<PAGE> 1
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1999
<TABLE>
<S> <C>
COMMISSION FILE NO. 0-21570 COMMISSION FILE NO. 333-32259
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)
</TABLE>
1845 WOODALL RODGERS FREEWAY, SUITE 1300, DALLAS, TEXAS 75201
(Address of principal executive offices, including zip code)
(214) 922-8700
(Registrants' telephone number, including area code)
Indicate by check mark whether Chancellor Media Corporation and Chancellor
Media Corporation of Los Angeles (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.
<TABLE>
<S> <C>
Chancellor Media Corporation Yes [X] No [ ]
Chancellor Media Corporation of Los Angeles Yes [X] No [ ]
</TABLE>
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: As of April 30, 1999,
143,243,647 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.
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<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
NO.
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements........................................ 3
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (unaudited)..................... 3
Consolidated Statements of Operations (unaudited)........... 4
Consolidated Statements of Cash Flows (unaudited)........... 5
Notes to Consolidated Financial Statements (unaudited)...... 6
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
Consolidated Balance Sheets (unaudited)..................... 11
Consolidated Statements of Operations (unaudited)........... 12
Consolidated Statements of Cash Flows (unaudited)........... 13
Notes to Consolidated Financial Statements (unaudited)...... 14
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 20
Item 3. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 25
Item 6. Exhibits and Reports on Form 8-K............................ 25
Signatures.................................................. 28
</TABLE>
2
<PAGE> 3
PART I
ITEM 1. FINANCIAL STATEMENTS
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------ -----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 12,256 $ 7,069
Accounts receivable, less allowance for doubtful accounts
of $15,580 in 1998 and $17,844 in 1999................. 352,646 310,916
Other current assets...................................... 59,909 70,277
---------- ----------
Total current assets.............................. 424,811 388,262
Property and equipment, net................................. 1,388,156 1,395,898
Intangible assets, net...................................... 5,056,047 5,294,161
Other assets, net........................................... 358,893 369,269
---------- ----------
$7,227,907 $7,447,590
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 236,618 $ 275,865
Long-term debt.............................................. 4,096,000 4,378,000
Deferred tax liabilities.................................... 453,134 455,903
Other liabilities........................................... 50,325 52,518
---------- ----------
Total liabilities................................. 4,836,077 5,162,286
---------- ----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value. 2,200,000 shares of 7%
convertible preferred stock authorized, issued and
outstanding............................................ 110,000 110,000
Preferred stock, $.01 par value. 6,000,000 shares
authorized; 5,990,000 shares of $3.00 convertible
exchangeable preferred stock issued and outstanding.... 299,500 299,500
Common stock, $.01 par value. Authorized 200,000,000
shares; issued and outstanding 142,847,674 shares in
1998 and 143,063,179 shares in 1999.................... 1,428 1,431
Paid-in capital........................................... 2,259,583 2,262,916
Accumulated deficit....................................... (278,681) (388,543)
---------- ----------
Total stockholders' equity........................ 2,391,830 2,285,304
---------- ----------
$7,227,907 $7,447,590
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
MARCH 31, MARCH 31,
1998 1999
--------- ---------
<S> <C> <C>
Gross revenues.............................................. $262,421 $ 394,123
Less agency commissions................................... 28,864 43,858
-------- ---------
Net revenues...................................... 233,557 350,265
-------- ---------
Operating expenses:
Operating expenses, excluding depreciation and
amortization........................................... 148,019 208,510
Depreciation and amortization............................. 91,936 147,744
Corporate general and administrative...................... 6,803 17,814
Non-recurring charges..................................... -- 28,979
-------- ---------
Operating expenses..................................... 246,758 403,047
-------- ---------
Operating loss......................................... (13,201) (52,782)
-------- ---------
Other (income) expense:
Interest expense, net..................................... 48,300 84,392
Gain on disposition of representation contracts........... -- (3,603)
-------- ---------
Other (income) expense, net............................ 48,300 80,789
-------- ---------
Loss before income taxes............................... (61,501) (133,571)
Income tax benefit.......................................... 2,941 30,126
Dividends on preferred stock of subsidiary.................. 10,011 --
-------- ---------
Net loss.......................................... (68,571) (103,445)
Preferred stock dividends................................... 6,417 6,417
-------- ---------
Net loss attributable to common stockholders.............. $(74,988) $(109,862)
======== =========
Basic and diluted loss per common share..................... $ (0.60) $ (0.77)
======== =========
Weighted average common shares outstanding.................. 124,718 142,960
======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
MARCH 31, MARCH 31,
1998 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (68,571) $(103,445)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation........................................... 6,058 34,872
Amortization of goodwill, intangible assets and other
assets................................................ 85,878 112,872
Provision for doubtful accounts........................ 1,625 3,119
Deferred income tax benefit............................ (2,941) (33,393)
Gain on sale of representation contracts............... -- (3,603)
Write-off of transaction costs......................... -- 16,783
Dividends on preferred stock of subsidiary............. 10,011 --
Other.................................................. (449) --
Changes in certain assets and liabilities, net of
effects of acquisitions:
Accounts receivable.................................. 9,901 44,734
Other current assets................................. (3,308) (10,368)
Accounts payable and accrued expenses................ (6,962) 32,206
Other assets......................................... (25) (1,456)
Other liabilities.................................... (577) (1,085)
--------- ---------
Net cash provided by operating activities......... 30,640 91,236
--------- ---------
Cash flows from investing activities:
Acquisitions, net of cash acquired........................ (24,350) (332,110)
Escrow deposits on pending acquisitions................... (4,000) --
Payments made on purchases of representation contracts.... (7,422) (8,676)
Payments received on sales of representation contracts.... 4,164 6,187
Construction of advertising structures.................... -- (5,157)
Purchases of property and equipment....................... (6,224) (9,771)
Other..................................................... (4,844) (25,815)
--------- ---------
Net cash used by investing activities............. (42,676) (375,342)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt.................. 56,000 329,000
Principal payments on long-term debt...................... (729,000) (47,000)
Net proceeds from issuance of common stock................ 997,667 3,336
Dividends on preferred stock.............................. (22,887) (6,417)
Payments for debt issuance costs.......................... (23) --
--------- ---------
Net cash provided by financing activities......... 301,757 278,919
--------- ---------
Increase (decrease) in cash and cash equivalents............ 289,721 (5,187)
Cash and cash equivalents at beginning of period............ 16,584 12,256
--------- ---------
Cash and cash equivalents at end of period.................. $ 306,305 $ 7,069
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
1. BASIS OF PRESENTATION
The accompanying unaudited interim financial statements include the
accounts of Chancellor Media Corporation and its subsidiaries (collectively,
"the Company" or "Chancellor Media"), all of which are wholly owned. All
significant intercompany balances and transactions have been eliminated in
consolidation and in the opinion of management, all adjustments (consisting of
normal recurring accruals) necessary to present fairly the financial position,
results of operations and cash flows have been recorded. Interim periods are not
necessarily indicative of results to be expected for the year.
These financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998. The
year-end consolidated balance sheet data was derived from the audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles.
Loss per common share is based on the weighted average shares of common
stock outstanding during the period. Stock options, the $3.00 Convertible
Exchangeable Preferred Stock and the 7% Convertible Preferred Stock are not
included in the calculation of loss per common share as their effect would be
antidilutive. Shares excluded from the calculation that related to potentially
dilutive securities amounted to 23,775,091 and 24,900,162 for the three months
ended March 31, 1998 and 1999, respectively.
2. RECENT DEVELOPMENTS
(a) Completed Transactions
On January 15, 1999, the Company acquired the music production library and
related license agreements of Brown Bag Productions for a purchase price of
$8,483 including various other direct acquisition costs.
On January 21, 1999 and February 9, 1999, the Company acquired
approximately 4,500 outdoor display faces from Triumph Outdoor Holdings and
certain affiliated companies for $37,006 in cash including working capital and
various other direct acquisition costs.
On January 28, 1999, the Company acquired Wincom Broadcasting Corporation
which owns WQAL-FM in Cleveland. The Company had previously been operating
WQAL-FM under a time brokerage agreement effective October 1, 1998. On February
2, 1999, the Company acquired five additional radio stations in Cleveland
including (i) WDOK-FM and WRMR-AM from Independent Group Limited Partnership,
(ii) WZAK-FM from Zapis Communications and (iii) Zebra Broadcasting Corporation
which owns WZJM-FM and WJMO-AM. The six Cleveland stations were acquired for an
aggregate purchase price of $283,758 in cash including working capital.
Between January and March 1999, the Company acquired approximately 100
billboards and outdoor displays in various transactions for approximately $8,198
in cash.
The acquisitions were accounted for as purchases. Accordingly, the
accompanying consolidated financial statements include the results of operations
of the acquired entities accounted for as purchases from the respective dates of
acquisition.
6
<PAGE> 7
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the net assets acquired follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
1999
------------
<S> <C>
Cash and cash equivalents.............................. $ 4,360
Accounts receivable, net............................... 6,403
Other current assets................................... 1,355
Property and equipment................................. 27,768
Intangible assets...................................... 336,383
Accounts payable and accrued expenses.................. (2,662)
Deferred tax liabilities............................... (36,162)
--------
Total net assets acquired.................... 337,445
Less:
Cash and cash equivalents acquired................... 4,360
Liability assumed.................................... 725
Notes payable........................................ 250
--------
Cash paid for acquisitions............................. $332,110
========
</TABLE>
The pro forma consolidated condensed results of operations data for the
three months ended March 31, 1998 and 1999, as if the acquisitions during 1998
and 1999 and the related financing transactions occurred at January 1, 1998,
follow:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
MARCH 31, MARCH 31,
1998 1999
--------- ---------
<S> <C> <C>
Net revenues................................................ $308,622 $352,184
Net loss.................................................... (79,164) (87,697)
Basic and diluted loss per common share..................... (0.69) (0.66)
</TABLE>
The pro forma results are not necessarily indicative of the financial
results which would have occurred if the transactions had been in effect for the
entire periods presented.
On April 12, 1999, the Company acquired approximately 159 billboards and
outdoor displays in various markets for approximately $3,700 in cash.
On April 16, 1999, the Company sold WMVP-AM in Chicago to ABC, Inc. for
$21,000 in cash and recognized a gain of $14,466. The Company had previously
entered into a time brokerage agreement effective September 10, 1998 to sell
substantially all of the broadcast time of WMVP-AM pending completion of the
sale.
(b) Pending Transactions
On August 26, 1998, the Company and Capstar Broadcasting Corporation
(together with its subsidiaries, "Capstar") entered into an agreement to merge
in a stock-for-stock transaction that will create the nation's largest radio
broadcasting entity (the "Capstar Merger"). Pursuant to the agreement, as
amended, each share of Capstar common stock will be converted into 0.4955 of a
share of common stock of Chancellor Media. Previously, on February 20, 1998, the
Company had entered into an agreement to acquire, over a period of three years,
eleven radio stations from Capstar for an aggregate purchase price of $637,500,
of which the acquisition of one radio station was completed on May 29, 1998 for
$143,250. The Company is currently assessing the effects of the Capstar Merger
on the February 20, 1998 purchase agreement. On February 1,
7
<PAGE> 8
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1999, the Company began operating WKNR-AM in Cleveland, a station owned by
Capstar, under a time brokerage agreement. Although there can be no assurance,
the merger with Capstar is expected to be completed in the second or early third
quarter of 1999.
On September 15, 1998, the Company entered into an agreement to acquire
KKFR-FM and KFYI-AM in Phoenix from The Broadcast Group, Inc. for $90,000 in
cash. The Company began operating KKFR-FM and KFYI-AM under a time brokerage
agreement effective November 5, 1998. Although there can be no assurance, the
Company expects that the Phoenix acquisition will be consummated in the second
quarter of 1999.
Consummation of the pending transactions is subject to various conditions,
including, in most cases, approval from the Federal Communications Commission
and the expiration or early termination of any waiting period required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. 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.
3. NON-RECURRING CHARGES
In March 1999, the Company recorded a charge of $28,979 which consisted of
the following:
<TABLE>
<S> <C>
Write-off of LIN Merger and Petry transaction costs(a)..... $16,783
Executive severance costs(b)............................... 12,196
-------
Total............................................ $28,979
=======
</TABLE>
- ---------------
(a) On July 7, 1998, the Company entered into a merger agreement with the
indirect parent of LIN Television Corporation ("LIN") to acquire LIN in a
stock for stock transaction (the "LIN Merger"). On April 8, 1998, the
Company entered into an agreement to acquire Petry Media Corporation, a
leading independent television representation firm, for approximately
$127,000. Effective March 15, 1999, the Company and LIN agreed to terminate
the LIN Merger agreement and in connection with the termination of the LIN
Merger, the Company's Board of Directors approved the negotiation of the
assignment of the Petry purchase agreement to LIN. Subsequently, the
Company terminated the Petry acquisition agreement, in accordance with its
terms, effective April 28, 1999. The Company recorded a charge of $16,783
to write off transaction costs incurred in connection with the LIN Merger
and Petry transaction.
(b) On March 15, 1999, the Company announced an executive realignment which
included (i) the resignation of Jeffrey A. Marcus as the Company's
President and Chief Executive Officer; (ii) the resignation of Thomas P.
McMillin as the Company's Chief Financial Officer; (iii) the departure of
Richard A. B. Gleiner as the Company's General Counsel; and (iv) the
resignation of Eric C. Neuman as the Company's Senior Vice
President -- Strategic Development, each effective March 15, 1999. The
Company recorded a charge of $12,196 for executive severance and other
costs.
4. CONTINGENCIES
In July 1998, a stockholder derivative action was commenced in the Delaware
Court of Chancery by a stockholder purporting to act on behalf of the Company.
The defendants in the case include Hicks, Muse, Tate & Furst Incorporated
("Hicks Muse"), LIN Television Corporation and some of the Company's directors.
The plaintiff alleges that, among other things, (1) Hicks Muse allegedly caused
the Company to pay too high of a price for LIN because Hicks Muse had allegedly
paid too high of a price when it acquired LIN; and (2) the transaction therefore
allegedly constitutes a breach of fiduciary duty and a waste of corporate assets
by Hicks Muse, which is alleged to control the Company, and the directors of the
Company named as defendants. The plaintiff seeks to enjoin consummation or
rescission of the transaction, compensatory
8
<PAGE> 9
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
damages, an order requiring that the directors named as defendants "carry out
their fiduciary duties," and attorneys' fees and other costs. Plaintiff,
defendants and the Company had reached a tentative settlement of this lawsuit.
However, as a result of the decision by the Company and LIN to terminate the LIN
Merger, the settlement will not proceed as planned.
In September 1998, a stockholder class action complaint was filed in the
Delaware Court of Chancery by a stockholder purporting to act individually and
on behalf of all other persons, other than defendants, who own securities of the
Company and are similarly situated. The defendants in the case are named as
Chancellor Media, Hicks Muse, Thomas O. Hicks, Jeffrey A. Marcus, James E. de
Castro, Eric C. Neuman, Lawrence D. Stuart, Jr., Steven Dinetz, Thomas J.
Hodson, Perry Lewis, John H. Massey and Vernon E. Jordan, Jr. The plaintiff
alleges breach of fiduciary duties, gross mismanagement, gross negligence or
recklessness, and other matters relating to the defendants' actions in
connection with the proposed Capstar merger. The plaintiff seeks to certify the
complaint as a class action, enjoin consummation of the Capstar merger, order
defendants to account to plaintiff and other alleged class members for damages,
and award attorneys' fees and other costs. The Company believes that the lawsuit
is without merit and intends to vigorously defend the action.
On July 10, 1998, the Company entered into an agreement to acquire a 50%
economic interest in Grupo Radio Centro, S.A. de C.V., an owner and operator of
radio stations in Mexico, for approximately $120.5 million in cash and $116.5
million in Chancellor Media common stock. On October 15, 1998, the Company
announced that it had provided notice to Grupo Radio that it was terminating the
acquisition agreement in accordance with its terms. The Company has received
notice from Grupo Radio requesting arbitration under the terms of the
acquisition agreement of allegations that Chancellor Media wrongfully terminated
that agreement, and the parties have commenced the arbitration process. The
Company believes that it had a proper basis for terminating the agreement in
accordance with its terms and intends to contest these allegations vigorously.
The Company is also involved in various other claims and lawsuits which are
generally incidental to its business. The Company is also vigorously contesting
all of these matters and believes that the ultimate resolution of these matters
and those mentioned above will not have a material adverse effect on its
consolidated financial position or results of operations.
9
<PAGE> 10
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. SEGMENT DATA
The Company conducts business in three distinct operating segments
consisting of radio broadcasting, outdoor advertising and media representation.
Separate financial data for each of the Company's three business segments is
provided below.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
MARCH 31, MARCH 31,
1998 1999
--------- ---------
<S> <C> <C>
Chancellor Radio Group -- radio broadcasting:
Net revenues.............................................. $200,349 $261,779
Operating expenses........................................ 123,352 154,121
Depreciation and amortization............................. 80,723 104,682
Operating loss............................................ (5,473) (298)
Chancellor Outdoor Group -- outdoor advertising:
Net revenues.............................................. -- 53,601
Operating expenses........................................ -- 28,451
Depreciation and amortization............................. -- 31,396
Operating loss............................................ -- (9,071)
Katz -- media representation:
Net revenues.............................................. 38,671 39,695
Operating expenses........................................ 30,130 30,748
Depreciation and amortization............................. 6,567 7,783
Operating income (loss)................................... 255 (344)
</TABLE>
The segment financial data includes intersegment revenues and expenses
which must be excluded to reconcile to the Company's consolidated financial
statements. In addition, certain depreciation and amortization expenses,
corporate general and administrative expenses and non-recurring charges were not
allocated to business segments and must be included to reconcile to the
Company's consolidated financial statements. Reconciling financial data is
provided below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
MARCH 31, MARCH 31,
1998 1999
--------- ---------
<S> <C> <C>
Intersegment net revenues................................... $5,463 $ 4,810
Intersegment operating expenses............................. 5,463 4,810
Unallocated depreciation and amortization................... 4,646 3,883
Unallocated corporate general and administrative expenses... 3,337 10,207
Unallocated non-recurring charges........................... -- 28,979
</TABLE>
6. RECENTLY ISSUED ACCOUNTING PRINCIPLE
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities. This Statement establishes accounting and
reporting standards for derivative instruments and hedging activities. SFAS No.
133 is effective for all fiscal quarters of all fiscal years beginning after
June 15, 1999. Management does not anticipate that this Statement will have a
material impact on the Company's consolidated financial statements.
10
<PAGE> 11
PART I
ITEM 1. FINANCIAL STATEMENTS
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------ -----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 12,256 $ 7,069
Accounts receivable, less allowance for doubtful accounts
of $15,580 in 1998 and $17,844 in 1999................. 352,646 310,916
Other current assets...................................... 59,909 70,277
---------- ----------
Total current assets.............................. 424,811 388,262
Property and equipment, net................................. 1,388,156 1,395,898
Intangible assets, net...................................... 5,056,047 5,286,435
Other assets, net........................................... 358,893 369,269
---------- ----------
$7,227,907 $7,439,864
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 236,618 $ 275,865
Long-term debt.............................................. 4,096,000 4,378,000
Deferred tax liabilities.................................... 453,134 459,062
Other liabilities........................................... 50,325 52,518
---------- ----------
Total liabilities................................. 4,836,077 5,165,445
---------- ----------
Commitments and contingencies
Stockholder's equity:
Common stock, $.01 par value. 1,040 shares authorized,
issued and outstanding................................. 1 1
Paid-in capital........................................... 2,670,510 2,653,485
Accumulated deficit....................................... (278,681) (379,067)
---------- ----------
Total stockholder's equity........................ 2,391,830 2,274,419
---------- ----------
$7,227,907 $7,439,864
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
11
<PAGE> 12
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
MARCH 31, MARCH 31,
1998 1999
--------- ---------
<S> <C> <C>
Gross revenues.............................................. $262,421 $ 394,123
Less agency commissions................................... 28,864 43,858
-------- ---------
Net revenues........................................... 233,557 350,265
-------- ---------
Operating expenses:
Operating expenses, excluding depreciation and
amortization........................................... 148,019 208,510
Depreciation and amortization............................. 91,936 147,744
Corporate general and administrative...................... 6,803 17,814
Non-recurring charges..................................... -- 16,344
-------- ---------
Operating expenses..................................... 246,758 390,412
-------- ---------
Operating loss......................................... (13,201) (40,147)
-------- ---------
Other (income) expense:
Interest expense, net..................................... 48,300 84,392
Gain on disposition of representation contracts........... -- (3,603)
-------- ---------
Other (income) expense, net............................ 48,300 80,789
-------- ---------
Loss before income taxes............................... (61,501) (120,936)
Income tax benefit.......................................... 2,941 26,967
-------- ---------
Net loss.......................................... (58,560) (93,969)
Preferred stock dividends................................... 10,011 --
-------- ---------
Net loss attributable to common stock..................... $(68,571) $ (93,969)
======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
12
<PAGE> 13
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
MARCH 31, MARCH 31,
1998 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(58,560) $ (93,969)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation........................................... 6,058 34,872
Amortization of goodwill, intangible assets and other
assets................................................ 85,878 112,872
Provision for doubtful accounts........................ 1,625 3,119
Deferred income tax benefit............................ (2,941) (30,234)
Gain on sale of representation contracts............... -- (3,603)
Write-off of transaction costs......................... -- 4,148
Other.................................................. (449) --
Changes in certain assets and liabilities, net of
effects of acquisitions:
Accounts receivable.................................. 9,901 44,734
Other current assets................................. (3,308) (10,368)
Accounts payable and accrued expenses................ (6,962) 32,206
Other assets......................................... (25) (1,456)
Other liabilities.................................... (577) (1,085)
-------- ---------
Net cash provided by operating activities......... 30,640 91,236
-------- ---------
Cash flows from investing activities:
Acquisitions, net of cash acquired........................ (24,350) (332,110)
Escrow deposits on pending acquisitions................... (4,000) --
Payments made on purchases of representation contracts.... (7,422) (8,676)
Payments received on sales of representation contracts.... 4,164 6,187
Construction of advertising structures.................... -- (5,157)
Purchases of property and equipment....................... (6,224) (9,771)
Other, net................................................ (4,844) (17,357)
-------- ---------
Net cash used by investing activities............. (42,676) (366,884)
-------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt.................. 56,000 329,000
Principal payments on long-term debt...................... (729,000) (47,000)
Cash contributed by parent................................ 997,667 3,336
Distribution to parent.................................... -- (8,458)
Dividends to parent....................................... (6,417) (6,417)
Dividends on preferred stock.............................. (16,470) --
Payments for debt issuance costs.......................... (23) --
-------- ---------
Net cash provided by financing activities......... 301,757 270,461
-------- ---------
Increase (decrease) in cash and cash equivalents............ 289,721 (5,187)
Cash and cash equivalents at beginning of period............ 16,584 12,256
-------- ---------
Cash and cash equivalents at end of period.................. $306,305 $ 7,069
======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE> 14
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
The accompanying unaudited interim financial statements include the
accounts of Chancellor Media Corporation of Los Angeles and its subsidiaries
(collectively, "CMCLA"), all of which are wholly owned. Chancellor Media
Corporation of Los Angeles is an indirect, wholly owned subsidiary of Chancellor
Media Corporation ("Chancellor Media"). All significant intercompany balances
and transactions have been eliminated in consolidation and in the opinion of
management, all adjustments (consisting of normal recurring accruals) necessary
to present fairly the financial position, results of operations and cash flows
have been recorded. Certain reclassifications have been made to 1998 interim
financial information for comparative purposes. Interim periods are not
necessarily indicative of results to be expected for the year.
These financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in CMCLA's
Annual Report on Form 10-K for the year ended December 31, 1998. The year-end
consolidated balance sheet data was derived from the audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles.
2. RECENT DEVELOPMENTS
(a) Completed Transactions
On January 15, 1999, CMCLA acquired the music production library and
related license agreements of Brown Bag Productions for a purchase price of
$8,483 including various other direct acquisition costs.
On January 21, 1999 and February 9, 1999, CMCLA acquired approximately
4,500 outdoor display faces from Triumph Outdoor Holdings and certain affiliated
companies for $37,006 in cash including working capital and various other direct
acquisition costs.
On January 28, 1999, CMCLA acquired Wincom Broadcasting Corporation which
owns WQAL-FM in Cleveland. CMCLA had previously been operating WQAL-FM under a
time brokerage agreement effective October 1, 1998. On February 2, 1999, CMCLA
acquired five additional radio stations in Cleveland including (i) WDOK-FM and
WRMR-AM from Independent Group Limited Partnership, (ii) WZAK-FM from Zapis
Communications and (iii) Zebra Broadcasting Corporation which owns WZJM-FM and
WJMO-AM. The six Cleveland stations were acquired for an aggregate purchase
price of $283,758 in cash including working capital.
Between January and March 1999, CMCLA acquired approximately 100 billboards
and outdoor displays in various transactions for approximately $8,198 in cash.
The acquisitions were accounted for as purchases. Accordingly, the
accompanying consolidated financial statements include the results of operations
of the acquired entities accounted for as purchases from the respective dates of
acquisition.
14
<PAGE> 15
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the net assets acquired follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
1999
------------
<S> <C>
Cash and cash equivalents.............................. $ 4,360
Accounts receivable, net............................... 6,403
Other current assets................................... 1,355
Property and equipment................................. 27,768
Intangible assets...................................... 336,383
Accounts payable and accrued expenses.................. (2,662)
Deferred tax liabilities............................... (36,162)
--------
Total net assets acquired.................... 337,445
Less:
Cash and cash equivalents acquired................... 4,360
Liability assumed.................................... 725
Notes payable........................................ 250
--------
Cash paid for acquisitions............................. $332,110
========
</TABLE>
The pro forma consolidated condensed results of operations data for the
three months ended March 31, 1998 and 1999, as if the acquisitions during 1998
and 1999 and the related financing transactions occurred at January 1, 1998,
follow:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
MARCH 31, MARCH 31,
1998 1999
--------- ---------
<S> <C> <C>
Net revenues................................................ $308,622 $352,184
Net loss.................................................... (79,164) (80,369)
</TABLE>
The pro forma results are not necessarily indicative of the financial
results which would have occurred if the transactions had been in effect for the
entire periods presented.
On April 12, 1999, CMCLA acquired approximately 159 billboards and outdoor
displays in various markets for approximately $3,700 in cash.
On April 16, 1999, CMCLA sold WMVP-AM in Chicago to ABC, Inc. for $21,000
in cash and recognized a gain of $14,466. CMCLA had previously entered into a
time brokerage agreement effective September 10, 1998 to sell substantially all
of the broadcast time of WMVP-AM pending completion of the sale.
(b) Pending Transactions
On August 26, 1998, Chancellor Media, parent company of CMCLA, and Capstar
Broadcasting Corporation (together with its subsidiaries, "Capstar") entered
into an agreement to merge in a stock-for-stock transaction that will create the
nation's largest radio broadcasting entity (the "Capstar Merger"). Pursuant to
the agreement, as amended, each share of Capstar common stock will be converted
into 0.4955 of a share of common stock of Chancellor Media. Previously, on
February 20, 1998, CMCLA had entered into an agreement to acquire, over a period
of three years, eleven radio stations from Capstar for an aggregate purchase
price of $637,500, of which the acquisition of one radio station was completed
on May 29, 1998 for $143,250. CMCLA is currently assessing the effects of the
Capstar Merger on the February 20, 1998 purchase agreement. On February 1, 1999,
CMCLA began operating WKNR-AM in Cleveland, a station owned by
15
<PAGE> 16
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Capstar, under a time brokerage agreement. Although there can be no assurance,
the Capstar Merger is expected to be completed in the second or early third
quarter of 1999.
On September 15, 1998, CMCLA entered into an agreement to acquire KKFR-FM
and KFYI-AM in Phoenix from The Broadcast Group, Inc. for $90,000 in cash. CMCLA
began operating KKFR-FM and KFYI-AM under a time brokerage agreement effective
November 5, 1998. Although there can be no assurance, CMCLA expects that the
Phoenix acquisition will be consummated in the second quarter of 1999.
Consummation of the pending transactions is subject to various conditions,
including, in most cases, approval from the Federal Communications Commission
and the expiration or early termination of any waiting period required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. CMCLA believes
that such conditions will be satisfied in the ordinary course, but there can be
no assurance that this will be the case.
3. NON-RECURRING CHARGES
In March 1999, CMCLA recorded a charge of $16,344 which consisted of the
following:
<TABLE>
<S> <C>
Write-off of Petry transaction costs(a).................... $ 4,148
Executive severance costs(b)............................... 12,196
-------
Total............................................ $16,344
=======
</TABLE>
- ---------------
(a) On July 7, 1998, Chancellor Media entered into a merger agreement with the
indirect parent of LIN Television Corporation ("LIN") to acquire LIN in a
stock for stock transaction (the "LIN Merger"). On April 8, 1998, CMCLA
entered into an agreement to acquire Petry Media Corporation, a leading
independent television representation firm, for approximately $127,000.
Effective March 15, 1999, Chancellor Media and LIN agreed to terminate the
LIN Merger agreement and in connection with the termination of the LIN
Merger, CMCLA's Board of Directors approved the negotiation of the
assignment of the Petry purchase agreement to LIN. Subsequently, CMCLA
terminated the Petry acquisition agreement, in accordance with its terms,
effective April 28, 1999. CMCLA recorded a charge of $4,148 to write off
transaction costs incurred in connection with the Petry transaction.
(b) On March 15, 1999, Chancellor Media and CMCLA announced an executive
realignment which included (i) the resignation of Jeffrey A. Marcus as
CMCLA's President and Chief Executive Officer; (ii) the resignation of
Thomas P. McMillin as CMCLA's Chief Financial Officer; (iii) the departure
of Richard A. B. Gleiner as CMCLA's General Counsel; and (iv) the
resignation of Eric C. Neuman as CMCLA's Senior Vice President -- Strategic
Development, each effective March 15, 1999. CMCLA recorded a charge of
$12,196 for executive severance and other costs.
4. CONTINGENCIES
In July 1998, a stockholder derivative action was commenced in the Delaware
Court of Chancery by a stockholder purporting to act on behalf of Chancellor
Media. The defendants in the case include Hicks, Muse, Tate & Furst Incorporated
("Hicks Muse"), LIN Television Corporation and some of Chancellor Media's
directors. The plaintiff alleges that, among other things, (1) Hicks Muse
allegedly caused Chancellor Media to pay too high of a price for LIN because
Hicks Muse had allegedly paid too high of a price when it acquired LIN; and (2)
the transaction therefore allegedly constitutes a breach of fiduciary duty and a
waste of corporate assets by Hicks Muse, which is alleged to control Chancellor
Media, and the directors of Chancellor Media named as defendants. The plaintiff
seeks to enjoin consummation or rescission of the transaction, compensatory
damages, an order requiring that the directors named as defendants "carry out
their
16
<PAGE> 17
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
fiduciary duties," and attorneys' fees and other costs. Plaintiff, defendants
and Chancellor Media had reached a tentative settlement of this lawsuit.
However, as a result of the decision by Chancellor Media and LIN to terminate
the LIN Merger, the settlement will not proceed as planned.
In September 1998, a stockholder class action complaint was filed in the
Delaware Court of Chancery by a stockholder purporting to act individually and
on behalf of all other persons, other than defendants, who own securities of
Chancellor Media and are similarly situated. The defendants in the case are
named as Chancellor Media, Hicks Muse, Thomas O. Hicks, Jeffrey A. Marcus, James
E. de Castro, Eric C. Neuman, Lawrence D. Stuart, Jr., Steven Dinetz, Thomas J.
Hodson, Perry Lewis, John H. Massey and Vernon E. Jordan, Jr. The plaintiff
alleges breach of fiduciary duties, gross mismanagement, gross negligence or
recklessness, and other matters relating to the defendants' actions in
connection with the proposed Capstar merger. The plaintiff seeks to certify the
complaint as a class action, enjoin consummation of the Capstar merger, order
defendants to account to plaintiff and other alleged class members for damages,
and award attorneys' fees and other costs. Chancellor Media believes that the
lawsuit is without merit and intends to vigorously defend the action.
On July 10, 1998, Chancellor Media entered into an agreement to acquire a
50% economic interest in Grupo Radio Centro, S.A. de C.V., an owner and operator
of radio stations in Mexico, for approximately $120.5 million in cash and $116.5
million in Chancellor Media common stock. On October 15, 1998, Chancellor Media
announced that it had provided notice to Grupo Radio that it was terminating the
acquisition agreement in accordance with its terms. Chancellor Media has
received notice from Grupo Radio requesting arbitration under the terms of the
acquisition agreement of allegations that Chancellor Media wrongfully terminated
that agreement, and the parties have commenced the arbitration process.
Chancellor Media believes that it had a proper basis for terminating the
agreement in accordance with its terms and intends to contest these allegations
vigorously.
Chancellor Media and CMCLA are also involved in various other claims and
lawsuits which are generally incidental to CMCLA's business. Chancellor Media
and CMCLA are also vigorously contesting all of these matters and believe that
the ultimate resolution of these matters and those mentioned above will not have
a material adverse effect on CMCLA's consolidated financial position or results
of operations.
17
<PAGE> 18
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. SEGMENT DATA
CMCLA conducts business in three distinct operating segments consisting of
radio broadcasting, outdoor advertising and media representation. Separate
financial data for each of CMCLA's three business segments is provided below.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
MARCH 31, MARCH 31,
1998 1999
--------- ---------
<S> <C> <C>
Chancellor Radio Group-- radio broadcasting:
Net revenues.............................................. $200,349 $261,779
Operating expenses........................................ 123,352 154,121
Depreciation and amortization............................. 80,723 104,682
Operating loss............................................ (5,473) (298)
Chancellor Outdoor Group -- outdoor advertising:
Net revenues.............................................. -- 53,601
Operating expenses........................................ -- 28,451
Depreciation and amortization............................. -- 31,396
Operating loss............................................ -- (9,071)
Katz -- media representation:
Net revenues.............................................. 38,671 39,695
Operating expenses........................................ 30,130 30,748
Depreciation and amortization............................. 6,567 7,783
Operating income (loss)................................... 255 (344)
</TABLE>
The segment financial data includes intersegment revenues and expenses
which must be excluded to reconcile to CMCLA's consolidated financial
statements. In addition, certain depreciation and amortization expenses,
corporate general and administrative expenses and non-recurring charges were not
allocated to business segments and must be included to reconcile CMCLA's
consolidated financial statements. Reconciling financial data is provided below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
MARCH 31, MARCH 31,
1998 1999
--------- ---------
<S> <C> <C>
Intersegment net revenues................................... $5,463 $ 4,810
Intersegment operating expenses............................. 5,463 4,810
Unallocated depreciation and amortization................... 4,646 3,883
Unallocated corporate general and administrative expenses... 3,337 10,207
Unallocated non-recurring charges........................... -- 16,344
</TABLE>
6. RECENTLY ISSUED ACCOUNTING PRINCIPLE
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities. This Statement establishes accounting and
reporting standards for derivative instruments and hedging activities. SFAS No.
133 is effective for all fiscal quarters of all fiscal years beginning after
June 15, 1999. Management does not anticipate that this Statement will have a
material impact on CMCLA's consolidated financial statements.
7. SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARY GUARANTORS
The 9 3/8% Senior Subordinated Notes due 2004, the 8 3/4% Senior
Subordinated Notes due 2007, the 10 1/2% Senior Subordinated Notes due 2007, the
8 1/8% Senior Subordinated Notes due 2007, the 9% Senior
18
<PAGE> 19
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Subordinated Notes due 2008 and the 8% Senior Notes due 2008 are fully and
unconditionally guaranteed, on a joint and several basis, by all of CMCLA's
direct and indirect subsidiaries other than certain inconsequential subsidiaries
(the "Subsidiary Guarantors"). The Subsidiary Guarantors are wholly-owned
subsidiaries of CMCLA. Summarized financial information of the Subsidiary
Guarantors as of December 31, 1998 and March 31, 1999 and for the three months
ended March 31, 1999 is presented below. Separate financial statements and other
disclosures concerning the Subsidiary Guarantors are not presented because
management has determined that they are not material to investors. There are no
significant restrictions on distributions from each of the Subsidiary Guarantors
to CMCLA.
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------ ----------
<S> <C> <C>
Current assets.............................................. $ 376,217 $ 354,858
Noncurrent assets........................................... 5,530,190 5,910,241
Current liabilities......................................... 133,872 124,414
Noncurrent liabilities...................................... 5,744,413 6,182,570
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
1999
------------
<S> <C>
Net revenues............................................ $316,706
Operating loss.......................................... (23,142)
Net loss................................................ (86,241)
</TABLE>
19
<PAGE> 20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Chancellor Media Corporation ("Chancellor Media") along with Chancellor
Media Corporation of Los Angeles ("CMCLA"), an indirect, wholly-owned subsidiary
of Chancellor Media, (together with its subsidiaries, the "Company") is a
diversified media company with operations in radio broadcasting, outdoor
advertising and media representation. As of March 31, 1999, the Chancellor Radio
Group portfolio (including 13 stations operated under time brokerage agreements)
consisted of 124 radio stations (92 FM and 32 AM) concentrated in the top 30
markets in the United States and in Puerto Rico and a national radio network,
The AMFM Radio Networks, which broadcasts advertising and syndicated programming
shows to a national audience of approximately 66 million listeners in the United
States (including approximately 39 million listeners from the Company's
portfolio of stations). As of March 31, 1999, Chancellor Outdoor Group operated
over 42,500 outdoor advertising display faces nationwide. The media
representation business consists of Katz Media Group, Inc. ("Katz"), a
full-service media representation firm that sells national spot advertising time
for clients in the radio and television industries throughout the United States
and for the Company's portfolio of stations.
See Note 5 to the Consolidated Financial Statements included elsewhere in
this Form 10-Q for additional information on the Company's business segments.
The Company's results of operations for the three months ended March 31,
1999 are not comparable to the results of operations for the three months ended
March 31, 1998 due the impact of the various acquisitions and dispositions. The
Company completed the following transactions from April 1, 1998 through March
31, 1999 as follows:
- the acquisition of approximately 42,500 outdoor advertising billboards
and display faces for approximately $1.7 billion in cash;
- the acquisition of 16 radio stations (13 FM and three AM) for
approximately $433.4 million in cash;
- the exchange of five radio stations (four FM and one AM) and
approximately $153.3 million in cash for four FM radio stations; and
- the acquisition of various national radio network syndicated programming
shows and related programming or music production libraries, including
American Top Forty with Casey Kasem, for approximately $36.7 million in
cash.
Three Months Ended March 31, 1999 Compared To Three Months Ended March 31,
1998
Net revenues for the three months ended March 31, 1999 increased 50.0% to
$350.3 million compared to $233.6 million for the first quarter of 1998.
Operating expenses excluding depreciation and amortization for the three months
ended March 31, 1999 increased 40.9% to $208.5 million compared to $148.0
million for the three months ended March 31, 1998. The increase in net revenues
and operating expenses 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, as evidenced
by the increase in the Company's direct operating margin from 36.6% for the
three months ended March 31, 1998 to 40.5% for the three months ended March 31,
1999.
Depreciation and amortization for the three months ended March 31, 1999
increased 60.7% to $147.7 million compared to $91.9 million for the first
quarter of 1998. The increase is primarily due to the impact of the acquisitions
completed during 1998 and to date in 1999.
Corporate general and administrative expenses for the three months ended
March 31, 1999 increased 161.9% to $17.8 million compared to $6.8 million for
the first quarter of 1998. The increase is due to the growth of the Company, and
related increase in properties and staff, primarily due to recent acquisitions.
20
<PAGE> 21
In March 1999, the Company recorded non-recurring charges of $29.0 million
related to the write-off of LIN Television Corporation and Petry Media
Corporation transaction costs and executive severance and other costs related to
the executive management realignment. CMCLA recorded a charge of $16.3 million
related to the Petry Media Corporation transaction costs and executive severance
and other costs related to the executive realignment.
As a result of the above factors, the Company realized $52.8 million of
operating loss for the three months ended March 31, 1999 compared to $13.2
million of operating loss for the first quarter of 1998.
Interest expense, net for the three months ended March 31, 1999 increased
74.7% to $84.4 million compared to $48.3 million for the same period in 1998.
The net increase in interest expense was primarily due to (i) additional bank
borrowings under the senior credit facility required to finance the various
acquisitions discussed elsewhere herein offset by repayment of borrowings from
the net proceeds of the March 13, 1998 offering of 21,850,000 shares of common
stock; (ii) the issuance of the 9% Senior Subordinated Notes due 2008 by CMCLA
on September 30, 1998; and (iii) the issuance of the 8% Senior Notes due 2008 by
CMCLA on November 17, 1998.
The Company recorded a gain on disposition of representation contracts of
$3.6 million for the first quarter of 1999 related to its media representation
operations. The gain represents the sales proceeds received from a successor
representation firm for the buyout of an existing media representation contract,
net of any remaining deferred costs associated with obtaining the original
representation contract. While the consolidation of the radio broadcasting
industry has resulted in an increase in buyout activity, the impact on future
periods cannot be predicted.
The income tax benefit of $30.1 million for the three months ended March
31, 1999 is comprised of current federal and state income tax expense of $3.3
million and a deferred federal income tax benefit of $33.4 million.
Dividends on preferred stock of subsidiary were $10.0 million for the three
months ended March 31, 1998. In May and July 1998, the Company exchanged the
preferred stock of subsidiaries for CMCLA's 12% Debentures and 12 1/4%
Debentures.
Dividends on Chancellor Media's preferred stock were $6.4 million for the
first quarter of 1999 and 1998. Preferred stock consisted of (i) the Company's
$3.00 convertible exchangeable preferred stock which was issued in June 1997 and
(ii) the Company's 7% convertible preferred stock which was issued in September
1997 as part of the merger with Chancellor Broadcasting Company.
As a result of the above factors, the Company incurred a $109.9 million net
loss attributable to common stockholders for the three months ended March 31,
1999 compared to a $75.0 million net loss for the first quarter of 1998.
The basic and diluted net loss per common share for the three months ended
March 31, 1999 was $0.77 compared to a $0.60 basic and diluted loss per common
share for the first quarter of 1998.
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.
21
<PAGE> 22
Long-term debt consisted of the following at December 31, 1998 and March
31, 1999 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------ ----------
<S> <C> <C>
Senior Credit Facility...................................... $1,596,000 $1,878,000
8% Senior Notes............................................. 750,000 750,000
Senior Subordinated Notes................................... 1,750,000 1,750,000
---------- ----------
Total long-term debt.............................. $4,096,000 $4,378,000
========== ==========
</TABLE>
Senior Credit Facility. The Company's senior credit facility, as amended
(the "Senior Credit Facility") provides for aggregate commitments under a
revolving loan facility and a term loan facility of $1.6 billion and $900.0
million, respectively. 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. At April 30, 1999, the Company had drawn approximately
$1.0 billion of the revolving credit facility and $900.0 million of the term
loan facility.
8% Senior Notes. The 8% Senior Notes due 2008 (the "8% Senior Notes") are
senior unsecured obligations of CMCLA and rank equal in right of payment to the
obligations of CMCLA under the Senior Credit Facility and existing and all other
indebtedness of CMCLA not expressly subordinated to the 8% Senior Notes.
However, because the 8% Senior Notes are unsecured, the 8% Senior Notes are
effectively subordinated in right of payment to CMCLA's secured debt, including
the Senior Credit Facility. The 8% Senior Notes are fully and unconditionally
guaranteed, on a joint and several basis, by the Subsidiary Guarantors (as
defined below).
Senior Subordinated Notes. The 9 3/8% Senior Subordinated Notes due 2004,
the 8 3/4% Senior Subordinated Notes due 2007, the 10 1/2% Senior Subordinated
Notes due 2007, the 8 1/8% Senior Subordinated Notes due 2007 and the 9% Senior
Subordinated Notes due 2008 (collectively, the "Subordinated Notes") are
unsecured obligations of CMCLA. The Subordinated Notes are subordinated in right
of payment to all existing and any future senior indebtedness of CMCLA. The
Subordinated Notes are fully and unconditionally guaranteed, on a joint and
several basis, by all of CMCLA's direct and indirect subsidiaries other than
certain inconsequential subsidiaries (the "Subsidiary Guarantors"). The
Subsidiary Guarantors are wholly-owned subsidiaries of CMCLA.
The Senior Credit Facility and the indentures governing the 8% Senior Notes
and the Subordinated Notes contain customary restrictive covenants, which, among
other things and with certain exceptions, limit the ability of CMCLA and its
subsidiaries to incur additional indebtedness and liens in connection therewith,
enter into certain transactions with affiliates, pay dividends, consolidate,
merge or effect certain asset sales, issue additional stock, effect an asset
swap and make acquisitions. CMCLA is required under the Senior Credit Facility
to maintain specified financial ratios, including leverage, cash flow and debt
service coverage ratios (as defined). The Company is in compliance with these
covenants.
Pending Transactions. The $90.0 million in cash required to finance the
acquisition of KKFR-FM and KFYI-AM in Phoenix from The Broadcast Group, Inc. is
expected to be borrowed under the Company's Senior Credit Facility during the
second quarter of 1999. The Company is currently evaluating the treatment of the
February 20, 1998 agreement with Capstar Broadcasting Corporation ("Capstar") to
acquire ten of Capstar's radio stations for $434.3 million and the treatment of
the $150.0 million note receivable from Capstar assuming the merger with Capstar
is completed. Accordingly, it is unclear when such amounts would be required to
be borrowed by the Company, if at all. The Company believes that amounts
available under the Senior Credit Facility will be used to finance its pending
transactions as well as future acquisitions. At April 30, 1999, the Company had
available borrowings of $590.0 million under the revolving loan facility.
Depending on the timing of the consummation of its pending transactions, the
status of the merger with Capstar and any future acquisitions, the Company may
need to obtain additional financing. Other potential sources of financing for
the pending transactions and future acquisitions include cash flow from
operations, additional debt or equity financings, the sale of non-core assets or
a combination of those sources.
22
<PAGE> 23
See Note 2(b) to the Consolidated Financial Statements included elsewhere
in this Form 10-Q for additional information on the Company's pending
transactions.
Interest and Dividends. In addition to debt service requirements under the
Senior Credit Facility, CMCLA is required to pay interest on its 8% Senior Notes
and the Subordinated Notes. Interest payment requirements on these notes are
$214.9 million per year. Cash dividend requirements of Chancellor Media on its
$3.00 convertible exchangeable preferred stock and 7% convertible preferred
stock are $25.7 million per year. Because Chancellor Media is a holding company
with no significant assets other than the common stock of Chancellor Mezzanine
Holdings Corporation, Chancellor Media will rely solely on dividends from
Chancellor Mezzanine Holdings Corporation, which in turn is expected to
distribute dividends paid to it by CMCLA and other subsidiaries to Chancellor
Media, to permit Chancellor Media to pay cash dividends on the $3.00 convertible
exchangeable preferred stock and the 7% convertible preferred stock. The Senior
Credit Facility and the indentures governing the 8% Senior Notes and the
Subordinated Notes limit, but do not prohibit, CMCLA from paying such dividends
to Chancellor Mezzanine Holdings Corporation.
FORWARD LOOKING STATEMENTS
Certain statements used in the preceding and following discussion and
elsewhere in this Quarterly Report on Form 10-Q are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These forward-
looking statements about the financial condition, prospects, operations and
business of the Company are generally accompanied by words such as "believes,"
"expects," "plans," "anticipates," "intends," "likely," "estimates," or similar
expressions. These forward-looking statements are subject to risks,
uncertainties and other factors, some of which are beyond the control of the
Company, that could cause actual results to differ materially from those
forecast or anticipated in such forward-looking statements.
These risks, uncertainties and other factors include, but are not limited
to: the potential negative consequences of the substantial indebtedness of the
Company; the restrictions imposed on the Company and its subsidiaries by the
agreements governing its debt instruments; the competitive nature of the radio
broadcasting, outdoor advertising and media representation businesses; the
potential adverse effects on licenses and ownership of regulation of the radio
broadcasting industry; the difficulty of integrating substantial acquisitions
and entering new lines of business; the potential loss of outdoor advertising
space due to the regulation of outdoor advertising; the potential loss of
advertisers due to tobacco and alcohol industry regulation; and the control of
the Company by affiliates of Hicks, Muse, Tate & Furst Incorporated and
potential conflicts of interest relating thereto.
Because such forward-looking statements are subject to risks and
uncertainties, readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's view only as of the date
of this Quarterly Report on Form 10-Q. The Company undertakes no obligation to
update such statements or publicly release the result of any revisions to these
forward-looking statements which it may make to reflect events or circumstances
after the date of this report or to reflect the occurrence of unanticipated or
unforeseen events.
RECENTLY ISSUED ACCOUNTING PRINCIPLE
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities. This Statement establishes accounting and
reporting standards for derivative instruments and hedging activities. SFAS No.
133 is effective for all fiscal quarters of all fiscal years beginning after
June 15, 1999. Management does not anticipate that this Statement will have a
material impact on the Company's consolidated financial statements.
23
<PAGE> 24
YEAR 2000 ISSUE
The Year 2000 ("Y2K") issue is whether the Company's computer systems will
properly recognize date sensitive information when the year changes to 2000, or
"00." Systems that do not properly recognize such information could generate
erroneous data or cause a system to fail.
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the Y2K issue and has developed
an implementation plan. The Company uses purchased software programs for
corporate financial reporting, radio broadcasting operations and media
representation operations. The companies providing these software programs are
Y2K compliant, and the Company has received Y2K compliance certificates from
these software vendors. The Company uses proprietary software programs for its
outdoor advertising operations and is in the process of reviewing various
modifications and replacement plans. The Company estimates that approximately 50
percent of the outdoor systems' Y2K remediation has been completed as of April
30, 1999. The remaining remediation efforts are expected to be completed by the
end of the third quarter of 1999. The Company's Y2K implementation plan also
includes ensuring that its computer hardware and other equipment with embedded
chips or processors are Y2K compliant.
Costs associated with ensuring that the Company's existing systems are Y2K
compliant and replacing certain existing systems are currently expected to be
approximately $3.7 million, of which $1.5 million has been incurred through
March 31, 1999. These costs, in conjunction with investments the Company is
making in information systems and technology, are expected to reduce the risks
associated with Y2K issues. Future costs are to be funded through the Company's
operating cash flow.
In addition, the Company reviews the computer systems of companies it
intends to acquire in order to assess whether the systems are Y2K compliant. To
the extent the systems are not Y2K compliant, the Company will develop an
implementation plan to ensure the systems are Y2K compliant or will convert the
systems to the Company's computer systems which are Y2K compliant. The Company
continues its comprehensive review of the computer systems related to the
pending merger with Capstar, expected to be consummated in the second quarter or
early third quarter of 1999. The Company is in the process of reviewing various
modifications and replacement plans related to the pending merger with Capstar.
The costs associated with such efforts may be material. There is no guarantee
that the systems of companies to be acquired by the Company in the future will
be timely converted and would not have an adverse effect on the operations of
the Company.
The ability of third parties with whom the Company transacts business to
adequately address their Y2K issues is outside of the Company's control.
Therefore, there can be no assurance that the failure of such third parties to
adequately address their Y2K issues will not have a material adverse effect on
the Company's business, financial condition, cash flows and results of
operations. The Company has begun development of contingency plans intended to
mitigate any possible disruption in business that may result from certain of the
Company's systems or the systems of third parties that are not Y2K compliant.
The Y2K cost estimates are subject to change based on further analysis, and
any change in the costs may be material. As solutions are implemented and new
issues are recognized, the focus of the Company's efforts and costs to address
the Y2K issue may be adjusted. Furthermore, the Company cannot guarantee that
there will be no Y2K issues in spite of these efforts and if such modifications
and replacements are not made, or are not completed in time, the Y2K issue could
have a material impact on the Company's operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Management monitors and evaluates changes in market conditions on a regular
basis. Based upon the most recent review, management has determined that there
have been no material changes in market risks since year end. For further
information regarding market risk as of year end, refer to the Company's Annual
Report on Form 10-K for the year ended December 31, 1998.
24
<PAGE> 25
PART II
ITEM 1. LEGAL PROCEEDINGS
In the fiscal quarter ended March 31, 1999, neither the Company nor any of
its subsidiaries were parties to, or any of their respective properties subject
to, any new material legal proceedings, and there were no material developments
in the pending legal proceedings reported in Chancellor Media's and CMCLA's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998, as
amended. For a description of the Company's pending legal proceedings, see Note
4 to the Consolidated Financial Statements included elsewhere in this Form 10-Q.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.47(yy) -- Asset Purchase Agreement, dated August 11, 1998, between
Chancellor Media Corporation of Los Angeles and
Independent Group Limited Partnership.
2.48(yy) -- Asset Purchase Agreement, dated August 11, 1998, between
Chancellor Media Corporation of Los Angeles and Zapis
Communications Corporation.
2.49(yy) -- Stock Purchase Agreement, dated August 11, 1998, among
Chancellor Media Corporation of Los Angeles, Young Ones,
Inc., Zebra Broadcasting Corporation and the Sellers
named therein.
2.50(yy) -- Stock Purchase Agreement, dated August 11, 1998, among
Chancellor Media Corporation of Los Angeles, ML Media
Partners L.P., Wincom Broadcasting Corporation and WIN
Communications, Inc.
2.52(ddd) -- Agreement and Plan of Merger, dated as of August 26,
1998, among Chancellor Media Corporation, Capstar
Broadcasting Corporation and CBC Acquisition Company,
Inc.
2.54(ggg) -- Asset Purchase Agreement, dated as of August 14, 1998, by
and among Chancellor Media Corporation of Illinois,
Chancellor Media Illinois License Corp. and ABC, Inc.
2.55* -- Amended and Restated Agreement and Plan of Merger, dated
as of April 29, 1999, among Chancellor Media Corporation,
Capstar Broadcasting Corporation, CBC Acquisition
Company, Inc. and CMC Merger Sub, Inc.
2.56* -- Asset Purchase Agreement, dated as of September 15, 1998,
by and between The Broadcast Group, Inc. and Chancellor
Media/Shamrock Broadcasting, Inc.
3.1C(ss) -- Amended and Restated Certificate of Incorporation of
Chancellor Media Corporation.
3.2B(ss) -- Amended and Restated Bylaws of Chancellor Media
Corporation.
3.3(ff) -- Certificate of Incorporation of Chancellor Media
Corporation of Los Angeles (formerly known as Evergreen
Media Corporation of Los Angeles).
3.3A(pp) -- Amendment to Certificate of Incorporation of Chancellor
Media Corporation of Los Angeles, filed September 5,
1997.
3.3B(uu) -- Amendment to Certificate of Incorporation of Chancellor
Media Corporation of Los Angeles, filed October 28, 1997.
3.4(ff) -- Bylaws of Chancellor Media Corporation of Los Angeles.
</TABLE>
25
<PAGE> 26
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.52(bbb) -- Agreement, dated as of January 6, 1999, among Chancellor
Media Corporation, Chancellor Media Corporation of Los
Angeles, Matthew E. Devine and Vicki Devine.
10.57(ccc) -- Amendment No. 1 to Employment Agreement, dated as of
January 6, 1999, by and among Chancellor Media
Corporation, Chancellor Media Corporation of Los Angeles
and Thomas P. McMillin.
10.59(eee) -- Agreement, dated as of March 15, 1999, between Jeffrey A.
Marcus, Nancy Cain Marcus, Chancellor Media Corporation
and Chancellor Media Corporation of Los Angeles.
10.60(eee) -- Agreement, dated as of March 15, 1999, between Eric C.
Neuman, Elizabeth M. Neuman, Chancellor Media Corporation
and Chancellor Media Corporation of Los Angeles.
10.61(eee) -- Agreement, dated as of March 15, 1999, between Thomas P.
McMillin, Brigette McMillin, Chancellor Media Corporation
and Chancellor Media Corporation of Los Angeles.
27.1* -- Financial Data Schedule of Chancellor Media Corporation.
27.2* -- Financial Data Schedule of Chancellor Media Corporation
of Los Angeles.
</TABLE>
- ---------------
* Filed herewith.
(ff) Incorporated by reference to the identically-numbered exhibit to the
Registration Statement on Form S-4 (Reg. No. 333-32259), dated July 29,
1997, as amended, of Chancellor Media Corporation of Los Angeles (formerly
known as Evergreen Media Corporation of Los Angeles).
(pp) Incorporated by reference to the identically numbered exhibit to the
Current Report on Form 8-K of Chancellor Media Corporation and Chancellor
Media Corporation of Los Angeles, dated as of September 23, 1997 and filed
September 29, 1997.
(ss) Incorporated by reference to the identically numbered exhibit to the
Current Report on Form 8-K of Chancellor Media Corporation and Chancellor
Media Corporation of Los Angeles, dated as of February 23, 1998 and filed
February 27, 1998.
(uu) Incorporated by reference to the identically numbered exhibit to the
Annual Report on Form 10-K of Chancellor Media Corporation and Chancellor
Media Corporation of Los Angeles for the fiscal year ended December 31,
1997.
(yy) Incorporated by reference to the identically numbered exhibit to the
Quarterly Report on Form 10-Q of Chancellor Media Corporation and
Chancellor Media Corporation of Los Angeles for the fiscal quarter ended
June 30, 1998.
(bbb) Incorporated by reference to the identically numbered exhibit to the
Current Report on Form 8-K of Chancellor Media Corporation and Chancellor
Media Corporation of Los Angeles, dated as of January 7, 1999 and filed
January 7, 1999.
(ccc) Incorporated by reference to the identically numbered exhibit to
Chancellor Media Corporation's Registration Statement on Form S-4 (Reg.
No. 333-72481), dated as of February 17, 1999, as amended.
(ddd) Incorporated by reference to the identically numbered exhibit to the
Quarterly Report on Form 10-Q of Chancellor Media Corporation and
Chancellor Media Corporation of Los Angeles for the fiscal quarter ended
September 30, 1998.
(eee) Incorporated by reference to the identically numbered exhibit to the
Annual Report on Form 10-K of Chancellor Media Corporation and Chancellor
Media Corporation of Los Angeles for the fiscal year ended December 31,
1998.
26
<PAGE> 27
(ggg) Incorporated by reference to the identically numbered exhibit to the
Current Report on Form 8-K of Chancellor Media Corporation and Chancellor
Media Corporation of Los Angeles, as amended, filed on May 5, 1999.
(b) Reports on Form 8-K
1. Current Report on Form 8-K (Items 5 and 7), dated January 6, 1999 and
filed January 7, 1999, to announce the appointment of Thomas P. McMillin to the
position of Chief Financial Officer, following the resignation of Matthew E.
Devine.
2. Current Report on Form 8-K (Item 7), dated December 1, 1998 and filed
February 12, 1999, to amend the 8-K filed on December 15, 1998 announcing the
acquisition of the outdoor advertising division of Whiteco Industries, Inc. to
provide pro forma financial information.
3. Current Report on Form 8-K (Items 2 and 7), dated July 31, 1998 and
filed February 16, 1999, to announce the acquisition of certain assets of Martin
Media and certain affiliated companies including Martin & MacFarlane, Inc.
4. Current Report on Form 8-K (Items 5 and 7), dated March 15, 1999 and
filed March 16, 1999, to announce the completion of the Company's review of
strategic alternatives and to announce a series of steps to better position the
Company strategically, operationally and financially.
27
<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
<TABLE>
<S> <C>
Chancellor Media Corporation Chancellor Media Corporation
of Los Angeles
By: /s/ D. GEOFFREY ARMSTRONG By: /s/ D. GEOFFREY ARMSTRONG
------------------------------------------------- -------------------------------------------------
D. Geoffrey Armstrong D. Geoffrey Armstrong
Executive Vice President and Executive Vice President and
Chief Financial Officer Chief Financial Officer
</TABLE>
Date: May 14, 1999
28
<PAGE> 29
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.47(yy) -- Asset Purchase Agreement, dated August 11, 1998, between
Chancellor Media Corporation of Los Angeles and
Independent Group Limited Partnership.
2.48(yy) -- Asset Purchase Agreement, dated August 11, 1998, between
Chancellor Media Corporation of Los Angeles and Zapis
Communications Corporation.
2.49(yy) -- Stock Purchase Agreement, dated August 11, 1998, among
Chancellor Media Corporation of Los Angeles, Young Ones,
Inc., Zebra Broadcasting Corporation and the Sellers
named therein.
2.50(yy) -- Stock Purchase Agreement, dated August 11, 1998, among
Chancellor Media Corporation of Los Angeles, ML Media
Partners L.P., Wincom Broadcasting Corporation and WIN
Communications, Inc.
2.52(ddd) -- Agreement and Plan of Merger, dated as of August 26,
1998, among Chancellor Media Corporation, Capstar
Broadcasting Corporation and CBC Acquisition Company,
Inc.
2.54(ggg) -- Asset Purchase Agreement, dated as of August 14, 1998, by
and among Chancellor Media Corporation of Illinois,
Chancellor Media Illinois License Corp. and ABC, Inc.
2.55* -- Amended and Restated Agreement and Plan of Merger, dated
as of April 29, 1999, among Chancellor Media Corporation,
Capstar Broadcasting Corporation, CBC Acquisition
Company, Inc. and CMC Merger Sub, Inc.
2.56* -- Asset Purchase Agreement, dated as of September 15, 1998,
by and between The Broadcast Group, Inc. and Chancellor
Media/Shamrock Broadcasting, Inc.
3.1C(ss) -- Amended and Restated Certificate of Incorporation of
Chancellor Media Corporation.
3.2B(ss) -- Amended and Restated Bylaws of Chancellor Media
Corporation.
3.3(ff) -- Certificate of Incorporation of Chancellor Media
Corporation of Los Angeles (formerly known as Evergreen
Media Corporation of Los Angeles).
3.3A(pp) -- Amendment to Certificate of Incorporation of Chancellor
Media Corporation of Los Angeles, filed September 5,
1997.
3.3B(uu) -- Amendment to Certificate of Incorporation of Chancellor
Media Corporation of Los Angeles, filed October 28, 1997.
3.4(ff) -- Bylaws of Chancellor Media Corporation of Los Angeles.
10.52(bbb) -- Agreement, dated as of January 6, 1999, among Chancellor
Media Corporation, Chancellor Media Corporation of Los
Angeles, Matthew E. Devine and Vicki Devine.
10.57(ccc) -- Amendment No. 1 to Employment Agreement, dated as of
January 6, 1999, by and among Chancellor Media
Corporation, Chancellor Media Corporation of Los Angeles
and Thomas P. McMillin.
10.59(eee) -- Agreement, dated as of March 15, 1999, between Jeffrey A.
Marcus, Nancy Cain Marcus, Chancellor Media Corporation
and Chancellor Media Corporation of Los Angeles.
10.60(eee) -- Agreement, dated as of March 15, 1999, between Eric C.
Neuman, Elizabeth M. Neuman, Chancellor Media Corporation
and Chancellor Media Corporation of Los Angeles.
10.61(eee) -- Agreement, dated as of March 15, 1999, between Thomas P.
McMillin, Brigette McMillin, Chancellor Media Corporation
and Chancellor Media Corporation of Los Angeles.
</TABLE>
<PAGE> 30
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
27.1* -- Financial Data Schedule of Chancellor Media Corporation.
27.2* -- Financial Data Schedule of Chancellor Media Corporation
of Los Angeles.
</TABLE>
- ---------------
* Filed herewith.
(ff) Incorporated by reference to the identically-numbered exhibit to the
Registration Statement on Form S-4 (Reg. No. 333-32259), dated July 29,
1997, as amended, of Chancellor Media Corporation of Los Angeles (formerly
known as Evergreen Media Corporation of Los Angeles).
(pp) Incorporated by reference to the identically numbered exhibit to the
Current Report on Form 8-K of Chancellor Media Corporation and Chancellor
Media Corporation of Los Angeles, dated as of September 23, 1997 and filed
September 29, 1997.
(ss) Incorporated by reference to the identically numbered exhibit to the
Current Report on Form 8-K of Chancellor Media Corporation and Chancellor
Media Corporation of Los Angeles, dated as of February 23, 1998 and filed
February 27, 1998.
(uu) Incorporated by reference to the identically numbered exhibit to the
Annual Report on Form 10-K of Chancellor Media Corporation and Chancellor
Media Corporation of Los Angeles for the fiscal year ended December 31,
1997.
(yy) Incorporated by reference to the identically numbered exhibit to the
Quarterly Report on Form 10-Q of Chancellor Media Corporation and
Chancellor Media Corporation of Los Angeles for the fiscal quarter ended
June 30, 1998.
(bbb) Incorporated by reference to the identically numbered exhibit to the
Current Report on Form 8-K of Chancellor Media Corporation and Chancellor
Media Corporation of Los Angeles, dated as of January 7, 1999 and filed
January 7, 1999.
(ccc) Incorporated by reference to the identically numbered exhibit to
Chancellor Media Corporation's Registration Statement on Form S-4 (Reg.
No. 333-72481), dated as of February 17, 1999, as amended.
(ddd) Incorporated by reference to the identically numbered exhibit to the
Quarterly Report on Form 10-Q of Chancellor Media Corporation and
Chancellor Media Corporation of Los Angeles for the fiscal quarter ended
September 30, 1998.
(eee) Incorporated by reference to the identically numbered exhibit to the
Annual Report on Form 10-K of Chancellor Media Corporation and Chancellor
Media Corporation of Los Angeles for the fiscal year ended December 31,
1998.
(ggg) Incorporated by reference to the identically numbered exhibit to the
Current Report on Form 8-K of Chancellor Media Corporation and Chancellor
Media Corporation of Los Angeles, as amended, filed on May 5, 1999.
<PAGE> 1
EXHIBIT 2.55
[EXECUTION COPY]
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMONG
CHANCELLOR MEDIA CORPORATION,
CAPSTAR BROADCASTING CORPORATION,
CBC ACQUISITION COMPANY, INC.
AND
CMC MERGER SUB, INC.
DATED AS OF APRIL 29, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1 THE MERGER.................................................................................2
1.1 The Merger.....................................................................................2
1.2 Closing........................................................................................2
1.3 Effective Time.................................................................................2
1.4 Certificate of Incorporation...................................................................2
1.5 Bylaws.........................................................................................3
1.6 Directors......................................................................................3
1.7 Officers.......................................................................................3
1.8 Effect on Capstar Capital Stock................................................................3
(a) Outstanding Capstar Common Stock.............................................3
(b) Treasury Shares..............................................................4
(c) Impact of Stock Splits, etc..................................................4
1.9 Effect on Chancellor Capital Stock.............................................................4
1.10 Effect on Merger Sub Capital Stock.............................................................4
1.11 Exchange of Certificates.......................................................................5
(a) Paying Agent.................................................................5
(b) Exchange Procedures..........................................................5
(c) Letter of Transmittal........................................................5
(d) Distributions with Respect to Unexchanged Shares.............................6
(e) No Further Ownership Rights in Capstar Common Stock..........................6
(f) No Fractional Shares.........................................................6
(g) Termination of Payment Fund..................................................7
(h) No Liability.................................................................7
(i) Withholding of Tax...........................................................7
1.12 Dissenting Shares..............................................................................8
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF CAPSTAR..................................................8
2.1 Organization, Standing and Corporate Power.....................................................8
2.2 Capital Structure..............................................................................9
2.3 Authority; Noncontravention...................................................................10
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
2.4 Capstar SEC Documents; Financial Statements...................................................11
2.5 Absence of Certain Changes or Events..........................................................12
2.6 No Extraordinary Payments or Change in Benefits...............................................13
2.7 Voting Requirements...........................................................................13
2.8 State Takeover Statutes.......................................................................13
2.9 Capstar FCC Licenses; Operations of Capstar Licensed Facilities...............................14
2.10 Brokers.......................................................................................15
2.11 FCC Qualification.............................................................................15
2.12 Compliance With Applicable Laws...............................................................15
2.13 Absence of Undisclosed Liabilities............................................................15
2.14 Litigation....................................................................................16
2.15 Transactions With Affiliates..................................................................16
2.16 Labor Matters.................................................................................16
2.17 Employee Arrangements and Benefit Plans.......................................................16
2.18 Tax Matters...................................................................................17
2.19 Intellectual Property.........................................................................18
2.20 Environmental Matters.........................................................................19
2.21 Material Agreements...........................................................................20
2.22 Tangible Property.............................................................................21
2.23 Opinion of Financial Advisors.................................................................21
2.24 No Other Representations and Warranties.......................................................21
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF CHANCELLOR..............................................22
3.1 Organization, Standing and Corporate Power....................................................22
3.2 Capital Structure.............................................................................22
3.3 Authority; Noncontravention...................................................................23
3.4 Chancellor SEC Documents; Financial Statements................................................25
3.5 Absence of Certain Changes or Events..........................................................25
3.6 No Extraordinary Payments or Change in Benefits...............................................26
3.7 Brokers.......................................................................................26
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
3.8 Opinion of Financial Advisors.................................................................27
3.9 Absence of Undisclosed Liabilities............................................................27
3.10 Litigation....................................................................................27
3.11 Transactions With Affiliates..................................................................28
3.12 Voting Requirements...........................................................................28
3.13 FCC Qualification.............................................................................28
3.14 Employee Arrangements and Benefit Plans.......................................................28
3.15 Tax Matters...................................................................................29
3.16 Intellectual Property.........................................................................30
3.17 Environmental Matters.........................................................................30
3.18 Compliance With Applicable Laws...............................................................31
3.19 Chancellor FCC Licenses; Operations of Chancellor Licensed Facilities.........................31
3.20 State Takeover Statutes.......................................................................32
3.21 Chancellor Common Stock.......................................................................32
3.22 No Other Representations and Warranties.......................................................32
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF MERGER SUB..............................................33
4.1 Organization, Standing and Corporate Power....................................................33
4.2 Capital Structure.............................................................................33
4.3 Authority; Noncontravention...................................................................33
4.4 No Prior Activities...........................................................................34
ARTICLE 5 ADDITIONAL AGREEMENTS.....................................................................34
5.1 Preparation of Form S-4 and Joint Proxy Statement/Prospectus; Information Supplied............34
5.2 Stockholder Approval..........................................................................35
5.3 Access To Information; Confidentiality........................................................37
5.4 Public Announcements..........................................................................37
5.5 Acquisition Proposals.........................................................................37
5.6 Consents, Approvals and Filings...............................................................39
5.7 Affiliates Letters............................................................................40
5.8 Nasdaq or Exchange Listing....................................................................40
</TABLE>
iii
<PAGE> 5
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
5.9 Indemnification...............................................................................40
5.10 Letter of Chancellor's Accountants............................................................41
5.11 Letter of Capstar's Accountants...............................................................41
5.12 [Intentionally left blank.]...................................................................41
5.13 Senior Credit Facility Consents...............................................................41
5.14 Section 16(b) Board Approval..................................................................41
5.15 Termination of or Waiver of Rights Under Stockholders Agreements..............................42
5.16 Chancellor Registration Rights................................................................42
ARTICLE 6 COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER.................................43
6.1 Conduct of Business...........................................................................43
6.2 Capstar Stock Options.........................................................................45
6.3 Capstar Warrants..............................................................................46
6.4 Other Actions.................................................................................47
ARTICLE 7 CONDITIONS PRECEDENT......................................................................47
7.1 Conditions to Each Party's Obligation to Effect the Merger....................................47
(a) Stockholder Approval........................................................47
(b) FCC Order...................................................................47
(c) Governmental and Regulatory Consents........................................47
(d) HSR Act.....................................................................48
(e) No Injunctions or Restraints................................................48
(f) Nasdaq or Exchange Approval.................................................48
(g) Form S-4....................................................................48
(h) [Intentionally left blank.].................................................48
(i) [Intentionally left blank.].................................................48
(j) Consent of Senior Lenders...................................................48
7.2 Conditions to Obligations of Capstar..........................................................48
(a) Representations and Warranties..............................................48
(b) Performance of Obligations of Chancellor and Merger Sub.....................49
(c) Tax Opinion.................................................................49
</TABLE>
iv
<PAGE> 6
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
(d) Chancellor Registration Rights..............................................49
7.3 Conditions to Obligations of Chancellor.......................................................49
(a) Representations and Warranties..............................................49
(b) Performance of Obligations of Capstar.......................................50
(c) Tax Opinion.................................................................50
(d) Material Agreements.........................................................50
(e) Financial Services Agreements...............................................50
(f) Dissenting Shares...........................................................50
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER.........................................................51
8.1 Termination...................................................................................51
8.2 Effect of Termination.........................................................................52
8.3 Amendment.....................................................................................53
8.4 Extension; Consent; Waiver....................................................................53
8.5 Procedure for Termination, Amendment, Extension, Consent or Waiver............................53
ARTICLE 9 SURVIVAL OF PROVISIONS....................................................................53
9.1 Survival......................................................................................53
ARTICLE 10 NOTICES...................................................................................54
10.1 Notices.......................................................................................54
ARTICLE 11 MISCELLANEOUS.............................................................................56
11.1 Entire Agreement..............................................................................56
11.2 Expenses......................................................................................56
11.3 Counterparts..................................................................................56
11.4 No Third Party Beneficiary....................................................................56
11.5 Governing Law.................................................................................56
11.6 Assignment; Binding Effect....................................................................56
11.7 Headings, Gender, Etc.........................................................................57
11.8 Invalid Provisions............................................................................57
11.9 No Recourse Against Others....................................................................57
11.10 Release of Old Merger Sub.....................................................................57
</TABLE>
v
<PAGE> 7
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
Annexes
- -------
<S> <C> <C>
Annex I Certificate of Incorporation of Merger Sub
Annex II Form of Second Amended and Restated Certificate of Incorporation
of Chancellor
Annex III Bylaws of Merger Sub
Annex IV Form of Affiliate Letter
</TABLE>
vi
<PAGE> 8
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this
"Agreement"), dated as of April 29, 1999, is being entered into by and among
CHANCELLOR MEDIA CORPORATION, a Delaware corporation ("Chancellor"), CAPSTAR
BROADCASTING CORPORATION, a Delaware corporation ("Capstar"), CBC ACQUISITION
COMPANY, INC., a Delaware corporation and wholly-owned subsidiary of Capstar
("Old Merger Sub"), and CMC MERGER SUB, INC., a Delaware corporation and
wholly-owned subsidiary of Chancellor ("Merger Sub").
RECITALS
WHEREAS, Chancellor, Capstar and Old Merger Sub are parties to that
certain Agreement and Plan of Merger, dated as of August 26, 1998 (the "Old
Agreement");
WHEREAS, Chancellor and Capstar still deem it advisable and in the best
interests of their respective stockholders to combine their respective
businesses in a strategic merger as contemplated by the Old Agreement;
WHEREAS, Chancellor, Capstar and Old Merger Sub desire hereby to amend
and restate the Old Agreement in its entirety and to add Merger Sub as a party
to the Agreement and to release Old Merger Sub from any obligations under the
Old Agreement;
WHEREAS, subject to the terms and conditions set forth herein, (i) the
Board of Directors of Capstar, upon the recommendation of a duly authorized
special committee thereof (consisting of Capstar's independent director) (the
"Capstar Special Committee"), has approved and declared advisable the merger of
Merger Sub with and into Capstar, (ii) the Board of Directors of Chancellor,
including a majority of the independent directors thereof, has approved and
declared advisable the foregoing merger and the other transactions contemplated
by this Agreement, and (iii) the Board of Directors of Merger Sub has approved
and declared advisable the foregoing merger;
WHEREAS, concurrently with the execution of the Old Agreement and as a
condition to Chancellor entering into the Old Agreement, certain stockholders of
Capstar have entered into a voting agreement with respect to the transactions
contemplated thereby (the "Voting Agreement");
WHEREAS, concurrently with the execution hereof and as a condition to
Chancellor entering into this Agreement, Chancellor and the stockholders of
Capstar parties to the Voting Agreement have entered into an amendment and
restatement of such Voting Agreement;
WHEREAS, it is the intention of Chancellor, Capstar and Merger Sub that
such merger will qualify as a tax-free reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
and
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WHEREAS, Chancellor, Capstar and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with such
merger and also to prescribe various conditions to such merger;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1
THE MERGER
1.1 THE MERGER. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.3), Merger Sub shall merge with
and into Capstar (the "Merger") in accordance with the General Corporation Law
of the State of Delaware (the "Delaware Code"). At the Effective Time, the
separate corporate existence of Merger Sub shall cease and Capstar shall
continue as the surviving corporation of the Merger (the "Surviving
Corporation") and as a wholly-owned subsidiary of Chancellor under the laws of
the State of Delaware and with all the rights, privileges, immunities and
powers, and subject to all the duties and liabilities, of a corporation
organized under the Delaware Code. The Merger shall have the effects set forth
in the Delaware Code.
1.2 CLOSING. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
8.1, and subject to the satisfaction or waiver of the conditions set forth in
Article VII, the closing of the Merger (the "Closing") will take place at 10:00
a.m., Dallas, Texas time, on the second business day following the date on which
the last to be fulfilled or waived of the conditions set forth in Article VII
shall be fulfilled or waived in accordance with this Agreement (the "Closing
Date"), at the offices of Weil, Gotshal & Manges LLP, 100 Crescent Court, Suite
1300, Dallas, Texas 75201, unless another date, time or place is agreed to in
writing by the parties hereto.
1.3 EFFECTIVE TIME. The parties hereto will file with the Secretary of
State of the State of Delaware (the "Delaware Secretary of State") on the
Closing Date (or on such other date as the parties may agree) a certificate of
merger or other appropriate documents, executed in accordance with the relevant
provisions of the Delaware Code, and make all other filings or recordings
required under the Delaware Code in connection with the Merger. The Merger shall
become effective upon the filing of the certificate of merger with the Delaware
Secretary of State, or at such later time specified in such certificate of
merger (the "Effective Time").
1.4 CERTIFICATE OF INCORPORATION.
(a) The Certificate of Incorporation of Merger Sub in effect
immediately prior to the Merger, attached hereto as Annex I, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended in accordance with
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its terms and as provided by the Delaware Code, except that the name of the
Surviving Corporation will be "Capstar Broadcasting Corporation."
(b) Concurrently with the execution and delivery of this Agreement,
the Board of Directors of Chancellor has adopted a resolution setting forth and
approving an amendment and restatement of the Certificate of Incorporation of
Chancellor in the form set forth as Annex II hereto (the "Amended and Restated
Charter"), and directing that the Amended and Restated Charter be considered by
the stockholders of Chancellor at the Chancellor Stockholders Meeting (as
defined in Section 5.2(b)), all in accordance with the provisions of the
Delaware Code. Prior to the Effective Time of the Merger, Chancellor shall file
the Amended and Restated Charter with the Secretary of State of the State of
Delaware.
1.5 BYLAWS. The Bylaws of Merger Sub in effect immediately prior to the
Merger, attached hereto as Annex III, shall be the bylaws of the Surviving
Corporation until thereafter amended in accordance with their terms and as
provided by applicable law.
1.6 DIRECTORS. At the Effective Time, R. Gerald Turner shall become a
"Class II Director" of Chancellor. At or prior to the Effective Time, the Board
of Directors of Chancellor shall deliver or cause to be delivered to Chancellor
certified copies of the resolutions of the Chancellor Board of Directors
appointing R. Gerald Turner as a "Class II Director" of Chancellor to be
effective as of the Effective Time.
The directors of the Surviving Corporation immediately following the
Effective Time shall be the same as the directors of Chancellor immediately
following the Effective Time, except that such directors will not be classified
as to term. Each director of the Surviving Corporation will hold office from the
Effective Time until his or her respective successor is duly elected or
appointed and qualified in the manner provided in the Surviving Corporation's
Certificate of Incorporation and Bylaws or as otherwise provided by applicable
law.
1.7 OFFICERS. The initial officers of the Surviving Corporation at the
Effective Time shall be the officers of Chancellor immediately prior to the
Effective Time. Each such officer of the Surviving Corporation will hold office
from the Effective Time until his respective successor is duly elected or
appointed and qualified in the manner provided in the Certificate of
Incorporation and Bylaws of the Surviving Corporation or as otherwise provided
by applicable law.
1.8 EFFECT ON CAPSTAR CAPITAL STOCK.
(a) OUTSTANDING CAPSTAR COMMON STOCK. Each share of Class A Common
Stock, $0.01 par value, of Capstar ("Capstar Class A Common Stock"), Class B
Common Stock, $0.01 par value, of Capstar ("Capstar Class B Common Stock"), and
Class C Common Stock, $0.01 par value, of Capstar ("Capstar Class C Common
Stock" and, collectively with the Capstar Class A Common Stock and Capstar Class
B Common Stock, the "Capstar Common Stock") issued and outstanding immediately
prior to the
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Effective Time (other than shares of Capstar Common Stock held as treasury
shares by Capstar and Dissenting Shares (as defined in Section 1.12)) shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the right to receive 0.4955 of a validly issued, fully paid
and nonassessable share of the common stock, $0.01 par value, of Chancellor
("Chancellor Common Stock"). The ratio of the shares of Chancellor Common Stock
to be issued in exchange for each whole share of Capstar Common Stock is
referred to as the "Exchange Ratio." The shares of Chancellor Common Stock to be
issued to holders of Capstar Common Stock in accordance with this Section
1.8(a), and any cash to be paid in lieu of fractional shares of Chancellor
Common Stock, are referred to as the "Merger Consideration."
(b) TREASURY SHARES. Each share of Capstar Common Stock which is
held as a treasury share by Capstar at the Effective Time shall, by virtue of
the Merger and without any action on the part of Capstar, be cancelled and
retired and cease to exist, without any conversion thereof.
(c) IMPACT OF STOCK SPLITS, ETC. In the event of any change in
Capstar Common Stock and/or Chancellor Common Stock between the date of this
Agreement and the Effective Time of the Merger in accordance with the terms of
this Agreement by reason of any stock split, stock dividend, subdivision,
reclassification, recapitalization, combination, exchange of shares or the like,
the number and class of shares of Chancellor Common Stock to be issued and
delivered in the Merger in exchange for each outstanding share of Capstar Common
Stock as provided in this Agreement shall be appropriately adjusted so as to
maintain the relative proportionate interests of the holders of Chancellor
Common Stock and Capstar Common Stock.
1.9 EFFECT ON CHANCELLOR CAPITAL STOCK. Each share of Chancellor Common
Stock, 7% Convertible Preferred Stock, $0.01 par value ("Chancellor 7%
Convertible Preferred Stock"), and $3.00 Convertible Exchangeable Preferred
Stock, $0.01 par value ("Chancellor $3.00 Convertible Preferred Stock" and,
collectively with the Chancellor 7% Convertible Preferred Stock, the "Chancellor
Convertible Preferred Stock"), of Chancellor issued and outstanding immediately
prior to the Effective Time shall remain outstanding and shall be unaffected by
the Merger.
1.10 EFFECT ON MERGER SUB CAPITAL STOCK. Each share of common stock,
$0.01 par value, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into one share of common stock, $0.01 par
value, of the Surviving Corporation and such shares shall, collectively,
represent all of the issued and outstanding capital stock of the Surviving
Corporation.
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1.11 EXCHANGE OF CERTIFICATES.
(a) PAYING AGENT. Immediately following the Effective Time,
Chancellor shall deposit with its transfer agent and registrar (the "Paying
Agent"), for the benefit of the holders of Capstar Common Stock (other than
treasury shares and Dissenting Shares), certificates representing the shares of
Chancellor Common Stock to be issued to such holders pursuant to Section 1.8
(such certificates, together with any dividends or distributions with respect to
the shares represented by such certificates, being hereinafter referred to as
the "Payment Fund").
(b) EXCHANGE PROCEDURES. As soon as practicable after the Effective
Time, each holder of an outstanding certificate or certificates which prior
thereto represented shares of Capstar Common Stock shall, upon surrender to the
Paying Agent of such certificate or certificates and acceptance thereof by the
Paying Agent, be entitled to a certificate representing that number of whole
shares of Chancellor Common Stock which the aggregate number of shares of
Capstar Common Stock previously represented by such certificate or certificates
surrendered shall have been converted into the right to receive pursuant to
Section 1.8 of this Agreement. The Paying Agent shall accept such certificates
upon compliance with such reasonable terms and conditions as the Paying Agent
may impose to effect an orderly exchange thereof in accordance with its normal
exchange practices. If the Merger Consideration (or any portion thereof) is to
be delivered to any person other than the person in whose name the certificate
or certificates representing the shares of Capstar Common Stock surrendered in
exchange therefor is registered, it shall be a condition to such exchange that
the certificate or certificates so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the person requesting such
exchange shall pay to the Paying Agent any transfer or other Taxes (as defined
in Section 2.18) required by reason of the payment of such consideration to a
person other than the registered holder of the certificate(s) surrendered, or
shall establish to the satisfaction of the Paying Agent that such Tax has been
paid or is not applicable. After the Effective Time, there shall be no further
transfer on the records of Capstar or its transfer agent of certificates
representing shares of Capstar Common Stock, and if such certificates are
presented to the Surviving Corporation, they shall be cancelled against delivery
of the Merger Consideration as hereinabove provided. Until surrendered as
contemplated by this Section 1.11(b), each certificate representing shares of
Capstar Common Stock (other than certificates representing treasury shares to be
cancelled in accordance with the terms of this Agreement and Dissenting Shares),
shall be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender the Merger Consideration without any interest
thereon, as contemplated by Section 1.8.
(c) LETTER OF TRANSMITTAL. Promptly after the Effective Time (but in
no event more than five business days thereafter), Chancellor shall require the
Paying Agent to mail to each record holder of certificates that immediately
prior to the Effective Time represented shares of Capstar Common Stock which
have been converted pursuant to Section 1.8, a form of letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
shall pass, only upon proper delivery of certificates representing shares of
Capstar Common Stock to the Paying Agent, and which shall be in
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<PAGE> 13
such form and have such provisions as Chancellor reasonably may specify) and
instructions for use in surrendering such certificates and receiving the Merger
Consideration to which such holder shall be entitled therefor pursuant to
Section 1.8.
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends
or other distributions with respect to Chancellor Common Stock with a record
date after the Effective Time shall be paid to the holder of any certificate
that immediately prior to the Effective Time represented shares of Capstar
Common Stock which have been converted pursuant to Section 1.8, until the
surrender for exchange of such certificate in accordance with this Article I.
Following surrender for exchange of any such certificate, there shall be paid to
the holder of such certificate, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to the number of whole
shares of Chancellor Common Stock into which the shares of Capstar Common Stock
represented by such certificate immediately prior to the Effective Time were
converted pursuant to Section 1.8, and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time, but prior to such surrender, and with a payment date subsequent
to such surrender, payable with respect to such whole shares of Chancellor
Common Stock.
(e) NO FURTHER OWNERSHIP RIGHTS IN CAPSTAR COMMON STOCK. The Merger
Consideration (or, in the case of Dissenting Shares, the cash payment therefor)
paid upon the surrender for exchange of certificates representing shares of
Capstar Common Stock in accordance with the terms of this Article I shall be
deemed to have been issued and paid in full satisfaction of all rights
pertaining to the shares of Capstar Common Stock theretofore represented by such
certificates, subject, however, to Capstar's obligation (if any) to pay any
dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared by Capstar on the shares of Capstar
Common Stock and which remain unpaid at the Effective Time. From and after the
Effective Time, the holders of certificates evidencing ownership of shares of
Capstar Common Stock shall cease to have any further rights with respect to such
shares except as provided herein or by applicable law.
(f) NO FRACTIONAL SHARES. No certificates or scrip representing
fractional shares of Chancellor Common Stock shall be issued upon the surrender
for exchange of certificates that immediately prior to the Effective Time
represented shares of Capstar Common Stock which have been converted pursuant to
Section 1.8, and such fractional share interests will not entitle the owner
thereof to vote or any rights of a stockholder of Chancellor. In lieu of any
such fractional shares, the Paying Agent shall, on behalf of all holders of
fractional shares of Chancellor Common Stock, aggregate all such fractional
interests (collectively, the "Fractional Shares") and such Fractional Shares
shall be sold by the Paying Agent as agent for the holders of such Fractional
Shares at the then prevailing price on The Nasdaq Stock Market (or on the New
York Stock Exchange, if such shares of Chancellor Common Stock are then listed
thereon), all in the manner provided hereinafter. Until the gross proceeds of
such sale or sales have been distributed to the holders of Fractional Shares,
the Paying Agent shall retain such proceeds in trust for the benefit of such
holders as part of the Payment Fund. The sale of the Fractional
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<PAGE> 14
Shares shall be executed on The Nasdaq Stock Market or through one or more
member firms of The Nasdaq Stock Market (or, in each case, on the New York Stock
Exchange, if such shares of Chancellor Common Stock are then listed thereon) and
will be executed in round lots, to the extent practicable. The Paying Agent will
determine the portion, if any, of the gross proceeds of such sale or sales to
which each holder of Fractional Shares is entitled, by multiplying the amount of
the aggregate gross proceeds of the sale of the Fractional Shares by a fraction,
the numerator of which is the amount of Fractional Shares to which such holder
is entitled and the denominator of which is the aggregate amount of Fractional
Shares to which all holders of Fractional Shares are entitled; provided,
however, that in lieu of the foregoing, at the sole option of Chancellor,
Chancellor may instead satisfy payment with respect to such Fractional Shares by
delivering to the Paying Agent reasonably promptly following the Effective Time
cash (without interest) in an amount equal to the aggregate amount of all such
Fractional Shares multiplied by the closing price per share of Chancellor Common
Stock on The Nasdaq Stock Market (or on the New York Stock Exchange, if such
shares of Chancellor Common Stock are then listed thereon) on the trading day
immediately prior to the Effective Time.
(g) TERMINATION OF PAYMENT FUND. Any portion of the Payment Fund
which remains undistributed to the holders of certificates representing shares
of Capstar Common Stock for 120 days after the Effective Time shall be delivered
to Chancellor, upon demand, and any holders of shares of Capstar Common Stock
who have not theretofore complied with this Article I shall thereafter look only
to Chancellor and only as general creditors thereof for payment of their claims
for any Merger Consideration.
(h) NO LIABILITY. None of Chancellor, the Surviving Corporation or
the Paying Agent shall be liable to any person in respect of any cash, shares,
dividends or distributions payable from the Payment Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any certificates representing shares of Capstar Common Stock shall not have
been surrendered prior to five years after the Effective Time (or immediately
prior to such earlier date on which any Merger Consideration in respect of such
certificate would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 2.3)), any such cash, shares,
dividends or distributions payable in respect of such certificate shall, to the
extent permitted by applicable law, become the property of Chancellor, free and
clear of all claims or interest of any person previously entitled thereto.
(i) WITHHOLDING OF TAX. Chancellor shall be entitled to deduct and
withhold (or caused to be deducted or withheld) from the Merger Consideration
otherwise payable pursuant to this Agreement to any former holder of Capstar
Common Stock and from payments made in respect of Dissenting Shares, such amount
as Chancellor (or any affiliate thereof) or the Paying Agent is required to
deduct and withhold with respect to the making of such payment under the Code or
state, local or foreign Tax law. To the extent that amounts are so withheld (or
caused to be withheld) by Chancellor, such withheld amounts shall be treated for
all purposes of this Agreement
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as having been paid to the former holder of Capstar Common Stock in respect of
which such deduction and withholding was made by Chancellor.
1.12 DISSENTING SHARES. Notwithstanding anything to the contrary in this
Agreement, shares of Capstar Class B Common Stock and Capstar Class C Common
Stock outstanding immediately prior to the Effective Time and held by a holder
who has not voted in favor of the Merger or consented thereto and who properly
demands in writing appraisal of such shares of Capstar Class B Common Stock and
Capstar Class C Common Stock, as the case may be, in accordance with Section 262
of the Delaware Code and who shall not have withdrawn such demand or otherwise
have forfeited appraisal rights, shall not be converted into or represent the
right to receive the Merger Consideration therefor ("Dissenting Shares"). Such
stockholders shall be entitled to receive payment of the appraised value of such
shares of Capstar Class B Common Stock and Capstar Class C Common Stock, as the
case may be, held by them in accordance with the provisions of Section 262 of
the Delaware Code, except that all Dissenting Shares held by stockholders who
shall have failed to perfect or who effectively shall have withdrawn or lost
their rights to appraisal of such securities under Section 262 shall thereupon
be deemed to have been converted into, as of the Effective Time, the right to
receive, without any interest thereon, the Merger Consideration, upon surrender
in the manner provided in this Article I of the certificate or certificates that
formerly represented such securities. Capstar shall take all actions required to
be taken by it in accordance with Section 262(d) of the Delaware Code with
respect to the holders of Capstar Class B Common Stock and Capstar Class C
Common Stock.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF CAPSTAR
Capstar hereby represents and warrants to Chancellor and Merger Sub as
follows:
2.1 ORGANIZATION, STANDING AND CORPORATE POWER. Each of Capstar and the
Capstar Significant Subsidiaries (as defined below) is a corporation, limited
partnership or limited liability company duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is organized and
has the requisite corporate, partnership or limited liability company power and
authority to carry on its business as now being conducted. Each of Capstar and
the Capstar Significant Subsidiaries is duly qualified to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to be so qualified could not reasonably be expected to
have a material adverse effect on the business, properties, results of
operations, or condition (financial or otherwise) of Capstar and its
subsidiaries, considered as a whole (other than as a result of changes in
general economic conditions or in economic conditions generally affecting the
radio broadcasting industry) (a "Capstar Material Adverse Effect"). Capstar has
delivered to Chancellor complete and correct copies of its Certificate of
Incorporation and Bylaws, as amended to August 26, 1998. For purposes of this
Agreement, a "Capstar Significant Subsidiary" means any subsidiary of Capstar
that would constitute a "significant subsidiary" within the meaning of Rule 1-02
of
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Regulation S-X of the Securities and Exchange Commission (the "SEC"). For
purposes of this Agreement, a "subsidiary" of any person shall mean any other
entity at least a majority of the equity interests in which is beneficially
owned, directly or indirectly, by the specified person.
2.2 CAPITAL STRUCTURE. (a) The authorized capital stock of Capstar
consists of (i) 750,000,000 shares of Capstar Class A Common Stock, (ii)
150,000,000 shares of Capstar Class B Common Stock, (iii) 150,000,000 shares of
Capstar Class C Common Stock, and (iv) 100,000,000 shares of preferred stock,
$0.01 par value, none of which shares of preferred stock are issued and
outstanding. At the close of business on August 24, 1998: (A) 33,925,158 shares
of Capstar Class A Common Stock were issued and outstanding, 500,000 shares of
Capstar Class A Common Stock were reserved for issuance pursuant to outstanding
warrants (the "Class A Warrants") to purchase shares of Capstar Class A Common
Stock, 4,700,000 shares of Capstar Class A Common Stock were reserved for
issuance pursuant to options to purchase Capstar Class A Common Stock granted
under the Capstar Broadcasting Corporation 1998 Amended and Restated Stock
Option Plan (the "Capstar Stock Option Plan"), of which stock options to
purchase 3,841,045 shares of Capstar Class A Common Stock have been granted to
directors, officers or employees of Capstar or others ("Capstar Stock Options"),
and 300,000,000 shares of Capstar Class A Common Stock were reserved for
issuance upon the conversion of shares of Capstar Class B Common Stock and
Capstar Class C Common Stock; (B) 6,081,723 shares of Capstar Class B Common
Stock were issued and outstanding and no shares of Capstar Class B Common Stock
were reserved for issuance for any purpose; (C) 67,589,121 shares of Capstar
Class C Common Stock were issued and outstanding and 2,196,408 shares of Capstar
Class C Common Stock were reserved for issuance pursuant to outstanding warrants
(the "Class C Warrants" and, collectively with the Class A Warrants, the
"Warrants") to purchase shares of Capstar Class C Common Stock; and (D) no
shares of Capstar Common Stock were held as treasury shares by Capstar or any
subsidiary of Capstar. Except as set forth above or disclosed in writing by
Capstar to Chancellor in a disclosure letter (the "Capstar Disclosure Letter")
delivered to Capstar prior to the execution and delivery of the Old Agreement,
at the close of business on August 24, 1998, no shares of capital stock or other
equity securities of Capstar were authorized, issued, reserved for issuance or
outstanding. All outstanding shares of Capstar Common Stock are, and all shares
which may be issued upon the exercise of outstanding Capstar Stock Options and
Warrants will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. No bonds, debentures, notes
or other indebtedness of Capstar or any subsidiary of Capstar having the right
to vote (or convertible into, or exchangeable for, securities having the right
to vote) on any matters on which the stockholders of Capstar or any subsidiary
of Capstar may vote are issued or outstanding. All the outstanding shares of
capital stock or other equity interests of each subsidiary of Capstar have been
validly issued and are fully paid and nonassessable and (except for the shares
of 12% Senior Exchangeable Preferred Stock, $0.01 par value ("Capstar Partners
12% Preferred Stock"), of Capstar Broadcasting Partners, Inc., a Delaware
corporation ("Capstar Partners"), and the 12-5/8% Series E Cumulative
Exchangeable Preferred Stock, $0.01 par value ("Capstar Communications 12-5/8%
Preferred Stock"), of Capstar Communications, Inc. (formerly known as SFX
Broadcasting, Inc.) ("Capstar
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Communications")), are owned by Capstar, by one or more wholly-owned
subsidiaries of Capstar or by Capstar and one or more such wholly-owned
subsidiaries, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens"), except for Liens arising out of the senior credit
facility of Capstar Radio Broadcasting Partners, Inc., a Delaware corporation
("Capstar Radio Partners"), and the $150 million promissory note dated May 29,
1998, as it may be amended from time to time, made payable by Capstar to
Chancellor. Except as set forth above, in Section 6.4, in the Capstar Disclosure
Letter or the Capstar SEC Documents (as defined in Section 2.4) and except for
certain provisions of the Certificate of Incorporation of Capstar relating to
"alien ownership" of the Capstar Common Stock, as of August 26, 1998, neither
Capstar nor any subsidiary of Capstar had any outstanding option, warrant,
subscription or other right, agreement or commitment that either (i) obligated
Capstar or any subsidiary of Capstar to issue, sell or transfer, repurchase,
redeem or otherwise acquire or vote any shares of the capital stock of Capstar
or any Capstar Significant Subsidiary or (ii) restricted the transfer of Capstar
Common Stock. Except with respect to the formation of Old Merger Sub, from the
close of business on August 24, 1998 to August 26, 1998, neither Capstar nor any
subsidiary of Capstar issued any capital stock or securities or other rights
convertible into or exercisable or exchangeable for shares of such capital
stock.
2.3 AUTHORITY; NONCONTRAVENTION. Capstar has the requisite corporate
power and authority to enter into this Agreement and, subject to the approval
and adoption of this Agreement by the holders of a majority of the voting power
of the outstanding shares of Capstar Class A Common Stock and the Capstar Class
C Common Stock, voting as a single class as set forth in Section 5.2(a) (the
"Capstar Stockholders Approval"), to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement by Capstar and the
consummation by Capstar of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Capstar, subject to
the Capstar Stockholders Approval. This Agreement has been duly executed and
delivered by Capstar and, assuming this Agreement constitutes the valid and
binding agreement of each of the other parties hereto, constitutes a valid and
binding obligation of Capstar, enforceable against it in accordance with its
terms except that the enforcement thereof may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to creditor's rights generally and (b) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity). Except as disclosed in the Capstar Disclosure Letter or the
supplement to the Capstar Disclosure Letter dated the date hereof and subject to
receipt of the Capstar Stockholders Approval, the execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated by this
Agreement and compliance with the provisions hereof will not, (i) conflict with
any of the provisions of the Certificate of Incorporation or Bylaws of Capstar
or the comparable documents of any Capstar Significant Subsidiary, (ii) subject
to the governmental filings and other matters referred to in the following
sentence, conflict with, result in a breach of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a material benefit
under, or require the consent of any person under, any indenture or other
agreement, permit, concession, franchise,
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license or similar instrument or undertaking to which Capstar or any of the
Capstar Significant Subsidiaries is a party or by which Capstar or any of the
Capstar Significant Subsidiaries or any of their assets is bound or affected,
(iii) result in an obligation by Capstar, the Surviving Corporation, Chancellor,
or any of their respective subsidiaries to redeem, repurchase or retire (or
offer to redeem, repurchase or retire) any indebtedness of Capstar or any of its
subsidiaries outstanding as of the date hereof or equity security of Capstar or
any of its subsidiaries outstanding as of the date hereof, or (iv) subject to
the governmental filings and other matters referred to in the following
sentence, contravene any law, rule or regulation of any state or of the United
States or any political subdivision thereof or therein, or any order, writ,
judgment, injunction, decree, determination or award currently in effect,
except, in the cases of the foregoing clauses (ii) through (iv), for conflicts,
breaches, defaults or other consequences (collectively, "breaches") that,
individually or in the aggregate, could not reasonably be expected to have a
Capstar Material Adverse Effect or to materially hinder Capstar's ability to
consummate the transactions contemplated by this Agreement. No consent, approval
or authorization of, or declaration or filing with, or notice to, any
governmental agency or regulatory authority (a "Governmental Entity") which has
not been received or made, is required by or with respect to Capstar or any of
the Capstar Significant Subsidiaries in connection with the execution and
delivery of this Agreement by Capstar or the consummation by Capstar of the
transactions contemplated hereby, except for (i) the filing of premerger
notification and report forms under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), with respect to the Merger and the
termination or earlier expiration of the applicable waiting period thereunder,
(ii) such filings with and approvals required by the Federal Communications
Commission or any successor entity (the "FCC") under the Communications Act of
1934, as amended, and the rules, regulations and policies of the FCC promulgated
thereunder (collectively, the "Communications Act") including those required in
connection with the transfer of control of Capstar FCC Licenses (as defined in
Section 2.9) for the operation of the Capstar Licensed Facilities, (iii) a proxy
statement to be filed with the SEC by Capstar relating to the Capstar
Stockholders Approval (such proxy statement, as amended or supplemented from
time to time, the "Joint Proxy Statement/Prospectus"), (iv) such reports under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as may be
required in connection with this Agreement and the transactions contemplated by
this Agreement, (v) such filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
other transactions contemplated by this Agreement, (vi) such filings as may be
required in connection with statutory provisions and regulations relating to
real property transfer gains taxes and real property transfer taxes, (vii) any
filing required by the New York Stock Exchange, and (viii) the filing of the
Certificate of Merger with the Delaware Secretary of State and appropriate
documents with the relevant authorities of other states in which Capstar is
qualified to do business.
2.4 CAPSTAR SEC DOCUMENTS; FINANCIAL STATEMENTS. (i) Capstar has filed
with the SEC a Registration Statement on Form S-1, as amended (the "IPO
Registration Statement"), with respect to the registration of an initial public
offering of the Capstar Class A Common Stock pursuant to the Prospectus dated
May 26, 1998 contained in such
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IPO Registration Statement, and has filed all required reports, schedules,
forms, statements and other documents with the SEC since the effective date of
the IPO Registration Statement to August 26, 1998 (such IPO Registration
Statement and reports, schedules, forms, statements and other documents and any
other documents filed with the SEC by Capstar, Capstar Partners, Capstar Radio
Partners and Capstar Communications and publicly available prior to August 26,
1998 are hereinafter referred to as the "Capstar SEC Documents"); (ii) as of
their respective dates, the Capstar SEC Documents complied in all material
respects with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Capstar SEC
Documents, and none of the Capstar SEC Documents as of such dates contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading; and (iii)
as of their respective dates, the consolidated financial statements of Capstar
and its predecessors included in the Capstar SEC Documents complied as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Rule 10-01 of Regulation S-X) and
fairly present, in all material respects, the consolidated financial position of
Capstar and its consolidated subsidiaries (or its predecessors and their
respective consolidated subsidiaries) as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (on the basis stated therein and subject, in the case of unaudited
quarterly statements, to normal year-end audit adjustments).
2.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Capstar SEC Documents, the Capstar Disclosure Letter or in the supplement to the
Capstar Disclosure Letter dated the date hereof, or as otherwise agreed to in
one or more writings after August 26, 1998 by Chancellor (which writings are
hereby reaffirmed), or as expressly permitted by this Agreement, since the date
of the most recent audited financial statements of Capstar contained in the
Capstar SEC Documents, Capstar and its subsidiaries have conducted their
business only in the ordinary course, and there has not been (i) any change
which could reasonably be expected to have a Capstar Material Adverse Effect
(including as a result of the consummation of the transactions contemplated by
this Agreement), (ii) to August 26, 1998, any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any of Capstar's outstanding capital stock, (iii) to
August 26, 1998, any split, combination or reclassification of any of its
outstanding capital stock or any issuance or the authorization of any issuance
of any other securities in respect of, in lieu of or in substitution for shares
of its outstanding capital stock, (iv) to August 26, 1998, (x) any granting by
Capstar or any of its subsidiaries to any director, officer or other employee or
independent contractor of Capstar or any of its subsidiaries of any increase in
compensation or acceleration of benefits as a result of which the annual
compensation payable with respect thereto would exceed $150,000, except under
employment agreements in effect as of the date of the most recent audited
financial statements of Capstar contained in the Capstar SEC Documents, (y) any
granting by Capstar or any of
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its subsidiaries to any director, officer or other employee or independent
contractor of any increase in, or acceleration of benefits in respect of,
severance or termination pay, or pay in connection with any change of control of
Capstar, except in the ordinary course of business consistent with prior
practice or as was required under any employment, severance or termination
agreements in effect as of the date of the most recent audited financial
statements of Capstar contained in the Capstar SEC Documents, or (z) any entry
by Capstar or any of its subsidiaries into any employment, severance, change of
control, or termination or similar agreement as a result of which the annual
compensation payable with respect thereto would exceed $150,000 with any
director, executive officer or other employee or independent contractor, or (v)
any change in accounting methods, principles or practices by Capstar or any of
its subsidiaries materially affecting its assets, liability or business, except
insofar as may have been required by a change in generally accepted accounting
principles.
2.6 NO EXTRAORDINARY PAYMENTS OR CHANGE IN BENEFITS. Except as disclosed
in the Capstar Disclosure Letter, in the supplement to the Capstar Disclosure
Letter dated the date hereof or in the Capstar SEC Documents, no current or
former director, officer, employee or independent contractor of Capstar or any
of its subsidiaries is entitled to receive any payment under any agreement,
arrangement or policy (written or oral) relating to employment, severance,
change of control, termination, stock options, stock purchases, compensation,
deferred compensation, fringe benefits or other employee benefits currently in
effect (collectively, the "Capstar Benefit Plans"), nor will any benefit
received or to be received by any current or former director, officer, employee
or independent contractor of Capstar or any of its subsidiaries under any
Capstar Benefit Plan be accelerated or modified, in each case, as a result of or
in connection with the execution and delivery of, or the consummation of the
transactions contemplated by, this Agreement.
2.7 VOTING REQUIREMENTS. The affirmative vote of the holders of a
majority of the voting power of the outstanding shares of Capstar Class A Common
Stock and Capstar Class C Common Stock, voting as a single class as provided in
Capstar's Certificate of Incorporation, with respect to the adoption of this
Agreement is the only vote of the holders of any class or series of Capstar's
capital stock necessary by law to approve this Agreement and the transactions
contemplated by this Agreement.
2.8 STATE TAKEOVER STATUTES. The Board of Directors of Capstar has
approved the terms of this Agreement and the consummation of the transactions
contemplated by this Agreement, and such approval is sufficient to render
inapplicable to the Merger and the other transactions contemplated by this
Agreement the provisions of Section 203 of the Delaware Code. To Capstar's
knowledge, no other state takeover statute or similar statute or regulation
applies or purports to apply to the Merger, this Agreement or any of the
transactions contemplated by this Agreement and no provision of the Certificate
of Incorporation, Bylaws or other governing instrument of Capstar or any of its
subsidiaries would, directly or indirectly, restrict or impair the ability of
Capstar to consummate the transactions contemplated by this Agreement.
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2.9 CAPSTAR FCC LICENSES; OPERATIONS OF CAPSTAR LICENSED FACILITIES.
Capstar and its subsidiaries have operated the radio stations for which Capstar
and any of its subsidiaries hold licenses from the FCC, in each case which are
owned or operated by Capstar and its subsidiaries (each a "Capstar Licensed
Facility" and collectively the "Capstar Licensed Facilities"), in material
compliance with the terms of the licenses issued by the FCC to Capstar and its
subsidiaries (the "Capstar FCC Licenses"), and in material compliance with the
Communications Act, except where the failure to do so could not, individually or
in the aggregate, reasonably be expected to have a Capstar Material Adverse
Effect. To the knowledge of Capstar, each broadcast radio station for which
Capstar or any of its subsidiaries provides programming and advertising services
pursuant to a local marketing agreement (each a "Capstar LMA Facility" and
collectively the "Capstar LMA Facilities") has been operated in material
compliance with the terms of the licenses issued by the FCC to the owner of such
Capstar LMA Facility (each an "LMA Facility FCC License" and collectively the
"LMA Facility FCC Licenses"). Capstar has, and its subsidiaries have, timely
filed or made all applications, reports and other disclosures required by the
FCC to be made with respect to the Capstar Licensed Facilities and have timely
paid all FCC regulatory fees with respect thereto, except where the failure to
do so could not, individually or in the aggregate, reasonably be expected to
have a Capstar Material Adverse Effect. Capstar and each of its subsidiaries
have, and are the authorized legal holders of, all the Capstar FCC Licenses
necessary or used in the operation of the businesses of the Capstar Licensed
Facilities as presently operated. To the knowledge of Capstar, the third-parties
with which Capstar or its subsidiaries have entered into local marketing
agreements with respect to the Capstar LMA Facilities have, and are the
authorized legal holders of, the LMA Facility FCC License necessary or used in
the operation of the business of the respective Capstar LMA Facility to which
such local marketing agreement relates. All Capstar FCC Licenses and, to the
knowledge of Capstar, LMA Facility FCC Licenses are validly held and are in full
force and effect, unimpaired by any act or omission of Capstar, each of its
subsidiaries (or, to Capstar's knowledge, their respective predecessors) or
their respective officers, employees or agents, except where such impairments
could not, individually or in the aggregate, reasonably be expected to have a
Capstar Material Adverse Effect. As of August 26, 1998, except as set forth in
the Capstar Disclosure Letter, no application, action or proceeding is pending
for the renewal of any Capstar FCC License or, to the knowledge of Capstar, LMA
Facility FCC License as to which any petition to deny has been filed and, to
Capstar's knowledge, there is not now before the FCC any material investigation,
proceeding, notice of violation or order of forfeiture relating to any Capstar
Licensed Facility or Capstar LMA Facility that, if adversely determined, could
reasonably be expected to have a Capstar Material Adverse Effect. As of August
26, 1998, except as set forth in the Capstar Disclosure Letter, Capstar is not
aware of any basis that could reasonably be expected to cause the FCC not to
renew any of the Capstar FCC Licenses or the LMA Facility FCC Licenses (other
than proceedings to amend FCC rules or the Communications Act of general
applicability to the radio broadcast industry). There is not now pending and, to
Capstar's knowledge, there is not threatened, any action by or before the FCC to
revoke, suspend, cancel, rescind or modify in any material respect any of the
Capstar FCC Licenses or, to the knowledge of Capstar, any of the LMA Facility
FCC Licenses that, if adversely determined, could reasonably be expected to have
a
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Capstar Material Adverse Effect (other than proceedings to amend FCC rules or
the Communications Act of general applicability to the radio broadcast
industry).
2.10 BROKERS. Except with respect to Hicks, Muse & Co. Partners, L.P.
("Hicks Muse"), Credit Suisse First Boston Corporation ("CSFB"), BT Wolfensohn,
a division of BT Alex. Brown Incorporated ("BT Wolfensohn") and Bear, Stearns &
Co. Inc. ("Bear Stearns"), all negotiations relating to this Agreement and the
transactions contemplated hereby have been carried out by Capstar directly with
Chancellor without the intervention of any person on behalf of Capstar in such a
manner as to give rise to any valid claim by any person against Capstar,
Chancellor, the Surviving Corporation or any subsidiary of any of them for a
finder's fee, brokerage commission, or similar payment. The Capstar Disclosure
Letter and the supplement to the Capstar Disclosure Letter dated the date hereof
set forth a written summary of the terms of its agreement relating to the
transactions contemplated by this Agreement with CSFB, BT Wolfensohn and Bear
Stearns, and Section 7.3(e) of this Agreement sets forth a summary of the terms
of its agreement relating to the transactions contemplated by this Agreement
with Hicks Muse, and Capstar has no other agreements or understandings (written
or oral) with respect to such services.
2.11 FCC QUALIFICATION. Capstar and its subsidiaries are fully qualified
under the Communications Act to be the transferors of control of the Capstar FCC
Licenses. Except as disclosed in the Capstar Disclosure Letter or in the
supplement to the Capstar disclosure letter dated the date hereof, Capstar is
not aware of any facts or circumstances relating to the FCC qualifications of
Capstar or any of its subsidiaries that could reasonably be expected to prevent
the FCC's granting the FCC Form 316 Transfer of Control Application to be filed
with respect to the Merger.
2.12 COMPLIANCE WITH APPLICABLE LAWS. Each of Capstar and its
subsidiaries has in effect all federal, state, local and foreign governmental
approvals, authorizations, certificates, filings, franchises, licenses, notices,
permits and rights (collectively, "Permits") necessary for it to own, lease or
operate its properties and assets and to carry on its business as now conducted,
other than such Permits the absence of which could not, individually or in the
aggregate, reasonably be expected to have a Capstar Material Adverse Effect, and
there has occurred no default under any such Permit other than such defaults
which, individually or in the aggregate, could not reasonably be expected to
have a Capstar Material Adverse Effect. Except as disclosed in the Capstar
Disclosure Letter, Capstar and its subsidiaries are in compliance with all
applicable statutes, laws, ordinances, rules, orders and regulations of any
Governmental Entity, except for such noncompliance which, individually or in the
aggregate, could not reasonably be expected to have a Capstar Material Adverse
Effect.
2.13 ABSENCE OF UNDISCLOSED LIABILITIES. Except for (x) liabilities
disclosed in the Capstar SEC Documents, (y) current liabilities incurred by
Capstar and its subsidiaries in the ordinary course of business consistent with
past practices since the date of the most recent consolidated balance sheet of
Capstar set forth in Capstar's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998, as filed with the SEC (the "1998 Capstar 10-K"), and
(z) liabilities contemplated by this Agreement or
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disclosed in the Capstar Disclosure Letter, Capstar and its subsidiaries do not
have any material indebtedness, obligations or liabilities of any kind (whether
accrued, absolute, contingent or otherwise) (i) required by GAAP to be reflected
on a consolidated balance sheet of Capstar and its consolidated subsidiaries or
in the notes, exhibits or schedules thereto or (ii) which reasonably could be
expected to have a Capstar Material Adverse Effect.
2.14 LITIGATION. Except as disclosed in the Capstar SEC Documents or the
Capstar Disclosure Letter, to August 26, 1998, there is no litigation,
administrative action, arbitration or other proceeding pending against Capstar
or any of its subsidiaries or, to the knowledge of Capstar, threatened that,
individually or in the aggregate, could reasonably be expected to (i) have a
Capstar Material Adverse Effect or (ii) prevent, or significantly delay, the
consummation of the transactions contemplated by this Agreement. Except as set
forth in the Capstar Disclosure Letter or in the Capstar SEC Documents, to
August 26, 1998, there is no judgment, order, injunction or decree of any
Governmental Entity outstanding against Capstar or any of its subsidiaries that,
individually or in the aggregate, could reasonably be expected to have any
effect referred to in the foregoing clauses (i) and (ii) of this Section 2.14.
2.15 TRANSACTIONS WITH AFFILIATES. Other than the transactions
contemplated by this Agreement, or except to the extent disclosed in the Capstar
SEC Documents or in the Capstar Disclosure Letter or in the supplement to the
Capstar Disclosure Letter dated the date hereof, there have been no
transactions, agreements, arrangements or understandings between Capstar or its
subsidiaries, on the one hand, and Capstar's affiliates (other than subsidiaries
of Capstar) or any other person, on the other hand, that would be required to be
disclosed under Item 404 of Regulation S-K under the Securities Act.
2.16 LABOR MATTERS. Except as set forth in the Capstar Disclosure Letter
or in the Capstar SEC Documents, (i) neither Capstar nor any of its subsidiaries
is a party to any labor or collective bargaining agreement, and no employees of
Capstar or any of its subsidiaries are represented by any labor organization,
(ii) to the knowledge of Capstar, there are no material representation or
certification proceedings, or petitions seeking a representation proceeding,
pending or threatened to be brought or filed with the National Labor Relations
Board or any other labor relations tribunal or authority and (iii) to the
knowledge of Capstar, there are no material organizing activities involving
Capstar or any of its subsidiaries with respect to any group of employees of
Capstar or its subsidiaries.
2.17 EMPLOYEE ARRANGEMENTS AND BENEFIT PLANS.
(a) The Capstar Disclosure Letter sets forth a complete and correct
list of (i) as of August 26, 1998, all Capstar Benefit Plans, including all
employee benefit plans within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), sponsored by
Capstar or any of its subsidiaries, and (ii) as of August 26, 1998, all persons
with whom Capstar or its subsidiaries had written employment, severance,
termination, change-in-control or indemnification agreements
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(collectively, the "Employment Arrangements"), under which Capstar or any of its
subsidiaries had any obligation or liability (contingent or otherwise), except
for any Employment Arrangement which (x) provided for annual compensation
(excluding benefits) of $150,000 or less, (y) had an unexpired term of or can be
terminated (before, on or after a change in control) in less than one year from
the date hereof without additional cost or penalty or (z) related to agreements
for on-air talent entered into in the ordinary course of business consistent
with past practices. Except as set forth in the Capstar SEC Documents or in the
Capstar Disclosure Letter and except as could not, individually or in the
aggregate, reasonably be expected to have a Capstar Material Adverse Effect: (A)
each Capstar Benefit Plan has been administered and is in compliance with the
terms of such plan and all applicable laws, rules and regulations, (B) no
"reportable event" (as such term is used in section 4043 of ERISA) (other than
those events for which the 30 day notice has been waived pursuant to the
regulations), "prohibited transaction" (as such term is used in section 406 of
ERISA or section 4975 of the Code) or "accumulated funding deficiency" (as such
term is used in section 412 or 4971 of the Code) has heretofore occurred with
respect to any Capstar Benefit Plan and (C) each Capstar Benefit Plan intended
to qualify under Section 401(a) of the Code has received a favorable
determination from the United States Internal Revenue Service ("IRS") regarding
its qualified status and no notice has been received from the IRS with respect
to the revocation of such qualification.
(b) To August 26, 1998, there is no litigation or administrative or
other proceeding involving any Capstar Benefit Plan or Employment Arrangement
nor has Capstar or any of its subsidiaries received written notice that any such
proceeding is threatened, in each case where an adverse determination could
reasonably be expected to have a Capstar Material Adverse Effect. Except as set
forth in the Capstar Disclosure Letter, to August 26, 1998, neither Capstar nor
any of its subsidiaries has contributed to any "multiemployer plan" (within the
meaning of section 3(37) of ERISA) and neither Capstar nor any of its
subsidiaries has incurred, nor, to the best of Capstar's knowledge, is
reasonably likely to incur any withdrawal liability which remains unsatisfied in
an amount which could reasonably be expected to have a Capstar Material Adverse
Effect. The termination of, or withdrawal from, any Capstar Benefit Plan or
multiemployer plan to which Capstar or its subsidiaries contributes, on or prior
to the Closing Date, will not subject Capstar or any of its subsidiaries to any
liability under Title IV of ERISA that could reasonably be expected to have a
Capstar Material Adverse Effect.
2.18 TAX MATTERS. Except as set forth in the Capstar Disclosure Letter, in
the Capstar SEC Documents or in the 1998 Capstar 10-K, (A) Capstar and each
of its subsidiaries have timely filed with the appropriate taxing
authorities all material Tax Returns (as defined below) required to be filed
through the date hereof and will timely file any such material Tax Returns
required to be filed on or prior to the Closing Date (except those under
valid extension) and all such Tax Returns are and will be true and correct
in all material respects, (B) all Taxes (as defined below) of Capstar and
each of its subsidiaries shown to be due on the Tax Returns described in
(A) above have been or will be timely paid, (C) no material deficiencies
for any Taxes have been proposed, asserted or assessed against Capstar
or any of its subsidiaries that have not been fully paid or adequately
provided for in the appropriate financial statements of Capstar and its
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subsidiaries, and no power of attorney with respect to any Taxes has been
executed or filed with any taxing authority and no material issues relating to
Taxes have been raised in writing by any governmental authority during any
presently pending audit or examination, (D) Capstar and its subsidiaries are not
now subject to audit by any taxing authority and no waivers of statutes of
limitation with respect to the Tax Returns have been given by or requested in
writing from Capstar or any of its subsidiaries, (E) there are no material liens
for Taxes (other than for Taxes not yet due and payable) on any assets of
Capstar or any of its subsidiaries, (F) neither Capstar nor any of its
subsidiaries is a party to or bound by (nor will any of them become a party to
or bound by) any tax indemnity, tax sharing, tax allocation agreement, or
similar agreement, arrangement or practice with respect to Taxes, (G) neither
Capstar nor any of its subsidiaries has ever been a member of an affiliated
group of corporations within the meaning of Section 1504 of the Code, other than
the affiliated group of which Capstar is the common parent, (H) neither Capstar
nor any of its subsidiaries has filed a consent pursuant to the collapsible
corporation provisions of Section 341(f) of the Code (or any corresponding
provision of state or local law) or agreed to have Section 341(f)(2) of the Code
(or any corresponding provisions of state or local law) apply to any disposition
of any asset owned by Capstar or any of its subsidiaries, as the case may be,
(l) neither Capstar nor any of its subsidiaries has agreed to make, nor is any
required to make, any adjustment under Section 481(a) of the Code or any similar
provision of state, local or foreign law by reason of a change in accounting
method or otherwise, (J) Capstar and its subsidiaries have complied in all
material respects with all applicable laws, rules and regulations relating to
withholding of Taxes and (K) no property owned by Capstar or any of its
subsidiaries (i) is property required to be treated as being owned by another
person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended and in effect immediately prior to the enactment of the
Tax Reform Act of 1986; (ii) constitutes "tax exempt use property" within the
meaning of Section 168(h)(l) of the Code; or (iii) is tax exempt bond financed
property within the meaning of Section 168(g) of the Code.
As used in this Agreement, "Tax Return" shall mean any return, report,
claim for refund, estimate, information return or statement or other similar
document relating to or required to be filed with any governmental authority
with respect to Taxes, including any schedule or attachment thereto, and
including any amendment thereof. As used in this Agreement, "Taxes" shall mean
all federal, state, local and foreign taxes, duties, levies or similar charges
of any kind, including but not limited to those measured by or referred to as
income, gross receipts, sales, use, ad valorem, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
value added, property or windfall profits taxes, customs, duties or similar
fees, assessments or charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts imposed by any
governmental authority, domestic or foreign.
2.19 INTELLECTUAL PROPERTY. Except as set forth in the Capstar
Disclosure Letter and except to the extent that the inaccuracy of any of the
following (or the circumstances giving rise to such inaccuracy), individually or
in the aggregate, could not reasonably be expected to have a Capstar Material
Adverse Effect: (a) Capstar and each of its subsidiaries owns, or is licensed to
use (in each case, free and clear of any Liens), all Intellectual Property (as
defined below) used in or necessary for the conduct of its
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business as currently conducted; (b) the use of any Intellectual Property by
Capstar and its subsidiaries does not infringe on or otherwise violate the
rights of any person and is in accordance with any applicable license pursuant
to which Capstar or any subsidiary acquired the right to use any Intellectual
Property; (c) to the knowledge of Capstar, no person is challenging, infringing
on or otherwise violating any right of Capstar or any of its subsidiaries with
respect to any Intellectual Property owned by and/or licensed to Capstar or its
subsidiaries; and (d) neither Capstar nor any of its subsidiaries has received
any written notice of any pending claim with respect to any Intellectual
Property used by Capstar and its subsidiaries and to its knowledge no
Intellectual Property owned and/or licensed by Capstar or its subsidiaries is
being used or enforced in a manner that would result in the abandonment,
cancellation or unenforceability of such Intellectual Property.
For purposes of this Agreement, "Intellectual Property" shall mean
trademarks, service marks, brand names and other indications of origin, the
goodwill associated with the foregoing and registrations in any jurisdiction of,
and applications in any jurisdiction to register, the foregoing, including any
extension, modification or renewal of any such registration or application;
inventions, discoveries and ideas, whether patentable or not, in any
jurisdiction; patents, applications for patents (including, without limitation,
divisions, continuations, continuations in part and renewal applications), and
any renewals, extensions or reissues thereof, in any jurisdiction; nonpublic
information, trade secrets and confidential information and rights in any
jurisdiction to limit the use or disclosure thereof by any person; writings and
other works, whether copyrightable or not, in any jurisdiction; registrations or
applications for registration of copyrights in any jurisdiction, and any
renewals or extensions thereof; any similar intellectual property or proprietary
rights; and any claims or causes of action arising out of or relating to any
infringement or misappropriation of any of the foregoing.
2.20 ENVIRONMENTAL MATTERS. Except as disclosed in the Capstar SEC
Documents or in the Capstar Disclosure Letter and except as could not reasonably
be expected to have a Capstar Material Adverse Effect: (i) the operations of
Capstar and its subsidiaries have been and are in compliance with all
Environmental Laws (as defined below) and with all Permits required by
Environmental Laws, (ii) to August 26, 1998, there are no pending or, to the
knowledge of Capstar, threatened, actions, suits, claims, investigations or
other proceedings (collectively, "Actions") under or pursuant to Environmental
Laws against Capstar or its subsidiaries or involving any real property
currently or, to the knowledge of Capstar, formerly owned, operated or leased by
Capstar or its subsidiaries, (iii) Capstar and its subsidiaries are not subject
to any Environmental Liabilities (as defined below), and, to the knowledge of
Capstar, no facts, circumstances or conditions relating to, arising from,
associated with or attributable to any real property currently or, to the
knowledge of Capstar, formerly owned, operated or leased by Capstar or its
subsidiaries or operations thereon that could reasonably be expected to result
in Environmental Liabilities, (iv) all real property owned and to the knowledge
of Capstar all real property operated or leased by Capstar or its subsidiaries
is free of contamination from Hazardous Material (as defined below) and (v)
there is not now, nor, to the knowledge of Capstar, has there been in the past,
on, in or under any real property owned, leased or operated by Capstar or any of
its predecessors (a) any underground storage tanks, above-ground storage tanks,
dikes or impoundments containing Hazardous
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Materials, (b) any asbestos-containing materials, (c) any polychlorinated
biphenyls, or (d) any radioactive substances.
As used in this Agreement, "Environmental Laws" means any and all
federal, state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decisions, injunctions, orders, decrees, requirements of any
Governmental Entity, any and all common law requirements, rules and bases of
liability regulating, relating to or imposing liability or standards of conduct
concerning pollution, Hazardous Materials or protection of human health or the
environment, as currently in effect and includes, but is not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
42 U.S.C. ss. 9601 et seq., the Hazardous Materials Transportation Act 49 U.S.C.
ss. 1801 et seq., the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C.
ss. 6901 et seq., the Clean Water Act, 33 U.S.C. ss. 1251 et seq., the Clean Air
Act, 33 U.S.C. ss. 2601 et seq., the Toxic Substances Control Act, 15 U.S.C. ss.
2601 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.,
ss. 136 et seq., and the Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 et seq.,
as such laws have been amended or supplemented, and the regulations promulgated
pursuant thereto, and all analogous state or local statutes. As used in this
Agreement, "Environmental Liabilities" with respect to any person means any and
all liabilities of or relating to such person or any of its subsidiaries
(including any entity which is, in whole or in part, a predecessor of such
person or any of such subsidiaries), whether vested or unvested, contingent or
fixed, actual or potential, known or unknown, which (i) arise under or relate to
matters covered by Environmental Laws and (ii) relate to actions occurring or
conditions existing on or prior to the Closing Date. As used in this Agreement,
"Hazardous Materials" means any hazardous or toxic substances, materials or
wastes, defined, listed, classified or regulated as such in or under any
Environmental Laws which includes, but is not limited to, petroleum, petroleum
products, friable asbestos, urea formaldehyde and polychlorinated biphenyls.
2.21 MATERIAL AGREEMENTS.
(a) Except as disclosed in the Capstar Disclosure Letter, from and
after the date of filing of the Capstar SEC Documents to August 26, 1998,
neither Capstar nor any of its subsidiaries has entered into any contract,
agreement or other document or instrument (other than the Old Agreement) that
would be required to be filed with the SEC or any material amendment,
modification or waiver under any contract, agreement or other document or
instrument (other than any such amendments, modifications or waivers entered
into following August 26, 1998 in connection with the transactions contemplated
hereby) that was previously filed with the SEC or would be required to be so
filed.
(b) Except as filed as an exhibit to the Capstar SEC Documents or as
set forth in the Capstar Disclosure Letter, to August 26, 1998, neither Capstar
nor any of its subsidiaries is a party to or has entered into or made any
material amendment or modification to or granted any material waiver under any
contract, agreement, document or instrument that Capstar would be required to
file under Item 601 of Regulation S-K
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promulgated under the Exchange Act as an Exhibit to Form 10-K (collectively, the
"Material Agreements").
(c) Each of the Material Agreements is valid and enforceable against
Capstar in accordance with its terms, and there is no default under any Material
Agreements either by Capstar or any of its subsidiaries which is a party to such
Material Agreements or, to the knowledge of Capstar, by any other party thereto,
and no event has occurred that with the lapse of time or the giving of notice or
both would constitute a default thereunder by Capstar or, to the knowledge of
Capstar, any other party thereto, in any such case in which such default or
event could reasonably be expected to have a Capstar Material Adverse Effect. In
addition, neither Capstar nor any subsidiary of Capstar is in material breach of
any Material Agreement (including any breach which would give rise to a right to
terminate any such agreement). To August 26, 1998, neither Capstar nor any
subsidiary of Capstar has received any written notice (or to the knowledge of
Capstar any other notice) of default or termination under any Material
Agreement, and to the knowledge of Capstar, there exists no basis for any
assertion of a right of default or termination under such agreements. To August
26, 1998, neither Capstar nor any subsidiary of Capstar has received any written
notice (or to the knowledge of Capstar any other notice) of the exercise of a
put option or other right pursuant to which Capstar or any of its subsidiaries
would be obligated to purchase capital stock or assets relating to any Capstar
LMA Facility.
2.22 TANGIBLE PROPERTY. All of the assets of Capstar and the Capstar
Significant Subsidiaries are in good operating condition, reasonable wear and
tear excepted, and usable in the ordinary course of business, except where the
failure to be in such condition or so usable could not, individually or in the
aggregate, reasonably be expected to have a Capstar Material Adverse Effect.
2.23 OPINION OF FINANCIAL ADVISORS.
(a) The Capstar Special Committee has received the opinion of Bear
Stearns, dated as of April 13, 1999, to the effect that, as of such date, the
Exchange Ratio is fair, from a financial point of view, to the public holders of
Capstar Class A Common Stock.
(b) The Board of Directors of Capstar has received the opinions of
each of CSFB and BT Wolfensohn, dated August 26, 1998, to the effect that, as of
such date, the Exchange Ratio is fair, from a financial point of view, to the
holders of Capstar Common Stock.
2.24 NO OTHER REPRESENTATIONS AND WARRANTIES. Except for the
representations and warranties made by Capstar as expressly set forth in this
Agreement or in any certificate or document delivered pursuant this Agreement,
neither Capstar nor any of its affiliates has made and shall not be construed as
having made to Chancellor or to any affiliate thereof any representation or
warranty of any kind.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CHANCELLOR
Chancellor represents and warrants to Capstar as follows:
3.1 ORGANIZATION, STANDING AND CORPORATE POWER. Each of Chancellor and
the Chancellor Significant Subsidiaries (as defined below) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate power
and authority to carry on its business as now being conducted. Each of
Chancellor and the Chancellor Significant Subsidiaries is duly qualified to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary, except where the failure to be so qualified could not reasonably be
expected to have a material adverse effect on the business, properties, results
of operations, or condition (financial or otherwise) of Chancellor and its
subsidiaries, considered as a whole (other than as a result of changes in
general economic conditions or in economic conditions generally affecting the
radio broadcasting industry) (a "Chancellor Material Adverse Effect").
Chancellor has delivered to Capstar complete and correct copies of its
Certificate of Incorporation and Bylaws, as amended to August 26, 1998. For
purposes of this Agreement, a "Chancellor Significant Subsidiary" means any
subsidiary of Chancellor that would constitute a "significant subsidiary" within
the meaning of Rule 1-02 of Regulation S-X of the SEC.
3.2 CAPITAL STRUCTURE. The authorized capital stock of Chancellor
consists of (i) 75,000,000 shares of Chancellor Class A Common Stock, none of
which are issued and outstanding, (ii) 200,000,000 shares of Chancellor Common
Stock and (iii) 50,000,000 shares of preferred stock, $0.01 par value, of which
(x) 2,200,000 shares have been designated as 7% Convertible Preferred Stock and
(y) 6,000,000 shares have been designated as $3.00 Convertible Exchangeable
Preferred Stock. At the close of business on August 24, 1998: (i) 142,355,677
shares of Chancellor Common Stock were issued and outstanding, 14,149,671 shares
of Chancellor Common Stock were reserved for issuance pursuant to outstanding
options or warrants to purchase Chancellor Common Stock which have been granted
to directors, officers or employees of Chancellor or others ("Chancellor Stock
Options"), 18,059,088 shares of Chancellor Common Stock were reserved for
issuance upon the conversion of the Chancellor Convertible Preferred Stock, and
no shares of Chancellor Common Stock were held as treasury shares by Chancellor
or any subsidiary of Chancellor; (ii) 2,200,000 shares of Chancellor 7%
Convertible Preferred Stock were issued and outstanding; (iii) 6,000,000 shares
of Chancellor $3.00 Convertible Preferred Stock were issued and outstanding; and
(iv) no shares of Chancellor Convertible Preferred Stock were held as treasury
shares by Chancellor or any subsidiary of Chancellor. Except as set forth above
or disclosed in writing by Chancellor to Capstar in a disclosure letter (the
"Chancellor Disclosure Letter") delivered to Capstar prior to the execution and
delivery of the Old Agreement, at the close of business on August 24, 1998, no
shares of capital stock or other equity securities of Chancellor were
authorized, issued, reserved for issuance or outstanding. All outstanding shares
of capital stock of Chancellor are, and all shares which may be issued pursuant
to Chancellor's
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stock option plans, as amended to the date hereof (the "Chancellor Stock Option
Plans"), or upon the exercise of outstanding Chancellor Stock Options or upon
the conversion of outstanding shares of Chancellor Convertible Preferred Stock
will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. No bonds, debentures, notes
or other indebtedness of Chancellor or any subsidiary of Chancellor having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which the stockholders of Chancellor or any
subsidiary of Chancellor may vote are issued or outstanding. All the outstanding
shares of capital stock of each subsidiary of Chancellor have been validly
issued and are fully paid and nonassessable and (except for the shares of
12-1/4% Series A Senior Cumulative Exchangeable Preferred Stock, $0.01 par
value, of Chancellor Media Corporation of Los Angeles, a Delaware corporation
(the "Chancellor Operating Subsidiary")), are owned by Chancellor, by one or
more wholly-owned subsidiaries of Chancellor or by Chancellor and one or more
such wholly-owned subsidiaries, free and clear of all Liens, except for Liens
arising out of the senior credit facility of Chancellor Operating Subsidiary and
those that, individually or in the aggregate, could not reasonably be expected
to have a Chancellor Material Adverse Effect. Except as set forth above or in
the Chancellor Disclosure Letter and in that certain Amended and Restated
Stockholders Agreement, dated as of February 14, 1996, as amended by the First
Amendment to Amended and Restated Stockholders Agreement dated as of September
4, 1997, among Chancellor and the stockholders parties thereto (the "Chancellor
Stockholders Agreement") (which restricts the transfer of shares of Chancellor
Common Stock by the parties to the Chancellor Stockholders Agreement in certain
circumstances), and except for certain provisions of the Certificate of
Incorporation of Chancellor relating to "alien ownership" of the Chancellor
Common Stock, as of August 26, 1998, neither Chancellor nor any subsidiary of
Chancellor had any outstanding option, warrant, subscription or other right,
agreement or commitment that either (i) obligates Chancellor or any subsidiary
of Chancellor to issue, sell or transfer, repurchase, redeem or otherwise
acquire or vote any shares of the capital stock of Chancellor or any Chancellor
Significant Subsidiary or (ii) restricts the transfer of Chancellor Common
Stock. From the close of business on August 24, 1998 to August 26, 1998, neither
Chancellor nor any subsidiary of Chancellor had issued any capital stock or
securities or other rights convertible into or exercisable or exchangeable for
shares of such capital stock, other than shares of Chancellor Common Stock
issued upon the exercise of Chancellor Stock Options outstanding on August 24,
1998 or upon the conversion of shares of Chancellor Convertible Preferred Stock
outstanding on August 24, 1998.
3.3 AUTHORITY; NONCONTRAVENTION. Chancellor has the requisite corporate
power and authority to enter into this Agreement and, subject to the approval of
the stockholders of Chancellor as set forth in Section 5.2(b) (the "Chancellor
Stockholders Approval") of (i) the issuance of shares of Chancellor Common Stock
to the holders of Capstar Common Stock in the Merger and (ii) the Amended and
Restated Charter (clauses (i) and (ii) collectively being referred to
hereinafter as the "Chancellor Stockholder Proposals"), to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by Chancellor and the consummation by Chancellor of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Chancellor, subject to the
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Chancellor Stockholders Approval. This Agreement has been duly executed and
delivered by Chancellor and, assuming this Agreement constitutes the valid and
binding agreement of each of the other parties hereto, constitutes a valid and
binding obligation of Chancellor, enforceable against it in accordance with its
terms except that the enforcement thereof may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to creditor's rights generally and (b) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity). Except as set forth in the Chancellor Disclosure Letter and
subject to the receipt of the Chancellor Stockholders Approval and the filing of
the Amended and Restated Charter, the execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated by this Agreement
and compliance with the provisions hereof will not, (i) conflict with any of the
provisions of the Certificate of Incorporation or Bylaws of Chancellor or the
comparable documents of any subsidiary of Chancellor, (ii) subject to the
governmental filings and other matters referred to in the following sentence,
conflict with, result in a breach of or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or require
the consent of any person under, any indenture or other agreement, permit,
concession, franchise, license or similar instrument or undertaking to which
Chancellor or any of its subsidiaries is a party or by which Chancellor or any
of its subsidiaries or any of their assets is bound or affected, (iii) result in
an obligation by Chancellor or any of its subsidiaries to redeem, repurchase or
retire (or offer to redeem, repurchase or retire) any indebtedness of Chancellor
or any of its subsidiaries outstanding as of the date hereof or equity security
of Chancellor or any of its subsidiaries outstanding as of the date hereof, or
(iv) subject to the governmental filings and other matters referred to in the
following sentence, contravene any law, rule or regulation of any state or of
the United States or any political subdivision thereof or therein, or any order,
writ, judgment, injunction, decree, determination or award currently in effect,
except, in the cases of the foregoing clauses (ii) through (iv), for breaches
that, individually or in the aggregate, could not reasonably be expected to have
a Chancellor Material Adverse Effect or to materially hinder Chancellor's
ability to consummate the transactions contemplated by this Agreement. No
consent, approval or authorization of, or declaration or filing with, or notice
to, any Governmental Entity which has not been received or made, is required by
or with respect to Chancellor or any of its subsidiaries in connection with the
execution and delivery of this Agreement by Chancellor or the consummation by
Chancellor of the transactions contemplated hereby, except for (i) the filing of
premerger notification and report forms under the HSR Act with respect to the
Merger and the termination or earlier expiration of the applicable waiting
period thereunder, (ii) such filings with and approvals required by the FCC
under the Communications Act, including those required in connection with the
acquisition of control of the Capstar FCC Licenses for the operation of the
Capstar Licensed Facilities, (iii) the filing of the Certificate of Merger with
the Delaware Secretary of State and appropriate documents with the relevant
authorities of other states in which Chancellor is qualified to do business,
(iv) the Joint Proxy Statement/Prospectus to be filed with the SEC by Chancellor
relating to the Chancellor Stockholders Approval and the issuance of Chancellor
Common Stock in connection with the Merger, (v) any filing required by The
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Nasdaq Stock Market (or the New York Stock Exchange, if the shares of Chancellor
Common Stock are then listed thereon) with respect to the issuance of shares of
Chancellor Common Stock in connection with the Merger or upon the exercise of
Capstar Stock Options issued pursuant to the Capstar Stock Option Plan or the
Warrants, (vi) the filing of such reports under the Exchange Act as may be
required in connection with this Agreement and the transactions contemplated by
this Agreement, (vii) such filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
other transactions contemplated by this Agreement, (viii) such filings as may be
required in connection with statutory provisions and regulations relating to
real property transfer gains taxes and real property transfer taxes, and (ix)
the filing of the Amended and Restated Charter.
3.4 CHANCELLOR SEC DOCUMENTS; FINANCIAL STATEMENTS. Except as set forth
in the supplement to the Chancellor Disclosure Letter dated the date hereof, (i)
Chancellor and its predecessors have filed all required reports, schedules,
forms, statements and other documents with the SEC since January 1, 1995 to
August 26, 1998 (such reports, schedules, forms, statements and other documents
and any other documents filed with the SEC and publicly available prior to
August 26, 1998 are hereinafter referred to as the "Chancellor SEC Documents");
(ii) as of their respective dates, the Chancellor SEC Documents complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Chancellor SEC Documents, and none of the
Chancellor SEC Documents as of such dates contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; and (iii) as of their
respective dates, the consolidated financial statements of Chancellor and its
predecessors included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto or,
in the case of unaudited statements, as permitted by Rule 10-01 of Regulation
S-X) and fairly present, in all material respects, the consolidated financial
position of Chancellor and its consolidated subsidiaries (or its predecessors
and their respective consolidated subsidiaries) as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (on the basis stated therein and subject, in the case of unaudited
quarterly statements, to normal year-end audit adjustments).
3.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Chancellor SEC Documents or except as disclosed in the Chancellor Disclosure
Letter or in the supplement to the Chancellor Disclosure Letter dated the date
hereof, or as otherwise agreed to in writing after August 26, 1998 by Capstar,
or as expressly permitted by this Agreement, since the date of the most recent
audited financial statements included in the Chancellor SEC Documents,
Chancellor and its subsidiaries have conducted their business only in the
ordinary course, and there has not been (i) any
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change which could reasonably be expected to have a Chancellor Material Adverse
Effect (including as a result of the consummation of the transactions
contemplated by this Agreement), (ii) any declaration, setting aside or payment
of any dividend or other distribution (whether in cash, stock or property) with
respect to any of Chancellor's currently outstanding capital stock (other than
the payment of regular cash dividends on the Chancellor 7% Convertible Preferred
Stock and Chancellor $3.00 Convertible Preferred Stock, in each case in
accordance with usual record and payment dates), (iii) any split, combination or
reclassification of any of its outstanding capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of its outstanding capital stock, (iv) (x) any
granting by Chancellor or any of its subsidiaries to any director, officer or
other employee or independent contractor of Chancellor or any of its
subsidiaries of any increase in compensation or acceleration of benefits, except
in the ordinary course of business consistent with prior practice or as was
required under employment agreements in effect as of the date of the most recent
audited financial statements included in the Chancellor SEC Documents, (y) any
granting by Chancellor or any of its subsidiaries to any director, officer or
other employee or independent contractor of any increase in, or acceleration of
benefits in respect of, severance or termination pay, or pay in connection with
any change of control of Chancellor, except in the ordinary course of business
consistent with prior practice or as was required under any employment,
severance or termination agreements in effect as of the date of the most recent
audited financial statements included in the Chancellor SEC Documents or (z) any
entry by Chancellor or any of its subsidiaries into any employment, severance,
change of control, or termination or similar agreement with any director,
executive officer or other employee or independent contractor other than in the
ordinary course of business consistent with past practices, or (v) any change in
accounting methods, principles or practices by Chancellor or any of its
subsidiaries materially affecting its assets, liability or business, except
insofar as may have been required by a change in generally accepted accounting
principles.
3.6 NO EXTRAORDINARY PAYMENTS OR CHANGE IN BENEFITS. Except as disclosed
in the Chancellor Disclosure Letter or in the supplement to the Chancellor
Disclosure Letter dated the date hereof, no current or former director, officer,
employee or independent contractor of Chancellor or any of its subsidiaries is
entitled to receive any payment under any agreement, arrangement or policy
(written or oral) relating to employment, severance, change of control,
termination, stock options, stock purchases, compensation, deferred
compensation, fringe benefits or other employee benefits currently in effect
(collectively, the "Chancellor Benefit Plans"), nor will any benefit received or
to be received by any current or former director, officer, employee or
independent contractor of Chancellor or any of its subsidiaries under any
Chancellor Benefit Plan be accelerated or modified, in each case, as a result of
or in connection with the execution and delivery of, or the consummation of the
transactions contemplated by, this Agreement.
3.7 BROKERS. Except with respect to Salomon Brothers Inc. and Smith
Barney Inc., collectively doing business as Salomon Smith Barney ("Salomon Smith
Barney"), Wasserstein Perella & Co. ("Wasserstein"), Morgan Stanley & Co.
Incorporated ("Morgan Stanley") and Goldman, Sachs & Co. ("Goldman Sachs"), all
negotiations
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relating to this Agreement and the transactions contemplated hereby have been
carried out by Chancellor directly with Capstar without the intervention of any
person on behalf of Chancellor in such a manner as to give rise to any valid
claim by any person against Chancellor, Capstar, the Surviving Corporation or
any subsidiary of any of them for a finder's fee, brokerage commission, or
similar payment. The Chancellor Disclosure Letter and the supplement to the
Chancellor Disclosure Letter dated the date hereof set forth a written summary
of the terms of its agreements relating to the transactions contemplated by this
Agreement with Salomon Smith Barney, Wasserstein, Morgan Stanley and Goldman
Sachs, and Chancellor has no other agreements or understandings (written or
oral) with respect to such services.
3.8 OPINION OF FINANCIAL ADVISORS.
(a) The Board of Directors of Chancellor has received the opinion of
Wasserstein, dated the date hereof, to the effect that, as of such date, the
Exchange Ratio is fair, from a financial point of view, to Chancellor and the
holders of Chancellor Common Stock.
(b) The special committee of the Board of Directors of Chancellor
(consisting of independent directors) (the "Chancellor Special Committee") has
received the opinion of Salomon Smith Barney, dated as of August 26, 1998, to
the effect that, as of such date, the Exchange Ratio is fair, from a financial
point of view, to the holders of Chancellor Common Stock who are not affiliated
with Hicks, Muse, Tate & Furst Incorporated.
(c) The Board of Directors of Chancellor has received the opinion of
Morgan Stanley, dated as of August 26, 1998, to the effect that, as of such
date, the Exchange Ratio is fair, from a financial point of view, to Chancellor
and the holders of Chancellor Common Stock.
3.9 ABSENCE OF UNDISCLOSED LIABILITIES Except for (x) liabilities
disclosed in the Chancellor SEC Documents, (y) current liabilities incurred by
Chancellor and its subsidiaries in the ordinary course of business consistent
with past practices since the date of the most recent consolidated balance sheet
of Chancellor set forth in Chancellor's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, as filed with the SEC, and (z) liabilities
contemplated by this Agreement or disclosed in the Chancellor Disclosure Letter,
Chancellor and its subsidiaries do not have any material indebtedness,
obligations or liabilities of any kind (whether accrued, absolute, contingent or
otherwise) (i) required by GAAP to be reflected on a consolidated balance sheet
of Chancellor and its consolidated subsidiaries or in the notes, exhibits or
schedules thereto or (ii) which reasonably could be expected to have a
Chancellor Material Adverse Effect.
3.10 LITIGATION. Except as disclosed in the Chancellor SEC Documents or
in the Chancellor Disclosure Letter, to August 26, 1998, there is no litigation,
administrative action, arbitration or other proceeding pending against
Chancellor or any of its subsidiaries or, to the knowledge of Chancellor,
threatened that, individually or in the aggregate, could reasonably be expected
to (i) have a Chancellor Material Adverse Effect
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or (ii) prevent, or significantly delay the consummation of the transactions
contemplated by this Agreement. Except as set forth in the Chancellor SEC
Documents, to the date of this Agreement, there is no judgment, order,
injunction or decree of any Governmental Entity outstanding against Chancellor
or any of its subsidiaries that, individually or in the aggregate, could
reasonably be expected to have any effect referred to in the foregoing clauses
(i) and (ii) of this Section 3.10.
3.11 TRANSACTIONS WITH AFFILIATES. Other than the transactions
contemplated by this Agreement or except to the extent disclosed in the
Chancellor SEC Documents or in the Chancellor Disclosure Letter or in the
supplement to the Chancellor Disclosure Letter dated the date hereof, there have
been no transactions, agreements, arrangements or understandings between
Chancellor or its subsidiaries, on the one hand, and Chancellor's affiliates
(other than subsidiaries of Chancellor) or any other person, on the other hand,
that would be required to be disclosed under Item 404 of Regulation S-K under
the Securities Act.
3.12 VOTING REQUIREMENTS. The affirmative votes of (i) a majority of the
outstanding shares of Chancellor Common Stock with respect to the approval and
adoption of the Amended and Restated Charter, and (ii) a majority of the votes
cast by the holders of Chancellor Common Stock with respect to the approval of
the issuance of Chancellor Common Stock to Capstar stockholders in the Merger,
are the only votes of the holders of any class or series of Chancellor's capital
stock necessary by law to approve the transactions contemplated by this
Agreement.
3.13 FCC QUALIFICATION. Chancellor and its subsidiaries are fully
qualified under the Communications Act to be the transferees of control of the
Capstar FCC Licenses. Except as disclosed in the Chancellor Disclosure Letter or
in the supplement to the Chancellor Disclosure Letter dated the date hereof,
Chancellor is not aware of any facts or circumstances relating to the FCC
qualifications of Chancellor or any of its subsidiaries that could reasonably be
expected to prevent the FCC's granting the FCC Form 316 Transfer of Control
Application to be filed with respect to the Merger.
3.14 EMPLOYEE ARRANGEMENTS AND BENEFIT PLANS.
(a) Except as set forth in the Chancellor SEC Documents or in the
Chancellor Disclosure Letter and except as could not, individually or in the
aggregate, reasonably be expected to have a Chancellor Material Adverse Effect:
(A) each Chancellor Benefit Plan has been administered and is in compliance with
the terms of such plan and all applicable laws, rules and regulations, (B) no
"reportable event" (as such term is used in section 4043 of ERISA) (other than
those events for which the 30 day notice has been waived pursuant to the
regulations), "prohibited transaction" (as such term is used in section 406 of
ERISA or section 4975 of the Code) or "accumulated funding deficiency" (as such
term is used in section 412 or 4971 of the Code) has heretofore occurred with
respect to any Chancellor Benefit Plan and (C) each Chancellor Benefit Plan
intended to qualify under Section 401(a) of the Code has received a favorable
determination from the IRS regarding its qualified status and no notice has been
received from the IRS with respect to the revocation of such qualification.
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(b) To August 26, 1998, there is no litigation or administrative or
other proceeding involving any Chancellor Benefit Plan nor has Chancellor or its
subsidiaries received written notice that any such proceeding is threatened, in
each case where an adverse determination could reasonably be expected to have a
Chancellor Material Adverse Effect. Neither Chancellor nor any of its
subsidiaries has incurred, nor, to the best of Chancellor's knowledge, is
reasonably likely to incur any withdrawal liability with respect to any
"multiemployer plan" (within the meaning of section 3(37) of ERISA) which
remains unsatisfied in an amount which could reasonably be expected to have a
Chancellor Material Adverse Effect. The termination of, or withdrawal from, any
Chancellor Benefit Plan or multiemployer plan to which Chancellor or its
subsidiaries contributes, on or prior to the Closing Date, will not subject
Chancellor or any of its subsidiaries to any liability under Title IV of ERISA
that could reasonably be expected to have a Chancellor Material Adverse Effect.
3.15 TAX MATTERS. Except as set forth in the Chancellor Disclosure
Letter or the Chancellor SEC Documents, (A) Chancellor and each of its
subsidiaries have timely filed with the appropriate taxing authorities all
material Tax Returns required to be filed through the date hereof and will
timely file any such material Tax Returns required to be filed on or prior to
the Closing Date (except those under valid extension) and all such Tax Returns
are and will be true and correct in all material respects, (B) all Taxes of
Chancellor and each of its subsidiaries shown to be due on the Tax Returns
described in (A) above have been or will be timely paid, (C) no material
deficiencies for any Taxes have been proposed, asserted or assessed against
Chancellor or any of its subsidiaries that have not been fully paid or
adequately provided for in the appropriate financial statements of Chancellor
and its subsidiaries, and no power of attorney with respect to any Taxes has
been executed or filed with any taxing authority and no material issues relating
to Taxes have been raised in writing by any governmental authority during any
presently pending audit or examination, (D) Chancellor and its subsidiaries are
not now subject to audit by any taxing authority and no waivers of statutes of
limitation with respect to the Tax Returns have been given by or requested in
writing from Chancellor or any of its subsidiaries, (E) there are no material
liens for Taxes (other than for Taxes not yet due and payable) on any assets of
Chancellor or any of its subsidiaries, (F) neither Chancellor nor any of its
subsidiaries is a party to or bound by (nor will any of them become a party to
or bound by) any tax indemnity, tax sharing, tax allocation agreement, or
similar agreement, arrangement or practice with respect to Taxes, (G) neither
Chancellor nor any of its subsidiaries has ever been a member of an affiliated
group of corporations within the meaning of Section 1504 of the Code, other than
the affiliated group of which Chancellor is the common parent, (H) neither
Chancellor nor any of its subsidiaries has filed a consent pursuant to the
collapsible corporation provisions of Section 341(f) of the Code (or any
corresponding provision of state or local law) or agreed to have Section
341(f)(2) of the Code (or any corresponding provisions of state or local law)
apply to any disposition of any asset owned by Chancellor or any of its
subsidiaries, as the case may be, (I) neither Chancellor nor any of its
subsidiaries has agreed to make, nor is any required to make, any adjustment
under Section 481(a) of the Code or any similar provision of state, local or
foreign law by reason of a change in accounting method or otherwise, (J)
Chancellor and its subsidiaries have complied in all material respects with all
applicable laws, rules and regulations relating to withholding of
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Taxes and (K) no property owned by Chancellor or any of its subsidiaries (i) is
property required to be treated as being owned by another person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended
and in effect immediately prior to the enactment of the Tax Reform Act of 1986;
(ii) constitutes "tax exempt use property" within the meaning of Section
168(h)(l) of the Code; or (iii) is tax exempt bond financed property within the
meaning of Section 168(g) of the Code.
3.16 INTELLECTUAL PROPERTY. Except as set forth in the Chancellor
Disclosure Letter or the Chancellor SEC Documents and except to the extent that
the inaccuracy of any of the following (or the circumstances giving rise to such
inaccuracy), individually or in the aggregate, could not reasonably be expected
to have a Chancellor Material Adverse Effect: (a) Chancellor and each of its
subsidiaries owns, or is licensed to use (in each case, free and clear of any
Liens), all Intellectual Property used in or necessary for the conduct of its
business as currently conducted; (b) the use of any Intellectual Property by
Chancellor and its subsidiaries does not infringe on or otherwise violate the
rights of any person and is in accordance with any applicable license pursuant
to which Chancellor or any subsidiary acquired the right to use any Intellectual
Property; and (c) to the knowledge of Chancellor, no person is challenging,
infringing on or otherwise violating any right of Chancellor or any of its
subsidiaries with respect to any Intellectual Property owned by and/or licensed
to Chancellor or its subsidiaries; and (d) neither Chancellor nor any of its
subsidiaries has received any written notice of any pending claim with respect
to any Intellectual Property used by Chancellor and its subsidiaries and to its
knowledge no Intellectual Property owned and/or licensed by Chancellor or its
subsidiaries is being used or enforced in a manner that would result in the
abandonment, cancellation or unenforceability of such Intellectual Property.
3.17 ENVIRONMENTAL MATTERS. Except as disclosed in the Chancellor SEC
Documents or in the Chancellor Disclosure Letter and except as could not
reasonably be expected to have a Chancellor Material Adverse Effect (i) the
operations of Chancellor and its subsidiaries have been and are in compliance
with all Environmental Laws and with all Permits required by Environmental Laws,
(ii) to August 26, 1998, there are no pending or, to the knowledge of
Chancellor, threatened, Actions under or pursuant to Environmental Laws against
Chancellor or its subsidiaries or involving any real property currently or, to
the knowledge of Chancellor, formerly owned, operated or leased by Chancellor or
its subsidiaries, (iii) Chancellor and its subsidiaries are not subject to any
Environmental Liabilities, and, to the knowledge of Chancellor, no facts,
circumstances or conditions relating to, arising from, associated with or
attributable to any real property currently or, to the knowledge of Chancellor,
formerly owned, operated or leased by Chancellor or its subsidiaries or
operations thereon that could reasonably be expected to result in Environmental
Liabilities, (iv) all real property owned and to the knowledge of Chancellor all
real property operated or leased by Chancellor or its subsidiaries is free of
contamination from Hazardous Material and (v) there is not now, nor, to the
knowledge of Chancellor, has there been in the past, on, in or under any real
property owned, leased or operated by Chancellor or any of its predecessors (a)
any underground storage tanks, above-ground storage tanks, dikes or impoundments
containing Hazardous Materials, (b) any asbestos-containing materials, (c) any
polychlorinated biphenyls, or (d) any radioactive substances.
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3.18 COMPLIANCE WITH APPLICABLE LAWS. Each of Chancellor and its
subsidiaries has in effect all Permits necessary for it to own, lease or operate
its properties and assets and to carry on its business as now conducted, other
than such Permits the absence of which could not, individually or in the
aggregate, reasonably be expected to have a Chancellor Material Adverse Effect,
and there has occurred no default under any such Permit other than such defaults
which, individually or in the aggregate, could not reasonably be expected to
have a Chancellor Material Adverse Effect. Except as disclosed in the Chancellor
Disclosure Letter, Chancellor and its subsidiaries are in compliance with all
applicable statutes, laws, ordinances, rules, orders and regulations of any
Governmental Entity, except for such noncompliance which, individually or in the
aggregate, could not reasonably be expected to have a Chancellor Material
Adverse Effect.
3.19 CHANCELLOR FCC LICENSES; OPERATIONS OF CHANCELLOR LICENSED
FACILITIES. Chancellor and its subsidiaries have operated the radio stations for
which Chancellor and any of its subsidiaries hold licenses from the FCC, in each
case which are owned or operated by Chancellor and its subsidiaries (each a
"Chancellor Licensed Facility" and collectively the "Chancellor Licensed
Facilities"), in material compliance with the terms of the licenses issued by
the FCC to Chancellor and its subsidiaries (the "Chancellor FCC Licenses"), and
in material compliance with the Communications Act, except where the failure to
do so could not, individually or in the aggregate, reasonably be expected to
have a Chancellor Material Adverse Effect. To the knowledge of Chancellor, each
broadcast radio station for which Chancellor or any of its subsidiaries provides
programming and advertising services pursuant to a local marketing agreement
(each a "Chancellor LMA Facility" and collectively the "Chancellor LMA
Facilities") has been operated in material compliance with the terms of the
licenses issued by the FCC to the owner of such Chancellor LMA Facility (each an
"Chancellor LMA Facility FCC License" and collectively the "Chancellor LMA
Facility FCC Licenses"). Chancellor has, and its subsidiaries have, timely filed
or made all applications, reports and other disclosures required by the FCC to
be made with respect to the Chancellor Licensed Facilities and have timely paid
all FCC regulatory fees with respect thereto, except where the failure to do so
could not, individually or in the aggregate, reasonably be expected to have a
Chancellor Material Adverse Effect. Chancellor and each of its subsidiaries
have, and are the authorized legal holders of, all the Chancellor FCC Licenses
necessary or used in the operation of the businesses of the Chancellor Licensed
Facilities as presently operated. To the knowledge of Chancellor, the
third-parties with which Chancellor or its subsidiaries have entered into local
marketing agreements with respect to the Chancellor LMA Facilities have, and are
the authorized legal holders of, the Chancellor LMA Facility FCC License
necessary or used in the operation of the business of the respective Chancellor
LMA Facility to which such local marketing agreement relates. All Chancellor FCC
Licenses and, to the knowledge of Chancellor, Chancellor LMA Facility FCC
Licenses are validly held and are in full force and effect, unimpaired by any
act or omission of Chancellor, each of its subsidiaries (or, to Chancellor's
knowledge, their respective predecessors) or their respective officers,
employees or agents, except where such impairments could not, individually or in
the aggregate, reasonably be expected to have a Chancellor Material Adverse
Effect. As of August 26, 1998, except as set forth in the Chancellor Disclosure
Letter, no application,
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action or proceeding is pending for the renewal of any Chancellor FCC License
or, to the knowledge of Chancellor, Chancellor LMA Facility FCC License as to
which any petition to deny has been filed and, to Chancellor's knowledge, there
is not now before the FCC any material investigation, proceeding, notice of
violation or order of forfeiture relating to any Chancellor Licensed Facility or
Chancellor LMA Facility that, if adversely determined, could reasonably be
expected to have a Chancellor Material Adverse Effect, and Chancellor is not
aware of any basis that could reasonably be expected to cause the FCC not to
renew any of the Chancellor FCC Licenses or the Chancellor LMA Facility FCC
Licenses (other than proceedings to amend FCC rules or the Communications Act of
general applicability to the radio broadcast industry). There is not now pending
and, to Chancellor's knowledge, there is not threatened, any action by or before
the FCC to revoke, suspend, cancel, rescind or modify in any material respect
any of the Chancellor FCC Licenses or to the knowledge of Chancellor, any of the
Chancellor LMA Facility FCC Licenses that, if adversely determined, could
reasonably be expected to have a Chancellor Material Adverse Effect (other than
proceedings to amend FCC rules or the Communications Act of general
applicability to the radio broadcast industry).
3.20 STATE TAKEOVER STATUTES. The Board of Directors of Chancellor has
approved the terms of this Agreement and the consummation of the transactions
contemplated by this Agreement, and such approval is sufficient to render
inapplicable to the Merger and the other transactions contemplated by this
Agreement the provisions of Section 203 of the Delaware Code. To Chancellor's
knowledge, no other state takeover statute or similar statute or regulation
applies or purports to apply to the Merger, this Agreement or any of the
transactions contemplated by this Agreement and no provision of the Certificate
of Incorporation, Bylaws or other governing instrument of Chancellor or any of
its subsidiaries would, directly or indirectly, restrict or impair the ability
of Chancellor to consummate the transactions contemplated by this Agreement.
3.21 CHANCELLOR COMMON STOCK. The shares of Chancellor Common Stock to
be issued in the Merger will be, upon delivery against receipt of the shares of
Capstar Common Stock for which such shares will be issued in accordance with
Section 1.8 of this Agreement, duly authorized, validly issued, fully paid and
nonassessable. The shares of Chancellor Common Stock to be issued pursuant to
the Capstar Stock Options issued under the Capstar Stock Option Plan and upon
exercise of the Warrants will be, upon delivery of the exercise price therefor
in accordance with the terms of the Capstar Stock Option Plan and agreements
pursuant to which such Capstar Stock Options were issued and the warrant
agreements pursuant to which such Warrants were issued, respectively, duly
authorized, validly issued, fully paid and nonassessable.
3.22 NO OTHER REPRESENTATIONS AND WARRANTIES. Except for the
representations and warranties made by Chancellor as expressly set forth in this
Agreement or in any certificate or document delivered pursuant this Agreement,
neither Chancellor nor any of its affiliates has made and shall not be construed
as having made to Capstar or to any affiliate thereof any representation or
warranty of any kind.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF MERGER SUB
Merger Sub represents and warrants to Capstar as follows:
4.1 ORGANIZATION, STANDING AND CORPORATE POWER Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority to
carry on its business as now being conducted. Merger Sub is duly qualified to do
business and in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties would make such
qualification necessary, except where the failure to be so qualified could not
reasonably be expected to have a Chancellor Material Adverse Effect.
4.2 CAPITAL STRUCTURE. The authorized capital stock of Merger Sub
consists of 1,000 shares of common stock, $0.01 par value, all of which are
issued and outstanding and owned of record and beneficially by Chancellor, free
and clear of all Liens. All outstanding shares of capital stock of Merger Sub
are duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. Merger Sub has no outstanding options, warrants,
subscriptions or other rights, agreements or commitments that obligates it to
issue, sell or transfer, repurchase, redeem or otherwise acquire or vote any
shares of the capital stock of Merger Sub.
4.3 AUTHORITY; NONCONTRAVENTION. Merger Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by Merger Sub and the consummation by it of the transactions
contemplated by this Agreement, have been duly authorized by all necessary
corporate action on the part of Merger Sub, including all necessary stockholder
approval. This Agreement has been duly executed and delivered by Merger Sub,
and, assuming this Agreement constitutes the valid and binding agreement of
Chancellor and Capstar, constitutes a valid and binding obligation of Merger Sub
enforceable against it in accordance with its terms except that the enforcement
thereof may be limited by (a) bankruptcy, insolvency, reorganization, moratorium
or similar laws now or hereafter in effect relating to creditor's rights
generally and (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity). The execution
and delivery of this Agreement do not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement will not, (i) conflict with any of the provisions of the Certificate
of Incorporation or Bylaws of Merger Sub, or (ii) subject to the governmental
filings and other matters referred to in the following sentence, contravene any
law, rule or regulation of any state or of the United States or any political
subdivision thereof or therein, or any order, writ, judgment, injunction,
decree, determination or award currently in effect. No consent, approval or
authorization of, or declaration or filing with, or notice to, any Governmental
Entity which has not been received or made is required by or with respect to
Merger Sub in connection with the execution and delivery of this Agreement by it
or the
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consummation by it of any of the transactions contemplated by this Agreement,
except for (i) the filing of premerger notification and report forms under the
HSR Act with respect to the Merger and the termination or earlier expiration of
the applicable waiting periods thereunder, (ii) such filings with and approvals
required by the FCC under the Communications Act including those required in
connection with the transfer of control of the Capstar FCC Licenses for the
operation of the Capstar Licensed Facilities, and (iii) the filing of a
certificate of merger with the Delaware Secretary of State.
4.4 NO PRIOR ACTIVITIES. Except for this Agreement, Merger Sub (i) has
not entered into any agreements or arrangements with any person or (ii) is not
subject to or bound by any obligation or undertaking. Except as contemplated by
this Agreement, Merger Sub has not engaged, directly or indirectly, in any
business activities of any type or kind.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 PREPARATION OF FORM S-4 AND JOINT PROXY STATEMENT/PROSPECTUS;
INFORMATION SUPPLIED.
(a) As soon as practicable following the date of this Agreement, (i)
Chancellor and Capstar shall prepare and file with the SEC the Joint Proxy
Statement/Prospectus and (ii) Capstar and Chancellor shall prepare and file a
Registration Statement on Form S-4 (the "Form S-4") with respect to the
registration of the issuance of shares of Chancellor Common Stock in the Merger,
of which the Joint Proxy Statement/Prospectus will form a part. Each of
Chancellor and Capstar shall use its reasonable best efforts to have the Form
S-4 declared effective under the Securities Act as promptly as practicable after
such filing. Chancellor shall use its reasonable best efforts to cause the Joint
Proxy Statement/Prospectus to be mailed to Chancellor's stockholders, and
Capstar shall use its reasonable best efforts to cause the Joint Proxy
Statement/Prospectus to be mailed to Capstar's stockholders, in each case as
promptly as practicable after the Form S-4 is declared effective under the
Securities Act. Chancellor shall also take any action (other than qualifying to
do business in any jurisdiction in which it is not now so qualified or take any
action that would subject it to the service of process in suits, other than as
to matters and transactions relating to the Form S-4, in any jurisdiction where
it is not so subject) required to be taken under any applicable state securities
laws in connection with the issuance of the Chancellor Common Stock in the
Merger and Capstar shall furnish all information concerning itself and the
holders of shares of Capstar Common Stock as may be reasonably requested in
connection with any such action.
(b) Capstar agrees and represents and warrants that the information
supplied or to be supplied by it specifically for inclusion or incorporation by
reference in the (i) Form S-4 will not, at the time the Form S-4 is filed with
the SEC, at any time it is amended or supplemented or at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required
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to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading, or (ii)
the Joint Proxy Statement/Prospectus will not, at the date it is first mailed to
Capstar's stockholders or at the time of the Capstar Stockholders Meeting (as
defined in Section 5.2(a)), contain any statement which, at the time and in
light of the circumstances under which it is made, is false or misleading with
respect to any material fact, or omits to state any material fact necessary in
order to make the statements therein not false or misleading or necessary to
correct any statement in any earlier communication with respect to the
solicitation of a proxy for the same meeting or subject matter thereof which has
become false or misleading.
(c) Chancellor agrees and represents and warrants that the
information supplied or to be supplied by it specifically for inclusion or
incorporation by reference in (i) the Form S-4 will not, at the time the Form
S-4 is filed with the SEC, at any time it is amended or supplemented or at the
time it becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, or (ii) the Joint Proxy
Statement/Prospectus will not, at the date it is first mailed to Chancellor's
stockholders or at the time of the Chancellor Stockholders Meeting, contain any
statement which, at the time and in light of the circumstances under which it is
made, is false or misleading with respect to any material fact, or omits to
state any material fact necessary in order to make the statements therein not
false or misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of a proxy for the same meeting
or subject matter thereof which has become false or misleading. Chancellor
agrees that the Form S-4 will comply as to form in all material respects with
the requirements of the Securities Act and the rules and regulations promulgated
thereunder and Chancellor agrees that the Joint Proxy Statement/Prospectus will
comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations promulgated thereunder, except in each case
with respect to statements made or incorporated by reference in the Form S-4 or
the Joint Proxy Statement/Prospectus supplied by Capstar specifically for
inclusion or incorporation by reference therein as to which Chancellor assumes
no responsibility.
5.2 STOCKHOLDER APPROVAL.
(a) Capstar agrees that it will take all action necessary in
accordance with applicable law and its Certificate of Incorporation and Bylaws
to convene a meeting of its stockholders (the "Capstar Stockholders Meeting") to
submit this Agreement, together (subject to Section 5.5(b) below) with the
affirmative recommendation of the Capstar Special Committee and Capstar's Board
of Directors, to Capstar's stockholders so that they may consider and vote upon
the approval and adoption of this Agreement. Capstar will use its best efforts
to hold the Capstar Stockholders Meeting as soon as reasonable after the date
hereof and, so long as the recommendation of the Capstar Special Committee or
the Board of Directors of Capstar has not been withdrawn or modified in
accordance with Section 5.5(b), to obtain the favorable votes of its
stockholders. Except as may otherwise be permitted by Section 5.5(b) below, the
Capstar
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Special Committee and the Board of Directors of Capstar shall recommend to its
stockholders that they vote in favor of the approval and adoption of this
Agreement. Without limiting the generality of the foregoing, Capstar agrees that
its obligations pursuant to the first two sentences of this Section 5.2(a) shall
not be affected by (i) the commencement, public proposal, public disclosure or
communication to Chancellor of any Acquisition Proposal (as defined in Section
5.5(c) below) or (ii) the withdrawal or modification by Capstar Special
Committee or the Board of Directors of Capstar of its approval or recommendation
of this Agreement and the Merger in accordance with Section 5.5(b) below, except
with respect to a withdrawal or modification of the affirmative recommendation
of the Capstar Special Committee or the Board of Directors of Capstar to Capstar
stockholders at the Capstar Stockholders Meeting in accordance with Section
5.5(b) or in the event Capstar elects to terminate this Agreement in accordance
with Section 8.1(b)(vii).
(b) Chancellor agrees that it will take all action necessary in
accordance with applicable law and its Certificate of Incorporation and Bylaws
to convene a meeting of its stockholders (the "Chancellor Stockholders Meeting")
to submit the Chancellor Stockholder Proposals, together (subject to the proviso
of the last sentence of this Section 5.2(b)) with the affirmative recommendation
of the Chancellor Special Committee and Chancellor's Board of Directors, to the
Chancellor's stockholders so that they may consider and vote upon the Chancellor
Stockholder Proposals. Chancellor will use its best efforts to hold the
Chancellor Stockholders Meeting as soon as reasonable after the date hereof and,
so long as the recommendation of the Chancellor Special Committee or the Board
of Directors of Chancellor has not been withdrawn or modified in accordance with
this Section 5.2(b), to obtain the favorable votes of its stockholders. The
Chancellor Special Committee and the Board of Directors of Chancellor shall
recommend to its stockholders that they vote in favor of each of the Chancellor
Stockholder Proposals; provided, however, that in the event that the Chancellor
Special Committee or the Board of Directors of Chancellor determines in good
faith, following consultation with and after considering the advice of outside
counsel, that in order to comply with its fiduciary duties to stockholders under
applicable law it is necessary for the Chancellor Special Committee or the full
Board of Directors of Chancellor to withdraw or modify, in a manner materially
adverse to Capstar, its approval or recommendation of the transactions
contemplated by this Agreement or the Merger (including either or both of the
Chancellor Stockholder Proposals), then the Chancellor Special Committee or the
full Board of Directors of Chancellor shall be entitled to (A) withdraw or
modify such recommendation without breaching the terms of this Agreement or (B)
terminate this Agreement in accordance with Section 8.1(b)(viii); provided,
further, that in the event of any such withdrawal or modification of such
recommendation by the Chancellor Special Committee or the full Board of
Directors of Chancellor in which Chancellor does not elect to terminate this
Agreement pursuant to Section 8.1(b)(viii), such modification or withdrawal
shall not affect the obligation of Chancellor's Board of Directors to call and
convene the Chancellor Stockholders Meeting and submit the Chancellor
Stockholder Proposals to the Chancellor stockholders for a vote thereon in
accordance with this Section 5.2(b) and 5.2(c) hereof.
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(c) Unless this Agreement is first terminated in accordance with
Section 8.1(b)(vii) or 8.1(b)(viii), each of Chancellor and Capstar agrees to
cooperate and use its respective best efforts to hold the Chancellor
Stockholders Meeting and the Capstar Stockholders Meeting on the same day.
5.3 ACCESS TO INFORMATION; CONFIDENTIALITY. Upon reasonable notice, each
of Chancellor and Capstar shall, and shall cause each of its respective
subsidiaries to, afford to the other parties hereto and to their respective
officers, employees, counsel, financial advisors and other representatives
reasonable access during normal business hours during the period prior to the
Effective Time to all its properties, books, contracts, commitments, personnel
and records and, during such period, each of Chancellor and Capstar shall, and
shall cause each of its respective subsidiaries to, furnish as promptly as
practicable to the other parties hereto such information concerning its
business, properties, financial condition, operations and personnel as such
parties may from time to time reasonably request, subject to restrictions as to
confidentiality contained in any agreements in effect as of the date of this
Agreement to which either Chancellor or Capstar is a party, provided that
Chancellor or Capstar, as the case may be, shall use its reasonable best efforts
to obtain consent to the waiver of any such restrictions upon the request of the
other party. Without limiting the foregoing, Capstar shall provide promptly to
Chancellor all weekly pacing reports and monthly financial statements prepared
by Capstar or any of its subsidiaries in the ordinary course of business. Except
as required by law, each of the Chancellor and Capstar will hold, and will cause
its respective directors, officers, partners, employees, accountants, counsel,
financial advisors and other representatives and affiliates to hold, any
nonpublic information obtained from Capstar or Chancellor, respectively, in
confidence to the extent required by and in accordance with the provisions of
the letter dated August 1, 1998, between Chancellor and Capstar (the
"Confidentiality Agreement"), and each of Chancellor and Capstar agrees that
prior to the Effective Time neither party will use any of such nonpublic
information to directly or indirectly divert or attempt to divert any business,
customer or employee of the other.
5.4 PUBLIC ANNOUNCEMENTS. Chancellor and Capstar agree that each of them
will consult with the other before issuing, and will provide each other the
opportunity to review and comment upon, any press release or other public
statements with respect to the transactions contemplated by this Agreement,
including the Merger, and shall not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
applicable law, court process or by obligations pursuant to rules of any
national securities exchange or The Nasdaq Stock Market (to the extent
applicable to them).
5.5 ACQUISITION PROPOSALS.
(a) Except as may otherwise be provided in Section 5.5(e), from and
after August 26, 1998, without the prior written consent of Chancellor, Capstar
did not and shall not, and did not and shall not authorize or permit any of its
subsidiaries to, and did and shall direct and use its best efforts to cause its
and its subsidiaries' respective directors, officers, partners, employees,
agents, accountants, counsel, financial advisors
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and other representatives and affiliates (collectively, "Representatives") not
to, (i) directly or indirectly, solicit, initiate or encourage (including by way
of furnishing information or assistance) or take any other action to facilitate
any inquiries or the making of any proposal which constitutes or may reasonably
be expected to lead to an Acquisition Proposal (as defined below) or (ii) enter
into or participate in any discussions or negotiations regarding any Acquisition
Proposal. As of August 26, 1998, Capstar immediately ceased and terminated any
existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any persons conducted by it or its Representatives with respect
to the foregoing. Except as may otherwise be provided by Section 5.5(e), from
and after August 26, 1998, Capstar did not, and agrees not to, release any third
party from, or waive any provision of, any standstill agreement to which it is a
party or any confidentiality agreement between it and another person who has
made, or who may reasonably be considered likely to make, an Acquisition
Proposal. From and after August 26, 1998, Capstar did, and agrees that it will,
notify Chancellor orally and in writing promptly (but in any event within 24
hours) of any such inquiries, offers or proposals (including, without
limitation, the terms and conditions of any such proposal but, at Capstar's
discretion, excluding the identity of such third party).
(b) Neither the Board of Directors of Capstar nor any committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Chancellor, the approval or recommendation by such Board of
Directors or committee thereof of this Agreement and the Merger, (ii) approve or
recommend, or propose to approve or recommend, any Acquisition Proposal or (iii)
cause Capstar to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any Acquisition
Proposal; provided, however, that in the event that the Capstar Special
Committee or the Board of Directors of Capstar determines in good faith,
following consultation with and after considering the advice of outside counsel,
that in order to comply with its fiduciary duties to stockholders under
applicable law it is necessary for the Capstar Special Committee or the full
Board of Directors of Capstar to withdraw or modify, in a manner materially
adverse to Chancellor, its approval or recommendation of this Agreement and the
Merger, then the Capstar Special Committee or the full Board of Directors of
Capstar shall be entitled to (A) withdraw or modify such recommendation without
breaching the terms of this Agreement or (B) terminate this Agreement in
accordance with Section 8.1(b)(vii); provided, further, that in the event of any
such withdrawal or modification of such recommendation by the Capstar Special
Committee or the full Board of Directors of Capstar in which Capstar does not
elect to terminate this Agreement pursuant to Section 8.1(b)(vii), such
modification or withdrawal shall not affect the obligation of Capstar's Board of
Directors to call and convene the Capstar Stockholders Meeting and submit this
Agreement to the Capstar stockholders for a vote thereon in accordance with
Section 5.2(a) and 5.2(c) hereof.
(c) For purposes of this Agreement, an "Acquisition Proposal" means
any written proposal or offer from any person (other than Chancellor or any of
its subsidiaries) for a tender or exchange offer, merger, consolidation, other
business combination, recapitalization, liquidation, dissolution or similar
transaction involving Capstar or any Capstar Significant Subsidiary, or any
proposal to acquire in any manner a
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substantial equity interest in, or a substantial portion of the assets of,
Capstar or a Capstar Significant Subsidiary.
(d) Nothing contained in this Section 5.5 shall prohibit the Board
of Directors of Capstar from taking and disclosing to its stockholders a
position in accordance with Rules 14d-9 and 14e-2 under the Exchange Act with
respect to a tender offer or any exchange offer commenced by a third party.
(e) In the event that Capstar notifies Chancellor of the existence
of any inquiries, offers or proposals in accordance with Section 5.5(a), the
Capstar Special Committee or the Board of Directors of Capstar may, or authorize
Capstar to, engage in discussions or negotiations with a third party who
(without any solicitation or initiation, directly or indirectly, by or with
Capstar or any of its Representatives after the date of this Agreement) seeks to
initiate such discussions or negotiations and may, or authorize Capstar to,
furnish such third party information concerning Capstar and its business,
properties and assets and may release such third party from, or waive any
provision of, any standstill or confidentiality agreement with respect to such
third party, provided that such action is consistent with the fiduciary duties
of the Capstar Special Committee or the full Board of Directors of Capstar under
applicable law, as determined by the Capstar Special Committee or the Board of
Directors in good faith following consultation with and after considering the
advice of outside counsel.
5.6 CONSENTS, APPROVALS AND FILINGS. Chancellor and Capstar will make
and cause their respective subsidiaries and, to the extent necessary, their
other affiliates to make all necessary filings, including, without limitation,
those required under the HSR Act, the Securities Act, the Exchange Act, and the
Communications Act (including filing an application with the FCC for the
transfer of control of the Capstar FCC Licenses) as soon as practicable after
the date of this Agreement, in order to facilitate the prompt consummation of
the Merger and the other transactions contemplated by this Agreement. In
addition, Chancellor and Capstar will each use its best efforts, and will
cooperate fully and in good faith with each other, (i) to comply as promptly as
practicable with all governmental requirements applicable to the Merger and the
other transactions contemplated by this Agreement, and (ii) to obtain as
promptly as practicable all necessary permits, orders or other consents of
Governmental Entities and consents of all third parties necessary for the
consummation of the Merger and the other transactions contemplated by this
Agreement, including without limitation, the consent of the FCC to the transfer
of control of the Capstar FCC Licenses. Each of Chancellor and Capstar shall use
its best efforts to promptly provide such information and communications to
Governmental Entities as such Governmental Entities may reasonably request. Each
of the parties hereto shall provide to the other parties copies of all
applications in advance of filing or submission of such applications to
Governmental Entities in connection with this Agreement and shall make such
revisions thereto as reasonably requested by each other party hereto. Each of
the parties hereto shall provide to the other parties the opportunity to
participate in all meetings and material conversations with Governmental
Entities with respect to the matters contemplated by this Agreement.
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5.7 AFFILIATES LETTERS. Prior to the Closing Date, Capstar shall deliver
to Chancellor a letter identifying all persons who, at the time the Merger is
submitted for approval to the stockholders, may be deemed to be an "affiliate"
of such party for purposes of Rule 145 under the Securities Act. Capstar shall
use its best efforts to cause each such person to deliver to Chancellor on or
prior to the Closing Date a written agreement substantially in the form attached
as Annex IV hereto.
5.8 NASDAQ OR EXCHANGE LISTING. Chancellor shall use its best efforts to
cause the shares of Chancellor Common Stock to be issued (a) in the Merger, (b)
upon the exercise of the Capstar Stock Options issued under the Capstar Stock
Option Plan, and (c) upon exercise of the Warrants, to be approved for quotation
on The Nasdaq Stock Market (or for listing on the New York Stock Exchange, if
the shares of Chancellor Common Stock are then listed thereon) at the Effective
Time.
5.9 INDEMNIFICATION. The Certificate of Incorporation of the Surviving
Corporation shall contain the provisions with respect to indemnification
contained in the certificate of incorporation of Capstar, as in effect on the
date hereof, and none of such provisions shall be amended, repealed or otherwise
modified for a period of six years after the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at any time
prior to the Effective Time were directors or officers of Capstar, or any of its
respective subsidiaries (the "Capstar Indemnified Parties") in respect of
actions or omissions occurring at or prior to the Effective Time (including,
without limitation, the transactions contemplated by this Agreement), unless
such modification is required by law. If commercially available, Chancellor will
cause to be maintained for a period of not less than six years from the
Effective Time Capstar's current directors' and officers' insurance and
indemnification policies to the extent that they provide coverage for events
occurring prior to the Effective Time (the "D&O Insurance") for all persons who
are directors and executive officers of Capstar on the date of this Agreement,
so long as the annual premium therefor would not be in excess of 250% of the
last annual premium paid prior to the date of the Old Agreement; provided,
however, that Chancellor or its subsidiaries may, in lieu of maintaining such
existing D&O Insurance as provided above, cause coverage to be provided under
any policy maintained for the benefit of Chancellor and its subsidiaries so long
as the terms thereof are not less advantageous to the beneficiaries thereof than
the existing D&O Insurance. Immediately following the Effective Time, Chancellor
shall (i) enter into agreements with Chancellor's executive officers and members
of the Board of Directors providing for indemnification on substantially
identical terms as the agreements of Capstar with the current directors of
Capstar and (ii) use its commercially reasonable efforts to obtain an additional
directors and officers insurance policy for Chancellor in an amount equal to at
least $25 million to cover members of the Chancellor Board of Directors
(including the director appointed as of the Effective Time pursuant to this
Agreement) for facts and circumstances arising after the Effective Time. The
provisions of this Section 5.9 are intended to be for the benefit of, and shall
be enforceable by, each Capstar Indemnified Party, executive officer of
Chancellor and member of the Chancellor Board of Directors following the
Effective Time, and his heirs and his personal representatives and shall be
binding on all successors and assigns of Chancellor and the Surviving
Corporation.
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5.10 LETTER OF CHANCELLOR'S ACCOUNTANTS. Chancellor shall use its
reasonable best efforts to cause to be delivered to Capstar a letter of
PricewaterhouseCoopers LLP, Chancellor's independent public accountants, and any
other independent public accountants whose report would be required to be
included in the Form S-4 pursuant to the rules and regulations under the
Securities Act, each dated a date within two business days before the date on
which the Form S-4 shall become effective and an additional letter from each of
them dated a date within two business days before the Closing Date, each
addressed to such party, in form and substance reasonably satisfactory to
Capstar and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Form S-4.
5.11 LETTER OF CAPSTAR'S ACCOUNTANTS. Capstar shall use its reasonable
best efforts to cause to be delivered to Chancellor, a letter of
PricewaterhouseCoopers LLP, Capstar's independent public accountants, and any
other independent public accountants whose report would be required to be
included in the Form S-4 pursuant to the rules and regulations under the
Securities Act, each dated a date within two business days before the date on
which the Form S-4 shall become effective and an additional letter from each of
them dated a date within two business days before the Closing Date, each
addressed to such party, in form and substance reasonably satisfactory to
Chancellor and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Form S-4.
5.12 [INTENTIONALLY LEFT BLANK.]
5.13 SENIOR CREDIT FACILITY CONSENTS. Prior to Closing, Capstar agrees
to use its commercially reasonable efforts to obtain the consent of lenders
under its senior secured credit facilities to (i) waive the potential event of
default under such facility as a result of a change of control thereunder in
order to consummate the Merger and the transactions contemplated by this
Agreement and (ii) permit Capstar and its subsidiaries to make change of control
offers pursuant to the terms of the indentures governing their outstanding
indebtedness and the certificates of designation governing the Capstar Partners
12% Preferred Stock and the Capstar Communications 12-5/8% Preferred Stock. In
the event that Capstar is unable to obtain such consent upon commercially
reasonable terms (giving effect to the overall capitalization of Chancellor and
its consolidated subsidiaries following the Effective Time), each of Chancellor
and Capstar agrees to cooperate with the other party in obtaining refinancing of
such senior secured credit facility upon terms and conditions that are mutually
agreed upon in good faith by each party.
5.14 SECTION 16(b) BOARD APPROVAL.
(a) Prior to Closing, the Board of Directors of Chancellor shall, by
resolution duly adopted by such Board of Directors or a duly authorized
committee of "non-employee directors" thereof, approve and adopt, for purposes
of exemption from "short-swing" liability under Section 16(b) of the Exchange
Act, the acquisition of Chancellor Common Stock at the Effective Time by
officers and directors of Chancellor (including officers or directors of Capstar
who become, prior to, at, or following the
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Effective Time of the Merger, officers or directors of Chancellor) as a result
of the conversion of shares of Capstar Common Stock in the Merger and the
assumption of the Capstar Stock Options and Warrants by Chancellor at the
Effective Time. Such resolution shall set forth the name of the applicable
"insiders" for purposes of Section 16 of the Exchange Act, the number of
securities to be acquired by each individual, that the approval is being granted
to exempt the transaction under Rule 16b-3 under the Exchange Act, and, for
Capstar Stock Options and Warrants to be assumed by Chancellor at the Effective
Time, the material terms of the options and warrants to purchase Chancellor
Common Stock acquired by such insiders as a result of the assumption by
Chancellor of such Capstar Stock Options and Warrants.
(b) Prior to Closing, the Board of Directors of Capstar shall, by
resolution duly adopted by such Board of Directors or a duly authorized
committee of "non-employee directors" thereof, approve and adopt, for purposes
of exemption from "short-swing" liability under Section 16(b) of the Exchange
Act, the conversion at the Effective Time of the shares of Capstar Common Stock
held by officers and directors of Capstar into shares of Chancellor Common Stock
as a result of the conversion of shares in the Merger, and the assumption by
Chancellor at the Effective Time of the Capstar Stock Options and Warrants of
the officers and directors of Capstar. Such resolution shall set forth the name
of the applicable "insiders" for purposes of Section 16 of the Exchange Act and,
for each "insider," the number of shares of Capstar Common Stock to be converted
into shares of Chancellor Common Stock at the Effective Time, the number and
material terms of the Capstar Stock Options and Warrants to be assumed by
Chancellor at the Effective Time, and that the approval is being granted to
exempt the transaction under Rule 16b-3 under the Exchange Act.
5.15 TERMINATION OF OR WAIVER OF RIGHTS UNDER STOCKHOLDERS AGREEMENTS.
Prior to the Closing, Capstar shall use its reasonable best efforts to obtain
the consent of the requisite parties to the Stockholders Agreement dated October
16, 1996, as amended, among Capstar and the other parties listed therein, the
Stockholders Agreement dated November 26, 1996, as amended, among Capstar and
the other parties listed therein, and the Amended and Restated Stockholders
Agreement dated May 18, 1998, among Capstar and the other parties listed therein
(collectively, the "Capstar Stockholders Agreements') to terminate, or otherwise
waive their rights from and after the Effective Time under, such Capstar
Stockholders Agreements at the Effective Time. To the extent that a termination
or waiver of rights under any of the Capstar Stockholders Agreements is not
effected prior to Closing, Chancellor agrees to assume the obligations of the
Surviving Corporation thereunder with respect to shares of Chancellor Stock
issued in the Merger or otherwise subject to such agreement(s).
5.16 CHANCELLOR REGISTRATION RIGHTS. Prior to the Closing, Chancellor
shall use its reasonable best efforts to enter into a joinder to the Chancellor
Stockholders Agreement (the "Chancellor Registration Rights Agreement") with the
holders of Capstar Common Stock at the Effective Time (or otherwise enter into a
new agreement with such holders and the existing parties to the Chancellor
Stockholders Agreement) that, after giving effect to the Merger and the issuance
of shares of Chancellor Common Stock therein, will own at least 1% of the
outstanding shares of Chancellor Common Stock
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immediately following the Effective Time, providing for rights of registration
under the Securities Act of all shares of Chancellor Common Stock held by such
holders following the Merger on substantially similar terms as are provided in
the Chancellor Stockholders Agreement, with such changes as are described in the
supplement to the Chancellor Disclosure Letter dated the date hereof.
ARTICLE 6
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER
6.1 CONDUCT OF BUSINESS.
(a) Except as expressly contemplated by this Agreement or in the
supplement to the Capstar Disclosure Letter dated the date hereof, during the
period from August 26, 1998 to the Effective Time, Capstar did and shall, and
did and shall cause its subsidiaries to, act and carry on their respective
businesses in the ordinary course of business and, to the extent consistent
therewith, use reasonable efforts to preserve intact their current business
organizations, keep available the services of their current officers and
employees and preserve the goodwill of those engaged in material business
relationships with them. Without limiting the generality of the foregoing,
during the period from August 26, 1998 to the Effective Time and except as
contemplated by this Agreement, as set forth in the Capstar SEC Documents or a
supplement to the Capstar Disclosure Letter dated the date hereof or as
otherwise agreed to in one or more writings after August 26, 1998 (which
writings are hereby reaffirmed), Capstar did and shall not, and did and shall
not permit any of its subsidiaries to, without the prior consent of Chancellor
(which shall not be unreasonably delayed or withheld):
(i) (w) declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, stock or property) in respect of,
any of its or its subsidiaries' outstanding capital stock (except
dividends and distributions by a direct or indirect wholly owned
subsidiary of Capstar to its parent and regularly scheduled dividend
payments on the 12% Senior Exchangeable Preferred Stock of Capstar
Partners and 12-5/8% Series E Cumulative Preferred Stock of Capstar
Communications), (x) split, combine or reclassify any of its outstanding
capital stock or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for shares of its
outstanding capital stock, (y) except in connection with the termination
of the employment of any employees, purchase, redeem or otherwise
acquire any shares of outstanding capital stock or any rights, warrants
or options to acquire any such shares, or (z) issue, sell, grant, pledge
or otherwise encumber any shares of its capital stock, any other equity
securities or any securities convertible into, or any rights, warrants
or options to acquire, any such shares, equity securities or convertible
securities (other than (A) upon the exercise of Capstar Stock Options
outstanding on August 26, 1998, (B) pursuant to employment agreements or
other contractual arrangements in effect on August 26, 1998, and (C)
issuances of stock of any direct or indirect wholly-owned subsidiary of
Capstar to its parent);
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(ii) amend its Certificate of Incorporation, Bylaws or other
comparable charter or organizational documents;
(iii) acquire any business (including the assets thereof) or any
corporation, partnership, joint venture, association or other business
organization or division thereof;
(iv) sell, mortgage or otherwise encumber or subject to any Lien
or otherwise dispose of any of its properties or assets that are
material to Capstar and its subsidiaries, taken as whole, other than
bank Liens on any radio station assets acquired by Capstar or any of its
subsidiaries in accordance with the terms of this Agreement;
(v) (x) other than working capital borrowings in the ordinary
course of business and consistent with past practices or borrowings used
for the purchase of any radio station or other acquisition permitted by
the terms of this Agreement, incur any indebtedness for borrowed money
or guarantee any such indebtedness of another person, other than
indebtedness owing to or guarantees of indebtedness owing to Capstar or
any of its direct or indirect wholly-owned subsidiaries or (y) make any
material loans or advances to any other person, other than to Capstar or
any of its direct or indirect wholly-owned subsidiaries and other than
routine advances to employees consistent with past practices;
(vi) make any Tax election or settle or compromise any Tax
liability that could reasonably be expected to be material to Capstar
and its subsidiaries, taken as a whole or change its Tax or accounting
methods, policies, practice or procedures, except as required by GAAP;
(vii) pay, discharge, settle or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) of Capstar included in the
Capstar SEC Documents or incurred since the date of such financial
statements in the ordinary course of business consistent with past
practice;
(viii) make any material commitments or agreements for capital
expenditures or capital additions or betterments except as materially
consistent with the budget for capital expenditures as of August 26,
1998, in the ordinary course of business consistent with past practices
and for acquisitions of radio station assets, including radio towers
related thereto, in accordance with the terms of this Agreement;
(ix) except as may be required by law:
(A) other than in the ordinary course of business and
consistent with past practices, make any representation or promise, oral
or
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written, to any employee or former director, officer or employee of
Capstar or any of its subsidiaries which is inconsistent with the terms
of any Capstar Benefit Plan;
(B) other than in the ordinary course of business and
consistent with past practices, make any change to, or amend in any way,
the contracts, salaries, wages, or other compensation of any director,
employee or any agent or consultant of Capstar or any of its
subsidiaries other than routine changes or amendments that are required
under existing contracts;
(C) except for renewals in the ordinary course of
business consistent with past practices, adopt, enter into, amend, alter
or terminate, partially or completely, any Capstar Benefit Plan, or any
election made pursuant to the provisions of any Capstar Benefit Plan, to
accelerate any payments, obligations or vesting schedules under any
Capstar Benefit Plan; or
(D) other than in the ordinary course of business
consistent with past practices, approve any general or company-wide pay
increases for employees;
(x) except in the ordinary course of business, modify, amend or
terminate any material agreement, permit, concession, franchise, license
or similar instrument to which Capstar or any of its subsidiaries is a
party or waive, release or assign any material rights or claims
thereunder; or
(xi) authorize any of, or commit or agree to take any of, the
foregoing actions.
6.2 CAPSTAR STOCK OPTIONS.
(a) At the Effective Time, each Capstar Stock Option that is
outstanding and unexercised immediately prior to the Effective Time shall be
deemed to have been assumed by Chancellor, without further action by Chancellor,
the Surviving Corporation or the holders of such options, and shall thereafter
be deemed to be an option to acquire shares of Chancellor Common Stock in such
amount and at the exercise price provided below and otherwise having the same
terms and conditions as are in effect immediately prior to the Effective Time
(except to the extent that such terms and conditions may be altered in
accordance with their terms as a result of the transactions contemplated
hereby):
(i) the number of shares of Chancellor Common Stock to be
subject to the new option shall be equal to the product of (x) the
number of shares of Capstar Common Stock subject to the original option
and (y) the Exchange Ratio; and
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(ii) the exercise price per share of Chancellor Common Stock
under the new option shall be equal to (x) the exercise price per share
of Capstar Common Stock under the original option divided by (y) the
Exchange Ratio.
The adjustments provided herein to any options which are "incentive
stock options" (as defined in Section 422 of the Code) shall be effected in a
manner consistent with Section 424(a) of the Code.
(b) At the Effective Time, Chancellor shall approve and adopt the
Capstar Stock Option Plans and assume the obligations of Capstar thereunder,
with such changes thereto as may be necessary to reflect the consummation of the
transactions contemplated hereby. Nothing in this Section 6.2(b) shall be
construed to prevent Chancellor in any way from terminating or freezing the
benefits under any such plans (subject to the rights of the holders of the
Capstar Stock Options thereunder) and adopting one or more new stock option
plans, as approved by the Board of Directors of Chancellor following the
Effective Time.
(c) Promptly following the Effective Time, Chancellor shall use its
reasonable best efforts to file with the SEC a Registration Statement on Form
S-8 (or an amendment to any such form of Chancellor currently on file with the
SEC that is available therefor) (the "Form S-8") for the purpose of registering
the shares of Chancellor Common Stock issuable upon the exercise of the Capstar
Stock Options issued or issuable under the Capstar Stock Option Plan, and
Chancellor shall use its reasonable best efforts to have the Form S-8 (or any
post-effective amendment thereto) declared effective under the Securities Act as
soon as practicable after such filing.
6.3 CAPSTAR WARRANTS.
(a) At the Effective Time, each Warrant to purchase shares of
Capstar Common Stock that is outstanding immediately prior to the Effective Time
shall be deemed to have been assumed by Chancellor, without further action by
Chancellor, the Surviving Corporation or the holders of such Warrants, and shall
thereafter be deemed to be a warrant to purchase shares of Chancellor Common
Stock in such amount and at the purchase price provided below and otherwise
having the same terms and conditions as are in effect immediately prior to the
Effective Time (except to the extent that such terms and conditions may be
altered in accordance with their terms as a result of the transactions
contemplated hereby):
(i) the number of shares of Chancellor Common Stock to be
subject to the new warrant shall be equal to the product of (x) the
number of shares of Capstar Common Stock subject to the original Warrant
and (y) the Exchange Ratio; and
(ii) the purchase price per share of Chancellor Common Stock
under the new warrant shall be equal to (x) the purchase price per share
of Capstar Common Stock under the original Warrant divided by (y) the
Exchange Ratio.
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(b) Promptly following the Effective Time, Chancellor shall use its
reasonable best efforts to file with the SEC a Registration Statement on Form
S-8 (or an amendment to any such form of Chancellor currently on file with the
SEC that is available therefor) (the "Form S-8") for the purpose of registering
the shares of Chancellor Common Stock issuable upon the exercise of the
Warrants, and Chancellor shall use its reasonable best efforts to have the Form
S-8 (or any post-effective amendment thereto) declared effective under the
Securities Act as soon as practicable after such filing.
6.4 OTHER ACTIONS. From and after August 26, 1998, neither Chancellor
nor Capstar shall, and neither of them shall permit any of their respective
subsidiaries to, take any action that would, or that could reasonably be
expected to, result in any of the conditions of the Merger set forth in Article
VII not being satisfied.
ARTICLE 7
CONDITIONS PRECEDENT
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) STOCKHOLDER APPROVAL. The Capstar Stockholders Approval and
Chancellor Stockholders Approval shall have been obtained in accordance with the
requirements of the Delaware Code and The Nasdaq Stock Market, as applicable.
(b) FCC ORDER. The FCC shall have issued an order (the "FCC Order")
approving the transfers of control pursuant to the Merger of the Capstar FCC
Licenses for the operation of the Capstar Licensed Facilities without the
imposition of any conditions or restrictions that could reasonably be expected
to have a Capstar Material Adverse Effect, and which FCC Order has not been
reversed, stayed, enjoined, set aside or suspended and with respect to which no
timely request for stay, petition for reconsideration or appeal has been filed
and as to which the time period for filing of any such appeal or request for
reconsideration or for any sua sponte action by the FCC with respect to the FCC
Order has expired, or, in the event that such a filing or review sua sponte has
occurred, as to which such filing or review shall have been disposed of
favorably to the grant of the FCC Order and the time period for seeking further
relief with respect thereto shall have expired without any request for such
further relief having been filed or review initiated.
(c) GOVERNMENTAL AND REGULATORY CONSENTS. All required consents,
approvals, permits and authorizations to the consummation of the Merger shall be
obtained from any Governmental Entity (other than the FCC) whose consent,
approval, permission or authorization is required by reason of a change in law
after the date of this Agreement, unless the failure to obtain such consent,
approval, permission or authorization could not reasonably be expected to have a
Capstar Material Adverse
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Effect, or to materially and adversely affect the validity or enforceability of
this Agreement or the Merger.
(d) HSR ACT. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have otherwise expired.
(e) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, however, that the party
invoking this condition shall use its reasonable best efforts to have any such
order or injunction vacated.
(f) NASDAQ OR EXCHANGE APPROVAL. The shares of Chancellor Common
Stock issuable pursuant to the Merger shall have been approved for quotation on
The Nasdaq Stock Market (or the New York Stock Exchange, if the shares of
Chancellor Common Stock are then listed thereon).
(g) FORM S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order.
(h) [INTENTIONALLY LEFT BLANK.]
(i) [INTENTIONALLY LEFT BLANK.]
(j) CONSENT OF SENIOR LENDERS. Capstar shall have received (i) all
necessary consents under its senior secured credit facility in order to
consummate the Merger and the transactions contemplated by this Agreement, or
(ii) a firm commitment of senior secured financing from a nationally recognized
commercial bank or syndicate of banks in amounts sufficient to refinance all of
the outstanding indebtedness under its senior secured credit facilities at the
Closing.
7.2 CONDITIONS TO OBLIGATIONS OF CAPSTAR. The obligation of Capstar to
effect the Merger is further subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Chancellor and Merger Sub contained in this Agreement shall have
been true and correct as of the date such representations and warranties are
made under this Agreement and shall be true and correct at and as of the Closing
Date as though made at and as of such time (except to the extent that any such
representations and warranties expressly relate only to an earlier time, in
which case they shall have been true and correct at such earlier time);
provided, however, that this condition shall be deemed to have been satisfied
unless the individual or aggregate impact of all inaccuracies of such
representations and warranties (without regard to any materiality or Chancellor
Material Adverse Effect qualifier(s) contained therein) could reasonably be
expected to have a material adverse effect on the condition (financial or
otherwise) of Chancellor and its subsidiaries, considered as a whole, and except
to the extent that any inaccuracies of such
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representations and warranties are a result of changes in the United States
financial markets generally or in national, regional or local economic
conditions generally, or are a result of matters arising after the date hereof
that affect the broadcast industry generally. Each of Chancellor and Merger Sub
shall have delivered to Capstar a certificate dated as of the Closing Date,
signed by a senior executive officer of such company, to the effect set forth in
this Section 7.2(a).
(b) PERFORMANCE OF OBLIGATIONS OF CHANCELLOR AND MERGER SUB. Each of
Chancellor and Merger Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, including without limitation, the filing of the Amended and
Restated Charter, and Capstar shall have received a certificate signed on behalf
of each of Chancellor and Merger Sub by a senior executive officer of each of
them to such effect.
(c) TAX OPINION. Capstar shall have received an opinion of Vinson &
Elkins L.L.P., dated as of the Closing Date, to the effect that (i) the Merger
will constitute a reorganization under Section 368(a) of the Code, (ii)
Chancellor, Merger Sub and Capstar will each be a party to the reorganization
under Section 368(b) of the Code, and (iii) no gain or loss will be recognized
by the stockholders of Capstar on the receipt pursuant to the Merger of shares
of Chancellor Common Stock in exchange for shares of Capstar Common Stock,
except with respect to cash received in lieu of fractional shares of Chancellor
Common Stock or Dissenting Shares. In rendering such opinion, Vinson & Elkins
L.L.P. shall receive and may rely upon representations contained in certificates
of Chancellor, Merger Sub and Capstar.
(d) CHANCELLOR REGISTRATION RIGHTS. Chancellor shall have entered
into the Chancellor Registration Rights Agreement.
7.3 CONDITIONS TO OBLIGATIONS OF CHANCELLOR. The obligations of
Chancellor and Merger Sub to effect the Merger is further subject to the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Capstar contained in this Agreement shall have been true and
correct as of the date such representations and warranties are made under this
Agreement and shall be true and correct at and as of the Closing Date as though
made at and as of such time (except to the extent that any such representations
and warranties expressly relate only to an earlier time, in which case they
shall have been true and correct at such earlier time); provided, however, that
this condition shall be deemed to have been satisfied unless the individual or
aggregate impact of all inaccuracies of such representations and warranties
(without regard to any materiality or Capstar Material Adverse Effect
qualifier(s) contained therein) could reasonably be expected to have a material
adverse effect on the condition (financial or otherwise) of Capstar (or,
following the Effective Time, the Surviving Corporation) and its subsidiaries,
considered as a whole, and except to the extent that any inaccuracies of such
representations and warranties are a result of changes in the United States
financial markets generally or in national, regional or local economic
conditions generally, or are a result of matters arising after the date hereof
that affect the broadcast industry generally. Capstar shall have delivered to
Chancellor a certificate
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dated as of the Closing Date, signed by a senior executive officer of Capstar,
to the effect set forth in this Section 7.3(a).
(b) PERFORMANCE OF OBLIGATIONS OF CAPSTAR. Capstar shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Chancellor and
Merger Sub shall have received a certificate signed on behalf of Capstar by a
senior executive officer of Capstar to such effect.
(c) TAX OPINION. Chancellor shall have received an opinion of Weil,
Gotshal & Manges LLP, dated as of the Closing Date, to the effect that (i) the
Merger will constitute a reorganization under Section 368(a) of the Code, (ii)
Chancellor, Merger Sub and Capstar will each be a party to the reorganization
under Section 368(b) of the Code, and (iii) no gain or loss will be recognized
by Chancellor, Merger Sub or Capstar by reason of the Merger. In rendering such
opinion, Weil, Gotshal & Manges LLP shall receive and may rely upon
representations contained in certificates of Chancellor, Merger Sub and Capstar.
(d) MATERIAL AGREEMENTS. Capstar and its subsidiaries shall have
received any necessary consents required as a result of the Merger and
transactions contemplated by this Agreement with respect to each Material
Agreement. A true and correct list of which Material Agreements require such
consents is set forth in the Capstar Disclosure Letter.
(e) FINANCIAL SERVICES AGREEMENTS. Capstar and certain of its
subsidiaries and Hicks Muse shall have entered into an amendment to each of the
Monitoring and Oversight Agreement (the "Capstar M&O Agreement") between Hicks
Muse and Capstar, the Monitoring and Oversight Agreement (the "Partners M&O
Agreement") between Hicks Muse and Capstar Partners, the Financial Advisory
Agreement (the "Capstar Financial Advisory Agreement") between Hicks Muse and
Capstar, and the Financial Advisory Agreement (the "Partners Financial Advisory
Agreement") between Hicks Muse and Partners, that provide (i) the Partners M&O
Agreement will be terminated at the Effective Time with no further obligation of
any party thereto, (ii) the Partners Financial Advisory Agreement will be
terminated at the Effective Time with no further obligation of any party
thereto, (iii) the Capstar M&O Agreement will be terminated at the Effective
Time and, in consideration therefor, Capstar shall deliver to Hicks Muse at
Closing a one-time cash payment of $14,202,000, and (iv) the Capstar Financial
Advisory Agreement will be terminated at the Effective Time and, in
consideration therefor, Hicks Muse will receive a fee from Capstar of
$17,500,000 in cash, payable at Closing, in satisfaction of its services
performed under the Capstar Financial Advisory Agreement in connection with the
Merger.
(f) DISSENTING SHARES. Holders of not more than 10% of the
outstanding shares of Capstar Class B Common Stock and Capstar Class C Common
Stock shall have properly demanded appraisal rights for their shares under the
Delaware Code.
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ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated and the Merger
abandoned as follows:
(a) at any time prior to the Effective Time, whether before or after
receipt of the Chancellor Stockholders Approval or the Capstar Stockholders
Approval, by mutual written consent of Chancellor and Capstar;
(b) at any time prior to the Effective Time, whether before or after
receipt of the Chancellor Stockholders Approval or the Capstar Stockholders
Approval:
(i) by Chancellor or Capstar if the Capstar Stockholders
Approval shall not have been obtained after submission by the Board of
Directors of Capstar of this Agreement for approval and adoption by the
common stockholders of Capstar at a special meeting called for such
purpose in accordance with Section 5.2(a);
(ii) by Capstar or Chancellor if the Chancellor Stockholders
Approval shall not have been obtained after submission by the Board of
Directors of Chancellor of the Chancellor Stockholder Proposals for
approval by the common stockholders of Chancellor at an annual or
special meeting called for such purpose in accordance with Section
5.2(b);
(iii) by Chancellor or Capstar if the Merger shall not have been
consummated on or before September 30, 1999, unless the failure to
consummate the Merger is the result of a willful and material breach of
this Agreement by the party seeking to terminate this Agreement;
(iv) by Chancellor or Capstar if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Merger
and such order, decree, ruling or other action shall have become final
and nonappealable;
(v) by Chancellor or Capstar in the event of a breach by the
other party of any representation, warranty, covenant or other agreement
contained in this Agreement which (A) would give rise to the failure of
a condition set forth in Section 7.2(a) or (b) or Section 7.3(a) or (b),
as applicable, and (B) cannot be or has not been cured within 30 days
after the giving of written notice to the breaching party of such breach
(a "Material Breach"), provided that the terminating party is not then
in Material Breach of any representation, warranty, covenant or other
agreement contained in this Agreement;
(vi) by Chancellor if Capstar shall have breached the
requirements of Section 5.5 hereof, unless Chancellor shall at such time
be in
51
<PAGE> 59
Material Breach of any representation, warranty, covenant or other
agreement contained in this Agreement;
(vii) by Capstar if the Board of Directors of Capstar or the
Capstar Special Committee has determined in good faith, following
consultation with and after considering the advice of outside counsel,
that in order to comply with its fiduciary duties to stockholders under
applicable law it is necessary for the Capstar Special Committee or the
full Board of Directors of Capstar to withdraw or modify, in a manner
materially adverse to Chancellor, its approval or recommendation of this
Agreement or the Merger in accordance with Section 5.5(b); or
(viii) by Chancellor if the Board of Directors of Chancellor or
the Chancellor Special Committee has determined in good faith, following
consultation with and after considering the advice of outside counsel,
that in order to comply with its fiduciary duties to stockholders under
applicable law it is necessary for the Chancellor Special Committee or
the full Board of Directors of Chancellor to withdraw or modify, in a
manner materially adverse to Capstar, its approval or recommendation of
the Merger and the Chancellor Stockholder Proposals in accordance with
Section 5.2(b).
8.2 EFFECT OF TERMINATION.
(a) In the event that Chancellor or Capstar terminates this
Agreement as provided in Section 8.1(a), 8.1(b)(iii) or 8.1(b)(iv), this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Chancellor or Capstar, other than the last sentence
of Section 5.3 and Sections 2.10, 3.7, 8.2 and 11.2.
(b) In the event that this Agreement is terminated by Chancellor
pursuant to Section 8.1(b)(v) or 8.1(b)(vi) or by Capstar or Chancellor pursuant
to Section 8.1(b)(i), Capstar shall promptly reimburse Chancellor for all
substantiated out-of-pocket costs and expenses incurred by them in connection
with this Agreement and the transactions contemplated hereby, including, without
limitation, costs and expenses of accountants, attorneys and financial advisors.
In the event that this Agreement is terminated by Capstar pursuant to Section
8.1(b)(v) or by Chancellor or Capstar pursuant to Section 8.1(b)(ii), Chancellor
shall promptly reimburse Capstar for all substantiated out-of-pocket costs and
expenses incurred by it in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, costs and expenses of
accountants, attorneys and financial advisors.
(c) In the event that this Agreement is terminated by Capstar
pursuant to Section 8.1(b)(vii) or by Chancellor pursuant to Section
8.1(b)(viii), the party electing to terminate this Agreement shall, concurrently
with such termination, pay to the non-terminating party (by wire transfer of
immediately available funds) an amount of $50,000,000 in cash (the "Termination
Fee").
52
<PAGE> 60
(d) This Agreement shall not be deemed to have been validly
terminated until all payments contemplated by Section 8.2(b) and 8.2(c) shall
have been made in full. In the event of a termination pursuant to Sections
8.1(b)(i), 8.1(b)(ii), 8.1(b)(v) or 8.1(b)(vi), the reimbursement of expenses by
the breaching party pursuant to Section 8.2(b) shall be the parties sole remedy
unless the termination resulted from a willful material breach of the
representations, warranties, covenants or other agreements in this Agreement, in
which case the non-breaching party may seek damages or any other appropriate
remedy at law or in equity. In the event of a termination pursuant to Sections
8.1(b)(vii) or 8.1(b)(viii), the payment of the Termination Fee by Capstar or
Chancellor, as applicable, pursuant to Section 8.2(c) shall be the
non-terminating party's sole remedy.
8.3 AMENDMENT. Subject to the applicable provisions of the Delaware
Code, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties; provided, however, that after the
Capstar Stockholders Approval has been obtained, no amendment shall be made
which reduces the consideration payable in the Merger or adversely affects the
rights of Capstar's stockholders hereunder without the approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
8.4 EXTENSION; CONSENT; WAIVER. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to Section 8.3, waive compliance with any of the agreements or conditions of the
other parties contained in this Agreement or consent to any action requiring
consent pursuant to this Agreement. Any agreement on the part of a party to any
such extension, waiver or consent shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of any party
to this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights.
8.5 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION, CONSENT OR WAIVER.
A termination of this Agreement pursuant to Section 8.1, an amendment of this
Agreement pursuant to Section 8.3 or an extension, consent or waiver pursuant to
Section 8.4 shall, in order to be effective, require in the case of each of
Chancellor or Capstar, action by its Board of Directors.
ARTICLE 9
SURVIVAL OF PROVISIONS
9.1 SURVIVAL. The representations and warranties of Chancellor, Merger
Sub and Capstar made in this Agreement, or in any certificate, respectively,
delivered by any of them pursuant to this Agreement, will not survive the
Closing.
53
<PAGE> 61
ARTICLE 10
NOTICES
10.1 NOTICES. All notices and other communications under this Agreement
must be in writing and will be deemed to have been duly given if delivered,
telecopied or mailed, by certified mail, return receipt requested, first-class
postage prepaid, to the parties at the following addresses:
If to Chancellor or Merger Sub, to:
Chancellor Media Corporation
300 Crescent Court, Suite 600
Dallas, Texas 75201
Attention: D. Geoffrey Armstrong
William S. Banowsky, Jr.
Facsimile: (214) 922-8701
with copies to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Attention: Michael A. Saslaw
Facsimile: (214) 746-7777
and
Thompson & Knight, P.C.
1700 Pacific Avenue
Suite 3300
Dallas, Texas 75201
Attention: Sam P. Burford, Jr.
Facsimile: (214) 969-1751
If to Capstar, to:
Capstar Broadcasting Corporation
600 Congress Avenue
Suite 1400
Austin, Texas 78701
Attention: R. Steven Hicks
William S. Banowsky, Jr.
Facsimile: (512) 340-7890
and
54
<PAGE> 62
c/o Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attention: Lawrence D. Stuart, Jr.
Facsimile: (214) 740-7313
with copies to:
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Michael D. Wortley
Facsimile: (214) 999-7732
and
R. Gerald Turner
Southern Methodist University
P.O. Box 750100
Dallas, Texas 75272-0333
Facsimile: (214) 768-3844
and
Hughes & Luce, LLP
1717 Main Street
Suite 2800
Dallas, Texas 75201
Attention: Alan J. Bogdanow
Facsimile: (214) 939-5849
All notices and other communications required or permitted under this Agreement
that are addressed as provided in this Article X will, if delivered personally,
be deemed given upon delivery, will, if delivered by telecopy, be deemed
delivered when confirmed and will, if delivered by mail in the manner described
above, be deemed given on the third business day after the day it is deposited
in a regular depository of the United States mail. Any party from time to time
may change its address for the purpose of notices to that party by giving a
similar notice specifying a new address, but no such notice will be deemed to
have been given until it is actually received by the party sought to be charged
with the contents thereof.
55
<PAGE> 63
ARTICLE 11
MISCELLANEOUS
11.1 ENTIRE AGREEMENT. Except for the documents executed by Chancellor
and Capstar pursuant hereto, this Agreement supersedes all prior discussions and
agreements between the parties with respect to the subject matter of this
Agreement, and this Agreement (including the exhibits hereto and other documents
delivered in connection herewith) and the Confidentiality Agreement contain the
sole and entire agreement between the parties hereto with respect to the subject
matter hereof.
11.2 EXPENSES. Except as provided in Section 8.2, whether or not the
Merger is consummated, each of Chancellor and Capstar will pay its own costs and
expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby;
provided, that the fees and expenses incurred in connection with (i) the filings
and registrations with the Department of Justice and Federal Trade Commission
pursuant to the HSR Act, (ii) the filings with the FCC under the Communications
Act, and (iii) the printing, mailing and distribution of the Joint Proxy
Statement/Prospectus and the preparation and filing of the Form S-4, shall be
borne equally by Chancellor and Capstar. In the event of any lawsuit or other
judicial proceeding brought by either party to enforce any of the provisions of
this Agreement, the losing party in such proceeding shall reimburse the
prevailing party's fees and expenses incurred in connection therewith, including
the fees and expenses of its attorneys.
11.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which will
constitute one and the same instrument and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties.
11.4 NO THIRD PARTY BENEFICIARY. Except for Section 5.9, the terms and
provisions of this Agreement are intended solely for the benefit of the parties
hereto (including their respective Boards of Directors and the Capstar Special
Committee and Chancellor Special Committee), and their respective successors or
assigns, and it is not the intention of the parties to confer third-party
beneficiary rights upon any other person.
11.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
11.6 ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, and any such assignment that is
not consented to shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by,
the parties and their respective successors and assigns.
56
<PAGE> 64
11.7 HEADINGS, GENDER, ETC. The headings used in this Agreement have
been inserted for convenience and do not constitute matter to be construed or
interpreted in connection with this Agreement. Unless the context of this
Agreement otherwise requires, (a) words of any gender are deemed to include each
other gender; (b) words using the singular or plural number also include the
plural or singular number, respectively; (c) the terms "hereof," "herein,"
"hereby," "hereto," and derivative or similar words refer to this entire
Agreement; (d) the terms "Article" or "Section" refer to the specified Article
or Section of this Agreement; (e) all references to "dollars" or "$" refer to
currency of the United States of America; (f) the term "person" shall include
any natural person, corporation, limited liability company, general partnership,
limited partnership, or other entity, enterprise, authority or business
organization; and (g) the term "or" is not exclusive.
11.8 INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under any present or future law, and if
the rights or obligations of Capstar or Chancellor under this Agreement will not
be materially and adversely affected thereby, (a) such provision will be fully
severable; (b) this Agreement will be construed and enforced as if such illegal,
invalid, or unenforceable provision had never comprised a part hereof; and (c)
the remaining provisions of this Agreement will remain in full force and effect
and will not be affected by the illegal, invalid, or unenforceable provision or
by its severance herefrom.
11.9 NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, stockholder, incorporator or partner, as such, of Chancellor,
Capstar, Merger Sub or the Surviving Corporation shall have any liability for
any obligations of Chancellor, Capstar, Merger Sub or the Surviving Corporation
under this Agreement or for any claim based on, in respect of or by reason of
such obligations or their creation.
11.10 RELEASE OF OLD MERGER SUB. Each of Chancellor and Capstar hereby
generally release and forever discharge Old Merger Sub and its successors and
their respective directors, officers, employees, agents or other representatives
from any and all obligations, claims or liabilities whatsoever arising out of
the Old Agreement, this Agreement and the transactions contemplated thereby or
hereby.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
57
<PAGE> 65
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of Chancellor, Capstar, Old Merger Sub and
Merger Sub effective as of the date first written above.
CHANCELLOR MEDIA CORPORATION
By: /s/ THOMAS O. HICKS
---------------------------------
Name: Thomas O. Hicks
Title: Chairman and Chief Executive Officer
CAPSTAR BROADCASTING CORPORATION
By: /s/ WILLIAM S. BANOWSKY, JR.
---------------------------------
Name: William S. Banowsky, Jr.
Title: Executive Vice President and General Counsel
CMC MERGER SUB, INC.
By: /s/ THOMAS O. HICKS
---------------------------------
Name: Thomas O. Hicks
Title: Chairman
CBC ACQUISITION COMPANY, INC.
By: /s/ WILLIAM S. BANOWSKY, JR.
---------------------------------
Name: William S. Banowsky, Jr.
Title: Executive Vice President and General Counsel
58
<PAGE> 1
EXHIBIT 2.56
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
THE BROADCAST GROUP, INC.,
SELLER
AND
CHANCELLOR MEDIA/SHAMROCK BROADCASTING, INC.,
BUYER
DATED AS OF SEPTEMBER 15, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I. ASSETS TO BE CONVEYED..................................................................................1
1.1. Licenses and Authorizations............................................................1
1.2. Station Equipment......................................................................2
1.3. Contracts..............................................................................2
1.4. Real Property..........................................................................3
1.5. Call Signs, Promotional Materials and Intangibles......................................3
1.6. Records................................................................................3
1.7. Accounts Receivable....................................................................3
1.8. Excluded Assets........................................................................4
1.9. Effect of Time Brokerage Agreement on Certain Contracts................................4
ARTICLE II. ASSUMPTION OF LIABILITIES.............................................................................5
ARTICLE III. TOTAL CONSIDERATION AND APPRAISAL....................................................................5
3.1. Total Consideration....................................................................5
3.2. Appraisal..............................................................................6
ARTICLE IV. PRORATIONS AND ADJUSTMENTS............................................................................6
ARTICLE V. NONCOMPETITION AGREEMENT...............................................................................7
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF SELLER..............................................................7
6.1. Organization...........................................................................7
6.2. Authorization..........................................................................7
6.3. No Breach..............................................................................8
6.4. Station Licenses.......................................................................8
6.5. Station Applications...................................................................9
6.6. Title to Assets........................................................................9
6.7. Condition of Equipment.................................................................9
6.8. Condition of Real Property.............................................................9
6.9. Assigned Contracts....................................................................11
6.10. Employees............................................................................11
6.11. Employee Benefit Plans...............................................................12
6.12. Litigation...........................................................................13
6.13. Payment of Taxes.....................................................................13
6.14. Compliance With Laws.................................................................13
6.15. Insolvency Proceedings...............................................................14
6.16. Citizenship..........................................................................14
6.17. Patents, Trademarks, Copyrights......................................................15
6.18. Financial Statements.................................................................15
6.19. Sufficiency of Assets................................................................16
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
6.20. No Misleading Statements.............................................................16
6.21. Broadcast Cash Flow..................................................................16
6.22. Limitation of Buyer's Representations and Warranties.................................16
6.23. Definition of Seller's Knowledge.....................................................16
ARTICLE VII. REPRESENTATIONS AND WARRANTIES OF BUYER.............................................................16
7.1. Organization..........................................................................16
7.2. Authorization.........................................................................16
7.3. No Breach.............................................................................16
7.4. Litigation............................................................................17
7.5. No Misleading Statements..............................................................17
7.6. Qualification as Broadcast Licensee...................................................17
7.7. Limitation of Seller's Representations and Warranties.................................17
7.8. Buyer's In-Market Revenue.............................................................17
ARTICLE VIII. ENVIRONMENTAL MATTERS..............................................................................17
8.1. Definitions...........................................................................17
8.2. Environmental Compliance..............................................................18
ARTICLE IX. PRE-CLOSING OBLIGATIONS..............................................................................19
9.1. Application for Commission Consent....................................................19
9.2. Hart-Scott-Rodino Act.................................................................20
9.3. Other Governmental Consents...........................................................20
9.4. Financial Information.................................................................20
9.5. Consents..............................................................................20
9.6. Surveys...............................................................................20
9.7. Confidentiality.......................................................................21
9.8. Access................................................................................21
9.9. Employee Matters......................................................................21
9.10. Operations Prior to Closing..........................................................22
9.11. Adverse Developments.................................................................23
9.12. Administrative Violations............................................................23
9.13. Bulk Sales Act.......................................................................24
9.14. Asbestos-Containing Material.........................................................24
9.15. Control of Stations..................................................................24
ARTICLE X. CONDITIONS PRECEDENT..................................................................................24
10.1. Mutual Conditions....................................................................24
10.1.1. Governmental Consents......................................................24
10.1.2. Absence of Litigation......................................................24
10.2. Conditions to Buyer's Obligation.....................................................24
10.2.1. Representations and Warranties.............................................25
10.2.2. Compliance with Conditions.................................................25
10.2.3. Title Commitment...........................................................25
10.2.4. Validity of Station Licenses...............................................25
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
10.2.5. Closing Documents..........................................................25
10.2.6. Third Party Consents.......................................................25
10.2.7. Estoppel Certificates......................................................25
10.2.8. Settlement of Claims.......................................................26
10.2.9. Finality...................................................................26
10.3. Conditions to Seller's Obligation....................................................26
10.3.1. Representations and Warranties.............................................26
10.3.2. Compliance with Conditions.................................................26
10.3.3. Payment....................................................................26
10.3.4. Closing Documents..........................................................26
ARTICLE XI. CLOSING..............................................................................................26
11.1. Closing Date.........................................................................26
11.2. Performance at Closing...............................................................27
11.2.1. By Seller..................................................................27
11.2.2. By Buyer...................................................................28
11.2.3. Other Documents and Acts...................................................28
ARTICLE XII. POST-CLOSING OBLIGATIONS............................................................................28
12.1. Indemnification......................................................................28
12.1.1.Buyer's Right to Indemnification............................................28
12.1.2. Seller's Right to Indemnification..........................................29
12.1.3. Conduct of Proceedings.....................................................29
12.1.4. Indemnification Not Sole Remedy............................................30
12.1.5. Right of Offset............................................................30
12.1.6. Conditions of Indemnification..............................................30
12.2. Post-Closing Access..................................................................30
ARTICLE XIII. DEFAULT AND REMEDIES...............................................................................30
13.1. Termination by Seller................................................................30
13.2. Termination by Buyer.................................................................31
13.3. Breach and Opportunity to Cure.......................................................31
13.4. Seller's Remedies....................................................................31
13.5. Buyer's Remedies.....................................................................32
13.6. Designation for Hearing..............................................................32
13.7. Legal Actions........................................................................32
ARTICLE XIV. DAMAGE..............................................................................................33
14.1. Risk of Loss.........................................................................33
14.2. Failure of Broadcast Transmission....................................................33
14.3. Resolution of Disagreements..........................................................34
ARTICLE XV. GENERAL PROVISIONS...................................................................................34
15.1. Brokerage............................................................................34
15.2. Expenses.............................................................................34
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
15.3. Notices..............................................................................34
15.4. Attorneys' Fees......................................................................35
15.5. Survival of Representations, Warranties and Indemnification Rights...................35
15.6. Exclusive Dealings...................................................................36
15.7. Waiver...............................................................................36
15.8. Assignment...........................................................................36
15.9. Entire Agreement.....................................................................36
15.10. Counterparts........................................................................36
15.11. Construction........................................................................36
15.12. Schedules and Exhibits..............................................................37
15.13. Severability........................................................................37
15.14. Choice of Law.......................................................................37
15.15. Counsel.............................................................................37
15.16. Public Statements...................................................................37
</TABLE>
iv
<PAGE> 6
TABLE OF SCHEDULES AND EXHIBITS
Schedule 1.1 Licenses, Authorizations and Applications
Schedule 1.2 Station Equipment
Schedule 1.3 Contracts
Schedule 1.4 Real Property
Schedule 1.5 Call Signs, Promotional Materials and Intangibles
Schedule 1.6 Contractual Limits on Assignment of Employee Records
Schedule 1.8 Excluded Assets
Schedule 6.1 Seller's Business and Assets
Schedule 6.6 Exceptions to Title
Schedule 6.8 Liens on Real Property
Schedule 6.10 Employees
Schedule 6.11 Employee Plans
Schedule 6.12 Litigation
Schedule 6.18 Financial Statements
Exhibit A Seller Noncompetition Agreement
Exhibit B Wolpin and Weber Noncompetition Agreement
<PAGE> 7
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made and
entered into on September 15, 1998 (the "Contract Date"), by and between THE
BROADCAST GROUP, INC., a Michigan corporation ("Seller"), THE WOLPIN CO., a
Michigan corporation ("Seller's Guarantor"), CHANCELLOR MEDIA/SHAMROCK
BROADCASTING, INC., a Delaware corporation ("Buyer"), and CHANCELLOR MEDIA
CORPORATION OF LOS ANGELES, INC., a Delaware corporation ("Buyer's Guarantor").
BACKGROUND:
Seller is the licensee, owner and operator of Broadcast
Stations KKFR-FM, 92.3 MHz, Glendale, Arizona (the "FM Station") and KFYI (AM),
910 kHz, Phoenix, Arizona (the "AM Station," together with the FM Station, the
"Stations"), pursuant to certain authorizations issued by the Federal
Communications Commission (the "Commission" or "FCC"), and owns certain assets
used or held for use solely in connection with the operation of the Stations.
Seller desires to sell and assign and Buyer desires to purchase and acquire
substantially all of the property and assets used or held for use in the
operation of the Stations upon the terms set forth in this Agreement (the
"Transaction"). Seller's Guarantor is a party to this Agreement in order to
provide a guaranty for, and to be jointly and severally liable with Seller for
any breach of, Seller's obligations under this Agreement. Buyer's Guarantor is a
party to this Agreement in order to provide a guaranty for, and to be jointly
and severally liable with Buyer for any breach of, Buyer's obligations under
this Agreement. Buyer and Seller intend to enter into, simultaneously with the
execution hereof, an agreement providing for the sale of substantially all of
the broadcast time of the Stations to Buyer (the "Time Brokerage Agreement"),
subject to and in compliance with the rules and policies of the Commission. The
parties acknowledge that the licenses issued by the Commission for the operation
of the Stations may not be assigned without the prior written consent of the
Commission. Accordingly, in consideration of the foregoing and of the mutual
promises, covenants, and conditions set forth below, the parties agree as
follows:
ARTICLE I.
ASSETS TO BE CONVEYED
On the Closing Date (as defined in Section 11.1), subject to
and in reliance upon the covenants, representations, warranties and agreements
set forth herein, and subject to the terms and conditions contained herein, and
subject to the Time Brokerage Agreement if then in effect, Seller shall sell,
assign, transfer and deliver to Buyer and Buyer shall purchase from Seller, all
of the assets owned or leased by Seller that are used or held for use in the
operation of the Stations, other than Excluded Assets (as defined below),
including without limitation, the following (collectively, the "Assets"):
1.1. Licenses and Authorizations. All licenses, permits,
permissions and other authorizations issued to Seller for the operation of the
Stations by the Commission or
<PAGE> 8
any other governmental agencies, including, but not limited to, those listed on
Schedule 1.1 and the right to use the Stations' call letters (the "Station
Licenses"), and all applications for modification, extension or renewal thereof,
and any pending applications for any new licenses, permits, permissions or
authorizations pending on the Closing Date, including, but not limited to, those
listed on Schedule 1.1 (the "Station Applications").
1.2. Station Equipment. All the fixed and tangible personal
property owned by or leased to Seller that is used or held for use in the
operation of the Stations including, but not limited to, the transmitters,
towers, ground system and studio equipment listed on Schedule 1.2 together with
any replacements, improvements, or additions thereto made between the Contract
Date and the Closing Date (the "Station Equipment").
1.3. Contracts. Subject to Section 1.9, all rights of Seller
or others for the benefit of the Stations under
(a) all agreements, contracts, or leases described on
Schedule 1.3(a);
(b) such other contracts, agreements or leases
entered into (i) in the case of contracts other than employment contracts, with
the written consent of Buyer, which consent shall not be unreasonably withheld
and shall be deemed granted if Buyer does not notify Seller in writing of
Buyer's grounds for withholding consent within five (5) business days of Buyer's
receipt of Seller's written request for consent; (ii) in the case of employment
contracts, with the consent of Buyer, which shall be requested by Seller during
normal working hours from the employee of Buyer designated and authorized by
Buyer to review such requests and grant such consent (the "Designated
Employee"), or a person with similar authority substituting for the Designated
Employee in the Designated Employee's absence, which consent shall not be
unreasonably withheld and shall be deemed granted if the Designated Employee or
substitute cannot be reached through all reasonable efforts by Seller during
normal working hours within eight (8) hours, or if the Designated Employee does
not notify Seller of the grounds for withholding consent within eight (8) hours
after receiving such request; or (ii) in the ordinary course of business,
between the Contract Date and the earlier of the TBA Commencement Date or the
Closing Date, that do not, in the aggregate, impose obligations in excess of
Twenty-Five Thousand Dollars ($25,000) on Buyer (the contracts, agreements and
leases described in clauses (a) and (b) are collectively referred to as the
"Operating Contracts");
(c) all contracts for the sale of time on the
Stations for cash (i) at rates substantially in accordance with the Stations'
past practices with a remaining term at Closing of twelve (12) months or less,
(ii) set forth on Schedule 1.3(c), or (iii) entered into with the written
consent of Buyer, which consent shall not be unreasonably withheld and shall be
deemed granted if Buyer does not notify Seller in writing of Buyer's grounds for
withholding consent within five (5) business days of Buyer's receipt of Seller's
written request for consent ("Sales Agreements");
(d) contracts for the sale of time on the Stations in
exchange for merchandise or services used or useful for the benefit of the
Stations to the extent that such contracts are listed on Schedule 1.3(d) or (i)
were entered into in the ordinary course of business,
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(ii) are preemptible for cash time sales, and (iii) obligate Buyer to provide
advertising time only on a "run of schedule" basis ("Trade Agreements"); and
(e) contracts for the sale of time on the Stations in
exchange for programming set forth on Schedule 1.3(e) or entered into after the
Contract Date in the ordinary course of business or with the written consent of
Buyer, which consent shall not be unreasonably withheld and shall be deemed
granted if Buyer does not notify Seller in writing of Buyer's grounds for
withholding consent within five (5) business days of Buyer's receipt of Seller's
written request for consent ("Barter Agreements").
1.4. Real Property. All right, title and interest in the real
property used or held for use or necessary in the operation of the Stations and
owned, leased, or licensed by Seller, as described in Schedule 1.4, or acquired
for the benefit of the Stations by Seller with the written consent of Buyer
between the Contract Date and Closing Date (the "Real Property").
1.5. Call Signs, Promotional Materials and Intangibles. All of
Seller's rights in the Stations' call signs, copyrights, patents, trademarks,
trade names, slogans, logos, service marks, computer software, domain name
registrations, magnetic media, data processing files, systems and programs,
business lists, trade secrets, sales and operating plans, all goodwill of the
Stations and other similar intangible property rights used or held for use in
the operation of the Stations, including but not limited to the intangible
property identified on Schedule 1.5 (the "Intangible Property").
1.6. Records. All of Seller's records, including but not
limited to all books of account, customer lists, supplier lists, transferable
computer programs and software (subject to any restrictions on transfer or sale
of commercial computer software contained in licenses for such software),
employee personnel files (subject to any legal limitations on transfer or
disclosure thereof or to any contractual limitations on transfer or disclosure
thereof set forth in Schedule 1.6), local public inspection file materials,
engineering data, logs, programming records, consultants' reports, ratings
reports, budgets, marketing and demographic data, financial reports and
projections, lists of advertisers, promotional materials, and sales, operating
and business plans, relating to or used in the operation of the Stations or
necessary or desirable to show compliance with any law or regulation applicable
to the Stations or the operation of the Stations and not pertaining solely to
Seller's internal financial or corporate affairs or its other interests (the
"Station Records").
1.7. Accounts Receivable. Unless the parties have entered into
the Time Brokerage Agreement and such accounts receivable have been assigned to
Buyer for purpose of collection pursuant thereto, at the Closing, Seller shall
assign to Buyer, for purpose of collection only, all of Seller's accounts
receivable arising from the operation of the Stations (the "Receivables"). For a
period of one hundred twenty days (120) after the Closing Date, Buyer will
collect the Receivables for Seller's benefit. Buyer will not adjust, compromise
or settle any dispute concerning the Receivables without prior written consent
of Seller. Within five (5) business days of the end of each calendar month after
the Closing Date, Buyer shall pay to Seller all amounts collected on account of
the Receivables during the prior calendar month. Within one
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hundred thirty (130) days of the Closing Date, Buyer will deliver to Seller the
balance of amounts collected on account of the Receivables, and a complete
certified statement of all collections and payments made with respect to the
Receivables. Buyer shall then reassign to Seller the Receivables that remain
uncollected. For the purposes hereof, all sums received by Buyer from any person
or entity that is the payee on any of Seller's accounts receivable shall be
deemed to be payments with respect to the accounts receivable from such person
or entity, until all amounts due Seller from such person or entity have been
collected.
1.8. Excluded Assets. It is understood and agreed that the
following assets shall not be among the Assets purchased pursuant to this
Agreement:
(a) Seller's cash on hand as of the Closing and any
of Seller's interests in its bank accounts and all of Seller's other cash, cash
equivalents, security funds, securities, investments, deposits, prepayments
(including prepaid taxes and insurance), tax refunds and overpayments;
(b) Any insurance policies and proceeds thereof,
promissory notes, amounts due from employees, bonds, letters of credit,
certificates of deposits or other similar items and cash surrender value in
regard thereto;
(c) Any pension, profit-sharing, or employee benefit
plans, including all of Seller's interest in any Employee Plan (as defined in
Section 6.11), and any collective bargaining agreements;
(d) Any accounts receivable outstanding on the
Closing Date subject to Section 1.7 hereof;
(e) Any agreements not included among the Assigned
Contracts or the TBA-Assigned Contracts, as defined in Section 1.9;
(f) All tax returns and supporting materials, all
financial statements and supporting materials, all books and records that Seller
is required by law to retain, all corporate minutes and records, and all records
of Seller relating to the sale of the Assets; and
(g) Any interest in and to any refunds of federal,
state, or local franchise, income or other taxes for periods prior to the
Closing Date.
(h) Any items listed on Schedule 1.8.
1.9. Effect of Time Brokerage Agreement on Certain Contracts
In the event that the parties execute the Time Brokerage Agreement, pursuant
thereto and as of the Commencement Date thereof (as defined in the Time
Brokerage Agreement, the "TBA Commencement Date"), Seller will assign to Buyer
and Buyer will assume (i) the Operating Contracts on Schedule 1.3(a) that are
marked to show that they will be assigned pursuant to the Time Brokerage
Agreement, (ii) the Operating Contracts to be assumed by Buyer pursuant to
Section 1.3(b); (iii) the Sales Agreements; (iv) the Trade Agreements; and (v)
the Barter
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Agreements (collectively, the "TBA-Assigned Contracts"). The Operating
Contracts, Sales Agreements, Trade Agreements, and Barter Agreements, exclusive
of the TBA-Assigned Contracts, if any, are referred to herein as the "Assigned
Contracts."
ARTICLE II.
ASSUMPTION OF LIABILITIES
Except to the extent assumed prior to the closing of the
transaction contemplated by this Agreement (the "Closing") as provided in the
Time Brokerage Agreement, at the Closing, Buyer shall assume all liabilities,
obligations, commitments, and responsibilities of Seller accruing or arising
from and relating exclusively to the ownership of the Assets or operation of the
Stations from and after the Closing Date under any of the Assigned Contracts
(collectively, the "Assumed Liabilities"). Buyer shall not assume or undertake
to pay, satisfy or discharge any of Seller's liabilities, obligations,
commitments or responsibilities other than the Assumed Liabilities. If, in the
case of any Assigned Contract for which consent to assignment of a third party
is required as indicated on Schedule 1.3(a), and (i) such consent has not been
obtained as of the Closing Date, and, (ii) if such Assigned Contract is
designated as required on Schedule 1.3(a) (a "Required Contract") (such consent
to assign with respect to a Required Contract, a "Required Consent"), Buyer
waives the condition precedent to its obligations set forth at Section 10.2.7 in
its sole discretion, then, provided Buyer uses its commercially reasonable best
efforts to both obtain the consent or Required Consent, as applicable, and to
receive the benefits of such Assigned Contract, which Buyer hereby covenants to
do, Seller shall use its commercially reasonable best efforts to cause the other
party to such Assigned Contract to provide Buyer the benefits under and for the
term of such Assigned Contract until such consent or Required Consent, as
applicable, is obtained, at which time such Assigned Contract shall be assigned
to Buyer; provided, however, that Seller shall not be relieved of, and Buyer
shall not assume, any obligation or liability of Seller under such Assigned
Contract prior to such assignment to Buyer, and that Buyer shall reimburse
Seller for amounts paid by Seller pursuant to the terms of such Assigned
Contract to the extent Buyer receives or could, but for Buyer's action or
inaction, receive, benefits thereunder; provided further, that, in the event of
a default by the other party to a Required Contract not assigned to Buyer prior
to Closing, for which benefits are intended to be provided to Buyer after
Closing pursuant to the terms of this Article II, Buyer shall reimburse Seller
for its reasonable expenses incurred in obtaining performance from such
defaulting party, pursuing any remedies available in respect of such party's
default, and obtaining substitute performance, subject to Buyer's prior approval
of any such actions and resulting expenses, which, in the case of approval of
such actions by Seller, approval of such resulting expenses shall not be
unreasonably withheld.
ARTICLE III.
TOTAL CONSIDERATION AND APPRAISAL
3.1. Total Consideration. The purchase price for the Assets
being purchased shall be Eighty-Nine Million Eight Hundred Fifty Thousand
Dollars ($89,850,000.00) (the "Purchase Price"), and the consideration for the
Noncompetition Agreements referenced in Article V below shall be Fifty Thousand
Dollars for the Noncompetition Agreement between
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Buyer and both of Walter J. Wolpin ("Wolpin") and Fredric G. Weber ("Weber") and
One Hundred Thousand Dollars for the Noncompetition Agreement between Buyer and
Seller (such consideration, collectively, the "Noncompetition Consideration").
The Purchase Price and the Noncompetition Consideration are collectively
referred to herein as the "Total Consideration." At Closing, Buyer will pay, by
wire transfer of federal funds (pursuant to wire instructions that Seller shall
deliver to Buyer prior to Closing), to Seller, the Purchase Price plus or minus
any adjustments, as set forth in Article IV hereof or elsewhere in this
Agreement, and to Seller and to Wolpin and Weber, as appropriate, the
Noncompetition Consideration.
3.2. Appraisal. After the Closing, Buyer shall, at its sole
cost and expense, cause the aggregate fair market value of the Assets to be
appraised by an appraisal firm of its choosing. Buyer shall, within one hundred
twenty (120) days after the Closing, deliver a draft of IRS Form 8594 reflecting
the information required by Section 1060 of the Internal Revenue Code (the
"Code") and the regulations thereunder (and excluding any information required
to be excluded by Treas. Reg. ss. 1.1060-1T(b)(4)) to Seller for review and
approval, which approval shall not be unreasonably withheld. In the event such
consent is not withheld, Buyer and Seller shall each file with their respective
federal income tax returns for the tax year in which the Closing occurs, IRS
Forms 8594 containing the information agreed upon under the procedure outlined
above. Except as otherwise required by law or any taxing authority, each of
Buyer and Seller shall report, or cause to be reported, the transactions
contemplated hereby for income tax purposes (including but not limited to, on
their respective income tax returns, before any governmental agency charged with
the collection of income tax or in any judicial proceeding concerning the income
tax consequences of the Buyer's purchase or Seller's sale of the Assets
hereunder) in a manner consistent with the information agreed upon pursuant to
this section and contained in the relevant IRS Form 8594. Notwithstanding any
other provision of this Agreement, the provisions of this Section 3.1(b) shall
survive the Closing without limitation.
ARTICLE IV.
PRORATIONS AND ADJUSTMENTS
Except as otherwise provided in the Time Brokerage Agreement,
the operation of the Stations and the income and normal operating expenses,
including without limitation assumed liabilities and prepaid expenses,
attributable thereto through 11:59 p.m. of the day prior to the Closing Date
(the "Adjustment Date") shall be for the account of Seller and thereafter for
the account of Buyer. Expenses for goods or services received both before and
after the Adjustment Date, taxes and assessments, power and utilities charges,
and rents and similar prepaid and deferred items shall be prorated between
Seller and Buyer as of the Adjustment Date (the "Closing Date Adjustments"). All
installments of special assessments and similar charges or liens imposed against
the Real Property and Station Equipment that are due and payable on or before
the Adjustment Date shall be paid by the Seller, and installments payable with
respect to such special assessments, charges or liens after the Adjustment Date
shall be paid by Buyer, and such charges shall be prorated as required
hereunder. Three (3) days prior to the Closing Date Seller shall estimate all
apportionments pursuant to this Article IV and shall deliver a statement of its
estimates to Buyer (which statement shall set forth in reasonable detail the
basis for those estimates). At the Closing, Buyer shall pay to Seller, or Seller
shall pay to Buyer, as the case
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may be, the net amount due as a result of the estimated apportionments
(excluding any item that is in dispute). Within sixty (60) days after the
Closing (the "Payment Date"), Buyer shall deliver to Seller a statement of any
adjustments to Seller's estimate of the apportionments, and Buyer shall pay to
Seller, or Seller shall pay to Buyer, as the case may be, any amount due as a
result of the adjustment (or, if there is any dispute, the undisputed amount).
If Seller disputes Buyer's determinations, or if at any time after delivery of
Buyer's statement of determinations, either party determines that any item
included in the apportionments is inaccurate, or that an additional item should
be included in the apportionments, the parties shall confer with regard to the
matter and an appropriate adjustment and payment shall be made as agreed upon by
the parties (or, if they are unable to resolve the matter, they shall select a
firm of independent certified public accountants to resolve the matter, whose
decision on the matter shall be binding and whose fees and expenses shall be
borne equally by the parties). All amounts due pursuant to this subsection that
are not paid within thirty (30) days of the date they are due shall bear
interest until paid at a rate per annum equal to generally prevailing prime
interest rate (as reported by The Wall Street Journal) plus five percent (5%).
ARTICLE V.
NONCOMPETITION AGREEMENT
At Closing, Seller and Buyer shall enter into a Noncompetition
Agreement in the form set forth in Exhibit A, and Wolpin and Weber and Buyer
shall enter into a Noncompetition Agreement in the form set forth in Exhibit B
(such Noncompetition Agreements, collectively, the "Covenants").
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller makes the following representations and warranties, all
of which have been relied upon by Buyer in entering into this Agreement and,
except as otherwise specifically provided, all of which shall be true and
correct at Closing.
6.1. Organization. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Michigan,
is duly qualified to do business in, and is in good standing under, the laws of
the State of Arizona and has full power and authority to own, lease and operate
the Assets and to conduct the business and operations of the Stations as
currently conducted and proposed to be conducted by Seller and to enter into and
perform this Agreement. The address of Seller's chief executive offices, all of
Seller's additional places of business, and the locations of all material
tangible personal property included in the Assets are listed in Schedule 6.1.
Except as set forth in Schedule 6.1, during the past five (5) years, Seller has
not, nor to the best of Seller's knowledge, has any prior owner of the Stations
been known by or used any corporate, partnership, fictitious or other name in
the conduct of the Stations' business or in connection with the use or operation
of the Assets.
6.2. Authorization. The execution and delivery of this
Agreement by Seller has been duly authorized by all necessary corporate action
on its part. Seller will deliver evidence of such authorization at Closing. This
Agreement has been duly executed by Seller and
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delivered to Buyer and to Seller's knowledge constitutes the legal, valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms, except as limited by laws affecting the enforcement of creditors' rights
generally or equitable principles.
6.3. No Breach. None of (i) the execution, delivery and
performance of this Agreement by Seller, (ii) the consummation of this Agreement
and all other documents or instruments related thereto or executed in connection
therewith or in contemplation of the Transaction, or (iii) Seller's compliance
with the terms and conditions hereof will, with or without the giving of notice
or the lapse of time or both, conflict with, breach the terms and conditions of,
constitute a default under, or violate Seller's certificate of incorporation or
bylaws, any judgment, decree, order, injunction, agreement, lease or other
instrument to which Seller is a party or by which Seller is legally bound, or
any law, rule, or regulation applicable to Seller or the operation of the
Stations, where such conflict or breach is reasonably likely to have a material
adverse effect on the operation of the Stations or impose material liabilities
on Buyer.
6.4. Station Licenses. The Station Licenses are all of the
licenses, permits, and other authorizations used or necessary to lawfully
operate the Stations in the manner and to the full extent as they are operated
as of the date hereof, and the Station Licenses are validly issued in the name
of Seller. Seller has delivered to Buyer true and complete copies of the Station
Licenses that are material to the operation of the Stations, including any and
all amendments and other modifications thereto. As of the date hereof, and,
except to the extent caused by Buyer's performance or non-performance under the
Time Brokerage Agreement, as of Closing, the Station Licenses are in full force
and effect; are valid for the balance of the current license term (the
expiration date of which is shown on Schedule 1.1 for each Station License),
except where such term expires prior to Closing, in which case such Station
Licenses will, except to the extent caused by Buyer's performance or
non-performance under the Time Brokerage Agreement, have been renewed prior to
Closing and will be valid for the new license term; are unimpaired by any acts
or omissions of Seller or any of its affiliates, or the employees, agents,
officers, directors, or shareholders of Seller or any of its affiliates; and are
free and clear of any restrictions which might limit the full operation of the
Stations in the manner and to the full extent as they are operated on the date
hereof (other than restrictions under the terms of the licenses themselves or of
the Commission's rules). As of the date hereof and, except to the extent caused
by Buyer's performance or non-performance under the Time Brokerage Agreement, as
of Closing, there are no applications, proceedings, or complaints pending or, to
the knowledge of Seller, threatened which may have a material adverse effect on
the business or operation of the Stations (other than rulemaking proceedings
that apply to the radio broadcasting industry generally). Seller is not aware of
any reason why those of the Station Licenses subject to expiration might not be
renewed in the ordinary course for a full term without material qualifications
or of any reason why any of the Station Licenses might be revoked. As of the
date hereof and, except to
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the extent caused by the performance or non-performance of Buyer under the Time
Brokerage Agreement, as of Closing, the Stations are in compliance with the
Commission's policy on exposure to radio frequency radiation. As of the date
hereof, and, except to the extent due to Buyer's performance or non-performance
under the Time Brokerage Agreement, as of Closing, no renewal of any Station
License would constitute a major environmental action under the rules of the
Commission. As of the date hereof, and, except to the extent due to Buyer's
performance or non-performance under the Time Brokerage Agreement, as of
Closing, there are no facts which, under the Communications Act of 1934, as
amended, or the existing rules of the Commission, would disqualify Seller from
assigning the Station Licenses or from consummating the transactions
contemplated herein within the times contemplated herein. Subject to Buyer's
fulfillment of its related obligations under the Time Brokerage Agreement,
Seller maintains an appropriate public inspection file at the Stations' studio
in accordance with Commission rules. Access to the Stations' transmission
facilities are restricted in accordance with the policies of the Commission.
6.5. Station Applications. All information contained in any
Stations Application (as described on Schedule 1.1 hereto) pending with the
Commission is true, complete and accurate in all material respects.
6.6. Title to Assets. Except as set forth on Schedule 6.6(a),
Seller has good and marketable title to the Real Property, in the case of owned
Real Property, good title to the Station Equipment, in the case of owned Station
Equipment, and a valid leasehold interest, in the case of leased Real Property
and Station Equipment, in each case free and clear of all debts, liens, charges,
security interests, mortgages, deeds of trust, pledges, judgments, trusts,
adverse claims, liabilities, collateral assignments, leases, easements,
covenants, encumbrances and other impairments of title ("Liens"), other than as
set forth on Schedule 6.6(a). At Closing, Seller shall convey to Buyer good and
marketable title to the Real Property, and title to all other Assets free and
clear of all Liens other than those set forth on Schedule 6.6(b) ("Permitted
Liens").
6.7. Condition of Equipment. The Station Equipment listed on
Schedule 1.2 constitutes all of the material personal property that is used,
held by the Seller or, as of the date hereof, others for use by the Stations, or
necessary to operate the Stations as they are now operated. As of the date
hereof and, except to the extent caused by Buyer's use of the Station Equipment
pursuant to, or breach of Buyer's obligation to maintain the equipment under,
the Time Brokerage Agreement, as of Closing, the Station Equipment is in good
operating condition and repair (reasonable wear and tear excepted), is
performing satisfactorily, is not in need of repair, has been properly
maintained, is available for immediate use and is otherwise sufficient to permit
the Stations to operate in accordance with the Station Licenses and the rules
and regulations of the Commission. All Station Equipment is type-approved or
type-accepted where such type-approval or type-acceptance is required. The
ground system of the AM Station is as specified in the current license or
applicable construction permit for the AM Station (including with respect to the
number, length and burial depth or radials).
6.8. Condition of Real Property.
(a) The Real Property listed on Schedule 1.4(a)
constitutes all the real property owned or leased by Seller or others in
connection with the operation of the Stations as they are now operated.
(b) As of the date hereof and, except to the extent
such matters are due to Buyer's performance or non-performance under the Time
Brokerage Agreement, as of Closing, Seller has not received notice of any
pending and, to the best of Seller's knowledge,
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there are no threatened or contemplated condemnation or eminent domain
proceedings that may affect the Real Property. As of the date hereof and, except
to the extent such matters are due to Buyer's performance or non-performance
under the Time Brokerage Agreement, as of Closing, Seller has not received
notice of any writ, injunction, decree, order or judgment, nor any litigation
pending, and, to the best of Seller's knowledge, none are threatened, relating
to the ownership, use, lease, occupancy or operation of any of the Real
Property. As of the date hereof and, except to the extent such matters are due
to Buyer's performance or non-performance under the Time Brokerage Agreement, as
of Closing, Seller has not received notice that Seller's use and occupancy of
the Real Property does not comply in all material respects with all regulations,
codes, ordinances, and statutes of all applicable governmental authorities,
including without limitation all environmental protection and sanitary laws and
regulations, occupational safety and health regulations, and electrical codes.
(c) (i) The premises leased for use in conjunction
with the Stations are leased pursuant to the agreements described in Schedule
1.4 (the "Lease Agreements"), which are the sole and complete agreements
concerning Seller's use of the leased premises. Neither Seller nor, to Seller's
knowledge, any other party is in default, violation or breach in any material
respect under any Lease Agreement, and to Seller's knowledge no event has
occurred and is continuing that constitutes or, with notice or the passage of
time or both, would constitute a default, violation or breach thereunder, except
to the extent caused by Buyer's performance or non-performance under the Time
Brokerage Agreement. No amount payable by Seller under any Lease Agreement is
past due. Except to the extent caused by Buyer's performance or non-performance
under the Time Brokerage Agreement, Seller has not received any notice of a
default, offset or counterclaim under any Lease Agreement or any other
communication asserting non-compliance with any Lease Agreement. Seller enjoys
peaceful and undisturbed possession of the premises leased by Seller under the
Lease Agreement. Except as set forth on Schedule 6.8(c), the Lease Agreements
are free and clear of all Liens arising from Seller's acts, except for lessors'
interests in the leases. Seller has delivered to Buyer, true and complete copies
of the Lease Agreements, together, in the case of any subleases or similar
occupancy agreements, with copies of all overleases. Except as disclosed in
Schedule 6.8(c), Seller has full legal power and authority to assign its rights
under the Lease Agreements to Buyer in accordance with this Agreement on terms
and conditions no less favorable than those in effect on the date hereof, and
such assignment will not affect the validity, enforceability and continuity of
any such lease.
(ii) To Seller's Knowledge, each Lease Agreement
is legal, valid, binding, enforceable and in full force and effect, and, except
as expressly set forth in the subject Lease Agreement, Seller has the exclusive
right to use and occupy the premises leased under each Lease Agreement.
(d) All utilities that are required for the full and
complete occupancy and use of the Real Property for the purposes for which such
properties are presently being used by Seller, including without limitation
electric, water, sewer, and telephone, have been connected and to Seller's
knowledge are in good working order, except if otherwise to the extent caused by
Buyer's performance or non-performance under the Time Brokerage Agreement. By
the Closing Date, Seller will have paid all charges for such utilities,
including without limitation any "tie-in"
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charges or connection fees, except for those charges that will not become due
until after the Closing Date and that are to be prorated between Seller and
Buyer pursuant to Article IV.
6.9. Assigned Contracts. Except with respect to such terms and
conditions that, in the aggregate, would not have a materially adverse effect on
the Stations, the Assigned Contracts are assignable to Buyer on terms and
conditions no less favorable than those in effect on the date hereof, subject to
the obtaining of consent to assignment for those Assigned Contracts identified
on Schedule 1.3(a) as requiring consent to assignment. As of the date hereof,
and, except to the extent caused by Buyer's performance or non-performance under
the Time Brokerage Agreement, as of the Closing, each Required Contract is in
full force and effect and is unimpaired by any acts or omissions of Seller,
Seller's employees, agents, officers, directors or shareholders. As of the date
hereof, and, except to the extent caused by Buyer's performance or
non-performance under the Time Brokerage Agreement, as of the Closing, Seller
has complied in all material respects with all Assigned Contracts, and there has
not occurred as to any Assigned Contract any material default by Seller or any
event that, with notice or the lapse of time or otherwise, could become a
material default by Seller. As of the date hereof, and, except to the extent
caused by Buyer's performance or non-performance under the Time Brokerage
Agreement, as of the Closing, Seller has not granted or been granted any
material waiver or forbearance with respect to any of the Required Contracts.
Except where such default by a third party would not have a materially adverse
effect on the Stations, to the best knowledge of Seller, as of the date hereof,
and, except to the extent caused by Buyer's performance or non-performance under
the Time Brokerage Agreement, as of the Closing, there has not occurred as to
any Assigned Contract any default by any other party thereto or any event that,
with notice or the lapse of time or at the election of any person other than
Seller, could become a default by such party. As of the date hereof, and, except
to the extent caused by Buyer's performance or non-performance under the Time
Brokerage Agreement, as of the Closing, those Assigned Contracts whose stated
duration extends beyond the Closing Date will, at Closing, be in full force and
effect and will be unimpaired by any acts or omissions of Seller, Seller's
agents, employees, officers, directors or shareholders, except as may be
reasonably necessary in the conduct of the Stations' business. Seller has
provided to Buyer true and correct copies of all written Assigned Contracts, as
modified to date, or true and complete memoranda describing the terms of all
oral Assigned Contracts, and all material liabilities and obligations under such
Assigned Contracts can be ascertained from such copies or memoranda. Except as
permitted hereunder, the Assigned Contracts as amended through the date of this
Agreement will not be modified without Buyer's written consent, which consent
shall not be unreasonably withheld, and shall be deemed granted if Buyer does
not notify Seller in writing of Buyer's reasonable grounds for withholding
consent within five (5) business days of Buyer's receipt of Seller's written
request for consent.
6.10. Employees.
(a) Schedule 6.10 contains a true and complete list
of all persons employed by Seller at the Stations, each such person's
compensation and bonus arrangements and the Employee Plans listed in Schedule
6.11, if any, applicable to each such person. As of the date hereof, Seller is
not a party to any agreement or arrangement, written or oral, with salaried
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or non-salaried employees except as described in Schedules 6.10 and 6.11 or
included among the Operating Contracts. Except as described in Schedule 6.10,
Seller has no knowledge as of the date hereof that any employee identified in
Schedule 6.10 currently plans to terminate employment, whether by reason of the
transactions contemplated by this Agreement or otherwise.
(b) Except as disclosed in Schedule 6.10, Seller is
not a party to or subject to any contract with any labor organization, nor has
Seller agreed to recognize any union or other collective bargaining unit, nor
has any union or other collective bargaining unit been certified as representing
any of Seller's employees at the Stations. As of the date hereof, Seller has no
knowledge of any organizational effort currently being made or threatened by or
on behalf of any labor union with respect to employees of Seller at the
Stations. As of the date hereof, there are no unfair labor practice charges
pending or, to the best of Seller's knowledge, threatened against Seller; there
are no pending or threatened strikes, arbitration proceedings involving labor
matters or other labor disputes affecting Seller or the Stations; and Seller has
not experienced any strikes, work stoppages or other significant labor
difficulties of any nature at the Stations in the past two (2) years.
6.11. Employee Benefit Plans. Schedule 6.11 sets forth a true
and complete list of each employee or retiree benefit or compensation plan
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or compensation, bonus, incentive, deferral,
equity based, severance, termination, retention, change in control, employment
or other similar program, agreement, arrangement, trust or other funding
arrangement, whether or not subject to the provisions of ERISA, to which Seller
is bound or that is or has been established or maintained or in respect of which
Seller has had any obligation to contribute during the last three (3) years
(each, an "Employee Plan"). Except pursuant to an Employee Plan, Seller has no
fixed or contingent liability or obligation to or in respect of any person now
or formerly employed at the Stations or any beneficiary or dependent of any such
person, including, without limitation, in respect of pension or thrift benefits
or payments, individual or supplemental pension benefits or payments or
compensation arrangements, contributions to hospitalization or other health,
life or other welfare benefits, incentive benefits or payments, bonus benefits
or payments or vacation, sick leave, disability and termination benefits or
payments, including workers' compensation. Except as disclosed on Schedule 6.11,
no trade or business (whether or not incorporated) is or has been as of any date
within the preceding six (6) years treated as a single employer together with
Seller pursuant to Section 414 of the Internal Revenue Code of 1986, as amended,
and the regulations thereunder (the "Code"). Seller has not incurred or does not
reasonably expect to incur (either directly or indirectly, including as a result
of any indemnification obligation) any liability that could become a liability
of Buyer or, following the Closing, remain a liability of the Stations under or
pursuant to Title I or IV of ERISA or the penalty, excise tax or joint and
several liability provisions of the Code relating to employee benefit plans and,
to the best knowledge of Seller, no event, transaction or condition has occurred
or exists which could result in any such liability. Each of the Employee Plans
has been operated and administered in all respects in accordance with all
applicable laws, including but not limited to ERISA and the Code. It is
expressly understood that Buyer is not assuming any obligation of Seller under
or with respect to any Employee Plan.
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6.12. Litigation. Except as set forth on Schedule 6.12, there
is no unsatisfied judgment outstanding and no litigation, proceeding, claim or
investigation of any nature pending or, to Seller's best knowledge, threatened
against Seller or any of the Assets which is reasonably likely to materially
adversely affect the continued operation of the Stations or materially impair
the value of the Assets or which is reasonably likely to materially adversely
affect Seller's ability to perform in accordance with the terms of this
Agreement. Seller has no knowledge of any facts that could reasonably result in
any proceedings that would be reasonably likely to have a material adverse
effect on the Stations. With respect to each matter set forth therein, Schedule
6.12 sets forth a description of the forum for the matter, the parties thereto
and the type and amount of relief sought.
6.13. Payment of Taxes. Seller has, or by the Closing Date
will have, duly filed all tax returns and forms required to be filed in respect
of the Stations and paid in full or discharged all taxes, assessments, excises,
interest, penalties, deficiencies and other levies relating to the Assets,
excepting such taxes, assessments, and other levies as will not be due until
after the Closing Date or that are to be prorated between Seller and Buyer
pursuant to Article IV. To Seller's knowledge, no event has occurred that could
impose on Buyer any liability for any taxes, penalties, or interest due or to
become due from Seller from any taxing authority, except to the extent such
event is caused by Buyer's performance or non-performance under the Time
Brokerage Agreement.
6.14. Compliance With Laws. As of the date hereof, Seller has
complied in all material respects with, and is not in material violation of any
federal, state or local laws, regulations or orders (including any applicable
statutes, ordinances or codes relating to zoning and land use, health and
sanitation, environmental protection, occupational safety, and the use of
electrical power) affecting the Assets, Seller's business, or the operation of
the Stations. Without limiting the generality of the foregoing:
(a) As of the date hereof, the Stations' transmitting
and studio equipment is operating in all material respects in accordance with
the terms and conditions of the Station Licenses and all underlying construction
permits, and the rules, regulations and policies of the Commission, including
without limitation all regulations concerning equipment authorization and human
exposure to radio frequency radiation. To the best of Seller's knowledge, (i)
the Stations are not causing interference in violation of Commission rules to
the transmission of any other broadcast Station or communications facility and
have not received any complaints with respect thereto and (ii) no other
broadcast Station or communications facility is causing interference in
violation of Commission rules to the Stations' transmissions or the public's
reception of such transmissions.
(b) Seller has, in the conduct of the Stations'
business, complied in all material respects with all applicable laws, rules and
regulations relating to the employment of labor, including those concerning
wages, hours, equal employment opportunity, collective bargaining, pension and
welfare benefit plans, and the payment of Social Security and similar taxes, and
Seller is not liable for any arrearages of wages or any tax penalties due to any
failure to comply with any of the foregoing.
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(c) As of the date hereof, Seller has received no
notification from the Commission that Seller's affirmative action program for
the Stations or Seller's other employment practices fail to comply with
Commission rules and policies.
(d) As of the date hereof, all ownership reports,
employment reports, tax returns and other documents required to be filed by
Seller with the Commission or other governmental authorities have been filed,
and, except to the extent caused by Buyer's performance or non-performance under
the Time Brokerage Agreement, will be filed through the Closing Date. Such items
as are required to be placed in the Stations' local public inspection files have
been placed in such files, and, subject to Buyer's fulfillment of its related
obligations under the Time Brokerage Agreement, will be placed in such files
until Closing. As of the date hereof, all proofs of performance and measurements
that are required to be made by Seller with respect to the Stations'
transmission facilities have been completed and filed at the Stations. As of the
date hereof, and except as affected by Buyer's performance under the Time
Brokerage Agreement, as of Closing, all information contained in the foregoing
documents is true, complete and accurate in all material respects.
(e) All towers and other structures owned by Seller
and used in the operation of the Stations or located on the Real Property are
obstruction marked and lighted to the extent required by, and in accordance with
the rules and regulations of the FAA, the Commission and other federal, state
and local authorities. To Seller's knowledge, appropriate tower registrations
required to be filed with the FCC and appropriate notifications required to be
filed with the FAA regarding the towers owned by Seller and used in the
operation of the Stations or located on the Real Property have been filed.
6.15. Insolvency Proceedings. Neither Seller nor the Assets
are the subject of any pending or threatened insolvency proceedings of any
character, including without limitation bankruptcy, receivership,
reorganization, composition or arrangement with creditors, voluntary or
involuntary. Seller has not made an assignment for the benefit of creditors or
taken any action in contemplation of or which would constitute a valid basis for
the institution of any such insolvency proceedings. After giving effect to the
Transaction, Seller (i) will have sufficient capital to carry on its business
and transactions, (ii) will be able to pay its debts as they mature or become
due, and (iii) will own assets the fair value of which will be greater than the
sum of all liabilities (including contingent liabilities) of Seller not
specifically assumed by Buyer pursuant to the terms of this Agreement. Seller is
not insolvent nor will it become insolvent as a result of entering into this
Transaction.
6.16. Citizenship. Seller is not a "foreign person" as defined
in Section 1445(f)(3) of the Code. On the Closing Date, Seller will deliver to
Buyer an affidavit to that effect, verified as true and sworn to under penalty
of perjury by a duly-authorized officer of Seller. The affidavit shall also set
forth Seller's name, address, taxpayer identification number, and such
additional information as may be required to exempt the Transaction from the
withholding provisions of Section 1445 of the Code. Buyer shall have the right
to furnish copies of the affidavit to the Internal Revenue Service.
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6.17. Patents, Trademarks, Copyrights.(a) The call signs and
all slogans, logos, copyrights, patents, trademarks, trade names, service marks,
and other similar intangible property rights, including registrations and
applications to register or renew the registrations of any of the foregoing,
used as of the date hereof to promote or identify the Stations, or otherwise
used in connection with the Stations' business, are listed or described on
Schedule 1.5 (the "Promotional Rights"). The Promotional Rights are either owned
or validly licensed by Seller, and Schedule 1.5 identifies which Promotional
Rights are so owned and which are licensed, and if licensed, the royalties paid
thereon and the parties paid thereunder. Except to the extent due to Buyer's
performance or non-performance under the Time Brokerage Agreement, the
operations of the Stations do not infringe any copyright, patent, trademark,
trade name, service mark, or other similar right of any third party. Except in
connection with its agreements with Cox Interactive Media, McDonald's
Corporation, and Power Pulse Magazine, Seller has not sold, licensed or
otherwise disposed of any Promotional Rights to any person or entity and Seller
has not agreed to indemnify any person or entity for any patent, trademark or
copyright infringement. Schedule 1.5 lists all of the Promotional Rights which
have been duly registered by Seller with, filed by Seller in, or issued at the
request of Seller by, as the case may be, the United States Patent and Trademark
Office and United States Copyright Office or other filing offices, domestic or
foreign.
(b) As of the date hereof, and, except to the extent
due to Buyer's performance or non-performance under the Time Brokerage
Agreement, as of Closing, Seller does not have any knowledge, nor has Seller
received any notice to the effect that its use of any of the Promotional Rights
may be or are claimed to infringe on the right of another. As of the date
hereof, and, except to the extent due to Buyer's performance or non-performance
under the Time Brokerage Agreement, as of Closing, Seller has no knowledge of
any infringement or unlawful or unauthorized use of such Promotional Rights,
including without limitation the use of any call sign, slogan or logo by any
broadcast or cable Station in the Phoenix, Arizona area that may be confusingly
similar to the call signs, slogans, and logos currently used by the Stations.
6.18. Financial Statements. Seller has furnished Buyer with
the financial statements listed or described on Schedule 6.18 (the "Financial
Statements"). The year-end Financial Statements: (i) have been prepared in
accordance with United States Generally Accepted Accounting Principles ("GAAP")
on a consistent basis throughout the periods involved and as compared with prior
periods and (ii) fairly and accurately reflect the financial condition and the
results of operations and cash flows of the Stations as of the dates and for the
periods indicated. The monthly and other interim Financial Statements: (i) have
been prepared in accordance with GAAP on a consistent basis throughout the
periods involved (except to the extent noted thereon) and on a basis consistent
with the year-end Financial Statements, and (ii) fairly and accurately reflect
the financial condition and the results of operations and cash flows of the
Stations as of the dates and for the periods indicated in all material respects.
Except as reflected in the Financial Statements or otherwise disclosed to Buyer
in writing, no event has occurred since the preparation of the most recent
Financial Statements that would make such Financial Statements misleading in any
respect.
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6.19. Sufficiency of Assets. The Assets are reasonably
sufficient to operate the Stations as they are operated as of the date hereof in
all material respects.
6.20. No Misleading Statements. No statement made by Seller to
Buyer in this Agreement contains any untrue statement of a material fact or
omits or will omit a material fact necessary in order to make such statements or
information not misleading as of the date hereof. Any information disclosed in
any provision of or schedule to this Agreement shall be deemed to be disclosed
for the purposes of all provisions and schedules to this Agreement.
6.21. Broadcast Cash Flow. The broadcast cash flow for the
Stations (the "BCF") for the twelve month period that ended July 31, 1998 is
greater than or equal to the BCF for calendar year 1997.
6.22. Limitation of Buyer's Representations and Warranties.
Seller acknowledges and agrees that except as expressly set forth in this
Agreement, Buyer makes no representations or warranties of any nature with
respect to the matters discussed herein.
6.23. Definition of Seller's Knowledge. As used in this
Agreement, references to the knowledge of Seller shall be deemed to refer to
matters: (i) within the actual, conscious knowledge of Wolpin or Weber, without
imputation of the knowledge of any other person; or (ii) as to which a
reasonable person in the same position as Wolpin or Weber would be expected to
have knowledge.
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties, all
of which have been relied upon by Seller in entering into this Agreement and,
except as otherwise specifically provided, all of which shall be true and
correct as of Closing.
7.1. Organization. Buyer is a corporation duly organized,
validly existing, and in good standing, under the laws of the State of Delaware,
and is duly qualified to do business in the State of Arizona.
7.2. Authorization. The execution and delivery of this
Agreement by Buyer has been duly authorized by all necessary corporate action on
its part. Buyer will deliver evidence of such authorization at Closing. This
Agreement has been duly executed by Buyer and delivered to Seller and to Buyer's
knowledge constitutes the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, except as limited by
laws affecting the enforcement of creditors' rights generally or equitable
principles.
7.3. No Breach. None of (i) the execution, delivery and
performance of this Agreement by Buyer, (ii) the consummation of the
Transaction, or (iii) Buyer's compliance with the terms and conditions hereof
will, with or without the giving of notice or the lapse of time or both,
conflict with, breach the terms and conditions of, constitute a default under,
or violate Buyer's articles of incorporation, bylaws, any judgment, decree,
order, agreement, lease
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or other instrument to which Buyer is a party or by which Buyer is legally
bound, or any law, rule or regulation applicable to Buyer.
7.4. Litigation. There is no action, suit, investigation or
other proceedings pending or, to Buyer's best knowledge, threatened which may
adversely affect Buyer's ability to perform in accordance with the terms of this
Agreement, and Buyer is unaware of any facts which could reasonably result in
any such proceeding.
7.5. No Misleading Statements. To Buyer's knowledge, no
statement made by Buyer to Seller and no information provided or to be provided
by Buyer to Seller pursuant to this Agreement or in connection with the
negotiations covering the purchase and sale contemplated herein contains or will
contain any untrue statement of a material fact or omits or will omit a material
fact necessary in order to make such statements or information not misleading.
7.6. Qualification as Broadcast Licensee. Buyer knows of no
fact that would, under the Communications Act of 1934, as amended, or the rules,
regulations and policies of the FCC and other federal agencies and departments,
disqualify Buyer from becoming the licensee of the Stations. There are no
proceedings, complaints, notices of forfeiture, claims, investigations pending
or, to the knowledge of Buyer, threatened against any or in respect of any of
the broadcast stations licensed to Buyer or its affiliates that would materially
impair the qualifications of Buyer to become a licensee of the Stations.
7.7. Limitation of Seller's Representations and Warranties.
Buyer acknowledges and agrees that except as expressly set forth in this
Agreement, Seller makes no representations or warranties of any nature with
respect to the Assets or the Stations. At Closing, provided that Seller has
complied fully with its obligations under Section 9.8, Buyer shall have fully
investigated and evaluated the condition and operation of the Assets and shall
acquire the Assets on an "As-Is," "Where-Is" basis, subject only to the
representations and warranties expressly set forth herein.
7.8. Buyer's In-Market Revenue. Buyer represents, as of the
date hereof, that the comparable revenues of Buyer's radio stations in the
Phoenix, Arizona radio market are, in the aggregate, not materially greater than
the figures for estimated station revenues set forth in the most recent edition
of the Radio Market Report published by BIA Research, Inc.
ARTICLE VIII.
ENVIRONMENTAL MATTERS
8.1. Definitions.
"Environmental Law" means any and all federal, state, local or
foreign statutes, laws, regulations, guidances, policies, ordinances, court
decisions, orders or rules relating to the environment; occupational safety and
health; the effect of the environment or Hazardous Materials on human health;
emissions, discharges or releases of Hazardous Materials into the environment,
including without limitation into ambient air, surface water, groundwater or
land;
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or otherwise relating to the handling of Hazardous Materials or the clean-up or
other remediation thereof.
"Hazardous Materials" means any and all "hazardous substances"
"hazardous wastes," "pollutants," "contaminants" or "toxic substances," as
defined by the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901 et seq., the Clean Water Act, 33 U.S.C. Section 1251 et
seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., or the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq., and regulations promulgated
thereunder, or any analogous state and local laws and regulations; including but
not limited to petroleum and petroleum products, polychlorinated biphenyls
("PCBs") and asbestos.
"Affiliates" means entities that control Seller, are under
control of Seller or are under common control with Seller.
8.2. Environmental Compliance. Except as set forth on Schedule
8.2:
(a) As of the date hereof and, except to the extent
caused after the TBA Commencement Date by Buyer, its agents, employees, or other
persons while acting pursuant to a contract with Buyer, as of Closing, with
respect to the Assets or operation of the Stations, Seller and its predecessors
and Affiliates are in compliance in all material respects with all Environmental
Laws, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed, commenced or threatened
against Seller which: (i) asserts or alleges that Seller violated any
Environmental Laws; (ii) asserts or alleges that Seller is required to clean up,
remove or take remedial or other response action due to the disposal,
depositing, discharge, leaking or other release of any Hazardous Materials; or
(iii) asserts or alleges that Seller is required to pay all or a portion of the
cost of any past, present or future cleanup, removal or remedial or other
response action which arises out of or is related to the disposal, depositing,
discharge, leaking or other release of any Hazardous Materials. Without limiting
the generality of the foregoing, to the knowledge of Seller, each of Seller and
its Affiliates is in full compliance in all material respects with all of the
terms and conditions of all permits, licenses, and other authorizations which
are required under Environmental Laws with respect to the Assets or operation of
the Stations;
(b) Except for the presence of asbestos-containing
materials at the Real Property, to the knowledge of Seller as of the date hereof
and, and, except to the extent caused after the TBA Commencement Date by Buyer,
its agents, employees, or other persons while acting pursuant to a contract with
Buyer, as of Closing, no Person has caused or permitted Hazardous Materials to
be stored, deposited, treated, recycled or disposed of on, under or at any Real
Property owned, leased, used or occupied by Seller which Hazardous Materials, if
known to be present, would require the expenditure of material costs for
cleanup, removal or other remedial action under any Environmental Laws;
(c) To Seller's knowledge as of the date hereof and,
except to the extent caused by Buyer's performance under the Time Brokerage
Agreement, as of Closing, there are not now, nor, to the knowledge of Seller,
have there previously been, underground or
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above ground storage on, under, or at the Real Property which have, or to the
knowledge of Seller, are likely to require the expenditure of material costs for
achieving compliance with Environmental Laws or for cleanup, removal or some
other remedial action under Environmental Laws;
(d) To Seller's knowledge as of the date hereof and,
and, except to the extent caused after the TBA Commencement Date by Buyer, its
agents, employees, or other persons while acting pursuant to a contract with
Buyer, as of Closing, there are no conditions existing currently which would
subject Seller to damages, penalties, injunctive relief or cleanup costs under
any Environmental Laws or which require or are likely to require the expenditure
of material costs for cleanup, removal, or other remedial action pursuant to
Environmental Laws by Seller; and
(e) To Seller's knowledge as of the date hereof and,
and, except to the extent caused after the TBA Commencement Date by Buyer, its
agents, employees, or other persons while acting pursuant to a contract with
Buyer, as of Closing, Seller is not subject to any judgment, order or citation
related to or arising out of any Environmental Laws and has not been named or
listed as a potentially responsible party by any governmental body or agency at
any site listed on the Federal National Priorities List or any similar State
list of contaminated sites.
ARTICLE IX.
PRE-CLOSING OBLIGATIONS
The parties covenant and agree as follows with respect to the
period prior to the Closing Date:
9.1. Application for Commission Consent. Within five (5)
business days after the date hereof (the "Application Filing Date"), Seller and
Buyer shall join in and file an application or applications requesting the
Commission's written consent to the assignment of the Station Licenses from
Seller to Buyer (the "Assignment Applications"), and they will diligently take
all steps necessary or desirable and proper to prosecute expeditiously the
Assignment Applications, including, without limitation, compliance with the
public notice requirements of the Communications Act of 1934, as amended. The
failure by either party to timely file or diligently prosecute its portion of
the Assignment Applications shall be deemed a material breach of this Agreement.
Each party shall bear its own expenses in connection with the preparation,
filing and prosecution of the Assignment Applications. Buyer shall not directly
or indirectly, through its "ultimate parent entity," as defined in the HSR Act,
any affiliate or otherwise, acquire or agree to acquire any other radio or
television station in the Phoenix, Arizona area or any attributable interests
therein at any time prior to the earlier of the Closing Date or the date the
consent of the FCC to the Assignment Applications (the "FCC Consent") becomes a
Final Order, except (i) where such actions would not delay more than thirty (30)
days either the FCC Consent or the expiration of the waiting period under the
HSR Act, as defined below, without a second request by the Federal trade
Commission or the Department of Justice for information regarding this
transaction; or (ii) as part of a multi-station, multi-market transaction, in
which case Buyer shall agree to enter into one or more contracts for the sale,
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transfer, or other disposal as necessary of any additional stations in the
Phoenix, Arizona area within six (6) months of the date of acquisition thereof.
9.2. Hart-Scott-Rodino Act. Within ten (10) business days
after the date of this Agreement, each party shall submit to the United States
Department of Justice and the United States Federal Trade Commission all forms
and information applicable to the transaction required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
promulgated thereunder (the "HSR Act"), and shall furnish to the other party all
information that the other reasonably requests in connection with such filings.
9.3. Other Governmental Consents. Promptly following the
execution of this Agreement, Seller and Buyer shall proceed to prepare and file
with the appropriate governmental authorities (other than the Commission) such
requests, if any, for approval or waiver as may be required from such
governmental authorities in connection with the Transaction, and shall jointly,
diligently and expeditiously prosecute, and shall cooperate fully with each
other in the prosecution of, such requests for approval or waiver and all
proceedings necessary to secure such approvals and waivers.
9.4. Financial Information. Between the date hereof and the
earlier of the TBA Commencement Date and the Closing Date, Seller shall furnish
Buyer with monthly financial statements within thirty (30) days after the end of
each calendar month, and with such sales, expense and other financial reports as
are prepared by Seller in the ordinary course of business.
9.5. Consents. Seller shall use its commercially reasonable
best efforts to obtain the consents of the other contracting parties to the
assignment of the Assigned Contracts requiring such consent. The delivery of the
Required Consents shall be a condition to Buyer's obligation to close under
Section 10.2.7.
9.6. Surveys. Within thirty (30) days after the date of this
Agreement, Seller shall deliver to Buyer surveys of the Real Property (the
"Surveys") sufficient to remove any "survey exception" from the title insurance
policies to be issued pursuant to the Title Commitment. Within fifteen (15) days
of receipt of the Surveys, Buyer shall give Seller notice of any exceptions to
matters revealed by the Surveys that would reasonably be expected to have a
material adverse effect on the Stations or to result in material costs to Buyer
after Closing (the "Objectionable Exceptions"). If Buyer fails to give such
notice in a timely manner, Buyer shall be deemed to have accepted matters
revealed by the Surveys other than the Objectionable Exceptions expressly set
forth in the notice. Within fifteen (15) days after receipt of Buyer's notice,
Seller shall notify Buyer that, with respect to each Objectionable Exception,
Seller will (i) attempt to cure or remove such Objectionable Exception prior to
Closing and, if unable to cure or remove such Objectionable Exceptions,
indemnify Buyer regarding such Objectionable Exception pursuant to Section
12.1.1, or (ii) neither cure or remove nor indemnify Buyer regarding such
Objectionable Exception, in which case Buyer shall have the option to terminate
this Agreement by giving Seller written notice thereof within fifteen (15)
business days of receipt of notice of Seller's election, or Buyer shall be
deemed to have waived such right of termination.
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If Seller fails to elect either of options (i) or (ii) above within the fifteen
(15) day period, then Seller shall be deemed to have elected option (i).
9.7. Confidentiality. Each party agrees that any and all
information learned or obtained by it from the other (and that is not otherwise
public or known in the radio broadcast industry) shall be confidential and
agrees not to disclose any such information to any person whatsoever other than
as is necessary for the purpose of effecting the Transaction or as otherwise
required by law.
9.8. Access. Except as otherwise provided in the Time
Brokerage Agreement, between the date hereof and the Closing Date, Seller shall
give, upon prior notice and at such times as are necessary or desirable for
maintaining confidentiality regarding the transaction contemplated under this
Agreement, Buyer or representatives of Buyer (including underwriters, lenders,
consultants and investors) reasonable access to the Assets and to the books and
records of Seller relating to the business and operation of the Stations. It is
expressly understood that, pursuant to this Section, Buyer, at its sole expense,
shall be entitled to make such engineering inspections of the Stations and
surveys of the Real Property, and such audits of the Stations' financial records
as Buyer may desire, so long as the same do not unreasonably interfere with
Seller's operation of the Stations.
9.9. Employee Matters.
(a) As set forth on Schedule 6.10, Seller has
provided to Buyer an accurate list of all current employees of the Stations
together with a description of the terms and conditions of their respective
employment and their duties as of the date of this Agreement. Seller shall
promptly notify Buyer of any changes that occur prior to Closing with respect to
such information.
(b) Upon the earlier of the TBA Commencement Date or
the Closing Date, Buyer shall hire the employees of Seller identified on
Schedule 9.12(b) (the "Scheduled Employees"), and other employees of Seller
hired pursuant to Section 1.3(b)(ii), and assume their employment contracts as
listed on Schedule 1.3(a). If the parties enter into and perform the Time
Brokerage Agreement, then the two employees of Seller in its capacity as
Licensee under the Time Brokerage Agreement shall be hired by Buyer as of the
Closing Date. Nothing in this Agreement shall obligate Buyer to hire any
employee of Seller, except as set forth above. Buyer may extend offers of
employment to those other employees of Seller whom it desires to hire, which
offers shall be on terms and conditions that Buyer shall determine in its sole
discretion. Such employees who accept such offers and enter into employment with
Buyer are hereinafter referred to as the "Hired Employees." Except as may relate
to any claims by Buyer or any Hired Employee against Seller, Seller waives any
claims against Buyer or any of the Hired Employees arising from the offer of
employment to, or acceptance of employment by, any Hired Employee, including
without limitation any claims arising from any employment agreement or
non-compete agreement. On or prior to the earlier of the TBA Commencement Date
or Closing, Seller shall (i) compensate each of the Scheduled Employees and the
Hired Employees for all accrued vacation and sick leave; (ii) terminate the
employment of all Hired Employees and cooperate
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with, and use its best commercially reasonable efforts to assist, Buyer in its
efforts to secure satisfactory employment arrangements with the Hired Employees
to whom Buyer makes offers of employment. For purposes of clause (i) of the
preceding sentence, "accrued" shall mean an amount of vacation or leave that:
(i) has been earned by a Scheduled or Hired Employee or granted to such
Scheduled or Hired Employee by Seller, acting in the ordinary course of business
consistent with past practice, in respect of a particular period of such
Scheduled or Hired Employee's employment, all or part of which period precedes
the Closing Date, (ii) is the proportional part of such vacation or leave
corresponding to all or such portion of such period of employment prior to the
Closing Date, and (iii) has not been taken by such Scheduled or Hired Employee
and for which such Scheduled or Hired employee has not been compensated. After
the date that the Scheduled Employees and Hired Employees begin employment with
Buyer and during the time that Buyer shall collect Seller's Accounts Receivable
pursuant to this Agreement or the Time Brokerage Agreement, as applicable, Buyer
shall pay commissions to such employees in respect of sales entered prior to
such date but for which payment is not collected until after such date,
deducting such commissions from the amounts collected by Buyer on such Accounts
Receivable.
(c) Nothing contained in this Agreement shall confer
upon any employee of Seller any right with respect to continued employment by
Buyer, nor shall anything herein interfere with the right of Buyer to terminate
the employment of any of the Hired Employees at any time, with or without cause,
provided that Buyer shall not terminate the employment of any employee
identified on Schedule 9.1 2(b) except in accordance with the terms of such
employee's employment agreement with Seller (as assigned to, and assumed by,
Buyer).
9.10. Operations Prior to Closing. Between the date of this
Agreement and the Closing Date, and except to the extent of Buyer's obligations
under the Time Brokerage Agreement:
(a) Seller shall operate the Stations in the normal
and usual manner, consistent with Seller's past practice and the rules,
regulations, and policies of the Commission and all terms and conditions of the
Station Licenses, and shall conduct the Stations' business only in the ordinary
course. To the extent consistent with such operations, Seller shall use its
commercially reasonable best efforts to: (i) maintain the present character and
entertainment format of the Stations and the quality of their programs; (ii)
keep available for Buyer the services and number of the Stations' present
employees reasonably necessary for the operation of the Stations; (iii) preserve
the Stations' present customers and business relations; (iv) continue to make
expenditures and engage in activities designed to promote the Stations; (v)
continue making capital expenditures in accordance with the capital expenditure
budget for the Stations and otherwise consistent with past practices of the
Stations; and (vi) undertake to collect their accounts receivable in accordance
with Seller's normal and customary collection practices.
(b) Seller shall: (i) subject to Article XIV,
maintain the Assets in their present condition (reasonable wear and tear in
normal use excepted); and (ii) maintain all
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inventories of supplies, tubes, and spare parts at levels consistent with the
Stations' prior practices.
(c) Seller shall maintain its books and records in
the usual and ordinary manner, on a basis consistent with prior periods.
(d) Seller shall comply with all laws, rules,
ordinances and regulations applicable to it, to the Assets and to the business
and operation of the Stations, where the failure to so comply will have a
material adverse effect on the Assets or the Stations, or on the interests of
Buyer therein.
(e) Except to the extent that such defaults in the
aggregate do not have a material adverse effect on the Stations or on any
Required Contract, Seller shall perform its obligations under all Assigned
Contracts without default and shall pay all of Seller's trade accounts payable
in a timely manner; provided, however, that Seller may dispute, in good faith,
any alleged obligation of Seller.
(f) Seller shall not, without the express written
consent of Buyer which shall not be unreasonably withheld, and which shall be
deemed given in the event Buyer has not responded to a written request therefor
within ten (10) days: (i) sell or agree to sell or otherwise dispose of any of
the Assets (A) other than in the ordinary course of business, and (B) unless
such Assets are (x) obsolete or worn beyond use and no longer necessary for the
conduct of the operation of the Stations as conducted on the date hereof, or (y)
replaced prior to Closing by assets of equal or greater worth, quality and
utility; (ii) acquiesce in any infringement, unauthorized use or impairment of
the Intangible Property, or change the Stations' call signs; (iii) enter into
any employment contract on behalf of the Stations unless the same is terminable
at will and without penalty; or (iv) enter into any other contract, lease or
agreement that will be binding on Buyer after Closing.
9.11. Adverse Developments. Seller shall promptly notify Buyer
of any unusual or materially adverse developments that occur prior to Closing
with respect to the Assets or the operation of the Stations; provided, however,
that Seller's compliance with the disclosure requirements of this Section 9.14
shall not relieve Seller of any obligation with respect to any representation,
warranty or covenant of Seller in this Agreement or waive any condition to
Buyer's obligations under this Agreement.
9.12. Administrative Violations. If Seller receives any
finding, order, complaint, citation or notice prior to the Closing Date which
states that any aspect of the Stations' operations violates any rule or
regulation of the Commission or of any other governmental authority (an
"Administrative Violation"), including without limitation any rule or regulation
concerning environmental protection, the employment of labor, or equal
employment opportunity, Seller shall promptly notify Buyer of the Administrative
Violation and, except to the extent that such Administrative Violation is the
result of Buyer's performance under the Time Brokerage Agreement, remove or
correct the Administrative Violation and be responsible for the payment of all
costs associated therewith, including any fines or back pay that may be
assessed.
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9.13. Bulk Sales Act. Seller agrees to indemnify, defend, and
hold Buyer harmless against any claims, liabilities, costs, or expenses,
including reasonable attorneys' fees, that Buyer may incur as a result of the
failure to comply with the bulk sales provisions of the Uniform Commercial Code
or similar laws.
9.14. Asbestos-Containing Material. Prior to the earlier of
the TBA Commencement Date and the Closing Date, Seller shall commence and
thereafter diligently complete, at Seller's expense, any actions legally
required and consistent with sound environmental practice to address
asbestos-containing materials identified as being present at the Real Property
in the report of the environmental assessment of the Real Property completed on
behalf of Buyer by Versar, Inc. based on its site inspections at the Real
Property conducted prior to the date hereof.
9.15. Control of Stations. This Agreement shall not be
consummated until after the Commission has given its written consent thereto,
and notwithstanding anything herein to the contrary, between the date of this
Agreement and the Closing Date, Buyer shall not directly or indirectly control,
supervise or direct, or attempt to control, supervise or direct the operation of
the Stations. Such operations shall be the sole responsibility of Seller;
provided, however, that concurrently with the execution of this Agreement, the
parties shall execute the Time Brokerage Agreement.
ARTICLE X.
CONDITIONS PRECEDENT
10.1. Mutual Conditions. The obligation of both Seller and
Buyer to consummate this Agreement is subject to the satisfaction of each of the
following conditions:
10.1.1. Governmental Consents. The Commission shall
have granted the FCC Consent. Any applicable waiting period under the HSR Act
shall have expired or been earlier terminated without receipt of any second or
subsequent request for information from the Department of Justice or Federal
Trade Commission, or the time period for further action by such agencies
following any such second or subsequent request for information shall have
passed, and there shall have been neither any commencement of any litigation by
any governmental authority of competent jurisdiction to restrain the
consummation of the Transaction, nor any written notice from such governmental
authority of a decision to commence such litigation, which has not been
withdrawn or otherwise resolved.
10.1.2. Absence of Litigation. As of the Closing
Date, no order enjoining, restraining, or prohibiting the consummation of the
Transaction shall have been entered by any court, the Commission, or any other
governmental authority; provided, however, that this condition may not be
invoked by a party if any such action, suit, or proceeding was solicited or
encouraged by, or instituted as a result of any act or omission of, such party.
10.2. Conditions to Buyer's Obligation. In addition to
satisfaction of the mutual conditions contained in Section 10.1, the obligation
of Buyer to consummate this Agreement is subject to the satisfaction of each of
the following conditions:
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10.2.1. Representations and Warranties. Except as
expressly set forth therein, the representations and warranties of Seller to
Buyer shall be true, complete, and correct in all material respects as of the
Closing Date with the same force and effect as if then made, except where such
inaccuracy will not have a material adverse effect upon the operations of the
Stations or impose material obligations on Buyer for which Seller does not agree
to be responsible; provided, however, that, in the event any of the
representation and warranties of Seller contained in Sections 6.7, 6.8(b),
6.8(c)(ii), 6.17(b), or 8.2 fail to satisfy the requirements of this Section
10.2.1, and the event giving rise to such failure shall have occurred after the
TBA Commencement Date (as to such specified provisions, a "Post-TBA Default"),
then such Post-TBA Default shall not relieve Buyer of its obligation to close in
accordance with the terms hereof. The limitation as to Post-TBA Defaults set
forth in the preceding sentence shall affect neither Buyer's right to obtain any
other relief otherwise available in the event of a Post-TBA Default nor Seller's
rights and Buyer's obligations in respect of any other representations and
warranties of Seller set forth herein.
10.2.2. Compliance with Conditions. All of the terms,
conditions and covenants to be complied with or performed by Seller on or before
the Closing Date shall have been timely complied with and performed in all
material respects, except where such non-compliance will not have a material
adverse effect upon the operation of the Stations, the financial condition of
the Assets, or Buyer's interests therein.
10.2.3. Title Commitment. Buyer shall have received
the commitment of a title insurance company reasonably satisfactory to Buyer
agreeing to issue to Buyer, at standard rates, current ALTA form extended
coverage title insurance policies, insuring Buyer's interest in the Real
Property (the "Title Commitment"), which shall reveal nothing inconsistent with
Seller's representations and warranties hereunder.
10.2.4. Validity of Station Licenses. On the Closing
Date, Seller shall be the owner and holder of the Station Licenses to the extent
that such authorizations can be owned or held by Seller under the Communications
Act of 1934, as amended; the Station Licenses shall be in full force and effect,
valid for the balance of the current license term as set forth in Schedule 1.1;
and the Station Licenses shall be unimpaired by any acts or omissions of Seller
or Seller's employees, agents, officers, directors or shareholders.
10.2.5. Closing Documents. Seller shall deliver to
Buyer all of the closing documents specified in Section 11.2.1, all of which
documents shall be dated as of the Closing Date, duly executed, and in a form
reasonably acceptable to Buyer and to Seller.
10.2.6. Third Party Consents. Subject to Article II,
Seller shall have obtained all the Required Consents.
10.2.7. Estoppel Certificates. Seller shall have
obtained such fee owner's consents as are required for assignment of the Lease
Agreements, and such estoppel certificates with respect to the Lease Agreements
for the leased premises as are reasonably requested by Buyer not less than
thirty (30) days prior to the Closing Date, provided that if Seller is unable
after reasonable good faith effort to obtain execution of such estoppel
certificates, then
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Seller shall have the right to deliver a certificate of Seller with respect to
the information that would otherwise be set forth in a reasonable fee owner's
estoppel certificate.
10.2.8. Settlement of Claims. Seller shall have used
its commercially reasonable best efforts to settle any and all claims against
Seller that would reasonably be expected to materially and aversely affect or
concern the Assets after Closing.
10.2.9. Finality. The FCC Consent shall have become a
Final Order. "Final Order" means an order or action of the Commission that, by
reason of expiration of time or exhaustion of remedies, is no longer subject to
administrative or judicial reconsideration or review.
10.3. Conditions to Seller's Obligation. In addition to
satisfaction of the mutual conditions contained in Section 10.1, the obligation
of Seller to consummate this Agreement is subject to satisfaction of each of the
following conditions:
10.3.1. Representations and Warranties. The
representations and warranties of Buyer to Seller shall be true, complete and
correct in all material respects as of the Closing Date with the same force and
effect as if then made.
10.3.2. Compliance with Conditions. All of the terms,
conditions and covenants to be complied with or performed by Buyer on or before
the Closing Date shall have been timely complied with and performed in all
material respects.
10.3.3. Payment. Buyer shall pay Seller the Total
Consideration as provided in Article III.
10.3.4. Closing Documents. Buyer shall deliver to
Seller all the closing documents specified in Section 11.2.2, all of which
documents shall be dated as of the Closing Date, duly executed, and in a form
reasonably satisfactory to Seller.
ARTICLE XI.
CLOSING
11.1. Closing Date. Except as otherwise provided in this
Section, the Closing hereunder shall occur on a date mutually agreeable to Buyer
and Seller no later than the last day of the month after the fifth business day
after the later of (i) the Commission's action granting its consent to the
Assignment Applications has become a Final Order, or, at the election of the
Buyer, the date of the Commission's action granting its consent and (ii) the
date on which the applicable waiting period under the HSR Act has expired or
been earlier terminated without receipt of any second or subsequent request for
information from the Department of Justice or Federal Trade Commission, or the
time period for further action by such agencies following any such second or
subsequent request for information shall have passed, and there shall have been
neither any commencement of any litigation by any governmental authority of
competent jurisdiction to restrain the consummation of the Transaction, nor any
written notice from such governmental authority of a decision to commence such
litigation, which has not been withdrawn
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or otherwise resolved (the "Closing Date"); provided, however, that in the event
the parties execute the Time Brokerage Agreement, the Closing Date shall not be
earlier than January 4, 1999; provided further, that, in the event the parties
execute the Time Brokerage Agreement, Buyer shall have the option, in its sole
discretion, to delay the Closing for up to six (6) months after the later of
January 4, 1999 and the date that the conditions set forth in clauses (i) and
(ii) above have been satisfied (but in no event more than twelve (12) months
following the date of this Agreement), in which event Buyer shall notify Seller
at least ten (10) business days prior to the date that would otherwise have been
the Closing Date of its exercise of such option to delay the Closing, and shall
thereafter notify Seller at least five (5) business days prior to the date
chosen by Buyer to be the Closing Date. The Closing shall be effective as of
11:59 p.m. on the Closing Date. The Closing shall take place at the offices of
Buyer's counsel in Washington, D.C., commencing at 10:00 a.m. on the Closing
Date. If, as of the Closing Date, any condition precedent described in Article X
has not been satisfied, the party that is entitled to require that such
condition be satisfied may (in its sole discretion) notify the other party of
the absence of such condition precedent at or before the Closing and
simultaneously therewith postpone the Closing until a date ten (10) days after
all such conditions have been (or are able to be) performed, and such postponed
date shall constitute the new Closing Date for all purposes hereunder, provided
that in no event shall either party have the right to postpone the Closing Date
beyond the date that is twelve (12) months following the date of this Agreement.
Each of the parties shall use its reasonable best efforts to obtain any FCC
authority necessary to schedule the Closing Date as contemplated in this
Section.
11.2. Performance at Closing. Except as otherwise provided in
the Time Brokerage Agreement, the following documents shall be executed and
delivered at Closing:
11.2.1. By Seller Seller shall deliver to Buyer:
(a) A certificate executed by Seller attesting to
Seller's compliance with the matters set forth in Sections 10.2.1 and 10.2.2,
together with certified copies of (i) the Certificate of Incorporation of Seller
and (ii) appropriate evidence of Seller's authorization to enter into and
consummate this Agreement.
(b) One or more assignments transferring to Buyer all
of the assignable interests of Seller in and to the Station Licenses, the
Station Applications, and all other licenses, permits, and authorizations issued
by any other governmental authorities that are used in or necessary for the
lawful operation of the Stations.
(c) One or more bills of sale conveying to Buyer the
Station Equipment.
(d) One or more assignments, together with all
Required Consents, assigning to Buyer all of the Assigned Contracts, the Station
Records and the Intangible Property.
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(e) One or more assignments, warranty deeds or other
appropriate instruments conveying to Buyer all rights of Seller in the Real
Property and all consents to such assignments necessary for the legally
enforceable assignment of such interests.
(f) The Covenants.
(g) An opinion of Seller's counsel, in form and
content reasonably acceptable to Buyer's counsel.
(h) The affidavit described in Section 6.16.
11.2.2. By Buyer. Buyer shall deliver to Seller:
(a) A certificate executed by Buyer attesting to
Buyer's compliance with the matters set forth in Sections 10.3.1 and 10.3.2,
together with certified copies of (i) the Certificate of Incorporation of Buyer
and (ii) appropriate evidence of Buyer's authorization to enter into and
consummate this Agreement.
(b) The Total Consideration.
(c) Such assumption agreements and other instruments
and documents as are required to make, confirm, and evidence Buyer's assumption
of and obligation to pay, perform, or discharge Seller's obligations under the
Assumed Liabilities.
(d) An opinion of Buyer's counsel, in form and
content reasonably acceptable to Seller's counsel.
11.2.3. Other Documents and Acts. The parties will
also execute such other documents and perform such other acts, before and after
the Closing Date, as may be reasonably necessary for the complete implementation
and consummation of this Agreement; provided that in no event shall the
execution of such other documents or performance of such other acts impose any
liabilities on either party not contemplated in this Agreement.
ARTICLE XII.
POST-CLOSING OBLIGATIONS
The parties covenant and agree as follows with respect to the
period subsequent to the Closing Date:
12.1. Indemnification.
12.1.1. Buyer's Right to Indemnification. Seller
undertakes and agrees to indemnify, defend by counsel reasonably acceptable to
Buyer, and hold harmless Buyer, its parent, subsidiaries, affiliates, successors
and assigns and their respective directors, officers, employees, shareholders,
representatives and agents (hereinafter referred to collectively as "Buyer
Indemnitees") from and against and in respect of any and all losses, costs,
liabilities, claims, obligations, diminution in value and expenses, including
reasonable attorneys' fees,
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incurred or suffered by a Buyer Indemnitee, except to the extent caused by
Buyer's performance or non-performance under the Time Brokerage Agreement,
arising from (i) the claims of third parties with respect to operation of the
Stations or ownership of the Assets prior to Closing not included in the Assumed
Liabilities or otherwise consented to by Buyer in writing; (ii) a material
breach, misrepresentation, or other violation of any of Seller's covenants,
warranties or representations contained in this Agreement; (iii) all liabilities
of Seller or the Stations not included in the Assumed Liabilities or otherwise
consented to by Buyer in writing; (iv) all liens, charges, or encumbrances on
any of the Assets which are not expressly permitted by this Agreement or
otherwise consented to by Buyer in writing; (v) all Administrative Violations
and alleged Administrative Violations occurring prior to Closing; and (vi) any
breach or default by Seller under any Assigned Contract prior to Closing. The
foregoing indemnity is intended by Seller to cover all acts, suits, proceedings,
claims, demands, assessments, adjustments, diminution in value, costs, and
expenses with respect to any and all of the specific matters in this indemnity
set forth.
12.1.2. Seller's Right to Indemnification. Buyer
undertakes and agrees to indemnify, defend by counsel reasonably acceptable to
Seller, and hold harmless Seller, its parent, subsidiaries, affiliates,
successors and assigns and their respective directors, officers, employees,
shareholders, representatives and agents (hereinafter referred to collectively
as "Seller Indemnitees") against any and all losses, costs, liabilities, claims,
obligations and expenses, including reasonable attorneys' fees, incurred or
suffered by a Seller Indemnitee, except to the extent caused by Seller's
performance under the Time Brokerage Agreement, arising from (i) the operation
of the Stations or ownership of the Assets after Closing; (ii) a breach,
misrepresentation, or other violation of any of Buyer's covenants, warranties
and representations contained in this Agreement; (iii) all liabilities included
in the Assumed Liabilities or otherwise consented to by Buyer in writing; and
(iv) any breach or default by Buyer under any Assigned Contract after Closing.
The foregoing indemnity is intended by Buyer to cover all acts, suits,
proceedings, claims, demands, assessments, adjustments, costs, and expenses with
respect to any and all of the specific matters in this indemnity set forth.
12.1.3. Conduct of Proceedings. If any claim or
proceeding covered by the foregoing agreements to indemnify and hold harmless
shall arise, the party who seeks indemnification (the "Indemnified Party") shall
give written notice thereof to the other party (the "Indemnitor") promptly after
the Indemnified Party learns of the existence of such claim or proceeding;
provided, however, that the Indemnified Party's failure to give the Indemnitor
prompt notice shall not bar the Indemnified Party's right to indemnification
except to the extent that such failure has materially prejudiced the
Indemnitor's ability to defend the claim or proceeding. The Indemnitor shall
have the right to employ counsel reasonably acceptable to the Indemnified Party
to defend against any such claim or proceeding, or to compromise, settle or
otherwise dispose of the same, if the Indemnitor deems it advisable to do so,
all at the expense of the Indemnitor; provided that the Indemnitor shall not
have the right to compromise, settle, or dispose of any such claim or proceeding
unless it has acknowledged in writing its obligation to indemnify the
Indemnified Party as set forth herein and then and periodically thereafter
provides the Indemnified Party with reasonably sufficient evidence of the
ability of the Indemnitor to satisfy any such liabilities. The parties will
fully cooperate in any such action, and shall make
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available to each other any books or records useful for the defense of any such
claim or proceeding. If the Indemnitor does not elect to assume control or
otherwise participate in the defense of any third party claim, it shall be bound
by the results obtained by the Indemnified Party with respect to such claim,
including any settlement, subject to the Indemnitor's right to contest the
underlying obligation to indemnify the Indemnified Party.
12.1.4. Indemnification Not Sole Remedy. The right to
indemnification hereunder shall not be the exclusive remedy of any party in
connection with any breach by another party of its representations, warranties,
or covenants, nor shall such indemnification be deemed to prejudice or operate
as a waiver of any remedy to which any party may otherwise be entitled as a
result of any such breach.
12.1.5. Right of Offset. Each of Buyer and Seller
shall have the right to offset against amounts owing to the other any amounts
owing to such party pursuant to this Article XII.
12.1.6. Conditions of Indemnification.
Notwithstanding any other provision hereof, no Indemnified Party shall be
entitled to make a claim for indemnification against an Indemnitor in respect of
any breach of this Agreement except to the extent that the aggregate amount of
such damages exceeds the amount of Two Hundred Fifty Thousand Dollars
($250,000); provided, however, that once such aggregate has been exceeded, such
Indemnitor shall be liable for the full amount of such damages.
12.2. Post-Closing Access. Each party agrees that it will use
reasonable efforts to cooperate with and make available to the other party,
during normal business hours and upon reasonable notice, all books and records
which are necessary or reasonably useful in connection with any tax inquiry,
audit, investigation or dispute, any litigation brought by any party that is
unrelated to the requesting party or investigation brought by any party that is
unrelated to the requesting party or any other matter requiring any such books
and records, information, or employees for any reasonable business purpose. The
party requesting any such books and records, information or employees shall bear
all of the out-of-pocket costs and expenses reasonably incurred in connection
with providing such books and records, information or employees. All information
received pursuant to this Section 12.2 shall be kept confidential by the party
receiving it. If Buyer or Seller is required by legal process or operation of
law to disclose any confidential information, it shall provide the other party
with prompt written notice of such request so that such other party may seek an
appropriate protective order.
ARTICLE XIII.
DEFAULT AND REMEDIES
13.1. Termination by Seller. This Agreement may be terminated
by Seller and the purchase and sale of the Stations abandoned, if Seller is not
then in material default, upon written notice to Buyer, upon the occurrence of
any of the following:
(a) If on the date that would otherwise be the
Closing Date (subject to the right of Buyer to cure provided in Section 13.3
hereof and to postpone the Closing Date as set
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forth in Section 11.1) any of the conditions precedent to the obligations of
Buyer set forth in this Agreement have not been satisfied in all material
respects or waived in writing by Seller.
(b) If there shall be in effect on the date that
would otherwise be the Closing Date any judgment, decree or order that would
prevent or make unlawful the Closing.
(c) If the Closing shall not have occurred by the
date that is twelve (12) months after the Contract Date (the "Outside Date") for
reasons other than Seller's default.
(d) For material default hereunder by Buyer, subject
to Section 13.3, or material default by Buyer under the Time Brokerage
Agreement, subject to the applicable cure provisions thereof.
13.2. Termination by Buyer. This Agreement may be terminated
by Buyer and the purchase and sale of the Stations abandoned, if Buyer is not
then in material default, upon written notice to Seller, upon the occurrence of
any of the following:
(a) If on the date that would otherwise be the
Closing Date (subject to the right of Seller to cure provided in Section 13.3
and to postpone the Closing Date as set forth in Section 11.1) any of the
conditions precedent to the obligations of Seller set forth in this Agreement
have not been satisfied in all material respects or waived in writing by Buyer.
(b) If there shall be in effect on the date that
would otherwise be the Closing Date any judgment, decree or order that would
prevent or make unlawful the Closing.
(c) If the Closing shall not have occurred by the
Outside Date.
(d) For material default hereunder by Seller, subject
to Section 13.3, or material default by Seller under the Time Brokerage
Agreement, subject to the applicable cure provisions thereof.
(e) If Seller elects to neither cure or remove nor
indemnify Buyer for an Objectionable Exception pursuant to Section 9.6.
13.3. Breach and Opportunity to Cure. If either party believes
the other to be in default hereunder, the non-defaulting party shall provide the
defaulting party with notice specifying in reasonable detail the nature of such
default. If such default has not been cured by the earlier of: (i) the Closing
Date, or (ii) within FIFTEEN (15) days after delivery of such notice, then the
party giving such notice may (x) terminate this Agreement, (y) extend the
Closing Date under Section 11.1 (but no such extension shall constitute a waiver
of such non-defaulting party's right to terminate as a result of such default),
and/or (z) exercise the remedies available to such party pursuant to Section
13.4 or 13.5, subject to the right of the other party to contest such action
through appropriate proceedings.
13.4. Seller's Remedies. The parties recognize that if, prior
to Closing, Buyer breaches this Agreement and refuses to perform under the
provisions of this Agreement,
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monetary damages alone would not be adequate to compensate Seller for its
injury. Seller shall therefore be entitled, in addition to any other remedies
that may be available (including but not limited to the provisions of Section
12.1 (relating to Indemnification)), to obtain specific performance of the terms
of this Agreement prior to Closing. If any action is brought by Seller to
enforce this Agreement prior to Closing, Buyer shall waive the defense that
there is an adequate remedy at law. Following the Closing, Seller shall be
entitled, in addition to any other remedies that may be available, to seek
specific performance of the terms of this Agreement if such remedy is available
at equity. In the event Seller elects to terminate this Agreement as a result of
Buyer's default instead of seeking specific performance, Seller shall be
entitled to recover Seller's actual damages.
13.5. Buyer's Remedies. The parties recognize that if, prior
to Closing, Seller breaches this Agreement and refuses to perform under the
provisions of this Agreement, monetary damages alone would not be adequate to
compensate Buyer for its injury. Buyer shall therefore be entitled, in addition
to any other remedies that may be available (including but not limited to the
provisions of Section 12.1 (relating to Indemnification)), to obtain specific
performance of the terms of this Agreement prior to Closing. If any action is
brought by Buyer to enforce this Agreement prior to Closing, Seller shall waive
the defense that there is an adequate remedy at law. Following the Closing,
Buyer shall be entitled, in addition to any other remedies that may be
available, to seek specific performance of the terms of this Agreement if such
remedy is available at equity. In the event Buyer elects to terminate this
Agreement as a result of Seller's default instead of seeking specific
performance, Buyer shall be entitled to recover Buyer's actual damages.
13.6. Designation for Hearing. Either party may terminate this
Agreement upon notice to the other, if, for any reason, the Assignment
Applications are designated for hearing by the Commission; provided, however,
that notice of termination must be given within twenty (20) days after release
of the hearing designation order and that the party giving such notice is not in
default and has otherwise complied with its obligations under this Agreement.
Upon termination pursuant to this Section 13.6, the parties shall be released
and discharged from any further obligation hereunder.
13.7. Legal Actions. If, prior to the Closing Date, any
action, suit, or proceeding shall have been instituted by or before any court or
other governmental authority (other than the Commission) to enjoin, restrain, or
prohibit the consummation of the Transaction, the Closing may be adjourned at
the option of either party, with prior consent of the Commission if necessary,
which consent both parties will use their reasonable best efforts to obtain, for
a period of up to ninety (90) days, and if, at the end of such period, the
action, suit, or proceeding shall not have been favorably resolved, and an order
enjoining, restraining or prohibiting the Closing shall have been entered,
either party may, by written notice to the other, terminate this Agreement;
provided, however, that if such action, suit, or proceeding shall have been
solicited or encouraged by, or instituted as a result of any act or omission of,
Seller or Buyer, then such soliciting, encouraging, or instituting party shall
not have any right of adjournment or termination pursuant to this Section. In
the event of termination pursuant to this Section, the parties shall be released
and discharged from any further obligation hereunder.
32
<PAGE> 39
ARTICLE XIV.
DAMAGE
14.1. Risk of Loss. Except to the extent of any loss or damage
caused by acts or omissions of Buyer, its agents, employees, or other persons
while acting pursuant to a contract with Buyer, the risk of loss or damage to
the Assets shall be upon Seller at all times prior to the Closing. In the event
of loss or damage except to the extent caused by acts or omissions of Buyer, its
agents, employees, or other persons while acting pursuant to a contract with
Buyer, Seller shall promptly notify Buyer thereof and shall use commercially
reasonable efforts to repair, replace and restore the lost or damaged property
to its former condition as soon as possible. If such repair, replacement and
restoration of damage not caused by Buyer, its agents, employees, or other
persons while acting pursuant to a contract with Buyer has not been completed
prior to the Closing Date, Buyer may, at its option:
(a) elect to terminate this Agreement, but only if
the failure to repair, replace and restore the lost or damaged property relates
to a material portion of the Assets and continues for a period in excess of
sixty (60) days after the Closing Date without consideration of this Section
14.1;
(b) elect to consummate the Transaction on the
Closing Date in which event Seller shall pay to Buyer the amount necessary to
restore the lost or damaged property to its former condition and against such
obligation shall assign to Buyer all of Seller's rights under any applicable
insurance policies; or
(c) elect to postpone the Closing Date, with prior
consent of the Commission if necessary, which consent both parties will use
their reasonable best efforts to obtain, until a date within fifteen (15)
business days after Seller gives written notice to Buyer of completion of the
repair, replacement and restoration of such lost or damaged property. If, after
the expiration of that extension period, the lost or damaged property has not
been adequately repaired, replaced or a restored, Buyer may terminate this
Agreement, and the parties shall be released and discharged from any further
obligation hereunder.
14.2. Failure of Broadcast Transmission. Seller shall give
prompt written notice to Buyer if either of the following (a "Specified Event")
shall occur: (i) the regular broadcast transmissions of the Stations in the
normal and usual manner are interrupted or discontinued; or (ii) the Stations
are operated at less than their licensed antenna height above average terrain or
at less than ninety percent (90%) of their licensed effective radiated power. If
any Specified Event persists for more than one seventy-two (72) consecutive
hours or one hundred twenty (120) non-consecutive hours (or, in the event of
force majeure or utility failure affecting generally the market served by the
Stations, ninety-six (96) consecutive hours or three hundred thirty-six
non-consecutive hours) during any period of thirty (30) consecutive days, then
Buyer may, at its option: (i) terminate this Agreement by written notice given
to Seller not more than ten (10) days after the expiration of such thirty (30)
day period, or (ii) proceed in the manner set forth in Section 14.3.1. In the
event of termination of this Agreement by Buyer pursuant to this Section, the
parties shall be released and discharged from any further obligation hereunder.
33
<PAGE> 40
14.3. Resolution of Disagreements. If the parties are unable
to agree upon the extent of any loss or damage, the cost to repair, replace or
restore any lost or damaged property, the adequacy of any repair, replacement,
or restoration of any lost or damaged property, or any other matter arising
under this Section 14.3, the disagreement shall be referred to a qualified
consulting communications engineer mutually acceptable to Seller and Buyer who
is a member of the Association of Federal Communications Consulting Engineers,
whose decision shall be final, binding upon and non-appealable by the parties,
and whose fees and expenses shall be paid one-half by Seller and one-half by
Buyer.
ARTICLE XV.
GENERAL PROVISIONS
15.1. Brokerage. Each party represents and warrants to the
other that no agent, broker, investment banker, or other person or firm acting
on behalf of such party or any of its affiliates or under the authority of any
of them is or will be entitled to any broker's or finder's fee or any other
commission or similar fee in connection with the Transaction, except as such
party hereby agrees to pay on its own behalf and with respect to which such
party agrees to indemnify the other party pursuant to the terms hereof.
15.2. Expenses. Except as otherwise provided herein, all
expenses involved in the preparation and consummation of this Agreement shall be
borne by the party incurring the same whether or not the Transaction is
consummated. All Commission filing fees for the Assignment Applications and all
filing fees required to be paid under the HSR Act shall be paid by Buyer. All
recording costs for instruments of transfer, and all stamp, sales, use and
transfer taxes shall be paid by Seller.
15.3. Notices. All notices, requests, demands, and other
communications pertaining to this Agreement shall be in writing and shall be
deemed duly given when delivered personally (which shall include delivery by
Federal Express or other nationally recognized, reputable overnight courier
service that issues a receipt or other confirmation of delivery) to the party
for whom such communication is intended, or upon receipt or refusal or failure
to accept receipt if mailed by certified or registered U.S. mail, return receipt
requested, postage prepaid, addressed as follows:
(a) If to Seller:
Fredric G. Weber
Arizona Biltmore Hotel
Villa 7214
24th Street and Missouri
Phoenix, AZ 85016
and
Jeffrey H. Miro
Sean P. Corcoran
34
<PAGE> 41
Miro Weiner & Kramer
500 N. Woodward Avenue
Suite 100
Bloomfield Hills, MI 48303
(Counsel to The Broadcast Group, Inc.)
(b) If to Buyer:
Jeffrey Marcus, President
Chancellor Media Corporation/Shamrock
Broadcasting, Inc.
433 E. Las Colinas Blvd.
Suite 1130
Irving, TX 75039
and
Eric L. Bernthal
Kevin C. Boyle
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004
(Counsel to Chancellor Media
Corporation/Shamrock Broadcasting, Inc.)
Any party may change its address for notices by notice to the others given
pursuant to this Section. All notices to Seller shall be enclosed in envelopes
that are conspicuously labeled "Personal and Confidential; To Be Opened By
Addressee Only"; provided, however, that the failure to include such
confidentiality notice will not invalidate the notice or constitute breach of
this agreement.
15.4. Attorneys' Fees. If either party initiates any
litigation against the other party involving this Agreement, the prevailing
party in such action shall be entitled to receive reimbursement from the other
party for all reasonable attorneys' fees and other costs and expenses incurred
by the prevailing party in respect of that litigation, including any appeal, and
such reimbursement may be included in the judgment or final order issued in that
proceeding.
15.5. Survival of Representations, Warranties and
Indemnification Rights. The several representations and warranties of the
parties contained herein, and the parties respective indemnification rights
pursuant to Section 12.1, shall survive the Closing for a period of two (2)
years, at which time the same shall expire (except for claims asserted during
such two (2) year period); provided, however, that representations and
warranties with respect to title and authorization shall survive in perpetuity.
35
<PAGE> 42
15.6. Exclusive Dealings. For so long as this Agreement
remains in effect, is not subject to termination, and Seller has not notified
Buyer that Buyer is in default hereunder, neither Seller, its officers,
directors, employees, nor any person acting on Seller's behalf, shall, directly
or indirectly, solicit or initiate any offer from, or conduct any negotiations
with, any person other than Buyer or Buyer's assignee(s) concerning the
acquisition of the Stations.
15.7. Waiver. Unless otherwise specifically agreed in writing
to the contrary: (i) the failure of any party at any time to require performance
by any other of any provision of this Agreement shall not affect such party's
right thereafter to enforce the same; (ii) no waiver by any party of any default
by any other shall be valid unless in writing and acknowledged by an authorized
representative of the non-defaulting party, and no such waiver shall be taken or
held to be a waiver by such party of any other preceding or subsequent default;
and (iii) no extension of time granted by any party for the performance of any
obligation or act by any other party shall be deemed to be an extension of time
for the performance of any other obligation or act hereunder.
15.8. Assignment. No party may assign its rights or
obligations hereunder without the prior written consent of the other parties
except: (i) Buyer may assign all or a portion of its rights and obligations to a
corporation, partnership or other business entity that is wholly owned by
Buyer's ultimate parent entity, provided that such assignment shall not delay
the Closing Date for more than thirty (30) days, and provided further that such
assignee shall be at least as qualified as Buyer to enter into and perform all
of Buyer's obligations under this Agreement, as reasonably determined by
Seller's FCC counsel, and (ii) Buyer may make a collateral assignment of its
rights under this Agreement to any lender that provides funds to Buyer for the
acquisition or operation of the Stations. Subject to the foregoing, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties hereto and their respective successors and assignees.
15.9. Entire Agreement. This Agreement and the Exhibits and
Schedules hereto (which are incorporated by reference herein) constitute the
entire agreement between the parties with respect to the subject matter hereof
and referenced herein, supersede and terminate any prior agreements between the
parties (written or oral). This Agreement may not be altered or amended except
by an instrument in writing signed by the party against whom enforcement of any
such change is sought.
15.10. Counterparts. This Agreement may be signed in any
number of counterparts with the same effect as if the signatures on each such
counterpart were on the same instrument.
15.11. Construction. The Section headings of this Agreement
are for convenience only and in no way modify, interpret or construe the meaning
of specific provisions of the Agreement. As used herein, the neuter gender shall
also denote the masculine and feminine, and the masculine gender shall also
denote the neuter and feminine, where the context so permits.
36
<PAGE> 43
15.12. Schedules and Exhibits. The Schedules and Exhibits to
this Agreement are a material part of this Agreement.
15.13. Severability. If any one or more of the provisions
contained in this Agreement should be found invalid, illegal or unenforceable in
any respect, the validity, legality, and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. Any illegal or unenforceable term shall be deemed to be void and of no
force and effect only to the minimum extent necessary to bring such term within
the provisions of applicable law and such term, as so modified, and the balance
of this Agreement shall then be fully enforceable.
15.14. Choice of Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Arizona, without regard to
the choice of law rules utilized in that jurisdiction.
15.15. Counsel. Each party has been represented by its own
counsel in connection with the negotiation and preparation of this Agreement
and, consequently, each party hereby waives the application of any rule of law
that would otherwise be applicable in connection with the interpretation of this
Agreement, including but not limited to any rule of law to the effect that any
provision of this Agreement shall be interpreted or construed against the party
whose counsel drafted that provision.
15.16. Public Statements. Prior to the Closing Date, neither
Seller nor Buyer shall, without the prior written approval of the other party,
make any press release or other public announcement concerning the transactions
contemplated by this Agreement except (i) Seller and Buyer shall issue a
mutually agreeable public announcement promptly after the Application Filing
Date; and (ii) to the extent that either party shall be so obligated by law, in
which case the other party shall be so advised and the parties shall use their
best efforts to cause a mutually agreeable release or announcement to be issued.
Prior to the Application Filing Date, or if Buyer terminates this Agreement,
Buyer shall keep confidential and not disclose to any other person or entity (i)
the existence of this Agreement or (ii) any "Review Material" or other
information furnished to Buyer or to Buyer's representatives, certified public
accounts, attorneys, bankers or other financial representatives, directors,
officers, employees, and/or agents ("Representatives"); provided, however, that
(a) such information may be disclosed to Buyer's Representatives who have a need
to know such information for purposes of evaluating the proposed transaction if
such Representatives are informed in writing of the confidentiality undertakings
contained herein and agree to be bound thereby; (b) such information may be
disclosed as and to the extent required by law; and (c) any disclosure of such
information to which Seller consents in writing may be made. "Review Material"
shall include (i) any information relating to the Assets that is disclosed by
Seller or any of Seller's agents, including, without limitation, Seller's
attorneys and accountants, to Buyer or any of Buyer's Representatives, (ii) all
comments, analyses, compilations, studies or other materials prepared by Buyer
or Buyer's Representatives that are based, in whole or in part, on such
information disclosed by Seller or any of Seller's agents, and (iii) all
reports, test results, evaluations, assessments, surveys and inspection
materials relating to the Assets that are prepared by or for
37
<PAGE> 44
Buyer in connection with its investigation or evaluation of the Assets. Upon any
termination of this Agreement, Buyer will deliver to Seller the Review Material
and Buyer will also cause all copies and summaries or synopses thereof to be
returned to Seller or destroyed. Such destruction shall be certified in writing
by Buyer to Seller. Seller shall have the right to obtain injunctive relief to
prevent any breach of the obligations set forth in this Section 15.16, and to
sue for damages resulting from any such breach. Buyer's obligations with respect
to Review Material under this Section 15.16 shall survive the termination of
this Agreement.
38
<PAGE> 45
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed by a respective duly authorized officer as of the date
first written above.
SELLER:
THE BROADCAST GROUP, INC.
By: /s/ FRED WEBER
----------------------------------------
Fred Weber
Chief Executive Officer
SELLER'S GUARANTOR:
THE WOLPIN CO.
By: /s/ FRED WEBER
----------------------------------------
Fred Weber
Executive Vice-President
BUYER:
CHANCELLOR MEDIA CORPORATION/
SHAMROCK BROADCASTING, INC.
By: /s/ ERIC C. NEUMAN
----------------------------------------
Eric C. Neuman
Senior Vice President-Strategic Development
BUYER'S GUARANTOR:
CHANCELLOR MEDIA CORPORATION OF LOS
ANGELES, INC.
By: /s/ ERIC C. NEUMAN
----------------------------------------
Eric C. Neuman
Senior Vice President-Strategic Development
39
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