<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 22, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
(Exact name of registrant as specified in its charter)
---------------------
<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)
MATTHEW E. DEVINE
CHIEF FINANCIAL OFFICER
433 EAST LAS COLINAS BOULEVARD 433 EAST LAS COLINAS BOULEVARD
IRVING, TEXAS 75039 IRVING, TEXAS 75039
(972) 869-9020 (972) 869-9020
(Address, including zip code, and telephone number, (Name, address, including zip code, telephone
including area code, of registrant's principal executive offices) number, including area code, of agent for service)
</TABLE>
---------------------
Copies to
JOHN D. WATSON, JR., ESQ.
MARK D. SPOTO, ESQ.
MONETTE P. DAWSON, ESQ.
LATHAM & WATKINS
1001 PENNSYLVANIA AVENUE, N.W., SUITE 1300
WASHINGTON, D.C. 20004-2505
(202) 637-2200
---------------------
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 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. [ ]
------------------
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. [ ]
------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=======================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SHARES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED NOTE PRICE(1) REGISTRATION FEE(1)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8 1/8% Senior Subordinated Notes Due
2007, Series B....................... $500,000,000 100% $500,000,000 $147,500.00
- -----------------------------------------------------------------------------------------------------------------------
Guarantees of the 8 1/8% Senior
Subordinated Notes due 2007, Series
B(2)................................. N/A N/A N/A N/A
=======================================================================================================================
</TABLE>
(1) The registration fee has been calculated pursuant to Rule 457(a) and Rule
457(f)(2) under the Securities Act of 1933, as amended. The Proposed Maximum
Aggregate Offering Price is estimated solely for the purpose of calculating
the registration fee.
(2) Represents the guarantees of the 8 1/8% Senior Subordinated Notes due 2007,
Series B to be issued by the Co-Registrants. Pursuant to Rule 457(n), no
additional registration fee is being paid in respect of the guarantees. The
guarantees are not traded separately.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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>
PRIMARY STANDARD IRS
STATE OR OTHER INDUSTRIAL EMPLOYER
JURISDICTION OF CLASSIFICATION IDENTIFICATION
NAME INCORPORATION 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 the Bay Area...... Delaware 4832 59-2312787
KIOI License Corp................................. Delaware 4832 75-2449654
Chancellor Media Corporation of Illinois.......... Delaware 4832 75-2490925
WRCX License Corp................................. Delaware 4832 75-2528716
Chancellor Media Corporation of Chicago AM........ Delaware 4832 59-2412802
WMVP-AM License Corp.............................. Delaware 4832 75-2449660
Chancellor Media Corporation of Dade County....... Delaware 4832 59-2312792
WVCG License Corp................................. Delaware 4832 75-2449668
Chancellor Media/Pyramid Corporation.............. Delaware 4832 04-3221315
Chancellor Media/Pyramid Holdings Corporation..... Delaware 4832 04-3221316
Broadcast Architecture, Inc....................... Massachusetts 4832 04-3096275
Chancellor Media Corporation of Massachusetts..... Delaware 4832 04-3216274
WJMN License Corp................................. Delaware 4832 04-3216272
Chancellor Media Corporation of the Nation's
Capital......................................... Delaware 4832 75-2699485
WWRC License Corp................................. Delaware 4832 75-2697127
Chancellor Media Partners Corporation............. Delaware 4832 13-3467127
Chancellor Media Corporation of Gotham............ Delaware 4832 36-3905992
Chancellor Media Corporation of New York.......... Delaware 4832 54-1475267
WYNY License Corp................................. Delaware 4832 36-3906005
Chancellor Media Corporation of Detroit........... Delaware 4832 36-2826680
WKQI/WDOZ/WNIC License Corp....................... Delaware 4832 36-3906004
Chancellor Media Corporation of Chicagoland....... Delaware 4832 36-3604824
WEJM/WEJM-FM/WVAZ License Corp.................... Delaware 4832 36-3905998
Chancellor Media Corporation of Charlotte......... Delaware 4832 62-1364794
WIOQ License Corp................................. Delaware 4832 36-3906002
Chancellor Media Corporation of Dallas............ Delaware 4832 75-2245927
KSKY License Corp................................. Delaware 4832 36-3906008
Chancellor Media Corporation of San Francisco..... Delaware 4832 75-2449639
KMEL License Corp................................. Delaware 4832 75-2449650
Chancellor Media Corporation of Houston........... Delaware 4832 75-2486583
Chancellor Media of Houston Limited Partnership... Delaware 4832 75-2486577
KLOL License Limited Partnership.................. Delaware 4832 75-2486580
Chancellor Media Corporation of Tiburon........... Delaware 4832 75-2674715
KKSF License Corp................................. Delaware 4832 75-2674717
Chancellor Media Corporation of Washington,
D.C............................................. Delaware 4832 75-243256
Chancellor Media Corporation of St. Louis......... Delaware 4832 75-2449637
WTOP License Limited Partnership.................. Delaware 4832 75-2528718
Chancellor Media Corporation of the Motor City.... Delaware 4832 75-2666019
WJLB License Corp................................. Delaware 4832 75-2666024
Chancellor Media Corporation of Michigan.......... Delaware 4832 75-2666017
WMXD License Corp................................. Delaware 4832 75-2666023
Chancellor Media/WAXQ Inc......................... Delaware 4832 13-3387794
WAXQ License Corp................................. Delaware 4832 N/A
Chancellor Media/WMZQ Inc......................... Delaware 4832 04-2981015
WMZQ License Corp................................. Delaware 4832 N/A
</TABLE>
<PAGE> 3
TABLE OF CO-REGISTRANTS -- (CONTINUED)
<TABLE>
<CAPTION>
PRIMARY STANDARD IRS
STATE OR OTHER INDUSTRIAL EMPLOYER
JURISDICTION OF CLASSIFICATION IDENTIFICATION
NAME INCORPORATION CODE NUMBER NUMBER
---- --------------- ---------------- --------------
<S> <C> <C> <C>
Chancellor Media Corporation of the Liberty
City............................................ Delaware 4832 75-2674728
WDAS (FM) License Corp............................ Delaware 4832 75-2674731
WDAS (AM) License Corp............................ Delaware 4832 75-2674729
Chancellor Media/Riverside Broadcasting Co.
Inc............................................. Delaware 4832 13-2688382
WLTW License Corp................................. Delaware 4832 N/A
Chancellor Media Corporation of the Great Lakes... Delaware 4832 75-2674722
WWWW/WDFN License Corp............................ Delaware 4832 75-2674723
Chancellor Media Corporation of the Capital
City............................................ Delaware 4832 75-2647157
WGAY 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 of Texas,
Inc............................................. Texas 4832 71-0527506
Chancellor Media/Shamrock Broadcasting Licenses of
Denver, Inc..................................... Delaware 4832 75-2688376
Chancellor Media/KCMG Inc......................... Delaware 4832 13-3930133
Chancellor Media/KYSR Inc......................... Delaware 4832 13-3547704
Chancellor Media/WLIT Inc......................... Delaware 4832 13-3930134
Radio 100 L.L.C................................... Delaware 4832 N/A
Chancellor Media Corporation of Pennsylvania...... Delaware 4832 04-3216281
WJJZ License Corp................................. Delaware 4832 04-3216283
Chancellor Media Corporation of Miami............. Delaware 4832 04-3216285
WEDR License Corp................................. Delaware 4832 04-3216278
Chancellor Media Corporation of Boston............ Delaware 4832 04-3221317
WXKS (AM) License Corp............................ Delaware 4832 04-3221319
WXKS (FM) License Corp............................ Delaware 4832 04-3221318
Chancellor Media Corporation of the Windy City.... Delaware 4832 04-3221712
WNUA License Corp................................. Delaware 4832 04-3221714
Chancellor Media Corporation of Philadelphia...... Delaware 4832 04-3221716
Chancellor Media Corporation of the Keystone
State........................................... Delaware 4832 04-3221374
WYXR License Corp................................. Delaware 4832 04-3221718
WUSL License Corp................................. Delaware 4832 04-3221375
KKBT License Corp................................. Delaware 4832 75-2449648
Katz Media Corporation............................ Delaware 7319 13-3779266
Katz Cable Corporation............................ Delaware 7319 13-3814104
Seltel Inc........................................ Delaware 7319 06-0963166
The National Payroll Company, Inc................. Delaware 7319 13-3744365
Katz Communications, Inc.......................... Delaware 7319 13-0904500
Eastman Radio Sales, Inc.......................... Delaware 7319 13-3581043
Christal Radio Sales, Inc......................... Delaware 7319 13-2618663
Amcast Radio Sales, Inc........................... Delaware 7319 13-3406436
Katz Millennium Marketing, Inc.................... Delaware 7319 13-3894491
</TABLE>
<PAGE> 4
THIS PROSPECTUS AND THE INFORMATION CONTAINED HEREIN ARE SUBJECT TO CHANGE,
COMPLETION OR AMENDMENT WITHOUT NOTICE. THESE SECURITIES MAY NOT BE SOLD NOR MAY
AN OFFER TO BUY BE ACCEPTED PRIOR TO THE TIME THIS PROSPECTUS IS DELIVERED IN
FINAL FORM. UNDER NO CIRCUMSTANCES SHALL THIS PROSPECTUS CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH JURISDICTION.
SUBJECT TO COMPLETION, DATED APRIL 22, 1998
PROSPECTUS
OFFER TO EXCHANGE
8 1/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B FOR ALL OUTSTANDING
8 1/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES A
OF
CHANCELLOR MEDIA CORPORATION
OF LOS ANGELES
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1998, UNLESS EXTENDED
------------------------------
Chancellor Media Corporation of Los Angeles ("CMCLA", and together with its
subsidiaries, the "Company") hereby offers (the "Exchange Offer"), upon the
terms and subject to the conditions set forth in this Prospectus and the
accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange
its outstanding 8 1/8% Senior Subordinated Notes due 2007, Series A (the
"Original Notes"), of which an aggregate of $500,000,000 in principal amount is
outstanding as of the date hereof, for an equal principal amount of newly issued
8 1/8% Senior Subordinated Notes due 2007, Series B (the "Exchange Notes"). The
Original Notes were issued on December 22, 1997 (the "Offering") by the Company.
The form and terms of the Exchange Notes will be the same as the form and terms
of the Original Notes except that (i) the Exchange Notes will be registered
under the Securities Act of 1933, as amended (the "Securities Act") and hence
will not bear legends restricting the transfer thereof; and (ii) the holders of
the Exchange Notes will not be entitled to certain rights of the holders of
Original Notes under the Registration Rights Agreement, which rights will
terminate upon the consummation of the Exchange Offer. The Exchange Notes will
evidence the same debt as the Original Notes and will be entitled to the
benefits of an indenture dated as of December 22, 1997, governing the Original
Notes and the Exchange Notes (the "Indenture"). The Indenture provides for the
issuance of both the Exchange Notes and the Original Notes. The Exchange Notes
and the Original Notes are sometimes referred to herein collectively as the
"Notes".
The Exchange Notes will mature on December 15, 2007. Interest on the
Exchange Notes will be payable semi-annually on each June 15 and December 15
commencing June 15, 1998, at the rate of 8 1/8% per annum. The Exchange Notes
will be redeemable, in whole or in part, at the option of the Company, on or
after December 15, 2002 at the redemption prices set forth herein, plus accrued
and unpaid interest, if any, to the date of redemption. In addition, on or prior
to December 15, 2000, the Company may, at its option, redeem the Exchange Notes,
in part, with the net cash proceeds of one or more Public Equity Offerings (as
defined), 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 the Notes outstanding must
equal at least 65% of the aggregate principal amount of the Notes originally
issued in the Offering.
The Exchange Notes will be general unsecured obligations of the Company and
will rank pari passu in right of payment to the Company's 9 3/8% Senior
Subordinated Notes due 2004 (the "9 3/8% Notes"), the Company's 8 3/4% Senior
Subordinated Notes due 2007 (the "8 3/4% Notes") and the Company's 10 1/2%
Senior Subordinated Notes due 2007 (the "10 1/2% Notes"), and will be
subordinated in right of payment to all existing and future Senior Debt (as
defined) of the Company. As of December 31, 1997, on a pro forma basis after
giving effect to the Completed Transactions (as defined) completed after such
date, the offering (the "1998 Equity Offering") on March 13, 1998 by Chancellor
Media Corporation ("Chancellor Media") of 21,850,000 shares of its common stock
and the contribution of the net proceeds therefrom to the Company and the
proposed Preferred Stock Repurchase (as defined), but without giving effect to
the Company's Pending Transactions (as defined), approximately $1.08 billion of
Senior Debt and $500.0 million of debt ranking pari passu to the Exchange Notes
would have been outstanding. The Exchange Notes will be fully and
unconditionally guaranteed on a senior subordinated basis by substantially all
of the Company's direct and indirect subsidiaries (the "Guarantors").
Upon a Change of Control (as defined), (i) the Company will have the option,
at any time on or prior to December 15, 2000, to redeem the Exchange 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), together with accrued
and unpaid interest, if any, to the date of redemption, and (ii) if the Company
does not so redeem the Exchange Notes or if such Change of Control occurs after
December 15, 2000, each holder will have the right to require the Company to
repurchase such holder's Exchange Notes at a price equal to 101% of their
principal amount, plus accrued and unpaid interest to the date of repurchase. In
addition, the Company will be obligated to offer to repurchase the Exchange
Notes at 100% of their principal amount, plus accrued and unpaid interest, if
any, to the date of repurchase, in the event of certain asset sales. See
"Description of the Exchange Notes."
(Continued on next page)
------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN
FACTORS WHICH HOLDERS OF ORIGINAL NOTES AND PROSPECTIVE PURCHASERS OF EXCHANGE
NOTES SHOULD CONSIDER IN CONNECTION WITH THIS EXCHANGE OFFER.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE> 5
(Continued from previous page)
The Original Notes are eligible for trading in the Private Offerings,
Resales and Trading through Automatic Linkages market (the "PORTAL" Market) of
the National Association of Securities Dealers, Inc. Prior to this Exchange
Offer, there has been no public market for the Exchange Notes. If a market for
the Exchange Notes develops, the Exchange Notes could trade at a discount from
their principal amount. The Company does not intend to list the Exchange Notes
on any securities exchange or to seek approval for quotation on any automated
quotation system. There can be no assurance that an active public market for the
Exchange Notes will develop. See "Risk Factors -- Absence of Public Market for
the Exchange Notes."
The Company will accept for exchange any and all validly tendered Original
Notes on or prior to 5:00 p.m., New York City time, on , 1998 (if
and as extended, the "Expiration Date"). Tenders of Original Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date. The Exchange Offer is not conditioned upon any minimum principal amount of
notes being tendered for exchange. The Original Notes may be tendered only in
integral multiples of $1,000. In the event the Company terminates the Exchange
Offer and does not accept for exchange any Original Notes, the Company will
promptly return all previously tendered Original Notes to the holders thereof.
The Original Notes were originally issued and sold on December 22, 1997 in
a transaction not registered under the Securities Act in reliance upon the
exemptions provided by Rule 144A and Regulation S of the Securities Act (the
"Offering"). Accordingly, the Original Notes may not be reoffered, resold or
otherwise pledged, hypothecated or transferred in the United States unless so
registered or unless an applicable exemption from the registration requirements
of the Securities Act is available. Based upon interpretations by the staff (the
"Staff") of the Securities and Exchange Commission (the "Commission") set forth
in no-action letters issued to third parties, the Company believes that the
Exchange Notes issued pursuant to the Exchange Offer in exchange for the
Original Notes may be offered for resale, resold and otherwise transferred by
holders thereof (other than any such holder which is (i) an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act, (ii) a
broker-dealer who acquired the Original Notes directly from the Company or (iii)
a broker-dealer who acquired the Original Notes as a result of market making or
other trading activities) without compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business and
such holder is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a distribution
of such Exchange Notes. Each broker-dealer that receives the Exchange Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. The
Letter of Transmittal states that by so acknowledging 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. Broker-dealers who
acquired Original Notes as a result of market making or other trading activities
may use this Prospectus, as supplemented or amended, in connection with resales
of the Exchange Notes. The Company has agreed that, for a period not to exceed
180 days after the Expiration Date, it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution." Any holder that cannot rely upon such interpretations must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction.
Any Original Notes not tendered and accepted in the Exchange Offer will
remain outstanding. To the extent that Original Notes are tendered and accepted
in the Exchange Offer, a holder's ability to sell untendered, or tendered but
unaccepted, Original Notes could be adversely affected. Following consummation
of the Exchange Offer, the holders of Original Notes will continue to be subject
to the existing restrictions on transfer thereof and the Company will have no
further obligation to such holders to provide for the registration under the
Securities Act of the Original Notes except under certain limited circumstances.
No assurance can be given as to the liquidity of the trading market for either
the Original Notes or the Exchange Notes.
The Company will not receive any proceeds from, and has agreed to bear the
expense of, this Exchange Offer. No underwriter is being used in connection with
this Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF THE ORIGINAL NOTES IN ANY JURISDICTION
IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
---------------------
ii
<PAGE> 6
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THIS EXCHANGE OFFER COVERED BY THIS PROSPECTUS OR THE
ACCOMPANYING LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL DO NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH AN
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE
ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF.
THIS PROSPECTUS (THIS "PROSPECTUS") IS BEING FURNISHED BY THE COMPANY IN
CONNECTION WITH AN EXCHANGE OFFER SOLELY FOR THE PURPOSE OF ENABLING A
PROSPECTIVE INVESTOR TO CONSIDER PARTICIPATING IN THE EXCHANGE OF THE ORIGINAL
NOTES FOR EXCHANGE NOTES. THE INFORMATION CONTAINED HEREIN HAS BEEN PROVIDED BY
THE COMPANY AND OTHER SOURCES IDENTIFIED HEREIN. NO REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, IS MADE AS TO THE ACCURACY OR COMPLETENESS OF SUCH
INFORMATION, AND NOTHING CONTAINED HEREIN IS, OR SHALL BE RELIED UPON AS, A
PROMISE OR REPRESENTATION.
EACH PROSPECTIVE INVESTOR MUST COMPLY WITH ALL APPLICABLE LAWS AND
REGULATIONS IN FORCE IN ANY JURISDICTION IN CONNECTION WITH THE DISTRIBUTION OF
THIS PROSPECTUS AND THE OFFER OR SALE OF THE EXCHANGE NOTES. IN MAKING AN
INVESTMENT DECISION, PROSPECTIVE INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE COMPANY AND THE TERMS OF THIS EXCHANGE OFFER, INCLUDING THE MERITS AND RISKS
INVOLVED. THE CONTENTS OF THIS PROSPECTUS ARE NOT TO BE CONSTRUED AS LEGAL,
BUSINESS OR TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT HIS, HER OR
THEIR OWN ATTORNEY, BUSINESS ADVISOR AND/OR TAX ADVISOR FOR LEGAL, BUSINESS OR
TAX ADVICE.
ALL APPLICABLE PROVISIONS OF THE FINANCIAL SERVICES ACT OF 1986 MUST BE
COMPLIED WITH IN RESPECT TO ANYTHING DONE IN RELATION TO THE EXCHANGE NOTES IN,
FROM OR OTHERWISE INVOLVING THE UNITED KINGDOM.
THE EXCHANGE NOTES OFFERED HEREBY HAVE NOT BEEN RECOMMENDED BY ANY UNITED
STATES FEDERAL OR STATE SECURITIES COMMISSION OR ANY FOREIGN SECURITIES
COMMISSION OR ANY REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES
HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------------
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES
("RSA 421-B") WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS
EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE
CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER
RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE
FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION
MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR
QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR
TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE
PURCHASER,
iii
<PAGE> 7
CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS
PARAGRAPH.
NOTICE TO CANADIAN RESIDENTS
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Prospective Canadian holders of Exchange Notes should consult their own
legal and tax advisers with respect to the tax consequences of an investment in
the Exchange Notes in their particular circumstances and with respect to the
eligibility of the Exchange Notes for investment by the purchaser under relevant
Canadian legislation.
---------------------------
iv
<PAGE> 8
AVAILABLE INFORMATION
The Company and the Guarantors have filed with the Commission a
Registration Statement on Form S-4 (the "Registration Statement") under the
Securities Act with respect to the Exchange Offer. As permitted by the rules and
regulations of the Commission, this Prospectus omits certain information,
exhibits and undertakings contained in the Registration Statement. For further
information with respect to the Company, the Guarantors and this Exchange Offer,
reference is made to the Registration Statement, including the exhibits thereto
and the financial statements, notes and schedules filed as a part thereof.
The Company and Chancellor Media Corporation, the Company's indirect parent
corporation ("Chancellor Media"), are each subject to the informational
requirements of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), and in accordance therewith, file reports, proxy materials and
other information with the Commission. The reports, proxy materials and other
information filed by each of the Company and Chancellor Media with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Regional Offices of the Commission at Seven World Trade Center, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials also can be obtained from the
Public Reference Section of the Commission, Washington, D.C. 20549 at prescribed
rates. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov. The Indenture requires the Company to file with the
Commission and provide to holders of the Exchange Notes copies of the reports
and other information filed by the Company with the Commission pursuant to
Sections 13 or 15(d) under the Exchange Act. 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 Exchange Notes. See
"Description of the Exchange Notes -- Reports."
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<PAGE> 9
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus and in documents incorporated by reference herein.
As used herein, unless the context otherwise requires, the term "Company" refers
to Chancellor Media Corporation of Los Angeles and its subsidiaries. All share
and per share data in this Prospectus give effect to the Company's two-for-one
common stock split effected in the form of a stock dividend, paid on January 12,
1998 to stockholders of record at the close of business on December 29, 1997.
THE COMPANY
The Company is one of the largest radio broadcasting companies in the
United States. Upon consummation of the Pending Transactions (as defined), the
Company will own and operate 108 radio stations (79 FM and 29 AM) in 22 large
markets, including each of the nation's 12 largest radio revenue markets. Based
on the most recent industry data available to the Company, the Company's
portfolio will include the first or second ranked station cluster in terms of
revenue share in 15 markets. On a pro forma basis after giving effect to the
Completed Transactions (as defined), financing transactions undertaken by the
Company and Chancellor Radio Broadcasting Company ("CRBC") during 1997
(including the Offering), the contribution to the Company from Chancellor Media
of the net proceeds from the 1998 Equity Offering and the proposed Preferred
Stock Repurchase (as defined), but without giving effect to the Pending
Transactions, the Company would have had net revenue and broadcast cash flow (as
defined) of approximately $1.0 billion and $431.6 million, respectively, for the
year ended December 31, 1997, its pro forma broadcast cash flow margin for such
period would have been 43%, and approximately 64% of pro forma net revenue for
such period would have been generated by markets in which the Company owns four
or five FM stations ("superduopolies").
The Company's strategy is to secure leading clusters of radio stations in
the markets in which it operates. The Company's current station portfolio
consists of 97 stations (70 FM and 27 AM), including a total of 11
superduopolies in seven of the nation's 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. Consummation of the Pending Transactions will result in a
net increase of nine FM stations and two AM stations and will add the San Diego
market to the Company's portfolio. In addition, consummation of the Pending
Transactions will increase the number of superduopolies in the Company's station
portfolio to 14, including two new superduopolies in the nation's 12 largest
radio markets -- Dallas/Ft. Worth and Houston -- and one in another large
market -- Pittsburgh. See "Recent Developments -- Pending Transactions."
As a complement to its radio broadcasting operations, the Company has
recently 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 Broadcasting Corporation ("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 base of approximately 62 million listeners
(including approximately 45 million listeners from the Company's portfolio of
stations) to network advertisers.
The Company's portfolio is geographically diversified and employs a wide
variety of programming formats, including adult contemporary, contemporary hit
radio, urban, jazz, country, oldies, news/talk, rock and sports. Each of the
Company's stations targets a specific demographic audience within a market, with
the majority of the stations appealing primarily to 18 to 34 or 25 to 54 year
old men and/or women, the demographic groups most sought after by advertisers.
Management believes that, because of the size and diversity of its station
portfolio, 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 12% of the Company's pro forma broadcast cash flow for the year ended
December 31, 1997 (giving effect to the Completed Transactions, but without
giving effect to the Pending Transactions).
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The Company also owns Katz Media Group, Inc. ("KMG" and, together with its
operating subsidiaries, "Katz"), a full-service media representation firm
serving multiple types of electronic media, with a leading market share in the
representation of radio and 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 Company, formerly known as "Evergreen Media Corporation of Los Angeles"
("EMCLA"), was renamed Chancellor Media Corporation of Los Angeles in connection
with the merger on September 5, 1997 of Evergreen and Chancellor Broadcasting
Company ("Chancellor") and certain of their respective subsidiaries (the
"Chancellor Merger"). The Company's principal executive office is located at 433
East Las Colinas Boulevard, Suite 1130, Irving, Texas 75039, and its telephone
number is (972) 869-9020.
BUSINESS STRATEGY
The Company's senior management team has extensive experience in acquiring
and operating large radio station groups. The Company's business strategy
historically has been to assemble and operate radio station clusters in order to
maximize broadcast cash flow generated in each market. This strategy relies on
the following six key elements.
Create Large Market Superduopolies. The Company seeks to be the owner and
operator of the leading superduopoly in the largest markets in the United
States. Management believes that the large revenue base in these markets, in
conjunction with operating synergies achievable through the operation of
multiple stations, enable it to appeal to a wider universe of national and local
advertisers and to achieve a greater degree of profitability. The Pending
Transactions, if consummated, will complement the Company's existing stations in
the Dallas, Houston, Washington, D.C. and Pittsburgh markets as well as allow
the Company to expand into a new large market -- San Diego. The Company expects
to continue to selectively pursue acquisition opportunities in the major markets
in which it competes as well as in other markets.
Maximize Superduopoly Revenue and Expense Synergies. The Company seeks to
capitalize on the revenue growth and expense savings opportunities of
superduopolies. Superduopolies have only been permissible since the passage of
the Telecommunications Act of 1996 (the "1996 Act"). Management believes that
substantial benefits can be derived from the successful integration of these
station cluster groups. Management also believes that radio station clusters can
attract increased revenues in a market by delivering larger combined audiences
to advertisers and by engaging in joint marketing and promotional activities. In
addition, management expects to realize significant expense savings through the
consolidation of facilities and through the economies of scale created in areas
such as national representation commissions, employee benefits, insurance
premiums and other operating costs.
Establish Strong Listener Loyalty. Management believes that strong
listener familiarity with a given radio station produces listener loyalty.
Management seeks to establish this familiarity through a variety of programming
and marketing techniques, including the development of high-profile on-air
personalities and creative station-sponsored promotional events, all of which
are designed to secure heightened listener awareness. The Company also conducts
extensive market research to help identify programming format opportunities and
attract new listeners, as has been the case with WKTU-FM in New York. After
operating WKTU-FM for nine months under the call letters and country music
format inherited from a prior operator, in February 1996 the Company began to
operate WKTU-FM as a rhythmic contemporary hits station. According to Arbitron,
WKTU-FM was ranked eleventh in its target demographic group as a country
station, and was ranked first in several key demographic groups (including its
target demographic group) in the first full ranking period after the station
changed its format. The station has continued to rank among the top five
stations in its target demographic group in subsequent periods. Management
believes that institutionalizing its radio stations in their markets through
programming, marketing and research ensures steady long-term audience share
ratings.
Maintain Strict Cost Controls. Management maintains a company-wide focus
on cost controls in an effort to maximize broadcast cash flow margins.
Management reviews station spending on a monthly basis. In
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<PAGE> 11
addition, corporate level employees maintain weekly sales reporting systems
designed to enable management to evaluate station performance on a current
basis. The Company's focus on maximizing superduopoly revenues and maintaining
cost controls is reflected by the fact that, during 1995, 1996 and 1997, the
Company has achieved broadcast cash flow margins of 40% or more. The Company
also carefully monitors capital expenditures.
Develop Experienced, Incentivized Management Team. The Company believes
that management depth is critical to achieving superior operating performance in
a portfolio as large as the Company's. The Company's senior management team
collectively has an aggregate of more than 45 years of radio industry operating
experience. This senior management team is supported by an experienced team of
veteran group operators and station general managers. At the station level, the
Company seeks to incentivize its individual radio station managers and sales
forces to outperform revenue and broadcast cash flow budget expectations by
granting quarterly and annual performance measurement-based bonuses. The Company
believes that the incentives it offers to its employees, as well as its stature
in the radio industry, will enable it to continue to be successful in recruiting
top industry employees.
Maximize Free Cash Flow. By emphasizing the revenue and expense synergies
achievable through the assembly and operation of superduopolies and by carefully
monitoring operating costs, the Company seeks to maximize broadcast cash flow
and, ultimately, after tax cash flow (broadcast cash flow less corporate general
and administrative expenses, debt service, tax payments and dividend
requirements). This focus on after tax cash flow should facilitate reduction of
leverage without undue dependence on capital markets and position the Company to
pursue attractive acquisitions.
Related Business Expansion. In addition to the foregoing six key elements,
the Company seeks to further leverage its radio expertise and expand into
industries related to the operation of radio stations. In this regard, the
Company formed a national radio network, The AMFM Radio Networks, in September
1997 and acquired Katz, a full-service media representation firm in October
1997. The Company has also recently begun exploring the acquisition of
additional complementary media businesses, particularly businesses with
significant after tax cash flow generating potential, including radio stations
in medium-sized markets, television, outdoor advertising, and similar
international media opportunities.
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<PAGE> 12
RECENT DEVELOPMENTS
For a further discussion of the transactions described below, see
"Business" and "Pro Forma Financial Information."
THE AMFM RADIO NETWORKS
- - In September 1997, the Company announced the formation of a national radio
network, The AMFM Radio Networks, and the appointment of David Kantor to the
position of Senior Vice President with responsibility for all of the
Company's radio network operations. Prior to joining the Company, Mr. Kantor
served as President of ABC Radio Networks, the largest commercial radio
network in the United States. The AMFM Radio Networks began broadcasting
advertising over the Company's portfolio of stations and stations by Capstar
in January 1998. Management believes that the network will allow the Company
to further leverage this broad station base, personalities and advertising
inventory by delivering a national base of approximately 62 million
listeners (including approximately 45 million listeners from the Company's
portfolio of stations) to network advertisers. See "Risk Factors --
Integration of Operations; Operation of Katz and Radio Network."
COMPLETED TRANSACTIONS
- - Since January 1, 1997, the Company has completed (i) the Chancellor Merger
(as defined), which added 52 radio stations (36 FM and 16 AM) to the
Company's portfolio of stations, for a net purchase price of approximately
$2.0 billion, (ii) the acquisition of 23 radio stations for a net purchase
price of approximately $1.5 billion, (iii) the exchange of ten stations and
$66.5 million in cash for eight stations and $9.5 million in cash, (iv) the
sale or other disposition of 10 radio stations for $269.3 million in cash
and a promissory note for $18.0 million and (v) the acquisition of Katz, a
full service media representation firm, for a net purchase price of
approximately $379.1 million. These transactions, together with the
acquisitions and dispositions completed by the Company during 1996 and
acquisitions and dispositions completed by Chancellor during 1996 and 1997,
are referred to herein as the "Completed Transactions."
PENDING TRANSACTIONS
- - CAPITOL BROADCASTING ACQUISITION. 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 $72.0 million in cash (including
$4.0 million paid by the Company in escrow), plus an amount equal to the
value assigned to certain accounts receivable for the stations (the "Capitol
Broadcasting Acquisition"). Although there can be no assurance, the Company
expects that the Capitol Broadcasting Acquisition will be consummated in the
second quarter of 1998.
- - CAPSTAR TRANSACTION. On February 20, 1998, the Company entered into an
agreement to acquire from Capstar 11 radio stations in Dallas/Ft. Worth,
Houston, San Diego and Pittsburgh (the "Capstar/SFX Stations") for an
aggregate purchase price of approximately $637.5 million (the "Capstar
Transaction"). The Capstar/SFX Stations are presently owned by SFX
Broadcasting, Inc. ("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 Company would exchange its
two Jacksonville stations (valued for purposes of the Capstar Transaction at
$53.0 million) plus $90.3 million in cash for one of the Capstar/SFX
Stations in Houston. The Company would pay approximately $494.3 million 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 $250.0
million (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
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<PAGE> 13
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 $650.0 million 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, controls
Capstar, and certain directors of the Company are directors and/or executive
officers of Capstar and/or Hicks Muse. Capstar has informed the Company that
Capstar expects that the Capstar/SFX Acquisition will be consummated in the
second quarter of 1998.
- - PETRY ACQUISITION. On April 8, 1998, the Company entered into an agreement
to acquire Petry Media Corporation ("Petry"), a leading independent
television representation firm, for approximately $150.0 million in cash
(the "Petry Acquisition"). Although there can be no assurance, the Company
expects that the Petry Acquisition will be consummated in the third or
fourth quarter of 1998.
The foregoing transactions are referred to herein as the "Pending
Transactions." Upon the consummation of the Pending Transactions, the Company's
portfolio will consist of 108 radio stations (79 FM and 29 AM).
CHANGES IN EXECUTIVE MANAGEMENT
On April 14, 1998, Scott K. Ginsburg resigned as President and Chief
Executive Officer of Chancellor Media, Chancellor Mezzanine Holdings Corporation
("CMHC") and the Company, and on April 20, 1998, Mr. Ginsburg resigned as a
director of Chancellor Media, CMHC and the Company and from all positions held
with their respective subsidiaries. Thomas O. Hicks, Chairman of the Board of
Chancellor Media, CMHC and the Company, is serving as Chief Executive Officer of
Chancellor Media, CMHC and the Company on an interim basis.
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<PAGE> 14
THE EXCHANGE OFFER
The Exchange Offer......... The Company is offering to exchange up to $500.0
million aggregate principal amount of Exchange
Notes for a like principal amount of Original
Notes. The Exchange Notes may be exchanged only in
multiples of $1,000 principal amount. The Company
will issue the Exchange Notes on or promptly after
the Expiration Date. See "The Exchange Offer."
Based on interpretations by the Staff of the
Commission set forth in no-action letters issued to
third parties, the Company believes that the
Exchange Notes issued pursuant to the Exchange
Offer in exchange for the Original Notes may be
offered for resale, resold and otherwise
transferred by any holder thereof (other than any
such holder which is (i) an "affiliate" of the
Company within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who acquired
the Original Notes directly from the Company or
(iii) a broker-dealer who acquired the Original
Notes as a result of market making or other trading
activities) without compliance with the
registration and prospectus delivery requirements
of the Securities Act, provided that such Exchange
Notes are acquired in the ordinary course of such
holder's business and such holder is not engaged
in, and does not intend to engage in, and has no
arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes. Each broker-dealer that receives the
Exchange Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale
of such Exchange Notes. See "Plan of Distribution."
To comply with the securities laws of certain
jurisdictions, it may be necessary to qualify for
sale or register the Exchange Notes prior to
offering or selling such Exchange Notes. If a
holder of Original Notes does not exchange such
Original Notes pursuant to the Exchange Offer, such
Original Notes will continue to be subject to the
restrictions on transfer contained in the legend
thereon. In general, the Original Notes may not be
offered or sold, unless registered under the
Securities Act, except pursuant to an exemption
from, or in a transaction not subject to the
Securities Act and applicable state securities
laws. See "The Exchange Offer -- Consequences of
Failure to Exchange" and "Description of Exchange
Notes".
Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1998 unless
extended in which case the term "Expiration Date"
shall mean the latest date and time to which the
Exchange Offer is so extended.
Conditions to the Exchange
Offer.................... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company in
whole or in part and from time to time in its sole
discretion. See "The Exchange Offer -- Certain
Conditions to the Exchange Offer." The Exchange
Offer is not conditioned upon any minimum aggregate
principal amount of Original Notes being tendered
for exchange.
Procedures for Tendering
the Original Notes......... Each registered holder of Original Notes (a
"Registered Holder") wishing to tender such
Original Notes in the Exchange Offer must complete,
sign and date the Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein, and
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<PAGE> 15
mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with such
Original Notes and any other required
documentation, to the Exchange Agent at the address
set forth herein. By executing the Letter of
Transmittal, each holder of the Original Notes
(other than Participating Broker-Dealers (as
defined)) must represent to the Company that, among
other things, (i) the Exchange Notes to be acquired
pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person
receiving such Exchange Notes, whether or not the
holder of the Original Notes, (ii) neither the
holder of the Original Notes nor any such other
person has an arrangement or understanding with any
person to participate in the distribution of such
Original Notes and (iii) neither the holder nor any
such person is an "affiliate," as defined in Rule
405 under the Securities Act, of the Company. Each
Registered Holder whose Original Notes are held
through DTC (as defined) and wishes to participate
in the Exchange Offer may do so through DTC's
Automated Tender Offer Program ("ATOP") by which
each tendering participant will agree to be bound
by the Letter of Transmittal. Any Original Notes
not accepted for exchange for any reason will be
returned without expense to the tendering holder
thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
See "The Exchange Offer -- Procedures for
Tendering Original Notes."
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Original Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender such Original Notes should
contact such Registered Holder promptly and
instruct such Registered Holder to tender on such
beneficial owner's behalf. If such beneficial owner
wishes to tender on its own behalf, such beneficial
owner must, prior to completing and executing the
Letter of Transmittal and delivering its Original
Notes, either make appropriate arrangements to
register ownership of the Original Notes in such
owner's name or obtain a properly completed bond
power from the Registered Holder. The transfer of
registered ownership may take considerable time and
may not be able to be completed prior to the
Expiration Date. See "The Exchange Offer --
Procedures for Tendering Original Notes."
Guaranteed Delivery
Procedures................. Holders of Original Notes who wish to tender their
Original Notes and whose Original Notes are not
immediately available or who cannot deliver their
Original Notes or any other documents required by
the Letter of Transmittal to the Exchange Agent
prior to the Expiration Date, must tender their
Original Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer --
Guaranteed Delivery Procedures."
Withdrawal Rights.......... Tenders of Original Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the
Expiration Date. For a withdrawal to be effective,
a written or facsimile notice of withdrawal must be
received by the Exchange Agent at its address set
forth herein. Such notice must (i) specify the name
of the person having tendered the Original Notes to
be withdrawn; (ii) identify the Original Notes to
be withdrawn (including the certificate number or
numbers and principal amount of Original Notes to
be withdrawn); (iii) be signed by the holder
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<PAGE> 16
in the same manner as the original signature on the
Letter of Transmittal by which such Original Notes
were tendered; and (iv) specify the name in which
the Original Notes are to be registered; if
different from that of the withdrawing holder. See
"The Exchange Offer -- Withdrawal Rights."
Acceptance of Original
Notes and Delivery of
Exchange Notes........... Subject to the satisfaction or waiver of the
conditions to the Exchange Offer, the Company will
accept for exchange any and all Original Notes
which are properly tendered in the Exchange Offer
prior to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Notes issued pursuant
to the Exchange Offer will be delivered promptly
following the Expiration Date. See "The Exchange
Offer -- Terms of the Exchange Offer."
Consequences of Failure to
Exchange................. Holders of Original Notes who do not exchange their
Original Notes for the Exchange Notes pursuant to
the Exchange Offer will continue to be subject to
the restrictions on transfer of such Original Notes
as set forth in the legend thereon. In general,
Original Notes that are not exchanged pursuant to
the Exchange Offer may not be offered or sold
except pursuant to a registration statement filed
under the Securities Act or an exemption from
registration thereunder and in compliance with
applicable state securities laws. In the event the
Company completes the Exchange Offer, the interest
rate on Original Notes will remain as stated
thereon and holders of Original Notes will have no
further rights under the Registration Rights
Agreements (as defined below).
Certain Tax
Considerations............. Latham & Watkins, counsel to the Company, has
advised the Company that because the Exchange Notes
should not be considered to differ materially from
the Original Notes, the exchange of Original Notes
for Exchange Notes should not result in any
material federal income tax consequences to holders
exchanging Original Notes for Exchange Notes. For a
full description of the basis of, and limitations
on, this opinion, see "Material United States
Federal Income Tax Considerations."
Registration Rights
Agreement.................. Pursuant to a registration rights agreement (the
"Registration Rights Agreement") among the Company
and the initial purchasers of the Original Notes
(the "Initial Purchasers"), the Company agreed (i)
to file a registration statement within 120 days
after the Issue Date with respect to an offer to
exchange the Original Notes for a like amount of
Exchange Notes and (ii) to use its reasonable best
efforts to cause such registration statement to
become effective under the Securities Act within
180 days after the Issue Date. The Exchange Offer
is intended to satisfy the rights of holders of
Original Notes under the Registration Rights
Agreement, which rights terminate upon consummation
of the Exchange Offer. The holders of the Exchange
Notes are not entitled to any exchange or
registration rights with respect to the Exchange
Notes.
Exchange Agent............. is the Exchange Agent for the
Exchange Offer. The address and telephone number of
the Exchange Agent are set forth in the "The
Exchange Offer -- Exchange Agent."
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<PAGE> 17
SUMMARY OF TERMS OF THE EXCHANGE NOTES
The Exchange Offer applies to $500.0 million aggregate principal amount of
the Original Notes. The form and terms of the Exchange Notes will be the same as
the form and terms of the Original Notes except that (i) the Exchange Notes will
be registered under the Securities Act, and, therefore, will not bear legends
restricting the transfer thereof and (ii) the holders of the Exchange Notes will
not be entitled to certain rights of the holders of the Original Notes under the
Registration Rights Agreement, which rights will terminate upon consummation of
the Exchange Offer. The Exchange Notes will evidence the same debt as the
Original Notes and both series of Notes will be entitled to the benefits of the
Indenture and treated as a single class of debt securities.
Issuer..................... Chancellor Media Corporation of Los Angeles.
Securities Offered......... $500,000,000 aggregate principal amount of 8 1/8%
Senior Subordinated Notes due 2007, Series B.
Maturity Date.............. December 15, 2007.
Interest Rate and Payment
Dates.................... The Exchange Notes will bear interest at a rate of
8 1/8% per annum. Interest on the Exchange Notes
will accrue from the date of issuance and will be
payable semi-annually on each June 15 and December
15, commencing June 15, 1998.
Optional Redemption........ The Exchange Notes will be redeemable, in whole or
in part, at the option of the Company on or after
December 15, 2002 at the redemption prices set
forth herein, plus accrued and unpaid interest to
the date of redemption. In addition, on or prior to
December 15, 2000, the Company may, at its option,
redeem the Exchange Notes, in part, with the net
cash proceeds of one or more Public Equity
Offerings (as defined), 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 Exchange Notes outstanding must
equal at least 65% of the aggregate principal
amount of Original Notes originally issued on
December 22, 1997. See "Description of the Exchange
Notes -- Optional Redemption."
Change of Control.......... If a Change of Control (as defined) occurs, (i) the
Company will have the option, at any time on or
prior to December 15, 2000, to redeem the Exchange
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 the Company does not so redeem the
Exchange Notes or if such Change of Control occurs
after December 15, 2000, the Company will be
required to offer to repurchase all outstanding
Exchange 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 the Company will have sufficient
funds to purchase all the Exchange Notes in the
event of a Change of Control or that the Company
would be able to obtain financing for such purpose
on favorable terms, if at all. In addition, the
Senior Credit Facility (as defined) will restrict
the Company's ability to repurchase the Exchange
Notes, including pursuant to a Change of Control
Offer (as defined). The Senior Credit Facility 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. Consequently, certain
events that may give rise to a change of control
under the Senior Credit Facility may not give rise
to a Change of Control under the Indenture. See
"Risk Factors -- Change of Control," "Description
of the Exchange Notes --
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<PAGE> 18
Change of Control" and "Description of Certain
Indebtedness -- Senior Credit Facility -- Events of
Default."
Offers to Purchase......... In the event of certain asset sales, the Company
will be required to offer to repurchase the
Exchange Notes (to the extent of any net proceeds
remaining following the Company's offer to purchase
the 9 3/8% Notes, the 8 3/4% Notes and the 10 1/2%
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 the
Exchange Notes -- Certain Covenants -- Limitation
on Asset Sales."
Ranking.................... The Exchange Notes will be general unsecured
obligations of the Company and will rank pari passu
in right of payment to the Company's 9 3/8% Notes,
the 8 3/4% Notes and the 10 1/2% Notes, and will be
subordinated in right of payment to all existing
and future Senior Debt. As of December 31, 1997, on
a pro forma basis after giving effect to the
Completed Transactions completed after such date,
the 1998 Equity Offering and the application of the
net proceeds therefrom, and the proposed Preferred
Stock Repurchase (as defined), but without giving
effect to the Pending Transactions, approximately
$1.08 billion of Senior Debt (represented by
borrowings under the Senior Credit Facility) would
have been outstanding and approximately $500.0
million of debt ranking pari passu to the Exchange
Notes would have been outstanding. See "Description
of the Exchange Notes -- Subordination."
Guarantees................. The Exchange 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 Exchange Notes are
subordinated to all existing and future Senior
Debt, to all existing and future Guarantor Senior
Debt (as defined)(which includes the guarantee by
the Guarantors of the Company's borrowings under
the Senior Credit Facility), and will rank pari
passu to the Guarantors' guarantees of the 9 3/8%
Notes, the 8 3/4% Notes and the 10 1/2% Notes. See
"Description of the Exchange Notes -- Guarantees."
Certain Covenants.......... The Indenture imposes certain limitations on the
ability of the Company and its 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 Debt and senior in right of
payment to the Exchange Notes, impose restrictions
on the ability of a subsidiary to pay dividends or
make certain payments to the Company, enter into
sale and leaseback transactions, conduct business
other than the ownership and operation of radio
broadcast stations and businesses related thereto,
merge or consolidate with any other person or sell,
assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the assets
of the Company. See "Description of the Exchange
Notes -- Certain Covenants.
10
<PAGE> 19
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes pursuant to this Prospectus.
RISK FACTORS
See "Risk Factors", which begin on page 14, for a discussion of certain
factors that should be considered in evaluating an investment in the Exchange
Notes.
11
<PAGE> 20
SUMMARY PRO FORMA FINANCIAL INFORMATION
The following table presents summary unaudited combined pro forma financial
information of the Company for the year ended December 31, 1997 and should be
read in conjunction with the unaudited pro forma condensed combined financial
statements, a complete set of which are included on pages P-1 through P-16 of
this Prospectus.
The summary pro forma financial information set forth below under Company
As Adjusted for the Completed Transactions presents adjustments for (i) in the
case of the Operating Data and Other Data, the Completed Transactions, financing
transactions undertaken by the Company and CRBC during 1997 (including the
Offering), and the contribution to the Company from Chancellor Media of the net
proceeds from the 1998 Equity Offering as if such transactions had occurred on
January 1, 1997 and (ii) in the case of the Balance Sheet Data, the Completed
Transactions consummated after December 31, 1997 and the contribution to the
Company from Chancellor Media of the net proceeds from the 1998 Equity Offering,
as if such transactions had occurred on December 31, 1997.
The summary pro forma financial information set forth below under Company
Pro Forma presents the adjustments as described under Company As Adjusted for
the Completed Transactions and further assumes that all of the outstanding
shares of the Company's 12 1/4% Series A Senior Cumulative Exchangeable
Preferred Stock (the "12 1/4% Preferred Stock") and the Company's 12%
Exchangeable Preferred Stock (the "12% Preferred Stock") will be repurchased by
the Company and retired pursuant to a tender offer, certain permitted
redemptions, negotiated purchases or open-market transactions (the "Preferred
Stock Repurchase"). The pro forma data is based on assumed premiums plus accrued
and unpaid dividends to be paid to holders of 12 1/4% Preferred Stock and 12%
Preferred Stock in the proposed Preferred Stock Repurchase, and other
assumptions relating to such repurchases. No assurance can be given that the
actual premiums paid in connection with any such repurchases made by the Company
will not be greater, perhaps by a substantial amount, than the amounts assumed
in the pro forma data. In addition, there can be no assurance that any shares of
12 1/4% Preferred Stock and 12% Preferred Stock will be repurchased by the
Company. See "Risk Factors -- Possible Non-Consummation of, or Increased Cost
of, Proposed Repurchase of 12 1/4% Preferred Stock and 12% Preferred Stock."
The summary pro forma financial information does not give effect to the
Pending Transactions. See "Business -- Recent Developments -- Pending
Transactions" for a description of these transactions.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
--------------------------------------
COMPANY
AS ADJUSTED
FOR THE
COMPANY COMPLETED COMPANY
HISTORICAL TRANSACTIONS PRO FORMA
---------- ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING DATA:
Net revenues............................ $ 582,078 $1,004,205 $1,004,205
Station operating expenses excluding
depreciation and amortization......... 316,248 572,613 572,613
Operating income........................ 58,406 35,038 35,038
Interest expense........................ 85,017 150,375 163,288
Net loss................................ (18,844) (71,296) (78,785)
Preferred stock dividends............... 12,901 40,222 --
Net loss attributable to common stock... (31,745) (111,518) (78,785)
</TABLE>
12
<PAGE> 21
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
--------------------------------------------
COMPANY
AS ADJUSTED
FOR THE
COMPANY COMPLETED COMPANY
HISTORICAL TRANSACTIONS PRO FORMA
------------ -------------- ------------
(DOLLARS IN THOUSANDS, EXCEPT MARGIN DATA)
<S> <C> <C> <C>
OTHER DATA:
Broadcast cash flow(1).................. $ 265,830 $ 431,592 $ 431,592
Broadcast cash flow margin.............. 46% 43% 43%
EBITDA(1)............................... $ 244,388 $ 395,754 $ 395,754
Ratio of earnings to fixed charges(2)... -- -- --
BALANCE SHEET DATA (END OF PERIOD):
Working capital......................... $ 112,644 $ 349,936 $ 126,229
Intangible assets, net.................. 4,404,443 4,491,569 4,491,569
Total assets............................ 4,961,477 5,283,119 5,045,827
Long-term debt.......................... 2,573,000 1,900,000 2,084,466
Redeemable preferred stock.............. 331,208 331,208 --
Stockholder's equity.................... 1,480,207 2,474,849 2,397,884
</TABLE>
- ---------------
(1) Broadcast cash flow consists of operating income excluding depreciation,
amortization, corporate general and administrative expense, and other
non-cash and non-recurring 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.
(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 for the year
ended December 31, 1997. On a pro forma basis after giving effect to the
Completed Transactions, financing transactions undertaken by the Company and
CRBC during 1997 and the contribution to the Company from Chancellor Media
of the net proceeds from the 1998 Equity Offering, earnings were
insufficient to cover fixed charges by $94,875 for the year ended December
31, 1997. On a pro forma basis after giving effect to the Completed
Transactions, financing transactions undertaken by the Company and CRBC
during 1997, the contribution to the Company from Chancellor Media of the
net proceeds from the 1998 Equity Offering and the Preferred Stock
Repurchase, earnings were insufficient to cover fixed charges by $107,788
for the year ended December 31, 1997.
13
<PAGE> 22
RISK FACTORS
Holders of Original Notes considering participating in this Exchange Offer
should carefully consider, in addition to the other information contained in
this Prospectus, the following factors regarding an investment in the Exchange
Notes.
SUBSTANTIAL LEVERAGE; HISTORY OF NET LOSSES AND INSUFFICIENCY OF EARNINGS TO
COVER FIXED CHARGES
The Company has consolidated indebtedness that is substantial in relation
to its stockholders equity. The Company is subject to the terms of a senior loan
agreement dated April 25, 1997 (as amended, the "Senior Credit Facility"), the
indenture governing the 9 3/8% Notes (the "9 3/8% Indenture"), the indenture
governing the 8 3/4% Notes (the "8 3/4% Indenture), the indenture governing the
10 1/2% Notes (the "10 1/2% Indenture"), the Indenture and the certificates of
designation governing two series of preferred stock, the 12 1/4% Series A Senior
Cumulative Exchangeable Preferred Stock (the "12 1/4% Preferred Stock") and the
12% Exchangeable Preferred Stock (the "12% Preferred Stock"). The Senior Credit
Facility, the 9 3/8% Indenture, the 8 3/4% Indenture, the 10 1/2% Indenture, the
Indenture and such certificates of designation limit, but do not prohibit, the
incurrence of additional indebtedness by the Company. As of December 31, 1997,
the Company had outstanding long-term indebtedness of approximately $2.57
billion and redeemable preferred stock of $331.2 million, an accumulated deficit
of $157.4 million and stockholder's equity of $1.48 billion. As of December 31,
1997, on a pro forma basis after giving effect to the Completed Transactions
consummated after such date, the contribution to the Company from Chancellor
Media of the net proceeds from the 1998 Equity Offering and the proposed
Preferred Stock Repurchase, but without giving effect to the Pending
Transactions, the Company would have had outstanding long-term indebtedness of
approximately $2.08 billion, an accumulated deficit of $234.4 million and
stockholder's equity of $2.40 billion. See "Summary Pro Forma Financial
Information," "Risk Factors -- Possible Non-Consummation of, or Increased Cost
of, Proposed Repurchase of 12 1/4% Preferred Stock and 12% Preferred Stock,"
"Capitalization" and "Use of Proceeds." In addition to the foregoing long-term
indebtedness, it is expected that the Company will finance the Pending
Transactions through the incurrence of as much as approximately $806.5 million
in additional long-term indebtedness. Of the amount required to finance the
Capstar Transaction, the Company expects that $340.3 million will be required
immediately upon consummation of the Capstar/SFX Acquisition (which amount
includes the Capstar Loan) and $244.2 million will be required over the three
year period in which the Capstar/SFX Stations will be acquired.
The degree to which the Company is leveraged could have material
consequences to the Company and the holders of the Exchange Notes, including,
but not limited to the following: (i) its ability to obtain additional financing
in the future for acquisitions, working capital, capital expenditures, and
general corporate or other purposes may be impaired, (ii) a substantial portion
of its cash flow will be required for debt service under the Senior Credit
Facility, the 9 3/8% Notes, the 8 3/4% Notes, the 10 1/2% Notes, the Original
Notes, and, assuming consummation of the Exchange Offer, the Exchange Notes,
and, as a result, will not be available for other purposes, (iii) to the extent
the Company is not successful in repurchasing the 12% Preferred Stock and the
12 1/4% Preferred Stock, commencing in February 2001, the Company will have
substantial cash dividend requirements on the 12 1/4% Preferred Stock and,
commencing in January 2002, on the 12% Preferred Stock (the Company is
permitted, but not required to pay cash dividends on such securities prior to
such debt, and has made the most recent dividend payments on both securities in
cash), (iv) the Company's level of indebtedness could make it more vulnerable to
economic downturns, limit its ability to withstand competitive pressures and
reduce its flexibility in responding to changing business and economic
conditions, (v) certain of the Company's borrowings are and will continue to be
at variable rates of interest, which causes the Company to be vulnerable to
increases in interest rates and (vi) the agreements governing its long-term debt
(and, to a lesser extent, the 12 1/4% Preferred Stock and the 12% Preferred
Stock) contain numerous restrictive operating and financial covenants with which
it must comply. The failure by the Company to comply with such covenants could
result in an event of default thereunder, which could permit acceleration of the
obligations under such instruments and in some cases acceleration of obligations
under other instruments that contain cross-default or cross-acceleration
provisions.
14
<PAGE> 23
The ability of the Company to satisfy its obligations under the Senior
Credit Facility, the 9 3/8% Indenture, the 8 3/4% Indenture, the 10 1/2%
Indenture, the Indenture, and the certificates of designation governing the
12 1/4% Preferred Stock and the 12% Preferred Stock will depend upon the
Company's future operating performance. Such operating performance will be
affected by prevailing economic conditions and financial, business and other
factors, certain of which are beyond the Company's control. The Company
anticipates that its operating cash flow, together with borrowings under the
Senior Credit Facility, will be sufficient to meet its operating expenses and to
service its debt and preferred stock dividend requirements as they become due.
However, if the Company is unable to service its indebtedness, whether upon
acceleration of such indebtedness or in the ordinary course of business, it will
be forced to pursue one or more alternative strategies such as selling assets,
restructuring or refinancing its indebtedness, or seeking additional equity
capital. There can be no assurance that any of these strategies could be
effected on satisfactory terms, if at all, or that the approval of the Federal
Communications Commission (the "FCC") could be obtained on a timely basis, or at
all, for the transfer of any of the stations' licenses in connection with a
proposed sale of assets.
The Company has historically experienced, on a consolidated basis, net
losses, principally as a result of significant interest charges, certain
non-recurring expenses and depreciation and amortization charges relating to the
acquisition of radio broadcasting stations. The Company's net loss attributable
to common stock for the years ended December 31, 1995, 1996 and 1997 was $5.9
million, $16.2 million and $31.7 million, respectively. On a pro forma basis,
after giving effect to the Completed Transactions, financing transactions
undertaken by the Company and CRBC during 1997, the contribution to CMCLA from
Chancellor Media of the net proceeds from the 1998 Equity Offering and the
proposed Preferred Stock Repurchase, but without giving effect to the Pending
Transactions, the Company's net loss attributable to common stock for the year
ended December 31, 1997 would have been $78.8 million. The acquisition of radio
broadcasting stations and business related thereto has been and will continue to
be an important part of the Company's operating strategy, and the Company
expects that amortization charges and interest expenses relating to past and
possible future acquisitions will continue to have a significant adverse effect
on the Company's reported results.
POSSIBLE NON-CONSUMMATION OF, OR INCREASED COST OF, PROPOSED REPURCHASE OF
12 1/4% PREFERRED STOCK AND 12% PREFERRED STOCK
Except under certain circumstances applicable to a portion of each issue,
neither the 12 1/4% Preferred Stock nor the 12% Preferred Stock is currently
redeemable at the option of the Company. The Company anticipates that it will
attempt to repurchase any and all shares of such preferred stock in the near
future. However, the decision whether to sell shares of 12 1/4% Preferred Stock
or 12% Preferred Stock will be entirely within the discretion of the holders
thereof based on the price offered by the Company, the terms and conditions of
the offer and other factors deemed relevant by a holder. There can be no
assurance that the Company will be able to repurchase all shares of 12 1/4%
Preferred Stock or 12% Preferred Stock, as to the amount of securities of either
series that may be repurchased or as to the prices at which any repurchase will
be made. In addition, the Company reserves the right not to seek to repurchase
either or both of the 12 1/4% Preferred Stock or the 12% Preferred Stock based
on prevailing market prices for such preferred stock and other factors which the
Company deems relevant.
NECESSITY OF GOVERNMENTAL REVIEWS AND APPROVALS PRIOR TO CONSUMMATION OF THE
PENDING TRANSACTIONS
Approval of the FCC is required for the issuance, renewal or transfer of
radio broadcast station operating licenses. In addition, the consummation of the
Pending Transactions (other than the Capitol Broadcasting Acquisition) are, and
any future transactions undertaken by the Company likely will be, conditioned
upon the expiration or termination of the applicable waiting periods under the
HSR Act. To date, the FCC has not yet approved the Capstar Transaction or the
Capitol Broadcasting Acquisition, and the waiting periods required under the HSR
Act for the Capstar Transaction and the Petry Acquisition have not expired or
been terminated. No waiting period under the HSR Act was required for the
Capitol Broadcasting Acquisition and the approval of the FCC is not required for
the Petry Acquisition.
15
<PAGE> 24
INTEGRATION OF ACQUISITIONS; OPERATION OF KATZ AND RADIO NETWORK
As a result of the Completed Transactions, the Company holds, and if the
Pending Transactions are consummated, the Company will hold, a significantly
larger portfolio of radio stations than the Company has held in the past. In
addition, management is regularly involved in discussions with third parties
regarding potential acquisitions, and the Company may pursue an active
acquisition strategy that could result in additional expansion in the future. As
a result of the Company's acquisition strategy, the Company's management is
required to manage a substantially larger radio station group than historically
has been the case. The Company's future operations and earnings will be largely
dependent on the Company's ability to integrate the stations recently acquired
and proposed to be acquired. The Company must, among other things, integrate
management and employee personnel and combine certain administrative procedures.
There can be no assurance that the Company will successfully integrate the
stations recently acquired and proposed to be acquired, and the failure to do so
could have a material adverse effect on the Company's results of operations and
financial condition. In addition, the need to focus management's attention on
the integration of these stations may limit the ability of the Company to
successfully pursue other opportunities for a period of time.
The acquisition strategy of the Company involves numerous other risks,
including increasing leverage and debt service requirements, the diversion of
management's attention from other business concerns and the potential loss of
key employees of acquired stations. The availability of additional acquisition
financing cannot be assured, and depending on the terms of the proposed
acquisitions and financings, could be restricted by the terms of the Senior
Credit Facility, the 9 3/8% Indenture, the 8 3/4% Indenture, the 10 1/2%
Indenture, the Indenture, the certificates of designation for the 12 1/4%
Preferred Stock and the 12% Preferred Stock, and, to a lesser extent, the
certificates of designation for Chancellor Media's 7% Convertible Preferred
Stock (the "7% Convertible Preferred Stock") and $3.00 Convertible Exchangeable
Preferred Stock (the "$3.00 Convertible Preferred Stock"). There can be no
assurance that any future acquisitions will not have a material adverse effect
on the Company's financial condition and results of operations.
With the Company's acquisition of Katz (and its proposed acquisition of
Petry), the Company has entered into a line of business not previously
undertaken by the Company on a national basis. Although the media representation
business is related to the radio broadcasting business and the Company's
subsidiaries have experience in certain aspects of the media representation
business at the local radio station level, the Company, through its Katz
subsidiaries, must operate the business of Katz and manage a significantly
larger base of management and employee personnel performing national media
representation functions. There can be no assurance that the Company will be
able to successfully operate Katz or Petry (if the Petry Acquisition is
consummated). In addition, the need to focus management's attention on the
operation of this business may limit the ability of the Company to successfully
pursue other opportunities for a period of time.
The Company, through The AMFM Radio Networks, is operating a new national
radio network. Although certain of the Company's radio stations have syndicated
programs created locally in the past, the Company has not previously undertaken,
at the national level, a radio network. The Company will compete with a number
of established state and national radio network operators in this regard. There
can be no assurance that the Company will be successful in its efforts to create
a new national radio network.
COMPETITIVE NATURE OF RADIO BROADCASTING AND MEDIA REPRESENTATION
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 stations compete for listeners and advertising revenue
directly with other radio stations, as well as with other media, within their
respective markets. 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
consolidation in the radio broadcasting industry continues, certain competitors
may emerge with larger portfolios of major market radio stations, greater
ability to deliver large audiences to advertisers and more access to capital
resources than the 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 their stations
located
16
<PAGE> 25
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, direct broadcast satellite
("DBS") systems and other digital audio broadcasting formats to local and
national audiences. In addition, the FCC has auctioned spectrum for a new
satellite-delivered Digital Audio Radio Service ("DARS"). These actions may
result in the introduction of several new national or regional multi-channel and
multi-format satellite radio services with sound quality equivalent to compact
discs. Another possible competitor to traditional radio is In Band On Channel
("IBOC") digital radio. IBOC could provide multi-channel, multi-format digital
radio services in the same band width currently occupied by traditional AM and
FM radio services. 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 media representation operations depends on the
Company's ability to maintain and acquire representation contracts with radio
and television stations and cable systems, the inventory of time the Company
represents and the experience of 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. The
Company competes not only with other independent and network media
representatives but also with direct national advertising. The Company 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.
ANTITRUST MATTERS
As a result of the recent consolidation of ownership in the radio broadcast
industry, the DOJ has been giving closer scrutiny to acquisitions in the
industry, including certain transactions involving the Company. The consummation
of each of the Pending Transactions (other than the Capitol Broadcasting
Acquisition) is, and any future transactions undertaken by the Company likely
will be, subject to notification filing requirements, applicable waiting periods
and possible review by the DOJ or the United States Federal Trade Commission
(the "FTC") under the HSR Act. DOJ review of certain transactions has caused,
and may continue to cause, delays in anticipated consummations of certain
transactions and, in some cases, may result in attempts by DOJ to enjoin such
transactions or negotiate modifications of the proposed transactions. Such
delays, injunctions and modifications could have an adverse effect on the
Company and may result in the abandonment of some otherwise attractive
transactions.
The DOJ has stated publicly that it has established certain revenue and
audience share concentration benchmarks with respect to radio station
acquisitions, above which a transaction may receive additional antitrust
scrutiny. However, to date, the DOJ has also investigated transactions that do
not meet or exceed these benchmarks and has cleared transactions that do exceed
the benchmarks. Although 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.
RADIO BROADCASTING INDUSTRY SUBJECT TO FEDERAL REGULATION
The radio broadcasting industry is subject to extensive regulation by the
FCC under the Communications Act of 1934, as amended (as amended by the 1996
Act, the "Communications Act"). Approval of the FCC is required for the
issuance, renewal or transfer of radio broadcast station operating licenses. See
"-- Necessity of Governmental Reviews and Approvals Prior to Consummation of the
Pending Transactions" above. In particular, the Company's business is dependent
upon its continuing to hold radio broadcasting licenses from the FCC that are
issued for terms of up to eight years. While in the vast majority of cases such
licenses are renewed by the FCC, there can be no assurance that any of the
stations' licenses will be renewed at their expiration dates, or that renewals,
if granted, will not include conditions or qualifications that could adversely
affect the Company's operations. In addition, the Communications Act and FCC
rules restrict alien ownership
17
<PAGE> 26
and voting of capital stock of, and participations in the affairs of the
Company. Moreover, laws, regulations and policies may be changed significantly
over time and there can be no assurance that such changes will not have a
material adverse effect on the business, financial condition and results of
operations of the Company.
The 1996 Act, which amended the Communications Act in a number of important
respects, has created significant new opportunities for radio broadcasters, but
also has created uncertainties as to how the FCC and the courts will enforce and
interpret the 1996 Act. Although the 1996 Act eliminated the national ownership
ceiling previously applicable to radio broadcasters and also loosened
restrictions previously applicable to ownership within single markets,
significant restrictions remain on permitted levels of local ownership. In
markets with 45 or more stations, ownership is limited to eight stations, no
more than five of which can be FM or AM; in markets with 30-44 stations,
ownership is limited to seven stations, no more than four of which can be FM or
AM; in markets with 15-29 stations, ownership is limited to six stations, no
more than four of which can be FM or AM; and in markets with 14 or fewer
stations, ownership is limited to no more than 50% of the market's total and no
more than three AM or FM. Compliance with the FCC's multiple ownership rules is
expected to cause the Company and other radio broadcasters to forego acquisition
opportunities that they might otherwise wish to pursue. Compliance with these
rules by third parties may also have a significant impact on the Company as, for
example, in precluding the consummation of swap transactions that would cause
such third parties to violate multiple ownership rules.
Hicks Muse, through its ownership of a majority of the outstanding capital
stock of Capstar, has an attributable interest in Capstar. In addition, three of
the Company's directors -- Thomas O. Hicks, Lawrence D. Stuart, Jr. and Eric C.
Neuman -- are directors of Capstar and therefore have attributable interests in
Capstar, and Messrs. Hicks, Stuart and Neuman are officers of Hicks Muse.
Capstar presently owns or proposes to acquire over 300 radio stations in
numerous markets (mainly mid-size and small) throughout the United States. Hicks
Muse and Messrs. Hicks and Neuman also have attributable interests in Sunrise
Broadcasting, Inc. ("Sunrise"), which owns or proposes to acquire six television
stations in six markets, and in LIN Television Corporation ("LIN"), which owns
or operates 11 television stations in eight markets. Under the FCC's rules,
these broadcast interests are attributed to the Company. If any such radio
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 such markets when determining compliance with the
multiple ownership rules. In addition, under the FCC's one-to-a-market rules, a
party may not have attributable interests in radio stations and a television
station in the same market unless a waiver is granted by the FCC. Although none
of the television stations owned through Sunrise and LIN overlap with any of the
stations owned or to be acquired by the Company in any of its markets, there can
be no assurance that, in the future, such overlaps will not occur. As a result
of these attributable interests, the Company's future acquisition strategy may
be adversely affected. There can be no assurance that these additional
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.
CONFLICT OF INTEREST
As described above (see "-- Radio Broadcasting Industry Subject to Federal
Regulation"), Hicks Muse and certain of the Company's directors have interests
in Capstar, which owns or proposes to acquire over 300 radio stations in a
number of states, in Sunrise, which owns or proposes to acquire six television
stations in six markets, and in LIN, which owns or operates 11 television
stations in eight markets. Hicks Muse and these directors may in the future
acquire interests in, manage or otherwise control other radio or television
stations or other entertainment and communications media.
Directors of the Company who are also directors and/or executive officers
of Capstar, Sunrise or LIN may have conflicts of interest with respect to
matters potentially or actually involving or affecting the Company and Capstar,
Sunrise or LIN, such as acquisitions, operations, financings and other corporate
opportunities that may be suitable for both the Company and Capstar, Sunrise or
LIN. To the extent that such opportunities arise, these directors may consult
with their legal advisors and make determinations with respect to such
opportunities after consideration of a number of factors, including whether such
opportunities are consistent with the Company's strategic objectives and whether
the Company will be able to undertake or
18
<PAGE> 27
benefit from such opportunities. In addition, determinations may be made by the
Company's Board of Directors, when appropriate, by a vote of some or all of the
disinterested directors only. However, no assurances can be given that such
disinterested director approval will be sought or that any such conflicts will
be resolved in favor of the Company.
SUBORDINATION
The payment of principal, premium, if any, and interest on, and any other
amounts owing in respect of, the Exchange Notes will be subordinated to the
prior payment in full of all existing and future Senior Debt of the Company. The
Guarantors' Guarantees also will be subordinated in right of payment to
Guarantor Senior Debt (as defined) of any Guarantor. Guarantor Senior Debt will
include all existing and future indebtedness of the Guarantors not expressly
subordinated to other indebtedness of the Guarantors, including indebtedness
represented by the guarantee of the Guarantors under the Senior Credit Facility.
As of December 31, 1997, on a pro forma basis after giving effect to the
Completed Transactions consummated after such date, the 1998 Equity Offering and
the application of the net proceeds therefrom, and the proposed Preferred Stock
Repurchase, but without giving effect to the Pending Transactions, approximately
$1.08 billion of Senior Debt would have been outstanding (represented by
borrowings under the Senior Credit Facility) and approximately $1.42 billion
would have been available for additional borrowing under the Revolving Loan
Facility. In addition, it is expected that the Company will finance the Pending
Transactions through the incurrence of as much as approximately $806.5 million
in additional Senior Debt (represented by additional borrowings under the Senior
Credit Facility). The 9 3/8% Indenture, the 8 3/4% Indenture, the 10 1/2%
Indenture and the Indenture limit the incurrence by the Company and the
Guarantors of additional Senior Debt and Guarantor Senior Debt, respectively. In
the event of the bankruptcy, liquidation, dissolution, reorganization or other
winding up of the Company, the assets of the Company will be available to pay
obligations on the Exchange Notes only after all Senior Debt has been paid in
full, and there may not be sufficient assets remaining to pay amounts due on any
or all of the Exchange Notes. In addition, under certain circumstances, the
Company may not pay principal of, premium, if any, or interest on, or any other
amounts owing in respect of, the Exchange Notes, or purchase, redeem or
otherwise retire the Exchange Notes, if a payment default or a non-payment
default exists with respect to certain Senior Debt, including Senior Debt under
the Senior Credit Facility and, in the case of non-payment default, if a payment
blockage notice has been received by the Trustee (as defined). See "Description
of the Exchange Notes -- Subordination" and "Description of Certain
Indebtedness -- Senior Credit Facility."
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Senior Credit Facility, the 9 3/8% Indenture, the 8 3/4% Indenture, the
10 1/2% Indenture, the Indenture and the certificates of designations for the
Company's preferred stock and the Senior Credit Facility each contain certain
covenants that restrict, among other things, the Company's ability to incur
additional indebtedness, incur liens, pay dividends or make certain other
restricted payments, consummate certain asset sales, enter into certain
transactions with affiliates, incur indebtedness that is subordinate in right of
payment to any Senior Debt and senior in right of payment to the Exchange Notes,
impose restrictions on the ability of a subsidiary to pay dividends or make
certain payments to the Company, enter into sale and leaseback transactions,
conduct business other than the ownership and operation of radio broadcast
stations and businesses related thereto, merge or consolidate with any other
person or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company. The Senior Credit Facility
requires the Company to maintain specified financial ratios and to satisfy
certain financial condition tests. The Company's ability to meet those financial
ratios and financial condition tests can be affected by events beyond its
control, and there can be no assurance that the Company will meet those tests. A
breach of any of these covenants could result in a default under the Senior
Credit Facility, the 9 3/8% Indenture, the 8 3/4% Indenture, the 10 1/2%
Indenture and the Indenture, and other financial documents. In the event of an
event of default under the Senior Credit Facility, the 9 3/8% Indenture, the
8 3/4% Indenture, or the 10 1/2% Indenture the lenders thereunder could elect to
declare all amounts outstanding thereunder, together with accrued interest, to
be immediately due and payable. In the case of the Senior Credit Facility, if
the Company were unable to repay those amounts, the lenders thereunder could,
subject to compliance with applicable FCC rules, proceed
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against the collateral granted to them to secure that indebtedness. If the
indebtedness under the Senior Credit Facility were to be accelerated, there can
be no assurance that the assets of the Company would be sufficient to repay in
full that indebtedness and the other indebtedness of the Company, including the
Exchange Notes. See "Description of the Exchange Notes -- Certain Covenants" and
"Description of Certain Indebtedness."
CONTROL OF THE COMPANY
Thomas O. Hicks and affiliates of Hicks Muse hold approximately 13% of the
outstanding primary shares of the Common Stock of Chancellor Media.
Additionally, three directors of Chancellor Media are also principals or
executive officers of Hicks Muse. Accordingly, Mr. Hicks and Hicks Muse will
have substantial influence over the management and policies of Chancellor Media
and the Company and on all matters submitted to a vote of the holders of Common
Stock of Chancellor Media, and 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 or the Company.
FRAUDULENT CONVEYANCE
Various fraudulent conveyance laws have been enacted for the protection of
creditors and may be utilized by a court to subordinate or avoid the Original
Notes or the Exchange Notes or the Guarantees in favor of other existing or
future creditors of the Company or the Guarantors.
If a court in a lawsuit on behalf of any unpaid creditor of the Company or
a representative of the Company's creditors were to find that, at the time the
Company issued the Original Notes, the Company (x) intended to hinder, delay or
defraud any existing or future creditor or contemplated insolvency with a design
to prefer one or more creditors to the exclusion in whole or in part of others
or (y) did not receive fair consideration or reasonably equivalent value for
issuing such Original Notes and the Company (i) was insolvent, (ii) was rendered
insolvent by reason of such issuance, (iii) was engaged or about to engage in a
business or transaction for which its remaining assets constituted unreasonably
small capital to carry on its business or (iv) intended to incur, or believed
that it would incur, debts beyond its ability to pay such debts as they matured,
such court could void the Company's obligations under the Original Notes or the
Exchange Notes and void such transactions. Alternatively, in such event, claims
of the holders of such Original Notes or the Exchange Notes could be
subordinated to claims of the other creditors of the Company.
The Company's obligations under the Exchange Notes will be guaranteed by
each of the Guarantors. To the extent that a court were to find that (x) the
Guarantee was incurred by the Guarantor with intent to hinder, delay or defraud
any present or future creditor or the Guarantor contemplated insolvency with a
design to prefer one or more creditors to the exclusion in whole or in part of
others or (y) the Guarantor did not receive fair consideration or reasonably
equivalent value for issuing the Guarantee and the Guarantor (i) was insolvent,
(ii) was rendered insolvent by reason of the issuance of the Guarantee, (iii)
was engaged or about to engage in a business or transaction for which the
remaining assets of the Guarantor constituted unreasonably small capital to
carry on its business or (iv) intended to incur, or believed that it would
incur, debts beyond its ability to pay such debts as they matured, the court
could void or subordinate the Guarantee in favor of such Guarantor's creditors.
Among other things, a legal challenge of any Guarantee on fraudulent conveyance
grounds may focus on the benefits, if any, realized by a Guarantor as a result
of the issuance by the Company of the Original Notes.
To the extent that any Guarantee is avoided as a fraudulent conveyance or
held unenforceable for any other reason, holders of the Original Notes or the
Exchange Notes would cease to have any claim in respect of such Guarantor and
would be creditors solely of the Company and the other Guarantors, if any. In
such event, the claims of the holders of the Original Notes or the Exchange
Notes against such Guarantor would be subject to the prior payment of all
liabilities and preferred stock claims of the Guarantor. There can be no
assurance that, after providing for all prior claims and preferred stock
interests, if any, there would be sufficient assets to satisfy the claims of the
holders of the Original Notes or the Exchange Notes relating to any voided
portion of a guarantee.
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Based upon financial and other information currently available to it,
management of the Company believes that the Exchange Notes and the Guarantees
are being incurred for proper purposes and in good faith and that the Company
and each of the Guarantors (i) are solvent and will continue to be solvent after
giving effect to the issuance of the Exchange Notes or Guarantee, as the case
may be, (ii) will have sufficient capital for carrying on its business after
such issuance, and (iii) will be able to pay its debts as they mature. See
"Management's Discussions and Analysis of Results of Operations and Financial
Condition -- Liquidity and Capital Resources."
CHANGE OF CONTROL
Upon a Change of Control, the Company may be required to offer to purchase
all of the Exchange Notes then outstanding at 101% of their principal amount,
plus accrued interest to the date of repurchase. 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 the Exchange Notes that the Company might be
required to purchase. In the event that the Company were required to purchase
Exchange 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 various financing arrangements of the Company
will restrict the Company's ability to repurchase the Exchange Notes, including
pursuant to a Change of Control Offer. Also, a Change of Control will result in
an event of default under the Senior Credit Facility and may cause the
acceleration of other Senior Debt, if any, in which case the subordination
provisions of the Exchange Notes would require payment in full of the Senior
Credit Facility and any such Senior Debt before repurchase of the Exchange
Notes. In addition, a Change of Control may result in the Company being required
to offer to redeem the 12 1/4% Preferred Stock and 12% Preferred Stock, and may
result in Chancellor Media being required to offer to redeem the 7% Convertible
Preferred Stock and the $3.00 Convertible Preferred Stock. See "Description of
the Exchange Notes -- Change of Control," "Description of the Exchange
Notes -- Subordination" and "Description of Certain Indebtedness -- Senior
Credit Facility -- Change of Control." The inability to repay Senior Debt, if
accelerated, and to purchase all of the tendered Exchange Notes, would
constitute an event of default under the Indenture.
CONSEQUENCES OF FAILURE TO EXCHANGE ORIGINAL NOTES
The Exchange Notes will be issued in exchange for Original Notes only after
timely receipt by the Exchange Agent of such Original Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documents. Therefore, holders of Original Notes desiring to tender such Original
Notes in exchange for the Exchange Notes should allow sufficient time to ensure
timely delivery. Neither the Exchange Agent nor the Company is under any duty to
give notification of defects or irregularities with respect to tenders of
Original Notes for exchange. Original Notes that are not tendered or are
tendered but not accepted will, following consummation of the Exchange Offer,
continue to be subject to the existing restrictions upon transfer thereof. In
addition, any holder of Original Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes will be
required to comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each broker-
dealer that receives Exchange Notes for its own account in exchange for Original
Notes, where such Original Notes were acquired by such broker-dealer as a result
of market-making activities or any other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution." To the extent that Original Notes are
tendered and accepted in the Exchange Offer, the trading market for untendered
and tendered but unaccepted Original Notes could be adversely affected. See
"Exchange Offer."
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES
The Original Notes have not been registered under the Securities Act and
are subject to significant transfer restrictions. The Exchange Notes will
constitute a new issue of securities with no established trading market. The
Company does not intend to list the Exchange Notes on any national securities
exchange or to seek the admission thereof to trading in the National Association
of Securities Dealers Automated Quotation
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system. The Company has been advised by the Initial Purchasers (as defined) that
they intend to make a market in the Exchange Notes. However, the Initial
Purchasers are not obligated to do so, and any market-making activity with
respect to the Exchange Notes may be discontinued at any time without notice. In
addition, such market-making activity will be subject to the limits imposed by
the Exchange Act, and may be limited during the Exchange Offer. If a trading
market does not develop or is not maintained, holders of the Exchange Notes may
experience difficulty in reselling the Exchange Notes or may be unable to sell
them at all. If a trading market does not develop or is not maintained, holders
of the Exchange Notes may experience difficulty in reselling the Exchange Notes
or may be unable to sell them at all. If a market for the Exchange Notes
develops, any such market may be discontinued at any time. If a public trading
market develops for the Exchange Notes, future trading prices of the Exchange
Notes will depend on many factors, including, among other things, prevailing
interest rates, the Company's results of operations and the market for similar
securities. Depending on prevailing interest rates, the market for similar
securities and other factors, including the financial condition of the Company,
the Exchange Notes may trade at a discount from their principal amount.
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<PAGE> 31
THE EXCHANGE OFFER
PURPOSE AND EFFECTS OF THE EXCHANGE OFFER
The Original Notes were sold by the Company on December 22, 1997 (the
"Issue Date") to the Initial Purchasers. The Initial Purchasers subsequently
placed the Original Notes with qualified institutional buyers in transactions
not requiring registration under the Securities Act or applicable state
securities laws, including sales pursuant to Rule 144A and Regulation S under
the Securities Act. As a condition to the sale of the Original Notes, the
Company and the Initial Purchasers entered into the Registration Rights
Agreement on December 22, 1997. Pursuant to the Registration Rights Agreement,
the Company agreed that unless the Exchange Offer is not permitted by applicable
law or Commission policy, it would (i) use its reasonable best efforts, within
120 days after the Issue Date, to file with the Commission a registration
statement (the "Registration Statement") with respect to a registered offer to
exchange the Original Notes for Exchange Notes, (ii) use its reasonable best
efforts to cause such Registration Statement to be declared effective under the
Securities Act within 180 days after the Issue Date and (iii) use its reasonable
best efforts to consummate the Exchange Offer within 225 days after the Issue
Date. A copy of the Registration Rights Agreement has been filed as an exhibit
to the Registration Statement of which this Prospectus is a part. The
Registration Statement of which this Prospectus is a part is intended to satisfy
certain of the Company's obligations under the Registration Rights Agreement.
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, upon the Registration Statement
being declared effective, will accept any and all Original Notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on the
Expiration Date and exchange them for Exchange Notes. The Company will issue
$1,000 principal amount of Exchange Notes in exchange for each $1,000 principal
amount of outstanding Original Notes accepted in the Exchange Offer. Holders may
tender some or all of their Original Notes pursuant to the Exchange Offer.
However, the Original Notes may be tendered only in integral multiples of
$1,000.
The Company will keep the Exchange Offer open for not less than 20 business
days or longer if required by applicable law, after the date notice of the
Exchange Offer is mailed to holders of the Original Notes.
The Exchange Notes will evidence the same debt as the Original Notes for
which they are exchanged, and are entitled to the benefits of the Indenture. The
form and terms of the Exchange Notes are the same as the form and terms of the
Original Notes except that the Exchange Notes have been registered under the
Securities Act and hence will not bear legends restricting the transfer thereof.
Holders do not have appraisal or dissenters' rights under the Delaware
General Corporation Law or under the Indenture in connection with the Exchange
Offer. The Company intends to conduct the Exchange Offer in accordance with the
applicable requirements of Regulation 14E under the Exchange Act.
The Company shall be deemed to have accepted validly tendered Exchange
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 Exchange Notes from the Company.
If any tendered Original Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Original Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders whose Original Notes are not tendered or are tendered but not
accepted in the Exchange Offer will continue to hold such Original Notes and
will be entitled to all the rights and preferences and subject to the
limitations applicable thereto under the Indenture. Following consummation of
the Exchange Offer, the holders will continue to be subject to the existing
restrictions upon transfer thereof and the Company will have no further
obligation to such holders to provide for the registration under the Securities
Act of the Original
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Notes held by them. To the extent that Original Notes are tendered and accepted
in the Exchange Offer, the trading market for untendered and tendered but
unaccepted Original Notes could be adversely affected.
Holders who tender Original 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 the
Original 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; Solicitation of Tenders."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean , 1998 unless the
Company, in its sole discretion, extends the Exchange Offer, in which case the
term "Expiration Date" shall mean the latest date to which the Exchange Offer is
so extended.
In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
Registered Holders an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. Such announcement may state that the Company is extending the Exchange
Offer for a specified period of time or on a daily basis until 5:00 p.m., New
York City time, on the date on which a specified percentage of Original Notes
are tendered.
The Company reserves the right (i) to delay accepting any Original Notes,
to extend the Exchange Offer or to terminate the Exchange Offer and not accept
Original Notes not previously accepted if any of the conditions set forth below
under "-- Certain Conditions to the Exchange Offer" shall have occurred and
shall not have been waived by the Company, 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 deemed by it to be advantageous to the
holders. Any such delay in acceptance, extension, termination or amendment will
be followed as promptly as practicable by oral or written notice thereof to the
holders. If the Exchange Offer is amended in a manner determined by the Company
to constitute a material change, the Company will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to all
Registered Holders, and the Company will extend the Exchange Offer for a period
of five to ten business days, depending upon the significance of the amendment
and the manner of disclosure to Registered Holders, if the Exchange Offer would
otherwise expire during such five to ten business day period. During any
extension of the Expiration Date, all Original Notes previously tendered will
remain subject to the Exchange Offer and may be accepted for exchange by the
Company.
Without limiting the manner in which the Company may choose to make public
announcement of any extension, amendment or termination of the Exchange Offer,
the Company shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
INTEREST ON THE EXCHANGE NOTES
Interest accrues on the Original Notes, and will accrue on the Exchange
Notes, in each case, from December 22, 1997, at the rate of 8 1/8% per annum and
will be payable in cash semiannually in arrears on each June 15 and December 15,
commencing on June 15, 1998. No interest will be payable on the Original Notes
on the date of the exchange for the Exchange Notes and therefore no interest
will be paid thereon to the holders at such time.
PROCEDURES FOR TENDERING ORIGINAL NOTES
The tender to the Company of the Original Notes by a holder thereof as set
forth below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a holder who wishes to tender
the Original Notes for
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<PAGE> 33
exchange pursuant to the Exchange Offer must transmit a properly completed and
duly executed Letter of Transmittal, including all other documents required by
such Letter of Transmittal, to the Exchange Agent at one of the addresses set
forth below under "-- Exchange Agent" on or prior to the Exchange Date or, in
the alternative, comply with The Depository Trust Company's ("DTC") ATOP
procedures described below. In addition, either (i) certificates for such
Original Notes must be received by the Exchange Agent along with the Letter of
Transmittal, (ii) a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Original Notes, if such procedure is available, into the
Exchange Agent's account at DTC pursuant to the procedure for book-entry
transfer described below, or properly transmitted Agent's Message (as defined
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. THE METHOD OF DELIVERY OF THE ORIGINAL NOTES, LETTERS OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO INSURE TIMELY DELIVERY. NO LETTER OF TRANSMITTAL OR ORIGINAL NOTES
SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Original Notes surrendered for
exchange pursuant thereto are tendered (i) by a Registered Holder of the
Original Notes who has not completed the boxes entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution (as defined below). In the event
that signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, are required to be guaranteed, such guarantees must be by a firm
(an "Eligible Institution") that is a member of a recognized signature guarantee
medallion program (an "Eligible Program") within the meaning of Rule 17Ad-15
under the Exchange Act. If the Exchange Notes and/or Original Notes not
exchanged are to be delivered to an address other than that of the Registered
Holder appearing on the note register for the Original Notes, the signature on
the Letter of Transmittal must be guaranteed by an Eligible Institution. If the
Original Notes are registered in the name of a person other than the person
signing the Letter of Transmittal, the Original Notes surrendered for exchange
must be endorsed by, or be accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by the Company in its
sole discretion, duly executed by the Registered Holder with the signature
thereon guaranteed by an Eligible Institution.
Any beneficial owner whose Original Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Original Notes should contact the Registered Holder promptly and
instruct such Registered Holder to tender Original Notes on such beneficial
owner's behalf. If such beneficial owner wishes to tender such Original Notes
himself, such beneficial owner must, prior to completing and executing the
Letter of Transmittal and delivering such Original Notes in such beneficial
owner's name, either make appropriate arrangements to register ownership of the
Original Notes in such beneficial owner's name or obtain a properly completed
bond power from the Registered Holder of the Original Notes. The transfer of
registered ownership may take considerable time and may not be able to be
completed prior to the Expiration Date.
The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may utilize DTC's ATOP to tender.
Accordingly, participants in DTC's ATOP may, in lieu of physically completing
and signing the Letter of Transmittal and delivering it to the Exchange Agent,
electronically transmit their acceptance of the Exchange Offer by causing DTC to
transfer the Original Notes to the Exchange Agent in accordance with DTC's ATOP
procedures for transfer. DTC will then send an Agent's Message to the Exchange
Agent.
The term "Agent's Message" means a message transmitted by DTC received by
the Exchange Agent and forming part of the Book-Entry Confirmation, which states
that DTC has received an express acknowledgement from a participant in DTC's
ATOP that is tendering Original Notes which are the subject of such book entry
confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal (or, in the case of an Agent's Message
relating to guaranteed delivery, that such participant has
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<PAGE> 34
received and agrees to be bound by the applicable Notice of Guaranteed
Delivery), and that the agreement may be enforced against such participant.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of the Original Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and all
tenders of any particular Original Note not properly tendered or to not accept
any particular Original Note which acceptance might, in the judgment of the
Company or its counsel, be unlawful. The Company also reserves the absolute
right in its sole discretion to waive any defects or irregularities or
conditions of the Exchange Offer as to any particular Original Note either
before or after the Expiration Date (including the right to waive the
ineligibility of any holder who seeks to tender the Original Notes in the
Exchange Offer). The interpretation of the terms and conditions of the Exchange
Offer as to any particular Original Note either before or after the Expiration
Date (including the Letter of Transmittal and instructions thereto) by the
Company shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with the tenders of Original Notes for exchange
must be cured within such reasonable period of time as the Company shall
determine. Neither the Company, the Exchange Agent nor any other person shall be
under any duty to give notification of any defect or irregularity with respect
to any tender of the Original Notes for exchange, nor shall any of them incur
any liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than
the Registered Holder or holders of Original Notes, such Original Notes must be
endorsed or accompanied by a properly completed bond power, in either case
signed exactly as the names of the Registered Holder or holders that appear on
the Original Notes with the signature thereon guaranteed by an Eligible
Institution.
If the Letter of Transmittal or any Original 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 person should so indicate when signing and, unless waived by the
Company, proper evidence satisfactory to the Company of their authority to so
act must be submitted with the Letter of Transmittal.
By tendering, each holder will represent to the Company that, among other
things, either (a) such holder is not an "affiliate" of the Company, within the
meaning of Rule 405 under the Securities Act, that it is not a broker-dealer
that owns Original Notes acquired directly from the Company, that it is
acquiring the Exchange Notes in the ordinary course of such holder's business
and that such holder has no arrangement with any person to participate in the
distribution of such Exchange Notes, or (b) such holder is an "affiliate" of the
Company and that it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable to it.
ACCEPTANCE OF ORIGINAL NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Original Notes
properly tendered and will issue the Exchange Notes promptly after acceptance of
the Original Notes. See "-- Certain Conditions to the Exchange Offer" below. For
purposes of the Exchange Offer, the Company shall be deemed to have accepted
properly tendered Original Notes for exchange when, and if, the Company has
given oral or written notice thereof to the Exchange Agent.
In all cases, issuance of Exchange Notes for Original 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 Original Notes or
a timely Book-Entry Confirmation of such Original Notes into the Exchange
Agent's account at DTC, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Original Notes are
not accepted for any reason set forth in the terms and conditions of the
Exchange Offer or if certificates representing the Original Notes are submitted
for a greater principal amount than the holder desires to exchange, such
unaccepted or non-exchanged Original Notes will be returned without expense to
the tendering holder thereof (or, in the case of Original Notes tendered by
book-entry transfer into the Exchange Agent's account at DTC pursuant to the
book-entry transfer procedures
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described below, such non-exchanged Original Notes will be credited to an
account maintained with DTC) as promptly as practicable after the expiration or
termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Original Notes at DTC 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 DTC's systems may make book-entry delivery of the
Original Notes by causing DTC to transfer such Original Notes into the Exchange
Agent's account at DTC in accordance with DTC's procedure for transfer. However,
although delivery of the Original Notes may be effected through book-entry
transfer at DTC, the Letter of Transmittal or a facsimile thereof, with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "-- Exchange Agent" on or prior to the
Expiration Date or the guaranteed delivery procedures described below must be
complied with. Delivery of documents to the book-entry transfer facility does
not constitute delivery to the Exchange Agent.
THE METHOD OF DELIVERY OF THE ORIGINAL NOTES, LETTERS OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO INSURE TIMELY DELIVERY. NO LETTER OF TRANSMITTAL OR ORIGINAL NOTES
SHOULD BE SENT TO THE COMPANY.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Original Notes desires to tender such
Original Notes and the Original Notes are not immediately available, or time
will not permit such holder's Original 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 completed and duly executed Letter of Transmittal (or a
facsimile thereof) and Notice of Guaranteed Delivery (be telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of the Original Notes and the principal amount of Original
Notes tendered, stating that the tender is being made thereby and guaranteeing
that within three business days after the date of execution of the Notice of
Guaranteed Delivery, the certificates for all physically tendered Original
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent, and (iii) the
certificates for all physically tendered Original Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and all other
documents required by the Letter of Transmittal, are received by the Exchange
Agent within three business days after the date of execution of the Notice and
Guaranteed Delivery. Unless Original Notes being tendered by the above-described
method (or a timely Book-Entry Confirmation) are deposited with the Exchange
Agent within the time period set forth above (accompanied or preceded by a
properly completed Letter of Transmittal and any other required documents), the
Company may, at its option, reject the tender. Copies of a Notice of Guaranteed
Delivery which may be used by Eligible Institutions for the purposes described
in this paragraph are being delivered with this Prospectus and the related
Letter of Transmittal.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Original Notes (or a timely Book-Entry Confirmation) is
received by the Exchange Agent. Issuances of Exchange Notes in exchange for
Original Notes tendered pursuant to a Notice of Guaranteed Delivery or letter,
telegram or facsimile transmissions to similar effect (as provided above) by an
Eligible Institution will be made only against deposit of the Letter of
Transmittal (and any other required documents) and the tendered Original Notes
(or a timely book-Entry Confirmation).
27
<PAGE> 36
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
Subject to, and effective upon, the acceptance for exchange of the
principal amount of Original Notes tendered in accordance with the Letter of
Transmittal, the party tendering Original Notes for exchange (the "Transferor")
sells, assigns and transfers to, or upon the order of, the Company all right,
title and interest in and to the Original Notes, tendered thereby. The
Transferor, irrevocably constitutes and appoints the Exchange Agent as the
Transferor's agent and attorney-in-fact (with full knowledge that the Exchange
Agent also acts as the agent of the Company) with respect to the tendered
Original Notes, with full power of substitution to (i) deliver certificates for
such Original Notes, (ii) deliver Original Notes and all accompanying evidence
of transfer and authenticity to or upon the order of the Company upon receipt by
the Exchange Agent, or the Transferor's agent, of the Exchange Notes to which
the Transferor is entitled upon the acceptance by the Company of the Original
Notes tendered under the Exchange Offer and (iii) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Original Notes,
all in accordance with the terms of the Exchange Offer. The Transferor
represents and warrants that he or she has full power and authority to tender,
exchange, assign and transfer the Original Notes and that, when the same are
accepted for exchange, the Company will acquire good and unencumbered title to
the tendered Original Notes, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim. The Transferor also
warrants that it will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
exchange, assignment and transfer of tendered Original Notes. The Transferor
further agrees that acceptance of any tendered Original Notes by the Company and
the issuance of Exchange Notes in exchange therefor shall constitute performance
in full by the Company of its obligations under the Registration Rights
Agreement and that the company shall have no further obligations or liabilities
thereunder (except in certain limited circumstances). All authority conferred by
the Transferor will survive the death or incapacity or dissolution of the
Transferor, and every obligation of the Transferor shall be binding upon the
heirs, legal representatives, successors, assigns, executors and administrators
of such Transferor.
By tendering Original Notes, the Transferor certifies (a) that it is not an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act, that it is not a broker-dealer that owns Original Notes acquired directly
from the Company, that it is acquiring the Exchange Notes offered hereby in the
ordinary course of such Transferor's business and that such Transferor has no
arrangement with any person to participate in the distribution of such Exchange
Notes or (b) that it is an "affiliate" (as so defined) of the Company or of the
Initial Purchasers, and that it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable to it.
WITHDRAWAL RIGHTS
Tenders of Original Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date.
For a withdrawal to be effective, (i) a written or facsimile notice of
withdrawal must be received by the Exchange Agent at its address set forth below
under "-- Exchange Agent" or (ii) holders must comply with the appropriate
procedures of DTC's ATOP. Any such notice of withdrawal must (i) specify the
name of the person having tendered the Original Notes to be withdrawn, (ii)
identify the Original Notes to be withdrawn (including the serial number or
numbers and the principal amount of Original Notes to be withdrawn), (iii) be
signed by the holder in the same manner as the original signature on the Letter
of Transmittal by which such Original Notes were tendered and (iv) specify the
name in which such Original Notes are to be registered, if different from that
of the withdrawing holder. If Original Notes have been tendered pursuant to the
procedure for book-entry described above, any notice of withdrawal must specify,
in lieu of certificate numbers, the name and number of the account at DTC to be
credited with the withdrawn Original Notes and otherwise comply with the
procedures of such facility. Any 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
Original Notes so withdrawn will be deemed not to have been validly
28
<PAGE> 37
tendered for exchange for purposes of the Exchange Offer. Any Original 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 (or, in the
case of Original Notes tendered by book-entry transfer into the Exchange Agent's
account at DTC pursuant to the book-entry transfer procedures described above,
such Original Notes will be credited to an account maintained with DTC for the
Original Notes) as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Original Notes may be
retendered by following one of the procedures described under "-- Procedures for
Tendering Original Notes" above at any time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company's
obligation to accept for exchange, or exchange Exchange Notes for, any Original
Notes not theretofore accepted for exchange is subject to the following
conditions:
(a) no action or proceeding having been instituted or threatened in
any court or by or before any governmental agency with respect to the
Exchange Offer which, in the judgment of the Company, might impair the
ability of the Company to proceed with the Exchange Offer or have a
material adverse effect on the Company or there shall not have occurred any
material adverse development in any existing action or proceeding with
respect to the Company or any of its subsidiaries;
(b) there shall not have been any material change, or development
involving a prospective change, in the business or financial affairs of the
Company or any of its subsidiaries which, in the judgment of the Company,
would materially impair the Company's ability to consummate the Exchange
Offer or have a material adverse impact on the Company if the Exchange
Offer is consummated;
(c) there shall not have been proposed, adopted or enacted any law,
statute, rule or regulation which, in the judgment of the Company, might
materially impair the ability of the Company to proceed with the Exchange
Offer or have a material adverse effect on the Company if the Exchange
Offer is consummated; or
(d) all governmental approvals which the Company shall deem necessary
for the consummation of the Exchange Offer as contemplated hereby shall
have been obtained.
If the Company determines in good faith that any of the conditions are not
met, the Company may (i) refuse to accept any Original Notes and return all
tendered Original Notes to exchanging Holders, (ii) extend the Exchange Offer
and retain all Original Notes tendered prior to the expiration of the Exchange
Offer, subject, however, to the rights of holders to withdraw such Original
Notes (see "-- Withdrawal Rights") or (iii) waive certain of such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Original Notes which have not been withdrawn or revoked. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to all Registered Holders.
Holders have certain rights and remedies against the Company under the
Registration Rights Agreement. If, notwithstanding a failure of the conditions
stated above, (i) a registration statement concerning the Exchange Offer has not
been filed on or prior to the 120th day after the Closing Date, (ii) such
registration statement is not declared effective by the Commission on or prior
to the 180th day after the Closing Date, (iii) such registration statement is
declared effective by the Commission and the Company does not exchange the
Exchange Notes for all Original Notes validly tendered on or prior to the 225th
day after the Closing Date or (iv) a registration statement for an offering to
be made on a continuous basis pursuant to Rule 415 under the Securities Act has
been declared effective by the Commission and ceases to be effective or usable
during the 24 months after the Closing Date without being cured on the same day
(each, a "Registration Default"), then with respect to the first 90-day period
following the date on which such Registration Default occurs, Holders have the
right to receive, as liquidated damages, additional interest of 0.5% per annum
until the Registration Default has been cured. The amount of such additional
interest shall increase by 0.5% per annum at the beginning of each subsequent
90-day period until all Registration Defaults are cured; provided, that
29
<PAGE> 38
such additional interest shall not exceed 1.0% per annum at any one time. Such
conditions are not intended to modify those rights or remedies in any respect.
The foregoing conditions are for the benefit of the Company and may be
asserted by the Company in good faith regardless of the circumstances giving
rise to such conditions or may be waived by the Company in whole or in part at
any time and from time to time in its discretion. The failure by the Company at
any time to exercise 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 has
reserved the right, notwithstanding the satisfaction of each of the foregoing,
to terminate or amend the Exchange Offer.
EXCHANGE AGENT
has been appointed as Exchange Agent for the Exchange Offer.
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
<TABLE>
<S> <C> <C>
By Mail: By Hand Delivery: By Courier:
Confirm by Telephone:
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES; SOLICITATION OF TENDERS
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$0.7 million and include fees and expenses of the Exchange Agent and accounting
and legal fees.
The Company will pay all transfer taxes, if any, applicable to the exchange
of the Original Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes, or the Original Notes not tendered or tendered but
not accepted for exchange, are to be delivered to, or are to be registered or
issued in the name of, any person other than the Registered Holder of the
Original Notes tendered, or if tendered Original Notes are registered in the
name of any person other than the person signing the Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of the
Original Notes pursuant to the Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the original Registered Holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
30
<PAGE> 39
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus or the accompanying Letter of Transmittal. If given or made,
such information or representations must not be relied upon as having been
authorized by the Company. This Prospectus and the accompanying Letter of
Transmittal does not constitute an offer to sell, or a solicitation of an offer
to buy, the Exchange Notes in any jurisdiction where, or to any person to whom,
it is unlawful to make such an offer or a solicitation. Neither the delivery of
the Prospectus or the accompanying Letter of Transmittal, nor any sale made
thereunder shall, under any circumstances, create any implication that there has
not been any change in the facts set forth in this Prospectus or in the affairs
of the Company since the date hereof.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Original Notes, which is face value, as reflected in the Company's accounting
records on the date of the exchange. Accordingly, no gain or loss for accounting
purposes will be recognized. The costs of the Exchange Offer will be expensed
over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Original Notes who do not exchange their Original Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Original Notes as set forth in the legend
thereon. In general, the Original Notes may not be offered or sold, unless
registered under the Securities Act, except pursuant to an exemption from, or in
a transaction not subject to, the Securities Act and applicable state securities
laws. The Company does not intend to register the Original Notes under the
Securities Act. The Company believes that, based upon interpretations contained
in no-action letters issued to third parties by the Staff, the Exchange Notes
issued pursuant to the Exchange Offer in exchange for Original Notes may be
offered for resale, resold or otherwise transferred by holders thereof (other
than any such holder which is (i) an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act, (ii) a broker-dealer who acquired
the Original Notes directly from the Company or (iii) a broker-dealer who
acquired the Original Notes as a result of market making or other trading
activities) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holder's business and such holder is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes. Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution." If any Holder (other than a broker-dealer described in the
preceding sentence) has any arrangement or understanding with respect to the
distribution of the Exchange Notes to be acquired pursuant to the Exchange
Offer, such Holder (i) may not rely on the applicable interpretations of the
Staff and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction. In
addition, to comply with the securities laws of certain jurisdictions, if
applicable, the Exchange Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with.
FEDERAL INCOME TAX CONSEQUENCES
The exchange of Original Notes for Exchange Notes by holders should not be
a taxable exchange for federal income tax purposes, and holders should not
recognize any taxable gain or loss or any interest income as a result of such
exchange. See "Material United States Federal Income Tax Considerations."
OTHER
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Original Notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
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<PAGE> 40
To the extent that Original Notes are tendered and accepted in the Exchange
Offer, the trading market, if any, for the Original Notes could be adversely
affected. See "Risk Factors -- Consequences of Failure to Exchange Original
Notes." The Company may in the future seek to acquire untendered Original Notes
in open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Company has no present plan to acquire any Original
Notes which are not tendered in the Exchange Offer.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes. In consideration for issuing the Exchange Notes as contemplated
in this Prospectus, the Company will receive in exchange Original Notes in like
principal amount, which will be cancelled and as such will not result in any
increase in indebtedness of the Company.
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the Company
at December 31, 1997, (ii) such pro forma capitalization as adjusted to give
effect to the Completed Transactions consummated after December 31, 1997 and the
contribution to the Company from Chancellor Media of the net proceeds from the
1998 Equity Offering, but without giving effect to the Pending Transactions and
(iii) such pro forma capitalization as further adjusted to give effect to the
proposed Preferred Stock Repurchase. See "Pro Forma Financial Statements."
<TABLE>
<CAPTION>
COMPANY
AS ADJUSTED
FOR THE
COMPANY COMPLETED COMPANY
HISTORICAL TRANSACTIONS PRO FORMA
---------- ------------ -------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Long-term Debt:
Senior Credit Facility(1)...................... $1,573,000 $ 900,000(2) $1,084,466(2)
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
---------- ---------- ----------
Total Long-term Debt................... 2,573,000 1,900,000(2) 2,084,466(2)
Redeemable Preferred Stock:
12 1/4% Series A Senior Cumulative Exchangeable
Preferred Stock............................. 119,445 119,445 --(3)
12% Exchangeable Preferred Stock............... 211,763 211,763 --(3)
Stockholder's equity:
Common Stock................................... 1 1 1
Additional Paid-in Capital..................... 1,637,628 2,632,270 2,632,270
Accumulated Deficit............................ (157,422) (157,422) (234,387)(3)
---------- ---------- ----------
Total Stockholder's Equity.................. 1,480,207 2,474,849 2,397,884
---------- ---------- ----------
Total Capitalization................... $4,384,415 $4,706,057(2) $4,482,350(2)
========== ========== ==========
</TABLE>
- ---------------
(1) The Senior Credit Facility 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.
(2) Does not give effect to borrowings that the Company expects to make in order
to finance the Pending Transactions. The Company expects that it will
finance the Pending Transactions through borrowings of as much as
approximately $806.5 million under the Senior Credit Facility. Of the amount
required to finance the Capstar Transaction, the Company expects that $340.3
million will be required immediately upon consummation of the Capstar/SFX
Acquisition (which amount includes the Capstar Loan) and
32
<PAGE> 41
$244.2 million will be required over the three year period in which the
Capstar/SFX Stations will be acquired.
(3) Reflects the use of a portion of the net proceeds of Chancellor Media's 1998
Equity Offering which were contributed to CMCLA by Chancellor Media to pay
premiums and accrued and unpaid dividends on the proposed repurchase of all
of the outstanding shares of 12 1/4% Preferred Stock and 12% Preferred
Stock. No assurance can be given that the actual premiums paid in connection
with any repurchase by the Company will not be greater, perhaps by a
substantial amount, than the amounts assumed in the pro forma data. In
addition, there can be no assurance that any shares of 12 1/4% Preferred
Stock and 12% Preferred Stock will be repurchased by the Company. See "Risk
Factors -- Possible Non-Consummation of, or Increased Cost of, Proposed
Repurchase of 12 1/4% Preferred Stock and 12% Preferred Stock."
33
<PAGE> 42
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The selected consolidated historical financial data presented below as of
and for each of the five years in the period ended December 31, 1997 have been
derived from the annual audited consolidated financial statements of the Company
and its subsidiaries. The consolidated historical financial results of the
Company and its subsidiaries are not comparable from period to period because of
the acquisition and disposition of various radio stations and assets by the
Company and its subsidiaries during the periods covered (See "Pro Forma
Financial Information"). The following data should be read in conjunction with
the historical consolidated financial statements of the Company and its
subsidiaries and the related notes thereto, the unaudited pro forma condensed
consolidated financial statements of the Company and the related notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations," included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Gross revenues...................... $106,813 $125,478 $186,365 $ 337,405 $ 663,804
Net revenues........................ 93,504 109,516 162,931 293,850 582,078
Station operating expenses excluding
depreciation and amortization.... 60,656 68,852 97,674 174,344 316,248
Depreciation and amortization....... 33,524 30,596 47,005 93,749 185,982
Corporate general and administrative
expense.......................... 2,378 2,672 4,475 7,797 21,442
Other nonrecurring costs(1)......... 7,002 -- -- -- --
-------- -------- -------- ---------- ----------
Operating income (loss)............. (10,056) 7,396 13,777 17,960 58,406
Interest expense.................... 13,878 13,809 19,199 37,527 85,017
Other (income) expense, net(2)...... (3,185) (6,452) 236 (477) (19,919)
-------- -------- -------- ---------- ----------
Income (loss) before income taxes
and extraordinary item........... (20,749) 39 (5,658) (19,090) (6,692)
Income tax expense (benefit)........ -- -- 192 (2,896) 7,802
-------- -------- -------- ---------- ----------
Income (loss) before extraordinary
item............................. (20,749) 39 (5,850) (16,194) (14,494)
Extraordinary loss on early
extinguishment of debt(3)........ -- 3,585 -- -- 4,350
-------- -------- -------- ---------- ----------
Net loss............................ (20,749) (3,546) (5,850) (16,194) (18,844)
Preferred stock dividends(4)........ -- -- -- -- 12,901
-------- -------- -------- ---------- ----------
Net loss attributable to common
stock............................ $(20,749) $ (3,546) $ (5,850) $ (16,194) $ (31,745)
======== ======== ======== ========== ==========
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- ---------- ----------
CONSOLIDATED BALANCE SHEET DATA AT
YEAR-END:
Working capital..................... $ 7,873 $ 15,952 $ 30,556 $ 41,421 $ 112,644
Intangible assets (net of
accumulated amortization)........ 212,517 233,494 458,787 853,643 4,404,443
Total assets........................ 283,505 297,990 552,347 1,020,959 4,961,477
Long-term debt (including current
portion)(5)...................... 152,000 174,000 201,000 358,000 2,573,000
Redeemable preferred stock.......... -- -- -- -- 331,208
Stockholder's equity................ 120,968 112,353 304,577 549,411 1,480,207
OTHER FINANCIAL DATA:
Broadcast cash flow(6)........... 32,848 40,664 65,257 119,506 265,830
Ratio of earning to fixed
charges(7)..................... -- 1.0 -- -- --
</TABLE>
See accompanying notes to Selected Consolidated Financial Data
34
<PAGE> 43
NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA
(1) Consists of a non-cash charge resulting from the grant of employee stock
options prior to Chancellor Media's initial public offering.
(2) Includes gain on disposition of assets of $3,392, $6,991 and $18,380 in
1993, 1994 and 1997, respectively.
(3) In connection with its debt refinancing in 1994 and 1997, the Company wrote
off the unamortized balance of deferred debt issuance costs of $3,585 and
$4,350, respectively, as an extraordinary charge.
(4) Represents preferred stock dividends on the 12% Preferred Stock and the
12 1/4% Preferred Stock for the period September 5, 1997 to December 31,
1997. Such preferred stock was issued by the Company on September 5, 1997
in connection with the Chancellor Merger in exchange for substantially
identical securities originally issued by CRBC.
(5) The current portion of the Company's long-term debt was $10,625, $4,000,
$4,000, $26,500 and $0 at December 31, 1993, 1994, 1995, 1996 and 1997,
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.
(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.
35
<PAGE> 44
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Since 1995, the Company has engaged in an acquisition strategy
concentrating on expanding the Company's presence in the nation's largest radio
markets. Implementation of this acquisition strategy was significantly
accelerated in 1996 to date in 1998 due to passage of the 1996 Act and the
associated relaxation of national and local ownership limits. See
"Business -- Federal Regulation of Radio Broadcasting Industry -- Ownership
Matters." For a discussion of the various transactions completed and agreements
entered into since January 1, 1997 as part of the Company's acquisition
strategy, see "Business -- Recent Developments." For a discussion of the
Company's operating strategy, see "Business -- Company Strategy."
The Company's current station portfolio consists of 97 stations (70 FM and
27 AM), including a total of 11 superduopolies in seven of the nation's 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. Consummation of
the Pending Transactions will result in a net increase of nine FM stations and
two AM stations and will add the San Diego market to the Company's portfolio. In
addition, consummation of the Pending Transactions will increase the number of
superduopolies in the Company's station portfolio to 14, including two new
superduopolies in the nation's 12 largest radio markets -- Dallas/Ft. Worth and
Houston and one other large market -- Pittsburgh.
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.
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 (as
defined), the Katz Acquisition (as defined) and various other station
acquisitions and dispositions discussed in "Business -- Recent Developments."
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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 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% or $146.3 million 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 Viacom Acquisition and the Chancellor Merger, as well as other
acquisitions completed during 1997.
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 (as defined
below) 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.
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
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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, supplemented by cash flow from operations
not required to fund operational requirements and debt service, to fund
implementation of the Company's acquisition strategy.
On December 22, 1997, the Company completed the Offering, pursuant to Rule
144A under the Securities Act of 1933, as amended, of $500.0 million aggregate
principal amount of Original Notes. The net proceeds of the Offering of
approximately $485.0 million were used to reduce borrowings under the revolving
credit portion of the Company's Senior Credit Facility.
On March 13, 1998, Chancellor Media completed a secondary public 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 will be used for general corporate purposes,
including the possible repurchase of the outstanding shares of 12 1/4% Preferred
Stock and 12% Preferred Stock. Pending any such use, net proceeds were used to
reduce borrowings under the revolving credit portion of the Company's Senior
Credit Facility, and any excess was invested in short-term investment grade
securities. Amounts not used in connection with the proposed repurchase of the
12% Preferred Stock and the 12 1/4% Preferred Stock will be available for
general corporate purposes (including financing of the Pending Transactions),
subject to compliance with certain conditions.
The total cash financing required to consummate the Pending Transactions is
expected to be $806.5 million. Of this amount, approximately $4.0 million has
already been advanced by the Company in the form of escrow deposits or other
upfront payments. Accordingly, the Company will require approximately $802.5
million in additional financing to consummate the Pending Transactions. Of such
amount, a total of $584.5 million in cash will be required to finance the
Capstar Transaction. The Company expects that $340.3 million will
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be required for the Capstar Transaction immediately upon the consummation of the
Capstar/SFX Acquisition and $244.2 million will be required for the Capstar
Transaction over the three year period in which the Capstar/SFX Stations will be
acquired. The Company anticipates that it will obtain any additional financing
needed to complete the Pending Transactions through borrowings under the Senior
Credit Facility and excess net proceeds resulting from the 1998 Equity Offering.
The Company from time to time may explore other financing alternatives to
supplement the financing available under the Senior Credit Facility, including
the public or private issuance of debt, common equity or preferred equity
securities.
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 $1.25 billion revolving facility (the
"Revolving Loan Facility") and a $500.0 million 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 $1.6 billion and $900.0 million, respectively. At March 1, 1998,
the Company had drawn $900.0 million of the Term Loan Facility and $698.0
million of the Revolving Loan Facility. Upon consummation of the 1998 Equity
Offering, on March 13, 1998, all amounts outstanding under the Revolving Loan
Facility on such date were repaid. The aggregate commitment under the Revolving
Loan Facility remains available for reborrowing, subject to compliance with the
conditions contained in the Senior Credit Facility. 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 $4.4 million (net of
a tax benefit of $2.3 million) as an extraordinary charge. 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 and its
subsidiaries have guaranteed those obligations.
Notes. The Company is required to pay interest on the 9 3/8% Notes, the
8 3/4% Notes, the 10 1/2% Notes and the Original Notes (collectively, the
"Senior Subordinated Notes"). Interest payment requirements of the Company on
the Senior Subordinated Notes are $87.4 million per year.
Redeemable Preferred Stock. The Company is not required to pay cash
dividends on its 12 1/4% Preferred Stock and 12% Preferred Stock through
February 14, 2001 and January 14, 2002, respectively, although the Company must
incur accretion or issue additional shares of such preferred stock,
respectively, in lieu of cash dividends until such times. Although it is not
obligated to continue doing so, the Company has paid the most recent dividends
on the 12% Preferred Stock and the 12 1/4% Preferred Stock in cash. Dividend
requirements of the Company on its 12 1/4% Preferred Stock and its 12% Preferred
Stock are $40.0 million per year (assuming continued payment of dividends in
cash).
RECENTLY-ISSUED ACCOUNTING PRINCIPLES
The Company adopted the provisions of SFAS No. 128, Earnings Per Share,
effective for the year ended December 31, 1997. This Statement establishes new
standards for computing and presenting earnings per share and requires
restatement of all prior period earnings per share data. The adoption of this
Statement resulted in the dual presentation of basic and diluted earnings per
share on the Company's income statement. In accordance with this statement, the
Company has applied these provisions on a retroactive basis. Basic and diluted
loss per common share does not differ from previously reported primary loss per
share information for the years ended December 31, 1993, 1994, 1995 and 1996 due
to the Company's loss position.
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 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
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<PAGE> 48
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.
YEAR 2000 ISSUE
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the Year 2000 Issue (as defined)
and has developed an implementation plan. 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 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 are Year 2000 compliant. Costs associated with
ensuring the Company's systems are Year 2000 compliant are expected to be
minimal. 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 an impact on the operations of the Company.
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BUSINESS
The Company is one of the largest radio broadcasting companies in the
United States. Upon consummation of the Pending Transactions, the Company will
own and operate 108 radio stations (79 FM and 29 AM) in 22 large markets,
including each of the nation's 12 largest radio revenue markets. Based on the
most recent industry data available to the Company, the Company's portfolio will
include the first or second ranked station cluster in terms of revenue share in
15 markets. On a pro forma basis after giving effect to the Completed
Transactions, the financing transactions undertaken by the Company and CRBC
during 1997 (including the Offering), the contribution to the Company from
Chancellor Media of the net proceeds from the 1998 Equity Offering and the
proposed Preferred Stock Repurchase, but without giving effect to the Pending
Transactions, the Company would have had net revenue and broadcast cash flow of
approximately $1.0 billion and $431.6 million, respectively, for the year ended
December 31, 1997, its pro forma broadcast cash flow margin for such period
would have been 43%, and approximately 64% of pro forma net revenue for such
period would have been generated by markets in which the Company owns
superduopolies.
The Company's strategy has been to secure leading clusters of radio
stations in the markets in which it operates. The Company's current station
portfolio consists of 97 stations (70 FM and 27 AM), including a total of 11
superduopolies in seven of the nation's 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. Consummation of the Pending Transactions will result in a
net increase of nine FM stations and two AM stations and will add the San Diego
market to the Company's portfolio. In addition, consummation of the Pending
Transactions will increase the number of superduopolies in the Company's station
portfolio to 14, including two new superduopolies in the nation's 12 largest
radio markets -- Dallas/Ft. Worth and Houston -- and one in another large
market -- Pittsburgh. See "Recent Developments -- Pending Transactions."
As a complement to its radio broadcasting operations, the Company has
recently 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 base of
approximately 62 million listeners (including approximately 45 million listeners
from the Company's portfolio of stations) to network advertisers.
The Company's portfolio is geographically diversified and employs a wide
variety of programming formats, including adult contemporary, contemporary hit
radio, urban, jazz, country, oldies, news/talk, rock and sports. Each of the
Company's stations targets a specific demographic audience within a market, with
the majority of the stations appealing primarily to 18 to 34 or 25 to 54 year
old men and/or women, the demographic groups most sought after by advertisers.
Management believes that, because of the size and diversity of its station
portfolio, 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 12% of the Company's pro forma broadcast cash flow for the year ended
December 31, 1997 (giving effect to the Completed Transactions, but without
giving effect to the Pending Transactions).
The Company also owns Katz, a full-service media representation firm
serving multiple types of electronic media, with a leading market share in the
representation of radio and 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 Company's principal executive office is located at 433 East Las Colinas
Boulevard, Suite 1130, Irving, Texas 75039, and its telephone number is (972)
869-9020.
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RECENT DEVELOPMENTS
The AMFM Radio Networks
In September 1997, the Company announced the formation of a national radio
network, The AMFM Radio Networks, and the appointment of David Kantor to the
position of Senior Vice President with responsibility for all of the Company's
radio network operations. Prior to joining the Company, Mr. Kantor served as
President of ABC Radio Networks, the largest commercial radio network in the
United States. The AMFM Radio Networks began broadcasting advertising over the
Company's portfolio of stations and stations owned by Capstar in January 1998.
Management believes that the network will allow the Company to further leverage
this broad station base, personalities and advertising inventory by delivering a
national base of approximately 62 million listeners (including approximately 45
million listeners from the Company's portfolio of stations) to network
advertisers.
Summary of Acquisitions and Dispositions Since January 1, 1997
Since January 1, 1997, the Company has completed (i) the Chancellor Merger
(as defined), which added 52 radio stations (36 FM and 16 AM) to the Company's
portfolio of stations, for a net purchase price of approximately $2.0 billion,
(ii) the acquisition of 23 radio stations for a net purchase price of
approximately $1.5 billion, (iii) the exchange of ten stations and $66.5 million
in cash for eight stations and $9.5 million in cash, (iv) the sale or other
disposition of 10 radio stations for $269.3 million in cash and a promissory
note for $18.0 million and (v) the acquisition of Katz, a full service media
representation firm, for a net purchase price of approximately $379.1 million.
In addition, the Company has entered into agreements to purchase an additional
13 radio stations in exchange for two stations and $656.5 million in cash and a
leading independent television representation firm, Petry, for $150.0 million in
cash (collectively, the "Pending Transactions"). There can be no assurance that
the Pending Transactions will be consummated.
Transactions Completed Since January 1, 1997
On January 31, 1997, the Company acquired WWWW-FM and WDFN-AM in Detroit
from affiliates of Chancellor Broadcasting Company ("Chancellor") 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 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. in return for WWRC-AM in Washington, D.C. 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.
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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, 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 (as defined) 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, the Company issued 5,990,000 shares of $3.00
Convertible Exchangeable Preferred Stock (the "$3.00 Convertible Preferred
Stock") for net proceeds of $287.8 million which were 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 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.
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 $44.0 million in cash and recognized a gain of $1.7 million.
Simultaneously therewith, Chancellor sold the call letters "KSAN-FM" (which
Chancellor previously used in San Francisco) to Susquehanna. On July 7, 1997,
the Company and Chancellor 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, Chancellor 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 $80.0 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
Chancellor whereby the Company began managing certain limited functions of
Chancellor'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 bears interest at 7 3/4%, with a
balloon principal payment due four years after closing. At closing, Douglas was
required to post a
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$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, Chancellor Radio
Broadcasting Company ("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, 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 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 the
Company's Common Stock, resulting in the issuance of 34,617,460 shares of the
Company'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% Senior Subordinated Notes due 2004 and $200.0 million 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 (the "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% 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 $120.2 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 (the "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, 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 (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 $149.6 million, (ii)
the assumption of long-term debt of KMG and its subsidiaries of $222.0 million
which included $122.0 million of borrowings outstanding under the KMG senior
credit facility and $100.0 million of 10 1/2% Senior Subordinated Notes due 2007
of Katz Media Corporation (a subsidiary of KMG) and (iii) estimated acquisition
costs of $7.5 million.
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 Chancellor 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.
On April 3, 1998, the Company completed its exchange of WTOP-AM in
Washington, KZLA-FM in Los Angeles and WGMS-FM in Washington plus $63.0 million
in cash to Bonneville in return for WBIX-FM
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<PAGE> 53
in New York, KLDE-FM in Houston and KBIG-FM in Los Angeles. The Company had
previously been operating 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.
Pending Transactions
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 $72.0 million in cash (including $4.0 million paid by the Company
in escrow), plus an amount equal to the value assigned to certain accounts
receivable for the stations (the "Capitol Broadcasting Acquisition"). Although
there can be no assurance, the Company expects that the Capitol Broadcasting
Acquisition will be consummated in the second quarter of 1998.
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 WVTY-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 (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 Company would exchange
WAPE-FM and WFYV-FM in Jacksonville (valued for purposes of the Capstar
Transaction at $53.0 million) plus $90.3 million in cash for Capstar/SFX Station
KODA-FM in Houston. The Company would pay approximately $494.3 million 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 $250.0 million (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 $650.0 million in equity investments that are
subordinate to the Capstar Loan between January 1, 1998 and the consummation of
the Capstar/SFX Acquisition. Hicks Muse, which is a substantial shareholder of
the Company, controls Capstar, and certain directors of the Company are
directors and/or executive officers of Capstar and/or Hicks Muse. The Capstar
Transaction was approved by the disinterested directors of the Company's Board
of Directors. Capstar has informed the Company that Capstar expects that the
Capstar/SFX Acquisition will be consummated in the second quarter of 1998.
On April 8, 1998, the Company entered into an agreement to acquire Petry, a
leading independent television representation firm, for approximately $150.0
million in cash (the "Petry Acquisition"). Although there can be no assurance,
the Company expects that the Petry Acquisition will be consummated in the third
or fourth quarter of 1998.
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. 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.
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<PAGE> 54
BROADCAST PROPERTIES
The following table sets forth selected information with respect to the
portfolio of radio stations that are owned by the Company as of April 7, 1998 or
would be owned upon consummation 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 4.5 Urban Contemporary Women 18-34 2
KYSR-FM 2.8 Hot Adult Contemporary Persons 25-54 12
KBIG-FM 2.7 Adult Contemporary Persons 25-54 13
KLAC-AM 2.3 Adult Standards/Sports Persons 35-64 21
KCMG-FM(5) 1.4 Adult Contemporary Women 25-54 22
New York, NY........ 2 WLTW-FM 6.2 Soft Adult Contemporary Persons 25-54 1
WKTU-FM 4.6 Rhythmic Contemporary Persons 25-54 5
Hits
WHTZ-FM 3.9 Contemporary Hit Radio Persons 18-34 5
WBIX-FM(6) 1.5 Hot Adult Contemporary Women 25-49 13
WAXQ-FM 1.4 Classic Rock Persons 25-54 17
Chicago, IL......... 3 WGCI-FM 7.2 Urban Oldies Persons 25-54 1
WNUA-FM 4.8 Contemporary Jazz Persons 25-54 4
WLIT-FM 4.5 Soft Adult Contemporary Persons 25-54 2
WVAZ-FM 4.3 Black Adult Women 25-54 3
WRCX-FM 3.0 Mainstream Rock Men 18-34 2
WGCI-AM 1.7 Urban/R&B Persons 18-34 20
WMVP-AM 1.1 Personality/Sports Men 25-54 22
San Francisco, CA... 4 KYLD-FM 4.2 Contemporary Hits Persons 18-34 1
KMEL-FM 3.4 Contemporary Hits Persons 18-34 2
KKSF-FM 3.3 Contemporary Jazz Persons 25-54 2
KABL-AM 3.2 Adult Standards Persons 35-64 13
KISQ-FM 3.0 70's Oldies Persons 25-54 4
KIOI-FM 2.9 Adult Contemporary Women 25-54 1
KNEW-AM 1.4 Country/Sports Persons 25-54 37
Dallas, TX.......... 5 KHKS-FM 7.5 Contemporary Hits Women 18-34 1
KZPS-FM 3.9 Classic Rock Persons 25-54 4
KDGE-FM 2.7 Alternative Rock Persons 18-34 6
KSKY-AM N/M Inspirational N/M N/M
KBFB-FM* 2.6 Adult Contemporary Persons 25-54 14
KTXQ-FM* 2.4 Album Rock Persons 18-49 13
Philadelphia, PA.... 6 WDAS-FM 5.5 Urban Contemporary Persons 25-54 2
WUSL-FM 4.7 Urban Contemporary Women 18-34 4
WJJZ-FM 4.2 Contemporary Jazz Persons 35-54 7
WIOQ-FM 3.2 Contemporary Hit Radio/ Women 18-34 6
Dance
WYXR-FM 3.0 Adult Contemporary Women 18-49 3
WDAS-AM 1.2 Gospel N/M N/M
Washington, D.C..... 7 WMZQ-FM 5.1 Country Persons 25-54 3
WASH-FM 4.2 Adult Contemporary Women 25-54 2
WBIG-FM 4.1 Oldies Persons 25-54 6
WGAY-FM 3.7 Adult Contemporary Persons 35-64 8
WTEM-AM 1.1 Sports/Talk Men 18-49 17
WWRC-AM 0.9 News/Talk Persons 35-64 20
WWDC-FM* 4.0 Adult Rock Persons 18-34 4
WWDC-AM* 0.5 Nostalgia Persons 55+ 11
</TABLE>
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<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>
Houston, TX......... 8 KKBQ-FM 4.5 Fresh Country Persons 25-54 6
KLDE-FM 4.5 Oldies Persons 25-54 4
KLOL-FM 4.1 Album Rock Men 18-34 2
KTRH-AM 3.9 News/Sports Men 25-54 17
KBME-AM(7) 0.2 Popular Standards Persons 35-64 34
KODA-FM* 7.1 Adult Contemporary Persons 25-54 1
KKRW-FM* 3.6 Classic Rock Persons 25-54 7
KQUE-AM* 1.8 Nostalgia Persons 35-64 19
Atlanta, GA......... 9 WFOX-FM 4.2 Oldies Persons 25-54 7
Boston, MA.......... 10 WJMN-FM 6.2 Contemporary Hits Women 18-24 1
WXKS-FM 5.9 Contemporary Hits Women 25-34 1
WXKS-AM 2.5 Nostalgia Women 45-54 14
Detroit, MI......... 11 WJLB-FM 7.9 Urban Contemporary Persons 18-34 1
WNIC-FM 7.4 Adult Contemporary Women 25-54 1
WKQI-FM 4.1 Adult Contemporary Women 25-54 5
WMXD-FM 3.9 Black Adult Persons 25-54 4
WWWW-FM 3.4 Country Women 25-54 9
WDFN-AM 1.8 Sports/Talk Men 25-49 7
WYUR-AM N/M Brokered(8) N/M N/M
Miami/Ft.
Lauderdale, FL..... 12 WEDR-FM 4.9 Urban Contemporary Persons 25-54 4
WVCG-AM N/M Brokered(9) N/M N/M
Denver, CO.......... 14 KXKL-FM 4.7 Oldies Persons 25-54 7
KALC-FM 4.7 Hot Adult Contemporary Persons 18-34 3
KIMN-FM 3.4 70's Oldies Persons 25-54 11
KXPK-FM 3.0 Alternative Rock Persons 18-49 10
KVOD-FM 2.2 Classical Persons 25-54 19
KRRF-AM 0.4 Talk Men 25-54 21
Minneapolis/St.
Paul, MN........... 15 KEEY-FM 8.0 Country Persons 25-54 2
KDWB-FM 7.8 Contemporary Hit Radio Persons 18-34 2
KQQL-FM 4.5 Oldies Persons 25-54 6
KTCZ-FM 4.0 Progressive Album Rock Men 25-49 4
WRQC-FM 3.8 Album Rock Men 18-34 2
KFAN-AM 2.6 Sports Men 18-49 4
KXBR-AM 0.5 Classic Country Persons 35-64 16
Phoenix, AZ......... 16 KOY-AM 5.3 Adult Standards Persons 35-64 10
KMLE-FM 5.2 Country Persons 25-54 4
KOOL-FM 5.1 Oldies Persons 25-54 2
KYOT-FM 3.6 Contemporary Jazz Persons 25-54 8
KZON-FM 3.0 Alternative Rock Persons 18-34 3
KISO-AM N/M Urban Adult Contemporary Persons 25-54 N/M
San Diego, CA....... 17 KYXY-FM* 5.1 Adult Contemporary Persons 25-54 3
KPLN-FM* 1.8 Classic Rock Persons 25-54 13
Cincinnati, OH...... 19 WUBE-FM(10) 9.4 Country Persons 25-54 1
WYGY-FM(10) 4.0 Young Country Men 18-34 8
WBOB-AM 0.9 Sports/Talk Men 18-49 15
WUBE-AM N/M Nostalgia Persons 35-64 N/M
Pittsburgh, PA...... 24 WWSW-FM 5.1 Oldies Persons 25-54 3
WWSW-AM(11) 0.4 Oldies Persons 25-54 26
WDVE-FM* 9.2 Rock Persons 25-54 1
WXDX-FM* 5.0 Alternative Rock Persons 18-34 2
WJJJ-FM* 3.5 Smooth Jazz Persons 25-54 10
WVTY-FM* 3.2 Adult Contemporary Persons 25-54 11
</TABLE>
47
<PAGE> 56
<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>
Orlando, FL......... 26 WJHM-FM 6.6 Urban Contemporary Persons 18-34 3
WOCL-FM 6.4 Oldies Persons 25-54 7
WXXL-FM 6.1 Contemporary Hit Radio Persons 18-34 2
WOMX-FM 5.0 Adult Contemporary Persons 25-54 8
Sacramento, CA...... 28 KFBK-AM 9.6 News/Talk Persons 25-54 2
KHYL-FM 4.2 Oldies Persons 25-54 5
KGBY-FM 4.0 Adult Contemporary Women 25-54 2
KSTE-AM 2.3 Talk Persons 25-54 15
Jacksonville, FL.... 44 WFYV-FM+ 9.4 Album Oriented Rock Men 25-54 1
WAPE-FM+ 7.7 Contemporary Hit Radio Women 18-34 1
Nassau/Suffolk
(Long Island) 45 WALK-FM 5.3 Adult Contemporary Persons 25-54 2
NY(12)...........
WALK-AM N/M Adult Contemporary Persons 35-64 N/M
Riverside/San 64 KGGI-FM 7.0 Contemporary Hit Radio Persons 18-34 1
Bernardino, CA.....
KMRZ-AM 0.5 Oldies Men 25-54 44
</TABLE>
- ---------------
N/M: Not meaningful
+ Indicates station to be disposed 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, Fall 1997, Local Market
Reports in the specified markets for listeners age 12+, Monday to Sunday,
6:00 a.m. to Midnight. Copyright, The Arbitron Company.
(4) Information derived from The Arbitron Company, Fall 1997, Local Market
Reports in the specified markets for the Target Demographics specified for
listening Monday to Sunday, 6:00 a.m. to Midnight. Copyright, The Arbitron
Company.
(5) The format of KCMG-FM (formerly KIBB-FM) was changed from Rhythmic Adult
Contemporary with a target demographic of Persons 25-54 to Adult
Contemporary with a target demographic of Women 25-54 effective November
19, 1997. The station ranking in the target demographic for KCMG-FM for
Fall 1997 is based on the new target demographic of Women 25-54.
(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 Fall
1997 is based on the prior target demographic of Women 25-44.
(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 target demographic for KBME-AM for Fall 1997 is based on the
prior target demographic of Persons 25-54.
(8) The Company has historically brokered WYUR-AM to third parties.
(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) Nassau/Suffolk (Long Island) may be considered part of the greater New York
market, although it is reported separately as a matter of convention.
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<PAGE> 57
COMPANY STRATEGY
The Company's senior management team has extensive experience in acquiring
and operating large radio station groups. The Company's business strategy
historically has been to assemble and operate radio station clusters in order to
maximize broadcast cash flow generated in each market. This strategy relies on
the following six key elements.
Create Large Market Superduopolies. The Company seeks to be the owner and
operator of the leading superduopoly in the largest markets in the United
States. Management believes that the large revenue base in these markets, in
conjunction with operating synergies achievable through the operation of
multiple stations, enable it to appeal to a wider universe of national and local
advertisers and to achieve a greater degree of profitability. The Pending
Transactions, if consummated, will complement the Company's existing stations in
the Dallas, Houston, Washington, D.C. and Pittsburgh markets as well as allow
the Company to expand into a new large market -- San Diego. The Company expects
to continue to selectively pursue acquisition opportunities in the major markets
in which it competes as well as in other markets.
Maximize Superduopoly Revenue and Expense Synergies. The Company seeks to
capitalize on the revenue growth and expense savings opportunities of
superduopolies that have been created or that will be created. Superduopolies
have only been permissible since the passage of the 1996 Act in January 1996.
Management believes that substantial benefits can be derived from the successful
integration of these station cluster groups. Management also believes that radio
station clusters can attract increased revenues in a market by delivering larger
combined audiences to advertisers and by engaging in joint marketing and
promotional activities. In addition, management expects to realize significant
expense savings through the consolidation of facilities and through the
economies of scale created in areas such as national representation commissions,
employee benefits, insurance premiums and other operating costs.
Establish Strong Listener Loyalty. Management believes that strong listener
familiarity with a given radio station produces listener loyalty. Management
seeks to establish this familiarity through a variety of programming and
marketing techniques, including the development of high-profile on-air
personalities and creative station-sponsored promotional events, all of which
are designed to secure heightened listener awareness. The Company also conducts
extensive market research to help identify programming format opportunities and
attract new listeners, as has been the case with WKTU-FM in New York. After
operating WKTU-FM for nine months under the call letters and country music
format inherited from a prior operator, in February 1996 the Company began to
operate WKTU-FM as a rhythmic contemporary hits station. According to Arbitron,
WKTU-FM was ranked eleventh in its target demographic group as a country
station, and was ranked first in several key demographic groups (including its
target demographic group) in the first full ranking period after the station
changed its format. The station has continued to rank among the top five
stations in its target demographic group in subsequent periods. Management
believes that institutionalizing its radio stations in their markets through
programming, marketing and research ensures steady long-term audience share
ratings.
Maintain Strict Cost Controls. Management maintains a company-wide focus on
cost controls in an effort to maximize broadcast cash flow margins. Management
reviews station spending on a monthly basis. In addition, corporate level
employees maintain weekly sales reporting systems designed to enable management
to evaluate station performance on a current basis. The Company's focus on
maximizing superduopoly revenues and maintaining cost controls is reflected by
the fact that, during 1995, 1996 and 1997, the Company has achieved broadcast
cash flow margins of 40% or more. The Company also carefully monitors capital
expenditures.
Develop Experienced, Incentivized Management Team. The Company believes
that management depth is critical to achieving superior operating performance in
a portfolio as large as the Company's. The Company's senior management team
collectively has an aggregate of more than 45 years of radio industry operating
experience. This senior management team is supported by an experienced team of
veteran group operators and station general managers. At the station level, the
Company seeks to incentivize its individual radio station managers and sales
forces to outperform revenue and broadcast cash flow budget expectations by
granting quarterly and annual performance measurement-based bonuses. The Company
believes that the
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<PAGE> 58
incentives it offers to its employees, as well as its stature in the radio
industry, will enable it to continue to be successful in recruiting top industry
employees.
Maximize After Tax Cash Flow. By emphasizing the revenue and expense
synergies achievable through the assembly and operation of superduopolies and by
carefully monitoring operating costs, the Company seeks to maximize broadcast
cash flow and, ultimately, after tax cash flow (broadcast cash flow less
corporate general and administrative expenses, debt service, tax payments and
dividend requirements). This focus on after tax cash flow should facilitate
reduction of leverage without undue dependence on capital markets and position
the Company to pursue attractive acquisitions.
Related Business Expansion. In addition to the foregoing six key elements,
the Company seeks to further leverage its radio expertise and expand into
industries related to the operation of radio stations. In this regard, the
Company formed a national radio network, The AMFM Radio Networks, in September
1997 and acquired Katz, a full-service media representation firm in October
1997. The Company has also recently begun exploring the acquisition of
additional complementary media businesses, particularly businesses with
significant after tax cash flow generating potential, including radio stations
in medium-sized markets, television, outdoor advertising, and similar
international media opportunities. There can be no assurance that these plans
will ultimately be successful.
ADVERTISING
The primary source of the Company's radio revenues is the sale of
broadcasting time for local, regional and national advertising. On a pro forma
basis, giving effect to the Completed Transactions (but without giving effect to
the Pending Transactions), approximately 70% of the Company's gross radio
revenues would have been generated from the sale of local advertising in 1997.
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 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
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<PAGE> 59
amortizes the income associated with a sellout of an existing client's contract
over the remaining life of the contract sold.
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, direct broadcast satellite
("DBS") systems and other digital audio broadcasting formats to local and
national audiences. In addition, the FCC has auctioned spectrum for a new
satellite-delivered Digital Audio Radio Service ("DARS"). These actions may
result in the introduction of several new national or regional satellite radio
services with sound quality equivalent to compact discs. Another possible
competitor to traditional radio is In Band On Channel ("IBOC") digital radio.
IBOC could provide multi-channel, multi-format digital radio services in the
same band width currently occupied by traditional AM and FM radio services. 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.
FEDERAL REGULATION OF RADIO BROADCASTING INDUSTRY
Introduction. The radio broadcasting industry is subject to extensive and
changing regulation over, among other things, program content, technical
operations and business and employment practices.
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
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<PAGE> 60
licensee (and proposed licensee) and those persons or entities that have
"attributable" interests, and compliance with the Anti-Drug Abuse Act of 1988.
Among other things, the FCC assigns frequency bands for radio broadcasting;
determines the particular frequencies, locations and operating power of radio
broadcast stations; issues, renews, revokes and modifies radio broadcast station
licenses; regulates equipment used by radio broadcast stations; adopts and
implements regulations and policies that directly or indirectly affect the
ownership, operation, program content and employment and business practices of
radio broadcast stations; and has the power to impose penalties for violations
of its rules and the Communications Act.
The following is a brief summary of certain provisions of the
Communications Act and specific FCC rules and policies. Reference should be made
to the Communications Act, FCC rules, and the public notices and rulings of the
FCC for further information concerning the nature and extent of federal
regulation of radio broadcast stations.
Failure to observe these or other FCC rules and policies may result in the
imposition of various sanctions, including admonishment, monetary forfeitures,
the grant of "short" (less than the maximum eight-year term) renewal terms or,
for particularly egregious violations, the denial of a license renewal
application, the revocation of FCC licenses, or the denial of FCC consent to
acquire additional broadcast properties.
License Renewal. Radio broadcast licenses are granted for maximum terms of
up to eight years. They may be renewed through an application to the FCC, and,
in certain instances, licensees are entitled to renewal expectancies. During
certain periods when a renewal application is pending, competing applicants may
file for the radio frequency being used by the renewal applicant, although the
FCC is prohibited from considering such competing applications if the existing
license has satisfied certain obligations. Petitions to deny license renewals
can be filed by interested parties, including members of the public. The FCC is
required to hold hearings on a renewal application in certain circumstances.
The following table sets forth the date of acquisition by the Company of
the radio stations actually owned by the Company as of April 7, 1998 or would be
owned upon consummation 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 12/97*
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 6/98
WKTU-FM..................... New York, NY 5/95 103.5 MHz 6/98
WHTZ-FM..................... New York, NY 9/97 100.3 MHz 6/98
WBIX-FM..................... New York, NY 4/98 105.1 MHz 6/98
WAXQ-FM..................... New York, NY 7/97 104.3 MHz 6/98
WGCI-FM..................... Chicago, IL 12/97 107.5 MHz 12/03
WNUA-FM..................... Chicago, IL 1/96 95.5 MHz 12/03
WLIT-FM..................... Chicago, IL 9/97 93.9 MHz 12/03
WVAZ-FM..................... Chicago, IL 5/95 102.7 MHz 12/03
WRCX-FM..................... Chicago, IL 12/93 103.5 MHz 12/03
WGCI-AM..................... Chicago, IL 12/97 1390 kHz 12/03
WMVP-AM..................... Chicago, IL 5/84 1000 kHz 12/03
</TABLE>
52
<PAGE> 61
<TABLE>
<CAPTION>
DATE OF EXPIRATION DATE
STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE
------- --------- ----------- --------- ---------------
<S> <C> <C> <C> <C>
KYLD-FM..................... San Francisco, CA 9/97 94.9 MHz 12/97*
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*
KIOI-FM..................... San Francisco, CA 4/94 101.3 MHz 12/97*
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 8/98
WUSL-FM..................... Philadelphia, PA 5/97 98.9 MHz 8/98
WJJZ-FM..................... Philadelphia, PA 1/96 106.1 MHz 8/98
WIOQ-FM..................... Philadelphia, PA 5/97 102.1 MHz 8/98
WYXR-FM..................... Philadelphia, PA 1/96 104.5 MHz 8/98
WDAS-AM..................... Philadelphia, PA 5/97 1480 kHz 8/98
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. 980
4/97 kHz(2) 10/03
WWRC-AM(2).................. Washington, D.C. 570
9/97 kHz(2) 10/03
WWDC-FMS.................... Washington, D.C. Pending 101.1 MHz 10/03
WWDC-AMS.................... Washington, D.C. Pending 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-FMS.................... Houston, TX Pending 99.1 MHz 8/05
KKRW-FMS.................... Houston, TX Pending 93.7 MHz 8/05
KQUE-AMS.................... Houston, TX Pending 1290 kHz 8/97*
WFOX-FM..................... Atlanta, GA 9/97 97.1 MHz 4/03
WJMN-FM..................... Boston, MA 1/96 94.5 MHz 4/98*
WXKS-FM..................... Boston, MA 1/96 107.9 MHz 4/05
WXKS-AM..................... Boston, MA 1/96 1430 kHz 4/98*
WJLB-FM..................... Detroit, MI 4/97 97.9 MHz 10/03
WNIC-FM..................... Detroit, MI 5/95 100.3 MHz 10/03
WKQI-FM..................... Detroit, MI 5/95 95.5 MHz 10/03
WMXD-FM..................... Detroit, MI 4/97 92.3 MHz 10/03
WWWW-FM..................... Detroit, MI 1/97 106.7 MHz 10/03
WDFN-AM..................... Detroit, MI 1/97 1130 kHz 10/03
WYUR-AM..................... Detroit, MI 5/95 1310 kHz 10/03
WEDR-FM..................... Miami/Ft. Lauderdale, FL 10/96 99.1 MHz 2/03
WVCG-AM..................... Miami/Ft. Lauderdale, FL 7/83 1080 kHz 2/03
</TABLE>
53
<PAGE> 62
<TABLE>
<CAPTION>
DATE OF EXPIRATION DATE
STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE
------- --------- ----------- --------- ---------------
<S> <C> <C> <C> <C>
KXKL-FM..................... Denver, CO 9/97 105.1 MHz 4/05
KALC-FM..................... Denver, CO 9/97 105.9 MHz 4/05
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
KYXY-FMS.................... San Diego, CA Pending 96.5 MHz 12/97*
KPLN-FMS.................... San Diego, CA Pending 103.7 MHz 12/97*
WUBE-FM..................... Cincinnati, OH 9/97 105.1 MHz 10/03
WYGY-FM..................... Cincinnati, OH 9/97 96.5 MHz 10/03
WBOB-AM..................... Cincinnati, OH 9/97 1160 kHz 10/03
WUBE-AM..................... Cincinnati, OH 9/97 1230 kHz 10/03
WWSW-FM..................... Pittsburgh, PA 9/97 94.5 MHz 8/98
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
WVTY-FMS.................... Pittsburgh, PA Pending 96.1 MHz 8/98
WJHM-FM..................... Orlando, FL 9/97 101.9 MHz 2/03
WOCL-FM..................... Orlando, FL 9/97 105.9 MHz 2/03
WXXL-FM..................... Orlando, FL 9/97 106.7 MHz 2/03
WOMX-FM..................... Orlando, FL 9/97 105.1 MHz 2/03
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
WFYV-FM+.................... Jacksonville, FL 9/97 104.5 MHz 2/03
WAPE-FM+.................... Jacksonville, FL 9/97 95.1 MHz 2/03
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 6/98
KGGI-FM..................... Riverside/San-Bernardino, CA 9/97 99.1 MHz 12/05
KMRZ-AM..................... Riverside/San-Bernardino, CA 9/97 1290 kHz 12/05
</TABLE>
54
<PAGE> 63
- ---------------
* Indicates pending renewal application.
+ Indicates station to be disposed 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.
55
<PAGE> 64
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, CMHC and the Company prohibit 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, CMHC or the Company.
The Communications Act and FCC rules also generally prohibit the common
ownership, operation or control of a radio broadcast station and a television
broadcast station serving the same local market, and of a radio broadcast
station and a daily newspaper serving the same local market. Under these
"cross-ownership" rules, absent waivers, the 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.
The 1996 Act eliminated national ownership caps on ownership of AM and FM
radio stations. Prior to the 1996 Act, radio groups were limited to ownership of
20 FM stations and 20 AM stations on a national basis. Additionally, the 1996
Act increased local ownership limits. Prior to the 1996 Act, a single owner was
limited to owning two FMs and two AMs in a single large radio market with common
ownership of three stations, including two in the same service, permitted in
smaller markets. After the 1996 Act, local ownership limits were increased as
follows: in markets with 45 or more stations, ownership is limited to eight
stations, no more than five of which can be in the same 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.
Because of these multiple ownership rules and the cross-interest policy
described below, a purchaser of capital stock of Chancellor Media or the Company
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 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
56
<PAGE> 65
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.
Hicks Muse, through its ownership of a majority of the outstanding capital
stock of Capstar, has an attributable interest in Capstar, and also has
attributable interests in Sunrise and LIN. Thomas O. Hicks, the Chairman of the
Board and a director of Chancellor Media, CMHC and the Company, has an
attributable interest in Capstar, which holds attributable interests in numerous
radio stations in various markets (mainly mid-size and small) throughout the
United States. Mr. Hicks also has an attributable interest in Sunrise, which
owns or proposes to acquire six television stations in six markets. Eric C.
Neuman, a director of Chancellor Media, CMHC and the Company, also has
attributable interests in Capstar and Sunrise. Messrs. Hicks and Newman also
have attributable interests in LIN, which owns or operates 11 television
stations in eight markets. Lawrence D. Stuart, Jr., a director of Chancellor
Media, CMHC and the Company, also has attributable interest in Capstar. The
attributable interests of Hicks Muse and Messrs. Hicks, Neuman and Stuart in
these broadcast entities may impact the ability of the Company to acquire
certain properties. Under the FCC's rules, these broadcast interests are
attributed to the Company. If any such radio 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 such markets when
determining compliance with the multiple ownership rules. In addition, under the
FCC's one-to-a-market rules, a party may not have attributable interests in
radio stations and a television station in the same market unless a waiver is
granted by the FCC. Although none of the television stations owned through
Sunrise and LIN overlap with any of the stations owned or to be acquired by the
Company in any of its markets, there can be no assurance that, in the future,
such overlaps will not occur. As a result of these attributable interests, the
Company's future acquisition strategy may be adversely affected. There can be no
assurance that these additional 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. See "Risk
Factors -- Radio Broadcasting Industry Subject to Federal Regulation."
The FCC has issued a Notice of Proposed Rulemaking (the "NPRM") that
contemplates tightening attribution standards where parties have multiple
nonattributable interests in and relationships with stations that would be
prohibited by the FCC's cross-interest rules, if the interests/relationships
were attributable. The NPRM contemplates that this change in attribution will
apply only to persons holding debt or equity interests that exceed certain
benchmarks.
In addition, the FCC has a "cross-interest" policy that under certain
circumstances could prohibit a person or entity with an attributable interest in
a broadcast station or daily newspaper from having a "meaningful"
nonattributable interest in another broadcast station or daily newspaper in the
same local market. Among other things, "meaningful" interests could include
significant equity interests (including non-voting stock, voting stock, and
limited partnership interests) and significant employment positions. This policy
may limit the permissible investments that an equity investor in 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
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<PAGE> 66
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. Over the past three 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" (certain
types of these agreements also are known as "Local Marketing Agreements," or
"LMAs"). These agreements may take various forms. Separately-owned and licensed
stations may agree to function cooperatively in terms of programming,
advertising sales, and other matters, subject to the licensee of each station
maintaining independent control over the programming and other operations of its
own station and compliance with the requirements of antitrust laws. One typical
type of TBA is a programming agreement between two separately-owned radio
stations that serve a common service area, whereby the licensee of one station
programs substantial portions of the broadcast day on the other licensee's
station (subject to ultimate editorial and other controls being exercised by the
latter licensee), and sells advertising time during those program segments. The
FCC staff has held that such agreements do not violate the Communications Act as
long as the licensee of the station that is being substantially programmed by
another entity maintains complete responsibility for, and control over,
operations of its broadcast station and otherwise ensures compliance with
applicable FCC rules and policies.
A station that brokers more than 15% of the broadcast time, on a weekly
basis, on another station in the same market will be considered to have an
attributable ownership interest in the brokered station for purposes of the
FCC's ownership rules, discussed above. As a result, a broadcast station may not
enter into a TBA that allows it to program more than 15% of the broadcast time,
on a weekly basis, of another local station that it could not own under the
FCC's local multiple ownership rules. FCC rules also prohibit a broadcast
licensee from simulcasting more than 25% of its programming on another station
in the same broadcast service (i.e., AM-AM or FM-FM) where the two stations
serve substantially the same geographic area, whether the licensee owns the
stations or owns and programs the other through a TBA arrangement.
Proposed Changes. The FCC is considering various proposals to modify its
broadcast "attribution" rules. Among the proposals are (i) raising the basic
benchmark for attributing ownership from 5% to 10% of the licensee's voting
stock, (ii) raising the attribution benchmark for certain institutional
investors from 10% to 20%, (iii) limiting the applicability of the single
majority shareholder rule (discussed above) to treat as attributable large stock
interests coupled with other debt or securities and (iv) treating non-voting
stock as attributable in certain circumstances. The FCC is also considering
changes to its multiple ownership rules to encourage minority ownership of radio
and television broadcast stations.
The FCC has under consideration, and may in the future consider and adopt,
new laws, regulations and policies regarding a wide variety of matters that
could, directly or indirectly, affect the operation, ownership and financial
performance of 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
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<PAGE> 67
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 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
over and above the already substantial impact of the 1996 Act.
The FCC has taken initial steps to authorize the use of a new technology,
DARS, to deliver audio programming by satellite. The FCC is also considering
various proposals for terrestrial DARS. DARS may provide a medium for the
delivery of multiple new audio programming formats to local and national
audiences. It is not known at this time whether this technology also may be used
in the future by existing radio broadcast stations either on existing or
alternate broadcasting frequencies.
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
the 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.
EMPLOYEES
The Company has approximately 4,300 full-time employees and 900 part-time
employees. Certain employees at the Company's stations in New York, Los Angeles,
Chicago, San Francisco, Washington, D.C., Philadelphia, Detroit and Cincinnati
(approximately 300 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.
PROPERTIES
The Company's corporate headquarters is in Irving, 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
station's studio is generally housed with its office in a downtown or business
district. A
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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 stations and its corporate
headquarters are located in leased or owned facilities. The terms of these
leases typically expire 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 69 sales offices in approximately 54 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 August 1993, the Company terminated an agreement with Sagittarius
Broadcasting Company (an affiliate of Infinity Broadcasting Corporation) and One
Twelve, Inc. (collectively, the "Claimants") pursuant to which programming
featuring radio personality Howard Stern was broadcast on radio station WLUP-AM
(now WMVP-AM) in Chicago. The Claimants allege that termination of the agreement
was wrongful and have sued 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 facie tort. In the proposed amended complaint, Claimants seek
compensatory and punitive damages in excess of $25.0 million. On March 13, 1997,
the Court denied 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 judgment 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 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, interim Chief
Executive Officer and Director
James E. de Castro..................... 45 Chief Operating Officer and Director
Matthew E. Devine...................... 49 Chief Financial Officer and Chief
Accounting Officer, Secretary
Kenneth J. O'Keefe..................... 43 Executive Vice President -- Operations
Thomas J. Hodson....................... 54 Director
Perry J. Lewis......................... 59 Director
Jeffrey A. Marcus...................... 51 Director
John H. Massey......................... 57 Director
Eric C. Neuman......................... 52 Director
Lawrence D. Stuart, Jr................. 52 Director
Steven Dinetz.......................... 51 Director
Vernon E. Jordan, Jr................... 62 Director
</TABLE>
In addition to the foregoing, one seat on the Board of Directors of
Chancellor Media, CMHC and CMCLA is currently vacant as a result of the
resignation of Scott K. Ginsburg from the Board of Directors on April 20, 1998.
Under the respective bylaws of Chancellor Media, CMHC and CMCLA, the Board of
Directors of each company has the authority to fill this vacancy. As of the date
of this Prospectus, the vacant seat on the Board of Directors of each company
has not yet been filled.
THOMAS O. HICKS
Mr. Hicks was elected Chairman of the Board and a director of Chancellor
Media, CMHC and CMCLA upon the consummation of the Chancellor Merger. Mr. Hicks
has also served as interim Chief Executive Officer of Chancellor Media, CMHC and
CMCLA since April 14, 1998. 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 and Mexico City specializing in
strategic investments, leveraged acquisitions and recapitalizations. From 1984
to May 1989, Mr. Hicks was Co-Chairman of the Board and Co-Chief Executive
Officer of Hicks & Haas, Incorporated, a Dallas based private investment firm.
Mr. Hicks serves as a director of Capstar Broadcasting Corporation, Sybron
International Corporation, Inc., Berg Electronics Corp., Neodata Corporation,
D.A.C. Vision Inc. and Olympus Real Estate Corporation.
JAMES E. DE CASTRO
Mr. de Castro has been Chief Operating Officer of Chancellor Media, CMHC
and CMCLA since September 22, 1997. From September 5, 1997 to September 22,
1997, Mr. de Castro served as Co-Chief Operating Officer of Chancellor Media,
CMHC and CMCLA. Mr. de Castro was elected Co-Chief Operating Officer and a
director of Chancellor Media, CMHC and CMCLA 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 Chief Financial Officer, Chief Accounting Officer and
Secretary of Chancellor Media, CMHC and CMCLA 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.
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<PAGE> 70
KENNETH J. O'KEEFE
Mr. O'Keefe became an Executive Vice President of Chancellor Media, CMHC
and CMCLA 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 J. HODSON
Mr. Hodson became a director of Chancellor Media, CMHC and CMCLA 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.
PERRY J. LEWIS
Mr. Lewis became a director of Chancellor Media, CMHC and CMCLA upon
consummation of the Chancellor Merger. Mr. Lewis had previously served as a
director of Evergreen since Evergreen acquired 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.
JEFFREY A. MARCUS
Mr. Marcus became a director of Chancellor Media, CMHC and CMCLA upon
consummation of the Chancellor Merger. Prior to the Chancellor Merger, Mr.
Marcus served as a director of Chancellor and CRBC. Mr. Marcus currently serves
as the Chairman and Chief Executive Officer of Marcus Cable Company, the ninth
largest cable television multiple system operator (MSO) in the United States
which serves over 1.2 million customers and which Mr. Marcus formed in 1990.
Until November 1988, Mr. Marcus served as Chairman and Chief Executive Officer
of WestMarc Communications, Inc., an MSO formed through the merger in 1987 of
Marcus Communications, Inc. and Western TeleCommunications, Inc. Mr. Marcus has
more than 29 years experience in the cable television business. Mr. Marcus is a
co-owner of the Texas Rangers Baseball Club and serves as a director of Brinker
International, Inc. and a director or trustee of several charitable and civic
organizations.
JOHN H. MASSEY
Mr. Massey became a director of Chancellor Media, CMHC and CMCLA 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., a regional investment banking firm. Since 1986, Mr. Massey has served as a
director of Gulf-California Broadcast Company, a private holding company that
was sold in May 1996. From 1986 to 1992, he also was President of
Gulf-California Broadcast Company. From 1976 to 1986, Mr. Massey was President
of Gulf Broadcast Company, which owned and operated 6 television stations and 11
radio stations in major markets in the United States. Mr. Massey currently
serves as a director of Central Texas Bankshare Holdings, Inc., 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.
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<PAGE> 71
ERIC C. NEUMAN
Mr. Neuman became a director of Chancellor Media, CMHC and CMCLA upon
consummation of the Chancellor Merger. Mr. Neuman previously served as a
director of Chancellor and CRBC since April 1996. Since May 1993, Mr. Neuman has
been an officer of Hicks Muse and is currently serving as Senior Vice President.
From 1985 to 1993, Mr. Neuman was a Managing General Partner of Communications
Partners, Ltd., a private investment firm specializing in media and
communications businesses. Mr. Neuman currently serves as a director of Capstar
Broadcasting Corporation.
LAWRENCE D. STUART, JR.
Mr. Stuart became a director of Chancellor Media, CMHC and CMCLA 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 Broadcasting Corporation.
STEVEN DINETZ
Mr. Dinetz was elected Co-Chief Operating Officer and a director of
Chancellor Media, CMHC, and CMCLA 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 CMCLA, 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 CMCLA on October
14, 1997. Mr. Jordan currently serves as a senior partner in the Washington,
D.C. 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 New York 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.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
holders of more than 10% of the Company's Common Stock to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of any equity securities of the Company. To the Company's
knowledge, for the period from January 1, 1997 through March 1, 1998, all
Section 16(a) filing requirements applicable to its executive officers,
directors and holders of more than 10% of the Company's Common Stock were
satisfied, except that (i) Putnam Investments, Inc. has not filed a Form 3 in
connection with its ownership of the Company's Common Stock, (ii) directors
Jeffrey A. Marcus and John H. Massey each filed a late Form 5 for the year ended
December 31, 1997 in connection with the grant of stock options under the
Company's Non-Employee Director Stock Option Plan in September 1997, and (iii)
director Steven Dinetz has not filed a Form 4 in connection with certain stock
option exercises effected by Mr. Dinetz in November and December 1997.
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<PAGE> 72
COMPENSATION OF DIRECTORS
Directors who are also officers of Chancellor Media, CMHC and CMCLA receive
no additional compensation for their services as directors. Effective following
the Chancellor Merger, directors of Chancellor Media, CMHC and CMCLA who are not
officers will 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 CMCLA 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 CMCLA in
office on the day of Chancellor Media's annual stockholders meeting are entitled
to an award of options to purchase 15,000 shares of Common Stock at an exercise
price equal to the fair market value of such shares on the date of grant.
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 ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(2) STOCK AWARDS OPTIONS PAYOUTS COMPENSATION(3)
------------------ ---- -------- ---------- --------------- ------------ ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Scott K. Ginsburg.... 1997 $850,000 $3,615,000 -- -- 500,000 -- $9,101
Former President 1996 750,000 956,000 -- -- 375,000 -- 9,776
and Chief 1995 650,000 -- -- -- -- 7,663
Executive Officer
James E. de Castro... 1997 $825,000 $2,581,000 -- -- 425,000 -- 2,630
Chief Operating 1996 750,000 704,000 -- -- 75,000 -- 2,455
Officer 1995 650,000 125,000 -- -- 300,000 -- 2,455
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
</TABLE>
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<PAGE> 73
- ---------------
(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 $50,000 or 10% of the total of the
annual salary and bonus for the named officer.
(3) Represents payments of term life insurance policies.
(4) Represents compensation for the period beginning March 1, 1996, when Mr.
O'Keefe joined the Company.
Option Grants in Last Fiscal Year. The following table sets forth
information regarding options to purchase Common Stock granted by the Company to
its Chief Executive Officer and the other executive officers named in the
Summary Compensation Table during the 1997 fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------
NUMBER OF
SECURITIES % OF TOTAL GRANT DATE VALUE
UNDERLYING OPTIONS --------------------------
OPTIONS GRANTED TO EXERCISE OR GRANT DATE
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME (#)(1)(2) FISCAL YEAR ($/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.
(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.
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<PAGE> 74
(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.
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......... -- -- 175,000 125,000 4,662,000 3,330,000
</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 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
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<PAGE> 75
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. Should the stockholders of Chancellor Media fail to approve
the 1998 Chancellor Media Corporation Employee Stock Option Plan, the Ginsburg
Separation and Consulting Agreement provides that Mr. Ginsburg shall receive
equivalent rights through stock appreciation rights. 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 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
On September 4, 1997, Evergreen and the Company entered into a new
employment agreement (the "de Castro Employment Agreement") with Mr. de Castro,
Chief Operating Officer of Chancellor Media, CMHC and CMCLA, to be effective on
the closing date of the Chancellor Merger. The de Castro Employment Agreement,
which has a term that extends through September 5, 2002, 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 closing date of the Chancellor Merger and on
each of the first four anniversaries thereof on which Mr. de Castro remains
employed by the
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Company, Mr. de Castro shall be granted options to purchase 200,000 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 consummation of the
Chancellor Merger, Mr. de Castro will receive on such termination date a number
of options equal to 1,000,000 minus the number of options previously granted to
Mr. de Castro pursuant to the preceding sentence prior to such date. In
addition, in recognition of Mr. de Castro's rights under his prior employment
agreement, the Company granted Mr. de Castro an option to acquire an additional
225,000 shares of Common Stock on the closing date of the Chancellor Merger. The
de Castro Employment Agreement provides that 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), 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 closing date of the
Chancellor Merger. 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
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 consummation of the Chancellor
Merger, to require that Mr. de Castro not be 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.
Following Mr. Ginsburg's resignation, on April 19, 1998, the Board of
Directors of Chancellor Media, CMHC and CMCLA approved the principal terms of a
new employment agreement to be entered with Mr. de Castro (the "New de Castro
Employment Agreement"), under which Mr. de Castro would remain in his position
as Chief Operating Officer of Chancellor Media, CMHC and CMCLA. It is expected
that the terms of the New de Castro Employment Agreement will be identical to
the terms of the de Castro Employment Agreement, except in the following
respects: (i) the New de Castro Employment Agreement will have a term that
extends through April 17, 2003, (ii) the New de Castro Employment Agreement will
provide for a $1,000,000 signing bonus, (iii) the Company shall make a one-time
cash payment to Mr. de Castro of $5,000,000 net of applicable employee
withholding taxes and the Company shall grant to Mr. de Castro stock options to
purchase 800,000 shares of Common Stock of Chancellor Media at an exercise price
per share equal to the closing price for the Common Stock of Chancellor Media on
the Nasdaq Stock Market on April 16, 1998 (subject to stockholder approval of
the 1998 Chancellor Media Corporation Employee Stock Option Plan), (iv) certain
portions of the formula used to calculate Mr. de Castro's annual bonus would be
adjusted and (v) the Company will grant to Mr. de Castro 80% of the number of
stock options that the Company grants annually to its new Chief Executive
Officer (without taking into account any initial lump-sum stock options granted
to such Chief Executive Officer), on the same terms and conditions as set forth
in the grant to such new Chief Executive Officer. Definitive documentation
regarding the New de Castro Employment Agreement is currently in progress.
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<PAGE> 77
Devine Employment Agreement
On September 4, 1997, Evergreen and the Company entered into a new
employment agreement (the "Devine Employment Agreement") with Mr. Devine, Senior
Vice President and Chief Financial Officer of Chancellor Media, CMHC and the
Company, to be effective on the closing date of the Chancellor Merger. The
Devine Employment Agreement, which has a term that extends through September 5,
2002, 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 closing date of the Chancellor Merger
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 150,000
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 consummation of the Chancellor
Merger, Mr. Devine will receive on such termination date a number of options
equal to 750,000 minus the number of options previously granted to Mr. Devine
pursuant to the preceding sentence prior to such date. In addition, in
recognition of Mr. Devine's rights under his prior employment agreement, the
Company granted Mr. Devine an option to acquire an additional 112,500 shares of
Common Stock on the closing date of the Chancellor Merger. 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), 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 station, the Company shall continue to pay Mr.
Devine his applicable base salary through the earlier of the fifth anniversary
of the closing date of the Chancellor Merger 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.
Following Mr. Ginsburg's resignation, on April 19, 1998, the Board of
Directors of Chancellor Media, CMHC and CMCLA approved the principal terms of a
new employment agreement to be entered with Mr. Devine (the "New Devine
Employment Agreement"), under which Mr. Devine would remain in his position as
Chief Financial Officer of Chancellor Media, CMHC and CMCLA or any new
multi-media company formed with Chancellor Media. It is expected that the terms
of the New Devine Employment Agreement will be identical to the terms of the
Devine Employment Agreement, except in the following respects: (i) the New
Devine Employment Agreement will have a term that extends through April 17,
2003, (ii) the New Devine Employment Agreement will provide for a $1,000,000
signing bonus, (iii) the Company shall make a one-time cash payment to Mr.
Devine of $2,000,000 net of applicable employee withholding taxes and the
Company shall grant to Mr. Devine stock options to purchase 600,000 shares of
Common Stock of Chancellor Media at an exercise price per share equal to the
closing price for the Common Stock of Chancellor Media on the Nasdaq Stock
Market on April 16, 1998 (subject to stockholder approval of the
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<PAGE> 78
1998 Chancellor Media Corporation Employee Stock Option Plan) (iv) Mr. Devine's
maximum annual bonus would be increased and certain portions of the formula used
to calculate Mr. Devine's annual bonus would be adjusted, (v) certain provisions
related to termination by Mr. Devine for other than "good reason" would be
modified to make them comparable to certain provisions related to termination by
Mr. de Castro for other than "good reason" contained in the de Castro Employment
Agreement and (vi) the Company will grant to Mr. Devine 60% of the number of
stock options that the Company grants annually to its new Chief Executive
Officer (without taking into account any initial lump-sum stock options granted
to such Chief Executive Officer), on the same terms and conditions as set forth
in the grant to such new Chief Executive Officer. Definitive documentation
regarding the New Devine Employment Agreement is currently in progress.
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.
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
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<PAGE> 79
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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The members of the compensation committee of Chancellor Media, CMHC and
CMCLA 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 CMCLA. Messrs. Massey and Marcus previously
served on the compensation committee of Chancellor, and Mr. Lewis previously
served on the compensation committee of Evergreen.
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 March 1, 1998 by (i) each director
and executive officer of Chancellor Media and their affiliates on March 1, 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 March 1, 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 KMG, which is a wholly-owned subsidiary of CMHC. As of March 1,
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>
Scott K. Ginsburg.......................................... 4,718,132(2) 3.9%
James E. de Castro......................................... 1,170,000(3) *
Matthew E. Devine.......................................... 562,500(4) *
Kenneth J. O'Keefe......................................... 104,000(5) *
Thomas O. Hicks............................................ 16,444,371(6) 13.7%
Perry J. Lewis............................................. 118,548(7) *
Thomas J. Hodson........................................... 15,000(8) *
Eric C. Neuman............................................. 6,356 *
Lawrence D. Stuart, Jr..................................... 9,910 *
Jeffrey A. Marcus.......................................... 87,878(9) *
John H. Massey............................................. 41,024(10) *
Steven Dinetz.............................................. 1,681,226(11) 1.4%
Vernon E. Jordan, Jr....................................... -- *
All directors and executive officers as a group............ 24,958,945(12) 20.8%
Hicks Muse and affiliates.................................. 16,444,371(13) 13.7%
Putnam Investments, Inc.................................... 15,703,966(14) 13.1%
Janus Capital Corp......................................... 6,517,600(15) 5.4%
</TABLE>
- ---------------
* Less than one percent (1%).
(1) Assumes that 120,145,483 primary shares of Chancellor Media Common Stock
were issued and outstanding as of March 1, 1998.
(2) Includes options to purchase 500,000 shares and 14,400 shares held by Mr.
Ginsburg as custodian for his children.
(3) Consists of options to purchase 1,170,000 shares.
(4) Consists of options to purchase 562,500 shares.
(5) Includes options to purchase 100,000 shares.
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<PAGE> 80
(6) Consists of 778,969 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.
(7) Includes options to purchase 15,000 shares.
(8) Consists of options to purchase 15,000 shares.
(9) Includes options to purchase 24,242 shares.
(10) Consists of options to purchase 24,242 shares and 16,782 shares held by Mr.
Massey's wife as her separate property.
(11) Includes (i) options to purchase 1,549,138 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.
(12) Includes options to purchase 3,960,122 shares.
(13) Consists of 778,969 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 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, and Alan B. Menkes are officers, directors
and minority stockholders of Hicks Muse and as such may be deemed to share
with Mr. Hicks the power to vote or dispose of shares held by such
partnerships. Messrs. Hicks, Muse, Tate, Furst, Stuart, Levitt and Menkes
disclaim the existence of a group and each of them disclaims beneficial
ownership of shares not owned of record by him. The address of Hicks Muse
is 200 Crescent Court, Suite 1600, Dallas, TX 75201.
(14) The address of Putnam Investments, Inc. is One Post Office Square, Boston,
MA 02109.
(15) The address of Janus Capital Corp. is 100 Fillmore Street, Denver, CO
80206-4923.
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<PAGE> 81
CERTAIN RELATIONSHIPS AND RELATED 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 the
Company. 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 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.
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.
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. In addition, Chancellor Media is subject to an additional
registration rights agreement relating to the Common Stock held by former
stockholders of Chancellor (collectively with the Chancellor Stockholders
Agreement, the "Registration Rights Agreements"). Each of the Registration
Rights Agreements relates to shares of Common Stock held by certain affiliates
of Hicks Muse, and in one instance, shares of Common Stock held by an
unaffiliated third party.
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 the Capstar Transaction with Capstar, which is
affiliated with the Company. For a description of this transaction, see
"Business -- Recent Developments -- Pending Transactions."
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
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affiliated with the AMFM Radio Networks and receive a portion of advertising
revenues generated by the network.
DESCRIPTION OF THE EXCHANGE NOTES
The Exchange Notes will be issued under an indenture, dated as of December
22, 1997 (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 Exchange 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 Exchange 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 and
the 10 1/2% Notes, and will be subordinated in right of payment to all Senior
Debt of the Company. The Exchange Notes will be guaranteed on a senior
subordinated basis by the Guarantors.
The Exchange 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 Exchange Notes. The
Exchange 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 Exchange 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 Exchange Notes will be limited to $500,000,000 aggregate principal
amount and will mature on December 15, 2007. Interest on the Exchange Notes will
accrue at the rate of 8 1/8% per annum and will be payable semiannually on each
June 15 and December 15, commencing on June 15, 1998, to the persons who are
registered holders at the close of business on the June 1 and December 1
immediately preceding the applicable interest payment date. Interest on the
Exchange 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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<PAGE> 83
OPTIONAL REDEMPTION
The Exchange Notes will be 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
years set forth below, plus, in each case, accrued and unpaid interest thereon
to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C> <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, at its
option, use the net cash proceeds of one or more Public Equity Offerings (as
defined below) to redeem the Exchange Notes, in part, at a redemption price
equal to 108.125% 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 Notes outstanding must equal
at least 65% of the aggregate principal amount of 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 60 days after the consummation of such Public
Equity Offering.
In addition, at any time on or prior to December 15, 2000, the Exchange
Notes may also be redeemed in 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 Exchange Notes).
"Applicable Premium" means, with respect to an Exchange Note at any
Redemption Date, the greater of (i) 1.0% of the principal amount of such
Exchange Note and (ii) (a) the present value of all remaining required interest
and principal payments due on such Exchange Note and all premium payments
relating thereto assuming a redemption date of December 15, 2002, 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 Exchange 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 data)) most
nearly equal to the period from the Redemption Date to December 15, 2002;
provided, however, that if the period from the Redemption Date to December 15,
2002 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 December
15, 2002 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 Exchange
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 Exchange Note of $1,000 in original principal
amount or less will be redeemed in part. If any Exchange Note is to be redeemed
in part only, the notice of redemption relating to such Exchange Note shall
state the portion of the principal amount thereof to be redeemed. A new
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<PAGE> 84
Exchange 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
Exchange Note.
The Senior Credit Facility restricts the Company's ability to optionally
redeem the Exchange Notes.
CHANGE OF CONTROL
The Indenture provides 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 Exchange 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 provides 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 Exchange Notes as provided below. The Company will first comply with the
covenant in the preceding sentence before it will be required to repurchase
Exchange 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
or before the Change of Control Payment Date, the purchase price for the
Exchange 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 an Exchange
Note purchased pursuant to a Change of Control Offer will be required to
surrender the Exchange 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 Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the purchase of Exchange 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 Exchange 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
Exchange Notes but would not constitute a Change of Control. However, the
Indenture contains 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 Exchange
Notes that the Company might be required to purchase. In
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the event that the Company were required to purchase Exchange 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
Exchange 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 Exchange Notes are subject to a Change of Control
Offer.
Without the consent of each holder of the Exchange 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 Exchange 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 respect
to any such offer. In addition, the Trustee may not waive the right of any
holder of the Exchange Notes to require the repurchase of his or her Exchange
Notes upon a Change of Control.
SUBORDINATION
The payment of all Obligations on the Exchange 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 Exchange Notes, or for the acquisition of any
of the Exchange 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 Exchange Notes or issued in exchange for the Exchange Notes,
(ii) in securities substantially identical to the Exchange 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 Exchange Notes and having a Weighted Average Life to Maturity at
least equal to the remaining Weighted Average Life to Maturity of the Exchange
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 Exchange
Notes or to pay interest accrued on outstanding Exchange Notes)), will be made
by the Company or any other Person on behalf of the Company with respect to any
Obligations on the Exchange Notes or to acquire any of the Exchange 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 Exchange 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
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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 Exchange
Notes or issued in exchange for the Exchange Notes, (ii) in securities
substantially identical to the Exchange 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 Exchange
Notes and having a Weighted Average Life to Maturity at least equal to the
remaining Weighted Average Life to Maturity of the Exchange 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 Exchange Notes or to pay interest accrued on
outstanding Exchange Notes)) with respect to any Obligations on the Exchange
Notes or to acquire any of the Exchange 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 Exchange 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 Exchange 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 provides
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 provides 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 Exchange Notes, 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
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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 Exchange 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 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 Exchange 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 Exchange Notes, at least to the extent that the
Indebtedness being acquired is subordinated to the Exchange 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 Exchange Notes, at least to the extent that
the Indebtedness being acquired is subordinated to the Exchange 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
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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, 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 (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 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 provides 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 Exchange
Notes (pro rata among the holders of Exchange Notes tendered to the Company for
purchase, based upon the aggregate principal amount of the Exchange Notes so
tendered) tendered to the Company for purchase at a price equal to 100% of the
principal amount thereof, plus accrued interest thereon
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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, 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, 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 and 10 1/2% 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 Exchange Notes as shown on the applicable
register of holders of Exchange 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 Exchange Notes may elect to tender their
Exchange Notes in whole or in part in integral multiples of $1,000. To the
extent holders properly tender Exchange 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 Exchange Notes to be
repurchased on a pro rata basis (based upon the aggregate principal amount of
Exchange Notes tendered). To the extent that the aggregate principal amount of
Exchange 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 Exchange 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 Exchange Notes pursuant to a Net Proceeds Offer.
Limitation on Asset Swaps. The Indenture provides 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 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
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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 December 15, 1997.
Limitations on Transactions with Affiliates. The Indenture provides 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), as well as reasonable and customary investment banking,
financial advisory, commercial banking and similar fees and expenses paid to BT
Securities Corporation and its Affiliates.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Indenture provides 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 and the 10 1/2%
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 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
prohibits the Company from incurring or suffering to exist Indebtedness that is
senior in right of payment to the Exchange Notes and is expressly subordinate in
right of payment to any other Indebtedness of the Company.
Limitation on Preferred Stock of Subsidiaries. The Indenture provides 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
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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 provides 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 and the 10 1/2%
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 provides 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.
Guarantees of Certain Indebtedness. The Indenture provides 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 Exchange Notes and which evidences such Subsidiary's
Guarantee of the Exchange 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 Exchange 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 provides that for so long as
any Exchange 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 provides 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 Exchange 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'
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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 described above, the full and prompt payment of
principal of and interest on the Exchange 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 Exchange 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 Exchange 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 and the 10 1/2% 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
is 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
Senior Credit Facility 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 are defined in the Indenture as "Events of Default":
(i) the failure to pay interest on the Exchange 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 Exchange 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 Exchange 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 Trustee or holders of at least
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25% in aggregate principal amount of outstanding Exchange 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 Exchange Notes shall, or the holders of at least 25% in principal
amount of outstanding Exchange Notes may, declare the principal of and accrued
but unpaid interest, if any, on all the Exchange 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 Senior Credit Facility, will become
due and payable upon the first to occur of an acceleration under the Senior
Credit Facility or five Business Days after receipt by the Company and the
Representative under the Senior Credit Facility 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 Exchange Notes.
The Indenture provides that, at any time after a declaration of
acceleration with respect to the Exchange Notes as described in the preceding
paragraph, the holders of a majority in principal amount of the Exchange 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 Exchange 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 Exchange 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 Exchange Notes may waive any existing
Default or Event of Default under the Indenture, and its consequences, except a
default in the payment of the principal of or interest on any Exchange 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
Exchange 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
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Indenture, the holders of a majority in principal amount of the outstanding
Exchange 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 Exchange 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 Exchange 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 Exchange Notes, replace stolen, lost or mutilated
Exchange 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 Exchange Notes on the dates such payments are due in accordance with the
terms of such Exchange 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 Exchange 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 Exchange Notes not therefore
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.
REPORTS TO HOLDERS
The Company will file with the Trustee and provide to the holders of the
Exchange 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 Exchange Notes.
MODIFICATION OF THE INDENTURE
From time to time, the Company and the Trustee, together, without the
consent of the holders of the Exchange 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 Exchange Notes, except that, without the consent of each holder
of the Exchange Notes affected thereby, no amendment may, directly or
indirectly: (i) reduce the amount of Exchange 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
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any Exchange Notes; (iii) reduce the principal of or change the fixed maturity
of any Exchange Notes, or change the date on which any Exchange Notes may be
subject to redemption or repurchase, or reduce the redemption or repurchase
price therefor; (iv) make any Exchange Notes payable in money other than that
stated in the Exchange 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 Exchange Notes to waive Defaults or Events of Default;
or (vi) after the Company's obligation to purchase the Exchange 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 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" means a Person who, directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Company. 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.
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"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 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 Exchange 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 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
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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 or to Steven Dinetz or Scott K. Ginsburg (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 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
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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 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
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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.
"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 Agreement, 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 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.
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"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 $1.0 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 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,
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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 and the 10 1/2% 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 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
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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.
"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 public offering of Capital
Stock (other than Disqualified Capital Stock) of Chancellor Media, CMHC or the
Company, pursuant to an effective registration statement filed with the
Commission in accordance with the Securities Act; provided, however, that, in
the case of a Public Equity Offering by Chancellor Media or CMHC, Chancellor
Media or CMHC contributes to the capital of the Company net cash proceeds in an
amount at least sufficient to redeem the 9 3/8% Notes, 8 3/4% Notes, 10 1/2%
Notes and Exchange 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 from time to time named party thereto,
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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 Exchange 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 3/4% Notes, the 10 1/2% Notes, the Original
Notes, the 12 1/4% Subordinated Exchange Debentures due 2008 of the Company and
the 12% Subordinated Exchange Debentures due 2009 of the Company.
"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 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
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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 Exchange 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, The Depository Trust Company, New York, New York ("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
Exchange 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 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
Exchange Notes, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Exchange 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
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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 Exchange 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 Exchange Notes (including the presentation of Exchange
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 Exchange 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 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.
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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 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
TOTAL LEVERAGE RATIO APPLICABLE MARGIN APPLICABLE MARGIN
-------------------- ----------------- -----------------
<S> <C> <C>
Greater than 6.75..................................... 1.000% 2.000%
Greater than 6.50 but less than or equal to 6.75...... 0.750% 1.750%
Greater than 6.00 but less than or equal to 6.50...... 0.375% 1.375%
Greater than 5.50 but less than or equal to 6.00...... 0.125% 1.125%
Greater than 5.00 but less than or equal to 5.50...... 0.000% 0.875%
Greater than 4.50 but less than or equal to 5.00...... 0.000% 0.625%
Greater than 4.00 but less than or equal to 4.50...... 0.000% 0.500%
Less than or equal to 4.00............................ 0.000% 0.400%
</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
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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 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
and KMG owned by CMHC, (iii) a pledge of all capital stock of CMCLA owned by
KMG, (iv) a non-recourse pledge of all capital stock of CMHC owned by Chancellor
Media, (v) 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, (vi) a collateral assignment of all partnership interests held by the
subsidiaries of CMCLA, (vii) a collateral assignment of all trust interests held
by the subsidiaries of CMCLA, (viii) a collateral assignment of all limited
liability company interests held by CMCLA, (ix) downstream guarantees provided
by CMHC and KMG and (x) 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>
4/25/97 through 12/31/98.......................... 6.00 to 1.00 7.00 to 1.00
1/1/99 through 12/31/99........................... 5.50 to 1.00 6.00 to 1.00
1/1/00 through 12/31/00........................... 3.75 to 1.00 5.25 to 1.00
1/1/01 and thereafter............................. 3.50 to 1.00 5.25 to 1.00
</TABLE>
In the event that Chancellor Media, CMHC or CMCLA issues Subordinated
Indebtedness (as defined in the Senior Credit Facility), other than the
assumption or refinancing of the 9 3/8% Notes and the 8 3/4% Notes and the
assumption of the 10 1/2% Notes and certain other issuances, the Senior Leverage
Ratios will be permanently reduced by 0.50. As a result of the issuance of the
Original Notes, the Senior Leverage Ratios were permanently reduced by 0.50.
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, the 8 3/4% Notes, the 10 1/2% Notes and the
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 within any
applicable cure period or waived in writing, (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.
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 and KMG shall 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 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 Exchange 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.
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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.
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.
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.
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<PAGE> 110
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 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 Exchange 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.
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 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
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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 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 Exchange 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.
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 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
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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.
12% EXCHANGE DEBENTURES
For a description of the 12% Subordinated Exchange Debentures due 2009
issuable by the Company from time to time upon exchange of the 12% Preferred
Stock, see "Description of Capital Stock -- CMCLA -- 12% Preferred
Stock -- Exchange."
12 1/4% EXCHANGE DEBENTURES
For a description of the 12 1/4% Subordinated Exchange Debentures due 2008
issuable by the Company from time to time upon exchange of the 12 1/4% Preferred
Stock, see "Description of Capital Stock -- CMCLA -- 12 1/4% Preferred
Stock -- Exchange."
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."
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
120,145,483 of which were issued and outstanding as of March 1, 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 March 1, 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
and the Indenture and the certificates of designation governing the 12%
Preferred Stock and the 12 1/4% Preferred Stock each indirectly restrict,
Chancellor Media's ability to pay cash dividends on the Common Stock and Class A
Common Stock.
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<PAGE> 113
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.
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
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<PAGE> 114
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 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 will 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.
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 (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 10 1/2% Indenture and 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 June 15 of
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<PAGE> 115
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 $25.00 per share (after giving effect to the 1998 Stock
Split) of underlying Common Stock (equivalent to a conversion rate of 2.00
shares 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.
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.
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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 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
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<PAGE> 117
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 Preferred Stock constitutes "Parity Liquidation Stock" for
purposes of the 7% Convertible Preferred Stock.
Voting Rights
The holders of 7% Convertible Preferred Stock will 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 10 1/2% Indenture and 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
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<PAGE> 118
(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 PERCENTAGE
---- ----------
<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
$18.095 per share (after giving effect to the 1998 Stock Split) 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 consists of 2,000 shares of common
stock, par value $.01 per share, 1,000 of which were owned of record and
beneficially by CMHC and 40 of which were owned of record and beneficially by
KMG as of March 1, 1998, and 10,000,000 shares of preferred stock, par value
$.01 per share, 1,000,000 of which are designated 12 1/4% Series A Senior
Cumulative Exchangeable Preferred Stock with an initial liquidation value of
$119.444944 per share (the "12 1/4% Preferred Stock"), of which 1,000,000 shares
are issued and outstanding, and 3,600,000 of which are designated 12%
Exchangeable Preferred Stock with a stated liquidation value of $100.00 per
share (the "12% Preferred Stock"), of which 2,117,629 shares are issued and
outstanding.
12 1/4% PREFERRED STOCK
Dividends. Holders of the 12 1/4% Preferred Stock are entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of funds
legally available therefor, dividends on each share of 12 1/4% Preferred Stock
at a rate per annum equal to 12 1/4% of the then effective liquidation
preference per share of the 12 1/4% Preferred Stock, payable quarterly. If any
dividend payable on any dividend payment date on or before February 15, 2001 is
not declared or paid in full in cash on such dividend payment date, the amount
not paid on such dividend payment date will be added to the liquidation
preference of the 12 1/4% Preferred Stock on such dividend payment date and will
be deemed paid in full and will not accumulate. After February 15, 2001,
dividends may be paid only in cash out of funds legally available therefor.
Although the Company was not required to do so, it paid the most recent
quarterly dividend payment on the 12 1/4% Preferred Stock in cash.
Ranking. The 12 1/4% Preferred Stock ranks, with respect to dividend
rights and distribution rights on liquidation, winding-up and dissolution (a)
senior to the common stock of the Company, to the 12% Preferred Stock and to
each other class of capital stock or series of preferred stock that may in the
future be established by the Board of Directors of the Company the terms of
which do not expressly provide that it ranks senior to or on a parity with the
12 1/4% Preferred Stock, (b) on a parity with each other class of capital stock
or series of preferred stock that may in the future be established by the Board
of Directors of the Company the terms of which expressly provide that such class
or series will rank on a parity with the 12 1/4% Preferred Stock and (c) junior
to each class of capital stock or series of preferred stock that may in the
future be established by the
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<PAGE> 119
Board of Directors of the Company the terms of which expressly provide that such
class or series will rank senior to the 12 1/4% Preferred Stock.
Optional Redemption. The 12 1/4% Preferred Stock is redeemable (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 10 1/2% Indenture and the Indenture, and to the legal availability of funds
therefor), in whole or in part at any time on and after February 15, 2001 at the
option of the Board of Directors of the Company, at the redemption prices
(expressed as percentages of the then effective liquidation preference thereof)
set forth below, if redeemed during the twelve-month period commencing on
February 15 of each of the years set forth below, plus accumulated and unpaid
dividends to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001........................................................ 106.125%
2002........................................................ 104.900
2003........................................................ 103.675
2004........................................................ 102.450
2005........................................................ 101.225
2006 and thereafter......................................... 100.000
</TABLE>
In addition, on or prior to February 15, 1999, the Company may, at its
option, use the net cash proceeds of any Public Equity Offering (as defined in
the certificate of designation for the 12 1/4% Preferred Stock) to redeem the
12 1/4% Preferred Stock, in part, at a redemption price equal to 109.8% of the
then effective liquidation preference if redeemed during the twelve-month period
commencing on February 15, 1998, plus accumulated and unpaid dividends to the
date of redemption; provided, however, that after any such redemption from the
proceeds of a Public Equity Offering, the shares of 12 1/4% Preferred Stock
outstanding must equal at least 75% of the aggregate number of shares of 12 1/4%
Preferred Stock originally issued; provided further, that any such redemption
must occur on or prior to 60 days after receipt by the Company of the proceeds
of the Public Equity Offering.
Mandatory Redemption. The 12 1/4% Preferred Stock is subject to mandatory
redemption (subject to contractual and other restrictions with respect thereto
and to the legal availability of funds therefor) in whole on February 15, 2008,
at a price equal to the then effective liquidation preference thereof, plus all
accumulated and unpaid dividends to the date of redemption.
Voting Rights. Holders of the 12 1/4% Preferred Stock have no voting
rights except as otherwise required by law; provided that the Company may not
authorize any class of capital stock that ranks senior to or on a parity with
the 12 1/4% Preferred Stock and may not, subject to certain exceptions, effect a
merger or sale of substantially all of its assets, without the affirmative vote
of holders of at least a majority of the shares of 12 1/4% Preferred Stock then
outstanding voting or consenting, as the case may be, as one class and, provided
further, that the holders of 12 1/4% Preferred Stock, voting together as a
single class, shall have the right to elect the lesser of two directors and that
number of directors constituting 25% of the Board of Directors of the Company
upon the occurrence of certain events including, but not limited to, the failure
by the Company on or after February 15, 2001 to pay cash dividends in full on
the 12 1/4% Preferred Stock for six or more quarterly dividend periods, whether
or not consecutive, the failure by the Company to discharge any mandatory
redemption or repayment obligation with respect to the 12 1/4% Preferred Stock,
the failure by the Company to make a Change of Control Offer (as defined in the
certificate of designation for the 12 1/4% Preferred Stock), the breach or
violation of one or more of the covenants contained in the certificate of
designation for the 12 1/4% Preferred Stock or the failure the Company to repay
at final stated maturity, or the acceleration of the final stated maturity of
certain indebtedness of the Company (including indebtedness under the Senior
Credit Facility, the 9 3/8% Notes, the 8 3/4% Notes and the 10 1/2% Notes, the
Original Notes, and, assuming consummation of the Exchange Offer, the Exchange
Notes).
Change of Control. The certificate of designation for the 12 1/4%
Preferred Stock provides that, upon the occurrence of a Change of Control (as
defined below), each holder will have the right to require that the Company
repurchase all or a portion of such holder's 12 1/4% Preferred Stock in cash at
a purchase price equal
111
<PAGE> 120
to 101% of the then current effective liquidation preference thereof, plus an
amount in cash equal to all accumulated and unpaid dividends per share to the
date of repurchase. If the repurchase of the 12 1/4% Preferred Stock would
violate or constitute a default under the Senior Credit Facility, the 9 3/8%
Indenture, or other indebtedness of the Company, then pursuant to the
certificate of designation for the 12 1/4% Preferred Stock, the Company will
either (A) repay in full all such indebtedness and terminate all commitments
outstanding under the Senior Credit Facility or (B) obtain the requisite
consents, if any, under the Senior Credit Facility, the 9 3/8% Indenture, or
such other indebtedness required to permit the repurchase of 12 1/4% Preferred
Stock. In an offer by the Company to repurchase the 12 1/4% Preferred Stock at
the holder's option upon a Change of Control, the Company will comply with
Section 14(e) of the Exchange Act and the rules and regulations promulgated
thereunder, as then in effect.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or
series of related transactions) of all or substantially all of the assets of the
Company to any Person or group of related Persons for purposes of Section 13(d)
of the Exchange Act (a "Group"), other than to Hicks Muse or any of its
affiliates, officers and directors or to Steven Dinetz (the "Permitted
Holders"); or (ii) a majority of the Board of Directors of Chancellor Media,
CMHC or the Company shall consist of Persons who are not Continuing Directors
(as defined below); or (iii) the acquisition by any Person or Group (other than
the Permitted Holders) of the power, directly or indirectly, to vote or direct
the voting of securities having more than 50% of the ordinary voting power for
the election of directors of Chancellor Media, CMHC or the Company.
"Continuing Director" means, as of the date of determination, any Person
who (i) was a member of the Board of Directors of CRBC on February 26, 1996,
(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.
With respect to the sale of "all or substantially all" of the assets of the
Company, which would constitute a Change of Control for purposes of the
certificate of designation for the 12 1/4% Preferred Stock, the meaning of the
phrase "all or substantially all" varies according to the facts and
circumstances of the subject transaction, has no clearly established meaning
under relevant law and is subject to judicial interpretation. Accordingly, in
certain circumstances there may be a degree of uncertainty in ascertaining
whether a particular transaction would involve a disposition of "all or
substantially all" of the assets of the Company and, therefore, it may be
unclear whether a Change of Control has occurred and whether the 12 1/4%
Preferred Stock is subject to a Change of Control Offer.
Certain Covenants. The certificate of designation for the 12 1/4%
Preferred Stock contains covenants customary for securities comparable to the
12 1/4% Preferred Stock, including covenants that restrict the ability of the
Company and its subsidiaries to incur additional indebtedness, pay dividends and
make certain other restricted payments, and merge or consolidate with any other
person or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially of the assets of the Company.
Exchange. The Company may, at its option, subject to certain conditions,
including its ability to incur additional indebtedness under the Senior Credit
Facility, the 9 3/8% Indenture, the 8 3/4% Indenture, the 10 1/2% Indenture, and
the Indenture, on any scheduled dividend payment date, exchange the 12 1/4%
Preferred Stock, in whole but not in part, for its 12 1/4% Subordinated Exchange
Debentures due 2008 (the "12 1/4% Exchange Debentures"). Holders of the 12 1/4%
Preferred Stock will be entitled to receive $1.00 principal amount of 12 1/4%
Exchange Debentures for each $1.00 in liquidation preference of 12 1/4%
Preferred Stock including, to the extent necessary, 12 1/4% Exchange Debentures
in principal amounts of less than $1,000.
The 12 1/4% Exchange Debentures, if issued, will be issued under an
indenture (as supplemented the "12 1/4% Exchange Indenture") between the Company
and U.S. Trust Company of Texas, N.A., as Trustee. The 12 1/4% Exchange
Debentures will be unsecured obligations of the Company, ranking subordinate in
right of payment to all senior indebtedness of the Company, including the 9 3/8%
Notes, the 8 3/4% Notes, the 10 1/2% Notes, the Original Notes, and assuming
consummation of the Exchange Offer, the Exchange Notes, and the indebtedness
under the Senior Credit Facility. Interest on the 12 1/4% Exchange Debentures
will accrue
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<PAGE> 121
at the same rate per annum as the stated dividend rate on the 12 1/4% Preferred
Stock. The 12 1/4% Exchange Debentures will be redeemable, at the Company's
option, in whole at any time or in part from time to time, after an initial
period, at redemption prices equivalent to those relating to the optional
redemption of the 12 1/4% Preferred Stock. The 12 1/4% Exchange Indenture
provides that upon the occurrence of a change of control of the Company (as
defined therein), each holder will have the right to require that the Company
repurchase all or a portion of such holder's 12 1/4% Exchange Debentures at a
purchase price equal to 101% of the principal amount thereof plus accrued
interest, if any, to the date of repurchase. The 12 1/4% Exchange Indenture
contains certain customary covenants for securities comparable to the 12 1/4%
Exchange Debentures, including covenants restricting the incurrence of
additional indebtedness, the issuance of subsidiary preferred stock, the making
of certain restricted payments, the creation of dividend and other payment
restrictions affecting subsidiaries, certain transactions with affiliates, and
the lines of business in which the Company and its subsidiaries may be engaged.
12% PREFERRED STOCK
Dividends. Holders of the 12% Preferred Stock are entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of funds
legally available therefor, dividends on each share of 12% Preferred Stock at a
rate per annum equal to 12%, subject to increase in certain circumstances of the
then effective liquidation preference per share of the 12% Preferred Stock,
payable semi-annually. All dividends on the 12% Preferred Stock are cumulative.
The Company, at its option, may pay dividends on any dividend payment date
occurring on or before January 15, 2002 either in cash or in additional shares
of 12% Preferred Stock. After January 15, 2002, dividends may be paid only in
cash out of funds legally available therefor. Although the Company was not
required to do so, it paid the most recent semi-annual dividend payment on the
12% Preferred Stock in cash.
Ranking. The 12% Preferred Stock ranks with respect to dividend rights and
rights on liquidation, winding-up and dissolution, (a) senior to the common
stock of the Company and to each other class of capital stock or series of
preferred stock that may in the future be established by the Board of Directors
of the Company the terms of which expressly provide that it ranks junior to or
on a parity with the 12% Preferred Stock, (b) on a parity with each other class
of capital stock or series of preferred stock that may in the future be
established by the Board of Directors of the Company the terms of which
expressly provide that such class or series will rank on a parity with the 12%
Preferred Stock and (c) junior to the 12 1/4% Preferred Stock and to each class
of capital stock or series of preferred stock that may in the future be
established by the Board of Directors of the Company the terms of which do not
expressly provide that such class or series will rank junior to the 12%
Preferred Stock.
Optional Redemption. The 12% Preferred Stock is redeemable (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 10 1/2% Indenture and the Indenture, and to the legal availability of funds
therefor), in whole or in part at any time on or after January 15, 2002 at the
option of the Company, at the redemption prices (expressed as percentages of the
then effective liquidation preference thereof) set forth below, if redeemed
during the twelve-month period commencing on January 15 of each of the years set
forth below, plus accumulated and unpaid dividends to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002........................................................ 106.00%
2003........................................................ 104.80%
2004........................................................ 103.60%
2005........................................................ 102.40%
2006........................................................ 101.20%
2007 and thereafter......................................... 100.00%
</TABLE>
In addition, on or prior to January 15, 2000, the Company may, at its option,
use the net cash proceeds of any Public Equity Offering (as defined in the
certificate of designation for the 12% Preferred Stock) to redeem the
113
<PAGE> 122
12% Preferred Stock, in part, at a redemption price equal to 112% of the then
effective liquidation preference, plus, in each case, accumulated and unpaid
dividends to the date of redemption; provided, however, that after any such
redemption from the proceeds of a Public Equity Offering, there must be at least
$150.0 million aggregate liquidation preference of 12% Preferred Stock
outstanding; provided further, that any such redemption must occur on or prior
to 60 days after receipt by the Company of the proceeds of the Public Equity
Offering.
Mandatory Redemption. The 12% Preferred Stock is subject to mandatory
redemption (subject to contractual and other restrictions with respect thereto
and to the legal availability of funds therefor) in whole on January 15, 2009 at
a price equal to the then effective liquidation preference thereof, plus all
accumulated and unpaid dividends to the date of redemption.
Voting Rights. Holders of the 12% Preferred Stock will have no voting
rights except as otherwise required by law; provided that the Company may not
authorize any class of capital stock that is senior to or on a parity with the
12% Preferred Stock (subject to an exception for the authorization of up to $50
million initial liquidation preference of Parity Stock) and may not, subject to
certain exceptions, effect a merger or sale of substantially all of its assets,
without the affirmative vote of holders of at least a majority of the shares of
12% Preferred Stock then outstanding voting or consenting, as the case may be,
as one class and, provided further, that the holders of 12% Preferred Stock,
voting together as a single class, shall have the right to elect the lesser of
two directors or that number of directors constituting 25% of the members of the
Board of Directors of the Company upon the occurrence of certain events
including, but not limited to, the failure by the Company on or after January
15, 2002 to pay cash dividends in full on the 12% Preferred Stock for three or
more quarterly dividend periods, whether or not consecutive, the failure by the
Company to discharge any mandatory redemption or repayment obligation with
respect to the 12% Preferred Stock, the failure by the Company to make a Change
of Control Offer (as defined in the certificate of designation for the 12%
Preferred Stock), the breach or violation of one or more of the covenants
contained in the certificate of designation for the 12% Preferred Stock or the
failure by the Company to repay at final stated maturity, or the acceleration of
the first stated maturity of certain indebtedness of the Company, whether or not
consecutive (including indebtedness under the Senior Credit Facility, the 9 3/8%
Notes, the 8 3/4% Notes, the 10 1/2% Notes, the Original Notes, and, assuming
consummation of the Exchange Offer, the Exchange Notes).
Change of Control. The certificate of designation for the 12% Preferred
Stock provides that, upon the occurrence of a change of control (which is
defined identically to the definition of "change of control" applicable to the
12 1/4% Preferred Stock), each holder will have the right to require that the
Company repurchase all or a portion of such holder's 12% Preferred Stock in cash
at a purchase price equal to 101% of the then current effective liquidation
preference thereof, plus an amount in cash equal to all accumulated and unpaid
dividends per share to the date of repurchase. If the repurchase of the 12%
Preferred Stock would violate or constitute a default under the certificate of
designation for the 12 1/4% Preferred Stock, the Senior Credit Facility, the
9 3/8% Indenture, or other indebtedness of the Company, then pursuant to the
certificate of designation for the 12% Preferred Stock, the Company will either
(A) repay in full all such indebtedness and terminate all commitments
outstanding under the Senior Credit Facility or (B) obtain the requisite
consents, if any, under the Senior Credit Facility, the 9 3/8% Indenture, or
such other indebtedness required to permit the repurchase of the 12% Preferred
Stock. In an offer by the Company to repurchase the 12% Preferred Stock at the
holder's option upon a Change of Control, the Company will comply with Section
14(e) of the Exchange Act and the rules and regulations promulgated thereunder,
as then in effect.
Certain Covenants. The certificate of designation of the 12% Preferred
Stock contains covenants customary for securities comparable to the 12%
Preferred Stock, including covenants that restrict the ability of the Company
and its subsidiaries to incur additional indebtedness, pay dividends and make
certain other restricted payments, and merge or consolidate with any other
person or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially of the assets of the Company.
Exchange. The Company may, at its option, subject to certain conditions,
including its ability to incur additional indebtedness under the 9 3/8%
Indenture and the Senior Credit Facility, on any scheduled dividend payment
date, exchange the 12% Preferred Stock, in whole but not in part, for its 12%
Subordinated Exchange
114
<PAGE> 123
Debentures due 2009 (the "12% Exchange Debentures"). Holders of the 12%
Preferred Stock will be entitled to receive $1.00 principal amount of 12%
Exchange Debentures for each $1.00 in liquidation preference of 12% Preferred
Stock including, to the extent necessary, 12% Exchange Debentures in principal
amounts of less than $1,000.
The 12% Exchange Debentures, if issued, will be issued under an indenture
(as supplemented, the "12% Exchange Indenture") between the Company and U.S.
Trust Company of Texas, N.A., as Trustee. The 12% Exchange Debentures will be
unsecured obligations of the Company, ranking subordinate in right of payment to
all senior indebtedness of the Company, including the 9 3/8% Notes, the 8 3/4%
Notes, the 10 1/2% Notes, the Original Notes, and, assuming consummation of the
Exchange Offer, the Exchange Notes, and the indebtedness under the Senior Credit
Facility. Interest on the 12% Exchange Debentures will accrue at the same rate
per annum as the stated dividend rate on the 12% Preferred Stock. The 12%
Exchange Debentures will be redeemable, at the Company's option, in whole at any
time or in part from time to time, after an initial period, at redemption prices
equivalent to those relating to the optional redemption of the 12% Preferred
Stock. The 12% Exchange Indenture provides that upon the occurrence of a change
of control (as defined therein) of the Company, each holder will have the right
to require that the Company repurchase all or a portion of such holder's 12%
Exchange Debentures at a purchase price equal to 101% of the principal amount
thereof plus accrued interest, if any, to the date of repurchase. The 12%
Exchange Indenture contains certain customary covenants for securities
comparable to the 12% Exchange Debentures, including covenants restricting the
incurrence of additional indebtedness, the issuance of subsidiary preferred
stock, the making of certain restricted payment, the creation of dividend and
other repayment restrictions affecting subsidiaries, certain transactions with
affiliates, and the lines of business in which the Company and its subsidiaries
may be engaged.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
Latham & Watkins, counsel to the Company, has advised the Company that the
following discussion expresses its opinion as to the material federal income tax
consequences expected to result to Holders whose Original Notes are exchanged
for the Exchange Notes in this Exchange Offer. The signed opinion of Latham &
Watkins is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. Such opinion is based upon current provisions of the
Internal Revenue Code of 1986, as amended, applicable Treasury regulations,
judicial authority and administrative rulings and practice. There can be no
assurance that the Internal Revenue Service (the "Service") will not take a
contrary view, and no ruling from the Service has been or will be sought.
Legislative, judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conclusions set forth
herein. Any such changes or interpretations may or may not be retroactive and
could affect the tax consequences to holders. EACH HOLDER OF THE ORIGINAL NOTES
SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
OF EXCHANGING THE ORIGINAL NOTES FOR THE EXCHANGE NOTES, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
The exchange of the Original Notes for the Exchange Notes pursuant to the
Exchange Offer should not be treated as an "exchange" for federal income tax
purposes, because the Exchange Notes should not be considered to differ
materially in kind or extent from the Original Notes. Accordingly, the exchange
of Original Notes for Exchange Notes should not be a taxable event to holders
for federal income tax purposes. Moreover, the Exchange Notes should have the
same tax attributes as the Original Notes and the same tax consequences to
holders as the Original Notes have to holders, including, without limitation,
the same issue price, adjusted issue price, original issue discount, adjusted
tax basis and holding period.
115
<PAGE> 124
PLAN OF DISTRIBUTION
Based on interpretations by the Staff set forth in no-action letters issued
to third parties, the Company believes that Exchange Notes issued pursuant to
the Exchange Offer in exchange for the Original Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any holder that
is (i) an Affiliate of the Company, (ii) a broker-dealer who acquired Original
Notes directly from the Company or (iii) a broker-dealer who acquired Original
Notes as a result of market-making or other trading activities) without
compliance with the registration and prospectus delivery provisions of the
Securities Act provided that such Exchange Notes are acquired in the ordinary
course of such holders' business, and such holders are not engaged in, and do
not intend to engage in, a distribution of Exchange Notes; provided that
broker-dealers ("Participating Broker-Dealers") receiving Exchange Notes in the
Exchange Offer will be subject to a prospectus delivery requirement with respect
to resales of such Exchange Notes. To date, the Staff has taken the position
that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to transactions involving an exchange of securities
such as the exchange pursuant to the Exchange Offer (other than a resale of an
unsold allotment from the sale of the Original Notes to the Initial Purchasers)
by means of this Prospectus. Pursuant to the Registration Rights Agreement, the
Company agreed to permit Participating Broker-Dealers and other persons, if any,
subject to similar prospectus delivery requirements to use this Prospectus in
connection with the resale of such Exchange Notes.
The Company will not receive any proceeds from any sale of the Exchange
Notes by Participating Broker-Dealers. The Exchange Notes received by
Participating Broker-Dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange 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 participating
Broker-Dealer and/or the purchasers of any such Exchange Notes. Any
participating Broker-Dealer that resells Exchange 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 Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a Participating Broker-Dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker-Dealer that requests
such documents in the Letter of Transmittal.
The Company has agreed in the Registration Rights Agreement to indemnify
each Participating Broker-Dealer reselling the Exchange Notes pursuant to this
Prospectus, and their officers, directors and controlling persons, against
certain liabilities in connection with the offer and sale of the Exchange Notes,
including liabilities under the Securities Act, or to contribute to payments
that such Participating Broker-Dealers may be required to make in respect
thereof.
LEGAL MATTERS
Legal matters in connection with the issue and sale of the Exchange Notes
will be passed upon for the Company by Latham & Watkins, Washington, D.C. Eric
L. Bernthal, a former director of Chancellor Media, is a partner of Latham &
Watkins and owns 5,000 shares of Common Stock of Chancellor Media and options to
acquire 25,000 shares of Common Stock of Chancellor Media.
116
<PAGE> 125
EXPERTS
The consolidated financial statements of Chancellor Media Corporation of
Los Angeles and Subsidiaries as of December 31, 1997 and for the year ended
December 31, 1997 included in this Registration Statement, have been included
herein in reliance on the report of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
The 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 in the Prospectus have been audited by KPMG Peat Marwick LLP,
independent certified public accountants, to the extent and for the periods
indicated in their reports thereon. Such financial statements have been included
in 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 Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
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.
117
<PAGE> 126
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 stations acquired in
the transactions completed by the Company and Chancellor Radio Broadcasting
Company ("CRBC") during 1997 and the elimination of the consolidated historical
data of the stations disposed in the transactions completed by the Company and
CRBC during 1997 (the "Completed Transactions"). The unaudited pro forma
condensed combined balance sheet data at December 31, 1997 presents adjustments
for the Completed Transactions consummated after such date, the contribution to
the Company from Chancellor Media of the net proceeds from the offering by
Chancellor Media of 21,850,000 shares of Common Stock completed on March 13,
1998 (the "1998 Equity Offering") and the proposed Preferred Stock Repurchase,
as if each such transaction had occurred at December 31, 1997. The unaudited pro
forma condensed combined statement of operations data for the twelve months
ended December 31, 1997 presents adjustments for the Completed Transactions,
financing transactions undertaken by the Company and CRBC during 1997, the
contribution to the Company from Chancellor Media of the net proceeds from the
1998 Equity Offering and the proposed Preferred Stock Repurchase, as if each
such transaction occurred on January 1, 1997. The pro forma financial
information does not give effect to the Pending Transactions.
The information set forth in the unaudited pro forma condensed combined
financial statements of the Company assumes that all of the outstanding shares
of 12 1/4% Preferred Stock and 12% Preferred Stock will be repurchased and
retired pursuant to a tender offer, certain permitted redemptions, negotiated
purchases or open-market transactions. The pro forma data is based on assumed
premiums plus accrued and unpaid dividends to be paid to holders of 12 1/4%
Preferred Stock and 12% Preferred Stock, and other assumptions relating to such
repurchases. No assurance can be given that the actual premiums paid in
connection with any such repurchases made by the Company will not be greater,
perhaps by a substantial amount, than the amounts assumed in the pro forma data.
In addition, there can be no assurance that any shares of 12 1/4% Preferred
Stock and 12% Preferred Stock will be repurchased by the Company. See "Risk
Factors -- Possible Non-Consummation of, or Increased Cost of, Proposed
Repurchase of 12 1/4% Preferred Stock and 12% Preferred Stock."
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> 127
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AT DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA COMPANY ADJUSTMENTS
ADJUSTMENTS AS ADJUSTED FOR THE
CMCLA FOR THE FOR THE PREFERRED
HISTORICAL COMPLETED COMPLETED STOCK COMPANY
AT 12/31/97 TRANSACTIONS TRANSACTIONS REPURCHASE PRO FORMA
----------- ------------ ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets..................... $ 283,661 $ 321,642(1) $ 520,953 $(237,292)(3) $ 283,661
(84,350)(2)
Property and equipment, net........ 159,797 1,874(2) 161,671 -- 161,671
Intangible assets, net............. 4,404,443 87,126(2) 4,491,569 -- 4,491,569(4)
Other assets....................... 113,576 (4,650)(2) 108,926 -- 108,926
---------- --------- ---------- --------- ----------
Total assets..................... $4,961,477 $ 321,642 $5,283,119 $(237,292) $5,045,827
========== ========= ========== ========= ==========
LIABILITIES AND STOCKHOLDER'S EQUITY:
Liabilities
Current liabilities................ $ 171,017 $ -- $ 171,017 $ (13,585)(3) $ 157,432
Long-term debt..................... 2,573,000 (673,000)(1) 1,900,000 184,466(3) 2,084,466
Deferred tax liabilities........... 361,640 -- 361,640 -- 361,640
Other liabilities.................. 44,405 -- 44,405 -- 44,405
---------- --------- ---------- --------- ----------
Total liabilities................ 3,150,062 (673,000) 2,477,062 170,881 2,647,943
Redeemable preferred stock......... 331,208 -- 331,208 (331,208)(3) --
STOCKHOLDER'S EQUITY:
Common stock....................... 1 -- 1 -- 1
Additional paid in capital......... 1,637,628 994,642(1) 2,632,270 -- 2,632,270
Accumulated deficit................ (157,422) -- (157,422) (76,965)(3) (234,387)
---------- --------- ---------- --------- ----------
Total stockholder's equity....... 1,480,207 994,642 2,474,849 (76,965) 2,397,884
---------- --------- ---------- --------- ----------
Total liabilities and
stockholder's equity.......... $4,961,477 $ 321,642 $5,283,119 $(237,292) $5,045,827
========== ========= ========== ========= ==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
P-2
<PAGE> 128
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
PRO FORMA COMPANY ADJUSTMENTS
ADJUSTMENTS AS ADJUSTED FOR THE
COMPLETED FOR THE FOR THE PREFERRED
COMPANY TRANSACTIONS COMPLETED COMPLETED STOCK COMPANY
YEAR ENDED DECEMBER 31, 1997 HISTORICAL HISTORICAL(5) TRANSACTIONS TRANSACTIONS PURCHASE PRO FORMA
---------------------------- ---------- ------------- ------------ ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues........................ $663,804 $485,216 $ (17,651)(6) $1,130,526 $ -- $1,130,526
(843)(7)
Less: agency commissions.............. (81,726) (44,595) -- (126,321) -- (126,321)
-------- -------- --------- ---------- ---------- ----------
Net revenues.......................... 582,078 440,621 (18,494) 1,004,205 -- 1,004,205
Station operating expenses excluding
depreciation and amortization....... 316,248 270,760 (14,395)(6) 572,613 -- 572,613
Depreciation and amortization......... 185,982 32,522 (2,677)(6) 341,675 -- 341,675
125,848(8)
Corporate general and administrative
expenses............................ 21,442 16,238 (1,842)(9) 35,838 -- 35,838
Merger expense........................ -- 6,124 (6,124)(10) -- -- --
Restructuring charge.................. -- 15,958 -- 15,958 -- 15,958
Stock option compensation............. -- 3,083 -- 3,083 -- 3,083
-------- -------- --------- ---------- ---------- ----------
Operating income (loss)............... 58,406 95,936 (119,304) 35,038 -- 35,038
Interest expense...................... 85,017 69,130 (579)(6) 150,375 12,913(13) 163,288
(3,193)(11)
Interest income....................... (1,922) (399) -- (2,321) -- (2,321)
Other (income) expense................ (17,997) (144) -- (18,141) -- (18,141)
-------- -------- --------- ---------- ---------- ----------
Income (loss) before income taxes..... (6,692) 27,349 (115,532) (94,875) (12,913) (107,788)
Income tax expense (benefit).......... 7,802 18,753 (50,134)(12) (23,579) (5,424)(14) (29,003)
-------- -------- --------- ---------- ---------- ----------
Net income (loss)..................... (14,494) 8,596 (65,398) (71,296) (7,489) (78,785)
Preferred stock dividends............. 12,901 27,321 -- 40,222 (40,222)(15) --
-------- -------- --------- ---------- ---------- ----------
Loss attributable to common stock..... $(27,395) $(18,725) $ (65,398) $ (111,518) $ 32,733 $ (78,785)
======== ======== ========= ========== ========== ==========
Broadcast cash flow................... $265,830 $169,861 $ (4,099) $ 431,592 $ -- $ 431,592
======== ======== ========= ========== ========== ==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
P-3
<PAGE> 129
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE COMPLETED TRANSACTIONS COMPLETED AFTER DECEMBER 31, 1997
(1) Reflects the contribution to the Company from Chancellor Media of the net
proceeds of $994,642 from Chancellor Media's 1998 Equity Offering. The net
proceeds of the 1998 Equity Offering were used to reduce bank borrowings
under the Senior Credit Facility (as defined) of $673,000 and the remaining
proceeds were recorded as an increase to cash of $321,642.
(2) Reflects the Completed Transactions that were completed after December 31,
1997 as follows:
<TABLE>
<CAPTION>
PURCHASE PRICE ALLOCATION FINANCING
---------------------------------------- ----------------------
PROPERTY AND INTANGIBLE DECREASE DECREASE IN
PURCHASE EQUIPMENT, ASSETS, IN OTHER CURRENT
COMPLETED TRANSACTIONS PRICE NET(A) NET(A) ASSETS ASSETS
---------------------- -------- ------------ ---------- -------- -----------
<S> <C> <C> <C> <C> <C>
KXPK-FM(b).................... $26,000 $1,411 $24,589 $1,650 $24,350
Bonneville Exchange(c)........ 63,000 463 62,537 3,000 60,000
------- ------ ------- ------ -------
Total............... $89,000 $1,874 $87,126 $4,650 $84,350
======= ====== ======= ====== =======
</TABLE>
- ---------------
(a) The Company has assumed that historical balances of net property and
equipment acquired approximate fair value for the preliminary allocation of
the purchase price. Such amounts are based primarily on information provided
by management of the respective stations acquired in the Completed
Transactions.
(b) On January 30, 1998, the Company acquired, in the Denver Acquisition,
KXPK-FM in Denver from Ever Green Wireless LLC (which is unrelated to the
Company) for $26,000 in cash, of which $1,650 was previously paid by CRBC as
escrow funds and are classified as other assets at December 31, 1997.
(c) On April 3, 1998, the Company exchanged WTOP-AM in Washington, KZLA-FM in
Los Angeles and WGMS-FM in Washington plus $60,000 in cash for Bonneville's
stations WBIX-FM in New York, KLDE-FM in Houston and KBIG-FM in Los Angeles
(the "Bonneville Exchange"). The Company had previously paid $3,000 in cash
to Bonneville on August 6, 1997 which was classified as other assets at
December 31, 1997.
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE PREFERRED STOCK REPURCHASE
(3) Reflects the adjustment to record the repurchase of all of the outstanding
shares of 12 1/4% Preferred Stock and 12% Preferred Stock based on assumed
premiums of $76,965 and accrued and unpaid dividends of $13,585 to be paid
to holders of 12 1/4% Preferred Stock and 12% Preferred Stock.
ALLOCATION OF COMPANY PRO FORMA INTANGIBLE ASSETS
(4) The Company Pro Forma intangible assets of $4,491,569 consists of the
following at December 31, 1997:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE
-----------
<S> <C> <C>
Broadcast licenses.......................................... 15-40 $3,594,673
Goodwill.................................................... 15-40 717,576
Representation contracts.................................... 17 105,000
Other intangibles........................................... 1-40 386,272
----------
$4,803,521
Less: accumulated amortization.............................. (311,952)
----------
Net intangible assets....................................... $4,491,569
==========
</TABLE>
P-4
<PAGE> 130
The Company discloses broadcast license value separately from goodwill and
amortizes such intangible assets over an estimated average life of 15 years,
whereas CRBC grouped all broadcast license value with goodwill and amortized
such intangibles assets over an estimated average life of 40 years. In
connection with the application of purchase accounting for the Chancellor
Merger, broadcast license value and goodwill have been separately identified and
disclosed and amortized over an estimated average life of 15 years in accordance
with the Company's policies and procedures. The intangible assets have been
treated in a consistent manner for the Company in the Unaudited Combined
Condensed Pro Forma Financial Statements and, upon the consummation of the
Chancellor Merger, have been accounted for similarly in the Company's financial
statements.
The Company amortizes intangible assets using the straight-line method over
estimated useful lives ranging from 1 to 40 years. The Company continually
evaluates the propriety of the carrying amount of goodwill and other intangible
assets as well as the amortization period to determine whether current events or
circumstances warrant adjustments to the carrying value and/or revised estimates
of useful lives. This evaluation consists of the projection of undiscounted
operating income before depreciation, amortization, nonrecurring charges and
interest for each of the Company's radio stations over the remaining
amortization periods of the related intangible assets. The projections are based
on a historical trend line of actual results since the acquisitions of the
respective stations adjusted for expected changes in operating results. To the
extent such projections indicate that undiscounted operating income is not
expected to be adequate to recover the carrying amounts of the related
intangible assets, such carrying amounts would be written down by charges to
expense.
P-5
<PAGE> 131
ADJUSTMENTS TO UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS RELATED TO
THE COMPLETED TRANSACTIONS
(5) The detail of the historical financial data of the stations to be acquired
or disposed of in the Completed Transactions for the year ended December 31,
1997 has been obtained from the historical financial statements of the
respective stations and is summarized below:
<TABLE>
<CAPTION>
ACQUISITIONS
--------------------------------------------------------------------
EVERGREEN CRBC AS
VIACOM ADJUSTED FOR KZPS-FM/
WUSL-FM ACQUISITION COMPLETED KDGE-FM
WDAS-FM/AM WIOQ-FM HISTORICAL CHANCELLOR HISTORICAL
YEAR ENDED HISTORICAL HISTORICAL 1/1- TRANSACTIONS 1/1-
DECEMBER 31, 1997 1/1-4/30(A) 1/1-5/15(B) 7/2(C) 1/1-9/5(D) 7/31(E)
----------------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Gross revenues................ $5,028 $7,088 $38,972 $241,481 $7,616
Less: agency commissions...... (680) (829) (5,470) (30,754) (929)
------ ------ ------- -------- ------
Net revenues.................. 4,348 6,259 33,502 210,727 6,687
Station operating expenses
excluding depreciation and
amortization................ 2,533 3,649 14,936 119,328 5,293
Depreciation and
amortization................ 875 -- 2,279 30,505 280
Corporate general and
administrative expenses..... 172 141 682 7,226 --
Merger expense................ -- -- -- 6,124 --
Restructuring charge.......... -- -- -- -- --
Stock option compensation..... -- -- -- 3,083 --
------ ------ ------- -------- ------
Operating income (loss)....... 768 2,469 15,605 44,461 1,114
Interest expense.............. 19 990 -- 49,812 --
Interest income............... (21) -- -- (218) --
Other (income) expense........ 884 -- -- (584) 12
------ ------ ------- -------- ------
Income (loss) before income
taxes....................... (114) 1,479 15,605 (4,549) 1,102
Income tax expense
(benefit)................... -- -- 5,892 1,180 --
------ ------ ------- -------- ------
Net income (loss)............. (114) 1,479 9,713 (5,729) 1,102
Preferred stock dividends..... -- -- -- 27,321 --
------ ------ ------- -------- ------
Income (loss) attributable to
common stock................ $ (114) $1,479 $ 9,713 $(33,050) $1,102
====== ====== ======= ======== ======
Broadcast cash flow........... $1,815 $2,610 $18,566 $ 91,399 $1,394
====== ====== ======= ======== ======
<CAPTION>
ACQUISITIONS
--------------------------------------------------------
KATZ KBIG-FM
ACQUISITION GANNETT KLDE-FM
HISTORICAL ACQUISITION KXPX-FM WBIX-FM
YEAR ENDED 1/1- HISTORICAL HISTORICAL HISTORICAL
DECEMBER 31, 1997 10/28(F) 1/1-12/29(G) 1/1-8/31(H) 1/1-10/10(I)
----------------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Gross revenues................ $144,886 $61,057 $3,460 $33,125
Less: agency commissions...... -- (8,052) (458) (4,636)
-------- ------- ------ -------
Net revenues.................. 144,886 53,005 3,002 28,489
Station operating expenses
excluding depreciation and
amortization................ 109,341 26,303 2,816 18,277
Depreciation and
amortization................ 141 1,736 198 --
Corporate general and
administrative expenses..... 8,105 -- -- --
Merger expense................ -- -- -- --
Restructuring charge.......... 15,958 -- -- --
Stock option compensation..... -- -- -- --
-------- ------- ------ -------
Operating income (loss)....... 11,341 24,966 (12) 10,212
Interest expense.............. 18,310 -- -- --
Interest income............... (170) -- -- --
Other (income) expense........ -- (375) (81) --
-------- ------- ------ -------
Income (loss) before income
taxes....................... (6,799) 25,341 69 10,212
Income tax expense
(benefit)................... 1,912 10,127 -- --
-------- ------- ------ -------
Net income (loss)............. (8,711) 15,214 69 10,212
Preferred stock dividends..... -- -- -- --
-------- ------- ------ -------
Income (loss) attributable to
common stock................ $ (8,711) $15,214 $ 69 $10,212
======== ======= ====== =======
Broadcast cash flow........... $ 35,545 $26,702 $ 186 $10,212
======== ======= ====== =======
</TABLE>
P-6
<PAGE> 132
<TABLE>
<CAPTION>
DISPOSITIONS
--------------------------------------------------------------------------------
WPEG-FM
WBAV-FM/AM SAN
WRFX-FM WEJM- FRANCISCO
WFNZ-FM WNKS-FM WPNT-FM FM/AM WJZW-FM FREQUENCY
YEAR ENDED HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
DECEMBER 31, 1997 1/1-5/15(B) 1/1-5/15(J) 5/30-6/19(K) 1/1-8/26(L) 1/1-7/2(M) 1/1-7/7(N)
----------------- ----------- ----------- ------------ ----------- ---------- ----------
<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)
Station 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 expenses..... -- -- -- -- (70) --
Merger expense................ -- -- -- -- -- --
Restructuring charge.......... -- -- -- -- -- --
Stock option compensation..... -- -- -- -- -- --
------- ------- ----- ------- ------- -------
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 expense
(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 WTOP-AM
WZHF-AM WGMS-FM
KDFC-FM KDFC-AM WLUP-FM KZLA-FM WFLN-FM COMPLETED
YEAR ENDED HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS
DECEMBER 31, 1997 1/1-1/31(O) 1/1-8/13(P) 1/1-7/14(E) 1/1-10/1(I) 1/1-4/30(Q) HISTORICAL
----------------- ----------- ----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues................ $(278) $(1,091) $(6,928) $(31,429) $(1,298) $485,216
Less: agency commissions...... 26 23 935 3,951 134 (44,595)
----- ------- ------- -------- ------- --------
Net revenues.................. (252) (1,068) (5,993) (27,478) (1,164) 440,621
Station operating expenses
excluding depreciation and
amortization................ (224) (665) (5,642) (14,434) (728) 270,760
Depreciation and
amortization................ -- (54) (1,443) -- (800) 32,522
Corporate general and
administrative expenses..... -- (18) -- -- -- 16,238
Merger expense................ -- -- -- -- -- 6,124
Restructuring charge.......... -- -- -- -- -- 15,958
Stock option compensation..... -- -- -- -- -- 3,083
----- ------- ------- -------- ------- --------
Operating income (loss)....... (28) (331) 1,092 (13,044) 364 95,936
Interest expense.............. -- -- -- (1) -- 69,130
Interest income............... -- -- -- 10 -- (399)
Other (income) expense........ -- -- -- -- -- (144)
----- ------- ------- -------- ------- --------
Income (loss) before income
taxes....................... (28) (331) 1,092 (13,053) 364 27,349
Income tax expense
(benefit)................... -- (98) -- -- -- 18,753
----- ------- ------- -------- ------- --------
Net income (loss)............. (28) (233) 1,092 (13,053) 364 8,596
Preferred stock dividends..... -- -- -- -- -- 27,321
----- ------- ------- -------- ------- --------
Income (loss) attributable to
common stock................ $ (28) $ (233) $ 1,092 $(13,053) $ 364 $(18,725)
===== ======= ======= ======== ======= ========
Broadcast cash flow........... $ (28) $ (403) $ (351) $(13,044) $ (436) $169,861
===== ======= ======= ======== ======= ========
</TABLE>
P-7
<PAGE> 133
- ---------------
(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 5(m) and 5(p)).
(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 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 ("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-8
<PAGE> 134
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
Station 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
expenses............................. 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) expense................. (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>
P-9
<PAGE> 135
- ---------------
(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).
(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 5(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
P-10
<PAGE> 136
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. The Company expects that the time brokerage agreements regarding
the Long Island properties will be terminated upon the consummation of
Capstar's acquisition of SFX (the "Capstar/SFX Acquisition"). The Company
has also agreed, in the Capstar Transaction, to exchange its two
Jacksonville properties, plus $90,250 in cash, to Capstar in exchange for
KODA-FM in Houston, which the Company expects will be consummated at or
following the Capstar/SFX Acquisition.
(v) Reflects incremental amortization related to the Completed Chancellor
Transactions and is based on the following allocation to intangible assets:
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
COMPLETED CHANCELLOR TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 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.
P-11
<PAGE> 137
(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)
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.
P-12
<PAGE> 138
(h) On January 30, 1998, the Company acquired, in the Denver Acquisition,
KXPK-FM in Denver from Ever Green Wireless LLC (which is unrelated to the
Company) 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 May 15, 1997, the Company sold, in the EZ Sale, WNKS-FM in Charlotte for
$10,000 in cash.
(k) 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.
(l) 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.
(m) 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 5(c)). Accordingly,
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.
(n) 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.
(o) 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.
(p) 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 5(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 5(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.
(q) On August 12, 1996, the Company entered into an agreement to acquire
WFLN-FM in Philadelphia from Secret for $37,750 in cash. The Company also
entered into an agreement to operate WFLN-FM under a time brokerage
agreement effective September 1, 1996. The Company subsequently entered
into an agreement to sell WFLN-FM to Greater Media for $41,800 in cash. On
May 1, 1997, the Company assigned its time brokerage agreement to operate
WFLN-FM to Greater Media. On July 16, 1997, Secret purported to terminate
the sale of WFLN-FM to the Company. The Company subse-
P-13
<PAGE> 139
quently brought suit against Secret to enforce its right to acquire
WFLN-FM. In August 1997, pursuant to a court settlement, the Company,
Secret and Greater Media agreed that (i) Secret would sell WFLN-FM directly
to Greater Media for $37,750, (ii) Greater Media would deposit $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 and Secret would litigate each
party's entitlement to the amount deposited with the court. On April 13,
1998, the Company and Secret entered into a settlement agreement under
which the Company received $3,500 of the amount deposited with the court
plus interest earned during the period in which the court held such
amounts, and Secret received the balance of such amounts.
(6) Reflects the elimination of intercompany transactions between the Company
and Katz for the year ended December 31, 1997.
(7) 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>
(8) Reflects incremental amortization related to the Completed Transactions and
is based on the following allocation to intangible assets:
<TABLE>
<CAPTION>
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
COMPLETED TRANSACTIONS AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1997 PERIOD(I) NET EXPENSE(I) EXPENSE INCREASE
---------------------------- ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
WWWW-FM/WDFN-AM.................. 1/1-1/31 $ 26,590 $ 148 $ -- $ 148
KKSF-FM (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 62,537 4,169 -- 4,169
---------- -------- ------- --------
Total............................ $3,835,094 $160,211 $34,363 $125,848
========== ======== ======= ========
</TABLE>
- ---------------
(i) Intangible assets are amortized on a straight-line basis over an
estimated average 15 year life (except for the Katz
Acquisition -- see (v) 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, 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.
P-14
<PAGE> 140
(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.
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.
(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 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 and Chancellor Media's 1998 Equity
Offering completed on March 13, 1998:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
Additional bank borrowings related to:
Completed Station Acquisitions............................ $1,527,059
Chancellor Merger(a)...................................... 164,000
Katz Acquisition(b)....................................... 157,101
Completed Station Dispositions............................ (349,250)
New Loan Fees............................................. 10,473
----------
Total additional bank borrowings............................ $1,509,383
==========
Interest expense at 7.0%.................................... $ 60,183
Less: historical interest expense related to completed
station acquisitions and dispositions..................... (1,009)
----------
Net increase in interest expense............................ 59,174
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........................... (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)
Interest expense on the Company's $500,000 8 1/8% Notes
issued December 22, 1997.................................. 39,722
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............................................... (12,493)
----------
Total adjustment for net decrease in interest expense....... $ (3,193)
==========
</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.
P-15
<PAGE> 141
(b) The Company incurred additional bank borrowings of $149,601 to finance
the payment of $11.00 in cash for each outstanding share of KMG Common
Stock and $7,500 to finance estimated acquisition costs related to the
Katz Acquisition.
(12) Reflects the income tax benefit related to pro forma adjustments. The
adjustment to income taxes reflects the application of the estimated
effective tax rate on a pro forma basis to income (loss) before income
taxes for historical and pro forma adjustment amounts.
ADJUSTMENTS TO UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS RELATED TO
THE PREFERRED STOCK REPURCHASE
(13) Reflects the adjustment to interest expense in connection with the
consummation of the proposed Preferred Stock Repurchase:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
Increase in long-term debt................................. $184,466
Assumed interest rate...................................... 7.0%
--------
Increase in interest expense............................... $ 12,913
========
</TABLE>
(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 of
$40,222 for the year ended December 31, 1997 in connection with the
repurchase of all of the outstanding shares of 12 1/4% Preferred Stock and
12% Preferred Stock.
P-16
<PAGE> 142
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-32
Schedule II -- Valuation and Qualifying Accounts.......... F-33
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
Report of Independent Accountants......................... F-34
Consolidated Balance Sheets as of December 31, 1995 and
1996................................................... F-35
Consolidated Statements of Operations for the years ended
December 31, 1994, 1995 and
1996................................................... F-36
Consolidated Statements of Changes in Common Stockholder's
Equity for the years ended December 31, 1994, 1995 and
1996................................................... F-37
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and
1996................................................... F-38
Notes to Consolidated Financial Statements................ F-39
Unaudited Consolidated Balance Sheets as of December 31,
1996 and June 30, 1997................................. F-55
Unaudited Consolidated Statements of Operations for the
three and six months ended June 30, 1996 and 1997...... F-56
Unaudited Consolidated Statements of Changes in
Stockholder's Equity for the six months ended June 30,
1997................................................... F-57
Unaudited Consolidated Statements of Cash Flows for the
six months ended June 30, 1996 and 1997................ F-58
Notes to Unaudited Consolidated Financial Statements...... F-59
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
Independent Auditors' Report.............................. F-65
Combined Balance Sheets as of December 31, 1995 and 1996
and June 30, 1997
(unaudited)............................................ F-66
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-67
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-68
Notes to Combined Financial Statements.................... F-69
WMZQ INC. AND VIACOM BROADCASTING EAST INC.:
Independent Auditors' Report.............................. F-74
Combined Balance Sheets as of December 31, 1995 and 1996
and June 30, 1997
(unaudited)............................................ F-75
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-76
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-77
Notes to Combined Financial Statements.................... F-78
</TABLE>
F-1
<PAGE> 143
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
WDAS-AM/FM (STATION OWNED AND OPERATED BY BEASLEY FM
ACQUISITION CORP.):
Independent Auditors' Report.............................. F-83
Balance Sheets as of December 31, 1996 and March 31, 1997
(unaudited)............................................ F-84
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-85
Statements of Cash Flows for the year ended December 31,
1996 and the three months ended March 31, 1996 and 1997
(unaudited)............................................ F-86
Notes to Financial Statements............................. F-87
KYSR INC. AND KIBB INC.:
Independent Auditors' Report.............................. F-91
Combined Balance Sheets as of December 31, 1995 and 1996
and June 30, 1997
(unaudited)............................................ F-92
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-93
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-94
Notes to Combined Financial Statements.................... F-95
WLIT INC.:
Independent Auditors' Report.............................. F-100
Balance Sheets as of December 31, 1995 and 1996 and June
30, 1997 (unaudited)................................... F-101
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-102
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-103
Notes to Financial Statements............................. F-104
COLFAX COMMUNICATIONS, INC. RADIO GROUP
Report of Independent Public Accountants.................. F-109
Combined Balance Sheets as of December 31, 1996, 1995, and
1994................................................... F-110
Combined Statements of Income for the years ended December
31, 1996, 1995, and 1994............................... F-111
Combined Statements of Changes in Partners' Equity for the
years ended December 31, 1996, 1995, and 1994.......... F-112
Combined Statements of Cash Flows for the years ended
December 31, 1996, 1995, and 1994...................... F-113
Notes to Consolidated Financial Statements................ F-114
</TABLE>
F-2
<PAGE> 144
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> 145
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, present fairly, in all material respects, the information set forth
therein.
KPMG PEAT MARWICK LLP
Dallas, Texas
January 31, 1997
F-4
<PAGE> 146
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> 147
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> 148
CHANCELLOR 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> 149
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> 150
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> 151
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 Media
Group, Inc. 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> 152
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> 153
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> 154
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> 155
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> 156
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, 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.
F-15
<PAGE> 157
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> 158
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> 159
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> 160
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> 161
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> 162
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> 163
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> 164
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> 165
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> 166
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 NUMBER
OUTSTANDING AT AVERAGE WEIGHTED EXERCISABLE AT WEIGHTED
RANGE OF DECEMBER 31, REMAINING AVERAGE DECEMBER 31, AVERAGE
EXERCISE PRICES 1997 CONTRACTUAL LIFE EXERCISE PRICE 1997 EXERCISE 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> 167
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> 168
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> 169
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> 170
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
F-29
<PAGE> 171
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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>
F-30
<PAGE> 172
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(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-31
<PAGE> 173
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-32
<PAGE> 174
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-33
<PAGE> 175
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-34
<PAGE> 176
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-35
<PAGE> 177
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-36
<PAGE> 178
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-37
<PAGE> 179
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-38
<PAGE> 180
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-39
<PAGE> 181
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-40
<PAGE> 182
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-41
<PAGE> 183
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-42
<PAGE> 184
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-43
<PAGE> 185
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-44
<PAGE> 186
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-45
<PAGE> 187
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1996
------------ ------------
<S> <C> <C>
Term loan............................................... $ 67,562,500 $ 74,968,527
Revolving credit loan................................... 24,607,242 20,344,972
Subordinated notes due 2004............................. 80,000,000 260,000,000
------------ ------------
172,169,742 355,313,499
Less current portion.................................... 4,062,500 400,000
------------ ------------
$168,107,242 $354,913,499
============ ============
</TABLE>
The Company's term and revolving credit facilities were refinanced on
January 23, 1997, in conjunction with the acquisition of Colfax Communications
under a new bank credit agreement (the "New Credit Agreement") with Bankers
Trust Company, as administrative agent, and other institutions party thereto.
The New Credit Agreement includes a $225.0 million term loan facility (the "Term
Loan Facility") and a revolving loan facility (the "Revolving Loan Facility"
and, together with the Term Loan, the "New Bank Financing"). The Revolving Loan
Facility originally provides for borrowings up to $120.0 million, which is
subsequently reduced as and when the Company receives the net cash proceeds of
the pending station swaps and dispositions. In connection with the refinancing
of the term and revolving loan facilities, the Company incurred an extraordinary
charge to write-off deferred finance costs of approximately $4.5 million.
The New Bank Financing is collateralized by (i) a first priority perfected
pledge of all capital stock and notes owned by the Company and (ii) a first
priority perfected security interest in all other assets (including receivables,
contracts, contract rights, securities, patents, trademarks, other intellectual
property, inventory, equipment and real estate) owned by the Company, excluding
FCC licenses, leasehold interests in studio or office space and leasehold and
partnership interests in tower or transmitter sites in which necessary consents
to the granting of a security interest cannot be obtained without payments to
any other party or on a timely basis. The New Bank Financing also is guaranteed
by the subsidiaries of Chancellor and Chancellor Radio Broadcasting, whose
guarantees are collateralized by a first priority perfected pledge of the
capital stock Chancellor Radio Broadcasting.
The Term Loan Facility is due in increasing quarterly installments
beginning in 1997 and matures in January 2003. All outstanding borrowings under
the Revolving Facility mature in January 2003. The facilities bear interest at a
rate equal to, at the Company's option, the prime rate of Bankers Trust Company,
as announced from time to time, or the London Inter-Bank Offered Rate ("LIBOR")
in effect from time to time, plus an applicable margin rate. The Company pays
quarterly commitment fees in arrears equal to either .375% or .250% per annum on
the unused portion of the Revolving Facility, depending upon whether the
Company's leverage ratio is equal to or greater than 4.5:1 or less than 4.5:1,
respectively. The bank financing facilities which existed on December 31, 1996
accrued interest at the prime rate plus 1.25% (9.5%) on $3.3 million and the
LIBOR rate plus 2.50% (8.125%) on $92.0 million of borrowings.
In connection with the IPO (defined), the Company redeemed 25% of its
Existing Notes (defined) for approximately $22.2 million. The redemption was
completed in March 1996 and resulted in an extraordinary charge of $2.8 million.
The remaining $60.0 million 12 1/2% Senior Subordinated Notes due 2004 (the
"Existing Notes") mature October 1, 2004, and bear interest at 12.5% per annum.
On February 14, 1996, in conjunction with the acquisition of Trefoil
Communications, Inc., the Company issued $200.0 million aggregate principal
amount of 9 3/8% Senior Subordinated Notes due 2004 (the "New Notes" and,
together with the Existing Notes, the "Notes"), which mature on October 1, 2004,
and bear interest at 9.375% per annum. Interest on the Notes is paid
semi-annually. The Existing and New Notes are redeemable, in whole or in part,
at the option of the Company on or after October 1, 1999 and February 1, 2000,
respectively, at redemption prices expressed as a percentage of the principal
amount, ranging from 100.000% to 105.556%,
F-46
<PAGE> 188
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
plus accrued interest thereon to the date of acquisition. In addition, prior to
January 31, 1999, the Company may redeem up to 25% of the original aggregate
principal amount of the New Notes with the net proceeds of one or more public
equity offerings. The Notes are unsecured obligations of the Company, ranking
subordinate in right of payment to all senior debt of the Company. The New Notes
rank pari passu in right of payment to the Existing Notes. The Notes are
guaranteed on a senior subordinated basis by Chancellor Radio Broadcasting
Company's subsidiaries.
Scheduled debt maturities for the Company's outstanding long-term debt at
December 31, 1996 for each of the next five years and thereafter are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 400,000
1998........................................................ 400,000
1999........................................................ 9,874,886
2000........................................................ 11,296,119
2001........................................................ 17,469,864
Thereafter.................................................. 315,872,630
------------
$355,313,499
============
</TABLE>
See Note 5 for pro forma effects of the New Bank Financing subsequent to
year end. Both the New Bank Financing and Notes indentures contain certain
covenants, including, among others, limitations on the incurrence of additional
debt, in the case of the New Bank Financing; requirements to maintain certain
financial ratios; and restrictions on the payment of dividends to stockholders
and from the subsidiaries to Chancellor.
8. CAPITAL STRUCTURE
In February 1996, Chancellor sold 7.7 million shares of its Class A Common
Stock, par value $.01 per share (the "Class A Common Stock"), in an initial
public offering, (the "IPO"), which generated net proceeds of $142.4 million,
and in a private placement, issued $100.0 million of exchangeable redeemable
preferred stock (the "Acquisition Preferred Stock") of Chancellor Radio
Broadcasting and 742,192 shares of Class A common stock of Chancellor to an
affiliated entity and other investors.
Immediately prior to the IPO, Chancellor effected a recapitalization of its
current capital stock. Pursuant to the recapitalization, each six shares of
Chancellor's Nonvoting Stock were reclassified into one share of Class A Common
Stock. Each six shares of Chancellor's Voting Stock were reclassified into one
share of Class B Common Stock and each six shares of Convertible Nonvoting Stock
were reclassified into one share of Class C Common Stock. In connection with the
recapitalization, 63,334 shares of Class A Common Stock were exchanged for an
equal number of shares of Class B Common Stock, and an additional 8,484,410
shares of Class A Common Stock were exchanged for an equal number of shares of
Class C Common Stock. The recapitalization has been given retroactive effect in
the financial statements.
In February 1996, subsequent to the IPO, the Company completed a private
placement of $100.0 million of newly authorized Senior Cumulative Exchangeable
Preferred Stock (the "Old Preferred Stock"). Upon completion, the proceeds of
the Old Preferred Stock were used to redeem the Acquisition Preferred Stock and
55,664 shares of Class A Common Stock. The redemption resulted in a charge to
net loss attributable to common stock of approximately $16.6 million and an
additional reduction of paid-in capital of approximately $1.0 million.
In June 1996, the holders of Chancellor's Class C Common Stock filed an
application with the FCC to convert the stock into Chancellor's Class B Common
Stock. The holders of Class C Common Stock received approval of their
applications and subsequently converted their stock on October 22, 1996.
F-47
<PAGE> 189
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In August 1996 pursuant to an agreement entered into at the time of the
IPO, Chancellor sold 1.2 million shares of Class A Common Stock in a private
placement to an affiliated entity, which generated proceeds of $23.0 million
which were contributed to Chancellor Radio Broadcasting.
In September 1996, the Company completed an exchange offering whereby it
exchanged the Old Preferred Stock for 1,000,000 shares of 12 1/4% Series A
Senior Cumulative Exchangeable Preferred Stock (the "Senior Exchangeable
Preferred Stock") in a transaction registered under the Securities Act of 1933,
as amended. The terms of the Senior Exchangeable Preferred Stock are
substantially identical to those of the Old Preferred Stock. Dividends on the
Senior Exchangeable Preferred Stock accrue from its date of issuance and are
payable quarterly commencing November 15, 1996, at a rate per annum of 12 1/4%
of the then effective liquidation preference per share. Dividends may be paid,
at the Company's option, on any dividend payment date occurring on or prior to
February 15, 2001 either in cash or by adding such dividends to the then
effective liquidation preference of the Senior Exchangeable Preferred Stock. The
Senior Exchangeable Preferred Stock is redeemable at the Company's option, in
whole or in part at any time on or after February 15, 2001, at various
redemption prices, plus, accumulated and unpaid dividends to the date of
redemption. In addition, prior to February 15, 1999, the Company may, at its
option, redeem the Senior Exchangeable Preferred Stock with the net cash
proceeds from one or more Public Equity Offerings (as defined), at various
redemption prices, plus, accumulated and unpaid dividends to the redemption
date; provided, however, that after any such redemption there is outstanding at
least 75% of the number of shares of Senior Exchangeable Preferred Stock
originally issued.
The Company is required, subject to certain conditions, to redeem all of
the Senior Exchangeable Preferred Stock outstanding on February 15, 2008, at a
redemption price equal to 100% of the then effective liquidation preference
thereof, plus, accumulated and unpaid dividends to the date of redemption. Upon
the occurrence of a change of control (as defined), the Company must offer to
purchase all of the then outstanding shares of Senior Exchangeable Preferred
Stock at a price equal to 101% of the then effective liquidation preference
thereof, plus, accumulated and unpaid dividends to the date of purchase. Subject
to certain conditions, the Senior Exchangeable Preferred Stock is exchangeable
in whole, but not in part, at the option of the Company, on any dividend payment
date for the Company's 12 1/4% subordinated exchange debentures due 2008.
On January 23, 1997, Chancellor completed a private placement of $100.0
million of newly authorized 7% Convertible Preferred Stock (the "Convertible
Preferred Stock") and Chancellor Radio Broadcasting completed a private
placement of $200.0 million of newly authorized 12% Exchangeable Preferred Stock
(the "Exchangeable Preferred Stock").
Dividends on the Convertible Preferred Stock accrue from its date of
issuance and are payable quarterly commencing April 15, 1997, at a rate per
annum of 7% of the liquidation preference per share. The liquidation preference
of the Convertible Preferred Stock is $50.00 per share, and requires cash
dividends of $7.7 million per year. Because Chancellor is a holding company with
no assets other than the common stock of the Company, Chancellor will rely
solely on the dividends from the Company to satisfy its dividend payment
obligation on the 7% Convertible Preferred Stock. The Convertible Preferred
Stock is convertible at the option of the holder at any time after March 23,
1997, unless previously redeemed, into Class A Common Stock of Chancellor at a
conversion price of $32.90 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.
F-48
<PAGE> 190
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Dividends on the Exchangeable Preferred Stock will accrue from the date of
its issuance and will be payable semi-annually commencing July 15, 1997, at a
rate per annum of 12% of the liquidation preference per share. Dividends may be
paid, at the Company's option, on any dividend payment date occurring on or
prior to January 15, 2002 either in cash or in additional shares of Exchangeable
Preferred Stock. The liquidation preference of the Exchangeable Preferred Stock
will be $100.00 per share. The Exchangeable Preferred Stock is redeemable at the
Company's option, in whole or in part at any time on or after January 15, 2002,
at the redemption prices set forth herein, plus accrued and unpaid dividends to
the date of redemption. In addition, prior to January 15, 2000, the Company may,
at its option, redeem the Exchangeable Preferred Stock with the net cash
proceeds from one or more Public Equity Offerings (as defined), at various
redemption prices plus accrued and unpaid dividends to the redemption date;
provided, however, that after any such redemption there is outstanding at least
$150.0 million aggregate liquidation preference of Exchangeable Preferred Stock.
The Company is required, subject to certain conditions, to redeem all of the
Exchangeable Preferred Stock outstanding on January 15, 2009, at a redemption
price equal to 100% of the liquidation preference thereof, plus accrued and
unpaid dividends to the date of redemption. Upon the occurrence of a Change of
Control (as defined), the Company will, subject to certain conditions, offer to
purchase all of the then outstanding shares of Exchangeable Preferred Stock at a
price equal to 101% of the liquidation preference thereof, plus accrued and
unpaid dividends to the repurchase date. In addition, prior to January 15, 1999,
upon the occurrence of a Change of Control, the Company will have the option to
redeem the Exchangeable Preferred Stock in whole but not in part at a redemption
price equal to 112% of the liquidation preference thereof, plus accrued and
unpaid dividends to the date of redemption. The Exchangeable Preferred Stock
will, with respect to dividend rights and rights on liquidation, rank junior to
the Senior Exchangeable Preferred Stock. Subject to certain conditions, the
Exchangeable Preferred Stock is exchangeable in whole, but not in part, at the
option of the Company, on any dividend payment date for the Company's 12%
subordinated exchange debentures due 2009, including any such securities paid in
lieu of cash interest.
In addition to the accrued dividends discussed above, the recorded value of
the Senior Exchangeable Preferred Stock, the Convertible Preferred Stock and the
Exchangeable Preferred Stock includes or will include an amount for the
accretion of the difference between the stock's fair value at date of issuance
and its mandatory redemption amount, calculated using the effective interest
method.
9. INCOME TAXES
All of the Company's revenues were generated in the United States. The
provision for income taxes for continuing operations consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Current:
State.................................................... $ -- $ 11,098 $ 64,070
Deferred:
Federal.................................................. 1,267,109 3,220,528 3,866,209
State.................................................... 223,607 568,329 682,272
---------- ---------- ----------
Total provision.................................. $1,490,716 $3,799,955 $4,612,551
========== ========== ==========
</TABLE>
F-49
<PAGE> 191
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-50
<PAGE> 192
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-51
<PAGE> 193
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-52
<PAGE> 194
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-53
<PAGE> 195
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-54
<PAGE> 196
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-55
<PAGE> 197
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED 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-56
<PAGE> 198
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-57
<PAGE> 199
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-58
<PAGE> 200
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.
F-59
<PAGE> 201
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The acquisition is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired and liabilities assumed:
Property and equipment.................................... $ 9,209
Goodwill and other intangibles............................ 171,837
--------
$181,046
</TABLE>
On February 19, 1997, Chancellor and Chancellor Radio Broadcasting entered
into an agreement to merge with Evergreen in a stock-for-stock transaction (the
"Merger"), with Evergreen remaining as the surviving corporation. Pursuant to
the agreement, shareholders of the Company's common stock will receive 0.9091
shares of Evergreen's common stock. Consummation of the merger is subject to
shareholder approval and certain other closing conditions including regulatory
approval. The Company has incurred 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.
F-60
<PAGE> 202
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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).
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
F-61
<PAGE> 203
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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
F-62
<PAGE> 204
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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-63
<PAGE> 205
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-64
<PAGE> 206
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-65
<PAGE> 207
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-66
<PAGE> 208
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-67
<PAGE> 209
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-68
<PAGE> 210
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-69
<PAGE> 211
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-70
<PAGE> 212
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-71
<PAGE> 213
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-72
<PAGE> 214
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-73
<PAGE> 215
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-74
<PAGE> 216
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-75
<PAGE> 217
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-76
<PAGE> 218
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-77
<PAGE> 219
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-78
<PAGE> 220
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-79
<PAGE> 221
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-80
<PAGE> 222
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-81
<PAGE> 223
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-82
<PAGE> 224
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-83
<PAGE> 225
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-84
<PAGE> 226
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-85
<PAGE> 227
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-86
<PAGE> 228
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-87
<PAGE> 229
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-88
<PAGE> 230
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-89
<PAGE> 231
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-90
<PAGE> 232
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-91
<PAGE> 233
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-92
<PAGE> 234
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-93
<PAGE> 235
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-94
<PAGE> 236
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-95
<PAGE> 237
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-96
<PAGE> 238
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-97
<PAGE> 239
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-98
<PAGE> 240
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-99
<PAGE> 241
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-100
<PAGE> 242
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-101
<PAGE> 243
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-102
<PAGE> 244
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-103
<PAGE> 245
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-104
<PAGE> 246
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-105
<PAGE> 247
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-106
<PAGE> 248
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-107
<PAGE> 249
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-108
<PAGE> 250
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-109
<PAGE> 251
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-110
<PAGE> 252
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-111
<PAGE> 253
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-112
<PAGE> 254
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-113
<PAGE> 255
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-114
<PAGE> 256
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-115
<PAGE> 257
COLFAX COMMUNICATIONS, INC. RADIO GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Sale of Stations
On August 24, 1996, Chancellor Radio Broadcasting Company ("Chancellor"), a
Delaware Corporation, agreed to purchase substantially all of the assets of
CALP, Radio 570, Radio 100, Radio 100 of Maryland, Radio 94 (with the exception
of KOOL(AM)), and Radio 95 (with the exception of KIDO(AM), KLTB(FM), and
KARO(FM)) for total consideration of $365,000,000 plus the net working capital
of the stations. The transaction closed on January 23, 1997. The agreement
stipulates that the purchase price for the assets be allocated among the limited
partnerships as follows:
<TABLE>
<CAPTION>
<S> <C>
CALP........................................................ $ 50,000,000
Radio 570................................................... 21,000,000
Radio 100................................................... 85,000,000
Radio 100 of Maryland....................................... 90,000,000
Radio 94.................................................... 30,000,000
Radio 95.................................................... 89,000,000
------------
$365,000,000
============
</TABLE>
On October 28, 1996, Jacor Broadcasting of Idaho, Inc., an Ohio
corporation, entered into an agreement to purchase substantially all of the
assets of radio stations KIDO(AM), KLTB(FM), and KARO(FM) for $11,000,000. The
transaction closed on January 31, 1997.
Partnership Allocations
The partnerships distribute cash from operations and allocate net profits
or losses to the partners, in general, in accordance with their stated interests
except that no partner shall receive any distribution from a partnership until
such time as the net invested capital of the general partner and Class A Limited
Partner have been distributed, along with a cumulative priority return on the
average net invested capital at an annual rate equal to the prime rate plus one
quarter of one percent compounded monthly.
In accordance with the Company's debt agreement (described below)
distributions to partners may be permitted on a quarterly basis if certain
requirements are met.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Accounting
The accompanying financial statements are prepared on the accrual basis of
accounting in accordance with generally accepted accounting principles.
Barter Transactions
The partnerships enter into barter transactions in which they provide
on-air advertising in exchange for goods and services. Revenues and expenses
from barter transactions are presented in the accompanying statement of revenues
and expenses based on the estimated fair market value of the goods or services
received. Barter revenue approximated $1,925,000, $1,590,000, and $1,870,000 for
the years ended December 31, 1996, 1995, and 1994, respectively; while barter
expense approximated $1,763,000, $1,486,000, and $1,520,000 for the years ended
December 31, 1996, 1995, and 1994, respectively.
Income Taxes
Provision for Federal and state income taxes has not been made in the
accompanying financial statements since the partnerships do not pay Federal and
state income taxes but rather allocate profits and losses to the partners for
inclusion in their respective income tax returns.
F-116
<PAGE> 258
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-117
<PAGE> 259
COLFAX COMMUNICATIONS, INC. RADIO GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The carrying amount reported in the balance sheets for cash, accounts
receivable, accounts payable and accrued liabilities, approximate their fair
value due to the immediate or short-term maturity of such instruments. The
carrying amount reported for long-term debt approximates fair value due to the
debt being priced at floating rates (see Note 7 for additional information).
4. PROPERTY AND EQUIPMENT:
The components of property and equipment at December 31, 1996 and 1995, are
summarized below:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Land.................................... $ 3,719,572 $ 1,901,663 $ 2,233,341
Buildings............................... 1,372,161 26,453 604,927
Construction in progress................ 27,660 27,232 201,404
Furniture, fixtures and equipment....... 11,323,175 8,520,853 7,690,841
Leasehold improvements.................. 835,407 816,031 522,806
----------- ----------- -----------
17,277,975 11,292,232 11,253,319
Less -- Accumulated depreciation........ (2,769,878) (2,616,508) (1,644,716)
----------- ----------- -----------
$14,508,097 $ 8,675,724 $ 9,608,603
=========== =========== ===========
</TABLE>
5. FCC LICENSES AND OTHER NONCURRENT ASSETS:
The components of FCC licenses and other noncurrent assets at December 31,
1996 and 1995, are summarized below:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
FCC licenses............................ $163,988,330 $ 39,505,773 $ 39,505,773
Covenants not to compete................ 1,931,834 8,493,147 8,493,147
Start-up and organization costs......... 2,489,973 2,132,587 2,153,036
Other................................... 1,376,763 958,245 1,891,395
------------ ------------ ------------
169,786,900 51,089,752 52,043,351
Less -- Accumulated amortization........ (22,207,301) (18,706,165) (14,389,548)
------------ ------------ ------------
$147,579,599 $ 32,383,587 $ 37,653,803
============ ============ ============
</TABLE>
6. RELATED-PARTY TRANSACTIONS:
Each partnership is involved in certain transactions with other
partnerships in the radio group related to sharing of services and purchasing.
These transactions are settled on a current basis through adjustments to
partners' equity accounts.
On January 18, 1995, CALP and Radio 100 of Maryland each entered into a 10
year agreement to lease tower space from Colfax Towers, Inc. The annual rental
payment for CALP equaled $31,200 and $30,000 for the years ended December 31,
1996 and 1995, respectively. The annual rental payment for Radio 100 of Maryland
equaled $37,200 and $36,000 for the years ended December 31, 1996 and 1995,
respectively. Colfax Towers, Inc., is owned by the shareholders of Colfax
Communications, Inc.
Employees of Colfax perform activities on behalf of and oversee the
operations of the radio stations included in the radio group. Colfax does not
charge any fees to the radio stations for the performance of such services.
Corporate expenses of $1,240,253, $1,354,296, and $1,144,082 related to those
services are not included in the financial statements of the radio group for the
years ending December 31, 1996, 1995, and 1994, respectively. These corporate
expenses were funded directly by the owners of Colfax Communications, Inc.
F-118
<PAGE> 260
COLFAX COMMUNICATIONS, INC. RADIO GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
7. LONG-TERM DEBT:
On December 27, 1995, CALP, Radio 570, Radio 100, and Radio 100 of Maryland
entered into a $40 million revolving loan agreement. On April 2, 1996, under an
amendment to the loan agreement, CALP, Radio 570, Radio 100, Radio 100 of
Maryland, and Radio 94 (collectively, the "Borrowers") increased the amount
available under the revolving loan agreement to $60 million. At December 31,
1996, $55,650,000 was outstanding under this agreement. The proceeds were
allocated to each borrower on the basis of each station's capital account as
follows:
<TABLE>
<S> <C>
CALP........................................................ $ 5,702,360
Radio 570................................................... 4,156,587
Radio 100................................................... 16,423,860
Radio 100 of Maryland....................................... 9,214,544
Radio 94.................................................... 20,152,649
-----------
$55,650,000
===========
</TABLE>
The initial proceeds were used to repay the indebtedness of CALP to make
certain permitted distributions to partners of the Borrowers, and for working
capital purposes in the operations of the Borrowers. Borrowings under this
agreement bear interest at floating rates equal to prime and/or LIBOR (as
defined in the loan agreement) plus an applicable margin determined by a
leverage ratio. The expiration date of the loan agreement is December 31, 2002.
Under the loan agreement, the Borrowers are required to maintain a specific
leverage ratio and certain ratios pertaining to cash flow coverage.
In connection with the sale of the stations (discussed in Note 2), the debt
was repaid in full in January 1997.
8. COMMITMENTS:
The Radio Group has entered into various contracts for exclusive radio
broadcasting rights and other programming. In addition, the partnerships lease
office space and have entered into various service contracts, including certain
personal service contracts. These broadcasting rights, leases and service
contracts expire over periods ranging from 1997 to 2012. The minimum future
commitments under these agreements, leases and service contracts are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 3,766,028
1998........................................................ 2,826,433
1999........................................................ 1,178,594
2000........................................................ 1,140,345
2001........................................................ 646,234
Thereafter.................................................. 2,077,616
-----------
$11,635,250
===========
</TABLE>
9. RESTRUCTURING CHARGES:
During 1995, the Radio Group recorded restructuring costs of $737,729 at
certain radio stations. These costs included severance and salary payments to
terminated employees of $357,563, costs related to hiring a new general manager
at one of the radio stations of $135,519 and costs related to a loss on space
vacated by one of the radio stations of $244,647.
F-119
<PAGE> 261
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL IN CONNECTION WITH THE EXCHANGE OFFER
COVERED BY THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL. IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS AND THE ACCOMPANYING LETTER OF
TRANSMITTAL DO NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER
TO BUY, THE EXCHANGE NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM,
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN
ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF.
------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................. v
Prospectus Summary..................... 1
Risk Factors........................... 14
The Exchange Offer..................... 23
Use of Proceeds........................ 32
Capitalization......................... 32
Selected Consolidated Historical
Financial Data....................... 34
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 36
Business............................... 41
Management and Board of Directors...... 61
Security Ownership of Certain
Beneficial
Owners and Management................ 71
Certain Relationships and Related
Transactions......................... 73
Description of the Exchange Notes...... 74
Book-Entry; Delivery and Form.......... 96
Description of Certain Indebtedness.... 97
Description of Capital Stock........... 104
Material United States Federal Income
Tax Considerations................... 115
Plan of Distribution................... 116
Legal Matters.......................... 116
Experts................................ 117
Pro Forma Financial Information........ P-1
Index to Financial Statements.......... F-1
</TABLE>
======================================================
======================================================
CHANCELLOR MEDIA CORPORATION OF
LOS ANGELES
OFFER TO EXCHANGE
8 1/8% SENIOR SUBORDINATED
NOTES DUE 2007, SERIES B
FOR ALL OUTSTANDING 8 1/8%
SENIOR SUBORDINATED NOTES
DUE 2007, SERIES A
---------------------------
PROSPECTUS
---------------------------
APRIL , 1998
======================================================
<PAGE> 262
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law empowers a Delaware
corporation to indemnify any person who is, or is threatened to be made, a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of such corporation) by reason of the fact that such person is or was
an officer or director of such corporation, or is or was serving at the request
of such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided that he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. A Delaware corporation may indemnify officers
and directors in an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation. Where an officer
or director is successful on the merits or otherwise in the defense of any
action referred to above, the corporation must indemnify him against the
expenses which he actually and reasonably incurred in connection therewith.
The Company's Certificate of Incorporation 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 the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit.
The Company's Bylaws provide that the Company shall indemnify every person
who is or was a party or is or was threatened to be made a party to any action
suit, or proceeding, whether civil, criminal, administrative or investigative,
by reason of the fact that he is or was a director or officer of the Corporation
or, while a director or officer or employee of the Corporation, is or was
serving at the request of the Corporation as a director, officer, employee,
agent or trustee of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including counsel
fees), judgments, fines and amounts paid in settlement actually and reasonable
incurred by him in connection with such action, suit or proceeding, to the full
extent permitted by applicable law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
A. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
1.1+ -- Securities Purchase Agreement, dated as of December 22,
1997, by and among Chancellor Media Corporation of Los
Angeles, BT Alex. Brown, Credit Suisse First Boston,
Goldman, Sachs & Co., Morgan Stanley Dean Witter and
Salomon Smith Barney.
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.
</TABLE>
II-1
<PAGE> 263
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
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.
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.
</TABLE>
II-2
<PAGE> 264
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.26(q) -- Asset Purchase Agreement dated September 19, 1996 between
Beasley-FM Acquisition Corp., WDAS License Limited
Partnership and Evergreen Media Corporation of Los
Angeles.
2.27(q) -- Asset Purchase Agreement dated September 19, 1996 between
The Brown Organization and Evergreen Media Corporation of
Los Angeles.
2.28(r) -- Stock Purchase Agreement by and between Viacom
International Inc. and Evergreen Media Corporation of Los
Angeles, dated February 16, 1997 (See table of contents
for omitted schedules and exhibits).
2.29(r) -- Agreement and Plan of Merger, by and among Evergreen
Media Corporation, Chancellor Broadcasting Company and
Chancellor Radio Broadcasting Company, dated as of
February 19, 1997.
2.30(r) -- Stockholders Agreement, by and among Chancellor
Broadcasting Company, Evergreen Media Corporation, Scott
K. Ginsburg (individually and as custodian for certain
shares held by his children), HM2/Chancellor, L.P.,
Hicks, Muse, Tate & First Equity Fund II, L.P., HM2/HMW,
L.P., The Chancellor Business Trust, HM2/HMD Sacramento
GP, L.P., Thomas O. Hicks, as Trustee of the William Cree
Hicks 1992 Irrevocable Trust, Thomas O. Hicks, as Trustee
of the Catherine Forgave Hicks 1993 Irrevocable Trust,
Thomas O. Hicks, as Trustee of the John Alexander Hicks
1984 Trust, Thomas O. Hicks, as Trustee of the Mack
Hardin Hicks 1984 Trust, Thomas O. Hicks, as Trustee of
Robert Bradley Hicks 1984 Trust, Thomas O. Hicks, as
Trustee of the Thomas O. Hicks, Jr. 1984 Trust, Thomas O.
Hicks and H. Rand Reynolds, as Trustees for the Muse
Children's GS Trust, and Thomas O. Hicks, dated as of
February 19, 1997.
2.31(r) -- Joint Purchase Agreement, by and among Chancellor Radio
Broadcasting Company, Chancellor Broadcasting Company,
Evergreen Media Corporation of Los Angeles, and Evergreen
Media Corporation, dated as of February 19, 1997.
2.32(s) -- Asset Exchange Agreement, by and among EZ Communications,
Inc., Professional Broadcasting Incorporated, EZ
Philadelphia, Inc., Evergreen Media Corporation of Los
Angeles, Evergreen Media Corporation of Charlotte,
Evergreen Media Corporation of the East, Evergreen Media
Corporation of Carolinaland, WBAV/WBAV-FM/WPEG License
Corp. and WRFX License Corp., dated as of December 5,
1996 (See table of contents for list of omitted
schedules).
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).
</TABLE>
II-3
<PAGE> 265
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
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 the
Company and Capstar Broadcasting Corporation.
3.3(ff) -- Certificate of Incorporation of Chancellor Media
Corporation of Los Angeles (formerly known as Evergreen
Media Corporation of Los Angeles).
3.3A(pp) -- Amendment to Certificate of Incorporation of Chancellor
Media Corporation of Los Angeles, filed September 5,
1997.
3.3B(tt) -- Amendment to Certificate of Incorporation of Chancellor
Media Corporation of Los Angeles, filed October 28, 1997.
3.4(ff) -- Bylaws of Chancellor Media Corporation of Los Angeles.
4.10(t) -- Second Amended and Restated Loan Agreement dated as of
April 25, 1997 among Evergreen Media Corporation of Los
Angeles, the financial institutions whose names appear as
Lenders on the signature pages thereof (the "Lenders"),
Toronto Dominion Securities, Inc., as Arranging Agent,
The Bank of New York and Bankers Trust Company, as
Co-Syndication Agents, NationsBank of Texas, N.A. and
Union Bank of California, as Co-Documentation Agents, and
Toronto Dominion (Texas), Inc., as Administrative Agent
for the Lenders, together with certain collateral
documents attached thereto as exhibits, including
Assignment of Partnership Interests, Assignment of Trust
Interests, Borrower's Pledge Agreement, Parent Company
Guaranty, Stock Pledge Agreement, Subsidiary 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 the Company.
4.16(bb) -- First Supplemental Indenture, dated as of February 14,
1996, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of the
Company.
4.17(cc) -- Indenture, dated as of February 26, 1996, governing the
12 1/4% Subordinated Exchange Debentures due 2008 of the
Company.
4.18(dd) -- Indenture, dated as of January 23, 1997, governing the
12% Subordinated Exchange Debentures due 2009 of the
Company.
4.19(ee) -- Indenture, dated as of June 24, 1997, governing the
8 3/4% Senior Subordinated Notes due 2007 of the Company.
4.21(ff) -- Specimen of the 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock Certificate of the Company.
4.22(ff) -- Specimen of the 12% Exchangeable Preferred Stock
Certificate of the Company.
</TABLE>
II-4
<PAGE> 266
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
4.23(ff) -- Form of Certificate of Designation for the 12 1/4% Series
A Senior Cumulative Exchangeable Preferred Stock of the
Company.
4.24(ff) -- Form of Certificate of Designation for the 12%
Exchangeable Preferred Stock of the Company.
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 the
Company.
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 the
Company.
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 the Company.
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
the Company.
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 the
Company.
4.34(tt) -- Amended and Restated Indenture, dated as of October 28,
1997, governing the 10 1/2% Senior Subordinated Notes due
2007 of the Company.
4.35(tt) -- 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 the Company.
4.36(tt) -- Third Amendment to Second Amended and Restated Loan
Agreement, dated October 28, 1997, among the Company, the
Lenders, the Agents and the Administrative Agent.
4.37(tt) -- Fourth Amendment to Second Amended and Restated Loan
Agreement, dated February 10, 1998, among the Company,
the Lenders, the Agents and the Administrative Agent.
4.38+ -- Indenture, dated as of December 22, 1997, governing the
8 1/8% Senior Subordinated Notes due 2007 of the Company.
5.1+ -- Opinion of Latham & Watkins.
8.1+ -- Tax Matters Opinion of Latham & Watkins.
10.23(f) -- Evergreen 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-5
<PAGE> 267
<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, 1996 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, 1995 from
Chancellor Corporation to Steven Dinetz.
10.39(mm) -- Stock Option Grant Letter dated September 30, 1995 from
Chancellor Corporation to Eric W. Neumann.
10.40(nn) -- Stock Option Grant Letter dated September 30, 1995 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.
10.43+ -- Registration Rights Agreement, dated December 22, 1997,
by and among Chancellor Media Corporation of Los Angeles
and the initial purchasers of the 8 1/8% Senior
Subordinated Notes due 2007.
10.44* -- Agreement dated April 20, 1998 by and among Chancellor
Media Corporation, Chancellor Media Corporation of Los
Angeles and Scott K. Ginsburg.
12.1+ -- Chancellor Media Corporation of Los Angeles Computation
of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends.
21.2(tt) -- Subsidiaries of Chancellor Media Corporation of Los
Angeles.
23.1+ -- Consent of Latham & Watkins (included as part of their
opinion listed as Exhibit 5.1).
23.2+ -- Consent of Coopers & Lybrand L.L.P., independent
accountants.
23.3+ -- Consent of KPMG Peat Marwick LLP, independent
accountants.
23.4+ -- Consent of Coopers & Lybrand L.L.P., 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 Latham & Watkins (included as part of their
opinion listed as Exhibit 8.1).
24.1 -- Powers of Attorney (included on signature pages)
25.1+ -- Statement of Eligibility on Form T-1 of The Bank of New
York under the Indenture.
99.1* -- Letter Of Transmittal for the Exchange Offer.
99.2* -- Notice of Guaranteed Delivery for the Exchange Offer.
</TABLE>
II-6
<PAGE> 268
B. Financial Statements
1. Consolidated Financial Statements of Chancellor Media Corporation of
Los Angeles and Subsidiaries as of December 31, 1996 and 1997 and for
the years ended December 31, 1995, 1996 and 1997.
2. Consolidated Financial Statements of Chancellor Radio Broadcasting
Company and Subsidiaries as of December 31, 1995 and 1996 and June
30, 1997 and for the years ended December 31, 1994, 1995 and 1996 and
for the three and six months ended June 30, 1996 and 1997.
3. Combined Financial Statements of Riverside Broadcasting Co., Inc. and
WAXQ Inc. as of December 31, 1995 and 1996 and June 30, 1997 and for
the years ended December 31, 1994, 1995 and 1996 and the six months
ended June 30, 1996 and 1997.
4. Combined Financial Statements of WMZQ Inc. and Viacom Broadcasting
East Inc. as of December 31, 1995 and 1996 and June 30, 1997 and for
the years ended December 31, 1994, 1995 and 1996 and the six months
ended June 30, 1996 and 1997.
5. Financial Statements of WDAS-AM/FM (Station owned and operated by
Beasley FM Acquisition Corp.) as of December 31, 1996 and March 31,
1997 and for the year ended December 31, 1996 and the three months
ended March 31, 1996 and 1997.
6. Combined Financial Statements of KYSR Inc. and KIBB Inc. as of
December 31, 1995 and 1996 and June 30, 1997 and for the years ended
December 31, 1994, 1995 and 1996 and the six months ended June 30,
1996 and 1997.
7. Financial Statements of WLIT Inc. as of December 31, 1995 and 1996
and June 30, 1997 and for the years ended December 31, 1994, 1995 and
1996 and the six months ended June 30, 1996 and 1997.
8. Combined Financial Statements of Colfax Communications, Inc. Radio
Group as of December 31, 1996, 1995 and 1994 and for the years ended
December 31, 1996, 1995 and 1994.
- ---------------
* To be filed by amendment.
+ Filed herewith.
(a) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-1, as amended (Reg. No.
33-60036).
(f) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-4, as amended (Reg. No.
33-89838).
(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)
II-7
<PAGE> 269
Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-3, as amended (Reg. No.
333-12453).
(r) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated February 16, 1997 and filed
March 9, 1997.
(s) Incorporated by reference to the identically numbered exhibit to
Evergreen's Annual Report on Form 10-K for the fiscal year ended December
31, 1996.
(t) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated April 1, 1997 and filed May
9, 1997.
(y) Incorporated by reference to the identically numbered exhibit of
Evergreen's Registration Statement on Form S-4, filed August 1, 1997.
(z) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated July 7, 1997 and filed July
31, 1997.
(aa) Incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K
of Chancellor Broadcasting Company and Chancellor Radio Broadcasting
Company, as filed on February 29, 1996.
(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 EMCLA's
Registration Statement on Form S-4 (Reg. No. 333-32259), dated July 29,
1997, as amended.
(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 and CRBC for the quarterly period ending March 31,
1997.
(ii) Incorporated by reference to Exhibit 10.6 to Chancellor'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.
(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
Company'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 the Company, dated as
of February 23, 1998 and filed as of February 27, 1998.
(tt)
II-8
<PAGE> 270
Incorporated by reference to the identically numbered exhibit to the
Annual Report on Form 10-K of Chancellor Media and the Company for the
fiscal year ended December 31, 1997.
The Company hereby agrees to furnish supplementarily a copy of any omitted
schedule or exhibit to the Commission upon request.
ITEM 22. UNDERTAKINGS.
A. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 20 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expense incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted against the registrant by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's Annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's Annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
D. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
E. (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145, the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-9
<PAGE> 271
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Irving, State of Texas,
on April 17, 1998.
CHANCELLOR MEDIA CORPORATION
OF LOS ANGELES
By: /s/ MATTHEW E. DEVINE
----------------------------------
Matthew E. Devine
Senior Vice President and
Chief Financial Officer
POWERS OF ATTORNEY
Each person whose signature appears below constitutes and appoints Matthew
E. Devine as his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for such person and in his name, place and
stead, in any and all capacities, to sign any or all further amendment
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1933, AS
AMENDED, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ THOMAS O. HICKS Chairman of the Board and interim April 20, 1998
- ----------------------------------------------------- Chief Executive Officer
Thomas O. Hicks (Principal Executive Officer)
/s/ JAMES E. DE CASTRO Chief Operating Officer and April 21, 1998
- ----------------------------------------------------- Director
James E. de Castro
/s/ MATTHEW E. DEVINE Senior Vice President and Chief April 17, 1998
- ----------------------------------------------------- Financial Officer (Principal
Matthew E. Devine Financial Officer and Principal
Accounting Officer)
/s/ THOMAS J. HODSON Director April 20, 1998
- -----------------------------------------------------
Thomas J. Hodson
/s/ PERRY J. LEWIS Director April 20, 1998
- -----------------------------------------------------
Perry J. Lewis
/s/ ERIC C. NEUMAN Director April 20, 1998
- -----------------------------------------------------
Eric C. Neuman
/s/ JOHN H. MASSEY Director April 17, 1998
- -----------------------------------------------------
John H. Massey
</TABLE>
II-10
<PAGE> 272
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ JEFFREY A. MARCUS Director April 17, 1998
- -----------------------------------------------------
Jeffrey A. Marcus
/s/ LAWRENCE D. STUART, JR. Director April 20, 1998
- -----------------------------------------------------
Lawrence D. Stuart, Jr.
/s/ STEVEN DINETZ Director April 17, 1998
- -----------------------------------------------------
Steven Dinetz
/s/ VERNON E. JORDAN, JR. Director April 21, 1998
- -----------------------------------------------------
Vernon E. Jordan, Jr.
</TABLE>
II-11
<PAGE> 273
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each
co-registrant listed on Attachment A hereto has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Irving, State of Texas, on April 17, 1998.
THE CO-REGISTRANTS LISTED ON
ATTACHMENT A HERETO
By: /s/ MATTHEW E. DEVINE
----------------------------------
Matthew E. Devine
Vice President
of Each Co-Registrant
POWERS OF ATTORNEY
Each person whose signature appears below constitutes and appoints Matthew
E. Devine as his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for such person and in his name, place and
stead, in any and all capacities, to sign any or all further amendment
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1933, AS
AMENDED, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ THOMAS O. HICKS Chief Executive Officer of Each April 20, 1998
- ----------------------------------------------------- Co-Registrant (Principal
Thomas O. Hicks Executive Officer of Each Co-
Registrant)
/s/ MATTHEW E. DEVINE Vice President and Director of April 17, 1998
- ----------------------------------------------------- Each Co-Registrant (Principal
Matthew E. Devine Financial Officer and
Principal Accounting Officer
of Each Co-Registrant)
/s/ ERIC C. NEUMAN Director of Each Co-Registrant April 20, 1998
- -----------------------------------------------------
Eric C. Neuman
/s/ LAWRENCE D. STUART, JR. Director of Each Co-Registrant April 20, 1998
- -----------------------------------------------------
Lawrence D. Stuart, Jr.
</TABLE>
II-12
<PAGE> 274
ATTACHMENT A
<TABLE>
<CAPTION>
NAME
<S> <C> <C> <C>
Chancellor Media Corporation of the Lone Star
State
Chancellor KZPS/KDGE License Corp.
Chancellor Media Corporation of the Bay Area
KIOI License Corp.
Chancellor Media Corporation of Illinois
WRCX License Corp.
Chancellor Media Corporation of Chicago AM
WMVP-AM License Corp.
Chancellor Media Corporation of Dade County
WVCG License Corp.
Chancellor Media/Pyramid Corporation
Chancellor Media/Pyramid Holdings Corporation
Broadcast Architecture, Inc.
Chancellor Media Corporation of Massachusetts
WJMN License Corp.
Chancellor Media Corporation of the Nation's
Capital
WWRC License Corp.
Chancellor Media Partners Corporation
Chancellor Media Corporation of Gotham
Chancellor Media Corporation of New York
WYNY License Corp.
Chancellor Media Corporation of Detroit
WKQI/WDOZ/WNIC License Corp.
Chancellor Media Corporation of Chicagoland
WEJM/WEJM-FM/WVAZ License Corp.
Chancellor Media Corporation of Charlotte
WIOQ License Corp.
Chancellor Media Corporation of Dallas
KSKY License Corp.
Chancellor Media Corporation of San Francisco
KMEL License Corp.
Chancellor Media Corporation of Houston
Chancellor Media of Houston Limited Partnership
(through its general partner, Chancellor Media
Corporation of Houston)
KLOL License Limited Partnership (through its
general partner, Chancellor Media Corporation of
Houston)
Chancellor Media Corporation of Tiburon
KKSF License Corp.
Chancellor Media Corporation of Washington, D.C.
Chancellor Media Corporation of St. Louis
WTOP License Limited Partnership (through its
general partner, Chancellor Media Corporation of
Washington, D.C.)
Chancellor Media Corporation of the Motor City
WJLB License Corp.
Chancellor Media Corporation of Michigan
WMXD License Corp.
Chancellor Media/WAXQ Inc.
WAXQ License Corp.
Chancellor Media/WMZQ Inc.
WMZQ License Corp.
</TABLE>
II-13
<PAGE> 275
ATTACHMENT A -- (CONTINUED)
<TABLE>
<CAPTION>
NAME
<S> <C> <C> <C>
Chancellor Media Corporation of the Liberty City
WDAS (FM) License Corp.
WDAS (AM) License Corp.
Chancellor Media/Riverside Broadcasting Co. Inc.
WLTW License Corp.
Chancellor Media Corporation of the Great Lakes
WWWW/WDFN License Corp.
Chancellor Media Corporation of the Capital City
WGAY 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 of Texas,
Inc.
Chancellor Media/Shamrock Broadcasting Licenses of
Denver, Inc.
Chancellor Media/KCMG Inc.
Chancellor Media/KYSR Inc.
Chancellor Media/WLIT Inc.
Radio 100 L.L.C. (through its sole member,
Chancellor Media Corporation of Los Angeles)
Chancellor Media Corporation of Pennsylvania
WJJZ License Corp.
Chancellor Media Corporation of Miami
WEDR License Corp.
Chancellor Media Corporation of Boston
WXKS (AM) License Corp.
WXKS (FM) License Corp.
Chancellor Media Corporation of the Windy City
WNUA License Corp.
Chancellor Media Corporation of Philadelphia
Chancellor Media Corporation of the Keystone State
WYXR License Corp.
WUSL License Corp.
KKBT License Corp.
</TABLE>
II-14
<PAGE> 276
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
co-registrant identified below has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Irving, State of Texas, on April 20, 1998.
KATZ MEDIA CORPORATION
By: /s/ RICHARD E. VENDIG
----------------------------------
Richard E. Vendig
Senior Vice President, Chief
Financial and Administrative
Officer, Treasurer
POWERS OF ATTORNEY
Each person whose signature appears below constitutes and appoints Matthew
E. Devine as his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for such person and in his name, place and
stead, in any and all capacities, to sign any or all further amendment
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1933, AS
AMENDED, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ THOMAS F. OLSON Chief Executive Officer, April 20, 1998
- ----------------------------------------------------- President and Director
Thomas F. Olson (Principal Executive
Officer)
/s/ RICHARD E. VENDIG Senior Vice President, Chief April 20, 1998
- ----------------------------------------------------- Financial and
Richard E. Vendig Administrative Officer,
Treasurer (Principal
Financial Officer and
Principal Accounting
Officer)
/s/ JAMES E. DE CASTRO Director April 21, 1998
- -----------------------------------------------------
James E. de Castro
/s/ MATTHEW E. DEVINE Director April 17, 1998
- -----------------------------------------------------
Matthew E. Devine
/s/ KENNETH J. O'KEEFE Director April 17, 1998
- -----------------------------------------------------
Kenneth J. O'Keefe
/s/ JAMES E. BELOYIANIS Director April 20, 1998
- -----------------------------------------------------
James E. Beloyianis
/s/ STUART O. OLDS Director April 20, 1998
- -----------------------------------------------------
Stuart O. Olds
</TABLE>
II-15
<PAGE> 277
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 registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on April 20, 1998.
THE CO-REGISTRANTS LISTED ON
ATTACHMENT B 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 B
POWERS OF ATTORNEY
Each person whose signature appears below constitutes and appoints Matthew
E. Devine as his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for such person and in his name, place and
stead, in any and all capacities, to sign any or all further amendment
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1933, AS
AMENDED, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ THOMAS F. OLSON Chief Executive Officer, April 20, 1998
- ----------------------------------------------------- President and Director
Thomas F. Olson (Principal Executive
Officer of Each
Co-Registrant Listed on
Attachment B)
/s/ RICHARD E. VENDIG Senior Vice President, Chief April 20, 1998
- ----------------------------------------------------- Financial and
Richard E. Vendig Administrative Officer,
Treasurer (Principal
Financial Officer and
Principal Accounting
Officer of Each
Co-Registrant Listed on
Attachment B)
/s/ JAMES E. DE CASTRO Director of Each April 21, 1998
- ----------------------------------------------------- Co-Registrant Listed on
James E. De Castro Attachment B
/s/ MATTHEW E. DEVINE Director of Each April 17, 1998
- ----------------------------------------------------- Co-Registrant Listed on
Matthew E. Devine Attachment B
/s/ KENNETH J. O'KEEFE Director of Each April 17, 1998
- ----------------------------------------------------- Co-Registrant Listed on
Kenneth J. O'Keefe Attachment B
</TABLE>
II-16
<PAGE> 278
ATTACHMENT B
<TABLE>
<CAPTION>
NAME
<S> <C>
Seltel, Inc.
The National Payroll Company, Inc.
Katz Cable Corporation
Katz Communications, Inc.
Christal Radio Sales, Inc.
Eastman Radio Sales, Inc.
Amcast Radio Sales, Inc.
Katz Millennium Marketing, Inc.
</TABLE>
II-17
<PAGE> 279
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
1.1+ -- Securities Purchase Agreement, dated as of December 22,
1997, by and among Chancellor Media Corporation of Los
Angeles, BT Alex. Brown, Credit Suisse First Boston,
Goldman, Sachs & Co., Morgan Stanley Dean Witter and
Salomon Smith Barney.
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.
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.
</TABLE>
<PAGE> 280
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.22(p) -- Asset Purchase Agreement dated August 12, 1996 by and
among Chancellor Broadcasting Company, Shamrock
Broadcasting, Inc. and Evergreen Media Corporation of the
Great Lakes.
2.23(p) -- Asset Purchase Agreement dated as of August 12, 1996
between Secret Communications Limited Partnership and
Evergreen Media Corporation of Los Angeles (WQRS-FM).
(See table of contents for list of omitted exhibits and
schedules)
2.24(p) -- Asset Purchase Agreement dated as of August 12, 1996
between Secret Communications Limited Partnership and
Evergreen Media Corporation of Los Angeles. (See table of
contents for list of omitted schedules)
2.25(q) -- Letter of intent dated August 27, 1996 between EZ
Communications, Inc. and Evergreen Media Corporation.
2.26(q) -- Asset Purchase Agreement dated September 19, 1996 between
Beasley-FM Acquisition Corp., WDAS License Limited
Partnership and Evergreen Media Corporation of Los
Angeles.
2.27(q) -- Asset Purchase Agreement dated September 19, 1996 between
The Brown Organization and Evergreen Media Corporation of
Los Angeles.
2.28(r) -- Stock Purchase Agreement by and between Viacom
International Inc. and Evergreen Media Corporation of Los
Angeles, dated February 16, 1997 (See table of contents
for omitted schedules and exhibits).
2.29(r) -- Agreement and Plan of Merger, by and among Evergreen
Media Corporation, Chancellor Broadcasting Company and
Chancellor Radio Broadcasting Company, dated as of
February 19, 1997.
2.30(r) -- Stockholders Agreement, by and among Chancellor
Broadcasting Company, Evergreen Media Corporation, Scott
K. Ginsburg (individually and as custodian for certain
shares held by his children), HM2/Chancellor, L.P.,
Hicks, Muse, Tate & First Equity Fund II, L.P., HM2/HMW,
L.P., The Chancellor Business Trust, HM2/HMD Sacramento
GP, L.P., Thomas O. Hicks, as Trustee of the William Cree
Hicks 1992 Irrevocable Trust, Thomas O. Hicks, as Trustee
of the Catherine Forgave Hicks 1993 Irrevocable Trust,
Thomas O. Hicks, as Trustee of the John Alexander Hicks
1984 Trust, Thomas O. Hicks, as Trustee of the Mack
Hardin Hicks 1984 Trust, Thomas O. Hicks, as Trustee of
Robert Bradley Hicks 1984 Trust, Thomas O. Hicks, as
Trustee of the Thomas O. Hicks, Jr. 1984 Trust, Thomas O.
Hicks and H. Rand Reynolds, as Trustees for the Muse
Children's GS Trust, and Thomas O. Hicks, dated as of
February 19, 1997.
2.31(r) -- Joint Purchase Agreement, by and among Chancellor Radio
Broadcasting Company, Chancellor Broadcasting Company,
Evergreen Media Corporation of Los Angeles, and Evergreen
Media Corporation, dated as of February 19, 1997.
2.32(s) -- Asset Exchange Agreement, by and among EZ Communications,
Inc., Professional Broadcasting Incorporated, EZ
Philadelphia, Inc., Evergreen Media Corporation of Los
Angeles, Evergreen Media Corporation of Charlotte,
Evergreen Media Corporation of the East, Evergreen Media
Corporation of Carolinaland, WBAV/WBAV-FM/WPEG License
Corp. and WRFX License Corp., dated as of December 5,
1996 (See table of contents for list of omitted
schedules).
</TABLE>
<PAGE> 281
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.33(s) -- Asset Purchase Agreement, by and among EZ Communications,
Inc., Professional Broadcasting Incorporated, EZ
Charlotte, Inc., Evergreen Media Corporation of Los
Angeles, Evergreen Media Corporation of the East and
Evergreen Media Corporation of Carolinaland, dated as of
December 5, 1996 (See table of contents for list of
omitted schedules).
2.34(t) -- Asset Purchase Agreement by and between Pacific and
Southern Company, Inc. and Evergreen Media Corporation of
Los Angeles (re: WGCI-AM and WGCI-FM), dated as of April
4, 1997 (see table of contents for list of omitted
schedules and exhibits).
2.35(t) -- Asset Purchase Agreement by and between Pacific and
Southern Company, Inc. and Evergreen Media Corporation of
Los Angeles (re: KKBQ-AM and KKBQ-FM), dated as of April
4, 1997 (see table of contents for list of omitted
schedules and exhibits)
2.36(t) -- Asset Purchase Agreement by and between Pacific and
Southern Company, Inc. and Evergreen Media Corporation of
Los Angeles (re: KHKS-FM), dated as of April 4, 1997 (see
table of contents for list of omitted schedules and
exhibits).
2.41(y) -- Amended and Restated Agreement and Plan of Merger among
Chancellor Broadcasting Company, Chancellor Radio
Broadcasting Company, Evergreen Media Corporation,
Evergreen Mezzanine Holdings Corporation and Evergreen
Media Corporation of Los Angeles, dated as of February
19, 1997, amended and restated as of July 31, 1997.
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 the
Company and Capstar Broadcasting Corporation.
3.3(ff) -- Certificate of Incorporation of Chancellor Media
Corporation of Los Angeles formerly known as Evergreen
Media Corporation of Los Angeles.
3.3A(pp) -- Amendment to Certificate of Incorporation of Chancellor
Media Corporation of Los Angeles, filed September 5,
1997.
3.3B(tt) -- Amendment to the Certificate of Incorporation of
Chancellor Media Corporation of Los Angeles, filed
October 28, 1997.
3.4(ff) -- Bylaws of Chancellor Media Corporation of Los Angeles.
4.10(t) -- Second Amended and Restated Loan Agreement dated as of
April 25, 1997 among Evergreen Media Corporation of Los
Angeles, the financial institutions whose names appear as
Lenders on the signature pages thereof (the "Lenders"),
Toronto Dominion Securities, Inc., as Arranging Agent,
The Bank of New York and Bankers Trust Company, as
Co-Syndication Agents, NationsBank of Texas, N.A. and
Union Bank of California, as Co-Documentation Agents, and
Toronto Dominion (Texas), Inc., as Administrative Agent
for the Lenders, together with certain collateral
documents attached thereto as exhibits, including
Assignment of Partnership Interests, Assignment of Trust
Interests, Borrower's Pledge Agreement, Parent Company
Guaranty, Stock Pledge Agreement, Subsidiary 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.
</TABLE>
<PAGE> 282
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
4.15(aa) -- Indenture, dated as of February 14, 1996, governing the
9 3/8% Senior Subordinated Notes due 2004 of the Company.
4.16(bb) -- First Supplemental Indenture, dated as of February 14,
1996, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of the
Company.
4.17(cc) -- Indenture, dated as of February 26, 1996, governing the
12 1/4% Subordinated Exchange Debentures due 2008 of the
Company.
4.18(dd) -- Indenture, dated as of January 23, 1997, governing the
12% Subordinated Exchange Debentures due 2009 of the
Company.
4.19(ee) -- Indenture, dated as of June 24, 1997, governing the
8 3/4% Senior Subordinated Notes due 2007 of the Company.
4.21(ff) -- Specimen of the 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock Certificate of the Company.
4.22(ff) -- Specimen of the 12% Exchangeable Preferred Stock
Certificate of the Company.
4.23(ff) -- Form of Certificate of Designation for the 12 1/4% Series
A Senior Cumulative Exchangeable Preferred Stock of the
Company.
4.24(ff) -- Form of Certificate of Designation for the 12%
Exchangeable Preferred Stock of the Company.
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 the
Company.
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 the
Company.
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 the Company.
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
the Company.
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 the
Company.
4.34(tt) -- Amended and Restated Indenture, dated as of October 28,
1997, governing the 10 1/2% Senior Subordinated Notes due
2007 of the Company.
4.35(tt) -- Second Supplemental 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 the Company.
4.36(tt) -- Third Amendment to Second Amended and Restated Loan
Agreement dated October 28, 1997, among the Company, the
Lenders, the Agents and the Administrative Agent.
</TABLE>
<PAGE> 283
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
4.37(tt) -- Fourth Amendment to Second Amended and Restated Loan
Agreement, dated February 10, 1998, among the Company,
the Lenders, the Agents and the Administrative Agent.
4.38+ -- Indenture, dated as of December 22, 1997, governing the
8 1/8% Senior Subordinated Notes due 2007 of the Company.
5.1+ -- Opinion of Latham & Watkins.
8.1+ -- Tax Matters Opinion of Latham & Watkins.
10.23(f) -- Evergreen 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.
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, 1996 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, 1995 from
Chancellor Corporation to Steven Dinetz.
10.39(mm) -- Stock Option Grant Letter dated September 30, 1995 from
Chancellor Corporation to Eric W. Neumann.
10.40(nn) -- Stock Option Grant Letter dated September 30, 1995 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.
10.43+ -- Registration Rights Agreement, dated December 22, 1997,
by and among Chancellor Media Corporation of Los Angeles
and the initial purchasers of the 8 1/8% Senior
Subordinated Notes due 2007.
10.44* -- Agreement dated April 20, 1998 by and among Chancellor
Media Corporation, Chancellor Media Corporation of Los
Angeles and Scott K. Ginsburg.
12.1+ -- Chancellor Media Corporation of Los Angeles Computation
of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends.
21.2(tt) -- Subsidiaries of Chancellor Media Corporation of Los
Angeles.
</TABLE>
<PAGE> 284
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
23.1+ -- Consent of Latham & Watkins (included as part of their
opinion listed as Exhibit 5.1).
23.2+ -- Consent of Coopers & Lybrand L.L.P., independent
accountants.
23.3+ -- Consent of KPMG Peat Marwick LLP, independent
accountants.
23.4+ -- Consent of Coopers & Lybrand L.L.P., 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 Latham & Watkins (included as part of their
opinion listed as Exhibit 8.1).
24.1 -- Powers of Attorney (included on signature pages)
25.1+ -- Statement of Eligibility on Form T-1 of U.S. Trust
Company of Texas, N.A. under the Indenture.
99.1* -- Letter Of Transmittal for the Exchange Offer.
99.2* -- Notice of Guaranteed Delivery for the Exchange Offer.
</TABLE>
- ---------------
* To be filed by amendment
+ Filed herewith
(a) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-1, as amended (Reg. No.
33-60036).
(f) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-4, as amended (Reg. No.
33-89838).
(h) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated July 14, 1995.
(i) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated January 17, 1996.
(j) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ending
September 30, 1995.
(k) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-1, as amended (Reg. No.
33-69752).
(n) Incorporated by reference to the identically numbered exhibit to
Evergreen's Annual Report on Form 10-K for the fiscal year ended December
31, 1995.
(o) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ending
March 31, 1996.
(p) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1996.
(q) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-3, as amended (Reg. No.
333-12453).
(r) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated February 16, 1997 and filed
March 9, 1997.
(s) Incorporated by reference to the identically numbered exhibit to
Evergreen's Annual Report on Form 10-K for the fiscal year ended December
31, 1996.
(t) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated April 1, 1997 and filed May
9, 1997.
<PAGE> 285
(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 EMCLA's
Registration Statement on Form S-4 (Reg. No. 333-32259), dated July 29,
1997, as amended.
(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 and CRBC for the quarterly period ending March 31,
1997.
(ii) Incorporated by reference to Exhibit 10.6 to Chancellor'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.
(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
Company'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 the Company, 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 Company for the
fiscal year ended December 31, 1997.
<PAGE> 1
EXHIBIT 1.1
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
$500,000,000
8-1/8% SENIOR SUBORDINATED NOTES DUE 2007
PURCHASE AGREEMENT
December 15, 1997
BT ALEX. BROWN INCORPORATED
GOLDMAN, SACHS & CO.
SALOMON BROTHERS INC
MORGAN STANLEY & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
c/o BT Alex. Brown Incorporated
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 $500,000,000 aggregate principal amount of its 8-1/8% Senior
Subordinated Notes due 2007, 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
December 22, 1997 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 a final offering memorandum dated December 15, 1997 (the "Memorandum")
setting forth or including a descrip-
<PAGE> 2
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tion 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 8-1/8% Senior Subordinated Notes due 2007, 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 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 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 any of the Initial Purchasers furnished to the Company
in writing by or on behalf of such Initial Purchasers expressly for use in the
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 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,
<PAGE> 3
-3-
except where the failure to be so qualified would not have a material adverse
effect on the business, 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 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 as disclosed in the Memorandum under the caption "Description of Certain
Indebtedness - Senior Credit Facility," all of the outstanding shares of
capital stock of each of the Issuers are owned 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 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 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, 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
<PAGE> 4
-4-
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, by 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,
<PAGE> 5
-5-
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 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
<PAGE> 6
-6-
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 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
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, Coopers & Lybrand
L.L.P., KPMG Peat Marwick L.L.P., Arthur Andersen LLP and Price Waterhouse LLP
which have examined certain of such consolidated financial statements as set
forth in its reports included in the 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 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) have been prepared in accordance with the applicable
requirements of Regulation S-X promulgated under the Exchange Act; (C) have
been prepared in accordance with the Commission's rules and guidelines with
respect to pro forma financial statements; and
<PAGE> 7
-7-
(D) have 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
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 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 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 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 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 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 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,
<PAGE> 8
-8-
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 G, 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
Memorandum as being owned by it and good and marketable title to a leasehold
estate in the real and personal property described in the 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 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.
(s) Except for the Company's existing credit agreement and
except as described in the 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
<PAGE> 9
-9-
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 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
Memorandum are based on or derived from sources that the
<PAGE> 10
-10-
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 any Initial Purchasers or to counsel for the
Initial Purchasers shall be deemed a representation and warranty by the Company
to each of 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 conditions herein set forth, the Issuers
agree to issue and sell to the Initial Purchasers, and the Initial Purchasers,
acting severally and not jointly, agree to purchase from the Issuers, all of
the Notes at 97.376% 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 36 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 therefor 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 Cahill Gordon & Reindel, 80 Pine Street, New York, New York
10005, at 9:00 A.M., New York time, on December 22, 1997, 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, at least 24 hours prior to 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 Memorandum, as soon as practicable after this Agreement
is entered into and as in the judgment of the Initial Purchasers is advisable.
<PAGE> 11
-11-
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
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 its 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 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 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 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 Memorandum that corrects such statement or
omission or effects such compliance.
(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 Memorandum or any amendment or supplement thereto as the Initial Purchasers
may reasonably request.
<PAGE> 12
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(e) The Company will apply the net proceeds from the sale of
the Notes substantially as set forth under "Use of Proceeds" in the 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
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 market (the "PORTAL Market") 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 Agree-
<PAGE> 13
-13-
ment 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 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 fees and expenses of counsel and (vii) all expenses and
listing fees incurred in connection with the application for quotation of the
Notes on the PORTAL Market. 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 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 their 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 Cahill Gordon & Reindel, counsel for the Initial Purchasers) that shall have
been incurred by the Initial Purchaser 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 their 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 Latham & Watkins, counsel for the Issuers, substantially in the form
of Exhibit B hereto. In rendering such opinion, Latham & Watkins shall have
received and may rely upon such certificates and other documents and
information as it may reasonably request to pass upon such matters.
<PAGE> 14
-14-
(b) The Initial Purchasers shall have received an opinion,
dated the Closing Date, of Cahill Gordon & Reindel, counsel for the Initial
Purchasers, with respect to certain legal matters relating to this Agreement,
and such other related matters as the Initial Purchasers may require. In
rendering such opinion, Cahill Gordon & Reindel 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, Cahill Gordon & Reindel may state that their opinion is limited to
matters of New York, Delaware corporate and federal law.
(c) The Initial Purchasers shall have received from Coopers &
Lybrand L.L.P. and KPMG Peat Marwick L.L.P. dated December 18, 1997, from Price
Waterhouse LLP and Arthur Anderson LLP dated December 22, 1997, and from
Coopers & Lybrand L.L.P. dated the Closing Date, in each case, customary
comfort letters 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 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 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 Memorandum, except as described in or as contemplated by the Memorandum,
none of the Issuers shall have incurred any liabilities or obligations, direct
or contingent (other than in the ordinary course of business) that are mate-
<PAGE> 15
-15-
rial 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 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 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
President and Chief Executive Officer and Senior Vice President and Chief
Financial Officer 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 statement in the 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);
and
<PAGE> 16
-16-
(iv) Subsequent to the respective dates as of which
information is given in the Memorandum, except in each case as
described in or as contemplated by the 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 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 QIB. Each
of 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
<PAGE> 17
-17-
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 "Transfer Restrictions" contained in the
Memorandum.
(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 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 the commencement of the offering and the closing date of
<PAGE> 18
-18-
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 ERISA) or any "plan" (within the meaning of Section
4975 of 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 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
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,
<PAGE> 19
-19-
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 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
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 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 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 Pur-
<PAGE> 20
-20-
chasers 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 satis-
<PAGE> 21
-21-
factory 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 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,
<PAGE> 22
-22-
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.
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
<PAGE> 23
-23-
behalf of them 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, 9 and 15 hereof 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
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 Nasdaq National Market shall
have been suspended or materially limited;
(ii) a general moratorium on commercial banking activities
in New York shall have been declared by either federal, state or other
governmental authorities;
(iii) 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 Memorandum, as amended as of the date hereof;
or
(iv) 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.
(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 front
<PAGE> 24
-24-
cover page, the legend concerning over-allotments, stabilizing transactions,
syndicate short covering transactions and penalty bids on page iv, and in the
second and sixth paragraphs under the caption "Private Placement" in the
Memorandum and the last two paragraphs under the caption "Private Placement" in
the Memorandum (to the extent such statements relate to the Initial
Purchasers) constitute the only information furnished on behalf of each 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, 433 East Las Colinas Blvd., Suite 1130, Irving,
Texas 75039, 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, its 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.
<PAGE> 25
-25-
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.
<PAGE> 26
-26-
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 by and
among the Issuers and the Initial Purchasers.
Very truly yours,
The Company:
CHANCELLOR MEDIA CORPORATION OF
LOS ANGELES
By:
-----------------------------------
Name: Matthew E. Devine
Title: Senior Vice President,
Chief Financial Officer
and Secretary
The Guarantors:
On behalf of the Subsidiary Guarantors
listed on Exhibit A hereto:
By:
-----------------------------------
Name: Omar Choucair
Title: Vice President
On behalf of the Subsidiary Guarantors
listed on Exhibit B hereto:
By:
-----------------------------------
Name: Richard E. Vendig
Title: Senior Vice President,
Chief Financial and
Administrative Officer,
Treasurer
<PAGE> 27
-27-
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
BT ALEX. BROWN INCORPORATED
By:
------------------------------
Name:
Title:
GOLDMAN, SACHS & CO.
By:
------------------------------
Name:
Title:
SALOMON BROTHERS INC
By:
------------------------------
Name:
Title:
MORGAN STANLEY & CO. INCORPORATED
By:
------------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON CORPORATION
By:
------------------------------
Name:
Title:
<PAGE> 28
EXHIBIT A
[REGISTRATION RIGHTS AGREEMENT]
<PAGE> 29
EXHIBIT B
Form of Opinion of Latham & Watkins
1. The Company has been duly incorporated, is validly
existing as a corporation in good standing under the Delaware GCL and has the
corporate power and authority required to carry on its business and to own,
lease and operate its properties as described in the Final Memorandum.
2. Based solely on certificates of public officials, we
confirm that the Company is qualified to do business in the State of Texas.
3. All of the shares of capital stock of the Company
outstanding prior to the issuance of the Shares have been duly authorized and
validly issued and are fully paid, non-assessable and are not subject to any
preemptive or, to the best of our knowledge, similar rights that entitle or
will entitle any person to acquire shares of capital stock from the Company
upon issuance of the Shares by the Company.
4. The Purchase Agreement has been duly authorized,
executed and delivered by the Company.
5. The statements in the Final Memorandum under the
captions ["Offering Memorandum Summary -- Recent Developments," "Risks Factors
- -- Necessity of Governmental Reviews and Approvals Prior to Consummation of the
Pending Transactions; Required Dispositions," "Risk Factors -- Radio Industry
Subject to Federal Regulation," "Risk Factors -- Antitrust Matters," "Risk
Factors -- FCC Consent for Viacom Acquisition, Chancellor Merger and Other
Pending Transactions; Petitions to Deny," "Risk Factors -- Chancellor Viacom
Acquisition; Financing" (as to the first paragraph and only the fifth and sixth
sentences of the second paragraph under such caption only), "Risk Factors --
Limitation on Ability to Pay Dividends," "Business and Properties -- Recent
Developments," "Business and Properties -- Federal Regulation of Radio
Broadcasting Industry," "Business and Properties -- Legal Proceedings,"
"Management and Board of Directors -- Employment Agreements," "Description of
the Convertible Preferred Stock," "Description of Exchange Debentures,"
"Registration Rights; Liquidated Damages," "Description of Certain
Indebtedness," "Description of Capital Stock" and "Certain United States
Federal Income Tax Considerations,"] insofar as such statements constitute a
summary of legal matters, documents or proceedings referred to therein, are
accurate in all material respects.
<PAGE> 30
-2-
6. The execution, delivery and performance of the
Purchase Agreement, the Indenture and the Registration Rights Agreement by the
Company, compliance by the Company with all of the provisions thereof, the
issuance and sale of the Notes and the consummation of the transactions
contemplated thereby will not (A) require any consent, approval, authorization
or other order of any Federal or New York State court, regulatory body,
administrative agency or other governmental body, including the FCC, except
(subject to paragraph 17 below, and assuming reliance by us on the accuracy of
the representations, warranties and agreements referred to therein) (x) such as
have been obtained or made and are in full force and effect, (y) in the case of
the performance of and compliance with the Registration Rights Agreement, such
as will be obtained and made under the Securities Act of 1933, as amended (the
"Act"), and the Trust Indenture Act of 1939, as amended (the "TIA"), and (z) as
may be required under Blue Sky laws of the various states; (B) result in a
violation of the Amended and Restated Certificate of Incorporation or Amended
Bylaws of the Company; (C) require any consent or approval (which has not been
obtained) of the parties to, or result in a breach of or a default under, any
agreement or other instrument to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or their
respective properties are bound that is identified to us in a certificate of an
officer of the Company as being material to the business of the Company and its
subsidiaries (the "Material Agreements"); or (D) violate or conflict with any
Federal or New York State laws or administrative regulations, including without
limitation the Communications Act, court decrees or rulings known to us and
applicable to the Company or any of its subsidiaries or their respective
properties; or (E) result in termination or revocation of any of the FCC
Licenses listed in Exhibit A hereto (the "FCC Licenses") or result in any other
material impairment of the rights of the holder of any such FCC License; except
with respect to clauses (A), (C) and (D), where the failure to obtain such
consent or approval or such breach, default, violation or conflict would not
reasonably be expected to have a material adverse effect on the Company and its
subsidiaries, taken as a whole, or to impair the ability of the Company and its
subsidiaries to consummate the transactions contemplated by the Purchase
Agreement.
7. To the best of our knowledge, there is no legal or
governmental proceeding pending or threatened to which the Company or any of
its subsidiaries is a party or to which any of their respective property
(including, without limitation, any of the FCC Licenses) is subject which is
required to be de-
<PAGE> 31
-3-
scribed in the Final Memorandum and is not so described, and there is no
material contract or other document which would be required to be described in
a prospectus pursuant to the Act which is not described in the Final
Memorandum.
8. The Company's subsidiaries validly hold the FCC
Licenses listed on Exhibit A hereto, each of which is in full force and effect
on the date hereof, and, to the best of our knowledge, based on inquiry of the
Company and review of the FCC Records, the FCC Licenses constitute the only
material licenses or other authorizations of the FCC that are required by the
Communications Act and the rules, regulations and orders of the FCC (the "FCC
Rules"), in order to operate the radio stations listed in Exhibit A hereto on
the frequencies and in the communities of license specified therein.
9. To the best of our knowledge, based solely on inquiry
of officers of the Company and review of the FCC's public files, none of the
FCC Licenses listed in Exhibit A is the subject of any proceedings with respect
to the possible revocation thereof.
10. Each of the following subsidiaries of the Company
(each, a "Subsidiary") has been duly incorporated, is validly existing as a
corporation in good standing under the Delaware GCL and has the corporate power
and authority required to carry on its respective business as it is currently
being conducted and to own, lease and operate its respective properties as
described in the Final Memorandum: [Evergreen Media Corporation of Houston,
Evergreen Media Corporation of the Bay Area, Evergreen Media Corporation of Los
Angeles, Evergreen Media Corporation of San Francisco, Evergreen Media
Corporation of Washington, D.C., Evergreen Media Corporation of Miami,
Evergreen Media Corporation of Chicago FM, Evergreen Media Corporation of
Chicago and, Evergreen Media Corporation of Illinois, Evergreen Media
Corporation of the Windy City, Evergreen Media Corporation of Charlotte,
Evergreen Media Corporation of the Keystone State (formerly known as Evergreen
Media Corporation of North Carolina), Evergreen Media Corporation of New York,
Evergreen Media Corporation of Boston, Evergreen Media Corporation of
Massachusetts, Evergreen Media Corporation of Detroit, Evergreen Media
Corporation of Philadelphia, Evergreen Media Corporation of the Liberty City,
Evergreen Media Corporation of Michigan, Evergreen Media Corporation of the
Motor City and Evergreen Media Corporation of Tiburon.]
11. All of the outstanding shares of capital stock of
each Subsidiary have been duly authorized and validly issued
<PAGE> 32
-4-
and are fully paid and non assessable, and to the best of our knowledge, based
solely on a review of each such Subsidiary's stock records and inquiries of
officers of the Company, are owned, directly or indirectly, by the Company,
free and clear of any security interest, claim, lien, encumbrance or adverse
interest of any nature, other than the stock pledge securing certain
obligations of the Company, Evergreen LA and certain other subsidiaries under
the Senior Credit Facility.
12. The Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds thereof as
described in the Final Memorandum, will not be an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
13. Each document filed pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and incorporated by
reference in the Final Memorandum (the "Incorporated Documents") (except for
financial statements, pro forma financial statements and other financial and
statistical data included therein as to which we express no opinion) complied
when so filed as to form in all material respects with the Exchange Act and the
applicable rules and regulations of the Commission thereunder.
14. The Notes have been duly authorized by the Company
for issuance and, when executed by the Company and authenticated by the Trustee
in accordance with the provisions of the Indenture, will have been duly
executed, issued and delivered and will constitute legally valid and binding
obligations of the Company, entitled to the benefits of the Indenture and
enforceable against the Company in accordance with their terms. The Company
has all requisite corporate power and authority to execute, deliver and perform
its obligations under the Indenture; the Indenture has been duly authorized by
the Company and meets the requirements for qualification under the TIA as in
effect on the date hereof and, when executed and delivered by the Company
(assuming due authorization, execution and delivery by the Trustee), will
constitute a legally valid and binding agreement of the Company, enforceable
against it in accordance with its terms.
15. The Company has all requisite corporate power and
authority to execute and deliver the Registration Rights Agreement; the
Registration Rights Agreement has been duly authorized by the Company and, when
executed and delivered by the Company (assuming due authorization, execution
and delivery by the Initial Purchasers), will constitute a legally valid and
<PAGE> 33
-5-
binding agreement of the Company, enforceable against it in accordance with its
terms.
16. To the best of our knowledge, there are no holders of
securities of the Company who, by reason of the execution by the Company of any
of the Indenture, the Registration Rights Agreement or the Purchase Agreement
or the consummation of the transactions contemplated therein, have the right to
request or demand that the Company register under the Act any securities held
by them.
17. The Final Memorandum, as of its date (except for the
financial statements, including the notes thereto, pro forma financial
statements and other financial and statistical data included or incorporated by
reference therein, as to which we express no opinion), comply as to form in all
material respects with the requirements of Rule 144A(d)(4) under the Act.
18. Assuming the accuracy of and compliance with (1) the
representations, warranties and agreements of the Company in the Purchase
Agreement, (2) the representations, warranties and agreements of the Initial
Purchasers in Section 8 of the Purchase Agreement and (3) the representations,
warranties and agreements made in accordance with the Purchase Agreement and
Final Memorandum of the purchasers to whom the Initial Purchasers initially
resells notes, it is not necessary in connection with the offer, sale and
delivery of the Notes to the Initial Purchasers under the Purchase Agreement or
in connection with the initial resale of the Notes by the Initial Purchasers in
the manner contemplated by the Purchase Agreement and the Final Memorandum to
register the Securities under the Act or to qualify the Indenture under the
TIA; provided that we express no opinion as to when and under what
circumstances the Securities may be otherwise resold.
In addition, we have participated in conferences with
directors and other representatives of the Company, representative of the
independent certified public accountants for the Company, and your
representatives, at which the contents of the Final Memorandum and related
matters were discussed and, although we are not passing upon, and do not assume
any responsibility for, the accuracy, completeness or fairness of the
statements contained in the Final Memorandum and have not made any independent
check or verification thereof (other than as expressly described in paragraphs
5, 8, 9 and 11 above), during the course of such participation (relying as to
materiality to the extent we have deemed appropriate upon the statements of
officers and other representatives of the Company), no facts
<PAGE> 34
-6-
came to our attention that caused us to believe that the Final Memorandum, as
of its date or as the date hereof, contained an untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; it being understood that we express no belief with respect to the
financial statements, including the notes thereto, pro forma financial
statements and other financial and statistical data included or incorporated by
reference in the Final Memorandum.
<PAGE> 1
EXHIBIT 4.38
================================================================================
INDENTURE
Dated as of December 22, 1997
Among
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES, as Issuer
THE GUARANTORS named herein
and
THE BANK OF NEW YORK, as Trustee
-------------------------
$500,000,000
8 1/8% Senior Subordinated Notes due 2007
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ---------------
<S> <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). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.05
(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.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Incorporation by Reference of TIA. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 1.03. Rules of Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.02. Execution and Authentication. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.03. Registrar and Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.04. Paying Agent To Hold Assets in Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.05. Securityholder Lists. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.06. Transfer and Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.07. Replacement Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.08. Outstanding Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.09. Treasury Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.10. Temporary Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.11. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.12. Defaulted Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.13. CUSIP Number. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.14. Deposit of Moneys. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.15. Book-Entry Provisions for Global Securities. . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.16. Special Transfer Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.02. Selection of Securities To Be Redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.03. Notice of Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 3.04. Effect of Notice of Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 3.05. Deposit of Redemption Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 3.06. Securities Redeemed in Part. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.02. Maintenance of Office or Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.03. Limitation on Restricted Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.04. Corporate Existence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.05. Payment of Taxes and Other Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.06. Maintenance of Properties and Insurance. . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.07. Compliance Certificate; Notice of Default. . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 4.08. Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.09. SEC Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.10. Waiver of Stay, Extension or Usury Laws. . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.11. Limitation on Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.12. Limitation on Incurrence of Additional Indebtedness. . . . . . . . . . . . . . . . . . . 48
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries. . . . . . . 48
SECTION 4.14. Prohibition on Incurrence of Senior Subordinated Indebtedness. . . . . . . . . . . . . . 49
SECTION 4.15. Change of Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 4.16. Limitation on Asset Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 4.17. Limitation on Preferred Stock of Subsidiaries. . . . . . . . . . . . . . . . . . . . . . 55
SECTION 4.18. Limitation on Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 4.19. Guarantees of Certain Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 4.20. Limitation on Sale and Leaseback Transactions. . . . . . . . . . . . . . . . . . . . . . 56
SECTION 4.21. Limitation on Line of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 4.22. Limitation on Asset Swaps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.02. Successor Corporation Substituted. . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 6.02. Acceleration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 6.03. Other Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.04. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.05. Control by Majority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.06. Limitation on Suits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 6.07. Rights of Holders To Receive Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 6.08. Collection Suit by Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 6.09. Trustee May File Proofs of Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.10. Priorities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.11. Undertaking for Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 7.02. Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 7.03. Individual Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 7.04. Trustee's Disclaimer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 7.05. Notice of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 7.06. Reports by Trustee to Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 7.07. Compensation and Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 7.08. Replacement of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 7.09. Successor Trustee by Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 7.10. Eligibility; Disqualification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 7.11. Preferential Collection of Claims Against the Company. . . . . . . . . . . . . . . . . . 72
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of the Company's Obligations. . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 8.02. Acknowledgment of Discharge by Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 8.03. Application of Trust Money. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 8.04. Repayment to the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 8.05. Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 9.02. With Consent of Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 9.03. Compliance with TIA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 9.04. Revocation and Effect of Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 9.05. Notation on or Exchange of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 9.06. Trustee To Sign Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
ARTICLE TEN
SUBORDINATION OF SECURITIES
SECTION 10.01. Securities Subordinated to Senior Indebtedness. . . . . . . . . . . . . . . . . . . . . . 80
</TABLE>
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<TABLE>
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SECTION 10.02. No Payment on Securities in Certain Circumstances. . . . . . . . . . . . . . . . . . . . 81
SECTION 10.03. Payment Over of Proceeds upon Dissolution, Etc. . . . . . . . . . . . . . . . . . . . . . 83
SECTION 10.04. Payments May Be Paid Prior to Dissolution. . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 10.05. Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 10.06. Obligations of the Company Unconditional. . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 10.07. Notice to Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 10.08. Reliance on Judicial Order or Certificate of Liquidating Agent. . . . . . . . . . . . . . 87
SECTION 10.09. Trustee's Relation to Senior Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 10.10. Subordination Rights Not Impaired by Acts or Omissions of the Company or Holders
of Senior Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 10.11. Securityholders Authorize Trustee To Effectuate Subordination of Securities. . . . . . . 89
SECTION 10.12. This Article Ten Not To Prevent Events of Default. . . . . . . . . . . . . . . . . . . . 89
SECTION 10.13. Trustee's Compensation Not Prejudiced. . . . . . . . . . . . . . . . . . . . . . . . . . 89
ARTICLE TEN A
GUARANTEES OF THE SECURITIES
SECTION 10A.02. Execution and Delivery of the Guarantees. . . . . . . . . . . . . . . . . . . . . . . . . 92
SECTION 10A.03. Additional Guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 10A.04. Limitation of Guarantors' Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 10A.05. Guarantors May Consolidate, etc., on Certain Terms. . . . . . . . . . . . . . . . . . . . 93
SECTION 10A.06. Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 10A.07. Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
ARTICLE TEN B
SUBORDINATION OF GUARANTEES
SECTION 10B.01. Guarantee Obligations Subordinated to Guarantor Senior Indebtedness. . . . . . . . . . . 95
SECTION 10B.02. No Payment on Guarantees in Certain Circumstances. . . . . . . . . . . . . . . . . . . . 96
SECTION 10B.03. Payment Over of Proceeds upon Dissolution, Etc. . . . . . . . . . . . . . . . . . . . . . 98
SECTION 10B.04. Payments May Be Paid Prior to Dissolution. . . . . . . . . . . . . . . . . . . . . . . . 100
SECTION 10B.05. Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
</TABLE>
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<TABLE>
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SECTION 10B.06. Guarantee Provisions Solely To Define Relative Rights. . . . . . . . . . . . . . . . . . 101
SECTION 10B.07. Trustee to Effectuate Subordination of Obligations Under the Guarantees. . . . . . . . . 102
SECTION 10B.08. No Waiver of Guarantee Subordination Provisions. . . . . . . . . . . . . . . . . . . . . 102
SECTION 10B.09. Guarantors to Give Notice to Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . 103
SECTION 10B.10. Reliance on Judicial Order or Certificate of Liquidating Agent Regarding
Dissolution, etc., of Guarantors. . . . . . . . . . . . . . . . . . . . . . . . . . . 104
SECTION 10B.11. Rights of Trustee as a Holder of Guarantor Senior Indebtedness; Preservation of
Trustee's Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
SECTION 10B.12. No Suspension of Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
SECTION 10B.13. Trustee's Relation to Guarantor Senior Indebtedness. . . . . . . . . . . . . . . . . . . 105
SECTION 10B.14. Subordination Rights Not Impaired by Acts or Omissions of the Guarantors or
Holders of Guarantor Senior Indebtedness. . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 10B.15. This Article Ten B Not To Prevent Events of Default. . . . . . . . . . . . . . . . . . . 106
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
SECTION 11.02. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
SECTION 11.03. Communications by Holders with Other Holders. . . . . . . . . . . . . . . . . . . . . . . 108
SECTION 11.04. Certificate and Opinion as to Conditions Precedent. . . . . . . . . . . . . . . . . . . . 108
SECTION 11.05. Statements Required in Certificate or Opinion. . . . . . . . . . . . . . . . . . . . . . 108
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar. . . . . . . . . . . . . . . . . . . . . . . . 109
SECTION 11.07. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
SECTION 11.08. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
SECTION 11.09. No Adverse Interpretation of Other Agreements. . . . . . . . . . . . . . . . . . . . . . 109
SECTION 11.10. No Recourse Against Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
SECTION 11.11. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
SECTION 11.12. Duplicate Originals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
SECTION 11.13. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Exhibit A-1 - Form of Series A Security
Exhibit A-2 - Form of Series B Security
</TABLE>
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Exhibit B - Form of Legend for Book-Entry Securities
Exhibit C - Transferee Certificate for Non-QIB Accredited Investors
Exhibit D - Transferee Certificate for Transfers Pursuant to Regulation S
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of the Indenture.
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<PAGE> 9
INDENTURE, dated as of December 22, 1997, 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 1/8% Senior Subordinated Notes due 2007 (the "Securities"):
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"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 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.
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"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" means a Person who, directly or indirectly,
through one or more intermediaries, controls, or is controlled by, or is under
common control with, the Company. 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.
<PAGE> 11
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"Agent Members" has the meaning provided in Section 2.15.
"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.
"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
<PAGE> 12
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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.
"Blockage Period" shall have the meaning provided in Section
10.02.
"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.
"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.
"Capitalized Lease Obligation" means, as to any Person, the
obligation of such Person to pay rent or other amounts under a lease to which
such Person is a party that is required to be classified and accounted for as a
capital lease obligation under GAAP and, for purposes of this definition, the
amount of such obligation at any date shall be the capitalized amount of such
obligation at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations
issued by, or unconditionally guaranteed by, the United States Government or
issued by any agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any
<PAGE> 13
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such state or any public instrumentality thereof maturing within one year from
the date of acquisition thereof and, at the time of acquisition, having one of
the two highest ratings obtainable from either Standard & Poor's Corporation or
Moody's Investors Service, Inc.; (iii) commercial paper maturing no more than
one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from Standard & Poor's Corporation or at least
P-1 from Moody's Investors Service, Inc.; (iv) certificates of deposit or
bankers' acceptances maturing within one year from the date of acquisition
thereof issued by any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia or any U.S.
branch of a foreign bank having at the date of acquisition thereof combined
capital and surplus of not less than $200,000,000; (v) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"Chancellor Broadcasting" means Chancellor Broadcasting
Company, a Delaware corporation that was merged with and into Evergreen
Mezzanine Holdings Corporation, a Delaware corporation, 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 or to Steven
Dinetz or Scott K. Ginsburg (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.
<PAGE> 14
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"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
<PAGE> 15
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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 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.
<PAGE> 16
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"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 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.
"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.
"Default Notice" shall have the meaning provided in Section
10.02.
"Depository" means The Depository Trust Company or another
Person designated as Depository by the Company, which must be a clearing agency
registered under the Exchange Act.
"Designated Guarantor Senior Indebtedness" means (i)
Indebtedness guaranteed by a Guarantor under or in respect of the Senior Credit
Facility and (ii) any other Indebtedness constituting Guarantor Senior
Indebtedness which, at the time of determination, has an aggregate principal
amount of at least $25,000,000 and is specifically designated in the instrument
<PAGE> 17
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evidencing such Guarantor Senior Indebtedness as "Designated Guarantor Senior
Indebtedness" by the Guarantor.
"Designated Senior Indebtedness" means (i) Indebtedness under
or in respect of the Senior Credit Facility and (ii) any other Indebtedness
constituting Senior Indebtedness 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 Indebtedness as "Designated
Senior Indebtedness" by the Company.
"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.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated by the SEC
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.
"Funding Guarantor" has the meaning provided in Section
10A.06.
"Funds" has the meaning provided in Section 8.01.
<PAGE> 18
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"GAAP" means generally accepted accounting principles as in
effect in the United States of America as of the Issue Date.
"Global Securities" has the meaning provided in Section 2.02.
"Guarantees" means the guarantees of the Securities on a
senior subordinated basis by the Guarantors pursuant to Article Ten A.
"Guarantor" 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 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 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.
"Guarantor Senior Indebtedness" 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 Indebtedness" 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 Indebtedness" 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) In-
<PAGE> 19
-11-
debtedness 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 and the 10 1/2% Notes.
"Hicks Muse" means Hicks, Muse, Tate & Furst Incorporated, a
Delaware 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, 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.
"Indenture" means this Indenture, as amended or supplemented
from time to time in accordance with the terms hereof.
"Initial Purchasers" means BT Alex. Brown Incorporated,
Goldman, Sachs & Co., Salomon Brothers Inc, Morgan Stanley & Co. Incorporated
and Credit Suisse First Boston Corporation, pursuant to the Purchase Agreement.
<PAGE> 20
-12-
"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
Securities.
"Legal Holiday" has the meaning provided in Section 11.07.
"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
<PAGE> 21
-13-
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 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).
<PAGE> 22
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"Maturity Date" means December 15, 2007.
"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.
"Offering Memorandum" means the Offering Memorandum dated
December 15, 1997 pursuant to which $500.0 million aggre-
<PAGE> 23
-15-
gate 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 11.04 and 11.05, as they relate to the making
of an Officers' Certificate.
"Offshore Physical Securities" has the meaning provided in
Section 2.02.
"Opinion of Counsel" means a written opinion from legal
counsel who is reasonably acceptable to the Trustee complying with the
requirements of Sections 11.04 and 11.05, as they relate to the giving of an
Opinion of Counsel.
"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 4.14 and 4.15, 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 and the 10 1/2% 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)
<PAGE> 24
-16-
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, (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
<PAGE> 25
-17-
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.
"Physical Securities" has the meaning provided in Section
2.02.
"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.
"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 re-
<PAGE> 26
-18-
lated thereto, and specifically includes assets acquired through Asset
Acquisitions.
"Public Equity Offering" means an underwritten public offering
of Capital Stock (other than Disqualified Capital Stock) of the Chancellor
Media, CMHC or the Company, pursuant to an effective registration statement
filed with the Commission in accordance with the Securities Act; provided,
however, that, in the case of a Public Equity Offering by Chancellor Media or
CMHC, Chancellor Media or CMHC contributes to the capital of the Company net
cash proceeds in an amount at least sufficient to redeem the 9 3/8% Notes, 8
3/4% Notes, 10 1/2% Notes and Securities, if any, called for redemption in
accordance with the terms thereof.
"Purchase Agreement" means the Purchase Agreement dated as of
December 15, 1997 by and among the Company, the Guarantors and the Initial
Purchasers relating to the purchase of $500.0 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.
<PAGE> 27
-19-
"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 $500.0 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.
"Representative" means the indenture trustee or other trustee,
agent or representative in respect of any Designated Senior Indebtedness;
provided that if, and for so long as, any Designated Senior Indebtedness lacks
such a representative, then the Representative for such Designated Senior
Indebtedness shall at all times constitute the holders of a majority in
outstanding principal amount of such Designated Senior Indebtedness.
"Restricted Payment" has the meaning provided in Section 4.03.
"Restricted Security" means a Security that is a
"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 144A" means Rule 144A under 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.
<PAGE> 28
-20-
"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.
"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.
"Senior Indebtedness" 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
Securities. Without limiting the generality of the foregoing, "Senior
Indebtedness" 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)
<PAGE> 29
-21-
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 Indebtedness
shall not include any of the following amounts (whether or not constituting
Indebtedness as defined in this 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; and (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 3/4% Notes, the 10 1/2% Notes, the 12 1/4% Subordinated
Exchange Debentures due 2008 of the Company and the 12% Subordinated Exchange
Debentures due 2009 of the Company.
"Series A Securities" means the 8 1/8% Senior Subordinated
Notes due 2007, 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 1/8% Senior Subordinated
Notes due 2007, 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 from 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).
"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
<PAGE> 30
-22-
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.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 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 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
<PAGE> 31
-23-
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.
"U.S. Physical Securities" has the meaning provided in Section
2.02.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the total
of the product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Subsidiary" of any Person means any Subsidiary
of such Person of which all the outstanding voting securities (other than
directors' qualifying shares) which normally have the right to vote in the
election of directors are
<PAGE> 32
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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 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; and
(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.
<PAGE> 33
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ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
The Series A Securities and the Series B Securities and the
Trustee's certificate of authentication shall be substantially in the form of
Exhibits A-1 and A-2 annexed hereto, as applicable. The Securities may have
notations, legends or endorsements required by law, stock exchange rule or
usage (and, in the case of Series B Securities that are Private Exchange Notes,
legends restricting the transfer thereof similar to the legend on the Series A
Securities). The Company shall approve the form of the Securities and any
notation, legend or endorsement thereon. Each Security shall be dated the date
of its authentication.
The terms and provisions contained in the Securities shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
SECTION 2.02. Execution and Authentication.
Two Officers, or an Officer and an Assistant Secretary, shall
sign, or one Officer shall sign and one Officer or an Assistant Secretary (each
of whom shall, in each case, have been duly authorized by all requisite
corporate actions) shall attest to, the Securities for the Company by manual or
facsimile signature. Each Guarantor shall execute a Guarantee in the manner
set forth in Section 10A.02.
If an Officer, Secretary or Assistant Secretary whose
signature is on a Security was an Officer or Assistant Secretary at the time of
such execution but no longer holds that office or position at the time the
Trustee authenticates the Security, the Security shall nevertheless be valid.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
<PAGE> 34
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The Trustee shall authenticate Series A Securities for
original issue in the aggregate principal amount of up to $500,000,000 upon
receipt of a written order of the Company in the form of an Officers'
Certificate. In addition, on or prior to the date of the Registered Exchange
Offer, the Trustee or an authenticating agent shall authenticate Series B
Securities to be issued at the time of the Registered Exchange Offer in the
aggregate principal amount of up to $500,000,000 upon receipt of an Officers
Certificate of the Company. In each case, such Officers' Certificate shall
specify the amount of Securities to be authenticated and the date on which the
Securities are to be authenticated. The aggregate principal amount of
Securities outstanding at any time may not exceed $500,000,000 except as
provided in Section 2.07. Upon the written order of the Company in the form of
an Officers' Certificate, the Trustee shall authenticate Securities in
substitution of Securities originally issued to reflect any name change of the
Company.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate Securities. Unless otherwise
provided in the appointment, 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 the Company
and Affiliates of the Company.
The Securities shall be issuable in fully registered form
only, without coupons, in denominations of $1,000 and any integral multiple
thereof.
Securities offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more permanent Global Securities in
registered form, substantially in the form set forth in Exhibit A-1 ("Global
Securities"), deposited with the Trustee, as custodian for the Depository, and
shall bear the legend set forth on Exhibit B. The aggregate principal amount
of any Global Security may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the
Depository, as hereinafter provided.
Securities offered and sold in offshore transactions in
reliance on Regulation S shall be issued in the form of certificated Securities
in registered form, substantially in the form set forth in Exhibit A-1 (the
"Offshore Physical Securities"). Securities offered and sold in reliance on
any other exemption from registration under the Securities Act other than
<PAGE> 35
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as described in the preceding paragraph shall be issued in the form of
certificated Securities in registered form in substantially the form set forth
in Exhibit A-1 (the "U.S. Physical Securities"). The Offshore Physical
Securities and the U.S. Physical Securities are sometimes collectively herein
referred to as the "Physical Securities." Physical Securities shall initially
be registered in the name of the Depository or the nominee of such Depository
and be delivered to the Trustee as custodian for such Depository. Beneficial
owners of Physical Securities, however, may request registration of such
Physical Securities in their names or the names of their nominees.
Series B Securities may also be issued in the form of Global
Securities, and if so issued, will be treated as Global Securities under this
Indenture.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency (which shall be
located in the Borough of Manhattan in the City of New York, State of New
York), where (a) Securities may be presented or surrendered for registration of
transfer or for exchange ("Registrar"), (b) Securities may be presented or
surrendered for payment ("Paying Agent") and (c) notices and demands to or upon
the Company in respect of the Securities and this Indenture may be served. The
Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company, upon notice to the Trustee, may have one or more
co-Registrars and one or more additional paying agents reasonably acceptable to
the Trustee. The term "Paying Agent" includes any additional paying agent.
Neither the Company nor any Affiliate of the Company may act as Paying Agent.
The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture, which agreement shall implement
the provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee, in advance, of the name and address of any such Agent. If
the Company fails to maintain a Registrar or Paying Agent, the Trustee shall
act as such.
The Company initially appoints the Trustee as Registrar and
Paying Agent until such time as the Trustee has resigned or a successor has
been appointed.
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SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that each Paying Agent shall hold in trust for the
benefit of the Holders or the Trustee all assets held by the Paying Agent for
the payment of principal of, or interest on, the Securities (whether such
assets have been distributed to it by the Company or any other obligor on the
Securities), and shall notify the Trustee of any default by the Company (or any
other obligor on the Securities) in making any such payment. The Company at
any time may require a Paying Agent to distribute all assets held by it to the
Trustee and account for any assets disbursed and the Trustee may at any time
during the continuance of any payment Default, upon written request to a Paying
Agent, require such Paying Agent to distribute all assets held by it to the
Trustee and to account for any assets distributed. Upon distribution to the
Trustee of all assets that shall have been delivered by the Company to the
Paying Agent and the completion of any accounting required to be made
hereunder, the Paying Agent shall have no further liability for such assets.
SECTION 2.05. Securityholder 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 the Holders. 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 as of the applicable Record Date and in such form as the Trustee may
reasonably require of the names and addresses of the Holders, which list may be
conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
Subject to the provisions of Section 2.15 and Section 2.16,
when Securities are presented to the Registrar or a co-Registrar with a request
to register the transfer of such Securities or to exchange such Securities for
an equal principal amount of Securities of other authorized denominations, the
Registrar or co-Registrar shall register the transfer or make the exchange as
requested if its requirements for such transaction are met; provided, however,
that the Securities surrendered for transfer or exchange shall be duly endorsed
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Registrar or co-Registrar, duly executed
<PAGE> 37
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by the Holder thereof or his attorney duly authorized in writing. To permit
registrations of transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Securities at the Registrar's or co-Registrar's
request. No service charge shall be made 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.
The Registrar or co-Registrar shall not be required to register the transfer of
or exchange of any Security (i) during a period beginning at the opening of
business 15 days before the mailing of a notice of redemption of Securities and
ending at the close of business on the day of such mailing and (ii) selected
for redemption in whole or in part pursuant to Article Three, except the
unredeemed portion of any Security being redeemed in part.
Any Holder of the Global Security shall, by acceptance of such
Global Security, agree that transfers of beneficial interests in such Global
Security may be effected only through a book-entry system maintained by the
Holder of such Global Security (or its agent), and that ownership of a
beneficial interest in the Security shall be required to be reflected in a book
entry.
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
<PAGE> 38
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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.
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 definitive 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 definitive Securities but may have variations that the Company
considers appropriate for temporary Securities. Without unreasonable delay,
the Company shall prepare and execute, and the Trustee shall authenticate upon
re-
<PAGE> 39
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ceipt of a written order of the Company pursuant to Section 2.02, 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 the 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
<PAGE> 40
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numbers printed on the Securities. The Company will promptly notify the
Trustee of any change in the CUSIP numbers.
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.
SECTION 2.15. Book-Entry Provisions for Global Securities.
(a) The Global Securities initially shall (i) be registered
in the name of the Depository or the nominee of such Depository, (ii) be
delivered to the Trustee as custodian for such Depository and (iii) bear
legends as set forth in Exhibit B.
Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depository, or the Trustee as its
custodian, or under the Global Security, and the Depository may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of the Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of any
Security.
(b) Transfers of Global Securities shall be limited to
transfers in whole, but not in part, to the Depository, its successors or their
respective nominees. Interests of beneficial owners in the Global Securities
may be transferred or exchanged for Physical Securities in accordance with the
rules and procedures of the Depository and the provisions of Section 2.16. In
addition, Physical Securities shall be transferred to all beneficial owners in
exchange for their beneficial interests in Global Securities if (i) the
Depository notifies the Company that it is unwilling or unable to continue as
Deposi-
<PAGE> 41
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tory for any Global Security and a successor depository is not appointed by the
Company within 90 days of such notice or (ii) an Event of Default has occurred
and is continuing and the Registrar has received a request from the Depository
to issue Physical Securities.
(c) In connection with any transfer or exchange of a portion
of the beneficial interest in any Global Security to beneficial owners pursuant
to paragraph (b), the Registrar shall (if one or more Physical Securities are
to be issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Security in an amount equal to the principal
amount of the beneficial interest in the Global Security to be transferred,
and the Company shall execute, and the Trustee shall authenticate and deliver,
one or more Physical Securities of like tenor and amount.
(d) In connection with the transfer of Global Securities as
an entirety to beneficial owners pursuant to paragraph (b), the Global
Securities shall be deemed to be surrendered to the Trustee for cancellation,
and the Company shall execute, and the Trustee shall authenticate and deliver
to each beneficial owner identified by the Depository in exchange for its
beneficial interest in the Global Securities, an equal aggregate principal
amount of Physical Securities of authorized denominations.
(e) Any Physical Security constituting a Restricted Security
delivered in exchange for an interest in a Global Security pursuant to
paragraph (b) or (c) shall, except as otherwise provided by paragraphs
(a)(i)(x) and (c) of Section 2.16, bear the legend regarding transfer
restrictions applicable to the Physical Securities set forth in Exhibit A-1.
(f) The Holder of any Global Security may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
SECTION 2.16. Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors
and Non-U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Security constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
<PAGE> 42
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(i) the Registrar shall register the transfer of any
Security constituting a Restricted Security, whether or not such
Security bears the Private Placement Legend, if (x) the requested
transfer is after December 22, 1999, provided, however, that neither
the Company nor any Affiliate of the Company has held any beneficial
interest in such Security, or portion thereof, at any time on or prior
to December 22, 1999, or (y) (1) in the case of a transfer to an
Institutional Accredited Investor which is not a QIB (excluding
Non-U.S. Persons), the proposed transferee has delivered to the
Registrar a certificate substantially in the form of Exhibit C hereto
or (2) in the case of a transfer to a Non-U.S. Person, the proposed
transferee has delivered to the Registrar a certificate substantially
in the form of Exhibit D hereto; and
(ii) if the proposed transferor is an Agent Member holding
a beneficial interest in a Global Security, upon receipt by the
Registrar of (x) the certificate, if any, required by paragraph (i)
above and (y) written instructions given in accordance with the
Depository's and the Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical
Securities) a decrease in the principal amount of a Global Security in an
amount equal to the principal amount of the beneficial interest in a Global
Security to be transferred, and (b) the Company shall execute and the Trustee
shall authenticate and deliver one or more Physical Securities of like tenor
and amount.
(b) Transfers to QIBs. The following provisions shall apply
with respect to the registration of any proposed transfer of a Security
constituting a Restricted Security to a QIB (excluding transfers to Non-U.S.
Persons):
(i) the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the
box provided for on the form of Security stating, or has otherwise
advised the Company and the Registrar in writing, that the sale has
been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on the form
of Security stating, or has otherwise advised the Company and the
Registrar in writing, that it is purchasing the Security for its own
account or an account with respect to which it exercises sole
investment discretion and that it
<PAGE> 43
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and any such account is a QIB within the meaning of Rule 144A, and is
aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the
Company as it has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the
transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and
the Securities to be transferred consist of Physical Securities which
after transfer are to be evidenced by an interest in the Global
Security, upon receipt by the Registrar of instructions given in
accordance with the Depository's and the Registrar's procedures, the
Registrar shall reflect on its books and records the date and an
increase in the principal amount of the Global Security in an amount
equal to the principal amount of the Physical Securities to be
transferred, and the Trustee shall cancel the Physical Securities so
transferred.
(c) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Securities that bear
the Private Placement Legend unless (i) the circumstances contemplated by
paragraph (a)(i)(x) of this Section 2.16 exist, (ii) there is delivered to the
Registrar an Opinion of Counsel reasonably satisfactory to the Company and the
Trustee to the effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the provisions of
the Securities Act or (iii) such Security has been sold pursuant to an
effective registration statement under the Securities Act.
(d) General. By its acceptance of any Security bearing the
Private Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and in
the Private Placement Legend and agrees that it will transfer such Security
only as provided in this Indenture.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.15 or this Section
2.16. The Company shall have the
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right to inspect and make copies of all such letters, notices or other written
communications at any reasonable time upon the giving of reasonable written
notice to the Registrar.
ARTICLE THREE
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 60 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
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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;
(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
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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.
ARTICLE FOUR
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.
<PAGE> 47
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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 11.02.
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
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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 sub-
<PAGE> 49
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sequent 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
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;
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(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, consolidation
or 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 pro-
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ceeds 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 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
<PAGE> 52
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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
businesses.
(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
<PAGE> 53
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Company, are reasonably adequate and appropriate for the conduct of the
business of the Company and such Subsidiaries.
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,
<PAGE> 54
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telex 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 provide 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. 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 Section 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).
<PAGE> 55
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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 Agree-
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ments, 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), as well as
reasonable and customary investment banking, financial advisory, commercial
banking and similar fees and expenses paid to BT Securities Corporation and its
Affiliates.
SECTION 4.12. Limitation on Incurrence of Additional Indebtedness.
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.
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries.
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) 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 and the 10 1/2% 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
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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. Prohibition on Incurrence of Senior Subordinated
Indebtedness.
The Company shall not incur or suffer to exist any
Indebtedness that is senior in right of payment to the Securities and is
expressly subordinate in right of payment to any other Indebtedness of the
Company.
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. 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 Securities as provided below. The Company shall first comply
with the covenant in the preceding sentence before it shall be required to
repurchase Securities pursuant to the pro-
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visions described in this Section 4.15; provided that the Company's failure to
comply with such covenant shall constitute an Event of Default under Section
6.01(3).
(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");
(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, telex,
facsimile transmission or letter setting forth the name of the Holder,
the principal amount of the Securities the Holder delivered for
purchase and a
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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.
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
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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 permitted to
be operated by the Company or a Subsidiary hereunder (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 any Senior Indebtedness (and, to the
extent such Senior 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, prior to making any such 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 Cash Proceeds to repurchase and use all or a
portion of such Net Cash 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 Cash 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 Cash Proceeds to repurchase
10 1/2% Notes, in which event the Company shall be required to use only the Net
Cash Proceeds remaining after such repurchases to make the Net Proceeds Offer
contemplated by this Section 4.16; provided further, that if at
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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 (taking into account any
Net Cash Proceeds used to repurchase 9 3/8% Notes, 8 3/4% Notes and 10 1/2%
Notes pursuant to the second immediately preceding proviso) 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);
(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
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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, telex, 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 preced-
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ing 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.
(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 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 Section
4.12).
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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 Senior Indebtedness or
guarantees thereof permitted under this Indenture, (c) Liens permitted under
the 9 3/8% Notes Indenture, the 8 3/4% Notes Indenture and the 10 1/2% Notes
Indenture existing on the Issue Date, (d) Liens in favor of the Trustee, (e)
Liens to secure Guarantor Senior Indebtedness permitted under this 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.
SECTION 4.19. Guarantees of Certain Indebtedness.
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 Securities and which evidences such
Subsidiary's Guarantee of the Securities, such Guarantee to be a senior
subordinated unsecured obligation of such Subsidiary. Neither the Company nor
any 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 Transactions.
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 Indebted-
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ness (other than Permitted Indebtedness) in compliance with Section 4.12.
SECTION 4.21. Limitation on Line of Business.
For so long as any Securities 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
incidential 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.
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ARTICLE FIVE
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;
(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
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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 SIX
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 (whether or not such payment shall
be prohibited by Article Ten); 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 (whether or not such payment shall be
prohibited by Article Ten); 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
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(4) there shall be a 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 (giving
effect to any extensions thereof) 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; 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.
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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 (i) shall become immediately due and
payable or (ii) if there are any amounts outstanding under the Senior Credit
Facility, shall become due and payable upon the first to occur of an
acceleration under the Senior Credit Facility or 5 Business Days after receipt
by the Company and the Representative under the Senior Credit Facility of such
Acceleration Notice (unless all Events of Default specified in such
Acceleration Notice have been cured or waived). 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
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Officer's Certificate and Opinion of Counsel. No such rescission shall affect
any subsequent Default or impair any right consequent thereto.
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.
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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
(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
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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 SEVEN
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.
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(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).
(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 in
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
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of such funds or adequate indemnity against such risk or liability 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 wilful
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 Trustee.
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 11.04 and 11.05. 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.
(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,
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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
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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(1) 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.
SECTION 7.06. Reports by Trustee to Holders.
Within 60 days after each May 15 of each year beginning with
May 15, 1998, the Trustee shall, to the extent that any of the events described
in TIA Section 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 Section 313(a). The Trustee also shall comply with TIA
Sections 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 Section 313(d).
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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.
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The provisions of this Section 7.07 shall survive termination
of this Indenture.
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
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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 Sections 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
$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 Section 310(a)(2). The
Trustee shall comply with TIA Section 310(b); provided, however, that there
shall be excluded from the operation of TIA Section 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 Section 310(b)(1) are met.
The provisions of TIA Section 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 Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein. The provisions of TIA Section 311 shall apply to the Company and any
other obligor of the Securities.
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ARTICLE EIGHT
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(1) shall
cause the Trustee to have a conflicting interest as defined in and for
purposes of the
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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;
(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.
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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.
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.
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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 Com-
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pany 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 NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
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:
(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:
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(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 4.14 or 4.15, 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.
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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, 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 TEN
SUBORDINATION OF SECURITIES
SECTION 10.01. Securities Subordinated to Senior Indebtedness.
The Company covenants and agrees and the Trustee and each
Holder of the Securities, by its acceptance thereof, likewise covenants and
agrees, that all Securities shall be issued subject to the provisions of this
Article Ten; and the Trustee and each Person holding any Security, whether upon
original issue or upon transfer, assignment or exchange thereof, accepts and
agrees that the payment of all Obligations on the Securities (except for the
payment of fees and expenses of the Trustee and any indemnity under Section
7.07) by the Company shall, to the extent and in the manner herein set forth,
be subordinated and junior in right of payment to the prior payment in full in
cash or Cash Equivalents (or such payment shall be duly
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provided for to the satisfaction of the holders of the Senior Indebtedness) of
all Obligations on the Senior Indebtedness; that the subordination is for the
benefit of, and shall be enforceable directly by, the holders of Senior
Indebtedness, and that each holder of Senior Indebtedness whether now
outstanding or hereafter created, incurred, assumed or guaranteed shall be
deemed to have acquired Senior Indebtedness in reliance upon the covenants and
provisions contained in this Indenture and the Securities.
SECTION 10.02. No Payment on Securities in Certain Circumstances.
(a) 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, interest on or any other amounts owing with
respect to any Senior Indebtedness, no payment of any kind or character (except
(i) in Qualified Capital Stock issued by the Company to pay interest on the
Securities or issued in exchange for the Securities, (ii) in securities
substantially identical to the Securities issued by the Company in payment of
interest accrued thereon or (iii) in securities issued by the Company which are
subordinated to the Senior Indebtedness at least to the same extent as the
Securities and having a Weighted Average Life to Maturity at least equal to the
remaining Weighted Average Life to Maturity of the Securities (the issuance of
such subordinated securities to be consented to by the holders of at least a
majority of the outstanding amount of Senior Indebtedness consisting of each
class of Designated Senior Indebtedness then outstanding, which subordinated
securities shall be issued in exchange for outstanding Securities or to pay
interest accrued on outstanding Securities)) shall be made by the Company or
any other Person on behalf of the Company with respect to any Obligations on
the Securities or to acquire any of the Securities 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 Securities or would arise upon the passage of time as a result of such
payment) with respect to any Designated Senior Indebtedness (as such event of
default is defined in the instrument creating or evidencing such Designated
Senior Indebtedness) and such event of default permits the holders of such
Designated Senior Indebtedness then outstanding to accelerate the maturity
thereof and if the Representative for the respective issue of Designated Senior
Indebtedness gives written notice of the event of default to the Company and
the Trustee (a "Default Notice"), then, unless and until all events of default
have been cured or
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waived or have ceased to exist or the Company and the Trustee receive notice
from the Representative for the respective issue of Designated Senior
Indebtedness 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 shall make any
payment of any kind or character (except (i) in Qualified Capital Stock issued
by the Company to pay interest on the Securities or issued in exchange for the
Securities, (ii) in securities substantially identical to the Securities issued
by the Company in payment of interest accrued thereon or (iii) in securities
issued by the Company which are subordinated to the Senior Indebtedness at
least to the same extent as the Securities and having a Weighted Average Life
to Maturity at least equal to the remaining Weighted Average Life to Maturity
of the Securities (the issuance of such subordinated securities to be consented
to by the holders of at least a majority of the outstanding amount of Senior
Indebtedness consisting of each class of Designated Senior Indebtedness then
outstanding, which subordinated securities shall be issued in exchange for
outstanding Securities or to pay interest accrued on outstanding Securities))
with respect to any Obligations on the Securities or to acquire any of the
Securities 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 Securities was due and only one such Blockage
Period may be commenced within any 360 consecutive days. For all purposes of
this Section 10.02(a), 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 Indebtedness initiating such Blockage Period shall be, or be
made, the basis for the commencement of a second Blockage Period by the
Representative of such Designated Senior Indebtedness, whether or not within a
period of 360 consecutive days, unless such event of default shall have 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).
(b) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder when such payment is
prohibited by Section 10.02(a), such payment shall be held in trust for the
benefit of, and shall be
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paid over or delivered to, the holders of Senior Indebtedness (pro rata to such
holders on the basis of the respective amount of Senior Indebtedness held by
such holders) or their respective Representatives, as their respective
interests may appear. The Trustee shall be entitled to rely on information
regarding amounts then due and owing on the Senior Indebtedness, if any,
received from the holders of Senior Indebtedness (or their Representatives) or,
if such information is not received from such holders or their Representatives,
from the Company and only amounts included in the information provided to the
Trustee shall be paid to the holders of Senior Indebtedness.
Nothing contained in this Article Ten shall limit the right of
the Trustee or the Holders of Securities to take any action to accelerate the
maturity of the Securities pursuant to Section 6.02 or to pursue any rights or
remedies hereunder; provided that all Senior Indebtedness thereafter due or
declared to be due shall first be paid in full in cash or Cash Equivalents
before the Holders are entitled to receive any payment with respect to
Obligations on the Securities.
SECTION 10.03. Payment Over of Proceeds upon Dissolution, Etc.
(a) 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 Indebtedness
shall first be paid in full in cash or Cash Equivalents, or such payment duly
provided for to the satisfaction of the holders of the Senior Indebtedness,
before any payment or distribution of any kind or character is made on account
of any Obligations on the Securities, or for the acquisition of any of the
Securities for cash or property or otherwise. Upon any such dissolution,
winding-up, liquidation, reorganization, receivership or similar proceeding,
any payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the Holders of the Securities
or the Trustee under this Indenture would be entitled (other than any payments
of fees and expenses of the Trustee and any indemnity made under Section 7.07),
except for the provisions hereof, shall be paid by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or
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distribution, or by the Holders of the Securities or by the Trustee under this
Indenture if received by them, directly to the holders of Senior Indebtedness
(pro rata to such holders on the basis of the respective amounts of Senior
Indebtedness held by such holders) or their respective Representatives, or to
the trustee or trustees under any indenture pursuant to which any of such
Senior Indebtedness may have been issued, as their respective interests may
appear, for application to the payment of Senior Indebtedness remaining unpaid
until all such Senior Indebtedness has been paid in full in cash or Cash
Equivalents after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of Senior Indebtedness.
(b) To the extent any payment of Senior Indebtedness (whether
by or on behalf of the Company, as proceeds of security or enforcement of any
right of setoff or otherwise) is declared to be fraudulent or preferential, set
aside or required to be paid to any receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar Person under any bankruptcy,
insolvency, receivership, fraudulent conveyance or similar law, then, if such
payment is recovered by, or paid over to, such receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar Person, the Senior Indebtedness or
part thereof originally intended to be satisfied shall be deemed to be
reinstated and outstanding as if such payment had not occurred.
(c) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, shall be received by any Holder when
such payment or distribution is prohibited by Section 10.03(a), such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Senior Indebtedness (pro rata to such holders
on the basis of the respective amount of Senior Indebtedness held by such
holders) or their respective Representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Indebtedness may have
been issued, as their respective interests may appear, for application to the
payment of Senior Indebtedness remaining unpaid until all such Senior
Indebtedness has been paid in full in cash or Cash Equivalents, after giving
effect to any concurrent payment, distribution or provision therefor to or for
the holders of such Senior Indebtedness.
(d) The consolidation of the Company with, or the merger of
the Company with or into, another corporation or the
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liquidation or dissolution of the Company following the conveyance or transfer
of all or substantially all of its assets, to another corporation upon the
terms and conditions provided in Article Five and as long as permitted under
the terms of the Senior Indebtedness shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section if
such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, assume the Company's obligations hereunder in
accordance with Article Five.
SECTION 10.04. Payments May Be Paid Prior to Dissolution.
Nothing contained in this Article Ten or elsewhere in this
Indenture shall prevent (i) the Company, except under the conditions described
in Sections 10.02 and 10.03, from making payments at any time for the purpose
of making payments of principal of and interest on the Securities, or from
depositing with the Trustee any moneys for such payments, or (ii) in the
absence of actual knowledge by the Trustee that a given payment would be
prohibited by Section 10.02 or 10.03, the application by the Trustee of any
moneys deposited with it for the purpose of making such payments of principal
of, and interest on, the Securities to the Holders entitled thereto unless at
least one Business Day prior to the date upon which such payment would
otherwise become due and payable, the Trustee shall have received the written
notice provided for in Section 10.02(a) or in Section 10.07. The Company shall
give prompt written notice to the Trustee of any dissolution, winding-up,
liquidation or reorganization of the Company.
SECTION 10.05. Subrogation.
Subject to the payment in full in cash or Cash Equivalents of
all Senior Indebtedness, the Holders of the Securities shall be subrogated to
the rights of the holders of Senior Indebtedness to receive payments or
distributions of cash, property or securities of the Company applicable to the
Senior Indebtedness until the Securities shall be paid in full; and, for the
purposes of such subrogation, no such payments or distributions to the holders
of the Senior Indebtedness by or on behalf of the Company or by or on behalf of
the Holders by virtue of this Article Ten which otherwise would have been made
to the Holders shall, as between the Company and the Holders of the Securities,
be deemed to be a payment by the Company to or on account of the Senior
Indebtedness, it being understood that the provisions of this Article Ten are
and are intended solely for the purpose of defining the relative rights of the
Holders
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of the Securities, on the one hand, and the holders of the Senior Indebtedness,
on the other hand.
SECTION 10.06. Obligations of the Company Unconditional.
Nothing contained in this Article Ten or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as among the
Company, its creditors other than the holders of Senior Indebtedness, and the
Holders of the Securities, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders of the Securities the principal of and any
interest on the Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders of the Securities and creditors of the Company other than
the holders of the Senior Indebtedness, nor shall anything herein or therein
prevent the Holder of any Security or the Trustee on its behalf from exercising
all remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, in respect of cash, property or
securities of the Company received upon the exercise of any such remedy.
SECTION 10.07. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment to
or by the Trustee in respect of the Securities pursuant to the provisions of
this Article Ten. Regardless of anything to the contrary contained in this
Article Ten or elsewhere in this Indenture, the Trustee shall not be charged
with knowledge of the existence of any default or event of default with respect
to any Senior Indebtedness or of any other facts which would prohibit the
making of any payment to or by the Trustee unless and until the Trust Officer
of the Trustee shall have received notice in writing from the Company, or from
a holder of Senior Indebtedness or a Representative therefor, and, prior to the
receipt of any such written notice, the Trustee shall be entitled to assume (in
the absence of actual knowledge to the contrary) that no such facts exist;
provided, however, that if a Trust Officer of the Trustee shall not have
received, at least three Business Days prior to the date upon which, by the
terms hereof, any such money may become payable for any purpose (including,
without limitation, the payment of the Principal Amount, Issue Price, accrued
Original Issue Discount, Redemption Price, Purchase Price, Change in Control
Purchase Price or interest, if any, as the case may be,
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in respect of any Security), the notice with respect to such money provided for
in this Section 10.07, then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to receive
such money and to apply the same to the purpose for which such money was
received and shall not be affected by any notice to the contrary which may be
received by it within three Business Days prior to such date.
In the event that the Trustee determines in good faith that
any evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article Ten, the Trustee may request such Person to furnish evidence to
the reasonable satisfaction of the Trustee as to the amounts of Senior
Indebtedness held by such Person, the extent to which such Person is entitled
to participate in such payment or distribution and any other facts pertinent to
the rights of such Person under this Article Ten, and if such evidence is not
furnished the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
SECTION 10.08. Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of the Company
referred to in this Article Ten, the Trustee, subject to the provisions of
Article Seven hereof, and the Holders of the Securities shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction in
which bankruptcy, dissolution, winding-up, liquidation or reorganization
proceedings are pending, or upon a certificate of the receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making such payment or
distribution, delivered to the Trustee or the Holders of the Securities, for
the purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other Indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
Ten.
SECTION 10.09. Trustee's Relation to Senior Indebtedness.
The Trustee and any agent of the Company or the Trustee shall
be entitled to all the rights set forth in this Article Ten with respect to any
Senior Indebtedness which may at
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any time be held by it in its individual or any other capacity to the same
extent as any other holder of Senior Indebtedness and nothing in this Indenture
shall deprive the Trustee or any such agent of any of its rights as such
holder.
With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its duties, covenants,
responsibilities and obligations as are specifically set forth in this Article
Ten, and no implied duties, covenants, responsibilities or obligations with
respect to the holders of Senior Indebtedness shall be read into this Indenture
against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty
to the holders of Senior Indebtedness and shall not be liable to any such
holders if the Trustee shall in good faith mistakenly pay over or distribute to
Holders of Securities or to the Company or to any other person cash, property
or securities to which any holders of Senior Indebtedness shall be entitled by
virtue of this Article or otherwise.
Whenever a distribution is to be made or a notice given to
holders or owners of Senior Indebtedness, the distribution may be made and the
notice may be given to their Representative, if any.
SECTION 10.10. Subordination Rights Not Impaired by Acts or Omissions of the
Company or Holders of Senior Indebtedness.
No right of any present or future holders of any Senior
Indebtedness to enforce subordination as provided herein shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms of this Indenture,
regardless of any knowledge thereof which any such holder may have or otherwise
be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time and from time
to time, without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Securities and without
impairing or releasing the subordination provided in this Article Ten or the
obligations hereunder of the Holders of the Securities to the holders of the
Senior Indebtedness, do any one or more of the following: (i) change the
manner, place or terms of pay-
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ment or extend the time of payment of, or renew or alter, Senior Indebtedness,
or otherwise amend or supplement in any manner Senior Indebtedness, or any
instrument evidencing the same or any agreement under which Senior Indebtedness
is outstanding; (ii) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii)
release any Person liable in any manner for the payment or collection of Senior
Indebtedness; and (iv) exercise or refrain from exercising any rights against
the Company and any other Person.
SECTION 10.11. Securityholders Authorize Trustee To Effectuate Subordination
of Securities.
Each Holder of Securities by its acceptance of such Security
authorizes and expressly directs the Trustee on such Holder's behalf to take
such action as may be necessary or appropriate to effectuate, as between the
holders of Senior Indebtedness and the Holders of Securities, the subordination
provided in this Article Ten, and appoints the Trustee such Holder's
attorney-in-fact to act for and on behalf of each such Holder of Securities for
such purposes, including, in the event of any dissolution, winding-up,
liquidation or reorganization of the Company (whether in bankruptcy,
insolvency, receivership, reorganization or similar proceedings or upon an
assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business and assets of the Company, the filing of a claim
for the unpaid balance of its Securities and accrued interest in the form
required in those proceedings.
SECTION 10.12. This Article Ten Not To Prevent Events of Default.
The failure to make a payment on account of principal of or
interest on the Securities by reason of any provision of this Article Ten will
not be construed as preventing the occurrence of an Event of Default.
SECTION 10.13. Trustee's Compensation Not Prejudiced.
Nothing in this Article Ten will apply to amounts due to the
Trustee pursuant to other sections in this Indenture.
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ARTICLE TEN A
GUARANTEES OF THE SECURITIES
SECTION 10A.01. Guarantees.
Subject to the provisions of this Article Ten A, 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, regularity 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
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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 Ten A, 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.
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.
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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 10A.02. Execution and Delivery of the Guarantees.
To further evidence the Guarantees set forth in Section
10A.01, each Guarantor hereby agrees that a notation of such Guarantees,
substantially in the form included in Exhibit A 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 10A.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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SECTION 10A.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 10A.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
10A.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 10A.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 an-
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other 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 10A.05. Any Guarantor not so released remains liable for the
full amount of principal and interest on the Securities as provided in this
Article Ten A.
SECTION 10A.06. Contribution.
In order to provide for just and equitable contribution among
the Guarantors, the Guarantors agree, inter se, 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; provided that such Funding Guarantor's
contribution right with respect to any such Guarantor shall be subordinated in
right of payment to such Guarantor's Guarantor Senior Indebtedness on the same
basis as its Guarantee is subordinated to Guarantor Senior Indebtedness
pursuant to Article Ten B.
SECTION 10A.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
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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, subject to the provisions of Article Ten B, 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 10A.07 is knowingly
made in contemplation of such benefits.
ARTICLE TEN B
SUBORDINATION OF GUARANTEES
SECTION 10B.01. Guarantee Obligations Subordinated to Guarantor Senior
Indebtedness.
Each Guarantor covenants and agrees, and the Trustee and each
Holder of the Securities, by its acceptance thereof, likewise covenants and
agrees, that all Guarantees shall be issued subject to the provisions of this
Article Ten B; and the Trustee and each Person holding any Guarantee, whether
upon original issue or upon transfer, assignment or exchange thereof, accepts
and agrees that the payment of all Obligations on the Securities pursuant to
the Guarantees (except for the payment of fees and expenses of the Trustee
under Section 7.07) made by or on behalf of such Guarantor shall, to the extent
and in the manner herein set forth, be subordinated and junior in right of
payment to the prior payment in full in cash or Cash Equivalents (or such
payment shall be duly provided for to the satisfaction of the holders of the
Guarantor Senior Indebtedness of any Guarantor) of all existing and future
Obligations on the Guarantor Senior Indebtedness of such Guarantor; that
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the subordination is for the benefit of, and shall be enforceable directly by,
the holders of Guarantor Senior Indebtedness of any Guarantor, and that each
holder of Guarantor Senior Indebtedness of any Guarantor whether now
outstanding or hereafter created, incurred, assumed or guaranteed shall be
deemed to have acquired Guarantor Senior Indebtedness of any Guarantor in
reliance upon the covenants and provisions contained in this Indenture and the
Guarantees.
This Section 10B.01 and the following Sections 10B.02 through
10B.15 of this Article Ten B shall constitute a continuing offer to all Persons
who, in reliance upon such provisions, become holders of, or continue to hold,
Guarantor Senior Indebtedness of any Guarantor and, to the extent set forth in
Section 10B.02, holders of Designated Guarantor Senior Indebtedness; and such
provisions are made for the benefit of the holders of Guarantor Senior
Indebtedness of each Guarantor and, to the extent set forth in 10B.02, holders
of Designated Guarantor Senior Indebtedness; and such holders (to such extent)
are made obligees hereunder and they or each of them may enforce such
provisions.
SECTION 10B.02. No Payment on Guarantees in Certain Circumstances.
(a) 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, interest on or any other amounts owing with
respect to any Guarantor Senior Indebtedness, no payment of any kind or
character (except (i) in Qualified Capital Stock issued by the Company to pay
interest on the Securities or issued in exchange for the Securities, (ii) in
securities substantially identical to the Securities issued by the Company and
guaranteed by the Guarantors on the same basis as provided in the Guarantees
in payment of interest accrued on the Securities or (iii) in securities issued
by the Company and guaranteed by the Guarantors which securities and guarantees
thereof are subordinated to the Guarantor Senior Indebtedness at least to the
same extent as the Guarantees and having a Weighted Average Life to Maturity at
least equal to the remaining Weighted Average Life to Maturity of the
Securities (the issuance of any such guarantee in respect of such subordinated
securities to be consented to by the holders of at least a majority of the
outstanding amount of Guarantor Senior Indebtedness consisting of each class of
Designated Guarantor Senior Indebtedness then outstanding, which subordinated
securities shall be issued in exchange for outstanding Securities or to pay
interest accrued on outstanding Securi-
<PAGE> 105
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ties)) shall be made by any Guarantor or any other Person on behalf of such
Guarantor with respect to any Obligations on the Securities or under the
Guarantees or to acquire any of the Securities 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 Securities or would arise upon the passage of time as a result of such
payment) with respect to any Designated Guarantor Senior Indebtedness (as such
event of default is defined in the instrument creating or evidencing such
Designated Guarantor Senior Indebtedness) and such event of default permits the
holders of such Designated Guarantor Senior Indebtedness then outstanding to
accelerate the maturity thereof and if the Representative for the respective
issue of Designated Guarantor Senior Indebtedness gives a Default Notice to the
Company, the Guarantors and the Trustee, then, unless and until all events of
default have been cured or waived or have ceased to exist or the Company, the
Guarantors and the Trustee receive notice from the Representative for the
respective issue of Designated Guarantor Senior Indebtedness terminating the
Blockage Period, neither the Guarantors nor any other Person on behalf of the
Guarantors shall make any payment of any kind or character (except (i) in
Qualified Capital Stock issued by the Company to pay interest on the Securities
or issued in exchange for the Securities, (ii) in securities substantially
identical to the Securities issued by the Company and guaranteed by the
Guarantors on the same basis as provided in the Guarantees in payment of
interest accrued thereon or (iii) in securities issued by the Company and
guaranteed by the Guarantors which securities and guarantees thereof are
subordinated to the Guarantor Senior Indebtedness at least to the same extent
as the Guarantees and having a Weighted Average Life to Maturity at least equal
to the remaining Weighted Average Life to Maturity of the Securities (the
issuance of any such guarantee in respect of such subordinated securities to be
consented to by the holders of at least a majority of the outstanding amount of
Guarantor Senior Indebtedness consisting of each class of Designated Guarantor
Senior Indebtedness then outstanding, which subordinated securities shall be
issued in exchange for outstanding Securities or to pay interest accrued on
outstanding Securities) with respect to any Obligations of a Guarantor on the
Securities or under the Guarantees or to acquire any of the Securities 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 Securities was due and only one such Blockage Period may be
commenced within any 360 consecutive days. For all purposes of this Section
10B.02(a), no event of default which existed or was continuing
<PAGE> 106
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on the date of the commencement of any Blockage Period with respect to the
Designated Guarantor Senior Indebtedness initiating such Blockage Period shall
be, or be made, the basis for the commencement of a second Blockage Period by
the Representative of such Designated Guarantor Senior Indebtedness, whether or
not within a period of 360 consecutive days, unless such event of default shall
have 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).
(b) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder of a Guarantee when such
payment is prohibited by Section 10B.02(a), such payment shall be held in trust
for the benefit of, and shall be paid over or delivered to, the holders of
Guarantor Senior Indebtedness (pro rata to such holders on the basis of the
respective amounts of Guarantor Senior Indebtedness held by such holders) or
their respective Representatives, as their respective interests may appear.
The Trustee shall be entitled to rely on information regarding amounts then due
and owing on the Guarantor Senior Indebtedness, if any, received from the
holders of Guarantor Senior Indebtedness (or their Representatives) or, if such
information is not received from such holders or their Representatives, from
the Company or the Guarantors and only amounts included in the information
provided to the Trustee shall be paid to the holders of Guarantor Senior
Indebtedness.
Nothing contained in this Article Ten B shall limit the right
of the Trustee or the Holders of Securities to take any action to accelerate
the maturity of the Securities pursuant to Section 6.02 or to pursue any rights
or remedies hereunder; provided that all Guarantor Senior Indebtedness
thereafter due or declared to be due shall first be paid in full in cash or
Cash Equivalents before the Holders are entitled to receive any payment with
respect to Obligations on the Guarantees.
SECTION 10B.03. Payment Over of Proceeds upon Dissolution, Etc.
(a) Upon any payment or distribution of assets of any
Guarantor of any kind or character, whether in cash, property or securities, to
creditors upon any liquidation, dissolu-
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tion, winding-up, reorganization, assignment for the benefit of creditors or
marshalling of assets of any Guarantor or in a bankruptcy, reorganization,
insolvency, receivership or other similar proceeding relating to any Guarantor
or its property, whether voluntary or involuntary, all Obligations due or to
become due upon all Guarantor Senior Indebtedness shall first be paid in full
in cash or Cash Equivalents, or such payment duly provided for to the
satisfaction of the holders of the Guarantor Senior Indebtedness, before any
payment or distribution of any kind or character is made on account of any
Obligations of a Guarantor on the Guarantees, or for the acquisition of any of
the Securities for cash or property or otherwise. Upon any such dissolution,
winding-up, liquidation, reorganization, receivership or similar proceeding,
any payment, or distribution of assets of any Guarantor of any kind or
character, whether in cash, property or securities, to which the Holders of the
Guarantees or the Trustee under this Indenture would be entitled, except for
the provisions hereof, shall be paid by the Guarantors or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, or by the Holders of the Guarantees or by the Trustee
under this Indenture if received by them, directly to the holders of Guarantor
Senior Indebtedness (pro rata to such holders on the basis of the respective
amounts of Guarantor Senior Indebtedness held by such holders) or their
respective Representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Guarantor Senior Indebtedness may have been
issued, as their respective interests may appear, for application to the
payment of Guarantor Senior Indebtedness remaining unpaid until all such
Guarantor Senior Indebtedness has been paid in full in cash or Cash Equivalents
after giving effect to any concurrent payment, distribution or provision
therefor to or for the holders of Guarantor Senior Indebtedness.
(b) To the extent any payment of Guarantor Senior
Indebtedness (whether by or on behalf of a Guarantor, as proceeds of security
or enforcement of any right of setoff or otherwise) is declared to be
fraudulent or preferential, set aside or required to be paid to any receiver,
trustee in bankruptcy, liquidating trustee, agent or other similar Person under
any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then, if such payment is recovered by, or paid over to, such receiver, trustee
in bankruptcy, liquidating trustee, agent or other similar Person, the
Guarantor Senior Indebtedness or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred.
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(c) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of a Guarantor of any kind or character,
whether in cash, property or securities, shall be received by any Holder when
such payment or distribution is prohibited by Section 10B.03(a), such payment
or distribution shall be held in trust for the benefit of, and shall be paid
over or delivered to, the holders of Guarantor Senior Indebtedness (pro rata to
such holders on the basis of the respective amount of Guarantor Senior
Indebtedness held by such holders) or their respective Representatives, or to
the trustee or trustees under any indenture pursuant to which any of such
Guarantor Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of Guarantor Senior
Indebtedness remaining unpaid until all such Guarantor Senior Indebtedness has
been paid in full in cash or Cash Equivalents, after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders of
such Guarantor Senior Indebtedness.
(d) The consolidation of any Guarantor with, or the
merger of any Guarantor with or into, another corporation or the liquidation or
dissolution of any Guarantor following the conveyance or transfer of all or
substantially all of its assets to another corporation upon the terms and
conditions provided in Section 10A.05 as if the Guarantor were the Company and
as long as permitted under the terms of the Guarantor Senior Indebtedness shall
not be deemed a dissolution, winding-up, liquidation or reorganization for the
purposes of this Section 10B.03 if such other corporation shall, as a part of
such consolidation, merger, conveyance or transfer, assume such Guarantor's
obligations hereunder in accordance with Section 10A.05 as if the Guarantor
were the Company.
SECTION 10B.04. Payments May Be Paid Prior to Dissolution.
Nothing contained in this Article Ten B or elsewhere in this
Indenture shall prevent (i) a Guarantor, except under the conditions described
in Sections 10B.01 and 10B.02, from making payments at any time for the purpose
of making payments of principal of and interest on the Securities, or from
depositing with the Trustee any moneys for such payments, or (ii) in the
absence of actual knowledge by the Trustee that a given payment would be
prohibited by Sections 10B.01 and 10B.02, the application by the Trustee of any
moneys deposited with it for the purpose of making such payments of principal
of, and interest on, the Securities to the Holders entitled thereto unless, at
least one Business Day prior to the date upon which such
<PAGE> 109
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payment would otherwise become due and payable, the Trustee shall have actually
received the written notice provided for in Section 10B.02(a) or in Section
10B.09. The Guarantor shall give prompt written notice to the Trustee of any
dissolution, winding-up, liquidation or reorganization of any Guarantor.
SECTION 10B.05. Subrogation.
Subject to the payment in full in cash or Cash Equivalents of
all Guarantor Senior Indebtedness, the Holders of the Guarantees shall be
subrogated to the rights of the holders of Guarantor Senior Indebtedness to
receive payments or distributions of cash, property or securities of a
Guarantor applicable to the Guarantor Senior Indebtedness until the Securities
shall be paid in full; and, for the purposes of such subrogation, no such
payments or distributions to the holders of the Guarantor Senior Indebtedness
by or on behalf of any Guarantor or by or on behalf of the holders of the
Guarantees by virtue of this Article Ten B which otherwise would have been made
to such holders shall, as between such Guarantor and the holders of the
Guarantees, be deemed to be a payment by such Guarantor to or on account of the
Guarantor Senior Indebtedness.
SECTION 10B.06. Guarantee Provisions Solely To Define Relative Rights.
The subordination provisions of this Article Ten B are and are
intended solely for the purpose of defining the relative rights of the Holders
of the Securities on the one hand and the holders of Guarantor Senior
Indebtedness of each Guarantor and, to the extent set forth in Section 10B.02,
holders of Designated Guarantor Senior Indebtedness on the other hand. Nothing
contained in this Article Ten B or elsewhere in this Indenture or in the
Securities is intended to or shall (a) impair, as among each Guarantor, its
creditors other than holders of its Guarantor Senior Indebtedness and the
Holders of the Securities, the obligation of such Guarantor, which is absolute
and unconditional, to make payments to the Holders in respect of its
obligations under its Guarantee as and when the same shall become due and
payable in accordance with their terms; or (b) affect the relative rights
against such Guarantor of the Holders of the Securities and creditors of such
Guarantor other than the holders of the Guarantor Senior Indebtedness of such
Guarantor; or (c) prevent the Trustee or the Holder of any Security from
exercising all remedies otherwise permitted by applicable law upon a Default or
an Event of Default under this Indenture, subject to the rights, if any, under
the subor-
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dination provisions of this Article Ten B of the holders of Guarantor Senior
Indebtedness of the Guarantors hereunder and, to the extent set forth in
Section 10B.02, holders of Designated Guarantor Senior Indebtedness on the
other hand (1) in any case, proceeding, dissolution, liquidation or other
winding-up, assignment for the benefit of creditors or other marshalling of
assets and liabilities of the Guarantor referred to in Section 10B.03, to
receive, pursuant to and in accordance with such Section, cash, property and
securities otherwise payable or deliverable to the Trustee or such Holder, or
(2) under the conditions specified in Section 10B.02, to prevent any payment
prohibited by such Section or enforce their rights pursuant to Section
10B.02(c).
The failure by any Guarantor to make a payment in respect of
its obligations under this Guarantee by reason of any provision of this Article
Ten B shall not be construed as preventing the occurrence of a Default or an
Event of Default hereunder.
SECTION 10B.07. Trustee to Effectuate Subordination of Obligations Under the
Guarantees.
Each Holder of a Security by its acceptance of such Security
authorizes and expressly directs the Trustee to take on behalf of such Holder
of Securities such action as may be necessary or appropriate to effectuate as
between the holders of Guarantor Senior Indebtedness and Holders of Guarantees,
the subordination provided in this Article Ten B, and appoints the Trustee its
attorney-in-fact to act for it and on its behalf for such purposes, including,
in the event of any dissolution, winding-up, liquidation or reorganization of
any Guarantor (whether in bankruptcy, insolvency, receivership, reorganization
or similar proceedings or upon an assignment for the benefit of creditors or
otherwise) tending towards liquidation of the business and assets of such
Guarantor, the filing of a claim for the unpaid balance of its Guarantees and
accrued interest in the form required in those proceedings.
SECTION 10B.08. No Waiver of Guarantee Subordination Provisions.
No right of any present or future holder of any Guarantor
Senior Indebtedness of any Guarantor to enforce subordination as provided
herein shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or any Guarantor or by any act or
failure to act, in good faith, by any such holder, or by any
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non-compliance by the Company or any Guarantor with the terms of this
Indenture, regardless of any knowledge thereof any such holder may have or
otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Guarantor Senior Indebtedness of any Guarantor may,
at any time and from time to time, without the consent of or notice to the
Trustee, without incurring responsibility to the Trustee or the Holders of the
Securities and without impairing or releasing the subordination provided in
this Article Ten B or the obligations hereunder of the Holders of the
Guarantees to the holders of such Guarantor Senior Indebtedness, do any one or
more of the following: (1) change the manner, place or terms of payment or
extend the time of payment of, or renew or alter, such Guarantor Senior
Indebtedness or any Senior Indebtedness as to which such Guarantor Senior
Indebtedness relates, or otherwise amend or supplement in any manner such
Guarantor Senior Indebtedness or any Senior Indebtedness to which such
Guarantor Senior Indebtedness relates; (2) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing such
Guarantor Senior Indebtedness or any Senior Indebtedness as to which such
Guarantor Senior Indebtedness relates; (3) release any person liable in any
manner for the collection or payment of such Guarantor Senior Indebtedness or
any Senior Indebtedness as to which such Guarantor Senior Indebtedness relates;
and (4) exercise or refrain from exercising any rights against such Guarantor
and any other Person.
SECTION 10B.09. Guarantors to Give Notice to Trustee.
The Company and each Guarantor shall give prompt written
notice to the Trustee of any fact known to such Guarantor which would prohibit
the making of any payment to or by the Trustee in respect of the Securities
pursuant to the provisions of this Article Ten B. Notwithstanding the
subordination provisions of this Article Ten B or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any default or event of default with respect to any Guarantor Senior
Indebtedness or of any other facts which would prohibit the making of any
payment to or by the Trustee unless and until the Trustee shall have received
notice in writing from the Company, such Guarantor or from a holder of
Guarantor Senior Indebtedness or a Representative therefor, and, prior to the
receipt of any such written notice, the Trustee shall be entitled to assume (in
the absence of actual knowledge to the contrary) that no such facts exist. In
the
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event that the Trustee determines in good faith that any evidence is required
with respect to the right of any Person as a holder of Guarantor Senior
Indebtedness of any Guarantor to participate in any payment or distribution
pursuant to this Article Ten B, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Guarantor Senior Indebtedness of each Guarantor held by such Person, the extent
to which such Person is entitled to participate in such payment or distribution
and any other facts pertinent to the rights of such Person under this Article
Ten B, and if such evidence is not furnished the Trustee may defer any payment
to such Person pending judicial determination as to the right of such Person to
receive such payment.
SECTION 10B.10. Reliance on Judicial Order or Certificate of Liquidating
Agent Regarding Dissolution, etc., of Guarantors.
Upon any payment or distribution of assets of a Guarantor
referred to in this Article Ten B, the Trustee, subject to the provisions of
Article Seven hereof, and the Holders shall be entitled to rely upon any order
or decree entered by any court of competent jurisdiction in which such
bankruptcy, liquidation, reorganization, dissolution or winding-up proceeding
are pending or, upon a certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or distribution,
delivered to the Trustee or to the Holders of the Guarantees, for the purpose
of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Guarantor Senior Indebtedness of such Guarantor
and other Indebtedness of such Guarantor, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article Ten B.
SECTION 10B.11. Rights of Trustee as a Holder of Guarantor Senior
Indebtedness; Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article Ten B with respect to any Guarantor
Senior Indebtedness of any Guarantor which may at any time be held by the
Trustee, to the same extent as any other holder of such Guarantor Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder. Nothing in this Article Ten B
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shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 7.07.
SECTION 10B.12. No Suspension of Remedies.
Nothing contained in this Article Ten B shall limit the right
of the Trustee or the Holders of Securities to take any action to accelerate
the maturity of the Securities pursuant to Article Six or to pursue any rights
or remedies hereunder or under applicable law, subject to the rights, if any,
under this Article Ten B of the holders, from time to time, of Guarantor Senior
Indebtedness of the Guarantors.
SECTION 10B.13. Trustee's Relation to Guarantor Senior Indebtedness.
The Trustee and any agent of the Guarantor or the Trustee
shall be entitled to all the rights set forth in this Article Ten B with
respect to any Guarantor Senior Indebtedness which may at any time be held by
it in its individual or any other capacity to the same extent as any other
holder of the Guarantor Senior Indebtedness and nothing in this Indenture shall
deprive the Trustee or any such agent of any of its rights as such holder and
shall not be liable to any such holders if the Trustee shall in good faith
mistakenly pay over or distribute to Holders of Securities or to the Company or
to any other person cash, property or securities to which any holders of
Guarantor Senior Indebtedness shall be entitled by virtue of this Article or
otherwise.
With respect to the holders of Guarantor Senior Indebtedness,
the Trustee undertakes to perform or to observe only such of its duties,
covenants, responsibilities and obligations as are specifically set forth in
this Article Ten B, and no implied covenants or obligations with respect to the
holders of Guarantor Senior Indebtedness shall be read into this Indenture
against the Trustee. The Trustee shall not be deemed to owe any fiduciary or
other duty to the holders of Guarantor Senior Indebtedness.
Whenever a distribution is to be made or a notice given to
holders or owners of Guarantor Senior Indebtedness, the distribution may be
made and the notice may be given to their Representative, if any.
<PAGE> 114
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SECTION 10B.14. Subordination Rights Not Impaired by Acts or Omissions of the
Guarantors or Holders of Guarantor Senior Indebtedness.
No right of any present or future holders of any Guarantor
Senior Indebtedness to enforce subordination as provided herein shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of the Guarantors or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by the Guarantors with the terms of this
Indenture, regardless of any knowledge thereof which any such holder may have
or otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Guarantor Senior Indebtedness may, at any time and
from time to time, without the consent of or notice to the Trustee, without
incurring responsibility to the Trustee or the Holders of the Securities and
without impairing or releasing the subordination provided in this Article Ten B
or the obligations hereunder of the Holders of the Securities to the holders
of the Guarantor Senior Indebtedness, do any one or more of the following: (i)
change the manner, place or terms of payment or extend the time of payment of,
or renew or alter, Guarantor Senior Indebtedness, or otherwise amend or
supplement in any manner Guarantor Senior Indebtedness, or any instrument
evidencing the same or any agreement under which Guarantor Senior Indebtedness
is outstanding; (ii) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Guarantor Senior
Indebtedness; (iii) release any Person liable in any manner for the payment or
collection of Guarantor Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Guarantors and any other Person.
SECTION 10B.15. This Article Ten B Not To Prevent Events of Default.
The failure to make a payment on account of principal of or
interest on the Securities by reason of any provision of this Article Ten B
will not be construed as preventing the occurrence of an Event of Default.
<PAGE> 115
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ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. 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 11.02. 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 telex, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
if to the Company:
433 East Las Colinas Boulevard
Suite 1130
Irving, TX 75039
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 answered
back, if telexed; 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 registra-
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tion 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 11.03. Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section
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 Section 312(c).
SECTION 11.04. 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, if any, provided for in this Indenture relating to the
proposed action have been complied with.
SECTION 11.05. Statements Required in Certificate or Opinion.
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;
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(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 11.06. 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 11.07. 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 11.08. 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 11.09. 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.
<PAGE> 118
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SECTION 11.10. 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.
SECTION 11.11. 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 11.12. 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 11.13. 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.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the date first written above.
The Company:
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
By:
------------------------------------------
Name: Matthew E. Devine
Title: Senior Vice President, Chief
Financial Officer and Secretary
The Guarantors:
On Behalf of the Subsidiary Guarantors Listed
on Schedule I hereto
By:
------------------------------------------
Name: Omar Choucair
Title: Vice President
On Behalf of the Subsidiary Guarantors Listed
on Schedule II hereto
By:
------------------------------------------
Name: Richard E. Vendig
Title: Senior Vice President, Chief Financial
and Administrative Officer, Treasurer
<PAGE> 120
-112-
The Trustee:
THE BANK OF NEW YORK
By:
--------------------------------------
Name:
Title:
<PAGE> 121
EXHIBIT A-1
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
8 1/8% Senior Subordinated Notes due 2007
[FORM OF SERIES A SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES 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 SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR
(7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") 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 CHANCELLOR
MEDIA CORPORATION OF LOS ANGELES (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR
HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE 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 TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN
AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(E) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
(IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES 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
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE 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 SECURITIES ACT. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON"
HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
A-1-1
<PAGE> 122
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
8 1/8% Senior Subordinated Notes due 2007
No. $
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES, a Delaware
corporation (the "Company"), for value received, promises to pay to
or registered assigns, the principal sum of Dollars, on
December 15, 2007.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
A-1-2
<PAGE> 123
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
By:
---------------------------------------
Name: Matthew E. Devine
Title: Senior Vice President, Chief
Financial Officer and Secretary
By:
---------------------------------------
Name: Omar Choucair
Title: Vice President
Trustee's Certificate of Authentication
This is one of the 8 1/8% Senior Subordinated Notes due 2007
referred to in the within-mentioned Indenture.
Dated:
THE BANK OF NEW YORK,
as Trustee
By:
---------------------------------------
Authorized Signatory
A-1-3
<PAGE> 124
-4-
(REVERSE OF SECURITY)
8 1/8% Senior Subordinated Notes due 2007
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 December 22,
1997. The Company will pay interest semi-annually in arrears on each Interest
Payment Date, commencing June 15, 1998. 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 December 22, 1997 (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 1/8%
Senior Subordinated Notes due 2007 (the "Securities"), limited (except as
otherwise provided in the Indenture) in aggregate principal amount to
$500,000,000, which may be issued under the Indenture. The terms of the
Securities include those stated in the
A-1-4
<PAGE> 125
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Sections 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 subordinated basis, jointly and severally,
by the Guarantors pursuant to Article Ten A of the Indenture.
5. Subordination. The Securities are subordinated in
right of payment, in the manner and to the extent set forth in the Indenture,
to the prior payment in full in cash or Cash Equivalents of all Senior
Indebtedness, whether outstanding on the date of the Indenture or thereafter
created, incurred, assumed or guaranteed. To the extent and in the manner
provided in the Indenture, Senior Indebtedness must be paid before any payment
may be made to any Holder of this Security. Each Holder by his acceptance
hereof agrees to be bound by such provisions and authorizes and expressly
directs the Trustee, on his behalf, to take such action as may be necessary or
appropriate to effectuate the subordination provided for in the Indenture and
appoints the Trustee his attorney-in-fact for such purposes.
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, 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>
(b) In addition, on or prior to December 15, 2000, 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
108.125% 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 out-
A-1-5
<PAGE> 126
standing must equal at least 65% of the aggregate principal amount of the
Securities originally issued.
(c) In addition, at any time prior to December 15, 2000,
upon the occurrence of a Change of Control, the Company may redeem the
Securities, in whole but not in part, at a redemption price equal to the
principal amount thereof plus the Applicable Premium plus accrued and unpaid
interest, if any, to the date of redemption. The Company may not redeem
Securities pursuant to this paragraph if it has made an offer to repurchase the
Securities with respect to such Change of Control.
"Applicable Premium" means, with respect to a Security, the
greater of (i) 1.0% of the then outstanding principal amount of such Security
and (ii) (a) the present value of all remaining required interest and principal
payments due on such Security and all premium payments relating thereto
assuming a redemption date of December 15, 2002, computed using a discount rate
equal to the Treasury Rate plus 100 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 date fixed for redemption (or, if such
Statistical Release is no longer published, any publicly available source of
similar market data)) most nearly equal to the then remaining term to December
15, 2002; provided, however, that if the then remaining term to December 15,
2002 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 then remaining term to December 15, 2002
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.
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 60 days after the consummation of such Public Equity
Offering. Securities in denominations larger than $1,000 may be redeemed in
part.
A-1-6
<PAGE> 127
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.
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
A-1-7
<PAGE> 128
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 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
A-1-8
<PAGE> 129
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 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 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
A-1-9
<PAGE> 130
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, 433 East Las Colinas Blvd., Suite 1130, Irving,
Texas 75039.
A-1-10
<PAGE> 131
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 subordinated 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 A 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.
A-1-11
<PAGE> 132
GUARANTORS:
On Behalf of the Subsidiary Guarantors
Listed on Exhibit A hereto
By:
-----------------------------------
Name: Omar Choucair
Title: Vice President
On Behalf of the Subsidiary Guarantors Listed
on Exhibit B hereto
By:
-----------------------------------
Name: Richard E. Vendig
Title: Senior Vice President, Chief
Financial and Administrative
Officer, Treasurer
A-1-12
<PAGE> 133
[FORM OF ASSIGNMENT]
I or we assign to
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
- ---------------------------------------------
- --------------------------------------------------------------------------------
(please print or type name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
- --------------------------------------------------------------------------------
attorney to transfer the Security on the books of the Company with full power
of substitution in the premises.
In connection with any transfer of this Security occurring
prior to the date which is the earlier of (i) the date of the declaration by
the SEC of the effectiveness of a registration statement under the Securities
Act of 1933, as amended (the "Securities Act"), covering resales of this
Security (which effectiveness shall not have been suspended or terminated at
the date of the transfer) and (ii) December 22, 1999, the undersigned confirms
that it has not utilized any general solicitation or general advertising in
connection with the transfer and that:
[Check One]
[ ] (a) this Security is being transferred in
compliance with the exemption from registration under the Securities Act
provided by Rule 144A thereunder.
or
[ ] (b) this Security is being transferred other than
in accordance with (a) above and documents are being furnished which comply
with the conditions of transfer set forth in this Security and the Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not
be obligated to register this Security in the
A-1-13
<PAGE> 134
name of any person other than the Holder hereof unless and until the conditions
to any such transfer of registration set forth herein and in Section 2.16 of
the Indenture shall have been satisfied.
Dated:
----------------------- ---------------------------------------------
NOTICE: The signature on this assignment must
correspond with the name as it appears upon the
face of the within Security in every particular
without alteration or enlargement or any change
whatsoever and be guaranteed by the endorser's
bank or broker.
Signature Guarantee:
---------------------------------------------
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
A-1-14
<PAGE> 135
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company
pursuant to Section 4.15 or 4.16 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Security purchased by
the Company pursuant to Section 4.15 or 4.16 of the Indenture, state the
amount:
$
----------
Date: Your Signature:
------------------ -----------------------------------
(Sign exactly as your name appears on
the other side of this Security)
Signature Guarantee:
-----------------------------------
A-1-15
<PAGE> 136
EXHIBIT A-2
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
8 1/8% Senior Subordinated Notes due 2007
[FORM OF SERIES B SECURITY]
No. $
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES, a Delaware
corporation (the "Company"), for value received, promises to pay to
or registered assigns, the principal sum of Dollars, on
December 15, 2007.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
By:
--------------------------------------
Name:
Title:
By:
--------------------------------------
Name:
Title:
A-2-1
<PAGE> 137
Trustee's Certificate of Authentication
This is one of the 8 1/8% Senior Subordinated Notes due 2007
referred to in the within-mentioned Indenture.
Dated:
THE BANK OF NEW YORK,
as Trustee
By:
--------------------------------------
Authorized Signatory
A-2-2
<PAGE> 138
(REVERSE OF SECURITY)
8 1/8% Senior Subordinated Notes due 2007
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 December 22,
1997. The Company will pay interest semi-annually in arrears on each Interest
Payment Date, commencing June 15, 1998. 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 December 22, 1997 (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 1/8%
Senior Subordinated Notes due 2007 (the "Securities"), limited (except as
otherwise provided in the Indenture) in aggregate principal
A-2-3
<PAGE> 139
amount to $500,000,000, 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. Sections
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
subordinated basis, jointly and severally, by the Guarantors pursuant to
Article Ten A of the Indenture.
5. Subordination. The Securities are subordinated in
right of payment, in the manner and to the extent set forth in the Indenture,
to the prior payment in full in cash or Cash Equivalents of all Senior
Indebtedness, whether outstanding on the date of the Indenture or thereafter
created, incurred, assumed or guaranteed. To the extent and in the manner
provided in the Indenture, Senior Indebtedness must be paid before any payment
may be made to any Holder of this Security. Each Holder by his acceptance
hereof agrees to be bound by such provisions and authorizes and expressly
directs the Trustee, on his behalf, to take such action as may be necessary or
appropriate to effectuate the subordination provided for in the Indenture and
appoints the Trustee his attorney-in-fact for such purposes.
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, 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>
(b) In addition, on or prior to December 15, 2000, 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
108.125% of the principal amount thereof, plus accrued and unpaid interest
thereon to the date of redemption; provided, however, that after any such re-
A-2-4
<PAGE> 140
demption the aggregate principal amount of the Securities outstanding must
equal at least 65% of the aggregate principal amount of the Securities
originally issued.
(c) In addition, at any time prior to December 15, 2000,
upon the occurrence of a Change of Control, the Company may redeem the
Securities, in whole but not in part, at a redemption price equal to the
principal amount thereof plus the Applicable Premium plus accrued and unpaid
interest, if any, to the date of redemption. The Company may not redeem
Securities pursuant to this paragraph if it has made an offer to repurchase the
Securities with respect to such Change of Control.
"Applicable Premium" means, with respect to a Security, the
greater of (i) 1.0% of the then outstanding principal amount of such Security
and (ii)(a) the present value of all remaining required interest and principal
payments due on such Security and all premium payments relating thereto
assuming a redemption date of December 15, 2002, computed using a discount rate
equal to the Treasury Rate plus 100 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 date fixed for redemption (or, if such
Statistical Release is no longer published, any publicly available source of
similar market data)) most nearly equal to the then remaining term to December
15, 2002; provided, however, that if the then remaining term to December 15,
2002 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 then remaining term to December 15, 2002
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.
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 60 days after the consummation of such
A-2-5
<PAGE> 141
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.
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 Inden-
A-2-6
<PAGE> 142
ture 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 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
A-2-7
<PAGE> 143
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 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 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. 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.
A-2-8
<PAGE> 144
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, 433 East Las Colinas Blvd., Suite 1130, Irving
Texas, 75039.
A-2-9
<PAGE> 145
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 subordinated 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 A 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.
A-2-10
<PAGE> 146
GUARANTORS:
On behalf of the Guarantors Listed on Exhibit
A hereto:
By:
-----------------------------------
Name:
Title:
On behalf of the Guarantors Listed on Exhibit B
hereto:
By:
-----------------------------------
Name:
Title:
A-2-11
<PAGE> 147
[FORM OF ASSIGNMENT]
I or we assign to
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
- ---------------------------------------------
- --------------------------------------------------------------------------------
(please print or type name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
- --------------------------------------------------------------------------------
attorney to transfer the Security on the books of the Company with full power
of substitution in the premises.
Dated:
------------------------- ---------------------------------------------
NOTICE: The signature on this assignment
must correspond with the name as it appears
upon the face of the within Security in
every particular without alteration or
enlargement or any change whatsoever and be
guaranteed by the endorser's bank or broker.
Signature Guarantee:
---------------------------------------------
A-2-12
<PAGE> 148
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company
pursuant to Section 4.15 or 4.16 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Security purchased by
the Company pursuant to Section 4.15 or 4.16 of the Indenture, state the
amount:
$
----------
Date: Your Signature:
------------------- ---------------------------------
(Sign exactly as your name appears on
the other side of this Security)
Signature Guarantee:
-----------------------------------
A-2-13
<PAGE> 149
EXHIBIT B
FORM OF LEGEND FOR BOOK-ENTRY SECURITIES
Any Global Security authenticated and delivered hereunder
shall bear a legend (which would be in addition to any other legends required
in the case of a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY.
THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE
NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER
OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY
THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY
BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
B-1
<PAGE> 150
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
___________, ____
THE BANK OF NEW YORK
Attention: Corporate Trust Trustee Administration
Re: Chancellor Media Corporation of Los Angeles (the "Company") 8
1/8% Senior Subordinated Notes due 2007 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed purchase of $_______ aggregate
principal amount of the Securities, we confirm that:
1. We understand that any subsequent transfer of the
Securities is subject to certain restrictions and conditions set forth in the
Indenture dated as of December 22, 1997 relating to the Securities and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Securities except in compliance with, such restrictions and
conditions and the 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 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 or otherwise
transfer any Securities prior to the date which is two years after the original
issuance of the Securities, we will do so only (i) to the Company or any of its
subsidiaries, (ii) inside the United States in accordance with Rule 144A under
the Securities Act to a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act), (iii) inside the United States 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
the Trustee (as defined in the Indenture relating to the Securities), a signed
letter containing certain representations and agreements relating to the
restrictions on transfer of the Securities, (iv) outside the
C-1
<PAGE> 151
United States in accordance with Rule 904 of Regulation S under the Securities
Act, (v) pursuant to the exemption from registration provided by Rule 144 under
the Securities Act (if available), or (vi) pursuant to an effective
registration statement under the Securities Act, and we further agree to
provide to any person purchasing any of the Securities from us a notice
advising such purchaser that resales of the Securities are restricted as stated
herein.
3. We are not acquiring the Securities for or on behalf
of, and will not transfer the Securities to, any pension or welfare plan (as
defined in Section 3 of the Employee Retirement Income Security Act of 1974),
except as permitted in the section entitled "Transfer Restrictions" of the
Offering Circular.
4. We understand that, on any proposed resale of any
Securities, we will be required to furnish to the Trustee and the Company such
certification, legal opinions and other information as the Trustee 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.
5. 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 their investment, as the case may be.
6. We are acquiring the Securities purchased by us for
our 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.
Very truly yours,
By:
---------------------------------
Name:
Title:
C-2
<PAGE> 152
EXHIBIT D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
______________, ____
The Bank of New York
Attention: Corporate Trust Trustee Administration
Re: Chancellor Media Corporation of Los Angeles (the "Company") 8
1/8% Senior Subordinated Notes due 2007 (the "Securities")
Dear Sirs:
In connection with our proposed sale of $___________ aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act
of 1933, as amended (the "Securities Act"), and, accordingly, we represent
that:
(1) the offer of the Securities was not made to a person
in the United States;
(2) either (a) at the time the buy offer was originated,
the transferee was outside the United States or we and any person
acting on our behalf reasonably believed that the transferee was
outside the United States, or (b) the transaction was executed in, on
or through the facilities of a designated off-shore securities market
and neither we nor any person acting on our behalf knows that the
transaction has been pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the
United States in contravention of the requirements of Rule 903(b) or
Rule 904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Securities.
D-1
<PAGE> 153
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. Terms used in this certificate
have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
---------------------------------
Authorized Signature
D-2
<PAGE> 1
April 10, 1998
EXHIBIT 5.1
Chancellor Media Corporation of Los Angeles
433 East Las Colinas Boulevard
Suite 1130
Irving, Texas 75039
Re: Chancellor Media Corporation of Los Angeles Registration Statement
on Form S-4 (File No. 333-_______)
Ladies and Gentlemen:
In connection with the registration of $500.0 million aggregate
principal amount of 8-1/8% Senior Subordinated Notes due 2007, Series B (the
"Exchange Notes"), under the Securities Act of 1933, as amended (the "Act"), by
Chancellor Media Corporation of Los Angeles, a Delaware corporation (the
"Company"), and the related guarantees (the "Guarantees") of the Exchange Notes
issued by subsidiaries of the Company (the "Guarantors"), on Form S-4, filed
with the Securities and Exchange Commission (the "Commission"), you have
requested our opinion with respect to the matters set forth below. Capitalized
terms used herein but not otherwise defined herein have the meanings ascribed to
them in the Registration Statement.
In our capacity as counsel in connection with such registration, we are
familiar with the proceedings taken by the Company and the Guarantors in
connection with the authorization of the Exchange Notes and proceedings proposed
to be taken in connection with the issuance of the Exchange Notes and the
Guarantees, respectively, and for the purposes of this opinion, have assumed
such proceedings will be timely completed in the manner presently proposed. In
addition, we have made such legal and factual examinations and inquiries,
<PAGE> 2
April 10, 1998
Page 2
including an examination of originals or copies, certified or otherwise
identified to our satisfaction of such documents, corporate records and
instruments as we have deemed necessary or appropriate for purposes of this
opinion.
In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, and the
conformity to authentic original documents of all documents submitted to us as
copies.
We are opining herein as to the effect on the subject transaction only
of the internal laws of the state of New York, and we express no opinion with
respect to the applicability thereto, or the effect thereon, of the laws of any
other jurisdiction or as to any matters of municipal law or the laws of any
other local agencies within the state.
Subject to the foregoing and the other matters set forth herein, it is
our opinion that upon issuance thereof in the manner described in the
Registration Statement:
1. The Exchange Notes have been duly authorized by all necessary
corporate action of the Company, and when executed, authenticated
and delivered by or on behalf of the Company in exchange for the
Company's 8-1/8% Senior Subordinated Notes due 2007, Series A in
accordance with the terms of the Indenture, will constitute
legally valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms.
2. Each of the Guarantees has been duly authorized by all necessary
corporate action of the respective Guarantors, and when executed
in accordance with the terms of the Indenture and upon due
execution, authentication and delivery of the Exchange Notes by or
on behalf of the Company, will be legally valid and binding
obligations of the respective Guarantors, enforceable against the
Guarantors in accordance with their terms.
The opinions rendered in paragraphs 1 and 2 are subject to the
following exceptions, limitations and qualifications: (i) the effect of
bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights and remedies of creditors; (ii) the effect
on the Company and the Guarantors of general principles of equity, whether
enforcement is considered in a proceeding in equity or law, and the discretion
of the court before which any proceeding therefor may be brought; (iii) the
unenforceability under certain circumstances under law or court decisions of
provisions providing for the indemnification of or contribution to a party with
respect to a liability where such indemnification or contribution is contrary to
public
<PAGE> 3
April 10, 1998
Page 3
policy; and (iv) we express no opinion concerning the enforceability of any
waiver of rights or defenses contained in the Indenture.
To the extent that the obligations of the Company and the Guarantors
under the Indenture may be dependent upon such matters, we assume for purposes
of this opinion that the Trustee is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization; that the Trustee is
duly qualified to engage in the activities contemplated by the Indenture; that
the Indenture has been duly authorized, executed and delivered by the Trustee
and constitutes the legally valid, binding and enforceable obligation of the
Trustee enforceable against the Trustee in accordance with its terms; that the
Trustee is in compliance, generally and with respect to acting as a trustee
under the Indenture, with all applicable laws and regulations; and that the
Trustee has the requisite organizational and legal power and authority to
perform its obligations under the Indenture.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement and the reference to our firm under the
heading "Legal Matters" in the Registration Statement.
Very truly yours,
LATHAM & WATKINS
<PAGE> 1
April 10, 1998
EXHIBIT 8.1
Chancellor Media Corporation of Los Angeles
433 East Las Colinas Boulevard
Suite 1130
Irving, Texas 75039
Re: Registration Statement on Form S-4 (File No. 333-_____)
Dear Sir or Madam:
You have requested our opinion concerning the material federal income
tax consequences of the exchange of 8-1/8% Senior Subordinated Notes due 2007,
Series B of Chancellor Media Corporation of Los Angeles (the "Company") which
have been registered under the Securities Act of 1933, as amended, for
outstanding 8-1/8% Senior Subordinated Notes due 2007, Series A of the Company,
in connection with the Registration Statement on Form S-4 filed herewith (the
"Registration Statement").
The facts, as we understand them, and upon which with your permission
we rely in rendering the opinion expressed herein, are set forth in the
Registration Statement. Based on such facts, it is our opinion that the material
federal income tax consequences are accurately set forth under the heading
"Material United States Federal Income Tax Considerations" in the Registration
Statement. No opinion is expressed as to any matter not discussed therein.
This opinion is based on various statutory provisions, regulations
promulgated thereunder and interpretations thereof by the Internal Revenue
Service and the courts having jurisdiction over such matters, all of which are
subject to change either prospectively or retroactively. Also, any variation or
difference in the facts from those set forth in the Registration Statement may
affect the conclusions stated herein.
<PAGE> 2
April 10, 1998
Page 2
This opinion is rendered to you solely for use in connection with the
Registration Statement. We consent to your filing this opinion as an exhibit to
the Registration Statement, and to the reference to our firm under the headings
"Material United States Federal Income Tax Considerations" and "Legal Matters."
Very truly yours,
LATHAM & WATKINS
<PAGE> 1
EXHIBIT 10.43
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of December 22, 1997
Among
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
as Issuer
THE GUARANTORS NAMED HEREIN
and
BT ALEX. BROWN INCORPORATED
GOLDMAN, SACHS & CO.
SALOMON BROTHERS INC
MORGAN STANLEY & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
as Initial Purchasers
================================================================================
$500,000,000
8-1/8% SENIOR SUBORDINATED NOTES DUE 2007
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement"), dated
as of December 22, 1997, 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, Goldman, Sachs & Co., Salomon Brothers Inc, Morgan Stanley & Co.
Incorporated and Credit Suisse First Boston Corporation (collectively, the
"Initial Purchasers").
This Agreement is being entered into in connection with the
Purchase Agreement, dated as of December 15, 1997, 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 $500,000,000
aggregate principal amount of the Company's 8-1/8% Senior Subordinated Notes
Due 2007 (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.
<PAGE> 3
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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 120th day after the Issue Date.
Guarantors: See the first introductory paragraph hereto.
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 December 22, 1997 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.
<PAGE> 4
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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)
<PAGE> 5
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hereof is applicable, the Exchange Registration Statement) covering such Note,
Exchange Note or Private Exchange Note, as the case may be, has been 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.
<PAGE> 6
-5-
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, 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
<PAGE> 7
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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 held by Participating Broker-Dealers, 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
<PAGE> 8
-7-
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").
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Notes acquired by them 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 the Initial
Purchasers, simultaneously with the delivery of the Exchange Notes in the
Exchange Offer, issue and deliver to the Initial Purchasers in exchange (the
"Private Exchange") for such Notes held by the Initial Purchasers 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) 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;
<PAGE> 9
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(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 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
<PAGE> 10
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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:
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 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
<PAGE> 11
-10-
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 its 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 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, then,
commencing on the 121st day after the Issue 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, 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, then, commencing on the 181st day after the Issue
Date, Additional Interest shall accrue on the Notes included or that
should have been included in such Registration Statement over and
<PAGE> 12
-11-
above the stated interest at a rate of 0.50% per annum for the first
90 days immediately following the 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 Statement, 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.
<PAGE> 13
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(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. 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
registration(s) 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 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
<PAGE> 14
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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 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.
(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
<PAGE> 15
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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
<PAGE> 16
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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 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.
<PAGE> 17
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(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 selling 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
<PAGE> 18
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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.
(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 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, upon the occurrence of any event
contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, 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
<PAGE> 19
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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 underwriter or underwriters, addressed to the un-
<PAGE> 20
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derwriters 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. 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
<PAGE> 21
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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 the first Registration Statement relating to the Registrable Notes; and in
connection therewith, cooperate with the 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 ef-
<PAGE> 22
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fect 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
<PAGE> 23
-22-
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 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,
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 (x) the copies of the supplemented or amended Prospectus contemplated
by Section 5(k) hereof or (y) the Advice.
6. Registration Expenses
(a) 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 qualifica-
<PAGE> 24
-23-
tions 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 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
<PAGE> 25
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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, 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
<PAGE> 26
-25-
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 of 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
<PAGE> 27
-26-
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 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 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
<PAGE> 28
-27-
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
<PAGE> 29
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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.
(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
<PAGE> 30
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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 entered and none of the Issuers will enter into any
agreement with respect to any of its securities that will grant to any Person
piggy-back 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.
<PAGE> 31
-30-
(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
GOLDMAN, SACHS & CO.
SOLOMON BROTHERS INC
MORGAN STANLEY & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
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:
Cahill Gordon & Reindel
80 Pine Street
<PAGE> 32
-31-
New York, New York 10005
Facsimile No: (212) 269-5420
Attention: William M. Hartnett, Esq.
2. if to the Initial Purchasers, at the addresses
specified in Section 10(d)(1);
3. if to the Company, as follows:
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
433 East Las Colinas Blvd.
Suite 1130
Irving, Texas 75039
Facsimile No: (972) 869-3671
Attention: Matthew E. Devine,
Chief Financial Officer
with copies 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.
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
<PAGE> 33
-32-
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 counted in determining whether such consent or approval was
given by the Holders of such required percentage.
(k) 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.
(l) 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
<PAGE> 34
-33-
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.
<PAGE> 35
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:
----------------------------------------
Name: Matthew E. Devine
Title: Senior Vice President,
Chief Financial Officer
and Secretary
THE GUARANTORS:
On behalf of the Subsidiary Guarantors
Listed on Exhibit A hereto:
By:
----------------------------------------
On behalf of the Subsidiary Guarantors
Listed on Exhibit B hereto:
By:
----------------------------------------
Name:
Title:
<PAGE> 36
THE INITIAL PURCHASERS:
BT ALEX. BROWN INCORPORATED
By:
------------------------------
Name:
Title:
GOLDMAN, SACHS & CO.
By:
------------------------------
Name:
Title:
SALOMON BROTHERS INC
By:
------------------------------
Name:
Title:
MORGAN STANLEY & CO. INCORPORATED
By:
------------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON CORPORATION
By:
------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 12.1
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
YEAR
YEAR ENDED DECEMBER 31, ENDED
-------------------------------------------------- DECEMBER 31,
1993 1994 1995 1996 1997 1997
-------- ------- ------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Net income (loss) before income taxes................. $(20,749) $ 39 $(5,658) $(19,090) $(6,692) $(107,788)
Fixed charges......................................... 15,086 15,252 20,854 40,461 89,325 171,424
-------- ------- ------- -------- ------- ---------
Earnings as adjusted(A)............................... $ (5,663) $15,291 $15,196 $ 21,371 $82,633 $ 63,636
======== ======= ======= ======== ======= =========
Fixed Charges:
Interest expense...................................... $ 13,878 $13,809 $19,199 $ 37,527 $85,017 $ 163,288
Amortization of deferred financing costs.............. 728 712 631 1,113 1,337 3,217
Rents under leases representative of an interest
factor(1)........................................... 480 731 1,024 1,821 2,971 4,919
-------- ------- ------- -------- ------- ---------
Fixed charges as adjusted(B)............................ $ 15,086 $15,252 $20,854 $ 40,461 $89,325 $ 171,424
======== ======= ======= ======== ======= =========
Ratio of earnings to fixed charges (A) divided by (B)... -- 1.0 -- -- -- --
Deficiency of earnings to fixed charges................. $ 20,749 $ -- $ 5,658 $ 19,090 $ 6,692 $ 107,788
</TABLE>
- ---------------
(1) Management of CMCLA believes approximately one-third of rental and lease
expense is representative of the interest component of rent expense.
<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 ended December 31, 1997. We also consent to the reference
to our firm under the captions "Experts" and "Selected Consolidated Historical
Financial Data."
Coopers & Lybrand L.L.P.
Dallas, Texas
April 17, 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 herein on the following financial
statements: 1) the consolidated balance sheet of Chancellor 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; 2) the combined balance sheets of
WMZQ Inc. and Viacom Broadcasting East, Inc. as of December 31, 1995 and 1996
and the related combined statements of earnings and cash flows for each of the
years in the three-year period ended December 31, 1996; 3) the combined balance
sheets of Riverside Broadcasting Co., Inc. and WAXQ Inc. as of December 31, 1995
and 1996 and the related combined statements of earnings and cash flows for each
of the years in the three-year period ended December 31, 1996; 4) the balance
sheets of 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 and 5) the combined balance sheets of KYSR Inc. and KIBB Inc.
as of December 31, 1995 and 1996 and the related combined statements of
operations and cash flows for each of the years in the three-year period ended
December 31, 1996. We also consent to the reference to our firm under the
heading "Experts" in the Registration Statement.
KPMG Peat Marwick LLP
Dallas, Texas
April 17, 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".
Coopers & Lybrand L.L.P.
Dallas, Texas
April 17, 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 dated March 28, 1997, relating to the
balance sheets 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 ended December 31, 1996,
and the reference to our firm under the heading "Experts" in the Registration
Statement.
KPMG Peat Marwick LLP
St. Petersburg, Florida
April 17, 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 dated April , 1998 of Chancellor Media
Corporation of Los Angeles.
Arthur Andersen LLP
Washington, D.C.
April 17, 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.)
48 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.)
433 East Las Colinas Boulevard
Irving, Texas 75039
(Address of principal executive offices) (Zip code)
-----------------------------
TABLE OF CO-REGISTRANTS
<TABLE>
<S> <C> <C>
Chancellor Media Corporation Delaware 99-0248292
of the Lone Star State
KZPS/KDGE License Corp. Delaware 75-2449662
Chancellor Media Corporation Delaware 59-2312787
of the Bay Area
KIOI License Corp. Delaware 75-2449654
Chancellor Media Corporation Delaware 75-2490925
of Illinois
WRCX License Corp. Delaware 75-2528716
Chancellor Media Corporation Delaware 59-2412802
of Chicago AM
WMVP-AM License Corp. Delaware 75-2449660
Chancellor Media Corporation Delaware 59-2312792
of Dade County
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
WVCG License Corp. Delaware 75-2449668
Chancellor Media/ Delaware 04-3221315
Pyramid Corporation
Chancellor Media/Pyramid Delaware 04-3221316
Holdings Corporation
Broadcast Architecture, Inc. Massachusetts 04-3096275
Chancellor Media Corporation Delaware 04-3216274
of Massachusetts
WJMN License Corp. Delaware 04-3216272
Chancellor Media Corporation Delaware 75-2699485
of the Nation's Capital
WWRC License Corp. Delaware 75-2697127
Chancellor Media Partners Delaware 13-3467127
Corporation
Chancellor Media Corporation Delaware 36-3905992
of Gotham
Chancellor Media Corporation Delaware 54-1475267
of New York
WYNY License Corp. Delaware 36-3906005
Chancellor Media Corporation Delaware 36-2826680
of Detroit
WKQI/WDOZ/WNIC License Corp. Delaware 36-3906004
Chancellor Media Corporation Delaware 36-3604824
of Chicagoland
WEJM/WEJM-FM/WVAZ License Corp. Delaware 36-3905998
Chancellor Media Corporation Delaware 62-1364794
of Charlotte
WIOQ License Corp. Delaware 36-3906002
Chancellor Media Corporation Delaware 75-2245927
of Dallas
KSKY License Corp. Delaware 36-3906008
Chancellor Media Corporation Delaware 75-2449639
of San Francisco
KMEL License Corp. Delaware 75-2449650
Chancellor Media Corporation Delaware 75-2486583
of Houston
Chancellor Media of Houston Delaware 75-2486577
Limited Partnership
KLOL License Limited Partnership Delaware 75-2486580
Chancellor Media Corporation Delaware 75-2674715
of Tiburon
KKSF License Corp. Delaware 75-2674717
Chancellor Media Corporation Delaware 75-243256
of Washington, D.C.
Chancellor Media Corporation Delaware 75-2449637
of St. Louis
WTOP License Limited Partnership Delaware 75-2528718
Chancellor Media Corporation of Delaware 75-2666019
the Motor City
WJLB License Corp. Delaware 75-2666024
Chancellor Media Corporation Delaware 75-2666017
of Michigan
WMXD License Corp. Delaware 75-2666023
Chancellor Media/WAXQ Inc. Delaware 13-3387794
WAXQ License Corp. Delaware N/A
Chancellor Media/WMZQ Inc. Delaware 04-2981015
</TABLE>
-2-
<PAGE> 3
<TABLE>
<S> <C> <C>
WMZQ License Corp. Delaware N/A
Chancellor Media Corporation Delaware 75-2674728
of the Liberty City
WDAS (FM) License Corp. Delaware 75-2674731
WDAS (AM) License Corp. Delaware 75-2674729
Chancellor Media/Riverside Delaware 13-2688382
Broadcasting Co. Inc.
WLTW License Corp. Delaware N/A
Chancellor Media Corporation Delaware 75-2674722
of the Great Lakes
WWWW/WDFN License Corp. Delaware 75-2674723
Chancellor Media Corporation Delaware 75-2647157
of the Capital City
WGAY License Corp. Delaware 75-2647158
Chancellor Media Licensee Delaware 75-2544625
Company
Chancellor Media/Trefoil Delaware 95-3278846
Communications, Inc.
Chancellor Media/Shamrock Delaware 95-4068583
Broadcasting, Inc.
Chancellor Media/Shamrock Delaware 95-4501833
Radio Licenses, Inc.
Chancellor Media/Shamrock Texas 71-0527506
Broadcasting of Texas, Inc.
Chancellor Media/Shamrock Delaware 75-2688376
Broadcasting Licenses
of Denver, Inc.
Chancellor Media/KCMG Inc. Delaware 13-3930133
Chancellor Media/KYSR Inc. Delaware 13-3547704
Chancellor Media/WLIT Inc. Delaware 13-3930134
Radio 100 L.L.C. Delaware N/A
Chancellor Media Corporation Delaware 04-3216281
of Pennsylvania
WJJZ License Corp. Delaware 04-3216283
Chancellor Media Corporation Delaware 04-3216285
of Miami
WEDR License Corp. Delaware 04-3216278
Chancellor Media Corporation Delaware 04-3221317
of Boston
WXKS (AM) License Corp. Delaware 04-3221319
WXKS (FM) License Corp. Delaware 04-3221318
Chancellor Media Corporation Delaware 04-3221712
of the Windy City
WNUA License Corp. Delaware 04-3221714
Chancellor Media Corporation Delaware 04-3221716
of Philadelphia
Chancellor Media Corporation Delaware 04-3221374
of the Keystone State
WYXR License Corp. Delaware 04-3221718
WUSL License Corp. Delaware 04-3221375
KKBT License Corp. Delaware 75-2449648
Katz Media Corporation Delaware 13-3779266
Katz Cable Corporation Delaware 13-3814104
Seltel Inc. Delaware 06-0963166
The National Payroll Delaware 13-3744365
Company, Inc.
Katz Communications, Inc. Delaware 13-0904500
</TABLE>
-3-
<PAGE> 4
<TABLE>
<S> <C> <C>
Eastman Radio Sales, Inc. Delaware 13-3581043
Christal Radio Sales, Inc. Delaware 13-2618663
Amcast Radio Sales, Inc. Delaware 13-3406436
Katz Millennium Marketing, Inc. Delaware 13-3894491
</TABLE>
-----------------------------
8 1/8% Senior Subordinated Notes Due 2007, Series B
(Title of the indenture securities)
================================================================================
-4-
<PAGE> 5
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name Address
- --------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
-5-
<PAGE> 6
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 7th day of April, 1998.
THE BANK OF NEW YORK
By: /s/ JAMES W.P. HALL
-----------------------
Name: JAMES W.P. HALL
Title: VICE PRESIDENT
-6-
<PAGE> 7
EXHIBIT 7
-----------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business September 30,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 5,004,638
Interest-bearing balances .......... 1,271,514
Securities:
Held-to-maturity securities ........ 1,105,782
Available-for-sale securities ...... 3,164,271
Federal funds sold and Securities pur-
chased under agreements to resell..... 5,723,829
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ........................... 34,916,196
LESS: Allowance for loan and
lease losses ..................... 581,177
LESS: Allocated transfer risk
reserve........................... 429
Loans and leases, net of unearned
income, allowance, and reserve 34,334,590
Assets held in trading accounts ...... 2,035,284
Premises and fixed assets (including
capitalized leases) ................ 671,664
Other real estate owned .............. 13,306
Investments in unconsolidated
subsidiaries and associated
companies .......................... 210,685
Customers' liability to this bank on
acceptances outstanding ............ 1,463,446
Intangible assets .................... 753,190
Other assets ......................... 1,784,796
-----------
Total assets ......................... $57,536,995
===========
LIABILITIES
Deposits:
In domestic offices ................ $27,270,824
Noninterest-bearing ................ 12,160,977
Interest-bearing ................... 15,109,847
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 14,687,806
Noninterest-bearing ................ 657,479
Interest-bearing ................... 14,030,327
Federal funds purchased and Securities
sold under agreements to repurchase. 1,946,099
Demand notes issued to the U.S.
Treasury ........................... 283,793
Trading liabilities .................. 1,553,539
Other borrowed money:
With remaining maturity of one year
or less .......................... 2,245,014
With remaining maturity of more than
one year through three years.......... 0
With remaining maturity of more than
three years ...................... 45,664
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,473,588
Subordinated notes and debentures .... 1,018,940
Other liabilities .................... 2,193,031
-----------
Total liabilities .................... 52,718,298
-----------
EQUITY CAPITAL
Common stock ......................... 1,135,284
Surplus .............................. 731,319
Undivided profits and capital
reserves ........................... 2,943,008
Net unrealized holding gains
(losses) on available-for-sale
securities ......................... 25,428
Cumulative foreign currency transla-
tion adjustments ................... ( 16,342)
------------
Total equity capital ................. 4,818,697
-----------
Total liabilities and equity
capital ............................ $57,536,995
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this
Report of Condition and declare that it has been examined by us and to the best
of our knowledge and belief has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System and
is true and correct.
J. Carter Bacot )
Thomas A. Renyi ) Directors
Alan R. Griffith )
-------------------------------------------------------------
