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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
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COMMISSION FILE NO. 333-32259
COMMISSION FILE NO. 0-21570 CHANCELLOR MEDIA CORPORATION
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
(Exact Name of Registrant (Exact Name of Registrant
as Specified in its Charter) as Specified in its Charter)
DELAWARE DELAWARE
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
75-2247099 75-2451687
(I.R.S. Employer Identification Number) (I.R.S. Employer Identification Number)
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433 EAST LAS COLINAS BOULEVARD, SUITE 1130, IRVING, TEXAS 75039
(Address of principal executive office, including zip code)
(972) 869-9020
(Registrants' telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, $.01
par value
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Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants' knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of the voting and non-voting common equity held
by non-affiliates of Chancellor Media Corporation as of March 1, 1998, was
approximately $4,436,141,785. Solely for purposes of the preceding calculation,
outstanding shares of Common Stock held by executive officers and directors of
Chancellor Media Corporation have been treated as held by affiliates of
Chancellor Media Corporation. As of March 1, 1998, 120,145,483 shares of Common
Stock of Chancellor Media Corporation were outstanding and 1,040 shares of
Common Stock of Chancellor Media Corporation of Los Angeles were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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TABLE OF CONTENTS
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PART I
ITEM 1. BUSINESS.................................................... 1
ITEM 2. PROPERTIES.................................................. 20
ITEM 3. LEGAL PROCEEDINGS........................................... 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 21
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS....................................... 22
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA........................ 23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 26
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.. 31
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................. 32
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.................................. 32
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS......... 33
ITEM 11. EXECUTIVE COMPENSATION...................................... 36
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 43
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 44
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K....................................................... 45
SIGNATURES.................................................. 54
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PART I
ITEM 1. BUSINESS
GENERAL
Chancellor Media Corporation (formerly known as Evergreen Media
Corporation) ("Chancellor Media" and, together with Chancellor Media Corporation
of Los Angeles (formerly known as Evergreen Media Corporation of Los Angeles)
("CMCLA"), an indirect, wholly-owned subsidiary of Chancellor Media, and their
respective subsidiaries, 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 14 markets.
The Company's strategy is to secure leading clusters of radio stations in
the largest markets in the United States. At March 1, 1998, the Company's
station portfolio consisted of 97 stations (69 FM and 28 AM), including a total
of 11 station clusters of four or five FM stations ("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 ten FM stations and
one AM station 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." There can be no assurance that the
Pending Transactions will be consummated.
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. Management also believes that the diversity of its portfolio
of radio stations helps to insulate the Company from downturns in specific
markets and changes in musical tastes.
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The following table sets forth certain information regarding the Company's
portfolio and markets, assuming completion of the Pending Transactions:
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RANKING OF STATIONS
MARKET BY ----------
MARKET RADIO REVENUE(1) FM AM TOTAL
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Los Angeles............................. 1 4 1 5
New York................................ 2 5 -- 5
Chicago................................. 3 5 2 7
San Francisco........................... 4 5 2 7
Dallas/Ft. Worth........................ 5 5 1 6
Philadelphia............................ 6 5 1 6
Washington, D.C. ....................... 7 5 3 8
Houston................................. 8 5 3 8
Atlanta................................. 9 1 -- 1
Boston.................................. 10 2 1 3
Detroit................................. 11 5 2 7
Miami/Ft. Lauderdale.................... 12 1 1 2
Denver.................................. 14 5 1 6
Minneapolis/St. Paul.................... 15 5 2 7
Phoenix................................. 16 4 2 6
San Diego............................... 17 2 -- 2
Cincinnati.............................. 19 2 2 4
Pittsburgh.............................. 24 5 1 6
Orlando................................. 26 4 -- 4
Sacramento.............................. 28 2 2 4
Nassau/Suffolk (Long Island)............ 45 1 1 2
Riverside/San Bernardino................ 64 1 1 2
-- -- ---
Total......................... 79 29 108
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(1) Ranking of the principal radio market served by the Company's station(s)
among all U.S. radio markets ranked by 1997 gross radio broadcasting revenue
as reported by James H. Duncan, Duncan's Radio Market Guide (1998 ed.).
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.
Katz is exclusively retained 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. For
additional information regarding Katz segment data, see note 15 to the
Chancellor Media Consolidated Financial Statements included elsewhere in this
Annual Report on Form 10-K.
COMPANY STRATEGY
The Company's senior management team, led by Scott K. Ginsburg, James de
Castro, Matthew E. Devine and Kenneth O'Keefe, has extensive experience in
acquiring and operating large market radio station groups. The Company's
business strategy is to assemble and operate radio station clusters in order to
maximize broadcast cash flow generated in each market. This strategy relies on
the following seven 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
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these markets, in conjunction with operating synergies achievable through the
operation of multiple stations, will enable it to appeal to a wider universe of
national and local advertisers and to achieve a greater degree of profitability
than that of operators and broadcasters in smaller markets. The Pending
Transactions, if consummated, will complement the Company's existing stations in
the Los Angeles, New York, 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, with particular emphasis on the nation's largest 25 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 continue 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 achieved historical
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 of
Scott K. Ginsburg, James de Castro, Matthew E. Devine and Kenneth O'Keefe
collectively have an aggregate of more than 60 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 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
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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, the Company seeks
to further leverage its radio expertise by expanding 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 is also
exploring the acquisition of additional complementary media businesses,
particularly businesses with significant after tax cash flow generating
potential and with a large-market focus similar to the Company's.
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 seven stations for five
stations and $6.0 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 has agreed in a
separate transaction to swap three of its stations and $60.0 million in cash in
exchange for three other stations (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
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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.
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
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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 $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.
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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.
Pending Transactions
The following transactions, other than the SFX Exchange (as defined), are
referred to collectively as the "Pending Transactions."
On July 1, 1996, Chancellor entered into an agreement with SFX
Broadcasting, Inc. ("SFX") pursuant to which Chancellor agreed to exchange
WAPE-FM and WFYV-FM in Jacksonville and $11.0 million 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 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's pending acquisition of SFX, the SFX Exchange would be terminated.
On August 6, 1997, the Company paid $3.0 million to Bonneville for an
option to exchange WTOP-AM in Washington, KZLA-FM in Los Angeles and WGMS-FM in
Washington and $57.0 million 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 $72.0 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").
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 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 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
7
<PAGE> 10
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, 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.
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 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.
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 March 1, 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 12
25-54
KLAC-AM 2.3 Adult Standards/Sports Persons 21
35-64
KCMG-FM(5) 1.4 Adult Contemporary Women 25-54 22
KZLA-FM+ 2.7 Country Persons 14
25-54
KBIG-FM* 2.7 Adult Contemporary Persons 13
25-54
New York, NY................ 2 WLTW-FM 6.2 Soft Adult Contemporary Persons 1
25-54
WKTU-FM 4.6 Rhythmic Contemporary Persons 5
Hits 25-54
WHTZ-FM 3.9 Contemporary Hit Radio Persons 5
18-34
WAXQ-FM 1.4 Classic Rock Persons 17
25-54
WBIX-FM*(6) 1.5 Hot Adult Contemporary Women 25-49 13
Chicago, IL................. 3 WGCI-FM 7.2 Urban Oldies Persons 1
25-54
WNUA-FM 4.8 Contemporary Jazz Persons 4
25-54
WLIT-FM 4.5 Soft Adult Contemporary Persons 2
25-54
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 20
18-34
WMVP-AM 1.1 Personality/Sports Men 25-54 22
San Francisco, CA........... 4 KYLD-FM 4.2 Contemporary Hits Persons 1
18-34
KMEL-FM 3.4 Contemporary Hits Persons 2
18-34
KKSF-FM 3.3 Contemporary Jazz Persons 2
25-54
KABL-AM 3.2 Adult Standards Persons 13
35-64
KISQ-FM 3.0 70's Oldies Persons 4
25-54
KIOI-FM 2.9 Adult Contemporary Women 25-54 1
KNEW-AM 1.4 Country/Sports Persons 37
25-54
</TABLE>
8
<PAGE> 11
<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>
Dallas, TX.................. 5 KHKS-FM 7.5 Contemporary Hits Women 18-34 1
KZPS-FM 3.9 Classic Rock Persons 4
25-54
KDGE-FM 2.7 Alternative Rock Persons 6
18-34
KSKY-AM N/M Inspirational N/M N/M
KBFB-FM* 2.6 Adult Contemporary Persons 14
25-54
KTXQ-FM* 2.4 Album Rock Persons 13
18-49
Philadelphia, PA............ 6 WDAS-FM 5.5 Urban Contemporary Persons 2
25-54
WUSL-FM 4.7 Urban Contemporary Women 18-34 4
WJJZ-FM 4.2 Contemporary Jazz Persons 7
35-54
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 3
25-54
WASH-FM 4.2 Adult Contemporary Women 25-54 2
WBIG-FM 4.1 Oldies Persons 6
25-54
WGAY-FM 3.7 Adult Contemporary Persons 8
35-64
WTEM-AM 1.1 Sports/Talk Men 18-49 17
WWRC-AM 0.9 News/Talk Persons 20
35-64
WGMS-FM+ 4.0 Classical Persons 5
35-64
WTOP-AM+ 2.9 News/Sports Men 25-54 13
WWDC-FM* 4.0 Adult Rock Persons 4
18-34
WWDC-AM* 0.5 Nostalgia Persons 55+ 11
Houston, TX................. 8 KKBQ-FM 4.5 Fresh Country Persons 6
25-54
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 34
35-64
KODA-FM* 7.1 Adult Contemporary Persons 1
25-54
KLDE-FM* 4.5 Oldies Persons 4
25-54
KKRW-FM* 3.6 Classic Rock Persons 7
25-54
KQUE-AM* 1.8 Nostalgia Persons 19
35-64
Atlanta, GA................. 9 WFOX-FM 4.2 Oldies Persons 7
25-54
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 1
18-34
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 4
25-54
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 4
25-54
WVCG-AM N/M Brokered(9) N/M N/M
Denver, CO.................. 14 KXKL-FM 4.7 Oldies Persons 7
25-54
KALC-FM 4.7 Hot Adult Contemporary Persons 3
18-34
KIMN-FM 3.4 70's Oldies Persons 11
25-54
KXPK-FM 3.0 Alternative Rock Persons 10
18-49
KVOD-FM 2.2 Classical Persons 19
25-54
KRRF-AM 0.4 Talk Men 25-54 21
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
RANKING OF
STATION STATION RANKING
MARKET BY AUDIENCE TARGET IN TARGET
MARKET(1) REVENUE(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(4)
--------- ---------- ------- ----------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Minneapolis/St.
Paul, MN................... 15 KEEY-FM 8.0 Country Persons 2
25-54
KDWB-FM 7.8 Contemporary Hit Radio Persons 2
18-34
KQQL-FM 4.5 Oldies Persons 6
25-54
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 16
35-64
Phoenix, AZ................. 16 KOY-AM 5.3 Adult Standards Persons 10
35-64
KMLE-FM 5.2 Country Persons 4
25-54
KOOL-FM 5.1 Oldies Persons 2
25-54
KYOT-FM 3.6 Contemporary Jazz Persons 8
25-54
KZON-FM 3.0 Alternative Rock Persons 3
18-34
KISO-AM N/M Urban Adult Contemporary Persons N/M
25-54
San Diego, CA............... 17 KYXY-FM* 5.1 Adult Contemporary Persons 3
25-54
KPLN-FM* 1.8 Classic Rock Persons 13
25-54
Cincinnati, OH.............. 19 WUBE-FM(10) 9.4 Country Persons 1
25-54
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 N/M
35-64
Pittsburgh, PA.............. 24 WWSW-FM 5.1 Oldies Persons 3
25-54
WWSW-AM(11) 0.4 Oldies Persons 26
25-54
WDVE-FM* 9.2 Rock Persons 1
25-54
WXDX-FM* 5.0 Alternative Rock Persons 2
18-34
WJJJ-FM* 3.5 Smooth Jazz Persons 10
25-54
WVTY-FM* 3.2 Adult Contemporary Persons 11
25-54
Orlando, FL................. 26 WJHM-FM 6.6 Urban Contemporary Persons 3
18-34
WOCL-FM 6.4 Oldies Persons 7
25-54
WXXL-FM 6.1 Contemporary Hit Radio Persons 2
18-34
WOMX-FM 5.0 Adult Contemporary Persons 8
25-54
Sacramento, CA.............. 28 KFBK-AM 9.6 News/Talk Persons 2
25-54
KHYL-FM 4.2 Oldies Persons 5
25-54
KGBY-FM 4.0 Adult Contemporary Women 25-54 2
KSTE-AM 2.3 Talk Persons 15
25-54
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) NY(12)....... 45 WALK-FM 5.3 Adult Contemporary Persons 2
25-54
WALK-AM N/M Adult Contemporary Persons N/M
35-64
Riverside/San Bernardino, 64 KGGI-FM 7.0 Contemporary Hit Radio Persons 1
CA......................... 18-34
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.
10
<PAGE> 13
(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.
ADVERTISING
The primary source of the Company's radio revenues is the sale of
broadcasting time for local, regional and national advertising. Approximately
69% of the Company's gross radio revenues was generated from the sale of local
advertising in 1995 and 1996 and approximately 68% of the Company's gross radio
revenues was 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
11
<PAGE> 14
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
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 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.
EMPLOYEES
As of December 31, 1997, the Company had 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,
12
<PAGE> 15
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.
During 1997, the Company entered into new employment agreements with Scott
K. Ginsburg (the Company's President and Chief Executive Officer), James E. de
Castro (the Company's Chief Operating Officer), Matthew E. Devine (the Company's
Senior Vice President and Chief Financial Officer), and amended its employment
agreement with Kenneth J. O'Keefe (the Company's Executive Vice President --
Operations). See "Executive Compensation -- Employment Agreements" set forth in
Part III -- Item 11 herein.
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 of 1934, as amended (as
amended by the 1996 Act, the "Communications Act"). The Communications Act
prohibits the assignment or transfer of control of an FCC license without the
prior consent of the FCC. In determining whether to grant requests for consent
to such assignments or transfers, and in determining whether to grant or renew a
radio broadcast license, the FCC considers a number of factors pertaining to the
licensee (and proposed licensee), including: limitations on alien ownership and
the common ownership of television broadcast, radio broadcast and daily
newspaper properties, the "character" of the licensee (and proposed licensee)
and those persons or entities that have "attributable" interests, and compliance
with the Anti-Drug Abuse Act of 1988. Among other things, the FCC assigns
frequency bands for radio broadcasting; determines the particular frequencies,
locations and operating power of radio broadcast stations; issues, renews,
revokes and modifies radio broadcast station licenses; regulates equipment used
by radio broadcast stations; adopts and implements regulations and policies that
directly or indirectly affect the ownership, operation, program content and
employment and business practices of radio broadcast stations; and has the power
to impose penalties for violations of its rules and the Communications Act.
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.
13
<PAGE> 16
The following table sets forth the date of acquisition by the Company of
the radio stations actually owned by the Company as of March 1, 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*
KLAC-AM..................... Los Angeles, CA 9/97 570 kHz 12/05
KCMG-FM..................... Los Angeles, CA 9/97 100.3 MHz 12/05
KZLA-FM+.................... Los Angeles, CA 9/97 93.9 MHz 12/05
KBIG-FMS.................... Los Angeles, CA Pending 104.3 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
WAXQ-FM..................... New York, NY 7/97 104.3 MHz 6/98
WBIX-FMS.................... New York, NY Pending 105.1 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
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
WGMS-FM+.................... Washington, D.C. 9/97 103.5 MHz 10/03
WTOP-AM+.................... Washington, D.C. 11/92 1500 kHz 10/03
WWDC-FMS.................... Washington, D.C. Pending 101.1 MHz 10/03
WWDC-AMS.................... Washington, D.C. Pending 1260 kHz 10/03
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
DATE OF EXPIRATION DATE
STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE
------- --------- ----------- --------- ---------------
<S> <C> <C> <C> <C>
KKBQ-FM..................... Houston, TX 12/97 92.9 MHz 8/05
KLOL-FM..................... Houston, TX 6/93 101.1 MHz 8/97*
KTRH-AM..................... Houston, TX 6/93 740 kHz 8/05
KBME-AM..................... Houston, TX 12/97 790 kHz 8/05
KODA-FM**................... Houston, TX Pending 99.1 MHz 8/05
KLDE-FM**................... Houston, TX Pending 94.5 MHz 8/05
KKRW-FM**................... Houston, TX Pending 93.7 MHz 8/05
KQUE-AM**................... 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 4/98
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
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
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
DATE OF EXPIRATION DATE
STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE
------- --------- ----------- --------- ---------------
<S> <C> <C> <C> <C>
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>
- ---------------
* 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.
Ownership Matters. Under the Communications Act, a broadcast license may
not be granted to or held by any corporation that has more than one-fifth of its
capital stock owned or voted by aliens or their representatives, by foreign
governments or their representatives, or by non-U.S. corporations. Under the
Communications Act, a broadcast license also may not be granted to or held by
any corporation that is controlled, directly or indirectly, by any other
corporation more than one-fourth of whose capital stock is owned or voted by
aliens or their representatives, by foreign governments or their
representatives, or by non-U.S. corporations, if the FCC finds that the public
interest will be served by the refusal or revocation of such license. The
Company has been advised that the FCC staff has interpreted this provision of
the Communications Act to require an affirmative public interest finding before
a broadcast license may be granted to or held by any such corporation and that
the FCC has made such an affirmative finding only in limited circumstances.
These restrictions apply in modified form to other forms of business
organizations, including partnerships. The Company, therefore may be restricted
from having more than one-fourth of its stock owned or voted by aliens, foreign
governments or non-U.S. corporations. The respective Certificates of
Incorporation of Chancellor Media and CMCLA 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 or CMCLA.
16
<PAGE> 19
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 the Common Stock of Chancellor Media or CMCLA
who acquires an attributable interest in the Company may violate the FCC's rules
if it also has an "attributable" interest in other television or radio stations,
or in daily newspapers, depending on the number and location of those radio or
television stations or daily newspapers. Such a purchaser also may be restricted
in the companies in which it may invest, to the extent that those investments
give rise to an attributable interest. If an attributable stockholder of the
Company violates any of these ownership rules, the Company may be unable to
obtain from the FCC one or more authorizations needed to conduct its radio
station business and may be unable to obtain FCC consents for certain future
acquisitions.
The FCC generally applies its television/radio/newspaper cross-ownership
rules, and its broadcast multiple ownership rules, by considering the
"attributable," or cognizable, interests held by a person or entity. A person or
entity can have an interest in a radio station, television station or daily
newspaper by being an officer, director, partner or stockholder of a company
that owns that station or newspaper. Whether that interest is cognizable under
the FCC's ownership rules is determined by the FCC's attribution rules. If an
interest is attributable, the FCC treats the person or entity who holds that
interest as the "owner" of the radio station, television station or daily
newspaper in question, and therefore subject to the FCC's ownership rules.
In the case of corporations, the interest of officers, directors and
persons or entities that directly or indirectly have the right to vote 5% or
more of the corporation's voting stock (or 10% or more of such stock in the case
of insurance companies, investment companies, bank trust departments and certain
other "passive investors" that hold such stock for investment purposes only) are
generally attributed with ownership of whatever radio stations, television
stations, and daily newspapers the corporation owns. Likewise, the interest of
an officer or a director of a corporate parent (as well as the corporate parent)
is generally attributed with ownership of whatever the subsidiary owns.
In the case of a partnership, the interest of a general partner is
attributable, as is the interest of any limited partner who is "materially
involved" in the media-related activities of the partnership. Debt instruments,
non-voting stock, options and warrants for voting stock that have not yet been
exercised, limited partnership interests where the limited partner is not
"materially involved" in the media-related activities of the partnership, and
minority voting stock interests in corporations where there is a single holder
of more than 50% of the outstanding voting stock, generally do not subject their
holders to attribution.
17
<PAGE> 20
Hicks Muse, through its ownership of a majority of 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 and/or executive officers 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 Television, 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 or to be acquired
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.
The FCC has issued a Notice of Proposed Rulemaking (the "NPRM") that
contemplates tightening attribution standards where parties have multiple
nonattributable interests in and relationships with stations that would be
prohibited by the FCC's cross-interest rules, if the interests/relationships
were attributable. The NPRM contemplates that this change in attribution will
apply only to persons holding debt or equity interests that exceed certain
benchmarks.
In addition, the FCC has a "cross-interest" policy that under certain
circumstances could prohibit a person or entity with an attributable interest in
a broadcast station or daily newspaper from having a "meaningful"
non-attributable interest in another broadcast station or daily newspaper in the
same local market. Among other things, "meaningful" interests could include
significant equity interests (including non-voting stock, voting stock, and
limited partnership interests) and significant employment positions. This policy
may limit the permissible investments that an equity investor in the Company may
make or hold. If the FCC determines that a stockholder of the Company has
violated this cross-interest policy, the Company may be unable to obtain from
the FCC one or more authorizations needed to conduct its radio station business
and may be unable to obtain FCC consents for certain future acquisitions.
Programming and Operation. The Communications Act requires broadcasters to
serve the "public interest." The FCC has gradually relaxed or eliminated many of
the more formalized procedures it had developed in the past to promote the
broadcast of certain types of programming responsive to the needs of a station's
community of license. A licensee continues to be required, however, to present
programming that is responsive to community problems, needs and interests and to
maintain certain records demonstrating such responsiveness. Complaints from
listeners concerning a station's programming often will be considered by the FCC
when it evaluates the licensee's renewal application, but such complaints may be
filed and considered at any time. Stations also must follow various FCC rules
that regulate, among other things, political advertising, sponsorship
identification, and technical operations (including limits on radio frequency
radiation). In addition, licensees must develop and implement programs designed
to promote equal employment opportunities. The broadcast of obscene and indecent
material and the advertisement of contests and lotteries are regulated by FCC
rules, as well as by state and other federal laws.
Time Brokerage Agreements. 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
18
<PAGE> 21
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. As of March 1, 1998, seven stations
(including the four Long Island stations that are the subject of the SFX
Exchange) are being operated by the Company under TBAs and three of the
Company's stations are being operated by third parties under TBAs.
A station that brokers more than 15% of the broadcast time, on a weekly
basis, on another station in the same market will be considered to have an
attributable ownership interest in the brokered station for purposes of the
FCC's ownership rules, discussed above. As a result, a broadcast station may not
enter into a TBA that allows it to program more than 15% of the broadcast time,
on a weekly basis, of another local station that it could not own under the
FCC's local multiple ownership rules. FCC rules also prohibit a broadcast
licensee from simulcasting more than 25% of its programming on another station
in the same broadcast service (i.e., AM-AM or FM-FM) where the two stations
serve substantially the same geographic area, whether the licensee owns the
stations or owns and programs the other through a TBA arrangement.
Proposed Changes. The FCC is considering various proposals to modify its
broadcast "attribution" rules. Among the proposals are (i) raising the basic
benchmark for attributing ownership from 5% to 10% of the licensee's voting
stock, (ii) raising the attribution benchmark for certain institutional
investors from 10% to 20%, (iii) limiting the applicability of the single
majority shareholder rule (discussed above) to treat as attributable large stock
interests coupled with other debt or securities and (iv) treating non-voting
stock as attributable in certain circumstances. The FCC is also considering
changes to its multiple ownership rules to encourage minority ownership of radio
and television broadcast stations.
The FCC has under consideration, and may in the future consider and adopt,
new laws, regulations and policies regarding a wide variety of matters that
could, directly or indirectly, affect the operation, ownership and financial
performance of the Company's radio broadcast stations, result in the loss of
audience share and advertising revenues for the Company's radio broadcast
stations, and affect the ability of the Company to acquire additional radio
broadcast stations or finance such acquisitions. Such matters include: changes
to the license renewal process; the FCC's equal employment opportunity rules and
other matters relating to minority and female involvement in the broadcasting
industry; proposals to change rules relating to political broadcasting;
technical and frequency allocation matters; AM stereo broadcasting; proposals to
permit expanded use of FM translator stations; proposals to restrict or prohibit
the advertising of beer, wine and other alcoholic beverages on radio; changes in
the FCC's cross-interest, multiple ownership and cross-ownership policies;
changes to broadcast technical requirements; proposals to allow telephone
companies to deliver audio and video programming to the home through existing
phone lines; proposals to limit the tax deductibility of advertising expenses by
advertisers; proposals to auction to the highest bidder the right to use the
radio broadcast spectrum, instead of granting FCC licenses and subsequent
license renewals; and proposals to reinstate the "Fairness Doctrine" which
requires a station to present coverage of opposing 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. See "-- Competition." The FCC
is also considering various proposals for terrestrial DARS. DARS may provide a
medium for the delivery of multiple new audio programming formats to local and
national audiences. It is not known at this time whether this technology also
may be used in the future by existing radio broadcast stations either on
existing or alternate broadcasting frequencies.
19
<PAGE> 22
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 United States Federal Trade Commission (the
"FTC")and the Antitrust Division of the United States Department of Justice (the
"DOJ"), evaluate transactions requiring a pre-acquisition filing under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (the "HSR Act")
to determine whether those transactions should be challenged under the federal
antitrust laws. These agencies (particularly the DOJ) recently have been
increasingly active in their review of radio station acquisitions where an
operator proposes to acquire new stations in its existing markets.
As part of its increased scrutiny of radio station acquisitions, the DOJ
has stated publicly that it believes that TBAs and other similar agreements
customarily entered into in connection with radio station transfers prior to the
expiration of the waiting period under the HSR Act could violate the HSR Act.
Since then, the DOJ has stated publicly that it will apply its new policy
prohibiting TBAs in connection with purchase agreements until the expiration or
termination of the HSR waiting period on a prospective basis.
The DOJ has stated publicly that it has established certain revenue and
audience share concentration benchmarks with respect to radio station
acquisitions, above which a transaction may receive additional antitrust
scrutiny. However, to date, the DOJ has also investigated transactions that do
not meet or exceed these benchmarks, and has cleared transactions that do exceed
these benchmarks. In this respect, the DOJ has filed suit under the HSR Act
against Chancellor Media seeking to enjoin the acquisition by Chancellor Media
of the four Long Island stations from SFX under the SFX Exchange. 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.
ITEM 2. 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 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.
ITEM 3. 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" 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
20
<PAGE> 23
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 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1997.
21
<PAGE> 24
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Except with respect to its sale in June 1997 of 5,990,000 shares of $3.00
Convertible Preferred Stock, the Company did not sell equity securities during
1997 other than pursuant to transactions that were registered under the
Securities Act of 1933, as amended. For a discussion of the June 1997 sale of
5,990,000 shares of $3.00 Convertible Preferred Stock, see Note 9 to the
Chancellor Media Consolidated Financial Statements included elsewhere in this
Annual Report on Form 10-K.
Shares of the Company's Common Stock, par value $.01 per share, have been
quoted on The Nasdaq Stock Market under the symbol AMFM since the consummation
of the Chancellor Merger on September 5, 1997. From the consummation of the
initial public offering of the Company's Common Stock in May 1993 to September
4, 1997, shares of the Company's Class A Common Stock, par value $.01 per share,
were quoted on The Nasdaq Stock Market under the symbol EVGM. The following
table sets forth, for the calendar quarters indicated, the high and low closing
sales prices of the Common Stock on The Nasdaq Stock Market, as reported in
published financial sources.
<TABLE>
<CAPTION>
YEAR HIGH(1) LOW(1)
---- ------- ------
<S> <C> <C>
1996:
First Quarter........................................... $12.25 $ 8.42
Second Quarter.......................................... 14.75 10.92
Third Quarter........................................... 16.63 12.87
Fourth Quarter.......................................... 16.13 11.75
1997:
First Quarter........................................... $17.00 $11.88
Second Quarter.......................................... 22.31 14.31
Third Quarter........................................... 27.50 20.63
Fourth Quarter.......................................... 37.31 25.81
</TABLE>
- ---------------
(1) The closing sale prices have been adjusted retroactively 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 and for the three-for-two
stock split of the Company's Common Stock, effected in the form of a stock
dividend, paid on August 26, 1996.
There is no established public trading market for the common stock of
CMCLA. All of the issued and outstanding common stock of CMCLA is owned,
directly or indirectly, by the Company. As of March 1, 1998, there were
approximately 220 holders of record of the Common Stock (which number does not
include the number of stockholders whose shares are held of record by a broker
or clearing agency but does include each such brokerage house or clearing agency
as one record holder). The Company was informed by the underwriters in its
initial public offering that such underwriters expected that subsequent to such
offering there would be a sufficient number of beneficial owners of the
Company's Common Stock to comply with the minimum shareholder maintenance
standards set by The Nasdaq Stock Market. The Company knows of no reason why
this would not continue to be true as of the date hereof.
The Company has not declared or paid any cash dividends on its Common Stock
since its inception and does not currently anticipate paying any cash dividends
on its Common Stock in the foreseeable future. The Company intends to retain
future earnings for use in its business. The Company is currently subject to
restrictions under the terms of the Senior Credit Facility, the indentures
governing the Notes (as defined) and the certificates of designations governing
the 12% Preferred Stock and the 12 1/4% Preferred Stock that limit the amount of
cash dividends that may be paid on its Common Stock. The Company may pay cash
dividends on its Common Stock in the future only if certain financial tests set
forth in the Senior Credit Facility and these indentures and certificates are
met and only if it fulfills its obligations to pay dividends to the holders of
its preferred stock. In addition, no dividends may be paid on the Company's
Common Stock if dividends are in arrears with respect to the Company's $3.00
Convertible Preferred Stock or 7% Convertible Preferred Stock.
22
<PAGE> 25
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated historical financial data presented below have
been derived from the annual audited consolidated financial statements of
Chancellor Media and CMCLA for, and as of the end of, each of the years in the
five-year period ended December 31, 1997. The consolidated historical financial
results of Chancellor Media and CMCLA are not comparable from year to year
because of the acquisition and disposition of various radio stations by
Chancellor Media and CMCLA during the periods covered. This data should be read
in conjunction with the consolidated financial statements of Chancellor Media
and CMCLA and with the related notes thereto and with "Management's Discussion
and Analysis of Financial Conditions and Results of Operations" set forth in
Part II -- Item 7 herein.
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<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
Dividends on preferred stock of subsidiary(3)............. -- -- -- -- 12,901
-------- -------- -------- ---------- ----------
Income (loss) before extraordinary item................... (20,749) 39 (5,850) (16,194) (27,395)
Extraordinary loss on early extinguishment of debt(4)..... -- 3,585 -- -- 4,350
-------- -------- -------- ---------- ----------
Net loss.................................................. (20,749) (3,546) (5,850) (16,194) (31,745)
Preferred stock dividends(5).............................. 4,756 4,830 4,830 3,820 12,165
Accretion of redeemable preferred stock to mandatory
redemption value, including $17,506 in 1993 relating to
early redemption........................................ 18,823(6) -- -- -- --
-------- -------- -------- ---------- ----------
Net loss attributable to common stockholders.............. $(44,328) $ (8,376) $(10,680) $ (20,014) $ (43,910)
======== ======== ======== ========== ==========
Basic and diluted loss per common share before
extraordinary item...................................... (2.24)(6) (.19) (.26) (.33) (.41)
======== ======== ======== ========== ==========
Basic and diluted net loss per common share............... (2.24)(6) (.32) (.26) (.33) (.46)
======== ======== ======== ========== ==========
Weighted average common shares outstanding(7)............. 19,780(8) 26,004 41,442 60,414 95,636
Consolidated Balance Sheet Data at Year-End:
Working capital........................................... $ 7,873 $ 15,952 $ 30,556 $ 41,421 $ 116,786
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)(9)............. 152,000 174,000 201,000 358,000 2,573,000
Redeemable preferred stock................................ -- -- -- -- 331,208
Stockholders' equity...................................... 120,968 112,353 304,577 549,411 1,480,207
Other Financial Data:
Broadcast cash flow(10)................................. 32,848 40,664 65,257 119,506 265,830
</TABLE>
See accompanying notes to Selected Consolidated Financial Data
23
<PAGE> 26
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA
(1) Consists of a non-cash charge resulting from the grant of employee stock
options prior to the Company'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) 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 CMCLA on September 5, 1997 in
connection with the Chancellor Merger in exchange for substantially
identical securities originally issued by a subsidiary of Chancellor.
(4) 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.
(5) For the years ended December 31, 1993, 1994, 1995 and 1996, represents
preferred stock dividends on the Company's formerly outstanding convertible
preferred stock. For the year ended December 31, 1997, represents preferred
stock dividends on the $3.00 Convertible Preferred Stock (issued on June
16, 1997) and preferred stock dividends on the 7% Convertible Preferred
Stock for the period September 5, 1997 to December 31, 1997. The 7%
Convertible 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 Chancellor.
(6) Due to the early redemption of certain preferred stock in October 1993, a
one-time accretion charge of approximately $17,506 was incurred which
increased basic and diluted loss per common share for 1993 by $0.89.
(7) Gives effect to the two-for-one common stock split effected in the form of
a stock dividend paid on January 12, 1998 and to the three-for-two common
stock split effected in the form of a stock dividend paid on August 26,
1996, retroactively adjusted for all periods presented.
(8) Subsequent to the Company's initial public offering, the calculation of
weighted average common shares outstanding excludes common stock issuable
upon the exercise of outstanding warrants and options due to their
anti-dilutive effect on loss per common share.
(9) 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.
(10) 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.
24
<PAGE> 27
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
<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 $ 116,786
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
</TABLE>
See accompanying notes to Selected Consolidated Financial Data
25
<PAGE> 28
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
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, CMCLA 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 CMCLA on September 5, 1997 in
connection with the Chancellor Merger in exchange for substantially
identical securities originally issued by a subsidiary of Chancellor.
(5) The current portion of CMCLA'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,
CMCLA 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 CMCLA's operating
performance or liquidity that is calculated in accordance with generally
accepted accounting principles. Broadcast cash flow does not take into
account CMCLA'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 CMCLA's business or other
discretionary uses.
ITEM 7. 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" set forth in Part I -- Item 1 herein. 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" set
forth in Part I -- Item 1 herein.
At March 1, 1998, the Company's station portfolio consisted of 97 stations
(69 FM and 28 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 ten FM stations and
one AM station 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" set forth in Part I -- Item 1 herein.
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
26
<PAGE> 29
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, the
Katz Acquisition and various other station acquisitions and dispositions
discussed in "Business -- Recent Developments" set forth in Part I -- Item 1
herein and in Note 2 to the Consolidated Financial Statements included elsewhere
in this Form 10-K.
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 CRBC's $200.0 million
aggregate principal amount of 9 3/8% Senior Subordinated Notes due 2004 (the
"9 3/8% Notes") and $200.0 million aggregate principal amount of 8 3/4% Senior
Subordinated Notes due 2007 (the "8 3/4% Notes") upon consummation of the
Chancellor Merger on September 5, 1997 and (iii) the assumption of Katz' $100.0
million aggregate principal amount of 10 1/2% Senior Subordinated Notes due 2007
(the "10 1/2% Notes") upon consummation of the Katz Acquisition on October 28,
1997.
27
<PAGE> 30
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 of subsidiary were $12.9 million in 1997,
representing dividends on CMCLA's 12% Preferred Stock and 12 1/4% Preferred
Stock issued in September 1997 as part of the Chancellor Merger.
Dividends on Chancellor Media's preferred stock were $12.2 million in 1997
compared to $3.8 million in 1996. The increase in dividends is due to dividends
on Chancellor Media's $3.00 Convertible Preferred Stock issued in June 1997 and
dividends on Chancellor Media's 7% Convertible Preferred Stock issued in
September 1997 as part of the Chancellor Merger, offset by the conversion of a
total of 1,608,297 shares of Chancellor Media's formerly outstanding convertible
exchangeable preferred stock into a total of 10,051,832 shares of Chancellor
Media's Common Stock and the redemption of the remaining 1,703 shares of
formerly outstanding convertible exchangeable preferred stock during 1996.
As a result of the above factors, the Company incurred a $43.9 million net
loss attributable to common stockholders in 1997 compared to a $20.0 million net
loss in 1996.
The basic and diluted net loss per common share in 1997 was $0.46 compared
to a $0.33 basic and diluted loss per common share 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 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.
28
<PAGE> 31
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 1996
Offering 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.
Dividends paid on Chancellor Media's preferred stock decreased $1.0 million
to $3.8 million in 1996 compared to $4.8 million in 1995. The decrease in
preferred stock dividends is due to the conversion of a total of 1,608,297
shares of Chancellor Media's formerly outstanding convertible exchangeable
preferred stock into a total of 10,051,832 shares of Chancellor Media's Common
Stock and the redemption of the remaining 1,703 shares of formerly outstanding
convertible exchangeable preferred stock during 1996.
As a result of the above factors, the Company incurred a $20.0 million net
loss attributable to common stockholders in 1996 compared to a $10.7 million net
loss in 1995.
The basic and diluted net loss per common share in 1996 was $0.33 compared
to a $0.26 basic and diluted loss per common share 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, CMCLA completed an offering (the "8 1/8% Notes
Offering"), pursuant to Rule 144A under the Securities Act of 1933, as amended,
of $500.0 million aggregate principal amount of 8 1/8% Senior Subordinated Notes
due 2007 (the "8 1/8% Notes"). The net proceeds of the 8 1/8% Notes Offering of
approximately $485.0 million were used to reduce borrowings under the revolving
credit portion of the Company's Senior Credit Facility (as defined).
On March 13, 1998, the Company 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 will be used for general
corporate purposes, including the possible repurchase of the outstanding shares
of 12% Preferred Stock and 12 1/4% Preferred Stock of CMCLA. Pending any such
use, net proceeds will be used to reduce borrowings under the revolving credit
portion of the Company's Senior Credit Facility, and any excess will be 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 $716.5 million. Of this amount, approximately $7.0 million has
already been advanced by the Company in the form of escrow deposits or other
upfront payments. Accordingly, the Company will require approximately $709.5
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 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 Offering. The Company
from time to time may explore other financing
29
<PAGE> 32
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 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 Company's $500.0 million aggregate
principal amount of 8 1/8% Senior Subordinated Notes due 2007 issued on December
22, 1997 (the "8 1/8% Notes") (collectively, the "Notes"). Interest payment
requirements of the Company on the Notes are $87.4 million per year.
Redeemable Preferred Stock. The Company is not required to pay cash
dividends on the 12 1/4% Preferred Stock and 12% Preferred Stock of CMCLA
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).
Preferred Stock. The Company is required to pay cash dividends on its $3.00
Convertible Preferred Stock and its 7% Convertible Preferred Stock of $25.7
million per year. Because Chancellor Media is a holding company with no
significant assets other than the common stock of Chancellor Mezzanine Holding
Company ("CMHC"), Chancellor Media will rely solely on dividends from CMHC,
which in turn is expected distribute dividends paid to it by CMCLA and KMG to
Chancellor Media, to permit Chancellor Media to pay cash dividends on the $3.00
Convertible Preferred Stock and the 7% Convertible Preferred Stock. The Senior
Credit Facility, the indentures governing the Notes and the certificates of
designation for the 12% Preferred Stock and the 12 1/4% Preferred Stock limit,
but do not prohibit, CMCLA from paying such dividends to CMHC.
For additional information regarding the Senior Credit Facility, the Notes,
the Redeemable Preferred Stock and the Preferred Stock see Notes 7, 8 and 9,
respectively, to the Chancellor Media Consolidated Financial Statements included
elsewhere in this Annual Report on Form 10-K.
FORWARD LOOKING STATEMENTS
When used in the preceding and following discussion, the words "believes,"
"expects," "anticipates," "intends" and similar expressions are intended to
identify forward looking statements. Such statements are subject to a number of
known and unknown risks and uncertainties. Actual results in the future could
differ materially from those described in the forward looking statements. Such
risks and uncertainties include, but are not limited to, industry-wide market
factors and regulatory developments affecting the Company's operations and the
acquisitions and dispositions described elsewhere herein.
30
<PAGE> 33
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
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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
31
<PAGE> 34
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by this Item is included on Pages F-1 through
F-69 of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
KPMG Peat Marwick, LLP ("Peat Marwick") has previously served as the
auditors for Chancellor Media, CMCLA and their respective subsidiaries and has
previously advised Chancellor Media, CMCLA and their respective subsidiaries on
federal, state and local tax matters. After an evaluation by management of
services provided by other independent accounting firms, Chancellor Media and
CMCLA dismissed Peat Marwick as their independent accountants on September 23,
1997, and engaged Coopers & Lybrand L.L.P. ("Coopers") as the new independent
accountants for Chancellor Media, CMCLA and their respective subsidiaries as of
such date. The decision to dismiss Peat Marwick was approved by the Board of
Directors of Chancellor Media and CMCLA.
Peat Marwick's reports on the financial statements of Chancellor Media,
CMCLA and their respective subsidiaries for the past two years did not contain
an adverse opinion or a disclaimer of opinion, and was not qualified or modified
as to uncertainty, audit scope or accounting principles. During the two most
recent fiscal years of Chancellor Media, CMCLA and their respective subsidiaries
and the subsequent interim period preceding the dismissal, there were no
disagreements with Peat Marwick on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Peat Marwick, would have
caused Peat Marwick to make reference to the subject matter of the disagreements
in connection with its report. In addition, during the two most recent fiscal
years of Chancellor Media, CMCLA and their respective subsidiaries and the
subsequent interim period preceding the dismissal, there were no events of the
type requiring disclosure under Item 304(a)(1)(v) of Regulation S-K.
During the two most recent fiscal years of Chancellor Media, CMCLA and
their respective subsidiaries and the subsequent interim period preceding the
dismissal of Peat Marwick, Chancellor Media, CMCLA and their respective
subsidiaries did not consult with Coopers regarding (i) the application of
accounting principles to a specified transaction (either completed or proposed),
(ii) the type of audit opinion that might be rendered on the financial
statements of Chancellor Media, CMCLA and their respective subsidiaries or (iii)
any matter that was the subject of a "disagreement" or a "reportable event" (as
each term is defined in Item 304(a)(2)(ii) of Regulation S-K). However, Coopers
previously served as the independent accountants for Chancellor and CRBC. In
connection with the Chancellor Merger, Chancellor Media and CMCLA discussed with
Coopers various financial statement issues related to its historical association
with Chancellor and CRBC, and also discussed the various filings submitted by
Chancellor Media, CMCLA, Chancellor and CRBC to the Securities and Exchange
Commission in respect of the Chancellor Merger, which filings included or
incorporated by reference the financial statements of Chancellor Media, CMCLA,
Chancellor and CRBC.
Chancellor Media and CMCLA previously provided Peat Marwick with a copy of
the disclosures they made with respect to the change in accountants in
connection with the Current Report on Form 8-K, dated September 23, 1997 and
filed September 29, 1997, of Chancellor Media and CMCLA. Peat Marwick furnished
Chancellor Media and CMCLA with a letter addressed to the Commission stating
that it agreed with the statements made by Chancellor Media and CMCLA in such
Current Report, except that it was not in a position to agree or disagree with
the stated reasons for changing principal auditors, or with the statement that
the change was approved by the board of directors, or with the statements made
in the third paragraph of Item 4 of the Current Report on Form 8-K. A copy of
Peat Marwick's letter is incorporated as Exhibit 16.1 herein by reference to the
Current Report on Form 8-K, dated September 23, 1997 and filed September 29,
1997, of Chancellor Media and CMCLA.
32
<PAGE> 35
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
The directors and executive officers of Chancellor Media, CMHC and CMCLA
are:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Thomas O. Hicks........................ 52 Chairman of the Board and Director
Scott K. Ginsburg...................... 45 President, 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 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>
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. 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.
SCOTT K. GINSBURG
Mr. Ginsburg became President, Chief Executive Officer and a director of
Chancellor Media, CMHC and CMCLA upon the consummation of the Chancellor Merger.
Mr. Ginsburg had been Chairman of the Board, Chief Executive Officer and a
director of Evergreen prior to the Chancellor Merger. He had been Chairman of
the Board of Evergreen since 1990, and Chief Executive Officer and a director of
Evergreen since its inception in 1988. Mr. Ginsburg was President of Evergreen
from 1988 to 1993. Mr. Ginsburg entered the radio broadcasting business in 1983
as a founder of Statewide Broadcasting, Inc. ("Statewide"). In 1987, Statewide
merged with Heftel Broadcasting, Inc. to form H&G Communications, Inc., and Mr.
Ginsburg served as President and Chief Executive Officer of H&G Communications,
Inc. from the time of its formation until 1988, when Evergreen was formed.
Through these various positions, Mr. Ginsburg has served as the lead executive
of the Company and its predecessors since the initial radio acquisition by the
Company's predecessors in 1983.
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
33
<PAGE> 36
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.
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.
34
<PAGE> 37
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.
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.
35
<PAGE> 38
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, (iii)
directors Eric C. Neuman and Lawrence D. Stuart have not filed a Form 4 in
connection with the grant of stock options under the Company's Non-Employee
Director Stock Option Plan in September 1997 and (iv) 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.
ITEM 11. EXECUTIVE COMPENSATION
All share and per share data contained in Part III -- Item 11 of this
Annual Report on Form 10-K 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, and to
the Company's three-for-two common stock split effected in the form of a stock
dividend paid on August 26, 1996.
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.
36
<PAGE> 39
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
President and 1996 750,000 956,000 -- -- 375,000 -- 9,776
Chief Executive 1995 650,000 -- -- -- -- 7,663
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>
- ---------------
(1) No information is set forth in this Part III -- Item 11, "Executive
Compensation -- Compensation of Executive Officers" 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 $50,000 or 10% of the total of the
annual salary and bonus for the named officer.
(3) Represents payments of term life insurance policies.
(4) Represents compensation for the period beginning March 1, 1996, when Mr.
O'Keefe joined the Company.
37
<PAGE> 40
Option Grants in Last Fiscal Year. The following table sets forth
information regarding options to purchase Common Stock granted by the Company to
its Chief Executive Officer and the other executive officers named in the
Summary Compensation Table during the 1997 fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------
NUMBER OF
SECURITIES % OF TOTAL GRANT DATE VALUE
UNDERLYING OPTIONS --------------------------
OPTIONS GRANTED TO EXERCISE OR GRANT DATE
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME (#)(1)(2) FISCAL YEAR ($/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.
(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.
38
<PAGE> 41
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
On September 4, 1997, the Company entered into a new employment agreement
(the "Ginsburg Employment Agreement") with Mr. Ginsburg, President and Chief
Executive Officer of Chancellor Media, CMHC and CMCLA, to be effective on the
closing date of the Chancellor Merger. The Ginsburg Employment Agreement, which
has a term that extends through September 5, 2002 and which Mr. Ginsburg may
extend for an additional five-year term, provides 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 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 Ginsburg Employment Agreement. The Ginsburg Employment
Agreement provides that, on the closing date of the Chancellor Merger and on
each of the first four anniversaries thereof on which Mr. Ginsburg remains
employed by the Company, Mr. Ginsburg shall be granted options to purchase
200,000 shares of Common Stock. If Mr. Ginsburg's employment is terminated
without "cause" (as defined in the Ginsburg Employment Agreement) or if Mr.
Ginsburg terminates 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 will 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 provides that all options granted pursuant to the
Ginsburg 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 Ginsburg Employment
Agreement provides 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 shall make a one-time cash payment to Mr. Ginsburg in a gross amount
such that the net payments retained by Mr. Ginsburg (after payment by the
Company of any excise taxes imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended, with respect to such payment) shall equal $20,000,000. The
Ginsburg Employment Agreement further provides 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 shall make a one-time cash payment to
Mr. Ginsburg equal to two
39
<PAGE> 42
times the amount of his annual base salary for the contract year in which his
employment terminates. The Ginsburg Employment Agreement provides that Mr.
Ginsburg will have registration rights with respect to all Common Stock acquired
by Mr. Ginsburg at any time which rights are 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 will require Mr. Ginsburg to repay principal of the loan in five equal
annual installments, commencing on the sixth anniversary of the date on which
the loan is made. As of March 1, 1998, Mr. Ginsburg has borrowed approximately
$1,389,000 under the loan.
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 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 (after
payment by the Company of any excise taxes imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended, with respect to such payment) shall
equal $5,000,000. 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-
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<PAGE> 43
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.
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 (after payment by the Company of any excise taxes imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended, with respect to
such payment) shall equal $2,000,000. The 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.
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
41
<PAGE> 44
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, 1999 and 2000, assuming
that Mr. O'Keefe remains employed by the Company on such dates, Mr. O'Keefe
shall be granted options to purchase 100,000 shares of Common Stock.
Furthermore, with respect to the option to purchase 300,000 shares of Common
Stock granted under the O'Keefe Employment Agreement, (i) all such options will
become exercisable on February 28, 1999 if Mr. O'Keefe remains employed by the
Company on such date, (ii) if Mr. O'Keefe's employment is terminated as a result
of Mr. O'Keefe's death or disability or resignation by Mr. O'Keefe following a
material breach of the O'Keefe Amendment by the Company, a prorated portion of
such options will become exercisable and (iii) if Mr. O'Keefe's employment is
terminated without "cause" (as defined in the O'Keefe Amendment) or there is a
"change of control" (as defined in the O'Keefe Amendment), all such options
shall become exercisable. The O'Keefe Amendment provides that all options
described in the O'Keefe Amendment will be exercisable for seven years from the
date of grant of the option, and that all options granted pursuant to the
O'Keefe Amendment will be granted at a price per share equal to the market price
for Common Stock on the date of the grant. The O'Keefe Amendment provides that,
in the event of termination of Mr. O'Keefe's employment by the Company without
"cause," the Company shall pay Mr. O'Keefe his base salary and a prorated annual
bonus and provide health and life insurance coverage until the earlier of the
expiration of the term of the O'Keefe Amendment or the date on which Mr. O'Keefe
becomes employed in a position providing similar compensation.
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.
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<PAGE> 45
ITEM 12. 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, (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......................................... 1,220,000(3) *
Matthew E. Devine.......................................... 562,500(4) *
Kenneth J. O'Keefe......................................... 179,000(5) *
Thomas O. Hicks............................................ 16,444,371(6) 13.7%
Perry J. Lewis............................................. 133,548(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) 1.3%
Vernon E. Jordan, Jr....................................... -- *
All directors and executive officers as a group............ 25,098,945(12) 20.9%
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 1,220,000 shares.
(4) Consists of options to purchase 562,500 shares.
(5) Includes options to purchase 175,000 shares.
(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.
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<PAGE> 46
(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 4,085,122 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.
ITEM 13. 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 thereto, 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. The Company paid Hicks Muse Partners $0.3 million 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 $10.0 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.
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<PAGE> 47
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" contained in Part III -- Item 11 of this Annual Report on Form 10-K.
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" contained in Part
I -- Item 1 of this Annual Report on Form 10-K.
Certain of the Company's radio stations have engaged Katz, a wholly-owned
subsidiary of the Company which the Company acquired in October 1997, to sell
national spot advertising air time. For a description of the Katz Acquisition,
see "Business -- Recent Developments -- Transactions Completed Since January 1,
1997" contained in Part I -- Item 1 of this Annual Report on Form 10-K.
Additionally, the Company's radio stations (as well as stations owned by
Capstar) are affiliated with The AMFM Radio Networks, a new national radio
network created by the Company in 1997. For a description of The AMFM Radio
Networks, see "Business -- Recent Developments -- The AMFM Radio Networks"
contained in Part I -- Item 1 of this Annual Report on Form 10-K.
Under the terms of the Company's employment agreement with Mr. Ginsburg,
the Company has agreed to make to Mr. Ginsburg a ten-year unsecured loan. For a
discussion of the terms of the loan, see "Executive Compensation -- Employment
Agreements" set forth in Part III -- Item 11 of this Annual Report on Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements.
2. Financial Statement Schedules.
The financial statements and financial statement schedules listed in
the index to the Consolidated Financial Statements of Chancellor Media
and CMCLA that appear on Page F-1 of this Report on Form 10-K are filed
as part of this Report.
3. Exhibits.
The exhibits to this Report on Form 10-K are listed under item 14(c)
below.
(b) Reports on Form 8-K.
1. Current Report on Form 8-K, dated February 16, 1997 and filed March 9,
1997, of Evergreen, reporting certain events related to the execution
of the agreements contemplated by the Viacom Acquisition and the
Chancellor Merger.
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<PAGE> 48
2. Current Report on Form 8-K, dated April 1, 1997 and filed May 9, 1997,
of Evergreen, reporting certain events related to the execution of the
agreements contemplated by the Gannett Acquisition, the Senior Credit
Facility and the consummation of other transactions previously
described.
3. Current Report on Form 8-K, dated May 27, 1997 and filed May 28, 1997,
of Evergreen, reporting certain pro forma financial information.
4. Current Report on Form 8-K, dated May 27, 1997 and filed May 29, 1997,
of Evergreen, reporting a press release related to the placement of
the $3.00 Convertible Preferred Stock described herein.
5. Current Report on Form 8-K, dated May 30, 1997 and filed June 4, 1997,
of Evergreen, providing the following financial statement information:
(I) KKSF-FM/KDFC-FM/AM, (ii) WJLB-FM/WMXD-FM, (iii) WDAS-FM/AM, (iv)
WPNT-FM and (v) WLTW-FM, WAXQ-FM, WMZQ-FM, WJZW-AM, WBZS-AM and
WZHF-AM.
6. Current Report on Form 8-K, dated June 11, 1997 and filed June 12,
1997, of Evergreen, reporting a press release related to the placement
of the $3.00 Convertible Preferred Stock described herein.
7. Current Report on Form 8-K, dated June 16, 1997 and filed July 2,
1997, of Evergreen, reporting certain events related to the execution
of the agreement contemplated by Viacom Acquisition, the consummation
of certain transactions previously described and the completion of the
placement of the $3.00 Convertible Preferred Stock.
8. Current Report on Form 8-K, dated July 7, 1997 and filed July 31,
1997, of Evergreen, reporting certain events related to the Katz
Acquisition and the consummation of certain transactions previously
described.
9. Current Report on Form 8-K, dated September 5, 1997 and filed
September 17, 1997, as amended on Form 8-K/A, of Chancellor Media and
CMCLA, reporting the consummation of the Chancellor Merger and
providing financial data related to the consummation of the Chancellor
Merger.
10. Current Report on Form 8-K, dated September 23, 1997 and filed
September 29, 1997, of Chancellor Media and CMCLA, reporting the
change in certifying accountants.
11. Current Report on Form 8-K, dated December 22, 1997 and filed December
30, 1997, of CMCLA, reporting the placement of the 8 1/8% Notes and
the consummation of the Gannett Acquisition described herein.
12. Current Report on Form 8-K, dated January 13, 1998 and filed January
13, 1998, of Chancellor Media and CMCLA, as amended on Form 8-K/A
dated February 10, 1998, reporting certain pro forma financial
information.
13. Current Report on Form 8-K, dated February 23, 1998 and filed February
27, 1998, of Chancellor Media, reporting certain transactions related
to the 1998 Offering described herein.
14. Current Report on Form 10-K, dated March 10, 1998 and filed March 12,
1998, of Chancellor Media and CMCLA, reporting certain transactions
related to the 1998 Offering described herein.
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<PAGE> 49
(c) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
(h)2.11 -- 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).
(i)2.11A -- 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.
(i)2.11B -- 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.
(j)2.12 -- 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).
(n)2.13 -- 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).
(o)2.14 -- Asset Purchase Agreement dated April 4, 1996 between
American Radio System Corporation and Evergreen Media
Corporation of Buffalo (see table of contents for list of
omitted exhibits and schedules).
(o)2.15 -- Asset Purchase Agreement dated April 11, 1996 between
Mercury Radio Communications, L.P. and Evergreen Media
Corporation of Los Angeles, Evergreen Media/Pyramid
Holding Corporation, WHTT (AM) License Corp. (see table
of contents for list of omitted exhibits and schedules).
(o)2.16 -- 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).
(p)2.17 -- 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).
(p)2.18 -- 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 exhibit
and schedules).
(p)2.19 -- 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).
(p)2.21 -- Asset Purchase Agreement dated July 15, 1996 by and among
Century Chicago Broadcasting L.P., Century Broadcasting
Corporation, Evergreen Media Corporation of Los Angeles.
(p)2.22 -- Asset Purchase Agreement dated August 12, 1996 by and
among Chancellor Broadcasting Company, Shamrock
Broadcasting, Inc. and Evergreen Media Corporation of the
Great Lakes.
(p)2.23 -- 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 content for list of omitted exhibits and
schedules).
</TABLE>
47
<PAGE> 50
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
(p)2.24 -- 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).
(q)2.25 -- Letter of intent dated August 27, 1996 between EZ
Communications, Inc. Evergreen Media Corporation.
(q)2.26 -- Asset Purchase Agreement dated September 19, 1996 between
Beasley-FM Acquisition Corp. WDAS License Limited
Partnership and Evergreen Media Corporation of Los
Angeles.
(q)2.27 -- Asset Purchase Agreement dated September 19, 1996 between
The Brown Organization and Evergreen Media Corporation of
Los Angeles.
(r)2.28 -- 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 schedule and exhibits).
(r)2.29 -- 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.
(r)2.30 -- 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 Trustee for the Muse
Children's GS Trust, and Thomas O. Hicks, dated as of
February 19, 1997.
(r)2.31 -- Joint Purchase Agreement, by and among Chancellor Radio
Broadcasting Company, Evergreen Media Corporation of Los
Angeles, and Evergreen Media Corporation, dated as of
February 19, 1997.
(s)2.32 -- 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).
(s)2.33 -- 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 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).
(t)2.34 -- 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).
</TABLE>
48
<PAGE> 51
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
(t)2.35 -- 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).
(t)2.36 -- 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).
(y)2.41 -- Amended and Restated Agreement and Plan of Merger among
Chancellor Broadcasting Company, Chancellor Radio
Broadcasting Company, Evergreen Media Corporation,
Evergreen Media Corporation of Los Angeles and Evergreen
Mezzanine Holdings Corporation, dated as of February 19,
1997, as amended and restated on July 31, 1997.
(gg)2.42 -- Option Agreement, by and among Evergreen Media
Corporation, Chancellor Broadcasting Company, Bonneville
International Corporation and Bonneville Holding Company,
dated as of August 6, 1997.
(ss)2.43 -- Letter Agreement, dated February 20, 1998, between
Chancellor Media Corporation of Los Angeles and Capstar
Broadcasting Corporation.
(rr)3.1C -- Amended and Restated Certificate of Incorporation of
Chancellor Media.
(rr)3.2B -- Amended and Restated Bylaws of Chancellor Media.
(ff)3.3 -- Certificate of Incorporation of Chancellor Media
Corporation of Los Angeles (formerly known as Evergreen
Media Corporation of Los Angeles).
(pp)3.3A -- Amendment to Certificate of Incorporation of Chancellor
Media Corporation of Los Angeles, filed September 5,
1997.
*3.3B -- Amendment to Certificate of Incorporation of Chancellor
Media Corporation of Los Angeles, filed October 28, 1997.
(ff)3.4 -- Bylaws of Chancellor Media Corporation of Los Angeles.
(t)4.10 -- 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).
(z)4.11 -- 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.
(y)4.12 -- Specimen Common Stock Certificate of Chancellor Media.
(y)4.13 -- Specimen 7% Convertible Preferred Stock Certificate of
Chancellor Media.
(y)4.14 -- Form of Certificate of Designation for 7% Convertible
Preferred Stock of Chancellor Media.
(aa)4.15 -- Indenture, dated as of February 14, 1996, governing the
9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
</TABLE>
49
<PAGE> 52
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
(bb)4.16 -- First Supplemental Indenture, dated as of February 14,
1996, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
(cc)4.17 -- Indenture, dated as of February 26, 1996, governing the
12 1/4% Subordinated Exchange Debentures due 2008 of
CMCLA.
(dd)4.18 -- Indenture, dated as of January 23, 1997, governing the
12% Subordinated Exchange Debentures due 2009 of CMCLA.
(ee)4.19 -- Indenture, dated as of June 24, 1997, governing the
8 3/4% Senior Subordinated Notes due 2004 of CMCLA.
(ff)4.21 -- Specimen 12 1/4% Series A Senior Cumulative Exchangeable
Preferred Stock Certificate of CMCLA.
(ff)4.22 -- Specimen 12% Exchangeable Preferred Stock Certificate of
CMCLA.
(ff)4.23 -- Form of Certificate of Designation for 12 1/4% Series A
Senior Cumulative Exchangeable Preferred Stock of CMCLA.
(ff)4.24 -- Form of Certificate of Designation for 12% Exchangeable
Preferred Stock of CMCLA.
(pp)4.25 -- 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.
(hh)4.26 -- Second Supplemental Indenture, dated as of April 15,
1997, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
(pp)4.27 -- Third Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
(pp)4.28 -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated June 24, 1997, governing the
8 3/4% Senior Subordinated Notes due 2007 of CMCLA.
(pp)4.29 -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated February 26, 1997, governing
the 12 1/4% Subordinated Exchange Debentures due 2008 of
CMCLA.
(pp)4.30 -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated January 23, 1997, governing
the 12% Subordinated Exchange Debentures due 2009 of
CMCLA.
(qq)4.31 -- Specimen $3.00 Convertible Exchangeable Preferred Stock
Certificate of Chancellor Media.
(qq)4.32 -- Certificate of Designation for $3.00 Convertible
Exchangeable Preferred Stock of Chancellor Media.
(qq)4.33 -- Convertible Subordinated Exchange Indenture (including
form of 6% Convertible Subordinated Exchange Debenture
attached thereto), dated June 16, 1997, between Evergreen
Media Corporation and The Bank of New York.
*4.34 -- Amended and Restated Indenture, dated as of October 28,
1997, governing the 10 1/2% Senior Subordinated Notes due
2007 of CMCLA.
*4.35 -- 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.
</TABLE>
50
<PAGE> 53
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
*4.36 -- Third Amendment to Second Amended and Restated Loan
Agreement, dated October 28, 1997, among CMCLA, the
Lenders, the Agents and the Administrative Agent.
*4.37 -- Fourth Amendment to Second Amended and Restated Loan
Agreement, dated February 10, 1998, among CMCLA, the
Lenders, the Agents and the Administrative Agent.
(f)10.23 -- Evergreen Media Corporation Stock Option Plan for
Non-employee Directors.
**(n)10.26 -- Employment Agreement dated February 9, 1996 by and
between Evergreen Media Corporation and Kenneth J.
O'Keefe.
(o)10.28 -- 1995 Stock Option Plan for executive officers and key
employees of Evergreen Media Corporation.
**(pp)10.30 -- First Amendment to Employment Agreement dated March 1,
1997 by and between Evergreen Media Corporation and
Kenneth J. O'Keefe.
**(pp)10.31 -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and Scott K. Ginsburg.
**(pp)10.32 -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and James de Castro.
**(pp)10.33 -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and Matthew E. Devine.
**(pp)10.34 -- 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.
(jj)10.36 -- Chancellor Broadcasting Company 1996 Stock Award Plan.
(kk)10.37 -- Chancellor Holdings Corp. 1994 Director Stock Option
Plan.
(ll)10.38 -- Stock Option Grant Letter dated September 30, 1995 from
Chancellor Corporation to Steven Dinetz.
(mm)10.39 -- Stock Option Grant Letter dated September 30, 1995 from
Chancellor Corporation to Eric W. Neuman.
(nn)10.40 -- Stock Option Grant Letter dated September 30, 1995 from
Chancellor Corporation to Marvin Dinetz.
(oo)10.41 -- Stock Option Grant Letter dated February 14, 1997 from
Chancellor Broadcasting Company to Carl M. Hirsch.
(pp)16.1 -- Letter from KPMG Peat Marwick LLP to the Securities and
Exchange Commission dated September 29, 1997.
*21.1 -- Subsidiaries of Chancellor Media.
*21.2 -- Subsidiaries of CMCLA.
*23.1 -- Consent of Coopers & Lybrand L.L.P.
*23.2 -- Consent of KPMG Peat Marwick LLP
*27.1 -- Financial Data Schedule of Chancellor Media Corporation.
*27.2 -- Financial Data Schedule of Chancellor Media Corporation
of Los Angeles.
</TABLE>
- ---------------
* Filed herewith.
** Management contract or compensatory arrangement.
(f) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-4, as amended (Reg. No.
33-89838).
51
<PAGE> 54
(i) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated January 17, 1996.
(j) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ending
June 30, 1995.
(k) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-1, as amended (Reg. No.
33-69752).
(n) Incorporated by reference to the identically numbered exhibit to
Evergreen's Annual Report on Form 10-K for the fiscal year ended December
31, 1995.
(o) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ending
March 31, 1996.
(p) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1996.
(q) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-3, as amended (Reg. No.
333-12453).
(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 (Reg. No. 333-32677), 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 and CRBC, as filed on February 29, 1996.
(bb) Incorporated by reference to Exhibit 4.5 to the Annual Report on Form 10-K
of Chancellor, CRBC 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 and CRBC, as filed on February 29, 1996.
(dd) Incorporated by reference to Exhibit 4.7 to the Current Report on Form 8-K
of CRBC, as filed on February 6, 1997.
(ee) Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K
of Chancellor and CRBC, 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.
52
<PAGE> 55
(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 CMCLA's
Registration Statement on Form S-4 (Reg. No. 333-36451), dated September
26, 1997, as amended.
(qq) Incorporated by reference to the identically numbered exhibit to
Chancellor Media's Registration Statement on Form S-3 (Reg. No.
333-36855), dated October 1, 1997, as amended.
(rr) Incorporated by reference to the identically numbered exhibit to the
Quarterly Report on Form 10-Q of Chancellor Media and CMCLA for the
quarterly period ended September 30, 1997.
(ss) Incorporated by reference to the identically numbered exhibit to the
Current Report on Form 8-K of Chancellor Media and CMCLA, dated as of
February 23, 1998 and filed as of February 27, 1998.
53
<PAGE> 56
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON THE 26 DAY OF
MARCH, 1998.
CHANCELLOR MEDIA CORPORATION
CHANCELLOR MEDIA CORPORATION OF LOS
ANGELES
By /s/ MATTHEW E. DEVINE
-----------------------------------
Matthew E. Devine
Senior Vice President and
Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ THOMAS O. HICKS Chairman of the Board March 24, 1998
- -----------------------------------------------------
Thomas O. Hicks
/s/ SCOTT K. GINSBURG President, Chief Executive March 17, 1998
- ----------------------------------------------------- Officer and Director
Scott K. Ginsburg (Principal Executive Officer)
/s/ JAMES E. DE CASTRO Chief Operating Officer and March 17, 1998
- ----------------------------------------------------- Director
James E. de Castro
/s/ MATTHEW E. DEVINE Senior Vice President and Chief March 26, 1998
- ----------------------------------------------------- Financial Officer (Principal
Matthew E. Devine Financial Officer and
Principal Accounting Officer)
/s/ THOMAS J. HODSON Director March 18, 1998
- -----------------------------------------------------
Thomas J. Hodson
/s/ PERRY J. LEWIS Director March 24, 1998
- -----------------------------------------------------
Perry J. Lewis
/s/ ERIC C. NEUMAN Director March 23, 1998
- -----------------------------------------------------
Eric C. Neuman
/s/ JOHN H. MASSEY Director March 12, 1998
- -----------------------------------------------------
John H. Massey
/s/ JEFFREY A. MARCUS Director March 12, 1998
- -----------------------------------------------------
Jeffrey A. Marcus
/s/ LAWRENCE D. STUART, JR. Director March 25, 1998
- -----------------------------------------------------
Lawrence D. Stuart, Jr.
</TABLE>
54
<PAGE> 57
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ STEVEN DINETZ Director March 17, 1998
- -----------------------------------------------------
Steven Dinetz
/s/ VERNON E. JORDAN, JR. Director March 24, 1998
- -----------------------------------------------------
Vernon E. Jordan, Jr.
</TABLE>
55
<PAGE> 58
INDEX TO FINANCIAL STATEMENTS
(ITEM 14(A)1) AND ITEM 14(A)2)
<TABLE>
<S> <C>
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
Report of Independent Accountants......................... F-2
Independent Auditors' Report.............................. F-3
Consolidated Balance Sheets as of December 31, 1996 and
1997................................................... F-4
Consolidated Statements of Operations for the years ended
December 31, 1995, 1996 and 1997....................... F-5
Consolidated Statements of Changes in Common Stockholder's
Equity for the years ended December 31, 1995, 1996 and
1997................................................... F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1996 and 1997....................... F-7
Notes to Consolidated Financial Statements................ F-8
Report of Independent Accountants......................... F-33
Parent Company Condensed Balance Sheets as of December 31,
1996 and 1997.......................................... F-34
Parent Company Condensed Statements of Operations for the
years ended December 31, 1995, 1996 and 1997........... F-35
Parent Company Condensed Statements of Cash Flows for the
years ended December 31, 1995, 1996 and 1997........... F-36
Notes to Parent Company Condensed Financial Statements.... F-37
Schedule II -- Valuation and Qualifying Accounts.......... F-38
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
Report of Independent Accountants......................... F-39
Independent Auditors' Report.............................. F-40
Consolidated Balance Sheets as of December 31, 1996 and
1997................................................... F-41
Consolidated Statements of Operations for the years ended
December 31, 1995, 1996 and 1997....................... F-42
Consolidated Statements of Changes in Common Stockholder's
Equity for the years ended December 31, 1995, 1996 and
1997................................................... F-43
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1996 and
1997................................................... F-44
Notes to Consolidated Financial Statements................ F-45
Report of Independent Accountants......................... F-68
Schedule II -- Valuation and Qualifying Accounts.......... F-69
</TABLE>
F-1
<PAGE> 59
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Chancellor Media Corporation:
We have audited the accompanying consolidated balance sheet of Chancellor
Media Corporation and subsidiaries (collectively, the "Company") as of December
31, 1997, and the related consolidated statements of operations, stockholders'
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(b) paragraph 6
as to which the date is March 13, 1998
F-2
<PAGE> 60
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Chancellor Media Corporation:
We have audited the accompanying consolidated balance sheet of Chancellor
Media Corporation (formerly Evergreen Media Corporation) and subsidiaries as of
December 31, 1996, and the related consolidated statements of operations,
stockholders' 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 schedules as of and for the years
ended December 31, 1995 and 1996. These consolidated financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedules 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 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 schedules, 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-3
<PAGE> 61
CHANCELLOR MEDIA CORPORATION 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 STOCKHOLDERS' 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
Stockholders' equity (note 9):
Preferred stock, $.01 par value. 2,200,000 shares of 7%
convertible preferred stock authorized, issued and
outstanding in 1997.................................... -- 110,000
Preferred stock, $.01 par value. 6,000,000 shares
authorized; 5,990,000 shares of $3.00 convertible
exchangeable preferred stock issued and outstanding in
1997................................................... -- 299,500
Common stock, $.01 par value. Authorized 200,000,000
shares; issued and outstanding 78,077,696 shares in
1996 and 119,921,814 shares in 1997.................... 781 1,199
Class B common stock, $.01 par value. Authorized 4,500,000
shares; issued and outstanding 6,232,132 shares in
1996................................................... 62 --
Paid-in capital........................................... 662,080 1,226,930
Accumulated deficit....................................... (113,512) (157,422)
---------- ----------
Total stockholders' 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-4
<PAGE> 62
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<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
Dividends on preferred stock of subsidiary (note 8)......... -- -- 12,901
-------- -------- --------
Loss before extraordinary item......................... (5,850) (16,194) (27,395)
Extraordinary item -- loss on extinguishment of debt, net of
income tax benefit (note 7)............................... -- -- 4,350
-------- -------- --------
Net loss............................................... (5,850) (16,194) (31,745)
Preferred stock dividends (note 9(a))....................... 4,830 3,820 12,165
-------- -------- --------
Net loss attributable to common stockholders........... $(10,680) $(20,014) $(43,910)
======== ======== ========
Basic and diluted loss per common share (notes 1(l) and 9):
Before extraordinary item................................. $ (.26) $ (.33) $ (.41)
Extraordinary item........................................ -- -- (.05)
-------- -------- --------
Net loss............................................... $ (.26) $ (.33) $ (.46)
======== ======== ========
Weighted average common shares outstanding.................. 41,442 60,414 95,636
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 63
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
CONVERTIBLE CLASS B
PREFERRED STOCK COMMON STOCK COMMON STOCK
--------------------- -------------------- ------------------- WARRANTS
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT (NOTE 9(C))
---------- -------- ----------- ------ ---------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1994................... 1,610,000 $ 80,500 19,918,768 $ 199 6,296,632 $ 63 $ 12,488
Issuance of Common Stock in acquisition (note
9(b))......................................... -- -- 11,222,018 112 -- -- --
Issuance of Common Stock in public offering
(note 9(b))................................... -- -- 14,700,000 147 -- -- --
Exercise of common stock warrants (note 9(c))... -- -- 3,902,772 39 -- -- (12,488)
Conversion of Class B Common Stock to Common
Stock......................................... -- -- 64,500 1 (64,500) (1) --
Exercise of common stock options (note 9(d)).... -- -- 51,000 1 -- -- --
Convertible preferred stock dividends (note
9(a))......................................... -- -- -- -- -- -- --
Net loss........................................ -- -- -- -- -- -- --
---------- -------- ----------- ------ ---------- ---- --------
Balances at December 31, 1995................... 1,610,000 80,500 49,859,058 499 6,232,132 62 --
Issuance of Common Stock in public offering
(note 9(b))................................... -- -- 18,000,000 180 -- -- --
Conversion of 1993 Preferred Stock (note
9(a))......................................... (1,608,297) (80,415) 10,051,832 100 -- -- --
Redemption of 1993 Preferred Stock (note
9(a))......................................... (1,703) (85) -- -- -- -- --
Exercise of common stock options (note 9(d)).... -- -- 166,806 2 -- -- --
Convertible preferred stock dividends (note
9(a))......................................... -- -- -- -- -- -- --
Net loss........................................ -- -- -- -- -- -- --
---------- -------- ----------- ------ ---------- ---- --------
Balances at December 31, 1996................... -- -- 78,077,696 781 6,232,132 62 --
Issuance of $3.00 Convertible Preferred Stock
(note 9(a))................................... 5,990,000 299,500 -- -- -- -- --
Issuance of Common Stock in merger (note
9(b))......................................... -- -- 34,617,460 346 -- -- --
Issuance of common stock options in merger (note
9(d))......................................... -- -- -- -- -- -- --
Issuance of 7% Preferred Stock in merger (note
9(a))......................................... 2,200,000 110,000 -- -- -- -- --
Conversion of Class B Common Stock (note
9(b))......................................... -- -- 6,232,132 62 (6,232,132) (62) --
Exercise of common stock options (note 9(d)).... -- -- 994,526 10 -- -- --
Convertible preferred stock dividends (note
9(a))......................................... -- -- -- -- -- -- --
Net loss........................................ -- -- -- -- -- -- --
---------- -------- ----------- ------ ---------- ---- --------
Balances at December 31, 1997................... 8,190,000 $409,500 119,921,814 $1,199 -- $ -- $ --
========== ======== =========== ====== ========== ==== ========
<CAPTION>
TOTAL
PAID-IN ACCUMULATED STOCKHOLDERS'
CAPITAL DEFICIT EQUITY
---------- ----------- -------------
<S> <C> <C> <C>
Balances at December 31, 1994................... $ 101,921 $ (82,818) $ 112,353
Issuance of Common Stock in acquisition (note
9(b))......................................... 70,026 -- 70,138
Issuance of Common Stock in public offering
(note 9(b))................................... 132,574 -- 132,721
Exercise of common stock warrants (note 9(c))... 12,462 -- 13
Conversion of Class B Common Stock to Common
Stock......................................... -- -- --
Exercise of common stock options (note 9(d)).... 31 -- 32
Convertible preferred stock dividends (note
9(a))......................................... -- (4,830) (4,830)
Net loss........................................ -- (5,850) (5,850)
---------- --------- ----------
Balances at December 31, 1995................... 317,014 (93,498) 304,577
Issuance of Common Stock in public offering
(note 9(b))................................... 264,056 -- 264,236
Conversion of 1993 Preferred Stock (note
9(a))......................................... 80,315 -- --
Redemption of 1993 Preferred Stock (note
9(a))......................................... (5) -- (90)
Exercise of common stock options (note 9(d)).... 700 -- 702
Convertible preferred stock dividends (note
9(a))......................................... -- (3,820) (3,820)
Net loss........................................ -- (16,194) (16,194)
---------- --------- ----------
Balances at December 31, 1996................... 662,080 (113,512) 549,411
Issuance of $3.00 Convertible Preferred Stock
(note 9(a))................................... (11,692) -- 287,808
Issuance of Common Stock in merger (note
9(b))......................................... 536,225 -- 536,571
Issuance of common stock options in merger (note
9(d))......................................... 34,977 -- 34,977
Issuance of 7% Preferred Stock in merger (note
9(a))......................................... -- -- 110,000
Conversion of Class B Common Stock (note
9(b))......................................... -- -- --
Exercise of common stock options (note 9(d)).... 5,340 -- 5,350
Convertible preferred stock dividends (note
9(a))......................................... -- (12,165) (12,165)
Net loss........................................ -- (31,745) (31,745)
---------- --------- ----------
Balances at December 31, 1997................... $1,226,930 $(157,422) $1,480,207
========== ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 64
CHANCELLOR MEDIA CORPORATION 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) $ (31,745)
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)
Dividends on preferred stock of subsidiary...... 12,901
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 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)
Net proceeds from issuance of common stock,
preferred stock and warrants.................... 132,766 264,938 293,158
Dividends on preferred stock....................... (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-7
<PAGE> 65
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Chancellor Media Corporation (formerly known as Evergreen 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 Chancellor
Media 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-8
<PAGE> 66
CHANCELLOR MEDIA CORPORATION 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-9
<PAGE> 67
CHANCELLOR MEDIA CORPORATION 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) Loss Per Common Share
Loss per common share is based on the weighted average shares of common
stock outstanding during each year. Stock options, the $3.00 Convertible
Exchangeable Preferred Stock (the "$3.00 Convertible Preferred Stock") and the
7% Convertible Preferred Stock (the "7% Convertible Preferred Stock") are not
included in the calculation as their effect would be antidilutive.
On August 8, 1996, the Company declared a three-for-two stock split
effected in the form of a stock dividend payable on August 26, 1996 to
shareholders of record at the close of business on August 19, 1996. On December
18, 1997, the Company declared a two-for-one stock split effected in the form of
a stock dividend payable on January 12, 1998 to shareholders of record at the
close of business on December 29, 1997. All share and per share data (other than
authorized share data) contained in the accompanying consolidated financial
statements have been retroactively adjusted to give effect to the stock
dividends.
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, 1995 and 1996 due to the
Company's loss position.
(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
Prior to January 1, 1996, the Company 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,
F-10
<PAGE> 68
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 to continue to apply the provisions of APB Opinion No. 25 and
provide pro forma net income and pro forma earnings per share disclosures for
employee stock option grants made in 1995 and future years as if the
fair-value-based method defined in SFAS No. 123 had been applied. The Company
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 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 the Company's Common Stock, resulting
in total cash payments of $94,813 and the issuance of 11,222,018 shares of the
Company'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
F-11
<PAGE> 69
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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 Broadcasting Company ("Chancellor") 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
F-12
<PAGE> 70
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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, the Company issued 5,990,000 shares of $3.00 Convertible
Exchangeable Preferred Stock for net proceeds of $287,808 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 $68,000 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, 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
F-13
<PAGE> 71
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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 $18,000 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, 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, the Company 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 $1,998,383 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 $949,000 which included $549,000 of borrowings outstanding under the CRBC
senior credit facility, $200,000 of CRBC's 9 3/8% Senior Subordinated Notes due
2004 and $200,000 of CRBC's 8 3/4% Senior Subordinated Notes due 2007 (iii) the
issuance of 2,117,629 shares of CMCLA's 12% Exchangeable Preferred Stock in
exchange for CRBC's substantially identical securities with a fair value of
$215,570 including accrued and unpaid dividends of $3,807, (iv) the issuance of
1,000,000 shares of CMCLA's 12 1/4% Series A Senior Cumulative Exchangeable
Preferred Stock in exchange for CRBC's substantially identical securities with a
fair value of $120,217 including accrued and unpaid dividends of $772, (v) the
issuance of 2,200,000 shares of the Company's 7% Convertible Preferred Stock in
exchange for Chancellor's substantially identical securities with a fair value
of $111,048 including
F-14
<PAGE> 72
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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
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.
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 1996 Common Stock offering, 1996 preferred stock conversion and redemption,
the 1997 preferred stock offering described in note 9, 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)
Basic and diluted net loss per common share................. (2.02) (1.46)
</TABLE>
F-15
<PAGE> 73
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, Chancellor entered into an agreement with SFX
Broadcasting, Inc. ("SFX") pursuant to which Chancellor 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 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
F-16
<PAGE> 74
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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>
F-17
<PAGE> 75
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(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>
(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>
F-18
<PAGE> 76
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(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>
(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.
F-19
<PAGE> 77
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
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 CMCLA. 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
CMCLA. 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,
F-20
<PAGE> 78
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 CMCLA. 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 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 CMCLA. 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) Other
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.
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-21
<PAGE> 79
CHANCELLOR MEDIA CORPORATION 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 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 $120,217
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 CMCLA. 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 CMCLA 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 CMCLA'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.
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 CMCLA. 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 the
F-22
<PAGE> 80
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 CMCLA and is subordinate to the 12 1/4%
Preferred Stock.
(9) STOCKHOLDERS' EQUITY
(a) Preferred Stock
(i) 1993 Convertible Preferred Stock
In October 1993, the Company issued 1,610,000 shares of $3.00 Convertible
Exchangeable Preferred Stock (the "1993 Convertible Preferred Stock") for net
proceeds of approximately $76,645. The Company converted 1,608,297 shares of the
1993 Convertible Preferred Stock into 10,051,832 shares of the Company's Common
Stock and redeemed the remaining 1,703 shares of 1993 Convertible Preferred
Stock at $52.70 per share in 1996 (the "1996 Preferred Stock Conversion"). The
1993 Convertible Preferred Stock had a liquidation preference of $50.00 per
share plus accrued and unpaid dividends and a dividend rate of $3.00 per share,
payable quarterly.
(ii) $3.00 Convertible Exchangeable Preferred Stock
In June 1997, the Company issued 5,990,000 shares of Chancellor Media's
$3.00 Convertible Exchangeable Preferred Stock (the "$3.00 Convertible Preferred
Stock") for net proceeds of $287,808. The liquidation preference of each share
of Convertible Preferred Stock is $50.00 plus accrued and unpaid dividends of
$749 at December 31, 1997. Dividends on the $3.00 Convertible Preferred Stock
are cumulative and payable quarterly commencing September 15, 1997 at a rate per
annum of $3.00 per share, when, as and if declared by the Board of Directors of
the Company. The $3.00 Convertible Preferred Stock is convertible at the option
of the holder at any time unless previously redeemed or exchanged, into the
Company's Common Stock, par value $.01 per share at a conversion price of $25.00
per share, subject to adjustment in certain events. The $3.00 Convertible
Preferred Stock is redeemable in whole or in part, at the option of the Company,
on or after June 16, 1999, at redemption prices ranging from 104.8% and
declining to 100% of the liquidation preference on or after June 15, 2007, plus
in each case accrued and unpaid dividends, provided that on or prior to June 15,
2000, the closing price of the Common Stock has equaled or exceeded 150% of the
conversion price for 20 out of any 30 consecutive trading days. The $3.00
Convertible Preferred Stock is exchangeable, subject to certain conditions, at
the option of the Company, in whole but not in part, commencing September 15,
2000, for 6% Convertible Subordinated Exchange Debentures due 2012 (the "6%
Exchange Debentures") at a rate of $50.00 principal amount of 6% Exchange
Debentures for each share of $3.00 Convertible Preferred Stock. Upon the
occurrence of a change in control (as defined in the certificate of designation
governing the $3.00 Convertible Preferred Stock), holders will have special
conversion rights, subject to cash redemption by the Company. The $3.00
Convertible Preferred Stock is senior in liquidation preference to the Common
Stock of Chancellor Media and pari passu with the 7% Convertible Preferred
Stock.
(iii) 7% Convertible Preferred Stock
Upon consummation of the Chancellor Merger, on September 5, 1997, the
Company issued 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. The liquidation preference of each share
of 7% Convertible Preferred Stock is $50.00 plus accrued and unpaid dividends of
$1,604 at December 31, 1997. Dividends on the 7% Convertible Preferred Stock are
payable quarterly, commencing July 15, 1997. The 7% Convertible Preferred Stock
is
F-23
<PAGE> 81
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
convertible at the option of the holder at any time unless previously redeemed
or exchanged, into the Company's Common Stock, par value $.01 per share at a
conversion price of $18.095 per share, subject to adjustment in certain events.
The 7% Convertible Preferred Stock is redeemable in whole or in part, at the
option of the Company, on or after January 15, 2000, at redemption prices
ranging from 104.9% at January 15, 2000 and declining to 100% of the liquidation
preference on or after January 15, 2007, plus in each case accrued and unpaid
dividends. Upon the occurrence of a change in control (as defined in the
certificate of designation governing the 7% Convertible Preferred Stock), the
holders of the 7% Convertible Preferred Stock have the right to require the
Company to repurchase all or any part of the 7% Convertible Preferred Stock at a
price of 101% of the liquidation preference, plus accrued and unpaid dividends.
The 7% Convertible Preferred Stock is senior in liquidation preference to the
Common Stock of Chancellor Media and pari passu with the $3.00 Convertible
Preferred Stock.
(b) Common Stock
In May 1995, the Company issued 11,222,018 shares of Common Stock in
connection with the BPI Acquisition.
In July 1995, the Company completed a secondary public offering of
16,575,000 shares of its Common Stock (the "1995 Offering"). The Company issued
and sold 14,700,000 shares in the offering, while 1,875,000 shares were issued
and sold in connection with the exercise of certain warrants. Furthermore,
2,027,772 shares were issued in the offering in connection with the exercise of
the remaining warrants outstanding pursuant to the over-allotment option. The
net proceeds to the Company in connection with the 1995 Offering of
approximately $132,721 were used to reduce borrowings under the Company's prior
senior credit facility.
On October 17, 1996, the Company completed a secondary public offering of
18,000,000 shares of its Common Stock (the "1996 Offering"). The net proceeds to
the Company in connection with the 1996 Offering of approximately $264,236 were
used to reduce borrowings under the Company's prior senior credit facility.
On September 5, 1997, the Company issued 34,617,460 shares of Common Stock
at $15.50 per share in connection with the Chancellor Merger. In addition, upon
consummation of the Chancellor Merger, each share of the Company's formerly
outstanding Class A Common Stock and Class B Common Stock was reclassified,
changed and converted into one share of Common Stock.
On August 8, 1996, the Company declared a three-for-two stock split
effected in the form of a stock dividend payable on August 26, 1996 to
shareholders of record at the close of business on August 19, 1996. On December
18, 1997, the Company declared a two-for-one stock split effected in the form of
a stock dividend payable on January 12, 1998 to shareholders of record at the
close of business on December 29, 1997. All share and per share data (other than
authorized share data) contained in the accompanying consolidated financial
statements have been retroactively adjusted to give effect to the stock
dividend.
On March 13, 1998, the Company completed a secondary public offering of
21,850,000 shares of its Common Stock for net proceeds of approximately $995.1
million.
(c) Common Stock Purchase Warrants
In November 1992, the Company issued certain warrants which, immediately
prior to the consummation of the common stock offering in July 1995, entitled
holders to purchase an aggregate of 2,601,848 shares of Common Stock at $.01 per
share. These warrants were assigned a value at date of issuance of $12,488. Such
warrants were exercised in connection with the common stock offering in July
1995.
F-24
<PAGE> 82
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(d) Stock Options
The Company 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 the Company's Common Stock on the date of issuance.
In May 1995, the Company 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 Common Stock. Options
issued under the Director Plan have exercise prices equal to the fair market
value of the Company's 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, the Company assumed outstanding
options to purchase 310,276 shares of the Company's 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, the Company assumed outstanding
options to purchase 3,526,112 shares of the Company's 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.
The Company 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 the Company
determined compensation cost based on the fair value at the grant date for its
stock options under SFAS No. 123, the Company's net loss would have been
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1995 1996 1997
------- -------- --------
<S> <C> <C> <C>
Net loss:
As reported....................................... $(5,850) $(16,194) $(31,745)
Pro forma......................................... (8,787) (20,969) (36,650)
Basic and diluted loss per common share:
As reported....................................... (.26) (.33) (.46)
Pro forma......................................... (.33) (.41) (.51)
</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%
F-25
<PAGE> 83
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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>
(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 operating expenses approxi-
F-26
<PAGE> 84
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
mated $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.
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>
F-27
<PAGE> 85
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 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 carryforwards at December 31, 1997 are subject to annual use limitations
under tax rules governing changes of ownership.
F-28
<PAGE> 86
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(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-29
<PAGE> 87
CHANCELLOR MEDIA CORPORATION 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
Preferred stock -- $3.00 Convertible
Preferred Stock....................... -- -- 299,500 473,959
Preferred stock -- 7% Preferred Stock... -- -- 110,000 237,875
</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.
Preferred stock: The fair values of the Company's $3.00 Convertible
Preferred Stock and 7% Convertible 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 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 &
F-30
<PAGE> 88
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Co. Partners, L.P. ("Hicks Muse Partners"), an affiliate of Hicks Muse. Pursuant
thereto, the Company pays to Hicks Muse Partners an annual fee of not less than
$1,000 , subject to increase or decrease (but not below $1,000), based upon
changes in the Consumer Price Index. Hicks Muse Partners is also entitled to
reimbursement for any out-of-pocket expenses incurred in connection with
rendering services under the Financial Monitoring and Oversight Agreement. The
Financial Monitoring and Oversight Agreement provides that the agreement will
terminate at such time as Thomas O. Hicks and his affiliates collectively cease
to beneficially own at least two-thirds of the number of shares of 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-31
<PAGE> 89
CHANCELLOR MEDIA CORPORATION 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
stockholders......................... (15,481) (3,429) (1,997) 893
Basic and diluted income (loss) per
common share......................... (0.28) (0.06) (0.04) 0.01
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 (6,000) (25,254)
Net income (loss) attributable to common
stockholders......................... (6,011) 4,821 (11,049) (31,671)
Basic and diluted income (loss) per
common share:
Before extraordinary item............ (0.07) 0.11 (0.12) (0.27)
Net income (loss).................... (0.07) 0.06 (0.12) (0.27)
</TABLE>
Basic and diluted net loss per common share for the years ended December
31, 1996 and 1997 differs from the sum of basic and diluted net loss per common
share for the quarters during the respective year due to the different periods
used to calculate weighted average shares outstanding.
F-32
<PAGE> 90
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Chancellor Media Corporation:
Our report on the consolidated financial statements of Chancellor Media
Corporation and subsidiaries is included in this Form 10-K. In connection with
our audit of such financial statements, we have also audited the related
financial statement schedules of Chancellor Media Corporation and subsidiaries
as of and for the year ended December 31, 1997 included herein.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present 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(b) paragraph 6
as to which the date is March 13, 1998
F-33
<PAGE> 91
SCHEDULE I
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
CONDENSED BALANCE SHEETS -- PARENT COMPANY
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
1996 1997
--------- ----------
<S> <C> <C>
Investment in subsidiaries, at equity....................... $ 549,411 $1,480,207
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable............................................ $ -- $ --
Stockholders' equity:
Preferred stock........................................... -- 409,500
Common stocks............................................. 843 1,199
Paid-in capital........................................... 662,080 1,226,930
Accumulated deficit....................................... (113,512) (157,422)
--------- ----------
Total stockholders' equity........................ 549,411 1,480,207
--------- ----------
Total liabilities and stockholders' equity........ $ 549,411 $1,480,207
========= ==========
</TABLE>
See accompanying notes to condensed financial statements.
F-34
<PAGE> 92
SCHEDULE I, CONT.
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF OPERATIONS -- PARENT COMPANY
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
------- -------- --------
<S> <C> <C> <C>
Net loss -- equity in losses of unconsolidated
subsidiaries.............................................. $(5,850) $(16,194) $(31,745)
======= ======== ========
</TABLE>
See accompanying notes to condensed financial statements.
F-35
<PAGE> 93
SCHEDULE I, CONT.
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS -- PARENT COMPANY
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) $ (31,745)
Equity in undistributed losses of unconsolidated
subsidiaries......................................... 5,850 16,194 31,745
--------- --------- ---------
Net cash provided by operating activities....... -- -- --
Cash flows from investing activities -- investment in
subsidiaries............................................ (127,936) (261,028) (282,244)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock, preferred stock
and warrants......................................... 132,766 264,938 293,158
Redemption of redeemable preferred stock................ -- (90) --
Dividends on preferred stock............................ (4,830) (3,820) (10,914)
Distributions from subsidiaries......................... -- -- --
Net cash provided by financing activities....... 127,936 261,028 282,244
--------- --------- ---------
Net change in cash and cash equivalents................... -- -- --
Cash and cash equivalents at beginning of year............ -- -- --
--------- --------- ---------
Cash and cash equivalents at end of year.................. $ -- $ -- $ --
========= ========= =========
</TABLE>
See accompanying notes to condensed financial statements.
F-36
<PAGE> 94
SCHEDULE I, CONT.
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO PARENT COMPANY CONDENSED FINANCIAL STATEMENTS
(1) GENERAL
The accompanying condensed financial statements of Chancellor Media
Corporation (the "Company") should be read in conjunction with the consolidated
financial statements of the Company and its subsidiaries included in the
Company's Annual Report on Form 10-K.
(2) OBLIGATIONS, GUARANTEES AND COMMITMENTS
On November 6, 1992, the Company organized a new wholly-owned subsidiary to
which the Company transferred and assigned substantially all of its assets and
liabilities. The Company has guaranteed the obligations under a loan agreement
of this subsidiary (the "Senior Credit Facility"). Prior to such time the
Company was the debtor on such obligations. See note 7 to consolidated financial
statements regarding these obligations.
(3) OTHER
See note 9 to consolidated financial statements for a description of the
preferred stock, common stock and other equity securities of the Company.
F-37
<PAGE> 95
SCHEDULE II
CHANCELLOR MEDIA CORPORATION 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-38
<PAGE> 96
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-39
<PAGE> 97
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-40
<PAGE> 98
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........................................... 662,992 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-41
<PAGE> 99
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-42
<PAGE> 100
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-43
<PAGE> 101
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-44
<PAGE> 102
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-45
<PAGE> 103
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-46
<PAGE> 104
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-47
<PAGE> 105
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-48
<PAGE> 106
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-49
<PAGE> 107
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-50
<PAGE> 108
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-51
<PAGE> 109
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-52
<PAGE> 110
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-53
<PAGE> 111
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-54
<PAGE> 112
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-55
<PAGE> 113
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-56
<PAGE> 114
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-57
<PAGE> 115
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-58
<PAGE> 116
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-59
<PAGE> 117
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-60
<PAGE> 118
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-61
<PAGE> 119
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-62
<PAGE> 120
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-63
<PAGE> 121
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-64
<PAGE> 122
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-65
<PAGE> 123
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-66
<PAGE> 124
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-67
<PAGE> 125
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 Form 10-K. 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-68
<PAGE> 126
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-69
<PAGE> 127
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
(h)2.11 -- 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).
(i)2.11A -- 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.
(i)2.11B -- 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.
(j)2.12 -- 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).
(n)2.13 -- 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).
(o)2.14 -- Asset Purchase Agreement dated April 4, 1996 between
American Radio System Corporation and Evergreen Media
Corporation of Buffalo (see table of contents for list of
omitted exhibits and schedules).
(o)2.15 -- Asset Purchase Agreement dated April 11, 1996 between
Mercury Radio Communications, L.P. and Evergreen Media
Corporation of Los Angeles, Evergreen Media/Pyramid
Holding Corporation, WHTT (AM) License Corp. (see table
of contents for list of omitted exhibits and schedules).
(o)2.16 -- 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).
(p)2.17 -- 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).
(p)2.18 -- 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 exhibit
and schedules).
(p)2.19 -- 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).
(p)2.21 -- Asset Purchase Agreement dated July 15, 1996 by and among
Century Chicago Broadcasting L.P., Century Broadcasting
Corporation, Evergreen Media Corporation of Los Angeles.
(p)2.22 -- Asset Purchase Agreement dated August 12, 1996 by and
among Chancellor Broadcasting Company, Shamrock
Broadcasting, Inc. and Evergreen Media Corporation of the
Great Lakes.
(p)2.23 -- 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 content for list of omitted exhibits and
schedules).
</TABLE>
<PAGE> 128
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
(p)2.24 -- 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).
(q)2.25 -- Letter of intent dated August 27, 1996 between EZ
Communications, Inc. Evergreen Media Corporation.
(q)2.26 -- Asset Purchase Agreement dated September 19, 1996 between
Beasley-FM Acquisition Corp. WDAS License Limited
Partnership and Evergreen Media Corporation of Los
Angeles.
(q)2.27 -- Asset Purchase Agreement dated September 19, 1996 between
The Brown Organization and Evergreen Media Corporation of
Los Angeles.
(r)2.28 -- 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 schedule and exhibits).
(r)2.29 -- 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.
(r)2.30 -- 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 Trustee for the Muse
Children's GS Trust, and Thomas O. Hicks, dated as of
February 19, 1997.
(r)2.31 -- Joint Purchase Agreement, by and among Chancellor Radio
Broadcasting Company, Evergreen Media Corporation of Los
Angeles, and Evergreen Media Corporation, dated as of
February 19, 1997.
(s)2.32 -- 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).
(s)2.33 -- 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 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).
(t)2.34 -- 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).
</TABLE>
<PAGE> 129
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
(t)2.35 -- 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).
(t)2.36 -- 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).
(y)2.41 -- Amended and Restated Agreement and Plan of Merger among
Chancellor Broadcasting Company, Chancellor Radio
Broadcasting Company, Evergreen Media Corporation,
Evergreen Media Corporation of Los Angeles and Evergreen
Mezzanine Holdings Corporation, dated as of February 19,
1997, as amended and restated on July 31, 1997.
(gg)2.42 -- Option Agreement, by and among Evergreen Media
Corporation, Chancellor Broadcasting Company, Bonneville
International Corporation and Bonneville Holding Company,
dated as of August 6, 1997.
(ss)2.43 -- Letter Agreement, dated February 20, 1998, between
Chancellor Media Corporation of Los Angeles and Capstar
Broadcasting Corporation.
(rr)3.1C -- Amended and Restated Certificate of Incorporation of
Chancellor Media.
(rr)3.2B -- Amended and Restated Bylaws of Chancellor Media.
(ff)3.3 -- Certificate of Incorporation of Chancellor Media
Corporation of Los Angeles (formerly known as Evergreen
Media Corporation of Los Angeles).
(pp)3.3A -- Amendment to Certificate of Incorporation of Chancellor
Media Corporation of Los Angeles, filed September 5,
1997.
*3.3B -- Amendment to Certificate of Incorporation of Chancellor
Media Corporation of Los Angeles, filed October 28, 1997.
(ff)3.4 -- Bylaws of Chancellor Media Corporation of Los Angeles.
(t)4.10 -- 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).
(z)4.11 -- 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.
(y)4.12 -- Specimen Common Stock Certificate of Chancellor Media.
(y)4.13 -- Specimen 7% Convertible Preferred Stock Certificate of
Chancellor Media.
(y)4.14 -- Form of Certificate of Designation for 7% Convertible
Preferred Stock of Chancellor Media.
(aa)4.15 -- Indenture, dated as of February 14, 1996, governing the
9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
</TABLE>
<PAGE> 130
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
(bb)4.16 -- First Supplemental Indenture, dated as of February 14,
1996, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
(cc)4.17 -- Indenture, dated as of February 26, 1996, governing the
12 1/4% Subordinated Exchange Debentures due 2008 of
CMCLA.
(dd)4.18 -- Indenture, dated as of January 23, 1997, governing the
12% Subordinated Exchange Debentures due 2009 of CMCLA.
(ee)4.19 -- Indenture, dated as of June 24, 1997, governing the
8 3/4% Senior Subordinated Notes due 2004 of CMCLA.
(ff)4.21 -- Specimen 12 1/4% Series A Senior Cumulative Exchangeable
Preferred Stock Certificate of CMCLA.
(ff)4.22 -- Specimen 12% Exchangeable Preferred Stock Certificate of
CMCLA.
(ff)4.23 -- Form of Certificate of Designation for 12 1/4% Series A
Senior Cumulative Exchangeable Preferred Stock of CMCLA.
(ff)4.24 -- Form of Certificate of Designation for 12% Exchangeable
Preferred Stock of CMCLA.
(pp)4.25 -- 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.
(hh)4.26 -- Second Supplemental Indenture, dated as of April 15,
1997, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
(pp)4.27 -- Third Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
(pp)4.28 -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated June 24, 1997, governing the
8 3/4% Senior Subordinated Notes due 2007 of CMCLA.
(pp)4.29 -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated February 26, 1997, governing
the 12 1/4% Subordinated Exchange Debentures due 2008 of
CMCLA.
(pp)4.30 -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated January 23, 1997, governing
the 12% Subordinated Exchange Debentures due 2009 of
CMCLA.
(qq)4.31 -- Specimen $3.00 Convertible Exchangeable Preferred Stock
Certificate of Chancellor Media.
(qq)4.32 -- Certificate of Designation for $3.00 Convertible
Exchangeable Preferred Stock of Chancellor Media.
(qq)4.33 -- Convertible Subordinated Exchange Indenture (including
form of 6% Convertible Subordinated Exchange Debenture
attached thereto), dated June 16, 1997, between Evergreen
Media Corporation and The Bank of New York.
*4.34 -- Amended and Restated Indenture, dated as of October 28,
1997, governing the 10 1/2% Senior Subordinated Notes due
2007 of CMCLA.
*4.35 -- 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.
</TABLE>
<PAGE> 131
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
*4.36 -- Third Amendment to Second Amended and Restated Loan
Agreement, dated October 28, 1997, among CMCLA, the
Lenders, the Agents and the Administrative Agent.
*4.37 -- Fourth Amendment to Second Amended and Restated Loan
Agreement, dated February 10, 1998, among CMCLA, the
Lenders, the Agents and the Administrative Agent.
(f)10.23 -- Evergreen Media Corporation Stock Option Plan for
Non-employee Directors.
**(n)10.26 -- Employment Agreement dated February 9, 1996 by and
between Evergreen Media Corporation and Kenneth J.
O'Keefe.
(o)10.28 -- 1995 Stock Option Plan for executive officers and key
employees of Evergreen Media Corporation.
**(pp)10.30 -- First Amendment to Employment Agreement dated March 1,
1997 by and between Evergreen Media Corporation and
Kenneth J. O'Keefe.
**(pp)10.31 -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and Scott K. Ginsburg.
**(pp)10.32 -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and James de Castro.
**(pp)10.33 -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and Matthew E. Devine.
**(pp)10.34 -- 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.
(jj)10.36 -- Chancellor Broadcasting Company 1996 Stock Award Plan.
(kk)10.37 -- Chancellor Holdings Corp. 1994 Director Stock Option
Plan.
(ll)10.38 -- Stock Option Grant Letter dated September 30, 1995 from
Chancellor Corporation to Steven Dinetz.
(mm)10.39 -- Stock Option Grant Letter dated September 30, 1995 from
Chancellor Corporation to Eric W. Neuman.
(nn)10.40 -- Stock Option Grant Letter dated September 30, 1995 from
Chancellor Corporation to Marvin Dinetz.
(oo)10.41 -- Stock Option Grant Letter dated February 14, 1997 from
Chancellor Broadcasting Company to Carl M. Hirsch.
(pp)16.1 -- Letter from KPMG Peat Marwick LLP to the Securities and
Exchange Commission dated September 29, 1997.
*21.1 -- Subsidiaries of Chancellor Media.
*21.2 -- Subsidiaries of CMCLA.
*23.1 -- Consent of Coopers & Lybrand L.L.P.
*23.2 -- Consent of KPMG Peat Marwick LLP.
*27.1 -- Financial Data Schedule of Chancellor Media Corporation.
*27.2 -- Financial Data Schedule of Chancellor Media Corporation
of Los Angeles.
</TABLE>
- ---------------
* Filed herewith.
** Management contract or compensatory arrangement.
(f) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-4, as amended (Reg. No.
33-89838).
<PAGE> 132
(i) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated January 17, 1996.
(j) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ending
June 30, 1995.
(k) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-1, as amended (Reg. No.
33-69752).
(n) Incorporated by reference to the identically numbered exhibit to
Evergreen's Annual Report on Form 10-K for the fiscal year ended December
31, 1995.
(o) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ending
March 31, 1996.
(p) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1996.
(q) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-3, as amended (Reg. No.
333-12453).
(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 (Reg. No. 333-32677), 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 and CRBC, as filed on February 29, 1996.
(bb) Incorporated by reference to Exhibit 4.5 to the Annual Report on Form 10-K
of Chancellor, CRBC 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 and CRBC, as filed on February 29, 1996.
(dd) Incorporated by reference to Exhibit 4.7 to the Current Report on Form 8-K
of CRBC, as filed on February 6, 1997.
(ee) Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K
of Chancellor and CRBC, 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.
<PAGE> 133
(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 CMCLA's
Registration Statement on Form S-4 (Reg. No. 333-36451), dated September
26, 1997, as amended.
(qq) Incorporated by reference to the identically numbered exhibit to
Chancellor Media's Registration Statement on Form S-3 (Reg. No.
333-36855), dated October 1, 1997, as amended.
(rr) Incorporated by reference to the identically numbered exhibit to the
Quarterly Report on Form 10-Q of Chancellor Media and CMCLA for the
quarterly period ended September 30, 1997.
(ss) Incorporated by reference to the identically numbered exhibit to the
Current Report on Form 8-K of Chancellor Media and CMCLA, dated as of
February 23, 1998 and filed as of February 27, 1998.
<PAGE> 1
EXHIBIT 3.3b
CERTIFICATE OF MERGER
OF
KATZ MEDIA CORPORATION
WITH AND INTO
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
(Under Section 251 of the General
Corporation Law of the State of Delaware)
Chancellor Media Corporation of Los Angeles, a Delaware corporation,
hereby certifies that:
1. The name and state of incorporation of each of the constituent
corporations is as follows:
(a) Chancellor Media Corporation of Los Angeles, a
Delaware corporation ("CMCLA"); and
(b) Katz Media Corporation, a Delaware corporation
("KMC").
2. The Agreement and Plan of Merger (the "Agreement and Plan of
Merger"), dated as of October 28, 1997, by and between CMCLA and KMC has been
approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with Sections 228 and 251 of the General
Corporation Law of the State of Delaware.
3. The name of the surviving corporation (the "Surviving
Corporation") shall be, and hereby is, Chancellor Media Corporation of Los
Angeles.
4. The Certificate of Incorporation of CMCLA, as amended hereby,
shall be, and hereby is, the Certificate of Incorporation of the Surviving
Corporation, with Article Four of such Certificate of Incorporation amended and
restated in its entirety as set forth in Annex I attached hereto.
5. The executed Agreement and Plan of Merger is on file at an
office of the Surviving Corporation, the address of such office being 433 East
Las Colinas Blvd., Suite 1130, Irving, Texas 75039.
6. A copy of the Agreement and Plan of Merger will be furnished
by the Surviving Corporation, on request and without cost, to any stockholder
of either of the constituent corporations.
<PAGE> 2
IN WITNESS WHEREOF, CMCLA has caused this certificate to be signed as
of the ____ day of October, 1997.
CHANCELLOR MEDIA CORPORATION
OF LOS ANGELES
By:
--------------------------------------------
Name: Matthew E. Devine
Office: Chief Financial Officer and Chief
Accounting Officer, Secretary
<PAGE> 3
ANNEX I
ARTICLE FOURTH SHALL BE AMENDED AND RESTATED IN ITS ENTIRETY TO READ AS
FOLLOWS:
FOURTH: The total number of shares of all classes of capital
stock which the Corporation shall have authority to issue is 10,002,000 shares
consisting of (a) 10,000,000 shares of preferred stock, par value $.01 per
share (the "Preferred Stock") and (b) 2,000 shares of Common Stock, par value
$.01 per share (the "Common Stock").
The designations, powers, preferences, rights, qualifications,
limitations, and restrictions of the Preferred Stock and the Common Stock are
as follows:
1. Provisions Relating to the Preferred Stock.
(a) The Preferred Stock may be issued from time to time
in one or more classes or series, the shares of each class or series to have
such designations, powers, preferences and rights and such qualifications,
limitations and restrictions thereof as are stated and expressed herein and in
the resolution or resolutions providing for the issue of such class or series
adopted by the Board of Directors of the Corporation (the "Board of Directors")
as hereafter prescribed.
(b) Authority is hereby expressly granted to and vested
in the Board of Directors to authorize the issuance of the Preferred Stock from
time to time in one or more classes or series, and with respect to each class
or series of the Preferred Stock, to fix and state by the resolution or
resolutions from time to time adopted providing for the issuance thereof the
following:
(i) whether or not the class or series is to have
voting rights, full, special or limited, or is to be without voting rights, and
whether or not such class or series is to be entitled to vote as a separate
class either alone or together with the holders of one or more other classes or
series of stock;
(ii) the number of shares to constitute the class
or series and the designations thereof;
(iii) the preferences and relative, participating,
optional or other special rights, if any, and the qualifications, limitations
or restrictions thereof, if any, with respect to any class or series;
(iv) whether or not the shares of any class or
series shall be redeemable at the option of the Corporation or the holders
thereof or upon the happening of any specified event, and, if redeemable, the
redemption price or prices (which may be payable in the form of cash, notes,
securities or other property) and the time or times at which, and the terms and
conditions upon which, such shares shall be redeemable and the manner of
redemption;
<PAGE> 4
(v) whether or not the shares of a class or
series shall be subject to the operation of retirement or sinking funds to be
applied to the purchase or redemption of such shares for retirement, and, if
such retirement or sinking fund or funds are to be established, the annual
amount thereof and the terms and provisions relative to the operation thereof;
(vi) the dividend rate, whether dividends are
payable in cash, securities of the Corporation or other property, the
conditions upon which and the times when such dividends are payable, the
preference to or the relation to the payment of dividends payable on any other
class or classes or series of stock, whether or not such dividends shall be
cumulative or noncumulative and, if cumulative, the date or dates from which
such dividends shall accumulate;
(vii) the preferences, if any, and the amounts
thereof which the holders of any class or series thereof shall be entitled to
receive upon the voluntary or involuntary dissolution of, or upon any
distribution of the assets of, the Corporation;
(viii) whether or not the shares of any class or
series, at the option of the Corporation or the holder thereof or upon the
happening of any specified event, shall be convertible into or exchangeable for
the shares of any other class or classes or of any other series of the same or
any other class or classes of stock, securities, or other property of the
Corporation and the conversion price or prices or ratio or ratios or the rate
or rates at which such exchange may be made, with such adjustments, if any, as
shall be stated and expressed or provided for in such resolution or
resolutions; and
(ix) such other special rights and protective
provisions with respect to any class or series as may to the Board of Directors
seem advisable.
(c) The shares of each class or series of the Preferred
Stock may vary from the shares of any other class or series thereof in any or
all of the foregoing respects. The Board of Directors may increase the number
of shares of the Preferred Stock designated for any existing class or series by
a resolution adding to such class or series authorized and unissued shares of
the Preferred Stock not designated for any other class or series. The Board of
Directors may decrease the number of shares of the Preferred Stock designated
for any existing class or series by a resolution subtracting from such class or
series authorized and unissued shares of the Preferred Stock designated for
such existing class or series, and the shares so subtracted shall become
authorized, unissued and undesignated shares of the Preferred Stock.
(d) The number of authorized shares of Preferred Stock
may be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the Common
Stock, without a vote of a majority of the holders of the Preferred Stock, or
of any class or series thereof, unless a vote of any such holders is required
pursuant to the certificate or certificates establishing such class or series
of Preferred Stock.
2. Provisions Relating to the Common Stock.
(a) Each share of Common Stock of the Corporation shall
have identical rights and privileges in every respect. The holders of shares
of Common Stock shall be entitled
<PAGE> 5
to vote upon all matters submitted to a vote of the stockholders of the
Corporation and shall be entitled to one vote for each share of Common Stock
held.
(b) Subject to the prior rights and preferences, if any,
applicable to shares of the Preferred Stock or any series thereof, the holders
of shares of the Common Stock shall be entitled to receive such dividends
(payable in cash, stock, or otherwise) as may be declared thereon by the board
of directors at any time and from time to time out of any funds of the
Corporation legally available therefor.
(c) In the event of any voluntary or involuntary
liquidation, dissolution, or winding-up of the Corporation, after distribution
in full of the preferential amounts, if any, to be distributed to the holders
of shares of the Preferred Stock or any series thereof, the holders of shares
of the Common Stock shall be entitled to receive all of the remaining assets of
the Corporation available for distribution to its stockholders, ratably in
proportion to the number of shares of the Common Stock held by them. A
liquidation, dissolution, or winding-up of the Corporation, as such terms are
used in this Paragraph (c), shall not be deemed to be occasioned by or to
include any consolidation or merger of the Corporation with or into any other
corporation or corporations or other entity or a sale, lease, exchange, or
conveyance of all or a part of the assets of the Corporation.
3. General.
(a) Subject to the foregoing provisions of this
Certificate of Incorporation, the Corporation may issue shares of its Common
Stock from time to time for such consideration (not less than the par value
thereof) as may be fixed by the Board of Directors, which is expressly
authorized to fix the same in its absolute and uncontrolled discretion subject
to the foregoing conditions. Shares so issued for which the consideration
shall have been paid or delivered to the Corporation shall be deemed fully paid
stock and shall not be liable to any further call or assessment thereon, and
the holders of such shares shall not be liable for any further payments in
respect of such shares.
(b) The Corporation shall have authority to create and
issue rights and options entitling their holders to purchase shares of the
Corporation's capital stock of any class or series or other securities of the
Corporation, and such rights and options shall be evidenced by instrument(s)
approved by the Board of Directors. The Board of Directors shall be empowered
to set the exercise price, duration, times for exercise, and other terms of
such options or rights; provided, however, that the consideration to be
received for any shares of capital stock subject thereto shall not be less than
the par value thereof.
<PAGE> 1
EXHIBIT 4.34
================================================================================
KATZ MEDIA CORPORATION
-------------------------------------------
SERIES A AND SERIES B
10 1/2% SENIOR SUBORDINATED NOTES DUE 2007
-------------------------------------------
-------------------
AMENDED AND RESTATED INDENTURE
DATED AS OF DECEMBER 19, 1996
AMENDED AND RESTATED AS OF
OCTOBER 28, 1997
-------------------
American Stock Transfer & Trust Company
Trustee
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.03. Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . 13
Section 1.04. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 2. THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.01. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.02. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.04. Paying Agent to Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.05. Holder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.06. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.07. Replacement Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.08. Outstanding Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.09. Treasury Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.10. Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 2.13. Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 2.14. CUSIP Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 3. REDEMPTION AND PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.02. Selection of Notes to be Redeemed or Purchased . . . . . . . . . . . . . . . . . . . . 26
Section 3.03. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.04. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.05. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.06. Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.07. Optional Redemption Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.08. Mandatory Purchase Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 4. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.01. Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.02. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.03. Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.04. Stay, Extension and Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.05. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.06. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.07. Incurrence of Indebtedness and Issuance of Preferred Stock . . . . . . . . . . . . . . 33
Section 4.08. Transactions With Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.09. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.10. Compliance With Laws, Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.11. Dividend and Other Payment Restrictions Affecting Subsidiaries . . . . . . . . . . . . 34
Section 4.12. Maintenance of Office or Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.13. Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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Section 4.14. Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.15. Additional Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 4.16. Activities of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 4.17. No Senior Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 4.18. Asset Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 5. SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.01. Merger, Consolidation or Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.02. Successor Corporation Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 6. DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.05. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.06. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.07. Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 7. TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.03. Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.05. Notice to Holders of Defaults and Events of Default . . . . . . . . . . . . . . . . . 44
Section 7.06. Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.07. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 7.09. Successor Trustee by Merger, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 7.11. Preferential Collection of Claims Against the Company . . . . . . . . . . . . . . . . 46
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . 46
Section 8.02. Legal Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 8.03. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 8.04. Conditions to Legal or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . 47
Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other
Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 8.06. Repayment to The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 8.07. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 9. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 9.01. Amendments and Supplements Permitted Without Consent of Holders . . . . . . . . . . . 49
Section 9.02. Amendments and Supplements Requiring Consent of Holders . . . . . . . . . . . . . . . 49
Section 9.03. Compliance with TIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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Section 9.04. Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 9.05. Notation on or Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 9.06. Trustee Protected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 10. SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.01. Agreement to Subordinate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.02. Liquidation; Dissolution; Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.03. Default on Designated Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 10.04. Acceleration of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 10.05. When Distribution Must Be Paid Over . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 10.06. Notice by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 10.07. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 10.08. Relative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 10.09. Subordination May Not Be Impaired by Company . . . . . . . . . . . . . . . . . . . . 53
Section 10.10. Distribution or Notice to Representative . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.11. Rights of Trustee and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.12. Authorization to Effect Subordination . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.13. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 11. GUARANTEE OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.01. Subsidiary Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.02. Execution and Delivery of Subsidiary Guarantee . . . . . . . . . . . . . . . . . . . 55
Section 11.03. Guarantors May Consolidate, Etc., On Certain Terms . . . . . . . . . . . . . . . . . 56
Section 11.04. Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 11.05. Additional Guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 11.06. Limitation on Guarantor Liability . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 11.07. "Trustee" to Include Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 11.08. Subordination of Subsidiary Guarantee . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 12.01. Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 12.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 12.03. Communication by Holders with Other Holders . . . . . . . . . . . . . . . . . . . . 59
Section 12.04. Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . 59
Section 12.05. Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . 59
Section 12.06. Rules by Trustee and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12.07. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12.08. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12.09. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.10. Variable Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.11. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.12. No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . 60
Section 12.13. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.14. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.15. Table of Contents, Headings, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . 60
EXHIBIT A-1 Form of Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1-1
EXHIBIT A-2 Form of Registration S Temporary Global Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . A2-1
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EXHIBIT B-1 Form Of Certificate For Exchange Or Registration Of Transfer From Rule
144a Global Note To Regulation S Global Note . . . . . . . . . . . . . . . . . . . . . . . . . . . B1-1
EXHIBIT B-2 Form Of Certificate For Exchange Or Registration Of Transfer
From Regulation S Global Note To Rule 144a Global Note . . . . . . . . . . . . . . . . . . . . . . B2-1
EXHIBIT B-3 Form Of Certificate For Exchange Or Registration Of Transfer of Definitive
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B3-1
EXHIBIT B-4 Form Of Certificate For Exchange Or Registration Of Transfer From Rule
144a Global Note Or Regulation S Permanent Global Note To Definitive Note . . . . . . . . . . . . . B4-1
EXHIBIT C Form Of Certificate To Be Delivered By Institutional Accredited Investors . . . . . . . . . . . . . C-1
EXHIBIT D Form Of Subsidiary Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1
EXHIBIT E Form Of Supplemental Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1
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CROSS-REFERENCE TABLE*
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<CAPTION>
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
<S> <C>
310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.03
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.07
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06;11.02
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04;11.02
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.02
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.03,10.04
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.07
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05,11.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(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
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.12
317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
v
<PAGE> 7
This Amended and Restated Indenture, dated as of December 19, 1996 and
amended and restated as of October 28, 1997, is among Katz Media Corporation, a
Delaware corporation (the "Company"), Katz Communications, Inc., a Delaware
corporation, Katz Millennium Marketing Inc., a Delaware corporation, Amcast
Radio Sales, Inc., a Delaware corporation formerly known as Banner Radio Sales,
Inc., Christal Radio Sales, Inc., a Delaware corporation, Eastman Radio Sales,
Inc., a Delaware corporation, Seltel Inc., a Delaware corporation, Katz Cable
Corporation, a Delaware corporation and The National Payroll Corporation, Inc.,
a Delaware corporation (the "Guarantors") and American Stock Transfer & Trust
Company, a New York trust corporation, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the holders of the Company's 10 1/2%
Series A Senior Subordinated Notes due 2007 (the "Series A Notes" and the
Company's 10 1/2% Series B Senior Subordinated Notes due 2007 (the "Series B
Notes" and, together with the Series A Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"8 3/4% Notes" means $200.0 million aggregate principal amount of
8 3/4% Senior Subordinated Notes due 2007 of CMCLA, issued pursuant to an
indenture (the "8 3/4% Notes Indenture"), dated as of June 24, 1997, as
supplemented, as the same may be modified or amended from time to time.
"3/8% Notes" means $200.0 million aggregate principal amount of
93/8% Senior Subordinated Notes due 2004 of CMCLA, issued pursuant to an
indenture (the "93/8% Notes Indenture"), dated as of February 14, 1996, as
supplemented, as the same may be modified or amended from time to time.
"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.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Agent Members" means any members of, or participants in, the
Depositary.
"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
<PAGE> 8
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 (i) the sale, lease, conveyance or other
disposition of any assets other than Marketable Securities (including, without
limitation, by way of a sale and leaseback) other than in the ordinary course of
business and other than any Contract Buy Out or sub-lease of real property
(provided that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole will be governed by Section 4.13 and/or Section 5.01 hereof and not by the
provisions of Section 4.14 hereof), and (ii) the issue or sale by the Company or
any of its Subsidiaries of Equity Interests of any of the Company's
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $2.0 million or (b) for net proceeds in excess of $2.0
million. Notwithstanding the foregoing: (i) a transfer of assets by the Company
to a Subsidiary or by a Subsidiary to the Company or to another Subsidiary, (ii)
an issuance or sale of Equity Interests by a Subsidiary to the Company or to
another Subsidiary or any such issuance or sale in a manner that does not reduce
the percentage ownership of the Equity Interests of such Subsidiary by the
Company or any Subsidiary, (iii) a Restricted Payment that is permitted by
Section 4.05 hereof and (iv) an Asset Swap that is permitted under Section 4.18
hereof will not be deemed to be an Asset Sale.
"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 a 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.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal
or state law for the relief of debtors.
"Board of Directors" means, with respect to any Person, the
Company's board of directors or any authorized committee of such board of
directors (or similar governing body) of such Person.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be so required to be capitalized on the balance sheet in
accordance with GAAP.
"Capital Stock" means, (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Chancellor Broadcasting" means Chancellor Broadcasting Company, a
Delaware corporation that was merged with and into Evergreen Mezzanine Holdings
Corporation, a Delaware corporation, on September 5, 1997.
"Chancellor Media" means Chancellor Media Corporation, a Delaware
corporation formerly known as Evergreen Media Corporation and indirect parent of
CMCLA, and its successors.
"Chancellor Mezzanine" means Chancellor Mezzanine Holdings
Corporation, a Delaware corporation formerly known as Evergreen Mezzanine
Holdings Corporation and direct parent of CMCLA, and its successors.
2
<PAGE> 9
"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, Chancellor Mezzanine 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,
Chancellor Mezzanine or the Company. In no event shall the consummation of the
tender offer for KMG by Morris Acquisition Corporation, the merger of Morris
Acquisition Corporation with and into KMG or the merger of the Company with and
into CMCLA or transactions related to the foregoing be deemed to constitute a
"Change of Control" for purposes hereof.
"CMCLA" means Chancellor Media Corporation of Los Angeles, a
Delaware corporation formerly known as Evergreen Media Corporation of Los
Angeles, and its successors.
"Company" means Katz Media Corporation, a Delaware corporation.
"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 Hedging 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 Capital Lease Obligations paid or accrued by such Person and its Subsidiaries
during such period as determined on a consolidated basis in accordance with
GAAP.
"Consolidated Net Income" of any Person means, for any period, the
aggregate net income (or loss) of such Person and its Subsidiaries for such
period on a consolidated basis, determined in accordance with GAAP; provided
that there shall be excluded therefrom, without duplication, (i) gains and
losses from Asset Sales (without regard to the $2.0 million limitation set forth
in the definition thereof) or abandonments or reserves relating thereto and the
related tax effects, (ii) items classified as extraordinary or nonrecurring
gains and losses, and the related tax effects according to GAAP, (iii) the net
income (or loss) of any Person acquired in a pooling of interests transaction
accrued prior to the date it becomes a Subsidiary of such first referred to
Person or is merged or consolidated with it or any of its Subsidiaries, (iv) the
net income of any Subsidiary to the extent that the declaration of dividends or
similar distributions by that Subsidiary of that income is restricted by
contract, operation of law or otherwise and (v) the net income of any Person,
other than a Subsidiary, except to the extent of the lesser of (a) dividends or
distributions paid to such first referred to Person or its Subsidiary by such
Person and (b) the net income of such Person (but in no event less than zero),
and the net loss of such Person shall be included only to the extent of the
aggregate Investment of the first referred to Person or a consolidated
Subsidiary of such Person.
"Consolidated Non-Cash Charges" means, with respect to any Person
for any period, the aggregate depreciation, amortization and other non-cash
expenses of such Person and its Subsidiaries reducing Consolidated Net Income of
such Person and its Subsidiaries for such period, including, without limitation,
Non-Cash Rent Expense, determined on a consolidated basis in accordance with
GAAP (excluding any such charges constituting an extraordinary or nonrecurring
item).
3
<PAGE> 10
"Continuing Director" means, as of the date of determination, any
Person who (i) was a member of the Board of Directors of Chancellor Media,
Chancellor Mezzanine or CMCLA on the date of the amendment and restatement of
this Indenture, (ii) was nominated for election or elected to the Board of
Directors of Chancellor Media, Chancellor Mezzanine or CMCLA 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.
"Credit Agreement" means the Credit Agreement, dated on or about
February 14, 1996, as amended and restated as of January 23, 1997, among
Chancellor Broadcasting, Radio Broadcasting, the lenders from time to time party
thereto and Bankers Trust Company as managing agent, together with the related
documents thereto (including, without limitation, any guarantee agreements and
security documents), in each case, as such agreements may be amended (including
any amendment and restatement thereof), supplemented or otherwise modified from
time to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including by way of adding Subsidiaries of
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.
"Default" means any event that is or with the passage of time or
the giving of notice or both would be an Event of Default.
"Definitive Notes" means Notes that are in the form of Exhibit A
attached hereto (but without including the text referred to in footnotes 1 and 2
thereto).
"Depositary" means, with respect to the Notes issuable or issued
in whole or in part in global form, the Person specified in Section 2.03 hereof
as the Depositary with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
"Designated Senior Debt" means any Indebtedness outstanding under
(i) the New Credit Agreement and (ii) any other Senior Debt permitted under this
Indenture, the principal amount of which is $20.0 million or more and that has
been designated by the Company as "Designated Senior Debt."
"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 or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
redeemable at the 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 date on
which the Notes mature.
"DLJ" means Donaldson, Lufkin and Jenrette Securities Corporation.
"DLJMB" means DLJ Merchant Banking Partners, L.P. and related
investors.
"Eligible Institution" means a commercial banking institution that
has combined capital and surplus of not less than $100.0 million or its
equivalent in foreign currency, whose short-term debt is rated "A-2" (or higher)
according to S&P or "P-2" or higher according to Moody's or carrying an
equivalent rating by a nationally recognized rating agency if both of the two
named rating agencies cease publishing ratings of investments.
"Equity Interests" means Capital Stock and all warrants, options
or other rights to acquire Capital Stock (but excluding any debt security that
is convertible into, or exchangeable for Capital Stock).
4
<PAGE> 11
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Offer" means the offer by the Company to Holders to
exchange Series B Notes for Series A Notes.
"Existing Indebtedness" means up to $24.5 million in aggregate
principal amount of Katz Notes in existence and not repaid on December 19, 1996
pursuant to the Tender Offer, the Katz Notes being repaid pursuant to the Tender
Offer until the closing of the Tender Offer and up to $5.0 million of
Indebtedness of the Company and its Restricted Subsidiaries (other than
Indebtedness under the Old Credit Agreement and the New Credit Agreement), in
existence on December 19, 1996 until such amounts are repaid.
"Financial Monitoring and Oversight Agreements" means the
Financial Monitoring and Oversight Agreement among Hicks, Muse & Co. Partners,
L.P., Radio Broadcasting and Chancellor Broadcasting as in effect on February
14, 1996, and the Financial Advisory Agreement among HM2/Management Partners,
L.P., Radio Broadcasting and Chancellor Broadcasting, as in effect on February
14, 1996, or as amended in connection with the merger of Chancellor
Broadcasting, Radio Broadcasting, Chancellor Media, Chancellor Mezzanine and
CMCLA on September 5, 1997.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which are in effect on the date
hereof.
"Global Notes" means, individually and collectively, the
Regulation S Temporary Global Note, the Regulation S Permanent Global Note and
the Rule 144A Global Note.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America or any agency or
instrumentality thereof for the payment of which guarantee or obligations the
full faith and credit of the United States is pledged.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"Guarantors" means each of (i) Katz Communications, Inc., Katz
Millennium Marketing Inc., Banner Radio Sales, Inc., Christal Radio Sales, Inc.,
Eastman Radio Sales, Inc., Seltel Inc., Katz Cable Corporation and The National
Payroll Company, Inc. and (ii) any other subsidiary that executes a Subsidiary
Guarantee in accordance with the provisions of Section 4.15 and Article 11
hereof, and their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (a) currency exchange or interest rate swap
agreements, currency exchange or interest rate cap agreements and currency
exchange or interest rate collar agreements and (b) other agreements or
arrangements designed to protect such person against fluctuations in currency
exchange rates or interest rates.
"Hicks Muse" means Hicks, Muse, Tate & Furst Incorporated.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness
of such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or bankers' acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable or
liabilities in
5
<PAGE> 12
respect of representation contracts payable, if and to the extent any of the
foregoing indebtedness (other than letters of credit and Hedging Obligations)
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, as well as all indebtedness of others secured by a Lien on
any asset of such Person (whether or not such indebtedness is assumed by such
Person) and, to the extent not otherwise included, the Guarantee by such Person
of any indebtedness of any other Person. The amount of indebtedness of any
Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability of any
guarantees at such date; provided that for purposes of calculating the amount of
any non-interest bearing or other discount security, such Indebtedness shall be
deemed to be the principal amount thereof that would be shown on the balance
sheet of the issuer dated such date prepared in accordance with GAAP but that
such security shall be deemed to have been incurred only on the date of the
original issuance thereof.
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Initial Purchaser" means Donaldson, Lufkin & Jenrette Securities
Corporation.
"Insolvency or Liquidation Proceeding" means (i) any insolvency or
bankruptcy or similar case or proceeding, or any reorganization, receivership,
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, or (ii) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company.
"Interim Credit Facility" means that certain credit facility of
KMSI providing up to $5.6 million of credit borrowings, including any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time.
"Investments" means, with respect to any Person, all investments
by such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Subsidiary Guarantees), advances or capital
contributions (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, and all other items that are or would be classified as investments
on a balance sheet prepared in accordance with GAAP. If the Company or any
Subsidiary of the Company sells or otherwise disposes of any Equity Interests of
any direct or indirect Subsidiary of the Company such that, after giving effect
to any such sale or disposition, such Person is no longer a Subsidiary of the
Company, the Company shall be deemed to have made an Investment on the date of
any such sale or disposition equal to the fair market value of the Equity
Interests of such Subsidiary not sold or disposed of in an amount determined by
the Board of Directors in good faith.
"Katz Notes" means the Company's $100.0 million original principal
amount ($97.8 million principal amount outstanding prior to the Tender Offer) of
12 3/4% Senior Subordinated Notes due 2002.
"KCC Merger" means the merger between the Company and the company
formerly known as Katz Media Corporation, the survivor of which is the Company.
"KMG" means Katz Media Group, Inc., a Delaware corporation, and
indirect corporate parent of the Company.
"KMSI" means Katz Media Services, Inc., a Delaware corporation,
and direct corporate parent of the Company.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in The City of New York, the city in which the principal
corporate trust office of the Trustee is located or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
6
<PAGE> 13
"Leverage Ratio" shall mean, as to any Person, the ratio of (i)
the sum of the aggregate outstanding amount of Indebtedness of such Person and
its Subsidiaries as of the date of calculation on a consolidated basis in
accordance with GAAP to (ii) the Consolidated EBITDA of such Person for the four
full fiscal quarters (the "Four Quarter Period") ending on or prior to the date
of determination.
For purposes of this definition, the aggregate outstanding
principal amount of Indebtedness of the Person and its Subsidiaries for which
such calculation is made shall be determined on a pro forma basis as if the
Indebtedness giving rise to the need to perform such calculation had been
incurred and the proceeds therefrom had been applied, and all other transactions
in respect of which such Indebtedness is being incurred had occurred, on the
last day of the Four Quarter Period. In addition to the foregoing, for purposes
of this definition, "Consolidated EBITDA" shall be calculated on a pro forma
basis after giving effect to (i) the incurrence of the Indebtedness of such
Person and its Subsidiaries (and the application of the proceeds therefrom)
giving rise to the need to make such calculation and any incurrence (and the
application of the proceeds therefrom) or repayment of other Indebtedness, other
than the incurrence or repayment of Indebtedness pursuant to working capital
facilities, at any time subsequent to the beginning of the Four Quarter Period
and on or prior to the date of determination, as if such incurrence (and the
application of the proceeds thereof), or the repayment, as the case may be,
occurred on the first day of the Four Quarter Period and (ii) any Asset Sales or
Asset Acquisitions (including, without limitation, any Asset Acquisition giving
rise to the need to make such calculation as a result of such Person or one of
its Subsidiaries (including any Person that becomes a Subsidiary as a result of
such Asset Acquisition) incurring, assuming or otherwise becoming 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 Hedging
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement.
"Marketable Securities" means (a) Government Securities, (b) any
certificate of deposit maturing not more than 270 days after the date of
acquisition issued by, or time deposit of, an Eligible Institution, (c)
commercial paper maturing not more than 270 days after the date of acquisition
of an issuer (other than an Affiliate of the Company) with a rating, at the time
as of which any investment therein is made, of "A-2" (or higher) according to
S&P or "P-2" (or higher) according to Moody's or carrying an equivalent rating
by a nationally recognized rating agency if both of the two named rating
agencies cease publishing ratings of investments, (d) any bankers acceptances or
money market deposit accounts issued by an Eligible Institution, (e) any fund
investing exclusively in investments of the types described in clauses (a)
through (d) above, and (f) any repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses (a),
(b) and (d) above entered into with any domestic commercial bank having capital
and surplus in excess of $500 million and a Keefe Bank Watch Rating of "B" or
better.
"Media Representation Venture" means any entity principally
engaged in the business of media representation.
7
<PAGE> 14
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"NCC" means National Cable Communications, L.P., a Delaware
limited partnership.
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that are the subject of such Asset Sale
and any reserve for adjustment in respect of the sale price of such asset or
assets established in accordance with GAAP.
"New Credit Agreement" means that certain secured credit facility
by and among the Company, as borrower, all of the Company's domestic
Subsidiaries, as guarantors, the lenders party thereto, The First National Bank
of Boston, as administrative agent, and DLJ Capital Funding, Inc., as
syndication agent, providing up to $180 million of revolving credit and term
borrowings, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each case as
amended, modified, renewed, extended, refunded, replaced or refinanced from time
to time.
"Non-Cash Rent Expense" means an amount equal to the difference
between rent expense recorded pursuant to SFAS No. 13 and the portion of rent
expense requiring the use of current corporate resources.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise) or (c) constitutes the lender; (ii) no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness of the Company or any of its
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company or any of its
Subsidiaries.
"Note Custodian" means the Trustee, as custodian for the
Depository with respect to the Notes in global form, or any successor entity
thereto.
"Notes" means the Series A Notes and the Series B Notes.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, costs, expenses, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Offering" means the offer and sale of the Notes as contemplated
by the Offering Memorandum.
"Offering Memorandum" means the Offering Memorandum, dated
December 13, 1996, relating to the offering and placement of the Series A Notes.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Principal Accounting Officer, the Treasurer,
any Assistant Treasurer, the Controller, the Secretary or any Vice-President of
such Person.
"Officers' Certificate" means a certificate signed on behalf of
the Company by two Officers of the Company, one of whom must be the Chief
Executive Officer, the Chief Financial Officer, the Treasurer or the Principal
Accounting Officer of the Company, that meets the requirements of Section 12.04
hereof.
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<PAGE> 15
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, which opinion meets the requirements of
Section 12.05 hereof. The counsel may be an employee of or counsel to the
Company, any Subsidiary of the Company or the Trustee.
"Permitted Indebtedness" means, without duplication, (i) the
Notes; (ii) the Subsidiary 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 February 14, 1996; (iv) the
93/8% Notes and the 8 3/4% Notes and Guarantees thereof; (v) Hedging
Obligations; provided that such Hedging 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 Credit Agreement); (vii) Refinancing
Indebtedness; (viii) Indebtedness owed by the Company to any Wholly Owned
Subsidiary or by any Subsidiary to the Company or any Wholly Owned Subsidiary of
the Company; and (ix) guarantees by Subsidiaries of any Indebtedness permitted
to be incurred pursuant to this Indenture.
"Permitted Investments" means (i) Investments by the Company or
any Subsidiary to acquire the stock or assets of any Person (or Indebtedness of
such Person acquired in connection with a transaction in which such Person
becomes a Subsidiary of the Company) engaged in the broadcast business or
businesses reasonably related thereto including, without limitation, media
representation, sale of advertising and such other activities as are incidental
or similar or related thereto; provided that if any such Investment or series of
related Investments involves an Investment by the Company in excess of
$5,000,000, the Company is able, at the time of such Investment and immediately
after giving effect thereto, to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with Section 4.07, (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
4.14, (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
date of the amendment and restatement of this Indenture 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 Marketable Securities, (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 Junior Securities" means (i) equity securities of KMG,
KMSI, the Company or a successor entity and (ii) debt securities of the Company
that are unsecured and subordinated at least to the same extent as the Notes to
Senior Debt of the Company and guarantees of any such debt by any Guarantor that
are unsecured and subordinated at least to the same extent as the Subsidiary
Guarantee of such Guarantor to the Senior Debt of such Guarantor, as the case
may be, and has a final maturity date at least as late as the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Notes.
"Permitted Liens" means (a) Liens in favor of the Company or any
Subsidiary, (b) Liens on property of a Person existing at the time such Person
is merged into or consolidated with the Company or any Subsidiary of the
Company, provided, that such Liens were not incurred in connection with, or in
contemplation of, such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with the Company or
such Subsidiary; (c) Liens on property existing at the time of acquisition
thereof by the Company or any Subsidiary of the Company; provided that such
Liens were not incurred in connection with, or in contemplation of, such
acquisition and do not extend to any assets of the Company or any of its
Subsidiaries other than the property so acquired; (d) Liens to secure the
performance of statutory obligations, surety or appeal bonds or performance
bonds, or landlords', carriers', warehousemen's, mechanics', suppliers',
materialmen's or other like Liens, in any case incurred in the ordinary course
of business and with respect to amounts not yet delinquent or being contested in
good faith by appropriate process of law, if a reserve or other appropriate
provision, if any, as is required by GAAP shall have been made therefor; (e)
Liens for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate
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<PAGE> 16
proceedings promptly instituted and diligently concluded; provided that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (f) [intentionally omitted]; (g) Liens
securing Indebtedness incurred to refinance or replace Indebtedness that has
been secured by a Lien permitted under this Indenture; provided that (x) any
such Lien shall not extend to or cover any assets or property not securing the
Indebtedness so refinanced or replaced and (y) the refinancing Indebtedness
secured by such Lien shall have been permitted to be incurred under Section
4.07; (h) Liens existing on December 19, 1996; (i) charges or levies (other
than any Lien imposed by the Employee Retirement Income Security Act of 1974,
as amended) that are not yet subject to penalties for non-payment or are being
contested in good faith by appropriate proceedings and for which adequate
reserves, if required, have been established or other provisions have been made
in accordance with GAAP; (j) Liens (other than any Lien under the Employee
Retirement Income Security Act of 1974, as amended) incurred or deposits made
in the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security; (k) Liens incurred
or deposits made to secure the performance of tenders, bids, leases, statutory
or regulatory obligations, bankers' acceptances, surety and appeal bonds,
government contracts, performance and return of money bonds and other
obligations of a similar nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (l) Liens
incurred in the ordinary course of business of the Company or any Subsidiary of
the Company with respect to obligations that do not exceed $2.0 million in
principal amount in the aggregate at any one time outstanding and (m) Liens in
favor of the Trustee pursuant to Sections 6.09 and 7.07 hereof.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"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.
"pro forma" means, unless otherwise provided herein, with respect
to any calculation made or required to be made pursuant hereto, a calculation in
accordance with Article 11 of Regulation S-X under the Securities Act.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Radio Broadcasting" means Chancellor Radio Broadcasting Company,
a Delaware corporation that was merged with and into CMCLA on September 5, 1997.
"Refinancing Indebtedness" means any refinancing by the Company of
Indebtedness of the Company or any of its Subsidiaries incurred in accordance
with Section 4.07 (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.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of December 19, 1996, by and among the Company, the
Guarantors and the Initial Purchaser.
"Regulation S" means Regulation S promulgated under the Securities
Act.
"Regulation S Global Note" means a Regulation S Temporary Global
Note or Regulation S Permanent Global Note, as appropriate.
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<PAGE> 17
"Regulation S Permanent Global Note" means a permanent global note
that is deposited with and registered in the name of the Depositary or its
nominee, representing a series of Notes sold in reliance on Regulation S.
"Regulation S Temporary Global Note" means a single temporary
global note that is deposited with and registered in the name of the Depositary
or its nominee, representing a series of Notes sold in reliance on Regulation S.
"Representative" means the indenture trustee or other trustee,
agent or representative for any Senior Debt.
"Responsible Officer," when used with respect to the Trustee,
means any officer within the Corporate Trust Administration Office of the
Trustee (or any successor group of the Trustee) or any other officer of the
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his or her knowledge of and familiarity with the particular subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Payment" means (i) the declaration or payment of any
dividend or the making of any other distribution (other than dividends or
distributions payable in Qualified Capital Stock of the Company), (ii) any
purchase, redemption, retirement or other acquisition for value of 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, (iii) the making of any principal payment or
purchase, defeasance, redemption, prepayment, decrease or other acquisition or
retirement for value prior to any scheduled final maturity, scheduled repayment
or scheduled sinking fund payment, any Indebtedness of the Company or its
Subsidiaries that is subordinate or junior in right of payment to the Notes or
(iv) the making of any Investment (other than a Permitted Investment).
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 144A Global Note" means a permanent global note that is
deposited with and registered in the name of the Depositary or its nominee,
representing a series of Notes sold in reliance on Rule 144A or another
exemption from the registration requirements of the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" of any Person means (i) all Obligations (including
without limitation interest accruing after filing of a petition in bankruptcy
whether or not such interest is an allowable claim in such proceeding) of the
Company or its Subsidiaries, including without limitation any Guarantees of such
Obligations pursuant to the New Credit Agreement and (ii) any other Indebtedness
permitted to be incurred by the Company or the Guarantors under Section 4.07
hereof, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Notes. Notwithstanding anything to the contrary in the foregoing,
Senior Debt will not include (u) any liability for federal, state, local or
other taxes owed or owing by the Company, (v) any Indebtedness of the Company to
any of its Subsidiaries or other Affiliates (other than Indebtedness arising
under the New Credit Agreement), (w) any trade payables, (x) any Indebtedness
that is incurred in violation of this Indenture, (y) Indebtedness represented by
Disqualified Capital Stock or (z) 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 12 1/4% Subordinated
Exchange Debentures due 2008 of CMCLA and the 12% Subordinated Exchange
Debentures due 2009 of CMCLA.
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<PAGE> 18
"Series A Notes" means the Company's 10 1/2% Series A Senior
Subordinated Notes due 2007.
"Series B Notes" means the Company's 10 1/2% Series B Senior
Subordinated Notes due 2007.
"SFAS No. 13" means Statement of Financial Accounting Standards
No. 13.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"S&P" means Standard & Poor's Ratings Group and its successors.
"Subsidiary" means, with respect to any Person (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 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 the
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
Radio Broadcasting and Chancellor Broadcasting as in effect on February 14,
1996.
"Tender Offer" means the Offer to Purchase for Cash and
Solicitation of Consents to Amendments to the Related Indenture, dated November
14, 1996, as amended or supplemented, with respect to the Katz Notes.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Section
77aaa-77bbbb), as amended, as in effect on the date of original issuance of the
Notes.
"Transfer Restricted Notes" means securities that bear or are
required to bear the legend set forth in Section 2.06 hereof.
"Trustee" means American Stock Transfer & Trust Company until a
successor replaces it in accordance with the applicable provisions of Article 7
hereof, and thereafter means the successor.
"Unrestricted Subsidiary" means a Subsidiary of the Company so
designated by a resolution adopted by the Board of Directors of the Company,
provided that (a) neither the Company nor any of its other Subsidiaries (other
than Unrestricted Subsidiaries) (1) provides any credit support for any
Indebtedness of such Subsidiary (including any undertaking, agreement or
instrument evidencing such Indebtedness) or (2) is directly or indirectly liable
for any Indebtedness of such Subsidiary (including any undertaking, agreement or
instrument evidencing such Indebtedness) or (2) is directly or indirectly liable
for any Indebtedness of such Subsidiary, (b) the creditors with respect to
Indebtedness for borrowed money of such Subsidiary, having a principal amount in
excess of $5,000,000, have agreed in writing that they have no recourse, direct
or indirect, to the Company or any other Subsidiary of the Company (other than
Unrestricted Subsidiaries), including, without limitation, recourse with respect
to the payment of principal of or interest on any Indebtedness of such
Subsidiary and (c) at the time of designation of such Subsidiary such Subsidiary
has no property or assets (other than de minimis assets resulting from the
initial capitalization of such Subsidiary). Any such designation by the Board of
Directors of the Company shall be evidenced to the Trustee by the filing with
the Trustee of a certified copy of the resolution of the Company's Board of
Directors giving effect to such designation and an Officers' Certificate
certifying hat such
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<PAGE> 19
designation complied with the foregoing conditions. Until otherwise designated
by the Board of Directors of the Company, NCC shall be an Unrestricted
Subsidiary.
"U.S. Government Obligations" means direct obligations of the
Untied States of America for the payment of which the full faith and credit of
the United States of America is pledged, provided that no U.S. Government
Obligation shall be callable at the issuer's option.
"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. Person" has the meaning specified in Regulation S.
"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 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 payments of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
TERM DEFINED IN SECTION
<S> <C>
"Acceleration Notice" 6.02
"Affiliate Transaction" 4.08
"Asset Sale Payment" 3.08
"Cedel Bank" 2.01
"Covenant defeasance option" 8.01
"Change of Control Payment" 4.13
"Change of Control Offer" 4.13
"Custodian" 6.01
"DTC" 2.03
"Euroclear" 2.01
"Event of Default" 6.01
"Incur" 4.07
"Legal defeasance option" 8.01
"Net Proceeds Offer" 4.14
"Offer" 3.08
"Paying Agent" 2.03
"Payment Blockage Notice" 10.03
"Payment Date" 3.08
"Purchase Date" 3.01
"Registrar" 2.03
"Restricted Payments" 4.05
"Trustee Expenses" 6.08
</TABLE>
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in, and made a part of, this Indenture.
Any terms incorporated by reference in this Indenture that are
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defined by the TIA, defined by TIA reference to another statute or defined by
SEC rule under the TIA have the meanings so assigned to them therein.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein;
(2) an accounting term not otherwise defined herein has the
meaning assigned to it under GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE 2.
THE NOTES
SECTION 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibits A-1 and A-2 attached hereto. The Notes may
have notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be issued in minimum denominations of $1,000 and integral multiples of $1,000 in
excess thereof. The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this Indenture and 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.
(a) Global Notes. Series A Notes offered and sold to (i) qualified
institutional buyers as defined in Rule 144A ("QIBs") in reliance on Rule 144A,
(ii) institutional accredited investors as defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act ("Institutional Accredited Investors") that are
not QIBs, and (iii) accredited investors as defined in Rule 501(a)(4), (5) or
(6) under the Securities Act ("Accredited Investors"), shall be issued initially
in the form of the Rule 144A Global Note which, in each case, shall be deposited
on behalf of the purchasers of the Series A Notes represented thereby with the
Depositary or its nominee at its New York office, and registered in the name of
the Depositary or a nominee of the Depositary (the "Global Note Holder), duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the Rule 144A Global Notes may from
time to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee, as the case may be, in connection
with transfers of interest as hereinafter provided.
Series A Notes offered and sold in reliance on Regulation S as
provided in the Purchase Agreement shall be issued initially in the form of the
Regulation S Temporary Global Note and shall be deposited on behalf of the
purchasers of the Notes represented thereby with the Trustee, at its New York
office, as custodian for the Depositary, and registered in the name of the
Depositary or the nominee of the Depositary for the accounts of designated
agents holding on behalf of Euroclear System ("Euroclear") or Cedel Bank,
societe anonyme ("Cedel Bank") duly executed by the Company and authenticated by
the Trustee as hereinafter provided. The "40-day restricted period" (as defined
in Regulation S) shall be terminated upon the receipt by the Trustee of (i) a
written certificate from the Depositary, together with copies of certificates
from Euroclear and Cedel Bank certifying that they have received certification
of non-United States beneficial ownership of 100% of the aggregate principal
amount of the Regulation S Temporary Global Note (except to the extent of any
beneficial owners thereof who
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<PAGE> 21
acquired an interest therein pursuant to another exemption from registration
under the Securities Act and who will take delivery of a beneficial ownership
interest in a Rule 144A Global Note, all as contemplated by Section 2.06(a)(ii)
hereof), and (ii) an Officers' Certificate from the Company. Following the
termination of the 40-day restricted period, beneficial interests in the
Regulation S Temporary Global Note shall be exchanged for beneficial interests
in Regulation S Permanent Global Notes. Simultaneously with the authentication
of Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation
S Temporary Global Note. The aggregate principal amount of the Regulation S
Temporary Global Note and the Regulation S Permanent Global Notes may from time
to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee, as the case may be, in connection
with the transfer of interest as hereinafter provided.
Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate amount of outstanding Notes from time to time endorsed thereon and
that the aggregate amount of outstanding Notes represented thereby may from time
to time be reduced or increased, as appropriate, to reflect exchanges,
redemptions and transfers of interest. Any endorsement of a Global Note to
reflect the amount of any increase or decrease in the amount of outstanding
Notes represented thereby shall be made by the Trustee or the Note Custodian, at
the direction of the Trustee, in accordance with instructions given by the
Holder thereof as required by Section 2.06 hereof.
The provisions of the "Operating Procedures of the Euroclear
System" and "Terms and Conditions Governing Use of Euroclear" and the "General
Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall
be applicable to interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by the Agent Members through
Euroclear or Cedel Bank.
Except as set forth in Section 2.06 hereof, the Global Notes may
be transferred, in whole and not in part, only to another nominee of the
Depositary or to a successor of the Depositary or its nominee.
(b) Book-Entry Provisions. This Section 2.01(b) shall apply only
to Rule 144A Global Notes and the Regulation S Permanent Global Notes deposited
with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance
with this Section 2.01(b), authenticate and deliver the Global Notes that (i)
shall be registered in the name of the Depositary or the nominee of the
Depositary and (ii) shall be delivered by the Trustee to the Depositary or
pursuant to the Depositary's instructions or held by the Trustee as custodian
for the Depositary.
Agent Members shall have no rights either under this Indenture
with respect to any Global Note held on their behalf by the Depositary or by the
Trustee as custodian for the Depositary or under such Global Note, and the
Depositary may be treated by the Company, the Trustee and any agent of the
Company or the Trustee as the absolute owner of such Global Note 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 Depositary or impair, as between the Depositary and its Agent Members, the
operation of customary practices of such Depositary governing the exercise of
the rights of an owner of a beneficial interest in any Global Note.
(c) Definitive Notes. Notes issued in certificated form shall be
substantially in the form of Exhibit A-1 attached hereto (but without including
the text referred to in footnotes 1 and 2 thereto).
SECTION 2.02. EXECUTION AND AUTHENTICATION.
One Officer shall sign the Notes for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Notes and may
be in facsimile form.
If an Officer whose signature is on a Note no longer holds that
office at the time a Note is authenticated, the Note shall nevertheless be
valid.
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<PAGE> 22
A Note shall not be valid until authenticated by the manual
signature of an authorized signatory of the Trustee, and the Trustee's signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture. The form of Trustee's certificate of authentication to be borne by
the Notes shall be substantially as set forth in Exhibit A hereto.
The Trustee shall, upon a written order of the Company signed by
two Officers directing the Trustee to authenticate the Notes and certifying that
all conditions precedent to the issuance of the Notes contained herein have been
complied with, authenticate Notes for original issuance up to an aggregate
principal amount stated in paragraph 4 of the Notes (the aggregate principal
amount of outstanding Notes may not exceed that amount at any time, except as
provided in Section 2.07 hereof).
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. Unless limited by the terms of such appointment,
an authenticating agent may authenticate Notes 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 or an Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency (the "Registrar")
where Notes may be presented for registration of transfer or for exchange and an
office or agency (the "Paying Agent") where Notes may be presented for payment.
The Registrar shall keep a register of the Notes and of their transfer and
exchange. The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Registrar" includes any co-registrar, and
the term "Paying Agent" includes any additional paying agent. The Company may
change any Paying Agent or Registrar without prior notice to any Holder. The
Company shall notify in writing the Trustee and the Trustee shall notify the
Holders in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company shall
enter into an appropriate agency agreement with any Agent not a party to this
Indenture, and such agreement shall incorporate the TIA's provisions and
implement the provisions of this Indenture that relate to such Agent.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes. The
Company initially appoints the Trustee to act as the Registrar and Paying Agent
with respect to the Certificated Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee
to agree in writing that the Paying Agent will hold in trust for the Holders'
benefit or the Trustee all money the Paying Agent holds for redemption or
purchase of the Notes or for the payment of principal of, or premium, if any, or
interest on, or Liquidated Damages, if any, with respect to the Notes, and will
promptly notify the Trustee of any Default by the Company in providing the
Paying Agent with sufficient funds to (i) purchase Notes tendered pursuant to an
Offer arising under Section 4.13 hereof, (ii) redeem Notes called for
redemption, or (iii) make any payment of principal, premium, interest or
Liquidated Damages, if any, due on the Notes. While any such Default continues,
the Trustee may require the Paying Agent to pay all money it holds to the
Trustee and to account for any funds disbursed. The Company at any time may
require the Paying Agent to pay all money it holds to the Trustee and to account
for any funds disbursed. Upon payment over to the Trustee, the Paying Agent (if
other than the Company or any of its Subsidiaries) shall have no further
liability for the money it delivered to the Trustee. If the Company or any of
its Subsidiaries acts as Paying Agent, it shall segregate and hold in a separate
trust fund for the Holders' benefit or the Trustee all money it holds as Paying
Agent.
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SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require that sets forth the names and addresses of, and
the aggregate principal amount of Notes held by, each Holder, and the Company
shall otherwise comply with Section 312(a) of the TIA.
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. The transfer and
exchange of Global Notes or beneficial interests therein shall be effected
through the Depositary, in accordance with this Indenture and the procedures of
the Depositary therefor, which shall include restrictions on transfer comparable
to those set forth herein to the extent required by the Securities Act. The
Trustee shall have no obligation to ascertain the Depositary's compliance with
such restrictions on transfer. Beneficial interests in a Global Note may be
transferred to Persons who take delivery thereof in the form of a beneficial
interest in the same Global Note in accordance with the transfer restrictions
set forth in the legend in subsection (g) of this Section 2.06. Transfers of
beneficial interests in the Global Notes to Persons required or permitted to
take delivery thereof in the form of an interest in another Global Note shall be
permitted as follows:
(i) Rule 144A Global Note to Regulation S Global Note.
If, at any time, an owner of a beneficial interest in
a Rule 144A Global Note deposited with the Depositary
(or the Trustee as custodian for the Depositary)
wishes to transfer its beneficial interest in such
Rule 144A Global Note to a Person who is required or
permitted to take delivery thereof in the form of an
interest in a Regulation S Global Note, such owner
shall, subject to the Applicable Procedures, exchange
or cause the exchange of such interest for an
equivalent beneficial interest in a Regulation S
Global Note as provided in this Section 2.06(a)(i).
Upon receipt by the Trustee of (1) instructions given
in accordance with the Applicable Procedures from an
Agent Member directing the Trustee, as Registrar, to
credit or cause to be credited a beneficial interest
in the Regulation S Global Note in an amount equal to
the beneficial interest in the Rule 144A Global Note
to be exchanged or transferred, (2) a written order
given in accordance with the Applicable Procedures
containing information regarding the participant
account of the Depositary and the Euroclear or Cedel
Bank account to be credited with such increase and
(3) a certificate in the form of Exhibit B-1 hereto
given by the owner of such beneficial interest
stating that the transfer of such interest has been
made in compliance with the transfer restrictions
applicable to the Global Notes and pursuant to and in
accordance with Rule 903 or Rule 904 of Regulation S,
then the Trustee, as Registrar, shall instruct the
Depositary to reduce or cause to be reduced the
aggregate principal amount of the Rule 144A Global
Note and to increase or cause to be increased the
aggregate principal amount at maturity of the
Regulation S Global Note by the principal amount at
maturity of the beneficial interest in the Rule 144A
Global Note to be exchanged or transferred, to credit
or cause to be credited to the account of the Person
specified in such instructions a beneficial interest
in the Regulation S Global Note equal to the
reduction in the aggregate principal amount of the
Rule 144A Global Note, and to debit, or cause to be
debited, from the account of the Person making such
exchange or transfer the beneficial interest in the
Rule 144A Global Note that is being exchanged or
transferred.
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(ii) Regulation S Global Note to Rule 144A Global Note.
If, at any time, an owner of a beneficial interest in
a Regulation S Global Note deposited with the
Depositary (or with the Trustee as custodian for the
Depositary) wishes to transfer its beneficial
interest in such Regulation S Global Note to a Person
who is required or permitted to take delivery thereof
in the form of an interest in a Rule 144A Global
Note, such owner shall, subject to the Applicable
Procedures, exchange or cause the exchange of such
interest for an equivalent beneficial interest in a
Rule 144A Global Note as provided in this Section
2.06(a)(ii). Upon receipt by the Trustee of (1)
instructions from Euroclear or Cedel Bank, if
applicable, and the Depositary, directing the
Trustee, as Registrar, to credit or cause to be
credited a beneficial interest in the Rule 144A
Global Note in an amount equal to the beneficial
interest in the Regulation S Global Note to be
exchanged or transferred, such instructions to
contain information regarding the participant account
with the Depositary to be credited with such
increase, (2) a written order given in accordance
with the Applicable Procedures containing information
regarding the participant account of the Depositary
and (3) a certificate in the form of Exhibit B-2
attached hereto given by the owner of such beneficial
interest stating (A) if the transfer is pursuant to
Rule 144A, that the Person transferring such interest
in a Regulation S Global Note reasonably believes
that the Person acquiring such interest in a Rule
144A Global Note is a QIB and is obtaining such
beneficial interest in a transaction meeting the
requirements of Rule 144A and any applicable blue sky
or securities laws of any state of the United States,
(B) that the transfer complies with the requirements
of Rule 144 under the Securities Act and any
applicable blue sky or securities laws of any state
of the United States or (C) if the transfer is
pursuant to any other exemption from the registration
requirements of the Securities Act, that the transfer
of such interest has been made in compliance with the
transfer restrictions applicable to the Global Notes
and pursuant to and in accordance with the
requirements of the exemption claimed, such statement
to be supported by an opinion of counsel from the
transferee or the transferor in form reasonably
acceptable to the Company and to the Registrar, then
the Trustee, as Registrar, shall instruct the
Depositary to reduce or cause to be reduced the
aggregate principal amount of such Regulation S
Global Note and to increase or cause to be increased
the aggregate principal amount of the Rule 144A
Global Note by the principal amount of the beneficial
interest in the Regulation S Global Note to be
exchanged or transferred, and the Trustee, as
Registrar, shall instruct the Depositary,
concurrently with such reduction, to credit or cause
to be credited to the account of the Person specified
in such instructions a beneficial interest in the
applicable Rule 144A Global Note equal to the
reduction in the aggregate principal amount at
maturity of such Regulation S Global Note and to
debit or cause to be debited from the account of the
Person making such transfer the beneficial interest
in the Regulation S Global Note that is being
exchanged or transferred.
(b) Transfer and Exchange of Definitive Notes. When Definitive
Notes are presented by a Holder to the Registrar with a request:
(x) to register the transfer of the Definitive Notes; or
(y) to exchange such Definitive Notes for an equal
principal amount of Definitive Notes of other
authorized denominations,
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the Registrar shall register the transfer or make the exchange as requested;
provided, however, that the Definitive Notes presented or surrendered for
registration of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the
Registrar duly executed by such Holder or by his
attorney, duly authorized in writing; and
(ii) in the case of a Definitive Note that is a Transfer
Restricted Note, such request shall be accompanied by
the following additional information and documents,
as applicable:
(A) if such Transfer Restricted Note is being
delivered to the Registrar by a Holder for
registration in the name of such Holder,
without transfer, or such Transfer Restricted
Note is being transferred to the Company, a
certification to that effect from such Holder
(in substantially the form of Exhibit B-3
hereto);
(B) if such Transfer Restricted Note is being
transferred to a QIB in accordance with Rule
144A under the Securities Act or pursuant to
an exemption from registration in accordance
with Rule 144 under the Securities Act or
pursuant to an effective registration
statement under the Securities Act, a
certification to that effect from such Holder
(in substantially the form of Exhibit B-3
hereto); or
(C) if such Transfer Restricted Note is being
transferred in reliance on any other
exemption from the registration requirements
of the Securities Act, a certification to
that effect from such Holder (in
substantially the form of Exhibit B-3 hereto)
and an opinion of counsel from such Holder or
the transferee reasonably acceptable to the
Company and to the Registrar to the effect
that such transfer is in compliance with the
Securities Act.
(c) Transfer of a Beneficial Interest in a Rule 144A Global Note
or Regulation S Permanent Global Note for a Definitive Note.
(i) Any Person having a beneficial interest in a Rule
144A Global Note or Regulation S Permanent Global
Note may upon request, subject to the Applicable
Procedures, exchange such beneficial interest for a
Definitive Note. Upon receipt by the Trustee of
written instructions or such other form of
instructions as is customary for the Depositary (or
Euroclear or Cedel Bank, if applicable), from the
Depositary or its nominee on behalf of any Person
having a beneficial interest in a Rule 144A Global
Note or Regulation S Permanent Global Note, and, in
the case of a Transfer Restricted Note, the following
additional information and documents (all of which
may be submitted by facsimile):
(A) if such beneficial interest is being
transferred to the Person designated by the
Depositary as being the beneficial owner, a
certification to that effect from such Person
(in substantially the form of Exhibit B-4
hereto);
(B) if such beneficial interest is being
transferred to a QIB in accordance with Rule
144A under the Securities Act or pursuant to
an exemption from registration in accordance
with Rule 144 under the Securities Act
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or pursuant to an effective registration
statement under the Securities Act, a
certification to that effect from the
transferor (in substantially the form of
Exhibit B-4 hereto); or
(C) if such beneficial interest is being
transferred to an institutional "accredited
investor," within the meaning of Rule
501(a)(1), (2), (3) or (7) under the
Securities Act pursuant to a private
placement exemption from the registration
requirements of the Securities Act (and based
on an opinion of counsel if the Company so
requests), a certification to that effect
from such Holder (in substantially the form
of Exhibit B hereto) and a certification from
the applicable transferee (in substantially
the form of Exhibit C hereto);
(D) if such beneficial interest is being
transferred in reliance on any other
exemption from the registration requirements
of the Securities Act, a certification to
that effect from the transferor (in
substantially the form of Exhibit B-4 hereto)
and an opinion of counsel from the transferee
or the transferor reasonably acceptable to
the Company and to the Registrar to the
effect that such transfer is in compliance
with the Securities Act, in which case the
Trustee shall, in accordance with the
standing instructions and procedures existing
between the Depositary and the Trustee, cause
the aggregate principal amount of Rule 144A
Global Notes or Regulation S Permanent Global
Notes, as applicable, to be reduced
accordingly and, following such reduction,
the Company shall execute and, the Trustee
shall authenticate and deliver to the
transferee a Definitive Note in the
appropriate principal amount.
(ii) Definitive Notes issued in exchange for a beneficial
interest in a Rule 144A Global Note or Regulation S
Permanent Global Note, as applicable, pursuant to
this Section 2.06(c) shall be registered in such
names and in such authorized denominations as the
Depositary, pursuant to instructions from its direct
or indirect participants or otherwise, shall instruct
the Trustee. The Trustee shall deliver such
Definitive Notes to the Persons in whose names such
Notes are so registered. Following any such issuance
of Definitive Notes, the Trustee, as Registrar, shall
instruct the Depositary to reduce or cause to be
reduced the aggregate principal amount at maturity of
the applicable Global Note to reflect the transfer.
(d) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provision of this Indenture (other than the provisions
set forth in subsection (f) of this Section 2.06), a Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary or
a nominee of such successor Depositary.
(e) Transfer and Exchange of a Definitive Note for a Beneficial
Interest in a Global Note. A Definitive Note may not be transferred or exchanged
for a beneficial interest in a Global Note.
(f) Authentication of Definitive Notes in Absence of Depositary.
If at any time:
(i) the Depositary for the Notes notifies the Company that the
Depositary is unwilling or unable to continue as
Depositary for the Global Notes and a successor Depositary
for the Global Notes is not appointed by the Company
within 90 days after delivery of such notice; or
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(ii) the Company delivers to the Trustee an Officers'
Certificate or an order signed by two Officers of the
Company notifying the Trustee that it elects to cause
the issuance of Definitive Notes under this
Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02 hereof, authenticate and
deliver, Definitive Notes in an aggregate principal amount equal to the
principal amount of the Global Notes in exchange for such Global Notes.
(g) Legends.
(i) Except as permitted by the following paragraphs (ii),
(iii) and (iv), each Note certificate evidencing
Global Notes and Definitive Notes (and all Notes
issued in exchange therefor or substitution thereof)
shall bear a legend in substantially the following
form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY
WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND
THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE
HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR
THE BENEFIT OF THE ISSUER THAT (A) SUCH SECURITY MAY
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144
UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT
OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND,
IN THE CASE OF CLAUSE (b), (c) or (d), BASED UPON AN
OPINION OF COUNSEL IF THE ISSUER SO REQUESTS), (2) TO
THE ISSUER OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF
THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted
Note (including any Transfer Restricted Note
represented by a Global Note) pursuant to Rule 144
under the Securities Act or pursuant to an effective
registration statement under the Securities Act:
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(A) in the case of any Transfer Restricted Note
that is a Definitive Note, the Registrar
shall permit the Holder thereof to exchange
such Transfer Restricted Note for a
Definitive Note that does not bear the legend
set forth in (i) above and rescind any
restriction on the transfer of such Transfer
Restricted Note upon receipt of a
certification from the transferring Holder
substantially in the form of Exhibit B-4
hereto; and
(B) in the case of any Transfer Restricted Note
represented by a Global Note, such Transfer
Restricted Note shall not be required to bear
the legend set forth in (i) above, but shall
continue to be subject to the provisions of
Section 2.06(a) and (b) hereof; provided,
however, that with respect to any request for
an exchange of a Transfer Restricted Note
that is represented by a Global Note for a
Definitive Note that does not bear the legend
set forth in (i) above, which request is made
in reliance upon Rule 144, the Holder thereof
shall certify in writing to the Registrar
that such request is being made pursuant to
Rule 144 (such certification to be
substantially in the form of Exhibit B-4
hereto).
(iii) Upon any sale or transfer of a Transfer Restricted
Note (including any Transfer Restricted Note
represented by a Global Note) in reliance on any
exemption from the registration requirements of the
Securities Act (other than exemptions pursuant to
Rule 144A or Rule 144 under the Securities Act) in
which the Holder or the transferee provides an
opinion of counsel to the Company and the Registrar
in form and substance reasonably acceptable to the
Company and the Registrar (which opinion of counsel
shall also state that the transfer restrictions
contained in the legend are no longer applicable):
(A) in the case of any Transfer Restricted Note
that is a Definitive Note, the Registrar
shall permit the Holder thereof to exchange
such Transfer Restricted Note for a
Definitive Note that does not bear the legend
set forth in (i) above and rescind any
restriction on the transfer of such Transfer
Restricted Note; and
(B) in the case of any Transfer Restricted Note
represented by a Global Note, such Transfer
Restricted Note shall not be required to bear
the legend set forth in (i) above, but shall
continue to be subject to the provisions of
Section 2.06(a) and (b) hereof.
(iv) Notwithstanding the foregoing, upon consummation of
the Exchange Offer in accordance with the
Registration Rights Agreement, the Company shall
issue and, upon receipt of an authentication order in
accordance with Section 2.02 hereof, the Trustee
shall authenticate the Series B Notes in exchange for
Series A Notes accepted for exchange in the Exchange
Offer, which Series B Notes shall not bear the legend
set forth in (i) above, and the Registrar shall
rescind any restriction on the transfer of such
Series B Notes, in each case unless the Holder of
such Series A Notes is either (A) a broker-dealer,
(B) a Person participating in the distribution of the
Series A Notes or (C) a Person who is an affiliate
(as defined in Rule 144A) of the Company.
(h) Cancellation and/or Adjustment of Global Notes. At such time
as all beneficial interests in Global Notes have been exchanged for Definitive
Notes, redeemed, repurchased or cancelled, all Global Notes shall be returned to
or retained and cancelled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for an interest in another Global
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Note or for Definitive Notes, redeemed, repurchased or cancelled, the principal
amount of Notes represented by such Global Note shall be reduced accordingly
and an endorsement shall be made on such Global Note, by the Trustee or the
Note Custodian, at the direction of the Trustee, to reflect such reduction.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall
authenticate Definitive Notes and Global Notes at the
Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company
may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable
in connection therewith (other than any such transfer
taxes or similar governmental charge payable upon
exchange or transfer pursuant to Sections 3.07, 3.08,
4.13, 4.14 and 9.05 hereof).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for
redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part.
(iv) All Definitive Notes and Global Notes issued upon any
registration of transfer or exchange of Definitive
Notes or Global Notes shall be the valid obligations
of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture,
as the Definitive Notes or Global Notes surrendered
upon such registration of transfer or exchange.
(v) The Company shall not be required:
(A) to issue, to register the transfer of or to
exchange Notes during a period beginning at
the opening of business 15 days before the
day of any selection of Notes for redemption
under Section 3.02 hereof and ending at the
close of business on the day of selection; or
(B) to register the transfer of or to exchange a
Note between a record date and the next
succeeding interest payment date.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the
Company may deem and treat the Person in whose name
any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of
principal of and interest on such Note, and neither
the Trustee, any Agent nor the Company shall be
affected by notice to the contrary.
(vii) The Trustee shall authenticate Definitive Notes and
Global Notes in accordance with the provisions of
Section 2.02 hereof.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the
Company, and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Note, the Company shall issue and the Trustee,
upon the receipt of an Officers' Certificate, shall authenticate a replacement
Note if the Trustee's requirements are met. If the Trustee or the Company
requires it, the Holder must supply an indemnity bond that is sufficient in the
judgment of the Trustee and the Company to protect the Company, the Trustee, any
Agent or any authenticating
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agent from any loss that any of them may suffer if a Note is replaced. The
Company and the Trustee may charge for their expenses in replacing a Note.
Every replacement Note is an additional Obligation of the Company.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes the Trustee
has authenticated except for those it has cancelled, those delivered to it for
cancellation, those representing reductions in the interest in a Global Note
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section 2.08 as not outstanding.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases
to be outstanding unless the Trustee receives proof satisfactory to it that a
bona fide purchaser holds the replaced Note.
If the entire principal of, and premium, if any, and accrued
interest on, and Liquidated Damages, if any, with respect to any Note is
considered paid under Section 4.01 hereof, it ceases to be outstanding and
interest and Liquidated Damages, if any, on it cease to accrue.
Subject to Section 2.09 hereof, a Note does not cease to be
outstanding because the Company or an Affiliate holds the Note.
Section 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Company or an Affiliate shall be considered as though 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 Notes that a
Responsible Officer of the Trustee knows are so owned shall be so disregarded.
Notwithstanding the foregoing, Notes that the Company or an Affiliate offers to
purchase or acquires pursuant to an Offer, exchange offer, tender offer or
otherwise shall not be deemed to be owned by the Company or an Affiliate until
legal title to such Notes passes to the Company or such Affiliate, as the case
may be.
SECTION 2.10. TEMPORARY NOTES.
Until Definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes. Temporary Notes
shall be substantially in the form of Definitive Notes but may have variations
that the Company considers appropriate for temporary Notes. Without unreasonable
delay, the Company shall prepare and the Trustee, upon receipt of the Company's
written order signed by two Officers which shall specify the amount of temporary
Notes to be authenticated and the date on which the temporary Notes are to be
authenticated, shall authenticate Definitive Notes and deliver them in exchange
for temporary Notes. Until such exchange, Holders of temporary Notes shall be
entitled to the same rights, benefits and privileges as Definitive Notes.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for registration of transfer, exchange,
replacement, payment (including all Notes called for redemption and all Notes
accepted for payment pursuant to an Offer) or cancellation, and the Trustee
shall cancel all such Notes and shall destroy all cancelled Notes (subject to
the Exchange Act's record retention requirements) and deliver a certificate of
their destruction to the Company unless by written order, signed by two Officers
of the Company, the Company shall direct that cancelled Notes be returned to it.
The Company may not issue new Notes to replace any Notes that have been
cancelled by the Trustee or that have been delivered to the Trustee for
cancellation. If the Company or an Affiliate acquires any Notes (other than by
redemption or pursuant to an Offer), such acquisition shall not operate as a
redemption or satisfaction of the Indebtedness represented by such Notes unless
and until such Notes are delivered to the Trustee for cancellation.
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SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to Holders on a subsequent
special record date, in each case at the rate provided in the Notes and in
Section 4.01 hereof. The Company shall fix or cause to be fixed each such
special record date and payment date. As early as practicable prior to the
special record date, the Company (or the Trustee, in the name of and at the
expense of the Company) shall mail a notice that states the special record date,
the related payment date and the amount of interest to be paid.
SECTION 2.13. RECORD DATE.
The record date for purposes of determining the identity of
Holders of Notes entitled to vote or consent to any action by vote or consent
authorized or permitted under this Indenture shall be determined as provided for
in section 316(c) of the TIA.
SECTION 2.14. CUSIP NUMBER.
A "CUSIP" number shall be printed on the Notes, and the Trustee
shall use the CUSIP number in notices of redemption, purchase or exchange as a
convenience to Holders, provided that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes and that reliance may be placed only on
the other identification numbers printed on the Notes. The Company shall
promptly notify the Trustee of any change in the CUSIP number.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to Section 3.07
hereof, it shall furnish to the Trustee, at least 35 days prior to the
redemption date and at least 5 days prior to the date that notice of the
redemption is to be mailed by the Company to Holders (or such shorter time as
may be acceptable to the Trustee), an Officers' Certificate stating that the
Company has elected to redeem Notes pursuant to Section 3.07(a) or 3.07(b)
hereof, as the case may be, the date notice of redemption is to be mailed to
Holders, the redemption date, the aggregate principal amount of Notes to be
redeemed, the redemption price for such Notes and the amount of accrued and
unpaid interest on and Liquidated Damages, if any, with respect to such Notes as
of the redemption date. If the Trustee is not the Registrar, the Company shall,
concurrently with delivery of its notice to the Trustee of a redemption, cause
the Registrar to deliver to the Trustee a certificate (upon which the Trustee
may rely) setting forth the name of, and the aggregate principal amount of Notes
held by, each Holder.
If the Company is required to offer to purchase Notes pursuant to
Section 4.13 or 4.14 hereof, it shall furnish to the Trustee, at least two
Business Days before notice of the Offer is to be mailed to Holders (or such
shorter time as may be acceptable to the Trustee), an Officers' Certificate
setting forth that the Offer is being made pursuant to Section 4.13 or 4.14
hereof, as the case may be, the date upon which such purchase will occur ("the
Purchase Date"), the maximum principal amount of Notes the Company is offering
to purchase pursuant to the Offer, the purchase price for such Notes, and the
amount of accrued and unpaid interest on and Liquidated Damages, if any, with
respect to such Notes as of the Purchase Date.
The Company will also provide the Trustee with any additional
information that the Trustee reasonably requests in connection with any
redemption or Offer.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED OR PURCHASED.
If less than all outstanding Notes are to be redeemed or if less
than all Notes tendered pursuant to an Offer are to be accepted at any time,
selection of Notes for redemption or acceptance shall be made by the
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<PAGE> 32
Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed or, if the Notes are
not so listed, on a pro rata basis, by lot or by such other method as the
Trustee deems fair and appropriate, provided that no Notes with a principal
amount of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days
before the redemption date to each Holder of Notes to be redeemed at its
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof shall be issued in the name of the Holder thereof
upon cancellation of the original Note. On and after the redemption date,
interest shall cease to accrue on Notes or portions thereof 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 a notice of redemption to each Holder of Notes or
portions thereof that are to be redeemed.
The notice shall identify the Notes or portions thereof to be
redeemed and shall state:
(1) the redemption date;
(2) the redemption price for the Notes and separately stating the
amount of unpaid and accrued interest on, and Liquidated
Damages, if any, with respect to, such Notes as of the date of
redemption;
(3) if any Note is being redeemed in part, the portion of the
principal amount of such Notes to be redeemed and that, after
the redemption date, upon surrender of such Note, a new Note
or Notes in principal amount equal to the unredeemed portion
will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price for, and any
accrued and unpaid interest on, and Liquidated Damages, if
any, with respect to such Notes;
(6) that, unless the Company defaults in making such redemption
payment, interest (including Liquidated Damages, if any) on
Notes called for redemption ceases to accrue on and after the
redemption date;
(7) the paragraph of the Notes and section of this Indenture
pursuant to which the Notes called for redemption are being
redeemed; and
(8) the CUSIP number; provided that no representation is made as
to the correctness or accuracy of the CUSIP number listed in
such notice and printed on the Notes.
At the Company's request, the Trustee shall (at the Company's
expense) give the notice of redemption in the Company's name at least 30 but not
more than 60 days before a redemption; provided, however, that the Company shall
deliver to the Trustee, at least 45 days prior to the redemption date and at
least 10 days prior to the date that notice of the redemption is to be mailed to
Holders, an Officers' Certificate that (i) requests the Trustee to give notice
of the redemption to Holders (or such shorter time as may be acceptable to the
Trustee), (ii) sets forth the information to be provided to Holders in the
notice of redemption, as set forth in the preceding paragraph, (iii) states that
the Company has elected to redeem Notes pursuant to Section 3.07(a) or 3.07(b)
hereof, as the case may be, and (iv) sets forth the aggregate principal amount
of Notes to be redeemed and the amount of accrued and unpaid interest and
Liquidated Damages, if any, thereon as of the redemption date. If the Trustee is
not the Registrar, the Company shall, concurrently with any such request, cause
the Registrar to deliver to the Trustee a
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<PAGE> 33
certificate (upon which the Trustee may rely) setting forth the name of, the
address of, and the aggregate principal amount of Notes held by, each Holder.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Notes called for redemption
become due and payable on the redemption date at the price set forth in the
Note. Upon surrender to the Trustee or Paying Agent, such Notes called for
redemption shall be paid at the redemption price (which shall include accrued
interest thereon and Liquidated Damages, if any, to the redemption date) but
installments of interest, the maturity of which is on or prior to the redemption
date, shall be payable to Holders of record at the close of business on the
relevant record dates.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
On or prior to any redemption date, the Company shall deposit with
the Trustee or with the Paying Agent money sufficient to pay the redemption
price of, and accrued interest on, and Liquidated Damages, if any, with respect
to all Notes to be redeemed on that date. The Trustee or the Paying Agent shall
return to the Company any money that the Company deposited with the Trustee or
the Paying Agent in excess of the amounts necessary to pay the redemption price
of, and accrued interest on, and Liquidated Damages, if any, with respect to all
Notes to be redeemed.
If the Company complies with the preceding paragraph, interest and
Liquidated Damages, if any, on the Notes to be redeemed will cease to accrue on
such Notes on the applicable redemption date, whether or not such Notes are
presented for payment. If a Note is redeemed on or after an interest record date
but on or prior to the related interest payment date, then any accrued and
unpaid interest and Liquidated Damages, if any, shall be paid to the Person in
whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest will be paid on the unpaid principal, premium, if any,
interest and Liquidated Damages, if any, from the redemption date until such
principal, premium, interest and Liquidated Damages, if any, is paid, at the
rate of interest provided in the Notes and Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company
shall issue and the Trustee shall authenticate for the Holder at the Company's
expense a new Note equal in principal amount to the unredeemed portion of the
Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION PROVISIONS.
(a) Except as provided in Section 3.07(b) hereof, the Notes will
not be redeemable at the Company's option prior to January 15, 2002. Thereafter,
the Notes will be subject to redemption at the option of the Company, in whole
or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on January 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.250%
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.938%
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.625%
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.313%
2006 and thereafter . . . . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
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<PAGE> 34
(b) Notwithstanding the foregoing, at any time prior to January
15, 2000, the Company may redeem up to 35% in aggregate principal amount of the
Notes with the net proceeds of (i) one or more offerings of Equity Interests
(other than Disqualified Capital Stock) of the Company or (ii) one or more
offerings of Equity Interests or other securities of Chancellor Media or
Chancellor Mezzanine, to the extent the net proceeds thereof are contributed or
advanced to the Company as a capital contribution to common equity, in each
case, at a redemption price equal to 109.5% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages, if any, to the
redemption date; provided that at least 65% in aggregate principal amount of the
Notes originally issued remain outstanding immediately after the occurrence of
any such redemption; and provided, further, that each such redemption will occur
within 90 days of the date of the closing of such offering.
SECTION 3.08. MANDATORY PURCHASE PROVISIONS.
(a) Subject to Section 4.13 hereof, within 30 days after any
Change of Control or upon the Company's obligation to make an Asset Sale Offer
pursuant to Section 4.14 (b) hereof, the Company shall mail a notice to each
Holder at such Holder's registered address stating (i) that a Change of Control
Offer or an Asset Sale Offer (each, an "Offer") is being made pursuant to
Section 4.13 or Section 4.14 hereof, as the case may be, and that all Notes
tendered will be accepted for payment pursuant to such Offer; (ii) the purchase
price for the Notes (as set forth in Section 4.13 or 4.14 hereof, as the case
may be), the amount of accrued and unpaid interest on, and Liquidated Damages
thereon, if any, and the purchase date which shall be no earlier than 30 days
nor later than 60 days from the date such notice is mailed (the "Payment Date");
(iii) that any Notes not properly tendered will continue to accrue interest and
Liquidated Damages, if any, in accordance with the terms of this Indenture; (iv)
that, unless the Company defaults in the payment of the Change of Control
Payment, all Notes accepted for payment pursuant to the Offer, shall cease to
accrue interest after the Payment Date; (v) that Holders electing to have any
Notes purchased pursuant to an Offer will be required to surrender the Notes,
with a form entitled "Option of Holder to Elect Purchase" on the reverse of the
Notes completed, or transfer by book-entry, to the Paying Agent at the address
specified in the notice prior to the close of business on the fourth Business
Day preceding the Payment Date; (vi) that Holders will be entitled to withdraw
their election if the Paying Agent receives, not later than the close of
business on the third Business Day preceding the Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the Holder,
the principal amount of Notes delivered for purchase, and a statement that such
Holder is withdrawing his election to have such Notes purchased; and (vii) that
Holders whose Notes are being purchased only in part will be issued new Notes
equal in principal amount to the unpurchased portion of the Notes surrendered,
which unpurchased portion must be equal to $1,000 in principal amount or an
integral multiple thereof.
(b) On the Payment Date, the Company shall, to the extent lawful,
(i) in the case of a Change of Control Offer, accept for payment all Notes or
portions thereof properly tendered pursuant to such Offer and, in the case of an
Asset Sale Offer, accept for payment the maximum principal amount of Notes or
portions thereof tendered pursuant to such Offer that can be purchased out of
the excess Net Proceeds from the date of such Asset Sale, (ii) deposit with the
Paying Agent in the case of a Change of Control Offer, an amount equal to the
Change of Control Payment in respect of all Notes or portions thereof so
accepted and, in the case of an Asset Sale Offer, the aggregate purchase price
of all Notes or portions thereof accepted for payment and any accrued and unpaid
interest and Liquidated Damages, if any, on such Notes as of the Payment Date
(an "Asset Sale Payment"), and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company.
(c) The Paying Agent shall promptly mail to each Holder of Notes
so tendered either the Change of Control Payment or the Asset Sale Payment,
whichever the case may be, for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Company will publicly
announce the results of the Offer on or as soon as practicable after the Payment
Date.
(d) The Company will publicly announce the results of the Offer on
or as soon as practicable after the Payment Date.
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<PAGE> 35
(e) The Company shall 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 the Notes in connection with a Change of Control or Asset Sale.
(f) With respect to any Offer, if the Company deposits prior to
12:00 noon New York City time with the Paying Agent on the Payment Date an
amount in available funds sufficient to purchase all Notes accepted for payment,
interest shall cease to accrue on such Notes after the Payment Date; provided,
however, that if the Company fails to deposit such amount on the Payment Date,
interest shall continue to accrue on such Notes until such deposit is made.
ARTICLE 4.
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay the principal of, and premium, if any, and
accrued and unpaid interest on and Liquidated Damages, if any, with respect to
the Notes on the dates and in the manner provided in the Notes. Holders of Notes
must surrender their Notes to the Paying Agent to collect principal payments.
Principal of, premium, if any, and accrued and unpaid interest, and Liquidated
Damages, if any, shall be considered paid on the date due if the Paying Agent
(other than the Company or any of its Subsidiaries), the Global Note Holder or
each Holder that has specified an account, holds, as of 12:00 noon New York City
time, money the Company deposited in immediately available funds designated for
and sufficient to pay in cash all principal, premium, if any, and accrued and
unpaid interest on, and Liquidated Damages, if any, then due; provided that, to
the extent that the Holders have not specified accounts, such amounts shall be
considered paid on the date due if the Company mails a check for such amounts on
such date. The Paying Agent shall return to the Company, no later than five days
following the date of payment, any money (including accrued interest) that
exceeds the amount of principal, premium, if any, accrued and unpaid interest,
and Liquidated Damages, if any, paid on the Notes. The Company shall pay all
Liquidated Damages, if any, in the same manner on the dates and in the amounts
set forth in the Registration Rights Agreement. If any Liquidated Damages become
payable, the Company shall not later than 3 Business Days prior to the date that
any payment of Liquidated Damages is due (i) deliver an Officers' Certificate to
the Trustee setting forth the amount of Liquidated Damages payable to Holders
and (ii) instruct the Paying Agent to pay such amount of Liquidated Damages to
Holders entitled to receive such Liquidated Damages.
To the extent lawful, the Company shall pay interest (including
post-petition interest) on (i) overdue principal and premium at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Notes,
compounded semiannually and (ii) overdue installments of interest and Liquidated
Damages (without regard to any applicable grace period) at the same rate as set
forth in clause (i), compounded semiannually.
SECTION 4.02. REPORTS.
The Company shall file with the Trustee and provide to the
Holders, 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 Notes. The Company shall also comply with the
other provisions of TIA Section 314(a).
SECTION 4.03. COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year of the Company, an Officers' Certificate stating
that a review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining
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<PAGE> 36
whether the Company 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 or her knowledge, the Company has, in all
material respects, kept, observed, performed and fulfilled each and every
covenant contained in this Indenture and is not in default in the performance
or observance of any of the terms, provisions and conditions hereof (or, if a
Default or Event of Default shall have occurred, describing all such Defaults
or Events of Default of which he or she may have knowledge and what action the
Company has taken or proposes to take with respect thereto) and that, to the
best of his or her knowledge, no event has occurred and remains in existence by
reason of which payments on account of the principal of, premium, if any, and
accrued and unpaid interest on, and Liquidated Damages, if any, with respect to
the Notes are prohibited or if such event has occurred, a description of the
event and what action the Company is taking or proposes to take with respect
thereto.
So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the financial statements
delivered pursuant to Section 4.02 hereof shall be accompanied by a written
statement of the Company's independent public accountants (who shall be a firm
of established national reputation reasonably satisfactory to the Trustee) that
in making the examination necessary for certification of such financial
statements nothing has come to their attention that would lead them to believe
that the Company has violated Section 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11,
4.13, 4.14, 4.17, 4.18 or any provisions of Article 5 hereof 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.
The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
SECTION 4.04. STAY, EXTENSION AND 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, extension or usury law
wherever enacted, now or at any time hereafter in force, that might affect the
covenants or the performance of this Indenture; and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefit or advantage of any
such law, and covenants that it will not, by resort to any such law, 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
has been enacted.
SECTION 4.05. RESTRICTED PAYMENTS.
(a) Neither the Company nor any of its Subsidiaries shall,
directly or indirectly, make any 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 $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in
compliance with Section 4.07; or
(iii) the aggregate amount of Restricted Payments made by
CMCLA on or subsequent to September 5, 1997, together
with the aggregate amount of Restricted Payments made
by Radio Broadcasting subsequent to February 14, 1996
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 Radio Broadcasting from
February 14, 1996 through September 4, 1997, plus
100% of the aggregate Consolidated EBITDA of CMCLA
from and after September 5, 1997 (or, in the
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<PAGE> 37
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 CMCLA, 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 CMCLA from any Person (other than a
Subsidiary of CMCLA) from the issuance and sale on or
subsequent to September 5, 1997 of Qualified Capital
Stock of CMCLA, plus 100% of the aggregate net
proceeds, including the fair market value of property
other than cash as previously determined by the board
of directors of Radio Broadcasting in good faith,
previously received by Radio Broadcasting from any
Person (other than a Subsidiary of Radio
Broadcasting) from the issuance and sale on or
subsequent to February 14, 1996 of Qualified Capital
Stock of Radio Broadcasting (excluding any net
proceeds from issuances and sales financed directly
or indirectly using funds borrowed from CMCLA or any
Subsidiary of CMCLA or from Radio Broadcasting or any
Subsidiary of Radio Broadcasting, respectively, until
and to the extent such borrowing is repaid, but
including the proceeds from the issuance and sale of
any securities convertible into or exchangeable for
Qualified Capital Stock to the extent such securities
are so converted or exchanged and including any
additional proceeds received by CMCLA or Radio
Broadcasting, 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 CMCLA as a
capital contribution on or subsequent to September 5,
1997, 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 Radio Broadcasting as
a capital contribution on or subsequent to February
14, 1996 (excluding the net proceeds from one or more
offerings of Equity Interests by Chancellor Media or
Chancellor Mezzanine to the extent used to redeem the
Notes on or after the date of the amendment and
restatement of this Indenture).
(b) Notwithstanding the foregoing, these provisions will not
prohibit: (i) the payment of any dividend or the making of any distribution
within 60 days after the date of its declaration if such dividend or
distribution would have been permitted on the date of declaration; (ii) the
acquisition of Capital Stock or warrants, options or other rights to acquire
Capital Stock either (A) solely in exchange for shares of Qualified Capital
Stock or other rights to acquire Qualified Capital Stock or (B) 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; (iii)
the acquisition of Indebtedness of the Company that is subordinate or junior in
right of payment to the Notes, either (A) solely in exchange for shares of
Qualified Capital Stock (or warrants, options or other rights to acquire
Qualified Capital Stock) or for Indebtedness of the Company which is subordinate
or junior in right of payment to the Notes, at least to the extent that the
Indebtedness being acquired is subordinated to the Notes and has a Weighted
Average Life to Maturity no less than that of the Indebtedness being acquired or
(B) through the application of the net proceeds of a substantially concurrent
sale for cash (other than to a Subsidiary of the Company) of shares of Qualified
Capital Stock (or warrants, options or other rights to acquire Qualified Capital
Stock) or Indebtedness of the Company which is subordinate or junior in right of
payment to the Notes, at least to the extent that the Indebtedness being
acquired is subordinated to the Notes and has a Weighted Average Life to
Maturity no less than that of the Indebtedness being refinanced; (iv) payments
by Radio Broadcasting to fund the operating expenses of Chancellor Broadcasting
from February 14, 1996 through September 4, 1997 and by CMCLA to fund the
operating expenses of Chancellor Mezzanine from and after September 5, 1997, in
each case in an amount not to exceed $500,000 per annum; (v) payments by Radio
Broadcasting to Chancellor Broadcasting from February 14, 1996 through September
4, 1997 and by CMCLA to Chancellor Mezzanine from and after September 5, 1997,
respectively, in each case to make
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<PAGE> 38
payments pursuant to (A) the Financial Monitoring and Oversight Agreements or
(B) the Tax Sharing Agreement; (vi) payments by (A) Radio Broadcasting to
repurchase or to enable Chancellor Broadcasting to repurchase Capital Stock or
other securities of Chancellor Broadcasting from employees of Chancellor
Broadcasting or Radio Broadcasting in each case, from February 14, 1996 through
September 4, 1997, and (B) by CMCLA to repurchase or to enable Chancellor
Mezzanine to repurchase Capital Stock or other securities of Chancellor
Mezzanine from employees of Chancellor Mezzanine or CMCLA, in each case, after
September 5, 1997, in an aggregate amount not to exceed $5,000,000; (vii)
payments by Radio Broadcasting to Chancellor Broadcasting from February 14,
1996 through September 4, 1997, or by CMCLA to Chancellor Mezzanine from and
after September 5, 1997, in each case, to enable Chancellor Broadcasting or
Chancellor Mezzanine, respectively, to redeem or repurchase stock purchase or
similar rights in an aggregate amount not to exceed $500,000; (viii) payments,
not to exceed $100,000 in the aggregate, by Radio Broadcasting to Chancellor
Broadcasting from February 14, 1996 through September 4, 1997, together with
payments by CMCLA to Chancellor Mezzanine after September 5, 1997, in each
case, to enable Chancellor Broadcasting or Chancellor Mezzanine, respectively,
to make cash payments to holders of its Capital Stock in lieu of the issuance
of fractional shares of its Capital Stock; and (ix) 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 (ix) 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 Section 4.07 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 (v)(A),
(vi), (vii), (viii) and (ix), 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
CMCLA on or subsequent to September 5, 1997 and the aggregate amount of
Restricted Payments made by Radio Broadcasting subsequent to February 14, 1996
and through September 4, 1997, amounts expended pursuant to clauses (i), (ii),
(iii) (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), (v)(A), (vi),
(vii), (viii) and (ix) (including any amounts previously expended by Radio
Broadcasting 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 Section 4.05(a), 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 4.06. CORPORATE EXISTENCE.
Subject to Section 4.14 and Article 5 hereof, the Company shall do
or cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate, partnership or other existence
of each of its Subsidiaries in accordance with the respective organizational
documents of each of its Subsidiaries and the rights (charter and statutory),
licenses and franchises of the Company and each of its Subsidiaries; provided,
however, that the Company shall not be required to preserve any such right,
license or franchise, or the corporate, partnership or other existence of any
Subsidiary, if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
its Subsidiaries taken as a whole, and that the loss thereof is not adverse in
any material respect to the Holders.
SECTION 4.07. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
(a) 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
Indebtedness, after giving effect to the incurrence of such
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Indebtedness and the receipt and application of the proceeds thereof, the
Company's Leverage Ratio is less than 7.0 to 1.
(b) 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 this Section 4.07).
SECTION 4.08. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its
Subsidiaries to make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is in the ordinary course of business and on fair and
reasonable terms that are at least as favorable to the Company or such
Subsidiary than those that would have been obtained in a comparable arm's-length
transaction by the Company or such Subsidiary with an unrelated Person; and (ii)
with respect to any Affiliate Transaction that involves aggregate consideration
in excess of $5.0 million, the Company delivers to the Trustee a resolution of
the Board of Directors of the Company set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
such Affiliate Transaction has been approved by a majority of the disinterested
members of the Board of Directors of the Company; provided, however, that (a)
any employment agreement entered into by the Company or any of its Subsidiaries
in the ordinary course of business and consistent with the past practice of the
Company or such Subsidiary, (b) the payment of employee benefits, including
bonuses, retirement plans and stock options, and director fees in the ordinary
course of business, (c) transactions between or among the Company and/or its
Subsidiaries, (d) transactions between the Company or its Subsidiaries on the
one hand, and the Initial Purchaser or its Affiliates on the other hand,
involving the provision of financial or consulting services by the Initial
Purchaser or its Affiliates, provided that the fees payable to the Initial
Purchaser or its Affiliates do not exceed the usual and customary fees of the
Initial Purchaser and its Affiliates for similar services, (e) transactions
existing on December 19, 1996 or contemplated by the arrangements described in
the documents incorporated by reference in the Offering Memorandum as set forth
in the Offering Memorandum under the caption "Information Incorporated by
Reference," (f) reasonable and customary directors' fees, (g) loans to officers
or directors of the Company in the ordinary course of business, (h) transactions
among the Company or any of its Subsidiaries and DLJ and its Affiliates in
connection with the Refinancing as contemplated by the Offering Memorandum,
including those in connection with the Tender Offer and the New Credit
Agreement, (i) the repurchase of a station representation contract from KMSI in
connection with the termination of the Interim Credit Facility, (j) transactions
permitted by Section 4.05 hereof and (k) obligations of the Company under the
Financial Monitoring and Oversight Agreements and the Tax Sharing Agreement, in
each case, shall not be deemed Affiliate Transactions.
SECTION 4.09. LIENS.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien of any kind (other than Permitted Liens) to secure Indebtedness
other than Senior Debt on any property or asset now owned or hereafter acquired,
or on any income or profits therefrom or assign or convey any right to receive
income therefrom, unless all payments due under this Indenture and the Notes are
secured on an equal and ratable basis with the Obligations so secured until such
time as such Obligations are no longer secured by a Lien.
SECTION 4.10. COMPLIANCE WITH LAWS, TAXES.
The Company shall, and shall cause each of its Subsidiaries to,
comply with all statutes, laws, ordinances, or government rules and regulations
to which it is subject, the non-compliance with which would
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materially adversely affect the business, earnings, properties, assets or
condition, financial or otherwise, of the Company and its Subsidiaries taken as
a whole.
The Company shall, and shall cause each of its Subsidiaries to,
pay prior to delinquency all material taxes, assessments and governmental
levies, except those contested in good faith by appropriate proceedings.
SECTION 4.11. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective, any encumbrance or restriction on the ability of any
Subsidiary to (i)(a) pay dividends or make any other distributions to the
Company or any of its Subsidiaries on its Capital Stock or (b) pay any
Indebtedness owed to the Company or any of its Subsidiaries; (ii) make loans or
advances to the Company or any of its Subsidiaries; or (iii) transfer any of its
properties or assets to the Company or any of its Subsidiaries, except for such
encumbrances or restrictions existing under or by reasons of (a) Existing
Indebtedness as in effect on December 19, 1996, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive in the aggregate in terms of
such encumbrances or restrictions than those in effect on December 19, 1996; (b)
the New Credit Agreement as in effect on December 19, 1996, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive in the aggregate in terms of
such encumbrances or restrictions than those contained in the New Credit
Agreement as in effect on December 19, 1996; (c) this Indenture, the Notes and
the Subsidiary Guarantees; (d) applicable law; (e) any agreement relating to the
purchase, sale or lease of assets, or any instrument governing Indebtedness or
Capital Stock of a Person acquired by the Company or any of its Subsidiaries as
in effect at the time of acquisition (except to the extent such Indebtedness or
such restriction was incurred in connection with, or in contemplation of, such
acquisition), in each case, 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, provided that the
Consolidated EBITDA of such Person is not taken into account in determining
whether such acquisition was permitted by the terms contained herein; (f) by
reason of customary non-assignment provisions in leases and licenses entered
into in the ordinary course of business and consistent with past practices; (g)
purchase money or capitalized lease obligations for property acquired in the
ordinary course of business that impose restrictions of the nature described in
this Section 4.11(iii) hereof on the property so acquired; (h) Refinancing
Indebtedness, provided that the restrictions contained in the agreements
governing such Refinancing Indebtedness are no more restrictive in the aggregate
than those contained in the agreements governing the Indebtedness being
refinanced; (i) other Indebtedness permitted by Section 4.07 hereof, so long as
any such encumbrances or restrictions set forth in such Indebtedness are no more
restrictive in the aggregate than those contained in this Indenture or the New
Credit Agreement; or (j) any instrument governing the sale of assets of the
Company or any of its Subsidiaries, which encumbrance or restriction applies
solely to the assets of the Company or such Subsidiary, being sold in such
transaction.
SECTION 4.12. MAINTENANCE OF OFFICE OR AGENCIES.
The Company shall maintain in The City of New York an office or an
agency (which may be an office of any Agent) where Notes may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of any change in the
location of such office or agency. If at any time the Company shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any matter relieve the
Company of
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its obligation to maintain an office or agency in The City of New York for such
purposes. The Company shall give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee located at 6201 15th Avenue, Brooklyn, New York 11219 as one such office
or agency of the Company in accordance with Section 2.03 hereof.
SECTION 4.13. 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 Notes pursuant to the
offer described below (the "Change of Control Offer"), at a purchase price in
cash equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date of purchase
(the "Change of Control Payment").
(b) In the event a Change of Control occurs at a time when the
Company is prohibited from purchasing Notes under the terms of any Senior Debt,
then prior to mailing the notice to the Holders of the Notes pursuant to Section
3.08(a) hereof, but in any event within 30 days following any Change of Control,
the Company shall obtain the requisite consents, if any, under all agreements
governing such Senior Debt to the purchase of Notes pursuant to the Change of
Control Offer or repay the Senior Debt containing such a prohibition.
(c) The Company will not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Section 4.13 and in Article 3 hereof applicable
to a Change of Control Offer made by the Company (including any requirement to
repay in full any Senior Debt or obtain the consents of such lenders to such
Change of Control Offer as set forth in this Section 4.13 (b) hereof) and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
SECTION 4.14. ASSET SALES.
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, engage in an Asset Sale unless (i) the Company (or the
Subsidiary, as the case may be) receives consideration at the time of such Asset
Sale at least equal to the fair market value (evidenced by a resolution of the
Board of Directors of the Company) of the assets or Equity Interests issued or
sold or otherwise disposed of and (ii) at least 75% of the consideration
therefor received by the Company or such Subsidiary is in the form of cash or
Marketable Securities (other than in the case where the Company or such
Subsidiary is exchanging all or substantially all the assets of one or more
broadcast businesses operated by the Company or such Subsidiary (including by
way of transfer of the capital stock) for all or substantially all of 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 Marketable Securities shall
not apply) and is received at the time of such disposition; provided that the
amount of (x) any liabilities (as shown on the Company's or such Subsidiary's
most recent balance sheet or in the notes thereto) of the Company or any
Subsidiary (other than liabilities that are by their terms subordinated to the
Notes or the Subsidiary Guarantees) that are assumed by the transferee of any
such assets and (y) any notes or other obligations or securities received by the
Company or any such Subsidiary from such transferee that are promptly (within 90
days) converted by the Company or such Subsidiary into cash (to the extent of
the cash or Marketable Securities received), will be deemed to be cash for
purposes of the foregoing clauses (i) and (ii); provided further, however, that
the 75% limitation referred to above shall not apply to any sale, transfer or
other disposition of assets in which the cash portion of the consideration
received therefor, determined in accordance with the foregoing proviso, is equal
to or greater than what the after-tax net proceeds would have been had such
transaction complied with the aforementioned 75% limitation.
(b) Within 180 days after the receipt of any Net Proceeds from an
Asset Sale, the Company must apply such Net Proceeds, (i) to permanently reduce
Senior Debt of the Company or any Guarantor (and, in the case of revolving
Indebtedness, to permanently reduce the commitments with respect thereto), (ii)
to cash
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collateralize letters of credit under the Credit Agreement, provided that any
such cash collateral released to the Company or its Subsidiaries upon the
expiration of such letters of credit shall again be deemed to be Net Proceeds
received on the date of such release, (iii) 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 Proceeds, or (iv) to purchase Notes 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 in Article 3 hereof (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 93/8% Notes Indenture
as in effect on the date of the amendment and restatement of this Indenture,
offer to use such Net Proceeds to repurchase and use all or a portion of such
Net Proceeds to repurchase 93/8% Notes and then, to the extent required
pursuant to the 8 3/4% Notes Indenture as in effect on the date of the
amendment and restatement of this Indenture, offer to use the remaining Net
Proceeds to repurchase 8 3/4% 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 Section 4.14; 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
this clause (b); provided, further, that the Company may defer making a Net
Proceeds Offer until the aggregate Net Proceeds from Asset Sales (taking into
account any Net Proceeds used to repurchase 93/8% Notes and 8 3/4% 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.
(c) If the aggregate principal amount of Notes validly tendered
pursuant to any Net Proceeds Offer is less than the amount of Net Proceeds
subject to such Net Proceeds Offer, the Company may use any remaining portion of
such Net Proceeds not required to fund the repurchase of tendered Notes for
purposes otherwise permitted by this Indenture. Upon the consummation of any Net
Proceeds Offer, the amount of Net Proceeds subject to any future Net Proceeds
Offer from the Asset Sales giving rise to such Net Proceeds shall be deemed to
be zero.
SECTION 4.15. ADDITIONAL GUARANTEES.
If any of the Company's Subsidiaries executes and delivers a
Guarantee with respect to the Credit Agreement, then such Subsidiary shall
execute a Subsidiary Guarantee and deliver an opinion of counsel, in accordance
with the terms of Article 11 hereof. If any Guarantor is subsequently released
from its Guarantee of the Company's obligations under the Credit Agreement, such
Guarantor's Subsidiary Guarantee will also be released.
SECTION 4.16. ACTIVITIES OF THE COMPANY.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, engage in any business other than the
ownership and operation of broadcast businesses or businesses related thereto,
including, without limitation, media representation, sale of advertising and
such other activities as are incidental or similar or related thereto.
SECTION 4.17. NO SENIOR SUBORDINATED DEBT.
(a) The Company shall not incur any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt and senior in any
respect in right of payment to the Notes.
(b) No Guarantor shall incur any Indebtedness that is subordinate
or junior in right of payment to any Senior Debt of such Guarantor and senior in
any respect in right of payment to any Subsidiary Guarantee.
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SECTION 4.18. 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 4.07; (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.
ARTICLE 5.
SUCCESSORS
SECTION 5.01. Merger, Consolidation or Sale of Assets.
The Company shall not consolidate or merge with or into (whether
or not the Company is the surviving entity), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions to, another corporation, Person or
entity (other than the KCC Merger) unless (i) the Company is the surviving
corporation or entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition will have been made assumes all the obligations of the
Company under the Notes and this Indenture pursuant to a supplemental indenture
in form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction, no Default or Event of Default exists; and (iv) except in the case
of a merger of the Company with or into a Wholly Owned Subsidiary of the
Company, the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made will, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with Section
4.07.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or with which or into the Company is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition 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 has been named as the Company herein; provided, however,
that neither the Company nor any such successor corporation shall be released
from its Obligation to pay the principal of, premium, if any, and accrued and
unpaid interest on, and Liquidated Damages, if any, with respect to the Notes.
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ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
(a) An Event of Default is:
(i) default for 30 days in the payment when due of
interest on, or Liquidated Damages, if any, with
respect to the Notes whether or not prohibited by
Article 10 hereof;
(ii) default in payment when due of principal or premium,
if any, on the Notes at maturity, upon redemption or
otherwise whether or not prohibited by Article 10
hereof;
(iii) failure by the Company for 30 days after receipt of
written notice from the Trustee or Holders of at
least 25% in principal amount of the Notes then
outstanding to comply with the provisions described
under Sections 4.13, 4.14, 4.05, 4.07 or Article 5
hereof;
(iv) failure by the Company for 60 days after written
notice from the Trustee or the Holders of at least
25% in principal amount of the Notes then outstanding
to comply with its other agreements in this Indenture
or the Notes;
(v) default under any mortgage, indenture or instrument
under which there may be issued or by which there may
be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Subsidiaries
(or the payment of which is guaranteed by the Company
or any of its Subsidiaries) whether such Indebtedness
or Guarantee now exists, or is created after the date
hereof, which default (A)(i) is caused by a failure
to pay when due at final stated maturity (giving
effect to any grace period related thereto) the
principal of such Indebtedness (a "Payment Default")
or (ii) results in the acceleration of such
Indebtedness prior to its express maturity and (B) in
each case, the principal amount of any such
Indebtedness due to be paid, together with the
principal amount of any other such Indebtedness under
which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates
$10.0 million or more;
(vi) failure by the Company or any of its Subsidiaries to
pay non-appealable final judgments (other than any
judgment as to which a reputable insurance company has
accepted full liability) aggregating in excess of
$10.0 million, which judgments are not stayed,
bonded, discharged or vacated within 60 days after
their entry;
(vii) except as permitted by this Indenture, if any
Subsidiary Guarantee that is granted by a Significant
Subsidiary shall be held in any judicial proceeding
to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any
Guarantor that is a Significant Subsidiary, or any
Person acting on behalf of any Guarantor that is a
Significant Subsidiary, shall deny or disaffirm its
obligations under its Subsidiary Guarantee;
(viii) in existence when the Company or any Significant
Subsidiary pursuant to or within the meaning of any
Bankruptcy Law:
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(A) commences a voluntary case,
(B) consents to the entry of an order for relief
against it in an involuntary case,
(C) consents to the appointment of a Custodian of
it or for all or substantially all of its
property, or
(D) makes a general assignment for the benefit of
its creditors; and
(ix) in existence when a court of competent jurisdiction
enters an order or decree under any Bankruptcy Law
that:
(A) is for relief against the Company or any
Significant Subsidiary in an involuntary
case,
(B) appoints a Custodian of the Company or any
Significant Subsidiary or for all or
substantially all of the property of the
Company or any Significant Subsidiary, or
(C) orders the liquidation of the Company or any
Significant Subsidiary, and any such order or
decree remains unstayed and in effect for 60
days.
The term "Custodian" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
SECTION 6.02. ACCELERATION.
(a) If any Event of Default occurs and is continuing (other than
an Event of Default under Section 6.01(a)(viii) or (ix) hereof), the Trustee or
the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable by notice in writing to the
Company and the Trustee specifying the respective Event of Default and that it
is a "notice of acceleration" (the "Acceleration Notice"), and the same (i)
shall become immediately due and payable or (ii) if there are any amounts
outstanding under the Credit Agreement, shall become immediately due and payable
upon the first to occur of an acceleration under the Credit Agreement or five
Business Days after receipt by the Company and the Representative under the
Credit Agreement of such Acceleration Notice but only if such Event of Default
is then continuing. Notwithstanding the foregoing, in the case of an Event of
Default arising from Section 6.01(a)(viii) or (ix) hereof, all outstanding Notes
will become due and payable without further action or notice.
(b) In the event of a declaration of acceleration of the Notes
because an Event of Default has occurred and is continuing as a result of the
acceleration of any Indebtedness described in Section 6.01 (a)(v) hereof, the
declaration of acceleration of the Notes shall be automatically annulled if the
holders of any Indebtedness described in Section 6.01 (a)(v) hereof have
rescinded the declaration of acceleration in respect of such Indebtedness within
30 days of the date of such declaration and if (i) the annulment of the
acceleration of the Notes would not conflict with any judgment or decree of a
court of competent jurisdiction, and (ii) all existing Events of Default, except
nonpayment of principal or interest on the Notes that became due solely because
of the acceleration of the Notes, have been cured or waived.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal of, premium, if
any, or any accrued and unpaid interest on, or Liquidated Damages, if any, with
respect to the Notes or to enforce the performance of any provision of the Notes
or this Indenture.
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The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder 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. All remedies are cumulative
to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
The holders of a majority in aggregate principal amount of the
Notes then outstanding by notice to the Trustee may on behalf of all Holders of
all of the Notes waive any existing Default or Event of Default and its
consequences under this Indenture, except a continuing Default or Event of
Default in the payment of the principal of, premium, if any, and interest on,
and Liquidated Damages, if any, with respect to such Notes, which may only be
waived with the consent of each Holder of Notes affected. Upon any such waiver,
such Default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured for every purpose of this Indenture; provided
that no such waiver shall extend to any subsequent or other Default or impair
any right consequent thereon. The Trustee may withhold from Holders of the Notes
notice of any continuing Default or Event of Default (except a Default or Event
of Default relating to the payment of principal or interest) if it determines
that withholding notice is in such Holders' interest.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding
Notes 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
by this Indenture. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture, that the Trustee determines may be unduly
prejudicial to the rights of other Holders or would involve the Trustee in
personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder may pursue a remedy with respect to this Indenture or the
Notes only if (i) the Holder gives to the Trustee notice of a continuing Event
of Default; (ii) the Holders of at least 25% in principal amount of the then
outstanding Notes make a request to the Trustee to pursue the remedy; (iii) such
Holder or Holders offer and, if requested, provide to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense; (iv) the
Trustee does not comply with the request within 60 days after receipt of the
request and the offer of indemnity; and (v) during such 60-day period the
Holders of a majority in principal amount of the then outstanding Notes do not
give the Trustee a direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
Holders of the Notes may not enforce this Indenture, except as
provided herein.
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, premium, if any, and any
accrued and unpaid interest on, and Liquidated Damages, if any, with respect to
a Note, on or after a respective due date expressed in the Note, or to bring
suit for the enforcement of any such payment on or after such respective date,
shall not be impaired or affected without the consent of the Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a)(i) or (ii)
hereof occurs and is continuing, the Trustee is authorized to recover judgment
in its own name and as trustee of an express trust against the Company for (i)
the principal, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes, (ii) interest on overdue principal and premium, if any,
and, to the extent lawful, interest, and (iii) such further amount as shall
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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 ("Trustee Expenses").
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 to have the claims of the Trustee
(including any claim for Trustee Expenses) and the Holders allowed in any
Insolvency or Liquidation Proceeding or other judicial proceeding relative to
the Company (or any other obligor upon the Notes), its creditors or its property
and shall be entitled and empowered to collect, receive and distribute to
Holders any money or other property payable or deliverable on any such claims
and each Holder authorizes any Custodian in any such Insolvency or Liquidation
Proceeding or other judicial proceeding to make such payments to the Trustee,
and if the Trustee shall consent to the making of such payments directly to the
Holders any such Custodian is hereby authorized to make such payments directly
to the Holders, and to pay to the Trustee any amount due to it hereunder for
Trustee Expenses, and any other amounts due the Trustee under Section 7.07
hereof. To the extent that the payment of any such Trustee Expenses, and any
other amounts due the Trustee under Section 7.07 hereof out of the estate in any
such proceeding, shall be denied for any reason, payment of the same shall be
secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties which the Holders may be
entitled to receive in such proceeding, whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any Insolvency or
Liquidation Proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07 hereof;
Second: to Holders for amounts due and unpaid on the Notes for
principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Liquidated Damages, if any, and
interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment
to Holders.
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 a 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, 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 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
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ARTICLE 7.
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default occurs (and has not been cured) the
Trustee shall (i) exercise the rights and powers vested in it by this Indenture,
and (ii) use the same degree of care and skill in exercising such rights and
powers as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee's duties shall be determined solely by
the express provisions of this Indenture and the
Trustee need perform only those duties that are
specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall
be read into this Indenture against the Trustee; and
(ii) 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 or opinions
furnished to the Trustee and conforming to the
requirements of this Indenture. However, the Trustee
shall examine the certificates and opinions to
determine whether they conform to this Indenture's
requirements.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own wilful
misconduct, except that:
(i) this paragraph does not limit the effect of Section
7.01(b) hereof;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer,
unless it is proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(iii) 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 it receives pursuant to
Section 6.05 hereof.
(d) Whether or not expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), (c) and (e) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders unless such Holders shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money it
receives except as the Trustee may agree in writing with the Company. Money the
Trustee holds in trust need not be segregated from other funds except to the
extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document it believes to be genuine
and to have been signed or presented by the proper Person. The Trustee shall not
be obligated to investigate any fact or matter stated in the document.
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(b) Before the Trustee acts or refrains from acting, it may
reasonably require an Officers' Certificate or an Opinion of Counsel, or both.
The Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such Officers' Certificate or Opinion of Counsel. The
Trustee may consult with counsel and advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any Agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or
omits to take, except to the extent that such action or omission to act
constitutes negligence or wilful misconduct on the part of the Trustee.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or an
Affiliate with the same rights it would have if it were not Trustee. However, if
the Trustee acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the SEC for permission to continue as Trustee or
resign. Any Agent may do the same with like rights. The Trustee is also subject
to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes, it
shall not be accountable for the Company's use of the proceeds from the Notes or
for any money paid to the Company or upon the Company's direction under any
provisions hereof, it shall not be responsible for the use or application of any
money any Paying Agent other than the Trustee receives, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document furnished or issued in connection with the sale of the Notes
or pursuant to this Indenture, other than its certificate of authentication.
SECTION 7.05. NOTICE TO HOLDERS OF DEFAULTS AND EVENTS OF DEFAULT.
If a Default or Event of Default occurs and is continuing and if
it is actually known to the Trustee, the Trustee shall mail to Holders a notice
of the Default or Event of Default within 90 days after it occurs. Except in the
case of a Default or Event of Default in payment on any Note (including any
failure to redeem Notes called for redemption or any failure to purchase Notes
tendered pursuant to an Offer that are required to be purchased by the terms of
this Indenture), the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the Holders' interests.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each August 1 beginning with August 1, 1997,
the Trustee shall mail to Holders a brief report dated as of such reporting date
that complies with section 313(a) of the TIA (but if no event described in
section 313(a) of the TIA has occurred within the twelve months preceding the
reporting date, no report need be transmitted). The Trustee also shall comply
with section 313(b)(2) of the TIA. The Trustee shall also transmit by mail all
reports as required by section 313(c) of the TIA.
Commencing at the time this Indenture is qualified under the TIA,
a copy of each report at the time of its mailing to Holders shall be filed with
the SEC and each national securities exchange on which the Notes are listed. The
Company shall notify the Trustee when and if the Notes are listed on any
national securities exchange.
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SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee (in its capacities as
Trustee, Paying Agent and/or Registrar) from time to time reasonable
compensation for its services hereunder. 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 disbursements,
advances, fees and expenses it incurs or makes in addition to the compensation
for its services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify and hold harmless the Trustee (in its
capacities as Trustee, Paying Agent and/or Registrar) against any and all
losses, liabilities or expenses the Trustee incurs arising out of or in
connection with the acceptance or administration of its duties under this
Indenture, except as set forth below. The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. Failure by the Trustee to
so notify the Company shall not relieve the Company of its Obligations
hereunder. The Company shall defend the claim and the Trustee shall reasonably
cooperate in the defense. The Trustee may have one separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel. The Company
need not pay for any settlement made without its consent, which consent shall
not be unreasonably withheld.
The Company's Obligations under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
The Company need not reimburse any expense or indemnify against
any loss or liability the Trustee incurs through negligence or bad faith or
willful misconduct.
To secure the Company's payment of its Obligations in this Section
7.07, the Trustee shall have a Lien prior to the Notes on all money or property
the Trustee holds or collects, except such money or property held in trust to
pay principal of, premium, if any, and any accrued and unpaid interest on, and
Liquidated Damages, if any, with respect to particular Notes. Such Lien shall
survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(a)(viii) or (ix) hereof occurs, the
expenses and the compensation for the services (including the fees and expenses
of its agents and counsel) are intended to constitute administrative expenses
under any Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section 7.08.
The Trustee may resign and be discharged from the trust hereby
created by so notifying the Company. The Holders of a majority in principal
amount of the then outstanding Notes may remove the Trustee by so notifying the
Trustee and the Company. The Company may remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10 hereof;
(ii) the Trustee is adjudged a bankrupt or an insolvent or
an order for relief is entered with respect to the
Trustee under any Bankruptcy Law;
(iii) a Custodian or public officer takes charge of the
Trustee or its property; or
(iv) 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 promptly appoint a successor
Trustee, provided that the Holders of a majority in principal
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amount of the then outstanding Notes may appoint a successor Trustee to replace
any successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any
Holder may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, 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. The successor Trustee shall mail a notice of its
appointment to Holders. The retiring Trustee shall promptly transfer all
property it holds as Trustee to the successor Trustee, provided all sums owing
to the retiring Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
hereof shall continue for the retiring Trustee's benefit with respect to
expenses and liabilities it incurred prior to being replaced.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
The Trustee shall at all times (i) be a corporation organized and
doing business under the laws of the United States of America, of any state
thereof, or the District of Columbia authorized under such laws to exercise
corporate trustee power, (ii) be subject to supervision or examination by
federal or state authority, (iii) have a combined capital and surplus of at
least $10,000,000 as set forth in its most recent published annual report of
condition, and (iv) satisfy the requirements of sections 310(a)(1), (2) and (5)
of the TIA. The Trustee is subject to section 310(b) of the TIA.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
The Trustee is subject to section 311(a) of the TIA, excluding any
creditor relationship listed in section 311(b) of the TIA. A Trustee who has
resigned or been removed shall be subject to section 311(a) of the TIA to the
extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced
by a resolution set forth in an Officers' Certificate, at any time, elect to
have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes and
Subsidiary Guarantees upon compliance with the conditions set forth below in
this Article 8.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Company and each Guarantor shall,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
be deemed to have been discharged from its obligations with respect to all
outstanding Notes and Subsidiary
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Guarantees on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means
that the Company and each Guarantor shall be deemed to have paid and discharged
the entire Indebtedness represented by the outstanding Notes and Subsidiary
Guarantees, which shall thereafter be deemed to be "outstanding" only for the
purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and Subsidiary Guarantees and this Indenture (and
the Trustee, on demand of and at the expense of the Company, shall execute
proper instruments acknowledging the same), except for the following provisions
which shall survive until otherwise terminated or discharged hereunder: (a)
the rights of Holders of outstanding Notes to receive payments in respect of
the principal of, premium, if any, and interest and Liquidated Damages, if any,
on such Notes when such payments are due or on the redemption date, as the case
may be, from the trust referred to in Section 8.04(a), (b) the Company's
obligations with respect to such Notes under Sections 2.02, 2.03, 2.04, 2.05,
2.06, 2.07, 2.10 and 4.12 hereof, (c) the rights, powers, trusts, duties and
immunities of the Trustee including without limitation thereunder Section 7.07,
8.05 and 8.07 hereunder and the Company's obligations in connection therewith,
(d) the Company's rights to redeem Notes under Section 3.07 hereof and (e) the
provisions of this Article 8. Subject to compliance with this Article 8, the
Company may exercise its option under this Section 8.02 notwithstanding the
prior exercise of its option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Company and each Guarantor shall,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
be released from its obligations under the covenants contained in Sections 3.08,
4.02, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.13, 4.14, 4.15, 4.16, 4.17,
4.18, 5.01 and 11.01 hereof and any future covenant added to this Indenture with
respect to the outstanding Notes and Subsidiary Guarantees on and after the date
the conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes and Subsidiary Guarantees shall thereafter be deemed
not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes and
Subsidiary Guarantees shall not be deemed outstanding for accounting purposes).
For this purpose, Covenant Defeasance means that, with respect to the
outstanding Notes and Subsidiary Guarantees, the Company, its Subsidiaries or
any Guarantor may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.01 hereof, but,
except as specified above, the remainder of this Indenture and such Notes and
Subsidiary Guarantees shall be unaffected thereby. In addition, upon the
Company's exercise under Section 8.01 hereof of the option applicable to this
Section 8.03 hereof, subject to the satisfaction of the conditions set forth in
Section 8.04 hereof, Sections 6.01(a)(i) through 6.01(a)(vii) hereof shall not
constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes and Subsidiary Guarantees:
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders of the Notes, (i) cash
in United States dollars, (ii) non-callable Government
Securities which through the scheduled payment of principal,
premium, if any, interest and liquidated damages, if any,
in respect thereof in accordance with their terms will
provide, not later than one day before the due date of
payment, cash in United States dollars in an amount, or (iii)
a combination thereof, in such amounts as shall 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
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and discharge the principal of, premium, if any, and interest
and Liquidated Damages, if any, on the outstanding Notes on
the stated maturity or on the applicable redemption date, as
the case may be, and the Company must specify whether the
Notes are being defeased to maturity or to a particular
redemption date;
(b) in the case of an election under Section 8.02 hereof, the
Company shall have delivered to the Trustee an Opinion of
Counsel in the United States reasonably acceptable to the
Trustee confirming that (A) the Company has received from, or
there has been published by, the Internal Revenue Service a
ruling or (B) since the date hereof, there has been a change
in the applicable federal income tax law, in either case to
the effect that, and based thereon such Opinion of Counsel
shall confirm that, the Holders of the outstanding Notes shall
not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and shall be
subject to federal income tax on the same amounts, in the same
manner and at the same time as would have been the case if
such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the
Company shall have delivered to the Trustee an Opinion of
Counsel in the United States reasonably acceptable to the
Trustee confirming that the Holders of the outstanding Notes
shall not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and shall
be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case
if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Sections
6.01(a)(viii) and (ix) hereof are concerned, at any time in
the period ending on the 91st day after the date of deposit
(it being understood that this condition shall not be deemed
satisfied until the expiration of such period);
(e) such Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a default under any
material agreement or instrument including, without
limitation, the New Credit Agreement (other than this
Indenture) to which the Company or any of its Subsidiaries is
a party or by which the Company or any of its Subsidiaries is
bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the
deposit, the trust funds shall not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of Notes
over the other creditors of the Company with the intent of
defeating, hindering, delaying or defrauding any other
creditors of the Company or others;
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with;
and
(i) the Trustee shall have received such other documents and
assurances as the Trustee shall have reasonably required.
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SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as
Paying Agent) as the Trustee may determine, to the Holders of such Notes of all
sums due and to become due thereon in respect of principal, premium, if any,
interest and Liquidated Damages, if any, but such money need not be segregated
from other funds except to the extent required by applicable law.
The Company shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof 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 the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the written
request of the Company and be relieved of all liability with respect to any
money or non-callable Government Securities held by it as provided in Section
8.04 hereof which, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to the
Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are
in excess of the amount thereof that would then be required to be deposited to
effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO THE COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, interest or Liquidated Damages, if any, on any Note and remaining unclaimed
for one year after such principal, and premium, if any, or interest or
Liquidated Damages, if any, has become due and payable shall be paid to the
Company on its written request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
shall be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with Section
8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the obligations of the Company and the
Guarantors under this Indenture, the Notes and the Subsidiary Guarantees shall
be revived and reinstated as though no deposit had occurred pursuant to Section
8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted
to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the
case may be; provided, however, that, if the Company or any Guarantor makes any
payment of principal of, premium, if any, interest or Liquidated Damages, if
any, on any Note following the reinstatement of its obligations, the Company or
any Guarantor shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money held by the Trustee or Paying Agent.
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ARTICLE 9.
AMENDMENTS
SECTION 9.01. AMENDMENTS AND SUPPLEMENTS PERMITTED WITHOUT CONSENT OF HOLDERS.
Notwithstanding Section 9.02 hereof, the Company, the Guarantors
and the Trustee may amend or supplement this Indenture or the Notes without the
consent of any Holder (a) to cure any ambiguity, defect or inconsistency; (b) to
provide for uncertificated Notes in addition to or in place of certificated
Notes; (c) to provide for the assumption by a successor corporation of the
Company's Obligations to the Holders in the event of a disposition pursuant to
Article 5; (d) to comply with SEC's requirements to effect or maintain the
qualification of this Indenture under the TIA; (e) to provide for additional
Subsidiary Guarantees with respect to the Notes; (f) to make any change that
does not materially adversely affect any Holder's legal rights under this
Indenture, (g) to evidence and provide for a successor Trustee; (h) to add
additional covenants or Events of Default; or (i) to secure the Notes .
No amendment may be made to any provision of Article 10 that would
adversely affect the rights of any holder of Senior Debt then outstanding unless
the holders of such Senior Debt (or their Representative) consent to such
change.
Upon the Company's request, after receipt by the Trustee of a
resolution of the Board of Directors authorizing the execution of any amended or
supplemental indenture and the documents described in Section 9.06 hereof, the
Trustee shall join with the Company and the Guarantors in the execution of any
amended or supplemental indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations that
may be contained in any such amended or supplemental indenture, but the Trustee
shall not be obligated to enter into an amended or supplemental indenture that
affects its own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. AMENDMENTS AND SUPPLEMENTS REQUIRING CONSENT OF HOLDERS.
Subject to Section 6.07 hereof and Section 10.13, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture or the Notes
with the consent of the holders of at least a majority in principal amount of
the Notes then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for Notes), and
any existing Default or Event of Default (other than a payment Default) or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for Notes).
Upon the Company's request and after receipt by the Trustee of a
resolution of the Board of Directors authorizing the execution of any
supplemental indenture, evidence of the Holders' consent, and the documents
described in Section 9.06 hereof, the Trustee shall join with the Company and
the Guarantors in the execution of such amended or supplemental indenture unless
such amended or supplemental indenture affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise, in which case the Trustee may
in its discretion, but not be obligated to, enter into such amended or
supplemental indenture.
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 or
waiver, but it shall be sufficient if such consent approves the substance
thereof. After an amendment or waiver under this Section 9.02 becomes effective,
the Company shall mail to each Holder 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 amended or supplemental indenture or waiver.
Subject to Sections 6.02, 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Company or the Guarantors with any
provision of this Indenture, the Notes or the Subsidiary Guarantees. However,
without the
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consent of each Holder affected, an amendment, supplement or waiver may not
(with respect to any Note or Subsidiary Guarantee held by a non-consenting
Holder): (i) reduce the principal amount of Notes whose holders must consent
to an amendment, supplement or waiver, (ii) reduce the principal of or change
the fixed maturity of any Note or alter the provisions with respect to the
redemption of the Notes (other than provisions relating to Sections 4.13 and
4.14 hereof), in a manner adverse to Holders, (iii) reduce the rate of or
change the time for payment of interest on any Note, (iv) waive a Default or
Event of Default in the payment of principal of or premium, if any, or interest
on the Notes (except a rescission of acceleration of the Notes by the holders
of at least a majority in aggregate principal amount of the Notes and a waiver
of the payment default that resulted from such acceleration), (v) make any Note
payable in money other than that stated in the Notes, (vi) make any change in
the provisions of the Indenture relating to waivers of past Defaults or the
rights of holders of Notes to receive payments of principal of or premium, if
any, or interest on the Notes, (vii) waive a redemption payment with respect to
any Note (other than a payment required by either of Sections 4.13 or 4.14
hereof) or (viii) make any change in the foregoing amendment and waiver
provisions. In addition, any amendment to the provisions of Article 10 or
Section 11.08 hereof will require the consent of the holders of at least 75% in
aggregate principal amount of the Notes then outstanding if such amendment
would adversely affect the rights of holders of Notes.
SECTION 9.03. COMPLIANCE WITH TIA.
Every amendment or supplement to this Indenture or the Notes shall
be set forth in an amendment or supplemental indenture that complies with the
TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder and
every subsequent Holder of a Note or portion of a Note that evidences the same
Indebtedness as the consenting Holder's Note, even if notation of the consent is
not made on any Note. However, any such Holder or subsequent Holder may revoke
the consent as to his or her Note or portion of a Note if the Trustee receives
the notice of revocation before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the requisite principal
amount of Notes have consented to the amendment or waiver.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders of Notes entitled to consent to any
amendment or waiver. If a record date is fixed, then, notwithstanding the
provisions of the immediately preceding paragraph, those Persons who were
Holders of Notes at such record date (or their duly designated proxies), and
only those Persons, shall be entitled to consent to such amendment or waiver or
to revoke any consent previously given, whether or not such Persons continue to
be Holders of Notes after such record date. No consent shall be valid or
effective for more than 90 days after such record date unless consents from
Holders of the principal amount of Notes required hereunder for such amendment
or waiver to be effective shall have also been given and not revoked within such
90-day period.
After an amendment or waiver becomes effective it shall bind every
Holder, unless it is of the type described in any of clauses (i) through (vi) of
Section 9.02 hereof. In such case, the amendment or waiver shall bind each
Holder who has consented to it and every subsequent Holder of a Note that
evidences the same debt as the consenting Holder's Note.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may (at the Company's expense) place an appropriate
notation about an amendment, supplement or waiver on any Note thereafter
authenticated. The Company in exchange for all Notes may issue and the Trustee
shall authenticate new Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall
not affect the validity and effect of such amendment, supplement or waiver.
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SECTION 9.06. TRUSTEE PROTECTED.
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article 9 if the amendment does not adversely affect
the rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing such amendment or supplemental
indenture, the Trustee shall be entitled to receive and, subject to Section 7.01
hereof, shall be fully protected in relying upon, an Officers' Certificate and
Opinion of Counsel as conclusive evidence that such amendment or supplemental
indenture is authorized or permitted by this Indenture, that it is not
inconsistent herewith, and that it will be valid and binding upon the Company in
accordance with its terms. The Company may not sign an amendment or supplemental
indenture until the Board of Directors approves it.
ARTICLE 10.
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE.
The Company and the Guarantors agree, and each Holder by
accepting a Note agrees, that the payment of principal of, premium, interest and
Liquidated Damages, if any, on the Notes shall be subordinated in right of
payment, to the extent and in the manner provided in this Article 10 and Article
11, to the prior payment in full in cash or Marketable Securities of all Senior
Debt, whether outstanding on the date hereof or thereafter incurred.
SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, an assignment for the benefit of creditors or any marshalling of the
Company's assets and liabilities:
(a) the holders of Senior Debt will be entitled to receive
payment in full in cash or Marketable Securities of all Obligations due in
respect of such Senior Debt (including interest after the commencement of any
such proceeding at the rate specified in the applicable Senior Debt, whether or
not such interest is allowable as a claim in any such proceeding) before the
Holders of Notes will be entitled to receive any payment with respect to the
Notes (except that Holders of Notes may receive (i) Permitted Junior Securities
and any other Permitted Junior Securities issued in exchange for any Permitted
Junior Securities and (ii) payments and other distributions made from the
defeasance trust created pursuant to Article 8 hereof); and
(b) until all Obligations with respect to Senior Debt are paid in
full in cash or Marketable Securities, any distribution to which the Holders of
Notes would be entitled shall be made to the holders of Senior Debt (except that
Holders of Notes may receive (i) Permitted Junior Securities and any other
Permitted Junior Securities issued in exchange for any Permitted Junior
Securities and (ii) payments and other distributions made from the defeasance
trust created pursuant to Article 8 hereof).
SECTION 10.03. DEFAULT ON DESIGNATED SENIOR DEBT.
The Company also may not make any payment upon or in respect of
the Notes (except that Holders of Notes may receive (i) Permitted Junior
Securities and any other Permitted Junior Securities issued in exchange for any
Permitted Junior Securities and (ii) payments and other distributions made from
the defeasance trust created pursuant to Article 8 hereof) if:
(i) a default in the payment of the principal of, premium, if
any, or interest on Senior Debt occurs and is continuing; or
(ii) any other default occurs and is continuing with respect to
Designated Senior Debt that permits holders of the
Designated Senior Debt as to which such default relates to
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accelerate its maturity and the Trustee receives a notice of
such default (a "Payment Blockage Notice") from a Person who
may give it pursuant to Section 10.11 hereof. If the Trustee
receives any such Payment Blockage Notice, no subsequent
payment blockage period shall be commenced for purposes of
this Section 10.03 unless and until (x) 360 days have elapsed
since the commencement of the immediately prior payment
blockage period and (y) all scheduled payments of principal,
premium, if any, interest and Liquidated Damages, if any, on
the Notes that have come due have been paid in full in cash.
No nonpayment default that existed or was continuing on the
date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent
Payment Blockage Notice.
The Company may and shall resume payments on the Notes:
(a) in the case of a payment default described in clause (i)
above, upon the date on which such default is cured or
waived, and
(b) in case of a nonpayment default described in clause (ii)
above, the earlier of the date on which such nonpayment
default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received,
unless a payment default on Senior Debt then exists.
SECTION 10.04. ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of
Default, the Trustee shall promptly notify the Representative of any Senior Debt
of the acceleration.
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any payment
of any Obligations with respect to the Notes at a time when the Trustee has
actual knowledge that such payment is prohibited by Section 10.03 hereof, such
payment shall be held by the Trustee or such Holder, in trust for the benefit
of, and shall be paid forthwith over and delivered, upon written request to, the
holders of Senior Debt as their interest may appear or their Representative
under the indenture or other agreement (if any) pursuant to which Senior Debt
may have been issued, as their interest may appear, for application to the
payment of all Obligations with respect to Senior Debt remaining unpaid to the
extent necessary to pay such Obligations in full in accordance with their terms,
after giving effect to any concurrent payment or distribution to or for the
holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Debt 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 Debt, and shall not be liable to any
such holders if the Trustee shall pay over or distribute to or on behalf of
Holders or the Company or any other Person money or assets to which any holders
of Senior Debt shall be entitled by virtue of this Article 10, except if such
payment is made as a result of the willful misconduct or bad faith of the
Trustee.
SECTION 10.06. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying
Agent of any facts known to the Company that would cause a payment of any
Obligations with respect to the Notes to violate this Article 10, but failure to
give such notice shall not affect the subordination of the Notes to the Senior
Debt as provided in this Article 10.
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SECTION 10.07. SUBROGATION.
After all Senior Debt is paid in full in cash or Marketable
Securities and until the Notes are paid in full, Holders shall be subrogated
(equally and ratably with all other Indebtedness pari passu with the Notes) to
the rights of holders of Senior Debt to receive distributions applicable to
Senior Debt to the extent that distributions otherwise payable to the Holders
have been applied to the payment of Senior Debt. A distribution made under this
Article 10 to holders of Senior Debt that otherwise would have been made to
Holders is not, as between the Company and Holders, a payment by the Company on
the Senior Debt.
SECTION 10.08. RELATIVE RIGHTS.
This Article 10 defines the relative rights of the Holders and
holders of Senior Debt. Nothing in this Indenture shall:
(i) impair, as between the Company and the Holders, the
obligation of the Company, which is absolute and
unconditional, to pay principal of, premium, if any,
interest and Liquidated Damages, if any, on the Notes in
accordance with their terms;
(ii) affect the relative rights of Holders and creditors of the
Company other than their rights in relation to holders of
Senior Debt; or
(iii) prevent the Trustee or any Holder from exercising its
available remedies upon a Default or an Event of Default,
subject to the rights of holders and owners of Senior Debt
to receive distributions and payments otherwise payable to
Holders.
If the Company fails because of this Article 10 to pay principal
of, premium, if any, interest or Liquidated Damages, if any, on a Note on the
due date, the failure is nevertheless a Default or an Event of Default.
SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Debt to enforce the
subordination of the Indebtedness evidenced by the Notes shall be prejudiced or
impaired by any act or failure to act by the Company or any Holder or by the
failure of the Company or any Holder to comply with this Indenture.
Without in any way limiting the generality of the foregoing
paragraph, the holders of the Senior Debt may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders, without
incurring responsibility to the Holders and without impairing or releasing the
subordination provided in this Article or the obligations hereunder of the
Holders to the holders of Senior Debt, do any one or more of the following: (a)
change the manner, place or terms of payment or extend the time or payment of,
or renew or alter, Senior Debt or any instrument evidencing the same or any
agreement under which Senior Debt is outstanding; provided, however, that any
such alteration shall not (A) increase the amount of Senior Debt outstanding in
a manner prohibited by this Indenture or (B) otherwise violate Section 4.07
hereof; (b) sell, exchange, release or otherwise deal with any property pledged,
mortgaged or otherwise securing Senior Debt; (c) release any Person liable in
any manner for the collection of Senior Debt; provided, however, that any such
sale, exchange, release or other transaction shall not violate Section 4.09
hereof; and (d) exercise or refrain from exercising any rights against the
Company or any other Person; provided, however, that in no event shall any such
actions limit the right of the Holder to take any action to accelerate the
maturity of the Notes in accordance with the provisions set forth in Article 6
or to pursue any rights or remedies against the parties to the Indenture under
the Indenture or under applicable laws if the taking of such action does not
otherwise violate the terms of this Article.
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to
holders of Senior Debt, the distribution may be made and the notice given to
their Representative.
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Upon any payment or distribution of assets of the Company
referred to in this Article 10, the Trustee and the Holders shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
for the purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt 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 10.
SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice that the payment of any Obligations with respect to the
Notes would violate this Article 10. Only the Company or a Representative may
give the notice. Nothing in this Article 10 shall impair the claims of, or
payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold
Senior Debt with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights.
SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Note by the Holder's acceptance thereof
authorizes and directs the Trustee on the Holder's behalf to take such action as
may be necessary or appropriate to effectuate the subordination as provided in
this Article 10, and appoints the Trustee to act as the Holder's
attorney-in-fact for any and all such purposes. If the Trustee does not file a
proper proof of claim or proof of debt in the form required in any proceeding
referred to in Section 6.09 hereof at least 30 days before the expiration of the
time to file such claim, a Representative of Designated Senior Debt is hereby
authorized to file an appropriate claim for and on behalf of the Holders of the
Notes.
SECTION 10.13. AMENDMENTS.
Any amendment to the provisions of this Article 10 shall require
the consent of the Holders of at least 75% in aggregate amount of Notes then
outstanding if such amendment would adversely affect the rights of the Holders
of Notes.
ARTICLE 11.
GUARANTEE OF NOTES
SECTION 11.01. SUBSIDIARY GUARANTEES.
Each Guarantor hereby, jointly and severally, unconditionally
guarantees to each Holder of a Note authenticated and delivered by the Trustee
and to the Trustee and its successors and assigns, irrespective of the validity
and enforceability of this Indenture, the Notes and the Obligations of the
Company hereunder and thereunder, that: (a) the principal of, premium, if any,
interest and Liquidated Damages, if any, on the Notes will be promptly paid in
full when due, subject to any applicable grace period, whether at maturity, by
acceleration, redemption or otherwise, and interest on the overdue principal,
premium, if any, (to the extent permitted by law) interest on any interest, if
any, and Liquidated Damages, if any, on the Notes, and all other payment
Obligations of the Company to the Holders or the Trustee hereunder or thereunder
will be promptly paid in full and 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 Notes or any of such other Obligations, the same will be promptly
paid in full when due or performed in accordance with the terms of the extension
or renewal, subject to any applicable grace period, whether at stated maturity,
by acceleration, redemption or otherwise. Failing payment when so due of any
amount so guaranteed or
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any performance so guaranteed for whatever reason the Guarantors will be
jointly and severally obligated to pay the same immediately. An Event of
Default under this Indenture or the Notes shall constitute an event of default
under the Subsidiary Guarantees, and shall entitle the Holders to accelerate
the Obligations of the Guarantors hereunder in the same manner and to the same
extent as the Obligations of the Company. The Guarantors hereby agree that
their Obligations hereunder shall be unconditional, irrespective of the
validity, regularity or enforceability of the Notes or this Indenture, the
absence of any action to enforce the same, any waiver or consent by any Holder
with respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
Guarantor. Each Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever and covenants that this Subsidiary
Guarantee will not be discharged except by complete performance of the
Obligations contained in the Notes and this Indenture. If any Holder or the
Trustee is required by any court or otherwise to return to the Company, the
Guarantors, or any Note Custodian, Trustee, liquidator or other similar
official acting in relation to either the Company or the Guarantors, any amount
paid by either to the Trustee or such Holder, this Subsidiary Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and effect.
Each Guarantor agrees that it shall not be entitled to, and hereby waives, any
right of subrogation in relation to the Holders in respect of any Obligations
guaranteed hereby until payment in full of the Obligations hereunder. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
Obligations guaranteed hereby may be accelerated as provided in Article 6 for
the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such Obligations as provided in Article 6 hereof, such Obligations (whether or
not due and payable) shall forthwith become due and payable by the Guarantors
for the purpose of this Subsidiary Guarantee. 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
Subsidiary Guarantees.
SECTION 11.02. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.
To evidence its Subsidiary Guarantee set forth in Section 11.01
hereof, each Guarantor hereby agrees that a notation of such Subsidiary
Guarantee substantially in the form of Exhibit D shall be endorsed by an Officer
of such Guarantor on each Note authenticated and delivered by the Trustee and
that this Indenture shall be executed on behalf of such Guarantor, by manual or
facsimile signature, by an Officer of such Guarantor.
Each Guarantor hereby agrees that its Subsidiary Guarantee set
forth in Section 11.01 hereof shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
If an Officer whose signature is on this Indenture or on the
Subsidiary Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee (in
existence on or after the date hereof) set forth in this Indenture on behalf of
the Guarantors.
SECTION 11.03. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
(a) Except as set forth in Articles 4 and 5 hereof, nothing
contained in this Indenture shall prohibit a merger between a Guarantor and
another Guarantor or a merger between a Guarantor and the Company.
(b) Except as provided in Section 11.03(a) hereof or in a
transaction referred to in Section 11.04 hereof no Guarantor may consolidate
with or merge with or into (whether or not such Guarantor is the surviving
Person), another corporation, Person or entity whether or not affiliated with
such Guarantor unless (i)
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the Person formed by or surviving any such consolidation or merger (if other
than such Guarantor) assumes all the obligations of such Guarantor pursuant to
a supplemental indenture in form and substance reasonably satisfactory to the
Trustee, in the Form of Exhibit E hereto, under the Notes and this Indenture;
(ii) immediately after giving effect to such transaction, no Default or Event
of Default exists; and (iii) the Company would be permitted, immediately after
giving effect to such transaction, to incur at least $1.00 of additional
Indebtedness pursuant to the Leverage Ratio test set forth in Section 4.07
hereof. The requirements of subparagraph (iii) of this Section 11.03(b) shall
not apply in the case of a consolidation with or merger with or into the
Company or another Guarantor.
(c) In the case of any such consolidation, merger, sale or
conveyance and upon the assumption by the successor Person, by supplemental
indenture, executed and delivered to the Trustee and substantially in the form
of Exhibit E hereto, of the Subsidiary Guarantee endorsed upon the Notes and the
due and punctual performance of all of the covenants and conditions of this
Indenture to be performed by the Guarantor, such successor Person shall succeed
to and be substituted for the Guarantor with the same effect as if it had been
named herein as a Guarantor; provided that, solely for purposes of computing
Consolidated EBITDA for purposes of Section 4.05 hereof, the Consolidated EBITDA
of any Person other than the Company and its Subsidiaries shall, except as
otherwise expressly provided for in Section 4.05, only be included for periods
subsequent to the effective time of such merger, consolidation, combination or
transfer of assets. Such successor Person thereupon may cause to be signed any
or all of the Subsidiary Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee. All of the Subsidiary Guarantees so issued shall
in all respects have the same legal rank and benefit under this Indenture as the
Subsidiary Guarantees theretofore and thereafter issued in accordance with the
terms of this Indenture as though all of such Subsidiary Guarantees had been
issued at the date of the execution hereof.
SECTION 11.04. RELEASES.
In the event of a sale or other disposition of all or
substantially all of the assets of any Guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the Capital
Stock of any Guarantor, then such Guarantor (in the event of a sale or other
disposition, by way of such a merger, consolidation or otherwise, of all of the
capital stock of such Guarantor) or the corporation acquiring the property (in
the event of a sale or other disposition of all or substantially all of the
assets of such Guarantor) will be released and relieved of any obligations under
its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other
disposition are applied in accordance with the applicable provisions of the
Indenture pursuant to Section 4.14 hereof.
SECTION 11.05. ADDITIONAL GUARANTORS.
Any Person that was not a Guarantor on the date hereof may become
a Guarantor by executing and delivering to the Trustee (a) a supplemental
indenture in substantially the form of Exhibit E hereto, 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 creditors rights', fraudulent transfers, public policy and equitable
principles as may be acceptable to the Trustee in its discretion).
SECTION 11.06. LIMITATION ON GUARANTOR LIABILITY.
For purposes hereof, each Guarantor's liability shall be limited
to the lesser of (i) the aggregate amount of the Obligations of the Company
under the Notes and this Indenture and (ii) the amount, if any, which would not
have (A) rendered such Guarantor "insolvent" (as such term is defined in the
United States Bankruptcy Code and in the Debtor and Creditor Law of the State of
New York) or (B) left such Guarantor with unreasonably small capital at the time
its Subsidiary Guarantee of the Notes was entered into; provided that it will be
a presumption in any lawsuit or other proceeding in which a Guarantor is a party
that the amount guaranteed pursuant to the Subsidiary Guarantee is the amount
set forth in clause (i) above unless any creditor, or representative of
creditors of such Guarantor, or debtor in possession or trustee in bankruptcy of
the Guarantor, otherwise proves in such a lawsuit that the aggregate liability
of the Guarantor is the amount set forth in clause (ii) above. In making
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any determination as to solvency or sufficiency of capital of a Guarantor in
accordance with the previous sentence, the right of such Guarantor to
contribution from other Guarantors, and any other rights such Guarantor may
have, contractual or otherwise, shall be taken into account.
SECTION 11.07. "TRUSTEE" TO INCLUDE PAYING AGENT.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article 11 shall in each case (unless the context
shall otherwise require) be construed as extending to and including such Paying
Agent within its meaning as fully and for all intents and purposes as if such
Paying Agent were named in this Article 11 in place of the Trustee.
SECTION 11.08. SUBORDINATION OF SUBSIDIARY GUARANTEE.
The obligations of each Guarantor under its Subsidiary Guarantee
pursuant to this Article 11 shall be senior in right of payment to the Katz
Notes, but junior and subordinated to the Senior Debt of such Guarantor on the
same basis as the Notes are junior and subordinated to Senior Debt of the
Company. For the purposes of the foregoing sentence, the Trustee and the Holders
of Notes shall have the right to receive and/or retain payments by any of the
Guarantors only at such times as they may receive and/or retain payments in
respect of Notes pursuant to this Indenture, including Article 10 hereof. In the
event that the Trustee or any Holder shall have received any Guarantor payment
that is prohibited by the foregoing sentence, such Guarantor payment shall be
paid over and delivered forthwith to the holders of the Senior Debt remaining
unpaid, to the extent necessary to pay in full all Senior Debt.
Each Holder of a Note by its acceptance thereof (a) agrees to and
shall be bound by the provisions of this Section 11.08, (b) authorizes and
directs the Trustee in its behalf to take such actions as may be necessary and
appropriate to effectuate the subordination so provided and (c) appoints the
Trustee its attorney-in-fact for any and all such purposes.
ARTICLE 12.
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies, or
conflicts with the duties imposed by operation of section 318(c) of the TIA, the
imposed duties shall control.
SECTION 12.02. NOTICES.
Any notice or communication by the Company or the Trustee to the
other is duly given if in writing and delivered in person, mailed by registered
or certified mail, postage prepaid, return receipt requested or delivered by
telecopier or overnight air courier guaranteeing next day delivery to the
other's address:
Katz Media Corporation
125 West 55th Street
New York, NY 10019
Attention: Chief Financial Officer
Telecopier No.: (212) 424-6489
57
<PAGE> 64
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
399 Park Avenue, 22nd Floor
New York, New York 10022
Attention: Edward D. Sopher, Esq.
Telecopier No.: (212) 872-1002
If to the Trustee:
American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, NY 11219
Attention: Corporate Trust Administration Department
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; the date receipt is acknowledged, if mailed by registered
or certified mail; when answered back, if telecopied; and the next Business Day
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by
first-class mail to his or her address shown on the register kept by the
Registrar. Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 12.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to section 312(b) of the TIA
with other Holders with respect to their rights under this Indenture or the
Notes. The Company, the Trustee, the Registrar and any other Person shall have
the protection of section 312(c) of the TIA.
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
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:
(a) an Officers' Certificate (which shall include the statements
set forth in Section 12.05 hereof) stating that, in the
opinion of the signers, all conditions precedent and
covenants, if any, provided for in this Indenture relating to
the proposed action have been complied with; and
(b) an Opinion of Counsel (which shall include the statements set
forth in Section 12.05 hereof) stating that, in the opinion
of such counsel, all such conditions precedent provided for
in this Indenture relating to the proposed action have been
complied with.
58
<PAGE> 65
SECTION 12.05. 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 a certificate
provided pursuant to section 314(a)(4) of the TIA) shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is 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, in such Person's opinion, such
condition or covenant has been complied with.
SECTION 12.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
SECTION 12.07. LEGAL HOLIDAYS.
If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
SECTION 12.08. NO RECOURSE AGAINST OTHERS.
No officer, employee, director, incorporator or stockholder of
the Company or a Guarantor shall have any liability for any Obligations of the
Company or a Guarantor under the Notes or this Indenture, or for any claim based
on, in respect of, or by reason of, such Obligations or the creation of any such
Obligation. Each Holder by accepting a Note waives and releases all such
liability, and such waiver and release is part of the consideration for the
issuance of the Notes.
SECTION 12.09. COUNTERPARTS.
This Indenture may be executed in any number of counterparts and
by the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
SECTION 12.10. VARIABLE PROVISIONS.
The Company initially appoints the Trustee as Paying Agent,
Registrar and authenticating agent.
The first compliance certificate to be delivered by the Company
to the Trustee pursuant to Section 4.03 hereof shall be for the fiscal year
ending on December 31, 1997.
SECTION 12.11. GOVERNING LAW.
The internal laws of the State of New York shall govern this
Indenture and the Notes, without regard to the conflict of laws provisions
thereof.
59
<PAGE> 66
SECTION 12.12. 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, and no other
indenture, loan or debt agreement may be used to interpret this Indenture.
SECTION 12.13. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 12.14. SEVERABILITY.
If any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 12.15. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table, and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
[NEXT PAGE IS THE SIGNATURE PAGE]
60
<PAGE> 67
DATED AS OF OCTOBER 28, 1997 KATZ MEDIA CORPORATION
BY:
----------------------------------------
NAME:
TITLE:
DATED AS OF OCTOBER 28, 1997 KATZ COMMUNICATIONS, INC.
KATZ MILLENNIUM MARKETING INC.
AMCAST RADIO SALES, INC. (formerly known as
Banner Radio Sales, Inc.)
CHRISTAL RADIO SALES, INC.
EASTMAN RADIO SALES, INC.
SELTEL INC.
KATZ CABLE CORPORATION
THE NATIONAL PAYROLL COMPANY, INC.
BY:
----------------------------------------
NAME:
TITLE:
DATED AS OF OCTOBER 28, 1997 AMERICAN STOCK TRANSFER & TRUST
COMPANY, AS TRUSTEE
BY:
----------------------------------------
NAME:
TITLE:
BY:
----------------------------------------
NAME:
TITLE:
61
<PAGE> 68
EXHIBIT A-1
(FACE OF NOTE)
10 1/2% SERIES [A/B] SENIOR SUBORDINATED NOTE DUE 2007
No.
$__________
CUSIP No.
KATZ MEDIA CORPORATION
promises to pay to
or registered assigns,
the principal sum of
Dollars on January 15, 2007.
Interest Payment Dates: July 15 and January 15.
Record Dates: January 1 and July 1.
Dated: December 19, 1996
KATZ MEDIA CORPORATION
By:
---------------------------------
Name:
------------------------------
Title:
------------------------------
Trustee's Certificate of Authentication
Dated: December 19, 1996
This is one of the [Global]
Notes referred to in the
within-mentioned Indenture:
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Trustee
By:
-------------------------------------
(Authorized Signatory)
A1-1
<PAGE> 69
[Unless and until it is exchanged in whole or in part for
Notes in definitive form, this Note may not be transferred except as a whole by
the Depositary to a nominee of the Depositary or by a nominee of the Depositary
to the Depositary or another nominee of the Depositary or by the Depositary or
any such nominee to a successor Depositary or a nominee of such successor
Depositary. The Depository Trust Company shall act as the Depositary until a
successor shall be appointed by the Company and the Registrar. Unless this
certificate is presented by an authorized representative of The Depository
Trust Company (55 Water Street, New York, New York) ("DTC"), to the issuer or
its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or such other name
as may be requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or such other entity as may be 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.](1)
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933
(THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT (A) SUCH
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND, IN THE CASE OF CLAUSE
(b), (c) or (d), BASED UPON AN OPINION OF COUNSEL IF THE
ISSUER SO REQUESTS), (2) TO THE ISSUER OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY
OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.(2)
Additional provisions of this Note are set forth on the other
side of this Note.
- ------------------
(1) This paragraph should be included only if the Note is issued in global
form.
(2) This paragraph should be removed upon the exchange of Series A Notes for
Series B Notes in the Exchange Offer or upon the registration of the
Series A Notes pursuant to the terms of the Registration Rights
Agreement.
A1-2
<PAGE> 70
(BACK OF NOTE)
10% SERIES [A/B] SENIOR SUBORDINATED NOTE DUE 2007
1. INTEREST. Katz Media Corporation, a Delaware
corporation, (the "Company") promises to pay interest on the principal amount
of the Notes at the rate and in the manner specified below. Interest on the
Notes will accrue at 10 1/2% per annum from the date this Note is issued until
maturity. The Company will pay Liquidated Damages, if any, pursuant to
Section 5 of the Registration Rights Agreement referred to below. Interest and
Liquidated Damages, if any, will be payable semiannually in cash in arrears on
January 15 and July 15 of each year, or if any such day is not a Business Day
on the next succeeding Business Day (each, an "Interest Payment Date").
Interest on the Notes will accrue from the most recent date on which interest
has been paid or, if no interest has been paid, from the date of original
issuance; provided that the first Interest Payment Date shall be July 15, 1997.
The Company shall pay interest on overdue principal and premium, if any, from
time to time on demand at the rate of 1% per annum in excess of the interest
rate then in effect and shall pay interest on overdue installments of interest
and Liquidated Damages, if any, (without regard to any applicable grace
periods) from time to time on demand at the same rate to the extent lawful.
Interest will be computed on the basis of a 360-day year of twelve 30 day
months.
A1-3
<PAGE> 71
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered holders of Notes at the close of business on the January 1 or
July 1 next preceding the Interest Payment Date, even if such Notes are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes shall be payable as to principal, premium, if any,
interest and Liquidated Damages, if any, at the office or agency of the Company
maintained for such purpose within the City and State of New York, or, at the
option of the Company, payment of interest may be made by check mailed to the
Holders at their addresses set forth in the register of Holders; provided that
payment by wire transfer of immediately available funds shall be required with
respect to principal of, and interest, premium and Liquidated Damages, if any,
on, all Global Notes and all other Notes the Holders of which shall have
provided written wire transfer instructions to the Company or the Paying Agent.
Such payment shall be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
3. PAYING AGENT AND REGISTRAR. American Stock Transfer & Trust
Company (the "Trustee") will initially act as the Paying Agent and Registrar.
The Company may appoint additional paying agents or co-registrars, and change
the Paying Agent, any additional paying agent, the Registrar or any
co-registrar without prior notice to any Holder. The Company or any of its
Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture,
dated as of December 19, 1996 (the "Indenture"), among the Company, as issuer,
Katz Communications, Inc., Katz Millennium Marketing Inc., Banner Radio Sales,
Inc., Christal Radio Sales, Inc., Eastman Radio Sales, Inc., Seltel Inc., Katz
Cable Corporation and The National Payroll Company, Inc., as Guarantors and the
Trustee. The terms of the Notes 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. Code Section 77aaa-77bbbb) as in effect on the date of the
original issuance of the Notes (the "Trust Indenture Act"). The Notes are
subject to, and qualified by, all such terms, certain of which are summarized
herein, and Holders are referred to the Indenture and the Trust Indenture Act
for a statement of such terms (all capitalized terms not defined herein shall
have the meanings assigned them in the Indenture). The Notes are unsecured
senior subordinated obligations of the Company limited to $100,000,000 in
aggregate principal amount.
5. OPTIONAL REDEMPTION. (a) Except as described in paragraph
5(b) below, the Notes may not be redeemed at the option of the Company prior to
January 15, 2002. During the twelve (12) month period beginning January 15 of
the years indicated below, the Notes will be redeemable at the option of the
Company, in whole or in part, on at least 30 but not more than 60 days' notice
to each Holder of Notes to be redeemed, at the redemption prices (expressed as
percentages of the principal amount) set forth below, plus any accrued and
unpaid interest and Liquidated Damages, if any, to the applicable date of
redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003 . . . . . . . . . . . . . . . . . . . . . 105.250%
2003 . . . . . . . . . . . . . . . . . . . . . 103.938%
2004 . . . . . . . . . . . . . . . . . . . . . 102.625%
2005 . . . . . . . . . . . . . . . . . . . . . 101.313%
2006 and thereafter . . . . . . . . . . . . . . 100.000%
</TABLE>
(b) Notwithstanding the foregoing, at any time
prior to January 15, 2000, the Company may redeem up to 35% in aggregate
principal amount of the Notes with the net proceeds of (i) one or more
offerings of Equity Interests (other than Disqualified Stock) of the Company or
(ii) one or more offerings of Equity Interests or other securities of KMG or
KMSI, to the extent the net proceeds thereof are contributed or advanced to the
Company as a capital contribution to common equity, in each case, at a
redemption price equal to 109.5% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages, if any, to the redemption date;
provided that at least 65% in aggregate principal amount of the Notes
originally issued remain outstanding immediately after the occurrence of any
such redemption; and provided, further, that such redemption will occur within
90 days of the date of the closing of such offering.
A1-4
<PAGE> 72
6. MANDATORY REDEMPTION. Subject to the Company's obligation to
make an offer to purchase Notes under certain circumstances pursuant to
Sections 4.13 and 4.14 of the Indenture (as described in paragraph 7 below),
the Company is not required to make any mandatory redemption, purchase or
sinking fund payments with respect to the Notes.
7. MANDATORY OFFERS TO PURCHASE NOTES. (a) Upon the occurrence
of a Change of Control, each Holder of Notes shall have the right to require
the Company to repurchase all or any part (equal to $1,000 or an integral
multiple thereof) of such Holder's Notes pursuant to an offer (a "Change of
Control Offer") at a purchase price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase.
(b) If the Company or any Restricted Subsidiary
consummates one or more Asset Sales and does not use all of the Net Proceeds
from such Asset Sales as provided in Section 4.14 of the Indenture, the Company
will be required, under certain circumstances, to utilize the Excess Proceeds
from such Asset Sales to offer (an "Asset Sale Offer") to purchase Notes at a
purchase price in cash equal to 100% of the aggregate principal amount of the
Notes plus any accrued and unpaid interest and Liquidated Damages, if any, to
the date of purchase. If the Excess Proceeds are insufficient to purchase all
Notes tendered pursuant to any Asset Sale Offer, the Trustee shall select the
Notes to be purchased in accordance with the terms of Article 3 of the
Indenture.
(c) Holders may tender all or, subject to paragraph 8
below, any portion of their Notes in a Change of Control Offer or Asset Sale
Offer (collectively, an "Offer") by completing the form below entitled "OPTION
OF HOLDER TO ELECT PURCHASE."
(d) The Company shall comply with any tender offer rules
under the Exchange Act which may then be applicable, including Rule 14e-1, in
connection with an offer required to be made by the Company to repurchase the
Notes as a result of a Change of Control or an Asset Sale. To the extent that
the provisions of any securities laws or regulations conflict with provisions
of this Indenture, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
this Indenture by virtue thereof.
8. NOTICE OF REDEMPTION OR PURCHASE. Notice of an optional
redemption or an Offer will be mailed to each Holder at its registered address
at least 30 days but not more than 60 days before the date of redemption or
purchase. Notes may be redeemed or purchased in part, but only in whole
multiples of $1,000 unless all Notes held by a Holder are to be redeemed or
purchased. On or after any date on which Notes are redeemed or purchased,
interest and Liquidated Damages, if any, ceases to accrue on the Notes or
portions thereof called for redemption or accepted for purchase on such date.
9. SUBORDINATION. The Notes are subordinated in right of
payment, to the extent and in the manner provided in Article 10 of the
Indenture, to the prior payment in full of all Senior Debt, which includes (i)
all Obligations (including without limitation interest accruing after filing of
a petition in bankruptcy whether or not such interest is an allowable claim in
such proceeding) of the Company or its Subsidiaries, including without
limitation any Guarantees of such Obligations pursuant to the New Credit
Agreement and (ii) any other Indebtedness permitted to be incurred by the
Company or the Guarantors under the terms of the Indenture, unless the
instrument under which such Indebtedness is incurred expressly provides that it
is on a parity with or subordinated in right of payment to the Notes.
Notwithstanding anything to the contrary in the foregoing, Senior Debt will not
include (w) any liability for federal, state, local or other taxes owed or
owing by the Company, (x) any Indebtedness of the Company to any of its
Restricted Subsidiaries or other Affiliates (other than Indebtedness arising
under the New Credit Agreement), (y) any trade payables or (z) any Indebtedness
that is incurred in violation of Section 4.07 of the Indenture. The Company
agrees, and each Holder by accepting a Note consents and agrees, to the
subordination provided in the Indenture and authorizes the Trustee to give it
effect.
10. SUBSIDIARY GUARANTEES. The Company's payment obligations
under the Notes are jointly and severally unconditionally guaranteed by the
Guarantors. The Subsidiary Guarantees of each Guarantor will be subordinated
to the prior payment in full of all Senior Debt of such Guarantor and the
amounts for which the
A1-5
<PAGE> 73
Guarantors will be liable under the guarantees issued from time to time with
respect to Senior Debt.
11. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples thereof. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. Holders seeking to transfer or
exchange their Notes may be required, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not exchange
or register the transfer of any Note or portion of a Note selected for
redemption or tendered pursuant to an Offer. Also, it need not exchange or
register the transfer of any Notes for a period of 15 Business Days before a
selection of Notes to be redeemed or between a record date and the next
succeeding Interest Payment Date.
12. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
13. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to the following
paragraphs, the Indenture, the Notes and the Subsidiary Guarantees may be
amended or supplemented with the consent of the holders of at least a majority
in principal amount of the Notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for Notes), and any existing Default or Event of Default
(other than a payment Default) or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes).
Without the consent of any Holder, the Indenture or the Notes
may be amended to: cure any ambiguity, defect or inconsistency; provide for
uncertificated Notes in addition to or in place of certificated Notes; provide
for the assumption of the Company's obligations to Holders of Notes in the case
of a merger or consolidation of the Company; following the Exchange Offer, to
comply with the SEC's requirements to effect or maintain the qualification of
the Indenture under the TIA; provide for additional Guarantees with respect to
the Notes; make any change that does not materially adversely affect any
Holder's legal rights under the Indenture; or, evidence and provide for a
successor Trustee, add additional covenants or Events of Default or secure the
Notes. Any amendment to the provisions of Article 10 or Section 11.08 hereof
will require the consent of the holders of at least 75% in aggregate principal
amount of the Notes then outstanding if such amendment would adversely affect
the rights of holders of Notes. Certain amendments require the consent of each
Holder adversely affected.
14. DEFAULTS AND REMEDIES. Events of Default include (in summary
form): default for 30 days in payment when due of interest on, or Liquidated
Damages, if any, with respect to, the Notes; default in payment when due of
principal of, or premium, if any, on the Notes at maturity; failure by the
Company for 30 days after receipt of notice to it to comply with the provisions
of Sections 4.13, 4.14, 4.05, 4.07 or Article 5 of the Indenture; failure by
the Company for 60 days after receipt of notice to it to comply with any of its
other agreements or covenants in, or provisions of, the Indenture or the Notes;
certain defaults under and acceleration prior to maturity of, or failure to pay
at maturity, certain other Indebtedness; failure to pay certain final judgments
that remain undischarged; certain judicial findings of unenforceability or
invalidity as to any guarantee of the Notes or the disaffirmance or denial by
any guarantor of its guarantee of the Notes; and certain events of bankruptcy
or insolvency involving the Company or any Restricted Subsidiary that is a
Significant Subsidiary. If an Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the Notes then
outstanding may declare all the Notes to be immediately 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 New Credit Agreement, shall become
immediately due and payable upon the first to occur of an acceleration under
the New Credit Agreement or five Business Days after receipt by the Company and
the Representative under the New Credit Agreement of such Acceleration Notice
but only if such Event of Default is then continuing. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to the Company, all outstanding Notes
will become due and payable without further action or notice. Holders may not
enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of
the then outstanding Notes may direct the
A1-6
<PAGE> 74
Trustee in its exercise of any trust or power. The holders of a majority in
aggregate principal amount of the Notes then outstanding by notice to the
Trustee may on behalf of all Holders of all of the Notes waive any existing
Default or Event of Default and its consequences under this Indenture, except a
continuing Default or Event of Default in the payment of the principal of,
premium, if any, and interest on, and Liquidated Damages, if any, with respect
to such Notes, which may only be waived with the consent of each Holder of
Notes affected.The Trustee may withhold from Holders notice of any continuing
Default or Event of Default (except a payment Default) if it determines that
withholding notice is in their interests. The Company must furnish an annual
compliance certificate to the Trustee.
15. TRUSTEE DEALINGS WITH THE COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or any Affiliate, and may otherwise deal with
the Company or any Affiliate, as if it were not Trustee.
16. NO RECOURSE AGAINST OTHERS. No officer, employee,
incorporator director, stockholder or Subsidiary of the Company or Guarantor
shall have any liability for any Obligations of the Company or Guarantor under
the Notes or the Indenture, or for any claim based on, in respect of, or by
reason of, such Obligations or the creation of any such Obligation, except, in
the case of a Subsidiary, for an express guarantee or an express creation of
any Lien by such Subsidiary of the Company's Obligations under the Notes. Each
Holder by accepting a Note waives and releases all such liability, and such
waiver and release is part of the consideration for the issuance of the Notes.
17. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED NOTES. In
addition to the rights provided to Holders of Notes under the Indenture,
Holders of Transfer Restricted Notes shall have all the rights set forth in
the Registration Rights Agreement, dated as of December 19, 1996, among the
Company, the Guarantors and Donaldson, Lufkin & Jenrette Securities Corporation
(the "Registration Rights Agreement").
18. SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or
merger, or any sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of the assets of the Company in
accordance with Section 5.01 of the Indenture, the successor corporation formed
by such consolidation or with which or into the Company is merged or to which
such sale, assignment, transfer, lease, conveyance or other disposition 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 has been named as the Company under the Indenture; provided, however,
that neither the Company nor any successor corporation shall be released from
its Obligation to pay the principal of, premium, if any, and accrued and unpaid
interest on, and Liquidated Damages, if any, with respect to the Notes.
19. GOVERNING LAW. The internal laws of the state of New York
shall govern this Indenture and the Notes without regard to the conflict of
laws provisions thereof.
20. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
21. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder 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).
22. 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 Notes and have directed the Trustee
to use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers printed on the Notes.
A1-7
<PAGE> 75
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Request may be made to:
Katz Media Corporation
125 West 55th Street
New York, NY 10019
Attention: Chief Financial Officer
A1-8
<PAGE> 76
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we)
assign and transfer this Security to
- --------------------------------------------------------------------------------
(INSERT ASSIGNEE'S SOCIAL SECURITY OR TAX I.D. NO.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PRINT OR TYPE ASSIGNEE'S NAME, ADDRESS AND ZIP CODE)
and irrevocably appoint
--------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Date:
-----------------
Your Signature:
-----------------------------------------------
(Sign exactly as your name appears on the face of this Security)
Signature Guarantee:***
---------------------------------------
- --------------
*** Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
A1-9
<PAGE> 77
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.13 or 4.14 of the Indenture, check the box below:
[ ] Section [ ] 4.13 Section 4.14
If you want to elect to have only part of the Note purchased
by the Company pursuant to Section 4.13 or Section 4.14 of the Indenture, state
the amount you elect to have purchased: $
-----------
Date:
------------------
Your Signature:
-----------------------------------------------
(Sign exactly as your name appears on the face of this Security)
Tax Identification No.:
--------------------------------------
Signature Guarantee:*
--------------------------------------
- ----------------
* Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
A1-10
<PAGE> 78
SCHEDULE OF EXCHANGES FOR DEFINITIVE NOTES FOR ANOTHER NOTE (2)
The following exchanges of a part of this Global Note for
Definitive Notes or another Global Note have been made:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
AMOUNT OF DECREASE AMOUNT OF INCREASE THIS GLOBAL NOTE SIGNATURE OF AUTHORIZED
IN PRINCIPAL AMOUNT IN PRINCIPAL AMOUNT FOLLOWING SUCH DECREASE OFFICER OF TRUSTEE OR
DATE OF EXCHANGE OF THIS GLOBAL NOTE OF THIS GLOBAL NOTE (OR INCREASE) NOTE CUSTODIAN
---------------- ------------------- ------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C>
</TABLE>
- ----------------
(2) TO BE INCLUDED ONLY IF THE NOTE IS ISSUED IN GLOBAL FORM.
A1-11
<PAGE> 79
EXHIBIT A-2
(FACE OF REGULATION S TEMPORARY GLOBAL NOTE)
10 1/2% SERIES [A/B] SENIOR SUBORDINATED NOTE DUE 2007
No.
$__________
CUSIP No.
KATZ MEDIA CORPORATION
promises to pay to
or registered assigns,
the principal sum of
Dollars on January 15, 2007.
Interest Payment Dates: July 15 and January 15.
Record Dates: January 1 and July 1.
Dated: December 19, 1996
KATZ MEDIA CORPORATION
By:
--------------------------
Name:
Title:
Trustee's Certificate of Authentication
Dated: December 19, 1996
This is one of the [Global]
Notes referred to in the
within-mentioned Indenture:
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Trustee
By:
-----------------------------------
(Authorized Signatory)
A2-1
<PAGE> 80
(BACK OF REGULATION S TEMPORARY GLOBAL NOTE)
10 1/2% SERIES [A/B] SENIOR SUBORDINATED NOTE DUE 2007
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL
NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE
NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN).
NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS
REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF
INTEREST HEREON.
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY
TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR
ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. THE DEPOSITORY TRUST COMPANY SHALL ACT AS THE DEPOSITARY UNTIL A
SUCCESSOR SHALL BE APPOINTED BY THE COMPANY AND THE REGISTRAR. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME
AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE 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.](1)
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933
(THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT (A) SUCH
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND, IN THE CASE OF CLAUSE
(b), (c) or (d), BASED UPON AN OPINION OF COUNSEL IF THE
ISSUER SO REQUESTS), (2) TO THE ISSUER OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN
- ------------
(1) This paragraph should be included only if the Note is issued in global
form.
A2-2
<PAGE> 81
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH
IN (A) ABOVE.(2)
Katz Media Corporation, a Delaware corporation (the
"company"), promises to pay interest on the principal amount of this Note at
the rate of 10 1/2% per annum, which interest shall be payable in cash
semi-annually on January 1 and July 1 of each year, or if any such day is not a
Business Day, on the next succeeding Business Day (each an "Interest Payment
Date"); provided that the first Interest Payment Date shall be July 1, 1997.
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of original
issuance. Interest will be computed on the basis of a 360-day year comprised
of twelve 30-day months.
This Regulation S Temporary Global Note is issued in respect
of an issue of 10 1/2% Senior Subordinated Notes due 2007 (the "notes") of the
Company, limited to the aggregate principal amount of U.S. $ 100.0 million
issued pursuant to an Indenture (the "Indenture") dated as of December 19,
1996, between the Company, Katz Communications, Inc., Katz Millennium Marketing
Inc., Banner Radio Sales, Inc., Christal Radio Sales, Inc., Eastman Radio
Sales, Inc., Seltel Inc., Katz Cable Corporation and The National Payroll
Company, Inc., as Guarantors (the "Guarantors") and American Stock Transfer &
Trust Company, as trustee (the "Trustee"), and is governed by the terms and
conditions of the Indenture governing the Notes, which terms and conditions are
incorporated herein by reference and, except as otherwise provided herein,
shall be binding on the Company and the Holder hereof as if fully set forth
herein. Unless the context otherwise requires, the terms used herein shall
have the meanings specified in the Indenture.
Until this Regulation S Temporary Global Note is exchanged for
Regulation S Permanent Global Notes, the Holder hereof shall not be entitled to
receive payments of interest hereon; until so exchanged in full, this
Regulation S Temporary Global Note shall in all other respects be entitled to
the same benefits as other Notes under the Indenture.
This Regulation S Temporary Global Note is exchangeable in
whole or in part for one or more Regulation S Permanent Global Notes or Rule
144A Global Notes only (i) on or after the termination of the 40-day restricted
period (as defined in Regulation S) and (ii) upon presentation of certificates
(accompanied by an opinion of counsel, if applicable) required by Article 2 of
the Indenture. Upon exchange of this Regulation S Temporary Global Note for
one or more Regulation S Permanent Global Notes or Rule 144A Global Notes, the
Trustee shall cancel this Regulation S Temporary Global Note.
This Regulation S Temporary Global Note shall not become valid
or obligatory until the certificate of authentication hereon shall have been
duly manually signed by the Trustee in accordance with the Indenture. This
Regulation S Temporary Global Note shall be governed by and construed in
accordance with the laws of the State of the New York. All references to "$,"
"Dollars," "dollars" or "U.S. $" are to such coin or currency of the United
States of America as at the time shall be legal tender for the payment of
public and private debts therein.
- --------------
(2) This paragraph should be removed upon the exchange of Series A Notes for
Series B Notes in the Exchange Offer or upon the registration of the
Series A Notes pursuant to the terms of the Registration Rights Agreement.
A2-3
<PAGE> 82
SCHEDULE OF EXCHANGES FOR GLOBAL NOTE
The following exchanges of a part of this Regulation S
Temporary Global Note for other Global Notes have been made:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
AMOUNT OF DECREASE AMOUNT OF INCREASE THIS GLOBAL NOTE SIGNATURE OF AUTHORIZED
IN PRINCIPAL AMOUNT IN PRINCIPAL AMOUNT FOLLOWING SUCH DECREASE OFFICER OF TRUSTEE OR
DATE OF EXCHANGE OF THIS GLOBAL NOTE OF THIS GLOBAL NOTE (OR INCREASE) NOTE CUSTODIAN
---------------- ------------------- ------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C>
</TABLE>
A2-4
<PAGE> 83
EXHIBIT B-1
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM RULE 144A GLOBAL NOTE TO REGULATION S GLOBAL NOTE
(PURSUANT TO SECTION 2.06(a)(i) OF THE INDENTURE)
American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, NY 11219
Attention: Corporate Trust Division
Re: 10 1/2% Notes due 2007 of Katz Media Corporation
Reference is hereby made to the Indenture, dated as of
December 19, 1996 (the "Indenture"), between Katz Media Corporation, as issuer
(the "Company"), Katz Communications, Inc., Katz Millennium Marketing Inc.,
Banner Radio Sales, Inc., Christal Radio Sales, Inc., Eastman Radio Sales,
Inc., Seltel Inc., Katz Cable Corporation and The National Payroll Company,
Inc., as Guarantors (the "Guarantors") and American Stock Transfer & Trust
Company, as trustee (the "Trustee"). Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
This letter relates to $_______ principal amount of Notes
which are evidenced by one or more Rule 144A Global Notes (CUSIP 486107AA3) and
held with the Depositary in the name of ____________________________ (the
"Transferor"). The Transferor has requested a transfer of such beneficial
interest in the Notes to a Person who will take delivery thereof in the form of
an equal principal amount of Notes evidenced by one or more Regulation S Global
Notes (CUSIP U24450AA3), which amount, immediately after such transfer, is to
be held with the Depositary through Euroclear or Cedel Bank or both (Common
Code 7211783).
In connection with such request and in respect of such Notes,
the Transferor hereby certifies that such transfer has been effected in
compliance with the transfer restrictions applicable to the Global Notes and
pursuant to and in accordance with Rule 903 or Rule 904 of Regulation S under
the United States Securities Act of 1933, as amended (the "Securities Act"),
and accordingly the Transferor hereby further certifies that:
(1) The offer of the Notes was not made to a person in
the United States;
(2) either:
(a) at the time the buy order was originated, the
transferee was outside the United States or
the Transferor and any person acting on its
behalf reasonably believed and believes that
the transferee was outside the United States;
or
(b) the transaction was executed in, on or
through the facilities of a designated
offshore securities market and neither the
Transferor nor any person acting on its
behalf knows that the transaction was
prearranged with a buyer in the United
States;
(3) no directed selling efforts have been made in
contravention of the requirements of Rule 904(b) of
Regulation S;
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities
Act; and
B1-1
<PAGE> 84
(5) upon completion of the transaction, the beneficial
interest being transferred as described above is to
be held with the Depositary through Euroclear or
Cedel Bank or both (Common Code 7211783).
Upon giving effect to this request to exchange a beneficial
interest in a Rule 144A Global Note for a beneficial interest in a Regulation S
Global Note, the resulting beneficial interest shall be subject to the
restrictions on transfer applicable to Regulation S Global Notes pursuant to
the Indenture and the Securities Act and, if such transfer occurs prior to the
end of the 40-day restricted period associated with the initial offering of
Notes, the additional restrictions applicable to transfers of interest in the
Regulation S Temporary Global Note.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company, the Guarantors and Donaldson,
Lufkin & Jenrette Securities Corporation (277 Park Avenue, New York, NY 10172),
the initial purchaser of such Notes being transferred. Terms used in this
certificate and not otherwise defined in the Indenture have the meanings set
forth in Regulation S under the Securities Act.
------------------------------------
[Insert Name of Transferor]
By:
--------------------------------
Name:
Title:
Dated:
------------------------------ , ----
cc: Katz Media Corporation
Donaldson, Lufkin & Jenrette Securities Corporation
B1-2
<PAGE> 85
EXHIBIT B-2
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL NOTE
(PURSUANT TO SECTION 2.06(a)(ii) OF THE INDENTURE)
American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, NY 11219
Attention: Corporate Trust Division
Re: 10 1/2% Notes due 2007 of Katz Media Corporation
Reference is hereby made to the Indenture, dated as of
December 19, 1996 (the "Indenture"), between Katz Media Corporation, as issuer
(the "Company"), Katz Communications, Inc., Katz Millennium Marketing Inc.,
Banner Radio Sales, Inc., Christal Radio Sales, Inc., Eastman Radio Sales,
Inc., Seltel Inc., Katz Cable Corporation and The National Payroll Company,
Inc., as Guarantors (the "Guarantors") and American Stock Transfer & Trust
Company, as trustee (the "Trustee"). Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
This letter relates to $_______ principal amount of Notes
which are evidenced by one or more Regulation S Global Notes (CUSIP U24450AA3)
and held with the Depositary through Euroclear or Cedel Bank (Common Code
7211783) in the name of ____________________________ (the "Transferor"). The
Transferor has requested a transfer of such beneficial interest in the Notes to
a Person who will take delivery thereof in the form of an equal principal
amount of Notes evidenced by one or more Rule 144A Global Notes (CUSIP
486107AA3), to be held with the Depositary.
In connection with such request and in respect of such Notes,
the Transferor hereby certifies that:
[CHECK ONE]
[ ] such transfer is being effected pursuant to and in accordance
with Rule 144A under the United States Securities Act of 1933,
as amended (the "Securities Act"), and, accordingly, the
Transferor hereby further certifies that the Notes are being
transferred to a Person that the Transferor reasonably
believes is purchasing the Notes for its own account, or for
one or more accounts with respect to which such Person
exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the
meaning of Rule 144A in a transaction meeting the requirements
of Rule 144A;
or
[ ] such transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
[ ] such transfer is being effected pursuant to an effective
registration statement under the Securities Act;
or
B2-1
<PAGE> 86
[ ] such transfer is being effected pursuant to an exemption from
the registration requirements of the Securities Act other than
Rule 144A or Rule 144, and the Transferor hereby further
certifies that the Notes are being transferred in compliance
with the transfer restrictions applicable to the Global Notes
and in accordance with the requirements of the exemption
claimed, which certification is supported by an opinion of
counsel, provided by the transferor or the transferee (a copy
of which the Transferor has attached to this certification) in
form reasonably acceptable to the Company and to the
Registrar, to the effect that such transfer is in compliance
with the Securities Act;
and such Notes are being transferred in compliance with any applicable blue sky
securities laws of any state of the United States.
Upon giving effect to this request to exchange a beneficial
interest in Regulation S Global Notes for a beneficial interest in Rule 144A
Global Notes, the resulting beneficial interest shall be subject to the
restrictions on transfer applicable to Rule 144A Global Notes pursuant to the
Indenture and the Securities Act.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company, the Guarantors and Donaldson,
Lufkin & Jenrette Securities Corporation (277 Park Avenue, New York, NY 10172),
the initial purchaser of such Notes being transferred. Terms used in this
certificate and not otherwise defined in the Indenture have the meanings set
forth in Regulation S under the Securities Act.
---------------------------
[Insert Name of Transferor]
By:
------------------------
Name:
Title:
Dated: 19
------------------------------, --
cc: Katz Media Corporation
Donaldson, Lufkin & Jenrette Securities Corporation
B2-2
<PAGE> 87
EXHIBIT B-3
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
OF DEFINITIVE NOTES
(PURSUANT TO SECTION 2.06(b) OF THE INDENTURE)
American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, NY 11219
Attention: Corporate Trust Division
Re: 10 1/2% Notes due 2007 of Katz Media Corporation
Reference is hereby made to the Indenture, dated as of
December 19, 1996 (the "Indenture"), between Katz Media Corporation, as issuer
(the "Company"), Katz Communications, Inc., Katz Millennium Marketing Inc.,
Banner Radio Sales, Inc., Christal Radio Sales, Inc., Eastman Radio Sales,
Inc., Seltel Inc., Katz Cable Corporation and The National Payroll Company,
Inc., as Guarantors (the "Guarantors") and American Stock Transfer & Trust
Company, as trustee (the "Trustee"). Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
This letter relates to $_______ principal amount of Notes
which are evidenced by one or more Definitive Notes (CUSIP __________) in the
name of ________________ (the "Transferor"). The Transferor has requested an
exchange or transfer of such Definitive Note(s) in the form of an equal
principal amount of Notes evidenced by one or more Definitive Notes (CUSIP
_________), to be delivered to the Transferor or, in the case of a transfer of
such Notes, to such Person as the Transferor instructs the Trustee.
In connection with such request and in respect of the Notes
surrendered to the Trustee herewith for exchange or transfer (the "Surrendered
Notes"), the Transferor hereby certifies that:
[CHECK ONE]
[ ] the Surrendered Notes are being acquired for the Transferor's
own account, without transfer;
or
[ ] the Surrendered Notes are being transferred to the Company;
or
[ ] the Surrendered Notes are being transferred pursuant to and in
accordance with Rule 144A under the United States Securities
Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the
Surrendered Notes are being transferred to a Person that the
Transferor reasonably believes is purchasing the Surrendered
Notes for its own account, or for one or more accounts with
respect to which such Person exercises sole investment
discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule
144A, in each case in a transaction meeting the requirements
of Rule 144A;
or
B3-1
<PAGE> 88
[ ] the Surrendered Notes are being transferred in a transaction
permitted by Rule 144 under the Securities Act;
or
[ ] the Surrendered Notes are being transferred pursuant to an
effective registration statement under the Securities Act;
or
[ ] such transfer is being effected pursuant to an exemption from
the registration requirements of the Securities Act other than
Rule 144A or Rule 144, and the Transferor hereby further
certifies that the Notes are being transferred in compliance
with the transfer restrictions applicable to the Global Notes
and in accordance with the requirements of the exemption
claimed, which certification is supported by an opinion of
counsel, provided by the transferor or the transferee (a copy
of which the Transferor has attached to this certification) in
form reasonably acceptable to the Company and to the
Registrar, to the effect that such transfer is in compliance
with the Securities Act;
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company, the Guarantors and Donaldson,
Lufkin & Jenrette Securities Corporation (277 Park Avenue, New York, NY 10172),
the initial purchaser of such Notes being transferred. Terms used in this
certificate and not otherwise defined in the Indenture have the meanings set
forth in Regulation S under the Securities Act.
----------------------------------
[Insert Name of Transferor]
By:
------------------------------
Name:
Title:
Dated:
------------------------------, ----
cc: Katz Media Corporation
Donaldson, Lufkin & Jenrette Securities Corporation
B3-2
<PAGE> 89
EXHIBIT B-4
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM RULE 144A GLOBAL NOTE OR REGULATION S PERMANENT GLOBAL
NOTE TO DEFINITIVE NOTE
(PURSUANT TO SECTION 2.06(c) OF THE INDENTURE)
American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, NY 11219
Attention: Corporate Trust Division
Re: 10 1/2% Notes due 2007 of Katz Media Corporation
Reference is hereby made to the Indenture, dated as of
December 19, 1996 (the "Indenture"), between Katz Media Corporation, as issuer
(the "Company"), Katz Communications, Inc., Katz Millennium Marketing Inc.,
Banner Radio Sales, Inc., Christal Radio Sales, Inc., Eastman Radio Sales,
Inc., Seltel Inc., Katz Cable Corporation and The National Payroll Company,
Inc., as Guarantors (the "Guarantors") and American Stock Transfer & Trust
Company, as trustee (the "Trustee"). Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
This letter relates to $_______ principal amount of Notes
which are evidenced by a beneficial interest in one or more Rule 144A Global
Notes or Regulation S Permanent Global Notes (CUSIP __________) in the name of
______________________ (the "Transferor"). The Transferor has requested an
exchange or transfer of such beneficial interest in the form of an equal
principal amount of Notes evidenced by one or more Definitive Notes (CUSIP
_________), to be delivered to the Transferor or, in the case of a transfer of
such Notes, to such Person as the Transferor instructs the Trustee.
In connection with such request and in respect of the Notes
surrendered to the Trustee herewith for exchange or transfer (the "Surrendered
Notes), the Transferor hereby certifies that:
[CHECK ONE]
[ ] the Surrendered Notes are being transferred to the beneficial
owner of such Notes;
or
[ ] the Surrendered Notes are being transferred pursuant to and in
accordance with Rule 144A under the United States Securities
Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the
Surrendered Notes are being transferred to a Person that the
Transferor reasonably believes is purchasing the Surrendered
Notes for its own account, or for one or more accounts with
respect to which such Person exercises sole investment
discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule
144A, in each case in a transaction meeting the requirements
of Rule 144A;
or
[ ] the Surrendered Notes are being transferred in a transaction
permitted by Rule 144 under the Securities Act;
B4-1
<PAGE> 90
or
[ ] the Surrendered Notes are being transferred pursuant to an
effective registration statement under the Securities Act;
or
[ ] such transfer is being effected pursuant to an exemption from
the registration requirements of the Securities Act other than
Rule 144A or Rule 144, and the Transferor hereby further
certifies that the Notes are being transferred in compliance
with the transfer restrictions applicable to the Global Notes
and in accordance with the requirements of the exemption
claimed, which certification is supported by an opinion of
counsel, provided by the transferor or the transferee (a copy
of which the Transferor has attached to this certification) in
form reasonably acceptable to the Company and to the
Registrar, to the effect that such transfer is in compliance
with the Securities Act;
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company, the Guarantors and Donaldson, Lufkin & Jenrette
Securities Corporation (277 Park Avenue, New York, NY 10172), the initial
purchaser of such Notes being transferred. Terms used in this certificate and
not otherwise defined in the Indenture have the meanings set forth in
Regulation S under the Securities Act.
----------------------------------
[Insert Name of Transferor]
By:
------------------------------
Name:
Title:
Dated:
------------------------------, ----
cc: Katz Media Corporation
Donaldson, Lufkin & Jenrette Securities Corporation
B4-2
<PAGE> 91
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED BY
INSTITUTIONAL ACCREDITED INVESTORS
________________, _____
American Stock Transfer & Trust Department, as Registrar
Attention: Corporate Trust Department
Ladies and Gentlemen:
In connection with our proposed purchase of certain 10 1/2%
Series [A/B] Senior Subordinated Notes due 2007 (the "Notes") of Katz Media
Corporation, a Delaware corporation (the "Company"), we represent that:
(i) we are an "accredited investor" within the meaning of
Rule 501(a)(1), (2), (3) or (7) under the Securities
Act of 1933, as amended (the "Securities Act"), or an
entity in which all of the equity owners are
accredited investors within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act
(an "Institutional Accredited Investor");
(ii) any purchase of Notes will be for our own account or
for the account of one or more other Institutional
Accredited Investors;
(iii) in the event that we purchase any Notes, we will
acquire such Notes having a minimum purchase price of
at least $100,000 for our own account and for each
separate account for which we are acting;
(iv) we have such knowledge and experience in financial
and business matters that we are capable of
evaluating the merits and risks of purchasing Notes;
(v) we are not acquiring Notes with a view to any
distribution thereof in a transaction that would
violate the Securities Act or the securities laws of
any State of the United States or any other
applicable jurisdiction; provided that the
disposition of our property and the property of any
accounts for which we are acting as fiduciary shall
remain at all times within our control; and
(vi) we have received a copy of the Offering Memorandum
and acknowledge that we have had access to such
financial and other information, and have been
afforded the opportunity to ask such questions of
representatives of the Company and receive answers
thereto, as we deem necessary in connection with our
decision to purchase Notes.
We understand that the Notes are being offered in a
transaction not involving any public offering within the meaning of the
Securities Act and that the Notes have not been registered under the Securities
Act, and we agree, on our own behalf and on behalf of each account for which we
acquire any Notes, that such Notes may be offered, resold, pledged or otherwise
transferred only (i) to a person whom we reasonably believe to be a qualified
institutional buyer (as defined in Rule 144A under the Securities Act) in a
transaction meeting the requirements of Rule 144A, in a transaction meeting the
requirements of Rule 144 under the Securities Act, outside the United States in
a transaction meeting the requirements of Rule 904 under the Securities Act or
in accordance with another exemption from the registration requirements of the
Securities Act (and based upon an opinion of counsel if the Company so
requests), (ii) to the Company or (iii) pursuant to an effective registration
statement, and, in each case,
C-1
<PAGE> 92
in accordance with any applicable securities laws of any State of the United
States or any other applicable jurisdiction. We understand that the registrar
will not be required to accept for registration of transfer any Notes, except
upon presentation of evidence satisfactory to the Company that the foregoing
restrictions on transfer have been complied with. We further understand that
the Notes purchased by us will be in the form of definitive physical
certificates and that such certificates will bear a legend reflecting the
substance of this paragraph.
We acknowledge that you, the Company and others will rely upon
our confirmations, acknowledgements and agreements set forth herein, and we
agree to notify you promptly in writing if any of our representations or
warranties herein ceases to be accurate and complete.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
-------------------------------
[Insert Name of Transferor]
By:
---------------------------
Name:
Title:
Address:
C-2
<PAGE> 93
EXHIBIT D
FORM OF SUBSIDIARY GUARANTEE
Each Guarantor hereby, jointly and severally, unconditionally
guarantees to each Holder of a 10 1/2% Senior Subordinated Note due 2007 of
Chancellor Media Corporation of Los Angeles, a Delaware corporation (the
"Company") authenticated and delivered by the Trustee and to the Trustee and
its successors and assigns, irrespective of the validity and enforceability of
the Indenture, the Notes and the Obligations of the Company hereunder and
thereunder, that: (a) the principal of, premium, if any, interest and
Liquidated Damages, if any, on the Notes will be promptly paid in full when
due, subject to any applicable grace period, whether at maturity, by
acceleration, redemption or otherwise, and interest on the overdue principal,
premium, if any (to the extent permitted by law), interest on any interest, if
any, and Liquidated Damages, if any, on the Notes, and all other payment
Obligations of the Company to the Holders or the Trustee hereunder or
thereunder will be promptly paid in full and 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 Notes or any of such other Obligations, the same will
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, subject to any applicable grace period, whether at
stated maturity, by acceleration, redemption or otherwise. Failing payment
when so due of any amount so guaranteed or any performance so guaranteed for
whatever reason the Guarantors will be jointly and severally obligated to pay
the same immediately.
The obligations of each Guarantor to the Holders of Notes and
to the Trustee pursuant to this Subsidiary Guarantee and the Indenture are
expressly set forth in Article 11 of the Indenture and reference is hereby made
to such Indenture for the precise terms of this Subsidiary Guarantee. THE
TERMS OF ARTICLE 11 OF THE INDENTURE ARE INCORPORATED HEREIN BY REFERENCE. In
the case of any discrepancy between this writing and Article 11 of the
Indenture, Article 11 of the Indenture shall control.
This is a continuing Subsidiary Guarantee and shall remain in
full force and effect and shall be binding upon each Guarantor and its
successors and assigns until full, final and indefeasible payment of all of the
Company's obligations under the Notes and the Indenture (subject to Section
11.04 of the Indenture) and shall inure to the benefit of the successors and
assigns of the Trustee and the Holders of Notes and, in the event of any
transfer or assignment of rights by any Holder of Notes or the Trustee, the
rights and privileges herein conferred upon the party shall automatically
extend to and be vested in such transferee or assignee, all subject to the
terms and conditions hereof. This is a Subsidiary Guarantee of payment and not
a guarantee of collection.
For purposes hereof, each Guarantor's liability shall be
limited to the lesser of (i) the aggregate amount of the Obligations of the
Company under the Notes and the Indenture and (ii) the amount, if any, which
would not have (A) rendered such Guarantor "insolvent" (as such term is defined
in the United States Bankruptcy Code and in the Debtor and Creditor Law of the
State of New York) or (B) left such Guarantor with unreasonably small capital
at the time its Subsidiary Guarantee of the Notes was entered into; provided
that it will be a presumption in any lawsuit or other proceeding in which a
Guarantor is a party that the amount guaranteed pursuant to the Subsidiary
Guarantee is the amount set forth in clause (i) above unless any creditor, or
representative of creditors of such Guarantor, or debtor in possession or
trustee in bankruptcy of the Guarantor, otherwise proves in such a lawsuit that
the aggregate liability of the Guarantor is the amount set forth in clause (ii)
above. The Indenture provides that, in making any determination as to solvency
or sufficiency of capital of a Guarantor in accordance with the previous
sentence, the right of such Guarantor to contribution from other Guarantors,
and any other rights such Guarantor may have, contractual or otherwise, shall
be taken into account.
This Subsidiary Guarantee shall not be valid or obligatory for
any purpose until the certificate of authentication on the Note upon which this
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
D-1
<PAGE> 94
Capitalized terms used herein have the same meanings given in
the Indenture unless otherwise indicated.
[GUARANTOR]
By:
------------------------------
Name:
Title:
D-2
<PAGE> 95
EXHIBIT E
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated
as of _________________, _____, between (the "Guarantor"), a subsidiary of Katz
Media Corporation, a Delaware corporation (the "Company"), and American Stock
Transfer & Trust Company, as trustee under the indenture referred to below (the
"Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to
the Trustee an indenture (the "Indenture"), dated as of December 19, 1996,
providing for the issuance of an aggregate principal amount of $100,000,000 of
10 1/2% Series [A/B] Senior Subordinated Notes due 2007 (the "Notes");
WHEREAS, Section 4.15 of the Indenture provides that under
certain circumstances the Company is required to cause the Guarantor to execute
and deliver to the Trustee a supplemental indenture pursuant to which the
Guarantor shall unconditionally guarantee all of the Company's obligations
under the Notes pursuant to a Guarantee on the terms and conditions set forth
in Article 11 of the Indenture; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the
Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, the Guarantor and the Trustee mutually covenant and agree for the
equal and ratable benefit of the holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guarantor hereby agrees,
jointly and severally with all other Guarantors, to guarantee the Company's
Obligations under the Notes on the terms and subject to the conditions set
forth in Article 11 of the Indenture and to be bound by all other applicable
provisions of the Indenture.
3. No Recourse Against Others. No officer, employee,
director, incorporator or stockholder of the Company or a Guarantor shall have
any liability for any Obligations of the Company or a Guarantor under the Notes
or this Indenture, or for any claim based on, in respect of, or by reason of,
such Obligations or the creation of any such Obligation. Each Holder by
accepting a Note waives and releases all such liability, and such waiver and
release is part of the consideration for the issuance of the Notes.
4. Governing Law. The internal laws of the State of New York
shall govern this Supplemental Indenture, without regard to the conflict of
laws provisions thereof.
5. Counterparts. This Indenture may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
6. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
E-1
<PAGE> 96
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed and attested, all as of the date
first above written.
Date: GUARANTOR
---------------------, ------
By:
----------------------------------
Name:
Title:
Attest:
- ------------------------------------
Name:
Title:
American Stock Transfer & Trust Company,
as Trustee
By:
----------------------------------
Name:
Title:
Attest:
- ------------------------------------
Name:
Title:
E-2
<PAGE> 1
EXHIBIT 4.35
- --------------------------------------------------------------------------------
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
as Obligor
AND
the Guarantors named herein
AND
AMERICAN STOCK TRANSFER & TRUST COMPANY
as Trustee
-------------------------
SECOND SUPPLEMENTAL INDENTURE
Dated as of October 28, 1997
to
Indenture
Dated as of December 19, 1996
--------------------------
$100,000,000
10 1/2% Senior Subordinated Notes
due 2007
- --------------------------------------------------------------------------------
<PAGE> 2
SECOND SUPPLEMENTAL INDENTURE dated as of October 28, 1997, among
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES, a Delaware corporation (the
"Company"), the subsidiaries identified on Exhibit A attached hereto
(collectively, the "New Subsidiary Guarantors") and AMERICAN STOCK TRANSFER &
TRUST COMPANY, a New York banking association, as Trustee (the "Trustee").
WHEREAS, Katz Media Corporation ("Katz Media") and the subsidiary
guarantors named therein have heretofore executed and delivered to the Trustee
an Indenture dated as of December 19, 1996, as amended and restated pursuant to
the First Supplemental Indenture among Katz Media, the subsidiary guarantors
named therein and the Trustee dated October 28, 1997 (as amended and restated,
the "Indenture"), providing for the issuance of $100,000,000 aggregate
principal amount of Katz Media's 10 1/2% Senior Subordinated Notes due 2007
(the "Notes");
WHEREAS, pursuant to that certain Agreement and Plan of Merger by and
between Chancellor Media Corporation of Los Angeles ("CMCLA") and Katz Media
Corporation ("Katz Media") dated as of October 28, 1997 (the "Merger
Agreement"), Katz Media merged with and into CMCLA (the "Merger").
WHEREAS, CMCLA, the New Subsidiary Guarantors and the Trustee desire
by this Second Supplemental Indenture, (i) pursuant to and as contemplated by
Section 5.01 of the Indenture, that CMCLA expressly assume all of the
obligations of Katz Media under the Notes and the Indenture and (ii) pursuant
to and as contemplated by Sections 4.15, 11.05 and 9.01 of the Indenture, that
each of the New Subsidiary Guarantors become a Guarantor thereunder;
WHEREAS, the execution and delivery of this Second Supplemental
Indenture has been authorized by resolutions of the Boards of Directors of
CMCLA and the New Subsidiary Guarantors; and
WHEREAS, all conditions and requirements necessary to make this Second
Supplemental Indenture a valid, binding legal instrument in accordance with its
terms have been performed and fulfilled by the parties hereto and the execution
and delivery thereof have been in all respects duly authorized by the parties
hereto.
NOW, THEREFORE, in consideration of the above premises, each party
agrees, for the benefit of the others and for the equal and ratable benefit of
the holders of the Notes, as follows:
ARTICLE 1.
ASSUMPTION OF OBLIGATIONS AS ISSUER
Section 1.01. Assumption. CMCLA hereby expressly and unconditionally
assumes each and every covenant, agreement and undertaking of Katz Media in the
Indenture as of the date of this Second Supplemental Indenture, and also hereby
expressly and unconditionally assumes each and every covenant, agreement and
undertaking of Katz Media in each Note outstanding on the date of this Second
Supplemental Indenture.
2
<PAGE> 3
ARTICLE 2.
ASSUMPTION OF OBLIGATIONS AS GUARANTOR
Section 2.01. Assumption. Each of the New Subsidiary Guarantors hereby
expressly and unconditionally assumes each and every covenant, agreement and
undertaking of a Guarantor in the Indenture as of the date of this Second
Supplemental Indenture, and also hereby expressly and unconditionally assumes
each and every covenant, agreement and undertaking of a Guarantor in each Note
outstanding on the date of this Second Supplemental Indenture.
ARTICLE 3.
MISCELLANEOUS PROVISIONS
Section 3.01. Tems Defined. For all purposes of this Second Supplemental
Indenture, except as otherwise defined or unless the context otherwise
requires, terms used in capitalized form in this Second Supplemental Indenture
and defined in the Indenture have the meanings specified in the Indenture.
Section 3.02. Indenture. Except as amended hereby, the Indenture and the
Notes are in all respects ratified and confirmed and all the terms shall remain
in full force and effect.
Section 3.03. No Recourse Against Others. No officer, employee, director,
incorporator or stockholder of the Company or a New Subsidiary Guarantor shall
have any liability for any Obligations of the Company or a New Subsidiary
Guarantor under the Notes or the Indenture, or for any claim based on, in
respect of, or by reason of, such Obligations or the creation of any such
Obligation. Each Holder by accepting a Note waives and releases all such
liability, and such waiver and release is part of the consideration for the
issuance of the Notes.
Section 3.04. Governing Law. THIS SECOND SUPPLEMENTAL INDENTURE 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 3.05. Successors. All agreements of CMCLA and the New Subsidiary
Guarantors in this Second Supplemental Indenture and the Notes shall bind their
successors. All agreements of the Trustee in this Second Supplemental
Indenture shall bind its successors.
Section 3.06. Duplicate Originals. All parties may sign any number of
copies of this Second Supplemental indenture. Each signed copy shall be an
original, but all of them together shall represent the same agreement.
Section 3.07. Severability. In case any one or more of the provisions in
this Second Supplemental Indenture or in the Notes 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
3
<PAGE> 4
thereby, it being intended that all of the provisions hereof shall be
enforceable to the full extent permitted by law.
Section 3.08. Trustee Disclaimer. The Trustee accepts the amendment of the
Indenture effected by this Second Supplemental Indenture and agrees to execute
the trust created by the Indenture as hereby amended, but on the terms and
conditions set forth in the Indenture, including the terms and provisions
defining and limiting the liabilities and responsibilities of the Trustee,
which terms and provisions shall in like manner define and limit its
liabilities and responsibilities in the performance of the trust created by the
Indenture as hereby amended, and without limiting the generality of the
foregoing, the Trustee shall not be responsible in any manner whatsoever for or
with respect to any of the recitals or statements contained herein, all of
which recitals or statements are made solely by CMCLA and the New Subsidiary
Guarantors, or for or with respect to (i) the validity or sufficiency of this
Second Supplemental Indenture or any of the terms or provisions hereof, (ii)
the proper authorization hereof by CMCLA and the New Subsidiary Guarantors by
corporate action or otherwise, (iii) the due execution hereof by CMCLA and the
New Subsidiary Guarantors or (iv) the consequences (direct or indirect and
whether deliberate or inadvertent) of any amendment herein provided for, and
the Trustee makes no representation with respect to any such matters.
Section 3.09. Effectiveness.
(A) This second supplemental indenture shall become effective once
executed upon fulfillment of the conditions set forth in section 3.08(B) below.
(B) This second supplemental indenture shall not become effective
until receipt by the Trustee of the following, in each case dated no earlier
than the date hereof.
(i) A certificate of an appropriate officer of CMCLA; and
(i) An opinion of Latham & Watkins, counsel to CMCLA.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed as of the day and year written
above.
CHANCELLOR MEDIA CORPORATION
OF LOS ANGELES, as Obligor
--------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:
---------------------------
Title: Vice President
AMERICAN STOCK TRANSFER & TRUST
COMPANY, as Trustee
--------------------------------
By:
---------------------------
Title:
------------------------
Attest:
---------------------------
Title:
5
<PAGE> 6
CHANCELLOR MEDIA CORPORATION OF THE LONE
STAR STATE,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KZPS/KDGE LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION OF THE BAY AREA,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KIOI LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
6
<PAGE> 7
CHANCELLOR MEDIA CORPORATION OF ILLINOIS,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WRCX LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION OF CHICAGO AM,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WMVP-AM LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
7
<PAGE> 8
CHANCELLOR MEDIA CORPORATION OF DADE COUNTY
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WVCG LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA/PYRAMID CORPORATION,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA/PYRAMID HOLDINGS,
CORPORATION, as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
8
<PAGE> 9
BROADCAST ARCHITECTURE, INC.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION OF
MASSACHUSETTS, as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WJMN LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION
OF PENNSYLVANIA, as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
9
<PAGE> 10
WJJZ LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
-------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION OF MIAMI,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WEDR LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION OF BOSTON,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
10
<PAGE> 11
WXKS (AM) LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WXKS (FM) LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION OF THE
WINDY CITY, as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WNUA LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
11
<PAGE> 12
CHANCELLOR MEDIA CORPORATION OF PHILADELPHIA,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION
OF THE KEYSTONE STATE,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KYLD LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WYXR LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
12
<PAGE> 13
WUSL LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION OF ROCHESTER,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KKBT LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION
OF THE NATION'S CAPITAL, as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
13
<PAGE> 14
WWRC LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA PARTNERS CORPORATION,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION OF GOTHAM,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION OF NEW YORK,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
14
<PAGE> 15
WYNY LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION OF DETROIT,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WKQI/WDOZ/WNIC LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION OF CHICAGOLAND,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
15
<PAGE> 16
WEJM/WEJM-FM/WVAZ LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION OF CHARLOTTE,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WIOQ LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION OF DALLAS,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
16
<PAGE> 17
KSKY LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION OF SAN FRANCISCO,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KMEL LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION OF HOUSTON,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
17
<PAGE> 18
CHANCELLOR MEDIA OF HOUSTON LIMITED
PARTNERSHIP, as Guarantor
By: Chancellor Media Corporation of Houston
Its: General Partner
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KTRH LICENSE LIMITED PARTNERSHIP,
as Guarantor
By: Chancellor Media Corporation of Houston
Its: General Partner
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KLOL LICENSE LIMITED PARTNERSHIP,
as Guarantor
By: Chancellor Media Corporation of Houston
Its: General Partner
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
18
<PAGE> 19
CHANCELLOR MEDIA CORPORATION OF TIBURON,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KKSF LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KDFC (AM) LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KDFC (FM) LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
19
<PAGE> 20
CHANCELLOR MEDIA CORPORATION
OF WASHINGTON, D.C.
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION OF ST. LOUIS,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WTOP LICENSE LIMITED PARTNERSHIP,
as Guarantor
By: Chancellor Media Corporation of
Washington, D.C.
Its: General Partner
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
20
<PAGE> 21
WASH LICENSE LIMITED PARTNERSHIP,
as Guarantor
By: Chancellor Media Corporation of
Washington, D.C.
Its: General Partner
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION OF THE
MOTOR CITY, as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WJLB LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION OF MICHIGAN,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
21
<PAGE> 22
WMXD LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA/WAXQ INC.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WAXQ LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA/WMZQ INC.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
22
<PAGE> 23
WMZQ LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION OF THE
LIBERTY CITY, as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WDAS (FM) LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WDAS (AM) LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
23
<PAGE> 24
CHANCELLOR MEDIA/RIVERSIDE BROADCASTING CO.,
INC.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WLTW LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION OF THE
GREAT LAKES, as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WWWW/WDFN LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
24
<PAGE> 25
CHANCELLOR MEDIA/VBE, INC.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION OF THE
CAPITAL CITY, as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WGAY LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA CORPORATION OF CHICAGO,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
25
<PAGE> 26
WPNT LICENSE CORP.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
CHANCELLOR MEDIA/KIBB INC.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title:
CHANCELLOR MEDIA/KYSR INC.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title:
CHANCELLOR MEDIA/WLIT INC.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title:
26
<PAGE> 27
CHANCELLOR MEDIA/WDRQ INC.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title:
RADIO 100 L.L.C.,
as Guarantor
By: Chancellor Media Corporation of Los
Angeles
Its: Sole Member
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title:
CHANCELLOR MEDIA/TREFOIL COMMUNICATIONS, INC.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title:
CHANCELLOR MEDIA/SHAMROCK BROADCASTING, INC.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title:
27
<PAGE> 28
CHANCELLOR MEDIA/SHAMROCK RADIO LICENSES,
INC.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title:
CHANCELLOR MEDIA/SHAMROCK BROADCASTING OF
TEXAS, INC.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title:
CHANCELLOR MEDIA/SHAMROCK BROADCASTING
LICENSES OF DENVER, INC.,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title:
CHANCELLOR MEDIA LICENSEE COMPANY,
as Guarantor
+
---------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title:
28
<PAGE> 29
-----------------------------------
+Matthew E. Devine
(signing in his capacity as Vice
President of each of the above
Companies)
Attest:
------------------------------------
**Omar Choucair
(signing in his capacity as Vice
President of each of the above Companies)
KATZ MEDIA CORPORATION
as Guarantor
---------------------------------------------
By: Richard E. Vendig
Title: Senior Vice President, Chief
Financial and Administrative
Officer, Treasurer
Attest:
------------------------------------
Title:
29
<PAGE> 30
Exhibit A
CERTAIN SUBSIDIARIES OF
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
1. Chancellor Media Licensee Company
2. Chancellor Media/Trefoil Communications, Inc.
3. Chancellor Media/Shamrock Broadcasting, Inc.
4. Chancellor Media/Shamrock Radio Licenses, Inc.
5. Chancellor Media/Shamrock Broadcasting of Texas, Inc.
6. Chancellor Media/Shamrock Broadcasting Licenses of Denver
7. Chancellor Media Corporation of the Lone Star State
8. KZPS/KDGE License Corp.
9. Chancellor Media Corporation of the Bay Area
10. KIOI License Corp.
11. Chancellor Media Corporation of Illinois
12. WRCX License Corp.
13. Chancellor Media Corporation of Chicago AM
14. WMVP-AM License Corp.
15. Chancellor Media Corporation of Dade County
16. WVCG License Corp.
17. Chancellor Media/Pyramid Corporation
18. Chancellor Media/Pyramid Holdings Corporation
19. Broadcast Architecture, Inc.
20. Chancellor Media Corporation of Massachusetts
21. WJMN License Corp.
22. Chancellor Media Corporation of Pennsylvania
23. WJJZ License Corp.
24. Chancellor Media Corporation of Miami
25. WEDR License Corp.
26. Chancellor Media Corporation of Boston
27. WXKS (AM) License Corp.
28. WXKS (FM) License Corp.
29. Chancellor Media Corporation of the Windy City
30. WNUA License Corp.
31. Chancellor Media Corporation of Philadelphia
32. Chancellor Media Corporation of the Keystone State
33. KYLD License Corp.
34. WYXR License Corp.
35. WUSL License Corp.
36. Chancellor Media Corporation of Rochester
37. KKBT License Corp.
38. Chancellor Media Corporation of the Nation's Capital
39. WWRC License Corp.
40. Chancellor Media Partners Corporation
41. Chancellor Media Corporation of Gotham
42. Chancellor Media Corporation of New York
43. WYNY License Corp.
44. Chancellor Media Corporation of Detroit
45. WKQI/WDOZ/WNIC License Corp.
46. Chancellor Media Corporation of Chicagoland
30
<PAGE> 31
47. WEJM/WEJM-FM/WVAZ License Corp.
48. Chancellor Media Corporation of Charlotte
49. WIOQ License Corp.
50. Chancellor Media Corporation of Dallas
51. KSKY License Corp.
52. Chancellor Media Corporation of San Francisco
53. KMEL License Corp.
54. Chancellor Media Corporation of Houston
55. Chancellor Media of Houston Limited Partnership
56. KTRH License Limited Partnership
57. KLOL License Limited Partnership
58. Chancellor Media Corporation of Tiburon
59. KKSF License Corp.
60. KDFC (AM) License Corp.
61. KDFC (FM) License Corp.
62. Chancellor Media Corporation of Washington, D.C.
63. Chancellor Media Corporation of St. Louis
64. WTOP License Limited Partnership
65. WASH License Limited Partnership
66. Chancellor Media Corporation of the Motor City
67. WJLB License Corp.
68. Chancellor Media Corporation of Michigan
69. WMXD License Corp.
70. Chancellor Media/WAXQ Inc.
71. WAXQ License Corp.
72. Chancellor Media/WMZQ Inc.
73. WMZQ License Corp.
74. Chancellor Media Corporation of the Liberty City
75. WDAS (FM) License Corp.
76. WDAS (AM) License Corp.
77. Chancellor Media/Riverside Broadcasting Co. Inc.
78. WLTW License Corp.
79. Chancellor Media Corporation of the Great Lakes
80. WWWW/WDFN License Corp.
81. Chancellor Media/VBE, Inc.
82. Chancellor Media Corporation of the Capital City
83. WGAY License Corp.
84. Chancellor Media Corporation of Chicago
85. WPNT License Corp.
86. Chancellor Media/KIBB Inc.
87. Chancellor Media/KYSR Inc.
88. Chancellor Media/WLIT Inc.
89. Chancellor Media/WDRQ Inc.
90. Radio 100 L.L.C.
91. Katz Media Corporation (formerly known as The Cable Company, Inc.)
31
<PAGE> 1
EXHIBIT 4.36
THIRD AMENDMENT
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
THIS THIRD AMENDMENT TO SECOND AMENDED AND RESTATED LOAN
AGREEMENT (this "Amendment") made as of the 28th day of October, 1997, among
Chancellor Media Corporation of Los Angeles, a Delaware corporation (formerly
known as Evergreen Media Corporation of Los Angeles) (the "Borrower"), the
financial institutions whose names appear as Lenders on the signature pages
hereto (collectively, the "Lenders"), Toronto Dominion (Texas), Inc., Bankers
Trust Company, The Bank of New York, NationsBank of Texas, N.A. and Union Bank
of California (collectively, the "Managing Agents"), Toronto Dominion
Securities (USA), Inc. (the "Syndication Agent") and Toronto Dominion (Texas),
Inc., as administrative agent for the Lenders (the "Administrative Agent"),
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders, the Managing Agents, the
Syndication Agent and the Administrative Agent are parties to that certain
Second Amended and Restated Loan Agreement dated as of April 25, 1997, as
modified and amended by that certain First Amendment to Second Amended and
Restated Loan Agreement dated as of June 26, 1997, as further modified and
amended by that certain Second Amendment to Second Amended and Restated Loan
Agreement dated as of August 7, 1997 (as amended, the "Loan Agreement"); and
WHEREAS, Chancellor Media Corporation, a Delaware corporation
(formerly known as Evergreen Media Corporation) (the "Parent Company") and
Morris Acquisition Corporation, a Delaware corporation ("Morris"), have made a
tender offer (the "Tender Offer"), disclosed in that certain Tender Offer
Statement on Schedule 14D-1, dated July 18, 1997, to acquire any and all
outstanding shares of common stock of Katz Media Group, Inc., a Delaware
corporation ("KMG"), pursuant to the terms of that certain Merger Agreement,
dated as of July 14, 1997, among the Parent Company, Chancellor Broadcasting
Company, Morris and KMG (the "Merger Agreement"); and
WHEREAS, as of the date hereof, Chancellor Mezzanine Holdings
Corporation, a Delaware corporation (formerly known as Evergreen Mezzanine
Holdings Corporation) ("CMHC"), a wholly-owned direct Subsidiary of the Parent
Company, owns all of the issued and outstanding common stock of the Borrower
and all of the issued and outstanding Capital Stock of Morris; and
WHEREAS, in connection with the Tender Offer, Morris intends
to purchase at least ninety percent (90%) of the issued and outstanding Capital
Stock of KMG for an aggregate cash purchase price of approximately
$160,000,000, which amount the Borrower desires to make available to Morris;
and
WHEREAS, subject to the satisfactory completion of the Tender
Offer and the satisfaction of the other conditions precedent of the Merger
Agreement, Morris will merge with and into KMG in a Delaware "short-form"
merger, with KMG being the surviving corporation (the "Merger"); and
<PAGE> 2
WHEREAS, as of the effective date of the Merger, CMHC will own
all of the issued and outstanding Capital Stock of KMG, and KMG will own all of
the issued and outstanding Capital Stock of Katz Media Services, Inc., a
Delaware corporation ("KMSI"); and
WHEREAS, following consummation of the Merger, KMSI will merge
with and into KMG, with KMG being the surviving corporation (the "KMSI
Merger"); and
WHEREAS, as of the effective date of the KMSI Merger, KMG will
own all of the issued and outstanding Capital Stock of Katz Media Corporation,
a Delaware corporation ("KMC"); and
WHEREAS, following consummation of the KMSI Merger, CMHC and
KMG will cause the merger of KMC with and into the Borrower, with the Borrower
being the surviving corporation (the "KMC Merger"), in consideration of which
KMC Merger the Borrower will issue to KMG shares of common stock of the
Borrower representing approximately four percent (4%) of the common stock of
the Borrower; and
WHEREAS, as of the effective date of the KMC Merger, the
common stock of the Borrower will be owned approximately ninety-six percent
(96%) by CMHC and approximately four percent (4%) by KMG; and
WHEREAS, KMC has issued those certain 10- 1/2% Senior
Subordinated Notes due 2007 in the original principal amount of $100,000,000
(the "KMC Subordinated Notes"), the obligations under which KMC Subordinated
Notes will be assumed by the Borrower in connection with the KMC Merger; and
WHEREAS, following consummation of the KMC Merger, the
Borrower intends to contribute certain of the assets and liabilities of KMC
(other than the KMC Subordinated Notes) to a newly formed and wholly-owned
Subsidiary of the Borrower, Katz Media Corporation, a Delaware corporation,
(such contribution together with the KMG Merger, the KMSI Merger, the KMC
Merger and all other related transactions are hereinafter referred to as the
"Katz Acquisition"); and
WHEREAS, the Borrower, CMHC and the Parent Company have asked
and the Lenders have agreed to amend the Loan Agreement as set forth herein in
order to permit consummation of the Katz Acquisition and certain other
transactions contemplated in connection therewith, including, without
limitation, the refinancing of KMC's existing indebtedness;
NOW, THEREFORE, for and in consideration of the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, the
parties agree that all capitalized terms used herein shall have the meanings
ascribed thereto in the Loan Agreement except as otherwise defined or limited
herein, and further agree as follows:
1. Amendments to Article 1.
(a) Article 1 of the Loan Agreement, Definitions, is
hereby modified and amended by deleting the words "involved in the business of
operating broadcast radio stations" in the last two lines of the definition of
"Acquisition" and by substituting the following in lieu thereof:
- 2 -
<PAGE> 3
"involved in a business as permitted to be conducted by the Borrower
or its Subsidiaries by Section 5.2"
(b) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by adding the following after the
definition of "Acquisition":
"'Acquisition Date' shall mean the date on which the Katz
Acquisition is consummated."
(c) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by deleting the definition of "Borrower" in
its entirety and by substituting the following in lieu thereof:
"'Borrower' shall mean Chancellor Media Corporation of Los
Angeles, a Delaware corporation (formerly known as Evergreen Media
Corporation of Los Angeles)."
(d) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by deleting existing clause (a) of the
definition of "Cash Interest Expense" and by substituting the following in lieu
thereof:
"(a) any cash dividend on account of any Preferred Stock of
the Borrower, or any Restricted Payments made to permit the payment of
interest on Subordinated Indebtedness or cash dividends on the
Preferred Stock of KMG, CMHC or the Parent Company,"
(e) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by adding the following after the
definition of "CBC Preferred Stock":
"'CMHC' shall mean Chancellor Mezzanine Holdings Corporation,
a Delaware corporation (formerly known as Evergreen Mezzanine Holdings
Corporation), which, as of the Merger Date, shall own all of the
issued and outstanding common stock of the Borrower, and which, no
later than the Acquisition Date, shall own approximately ninety-six
percent (96%) of the issued and outstanding common stock of the
Borrower and all of the issued and outstanding Capital Stock of KMG.
"'CMHC Guaranty' shall mean that certain Guaranty dated no
later than the Merger Date, issued by CMHC in favor of the Collateral
Agent, in substantially the form attached hereto as Exhibit D."
(f) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by deleting the definition of "EMHC" in its
entirety.
(g) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by adding the following sentence to the end
of the definition of "Indebtedness":
"Notwithstanding anything contained herein to the contrary, for
Subsidiaries formed or acquired in connection with consummation of the
Katz Acquisition, 'Indebtedness'
- 3 -
<PAGE> 4
shall not include any deferred income or deferred rent to the extent
that such amounts are required to be reflected on a Person's balance
sheet as liabilities for accounting purposes."
(h) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by adding the following definitions
immediately after the existing definition of "Joint Purchase Agreement":
"'Katz Acquisition' shall mean the KMG Merger and a series of
related transactions by which the KMC Merger is consummated and by
which certain assets and liabilities of KMC (other than the KMC
Subordinated Notes) are contributed to a newly-formed and wholly-owned
Subsidiary of the Borrower.
"'KMC' shall mean Katz Media Corporation, a Delaware
corporation, all of the issued and outstanding stock of which,
immediately prior to the effective date of the merger of KMC with and
into the Borrower, shall be owned by KMG.
"'KMC Merger' shall mean the merger of KMC with and into the
Borrower, with the Borrower being the surviving corporation.
"'KMC Subordinated Notes' shall mean those certain 10- 1/2%
Senior Subordinated Notes due 2007 issued by KMC in the original
principal amount of $100,000,000, which, no later than the Acquisition
Date, shall be assumed by the Borrower.
"'KMG' shall mean Katz Media Group, Inc., a Delaware
corporation, which no later than the Acquisition Date, shall own
approximately four percent (4%) of the issued and outstanding common
stock of the Borrower.
"'KMG Guaranty' shall mean that certain Guaranty dated no
later than the effective date of the KMG Merger, issued by KMG in
favor of the Collateral Agent, in substantially the form attached
hereto as Exhibit D- 2.
"'KMG Merger' shall mean the merger of Morris with and into
KMG, with KMG being the surviving corporation, following the
Acquisition by Morris of at least ninety percent (90%) of the issued
and outstanding common stock of KMG pursuant to the terms and
conditions of that certain Merger Agreement, dated as of July 14,
1997, among the Parent Company, Morris and KMG and that certain Tender
Offer Statement on Schedule 14D-1, dated July 18, 1997.
"'KMG Pledge Agreement' shall mean that certain Stock Pledge
Agreement dated no later than the effective date of the KMG Merger
between KMG and the Collateral Agent, in substantially the form
attached hereto as Exhibit H-3."
(i) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by deleting the each reference to "EMHC" in
the definition of "Merger" and by substituting the words "Evergreen Mezzanine
Holdings Corporation" in lieu thereof.
(j) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by adding the following definition after
the definition of "Merger Date":
- 4 -
<PAGE> 5
"'Morris' shall mean Morris Acquisition Corporation, a
Delaware corporation."
(k) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by adding the following definition after
the definition of "Multiemployer Plan":
"'NCC' shall mean National Cable Communications, L.P., a
Delaware limited partnership, of which fifty percent (50%) of the
partnership interests therein shall be owned, as of the Acquisition
Date, by a Subsidiary of KMG."
(l) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by deleting the words "or EMHC" in clause
(a) of the definition of "Net Cash Proceeds" and by substituting the words "KMG
or CMHC" in lieu thereof.
(m) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by deleting the words "or EMHC" and by
adding the words "KMG or CMHC" in the fourth and the fifteenth lines of the
definition of "Net Proceeds."
(n) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by deleting the definition of "Parent
Company" in its entirety and by substituting the following in lieu thereof:
"'Parent Company' shall mean Chancellor Media Corporation, a
Delaware corporation (formerly known as Evergreen Media Corporation),
which, as of the Merger Date, owned all of the issued and outstanding
Capital Stock of CMHC."
(o) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by deleting "$5,000,000" and by
substituting "$10,000,000" in the ninth line of the definition of "Permitted
Guaranties".
(p) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by deleting the definition of "Preferred
Stock" and substituting the following in lieu thereof:
"'Preferred Stock' shall mean (a) the CBC Preferred Stock upon
the assumption thereof by the Borrower or the Parent Company at any
time on or after the Merger Date, (b) the Parent Company Preferred
Stock and (c) any other preferred stock issued by the Parent Company,
CMHC, KMG or the Borrower consistent with the terms and provisions of
this Agreement."
(q) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by deleting existing clause (i) of
subsection (e) of the definition of "Pro Forma Fixed Charges" and by
substituting the following in lieu thereof:
"(i) to be used to pay cash dividends on any Preferred Stock or
interest on the Indebtedness for Money Borrowed incurred by the Parent
Company, CMHC, KMG or the Borrower,"
- 5 -
<PAGE> 6
(r) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by adding the following after the existing
definition of "Reportable Event":
"'Representation Agreement' shall mean any agreement now in
effect or hereafter entered into between the Borrower or any of its
Subsidiaries and owners and operators of electronic media (including,
without limitation, radio and television stations, cable systems,
interactive television projects, Internet and other on-line services)
pursuant to which the Borrower or such Subsidiary sells advertising on
such media, as such agreements may be amended, supplemented or
otherwise modified from time to time."
(s) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by deleting "the EMHC Guaranty" from the
definition of "Security Documents" and by substituting "the CMHC Guaranty, the
KMG Guaranty" in lieu thereof and by inserting "the KMG Pledge Agreement,"
immediately following "the Stock Pledge Agreement."
(t) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by deleting the words "or EMHC" from clause
(b) of the definition of "Subordinated Indebtedness" and by substituting the
words "KMG or CMHC" in lieu thereof.
(u) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by adding the following after the last
sentence in the definition of "Subsidiary":
"Notwithstanding anything to the contrary contained in the foregoing,
in the case of the Borrower and its Subsidiaries, the term
'Subsidiary' shall not include NCC."
(v) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by deleting the words "and EMHC" from the
eighth line of the definition of "Total Leverage Ratio" and by substituting ",
KMG and CMHC" in lieu thereof.
(w) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by deleting the existing definition of
"Unrestricted Subsidiary" in its entirety and by substituting the following in
lieu thereof:
"'Unrestricted Subsidiary' shall mean any Subsidiary or
Subsidiaries of the Parent Company, other than CMHC, KMG, the Borrower
and any Subsidiary of CMHC, KMG or the Borrower."
2. Amendment to Section 2.3. Section 2.3 of the Loan Agreement
is hereby modified and amended by deleting the words "and EMHC" from the
eighteenth line of subsection (f), Applicable Margin, and by substituting the
words ", CMHC and KMG" in lieu thereof.
3. Amendment to Section 2.7. Section 2.7 of the Loan Agreement
is hereby modified and amended by deleting subsection (b), Repayment from
Issuance of Subordinated Indebtedness by Parent Company, EMHC or Borrower, in
its entirety and by substituting the following in lieu thereof:
- 6 -
<PAGE> 7
"(b) Repayment from Issuance of Subordinated Indebtedness
by Parent Company, CMHC, KMG or Borrower. Fifty percent (50%) of the
Net Proceeds of any Subordinated Indebtedness (other than Subordinated
Indebtedness issued solely to refinance the CRBC Subordinated
Indebtedness and which does not increase the principal amount thereof)
issued by the Parent Company (to the extent such Subordinated
Indebtedness is guaranteed by any of CMHC, KMG, the Borrower or any of
the Borrower's Subsidiaries), CMHC, KMG or Borrower shall, on the date
of receipt by the Parent Company, CMHC, KMG or Borrower be applied to
the Obligations, and with respect to the Loans, such payment shall be
applied, at the election of Borrower, to the Term Loan or the
Revolving Loans or any combination thereof, and that in the case of
repayment of the Revolving Loans, no permanent reduction of the
Revolving Loan Commitment shall be required."
4. Amendments to Section 4.1.
(a) Section 4.1 of the Loan Agreement, Representations
and Warranties, is hereby modified and amended by deleting the last sentence of
subsection (e) and by substituting the following in lieu thereof:
"The Borrower's Subsidiaries are engaged in the radio broadcasting and
related businesses and, on or at any time after the Acquisition Date,
in the business of representing radio and television stations, cable
stations, interactive Internet service providers, other broadcasters,
publishers and purveyors of publicly accessible media and other
business media and marketing entities in the sale of advertising and
programming."
(b) Section 4.1 of the Loan Agreement, Representations
and Warranties, is hereby further modified and amended by adding the following
after the word "Subsidiaries" in the twelfth line of subsection (u):
"(other than with respect to the Capital Stock of Subsidiaries
organized under the laws of jurisdictions outside of the United
States, in which case, sixty-five percent (65%) of the Capital Stock
of such Subsidiaries has been pledged to the Collateral Agent)"
5. Amendment to Section 5.2. Section 5.2 of the Loan Agreement,
Business; Compliance with Applicable Law, is hereby modified and amended by
deleting clause (a) of the second sentence and by substituting the following in
lieu thereof:
"(a) (i) engage solely in the business of radio broadcasting and
related businesses, (ii) on or at any time after the Acquisition Date,
engage solely in the business of representing radio and television
stations, cable stations, interactive Internet service providers,
other broadcasters, publishers and purveyors of publicly accessible
media and other business media and marketing entities in the sale of
advertising and programming or (iii) engage solely in holding
securities of radio broadcasting businesses and any Non-Core
Businesses, as permitted by Section 7.6(g) and (h),"
6. Amendments to Section 5.12.
(a) Section 5.12 of the Loan Agreement, Covenants
Regarding Formation of Subsidiaries and Acquisitions, is hereby modified and
amended by inserting the words "or a
- 7 -
<PAGE> 8
Subsidiary of the Borrower organized under the laws of a jurisdiction outside
of the United States" after the words "Divestiture Trust" in clause (a)
thereof.
(b) Section 5.12 of the Loan Agreement, Covenants
Regarding Formation of Subsidiaries and Acquisitions, is hereby further
modified and amended by inserting the parenthetical "(unless such Subsidiary or
Person is organized under the laws of a jurisdiction outside of the United
States, in which case, sixty-five percent (65%) of the equity interests in such
Subsidiary or Person shall be pledged in accordance herewith)" after the words
"Subsidiary or Person" in clause (b).
7. Amendments to Section 7.1.
(a) Section 7.1 of the Loan Agreement, Indebtedness of
the Borrower and its Subsidiaries, is hereby modified and amended by deleting
the existing clause (b) from subsection (vii) and by substituting the following
in lieu thereof:
"(b) as of or at any time after consummation of the KMC Merger, the
Subordinated Indebtedness evidenced by the KMC Subordinated Notes and
(c) additional Subordinated Indebtedness (including unsecured,
subordinated Guaranties issued by the Borrower or any of its
Subsidiaries of Subordinated Indebtedness issued by the Parent
Company, CMHC or KMG) in an aggregate principal amount not exceeding
$600,000,000, and as of or at any time after consummation of the KMC
Merger, not exceeding $500,000,000, in each case at any one time
outstanding;"
(b) Section 7.1 of the Loan Agreement, Indebtedness of
the Borrower and its Subsidiaries, is hereby further modified and amended by
deleting "$5,000,000" from clause (ix) and by substituting "$10,000,000"
therefor.
(c) Section 7.1 of the Loan Agreement, Indebtedness of
the Borrower and its Subsidiaries, is hereby further modified and amended by
inserting the following immediately prior to the period in subsection (ix)
thereof:
";
"(x) on or at any time after the Acquisition Date,
liabilities in respect of Representation Agreements incurred by the
Borrower or its Subsidiaries in the ordinary course of business; and
"(xi) Taxes payable"
8. Amendments to Section 7.4.
(a) Section 7.4 of the Loan Agreement, Liquidation,
Change in Ownership, Disposition of Assets, Change in Business of License Subs,
is hereby modified and amended by deleting the words within the parentheses in
subsection (a)(ii) and by substituting the following therefor: "(except a
merger pursuant to the Merger Agreement, or the KMC Merger, or any merger or
liquidation among the Borrower and one or more of its Subsidiaries, provided
that the Borrower is the surviving corporation, or between or among two or more
of the Subsidiaries of the Borrower)".
- 8 -
<PAGE> 9
(b) Section 7.4 of the Loan Agreement, Liquidation,
Change in Ownership, Disposition of Assets, Change in Business of License Subs,
is hereby further modified and amended by adding the following immediately
after the word "assets" in line three of subsection (b):
"(other than termination, sale or other disposition of Representation
Agreements in the ordinary course of business)"
(c) Section 7.4 of the Loan Agreement, Liquidation,
Change in Ownership, Disposition of Assets, Change in Business of License Subs,
is hereby further modified and amended by deleting the existing subsection (d)
and by substituting the following therefor:
"(d) as to the Borrower, issue any additional shares of
common stock unless such shares are issued to CMHC, or to KMG in
connection with the Katz Acquisition, and simultaneously pledged to
the Collateral Agent, as appropriate, by CMHC pursuant the Stock
Pledge Agreement or by KMG pursuant to the KMG Pledge Agreement."
9. Amendment to Section 7.5. Section 7.5 of the Loan Agreement,
Negative Pledges, is hereby modified and amended by deleting the words within
the parentheses and by substituting the following therefor:
"(excluding this Agreement, any Loan Document or any Capitalized Lease
Obligations with respect to property leased thereunder or purchase
money security interests permitted by clause (i) of the definition of
'Permitted Liens' or the organizational documents and partnership
agreement of NCC)"
10. Amendments to Section 7.6.
(a) Section 7.6 of the Loan Agreement, Investments,
Acquisitions and Asset Swaps, is hereby modified and amended by deleting the
existing subsection (b) and substituting the following in lieu thereof:
"(b) The Borrower and its Subsidiaries may make
intercompany loans to, and other Investments in, the Borrower or any
of its Subsidiaries which are parties to the Subsidiary Guaranty;"
(b) Section 7.6 of the Loan Agreement, Investments,
Acquisitions and Asset Swaps, is hereby further modified and amended by adding
a new clause (v) in subsection (c) which shall read as follows:
"(v) The Borrower may consummate the Katz Acquisition."
(c) Section 7.6 of the Loan Agreement, Investments,
Acquisitions and Asset Swaps, is hereby further modified and amended by adding
the following phrase immediately after the parenthetical in the fourth line of
subsection (h):
", together with the aggregate purchase price of any Acquisitions
permitted under Section 7.6(i),"
- 9 -
<PAGE> 10
(d) Section 7.6 of the Loan Agreement, Investments,
Acquisitions and Asset Swaps, is hereby further modified and amended by the
addition of a new subsection (i) which shall read as follows:
"(i) the Borrower and any of its Subsidiaries may make
Acquisitions of any businesses engaged in Non-Core Businesses,
provided that the sum of (x) the aggregate purchase price of all such
Acquisitions and (y) the aggregate market value of all securities
permitted to be purchased under Section 7.6(h) (measured as of the
date of purchase), shall not exceed $150,000,000 at any one time
outstanding or such greater amount as may be approved in writing by
the Required Lenders;"
(e) Section 7.6 of the Loan Agreement, Investments,
Acquisitions and Asset Swaps, is hereby further modified and amended by the
addition of a new subsection (j) which shall read as follows:
"(j) the Borrower and any of its Subsidiaries may make
Investments in Subsidiaries of the Borrower which are not parties to
the Subsidiary Guaranty and in NCC and other Investments acquired as
part of the Katz Acquisition, provided that the aggregate amount of
all such Investments, when added to the aggregate amount of Restricted
Payments and Restricted Purchases permitted to be made under Section
7.7(b), shall not exceed the total amount of Restricted Payments and
Restricted Purchases permitted to be made under Section 7.7(b)."
11. Amendments to Section 7.7.
(a) Section 7.7 of the Loan Agreement, Restricted
Payments and Purchases, is hereby modified and amended by deleting the word
"EMHC" in the second line of subsection (a) and by substituting the words "KMG
or CMHC" in lieu thereof.
(b) Section 7.7 of the Loan Agreement, Restricted
Payments and Purchases, is hereby modified and amended by deleting the existing
subsection (b) and by substituting the following in lieu thereof:
"(b) the Borrower and the Borrower's Subsidiaries may make Restricted
Payments and Restricted Purchases for or in connection with the
repayment, prepayment, repurchase or redemption of any of the
Borrower's, CMHC's, KMG's or the Parent Company's equity or debt
securities (including warrants for the purchase of such equity or debt
securities), plus Investments under Section 7.6(j) hereof, plus other
Restricted Payments and Restricted Purchases during the term of this
Agreement (in addition to amounts paid pursuant to Section 7.7(a)
above), in an aggregate amount not to exceed at any time during the
term of this Agreement the sum of (i) to the extent that such sums
have been contributed at any time from and after the Agreement Date as
equity to the Borrower, up to $100,000,000 in proceeds of an offering
of common or preferred stock of the Parent Company or any of its
Subsidiaries, plus (ii) up to an additional $170,000,000, provided
that such amount is used to repurchase, redeem, repay or refinance any
preferred stock or bridge indebtedness issued by CBC, CRBC, the
Borrower, CMHC or the Parent Company subsequent to the Agreement Date
but prior to the Merger Date, plus (iii) for Restricted Payments or
Restricted Purchases made in connection with consummation of the Katz
Acquisition in an amount not to exceed $160,000,000, plus (iv) the
Broadcast Cash Flow for the
- 10 -
<PAGE> 11
twelve-month period immediately preceding the proposed payment or
measurement date, provided, however, that any Restricted Payment or
Restricted Purchase made under and in compliance with this Section
7.7(b) in any twelve- month period shall not cause a Default solely as
a result of a decrease in such Broadcast Cash Flow during any
subsequent twelve-month period;"
(c) Section 7.7 of the Loan Agreement, Restricted
Payments and Restricted Purchases, is hereby further modified and amended by
providing that the payments permitted to be made under subsections (c), (d) and
(e) may be made directly to the Parent Company, or may be made to either CMHC
or KMG for such Person's own use for such purpose or for distribution by such
Person to the Parent Company.
12. Amendment to Section 7.8. Section 7.8 of the Loan Agreement,
Leverage Ratio, is hereby modified and amended by deleting the word "EMHC" in
the last sentence thereof and by substituting "CMHC, KMG" in lieu thereof, and
by adding a new clause (d) to the parenthetical, which shall read as follows:
"(d) or assumed in connection with the consummation of the Katz
Acquisition in an amount not to exceed $100,000,000"
13. Amendments to Section 8.1.
(a) Section 8.1(e) of the Loan Agreement, Events of
Default, is hereby modified and amended by deleting the existing subsection
(ii) thereof and by substituting the following therefor:
"(ii) the Parent Company shall cease to own all of the issued and
outstanding common stock of CMHC; (iii) CMHC shall cease to own all of
the issued and outstanding common stock of KMG; (iv) CMHC and KMG
together shall cease to own all of the issued and outstanding common
stock of the Borrower; or (v) CMHC shall cease to own at least ninety
percent (90%) of the issued and outstanding common stock of the
Borrower;"
(b) Sections 8.1(f), (g), (h), (j) and (m) of the Loan
Agreement shall be amended to change the reference therein to "EMHC" to "CMHC"
and to include KMG with the same effect as the references therein to CMHC and
the Parent Company.
(c) Section 8.1(o) of the Loan Agreement, Events of
Default, is hereby modified and amended by deleting the section in its entirety
and by substituting the following therefor:
"(o) CMHC shall breach the CMHC Guaranty or the Stock
Pledge Agreement, KMG shall breach the KMG Guaranty or the KMG Pledge
Agreement or the Parent Company shall breach the Parent Company Pledge
Agreement."
14. Amendment to Exhibit D. Exhibit D to the Loan Agreement, Form
of EMHC Guaranty, is hereby modified and amended (A) by deleting all references
to "EMHC" therein and by substituting "CMHC" in lieu thereof, (B) to the extent
necessary to reflect that, as of the effective date of the KMG Merger, CMHC
shall own approximately ninety-six percent (96%) of
- 11 -
<PAGE> 12
the issued and outstanding common stock of the Borrower and (C) by the addition
of Exhibit D-2, Form of KMG Guaranty, attached hereto as Exhibit D-2 to the
Loan Agreement.
15. Amendment to Exhibit H. Exhibit H-1 to the Loan Agreement,
Form of Stock Pledge, is hereby modified and amended by deleting the existing
Exhibit H-1 in its entirety and substituting Exhibit H-1 attached hereto in
lieu thereof and by the addition of Exhibit H-3, Form of KMG Pledge Agreement,
attached hereto as Exhibit H-3 to the Loan Agreement.
16. No Other Amendments or Waivers. Except for the amendments set
forth above, the text of the Loan Agreement and the other Loan Documents shall
remain unchanged and in full force and effect, and the Lenders and the
Administrative Agent expressly reserve the right to require strict compliance
with the terms of the Loan Agreement and the other Loan Documents.
17. Effectiveness; Conditions Precedent. Upon execution of this
Amendment by the Required Lenders, the provisions of this Amendment shall be
effective subject only to the prior fulfillment of each of the following
conditions:
(a) The representations and warranties of the Borrower
under the Loan Agreement and of other obligors under the other Loan Documents
shall be true and correct as of the date hereof, and no Default or Event of
Default shall exist as of the date hereof; and
(b) The Administrative Agent's receipt of all such other
certificates, reports, statements, or other documents as the Administrative
Agent, any Managing Agent, or any Lender may reasonably request.
18. Conditions Subsequent. As a condition subsequent to the
effectiveness of this Amendment and not later than the date on which the KMG
Merger shall be consummated, the Borrower shall perform or shall cause to be
performed the following (the failure by the Borrower to so perform or cause to
be performed constituting an Event of Default):
(a) satisfactory completion of the consent solicitation
with respect to holders of the KMC Subordinated Notes;
(b) KMG shall execute and deliver to the Collateral Agent
the KMG Guaranty;
(c) CMHC shall execute and deliver to the Collateral
Agent the Stock Pledge Agreement, together with all of the shares of stock of
the Borrower and of KMG pledged thereunder and appropriate stock powers
executed in blank;
(d) KMG shall execute and deliver to the Collateral Agent
the KMG Pledge Agreement, together with all of the shares of stock of the
Borrower pledged thereunder and appropriate stock powers executed in blank; and
(e) the Borrower and its Subsidiaries, as appropriate,
shall execute and deliver to the Collateral Agent any other certificates,
documents, instruments or other agreements requested by the Collateral Agent
with respect to KMG or any Subsidiary of the Borrower formed or acquired in
connection with the Katz Acquisition, including, without limitation, an
- 12 -
<PAGE> 13
amendment to the Borrower Pledge Agreement, supplements to the Subsidiary
Guaranty, supplements to the Subsidiary Pledge Agreement and Subsidiary Loan
Certificates.
19. Counterparts. This Amendment may be executed in multiple
counterparts, each of which shall be deemed to be an original and all of which,
taken together, shall constitute one and the same agreement.
20. Governing Law. This Amendment shall be deemed to be made
pursuant to the laws of the State of New York with respect to agreements made
and to be performed wholly in the State of New York and shall be construed,
interpreted, performed and enforced in accordance therewith.
21. Loan Document. This Amendment shall be deemed to be a Loan
Document for all purposes under the Loan Agreement.
[Remainder of this page intentionally left blank.]
- 13 -
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused their respective
duly authorized officers or representatives to execute and deliver this
Amendment as of the day and year first above written.
BORROWER: CHANCELLOR MEDIA CORPORATION OF
LOS ANGELES, a Delaware corporation
By:
----------------------------
Name:
----------------------
Its: Chief Financial Officer
Attest:
--------------------
Name:
-------------
Its: Vice President
ADMINISTRATIVE AGENT: TORONTO DOMINION (TEXAS), INC., a
Delaware corporation
By:
----------------------------
Name:
----------------------
Its: Vice President
COLLATERAL AGENT: TORONTO DOMINION (TEXAS), INC., a
Delaware corporation
By:
----------------------------
Name:
----------------------
Its: Vice President
ISSUING BANK: THE TORONTO-DOMINION BANK
By:
----------------------------
Name:
----------------------
Its: Manager
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
THIRD AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 1
<PAGE> 15
MANAGING AGENTS TORONTO DOMINION (TEXAS), INC., a
AND LENDERS: Delaware corporation
By:
---------------------------
Name:
--------------------
Its: Vice President
THE BANK OF NEW YORK
By:
---------------------------
Name:
--------------------
Its: Vice President
NATIONSBANK OF TEXAS, N.A.
By:
---------------------------
Name:
--------------------
Its: Senior Vice President
UNION BANK OF CALIFORNIA
By:
---------------------------
Name:
--------------------
Its: Vice President
BANKERS TRUST COMPANY
By:
---------------------------
Name:
--------------------
Its: Vice President
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By:
---------------------------
Name:
--------------------
Its: Authorized Signatory
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
THIRD AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 2
<PAGE> 16
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By:
---------------------------
Name:
---------------------
Its: Senior Vice President
& Director
BANK OF AMERICA NT&SA
By:
---------------------------
Name:
---------------------
Its: Vice President
BANKBOSTON, N.A.
By:
---------------------------
Name:
---------------------
Its: Director
BANQUE PARIBAS, LOS ANGELES AGENCY
By:
---------------------------
Name:
---------------------
Its: Vice President
By:
---------------------------
Name:
---------------------
Its: Group Vice President
BARCLAYS BANK PLC
By:
---------------------------
Name:
---------------------
Its: Associate Director
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
THIRD AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 3
<PAGE> 17
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE
By:
---------------------------
Name:
---------------------
Its: Vice President
By:
---------------------------
Name:
---------------------
Its: Vice President
CREDIT LYONNAIS, NEW YORK BRANCH
By:
---------------------------
Name:
---------------------
Its: Vice President
CREDIT SUISSE FIRST BOSTON
By:
---------------------------
Name:
---------------------
Its: Director
By:
---------------------------
Name:
---------------------
Its: Vice President
THE DAI-ICHI KANGYO BANK, LTD.
By:
---------------------------
Name:
---------------------
Its: Vice President
KEY CORPORATE CAPITAL INC.
By:
---------------------------
Name:
---------------------
Its: Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
THIRD AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 4
<PAGE> 18
SOCIETE GENERALE
By:
---------------------------
Name:
---------------------
Its: Vice President
BANK OF MONTREAL
By:
---------------------------
Name:
---------------------
Its: Senior Vice President
CORESTATES BANK, N.A.
By:
---------------------------
Name:
---------------------
Its: Vice President
FLEET NATIONAL BANK
By:
---------------------------
Name:
---------------------
Its: Assistant Vice President
THE FUJI BANK, LIMITED, HOUSTON
AGENCY
By:
---------------------------
Name:
---------------------
Its: Vice President & Manager
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, NEW YORK BRANCH
By:
---------------------------
Name:
---------------------
Its: Joint General Manager
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
THIRD AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 5
<PAGE> 19
MELLON BANK, N.A.
By:
---------------------------
Name:
---------------------
Its: Vice President
PNC BANK, NATIONAL ASSOCIATION
By:
---------------------------
Name:
---------------------
Its: Vice President
SANWA BANK LIMITED
By:
---------------------------
Name:
---------------------
Its: Vice President
THE BANK OF NOVA SCOTIA
By:
---------------------------
Name:
---------------------
Its: Authorized Signatory
THE SUMITOMO BANK, LTD.
By:
---------------------------
Name:
---------------------
Its: Vice President and
Manager
By:
---------------------------
Name:
---------------------
Its: Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
THIRD AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 6
<PAGE> 20
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By:
---------------------------
Name:
---------------------
Its: Vice President
ABN-AMRO BANK, N.V. - HOUSTON AGENCY
By:
---------------------------
Name:
---------------------
Its: Vice President
By:
---------------------------
Name:
---------------------
Its: Group Vice President
DRESDNER BANK AG, NEW YORK BRANCH
By:
---------------------------
Name:
---------------------
Its: Assistant Treasurer
By:
---------------------------
Name:
---------------------
Its: Vice President
SUMMIT BANK
By:
---------------------------
Name:
---------------------
Its: Vice President
THE TOKAI BANK, LIMITED
By:
---------------------------
Name:
---------------------
Its: Assistant General
Manager
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
THIRD AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 7
<PAGE> 21
UNION BANK OF SWITZERLAND, NEW YORK
BRANCH
By:
---------------------------
Name:
---------------------
Its:
---------------------
By:
---------------------------
Name:
---------------------
Its:
---------------------
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION
By:
---------------------------
Name:
---------------------
Its: Banking Officer
BANK OF IRELAND
By:
---------------------------
Name:
---------------------
Its: Account Manager
CAISSE NATIONALE DE CREDIT AGRICOLE
By:
---------------------------
Name:
---------------------
Its: Senior Vice President/
Branch Manager
CRESTAR BANK
By:
---------------------------
Name:
---------------------
Its: Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
THIRD AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 8
<PAGE> 22
MERITA BANK, LTD., NEW YORK BRANCH
By:
---------------------------
Name:
---------------------
Its: Vice President
By:
---------------------------
Name:
---------------------
Its: Vice President
NATIONAL CITY BANK
By:
---------------------------
Name:
---------------------
Its: Vice President
THE ROYAL BANK OF SCOTLAND PLC
By:
---------------------------
Name:
---------------------
Its: Vice President
RIGGS BANK, N.A.
By:
---------------------------
Name:
---------------------
Its: Vice President
THE SUMITOMO TRUST & BANKING CO.,
LTD., NEW YORK BRANCH
By:
---------------------------
Name:
---------------------
Its: Senior Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
THIRD AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 9
<PAGE> 23
THE YASUDA TRUST AND BANKING CO.,
LTD.
By:
---------------------------
Name:
---------------------
Its: Senior Vice President
NATIONAL BANK OF CANADA
By:
---------------------------
Name:
---------------------
Its: Vice President
By:
---------------------------
Name:
---------------------
Its: Assistant Vice President
CITY NATIONAL BANK
By:
---------------------------
Name:
---------------------
Its: Senior Vice President
SENIOR DEBT PORTFOLIO
By:
---------------------------
Name:
---------------------
Its:
----------------------
BANK OF SCOTLAND
By:
---------------------------
Name:
---------------------
Its:
----------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
THIRD AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 10
<PAGE> 24
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By:
---------------------------
Name:
---------------------
Its:
----------------------
HELLER FINANCIAL, INC.
By:
---------------------------
Name:
---------------------
Its:
----------------------
GOLDMAN SACHS CREDIT PARTNERS, L.P.
By:
---------------------------
Name:
---------------------
Its:
----------------------
BEAR STEARNS INVESTMENT PRODUCTS,
INC.
By:
---------------------------
Name:
---------------------
Its:
----------------------
GULF INTERNATIONAL BANK B.S.C.
By:
---------------------------
Name:
---------------------
Its:
----------------------
LEHMAN COMMERCIAL PAPER, INC.
By:
---------------------------
Name:
---------------------
Its:
----------------------
THIRD AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 11
<PAGE> 25
BZW
By:
---------------------------
Name:
---------------------
Its:
----------------------
THE CHASE MANHATTAN BANK
By:
---------------------------
Name:
---------------------
Its:
----------------------
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By:
---------------------------
Name:
---------------------
Its:
----------------------
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By:
---------------------------
Name:
---------------------
Its:
----------------------
CITIBANK, N.A.
By:
---------------------------
Name:
---------------------
Its:
----------------------
FIRST UNION NATIONAL BANK
By:
---------------------------
Name:
---------------------
Its:
----------------------
THIRD AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 12
<PAGE> 26
OCTAGON CREDIT INVESTORS LOAN
PORTFOLIO (a unit of The Chase
Manhattan Bank)
By:
---------------------------
Name:
---------------------
Its:
----------------------
KZH-ING-1 CORPORATION
By:
---------------------------
Name:
---------------------
Its:
----------------------
PARIBAS CAPITAL FUNDING LLC
By:
---------------------------
Name:
---------------------
Its:
----------------------
PRIME INCOME TRUST
By:
---------------------------
Name:
---------------------
Its:
----------------------
CYPRESSTREE INVESTMENT MANAGEMENT,
INC.
By:
---------------------------
Name:
---------------------
Its:
----------------------
FIRSTRUST
By:
---------------------------
Name:
---------------------
Its:
----------------------
THIRD AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 13
<PAGE> 27
COMMERCIAL LOAN FUNDING TRUST I
By:
---------------------------
Name:
---------------------
Its:
----------------------
GENERAL ELECTRIC CAPITAL CORPORATION
By:
---------------------------
Name:
---------------------
Its:
----------------------
COMMERZBANK AG, NEW YORK BRANCH
By:
---------------------------
Name:
---------------------
Its:
----------------------
THIRD AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 14
<PAGE> 1
EXHIBIT 4.37
FOURTH AMENDMENT
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
THIS FOURTH AMENDMENT TO SECOND AMENDED AND RESTATED LOAN
AGREEMENT (this "Amendment") made as of the 10th day of February, 1998, among
Chancellor Media Corporation of Los Angeles, a Delaware corporation (formerly
known as Evergreen Media Corporation of Los Angeles) (the "Borrower"), the
financial institutions whose names appear as Lenders on the signature pages
hereto (collectively, the "Lenders"), Toronto Dominion (Texas), Inc., Bankers
Trust Company, The Bank of New York, NationsBank of Texas, N.A. and Union Bank
of California (collectively, the "Managing Agents"), Toronto Dominion
Securities (USA), Inc. (the "Syndication Agent") and Toronto Dominion (Texas),
Inc., as administrative agent for the Lenders (the "Administrative Agent"),
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders, the Managing Agents, the
Syndication Agent and the Administrative Agent are parties to that certain
Second Amended and Restated Loan Agreement dated as of April 25, 1997, as
modified and amended by that certain First Amendment to Second Amended and
Restated Loan Agreement dated as of June 26, 1997, as further modified and
amended by that certain Second Amendment to Second Amended and Restated Loan
Agreement dated as of August 7, 1997, as further modified by that certain Third
Amendment to Second Amended and Restated Loan Agreement dated as of October 28,
1997 (as amended, the "Loan Agreement"); and
WHEREAS, the Borrower has requested the Administrative Agent,
the Managing Agents, the Syndication Agent and the Lenders to agree to amend
certain covenants in the Loan Agreement as more fully set forth herein;
NOW, THEREFORE, for and in consideration of the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, the
parties agree that all capitalized terms used herein shall have the meanings
ascribed thereto in the Loan Agreement except as otherwise defined or limited
herein, and further agree as follows:
1. Amendment to Article 1. Article 1 of the Loan Agreement,
Definitions, is hereby modified by deleting the existing definition of
"Non-Core Business" and by substituting the following therefor:
"'Non-Core Business' shall mean any business which is
not either the radio broadcasting business or the business of
representing radio and television stations, cable television
systems, interactive Internet service providers, other
broadcasters, publishers and purveyors of publicly accessible
media and other business media and marketing entities in the
sale of advertising and programming."
2. Amendment to Article 5.
(a) Section 5.2 of the Loan Agreement, Business;
Compliance with Applicable Law, is hereby modified and amended by deleting the
entire section (other than the last sentence) and by substituting the following
therefor:
<PAGE> 2
"The Borrower and its Subsidiaries will (a) engage in the
business of radio broadcasting and related businesses, in the
business of representing radio and television stations, cable
television systems, interactive Internet service providers,
other broadcasters, publishers and purveyors of publicly
accessible media and other business media and marketing
entities in the sale of advertising and programming, and in
holding securities of such businesses and any Non-Core
Businesses, to the extent permitted by Section 7.6(g) and (h);
and (b) substantially comply with the requirements of all
material Applicable Laws."
(b) Section 5.9 of the Loan Agreement, Use of Proceeds, is
hereby modified by adding the words "and Restricted Purchases" after the words
"Restricted Payments" in subsection (i) thereof.
3. Amendments to Article 7.
Section 7.6 of the Loan Agreement, Investments,
Acquisitions and Asset Swaps, is hereby modified and amended by deleting
subsection (c) thereof and by substituting the following therefor:
"(c) The Borrower and its Subsidiaries may make
Acquisitions as follows:
(i) The Borrower or any of its
Subsidiaries may make Acquisitions with the prior written
consent of the Required Lenders;
(ii) The Borrower or any of its
Subsidiaries may make one or more Acquisitions of broadcast
radio stations in Top-50 Markets or in markets other than
Top-50 Markets that are served by CRBC or its Subsidiaries as
of the Merger Date;
(iii) The Borrower or any of its
Subsidiaries may acquire one or more groups of broadcast radio
stations provided that at least fifty percent (50%) of the
Broadcast Cash Flow of such group is contributed by radio
broadcast stations from Top-50 Markets; and
(iv) The Borrower or any of its
Subsidiaries may acquire other businesses provided that such
businesses are not Non-Core Businesses."
The remainder of Section 7.6(c), beginning with the words "Any Acquisition
permitted above . . ." shall remain unchanged.
(b) Section 7.7 of the Loan Agreement, Restricted
Payments and Purchases, is hereby modified and amended by adding the following
new language to Section 7.7(b) at the end of such section but immediately prior
to the semi-colon:
"plus (v) for the sole purpose of purchasing, redeeming,
acquiring, or retiring the Borrower's preferred stock,
additional funds made available to the Borrower through the
issuance by the Parent Company after the date of this Fourth
Amendment of additional equity, the proceeds of which are
contributed as equity to the Borrower"
- 2 -
<PAGE> 3
(c) Section 7.8 of the Loan Agreement, Leverage
Ratios, is hereby modified and amended by deleting the entire section
(other than the first sentence) and by substituting the following
table in lieu thereof:
<TABLE>
<CAPTION>
Senior Leverage Total Leverage
--------------- --------------
"Period Ending Covenant Covenant
------------- -------- --------
<S> <C> <C>
Agreement Date through December 31, 1998 6.00 to 1.00 7.00 to 1.00
January 1, 1999 through December 31, 1999 5.50 to 1.00 6.00 to 1.00
January 1, 2000 through December 31, 2000 3.75 to 1.00 5.25 to 1.00
January 1, 2001 and thereafter 3.50 to 1.00 5.25 to 1.00"
</TABLE>
4. Amendment to Article 11.
Article 11 of the Loan Agreement, Miscellaneous, is hereby modified
and amended with respect to Section 11.5 thereof, Assignment, by adding the
words, "grant participations in," after the words "each Lender may" in clause
(iv) of the proviso in the first sentence of subsection (b); by adding the
following words to the end of existing clause (z) (2) of the fourth sentence of
such subsection (b): "or, in the case of a participant that is an Affiliate of
a Lender, an express representation by the participant that it is not
purchasing such participation for any Plan and that it will not acquire any
right to vote under this Agreement by virtue of such participation, . . ."; and
by adding the following sentence at the end of such subsection (b): "For
purposes of this Section 11.5(b), 'Affiliate' shall have its meaning set forth
in Article 1 hereof, except that the words 'any Lender' shall be substituted
for the words 'the Borrower' in the second line thereof."
5. No Other Amendments or Waivers. Except for the amendments set
forth above, the text of the Loan Agreement and the other Loan Documents shall
remain unchanged and in full force and effect, and the Lenders and the
Administrative Agent expressly reserve the right to require strict compliance
with the terms of the Loan Agreement and the other Loan Documents.
6. Effectiveness; Conditions Precedent. Upon execution of this
Amendment by the Required Lenders, the provisions of this Amendment shall be
effective subject only to the prior fulfillment of each of the following
conditions:
(a) The representations and warranties of the Borrower
under the Loan Agreement and of other obligors under the other Loan Documents
shall be true and correct as of the date hereof, and no Default or Event of
Default shall exist as of the date hereof; and
(b) The Administrative Agent's receipt of all such other
certificates, reports, statements, or other documents as the Administrative
Agent, any Managing Agent, or any Lender may reasonably request.
7. Counterparts. This Amendment may be executed in multiple
counterparts, each of which shall be deemed to be an original and all of which,
taken together, shall constitute one and the same agreement.
8. Governing Law. This Amendment shall be deemed to be made
pursuant to the laws of the State of New York with respect to agreements made
and to be performed wholly in the State of New York and shall be construed,
interpreted, performed and enforced in accordance therewith.
- 3 -
<PAGE> 4
9. Loan Document. This Amendment shall be deemed to be a Loan
Document for all purposes under the Loan Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
- 4 -
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused their respective
duly authorized officers or representatives to execute and deliver this
Amendment as of the day and year first above written.
BORROWER: CHANCELLOR MEDIA CORPORATION OF
LOS ANGELES, a Delaware corporation
By:
---------------------------
Name:
---------------------
Its: Chief Financial Officer
Attest:
------------------
Name:
------------
Its: Vice President
ADMINISTRATIVE AGENT: TORONTO DOMINION (TEXAS), INC., a
Delaware corporation
By:
---------------------------
Name:
---------------------
Its: Vice President
COLLATERAL AGENT: TORONTO DOMINION (TEXAS), INC., a
Delaware corporation
By:
---------------------------
Name:
---------------------
Its: Vice President
ISSUING BANK: THE TORONTO-DOMINION BANK
By:
---------------------------
Name:
---------------------
Its: Manager
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
FOURTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 1
<PAGE> 6
MANAGING AGENTS TORONTO DOMINION (TEXAS), INC., a
AND LENDERS: Delaware corporation
By:
---------------------------
Name:
---------------------
Its: Vice President
THE BANK OF NEW YORK
By:
---------------------------
Name:
---------------------
Its: Vice President
NATIONSBANK OF TEXAS, N.A.
By:
---------------------------
Name:
---------------------
Its: Senior Vice President
UNION BANK OF CALIFORNIA
By:
---------------------------
Name:
---------------------
Its: Vice President
BANKERS TRUST COMPANY
By:
---------------------------
Name:
---------------------
Its: Vice President
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By:
---------------------------
Name:
---------------------
Its: Authorized Signatory
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
FOURTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 2
<PAGE> 7
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By:
---------------------------
Name:
---------------------
Its: Senior Vice President
& Director
BANK OF AMERICA NT&SA
By:
---------------------------
Name:
---------------------
Its: Vice President
BANKBOSTON, N.A.
By:
---------------------------
Name:
---------------------
Its: Director
BANQUE PARIBAS, LOS ANGELES AGENCY
By:
---------------------------
Name:
---------------------
Its: Vice President
By:
---------------------------
Name:
---------------------
Its: Group Vice President
BARCLAYS BANK PLC
By:
---------------------------
Name:
---------------------
Its: Associate Director
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
FOURTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 3
<PAGE> 8
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE
By:
---------------------------
Name:
---------------------
Its: Vice President
By:
---------------------------
Name:
---------------------
Its: Vice President
CREDIT LYONNAIS, NEW YORK BRANCH
By:
---------------------------
Name:
---------------------
Its: Vice President
CREDIT SUISSE FIRST BOSTON
By:
---------------------------
Name:
---------------------
Its: Director
By:
---------------------------
Name:
---------------------
Its: Vice President
THE DAI-ICHI KANGYO BANK, LTD.
By:
---------------------------
Name:
---------------------
Its: Vice President
KEY CORPORATE CAPITAL INC.
By:
---------------------------
Name:
---------------------
Its: Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
FOURTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 4
<PAGE> 9
SOCIETE GENERALE
By:
---------------------------
Name:
---------------------
Its: Vice President
BANK OF MONTREAL
By:
---------------------------
Name:
---------------------
Its: Senior Vice President
CORESTATES BANK, N.A.
By:
---------------------------
Name:
---------------------
Its: Vice President
FLEET NATIONAL BANK
By:
---------------------------
Name:
---------------------
Its: Assistant Vice President
THE FUJI BANK, LIMITED, HOUSTON
AGENCY
By:
---------------------------
Name:
---------------------
Its: Vice President & Manager
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, NEW YORK BRANCH
By:
---------------------------
Name:
---------------------
Its: Joint General Manager
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
FOURTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 5
<PAGE> 10
MELLON BANK, N.A.
By:
---------------------------
Name:
---------------------
Its: Vice President
PNC BANK, NATIONAL ASSOCIATION
By:
---------------------------
Name:
---------------------
Its: Vice President
SANWA BANK LIMITED
By:
---------------------------
Name:
---------------------
Its: Vice President
THE BANK OF NOVA SCOTIA
By:
---------------------------
Name:
---------------------
Its: Authorized Signatory
THE SUMITOMO BANK, LTD.
By:
---------------------------
Name:
---------------------
Its: Vice President and
Manager
By:
---------------------------
Name:
---------------------
Its: Vice President
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By:
---------------------------
Name:
---------------------
Its: Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
FOURTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 6
<PAGE> 11
ABN-AMRO BANK, N.V. - HOUSTON AGENCY
By:
---------------------------
Name:
---------------------
Its: Vice President
By:
---------------------------
Name:
---------------------
Its: Group Vice President
DRESDNER BANK AG, NEW YORK BRANCH
By:
---------------------------
Name:
---------------------
Its: Assistant Treasurer
By:
---------------------------
Name:
---------------------
Its: Vice President
SUMMIT BANK
By:
---------------------------
Name:
---------------------
Its: Vice President
THE TOKAI BANK, LIMITED
By:
---------------------------
Name:
---------------------
Its: Assistant General
Manager
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
FOURTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 7
<PAGE> 12
UNION BANK OF SWITZERLAND, NEW YORK
BRANCH
By:
---------------------------
Name:
---------------------
Its:
---------------------
By:
---------------------------
Name:
---------------------
Its:
---------------------
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION
By:
---------------------------
Name:
---------------------
Its: Banking Officer
BANK OF IRELAND
By:
---------------------------
Name:
---------------------
Its: Account Manager
CAISSE NATIONALE DE CREDIT AGRICOLE
By:
---------------------------
Name:
---------------------
Its: Senior Vice President/
Branch Manager
CRESTAR BANK
By:
---------------------------
Name:
---------------------
Its: Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
FOURTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 8
<PAGE> 13
MERITA BANK, LTD., NEW YORK BRANCH
By:
---------------------------
Name:
---------------------
Its: Vice President
By:
---------------------------
Name:
---------------------
Its: Vice President
NATIONAL CITY BANK
By:
---------------------------
Name:
---------------------
Its: Vice President
THE ROYAL BANK OF SCOTLAND PLC
By:
---------------------------
Name:
---------------------
Its: Vice President
RIGGS BANK, N.A.
By:
---------------------------
Name:
---------------------
Its: Vice President
THE SUMITOMO TRUST & BANKING CO.,
LTD., NEW YORK BRANCH
By:
---------------------------
Name:
---------------------
Its: Senior Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
FOURTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 9
<PAGE> 14
NATIONAL BANK OF CANADA
By:
---------------------------
Name:
---------------------
Its: Vice President
By:
---------------------------
Name:
---------------------
Its: Assistant Vice President
CITY NATIONAL BANK
By:
---------------------------
Name:
---------------------
Its: Senior Vice President
SENIOR DEBT PORTFOLIO
By:
---------------------------
Name:
---------------------
Its:
---------------------
BANK OF SCOTLAND
By:
---------------------------
Name:
---------------------
Its:
---------------------
NATEXIS BANQUE
By:
---------------------------
Name:
---------------------
Its:
---------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
FOURTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 10
<PAGE> 15
HELLER FINANCIAL, INC.
By:
---------------------------
Name:
---------------------
Its:
---------------------
GOLDMAN SACHS CREDIT PARTNERS, L.P.
By:
---------------------------
Name:
---------------------
Its:
---------------------
BEAR STEARNS INVESTMENT PRODUCTS,
INC.
By:
---------------------------
Name:
---------------------
Its:
---------------------
GULF INTERNATIONAL BANK B.S.C.
By:
---------------------------
Name:
---------------------
Its:
---------------------
LEHMAN COMMERCIAL PAPER, INC.
By:
---------------------------
Name:
---------------------
Its:
---------------------
BZW
By:
---------------------------
Name:
---------------------
Its:
---------------------
THE CHASE MANHATTAN BANK
By:
---------------------------
Name:
---------------------
Its:
---------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
FOURTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 11
<PAGE> 16
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By:
---------------------------
Name:
---------------------
Its:
---------------------
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By:
---------------------------
Name:
---------------------
Its:
---------------------
CITIBANK, N.A.
By:
---------------------------
Name:
---------------------
Its:
---------------------
FIRST UNION NATIONAL BANK
By:
---------------------------
Name:
---------------------
Its:
---------------------
OCTAGON CREDIT INVESTORS LOAN
PORTFOLIO (a unit of The Chase
Manhattan Bank)
By:
---------------------------
Name:
---------------------
Its:
---------------------
KZH-ING-1 CORPORATION
By:
---------------------------
Name:
---------------------
Its:
---------------------
PARIBAS CAPITAL FUNDING LLC
By:
---------------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
FOURTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 12
<PAGE> 17
Name:
---------------------
Its:
---------------------
PRIME INCOME TRUST
By:
---------------------------
Name:
---------------------
Its:
---------------------
CYPRESSTREE INVESTMENT MANAGEMENT,
INC.
By:
---------------------------
Name:
---------------------
Its:
---------------------
FIRSTRUST
By:
---------------------------
Name:
---------------------
Its:
---------------------
COMMERCIAL LOAN FUNDING TRUST I
By:
---------------------------
Name:
---------------------
Its:
---------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
FOURTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 13
<PAGE> 18
GENERAL ELECTRIC CAPITAL CORPORATION
By:
---------------------------
Name:
---------------------
Its:
---------------------
COMMERZBANK AG, NEW YORK BRANCH
By:
---------------------------
Name:
---------------------
Its:
---------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
FOURTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 14
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF CHANCELLOR MEDIA CORPORATION
<TABLE>
<CAPTION>
NAME JURISDICTION OF FORMATION
---- -------------------------
<S> <C>
Chancellor Mezzanine Holdings Corporation................... DE
Katz Media Group, Inc. ..................................... DE
Chancellor Media Corporation of Los Angeles................. DE
Chancellor Media Corporation of the Bay Area................ DE
Chancellor Media Corporation of Chicago AM.................. DE
Chancellor Media Corporation of the Lone Star State......... DE
Chancellor Media Corporation of Dade County................. DE
Chancellor Media Corporation of Houston..................... DE
Chancellor Media Corporation of Illinois.................... DE
Chancellor Media Corporation of San Francisco............... DE
Chancellor Media Corporation of Washington, D.C............. DE
Chancellor Media of Houston Limited Partnership............. DE
KIOI License Corp........................................... DE
KKBT License Corp........................................... DE
KLOL License Limited Partnership............................ DE
KMEL License Corp........................................... DE
WMVP-AM License Corp........................................ DE
KZPS/KDGE License Corp...................................... DE
WTOP License Limited Partnership............................ DE
WVCG License Corp........................................... DE
WRCX License Corp........................................... DE
Chancellor Media Corporation of St. Louis................... DE
Chancellor Media Partners Corporation....................... DE
Chancellor Media Corporation of Dallas...................... DE
KSKY License Corp........................................... DE
Chancellor Media Corporation of Chicagoland................. DE
WEJM/WEJM-FM/WVAZ License Corp.............................. DE
Chancellor Media Corporation of Charlotte................... DE
WIOQ License Corp........................................... DE
Chancellor Media Corporation of Detroit..................... DE
WKQI/WDOZ/WNIC License Corp................................. DE
Chancellor Media Corporation of New York.................... DE
WYNY License Corp........................................... DE
Chancellor Media Corporation of Gotham...................... DE
Chancellor Media/Pyramid Corporation........................ DE
Chancellor Media/Pyramid Holdings Corporation............... DE
Broadcast Architecture Inc.................................. MA
Chancellor Media Corporation of Massachusetts............... DE
WJMN License Corporation.................................... DE
Chancellor Media Corporation of Pennsylvania................ DE
WJJZ License Corp........................................... DE
Chancellor Media Corporation of Miami....................... DE
WEDR License Corp........................................... DE
Chancellor Media Corporation of Boston...................... DE
WXKS(AM) License Corp....................................... DE
WXKS(FM) License Corp....................................... DE
Chancellor Media Corporation of the Windy City.............. DE
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
NAME JURISDICTION OF FORMATION
---- -------------------------
<S> <C>
WNUA License Corp........................................... DE
Chancellor Media Corporation of Philadelphia................ DE
WYXR License Corp........................................... DE
WUSL License Corp........................................... DE
Chancellor Media Corporation of the Capital City............ DE
WGAY License Corp........................................... DE
Chancellor Media Corporation of the Great Lakes............. DE
WWWW/WDFN License Corp...................................... DE
Chancellor Media Corporation of Tiburon..................... DE
KKSF License Corp........................................... DE
Chancellor Media Corporation of the Liberty City............ DE
WDAS(FM) License Corp....................................... DE
Chancellor Media Corporation of the Keystone State.......... DE
WDAS(AM) License Corp....................................... DE
Chancellor Media Corporation of Michigan.................... DE
WMXD License Corp........................................... DE
Chancellor Media Corporation of the Motor City.............. DE
WJLB License Corp........................................... DE
Chancellor Media Corporation of the Nation's Capital........ DE
WWRC License Corp........................................... DE
WAXQ License Corp........................................... DE
WLTW License Corp........................................... DE
WMZQ License Corp........................................... DE
Chancellor Media/WAXQ Inc................................... DE
Chancellor Media/WMZQ Inc................................... DE
Chancellor Media/Riverside Broadcasting Co., Inc............ DE
Chancellor Media Licensee Company........................... DE
Chancellor Media/Trefoil Communications, Inc................ DE
Chancellor Media/Shamrock Broadcasting, Inc................. DE
Chancellor Media/Shamrock Radio Licenses, Inc............... DE
Chancellor Media/Shamrock Broadcasting of Texas, Inc........ TX
Chancellor Media/Shamrock Broadcasting Licenses of Denver,
Inc....................................................... DE
Chancellor Media/KCMG Inc................................... DE
Chancellor Media/KYSR Inc................................... DE
Chancellor Media/WLIT Inc................................... DE
Radio 100 L.L.C............................................. DE
Chancellor Media Air Services Corporation................... DE
Katz Media Corporation...................................... DE
Seltel, Inc................................................. DE
Katz Cable Corporation...................................... DE
National Cable Communications, L.P.......................... DE
The National Payroll Company, Inc........................... DE
Katz Communications, Inc.................................... DE
Eastman Radio Sales, Inc.................................... DE
Christal Radio Sales, Inc................................... DE
Amcast Radio Sales, Inc..................................... DE
Katz Millennium Marketing, Inc.............................. DE
Katz International Limited.................................. UK
Katz Radio Sales Limited.................................... UK
Katz Television Sales Limited............................... UK
</TABLE>
<PAGE> 1
EXHIBIT 21.2
SUBSIDIARIES OF CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
<TABLE>
<CAPTION>
NAME JURISDICTION OF FORMATION
---- -------------------------
<S> <C>
Chancellor Media Corporation of the Bay Area................ DE
Chancellor Media Corporation of Chicago AM.................. DE
Chancellor Media Corporation of the Lone Star State......... DE
Chancellor Media Corporation of Dade County................. DE
Chancellor Media Corporation of Houston..................... DE
Chancellor Media Corporation of Illinois.................... DE
Chancellor Media Corporation of San Francisco............... DE
Chancellor Media Corporation of Washington, D.C............. DE
Chancellor Media of Houston Limited Partnership............. DE
KIOI License Corp........................................... DE
KKBT License Corp........................................... DE
KLOL License Limited Partnership............................ DE
KMEL License Corp........................................... DE
WMVP-AM License Corp........................................ DE
KZPS/KDGE License Corp...................................... DE
WTOP License Limited Partnership............................ DE
WVCG License Corp........................................... DE
WRCX License Corp........................................... DE
Chancellor Media Corporation of St. Louis................... DE
Chancellor Media Partners Corporation....................... DE
Chancellor Media Corporation of Dallas...................... DE
KSKY License Corp........................................... DE
Chancellor Media Corporation of Chicagoland................. DE
WEJM/WEJM-FM/WVAZ License Corp.............................. DE
Chancellor Media Corporation of Charlotte................... DE
WIOQ License Corp........................................... DE
Chancellor Media Corporation of Detroit..................... DE
WKQI/WDOZ/WNIC License Corp................................. DE
Chancellor Media Corporation of New York.................... DE
WYNY License Corp........................................... DE
Chancellor Media Corporation of Gotham...................... DE
Chancellor Media/Pyramid Corporation........................ DE
Chancellor Media/Pyramid Holdings Corporation............... DE
Broadcast Architecture Inc.................................. MA
Chancellor Media Corporation of Massachusetts............... DE
WJMN License Corporation.................................... DE
Chancellor Media Corporation of Pennsylvania................ DE
WJJZ License Corp........................................... DE
Chancellor Media Corporation of Miami....................... DE
WEDR License Corp........................................... DE
Chancellor Media Corporation of Boston...................... DE
WXKS(AM) License Corp....................................... DE
WXKS(FM) License Corp....................................... DE
Chancellor Media Corporation of the Windy City.............. DE
WNUA License Corp........................................... DE
Chancellor Media Corporation of Philadelphia................ DE
WYXR License Corp........................................... DE
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
NAME JURISDICTION OF FORMATION
---- -------------------------
<S> <C>
WUSL License Corp........................................... DE
Chancellor Media Corporation of the Capital City............ DE
WGAY License Corp........................................... DE
Chancellor Media Corporation of the Great Lakes............. DE
WWWW/WDFN License Corp...................................... DE
Chancellor Media Corporation of Tiburon..................... DE
KKSF License Corp........................................... DE
Chancellor Media Corporation of the Liberty City............ DE
WDAS(FM) License Corp....................................... DE
Chancellor Media Corporation of the Keystone State.......... DE
WDAS(AM) License Corp....................................... DE
Chancellor Media Corporation of Michigan.................... DE
WMXD License Corp........................................... DE
Chancellor Media Corporation of the Motor City.............. DE
WJLB License Corp........................................... DE
Chancellor Media Corporation of the Nation's Capital........ DE
WWRC License Corp........................................... DE
WAXQ License Corp........................................... DE
WLTW License Corp........................................... DE
WMZQ License Corp........................................... DE
Chancellor Media/WAXQ Inc................................... DE
Chancellor Media/WMZQ Inc................................... DE
Chancellor Media/Riverside Broadcasting Co., Inc............ DE
Chancellor Media Licensee Company........................... DE
Chancellor Media/Trefoil Communications, Inc................ DE
Chancellor Media/Shamrock Broadcasting, Inc................. DE
Chancellor Media/Shamrock Radio Licenses, Inc............... DE
Chancellor Media/Shamrock Broadcasting of Texas, Inc........ TX
Chancellor Media/Shamrock Broadcasting Licenses of Denver,
Inc....................................................... DE
Chancellor Media/KCMG Inc................................... DE
Chancellor Media/KYSR Inc................................... DE
Chancellor Media/WLIT Inc................................... DE
Radio 100 L.L.C............................................. DE
Chancellor Media Air Services Corporation................... DE
Katz Media Corporation...................................... DE
Seltel, Inc................................................. DE
Katz Cable Corporation...................................... DE
National Cable Communications, L.P.......................... DE
The National Payroll Company, Inc........................... DE
Katz Communications, Inc.................................... DE
Eastman Radio Sales, Inc.................................... DE
Christal Radio Sales, Inc................................... DE
Amcast Radio Sales, Inc..................................... DE
Katz Millennium Marketing, Inc.............................. DE
Katz International Limited.................................. UK
Katz Radio Sales Limited.................................... UK
Katz Television Sales Limited............................... UK
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Chancellor Media Corporation:
We consent to the incorporation by reference in the Registration Statements
on Form S-3 (Nos. 333-36855, 333-44401 and 333-47629) and the Registration
Statements on Form S-8 (Nos. 33-83124, 333-04379 and 333-35039) of Chancellor
Media Corporation of our report 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(b)
paragraph 6 as to which the date is March 13, 1998, related to the consolidated
balance sheet of Chancellor Media Corporation and subsidiaries as of December
31, 1997 and the related consolidated statements of operations, stockholders'
equity, and cash flows and related financial statement schedules for the year
ended December 31, 1997, which report appears in the December 31, 1997 Annual
Report on Form 10-K of Chancellor Media Corporation.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
March 30, 1998
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Chancellor Media Corporation:
We consent to incorporation by reference in the Registration Statements on
Form S-3 (Nos. 333-36855, 333-44401 and 333-47629) and the Registration
Statements on Form S-8 (Nos. 33-83124, 333-04379 and 333-35039) of Chancellor
Media Corporation of our report dated January 31, 1997, related to the
consolidated balance sheets of Chancellor Media Corporation and subsidiaries as
of December 31, 1996 and the related consolidated statements of operations,
stockholders' equity, and cash flows and related schedules for the years ended
December 31, 1995 and 1996, which report appears in the December 31, 1997 Annual
Report on Form 10-K of Chancellor Media Corporation.
KPMG Peat Marwick LLP
Dallas, Texas
March 30, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 12/31/97
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000894972
<NAME> CHANCELLOR MEDIA CORPORATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 16,584
<SECURITIES> 0
<RECEIVABLES> 252,520
<ALLOWANCES> 12,651
<INVENTORY> 0
<CURRENT-ASSETS> 283,661
<PP&E> 192,529
<DEPRECIATION> 32,732
<TOTAL-ASSETS> 4,961,477
<CURRENT-LIABILITIES> 171,017
<BONDS> 2,573,000
331,208
409,500
<COMMON> 1,199
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,961,477
<SALES> 582,078
<TOTAL-REVENUES> 582,078
<CGS> 81,726
<TOTAL-COSTS> 523,672
<OTHER-EXPENSES> 383
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 85,017
<INCOME-PRETAX> (6,692)
<INCOME-TAX> 7,802
<INCOME-CONTINUING> (27,395)
<DISCONTINUED> 0
<EXTRAORDINARY> 4,350
<CHANGES> 0
<NET-INCOME> (43,910)
<EPS-PRIMARY> (0.46)
<EPS-DILUTED> (0.46)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 12/31/97
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001043102
<NAME> CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 16,584
<SECURITIES> 0
<RECEIVABLES> 252,520
<ALLOWANCES> 12,651
<INVENTORY> 0
<CURRENT-ASSETS> 283,661
<PP&E> 192,529
<DEPRECIATION> 32,732
<TOTAL-ASSETS> 4,961,477
<CURRENT-LIABILITIES> 171,017
<BONDS> 2,573,000
331,208
0
<COMMON> 1
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,961,477
<SALES> 582,078
<TOTAL-REVENUES> 582,078
<CGS> 81,726
<TOTAL-COSTS> 523,672
<OTHER-EXPENSES> 383
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 85,017
<INCOME-PRETAX> (6,692)
<INCOME-TAX> 7,802
<INCOME-CONTINUING> (14,494)
<DISCONTINUED> 0
<EXTRAORDINARY> 4,350
<CHANGES> 0
<NET-INCOME> (31,745)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
