= ======= ==== =======
</TABLE>
P-18
<PAGE> 178
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
NINE MONTHS ENDED SEPTEMBER 30, 1998 PERIOD ASSETS, NET EXPENSE(1) EXPENSE INCREASE
- ------------------------------------ ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
POA Acquisition.................... 1/1-7/9 $ 2,867 $301 $ -- $301
======= ==== ==== ====
</TABLE>
- ---------------
(1) Intangible assets were amortized on a straight-line basis over an
estimated average 5 year life by Martin.
Historical depreciation expense of the Completed Martin Transactions is
assumed to approximate depreciation expense on a pro forma basis. Actual
depreciation and amortization may differ based upon final purchase price
allocations.
(vii)On July 31, 1997, Martin paid $6,000 to Kunz & Company for an option to
purchase approximately 1,000 display faces from its Kunz Outdoor
Advertising division for $33,289 in cash plus various other direct
acquisition costs. Martin began operating these 1,000 display faces under a
management agreement effective July 31, 1997. Pursuant to the management
agreement, Martin paid a management fee of $285 per month to Kunz &
Company. Reflects the elimination of management fees paid by Martin to Kunz
& Company of $1,425 for the year ended December 31, 1997 and $1,995 for the
period January 1, 1998 through July 31, 1998.
(viii)
Reflects the adjustment to interest expense in connection with the
consummation of the Completed Martin Transactions:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------- -------------
<S> <C> <C>
Additional bank borrowings related to:
Completed Martin Acquisitions........................... $85,667 $35,167
------- -------
Interest expense on additional bank borrowings at 8.5%.... $ 6,506 $ 276
Less: historical interest expense of the companies
acquired in the Completed Martin Transactions........... (243) (1)
------- -------
Net increase in interest expense.......................... $ 6,263 $ 275
======= =======
</TABLE>
(m) On October 23, 1998, the Company acquired Primedia Broadcast Group, Inc.
("Primedia") and certain of its affiliates, which own and operate eight FM
stations in Puerto Rico, for approximately $76,050 in cash less working
capital deficit of $1,280 plus various other direct acquisition costs (the
"Primedia Acquisition").
(n) On December 1, 1998, the Company acquired the assets of the Outdoor
Advertising division of Whiteco Industries, Inc., an outdoor advertising
company with over 22,000 billboards and outdoor displays in 34 states, for
$930,000 in cash plus working capital of $24,221 subject to certain
adjustments and various other direct acquisition costs of approximately
$20,000.
(o) On May 15, 1997, the Company sold, in the EZ Sale, WNKS-FM in Charlotte for
$10,000 in cash.
(p) On May 30, 1997, the Company acquired, in the Century Acquisition, WPNT-FM
in Chicago for $75,750 in cash (including $2,000 for the purchase of the
station's accounts receivable) of which $5,500 was paid as escrow funds in
July 1996. On June 19, 1997, the Company sold, in the Bonneville/WPNT
Disposition, WPNT-FM in Chicago for $75,000 in cash and recognized a gain
of $500.
(q) On June 3, 1997, the Company sold, in the Crawford Disposition, WEJM-FM in
Chicago for $14,750 in cash. On August 26, 1997, the Company sold, in the
Douglas Chicago Disposition, WEJM-AM in Chicago for $7,500 in cash.
(r) On July 7, 1997, the Company sold, in the ABC/Washington Disposition,
WJZW-FM in Washington for $68,000 in cash. The assets of WJZW-FM were
classified as assets held for sale in connection with the purchase price
allocation of the Evergreen Viacom Acquisition (see 4(c)). Accordingly,
P-19
<PAGE> 179
WJZW-FM net income for the period July 2, 1997 to July 7, 1997 has been
excluded from the Company's historical condensed statement of operations.
(s) On July 7, 1997, the Company sold, 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.
(t) On January 31, 1997, the Company acquired, in the KKSF/KDFC Acquisition,
KKSF-FM and KDFC-FM/AM in San Francisco for $115,000 in cash. The Company
had previously been operating KKSF-FM and KDFC-FM/AM under a time brokerage
agreement since November 1, 1996. On July 21, 1997, the Company sold, in
the Bonneville/KDFC Disposition, KDFC-FM in San Francisco for $50,000 in
cash. The assets of KDFC-FM were 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 $791
for the period February 1, 1997 through July 21, 1997 has been excluded
from the Company's historical condensed statement of operations. Therefore,
the KDFC-FM condensed statement of operations includes the results of
operations for January 1, 1997 through January 31, 1997 (the time brokerage
agreement holding period in 1997) for the year ended December 31, 1997.
(u) On August 13, 1997, the Company sold, in the Douglas AM Dispositions,
WBZS-AM and WZHF-AM in Washington (acquired as part of the Evergreen Viacom
Acquisition -- see 4(c)) and KDFC-AM in San Francisco for $18,000 in the
form of a promissory note. The assets of WBZS-AM and WZHF-AM were
classified as assets held for sale in connection with the purchase price
allocation of the Evergreen Viacom Acquisition (see 4(c)). Accordingly,
WBZS-AM and WZHF-AM net income for the period July 2, 1997 to August 13,
1997 has been excluded from the Company's historical condensed statement of
operations.
(v) On April 13, 1998, the Company and Secret entered into a settlement
agreement regarding WFLN-FM in Philadelphia. Previously in August 1996, the
Company and Secret had entered into an agreement under which the Company
would acquire WFLN-FM from Secret for $37,750 in cash. In April 1997, the
Company entered into an agreement to sell WFLN-FM to Greater Media for
$41,800 in cash. On July 16, 1997, Secret purported to terminate the sale
of WFLN-FM to the Company. The Company subsequently brought suit against
Secret to enforce its rights to acquire WFLN-FM. Pursuant to a court
settlement entered in August 1997 and the settlement agreement between the
Company and Secret entered on April 13, 1998, (i) Secret sold WFLN-FM
directly to Greater Media for $37,750, (ii) Greater Media deposited $4,050
(the difference between the Company's proposed acquisition price for
WFLN-FM from Secret and the Company's proposed sale price for WFLN-FM to
Greater Media) with the court and (iii) the Company received $3,500 of such
amount deposited by Greater Media with the court, plus interest earned
during the period which the court held such amounts (the "WFLN
Settlement"), and Secret received the balance of such amounts.
(w) CRBC began operating WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM in Long Island
under a time brokerage agreement effective July 1, 1996 (see 4(d)(iv)(3)).
On May 29, 1998, as part of the Capstar/SFX Transaction, the Company's time
brokerage agreements regarding the Long Island properties were terminated.
The results of operations of WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM in Long
Island are included in CRBC's historical condensed statement of operations
for January 1, 1997 through September 5, 1997 and in the Company's
historical condensed statement of operations for September 6, 1997 through
December 31, 1997. Additionally, the Company's historical condensed
statement of operations for the nine months ended September 30, 1998
includes the results of operations of WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM
in Long Island for January 1, 1998 through May 29, 1998.
(5) Reflects the elimination of intercompany transactions between the Company
and Katz for the year ended December 31, 1997.
P-20
<PAGE> 180
(6) Reflects the elimination of time brokerage agreement fees received by the
Company as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 MARKET PERIOD REVENUE
- ---------------------------- ------ ------ -------
<S> <C> <C> <C>
KZLA-FM...................................... Los Angeles 10/1-12/31 $(567)
WTOP-AM...................................... Washington, D.C. 10/1-12/31 (276)
-----
$(843)
=====
</TABLE>
(7) Reflects incremental amortization related to the Completed Transactions and
is based on the following allocation to intangible assets:
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1997 PERIOD(I) ASSETS, 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(ii)...................... 1/1-1/31 58,698 326 -- 326
WJLB-FM/WMXD-FM.................. 1/1-3/31 165,559 2,759 -- 2,759
WWRC-AM.......................... 1/1-4/2 16,808 286 -- 286
WDAS-FM/AM....................... 1/1-4/30 98,185 2,182 820 1,362
Evergreen Viacom
Acquisition(iii)............... 1/1-7/2 515,654 17,379 793 16,586
Chancellor Merger(iv)............ 1/1-9/5 2,178,137 98,823 23,638 75,185
Chicago/Dallas Exchange.......... 1/1-10/7 (613) (31) -- (31)
Katz Acquisition(v).............. 1/1-10/28 354,058 10,267 7,616 2,651
Gannett Acquisition.............. 1/1-12/29 334,892 22,264 1,228 21,036
Denver Acquisition............... 1/1-12/31 24,589 1,639 268 1,371
Bonneville Option................ 1/1-12/31 62,504 4,167 -- 4,167
KODA-FM.......................... 1/1-12/31 93,294 6,220 1,441 4,779
WWDC-FM/AM....................... 1/1-12/31 64,338 4,289 -- 4,289
Martin Acquisition(vi)........... 1/1-12/31 564,370 30,577 12,650 17,927
Primedia Acquisition............. 1/1-12/31 70,447 4,696 2,248 2,448
Kunz Option(vi).................. 1/1-12/31 29,467 1,665 -- 1,665
Whiteco Acquisition(vi).......... 1/1-12/31 873,317 49,342 6,114 43,228
---------- -------- ------- --------
Total................... $5,530,294 $256,998 $56,816 $200,182
========== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
NINE MONTHS ENDED SEPTEMBER 30, 1998 PERIOD(I) ASSETS, NET EXPENSE(I) EXPENSE INCREASE
- ------------------------------------ ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Denver Acquisition................ 1/1-1/30 $ 24,589 $ 137 $ -- $ 137
Bonneville Option................. 1/1-4/3 62,504 1,076 -- 1,076
KODA-FM........................... 1/1-5/29 93,294 2,574 656 1,918
WWDC-FM/AM........................ 1/1-6/1 64,338 1,799 -- 1,799
Martin Acquisition(vi)............ 1/1-7/31 564,370 17,836 4,904 12,932
Primedia Acquisition.............. 1/1-9/30 70,447 3,522 1,620 1,902
Kunz Option(vi)................... 1/1-9/30 29,467 1,249 -- 1,249
Whiteco Acquisition(vi)........... 1/1-9/30 873,317 37,007 4,666 32,341
---------- ------- ------- -------
Total.................... $1,782,326 $65,200 $11,846 $53,354
========== ======= ======= =======
</TABLE>
(i) Intangible assets are amortized on a straight-line basis over an estimated
average 15 year life (except for the Katz Acquisition, the Martin
Acquisition, the Kunz Option and the Whiteco Acquisition -- see (v) and
(vi) below). The incremental amortization period represents the period of
the year that the station was not owned by the Company.
(ii) Intangible assets for KKSF-FM excludes (1) $50,000 of the purchase price
allocated to KDFC-FM which has been classified as assets held for sale, (2)
$1,500 to be reimbursed by the buyers of KDFC-FM for costs incurred in
connection with relocating KKSF and (3) $4,802 of the purchase price
allocated to KDFC-AM which was sold, in the Douglas AM Dispositions, on
August 13, 1997.
(iii)Intangible assets for the Evergreen Viacom Acquisition of $515,654 excludes
(1) $67,231 of the purchase price allocated to WJZW-FM which was sold in
the ABC/Washington Disposition on July 7,
P-21
<PAGE> 181
1997 and (2) $12,148 of the purchase price allocated to WZHF-AM and WBZS-AM
which were sold in the Douglas AM Dispositions on August 13, 1997.
(iv) Intangible assets for the Chancellor Merger of $2,178,137 includes $293,548
resulting from the recognition of deferred tax liabilities.
(v) Intangible assets for the Katz Acquisition of $354,058 consist of goodwill
of $249,058 and representation contract value of $105,000 with estimated
average lives of 40 years and 17 years, respectively.
(vi) Intangible assets for the Martin Acquisition, the Kunz Option and the
Whiteco Acquisition of $564,370, $29,467 and $873,317, respectively,
consist of goodwill, customer contact value and non-compete agreements with
estimated average lives of 40 years, 5 years and 5 years, respectively.
Historical depreciation expense of the Completed Transactions is assumed to
approximate depreciation expense on a pro forma basis. Actual depreciation
and amortization may differ based upon final purchase price allocations.
(8) Reflects the elimination of management fees paid by the Company to Kunz &
Company of $570 for the period August 1, 1998 through September 30, 1998 in
connection with the Kunz Option.
(9) Reflects the elimination of duplicate corporate expenses of $1,842 for the
year ended December 31, 1997 related to the Completed Transactions.
(10) Reflects the elimination of merger expenses of $6,124 for the year ended
December 31, 1997 incurred by CRBC in connection with the Chancellor
Merger.
(11) Reflects the elimination of the profit participation fee paid by Whiteco to
Metro Management Associates of $2,322 and $1,756 for the year ended
December 31, 1997 and the nine months ended September 30, 1998,
respectively.
(12) Reflects the adjustment to interest expense in connection with the
consummation of the Completed Transactions, the amendment and restatement
of the Company's senior credit agreement on April 25, 1997 (the "Senior
Credit Facility"), Chancellor Media's $3.00 Convertible Preferred Stock
Offering completed on June 16, 1997, the offering by the Company of the
8 1/8% Notes on December 22, 1997, Chancellor Media's 1998 Equity Offering
completed on March 13, 1998, the repurchase of the Company's 12% Exchange
Debentures on June 10, 1998, the repurchase of the Company's 12 1/4%
Exchange Debentures on August 19, 1998, the Company's offering of the 9%
Notes on September 30, 1998 and the Company's offering of the 8% Senior
Notes on November 17, 1998:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
Additional bank borrowings related to:
Completed Acquisitions................................. $3,494,948 $1,967,889
Completed Dispositions................................. (349,250) --
Chancellor Merger(a)................................... 164,000 --
Katz Acquisition(b).................................... 157,101 --
New Loan Fees.......................................... 10,473 --
---------- ----------
Total additional bank borrowings......................... $3,477,272 $1,967,889
========== ==========
Interest expense at 7.0%................................. $ 197,936 $ 89,122
Less: historical interest expense related to completed
station acquisitions and dispositions.................. (20,251) (12,896)
---------- ----------
Net increase in interest expense......................... 177,685 76,226
</TABLE>
P-22
<PAGE> 182
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
Reduction in interest expense on bank debt related to the
application of net proceeds of the following at 7.0%:
$3.00 Convertible Preferred Stock Offering proceeds
contributed to the Company of $287,808 for the
period January 1, 1997 to June 16, 1997............. (9,290) --
8 1/8% Notes proceeds of $485,000 for the period
January 1, 1997 to December 22, 1997 to December 22,
1997................................................ (33,196) --
Chancellor Media's 1998 Equity Offering proceeds
contributed to the Company and used to reduce bank
borrowings by $673,000 for the year ended December
31, 1997............................................ (47,110) (9,553)
9% Notes proceeds of $730,000 for the year ended
December 31, 1997 and the nine months ended
September 30, 1998.................................. (51,100) (38,325)
8% Notes proceeds of $730,000 for the year ended
December 31, 1997 and the nine months ended
September 30, 1998.................................. (51,100) (38,325)
Interest expense on the Company's $500,000 8 1/8% Notes
issued December 22, 1997............................... 39,722 --
Interest expense on borrowings to finance the repurchase
of the Company's 12% Exchange Debentures on June 10,
1998................................................... 18,200 8,089
Interest expense on borrowings to finance the repurchase
of the Company's 12 1/4% Exchange Debentures on August
19, 1998............................................... 9,949 6,329
Interest expense on the Company's $750,000 9% Notes
issued September 30, 1998.............................. 67,500 50,625
Interest expense on the Company's $750,000 8% Senior
Notes issued November 17, 1998......................... 60,000 45,000
Reduction in interest expense related to the application
of the 7.0% interest rate to the Company's bank debt
prior to the refinancing of the Senior Credit Facility,
to CRBC's bank debt prior to consummation of the
Chancellor Merger and to KMG's bank debt prior to
consummation of the Katz Acquisition................... (24,387) (11,692)
---------- ----------
Total adjustment for net decrease in interest expense.... $ 156,873 $ 88,374
========== ==========
</TABLE>
- ---------------
(a) The Company incurred additional bank borrowings of $133,000 to
distribute to CMHC to retire outstanding borrowings under the
Chancellor Broadcasting/Viacom Interim Financing and $31,000 to finance
estimated acquisition costs related to the Chancellor Merger.
(b) The Company incurred additional bank borrowings of $149,601 to finance
the payment of $11.00 in cash for each outstanding share of Katz Common
Stock and $7,500 to finance estimated acquisition costs related to the
Katz Acquisition.
(13) On October 9, 1998, the Company acquired approximately a 22.4% non-voting
equity interest in Z Spanish Media Corporation ("Z Spanish Media") for
$25,000 in cash (the "Z Spanish Acquisition"). Z Spanish Media, which is
headquartered in Sacramento, California, is the owner and operator of 22
Hispanic format radio stations in California, Texas, Arizona and Illinois.
The Z Spanish Acquisition is accounted for on the equity method.
Accordingly, approximately 22.4% of the net loss of Z Spanish of $3,952 and
$1,911 for the year ended December 31, 1997 and for the nine months ended
September 30, 1998, respectively, is recorded as Other Expense.
P-23
<PAGE> 183
(14) 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.
(15) Reflects the elimination of preferred stock dividends and accretion on the
12% Preferred Stock and the 12 1/4% Preferred Stock of $40,222 and $16,702
for the year ended December 31, 1997 and the nine months ended September
30, 1998, respectively, in connection with the exchange of the 12%
Preferred Stock and 12 1/4% Preferred Stock into 12% Debentures and 12 1/4%
Debentures, respectively, and the subsequent repurchase of all the 12%
Debentures and 12 1/4% Debentures.
ADJUSTMENTS TO UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS RELATED TO
THE PENDING TRANSACTIONS
(16) The detail of the historical financial data of the companies to be acquired
in the Pending Transactions for the year ended December 31, 1997 and the
nine months ended September 30, 1998 has been obtained from the historical
financial statements of the respective companies and is summarized below:
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
------------------------------------------------ --------------
CAPSTAR/SFX CLEVELAND PHOENIX CHICAGO
TRANSACTION ACQUISITIONS ACQUISITION DISPOSITION PENDING
HISTORICAL HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS
YEAR ENDED DECEMBER 31, 1997 1/1 - 12/31(a) 1/1 - 12/31(b) 1/1 - 12/31(c) 1/1 - 12/31(d) HISTORICAL
---------------------------- -------------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Gross revenues................................. $60,701 $33,728 $13,796 $(15,231) $ 92,994
Less: agency commissions....................... (7,657) (4,102) (1,656) 1,990 (11,425)
------- ------- ------- -------- --------
Net revenues................................... 53,044 29,626 12,140 (13,241) 81,569
Operating expenses excluding depreciation and
amortization................................. 37,857 16,433 7,132 (16,248) 45,174
Depreciation and amortization.................. 7,564 673 184 (592) 7,829
Corporate general and administrative........... -- 481 -- -- 481
------- ------- ------- -------- --------
Operating income............................... 7,623 12,039 4,824 3,599 28,085
Interest expense............................... 10 714 -- -- 724
Interest income................................ -- (513) -- -- (513)
Other (income) expense......................... -- (1,357) -- -- (1,357)
------- ------- ------- -------- --------
Income (loss) before income taxes.............. 7,613 13,195 4,824 3,599 29,231
Income tax expense............................. -- 75 1,750 -- 1,825
------- ------- ------- -------- --------
Net income (loss).............................. $ 7,613 $13,120 $ 3,074 $ 3,599 $ 27,406
======= ======= ======= ======== ========
Broadcast cash flow............................ $15,187 $13,193 $ 5,008 $ 3,007 $ 36,395
======= ======= ======= ======== ========
</TABLE>
P-24
<PAGE> 184
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
--------------------------------------------- -------------
CAPSTAR/SFX CLEVELAND PHOENIX CHICAGO
TRANSACTION ACQUISITIONS ACQUISITION DISPOSITION PENDING
HISTORICAL HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998 1/1 - 5/29(a) 1/1 - 9/30(b) 1/1 - 9/30(c) 1/1 - 8/20(d) HISTORICAL
------------------------------------ ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Gross revenues..................................... $23,382 $27,008 $10,310 $(10,931) $49,769
Less: agency commissions........................... (2,866) (3,539) (1,117) 1,221 (6,301)
------- ------- ------- -------- -------
Net revenues....................................... 20,516 23,469 9,193 (9,710) 43,468
Operating expenses excluding depreciation and
amortization..................................... 14,269 12,696 5,243 (13,026) 19,182
Depreciation and amortization...................... 3,101 174 146 (367) 3,054
------- ------- ------- -------- -------
Operating income (loss)............................ 3,146 10,599 3,804 3,683 21,232
Interest expense................................... 4 156 275 -- 435
Interest income.................................... 1 (46) -- -- (45)
Other (income) expense............................. -- 873 -- -- 873
------- ------- ------- -------- -------
Income (loss) before income taxes.................. 3,141 9,616 3,529 3,683 19,969
Income tax expense................................. -- -- 1,271 -- 1,271
------- ------- ------- -------- -------
Net income (loss).................................. $ 3,141 $ 9,616 $ 2,258 $ 3,683 $18,698
======= ======= ======= ======== =======
Broadcast cash flow................................ $ 6,247 $10,773 $ 3,950 $ 3,316 $24,286
======= ======= ======= ======== =======
</TABLE>
- ---------------
(a) On February 20, 1998, the Company entered into an agreement to acquire from
Capstar KTXQ-FM and KBFB-FM in Dallas/Ft. Worth, KODA-FM, KKRW-FM and
KQUE-FM in Houston, KPLN-FM and KYXY-FM in San Diego and WDRV-FM, WJJJ-FM,
WXDX-FM and WDVE-FM in Pittsburgh (collectively, the "Capstar/SFX
Stations") for an aggregate purchase price of approximately $637,500 in a
series of purchases and exchanges over a period of three years (the
"Capstar/SFX Transaction"). The Capstar/SFX Stations were acquired by
Capstar as part of Capstar's acquisition of SFX on May 29, 1998. On May 29,
1998, the Company completed the Houston Exchange (defined above) and began
operating the remaining ten Capstar/SFX Stations under time brokerage
agreements. The Company also provided a loan to Capstar in the principal
amount of $150,000 (the "Capstar Loan") as part of the Capstar/SFX
Transaction. A portion of the Capstar Loan will be prepaid in connection
with the Company's acquisition of, and the proceeds of such prepayment
would be used by the Company as a portion of the purchase price for, each
Capstar/SFX Station. The Company is currently assessing whether the terms
of the Capstar/SFX Transaction will be modified upon the consummation of
the Capstar Merger by Chancellor Media. The purchase price for the
remaining ten Capstar/SFX Stations will be approximately $494,250.
(b) On August 11, 1998, the Company entered into an agreement to acquire four
FM and two AM radio stations in Cleveland for an aggregate purchase price
of approximately $275,000 in cash plus working capital of $10,877 plus
various other direct acquisition costs (the "Cleveland Acquisitions"). The
Cleveland Acquisitions consist of the purchase by the Company of (i)
WDOK-FM and WRMR-AM from Independent Group Limited Partnership, (ii)
WZAK-FM from Zapis Communications, (iii) Zebra Broadcasting Corporation
which owns WZJM-FM and WJMO-AM and (iv) Wincom Broadcasting Corporation
which owns WQAL-FM (the "Wincom Acquisition"). The consummation of each of
the Cleveland Acquisitions (other than the Wincom Acquisition) is
contingent upon the consummation of each of the other Cleveland
Acquisitions (other than the Wincom Acquisition). The Company began
operating WQAL-FM under a time brokerage agreement effective October 1,
1998.
(c) On September 15, 1998, the Company entered into an agreement to acquire
KKFR-FM and KFYI-AM in Phoenix from The Broadcast Group, Inc. for $90,000
in cash plus various other direct acquisition costs (the "Phoenix
Acquisition"). The Company began operating KKFR-FM and KFYI-AM under a time
brokerage agreement effective November 5, 1998.
(d) On August 20, 1998, the Company entered into an agreement to sell WMVP-AM
in Chicago to ABC, Inc. for $21,000 in cash (the "Chicago Disposition").
The Company entered into a time
P-25
<PAGE> 185
brokerage agreement to sell substantially all of the broadcast time of
WMVP-AM effective September 10, 1998.
(17) Reflects incremental amortization related to the assets acquired in the
Pending Transactions and is based on the allocation of the total
consideration as follows:
<TABLE>
<CAPTION>
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1997 PERIOD(i) NET EXPENSE(i) EXPENSE INCREASE
- ---------------------------- ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Capstar/SFX Transaction................. 1/1-12/31 $483,835 $32,256 $5,874 $26,382
Cleveland Acquisitions.................. 1/1-12/31 309,547 20,636 292 20,344
Chicago Disposition..................... 1/1-12/31 (2,844) (190) (339) 149
Phoenix Acquisition..................... 1/1-12/31 88,212 5,881 103 5,778
-------- ------- ------ -------
Total........................... $878,750 $58,583 $5,930 $52,653
======== ======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
NINE MONTHS ENDED SEPTEMBER 30, 1998 PERIOD(i) NET EXPENSE(i) EXPENSE INCREASE
- ------------------------------------ ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Capstar/SFX Transaction................ 1/1-9/30 $483,835 $24,192 $3,627 $20,565
Cleveland Acquisitions................. 1/1-9/30 309,547 15,477 19 15,458
Chicago Disposition.................... 1/1-9/30 (2,844) (142) (189) 47
Phoenix Acquisition.................... 1/1-9/30 88,212 4,411 78 4,333
-------- ------- ------ -------
Total.......................... $878,750 $43,938 $3,535 $40,403
======== ======= ====== =======
</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 company was not owned by the
Company.
Historical depreciation expense of the Pending Transactions is assumed to
approximate depreciation expense on a pro forma basis. Actual depreciation
and amortization may differ based upon final purchase price allocations.
(18) Reflects the adjustment to interest expense in connection with the
consummation of the Pending Transactions:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
Additional bank borrowings related to:
Pending Acquisitions................................... $720,214 $720,214
Pending Dispositions................................... (21,000) (21,000)
-------- --------
Total additional bank borrowings....................... $699,214 $699,214
======== ========
Interest expense at 7.0%............................... $ 48,945 $ 36,708
Less: historical interest expense related to completed
station acquisitions and dispositions.................. (724) (434)
-------- --------
Total adjustment for net increase in interest expense.... $ 48,221 $ 36,274
======== ========
</TABLE>
(19) 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-26
<PAGE> 186
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
Report of Independent Accountants......................... F-3
Independent Auditors' Report.............................. F-4
Consolidated Balance Sheets as of December 31, 1996 and
1997................................................... F-5
Consolidated Statements of Operations for the years ended
December 31, 1995, 1996 and 1997....................... F-6
Consolidated Statements of Stockholder's Equity for the
years ended December 31, 1995, 1996 and 1997........... F-7
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1996 and 1997....................... F-8
Notes to Consolidated Financial Statements................ F-9
Report of Independent Accountants......................... F-31
Schedule II -- Valuation and Qualifying Accounts.......... F-32
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets as of December 31,
1997 and September 30, 1998............................ F-33
Unaudited Consolidated Statements of Operations for the
three and nine months ended September 30, 1997 and
1998................................................... F-34
Unaudited Consolidated Statements of Cash Flows for the
nine months ended September 30, 1997 and 1998.......... F-35
Notes to Unaudited Consolidated Financial Statements...... F-36
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
Report of Independent Accountants......................... F-47
Consolidated Balance Sheets as of December 31, 1995 and
1996................................................... F-48
Consolidated Statements of Operations for the years ended
December 31, 1994, 1995 and 1996....................... F-49
Consolidated Statements of Changes in Common Stockholder's
Equity for the years ended December 31, 1994, 1995 and
1996................................................... F-50
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996....................... F-51
Notes to Consolidated Financial Statements................ F-52
Unaudited Consolidated Balance Sheets as of December 31,
1996 and June 30, 1997................................. F-68
Unaudited Consolidated Statements of Operations for the
three and six months ended June 30, 1996 and 1997...... F-69
Unaudited Consolidated Statements of Changes in
Stockholder's Equity for the six months ended June 30,
1997................................................... F-70
Unaudited Consolidated Statements of Cash Flows for the
six months ended June 30, 1996 and 1997................ F-71
Notes to Unaudited Consolidated Financial Statements...... F-72
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
Independent Auditors' Report.............................. F-78
Combined Balance Sheets as of December 31, 1995 and 1996
and June 30, 1997 (unaudited).......................... F-79
Combined Statements of Earnings for the years ended
December 31, 1994, 1995 and 1996 and the six months
ended June 30, 1996 and 1997 (unaudited)............... F-80
Combined Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996 and the six months
ended June 30, 1996 and 1997 (unaudited)............... F-81
Notes to Combined Financial Statements.................... F-82
WMZQ INC. AND VIACOM BROADCASTING EAST INC.:
Independent Auditors' Report.............................. F-87
Combined Balance Sheets as of December 31, 1995 and 1996
and June 30, 1997 (unaudited).......................... F-88
</TABLE>
F-1
<PAGE> 187
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Combined Statements of Earnings for the years ended
December 31, 1994, 1995 and 1996 and the six months
ended June 30, 1996 and 1997 (unaudited)............... F-89
Combined Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996 and the six months
ended June 30, 1996 and 1997 (unaudited)............... F-90
Notes to Combined Financial Statements.................... F-91
WDAS-AM/FM (STATION OWNED AND OPERATED BY BEASLEY FM
ACQUISITION CORP.):
Independent Auditors' Report.............................. F-96
Balance Sheets as of December 31, 1996 and March 31, 1997
(unaudited)............................................ F-97
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-98
Statements of Cash Flows for the year ended December 31,
1996 and the three months ended March 31, 1996 and 1997
(unaudited)............................................ F-99
Notes to Financial Statements............................. F-100
KYSR INC. AND KIBB INC.:
Independent Auditors' Report.............................. F-104
Combined Balance Sheets as of December 31, 1995 and 1996
and June 30, 1997 (unaudited).......................... F-105
Combined Statements of Operations for the years ended
December 31, 1994, 1995 and 1996 and the six months
ended June 30, 1996 and 1997 (unaudited)............... F-106
Combined Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996 and the six months
ended June 30, 1996 and 1997 (unaudited)............... F-107
Notes to Combined Financial Statements.................... F-108
WLIT INC.:
Independent Auditors' Report.............................. F-113
Balance Sheets as of December 31, 1995 and 1996 and June
30, 1997 (unaudited)................................... F-114
Statements of Earnings for the years ended December 31,
1994, 1995 and 1996 and the six months ended June 30,
1996 and 1997 (unaudited).............................. F-115
Statements of Cash Flows for the years ended December 31,
1994, 1995 and 1996 and the six months ended June 30,
1996 and 1997 (unaudited).............................. F-116
Notes to Financial Statements............................. F-117
COLFAX COMMUNICATIONS, INC. RADIO GROUP
Report of Independent Public Accountants.................. F-122
Combined Balance Sheets as of December 31, 1996, 1995, and
1994................................................... F-123
Combined Statements of Income for the years ended December
31, 1996, 1995, and 1994............................... F-124
Combined Statements of Changes in Partners' Equity for the
years ended December 31, 1996, 1995, and 1994.......... F-125
Combined Statements of Cash Flows for the years ended
December 31, 1996, 1995, and 1994...................... F-126
Notes to Combined Financial Statements.................... F-127
OUTDOOR ADVERTISING DIVISION OF WHITECO INDUSTRIES, INC.
Independent Auditors' Report.............................. F-133
Balance Sheets as of December 31, 1996 and 1997 and
September 30, 1998 (unaudited)......................... F-134
Statements of Income for the years ended December 31,
1995, 1996, 1997 and the nine months ended September
30, 1997 and 1998 (unaudited).......................... F-135
Statements of Cash Flows for the years ended December 31,
1995, 1996, 1997 and the nine months ended September
30, 1997 and 1998 (unaudited).......................... F-136
Notes to Financial Statements............................. F-137
</TABLE>
F-2
<PAGE> 188
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Chancellor Media Corporation of Los Angeles:
We have audited the accompanying consolidated balance sheet of Chancellor
Media Corporation of Los Angeles and subsidiaries (collectively, the "Company")
as of December 31, 1997, and the related consolidated statements of operations,
stockholder's equity and cash flows for the year ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company as of December 31, 1997, and the consolidated results of its
operations and its cash flows for the year ended December 31, 1997 in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
February 10, 1998, except for notes 2(b)
paragraphs 1 and 3-5 as to which the date
is February 20, 1998 and 9(a) as to
which the date is March 13, 1998
F-3
<PAGE> 189
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Chancellor Media Corporation of Los Angeles:
We have audited the accompanying consolidated balance sheet of Chancellor
Media Corporation of Los Angeles (formerly Evergreen Media Corporation of Los
Angeles) and subsidiaries as of December 31, 1996, and the related consolidated
statements of operations, stockholder's equity and cash flows for the years
ended December 31, 1995 and 1996. In connection with our audits of the
consolidated financial statements, we have also audited the financial statement
schedule as of and for the years ended December 31, 1995 and 1996. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule 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 Chancellor
Media Corporation of Los Angeles and subsidiaries as of December 31, 1996, and
the results of their operations and their cash flows for the years ended
December 31, 1995 and 1996 in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
KPMG PEAT MARWICK LLP
Dallas, Texas
January 31, 1997
F-4
<PAGE> 190
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 3,060 $ 16,584
Accounts receivable, less allowance for doubtful accounts
of $2,292 in 1996 and $12,651 in 1997.................. 85,159 239,869
Other current assets (note 3)............................. 6,352 27,208
---------- ----------
Total current assets.............................. 94,571 283,661
Property and equipment, net (note 4)........................ 48,193 159,797
Intangible assets, net (note 5)............................. 853,643 4,404,443
Other assets, net (note 3).................................. 24,552 113,576
---------- ----------
$1,020,959 $4,961,477
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses (note 6)............ $ 26,650 $ 171,017
Current portion of long-term debt (note 7)................ 26,500 --
---------- ----------
Total current liabilities......................... 53,150 171,017
Long-term debt, excluding current portion (note 7).......... 331,500 2,573,000
Deferred tax liabilities (note 11).......................... 86,098 361,640
Other liabilities........................................... 800 44,405
---------- ----------
Total liabilities................................. 471,548 3,150,062
---------- ----------
Redeemable preferred stock (note 8):
Redeemable senior cumulative exchangeable preferred stock
of subsidiary, par value $.01 per share; 1,000,000
shares authorized, issued and outstanding in 1997;
liquidation preference of $121,274..................... -- 119,445
Redeemable cumulative exchangeable preferred stock of
subsidiary, par value $.01 per share; 3,600,000 shares
authorized and 2,117,629 shares issued and outstanding
in 1997; liquidation preference of $223,519............ -- 211,763
Stockholder's equity (note 9):
Common stock, $.01 par value. Authorized 1,040 shares;
issued and outstanding 1,000 shares in 1996 and 1,040
shares in 1997......................................... 1 1
Paid-in capital........................................... 662,922 1,637,628
Accumulated deficit....................................... (113,512) (157,422)
---------- ----------
Total stockholder's equity........................ 549,411 1,480,207
---------- ----------
Commitments and contingencies (notes 2, 7 and 12)...........
$1,020,959 $4,961,477
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 191
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Gross revenues.............................................. $186,365 $337,405 $663,804
Less agency commissions................................... 23,434 43,555 81,726
-------- -------- --------
Net revenues........................................... 162,931 293,850 582,078
-------- -------- --------
Operating expenses:
Station operating expenses excluding depreciation and
amortization........................................... 97,674 174,344 316,248
Depreciation and amortization............................. 47,005 93,749 185,982
Corporate general and administrative...................... 4,475 7,797 21,442
-------- -------- --------
Operating expenses..................................... 149,154 275,890 523,672
-------- -------- --------
Operating income....................................... 13,777 17,960 58,406
-------- -------- --------
Nonoperating (income) expenses:
Interest expense.......................................... 19,199 37,527 85,017
Interest income........................................... (55) (477) (1,922)
Gain on disposition of assets (note 2).................... -- -- (18,380)
Other expense, net........................................ 291 -- 383
-------- -------- --------
Nonoperating expenses, net............................. (19,435) (37,050) (65,098)
-------- -------- --------
Loss before income taxes and extraordinary item........ (5,658) (19,090) (6,692)
Income tax expense (benefit) (note 11)...................... 192 (2,896) 7,802
-------- -------- --------
Loss before extraordinary item......................... (5,850) (16,194) (14,494)
Extraordinary item -- loss on extinguishment of debt, net of
income tax benefit (note 7)............................... -- -- 4,350
-------- -------- --------
Net loss............................................... (5,850) (16,194) (18,844)
Preferred stock dividends (note 8).......................... -- -- 12,901
-------- -------- --------
Net loss attributable to common stock.................. $ (5,850) $(16,194) $(31,745)
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 192
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
--------------- PAID-IN ACCUMULATED STOCKHOLDER'S
AMOUNT SHARES CAPITAL DEFICIT EQUITY
------ ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
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............. -- -- 974,706 -- 974,706
Dividend to Parent............................ -- -- -- (12,165) (12,165)
Issuance of common stock in connection with
the Katz Acquisition........................ -- 40 -- -- --
Net loss...................................... -- -- -- (31,745) (31,745)
-- ----- ---------- --------- ----------
Balances at December 31, 1997................. $1 1,040 $1,637,628 $(157,422) $1,480,207
== ===== ========== ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 193
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (5,850) $ (16,194) $ (18,844)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation........................................... 5,508 7,707 14,918
Amortization of goodwill, intangible assets and other
assets............................................... 41,497 86,042 171,064
Provision for doubtful accounts........................ 904 2,179 5,174
Deferred income tax benefit............................ (479) (4,353) (3,829)
Gain on disposition of assets.......................... -- -- (18,380)
Loss on extinguishment of debt, net of income tax
benefit.............................................. -- -- 4,350
Changes in certain assets and liabilities, net of
effects of acquisitions:
Accounts receivable.................................. (6,628) (28,146) (29,977)
Other current assets................................. 724 (2,804) 733
Accounts payable and accrued expenses................ 3,711 3,991 20,004
Other assets......................................... (184) (354) (4,283)
Other liabilities.................................... 490 (587) (1,416)
--------- --------- -----------
Net cash provided by operating activities......... 39,693 47,481 139,514
--------- --------- -----------
Cash flows from investing activities:
Acquisitions, net of cash acquired........................ (188,004) (457,764) (1,631,505)
Escrow deposits on pending acquisitions................... -- (17,000) (4,655)
Proceeds from sale of assets.............................. -- 32,000 269,250
Payments made on purchases of representation contracts.... -- -- (31,456)
Payments received on sales of station representation
contracts.............................................. -- -- 9,296
Capital expenditures...................................... (2,642) (6,543) (11,666)
Other..................................................... (1,466) (12,631) (22,273)
--------- --------- -----------
Net cash used by investing activities............. (192,112) (461,938) (1,423,009)
--------- --------- -----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt.................. 186,000 447,750 2,945,250
Principal payments on long-term debt...................... (159,000) (290,750) (1,901,250)
Cash contributed by parent................................ 132,766 264,938 293,158
Dividends to parent....................................... (4,830) (3,820) (14,572)
Payments for debt issuance costs.......................... (303) (3,941) (25,567)
Redemption of preferred stock............................. -- (90) --
--------- --------- -----------
Net cash provided by financing activities......... 154,633 414,087 1,297,019
--------- --------- -----------
Increase (decrease) in cash and cash equivalents............ 2,214 (370) 13,524
Cash and cash equivalents at beginning of year.............. 1,216 3,430 3,060
--------- --------- -----------
Cash and cash equivalents at end of year.................... $ 3,430 $ 3,060 $ 16,584
========= ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 194
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Chancellor Media Corporation of Los Angeles (formerly known as Evergreen
Media Corporation of Los Angeles) ("CMCLA"), a wholly-owned subsidiary of
Chancellor Media Corporation ("Chancellor Media"), and its subsidiaries
(collectively, the "Company") own and operate commercial radio stations in
various geographical regions across the United States. The Company's station
portfolio as of December 31, 1997 included 96 stations (68 FM and 28 AM)
comprising a total of 11 station clusters of four or five FM stations
("superduopolies") in seven of the 12 largest radio markets -- Los Angeles, New
York, Chicago, San Francisco, Philadelphia, Washington, D.C. and Detroit -- and
in four other large markets -- Denver, Minneapolis/St. Paul, Phoenix and
Orlando. The Company also owns Katz Media Group, Inc. ("KMG" and, together with
its operating subsidiaries, "Katz"), a full-service media representation firm
that sells national spot advertising time for its clients in the television,
radio and cable industries.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of CMCLA and its
subsidiaries 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,
representation contracts and other identifiable intangible assets. Intangible
assets resulting from acquisitions are valued based upon estimated fair values.
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 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,
1995, 1996 and 1997, the Company recognized amortization of debt issuance costs
of $631, $1,113 and $1,337, respectively, which amounts are included in
amortization expense in the accompanying consolidated statements of operations.
F-9
<PAGE> 195
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(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.
(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 which impacted
operations.
(h) Revenue Recognition
Revenue is derived primarily from the sale of radio advertising time to
local and national advertisers and from commissions on sales of advertising time
for radio and television stations and cable television systems under
representation contracts by the Company's media representation firm, Katz.
Revenue is recognized as advertisements 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) Representation Contracts
Representation contracts typically may be terminated by either party upon
written notice one year after receipt of such notice. In accordance with
industry practice, in lieu of termination, an arrangement is typically made for
the purchase of such contracts by the successor representation firm. Under such
arrangements, the purchase price paid by the successor representation firm is
based upon the historic commission income projected over the remaining contract
period, including the evergreen notice period, plus 2 months.
Income resulting from the disposition of representation contracts is
recognized as other revenue over the remaining life of the contracts sold. Other
revenue on the disposition of representation contracts included in gross revenue
in the accompanying consolidated statement of operations was $153 for the year
ended December 31, 1997. Costs of obtaining representation contracts are
deferred and amortized over the related period of benefit. Amortization of costs
of obtaining representation contracts included in depreciation and amortization
in the accompanying consolidated statement of operations was $380 for the year
ended December 31, 1997.
(j) 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 $19,134, $37,042 and $84,610 for interest in
1995, 1996 and 1997, respectively. The Company paid approximately $733 and
$11,079 for income taxes in 1996 and 1997, respectively.
F-10
<PAGE> 196
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(k) 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.
(l) Omission of Per Share Information
Net loss per share is not presented as such information is not meaningful.
All of the issued and outstanding shares of the Company's common stock have been
owned, directly or indirectly, by Chancellor Media during the three-year period
ended December 31, 1997.
(m) 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 uncollectible trade receivables are maintained. At December 31, 1995, 1996
and 1997, no receivable from any customer exceeded 5% of stockholders' equity
and no customer accounted for more than 10% of net revenues in 1995, 1996 or
1997.
(n) Stock Option Plan
The Company does not have any stock compensation plans under which it
grants stock awards to employees. Chancellor Media grants stock options to the
Company's officers and other key employees on behalf of the Company.
Prior to January 1, 1996, Chancellor Media 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. SFAS No. 123, Accounting for Stock-Based Compensation, permits
entities to recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant or 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.
Chancellor Media has elected to continue to apply the provisions of APB Opinion
No. 25 and provide the pro forma disclosures of SFAS No. 123.
(o) Recently Issued Accounting Principles
The Company adopted the provisions of SFAS No. 129, Disclosures of
Information about Capital Structure, effective for the year ended December 31,
1997. This Statement consolidates existing pronouncements on required
disclosures about a company's capital structure including a brief discussion of
rights and
F-11
<PAGE> 197
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
privileges for securities outstanding. The adoption of this Statement had no
material effect on the Company's consolidated financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
Reporting Comprehensive Income. This Statement requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. SFAS No. 130 is effective for
financial statement periods beginning after December 15, 1997. Management does
not anticipate that this Statement will have a significant effect on the
Company's consolidated financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information. This
Statement establishes standards for reporting information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial reports issued to
stockholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. SFAS No. 131 is
effective for fiscal years beginning after December 15, 1997. Management does
not anticipate that this Statement will have a significant effect on the
Company's consolidated financial statements.
(p) Reclassifications
Certain reclassifications have been made to prior years' consolidated
financial statements to conform to the current year presentation.
(2) ACQUISITIONS AND DISPOSITIONS
(a) Completed Transactions
In May 1995, the Company 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 Chancellor Media's Common Stock,
resulting in total cash payments of $94,813 and the issuance of 11,222,018
shares of Chancellor Media's Common Stock valued at $6.25 per share. In
addition, the Company retired existing BPI debt of $81,926 and incurred various
other direct acquisition costs. The total purchase price, including closing
costs, allocated to net assets acquired was approximately $258,634.
On January 17, 1996, the Company 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 in cash.
On May 3, 1996, the Company acquired WKLB-FM in Boston from Fairbanks
Communications for $34,000 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 exchange was accounted for as a
like-kind exchange and no gain or loss was recognized upon consummation of the
transaction. 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.
F-12
<PAGE> 198
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On July 19, 1996, the Company sold WHTT-FM and WHTT-AM in Buffalo to
Mercury Radio for $19,500 in cash, and on August 1, 1996, the Company sold
WSJZ-FM in Buffalo to American Radio Systems for $12,500 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 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 (including interest costs during the holding period of
approximately $1,169) 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 from
Crescent Communications for $44,000 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 from affiliates
of the Rivers Group for $65,000 in cash plus various other direct acquisition
costs.
On January 31, 1997, the Company acquired WWWW-FM and WDFN-AM in Detroit
from affiliates of Chancellor Radio Broadcasting Company ("CRBC") for $30,000 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 and KDFC-FM/AM in San
Francisco from affiliates of the Brown Organization for $115,000 in cash plus
various other direct acquisition costs. The Company had previously been
operating KKSF-FM and KDFC-FM/AM under a time brokerage agreement since November
1, 1996. On July 21, 1997, the Company sold KDFC-FM to Bonneville International
Corporation ("Bonneville") for $50,000 in cash. The assets of KDFC-FM were
classified as assets held for sale in connection with the purchase price
allocation of the acquisition of KKSF-FM and KDFC-FM/AM and no gain or loss was
recognized by the Company upon consummation of the sale. The combined net income
of KDFC-FM of approximately $934 has been excluded from the consolidated
statement of operations for the year ended December 31, 1997. The excess of the
proceeds over the carrying amount at the date of sale approximated $739
(including interest costs during the holding period of approximately $1,750) and
has been accounted for as an adjustment to the original purchase price of the
acquisition of KKSF-FM and KDFC-FM/AM.
On April 1, 1997, the Company acquired WJLB-FM and WMXD-FM in Detroit from
Secret Communications, L.P. ("Secret") for $168,000 in cash plus various other
direct acquisition costs. The Company had previously been operating WJLB-FM and
WMXD-FM under time brokerage agreements since September 1, 1996.
On April 3, 1997, the Company exchanged WQRS-FM in Detroit (which the
Company acquired on April 3, 1997 from Secret for $32,000 in cash plus various
other direct acquisition costs), to affiliates of Greater Media Radio, Inc. in
return for WWRC-AM in Washington, D.C. and $9,500 in cash. The exchange was
accounted for as a like-kind exchange and no gain or loss was recognized upon
consummation of the transaction. The net purchase price to the Company of
WWRC-AM was therefore $22,500. The Company had previously been operating WWRC-AM
under a time brokerage agreement since June 17, 1996.
On May 1, 1997, the Company acquired WDAS-FM/AM in Philadelphia from
affiliates of Beasley FM Acquisition Corporation for $103,000 in cash plus
various other direct acquisition costs.
F-13
<PAGE> 199
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On May 15, 1997, the Company exchanged five of its six stations in
Charlotte, North Carolina (WPEG-FM, WBAV-FM/AM, WRFX-FM and WFNZ-AM) for two FM
stations in Philadelphia (WIOQ-FM and WUSL-FM) owned by EZ Communications, Inc.
("EZ") in Philadelphia (the "Charlotte Exchange"), and also sold the Company's
sixth radio station in Charlotte, WNKS-FM, to EZ for $10,000 in cash and
recognized a gain of $3,536. The Charlotte Exchange was accounted for as a
like-kind exchange and no gain or loss was recognized upon consummation of the
transaction.
On May 30, 1997, the Company acquired WPNT-FM in Chicago from affiliates of
Century Broadcasting Company for $75,740 in cash (including $1,990 for the
purchase of the station's accounts receivable) plus various other direct
acquisition costs. On June 19, 1997, the Company sold WPNT-FM in Chicago to
Bonneville for $75,000 in cash and recognized a gain of $529.
On June 3, 1997, the Company sold WEJM-FM in Chicago to affiliates of
Crawford Broadcasting for $14,750 in cash and recognized a gain of $9,258.
On July 2, 1997, the Company 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 $612,388 in cash including
various other direct acquisition costs (the "Viacom Acquisition"). The Viacom
Acquisition was financed with (i) bank borrowings under the Senior Credit
Facility (as defined) of $552,559; (ii) $53,750 in escrow funds paid by the
Company on February 19, 1997 and (iii) $6,079 financed through working capital.
In June 1997, Chancellor Media issued 5,990,000 shares of $3.00 Convertible
Exchangeable Preferred Stock for net proceeds of $287,808 which were contributed
to the Company by Chancellor Media and used to repay borrowings under the Senior
Credit Facility and subsequently were reborrowed on July 2, 1997 as part of the
financing of the Viacom Acquisition. On July 7, 1997, the Company sold WJZW-FM
in Washington, D.C. to affiliates of Capital Cities/ABC Radio for $68,000 in
cash. The assets of WJZW-FM, as well as the assets of WZHF-AM and WBZS-AM, which
were sold on August 13, 1997, were accounted for as assets held for sale in
connection with the purchase price allocation of the Viacom Acquisition and no
gain or loss was recognized by the Company upon consummation of the sales. The
combined net income of WJZW-FM, WZHF-AM and WBZS-AM of approximately $153 has
been excluded from the consolidated statement of operations for the year ended
December 31, 1997. The excess of the carrying amounts over the proceeds at the
dates of sale approximated $894 and has been accounted for as an adjustment to
the original purchase price of the Viacom Acquisition.
On July 7, 1997, the Company sold the Federal Communications Commission
("FCC") authorizations and certain transmission equipment previously used in the
operation of KYLD-FM in San Francisco to Susquehanna Radio Corporation
("Susquehanna") for $44,000 in cash and recognized a gain of $1,726.
Simultaneously therewith, CRBC sold the call letters "KSAN-FM" (which CRBC
previously used in San Francisco) to Susquehanna. On July 7, 1997, the Company
and CRBC entered into a time brokerage agreement to enable the Company to
operate KYLD-FM on the frequency previously assigned to KSAN-FM, and on July 7,
1997, CRBC changed the call letters of KSAN-FM to KYLD-FM. Upon the consummation
of the Chancellor Merger (as defined herein), the Company changed the format of
the new KYLD-FM to the format previously operated on the old KYLD-FM.
On July 14, 1997, the Company completed the disposition of WLUP-FM in
Chicago to Bonneville for net proceeds of $80,000 which were held by a qualified
intermediary pending the completion of the deferred exchange of WLUP-FM for
KZPS-FM and KDGE-FM in Dallas. On October 7, 1997, the Company applied the net
proceeds from the disposition of WLUP-FM of $80,000 in cash, plus an additional
$3,500 and various other direct acquisition costs, in a deferred exchange of
WLUP-FM for KZPS-FM and KDGE-FM in Dallas. The exchange was accounted for as a
like-kind exchange and no gain or loss was recognized upon consummation of the
transaction. The Company had previously operated KZPS-FM and KDGE-FM under time
brokerage agreements effective August 1, 1997.
F-14
<PAGE> 200
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On July 21, 1997, the Company entered into a time brokerage agreement with
CRBC whereby the Company began managing certain limited functions of CRBC's
stations KBGG-FM, KNEW-AM and KABL-FM in San Francisco pending the consummation
of the Chancellor Merger (as defined herein), which occurred on September 5,
1997.
On August 13, 1997, the Company sold WBZS-AM and WZHF-AM in Washington,
D.C. (acquired as part of the Viacom Acquisition) and KDFC-AM in San Francisco
to affiliates of Douglas Broadcasting ("Douglas") for $18,000 in the form of a
promissory note. The promissory note bears interest at 7 3/4%, with a balloon
principal payment due four years after closing. At closing, Douglas was required
to post a $1,000 letter of credit for the benefit of the Company that will
remain outstanding until all amounts due under the promissory note are paid.
On August 27, 1997, the Company sold WEJM-AM in Chicago to Douglas for
$7,500 in cash and recognized a gain of $3,331.
On September 5, 1997, pursuant to an Amended and Restated Agreement and
Plan of Merger, dated as of February 19, 1997 and amended and restated on July
31, 1997 (the "Chancellor Merger Agreement"), among Chancellor Broadcasting
Company ("Chancellor"), CRBC, Evergreen Media Corporation ("Evergreen"),
Evergreen Mezzanine Holdings Corporation ("EMHC") and Evergreen Media
Corporation of Los Angeles ("EMCLA"), (i) Chancellor was merged (the "Parent
Merger") with and into EMHC, a direct, wholly-owned subsidiary of Evergreen,
with EMHC remaining as the surviving corporation and (ii) CRBC was merged (the
"Subsidiary Merger") with and into EMCLA, a direct, wholly-owned subsidiary of
EMHC, with EMCLA remaining as the surviving corporation (collectively, the
"Chancellor Merger"). Upon consummation of the Parent Merger, Evergreen was
renamed Chancellor Media Corporation and EMHC was renamed Chancellor Mezzanine
Holdings Corporation ("CMHC"). Upon consummation of the Subsidiary Merger, the
Company was renamed Chancellor Media Corporation of Los Angeles . Consummation
of the Chancellor Merger added 52 radio stations (36 FM and 16 AM) to the
Company's portfolio of stations, including 13 stations in markets in which the
Company previously operated. The total purchase price allocated to net assets
acquired was approximately $1,998,383 which included (i) the conversion of each
outstanding share of Chancellor Common Stock into 0.9091 shares of Chancellor
Media Common Stock, resulting in the issuance of 34,617,460 shares of Chancellor
Media Common Stock at $15.50 per share, (ii) the assumption of long-term debt of
CRBC of $949,000 which included $549,000 of borrowings outstanding under the
CRBC senior credit facility, $200,000 of CRBC's 9 3/8% Senior Subordinated Notes
due 2004 and $200,000 of CRBC's 8 3/4% Senior Subordinated Notes due 2007 (iii)
the issuance of 2,117,629 shares of the Company's 12% Exchangeable Preferred
Stock in exchange for CRBC's substantially identical securities with a fair
value of $215,570 including accrued and unpaid dividends of $3,807, (iv) the
issuance of 1,000,000 shares of the Company's 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock in exchange for CRBC's substantially identical
securities with a fair value of $120,217 including accrued and unpaid dividends
of $772, (v) the issuance of 2,200,000 shares of Chancellor Media's 7%
Convertible Preferred Stock in exchange for Chancellor's substantially identical
securities with a fair value of $111,048 including accrued and unpaid dividends
of $1,048, (vi) the assumption of stock options issued to Chancellor stock
option holders with a fair value of $34,977 and (vii) estimated acquisition
costs of $31,000.
On October 28, 1997, the Company acquired Katz Media Group, Inc. ("KMG") a
full-service media representation firm, in a tender offer transaction for a
total purchase price of approximately $379,101 (the "Katz Acquisition") which
included (i) the conversion of each outstanding share of KMG Common Stock into
the right to receive $11.00 in cash, resulting in total cash payments of
$149,601, (ii) the assumption of long-term debt of KMG of $222,000 which
included $122,000 of borrowings outstanding under the KMG senior credit facility
and $100,000 of 10 1/2% Senior Subordinated Notes due 2007 of Katz Media
Corporation (a subsidiary of KMG) and (iii) estimated acquisition costs of
$7,500.
F-15
<PAGE> 201
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On December 29, 1997, the Company acquired five radio stations from Pacific
and Southern Company, Inc., a subsidiary of Gannett Co., Inc., consisting of
WGCI-FM/AM in Chicago for $140,000, KKBQ-FM/AM in Houston for $110,000 and
KHKS-FM in Dallas for $90,000, for an aggregate purchase price of $340,000 in
cash plus various other direct acquisition costs.
On January 30, 1998, the Company acquired KXPK-FM in Denver from Ever Green
Wireless LLC (which is unrelated to the Company) for $26,000 in cash plus
various other direct acquisition costs, of which $1,655 was previously paid by
CRBC as escrow funds and are classified as other assets at December 31, 1997.
The Company had previously been operating KXPK-FM under a time brokerage
agreement since September 1, 1997.
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>
1995 1996 1997
-------- -------- ----------
<S> <C> <C> <C>
Working capital, including cash of $492 in 1995,
$1,011 in 1996 and $9,724 in 1997................. $ 12,012 $ 11,218 $ 66,805
Property and equipment.............................. 11,684 11,519 118,371
Assets held for sale (note 2)....................... -- 32,000 131,000
Intangible assets................................... 264,650 465,824 3,823,746
Other assets........................................ -- -- 26,742
Deferred tax liability.............................. (29,712) (61,218) (279,371)
Other liabilities................................... -- -- (39,681)
-------- -------- ----------
$258,634 $459,343 $3,847,612
======== ======== ==========
</TABLE>
The pro forma consolidated condensed results of operations data for 1996
and 1997, as if the 1996 and 1997 acquisitions and dispositions discussed above,
the 8 1/8% Notes offering described in note 7(f) and the amendment and
restatement of the Senior Credit Facility described in note 7(a) occurred at
January 1, 1996, follow:
<TABLE>
<CAPTION>
UNAUDITED
----------------------
1996 1997
--------- ----------
<S> <C> <C>
Net revenues................................................ $ 882,054 $1,002,784
Net loss.................................................... (216,229) (149,683)
</TABLE>
The pro forma results are not necessarily indicative of what would have
occurred if the transactions had been in effect for the entire periods
presented.
(b) Pending Transactions
On July 1, 1996, CRBC entered into an agreement with SFX Broadcasting, Inc.
("SFX") pursuant to which CRBC agreed to exchange WAPE-FM and WFYV-FM in
Jacksonville and $11,000 in cash to SFX in return for WBAB-FM, WBLI-FM, WHFM-FM
and WGBB-AM in Nassau/Suffolk (Long Island) (the "SFX Exchange"). The Company
currently operates WBAB-FM, WBLI-FM, WHFM-FM and WGBB-FM pursuant to a time
brokerage agreement effective July 1, 1996 and SFX currently operates WAPE-FM
and WFYV-FM pursuant to a time brokerage agreement effective July 1, 1996. On
November 6, 1997, the Antitrust Division of the United States Department of
Justice (the "DOJ") filed suit against the Company seeking to enjoin, under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
F-16
<PAGE> 202
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Act"), the Company's acquisition of the four Long Island properties from SFX. If
the Company is unable to acquire the four Long Island properties, the SFX
Exchange will not be consummated. Furthermore, under the terms of the Capstar
Transaction (as defined below), upon consummation of Capstar Broadcasting
Corporation's pending acquisition of SFX, the SFX Exchange would be terminated.
On August 6, 1997, the Company paid $3,000 to Bonneville for an option to
exchange WTOP-AM in Washington, KZLA-FM in Los Angeles and WGMS-FM in Washington
and $57,000 in cash for Bonneville's stations WBIX-FM in New York, KLDE-FM in
Houston and KBIG-FM in Los Angeles (the "Bonneville Option"). The Bonneville
Option was exercised on October 1, 1997, and definitive exchange documentation
is presently being negotiated. The Company has entered into time brokerage
agreements to operate KLDE-FM and KBIG-FM effective October 1, 1997 and WBIX-FM
effective October 10, 1997 and has entered into time brokerage agreements to
sell substantially all of the broadcast time of WTOP-AM, KZLA-FM and WGMS-FM
effective October 1, 1997.
On February 17, 1998, the Company entered into an agreement to acquire
WWDC-FM/AM in Washington, D.C. from Capitol Broadcasting Company and its
affiliates for $72,000 in cash (including $4,000 paid by the Company in escrow
on February 18, 1998), plus an amount equal to the value assigned to certain
accounts receivable for the stations (the "Capitol Broadcasting Acquisition").
Consummation of the Capitol Broadcasting Acquisition is conditioned, among other
things, on the consummation of the exchanges of the Company's Washington, D.C.
stations that are subject to the Bonneville Option.
On February 20, 1998, the Company entered into an agreement to acquire from
Capstar Broadcasting Corporation (together with its subsidiaries, "Capstar")
KTXQ-FM and KBFB-FM in Dallas/Ft. Worth, KODA-FM, KKRW-FM and KQUE-AM in
Houston, KPLN-FM and KYXY-FM in San Diego and WVTY-FM, WJJJ-FM, WXDX-FM and
WDVE-FM in Pittsburgh (collectively, the "Capstar/SFX Stations") for an
aggregate purchase price of approximately $637,500 (the "Capstar Transaction").
The Capstar/SFX Stations are presently owned by SFX, and are expected to be
acquired by Capstar as part of Capstar's pending acquisition of SFX (the
"Capstar/SFX Acquisition"). The Capstar/SFX Stations would be acquired by the
Company in a series of purchases and exchanges over a period of three years, and
would be operated by the Company under time brokerage agreements immediately
upon the consummation of the Capstar/SFX Acquisition until acquired by the
Company. As part of the Capstar Transaction, the SFX Exchange would, upon
consummation of the Capstar/SFX Acquisition, be terminated and the Company would
exchange WAPE-FM and WFYV-FM in Jacksonville (valued for purposes of the Capstar
Transaction at $53,000) plus $90,250 in cash for Capstar/SFX Station KODA-FM in
Houston. The Company would pay approximately $494,250 for the remaining ten
Capstar/SFX Stations. As part of the Capstar Transaction, the Company would, at
the consummation of the Capstar/SFX Acquisition, provide a subordinated loan to
Capstar in the principal amount of $250,000 (the "Capstar Loan"). The Capstar
Loan would bear interest at the rate of 12% per annum (subject to increase in
certain circumstances), and would be secured by a senior pledge of common stock
of Capstar's direct subsidiaries and SFX and a senior guarantee by one of
Capstar's direct subsidiaries. A portion of the Capstar Loan would be prepaid by
Capstar in connection with the Company's acquisition of, and the proceeds of
such prepayment would be used by the Company as a portion of the purchase price
for, each Capstar/SFX Station. The Company's obligation to provide the Capstar
Loan is conditioned, among other things, on Capstar's receipt of at least
$650,000 in equity investments that are subordinate to the Capstar Loan between
January 1, 1998 and the consummation of the Capstar/SFX Acquisition. Hicks,
Muse, Tate & Furst, Incorporated ("Hicks Muse"), which is a substantial
shareholder of the Company (see note 14), controls Capstar, and certain
directors of the Company are directors and/or executive officers of Capstar
and/or Hicks Muse.
Consummation of each of the transactions discussed above is subject to
various conditions, including approval from the FCC and the expiration or early
termination of any waiting period required under the HSR Act. Except with
respect to the SFX Exchange, which the Company expects will be terminated in
connection
F-17
<PAGE> 203
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
with the Capstar Transaction, 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.
Escrow funds of $4,655 paid by the Company in connection with the
acquisition of KXPK-FM in Denver on January 30, 1998 and the Bonneville Option
have been classified as other assets in the accompanying balance sheet at
December 31, 1997.
(3) OTHER ASSETS
Other current assets consist of the following at December 31, 1996 and
1997:
<TABLE>
<CAPTION>
1996 1997
------ -------
<S> <C> <C>
Representation contracts receivable......................... $ -- $16,462
Prepaid expenses and other.................................. 6,352 10,746
------ -------
$6,352 $27,208
====== =======
</TABLE>
Other assets consist of the following at December 31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Deferred costs on purchases of representation contracts,
less accumulated amortization of $380 in 1997............. $ -- $ 35,411
Deferred debt issuance costs, less accumulated amortization
of $1,794 in 1996 and $943 in 1997........................ 7,086 24,624
Notes receivable (note 2)................................... -- 18,000
Representation contracts receivable......................... -- 12,187
Escrow deposits............................................. 17,000 4,655
Other....................................................... 466 18,699
------- --------
$24,552 $113,576
======= ========
</TABLE>
(4) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1996 and
1997:
<TABLE>
<CAPTION>
ESTIMATED USEFUL LIFE 1996 1997
--------------------- ------- --------
<S> <C> <C> <C>
Broadcast and other equipment.................. 3-15 years $47,937 $115,440
Buildings and improvements..................... 3-20 years 11,735 24,308
Furniture and fixtures......................... 5-7 years 8,392 29,659
Land........................................... -- 7,379 23,122
------- --------
75,443 192,529
Less accumulated depreciation.................. 27,250 32,732
------- --------
$48,193 $159,797
======= ========
</TABLE>
F-18
<PAGE> 204
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) INTANGIBLE ASSETS
Intangible assets consist of the following at December 31, 1996 and 1997:
<TABLE>
<CAPTION>
ESTIMATED USEFUL LIFE 1996 1997
--------------------- ---------- ----------
<S> <C> <C> <C>
Broadcast licenses......................... 15-40 $ 498,766 $3,507,547
Goodwill................................... 15-40 131,775 717,576
Representation contracts................... 17 -- 105,000
Other intangibles.......................... 1-40 397,062 386,272
---------- ----------
1,027,603 4,716,395
Less accumulated amortization.............. 173,960 311,952
---------- ----------
$ 853,643 $4,404,443
========== ==========
</TABLE>
In addition to broadcast licenses, goodwill and representation contracts,
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).
(6) ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following at December
31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Accounts payable............................................ $17,746 $ 83,738
Accrued payroll............................................. 7,262 31,349
Representation contracts payable............................ -- 21,680
Accrued interest............................................ 1,642 18,130
Accrued dividends........................................... -- 16,120
------- --------
$26,650 $171,017
======= ========
</TABLE>
(7) LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
-------- ----------
<S> <C> <C>
Senior Credit Facility(a)................................... $348,000 $1,573,000
Senior Notes(b)............................................. 10,000 --
9 3/8% Notes(c)............................................. -- 200,000
8 3/4% Notes(d)............................................. -- 200,000
10 1/2% Notes(e)............................................ -- 100,000
8 1/8% Notes(f)............................................. -- 500,000
-------- ----------
Total long-term debt.............................. 358,000 2,573,000
Less current portion........................................ 26,500 --
-------- ----------
$331,500 $2,573,000
======== ==========
</TABLE>
F-19
<PAGE> 205
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(a) Senior Credit Facility
On April 25, 1997, the Company entered into a loan agreement which amended
and restated its prior senior credit facility. Under the amended and restated
agreement, as amended on June 26, 1997, August 7, 1997, October 28, 1997 and
February 10, 1998 (as amended, the "Senior Credit Facility"), the Company
established a $1,250,000 revolving facility (the "Revolving Loan Facility") and
a $500,000 term loan facility (the "Term Loan Facility"). Upon consummation of
the Chancellor Merger, the aggregate commitments under the Revolving Loan
Facility and the Term Loan Facility were increased to $1,600,000 and $900,000,
respectively. In connection with the amendment and restatement of the Senior
Credit Facility, the Company wrote off the unamortized balance of deferred debt
issuance costs of $4,350 (net of a tax benefit of $2,343) as an extraordinary
charge.
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 below, the interest rate on the $900,000
outstanding under the Term Loan at December 31, 1997 was 7.09% on a blended
basis, based on Eurodollar rates, and the interest rate on the $665,000 and
$8,000 of advances outstanding under the Revolving Loan were 7.06% on a blended
basis and 8.63% at December 31, 1997, based on the Eurodollar and prime rates,
respectively. The Company pays fees ranging from 0.25% to 0.375% per annum on
the aggregate unused portion of the loan commitment based upon the leverage
ratio for the most recent quarter end, in addition to an annual agent's fee.
Pursuant to the Senior Credit Facility, the Company is required to enter
into interest hedging agreements that result in fixing or placing a cap on the
Company's floating rate debt so that no less than 50% of the principal amount of
total debt outstanding has a fixed or capped rate. At December 31, 1997,
interest rate swap agreements covering a notional balance of $1,325,000 were
outstanding. These outstanding swap agreements mature from 1998 through 1999 and
require the Company to pay fixed rates of 4.96% to 6.63% while the counterparty
pays a floating rate based on the three-month London Interbank Borrowing Offered
Rate ("LIBOR"). During the years ended December 31, 1995, 1996 and 1997, the
Company recognized charges (income) under its interest rate swap agreements of
$(275), $111 and $2,913, respectively. Because the interest rate swap agreements
are with banks that are lenders under the Senior Credit Facility, the Company is
not exposed to credit loss.
The Term Loan Facility is payable in quarterly installments commencing on
September 30, 2000 and ending June 30, 2005. The Revolving Loan Facility
requires scheduled annual reductions of the commitment amount, payable in
quarterly installments commencing on September 30, 2000 and ending on June 30,
2005. The capital stock of the Company's subsidiaries is pledged to secure the
performance of the Company's obligations under the Senior Credit Facility, and
each of the Company's subsidiaries have guaranteed those obligations.
(b) Senior Notes
The Company issued $20,000 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 through May 1999.
In connection with the amendment and restatement of the Senior Credit Facility,
on April 25, 1997, the Company repaid all amounts outstanding under the Senior
Notes.
(c) 9 3/8% Notes
Upon consummation of the Chancellor Merger, on September 5, 1997, the
Company assumed CRBC's $200,000 aggregate principal amount of 9 3/8% Senior
Subordinated Notes due 2004 (the "9 3/8% Notes"). Interest on the 9 3/8% Notes
is payable semiannually, commencing on April 1, 1996. The 9 3/8% Notes mature on
F-20
<PAGE> 206
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
October 1, 2004 and are redeemable, in whole or in part, at the option of the
Company on or after February 1, 2000, at redemption prices ranging from 104.688%
at February 1, 2000 and declining to 100% on or after February 1, 2003, plus in
each case accrued and unpaid interest. In addition, on or prior to January 31,
1999, the Company may redeem up to 25% of the original aggregate principal
amount of the 9 3/8% Notes at a redemption price of 107.031% plus accrued and
unpaid interest with the net proceeds of one or more public equity offerings of
CMHC or the Company. Upon the occurrence of a change in control (as defined in
the indenture governing the 9 3/8% Notes), the holders of the 9 3/8% Notes have
the right to require the Company to repurchase all or any part of the 9 3/8%
Notes at a purchase price equal to 101% plus accrued and unpaid interest.
(d) 8 3/4% Notes
Upon consummation of the Chancellor Merger, on September 5, 1997, the
Company assumed CRBC's $200,000 aggregate principal amount of 8 3/4% Senior
Subordinated Notes due 2007 (the "8 3/4% Notes"). Interest on the 8 3/4% Notes
is payable semiannually, commencing on December 15, 1997. The 8 3/4% Notes
mature on June 15, 2007 and are redeemable, in whole or in part, at the option
of the Company on or after June 15, 2002, at redemption prices ranging from
104.375% at June 15, 2002 and declining to 100% on or after June 15, 2005, plus
in each case accrued and unpaid interest. In addition, prior to June 15, 2000,
the Company may redeem up to 25% of the original aggregate principal amount of
the 8 3/4% Notes at a redemption price of 108.75% plus accrued and unpaid
interest with the net proceeds of one or more public equity offerings of CMHC or
the Company. Upon the occurrence of a change in control (as defined in the
indenture governing the 8 3/4% Notes) on or prior to June 15, 2000, the 8 3/4%
Notes may be redeemed as a whole at the option of the Company at a redemption
price of 100% plus the Applicable Premium (as defined in the indenture governing
the 8 3/4% Notes) and accrued and unpaid interest. Upon the occurrence of a
change in control after June 15, 2000, the holders of the 8 3/4% Notes have the
right to require the Company to repurchase all or any part of the 8 3/4% Notes
at a purchase price equal to 101% plus accrued and unpaid interest.
(e) 10 1/2% Notes
Upon consummation of the Katz Acquisition, on October 28, 1997, the Company
assumed Katz Media Corporation's $100,000 aggregate principal amount of 10 1/2%
Senior Subordinated Notes due 2007 (the "10 1/2% Notes"). Interest on the
10 1/2% Notes is payable semiannually, commencing on July 15, 1997. The 10 1/2%
Notes mature on January 15, 2007 and are redeemable, in whole or in part, at the
option of the Company on or after January 15, 2002, at redemption prices ranging
from 105.25% at January 15, 2002 and declining to 100% on or after January 15,
2006, plus in each case accrued and unpaid interest. In addition, prior to
January 15, 2000, the Company may redeem up to 35% of the original aggregate
principal amount of the 10 1/2% Notes at a redemption price of 109.5% plus
accrued and unpaid interest with the net proceeds of one or more offerings of
equity interests of Chancellor Media, CMHC or the Company. Upon the occurrence
of a change in control (as defined in the indenture governing the 10 1/2%
Notes), the holders of the 10 1/2% Notes have the right to require the Company
to repurchase all or any part of the 10 1/2% Notes at a purchase price equal to
101% plus accrued and unpaid interest.
(f) 8 1/8% Notes
On December 22, 1997, the Company issued $500,000 aggregate principal
amount of 8 1/8% Senior Subordinated Notes due 2007 (the "8 1/8% Notes") for
estimated net proceeds of $485,000. Interest on the 8 1/8% Notes is payable
semiannually, commencing on June 15, 1998. The 8 1/8% Notes mature on December
15, 2007 and are redeemable, in whole or in part, at the option of the Company
on or after December 15, 2002, at redemption prices ranging from 104.063% at
December 15, 2002 and declining to 100% on or after December 15, 2005, plus in
each case accrued and unpaid interest. In addition, prior to December 15, 2000,
the Company may redeem up to 35% of the original aggregate principal amount of
the 8 1/8% Notes at a
F-21
<PAGE> 207
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
redemption price of 108.125% plus accrued and unpaid interest with the net
proceeds of one or more public equity offerings of Chancellor Media, CMHC or the
Company. Also, upon the occurrence of a change in control (as defined in the
indenture governing the 8 1/8% Notes), the 8 1/8% Notes may be redeemed as a
whole at the option of the Company at a redemption price of 100% plus the
Applicable Premium (as defined in the indenture governing the 8 1/8% Notes) and
accrued and unpaid interest. Upon the occurrence of a change in control after
December 15, 2000, the holders of the 8 1/8% Notes have the right to require the
Company to repurchase all or any part of the 8 1/8% Notes at a purchase price
equal to 101% plus accrued and unpaid interest.
(g) Summarized Financial Information of Subsidiary Guarantors
The 9 3/8% Notes, the 8 3/4% Notes, the 10 1/2% Notes and the 8 1/8% Notes
(collectively, the "Notes") are unsecured obligations of the Company,
subordinated in right of payment to all existing and any future senior
indebtedness of the Company. The Notes are fully and unconditionally guaranteed,
on a joint and several basis, by all of the Company's direct and indirect
subsidiaries other than certain inconsequential subsidiaries (the "Subsidiary
Guarantors"). The Subsidiary Guarantors are wholly-owned subsidiaries of the
Company. Summarized financial information of the Subsidiary Guarantors as of
December 31, 1997 and for the year ended December 31, 1997 is presented below.
Separate financial statements and other disclosures concerning the Subsidiary
Guarantors are not presented because management has determined that they are not
material to investors. There are no significant restrictions on distributions
from each of the Subsidiary Guarantors to the Company.
<TABLE>
<CAPTION>
1997
---------
<S> <C>
Current assets.............................................. 223,913
Noncurrent assets........................................... 987,028
Current liabilities......................................... 89,362
Noncurrent liabilities...................................... 1,130,105
Net revenues................................................ 495,485
Operating income............................................ 58,354
Net loss.................................................... (17,721)
</TABLE>
(h) Other
The Senior Credit Facility and the indentures governing the Notes contain
customary restrictive covenants, which, among other things and with certain
exceptions, limit the ability of the Company and its subsidiaries to incur
additional indebtedness and liens in connection therewith, enter into certain
transactions with affiliates, pay dividends, consolidate, merge or effect
certain asset sales, issue additional stock, effect an asset swap and make
acquisitions. The Company is required under the Senior Credit Facility to
maintain specified financial ratios, including leverage, cash flow and debt
service coverage ratios (as defined).
A summary of the future maturities of long-term debt at December 31, 1997
follows:
<TABLE>
<S> <C>
1998........................................................ $ --
1999........................................................ --
2000........................................................ 67,500
2001........................................................ 157,500
2002........................................................ 180,000
Thereafter.................................................. 2,168,000
</TABLE>
F-22
<PAGE> 208
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) REDEEMABLE PREFERRED STOCK
(a) 12 1/4% Preferred Stock
Upon consummation of the Chancellor Merger, on September 5, 1997, the
Company issued 1,000,000 shares of 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock (the "12 1/4% Preferred Stock") in exchange for
CRBC's substantially identical securities with a fair value of $120,217
including accrued and unpaid dividends of $772. The liquidation preference of
each share of 12 1/4% Preferred Stock is $119.445 plus accrued and unpaid
dividends of $1,829 at December 31, 1997. The dividend rate on the 12 1/4%
Preferred Stock is 12.25% per annum of the liquidation preference and is 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 12 1/4% Preferred Stock and will be deemed
paid in full and will not accumulate. The 12 1/4% Preferred Stock is redeemable
in whole or in part, at the option of the Company on or after February 15, 2001,
at redemption prices ranging from 106.125% at February 15, 2001 and declining to
100.0% of the liquidation preference on or after February 15, 2006, plus in each
case accrued and unpaid dividends. In addition, prior to February 15, 1999, the
Company may redeem up to 25% of the shares of 12 1/4% Preferred Stock originally
issued at a redemption price of 109.8% of the liquidation preference plus
accrued and unpaid dividends with the net proceeds of one or more public equity
offerings of the Company. The Company is required, subject to certain
conditions, to redeem all of the 12 1/4% Preferred Stock outstanding on February
15, 2008, at a redemption price of 100% of the liquidation preference, plus
accrued and unpaid dividends. The 12 1/4% Preferred Stock is exchangeable,
subject to certain conditions, at the option of the Company, in whole but not in
part, for 12 1/4% Subordinated Exchange Debentures due 2008 (the "12 1/4%
Exchange Debentures") at a rate of $1.00 principal amount of 12 1/4% Exchange
Debentures for each $1.00 in liquidation preference of 12 1/4% Preferred Stock.
Upon the occurrence of a change in control (as defined in the certificate of
designation governing the 12 1/4% Preferred Stock), the holders of the 12 1/4%
Preferred Stock have the right to require the Company to repurchase all or any
part of the 12 1/4% Preferred Stock at a price of 101% of the liquidation
preference plus accrued and unpaid dividends. The 12 1/4% Preferred Stock is
senior in liquidation preference to the Common Stock of the Company and to the
12% Preferred Stock.
(b) 12% Preferred Stock
Upon consummation of the Chancellor Merger, on September 5, 1997, the
Company issued 2,117,629 shares of 12% Exchangeable Preferred Stock (the "12%
Preferred Stock") in exchange for CRBC's substantially identical securities with
a fair value of $215,570 including accrued and unpaid dividends of $3,807. The
liquidation preference of each share of 12% Preferred Stock is $100.00 plus
accrued and unpaid dividends of $11,756 at December 31, 1997. The dividend rate
on the 12% Preferred Stock is 12% per annum of the liquidation preference and is
payable semi-annually. 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 12% Preferred Stock. The 12% Preferred Stock is
redeemable in whole or in part, at the option of the Company, on or after
January 15, 2002, at redemption prices ranging from 106% at January 15, 2002 and
declining to 100% of the liquidation preference on or after January 15, 2007,
plus in each case accrued and unpaid dividends. In addition, prior to January
15, 2000, the Company may redeem all but $150,000 of the aggregate liquidation
preference of 12% Preferred Stock at a redemption price of 112% of the
liquidation preference plus accrued and unpaid dividends with the net proceeds
of one or more public equity offerings of the Company. The Company is required,
subject to certain conditions, to redeem all of the 12% Preferred Stock
outstanding on January 15, 2009, at a redemption price of 100% of the
liquidation preference, plus accrued and unpaid dividends. The 12% Preferred
Stock is exchangeable, subject to certain conditions, at the option of the
Company, in whole but not in part, for 12% Subordinated Exchange Debentures due
2009 (the "12% Exchange Debentures") at a rate of $1.00 principal amount of 12%
Exchange Debentures for each $1.00 in liquidation preference of 12% Preferred
Stock. Upon the occurrence of a change in control (as defined in
F-23
<PAGE> 209
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the certificate of designation governing the 12% Preferred Stock), the holders
of the 12% Preferred Stock have the right to require the Company to repurchase
all or any part of the 12% Preferred Stock at a price of 101% of the liquidation
preference plus accrued and unpaid dividends. In addition, upon the occurrence
of a change in control, the Company may redeem the 12% Preferred Stock in whole
but not in part at a redemption price of 112% of the liquidation preference plus
accrued and unpaid dividends. The 12% Preferred Stock is senior in liquidation
preference to the Common Stock of the Company and is subordinate to the 12 1/4%
Preferred Stock.
(9) STOCKHOLDER'S EQUITY
(a) On March 13, 1998, Chancellor Media completed a secondary public
offering of 21,850,000 shares of its Common Stock (the "1998 Offering"). The net
proceeds from the 1998 Offering of approximately $995.1 million were contributed
to the Company by Chancellor Media.
(b) Stock Options
Chancellor Media 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 7,215,000 shares of 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 Chancellor Media Common Stock on the date of issuance.
In May 1995, Chancellor Media 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 450,000 shares of Chancellor Media Common
Stock. Options issued under the Director Plan have exercise prices equal to the
fair market value of Chancellor Media 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.
In connection with the BPI Acquisition, Chancellor Media assumed
outstanding options to purchase 310,276 shares of Chancellor Media Common Stock
(the "BPI Options"). The BPI Options vested and became exercisable on May 12,
1996 and have an expiration date of ten years subsequent to the original date of
issuance by BPI.
In connection with the Chancellor Merger, Chancellor Media assumed
outstanding options to purchase 3,526,112 shares of Chancellor Media Common
Stock (the "Chancellor Options") with a fair value of $34,977. The Chancellor
Options have varying vesting periods as provided in separate stock option
agreements and generally carry an expiration date of ten years subsequent to the
original date of issuance by Chancellor.
The total options available for grant were 3,679,500 and 1,115,894 at
December 31, 1996 and 1997, respectively.
Chancellor Media 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 Chancellor Media
determined compensation cost based on the fair value at the grant date for
F-24
<PAGE> 210
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 1997
------- -------- --------
<S> <C> <C> <C>
Net loss:
As reported.......................................... $(5,850) $(16,194) $(31,745)
Pro forma............................................ (8,787) (20,969) (36,650)
</TABLE>
Pro forma net loss reflects only options granted in 1995, 1996 and 1997.
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 prior to 1995 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: expected volatility of 44.5% for 1995 and 1996 and
41.9% for 1997; risk-free interest rate of 6.0% for 1995 and 1996 and 5.4% for
1997; dividend yield of 0% and expected lives ranging from three to seven years
for 1995, 1996 and 1997.
Following is a summary of activity in the employee option plans and
agreements discussed above for the years ended December 31, 1995, 1996 and 1997:
<TABLE>
<CAPTION>
1995 1996 1997
-------------------- -------------------- --------------------
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.......................... 1,956,000 $ 1.55 2,579,748 $ 3.46 3,559,984 $ 5.97
Granted......................... 516,000 10.08 1,174,500 11.56 2,773,590 22.89
Assumed in acquisitions......... 310,276 4.85 -- -- 3,526,112 9.29
Exercised....................... (51,000) 0.65 (166,806) 4.27 (994,526) 5.43
Canceled........................ (151,528) 4.30 (27,458) 4.96 (38,464) 19.46
--------- ------ --------- ------ --------- ------
Outstanding at end of year...... 2,579,748 $ 3.46 3,559,984 $ 5.97 8,826,696 $12.98
========= ====== ========= ====== ========= ======
Options exercisable at year
end........................... 1,890,000 1,935,484 5,687,960
========= ========= =========
Weighted average fair value of
options granted during the
year.......................... 4.27 4.88 10.25
========= ========= =========
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------- -------------------------
NUMBER WEIGHTED WEIGHTED NUMBER WEIGHTED
OUTSTANDING AT AVERAGE AVERAGE EXERCISABLE AT AVERAGE
RANGE OF DECEMBER 31, REMAINING EXERCISE DECEMBER 31, EXERCISE
EXERCISE PRICES 1997 CONTRACTUAL LIFE PRICE 1997 PRICE
--------------- -------------- ---------------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
$0.01........................... 1,000,000 5.3 years $ 0.01 1,000,000 $ 0.01
$4.13 to 6.17................... 2,186,056 7.2 years 4.58 2,039,692 4.60
$10.67 to 15.81................. 2,378,562 8.3 years 11.49 983,624 11.63
$17.05 to 23.75................. 2,769,078 9.5 years 21.38 1,464,644 22.50
$26.38 to 31.63................. 493,000 9.8 years 28.32 200,000 27.50
--------- ------ --------- ------
8,826,696 12.98 5,687,960 10.44
========= ====== ========= ======
</TABLE>
F-25
<PAGE> 211
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(10) EMPLOYEE BENEFIT PLANS
(a) 401(k) Plan
The Company 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
1995, 1996 or 1997.
(b) Katz Savings and Profit Sharing Plan
Katz has a defined contribution retirement plan, The Katz Media Group
Savings and Profit Sharing Plan (the "Katz Plan"). The Katz Plan covers
substantially all employees of Katz with greater than six months of service. The
Katz Plan permits Katz to match a percentage of a participant's contribution up
to a stated maximum percentage of an employee's salary. Cash contributions
included in to operating expenses approximated $200 for the year ended December
31, 1997. Effective January 1, 1998, the Company elected to discontinue cash
contributions under the matching provision of the Katz Plan. The Company intends
to merge the Katz Plan into the Company's 401(k) Plan during 1998.
(c) Katz Other Postretirement Benefits
Prior to the Company's acquisition of Katz on October 28, 1997, Katz
provided for certain medical, dental and life insurance benefits for employees
who retire beginning at age 55 with a minimum of 15 years of service and for
employees who retire at age 65 with a minimum of 10 years of service. The
Company will continue providing this coverage only for retirees and
beneficiaries currently receiving coverage and those active employees who have,
or will have attained by December 31, 1998, the age and service necessary to
receive coverage.
The accumulated post retirement benefit obligation ("APBO") consists of
$703 for retirees and $337 for active employees fully eligible for benefits for
a total APBO of $1,040 at December 31, 1997. As of December 31, 1997, Katz and
its subsidiaries have not funded any portion of the accumulated postretirement
benefit obligation. The net periodic postretirement benefit cost consists of
interest cost on the APBO of $11 for the year ended December 31, 1997. The APBO
was determined using an assumed discount rate of 6.5% and a health care cost
trend rate of 5% per annum for all future years. The effect of a 1% increase in
the health care cost trend rate would increase the APBO by $368 and would
increase the service and interest cost components of the net periodic
postretirement benefit cost by $24.
(11) INCOME TAXES
Income tax expense (benefit) from continuing operations consists of the
following:
<TABLE>
<CAPTION>
1995 1996 1997
----- ------- -------
<S> <C> <C> <C>
Current tax expense:
Federal............................................... $ 246 $ 485 $ 6,840
State................................................. 425 972 4,791
----- ------- -------
Total current tax expense............................... 671 1,457 11,631
Deferred benefit........................................ (479) (4,353) (3,829)
----- ------- -------
Total income tax expense (benefit)...................... $ 192 $(2,896) $ 7,802
===== ======= =======
</TABLE>
During 1997, the Company incurred an extraordinary loss on extinguishment
of debt. The tax benefit related to the extraordinary loss is approximately
$2,343. This tax benefit, which reduces current taxes payable, is separately
allocated to the extraordinary item.
F-26
<PAGE> 212
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, 1995, 1996 and 1997 as a
result of the following:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Computed "expected" tax benefit....................... $(1,980) $(6,682) $(2,342)
Amortization of goodwill.............................. 788 2,477 5,744
Net operating loss carryforwards for which no tax
benefit was recognized.............................. 923 -- --
State income taxes, net of federal benefit............ 276 632 2,533
Other, net............................................ 185 677 1,867
------- ------- -------
$ 192 $(2,896) $ 7,802
======= ======= =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1996 and
1997 are presented below:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss and credit carryforwards............... $ 13,519 $ 38,552
Accrued compensation primarily relating to stock
options................................................ 1,687 1,720
Differences in book and tax bases related to media
representation contracts............................... -- 39,908
Differences in book and tax bases of lease liabilities.... -- 4,727
Other..................................................... 1,215 3,147
--------- ---------
Total deferred tax assets......................... 16,421 88,054
--------- ---------
Deferred tax liabilities:
Property and equipment and intangibles, primarily
resulting from difference in bases from BPI, Pyramid,
Chancellor Merger and Katz acquisitions................ (101,761) (445,992)
Other..................................................... (758) (3,702)
--------- ---------
Total deferred tax liabilities.................... (102,519) (449,694)
--------- ---------
Net deferred tax liability........................ $ (86,098) $(361,640)
========= =========
</TABLE>
Deferred tax assets and liabilities are computed by applying the U.S.
federal and state income tax rate in effect to the gross amounts of temporary
differences and other tax attributes, such as net operating loss carryforwards.
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, 1997 to be realized as a result of the
reversal during the carryforward period of existing taxable temporary
differences giving rise to deferred tax liabilities and the generation of
taxable income in the carryforward period.
At December 31, 1997, the Company has net operating loss carryforwards
available to offset future taxable income of approximately $85,000, expiring
from 1998 to 2012 and has alternative minimum tax credit carryforwards of
approximately $3,600 that do not expire. All of the net operating loss and tax
credit
F-27
<PAGE> 213
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
carryforwards at December 31, 1997 are subject to annual use limitations under
tax rules governing changes of ownership.
(12) 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 $3,073,
$5,462 and $10,913 during 1995, 1996 and 1997, respectively. Future minimum
lease payments under noncancelable operating leases (with initial or remaining
lease terms in excess of one year) as of December 31, 1997 are as follows:
<TABLE>
<S> <C>
Year ending December 31:
1998...................................................... 30,784
1999...................................................... 28,644
2000...................................................... 26,533
2001...................................................... 25,188
2002...................................................... 23,506
Thereafter................................................ 156,335
</TABLE>
In August 1993, the Company 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 the Company 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 the Company'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, the Company 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 facia 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 the Company'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,
the Company filed a notice of appeal of the denial of the Company's motion for
summary judgment. In October 1997, the N.Y. State Supreme Court, Appellate
Division, granted a portion of the appeal seeking to strike certain damages
sought, but otherwise affirmed the denial of the motion for summary judgement
and sent the case back to the trial court for trial. The Company believes that
it acted within its rights in terminating the agreement.
The Company is 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.
F-28
<PAGE> 214
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(13) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments at December 31, 1996 and 1997. 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>
1996 1997
------------------- -----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Interest rate swaps................................. $ -- $ 199 $ -- $ 3,919
Long-term debt -- Senior Credit Facility............ 348,000 348,000 1,573,000 1,573,000
Long-term debt -- Senior Notes...................... 10,000 10,572 -- --
Long-term debt -- 9 3/8% Notes...................... -- -- 200,000 209,000
Long-term debt -- 8 3/4% Notes...................... -- -- 200,000 205,000
Long-term debt -- 10 1/2% Notes..................... -- -- 100,000 110,000
Long-term debt -- 8 1/8% Notes...................... -- -- 500,000 500,000
Redeemable preferred stock -- 12 1/4% Preferred
Stock............................................. -- -- 119,444 133,000
Redeemable preferred stock -- 12% Preferred Stock... -- -- 211,764 239,821
</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.
Long-term debt: The fair values of the Company's 9 3/8% Notes, 8 3/4%
Notes, 10 1/2% Notes and 8 1/8% Notes are based on December 31, 1997 quoted
market prices. As amounts outstanding under the Company's Senior Credit
Facility agreements bear interest at current market rates, their carrying
amounts approximate fair market value.
Redeemable preferred stock: The fair values of the Company's 12 1/4%
Preferred Stock and 12% Preferred Stock are based on December 31, 1997
quoted market prices.
(14) RELATED PARTY TRANSACTIONS
As of December 31, 1997, Thomas O. Hicks and affiliates of Hicks Muse
beneficially owned an aggregate 18,727,028 shares of Common Stock of Chancellor
Media. Mr. Hicks was elected Chairman of the Board and a director of the Company
upon consummation of the Chancellor Merger.
The Company is subject to a financial monitoring and oversight agreement,
dated April 1, 1996, as amended on September 4, 1997, (the "Financial Monitoring
and Oversight Agreement") with Hicks, Muse & Co. Partners, L.P. ("Hicks Muse
Partners"), an affiliate of Hicks Muse. Pursuant thereto, the Company pays to
Hicks Muse Partners an annual fee of not less than $1,000 , subject to increase
or decrease (but not below $1,000), based upon changes in the Consumer Price
Index. Hicks Muse Partners is also entitled to reimbursement for any
out-of-pocket expenses incurred in connection with rendering services under the
Financial Monitoring and Oversight Agreement. The Financial Monitoring and
Oversight Agreement provides 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 Chancellor Media Common Stock
beneficially owned by them, collectively. The Company paid Hicks Muse Partners
$333 in 1997 pursuant to the Financial
F-29
<PAGE> 215
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Monitoring and Oversight Agreement which is included in corporate general and
administrative expense in the accompanying consolidated statement of operations.
In connection with the consummation of the Chancellor Merger, a Financial
Advisory Agreement among Chancellor, CRBC and HM2/Management Partners, L.P.
("HM2/Management"), an affiliate of Hicks Muse, was terminated. 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 Chancellor
Merger, HM2/Management was paid a fee of $10,000 in cash upon consummation of
the Chancellor Merger which was accounted for as a direct acquisition cost.
Notwithstanding the termination of the Financial Advisory Agreement, the Company
paid Hicks Muse Partners $1,500 for financial advisory services in connection
with the Katz Acquisition which was accounted for as a direct acquisition cost.
Vernon E. Jordan, Jr., a director of the Company, also serves on the board
of directors of Bankers Trust Company and Bankers Trust New York Corporation.
Affiliates of Bankers Trust Company and Bankers Trust New York Corporation have
provided a variety of commercial banking, investment banking and financial
advisory services to the Company, and expect to continue to provide such
services to the Company in the future.
(15) SEGMENT DATA
The Company operated in two principal business segments -- radio
broadcasting and media representation -- in 1997. The Company's radio
broadcasting segment included a portfolio of 96 stations (68 FM and 28 AM) for
which the Company owned at December 31, 1997 in 21 large markets, including each
of the nation's 12 largest radio revenue markets. The Company entered into the
media representation segment with the acquisition of Katz on October 28, 1997.
Katz is a full-service media representation firm serving multiple types of
electronic media, with leading market share in the representation of radio and
television stations and cable television systems. Katz is retained on an
exclusive basis by radio stations, television stations and cable television
systems in over 200 designated market areas throughout the United States,
including at least one radio or television station in each of the 50 largest
designated market areas, to sell national spot advertising air time. The media
representation segment data for 1997 includes the results of operations of Katz
from the date of acquisition.
<TABLE>
<CAPTION>
DEPRECIATION
NET OPERATING AND IDENTIFIABLE CAPITAL
1997 REVENUES INCOME AMORTIZATION ASSETS EXPENDITURES
---- -------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Radio broadcasting....................... $548,856 $52,219 $182,314 $4,465,526 $11,430
Media representation..................... 33,222 6,187 3,668 495,951 436
-------- ------- -------- ---------- -------
Total.......................... $582,078 $58,406 $185,982 $4,961,477 $11,866
======== ======= ======== ========== =======
</TABLE>
(16) QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
<S> <C> <C> <C> <C>
1996:
Net revenues....................................... $ 53,371 $ 72,991 $ 78,768 $ 88,720
Operating income (loss)............................ (8,223) 7,062 9,351 9,770
Net income (loss) attributable to common stock..... (14,273) (2,222) (793) 1,094
1997:
Net revenues....................................... $ 81,897 $106,364 $145,022 $248,795
Operating income................................... 568 16,968 15,002 25,868
Income (loss) before extraordinary item............ (6,011) 9,870 (3,221) (15,132)
Net income (loss) attributable to common stock..... (6,011) 5,520 (6,000) (25,254)
</TABLE>
F-30
<PAGE> 216
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Chancellor Media Corporation of Los Angeles:
Our report on the consolidated financial statements of Chancellor Media
Corporation of Los Angeles and subsidiaries is included in this Registration
Statement. In connection with our audit of such financial statements, we have
also audited the related financial statement schedule of Chancellor Media
Corporation of Los Angeles and subsidiaries as of and for the year ended
December 31, 1997 included herein.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
February 10, 1998, except for notes 2(b)
paragraphs 1 and 3-5 as to which the date
is February 20, 1998 and 9(a) as to
which the date is March 13, 1998
F-31
<PAGE> 217
SCHEDULE II
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS ADDITIONS
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS WRITEOFFS OF PERIOD
----------- ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1997...... $ 2,292 5,174 7,049(1) 1,864 $12,651
======= ===== ======= ===== =======
Year ended December 31, 1996...... $ 2,000 2,179 156(1) 2,043 $ 2,292
======= ===== ======= ===== =======
Year ended December 31, 1995...... $ 835 904 1,644(1) 1,383 $ 2,000
======= ===== ======= ===== =======
Deferred tax asset valuation
allowance:
Year ended December 31, 1997...... $ -- -- -- -- $ --
======= ===== ======= ===== =======
Year ended December 31, 1996...... $ -- -- -- -- $ --
======= ===== ======= ===== =======
Year ended December 31, 1995...... $14,458 -- (14,458) -- $ --
======= ===== ======= ===== =======
</TABLE>
- ---------------
(1) Additions (deductions) result from the application of purchase accounting
relating to the BPI Acquisition in 1995, the Pyramid Acquisition in 1996
and the Chancellor Merger, the Viacom Acquisition and the Katz Acquisition
in 1997.
F-32
<PAGE> 218
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 16,584 $ 13,063
Accounts receivable, less allowance for doubtful accounts
of $12,651 in 1997 and $13,002 in 1998................. 239,869 321,391
Other current assets...................................... 27,208 42,343
---------- ----------
Total current assets.............................. 283,661 376,797
Note receivable from affiliate.............................. -- 150,000
Property and equipment, net................................. 159,797 299,906
Intangible assets, net...................................... 4,404,443 4,916,533
Other assets, net........................................... 113,576 162,142
---------- ----------
$4,961,477 $5,905,378
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 171,017 $ 177,472
Long-term debt.............................................. 2,573,000 3,018,000
Deferred tax liabilities.................................... 361,640 312,731
Other liabilities........................................... 44,405 60,403
---------- ----------
Total liabilities................................. 3,150,062 3,568,606
---------- ----------
Redeemable preferred stock:
Redeemable senior cumulative exchangeable preferred stock
of subsidiary, par value $.01 per share; 1,000,000
shares authorized, issued and outstanding; liquidation
preference of $121,274 in 1997......................... 119,445 --
Redeemable cumulative exchangeable preferred stock of
subsidiary, par value $.01 per share; 3,600,000 shares
authorized and 2,117,629 shares issued and outstanding;
liquidation preference of $223,519 in 1997............. 211,763 --
Stockholder's equity:
Common stock, $.01 par value, 1,040 shares authorized,
issued and outstanding................................. 1 1
Paid-in capital............................................. 1,637,628 2,654,273
Accumulated deficit......................................... (157,422) (317,502)
---------- ----------
Total stockholder's equity........................ 1,480,207 2,336,772
---------- ----------
$4,961,477 $5,905,378
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-33
<PAGE> 219
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1997 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Gross revenues............................... $166,817 $389,551 $382,994 $1,015,562
Less agency commissions.................... (21,795) (45,722) (49,711) (116,466)
-------- -------- -------- ----------
Net revenues....................... 145,022 343,829 333,283 899,096
Operating expenses:
Operating expenses, excluding depreciation
and amortization........................ 73,551 175,062 184,713 491,924
Depreciation and amortization.............. 50,474 118,584 104,386 311,644
Corporate general and administrative....... 5,995 10,109 11,646 25,188
Executive severance charge................. -- -- -- 59,475
-------- -------- -------- ----------
Operating expenses................. 130,020 303,755 300,745 888,231
-------- -------- -------- ----------
Operating income................... 15,002 40,074 32,538 10,865
-------- -------- -------- ----------
Other (income) expense:
Interest expense, net...................... 22,295 48,624 45,036 135,709
Gain on disposition of representation
contracts............................... -- (18,497) -- (29,767)
Other income............................... (5,057) -- (18,380) (3,559)
-------- -------- -------- ----------
Other (income) expense............. 17,238 30,127 26,656 102,383
-------- -------- -------- ----------
Income (loss) before income taxes
and extraordinary item........... (2,236) 9,947 5,882 (91,518)
Income tax expense (benefit)................. 985 1,548 5,244 (15,380)
-------- -------- -------- ----------
Income (loss) before extraordinary
item............................. (3,221) 8,399 638 (76,138)
Extraordinary loss, net of income tax
benefit.................................... -- 15,224 4,350 47,089
-------- -------- -------- ----------
Net loss........................... (3,221) (6,825) (3,712) (123,227)
Preferred stock dividends.................... 2,779 899 2,779 17,601
-------- -------- -------- ----------
Net loss attributable to common
stock............................ $ (6,000) $ (7,724) $ (6,491) $ (140,828)
======== ======== ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-34
<PAGE> 220
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------
SEPTEMBER 30, SEPTEMBER 30,
1997 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (3,712) $ (123,227)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation........................................... 9,091 18,632
Amortization of goodwill, intangible assets and other
assets............................................... 95,295 293,012
Executive severance charge -- stock option
compensation......................................... -- 16,000
Provisions for doubtful accounts....................... 3,409 4,573
Deferred income tax expense (benefit).................. 5,244 (15,380)
Gain on disposition of representation contracts........ -- (29,767)
Gain on disposition of assets.......................... (18,380) --
Loss on extinguishment of debt......................... 4,350 47,089
Other.................................................. -- (1,893)
Changes in certain assets and liabilities, net of
effects of acquisitions:
Accounts receivable.................................. (15,171) (73,528)
Other current assets................................. 4,481 (10,283)
Accounts payable and accrued expenses................ 8,445 12,737
Other assets......................................... 54 (4,114)
Other liabilities.................................... 197 12,608
----------- -----------
Net cash provided by operating activities......... 93,303 146,459
----------- -----------
Cash flows from investing activities:
Acquisitions, net of cash acquired........................ (2,083,701) (905,264)
Escrow deposits on pending acquisitions................... (10,005) --
Payments made on purchases of representation contracts.... -- (25,724)
Proceeds from sale of representation contracts............ -- 20,283
Proceeds from sale of assets.............................. 269,250 --
Issuance of note receivable from affiliate................ -- (150,000)
Capital expenditures...................................... (6,436) (21,684)
Other..................................................... (20,914) (39,750)
----------- -----------
Net cash used by investing activities............. (1,851,806) (1,122,139)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt.................. 2,105,000 1,973,000
Principal payments on long-term debt...................... (606,000) (1,528,000)
Cash contributed by parent................................ 288,898 1,000,645
Repurchase of 12% and 12 1/4% Exchange Debentures......... -- (403,213)
Dividends on preferred stock.............................. -- (31,183)
Dividend to parent........................................ (5,748) (19,253)
Payments for debt issuance costs.......................... (10,567) (19,837)
Other..................................................... (158) --
----------- -----------
Net cash provided by financing activities......... 1,771,425 972,159
----------- -----------
Increase (decrease) in cash and cash equivalents............ 12,922 (3,521)
Cash and cash equivalents at beginning of period............ 3,060 16,584
----------- -----------
Cash and cash equivalents at end of period.................. $ 15,982 $ 13,063
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-35
<PAGE> 221
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
1. BASIS OF PRESENTATION
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 Chancellor Media Corporation of Los Angeles and its subsidiaries
(collectively, "CMCLA") for the periods presented. Chancellor Media Corporation
of Los Angeles is an indirect, wholly owned subsidiary of Chancellor Media
Corporation ("Chancellor Media").
Interim periods are not necessarily indicative of results to be expected
for the year. It is suggested that these financial statements be read in
conjunction with the consolidated financial statements and the notes thereto
included in CMCLA's Annual Report on Form 10-K for the year ended December 31,
1997.
The consolidated financial statements include the accounts of CMCLA and its
subsidiaries, all of which are wholly-owned. All significant intercompany
balances and transactions have been eliminated in consolidation.
CMCLA adopted SFAS No. 130, Reporting Comprehensive Income, effective
January 1, 1998. This statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. CMCLA has no items of comprehensive income for any
period presented and therefore is not required to report comprehensive income.
2. ACQUISITIONS AND DISPOSITIONS
1997 Completed Transactions
On January 31, 1997, CMCLA acquired WWWW-FM and WDFN-AM in Detroit from
affiliates of Chancellor Radio Broadcasting Company ("CRBC") for $30,000 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, CMCLA acquired KKSF-FM and KDFC-FM/AM in San Francisco
from affiliates of the Brown Organization for $115,000 in cash plus various
other direct acquisition costs. CMCLA had previously been operating KKSF-FM and
KDFC-FM/AM under a time brokerage agreement since November 1, 1996. On July 21,
1997, CMCLA sold KDFC-FM to Bonneville International Corporation ("Bonneville")
for $50,000 in cash. The assets of KDFC-FM were classified as assets held for
sale in connection with the purchase price allocation of the acquisition of
KKSF-FM and KDFC-FM/AM and no gain or loss was recognized by CMCLA upon
consummation of the sale.
On April 1, 1997, CMCLA acquired WJLB-FM and WMXD-FM in Detroit from Secret
Communications Limited Partnership ("Secret") for $168,000 in cash plus various
other direct acquisition costs. CMCLA had previously been operating WJLB-FM and
WMXD-FM under time brokerage agreements since September 1, 1996.
On April 3, 1997, CMCLA exchanged WQRS-FM in Detroit (which CMCLA acquired
on April 3, 1997 from Secret for $32,000 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. (now known as WTEM-AM) and $9,500 in
cash. The exchange was accounted for as a like-kind exchange and no gain or loss
was recognized upon consummation of the transaction. The net purchase price to
CMCLA of WWRC-AM was therefore $22,500. CMCLA had previously been operating
WWRC-AM under a time brokerage agreement since June 17, 1996.
F-36
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CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On May 1, 1997, CMCLA acquired WDAS-FM/AM in Philadelphia from affiliates
of Beasley FM Acquisition Corporation for $103,000 in cash plus various other
direct acquisition costs.
On May 15, 1997, CMCLA exchanged five of its six stations in Charlotte,
North Carolina (WPEG-FM, WBAV-FM/AM, WRFX-FM and WFNZ-AM) for two FM stations in
Philadelphia (WIOQ-FM and WUSL-FM) owned by EZ Communications, Inc. ("EZ") in
Philadelphia (the "Charlotte Exchange"), and also sold CMCLA's sixth radio
station in Charlotte, WNKS-FM, to EZ for $10,000 in cash and recognized a gain
of $3,536. The Charlotte Exchange was accounted for as a like-kind exchange and
no gain or loss was recognized upon consummation of the transaction.
On May 30, 1997, CMCLA acquired WPNT-FM in Chicago from affiliates of
Century Broadcasting Company for $75,740 in cash (including $1,990 for the
purchase of the station's accounts receivable) plus various other direct
acquisition costs. On June 19, 1997, CMCLA sold WPNT-FM in Chicago to Bonneville
for $75,000 in cash and recognized a gain of $529.
On June 3, 1997, CMCLA sold WEJM-FM in Chicago to affiliates of Crawford
Broadcasting for $14,750 in cash and recognized a gain of $9,258.
On July 2, 1997, CMCLA 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 $612,388 in cash including
various other direct acquisition costs (the "Viacom Acquisition"). The Viacom
Acquisition was financed with (i) bank borrowings under the Senior Credit
Facility (as defined) of $552,559; (ii) $53,750 in escrow funds paid by CMCLA on
February 19, 1997 and (iii) $6,079 financed through working capital. In June
1997, Chancellor Media issued 5,990,000 shares of $3.00 Convertible Preferred
Stock for net proceeds of $287,808 which were contributed to CMCLA and used to
repay borrowings under the Senior Credit Facility and subsequently were
reborrowed on July 2, 1997 as part of the financing of the Viacom Acquisition.
On July 7, 1997, CMCLA sold WJZW-FM in Washington, D.C. to affiliates of Capital
Cities/ABC Radio for $68,000 in cash. The assets of WJZW-FM, as well as the
assets of WZHF-AM and WBZS-AM, which were also sold on August 13, 1997, were
accounted for as assets held for sale in connection with the purchase price
allocation of the Viacom Acquisition and no gain or loss was recognized by CMCLA
upon consummation of the sales.
On July 7, 1997, CMCLA sold the Federal Communications Commission ("FCC")
authorizations and certain transmission equipment previously used in the
operation of KYLD-FM in San Francisco to Susquehanna Radio Corporation
("Susquehanna") for $44,000 in cash and recognized a gain of $1,726.
Simultaneously therewith, CRBC sold the call letters "KSAN-FM" (which CRBC
previously used in San Francisco) to Susquehanna. On July 7, 1997, CMCLA and
CRBC entered into a time brokerage agreement to enable CMCLA to operate KYLD-FM
on the frequency previously assigned to KSAN-FM, and on July 7, 1997, CRBC
changed the call letters of KSAN-FM to KYLD-FM. Upon the consummation of the
Chancellor Merger (as defined herein), CMCLA changed the format of the new
KYLD-FM to the format previously operated on the old KYLD-FM.
On July 14, 1997, CMCLA completed the disposition of WLUP-FM in Chicago to
Bonneville for net proceeds of $80,000 which were held by a qualified
intermediary pending the completion of the deferred exchange of WLUP-FM for
KZPS-FM and KDGE-FM in Dallas. On October 7, 1997, CMCLA applied the net
proceeds from the disposition of WLUP-FM of $80,000 in cash, plus an additional
$3,500 and various other direct acquisition costs, in a deferred exchange of
WLUP-FM for KZPS-FM and KDGE-FM in Dallas. The exchange was accounted for as a
like-kind exchange and no gain or loss was recognized upon consummation of the
transaction. CMCLA had previously operated KZPS-FM and KDGE-FM under time
brokerage agreements effective August 1, 1997.
On July 21, 1997, CMCLA entered into a time brokerage agreement with CRBC
whereby CMCLA began managing certain limited functions of CRBC's stations
KBGG-FM, KNEW-AM and KABL-FM in
F-37
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CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
San Francisco pending the consummation of the Chancellor Merger (as defined
herein), which occurred on September 5, 1997.
On August 13, 1997, CMCLA sold WBZS-AM and WZHF-AM in Washington, D.C.
(acquired as part of the Viacom Acquisition) and KDFC-AM in San Francisco to
affiliates of Douglas Broadcasting ("Douglas") for $18,000 in the form of a
promissory note. The promissory note, as amended on May 1, 1998, bears interest
at 7 3/4% from the closing date through February 28, 1998 and at 10.0% from
March 1, 1998 through the remainder of the term of the note, with a balloon
principal payment due four years after closing. At closing, Douglas posted a
$1,000 letter of credit for the benefit of CMCLA that will remain outstanding
until all amounts due under the promissory note are paid.
On August 27, 1997, CMCLA sold WEJM-AM in Chicago to Douglas for $7,500 in
cash and recognized a gain of $3,331.
On September 5, 1997, pursuant to an Amended and Restated Agreement and
Plan of Merger, dated as of February 19, 1997 and amended and restated on July
31, 1997 (the "Chancellor Merger Agreement"), among Chancellor Broadcasting
Company ("Chancellor"), CRBC, Evergreen Media Corporation ("Evergreen"),
Evergreen Mezzanine Holdings Corporation ("EMHC") and Evergreen Media
Corporation of Los Angeles ("EMCLA"), (i) Chancellor was merged with and into
EMHC, a direct, wholly-owned subsidiary of Evergreen, with EMHC remaining as the
surviving corporation and (ii) CRBC was merged with and into EMCLA, a direct,
wholly-owned subsidiary of EMHC, with EMCLA remaining as the surviving
corporation (collectively, the "Chancellor Merger"). Upon consummation of the
Chancellor Merger, Evergreen was renamed Chancellor Media Corporation, EMHC was
renamed Chancellor Mezzanine Holdings Corporation ("CMHC") and EMCLA was renamed
Chancellor Media Corporation of Los Angeles ("CMCLA"). Consummation of the
Chancellor Merger added 52 radio stations (36 FM and 16 AM) to CMCLA's portfolio
of stations, including 13 stations in markets in which CMCLA previously
operated. The total purchase price allocated to net assets acquired was
approximately $1,998,383 which included (i) the conversion of each outstanding
share of Chancellor Common Stock into 0.9091 shares of Chancellor Media's Common
Stock, resulting in the issuance of 34,617,460 shares of Chancellor Media's
Common Stock at $15.50 per share, (ii) the assumption of long-term debt of CRBC
of $949,000 which included $549,000 of borrowings outstanding under the CRBC
senior credit facility, $200,000 of CRBC's 9 3/8% Senior Subordinated Notes due
2004 and $200,000 of CRBC's 8 3/4% Senior Subordinated Notes due 2007, (iii) the
issuance of 2,117,629 shares of CMCLA's 12% Exchangeable Preferred Stock in
exchange for CRBC's substantially identical securities with a fair value of
$215,570 including accrued and unpaid dividends of $3,807, (iv) the issuance of
1,000,000 shares of CMCLA's 12 1/4% Series A Senior Cumulative Exchangeable
Preferred Stock in exchange for CRBC's substantially identical securities with a
fair value of $120,217 including accrued and unpaid dividends of $772, (v) the
issuance of 2,200,000 shares of Chancellor Media's 7% Convertible Preferred
Stock in exchange for Chancellor's substantially identical securities with a
fair value of $111,048 including accrued and unpaid dividends of $1,048, (vi)
the assumption of stock options issued to Chancellor stock option holders with a
fair value of $34,977 and (vii) estimated acquisition costs of $31,000.
On October 28, 1997, Chancellor Media and CMCLA acquired Katz Media Group,
Inc. ("KMG"), a full-service media representation firm, in a tender offer
transaction for a total purchase price of approximately $379,101 (the "Katz
Acquisition") which included (i) the conversion of each outstanding share of KMG
Common Stock into the right to receive $11.00 in cash, resulting in total cash
payments of $149,601, (ii) the assumption of long-term debt of KMG and its
subsidiaries of $222,000 which included $122,000 of borrowings outstanding under
the KMG senior credit facility and $100,000 of 10 1/2% Senior Subordinated Notes
due 2007 of Katz Media Corporation (a subsidiary of KMG) and (iii) estimated
acquisition costs of $7,500.
On December 29, 1997, CMCLA acquired five radio stations from Pacific and
Southern Company, Inc., a subsidiary of Gannett Co., Inc., consisting of
WGCI-FM/AM in Chicago for $140,000, KKBQ-FM/AM in
F-38
<PAGE> 224
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Houston for $110,000 and KHKS-FM in Dallas for $90,000, for an aggregate
purchase price of $340,000 in cash plus various other direct acquisition costs.
1998 Completed Transactions
On January 30, 1998, CMCLA acquired KXPK-FM in Denver from Ever Green
Wireless LLC (which is unrelated to the Company) for $26,000 in cash plus
various other direct acquisition costs, of which $1,650 was previously paid by
CRBC as escrow funds and are classified as other assets at December 31, 1997.
CMCLA had previously operated KXPK-FM under a time brokerage agreement since
September 1, 1997.
On April 3, 1998, CMCLA exchanged WTOP-AM in Washington, KZLA-FM in Los
Angeles and WGMS-FM in Washington plus $63,000 in cash (including $3,000 paid by
CMCLA in escrow and classified as other assets at December 31, 1997) to
Bonneville for WBIX-FM in New York, KLDE-FM in Houston and KBIG-FM in Los
Angeles (the "Bonneville Exchange"). CMCLA had previously operated KLDE-FM and
KBIG-FM under time brokerage agreements since October 1, 1997 and WBIX-FM since
October 10, 1997, and had sold substantially all of the broadcast time of
WTOP-AM, KZLA-FM and WGMS-FM to Bonneville since October 1, 1997.
On April 13, 1998, CMCLA and Secret entered into a settlement agreement
regarding WFLN-FM in Philadelphia. Previously in August 1996, CMCLA and Secret
had entered into an agreement under which CMCLA would acquire WFLN-FM from
Secret for $37,750 in cash. In April 1997, CMCLA entered into an agreement to
sell WFLN-FM to Greater Media for $41,800 in cash. On July 16, 1997, Secret
purported to terminate the sale of WFLN-FM to CMCLA. CMCLA subsequently brought
suit against Secret to enforce its rights to acquire WFLN-FM. Pursuant to a
court settlement entered in August 1997 and the settlement agreement between
CMCLA and Secret entered on April 13, 1998, (i) Secret sold WFLN-FM directly to
Greater Media for $37,750, (ii) Greater Media deposited $4,050 (the difference
between CMCLA's proposed acquisition price for WFLN-FM from Secret and CMCLA's
proposed sale price for WFLN-FM to Greater Media) with the court and (iii) CMCLA
received $3,500 of such amount deposited by Greater Media with the court, plus
interest earned during the period which the court held such amounts (the "WFLN
Settlement"), and Secret received the balance of such amounts.
On May 29, 1998, as part of the Capstar/SFX Transaction (defined below),
CMCLA exchanged WAPE-FM and WFYV-FM in Jacksonville (valued for purposes of the
Capstar/SFX Transaction at $53,000) plus $90,250 in cash to Capstar Broadcasting
Corporation (together with its subsidiaries, "Capstar") in return for KODA-FM in
Houston (the "Houston Exchange"). Furthermore, on May 29, 1998, Capstar sold
KKPN-FM in Houston (acquired by Capstar as part of Capstar's acquisition (the
"SFX Acquisition") of SFX Broadcasting, Inc. ("SFX")) due to the attributable
ownership of Hicks, Muse, Tate & Furst, Incorporated ("Hicks Muse") in both
Capstar and CMCLA in order to comply with the FCC's multiple ownership limits.
In connection with Capstar's sale of KKPN-FM, CMCLA received a commission from
Capstar of $1,730. On May 29, 1998, CMCLA also provided a loan to Capstar in the
principal amount of $150,000 as part of the Capstar/SFX Transaction (the
"Capstar Loan"). The Capstar Loan bears interest at the rate of 12% per annum
(subject to increase in certain circumstances), and is secured by a senior
pledge of common stock of Capstar's direct subsidiary. A portion of the Capstar
Loan will be prepaid by Capstar in connection with CMCLA's acquisition of, and
the proceeds of such prepayment would be used by CMCLA as a portion of the
purchase price for, each Capstar/SFX Station. Hicks Muse, which is a substantial
shareholder of Chancellor Media, controls Capstar, and certain officers and
directors of Chancellor Media and CMCLA are directors and/or executive officers
of Capstar and/or Hicks Muse.
On June 1, 1998, CMCLA acquired WWDC-FM/AM in Washington, D.C. from Capitol
Broadcasting Company and its affiliates for $74,062 in cash (including $2,062
for the purchase of the stations' accounts receivable) plus various other direct
acquisition costs, of which $4,000 was previously paid by CMCLA as
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<PAGE> 225
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
escrow funds and are classified as other assets at December 31, 1997 (the
"Capitol Broadcasting Acquisition").
On May 1, 1998, CMCLA formed a new marketing group division, in an effort
to enhance the revenues the Company derives from its sales promotion activities.
On June 1, 1998, CMCLA acquired Global Sales Development, Inc., a consulting
firm based in Richmond, Virginia, for $675 in cash plus various other direct
acquisition costs to lead its marketing efforts for this new division.
On June 15, 1998, CMCLA's national radio network, The AMFM Radio Networks,
acquired the syndicated programming shows of Global Satellite Network for
$14,000 in cash plus various other direct acquisition costs. The syndicated
programming shows acquired include "Rockline", "Modern Rock Live", "Reelin' in
the Years" and the concert series "Live from the Pit".
On July 31, 1998, CMCLA acquired Martin Media, L.P. and certain affiliated
companies ("Martin Media"), an outdoor advertising company with over 14,500
billboards and outdoor displays in 12 states serving 23 markets, for $591,674 in
cash plus working capital of $19,443 subject to certain adjustments and various
other direct acquisition costs of approximately $10,000.
On August 28, 1998, CMCLA acquired various syndicated programming shows of
Casey Kasem and the related programming libraries for $7,150 in cash and $7,000
in the form of a note due August 2000.
In September 1998, CMCLA acquired approximately 325 billboards and outdoor
displays in various markets for approximately $10,166 in cash.
On October 9, 1998, CMCLA acquired approximately a 22.4% non-voting equity
interest in Z-Spanish Media Corporation ("Z Spanish Media") for approximately
$25,000 in cash (the "Z Spanish Acquisition"). Z Spanish Media, which is
headquartered in Sacramento, California, is the owner and operator of 22
Hispanic format radio stations in California, Texas, Arizona and Illinois.
On October 23, 1998, CMCLA acquired Primedia Broadcast Group, Inc. and
certain of its affiliates, which own and operate eight FM stations in Puerto
Rico, for approximately $76,050 in cash less working capital deficit of $1,280
plus various other direct acquisition costs (the "Primedia Acquisition").
In November 1998, CMCLA acquired approximately 290 billboards and outdoor
displays in various markets for approximately $12,978 in cash.
Pending Transactions
On July 31, 1997, Martin Media paid $6,025 to Kunz & Company for an option
to purchase approximately 1,000 display faces of its Kunz Outdoor Advertising
division for $33,289 in cash plus various other direct acquisition costs (the
"Kunz Option"). Although there can be no assurance, CMCLA expects that the
exercise of the Kunz Option will be consummated in the fourth quarter of 1998.
On February 20, 1998, CMCLA entered into an agreement to acquire from
Capstar KTXQ-FM and KBFB-FM in Dallas/Ft. Worth, KODA-FM, KKRW-FM and KQUE-AM in
Houston, KPLN-FM and KYXY-FM in San Diego and WDRV-FM, WJJJ-FM, WXDX-FM and
WDVE-FM in Pittsburgh (collectively, the "Capstar/SFX Stations") for an
aggregate purchase price of approximately $637,500 in a series of purchases and
exchanges over a period of three years (the "Capstar/SFX Transaction"). The
Capstar/SFX stations were acquired by Capstar as part of Capstar's acquisition
of SFX on May 29, 1998. On May 29, 1998, CMCLA completed the Houston Exchange
(defined above) and began operating the remaining ten Capstar/ SFX Stations
under time brokerage agreements. CMCLA is currently assessing whether the terms
of the Capstar/SFX Transaction will be modified upon the consummation of the
Capstar Merger.
On April 8, 1998, CMCLA entered into an agreement to acquire Petry Media
Corporation, a leading independent television representation firm (the "Petry
Acquisition"). The agreement currently provides for a
F-40
<PAGE> 226
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
purchase price of $129.5 million in cash. On June 3, 1998, the Antitrust
Division of the United States Department of Justice (the "DOJ") issued a second
request for additional information under the HSR Act in connection with the
Petry Acquisition to which CMCLA has responded. CMCLA and Petry are still
negotiating with the DOJ regarding this transaction and have agreed to extend
the waiting period under the HSR Act pending completion of these discussions.
Accordingly at this time, CMCLA cannot be sure of the terms on which this
transaction will be completed, if at all.
On July 7, 1998, Chancellor Media entered into an agreement whereby the
ultimate parent of LIN Television Corporation ("LIN") will merge into Chancellor
Media (the "LIN Merger"). Pursuant to this agreement, Chancellor Media will
issue .0300 shares of Chancellor Media Common Stock for each share of LIN's
Common Stock resulting in the issuance of approximately 17,700,000 shares
(comprised of approximately 16,200,000 newly issued shares, the assumption of
LIN phantom stock units representing approximately 425,000 shares and the
assumption of LIN options representing the right to purchase approximately
1,075,000 shares). Upon consummation of the LIN Merger, it is expected that LIN
will own or operate 12 television stations in eight markets in the United
States. Although there can be no assurance, Chancellor Media expects that the
LIN Merger will be consummated in the first quarter of 1999.
On August 11, 1998, CMCLA entered into agreements to acquire four FM and
two AM radio stations in Cleveland for an aggregate purchase price of
approximately $275,000 in cash plus various other direct acquisition costs (the
"Cleveland Acquisitions"). The Cleveland Acquisitions consist of the purchase by
the Company of (i) WDOK-FM and WRMR-AM from Independent Group Limited
Partnership, (ii) WZAK-FM from Zapis Communications, (iii) Zebra Broadcasting
Corporation which owns WZJM-FM and WJMO-AM and (v) Wincom Broadcasting
Corporation which owns WQAL-FM (the "Wincom Acquisition"). The consummation of
each of the Cleveland Acquisitions (other than the Wincom Acquisition) is
contingent upon the consummation of each of the other Cleveland Acquisitions
(other than the Wincom Acquisition). CMCLA began operating WQAL-FM under a time
brokerage agreement effective October 1, 1998. Although there can be no
assurance, CMCLA expects that the Cleveland Acquisitions will be consummated in
the first quarter of 1999.
On August 20, 1998, CMCLA entered into an agreement to sell WMVP-AM in
Chicago to ABC, Inc. for $21,000 in cash (the "Chicago Disposition"). CMCLA
entered into a time brokerage agreement to sell substantially all of the
broadcast time of WMVP-AM effective September 10, 1998. Although there can be no
assurance, CMCLA expects that the Chicago Disposition will be consummated in the
fourth quarter of 1998.
On August 26, 1998, Chancellor Media and Capstar entered into an agreement
to merge in a stock-for-stock transaction that will create the nation's largest
radio broadcasting entity. Pursuant to this agreement, Chancellor Media will
acquire Capstar in a reverse merger in which Capstar will be renamed Chancellor
Media Corporation. Each share of Chancellor Media Common Stock will represent
one share in the combined entity. Each share of Capstar Common Stock will
represent 0.480 shares of Common Stock in the combined entity, subject to an
upward adjustment not to exceed 0.025 shares to the extent that Capstar's 1998
cash flow from specified assets exceeds certain specified targets. Capstar owns
and operates more than 355 radio stations serving 83 mid-sized markets
nationwide. Although there can be no assurance, Chancellor Media expects that
the Capstar Merger will be consummated in the second quarter of 1999.
On August 31, 1998, CMCLA entered into an agreement to acquire the assets
of the Outdoor Advertising Division of Whiteco Industries, Inc., an outdoor
advertising company with over 21,800 billboards and outdoor displays in 34
states, for $930,000 in cash plus working capital and various other direct
acquisition costs (the "Whiteco Acquisition"). The DOJ has requested that CMCLA
and Whiteco submit certain additional information on a voluntary basis in
connection with the DOJ's review of the Whiteco Acquisition. CMCLA and Whiteco
have responded to this request and are currently in discussions with the DOJ
regarding the terms on which this transaction may be completed. Although there
can be no assurance, CMCLA expects that the Whiteco Acquisition will be
consummated in the fourth quarter of 1998.
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CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On September 3, 1998, CMCLA entered into an agreement to acquire Pegasus, a
television broadcasting company which owns a television station in Puerto Rico,
for approximately $69,600 in cash (the "Pegasus Acquisition"). Although there
can be no assurance, CMCLA expects that the Pegasus Acquisition will be
consummated in the first quarter of 1999. In connection with the LIN Merger,
CMCLA may assign its rights under its agreement with Pegasus to LIN.
On September 15, 1998, CMCLA entered into an agreement to acquire KKFR-FM
and KFYI-AM in Phoenix from The Broadcast Group, Inc. for $90,000 in cash (the
"Phoenix Acquisition"). CMCLA began operating KKFR-FM and KFYI-AM under a time
brokerage agreement effective November 5, 1998. Although there can be no
assurance, CMCLA expects that the Phoenix Acquisition will be consummated in the
second quarter of 1999.
The foregoing are collectively referred to herein as the "Pending
Transactions." Consummation of each of the Pending Transactions discussed above
is subject to various conditions, including, in certain cases, approval from the
FCC and the expiration or early termination of any waiting period required under
the HSR Act. Except as described above, CMCLA believes that such conditions will
be satisfied in the ordinary course, but there can be no assurance that this
will be the case.
Escrow funds of $6,025 related to the Kunz Option are classified as other
assets in the accompanying balance sheet at September 30, 1998. Escrow funds of
$4,650 paid by CMCLA in connection with the Bonneville Exchange and the Capitol
Broadcasting Acquisition were classified as other assets in the accompanying
balance sheet at December 31, 1997.
Other Transactions
On July 10, 1998, Chancellor Media entered into an agreement to acquire a
50% economic interest in Grupo Radio Centro, S.A. de C.V. ("GRC"), an owner and
operator of radio stations in Mexico, for approximately $120.5 million in cash
and $116.5 million in Chancellor Media Common Stock. On October 15, 1998,
Chancellor Media announced that it had provided notice to GRC that it was
terminating the acquisition agreement in accordance with its terms.
Summary of Net Assets Acquired
The completed 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>
YEAR NINE MONTHS
ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
Working capital, including cash of $9,724 in 1997
and $6,505 in 1998................................ $ 66,805 $ 19,223
Property and equipment.............................. 118,371 137,060
Assets held for sale................................ 131,000 --
Intangible assets................................... 3,823,746 751,808
Other assets........................................ 26,742 6,025
Deferred tax liability.............................. (279,371) --
Other liabilities................................... (39,681) (697)
---------- --------
$3,847,612 $913,419
========== ========
</TABLE>
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<PAGE> 228
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The pro forma consolidated condensed results of operations data for the
nine months ended September 30, 1997 and 1998, as if the 1997 Completed
Transactions and the 1998 Completed Transactions discussed above, the 8 1/8%
Notes Offering, the amendment and restatement of the Senior Credit Facility and
the 1998 Financing Transactions (as defined herein) occurred at January 1, 1997,
follow:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1997 1998
-------------- -------------
<S> <C> <C>
Net revenues...................................... $ 826,026 $ 963,063
Net loss.......................................... (143,303) (119,198)
</TABLE>
The pro forma results are not necessarily indicative of what would have
occurred if the acquisitions had been in effect for the entire periods
presented.
3. FINANCING TRANSACTIONS
1998 Completed Financing Transactions
On March 13, 1998, Chancellor Media completed an offering of 21,850,000
shares of its Common Stock (the "1998 Equity Offering"). The net proceeds from
the 1998 Equity Offering of approximately $994,642 were contributed to CMCLA and
were used to reduce bank borrowings under the revolving credit portion of the
Senior Credit Facility (as defined) and the excess proceeds were initially
invested in short-term investment grade securities. The Company subsequently
used the excess proceeds for general corporate purposes, including the financing
of the Bonneville Exchange, the Capstar Loan and a portion of the Houston
Exchange.
On May 8, 1998, CMCLA completed a consent solicitation (the "12% Preferred
Stock Consent Solicitation") to modify certain timing restrictions on its
ability to exchange all shares of its 12% Exchangeable Preferred Stock (the "12%
Preferred Stock") for its 12% Subordinated Exchange Debentures due 2009 (the
"12% Debentures"). Consenting holders of 12% Preferred Stock received payments
of $0.05 per share of 12% Preferred Stock. On May 13, 1998, CMCLA exchanged the
shares of 12% Preferred Stock for 12% Debentures (the "12% Exchange"). In
connection with the 12% Preferred Stock Consent Solicitation and 12% Exchange,
CMCLA incurred approximately $270 in transaction costs which were recorded as
deferred debt issuance costs.
On June 10, 1998, CMCLA completed a cash tender offer (the "12% Debentures
Tender Offer") for all of its 12% Debentures for an aggregate repurchase cost of
$262,495 which included (i) the principal amount of the 12% Debentures of
$211,763, (ii) premiums on the repurchase of the 12% Debentures of $47,798,
(iii) accrued and unpaid interest on the 12% Debentures from May 14, 1998
through June 10, 1998 of $1,976 and (iv) estimated transaction costs of $958. In
connection with the 12% Debentures Tender Offer, CMCLA recorded an extraordinary
charge of $31,865 (net of a tax benefit of $17,158) consisting of the premiums,
estimated transaction costs and the write-off of the unamortized balance of
deferred debt issuance costs.
On July 20, 1998, CMCLA completed a consent solicitation (the "12 1/4%
Preferred Stock Consent Solicitation") to modify certain timing restrictions on
its ability to exchange all shares of its 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock (the "12 1/4% Preferred Stock") for its 12 1/4%
Subordinated Exchange Debentures due 2008 (the "12 1/4% Debentures"). Consenting
holders of 12 1/4% Preferred Stock received payments of $0.05 per share of
12 1/4% Preferred Stock. On July 23, 1998, CMCLA exchanged the shares of 12 1/4%
Preferred Stock for 12 1/4% Debentures (the "12 1/4% Exchange"). In connection
with the 12 1/4% Preferred Stock Consent Solicitation and 12 1/4% Exchange,
CMCLA incurred approximately $170 in transaction costs which were recorded as
deferred debt issuance costs.
F-43
<PAGE> 229
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On August 19, 1998, CMCLA completed a cash tender offer (the "12 1/4%
Debentures Tender Offer") for all of its 12 1/4% Debentures for an aggregate
repurchase cost of $144,527 which included (i) the principal amount of the
12 1/4% Debentures of $119,445, (ii) premiums on the repurchase of the 12 1/4%
Debentures of $22,683, (iii) accrued and unpaid interest on the 12 1/4%
Debentures from August 16, 1998 through August 19, 1998 of $1,829 and (iv)
estimated transaction costs of $570. In connection with the 12 1/4% Debentures
Tender Offer, CMCLA recorded an extraordinary charge of $15,224 (net of a tax
benefit of $8,199) consisting of the premiums, estimated transaction costs and
the write-off of the unamortized balance of deferred debt issuance costs.
On September 30, 1998, CMCLA issued $750,000 aggregate principal amount of
9% Senior Subordinated Notes due 2008 (the "9% Notes") for net proceeds of
approximately $730,000 (the "9% Notes Offering"). The net proceeds from the 9%
Notes Offering will be used to finance a portion of CMCLA's Pending
Transactions. Prior to consummation of the Pending Transactions, CMCLA used the
net proceeds to temporarily reduce borrowings outstanding under the revolving
credit portion of the Senior Credit Facility.
1998 Pending Financing Transactions
On November 12, 1998, CMCLA signed a definitive purchase agreement that
provides for the issuance of $750,000 of 8% Senior Notes due 2008 (the "8%
Senior Notes Offering"). The net proceeds from the 8% Senior Notes Offering will
be used to reduce bank borrowings under the revolving credit portion of the
Senior Credit Facility and any excess proceeds will be invested in short-term
investment grade securities pending use for general corporate purposes. Although
there can be no assurance, CMCLA expects that the 8% Senior Notes Offering will
be consummated on November 17, 1998.
4. LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1997 and September
30, 1998:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
Senior Credit Facility(a)........................... $1,573,000 $ 1,268,000
9 3/8% Notes(b)..................................... 200,000 200,000
8 3/4% Notes(b)..................................... 200,000 200,000
10 1/2% Notes(b).................................... 100,000 100,000
8 1/8% Notes(b)..................................... 500,000 500,000
9% Notes(b)......................................... -- 750,000
---------- -------------
Total long-term debt...................... $2,573,000 $ 3,018,000
========== =============
</TABLE>
(a) Senior Credit Facility
On April 25, 1997, CMCLA entered into a loan agreement which amended and
restated its prior senior credit facility. Under the amended and restated
agreement, as amended on June 26, 1997, August 7, 1997, October 28, 1997,
February 10, 1998, May 1, 1998, July 31, 1998 and November 9, 1998 (as amended,
the "Senior Credit Facility"), CMCLA established a $1,250,000 revolving facility
(the "Revolving Loan Facility") and a $500,000 term loan facility (the "Term
Loan Facility"). Upon consummation of the Chancellor Merger, the aggregate
commitments under the Revolving Loan Facility and the Term Loan Facility were
increased to $1,600,000 and $900,000, respectively. In connection with the
amendment and restatement of the Senior Credit Facility, CMCLA wrote off the
unamortized balance of deferred debt issuance costs of $4,350 (net of a tax
benefit of $2,343) as an extraordinary charge.
Borrowings under the Senior Credit Facility bear interest at a rate based,
at the option of CMCLA, on the participating banks' prime rate or Eurodollar
rate, plus an incremental rate. Without giving effect to the
F-44
<PAGE> 230
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
interest rate swap and cap agreements described below, the interest rate on the
$900,000 outstanding under the Term Loan Facility at September 30, 1998 was
6.25% on a blended basis, based on Eurodollar rates, and the interest rate on
advances of $355,000 and $13,000 outstanding under the Revolving Loan Facility
were 6.25% and 8.50%, respectively, at September 30, 1998, based on the
Eurodollar and prime rates, respectively. CMCLA pays fees ranging from 0.25% to
0.375% per annum on the aggregate unused portion of the loan commitment based
upon the leverage ratio for the most recent quarter end, in addition to an
annual agent's fee. Pursuant to the Senior Credit Facility, CMCLA is required to
enter into interest hedging agreements that result in the fixing or placing a
cap on CMCLA's floating rate debt so that not less than 50% of the principal
amount of total debt outstanding has a fixed or capped rate.
The Term Loan Facility is payable in quarterly installments commencing on
September 30, 2000 and ending June 20, 2005. The Revolving Loan Facility
requires scheduled annual reductions of the commitment amount, payable in
quarterly installments commencing on September 30, 2000 and ending on June 30,
2005. At October 31, 1998, CMCLA had drawn $900,000 of the Term Loan Facility
and $433,000 of the Revolving Loan Facility. The capital stock of CMCLA's
subsidiaries is pledged to secure the performance of CMCLA's obligations under
the Senior Credit Facility, and each of CMCLA's domestic subsidiaries have
guaranteed those obligations.
(b) Senior Subordinated Notes
Upon consummation of the Chancellor Merger, on September 5, 1997, CMCLA
assumed all of the obligations under CRBC's $200,000 aggregate principal amount
9 3/8% Senior Subordinated Notes due 2004 (the "9 3/8% Notes") and the indenture
governing such securities, and assumed all of the obligations under CRBC's
$200,000 aggregate principal amount 8 3/4% Senior Subordinated Notes due 2007
(the "8 3/4% Notes") and the indenture governing such securities. Upon
consummation of the Katz Acquisition, on October 28, 1997, CMCLA assumed all of
the obligations under Katz Media Corporation's $100,000 aggregate principal
amount of 10 1/2% Senior Subordinated Notes due 2007 (the "10 1/2% Notes") and
the amended and restated indenture governing such securities. On December 22,
1997, CMCLA issued $500,000 aggregate principal amount of 8 1/8 Senior
Subordinated Notes due 2007 (the "8 1/8% Notes") for net proceeds of
approximately $485,000. On September 30, 1998, CMCLA issued $750,000 aggregate
principal amount of 9% Notes for net proceeds of approximately $730,000.
(c) Summarized Financial Information of Subsidiary Guarantors
The 9 3/8% Notes, the 8 3/4% Notes, the 10 1/2% Notes, the 8 1/8% Notes and
the 9% Notes (collectively, the "Notes") are unsecured obligations of CMCLA,
subordinated in right of payment to all existing and any future senior
indebtedness of CMCLA. The Notes are fully and unconditionally guaranteed, on a
joint and several basis, by all of CMCLA's direct and indirect subsidiaries
other than certain inconsequential subsidiaries (the "Subsidiary Guarantors").
The Subsidiary Guarantors are wholly-owned subsidiaries of CMCLA. Summarized
financial information of the Subsidiary Guarantors as of December 31, 1997 and
September 30, 1998 and for the nine months ended September 30, 1998 is presented
below. Separate financial statements and other disclosures concerning the
subsidiary Guarantors are not presented because management has determined that
they are not material to investors. There are no significant restrictions on
distributions from each of the Subsidiary Guarantors to CMCLA.
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
Current assets.............................................. $ 223,913 $ 300,154
Noncurrent assets........................................... 987,028 911,700
Current liabilities......................................... 89,362 90,250
Noncurrent liabilities...................................... 1,130,105 1,129,460
</TABLE>
F-45
<PAGE> 231
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
-------------
SEPTEMBER 30,
1998
-------------
<S> <C>
Net revenues................................................ $724,806
Operating income............................................ 73,563
Net income.................................................. 20,827
</TABLE>
(d) Other
The Senior Credit Facility and the indentures governing the Notes contain
customary restrictive covenants, which, among other things and with certain
exceptions, limit the ability of CMCLA and its subsidiaries to incur additional
indebtedness and liens in connection therewith, enter into certain transactions
with affiliates, pay dividends, consolidate, merge or effect certain asset
sales, issue additional stock, effect an asset swap and make acquisitions. CMCLA
is required under the Senior Credit Facility to maintain specified financial
ratios, including leverage, cash flow and debt service coverage ratios (as
defined).
5. OTHER INCOME
Other income consists of the following for the nine months ended September
30, 1997 and 1998:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------
SEPTEMBER 30, SEPTEMBER 30,
1997 1998
------------- -------------
<S> <C> <C>
Gain on disposition of assets(a)................... $18,380 $ --
WFLN Settlement(b)................................. -- 3,559
------- ------
$18,380 $3,559
======= ======
</TABLE>
- ---------------
(a) For the nine months ended September 30, 1997, CMCLA recorded a gain on
disposition of assets of $18,380 related to the dispositions of WNKS-FM in
Charlotte on May 15, 1997 ($3,536), WPNT-FM in Chicago on May 30, 1997
($529), WEJM-FM in Chicago on June 3, 1997 ($9,258), the FCC authorizations
and certain transmission equipment previously used in the operation of
KYLD-FM in San Francisco on July 2, 1997 ($1,726) and WEJM-AM in Chicago on
August 27, 1997 ($3,331).
(b) For the nine months ended September 30, 1998, CMCLA recorded a gain from
the WFLN Settlement (defined above) of $3,559.
6. CONTINGENCIES
CMCLA is involved in several lawsuits that are incidental to its business.
A discussion of certain of these lawsuits is contained in Part II, Item 1,
"Legal Proceedings", of this Form 10-Q. CMCLA believes that the ultimate
resolution of the lawsuits will not have a material effect on its financial
position or results of operations.
F-46
<PAGE> 232
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-47
<PAGE> 233
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-48
<PAGE> 234
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-49
<PAGE> 235
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-50
<PAGE> 236
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
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-51
<PAGE> 237
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 Six 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-52
<PAGE> 238
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-53
<PAGE> 239
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-54
<PAGE> 240
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-55
<PAGE> 241
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-56
<PAGE> 242
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-57
<PAGE> 243
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-58
<PAGE> 244
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
F-59
<PAGE> 245
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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%, 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.
F-60
<PAGE> 246
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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 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
F-61
<PAGE> 247
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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-62
<PAGE> 248
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-63
<PAGE> 249
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-64
<PAGE> 250
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,
----------------------------------------------------------------------------------------
1994 1995 1996
-------------------------- ---------------------------- ----------------------------
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-65
<PAGE> 251
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-66
<PAGE> 252
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-67
<PAGE> 253
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ ----------
<S> <C> <C>
Current assets:
Cash...................................................... $ 3,789 $ 5,889
Accounts receivable, net of allowance for doubtful
accounts of $1,024 and $1,182, respectively............ 46,585 63,576
Prepaid expenses and other................................ 2,754 2,887
-------- ----------
Total current assets.............................. 53,128 72,352
Restricted cash............................................. 20,363 53,750
Property and equipment, net................................. 49,123 69,581
Intangibles and other, net.................................. 551,406 970,080
Deferred financing costs, net............................... 16,723 16,827
Deferred income tax benefit................................. -- 1,183
-------- ----------
Total assets...................................... $690,743 $1,183,773
======== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................... $ 4,409 $ 4,989
Accrued liabilities....................................... 12,530 16,248
Accrued interest.......................................... 6,869 5,702
Current portion of long-term debt......................... 400 1,928
-------- ----------
Total current liabilities......................... 24,208 28,867
Long-term debt.............................................. 354,914 545,335
Deferred income taxes....................................... 2,606 --
Other....................................................... 802 997
-------- ----------
Total liabilities................................. 382,530 575,199
-------- ----------
Redeemable senior cumulative exchangeable preferred stock,
par value $.01 per share; 1,000,000 shares authorized,
issued and outstanding; preference in liquidation of
$117,670.................................................. 107,222 114,271
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 $210,774............................................... -- 202,891
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................................ 219,519 322,216
Accumulated deficit....................................... (18,529) (30,805)
-------- ----------
Total stockholder's equity........................ 200,991 291,412
-------- ----------
Total liabilities and stockholder's equity........ $690,743 $1,183,773
======== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-68
<PAGE> 254
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1996 1997 1996 1997
------- -------- -------- --------
<S> <C> <C> <C> <C>
Gross broadcasting revenues........................ $50,759 $ 83,538 $ 79,848 $147,015
Less agency commissions............................ 6,333 10,450 9,780 18,073
------- -------- -------- --------
Net revenues.................................. 44,426 73,088 70,068 128,942
------- -------- -------- --------
Operating expenses:
Programming, technical and news.................. 7,865 12,829 13,010 26,700
Sales and promotion.............................. 12,367 20,785 19,310 36,748
General and administrative....................... 6,002 8,051 10,405 16,404
Depreciation and amortization.................... 5,148 8,605 9,675 16,714
Corporate expenses............................... 832 2,222 1,839 3,934
Merger expense................................... -- 459 -- 2,515
Stock option compensation........................ 950 950 1,900 1,900
------- -------- -------- --------
33,164 53,901 56,139 104,915
------- -------- -------- --------
Income from operations........................ 11,262 19,187 13,929 24,027
Other (income) expense:
Interest expense................................. 9,680 12,488 17,327 23,908
Other, net....................................... 92 25 98 (1,607)
------- -------- -------- --------
Income (loss) before provision for income
taxes and extraordinary loss................ 1,490 6,674 (3,496) 1,726
Provision for income taxes......................... 662 3,727 1,601 3,327
------- -------- -------- --------
Income (loss) before extraordinary loss....... 828 2,947 (5,097) (1,601)
Extraordinary loss on early extinguishment of debt,
net of income tax benefit........................ -- 7,926 4,646 10,675
------- -------- -------- --------
Net Income (loss)............................. 828 (4,979) (9,743) (12,276)
Loss on repurchase of preferred stock.............. -- -- 16,570 --
Dividends and accretion on preferred stock......... 3,183 9,987 4,843 18,122
------- -------- -------- --------
Net loss attributable to common stock......... $(2,355) $(14,966) $(31,156) $(30,398)
======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-69
<PAGE> 255
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
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.................................. -- -- (18,122) -- (18,122)
Capital contributions, net................ -- -- 120,819 -- 120,819
Net loss.................................. -- -- -- (12,276) (12,276)
----- -- -------- -------- --------
Balance, June 30, 1997...................... 1,000 $1 $322,216 $(30,805) $291,412
===== == ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-70
<PAGE> 256
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------
1996 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (9,743) $ (12,276)
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 9,675 16,714
Amortization of deferred financing costs............... 1,393 1,236
Stock option compensation.............................. 1,900 1,900
Deferred income taxes.................................. 1,539 3,327
Gain on disposition of stations........................ -- (1,409)
Extraordinary loss..................................... 4,646 10,675
Changes in assets and liabilities, net of the effects
of acquired businesses:
Accounts receivable.................................. (2,632) (3,741)
Prepaids and other................................... (1,380) 365
Accounts payable..................................... (87) (806)
Accrued liabilities.................................. (66) 1,564
Accrued interest..................................... 4,243 (1,167)
--------- ---------
Net cash provided by operating activities......... 9,488 16,382
--------- ---------
Cash flows from investing activities:
Purchases of broadcasting properties...................... (406,140) (582,383)
Dispositions of broadcasting properties................... -- 103,259
Purchases of other property and equipment................. (1,374) (3,690)
--------- ---------
Net cash used in investing activities............. (407,514) (482,814)
Cash flows from financing activities:
Proceeds from issuance of long-term debt.................. 277,628 417,632
Proceeds from borrowings under revolving debt facility.... 46,764 255,441
Repayments of long-term debt.............................. (90,885) (342,856)
Repayments of borrowings under revolving debt facility.... (68,432) (157,399)
Issuances of preferred stock.............................. 175,119 191,817
Repurchase of preferred stock............................. (95,462) --
Additional capital contributions.......................... 155,475 105,672
Distribution of additional paid in capital................ (1,038) (1,775)
Payment of preferred stock dividends...................... (506)
--------- ---------
Net cash provided by financing activities......... 398,663 468,532
--------- ---------
Net increase in cash.............................. 637 2,100
Cash, at beginning of period................................ 1,314 3,789
--------- ---------
Cash, at end of period...................................... $ 1,951 $ 5,889
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-71
<PAGE> 257
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED 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 and six month periods ended June 30, 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 stations
acquired in this transaction, to Clear Channel Radio, Inc. for $41.3 million in
cash. Accordingly, theses 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 31, 1997, the Company completed the sale of WWWW-FM and WDFN-AM
in Detroit to Evergreen Media Corporation ("Evergreen") for $30.0 million in
cash. The pre-tax gain of $1.4 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.
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>
F-72
<PAGE> 258
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 certain costs related to the Merger which
have been expensed in the period incurred.
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") occurred
prior to the consummation of the Merger, the Company would 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 would be required to
purchase the Viacom subsidiaries which own six of the ten Viacom stations for
$595.0 million, plus net working capital. On July 2, 1997, the Company 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").
On March 24, 1997, the Company exchanged the West Palm Beach stations
acquired from Omni for one AM station in Sacramento and approximately $33.0
million in cash from American Radio Systems Corporation (the "American Radio
Exchange").
On July 7, 1997, the Company entered into a time brokerage agreement with
Evergreen whereby Evergreen began managing certain limited functions of the
Company's station in San Francisco which broadcasts on frequency 94.9 (formerly
KSAN-FM).
On July 14, 1997, the Company and Evergreen entered into an agreement
pursuant to which a jointly-owned affiliate of Evergreen and the Company will
acquire Katz Media Group, Inc. ("Katz"), a full-service media representation
firm, in a tender offer transaction valued at approximately $373.0 million. Debt
of Katz of approximately $218.0 million will also be assumed in the transaction.
On July 21, 1997, the Company entered into a time brokerage agreement with
Evergreen whereby Evergreen began managing certain limited functions of the
Company's stations KBGG-FM, KNEW-AM and KABL-AM in San Francisco.
On July 30, 1997, the Company entered into an agreement to acquire KXPK-FM
in Denver from Evergreen Wireless LLC (which is unrelated to Evergreen) for
$26.0 million in cash (including $1.7 million paid by the Company in escrow).
The Company 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, the Company expects that the acquisition will be
completed in the first quarter of 1998, after completion of the Merger.
On August 7, 1997, the Company and Evergreen announced that they had
acquired, for $3.0 million, an option from Bonneville International Corporation
("Bonneville") to exchange Evergreen's station WTOP-AM in Washington, the
Company's stations KZLA-FM in Los Angeles and WGMS-FM in Washington and $57.0
million of cash for Bonneville's stations WDBZ-FM in New York, KLDE-FM in
Houston and KBIG-FM in Los Angeles. The option expires on December 31, 1997.
On August 11, 1997, the Company completed the sale of WDRQ-FM in Detroit to
Capital Cities/ABC for $37.0 million. The proceeds were used to repay borrowings
under Chancellor's Interim Loan (as defined).
F-73
<PAGE> 259
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1997
---------------------- ----------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Net revenue.................................. $ 70,068 $109,422 $128,942 $131,149
Loss before extraordinary loss............... (5,097) (9,428) (1,601) (1,687)
Net loss attributable to common stock........ (31,156) (28,148) (30,398) (22,687)
</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. 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 $4.6 million.
On June 5, 1997, the Company closed on the tender offer for all $60.0
million of its outstanding 12 1/2% Senior Subordinated Notes for approximately
$70.1 million, which included a premium. The redemption was funded through
additional borrowings under the bank credit agreement and resulted in an
extraordinary charge of $11.8 million.
On June 24, 1997, the Company completed its private offering of $200.0
million of Chancellor Radio Broadcasting Company's 8 3/4% Senior Notes, which
mature on June 15, 2007 and bear interest at 8.75% per annum. The proceeds were
used to pay down borrowings under the bank credit agreement, which resulted in
an extraordinary charge to write-off deferred finance costs of $1.4 million.
On July 2, 1997, the Company entered into a restated credit agreement (the
"Restated Credit Agreement") in order to finance the Chancellor Viacom
Acquisition. The Restated Credit Agreement consists of a $400.0 million term
loan facility and a $350.0 million revolving loan facility. Also, Chancellor
received an interim loan of $170.0 million (the "Interim Loan"), the proceeds
from which were contributed to Chancellor Radio Broadcasting in connection with
the Viacom acquisition.
The Restated Credit Agreement 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 Restated Credit
Agreement is also 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 June 2004. All outstanding borrowings under the revolving facility
mature in June 2004. 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 June 30, 1997
accrued interest at the prime rate plus 1.00% (9.50%) on $11.9 million and the
LIBOR rate plus 2.00% (7.6875%) on $135.4 million of borrowings.
F-74
<PAGE> 260
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Interim Loan is an unsecured obligation of Chancellor and is due on the
earlier of the consummation of the Merger or July 2, 1999. Outstanding
borrowings under the Interim Loan bear interest at a rate equal to the
three-month LIBOR plus an applicable margin rate beginning at 3.25% and
increasing to 9.00% at various intervals during the loan period.
Scheduled debt maturities for the Company's outstanding long-term debt
under the Restated Credit Agreement as of July 2, 1997, after completion of the
Chancellor Viacom Acquisition, for each of the next five calendar years and
thereafter were as follows, in thousands:
<TABLE>
<S> <C>
1997........................................................ $ --
1998........................................................ 20,000
1999........................................................ 50,000
2000........................................................ 60,000
2001........................................................ 60,000
2002........................................................ 70,000
Thereafter.................................................. 153,000
--------
$413,000
========
</TABLE>
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. 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%
F-75
<PAGE> 261
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 Company's 12 1/4%
Senior Cumulative Exchangeable Preferred Stock (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. INCOME TAXES
Income tax expense (benefit) differs from the amount computed by applying
the federal statutory income tax rate of 34% to income (loss) before income
taxes and extraordinary loss for the following reasons, dollars in thousands:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS ENDED
ENDED JUNE 30, JUNE 30,
-------------- -----------------
1996 1997 1996 1997
---- ------ ------- ------
<S> <C> <C> <C> <C>
U.S. federal income tax at statutory rate....... $507 $2,269 $(1,189) $ 587
State income taxes, net of federal benefit...... 89 401 (210) 104
Valuation allowance provided for loss
carryforward generated during the current
period........................................ (59) -- 2,750 --
Permanent difference............................ -- 1,072 -- 2,636
Other........................................... 125 (15) 250 --
---- ------ ------- ------
$662 $3,727 $ 1,601 $3,327
==== ====== ======= ======
</TABLE>
6. SUBSEQUENT EVENT
In July 1997, the Company incurred non-cash stock option and severance
compensation of approximately $685,000 and $1.4 million, respectively, for
terminations associated with the Merger. In addition, the Company paid $945,000
for a two year consulting and non-compete agreement which will be deferred and
amortized over the related period.
7. NEW ACCOUNTING PRONOUNCEMENTS
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-76
<PAGE> 262
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Statement of Financial Accounting Standard No. 130, "Reporting
Comprehensive Income" was issued in June 1997, which establishes standards for
reporting and display of comprehensive income and its components (revenues,
expenses, gains, and losses) in a full set of general-purpose financial
statements. The reporting and display requirements of SFAS No. 130 will be
effective for the Company's financial statements beginning with the first
quarterly report for 1998. Management does not believe that the implementation
of SFAS 130 will have a material effect on its financial statements.
F-77
<PAGE> 263
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-78
<PAGE> 264
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
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 $170 in
1997............................... $ 5,507 $ 9,713 $10,489
Prepaid expenses and other current
assets............................. 178 381 162
Deferred income taxes................. 45 829 829
------- ------- -------
Total current assets.......... 5,730 10,923 11,480
Property and equipment, net (note 4).... 1,075 4,177 2,668
Intangible assets, net (note 5)......... 47,422 66,626 74,038
------- ------- -------
$54,227 $81,726 $88,186
======= ======= =======
LIABILITIES AND EQUITY
Current liabilities -- accounts payable
and accrued expenses.................. $ 1,167 $ 3,669 $2,894
Deferred income taxes................... 222 4,373 4,373
Equity (note 9)......................... 52,838 73,684 80,919
Commitments and contingencies (note
10)...................................
------- ------- -------
$54,227 $81,726 $88,186
======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-79
<PAGE> 265
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
COMBINED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gross revenues.......................... $28,254 $25,862 $36,121 $14,274 $25,135
Less agency commissions and national
rep fees........................... 4,700 4,342 5,892 2,107 3,652
------- ------- ------- ------- -------
Net revenues.................. 23,554 21,520 30,229 12,167 21,483
------- ------- ------- ------- -------
Operating expenses:
Station operating expenses excluding
depreciation and amortization...... 9,212 9,069 12,447 5,192 8,893
Depreciation and amortization......... 1,662 1,676 4,528 838 1,290
Corporate general and
administrative..................... 945 980 943 510 442
------- ------- ------- ------- -------
Operating expenses................. 11,819 11,725 17,918 6,540 10,625
------- ------- ------- ------- -------
Operating income................... 11,735 9,795 12,311 5,627 10,858
Other (income) expense (note 3)......... -- -- (741) -- --
------- ------- ------- ------- -------
Earnings before income taxes....... 11,735 9,795 13,052 5,627 10,858
Income tax expense (note 6)............. 6,053 5,154 6,683 2,881 4,336
------- ------- ------- ------- -------
Net earnings.................. $ 5,682 $ 4,641 $ 6,369 $ 2,746 $ 6,522
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-80
<PAGE> 266
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows provided by operating activities:
Net earnings................................... $ 5,682 $ 4,641 $ 6,369 $ 2,746 $ 6,522
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation................................ 153 168 286 84 266
Amortization of goodwill.................... 1,509 1,508 1,811 754 1,024
Changes in certain assets and liabilities:
Deferred income taxes..................... 32 110 (603) -- --
Accounts receivable, net.................. (676) 659 (4,172) (984) (776)
Prepaid expenses and other current
assets................................. 12 103 (203) 128 219
Accounts payable and accrued expenses..... (192) (483) 2,502 765 (775)
------- ------- ------- ------- -------
Net cash provided by operating
activities........................... 6,520 6,706 5,990 3,493 6,480
------- ------- ------- ------- -------
Cash flows used by investing activities --capital
expenditures................................... (150) (129) (695) (250) (417)
------- ------- ------- ------- -------
Net cash used by financing
activities -- distribution to parent........... (6,370) (6,577) (5,295) (3,243) (6,063)
------- ------- ------- ------- -------
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-81
<PAGE> 267
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-82
<PAGE> 268
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 six months ended June 30, 1996 and 1997, reflect
all adjustments, consisting of only normal and recurring items,
F-83
<PAGE> 269
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
which are necessary for a fair presentation of the results for the interim
periods presented. The results for the interim periods ended June 30, 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-84
<PAGE> 270
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-85
<PAGE> 271
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-86
<PAGE> 272
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-87
<PAGE> 273
WMZQ INC. AND VIACOM BROADCASTING EAST INC.
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
------------------ JUNE 30,
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 $136 in
1997............................... $ 4,893 $ 5,401 $ 5,407
Prepaid expenses and other current
assets............................. 467 629 55
Deferred income taxes (note 5)........ 60 94 94
------- ------- -------
Total current assets.......... 5,420 6,124 5,556
Property and equipment, net (note 3).... 2,407 2,316 2,408
Intangible assets, net (note 4)......... 50,204 48,695 50,399
------- ------- -------
$58,031 $57,135 $58,363
======= ======= =======
LIABILITIES AND EQUITY
Current liabilities -- accounts payable
and accrued expenses.................. $ 2,411 $ 2,458 $ 1,814
Deferred income taxes (note 5).......... 1,899 2,121 2,123
Equity (note 8)......................... 53,721 52,556 54,426
Commitments and contingencies (note
9)....................................
------- ------- -------
$58,031 $57,135 $58,363
======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-88
<PAGE> 274
WMZQ INC. AND VIACOM BROADCASTING EAST INC.
COMBINED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gross revenues................................... $21,389 $25,656 $26,584 $13,422 $13,837
Less agency commissions and national rep
fees........................................ 3,321 4,131 4,075 1,624 1,818
------- ------- ------- ------- -------
Net revenues........................... 18,068 21,525 22,509 11,798 12,019
------- ------- ------- ------- -------
Operating expenses:
Station operating expenses excluding
depreciation and amortization............... 10,398 11,445 11,362 6,394 6,043
Depreciation and amortization.................. 1,798 1,814 1,884 906 989
Corporate general and administrative........... 694 940 674 436 240
------- ------- ------- ------- -------
Operating expenses.......................... 12,890 14,199 13,920 7,736 7,272
------- ------- ------- ------- -------
Earnings before income taxes................ 5,178 7,326 8,589 4,062 4,747
Income tax expense (note 5)...................... 2,607 3,437 3,929 1,858 1,556
------- ------- ------- ------- -------
Net earnings........................... $ 2,571 $ 3,889 $ 4,660 $ 2,204 $ 3,191
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-89
<PAGE> 275
WMZQ INC. AND VIACOM BROADCASTING EAST INC.
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------- -----------------
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 $ 2,204 $ 3,191
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation....................... 289 305 375 150 237
Amortization of goodwill........... 1,509 1,509 1,509 756 752
Deferred income tax expense........ 323 302 188 -- --
Changes in certain assets and
liabilities, net of effects of
acquisitions:
Accounts receivable, net......... 179 (1,485) (508) (445) (6)
Prepaid expenses and other
current assets................ 14 (121) (162) (730) 574
Accounts payable and accrued
expenses...................... (559) 20 47 2,446 (644)
------- ------- ------- ------- -------
Net cash provided by operating
activities.................. 4,326 4,419 6,109 4,381 4,104
------- ------- ------- ------- -------
Cash flows used by investing
activities -- capital expenditures.... (194) (491) (284) (142) (232)
------- ------- ------- ------- -------
Cash flows used by financing
activities -- distribution to
Parent................................ (4,132) (3,928) (5,825) (4,239) (3,872)
------- ------- ------- ------- -------
Increase (decrease) in cash............. -- -- -- -- --
Cash at beginning of period............. -- -- -- -- --
------- ------- ------- ------- -------
Cash at end of period................... $ -- $ -- $ -- $ -- $ --
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-90
<PAGE> 276
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-91
<PAGE> 277
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 six months ended June 30, 1996 and 1997, reflect
all adjustments, consisting of only normal and recurring items,
F-92
<PAGE> 278
WMZQ INC. AND VIACOM BROADCASTING EAST INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
which are necessary for a fair presentation of the results for the interim
periods presented. The results for the interim periods ended June 30, 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-93
<PAGE> 279
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-94
<PAGE> 280
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-95
<PAGE> 281
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-96
<PAGE> 282
WDAS-AM/FM
(STATION OWNED AND OPERATED BY
BEASLEY FM ACQUISITION CORP.)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ -----------
(UNAUDITED)
(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-97
<PAGE> 283
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
------------ ------- -------
(UNAUDITED)
(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-98
<PAGE> 284
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-99
<PAGE> 285
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-100
<PAGE> 286
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 June 30, 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-101
<PAGE> 287
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-102
<PAGE> 288
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-103
<PAGE> 289
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-104
<PAGE> 290
KYSR INC. AND KIBB INC.
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
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 $321 in 1997...... $ 6,253 $ 7,283 $ 7,403
Prepaid expenses and other................................ 412 609 18
Deferred income taxes (note 5)............................ 89 101 101
-------- -------- --------
Total current assets.............................. 6,754 7,993 7,522
Property and equipment, net (note 3)........................ 4,172 4,082 4,195
Intangible assets, net (note 4)............................. 116,946 113,644 111,984
Other assets, net........................................... 22 22 22
-------- -------- --------
$127,894 $125,741 $123,723
======== ======== ========
LIABILITIES AND EQUITY
Current liabilities -- accounts payable and accrued
expenses.................................................. $ 3,883 $ 3,624 $ 2,082
Deferred income taxes (note 5).............................. 9,683 11,027 11,027
Equity (note 8)............................................. 114,328 111,090 110,614
Commitments and contingencies (note 9)......................
-------- -------- --------
$127,894 $125,741 $123,723
======== ======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-105
<PAGE> 291
KYSR INC. AND KIBB INC.
COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gross revenues.......................... $28,590 $30,571 $33,769 $15,762 $16,784
Less agency commissions and national
rep fees........................... 4,490 4,882 5,462 2,196 2,385
------- ------- ------- ------- -------
Net revenues.................. 24,100 25,689 28,307 13,566 14,399
------- ------- ------- ------- -------
Operating expenses:
Station operating expenses, excluding
depreciation and amortization...... 13,407 12,901 13,378 6,834 7,119
Depreciation and amortization......... 3,640 3,661 3,627 1,826 1,844
Corporate general and
administrative..................... 892 1,094 844 542 302
------- ------- ------- ------- -------
Operating expenses................. 17,939 17,656 17,849 9,202 9,265
------- ------- ------- ------- -------
Operating income................... 6,161 8,033 10,458 4,364 5,134
Interest expense (note 7)............... 6,374 6,374 6,374 3,187 3,178
------- ------- ------- ------- -------
Earnings (loss) before income taxes... (213) 1,659 4,084 1,177 1,956
Income tax expense (benefit) (note 5)... (70) 699 1,694 494 296
------- ------- ------- ------- -------
Net earnings (loss)........... $ (143) $ 960 $ 2,390 $ 683 $ 1,660
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-106
<PAGE> 292
KYSR INC. AND KIBB INC.
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------ -----------------
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 $ 683 $ 1,660
Adjustments to reconcile net earnings (loss)
to net cash provided by operating
activities:
Depreciation.............................. 338 359 325 175 193
Amortization of intangibles............... 3,302 3,302 3,302 1,651 1,651
Deferred tax expense...................... 1,597 1,412 1,332 -- --
Changes in certain assets and liabilities:
Accounts receivable, net................ (1,452) (120) (1,030) (330) (120)
Prepaid expenses and other current
assets............................... 372 (149) (197) (1,468) 591
Accounts payable and accrued expenses... (345) 265 (259) 2,236 (1,542)
------ ------ ------ ------- -------
Net cash provided by operating
activities......................... 3,669 6,029 5,863 2,947 2,433
------ ------ ------ ------- -------
Cash used by investing activities -- capital
expenditures................................. (280) (223) (235) (80) (296)
------ ------ ------ ------- -------
Cash flows used by financing
activities -- distributions to Parent........ (3,389) (5,806) (5,628) (2,867) (2,137)
------ ------ ------ ------- -------
Increase (decrease) in cash.................... -- -- -- -- --
Cash at beginning of period.................... -- -- -- -- --
------ ------ ------ ------- -------
Cash at end of period.......................... $ -- $ -- $ -- $ -- $ --
====== ====== ====== ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-107
<PAGE> 293
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-108
<PAGE> 294
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-109
<PAGE> 295
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 six months ended June 30, 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 June 30, 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-110
<PAGE> 296
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-111
<PAGE> 297
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-112
<PAGE> 298
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-113
<PAGE> 299
WLIT INC.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
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 $110 in 1997........ $ 3,110 $ 3,627 $ 3,836
Prepaid expenses and other current assets................. 592 490 200
Deferred income taxes (note 5)............................ 37 44 44
------- ------- -------
Total current assets.............................. 3,739 4,161 4,080
Property and equipment, net (note 3)........................ 461 457 545
Intangible assets, net (note 4)............................. 16,958 16,415 16,143
------- ------- -------
$21,158 $21,033 $20,768
======= ======= =======
LIABILITIES AND EQUITY
Current liabilities -- accounts payable and accrued
expenses.................................................. $ 1,442 $ 1,195 $ 1,376
Deferred income taxes (note 5).............................. 58 53 53
Equity (note 8)............................................. 19,658 19,785 19,339
Commitment and contingencies (note 9).......................
------- ------- -------
$21,158 $21,033 $20,768
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-114
<PAGE> 300
WLIT INC.
STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------- ----------------
1994 1995 1996 1996 1997
------- ------- ------- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gross revenues................................ $14,367 $16,720 $18,294 $8,080 $10,035
Less agency commissions and national rep
fees..................................... 2,523 2,848 3,071 1,144 1,410
------- ------- ------- ------ -------
Net revenues........................ 11,844 13,872 15,223 6,936 8,625
------- ------- ------- ------ -------
Operating expenses:
Station operating expenses excluding
depreciation and amortization............ 6,555 6,977 7,508 3,839 4,221
Depreciation and amortization............... 655 653 659 327 340
Corporate general and administrative........ 478 630 479 274 172
------- ------- ------- ------ -------
Operating expenses....................... 7,688 8,260 8,646 4,440 4,733
------- ------- ------- ------ -------
Earnings before income taxes............. 4,156 5,612 6,577 2,496 3,892
Income tax expense (note 5)................... 1,804 2,359 2,728 1,048 1,280
------- ------- ------- ------ -------
Net earnings........................ $ 2,352 $ 3,253 $ 3,849 $1,448 $ 2,612
======= ======= ======= ====== =======
</TABLE>
See accompanying notes to financial statements.
F-115
<PAGE> 301
WLIT INC.
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------- -----------------
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 $ 1,448 $ 2,612
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation....................... 114 114 116 55 68
Amortization of intangibles........ 541 539 543 272 272
Deferred income taxes.............. (13) 5 (8) -- --
Changes in certain assets and
liabilities:
Accounts receivable, net......... (73) (460) (517) (476) (209)
Prepaid expenses and other
current assets................ (101) (181) 98 (577) 295
Accounts payable and accrued
expenses...................... (384) 173 (247) 1,461 (1,542)
------- ------- ------- ------- -------
Net cash provided by operating
activities.................. 2,436 3,443 3,834 2,183 1,496
------- ------- ------- ------- -------
Cash flows used by investing
activities -- capital expenditures.... (180) (110) (112) (45) (156)
------- ------- ------- ------- -------
Cash flows used by financing
activities -- distributions to
Parent................................ (2,256) (3,333) (3,722) (2,138) (1,340)
------- ------- ------- ------- -------
Increase (decrease) in cash............. -- -- -- -- --
Cash at beginning of period............. -- -- -- -- --
------- ------- ------- ------- -------
Cash at end of period................... $ -- $ -- $ -- $ -- $ --
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-116
<PAGE> 302
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-117
<PAGE> 303
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 six months ended June 30, 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 June 30, 1996 and 1997 are
not necessarily indicative of results to be expected for any other interim
period or for the full year.
F-118
<PAGE> 304
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-119
<PAGE> 305
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-120
<PAGE> 306
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-121
<PAGE> 307
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-122
<PAGE> 308
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-123
<PAGE> 309
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-124
<PAGE> 310
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-125
<PAGE> 311
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-126
<PAGE> 312
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-127
<PAGE> 313
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-128
<PAGE> 314
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>
<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-129
<PAGE> 315
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-130
<PAGE> 316
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
F-131
<PAGE> 317
COLFAX COMMUNICATIONS, INC. RADIO GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
1994, respectively. These corporate expenses were funded directly by the owners
of Colfax Communications, Inc.
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-132
<PAGE> 318
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Whiteco Industries, Inc.
Merrillville, Indiana
We have audited the accompanying balance sheets of the Outdoor Advertising
Division of Whiteco Industries, Inc. as of December 31, 1996 and 1997, and the
related statements of income and cash flows for each of the three years in the
period ended December 31, 1997. 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 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 the Outdoor Advertising
Division of Whiteco Industries, Inc. as of December 31, 1996 and 1997, and the
results of its operations and cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
BDO Seidman, LLP
Chicago, Illinois
September 17, 1998
F-133
<PAGE> 319
OUTDOOR ADVERTISING DIVISION OF
WHITECO INDUSTRIES, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- SEPTEMBER 30,
1996 1997 1998
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets
Cash............................................. $ 155,781 $ 249,733 $ 7,109,413
Accounts receivable (net of $631,000, $1,111,000
and $1,941,000 allowance for uncollectible
accounts for December 31, 1996, 1997 and
September 30, 1998, respectively)............. 9,112,798 10,718,470 13,113,464
Prepaid expenses and other
receivables................................... 2,520,913 2,684,801 2,655,593
Prepaid sign costs............................... 4,880,789 5,064,178 4,951,369
------------ ------------ ------------
Total current assets..................... 16,670,281 18,717,182 27,829,839
------------ ------------ ------------
Property and equipment
Land, buildings and improvements................. 5,389,827 6,279,957 6,980,180
Advertising signs................................ 134,120,274 150,697,192 160,138,490
Equipment........................................ 4,226,984 4,925,336 6,210,613
------------ ------------ ------------
Total cost............................... 143,737,085 161,902,485 173,329,283
Accumulated depreciation......................... 84,300,457 91,601,392 98,914,094
------------ ------------ ------------
Net property and equipment......................... 59,436,628 70,301,093 74,415,189
------------ ------------ ------------
Other sign costs................................... 707,273 1,424,848 2,164,372
------------ ------------ ------------
$ 76,814,182 $ 90,443,123 $104,409,400
============ ============ ============
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities
Accounts payable................................. $ 505,561 $ 900,145 $ 462,790
Customers' advance payments and deposits......... 127,925 70,174 17,777
Accrued expenses................................. 1,577,194 2,210,355 3,965,815
------------ ------------ ------------
Total current liabilities................ 2,210,680 3,180,674 4,446,382
------------ ------------ ------------
Commitments
Divisional equity.................................. 74,603,502 87,262,449 99,963,018
------------ ------------ ------------
$ 76,814,182 $ 90,443,123 $104,409,400
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
F-134
<PAGE> 320
OUTDOOR ADVERTISING DIVISION OF
WHITECO INDUSTRIES, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ --------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................................. $108,447,476 $117,268,324 $126,800,754 $93,827,208 $103,693,938
Less: Agency discounts................... 6,616,011 8,400,821 8,702,563 6,372,877 7,190,622
------------ ------------ ------------ ----------- ------------
Net revenues........................... 101,831,465 108,867,503 118,098,191 87,454,331 96,503,316
Cost of revenues......................... 40,659,116 42,021,229 45,615,461 34,260,557 34,981,851
Selling and administrative
expenses............................... 14,878,784 16,288,955 18,369,034 13,127,709 14,642,469
Corporate overhead expenses.............. 5,176,832 5,644,490 6,073,671 4,786,406 5,193,299
Depreciation and amortization............ 8,675,204 10,501,844 11,525,410 8,232,183 8,760,265
Profit participation fee................. 2,101,620 2,248,329 2,321,884 1,701,068 1,756,342
------------ ------------ ------------ ----------- ------------
Income from operations before other
income and interest expense............ 30,339,909 32,162,656 34,192,731 25,346,408 31,169,090
Other income, less other
expenses............................... (1,060,355) (1,131,033) (1,833,411) 1,523,219 852,526
Interest expense......................... 38,556 17,927 3,794 (622) (98,231)
------------ ------------ ------------ ----------- ------------
Net income............................... $ 31,361,708 $ 33,275,762 $ 36,022,348 $26,869,005 $ 31,923,385
============ ============ ============ =========== ============
</TABLE>
See accompanying notes to financial statements.
F-135
<PAGE> 321
OUTDOOR ADVERTISING DIVISION OF
WHITECO INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ ---------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income................................... $ 31,361,708 $ 33,275,762 $ 36,022,348 $ 26,869,005 $ 31,923,385
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for depreciation and
amortization........................... 8,675,204 10,501,844 11,525,410 8,232,183 8,760,266
Gain on disposals of assets.............. (795,498) (812,482) (1,488,665) (1,369,119) (792,637)
Increase in accounts receivable.......... (694,344) (1,853,160) (1,605,672) (1,332,818) (2,394,994)
Decrease (increase) in prepaid expenses
and other receivables.................. (220,881) (1,202,910) (163,888) (373,047) 29,208
Increase in prepaid sign costs and other
sign costs............................. (1,044,722) (815,916) (1,840,672) (963,958) (1,063,971)
(Decrease) increase in accounts payable
and accrued expenses................... (66,319) 869,627 1,027,745 570,828 1,318,105
Increase (decrease) in customers' advance
payments and deposits.................. 185,750 (57,825) (57,751) (41,035) (52,397)
------------ ------------ ------------ ------------ ------------
Total adjustments.................... 6,039,190 6,629,178 7,396,507 4,723,034 5,803,580
------------ ------------ ------------ ------------ ------------
Net cash provided by operating activities.... 37,400,898 39,904,940 43,418,855 31,592,039 37,726,965
------------ ------------ ------------ ------------ ------------
Cash flows from investing activities
Proceeds from sales of assets.............. 1,352,297 1,115,793 2,474,779 1,679,067 1,170,065
Expenditures for advertising signs......... (26,033,225) (14,713,166) (19,541,162) (16,815,288) (9,563,563)
Expenditures for property and equipment.... (1,986,847) (2,180,644) (2,895,119) (2,111,561) (3,250,971)
------------ ------------ ------------ ------------ ------------
Net cash used in investing activities........ (26,667,775) (15,778,017) (19,961,502) (17,247,782) (11,644,469)
------------ ------------ ------------ ------------ ------------
Cash flows from financing activities
Interdivisional transactions............... (11,489,912) (24,124,287) (23,363,401) (7,445,015) (19,222,816)
------------ ------------ ------------ ------------ ------------
Net cash used in financing activities........ (11,489,912) (24,124,287) (23,363,401) (7,445,015) (19,222,816)
------------ ------------ ------------ ------------ ------------
Net (decrease) increase in cash.............. (756,789) 2,636 93,952 6,899,242 6,859,680
Cash, at beginning of year................... 909,934 153,145 155,781 155,781 249,733
------------ ------------ ------------ ------------ ------------
Cash, at end of year......................... $ 153,145 $ 155,781 $ 249,733 $ 7,055,023 $ 7,109,413
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
F-136
<PAGE> 322
OUTDOOR ADVERTISING DIVISION OF
WHITECO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF SEPTEMBER 30, 1998 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Whiteco Industries, Inc. ("Whiteco") has entered into an agreement to sell
substantially all of the assets and certain liabilities of its Outdoor
Advertising Division (the "Division"). The Division owns and operates outdoor
advertising signs throughout the United States.
During the periods covered by the financial statements, the Division was
conducted as an integral part of Whiteco's overall operations and separate
financial statements were not prepared. These financial statements have been
prepared from Whiteco's historical accounting records. Corporate overhead
expenses are actual expenses incurred by the Division. The Division operated
independently from Whiteco Industries, Inc. However, the expenses incurred by
the Division for corporate overhead may not necessarily be indicative of
expenses that would have been incurred had the Division been operated as a
separate entity.
Interim Financial Statements
The financial information as of September 30, 1998 and with respect to the
nine months ended September 30, 1997 and 1998 is unaudited. In the opinion of
management, the financial statements contain all adjustments consisting of
normal recurring accruals, necessary for the fair presentation of the results
for such periods. The information is not necessarily indicative of the results
of operations to be expected for the fiscal year end.
Contracts and Revenue Recognition
Outdoor advertising signs are contracted to customers under individual
advertising contracts that primarily run from one month to five years. Revenue
is recognized ratably over the life of the contract. Costs associated with the
outdoor advertising operations, including contract costs and land rental, are
expensed over the related contract term.
Prepaid Sign Costs and Other Sign Costs
Prepaid sign costs and other sign costs are primarily land rental payments
relating to future periods. Amortization on these assets was $1,020,942,
$1,075,827 and $939,708 for the years ended December 31, 1995, 1996 and 1997,
and $223,975 and $437,256 for the nine months ended September 30, 1997 and 1998,
respectively.
Property and Equipment
LAND, BUILDINGS AND IMPROVEMENTS AND EQUIPMENT
Land, buildings and improvements and equipment are carried at cost,
including interest charges capitalized during construction. Depreciation on
these assets is computed over various lives under the straight-line method and
amounted to $767,872, $911,890 and $1,092,869 for the years ended December 31,
1995, 1996 and 1997 and $957,510 and $1,113,288 for the nine months ended
September 30, 1997 and 1998, respectively.
ADVERTISING SIGNS
Advertising sign structures are depreciated by the straight-line method
over lives principally from eight to twelve years. Depreciation of advertising
signs was $6,886,390, $8,514,127 and $9,492,833 for the years ended
F-137
<PAGE> 323
OUTDOOR ADVERTISING DIVISION OF
WHITECO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1995, 1996 and 1997, and $7,050,698 and $7,209,722 for the nine
months ended September 30, 1997 and 1998, respectively.
Income Taxes
The Division is part of Whiteco Industries, Inc. which is an "S"
corporation and, as such, federal and most state income taxes are the
responsibility of the stockholder and therefore not reflected on the Division's
financial statements.
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. LEASES
The Division leases office facilities and property under various operating
leases. The Division's primary office premises are leased from a partnership in
which Whiteco Industries, Inc. is the general partner. Annual minimum rental
payments under leases that have an initial or remaining term in excess of one
year at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
RELATED
YEAR PARTY OTHER TOTAL
---- -------- -------- ----------
<S> <C> <C> <C>
1998................................................ $224,000 $270,000 $ 494,000
1999................................................ 224,000 131,000 355,000
2000................................................ 224,000 130,000 354,000
2001................................................ 224,000 131,000 355,000
2002................................................ 224,000 131,000 355,000
Thereafter.......................................... 56,000 962,000 1,018,000
</TABLE>
Total lease expense was approximately $675,000, $646,000 and $665,000 for
the years ended December 31, 1995, 1996 and 1997, and $326,000 and $333,000 for
the nine months ended September 30, 1997 and 1998, respectively. Related party
lease expense was $254,000, $230,000 and $117,000 for the years ended December
31, 1995, 1996 and 1997, and $172,000 and $176,000 for the nine months ended
September 30, 1997 and 1998, respectively.
3. RETIREMENT SAVINGS PLAN
The Division is a part of Whiteco Industries, Inc. ("Whiteco") who
maintains a qualified plan under Section 401(k) of the Internal Revenue Code.
This plan is available for all employees who have completed one year or more of
continuous service. The plan permits employees to contribute up to 15% of their
annual compensation. The plan allows for discretionary Whiteco contributions.
Currently, Whiteco matches 20% of the employees' contributions, to a maximum of
6% of earnings, and also makes a 1% quarterly matching contribution.
Contributions were $154,160, $171,270 and $177,100 for the years ended December
31, 1995, 1996 and 1997, and $135,000 and $186,432 for the nine months ended
September 30, 1997 and 1998, respectively.
F-138
<PAGE> 324
OUTDOOR ADVERTISING DIVISION OF
WHITECO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. MANAGEMENT AGREEMENT
In October 1984, the Division entered into an agreement with Metro
Management Associates (the "Partnership"), a partnership in which several
partners are employees of Whiteco, for the management and operation of
approximately 540 outdoor advertising signs located in Indiana, Texas, Rhode
Island, Missouri, Ohio, Florida, Illinois, Kentucky, Pennsylvania and Virginia.
All revenue and operating expenses related to the management and operation of
the Partnership's outdoor advertising signs are included in the Division's
results of operations. The Division is required to pay a profit participation
fee to the Partnership which approximates the operating profit of the managed
assets and is based upon a fixed monthly fee and a variable fee based upon
revenue. On August 31, 1998, the Partnership entered into an agreement to sell
substantially all of the assets and certain specified liabilities of the
Partnership to Chancellor Media Corporation. The management agreement between
the Division and the Partnership will be terminated upon consummation of the
acquisition by Chancellor Media Corporation.
5. SUBSEQUENT EVENT
On August 31, 1998, Whiteco Industries, Inc. entered into an agreement to
sell substantially all of the assets and certain specified liabilities of the
Division to Chancellor Media Corporation.
F-139
<PAGE> 325
------------------------------------------------------
------------------------------------------------------
WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS ABOUT THE TRANSACTIONS WE DISCUSS IN THIS PROSPECTUS OTHER THAN
THOSE CONTAINED HEREIN OR IN THE DOCUMENTS WE INCORPORATE HEREIN BY REFERENCE.
IF YOU ARE GIVEN ANY INFORMATION OR REPRESENTATIONS ABOUT THESE MATTERS THAT IS
NOT DISCUSSED OR INCORPORATED IN THIS PROSPECTUS, YOU MUST NOT RELY ON THAT
INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY SECURITIES ANYWHERE OR TO ANYONE WHERE OR TO WHOM WE ARE NOT
PERMITTED TO OFFER OR SELL SECURITIES UNDER APPLICABLE LAW. THE DELIVERY OF THIS
PROSPECTUS OFFERED HEREBY DOES NOT, UNDER ANY CIRCUMSTANCES, MEAN THAT THERE HAS
NOT BEEN A CHANGE IN OUR AFFAIRS SINCE THE DATE HEREOF. IT ALSO DOES NOT MEAN
THAT THE INFORMATION IN THIS PROSPECTUS OR IN THE DOCUMENTS WE INCORPORATE
HEREIN BY REFERENCE IS CORRECT AFTER THIS DATE.
------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Where You Can Find More Information........ i
Prospectus Summary......................... 1
Risk Factors............................... 13
Use of Proceeds............................ 23
Capitalization............................. 23
Selected Consolidated Historical Financial
Data..................................... 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 27
Business................................... 35
Management and Board of Directors.......... 69
Security Ownership of Certain Beneficial
Owners and Management.................... 86
Certain Relationships and Related
Transactions............................. 89
The Exchange Offer......................... 91
Description of New Notes................... 100
Book-Entry; Delivery and Form.............. 128
Description of Certain Indebtedness........ 130
Description of Capital Stock............... 143
Certain Federal Income Tax
Considerations........................... 151
Plan of Distribution....................... 151
Legal Matters.............................. 152
Experts.................................... 152
Pro Forma Financial Information............ P-1
Index to Financial Statements.............. F-1
</TABLE>
------------------------------
UNTIL MARCH 10, 1999, ALL DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
OFFER TO EXCHANGE ALL
OUTSTANDING
9% SENIOR SUBORDINATED
NOTES DUE 2008
FOR
9% SENIOR SUBORDINATED
NOTES DUE 2008
CHANCELLOR MEDIA CORPORATION OF
LOS ANGELES
-------------------------
PROSPECTUS
-------------------------
DECEMBER 10, 1998
------------------------------------------------------
------------------------------------------------------
<PAGE> 326
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware ("DGCL")
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.
CMCLA's Certificate of Incorporation, as amended, provides that no director of
the Company shall be liable to the Company 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 CMCLA 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 DGCL, or (iv) for
any transaction from which the director derived an improper personal benefit.
CMCLA's Bylaws provide that CMCLA 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 attorneys' 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.
II-1
<PAGE> 327
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
A. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
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., and Evergreen Media Corporation of Los Angeles.
(See table of contents for list of omitted schedules).
</TABLE>
II-2
<PAGE> 328
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
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., Century Broadcasting
Corporation, Evergreen Media Corporation of Los Angeles
and Evergreen Media Corporation of Chicago.
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.
</TABLE>
II-3
<PAGE> 329
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
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.
2.42(gg) -- Option Agreement, by and among Evergreen Media
Corporation, Chancellor Broadcasting Company, Bonneville
International Corporation and Bonneville Holding Company,
dated as of August 6, 1997.
2.43(ss) -- Letter Agreement, dated February 20, 1998, between CMCLA
and Capstar Broadcasting Corporation.
2.44(yy) -- Amendment No. 1, dated May 19, 1998, to Letter Agreement
dated February 20, 1998, between CMCLA and Capstar
Broadcasting Corporation.
</TABLE>
II-4
<PAGE> 330
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.45(yy) -- Unit and Stock Purchase Agreement by and among CMCLA,
Martin Media, L.P., Martin & MacFarlane, Inc., Nevada
Outdoor Systems, Inc., MW Sign Corp. and certain sellers
named therein, dated as of June 19, 1998 (see table of
contents for list of omitted schedules and exhibits).
2.46(yy) -- Agreement and Plan of Merger between Chancellor Media
Corporation and Ranger Equity Holdings Corporation dated
as of July 7, 1998.
2.47(yy) -- Asset Purchase Agreement, dated August 11, 1998, between
Chancellor Media Corporation of Los Angeles and
Independent Group Limited Partnership.
2.48(yy) -- Asset Purchase Agreement, dated August 11, 1998, between
Chancellor Media Corporation of Los Angeles and Zapis
Communications Corporation.
2.49(yy) -- Stock Purchase Agreement, dated August 11, 1998, among
Chancellor Media Corporation of Los Angeles, Young Ones,
Inc., Zebra Broadcasting Corporation and the Sellers
named therein.
2.50(yy) -- Stock Purchase Agreement, dated August 11, 1998, among
Chancellor Media Corporation of Los Angeles, ML Media
Partners LP., Wincom Broadcasting Corporation and WIN
Communications, Inc.
2.51(yy) -- Stock Purchase and Merger Agreement, dated July 9, 1998,
by and among Chancellor Media Corporation, Chancellor
Mexico LLC, Grupo Radio Centro, S.A. De C.V., and the
Selling Shareholders.
2.52+ -- Asset Purchase Agreement, dated August 30, 1998, by and
among Chancellor Media Corporation of Los Angeles,
Whiteco Industries Inc. and Metro Management Associates.
3.3(ff) -- Certificate of Incorporation of Chancellor Media
Corporation of Los Angeles, formerly known as Evergreen
Media Corporation.
3.3A(pp) -- Amendment to Certificate of Incorporation of Chancellor
Media Corporation of Los Angeles, filed September 5,
1997.
3.3B(uu) -- Amendment to the Certificate of Incorporation of
Chancellor Media Corporation, filed October 28, 1997.
3.4(ff) -- Bylaws of Chancellor Media Corporation of Los Angeles.
3.5* -- Certificate of Incorporation of Chancellor Media of the
Lone Star State.
3.6* -- Bylaws of Chancellor Media Corporation of the Lone Star
State.
3.7* -- Certificate of Incorporation of KZPS/KDGE License Corp.
3.8* -- Bylaws of KZPS/KDGE License Corp.
3.9* -- Certificate of Incorporation of Chancellor Media
Corporation of California.
3.10* -- Bylaws of Chancellor Media Corporation of California.
3.11* -- Certificate of Incorporation of KIOI License Corp.
3.12* -- Bylaws of KIOI License Corp.
</TABLE>
II-5
<PAGE> 331
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.13* -- Certificate of Incorporation of Chancellor Media
Corporation of Illinois.
3.14* -- Bylaws of Chancellor Media Corporation of Illinois.
3.15* -- Certificate of Incorporation of Chancellor Media Illinois
License Corp.
3.16* -- Bylaws of Chancellor Media Illinois License Corp.
3.17* -- Certificate of Incorporation of Chancellor Media
Corporation of Dade County.
3.18* -- Bylaws of Chancellor Media Corporation of Dade County.
3.19* -- Certificate of Incorporation of WVCG License Corp.
3.20* -- Bylaws of WVCG License Corp.
3.21* -- Certificate of Incorporation of Chancellor Media
Corporation of Massachusetts.
3.22* -- Bylaws of Chancellor Media Corporation of Massachusetts.
3.23* -- Certificate of Incorporation of Chancellor Media
Pennsylvania License Corp.
3.24* -- Bylaws of Chancellor Media Pennsylvania License Corp.
3.25* -- Certificate of Incorporation of Chancellor Media
Corporation of Miami.
3.26* -- Bylaws of Chancellor Media Corporation of Miami.
3.27* -- Certificate of Incorporation of WEDR License Corp.
3.28* -- Bylaws of WEDR License Corp.
3.29* -- Agreement of Limited Partnership of Chancellor Media
Corporation of Houston Limited Partnership.
3.30* -- Certificate of Incorporation of Chancellor Media
Corporation of Houston.
3.31* -- Bylaws of Chancellor Media Corporation of Houston.
3.32* -- Certificate of Incorporation of Chancellor Media
Corporation of the Keystone State.
3.33* -- Bylaws of Chancellor Media Corporation of the Keystone
State.
3.34* -- Certificate of Incorporation of Chancellor Media
Corporation of New York.
3.35* -- Bylaws of Chancellor Media Corporation of New York.
3.36* -- Certificate of Incorporation of Chancellor Media
Corporation of Charlotte.
3.37* -- Bylaws of Chancellor Media Corporation of Charlotte.
3.38* -- Certificate of WIOQ License Corp.
3.39* -- Bylaws of WIOQ License Corp.
3.40* -- Certificate of Incorporation of Chancellor Media
Corporation of Washington, D.C.
3.41* -- Bylaws of Chancellor Media Corporation of Washington,
D.C.
3.42* -- Certificate of Incorporation of Chancellor Media
Corporation of St. Louis.
</TABLE>
II-6
<PAGE> 332
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.43* -- Bylaws of Chancellor Media Corporation of St. Louis.
3.44* -- Certificate of Incorporation of Chancellor Media
Corporation of Michigan.
3.45* -- Bylaws of Chancellor Media Corporation of Michigan.
3.46* -- Certificate of Incorporation of Chancellor Media/WAXQ
License Corp.
3.47* -- Bylaws of Chancellor Media/WAXQ License Corp.
3.48* -- Certificate of WAXQ License Corp.
3.49* -- Bylaws of WAXQ License Corp.
3.50* -- Certificate of Incorporation of Chancellor Media/KCMG
Inc.
3.51* -- Bylaws of Chancellor Media/KCMG Inc.
3.52* -- Certificate of Incorporation of Chancellor
Media/Riverside Broadcasting Co., Inc.
3.53* -- Bylaws of Chancellor Media/Riverside Broadcasting Co.,
Inc.
3.54* -- Certificate of Incorporation of WLTW License Corp.
3.55* -- Bylaws of WLTW License Corp.
3.56* -- Certificate of Incorporation of Chancellor Media
Corporation of the Capital City.
3.57* -- Bylaws of Chancellor Media Corporation of the Capital
City.
3.58* -- Certificate of Incorporation of Chancellor Media D.C.
License Corp.
3.59* -- Bylaws of Chancellor Media D.C. License Corp.
3.60* -- Certificate of Incorporation of Chancellor Media Licensee
Company.
3.61* -- Bylaws of Chancellor Media Licensee Company.
3.62* -- Certificate of Incorporation of Chancellor Media/Trefoil
Communications, Inc.
3.63* -- Amended and Restated Bylaws of Chancellor Media/Trefoil
Communications, Inc.
3.64* -- Certificate of Incorporation of Chancellor Media/Shamrock
Broadcasting, Inc.
3.65* -- Amended and Restated Bylaws of Chancellor Media/Shamrock
Broadcasting, Inc.
3.66* -- Certificate of Incorporation of Chancellor Media/Shamrock
Radio Licenses, Inc.
3.67* -- Bylaws of Chancellor Media/Shamrock Radio Licenses, Inc.
3.68* -- Certificate of Incorporation of Chancellor Media/Shamrock
Broadcasting Licenses of Denver, Inc.
3.69* -- Bylaws of Chancellor Media/Shamrock Broadcasting Licenses
of Denver, Inc.
3.70* -- Articles of Incorporation of Chancellor Media/Shamrock
Broadcasting of Texas, Inc.
</TABLE>
II-7
<PAGE> 333
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.71* -- Amended and Restated Bylaws of Chancellor Media/Shamrock
Broadcasting of Texas, Inc.
3.72* -- Limited Liability Company Agreement of Chancellor
Media/Shamrock Radio Licenses, LLC.
3.73* -- Certificate of Incorporation of Chancellor Media Outdoor
Corporation.
3.74* -- Bylaws of Chancellor Media Outdoor Corporation.
3.75* -- Certificate of Incorporation of Chancellor Media Nevada
Sign Corporation.
3.76* -- Bylaws of Chancellor Media Nevada Sign Corporation.
3.77* -- Certificate of Incorporation of Chancellor Media MW Sign
Corporation.
3.78* -- Bylaws of Chancellor Media MW Sign Corporation.
3.79* -- Certificate of Incorporation of Chancellor Media Martin
Corporation.
3.80* -- Bylaws of Chancellor Media Martin Corporation.
3.81* -- Articles of Incorporation of Western Poster, Inc.
3.82* -- Bylaws of Western Poster, Inc.
3.83* -- Certificate of Incorporation of The AMFM Radio Networks,
Inc.
3.84* -- Bylaws of The AMFM Radio Networks, Inc.
3.85* -- Certificate of Incorporation of Chancellor Media Air
Services Corporation.
3.86* -- Bylaws of Chancellor Media Air Services Corporation.
3.87* -- Certificate of Incorporation of Chancellor Media Whiteco
Outdoor Corporation.
3.88* -- Bylaws of Chancellor Media Whiteco Outdoor Corporation.
3.89* -- Certificate of Incorporation of Chancellor Merger Corp.
3.90* -- Bylaws of Chancellor Merger Corp.
3.91* -- Articles of Organization of Broadcast Architecture, Inc.
3.92* -- Bylaws of Broadcast Architecture, Inc.
3.93+ -- Agreement of Limited Partnership of Martin Media.
3.94* -- Articles of Incorporation of Dowling Company
Incorporated.
3.95* -- Bylaws of Dowling Company Incorporated.
3.96* -- Articles of Incorporation of Nevada Outdoor Systems, Inc.
3.97* -- Bylaws of Nevada Outdoor Systems, Inc.
3.98* -- Articles of Incorporation of MW Sign Corp.
3.99* -- Bylaws of MW Sign Corp.
3.100* -- Articles of Incorporation of Martin & MacFarlane, Inc.
3.101* -- Bylaws of Martin & MacFarlane, Inc.
3.102* -- Certificate of Incorporation of Katz Media Corporation.
3.103* -- Bylaws of Katz Media Corporation.
3.104* -- Certificate of Incorporation of Katz Communications, Inc.
</TABLE>
II-8
<PAGE> 334
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.105* -- Bylaws of Katz Communications, Inc.
3.106* -- Certificate of Incorporation of Katz Millennium
Marketing, Inc.
3.107* -- Bylaws of Katz Millennium Marketing, Inc.
3.108* -- Certificate of Incorporation of Amcast Radio Sales, Inc.
3.109* -- Bylaws of Amcast Radio Sales, Inc.
3.110* -- Certificate of Incorporation of Christal Radio Sales,
Inc.
3.111* -- Amended and Restated Bylaws of Christal Radio Sales, Inc.
3.112* -- Certificate of Incorporation of Eastman Radio Sales, Inc.
3.113* -- Bylaws of Eastman Radio Sales, Inc.
3.114* -- Certificate of Incorporation of Seltel, Inc.
3.115* -- Bylaws of Seltel, Inc.
3.116* -- Certificate of Incorporation of Katz Cable Corporation.
3.117* -- Amended and Restated Bylaws of Katz Cable Corporation.
3.118* -- Certificate of Incorporation of The National Payroll
Company, Inc.
3.119* -- Bylaws of The National Payroll Company, Inc.
3.120* -- Limited Liability Company Agreement of Chancellor Media
Radio Licenses, LLC
3.121* -- Agreement of Limited Partnership of KLOL License Limited
Partnership.
3.122* -- Agreement of Limited Partnership of WTOP License Limited
Partnership.
3.123* -- Certificate of Formation of Radio 100, L.L.C.
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 Guaranty and
Subsidiary Pledge Agreement (see table of contents for
list of omitted schedules and exhibits.
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 CMCLA.
</TABLE>
II-9
<PAGE> 335
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
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 CMCLA.
4.17(cc) -- Indenture, dated as of February 26, 1996, governing the
12 1/4% Subordinated Exchange Debentures due 2008 of
CMCLA.
4.18(dd) -- Indenture, dated as of January 23, 1997, governing the
12% Subordinated Exchange Debentures due 2009 of CMCLA.
4.19(ee) -- Indenture, dated as of June 24, 1997, governing the
8 3/4% Senior Subordinated Notes due 2007 of CMCLA.
4.21(ff) -- Specimen of the 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock Certificate of CMCLA.
4.22(ff) -- Specimen of the 12% Exchangeable Preferred Stock
Certificate of CMCLA.
4.23(ff) -- Form of Certificate of Designation for the 12 1/4% Series
A Senior Cumulative Exchangeable Preferred Stock of
CMCLA.
4.24(ff) -- Form of Certificate of Designation for the 12%
Exchangeable Preferred Stock of CMCLA.
4.25(pp) -- Second Amendment to Second Amended and Restated Loan
Agreement, dated August 7, 1997, among Evergreen Media
Corporation of Los Angeles, the Lenders, the Agents and
the Administrative Agent.
4.26(hh) -- Second Supplemental Indenture, dated as of April 15,
1997, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
4.27(pp) -- Third Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
4.28(pp) -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated June 24, 1997, governing the
8 3/4% Senior Subordinated Notes due 2007 of CMCLA.
4.29(pp) -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated February 26, 1997, governing
the 12 1/4% Subordinated Exchange Debentures due 2008 of
CMCLA.
4.30(pp) -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated January 23, 1997, governing
the 12% Subordinated Exchange Debentures due 2009 of
CMCLA.
4.34(uu) -- Amended and Restated Indenture, dated as of October 28,
1997, governing the 10 1/2% Senior Subordinated Notes due
2007 of CMCLA.
4.35(uu) -- Second Supplement Indenture, dated as of October 28,
1997, to the Amended and Restated Indenture dated October
28, 1997 governing the 10 1/2% Senior Subordinated Notes
due 2007 of CMCLA.
4.36(uu) -- Third Amendment to Second Amended and Restated Loan
Agreement, dated October 28, 1997, among CMCLA, the
Lenders, the Agents and the Administrative Agent.
</TABLE>
II-10
<PAGE> 336
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
4.37(uu) -- Fourth Amendment to Second Amended and Restated Loan
Agreement, dated February 10, 1998, among CMCLA, the
Lenders, the Agents and the Administrative Agent.
4.38(vv) -- Indenture, dated as of December 22, 1997, governing the
8 1/8% Senior Subordinated Notes due 2007 of CMCLA.
4.39(ww) -- Fifth Amendment to Second Amended and Restated Loan
Agreement, dated May 1, 1998, among CMCLA, the Lenders,
the Agents and the Administrative Agent.
4.40(yy) -- Sixth Amendment to Second Amended and Restated Loan
Agreement, dated July 31, 1998, among CMCLA, the Lenders,
the Agents and the Administrative Agent.
4.41* -- Indenture, dated as of September 30, 1998, governing the
9% Senior Subordinated Notes due 2008 of CMCLA.
4.42* -- Purchase Agreement, dated as of September 25, 1998, among
CMCLA, the Guarantors named therein and Goldman, Sachs &
Co.
4.43* -- Registration Rights Agreement, dated as of September 30,
1998, among CMCLA, the Guarantors named therein and
Goldman, Sachs & Co.
4.44(aaa) -- Seventh Amendment to Second Amended and Restated Loan
Agreement, dated November 9, 1998, among CMCLA, the
Lenders, the Agents and the Administrative Agent.
4.45+ -- Indenture, dated as of November 17, 1998, governing the
8% Senior Notes due 2008 of CMCLA.
4.46+ -- Purchase Agreement, dated as of November 12, 1998, among
CMCLA, the Guarantors named therein, BT Alex. Brown
Incorporated, Chase Securities Inc., Morgan Stanley & Co.
Incorporated and Salomon Smith Barney Inc.
4.47+ -- Registration Rights Agreement, dated as of November 17,
1998, among CMCLA, the Guarantors named therein, BT Alex.
Brown Incorporated, Chase Securities Inc., Morgan Stanley
& Co. Incorporated and Salomon Smith Barney Inc.
5.1* -- Opinion of Weil, Gotshal & Manges LLP.
10.23(xx) -- Amended and Restated Chancellor Media Corporation Stock
Option Plan for Non-employee Directors.
10.26(n)** -- Employment Agreement dated February 9, 1996 by and
between Evergreen Media Corporation and Kenneth J.
O'Keefe.
10.28(o) -- 1995 Stock Option Plan for executive officers and key
employees of Evergreen Media Corporation.
10.30(pp)** -- First Amendment to Employment Agreement dated March 1,
1997 by and between Evergreen Media Corporation and
Kenneth J. O'Keefe.
10.31(pp)** -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and Scott K. Ginsburg.
</TABLE>
II-11
<PAGE> 337
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.32(pp)** -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and James de Castro.
10.33(pp)** -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and Matthew E. Devine.
10.34(pp)** -- Second Amendment to Employment Agreement dated September
4, 1997 by and among Evergreen Media Corporation,
Evergreen Media Corporation of Los Angeles and Kenneth J.
O'Keefe.
10.35(ii)** -- Employment Agreement dated February 14, 19965 by and
among Chancellor Broadcasting Company, Chancellor Radio
Broadcasting Company and Steven Dinetz.
10.36(jj) -- Chancellor Broadcasting Company 1996 Stock Award Plan.
10.37(kk) -- Chancellor Holdings Corp. 1994 Director Stock Option
Plan.
10.38(ll) -- Stock Option Grant Letter dated September 30, 1996 from
Chancellor Corporation to Steven Dinetz.
10.39(mm) -- Stock Option Grant Letter dated September 30, 1996 from
Chancellor Corporation to Eric W. Neumann.
10.40(nn) -- Stock Option Grant Letter dated September 30, 1996 from
Chancellor Corporation to Marvin Dinetz.
10.41(oo) -- Stock Option Grant Letter dated February 14, 1997 from
Chancellor Broadcasting Company to Carl M. Hirsch.
10.44(vv)** -- Agreement dated April 20, 1998 by and among Chancellor
Media Corporation, Chancellor Media Corporation of Los
Angeles and Scott K. Ginsburg.
10.45(vv)** -- Employment Agreement dated April 29, 1998 by and among
Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and Jeffrey A. Marcus.
10.46(yy) -- Chancellor Media Corporation 1998 Stock Option Plan.
10.47(yy) -- Voting Agreement, among Chancellor Media Corporation and
Rangers Equity Partners, L.P. dated as of July 7, 1998.
10.48* -- Employment Agreement, dated as of May 18, 1998, by and
among Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and James E. de Castro.
10.49* -- Employment Agreement, dated as of May 18, 1998, by and
among Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and Matthew E. Devine.
10.50* -- Employment Agreement, dated as of June 1, 1998, by and
among Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and Eric C. Neuman.
10.51* -- Employment Agreement, dated as of August 18, 1998, by and
among Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and James A. McLaughlin, Jr.
12.1* -- Chancellor Media Corporation of Los Angeles Computation
of Ratio of Earnings to Combined Fixed Charges.
</TABLE>
II-12
<PAGE> 338
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
23.1* -- Consent of Weil, Gotshal & Manges LLP (included as part
of their opinion listed as Exhibit 5.1).
23.2+ -- Consent of PricewaterhouseCoopers LLP, independent
accountants.
23.3+ -- Consent of KPMG Peat Marwick LLP, independent
accountants.
23.4+ -- Consent of PricewaterhouseCoopers LLP, independent
accountants.
23.5+ -- Consent of KPMG Peat Marwick LLP, independent
accountants.
23.6+ -- Consent of Arthur Andersen LLP, independent accountants.
23.7+ -- Consent of BDO Seidman, LLP, independent accountants.
24.1* -- Powers of Attorney.
25.1+ -- Statement of Eligibility and Qualification of The Bank of
New York, as trustee, under the Indenture listed as
Exhibit 4.41 hereto on Form T-1.
99.1* -- Form of Letter of Transmittal.
99.2* -- Form of Notice of Guaranteed Delivery.
</TABLE>
- ---------------
* Previously filed.
** Management Contract or Compensatory Agreement.
+ Filed herewith.
(a) Incorporated by reference to the identically numbered exhibit to the
Registration Statement on Form S-1, as amended (Reg. No. 33-60036), of
Evergreen Media Corporation ("Evergreen").
(f) Incorporated by reference to the identically numbered exhibit 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
June 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).
II-13
<PAGE> 339
(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.
(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.
(ff) Incorporated by reference to the identically-numbered exhibit to the
Registration Statement on Form S-4 (Reg. No. 333-32259), dated July 29,
1997, as amended, of Evergreen Media Corporation of Los Angeles
("EMCLA").
(gg) Incorporated by reference to the identically numbered exhibit to the
Quarterly Report on Form 10-Q of Evergreen and EMCLA for the quarterly
period ending June 30, 1997.
(hh) Incorporated by reference to Exhibit 4.8 to the Quarterly Report on Form
10-Q of Chancellor Broadcasting Company ("CBC") and CRBC for the
quarterly period ending March 31, 1997.
(ii) Incorporated by reference to Exhibit 10.6 to CBC's Registration Statement
on Form S-1 (Reg. No. 333-02782) filed February 9, 1996.
(jj) Incorporated by reference to Exhibit 4.22 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(kk) Incorporated by reference to Exhibit 4.23 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(ll) Incorporated by reference to Exhibit 4.24 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(mm) Incorporated by reference to Exhibit 4.25 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
II-14
<PAGE> 340
(nn) Incorporated by reference to Exhibit 4.26 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(oo) Incorporated by reference to Exhibit 4.27 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(pp) Incorporated by reference to the identically numbered exhibit to the
CMCLA's Registration Statement on Form S-4 (Reg. No. 333-36451), dated
September 26, 1997, as amended.
(ss) Incorporated by reference to the identically numbered exhibit to the
Current Report on Form 8-K of Chancellor Media and CMCLA, dated as of
February 23, 1998 and filed as of February 27, 1998.
(tt) Incorporated by reference to the identically numbered exhibit to the
Annual Report on Form 10-K of Chancellor Media and the CMCLA for the
fiscal year ended December 31, 1997.
(uu) Incorporated by reference to the identically numbered exhibit to the
Annual Report on Form 10-K of Chancellor and CMCLA for the fiscal year
ended December 31, 1997.
(vv) Incorporated by reference to the identically numbered exhibit to CMCLA's
Registration Statement on Form S-4 (Reg. No. 333-50739), dated April 22,
1998, as amended.
(ww) Incorporated by reference to the identically numbered exhibit to the
Quarterly Report on Form 10-Q of Chancellor Media and CMCLA for the
quarterly period ending March 31, 1998.
(xx) Incorporated by reference to Exhibit 4.41 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-53179), dated May 20,
1998.
(yy) Incorporated by reference to the identically numbered exhibit to the
Quarterly Report on Form 10-Q of Chancellor Media and CMCLA for the
quarterly period ending June 30, 1998.
(aaa) Incorporated by reference to Exhibit 4.42 to the Quarterly Report on Form
10-Q of Chancellor Media and CMCLA for the quarterly period ending
September 30, 1998.
The Company hereby agrees to furnish supplementary a copy of any omitted
schedule or exhibit to the Commission upon request.
B. Financial Statement Schedules
All schedules have been omitted since the required information is either not
present or not present in amounts sufficient to require submission of the
schedules, or because the information required is included in the consolidated
financial statements or the notes thereto.
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
II-15
<PAGE> 341
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 Securities Act of 1933, as amended, 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 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-16
<PAGE> 342
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this Amendment No. 1 to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas, on December 8, 1998.
CHANCELLOR MEDIA CORPORATION
OF LOS ANGELES
By: /s/ MATTHEW E. DEVINE
--------------------------------------
Matthew E. Devine
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities and Exchange Act of 1933, as
amended, this Amendment No. 1 to Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board December 8, 1998
- ------------------------------------------
Thomas O. Hicks
* Chief Executive Officer December 8, 1998
- ------------------------------------------ and President (Principal
Jeffrey A. Marcus Executive Officer)
* Chief Operating Officer December 8, 1998
- ------------------------------------------ and Director
James E. de Castro
/s/ MATTHEW E. DEVINE Senior Vice President and December 8, 1998
- ------------------------------------------ Chief Financial Officer
Matthew E. Devine (Principal Financial
Officer and Principal
Accounting Officer)
* Director December 8, 1998
- ------------------------------------------
Thomas J. Hodson
* Director December 8, 1998
- ------------------------------------------
Perry J. Lewis
Director
- ------------------------------------------
John H. Massey
* Director December 8, 1998
- ------------------------------------------
Michael J. Levitt
* Director December 8, 1998
- ------------------------------------------
Lawrence D. Stuart, Jr.
</TABLE>
II-17
<PAGE> 343
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Director December 8, 1998
- ------------------------------------------
Steven Dinetz
* Director December 8, 1998
- ------------------------------------------
Vernon E. Jordan, Jr.
* Director December 8, 1998
- ------------------------------------------
J. Otis Winters
*By: /s/ MATTHEW E. DEVINE
-------------------------------------
Matthew E. Devine
Attorney-in-Fact
</TABLE>
II-18
<PAGE> 344
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
Co-Registrants listed on Attachment A hereto has duly caused this Amendment No.
1 to Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Dallas, State of Texas, on December 8,
1998.
THE CO-REGISTRANTS LISTED ON
ATTACHMENT A HERETO
By: /s/ MATTHEW E. DEVINE
--------------------------------------
Matthew E. Devine
Vice President
of Each Co-Registrant Listed on
Attachment A
Pursuant to the requirements of the Securities and Exchange Act of 1933, as
amended, this Amendment No. 1 to 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>
* Chief Executive Officer December 8, 1998
- ------------------------------------------ and President of Each
Jeffrey A. Marcus Co-Registrant (Principal
Executive Officer of
Each Co-Registrant)
/s/ MATTHEW E. DEVINE Vice President and December 8, 1998
- ------------------------------------------ Director of Each
Matthew E. Devine Co-Registrant (Principal
Financial Officer and
Principal Accounting
Officer of Each
Co-Registrant)
* Director of Each Co- December 8, 1998
- ------------------------------------------ Registrant
Eric C. Neuman
* Director of Each Co- December 8, 1998
- ------------------------------------------ Registrant
Lawrence D. Stuart, Jr.
*By: /s/ MATTHEW E. DEVINE
-------------------------------------
Matthew E. Devine
Attorney-in-Fact
</TABLE>
II-19
<PAGE> 345
ATTACHMENT A
<TABLE>
<CAPTION>
NAME
<S> <C>
Chancellor Media Corporation of the Lone Star State
KZPS/KDGE License Corp.
Chancellor Media Corporation of California
KIOI License Corp.
Chancellor Media Corporation of Illinois
Chancellor Media Illinois License Corp.
Chancellor Media Corporation of Dade County
WVCG License Corp.
Chancellor Media Corporation of Massachusetts
Chancellor Media Pennsylvania License Corp.
Chancellor Media Corporation of Miami
WEDR License Corp.
Chancellor Media Corporation of Houston
Chancellor Media Corporation of the Keystone State
Chancellor Media Corporation of New York
Chancellor Media Corporation of Charlotte
WIOQ License Corp.
Chancellor Media Corporation of Washington, D.C.
Chancellor Media Corporation of St. Louis
Chancellor Media Corporation of Michigan
Chancellor Media/WAXQ Inc.
WAXQ License Corp.
Chancellor Media/KCMG Inc.
Chancellor Media/Riverside Broadcasting Co., Inc.
WLTW License Corp.
Chancellor Media Corporation of the Capital City
Chancellor Media D.C. License Corp.
Chancellor Media Licensee Company
Chancellor Media/Trefoil Communications, Inc.
Chancellor Media/Shamrock Broadcasting, Inc.
Chancellor Media/Shamrock Radio Licenses, Inc.
Chancellor Media/Shamrock Broadcasting Licenses of Denver,
Inc.
Chancellor Media/Shamrock Broadcasting of Texas, Inc.
The AMFM Radio Networks, Inc.
Chancellor Media Air Services Corporation
Chancellor Merger Corp.
Broadcast Architecture, Inc.
</TABLE>
II-20
<PAGE> 346
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
Co-Registrants listed on Attachment B hereto has duly caused this Amendment No.
1 to Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Dallas, State of Texas, on December 8,
1998.
THE CO-REGISTRANTS LISTED ON
ATTACHMENT B HERETO.
By: /s/ MATTHEW E. DEVINE
--------------------------------------
Matthew E. Devine
Vice President of Each Co-Registrant
Listed on Attachment B
Pursuant to the requirements of the Securities and Exchange Act of 1933, as
amended, this Amendment No. 1 to 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>
* Chief Executive Officer, December 8, 1998
- ------------------------------------------ President and Director
Jeffrey A. Marcus of Each Co-Registrant
(Principal Executive
Officer)
/s/ MATTHEW E. DEVINE Vice President of Each December 8, 1998
- ------------------------------------------ Co-Registrant,
Matthew E. Devine (Principal Financial
Officer and Principal
Accounting Officer)
* Director of Each December 8, 1998
- ------------------------------------------ Co-Registrant
Eric C. Neuman
*By: /s/ MATTHEW E. DEVINE
---------------------------------------
Matthew E. Devine
Attorney-in-Fact
</TABLE>
II-21
<PAGE> 347
ATTACHMENT B
<TABLE>
<CAPTION>
NAME
<S> <C>
Chancellor Media Outdoor Corporation
Chancellor Media Nevada Sign Corporation
Chancellor Media MW Sign Corporation
Chancellor Media Martin Corporation
Chancellor Media Whiteco Outdoor Corporation
Dowling Company Incorporated
Nevada Outdoor Systems, Inc.
</TABLE>
II-22
<PAGE> 348
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
Co-Registrants listed on Attachment C hereto has duly caused this Amendment No.
1 to Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Dallas, State of Texas, on December 8,
1998.
THE CO-REGISTRANTS LISTED ON
ATTACHMENT C HERETO.
By: /s/ RICHARD E. VENDIG
--------------------------------------
Richard E. Vendig
Senior Vice President, Chief Financial
and
Administrative Officer, Treasurer of
Each
Co-Registrant Listed on Attachment C
Pursuant to the requirements of the Securities and Exchange Act of 1933, as
amended, this Amendment No. 1 to 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>
* Senior Vice President, December 8, 1998
- ------------------------------------------ Chief Financial and
Richard E. Vendig Administrative Officer,
Treasurer of Each
Co-Registrant (Principal
Executive Officer,
Principal Financial
Officer and Principal
Accounting Officer)
* Director of Each December 8, 1998
- ------------------------------------------ Co-Registrant
Jeffrey A. Marcus
/s/ MATTHEW E. DEVINE Director of Each December 8, 1998
- ------------------------------------------ Co-Registrant
Matthew E. Devine
* Director of Each December 8, 1998
- ------------------------------------------ Co-Registrant
Eric C. Neuman
*By: /s/ MATTHEW E. DEVINE
---------------------------------------
Matthew E. Devine
Attorney-in-Fact
</TABLE>
II-23
<PAGE> 349
ATTACHMENT C
<TABLE>
<CAPTION>
NAME
<S> <C>
MW Sign Corp.
Martin & MacFarlane, Inc.
Katz Media Corporation
Katz Communications, Inc.
Katz Millennium Marketing, Inc.
Amcast Radio Sales, Inc.
Christal Radio Sales, Inc.
Eastman Radio Sales, Inc.
Seltel, Inc.
Katz Cable Corporation
The National Payroll Company, Inc.
</TABLE>
II-24
<PAGE> 350
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
Co-Registrants has duly caused this Amendment No. 1 to Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Dallas, State of Texas, on December 8, 1998.
CHANCELLOR MEDIA/SHAMROCK
RADIO LICENSES, LLC
CHANCELLOR MEDIA RADIO
LICENSES, LLC
RADIO 100, L.L.C.
By: /s/ MATTHEW E. DEVINE
--------------------------------------
Matthew E. Devine
Vice President of Each Co-Registrant
Pursuant to the requirements of the Securities and Exchange Act of 1933, as
amended, this Amendment No. 1 to 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>
* Chief Executive Officer December 8, 1998
- ------------------------------------------ and President of Each
Jeffrey A. Marcus Co-Registrant (Principal
Executive Officer)
/s/ MATTHEW E. DEVINE Vice President of Each December 8, 1998
- ------------------------------------------ Co-Registrant (Principal
Matthew E. Devine Financial Officer and
Principal Accounting
Officer)
*By: /s/ MATTHEW E. DEVINE
---------------------------------------
Matthew E. Devine
Attorney-in-Fact
</TABLE>
II-25
<PAGE> 351
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Co-Registrant
has duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas, on December 8, 1998.
WTOP LICENSE LIMITED
PARTNERSHIP
By: CHANCELLOR MEDIA CORPORATION OF
WASHINGTON, D.C., its general partner
By: /s/ MATTHEW E. DEVINE
--------------------------------------
Matthew E. Devine
Vice President
Pursuant to the requirements of the Securities and Exchange Act of 1933, as
amended, this Amendment No. 1 to 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>
* Chief Executive Officer and December 8, 1998
- ------------------------------------------ President (Principal
Jeffrey A. Marcus Executive Officer)
/s/ MATTHEW E. DEVINE Vice President and Director December 8, 1998
- ------------------------------------------ (Principal Financial
Matthew E. Devine Officer and Principal
Accounting Officer)
* Director December 8, 1998
- ------------------------------------------
Eric C. Neuman
* Director December 8, 1998
- ------------------------------------------
Lawrence D. Stuart, Jr.
*By: /s/ MATTHEW E. DEVINE
-------------------------------------
Matthew E. Devine
Attorney-in-Fact
</TABLE>
II-26
<PAGE> 352
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
Co-Registrants has duly caused this Amendment No. 1 to Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Dallas, State of Texas, on December 8, 1998.
CHANCELLOR MEDIA CORPORATION
OF HOUSTON LIMITED PARTNERSHIP
KLOL LICENSE LIMITED
PARTNERSHIP
By: CHANCELLOR MEDIA CORPORATION OF
HOUSTON, their general partner
By: /s/ MATTHEW E. DEVINE
--------------------------------------
Matthew E. Devine
Vice President
Pursuant to the requirements of the Securities and Exchange Act of 1933, as
amended, this Amendment No. 1 to 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>
* Chief Executive Officer December 8, 1998
- ------------------------------------------ and President (Principal
Jeffrey A. Marcus Executive Officer)
/s/ MATTHEW E. DEVINE Vice President and December 8, 1998
- ------------------------------------------ Director (Principal
Matthew E. Devine Financial Officer and
Principal Accounting
Officer)
* Director December 8, 1998
- ------------------------------------------
Eric C. Neuman
* Director December 8, 1998
- ------------------------------------------
Lawrence D. Stuart, Jr.
*By: /s/ MATTHEW E. DEVINE
-------------------------------------
Matthew E. Devine
Attorney-in-Fact
</TABLE>
II-27
<PAGE> 353
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Co-Registrant
has duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas, on December 8, 1998.
MARTIN MEDIA, L.P.
By: MW SIGN CORP., its general partner
By: /s/ MATTHEW E. DEVINE
--------------------------------------
Matthew E. Devine
Vice President
Pursuant to the requirements of the Securities and Exchange Act of 1933, as
amended, this Amendment No. 1 to 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>
* Chief Executive Officer, December 8, 1998
- ------------------------------------------ President and Director
Jeffrey A. Marcus (Principal Executive
Officer)
/s/ MATTHEW E. DEVINE Vice President and December 8, 1998
- ------------------------------------------ Director (Principal
Matthew E. Devine Financial Officer and
Principal Accounting
Officer)
* Director December 8, 1998
- ------------------------------------------
Eric C. Neuman
*By: /s/ MATTHEW E. DEVINE
-------------------------------------
Matthew E. Devine
Attorney-in-Fact
</TABLE>
II-28
<PAGE> 354
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Co-Registrant
has duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas, on December 8, 1998.
WESTERN POSTER SERVICE, INC.
By: /s/ MATTHEW E. DEVINE
--------------------------------------
Matthew E. Devine
Vice President
Pursuant to the requirements of the Securities and Exchange Act of 1933, as
amended, this Amendment No. 1 to 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>
* Chief Executive Officer, December 8, 1998
- ------------------------------------------ President and Director
Jeffrey A. Marcus (Principal Executive
Officer)
/s/ MATTHEW E. DEVINE Vice President and December 8, 1998
- ------------------------------------------ Director (Principal
Matthew E. Devine Financial Officer and
Principal Accounting
Officer)
* Director December 8, 1998
- ------------------------------------------
Eric C. Neuman
Director
- ------------------------------------------
Rachel Kitchens
Director
- ------------------------------------------
William Pierce
*By: /s/ MATTHEW E. DEVINE
-------------------------------------
Matthew E. Devine
Attorney-in-Fact
</TABLE>
II-29
<PAGE> 355
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
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., and Evergreen Media Corporation of Los Angeles.
(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.
</TABLE>
<PAGE> 356
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.21(p) -- Asset Purchase Agreement dated July 15, 1996 by and among
Century Chicago Broadcasting L.P., Century Broadcasting
Corporation, Evergreen Media Corporation of Los Angeles
and Evergreen Media Corporation of Chicago.
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.
</TABLE>
<PAGE> 357
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
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.
2.42(gg) -- Option Agreement, by and among Evergreen Media
Corporation, Chancellor Broadcasting Company, Bonneville
International Corporation and Bonneville Holding Company,
dated as of August 6, 1997.
2.43(ss) -- Letter Agreement, dated February 20, 1998, between CMCLA
and Capstar Broadcasting Corporation.
2.44(yy) -- Amendment No. 1, dated May 19, 1998, to Letter Agreement
dated February 20, 1998, between CMCLA and Capstar
Broadcasting Corporation.
</TABLE>
<PAGE> 358
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.45(yy) -- Unit and Stock Purchase Agreement by and among CMCLA,
Martin Media, L.P., Martin & MacFarlane, Inc., Nevada
Outdoor Systems, Inc., MW Sign Corp. and certain sellers
named therein, dated as of June 19, 1998 (see table of
contents for list of omitted schedules and exhibits).
2.46(yy) -- Agreement and Plan of Merger between Chancellor Media
Corporation and Ranger Equity Holdings Corporation dated
as of July 7, 1998.
2.47(yy) -- Asset Purchase Agreement, dated August 11, 1998, between
Chancellor Media Corporation of Los Angeles and
Independent Group Limited Partnership.
2.48(yy) -- Asset Purchase Agreement, dated August 11, 1998, between
Chancellor Media Corporation of Los Angeles and Zapis
Communications Corporation.
2.49(yy) -- Stock Purchase Agreement, dated August 11, 1998, among
Chancellor Media Corporation of Los Angeles, Young Ones,
Inc., Zebra Broadcasting Corporation and the Sellers
named therein.
2.50(yy) -- Stock Purchase Agreement, dated August 11, 1998, among
Chancellor Media Corporation of Los Angeles, ML Media
Partners LP., Wincom Broadcasting Corporation and WIN
Communications, Inc.
2.51(yy) -- Stock Purchase and Merger Agreement, dated July 9, 1998,
by and among Chancellor Media Corporation, Chancellor
Mexico LLC, Grupo Radio Centro, S.A. De C.V., and the
Selling Shareholders.
2.52+ -- Asset Purchase Agreement, dated August 30, 1998, by and
among Chancellor Media Corporation of Los Angeles,
Whiteco Industries Inc. and Metro Management Associates.
3.3(ff) -- Certificate of Incorporation of Chancellor Media
Corporation of Los Angeles, formerly known as Evergreen
Media Corporation.
3.3A(pp) -- Amendment to Certificate of Incorporation of Chancellor
Media Corporation of Los Angeles, filed September 5,
1997.
3.3B(uu) -- Amendment to the Certificate of Incorporation of
Chancellor Media Corporation, filed October 28, 1997.
3.4(ff) -- Bylaws of Chancellor Media Corporation of Los Angeles.
3.5* -- Certificate of Incorporation of Chancellor Media of the
Lone Star State.
3.6* -- Bylaws of Chancellor Media Corporation of the Lone Star
State.
3.7* -- Certificate of Incorporation of KZPS/KDGE License Corp.
3.8* -- Bylaws of KZPS/KDGE License Corp.
3.9* -- Certificate of Incorporation of Chancellor Media
Corporation of California.
3.10* -- Bylaws of Chancellor Media Corporation of California.
3.11* -- Certificate of Incorporation of KIOI License Corp.
3.12* -- Bylaws of KIOI License Corp.
</TABLE>
<PAGE> 359
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.13* -- Certificate of Incorporation of Chancellor Media
Corporation of Illinois.
3.14* -- Bylaws of Chancellor Media Corporation of Illinois.
3.15* -- Certificate of Incorporation of Chancellor Media Illinois
License Corp.
3.16* -- Bylaws of Chancellor Media Illinois License Corp.
3.17* -- Certificate of Incorporation of Chancellor Media
Corporation of Dade County.
3.18* -- Bylaws of Chancellor Media Corporation of Dade County.
3.19* -- Certificate of Incorporation of WVCG License Corp.
3.20* -- Bylaws of WVCG License Corp.
3.21* -- Certificate of Incorporation of Chancellor Media
Corporation of Massachusetts.
3.22* -- Bylaws of Chancellor Media Corporation of Massachusetts.
3.23* -- Certificate of Incorporation of Chancellor Media
Pennsylvania License Corp.
3.24* -- Bylaws of Chancellor Media Pennsylvania License Corp.
3.25* -- Certificate of Incorporation of Chancellor Media
Corporation of Miami.
3.26* -- Bylaws of Chancellor Media Corporation of Miami.
3.27* -- Certificate of Incorporation of WEDR License Corp.
3.28* -- Bylaws of WEDR License Corp.
3.29* -- Agreement of Limited Partnership of Chancellor Media
Corporation of Houston Limited Partnership.
3.30* -- Certificate of Incorporation of Chancellor Media
Corporation of Houston.
3.31* -- Bylaws of Chancellor Media Corporation of Houston.
3.32* -- Certificate of Incorporation of Chancellor Media
Corporation of the Keystone State.
3.33* -- Bylaws of Chancellor Media Corporation of the Keystone
State.
3.34* -- Certificate of Incorporation of Chancellor Media
Corporation of New York.
3.35* -- Bylaws of Chancellor Media Corporation of New York.
3.36* -- Certificate of Incorporation of Chancellor Media
Corporation of Charlotte.
3.37* -- Bylaws of Chancellor Media Corporation of Charlotte.
3.38* -- Certificate of WIOQ License Corp.
3.39* -- Bylaws of WIOQ License Corp.
3.40* -- Certificate of Incorporation of Chancellor Media
Corporation of Washington, D.C.
3.41* -- Bylaws of Chancellor Media Corporation of Washington,
D.C.
3.42* -- Certificate of Incorporation of Chancellor Media
Corporation of St. Louis.
</TABLE>
<PAGE> 360
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.43* -- Bylaws of Chancellor Media Corporation of St. Louis.
3.44* -- Certificate of Incorporation of Chancellor Media
Corporation of Michigan.
3.45* -- Bylaws of Chancellor Media Corporation of Michigan.
3.46* -- Certificate of Incorporation of Chancellor Media/WAXQ
License Corp.
3.47* -- Bylaws of Chancellor Media/WAXQ License Corp.
3.48* -- Certificate of WAXQ License Corp.
3.49* -- Bylaws of WAXQ License Corp.
3.50* -- Certificate of Incorporation of Chancellor Media/KCMG
Inc.
3.51* -- Bylaws of Chancellor Media/KCMG Inc.
3.52* -- Certificate of Incorporation of Chancellor
Media/Riverside Broadcasting Co., Inc.
3.53* -- Bylaws of Chancellor Media/Riverside Broadcasting Co.,
Inc.
3.54* -- Certificate of Incorporation of WLTW License Corp.
3.55* -- Bylaws of WLTW License Corp.
3.56* -- Certificate of Incorporation of Chancellor Media
Corporation of the Capital City.
3.57* -- Bylaws of Chancellor Media Corporation of the Capital
City.
3.58* -- Certificate of Incorporation of Chancellor Media D.C.
License Corp.
3.59* -- Bylaws of Chancellor Media D.C. License Corp.
3.60* -- Certificate of Incorporation of Chancellor Media Licensee
Company.
3.61* -- Bylaws of Chancellor Media Licensee Company.
3.62* -- Certificate of Incorporation of Chancellor Media/Trefoil
Communications, Inc.
3.63* -- Amended and Restated Bylaws of Chancellor Media/Trefoil
Communications, Inc.
3.64* -- Certificate of Incorporation of Chancellor Media/Shamrock
Broadcasting, Inc.
3.65* -- Amended and Restated Bylaws of Chancellor Media/Shamrock
Broadcasting, Inc.
3.66* -- Certificate of Incorporation of Chancellor Media/Shamrock
Radio Licenses, Inc.
3.67* -- Bylaws of Chancellor Media/Shamrock Radio Licenses, Inc.
3.68* -- Certificate of Incorporation of Chancellor Media/Shamrock
Broadcasting Licenses of Denver, Inc.
3.69* -- Bylaws of Chancellor Media/Shamrock Broadcasting Licenses
of Denver, Inc.
3.70* -- Articles of Incorporation of Chancellor Media/Shamrock
Broadcasting of Texas, Inc.
</TABLE>
<PAGE> 361
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.71* -- Amended and Restated Bylaws of Chancellor Media/Shamrock
Broadcasting of Texas, Inc.
3.72* -- Limited Liability Company Agreement of Chancellor
Media/Shamrock Radio Licenses, LLC.
3.73* -- Certificate of Incorporation of Chancellor Media Outdoor
Corporation.
3.74* -- Bylaws of Chancellor Media Outdoor Corporation.
3.75* -- Certificate of Incorporation of Chancellor Media Nevada
Sign Corporation.
3.76* -- Bylaws of Chancellor Media Nevada Sign Corporation.
3.77* -- Certificate of Incorporation of Chancellor Media MW Sign
Corporation.
3.78* -- Bylaws of Chancellor Media MW Sign Corporation.
3.79* -- Certificate of Incorporation of Chancellor Media Martin
Corporation.
3.80* -- Bylaws of Chancellor Media Martin Corporation.
3.81* -- Articles of Incorporation of Western Poster, Inc.
3.82* -- Bylaws of Western Poster, Inc.
3.83* -- Certificate of Incorporation of The AMFM Radio Networks,
Inc.
3.84* -- Bylaws of The AMFM Radio Networks, Inc.
3.85* -- Certificate of Incorporation of Chancellor Media Air
Services Corporation.
3.86* -- Bylaws of Chancellor Media Air Services Corporation.
3.87* -- Certificate of Incorporation of Chancellor Media Whiteco
Outdoor Corporation.
3.88* -- Bylaws of Chancellor Media Whiteco Outdoor Corporation.
3.89* -- Certificate of Incorporation of Chancellor Merger Corp.
3.90* -- Bylaws of Chancellor Merger Corp.
3.91* -- Articles of Organization of Broadcast Architecture, Inc.
3.92* -- Bylaws of Broadcast Architecture, Inc.
3.93+ -- Agreement of Limited Partnership of Martin Media.
3.94* -- Articles of Incorporation of Dowling Company
Incorporated.
3.95* -- Bylaws of Dowling Company Incorporated.
3.96* -- Articles of Incorporation of Nevada Outdoor Systems, Inc.
3.97* -- Bylaws of Nevada Outdoor Systems, Inc.
3.98* -- Articles of Incorporation of MW Sign Corp.
3.99* -- Bylaws of MW Sign Corp.
3.100* -- Articles of Incorporation of Martin & MacFarlane, Inc.
3.101* -- Bylaws of Martin & MacFarlane, Inc.
3.102* -- Certificate of Incorporation of Katz Media Corporation.
3.103* -- Bylaws of Katz Media Corporation.
3.104* -- Certificate of Incorporation of Katz Communications, Inc.
</TABLE>
<PAGE> 362
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.105* -- Bylaws of Katz Communications, Inc.
3.106* -- Certificate of Incorporation of Katz Millennium
Marketing, Inc.
3.107* -- Bylaws of Katz Millennium Marketing, Inc.
3.108* -- Certificate of Incorporation of Amcast Radio Sales, Inc.
3.109* -- Bylaws of Amcast Radio Sales, Inc.
3.110* -- Certificate of Incorporation of Christal Radio Sales,
Inc.
3.111* -- Amended and Restated Bylaws of Christal Radio Sales, Inc.
3.112* -- Certificate of Incorporation of Eastman Radio Sales, Inc.
3.113* -- Bylaws of Eastman Radio Sales, Inc.
3.114* -- Certificate of Incorporation of Seltel, Inc.
3.115* -- Bylaws of Seltel, Inc.
3.116* -- Certificate of Incorporation of Katz Cable Corporation.
3.117* -- Amended and Restated Bylaws of Katz Cable Corporation.
3.118* -- Certificate of Incorporation of The National Payroll
Company, Inc.
3.119* -- Bylaws of The National Payroll Company, Inc.
3.120* -- Limited Liability Company Agreement of Chancellor Media
Radio Licenses, LLC
3.121* -- Agreement of Limited Partnership of KLOL License Limited
Partnership.
3.122* -- Agreement of Limited Partnership of WTOP License Limited
Partnership.
3.123* -- Certificate of Formation of Radio 100, L.L.C.
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 Guaranty and
Subsidiary Pledge Agreement (see table of contents for
list of omitted schedules and exhibits.
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 CMCLA.
</TABLE>
<PAGE> 363
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
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 CMCLA.
4.17(cc) -- Indenture, dated as of February 26, 1996, governing the
12 1/4% Subordinated Exchange Debentures due 2008 of
CMCLA.
4.18(dd) -- Indenture, dated as of January 23, 1997, governing the
12% Subordinated Exchange Debentures due 2009 of CMCLA.
4.19(ee) -- Indenture, dated as of June 24, 1997, governing the
8 3/4% Senior Subordinated Notes due 2007 of CMCLA.
4.21(ff) -- Specimen of the 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock Certificate of CMCLA.
4.22(ff) -- Specimen of the 12% Exchangeable Preferred Stock
Certificate of CMCLA.
4.23(ff) -- Form of Certificate of Designation for the 12 1/4% Series
A Senior Cumulative Exchangeable Preferred Stock of
CMCLA.
4.24(ff) -- Form of Certificate of Designation for the 12%
Exchangeable Preferred Stock of CMCLA.
4.25(pp) -- Second Amendment to Second Amended and Restated Loan
Agreement, dated August 7, 1997, among Evergreen Media
Corporation of Los Angeles, the Lenders, the Agents and
the Administrative Agent.
4.26(hh) -- Second Supplemental Indenture, dated as of April 15,
1997, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
4.27(pp) -- Third Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
4.28(pp) -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated June 24, 1997, governing the
8 3/4% Senior Subordinated Notes due 2007 of CMCLA.
4.29(pp) -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated February 26, 1997, governing
the 12 1/4% Subordinated Exchange Debentures due 2008 of
CMCLA.
4.30(pp) -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated January 23, 1997, governing
the 12% Subordinated Exchange Debentures due 2009 of
CMCLA.
4.34(uu) -- Amended and Restated Indenture, dated as of October 28,
1997, governing the 10 1/2% Senior Subordinated Notes due
2007 of CMCLA.
4.35(uu) -- Second Supplement Indenture, dated as of October 28,
1997, to the Amended and Restated Indenture dated October
28, 1997 governing the 10 1/2% Senior Subordinated Notes
due 2007 of CMCLA.
4.36(uu) -- Third Amendment to Second Amended and Restated Loan
Agreement, dated October 28, 1997, among CMCLA, the
Lenders, the Agents and the Administrative Agent.
</TABLE>
<PAGE> 364
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
4.37(uu) -- Fourth Amendment to Second Amended and Restated Loan
Agreement, dated February 10, 1998, among CMCLA, the
Lenders, the Agents and the Administrative Agent.
4.38(vv) -- Indenture, dated as of December 22, 1997, governing the
8 1/8% Senior Subordinated Notes due 2007 of CMCLA.
4.39(ww) -- Fifth Amendment to Second Amended and Restated Loan
Agreement, dated May 1, 1998, among CMCLA, the Lenders,
the Agents and the Administrative Agent.
4.40(yy) -- Sixth Amendment to Second Amended and Restated Loan
Agreement, dated July 31, 1998, among CMCLA, the Lenders,
the Agents and the Administrative Agent.
4.41* -- Indenture, dated as of September 30, 1998, governing the
9% Senior Subordinated Notes due 2008 of CMCLA.
4.42* -- Purchase Agreement, dated as of September 25, 1998, among
CMCLA, the Guarantors named therein and Goldman, Sachs &
Co.
4.43* -- Registration Rights Agreement, dated as of September 30,
1998, among CMCLA, the Guarantors named therein and
Goldman, Sachs & Co.
4.44(aaa) -- Seventh Amendment to Second Amended and Restated Loan
Agreement, dated November 9, 1998, among CMCLA, the
Lenders, the Agents and the Administrative Agent.
4.45+ -- Indenture, dated as of November 17, 1998, governing the
8% Senior Notes due 2008 of CMCLA.
4.46+ -- Purchase Agreement, dated as of November 12, 1998, among
CMCLA, the Guarantors named therein, BT Alex. Brown
Incorporated, Chase Securities Inc., Morgan Stanley & Co.
Incorporated and Salomon Smith Barney Inc.
4.47+ -- Registration Rights Agreement, dated as of November 17,
1998, among CMCLA, the Guarantors named therein, BT Alex.
Brown Incorporated, Chase Securities Inc., Morgan Stanley
& Co. Incorporated and Salomon Smith Barney Inc.
5.1* -- Opinion of Weil, Gotshal & Manges LLP.
10.23(xx) -- Amended and Restated Chancellor Media Corporation Stock
Option Plan for Non-employee Directors.
10.26(n)** -- Employment Agreement dated February 9, 1996 by and
between Evergreen Media Corporation and Kenneth J.
O'Keefe.
10.28(o) -- 1995 Stock Option Plan for executive officers and key
employees of Evergreen Media Corporation.
10.30(pp)** -- First Amendment to Employment Agreement dated March 1,
1997 by and between Evergreen Media Corporation and
Kenneth J. O'Keefe.
10.31(pp)** -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and Scott K. Ginsburg.
</TABLE>
<PAGE> 365
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.32(pp)** -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and James de Castro.
10.33(pp)** -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and Matthew E. Devine.
10.34(pp)** -- Second Amendment to Employment Agreement dated September
4, 1997 by and among Evergreen Media Corporation,
Evergreen Media Corporation of Los Angeles and Kenneth J.
O'Keefe.
10.35(ii)** -- Employment Agreement dated February 14, 19965 by and
among Chancellor Broadcasting Company, Chancellor Radio
Broadcasting Company and Steven Dinetz.
10.36(jj) -- Chancellor Broadcasting Company 1996 Stock Award Plan.
10.37(kk) -- Chancellor Holdings Corp. 1994 Director Stock Option
Plan.
10.38(ll) -- Stock Option Grant Letter dated September 30, 1996 from
Chancellor Corporation to Steven Dinetz.
10.39(mm) -- Stock Option Grant Letter dated September 30, 1996 from
Chancellor Corporation to Eric W. Neumann.
10.40(nn) -- Stock Option Grant Letter dated September 30, 1996 from
Chancellor Corporation to Marvin Dinetz.
10.41(oo) -- Stock Option Grant Letter dated February 14, 1997 from
Chancellor Broadcasting Company to Carl M. Hirsch.
10.44(vv)** -- Agreement dated April 20, 1998 by and among Chancellor
Media Corporation, Chancellor Media Corporation of Los
Angeles and Scott K. Ginsburg.
10.45(vv)** -- Employment Agreement dated April 29, 1998 by and among
Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and Jeffrey A. Marcus.
10.46(yy) -- Chancellor Media Corporation 1998 Stock Option Plan.
10.47(yy) -- Voting Agreement, among Chancellor Media Corporation and
Rangers Equity Partners, L.P. dated as of July 7, 1998.
10.48* -- Employment Agreement, dated as of May 18, 1998, by and
among Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and James E. de Castro.
10.49* -- Employment Agreement, dated as of May 18, 1998, by and
among Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and Matthew E. Devine.
10.50* -- Employment Agreement, dated as of June 1, 1998, by and
among Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and Eric C. Neuman.
10.51* -- Employment Agreement, dated as of August 18, 1998, by and
among Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and James A. McLaughlin, Jr.
12.1* -- Chancellor Media Corporation of Los Angeles Computation
of Ratio of Earnings to Combined Fixed Charges.
</TABLE>
<PAGE> 366
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
23.1* -- Consent of Weil, Gotshal & Manges LLP (included as part
of their opinion listed as Exhibit 5.1).
23.2+ -- Consent of PricewaterhouseCoopers LLP, independent
accountants.
23.3+ -- Consent of KPMG Peat Marwick LLP, independent
accountants.
23.4+ -- Consent of PricewaterhouseCoopers LLP, independent
accountants.
23.5+ -- Consent of KPMG Peat Marwick LLP, independent
accountants.
23.6+ -- Consent of Arthur Andersen LLP, independent accountants.
23.7+ -- Consent of BDO Seidman, LLP, independent accountants.
24.1* -- Powers of Attorney.
25.1+ -- Statement of Eligibility and Qualification of The Bank of
New York, as trustee, under the Indenture listed as
Exhibit 4.41 hereto on Form T-1.
99.1* -- Form of Letter of Transmittal.
99.2* -- Form of Notice of Guaranteed Delivery.
</TABLE>
- ---------------
* Previously filed.
** Management Contract or Compensatory Agreement.
+ Filed herewith.
(a) Incorporated by reference to the identically numbered exhibit to the
Registration Statement on Form S-1, as amended (Reg. No. 33-60036), of
Evergreen Media Corporation ("Evergreen").
(f) Incorporated by reference to the identically numbered exhibit 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
June 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).
<PAGE> 367
(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.
(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.
(ff) Incorporated by reference to the identically-numbered exhibit to the
Registration Statement on Form S-4 (Reg. No. 333-32259), dated July 29,
1997, as amended, of Evergreen Media Corporation of Los Angeles
("EMCLA").
(gg) Incorporated by reference to the identically numbered exhibit to the
Quarterly Report on Form 10-Q of Evergreen and EMCLA for the quarterly
period ending June 30, 1997.
(hh) Incorporated by reference to Exhibit 4.8 to the Quarterly Report on Form
10-Q of Chancellor Broadcasting Company ("CBC") and CRBC for the
quarterly period ending March 31, 1997.
(ii) Incorporated by reference to Exhibit 10.6 to CBC's Registration Statement
on Form S-1 (Reg. No. 333-02782) filed February 9, 1996.
(jj) Incorporated by reference to Exhibit 4.22 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(kk) Incorporated by reference to Exhibit 4.23 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(ll) Incorporated by reference to Exhibit 4.24 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(mm) Incorporated by reference to Exhibit 4.25 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
<PAGE> 368
(nn) Incorporated by reference to Exhibit 4.26 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(oo) Incorporated by reference to Exhibit 4.27 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(pp) Incorporated by reference to the identically numbered exhibit to the
CMCLA's Registration Statement on Form S-4 (Reg. No. 333-36451), dated
September 26, 1997, as amended.
(ss) Incorporated by reference to the identically numbered exhibit to the
Current Report on Form 8-K of Chancellor Media and CMCLA, dated as of
February 23, 1998 and filed as of February 27, 1998.
(tt) Incorporated by reference to the identically numbered exhibit to the
Annual Report on Form 10-K of Chancellor Media and the CMCLA for the
fiscal year ended December 31, 1997.
(uu) Incorporated by reference to the identically numbered exhibit to the
Annual Report on Form 10-K of Chancellor and CMCLA for the fiscal year
ended December 31, 1997.
(vv) Incorporated by reference to the identically numbered exhibit to CMCLA's
Registration Statement on Form S-4 (Reg. No. 333-50739), dated April 22,
1998, as amended.
(ww) Incorporated by reference to the identically numbered exhibit to the
Quarterly Report on Form 10-Q of Chancellor Media and CMCLA for the
quarterly period ending March 31, 1998.
(xx) Incorporated by reference to Exhibit 4.41 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-53179), dated May 20,
1998.
(yy) Incorporated by reference to the identically numbered exhibit to the
Quarterly Report on Form 10-Q of Chancellor Media and CMCLA for the
quarterly period ending June 30, 1998.
(aaa) Incorporated by reference to Exhibit 4.42 to the Quarterly Report on Form
10-Q of Chancellor Media and CMCLA for the quarterly period ending
September 30, 1998.
<PAGE> 1
================================================================================
ASSET PURCHASE AGREEMENT
by and among
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES,
WHITECO INDUSTRIES, INC.
and
METRO MANAGEMENT ASSOCIATES
Dated: August 30, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I. DEFINITIONS .............................................. 1
1.1. Defined Terms ............................................ 1
1.2. Other Defined Terms ...................................... 9
ARTICLE II. PURCHASE AND SALE OF ASSETS .............................. 11
2.1. Transfer of Assets ....................................... 11
2.2. Assumption of Liabilities ................................ 12
2.3. Purchase Price ........................................... 12
2.4. Calculation of the Purchase Price ........................ 13
2.5. Final Adjustment ......................................... 13
2.6. Disputed Final Adjustment Amount ......................... 14
2.7. Resolution of Disputed Final Adjustment Amount ........... 14
2.8. Closing Costs; Transfer Taxes and Fees ................... 14
ARTICLE III. CLOSING ................................................. 15
3.1. Closing .................................................. 15
3.2. Conveyances at Closing ................................... 15
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER ................. 16
4.1. Organization of Seller and Partnership ................... 16
4.2. Authorization ............................................ 16
4.3. Absence of Certain Changes or Events ..................... 17
4.4. Warranted Assets ......................................... 17
4.5. Owned Real Property ...................................... 18
4.6. Contracts ................................................ 19
4.7. No Conflict or Violation ................................. 20
4.8. Consents and Approvals ................................... 21
4.9. Financial Statements ..................................... 21
4.10. Projections .............................................. 21
4.11. Books and Records ........................................ 21
4.12. Litigation ............................................... 22
4.13. Labor Matters ............................................ 22
4.14. Compliance with Law ...................................... 22
4.15. No Brokers ............................................... 23
4.16. No Other Agreements to Sell the Assets ................... 23
4.17. Proprietary Rights ....................................... 23
4.18. Employee Benefit Plans ................................... 24
4.19. Tax Matters .............................................. 27
4.20. Customers ................................................ 27
4.21. Environmental Matters .................................... 27
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
4.22. Intracompany Transactions .................................... 28
4.23. Third Party Asset Purchase Agreements ........................ 28
4.24. Condition of Property ........................................ 28
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER ...................... 28
5.1. Organization of Buyer ........................................ 28
5.2. Authorization ................................................ 28
5.3. No Conflict or Violation ..................................... 29
5.4. Consents and Approvals ....................................... 29
5.5. Broker and Finders ........................................... 29
5.6. Litigation and Proceedings ................................... 29
5.7. Financial Ability ............................................ 29
5.8. Compliance with Law .......................................... 30
ARTICLE VI. COVENANTS OF SELLER, PARTNERSHIP AND BUYER ................... 30
6.1. Further Assurances ........................................... 30
6.2. No Solicitation .............................................. 31
6.3. Notification of Certain Matters .............................. 31
6.4. Access to Information ........................................ 31
6.5. Conduct of Business .......................................... 34
6.6. Employee Matters ............................................. 35
6.7. Services ..................................................... 36
6.8. No Business Employee Solicitation ............................ 37
6.9. Third Party Asset Purchase Agreements ........................ 37
6.10. HSR Act Filing ............................................... 38
6.11. Excluded Real Property ....................................... 38
6.12. Profile Systems .............................................. 38
ARTICLE VII. CONDITIONS TO SELLER'S AND PARTNERSHIP'S OBLIGATIONS ......... 38
7.1. No Proceedings, Litigation or Laws ........................... 39
7.2. Opinion of Counsel ........................................... 39
7.3. Certificates ................................................. 39
7.4. Corporate Documents .......................................... 39
7.5. HSR Act ...................................................... 39
7.6. Ancillary Agreements ......................................... 39
ARTICLE VIII. CONDITIONS TO BUYER'S OBLIGATIONS ........................ 39
8.1. No Proceedings or Litigation ................................. 40
8.2. Opinion of Counsel ........................................... 40
8.3. Certificates ................................................. 40
8.4. Corporate Documents .......................................... 40
8.5. HSR Act ...................................................... 40
8.6. Ancillary Agreements ......................................... 40
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
8.7. Nonforeign Affidavit .................................................. 40
8.8. Conduct of Business ................................................... 41
ARTICLE IX. RISK OF LOSS; CONSENTS TO ASSIGNMENT .................................... 41
9.1. Damage or Destruction of Assets Prior to Closing ...................... 41
9.2. Elimination of Some Signage Structures from Transfer;
Corresponding Reduction of Purchase Price and Other Amendments ........ 41
9.3. Consents to Assignment ................................................ 42
ARTICLE X. ACTIONS BY BUYER, SELLER AND PARTNERSHIP AFTER THE CLOSING ............... 43
10.1. Further Actions ....................................................... 43
10.2. Survival of Representations, Etc. ..................................... 43
10.3. Books and Records ..................................................... 43
10.4. Indemnification ....................................................... 44
10.5. Bulk Sales ............................................................ 46
10.6. Taxes and Asset Allocation ............................................ 46
10.7. Covenant Not To Compete ............................................... 47
10.8. Confidentiality ....................................................... 47
10.9. Use of Name ........................................................... 48
10.10. Maintenance of Net Worth .............................................. 48
ARTICLE XI. MISCELLANEOUS ........................................................... 48
11.1. Termination ........................................................... 48
11.2. Liquidated Damages .................................................... 49
11.3. Specific Performance .................................................. 50
11.4. Representations and Warranties Relating to the Signage Properties
and Disclosures Thereof ............................................... 50
11.5. Assignment ............................................................ 50
11.6. Notices ............................................................... 50
11.7. Choice of Law ......................................................... 52
11.8. Amendments and Waivers ................................................ 52
11.9. Multiple Counterparts ................................................. 52
11.10. Expenses .............................................................. 52
11.11. Invalidity ............................................................ 53
11.12. Titles ................................................................ 53
11.13. Publicity ............................................................. 53
11.14. Arbitration ........................................................... 53
11.15. Knowledge ............................................................. 53
</TABLE>
iii
<PAGE> 5
SCHEDULES
<TABLE>
<CAPTION>
Schedule
- --------
<S> <C>
1.1(a) Acquired Real Property
1.1(b) Assets of the Partnership
1.1(c) Capital Expenditures Amount
1.1(d) Excluded Real Property
1.1(e) Retained Assets
4.3 Absence of Certain Changes or Events
4.5 Owned Real Property
4.5.1 Ground Leases
4.5(e) Improvements, Fixtures and Equipment
4.5(f) Special Assessments
4.6 Contracts
4.6(b) Absence of Breaches or Defaults
4.7 Conflicts or Violations
4.8 Consents and Approvals
4.9 Business Statements
4.10 Projections
4.12 Litigation
4.13 Labor Matters
4.14 Compliance with Laws
4.16 Agreements to Sell the Assets
4.17 Proprietary Rights
4.18(b) Employee Benefit Plans
4.18(c) Exceptions as to Employee Benefit Plans
4.20 Industry Customer Groups
4.21 Environmental Matters
4.22 Intracompany Transactions
4.23 Third Party Asset Purchase Agreements
4.24 Condition of Warranted Assets Other Than Signage
Property
6.1 Further Assurances
6.5 Conduct of Business
6.7 Services
</TABLE>
EXHIBITS
<TABLE>
<CAPTION>
Exhibits
- --------
<S> <C>
2.4 Business Financial Statement Accounting Conventions
A Headquarters Sublease Agreement
B Data Processing Agreement
C Monitoring Systems Agreement
D Telephone Services Agreement
E Future Use Rights Agreement
F Section 6.6 Agreement
G Terms of Severance Agreements
H-1 Opinion of Latham & Watkins
H-2 Opinion of Chadbourne & Parke LLP
I Projected Pro Forma Net Sign Revenues
and EBITDA by Operating Region for 1998
</TABLE>
iv
<PAGE> 6
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT, dated as of August 30, 1998, is by and
among CHANCELLOR MEDIA CORPORATION OF LOS ANGELES, a Delaware corporation
("Buyer"), WHITECO INDUSTRIES, INC., a Nebraska corporation ("Seller") and METRO
MANAGEMENT ASSOCIATES, an Indiana general partnership ("Partnership").
RECITALS
A. Seller owns and operates an outdoor advertising business and
certain related assets and the Partnership owns certain assets which Seller
operates as part of Seller's outdoor advertising business.
B. Buyer desires to purchase and assume from Seller and Partnership,
and Seller and Partnership desire to sell and transfer to Buyer, substantially
all of the assets of Seller and the assets of Partnership as set forth on
Schedule 1.1(b) primarily relating to the Business (as defined below), all as
more specifically set forth in this Agreement, upon the terms and subject to the
conditions of this Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the premises and mutual covenants
and promises contained herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
ARTICLE I.
DEFINITIONS
1.1. Defined Terms.
As used herein and on the attached exhibits and Disclosure Schedule,
the terms below shall have the following meanings. Any of such terms, unless the
context otherwise requires, may be used in the singular or plural, depending
upon the reference.
"Acquired Real Property" shall mean the parcels of land described on
Schedule 1.1(a) which are the subject of purchase agreements between Seller and
the parties listed on Schedule 1.1(a), and any additional parcels of land that
become the subject of purchase agreements between Seller and a third party which
are approved by Buyer that Buyer agrees with Seller to be treated as if set
forth on Schedule 1.1(a).
"Acquired Real Property Payment Amount" shall mean the aggregate
amount of purchase price paid by Seller, as approved by Buyer, and aggregate
out-of-pocket cost incurred by Seller in connection with the acquisitions of
Acquired Real Property.
<PAGE> 7
"Advertising Contracts" shall mean all of Seller's and Partnership's
interest in Contracts, including all records and correspondence with respect
thereto, for advertising relating to the use of the Signage Structures and for
outdoor advertising structures not owned by Seller or the Partnership by the
customers and clients of Seller.
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by, or is under common control
with such Person, where the term "control" means the ownership, directly or
indirectly, of more than fifty percent (50%) of the equity capital or the right
or power in fact to direct the management of such Person.
"Ancillary Agreements" shall mean the Headquarters Sublease Agreement,
Data Processing Agreement, Monitoring Systems Agreement, Telephone Services
Agreement, Future Use Rights Agreements and Section 6.6 Agreement in the forms
attached hereto as Exhibits A, B, C, D, E and F, respectively.
"Books and Records" shall mean, to the extent they are primarily used
or held for use in, or pertaining to, the Business or relate primarily to the
Business (a) all records and lists of Seller and Partnership, (b) all records
and lists of Seller and Partnership pertaining to the customers, business
prospects, business relationships, suppliers or personnel of Seller and
Partnership, (c) all product, business and marketing plans of Seller and
Partnership and (d) all books, files, reports, plans, drawings and operating
records of every kind maintained by Seller and Partnership, but excluding the
originals of Seller's minute books and stock books, Partnership's partnership
records and Seller's and Partnership's tax returns.
"Business" shall mean (a) the outdoor advertising business and related
assets of Seller in the United States, broadly described, and wherever located,
including all tangible and intangible assets used therein and (b) the assets of
the Partnership in the United States set forth on Schedule 1.1(b).
"Business Interim Statements" shall have the meaning set forth in the
definition of Financial Statements.
"Buyer" shall have the meaning set forth in the preamble.
"Capital Expenditures Amount" shall mean the difference (if any)
between (a) the actual amount of capital expenditures (including deposits made
on triwaves) and construction in progress for new build signs during the portion
of the calendar year 1998 prior to the Closing Date and triwaves existing on the
Closing Date and (b) the amount of 1998 budgeted capital expenditures (which
includes anticipated construction in progress and deposits made on triwaves)
through the Closing Date for new build signs and triwaves, as provided on
Schedule 1.1(c), and as calculated on a pro rata basis for any incomplete
quarter. The Capital Expenditures Amount shall be deemed to be positive if (a)
exceeds (b), and shall be deemed to be negative if (b) exceeds (a). Amounts of
Third Party Asset Purchase Expenditures shall not constitute a Capital
Expenditure Amount. Amounts expended by Seller for additional construction on
locations acquired under Third Party Asset Purchase Agreements to the extent
approved by Buyer, shall be deemed Third Party Asset Purchase Expenditure
Amounts.
2
<PAGE> 8
"Business Statements" shall have the meaning set forth in the
definition of Financial Statements.
"Buyer" shall have the meaning set forth in the preamble.
"Closing Balance Sheet Net Working Capital" shall mean the difference
between the current assets and current liabilities of the Business reflected on
the Closing Balance Sheet.
"Closing Date" shall mean (i) the date which is ten (10) business
days after the date on which all conditions set forth in Articles VII and VIII
have been satisfied or waived, or (ii) such other date as Buyer and Seller shall
mutually agree upon.
"Confidentiality Agreement" shall mean that certain Confidentiality
Agreement dated July 10, 1997 [sic] [1998], by and among Chancellor Media
Corporation and Seller.
"Contracts" shall mean all written or binding contracts, leases,
licenses, commitments and agreements relating to the Business to which Seller or
Partnership is a party or is bound other than Signage Occupancy Rights and
Signage Permits. For the avoidance of doubt, the term Contracts shall not
include any contracts, leases, licenses, commitments and agreements that do not
relate to the Business.
"Data Processing Agreement" shall mean that certain Data Processing
Agreement between Buyer and Seller, dated as of the date hereof, in the form
attached hereto as Exhibit B.
"Disclosure Schedule" shall mean the schedule attached hereto which
contains the General Disclosure Statement and which sets forth certain
exceptions to the representations and warranties contained in Article IV hereof
and certain other information called for by this Agreement. Unless otherwise
specified, each reference in this Agreement to any numbered schedule is a
reference to that numbered schedule contained in the Disclosure Schedule and
each numbered Schedule shall be deemed to incorporate the General Disclosure
Statement and each other numbered Schedule.
"EBITDA" shall mean, with respect to any Person for any period,
earnings before deductions for interest, taxes, depreciation and amortization,
determined in accordance with generally accepted accounting principles
consistently applied.
"Encumbrance" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the nature thereof.
"Environmental Laws" shall mean all federal, state, local or foreign
laws, statutes, ordinances, regulations, requirements, rules, judgments,
policies, plans, decrees or orders which (i) regulate or relate to the
protection or clean-up of the environment, the Handling of Substances, the
preservation or protection of surface water, groundwater, drinking water, air,
wildlife, plants
3
<PAGE> 9
or other natural resources, or the health and safety of Persons or property,
including, without limitation, protection of the health and safety of employees
or (ii) impose liability with respect to any of the foregoing, including,
without limitation, the Federal Water Pollution Control Act, Resource
Conservation & Recovery Act, Safe Drinking Water Act, Toxic Substances Control
Act, Clean Air Act, Comprehensive Environmental Response, Compensation and
Liability Act, or any other similar federal, state or local law of similar
effect, each as amended.
"Environmental Liabilities for Facilities Real Property" shall mean
any and all liabilities, damages and losses and reasonable costs and expenses,
in each case only to the extent required or imposed under or resulting from
rights or claims related to applicable Environmental Law, arising from any
Facilities Environmental Matters, including, without limitation, reasonable
costs of investigation, cleanup, removal, remedial, corrective or response
action, the reasonable costs associated with posting financial assurances for
the completion of investigation, cleanup, removal, remedial, corrective or
response actions, reasonable attorney's fees, the preparation of any closure or
other necessary or required plans or analyses, or other necessary reports or
analyses submitted to or prepared for regulating agencies.
"Excluded Liabilities" shall mean the following liabilities and
obligations of Seller or Partnership except to the extent (i) the amount of such
liabilities is set forth in the Closing Balance Sheet Net Working Capital on the
Final Balance Sheet or (ii) that Buyer has specifically assumed or agreed to
assume responsibility for in this Agreement or any other written instrument:
(a) all claims by and obligations owing to third parties relating to
(a) events occurring prior to the Closing and (b) the period prior to the
Closing attributable to a condition existing on or prior to the Closing
Date;
(b) all liabilities and obligations for fees and expenses incurred by
or on behalf of Seller or Partnership in connection with the transactions
contemplated by this Agreement;
(c) all liabilities and obligations arising out of or relating to the
Retained Assets except to the extent arising from Buyer's use of Future Use
Rights;
(d) all liabilities and obligations for which Seller and/or
Partnership have expressly assumed responsibility pursuant to this
Agreement;
(e) all Environmental Liabilities for Facilities Real Property;
(f) all liabilities and obligations relating to former employees of
Seller or Partnership no longer employed by Seller or Partnership as of the
close of business on the Closing Date;
(g) all Financing Obligations;
(h) all liabilities with respect to all actions, suits, proceedings,
disputes, claims or investigations arising out of or relating to (a) events
occurring prior to the Closing and
4
<PAGE> 10
(b) the period prior to the Closing attributable to a condition existing
on or prior to the Closing;
(i) all debts, liabilities or obligations of Seller and/or Partnership
that do not arise out of or are not principally related to the Business;
and
(j) Excluded Taxes.
"Excluded Real Property" shall mean the real property identified on
Schedule 1.1(d).
"Excluded Taxes" shall mean all Taxes of Seller or Partnership.
"Facilities Environmental Matters" shall mean (i) the production, use,
generation, management, storage, treatment, recycling, disposal, discharge,
release, or other handling or disposition at any time on or prior to the Closing
Date (collectively, "Handling"), of any toxic, hazardous, or other regulated
wastes, substances, products, pollutants or materials which are regulated under
any applicable Environmental Law including, without limitation, asbestos,
petroleum and petroleum products (collectively, "Substances"), either in, on,
under or from any Facilities Real Properties including, without limitation, the
effects of such Handling of Substances on resources, Persons, disposal
facilities or property within or outside the boundaries of any Facilities Real
Property, (ii) the presence as of the Closing Date of Substances in, on or under
any Facilities Real Property (to the extent of the amounts of such Substances
then present) regardless of how the Substances came to rest at, on or under the
Facilities Real Property, (iii) the failure on or prior to the Closing Date of
any Facilities Real Property to be in compliance with any applicable
Environmental Laws (to the extent of such non-compliance), and (iv) any other
act, omission or condition existing with respect to the Facilities Real Property
prior to the Closing Date which gives rise to liability under any applicable
Environmental Laws (to the extent of such act, omission or condition as of the
Closing Date).
"Facilities Real Property" shall mean all real property owned by
Seller and used or held for use in, or pertaining to, the Business, other than
(a) the Excluded Real Property and (b) the Signage Real Property.
"Final Balance Sheet Net Working Capital" shall mean the difference
between the current assets and current liabilities of the Business reflected on
the Final Balance Sheet which shall be deemed to be positive if current assets
exceed current liabilities and shall be deemed to be negative if current
liabilities exceed current assets.
"Financial Statements" shall mean (i) the audited financial statements
of Seller for the years ended December 31, 1996 and December 31, 1997 ("Whiteco
Audited Statements"), (ii) the audited financial statements of the Partnership
for the years ended December 31, 1996 and December 31, 1997 ("Partnership Annual
Statements"), (iii) the interim unaudited financial statements of Whiteco for
the period ending June 30, 1998 ("Whiteco Interim Statements"), (iv) the interim
unaudited financial statements of the Partnership for the period ending June 30,
1998 ("Partnership Interim Statements"), (v) the unaudited financial statements
reflecting the
5
<PAGE> 11
operations of the Business for the calendar year 1997 ("1997 Business
Statements"), and (vi) the unaudited financial statements reflecting the
operations of the Business for the six month period ending June 30, 1998
("Business Interim Statements" and, together with the 1997 Business Statements,
the "Business Statements").
"Financing Obligations" shall mean (i) indebtedness of Seller and
Partnership for borrowed money, (ii) obligations of Seller and Partnership
evidenced by bonds, notes, debentures or similar instruments, (iii) obligations
under capitalized leases, (iv) obligations under conditional sale, title
retention or similar agreements or arrangements creating an obligation of Seller
or Partnership with respect to the deferred purchase price of property, goods or
services (other than customary trade credit), and (v) all obligations of Seller
or Partnership to guarantee any of the foregoing types of obligations on behalf
of others.
"Fixtures and Equipment" shall mean all of the signage (other than
Signage Structures), furniture, fixtures, furnishings, machinery, automobiles,
trucks, equipment and other tangible personal property owned by Seller and
Partnership and used primarily in, or pertain primarily to, the Business.
"Future Use Rights" shall mean those rights relating to Excluded Real
Property to be granted to Buyer pursuant to the Future Use Rights Agreements.
"Future Use Rights Agreements" shall mean the Future Use Rights
Agreements between Buyer and Seller, dated as of the Closing Date, in the proper
form for the relevant jurisdictions and suitable for recording therein in the
form attached hereto as Exhibit E.
"Goodwill" shall mean any and all goodwill and going concern value
pertaining to the Business or the Assets.
"Ground Leases" shall mean all of Seller's interest in ground leases
other than ground leases included in Signage Properties, including all Seller's
records and correspondence with respect thereto.
"Handling" shall have the meaning set forth in the definition of
Facilities Environmental Matters.
"Headquarters Sublease Agreement" shall mean that certain Headquarters
Sublease Agreement between Buyer and Seller, dated as of the Closing Date, in
the form attached hereto as Exhibit A.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
"Inventory" shall mean all Seller's raw materials, both new and used,
including but not limited to, wood and steel poles, lumber, panels, lighting
fixtures and parts, electrical wire, conduit, I-beams, catwalks and similar
items used in the construction, repair and maintenance of Signage Structures and
similar items, in each case wherever the same may be located and primarily used
or held for use in the Business.
6
<PAGE> 12
"Leasehold Improvements" shall mean all leasehold improvements
situated in or on Ground Leases or Signage Locations.
"Material Adverse Change" shall mean any significant and substantial
adverse change in the financial condition, business or operations of the
Business taken as a whole or on the Assets taken as a whole or on the ability of
Seller or Partnership to consummate the transactions contemplated hereby, or any
event or condition which would reasonably be expected to constitute such a
"material adverse change," except any such change resulting from or arising in
connection with (i) industry-wide developments similarly affecting other
companies in businesses similar to the Business or (ii) changes or conditions
affecting the economy in general. The fact of this Agreement or the transactions
contemplated hereunder shall not be deemed to constitute a Material Adverse
Change.
"Material Adverse Effect" shall mean any significant and substantial
adverse effect in the financial condition, business or operations of the
Business taken as a whole or on the Assets taken as a whole or on the ability of
Seller or Partnership to consummate the transactions contemplated hereby, or any
event or condition which would reasonably be expected to constitute such a
"material adverse effect," except any such effect resulting from or arising in
connection with (i) industry-wide developments similarly affecting other
companies in businesses similar to the Business or (ii) changes or conditions
affecting the economy in general. The fact of this Agreement or the transactions
contemplated hereunder shall not be deemed to constitute a Material Adverse
Effect.
"Monitoring Systems Agreement" shall mean that certain Monitoring
Systems Agreement between Buyer and Profile Systems, LLC, an Affiliate of
Seller, in the form attached hereto as Exhibit C.
"1997 Business Statements" shall have the meaning set forth in the
definition of Financial Statements.
"Non-Signage Permits" shall mean all Seller's licenses, permits,
authorizations, consents and other approvals granted or required by governmental
and regulatory authorities that pertain to the Business other than Signage
Permits.
"Owned Real Property" shall mean all Signage Real Property and all
Facilities Real Property.
"Partnership" shall have the meaning set forth in the preamble.
"Partnership Annual Statements" shall have the meaning set forth in
the definition of Financial Statements.
"Partnership Interim Statements" shall have the meaning set forth in
the definition of Financial Statements.
7
<PAGE> 13
"Person" shall mean any individual, partnership, corporation, trust,
association, unincorporated organization, government or any department or agency
thereof or any other entity.
"Personal Property Leases" shall mean all of the existing leases with
respect to the personal property of Seller and Partnership used primarily in, or
pertaining primarily to, the Business other than the Signage Occupancy Rights.
"Proprietary Rights" shall mean all of Seller's and Partnership's (i)
domestic and foreign registrations of trademarks and other marks, trade names
and trade rights (except the names "Whiteco Construction Services," "Whiteco
Industries, Inc.," "Whiteco International," "Whiteco-Qingyu Advertising Company
Ltd." and "Whiteco Data Systems"), including the names, "Whiteco Outdoor
Advertising" and "Whiteco Outdoor," and the names "Whiteco" and "White," except
to the extent currently used by Seller or Partnership in its real estate,
construction or lodging operations and in Whiteco International (ii) pending
applications for such registrations, (iii) patents and applications therefor,
(iv) trademarks and other marks, trade names and other trade rights whether or
not registered, (v) copyrights and registrations thereof, (vi) trade secrets,
designs, plans, specifications, technical information and other proprietary
rights, and (vii) rights under any licenses to Seller or Partnership to use any
copyrights, marks, trade names, trade rights, patents or other proprietary
rights, in each case that is used or held for use in, or pertaining to, the
Business.
"Retained Assets" shall mean the Excluded Real Property and certain
other properties of Seller and Partnership as set forth on Schedule 1.1(e).
"Seller" shall have the meaning set forth in the preamble.
"Signage Locations" shall mean all locations on which Signage
Structures are erected, or to be erected, other than Signage Real Property.
"Signage Occupancy Rights" shall mean the leases, licenses, easements
or other arrangements whether or not expired or contested representing the basis
on which Signage Structures are erected or to be erected on Signage Locations.
"Signage Permits" shall mean all Seller's licenses, permits,
authorizations, consents and other approvals granted or required by governmental
and regulatory authorities for the existence, operation, and maintenance of the
Signage Structures, including all of Seller's records and correspondence with
respect thereto.
"Signage Properties" shall mean all Signage Structures, Signage Real
Property, Signage Occupancy Rights and Signage Permits.
"Signage Real Property" shall mean real property owned by Seller or
Partnership which is used or is to be used exclusively by Seller or Partnership
for the erection of Signage Structures.
8
<PAGE> 14
"Signage Structures" shall mean all Seller's and Partnership's outdoor
advertising structures, faces, and equipment attached thereto, in the United
States, including those listed on Seller's computer program "CNTY_STRC_FACE_ORA"
dated August 26, 1998, a copy of which has been provided by Seller to Buyer as
the same may change in the ordinary course of business or as contemplated by
this Agreement between the date hereof and the Closing Date by virtue of
additions and deletions.
"Substances" shall have the meaning set forth in the definition of
Facilities Environmental Matters.
"Tax" shall mean any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
windfall profits, environmental (including taxes under Code Sec. 59A), capital
stock, franchise, profits, withholding, social security unemployment,
disability, real property, personal property, sales, use, transfer, value added,
alternative or add-on minimum, estimated, or other tax, governmental fee or like
assessment or charge of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not including, without limitation, any
liability for the unpaid Taxes of any party under Treas. Reg. Section 1.1502-6
or any similar provision of state, local or foreign law, as a transferee or
successor, by contract, or otherwise.
"Third Party Asset Purchase Agreements" shall mean the contracts and
arrangements existing on the date hereof listed on Schedule 4.23 and additional
similar contracts or arrangements of Seller with third parties executed between
the date hereof and the Closing Date approved by Buyer and acknowledged by Buyer
to constitute Third Party Asset Purchase Agreements.
"Third Party Asset Purchase Expenditure Amounts" shall mean the amount
of $1,025,512.80 expended by Seller on or prior to the date hereof with respect
to payment of purchase price on the contract with Capital Signs listed on
Schedule 4.23 plus expenditures between the date hereof and the Closing Date of
payments of purchase price on Third Party Asset Purchase Agreements.
"Warranted Assets" shall mean the Assets other than the Signage
Properties.
"Whiteco Audited Statements" shall have the meaning set forth in the
definition of Financial Statements.
"Whiteco Interim Statements" shall have the meaning set forth in the
definition of Financial Statements.
"Whiteco Outdoor Advertising" shall mean the outdoor advertising
division of Seller in the United States.
1.2. Other Defined Terms.
The following terms shall have the meanings defined for such terms in
the Sections set forth below:
9
<PAGE> 15
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Acquisitions 4.23
Actions 4.12
Aggregate Fair Market Value 10.6(b)
Assets 2.1
Assumed Liabilities 2.2
Assumption Document 3.2(b)
Auditor 2.7
Benefit Arrangement 4.18(a)(i)
Bulk Sales Act 10.5
Buyer Indemnitees 10.4(a)
Claim 10.4(d)
Claim Notice 10.4(d)
Closing 3.1
Closing Date Audit Certificate 2.4
Closing Payment 2.3(b)
Code 4.18(a)(ii)
Consultant 6.4(b)(i)
Damages 10.4(a)
EBITDA Attributable to the Eliminated Signs 9.2
Eliminated Signs 9.2
Employees 6.6(a)
Employees 4.18(a)(iii)
Environmental Auditor 6.4(b)(iv)
Environmental Claims 10.4(g)
Environmental Remediation 6.4(b)(ii)
ERISA 4.18(a)(iv)
ERISA Affiliate 4.18(a)(v)
Final Adjustment Amount 2.5
Final Balance Sheet 2.4
Indemnitees 10.4(b)
Liquidated Damages Payment 11.2
Multiemployer Plan 4.18(a)(vi)
PBGC 4.18(a)(vii)
Pension Plan 4.18(a)(viii)
Permitted Encumbrances 4.5(a)
Purchase Price 2.3(a)
Section 6.1(iii)(D) Items 6.1
Seller Indemnitees 10.4(b)
Third Party Notice 10.4(d)
Transferred Employees 6.6(a)
Welfare Plan 4.18(a)(ix)
</TABLE>
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<PAGE> 16
ARTICLE II.
PURCHASE AND SALE OF ASSETS
2.1. Transfer of Assets.
Upon the terms and subject to the conditions contained herein, at the
Closing, Seller and Partnership will sell, convey, transfer, assign and deliver
to Buyer, and Buyer will purchase from Seller and Partnership, all of the right,
title and interest of Seller and Partnership in and to properties, assets and
rights of any kind, whether tangible or intangible, real or personal used or
held for use in, or pertaining to, the Business, except for Retained Assets
(collectively, the "Assets"), wherever located, as the same shall exist
immediately prior to the Closing, including, without limitation, all of Seller's
and Partnership's right, title and interest in the following:
(a) accounts and notes receivable (whether current or noncurrent),
refunds, deposits, prepayments or prepaid expenses;
(b) Cash and cash equivalents contained in the bank accounts set forth
on Schedule 1.1(e);
(c) Contracts;
(d) Signage Properties;
(e) Owned Real Property;
(f) Leasehold Improvements;
(g) Fixtures and Equipment;
(h) Inventory;
(i) Books and Records;
(j) Proprietary Rights;
(k) Signage Permits;
(1) Non-Signage Permits;
(m) computer software exclusively used or exclusively held for use in
the Business, to the extent transferable;
(n) rights under or pursuant to all warranties, representations and
guarantees made by suppliers in connection with the Assets or services furnished
to Seller or Partnership, to the extent such warranties, representations and
guarantees (i) are not required by Seller or Partnership to fulfill its
obligations under this Agreement and (ii) are assignable;
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<PAGE> 17
(o) prepaid items (or portions thereof);
(p) all telephone, facsimile, and pager numbers, all internet and
other electronic mail addresses and all listings in all telephone books and
directories (in any form or medium) that relate to the Business;
(q) Goodwill;
(r) Personal Property Leases; and
(s) Ground Leases.
2.2. Assumption of Liabilities.
Upon the terms and subject to the conditions contained herein,
including the adjustments provided in Sections 2.4 and 2.5, Buyer shall, at the
Closing, assume and become responsible for all liabilities and obligations of
Seller and Partnership pertaining to the Business of any kind, whether known or
unknown, fixed or contingent, except for the Excluded Liabilities (the "Assumed
Liabilities"), including, without limitation:
(a) liabilities and obligations accruing, arising out of, or relating
to events or occurrences under the Contracts and Ground Leases;
(b) accounts payable, accrued expenses and other current liabilities
to the extent the amount of such liability is reflected in the Closing Balance
Sheet Net Working Capital on the Final Balance Sheet;
(c) liabilities and obligations arising out of Buyer's employment of
Transferred Employees after the Closing Date; and
(d) liabilities and obligations under Signage Occupancy Rights.
2.3. Purchase Price.
(a) Total Price. The aggregate purchase price to be paid by Buyer (the
"Purchase Price") shall be an amount equal to the aggregate amount of Nine
Hundred Thirty Million Dollars ($930,000,000), plus the Acquired Real Property
Payment Amount, plus the Third Party Asset Purchase Expenditure Amounts, plus
the Closing Balance Sheet Net Working Capital if a positive number, minus the
Closing Balance Sheet Net Working Capital if a negative number, plus the Capital
Expenditures Amount if a positive number, minus the Capital Expenditures Amount
if a negative number.
(b) Payment at Closing. At the Closing Buyer shall pay an amount (the
"Closing Payment") equal to the sum of Nine Hundred Thirty Million Dollars
($930,000,000), of which $57,798,000 shall be payable to Partnership and
$872,202,000 shall be payable to Seller, plus or minus the amount set forth in
the Closing Payment Certificate (as defined below) if Seller causes such
Certificate to be delivered to Buyer on or before five (5) days before the
Closing
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Date. The Closing Payment shall be made by wire transfer of immediately
available funds to up to five accounts designated by Seller and Partnership. The
"Closing Payment Certificate" shall mean a statement prepared by Seller and
certified by Dennis Kackos or John Peterman as the best estimate of the amount,
if any, by which the Purchase Price exceeds or is less than Nine Hundred Thirty
Million Dollars ($930,000,000) which shall include separate estimates for the
Acquired Real Property Payment Amount, Third Party Asset Purchase Expenditure
Amounts, the Closing Balance Sheet Net Working Capital and the Capital
Expenditures Amount, if any.
2.4. Calculation of the Purchase Price.
On or before ninety (90) days after the Closing Date, Buyer shall
prepare and deliver to Seller and Partnership (i) a balance sheet of the
Business dated the Closing Date which shall be audited by Buyer's independent
auditors, and the related audit report of such firm (the "Final Balance Sheet"),
and (ii) a Certificate (the "Closing Date Audit Certificate") setting out a
calculation of the Purchase Price including schedules setting out in reasonable
detail calculations of the Acquired Real Property Payment Amount, the Third
Party Asset Purchase Expenditure Amounts, the Closing Balance Sheet Net Working
Capital (which for purposes of the Closing Date Audit Certificate shall be
prepared using the accounting rules set forth in Exhibit 2.4 whether or not
these rules are in accordance with generally accepted accounting principles and
whether or not these rules were used in the preparation of the Final Balance
Sheet) and the Capital Expenditures Amount, if any. Subject to the final proviso
in this Section 2.4, the Final Balance Sheet shall be prepared in accordance
with generally accepted accounting principles consistent with the preparation of
the Business Statements, but if such methods are not in accordance with
generally accepted accounting principles, appropriate adjustments will be made
to adopt generally accepted accounting principles. The Final Balance Sheet shall
fairly present the financial position of the Business as of the close of
business on the Closing Date. The Final Balance Sheet shall fairly present the
Assets and the known Assumed Liabilities as of the Closing Date, to the extent
generally accepted accounting principles as above described consistently applied
require such Assets and Assumed Liabilities to be set forth on a balance sheet.
In preparing the Final Balance Sheet: (i) all known accounting entries
(including all liabilities and accruals), regardless of amount, will be taken
into account, and all identified errors and omissions will be corrected and all
adjustments made, and (ii) the aggregate reserves and provisions (whether or not
denominated reserves) reflected in the Final Balance Sheet will be adequate,
appropriate and reasonable for their purposes, and calculated consistent with
past practices, provided, however, as hereinabove provided the Closing Date
Audit Certificate shall be prepared reflecting the accounting rules set forth in
Exhibit 2.4.
2.5. Final Adjustment.
The Purchase Price as set forth in the Closing Date Audit Certificate
shall be compared with the Closing Payment. The difference between the two
amounts is herein referred to as the "Final Adjustment Amount." If the Purchase
Price is less than the Closing Payment, Seller shall pay to Buyer, in
immediately available funds, an amount equal to the Final Adjustment Amount. If
the Purchase Price is greater than the Closing Payment, Buyer shall pay to
Seller, in immediately available funds, an amount equal to the Final Adjustment
Amount. Any payment required to be made by Buyer or Seller pursuant to this
Section 2.5 shall bear interest from the
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Closing Date through the date of payment on the basis of the average daily rate
of interest publicly announced from time to time by Bank of America as its prime
rate.
2.6. Disputed Final Adjustment Amount.
If Seller shall disagree with the calculation of the Purchase Price as
provided in the Closing Date Audit Certificate, it shall notify Buyer of such
disagreement in writing specifying in detail the particulars of such
disagreement within sixty (60) business days after Seller's receipt of the
Closing Date Audit Certificate. Buyer shall provide Seller and Seller's
accountants full access to the records of Buyer, and, subject to the consent of
Buyer's independent auditors (which consent Buyer will obtain), to the work
papers of Buyer's independent auditors, to the extent reasonably related to
Seller's evaluation of the Final Balance Sheet and preparation of the Closing
Date Audit Certificate.
2.7. Resolution of Disputed Final Adjustment Amount.
Buyer and Seller shall use their reasonable efforts for a period of
thirty (30) calendar days after Seller's delivery of the notice referred to in
Section 2.6 above (or such longer period as Buyer and Seller shall mutually
agree upon) to resolve any disagreements raised by Seller with respect to the
calculation of the Final Adjustment Amount. If, at the end of such period, Buyer
and Seller are unable to resolve all such disagreements, Seller's independent
auditors and Buyer's independent auditors shall jointly select a third
independent auditor of recognized national standing (the "Auditor") to resolve
any remaining disagreements. The Auditor shall determine the differences
submitted to the Auditor and shall determine whether and to what extent, if any,
the Closing Date Audit Certificate requires adjustment. The determination of the
Auditor shall be final, binding and conclusive on the parties. Buyer and Seller
shall use their reasonable efforts to cause the Auditor to make its
determination within thirty (30) calendar days of accepting its selection.
Within three (3) calendar days after the date of determination of the Auditor,
the Final Adjustment Amount shall be calculated and paid to Buyer by Seller (or
to Seller by Buyer, as the case may be) in the manner set forth in Section 2.4.
The fees and expenses of the Auditor shall be borne equally by the parties.
2.8. Closing Costs; Transfer Taxes and Fees.
The cost of any surveys, title reports or title searches, and the
recording or filing of all applicable conveyancing instruments incurred by
reason of the transfer of Assets hereunder shall be paid by Buyer. The cost of
any documentary, sales and transfer taxes in connection therewith shall be
divided equally between Buyer on the one hand and Seller and Partnership on the
other hand, and each of Buyer, Seller and Partnership shall promptly pay its
respective portion of such taxes. Seller and Partnership shall cooperate with
Buyer in its efforts to obtain title commitments with respect to the Owned Real
Property.
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ARTICLE III.
CLOSING
3.1. Closing.
The Closing of the transactions contemplated herein (the "Closing")
shall be held at 10:00 a.m. local time on the Closing Date at the offices of
Latham & Watkins, Sears Tower, Suite 5800, 233 South Wacker Drive, Chicago,
Illinois 60606-6401, unless the parties hereto otherwise agree.
3.2. Conveyances at Closing.
(a) Instruments and Possession. To effect the sale and assumption
referred to in Article II, Seller and Partnership will, at the Closing, execute
and deliver to Buyer:
(i) one or more special warranty deeds in the proper form for
each relevant jurisdiction and suitable for recording therein
conveying good and valid fee simple title to all Owned Real Property
to Buyer or its designee;
(ii) one or more bills of sale conveying in the aggregate all
of Seller's and Partnership's owned personal property included in the
Assets;
(iii) one or more Assignments of Lease with respect to the
Ground Leases and the Personal Property Leases and such of the Signage
Occupancy Rights as are represented by leaseholds;
(iv) general bills of sale and assignments of all of Seller's
and Partnership's right, title and interest in and to the Signage
Properties other than the Signage Real Property;
(v) one or more Assignment of Contracts;
(vi) assignments of those Proprietary Rights included in the
Assets, in recordable form to the extent necessary to assign such
rights;
(vii) the Ancillary Agreements; and
(viii) all closing certificates, opinions of counsel and other
documents required to be delivered by Seller or Partnership to Buyer
at the Closing pursuant to this Agreement.
(b) Assumption and Other Documents. To effect the sale and assumption
referred to in Article II, Buyer at the Closing shall execute and deliver to
Seller and Partnership:
(i) the Closing Payment;
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(ii) an instrument of assumption evidencing Buyer's assumption,
pursuant to Section 2.2, of the Assumed Liabilities (the "Assumption
Document");
(iii) one or more assumptions of Ground Leases and Personal
Property Leases;
(iv) one or more assumptions of Contracts;
(v) the Ancillary Agreements; and
(vi) all closing certificates, opinions of counsel and other
documents required to be delivered by Buyer to Seller or Partnership
at the Closing pursuant to this Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows, except as
otherwise set forth on the Disclosure Schedule:
4.1. Organization of Seller and Partnership.
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nebraska. Partnership is a general
partnership duly formed, validly existing and in good standing under the laws of
the State of Indiana. Seller and Partnership are duly qualified to do business
and are in good standing in each jurisdiction where, by reason of the nature of
the Business, the same is required, except for such jurisdictions in which the
failure to be so qualified or in good standing would not have a Material Adverse
Effect. Copies of the Articles of Incorporation and Bylaws of Seller and the
Amended and Restated General Partnership Agreement of Partnership, and all
amendments thereto, heretofore delivered to Buyer are accurate and complete as
of the date hereof.
4.2. Authorization.
Seller and Partnership each have all requisite corporate or
partnership (as applicable) power and authority to own, lease, operate and sell
the Assets, to conduct the Business as it is presently being conducted, to
execute and deliver this Agreement and the Ancillary Agreements to which it is a
party, and to perform its obligations hereunder and thereunder. The execution
and delivery by Seller and Partnership of this Agreement and the Ancillary
Agreements to which it is a party and the consummation by Seller and Partnership
of the transactions contemplated hereby and thereby have been duly authorized by
all requisite corporate or partnership (as applicable) actions on the part of
Seller and Partnership, respectively. This Agreement has been duly executed and
delivered by Seller and Partnership and is a legal, valid and binding obligation
of Seller and Partnership, and each of the Ancillary Agreements to be delivered
by Seller pursuant to this Agreement, when executed and delivered at Closing,
will constitute a
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valid and binding obligation of Seller, enforceable against Seller in accordance
with their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and general equity
principles.
4.3. Absence of Certain Changes or Events.
Except as set forth on Schedule 4.3 or as contemplated by this
Agreement, since June 30, 1998, there has not been any:
(a) Material Adverse Change;
(b) change in accounting methods, principles or practices by Seller or
Partnership, except as required by law or by generally applicable changes
instituted in the accounting profession;
(c) material damage, destruction or loss (whether or not covered by
insurance) adversely affecting the Assets or the Business;
(d) cancellation of any indebtedness or waiver or release of any right
or claim of Seller or Partnership pertaining to the Business, except for any
such cancellations, waivers or releases made in the ordinary course of business;
(e) increase in the rate of compensation payable or to become payable
to any director, officer or other employee of the Business, except as provided
in any employment agreement (including any union contract) between Seller or
Partnership and any such Persons or in any Employee Plan, and any increases in
the normal course of business;
(f) adverse change in employee relations which has had or would have a
Material Adverse Effect;
(g) amendment, cancellation or termination of any material Contract or
entry into any material Contract which is not in the ordinary course of business
of Seller or Partnership;
(h) sale, assignment or transfer of any portion of the Assets, other
than in the ordinary course of business, except as approved by Buyer;
(i) changes in payment terms with customers or suppliers adversely
affecting the Assets or the Business, except for such changes made in the
ordinary course of business; or
(j) agreement by Seller or Partnership to do any of the things
described in the preceding clauses (a) through (i) other than as expressly
provided for herein.
4.4. Warranted Assets.
Each of Seller and Partnership (as applicable) have and will transfer
good and valid title to the Warranted Assets (other than those which are leased
or licensed by Seller or
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Partnership) free and clear of any Encumbrances, other than Permitted
Encumbrances, in the case of Owned Real Property.
4.5. Owned Real Property.
Schedule 4.5 contains a complete and accurate list of all Owned Real
Property. Schedule 4.5.1 contains a complete and accurate list of all Ground
Leases. To Seller's and Partnership's knowledge, all Ground Leases are valid,
binding and enforceable in all material respects in accordance with their terms
and are in full force and effect. Seller has delivered or will deliver prior to
the Closing Date to Buyer copies of all title policies in their possession with
respect to the Owned Real Property.
(a) Owned Real Property. Except as set forth on Schedule 4.5, Seller
has good and valid fee simple title to all Owned Real Property and all Excluded
Real Property that is subject to Future Use Rights. At the Closing, Seller will
transfer to Buyer good and valid fee simple title to all Owned Real Property
subject only to the following (the "Permitted Encumbrances"): (i) materialmen's,
mechanics', carriers', workmen's, repairmen's or other like liens arising in the
ordinary course of Seller's business for amounts not yet due or which are being
contested in good faith by appropriate proceedings; (ii) liens for current taxes
not yet due or any taxes being contested in good faith by appropriate
proceedings; (iii) any other Encumbrances and other matters affecting title to
Owned Real Property, which do not (A) materially adversely affect the use or
value (in respect of its current use) of Owned Real Property, (B) secure any
Financing Obligation or (C) constitute a lease, sublease or other occupancy
agreement that gives any third party any right to occupy or use all or any
portion of the Owned Real Property other than Advertising Contracts to the
extent that such Contracts deal with advertising on such signage.
(b) Actions. Except as set forth on Schedule 4.12, there are no
pending or, to the knowledge of Seller and Partnership, threatened condemnation
proceedings with respect to any portion of Owned Real Property or Excluded Real
Property that is subject to Future Use Rights, or litigation or administrative
actions relating to any portion of Owned Real Property or Excluded Real Property
that is subject to Future Use Rights.
(c) Certificate of Occupancy. Seller and Partnership (as applicable)
have received all material approvals of governmental authorities (including,
without limitation, Non-Signage Permits and certificates of occupancy or other
similar certificates permitting lawful occupancy of the Owned Real Property)
required in connection with the present use of the Owned Real Property and all
improvements thereon.
(d) Utilities. All Owned Real Property and the improvements thereon
are supplied with utilities and other services necessary for the operation of
such facilities as currently operated.
(e) Improvements, Fixtures and Equipment. Except as provided in
Schedule 4.5(e), all Leasehold Improvements (other than Leasehold Improvements
on Signage Locations) and all Fixtures and Equipment and other tangible assets
(other than Signage Structures) owned, leased or used by Seller on the Owned
Real Property are, (i) in good
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condition and repair (normal wear and tear excepted), (ii) free from material
structural defect and (iii) sufficient for the operation of the Business as
presently conducted. Except as provided in Schedule 4.5(e), none of the
improvements on the Owned Real Property encroach in any material respect on any
property owned by any other Person and no improvements located on any property
owned by any Person encroaches in any material respect on any portion of the
Owned Real Property.
(f) No Special Assessment. Neither Seller nor Partnership has received
notice of any special assessment relating to any Owned Real Property or any
portion thereof which remains unpaid and neither Seller nor Partnership has any
knowledge of any pending or threatened special assessment, other than any
special assessments disclosed on Schedule 4.5(f).
4.6. Contracts.
(a) Contracts. Schedule 4.6 sets forth a true, correct and complete
list of all Contracts of the following categories (other than Contracts set
forth elsewhere on the Disclosure Schedule):
(i) Contracts not made in the ordinary course of Seller's or
Partnership's business obligating Seller or Partnership to make
payments in excess of $150,000;
(ii) Employment contracts and severance agreements, including,
without limitation, Contracts (A) to employ or terminate executive
officers or other personnel and other contracts with present or former
officers, directors, shareholders, partners, representatives or agents
of Seller or Partnership or (B) that will result in the payment by, or
the creation of any commitment or obligation (absolute or contingent)
to pay on behalf of Buyer, Seller or Partnership any severance,
termination, "golden parachute," or other similar payments to any
present or former personnel following termination of employment or
otherwise as a result of the consummation of the transactions
contemplated by this Agreement;
(iii) Labor or union contracts (including, but not limited to,
any employee collective bargaining agreement);
(iv) Material distribution, franchise, license, sales,
commission, consulting or agency contracts for advertising to be
provided to Seller excluding Advertising Contracts providing for
annual payments in excess of $150,000 which are not cancelable on
thirty (3 0) calendar days' notice;
(v) Material options to buy any property, real or personal, or
material options to sell any Owned Real Property or personal property
included in the Assets;
(vi) Contracts (except Personal Property Leases and
construction Contracts), in the case of each Contract, involving
expenditures or liabilities in
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excess of $250,000 or aggregate expenditures or liabilities in excess
of $2,000,000 or otherwise material to the Business;
(vii) Material Contracts containing covenants limiting the
freedom of Seller or Partnership to engage in the Business or compete
with any Person other than in connection with any license agreements
to which Seller or Partnership is a party (other than provisions in
Signage Occupancy Rights that limit the type of advertising messages
or advertising that may be displayed on Signage Structures or the
types of advertisers); and
(viii) Personal Property Leases involving expenditures or
liabilities in excess of $400,000 for each such lease.
Seller and Partnership have delivered or made available to Buyer true, correct
and complete copies of all of the Contracts listed on Schedule 4.6, including
all amendments and supplements thereto, all of which Contracts are being assumed
by Buyer.
(b) Absence of Breaches or Defaults. Except as set forth on Schedule
4.6(b), to Seller's and Partnership's knowledge, all of the Contracts set forth
on Schedule 4.6 and any Advertising Contract not set forth therein (subject to
the disclosures set forth in the Disclosure Schedule) are valid and in full
force and effect. Each of Seller or Partnership has duly performed all of its
obligations under such Contracts to the extent those obligations to perform have
accrued, and no violation of, or default or breach under, such Contracts by
Seller or Partnership, or, to Seller's and Partnership's knowledge, any other
party has occurred and neither Seller nor Partnership, nor, to Seller's or
Partnership's knowledge, any other party has repudiated any provisions thereof.
4.7. No Conflict or Violation.
Except as set forth on Schedule 4.7, neither the execution, delivery
or performance of this Agreement and the Ancillary Agreements when so executed
by Seller or Partnership (as applicable) nor the consummation by Seller and
Partnership of the transactions contemplated hereby and thereby will (a) violate
or conflict with any provision of the Articles of Incorporation or Bylaws of
Seller or the Amended and Restated General Partnership Agreement of Partnership,
(b) except to the extent related to Signage Occupancy Rights or Signage Permits,
violate, conflict with, or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any material Encumbrance upon any of the
Assets under, any of the terms, conditions or provisions of any Contract,
indebtedness, note, bond, indenture, security or pledge agreement, commitment,
license, lease, franchise, Signage Permit, agreement, or other instrument or
obligation (i) to which Seller or Partnership is a party or (ii) by which the
Assets are bound, (c) except to the extent related to Signage Occupancy Rights
or Signage Permits (other than federal and state but not local laws applicable
thereto), violate any statute, rule, regulation, ordinance, code, order,
judgment, ruling, writ, injunction, decree or award to which Seller or
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Partnership (with respect to the Business) or the Assets is subject or (d)
except to the extent related to Signage Occupancy Rights, impose any Encumbrance
on the Assets.
4.8. Consents and Approvals.
Except as set forth on Schedule 4.8 or in connection with compliance
with the HSR Act or to the extent related to Signage Occupancy Rights or Signage
Permits (other than state and federal laws applicable thereto), no material
consent, approval or authorization of, or declaration, filing or registration
with, any governmental or regulatory authority is required to be made or
obtained by Seller or Partnership in connection with Seller's or Partnership's
execution, delivery and performance of this Agreement, other than any such
requirement that is applicable as a result of the specific legal or regulatory
status of Buyer or as a result of any other facts that specifically relate to
the business or activities in which Buyer is or proposes to be engaged, other
than the Business.
4.9. Financial Statements.
The Whiteco Audited Statements, the Partnership Annual Statements, the
Whiteco Interim Statements and the Partnership Interim Statements, have been
furnished to Buyer's independent auditors for their review and retention without
duplication or distribution thereof (a) were prepared in accordance with the
Books and Records of Seller and Partnership, (b) were prepared in accordance
with generally accepted accounting principles consistently applied throughout
the periods covered thereby (subject, in the case of the unaudited financial
statements, to the absence of footnotes and in the case of Interim Statements to
normal year-end adjustments), and (c) fairly present the assets, liabilities
(including all reserves) and financial position of Seller and Partnership as
applicable, as of the respective dates thereof and the results of operations and
changes in cash flows for the periods then ended. The Whiteco Audited Statements
have been audited by independent certified public accountants, whose reports
thereon are included with such audited financial statements. The Business
Statements attached as Schedule 4.9 fairly present the assets, liabilities
(including all reserves) and the financial position of the Business as of the
respective dates thereof and the results of operations and changes in cash flows
for the periods then ended subject to the notes and ancillary information
included in such statements.
4.10. Projections.
The financial projections attached as Schedule 4.10, subject to the
notes included in such projections, represent Seller's best estimate of the
anticipated future results of the Business without giving effect to the
transactions contemplated by this Agreement, based on assumptions believed by
Seller to be reasonable.
4.11. Books and Records.
Seller and Partnership as the case may be have made and kept (and
given Buyer access to) the Books and Records, which, in all material respects
accurately and fairly reflect the activities of Seller and Partnership that
would be so recorded.
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4.12. Litigation.
Except as set forth on Schedule 4.12, there is no material action,
order, writ, injunction, judgment or decree outstanding or any material claim,
suit, litigation, proceeding, labor dispute, arbitral action, governmental audit
or investigation (collectively, "Actions") pending or, to the knowledge of
Seller, threatened (a) against, related to or affecting (i) the Business or the
Assets, or (ii) any officers, directors, partners, representatives or agents of
Seller or Partnership as such (b) seeking as of the date hereof to delay, limit
or enjoin the transactions contemplated by this Agreement, (c) that would
materially impair the abilities of Seller or Partnership to perform their
respective obligations under this Agreement or any of the Ancillary Agreements,
(d) which would prevent or be violated by in any material manner (as applicable)
the consummation of the transactions contemplated hereby or (e) in which Seller
or Partnership is a plaintiff pertaining to the Business, including any
derivative suits brought by or on behalf of Seller or Partnership. Neither
Seller nor Partnership is in default with respect to or subject to any judgment,
order, writ, injunction or decree of any court or governmental agency in any
material matter, and to the knowledge of Seller or Partnership, there are no
material unsatisfied judgments against Seller or Partnership with respect to the
Business or the Assets.
4.13. Labor Matters.
Except as set forth on Schedule 4.13, (i) Seller and Partnership (with
respect to the Business) are not parties to any labor agreement with respect to
their employees with any labor organization, union, group or association and
there are no employee unions (nor any other similar labor or employee
organizations) (with respect to the Business) under local statutes, custom or
practice and (ii) in the last three (3) years, Seller and Partnership have not
experienced any attempt by organized labor or its representatives to make Seller
(with respect to the Business) or Partnership (with respect to the Business)
conform to demands of organized labor relating to its employees or enter into a
binding agreement with organized labor that would cover the employees. Except as
set forth on Schedule 4.13, there is no labor strike or labor disturbance
pending or, to Seller's and Partnership's knowledge, threatened against Seller
(with respect to the Business) or Partnership (with respect to the Business),
and in the past three (3) years Seller and Partnership (with respect to the
Business) have not experienced a work stoppage or other labor difficulty. Seller
and Partnership are in material compliance with all applicable laws respecting
employment practices, employee documentation, terms and conditions of employment
and wages and hours and, to Seller's and Partnership's knowledge, neither Seller
nor Partnership has engaged in any unfair labor practice. There is no unfair
labor practice charge or complaint against Seller or Partnership pending, or to
the knowledge of Seller or Partnership, threatened before the National Labor
Relations Board or any other domestic or foreign governmental agency arising out
of the conduct of the business of Seller and Partnership.
4.14. Compliance with Law.
Except as set forth on Schedule 4.14, Seller and Partnership have
complied in all material respects with all applicable statutes and governmental
rules, regulations, and Signage Permits and Non-Signage Permits in connection
with their conduct of the Business and in respect of the Assets, and neither
Seller nor Partnership is, in any material respect, in violation of or
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default under any applicable statutes and governmental rules, regulations, and
Signage Permits and Non-Signage Permits with respect to the operation of the
Business or the Assets, except for such violations or defaults that have not had
and could not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect, or has received any written notification thereof; it
being understood that nothing in this Section 4.14 is intended to address any
compliance with laws of the type covered by Sections 4.5 (Owned Real Property),
4.17 (Proprietary Rights), 4.18 (Employee Benefit Plans) and 4.19 (Tax Matters).
4.15. No Brokers.
No broker, finder or similar agent is entitled to any finder's fee,
brokerage fees or commission or similar payment from Seller or Partnership in
connection with the transactions contemplated hereby.
4.16. No Other Agreements to Sell the Assets.
Except as set forth in Schedule 4.16, neither Seller nor Partnership
nor any of their respective officers, directors, shareholders, partners,
representatives or agents have any commitment or legal obligation, absolute or
contingent, to any other Person other than Buyer to sell, assign, transfer or
effect a sale of any portion of the Assets (other than in the ordinary course of
business), to sell or effect a sale of the capital stock of Seller or an equity
interest in Partnership, to effect any merger, consolidation, liquidation,
dissolution or other reorganization of Seller or Partnership, or to enter into
any agreement or cause the entering into of an agreement with respect to any of
the foregoing business combination transactions.
4.17. Proprietary Rights.
(a) Proprietary Rights. Schedule 4.17 is a true, correct and complete
list of all Proprietary Rights and all material agreements under which Seller or
Partnership are licensed to use Proprietary Rights.
(b) Ownership and Protection of Proprietary Rights. Seller or
Partnership owns and/or has the right to use each of the Proprietary Rights
listed on Schedule 4.17. The Proprietary Rights listed on Schedule 4.17
(together with any other Proprietary Rights being assigned to Buyer hereunder)
constitute all of the Proprietary Rights necessary to conduct the Business in
the manner presently conducted. None of the Proprietary Rights is involved in
any pending or, to the knowledge of Seller and Partnership, threatened
litigation. To the knowledge of Seller and Partnership, no other Person (i) has
the right to use any of the Proprietary Rights, except pursuant to the
Contracts; or (ii) is infringing upon any Proprietary Rights. To the knowledge
of Seller and Partnership, Seller's and Partnership's use of the Proprietary
Rights is not infringing upon or otherwise violating the rights of any third
party. No proceedings have been instituted against or written notices received
by Seller or Partnership that are presently outstanding alleging that Seller's
or Partnership's use of the Proprietary Rights infringes upon or otherwise
violates any rights of a third party in or to such Proprietary Rights. Except as
provided in Schedule 4.17, all Proprietary Rights necessary to the conduct the
Business as presently
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conducted are assignable by Seller or Partnership to Buyer and/or may be
licensed by Seller or Partnership to Buyer in the manner contemplated by this
Agreement.
4.18. Employee Benefit Plans.
(a) Definitions. The following terms, when used in this Section 4.18,
shall have the following meanings. Any of these terms may, unless the context
otherwise requires, be used in the singular or the plural depending on the
reference.
(i) Benefit Arrangement. "Benefit Arrangement" shall mean any
employment, consulting, severance or other similar contract, arrangement or
policy and each plan, arrangement (written or oral), program, agreement or
commitment providing for insurance coverage (including without limitation any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits,
life, health, disability or accident benefits (including without limitation any
"voluntary employees' beneficiary association" as defined in Section 501(c)(9)
of the Code providing for the same or other benefits) or for deferred
compensation, profit-sharing bonuses, stock options, stock appreciation rights,
stock purchases or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which (A) is not a Welfare Plan, Pension
Plan or Multiemployer Plan, (B) is entered into, maintained, contributed to or
required to be contributed to, as the case may be, by Seller, Partnership or an
ERISA Affiliate or under which Seller, Partnership or any ERISA Affiliate may
incur any liability, and (C) covers any employee or former employee of Seller,
Partnership or any ERISA Affiliate.
(ii) Code. "Code" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations thereunder.
(iii) Employee Plans. "Employee Plans" shall mean all Benefit
Arrangements, Multiemployer Plans, Pension Plans and Welfare Plans.
(iv) ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
(v) ERISA Affiliate. "ERISA Affiliate" shall mean any entity
which is (or at any relevant time was) a member of a "controlled group of
corporations" with, under "common control" with, or a member of an "affiliated
service group" with, Seller as defined in Section 414(b), (c), (m) or (o) of
the Code.
(vi) Multiemployer Plan. "Multiemployer Plan" shall mean any
"multiemployer plan," as defined in Section 4001(a)(3) of ERISA, which Seller,
Partnership or any ERISA Affiliate maintains, administers, contributes to or is
required to contribute to, or, after September 25, 1980, maintained,
administered, contributed to or was required to contribute to, or under which
Seller, Partnership or any ERISA Affiliate may incur any liability and which
covers any employee or former employee of Seller, Partnership or any ERISA
Affiliate.
(vii) PBGC. "PBGC" shall mean the Pension Benefit Guaranty
Corporation.
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(viii) Pension Plan. "Pension Plan" shall mean any "employee
pension benefit plan" as defined in Section 3(2) of ERISA (other than a
Multiemployer Plan) which Seller, Partnership or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, or, within the five
years prior to the closing date, maintained, administered, contributed to or was
required to contribute to, or under which Seller, Partnership or any ERISA
Affiliate may incur any liability and which covers any employee or former
employee of Seller, Partnership or any ERISA Affiliate.
(ix) Welfare Plan. "Welfare Plan" shall mean any "employee welfare
benefit plan" as defined in Section 3(l) of ERISA, which Seller, Partnership or
any ERISA Affiliate maintains, administers, contributes to or is required to
contribute to, or under which Seller, Partnership or any ERISA Affiliate may
incur any liability and which covers any employee or former employee of Seller,
Partnership or any ERISA Affiliate.
(b) Disclosure; Delivery of Copies of Relevant Documents and Other
Information. Schedule 4.18(b) contains a complete list of each Employee Plan
which covers or has covered employees of the Business. True and complete copies
of each of the following documents have been delivered by Seller to Buyer: (i)
each Employee Plan and, if applicable, each related trust agreement which covers
or has covered Transferred Employees as defined in Section 6.6 including written
interpretations thereof and written descriptions thereof which have been
distributed to such Transferred Employees (including descriptions of the number
and level of employees covered thereby) and a complete description of any such
material Employee Plan which is not in writing, (ii) the most recent
determination letter issued by the Internal Revenue Service with respect to each
Pension Plan and each voluntary employees beneficiary association as defined
under Section 501(c)(9) of the Code, (iii) for the three most recent plan years,
Annual Reports on Form 5500 Series required to be filed with any governmental
agency for each Pension Plan and Welfare Plan, and (iv) a list of names, service
dates and salaries as of August 26, 1998 for employees of the Business.
(c) Representations. Except as set forth in Schedule 4.18(c), Seller
and Partnership represent and warrant as follows:
(i) Pension Plans
(A) Neither Seller, Partnership nor any ERISA Affiliates has
failed to make a contribution or taken any other action or failed to
take any other action or failed to take any action relating to a
Pension Plan, the result of which would be the imposition of a lien on
the Assets. Neither Seller, Partnership nor any ERISA Affiliate is
subject to any lien imposed under Section 412(n) of the Code or
Section 302(f) of ERISA, whichever may apply, with respect to any
Pension Plan. None of the Pension Plans has ever been subject to title
IV of ERISA, Section 302 of ERISA or Section 401 of the Code it being
understood for such purpose that the Whiteco Industries, Inc.
Employees Retirement Savings Plan 401(k) plan is not so subject.
(ii) Multiemployer Plans
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(A) Neither Seller, Partnership nor any ERISA Affiliate has,
at any time, withdrawn from a Multiemployer Plan in a "complete
withdrawal" or a "partial withdrawal" as defined in Sections 4203 and
4205 of ERISA, respectively, so as to result in any material
unsatisfied liability, contingent or otherwise (including without
limitation the obligations pursuant to an agreement entered into in
accordance with Section 4204 of ERISA), of Seller, Partnership or any
ERISA Affiliate. Neither Seller, Partnership nor any ERISA Affiliate
has engaged in, or is a successor or parent corporation to an entity
that has engaged in, a transaction described in Section 4212(c) of
ERISA.
(B) All contributions required to be made by Seller,
Partnership or any ERISA Affiliate to each Multiemployer Plan have
been made when due.
(C) If, as of the Closing Date, Seller, Partnership (and all
ERISA Affiliates) were to withdraw from all Multiemployer Plans to
which it (or any of them) has contributed or been obligated to
contribute, it (and they) would incur no material liability to such
plans under Title IV of ERISA.
(D) To the best of Seller's knowledge with respect to each
Multiemployer Plan: (1) no such Multiemployer Plan has been terminated
or has been in reorganization under ERISA so as to result, directly or
indirectly, in any liability, contingent or otherwise, of Seller,
Partnership or any ERISA Affiliate under Title IV of ERISA; (2) no
proceeding has been initiated by any person (including the PBGC) to
terminate any Multiemployer Plan; (3) Seller, Partnership and the
ERISA Affiliates have no reason to believe that any Multiemployer Plan
will be terminated or will be reorganized under ERISA; and (4) Seller,
Partnership and the ERISA Affiliates do not expect to withdraw from
any Multiemployer Plan.
(iii) Welfare Plans
(A) Each Welfare Plan which covers employees of the Business
and which is a "group health plan," as defined in Section 607(l) of
ERISA, has been operated in compliance with provisions of Part 6 of
Title 1, Subtitle B of ERISA and Section 4980B of the Code at all
times.
(B) Neither Seller nor any ERISA Affiliate has incurred any
material, unsatisfied liability with respect to any Welfare Plan that
is a "multiemployer plan", as defined in Section 3(37) of ERISA,
relating to the employees of the Business under the terms of such
Welfare Plan, any collective bargaining agreement or otherwise
resulting from any cessation of contributions, cessation of obligation
to make contributions or other form of withdrawal from such Welfare
Plan.
(C) If, as of the Closing Date, Seller, Partnership (and all
ERISA Affiliates) were to have a cessation of contributions, cessation
of obligations to make contribution or other form of withdrawal from
all Welfare
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Plans that are "multiemployer plans", as defined in Section 3(37) of
ERISA covering the employees of the Business, it (and they) would
incur no liabilities with respect to any such Welfare Plans under the
terms of such Welfare Plans, any collective bargaining agreement or
otherwise.
(D) None of Seller, Partnership, any ERISA Affiliate or any
Welfare Plan has any present or future obligation to make any payment
to, or with respect to, any present or former employees of the
Business pursuant to any retiree medical benefit plan, or other
retiree Welfare Plan, and no condition exists which would prevent
Seller or Partnership (as applicable) from amending or terminating any
such benefit plan or Welfare Plan.
(iv) No Acceleration or Creation of Rights. Neither the execution
and delivery of this Agreement by Seller and Partnership nor the
consummation of the transaction contemplated hereby will result in the
acceleration or creation of any rights of any person to benefits under
any Employee Plan (including, without limitation, the acceleration of
the vesting or exercisability of any stock options, the acceleration
of the vesting of any restricted stock, the acceleration of the
accrual or vesting of any benefits under any Pension Plan or the
acceleration or creation of any rights under any severance, parachute
or change in control agreement).
4.19. Tax Matters.
(a) Foreign Person. Neither Seller nor the Partnership nor any partner
thereof is a person, other than a United States person, within the meaning of
the Code.
(b) No Withholding. The transaction contemplated herein is not subject
to the tax withholding provisions of Section 3406 of the Code, or Subchapter A
of Chapter 3 of the Code or of any other provision of law.
4.20. Customers.
Schedule 4.20 sets forth an accurate list of the names of the ten (10)
largest industry groups of customers of the Business for the most recent fiscal
year, showing the approximate percentage of total sales for each such industry
group during such fiscal year in connection with the Business.
4.21. Environmental Matters.
Seller has provided Buyer true, complete and correct copies of all
environmental audits, investigations, studies, and assessments relating to the
Business conducted in the past ten years by outside consultants and all material
environmental investigations conducted in the past ten years by employees of the
Seller that are in the possession of Seller with respect to the Assets. Seller
has set forth on Schedule 4.21 all matters of which Seller has knowledge
relating to: (a) any notices of violation or alleged violation, any writs,
injunctions, decrees, orders, or judgments outstanding, or any actions, suits,
claims, proceedings or investigations pending or threatened, relating to the
Business under any Environmental Laws; (b) any agreement under which Seller or
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Partnership is obliged, directly or indirectly, by any representation, warranty,
indemnification, covenant, restriction or other undertaking concerning
liabilities under Environmental Laws relating to the Business; or (c) the
presence of any underground storage tanks or polychlorinated biphenyls at any of
the Assets; or (d) any material non-compliance with Environmental Laws in
connection with the Business.
4.22. Intracompany Transactions.
Schedule 4.22 contains a complete list describing all material
arrangements (including for the provision of products or services),
relationships and transactions between the Business, on the one hand, and other
units or divisions of Seller or Partnership or affiliates of Seller or
Partnership, on the other hand.
4.23. Third Party Asset Purchase Agreements.
Schedule 4.23 contains an accurate and complete summary of all Third
Party Asset Purchase Agreements.
4.24. Condition of Property.
Except as set forth on Schedule 4.24, the Warranted Assets are, in all
material respects, (i) in good operating condition, except normal wear and tear,
and (ii) suitable for the purposes for which they are presently held.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller and Partnership as
follows:
5.1. Organization of Buyer.
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Buyer is duly licensed and
qualified to do business and is in good standing in each jurisdiction in which
such qualification is required or will be required as a result of the
transaction contemplated by this Agreement by applicable law, except where the
failure to be so qualified will not have a material adverse effect on the
ability of Buyer to consummate the transactions contemplated hereby. Copies of
the Certificate of Incorporation and Bylaws of Buyer, heretofore delivered by
Buyer to Seller, are accurate and complete as of the date hereof.
5.2. Authorization.
Buyer has full corporate power and authority to execute and deliver
this Agreement, and the Ancillary Agreements, and to perform its obligations
hereunder and thereunder. The execution, delivery and performance by Buyer of
this Agreement and the
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Ancillary Agreements have been duly authorized by all requisite corporate action
on the part of Buyer. This Agreement has been duly executed and delivered by
Buyer and is a legal, valid and binding obligation of Buyer, and each of the
Ancillary Agreements when executed and delivered at Closing will constitute a
valid and binding obligation of Buyer, enforceable against Buyer in accordance
with their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and general equity
principles.
5.3. No Conflict or Violation.
Neither the execution and delivery of this Agreement nor the Ancillary
Agreements by Buyer nor the performance of its obligations hereunder and
thereunder will result in (a) a violation of or a conflict with any provision of
the Certificate of Incorporation or Bylaws of Buyer, (b) violate or conflict
with or result in a breach of or constitute a default under any term or
provision of any contract, agreement, commitment, lease, license, franchise or
permit or other instrument or obligation to which Buyer is a party or is bound,
or (c) a violation by Buyer of any statute, rule, regulation, ordinance, code,
order, judgment, writ, ruling, injunction, decree, or award, to which Buyer is
subject.
5.4. Consents and Approvals.
No consent, approval or authorization of, or declaration, filing or
registration with any governmental or regulatory authority, or any other Person,
is required to be made or obtained by Buyer in connection with Buyer's
execution, delivery and performance of this Agreement and the Ancillary
Agreements or Buyer's consummation of the transactions contemplated hereby and
thereby, except in connection with or in compliance with the HSR Act.
5.5. Broker and Finders.
Buyer has not entered into any agreement or incurred any obligation,
directly or indirectly, for the payment of any brokerage fees, commissions or
finder's fee in connection with the transactions contemplated by this Agreement
or any Ancillary Agreement, except for any arrangements with BT Alex. Brown
Incorporated, for which Buyer shall be solely responsible.
5.6. Litigation and Proceedings.
There are no Actions pending or, to the best knowledge of Buyer,
threatened, (a) seeking as of the date hereof to delay, limit or enjoin the
transactions contemplated by this Agreement, (b) that would materially impair
the abilities of Buyer to perform its obligations under this Agreement or any of
the Ancillary Agreements or (c) which would prevent or be violated by (as
applicable) the consummation of the transactions contemplated hereby or thereby.
5.7. Financial Ability.
Buyer has the financial resources necessary to consummate the
transactions contemplated by this Agreement and the Ancillary Agreements,
including, without limitation, the ability to pay the Purchase Price.
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5.8. Compliance with Law.
Buyer is and since its organization has been, in compliance in all
material respects with all applicable statutes and governmental rules,
regulations and permits.
ARTICLE VI.
COVENANTS OF SELLER, PARTNERSHIP AND BUYER
Seller, Partnership and Buyer each covenant as follows:
6.1. Further Assurances.
Each of the parties hereto agrees, both before and after the Closing,
(i) to use all reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement
and the Ancillary Agreements; provided, however, that, subject to the final
sentence of this paragraph, nothing herein contained shall require Seller or
Partnership prior to the Closing to seek to obtain consents to the transfer of
Signage Properties other than those set forth on Schedule 6.1, (ii) to execute
any documents, instruments or conveyances of any kind which may be reasonably
necessary or advisable to carry out any of the transactions contemplated under
this Agreement and the Ancillary Agreements, and (iii) to cooperate with each
other in connection with the foregoing, including using their respective
reasonable efforts (A) to obtain all necessary waivers, consents and approvals
from governmental authorities and from parties to the Contracts and leases other
than those relating to Signage Property to be assumed by Buyer, (B) to obtain
all necessary Permits as are required to be obtained under any federal, state,
local or foreign law or regulations, (C) to timely effect all necessary
registrations and filings, including, without limitation, submissions of
information requested by governmental authorities, (D) to provide to Buyer's
independent auditors on a timely basis such representation letters and other
certificates requested by Buyer's independent auditors; and (E) to fulfill all
conditions to this Agreement; provided, however, that neither Buyer, Seller nor
Partnership shall be required to make any material payments, commence
litigation, incur any obligation or liability or agree to any material
modifications to the terms of any Contracts, Ground Leases, Signage Permits,
Non-Signage Permits or Signage Occupancy Rights in connection with the foregoing
except as contemplated by this Agreement. At Buyer's request, Seller shall use
its commercially reasonable efforts to obtain consents from lessors of Signage
Properties identified by Buyer to the assignment of the leases thereto;
provided, however, that Seller may decline to seek such consents in any
circumstances in which such action would, in Seller's reasonable judgment,
disserve its business interests.
Buyer acknowledges that the furnishing by Seller of the information
and documents referred to in Section 6.1(iii)(D) ("Section 6.1(iii)(D) Items")
is at the request of, and an accommodation to, Buyer. Buyer will use its
reasonable best efforts to maintain the confidentiality of Section 6.1(iii)(D)
Items subject to the requirements of the Securities Act of 1933, as amended, and
the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder or as otherwise required by law to be disclosed. Buyer (for itself
and its
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Affiliates, officers, directors, shareholders, representatives and agents)
hereby waives any claim Buyer or its Affiliates, officers, directors,
shareholders, representatives and agents may have against Seller with respect to
Section 6.1(iii)(D) Item information and documents so provided, whether or not
any of such Section 6.1(iii)(D) Items is inaccurate, or misleading or omits any
material information. Buyer will indemnify and hold harmless Seller or any of
its Affiliates, officers, directors, shareholders, representatives and agents
for any damages Seller or any of its Affiliates, officers, directors,
shareholders, representatives and agents may incur as a result of or relating to
the furnishing of any such Section 6.1(iii)(D) Items, including any claims or
actions by Buyer, any of its Affiliates, officers, directors, shareholders,
representatives and agents of any of the foregoing, or any other party.
6.2. No Solicitation.
From the date hereof through the Closing or the earlier termination of
this Agreement pursuant to Section 11.1, Seller and Partnership shall not, and
Seller and Partnership shall not knowingly permit its officers, directors,
partners, representatives, agents and employees to, and Seller and Partnership
shall use all reasonable efforts to cause each of their respective
representatives (including, without limitation, investment bankers, attorneys
and accountants) not to, directly or indirectly, entertain, enter into, solicit,
initiate or continue any discussions or negotiations with, or encourage or
respond to any inquiries or proposals by, or participate in any negotiations
with, or provide any information to, or otherwise cooperate in any other way
with, any Person, other than Buyer and its representatives, concerning any sale
of all or any portion of the Assets or the Business, or of any shares of capital
stock of Seller or partnership interests of Partnership, or any merger,
consolidation, liquidation, dissolution or similar transaction involving Seller
or Partnership (other than the sale of inventory in the ordinary course of
business).
6.3. Notification of Certain Matters.
From the date hereof through the Closing (a) Buyer shall give prompt
notice to Seller of any litigation or administrative proceeding pending and
known to such party, or to its knowledge threatened, the occurrence of which
challenges the transactions contemplated hereby and (b) Seller shall give prompt
notice to Buyer of any litigation or administrative proceeding pending, or to
its knowledge threatened, which challenges the transactions contemplated hereby
or the occurrence of any significant or material event known to Seller or
Partnership that relates to the Business or the Assets.
6.4. Access to Information.
(a) Access.
From the date hereof through the Closing, each of Seller and
Partnership shall, and shall cause its officers, directors and employees to,
afford Buyer and its authorized representatives, during normal business hours
and upon reasonable notice to Seller and Partnership and in a manner which will
not unduly interfere with the operations of Seller, Partnership or the Business,
complete access at all reasonable times to the Assets for the purpose of
inspecting the same, and to the officers and employees of Seller or Partnership,
shall furnish
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Buyer and its authorized representatives all financial, operating and other data
and information as Buyer may reasonably request, except to the extent that such
access would violate any governmental regulation, law or order to which Seller,
or Partnership, their employees or the Assets are subject; provided that Seller
and Partnership shall have the right to have a representative present at all
such times; and provided further that such access shall be at the expense of
Buyer. Notwithstanding such access and the information provided to Buyer after
the date hereof, Buyer acknowledges and agrees that neither Seller nor
Partnership makes any representations or warranties, express or implied, at
common law, by statute or otherwise, except as specifically set forth in this
Agreement.
(b) Environmental Liabilities.
(i) At any time prior to or following the Closing Date, Buyer
shall have the right, at its sole cost and expense, to engage an independent
environmental consultant (the "Consultant") to conduct a Phase I and/or Phase II
audit, as such terms are commonly understood, with respect to Facilities Real
Property and Ground Leases which will include the right to (A) conduct tests of
the soil, surface or subsurface waters and air quality at, in, on, beneath or
about the Facilities Real Property and Ground Leases, and such other procedures
as may be recommended by the Consultant based on its reasonable professional
judgment, in a manner consistent with good engineering practice, (B) inspect
records, reports, permits, applications, monitoring results, studies,
correspondence, data and any other information or documents relevant to
environmental conditions or environmental noncompliance, (C) inspect all
buildings and equipment at the Facilities Real Property and the real estate
subject to Ground Leases including, without limitation, the visual inspection
thereof for asbestos-containing construction materials and (D) interview Seller
and Partnership employees; except that the rights above granted to Buyer with
respect to Ground Leases shall be subject to any required consent of landlord
and provided, in each case, such tests, inspections, and interviews shall be
conducted only (1) during regular business hours upon reasonable notice to
Seller or Partnership (as applicable); and (2) in a manner which will not unduly
interfere with the operation of the business of Seller or Partnership (as
applicable) and/or the use of, access to or egress from the Facilities Real
Property and the properties covered by Ground Leases.
(ii) If the audits conducted in connection with Section 6.4(b)(i)
above detail "recognized environmental conditions" (as such term is commonly
used in a Phase I audit) in connection with the Facilities Real Property, Seller
shall be responsible for all costs and expenses of cleanup, removal, remedial,
corrective or response action necessary to address such recognized environmental
condition ("Environmental Remediation"). Seller shall have the right to control
such Environmental Remediation.
(iii) If Seller and Buyer shall disagree as to the required extent
of Environmental Remediation, Seller or Partnership shall notify Buyer of such
disagreement in writing specifying in detail the particulars of such
disagreement within twenty (20) business days after Seller's receipt of a Phase
I or Phase II audit conducted pursuant to Section 6.4(b)(i) above. Buyer shall
provide Seller full access to the audits (and all related records) that are the
cause of such disagreement.
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(iv) Buyer and Seller shall use their reasonable efforts for a
period of thirty (30) calendar days after Buyer's delivery of the notice
referred to in Section 6.4(b)(iii) above (or such longer period as Buyer and
Seller shall mutually agree upon) to resolve any disagreements raised by Seller
with respect to the extent of Environmental Remediation. If, at the end of such
period, Buyer and Seller are unable to resolve all such disagreements, Dames &
Moore (the "Environmental Auditor") shall determine the extent of Environmental
Remediation required. The determination of the Environmental Auditor shall be
final, binding and conclusive on the parties. Buyer, Seller and Partnership
shall use their reasonable efforts to cause the Environmental Auditor to make
its determination within thirty (30) calendar days of receipt of the parties'
request for a determination. Within thirty (30) calendar days after the date of
determination of the Environmental Auditor, Seller and Partnership shall
initiate the Environmental Remediation. The fees and expenses of the
Environmental Auditor shall be shared equally between Buyer and Seller.
(v) In the event Seller reasonably determines that the cost of
Environmental Remediation is greater than the fair market value of the parcel of
Facilities Real Property being remediated or proposed to be remediated, Seller
shall have the option to purchase such Facilities Real Property from Buyer on
one year's notice at its fair market value determined by averaging the
appraisals of three recognized appraisers, one selected by Buyer, one selected
by Seller and one selected by the two appraisers so selected; provided, however,
that the fair market value of any such Facilities Real Property calculated
pursuant to this Section 6.4(b)(v) shall not take into account any diminution of
value of any such Facilities Real Property as a result of any "recognized
environmental condition" thereon. If Seller exercises this option, Seller shall
have no further obligation to conduct any Environmental Remediation with respect
to such Facilities Real Property.
(vi) In the event that within twelve (12) months of the closing
Buyer determines that potential environmental liabilities of Seller at the sites
of one or more Ground Leases are material, Buyer shall have the right to
reassign the Ground Leases to Seller at Seller's expense and without liability
to Buyer, after which Buyer shall have no liabilities or rights under such
Ground Leases.
(c) Legal Description.
Prior to the Closing, Seller and Partnership shall deliver to Buyer
legal descriptions for all Owned Real Property.
(d) Advertising Contracts and Contact Persons.
On or before the Closing, Seller and Partnership shall deliver to
Buyer a substantially complete and accurate list of Advertising Contracts and
shall use its reasonable best efforts to deliver to Buyer the names and
addresses of the ten most important contact persons for the sale of advertising
in each region.
(e) On or before the Closing, Seller shall deliver to Buyer Schedule
4.8.
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6.5. Conduct of Business.
From the date hereof through the Closing, each of Seller and
Partnership shall, except as contemplated by this Agreement, or as consented to
by Buyer in writing, (i) operate the Business and maintain the Assets in the
ordinary course and substantially in accordance with past practice, (ii) use
their best efforts to maintain the ordinary and customary relationships of the
Business with its suppliers, customers and others having business relationships
with it, (iii) use their best efforts to maintain the books and records of the
Business in accordance with past practices, (iv) use reasonable efforts to
preserve intact the goodwill of the Business, (v) use their best efforts to keep
available the services of the officers and employees of the Business as a group,
subject to changes in the ordinary course; (vi) use their best efforts to notify
Buyer of any emergency or other material change in the normal course of the
Business or in the operation of the Assets and of any complaints, investigations
or hearings (or communications indicating that the same may be contemplated) of
any governmental body or authority other than nonmaterial complaints,
investigations or hearings arising in the ordinary course of business, and (vii)
not take any action inconsistent with this Agreement. Without limiting the
generality of the foregoing, Seller and Partnership shall not, except as
specifically contemplated by this Agreement or as set forth on Schedule 6.5;
(a) propose or adopt any amendments to (i) the Articles of
Incorporation or Bylaws of Seller or (ii) the Amended and Restated General
Partnership Agreement of Partnership, except as otherwise required by law;
(b) (i) enter into, extend, materially modify, terminate or renew any
Contract, Ground Lease or Signage Occupancy Rights, except in the ordinary
course of business; (ii) settle or otherwise resolve any financial issue, claim
or adjustment under any Contract, Ground Lease or Signage Occupancy Rights,
except in the ordinary course of business; or (iii) effect any modification to
any Contract, Ground Lease or Signage Occupancy Rights in connection with
obtaining any consent or approval necessitated by the transactions contemplated
hereby;
(c) sell, assign, transfer, convey, lease, license, mortgage, pledge
or otherwise dispose of or encumber any Assets, or any interests therein, except
in the ordinary course of business;
(d) except as otherwise required by law and only with respect to those
employees engaged in the Business, take any action with respect to the grant of
any bonus, severance or termination pay (otherwise than pursuant to policies or
agreements of Seller or Partnership in effect on the date hereof that are
described on the Disclosure Schedule or as contemplated by Section 6.6(b)) or
with respect to any increase of benefits payable under its severance or
termination pay policies or agreements in effect on the date hereof or increase
in any material respect the compensation or fringe benefits of any employee or
pay any benefit not in the ordinary course of business and consistent with past
practice and not required by any existing Employee Plan, agreement or policy;
provided, however, in the event the conditions specified in Sections 7.5 and 8.5
have not been met within 35 days from the date hereof, Seller may grant stay-on
bonuses, the cost of which will be shared equally among Buyer and Seller, to any
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employee of the Business in such amounts as Seller shall deem appropriate in its
sole discretion, provided however, Buyer's obligations hereunder shall not
exceed $1,000,000;
(e) voluntarily make any change in the key management structure of the
Business, including, without limitation, the hiring of additional officers or
the termination of existing officers other than in the ordinary course of
business;
(f) except in the ordinary course of business, adopt, enter into or
amend any Employee Plan, agreement (including, without limitation, any
collective bargaining or employment agreement), trust, fund or other arrangement
for the benefit or welfare of any employee of the Business;
(g) other than failures in the ordinary course of business, fail to
maintain the Assets in substantially their current state of repair, excepting
normal wear and tear, or fail to replace consistent with past practice,
inoperable, worn-out, obsolete or destroyed Assets;
(h) except with respect to endorsement of negotiable instruments
executed in the ordinary course of business, incur, assume or guarantee any
indebtedness for borrowed money pertaining to the Business;
(i) cancel any debt or waive any claim or right pertaining to the
Business or Assets except in the ordinary course of business;
(j) enter into any agreement, or otherwise become obligated, to do any
action prohibited hereunder;
(k) alter the past practices of Seller and Partnership with respect to
the collection of receivables or the payment of payables; or
(l) intentionally do any other act which would cause any
representation or warranty of Seller or Partnership in this Agreement to be or
become untrue in any material respect.
6.6. Employee Matters.
(a) Buyer shall extend offers of employment to all employees of Seller
actively employed as of the Closing Date in connection with the Business except
John R. Ayers (such employees who accept such offers of employment are
hereinafter referred to as the "Transferred Employees"), effective as of the
Closing, which offers shall be on terms and conditions which shall be
substantially comparable individually and in the aggregate to those currently
provided by Seller or Partnership, as the case may be, to such employees and the
prior service of the Transferred Employees with Seller or Partnership shall be
taken into account by Buyer for all purposes in Employee Benefits Plans
maintained by Buyer. Buyer's Benefit Plans shall waive any pre-existing
limitations and waiting periods which would otherwise be applicable to the
Transferred Employees and shall provide that any expenses incurred by such
employees (and their dependents) during the plan year within which the Closing
occurs shall be taken into account for purposes of satisfying applicable
deductible, coinsurance and maximum out-of-pocket payments under such
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Buyer Plans. Seller and Partnership shall cooperate with and use commercially
reasonable efforts to assist Buyer in its efforts to secure satisfactory
employment arrangements with those employees of Seller and Partnership to whom
Buyer makes offers of employment.
(b) Buyer shall assume all obligations with respect to Transferred
Employees under any collective bargaining agreement under which Seller or the
Partnership is obligated, effective as of the Closing. To the extent necessary
to avoid the imposition on Seller or the Partnership of withdrawal liability
under a Multiemployer Plan, Buyer shall enter into an agreement described in
Section 4204 of ERISA with Seller or the Partnership, as the case may be. Seller
and Partnership agree to cooperate with Buyer with respect to any request that
any Multiemployer Plan waive the bond, escrow or security requirements of
Section 4204(a)(1)(B) of ERISA so as to eliminate any requirement that Buyer
provide such bond, escrow or security. In the event any such variance or
exemption is granted, Buyer's obligation to provide the bond, escrow or other
security shall be eliminated during the period that such variance or exemption
is in effect. Buyer shall assume all obligations to pay to the Transferred
Employees all bonuses that any such Transferred Employees will be entitled to
receive as of December 31, 1998; provided, however, that appropriate accruals
have been made for any such bonuses in the calculation of the Closing Balance
Sheet Net Working Capital. Buyer, at its sole cost and expense, shall enter into
severance agreements with the terms set forth in Exhibit G.
(c) Except as provided in (b), above, Seller or Partnership (as
applicable) shall be solely responsible for all of the Employee Plans and all
obligations and liabilities thereunder. Except as provided in (b), Buyer shall
not assume any of the Employee Plans or any obligation or liability thereunder.
(d) Nothing contained in this Agreement shall confer upon any
Transferred Employee any right with respect to continuance of employment by
Buyer, nor shall anything herein interfere with the right of Buyer to terminate
the employment of any of the Transferred Employees at any time, with or without
cause, or restrict Buyer in the exercise of its independent business judgment in
modifying any of the terms and conditions of the employment of the Transferred
Employees except that the severance agreements set forth in Exhibit G shall not
be modified without the consent of the affected employee. Buyer shall be solely
responsible for all liabilities and obligations relating to such a termination
of employment.
(e) Except as set forth in Exhibit G, no provision of this Agreement
shall create any third party beneficiary rights in any beneficiary or dependent
of a Transferred Employee, or any collective bargaining representative thereof,
with respect to the compensation, terms and conditions of employment and
benefits that may be provided to any Transferred Employee by Buyer or under any
benefit plan which Buyer may maintain.
6.7. Services.
At Buyer's request, Seller and Partnership (as applicable) shall,
following the Closing, except as set forth in Schedule 6.7 and except for
matters covered in the Ancillary Agreements provide Buyer any services currently
provided by Seller to the Business for a period not exceeding the term of the
Headquarters Sublease Agreement at the same rates as currently
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charged to the Business, provided, however, Buyer, Seller and/or Partnership (as
applicable) shall on the Closing Date enter into the following agreements in the
forms attached hereto as Exhibits A, B, C and D respectively:
(i) Headquarters Sublease Agreement;
(ii) Data Processing Agreement;
(iii) Monitoring Systems Agreement; and
(iv) Telephone Services Agreement.
6.8. No Business Employee Solicitation.
(a) For a period commencing on the date hereof and extending five (5)
years following the Closing Date, Seller and Partnership will not, and will
cause each of its Affiliates, officers, directors, employees, representatives,
and agents to not, knowingly solicit the employment of any officer or employee
of the Business. The term "solicit the employment (or similar terms) shall not
be deemed to include general solicitations of employment through newspaper or
other public media or a blind search conducted by an executive search firm, in
either case not specifically directed towards employees of the Business and
circumstances where (a) Buyer first terminates the employment of such employee
or gives its prior written consent to such employment or offer of employment,
(b) such employee contacts Seller regarding employment opportunities, (c) such
employee responds to any general solicitation by Seller for employment with
Seller or (d) the employment of such employee with Buyer has terminated.
(b) Following the termination of this Agreement pursuant to Section
11.1, for a period commencing on any such date of termination and extending
five (5) years following any such termination date, Buyer will not, and will
cause each of its Affiliates, officers, directors, employees, representatives,
and agents to not, knowingly solicit the employment of any officer or employee
of Seller or Partnership.
6.9. Third Party Asset Purchase Agreements.
Seller shall continue to negotiate and use its reasonable efforts to
consummate Third Party Asset Purchase Agreements. To compensate and induce
Seller with respect to negotiation of Third Party Asset Purchase Agreements,
Buyer agrees to pay to Seller (in addition to the payment of the Third Party
Asset Purchase Expenditure Amount and irrespective of whether such closing
occurs prior to or after the Closing Date) an amount equal to (i) one percent
(1%) of the purchase price of any Third Party Asset Purchase Agreements), plus
(ii) ten percent (10%) of the amount by which the purchase price of any Third
Party Asset Purchase Agreements is less than 12.7 times the projected 1999
EBITDA estimated by Seller and approved by Buyer for the Assets Purchased under
Third Party Asset Purchase Agreements. Payments with respect to Third Party
Asset Purchase Agreements closed prior to the Closing Date shall be paid by the
Closing Date, and payments on Third Party Asset Purchase Agreements which close
after the Closing Date shall be made on the date they close.
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6.10. HSR Act Filing.
Within three (3) days of the date hereof, each party shall, in
cooperation with each other, file any reports or notifications or supplementary
information which may be required to be filed by it under the HSR Act with the
Federal Trade Commission or the Department of Justice, and shall furnish to each
other party hereto all such information in its possession as may be necessary
for the completion of the reports and notifications to be filed by such parties.
Each party agrees to request early termination and to prosecute such application
with diligence and cooperation. The fees for such filings shall be shared
equally by the parties. Each party shall keep the other parties apprised of the
status of any inquiries made of such party by the Federal Trade Commission or
the Department of Justice or any other governmental or regulatory authority with
respect to this Agreement or the transactions contemplated herein.
6.11. Excluded Real Property.
On the Closing Date, Buyer and Seller shall enter into the Future Use
Rights Agreement.
6.12. Profile Systems.
Seller hereby grants to Buyer a right of first refusal to purchase
Seller's ownership interests in Profile Systems, LLC ("Profile") pursuant to
which Seller shall offer to Buyer an opportunity to purchase Seller's ownership
interest in Profile at a stated price and upon stated terms for a thirty (30)
day period (the "Option Period") before Seller offers the opportunity to
purchase all or any portion of Seller's ownership interest in Profile to any
third party. If Buyer does not exercise its option to purchase Seller's
ownership interest in Profile at such stated price and upon such terms within
the Option Period, Seller shall have the right, for a ninety (90) day period
thereafter to sell its ownership interests in Profile to another purchaser for a
price at least equal to the price and upon the same terms originally offered to
Buyer. If Seller does not consummate a sale of its ownership interests in
Profile within such ninety (90) day period, Buyer's right of first refusal will
arise again. In any case in which any offer of Seller contains an element of
consideration other than cash, Buyer shall have the right to substitute cash in
an amount equal to Buyer's determination of the fair economic value of the
non-cash consideration, and any sale to Buyer for cash shall be based on such
determination of fair economic value. If Seller disagrees with such
determination by Buyer, Seller shall have the right to submit such dispute to
binding arbitration under to Section 11.14, and to the extent the arbitration
award determines that Buyer's determination of the fair economic value of such
consideration was too low, Buyer shall promptly pay Seller such deficiency with
interest at the prime rate charged by Bank of America.
ARTICLE VII.
CONDITIONS TO SELLER'S AND PARTNERSHIP'S OBLIGATIONS
The obligations of Seller and Partnership to effect the Closing are
subject, in the discretion of Seller and Partnership, to the satisfaction, on or
prior to the Closing, of each of the following conditions, any of which may be
waived by Seller and Partnership:
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7.1. No Proceedings, Litigation or Laws.
No Action by any governmental authority of competent jurisdiction
shall have been instituted or threatened which would enjoin, restrain, or
prohibit the consummation of the transactions contemplated by this Agreement and
no court order shall have been entered in action or proceeding which enjoins,
restrains or prohibits the consummation of the transactions contemplated hereby.
7.2. Opinion of Counsel.
Buyer shall have delivered to Seller and Partnership an opinion of
Latham & Watkins, counsel to Buyer, dated as of the Closing Date, in
substantially the form set forth in Exhibit H-1.
7.3. Certificates.
Buyer shall furnish Seller and Partnership with such certificates of
its duly authorized officers and others to evidence compliance with the
conditions set forth in this Article VII as may be reasonably requested by
Seller or Partnership.
7.4. Corporate Documents.
Seller and Partnership shall have received from Buyer resolutions
adopted by the board of directors of Buyer approving this Agreement and the
Ancillary Agreements and the transactions contemplated hereby and thereby,
certified by Buyer's corporate secretary, as applicable.
7.5. HSR Act.
All required filings under the HSR Act shall have been completed and
all applicable time limitations under the HSR Act shall have expired without a
request for further information by the relevant federal authorities under the
HSR Act or been terminated, or, in the event of such a request for further
information, the expiration of all applicable time limitations under the HSR Act
without the objection of such federal authorities.
7.6. Ancillary Agreements.
Buyer shall have executed and delivered the Ancillary Agreements in
the forms attached as exhibits hereto.
ARTICLE VIII.
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the transactions provided for
hereby are subject, in the discretion of Buyer, to the satisfaction, on or prior
to the Closing, of each of the following conditions, any of which may be waived
by Buyer:
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8.1. No Proceedings or Litigation.
No Action by any governmental authority of competent jurisdiction
shall have been instituted or threatened which would enjoin, restrain or
prohibit the consummation of the transactions contemplated by this Agreement,
and no court order shall have been entered in any action or proceeding which
enjoins, restrains or prohibits the consummation of the transaction contemplated
hereby.
8.2. Opinion of Counsel.
Seller and Partnership shall have delivered to Buyer and their lenders
an opinion of counsel, dated as of the Closing Date, in substantially the form
set forth in Exhibit G-2.
8.3. Certificates.
Each of Seller and Partnership shall furnish Buyer with a certificate
of a duly authorized officer certifying as to the satisfaction of conditions set
forth in this Article VIII.
8.4. Corporate Documents.
Buyer shall have received from Seller and Partnership, as applicable,
resolutions adopted by the board of directors of Seller and the partners of
Partnership approving this Agreement, the Ancillary Agreements and/or the
transactions contemplated hereby and thereby (as applicable), certified by
Seller's corporate secretary and by any general partner of Partnership (as
applicable).
8.5. HSR Act.
All required filings under the HSR Act shall have been completed and
all applicable time limitations under the HSR Act shall have expired without a
request for further information by the relevant federal authorities under the
HSR Act or been terminated, or, in the event of such a request for further
information, the expiration of all applicable time limitations under the HSR Act
without the objection of such federal authorities.
8.6. Ancillary Agreements.
Seller shall have executed and delivered the Ancillary Agreements.
8.7. Nonforeign Affidavit.
Each of Seller and Partnership shall furnish Buyer an affidavit,
stating, under penalty of perjury, that the indicated number is the transferor's
United States taxpayer identification number and that the transferor is not a
foreign person, pursuant to Section 1445(b)(2) of the Code.
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8.8. Conduct of Business.
Since the date of this Agreement, each of Seller and Partnership,
except as contemplated by this Agreement or as set forth in the Disclosure
Schedule, shall have in all material respects operated the Business and
maintained the Assets in the ordinary course and substantially in accordance
with past practice, and each of Seller and Partnership shall furnish Buyer with
a certificate of a duly authorized officer or representative certifying as to
that effect.
ARTICLE IX.
RISK OF LOSS; CONSENTS TO ASSIGNMENT
9.1. Damage or Destruction of Assets Prior to Closing.
If any material portion of the Assets is destroyed or damaged by fire
or any other cause on or prior to the Closing Date, Seller and/or Partnership
shall give written notice to Buyer as soon as practicable thereafter, but in any
event within five (5) calendar days of discovery of such damage or destruction.
Seller shall either repair such damages or destruction at its cost and expense
or shall reimburse Buyer for the reasonable cost incurred by Buyer to repair
such damages or destruction.
9.2. Elimination of Some Signage Structures from Transfer; Corresponding
Reduction of Purchase Price and Other Amendments.
In the event Buyer and Seller agree to remove one or more Sign
Structures from the Assets being sold to Buyer hereunder ("Eliminated Signs")
due to damage, destruction, or any other reason, the Agreement shall be amended
in the manner set forth in this Section 9.2.
(a) Purchase Price Adjustment. (i) The portion of the Purchase Price
represented by $930,000,000 (nine hundred and thirty million dollars) shall be
reduced by an amount equal to fourteen (14) times the "EBITDA attributable to
the Eliminated Signs" calculated as provided below. The "EBITDA attributable to
Eliminated Signs" shall be calculated in the following manner: (A) each
Eliminated Sign shall be identified to the numbered district in Exhibit I in
which its gross revenue for the calendar year 1998 was included, (B) the
aggregate net revenue of all Signs in the identified district shall be
determined for the first six months of 1998 from the books and records of the
Seller, (C) the net revenue of all Eliminated Signs in the identified district
shall be determined from the books and records of the Seller and aggregated, (D)
a calculation shall be made of the percentage which the aggregate amount in (C)
above bears to the aggregate amount in (B) above, (E) the percentage derived in
(D) shall be multiplied by the EBITDA of the identified district shown in
Exhibit I, and (F) the result of such multiplication shall be combined with the
results of similar multiplications for all districts in which there were
Eliminated Signs, and the aggregate amount so obtained shall constitute the
"EBITDA attributable to Eliminated Signs";
(ii) the amount of the Acquired Real Property Payment Amount shall be
reduced by the portion thereof attributable to Eliminated Signs;
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(iii) the amount of the Third Party Asset Purchase Expenditure Amount
shall be reduced by the portion thereof attributable to the Eliminated Signs;
and
(iv) the Closing Payment and the Closing Date Audit Certificate shall
be prepared reflecting the reduction of Purchase Price provided by this Section
9.2(a). Sections 2.5, 2.6, 2.7 and 2.8 shall remain applicable in determining
the reduction of Purchase Price attributable to Eliminated Signs.
(b) Redefinition of the Term "Business" and Other Amendments to the
Agreement. While the parties regard it as unlikely that there will be Eliminated
Signs, they recognize that if Sign Structures are removed from the assets being
sold to Buyer it will be necessary to adjust and/or amend a number of provisions
in the Agreement in addition to the adjustment of Purchase Price set forth in
this Section 9.2(a) to reflect such reduction in an economically equitable
manner. Rather than attempting to parse through each provision of the Agreement,
the parties hereby agree to the following governing rules: (i) in the event Sign
Structures are removed from the Assets, the term "Business" shall be redefined
by adding the following proviso: "provided, however, the Business shall not
include any Sign Structures which under Section 9.2 become Eliminated Signs" and
(ii) all other definitions and provisions in the Agreement shall be redefined
and amended mutatis mutandis to the extent, if any, required to reflect in an
economically equitable manner the elimination of Sign Structures which become
Eliminated Signs under this Section 9.2, including by way of illustration but
not by way of limitation, the covenant not to compete set forth in Section 10.7,
and the right of Seller to use the name Whiteco Outdoor in connection with the
Eliminated Signs while they are owned by Seller.
9.3. Consents to Assignment.
Anything in this Agreement to the contrary notwithstanding, this
Agreement shall not constitute an agreement to assign any Contract, Ground
Lease, Personal Property Lease or Signage Occupancy Rights, or any claim or
right or any benefit arising thereunder or resulting therefrom, if an attempted
assignment thereof, without the consent of a third party thereto, would
constitute a breach thereof or in any way adversely affect the rights of Buyer
thereunder. If such consent is not obtained, or if an attempted assignment
thereof would be ineffective or would affect the rights thereunder so that Buyer
would not receive all such rights, Seller, Partnership and Buyer will cooperate,
in all reasonable respects, to obtain such consent as soon as practicable and,
until such consent is obtained, to provide to Buyer the benefits under any
Contract, Ground Lease, Personal Property Lease or Signage Occupancy Rights to
which such consent relates (with Buyer responsible for all the liabilities and
obligations thereunder). In particular, in the event that any such consent is
not obtained prior to Closing, then Buyer, Seller and/or Partnership shall enter
into such arrangements (including subleasing or subcontracting if permitted) to
provide to the parties the economic and operational equivalent of obtaining such
consent and assigning such Contract, Ground Lease, Personal Property Lease or
Signage Occupancy Rights including enforcement for the benefit of Buyer of all
claims or rights arising thereunder, and the performance by Buyer of the
obligations thereunder.
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ARTICLE X.
ACTIONS BY BUYER, SELLER AND PARTNERSHIP AFTER THE CLOSING
10.1. Further Actions.
On and after the Closing Date, Buyer, Seller and Partnership will take
all appropriate actions and execute all documents, instruments or conveyances of
any kind which may be reasonably necessary or advisable to confirm or effect
Buyer's ownership, possession and control (in accordance with this Agreement) of
the Assets and assumption of the Assumed Liabilities.
10.2. Survival of Representations, Etc.
No claim or cause of action for the Indemnification provided by
Section 10.4 shall be brought by Buyer under Section 10.4(a)(i) more than one
year after the Closing Date except for claims under Sections 4.4, the first
paragraph of Section 4.5, Section 4.5(a), and Section 4.21. Claims or causes of
action by Buyer for Indemnification for matters excluded under the preceding
sentence and under Sections 10.4(a)(ii), 10.4(a)(iii), 10.4(a)(iv), 10.4(a)(v),
10.4(a)(vi), and 10.4(a)(vii) shall survive until the expiration of the
applicable statute of limitations (with extensions) plus forty-five (45) days
with respect to the matters addressed in such Sections. Each covenant and
agreement contained herein shall survive the Closing and remain in full force
and effect unless otherwise limited by its terms. This termination of the
representations and warranties provided herein shall not affect the rights of a
party in respect of any Claim made by such party in a writing received by the
other party prior to the expiration of the applicable survival period provided
herein.
10.3. Books and Records.
(a) Of Buyer. Buyer agrees that it will cooperate with and make
available to Seller and Partnership, during normal business hours, all Books and
Records, information and employees (without substantial disruption of
employment) which are necessary or useful in connection with any tax inquiry,
audit, investigation or dispute, any litigation or investigation or any other
matter requiring any such Books and Records, information or employees for any
reasonable business purpose; it being understood that all Books and Records
shall be maintained by Buyer for seven (7) years following the Closing. Except
as otherwise required in Section 10.4, Seller and Partnership shall bear all of
the out-of-pocket costs and expenses (including, without limitation, attorneys'
fees, but excluding reimbursement for salaries and employee benefits) reasonably
incurred in connection with providing such Books and Records, information or
employees. All information received pursuant to this Section 10.3 shall be
subject to the confidentiality provisions of Section 10.8.
(b) Of Seller and Partnership. Seller and Partnership agree that they
will cooperate with and make available to Buyer, during normal business hours,
all books and records, information and employees (without substantial disruption
of employment) which are necessary or useful in connection with any tax inquiry,
audit, investigation or dispute, any litigation or
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investigation or any other matter requiring any such books and records,
information or employees for any reasonable business purpose; it being
understood that all books and records shall be maintained by Seller and
Partnership for seven (7) years following the Closing. Except as otherwise
required in Section 10.4, Buyer shall bear all of the out-of-pocket costs and
expenses (including, without limitation, attorneys' fees, but excluding
reimbursement for salaries and employee benefits) reasonably incurred in
connection with providing such books and records, information or employees. All
information received pursuant to this Section 10.3 shall be subject to the
confidentiality provisions of Section 10.8.
10.4. Indemnification.
(a) By Seller. Seller shall indemnify, save and hold harmless Buyer,
its Affiliates, and their respective directors, officers, shareholders and
employees (the "Buyer Indemnitees ") from and against any and all necessary and
required costs, losses, Taxes, liabilities, damages, lawsuits, deficiencies,
claims, demands, and expenses (whether or not arising out of third party
claims), including, without limitation, reasonable attorneys' fees and all
reasonable amounts paid in investigation, defense or settlement of any of the
foregoing herein, (collectively, "Damages"), incurred in connection with,
arising out of, or resulting from (i) subject to Section 10.4(f)(i) and
10.4(f)(iv), any breach of any representation or warranty made by Seller or
Partnership in this Agreement or the failure of any representation or warranty
made by Seller or Partnership in this Agreement to be true and correct in all
material respects at and as of the Closing Date, except for such changes as are
contemplated by this Agreement; (ii) subject to Section 10.4(f)(i), any breach
of any covenant or agreement made by Seller or Partnership in this Agreement;
(iii) waiver of any requirements of the Bulk Sales Act, as provided in Section
10.5; (iv) the existence of Environmental Liabilities for Facilities Real
Property including, without limitation, liabilities arising from Facilities Real
Property repurchased by Seller pursuant to Section 6.4(b)(v); (v) third party
claims against Buyer arising out of any violation of any applicable
Environmental Law as a result of occupancy of the premises at Ground Leases
which Buyer elects to cause Seller to reassume in accordance with Section
6.4(b)(vi); (vi) for a period of twelve (12) months from the Closing Date, third
party claims against Buyer arising out of any violations of any applicable
Environmental Law as a result of occupancy of the premises at Ground Leases
which Buyer does not elect to cause Seller to reassume in accordance with
Section 6.4(b)(vi); and (vii) any third party claim arising out of Excluded
Liabilities.
(b) By Buyer. Buyer shall indemnify, save and hold harmless Seller and
Partnership, and their respective directors, officers, shareholders and
employees (the "Seller Indemnitees" and together with the Buyer Indemnitees, the
"Indemnitees") from and against any and all Damages incurred in connection with,
arising out of, or resulting from (i) subject to Section 10.4(f)(ii) and Section
10.4(f)(iv), any breach of any representation or warranty made by Buyer in this
Agreement or the failure of any representation or warranty made by Buyer in this
Agreement to be true and correct in all material respects at and as of the
Closing Date; (ii) subject to Section 10.4(f)(ii), any breach of any covenant or
agreement made by Buyer in this Agreement; (iii) any Assumed Liability or any
third party claims related to Assumed Liabilities; or (iv) any matters arising
out of Buyer's actions with respect to Future Use Rights.
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(c) The term "Damages" as used in this Section 10.4 is not limited to
matters asserted by third parties, but includes Damages incurred or sustained by
an Indemnitee in the absence of third party claims. Payments by an Indemnitee
of amounts for which such Indemnitee is indemnified hereunder shall not
necessarily be a condition precedent to recovery.
(d) Defense of Claims. If a claim for Damages (a "Claim") is to be
made by an Indemnitee, such Indemnitee shall, subject to Section 10.2, give
written notice (a "Claim Notice") to the indemnifying party as soon as
practicable after such Indemnitee becomes aware of any fact, condition or event
which may give rise to Damages for which indemnification may be sought under
this Section 10.4. If any lawsuit or enforcement action is filed against any
Indemnitee hereunder, notice thereof (a "Third Party Notice") shall be given to
the indemnifying party as promptly as practicable (and in any event within
fifteen (15) calendar days after the service of the citation or summons). The
failure of any indemnified party to give timely notice hereunder shall not
affect rights to indemnification hereunder, except to the extent that the
indemnifying party demonstrates actual damage caused by such failure. After
receipt of a Third Party Notice, if the indemnifying party shall acknowledge in
writing to the indemnified party that the indemnifying party shall be obligated
under the terms of its indemnity hereunder in connection with such lawsuit or
action, then the indemnifying party shall be entitled, if it so elects, (i) to
take control of the defense and investigation of such lawsuit or action, (ii) to
employ and engage attorneys of its own choice to handle and defend the same, at
the indemnifying party's cost, risk and expense unless the named parties to such
action or proceeding include both the indemnifying party and the indemnified
party and the indemnified party has been advised in writing by counsel that
there may be one or more legal defenses available to such indemnified party that
are different from or additional to those available to the indemnifying party,
and (iii) to compromise or settle such claim, which compromise or settlement
shall be made only with the written consent of the indemnified party, such
consent not to be unreasonably withheld. The indemnified party shall cooperate
in all reasonable respects with the indemnifying party and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; and the indemnified party may, at its own cost, participate
in the investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom. The parties shall also cooperate with each other in any
notifications to insurers. If the indemnifying party fails to assume the defense
of such claim within fifteen (15) calendar days after receipt of the Third Party
Notice, the indemnified party against which such claim has been asserted will
(upon delivering notice to such effect to the indemnifying party) have the right
to undertake the defense, compromise or settlement of such claim and the
indemnifying party shall have the right to participate therein at its own cost;
provided, however, that such claim shall not be compromised or settled without
the written consent of the indemnifying party, which consent shall not be
unreasonably withheld. If the indemnified party shall reject any settlement
which provides for a release of the indemnified party, the indemnifying party
shall not be liable for any damages in excess of the proposed settlement amount.
In the event the indemnified party assumes the defense of the claim, the
indemnified party will keep the indemnifying party reasonably informed of the
progress of any such defense, compromise or settlement.
(e) Brokers and Finders. Pursuant to the provisions of this Section
10.4, each of Buyer, Seller and Partnership shall indemnify, hold harmless and
defend the other party from the payment of any and all broker's and finder's
expenses, commissions, fees or other forms of
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compensation which may be due or payable from or by the indemnifying party, or
may have been earned by any third party acting on behalf of the indemnifying
party in connection with the negotiation and execution hereof and the
consummation of the transactions contemplated hereby.
(f) Limitations.
(i) Seller shall be liable to Buyer for all Damages with respect
to the matters contained in Section 10.4(a)(i) or Section 10.4(a)(ii) once the
Damages therefrom exceed, in the aggregate, $100,000; provided that Seller and
Partnership shall not be liable for all such Damages in Sections 10.4(a)(i) and
10.4(a)(ii) in excess of the Purchase Price; and provided further that Damages
with respect to the representations and warranties contained in Section 4.21
shall not be subject to the limitations of the immediately preceding clause of
this Section 10.4(f)(i).
(ii) Buyer shall be liable to Seller or Partnership for all
Damages with respect to the matters contained in Section 10.4(b)(i) or Section
10.4(b)(ii) once the Damages therefrom exceed, in the aggregate, $100,000,
provided that Buyer shall not be liable for such Damages in excess of the
Purchase Price.
(iii) Following the consummation of the Closing, the indemnity
provisions in this Agreement are the exclusive remedy for any
misrepresentations, breaches of representations, warranties or covenants or any
other claims relating in any way to this Agreement or the transactions
contemplated hereby, provided, however, that nothing herein shall limit the
right of either party to seek specific performance or other injunctive relief
with respect to any breach of a covenant. The parties hereto agree that
Partnership shall have no liability hereunder and the Buyer agrees that no claim
shall be made against Partnership.
(iv) No claim based on a breach of any representation or warranty
or the failure of any representation or warranty to be true and correct in all
material respects shall be valid unless first made in writing within the
survival period set forth in Section 10.2.
10.5. Bulk Sales.
It may not be practicable to comply or attempt to comply with the
procedures of the "Bulk Sales Act" or similar law of any or all of the states in
which the Assets are situated or of any other state which may be asserted to be
applicable to the transactions contemplated hereby. Accordingly, Buyer, Seller
and Partnership waive any requirements, to the extent they are entitled to
benefits thereunder, for compliance with any or all of such laws.
10.6. Taxes and Asset Allocation.
(a) Asset Allocation. Subject to the division of Purchase Price made
in Section 2.3, Buyer, Seller and the Partnership agree that the aggregate fair
market value of the Assets, the Future Use Rights Agreement and Buyer's right of
first refusal to purchase Seller's ownership interest in Profile (the "Aggregate
Fair Market Value") will be appraised by the appraisal firm of Buyer's
selection. The fees and expenses related to such appraisal shall be paid by
Buyer. Buyer shall prepare one or more IRS Form 8594 reflecting the Aggregate
Fair Market
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Value as found by the appraisal firm of Buyer's selection reasonably acceptable
to Seller and such other information as required by the form, and shall forward
it within 120 days after Closing to Seller and the Partnership for their
approval, which approval shall not be unreasonably withheld, conditioned or
delayed. Buyer, Seller and the Partnership shall each file with their respective
federal income Tax Return for the tax year in which the Closing occurs, IRS Form
8594 containing the information agreed upon by the parties pursuant to the
immediately preceding sentence. Buyer agrees to report the purchase of the
Assets, and Seller and Partnership each agree to report the sale of such assets
on all federal, state and local Tax Returns in a manner consistent with the
information agreed upon by the parties pursuant to this section and contained in
its IRS Form 8594. Notwithstanding any other provision of this Agreement, the
provisions of this Section 10.6(b) shall survive the Closing without limitation.
10.7. Covenant Not To Compete.
For a period of five (5) years following the Closing, Seller,
Partnership, Dean White, John Peterman and Dennis Kackos shall not, directly or
indirectly (i) engage in, own, operate, be employed by, consult with, assist or
advise any business that competes, directly or indirectly, with the Business in
any state in the United States in which the Business is currently conducted;
provided, however, that the following activities shall not be deemed a violation
of this covenant: (a) the permitting and construction of signs so long as such
signs are used solely in connection with other activities of Seller or such
signs are sold to others, and in either case no advertising is sold directly or
indirectly by Seller or an Affiliate or agent of Seller on such signs and (b)
the leasing or licensing of real estate to other persons for the purpose of
construction of signs, (ii) solicit any customers of the Business; provided,
however, that the solicitation of customers of the Business shall not be deemed
a violation of this covenant if such solicitation is for the conduct of a sign
business outside of the United States or such solicitation is made in connection
with activities of Seller which are not restricted under this covenant, or (iii)
hire or offer employment to any employee of Seller or Partnership whose
employment is continued by Buyer after the Closing Date or any employee of Buyer
or any successor or Affiliate of Buyer which is engaged in the Business, unless
(a) Buyer first terminates the employment of such employee or gives its prior
written consent to such employment or offer of employment (b) such employee
contacts Seller regarding employment opportunities, (c) such employee responds
to any general solicitation by Seller for employment with Seller or (d) the
employment of such employee by Buyer has terminated. Seller and Partnership
acknowledge and agree that the time, scope, geographic area and other provisions
of this Covenant Not to Compete have been specifically negotiated by
sophisticated parties and that such provisions are reasonable under the
circumstances. The parties further agree that if, despite the foregoing
acknowledgment, a court or other tribunal of competent jurisdiction holds that
any of the restrictions of this Covenant Not to Compete are unenforceable, the
maximum restrictions of time, scope or geographic area reasonable under the
circumstances, as determined by such court or tribunal, shall be substituted for
any such restrictions held unenforceable.
10.8. Confidentiality.
Seller and Partnership have obtained confidential information relating
to the business, operations and assets of Buyer and its Affiliates and are in
possession of confidential
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information relating to the Business and the Assets (such information, "Buyer
Confidential Information"). Buyer has obtained confidential information relating
to the business, operations and assets of Seller and Partnership and their
Affiliates, including the Business and the Assets (such information, "Seller
Confidential Information"). For a period of five (5) years from the date hereof,
Seller and Partnership shall treat the Buyer Confidential Information and Buyer
shall treat the Seller Confidential Information, as the case may be, as
confidential, preserve the confidentiality thereof, not duplicate or use the
Buyer Confidential Information or the Seller Confidential Information, as the
case may be, and instruct its respective employees who have had access to the
Buyer Confidential Information or the Seller Confidential Information, as the
case may be, to keep confidential and not to use any Buyer Confidential
Information or Seller Confidential Information, as the case may be, unless the
Buyer Confidential Information or the Seller Confidential Information, as the
case may be, (i) is now or is hereafter disclosed, through no act or omission of
Buyer or its Affiliates or Seller or Partnership or their Affiliates, as the
case may be, in a manner making it available to the general public or (ii) is
required by law to be disclosed; provided, however, if the Closing does not
occur, Seller and Partnership shall have no obligation to keep any Buyer
Confidential Information that relates to the Business or the Assets
confidential, and if the Closing does occur, Buyer shall have no obligation to
keep any Seller Confidential Information that relates to the Business or the
Assets confidential.
10.9. Use of Name.
(a) Seller and Partnership shall not use the name "Whiteco" or "White"
in the United States in any way that is reasonably likely to cause confusion
with the use of such names by Buyer in connection with the Business in the
United States.
10.10. Maintenance of Net Worth.
Following the Closing, Seller shall maintain a net worth (determined
in accordance with generally accepted accounting principles) not less than the
amounts and for the periods as follows: (a) $150 million from the Closing Date
to the first anniversary of the Closing; (b) $100 million from the day after the
first anniversary of the Closing to the second anniversary of the Closing; and
(c) $50 million from the day after the second anniversary of the closing to (x)
the earlier of (i) the eighth anniversary of the Closing or (ii) the expiration
of all applicable statutes of limitation or (y) if later, the satisfaction,
dismissal or termination of any claims for indemnification outstanding on the
date determined under clause (x).
ARTICLE XI.
MISCELLANEOUS
11.1. Termination.
(a) Termination. This Agreement may be terminated at any time prior to
Closing:
(i) By mutual written consent of Buyer, Seller and Partnership;
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(ii) By Buyer or Seller if the applicable waiting period under the
HSR Act shall not have expired without adverse action by the Federal
Trade Commission or the Department of Justice on or before February
28, 1999; or
(iii) By Buyer or Seller if the Closing has not occurred within
(30) days after the applicable waiting period under the HSR Act has
expired or been terminated.
(b) In the Event of Termination. In the event of termination of this
Agreement:
(i) Each party will redeliver all documents, work papers and other
material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to
the party furnishing the same;
(ii) The provisions of the Confidentiality Agreement and Section
10.8 shall continue in full force and effect; and
(iii) No party hereto shall have any liability or further
obligation to any other party to this Agreement, except (A) as
provided in Section 11.2, (B) as stated in subsections (i), (ii) and
(iii) of this Section 11.1(b) and (C) except for any willful breach of
Section 6.10 occurring prior to the proper termination of this
Agreement.
11.2. Liquidated Damages.
If (a) the transactions contemplated by this agreement are not
consummated due to Buyer's default and on the date which is ten (10) business
days after the date the condition set forth in Section 8.5 has been satisfied
(or such later date as Buyer and Seller shall mutually agree upon as the Closing
Date); (b) neither Seller nor Partnership is in material breach of Section 6.5;
(c) the conditions set forth in Sections 8.1, and 8.5 have been satisfied; and
(d) Seller and Partnership have made a tender of the documents specified in
Sections 8.2, 8.3, 8.4, 8.6, 8.7, 8.8 and 2.1, then and in that event, Buyer
shall be obligated to pay to Seller and Partnership, collectively, Ninety-Five
Million Dollars ($95,000,000) (the "Liquidated Damages Payment"). The parties
acknowledge and agree that it is difficult or impossible to determine with
precision the amount of damages that would or might be incurred by Seller and
Partnership if the transactions contemplated by this Agreement were not
consummated as a result of a material breach by Buyer. It is understood that the
Liquidated Damages Payment shall be the sole and exclusive measure of damages
with respect to any such occurrence. Once the Liquidated Damages Payment has
been made in accordance with the provisions of this Section 11.2, Buyer shall
be relieved of any further liability in respect of damages relating to the fact
or circumstance giving rise to the Liquidated Damages Payment.
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11.3. Specific Performance.
The parties recognize that if, prior to Closing, Seller or
Partnership breaches this Agreement and refuses to perform under the provisions
of this Agreement, monetary damages alone would not be adequate to compensate
Buyer for its injury. Buyer shall therefore be entitled, in addition to any
other remedies that may be available (including but not limited to the
provisions of Section 10.4 (relating to indemnification)), to obtain specific
performance of the terms of this Agreement prior to Closing. If any action is
brought by Buyer to enforce this Agreement prior to Closing, Seller and
Partnership shall waive the defense that there is an adequate remedy at law.
Following the Closing, Buyer shall be entitled, in addition to any other
remedies that may be available, to seek specific performance of the terms of
this Agreement if such remedy is available at equity. In the event Buyer elects
to terminate this Agreement as a result of Seller's or Partnership's default
instead of seeking specific performance, Buyer shall be entitled to recover
Buyer's damages.
11.4. Representations and Warranties Relating to the Signage Properties and
Disclosures Thereof.
Buyer agrees that it is accepting the Signage Properties "as is,
where is, with all faults" and that such transfer is being made without any
representation or warranty of any kind express or implied including any warranty
of future income potential, or future operation expense, use, merchantability or
fitness for a particular purpose, or quality with respect to any of the Signage
Properties being so transferred, or as to the condition or workmanship thereof
or the absence of any defects therein, whether latent or patent or whether
properly permitted or licensed (collectively, the "Sign Property Conditions")
all of which representations and warranties are hereby renounced by Seller and
Partnership. However, Seller and Partnership do represent and warrant that the
Sign Property Conditions are not materially different from the Sign Property
Conditions as they have existed during the preceding four year period.
11.5. Assignment.
Neither this Agreement, the Ancillary Agreements nor any of the
rights or obligations hereunder or thereunder may be assigned by any party
without the prior written consent of the other parties thereto; except that
Buyer may, without such consent, assign all such rights to any lender as
collateral security and assign all such rights and obligations to a wholly-owned
subsidiary (or a partnership controlled by Buyer) of Buyer.
11.6. Notices.
All notices under this Agreement shall be in writing and shall be
deemed to have been duly given when received if personally delivered; when
transmitted if transmitted by telecopy, electronic or digital transmission
method provided that such transmission is confirmed by telephone; the day after
it is sent, if sent for next day delivery to a domestic address by overnight
mail; and upon receipt, if sent by certified or registered mail, return receipt
requested. In each case notice shall be sent to:
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If to Seller, addressed to:
Whiteco Industries, Inc.
1000 E. 80th Place
Suite 700 North
Merrillville, Indiana 46410
Attention: Ann Bowman
With a copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Donald Schapiro
If to Partnership, addressed to:
Metro Management Associates
c/o Whiteco Industries, Inc.
1000 E. 80th Place
Suite 700 North
Merrillville, Indiana 46410
Attention: Dennis Kackos
With a copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Donald Schapiro
If to Buyer, addressed to:
300 Crescent Court
Suite 600
Dallas, Texas 75201
Attention: Eric Neuman
With a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W., Suite 1300
Washington, D.C. 20004
Attention: Eric L. Bernthal
If to Dean White, John Peterman or Dennis Kackos, addressed to:
51
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c/o Whiteco Industries, Inc.
1000 E. 80th Place
Suite 700 North
Merrillville, Indiana 46410
With a copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Donald Schapiro
or to such other place and with such other copies as any party may designate as
to itself by written notice to the others.
11.7. Choice of Law.
This Agreement shall be construed, interpreted and the rights of the
parties determined in accordance with the internal law, and not the law of
conflicts, of the State of New York.
11.8. Amendments and Waivers.
This Agreement, the Ancillary Agreements, together with all exhibits
and schedules hereto and thereto (including the Disclosure Schedule), and the
Confidentiality Agreement constitutes the entire agreement among the parties
pertaining to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties. This Agreement may not be amended or supplemented except by an
instrument in writing signed on behalf of each of the parties hereto. No
modification or waiver of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
11.9. Multiple Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
11.10. Expenses.
Except as otherwise specified in this Agreement, each party hereto
shall pay its own legal, accounting, out-of-pocket and other expenses incident
to this Agreement and to any action taken by such party in preparation for
carrying this Agreement into effect.
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11.11. Invalidity.
In the event that any one or more of the provisions contained in this
Agreement or in any other instrument referred to herein, shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, then to the
maximum extent permitted by law, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement or any other such
instrument.
11.12. Titles.
The titles, captions or headings of the Articles and Sections herein
are inserted for convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
11.13. Publicity.
Except as otherwise required by applicable law, neither Buyer, Seller
or Partnership shall issue any press release or make any public or private
statement or disclosure regarding the existence, nature, terms or conditions of
the transactions contemplated hereby (other than such disclosure to Seller's and
Partnership's key employees as Seller or Partnership deem appropriate) prior to
the Closing Date, without prior approval of the other parties.
11.14. Arbitration.
Notwithstanding anything herein to the contrary, in the event that
there shall be a dispute among the parties after the Closing arising out of or
relating to this Agreement, including, without limitation, the indemnities
provided in Article X, the parties agree that such dispute shall be submitted to
binding arbitration in New York, New York, before a before a panel of three
arbitrators, one selected by the Buyer, one selected by the Seller and one
selected by the two arbitrators so selected and otherwise in accordance with the
rules of commercial arbitration of the American Arbitration Association. Any
award issued as a result of such arbitration shall be final and binding between
the parties thereto, and shall be enforceable by any court having jurisdiction
over the party against whom enforcement is sought. The fees and expenses of such
arbitration (including reasonable attorneys' fees) or any action to enforce an
arbitration award shall be paid by the party that does not prevail in such
arbitration.
11.15. Knowledge.
Whenever this Agreement refers to the "knowledge of Seller,"
"knowledge of Partnership" or a similar phrase, it refers to the collective
actual knowledge of Dean V. White, John M. Peterman, John R. Ayers, Dennis
Kackos, Mark Harris, Gina Crist, Ann Bowman, John Savey and Richard Mostak.
Whenever this Agreement refers to "knowledge of Buyer" or a similar phrase, it
refers to the collective actual knowledge of directors and key management
employees of Buyer.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed on their respective behalf, by their respective officers
thereunto duly authorized, all as of the day and year first, above written
WHITECO INDUSTRIES, INC.
By: /s/ DEAN V. WHITE
------------------------------------
Name: Dean V. White
Title: Chairman of the Board
METRO MANAGEMENT ASSOCIATES
By: /s/ DENNIS KACKOS
------------------------------------
Name: Dennis Kackos
Title: General Partner
CHANCELLOR MEDIA CORPORATION OF LOS
ANGELES
By: /s/ JEFFREY MARCUS
------------------------------------
Name: Jeffrey Marcus
Title: Chief Executive Officer
FOR PURPOSES OF SECT10N 10.7 ONLY:
DEAN WHITE
/s/ DEAN WHITE
---------------------------------------
JOHN PETERMAN
/s/ JOHN PETERMAN
---------------------------------------
DENNIS KACKOS
/s/ DENNIS KACKOS
---------------------------------------
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FOR PURPOSES OF SECTION 10.10 AS WELL:
DEAN WHITE
/s/ DEAN WHITE
---------------------------------------
55
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EXHIBIT 3.93
THIRD AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
MARTIN MEDIA, A California Limited Partnership
(formerly COLORADO RIVER MARKETS,
A California Limited Partnership)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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ARTICLE 1. DEFINITIONS ...................................................................1
1.1. Act ...............................................................................1
1.2. Affiliate .........................................................................1
1.3. Affiliate Transaction .............................................................2
1.4. Agreement .........................................................................2
1.5. Asset Sale ........................................................................2
1.6. Asset Sale Proceeds ...............................................................2
1.7. Assignee ..........................................................................2
1.8. Available Asset Sale Proceeds .....................................................2
1.9. Bankruptcy; Bankrupt ..............................................................2
1.10. Bankrupt Limited Partner .........................................................3
1.11. Book Value .......................................................................3
1.12. Business Day .....................................................................3
1.13. Capital Account ..................................................................3
1.14. Cash Available for Distribution ..................................................3
1.15. Capital Contribution .............................................................3
1.16. Capital Transactions .............................................................3
1.17. Certificate of Limited Partnership ...............................................3
1.18. Change of Control ................................................................3
1.19. Change of Control Offer ..........................................................4
1.20. Change of Control Payment Date ...................................................4
1.21. Change of Control Purchase Price .................................................4
1.22. Code .............................................................................4
1.23. Credit Agreement .................................................................4
1.24. Dissolved; Dissolution ...........................................................4
1.25. Distribution .....................................................................4
1.26. Exchange Act .....................................................................4
1.27. General Partner ..................................................................4
1.29. Incompetent; Incompetency ........................................................5
1.30. Initial Warrants .................................................................6
1.31. Kunz Subsequent Acquisition ......................................................6
1.32. Limited Partner ..................................................................6
1.33. Martin & MacFarlane ..............................................................6
1.34. Majority of the Limited Partners .................................................6
1.35. Minimum Gain .....................................................................6
1.36. Net Income; Net Loss .............................................................6
1.37. Nonrecourse Liability ............................................................7
1.38. Notice of Proposed Sale ..........................................................7
1.39. Partner ..........................................................................7
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<TABLE>
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1.40. Partner-Funded Debt ...............................................................7
1.41. Partnership .......................................................................7
1.42. Partnership Assets ................................................................7
1.43. Person ............................................................................7
1.44. Preferred Limited Partnership Units ...............................................7
1.45. Preferred Return ..................................................................7
1.46. Preferred Unit Certificates .......................................................7
1.47. Preferred Units; Units of Preferred Limited Partnership Interests .................7
1.48. Preferred Units Capital Account Amount ............................................8
1.49. Purchase Agreement ................................................................8
1.50. Quarterly Warrants ................................................................8
1.51. Record Date .......................................................................8
1.53. Redemption Date ...................................................................8
1.54. Redemption Notice .................................................................8
1.55. Regulatory Allocations ............................................................8
1.56. Selling Limited Partner ...........................................................8
1.58. Temporary Cash Investments ........................................................9
1.59. Time of Purchase ..................................................................9
1.60. Transfer ..........................................................................9
1.61. Units: Units of Common Partnerships Interests .....................................9
1.62. U.S. Government Obligations........................................................9
1.63. Warrants ..........................................................................9
1.64. Warrants Agreement ................................................................9
1.65. Warrants Units ....................................................................9
ARTICLE 2. ORGANIZATION ...................................................................9
2.1. Formation ..........................................................................9
2.2. Name ...............................................................................9
2.3. Principal Office ..................................................................10
2.4. Agent for Service of Process ......................................................10
2.5. Term of the Partnership ...........................................................10
2.6. Purposes ..........................................................................10
ARTICLE 3. CAPITAL CONTRIBUTIONS AND FINANCING ...........................................10
3.2. Units Upon Execution of Agreement .................................................10
3.3. Loans by a Partner ................................................................10
3.4. Withdrawal of Capital .............................................................10
3.5. Redemption ........................................................................10
3.6. Loans from the Partnership ........................................................11
3.7. Additional Capital Contributions and Admission of New Partners ....................11
ARTICLE 4. ACCOUNTING ....................................................................12
4.1. Capital Accounts ..................................................................12
</TABLE>
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4.2. Fiscal Year, Tax Matters Partner ..................................................13
4.3. Books and Records to be Maintained ................................................13
4.4. Information to be Provided to the Limited Partners ................................13
4.5. Interim Closing of the Books ......................................................14
4.6. Tax Withholding ...................................................................14
ARTICLE 5. NET INCOME AND NET LOSS; DISTRIBUTIONS ........................................14
5.1. Allocation of Income and Loss .....................................................14
5.2. Built-in Gain .....................................................................15
5.3. Minimum Gain Chargeback ...........................................................15
5.4. Qualified Income Offset ...........................................................15
5.5. Partner-Funded Debt ...............................................................16
5.6. Curative Allocations ..............................................................16
5.7. Excess Non-Recourse Liability Safe Harbor .........................................16
5.8. Treatment of Interest to Partners .................................................16
5.9. Transfer During Taxable Year ......................................................16
5.10. Depreciation Recapture ...........................................................17
5.11. Economic Allocations .............................................................17
5.12. Distributions ....................................................................17
5.13. Distributions Limitation .........................................................18
5.14. Cash Distributions in respect of Preferred Units .................................18
ARTICLE 6. RIGHTS AND DUTIES OF THE GENERAL PARTNER ......................................18
6.1. General Partner Compensation; Expenses ............................................18
6.2. Partnership Expenses ..............................................................19
6.3. Time Devoted to the Partnership ...................................................19
6.4. Partnership Governance ............................................................20
6.5. Competing Interests ...............................................................21
6.6. Restriction on Powers of the General Partner ......................................21
6.7. Limitation on General Partner Liability ...........................................21
6.8. Indemnification of General Partner ................................................21
6.9. Certain Transactions; General Partner Agreements ..................................22
6.10. Warrants .........................................................................22
ARTICLE 7. RIGHTS AND DUTIES OF LIMITED PARTNERS .........................................22
7.1. Basic Rights ......................................................................22
7.2. Prohibition Against Involvement in Management .....................................23
7.3. Acts Not Constituting Management ..................................................23
</TABLE>
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ARTICLE 8. VOTING, MEETINGS AND PROXIES ..................................................23
8.1. Actions Requiring Approval by the Limited Partners ................................23
8.2. Actions Requiring Unanimous Consent of the Limited Partners .......................23
8.3. Meetings - Place ..................................................................24
8.4. Meetings - Calling ................................................................24
8.5. Meetings - Notice .................................................................24
8.6. Meetings - Quorum .................................................................24
8.7. Written Consent Without Meeting ...................................................25
8.8. Proxies ...........................................................................25
ARTICLE 9. DISPOSITION OF LIMITED PARTNER INTERESTS ......................................25
9.1. Withdrawal of Limited Partner .....................................................25
9.2. Transfers Restricted ..............................................................25
9.3. Transfers to Trust ................................................................25
9.4. Transfer to a Legal Entity.........................................................26
9.5. Transfer to Beneficial Owners .....................................................26
9.6. Substituted Limited Partner .......................................................26
9.7. Effect of Assignment and Substitution .............................................27
9.8. Assignee's Capital ................................................................27
ARTICLE 10. PURCHASE OPTIONS .............................................................27
10.1. Option to Purchase Interest in Event of Death of a Limited Partner ...............27
10.2. Option to Purchase Interest in the Event of Divorce of a Limited Partner .........28
10.3. Option to Purchase Interest in the Event of Bankruptcy of a Limited Partner ......29
10.4. Option to Purchase Interest in Event of Incompetency of a Limited Partner.........30
10.5. Option to Purchase Interest in the Event of Notice of Proposed Sale to a Third-
party Purchaser ................................................................30
10.6. Limitation .......................................................................31
ARTICLE 11. PURCHASE PRICE AND TERMS .....................................................32
11.1. Purchase Price ...................................................................32
11.2. Effective Date ...................................................................32
ARTICLE 12. TERMINATION AND ADMISSION OF A GENERAL PARTNER ...............................32
12.1. Termination of a General Partner .................................................32
12.2. No Removal of General Partner ....................................................33
12.3. Transfer by General Partner ......................................................33
12.4. Permissible Transfers by MW Sign Corp. ...........................................33
12.5. Withdrawal of General Partner ....................................................33
12.6. Additional General Partner .......................................................33
12.7. Termination of General Partner ...................................................33
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE 13. DISSOLUTION AND TERMINATION OF PARTNERSHIP ...................................33
13.1. Dissolution and Termination ......................................................33
13.2. Reconstitution ...................................................................34
13.3. Events Not Dissolving the Partnership ............................................34
13.4. Winding Up .......................................................................35
13.5. Waiver of Rights to Court Decree of Dissolution ..................................36
ARTICLE 14. SPECIAL POWER OF ATTORNEY ....................................................36
14.1. Attorney-in-Fact .................................................................36
14.2. Special Provisions ...............................................................37
ARTICLE 15. COVENANTS ....................................................................37
ARTICLE 16. CERTAIN PROVISIONS APPLICABLE TO PREFERRED UNITS .............................38
16.1. Redemption .......................................................................38
16.2. Limitation on Certain Asset Sales ................................................39
16.3. Change of Control ................................................................41
16.4. Subordination Agreement ..........................................................43
ARTICLE 17. MISCELLANEOUS ................................................................43
17.1. Headings .........................................................................43
17.2. Time of Essence ..................................................................43
17.3. Entire Agreement; Modification; Waiver ...........................................43
17.4. Amendment ........................................................................44
17.5. Governing Law ....................................................................44
17.6. Recovery of Litigation Costs .....................................................44
17.7. Severability .....................................................................44
17.8. Notices ..........................................................................45
17.9. Gender and Number ................................................................45
17.10. Additional Documents ............................................................45
17.11. Parties in Interest .............................................................45
17.12. Counterparts ....................................................................45
17.13. Statutory References ............................................................45
17.14. Certificate of Nonforeign Status ................................................45
17.15. Preferred Units Certificates ....................................................45
17.16. .................................................................................46
</TABLE>
(v)
<PAGE> 7
THIRD AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
MARTIN MEDIA, A California Limited Partnership
(formerly COLORADO RIVER MARKETS. A California Limited Partnership)
This Third Amended and Restated Limited Partnership Agreement is made and
entered into by and between MW Sign Corp., a California corporation, as the
General Partner, and the Limited Partners shown on Exhibit A, attached and
incorporated by this reference.
Background
A. Colorado River Markets, A California Limited Partnership, was
formed on December 19, 1984) with Martin & MacFarlane, Inc., a California
corporation, as General Partner, and was operated in accordance with a Limited
Partnership Agreement dated December 18, 1984, as amended until on or about
August 22, 1991.
B. On or about August 22, 1991, in accordance with the First Amended
and Restated Limited Partnership Agreement (adopted by unanimous written consent
of the Partners), Martin & MacFarlane, Inc., transferred its interest as
General Partner to MW Sign Corp., who was admitted as the General Partner, and
the name of the Partnership was changed from Colorado River Markets, A
California Limited Partnership, to Martin Media, A California Limited
Partnership.
C. Effective as of September 30, 1991, the Partners executed a
Second Amended and Restated Limited Partnership Agreement for the Partnership.
D. Effective as of May 1, 1996, the Partners executed a First
Amendment to Second Amended and Restated Limited Partnership Agreement for the
Partnership.
E. Effective as of January 1, 1997, the Partners executed a Second
Amendment to Second Amended and Restated Limited Partnership Agreement for the
Partnership.
The Partners desire to amend and restate the agreement of the parties.
ARTICLE 1. DEFINITIONS.
1.1 Act. The California Revised Limited Partnership Act.
1.2. Affiliate. Any Person directly or indirectly through one or more
intermediaries controlling, controlled by or under common control with another
Person. The term "control" (including the terms "controlled by" and "under
common control with") means the possession, direct or indirect, 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.
Notwithstanding the foregoing, no holder of Preferred Units, Warrants or Warrant
Units, as such, shall be deemed an Affiliate of the Partnership or the General
Partner.
<PAGE> 8
1.3. Affiliate Transaction. As defined in Section 15.1(b).
1.4. Agreement. This Third Amended and Restated Limited Partnership
Agreement, as amended from time to time in accordance with the provisions
hereof.
1.5. Asset Sale. The sale, transfer or other disposition (other than
to the Partnership or any of its wholly-owned Subsidiaries) in any single
transaction or series of related transactions of (a) any capital stock of or
other equity interest in any Subsidiary of the Partnership, (b) real property
interest in or/real property (other than real property or interest in real
property) or (c) all or substantially all of the assets (other than real
property or interest in real property) of any business, or part thereof, owned
by the Partnership or any Subsidiary thereof, or a division, line of business or
comparable business segment of the Partnership or any Subsidiary thereof. Any
transaction constituting a Change of Control shall not be deemed to be an Asset
Sale.
1.6. Asset Sale Proceeds. With respect to any Asset Sale, (i) cash
received by the Partnership or any Subsidiary from such Asset Sale, after (a)
provision for all income tax distributions or other taxes measured by or
resulting from such Asset Sale, (b) payment of all brokerage commissions,
underwriting and other fees and expenses related to such Asset Sale, (c)
provision for minority interests in any Subsidiary as a result of such Asset
Sale and (d) deduction of appropriate amounts to be provided by the
Partnership or a Subsidiary as a reserve, in accordance with generally accepted
accounting principles, against any liabilities associated with the assets sold
or disposed of in such Asset Sale and retained by the Partnership or a
Subsidiary after such Asset Sale, including without limitation, pension and
other postemployment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated
with assets sold or disposed of in such Asset Sale, and (ii) promissory notes
and other non-cash consideration received by the Partnership or any Subsidiary
from such Asset Sale or other disposition upon the liquidation or conversion of
such notes or non-cash consideration into cash.
1.7. Assignee. A Person who has acquired a beneficial interest in this
Partnership from a Partner but who is not a substituted Partner.
1.8. Available Asset Sale Proceeds. With respect to any Asset Sale,
the aggregate Asset Sale Proceeds from such Asset Sale that have not been
applied in accordance with clause (iii)(A) or (iii)(B) of Section 16.2 and which
have not been the basis for an Excess Proceeds Offer in accordance with clause
(iii)(C) of such Section 16.2.
1.9. Bankruptcy, Bankrupt. Any of the following (a) the filing of a
voluntary, petition under any federal or state law for the relief of debtors
including the filing of a voluntary petition under any Chapter of Title 11 of
the United States Code; (b) the filing of an involuntary proceeding under any
such law; (c) the making of a general assignment for the benefit of the
assignor's creditors; (d) the appointment of a receiver or trustee of a
substantial portion of a Person's assets; (e) the seizure by a sheriff, receiver
or trustee of a substantial portion of a Person's assets; provided that no
bankruptcy shall occur in the case of an event described in clause (b), (d) or
(e) above, until the proceeding, appointment or seizure has been pending or has
been in force for sixty (60) days.
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1.10. Bankrupt Limited Partner. As defined in Section 10.3.
1.11. Book Value. The amount carried on the books of the Partnership
for financial accounting purposes.
1.12. Business Day. A day that is not a Saturday, a Sunday or a day on
which banking institutions in the State of New York or in the State of
California are not required to be open.
1.13. Capital Account. As defined in Section 4.1.
1.14. Cash Available for Distribution. The excess of the Partnership's
positive cash flow over the Partnership's working capital needs. The
Partnership's positive cash flow shall mean the excess of cash receipts over
cash disbursements for any given period. The Partnership's working capital
needs shall be determined by the General Partner and shall include, but not be
limited to, reasonable reserves for current and future operating expenses, debt
service, contingencies and emergencies. The terms of the Partnership's
borrowings as negotiated by the General Partner may severely restrict Cash
Available for Distribution.
1.15. Capital Contribution. With respect to any Partner at any time,
the aggregate amount of cash and the Gross Asset Value of any property (other
than cash) contributed to the Partnership by such Partner as of such time.
1.16. Capital Transactions. Any of the following: (i) any sale,
exchange, taking by eminent domain, damage, destruction or other disposition of
all or any part of the assets of the Partnership, other than tangible personal
property disposed of in the ordinary course of business; or (ii) any financing
or refinancing of any Partnership indebtedness; provided however, that the
receipt by the Partnership of Capital Contributions shall not constitute
Capital Transactions.
1.17. Certificate of Limited Partnership. The certificate referred to
in Section 15621 of the Act and any amendments thereto.
1.18. Change of Control. 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 however effected, including, without limitation,
by way of merger or reorganization) of assets of the Partnership or Subsidiaries
thereof, which assets constitute all or substantially all of the assets of the
Partnership and its Subsidiaries, taken as a whole, to any Person or group of
related Persons for purposes of Section 13(d) of the Exchange Act (a "Group"),
together with any Affiliates thereof; (ii) the approval by the General Partner
or Partners of any plan or proposal for the liquidation or dissolution of the
Partnership or an event of dissolution as described in Section 13.1(c) occurs;
(iii) E. Thomas Martin and David B. Weyrich, individually or in the aggregate,
shall cease to beneficially own (for purposes of this definition, within the
meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, voting
capital stock of the Managing General Partner (as defined in the last sentence
of this definition) representing more than 50% of all such outstanding voting
common stock; (iv) any Person or Group (other than E. Thomas Martin and David B.
Weyrich) shall become the owner, directly or indirectly, beneficially or of
record, of Units representing more than a 50% interest in the profits, losses
and distributions of the
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<PAGE> 10
Partnership or 50% or more of the Units then outstanding; (v) the replacement of
a majority of the Board of Directors of the Managing General Partner over a
two-year period from the directors who constituted the Board of Directors of the
Managing General Partner at the beginning of such period, and such replacement
shall not have been approved by a vote of at least two-thirds of the Board of
Directors of the Managing General Partner then still in office who either were
members of such Board of Directors at the beginning of such period or whose
election as a member of such Board of Directors was previously so approved; or
(vi) the occurrence of any "Change of Control" as defined in the Credit
Agreement either as in effect on the date hereof or as defined in such Agreement
as the same may hereafter be amended. The Managing General Partner of the
Partnership means each general partner thereof that has sole power, directly or
indirectly, to take all of the actions that any and all general partners are
entitled or required to take under this Agreement, as in effect at the Time of
Purchase.
1.19. Change of Control Offer. As defined in Section 16.3.
1.20. Change of Control Payment Date. As defined in Section 16.3.
1.21. Change of Control Purchase Price. As defined in Section 16.3.
1.22. Code. The Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent federal revenue laws.
1.23. Credit Agreement. The Second Amended and Restated Credit
Agreement, dated as of July 31, 1997, among the Partnership, the General
Partner, the Lenders, the Administrative Agent and the Co-Agent (as such terms
are defined therein), as amended by Amendment No. 3 thereto, dated as of
December 23, 1997, as the same may be amended from time to time.
1.24. Dissolved; Dissolution. The termination of a trust or an estate
or the dissolution of a partnership, corporation or other legal entity as
determined by applicable state law.
1.25. Distribution. The transfer of money or property by the
Partnership to a Partner without consideration.
1.26. Exchange Act. The Securities Exchange Act of 1934, as amended.
1.27. General Partner. MW Sign Corp. or any Person succeeding it as
General Partner or any subsequently admitted General Partner.
1.28. Gross Asset Value means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market
value of such asset, as determined by the General Partner
and the contributing Partner.
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<PAGE> 11
(b) The Gross Asset Values of all Partnership assets immediately
prior to the occurrence of any event described in
subsections (i) through (iv) hereof shall be adjusted to
equal their respective gross fair market values, as
determined by the General Partner using such reasonable
method of valuation as it may adopt in its reasonable
discretion as of the following times:
(i) the acquisition of an interest in the Partnership by a
new or existing Partner in exchange for more than a
de minimis Capital Contribution, if the General
Partner reasonably determines that such adjustment is
necessary or appropriate to reflect the relative
economic interests of the Partners in the Partnership;
(ii) the distribution by the Partnership to a Partner of
more than a de minimis amount of Partnership Assets as
consideration for an interest in the Partnership, if
the General Partner reasonably determines that such
adjustment is necessary or appropriate to reflect the
relative economic interests of the Partners in the
Partnership;
(iii) the liquidation of the Partnership within the meaning
of Regulation Section 1.704-1(b)(2)(ii)(g); and
(iv) at such other times as the General Partner shall
reasonably determine necessary or advisable in order
to comply with Regulation Sections 1.704-1(b) and
1.704-2.
(c) The Gross Asset Value of any Partnership Asset distributed
to a Partner shall be the gross fair market value of such
asset on the date of distribution as reasonably determined
by the General Partner.
(d) The Gross Asset Values of Partnership Assets shall be
increased (or decreased) to reflect any adjustments to the
adjusted basis of such assets pursuant to Code Section
734(b) or Code Section 743(b), but only to the extent that
such adjustments are taken into account in determining
Capital Accounts pursuant to Regulation Section
1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset
Values shall not be adjusted pursuant to this subparagraph
(d) to the extent that the General Partner reasonably
determines that an adjustment pursuant to subparagraph (b)
is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment
pursuant to this subparagraph(d).
1.29. Gross Asset Value means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
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<PAGE> 12
1.30. Initial Warrants. As defined in the Purchase Agreement.
1.31. Kunz Subsequent Acquisition. As defined in the Credit Agreement
as in effect on the date hereof.
1.32. Limited Partner. Each of the Persons admitted to the Partnership
as a Limited Partner in accordance with this Agreement. For purposes of the
Transfer provisions contained in this Agreement, the Persons deemed Limited
Partners and spouses are shown on Exhibit A and/or B.
1.33. Martin & MacFarlane shall mean Martin & MacFarlane, Inc., a
California corporation.
1.34. Majority of the Limited Partners. Limited Partners holding more
than fifty percent (50%) of the Units held by all the Limited Partners. The
term "Majority of the Limited Partners" shall be used in lieu of the term
"majority-in-interest of the limited partners" as defined in Act Section
16611(u) for all purposes in connection with this Agreement.
1.35. Majority of Preferred Units. Holders of more than 85% of the
outstanding Preferred Units at the time of the termination: provided that
from and after the date on which CIBC Oppenheimer Corp. has sold (other than
to its Affiliates) more than 3.750 of the Preferred Units purchased by it on the
date hereof, such percentage shall be 50%.
1.36. Minimum Gain. The amount determined, at the end of a taxable year
of the Partnership, by computing, with respect to each Nonrecourse Liability and
each Partner-Funded Debt of the Partnership, the amount of net gains from
Capital Transactions (of whatever character), if any, that would be realized by
the Partnership if it disposed of (in a taxable transaction) the Partnership
property subject to such Nonrecourse Liability or Partner-Funded Debt in full
satisfaction thereof, and by then aggregating the amounts so computed. For the
purpose of determining the amount of such gain, (i) only that portion of the
Partnership's Gross Asset Value allocable, pursuant to the Treasury Regulations
under Section 704(b) of the Code, to such Nonrecourse Liability or
Partner-Funded Debt shall be taken into account, (ii) the Gross Asset Value of
Partnership property shall be computed after taking into account depreciation
for such year and (iii) the amount of the unpaid principal balance of each
Nonrecourse Liability shall be reduced by repayments of all or a portion of such
Nonrecourse Liability made during each year.
1.37. Net Income: Net Loss. "Net Income" or "Net Loss" for each taxable
year or other period shall be the taxable income or loss of the Partnership
determined in accordance with Code section 703(a) (for this purpose, all items
of income, gain, loss or deduction required to be separately stated pursuant to
Code section 703(a)(1) shall be included in taxable income or loss) using the
accrual method of accounting, including tax-exempt income and as adjusted as
provided in Treasury Regulations section 1.704-1(b)(2)(iv)(i), but excluding any
items that are specially allocated pursuant to Article 5. The amounts of the
items of Partnership income, gain, loss or deduction available to be
specifically allocated pursuant to Article 5 hereof shall be determined by
applying rules analogous to those set forth in this definition of Net Income or
Net Loss. Net
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<PAGE> 13
Income and Net Losses and items thereof shall be determined and allocated with
respect to each fiscal year of the Partnership as of the end of such fiscal
year.
1.39. Nonrecourse Liability. Has the meaning set forth in Section
1.704-2(b)(3) of the Treasury Regulations.
1.40. Notice of Proposed Sale. As defined in Section 10.5.
1.41. Partner. Any Person who is a limited Partner or a General Partner
in the Partnership.
1.42. Partner-Funded Debt. Any non-recourse indebtedness of the
Partnership which is loaned or guaranteed by any Partner or is treated as
"partner nonrecourse debt" under Section 1.704-2(b)(4) of Treasury Regulations.
1.43. Partnership. The Partnership formed by this Agreement.
1.44. Partnership Assets. All direct and indirect interests in real and
personal property owned by the Partnership from time to time, and shall include
both tangible and intangible property (including cash).
1.45. Person. An individual, partnership, limited liability company,
trust, estate, association, corporation or other entity, as well as a guardian,
trustee, executor, administrator, committee, trustee in bankruptcy, receiver,
assignee for the benefit of creditors, conservator or other Person acting in a
fiduciary capacity.
1.46. Preferred Limited Partnership Interests. Limited partnership
interests having the rights to distributions set forth in Section 5.12(b)(1) and
(2) hereof and Section 13.4(b) insofar as such Section refers to Section
5.12(b)(1) and (2) hereof.
1.47. Preferred Return. With respect to a holder of Preferred Units, an
amount sufficient to provide to such holder an annual rate of return, compounded
quarterly, on the excess (on a weighted average basis during each fiscal year of
the Partnership), if any, of (i) the aggregate Capital Contributions previously
made (or deemed to be made) by such holder in respect of such Units (increased
by all accrued but unpaid Preferred Returns from prior fiscal quarters), over
(ii) any distributions received by such holder pursuant to Section 5.12(b)(1)
(to the extent the Preferred Returns allocable to such distribution was
previously taken into account under (i) above) and Section 5.12(b)(2) equal to
(a) 14%, from December 23, 1997 until June 23, 1998; (b) 15%, from June 23, 1998
until September 23, 1998; and (c) 15% plus 50 basis points for each three-month
period in which any Preferred Units shall remain outstanding from and after
September 23, 1998; provided, however, that the Preferred Return shall not
exceed a rate of 20% per annum compounded quarterly.
1.48. Preferred Unit Certificates. As defined in Section 16.1.
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<PAGE> 14
1.49. Preferred Units Capital Account Amount. The aggregate amount,
at the time of determination thereof, of the Capital Accounts for all Preferred
Units, determined without giving effect to any Preferred Return previously
credited to such Capital Accounts; and, when used with reference to any
Preferred Unit, the Preferred Units Capital Account Amount allocable to such
Unit.
1.50. Purchase Agreement. The Purchase Agreement, dated as of
December 23, 1997, by and among the Partnership, the General Partner and the
Purchasers set forth on Schedule I thereto.
1.51. Quarterly Warrants. As defined in the Purchase Agreement.
1.52. Record Date. As defined in Section 11.1(a).
1.53. Redemption Amount. The aggregate amount, at the time of
determination thereof, of the Capital Accounts for all Preferred Units plus the
Preferred Return for all such Units (to the extent not previously credited to
such Capital Accounts) to the applicable Redemption Date or purchase date
hereunder; and, when used with reference to any Preferred Unit, the Redemption
Amount allocable to such Unit.
1.54. Redemption Date. With respect to any Preferred Units, the date
fixed for redemption of such Units pursuant to Section 16.1.
1.55. Redemption Notice. As defined in Section 16.1.
1.56. Regulatory Allocations. Has the meaning set forth in Section 5.6.
1.57. Selling Limited Partner. As defined in Section 10.5.
1.58. Subsidiary. With respect to any specified Person, any
corporation, partnership, joint venture, limited liability company, association
or other business entity, whether now existing or hereafter organized or
acquired, (i) in the case of a corporation, of which more than 50% of the total
voting power of the capital stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, officers or trustees
thereof is held by such first-named Person or any of its Subsidiaries; or (ii)
in the case of a partnership, joint venture, limited liability company,
association or other business entity, with respect to which such first-named
Person or any of its Subsidiaries has the power to direct or cause the direction
of the management and policies of such entity by contract or otherwise or if in
accordance with generally accepted accounting principles such entity is
consolidated with the first-named Person for financial statement purposes.
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<PAGE> 15
1.59. Temporary Cash Investments. (i) Investments in U.S. Government
Obligations maturing within 365 days of the date of purchase; (ii) investments
in certificates of deposit issued by a bank organized under the laws of the
United States of America or any state thereof or the District of Columbia, in
each case having capital, surplus and undivided profits totaling more than
$500,000,000 and rated at least A by Standard & Poor's Corporation and A-2 by
Moody's Investors Service Inc. maturing within 365 days of purchase; or (iii)
investments not exceeding 365 days in duration in money market funds that
invest substantially all of such funds' assets in investments described in the
preceding clauses (i) and (ii).
1.60. Time of Purchase. As defined in the Purchase Agreement.
1.61. Transfer. Sell, pledge, transfer, encumber, assign or otherwise
dispose of property.
1.62. Units the number of Units shall not exceed 10,000. Preferred
Units shall not constitute Units. The number of Units held by each Partner in
the Partnership are set forth in Exhibit A, attached hereto and made a part
hereof. Subsequent to the admission of additional Limited Partners acquiring
Units, the Transfer of Units or the redemption of Units, the General Partner is
authorized to revise Exhibit A to reflect the Units of each Partner after
giving effect to such transaction. The General Partner shall provide a copy of
Exhibit A, as revised, to each Limited Partner.
1.63. U.S. Government Obligations. (a) Securities that are direct
obligations of the United States of America for the payment of which its full
faith and credit are pledged or (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America, the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in either case,
are not callable or redeemable at the option of the issuer thereof.
1.64. Warrants. As defined in the Purchase Agreement.
1.65 Warrant Agreement. The Warrant Agreement, dated as of December
23, 1997, by and among the Partnership, the Warrant Agent (as defined therein)
and MW Sign Corp.
1.66. Warrant Units. As defined in the Warrant Agreement.
ARTICLE 2. ORGANIZATION.
2.1. Formation. The Partnership was formed on December 19, 1984, by
filing a Certificate of Limited Partnership in the office of the California
Secretary of State in accordance with Section 15621 of the Act.
2.2. Name. The name of the Partnership is Martin Media, A California
Limited Partnership.
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<PAGE> 16
2.3. Principal Office. The principal office of the Partnership is
located at 1245 Vine Street, Paso Robles, California 93446, and may be changed
to such place as the General Partner shall determine.
2.4. Agent for Service of Process. The name and address of the agent
for service of process shall be determined by the General Partner.
2.5. Term of the Partnership. The Partnership commenced as of the
date of filing of the Certificate of Limited Partnership in the office of the
California Secretary of State on December 19, 1984. The Partnership shall
continue until December 31, 2024, or until Dissolution of the Partnership as
otherwise provided in this Agreement.
2.6. Purposes. The purposes of the Partnership are to purchase,
construct, manage, operate and hold for investment and sell outdoor advertising
structures, and invest in and hold interests in joint ventures, limited
liability companies, corporations or similar entities, and transfer assets into
such Subsidiary entities, and do all things reasonably incident thereto,
including but not limited to borrowing money for Partnership purposes and
securing such borrowing at any time.
ARTICLE 3. CAPITAL CONTRIBUTIONS AND FINANCING.
3.1. Intentionally left blank.
3.2. Units Upon Execution of Agreement. Upon execution of this
Agreement, the number of Units held by the Partners and the number of Preferred
Units held by certain Limited Partners shall be as set forth on Exhibits A and B
hereto, respectively.
3.3. Loans by a Partner. A Partner may make a loan to the Partnership
or may advance money on the Partnership's behalf only with the prior written
consent of the General Partner. Any loan or advance shall not increase the
Capital Account of the Partner or entitle the Partner to any greater share of
Partnership Distributions or subject the Partner to any greater share of
Partnership Net Income or Net Loss. The amount of the loan or advance shall:
(a) be a debt owed by the Partnership; (b) be evidenced by appropriate loan
documentation; and (c) bear interest at a fair market rate.
3.4. Withdrawal of Capital. No partner shall have the right or power
to withdraw capital from the Partnership or to reduce the Partner's Capital
Account except as provided in this Agreement. No partner shall receive interest
on Capital Contributions.
3.5. Redemption. Subject to the provisions of Section 15.1: The
General Partner is authorized without the consent of the Limited Partners to
cause the Partnership to redeem such interest of any of the Limited Partners as
the General Partner deems appropriate, from time to time, on such terms as the
General Partner deems it in the best interest of the Partnership to offer to any
Limited Partner, provided that such Limited Partner covenants to such terms. If
the General Partner causes the Partnership to redeem an interest in the
Partnership from a Person who is an Affiliate of the General Partner, the
General Partner shall be authorized to cause the Partnership to redeem such
interest on terms that the General Partner believes in good faith are not more
than what a Limited Partner who is not an Affiliate of the General Partner would
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receive. The General Partner may require the Partnership to redeem such
Affiliate's interest notwithstanding that the General Partner is aware that any
unaffiliated Limited Partner is desiring for such unaffiliated Limited Partner
to have its interest redeemed. The Limited Partners intend that the General
Partner shall have the absolute right to select what Limited Partner's interest
or Limited Partners' interests shall be redeemed. This selection right may be
made without regard to whether such Person is affiliated with the General
Partner. Upon redemption of Units held by a Limited Partner, the General Partner
shall transfer to the Partnership for no consideration a number of Units held by
the General Partner such that the quotient obtained by dividing the number of
Units held by the General Partner by the aggregate number of Units held by all
Partners, in which case immediately after such redemption, equals the quotient
obtained by dividing the number of Units held by the General Partner by the
aggregate number of Units held by all Partners, in each case immediately before
such redemption.
3.6. Loans from the Partnership. Subject to the provisions of Section
15.1, in any subsequent offerings of limited Partnership interests, the General
Partner in its sole discretion may cause the Partnership to make a loan to
Persons desiring to purchase limited Partnership interests. The Limited Partners
acknowledge that the General Partner has caused the Partnership to assume a loan
from Nevada Outdoor Systems, Inc. ("NOS") to David B. Weyrich in the amount of
ONE HUNDRED THOUSAND DOLLARS ($100,000) in connection with the acquisition of
certain assets and liabilities of NOS, and that such loan will be repaid on or
before January 10, 1998.
3.7. Additional Capital Contributions and Admission of New Partners.
a) Subject to Section 15.1: The General Partner shall have the
right to admit one or more additional Limited Partners to the Partnership or
approve admission or substitution of a member in any limited liability company
or limited partner in any other limited partnership in which the Partnership has
an interest on terms and conditions as the General Partner deems to be in the
best interests of the Partnership. It is contemplated that the Partnership may
acquire additional outdoor advertising structures or entities that engage in
outdoor advertising businesses through the exchange of limited partnership
interests for such assets. In addition, the General Partner may admit one or
more additional Limited Partners to the Partnership for cash or property
contributions to the capital of the Partnership on such terms as the General
Partner, in its discretion, determines. Upon the admission of a Limited Partner,
the Partnership shall issue to the General Partner for no consideration a number
of Units such that the quotient obtained by dividing the number of Units held by
the General Partner by the aggregate number of Units held by all Partners, in
each case immediately before such admission, equals the quotient obtained by
dividing the number of Units held by the General Partner by the aggregate number
of Units held by all Partners, in each case immediately after such admission.
b) Notwithstanding the foregoing, the Partnership shall not
issue any other interests in the Partnership on a parity or senior basis with
respect to distributions (or otherwise) to be made on the Preferred Units
pursuant to this Agreement "without the consent of holders of at least 85% of
the Preferred Units then outstanding.
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ARTICLE 4. ACCOUNTING.
4.1. Capital Accounts.
a) Maintenance of Capital Accounts. A Capital Account shall be
established and maintained for each Partner. Each Partner's Capital Account
shall be maintained in a manner consistent with Treasury Regulations section
1.704-1(b)(2)(iv).
b) Calculation of Capital Accounts. Each Partner's Capital
Account shall be:
(1) Increased by the amount of money contributed by the
Partner to the Partnership;
(2) Increased by the fair market value of property
contributed by the Partner to the Partnership (net of liabilities securing such
contributed property, that the Partnership is considered to assume or take
subject to under section 752 of the Code);
(3) Increased by allocations to the Partner of Partnership
income and gain or items thereof including income and gain except from tax
(except to the extent such income or gain has previously been reflected in the
Partner's Capital Account by adjustments thereto);
(4) Decreased by the amount of money distributed to the
Partner by the Partnership;
(5) Decreased by the fair market value of property
distributed to the Partner (net of liabilities securing such distributed
property that such Partner is considered to assume or take subject to under
section 752 of the Code);
(6) Decreased by allocations of Partnership loss, deduction
or items thereof except to the extent such loss or deduction has previously been
reflected in the Partner's Capital Account by adjustments thereto and
expenditures described in section 705(a)(2)(B) of the Code, and
(7) Otherwise adjusted in accordance with Treasury
Regulations section 1.704-1(b)(2)(iv).
c) Adjustment Upon Distribution of Property. If Partnership
property is distributed to a Partner, then, before the Capital Account of such
Partner is adjusted as required by this Section 4.1, the Capital Accounts of the
Partners shall be adjusted to reflect the manner in which the unrealized income,
gain, loss and deduction inherent in such property (that has not been reflected
in such Capital Accounts previously) would be allocated among the Partners if
there were a taxable disposition of such property for its fair market value on
the date of Distribution.
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d) Holders of Preferred Units. In addition to the adjustments set
forth in this Section 4.1(b), the Capital Account for each holder of Preferred
Units shall be adjusted as provided in Section 5.1(a).
4.2. Fiscal Year; Tax Matters Partner. The Partnership shall
continue to use a fiscal year ending on December 31 for all purposes. The
General Partner, MW Sign Corp., shall be the Partnership's tax matters partner
for purposes of Code section 6231(a)(7).
4.3. Books and Records to be Maintained. The Partnership shall keep
at its principal office full and accurate books and records, including the
following:
a) Partners. A current list of the full name and last known
business or residence address of each Partner set forth in alphabetical order,
together with the Capital Contribution and share in Net Income and Net Loss of
each Partner;
b) Certificate of Limited Partnership. A copy of the Certificate
of Limited Partnership and all certificates of amendment thereto, together with
executed copies of any powers of attorney pursuant to which any Certificate
of Limited Partnership has been executed;
c) Tax Returns. Copies of the Partnership's federal, state and
local income tax or information returns and reports, if any, for the six (6)
most recent fiscal years;
d) Agreement. Copies of the original Partnership Agreement and
all amendments thereto, together with executed copies of any powers of attorney
pursuant to which any amendment has been executed;
e) Financial Statements. Financial statements of the Partnership
for the six (6) most recent fiscal years; and
f) Books and Records. The Partnership's books and records for
the three (3) most recent fiscal years.
4.4. Information to be Provided to the Limited Partners.
a) Information Maintained by Partnership. At the expense of the
Partnership and upon demand by a Limited Partner or a Limited Partner's agent or
attorney, the General Partner shall promptly furnish a copy of the information
required to be maintained by Section 4.3.
b) Limited Partner Inspection Rights. A Limited Partner or the
Limited Partner's agent or attorney has the right, upon reasonable request, to
inspect and copy during normal business hours any of the Partnership records
required to be maintained by Section 4.3.
c) Tax Information. The General Partner shall send to each of
the Partners, within ninety (90) days after the end of each taxable year, such
information as is necessary to complete the Partner's federal and state income
tax or information returns and a copy of the Partnership's federal, state and
local tax or information returns for the year.
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d) Annual Report. The General Partner shall cause an annual
report to be sent to each of the Partners within one hundred twenty (120) days
after the end of each fiscal year. The report will include the financial
statements of the Partnership. If the financial statements are compiled,
reviewed or audited, they will be accompanied by the report of any independent
certified public accounting firm that compiled, reviewed or audited them.
4.5. Interim Closing of the Books. There shall be an interim closing
of the books of account of the Partnership at such time as the Partnership's
taxable year ends pursuant to the Code and at such other times as the General
Partner shall determine is required by generally accepted accounting practices
or is appropriate under the circumstances.
4.6. Tax Withholding. The Partnership shall at all times be entitled
to make payments with respect to any Partner in amounts required to discharge
any legal obligation of the Partnership pursuant to any provision of the Code,
the Treasury Regulations or any other tax provision or any provision enacted in
the future imposing a similar obligation of the Partnership to withhold or make
payments to any governmental authority with respect to any U.S. federal, state
and local or foreign tax liability of such Partner arising as a result of such
Partner's Units.
ARTICLE 5. NET INCOME AND NET LOSS; DISTRIBUTIONS.
5.1. Allocation of Income and Loss.
a) Preferred Return. The Capital Account of each holder
of Preferred Units, as such, shall be credited with gross income for each
fiscal year in an amount equal to the Preferred Return for the fiscal year,
whether or not actually paid as a distribution on such Preferred Units, it being
understood that such gross income will be treated as a "guaranteed payment"
within the meaning of Section 707(c) of the Code.
b) Allocation of Net Income or Net Loss.
(1) Net Loss for any fiscal year shall be allocated among the
Partners as follows:
(a) First, to all Partners (other than to holders of
Preferred Units, as such) according to their respective Units, with
consideration given for the varying Units of such Partners during such year;
(b) Second, to holders of Preferred Units, as such, to
the extent of their positive Capital Account balances in respect of their
respective Preferred Units;
(c) Third, to the General Partner.
(2) Net Income for any fiscal year shall be allocated among
the Partners as follows:
(a) First, to the General Partner to the extent of Net
Loss allocated to the General Partner under Section 5.1(b)(1)(c);
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(b) Second, to holders of Preferred Units, as such, to the
extent of and in proportion to the amount by which the Net Loss allocated to
each such Partner for the current and all prior fiscal years of the Partnership
under Section 5.1(b)(1)(b) exceeds the Net Income allocated to each such
Partner for the current and all of the prior fiscal years of the Partnership
under this Section 5.1(b)(2)(b);
(c) Third, to the Partners, to the extent of, and in
proportion to, the amount by which the Net Loss allocated to each such Partner
for the current and all prior fiscal years of the Partnership under Section
5.1(b)(1)(a) exceeds the Net Income allocated to each such Partner for the
current and all prior fiscal years of the Partnership pursuant this Section
5.1(b)(2)(c);
(d) Fourth, to the General Partner, until the General
Partner is allocated a cumulative amount (from December 19,1984) of NINE HUNDRED
SIXTY THOUSAND DOLLARS ($960,000) pursuant to this Section 5.1(b)(2)(d); and
(e) Then, to the Partners, according to their Units with
consideration for the varying Units of the Partners during such year.
5.2. Built-In Gain. In determining each Partner's distributive share
of items of income, gain, loss or deduction realized by the Partnership with
respect to all property and assets whose book value is greater than their
adjusted basis or federal income tax purposes (including any partnership or
tenancy in common interest contributed to the Partnership) shall be allocated
among the Partners as provided in Section 704(c) of the Code and the Treasury
Regulations thereunder.
5.3. Minimum Gain Chargeback. Notwithstanding the allocations
provided for in Sections 5.1 and 5.2, if there is a net decrease in Minimum Gain
during a taxable year of the Partnership (including any Minimum Gain
attributable to Partner-Funded Debt), each Partner at the end of such year shall
be allocated, before any other allocations of profits, losses, net gains from
Capital Transactions and net losses from Capital Transactions are made under
this Agreement for such year, items of income and gain for such year (and, if
necessary, subsequent years) in the amount and in the proportions described in
Section 1.704-2(f) of the Treasury Regulations.
5.4. Qualified Income Offset. Notwithstanding the allocations
provided for in Sections 5.1 and 5.2, no allocation of an item of loss or
deduction shall be made to a Partner to the extent such allocation would cause
or increase a deficit Capital Account balance in such Partner's Capital Account
as of the end of the taxable year to which such allocation relates, after taking
into account any adjustment, allocation or distribution described in Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Treasury Regulations, and if any
such adjustment, allocation or distribution unexpectedly occurs, the Partners
shall be allocated (after taking into account any allocations made pursuant to
this Section 5.4) items of income and gain in an amount and manner to eliminate
any Capital Account deficit attributable to such adjustment, allocation or
distribution as quickly as possible. For purposes of this Section 5.4, there
shall be excluded from a Partner's deficit Capital Account balance at the end of
a taxable year of the Partnership (x) such Partner's
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share, determined in accordance with Section 704(b) of the Code and Section
1.704-2(g) of the Treasury Regulations, of Minimum Gain (provided that in the
case of Minimum Gain attributable to Partner-Funded Debt, such Minimum Gain
shall be allocated only to the Partner or Partners to which such debt is
attributable pursuant to Section 1.704-2(i) of the Treasury Regulations), (y)
the amount of any loans (other than Partner-Funded Debt) for which such Partner
is personally liable (whether as a result of a guarantee or otherwise), and (z)
the amount such Partner is obligated to restore to the Partnership under Section
1.704-1(b)(2)(ii) of the Treasury Regulations.
5.5. Partner-Funded Debt. Notwithstanding the allocations provided
for in Sections 5.1 and 5.2, if there is a net increase in Minimum Gain during a
taxable year of the Partnership that is attributable to Partner-Funded Debt
then, first depreciation, to the extent the increase in such Minimum Gain is
allocable to depreciable property, and then a proportionate part of other
deductions and expenditures described in Section 705(a)(2)(B) of the Code, shall
be allocated to the lending or guaranteeing Partner (and to joint lenders or
guarantors in proportion to their relative obligations), provided that the total
amount of deductions so allocated for any year shall not exceed the increase in
Minimum Gain attributable to such Partner-Funded Debt in such year.
5.6. Curative Allocations. The allocations set forth in Sections 5.3,
5.4 and 5.5 (the "Regulatory Allocations") are intended to comply with certain
requirements of Sections 1.704-l(b) of the Treasury Regulations.
Notwithstanding any provision of this Article 5 other than the Regulatory
Allocations, the Regulatory Allocations shall be taken into account in
allocating other net income, net losses, net gains and net losses from Capital
Transactions, and net gains and net losses from Capital Transactions resulting
in a dissolution of the Partnership between the Partners so that, to the extent
possible, the net amount of such other allocations and the Regulatory
Allocations to each Partner shall be equal to the net amount that would have
been allocated to such Partner if the Regulatory Allocations had not been made.
5.7. Excess Non-Recourse Liability Safe Harbor. Pursuant to Section
1.752-3(a)(3) of the Treasury Regulations, solely for purposes of determining
each Partner's proportionate share of the "excess non-recourse liabilities" of
the Partnership (as defined in Section 1.752-3(a)(3) of the Treasury
Regulations), the Partners' respective interests in Partnership profits shall be
in accordance with their interests in the Partnership.
5.8. Treatment of Interest to Partners. For purposes of this Article
5, interest paid by the Partnership to any Partner related to a loan made by the
Partner to the Partnership shall be treated as an expense of the Partnership.
5.9. Transfer During Taxable Year. Subject to section 706 of the Code,
in the event of a Transfer of a Partner's interest or any part thereof at any
time other than the close of the Partnership's fiscal year, the allowable shares
of the various items of the Partnership's income, gain, loss, deduction and
credit (and other items separately reported) as computed for federal and state
income tax purposes, shall be allocated between the transferor and the
transferee by closing the Partnership's books with respect to such Transfer as
of the close of the calendar month in which such Transfer occurs (unless a
different method of allocation is approved, in writing, by the transferor and
the transferee and the General Partner).
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5.10. Depreciation Recapture. Each Partner's allocable share of
Partnership Net Income which is characterized as ordinary income pursuant to
section 1245 or 1250 of the Code or Section 18211 or 18212 of the California
Revenue and Taxation Code, as amended (the "depreciation recapture"), with
respect to the disposition of an item of Partnership property shall be borne,
as to depreciation recapture arising from depreciation accrued prior to the
date of this Agreement, by the Limited Partners in proportion to their
respective Units prior to the date of this Agreement, and as to depreciation
recapture arising from depreciation accrued from and after the date of this
Agreement, by the Limited Partners and the General Partner in the same ratio as
such Limited Partners' or General Partner's allocable share of depreciation
from and after the date of this Agreement bears to all the Limited Partners'
and the General Partner's allocable shares of depreciation from and after the
date of this Agreement. In no event shall depreciation recapture be allocable
to holders of Preferred Units, as such.
5.11. Economic Allocations. It is the intent of the Partners that the
good faith allocations of income or loss made by the General Partner under this
Agreement reflect the economic expectations of the Partners. If any allocation
of any item of Net Income and Net Loss under this Agreement is adjusted pursuant
to an income tax audit by the Internal Revenue Service or California Franchise
Tax Board or by court determination, the Partners agree that all Distributions,
including liquidating Distributions, shall continue to be made under the method
used by the General Partner in good faith to allocate income and loss and to
make Distributions under this Agreement prior to a court's, the Internal Revenue
Service's, Franchise Tax Board's or any other state's equivalent agency's
adjustment of the allocations of any items of the Partnership's income or loss.
5.12. Distributions.
a) Generally. Except as otherwise provided in Articles 13, 15
and 16 hereof, the General Partner may distribute Cash Available for
Distribution during the fiscal year to the Partners pursuant to Section
5.12(b).
b) Interim Distributions. Distributions to be made to the
Partners prior to, and otherwise not in conjunction with, the final liquidation
of the partnership shall be distributed as follows:
(1) First, to the holders of Preferred Units, as such, in
proportion to the number of Preferred Units held thereby on the date of
distribution, until the cumulative amount previously and currently distributed
to the holders of Preferred Units, as such, under this Section 5.12(b)(1)
equals the Preferred Return for the then-current fiscal year and each prior
fiscal year;
(2) Second, to the holders of Preferred Units, as such, in
proportion to the number of Units held thereby on the date of distribution, in
an amount equal to $25,000,000, provided that no such distribution shall be made
on or before September 23, 1998;
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(3) Third, to the General Partner until the General
Partner is distributed a cumulative amount (from December 19, 1984) of NINE
HUNDRED SIXTY THOUSAND DOLLARS ($960,000); and
(4) Fourth, in accordance with the number of Units
held by each Partner on the date that the General Partner declares that a
Distribution will be made.
c) Subject to Section 5.13, if the Partnership has Net
Income for federal income tax purposes for any fiscal year, then the Partnership
shall first distribute at least an amount of cash ("Tax Distribution"), first to
holders of Preferred Units, as such, in proportion to the number of Preferred
Units held thereby on the date of distribution, and then (if amounts are still
available) to all other Partners, which, when combined with all other
distributions to such Partners in the current and all preceding fiscal years,
equals the product of the highest combined federal, state and local marginal
income tax rate applicable to any Partner and the excess, if any, of (i) the
aggregate net taxable income allocated to such Partner in the current and all
preceding fiscal years over (ii) the aggregate net taxable loss allocated to
such Partner in all preceding taxable years. Any amounts distributed to a
Partner pursuant to this Section 5.12(c) shall reduce, on a dollar for dollar
basis, until fully recovered any distribution to which a Partner is otherwise
entitled under this Agreement.
5.13. Distributions Limitation. If after allocation of Net Income
and Net Loss and all allocations of income or deduction not included in Net
Income of Net Loss, a Distribution to a Limited Partner would cause such Limited
Partner's Capital Account to be negative in excess of the Limited Partner's
obligation to restore a deficit and such Partner's share of minimum gain, no
Distribution shall be made to such Limited Partner to the extent that the
Distribution would cause such an excess Capital Account deficit to arise for
such Limited Partner. The Distribution shall be made in such succeeding fiscal
year when a Distribution to such Limited Partner will not violate the
requirements of the preceding sentence. The provisions of this Section 5.13
shall not apply to the holders of Preferred Units, as such.
5.14. Cash Distributions in respect of Preferred Units. Anything
in this Agreement to the contrary notwithstanding, without the written consent
of the holders of Preferred Units receiving the same, the Partnership shall not
distribute any property to such holders other than cash in respect of such
Units.
ARTICLE 6. RIGHTS AND DUTIES OF THE GENERAL PARTNER.
6.1. General Partner Compensation; Expenses.
a) No Compensation for Management. The General Partner
shall not be entitled to receive any compensation from the Partnership except as
expressly provided by this Agreement.
b) Administrative Fee. The Partnership shall pay to
Martin & MacFarlane, Inc., (or the General Partner if Martin & MacFarlane, Inc.
ceases to serve), a monthly administrative fee for management of the
Partnership's business in an amount equal to four
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percent (4%) of the gross revenue earned on the Partnership's sign structures in
the preceding calendar month.
c) Commission. The Partnership shall pay the General
Partner a commission for services rendered in connection with the purchase or
contribution (in case of an acquisition involving in whole or in part of the
issuance of Units in exchange for sign structures), sale, refinancing or
exchange of any of the Partnership's sign structures in an amount equal to
either four percent (4%) of the fair market value of the sign structures
received in a purchase, exchange or contribution, four percent (4%) of the gross
sales price of such structures, or four percent (4%) of the principal balance of
any refinancing indebtedness, whichever is applicable. If there is a sale,
purchase, exchange or refinancing of any sign structures in any entity in which
the Partnership has an interest, or if there is a contribution of sign
structures to an entity in which the Partnership has an interest (other than a
contribution by the Partnership of its sign structures), the commission shall be
prorated based upon (i) the gross sales price of such structure, (ii) the
principal balance of any refinancing indebtedness, or (iii) the fair market
value of the purchased, exchanged or contributed sign structures, times the
Partnership's percentage interest in the entity as determined immediately before
the transaction.
d) Reimbursable Expenses. The Partnership shall reimburse
the General Partner for direct expenses incurred in organizing, capitalizing and
developing the Partnership, or in connection with obtaining additional capital
or facilities for the Partnership, including legal filing, printing, accounting,
acquisition and leasing expenses. In addition, the General Partner shall be
reimbursed by the Partnership for any expenses of the Partnership, including but
not limited to those specified in Section 6.2, that are advanced by the General
Partner.
e) Payment of Deferred Fee. On January 2, 1998, the
Partnership shall pay the General Partner THREE MILLION FOUR HUNDRED THOUSAND
DOLLARS ($3,400,000), which amount represents a deferred fee. The Partnership
shall treat such amount as a "guaranteed payment" within the meaning of Section
707(c) of the Code.
6.2. Partnership Expenses. The Partnership shall pay all of its
expenses, which may include, but are not limited to:
a) All costs of borrowed money, taxes and assessments on
the Partnership assets and other taxes applicable to the Partnership assets;
b) Legal, accounting, consulting and brokerage fees;
c) Expenses and taxes incurred in the distribution,
Transfer and recording of documents evidencing ownership of an interest in the
Partnership or in the Partnership assets; and
d) The cost of any audit of the Partnership's financial
statements performed by an independent certified public accounting firm.
6.3. Time Devoted to the Partnership. The General Partner is not
obligated to devote full time to the affairs of the Partnership. The General
Partner may become involved in other businesses, occupations and partnerships.
The General Partner shall devote such time to the
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Partnership as may be reasonably necessary to manage the Partnership business
and perform the duties of a General Partner.
6.4. Partnership Governance. The Limited Partners acknowledge
that the General Partner shall have full authority over the governance and
management of the Partnership, except as otherwise provided by this Agreement.
Notwithstanding anything in this Agreement to the contrary but subject to
Section 17.4, the General Partner shall have the right to amend this Agreement
without the consent of any of the Limited Partners: (a) to reflect the addition
or substitution of Limited Partners or the reduction of the Capital Accounts
upon the return of capital to the Partners; and (b) to delete or add any
provision from or to this Agreement required to be so deleted or added by a
state regulatory agency, the deletion or addition of which provision is deemed
by such regulatory agency to be for the benefit or protection of the Limited
Partners. The General Partner shall also have full charge of the day-to-day
management, conduct and operation of the Partnership's operations.
Notwithstanding anything in this Agreement to the contrary other than Section
15.1, the General Partner shall have the right, responsibility and authority, on
behalf of the Partnership and without the consent of the Limited Partners, to:
a) Lease, hire or contract with personnel needed to
advance the purposes of the Partnership;
b) Employ, from time to time, at the expense of the
Partnership, such accountants, attorneys or other professionals as it may
determine to be necessary or appropriate;
c) Do all acts required of the Partnership under the
terms of any agreement of which the Partnership is a party;
d) Borrow money on the Partnership's behalf, encumber
Partnership assets and prepay, increase, modify, refinance or extend
Partnership indebtedness;
e) Execute, acknowledge and deliver any and all
instruments to carry out the General Partner's duties;
f) Pay all syndication, organization and reorganization
expenses incurred by the Partnership;
g) Pay all expenses incurred in the operation of the
Partnership;
h) Maintain all necessary Partnership books and records;
i) Assume the overall duties imposed upon a General
Partner by the Act;
j) Invest in joint ventures, partnerships, corporations,
limited liability companies or other entities that purchase, construct, manage,
operate and hold for investment or for sale outdoor advertising structures;
k) Acquire by any legal means other outdoor advertising
businesses, including, subject to Section 15.1, any business in which the
General Partner or owners of the
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General Partner or any Affiliate thereof has any interest, on such terms as the
General Partner determines in good faith is acceptable to the Partnership. To
the extent California Corporations Code Sections 15678.1 through 15679-14
applies to the acquisition, the General Partner shall obtain the Limited
Partners' approval as provided in Section 8.1(d);
l) Subject to Section 15.1 to redeem Limited Partner
interests; and
m) Except as otherwise provided in this Agreement, to
admit additional or substituted Limited Partners.
6.5. Competing Interests. Each Partner may engage in or possess
an interest in other business ventures of every nature and description
independently or with others, regardless of whether such a venture competes with
the Partnership. Neither the Partnership nor any Partner shall have any right in
or to such other ventures or to the income or the profits derived therefrom.
6.6. Restriction on Powers of the General Partner. The General
Partner may not, without the written consent or ratification of all other
Partners, do any act in contravention of this Agreement or which would make it
impossible to carry out the ordinary business of the Partnership, confess a
judgment against the Partnership or possess, pledge or hypothecate any
Partnership asset for other than a Partnership purpose.
6.7. Limitation on General Partner Liability. Neither a General
Partner nor any of that General Partner's directors, officers or agents shall be
liable to the Partnership or the Limited Partners for any act or omission based
upon errors of judgment or other fault in connection with the business or
affairs of the Partnership, so long as: (a) the Person against whom liability is
asserted acted in good faith and in a manner reasonably believed by such Person
to be within the scope of the Person's authority under this Agreement and in the
best interests of the Partnership; and (b) such action or failure to act does
not constitute willful misconduct. The General Partner shall not be personally
liable for the return of Capital Contributions made by any Partner. The General
Partner is specifically permitted to satisfy any Partnership obligations as to
which the General Partner is personally liable before satisfying Partnership
obligations as to which the General Partner has no such personal liability.
6.8. Indemnification of General Partner. The Partnership agrees
to indemnify the General Partner and its directors, officers and agents to the
fullest extent permitted by law and to defend, save and hold them harmless from
and in respect of all fees, costs, losses, damages and expenses (including
attorneys' fees) incurred in connection with or resulting from any claim, action
or demand arising out of or in any way relating to the Partnership or its
assets, including amounts paid in settlement or compromise (if recommended by
the Partnership's counsel) of any such claim, action or demand and all fees,
costs and expenses (including attorneys' fees) in connection therewith. This
indemnification shall apply only if the Person against whom a claim, action or
demand is asserted has acted in good faith on behalf of the Partnership and in a
manner reasonably believed by such Person to be within the scope of its
authority under this Agreement and in the best interests of the Partnership, and
such action or failure to act does not constitute willful misconduct. The
termination of any action, suit or proceeding by judgment, order,
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settlement or upon a plea of nolo contendere or its equivalent, shall not of
itself create a presumption that any Person's misconduct was willful.
6.9. Certain Transactions; General Partner Agreements. The
Limited Partners hereby acknowledge that the General Partner expects to enter
into the following agreements on behalf of the Partnership, and the Limited
Partners hereby authorize the Partnership to execute, deliver and perform these
agreements in the form negotiated and agreed to by the General Partner:
a) Agreement for Purchase and Sale of Assets, dated as of
December 15, 1997, between the Partnership and Connell Co. (doing business as
Connell Outdoor Advertising); and
b) Agreement for Purchase and Sale of Assets, dated as of
November 17, 1997, by and among the Partnership, Vegas Outdoor Advertising, Inc.
and RS Enterprises, Inc.
6.10. Warrants. The Limited Partners hereby approve the issuance
by the Partnership of the Warrants and the issuance of Units pursuant thereto as
set forth in this Section 6.10. Initial Warrants shall be issuable upon the
270th day following the Time of Purchase (provided that any Preferred Units
shall then be outstanding) for such number of Units as shall equal 1.0% of the
sum of (i) the aggregate Units outstanding on the date of issuance of the
Initial Warrants (ii) the aggregate number of Units outstanding on December 23,
1997 that were acquired by the Partnership or its Subsidiaries on or before the
date of issuance of such Warrant and (iii) all Units issuable upon the exercise
of all options, warrants (not including Quarterly Warrants thereafter issuable
pursuant to the Purchase Agreement), rights or other securities convertible into
or exchangeable for Units outstanding on the date of issuance of the Initial
Warrants. Quarterly Warrants shall be issuable upon the last day of each
three-month period following the date which is 270 days after the Time of
Purchase (each such last day, a "Quarterly Warrant Issuance Date") (provided
that any Preferred Units shall remain outstanding on such Quarterly Warrant
Issuance Date) for such number of Units as shall equal 0.25% of the sum of (i)
the aggregate Units outstanding on the date of issuance of the Quarterly
Warrants (ii) aggregate number of Units outstanding on December 23, 1997 that
were acquired by the Partnership or its Subsidiaries on or before the date of
issuance of such Quarterly Warrant and (iii) all Units issuable upon the
exercise of all options, warrants (including pursuant to the Warrants then
outstanding, but not including Quarterly Warrants thereafter issuable pursuant
to the Purchase Agreement), rights or other securities convertible into or
exchangeable for Units outstanding on the date of issuance of the Quarterly
Warrants (after giving effect to all anti-dilution adjustments set forth in the
Warrant Agreement reflecting the issuance of such Quarterly Warrants). The
issuance of Units upon exercise of the Warrants, and the admission as Limited
Partners of the Persons to whom such Units are issued, shall not require any
approval of any of the Partners.
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ARTICLE 7. RIGHTS AND DUTIES OF LIMITED PARTNERS.
7.1. Basic Rights. The rights and duties of the Partners in relation to the
Partnership shall be determined by the following rules:
a) Limited Liability. No Limited Partner shall be required to make any
additional Capital Contribution to the Partnership other than as provided in
Section 13.4(c), or return any Distribution other than as provided in Section
13.4(d).
b) Compromise. The obligation of a Partner to make a Capital
Contribution or return money or property paid or distributed in violation of
this Agreement may be compromised only by the written consent of all the
Partners, except as provided in Section 15666 of the Act.
c) Distributions. Except as provided in Section 12 and Section 13 of
the Warrant Agreement, no Limited Partner shall have the right to receive
property other than cash upon Dissolution or any sale of Partnership assets;
however, the General Partner may distribute Partnership assets in kind as
provided in Section 13.4(e).
7.2. Prohibition Against Involvement In Management. A Person acting in the
capacity of a Limited Partner shall not participate in the control or management
of the Partnership.
7.3. Acts Not Constituting Management. A Limited Partner does not
participate in the control or management of the Partnership solely by: (a)
exercising a right of inspection; (b) exercising a right to information; (c)
exercising voting or consent rights provided in this Agreement; or (d) acting
as a director, officer, member or shareholder of a General Partner. This
provision shall be read to supplement, and not limit, Section 15632 of the Act.
ARTICLE 8. VOTING, MEETINGS AND PROXIES.
8.1. Actions Requiring Approval by the Limited Partners. Except as
otherwise specifically provided in this Agreement, the Limited Partners do not
have the right to vote on any Partnership matter. The actions specified in this
Section 8.1 may be taken only upon the affirmative vote or written consent of
the General Partner, a Majority of the Limited Partners and a Majority of the
Preferred Units.
a) A change in the Partnership's business or purposes.
b) The admission of a General Partner, other than under the
circumstances described in Section 8.2 or 13.2.
c) The amendment of the Partnership Agreement, except as otherwise
provided in Section 6.4 or Section 17.4 hereof or Section 10 of the Warrant
Agreement.
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d) Limited Partner approval rights in Section 15678.2 Section 15679.2
relating to mergers and reorganizations to the extent that the Act precludes
a partnership agreement from modifying or eliminating such approval rights.
8.2. Actions Requiring Unanimous Consent of the Limited Partners. The
Limited Partners are hereby given the right, by a unanimous vote or
unanimous written consent, to: (a) admit a new General Partner after the
General Partner ceases to be a General Partner where there is no remaining
or surviving General Partner; and (b) elect to continue the business of the
Partnership pursuant to Section 13.2 where there is no remaining or surviving
General Partner.
8.3. Meetings - Place. Meetings of Partners shall be held at the principal
office of the Partnership or such other site in San Luis Obispo County as
designated by the General Partner.
8.4. Meetings - Calling. Meetings of the Partners may be called by the
General Partner or by Limited Partners holding greater than ten percent (10%)
of the Units, only Limited Partners holding greater than ten percent (10%) of
the Preferred Units, in each case held by all such Limited Partners for any
matters for which such Limited Partners may vote.
8.5. Meetings - Notice.
a) Time and Contents. A written notice of the meeting shall be given
by a General Partner not less then ten (10) nor more than sixty (60) days
before the date of the meeting to each Partner. The notice shall state the
place, date and hour of the meeting and the general nature of the business to
be transacted, and no other business may be transacted.
b) Manner of Giving Notice. Notice of a Partners' meeting or any
report shall be given either personally or by mail or other means of written
communication, addressed to the Partner at the address of the Partner appearing
on the books of the Partnership for the purpose of notice. The notice or report
shall be deemed to have been given at the time when delivered personally or
deposited in the mail or sent by other means of written communication. A
declaration of mailing of any notice or report in accordance with this Article
8, executed by a General Partner and maintained with the records of the
Partnership, shall be prima facie evidence of the giving of the notice or
report.
c) Constructive Notice. If any notice or report addressed to a Partner
at the address of the Partner appearing on the books of the Partnership is
returned to the Partnership by the United States Postal Service marked to
indicate that the United States Postal Service is unable to deliver the notice
or report to the Partner at the address, all future notices or reports shall be
deemed to have been duly given without further mailing if they are made
available for the Partner at the principal office of the Partnership for a
period of one (1) year from the date of the giving of the notice or report to
all other Partners.
d) Written Waiver, Consent and Approval. The transactions of any
meeting of Partners, however called and noticed, and wherever held, are as
valid as though had at a meeting duly held after regular call and notice,
either before or after the meeting, if each of the
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Persons entitled to vote, not present in person or by proxy, signs a written
waiver of notice or a consent to the holding of the meeting or an approval of
the minutes thereof. All waivers, consents and approvals shall be filed with
the Partnership records or made a part of the minutes of the meeting.
Attendance of a Partner at a meeting shall constitute a waiver of notice of the
meeting, except when the Partner objects at the beginning of the meeting.
Neither the business to be transacted nor the purpose of any meeting of the
Partners need be specified in any written waiver of notice.
8.6. Meetings - Quorum. A Majority of the Limited Partners represented in
person or by proxy, shall constitute a quorum at a meeting of Partners.
8.7. Written Consent Without Meeting. Any action which may be taken at a
meeting of the Partners may be taken without a meeting if a consent in writing,
setting forth the action so taken, is approved by Partners having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all entitled to vote thereon were present and
voted. If the Limited Partners are requested to consent on a matter without a
meeting, each Partner shall be given notice of the motion to be voted upon in
the same manner as described above with respect to an actual meeting. If the
General Partner, or Limited Partners representing the requisite percentage of
Units or Preferred Units specified in Section 8.4, request a meeting to discuss
or vote on the matter, the notice of a meeting shall be given in accordance with
Section 8.5(b), and no action shall be taken until the meeting is held. Any
action taken without a meeting shall be effective fifteen (15) days after the
required minimum number of Partners have signed the consent; however, the action
will be effective immediately if the General Partner and Limited Partners
representing at least ninety percent (90%) of the Units held by Limited Partners
have signed the consent.
8.8. Proxies. The use of proxies in connection with this Article 8 will be
governed in the same manner as corporations formed under the General Corporation
Law of California.
ARTICLE 9. DISPOSITION OF LIMITED PARTNER INTERESTS.
9.1. Withdrawal of Limited Partner. A Limited Partner may not withdraw
from the Partnership, except as otherwise specifically provided in this
Agreement.
9.2. Transfers Restricted. Except for the Transfer of Preferred Units and
Units constituting Warrant Units (and the interests in the Partnership relating
thereto) as to which the following provisions of Section 9.2 and the provisions
of Section 9.3, Section 9.4 and Section 9.5 shall not apply, no Limited Partner
shall Transfer all or part of the Limited Partner's interest in the Partnership
without the written consent of the General Partner, which consent may be
withheld at the sole discretion of the General Partner, except as provided in
this Agreement. Any Transfer not permitted by this Agreement shall be null and
void.
9.3. Transfers to Trust. Notwithstanding any other provision in this
Agreement, an individual Limited Partner shall have the right to Transfer the
Limited Partner's interest in the Partnership to a trust for the benefit of the
Limited Partner or for the benefit of any family member (spouse, siblings,
ancestors or lineal descendants), provided that the Limited Partner and/or the
Limited Partner's spouse is/are the sole trustee(s) of the trust or, if not the
sole trustee(s) of the trust, is/are the only trustee(s) allowed to vote on
Partnership decisions. The addition of a different trustee allowed to vote on
Partnership decisions shall constitute a Transfer that is not permitted by this
Article 9. When the General Partner receives notice that the trust has one or
more trustees empowered to vote on Partnership decisions other than the original
Limited Partner or spouse or when the General Partner receives notice that the
original Limited Partner is no longer a trustee empowered to vote (by reason of
death or otherwise), the interest of the trust shall be deemed offered to a
Third-party Purchaser, thereby triggering the application of the option to
purchase pursuant to Section 10.5.
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<PAGE> 32
9.4. Transfer to a Legal Entity.
a) A Limited Partner who is an individual may Transfer the Limited
Partner's interest in the Partnership to a legal entity if the Limited Partner
owns a majority of the beneficial interest of the legal entity. However, a
subsequent Transfer of a beneficial interest in the legal entity shall not be
permitted under this Article 9 if, immediately after giving effect to the
purported Transfer, the Person who was the Limited Partner on the effective
date of this Agreement or a purchaser in a subsequent offering ceases to own a
majority of the beneficial interest in the legal entity. In such circumstance,
when the General Partner receives notice that the Person who was the Limited
Partner on the effective date of this Agreement or a purchaser in a subsequent
offering has ceased to own a majority of the beneficial interest in the legal
entity, the interest of the affected Limited Partner shall be deemed offered to
a Third-party Purchaser, thereby triggering the application of the option to
purchase pursuant to Section 10.5.
b) A Limited Partner that is a legal entity may Transfer its interest
to another legal entity if the same Persons (or their Affiliates) have the
beneficial ownership of a majority interest in the other legal entity. However,
a subsequent Transfer of a beneficial interest in the entity shall not be
permitted under this Article 9 if, immediately after giving effect to the
purported Transfer, those Persons who own a beneficial interest in the original
entity cease to own a majority of the beneficial interest in the new entity. In
such circumstance, when the General Partner receives notice that the Persons who
owned a beneficial interest in the original entity have ceased to own a majority
of the beneficial interest in the new entity, the interest of the affected
Limited Partner shall be deemed offered to a Third-party Purchaser, thereby
triggering the application of the option to purchase pursuant to Section 10.5.
9.5. Transfer to Beneficial Owners. A Limited Partner may Transfer its
interest to the beneficial owners of the Limited Partner upon Dissolution of the
Limited Partner as determined by applicable state law if the beneficial owner
was a Limited Partner on the effective date of this Agreement or a purchaser in
a subsequent offering. The Transfer to a beneficial owner who was not a Limited
Partner as of the effective date of this Agreement or purchaser in a subsequent
offering, shall be deemed offered to a Third-party Purchaser, thereby triggering
the application of the option to purchase pursuant to Section 10.5.
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<PAGE> 33
9.6. Substituted Limited Partner. An Assignee of a Limited Partner's
interest shall become a Limited Partner only upon the satisfaction of all of
the following conditions:
a) Transfer Instrument. Filing with the Partnership a duly executed
and acknowledged written instrument of assignment in a form approved by the
General Partner specifying the interest being assigned and setting forth the
intention of the assignor that the Assignee succeed to the assignor's interest
as a Limited Partner.
b) Written Opinion. If requested by the General Partner, providing,
the Partnership with a written opinion of counsel acceptable to the General
Partner that the proposed Transfer will not:
(1) Violate, or cause the Partnership to be in violation of,
any federal or state securities laws;
(2) Jeopardize the exempt status of the sale of Partnership
interests by the Partnership under the federal or state securities laws;
(3) Cause a termination of the Partnership under Code section
708; or
(4) Jeopardize the characterization of the Partnership as a
partnership under any federal or state tax law, regulation or ruling.
c) Partnership Agreement. Execution and acknowledgment by the assignor
and Assignee of any instruments required by the General Partner, including the
execution of this Agreement and any supplement to it, in which the transferee
agrees to be bound by the terms and conditions of this Agreement as are
applicable to the Units or interests being Transferred, as supplemented, and
the execution, acknowledgment and delivery to the General Partner of a special
power of attorney in the form described in Article 14.
d) Consent of General Partner. The General Partner's written consent
may be withheld in its sole discretion; provided that the General Partner's
consent shall not be required to admit any Assignee of Preferred Units or Units
constituting Warrant Units (and the interests in the Partnership relating
thereto), such admission to occur upon satisfaction of all requirements of this
Section 9.6 other than this Section 9.6(d).
9.7. Effect of Assignment and Substitution. No assignment by any Limited
Partner of all or any part of an interest in the Partnership, whether or not in
compliance with the terms of this Agreement, shall cause or constitute a
Dissolution of this Partnership. If a substitution of a Limited Partner is
permitted as provided in Section 9.6, the General Partner shall prepare,
publish, file and/or record such documents or instruments as may be required.
The consent or execution of such instruments by any of the other Limited
Partners shall not be required to effect such substitution.
9.8. Assignee's Capital. An Assignee of Preferred Units, Units and/or
partnership interests shall have the same number of Preferred Units, Units
and/or partnership interests, Capital Account, share of Partnership Net Income
and Net Loss or items
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<PAGE> 34
of income or deduction and credit for Capital Contributions in the same amounts
and percentages as adjusted for any revaluations required by this Agreement or
any state or federal law which are attributed to the assigned Preferred Units,
Units and/or partnership interests when held by the assignor.
ARTICLE 10. PURCHASE OPTIONS.
10.1. Option to Purchase Interest in Event of Death of a Limited Partner.
Upon the death of a Limited Partner (other than a holder of Preferred Units or
Warrant Units, as such), the personal representative of the deceased Limited
Partner shall give notice of the death to the General Partner. The notice shall
include the personal representative's name and address for correspondence.
a) General Partner Option. For thirty (30) days after the General
Partner receives notice of the death of a Limited Partner, the General Partner
shall have an option to purchase or designate (subject to the agreement of such
Limited Partner to do so) one or more other Limited Partners to purchase all or
a part of the interest owned by the deceased Limited Partner (other than
interests relating to Preferred Units or Warrant Units) at the price and on the
terms provided in Article 11.
b) Partnership Option. If the General Partner does not exercise its
option to purchase all of the interest under Section 10.1(a), for thirty (30)
days after the expiration of the General Partner's option or notice of the
intention not to exercise the option as to all or part of the interest whichever
occurs earlier, the Partnership shall have an option to redeem all or any part
of the remaining interest subject to this option at the price and on the terms
provided in Article 11.
c) Exercise of Option. Notice of the exercise of the option provided
by Sections 10.1(a) and 10.1(b), or intent not to exercise the option, shall
be given to the personal representative of the deceased Limited Partner during
the term of the option period.
d) Failure to Exercise Option. There is no requirement that the
General Partner or its designees or the Partnership must collectively purchase
all of the interest held by the deceased Limited Partner, if the General Partner
or the Partnership does not exercise the option provided by Section 10.1 as to
any part of the interest, then the interest not transferred shall be transferred
to the successor-in-interest of the deceased Limited Partner. The transferee
shall be an Assignee and shall only become a Limited Partner upon satisfaction
of the conditions provided in Section 9.6.
10.2. Option to Purchase Interest in the Event of Divorce of a Limited
Partner. In the event that the interest of a Limited Partner is transferred to
the spouse of such Limited Partner in a legal separation agreement or upon
Dissolution of marriage (the "Former Spouse"), the Limited Partner whose
marriage is being dissolved (the "Divorcing Limited Partner") shall give notice
to the General Partner. The notice shall be given within thirty (30) days of the
date the Transfer to the Former Spouse becomes effective.
a) Divorcing Limited Partner Option. For fifteen (15) days after the
Divorcing Limited Partner gives notice of the Transfer to the Former Spouse, the
Divorcing Limited Partner shall have the option to purchase all or part of the
interest owned by the Former Spouse upon the legal separation or dissolution of
marriage at the price and on the terms provided in Article 11.
b) General Partner Option. If the Divorcing Limited Partner does not
exercise the option to purchase all of the interest under Section 10.2(a), for
fifteen (15) days after the expiration of the Divorcing Limited Partner's option
or notice of the intent not to exercise the option as to all or part of the
interest, whichever occurs earlier, the General Partner shall have an option to
purchase or designate (subject to the agreement of such Limited Partner to do
so) one or more of the other Limited Partners to purchase all or part of the
remaining interest owned by the Former Spouse (other than interests relating to
Preferred units or Warrant Units) at the price and on the terms provided in
Article 11.
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<PAGE> 35
c) Partnership Option. If the General Partner does not exercise its
option to purchase all of the remaining interest under Section 10.2(b), for
thirty (30) days after the expiration of the General Partner's option or notice
of its intention not to exercise the option as to all or part of the interest,
whichever occurs earlier, the Partnership shall have an option to redeem all or
any part of the remaining interest subject to this option at the price and on
the terms provided in Article 11.
d) Exercise of Option. Notice of the exercise of the option provided
by Sections 10.2(a), 10.2(b) and 10.2(c), or intent not to exercise the option
shall be given to the General Partner and the Former Spouse during the term of
the option period.
e) Failure to Exercise Option. There is no required that the
Divorcing Limited Partner, the General Partner or its designees, or the
Partnership must collectively purchase all of the interest held by the Former
Spouse. If the Divorcing Limited Partner, the General Partner or its designees,
or the Partnership does not exercise the option provided by Section 10.2 as to
any part of the interest, then the Former Spouse shall be an Assignee and shall
only become a Limited Partner upon satisfaction of the conditions provided in
Section 9.6.
10.3. Option to Purchase Interest in the Event of Bankruptcy of a Limited
Partner. In the event of the Bankruptcy of a Limited Partner (other than a
holder of Preferred Units or Warrant Units, as such), such Limited Partner (the
"Bankrupt Limited Partner") shall give notice of such Bankruptcy to the General
Partner. The notice shall be given within ten (10) days of the Bankruptcy.
a) General Partner Option. For thirty (30) days after the General
Partner receives notice of such Bankruptcy, the General Partner shall have an
option to purchase or designate (subject to the agreement of such Limited
Partner to do so) one or more other Limited Partners to purchase all or part of
the interest owned by the Bankrupt Limited Partner at the price and on the terms
provided in Article 11.
b) Partnership Option. If the General Partner does not exercise its
option to purchase all of the interest under Section 10.3(a), for thirty (30)
days after the expiration of the General Partner's option or notice of the
intention not to exercise the option as to all or part of the interest,
whichever occurs earlier, the Partnership shall have an option to redeem all or
any part of the remaining interest subject to this option at the price and on
the terms provided in Article 11.
c) Exercise of Option. Notice of the exercise of the option provided
by Sections 10.3(a) and 10.3(b), or intent not to exercise the option, shall be
given to the Bankrupt Limited Partner during the term of the option period.
d) Failure to Exercise Option. There is no requirement that the
General Partner or its designees or the Partnership must collectively purchase
all of the interest held by the Bankrupt Limited Partner. If the General Partner
or the Partnership does not exercise the option provided by Section 10.3 as to
any part of the interest, then the Bankrupt Limited Partner shall retain the
interest not transferred subject to the rights of a trustee in Bankruptcy.
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10.4. Option to Purchase Interest in Event of Incompetency of a Limited
Partner. Upon the entry by a court of competent jurisdiction appointing a
guardian or conservator for the Limited Partner (other than a holder of
Preferred Units or Warrant Units, as such) or the estate of the Limited Partner
(other than a Holder of Preferred Units or Warrant Units, as such)
("Incompetency"), the guardian or the conservator shall give notice of the
Incompetency to the General Partner and the other Limited Partners. The notice
shall include, the name of the guardian or conservator and the address for
correspondence.
a) General Partner Option. For thirty (30) days after the General
Partner receives notice of the Incompetency of a Limited Partner, the General
Partner shall have an option to purchase or designate (subject to the agreement
of such Limited Partner to do so) one or more other Limited Partners to purchase
all or part of the interest owned by the Incompetent Limited Partner (other than
interests relating to Preferred Units or Warrant Units) at the price and on the
terms provided in Article 11.
b) Partnership Option. If the General Partner does not exercise its
option to purchase all of the interest under Section 10.4(a), for thirty (30)
days after the expiration of the General Partner's option or notice of the
intention not to exercise the option as to all or part of the interest,
whichever occurs earlier, the Partnership shall have an option to redeem all or
any part of the remaining interest subject to this option at the price and on
the terms provided in Article 11.
c) Exercise of Option. Notice of the exercise of the option provided
by Sections 10.4(a) and 10.4(b), or intent not to exercise the option, shall be
given to the guardian or conservator of the Incompetent Limited Partner during
the term of the option period.
d) Failure to Exercise Option. There is no requirement that the
General Partner or its designees or the Partnership must collectively purchase
all of the interest held by the Incompetent Limited Partner. If the General
Partner does not exercise the option provided by Section 10.3 as to any part of
the interest, then the Incompetent Limited Partner shall retain the interest not
transferred subject to the rights of the guardian or conservator.
10.5. Option to Purchase Interest in the Event of Notice of Proposed Sale
to a Third-party Purchaser. A Limited Partner (other than a holder of Preferred
Units or Warrant Units, as such) shall not Transfer an interest in the
Partnership to any Person who is not the Partnership, the General Partner or a
Limited Partner ("Third-party Purchaser") without complying with the provisions
of this Section 10.5. Any Transfer or encumbrance in violation of this Section
10.05 shall be null and void. If a Limited Partner (other than the holder of
Preferred Units or Warrant Units, as such) desires to sell an interest to a
Third-party Purchaser, the Limited Partner ("Selling Limited Partner") shall
first give notice stating, that desire to the General Partner and to the other
Limited Partners; ("Notice of Proposed Sale"). The Notice of Proposed Sale shall
state the identity of the Third-party Purchaser, the Units to be sold and the
price and terms for which the Limited Partner intends to sell such Units. The
following options shall then apply:
a) General Partner Option. For fifteen (15) days after the General
Partner receives the Notice of Proposed Sale, the General Partner shall have an
option to purchase all or
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part of the interest (other than interests relating to Preferred Units or
Warrant Units) at either: (1) the price and on the terms provided in Article 11;
or (2) the price and terms contained in the Notice of Proposed Sale.
b) Partnership Option. If The General Partner does not exercise its
option to purchase all of the interest under Section 10.5, for thirty (30) days
after the expiration of the General Partner's option or notice of the intention
not to exercise the option as to all or part of the interest, whichever occurs
earlier, the Partnership shall have an option to redeem all or any part of the
remaining interest subject to this option at either: (1) the price and on the
terms provided in Article 11; or (2) the price and terms contained in the Notice
of Proposed Sale.
c) Other Limited Partners Option. If the Partnership does not
exercise its option to purchase all of the interest under Section 10.5(b), for
fifteen (15) days after expiration of the Partnership's option or notice of the
intention not to exercise the option as to all or part of the interest,
whichever occurs earlier, the other Limited Partners shall have an option to
purchase all of the remaining interest Subject to the option at either: (1) the
price and on the terms provided in Article 11; or (2) the price and terms
contained in the Notice of Proposed Sale. Those Limited Partners electing to
purchase the remaining interest shall do so in proportion to their share
ownership, or as they shall otherwise agree.
d) Exercise of 0ption. Notice of the exercise or the option provided
by Section 10.5(a) or the intent not to exercise the option shall be given to
the Partnership, the Selling Limited Partner and the other Limited Partners
during the term of the option period. Notice of the exercise of the option
provided by Section 10.5(b), or intent not to exercise the option, shall be
given to the Selling Limited Partner and the other Limited Partners during the
term of the option period. Notice of the exercise of the option provided by
Section 10.5(c) shall be given to the selling Limited Partner during the term of
the option period.
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<PAGE> 38
e) Requirement to Collectively Purchase Entire Interest. If the
General Partner, the Partnership or the other Limited Partners exercise the
options provided by Section 10.5, they must collectively purchase all of the
interest offered by the Selling Limited Partner on the same price and terms
unless otherwise agreed to. All options arising under Section 10.5 shall be
deemed waived if any of the offered interests are not acquired through the
exercise of such an option.
f) Failure to Exercise Option. If the General Partner, the
Partnership or the remaining Limited Partners do not exercise the options
provided by Section 10.5 as to all of the interest offered, then the Selling
Limited Partner may Transfer the interest described in the Notice of Proposed
Sale to the Third-party Purchaser at the price and upon the terms specified
therein at any time within ninety (90) days from the date of the Notice of
Proposed Sale. If no Transfer occurs, the Selling Limited Partner shall remain
a member of the Partnership. If a Transfer does occur, the Third-party
Purchaser shall become an Assignee and shall only become a Limited Partner upon
satisfaction of the conditions set forth in Section 9.6.
10.6. Limitation. The provisions of this Article 10 are subject in all
respects to the provisions of Section 15.1.
ARTICLE 11. PURCHASE PRICE AND TERMS.
11.1. Purchase Price. The purchase price for the Limited Partner interest
sold pursuant to the options contained in Article 10 shall be equal to trailing
net cash flow multiplied by 6.5, with the product reduced by long-term debt and
the difference between current assets and current liabilities determined as
of the last day of the month preceding the month in which the option is
exercised. The "trailing net cash flow" means Net Income for the twelve (12)
months ending on the last day of the month preceding the month in which the
option is exercised, increased by depreciation and interest expense during the
period. For example, if as of January 1, 1998, a Limited Partner with Units
representing one percent of the outstanding partnership interests sold such
Units, the value of such Units is calculated based on amounts determined as of
December 31, 1996 as follows:
<TABLE>
<S> <C>
Net Income $ 2,860,059.00
Depreciation Increase 3,399,377.00
Interest Expense Increase 5,030,100.00
---------------
TRAILING NET CASH FLOW $ 11,289,536.00
Multiplied by 6.5 73,381,984.00
Less Long-Term Debt (47,897,028.00)
Plus current assets, less current liability 2,926,680.00
---------------
NET VALUE $ 28,411,636.00
</TABLE>
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<PAGE> 39
Because the Limited Partner's Units represent one percent (1%) of the
outstanding partnership interests, the value of the Limited Partner's Units
would be $284,116.36.
11.2. Effective Date. The effective date of any purchase of a limited
Partnership interest under Article 10 shall be forty-five (45) days after the
notice of the death of the Limited Partner, the notice of the interest being
transferred to the Former Spouse upon dissolution of marriage, the notice of the
Bankruptcy of the Limited Partner, the notice of the Incompetency of the Limited
Partner or the Notice of Proposed Sale to a Third-party Purchaser, respectively.
ARTICLE 12. TERMINATION AND ADMISSION OF A GENERAL PARTNER.
12.1. Termination of a General Partner. A Partner ceases to be a General
Partner and becomes a Limited Partner holding the same Capital Account, share of
Partnership Net Income and Net Loss and credit for Capital Contributions in the
same amounts and percentages as adjusted for any revaluations required by this
Agreement or any state or federal law upon the happening of any of the following
events:
a) Withdrawal. Withdrawal as a General Partner;
b) Dissolution. The Dissolution of a General Partner under state law;
c) Death or Incompetency. The death or Incompetency of a General
Partner, if an individual; or
d) Bankruptcy or Financial Difficulty. The Bankruptcy of a General
Partner or the issuance of a charging order against the General Partner's
interest which is not removed within thirty (30) days of its issuance.
12.2. No Removal of General Partner. The General Partner may not be removed
by a vote of the Limited Partners.
12.3. Transfer by General Partner. A General Partner may not Transfer all
or any part of its interest as a General Partner except as specifically
provided in this Agreement. If a General Partner Transfers or assigns any part
of its interest as a General Partner in contravention of this Agreement, that
Person shall be an Assignee and shall become a substituted Limited Partner upon
the satisfaction of the conditions set forth in Section 9.6.
12.4. Permissible Transfers by MW Sign Corp. MW Sign Corp. may Transfer its
entire interest as a General Partner to Martin & MacFarlane, Inc., or to any of
its other Affiliates or Martin & MacFarlane's Affiliates, who shall thereupon be
admitted to the Partnership as a General Partner having the same Units, Capital
Account, share of Partnership Net Income and Net Loss and credit for capital
contributions in the same amounts and percentages as MW Sign Corp. had
immediately before the Transfer. Thereafter, all references to MW Sign Corp. in
this Agreement shall be read as referring to the Affiliate to which the General
Partner interest was Transferred.
12.5. Withdrawal of General Partner. Unless otherwise specifically
provided by this Agreement, a General Partner may not withdraw from the
Partnership before the expiration of the term of the Partnership as provided in
Section 2.5.
12.6. Additional General Partner. No General Partner shall be admitted to
the Partnership except as specifically provided in this Agreement. Any
additional General Partner shall be admitted only upon the vote of all the
existing General Partners, a Majority of the Limited Partners and holders of at
least 85% or the Preferred Units then outstanding. As long as MW Sign Corp. is a
General Partner, no other Person shall have the rights, powers and
responsibilities ascribed to a General Partner under this Agreement. Any other
General Partner shall have all of the rights and responsibilities of Limited
Partners. If there is more than one General Partner and MW Sign Corp. is not a
General Partner, the General Partner's rights, powers and responsibilities shall
be exercised or borne equally by all General Partners.
12.7. Termination of General Partner. If the General Partner is terminated
as General Partner and there is no remaining or surviving General Partner, the
Partnership shall be Dissolved. The Limited Partners may reconstitute the
business of the Partnership as provided in Section 13.2.
ARTICLE 13. DISSOLUTION AND TERMINATION OF PARTNERSHIP.
13.1. Dissolution and Termination. Upon the occurrence of any of the
following events, the Partnership shall be Dissolved, unless the option provided
in Section 13.2 is exercised:
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a) Expiration of Term. Upon the expiration of the term of this
Partnership pursuant to Section 2.5.
b) Election. By the election of the General Partner, provided that
the General Partner shall not make such election without the prior written
consent of holders of at least 85% of the Preferred Units then outstanding.
c) No General Partner. When a General Partner ceases to be the
General Partner and there is no remaining General Partner.
13.2. Reconstitution. If the General Partner ceases to be a General
Partner where there is no remaining or surviving General Partner, the Partners
may reconstitute and continue the business of the Partnership in a new limited
partnership on the same terms as those contained in this Agreement. Such an
election shall require the vote of a majority-in-interest of the capital and
profits of the Partners, and shall be effective only if the election is made
within ninety (90) days of the date the last General Partner ceases to be a
General Partner. Once such an election has been made, a new General Partner may
be admitted into the new partnership. All Partners of the Partnership including
the former General Partner, may vote on whether to continue the business or
admit a new General Partner. Expenses incurred in the reformation, or attempted
reformation, of the Partnership shall be deemed expenses of the Partnership.
13.3. Events Not Dissolving the Partnership. A technical tax termination
under any applicable provisions of federal or state income tax laws shall not
cause a Dissolution of the Partnership. The withdrawal of a Partner and/or the
admission of a new Partner shall not cause a Dissolution of the Partnership.
13.4. Winding Up.
a) Partnership Operations. Upon Dissolution of the Partnership as
provided in Section 13.1, the continuing operation of the Partnership's business
shall be confined to those activities reasonably necessary to wind up the
Partnership's affairs, discharge its obligations and preserve and distribute its
assets in accordance with this Section 13.4, except as otherwise provided in
this Agreement. Allocations of Net Income and Net Loss and allocations of items
of income and deduction shall be made among the Partners as provided in Article
5.
b) Liquidating Distributions. Upon Dissolution of the Partnership,
the affairs of the Partnership shall be wound up, the assets liquidated (except
as otherwise provided in Section 13.4(e)) and the proceeds and other assets
distributed in the following order:
(1) Liabilities owing to creditors, including expenses of
liquidation, and liabilities to Partners who are creditors to the extent
permitted by law, in satisfaction of liabilities of the Partnership other than
any liability for a Distribution to a Partner under Act Section 15661, 15664 or
15665;
(2) Deposit in a trust account of a reasonable reserve for
payment of contingent liabilities and expenses; and
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(3) To the Partners in accordance with Section 5.12 hereof.
c) Partner's Obligation to Make Up Negative Capital Account.
(1) Except as otherwise provided in this Section 13.4(c),
no Partner shall have an obligation to restore its negative Capital Account
balance, if any.
(2) If, after taking into account all Capital Account
adjustments for the Partnership's taxable year during which the General
Partner's interest is liquidated, the General Partner has a deficit in its
Capital Account, the General Partner shall contribute to the capital of the
Partnership the amount of the deficit balance in the Capital Account.
(3) If, after taking into account all Capital Account
adjustments for the Partnership's taxable year during which the Limited Partner
interest of either F. Thomas Martin or David B. Weyrich is liquidated, that
Limited Partner has a deficit in his Capital Account, he shall contribute to the
capital of the Partnership. Any contribution to restore such deficit Capital
Account balance required by this Section 13.4(c)(3) shall be limited to the
lesser of: (a) the amount of Martin's or Weyrich's deficit Capital Accounts that
they respectively have agreed with the Partnership to restore; or (b) the amount
of the deficit balance in the Capital Account.
(4) Any amounts contributed to the Partnership pursuant to
Section 13.4(c)(3) shall be made by the later of: (a) the end of such
Partnership taxable year; or (b) within ninety (90) days after the date of such
liquidation. Any amounts contributed to the Partnership under this Section
13.4(c) shall be used first to pay creditors of the Partnership and any
remaining amount shall be distributed to the other Partners then having a
positive balance in their respective Capital Accounts in proportion to such
positive balances. A Partner's interest in the Partnership shall be deemed
liquidated for purposes of this Section 13.4(c)(4) upon the liquidation of the
Partnership or on the date of liquidation of the Partner's interest in the
Partnership under Treasury Regulations section 1.761-1(d). A liquidation for
such purposes shall occur upon a termination of the Partnership under Code
section 708(b)(1) or upon cessation of the Partnership as a going concern as
defined in Treasury Regulations section 1.704-1(b)(2)(ii)(g).
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(5) This Section 13.4(c) is intended to operate as a full
or partial, as the case may be, deficit restoration obligation or obligation to
make a payment within the mean of Treasury Regulations section
1.704-1(b)(2)(ii)(b) and section 1.752-2(b), respectively.
d) Restoration of Distributions. Each Partner, other than, unless
otherwise required by law, holders of Preferred Units, as such, shall return a
Distribution to the extent that, immediately after giving effect to the
Distribution, all liabilities of the Partnership exceed the fair market value of
the Partnership assets to the extent provided in Act Section 15666.
e) Distributions in Kind. The General Partner may distribute
Partnership assets in kind, rather than liquidate such assets. The General
Partner is specifically authorized to distribute such assets to itself. A
Distribution in kind shall be made in a manner consistent with Section 13.4(b).
Any Distributions in kind shall be based upon the current fair market value of
Partnership assets. No Limited Partner shall have the right or power to demand
or receive property other than cash in return for the Partner's invested
capital. If the value of property distributed to a Partner exceeds the amount
that Partner is entitled to upon Dissolution, then the Partner receiving the
Distribution in kind will be obligated to contribute to the Partnership
concurrently with the Partner's receipt of the Distribution an amount in cash
equal to the amount of such excess.
13.5 Waiver of Right to Court Decree of Dissolution. None of the
Partners shall have the right to dissolve the Partnership except as otherwise
provided in this Agreement. The Partners agree that irreparable damage would be
done to the Partnership if one of the Partners should bring an action in court
to dissolve the Partnership. Care has been taken in this Agreement to provide
what the Partners feel is a fair settlement between them in the event of various
contingencies, including Dissolution, and each Partner accepts the provisions of
this Agreement as establishing the Partners' rights and duties. Each Partner
hereby waives the right to seek a court decree of Dissolution or to seek the
appointment by a court of a liquidator for the Partnership.
ARTICLE 14. SPECIAL POWER OF ATTORNEY.
14.1. Attorney-in-Fact. Each Limited Partner grants to the General
Partner a special power of attorney irrevocably making, constituting and
appointing the General Partner as attorney-in-fact, with power and authority to
act in the Limited Partner's name and on the Limited Partner's behalf to
execute, acknowledge and swear to in the execution and acknowledgment of filing
of the following documents.
a) Government Instruments. Any instrument or document required to
be filed by the Partnership under the laws of any state or by any governmental
agency, or which the General Partner elects to file in furtherance of the
Partnership's business.
b) Partnership Changes. Any instrument or document that may be
required to effect the continuation of the Partnership, the admission of an
additional or substituted Partner, or the Dissolution and termination of the
Partnership (provided that the continuation, admission or Dissolution and
termination are in accordance with the terms of this Agreement), or to reflect
any change in amount of the Partner's Capital Account in accordance with the
terms of this Agreement.
c) Agreement Amendment. Any amendment of this Agreement duly
approved in accordance with the terms of this Agreement. The General Partner
shall promptly furnish to the Limited Partner a copy of any amendment to this
Agreement executed pursuant to a power of attorney from the Limited Partner.
14.2. Special Provisions. The special power of attorney being granted by
each Limited Partner under this Article 14: (a) is a special power of attorney
coupled with an interest; (b) is irrevocable; (c) shall survive the
Incompetency of the granting Limited Partner; and (d) is limited to the matters
set forth in Section 14.1.
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ARTICLE 15. COVENANTS.
15.1. The General Partner hereby covenants and agrees, for so long as any
Preferred Units are outstanding and notwithstanding any other provision of this
Agreement to the contrary, as follows.
a) Limitation on Distributions. Except as set forth in Section
5.12(c), Section 5.12(d), the Partnership shall not (nor shall it permit any of
its Subsidiaries to) pay or make any distribution on, or make any payment on
account of, or purchase, redeem, defease, retire or otherwise acquire, or set
apart assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement or other acquisition of, any interests in the
Partnership (other than in respect of Preferred Units), whether now or hereafter
outstanding, or make any other distribution or payment in respect thereof,
either directly or indirectly, whether in cash or property or in obligations of
the Partnership or any such Subsidiary.
b) Limitation on Transactions with Affiliates. Except as provided
in Sections 6.1(b),(c) or (d) and 6.8 and the last sentence of Section 3.6 and
except with respect to the Kunz Subsequent Acquisition, the Partnership shall
not (and shall not permit any of its Subsidiaries to) enter into any transaction
(an "Affiliate Transaction"), including without limitation, any purchase, sale,
lease or exchange of property or the rendering of any service, with the General
Partner or any Affiliate of the Partnership or the General Partner (other than
transactions entirely between the Partnership and its Subsidiaries) unless (i)
such Affiliate Transaction is on terms that are no less favorable to the
Partnership or the relevant Subsidiary than those that would have been obtained
in a comparable transaction by the Partnership or the relevant Subsidiary with
an unrelated Person: (ii) in the case of such an Affiliate Transaction
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involving aggregate payments in excess of $250,000, the Partnership delivers to
the holders of Preferred Units, Warrants and Warrant Units a resolution of the
Board of Directors of the General Partner set forth in an officer's certificate
certifying that such transaction complies with clause (i) above, is in the best
interests of the Partnership or the relevant Subsidiary and has been approved by
a majority of the disinterested directors of the General Partner; and (iii) with
respect to any Affiliate Transaction involving aggregate payments in excess of
$1,500,000, the Partnership delivers to the holders of Preferred Units; Warrants
and Warrant Units an opinion as to the fairness to the Partnership or the
relevant Subsidiary from a financial point of view which is issued by an
investment banking firm of national standing; or (B) than has been delivered to
the Partnership the prior written consent of a majority of the Preferred Units
and the holders of a majority of the Warrants (determined by reference to the
number of Warrant Units issuable thereunder) and Warrant Units then outstanding.
The Partnership will give written notice of each Affiliate Transaction to each
holder of Preferred Units, Warrants and Warrant Units no later than five days
before consummation thereof.
ARTICLE 16. CERTAIN PROVISIONS APPLICABLE TO PREFERRED UNITS
16.1. Redemption.
a) Optional Redemption. Until September 23, 1998, the Preferred
Units may be redeemed at the option of the Partnership, in whole or from time to
time in part, in the manner provided in Section 16.1(c) at a redemption price
equal to 102% of the Preferred Units Capital Account Amount for the Preferred
Units so redeemed, payable in cash, plus the aggregate Preferred Return
(cumulative from the date of this Agreement) for all such Preferred Units, which
shall also be paid in cash, to the Redemption Date. Following September 23,
1998, the Preferred Units may be redeemed at the option of the Partnership, in
whole or from time to time in part, at 100% of the Preferred Units Capital
Account Amount for the Preferred Units so redeemed, payable in cash, plus the
aggregate Preferred Return (cumulative from the date of this Agreement) for all
such Preferred Units, which shall also be paid in cash, to the Redemption Date.
b) Mandatory Redemption. The Partnership shall be obligated to
redeem all outstanding Preferred Units on December 23, 2006 at a redemption
price equal to the Redemption Amount, payable in cash.
c) Procedure for Redemption.
(i) In the event of a redemption of less than all of the
Preferred Units, the Units so redeemed will be determined by the
Partnership pro rata according to the number of such Units held by each
holder thereof.
(ii) The Partnership shall send a written notice of
redemption (the "Redemption Notice") by first-class mail, postage prepaid,
not fewer than 30 days nor more than 60 days prior to the applicable
Redemption Date to each holder of Preferred Units as of the record date
fixed for such redemption of Preferred Units at such holder's address as
the same appears on the records of the Partnership; provided, however, that
no failure to give such notice to any holder or holders nor any deficiency
therein shall affect the validity of the procedure for the redemption of
any Preferred Units to be redeemed except as to the holder or holders to
whom the Partnership has failed to give said notice or except as to the
holder or holders whose notice was defective. The Redemption Notice shall
state:
(A) whether all or less than all the outstanding
Preferred Units are to be redeemed and the total number of
Preferred Units being redeemed;
(B) the number of Preferred Units held of record by
that specific holder that the Partnership intends to redeem;
(C) the applicable Redemption Date;
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(D) the manner and place or places at which payment
for the Preferred Units called for redemption will, upon presentation
and surrender to the Partnership of the certificates, if any,
representing the Preferred Units ("Preferred Unit Certificates")
being redeemed, be made; and
(E) that the Preferred Return with respect to the
Preferred Units being redeemed shall cease to accrue on the
applicable Redemption Date.
(iii) On the applicable Redemption Date, the full
applicable redemption price shall become payable for the Preferred Units
being redeemed on such Redemption Date. As a condition of payment of the
applicable redemption price, each holder of Preferred Units must surrender
the Preferred Units Certificates, if any, representing the Preferred Units
being redeemed by the Partnership in the manner and at the place designated
in the applicable Redemption Notice. The full applicable redemption price
for such Units properly tendered for payment shall be paid in accordance
with the provisions of Section 8.1 of the Purchase Agreement to the person
whose name appears on such Preferred Unit Certificate or Certificates, if
any, as the owner thereof, on and after the applicable Redemption Date when
and as Preferred Unit Certificates, if any, for the Preferred Units being
redeemed are properly tendered for payment. Each such surrendered Preferred
Unit Certificate shall be canceled and retired. In the event that less than
all of the Preferred Units represented by any such Preferred Unit
Certificate are redeemed, a new Preferred Units Certificate shall be issued
representing the unredeemed Units if requested by such holder pursuant to
Section 17.15.
(iv) On the applicable Redemption Date, unless the
Partnership defaults in the payment of the applicable redemption price, the
Preferred Return will cease to accrue with respect to the Preferred Units
called for redemption. All rights of holders of such redeemed Preferred
Units will terminate except for the right to receive the applicable
redemption price.
16.2. Limitation on Certain Asset Sales.
a) The Partnership will not, and will not permit any of its
Subsidiaries to, consummate an Asset Sale unless (i) the Partnership or such
Subsidiary, as the case may be,
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receives consideration at the time of such sale or other disposition at least
equal to the fair market value thereof (as determined in good faith by the
Board of Directors of the General Partner); (ii) not less than 85% of the
consideration received by the Partnership or such Subsidiary, as the case may
be, is in the form of cash or Temporary Cash Investments and is received at the
time of such disposition; and (iii) the Asset Sale Proceeds received by the
Partnership or such Subsidiary are applied (A) first, to the extent the
Partnership elects, or is required, to prepay, repay or purchase debt under any
then existing indebtedness of the Partnership or any Subsidiary within 180 days
following the receipt of the Asset Sale Proceeds from any Asset Sale, provided
that any such repayment shall result in permanent reduction of the commitments
thereunder in an amount equal to the principal amount so repaid; (B) second, to
the extent of the balance of Asset Sale Proceeds after application as described
above, to the extent the Partnership elects, to an investment in assets
(including capital stock or other securities purchased in connection with the
acquisition of capital stock or property of another Person) used or useful in a
business similar or ancillary to the business of the Partnership or such
Subsidiary as conducted on the date hereof, provided that such investment is
consummated within 180 days following the receipt of such Asset Sale Proceeds
(the "Reinvestment Date"); and (C) third, if on the Reinvestment Date with
respect to any Asset Sale, the Available Asset Sale Proceeds exceed $1,000,000,
the Partnership shall apply an amount equal to such Available Asset Sale
Proceeds in excess of $1,000,000 to an offer to repurchase Preferred Units at
a purchase price in cash equal to, the Redemption Amount (an "Excess Proceeds
Offer").
b) If the Partnership is required to make an Excess Proceeds Offer,
the Partnership shall mail, within 30 days following the Reinvestment Date, a
notice to the holders of Preferred Units stating, among other things: (1) that
such holders of Preferred Units have the right to require the Partnership to
apply such Available Asset Sale Proceeds to repurchase Preferred Units at a
purchase price in cash as set forth above; (2) the purchase date (the "Purchase
Date"), which shall be no earlier than 30 days and not later than 60 days from
the date such notice is mailed; (3) the instructions, determined by the
Partnership, that each holder of Preferred Units must follow in order to have
such Preferred Units repurchased; and (4) the calculations used in determining
the amount of Available Asset Sale Proceeds to be applied to the repurchase of
such Preferred Units. The Excess Proceeds Offer shall remain open for a period
of 20 business days following its commencement (the "Offer Period"). The
notice, which shall govern the terms of the Excess Proceeds Offer, shall also
state:
(1) that the Excess Proceeds Offer is being made pursuant to
this Section 16.2 and the length of time the Excess Proceeds offer will remain
open;
(2) the purchase price and the Purchase Date;
(3) that any Preferred Units not tendered or accepted for
payment will continue to accrue the Preferred Return;
(4) that any Preferred Units accepted for payment pursuant to
the Excess Proceeds Offer shall cease to accrue the Preferred Return on and
after the Purchase Date;
(5) that holders electing to have Preferred Units purchased
pursuant to any Excess Proceeds Offer will be required to surrender the
Preferred Unit Certificates, if any, representing such Preferred Units to the
Partnership or a paying agent at the address specified in the notice at least
three Business Days before the Purchase Date;
(6) that holders will be entitled to withdraw their election if
the Partnership, or any paying agent, as the case may be, receives, not later
than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of such holder, the aggregate
Preferred Units the holder delivered for purchase and a statement that such
holder is withdrawing its election to have such Preferred Units purchased;
(7) that, if the aggregate purchase price of the Preferred
Units surrendered by holders exceeds the Available Asset Sale Proceeds, the
Partnership shall select the
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Preferred Units to be purchased on a pro rata basis based on the number of such
Units surrendered by holders not otherwise withdrawn by the expiration of the
Offer Period; and
(8) that holders whose Preferred Units were purchased only in
part will be issued new Preferred Unit Certificates, if so requested pursuant
to Section 17.15, representing Capital Accounts equal to the Capital Accounts
for the unpurchased portion of the Preferred Units surrendered.
On or before the Purchase Date, the Partnership shall, to the extent
lawful, accept for payment, on a pro rata basis as set forth above to the
extent necessary, Preferred Units or portions thereof tendered pursuant to the
Excess Proceeds Offer. The Partnership or its paying agent, as the case may be,
shall, in accordance with the provisions of Section 8.1 of the Purchase
Agreement, pay to each tendering holder an amount equal to the purchase price
of the Preferred Units tendered by such holders and so accepted, and the
Partnership shall promptly issue a new Preferred Unit Certificate, if so
requested pursuant to Section 17.15, mail or deliver any such new Preferred
Unit Certificate to such holder representing Capital Accounts equal to the
Capital Accounts for any unpurchased portion of such Preferred Units. Preferred
Unit Certificates, if any, representing any Preferred Unit not so accepted
shall be promptly mailed or delivered by the Partnership to the holder thereof.
If an Excess Proceeds Offer is not fully subscribed, the Partnership may
retain that portion of the Available Asset Sale Proceeds not required to
repurchase Preferred Units.
16.3. Change of Control.
a) Within 30 days of the occurrence of a Change of Control, the
Partnership shall notify the holders of Preferred Units in writing of such
occurrence and shall make an offer to purchase (the "Change of Control Offer")
the outstanding Preferred Units at a purchase price in cash equal to, for each
such holder, (i) in respect of any Change of Control Payment Date occurring on
or before September 23, 1998, 102% of the Preferred Units Capital Account
Amount for the Preferred Units so redeemed plus the aggregate Preferred Return
(cumulative from the date of this Agreement) to the Change of Control Payment
Date for all such Preferred Units and (ii) in respect of any Change of Control
Payment Date thereafter, 100% of the Preferred Units Capital Account Amount for
the Preferred Units so redeemed plus the aggregate Preferred Return (cumulative
from the date of this Agreement) to the Change of Control Payment Date for all
such Preferred Units (such purchase price being hereinafter referred to as the
"Change of Control Purchase Price") in accordance with the procedures set forth
in this Section 16.3.
b) Within 30 days of the occurrence of a Change of Control, the
Partnership also shall send by first-class mail, postage prepaid, to each
holder of Preferred Units, at the address appearing in the records of the
Partnership, a notice stating:
(1) that the Change of Control Offer is being made pursuant to
this Section 16.3 and that all Preferred Units tendered will be accepted for
payment, subject to the terms and conditions set forth herein;
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(2) the Change of Control Purchase Price and the purchase date
(which shall be a Business Day no earlier than 20 Business Days from the date
such notice is mailed (the "Change of Control Payment Date"));
(3) that any Preferred Unit not tendered will continue to accrue the
Preferred Return;
(4) that, unless the Partnership defaults in the payment of the
Change of Control Purchase Price, any Preferred Unit accepted for payment
pursuant to the Change of Control Offer shall cease to accrue the Preferred
Return on and after the Change of Control Payment Date;
(5) that holders accepting the offer to have their Preferred Units
purchased pursuant to a Change of Control Offer will be required to surrender
the Preferred Unit Certificates, if any, representing the Preferred Units to
the paying agent or the Partnership, as the case may be, at the address
specified in the notice prior to the close of business on the Business Day
preceding the Change of Control Payment Date;
(6) that holders will be entitled to withdraw their acceptance if
the paying agent or the Partnership, as the case may be, receives, not later
than the close of business on the third Business Day preceding the Change of
Control Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the holder, the number of Preferred Units delivered
for purchase and a statement that such holder is withdrawing its election to
have such Preferred Units purchased;
(7) that holders whose Preferred Units are being purchased only in
part will be issued new Preferred Unit Certificates, if so requested pursuant
to Section 17.15, representing Preferred Units with Capital Accounts equal to
the Capital Accounts for the unpurchased portion of the Preferred Units
surrendered;
(8) any other procedures that a holder must follow to accept a
Change of Control Offer or effect withdrawal of such acceptance; and
(9) the name and address of the paying agent.
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On the Change of Control Payment Date, the Partnership shall, to the
extent lawful, (i) accept for payment Preferred Units or portions thereof
tendered pursuant to the Change of Control Offer, and (ii) deposit with the
paying agent money sufficient to pay the purchase price of Preferred Units or
portions thereof so tendered. The paying agent shall, in accordance with the
provisions of Section 8.1 of the Purchase Agreement, pay to each such holder an
amount equal to the purchase price of such Preferred Units so tendered and the
Partnership shall execute and issue Preferred Unit Certificates, if so requested
pursuant to Section 17.15, representing Preferred Units with Capital Accounts
equal to the Capital Accounts for any unpurchased portion of the Preferred Units
surrendered.
16.4. Subordination Agreement.
a) To the extent that, pursuant to the terms of the Subordination
Agreement, dated December 23, 1997, by and among the Administrative Agent (as
defined in the Credit Agreement), the holders of Preferred Units outstanding on
the date hereof and the Partnership, holders of Preferred Units, Warrants and
Warrant Units shall be required to return certain cash distributions or payments
made to such holders by the Partnership hereunder, all such cash distributions
so returned shall be deemed to not have been made hereunder and all rights of
such holders against the Partnership hereunder in respect of such cash
distributions or otherwise shall remain in full force and effect and be
returned, from and after the date on which such distributions or payments were
made, to what they would have been had such distributions or payments not been
made.
b) In the event that the Administrative Agent shall not provide
holders of Preferred Units, Warrants or Warrant Units the acknowledgment
referred to in the last sentence of Section 1 of the Subordination Agreement on
or before five days after the date of the distribution or payment to which
such acknowledgment (had it been given) relates, the Partnership shall, at the
request of any such holder, accept the return of such portion of such
distribution or payment specified by such holder in a notice given to the
Partnership no later than 20 days after the date on which such distribution or
payment was made, whereupon the provisions of Section 16.4(a) shall apply in
respect of returned distribution or payment.
ARTICLE 17. MISCELLANEOUS.
17.1. Headings. The titles and headings of the various sections of this
Agreement are intended solely for convenience of reference and are not intended
to explain, modify or place any interpretation upon any of the provisions of
this Agreement.
17.2. Time of Essence. All times and dates in this Agreement shall be of
the essence.
17.3 Entire Agreement; Modification; Waiver. This Agreement supersedes
all prior and contemporaneous oral agreements, representations and
understandings of the parties. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by all of the parties. No
waiver of any of the provisions of this Agreement shall be deemed, or shall
constitute, a waiver of any other provisions, whether or not similar, nor shall
any
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waiver constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party making the waiver;
17.4. Amendment.
a) Except as otherwise provided in this Section 17.4 or in Section
6.4, this Agreement may be amended only by a writing signed by the General
Partner and approved by a Majority of the Limited Partners.
b) Notwithstanding the foregoing clause (a) of this Section 17.4,
an amendment to the Agreement that modifies a Limited Partner's Units or share
of Net Income and Net Loss in a way that is disproportionate to the way
other Limited Partners are affected by the amendment, must be approved in
writing by the affected Partner.
c) Notwithstanding the foregoing clauses (a) and (b) of this
Section 17.4, (i) no amendment to this Agreement which modifies any provision of
Section 3.7(b) or Article 5, 13, 15 or 16 hereof or this Section 17.4, or any
other provision relating specifically to the holders of Preferred Units, as
such, or the Preferred Units, or any of the definitions used in any such Article
or provisions shall be effective unless and until such amendment is approved in
writing by a majority of the Preferred Units and (ii) any amendment to this
Agreement which modifies any provision of Section 16.2 made without the prior
written consent of the Lenders party to the Credit Agreement shall be void.
(d) Notwithstanding any provision of this Article 17 or Section
6.4 hereof, the General Partner shall not (i) amend this Agreement in any manner
adverse to the holders of the Warrants or Warrant Units or which may impose
liability hereunder on the holders of the Warrants or Warrant Units except as
are required by law or (ii) amended this Agreement so as to restrict the
transferability of the Warrant Units.
(e) Notwithstanding any provision of this Article 17 or Section
6.4 hereof, the General Partner shall have the power to amend this Agreement
from time to time without obtaining the consent of any Limited Partner in
connection with the obligation of the Partnership to issue Units to the holders
of the Warrants upon exercise thereof.
17.5. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California.
17.6. Recovery of Litigation Costs. If any legal action or any
arbitration or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be
entitled.
17.7. Severability. In case any one or more of the provisions contained
in this Agreement or any application of the provisions shall be invalid,
illegal or unenforceable in any
-44-
<PAGE> 51
respect, the validity, legality and enforceability of the remaining provisions
or the remaining applications will not in any way be affected or impaired.
17.8. Notices. Notices given under this Agreement shall be in writing
and shall either be served personally or delivered by Certified first-class
United States mail, postage prepaid return receipt requested. Notices shall be
directed to the Partners at the addresses shown in the Partnership records
required to be kept in accordance with the provisions of Section 4.3(a). Any
Partner may change the Partner's address for purposes of this Section 17.8 by
giving written notice of the new address to the General Partner.
17.9. Gender and Number. As used in this Agreement, the masculine,
feminine or neuter gender, and the singular or plural number, shall each
include the others whenever the context so indicates.
17.10. Additional Documents. Each party hereto agrees to execute and
acknowledge, if required, any and all other documents and writings which may be
necessary to carry out the purposes and provisions hereof.
17.11. Parties in Interest. Nothing in this Agreement, whether express
or implied, is intended to confer any rights or remedies under or by reason of
this Agreement on any Persons other than the parties to it and their respective
successors and assigns and the holders of Warrants and Warrant Units, nor is
anything in this Agreement intended to relieve or discharge the obligation or
liability of any third Persons to any party), to this Agreement, nor shall any
provision give any third Person any right of subrogation or action over or
against any party to this Agreement.
17.12. Counterparts. This Agreement may be executed in one or more
duplicate counterparts, each of which together are deemed to be equivalent to a
signed original for all purposes.
17.13. Statutory References. All references to statutes in this
Agreement shall be read as referring to such statutes as amended from time to
time, and shall also refer to the comparable provisions of any successor
statutes, as amended from time to time.
17.14. Certificate of Nonforeign Status. Each Limited Partner (other
than holders of Preferred Units, Warrants and Warrant Units) represents and
warrants that it is, or is composed of Persons who are United States citizens
or resident aliens. Each Limited Partner will execute Certificates of
Nonforeign Status in the form attached hereto as Exhibit B and will inform the
General Partner immediately of any changes that would render the certificate
invalid or misleading.
17.15. Preferred Unit Certificates. Upon the request by a majority of
the holders of Preferred Units, the Partnership shall provide for the issuance
of Preferred Unit Certificates in such form as shall be reasonably acceptable
to holders of at least 85% of the Preferred Units then outstanding.
17.16. No provision of this Agreement shall abrogate any rights of any
Limited Partner pursuant to Section 15636(f)(1)(g) and Section 15636(f)(3) of
the Act.
-45-
<PAGE> 52
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of December 23, 1997.
GENERAL PARTNER:
MW SIGN CORP., a California corporation
By /s/ E. THOMAS MARTIN
-------------------------------------
Its President
------------------------------------
LIMITED PARTNERS
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For John X. Aguilar*
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Dianne H. Barnes*
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For J. Mark Barnes*
JOHN E. AND ANN MARTIN BOWLER
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Ann Martin Bowler*
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For John E. Bowler*
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Patrice Boyle*
-45-
<PAGE> 53
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For John Brophy*
ROBERT L. AND STEPHANIE A. BURKE
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Stephanie A. Burke*
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Robert L. Burke*
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Mary Ellen Coleman*
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Michael L. Fisher*
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Barry S. Heffner*
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Robert D. Humanson*
ELLIS AND BEVERLY JUMP
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Beverly Jump*
-46-
<PAGE> 54
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Ellis Jump*
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Steve R. Landaker*
FRANCIS X. AND SUSAN LOJACONO
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Susan Lojacono*
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Francis X. Lojacono*
December 23, 1997 FRANCIS X. LOJACONO, AS
TRUSTEE OF THE FRANCIS X.
LOJACONO, M.D., INC. PROFIT
SHARING TRUST*
MW SIGN CORP.
By: /s/ E. THOMAS MARTIN
-------------------------------------
Title:
---------------------------------
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Carole Martin*
December 23, 1997 /s/ E. THOMAS MARTIN
-------------------------------------
E. Thomas Martin*
-47-
<PAGE> 55
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Patricia Martin*
MW SIGN CORP., a California corporation
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
Title: President
---------------------------------
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Gary M. Noren*
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Robert M. Nyland*
TERENCE V. AND JUDY O'KEEFE
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Judy O'Keefe*
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Terence V. O'Keefe*
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Carlos A. Prietto, M.D.*
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Frank M. Sanchez*
-48-
<PAGE> 56
DAVID B. AND MARY WEYRICH
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Mary Weyrich*
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For David B. Weyrich*
NEVADA OUTDOOR, a Nevada corporation
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
Title:
---------------------------------
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Lynn Terlaga*
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Brent Baer*
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For David C. Lamberger*
MW SIGN CORP.
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
For Thomas S. Jones*
*By MW SIGN CORP., a California
corporation, as Attorney-in-Fact
December 23, 1997 By: /s/ E. THOMAS MARTIN
-------------------------------------
E. Thomas Martin
Title: President
-49-
<PAGE> 57
EXHIBIT A
MARTIN MEDIA, A CALIFORNIA LIMITED PARTNERSHIP
LIMITED PARTNERS
At December 23, 1997
NAME Number of Units
- ---- ---------------
MW Sign Corp. (as General Partner)
MW Sign Corp. (as a Limited Partner)
Carole Martin
Robert & Stephanie Burke
Steve Landaker
E. Thomas Martin
David Weyrich
John X. Aquilar
Frank Sanchez
Patrice Boyle
Lojacano Trust
J. Mark Barnes
Dianne Barnes
Robert Humanson
Ellis & Beverly Jump
Francis & Susan Lojacano
Robert Nyland
Gary Noren
Terence & Judy O'Keefe
John & Ann Bowler
John Brophy
Mary Ellen Coleman
Michael Fisher
Barry Heffner
Carlos Prietto
Estate of Patricia Martin
Nevada Outdoor Systems, Inc.
Lynn Terlaga
Brent Baer
Dave Lamberger
Thomas Jones ---------------
TOTAL: ===============
- ------
<PAGE> 58
EXHIBIT B
MARTIN MEDIA, A CALIFORNIA LIMITED PARTNERSHIP
HOLDERS OF PREFERRED UNITS
At December 23, 1997
<TABLE>
<CAPTION>
Name Number of Units
- ---- ---------------
<S> <C>
CIBC Oppenheimer Corp. 7,500
Total Return Portfolio 2,000
IDS Life Income Advantage Fund 1,500
IDS Life Special Income Fund 2,500
High Yield Portfolio 11,500
------
Total 25,000
======
</TABLE>
<PAGE> 1
EXHIBIT 4.45
===============================================================================
INDENTURE
DATED AS OF NOVEMBER 17, 1998
AMONG
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES, AS ISSUER
THE GUARANTORS NAMED HEREIN
AND
THE BANK OF NEW YORK, AS TRUSTEE
$750,000,000
8% SENIOR NOTES DUE 2008
===============================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
310(a) (1)..........................................................................................7.10
(a)(2)..............................................................................................7.10
(a)(3)..............................................................................................N.A.
(a)(4)..............................................................................................N.A.
(a)(5)........................................................................................7.08; 7.10
(b)....................................................................................7.08; 7.10; 11.02
(c).................................................................................................N.A.
311(a)..............................................................................................7.11
(b).................................................................................................7.11
(c).................................................................................................N.A.
312(a)..............................................................................................2.05
(b)................................................................................................11.03
(c)................................................................................................11.03
313(a)..............................................................................................7.06
(b)(1)..............................................................................................N.A.
(b)(2)..............................................................................................7.06
(c)..........................................................................................7.06; 11.02
(d).................................................................................................7.06
314(a).................................................................................4.07; 4.09; 11.02
(b).................................................................................................N.A.
(c)(1).............................................................................................11.04
(c)(2).............................................................................................11.04
(c)(3)..............................................................................................N.A.
(d).................................................................................................N.A.
(e).................................................................................................N.A.
(f)..................................................................................................N.A
315(a)...........................................................................................7.01(b)
(b)..........................................................................................7.05; 11.02
(c)..............................................................................................7.01(a)
(d)..............................................................................................7.01(c)
(e).................................................................................................6.11
316(a) (last sentence)..............................................................................2.09
(a)(1)(A)...........................................................................................6.05
(a)(1)(B)...........................................................................................6.04
(a)(2)..............................................................................................N.A.
(b).................................................................................................6.07
317(a) (1)..........................................................................................6.08
(a)(2)..............................................................................................6.09
(b).................................................................................................2.04
318(a).............................................................................................11.01
(c)................................................................................................11.01
</TABLE>
- ------------------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
i
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE.............................................................1
Section 1.01. Definitions......................................................................1
Section 1.02. Incorporation by Reference of TIA...............................................16
Section 1.03. Rules of Construction...........................................................16
ARTICLE 2. THE SECURITIES........................................................................................17
Section 2.01. Form and Dating.................................................................17
Section 2.02. Execution and Authentication....................................................18
Section 2.03. Registrar and Paying Agent......................................................19
Section 2.04. Paying Agent to Hold Money in Trust.............................................19
Section 2.05. Holder Lists....................................................................19
Section 2.06. Transfer and Exchange...........................................................19
Section 2.07. Replacement Securities..........................................................31
Section 2.08. Outstanding Securities..........................................................32
Section 2.09. Treasury Securities.............................................................32
Section 2.10. Temporary Securities............................................................32
Section 2.11. Cancellation....................................................................33
Section 2.12. Defaulted Interest..............................................................33
Section 2.13. CUSIP Number....................................................................33
Section 2.14. Deposit of Moneys...............................................................33
ARTICLE 3. REDEMPTION............................................................................................33
Section 3.01. Notices to Trustee..............................................................33
Section 3.02. Selection of Securities To Be Redeemed..........................................34
Section 3.03. Notice of Redemption............................................................34
Section 3.04. Effect of Notice of Redemption..................................................35
Section 3.05. Deposit of Redemption Price.....................................................35
Section 3.06. Securities Redeemed in Part.....................................................35
ARTICLE 4. COVENANTS.............................................................................................35
Section 4.01. Payment of Securities...........................................................35
Section 4.02. Maintenance of Office or Agency.................................................35
Section 4.03. Limitation on Restricted Payments...............................................36
Section 4.04. Corporate Existence.............................................................38
Section 4.05. Payment of Taxes and Other Claims...............................................39
Section 4.06. Maintenance of Properties and Insurance.........................................39
Section 4.07. Compliance Certificate; Notice of Default.......................................39
Section 4.08. Compliance with Laws............................................................40
Section 4.09. SEC Reports.....................................................................40
Section 4.10. Waiver of Stay, Extension or Usury Laws.........................................40
Section 4.11. Limitation on Transactions with Affiliates......................................41
Section 4.12. Limitation on Incurrence of Additional Indebtedness.............................41
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Section 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries......................................................41
Section 4.14. [Indentionally Omitted].........................................................42
Section 4.15. Change of Control...............................................................42
Section 4.16. Limitation on Asset Sales.......................................................43
Section 4.17. Limitation on Preferred Stock of Subsidiaries...................................46
Section 4.18. Limitation on Liens.............................................................46
Section 4.19. Guarantees of Certain Indebtedness..............................................46
Section 4.20. Limitation on Sale and Leaseback Transaction....................................46
Section 4.21. Limitation on Line of Business..................................................46
Section 4.22. Limitation on Asset Swaps.......................................................47
ARTICLE 5. SUCCESSOR CORPORATION.................................................................................47
Section 5.01. When Company May Merge, Etc.....................................................47
Section 5.02. Successor Corporation Substituted...............................................48
ARTICLE 6. DEFAULT AND REMEDIES..................................................................................48
Section 6.01. Events of Default...............................................................48
Section 6.02. Acceleration....................................................................49
Section 6.03. Other Remedies..................................................................50
Section 6.04. Waiver of Past Defaults.........................................................50
Section 6.05. Control by Majority.............................................................50
Section 6.06. Limitation on Suits.............................................................50
Section 6.07. Rights of Holders To Receive Payment............................................51
Section 6.08. Collection Suit by Trustee......................................................51
Section 6.09. Trustee May File Proofs of Claim................................................51
Section 6.10. Priorities......................................................................51
Section 6.11. Undertaking for Costs...........................................................52
ARTICLE 7. TRUSTEE 52
Section 7.01. Duties of Trustee...............................................................52
Section 7.02. Rights of Trustees..............................................................53
Section 7.03. Individual Rights of Trustee....................................................54
Section 7.04. Trustee's Disclaimer............................................................54
Section 7.05. Notice of Default...............................................................54
Section 7.06. Reports by Trustee to Holders...................................................55
Section 7.07. Compensation and Indemnity......................................................55
Section 7.08. Replacement of Trustee..........................................................56
Section 7.09. Successor Trustee by Merger, Etc................................................56
Section 7.10. Eligibility; Disqualification...................................................56
Section 7.11. Preferential Collection of Claims Against the Company...........................57
ARTICLE 8. DISCHARGE OF INDENTURE; DEFEASANCE....................................................................57
Section 8.01. Termination of the Company's Obligations........................................57
Section 8.02. Acknowledgment of Discharge by Trustee..........................................59
Section 8.03. Application of Trust Money......................................................59
Section 8.04. Repayment to the Company........................................................59
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Section 8.05. Reinstatement...................................................................59
ARTICLE 9. AMENDMENTS, SUPPLEMENTS AND WAIVERS...................................................................60
Section 9.01. Without Consent of Holder.......................................................60
Section 9.02. With Consent of Holders.........................................................60
Section 9.03. Compliance with TIA.............................................................61
Section 9.04. Revocation and Effect of Consents...............................................61
Section 9.05. Notation on or Exchange of Securities...........................................61
Section 9.06. Trustee To Sign Amendments, Etc.................................................62
ARTICLE 10. [Intentionally Omitted]..............................................................................62
ARTICLE 11. GUARANTEES OF THE SECURITIES.........................................................................62
Section 11.01. Guarantees.....................................................................62
Section 11.02. Execution and Delivery of the Guarantees.......................................63
Section 11.03. Additional Guarantors..........................................................64
Section 11.04. Limitation of Guarantors' Liability............................................64
Section 11.05. Guarantors May Consolidate, etc., on Certain Terms.............................64
Section 11.06. Contribution...................................................................65
Section 11.07. Waiver of Subrogation..........................................................65
ARTICLE 12. [Intentionally Omitted]..............................................................................65
ARTICLE 13. MISCELLANEOUS........................................................................................65
Section 13.01. TIA Controls...................................................................65
Section 13.02. Notices........................................................................66
Section 13.03. Communications by Holders with Other Holders...................................66
Section 13.04. Certificate and Opinion as to Conditions Precedent.............................66
Section 13.05. Statements Required in Certificate.............................................67
Section 13.06. Rules by Trustee, Paying Agent, Registrar......................................67
Section 13.07. Legal Holidays.................................................................67
Section 13.08. Governing Law..................................................................67
Section 13.09. No Adverse Interpretation of Other Agreements..................................67
Section 13.10. No Recourse Against Others.....................................................68
Section 13.11. Successors.....................................................................68
Section 13.12. Duplicate Originals............................................................68
Section 13.13. Severability...................................................................68
</TABLE>
iv
<PAGE> 6
EXHIBITS
Exhibit A-1 Form of Global Security
Exhibit A-2 Form of Regulation S Temporary Global Security
Exhibit B Form of Certificate of Transfer
Exhibit C Form of Certificate of Exchange
Exhibit D Form of Certificate from Acquiring Institutional Accredited
Investor
- ----------------
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of the Indenture.
v
<PAGE> 7
INDENTURE, dated as of November 17, 1998, among Chancellor
Media Corporation of Los Angeles, a Delaware corporation (the "COMPANY"), and
each subsidiary guarantor named on the signature pages hereto (collectively the
"GUARANTORS") and The Bank of New York, a New York banking corporation, as
trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of the
other parties and for the equal and ratable benefit of the Holders of the
Company's 8% Senior Notes due 2008 (the "SECURITIES"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A GLOBAL SECURITY" means a global security in the form of
Exhibit A-1 hereto bearing the Global Security Legend and the Private Placement
Legend and deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Securities sold in reliance on Rule 144A.
"8-1/8% NOTES" means the $500.0 million aggregate principal
amount of 8-1/8% Senior Subordinated Notes due 2007 of the Company, issued
pursuant to an indenture (the "8-1/8% NOTES INDENTURE"), dated as of December
22, 1997, as amended, as the same may be modified or amended from time to time
and future refinancings thereof.
"8-3/4% NOTES" means the $200.0 million aggregate principal
amount of 8-3/4% Senior Subordinated Notes due 2007 of the Company, issued
pursuant to an indenture (the "8-3/4% NOTES INDENTURE"), dated as of June 24,
1997, as amended, as the same may be modified or amended from time to time and
future refinancings thereof.
"9% NOTES" means the $750.0 million aggregate principal
amount of 9% Senior Subordinated Notes due 2008 of the Company, issued pursuant
to an indenture (the "9% NOTES INDENTURE"), dated as of September 30, 1998, as
amended, as the same may be modified or amended from time to time and future
refinancings thereof.
"9-3/8% NOTES" means the $200.0 million aggregate principal
amount of 9-3/8% Senior Subordinated Notes due 2004 of the Company, issued
pursuant to an indenture (the "9-3/8% NOTES INDENTURE"), dated as of February
14, 1996, as amended, as the same may be modified or amended from time to time
and future refinancings thereof.
"9-3/8% NOTES ISSUE DATE" means February 14, 1996.
"10-1/2% NOTES" means the $100.0 million aggregate principal
amount of 10-1/2% Senior Subordinated Notes due 2007 of the Company, issued
pursuant to an amended and restated indenture (the "10-1/2% NOTES INDENTURE"),
dated as of December 19, 1996, and amended and restated as of October 28, 1997,
as amended, as the same may be modified or amended from time to time and future
refinancings thereof.
"ACCELERATION NOTICE" has the meaning provided in Section
6.02.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person or any
of its Subsidiaries existing at the time such Person becomes a Subsidiary of
the Company or at the time it merges or consolidates with the Company or any of
its Subsidiaries or assumed in connection with the acquisition of assets from
such Person and not incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Subsidiary of the
Company or such acquisition, merger or consolidation.
<PAGE> 8
"ACQUIRED PREFERRED STOCK" means Preferred Stock of any
Person at the time such Person becomes a Subsidiary of the Company or at the
time it merges or consolidates with the Company or any of its Subsidiaries and
not issued by such Person in connection with, or in anticipation or
contemplation of, such acquisition, merger or consolidation.
"ADJUSTED NET ASSETS" of a Guarantor at any date shall mean
the lesser of the amount by which (x) the fair value of the property of such
Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under the Guarantee of such Guarantor at such date, and (y) the
present fair salable value of the assets of such Guarantor at such date exceeds
the amount that will be required to pay the probable liability of such
Guarantor on its debts (after giving effect to all other fixed and contingent
liabilities incurred or assumed on such date and after giving effect to any
collection from any Subsidiary of such Guarantor in respect of the obligations
of such Subsidiary under the Guarantee), excluding debt in respect of the
Guarantee, as they become absolute and matured.
"AFFILIATE" of any Person means any other Person who,
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"AFFILIATE TRANSACTION" has the meaning provided in Section
4.11.
"AGENT" means any Registrar, Paying Agent or Co-Registrar.
"ASSET ACQUISITION" means (i) an Investment by the Company or
any Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company or shall be consolidated or merged
with the Company or any Subsidiary of the Company or (ii) the acquisition by
the Company or any Subsidiary of the Company of assets of any Person comprising
a division or line of business of such Person.
"ASSET SALE" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer for value by the
Company or any of its Subsidiaries (excluding any Sale and Leaseback
Transaction or any pledge of assets or stock by the Company or any of its
Subsidiaries) to any Person other than the Company or a Wholly-Owned Subsidiary
of the Company of (i) any Capital Stock of any Subsidiary of the Company or
(ii) any other property or assets of the Company or any Subsidiary of the
Company other than in the ordinary course of business; provided, however, that
for purposes of Section 4.16, Asset Sales shall not include (a) a transaction
or series of related transactions for which the Company or its Subsidiaries
receive aggregate consideration of less than $500,000, (b) transactions
permitted under Section 4.22, (c) transactions permitted under Section 5.01 or
(d) any Contract Buy Out.
"ASSET SWAP" means the execution of a definitive agreement,
subject only to approval of the Federal Communications Commission and other
customary closing conditions, that the Company in good faith believes will be
satisfied, for a substantially concurrent purchase and sale, or exchange, of
Productive Assets between the Company or any of its Subsidiaries and another
Person or group of affiliated Persons; provided that any amendment to or waiver
of any closing condition which individually or in the aggregate is material to
the Asset Swap shall be deemed to be a new Asset Swap.
2
<PAGE> 9
"ATTRIBUTABLE VALUE" in respect of a sale and leaseback
arrangement of any property means, as at the time of determination, the greater
of (i) the fair market value of the property subject to such arrangement (as
determined in good faith by the Board of Directors of the Company) or (ii) the
present value (discounted at the interest rate borne by the Securities,
compounded annually) of the total obligations of the lessee for rental payments
during the remaining term of the lease included in such arrangement.
"BANKRUPTCY LAW" means Title 11, United States Code or any
similar federal, state or foreign law for the relief of debtors.
"BOARD OF DIRECTORS" means, with respect to any Person, the
board of directors (or any other equivalent governing body) of such Person or
any committee of the board of directors of such Person duly authorized, with
respect to any particular matter, to exercise the power of the board of
directors of such Person.
"BOARD RESOLUTION" means, with respect to any Person, a duly
adopted resolution of the Board of Directors of such Person.
"BUSINESS DAY" means a day that is not a Legal Holiday.
"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.
"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, including each class of
common stock and Preferred 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.
"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.
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<PAGE> 10
"CEDEL" means Cedel Bank, S.A.
"CHANCELLOR BROADCASTING" means Chancellor Broadcasting
Company, a Delaware corporation that was merged with and into Evergreen
Mezzanine Holdings Corporation, a Delaware corporation, on the Merger Date.
"CHANCELLOR MEDIA" means Chancellor Media Corporation, a
Delaware corporation formerly known as Evergreen Media 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 Company to any Person or group of related Persons for
purposes of Section 13(d) of the Exchange Act (a "GROUP") (whether or not
otherwise in compliance with the provisions of this Indenture), other than to
Hicks Muse or any of its Affiliates, officers, and directors (the "PERMITTED
HOLDERS"); or (ii) a majority of the Board of Directors of Chancellor Media,
CMHC or the Company shall consist of Persons who are not Continuing Directors;
or (iii) the acquisition by any Person or Group (other than the Permitted
Holders) of the power, directly or indirectly, to vote or direct the voting of
securities having more than 50% of the ordinary voting power for the election
of directors of Chancellor Media, CMHC or the Company.
"CHANGE OF CONTROL DATE" has the meaning provided in Section
4.15.
"CHANGE OF CONTROL OFFER" has the meaning provided in Section
4.15.
"CHANGE OF CONTROL PAYMENT DATE" has the meaning provided in
Section 4.15.
"CMHC" means Chancellor Mezzanine Holdings Corporation, a
Delaware corporation formerly known as Evergreen Mezzanine Holdings
Corporation, and its successors.
"COMMODITY AGREEMENT" means any commodity futures contract,
commodity option or other similar agreement or arrangement entered into by the
Company or any of its Subsidiaries designed to protect the Company or any of
its Subsidiaries against fluctuations in the price of commodities actually used
in the ordinary course of business of the Company and its Subsidiaries.
"COMPANY" means the party named as such in this Indenture
until a successor replaces it pursuant to this Indenture and thereafter means
such successor and also includes for the purposes of any provision contained
herein and required by the TIA any other obligor on the Securities.
"CONSOLIDATED EBITDA" means, with respect to any Person, for
any period, the sum (without duplication) of (i) Consolidated Net Income and
(ii) to the extent Consolidated Net Income has been reduced thereby, (A) all
income taxes of such Person and its Subsidiaries paid or accrued in accordance
with GAAP for such period (other than income taxes attributable to
extraordinary or non-recurring gains or losses), (B) Consolidated Interest
Expense and (C) Consolidated Non-Cash Charges, all as determined on a
consolidated basis for such Person and its Subsidiaries in conformity with
GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any
Person for any period, without duplication, the sum of (i) the interest expense
of such Person and its Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, including, without limitation, (a)
any amortization of debt discount, (b) the net cost under Interest Swap
Obligations (including any amortization of discounts), (c) the interest portion
of any deferred payment obligation, (d) all commissions, discounts and other
fees and charges owed with respect to letters of credit, bankers' acceptance
financing or similar facilities, and (e) all accrued interest and (ii) the
interest component of Capitalized Lease Obligations paid or accrued by such
Person and its Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP.
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<PAGE> 11
"CONSOLIDATED NET INCOME" of any Person means, for any
period, the aggregate net income (or loss) of such Person and its Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
provided that there shall be excluded therefrom, without duplication, (a) gains
and losses from Asset Sales (without regard to the $500,000 limitation set
forth in the definition thereof) or abandonments or reserves relating thereto
and the related tax effects, (b) items classified as extraordinary or
nonrecurring gains and losses, and the related tax effects according to GAAP,
(c) the net income (or loss) of any Person acquired in a pooling of interests
transaction accrued prior to the date it becomes a Subsidiary of such first
referred to Person or is merged or consolidated with it or any of its
Subsidiaries, (d) the net income of any Subsidiary to the extent that the
declaration of dividends or similar distributions by that Subsidiary of that
income is restricted by contract, operation of law or otherwise and (e) the net
income of any Person, other than a Subsidiary, except to the extent of the
lesser of (x) dividends or distributions paid to such first referred to Person
or its Subsidiary by such Person and (y) the net income of such Person (but in
no event less than zero), and the net loss of such Person shall be included
only to the extent of the aggregate Investment of the first referred to Person
or a 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 Media,
CMHC or the Company on the date of this Indenture, (ii) was nominated for
election or elected to the Board of Directors of Chancellor Media, CMHC or the
Company with the affirmative vote of a majority of the Continuing Directors who
were members of such Board of Directors at the time of such nomination or
election, or (iii) is a representative of a Permitted Holder.
"CONTRACT BUY OUT" means the involuntary disposition or
termination (including, without limitation, pursuant to buy out) of a contract
between a media representation company and a client station.
"CORPORATE TRUST OFFICE" means the office of the Trustee at
which at any particular time its corporate trust business shall be principally
administered, which office at the date of execution and delivery of this
Indenture is located at 101 Barclay Street, Floor 21W, New York, New York
10286.
"CRBC" means Chancellor Radio Broadcasting Company, a
Delaware corporation that was merged with and into the Company on the Merger
Date.
"CREDIT AGREEMENT" means the Credit Agreement, dated on or
about February 14, 1996, among Chancellor Broadcasting, CRBC, the lenders
thereto and Bankers Trust Company as managing agent, as such agreement 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 CRBC 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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<PAGE> 12
"CURRENCY AGREEMENT" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect the Company or any of its Subsidiaries against fluctuations in currency
values.
"CUSTODIAN" means any receiver, trustee, assignee,
liquidator, sequestrator or similar official under any Bankruptcy Law.
"DEFAULT" means an event or condition the occurrence of which
is, or with the lapse of time or the giving of notice or both would be an Event
of Default.
"DEFINITIVE SECURITY" means a certificated Security
registered in the name of the Holder thereof and issued in accordance with
Section 2.06 hereof, in the form of Exhibit A-1 hereto except that such
Security shall not bear the Global Security Legend and shall not have the
"Schedule of Exchanges of Interests in the Global Security" attached thereto.
"DEPOSITARY" means, with respect to the Securities issuable
or issued in whole or in part in global form, the Person specified in Section
2.03 hereof as the Depositary with respect to the Securities, and any and all
successors thereto appointed as depositary hereunder and having become such
pursuant to the applicable provision of this Indenture.
"DISCHARGED" has the meaning provided in Section 8.01.
"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 the final maturity date of the Securities.
"EVENT OF DEFAULT" has the meaning provided in Section 6.01.
"EUROCLEAR" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
"EXCHANGE OFFER" has the meaning set forth in the
Registration Rights Agreement.
"EXCHANGE OFFER REGISTRATION STATEMENT" has the meaning set
forth in the Registration Rights Agreement.
"EXCHANGE SECURITIES" means the Securities issued in the
Exchange Offer pursuant to Section 2.06(f) hereof.
"FINANCIAL MONITORING AND OVERSIGHT AGREEMENTS" means the
Financial Monitoring and Oversight Agreement among Hicks, Muse & Co. Partners,
L.P., CRBC and Chancellor Broadcasting, as in effect on the 9-3/8% Notes Issue
Date, and the Financial Advisory Agreement among HM2/Management Partners, L.P.,
CRBC and Chancellor Broadcasting, as in effect on the 9-3/8% Notes Issue Date,
or as each is amended in connection with the merger of Chancellor Broadcasting,
CRBC, Chancellor Media, CMHC and the Company on the Merger Date.
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<PAGE> 13
"FUNDS" has the meaning provided in Section 8.01.
"GAAP" means generally accepted accounting principles as in
effect in the United States of America as of the Issue Date.
"GLOBAL SECURITIES" means, individually and collectively,
each of the Restricted Global Securities and the Unrestricted Global
Securities, in the form of Exhibit A-1 and Exhibit A-2 hereto issued in
accordance with Section 2.01, 2.06(b)(iv), 2.06(d)(ii) or 2.06(f) hereof.
"GLOBAL SECURITY LEGEND" means the legend set forth in
Section 2.06(g)(ii), which is required to be placed on all Global Securities
issued under this Indenture.
"GUARANTEES" means the guarantees of the Securities on a
senior basis by the Guarantors pursuant to Article Eleven.
"GUARANTORS" means (i) initially, all of the Company's
Subsidiaries on the Issue Date except Katz International Limited, Katz
Television Sales Limited, Katz Radio Sales Limited, National Cable
Communications, L.P., WOYE, Inc., WNZT, Inc., WRPC, Inc., WLDI, Inc., WIO,
Inc., Codena Esterlotempo, Inc., WOQI, Inc., Puerto Rican American
Broadcasting, Inc. and WOQI (FM), Inc. and (ii) each of the Company's
Subsidiaries that, subsequent to the Issue Date, executes a supplemental
indenture in which such Subsidiary agrees to be bound by the terms of this
Indenture as a Guarantor; provided that any Person constituting a Guarantor as
described above shall cease to constitute a Guarantor when its respective
Guarantee is released in accordance with the terms thereof.
"HICKS MUSE" means Hicks, Muse, Tate & Furst Incorporated, a
Texas corporation.
"HOLDER" or "SECURITYHOLDER" means the Person in whose name a
Security is registered on the Registrar's books.
"INDEBTEDNESS" means with respect to any Person, without
duplication, any liability of such Person (i) for borrowed money, (ii)
evidenced by bonds, debentures, notes or other similar instruments, (iii)
constituting Capitalized Lease obligations, (iv) incurred or assumed as the
deferred purchase price of property, or pursuant to conditional sale
obligations and title retention agreements (but excluding trade accounts
payable arising in the ordinary course of business), (v) for the reimbursement
of any obligor on any letter of credit, bankers' 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 are secured by any Lien on any property or asset of
such first referred to Person, the amount of such Indebtedness being deemed to
be the lesser of the value of such property or asset or the amount of the
Indebtedness so secured. The amount of Indebtedness of any Person at any date
shall be the outstanding principal amount of all unconditional obligations
described above, as such amount would be reflected on a balance sheet prepared
in accordance with GAAP, and the maximum liability at such date of such Person
for any contingent obligations described above.
"INDENTURE" means this Indenture, as amended or supplemented
from time to time in accordance with the terms hereof.
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<PAGE> 14
"INDIRECT PARTICIPANT" means a Person who holds a beneficial
interest in a Global Security through a Participant.
"INITIAL PURCHASERS" means BT Alex. Brown Incorporated, Chase
Securities Inc., Morgan Stanley & Co. Incorporated and Salomon Smith Barney
Inc., pursuant to the Purchase Agreement.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act.
"INTEREST PAYMENT DATE" means the stated maturity of an
installment of interest on the Securities.
"INTEREST SWAP OBLIGATIONS" means the obligations of any
Person under any interest rate protection agreement, interest rate future,
interest rate option, interest rate swap, interest rate cap or other interest
rate hedge or arrangement.
"INVESTMENT" means (i) any transfer or delivery of cash,
stock or other property of value in exchange for Indebtedness, stock or other
security or ownership interest in any Person by way of loan, advance, capital
contribution, guarantee or otherwise and (ii) an investment deemed to have been
made by the Company at the time any entity which was a Subsidiary of the
Company ceases to be such a Subsidiary in an amount equal to the value of the
loans and advances made, and any remaining ownership interest in, such entity
immediately following such entity ceasing to be a Subsidiary of the Company.
The amount of any non-cash Investment shall be the fair market value of such
Investment, as determined conclusively in good faith by management of the
Company unless the fair market value of such Investment exceeds $1,000,000, in
which case the fair market value shall be determined conclusively in good faith
by the Board of Directors of the Company at the time such Investment is made.
"ISSUE DATE" means the date of original issuance of the
Series A Securities.
"LEGAL HOLIDAY" has the meaning provided in Section 13.07.
"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
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<PAGE> 15
Acquisitions (including, without limitation, any Asset Acquisition giving rise
to the need to make such calculation as a result of such Person or one of its
Subsidiaries (including any Person who becomes a Subsidiary as a result of such
Asset Acquisition) incurring, assuming or otherwise becoming liable for
Indebtedness) 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).
"MATURITY DATE" means November 1, 2008.
"MERGER DATE" means September 5, 1997.
"NET CASH PROCEEDS" means, with respect to any Asset Sale,
the proceeds in the form of cash or Cash Equivalents (including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents) received by the Company or any of its Subsidiaries from such
Asset Sale net of (i) reasonable out-of-pocket expenses and fees relating to
such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions, recording fees, title insurance
premiums, appraisers fees and costs reasonably incurred in preparation of any
asset or property for sale), (ii) taxes paid or reasonably estimated to be
payable (calculated based on the combined state, federal and foreign statutory
tax rates applicable to the Company or the Subsidiary engaged in such Asset
Sale) and (iii) repayment of Indebtedness secured by assets subject to such
Asset Sale; provided that if the instrument or agreement governing such Asset
Sale requires the transferor to maintain a portion of the purchase price in
escrow (whether as a reserve for adjustment of the purchase price or otherwise)
or to indemnify the transferee for specified liabilities in a maximum specified
amount, the portion of the cash or Cash Equivalents that is actually placed in
escrow or segregated and set aside by the transferor for such indemnification
obligation shall not be deemed to be Net Cash Proceeds until the escrow
terminates or the transferor ceases to segregate and set aside such funds, in
whole or in part, and then only to the extent of the proceeds released from
escrow to the transferor or that are no longer segregated and set aside by the
transferor.
"NET PROCEEDS OFFER" has the meaning provided in Section
4.16.
"NON-U.S. PERSON" means a person who is not a U.S. person, as
defined in Regulation S.
"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.
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<PAGE> 16
"OFFERING MEMORANDUM" means the Offering Memorandum dated
November 12, 1998 pursuant to which $750.0 million in aggregate principal
amount of the Securities were offered, and any supplement thereto.
"OFFICER" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, any Vice President, the
Chief Financial Officer, the Treasurer, the Controller, or the Secretary of
such Person, or any other officer designated by the Board of Directors serving
in a similar capacity.
"OFFICERS' CERTIFICATE" means, with respect to any Person, a
certificate signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of such Person and otherwise complying with
the requirements of Sections 13.04 and 13.05, as they relate to the making of
an Officers' Certificate.
"OPINION OF COUNSEL" means a written opinion from legal
counsel who is reasonably acceptable to the Trustee complying with the
requirements of Sections 13.04 and 13.05, as they relate to the giving of an
opinion of Counsel.
"PARTICIPANT" means, with respect to the Depositary,
Euroclear or Cedel, a Person who has an account with the Depositary, Euroclear
or Cedel, respectively (and, with respect to The Depository Trust Company,
shall include Euroclear and Cedel).
"PAYING AGENT" has the meaning provided in Section 2.03,
except that, during the continuance of a Default or Event of Default and for
the purposes of Articles Three and Eight and Sections 4.15 and 4.16, the Paying
Agent shall not be the Company or any Affiliate of the Company.
"PENDING TRANSACTIONS" has the meaning set forth in the
Offering Memorandum.
"PERMITTED INDEBTEDNESS" means, without duplication, (i) the
Securities; (ii) the Guarantees; (iii) Indebtedness of the Company incurred
pursuant to the Credit Agreement in an aggregate principal amount at any time
outstanding not to exceed the sum of the aggregate commitments pursuant to the
Credit Agreement as initially in effect on the 9-3/8% Notes Issue Date; (iv)
the 9-3/8% Notes, the 8-3/4% Notes, the 10-1/2% Notes, the 8-1/8% Notes and the
9% Notes, and the Guarantees thereof; (v) Interest Swap Obligations; provided
that such Interest Swap Obligations are entered into to protect the Company
from fluctuations in interest rates of its Indebtedness; (vi) additional
Indebtedness of the Company 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 Senior Credit Facility); (vii) Refinancing
Indebtedness; (viii) Indebtedness owed by the Company to any Wholly-Owned
Subsidiary or by any Subsidiary to the Company or any Wholly-Owned Subsidiary
of the Company; and (ix) guarantees by Subsidiaries of any Indebtedness
permitted to be incurred pursuant to this Indenture.
"PERMITTED INVESTMENTS" means (i) Investments by the Company
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 Company) engaged in the broadcast business or
businesses reasonably related thereto, including, without limitation, media
representation, sale of advertising and such other activities as are incidental
or similar or related thereto; provided that if any such Investment or series
of related Investments involves an Investment by the Company in excess of
$5,000,000, the Company is able, at the time of such Investment and immediately
after giving effect thereto, to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with Section 4.12, (ii)
Investments received by the Company or its Subsidiaries as consideration for a
sale of assets, including an Asset Sale effected in compliance with Section
4.16,
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<PAGE> 17
(iii) Investments by the Company or any Wholly-Owned Subsidiary of the Company
in any Wholly-Owned Subsidiary of the Company (whether existing on the Issue
Date or created thereafter) or any Person that after such Investments, and as a
result thereof, becomes a Wholly-Owned Subsidiary of the Company and
Investments in the Company by any Wholly-Owned Subsidiary of the Company, (iv)
cash and Cash Equivalents, (v) Investments in securities of trade 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.
"PERMITTED LIENS" means (i) Liens for taxes, assessments and
governmental charges to the extent not required to be paid under this
Indenture, (ii) statutory Liens of landlords and carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen or other like Liens to the extent
not required to be paid under this Indenture, (iii) pledges or deposits to
secure lease obligations or nondelinquent obligations under workers'
compensation, unemployment insurance or similar legislation, (iv) Liens to
secure the performance of public statutory obligations that are not delinquent,
performance bonds or other obligations of a like nature (other than for
borrowed money), in each case incurred in the ordinary course of business, (v)
easements, rights-of-way, restrictions, minor defects or irregularities in
title and other similar charges or encumbrances incurred in the ordinary course
of business not interfering in any material respect with the business of the
Company or its Subsidiaries, (vi) Liens upon specific items of inventory or
other goods and proceeds of any Person securing such Person's obligations in
respect of letters of credit or bankers' acceptances issued or created for the
account of such Person to facilitate the purchase, shipment or storage of such
inventory or other goods in the ordinary course of business, (vii) judgment and
attachment Liens not giving rise to an Event of Default, (viii) leases or
subleases granted to others in the ordinary course of business consistent with
past practice not interfering in any material respect with the business of the
Company or its Subsidiaries, (ix) any interest or title of a lessor in the
property subject to any lease, whether characterized as capitalized or
operating other than any such interest or title resulting from or arising out
of a default by the Company or its Subsidiaries of its obligations under such
lease and (x) Liens arising from filing UCC financing statements for
precautionary purposes in connection with true leases of personal property that
are otherwise permitted under this Indenture and under which the Company or any
of its Subsidiaries is a lessee.
"PERSON" means an individual, partnership, corporation,
limited liability company, unincorporated organization, trust or joint venture,
or a governmental agency or political subdivision thereof.
"PREFERRED STOCK" of any Person means any Capital Stock of
such Person that has preferential rights to any other Capital Stock of such
Person with respect to dividends or redemptions or upon liquidation.
"PRINCIPAL" of any Indebtedness (including the Securities)
means the principal amount of such Indebtedness plus the premium, if any, on
such Indebtedness.
"PRIVATE PLACEMENT LEGEND" means the legend set forth in
Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except
where otherwise permitted by the provisions of this Indenture.
"PROCEEDS PURCHASE DATE" shall have the meaning provided in
Section 4.16.
"PRODUCTIVE ASSETS" means assets of a kind used or usable by
the Company and its Subsidiaries in broadcast businesses or businesses
reasonably related thereto, including, without limitation, media
representation, sale of advertising and such other activities as are incidental
or similar or related thereto, and specifically includes assets acquired
through Asset Acquisitions.
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<PAGE> 18
"PUBLIC EQUITY OFFERING" means an underwritten, fully
registered public offering of Capital Stock (other than Disqualified Capital
Stock) of the Company, Chancellor Media, CMHC or upon consummation of the
Capstar Merger, Capstar Broadcasting Corporation, or any of their respective
successors, pursuant to an effective registration statement filed with the
Commission in accordance with the Securities Act, the gross proceeds of which
are at least $150 million; provided, however, that in the case of a Public
Equity Offering by Chancellor Media, CMHC or upon consummation of the Capstar
Merger, Capstar Broadcasting Corporation, or any of their respective
successors, the issuer of the public equity must contribute to the capital of
the Company an amount sufficient to redeem the Notes, if any, called for
redemption in accordance with the terms thereof. For the avoidance of doubt, no
(i) offerings pursuant to rule 144A of the Securities Act, (ii) "best efforts"
offerings (even if registered), or (iii) private placements of capital stock
shall qualify as "Public Equity Offerings."
"PURCHASE AGREEMENT" means the Purchase Agreement dated as of
November 12, 1998 by and among the Company, the Guarantors and the Initial
Purchasers relating to the purchase of $750.0 million aggregate principal
amount of Securities.
"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not
Disqualified Capital Stock.
"QUALIFIED INSTITUTIONAL BUYER" or "QIB" shall have the
meaning specified in Rule 144A under the Securities Act.
"REDEMPTION DATE" means, with respect to any Securities, the
Maturity Date of such Security or the earlier date on which such Security is to
be redeemed by the Company pursuant to the terms of the Securities.
"REDEMPTION PRICE" shall have the meaning provided in Section
3.03.
"REFINANCING INDEBTEDNESS" means any refinancing by the
Company of Indebtedness of the Company or any of its Subsidiaries incurred in
accordance with Section 4.12 (other than pursuant to clause (iii) 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.
"REGISTERED EXCHANGE OFFER" means the consummation of the
offer to exchange the Series B Securities for all of the outstanding Series A
Securities in accordance with the Registration Rights Agreement.
"REGISTRAR" has the meaning provided in Section 2.03.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement by and among the Company, the Guarantors and the Initial Purchasers,
relating to $750.0 million aggregate principal amount of Securities and dated
the Issue Date, as the same may be amended, supplemented or otherwise modified
from time to time in accordance with the terms thereof.
"REGULATION S" means Regulation S under the Securities Act.
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"REGULATION S GLOBAL SECURITY" means a Regulation S Temporary
Global Security or Regulation S Permanent Global Security, as appropriate.
"REGULATION S PERMANENT GLOBAL SECURITY" means a permanent
global Security in the form of Exhibit A-1 hereto bearing the Global Security
Legend and the Private Placement Legend and deposited with or on behalf of and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Regulation S
Temporary Global Security upon expiration of the Restricted Period.
"REGULATION S TEMPORARY GLOBAL SECURITY" means a temporary
global Security in the form of Exhibit A-2 hereto bearing the Global Security
Legend and the Private Placement Legend and deposited with or on behalf of and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Securities
initially sold in reliance on Rule 903 of Regulation S.
"RESTRICTED DEFINITIVE SECURITY" means a Definitive Security
bearing the Private Placement Legend.
"RESTRICTED GLOBAL SECURITY" means a Global Security bearing
the Private Placement Legend.
"RESTRICTED PAYMENT" has the meaning provided in Section
4.03.
"RESTRICTED PERIOD" means the 40 day restricted period as
defined in Regulation S. "RESTRICTED SECURITY" as defined in Rule 144A(a)(3)
under the Securities Act; provided, however, that the Trustee shall be entitled
to request and conclusively rely on an Opinion of Counsel with respect to
whether any Security constitutes a Restricted Security.
"RULE 144" means Rule 144 promulgated under the Securities
Act.
"RULE 144A" means Rule 144A promulgated under the Securities
Act.
"RULE 903" means Rule 903 promulgated under the Securities
Act.
"RULE 904" means Rule 904 promulgated the Securities Act.
"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 Company or a Subsidiary of any property, whether owned
by the Company or any Subsidiary at the Issue Date or later acquired, which has
been or is to be sold or transferred by the Company 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.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means the Series A Securities and Series B
Securities, as amended or supplemented from time to time in accordance with the
terms hereof, that are issued pursuant to this Indenture.
"SECURITIES ACT" means the Securities Act of 1933, as
amended, and the rules and regulations of the SEC promulgated thereunder.
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"SENIOR CREDIT FACILITY" means the Second Amended and
Restated Loan Agreement, dated April 25, 1997, as amended from time to time,
among the Company, the lenders from time to time named party thereto, Toronto
Dominion (Texas), Inc., 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, stock pledge agreements and other 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 Company
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.
"SERIES A SECURITIES" means the 8% Senior Notes due 2008,
Series A, issued, authenticated and delivered under this Indenture, as amended
or supplemented from time to time pursuant to the terms of this Indenture.
"SERIES B SECURITIES" means the 8% Senior Notes due 2008,
Series B (the terms of which are identical to the Series A Securities except
that, unless any Series B Securities shall be issued as Private Exchange
Securities (as defined in the Registration Rights Agreement), the Series B
Securities shall be registered under the Securities Act, and shall not contain
the respective legend on the face of the form of the Series A Securities), to
be issued in exchange for the Series A Securities pursuant to the Registered
Exchange Offer and this Indenture or the Private Exchange (as defined in the
Registration Rights Agreement).
"SHELF REGISTRATION" means the Shelf Registration as defined
in the Registration Rights Agreement.
"SIGNIFICANT SUBSIDIARY" means for any Person each Subsidiary
of such Person which (i) for the most recent fiscal year of such Person
accounted for more than 5% of the consolidated net income of such Person or
(ii) as at the end of such fiscal year, was the owner of more than 5% of the
consolidated assets of such Person.
"SUBSIDIARY," with respect to any Person, (i) means any
corporation of which the outstanding Capital Stock having at least a majority
of the votes entitled to be cast in the election of directors under ordinary
circumstances shall at the time be owned, directly or indirectly, by such
Person or (ii) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or indirectly,
owned by such Person. Notwithstanding anything in this Indenture to the
contrary, all references to the Company and its consolidated Subsidiaries or to
financial information prepared on a consolidated basis in accordance with GAAP
shall be deemed to include the Company 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 in this Indenture to the contrary, an Unrestricted Subsidiary shall
not be deemed to be a Subsidiary for purposes of this Indenture.
"TAX SHARING AGREEMENT" means the Tax Sharing Agreement
between CRBC and Chancellor Broadcasting, as in effect on the 9-3/8% Notes
Issue Date.
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"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb), as amended, as in effect on the date on which this Indenture is
qualified under the TIA, except as otherwise provided in Section 9.03.
"TRUST OFFICER" means (a) any officer within the corporate
trust department of the Trustee, including any vice president, assistant vice
president, assistant secretary, assistant treasurer, trust officer or any other
officer of the Trustee who customarily performs functions similar to those
performed by the Persons who at the time shall be such officers, respectively,
or to whom any corporate trust matter is referred because of such person's
knowledge of and familiarity with the particular subject and (b) who shall have
direct responsibility for the administration of this Indenture.
"TRUSTEE" means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions of this
Indenture and thereafter means such successor.
"UNRESTRICTED DEFINITIVE SECURITY" means one or more
Definitive Securities that do not bear and are not required to bear the Private
Placement Legend.
"UNRESTRICTED GLOBAL SECURITY" means a permanent global
Security in the form of Exhibit A-1 attached hereto that bears the Global
Security Legend and that has the "Schedule of Exchanges of Interests in the
Global Security" attached thereto, and that is deposited with or on behalf of
and registered in the name of the Depositary, representing a series of
Securities that do not bear the Private Placement Legend.
"UNRESTRICTED SUBSIDIARY" means a Subsidiary of the Company
created after the 9-3/8% Notes Issue Date and so designated by a resolution
adopted by the Board of Directors of the Company, provided that (a) neither the
Company nor any of its other Subsidiaries (other than Unrestricted
Subsidiaries) (1) provides any credit support for any Indebtedness of such
Subsidiary (including any undertaking, agreement or instrument evidencing such
Indebtedness) or (2) is directly or indirectly liable for any Indebtedness of
such Subsidiary, (b) 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
Company or any other Subsidiary of the Company (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
(c) 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 of the Company shall be evidenced to the Trustee by the filing with
the Trustee of a certified copy of the resolution of the Company's Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions. Until
otherwise designated by the Board of Directors of the Company, National Cable
Communications, L.P., a Delaware limited partnership, shall be an Unrestricted
Subsidiary.
"U.S. GOVERNMENT OBLIGATIONS" has the meaning provided in
Section 8.01.
"U.S. LEGAL TENDER" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
"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.
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"WHOLLY-OWNED SUBSIDIARY" of any Person means any Subsidiary
of such Person of which all the outstanding voting securities (other than
directors, qualifying shares) which normally have the right to vote in the
election of directors are owned by such Person or any Wholly-Owned Subsidiary
of such Person.
SECTION 1.02. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA,
such provision is incorporated by reference in and made a part of, this
Indenture. The following TIA terms used in this Indenture have the following
meanings:
"COMMISSION" means the SEC.
"INDENTURE SECURITIES" means the Securities.
"INDENTURE SECURITY HOLDER" means a Holder or a
Securityholder.
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the
Trustee.
"OBLIGOR" on the indenture securities means the Company or
any other obligor on the Company or any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined
by the TIA, defined by TIA reference to another statute or defined by SEC rule
and not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP as in effect on the 9-3/8% Notes Issue
Date;
(3) "OR" is not exclusive;
(4) words in the singular include the plural, and words in
the plural include the singular;
(5) "HEREIN," "HEREOF" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section
or other subdivision; and
(6) all references herein and in the Securities to "INTEREST"
on the Securities shall be deemed to include "ADDITIONAL INTEREST" due and
payable pursuant to the Registration Rights Agreement.
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ARTICLE 2.
THE SECURITIES
SECTION 2.01. FORM AND DATING.
(a) General. The Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibits A-1 and A-2
hereto. The Securities may have notations, legends or endorsements required by
law, stock exchange rule or usage. Each Security shall be dated the date of its
authentication. The Securities shall be in denominations of $1,000 and integral
multiples thereof.
The terms and provisions contained in the Securities shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company, the Guarantors and the Trustee, by their execution and delivery of
this Indenture, expressly agree to such terms and provisions and to be bound
thereby. However, to the extent any provision of any Security conflicts with
the express provisions of this Indenture, the provisions of this Indenture
shall govern and be controlling.
(b) Global Securities. Securities issued in global form shall
be substantially in the form of Exhibits A-1 or A-2 attached hereto (including
the Global Security Legend thereon and the "Schedule of Exchanges of Interests
in the Global Security" attached thereto). Securities issued in definitive form
shall be substantially in the form of Exhibit A-1 attached hereto (but without
the Global Security Legend thereon and without the "Schedule of Exchanges of
Interests in the Global Security" attached thereto). Each Global Security shall
represent such of the outstanding Securities as shall be specified therein and
each shall provide that it shall represent the aggregate principal amount of
outstanding Securities from time to time endorsed thereon and that the
aggregate principal amount of outstanding Securities represented thereby may
from time to time be reduced or increased, as appropriate, to reflect exchanges
and redemptions. Any endorsement of a Global Security to reflect the amount of
any increase or decrease in the aggregate principal amount of outstanding
Securities represented thereby shall be made by the Trustee or the Custodian,
at the direction of the Trustee, in accordance with instructions given by the
Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Securities. Securities offered and sold
in reliance on Regulation S shall be issued initially in the form of the
Regulation S Temporary Global Security, which shall be deposited on behalf of
the purchasers of the Securities represented thereby with the Trustee, at its
Corporate Trust office, as custodian for the Depositary, and registered in the
name of the Depositary or the nominee of the Depositary for the accounts of
designated agents holding on behalf of Euroclear or Cedel Bank, duly executed
by the Company and authenticated by the Trustee as hereinafter provided. The
Restricted Period shall be terminated upon the receipt by the Trustee of (i) a
written certificate from the Depositary, together with copies of certificates
from Euroclear and Cedel Bank certifying that they have received certification
of non-United States beneficial ownership of 100% of the aggregate principal
amount of the Regulation S Temporary Global Security (except to the extent of
any beneficial owners thereof who acquired an interest therein during the
Restricted Period pursuant to another exemption from registration under the
Securities Act and who will take delivery of a beneficial ownership interest in
a 144A Global Security bearing a Private Placement Legend, all as contemplated
by Section 2.06(a)(ii) hereof), and (ii) an Officers' Certificate from the
Company. Following the termination of the Restricted Period, beneficial
interests in the Regulation S Temporary Global Security shall be exchanged for
beneficial interests in Regulation S Permanent Global Securities pursuant to
the Applicable Procedures. Simultaneously with the authentication of Regulation
S Permanent Global Securities, the Trustee shall cancel the Regulation S
Temporary Global Security upon written order of the Company signed by an
Officer. The aggregate principal amount of the Regulation S Temporary Global
Security and the Regulation S Permanent Global Securities may from time to time
be increased or decreased by adjustments made on the records of the Trustee and
the Depositary or its nominee, as the case may be, in connection with transfers
of interests as hereinafter provided.
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(d) Euroclear and Cedel Procedures Applicable. The provisions
of the "Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel
Bank" and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Temporary Global Security and the
Regulation S Permanent Global Securities that are held by Participants through
Euroclear or Cedel Bank.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
An Officer shall sign the Securities for the Company by
manual or facsimile signature. Each Guarantor shall execute a Guarantee in the
manner set forth in Section 11.02. The Company's seal shall be reproduced on
the Securities and may be in facsimile form.
If an Officer whose signature is on a Security no longer
holds that office at the time a Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the
manual signature of the Trustee. The signature shall be conclusive evidence
that the Security has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed
by an Officer (an "Authentication Order"), authenticate Securities for original
issue up to the aggregate principal amount stated in paragraph 4 of the
Securities. The aggregate principal amount of Securities outstanding at any
time may not exceed such amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Securities. An authenticating agent may
authenticate Securities whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an Agent to deal with
Holders or an Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where
Securities may be presented for registration of transfer or for exchange
("REGISTRAR") and an office or agency where Securities may be presented for
payment ("PAYING AGENT"). The Registrar shall keep a register of the Securities
and of their transfer and exchange. The Company may appoint one or more
co-registrars and one or more additional paying agents. The term "Registrar"
includes any co-registrar and the term "Paying Agent" includes any additional
paying agent. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company shall notify the Trustee in writing of the
name and address of any Agent not a party to this Indenture. If the Company
fails to appoint or maintain another entity as Registrar or Paying Agent, the
Trustee shall act as such. The Company or any of its Subsidiaries may act as
Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Securities.
The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as Custodian with respect to the Global
Securities.
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The Company shall, prior to the Record Date, notify the
Paying Agent of any wire transfer instructions for payments that it receives
from Holders.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal, premium, if any, or interest on the Securities, and will
notify the Trustee of any default by the Company in making any such payment.
While any such default continues, the Trustee may require a Paying Agent to pay
all money held by it to the Trustee. The Company at any time may require a
Paying Agent to pay all money held by it to the Trustee. Upon payment over to
the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall
have no further liability for the money. If the Company or a Subsidiary acts as
Paying Agent, it shall segregate and hold in a separate trust fund for the
benefit of the Holders all money held by it as Paying Agent. Upon any
bankruptcy or reorganization proceedings relating to the Company, the Trustee
shall serve as Paying Agent for the Securities.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders and shall otherwise comply with TIA ss. 312(a). If the
Trustee is not the Registrar, the Company shall furnish to the Trustee five (5)
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Securities and the Company shall otherwise comply with TIA ss. 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Securities. A Global
Security may not be transferred as a whole except by the Depositary to a
nominee of the Depositary, by a nominee of the Depositary to the Depositary or
to another nominee of the Depositary, or by the Depositary or any such nominee
to a successor Depositary or a nominee of such successor Depositary. All Global
Securities will be exchanged by the Company for Definitive Securities if (i)
the Company delivers to the Trustee notice from the Depositary that it is
unwilling or unable to continue to act as Depositary or that it is no longer a
clearing agency registered under the Exchange Act and, in either case, a
successor Depositary is not appointed by the Company within 120 days after the
date of such notice from the Depositary or (ii) the Company in its sole
discretion determines that the Global Securities (in whole but not in part)
should be exchanged for Definitive Securities and delivers a written notice to
such effect to the Trustee; provided that in no event shall the Regulation S
Temporary Global Security be exchanged by the Company for Definitive Securities
prior to (x) the expiration of the Restricted Period and (y) the receipt by the
Registrar of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under
the Securities Act and provided further, there shall be no continuing Default
or Event of Default. Upon the occurrence of either of the preceding events in
(i) or (ii) above, Definitive Securities shall be registered in such names as
the Depositary shall instruct the Trustee, in writing. Global Securities also
may be exchanged or replaced, in whole or in part, as provided in Sections 2.07
and 2.10 hereof. Every Security executed, authenticated and delivered in
exchange for, or in lieu of, a Global Security or any portion thereof, pursuant
to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be executed,
authenticated and delivered in the form of, and shall be, a Global Security. A
Global Security may not be exchanged for another Security other than as
provided in this Section 2.06(a); however, beneficial interests in a Global
Security may be transferred and exchanged as provided in Section 2.06(b),(c) or
(f) hereof.
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(b) Transfer and Exchange of Beneficial Interests in the
Global Securities. The transfer and exchange of beneficial interests in the
Global Securities shall be effected through the Depositary, in accordance with
the provisions of this Indenture and the Applicable Procedures. Beneficial
interests in the Restricted Global Securities shall be subject to restrictions
on transfer comparable to those set forth herein to the extent required by the
Securities Act. Transfers of beneficial interests in the Global Securities also
shall require compliance with either subparagraph (i) or (ii) below, as
applicable, as well as one or more of the other following subparagraphs, as
applicable:
(i) Transfer of Beneficial Interests in the Same Global
Security. Beneficial interests in any Restricted Global Security may
be transferred to Persons who take delivery thereof in the form of a
beneficial interest in the same Restricted Global Security in
accordance with the transfer restrictions set forth in the Private
Placement Legend; provided, however, that prior to the expiration of
the Restricted Period, transfers of beneficial interests in the
Temporary Regulation S Global Security may not be made to a U.S.
Person or for the account or benefit of a U.S. Person (other than an
Initial Purchaser). Beneficial interests in any Unrestricted Global
Security may be transferred to Persons who take delivery thereof in
the form of a beneficial interest in an Unrestricted Global Security.
No written orders or instructions shall be required to be delivered to
the Registrar to effect the transfers described in this Section
2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial
Interests in Global Securities. In connection with all transfers and
exchanges of beneficial interests that are not subject to Section
2.06(b)(i) above, the transferor of such beneficial interest must
deliver to the Registrar either (A) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to
credit or cause to be credited a beneficial interest in another Global
Security in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with
the Applicable Procedures containing information regarding the
Participant account to be credited with such increase or (B) (1) a
written order from a Participant or an Indirect Participant given to
the Depositary in accordance with the Applicable Procedures directing
the Depositary to cause to be issued a Definitive Security in an
amount equal to the beneficial interest to be transferred or exchanged
and (2) instructions given by the Depositary to the Registrar
containing information regarding the Person in whose name such
Definitive Security shall be registered to effect the transfer or
exchange referred to in (1) above; provided that in no event shall
Definitive Securities be issued upon the transfer or exchange of
beneficial interests in the Regulation S Temporary Global Security
prior to (x) the expiration of the Restricted Period and (y) the
receipt by the Registrar of any certificates required pursuant to Rule
903 under the Securities Act. Upon consummation of an Exchange Offer
by the Company in accordance with Section 2.06(f) hereof, the
requirements of this Section 2.06(b)(ii) shall be deemed to have been
satisfied upon receipt by the Registrar of the instructions contained
in the Letter of Transmittal delivered by the Holder of such
beneficial interests in the Restricted Global Securities. Upon
satisfaction of all of the requirements for transfer or exchange of
beneficial interests in Global Securities contained in this Indenture
and the Securities or otherwise applicable under the Securities Act,
the Trustee shall adjust the principal amount of the relevant Global
Securities pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Security. A beneficial interest in any Restricted Global
Security may be transferred to a Person who takes delivery thereof in
the form of a beneficial interest in another Restricted Global
Security if the transfer complies with the requirements of Section
2.06(b)(ii) above and the Registrar receives the following:
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(A) if the transferee will take delivery in the form
of a beneficial interest in the 144A Global Security, then
the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (1)
thereof; and
(B) if the transferee will take delivery in the form
of a beneficial interest in the Regulation S Temporary Global
Security or the Regulation S Global Security, then the
transferor must deliver a certificate in the form of Exhibit
B hereto, including the certifications in item (2) thereof;
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Security for Beneficial Interests in the
Unrestricted Global Security. A beneficial interest in any Restricted
Global Security may be exchanged by any holder thereof for a
beneficial interest in an Unrestricted Global Security or transferred
to a Person who takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Security if the exchange or
transfer complies with the requirements of Section 2.06(b)(ii) above
and:
(A) such exchange or transfer is effected pursuant
to the Exchange Offer in accordance with the Registration
Rights Agreement and the holder of the beneficial interest to
be transferred, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Securities or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Security proposes to
exchange such beneficial interest for a beneficial
interest in an Unrestricted Global Security, a
certificate from such holder in the form of Exhibit
C hereto, including the certifications in item
(1)(a) thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Security proposes to
transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a
beneficial interest in an Unrestricted Global
Security, a certificate from such holder in the form
of Exhibit B hereto, including the certifications in
item (4) thereof;
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and, in each such case set forth in this
subparagraph (D), an Opinion of Counsel in form
reasonably acceptable to the Registrar to the effect
that such exchange or transfer is in compliance with
the Securities Act and that the restrictions on
transfer contained herein and in the Private
Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B)
or (D) above at a time when an Unrestricted Global Security has not yet been
issued, the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Securities in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Security
cannot be exchanged for, or transferred to Persons who take delivery thereof in
the form of, a beneficial interest in a Restricted Global Security.
(c) Transfer or Exchange of Beneficial Interests for
Definitive Securities.
(i) Beneficial Interests in Restricted Global Securities to
Restricted Definitive Securities. If any holder of a beneficial
interest in a Restricted Global Security proposes to exchange such
beneficial interest for a Restricted Definitive Security or to
transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Restricted Definitive Security, then, upon
receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Security proposes to exchange such
beneficial interest for a Restricted Definitive Security, a
certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred
to a QIB in accordance with Rule 144A under the Securities
Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred
to a Non-U.S. Person in an offshore transaction in accordance
with Rule 903 or Rule 904 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements
of the Securities Act in accordance with Rule 144 under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(a)
thereof;
(E) if such beneficial interest is being transferred
to an Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the
Securities Act other than those listed in subparagraphs (B)
through (D) above, a certificate to the effect set forth in
Exhibit B hereto, including the certifications, certificates
and Opinion of Counsel required by item (3)(d) thereof:
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<PAGE> 29
(F) if such beneficial interest is being transferred
to the Company or any of its Subsidiaries, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(c)
thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Security to be reduced accordingly pursuant
to Section 2.06(h) hereof, and the Company shall execute and
the Trustee shall authenticate and deliver to the Person
designated in the instructions a Definitive Security in the
appropriate principal amount. Any Definitive Security issued
in exchange for a beneficial interest in a Restricted Global
Security pursuant to this Section 2.06(c) shall be registered
in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall
instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The
Trustee shall deliver such Definitive Securities to the
Persons in whose names such Securities are so registered. Any
Definitive Security issued in exchange for a beneficial
interest in a Restricted Global Security pursuant to this
Section 2.06(c)(i) shall bear the Private Placement Legend
and shall be subject to all restrictions on transfer
contained therein.
(ii) Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Security may
not be exchanged for a Definitive Security or transferred to a Person
who takes delivery thereof in the form of a Definitive Security prior
to (x) the expiration of the Restricted Period and (y) the receipt by
the Registrar of any certificates required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act, except in the case of a
transfer pursuant to an exemption from the registration requirements
of the Securities Act other than Rule 903 or Rule 904.
(iii) Beneficial Interests in Restricted Global Securities to
Unrestricted Definitive Securities. A holder of a beneficial interest
in a Restricted Global Security may exchange such beneficial interest
for an Unrestricted Definitive Security or may transfer such
beneficial interest to a Person who takes delivery thereof in the form
of an Unrestricted Definitive Security only if:
(A) such exchange or transfer is effected pursuant
to the Exchange Offer in accordance with the Registration
Rights Agreement and the holder of such beneficial interest,
in the case of an exchange, or the transferee, in the case of
a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Securities
or (3) a Person who is an affiliate (as defined in Rule 144)
of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
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(D) the Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Security proposes to
exchange such beneficial interest for a Definitive
Security that does not bear the Private Placement
Legend, a certificate from such holder in the form
of Exhibit C hereto, including the certifications in
item (1)(b) thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Security proposes to
transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a
Definitive Security that does not bear the Private
Placement Legend, a certificate from such holder in
the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D) an
Opinion of Counsel in form reasonably acceptable to the
Registrar to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions
on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance
with the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Securities
to Unrestricted Definitive Securities. If any holder of a beneficial
interest in an Unrestricted Global Security proposes to exchange such
beneficial interest for a Definitive Security or to transfer such
beneficial interest to a Person who takes delivery thereof in the form
of a Definitive Security, then, upon satisfaction of the conditions
set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the
aggregate principal amount of the applicable Global Security to be
reduced accordingly pursuant to Section 2.06(h) hereof, and the
Company shall execute and the Trustee shall authenticate and deliver
to the Person designated in the instructions a Definitive Security in
the appropriate principal amount. Any Definitive Security issued in
exchange for a beneficial interest pursuant to this Section
2.06(c)(iv) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through instructions
from the Depositary and the Participant or Indirect Participant. The
Trustee shall deliver such Definitive Securities to the Persons in
whose names such Securities are so registered. Any Definitive Security
issued in exchange for a beneficial interest pursuant to this Section
2.06(c)(iv) shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Securities for
Beneficial Interests in Global Securities.
(i) Restricted Definitive Securities to Beneficial Interests
in Restricted Global Securities. If any Holder of a Restricted
Definitive Security proposes to exchange such Security for a
beneficial interest in a Restricted Global Security or to transfer
such Restricted Definitive Securities to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global
Security, then, upon receipt by the Registrar of the following
documentation:
(A) if the Holder of such Restricted Definitive
Security proposes to exchange such Security for a beneficial
interest in a Restricted Global Security, a certificate from
such Holder in the form of Exhibit C hereto, including the
certifications in item (2)(b) thereof;
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<PAGE> 31
(B) if such Restricted Definitive Security is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1)
thereof;
(C) if such Restricted Definitive Security is being
transferred to a Non-U.S. Person in an offshore transaction
in accordance with Rule 903 or Rule 904 under the Securities
Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (2) thereof;
(D) if such Restricted Definitive Security is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule
144 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
(E) if such Restricted Definitive Security is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration requirements
of the Securities Act other than those listed in
subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required
by item (3)(d) thereof;
(F) if such Restricted Definitive Security is being
transferred to the Company or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(G) if such Restricted Definitive Security is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Security,
and increase or cause to be increased the aggregate principal
amount of, in the case of clause (A) above, the appropriate
Restricted Global Security, in the case of clause (B) above,
the 144A Global Security, and in the case of clause (c)
above, the Regulation S Global Security.
(ii) Restricted Definitive Securities to Beneficial Interests
in Unrestricted Global Securities. A Holder of a Restricted Definitive
Security may exchange such Security for a beneficial interest in an
Unrestricted Global Security or transfer such Restricted Definitive
Security to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Security only if:
(A) such exchange or transfer is effected pursuant
to the Exchange Offer in accordance with the Registration
Rights Agreement and the Holder, in the case of an exchange,
or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Securities or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
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<PAGE> 32
(B) such transfer is effected pursuant to the Shelf
Registration in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive
Securities proposes to exchange such Securities for
a beneficial interest in the Unrestricted Global
Security, a certificate from such Holder in the form
of Exhibit C hereto, including the certifications in
item (1)(c) thereof; or
(2) if the Holder of such Definitive
Securities proposes to transfer such Securities to a
Person who shall take delivery thereof in the form
of a beneficial interest in the Unrestricted Global
Security, a certificate from such Holder in the form
of Exhibit B hereto, including the certifications in
item (4) thereof;
and, in each such case set forth in this subparagraph (D) an
Opinion of Counsel in form reasonably acceptable to the
Registrar to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions
on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance
with the Securities Act.
Upon satisfaction of the conditions of any of the
subparagraphs in this Section 2.06(d)(ii), the Trustee shall
cancel the Definitive Securities and increase or cause to be
increased the aggregate principal amount of the Unrestricted
Global Security.
(iii) Unrestricted Definitive Securities to Beneficial
Interests in Unrestricted Global Securities. A Holder of an
Unrestricted Definitive Security may exchange such Security for a
beneficial interest in an Unrestricted Global Security or transfer
such Definitive Securities to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Security
at any time. Upon receipt of a request for such an exchange or
transfer, the Trustee shall cancel the applicable Unrestricted
Definitive Security and increase or cause to be increased the
aggregate principal amount of one of the Unrestricted Global
Securities.
If any such exchange or transfer from a Definitive Security
to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D)
or (iii) above at a time when an Unrestricted Global Security has not yet been
issued, the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Securities in an aggregate principal amount equal to the
principal amount of Definitive Securities so transferred.
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<PAGE> 33
(e) Transfer and Exchange of Definitive Securities for
Definitive Securities. Upon request by a Holder of Definitive Securities and
such Holder's compliance with the provisions of this Section 2.06(e), the
Registrar shall register the transfer or exchange of Definitive Securities.
Prior to such registration of transfer or exchange, the requesting Holder shall
present or surrender to the Registrar the Definitive Securities duly endorsed
or accompanied by a written instruction of transfer in form satisfactory to the
Registrar duly executed by such Holder or by its attorney, duly authorized in
writing. In addition, the requesting Holder shall provide any additional
certifications, documents and information, as applicable, required pursuant to
the following provisions of this Section 2.06(e).
(i) Restricted Definitive Securities to Restricted Definitive
Securities. Any Restricted Definitive Security may be transferred to
and registered in the name of Persons who take delivery thereof in the
form of a Restricted Definitive Security if the Registrar receives the
following:
(A) if the transfer will be made pursuant to Rule
144A under the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule
903 or Rule 904, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any
other exemption from the registration requirements of the
Securities Act, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required
by item (3)(d) thereof.
(ii) Restricted Definitive Securities to Unrestricted
Definitive Securities. Any Restricted Definitive Security may be
exchanged by the Holder thereof for an Unrestricted Definitive
Security or transferred to a Person or Persons who take delivery
thereof in the form of an Unrestricted Definitive Security if:
(A) such exchange or transfer is effected pursuant
to the Exchange Offer in accordance with the Registration
Rights Agreement and the Holder, in the case of an exchange,
or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Securities or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the
Shelf Registration in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted
Definitive Securities proposes to exchange such
Securities for an Unrestricted Definitive Security,
a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in
item (1)(d) thereof; or
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<PAGE> 34
(2) if the Holder of such Restricted
Definitive Securities proposes to transfer such
Securities to a Person who shall take delivery
thereof in the form of an Unrestricted Definitive
Security, a certificate from such Holder in the form
of Exhibit B hereto, including the certifications in
item (4) thereof;
and, in each such case set forth in this subparagraph (D),
Opinion of Counsel in form reasonably acceptable to the
Company to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions
on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance
with the Securities Act.
(iii) Unrestricted Definitive Securities to Unrestricted
Definitive Securities. A Holder of Unrestricted Definitive Securities
may transfer such Securities to a Person who takes delivery thereof in
the form of an Unrestricted Definitive Security. Upon receipt of a
request to register such a transfer, the Registrar shall register the
Unrestricted Definitive Securities pursuant to the instructions from
the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer
in accordance with the Registration Rights Agreement, the Company shall issue
and, upon receipt of an Authentication Order in accordance with Section 2.02,
the Trustee shall authenticate (i) one or more Unrestricted Global Securities
in an aggregate principal amount equal to the principal amount of the
beneficial interests in the Restricted Global Securities tendered for
acceptance by Persons that certify in the applicable Letters of Transmittal
that (x) they are not broker-dealers, (y) they are not participating in a
distribution of the Exchange Securities and (z) they are not affiliates (as
defined in Rule 144) of the Company, and accepted for exchange in the Exchange
Offer and (ii) Definitive Securities in an aggregate principal amount equal to
the principal amount of the Restricted Definitive Securities accepted for
exchange in the Exchange Offer. Concurrently with the issuance of such
Securities, the Trustee shall cause the aggregate principal amount of the
applicable Restricted Global Securities to be reduced accordingly, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Securities so accepted
Definitive Securities in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face
of all Global Securities and Definitive Securities issued under this Indenture
unless specifically stated otherwise in the applicable provisions of this
Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below,
each Global Security and each Definitive Security (and all
Securities issued in exchange therefor or substitution
thereof) shall bear the legend in substantially the following
form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
ACT) (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)
(1), (2), (3) OR (7) UNDER THE ACT) OR (C) IT IS NOT A U.S. PERSON AND
IS ACQUIRING
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<PAGE> 35
THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT
WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL
OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE ACT, (C)
INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES (OR HAS HAD FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRANSFER AGENT A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED
FROM THE TRANSFER AGENT), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE ACT, (E) PURSUANT TO
THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT (IF
AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN
TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE
PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR
TO SUCH TRANSFER, FURNISH TO THE TRANSFER, FURNISH TO THE TRANSFER
AGENT AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT.
AS USED HEREIN, THE TERMS "OFF-SHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE
ACT."
(B) Notwithstanding the foregoing, any Global
Security or Definitive Security issued pursuant to
subparagraphs (b)(iv), (c)(ii), (c)(iii), (c)(iv), (d)(ii),
(d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and
all Securities issued in exchange therefor or substitution
thereof) shall not bear the Private Placement Legend.
(ii) Global Security Legend. Each Global Security shall bear
a legend in substantially the following form:
"THIS GLOBAL SECURITY IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS SECURITY) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO
ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY
MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO THE
INDENTURE, (II) THIS GLOBAL SECURITY MAY BE EXCHANGED IN WHOLE BUT NOT
IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS
GLOBAL SECURITY MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION
PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL
SECURITY MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR
WRITTEN CONSENT OF THE COMPANY."
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<PAGE> 36
(iii) Regulation S Temporary Global Security Legend. The
Regulation S Temporary Global Security shall bear a legend in
substantially the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL SECURITY,
AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR
CERTIFICATED SECURITIES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED
HEREIN)."
(h) Cancellation and/or Adjustment of Global Securities. At
such time as all beneficial interests in a particular Global Security have been
exchanged for Definitive Securities or a particular Global Security has been
redeemed, repurchased or cancelled in whole and not in part, each such Global
Security shall be returned to or retained and cancelled by the Trustee in
accordance with Section 2.11 hereof. At any time prior to such cancellation, if
any beneficial interest in a Global Security is exchanged for or transferred to
a Person who will take delivery thereof in the form of a beneficial interest in
another Global Security or for Definitive Securities, the principal amount of
Securities represented by such Global Security shall be reduced accordingly and
an endorsement shall be made on such Global Security by the Trustee or by the
Depositary at the direction of the Trustee to reflect such reduction; and if
the beneficial interest is being exchanged for or transferred to a Person who
will take delivery thereof in the form of a beneficial interest in another
Global Security, such other Global Security shall be increased accordingly and
an endorsement shall be made on such Global Security by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global
Securities and Definitive Securities upon the Company's order or at
the Registrar's request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Security or to a Holder of a
Definitive Security for any registration of transfer or exchange, but
the Company may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar governmental
charge payable upon exchange or transfer pursuant to Sections 2.10,
3.06, 3.09, 4.10, 4.15 and 9.05 hereof).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Security selected for redemption in whole
or in part, except the unredeemed portion of any Security being
redeemed in part.
(iv) All Global Securities and Definitive Securities issued
upon any registration of transfer or exchange of Global Securities or
Definitive Securities shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Global Securities or Definitive Securities
surrendered upon such registration of transfer or exchange.
(v) The Registrar shall not be required (A) to issue, to
register the transfer of or to exchange any Securities during a period
beginning at the opening of business 15 days before the day of any
selection of Securities for redemption under Section 3.02 hereof and
ending at the close of business on the day of selection, (B) to
register the transfer of or to exchange any Security so selected for
redemption in whole or in part, except the unredeemed portion of any
Security being redeemed in part or (c) to register the transfer of or
to exchange a Security between a record date and the next succeeding
Interest Payment Date.
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(vi) Prior to due presentment for the registration of a
transfer of any Security, the Trustee, any Agent and the Company may
deem and treat the Person in whose name any Security is registered as
the absolute owner of such Security for the purpose of receiving
payment of principal of and interest on such Securities and for all
other purposes, and none of the Trustee, any Agent or the Company
shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Securities and
Definitive Securities in accordance with the provisions of Section
2.02 hereof.
(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to this
Section 2.06 to effect a registration of transfer or exchange may be
submitted by facsimile.
SECTION 2.07. REPLACEMENT SECURITIES
If a mutilated Security is surrendered to the Trustee or if
the Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee, shall authenticate a
replacement Security if the Trustee's requirements are met. If required by the
Trustee or the Company, such Holder must provide an indemnity bond or other
indemnity sufficient in the judgment of the Company and the Trustee to protect
the Company, the Trustee or, any Agent from any loss which any of them may
suffer if a Security is replaced. The Company may charge such Holder for its
reasonable, out of pocket expenses in replacing a Security, including
reasonable fees and expenses of counsel.
Every replacement Security shall constitute an additional
obligation of the Company.
SECTION 2.08. OUTSTANDING SECURITIES.
Securities outstanding at any time are all the Securities
that have been authenticated by the Trustee except those cancelled by it, those
delivered to it for cancellation, and those described in this Section as not
outstanding. A Security does not cease to be outstanding because the Company or
any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other
than a mutilated Security surrendered for replacement), it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
A mutilated Security ceases to be outstanding upon surrender
of such Security and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent
holds U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of
the principal and interest due on the Securities payable on that date and is
not prohibited from paying such money to the Holders thereof pursuant to the
terms of this Indenture, then on and after that date such Securities cease to
be outstanding and interest on them ceases to accrue.
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SECTION 2.09. TREASURY SECURITIES.
In determining whether the Holders of the required principal
amount of Securities have concurred in any direction, waiver, consent or
notice, Securities owned by the Company or an Affiliate shall be considered as
though they are not outstanding, except that for the purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities which the Trustee knows are so owned shall be so
considered. The Company shall notify the Trustee, in writing, when it or any of
its Affiliates repurchases or otherwise acquires Securities, of the aggregate
principal amount of such Securities so repurchased or otherwise acquired.
SECTION 2.10. TEMPORARY SECURITIES
Until certificates representing Securities are ready for
delivery, the Company may prepare and the Trustee shall authenticate Temporary
Securities upon receipt of a written order of the Company in the form of an
Officers' Certificate. The Officers' Certificate shall specify the amount of,
Temporary Securities to be authenticated and the date on which the Temporary
Securities are to be authenticated. Temporary Securities shall be substantially
in the form of certificated Securities but may have variations that the Company
considers appropriate for temporary Securities and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall
prepare and execute, and the Trustee shall authenticate upon receipt of a
written Authentication Order definitive Securities in exchange for Temporary
Securities.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Securities to the Trustee
for cancellation. The Registrar and Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent,
and no one else, shall cancel and, at the written direction of the Company,
shall dispose of all Securities surrendered for transfer exchange, payment or
cancellation. Subject to Section 2.07, the Company may not issue new Securities
to replace Securities that the Company has paid or delivered to the Trustee for
cancellation. If the Company shall acquire any of the Securities, such
acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Securities unless and until the same are
surrendered to the Trustee for cancellation pursuant to this Section 2.11.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the
Securities, it shall pay the defaulted interest, plus (to the extent lawful)
any, interest payable on the defaulted interest, to the Persons who are Holders
on a subsequent special record date, which date shall be the fifteenth day next
preceding the date fixed by the Company for the payment of defaulted interest
or the next succeeding Business Day if such date is not a Business Day. At
least 15 days before the subsequent special record date, the Company shall mail
to each Holder, with a copy to the Trustee, a notice that states the subsequent
special record date, the payment date and the amount of defaulted interest, and
interest payable on such defaulted interest, if any, to be paid.
SECTION 2.13. CUSIP NUMBER.
The Company in issuing the Securities may use a "CUSIP"
number, and if so, the Trustee shall use the CUSIP number in notices of
redemption or exchange as a convenience to Holders; provided that no
representation is hereby deemed to be made by the Trustee as to the correctness
or accuracy of the CUSIP number printed in the notice or on the Securities, and
that reliance may be placed only on the other identification numbers printed on
the Securities. The Company will promptly notify the Trustee of any change in
the CUSIP numbers.
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SECTION 2.14. DEPOSIT OF MONEYS.
Prior to 10:00 a.m. New York City time on each Interest
Payment Date and Maturity Date, the Company shall have deposited with the
Paying Agent in immediately available funds money sufficient to make cash
payments, if any, due on such Interest Payment Date or Maturity Date, as the
case may be, in a timely manner which permits the Paying Agent to remit payment
to the Holders on such Interest Payment Date or Maturity Date, as the case may
be.
ARTICLE 3.
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Securities pursuant to
paragraph 6 of the Securities, it shall notify the Trustee and the Paying Agent
in writing of the Redemption Date and the principal amount of the Securities to
be redeemed and whether it wants the Trustee to give notice of redemption to
the Holders (at the Company's expense) at least 30 days (unless a shorter
notice shall be satisfactory to the Trustee) but not more than 90 days before
the Redemption Date. Any such notice may be cancelled at any time prior to
notice of such redemption being mailed to any Holder and shall thereby be void
and of no effect.
SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED.
If fewer than all of the Securities are to be redeemed, the
Trustee shall select the Securities to be redeemed in compliance with the
requirements of the principal national securities exchange, if any, on which
the Securities being redeemed are listed, or, if the Securities are not listed
on a national securities exchange, on a pro rata basis, by lot or in such other
fair and reasonable manner chosen at the discretion of the Trustee; provided,
however, that a redemption pursuant to the provisions of paragraph 6(b) of the
Securities shall be made on a pro rata basis.
The Trustee shall make the selection from the Securities
outstanding and not previously called for redemption and shall promptly notify
the Company in writing of the Securities selected for redemption and, in the
case of any Security selected for partial redemption, the principal amount
thereof to be redeemed. Securities in denominations of $1,000 or less may be
redeemed only in whole. The Trustee may select for redemption portions (equal
to $1,000 or any integral multiple thereof) of the principal of Securities that
have denominations larger than $1,000. Provisions of this Indenture that apply
to Securities called for redemption also apply to portions of Securities called
for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a
Redemption Date, the Company shall mail or cause to be mailed a notice of
redemption by first-class mail to each Holder whose Securities are to be
redeemed, with a copy to the Trustee. At the Company's request, the Trustee
shall give the notice of redemption in the Company's name and at the Company's
expense. Each notice for redemption shall identify the Securities to be
redeemed (including CUSIP numbers) and shall state:
(1) the Redemption Date;
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(2) the redemption price and the amount of accrued interest,
if any, to be paid (the "REDEMPTION PRICE");
(3) the paragraph of the Securities pursuant to which the
Securities are being redeemed;
(4) the name and address of the Paying Agent;
(5) that Securities called for redemption must be surrendered
to the Paying Agent to collect the Redemption Price;
(6) that, unless the Company defaults in making the
redemption payment, interest on Securities called for redemption ceases to
accrue on and after the Redemption Date, and the only remaining right of the
Holders of such Securities is to receive payment of the Redemption Price upon
surrender to the Paying Agent of the Securities redeemed;
(7) if any Security is being redeemed in part, the portion of
the principal amount of such Security to be redeemed and that, after the
Redemption Date, and upon surrender of such Security, a new Security or
Securities in the aggregate principal amount equal to the unredeemed portion
thereof will be issued; and
(8) if fewer than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Securities to be
redeemed and the aggregate principal amount of Securities to be outstanding
after such partial redemption.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with
Section 3.03, Securities called for redemption become due and payable on the
Redemption Date and at the Redemption Price. Upon surrender to the Trustee or
Paying Agent, such Securities called for redemption shall be paid at the
Redemption Price.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
On or before the Redemption Date, the Company shall deposit
with the Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price
of all Securities to be redeemed on that date. The Paying Agent shall promptly
return to the Company any U.S. Legal Tender so deposited which is not required
for that purpose, except with respect to monies owed as obligations to the
Trustee pursuant to Article Seven.
If the Company complies with the preceding paragraph, then,
unless the Company defaults in the payment of such Redemption Price, interest
on the Securities to be redeemed will cease to accrue on and after the
applicable Redemption Date, whether or not such Securities are presented for
payment.
SECTION 3.06. SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is to be redeemed in part,
the Trustee shall authenticate for the Holder a new Security or Securities
equal in principal amount to the unredeemed portion of the Security
surrendered.
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ARTICLE 4.
COVENANTS
SECTION 4.01. PAYMENT OF SECURITIES.
The Company shall pay the principal of and interest on the
Securities on the dates and in the manner provided in the Securities. An
installment of principal of or interest on the Securities shall be considered
paid on the date it is due if the Trustee or Paying Agent holds on that date
U.S. Legal Tender designated for and sufficient to pay the installment.
Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Notwithstanding anything to the contrary contained in this
Indenture, the Company may, to the extent it is required to do so by law,
deduct or withhold income or other similar taxes imposed by the United States
of America from principal or interest payments hereunder.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain the office or agency required
under Section 2.03. The Company shall give prior notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 13.02.
SECTION 4.03. LIMITATION ON RESTRICTED PAYMENTS.
Neither the Company nor any of its Subsidiaries will,
directly or indirectly, (a) declare or pay any dividend or make any
distribution (other than dividends or distributions payable in Qualified
Capital Stock of the Company) on shares of the Company's Capital Stock, (b)
purchase, redeem or otherwise acquire or retire for value any Capital Stock of
the Company or any warrants, rights or options to acquire shares of any class
of such Capital Stock, other than the exchange of such Capital Stock or any
warrants, rights or options to acquire shares of any class of such Capital
Stock for Qualified Capital Stock or warrants, rights or options to acquire
Qualified Capital Stock, (c) make any principal payment on, purchase, defease,
redeem, prepay, decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund
payment, any Indebtedness of the Company or its Subsidiaries that is
subordinate or junior in right of payment to the Securities, or (d) make any
Investment (other than Permitted Investments) (each of the foregoing prohibited
actions set forth in clauses (a), (b), (c) and (d) being referred to as a
"RESTRICTED Payment"), if, at the time of such Restricted Payment or
immediately after giving effect thereto, (i) a Default or an Event of Default
has occurred and is continuing, (ii) the Company is not able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with Section 4.12, or (iii) the aggregate amount of Restricted
Payments made by the Company on or after the Merger Date, together with the
aggregate amount of Restricted Payments made by CRBC subsequent to the 9-3/8%
Notes Issue Date and through September 4, 1997 (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:
(A) (x) 100% of the aggregate Consolidated EBITDA of
CRBC from the 9-3/8% Notes Issue Date through September 4,
1997, plus 100% of the aggregate Consolidated EBITDA of the
Company from and after the Merger
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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 Company, taken as one accounting period, less (y) 1.4
times Consolidated Interest Expense for the same entities and
for the same periods, plus
(B) 100% of the aggregate net proceeds, including
the fair market value of property other than cash as
determined by the Board of Directors in good faith, received
by the Company from any Person (other than a Subsidiary of
the Company) from the issuance and sale on or subsequent to
the Merger Date of Qualified Capital Stock of the Company,
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 CRBC in good faith,
previously received by CRBC from any Person (other than a
Subsidiary of CRBC) from the issuance and sale on or
subsequent to the 9-3/8% Notes Issue Date of Qualified
Capital Stock of CRBC (excluding any net proceeds from
issuances and sales financed directly or indirectly using
funds borrowed from the Company or any Subsidiary of the
Company or from CRBC or any Subsidiary of CRBC, 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 Company or CRBC, respectively, upon such conversion or
exchange), plus
(C) without duplication of any amount included in
clause (iii)(B) above, 100% of the aggregate net proceeds,
including the fair market value of property other than cash
(valued as provided in clause (iii)(B) above), received by
the Company as a capital contribution on or subsequent to the
Merger Date, plus 100% of the aggregate net proceeds,
including the fair market value of property other than cash
(valued as provided in clause (iii)(B) above), previously
received by CRBC as a capital contribution on or subsequent
to the 9-3/8% Notes Issue Date (excluding the net proceeds
from one or more Public Equity Offerings by Chancellor Media
or CMHC to the extent used to redeem the Securities on or
after the date of the Indenture).
Notwithstanding the foregoing, the provisions of this Section
4.03 shall not prohibit:
(1) the payment of any dividend or the making of any
distribution within 60 days after the date of its declaration if the dividend
or distribution would have been permitted on the date of declaration;
(2) the acquisition of Capital Stock or warrants, options or
other rights to acquire Capital Stock either (i) solely in exchange for shares
of Qualified Capital Stock or warrants, options 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
Company) of shares of Qualified Capital Stock or warrants, options or other
rights to acquire Qualified Capital Stock;
(3) the acquisition of Indebtedness of the Company that is
subordinate or junior in right of payment to the Securities, either (i) solely
in exchange for shares of Qualified Capital Stock (or warrants, options or
other rights to acquire Qualified Capital Stock) or for Indebtedness of the
Company which is subordinate or junior in right of payment to the Securities,
at least to the extent that the
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Indebtedness being acquired is subordinated to the Securities and has a
Weighted Average Life to Maturity no less than that of the Indebtedness being
acquired or (ii) through the application of the net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Company) of shares
of Qualified Capital Stock (or warrants, options or other rights to acquire
Qualified Capital Stock) or Indebtedness of the Company which is subordinate or
junior in right of payment to the Securities, at least to the extent that the
Indebtedness being acquired is subordinated to the Securities and has a
Weighted Average Life to Maturity no less than that of the Indebtedness being
refinanced;
(4) payments by CRBC to fund the operating expenses of
Chancellor Broadcasting from the 9-3/8% Notes Issue Date through September 4,
1997 and by the Company to fund the operating expenses of CMHC from and after
the Merger Date, in each case in an amount not to exceed $500,000 per annum;
(5) payments by CRBC to Chancellor Broadcasting from the
9-3/8% Notes Issue Date through September 4, 1997 and by the Company to CMHC
from and after the Merger Date, respectively, in each case to make payments
pursuant to (a) the Financial Monitoring and Oversight Agreements or (b) the
Tax Sharing Agreement;
(6) payments by (a) CRBC to repurchase or to enable
Chancellor Broadcasting to repurchase Capital Stock or other securities of
Chancellor Broadcasting from employees of Chancellor Broadcasting or CRBC, in
each case, from the 9-3/8% Notes Issue Date through September 4, 1997, and (b)
by the Company to repurchase or to enable CMHC to repurchase Capital Stock or
other securities of CMHC from employees of CMHC or the Company, in each case,
after the Merger Date, in an aggregate amount not to exceed $5,000,000;
(7) payments by CRBC to Chancellor Broadcasting from the
9-3/8% Notes Issue Date through September 4, 1997, or by the Company to CMHC
from and after the Merger Date, in each case, to enable Chancellor Broadcasting
or CMHC, respectively, to redeem or repurchase stock purchase or similar rights
in an aggregate amount not to exceed $500,000;
(8) payments, not to exceed $100,000 in the aggregate, by
CRBC to Chancellor Broadcasting from the 9-3/8% Notes Issue Date through
September 4, 1997, together with payments by the Company to CMHC after the
Merger Date, in each case to enable Chancellor Broadcasting or CMHC,
respectively, to make cash payments to holders of its Capital Stock in lieu of
the issuance of fractional shares of its Capital Stock; and
(9) payments made pursuant to any merger, consolidated sale
of assets effected in accordance with Section 5.01; provided, however, that no
such payment may be made pursuant to this clause (9) unless, after giving
effect to such transaction (and the incurrence of any Indebtedness in
connection therewith and the use of the proceeds thereof), the Company would be
able to incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 4.12 such that after incurring that $1.00 of
additional Indebtedness, the Leverage Ratio would be less than 5.5 to 1;
provided, however, that in the case of clauses 5(a), (6), (7), (8) and (9), no
Default or Event of Default shall have occurred or be continuing at the time of
such payment or as a result thereof.
In determining the aggregate amount of Restricted Payments
made by the Company on or subsequent to the Merger Date and the aggregate
amount of Restricted Payments made by CRBC subsequent to the 9-3/8% Notes Issue
Date and through September 4, 1997, amounts expended pursuant to clauses (1),
(2), (3) (but only to the extent that Indebtedness is acquired in exchange for,
or with the net proceeds from, the issuance of Qualified Capital Stock or
warrants, options or other rights to acquire
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Qualified Capital Stock), (5)(a), (6), (7), (8) and (9) (including any amounts
previously expended by CRBC pursuant to clauses (1), (2), (3) (but only to the
extent that Indebtedness is acquired in exchange for, or with the net proceeds
from, the issuance of Qualified Capital Stock or warrants, options or other
rights to acquire Qualified Capital Stock), (5)(a), (6), (7), (8) and (9) under
Section 4.03 of the 9-3/8% Notes Indenture) shall be included in such
calculation.
Prior to any Restricted Payment under the first paragraph of
this Section 4.03, the Company shall deliver to the Trustee an Officers'
Certificate setting forth the computation by which the amount available for
Restricted Payments pursuant to such paragraph was determined. The Trustee
shall have no duty or responsibility to determine the accuracy or correctness
of this computation and shall be fully protected in relying on such Officers'
Certificate.
SECTION 4.04. CORPORATE EXISTENCE.
Except as otherwise permitted by Article Five, the Company
shall do or cause to be done all things reasonably necessary to preserve and
keep in full force and effect its corporate or other existence and the
corporate or other existence of each of its Significant Subsidiaries in
accordance with the respective organizational documents of each such
Significant Subsidiary and the material rights (charter and statutory) and
franchises of the Company and each such Significant Subsidiary; provided,
however, that the Company shall not be required to preserve, with respect to
itself, any material right or franchise and, with respect to any of its
Significant Subsidiaries, any such existence, material right or franchise, if
the Board of Directors of the Company or such Significant Subsidiary, as the
case may be, shall determine that the preservation thereof is no longer
reasonably necessary or desirable in the conduct of the business of the Company
or any such Significant Subsidiary.
SECTION 4.05. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all material taxes,
assessments and governmental charges (including withholding taxes and any
penalties, interest and additions to taxes) levied or imposed upon it or any of
its Subsidiaries or properties of it or any of its Subsidiaries and (ii) all
material lawful claims for labor, materials, supplies and services that, if
unpaid, might by law become a Lien upon the property of it or any of its
Subsidiaries; provided, however, that there shall not be required to be paid or
discharged any such tax, assessment or charge, the amount, applicability or
validity of which is being contested in good faith by appropriate proceedings
and for which adequate provision has been made or where the failure to effect
such payment or discharge is not adverse in any material respect to the
Holders.
SECTION 4.06. MAINTENANCE OF PROPERTIES AND INSURANCE.
(a) The Company shall, and shall cause each of its
Subsidiaries to, maintain its material properties in normal condition (subject
to ordinary wear and tear) and make all reasonably necessary repairs, renewals
or replacements thereto as in the judgment of the Company may be reasonably
necessary to the conduct of the business of the Company and its Subsidiaries;
provided, however, that nothing in this Section 4.06 shall prevent the Company
or any of its Subsidiaries from discontinuing the operation and maintenance of
any of its properties, if such properties are, in the reasonable and good faith
judgment of the Board of Directors of the Company or the Subsidiary, as the
case may be, no longer reasonably necessary in the conduct of their respective
business.
(b) The Company shall provide or cause to be provided, for
itself and each of its Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds that, in the reasonable,
good faith opinion of the Company, are reasonably adequate and appropriate for
the conduct of the business of the Company and such Subsidiaries.
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SECTION 4.07. COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT.
(a) The Company shall deliver to the Trustee, within 120 days
after the end of the Company's fiscal year, an Officers' Certificate (signed by
the principal executive officer, principal financial officer or principal
accounting officer) stating that a review of its activities and the activities
of its Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether it has
kept, observed, performed and fulfilled its obligations under this Indenture
and further stating, as to each such Officer signing such certificate, that to
the best of his knowledge the Company during such preceding fiscal year has
kept, observed, performed and fulfilled each and every such obligation and no
Default or Event of Default occurred during such year and at the date of such
certificate there is no Default or Event of Default that has occurred and is
continuing or, if such signers do know of such Default or Event of Default, the
certificate shall describe the Default or Event of Default and its status with
particularity. The Officers' Certificate shall also notify the Trustee should
the Company elect to change the manner in which it fixes its fiscal year end.
(b) The copy of the annual report on Form 10-K of the Company
as filed with the SEC or the annual financial statements delivered to the
Trustee pursuant to Section 4.09 shall be accompanied by a written report of
the Company's independent accountants that in conducting their audit of the
financial statements which are a part of such annual report or such annual
financial statements nothing has come to their attention that would lead them
to believe that the Company has violated any provisions of Article Four, Five
or Six insofar as they relate to accounting matters or, if any such violation
has occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) (i) If any Default or Event of Default has occurred and
is continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Indenture or the Securities, the
Company shall deliver to the Trustee by registered or certified mail or by
telegram or facsimile transmission followed by hard copy by registered or
certified mail an Officers' Certificate specifying such event, notice or other
action as soon as possible and in any event within five Business Days of its
becoming aware of such occurrence.
SECTION 4.08. COMPLIANCE WITH LAWS.
The Company shall comply, and shall cause each of its
Subsidiaries to comply, with all applicable statutes, rules, regulations,
orders and restrictions of the United States of America, all states and
municipalities thereof, and of any governmental department, commission, board,
regulatory authority, bureau, agency and instrumentality of the foregoing, in
respect of the conduct of their respective businesses and the ownership of
their respective properties, except for such noncompliances as are not in the
aggregate reasonably likely to have a material adverse effect on the financial
condition or results of operations of the Company and its Subsidiaries taken as
a whole.
SECTION 4.09. SEC REPORTS.
The Company shall file with the Trustee and provided to the
Securityholders, within 15 days after it files them with the SEC, 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 SEC may by rules and
regulations prescribe) which the Company files with the SEC pursuant to Section
13 or 15(d) of the Exchange Act.
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In the event that the Company is no longer required to furnish such reports to
its securityholders pursuant to the Exchange Act, the Company 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 the Securities. The Company shall also comply with the other
provisions of TIA ss.314(a). Delivery of such reports, information and
documents to the Trustee is for informational purposes only and the Trustee's
receipt of such shall not constitute constructive notice of any information
contained therein or determinable from information contained therein, including
the Company's compliance with any of its covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officers' Certificates).
SECTION 4.10. WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
or any usury law or other law that would prohibit or forgive the Company from
paying all or any portion of the principal of or interest on the Securities as
contemplated herein, wherever enacted, now or at any time hereafter in force,
or which may affect the obligations or the performance of this Indenture; and
(to the extent that it may lawfully do so) the Company hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
SECTION 4.11. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
Neither the Company nor any of its Subsidiaries will,
directly or indirectly enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with or for the benefit of any of its
Affiliates (other than transactions between the Company and a Wholly-Owned
Subsidiary of the Company or among Wholly-Owned Subsidiaries of the Company)
(an "AFFILIATE TRANSACTION"), other than Affiliate Transactions on terms that
are no less favorable than those that might reasonably have been obtained in a
comparable transaction on an arm's-length basis from a Person that is not an
Affiliate; provided, however, that for a transaction or series of related
transactions involving value of $1,000,000 or more, such determination shall be
made in good faith by a majority of the members of the Board of Directors of
the Company and by a majority of the disinterested members of the Board of
Directors of the Company, if any; provided, further, that for a transaction or
series of related transactions involving value of $5,000,000 or more, the Board
of Directors of the Company has received an opinion from a nationally
recognized investment banking firm that such Affiliate Transaction is fair,
from a financial point of view, to the Company or such Subsidiary. The
foregoing restrictions will not apply to reasonable and customary directors'
fees, indemnification and similar arrangements and payments thereunder, or to
any obligations of the Company under the Financial Monitoring and Oversight
Agreements, the Tax Sharing Agreement or any employment agreement with any
officer of the Company (provided that each amendment of any of the foregoing
agreements shall be subject to the limitations of this Section 4.11).
SECTION 4.12. LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS.
Neither the Company 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 limitations,
the Company 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
Company's Leverage Ratio is less than 7.0 to 1.
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SECTION 4.13. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES.
Neither the Company nor any of its Subsidiaries shall,
directly or indirectly, create or otherwise cause or permit to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary to
(a) pay dividends or make any other distributions on its Capital Stock; (b)
make loans or advances or pay any Indebtedness or other obligation owed to the
Company or any of its Subsidiaries; or (c) transfer any of its property or
assets to the Company, except for such encumbrances or restrictions existing
under or by reason of: (1) applicable law, (2) this Indenture, (3) customary
non-assignment provisions of any lease governing a leasehold interest of the
Company or any Subsidiary, (4) any instrument governing Acquired Indebtedness,
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property or
assets of the Person, so acquired, (5) agreements permitted under the 9-3/8%
Notes Indenture, the 8-3/4% Notes Indenture, the 10-1/2% Notes Indenture, the
8-1/8% Notes Indenture and the 9% Notes Indenture existing on the Issue Date
(including the Credit Agreement and the Senior Credit Facility, as applicable),
as such agreements are from time to time in effect; provided, however, that any
amendments or modifications of such agreements which affect the encumbrances or
restrictions of the types subject to this Section 4.13 shall not result in such
encumbrances or restrictions being less favorable to the Company in any
material respect, as determined in good faith by the Board of Directors of the
Company, than the provisions as in effect before giving effect to the
respective amendment or modification, (6) an agreement effecting a refinancing,
replacement or substitution of Indebtedness issued, assumed or incurred
pursuant to an agreement referred to in clause (2), (4) or (5) above or any
other agreement evidencing Indebtedness permitted under this Indenture;
provided, however, that the provisions relating to such encumbrance or
restriction contained in any such refinancing, replacement or substitution
agreement or any such other agreement are not less favorable to the Company in
all material respects as determined in good faith by the Board of Directors of
the Company than the provisions relating to such encumbrance or restriction
contained in agreements referred to in such clause (2), (4) or (5), or (7)
restrictions on the transfer of assets subject to any Lien permitted under this
Indenture imposed by the holder of such Lien.
SECTION 4.14. [INTENTIONALLY OMITTED]
SECTION 4.15. CHANGE OF CONTROL.
(a) In the event of a Change of Control, the Company shall be
obligated to make an offer to repurchase all outstanding Securities pursuant to
the offer described in paragraph (b) below (the "CHANGE OF CONTROL OFFER"), at
a purchase price equal to 101% of the principal amount thereof plus accrued
interest, if any, to the date of repurchase.
(b) Within 30 days following the date upon which a Change of
Control occurs (the "CHANGE OF CONTROL DATE"), the Company shall send, by first
class mail, a notice to each Holder of Securities, with a copy to the Trustee,
which notice shall govern the terms of the Change of Control Offer. The notice
to the Holders shall contain all instructions and materials necessary to enable
such Holders to tender Securities pursuant to the Change of Control Offer. Such
notice shall state:
(1) that the Change of Control Offer is being made
pursuant to this Section 4.15 and that all Securities validly
tendered and not withdrawn will be accepted for payment;
(2) the purchase price (including the amount of
accrued interest, if any) and the purchase date (which shall
be no earlier than 30 days nor later than 45 days from the
date such notice is mailed, other than as may be required by
law) (the "CHANGE OF CONTROL PAYMENT DATE");
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(3) that any Security not tendered will continue to
accrue interest;
(4) that, unless the Company defaults in making
payment therefor, any Security accepted for payment pursuant
to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date;
(5) that Holders electing to have a Security
purchased pursuant to a Change of Control Offer will be
required to surrender the Security, properly endorsed for
transfer together with such customary documents as the
Company reasonably may request, to the Paying Agent at the
address specified in the notice prior to the close of
business on the Business Day prior to the Change of Control
Payment Date;
(6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than five
Business Days prior to the Change of Control Payment Date, a
telegram, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Securities
the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Security
purchased;
(7) that Holders whose Securities are purchased only
in part will be issued new Securities in a principal amount
equal to the unpurchased portion of the Securities
surrendered; and
(8) the circumstances and relevant facts regarding
such Change of Control.
(c) on or before the Change of Control Payment Date, the
Company shall (i) accept for payment Securities or portions thereof (in
integral multiples of $1,000) validly tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient
to pay the purchase price of all Securities so tendered and (iii) deliver to
the Trustee Securities so accepted together with an Officers' Certificate
stating the Securities or portions thereof being purchased by the Company. The
Paying Agent shall promptly mail to the Holders of Securities so accepted
payment in an amount equal to the purchase price out of the funds deposited
with the Paying Agent in accordance with the preceding sentence. The Trustee
shall promptly authenticate and mail to such Holders new Securities equal in
principal amount to any unpurchased portion of the Securities surrendered. Upon
the payment of the purchase price for the Securities accepted for purchase, the
Trustee shall return the Securities purchased to the Company for cancellation.
Any amounts remaining after the purchase of Securities pursuant to a Change of
Control Offer shall be returned by the Trustee to the Company.
(d) The Company will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the purchase of the Securities pursuant to a Change of Control Offer. To
the extent the provisions of any such rule conflict with the provisions of this
Indenture relating to a Change of Control Offer, the Company shall comply with
the provisions of such rule and be deemed not to have breached its obligations
relating to such Change of Control Offer by virtue thereof.
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SECTION 4.16. LIMITATION ON ASSET SALES.
(a) Neither the Company nor any of its Subsidiaries will
consummate an Asset Sale unless (i) the Company or the applicable Subsidiary,
as the case may be, receives consideration at the time of such Asset Sale at
least equal to the fair market value of the assets sold or otherwise disposed
of (as determined in good faith by management of the Company or, if such Asset
Sale involves consideration in excess of $2,500,000, by the Board of Directors
of the Company, as evidenced by a board resolution), (ii) at least 75% of the
consideration received by the Company or the Subsidiary, as the case may be,
from such Asset Sale is cash or Cash Equivalents (other than in the case where
the Company is exchanging all or substantially all the assets of one or more
broadcast businesses operated by the Company (including by way of the transfer
of the capital stock) for all or substantially all the assets (including by way
of the transfer of the capital stock) constituting one or more broadcast
businesses operated by another Person, in which event the foregoing requirement
with respect to the receipt of cash or Cash Equivalents shall not apply) and is
received at the time of such disposition and (iii) upon the consummation of an
Asset Sale, the Company applies or causes such Subsidiary to apply, such Net
Cash Proceeds within 180 days of receipt thereof either (A) to repay the
principal of the Senior Credit Facility or other Indebtedness ranking equal in
right of payment to the Senior Credit Facility (but not including the Notes)
(and, to the extent repayment of any such Indebtedness relates to principal
under a revolving credit or similar facility, to obtain a corresponding
reduction in the commitments thereunder), (B) to reinvest, or to be
contractually committed to reinvest pursuant to a binding agreement, in
Productive Assets and, in the latter case, to have so reinvested within 360
days of the date of receipt of such Net Cash Proceeds, or (C) to purchase
Securities (pro rata among the holders of Securities tendered to the Company
for purchase, based upon the aggregate principal amount of the Securities so
tendered) tendered to the Company for purchase at a price equal to 100% of the
principal amount thereof, plus accrued interest thereon to the date of
purchase, pursuant to an offer to purchase made by the Company as set forth
below (a "NET PROCEEDS OFFER"); provided, however, that if at any time any
non-cash consideration received by the Company or any Subsidiary of the
Company, as the case may be, in connection with any Asset Sale is converted
into or sold or otherwise disposed of for cash, then such conversion or
disposition shall be deemed to constitute an Asset Sale hereunder and the Net
Cash Proceeds thereof shall be applied in accordance with clause (iii) above;
provided, further that the Company may defer making a Net Proceeds Offer until
the aggregate Net Cash Proceeds from Asset Sales to be applied equals or
exceeds $5,000,000. In the event of a transaction effected in accordance with
Section 5.01 which involves less than all of the property or assets of the
Company, only property or assets not included in such transaction shall be
deemed to have been transferred in an Asset Sale.
(b) Subject to the deferral right set forth in the final
proviso of paragraph (a), each notice of a Net Proceeds Offer pursuant to this
Section 4.16 shall be mailed, by first class mail, by the Company to Holders of
the Securities as shown on the applicable register of Holders of the Securities
not more than 180 days after the relevant Asset Sale or, in the event the
Company or a Subsidiary has entered into a binding agreement as provided in (B)
above, within 180 days following the termination of such agreement but in no
event later than 360 days after the relevant Asset Sale, with a copy to the
Trustee. The notice shall contain all instructions and materials necessary to
enable such Holders to tender Securities pursuant to the Net Proceeds Offer and
shall state the following terms:
(1) that the Net Proceeds Offer is being made
pursuant to Section 4.16 and that Holders of Securities may
elect to tender their Securities in denominations of less
than $1,000 and that all Securities validly tendered will be
accepted for payment; provided, however, that if the
aggregate principal amount of Securities tendered in a Net
Proceeds Offer plus accrued interest at the expiration of
such offer exceeds the aggregate amount of the Net Proceeds
Offer, the Company shall select the Securities to be
purchased on a pro rata basis (based upon the principal
amount tendered);
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(2) the purchase price (including the amount of
accrued interest) 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 "PROCEEDS PURCHASE DATE");
(3) that any Security not tendered will continue to
accrue interest;
(4) that, unless the Company defaults in making
payment therefor, any Security accepted for payment pursuant
to the Net Proceeds Offer shall cease to accrue interest
after the Proceeds Purchase Date;
(5) that Holders electing to have a Security
purchased pursuant to a Net Proceeds Offer will be required
to surrender the Security, properly endorsed for transfer
together with such other customary documents as the Company
reasonably may request, to the Paying Agent at the address
specified in the notice prior to the close of business on the
Business Day prior to the Proceeds Purchase Date;
(6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than five
Business Days prior to the Proceeds Purchase Date, a
telegram, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Securities
the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Security
purchased;
(7) that Holders whose Securities are purchased only
in part will be issued new Securities in a principal amount
equal to the unpurchased portion of the Securities
surrendered; and
(8) the circumstances and relevant facts regarding
such Net Proceeds Offer.
(c) On or before the Proceeds Purchase Date, the Company
shall (i) accept for payment Securities or portions thereof validly tendered
pursuant to the Net Proceeds Offer, (ii) deposit with the Paying Agent U.S.
Legal Tender sufficient to pay the purchase price of all Securities so tendered
and (iii) deliver to the Trustee Securities so accepted together with an
Officers' Certificate stating the Securities or portions thereof being
purchased by the Company. The Paying Agent shall promptly mail to the Holders
of Securities so accepted payment in an amount equal to the purchase price out
of funds deposited with the Paying Agent in accordance with the preceding
sentence. The Trustee shall promptly authenticate and mail to such Holders new
Securities equal in principal amount to any unpurchased portion of the
Securities surrendered. Upon payment of the purchase price for the Securities
accepted for purchase, the Trustee shall return the Securities purchased to the
Company for cancellation. Any Securities not so accepted shall be promptly
mailed by the Company to the Holder thereof.
(d) If the aggregate principal amount of Securities validly
tendered pursuant to any Net Proceeds Offer is less than the amount of Net Cash
Proceeds subject to such Net Proceeds Offer, the Company may use any remaining
portion of such Net Cash Proceeds not required to fund the repurchase of
tendered Securities for purposes otherwise permitted by this Indenture. Upon
the consummation of any Net Proceeds Offer, the amount of Net Cash Proceeds
subject to any future Net Proceeds Offer from the Asset Sales giving rise to
such Net Cash Proceeds shall be deemed to be zero.
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(e) The Company will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with their purchase of Securities pursuant to a Net Proceeds Offer. To the
extent the provisions of any such rule conflict with the provisions of this
Indenture relating to a Net Proceeds Offer, the Company shall comply with the
provisions of such rule and be deemed not to have breached its obligations
relating to such Net Proceeds Offer by virtue thereof.
SECTION 4.17. LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES.
The Company shall not permit any of its Subsidiaries to issue
any Preferred Stock (other than to the Company or to a Wholly-Owned Subsidiary
of the Company) or permit any Person (other than the Company or a Wholly-Owned
Subsidiary of the Company) to own any Preferred Stock of a Subsidiary (other
than Acquired Preferred Stock; provided that at the time the issuer of such
Acquired Preferred Stock becomes a Subsidiary of the Company or merges with the
Company or any of its Subsidiaries, and after giving effect to such
transaction, the Company shall be able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with Section
4.12).
SECTION 4.18. LIMITATION ON LIENS.
Neither the Company nor any of its Subsidiaries shall create,
incur, assume or suffer to exist any Liens upon any of their respective assets,
except for (a) Permitted Liens, (b) Liens to secure the Senior Credit Facility
or any other Indebtedness ranking equal in right of payment to the Senior
Credit Facility or guarantees of the foregoing permitted under this Indenture,
(c) Liens permitted under the 9-3/8% Notes Indenture, the 8-3/4% Notes
Indenture, the 10-1/2% Notes Indenture, the 8-1/8% Notes Indenture and the 9%
Notes Indenture existing on the Issue Date, (d) Liens in favor of the Trustee,
and (e) any Lien to secure the replacement, refunding, extension or renewal, in
whole or in part, of any Indebtedness described in the foregoing clauses;
provided that, to the extent any such clause limits the amount secured or the
asset subject to such Liens, no extension or renewal will increase the assets
subject to such Liens or the amount secured thereby beyond the assets or
amounts set forth in such clauses.
SECTION 4.19. GUARANTEES OF CERTAIN INDEBTEDNESS.
The Company shall not permit any of its Subsidiaries,
directly or indirectly, to incur, guarantee or secure through the granting of
Liens, the payment of any Indebtedness under the Senior Credit Facility or any
refunding or refinancing thereof, in each case, unless such Subsidiary, the
Company and the Trustee execute and deliver a supplemental indenture pursuant
to which such Subsidiary becomes a Guarantor of the Securities and which
evidences such Subsidiary's Guarantee of the Securities, such Guarantee to be a
senior unsecured obligation of such Subsidiary. Neither the Company nor any
such Guarantor shall be required to make a notation on the Securities or its
Guarantee to reflect any such subsequent Guarantee. Nothing in this Section
4.19 shall be construed to permit any Subsidiary of the Company to incur
Indebtedness otherwise prohibited by Section 4.12.
SECTION 4.20. LIMITATION ON SALE AND LEASEBACK TRANSACTION.
Neither the Company nor any of its Subsidiaries shall enter
into any Sale and Leaseback Transaction, except that the Company or any
Subsidiary may enter into a Sale and Leaseback Transaction if, immediately
prior thereto, and after giving effect to such Sale and Leaseback Transaction
(the Indebtedness thereunder being equivalent to the Attributable Value
thereof) the Company could incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with Section 4.12.
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SECTION 4.21. LIMITATION ON LINE OF BUSINESS.
For so long as any Securities are outstanding, the Company
and its Subsidiaries shall engage solely in the ownership and operation of
broadcast businesses or businesses related thereto, including, without
limitation, media representation, sale of advertising and such other activities
as are incidental or similar or related thereto.
SECTION 4.22. LIMITATION ON ASSET SWAPS.
Neither the Company nor any of its Subsidiaries shall engage
in any Asset Swaps, unless: (i) at the time of entering into the agreement to
swap assets and immediately after giving effect to the proposed Asset Swap, no
Default or Event of Default shall have occurred and be continuing or would
occur as a consequence thereof; (ii) the Company would, after giving pro forma
effect to the proposed Asset Swap, have been permitted to incur at least $1.00
of additional Indebtedness (other than Permitted Indebtedness) in compliance
with Section 4.12; (iii) the respective fair market values of the assets being
purchased and sold by the Company or any of its Subsidiaries (as determined in
good faith by the management of the Company or, if such Asset Swap includes
consideration in excess of $2,500,000 by the Board of Directors, as evidenced
by a Board Resolution delivered to the Trustee) are substantially the same at
the time of entering into the agreement to swap assets; and (iv) at the time of
the consummation of the proposed Asset Swap, the percentage of any decline in
the fair market value (determined as aforesaid) of the asset or assets being
acquired by the Company and its Subsidiaries shall not be significantly greater
than the percentage of any decline in the fair market value (determined as
aforesaid) of the assets being disposed of by the Company, calculated from the
time the agreement to swap assets was entered into; provided, however, that
this Section 4.22 shall not apply to any of the Pending Transactions.
ARTICLE 5.
SUCCESSOR CORPORATION
SECTION 5.01. WHEN COMPANY MAY MERGE, ETC.
(a) The Company shall not, in a single transaction or through
a series of related transactions, consolidate with or merge with or into, or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets to, another Person or adopt a plan of
liquidation, unless:
(1) either (A) the Company shall be the survivor of
such merger or consolidation or (B) the surviving or
transferee Person is a corporation, partnership or trust
organized and existing under the laws of the United States,
any State thereof or the District of Columbia and such
surviving or transferee Person shall expressly assume by
supplemental indenture all the obligations of the Company
under the Securities and this Indenture;
(2) immediately after giving effect to such
transaction and the use of the proceeds therefrom (on a pro
forma basis, including any Indebtedness incurred or
anticipated to be incurred in connection with such
transaction), the Company or the surviving or transferee
Person is able to incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with
Section 4.12;
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(3) immediately after giving effect to such
transaction (including any Indebtedness incurred or
anticipated to be incurred in connection with the
transaction) no Default or Event of Default shall have
occurred and be continuing; and
(4) the Company has delivered to the Trustee an
Officers' Certificate and Opinion of Counsel, each stating
that such consolidation, merger or transfer complies with
this Indenture, that the surviving or transferee Person
agrees by supplemental indenture to be bound hereby, and that
all conditions precedent in this Indenture relating to such
transaction have been satisfied.
(b) For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of related
transactions) of all or substantially all of the properties and assets of one
or more Subsidiaries, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any transfer of assets
in accordance with Section 5.01, the successor Person formed by such
consolidation or into which the Company is merged or to which such transfer is
made shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein. When a successor
corporation assumes all of the obligations of the Company hereunder and under
the Securities and agrees to be bound hereby and thereby, the predecessor shall
be released from such obligations.
ARTICLE 6.
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" occurs if:
(1) the Company defaults in the payment of interest on the
Securities when the same becomes due and payable and the Default continues for
a period of 30 days; or
(2) the Company defaults in the payment of the principal of
any Securities when the same becomes due and payable, at maturity, upon
redemption or otherwise; or
(3) the Company fails to observe or perform any other
covenant or agreement contained in the Securities or this Indenture and the
Default continues for a period of 30 days after written notice thereof
specifying such Default has been given to the Company by the Trustee or the
Holders of at least 25% in aggregate principal amount of the outstanding
Securities; or
(4) there shall be a default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is guaranteed by the Company or any of
its Subsidiaries), whether such Indebtedness or guarantee exists on the date
hereof or
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is created after the date hereof, which Default (a) is caused by a failure to
pay principal of or premium or interest on such Indebtedness prior to the
expiration of any grace period provided in such Indebtedness (a "Payment
Default") or (b) results in the acceleration of such Indebtedness prior to its
express maturity and, in each case, the principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5,000,000 or more; or
(5) one or more judgments in an aggregate amount in excess of
$5,000,000 (which are not covered by insurance as to which the insurer has not
disclaimed coverage) shall have been rendered against the Company or any of its
Significant Subsidiaries and such judgments remain undischarged or unstayed for
a period of 60 days after such judgment or judgments become final and
non-appealable; or
(6) The Company or any Significant Subsidiary (A) commences a
voluntary case or proceeding under any Bankruptcy Law with respect to itself,
(B) consents to the entry of a judgment, decree or order for relief against it
in an involuntary case or proceeding under any Bankruptcy Law, (C) consents to
the appointment of a Custodian of it or for substantially all of its property,
(D) consents to or acquiesces in the institution of a bankruptcy or an
insolvency proceeding against it or (E) makes a general assignment for the
benefit of its creditors; or
(7) a court of competent jurisdiction enters a judgment,
decree or order for relief in respect of the Company or any Significant
Subsidiary in an involuntary case or proceeding under any Bankruptcy Law, which
shall (A) approve as properly filed a petition seeking reorganization,
arrangement, adjustment or composition in respect of the Company or any
Significant Subsidiary, (B) appoint a Custodian of the Company or any
Significant Subsidiary or for substantially all of its property or (C) order
the winding-up or liquidation of its affairs; and such judgment, decree or
order shall remain unstayed and in effect for a period of 60 consecutive days.
SECTION 6.02. ACCELERATION.
If an Event of Default (other than an Event of Default
specified in Section 6.01(6) or (7) with respect to the Company) occurs and is
continuing and has not been waived pursuant to Section 6.04, the Trustee may,
by notice to the Company, or the Holders of at least 25% in aggregate principal
amount of the Securities then outstanding may, by written notice to the Company
and the Trustee, and the Trustee shall, upon the request of such Holders,
declare the aggregate principal amount of the Securities outstanding, together
with accrued but unpaid interest, if any, on all Securities to be due and
payable by notice in writing to the Company and the Trustee specifying the
respective Event of Default and that it is a "notice of acceleration" (the
"ACCELERATION NOTICE"), and the same shall become immediately due and payable.
If an Event of Default specified in Section 6.01(6) or (7) occurs and is
continuing with respect to the Company, all unpaid principal and accrued
interest on the Securities then outstanding shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Securityholder. The Holders of a majority in principal
amount of the Securities then outstanding (by notice to the Trustee) may
rescind and cancel a declaration of acceleration and its consequences if (i)
the rescission would not conflict with any judgment or decree of a court of
competent jurisdiction, (ii) all existing Events of Default have been cured or
waived, except non-payment of the principal or interest on the Securities which
have become due solely by such declaration of acceleration, (iii) to the extent
the payment of such interest is lawful, interest (at the same rate as specified
in the Securities) on overdue installments of interest and overdue payments of
principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of a
Default or Event of Default of the type described in Sections 6.01(6) and (7),
the Trustee shall have received an Officers' Certificate and an Opinion of
Counsel that such Default or Event of Default has been cured or waived and the
Trustee shall be entitled to conclusively rely upon such Officers' Certificate
and Opinion of Counsel. No such rescission shall affect any subsequent Default
or impair any right consequent thereto.
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SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect
the payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Securityholder in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Subject to Sections 6.07 and 9.02, the Holders of a majority
in principal amount of the outstanding Securities by notice to the Trustee may
waive an existing Default or Event of Default and its consequences, except a
Default in the payment of principal of or interest on any Security as specified
in clauses (1) and (2) of Section 6.01.
SECTION 6.05. CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the
outstanding Securities may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it, including, without limitation, any remedies provided for
in Section 6.03. Subject to Section 7.01, however, the Trustee may, in its
discretion, refuse to follow any direction that conflicts with any law or this
Indenture, that the Trustee determines may be unduly prejudicial to the rights
of another Securityholder, or that may involve the Trustee in personal
liability; provided that the Trustee may take any other action deemed proper by
the Trustee, in its discretion, which is not inconsistent with such direction.
SECTION 6.06. LIMITATION ON SUITS.
A Securityholder may not pursue any remedy with respect to
this Indenture or the Securities unless:
(1) the Holder gives to the Trustee notice of a continuing
Event of Default;
(2) Holders of at least 25% in principal amount of the
outstanding Securities make a written request to the Trustee to pursue the
remedy;
(3) such Holders offer to the Trustee reasonably satisfactory
to the Trustee indemnity or security against any loss, liability or expense to
be incurred in compliance with such request;
(4) the Trustee does not comply with the request within 45
days after receipt of the request and the offer of satisfactory indemnity or
security; and
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(5) during such 45-day period the Holders of a majority in
principal amount of the outstanding Securities do not give the Trustee a
direction which, in the opinion of the Trustee, is inconsistent with the
request.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
such other Securityholder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the
right of any Holder to receive payment of principal of and interest on a
Security, on or after the respective due dates expressed in such Security, or
to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of principal or interest
specified in clause (1) or (2) of Section 6.01 occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company or any other obligor on the Securities for the whole amount
of principal and accrued interest remaining unpaid, together with interest on
overdue principal and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest at the rate set forth in the
Securities and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relating to the Company or
any other obligor upon the Securities, any of their respective creditors or any
of their respective property, and shall be entitled and empowered to collect
and receive any monies or other property payable or deliverable on any such
claims and to distribute the same, and any Custodian in any such judicial
proceedings is hereby authorized by each Securityholder to make such payments
to the Trustee and, in the event that the Trustee shall consent to the making
of such payments directly to the Securityholders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 7.07. The Company's payment
obligations under this Section 6.09 shall be secured in accordance with the
provisions of Section 7.07. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf
of any Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Securityholder in
any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article
Six, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Sections 6.09 and
7.07;
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Second: if the Holders are forced to proceed against the
Company directly without the Trustee, to Holders for their
collection costs;
Third: to Holders for amounts due and unpaid on the Securities
for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable
on the Securities for principal and interest, respectively;
and
Fourth: to the Company or any other obligor on the Securities,
as their interests may appear, or as a court of competent
jurisdiction may direct.
The Trustee, upon prior notice to the Company, may fix a
record date and payment date for any payment to
Securityholders pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by a Holder or
Holders of more than 10% in principal amount of the outstanding Securities.
ARTICLE 7.
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in its exercise
thereof as a prudent Person would exercise or use under the circumstances in
the conduct of its own affairs.
(b) Except during the continuance of a Default or an Event of
Default:
(1) The Trustee need perform only those duties as
are specifically set forth in this Indenture or the TIA and
no duties, covenants, responsibilities or obligations shall
be implied in this Indenture that are adverse to the Trustee.
(2) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates (including Officers' Certificates)
or opinions (including Opinions of Counsel) furnished to the
Trustee and conforming to the requirements of this Indenture.
However, as to any certificates or opinions which are
required by any provision of this Indenture to be delivered
or provided to the Trustee, the Trustee shall examine the
certificates and opinions to determine whether or not they
conform to the requirements of this Indenture (but need not
confirm or investigate the accuracy of mathematical
calculations or other facts stated therein).
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(c) Notwithstanding anything to the contrary herein
contained, the Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(1) This paragraph does not limit the effect of
paragraph (b) of this Section 7.01.
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is
proved that the Trustee was negligent in ascertaining the
pertinent facts.
(3) The Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Section 6.02, 6.04 or 6.05.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability or
the performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment indemnity against such risk or of such funds or adequate ability is
not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section
7.01.
(f) The Trustee shall not be liable for interest on any money
or assets received by it except as the Trustee may agree in writing with the
Company. Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.
(g) In the absence of bad faith, negligence or willful
misconduct on the part of the Trustee, the Trustee shall not be responsible for
the application of any money by any Paying Agent other than the Trustee.
SECTION 7.02. RIGHTS OF TRUSTEES.
Subject to Section 7.01:
(a) The Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting upon any document believed by it
to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 13.04 and 13.05. The Trustee shall not
be liable for and shall be fully protected in respect of any action it takes or
omits to take in good faith in reliance on such Officers' Certificate or
Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent or
attorney appointed with due care.
(d) The Trustee shall not be liable for any action that it
takes or omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers conferred upon it by this Indenture.
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(e) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate (including any
Officers' Certificate), statement, instrument, opinion (including any Opinion
of Counsel), notice, request, direction, consent, order, bond, debenture, or
other paper or document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see fit
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled, upon reasonable notice to the Company, to
examine the books, records, and premises of the Company, personally or by agent
or attorney at the sole cost of the Company and shall incur no liability or
additional liability of any kind by reason of such inquiry or investigation.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders of the Securities pursuant to the provisions of
this Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred by it in compliance with such request, order or
direction.
(g) The Trustee may consult with counsel of its selection and
the advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Securities shall be full and complete authorization and
protection from liability with respect to any action taken, omitted or suffered
by it hereunder in good faith and in accordance with the advice or opinion of
such counsel.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may
become the owner or pledgee of Securities and may otherwise deal with the
Company, any Subsidiary or Unrestricted Subsidiary, or their respective
Affiliates, with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights. However, the Trustee must comply with
Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Securities, and it shall not be accountable
for the Company's use of the proceeds from the Securities, and the recitals
contained herein and in the Securities shall be taken as the statements of the
Company and the Trustee shall not be responsible for any statement of the
Company in this Indenture or the Securities other than the Trustee's
certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing
and if it is known to the Trustee, the Trustee shall mail to each
Securityholder, as their name and address appears in the security register,
notice of the uncured Default or Event of Default within 60 days after such
Default or Event of Default occurs. Except in the case of a Default or an Event
of Default in payment of principal of, or interest on, any Security, including
an accelerated payment and the failure to make payment on the Change of Control
Payment Date pursuant to a Change of Control Offer or on the Proceeds Purchase
Date pursuant to a Net Proceeds Offer and, except in the case of a failure to
comply with Article Five, the Trustee may withhold the notice if and so long as
its Board of Directors, the executive .committee of its Board of Directors or a
committee of its directors and/or Trust Officers in good faith determines that
withholding the notice is in the interest of the Securityholders. The Trustee
shall not be deemed to have knowledge of a Default or Event of Default other
than (i) any Event of Default occurring pursuant to Section 6.01(l) or 6.01(2)
or (ii) any Default or Event of Default of which a Trust Officer shall have
received written notification and such notice references the Securities and the
Indenture or obtained actual knowledge.
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SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each May 15 of each year beginning with
May 15, 1999, the Trustee shall, to the extent that any of the events described
in TIA ss.313(a) occurred within the previous twelve months, but not otherwise,
mail to each Securityholder a brief report dated as of such date that complies
with TIA ss.313(a). The Trustee also shall comply with TIA ss.313 (b) and 313
(c)
A copy of each report at the time of its mailing to
Securityholders shall be mailed to the Company and filed with the SEC and each
stock exchange, if any, on which the Securities are listed.
The Company shall promptly notify the Trustee if the
Securities become listed on any stock exchange and the Trustee shall comply
with TIA ss.313(d).
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time such
compensation as may be agreed upon in writing by the Company and the Trustee.
The Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses, disbursements and advances
incurred or made by it in connection with the performance of its duties and the
discharge of its obligations under this Indenture. Such expenses shall include
the reasonable fees and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee and its agents,
employees, officers, stockholders and directors for, and hold them harmless
against, any and all loss, liability, damage, claim or expense incurred by them
except for such actions to the extent caused by any negligence, bad faith or
willful misconduct on their part, arising out of or in connection with the
acceptance or administration of this trust including the reasonable costs and
expenses of defending themselves against any claim or liability in connection
with the exercise or performance of any of their rights, powers or duties
hereunder. The Trustee shall notify the Company promptly of any claim asserted
against the Trustee for which it may seek indemnity. The Company shall defend
the claim and the Trustee shall cooperate in the defense. The Trustee may have
separate counsel and the Company shall pay the reasonable fees and expenses of
such counsel; provided that the Company will not be required to pay such fees
and expenses if it assumes the Trustee's defense and there is no conflict of
interest between the Company and the Trustee in connection with such defense as
reasonably determined by the Trustee. The Company need not pay for any
settlement made without its written consent. The Company need not reimburse any
expense or indemnify against any loss or liability to the extent incurred by
the Trustee through its negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section
7.07, the Trustee shall have a lien prior to the Securities on all assets or
money held or collected by the Trustee, in its capacity as Trustee, except
assets or money held in trust to pay principal of or interest on particular
Securities.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(6) or (7) occurs, such expenses and
the compensation for such services shall be paid to the extent allowed under
any Bankruptcy Law.
The provisions of this Section 7.07 shall survive termination
of this Indenture.
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SECTION 7.08. REPLACEMENT OF TRUSTEE.
The Trustee may resign by so notifying the Company. The
Holders of a majority in principal amount of the outstanding Securities may
remove the Trustee by so notifying the Company and the Trustee and may appoint
a successor trustee. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the trustee resigns or is removed or if a vacancy exists
in the office of Trustee for any reason, the Company shall notify each Holder
of such event and shall promptly appoint a successor Trustee. Within one year
after the successor Trustee takes office, the Holders of a majority in
principal amount of the Securities may appoint a successor Trustee to replace
the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Promptly after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. A successor Trustee shall mail notice of its succession
to each Securityholder.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee (at the
expense of the Company), the Company or the Holders of at least 10% in
principal amount of the outstanding Securities may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee; provided that such
corporation shall be otherwise qualified and eligible under this Article Seven.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA ss.ss.310(a)(1) and 310(a)(2). The Trustee (or in the case
of a corporation included in a bank holding company system, the related bank
holding company) shall have a combined capital and surplus of at least
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$100,000,000 as set forth in its most recent published annual report of
condition. In addition, if the Trustee is a corporation included in a bank
holding company system, the Trustee, independently of such bank holding
company, shall meet the capital requirements of TIA ss.ss.310(a)(2). The
Trustee shall comply with TIA ss.310(b); provided, however, that there shall be
excluded from the operation of TIA ss.310(b)(1) any indenture or indentures
under which other securities, or certificates of interest or participation in
other securities, of the Company are outstanding, if the requirements for such
exclusion set forth in TIA ss.310(b)(1) are met. The provisions of TIA ss.310
shall apply to the Company and any other obligor of the Securities.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
The Trustee shall comply with TIA ss.311(a), excluding any
creditor relationship listed in TIA ss.311(b). A Trustee who has resigned or
been removed shall be subject to TIA ss.311(a) to the extent indicated therein.
The provisions of TIA ss.311 shall apply to the Company and any other obligor
of the Securities.
ARTICLE 8.
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. TERMINATION OF THE COMPANY'S OBLIGATIONS.
This Indenture shall cease to be of further effect and the
obligations of the Company under the Securities and this Indenture shall
terminate (except that the obligations under Sections 7.07, 8.04 and 8.05 shall
survive the effect of this Article Eight) when all outstanding Securities
theretofore authenticated and issued have been delivered to the Trustee for
cancellation and the Company has paid all sums payable by it hereunder.
In addition, at the Company's option, either (a) the Company
shall be deemed to have been Discharged from any and all obligations with
respect to the Securities (except for certain obligations of the Company to
register the transfer or exchange of such Securities, replace stolen, lost or
mutilated Securities, maintain paying agencies and hold moneys for payment in
trust) after the applicable conditions set forth below have been satisfied or
(b) the Company shall cease to be under any obligation to comply with any term,
provision or condition set forth in Article Four (except that the Company's
obligations under Sections 4.01 and 4.02 shall survive) and Section 5.01 after
the applicable conditions set forth below have been satisfied:
(1) The Company shall have deposited or caused to be
deposited irrevocably with the Trustee as trust funds in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the Holders of
the Securities U.S. Legal Tender or U.S. Government Obligations or a
combination thereof which, through the payment of interest thereon and
principal in respect thereof in accordance with their terms, will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to
the Trustee, to pay all the principal of and interest on the Securities on the
dates such installments of interest or principal are due in accordance with the
terms of such Securities, as well as the Trustee's fees and expenses; provided
that no deposits made pursuant to this Section 8.01(l) shall cause the Trustee
to have a conflicting interest as defined in and for purposes of the TIA;
provided, further, that from and after the time of deposit, the Funds deposited
shall not be subject to the rights of holders of Senior Indebtedness pursuant
to the provisions of Article Ten; and provided, further, that, as confirmed by
an Opinion of Counsel, no such deposit shall result in the Company, the Trustee
or the trust becoming or being deemed to be an "investment company" under the
Investment Company Act of 1940;
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(2) The Company shall have delivered to the Trustee an
Opinion of Counsel or a private letter ruling issued to the Company by the IRS
to the effect that the Holders of the Securities will not recognize income,
gain or loss for federal income tax purposes as a result of the deposit and
related defeasance and will be subject to federal income tax on the same amount
and in the same manner and at the same times as would have been the case if
such option had not been exercised and, in the case of an Opinion of Counsel
furnished in connection with a Discharge pursuant to the foregoing, accompanied
by a private letter ruling issued to the Company by the IRS to such effect;
(3) No Event of Default or Default with respect to the
Securities shall have occurred and be continuing on the date of such deposit
after giving effect to such deposit;
(4) The Company shall have delivered to the Trustee an
Opinion of Counsel, subject to certain qualifications, to the effect that (i)
the Funds will not be subject to any rights of any other holders of
Indebtedness of the Company, and (ii) the Funds so deposited will not be
subject to avoidance under applicable Bankruptcy Law;
(5) The Company shall have paid or duly provided for payment
of all amounts then due to the Trustee pursuant to Section 7.07;
(6) No such deposit will result in a Default under this
Indenture or a breach or violation of, or constitute a default under, any other
instrument or agreement (including, without limitation, the Senior Credit
Facility) to which the Company or any of its Subsidiaries is a party or by
which it or its property is bound; and
(7) An Officers' Certificate and an Opinion of Counsel to the
effect that all conditions precedent to the defeasance have been complied with.
Notwithstanding the foregoing, the Opinion of Counsel
required by subparagraph 2 above need not be delivered if all Securities not
theretofore delivered to the Trustee for cancellation (i) have become due and
payable, (ii) will become due and payable on the Maturity Date within one year,
or (iii) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company.
"DISCHARGED" means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by, and obligations
under, the Securities and to have satisfied all the obligations under this
Indenture relating to the Securities (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same upon
compliance by the Company with the provisions of this Section), except (i) the
rights of the Holders of Securities to receive, from the trust fund described
in clause (1) above, payment of the principal of and the interest on such
Securities when such payments are due, (ii) the Company's obligations with
respect to the Securities under Sections 2.03 through 2.07, 7.07 and 7.08 and
(iii) the rights, powers, trusts, duties and immunities of the Trustee
hereunder.
"FUNDS" means the aggregate amount of U.S. Legal Tender
and/or U.S. Government Obligations deposited with the Trustee pursuant to this
Article Eight.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations of,
and obligations guaranteed by, the United States of America for the payment of
which the full faith and credit of the United States of America is pledged.
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SECTION 8.02. ACKNOWLEDGMENT OF DISCHARGE BY TRUSTEE.
Subject to Section 8.05, after (i) the conditions of Section
8.01, have been satisfied and (ii) the Company has delivered to the Trustee an
Opinion of Counsel, stating that all conditions precedent referred to in clause
(i) above relating to the satisfaction and discharge of this Indenture have
been complied with, the Trustee upon written request of the Company shall
acknowledge in writing the discharge of the Company's obligations under this
Indenture except for those surviving obligations specified in this Article
Eight.
SECTION 8.03. APPLICATION OF TRUST MONEY.
The Trustee shall hold in trust Funds deposited with it
pursuant to Section 8.01. It shall apply the Funds through the Paying Agent and
in accordance with this Indenture to the payment of principal and accrued and
unpaid interest on the Securities. The Company shall pay and indemnify the
Trustee against any tax, fee or other charge imposed on or assessed against the
U.S. Government Obligations deposited pursuant to Section 8.01 or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of outstanding
Securities.
SECTION 8.04. REPAYMENT TO THE COMPANY.
The Trustee and the Paying Agent shall promptly pay to the
Company, upon the Company's written request, any Funds held by them for the
payment of principal or interest that remains unclaimed for one year; provided,
however, that the Trustee or such Paying Agent may, at the expense of the
Company, cause to be published once in a newspaper of general circulation in
the City of New York or mailed to each Holder, notice that such Funds remain
unclaimed and that, after a date specified therein, which shall not be less
than 30 days from the date of such publication or mailing, any unclaimed
balance of such Funds then remaining will be repaid to the Company. After
payment to the Company, Holders entitled to the Funds must look to the Company
for payment as general creditors unless an applicable abandoned property law
designates another Person and all liability of the Trustee and Paying Agent
with respect to such Funds shall cease.
SECTION 8.05. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any Funds
by reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.01 until such time as the Trustee or Paying Agent is
permitted to apply all such Funds in accordance with Section 8.01; provided,
however, that if the Company has made any payment of interest on or principal
of any Securities because of the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Securities to receive
such payment from Funds held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDER.
The Company, when authorized by a Board Resolution, and the
Trustee, together, may amend or supplement this Indenture or the Securities
without notice to or consent of any Securityholder:
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(1) to cure any ambiguity, defect or inconsistency;
(2) to comply with Article Five;
(3) to provide for uncertificated Securities in addition to
or in place of certificated Securities; or
(4) to make any other change that does not adversely affect
in any material respect the rights of any Securityholders hereunder;
provided that the Company has delivered to the Trustee an Opinion of Counsel
and an Officers' Certificate, each stating that such amendment or supplement
complies with the provisions of this Section 9.01.
SECTION 9.02. WITH CONSENT OF HOLDERS.
Subject to Section 6.07, the Company, when authorized by a
Board Resolution, and the Trustee, together, with the written consent of the
Holder or Holders of at least a majority in principal amount of the outstanding
Securities may amend or supplement this Indenture or the Securities, without
notice to any other Securityholders. Subject to Sections 6.04 and 6.07, the
Holder or Holders of a majority in aggregate principal amount of the
outstanding Securities may waive compliance by the Company with any provision
of this Indenture or the Securities without notice to any other Securityholder.
No amendment, supplement or waiver, including a waiver pursuant to Section
6.04, shall, directly or indirectly, without the consent of each Holder of each
Security affected thereby:
(1) reduce the amount of Securities whose Holders must
consent to an amendment;
(2) reduce the rate of or change the time for payment of
interest, including defaulted interest, on any Securities;
(3) reduce the principal of or change the fixed maturity of
any Securities, or change the date on which any Securities may be subject to
redemption or repurchase, or reduce the redemption or repurchase price
therefor;
(4) make any Securities payable in money other than that
stated in the Securities;
(5) make any change in provisions of this Indenture
protecting the right of each Holder of a Security to receive payment of
principal of and interest on such Security on or after the due date thereof or
to bring suit to enforce such payment or permitting Holders of a majority in
principal amount of Securities to waive Defaults or Events of Default; or
(6) after the Company's obligation to purchase the Securities
arises under Section 4.15 or 4.16, amend, modify or change the obligation of
the Company to consummate a Change of Control Offer or a Net Proceeds Offer or
waive any default in the performance thereof or modify any of the provisions or
definitions with respect to any such offers.
It shall not be necessary for the consent of the Holders
under this Section 9.02 to approve the particular form of any proposed
amendment, supplement or waiver, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment, supplement or waiver under this Section
9.02 becomes effective (as provided in Section 9.04), the Company shall mail to
the Holders affected thereby a notice briefly describing the amendment,
supplement or waiver. Any failure of the Company to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture.
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SECTION 9.03. COMPLIANCE WITH TIA.
Every amendment, waiver or supplement of this Indenture or
the Securities shall comply with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the
same debt as the consenting Holder's Security, even if notation of the consent
is not made on any Security. Subject to the following paragraph, any such
Holder or subsequent Holder may revoke the consent as to his Security or
portion of his Security by notice to the Trustee or the Company received before
the date on which the Trustee receives an Officers' Certificate certifying that
the Holders of the requisite principal amount of Securities have consented (and
not theretofore revoked such consent) to the amendment, supplement or waiver
(at which time such amendment, supplement or waiver shall become effective).
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 120 days
after such record date.
After an amendment, supplement or waiver becomes effective,
it shall bind every Securityholder, unless it makes a change described in any
of clauses (1) through (6) of Section 9.02, in which case, the amendment,
supplement or waiver shall bind only each Holder of a Security who has
consented to it and every subsequent Holder of a Security or portion of a
Security that evidences the same debt as the consenting Holder's Security;
provided that any such waiver shall not impair or affect the right of any
Holder to receive payment of principal of and interest on a Security, on or
after the respective due dates expressed in such Security, or to bring suit for
the enforcement of any such payment on or after such respective dates without
the consent of such Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Trustee. The Trustee may place an appropriate notation on the Security
about the changed terms and return it to the Holder. Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the Security
shall issue and the Trustee shall authenticate a new Security that reflects the
changed terms.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to and adopted in accordance with this Article Nine;
provided that the Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver which affects the Trustee's own rights,
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<PAGE> 67
duties or immunities under this Indenture. The Trustee shall be entitled to
receive, and shall be fully protected in relying upon, an Opinion of Counsel
and an Officers' Certificate each stating that the execution of any amendment,
supplement or waiver authorized pursuant to this Article Nine is authorized or
permitted by this Indenture. Such Opinion of Counsel shall not be an expense of
the Trustee.
ARTICLE 10.
[INTENTIONALLY OMITTED]
ARTICLE 11.
GUARANTEES OF THE SECURITIES
SECTION 11.01. GUARANTEES.
Subject to the provisions of this Article Eleven, each
Guarantor hereby jointly and severally unconditionally guarantees to each
Holder of a Security authenticated and made available for delivery by the
Trustee and to the Trustee and its successors and assigns, irrespective of the
validity and enforceability of this Indenture, the Securities or the
obligations of the Company or any other Guarantors to the Holders or the
Trustee hereunder, that: (a) the principal of and interest on the Securities
will be duly and punctually paid in full when due, whether at maturity, by
acceleration or otherwise, and interest on the overdue principal and (to the
extent permitted by law) interest, if any, on the Securities and all other
Obligations on the Securities will be promptly paid in full or performed, all
in accordance with the terms hereof and thereof; and (b) in case of any
extension of time of payment or renewal of any Securities or any of such other
Obligations on the Securities, the same will be promptly paid in full when due
or performed in accordance with the terms of the extension or renewal, whether
at final stated maturity, by acceleration or otherwise. Failing payment when
due of any amount so guaranteed, for whatever reason, each Guarantor will be
obligated to pay the same immediately. An Event of Default under this Indenture
or the Securities shall constitute an event of default under the Guarantees,
and shall entitle the Holders of Securities to accelerate the obligations of
the Guarantors hereunder in the same manner and to the same extent as the
Obligations of the Company on the Securities.
Each of the Guarantors hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity, regularly or
enforceability of the Securities or this Indenture, the absence of any action
to enforce the same, any waiver or consent by any Holder of the Securities with
respect to any provisions hereof or thereof, any release of any other
Guarantor, the recovery of any judgment against the Company, any action to
enforce the same, whether or not a Guarantee is affixed to any particular
Security, or any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor. Each of the Guarantors hereby
waives the benefit of diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Company,
any right to require a proceeding first against the Company, protest, notice
and all demands whatsoever and covenants that its Guarantee will not be
discharged except by complete performance of the obligations contained in the
Securities, this Indenture and the Guarantee. If any Holder or the Trustee is
required by any court or otherwise to return to the Company or to any
Guarantor, or any custodian, trustee, liquidator or other similar official
acting in relation to the Company or such Guarantor, any amount paid by the
Company or such Guarantor to the Trustee or such Holder, the Guarantees, to the
extent theretofore discharged, shall be reinstated in full force and effect.
Each Guarantor further agrees that, as between it, on the one hand, and the
Holders of Securities and the Trustee, on the other hand, (a) subject to this
Article Eleven, the maturity of the obligations guaranteed hereby may be
accelerated as provided in Section 6.02 for the purposes of the Guarantees,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (b) in the
event of any acceleration of such obligations as provided in Section 6.02, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantors for the purpose of the Guarantees.
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<PAGE> 68
The Guarantees shall remain in full force and effect and
continue to be effective should any petition be filed by or against the Company
for liquidation or reorganization, should the Company become insolvent or make
an assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of the Company's assets, and shall,
to the fullest extent permitted by law, continue to be effective or be
reinstated, as the case may be, if at any time payment and performance of the
Securities are, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee on the Securities,
whether as a "voidable preference," "fraudulent transfer" or otherwise, all as
though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Securities shall, to the fullest extent permitted by law, be reinstated and
deemed reduced only by such amount paid and not so rescinded, reduced, restored
or returned.
No stockholder, officer, director, employer or incorporator,
past, present or future, of any Guarantor, as such, shall have any personal
liability under the Guarantees by reason of his, her or its status as such
stockholder, officer, director, employer or incorporator.
The Guarantors shall have the right to seek contribution from
any non-paying Guarantor so long as the exercise of such right does not impair
the rights of the Holders under the Guarantees.
Each Guarantor, and by its acceptance hereof each Holder,
hereby confirms that it is the intention of all such parties that in no event
shall any Guarantor's obligations under its Guarantee be subject to avoidance
under any applicable fraudulent conveyance or similar law of any relevant
jurisdiction. Therefore, in the event that the Guarantees would, but for this
sentence, be subject to avoidance, then the liability of the Guarantors under
the Guarantees shall be reduced to the extent necessary such that such
Guarantees shall not be subject to avoidance under the applicable fraudulent
conveyance or similar law. Subject to the preceding limitation on liability,
the Guarantee of each Guarantor constitutes a guarantee of payment in full when
due and not merely a guarantee of collectability.
SECTION 11.02. EXECUTION AND DELIVERY OF THE GUARANTEES.
To further evidence the Guarantees set forth in Section
11.01, each Guarantor hereby agrees that a notation of such Guarantees,
substantially in the form included in Exhibit A-1 and Exhibit A-2 hereto, shall
be endorsed on each Security authenticated and made available for delivery by
the Trustee. The validity and enforceability of any Guarantee shall not be
affected by the fact that it is not affixed to any particular Security.
Each of the Guarantors hereby agrees that its Guarantee set
forth in Section 11.01 shall remain in full force and effect notwithstanding
any failure to endorse on each Security a notation of such Guarantee.
If an Officer of a Guarantor whose signature is on this
Indenture or a Security no longer holds that office at the time the Trustee
authenticates such Security or at any time thereafter, such Guarantor's
Guarantee of such Security shall be valid nevertheless.
The delivery of any Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of any
Guarantee set forth in this Indenture on behalf of the Guarantor.
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<PAGE> 69
SECTION 11.03. ADDITIONAL GUARANTORS.
Any Person may become a Guarantor by executing and delivering
to the Trustee (a) a supplemental indenture, in form and substance satisfactory
to the Trustee, which subjects such Person to the provisions of this Indenture
as a Guarantor, and (b) an Opinion of Counsel to the effect that such
supplemental indenture has been duly authorized and executed by such Person and
constitutes the legal, valid, binding and enforceable obligation of such Person
(subject to such customary exceptions concerning fraudulent conveyance laws,
creditors' rights and equitable principles as may be acceptable to the Trustee
in its discretion)
SECTION 11.04. LIMITATION OF GUARANTORS' LIABILITY.
The obligations of each Guarantor are limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Guarantor (including, without limitation, any guarantees
under the Senior Credit Facility) and after giving effect to any collections
from or payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Guarantee or pursuant to Section
11.06, result in the obligations of such Guarantor under the Guarantees not
constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. Each Guarantor that makes a payment or distribution under the
Guarantees shall be entitled to a contribution from each other Guarantor in a
pro rata amount based on the Adjusted Net Assets of each Guarantor.
SECTION 11.05. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
(a) Nothing contained in this Indenture or in any of the
Securities shall prevent any consolidation or merger of a Guarantor with or
into the Company or another Guarantor or shall prevent any sale or conveyance
of the property of a Guarantor, as an entirety or substantially as an entirety,
to the Company or another Guarantor. Upon any such consolidation, merger, sale
or conveyance, the Guarantee given by such Guarantor shall no longer have any
force or effect.
(b) Nothing contained in this Indenture or in any of the
Securities shall prevent any consolidation or merger of a Guarantor with or
into a Person (provided such Person is a corporation, partnership or trust)
other than the Company or another Guarantor or shall prevent any sale or
conveyance of the property of a Guarantor as an entirety or substantially as an
entirety to any such Person (whether or not an Affiliate of the Guarantor).
Upon the sale or disposition of a Guarantor (or all or substantially all of its
assets) to a Person which is not a Subsidiary of the Company, which is
otherwise in compliance with this Indenture (including Section 4.16), such
Guarantor shall be deemed released from all its obligations under this
Indenture and its Guarantee and such Guarantee shall terminate; provided,
however, that any such termination shall occur only to the extent that all
obligations of such Guarantor under the Senior Credit Facility, and all its
guarantees of, and under all of its pledges of assets or other security
interests which secure, Indebtedness of the Company shall also terminate upon
such release, sale or transfer.
(c) The Trustee shall, at the Company's expense, deliver an
appropriate instrument evidencing such release upon receipt of a request by the
Company accompanied by an Officers' Certificate certifying as to the compliance
with this Section 11.05. Any Guarantor not so released remains liable for the
full amount of principal and interest on the Securities as provided in this
Article Eleven.
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<PAGE> 70
SECTION 11.06. CONTRIBUTION.
In order to provide for just and equitable contribution among
the Guarantors, the Guarantors agree, inter alia, that in the event any payment
or distribution is made by any Guarantor (a "FUNDING GUARANTOR") under the
Guarantees, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a pro rata amount based on the Adjusted Net Assets of each
Guarantor (including the Funding Guarantor) for all payments, damages and
expenses incurred by that Funding Guarantor in discharging the Company
obligations with respect to the Securities or any other Guarantor's obligations
with respect to the Guarantees.
SECTION 11.07. WAIVER OF SUBROGATION.
Each Guarantor hereby irrevocably waives any claim or other
rights which it may now or hereafter acquire against the Company that arise
from the existence, payment, performance or enforcement of such Guarantor's
obligations under the Guarantees and this Indenture, including, without
limitation, any right of subrogation, reimbursement, exoneration or
indemnification, and any right to participate in any claim or remedy of any
Holder of Securities against the Company, whether or not such claim, remedy or
right arises in equity, or under contract, statute or common law, including,
without limitation, the right to take or receive from the Company, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim or other rights. If any amount
shall be paid to any Guarantor in violation of the preceding sentence and the
Securities shall not have been paid in full, such amount shall have been deemed
to have been paid to such Guarantor for the benefit of, and held in trust for
the benefit of, the Holders of the Securities, and shall forthwith be paid to
the Trustee for the benefit of such Holders to be credited and applied upon the
Securities, whether matured or unmatured, in accordance with the terms of this
Indenture. Each Guarantor acknowledges that it will receive direct or indirect
benefits from the financing arrangements contemplated by this Indenture and
that the waiver set forth in this Section 11.07 is knowingly made in
contemplation of such benefits.
ARTICLE 12.
[INTENTIONALLY OMITTED]
ARTICLE 13.
MISCELLANEOUS
SECTION 13.01. TIA CONTROLS.
If any provision of this Indenture limits, qualifies, or
conflicts with another provision which is required to be included in this
Indenture by the TIA, the required provision shall control.
SECTION 13.02. NOTICES.
Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by hand
delivery, by telecopier or registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
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if to the Company:
300 Crescent Court
Suite 600
Dallas, Texas 75201
Attention: Chief Financial Officer
if to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
The Company and the Trustee by written notice to each other
may designate additional or different addresses for notices. Any notice or
communication to the Company or the Trustee shall be deemed to have been given
or made as of the date so delivered if personally delivered; when receipt is
acknowledged, if faxed; and five (5) calendar days after mailing if sent by
registered or certified mail, postage prepaid (except that a notice of change
of address shall not be deemed to have been given until actually received by
the addressee).
Any notice or communication mailed to a Securityholder shall
be mailed to him by first class mail or other equivalent means at his address
as it appears on the registration books of the Registrar and shall be
sufficiently given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.03. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA ss.312(b)
with other Securityholders with respect to their rights under this Indenture or
the Securities. The Company, the Trustee, the Registrar and any other Person
shall have the protection of TIA ss.312(c).
SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Except with respect to the issuance of the series of
Securities on the date of this Indenture, upon any request or application by
the Company to the Trustee to take any action under this Indenture, the Company
shall furnish to the Trustee:
(1) an Officers' Certificate, in form and substance
satisfactory to the Trustee, stating that, in the opinion of the signers, all
conditions precedent to be performed by the Company, if any, provided for in
this Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of
such counsel, all such conditions precedent to be performed by the Company, of
any, provided for in this Indenture relating to the proposed action have been
complied with.
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SECTION 13.05. STATEMENTS REQUIRED IN CERTIFICATE.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.07, shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;.
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as is reasonably necessary to enable him
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether or not, in the opinion of each
such Person, such condition or covenant has been complied with.
SECTION 13.06. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of Securityholders.
The Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 13.07. LEGAL HOLIDAYS.
A "LEGAL HOLIDAY" used with respect to a particular place of
payment is a Saturday, a Sunday or a day on which banking institutions in New
York, New York, or at such place of payment are not required to be open. If a
payment date is a Legal Holiday at such place, payment may be made at such
place on the next succeeding day that is not a Legal Holiday, and no interest
shall accrue for the intervening period.
SECTION 13.08. GOVERNING LAW.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS.
SECTION 13.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another
indenture, loan or debt agreement of the Company or any of its Subsidiaries.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 13.10. NO RECOURSE AGAINST OTHERS.
A past, present or future director, officer, employee,
stockholder or incorporator, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creations. Each Securityholder by accepting a Security
waives and releases all such liability. Such waiver and release are part of the
consideration for the issuance of the Securities.
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SECTION 13.11. SUCCESSORS.
All agreements of the Company in this Indenture and the
Securities shall bind its successors. All agreements of the Trustee in this
Indenture shall bind its successors.
SECTION 13.12. DUPLICATE ORIGINALS.
All parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together shall represent
the same agreement.
SECTION 13.13. SEVERABILITY.
In case any one or more of the provisions in this Indenture
or in the Securities shall be held invalid, illegal or unenforceable, in any
respect for any reason, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions shall not in
any way be affected or impaired thereby, it being intended that all of the
provisions hereof shall be enforceable to the full extent permitted by law.
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed all as of the date first written above.
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The Company
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
By: /s/ OMAR CHOUCAIR
---------------------------------------------
Name: Omar Choucair
Title: Vice President and Assistant Secretary
The Guarantors:
On Behalf of the Subsidiary Guarantors
Listed on Schedule I here
By: /s/ OMAR CHOUCAIR
---------------------------------------------
Name: Omar Choucair
Title: Vice President and Assistant Secretary
The Trustee:
THE BANK OF NEW YORK
By: /s/ REMO REALE
-----------------------------------------
Name: Remo J. Reale
Title: Assistant Vice President
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SCHEDULE I
CERTAIN SUBSIDIARIES OF
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
(ALL SUBSIDIARIES ARE DELAWARE CORPORATIONS EXCEPT AS EXPRESSLY INDICATED)
1. Chancellor Media Corporation of The Lone Star State
2. KZPS/KDGE License Corp.
3. Chancellor Media Corporation of California
4. KIOI License Corp.
5. Chancellor Media Corporation of Illinois
6. Chancellor Media Illinois License Corp.
7. Chancellor Media Corporation of Dade County
8. WVCG License Corp.
9. Chancellor Media Corporation of Massachusetts
10. Chancellor Media Pennsylvania License Corp.
11. Chancellor Media Corporation of Miami
12. WEDR License Corp.
13. Chancellor Media of Houston Limited Partnership
14. Chancellor Media Corporation of Houston
15. Chancellor Media Corporation of the Keystone State
16. Chancellor Media Corporation of New York
17. Chancellor Media Corporation of Charlotte
18. WIOQ License Corp.
19. Chancellor Media Corporation of Washington, D.C.
20. Chancellor Media Corporation of St. Louis
21. Chancellor Media Corporation of Michigan
22. Chancellor Media / WAXQ Inc.
23. WAXQ License Corp.
24. Chancellor Media / KCMG Inc.
25. Chancellor Media / Riverside Broadcasting Co., Inc.
26. WLTW License Corp.
27. Chancellor Media Corporation of the Capital City
28. Chancellor Media D.C. License Corp.
29. Chancellor Media Licensee Company
30. Chancellor Media/Trefoil Communications, Inc.
31. Chancellor Media/Shamrock Broadcasting, Inc.
32. Chancellor Media/Shamrock Radio Licenses, Inc.
33. Chancellor Media/Shamrock Broadcasting Licenses of Denver, Inc.
34. Chancellor Media/Shamrock Broadcasting of Texas, Inc (a Texas
corporation)
35. Chancellor Media/Shamrock Radio Licenses, LLC
36. Chancellor Media Outdoor Corporation
37. Chancellor Media Nevada Sign Corporation
38. Chancellor Media MW Sign Corporation
39. Chancellor Media Martin Corporation
40. Western Poster Service, Inc. (a Texas corporation)
41. The AMFM Radio Networks, Inc.
42. Chancellor Media Air Services Corporation
43. Chancellor Media Whiteco Outdoor Corporation
44. Chancellor Merger Corp.
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45. Broadcast Architecture, Inc. (a Massachusetts corporation)
46. Martin Media (a California limited partnership)
47. Dowling Company Incorporated (a Virginia corporation)
48. Nevada Outdoor Systems, Inc. (a Nevada corporation)
49. MW Sign Corp. (a California corporation)
50. Martin & MacFarlane, Inc. (a California corporation)
51. Katz Media Corporation
52. Katz Communications, Inc.
53. Katz Millennium Marketing, Inc.
54. Amcast Radio Sales, Inc.
55. Christal Radio Sales, Inc.
56. Eastman Radio Sales, Inc.
57. Seltel Inc.
58. Katz Cable Corporation
59. The National Payroll Company, Inc.
60. Chancellor Media Radio Licenses, LLC
61. KLOL License Limited Partnership
62. WTOP License Limited Partnership
63. Radio 100, L.L.C.
64. Revolution Outdoor Advertising, Inc.
65. Hardin Development Corporation
66. Parsons Development Company
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<PAGE> 77
EXHIBIT A-1
(Face of Security)
===============================================================================
CUSIP:
-----------
8% [Series A] [Series B] Senior Notes due 2008
No.: $
-----------
Chancellor Media Corporation of Los Angeles
promises to pay to
-------------------------------------------------------------
or registered assigns,
the principal sum of
-----------------------------------------------------------
Dollars on , 2008.
----------------
Interest Payment Dates: , and
-------------
Record Dates: , and
------------- ------------------
DATED: , 199_
------------
CHANCELLOR MEDIA CORPORATION OF
LOS ANGELES
BY:
----------------------------------
Name:
Title:
This is one of the [Global]
Securities referred to in the
within-mentioned Indenture:
The Bank of New York,
as Trustee
By:
--------------------------
Authorized Signatory
===============================================================================
A1-1
<PAGE> 78
(REVERSE OF SECURITY)
8% SENIOR NOTES DUE 2008
[INSERT THE GLOBAL NOTE LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE
INDENTURE]
[INSERT THE PRIVATE PLACEMENT LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS
OF THE INDENTURE]
1. Interest. CHANCELLOR MEDIA CORPORATION OF LOS ANGELES, a
Delaware corporation (the "COMPANY"), promises to pay interest on the principal
amount of this Security at the rate per annum shown above. Interest on the
Securities will accrue from the most recent date on which interest has been
paid or, if no interest has been paid, from November 17, 1998. The Company will
pay interest semi-annually in arrears on each Interest Payment Date, commencing
May 1, 1999. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
The Company shall pay interest on overdue principal and on
overdue installments of interest from time to time on demand at the rate borne
by the Securities to the extent lawful.
2. Method of Payment. The Company shall pay interest on the
Securities (except defaulted interest) to the Persons who are the registered
Holders at the close of business on the Record Date immediately preceding the
Interest Payment Date even if the Securities are cancelled on registration of
transfer or registration of exchange after such Record Date. Holders must
surrender Securities to a Paying Agent to collect principal payments. The
Company shall pay principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts
("U.S. LEGAL TENDER"). However, the Company may pay principal and interest by
its check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address.
3. Paying Agent and Registrar. Initially, The Bank of New
York (the "TRUSTEE") will act as Paying Agent and Registrar. The Company may
change any Paying Agent, Registrar or Co-Registrar without notice to the
Holders. The Company or any of its Subsidiaries may, subject to certain
exceptions, act as Registrar or Co-Registrar.
4. Indenture and Guarantees. The Company issued the
Securities under an indenture, dated as of November 17, 1998 (the "INDENTURE"),
among the Company, the Guarantors and the Trustee. This Security is one of a
duly authorized issue of Securities of the Company designated as its 8% Senior
Notes due 2008 (the "SECURITIES"), limited (except as otherwise provided in the
Indenture) in aggregate principal amount to $750,000,000, which may be issued
under the Indenture. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. 77aaa-77bbbb) (the "TIA"), as in effect on the
date of the Indenture. Notwithstanding anything to the contrary herein, the
Securities are subject to all such terms, and Holders of Securities are
referred to the Indenture and the TIA for a statement of them. The Securities
are general unsecured obligations of the Company. Payment on each Security is
guaranteed on a senior basis, jointly and severally, by the Guarantors pursuant
to Article Eleven of the Indenture.
5. [Intentionally Omitted.]
6. Optional Redemption. (a) The Securities will be
redeemable, at the Company's option, in whole at any time or in part from time
to time, upon not less than 30 nor more than 60 days prior notice mailed by
first class mail to each holder's registered address, at a redemption price
equal to 100% of the principal amount thereof plus the Applicable Premium (as
defined below) as of, and accrued and unpaid interest, if any, to the date of
redemption (the "REDEMPTION DATE") (subject to the right of holders of record
on the relevant record date to receive interest due on the relevant interest
payment date in respect of then outstanding Securities).
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<PAGE> 79
"APPLICABLE PREMIUM" means, with respect to a Security at any
Redemption Date, (a) the present value of all remaining required interest and
principal payments due on such Security assuming a Redemption Date of November
1, 2008, computed using a discount rate equal to the Treasury Rate (as defined
below) plus 50 basis points minus (b) the then outstanding principal amount of
such Security minus (c) accrued interest paid on the Redemption Date.
"TREASURY RATE" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15(519) ("STATISTICAL RELEASE") which has become publicly available at least
two business days prior to the Redemption Date (or, if such Statistical Release
is no longer published, any publicly available source of similar market data))
most nearly equal to the period from the Redemption Date to November 1, 2008;
provided, however, that if the period from the Redemption Date to November 1,
2008 is not equal to the constant maturity of a United States Treasury security
for which a weekly average yield is given, the Treasury Rate shall be obtained
by linear interpolation (calculated to the nearest one-twelfth of a year) from
the weekly average yields of United States Treasury securities for which such
yields are given, except that if the period from the Redemption Date to
November 1, 2008 is less than one year, the weekly average yield on actually
traded United States Treasury securities adjusted to a constant maturity of one
year shall be used.
(b) In addition, on or prior to November 1, 2001,
the Company may, at its option, use the net cash proceeds of one or more Public
Equity Offerings to redeem the Securities, in part, at a redemption price of
108.0% of the principal amount thereof, plus accrued and unpaid interest
thereon to the date of redemption; provided, however, that after any such
redemption the aggregate principal amount of the Securities outstanding must
equal at least 75% of the aggregate principal amount of the Securities
originally issued (that is, $562.5 million).
7. Notice of Redemption. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the Redemption Date to each
Holder of Securities to be redeemed at such Holder's registered address. In
order to effect a redemption with the proceeds of a Public Equity Offering, the
Company shall send the redemption notice in the manner specified in the
Indenture not later than 30 days after the consummation of such Public Equity
Offering and effect such redemption not later than 90 days after the
consummation of such Public Equity Offering. Securities in denominations larger
than $1,000 may be redeemed in part.
8. Change of Control Offer. In the event of a Change of
Control, upon the satisfaction of the conditions set forth in the Indenture,
the Company shall be required to offer to repurchase all of the then
outstanding Securities pursuant to a Change of Control Offer at a purchase
price equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of repurchase. Holders of Securities which are
the subject of such an offer to repurchase shall receive an offer to repurchase
and may elect to have such Securities repurchased in accordance with the
provisions of the Indenture pursuant to and in accordance with the terms of the
Indenture.
9. Limitation on Disposition of Assets. Under certain
circumstances, the Company is required to apply the net proceeds from Asset
Sales to offer to repurchase Securities at a price equal to 100% of the
aggregate principal amount thereof, plus accrued and unpaid interest to the
date of repurchase.
A1-3
<PAGE> 80
10. Denominations; Transfer; Exchange. The Securities are in
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. A Holder shall register the transfer of or exchange
Securities in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay certain transfer taxes or similar governmental charges
payable in connection therewith as permitted by the Indenture. The Registrar
need not register the transfer of or exchange any Securities during a period
beginning 15 days before the mailing of a redemption notice for any Securities
or portions thereof selected for redemption.
11. Persons Deemed Owners. The registered Holder of a
Security shall be treated as the owner of it for all purposes.
12. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for one year, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
13. Discharge Prior to Redemption or Maturity. if the Company
at any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of and interest on the Securities
to redemption or maturity and complies with the other provisions of the
Indenture relating thereto, the Company will be discharged from certain
provisions of the Indenture and the Securities (including certain covenants,
but excluding its obligation to pay the principal of and interest on the
Securities).
14. Amendment; Supplement; Waiver. Subject to certain
exceptions, the Indenture or the Securities may be amended or supplemented with
the written consent of the Holders of at least a majority in aggregate
principal amount of the Securities then outstanding, and any existing Default
or Event of Default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in aggregate principal amount of
the Securities then outstanding. Without notice to or consent of any Holder,
the parties thereto may amend or supplement the Indenture or the Securities to,
among other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Securities in addition to or in place of certificated
Securities, or comply with Article Five of the Indenture, or make any other
change that does not adversely affect in any material respect the rights of any
Holder of a Security.
15. Restrictive Covenants. The Indenture imposes certain
limitations on the ability of the Company and its Subsidiaries to, among other
things, incur additional Indebtedness, make payments in respect of its Capital
Stock or certain Indebtedness, engage in certain Asset Swaps, enter into
transactions with Affiliates, create dividend or other payment restrictions
affecting Subsidiaries and merge or consolidate with any other Person, sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of its assets or adopt a plan of liquidation. Such limitations are subject
to a number of important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such limitations.
16. Successors. When a successor assumes, in accordance with
the Indenture, all the obligations of its predecessor under the Securities and
the Indenture, the predecessor will be released from those obligations.
17. Defaults and Remedies. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in aggregate
principal amount of Securities then outstanding may declare all the Securities
to be due and payable in the manner, at the time and with the effect provided
in the Indenture. Holders of Securities may not enforce the Indenture or the
Securities except as provided
A1-4
<PAGE> 81
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has been offered indemnity or security reasonably
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Securities then outstanding to direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities notice of any
continuing Default or Event of Default (except a Default in payment of
principal or interest) if it determines in good faith that withholding notice
is in their interest.
18. Trustee Dealings. The Trustee under the Indenture, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may otherwise deal with the Company, its Subsidiaries, Unrestricted
Subsidiaries or their respective Affiliates as if it were not the Trustee.
19. No Recourse Against Others. No past, present or future
stockholder, director, officer, employee or incorporator, as such, of the
Company shall have any liability for any obligation of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
20. Authentication. This Security shall not be valid until
the Trustee or authenticating agent manually signs the certificate of
authentication on this Security.
21. Governing Law. The laws of the State of New York shall
govern this Security and the Indenture, without regard to principles of
conflict of laws.
22. Abbreviations and Defined Terms. Customary abbreviations
may be used in the name of a Holder of a Security or an assignee, such as: TEN
COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (=
joint tenants with right of survivorship and not as tenants in common), CUST
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
23. CUSIP Numbers. Pursuant to a recommendation promulgated
by the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Securities as a convenience to the
Holders of the Securities. No representation is made as to the accuracy of such
numbers as printed on the Securities and reliance may be placed only on the
other identification numbers printed hereon.
24. Registration Rights. Pursuant to the Registration Rights
Agreement, the Company will be obligated to consummate an exchange offer
pursuant to which, subject to the terms and conditions of the Registration
Rights Agreement, the Holder of this Security shall have the right to exchange
this Security for Securities of a separate series issued under the Indenture
(or a trust indenture substantially identical to the Indenture in accordance
with the terms of the Registration Rights Agreement) which have been registered
under the Securities Act, in like principal amount and having identical terms
as this Security. The Holders of the Securities shall be entitled to receive
certain additional interest payments in the event such exchange offer is not
consummated and upon certain other conditions, all pursuant to and in
accordance with the terms of the Registration Rights Agreement.
25. Indenture. Each Holder, by accepting a Security, agrees
to be bound by all of the terms and provisions of the Indenture, as the same
may be amended from time to time. Capitalized terms used herein and not defined
herein have the meanings ascribed thereto in the Indenture.
The Company will furnish to any Holder of a Security upon
written request and without charge a copy of the Indenture, which has the text
of this Security in larger type. Requests may be made to: CHANCELLOR MEDIA
CORPORATION OF LOS ANGELES, 300 Crescent Court, Suite 600, Dallas, Texas 75201.
A1-5
<PAGE> 82
GUARANTEE
The Guarantors (as defined in the Indenture referred to in
the Security upon which this notation is endorsed and each hereinafter referred
to as a "GUARANTOR," which term includes any successor person under the
Indenture) have unconditionally guaranteed on a senior basis (such guarantee by
each Guarantor being referred to herein as the "GUARANTEE") (i) the due and
punctual payment of the principal of and interest on the Securities, whether at
maturity, by acceleration or otherwise, the due and punctual payment of
interest on the overdue principal and interest, if any, on the Securities, to
the extent lawful, and the due and punctual performance of all other
obligations of the Company to the Holders or the Trustee all in accordance with
the terms set forth in Article Ten of the Indenture and (ii) in case of any
extension of time of payment or renewal of any Securities or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise.
No stockholder, officer, director or incorporator, as such,
past, present or future, of any Guarantor shall have any liability under the
Guarantee by reason of his or its status as such stockholder, officer, director
or incorporator.
The Guarantees shall not be valid or obligatory for any
purpose until the certificate of authentication on the Securities upon which
the Guarantees are noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.
GUARANTORS:
On Behalf of the Subsidiary Guarantors Listed
on Exhibit A hereto
By:
----------------------------------------
Name: Omar Choucair
Title: Vice President
A1-6
<PAGE> 83
Exhibit A
CERTAIN SUBSIDIARIES OF
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
(ALL SUBSIDIARIES ARE DELAWARE CORPORATIONS EXCEPT AS EXPRESSLY INDICATED)
1. Chancellor Media Corporation of The Lone Star State
2. KZPS/KDGE License Corp.
3. Chancellor Media Corporation of California
4. KIOI License Corp.
5. Chancellor Media Corporation of Illinois
6. Chancellor Media Illinois License Corp.
7. Chancellor Media Corporation of Dade County
8. WVCG License Corp.
9. Chancellor Media Corporation of Massachusetts
10. Chancellor Media Pennsylvania License Corp.
11. Chancellor Media Corporation of Miami
12. WEDR License Corp.
13. Chancellor Media of Houston Limited Partnership
14. Chancellor Media Corporation of Houston
15. Chancellor Media Corporation of the Keystone State
16. Chancellor Media Corporation of New York
17. Chancellor Media Corporation of Charlotte
18. WIOQ License Corp.
19. Chancellor Media Corporation of Washington, D.C.
20. Chancellor Media Corporation of St. Louis
21. Chancellor Media Corporation of Michigan
22. Chancellor Media / WAXQ Inc.
23. WAXQ License Corp.
24. Chancellor Media / KCMG Inc.
25. Chancellor Media / Riverside Broadcasting Co., Inc.
26. WLTW License Corp.
27. Chancellor Media Corporation of the Capital City
28. Chancellor Media D.C. License Corp.
29. Chancellor Media Licensee Company
30. Chancellor Media/Trefoil Communications, Inc.
31. Chancellor Media/Shamrock Broadcasting, Inc.
32. Chancellor Media/Shamrock Radio Licenses, Inc.
33. Chancellor Media/Shamrock Broadcasting Licenses of Denver, Inc.
34. Chancellor Media/Shamrock Broadcasting of Texas, Inc (a Texas
corporation)
35. Chancellor Media/Shamrock Radio Licenses, LLC
36. Chancellor Media Outdoor Corporation
37. Chancellor Media Nevada Sign Corporation
38. Chancellor Media MW Sign Corporation
39. Chancellor Media Martin Corporation
40. Western Poster Service, Inc. (a Texas corporation)
41. The AMFM Radio Networks, Inc.
42. Chancellor Media Air Services Corporation
43. Chancellor Media Whiteco Outdoor Corporation
44. Chancellor Merger Corp.
A1-7
<PAGE> 84
45. Broadcast Architecture, Inc. (a Massachusetts corporation)
46. Martin Media (a California limited partnership)
47. Dowling Company Incorporated (a Virginia corporation)
48. Nevada Outdoor Systems, Inc. (a Nevada corporation)
49. MW Sign Corp. (a California corporation)
50. Martin & MacFarlane, Inc. (a California corporation)
51. Katz Media Corporation
52. Katz Communications, Inc.
53. Katz Millennium Marketing, Inc.
54. Amcast Radio Sales, Inc.
55. Christal Radio Sales, Inc.
56. Eastman Radio Sales, Inc.
57. Seltel Inc.
58. Katz Cable Corporation
59. The National Payroll Company, Inc.
60. Chancellor Media Radio Licenses, LLC
61. KLOL License Limited Partnership
62. WTOP License Limited Partnership
63. Radio 100, L.L.C.
64. Revolution Outdoor Advertising, Inc.
65. Hardin Development Corporation
66. Parsons Development Company
A1-8
<PAGE> 85
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Security to
- -------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
--------------------------------------------------------
to transfer this Security on the books of the Company. The agent may substitute
another to act for him.
- -------------------------------------------------------------------------------
Date:
Your Signature:
-----------------------
(Sign exactly as your name appears on
the face of this Security)
SIGNATURE GUARANTEE.
- ------------------------------
Participant in a Recognized Signature
Guarantee Medallion Program
A1-9
<PAGE> 86
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.15 or 4.16 of the Indenture, check the box below:
[ ] Section 4.15 [ ] Section 4.16
If you want to elect to have only part of the Security
purchased by the Company pursuant to Section 4.15 or Section 4.16 of the
Indenture, state the amount you elect to have purchased: $________
Date: Your Signature:
----------------- ----------------------------
(Sign exactly as your name
appears on the Note)
Tax Identification No:
----------------------
SIGNATURE GUARANTEE.
- ------------------------------
Participant in a Recognized Signature
Guarantee Medallion Program
A1-10
<PAGE> 87
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL SECURITY1/
The following exchanges of a part of this Global Security for
an interest in another Global Security or for a Definitive Security, or
exchanges of a part of another Global Security or Definitive Security for an
interest in this Global Security, have been made:
<TABLE>
<CAPTION>
Amount of
decrease in Amount of Principal Amount of Signature of
Principal increase in of this authorized
Amount of Principal Global Security officer of
this Global Amount of following such Trustee or
Date of Exchange Security this Global Security decrease (or increase) Custodian
- ------------------- ----------- -------------------- ---------------------- ------------
<S> <C> <C> <C> <C>
</TABLE>
- -----------------------
11 This should be included only if the Security is issued in global form.
A1-11
<PAGE> 88
EXHIBIT A-2
(Face of Regulation S Temporary Global Security)
===============================================================================
CUSIP:
------------
8% [Series A] [Series B] Senior Notes due 2008
No. $
----- ------------
Chancellor Media Corporation of Los Angeles
promises to pay to
-------------------------------------------------------------
or registered assigns,
the principal sum of
-----------------------------------------------------------
Dollars on , 2008.
----------------
Interest Payment Dates: , and
------------- -------------
Record Dates: , and
-------------- -------------
DATED: , 199
--------------------
CHANCELLOR MEDIA CORPORATION OF
LOS ANGELES
By:
---------------------------------
Name:
Title:
This is one of the [Global]
Securities referred to in the
within-mentioned Indenture:
The Bank of New York,
as Trustee
By:
------------------------
Authorized Signatory
===============================================================================
A2-1
<PAGE> 89
(REVERSE OF REGULATION S TEMPORARY GLOBAL SECURITY)
8% SENIOR NOTES DUE 2008
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL
SECURITY, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR
CERTIFICATED SECURITIES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN).
THIS GLOBAL SECURITY IS HELD BY THE DEPOSITARY (AS DEFINED IN
THE INDENTURE GOVERNING THIS SECURITY) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON
UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS
HEREON AS MAY BE REQUIRED PURSUANT TO THE INDENTURE, (II) THIS GLOBAL SECURITY
MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL SECURITY MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL
SECURITY MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF THE COMPANY.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT
OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE ACT) (B) IT IS AN "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a) (1), (2), (3) OR (7) UNDER THE ACT) OR (C) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2)
AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR
ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE ACT, (C) INSIDE THE
UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
(OR HAS HAD FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRANSFER
AGENT A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE TRANSFER AGENT), (D) OUTSIDE THE UNITED STATES
IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT
(IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY
IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRANSFER,
FURNISH TO THE TRANSFER AGENT AND THE COMPANY SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT. AS USED
HEREIN, THE TERMS "OFF-SHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON"
HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE ACT.
A2-2
<PAGE> 90
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES, a Delaware
corporation (the "COMPANY"), promises to pay interest on the principal amount
of this Security at the rate per annum shown above. Interest on the Securities
will accrue from the most recent date on which interest has been paid or, if no
interest has been paid, from November 17, 1998. The Company will pay interest
semi-annually in arrears on each Interest Payment Date, commencing May 1, 1999.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
The Company shall pay interest on overdue principal and on
overdue installments of interest from time to time on demand at the rate borne
by the Securities to the extent lawful.
2. Method of Payment. The Company shall pay interest on the
Securities (except defaulted interest) to the Persons who are the registered
Holders at the close of business on the Record Date immediately preceding the
Interest Payment Date even if the Securities are cancelled on registration of
transfer or registration of exchange after such Record Date. Holders must
surrender Securities to a Paying Agent to collect principal payments. The
Company shall pay principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts
("U.S. LEGAL TENDER"). However, the Company may pay principal and interest by
its check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address.
3. Paying Agent and Registrar. Initially, The Bank of New
York (the "TRUSTEE") will act as Paying Agent and Registrar. The Company may
change any Paying Agent, Registrar or Co-Registrar without notice to the
Holders. The Company or any of its Subsidiaries may, subject to certain
exceptions, act as Registrar or Co-Registrar.
4. Indenture and Guaranty. The Company issued the Securities
under an Indenture, dated as of November 17, 1998 (the "INDENTURE"), among the
Company, the Guarantors and the Trustee. This Security is one of a duly
authorized issue of Securities of the Company designated as its 8% Senior Notes
due 2008 (the "SECURITIES"), limited (except as otherwise provided in the
Indenture) in aggregate principal amount to $750,000,000, which may be issued
under the Indenture. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. 77aaa-77bbbb) (the "TIA"), as in effect on the
date of the Indenture. Notwithstanding anything to the contrary herein, the
Securities are subject to all such terms, and Holders of Securities are
referred to the Indenture and the TIA for a statement of them. The Securities
are general unsecured obligations of the Company. Payment on each Security is
guaranteed on a senior basis, jointly and severally, by the Guarantors pursuant
to Article Eleven of the Indenture.
5. [Intentionally Omitted.]
6. Optional Redemption. (a) The Securities will be
redeemable, at the Company's option, in whole at any time or in part from time
to time, upon not less than 30 nor more than 60 days prior notice mailed by
first class mail to each holder's registered address, at a redemption price
equal to 100% of the principal amount thereof plus the Applicable Premium (as
defined below) as of, and accrued and unpaid interest, if any, to the date of
redemption (the "REDEMPTION DATE") (subject to the right of holders of record
on the relevant record date to receive interest due on the relevant interest
payment date in respect of then outstanding securities).
A2-3
<PAGE> 91
"APPLICABLE PREMIUM" means, with respect to a Security at any
Redemption Date, (a) the present value of all remaining required interest and
principal payments due on such Security assuming a Redemption Date of November
1, 2008, computed using a discount rate equal to the Treasury Rate (as defined
below) plus 50 basis points minus (b) the then outstanding principal amount of
such Security minus (c) accrued interest paid on the Redemption Date.
"TREASURY RATE" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15(519) ("STATISTICAL RELEASE") which has become publicly available at least
two business days prior to the Redemption Date (or, if such Statistical Release
is no longer published, any publicly available source of similar market data))
most nearly equal to the period from the Redemption Date to November 1, 2008;
provided, however, that if the period from the Redemption Date to November 1,
2008 is not equal to the constant maturity of a United States Treasury security
for which a weekly average yield is given, the Treasury Rate shall be obtained
by linear interpolation (calculated to the nearest one-twelfth of a year) from
the weekly average yields of United States Treasury securities for which such
yields are given, except that if the period from the Redemption Date to
November 1, 2008 is less than one year, the weekly average yield on actually
traded United States Treasury securities adjusted to a constant maturity of one
year shall be used.
(b) In addition, on or prior to November 1, 2001, the Company
may, at its option, use the net cash proceeds of one or more Public Equity
Offerings to redeem the Securities, in part, at a redemption price of 108.0% of
the principal amount thereof, plus accrued and unpaid interest thereon to the
date of redemption; provided, however, that after any such redemption the
aggregate principal amount of the Securities outstanding must equal at least
75% of the aggregate principal amount of the Securities originally issued (that
is, $562.5 million).
7. Notice of Redemption. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the Redemption Date to each
Holder of Securities to be redeemed at such Holder's registered address. In
order to effect a redemption with the proceeds of a Public Equity Offering, the
Company shall send the redemption notice in the manner specified in the
Indenture not later than 30 days after the consummation of such Public Equity
Offering and effect such redemption within 90 days after the consummation of
such Public Equity Offering. Securities in denominations larger than $1,000 may
be redeemed in part.
8. Change of Control Offer. In the event of a Change of
Control, upon the satisfaction of the conditions set forth in the Indenture,
the Company shall be required to offer to repurchase all of the then
outstanding Securities pursuant to a Change of Control Offer at a purchase
price equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of repurchase. Holders of Securities which are
the subject of such an offer to repurchase shall receive an offer to repurchase
and may elect to have such Securities repurchased in accordance with the
provisions of the Indenture pursuant to and in accordance with the terms of the
Indenture.
9. Limitation on Disposition of Assets. Under certain
circumstances, the Company is required to apply the net proceeds from Asset
Sales to offer to repurchase Securities at a price equal to 100% of the
aggregate principal amount thereof, plus accrued and unpaid interest to the
date of repurchase.
10. Denominations; Transfer; Exchange. The Securities are in
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. A Holder shall register the transfer of or exchange
Securities in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay certain transfer taxes or similar governmental charges
payable in connection therewith as permitted by the Indenture. The Registrar
need not register the transfer of or exchange any Securities during a period
beginning 15 days before the mailing of a redemption notice for any Securities
or portions thereof selected for redemption.
A2-4
<PAGE> 92
11. Persons Deemed Owners. The registered Holder of a
Security shall be treated as the owner of it for all purposes.
12. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for one year, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
13. Discharge Prior to Redemption or Maturity. if the Company
at any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of and interest on the Securities
to redemption or maturity and complies with the other provisions of the
Indenture relating thereto., the Company will be discharged from certain
provisions of the Indenture and the Securities (including certain covenants,
but excluding its obligation to pay the principal of and interest on the
Securities).
14. Amendment; Supplement; Waiver. Subject to certain
exceptions, the Indenture or the Securities may be amended or supplemented with
the written consent of the Holders of at least a majority in aggregate
principal amount of the Securities then outstanding, and any existing Default
or Event of Default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in aggregate principal amount of
the Securities then outstanding. Without notice to or consent of any Holder,
the parties thereto may amend or supplement the Indenture or the Securities to,
among other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Securities in addition to or in place of certificated
Securities, or comply with Article Five of the Indenture, or make any other
change that does not adversely affect in any material respect the rights of any
Holder of a Security.
15. Restrictive Covenants. The Indenture imposes certain
limitations on the ability of the Company and its Subsidiaries to, among other
things, incur additional Indebtedness, make payments in respect of its Capital
Stock or certain Indebtedness, engage in certain Asset Swaps, enter into
transactions with Affiliates, create dividend or other payment restrictions
affecting Subsidiaries and merge or consolidate with any other Person, sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of its assets or adopt a plan of liquidation. Such limitations are subject
to a number of important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such limitations.
16. Successors. When a successor assumes, in accordance with
the Indenture, all the obligations of its predecessor under the Securities and
the Indenture, the predecessor will be released from those obligations.
17. Defaults and Remedies. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in aggregate
principal amount of Securities then outstanding may declare the Securities to
be due and payable in the manner, at the time and with the effect provided in
the Indenture. Holders of Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee is not obligated to
enforce the Indenture or the Securities unless it has been offered indemnity or
security reasonably satisfactory to it. The Indenture permits, subject to
certain limitations therein provided, Holders of a majority in aggregate
principal amount of the Securities then outstanding to direct the Trustee in
its exercise of any trust or power. The Trustee may withhold from Holders of
Securities notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest) if it determines in good faith
that withholding notice is in their interest.
A2-5
<PAGE> 93
18. Trustee Dealings with Company. The Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with the Company, its
Subsidiaries, Unrestricted Subsidiaries or their respective Affiliates as if it
were not the Trustee.
19. No Recourse Against Others. No past, present or future
stockholder, director, officer, employee or incorporator, as such, of the
Company shall have any liability for any obligation of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
20. Authentication. This Security shall not be valid until
the Trustee or authenticating agent manually signs the certificate of
authentication on this Security.
21. Governing Law. The laws of the State of New York shall
govern this Security and the Indenture, without regard to principles of
conflict of laws.
22. Abbreviations and Defined Terms. Customary abbreviations
may be used in the name of a Holder of a Security or an assignee, such as: TEN
COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (=
joint tenants with right of survivorship and not as tenants in common), CUST
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
23. CUSIP Number. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Securities as a convenience to the
Holders of the Securities. No representation is made as to the accuracy of such
numbers as printed on the Securities and reliance may be placed only on the
other identification numbers printed hereon.
24. Indenture. Each Holder, by accepting a Security, agrees
to be bound by all of the terms and provisions of the Indenture, as the same
may be amended from time to time.
Capitalized terms used herein and not defined herein have the
meanings ascribed thereto in the Indenture.
The Company will furnish to any Holder of a Security upon
written request and without charge a copy of the Indenture, which has the text
of this Security in larger type. Requests may be made to: CHANCELLOR MEDIA
CORPORATION OF LOS ANGELES, 300 Crescent Court, Suite 600, Dallas, Texas 75201.
A2-6
<PAGE> 94
GUARANTEE
The Guarantors (as defined in the Indenture referred to in
the Security upon which this notation is endorsed and each hereinafter referred
to as a "GUARANTOR," which term includes any successor person under the
Indenture) have unconditionally guaranteed on a senior basis (such guarantee by
each Guarantor being referred to herein as the "GUARANTEE") (i) the due and
punctual payment of the principal of and interest on the Securities, whether at
maturity, by acceleration or otherwise, the due and punctual payment of
interest on the overdue principal and interest, if any, on the Securities, to
the extent lawful, and the due and punctual performance of all other
obligations of the Company to the Holders or the Trustee all in accordance with
the terms set forth in Article Ten of the Indenture and (ii) in case of any
extension of time of payment or renewal of any Securities or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise.
No stockholder, officer, director or incorporator, as such,
past, present or future, of any Guarantor shall have any liability under the
Guarantee by reason of his or its status as such stockholder, officer, director
or incorporator.
The Guarantees shall not be valid or obligatory for any
purpose until the certificate of authentication on the Securities upon which
the Guarantees are noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.
GUARANTORS:
On Behalf of the Subsidiary Guarantors
Listed on Exhibit A hereto
By:
------------------------------------------
Name: Omar Choucair
Title: Vice President
A2-7
<PAGE> 95
Exhibit A
CERTAIN SUBSIDIARIES OF
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
(ALL SUBSIDIARIES ARE DELAWARE CORPORATIONS EXCEPT AS EXPRESSLY INDICATED)
1. Chancellor Media Corporation of The Lone Star State
2. KZPS/KDGE License Corp.
3. Chancellor Media Corporation of California
4. KIOI License Corp.
5. Chancellor Media Corporation of Illinois
6. Chancellor Media Illinois License Corp.
7. Chancellor Media Corporation of Dade County
8. WVCG License Corp.
9. Chancellor Media Corporation of Massachusetts
10. Chancellor Media Pennsylvania License Corp.
11. Chancellor Media Corporation of Miami
12. WEDR License Corp.
13. Chancellor Media of Houston Limited Partnership
14. Chancellor Media Corporation of Houston
15. Chancellor Media Corporation of the Keystone State
16. Chancellor Media Corporation of New York
17. Chancellor Media Corporation of Charlotte
18. WIOQ License Corp.
19. Chancellor Media Corporation of Washington, D.C.
20. Chancellor Media Corporation of St. Louis
21. Chancellor Media Corporation of Michigan
22. Chancellor Media / WAXQ Inc.
23. WAXQ License Corp.
24. Chancellor Media / KCMG Inc.
25. Chancellor Media / Riverside Broadcasting Co., Inc.
26. WLTW License Corp.
27. Chancellor Media Corporation of the Capital City
28. Chancellor Media D.C. License Corp.
29. Chancellor Media Licensee Company
30. Chancellor Media/Trefoil Communications, Inc.
31. Chancellor Media/Shamrock Broadcasting, Inc.
32. Chancellor Media/Shamrock Radio Licenses, Inc.
33. Chancellor Media/Shamrock Broadcasting Licenses of Denver, Inc.
34. Chancellor Media/Shamrock Broadcasting of Texas, Inc (a Texas
corporation)
35. Chancellor Media/Shamrock Radio Licenses, LLC
36. Chancellor Media Outdoor Corporation
37. Chancellor Media Nevada Sign Corporation
38. Chancellor Media MW Sign Corporation
39. Chancellor Media Martin Corporation
40. Western Poster Service, Inc. (a Texas corporation)
41. The AMFM Radio Networks, Inc.
42. Chancellor Media Air Services Corporation
43. Chancellor Media Whiteco Outdoor Corporation
44. Chancellor Merger Corp.
A2-8
<PAGE> 96
45. Broadcast Architecture, Inc. (a Massachusetts corporation)
46. Martin Media (a California corporation)
47. Dowling Company Incorporated (a Virginia corporation)
48. Nevada Outdoor Systems, Inc. (a Nevada corporation)
49. MW Sign Corp. (a California corporation)
50. Martin & MacFarlane, Inc. (a California limited partnership)
51. Katz Media Corporation
52. Katz Communications, Inc.
53. Katz Millennium Marketing, Inc.
54. Amcast Radio Sales, Inc.
55. Christal Radio Sales, Inc.
56. Eastman Radio Sales, Inc.
57. Seltel Inc.
58. Katz Cable Corporation
59. The National Payroll Company, Inc.
60. Chancellor Media Radio Licenses, LLC
61. KLOL License Limited Partnership
62. WTOP License Limited Partnership
63. Radio 100, L.L.C.
64. Revolution Outdoor Advertising, Inc.
65. Hardin Development Corporation
66. Parsons Development Company
A2-9
<PAGE> 97
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Security to
- -------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
--------------------------------------------------------
to transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Date:
---------------------
Your Signature:
----------------------
(Sign exactly as your name appears
on the face of this Security)
SIGNATURE GUARANTEE.
- ------------------------------
Participant in a Recognized Signature
Guarantee Medallion Program
A2-10
<PAGE> 98
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.15 or 4.16 of the Indenture, check the box below:
[ ] Section 4.15 [ ] Section 4.16
If you want to elect to have only part of the Security
purchased by the Company pursuant to Section 4.15 or Section 4.16 of the
Indenture, state the amount you elect to have purchased: $________
Date: Your Signature:
----------------- ----------------------------
(Sign exactly as your name
appears on the Note)
Tax Identification No:
----------------------
SIGNATURE GUARANTEE.
- ------------------------------
Participant in a Recognized Signature
Guarantee Medallion Program
A2-11
<PAGE> 99
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL SECURITY1/
The following exchanges of a part of this Global Security for
an interest in another Global Security or for a Definitive Security, or
exchanges of a part of another Global Security or Definitive Security for an
interest in this Global Security, have been made:
<TABLE>
<CAPTION>
Amount of
decrease in Amount of Principal Amount of Signature of
Principal increase in of this authorized
Amount of Principal Global Security officer of
this Global Amount of following such Trustee or
Date of Exchange Security this Global Security decrease (or increase) Custodian
- ------------------- ----------- -------------------- ---------------------- ------------
<S> <C> <C> <C> <C>
</TABLE>
- -----------------------
33 This should be included only if the Security is issued in global form.
A2-12
<PAGE> 100
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Chancellor Media Corporation of Los Angeles
300 Crescent Court
Suite 600
Dallas, Texas 75201
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attn: Corporate Trust Trustee Administration
Re: 8% Series __ Senior Notes due 2008
Reference is hereby made to the Indenture, dated as of
November 17, 1998 (the "INDENTURE"), among Chancellor Media Corporation of Los
Angeles, as issuer (the "COMPANY"), the guarantors named therein and The Bank
of New York, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
______________, (the "TRANSFEROR") owns and proposes to
transfer the Security[ies] or interest in such Security[ies] specified in Annex
A hereto, in the principal amount of $___________ in such Security[ies] or
interests (the "TRANSFER"), to __________ (the "TRANSFEREE"), as further
specified in Annex A hereto. In connection with the Transfer, the Transferor
hereby certifies that it has advised the transferee of the transfer
restrictions applicable to the Security[ies] and:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE 144A GLOBAL SECURITY OR A DEFINITIVE SECURITY PURSUANT TO RULE 144A. The
Transfer is being effected pursuant to and in accordance with Rule 144A under
the United States Securities Act of 1933, as amended (the "SECURITIES ACT"),
and, accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Security is being transferred to a Person that the
Transferor reasonably believed and believes is purchasing the beneficial
interest or Definitive Security for its own account, or for one or more
accounts with respect to which such Person exercises sole investment
discretion, and such Person and each such account is a "qualified institutional
buyer" within the meaning of Rule 144A in a transaction meeting the
requirements of Rule 144A and such Transfer is in compliance with any
applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Security will be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the 144A Global Security and/or the Definitive Security and
in the Indenture and the Securities Act.
2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE TEMPORARY REGULATION S GLOBAL SECURITY, THE REGULATION S GLOBAL SECURITY OR
A DEFINITIVE SECURITY PURSUANT TO REGULATION S. The Transfer is being effected
pursuant to and in accordance with Rule 903 or Rule 904 under the Securities
Act and, accordingly, the Transferor hereby further certifies that (i) the
Transfer is not being made to a person in the United States and (x) at the time
the buy order was originated, the Transferee was outside the United States or
such Transferor and any Person acting on its behalf
B-1
<PAGE> 101
reasonably believed and believes that the Transferee was outside the United
States or (y) the transaction was executed in, on or through the facilities of
a designated offshore securities market and neither such Transferor nor any
Person acting on its behalf knows that the transaction was prearranged with a
buyer in the United States, (ii) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S
under the Securities Act, (iii) the transaction is not part of a plan or scheme
to evade the registration requirements of the Securities Act and (iv) if the
proposed transfer is being made prior to the expiration of the Restricted
Period, the transfer is not being made to a U.S. Person or for the account or
benefit of a U.S. Person (other than an initial purchaser). Upon consummation
of the proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Security will be subject to the
restrictions on Transfer enumerated in the Private Placement Legend printed on
the Regulation S Global Security, the Temporary Regulation S Global Security
and/or the Definitive Security and in the Indenture and the Securities Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A
BENEFICIAL INTEREST IN THE GLOBAL SECURITY OR A DEFINITIVE SECURITY PURSUANT TO
ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Securities and
Restricted Definitive Securities and pursuant to and in accordance with the
Securities Act and any applicable blue sky securities laws of any state of the
United States, and accordingly the Transferor hereby further certifies that
(check one):
(a) [ ] such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) [ ] such Transfer is being effected pursuant to an
effective registration statement under the Securities Act and in compliance
with the prospectus delivery requirements of the Securities Act;
or
(d) [ ] such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904,
and the Transferor hereby further certifies that it has not engaged in any
general solicitation within the meaning of Regulation D under the Securities
Act and the Transfer complies with the transfer restrictions applicable to
beneficial interests in a Restricted Global Security or Restricted Definitive
Securities and the requirements of the exemption claimed, which certification
is supported by (1) a certificate executed by the Transferee in the form of
Exhibit D to the Indenture and (2) if such Transfer is in respect of a
principal amount of Securities at the time of transfer of less than $250,000,
an Opinion of Counsel provided by the Transferor or the Transferee (a copy of
which the Transferor has attached to this certification), to the effect that
such Transfer is in compliance with the Securities Act. Upon consummation of
the proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Security will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Global Security and/or the Definitive Securities and in the Indenture and
the Securities Act.
B-2
<PAGE> 102
4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
AN UNRESTRICTED GLOBAL SECURITY OR OF AN UNRESTRICTED DEFINITIVE SECURITY.
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The
Transfer is being effected pursuant to and in accordance with Rule 144 under
the Securities Act and in compliance with the transfer restrictions contained
in the Indenture and any applicable blue sky securities laws of any state of
the United States and (ii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Security will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Securities, on Restricted Definitive Securities and in
the Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i)
The Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky securities
laws of any state of the United States and (ii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Security will no longer be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Restricted Global Securities, on Restricted Definitive
Securities and in the Indenture.
(c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i)
The Transfer is being effected pursuant to and in compliance with an exemption
from the registration requirements of the Securities Act other than Rule 144,
Rule 903 or Rule 904 and in compliance with the transfer restrictions contained
in the Indenture and any applicable blue sky securities laws of any State of
the United States and (ii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Security will not be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Securities or Restricted Definitive Securities and in the
Indenture.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
--------------------------------------------
[Insert Name of Transferor]
By:
-----------------------------------------
Name:
Title:
Dated: ,
------------ -----
B-3
<PAGE> 103
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Security (CUSIP ), or
(ii) [ ] Regulation S Global Security (CUSIP ), or
(b) [ ] a Restricted Definitive Security.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Security (CUSIP ), or
(ii) [ ] Regulation S Global Security (CUSIP ), or
(iii) [ ] Unrestricted Global Security (CUSIP ); or
(b) [ ] a Restricted Definitive Security; or
(c) [ ] an Unrestricted Definitive Security,
in accordance with the terms of the Indenture.
B-4
<PAGE> 104
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Chancellor Media Corporation of Los Angeles
300 Crescent Court
Suite 600
Dallas, Texas 75201
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attn: Corporate Trust Trustee Administration
Re: 8% Series Senior Notes due 2008
(CUSIP______________)
Reference is hereby made to the Indenture, dated as of
November 17, 1998 (the "INDENTURE"), among Chancellor Media Corporation of Los
Angeles, as issuer (the "COMPANY"), the guarantors named therein and The Bank
of New York, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
____________, (the "OWNER") owns and proposes to exchange the
Security[ies] or interest in such Security[ies] specified herein, in the
principal amount of $____________ in such Security[ies] or interests (the
"EXCHANGE"). In connection with the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL SECURITY FOR UNRESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL
INTERESTS IN AN UNRESTRICTED GLOBAL SECURITY
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL SECURITY TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL
SECURITY. In connection with the Exchange of the Owner's beneficial interest in
a Restricted Global Security for a beneficial interest in an Unrestricted
Global Security in an equal principal amount, the Owner hereby certifies (i)
the beneficial interest is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Global Securities and pursuant to and in
accordance with the United States Securities Act of 1933, as amended (the
"SECURITIES ACT"), (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the beneficial interest in
an Unrestricted Global Security is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL SECURITY TO UNRESTRICTED DEFINITIVE SECURITY. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global
Security for an Unrestricted Definitive Security, the Owner
C-1
<PAGE> 105
hereby certifies (i) the Definitive Security is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to the Restricted Global
Securities and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act
and (iv) the Definitive Security is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE
SECURITY TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL SECURITY. In
connection with the Owner's Exchange of a Restricted Definitive Security for a
beneficial interest in an Unrestricted Global Security, the Owner hereby
certifies (i) the beneficial interest is being acquired for the Owner's own
account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Securities
and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act
and (iv) the beneficial interest is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE
SECURITY TO UNRESTRICTED DEFINITIVE SECURITY. In connection with the Owner's
Exchange of a Restricted Definitive Security for an Unrestricted Definitive
Security, the Owner hereby certifies (i) the Unrestricted Definitive Security
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Securities and pursuant to and in
accordance with the Securities Act, (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the Unrestricted
Definitive Security is being acquired in compliance with any applicable blue
sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL SECURITIES FOR RESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL
INTERESTS IN RESTRICTED GLOBAL SECURITIES
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL SECURITY TO RESTRICTED DEFINITIVE SECURITY. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global
Security for a Restricted Definitive Security with an equal principal amount,
the Owner hereby certifies that the Restricted Definitive Security is being
acquired for the Owner's own account without transfer. Upon consummation of the
proposed Exchange in accordance with the terms of the Indenture, the Restricted
Definitive Security issued will continue to be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Definitive Security and in the Indenture and the Securities Act.
(b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE
SECURITY TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL SECURITY. In connection
with the Exchange of the Owner's Restricted Definitive Security for a
beneficial interest in the [CHECK ONE] __144A Global Security, __ Regulation S
Global Security with an equal principal amount, the Owner hereby certifies (i)
the beneficial interest is being acquired for the Owner's own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Securities and
pursuant to and in accordance with the Securities Act, and in compliance with
any applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Exchange in accordance with the terms of the
Indenture, the beneficial interest issued will be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the relevant
Restricted Global Security and in the Indenture and the Securities Act.
C-2
<PAGE> 106
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
----------------------------------
[Insert Name of Owner]
By:
-------------------------------
Name:
Title:
Dated: ,
------------ ------
C-3
<PAGE> 107
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Chancellor Media Corporation of Los Angeles
300 Crescent Court
Suite 600
Dallas, Texas 75201
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attn: Corporate Trust Trustee Administration
Re: 8% Series Senior Notes due 2008
Reference is hereby made to the Indenture, dated as of
November 17, 1998 (the "INDENTURE"), among Chancellor Media Corporation of Los
Angeles, as issuer (the "COMPANY"), the guarantors named therein and The Bank
of New York, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________
aggregate principal amount of:
(a) [ ] a beneficial interest in a Global Security, or
(b) [ ] a Definitive Security,
we confirm that:
1. We understand that any subsequent transfer of the
Securities or any interest therein is subject to certain restrictions and
conditions set forth in the Indenture and the undersigned agrees to be bound
by, and not to resell, pledge or otherwise transfer the Securities or any
interest therein except in compliance with, such restrictions and conditions
and the United States Securities Act of 1933, as amended (the "SECURITIES
ACT").
2. We understand that the offer and sale of the Securities
have not been registered under the Securities Act, and that the Securities and
any interest therein may not be offered or sold except as permitted in the
following sentence. We agree, on our own behalf and on behalf of any accounts
for which we are acting as hereinafter stated, that if we should sell the
Securities or any interest therein, we will do so only (A) to the Company or
any subsidiary thereof, (B) in accordance with Rule 144A under the Securities
Act to a "qualified institutional buyer" (as defined therein), (c) to an
institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
you and to the Company a signed letter substantially in the form of this letter
and, if such transfer is in respect of a principal amount of Securities, at the
time of transfer, of less than $250,000, an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that such transfer is in
compliance with the Securities Act, (D) outside the United States in accordance
with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the
provisions of Rule 144(k) under the Securities Act or (F) pursuant to an
effective registration statement under the
D-1
<PAGE> 108
Securities Act, and we further agree to provide to any person purchasing the
Definitive Security or beneficial interest in a Global Security from us in a
transaction meeting the requirements of clauses (A) through (E) of this
paragraph a notice advising such purchaser that resales thereof are restricted
as stated herein.
3. We understand that, on any proposed resale of the
Securities or beneficial interest therein, we will be required to furnish to
you and the Company such certifications, legal opinions and other information
as you and the Company may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand that the
Securities purchased by us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
and have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Securities, and we and any accounts for which we are acting are each able to
bear the economic risk of our or its investment.
5. We are acquiring the Securities or beneficial interest
therein purchased by us for our own account or for one or more accounts (each
of which is an institutional "accredited investor") as to each of which we
exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
-----------------------------------------
[Insert Name of Accredited Investor]
By:
---------------------------------------
Name:
Title:
Dated: ,
------------ -------
D-2
<PAGE> 1
EXHIBIT 4.46
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
$750,000,000
8% Senior Notes due 2008
PURCHASE AGREEMENT
November 12, 1998
BT ALEX. BROWN INCORPORATED
CHASE SECURITIES INC.
MORGAN STANLEY & CO. INCORPORATED
SALOMON SMITH BARNEY INC.
c/o BT Alex. Brown Incorporation
130 Liberty Street
New York, New York 10005
Ladies and Gentlemen:
Chancellor Media Corporation of Los Angeles (the "COMPANY"), a
Delaware corporation, and each subsidiary guarantor named on the signature page
hereto (the "GUARANTORS" and together with the Company, the "ISSUERS"), hereby
confirm their agreement with you (the "INITIAL PURCHASERS"), as set forth below.
1. The Securities. Subject to the terms and conditions
herein contained, the Company proposes to issue and sell to the Initial
Purchasers $750,000,000 in aggregate principal amount of its 8% Senior Notes due
2008, Series A (the "NOTES" and, together with the guarantee of each Guarantor
(the "GUARANTEE"), the "SECURITIES"). The Notes are to be issued under an
indenture (the "INDENTURE") to be dated as of November 17, 1998 by and among the
Company, the Guarantors and The Bank of New York, as trustee (the "TRUSTEE").
The Notes will be offered and sold to the Initial Purchasers
without being registered under the Securities Act of 1933, as amended (the
"ACT"), in reliance on exemptions therefrom.
In connection with the sale of the Notes, the Company has
prepared an offering memorandum dated November 12, 1998 (the "OFFERING
MEMORANDUM") setting forth or including a description of the terms of the Notes,
the terms of the offering of the Notes, a description of the Company and any
material developments relating to the Company occurring after the date of the
most recent historical financial statements included therein.
The Initial Purchasers and their direct and indirect
transferees of the Notes will be entitled to the benefits of the Registration
Rights Agreement, substantially in the form attached hereto as Exhibit A (the
"REGISTRATION RIGHTS AGREEMENT"), pursuant to which the Company has agreed,
among other things, to file with the Securities and Exchange Commission (the
"COMMISSION") under the circumstances set forth therein (i) a registration
statement (the "REGISTRATION STATEMENT") under the Act relating to the Company's
8% Senior Notes due 2008, Series B (the "EXCHANGE NOTES"), to be offered in
exchange for the Notes or (ii) a shelf registration statement pursuant to Rule
415 under the Act relating to
<PAGE> 2
the resale of the Notes by holders thereof or, if applicable, relating to the
resale of debt securities of the Company substantially identical to the Exchange
Notes (the "PRIVATE EXCHANGE NOTES") by the Initial Purchasers pursuant to an
exchange of the Notes for Private Exchange Notes.
2. Representations and Warranties of each of the Issuers.
Each of the Issuers represents and warrants to and agrees with the Initial
Purchasers that:
(a) The Offering Memorandum and any amendment or
supplement thereto as of the date thereof does not and as of the Closing Date
(as defined in Section 3 below) will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set forth in this
Section 2(a) do not apply to statements or omissions made in reliance upon and
in conformity with information relating to the Initial Purchasers furnished to
the Company in writing by or on behalf of such Initial Purchasers expressly for
use in the Offering Memorandum or any amendment or supplement thereto.
(b) Each of the Issuers has been duly organized, is
validly existing and is in good standing under the laws of its jurisdiction of
organization, with all requisite power and authority to own its properties and
conduct its businesses as now conducted as described in the Offering Memorandum,
and is duly qualified to do business and is in good standing in all other
jurisdictions where the ownership or leasing of its properties or the conduct of
its businesses requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the business, prospects,
condition (financial or other) or results of operations of the Issuers, taken as
a whole (a "MATERIAL ADVERSE EFFECT"). As of the Closing Date, the Company will
have the authorized, issued and outstanding capitalization set forth in the
Offering Memorandum under the caption "Description of Capital Stock"; the
outstanding shares of capital stock of each of the Issuers have been duly
authorized and validly issued, are fully paid and nonassessable and were not
issued in violation of any preemptive or similar rights; and except (i) as
disclosed in the Offering Memorandum under the caption "Description of Certain
Indebtedness--Senior Credit Facility" and (ii) for Western Poster Service, Inc.,
a Texas corporation, approximately 73.4% of whose capital stock is owned by the
Company, all of the outstanding shares of capital stock of each of the
Guarantors are owned (directly or indirectly) by the Company, free and clear of
all liens, encumbrances, equities and claims or restrictions on transferability
(other than those imposed by the Act and the securities or blue sky laws of
certain jurisdictions) or voting. The Company does not own, directly or
indirectly, any shares of stock or any other equity or long-term debt securities
or have any equity interest in any firm, partnership, joint venture or other
entity other than interests in its subsidiaries or as described in the Offering
Memorandum.
(c) No holder of securities of the Issuers will be
entitled to have such securities registered under the registration statements
required to be filed by any of the Issuers pursuant to the Registration Rights
Agreement, other than as expressly permitted thereby.
(d) The Company has all requisite corporate power
and authority to execute, deliver and perform each of its obligations under the
Notes, the Exchange Notes and the Private Exchange Notes. The Notes, when
issued, will be in the form contemplated by the Indenture and conform in all
material respects to the description thereof in the Offering Memorandum. The
Notes, the Exchange Notes and the Private Exchange Notes have each been duly
authorized by the Company and, when executed by the Company and authenticated by
the Trustee in accordance with the provisions of the Indenture and, in the case
of the Notes, delivered to and paid for by the Initial Purchasers in accordance
with the terms of this Agreement, will be entitled to the benefits of the
Indenture and will constitute valid and legally binding obligations of the
Company, enforceable against the Company in accordance with their terms, except
that the enforcement thereof may be subject to (i) bankruptcy,
2
<PAGE> 3
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws now or hereafter in effect relating to creditors, rights generally, and
(ii) general principles of equity and the discretion of the court before which
any proceeding therefor may be brought (regardless of whether such enforcement
is considered in a proceeding in equity or at law), and except insofar as the
usury waiver contained therein may be unenforceable. Each of the Issuers has all
requisite power and authority to execute, deliver and perform its respective
obligations under the Indenture; the Indenture has been duly authorized by the
Issuers and, when executed and delivered by the Issuers (assuming the due
authorization, execution and delivery by the Trustee), will constitute a valid
and legally binding obligation of the Issuers, enforceable against the Issuers
in accordance with its terms, except that the enforcement thereof may be subject
to (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors, rights
generally and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought (regardless of whether such
enforcement is considered in a proceeding in equity or at law), and except
insofar as the usury waiver contained therein may be unenforceable.
(e) The Guarantees have been duly authorized by
each Guarantor and, when executed by the Guarantors and authenticated by the
Trustee in accordance with the provisions of the Indenture will, upon the
execution, authentication and delivery of the Notes and payment therefor in
accordance with the terms of this Agreement, be entitled to the benefits of the
Indenture and will constitute a valid and legally binding obligation of the
Guarantors enforceable in accordance with its terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws now or hereafter in effect relating
to creditor's rights and remedies generally and (ii) general principles of
equity and the discretion of the court before which any proceeding therefor may
be brought (regardless of whether such enforcement is considered in a proceeding
in equity or at law), and except insofar as the usury waiver contained therein
may be unenforceable.
(f) Each of the Issuers has all requisite corporate
power and authority to execute and deliver this Agreement, to issue and deliver
the Securities and to consummate the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by each of the
Issuers. No consent, approval, authorization or order of any court or
governmental agency or body (including, without limitation, the Federal
Communications Commission (the "FCC")) is required for the performance of this
Agreement, the Notes, the Guarantees, the Indenture or any of the transactions
contemplated hereby by any of the Issuers, to the extent a party thereto, except
such as have been obtained and such as may be required under state securities or
blue sky laws in connection with the purchase and initial resale of the
Securities by the Initial Purchasers and except as contemplated by the
Registration Rights Agreement. None of the Issuers is (i) in violation of its
certificate of incorporation or bylaws (or similar organizational document),
(ii) in violation of any statute, judgment, decree, order, rule or regulation
applicable to any of the Issuers, which violation would have a Material Adverse
Effect, or (iii) in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, note, lease, license, franchise agreement, permit,
certificate, contract or other agreement or instrument to which any of the
Issuers is a party or to which the Company or the Guarantors is subject, which
violation or default would have a Material Adverse Effect.
(g) Each of the Issuers has all requisite corporate
power and authority to enter into the Registration Rights Agreement. The
Registration Rights Agreement has been duly authorized by each of the Issuers
and, when executed and delivered by the Issuers, will constitute a valid and
legally binding obligation of the Issuers, enforceable against each of the
Issuers in accordance with its terms, except that (A) the enforcement thereof
may be subject to (i) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws now or hereafter in effect
3
<PAGE> 4
relating to creditors, rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor may be
brought (regardless of whether such enforcement is considered in a proceeding in
equity or at law) and (B) any rights to indemnity or contribution thereunder may
be limited by federal and state securities laws and public policy
considerations.
(h) The execution, delivery and performance by the
Company and the Guarantors of this Agreement, the Notes, the Guarantees, the
Indenture and the Registration Rights Agreement and the consummation by the
Issuers of the transactions contemplated hereby and thereby will not conflict
with or constitute or result in a breach or violation by the Company of any of
(i) the terms or provisions of, or constitute a default by any Issuer under, any
contract, indenture, mortgage, deed of trust, loan agreement, note, lease,
license, franchise agreement or other agreement or instrument to which any
Issuer is a party or to which any of them or their respective properties is
subject (each a "CONTRACT" or collectively, the "CONTRACTS"), which conflict,
breach, violation or default would have a Material Adverse Effect, (ii) the
certificate of incorporation or bylaws (or similar organizational document) of
any Issuer, as the same will be in effect on the Closing Date, or (iii)
(assuming compliance with all applicable state securities and blue sky laws and
assuming the accuracy of the representations and warranties of the Initial
Purchasers in Section 8 hereof) any statute, judgment, decree, order, rule or
regulation of any court or governmental agency or other body applicable to any
Issuer or any of their properties, which conflict, breach, violation or default
would have a Material Adverse Effect.
(i) The audited consolidated financial statements
of the Company and its consolidated subsidiaries included in the Offering
Memorandum present fairly, in all material respects, the consolidated financial
position, results of operations and cash flows of the Company and its
consolidated subsidiaries at the dates and for the periods to which they relate
and have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis, except as otherwise stated therein.
The unaudited consolidated financial statements and the related notes included
in the Offering Memorandum present fairly, in all material respects, the
consolidated financial position, results of operations and cash flows of the
Company and its consolidated subsidiaries at the dates and for the periods to
which they relate, subject to year-end audit adjustments and the more detailed
note requirements for audited statements, and have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis,
except as otherwise stated therein. To the Company's knowledge,
PricewaterhouseCoopers, LLP, KPMG Peat Marwick LLP, Arthur Andersen LLP and BDO
Seidman LLP which have examined certain of such consolidated financial
statements as set forth in its reports included in the Offering Memorandum are
independent public accountants under Rule 101 of the AICPA's Code of
Professional Conduct, and its rulings and interpretations.
(j) The pro forma consolidated financial
information (including the notes thereto) included in the Offering Memorandum
(A) presents the information shown therein under the applicable requirements of
Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"); (B) has been prepared in accordance with the applicable
requirements of Regulation S-X promulgated under the Exchange Act; (C) has been
prepared in accordance with the Commission's rules and guidelines with respect
to pro forma financial statements; and (D) has been properly computed on the
bases described therein. The assumptions used in the preparation of the pro
forma financial statements and other pro forma condensed consolidated financial
information included in the Offering Memorandum are reasonable and the
adjustments used therein are reasonably appropriate to give effect to the
transactions or circumstances referred to therein.
(k) Except as described in the Offering Memorandum,
there is not pending or, to the knowledge of any Issuer, threatened, any action,
suit, proceeding, inquiry or investigation to which any Issuer is a party, or to
which the property of any Issuer or any Guarantor is subject, before or
4
<PAGE> 5
brought by any court or governmental agency or body (including, without
limitation, the FCC), that would have a Material Adverse Effect.
(l) Each of the Issuers owns or possesses licenses
or other rights to use all material patents, trademarks, service marks, trade
names, copyrights and know-how necessary to conduct the businesses now or
proposed to be operated by it as described in the Offering Memorandum, and none
of the Issuers has received any notice of infringement of or conflict with (or
knows of any such infringement of or conflict with) asserted rights of others
with respect to any patents, trademarks, service marks, trade names, copyrights
or know-how which, if such assertion of infringement or conflict were sustained,
would have a Material Adverse Effect.
(m) Each of the Issuers has obtained, or has
applied for, all licenses, permits, franchises and other governmental
authorizations necessary to conduct the businesses now or proposed to be
operated by it as described in the Offering Memorandum, the lack of which would
have a Material Adverse Effect.
(n) Subsequent to the respective dates as of which
information is given in the Offering Memorandum and except as described therein
or contemplated thereby, (i) none of the Issuers has incurred any material
liabilities or obligations, direct or contingent, or entered into any material
transactions, not in the ordinary course of business and (ii) the Company has
not purchased any of its outstanding capital stock, nor declared, paid or
otherwise made any dividend or distribution of any kind on its capital stock.
(o) Except as described in the Offering Memorandum,
none of the Issuers is in default under any Contract, has received a notice or
claim of any such default or has knowledge of any breach of any Contract by the
other party or parties thereto, except such defaults or breaches as would not
have a Material Adverse Effect.
(p) Each of the Issuers has filed all necessary
federal, state and foreign income and franchise tax returns, except where the
failure to so file such returns would not have a Material Adverse Effect, and
each has paid all taxes shown as due thereon; and other than tax deficiencies
which any Issuer is contesting in good faith and for which adequate reserves
have been provided, there is no tax deficiency that has been asserted against
any Issuer that would have a Material Adverse Effect.
(q) None of the Issuers nor any agent acting on
their behalf has taken or will take any action that might cause this Agreement
or the issuance and sale of the Securities to violate Regulation T, U or X of
the Board of Governors of the Federal Reserve System, in each case as in effect,
or as the same may hereafter be in effect, on the Closing Date.
(r) Each of the Issuers has good and marketable
title to all real property and good title to all personal property described in
the Offering Memorandum as being owned by it and good and marketable title to a
leasehold estate in the real and personal property described in the Offering
Memorandum as being leased by it (except for those leases of real property in
which the Company has good title and that would be marketable but for the
requirement that the landlord consent to an assignment or sublease of the
lease), free and clear of all liens, charges, encumbrances or restrictions,
except, in each case, as described in the Offering Memorandum or to the extent
the failure to have such title or the existence of such liens, charges,
encumbrances or restrictions would not have a Material Adverse Effect.
5
<PAGE> 6
(s) Except for the Company's existing credit
agreement and except as described in the Offering Memorandum, there are no
consensual encumbrances or restrictions on the ability of the Guarantors (i) to
pay dividends or make any other distributions on its capital stock or to pay any
indebtedness owed to the Company; (ii) to make any loans or advances to, or
investments in, the Company; or (iii) to transfer any of its property or assets
to the Company or the Guarantors or any other subsidiary of the Company or the
Guarantors.
(t) None of the Issuers is an "investment company"
or "promoter" or "principal underwriter" for an "investment company," as such
terms are defined in the Investment Company Act of 1940, as amended, and the
rules and regulations thereunder.
(u) None of the Issuers nor, to their knowledge,
any of their directors, officers or controlling persons has taken, directly or
indirectly, any action designed, or that might reasonably be expected, to cause
or result, under the Act or otherwise, in, or that has constituted,
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Notes.
(v) Each of the Issuers is in compliance with all
provisions of Section 517.075 of Florida Statutes, as amended, relating to
issuers doing business with Cuba.
(w) The Notes, the Guarantees, the Exchange Notes,
the Private Exchange Notes, the Indenture and the Registration Rights Agreement
conform in all material respects to the descriptions thereof in the Offering
Memorandum.
(x) None of the Issuers nor any of their respective
Affiliates (as defined in Rule 501(b) of Regulation D under the Act) has
directly, or through any agent, (i) sold, offered for sale, solicited offers to
buy or otherwise negotiated in respect of, any "security" (as defined in the
Act) that is or could be integrated with the sale of the Notes in a manner that
would require the registration under the Act of the Notes or (ii) engaged in any
form of general solicitation or general advertising (as those terms are used in
Regulation D under the Act) in connection with the offering of the Notes or in
any manner involving a public offering within the meaning of Section 4(2) of the
Act. Assuming the accuracy of the representations and warranties of the Initial
Purchasers in Section 8 hereof, the Company has not been informed by counsel
that it is necessary in connection with the offer, sale and delivery of the
Notes to the Initial Purchasers in the manner contemplated by this Agreement to
register any of the Notes under the Act or to qualify the Indenture under the
Trust Indenture Act of 1939, as amended (the "TIA").
(y) No securities of the Company or any subsidiary
are of the same class (within the meaning of Rule 144A under the Act) as the
Notes and listed on a national securities exchange registered under Section 6 of
the Exchange Act, or quoted in a U.S. automated inter-dealer quotation system.
(z) The statistical and market-related data
included in the Offering Memorandum are based on or derived from sources that
the Company believes to be reliable and accurate in all material respects.
Any certificate signed by any officer of the Company or any
subsidiary and delivered to the Initial Purchasers or to counsel for the Initial
Purchasers shall be deemed a representation and warranty by the Company to the
Initial Purchasers as to the matters covered thereby.
3. Purchase, Sale and Delivery of the Securities. On the
basis of the representations, warranties, agreements and covenants herein
contained and subject to the terms and
6
<PAGE> 7
conditions herein set forth, the Issuers agree to issue and sell to the Initial
Purchasers, and the Initial Purchasers agree to purchase from the Issuers, all
of the Notes at 97.50% of their principal amount. One or more certificates in
definitive form for the Notes that the Initial Purchasers have agreed to
purchase hereunder, and in such denomination or denominations and registered in
such name or names as the Initial Purchasers request upon notice to the Company
at least 24 hours prior to the Closing Date, shall be delivered by or on behalf
of the Issuers to the Initial Purchasers, against payment by or on behalf of the
Initial Purchasers of the purchase price therefore by wire transfer (same day
funds) to such account or accounts as the Company shall specify prior to the
Closing Date, or by such means as the parties hereto shall agree prior to the
Closing Date. Such delivery of and payment for the Notes shall be made at the
offices of Weil, Gotshal & Manges LLP, 100 Crescent Court, Suite 1300, Dallas,
Texas 75201, at 9:00 A.M., New York time, on November 17, 1998, or at such other
place, time or date as the Initial Purchasers, on the one hand, and the Company,
on the other hand, may agree upon, such time and date of delivery against
payment being herein referred to as the "CLOSING DATE." The Company will make
such certificate or certificates for the Notes available for checking and
packaging by the Initial Purchasers at the offices of BT Alex. Brown
Incorporated in New York, New York, or at such other place as BT Alex. Brown
Incorporated may designate, prior to or on the Closing Date.
4. Offering by the Initial Purchasers. The Initial
Purchasers propose to make an offering of the Notes at the price and upon the
terms set forth in the Offering Memorandum, as soon as practicable after this
Agreement is entered into and as in the judgment of the Initial Purchasers is
advisable.
5. Covenants of the Issuers. Each of the Issuers, jointly
and severally, covenants and agrees with the Initial Purchasers that:
(a) None of the Issuers will amend or supplement
the Offering Memorandum or any amendment or supplement thereto of which the
Initial Purchasers shall not previously have been advised and furnished a copy
for a reasonable period of time prior to the proposed amendment or supplement
and as to which the Initial Purchasers shall not have given their consent, which
will not be unreasonably withheld. The Issuers will promptly, upon the
reasonable request of the Initial Purchasers or counsel for the Initial
Purchasers, make any amendments or supplements to the Offering Memorandum that
may be necessary or advisable in connection with the resale of the Notes by the
Initial Purchasers.
(b) Each of the Issuers will cooperate with the
Initial Purchasers in arranging for the qualification of the Notes for offering
and sale under the securities or blue sky laws of which jurisdictions as the
Initial Purchasers may designate and will continue such qualifications in effect
for as long as may be reasonably necessary to complete the resale of the Notes;
provided, however, that in connection therewith, none of the Issuers shall be
required to qualify as a foreign corporation or to execute a general consent to
service of process in any jurisdiction or subject itself to taxation in any such
jurisdiction where it is not so subject.
(c) If, at any time prior to the completion of the
distribution by the Initial Purchasers of the Securities, any event occurs or
information becomes known as a result of which the Offering Memorandum as then
amended or supplemented would include any untrue statement of a material fact,
or omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
for any other reason it is necessary at any time to amend or supplement the
Offering Memorandum to comply with applicable law, the Issuers will promptly
notify the Initial Purchasers thereof and will prepare, at the expense of the
Issuers, an amendment or supplement to the Offering Memorandum that corrects
such statement or omission or effects such compliance.
7
<PAGE> 8
(d) Each of the Issuers will, without charge,
provide to the Initial Purchasers and to counsel for the Initial Purchasers as
many copies of the Offering Memorandum or any amendment or supplement thereto as
the Initial Purchasers may reasonably request.
(e) The Company will apply the net proceeds from
the sale of the Notes substantially as set forth under "Use of Proceeds" in the
Offering Memorandum.
(f) For so long as the Securities remain
outstanding (but in no event longer than five years), the Issuers will furnish
to the Initial Purchasers copies of all reports and other communications
(financial or otherwise) furnished by the Issuers to the Trustee or to the
holders of the Securities and, as soon as available, copies of any reports or
financial statements furnished to or filed by the Company with the Commission or
any national securities exchange on which any class of securities of the Company
may be listed.
(g) Prior to the Closing Date, the Issuers will
furnish to the Initial Purchasers, as soon as they have been prepared, a copy of
any unaudited interim financial statements of the Company for any period
subsequent to the period covered by the most recent financial statements
appearing in the Offering Memorandum.
(h) None of the Issuers nor any of their respective
Affiliates will sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any "security" (as defined in the Act) that could be
integrated with the sale of the Notes in a manner which would require the
registration under the Act of the Notes.
(i) The Issuers will not engage in any form of
general solicitation or general advertising (as those terms are used in
Regulation D under the Act) in connection with the offering of the Notes or in
any manner involving a public offering within the meaning of Section 4(2) of the
Act.
(j) The Issuers will use their reasonable best
efforts to (i) assist the Initial Purchasers in permitting the Notes to be
designated PORTAL securities in accordance with the rules and regulations
adopted by the NASD relating to trading in the Private Offerings, Resales and
Trading through Automated Linkages system (the "PORTAL System") and (ii) permit
the Notes to be eligible for clearance and settlement through The Depository
Trust Company.
6. Expenses. The Issuers, jointly and severally, agree to
pay the following costs and expenses and all other costs and expenses incident
to the performance of their respective obligations under this Agreement, whether
or not the transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 11 hereof, including all costs and expenses
incident to (i) the printing, word processing or other production of documents
with respect to the transactions contemplated hereby, including any costs of
printing the Offering Memorandum and any amendment or supplement thereto, and
any blue sky memoranda, (ii) all arrangements relating to the delivery to the
Initial Purchasers of copies of the foregoing documents, (iii) the fees and
disbursements of the counsel, the accountants and any other experts or advisors
retained by the Issuers, (iv) preparation (including printing), issuance and
delivery to the Initial Purchasers of the Securities (including Trustee's fees),
(v) the qualification of the Notes under state securities and blue sky laws,
including filing fees and reasonable fees and disbursements of counsel for the
Initial Purchasers relating thereto, (vi) fees and expenses of the Trustee,
including reasonable fees and expenses of counsel for the Trustee, and (vii) all
expenses and listing fees incurred in connection with the application for
quotation of the Notes on the PORTAL System. If the sale of the Securities
provided for herein is not consummated because any condition to the obligations
of the Initial Purchasers set forth in Section 7 hereof is not satisfied,
because this Agreement is terminated or because of any failure, refusal or
inability on the part of the Issuers to
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<PAGE> 9
perform all obligations and satisfy all conditions on their part to be performed
or satisfied hereunder (other than solely by reason of a default by the Initial
Purchasers of its obligations hereunder after all conditions hereunder have been
satisfied in accordance herewith), the Issuers agree to promptly reimburse the
Initial Purchasers upon demand for all reasonable out-of-pocket expenses
(including reasonable fees and disbursements of Latham & Watkins, counsel for
the Initial Purchasers) that shall have been incurred by the Initial Purchasers
in connection with the proposed purchase and sale of the Notes.
7. Conditions of the Initial Purchasers' Obligations. The
obligation of the Initial Purchasers to purchase and pay for the Securities
shall, in its sole discretion, be subject to the following conditions on or
prior to the Closing Date:
(a) The Initial Purchasers shall have received the
opinion in form and substance satisfactory to the Initial Purchasers, dated the
Closing Date, of Weil, Gotshal & Manges LLP, counsel for the Issuers,
substantially in the form of Exhibit B hereto. In rendering such opinion, Weil,
Gotshal & Manges LLP shall have received and may rely upon such certificates and
other documents and information as it may reasonably request to pass upon such
matters.
(b) The Initial Purchasers shall have received an
opinion or opinions, dated the Closing Date, of Latham & Watkins, counsel for
the Initial Purchasers, with respect to certain legal matters relating to this
Agreement and certain FCC regulatory matters, and such other related matters as
the Initial Purchasers may require. In rendering such opinion or opinions,
Latham & Watkins shall have received and may rely upon such certificates and
other documents and information as they may reasonably request to pass upon such
matters. In addition, in rendering their opinion or opinions, Latham & Watkins
may state that their opinion or opinions is limited to matters of New York,
California, Delaware corporate and federal law.
(c) The Initial Purchasers shall have received
customary comfort letters from PricewaterhouseCoopers, LLP, Arthur Andersen LLP,
KPMG Peat Marwick LLP and BDO Seidman LLP, dated on or prior to the Closing
Date, in each case addressed to the Initial Purchasers, in form and substance
reasonably satisfactory to the Initial Purchasers and counsel for the Initial
Purchasers.
(d) The representations and warranties of the
Issuers contained in this Agreement shall be true and correct in all material
respects as of the date hereof and as of the Closing Date; the Issuers shall
have complied in all material respects with all covenants and agreements and
satisfied all conditions on its part to be performed or satisfied hereunder at
or prior to the Closing Date; and subsequent to the date of the most recent
financial statements in the Offering Memorandum, there shall have been no
material adverse change in the business, condition (financial or other), results
of operations or prospects of the Issuers, taken as a whole, except as set forth
in, or contemplated by, the Offering Memorandum.
(e) The issuance and sale of the Securities by the
Issuers hereunder shall not be enjoined (temporarily or permanently) on the
Closing Date and no restraining order or other injunctive order shall have been
issued or any action, suit or proceeding shall have been commenced with respect
to this Agreement or any other transactions hereby, before any court or
governmental authority (including, without limitation, the FCC).
(f) Subsequent to the date as of which information
is given in the Offering Memorandum, except as described in or as contemplated
by the Offering Memorandum, none of the Issuers shall have incurred any
liabilities or obligations, direct or contingent (other than in the ordinary
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<PAGE> 10
course of business) that are material to the Issuers, taken as a whole, or
entered into any transactions not in the ordinary course of business that are
material to the business, condition (financial or other), results of operations
or prospects of the Issuers, taken as a whole, and, other than as contemplated
by the Offering Memorandum, there shall not have been any change in the capital
stock or long-term indebtedness of any Issuer that is material to the business,
condition (financial or other), results of operations or prospects of the
Issuers, taken as a whole.
(g) Subsequent to the date as of which information
is given in the Offering Memorandum, the conduct of the business and operations
of the Company or any of its subsidiaries has not been interfered with by
strike, fire, flood, hurricane, accident or other calamity (whether or not
insured) or by any court or governmental action, order or decree, and, except as
otherwise stated therein, the properties of the Company or any of its
subsidiaries have not sustained any loss or damage (whether or not insured) as a
result of any such occurrence, except any such interference, loss or damage
which would not have a Material Adverse Effect.
(h) The Initial Purchasers shall have received a
certificate of the Company, dated the Closing Date, signed on behalf of the
Company by its Vice President and Assistant Secretary of the Company, to the
effect that:
(i) The representations and warranties of the
Issuers in this Agreement are true and correct in all material
respects as if made on and as of the Closing Date (other than
to the extent any such representation or warranty is expressly
made to a certain date), and each Issuer has performed in all
material respects all covenants and agreements and satisfied,
in all material respects, all conditions on their part to be
performed or satisfied hereunder, to the extent a party
thereto, at or prior to the Closing Date;
(ii) At the Closing Date, since the date hereof or
since the date of the most recent financial statements in the
Offering Memorandum, except as described in the Offering
Memorandum, no event or events have occurred, nor has any
information become known that, individually or in the
aggregate, would have a Material Adverse Effect;
(iii) The issuance and sale of the Securities by the
Issuers hereunder has not been enjoined (temporarily or
permanently) by any court or governmental agency or body
(including without limitation, the FCC); and
(iv) Subsequent to the respective dates as of which
information is given in the Offering Memorandum, except in
each case as described in or as contemplated by the Offering
Memorandum, none of the Issuers has incurred any liabilities
or obligations, direct or contingent, that are material to the
Issuers, taken as a whole, or entered into any transactions
that, individually or in the aggregate, would have a Material
Adverse Effect; and there has been no change in the capital
stock or long-term indebtedness of the Issuers that
individually or in the aggregate would have a Material Adverse
Effect.
(i) On the Closing Date, the Initial Purchasers
shall have received the Registration Rights Agreement executed by the Issuers
and such agreement shall be in full force and effect on the Closing Date.
(j) On or before the Closing Date, the Initial
Purchasers and counsel for the Initial Purchasers shall have received such
further documents, opinions, certificates and schedules or
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<PAGE> 11
instruments relating to the business, corporate, legal and financial affairs of
the Issuers as they shall have heretofore reasonably requested from the Issuers.
All such opinions, certificates, letters, schedules, documents
or instruments delivered pursuant to this Agreement will comply with the
provisions hereof only if they are reasonably satisfactory in all material
respects to the Initial Purchasers and counsel for the Initial Purchasers. The
Company shall furnish to the Initial Purchasers such conformed copies of such
opinions, certificates, letters, schedules, documents and instruments in such
quantities as the Initial Purchasers shall reasonably request.
8. Offering of Notes; Restrictions on Transfer.
(a) Each of the Initial Purchasers represents and
warrants that it is a "qualified institutional buyer" as defined in Rule 144A
promulgated under the Act ("QIB"). The Initial Purchasers agrees with the
Issuers that (i) it has not and will not solicit offers for, or offer or sell,
the Securities by any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Act; and (ii) it has
and will solicit offers for the Securities only from, and will offer the
Securities only to (A) in the case of offers inside the United States, persons
whom it reasonably believes to be QIBs or, if any such person is buying for one
or more institutional accounts for which such person is acting as fiduciary or
agent, only when such person has represented to it that each such account is a
QIB, to whom notice has been given that such sale or delivery is being made in
reliance on Rule 144A, and, in each case, in transactions under Rule 144A and
(B) in the case of offers outside the United States, to persons other than U.S.
persons ("FOREIGN PURCHASERS," which term shall include dealers or other
professional fiduciaries in the United States acting on a discretionary basis
for foreign beneficial owners (other than an estate or trust)); provided,
however, that, in the case of this clause (B), in purchasing such Securities
such persons are deemed to have represented and agreed as provided under the
caption "Notice to Investors" contained in the Offering Memorandum (each such
entity referenced in this clause (ii), an "ELIGIBLE PURCHASER").
(b) Each of the Initial Purchasers represents and
warrants (as to itself only) with respect to offers and sales outside the United
States that (i) it has complied and will comply with all applicable laws and
regulations in each jurisdiction in which it acquires, offers, sells or delivers
Securities or has in its possession or distributes the Offering Memorandum or
any such other material, in all cases at its own expense; (ii) the Securities
have not been and will not be offered or sold within the United States or to, or
for the account or benefit of, U.S. persons except in accordance with Regulation
S under the Act or pursuant to an exemption from the registration requirements
of the Act; (iii) it has offered the Securities and will offer and sell the
Securities (A) as part of its distribution at any time and (B) otherwise until
40 days after the later of the commencement of the offering and the Closing
Date, only in accordance with Rule 903 of Regulation S and, accordingly, neither
it nor any persons acting on its behalf have engaged or will engage in any
directed selling efforts (within the meaning of Regulation S) with respect to
the Securities, and any such persons have complied and will comply with the
offering restrictions requirement of Regulation S; and (iv) it agrees that, at
or prior to confirmation of sales of the Securities, it will have sent to each
distributor, dealer or person receiving a selling concession, fee or other
remuneration that purchases Notes from it during the restricted period a
confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under
the United States Securities Act of 1933 (the "SECURITIES
ACT") and may not be offered and sold within the United
States or to, or for the account or benefit of, U.S. persons
(i) as part of the distribution of the Securities at any time
or (ii) otherwise until 40 days after the later of
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<PAGE> 12
the commencement of the offering and the closing date of the
offering, except in either case in accordance with Regulation
S (or Rule 144A if available) under the Securities Act. Terms
used above have the meaning given to them in Regulation S."
Terms used in this Section 8(b) and not defined in this Agreement have the
meanings given to them in Regulation S.
(c) Each of the Initial Purchasers represents and
warrants (as to itself only) that the source of funds being used by it to
acquire the Securities does not include the assets of any "employee benefit
plan" (within the meaning of Section 3 of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA")) or any "plan" (within the meaning of
Section 4975 of the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "CODE")).
9. Indemnification and Contribution.
(a) The Issuers agree, jointly and severally, to
indemnify and hold harmless each Initial Purchaser, and each person, if any, who
controls any Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, against any losses, claims, damages or
liabilities to which any of the Initial Purchasers or such controlling person
may become subject under the Act, the Exchange Act or otherwise, insofar as any
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon:
(i) any untrue statement or alleged untrue
statement of any material fact contained in the Offering
Memorandum or any amendment or supplement thereto or any
application or other document, or any amendment or supplement
thereto, executed by the Issuers or based upon written
information furnished by or on behalf of the Issuers filed in
any jurisdiction in order to qualify the Securities under the
securities or blue sky laws thereof or filed with any
securities association or securities exchange (each an
"APPLICATION"); or
(ii) the omission or alleged omission to state, in
the Offering Memorandum or any amendment or supplement thereto
or any Application, a material fact required to be stated
therein or necessary to make the statements therein not
misleading,
and will reimburse, as incurred, the Initial Purchasers and each such
controlling person for any legal or other expenses incurred by the Initial
Purchasers or such controlling person in connection with investigating,
defending against or appearing as a third-party witness in connection with any
such loss, claim, damage, liability or action; provided, however, the Issuers
will not be liable in any such case to the extent that any such loss, claim,
damage, or liability arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in the Offering
Memorandum or any amendment or supplement thereto or any Application in reliance
upon and in conformity with written information concerning the Initial
Purchasers furnished to the Issuers by or on behalf of each Initial Purchasers
through BT Alex. Brown Incorporated specifically for use therein. This indemnity
agreement will be in addition to any liability that the Issuers may otherwise
have to the indemnified parties. The Issuers shall not be liable under this
Section 9 for any settlement of any claim or action effected without its prior
written consent, which shall not be unreasonably withheld.
The Initial Purchasers shall not, without the prior written
consent of the Company, effect any settlement or compromise of any pending or
threatened proceeding in respect of which any Issuer is or could have been a
party, or indemnity could have been sought hereunder by any Issuer, unless such
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<PAGE> 13
settlement (A) includes an unconditional written release of such Issuer, in form
and substance reasonably satisfactory to the Company, from all liability on
claims that are the subject matter of such proceeding and (B) does not include
any statement as to an admission of fault, culpability or failure to act by or
on behalf of such Issuer.
(b) Each of the Initial Purchasers agrees,
severally and not jointly, to indemnify and hold harmless each of the Issuers,
their respective directors, officers and each person, if any, who controls any
Issuer within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act against any losses, claims, damages or liabilities to which the Issuers or
any such director, officer or controlling person may become subject under the
Act, the Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in any Offering Memorandum or any amendment or supplement thereto or any
Application, or (ii) the omission or the alleged omission to state therein a
material fact required to be stated in any Offering Memorandum or any amendment
or supplement thereto or any Application, or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
concerning such Initial Purchasers through BT Alex. Brown Incorporated,
furnished to the Issuers by or on behalf of such Initial Purchasers specifically
for use therein; and subject to the limitation set forth immediately preceding
this clause, will reimburse, as incurred, any legal or other expenses incurred
by the Issuers or any such director, officer or controlling person in connection
with investigating or defending against or appearing as a third party witness in
connection with any such loss, claim, damage, liability or action in respect
thereof. This indemnity agreement will be in addition to any liability that the
Initial Purchasers may otherwise have to the indemnified parties. The Initial
Purchasers shall not be liable under this Section 9 for any settlement of any
claim or action effected without its consent, which shall not be unreasonably
withheld.
None of the Issuers shall without the prior written consent of
the Initial Purchasers, effect any settlement or compromise of any pending or
threatened proceeding in respect of which any Initial Purchasers are or could
have been a party, or indemnity could have been sought hereunder by any Initial
Purchasers, unless such settlement (A) includes an unconditional written release
of the Initial Purchasers, in form and substance reasonably satisfactory to the
Initial Purchasers, from all liability on claims that are the subject matter of
such proceeding and (B) does not include any statement as to an admission of
fault, culpability or failure to act by or on behalf of any Initial Purchasers.
(c) Promptly after receipt by an indemnified party
under paragraphs (a) or (b) of this Section 9 of notice of the commencement of
any action for which such indemnified party is entitled to indemnification under
this Section 9, such indemnified party will, if a claim in respect thereof is to
be made against the indemnifying party under this Section 9, notify the
indemnifying party of the commencement thereof in writing; but the omission to
so notify the indemnifying party (i) will not relieve it from any liability
under paragraph (a) or (b) above unless and to the extent such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraphs (a) and (b) above. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, however, that if (i) the use
of counsel chosen by the indemnifying party to represent the indemnified party
would present such counsel with a conflict of interest, or (ii) the indemnifying
party shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after receipt
by the
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<PAGE> 14
indemnifying party of notice of the institution of such action, then, in each
such case, the indemnifying party shall not have the right to direct the defense
of such action on behalf of such indemnified party or parties and such
indemnified party or parties shall have the right to select separate counsel to
defend such action on behalf of such indemnified party or parties. After notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof and approval by such indemnified party of counsel
appointed to defend such action, the indemnifying party will not be liable to
such indemnified party under this Section 9 for any legal or other expenses,
other than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the immediately preceding sentence (it being understood, however,
that in connection with such action the indemnifying party shall not be liable
for the expenses of more than one separate counsel (in addition to local
counsel) in any one action or separate but substantially similar actions in the
same jurisdiction arising out of the same general allegations or circumstances,
designated by the Initial Purchasers in the case of paragraph (a) of this
Section 9 or the Company or any Guarantor in the case of paragraph (b) of this
Section 9, representing the indemnified parties under such paragraph (a) or
paragraph (b), as the case may be, who are parties to such action or actions) or
(ii) the indemnifying party has authorized in writing the employment of counsel
for the indemnified party at the expense of the indemnifying party. After such
notice from the indemnifying party to such indemnified party, the indemnifying
party will not be liable for the costs and expenses of any settlement of such
action effected by such indemnified party without the prior written consent of
the indemnifying party (which consent shall not be unreasonably withheld),
unless such indemnified party waived in writing its rights under this Section 9,
in which case the indemnified party may effect such a settlement without such
consent.
(d) In circumstances in which the indemnity
agreement provided for in the preceding paragraphs of this Section 9 is
available by its terms, but is held to be unenforceable, each indemnifying
party, in order to provide for just and equitable contribution, shall contribute
to the amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party or parties on the one hand and the indemnified party on the other in
connection with the statements or omissions or alleged statements or omissions
that resulted in such losses, claims, damages or liabilities (or actions in
respect thereof). The relative fault of the parties shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Issuers on the one hand, or the Initial
Purchasers on the other, the parties, relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission or
alleged statement or omission, and any other equitable considerations
appropriate in the circumstances. The Issuers and the Initial Purchasers agree
that it would not be just and equitable if the amount of such contribution were
determined by pro rata or per capita allocation or by any other method of
allocation that does not take into account the equitable considerations referred
to in the first sentence of this paragraph (d). Notwithstanding any other
provision of this paragraph (d), the Initial Purchasers shall not be obligated
to make contributions hereunder that in the aggregate exceed the amount by which
proceeds received by the Initial Purchasers under this Agreement exceeds the
aggregate amount of any damages that the Initial Purchasers have otherwise been
required to pay by reason of the untrue or alleged untrue statements or the
omissions or alleged omissions to state a material fact, and no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (d), each person,
if any, who controls the Initial Purchasers within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act shall have the same rights to
contribution as the Initial Purchasers, and each director and officer of each
Issuer and each person, if any, who controls any Issuer within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, shall have the same
rights to contribution as the Issuers.
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<PAGE> 15
10. Survival Clause. The respective representations,
warranties, agreements, covenants, indemnities and other statements of the
Issuers, their respective officers and the Initial Purchasers set forth in this
Agreement or made by or on behalf of it pursuant to this Agreement shall remain
in full force and effect, regardless of (a) any investigation made by or on
behalf of the Issuers, any of their respective officers or directors, the
Initial Purchasers or any controlling person referred to in Section 9 hereof and
(b) delivery of and payment for the Securities. The respective agreements,
covenants, indemnities and other statements set forth in Sections 6 and 9 shall
remain in full force and effect, regardless of any termination or cancellation
of this Agreement.
11. Termination.
(a) This Agreement may be terminated in the sole
discretion of the Initial Purchasers by notice to the Issuers given on or prior
to the Closing Date in the event that the Issuers shall have failed, refused or
been unable to perform all obligations and satisfy all conditions on their part
to be performed or satisfied hereunder at or prior thereto or, if at or prior to
the Closing Date:
(i) trading in securities generally on the New York
Stock Exchange, American Stock Exchange or the National Market
tier of the NASDAQ Stock Market shall have been suspended or
materially limited;
(ii) trading in the Chancellor Media Corporation's
Common Stock on the National Market tier of the NASDAQ Stock
Market shall have been suspended or materially limited;
(iii) a general moratorium on commercial banking
activities in New York shall have been declared by either
federal, state or other governmental authorities;
(iv) there shall have occurred an outbreak or
escalation of hostilities or other international or domestic
calamity, crisis or change in political, financial or economic
conditions, the effect of which on or markets of the United
States is such as to make it, in the sole judgment of the
Initial Purchasers, impracticable or inadvisable to commence
or continue the offering or the delivery of the Securities as
contemplated by the Offering Memorandum; or
(v) any securities of the Company shall have been
downgraded or placed on any "watch list" for possible
downgrading by any nationally recognized statistical rating
organization; provided however, that the condition set forth
in this subsection 12(a)(v) shall not apply to the November
12, 1998 downgrade to B1 from Ba3 announced by Moody's
Investor Service of the Company's (i) $200 million of 8.75%
Senior Subordinated Notes due 2007, (ii) $200 million of
9-3/8% Senior Subordinated Notes due 2004, (iii) $500 million
of 8.125% Senior Subordinated Notes due 2007 and (iv) $100
million of 10.5% Senior Subordinated Notes due 2007.
(b) Termination of this Agreement pursuant to this
Section 11 shall be without liability of any party to any other party except as
provided in Section 10 hereof.
12. Information Supplied by the Initial Purchasers. The
statements set forth in the last paragraph on the cover page of the Offering
Memorandum concerning delivery of the Notes and the last two paragraphs under
the caption "Private Placement" in the Offering Memorandum (to the extent
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<PAGE> 16
such statements relate to the Initial Purchasers) constitute the only
information furnished on behalf of the Initial Purchasers to the Issuers for the
purposes of Sections 2(a) and 9 hereof.
13. Notices. All communications hereunder shall be in
writing and, if sent to the Initial Purchasers, shall be mailed, delivered or
telecopied to BT Alex. Brown Incorporated, 130 Liberty Street, New York, New
York 10005, Attention: Corporate Finance Department; if sent to the Issuers,
shall be mailed, delivered or telecopied to the Issuers at Chancellor Media
Corporation of Los Angeles, 300 Crescent Court, Suite 600, Dallas, Texas 75201,
Attention: President.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; and one
business day after being timely delivered to a next-day air courier; and when
receipt is acknowledged by addressee, if telecopied.
14. Successors. This Agreement shall inure to the benefit
of and be binding upon the Initial Purchasers, each of the Issuers and their
respective successors and legal representatives, and nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person any legal or equitable right, remedy or claim under or in respect of this
Agreement, or any provisions herein contained; this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person except that (i)
the indemnities of the Issuers contained in Section 9 of this Agreement shall
also be for the benefit of any person or persons who control the Initial
Purchasers within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act and (ii) the indemnities of the Initial Purchasers contained in
Section 9 of this Agreement shall also be for the benefit of the directors of
the Issuers, their respective officers and any person or persons who control the
Issuers within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act. No purchaser of Notes from the Initial Purchasers will be deemed a
successor because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY
PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW.
16. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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If the foregoing correctly sets forth our understanding,
please indicate your acceptance thereof in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement between the
Company, the Guarantors and the Initial Purchasers.
Very truly yours,
The Company
CHANCELLOR MEDIA CORPORATION OF
LOS ANGELES
By: /s/ OMAR CHOUCAIR
------------------------------------------
Name: Omar Choucair
Title: Vice President and Assistant Secretary
The Guarantors:
On behalf of the Subsidiary Guarantors
listed on Schedule A hereto:
By: /s/ OMAR CHOUCAIR
------------------------------------------
Name: Omar Choucair
Title: Vice President and Assistant Secretary
17
<PAGE> 18
Confirmed and Accepted:
THE INITIAL PURCHASERS:
BT ALEX. BROWN INCORPORATED
CHASE SECURITIES INC.
MORGAN STANLEY & Co. INCORPORATED
SALOMON SMITH BARNEY INC.
By: BT ALEX. BROWN INCORPORATED
By: /s/ DAVID T. JACOBS
--------------------------------
Name: David T. Jacobs
Title: Vice President
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SCHEDULE A
CERTAIN SUBSIDIARIES OF
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
(all subsidiaries are Delaware corporations except as expressly indicated)
1. Chancellor Media Corporation Of The Lone Star State
2. KZPS/KDGE License Corp.
3. Chancellor Media Corporation of California
4. KIOI License Corp.
5. Chancellor Media Corporation of Illinois
6. Chancellor Media Illinois License Corp.
7. Chancellor Media Corporation of Dade County
8. WVCG License Corp.
9. Chancellor Media Corporation of Massachusetts
10. Chancellor Media Pennsylvania License Corp.
11. Chancellor Media Corporation of Miami
12. WEDR License Corp.
13. Chancellor Media of Houston Limited Partnership
14. Chancellor Media Corporation of Houston
15. Chancellor Media Corporation of the Keystone State
16. Chancellor Media Corporation of New York
17. Chancellor Media Corporation of Charlotte
18. WIOQ License Corp.
19. Chancellor Media Corporation of Washington, D.C.
20. Chancellor Media Corporation of St. Louis
21. Chancellor Media Corporation of Michigan
22. Chancellor Media / WAXQ Inc.
23. WAXQ License Corp.
24. Chancellor Media / KCMG Inc.
25. Chancellor Media / Riverside Broadcasting Co., Inc.
26. WLTW License Corp.
27. Chancellor Media Corporation of the Capital City
28. Chancellor Media D.C. License Corp.
29. Chancellor Media Licensee Company
30. Chancellor Media/Trefoil Communications, Inc.
31. Chancellor Media/Shamrock Broadcasting, Inc.
32. Chancellor Media/Shamrock Radio Licenses, Inc.
33. Chancellor Media/Shamrock Broadcasting Licenses of Denver, Inc.
34. Chancellor Media/Shamrock Broadcasting of Texas, Inc (a Texas corporation)
35. Chancellor Media/Shamrock Radio Licenses, LLC
36. Chancellor Media Outdoor Corporation
37. Chancellor Media Nevada Sign Corporation
38. Chancellor Media MW Sign Corporation
39. Chancellor Media Martin Corporation
40. Western Poster Service, Inc. (a Texas corporation)
41. The AMFM Radio Networks, Inc.
42. Chancellor Media Air Services Corporation
43. Chancellor Media Whiteco Outdoor Corporation
44. Chancellor Merger Corp.
S-1
<PAGE> 20
45. Broadcast Architecture, Inc. (a Massachusetts corporation)
46. Martin Media (a California limited partnership)
47. Dowling Company Incorporated (a Virginia corporation)
48. Nevada Outdoor Systems, Inc. (a Nevada corporation)
49. MW Sign Corp. (a California corporation)
50. Martin & MacFarlane, Inc. (a California corporation)
51. Katz Media Corporation
52. Katz Communications, Inc.
53. Katz Millennium Marketing, Inc.
54. Amcast Radio Sales, Inc.
55. Christal Radio Sales, Inc.
56. Eastman Radio Sales, Inc.
57. Seltel Inc.
58. Katz Cable Corporation
59. The National Payroll Company, Inc.
60. Chancellor Media Radio Licenses, LLC
61. KLOL License Limited Partnership
62. WTOP License Limited Partnership
63. Radio 100, L.L.C.
64. Revolution Outdoor Advertising, Inc.
65. Hardin Development Corporation
66. Parsons Development Company
S-2
<PAGE> 21
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
A-1
<PAGE> 22
EXHIBIT B
OPINION OF WEIL, GOTSHAL & MANGES LLP
<PAGE> 1
EXHIBIT 4.47
===============================================================================
$750,000,000
8% SENIOR NOTES DUE 2008
REGISTRATION RIGHTS AGREEMENT
Dated as of November 17, 1998
Among
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
as Issuer
THE GUARANTORS NAMED HEREIN
and
BT ALEX. BROWN INCORPORATED
CHASE SECURITIES INC.
MORGAN STANLEY & CO. INCORPORATED
SALOMON SMITH BARNEY INC.
as Initial Purchasers
===============================================================================
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT"), dated as of November
17, 1998, is being entered into among Chancellor Media Corporation of Los
Angeles, a Delaware corporation (the "COMPANY"), each of the subsidiaries of the
Company listed on the signature pages hereto (the "GUARANTORS" and, together
with the Company, the "ISSUERS") and BT Alex. Brown Incorporated, Chase
Securities Inc., Morgan Stanley & Co. Incorporated and Salomon Smith Barney Inc.
(the "INITIAL PURCHASERS").
This Agreement is being entered into in connection with the Purchase
Agreement, dated as of November 12, 1998, among the Company, the Guarantors and
the Initial Purchasers (the "PURCHASE AGREEMENT"), which provides for the sale
by the Company to the Initial Purchasers of $750,000,000 aggregate principal
amount of the Company's 8% Senior Notes Due 2008 (the "NOTES"). In order to
induce the Initial Purchasers to enter into the Purchase Agreement, the Issuers
have agreed to provide the registration rights set forth in this Agreement for
the benefit of the Initial Purchasers and their direct and indirect transferees.
The execution and delivery of this Agreement is a condition to the obligation of
the Initial Purchasers to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
ADDITIONAL INTEREST: See Section 4(a) hereof.
ADVICE: See the last paragraph of Section 5 hereof.
AGREEMENT: See the first introductory paragraph hereto.
APPLICABLE PERIOD: See Section 2(b) hereof.
CLOSING DATE: The Closing Date as defined in the Purchase Agreement.
COMPANY: See the first introductory paragraph hereto.
EFFECTIVENESS DATE: The 180th day after the Issue Date.
EFFECTIVENESS PERIOD: See Section 3(a) hereof.
EVENT DATE: See Section 4(b) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
EXCHANGE NOTES: See Section 2(a) hereof.
EXCHANGE OFFER: See Section 2(a) hereof.
EXCHANGE REGISTRATION STATEMENT: See Section 2(a) hereof.
FILING DATE: The 90th day after the Issue Date.
GUARANTORS: See the first introductory paragraph hereto.
<PAGE> 3
HOLDER: Any holder of a Registrable Note or Registrable Notes.
INDEMNIFIED PERSON: See Section 7(c) hereof.
INDEMNIFYING PERSON: See Section 7(c) hereof.
INDENTURE: The Indenture, dated as of November 17, 1998 among the
Company, the Guarantors and The Bank of New York, as trustee, pursuant to which
the Notes are being issued, as amended or supplemented from time to time in
accordance with the terms thereof.
INITIAL PURCHASERS: See the first introductory paragraph hereto.
INSPECTORS: See Section 5(o) hereof.
ISSUE DATE: The date on which the Notes were sold to the Initial
Purchasers pursuant to the Purchase Agreement.
ISSUERS: See the first introductory paragraph hereto.
NASD: See Section 5(t) hereof.
NOTES: See the second introductory paragraph hereto.
PARTICIPANT: See Section 7(a) hereof.
PARTICIPATING BROKER-DEALER: See Section 2(b) hereof.
PERSON: An individual, corporation, partnership, limited liability
company, trust, or joint venture, or a governmental agency or political
subdivision thereof or other legal entity.
PRIVATE EXCHANGE: See Section 2(b) hereof.
PRIVATE EXCHANGE NOTES: See Section 2(b) hereof.
PROSPECTUS: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, and all other amendments and supplements to the
Prospectus, with respect to the terms of the offering of any portion of the
Registrable Notes covered by such Registration Statement including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.
PURCHASE AGREEMENT: See the second introductory paragraph hereto.
RECORDS: See Section 5(o) hereof.
REGISTRABLE NOTES: Each Note upon original issuance of the Notes and
at all times subsequent thereto, each Exchange Note as to which Section 2(c)(v)
hereof is applicable upon original issuance and at all times subsequent thereto
and each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until in the case of any such Note, Exchange Note or Private
Exchange Note, as the case may be, the earliest to occur of (i) a Registration
Statement (other than, with respect to any Exchange Note as to which Section
2(c)(v) hereof is applicable, the Exchange Registration Statement) covering such
Note, Exchange Note or Private Exchange Note, as the case may be, has been
2
<PAGE> 4
declared effective by the SEC and such Note (unless such Note was not tendered
for exchange by the Holder thereof), Exchange Note or Private Exchange Note, as
the case may be, has been disposed of in accordance with such effective
Registration Statement, (ii) such Note, Exchange Note or Private Exchange Note,
as the case may be, is sold in compliance with Rule 144 or may be sold pursuant
to Rule 144(k), (iii) such note has been exchanged for an Exchange Note or
Exchange Notes pursuant to an Exchange Offer and is entitled to be resold
without complying with the prospectus delivery requirements of the Securities
Act (iv) such Note, Exchange Note or Private Exchange Note, as the case may be,
ceases to be outstanding for purposes of the Indenture.
REGISTRATION STATEMENT: Any registration statement of the Company and
the Guarantors, including, but not limited to, the Exchange Registration
Statement and any registration statement filed with the SEC pursuant to the
provisions of this Agreement, including post-effective amendments, all exhibits,
and all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
RULE 144: Rule 144 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
RULE 144A: Rule 144A promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC.
RULE 415: Rule 415 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
SECURITIES ACT: The Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
SHELF NOTICE: See Section 2(c) hereof.
SHELF REGISTRATION: See Section 3(a) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
TRUSTEE: The trustee under the Indenture and, if existent, the trustee
under any indenture governing the Exchange Notes and Private Exchange Notes (if
any).
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
2. Exchange Offer
(a) The Company agrees to file with the SEC no later than the Filing
Date an offer to exchange (the "EXCHANGE OFFER") any and all of the Registrable
Notes (other than the Private Exchange Notes, if any) for a like aggregate
principal amount of debt securities of the Company that are identical in all
material respects to the Notes (the "EXCHANGE NOTES") (and that are entitled to
the benefits of the Indenture or a trust indenture that is identical in all
material respects to the Indenture (other than such changes to the Indenture or
any such identical trust indenture as are necessary to comply with any
requirements of the SEC to effect or maintain the qualification thereof under
the TIA) and that,
3
<PAGE> 5
in either case, has been qualified under the TIA), except that the Exchange
Notes (other than Private Exchange Notes, if any) shall have been registered
pursuant to an effective Registration Statement under the Securities Act and
shall contain no restrictive legend thereon. The Exchange Offer shall be
registered under the Securities Act on an appropriate form (the "EXCHANGE
REGISTRATION STATEMENT") and shall comply with all applicable tender offer rules
and regulations under the Exchange Act. The Issuers agree to use their
reasonable best efforts to (x) cause the Exchange Registration Statement to be
declared effective under the Securities Act on or before the Effectiveness Date;
(y) keep the Exchange Offer open for at least 20 business days (or longer if
required by applicable law) after the date that notice of the Exchange Offer is
mailed to Holders; and (z) consummate the Exchange Offer on or before the 225th
day following the Issue Date. If after such Exchange Registration Statement is
declared effective by the SEC, the Exchange Offer or the issuance of the
Exchange Notes thereunder is interfered with by any stop order, injunction or
other order or requirement of the SEC or any other governmental agency or court,
such Exchange Registration Statement shall be deemed not to have become
effective for purposes of this Agreement.
Each Holder who participates in the Exchange Offer will be required to
represent that any Exchange Notes received by it will be acquired in the
ordinary course of its business, that at the time of the consummation of the
Exchange Offer such Holder will have no arrangement or understanding with any
Person to participate in the distribution of the Exchange Notes in violation of
the provisions of the Securities Act and that such Holder is not an affiliate of
the Company or any Guarantor within the meaning of the Securities Act and is not
acting on behalf of any persons or entities who could not truthfully make the
foregoing representations. In addition, each broker-dealer that desires to
participate in the Exchange Offer and to receive Exchange Notes will be required
to represent that the Notes being tendered by such broker-dealer were acquired
in ordinary trading or market-making activities and not in transactions directly
with any Issuer or an Affiliate thereof (a "PARTICIPATING BROKER-DEALER"). A
broker-dealer that is not able to make the foregoing representation will not be
permitted to participate in the Exchange Offer.
Upon consummation of the Exchange Offer in accordance with this
Section 2, the provisions of this Agreement shall continue to apply mutatis
mutandis, solely with respect to Registrable Notes that are Private Exchange
Notes and Exchange Notes as to which clause 2(c) hereof applies, the Company
shall have no further obligation to register Registrable Notes (other than
Private Exchange Notes and other than in respect of any Exchange Notes as to
which clause 2(c)(v) hereof applies) pursuant to Section 3 hereof. No securities
other than the Exchange Notes shall be included in the Exchange Registration
Statement.
(b) The Company shall include within the Prospectus contained in the
Exchange Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a summary
statement of the publicly, disseminated positions taken or policies made by the
Staff of the SEC with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of Exchange Notes received by such broker-dealer. Such "Plan of
Distribution" section shall also expressly permit the use of the Prospectus by
all Persons subject to the prospectus delivery requirements of the Securities
Act, including all Participating Broker-Dealers, and include a statement
describing the means by which Participating Broker-Dealers may resell the
Exchange Notes.
The Issuers shall use their reasonable best efforts to keep the
Exchange Registration Statement effective and to amend and supplement the
Prospectus contained therein, in order to permit such Prospectus to be lawfully
delivered by all Persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as is necessary to comply with applicable
law in connection with any resale of the Exchange Notes; provided, however, that
such period shall not exceed 180 days after the consummation of the Exchange
Offer (or such longer period if extended pursuant to the last paragraph of
Section 5 hereof) (the "APPLICABLE PERIOD").
4
<PAGE> 6
If, prior to consummation of the Exchange Offer, any Initial Purchaser
holds any Notes acquired by it and having, or that are reasonably likely to be
determined to have, the status of an unsold allotment in the initial
distribution, the Issuers shall, upon the request of such Initial Purchaser,
simultaneously with the delivery of the Exchange Notes in the Exchange Offer,
issue and deliver to such Initial Purchaser in exchange (the "PRIVATE EXCHANGE")
for such Notes held by the Initial Purchaser a like principal amount of debt
securities of the Company that are identical in all material respects to the
Exchange Notes (the "PRIVATE EXCHANGE NOTES") (and that are issued pursuant to
the same Indenture as the Exchange Notes or an indenture identical to the
Indenture in all material respects as permitted by the last paragraph of this
Section 2(b)) except for the placement of a restrictive legend on such Private
Exchange Notes. The Private Exchange Notes shall bear the same CUSIP number as
the Exchange Notes.
Interest on the Exchange Notes and the Private Exchange Notes will
accrue from the last interest payment date on which interest was paid on the
Notes surrendered in exchange therefor or, if no interest has been paid on the
Notes, from the Issue Date.
In connection with the Exchange offer, the Issuers shall:
(1) mail to each Holder a copy of the Prospectus forming part of the
Exchange Registration Statement, together with an appropriate letter of
transmittal and related documents;
(2) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York;
(3) permit Holders to withdraw tendered Notes at any time prior to the
close of business, New York time, on the last business day on which the
Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Issuers shall:
(1) accept for exchange all Notes tendered and not validly withdrawn
pursuant to the Exchange Offer or the Private Exchange;
(2) deliver to the Trustee for cancellation all Notes so accepted for
exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each
Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may
be, equal in principal amount to the Notes of such Holder so accepted for
exchange.
The Exchange Notes and the Private Exchange Notes may be issued under
(i) the Indenture or (ii) an indenture identical in all material respects to the
Indenture, which in either event shall provide that (1) the Exchange Notes shall
not be subject to the transfer restrictions set forth in the Indenture and (2)
the Private Exchange Notes shall be subject to the transfer restrictions set
forth in the Indenture. The Indenture or such indenture shall provide that the
Exchange Notes, the Private Exchange Notes and the Notes shall vote and consent
together on all matters as one class and that none of the Exchange Notes, the
Private Exchange Notes or the Notes will have the right to vote or consent as a
separate class on any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the Staff of the SEC, the Company is not permitted to effect
an Exchange offer, (ii) the Exchange Offer
5
<PAGE> 7
is not consummated within 225 days of the Issue Date, (iii) any holder of
Private Exchange Notes so requests at any time after the consummation of the
Private Exchange, (iv) the Holders of not less than a majority in aggregate
principal amount of the Registrable Notes determine that the interests of the
Holders would be materially adversely affected by consummation of the Exchange
Offer or (v) in the case of any Holder that participates in the Exchange Offer,
such Holder does not receive Exchange Notes on the date of the exchange that may
be sold without restriction under state and federal securities laws (other than
due solely to the status of such Holder as an affiliate of the Issuers or as an
"underwriter" within the meaning of the Securities Act), then the Company shall
promptly deliver to the Holders and the Trustee written notice thereof (the
"SHELF NOTICE") to the Trustee and in the case of clauses (i), (ii) and (iv),
all Holders, in the case of clause (iii), the Holders of the Private Exchange
Notes and in the case of clause (v), the affected Holder, and shall file a Shelf
Registration pursuant to Section 3 hereof.
3. Shelf Registration
If a Shelf Notice is delivered as contemplated by Section 2(c) hereof,
then:
(a) Shelf Registration. The Issuers shall as promptly as reasonably
practicable file with the SEC a Registration Statement for an offering to be
made on a continuous basis pursuant to Rule 415 covering all of the Registrable
Notes (the "SHELF REGISTRATION"). If the Issuers shall not have yet filed an
Exchange Registration Statement, the Company shall use its reasonable best
efforts to file with the SEC the Shelf Registration on or prior to the Filing
Date. The Shelf Registration shall be on Form S-1 or another appropriate form
permitting registration of such Registrable Notes for resale by Holders in the
manner or manners designated by them (including, without limitation, one or more
underwritten offerings). The Issuers shall not permit any securities other than
the Registrable Notes to be included in the Shelf Registration.
The Issuers shall use their reasonable best efforts to cause the Shelf
Registration to be declared effective under the Securities Act on or prior to
the Effectiveness Date (or, in the case of a Shelf Registration pursuant to
Shelf Notice delivered less than 90 days before the Effectiveness Date, on or
prior to the 90th day following the Shelf Notice (the "SHELF EFFECTIVENESS
DATE")) and to keep the Shelf Registration continuously effective under the
Securities Act until the date that is two years from the Issue Date, subject to
extension pursuant to the last paragraph of Section 5 hereof (the "EFFECTIVENESS
PERIOD"), or such shorter period ending when all Registrable Notes covered by
the Shelf Registration have been sold in the manner set forth and as
contemplated in the Shelf Registration.
(b) Withdrawal of Stop Orders. If the Shelf Registration ceases to be
effective for any reason at any time during the Effectiveness Period (other than
because of the sale of all of the securities registered thereunder), the Issuers
shall use their respective best efforts to obtain the prompt withdrawal of any
order suspending the effectiveness thereof.
(c) Supplements and Amendments. The Issuers shall promptly supplement
and amend the Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, if required by the Securities Act, or if reasonably requested by
the Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Registration Statement or by any underwriter of such Registrable
Notes.
4. Additional Interest
(a) The Issuers and the Initial Purchasers agree that the Holders of
Registrable Notes will suffer damages if the Issuers fail to fulfill their
obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the
6
<PAGE> 8
Issuers agree to pay, as liquidated damages, additional interest on the Notes
("ADDITIONAL INTEREST") under the circumstances and to the extent set forth
below:
(i) if neither the Exchange Registration Statement nor the Shelf
Registration has been filed on or prior to the Filing Date (or, in the case
of a Shelf Registration pursuant to a Shelf Notice delivered less than 45
days prior to the Filing Date, on or prior to the 45th day following such
Shelf Notice (the "SHELF FILING DATE")), then, commencing on the 91st day
after the Issue Date (or, if applicable, on the 1st day after the Shelf
Filing Date), Additional Interest shall accrue on the Notes over and above
the stated interest at a rate of 0.50% per annum for the first 90 days
immediately following the Filing Date (or, if applicable, the first 90 days
following the Shelf Filing Date), such Additional Interest rate increasing
by an additional 0.50% per annum at the beginning of each subsequent 90-day
period;
(ii) if neither the Exchange Registration Statement nor the Shelf
Registration is declared effective by the SEC on or prior to the
Effectiveness Date (or, if applicable, the Shelf Effectiveness Date), then,
commencing on the 181st day after the Issue Date (or, if applicable, the
1st day after the Shelf Effectiveness Date), Additional Interest shall
accrue on the Notes included or that should have been included in such
Registration Statement over and above the stated interest at a rate of
0.50% per annum for the first 90 days immediately following the
Effectiveness Date (or, if applicable, the first 90 days following the
Shelf Effectiveness Date), such Additional Interest rate increasing by an
additional 0.50% per annum at the beginning of each subsequent 90-day
period; and
(iii) if (A) the Company has not exchanged Exchange Notes for all
Notes validly tendered in accordance with the terms of the Exchange Offer
on or prior to the 225th day after the Issue Date or (B) the Exchange
Registration Statement ceases to be effective at any time prior to the time
that the Exchange Offer is consummated or (C) if applicable, the Shelf
Registration has been declared effective and such Shelf Registration ceases
to be effective at any time during the Effectiveness Period, then
Additional Interest shall accrue (over and above any interest otherwise
payable on such Notes) at a rate of 0.50% per annum on (x) the 226th day
after the Issue Date with respect to the Notes validly tendered and not
exchanged by the Company, in the case of (A) above, or (y) the day the
Exchange Registration Statement ceases to be effective in the case of (B)
above, or (z) the day such Shelf Registration ceases to be effective, in
the case of (C) above, such Additional Interest rate increasing by an
additional 0.50% per annum at the beginning of each such subsequent 90-day
period (it being understood and agreed that, notwithstanding any provision
to the contrary, so long as any Note that is the subject of a Shelf Notice
is then covered by an effective Shelf Registration, no Additional Interest
shall accrue on such Note);
provided, however, that the Additional Interest rate on any affected Note may
not exceed at any one time in the aggregate 1.0% per annum; and provided,
further, that (1) upon the filing of the Exchange Registration Statement or a
Shelf Registration (in the case of clause (i) of this Section 4(a)), (2) upon
the effectiveness of the Exchange Registration Statement or the Shelf
Registration (in the case of clause (ii) of this Section 4(a)), or (3) upon the
exchange of Exchange Notes for all Notes tendered and not validly withdrawn (in
the case of clause (iii)(A) of this Section 4(a)), or upon the effectiveness of
the Exchange Registration Statement that had ceased to remain effective (in the
case of (iii)(B) of this Section 4(a)), or upon the effectiveness of the Shelf
Registration that had ceased to remain effective (in the case of (iii)(C) of
this Section 4(a)), Additional Interest on the affected Notes as a result of
such clause (or the relevant subclause thereof), as the case may be, shall cease
to accrue.
(b) The Issuers shall notify the Trustee within one business day after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "EVENT DATE"). Any amounts of Additional
Interest due pursuant to clauses (a)(i), (a)(ii) or (a)(iii) of this Section 4
shall be payable to the Holders of affected Notes as of the relevant record date
in cash semi-annually on the same original interest payment dates as the Notes
(as set forth in the Indenture) commencing with the first such date occurring
after any such Additional Interest commences to accrue.
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<PAGE> 9
The amount of Additional Interest will be determined by multiplying the
applicable Additional Interest rate by the principal amount of the affected
Registrable Notes of such Holders, multiplied by a fraction, the numerator of
which is the number of days such Additional Interest rate was applicable during
such period (determined on the basis of a 360-day year comprised of twelve
30-day months and, in the case of a partial month, the actual number of days
elapsed), and the denominator of which is 360.
5. Registration Procedures
In connection with the filing of any Registration Statement pursuant
to Sections 2 or 3 hereof, the Issuers shall effect such registrations to permit
the sale of the securities covered thereby in accordance with the intended
method or methods of disposition thereof, and pursuant thereto and in connection
with any Registration Statement filed by the Issuers hereunder, the Issuers
shall:
(a) Prepare and file with the SEC on or prior to the Filing Date (or,
if applicable, the Shelf Filing Date) a Registration Statement or Registration
Statements as prescribed by Sections 2 or 3 hereof and use their reasonable best
efforts to cause each such Registration Statement to become effective and remain
effective as provided herein; provided, however, that, if (1) such filing is
made pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, before filing any
Registration Statement or Prospectus or any amendments or supplements thereto,
the Issuers shall furnish to and afford the Holders of the Registrable Notes
covered by such Registration Statement (in the case of a Registration Statement
filed pursuant to Section 3 hereof) or each such Participating Broker-Dealer (in
the case where a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered by Participating
Broker-Dealers), as the case may be, their counsel and the managing
underwriters, if any, a reasonable opportunity to review copies of all such
documents (including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed (in each case at least
five business days prior to such filing). The Issuers shall not file any
Registration Statement or Prospectus or any amendments or supplements thereto if
the Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Registration Statement, or any such Participating Broker-Dealer,
as the case may be, their counsel, or the managing underwriters, if any, shall
reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration or Exchange Registration Statement, as the
case may be, as may be necessary to keep such Registration Statement
continuously effective for the Effectiveness Period or the Applicable Period or
until consummation of the Exchange Offer, as the case may be, cause the related
Prospectus to be supplemented by any Prospectus supplement required by
applicable law and, as so supplemented, to be filed pursuant to Rule 424 (or any
similar provisions then in force) promulgated under the Securities Act; and
comply with the provisions of the Securities Act and the Exchange Act applicable
to them with respect to the disposition of all securities covered by such
Registration Statement as so amended or in such Prospectus as so supplemented
and with respect to the subsequent resale of any securities being sold by a
Participating Broker-Dealer covered by any such Prospectus; the Issuers shall be
deemed not to have used their best efforts to keep a Registration Statement
effective during the Applicable Period or Effectiveness Period, as applicable,
if they voluntarily take any action that would result in selling Holders of the
Registrable Notes covered thereby or Participating Broker-Dealers seeking to
sell Exchange Notes not being able to sell such Registrable Notes or such
Exchange Notes during that period, unless such action is required by applicable
law or unless the Issuers comply with this Agreement, including without
limitation, the provisions of paragraph 5(k) hereof and the last paragraph of
this Section 5; provided, however, that the foregoing shall not apply to actions
taken by the Issuers in good faith and for valid business reasons (not including
avoidance of their obligations hereunder), including without limitation, the
acquisition or divestiture of assets, so long as the Issuers, within 90 days
thereafter comply with the requirements of Section 5(k). Any such period during
which the Issuers fail
8
<PAGE> 10
to keep the Registration Statement effective and usable for offers and sales of
Registrable Notes or Exchange Notes during the Applicable Period or
Effectiveness Period, as applicable, is referred to as a "Suspension Period." A
Suspension Period shall commence on and include the date that the Issuers give
notice that the Registration Statement is no longer effective or the prospectus
included therein is no longer usable for offers and sales of Registrable Notes
or Exchange Notes and shall end on the date when each Holder of Registrable
Notes or Exchange Notes covered by such Registration Statement either receives
copies of the amended or supplemental prospectus contemplated by Section 5(k) or
is advised in writing by the Issuers that the use of the prospectus may be
resumed. If one or more Suspension Periods occur, the Applicable Period or
Effectiveness Period, as applicable, shall be extended by the aggregate number
of days included in each such Suspension Period
(c) If (1) a Shelf Registration is filed pursuant to Section 3 hereof,
or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, notify the selling Holders of Registrable Notes, or each
such Participating Broker-Dealer, as the case may be, their counsel and the
managing underwriters, if any, promptly (but in any event within two business
days), and confirm such notice in writing, (i) when a Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective under the Securities Act (including in such notice a
written statement that any Holder may, upon request, obtain, at the sole expense
of the Issuers, one conformed copy of such Registration Statement or
post-effective amendment, including financial statements and schedules,
documents incorporated or deemed to be incorporated by reference and exhibits),
(ii) of the issuance by the SEC of any stop order suspending the effectiveness
of a Registration Statement or of any order preventing or suspending the use of
any preliminary prospectus or the initiation of any proceedings for that
purpose, (iii) if at any time when a prospectus is required by the Securities
Act to be delivered in connection with sales of the Registrable Notes or resales
of Exchange Notes by Participating Broker-Dealers upon written notice by any
such Participating Broker-Dealer of a resale the representations and warranties
of the Company contained in any agreement (including any underwriting
agreement), contemplated by Section 5(n) hereof cease to be true and correct,
(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Registrable Notes or the Exchange Notes to
be sold by any Participating Broker-Dealer for offer or sale in any
jurisdiction, or the initiation or threatening of any proceeding for such
purpose, (v) of the happening of any event, the existence of any condition or
any information becoming known that makes any statement made in such
Registration Statement or related Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in or amendments or supplements to such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading and (vi) of the determination by the Issuers that a
post-effective amendment to a Registration Statement would be appropriate.
(d) Use their reasonable best efforts to prevent the issuance of any
order suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Notes or the
Exchange Notes for sale in any jurisdiction, and, if any such order is issued,
to use its reasonable best efforts to obtain the withdrawal of any such order at
the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriter or underwriters, if any, or the Holders of
a majority in aggregate principal amount
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<PAGE> 11
of the Registrable Notes being sold in connection with an underwritten offering,
(i) promptly incorporate in a prospectus supplement or post-effective amendment
such information as the managing underwriter or underwriters, if any, such
Holders, or counsel for any of them, reasonably request to be included therein,
and (ii) make all required filings of such prospectus supplement or such
post-effective amendment as soon as practicable after the Issuers have received
notification of the matters to be incorporated in such prospectus supplement or
post-effective amendment.
(f) If (1) a Shelf Registration is filed pursuant to Section 3 hereof,
or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, furnish to each selling Holder of Registrable Notes and
to each such Participating Broker-Dealer who so requests and to their respective
counsel and each managing underwriter, if any, at the sole expense of the
Issuers, one conformed copy of the Registration Statement or Registration
Statements and each post-effective amendment thereto, including financial
statements and schedules, and, if requested, all documents incorporated or
deemed to be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3 hereof,
or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, deliver to each selling Holder of Registrable Notes, or
each such Participating Broker-Dealer, as the case may be, their respective
counsel, and the underwriters, if any, at the sole expense of the Company, as
many copies of the Prospectus or Prospectuses (including each form of
preliminary prospectus) and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, the Issuers
hereby consent to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, and the underwriters or agents,
if any, and dealers if any, in connection with the offering and sale of the
Registrable Notes covered by, or the sale by Participating Broker-Dealers of the
Exchange Notes pursuant to, such Prospectus and any amendment or supplement
thereto. (h) Prior to any public offering of Registrable Notes or any delivery
of a Prospectus contained in the Exchange Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, use their reasonable best efforts to register or qualify such
Registrable Notes (and to cooperate with selling Holders of Registrable Notes or
each such Participating Broker-Dealer, as the case may be, the managing
underwriter or underwriters, if any, and their respective counsel in connection
with the registration or qualification (or exemption from such registration or
qualification) of such Registrable Notes) for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any sealing Holder, Participating Broker-Dealer, or the managing underwriter or
underwriters reasonably request in writing; provided, however, that where
Exchange Notes held by Participating Broker-Dealers or Registrable Notes are
offered other than through an underwritten offering, the Issuers agree to cause
their counsel to perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 5(h); keep each
such registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective and do any
and all other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Exchange Notes held by Participating
Broker-Dealers or the Registrable Notes covered by the applicable Registration
Statement; provided, however, that none of the Issuers shall be required to (A)
qualify generally to do business in any jurisdiction where any such Issuer is
not then so qualified, (B) take any action that would subject any such Issuer to
general service of process in any such jurisdiction where any such Issuer is not
then so subject or (C) become subject to taxation in any such jurisdiction where
any such Issuer is not then so subject.
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(i) If a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and enable such
Registrable Notes to be in such denominations and registered in such names as
the managing underwriter or underwriters, if any, or Holders may reasonably
request.
(j) Use their reasonable best efforts to cause the Registrable Notes
covered by the Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
Holders thereof or the underwriter or underwriters, if any, to dispose of such
Registrable Notes, except as may be required solely as a consequence of the
nature of a selling Holder's business, in which case the Issuers will cooperate
in all reasonable respects (at the sole expense of such Holder) with the filing
of such Registration Statement and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3 hereof,
or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, (A) upon the occurrence of any event contemplated by
paragraph 5(c)(v) or 5(c)(vi) hereof or (B) a Suspension Period remains in
effect more than 90 days after the occurrence thereof, as promptly as
practicable prepare and (subject to Section 5(a) hereof) file with the SEC, at
the sole expense of the Issuers, a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, or file any
other required document so that, as thereafter delivered to the purchasers of
the Registrable Notes being sold thereunder or to the purchasers of the Exchange
Notes to whom such Prospectus will be delivered by a Participating
Broker-Dealer, any such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(l) Use their reasonable best efforts to cause the Registrable Notes
covered by a Registration Statement or the Exchange Notes, as the case may be,
to be rated with the appropriate rating agencies, if so requested by the Holders
of a majority in aggregate principal amount of Registrable Notes covered by such
Registration Statement or the Exchange Notes, as the case may be, or the
managing underwriter or underwriters, if any.
(m) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with certificates for
the Registrable Notes or Exchange Notes, as the case may be, in a form eligible
for deposit with The Depository Trust Company and (ii) provide a CUSIP number
for the Registrable Notes or Exchange Notes, as the case may be.
(n) In connection with any underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as is
customary in underwritten offerings of debt securities similar to the Notes and
take all such other actions as are reasonably requested by the managing
underwriter or underwriters in order to expedite or facilitate the registration
or the disposition of such Registrable Notes and, in such connection, (i) make
such representations and warranties to, and covenants with, the underwriters
with respect to the business of the Issuers (including any acquired business,
properties or entities, if applicable) and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, as are customarily made by issuers to
underwriters in underwritten offerings of debt securities similar to the Notes,
and confirm the same in writing if and when requested; (ii) obtain the written
opinion of counsel to the Issuers and written updates thereof in form, scope and
substance reasonably satisfactory to the managing
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<PAGE> 13
underwriter or underwriters, addressed to the underwriters covering the matters
customarily covered in opinions requested in underwritten offerings of debt
securities similar to the Notes and such other matters as may be reasonably
requested by the managing underwriter or underwriters; (iii) obtain "cold
comfort" letters and updates thereof in form, scope and substance reasonably
satisfactory to the managing underwriter or underwriters from the independent
certified public accountants of the Issuers (and, if necessary, any other
independent certified public accountants of any subsidiary of the Issuers or of
any business acquired by the Company for which financial statements and
financial data are, or are required to be, included or incorporated by reference
in the Registration Statement), addressed to each of the underwriters, such
letters to be in customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with underwritten offerings of
debt securities similar to the Notes and such other matters as reasonably
requested by the managing underwriter or underwriters; and (iv) if an
underwriting agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable than those set forth in Section 7
hereof (or such other provisions and procedures acceptable to Holders of a
majority in aggregate principal amount of Registrable Notes covered by such
Registration Statement and the managing underwriter or underwriters or agents)
with respect to all parties to be indemnified pursuant to said Section 7. The
above shall be done at each closing under such underwriting agreement or as and
to the extent required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section 3 hereof,
or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, make available for inspection by any selling Holder of
such Registrable Notes being sold, or each such Participating Broker-Dealer, as
the case may be, any underwriter participating in any such disposition of
Registrable Notes, if any, and any attorney, accountant or other agent retained
by any such selling Holder or each such Participating Broker-Dealer, as the case
may be, or underwriter (collectively, the "INSPECTORS"), at the offices where
normally kept, during reasonable business hours, all financial and other
records, pertinent corporate documents and instruments of the Issuers and their
subsidiaries (collectively, the "RECORDS") as shall be reasonably necessary to
enable them to exercise any applicable due diligence responsibilities, and cause
the respective officers, directors and employees of the Issuers and their
subsidiaries to supply all information reasonably requested by any such
Inspector in connection with such Registration Statement. Records that the
Issuers determine, in good faith, to be confidential and any Records that it
notifies the Inspectors are confidential shall not be disclosed by the
Inspectors unless (i) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in such Registration Statement, (ii) the
release of such Records is ordered pursuant to a subpoena or other final order
from a court of competent jurisdiction, (iii) disclosure of such information is,
in the reasonable, good faith opinion of counsel for any Inspector, necessary in
connection with any action, claim, suit or proceeding, directly or indirectly,
involving such Inspector and arising out of, based upon, relating to, or
involving this Agreement, or any transactions contemplated hereby or arising
hereunder, or (iv) the information in such Records has been made generally
available to the public other than in violation of any obligation of
confidentiality, hereunder or otherwise. Each selling Holder of such Registrable
Securities and each such Participating Broker-Dealer will be required to agree
that information obtained by it as a result of such inspections shall be deemed
confidential and shall not be used by it for any purpose other than the sale or
exchange of Notes pursuant to an Exchange Offer or Shelf Registration. Each
selling Holder of such Registrable Notes and each such Participating
Broker-Dealer will be required to further agree that it will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction,
promptly give notice to the Issuers and allow the Issuers to undertake
appropriate action to prevent disclosure of the Records deemed confidential at
the Issuers sole expense.
(p) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the Exchange Offer
or first Registration Statement relating to the Registrable Notes; and in
connection therewith, cooperate with the
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<PAGE> 14
trustee under any such indenture and the Holders of the Registrable Notes, to
effect such changes to such indenture as may be required for such indenture to
be so qualified in accordance with the terms of the TIA; and execute, and use
their reasonable best efforts to cause such trustee to execute, all documents as
may be required to effect such changes, and all other forms and documents
required to be filed with the SEC to enable such indenture to be so qualified in
a timely manner.
(q) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earning statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than 45 days
after the end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Notes are sold to underwriters in a firm commitment
or best efforts underwritten offering and (ii) if not sold to underwriters in
such an offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
(r) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Company (or to such
other Person as directed by the Issuers) in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be, the Issuers shall mark, or cause
to be marked, on such Registrable Notes that such Registrable Notes are being
cancelled in exchange for the Exchange Notes or the Private Exchange Notes, as
the case may be; in no event shall such Registrable Notes be marked as paid or
otherwise satisfied.
(s) Reasonably cooperate with each seller of Registrable Notes covered
by any Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in connection
with any filings required to be made with the National Association of Securities
Dealers, Inc. (the "NASD").
(t) Use their reasonable best efforts to take all other steps
necessary or advisable to effect the registration of the Registrable Notes
covered by a Registration Statement contemplated hereby.
The Company may require each seller of Registrable Notes as to which
any Registration is being effected to furnish to the Issuers such information
regarding such seller and the distribution of such Registrable Notes as the
Issuers may, from time to time, reasonably request and, in such event, shall
have no further obligation. The Issuers may exclude from such registration the
Registrable Notes of any seller who unreasonably fails to furnish such
information within a reasonable time after receiving such request. Each seller
as to which any Shelf Registration is being effected agrees to furnish promptly
to the Issuers all information required to be disclosed in order to make the
information previously furnished to the Issuers by such seller not materially
misleading.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon actual receipt
of any notice from the Issuers of (A) the happening of any event of the kind
described in Section 5(c)(ii), 5(c)(iv), 5(c)(v) or 5(c)(vi) hereof or (B) a
Suspension Period under Section 5(b), such Holder will forthwith discontinue
disposition of such Registrable Notes covered by such Registration Statement or
Prospectus or Exchange Notes to be sold by such Holder or Participating
Broker-Dealer, as the case may be, until such Holder's or Participating
Broker-Dealer's-receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(k) hereof, or until it is advised in writing (the
"ADVICE") by the Issuers that the use of the applicable Prospectus may be
resumed and has received copies of any amendments or supplements thereto. In the
event the Issuers shall give any such notice, each of the Effectiveness Period
and the Applicable Period shall be extended by the number of days during such
periods from and including the date of the giving of such notice to and
including the date when each seller of Registrable Notes covered by such
Registration Statement or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, shall have received
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<PAGE> 15
(x) the copies of the supplemented or amended Prospectus contemplated by Section
5(k) hereof or (y) the Advice.
6. Registration Expenses
(a) Except as otherwise set forth herein, all fees and expenses
incident to the performance of or compliance with this Agreement by the Issuers
shall be borne by the issuers whether or not the Exchange Offer or a Shelf
Registration is filed or becomes effective, including, without limitation, (i)
all registration and filing fees (including, without limitation, (A) fees with
respect to filings required to be made with the NASD in connection with an
underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Notes or Exchange Notes and determination of the eligibility of the
Registrable Notes or Exchange Notes for investment under the laws of such
jurisdictions (x) where the holders of Registrable Notes are located, in the
case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the
case of Registrable Notes or Exchange Notes to be sold by a Participating
Broker-Dealer during the Applicable Period)), (ii) printing expenses, including,
without limitation, expenses of printing certificates for Registrable Notes or
Exchange Notes in a form eligible for deposit with The Depository Trust Company
and of printing prospectuses if the printing of prospectuses is requested by the
managing underwriter or underwriters, if any, by the Holders of a majority in
aggregate principal amount of the Registrable Notes included in any Registration
Statement or sold by any Participating Broker-Dealer, as the case may be, (iii)
messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Issuers and reasonable fees and disbursements of special counsel
for the sellers of Registrable Notes (subject to the provisions of Section 6(b)
hereof), (v) fees and disbursements of all independent certified public
accountants referred to in Section 5(n)(iii) hereof (including, without
limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance), (vi) rating agency fees, if-any,
and any fees associated with making the Registrable Notes or Exchange Notes
eligible for trading through The Depository Trust Company, (vii) Securities Act
liability insurance, if the Company desires such insurance, (viii) fees and
expenses of all other Persons retained by the Issuers, (ix) internal expenses of
the Issuers (including, without limitation, all salaries and expenses of
officers and employees of the Issuers performing legal or accounting duties),
(x) the expense of any annual audit, (xi) the fees and expenses incurred in
connection with the listing of the securities to be registered on any securities
exchange, if applicable and (xii) the expenses relating to printing, word
processing and distributing all Registration Statements, underwriting
agreements, securities sales agreements, indentures and any other documents
necessary in order to comply with this Agreement.
(b) The Issuers shall (i) reimburse the Holders of the Registrable
Notes being registered in a Shelf Registration for the reasonable fees and
disbursements of not more than one counsel (in addition to appropriate local
counsel) chosen by the Holders of a majority in aggregate principal amount of
the Registrable Notes to be included in such Registration Statement and (ii)
reimburse out-of-pocket expenses (other than legal expenses or selling
commissions or discounts) of Holders of Registrable Notes incurred in connection
with the registration and sale of the Registrable Notes pursuant to a Shelf
Registration or in connection with the exchange of Registrable Notes pursuant to
the Exchange Offer.
7. Indemnification
(a) The Issuers agree, jointly and severally, to indemnify and hold
harmless each Holder of Registrable Notes offered pursuant to a Shelf
Registration Statement and each Participating Broker-Dealer selling Exchange
Notes during the Applicable Period, the affiliates, directors, officers, agents,
representatives and employees of each such Person or its affiliates, and each
other Person, if any, who controls any such Person or its affiliates within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act (each, a "PARTICIPANT") against any and all losses, claims,
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<PAGE> 16
damages and liabilities (including, without limitation, the reasonable legal
fees and other expenses actually incurred in connection with any suit, action or
proceeding or any claim asserted) caused by, arising out of or based upon
(i) any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement pursuant to which the offering
of such Registrable Notes or Exchange Notes, as the case may be, is
registered (or any amendment thereto) or related Prospectus (or any
amendments or supplements thereto) or any related preliminary prospectus,
or
(ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading;
and will reimburse, as incurred, each Participant and each such controlling
person for any legal or other expenses incurred by the Participant or such
controlling person in connection with investigating, defending against or
appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action; provided, however, that the Issuers will not be
required to indemnify a Participant if (i) such losses, claims, damages or
liabilities are caused by any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with information
relating to any Participant furnished to the Issuers in writing by or on behalf
of such Participant expressly for use therein or (ii) if such Participant sold
to the person asserting the claim the Registrable Notes or Exchange Notes that
are the subject of such claim and such untrue statement or omission or alleged
untrue statement or omission was contained or made in any preliminary prospectus
and corrected in the Prospectus or any amendment or supplement thereto, and the
Prospectus does not contain any other untrue statement or omission or alleged
untrue statement or omission of a material fact that was the subject matter of
the related proceeding and it is established by the Issuers in the related
proceeding that such Participant failed to deliver or provide a copy of the
Prospectus (as amended or supplemented) to such Person with or prior to the
confirmation of the sale of such Registrable Notes or Exchange Notes sold to
such Person unless such failure to deliver or provide a copy of the Prospectus
(as amended or supplemented) was a result of noncompliance by the Issuers with
Section 5 of this Agreement.
(b) Each Participant agrees, severally and not jointly, to indemnify
and hold harmless each of the Issuers, their directors and officers and each
Person who controls each of the Issuers within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Issuers to each Participant, but only (i) with
reference to information relating to such Participant furnished to the Issuers
in writing by or on behalf of such Participant expressly for use in any
Registration Statement or Prospectus, any amendment or supplement thereto or any
preliminary prospectus or (ii) with respect to any untrue statement or
representation made by such Participant in writing to the Company. The liability
or any Participant under this paragraph shall in no event exceed the proceeds
received by such Participant from sales of Registrable Notes or Exchange Notes
giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "INDEMNIFIED PERSON") shall promptly
notify the Person against whom such indemnity may be sought (the "INDEMNIFYING
PERSON") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such counsel related to
such proceeding; provided, however, that the failure to so notify the
Indemnifying Person shall not relieve it of any obligation or liability that it
may have hereunder or otherwise (unless and only to the extent that such failure
directly results in the forfeiture of any substantial rights or defenses by the
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<PAGE> 17
Indemnifying Person and the Indemnifying Person was not otherwise aware of such
action or claim). In any such proceeding, any Indemnified Person shall have the
right to retain its own counsel, but the reasonable fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have mutually agreed in
writing to the contrary, (ii) the Indemnifying Person shall have failed within a
reasonable period of time to retain counsel reasonably satisfactory to the
Indemnified Person or (iii) the named parties in any such proceeding (including
any impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It is
understood that, unless there exists a conflict among Indemnified Persons, the
Indemnifying Person shall not, in connection with any one such proceeding or
separate but substantially similar related proceeding in the same jurisdiction
arising out of the same general allegations, be liable for the fees and expenses
of more than one separate firm (in addition to any local counsel) for all
Indemnified Persons and that all such fees and expenses shall be reimbursed
promptly as they are incurred. Any such separate firm for the Participants and
such control Persons of Participants shall be designated in writing by
Participants who sold a majority in interest of Registrable Notes and Exchange
Notes sold by all such Participants and any such separate firm for the Issuers,
its directors, its officers and such control Persons of the Issuers shall be
designated in writing by the Issuers. The Indemnifying Person shall not be
liable for any settlement of any proceeding effected without its prior written
consent, but if settled with such consent or if there be a final non-appealable
judgment for the plaintiff for which the Indemnified Person is entitled to
indemnification pursuant to this Agreement, the indemnifying Person agrees to
indemnify and hold harmless each Indemnified Person from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an Indemnified Person shall have requested an
Indemnifying Person to reimburse the Indemnified Person for reasonable fees and
expenses actually incurred by counsel as contemplated by the third sentence of
this paragraph, the indemnifying Person agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such Indemnifying
Person of the aforesaid request and (ii) such Indemnifying Person shall not have
reimbursed the Indemnified Person in accordance with such request prior to the
date of such settlement; provided, however, that the Indemnifying Person shall
not be liable for any settlement effected without its consent pursuant to this
sentence if the Indemnifying Person is contesting, in good faith, the request
for reimbursement. No Indemnifying Person shall, without the prior written
consent of the Indemnified Person, effect any settlement or compromise of any
pending or threatened proceeding in respect of which any Indemnified Person is
or could have been a party, and indemnity could have been sought hereunder by
such Indemnified Person, unless such settlement (A) includes an unconditional
written release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability-on claims that are
the subject matter of such proceeding and (B) does not include any statement as
to an admission of fault, culpability or failure to act by or on behalf of any
Indemnified Person.
(d) If the indemnification provided for in the first and second
paragraphs of this Section 7 is for any reason available by its terms, but is
held to be unenforceable, then each Indemnifying Person under such paragraphs,
in lieu of indemnifying such Indemnified Person thereunder and in order to
provide for just and equitable contribution, shall contribute to the amount paid
or payable by such Indemnified Person as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof). The relative
fault of the parties shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Issuers on the one hand or such Participant or such other
Indemnified Person, as the case may be, on the other, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission, and any other equitable considerations appropriate
in the circumstances.
16
<PAGE> 18
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay or has paid by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability that the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
8. Rule 144 and 144A
Each of the Issuers covenants that it will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the SEC thereunder in a timely manner in accordance
with the requirements of the Securities Act and the Exchange Act and, if at any
time the Issuers are not required to file such reports, it will, upon the
request of any Holder of Registrable Notes, make publicly available annual
reports and such information, documents and other reports of the type specified
in Sections 13 and 15(d) of the Exchange Act. Each of the Issuers further
covenants for so long as any Registrable Notes remain outstanding, to make
available to any Holder or beneficial owner of Registrable Notes in connection
with any sale thereof and any prospective purchaser of such Registrable Notes
from such Holder or beneficial owner the information required by Rule 144A(d)(4)
under the Securities Act in order to permit resales of such Registrable Notes
pursuant to Rule 144A.
9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf Registration are
to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in Aggregate principal amount of such Registrable
Notes included in such offering and reasonably acceptable to the Issuers.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
10. Miscellaneous
(a) No Inconsistent Agreements. None of the Issuers has entered, as of
the date hereof, and none of the Issuers will, after the date of this Agreement,
enter into any agreement with respect to any of its securities that is
inconsistent with the rights granted to the Holders of Registrable Notes in this
Agreement or otherwise conflicts with the provisions hereof. None of the Issuers
has
17
<PAGE> 19
entered and none of the Issuers will enter into any agreement with respect
to any of its securities that will grant to any Person piggyback registration
rights with respect to a Registration Statement.
(b) Adjustments Affecting Registrable Notes. None of the Issuers will,
directly or indirectly, take any action with respect to the Registrable Notes as
a class that would adversely affect the ability of the Holders of Registrable
Notes to include such Registrable Notes in a registration undertaken pursuant to
this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of the Holders of not less than a majority in aggregate principal amount
of the then outstanding Registrable Notes. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders of Registrable Notes whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of other
Holders of Registrable Notes may be given by Holders of at least a majority in
aggregate principal amount of the Registrable Notes being sold by such Holders
pursuant to such Registration Statement; provided, however, that the provisions
of this sentence may not be amended, modified or supplemented except in
accordance with the provisions of the immediately preceding sentence.
(d) Notices. All notices and other communications (including without
limitation any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or facsimile:
1. if to a Holder of the Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture, with a copy in like manner to the Initial
Purchasers as follows:
BT Alex. Brown Incorporated
Chase Securities Inc.
Morgan Stanley & Co. Incorporated
Salomon Smith Barney Inc.
c/o BT Alex. Brown Incorporated
130 Liberty Street
New York, New York
Facsimile No: (212) 250-7200
Attention: Corporate Finance Department
with a copy to:
Latham & Watkins
1001 Pennsylvania Avenue,. N.W.
Suite 1300
Washington, D.C. 20004-2505
Facsimile No: (202) 637-2201
Attention: John D. Watson, Jr., Esq.
2. if to the Initial Purchasers, at the addresses specified in Section
10(d)(1);
18
<PAGE> 20
3. if to the Company, as follows:
Chancellor Media Corporation of Los Angeles
300 Crescent Court
Suite 600
Dallas, Texas 75201
Facsimile No: (214) 922-8701
Attention: Matthew E. Devine, Chief Financial Officer
with copies to:
Weil, Gotshal & Manges LLP
100 Crescent Court
Suite 1300
Dallas, Texas 75201
Facsimile No: (214) 746-7777
Attention: Michael A. Saslaw, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; one business day after
being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties hereto;
provided, however, that this Agreement shall not inure to the benefit of or be
binding upon a successor or assign of a Holder unless and to the extent such
successor or assign holds Registrable Notes.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
(i) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, .provisions, covenants and restrictions without including any of such
that may be hereafter declared invalid, illegal, void or unenforceable.
(j) Notes Held by the Issuers or their Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Issuers or their affiliates
(as such term is defined in Rule 405 under the Securities Act) shall not be
19
<PAGE> 21
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
(g) Third Party Beneficiaries. Holders of Registrable Notes and
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.
(h) Entire Agreement. This Agreement, together with the Purchase
Agreement and the Indenture, is intended by the parties as a final and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein and any and all prior oral or
written agreements, representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda between the Initial Purchasers on
the one hand and the Issuers on the other, or between or among any agents,
representatives, parents, subsidiaries, affiliates, predecessors in interest or
successors in interest with respect to the subject matter hereof and thereof are
merged herein and replaced hereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
THE COMPANY
CHANCELLOR MEDIA CORPORATION OF
LOS ANGELES
By: /s/ OMAR CHOUCAIR
------------------------------------------
Name: Omar Choucair
Title: Vice President and Assistant Secretary
THE GUARANTORS:
On behalf of the Subsidiary Guarantors listed
on Exhibit A hereto:
By: /s/ OMAR CHOUCAIR
------------------------------------------
Name: Omar Choucair
Title: Vice President and Assistant Secretary
20
<PAGE> 22
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above written.
BT ALEX. BROWN INCORPORATED
CHASE SECURITIES INC.
MORGAN STANLEY & Co. INCORPORATED
SALOMON SMITH BARNEY INC.
By: BT ALEX. BROWN INCORPORATED
By: /s/ DAVID T. JACOBS
---------------------------------
Name: David T. Jacobs
Title: Vice President
21
<PAGE> 23
EXHIBIT A
CERTAIN SUBSIDIARIES OF
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
(all subsidiaries are Delaware corporations except as expressly indicated)
1. Chancellor Media Corporation Of The Lone Star State
2. KZPS/KDGE License Corp.
3. Chancellor Media Corporation of California
4. KIOI License Corp.
5. Chancellor Media Corporation of Illinois
6. Chancellor Media Illinois License Corp.
7. Chancellor Media Corporation of Dade County
8. WVCG License Corp.
9. Chancellor Media Corporation of Massachusetts
10. Chancellor Media Pennsylvania License Corp.
11. Chancellor Media Corporation of Miami
12. WEDR License Corp.
13. Chancellor Media of Houston Limited Partnership
14. Chancellor Media Corporation of Houston
15. Chancellor Media Corporation of the Keystone State
16. Chancellor Media Corporation of New York
17. Chancellor Media Corporation of Charlotte
18. WIOQ License Corp.
19. Chancellor Media Corporation of Washington, D.C.
20. Chancellor Media Corporation of St. Louis
21. Chancellor Media Corporation of Michigan
22. Chancellor Media / WAXQ Inc.
23. WAXQ License Corp.
24. Chancellor Media / KCMG Inc.
25. Chancellor Media / Riverside Broadcasting Co., Inc.
26. WLTW License Corp.
27. Chancellor Media Corporation of the Capital City
28. Chancellor Media D.C. License Corp.
29. Chancellor Media Licensee Company
30. Chancellor Media/Trefoil Communications, Inc.
31. Chancellor Media/Shamrock Broadcasting, Inc.
32. Chancellor Media/Shamrock Radio Licenses, Inc.
33. Chancellor Media/Shamrock Broadcasting Licenses of Denver, Inc.
34. Chancellor Media/Shamrock Broadcasting of Texas, Inc (a Texas corporation)
35. Chancellor Media/Shamrock Radio Licenses, LLC
36. Chancellor Media Outdoor Corporation
37. Chancellor Media Nevada Sign Corporation
38. Chancellor Media MW Sign Corporation
39. Chancellor Media Martin Corporation
40. Western Poster Service, Inc. (a Texas corporation)
41. The AMFM Radio Networks, Inc.
42. Chancellor Media Air Services Corporation
43. Chancellor Media Whiteco Outdoor Corporation
<PAGE> 24
44. Chancellor Merger Corp.
45. Broadcast Architecture, Inc. (a Massachusetts corporation)
46. Martin Media (a California limited partnership)
47. Dowling Company Incorporated (a Virginia corporation)
48. Nevada Outdoor Systems, Inc. (a Nevada corporation)
49. MW Sign Corp. (a California corporation)
50. Martin & MacFarlane, Inc. (a California corporation)
51. Katz Media Corporation
52. Katz Communications, Inc.
53. Katz Millennium Marketing, Inc.
54. Amcast Radio Sales, Inc.
55. Christal Radio Sales, Inc.
56. Eastman Radio Sales, Inc.
57. Seltel Inc.
58. Katz Cable Corporation
59. The National Payroll Company, Inc.
60. Chancellor Media Radio Licenses, LLC
61. KLOL License Limited Partnership
62. WTOP License Limited Partnership
63. Radio 100, L.L.C.
64. Revolution Outdoor Advertising, Inc.
65. Hardin Development Corporation
66. Parsons Development Company
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Chancellor Media Corporation of Los Angeles:
We consent to the inclusion in this Registration Statement on Form S-4 of
Chancellor Media Corporation of Los Angeles of our reports dated February 10,
1998, except for Notes 2(b) paragraphs 1 and 3-5 as to which the date is
February 20, 1998 and 9(a) as to which the date is March 13, 1998, on our audits
of the consolidated financial statements and financial statement schedule of
Chancellor Media Corporation of Los Angeles and Subsidiaries as of December 31,
1997 and for the year then ended. We also consent to the reference to our firm
under the captions "Experts".
PRICEWATERHOUSECOOPERS LLP
Dallas, Texas
December 8, 1998
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Chancellor Media Corporation of Los Angeles:
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts."
KPMG Peat Marwick LLP
Dallas, Texas
December 8, 1998
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Chancellor Media Corporation of Los Angeles:
We consent to the inclusion in this Registration Statement on Form S-4 of
Chancellor Media Corporation of Los Angeles of our report 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 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. We also consent to the
reference to our firm under the caption "Experts".
PRICEWATERHOUSECOOPERS LLP
Dallas, Texas
December 8, 1998
<PAGE> 1
EXHIBIT 23.5
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Chancellor Media Corporation of Los Angeles:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts."
KPMG Peat Marwick LLP
St. Petersburg, Florida
December 8, 1998
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Chancellor 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 of Chancellor Media Corporation of Los
Angeles.
Arthur Andersen LLP
Washington, D.C.
December 8, 1998
<PAGE> 1
EXHIBIT 23.7
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Chancellor Media Corporation of Los Angeles:
We hereby consent to the use in the Prospectus constituting a part of Chancellor
Media Corporation of Los Angeles' Registration Statement on Form S-4 of our
report dated September 17, 1998, relating to the financial statements of the
Outdoor Advertising Division of Whiteco Industries, Inc., which are contained in
the Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO Seidman, LLP
Chicago, Illinois
December 8, 1998
<PAGE> 1
EXHIBIT 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------
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.)
Table of Co-Registrants
-----------------------
<TABLE>
<S> <C> <C>
Chancellor Media Corporation of Delaware 99-0248294
the Lone Star State
KZPS/KDGE License Corp. Delaware 75-2449662
Chancellor Media Corporation of Delaware 59-2312787
California
KIOI License Corp. Delaware 75-2449654
Chancellor Media Corporation of Delaware 75-2490925
Illinois
Chancellor Media Illinois License Corp. Delaware 75-2528716
Chancellor Media Corporation of Delaware 59-2312792
Dade County
WVCG License Corp. Delaware 75-2449668
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
Chancellor Media Corporation of Delaware 04-3216274
Massachusetts
Chancellor Media Pennsylvania Delaware 04-3221375
License Corp.
Chancellor Media Corporation of Delaware 04-3216285
Miami
WEDR License Corp. Delaware 04-3216278
Chancellor Media Corporation of Delaware 75-2486577
Houston Limited Partnership
Chancellor Media Corporation of Delaware 75-2486583
Houston
Chancellor Media Corporation of Delaware 04-3221374
the Keystone State
Chancellor Media Corporation of Delaware 54-1475267
New York
Chancellor Media Corporation of Delaware 62-1364794
Charlotte
WIOQ License Corp. Delaware 36-3906002
Chancellor Media Corporation of Delaware 75-2432561
Washington, D.C.
Chancellor Media Corporation of Delaware 75-2449637
St. Louis
Chancellor Media Corporation of Delaware 75-2666017
Michigan
Chancellor Media/WAXQ Inc. Delaware 13-3387794
WAXQ License Corp. Delaware 75-2788524
Chancellor Media/KCMG Inc. Delaware 13-3930133
Chancellor Media/Riverside Delaware 13-2688382
Broadcasting Co., Inc.
WLTW License Corp. Delaware 75-2788528
Chancellor Media Corporation of Delaware 75-2647157
the Capital City
Chancellor Media D.C. License Corp. Delaware 75-2647158
Chancellor Media Licensee Company Delaware 75-2544625
Chancellor Media/Trefoil Communications, Inc. Delaware 95-3278846
Chancellor Media/Shamrock Broadcasting, Inc. Delaware 95-4068583
Chancellor Media/Shamrock Radio Licenses, Inc. Delaware 95-4501833
Chancellor Media/Shamrock Broadcasting Delaware 75-2688376
Licenses of Denver, Inc.
Chancellor Media/Shamrock Broadcasting Texas 71-0527506
of Texas, Inc.
Chancellor Media/Shamrock Radio Licenses, LLC Delaware 75-2779594
Chancellor Media Outdoor Corporation Delaware 75-2779605
Chancellor Media Nevada Sign Corporation Delaware 75-2788530
Chancellor Media MW Sign Corporation Delaware 75-2779602
Chancellor Media Martin Corporation Delaware 75-2779598
Western Poster Service, Inc. Texas 75-2084318
The AMFM Radio Networks, Inc. Delaware 52-2100851
Chancellor Media Air Services Corporation Delaware 75-2771440
Chancellor Media Whiteco Outdoor Corporation Delaware 75-2783296
Chancellor Merger Corp. Delaware 75-2771441
Broadcast Architecture, Inc. Massachusetts 04-3096275
Martin Media California 77-0058488
Dowling Company Incorporated Virginia 54-0787845
Nevada Outdoor Systems, Inc. Nevada 88-0267411
MW Sign Corp. California 95-4334859
</TABLE>
-2-
<PAGE> 3
<TABLE>
<S> <C> <C>
Martin & MacFarlane, Inc. California 95-2743749
Katz Media Corporation Delaware 13-3779266
Katz Communications, Inc. Delaware 13-0904500
Katz Millennium Marketing, Inc. Delaware 13-3894491
Amcast Radio Sales, Inc. Delaware 13-3406436
Christal Radio Sales, Inc. Delaware 13-2618663
Eastman Radio Sales, Inc. Delaware 13-3581043
Seltel Inc. Delaware 06-0963166
Katz Cable Corporation Delaware 13-3814104
The National Payroll Company, Inc. Delaware 13-3744365
Chancellor Media Radio Licenses, LLC Delaware 75-2779589
KLOL License Limited Partnership Delaware 75-2486580
WTOP License Limited Partnership Delaware 75-2528718
Radio 100, L.L.C. Delaware 75-2759570
</TABLE>
300 Crescent Court, Suite 600
Dallas, Texas 75201
(Address of principal executive offices) (Zip code)
----------
9% Senior Subordinated Notes Due 2008
(Title of the indenture securities)
================================================================================
<PAGE> 4
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.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006,
and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-4-
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 17th day of November, 1998.
THE BANK OF NEW YORK
By: /s/THOMAS C. KNIGHT
----------------------------------
Name: THOMAS C. KNIGHT
Title: ASSISTANT VICE PRESIDENT
