<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10-Q
Quarterly Report Pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
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<CAPTION>
<S> <C> <C>
Commission File No. 0-27726 Commission File No. 33-80534 Commission File No. 33-80534
CHANCELLOR BROADCASTING CHANCELLOR RADIO CHANCELLOR BROADCASTING
COMPANY BROADCASTING COMPANY LICENSEE COMPANY
(Exact Name of Registrant (Exact Name of Registrant (Exact Name of Registrant
as Specified in Its Charter) as Specified in Its Charter) as Specified in Its Charter)
DELAWARE DELAWARE DELAWARE
(State or other jurisdiction of (State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization) incorporation or organization)
75-2538487 75-2544623 75-2544625
(I.R.S. Employer Identification (I.R.S. Employer Identification (I.R.S. Employer Identification
Number) Number) Number)
</TABLE>
12655 N. CENTRAL EXPRESSWAY, SUITE 405, DALLAS, TEXAS 75243
(Address of Principal Executive Offices, Including Zip Code)
AREA CODE (214) 239-6220
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether Chancellor Broadcasting Company (1) has
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 registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes / / No /X/
Indicate by check mark whether Chancellor Radio Broadcasting Company and
Chancellor Broadcasting Licensee Company (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
registrant was required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes /X/ No / /
As of May 14, 1996, 8,749,481 shares of the Class A Common Stock, par
value $.01 per share, 63,500 shares of the Class B Common Stock, par value
$.01 per share, and 8,484,411 shares of the Class C Common Stock, par value
$.01 per share, of Chancellor Broadcasting Company were outstanding. As of
May 14, 1996, 1,000 shares of common stock, par value $.01 per share, of
Chancellor Radio Broadcasting Company and 1,000 shares of common stock, par
value $.01 per share, of Chancellor Broadcasting Licensee Company were
outstanding.
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<PAGE>
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
<TABLE>
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PAGE
----
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS
CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets as of December 31, 1995 and
March 31, 1996....................................................... 1
Consolidated Statements of Operations for the three months ended
March 31, 1995 and 1996.............................................. 2
Consolidated Statements of Changes in Stockholders' Equity for the
year ended December 31, 1995 and the three months ended
March 31, 1996 ...................................................... 3
Consolidated Statements of Cash Flows for the three months
ended March 31, 1995 and 1996........................................ 4
Notes to Consolidated Financial Statements........................... 5
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets as of December 31, 1995 and
March 31, 1996....................................................... 9
Consolidated Statements of Operations for the three months ended
March 31, 1995 and 1996.............................................. 10
Consolidated Statements of Changes in Stockholder's Equity for the
year ended December 31, 1995 and the three months ended
March 31, 1996....................................................... 11
Consolidated Statements of Cash Flows for the three months
ended March 31, 1995 and 1996........................................ 12
Notes to Consolidated Financial Statements........................... 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.................................. 16
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES................................................ 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..................................... 18
</TABLE>
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------- -------------
<S> <C> <C>
Current assets:
Cash $ 1,314,214 $ 2,514,868
Accounts receivable, net of allowance for doubtful accounts
of $263,528 and $600,000, respectively 13,243,292 28,452,064
Prepaid expenses and other 546,405 1,386,131
------------- -------------
Total current assets 15,103,911 32,353,063
Property and equipment, net 17,925,845 67,217,827
Intangibles and other, net 203,808,395 554,268,416
Deferred financing costs, net 4,284,413 19,447,676
------------- -------------
Total assets $ 241,122,564 $ 673,286,982
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,873,888 $ 3,603,589
Accrued liabilities 4,692,948 8,301,175
Accrued interest 2,710,891 6,279,140
Current portion of long-term debt 4,062,500 4,400,000
------------- -------------
Total current liabilities 13,340,227 22,583,904
Long-term debt 168,107,242 352,727,945
Deferred income taxes 4,952,361 17,836,384
Other -- 767,319
------------- -------------
Total liabilities 186,399,830 393,915,552
------------- -------------
Redeemable Senior Cumulative Exchangeable Preferred Stock of subsidiary,
par value $.01 per share; 1,000,000 shares authorized, issued and
outstanding; preference in liquidation of $100,000,000, plus
accumulated and unpaid dividends -- 97,652,032
Nonredeemable common stock and other stockholders' equity:
Class A common stock, par value $.01 per
share, 40,000,000 shares
authorized, 302,289 and 8,749,481 shares issued and outstanding,
respectively 3,023 87,495
Class B common stock, par value $.01 per share, 10,000,000 shares
authorized, 63,500 shares issued and outstanding 635 635
Class C common stock, par value $.01 per share, 10,000,000 shares
authorized, 8,484,411 shares issued and outstanding 84,844 84,844
Additional paid-in capital 66,271,498 206,453,059
Accumulated deficit (11,637,266) (23,868,501)
Treasury stock -- (1,038,134)
------------- -------------
Total stockholders' equity 54,722,734 181,719,398
------------- -------------
Total liabilities and stockholders' equity $ 241,122,564 $ 673,286,982
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1995 1996
----------- ------------
<S> <C> <C>
Gross broadcasting revenues $14,860,968 $ 29,089,515
Less agency commissions 1,779,413 3,447,276
----------- ------------
Net revenues 13,081,555 25,642,239
----------- ------------
Operating expenses:
Programming, technical and news 2,762,245 5,144,760
Sales and promotion 3,600,241 6,943,078
General and administrative 2,173,704 4,403,750
Depreciation and amortization 2,358,655 5,027,608
Corporate expenses 369,567 1,007,597
Stock option compensation -- 950,000
----------- ------------
11,264,412 23,476,793
----------- ------------
Income from operations 1,817,143 2,165,446
Other (income) expense:
Interest expense 4,113,507 7,145,506
Other, net (7,933) 5,624
----------- ------------
Loss before provision for income taxes, minority
interest and extraordinary loss (2,288,431) (4,985,684)
Provision for income taxes 1,194,938 939,361
Dividends and accretion on preferred stock of
subsidiary -- 1,660,269
----------- ------------
Net loss before extraordinary loss (3,483,369) (7,585,314)
Extraordinary loss on early extinguishment of debt -- 4,645,921
----------- ------------
Net loss (3,483,369) (12,231,235)
Loss on repurchase of preferred stock of subsidiary -- 16,570,065
----------- ------------
Net loss attributable to common stock $(3,483,369) $(28,801,300)
----------- ------------
----------- ------------
Loss applicable to common stock:
Loss before extraordinary loss $ (0.39) $ (1.83)
----------- ------------
----------- ------------
Extraordinary loss $ -- $ (0.35)
----------- ------------
----------- ------------
Net loss $ (0.39) $ (2.18)
----------- ------------
----------- ------------
Weighted average number of shares outstanding 8,850,033 13,191,626
----------- ------------
----------- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
COMMON STOCK COMMON STOCK COMMON STOCK ADDITIONAL
------------------ ------------- ------------------ PAID-IN ACCUMULATED TREASURY
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT STOCK TOTAL
--------- ------- ------ ------ --------- ------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1995 302,289 $3,0236 3,500 $635 8,484,244 $84,842 $ 59,911,500 $ (105,970) $ -- $ 59,894,030
Stock option
compensation -- -- -- -- -- -- 6,360,000 -- -- 6,360,000
Issuance of common
stock on June 29,
1995 -- -- -- -- 167 2 (2) -- -- --
Net loss -- -- -- -- -- -- -- (11,531,296) -- (11,531,296)
--------- ------- ------ ---- --------- ------- ------------ ------------ ----------- ------------
Balance, December 31,
1995 302,289 3,023 63,500 635 8,484,411 84,844 66,271,498 (11,637,266) -- 54,722,734
Stock option
compensation -- -- -- -- -- -- 950,000 -- -- 950,000
Issuance of common
stock on February
14, 1996 8,447,192 84,472 -- -- -- -- 155,801,626 -- -- 155,886,098
Loss on repurchase
of preferred stock
of subsidiary on
February 21, 1996 -- -- -- -- -- -- (16,570,065) -- -- (16,570,065)
Repurchase of
common stock on
February 21, 1996 -- -- -- -- -- -- -- -- (1,038,134) (1,038,134)
Net loss -- -- -- -- -- -- -- (12,231,235) -- (12,231,235)
--------- ------- ------ ---- --------- ------- ------------ ------------ ----------- ------------
Balance, March 31,
1996 8,749,481 $87,495 63,500 $635 8,484,411 $84,844 $206,453,059 $(23,868,501) $(1,038,134) $181,719,398
--------- ------- ------ ---- --------- ------- ------------ ------------ ----------- ------------
--------- ------- ------ ---- --------- ------- ------------ ------------ ----------- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1995 1996
----------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(3,483,369) $ (12,231,235)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 2,358,655 5,027,608
Provision for doubtful accounts 104,535 150,722
Stock option compensation -- 950,000
Deferred income taxes 1,194,938 939,361
Dividends and accretion on preferred stock of subsidiary -- 1,660,269
Extraordinary loss -- 4,645,921
Changes in assets and liabilities, net of the effects of acquired businesses:
Accounts receivable (380,713) 2,798,074
Prepaids and other (62,293) 56,513
Accounts payable (675,805) 761,323
Accrued liabilities 102,658 458,404
Accrued interest 2,519,248 3,568,249
----------- -------------
Net cash provided by operating activities 1,677,854 8,785,209
----------- -------------
Cash flows from investing activities:
Purchases of broadcasting properties (22,976) (405,566,199)
Purchases of other property and equipment (337,437) (820,314)
----------- -------------
Net cash used in investing activities (360,413) (406,386,513)
----------- -------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt -- 277,957,527
Proceeds from borrowings under revolving debt facility 1,995,395 28,609,148
Repayments of long-term debt -- (89,784,500)
Repayments of borrowings under revolving debt facility (3,659,093) (52,249,879)
Issuance of preferred stock of subsidiary -- 175,389,677
Repurchase of preferred stock of subsidiary -- (95,462,423)
Issuance of common stock -- 155,886,098
Repurchase of common stock -- (1,038,134)
Payment of preferred stock dividends -- (505,556)
----------- -------------
Net cash provided by financing activities (1,663,698) 398,801,958
----------- -------------
Net increase (decrease) in cash (346,257) 1,200,654
Cash, at beginning of period 1,516,808 1,314,214
----------- -------------
Cash, at end of period $ 1,170,551 $ 2,514,868
----------- -------------
----------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of
Chancellor Broadcasting Company ("Chancellor") and its subsidiaries (the
"Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1996.
2. ACQUISITION
On February 14, 1996, the Company acquired all of the outstanding
capital stock of Trefoil Communications, Inc. ("Trefoil") for approximately
$408.0 million, including acquisition costs. Trefoil is a holding company,
the sole asset of which is the capital stock of Shamrock Broadcasting, Inc.
("Shamrock Broadcasting"). The acquisition of Trefoil was financed through
the New Credit Agreement, the New Notes, the IPO and the offering of the
Acquisition Preferred Stock and Class A Common Stock (all as defined).
The acquisition of Trefoil was accounted for as a purchase. Accordingly,
the purchase price was allocated to the net assets acquired based upon their
estimated fair market values. The excess of the purchase price over the
estimated fair value of net assets acquired amounted to approximately $368.0
million, which has been accounted for as goodwill and is being amortized over
40 years using the straight line method. This allocation was based on
preliminary estimates.
The following summarizes the unaudited consolidated pro forma data for
the three months ended March 31, 1995 and 1996, as though the Company's
acquisitions of KDWB-FM and Trefoil Communications, Inc. had occurred as of
the beginning of 1995 (in thousands):
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1995 MARCH 31, 1996
--------------------- ---------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- --------- ---------- ---------
Net revenues $ 13,082 $32,853 $25,642 $33,572
Net loss before extraordinary loss (3,483) (11,158) (7,585) (10,596)
Net loss (3,483) (13,380) (12,231) (10,596)
Net loss per common share (0.39) (0.77) (2.18) (0.61)
Pursuant to Local Marketing Agreements ("LMA"), the Company has
outsourced certain limited functions of its Detroit and Houston stations to
certain third parties and, has entered into an agreement with one of those
third parties to exchange the Houston station, plus approximately $6.0
million in cash, for KIMN-FM and KALC-FM in Denver, Colorado. The Company
began managing certain limited functions of these stations, pursuant to an
LMA, effective April 1, 1996. Additionally, the Company also manages certain
limited functions pursuant to an LMA and has entered into an asset purchase
agreement to acquire certain assets of WKYN-AM in Florence, Kentucky.
3. LONG-TERM DEBT
The Company's $70.0 million term loan facility and $35.0 million
revolving loan facility were refinanced on February 14, 1996, in conjunction
with the acquisition of Trefoil Communications, Inc. under a new bank credit
agreement (the "New Credit Agreement") with Bankers Trust Company, as
administrative agent, and other institutions party thereto. In connection
with the refinancing of the term loan and revolving loan facility, the
Company incurred an extraordinary charge to write-off deferred finance costs
of approximately $1.8 million. The New Credit Agreement includes a $60.0
million term loan facility (the "A Term Loan Facility"), a $35.0 million term
loan facility (the "B Term Loan Facility" and , together with the A Term Loan
Facility, the "Term Loans") and a $40.0 million revolving loan facility (the
"Revolving Loan Facility" and, together with the Term Loans, the "New Bank
Financing"). The New Bank Financing is collateralized by (i) a first
priority perfected pledge of all capital
5
<PAGE>
CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
stock and notes owned by Chancellor and its subsidiaries and (ii) a first
priority perfected security interest in all other assets (including
receivables, contracts, contract rights, securities, patents, trademarks,
other intellectual property, inventory, equipment and real estate) owned by
Chancellor and its subsidiaries, excluding FCC licenses, leasehold interests
in studio or office space and certain leasehold and partnership interests in
tower or transmitter sites. The A and B Term Loan Facilities are due in
increasing quarterly installments beginning in 1996 and mature in August 2002
and 2003, respectively. All outstanding borrowings under the Revolving Loan
Facility mature in August 2002. The facilities bear interest, at the option
of the Company, at rates based upon the prime rate of Bankers Trust Company,
as announced from time to time, or the London Inter-Bank Offered Rate
("LIBOR") in effect form time to time, plus an applicable margin rate. The
Company pays quarterly commitment fees in arrears equal to .5% per annum on
the unused portion of the Revolving Loan Facility. As of March 31, 1996, the
New Bank Financing facilities accrued interest at prime rate plus 1.50% (
9.75%) and 1.75% (10.0%) on $62.1 million and $35.0 million of borrowings,
respectively.
In connection with the IPO (defined), the Company redeemed 25% of its
Existing Notes (defined) for approximately $22.2 million. The redemption was
completed in March 1996 and resulted in an extraordinary charge of $2.8
million. The remaining $60 million 12 1/2% Senior Subordinated Notes due
2004 (the "Existing Notes") mature October 1, 2004, and bear interest at
12.5% per annum. On February 14, 1996, in conjunction with the acquisition
of Trefoil Communications, Inc., the Company issued $200 million aggregate
principal amount of Senior Subordinated Notes due 2004 (the "New Notes" and,
together with the Existing Notes, the "Notes"), which mature on October 1,
2004, and bear interest at 9 3/8% per annum. Interest on the Notes is paid
semi-annually. The Existing and New Notes are redeemable, in whole or in
part, at the option of the Company on or after October 1, 1999 and February
1, 2000, respectively. In addition, prior to January 31, 1999, the company
may redeem up to 25% of the original aggregate principal amount of the New
Notes with the net proceeds of one or more public equity offerings. The
Notes are unsecured obligations of the Company, ranking subordinate in right
of payment to all senior debt of the Company. The New Notes rank PARI PASSU
in right of payment to the Existing Notes. The Notes are guaranteed on a
senior subordinated basis by Chancellor Radio Broadcasting Company's
subsidiaries.
Both the Bank Financing and Notes indenture contain certain covenants,
including, among others, limitations on the incurrence of additional debt, in
the case of the Bank Financing; requirements to maintain certain financial
ratios; and restrictions on the payment of dividends.
4. CAPITAL STRUCTURE
In February 1996, Chancellor sold 7.7 million shares of Class A common
stock in an initial public offering (the "IPO"), which generated net proceeds
of $142.4 million, and in a private placement, issued $100.0 million of
exchangeable redeemable preferred stock (the "Acquisition Preferred Stock")
of Chancellor Radio Broadcasting Company and 742,192 shares of Class A common
stock of Chancellor to an affiliated entity and other investors.
In February 1996, subsequent to the IPO, the Company commenced a private
placement of $100.0 million of newly authorized Senior Cumulative Exchangeable
Preferred Stock (the "Old Preferred Stock"). Upon completion, the proceeds of
the Old Preferred Stock were used to redeem the Acquisition Preferred Stock and
55,664 shares of Class A common stock. The redemption resulted in a charge to
net loss applicable to common stock of approximately $16.6 million and an
additional reduction of paid-in capital of approximately $1.0 million
In March 1996, the Company commenced an exchange offering to exchange
the Old Preferred Stock for 1,000,000 shares of public, 12 1/4% Senior
Cumulative Exchangeable Preferred Stock (the "New Preferred Stock"). The
terms of the New Preferred Stock are substantially identical to those of the
Old Preferred Stock. Dividends on the New Preferred Stock will accrue from
its date of issuance and will be payable quarterly commencing May 15, 1996,
at a rate per annum of 12 1/4% of the then effective liquidation preference
per share. Dividends may be paid, at the Company's option, on any dividend
payment date occurring on or prior to February 15, 2001 either in cash or by
adding such dividends to the then effective liquidation preference of the New
Preferred Stock. The initial liquidation preference of the New Preferred
Stock will be $100.00 per share. The New Preferred Stock is redeemable at
the Company's option, in whole or in part at any time on or after February 15,
2001, at various
6
<PAGE>
redemption prices (as defined), plus, accumulated and unpaid dividends to the
date of redemption. In addition, prior to February 15, 1999, the Company
may, at its option, redeem the New Preferred Stock with the net cash proceeds
from one or more Public Equity Offerings (as defined), at various redemption
prices (as defined), plus, accumulated and unpaid dividends to the redemption
date; provided, however, that after any such redemption there is outstanding
at least 75% of the number of shares of New Preferred Stock originally issued.
The Company is required, subject to certain conditions, to redeem all of
the New Preferred Stock outstanding on February 15, 2008, at a redemption
price equal to 100% of the then effective liquidation preference thereof,
plus, accumulated and unpaid dividends to the date of redemption. Upon the
occurrence of a change of control (as defined), the Company will offer to
purchase all of the then outstanding shares of New Preferred Stock at a price
equal to 101% of the then effective liquidation preference thereof, plus,
accumulated and unpaid dividends to the date of purchase. Subject to certain
conditions, the New Preferred Stock is exchangeable in whole, but not in
part, at the option of the Company, on any dividend payment date for the
Company's 12 1/4% subordinated exchange debentures due 2008.
In addition to the accrued dividends discussed above, the recorded value
of the New Preferred Stock includes an amount for the accretion of the
difference between the New Preferred Stock's fair value at date of issuance
and its mandatory redemption amount, calculated using the effective interest
method.
Immediately prior to the IPO, Chancellor effected a recapitalization of
its current capital stock. Pursuant to the recapitalization, each six shares
of Chancellor's Nonvoting Stock were reclassified into one share of Class A
Common Stock. Each six shares of Chancellor's Voting Stock were reclassified
into one share of Class B Common Stock and each six shares of Convertible
Nonvoting Stock were reclassified into one share of Class C Common Stock. In
connection with the recapitalization, 63,333 shares of Class A Common Stock
were exchanged for an equal number of shares of Class B Common Stock, and an
additional 8,483,078 shares of Class A Common Stock were exchanged for an
equal number of shares of Class C Common Stock. The recapitalization has
been given retroactive effect in the financial statements.
5. EMPLOYEE STOCK OPTION PLAN
On February 9, 1996, Chancellor's Board of Directors adopted a stock
award plan for the Company's management, employees and non-employee directors
providing for the grant of options and stock awards for up to 5% of Chancellor's
Common Stock (on a fully-diluted basis). On that same date, the Board of
Directors granted options to purchase 407,000 shares of Class A Common Stock
with an exercise price equal to the initial public offering price of $20 per
share.
6. INCOME TAXES
Income tax expense differs from the amount computed by applying the
federal statutory income tax rate of 34% to loss before income taxes and
dividends and accretion on preferred stock of subsidiary for the following
reasons:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------
1995 1996
----------- ------------
<S> <C> <C>
U.S. federal income tax at statutory rate $ (778,067) $ (3,274,746)
State income taxes, net of federal benefit (137,306) (577,896)
Valuation allowance provided for loss carryforward
generated during the current period 1,998,800 4,667,003
Other 111,511 125,000
----------- ------------
$ 1,194,938 $ 939,361
----------- ------------
----------- ------------
</TABLE>
7
<PAGE>
The deferred tax valuation allowance has been established due to the
uncertainty surrounding the Company's ability to generate taxable income in
the immediate future. While the Company currently expects that its long-term
profitability should ultimately be sufficient to enable it to realize full
benefit of its future tax deductions, considering all factors to be relevant,
the Company believes that a portion of the gross deferred tax assets may not
currently meet a "more likely than not" realizability test.
7. NEW ACCOUNTING PRONOUNCEMENT
Statement of Financial Accounting Standard No. 123, "Accounting for
Stock Based Compensation" was issued in October 1995, which establishes
financial accounting and reporting standards for stock based employee
compensation plans, including stock purchase plans, stock options, restricted
stock, and stock appreciation rights. The Company has elected to continue
accounting for stock based compensation under Accounting Principles Board
Opinion No. 25. The disclosure requirements of SFAS No. 123 will be
effective for the Company's financial statements beginning with the annual
report for 1996. Management does not believe that the implementation of SFAS
123 will have a material effect on its financial statements.
8
<PAGE>
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,314,214 $ 2,514,868
Accounts receivable, net of allowance for doubtful accounts
of $263,528 and $600,000, respectively 13,243,292 28,452,064
Prepaid expenses and other 546,405 1,386,131
------------ ------------
Total current assets 15,103,911 32,353,063
Property and equipment, net 17,925,845 67,217,827
Intangibles and other, net 203,808,395 554,268,416
Deferred financing costs, net 4,284,413 19,447,676
------------ ------------
Total assets $241,122,564 $673,286,982
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 1,873,888 $ 3,603,589
Accrued liabilities 4,692,948 8,301,175
Accrued interest 2,710,891 6,279,140
Current portion of long-term debt 4,062,500 4,400,000
------------ ------------
Total current liabilities 13,340,227 22,583,904
Long-term debt 168,107,242 352,727,945
Deferred income taxes 4,952,361 17,836,384
Other -- 767,319
------------ ------------
Total liabilities 186,399,830 393,915,552
------------ ------------
Redeemable Senior Cumulative Exchangeable Preferred Stock,
par value $.01 per share; 1,000,000 shares authorized, issued
and outstanding; preference in liquidation of $100,000,000, plus
accumulated and unpaid dividends -- 97,652,032
Nonredeemable common stock and other stockholder's equity:
Common stock, par value $.01 per share, 1,000 shares
authorized, issued and outstanding 10 10
Additional paid-in capital 66,359,990 203,927,620
Accumulated deficit (11,637,266) (22,208,232)
------------ ------------
Total stockholder's equity 54,722,734 181,719,398
------------ ------------
Total liabilities and stockholder's equity $241,122,564 $673,286,982
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1995 1996
----------- ------------
<S> <C> <C>
Gross broadcasting revenues $14,860,968 $ 29,089,515
Less agency commissions 1,779,413 3,447,276
----------- ------------
Net revenues 13,081,555 25,642,239
----------- ------------
Operating expenses:
Programming, technical and news 2,762,245 5,144,760
Sales and promotion 3,600,241 6,943,078
General and administrative 2,173,704 4,403,750
Depreciation and amortization 2,358,655 5,027,608
Corporate expenses 369,567 1,007,597
Stock option compensation -- 950,000
----------- ------------
11,264,412 23,476,793
----------- ------------
Income from operations 1,817,143 2,165,446
Other (income) expense:
Interest expense 4,113,507 7,145,506
Other, net (7,933) 5,624
----------- ------------
Loss before provision for income taxes and extraordinary
loss (2,288,431) (4,985,684)
Provision for income taxes 1,194,938 939,361
----------- ------------
Net loss before extraordinary loss (3,483,369) (5,925,045)
Extraordinary loss on early extinguishment of debt -- 4,645,921
----------- ------------
Net loss (3,483,369) (10,570,966)
Dividends and accretion on preferred stock -- 1,660,269
Loss on repurchase of preferred stock -- 16,570,065
----------- ------------
Net loss attributable to common stock $(3,483,369) $(28,801,300)
----------- ------------
----------- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995 2,000 $20 $ 59,999,980 $ (105,970) $ 59,894,030
Capital contributions -- -- 6,360,000 -- 6,360,000
Contribution of stock held
by affiliate of Hicks, Muse,
Tate & Furst (1,000) (10) 10 -- --
Net loss -- -- -- (11,531,296) (11,531,296)
------ ---- ------------- ------------ ------------
Balance, December 31, 1995 1,000 10 66,359,990 (11,637,266) 54,722,734
Loss on repurchase of preferred
stock -- -- (16,570,065) -- (16,570,065)
Dividends and accretion on
preferred stock -- -- (1,660,269) -- (1,660,269)
Capital contributions -- -- 155,797,964 -- 155,797,964
Net loss -- -- -- (10,570,966) (10,570,966)
------ ---- ------------- ------------ ------------
Balance, March 31, 1996 1,000 $ 10 $ 203,927,620 $(22,208,232) $181,719,398
------ ---- ------------- ------------ ------------
------ ---- ------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1995 1996
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(3,483,369) $(10,570,966)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,358,655 5,027,608
Provision for doubtful accounts 104,535 150,722
Stock option compensation -- 950,000
Deferred income taxes 1,194,938 939,361
Extraordinary loss -- 4,645,921
Changes in assets and liabilities, net of
the effects of acquired businesses:
Accounts receivable (380,713) 2,798,074
Prepaids and other (62,293) 56,513
Accounts payable (675,805) 761,323
Accrued liabilities 102,658 458,404
Accrued interest 2,519,248 3,568,249
----------- -------------
Net cash provided by operating activities 1,677,854 8,785,209
----------- -------------
Cash flows from investing activities:
Purchases of broadcasting properties (22,976) (405,566,199)
Purchases of other property and equipment (337,437) (820,314)
----------- -------------
Net cash used in investing activities (360,413) (406,386,513)
----------- -------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt -- 277,957,527
Proceeds from borrowings under revolving
debt facility 1,995,395 28,609,148
Repayments of long-term debt -- (89,784,500)
Repayments of borrowings under revolving
debt facility (3,659,093) (52,249,879)
Issuance of preferred stock -- 175,389,677
Repurchase of preferred stock -- (95,462,423)
Additional capital contributions -- 155,886,098
Distribution of additional paid in capital -- (1,038,134)
Payment of preferred stock dividends -- (505,556)
----------- -------------
Net cash provided by financing activities (1,663,698) 398,801,958
----------- -------------
Net increase (decrease) in cash (346,257) 1,200,654
Cash, at beginning of period 1,516,808 1,314,214
----------- -------------
Cash, at end of period $ 1,170,551 $ 2,514,868
----------- -------------
----------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of
Chancellor Radio Broadcasting Company ("Chancellor Radio Broadcasting") and
its subsidiaries (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31,
1996 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1996. Chancellor Radio Broadcasting is a wholly
owned subsidiary of Chancellor Broadcasting Company ("Chancellor").
2. ACQUISITION
On February 14, 1996, the Company acquired all of the outstanding
capital stock of Trefoil Communications, Inc. ("Trefoil") for approximately
$408.0 million, including acquisition costs. Trefoil is a holding company,
the sole asset of which is the capital stock of Shamrock Broadcasting, Inc.
("Shamrock Broadcasting"). The acquisition of Trefoil was financed through
the New Credit Agreement, the New Notes, the IPO and the offering of the
Acquisition Preferred Stock and Class A Common Stock (all as defined).
The acquisition of Trefoil was accounted for as a purchase.
Accordingly, the purchase price was allocated to the net assets acquired
based upon their estimated fair market values. The excess of the purchase
price over the estimated fair value of net assets acquired amounted to
approximately $368.0 million, which has been accounted for as goodwill and is
being amortized over 40 years using the straight line method. This
allocation was based on preliminary estimates and may be revised at a later
date.
The following summarizes the unaudited consolidated pro forma data for
the three months ended March 31, 1995 and 1996, as though the Company's
acquisitions of KDWB-FM and Trefoil Communications, Inc. had occurred as of
the beginning of 1995 (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1995 MARCH 31, 1996
--------------------- ---------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Net revenues $13,082 $ 32,853 $ 25,642 $33,572
Net loss before extraordinary loss (3,483) (8,023) (5,925) (7,460)
Net loss (3,483) (10,245) (10,571) (7,460)
</TABLE>
Pursuant to Local Marketing Agreements ("LMA"), the Company has
outsourced certain limited functions of its Detroit and Houston stations to
certain third parties and, has entered into an agreement with one of those
third parties to exchange the Houston station, plus approximately $6.0
million in cash, for KIMN-FM and KALC-FM in Denver, Colorado. The Company
began managing certain limited functions of these stations, pursuant to an
LMA, effective April 1, 1996. Additionally, the Company also manages certain
limited functions pursuant to an LMA and has entered into an asset purchase
agreement to acquire certain assets of WKYN-AM in Florence, Kentucky.
3. LONG-TERM DEBT
The Company's $70.0 million term loan facility and $35.0 million
revolving loan facility were refinanced on February 14, 1996, in conjunction
with the acquisition of Trefoil Communications, Inc. under a new bank credit
agreement (the "New Credit Agreement") with Bankers Trust Company, as
administrative agent, and other institutions party thereto. In connection
with the refinancing of the term loan and revolving loan facility, the
Company incurred an extraordinary charge to write-off deferred finance costs
of approximately $1.8 million. The New Credit Agreement includes a $60.0
million term loan facility (the "A Term Loan Facility"), a $35.0 million term
loan facility (the "B Term Loan Facility" and , together with the A Term Loan
Facility, the "Term Loans") and a $40.0 million revolving loan facility (the
"Revolving Loan Facility" and, together with the Term Loans, the "New Bank
Financing"). The New Bank Financing is collateralized by (i) a first
priority perfected pledge of all capital stock and notes owned by Chancellor
and its subsidiaries and (ii) a first priority perfected security interest in
all
13
<PAGE>
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
other assets (including receivables, contracts, contract rights, securities,
patents, trademarks, other intellectual property, inventory, equipment and
real estate) owned by Chancellor and its subsidiaries, excluding FCC
licenses, leasehold interests in studio or office space and certain leasehold
and partnership interests in tower or transmitter sites. The A and B Term
Loan Facilities are due in increasing quarterly installments beginning in
1996 and mature in August 2002 and 2003, respectively. All outstanding
borrowings under the Revolving Loan Facility mature in August 2002. The
facilities bear interest, at the option of the Company, at rates based upon
the prime rate of Bankers Trust Company, as announced from time to time, or
the London Inter-Bank Offered Rate ("LIBOR") in effect form time to time,
plus an applicable margin rate. The Company pays quarterly commitment fees
in arrears equal to .5% per annum on the unused portion of the Revolving Loan
Facility. As of March 31, 1996, the New Bank Financing facilities accrued
interest at prime rate plus 1.50% ( 9.75%) and 1.75% (10.0%) on $62.1 million
and $35.0 million of borrowings, respectively.
In connection with the IPO (defined), the Company redeemed 25% of its
Existing Notes (defined) for approximately $22.2 million. The redemption was
completed in March 1996 and resulted in an extraordinary charge of $2.8
million. The remaining $60 million 12 1/2% Senior Subordinated Notes due
2004 (the "Existing Notes") mature October 1, 2004, and bear interest at
12.5% per annum. On February 14, 1996, in conjunction with the acquisition
of Trefoil Communications, Inc., the Company issued $200 million aggregate
principal amount of Senior Subordinated Notes due 2004 (the "New Notes" and,
together with the Existing Notes, the "Notes"), which mature on October 1,
2004, and bear interest at 9 3/8% per annum. Interest on the Notes is paid
semi-annually. The Existing and New Notes are redeemable, in whole or in
part, at the option of the Company on or after October 1, 1999 and February
1, 2000, respectively. In addition, prior to January 31, 1999, the company
may redeem up to 25% of the original aggregate principal amount of the New
Notes with the net proceeds of one or more public equity offerings. The
Notes are unsecured obligations of the Company, ranking subordinate in right
of payment to all senior debt of the Company. The New Notes rank PARI PASSU
in right of payment to the Existing Notes. The Notes are guaranteed on a
senior subordinated basis by Chancellor Radio Broadcasting Company's
subsidiaries.
Both the Bank Financing and Notes indenture contain certain covenants,
including, among others, limitations on the incurrence of additional debt, in
the case of the Bank Financing; requirements to maintain certain financial
ratios; and restrictions on the payment of dividends.
4. CAPITAL STRUCTURE
In February 1996, Chancellor sold 7.7 million shares of Class A common
stock in an initial public offering (the "IPO"), which generated net proceeds
of $142.4 million, and in a private placement, issued $100.0 million of
exchangeable redeemable preferred stock (the "Acquisition Preferred Stock")
of Chancellor Radio Broadcasting and 742,192 shares of Class A common stock
of Chancellor to an affiliated entity and other investors.
In February 1996, subsequent to the IPO, the Company commenced a private
placement of $100.0 million of newly authorized Senior Cumulative
Exchangeable Preferred Stock (the "Old Preferred Stock"). Upon completion,
the proceeds of the Old Preferred Stock were used to redeem the Acquisition
Preferred Stock and 55,664 shares of Class A common stock. The redemption
resulted in a charge to net loss applicable to common stock of approximately
$16.6 million and an additional reduction of paid-in capital of approximately
$1.0 million
In March 1996, the Company commenced an exchange offering to exchange
the Old Preferred Stock for 1,000,000 shares of public, 12 1/4% Senior
Cumulative Exchangeable Preferred Stock (the "New Preferred Stock"). The
terms of the New Preferred Stock are substantially identical to those of the
Old Preferred Stock. Dividends on the New Preferred Stock will accrue from
its date of issuance and will be payable quarterly commencing May 15, 1996,
at a rate per annum of 12 1/4% of the then effective liquidation preference
per share. Dividends may be paid, at the Company's option, on any dividend
payment date occurring on or prior to February 15, 2001 either in cash or by
adding such dividends to the then effective liquidation preference of the New
Preferred Stock. The initial liquidation preference of the New Preferred
Stock will be $100.00 per share. The New Preferred Stock is redeemable at
the Company's option, in whole or in part at any time on or after February
15, 2001, at various redemption prices (as defined), plus, accumulated and
unpaid dividends to the date of redemption. In addition, prior to February
15, 1999, the Company may, at its option, redeem the Senior exchangeable
Preferred Stock with the net
14
<PAGE>
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
cash proceeds from one or more Public Equity Offerings (as defined), at
various redemption prices (as defined), plus, accumulated and unpaid
dividends to the redemption date; provided, however, that after any such
redemption there is outstanding at least 75% of the number of shares of New
Preferred Stock originally issued.
The Company is required, subject to certain conditions, to redeem all of
the New Preferred Stock outstanding on February 15, 2008, at a redemption
price equal to 100% of the then effective liquidation preference thereof,
plus, accumulated and unpaid dividends to the date of redemption. Upon the
occurrence of a change of control (as defined), the Company will offer to
purchase all of the then outstanding shares of New Preferred Stock at a price
equal to 101% of the then effective liquidation preference thereof, plus,
accumulated and unpaid dividends to the date of purchase. Subject to certain
conditions, the New Preferred Stock is exchangeable in whole, but not in
part, at the option of the Company, on any dividend payment date for the
Company's 12 1/4% subordinated exchange debentures due 2008.
In addition to the accrued dividends discussed above, the recorded value
of the New Preferred Stock includes an amount for the accretion of the
difference between the New Preferred Stock's fair value at date of issuance
and its mandatory redemption amount, calculated using the effective interest
method.
5. EMPLOYEE STOCK OPTION PLAN
On February 9, 1996, Chancellor's Board of Directors adopted a stock
award plan for the Company's management, employees and non-employee directors
providing for the grant of options and stock awards for up to 5% of
Chancellor's Common Stock (on a fully-diluted basis). On that same date, the
Board of Directors granted options to purchase 407,000 shares of Class A
Common Stock with an exercise price equal to the initial public offering
price of $20 per share.
6. INCOME TAXES
Income tax expense differs from the amount computed by applying the
federal statutory income tax rate of 34% to loss before income taxes for the
following reasons:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1995 1996
---------- -----------
<S> <C> <C>
U.S. federal income tax at statutory rate $ (778,067) $(3,274,746)
State income taxes, net of federal benefit (137,306) (577,896)
Valuation allowance provided for loss carryforward
generated during the current period 1,998,800 4,667,003
Other 111,511 125,000
---------- -----------
$1,194,938 $ 939,361
---------- -----------
---------- -----------
</TABLE>
The deferred tax valuation allowance has been established due to the
uncertainty surrounding the Company's ability to generate taxable income in
the immediate future. While the Company currently expects that its long-term
profitability should ultimately be sufficient to enable it to realize full
benefit of its future tax deductions, considering all factors to be relevant,
the Company believes that a portion of the gross deferred tax assets may not
currently meet a "more likely than not" realizability test.
7. NEW ACCOUNTING PRONOUNCEMENT
Statement of Financial Accounting Standard No. 123, "Accounting for
Stock Based Compensation" was issued in October 1995, which establishes
financial accounting and reporting standards for stock based employee
compensation plans, including stock purchase plans, stock options, restricted
stock, and stock appreciation rights. The Company has elected to continue
accounting for stock based compensation under Accounting Principles Board
Opinion No. 25. The disclosure requirements of SFAS No. 123 will be
effective for the Company's financial statements beginning with the annual
report for 1996. Management does not believe that the implementation of SFAS
123 will have a material effect on its financial statements.
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Chancellor Broadcasting Company and its subsidiaries (the "Company")
have grown largely through acquisitions, as well as through internally
generated growth. The Company completed its first acquisition in January
1994 with the purchase of KFBK-AM and KGBY-FM in Sacramento. In October
1994, the Company acquired the 11-station American Media Station Group. In
July 1995, the Company acquired KDWB-FM in Minneapolis-St. Paul. On February
14, 1996, the Company acquired Trefoil Communications, Inc., and its wholly
owned subsidiary Shamrock Broadcasting, Inc. ("Shamrock Broadcasting"), which
owned and operated 19 radio stations. The Company now owns 33 radio stations
serving the following top 40 markets: New York, New York; Los Angeles,
California; San Francisco, California; Detroit, Michigan; Houston, Texas;
Atlanta, Georgia; Riverside-San Bernardino, California; Minneapolis-St. Paul,
Minnesota; Nassau-Suffolk (Long Island), New York; Phoenix, Arizona;
Pittsburgh, Pennsylvania; Denver, Colorado; Cincinnati, Ohio; Sacramento,
California; and Orlando, Florida. Pursuant to Local Marketing Agreements
("LMA"), the Company has outsourced certain limited functions of its Detroit
and Houston stations to certain third parties and, has entered into an
agreement with one of those third parties to exchange the Houston station,
plus approximately $6.0 million in cash, for KIMN-FM and KALC-FM in Denver,
Colorado. The Company began managing certain limited functions of these
stations, pursuant to an LMA, effective April 1, 1996. Additionally, the
Company also manages certain limited functions pursuant to an LMA and has
entered into an asset purchase agreement to acquire certain assets of WKYN-AM
in Florence, Kentucky.
In the following analysis, management discusses the "broadcast cash
flow" of the combined station group. Broadcast cash flow consists of
operating income before depreciation and amortization, corporate expenses and
non-cash stock option compensation expense. Although broadcast cash flow is
not a measure of performance calculated in accordance with generally accepted
accounting principles ("GAAP"), management believes that it is useful to an
investor in evaluating the Company because it is a measure widely used in the
broadcast industry to evaluate a radio company's operating performance.
However, broadcast cash flow should not be considered in isolation or as a
substitute for net income, cash flows from operating activities and other
income or cash flow statement data prepared in accordance with GAAP or as a
measure of liquidity or profitability. The discussion of broadcast cash flow
appears as the last paragraph in the discussion of the results of operations.
For ease of comprehension, the following table and analysis presents and
discusses the combined historical net revenues, operating expenses and
broadcast cash flow of the Company, Midcontinent Radio of Minnesota Inc.
related to radio station KDWB-FM (where not already included in the Company's
results of operations per the terms of the LMA) and Shamrock Broadcasting for
the three months ended March 31, 1995 and 1996. Results related to the
Company's Detroit and Houston stations are limited to those revenues and
expenses attributable to the Company per the terms of the LMA agreements in
1996. No data for these stations prior to the LMA agreements in February
1996 or for 1995 have been included. This combined "same station basis"
information is presented in a manner similar to a "pooling of interests";
however, it is not in accordance with GAAP which does not allow for the
aggregation of financial data for entities which are not under common
management and control. Nevertheless, management believes the financial
information shown below is helpful in understanding past and current
operations of the Company's stations. In the following information, the
KDWB-FM LMA fee of $180,000, paid by the Company to Midcontinent Radio of
Minnesota Inc. in 1995, for the three months ended March 31, 1995, has been
eliminated from net revenues and operating expenses:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1995 1996
----------- -----------
<S> <C> <C>
Net revenues $31,269,460 $33,017,912
Operating expenses 23,154,286 22,917,506
----------- -----------
Broadcast cash flow $ 8,115,174 $10,100,406
----------- -----------
----------- -----------
</TABLE>
Because the Company incurred substantial indebtedness for its
acquisitions for which it has significant debt service requirements, and
because the Company has significant non-cash charges for stock option
compensation and depreciation and amortization expense related to the fixed
assets and intangibles acquired in the acquisitions, the Company expects that
it will report net losses for the foreseeable future.
16
<PAGE>
Periodically, the Company makes forward looking statements that are not
historical facts. Actual results may differ materially from those projected
in the forward looking statements. These forward looking statements involve
risks and uncertainties, including but not limited to, the following:
business conditions and growth in the radio broadcasting industry and general
economy; competitive factors; that interest rates may increase rather than
remain stable or decrease; that one or more of the Company's broadcasting
licenses may not be renewed; and the risk factors listed from time to time in
documents filed by the Company with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31,
1995
Net revenues increased 96.0% to $25.6 million for the three months ended
March 31, 1996 from $13.1 million for the same period in 1995. The majority
of this increase was due to the acquisition of Shamrock Broadcasting. On a
same station basis, net revenues increased 5.6% to $33.0 million for the
first quarter of 1996 from $31.3 million for the first quarter of 1995.
Station operating expenses increased 93.2% to $16.5 million for the
quarter ended March 31, 1996 from $8.5 million for the quarter ended March
31, 1995. The majority of this increase was due to the acquisition of
Shamrock Broadcasting. On a same station basis, station operating expenses
decreased 1.0% to $22.9 million for the three months ended March 31, 1996
from $23.2 million for the same period of 1995.
In the first quarter of 1996, the Company recorded non-cash stock option
compensation expense related to compensatory stock options of Chancellor
Broadcasting Company granted in 1994.
Depreciation and amortization increased 113.2% to $5.0 million for the
first quarter of 1996 from $2.4 million for the same period in the prior
year. Interest expense increased 73.7% to $7.1 million from $4.1 million for
the same periods. These increases, and the extraordinary loss on early
extinguishment of debt of $4.6 million, were primarily attributable to the
acquisition of Shamrock Broadcasting and the resulting change in capital
structure from its financing. See the discussion of "Liquidity and Capital
Resources" below. Corporate expenses increased 172.4% to $1.0 million for
the first three months of 1996 from approximately $370,000 for the same
period in 1995, as a result of additional personnel and overhead costs
associated with the acquisition of Shamrock Broadcasting.
During the first quarter of 1996, the Company incurred a one-time loss
of $16.6 million on the repurchase of preferred stock of its subsidiary and
incurred charges for dividends and accretion on the repurchased and newly
issued preferred stock of its subsidiary of $0.5 million and $1.2 million,
respectively.
As a result of the foregoing, income from operations increased 19.2% to
$2.2 million for the first quarter of 1996 from $1.8 million for the same
period in 1995. The Company had a net loss of $12.2 million compared with a
net loss of $3.5 million for the first quarter of the prior year.
On a same station basis, broadcast cash flow increased 24.5% to $10.1
million for the three months ended March 31, 1996, from $8.1 million for the
comparable 1995 period. Broadcast cash flow as a percentage of net revenues
increased to 30.6% for 1996 from 26.0% for 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity and capital resources have been significantly
impacted by the acquisition, and the financing thereof, of Trefoil
Communications, Inc. ("Trefoil"), on February 14, 1996. The acquisition of
Trefoil was financed through the New Credit Agreement, the New Notes, the IPO
and the offering of the Acquisition Preferred Stock and Class A Common Stock
(all as defined and described in the notes to the financial statements
included herewith). In connection with this financing, the Company
refinanced its existing bank financing and redeemed 25% of its Existing Notes
(as defined), resulting in a combined extraordinary charge of $4.6 million.
HM Fund II has advised Chancellor and Chancellor Broadcasting that on or
before September 30, 1996, it will sell all of its capital stock in its
affiliate, HMW, or will cause HMW to sell all or substantially all of its
assets (which consist primarily of eight radio broadcast stations), and that
it or HMW will invest the net proceeds of such sale in Class A Common stock
of Chancellor. Management believes that these proceeds, cash from operating
activities and available revolving credit borrowings under its bank credit
agreement should be sufficient to permit the Company to meet its financial
obligations and fund its operations.
17
<PAGE>
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On February 14, 1996, Chancellor Broadcasting Company ("Chancellor")
consummated an initial public offering (the "IPO") of its Class A Common
Stock, par value $.01 per share. In connection with such offering,
Chancellor reclassified its previously outstanding capital stock immediately
prior to the IPO. Pursuant to such reclassification, Chancellor's Non-Voting
Stock, Voting Stock and Convertible Non-Voting Stock were reclassified into
its Class A Common Stock, Class B Common Stock, and Class C Common Stock,
respectively, on a six-for-one basis. The holders of the Class A Common
Stock are entitled to one vote per share on all matters submitted to the
stock holders of Chancellor and, except as otherwise specified in the Second
Restated Certificate of Incorporation of Chancellor, to elect, voting as a
class, two members of the Board of Directors of Chancellor.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
------- -----------------------
2.1 Stock Purchase Agreement dated as of August 3, 1995, among
Chancellor Broadcasting, Trefoil Communications, Inc., and the
Selling Securityholders named therein. (1)
2.2 Option Agreement dated January 9, 1996 by and between Chancellor
Broadcasting and Evergreen Media Corporation. (1)
2.3 Option Agreement dated January 9, 1996 by and between Chancellor
Broadcasting and Secret Communications. (1)
2.4 Exchange Agreement dated March 12, 1996 by and between Chancellor
Broadcasting and Secret Communications. *
3.1 Certificate of Incorporation of Chancellor Broadcasting. (2)
3.2 Certificate of Incorporation of Broadcasting Licensee. (2)
3.3 Bylaws of Chancellor Broadcasting, as amended. (2)
3.4 Bylaws of Broadcasting Licensee. (2)
3.5 Certificate of Amendment of Chancellor Broadcasting. (3)
3.6 Certificate of Designation for the 14% Redeemable Exchangeable
Preferred Stock of Chancellor Broadcasting. (4)
3.7 Certificate of Amendment to Certificate of Designation for the
14% Redeemable Exchangeable Preferred Stock of Chancellor
Broadcasting. (3)
3.8 Certificate of Designation for the 12 1/4% Senior Cumulative
Exchangeable Preferred Stock of Chancellor Broadcasting. (3)
3.9 Second Restated Certificate of Incorporation of Chancellor. (3)
3.10 Certificate of Amendment to Second Restated Certificate of
Incorporation of Chancellor. (3)
3.11 Second Restated Bylaws of Chancellor. (3)
3.12 Certificate of Amendment to Certificate of Incorporation of
Chancellor Broadcasting. (3)
4.1 First Supplemental Indenture to the Indenture dated October 1,
1994, governing the 12 1/2% Senior Subordinated Notes due 2004. (3)
4.2 Indenture dated October 1, 1994 governing the outstanding 12 1/2%
Senior Subordinated Notes due 2004. (2)
18
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EXHIBIT
NO. DESCRIPTION OF DOCUMENT
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4.3 Indenture dated February 14, 1996 governing the outstanding 9 3/8%
Senior Subordinated Notes due 2004. (4)
4.4 Indenture dated February 26, 1996 governing the Exchange
Debentures. (3)
4.5 First Supplemental Indenture dated February 14, 1996 to the
Indenture governing the 9 3/8% Senior Subordinated Notes due
2004. (3)
4.6 Second Supplemental Indenture dated February 14, 1996 to the
Indenture governing the 12 1/2% Senior Subordinated Notes due
2004. (3)
10.1 Financial Advisory Agreement dated as of January 1, 1996 among
Chancellor, Chancellor Broadcasting and HM2/Management Partners,
L.P. (3)
10.2 Credit Agreement dated February 14, 1996 among Chancellor,
Chancellor Broadcasting, various banks and Bankers Trust Company,
as agent. (4)
10.3 Amended and Restated Monitoring and Oversight Agreement dated as
of January 1, 1996 between Chancellor, Chancellor Broadcasting and
HM2/Management Partners, L.P. (3)
10.4 Amended and Restated Stockholders Agreement dated February 14, 1996
among Chancellor and certain Holders named therein. (3)
10.5 Letter Agreement dated February 9, 1996 regarding Hicks Muse Equity
Investment among Chancellor and HM Fund II. (3)
10.6 Employment Agreement dated February 14, 1996 between Chancellor,
Chancellor Broadcasting and Steven Dinetz. *
11.1 Computation of Earnings Per Share. *
27.1 FDS - Chancellor Broadcsting Company *
27.2 FDS - Chancellor Radio Broadcasting Company *
27.3 FDS - Chancellor Broadcasting Licensee Company *
_______________
* Filed herewith.
(1) Incorporated by reference to Amendment No. 3 to the Registration
Statement on Form S-1 (File No. 33-98334) of Chancellor Broadcasting as
filed with the Securities and Exchange Commission.
(2) Incorporated by reference to the Registration Statement on Form S-1
(File No. 33-80534) of Chancellor Broadcasting as filed with the Securities
and Exchange Commission.
(3) Incorporated by reference to the Annual Report on Form 10-K of Chancellor,
Chancellor Broadcasting and Broadcasting Licensee for the fiscal year 1995.
(4) Incorporated by reference from the Form 8-K of Chancellor (File No.
33-98336) and Chancellor Broadcasting (File No. 33-98334) as filed with the
Securities and Exchange Commission on February 29, 1996.
(b) REPORTS ON FORM 8-K.
A Current Report on Form 8-K dated February 14, 1996 was filed with the
Securities and Exchange Commission on February 29, 1996 on behalf of
Chancellor and Chancellor Broadcasting relating to the acquisition by
Chancellor Broadcasting of Trefoil Communications, Inc. and its subsidiaries.
The audited financial statements of Trefoil Communications, Inc. and
Subsidiaries as of December 31, 1994 and 1995, and for each of the three
years ended December 31, 1995 and Malrite Communications Group, Inc. Radio
Operation as of July 30, 1993 and the seven-month period then ended were
filed with such report. In addition, an unaudited pro forma condensed
statement of operations for the year ended December 31, 1995 and an unaudited
pro forma balance sheet dated December 31, 1995 for Holdings and Trefoil
Communications, Inc. combined were filed with such report.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant and each co-registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CHANCELLOR BROADCASTING COMPANY
AND EACH CO-REGISTRANT
Date: May 14, 1996 By /s/ Jacques D. Kerrest
----------------------------------
Jacques D. Kerrest
Executive Vice President and Chief
Financial Officer
(Duly Authorized Officer and
Principal Financial and Accounting
Officer of Registrant and each
co-registrant)
20
<PAGE>
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (this "Agreement") is made and entered into this
12th day of March, 1996 by and among Chancellor Radio Broadcasting Company, a
Delaware corporation ("Chancellor"), Shamrock Broadcasting, Inc., a Delaware
corporation and indirectly wholly owned subsidiary of Chancellor ("Shamrock")
and Secret Communications, L.P., a Delaware limited partnership ("Secret").
W I T N E S S E T H:
WHEREAS, Secret owns and operates radio stations KALC-FM and KIMN-FM
(the "Denver Stations") in Denver, Colorado pursuant to a license issued by
the Federal Communications Commission ("FCC");
WHEREAS, Secret desires to exchange the Denver Stations with Shamrock
for radio station KTBZ-FM in Lake Jackson (Houston), Texas (the "Houston
Station") in a transaction that qualifies as a like-kind exchange within the
meaning of Section 1031 of the Internal Revenue Code and the regulations
thereunder.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements hereinafter set forth, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE 1
PURCHASE OF ASSETS
1.1 TRANSFER OF ASSETS. On the terms and subject to the conditions
hereof and subject to Section 1.2, on the Closing Date (as hereinafter
defined), Secret shall assign, transfer, convey and deliver to Shamrock and
Shamrock shall acquire and assume from Secret, all of the right, title and
interest of Secret in and to all of the following assets, properties,
interests and rights of Secret (collectively the "Denver Stations Assets"):
1.1.1 all of Secret's rights in and to the licenses, permits and
other authorizations issued to Secret by any governmental authority including
those issued by the FCC (the latter are hereafter referred to as the "Denver
Stations Licenses") used in connection with the operation of the Denver
Stations, along with renewals or modifications of such items between the date
hereof and the Closing Date as well as all of Secret's rights in and to the
call letters "KALC-FM" and "KIMN-FM";
1.1.2 all equipment, office furniture and fixtures, office materials
and supplies, inventory, spare parts and all other tangible personal property
of every kind and description, and Secret's rights therein, owned, leased or
held by Secret and used in connection with the operations of the Denver
Stations, including but not limited to those items described or listed in
Schedule 7.5 hereto, together with any replacements thereof and additions
thereto, made
<PAGE>
between the date hereof and the Closing Date, and less any retirements or
dispositions thereof made between the date hereof and the Closing Date in the
ordinary course of business of Secret;
1.1.3 all of Secret's rights in and under contracts, agreements,
leases and legally binding contractual rights of any kind, written or oral,
relating to the operation of the Denver Stations ("Contracts"), listed in
Schedules 7.7 hereto or entered into by Secret between the date hereof and
the Closing Date in the ordinary course of business of Secret;
1.1.4 all of Secret's rights in and to all trademarks, trade names,
service marks, franchises, copyrights, including registrations and
applications for registration of any of them, computer software, programs and
programming material of whatever form or nature, jingles, slogans, the Denver
Stations' logos and all other logos or licenses to use same and all other
intangible property rights of Secret, which are used exclusively in
connection with the operation of the Denver Stations, including but not
limited to those listed in Schedule 7.11 hereto (collectively, the
"Intellectual Property") together with any associated good will and any
additions thereto between the date hereof and the Closing Date;
1.1.5 all of Secret's rights in and to all the files, documents,
records, and books of account relating to the operation of the Denver
Stations or to the Denver Stations Assets, including, without limitation, the
Denver Stations' public file, programming information and studies, technical
information and engineering data, news and advertising studies or consulting
reports, marketing and demographic data, sales correspondence, lists of
advertisers, promotional materials, credit and sales reports and filings with
the FCC, copies of all written Contracts to be assigned hereunder, logs,
software programs and books and records relating to employees, financial,
accounting and operation matters; but excluding records relating solely to
any Excluded Asset (as hereinafter defined);
1.1.6 all of Secret's rights under manufacturers' and vendors'
warranties relating to items included in the Denver Stations Assets and all
similar rights against third parties relating to items included in the Denver
Stations Assets;
1.1.7 all real property owned in fee by Secret together with all
appurtenant easements thereunto and all structures, fixtures and improvements
located thereon as more fully described in Schedule 7.7 hereto, together with
any additions thereto between the date hereof and the Closing Date ("Real
Estate"); and
1.1.8 except for Excluded Assets, such other assets, properties,
interests and rights owned by Secret that are used exclusively in connection
with the operation of the Denver Stations or that are located as of the
Closing Date on the Real Estate.
1.2 EXCLUDED ASSETS. Notwithstanding anything to the contrary
contained herein, it is expressly understood and agreed that the Denver
Stations Assets shall not include the following assets along with all rights,
title and interest therein (the "Excluded Assets"):
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1.2.1 all cash and cash equivalents of Secret on hand and/or in
banks;
1.2.2 all cash accounts receivable or notes receivable of Secret;
1.2.3 all tangible and intangible personal property of Secret
disposed of or consumed in the ordinary course of business of Secret between
the date hereof and the Closing Date, or as permitted under the terms hereof;
1.2.4 all Contracts that have terminated or expired prior to the
Closing Date in the ordinary course of business of Secret and as permitted
hereunder;
1.2.5 Secret's corporate seal, minute books, charter documents,
corporate stock record books and such other books and records as pertain to
the organization, existence or share capitalization of Secret and duplicate
copies of such records as are necessary to enable Secret to file its tax
returns and reports as well as any other records or materials relating to
Secret generally and not involving or relating to the Denver Stations Assets
or the operation or operations of the Denver Stations;
1.2.6 Contracts of insurance and all insurance proceeds or claims
made by Secret;
1.2.7 all pension, profit sharing or cash or deferred (Section
401(k)) plans and trusts and the assets thereof and any other employee
benefit plan or arrangement and the assets thereof, if any, maintained by
Secret; and
1.2.8 any right, property or asset described in Schedule 1.2.8
hereto.
1.3 NONASSIGNABLE CONTRACTS.
1.3.1 NONASSIGNABILITY. Without limiting or otherwise affecting the
rights of Shamrock pursuant to Articles 11 or 15, to the extent that any
Contract to be assigned pursuant to the terms of Section 1.1.3 is not capable
of being assigned without the consent, approval or waiver of a third person
or entity, nothing in this Agreement will constitute an assignment or require
the assignment thereof except to the extent provided in this Section 1.3.
1.3.2 SECRET TO USE REASONABLE EFFORTS Notwithstanding anything
contained in this Agreement to the contrary, Secret will not be obligated to
assign to Shamrock any of its rights and obligations in and to any of the
Contracts referred to in Section 1.3.1 without first having obtained all
consents, approvals and waivers necessary for such assignment; provided,
however, that Secret shall use reasonable efforts to obtain all such
consents, approvals and waivers prior to and, if the Closing occurs, after
the Closing Date (as defined in Section 4.1).
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<PAGE>
1.3.3 IF WAIVERS OR CONSENTS CANNOT BE OBTAINED. To the extent that
the consents, approvals and waivers referred to in Section 1.3.1 are not
obtained by Secret, Secret shall use its best efforts to (a) provide to
Shamrock the financial and business benefits of any Contract referred to in
Section 1.3.1 and (b) enforce, at the request of Shamrock, for the account of
Shamrock, any rights of Secret arising from any such Contract (including
without limitation the right to elect to terminate in accordance with the
terms thereof upon the advice of Shamrock).
ARTICLE 2
ASSUMPTION OF OBLIGATIONS
2.1 ASSUMPTION OF OBLIGATIONS. Subject to the provisions of this
Section 2.1, Section 2.2 and Section 3.4, on the Closing Date, Shamrock shall
assume the obligations of Secret arising or to be performed on or after the
Closing Date under all Contracts, including without limitation (i) the
Contracts listed in Schedule 2.1 hereto; (ii) all Contracts for the sale of
advertising time; and (iii) all Contracts for consideration other than cash,
such as merchandise, services or promotional consideration ("Trade
Agreements"). All of the foregoing liabilities and obligations shall be
referred to herein collectively as the "Assumed Liabilities."
2.2 RETAINED LIABILITIES. Notwithstanding anything contained in this
Agreement to the contrary, Shamrock expressly does not, and shall not, assume
or agree to pay, satisfy, discharge or perform and will not be deemed by
virtue of the execution and delivery of this Agreement to have assumed or to
have agreed to pay, satisfy, discharge or perform, any liabilities,
obligations or commitments of Secret of any nature whatsoever whether
accrued, absolute, contingent or otherwise and whether or not disclosed to
Shamrock, other than the Assumed Liabilities. All of such liabilities and
obligations shall be referred to herein collectively as the "Retained
Liabilities."
ARTICLE 3
CONSIDERATION
3.1 DELIVERY OF CONSIDERATION. In exchange for the Denver Stations
Assets, in addition to the assumption of certain obligations of Secret
pursuant to Section 2.1 above, Shamrock shall, subject to Article 11 hereof,
at the Closing (as hereinafter defined) deliver to Secret: (i) the Houston
Station and (ii) $5,650,000 plus an additional amount equal to the product of
$150,000 multiplied by the number of months (including fractions thereof)
between July 31, 1996 and the earlier of the Closing or December 31, 1996, by
wire transfer of immediately available funds (collectively, the "Cash
Payment"), subject to adjustment pursuant to the provisions of Section 3.3
below and subject to the provisions of Section 4.1 hereof (collectively, the
"Exchange Price"). Shamrock will deliver the Houston Station to Secret in
accordance with the terms of an Asset Purchase Agreement among Secret,
Shamrock and
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<PAGE>
Chancellor dated the date hereof (the "Asset Purchase Agreement"), which is
being executed concurrently herewith and is attached hereto as Exhibit A.
3.2 ALLOCATION OF EXCHANGE PRICE. Secret and Chancellor mutually agree
upon the allocation of the Exchange Price among the Denver Stations Assets as
set forth on Schedule 3.2 hereto (the "Allocation"). Chancellor and Secret
agree to prepare and file all income tax returns (including, if applicable,
Form 8594) in a manner consistent with the Allocation and will not in
connection with the filing of such returns make any allocation of the
Exchange Price which is contrary to the respective Allocation. Chancellor
and Secret agree to consult with each other with respect to all issues
related to the Allocation in connection with any tax audits, controversy or
litigation.
3.3 ALLOCATIONS AND PRORATIONS.
3.3.1 For purposes of calculating the net payment to be made
pursuant to Section 3.3.2, all real property and personal property taxes with
respect to the Denver Stations Assets for the current tax year will be
prorated as of the Closing Date.
3.3.2 Allocation and proration of the items set forth in Subsection
3.3.1 above shall be made by Chancellor and a statement thereof given to
Secret within thirty (30) days after the Closing Date. Secret shall give
written notice of any objection thereto within twenty (20) days after
delivery of such statement, detailing the reason for such objection. If
timely objection is made and the parties cannot reach agreement within thirty
(30) days thereafter as to amounts claimed by one of the parties which total
at least $2,000 in the aggregate, 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). If the parties cannot agree on an accountant, each party shall
select an accounting firm, both of which shall review the apportionment and
agree on an appropriate adjustment, and payment shall be made as agreed upon
by the accounting firms. If the two accounting firms selected by the parties
are unable to resolve the matter, the two accounting firms shall select a
third firm of independent certified public accountants, which shall review
the apportionments and make a determination of an appropriate adjustment, and
whose decision will be final and binding on the parties, and whose fees and
expenses shall be borne by Chancellor and Secret in accordance with the
following sentence; provided, however, in no event shall the adjustment
resulting from such third accountant's review fall outside the range of
adjustments proposed by the accountants chosen by the parties. Payment of
the fees and expenses of all accounting firms shall be apportioned between
the parties as follows: each party shall pay an amount equal to the sum of
all fees and expenses of the accounting firm multiplied by a fraction, the
numerator of which is equal to (i) the net difference between the amount
claimed by such party and the amount owed by or awarded to such party divided
by (ii) the sum of (A) the net difference between the amount claimed by the
successful party and the amount awarded to such party, plus (B) the net
difference between the amount claimed by the unsuccessful party and the
amount awarded to the successful party. The net cash payment to Chancellor
or Secret, as the case may be, shall be
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<PAGE>
made within ten (10) days after the statement is delivered, if no timely
objection is made, or otherwise within ten (10) days after the parties reach
agreement as to all disputed amounts.
ARTICLE 4
CLOSING
4.1 CLOSING. The parties hereto intend that the consummation of the
transactions contemplated herein (the "Closing") shall occur simultaneously
with the consummation of the transactions relating to the Houston Station,
and agree to cooperate to achieve such consummations in a transaction that
qualifies as a like-kind exchange within the meaning of Section 1031 of the
Internal Revenue Code and the regulations thereunder (a "Like-Kind
Exchange"). Except as otherwise mutually agreed upon by Chancellor and
Secret and as otherwise set forth herein, the Closing shall occur within five
(5) business days after the FCC Consent has become a Final Order (as
hereinafter defined) or such other date as may be mutually agreed to by the
parties ("Closing Date"); provided, that either Secret or Chancellor may
delay the Closing until five (5) business days after such time as the FCC
Consent relating to the Houston Station has become a Final Order (as defined
in the Asset Purchase Agreement) (the "Houston Order") so long as the Closing
hereunder occurs by December 20, 1996. (A) If the Final Order or the Houston
Order is not in effect by December 20, 1996 and the Asset Purchase Agreement
has not been terminated by that date, the parties agree that the December 20,
1996 date set forth in the immediately preceding sentence shall be extended
until June 20, 1997. If both the Final Order and the Houston Order are not
in effect by June 20, 1997, the June 20, 1997 date set forth in the
immediately preceding sentence shall be extended until February 14, 1998. If
the Final Order is in effect and the Houston Order is not in effect by June
20, 1997, and the Asset Purchase Agreement has not been terminated by that
date, the June 20, 1997 date set forth in the immediately preceding sentence
shall be extended until February 14, 1998 and, at its option, Secret can
identify one or more radio stations (the "Exchange Stations") and Secret,
Chancellor and Shamrock agree to cooperate and take all actions reasonably
requested by the other in order to qualify the exchange of the Denver
Stations for the Exchange Stations as a transaction qualifying, in whole or
in part, as a Like-Kind Exchange. The election by Secret to effect a
Like-Kind Exchange shall not change the $33,400,000 effective exchange price
for the Denver Stations; however, appropriate adjustments shall be made to
such exchange price in respect of the Exchange Stations. If the Houston
Order is in effect and the Final Order is not in effect by June 20, 1997, the
June 20, 1997 date set forth in the immediately preceding sentence shall be
extended until February 14, 1998 and, at its option, Chancellor can identify
the Exchange Stations, and Secret, Chancellor and Shamrock agree to cooperate
and take all actions reasonably requested by the other in order to qualify
the exchange of the Houston Station for the Exchange Stations as a
transaction qualifying, in whole or in part, as a Like-Kind Exchange. The
election by Chancellor to effect a Like-Kind Exchange shall not change the
$27,000,000 effective exchange price for the Houston Station; however,
appropriate adjustments shall be made to the exchange price in respect of the
Exchange Stations. In no event shall both Secret and Chancellor have the
right to identify Exchange Stations. Each party shall be entitled to
reimbursement of the reasonable acquisition costs incurred by it in acquiring
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the Exchange Stations at the direction of the other party (including any
liquidated damages actually paid as a result of such party's breach or
termination of a purchase agreement at the other party's direction). (B) If
the Asset Purchase Agreement is terminated as a result of Chancellor's or
Shamrock's material breach thereof, at Secret's option, (i) Chancellor or
Shamrock shall deliver to Secret at the Closing, in lieu of the Houston
Station, $27,000,000 plus the Cash Payment by wire transfer of immediately
available funds or (ii) Secret can terminate this Agreement subject to
Secret's reservation of its rights to liquidated damages set forth in Article
17 hereof. (C) If the Asset Purchase Agreement is terminated as a result of
Secret's material breach thereof, at Chancellor's option, (i) Chancellor
shall deliver to Secret at the Closing, in lieu of the Houston Station,
$27,000,000 plus the Cash Payment by wire transfer of immediately available
funds or (ii) Chancellor can terminate this Agreement subject to Chancellor's
reservation of its rights to liquidated damages set forth in Article 17
hereof. (D) In the event that Secret is required to proceed with the Closing
on a cash basis, Chancellor will permit Secret to take any and all reasonable
steps to effectuate a deferred Like-Kind Exchange transaction as long as such
steps do not (i) relieve Secret of any of its obligations hereunder and
Secret remains fully obligated hereunder, (ii) delay the Closing, or (iii)
increase Chancellor's financial obligations hereunder. Secret agrees to
reimburse Chancellor for any reasonable costs and expenses (including
reasonable attorney's fees) incurred as a result of this accommodation to
Secret. (E) For purposes of the Agreement, "Final Order" means action by the
FCC consenting to the assignments contemplated by this Agreement which is not
reversed, stayed, enjoined, set aside, annulled or suspended, and with
respect to which action no timely request for stay, petition for rehearing,
or reconsideration, application for review or appeal is pending, and as to
which the time for filing any such request, petition or appeal or
reconsideration by the FCC on its own motion has expired. The Closing shall
be held in the offices of Chancellor Radio Broadcasting Company, 12655 North
Central Expressway, Suite 405, Dallas, Texas 75243, or at such place as the
parties hereto may agree.
ARTICLE 5
GOVERNMENTAL CONSENTS
5.1 FCC CONSENT. It is specifically understood and agreed by Chancellor
and Secret that the Closing and the assignment of the Denver Stations
Licenses and the transfer of the Denver Stations Assets are expressly
conditioned on and are subject to the prior consent and approval of the FCC
("FCC Consent").
5.2 FCC APPLICATION. Within five business days after the execution of
this Agreement or such earlier time as shall be agreed to by all of the
parties hereto, Chancellor and Secret shall file the application with the FCC
for the FCC Consent ("FCC Application"). Chancellor and Secret shall
prosecute the FCC Application with all reasonable diligence and otherwise use
their best efforts to obtain the FCC Consent as expeditiously as practicable
(but neither Chancellor nor Secret shall have any obligation to satisfy
complainants or the FCC by taking any steps which would have a material
adverse effect upon Chancellor or Secret or upon any of their Affiliates).
If the FCC Consent imposes any condition on Chancellor or Secret,
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<PAGE>
such party shall use its best efforts to comply with such condition;
provided, however, that neither Chancellor nor Secret shall be required
hereunder to comply with any condition that would have a material adverse
effect upon it or any of its Affiliates. If reconsideration or judicial
review is sought with respect to the FCC Consent, the party affected shall
vigorously oppose such efforts for reconsideration or judicial review;
provided, however, that nothing herein shall be construed to limit either
party's right to terminate this Agreement pursuant to Article 16 hereof.
5.3 FILINGS. As promptly as practicable after the execution of this
Agreement, Chancellor and Secret shall use their reasonable efforts to
obtain, and to cooperate with each other in obtaining, all authorizations,
consents, orders and approvals of any governmental authority that may be or
become necessary in connection with the consummation of the transactions
contemplated by this Agreement, and to take all reasonable actions to avoid
the entry of any order or decree by any governmental authority prohibiting
the consummation of the transactions contemplated hereby, including without
limitation, any reports or notifications that may be required to be filed by
it under the Hart-Scott Rodino Antitrust Improvements Act of 1976 (the "HSR
Act") with the Federal Trade Commission and the Antitrust Division of the
Department of Justice, and each shall furnish to one another all such
information in its possession as may be necessary for the completion of the
reports or notifications to be filed by the other.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF CHANCELLOR
Chancellor and Shamrock, jointly and severally, make the following
representations and warranties to Secret.
6.1 ORGANIZATION AND STANDING. Each of Chancellor and Shamrock is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware.
6.2 AUTHORIZATION AND BINDING OBLIGATION. Each of Chancellor and
Shamrock has all necessary corporate power and authority to enter into and
perform this Agreement and the transactions contemplated hereby, and to own
or lease the Denver Stations Assets and to carry on the business of the
Denver Stations upon the consummation of the transactions contemplated by
this Agreement. Each of Chancellor's and Shamrock's execution, delivery and
performance of this Agreement and the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action behalf of
each of Chancellor and Shamrock. This Agreement has been duly executed and
delivered by each of Chancellor and Shamrock and, assuming the due
authorization, execution and delivery of this Agreement by Secret, this
Agreement constitutes the valid and binding obligation of each of Chancellor
and Shamrock, enforceable against it in accordance with its terms, except as
limited by laws affecting creditors, rights or equitable principles generally.
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6.3 QUALIFICATION. To each of Chancellor's and Shamrock's knowledge,
there are no facts which, under the Communications Act of 1934, as amended,
or the existing rules and regulations of the FCC, would disqualify or
prohibit Chancellor or Shamrock as an assignee of the Denver Stations
Licenses.
6.4 ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS. Except as
set forth in Article 5 hereof with respect to governmental consents or
otherwise disclosed in Schedule 6.4 hereto, the execution, delivery and
performance of this Agreement by Chancellor and Shamrock: (a) do not violate
or conflict with any of the terms, conditions or provisions of the
Certificate of Incorporation or By-Laws of Chancellor or Shamrock; (b) do not
require the consent of any third party not affiliated with Chancellor or
Shamrock; (c) will not violate any applicable law, judgment, order,
injunction, decree, rule, regulation or ruling of any governmental authority
to which Chancellor or Shamrock is a party; and (d) will not, either alone or
with the giving of notice or the passage of time, or both, conflict with,
constitute grounds for termination of or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any agreement,
instrument, license or permit to which Chancellor or Shamrock is now subject.
6.5 LITIGATION: COMPLIANCE WITH LAW. There is no litigation,
administrative actions, arbitration or other proceeding, or petition,
complaint or investigation before any court or governmental body, pending
against Chancellor or Shamrock that would adversely affect Chancellor's or
Shamrock's ability to perform its obligations pursuant to this Agreement or
the agreements to be executed by Chancellor or Shamrock in connection
herewith. Neither Chancellor nor Shamrock has committed no violation of any
applicable law, regulation or ordinance or any other requirement of any
governmental body or court which would have a material adverse effect on
Chancellor or Shamrock or their respective ability to perform their
respective obligations pursuant to this Agreement or the agreements to be
executed in connection herewith.
6.6 FINANCIAL CAPACITY. Each of Chancellor and Shamrock has the
financial capacity to satisfy all of its obligations under this Agreement.
6.7 COMMISSION OR FINDER'S FEES. Neither Chancellor or Shamrock nor
any person or entity acting on behalf of Chancellor or Shamrock has agreed to
pay a commission, finder's fee or similar payment in connection with this
Agreement or any matter related hereto to any person or entity.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF SECRET
Secret hereby makes the following representations and warranties to
Chancellor and Shamrock:
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7.1 ORGANIZATION AND STANDING. Secret is a limited partnership duly
organized, validly existing and in good standing under the laws of the State
of Delaware and has the partnership power and authority to own, lease and
operate the Denver Stations Assets and to carry on the business of the Denver
Stations as now being conducted.
7.2 AUTHORIZATION AND BINDING OBLIGATION. Secret has the partnership
power and authority to enter into and perform this Agreement and the
transactions contemplated hereby, and the execution, delivery and performance
of this Agreement, and the transactions contemplated hereby have been duly
and validly authorized by all necessary action on its part. This Agreement
has been duly executed and delivered by Secret and, assuming the due
authorization, execution and delivery of this Agreement by Chancellor and
Shamrock, constitutes the valid and binding obligation of Secret enforceable
against it in accordance with its terms, except as limited by laws affecting
the enforcement of creditor's rights or equitable principles generally.
7.3 ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS. Except as
set forth in Article 5 with respect to governmental consents and as set forth
in Schedule 7.8 with respect to consents required in connection with the
assignment of certain Contracts, the execution, delivery and performance of
this Agreement by Secret: (a) will not conflict with, result in a breach of,
or constitute a violation of or default under, the provisions of Secret's
certificate of incorporation or by-laws or any applicable law, judgment,
order, injunction, decree, rule, regulation or ruling of any governmental
authority to which Secret is a party or by which Secret or any of the Denver
Stations Assets are bound; or (b) will not, either alone or with the giving
of notice or the passage of time, or both, conflict with, constitute grounds
for termination of or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any material Contract, Trade
Agreement, agreement, instrument, license or permit to which either Secret or
any of the Denver Stations Assets is now subject; other than in the case of
(a) or (b) any such conflicts, violations or defaults which would not,
individually or in the aggregate have a material adverse effect on the Denver
Stations.
7.4 COMPLIANCE WITH FCC REGULATIONS. (a) The operation of the Denver
Stations and all of the Denver Stations Assets are in compliance in all
material respects with (i) all applicable engineering standards required to
be met under applicable FCC rules, (ii) all Denver Stations Licenses and
(iii) all other applicable federal, state and local rules, regulations,
requirements and policies, including, but not limited to, equal employment
opportunity policies of the FCC, all applicable painting and lighting
requirements of the FCC and the Federal Aviation Administration and ANSI
Radiation Standards C95.1 - 1982 to the extent required to be met under
applicable FCC rules and regulations.
(b) The Denver Stations Licenses are in full force and effect and
constitute the only licenses and authorizations required from the FCC and
necessary for the operations of the Denver Stations as conducted by Secret.
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7.5 PERSONAL PROPERTY. Schedule 7.5 hereto contains a list of all
material tangible personal property and assets owned or held by Secret and used
or useful in the conduct of the business and operations of the Denver Stations.
Except as disclosed in Schedule 7.5, Secret owns and has, and following the
Closing, Shamrock will have, good and indefeasible title to all such property
(and to all other tangible personal property and assets to be transferred to
Shamrock hereunder), and none of such property is, or at the Closing will be,
subject to any material security interest, mortgage, pledge, conditional sales
agreement, lease, license, or other lien or encumbrance other than Permitted
Encumbrances (as hereinafter defined).
7.6 REAL PROPERTY.
7.6.1 Schedule 7.6 hereto contains a complete and accurate list and
description of all material real property owned and leased by Secret and used by
the Denver Stations and all agreements, leases and contracts of Secret relating
to the tower, transmitter, studio site and offices of the Denver Stations
(collectively the "Real Estate Contracts"). The Real Estate Contracts requiring
the consent of a third party to assignment are identified by an asterisk in
Schedule 7.6.
7.6.2 The Real Estate Contracts listed on Schedule 7.6 are in full
force and effect and are valid, binding and enforceable in accordance with their
terms.
7.6.3 Secret has and shall convey to Chancellor good and indefeasible
fee simple title to the owned Real Estate free and clear of any mortgages,
liens, charges and encumbrances, except the liens and encumbrances described in
Schedule 7.6 hereto and such other liens and encumbrances which, in the
aggregate, will not have a material adverse effect on the Denver Stations Assets
or the operation of the Denver Stations ("Permitted Encumbrances").
7.7 CONTRACTS. Schedule 7.7 hereto lists all material Contracts to which
Secret is a party as of the date of this Agreement. Those Contracts requiring
the consent of a third party to assignment are identified by an asterisk in
Schedule 7.7. Secret has delivered to Chancellor true and complete copies of all
written contracts listed on Schedule 7.7.
7.8 STATUS OF CONTRACTS. Except as set forth in Schedule 7.8, Secret is
not in default under any of the Contracts set forth on Schedule 7.7, except such
defaults which, in the aggregate, will not have a material adverse effect on the
Denver Stations Assets or the operation of the Denver Stations.
7.9 ENVIRONMENTAL.
(i) The real property and facilities owned, operated and leased
by Secret in the operation of the Denver Stations and the operations of the
Denver Stations thereon are in substantial compliance with all applicable
federal, state and local statutes,
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codes, rules, or regulations relating to the environment, natural resources
and public or employee health and safety ("Environmental Laws");
(ii) No judicial proceedings are pending or, to Secret's knowledge,
threatened against Secret alleging the violation of any Environmental Law
(and, to Secret's knowledge, there are no administrative proceedings
alleging the violation of any Environmental Law pending or threatened
against Secret in respect of the operation of the Denver Stations) and no
notice from any Governmental Entity or other person has been given to
Secret claiming any violation of any Environmental Laws in connection with
any real property or facility owned, operated or leased by Secret and used
in the operation of the Denver Stations, or requiring any repairs, work,
construction, alterations or installations on or in connection with any
real property or facility owned, operated or leased by Secret and used in
the operation of the Denver Stations that are needed in order to comply
with any Environmental Laws and that have not been complied with or
otherwise resolved to satisfaction of the party giving notice;
(iii) All substances, materials or wastes that are regulated by
federal, state or local government, including without limitation, any
substance, material or waste that is defined as a "hazardous waste,"
"hazardous material," "hazardous substance," "toxic waste" or "toxic
substance," under any provision of Environmental Law, used or generated by
Secret in the operation of the Denver Stations or, to Secret's knowledge,
any of its predecessors ("Hazardous Substances"), on any of the owned or
leased real property or facilities of Secret used in the operation of the
Denver Stations have been stored, used, treated, and disposed of by such
persons or on their behalf in such manner as not to result in any
Environmental Costs or Liabilities. "Environmental Costs and Liabilities"
means any losses, liabilities, obligations, damages, fines, penalties,
judgments, actions, claims, costs and expenses (including, without
limitation, reasonable fees, disbursements and expenses of legal counsel,
experts, engineers and consultants, and the costs of investigation or
feasibility studies, remedial or removal actions and cleanup activities)
arising from or under any Environmental Law, order of, or contract of
Secret with, any Governmental Entity or other person and exceeding $100,000
individually or in the aggregate; and
(iv) There are not now, nor have there been in the past, on, in
or under any real property or facilities when owned, leased or operated by
Secret in the operation of the Denver Stations or, to Secret's knowledge,
when owned, leased or operated by any of its predecessors and used in the
operation of the Denver Stations, any of the following that are in a
condition that violates any Environmental Law in any material respect or
that reasonably could be expected to require remediation under customary
broadcast industry standards: any (w) underground storage tanks,
aboveground storage tanks, dikes or impoundments, (x) asbestos containing
materials, (y) polychlorinated biphenyls or (z) radioactive substances; and
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(v) The Denver Stations's operations do not have a significant
environmental impact, as defined by 47 C.F.R. Section 1.1307.
Notwithstanding anything herein to the contrary, no representations or
warranties shall be deemed to have been made in this Section 7.9 by Secret with
respect to any "multi-tenant" facilities and the real property on which such
facilities are located where Secret or its subsidiaries or predecessors are or
were lessees and do not have any liability or responsibility for any matters
arising under Environmental Laws with respect to those portions of the multi-
tenant facilities not leased by them.
7.10 INTELLECTUAL PROPERTY. Schedule 7.10 hereto is a true and complete
list of all material Intellectual Property applied for, issued to or owned by
Secret or under which Secret is a licensee and used exclusively in the conduct
of the business and operations of the Denver Stations. To the knowledge of
Secret, the operation of the Denver Stations as now conducted does not conflict
with any valid patents, trademarks, trade names, service marks or copyrights of
others in any way which is reasonably likely to have a material adverse effect
on the Denver Stations Assets or the operation of the Denver Stations.
7.11 PERSONNEL INFORMATION. Secret has previously delivered to Chancellor
a true and complete list of all persons employed by the Denver Stations and a
list of all material compensation arrangements with such employees (other than
Employee Benefit Plans listed on Schedule 7.13). Secret is not a party to any
Contract with any labor organization, nor has Secret agreed to recognize any
union or other collective bargaining unit, nor has any union or other collective
bargaining unit been certified as representing any employees of Secret. Secret
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 Secret.
7.12 LITIGATION. Except as set forth in Schedule 7.12 hereto, Secret is
not subject to any judgment, award, order, writ, injunction, arbitration
decision or decree relating to the conduct of the business or the operation of
the Denver Stations or any of the Denver Stations Assets, and there is no
litigation, administrative action, proceeding or investigation pending or, to
the knowledge of Secret, threatened against Secret or the Denver Stations in any
federal, state or local court, or before any administrative agency or arbitrator
(including, without limitation, any proceeding which seeks the forfeiture of, or
opposes the renewal of, any of the Denver Stations Licenses), or before any
other tribunal duly authorized to resolve disputes which, if determined
adversely, will have a material adverse effect on the Denver Stations Assets or
the operation of the Denver Stations.
7.13 EMPLOYEE BENEFIT PLANS. Schedule 7.13 hereto contains a true and
complete list as of the date of this Agreement of all employee benefit plans
applicable to the employees of Secret employed at the Denver Stations ("Employee
Benefit Plans"). Secret does not maintain any other employee benefit plan as
the term is defined in Section 3 of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), applicable to the employees
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of Secret employed at the Denver Stations. None of the Employee Benefit Plans
constitutes a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA.
7.14 COMMISSIONS OR FINDER'S FEES. Neither Secret nor any person or entity
acting on behalf of Secret has agreed to pay a commission, finder's fee or
similar payment in connection with this Agreement or any matter related hereto
to any person or entity.
7.15 INSURANCE. Secret has insurance policies in full force and effect for
such amounts as are sufficient for material compliance with all requirements of
law and all agreements to which Secret is a party or by which it is bound.
7.16 FINANCIAL STATEMENTS. Secret has previously delivered to Chancellor
unaudited financial statements of the Denver Stations for the year ending
December 31, 1995. The financial statements have been prepared in accordance
with generally accepted accounting procedures applied on a consistent basis
throughout the periods covered thereby, and present fairly, in all material
respects, the financial position, the results of operations and cash flow as of
the dates and for the periods then ending, subject to normal and customary year-
end adjustments.
7.17 KNOWLEDGE. As used in this Article 7, the terms "to Secret's
knowledge and "to the knowledge of Secret" shall mean the actual knowledge of
the persons listed on Schedule 7.17.
ARTICLE 8
COVENANTS OF CHANCELLOR AND SHAMROCK
8.1 CLOSING. Subject to Article 11 hereof, on the Closing Date, Shamrock
shall acquire the Denver Stations Assets from Secret as provided in Article 1
hereof and shall assume the Assumed Liabilities of Secret as provided in Article
2 hereof.
8.2 NOTIFICATION. Chancellor and Shamrock shall notify Secret of any
litigation, arbitration or administrative proceeding pending or, to its
knowledge, threatened against Chancellor or Shamrock which challenges the
transactions contemplated hereby.
8.3 NO INCONSISTENT ACTION. Neither Chancellor nor Shamrock shall not
take any other action which is materially inconsistent with its obligations
under this Agreement.
8.4 SECRET'S POST-CLOSING ACCESS. Chancellor and Shamrock, for a period
of five (5) years following the Closing Date, shall make available during normal
business hours for audit and inspection by Secret and its representatives for
any reasonable purpose and upon reasonable notice all records, files, documents
and correspondence transferred to it hereunder with respect to taxes,
regulations, and litigations. Chancellor and Shamrock shall at no time dispose
of or destroy any such records, files, documents and correspondence without
giving
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thirty (30) days prior notice to Secret to permit Secret, at its expense,
to examine, duplicate or take possession of and title to such records, files,
documents and correspondence. All personnel records shall be maintained as
confidential if required by any applicable state or federal law.
Chancellor and Shamrock shall make available to Secret during normal
business hours upon reasonable notice in writing: (i) personnel of Chancellor
and Shamrock to assist Secret in locating and obtaining records and files with
respect to the Denver Stations for periods prior to the Closing Date; and (ii)
any personnel of Chancellor and Shamrock whose assistance or participation is
reasonably required by Secret in anticipation of, preparation for, or the
prosecution or defense of existing or future litigation, tax returns or other
matters, in which Secret is involved with respect to the Denver Stations;
provided, however, that nothing in this Section 8.4 shall obligate Chancellor
and Shamrock to take actions that would unreasonably disrupt the normal course
of its business, violate the terms of any contract or agreement to which it is a
party or to which it or any of its assets is subject or grant access to any of
its proprietary, confidential or classified information.
8.5 EMPLOYEE MATTERS. (a) Secret shall make available each Station's
personnel during normal business hours for Chancellor to interview and within
fifteen (15) days after the execution of this Agreement, Chancellor shall notify
Secret of the names of the employees whom Chancellor shall offer employment.
Secret hereby consents to Chancellor making such offers of employment subject to
the effectiveness of a Time Brokerage Agreement relating to the Stations between
the parties of even date herewith. Secret shall be responsible for all
obligations or liabilities to those employees not offered employment by
Chancellor, and Chancellor shall have no obligations with respect to those
employees.
(b) No portion of the assets of any Plan, fund, program or
arrangement, written or unwritten, heretofore sponsored or maintained by
Secret (and no amount attributable to any such plan, fund, program or
arrangement) shall be transferred to Chancellor or Shamrock, and Chancellor
and Shamrock shall not be required to continue, nor shall Chancellor and
Shamrock assume any obligation under, any such plan, fund, program or
arrangements after the Closing Date.
ARTICLE 9
COVENANTS OF SECRET
9.1 SECRET'S PRE-CLOSING COVENANTS. Secret covenants and agrees with
respect to the Denver Stations that between the date hereof and the Closing
Date, except as expressly permitted by this Agreement or with the prior written
consent of Chancellor or Shamrock, it shall act in accordance with the
following:
9.1.1 Secret shall conduct the business and operations of the Denver
Stations in the ordinary course of business.
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9.1.2 Secret shall operate the Denver Stations in all material
respects in accordance with FCC rules and regulations and the Denver Stations
Licenses and with all other laws, regulations, rules and orders.
9.1.3 Secret shall give or cause the Denver Stations to give
Chancellor and Chancellor's counsel, accountants, engineers and other
representatives, with Secret's prior consent (which consent shall not be
unreasonably withheld), full and reasonable access during normal business
hours to all of Secret's properties, books, Contracts, Trade Agreements,
reports and records including financial information and tax returns relating
to the Denver Stations, and to all real estate, buildings and equipment
relating to the Denver Stations, in order that Chancellor may have full
opportunity to make such investigation as it desires of the affairs of the
Denver Stations and to furnish Chancellor with information, and copies of all
documents and agreements including but not limited to financial and operating
data and other information concerning the financial condition, results of
operations and business of the Denver Stations, that Chancellor may
reasonably request. The rights of Chancellor under this Section shall not be
exercised in such a manner as to interfere unreasonably with the business of
the Denver Stations.
9.1.4 CONSENTS. Secret will use reasonable efforts to obtain the
third-party consents listed on Schedule 9.1.4.
9.2 NO INCONSISTENT ACTION. Secret shall not take any action which is
materially inconsistent with its obligations under this Agreement.
9.3 CLOSING COVENANT. On the Closing Date, Secret shall transfer, convey,
assign and deliver to and Shamrock the Denver Stations Assets and the Assumed
Liabilities as provided in Articles 1 and 2 of this Agreement.
ARTICLE 10
JOINT COVENANTS
Chancellor, Shamrock and Secret covenant and agree that between the date
hereof and the Closing Date, they shall act in accordance with the following:
10.1 CONFIDENTIALITY. Each of Chancellor, Shamrock and Secret shall each
keep confidential all information obtained by it with respect to the other
parties hereto in connection with this Agreement and the negotiations preceding
this Agreement, and will use such information solely in connection with the
transactions contemplated by this Agreement, and if the transactions
contemplated hereby are not consummated for any reason, each shall return to
each other party hereto, without retaining a copy thereof, any schedules,
documents or other written information obtained from such other party in
connection with this Agreement and the transactions contemplated hereby.
Notwithstanding the foregoing, no party shall be required to keep confidential
or return any information which (i) is known or available through other lawful
sources, not bound by a confidentiality agreement with the disclosing party, or
(ii) is or becomes
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publicly known through no fault of the receiving party or its agents, or
(iii) is required to be disclosed pursuant to an order or request of a
judicial or governmental authority (provided the disclosing party is given
reasonable prior notice), or (iv) is developed by the receiving party
independently of the disclosure by the disclosing party.
10.2 COOPERATION. Chancellor, Shamrock and Secret shall cooperate fully
with one another in taking any actions, including actions to obtain the required
consent of any governmental instrumentality or any third party necessary or
helpful to accomplish the transactions contemplated by this Agreement; provided,
however, that no party shall be required to take any action which would have a
material adverse effect upon it or any Affiliate.
10.3 CONTROL OF DENVER STATIONS. Chancellor and Shamrock shall not,
directly or indirectly, control or direct the operations of the Denver Stations.
Such operations, including complete control over Denver Stations programming,
employees and policies, shall be the sole responsibility of Secret.
10.4 BULK SALES LAWS. Chancellor and Shamrock hereby waives compliance by
Secret with the provisions of the "bulk sales" or similar laws of any state.
Secret agrees to indemnify Chancellor and Shamrock and hold them harmless from
any and all loss, cost, damage and expense (including but not limited to,
reasonable attorney's fees) sustained by Chancellor and Shamrock as a result of
any failure of Secret to comply with any "bulk sales" or similar laws.
10.5 PUBLIC ANNOUNCEMENTS. Neither Chancellor or Shamrock nor Secret shall
issue any press release or make any disclosure with respect to the transaction
contemplated by this Agreement without the prior written approval of the other
party, except as may be required by applicable law or by obligations pursuant to
any listing agreement with any securities exchange or any stock exchange
regulations.
ARTICLE 11
CONDITIONS OF CLOSING BY CHANCELLOR
The obligations of Chancellor and Shamrock hereunder are, at its option,
subject to satisfaction, at or prior to the Closing Date, of each of the
following conditions:
11.1 REPRESENTATIONS, WARRANTIES AND COVENANTS.
11.1.1 All representations and warranties of Secret made in this
Agreement or in any Exhibit, Schedule or document delivered pursuant hereto,
shall be true and complete as of the date hereof and on and as of the Closing
Date as if made on and as of that date, except for changes expressly permitted
or contemplated by the terms of this Agreement and for such breaches of
representations and warranties that, in the aggregate, will not have a material
adverse effect on the Denver Stations Assets or the operation of the Denver
Stations.
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11.1.2 All of the terms, covenants and conditions to be complied with
and performed by Secret on or prior to the Closing Date shall have been complied
with or performed in all material respects.
11.1.3 Chancellor shall have received a certificate, dated as of the
Closing Date, from Secret, executed by an officer of Secret to the effect that
the conditions set forth in Sections 11.1.1 and 11.1.2 have been fulfilled.
11.2 GOVERNMENTAL CONSENTS. The conditions specified in Section 5.1 of
this Agreement shall have been satisfied.
11.3 ADVERSE PROCEEDINGS. No order, decree or judgment of any court,
agency or other governmental authority shall have been rendered against any
party hereto which would render it unlawful, as of the Closing Date, to effect
the transactions contemplated by this Agreement in accordance with its terms.
11.4 CLOSING DOCUMENTS. Secret shall have delivered or caused to be
delivered to Shamrock, on the Closing Date, all deeds, bills of sale,
endorsements, assignments and other instruments of conveyance and transfer
consistent with the terms hereof and otherwise reasonably satisfactory in
form and substance to Shamrock, effecting the sale, transfer, assignment and
conveyance of the Denver Stations Assets to Shamrock, including, without
limitation, each of the documents required to be delivered pursuant to
Article 14.
11.5 PRE-MERGER NOTIFICATION. Any waiting period under the HSR Act with
respect to the transactions contemplated by this Agreement shall have elapsed.
ARTICLE 12
CONDITIONS OF CLOSING BY SECRET
The obligations of Secret hereunder are, at its option, subject to
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
12.1 REPRESENTATIONS, WARRANTIES AND COVENANTS.
12.1.1 All representations and warranties of Chancellor and Shamrock
shall be true and complete on and as of the Closing Date, except for changes
expressly permitted or contemplated by the terms of this Agreement and for such
breaches of representations and warranties that, in the aggregate, will not have
a material adverse effect on the ability of Chancellor and Shamrock to discharge
their obligations hereunder.
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12.1.2 All the terms, covenants and conditions to be complied with
and performed by Chancellor and Shamrock on or prior to the Closing Date shall
have been complied with or performed in all material respects.
12.1.3 Secret shall have received a certificate, dated as of the
Closing Date, executed by an officer of Chancellor and Shamrock, to the effect
that the conditions set forth in Sections 12.1.1 and 12.1.2 have been satisfied
on and as of the Closing Date.
12.2 GOVERNMENTAL CONSENTS. The conditions specified in Section 5.1 of
this Agreement shall have been satisfied. For purposes of this Section 12.2,
the condition specified in Section 5.1 shall be deemed to be satisfied whether
or not the FCC Consent has become a Final Order, unless a petition to deny has
been filed against the FCC assignment applications for the proposed transaction.
12.3 ADVERSE PROCEEDINGS. No order, decree or judgment of any court,
agency or other governmental authority shall have been rendered against any
party hereto which would render it unlawful, as of the Closing Date, to effect
the transactions contemplated by this Agreement in accordance with its terms.
ARTICLE 13
TRANSFER TAXES: FEES AND EXPENSES
13.1 EXPENSES. Except as set forth in Sections 13.2, 13.3 and 16.2 hereof,
each party hereto shall be solely responsible for all costs and expense incurred
by it in connection with the negotiation, preparation and performance of and
compliance with the terms of this Agreement, including, but not limited to, the
costs and expenses incurred pursuant to Article 5 hereof.
13.2 TRANSFER TAXES AND SIMILAR CHARGES. All costs of transferring the
Denver Stations Assets in accordance with this Agreement, including recordation,
transfer and documentary taxes and fees, and any excise, sales or use taxes,
shall be borne by Chancellor or Shamrock.
13.3 GOVERNMENTAL FILING OR GRANT FEES. Any filing or grant fees imposed
by any governmental authority the consent of which is required for the
consummation of the transactions contemplated hereby shall be borne by
Chancellor or Shamrock.
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ARTICLE 14
DOCUMENTS TO BE DELIVERED AT CLOSING
14.1 SECRET'S DOCUMENTS. At the Closing, Secret shall deliver or cause to
be delivered to Chancellor or Shamrock the following:
14.1.1 Certified resolutions of the Board of Directors of Secret
approving the execution and delivery of this Agreement and each of the other
documents and authorizing the consummation of the transactions contemplated
hereby and thereby;
14.1.2 Certificates, dated the Closing Date, by Secret in the form
described in Section 11.1.3; and
14.1.3 Bills of Sale, assignments and other good and sufficient
instruments of conveyance, transfer and assignment, all in form and substance
consistent with the terms hereof and otherwise reasonably satisfactory to
Shamrock, as shall be effective to vest in Shamrock or its permitted assignees,
good and marketable title in and to the Denver Stations Assets transferred
pursuant to this Agreement in accordance with the terms of this Agreement.
14.1.4 The consents listed on Schedule 9.1.4.
14.1.5 A legal opinion of counsel for Secret in form and substance
reasonably satisfactory to Chancellor.
14.2 CHANCELLOR'S AND SHAMROCK'S DOCUMENTS. At the Closing, Chancellor
shall deliver or cause to be delivered to Secret the following:
14.2.1 The Exchange Price in accordance with Section 3.1 hereof;
14.2.2 A certificate, dated the Closing Date, by Chancellor and
Shamrock in the form described in Section 12.1.3;
14.2.3 Long-Form Certificate of Good Standing (including tax
certification) of Chancellor and Shamrock and certified charter of Chancellor
from the State of Delaware dated not more than forty-five (45) days before the
Closing Date;
14.2.4 An assignment and assumption agreement or agreements
reasonably satisfactory in form and substance to counsel to Secret effecting
the assumption of the Assumed Liabilities; and
14.2.5 Certified resolutions of the Board of Directors of Chancellor
and Shamrock approving the execution and delivery of this Agreement and each of
the other documents and agreements referred to herein and authorizing the
consummation of the transactions contemplated hereby and thereby.
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14.2.6 A legal opinion of counsel for Chancellor in form and substance
reasonably satisfactory to Secret.
14.3 DENVER STATIONS ASSETS. At the Closing, Secret will put Shamrock into
full possession and control of the Denver Stations Assets.
ARTICLE 15
INDEMNIFICATION
15.1 INDEMNIFICATION BY SECRET. Secret hereby agrees to indemnify, defend
and hold harmless Chancellor and Shamrock, with respect to any and all demands,
claims, actions, suits, proceedings, assessments, judgments, costs, losses,
damages, liabilities and expenses (including, without limitation, interest,
penalties, court costs and reasonable attorneys' fees) ("Damages") asserted
against, resulting from, imposed upon or incurred by Chancellor and Shamrock
directly or indirectly relating to or arising out of:
15.1.1 The breach by Secret of any of its representations or warranties,
or failure by Secret to perform any covenants or agreements of Secret, set forth
in this Agreement or in any certificate, or in any document or schedule
delivered hereunder;
15.1.2 The Retained Liabilities;
15.1.3 The use or ownership of the Denver Stations Assets or operation
of the Denver Stations prior to the Closing Date; and
15.1.4 A claim by any person or entity based on any arrangement or
agreement to pay a commission, finder's fee or similar payment in connection
with this Agreement made or alleged to have been made by Secret.
15.2 INDEMNIFICATION BY CHANCELLOR. Chancellor and Shamrock, jointly and
severally, hereby agree to indemnify, defend and hold harmless Secret with
respect to any and all Damages asserted against, resulting from, imposed upon or
incurred by Secret directly or indirectly relating to or arising out of:
15.2.1 The breach by Chancellor or Shamrock of any of their
representations or warranties, or failure by Chancellor or Shamrock to perform
any covenants or agreements of Chancellor or Shamrock set forth in this
Agreement;
15.2.2 The Assumed Liabilities;
15.2.3 The use or ownership of the Denver Stations Assets or operation
of the Denver Stations after the Closing Date; and
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15.2.4 A claim by any person or entity based on any arrangement or
agreement to pay a commission, finder's fee or similar payment in connection
with this Agreement made or alleged to have been made by Chancellor or
Shamrock.
15.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained herein shall survive the Closing and remain in full force
and effect for nine months after the Closing Date. Any claim for
indemnification with respect to any of such matters which is not asserted by
notice given as herein provided which specifically identifies a particular
breach and the underlying facts and Damages relating thereto within such
specified period of survival may not be pursued and is hereby irrevocably waived
after such time.
15.4 PROCEDURES.
15.4.1 Promptly (within ten days) after the receipt by any party (the
"Indemnified Party") of notice of (a) any claim or (b) the commencement of any
action or proceeding which may entitle such party to indemnification under this
Article 15, such party shall give the party from whom indemnification may be
sought (the "Indemnifying Party") written notice of such claim or the
commencement of such action or proceeding and shall permit the Indemnifying
Party to assume the defense of any such claim or any litigation resulting from
such claim.
15.4.2 If the Indemnifying Party assumes the defense of any such claim
or litigation resulting therefrom with counsel reasonably acceptable to the
Indemnified Party, the obligations of the Indemnifying Party as to such claim
shall be limited to taking all steps necessary in the defense or settlement of
such claim or litigation resulting therefrom and to holding the Indemnified
Party harmless from and against any losses, damages and liabilities caused by or
arising out of any settlement approved by the Indemnifying Party or any judgment
in connection with such claim or litigation resulting therefrom; however, the
Indemnified Party may participate, at its expense, in the defense of such claim
or litigation provided that the Indemnifying Party shall direct and control the
defense of such claim or litigation. The Indemnified Party shall cooperate and
make available all books and records reasonably necessary and useful in
connection with the defense. The Indemnifying Party shall not, in the defense
of such claim or any litigation resulting therefrom, consent to entry of any
judgment, except with the written consent of the Indemnified Party, or enter
into any settlement, except with the written consent of the Indemnified Party.
Any settlement must include as an unconditional term thereof the giving by the
claimant or the plaintiff to the Indemnified Party of a release from all
liability in respect of such claim or litigation.
15.4.3 If the Indemnifying Party shall not assume the defense of any
such claim or litigation resulting therefrom, the Indemnified Party may, but
shall have no obligation to, defend against such claim or litigation in such
manner as it may deem appropriate, and the Indemnified Party may compromise or
settle such claim or litigation without the Indemnifying Party's consent. The
Indemnifying Party shall promptly reimburse the Indemnified Party for the amount
of all expenses, legal or otherwise, incurred by the Indemnified Party in
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connection with the defense against or settlement of such claim or litigation.
If no settlement of the claim or litigation is made, the Indemnifying Party
shall promptly reimburse the Indemnified Party for the amount of any judgment
rendered with respect to such claim or in such litigation and of all expenses,
legal or otherwise, incurred by the Indemnified Party in the defense against
such claim or litigation.
15.5 LIMITS ON AND CONDITIONS OF INDEMNIFICATION.
15.5.1 THRESHOLD AMOUNT: CAP.
Notwithstanding any other provision hereof, no Indemnified Party shall be
entitled to make a claim against an Indemnifying Party in respect of any breach
of a representation or warranty under Sections 15.1.1 or 15.2.1 except to the
extent that the aggregate amount of such Damages exceeds the amount of $118,400
(the "Threshold Amount"); provided, however, that once such aggregate has been
exceeded, such Indemnifying Party shall only be liable for the amount that such
Damages exceed the Threshold Amount. Notwithstanding any other provision of
this Agreement, neither the indemnity obligation of Secret under Section 15.1
nor the indemnity obligation of Chancellor under Section 15.2 will exceed
$1,600,000.
15.5.2 ASSIGNMENT OF CLAIMS. In the event that any of the Damages for
which an Indemnifying Party is responsible or allegedly responsible hereunder
are recoverable or potentially recoverable against any third party at the time
when payment is due under this Article 15, then, the Indemnified Party shall
assign any and all rights that it may have that are related in any fashion to
the Damages or the facts or circumstances giving rise thereto to the
Indemnifying Party as a condition to any payment due under this Article 15, or,
if such rights are not assignable under applicable law or otherwise, the
Indemnified Party hereunder shall attempt in good faith to collect any and all
damages and losses on account thereof from such third party for the benefit of,
and at the expense and direction of, the Indemnifying Party.
15.5.3 INDEMNITY PAYMENTS. The parties agree that any payments made
pursuant to this Article 15 will be treated by the parties on all applicable tax
returns as an adjustment to the purchase price payable hereunder.
15.5.4 EXCLUSIVE REMEDY POST-CLOSING. As between Secret, on the one
hand, and Chancellor, on the other hand, after the Closing, the rights and
obligations set forth in this Article 15 will be the exclusive rights and
obligations with respect to this Agreement, the events giving rise to this
Agreement and the transaction provided for herein or contemplated thereby.
Without limiting the generality or effect of the foregoing, as a material
inducement to the other parties hereto entering into this Agreement, each of the
parties to this Agreement hereby (i) waives any claim or cause of action which
it otherwise might assert, including without limitation under the common law or
federal or state securities, trade regulation or other laws, by reason of this
Agreement, the event giving rise to this Agreement and the transactions provided
for herein or contemplated hereby or thereby, except for claims or causes of
action brought under and subject to the terms and conditions of this Article 15
and (ii) agrees that, regardless of the foregoing provisions, no party will have
any liability in respect of any
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claim or cause of action that is or may be brought except in respect of
damages, and then only to the extent expressly provided in this Article 15.
Nothing contained in this Section 15.5.4 shall preclude any party hereto from
obtaining the remedies set forth in Section 17.1 of this Agreement in the
event this Agreement is terminated.
ARTICLE 16
TERMINATION RIGHTS
16.1 TERMINATION. This Agreement may be terminated at any time prior to
Closing as follows:
(a) by written notice of Chancellor to Secret if Secret breaches in any
material respect any of its representations or warranties or defaults in any
material respect in the observance or in the due and timely performance of any
of its covenants or agreements herein contained and such breach or default shall
not be cured within thirty (30) days of the date of notice of breach or default
served by Chancellor or by written notice of Secret to the Chancellor if
Chancellor or Shamrock breaches in any material respect any of its
representations or warranties or defaults in any material respect in the
observance or in the due and timely performance of any of its covenants or
agreements herein contained and such breach or default shall not be cured within
thirty (30) days of the date of notice of breach or default served by Secret; or
(b) by written notice of Chancellor to Secret, or by Secret to
Chancellor, if the FCC denies the FCC Application or designates it for a trial-
type hearing; or
(c) by written notice of Chancellor to Secret, or by Secret to
Chancellor, if there shall be in effect any judgment, final decree or order that
would prevent or make unlawful the consummation of the transactions contemplated
by this Agreement;
(d) by written notice of Chancellor to Secret, or by Secret to
the Chancellor, if the Closing shall not have been consummated on or before
February 14, 1998.
(e) by written notice of Secret to Chancellor pursuant to
Section 4.1(B) hereof; or
(f) by written notice of Chancellor to Secret pursuant to
Section 4.1(C) hereof.
Notwithstanding the foregoing, no party hereto may effect a termination hereof
if such party is in material default or breach of this Agreement.
16.2 SCHEDULES. Secret will deliver to Shamrock, within 10 days
immediately following the date of this Agreement, all schedules required to be
delivered under this
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<PAGE>
Agreement and certain financial information requested by Shamrock. Shamrock
shall be permitted, for a period of 10 days immediately following its receipt
of such schedules and information, to terminate this Agreement if it is not
satisfied with such schedules and information in its reasonable judgment
exercised in good faith. Following such termination, the parties shall have
no further obligation to one another in respect of this Agreement.
ARTICLE 17
MISCELLANEOUS PROVISIONS
17.1 LIQUIDATED DAMAGES: SPECIFIC PERFORMANCE.
(a) In the event this Agreement is terminated as a result of Chancellor's
or Shamrock's breach of this Agreement, Secret shall be entitled to (i) receive
$1,600,000 from Chancellor, which amount shall constitute liquidated damages or
(ii) subject to Section 17.1(b) below, obtain specific performance of the terms
of this Agreement. In the event this Agreement is terminated as a result of
Secret's breach of this Agreement, Chancellor shall be entitled to (i) receive
$1,600,000 from Secret, which amount shall constitute liquidated damages or (ii)
obtain specific performance of the terms of this Agreement. In the event this
Agreement is terminated pursuant to Section 16.1(e) above, Secret shall be
entitled to receive $1,600,000 from Chancellor, which amount shall constitute
liquidated damages. In the event this Agreement is terminated pursuant to
Section 16.1(f) above, Chancellor shall be entitled to receive $1,600,000 from
Secret, which amount shall constitute liquidated damages. It is understood and
agreed that such liquidated damage amount represents Chancellor's, Shamrock's
and Secret's reasonable estimate of actual damages and does not constitute a
penalty. Except as set forth in this Section 17.1, recovery of liquidated
damages shall be the sole and exclusive remedy of Secret against Chancellor and
of Chancellor and Shamrock against Secret for failing to consummate this
Agreement on the Closing Date and shall be applicable regardless of the actual
amount of damages sustained and, subject to this Section 17.1, all other
remedies are deemed waived by each of Chancellor, Shamrock and Secret, except
the right of either party to sue the other party for failure to pay the
liquidated damages.
(b) The parties hereto agree that in the event Chancellor seeks to enforce
its right to specific performance in accordance with this Section 17.1, Secret
shall then be entitled to obtain specific performance of the terms of this
Agreement. In the event of a default by either Chancellor or Secret which
results in the filing of a lawsuit for liquidated damages or specific
performance, the successful party in such lawsuit shall be entitled to
reimbursement by the unsuccessful party of reasonable legal fees and expenses
incurred by the successful party.
17.2 CERTAIN INTERPRETIVE MATTERS AND DEFINITIONS. Unless the
context otherwise requires, (i) all references to Sections, Articles or
Schedules are to Sections, Articles or Schedules of or to this Agreement,
(ii) each term defined in this Agreement has the meaning assigned to it, (iii)
each accounting term not otherwise defined in this Agreement has the
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meaning assigned to it in accordance with generally accepted accounting
principles as in effect on the date hereof, (iv) "or" is disjunctive but not
necessarily exclusive, (v) words in the singular include the plural and VICE
VERSA, and (vi) the term "Affiliate" has the meaning given it in Rule 12b-2
of Regulation 12B under the Securities Exchange Act of 1934, as amended. All
references to "$" or dollar amounts will be to lawful currency of the United
States of America.
17.3 FURTHER ASSURANCES. After the Closing, Secret shall from time to
time, at the request of and without further cost or expense to Chancellor and
Shamrock, execute and deliver such other instruments of conveyance and transfer
and take such other actions as may reasonably be requested in order to more
effectively consummate the transactions contemplated hereby to vest in Shamrock
good and marketable title to the assets being transferred hereunder, and
Chancellor and Shamrock shall from time to time, at the request of and without
further cost or expense to Secret, execute and deliver such other instruments
and take such other actions as may reasonably be requested in order to more
effectively relieve Secret of any obligations being assumed by Shamrock
hereunder.
17.4 BENEFIT AND ASSIGNMENT. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. No party may voluntarily or involuntarily assign its
interest under this Agreement without the prior written consent of the other
parties hereto, except for any assignment to an Affiliate of Chancellor or
Secret in which case Chancellor or Secret, as appropriate, shall remain fully
obligated under this Agreement as an assignor.
17.5 AMENDMENTS. No amendment, waiver of compliance with any provision or
condition hereof or consent pursuant to this Agreement shall be effective unless
evidenced by an instrument in writing signed by the party against whom
enforcement of any waiver, amendment, change, extension or discharge is sought.
17.6 HEADINGS. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
17.7 GOVERNING LAW. The construction and performance of this Agreement
shall be governed by the laws of the State of Delaware without giving effect to
the choice of law provisions thereof.
17.8 NOTICES. Any notice, demand or request required or permitted to be
given under the provisions of this Agreement shall be in writing, including by
telecopy, and shall be deemed to have been duly delivered and received on the
date of personal delivery, on the third day after deposit in the U.S. mail if
mailed by registered or certified mail, postage prepaid and return receipt
requested, on the day after delivery to a nationally recognized overnight
courier service if sent by an overnight delivery service for next morning
delivery or when dispatched by facsimile transmission and shall be addressed to
the following addresses, or to such other
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<PAGE>
address as any party may request, in the case of Secret, by notifying
Chancellor, and in the case of Chancellor, by notifying Secret:
To Chancellor: Chancellor Radio Broadcasting Company
or Shamrock 12655 North Central Expressway
Suite 405
Dallas, Texas 75243
Attention: Steven Dinetz
Fax: (214) 239-0220
Copy to: Matthew L. Leibowitz
Leibowitz & Associates, P.A.
One S.E. Third Avenue, Suite 1450
Miami, Florida 33131
Fax: (305) 530-9417
To Secret: Secret Communications, L.P.
312 Walnut Street
Suite 3550
Cincinnati, Ohio 45202
Attn: Frank E. Wood
Fax: (513) 621-3299
Copy to: Frost & Jacobs
2500 PNC Center
201 East Fifth Street
Cincinnati, OH 45202
Attention: Neil Ganulin
Fax: (513) 651-6981
Secret Communications
c/o Lane Industries
1200 Shermer Road
Northbrook, IL 60062
Attention: Arthur J. Schiller
Fax: (708) 498-2104
17.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
17.10 NO THIRD PARTY BENEFICIARIES. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give to any person
or entity other than the
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parties hereto and their successors or permitted assigns, any rights or
remedies under or by reason of this Agreement.
17.11 SEVERABILITY. The parties agree that if one or more provisions
contained in this Agreement shall be deemed or held to be invalid, illegal or
unenforceable in any respect under any applicable law, this Agreement shall be
construed with the invalid, illegal or unenforceable provision deleted, and the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected or impaired thereby.
17.12 SOLICITATION OF EMPLOYEES. During the period from the Closing
Date through the third anniversary thereof, Secret will not initiate contact
with any employee of Shamrock in the Denver, Colorado market for the purpose of
soliciting, hiring, attempting to hire or in any manner attempting to induce
such employee to leave the employment of Shamrock to be employed in any capacity
with Secret.
17.13 UNDERTAKING. Chancellor hereby agrees to cause Shamrock to
perform all of its obligations under this Agreement and hereby guarantees the
performance of such obligations by Shamrock.
17.14 ENTIRE AGREEMENT. This Agreement and the exhibits hereto embody
the entire agreement and understanding of the parties hereto and supersede any
and all prior agreements, arrangements and understandings relating to the
matters provided for herein.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
CHANCELLOR BROADCASTING COMPANY
By: /s/ STEVEN DINETZ
-------------------------------
Steven Dinetz
President
SHAMROCK BROADCASTING, INC.
By: /s/ STEVEN DINETZ
-------------------------------
Steven Dinetz
President
SECRET COMMUNICATIONS, L.P.
By: /s/ FRANK E. WOOD
-------------------------------
Frank E. Wood
President & CEO
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<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is entered into effective
as of February 14, 1996, between Chancellor Broadcasting Company, a Delaware
corporation (the "Company"), Chancellor Radio Broadcasting Company, a Delaware
corporation (the "Broadcasting Subsidiary"), and Steven Dinetz (the "EMPLOYEE)";
W I T N E S S E T H:
WHEREAS, the Company and the Broadcasting Subsidiary desire to employ
Employee, and Employee desires to be employed by the Company and the
Broadcasting Subsidiary, in accordance with the terms and conditions set forth
herein;
WHEREAS, the Broadcasting Subsidiary has entered into a Stock Purchase
Agreement dated as of August 3, 1995, pursuant to which the Broadcasting
Subsidiary is to acquire all of the capital stock of Trefoil Communications,
Inc. (the "Acquisition" and the date on which the Acquisition is consummated
being the "Acquisition Date");
WHEREAS, Employee is currently employed by Chancellor pursuant to an
Employment Agreement dated as of October 12, 1994 (the "ORIGINAL EMPLOYMENT
AGREEMENT");
NOW, THEREFORE, subject to the consummation of the Acquisition (it
being understood and agreed that if the Acquisition shall not have been
consummated on or before February 29, 1996, this Agreement shall be void and of
no force and effect, AB INITIO) the Company, the Broadcasting Subsidiary and the
Employee hereby agree as follows:
1. EMPLOYMENT. The Company and the Broadcasting Subsidiary hereby
employ Employee for the Employment Period specified in Section 2 below in the
capacity of President and Chief Executive Officer or such other comparable
management position or positions as designated by the Board of Directors of the
Company (the "BOARD OF DIRECTORS") from time to time. The Employee hereby
accepts such employment and, unless otherwise agreed to by the Board of
Directors, agrees to devote his full business time and efforts to the
performance of his duties hereunder and as an employee of the Company and the
Broadcasting Subsidiary or their respective subsidiaries, as directed by the
Board of Directors; provided, however, that nothing contained in this Section 1
shall be construed to prevent the Employee from
<PAGE>
devoting a reasonable amount of time to personal business and civic
activities. Subject to approval by the Board of Directors, Employee shall be
responsible for supervising the day-to-day operations of the Company and the
Broadcasting Subsidiary, and in such capacity his duties shall include,
without limitation, (a) preparing an annual budget, business plan, and
financial projections, all in reasonable detail and setting forth the
principal assumptions upon which such information was based; (b) hiring,
firing, and managing the performance of all employees of the Company, the
Broadcasting Subsidiary and their subsidiaries; (c) directing matters
relating to public relations and promotions of the Company's and the
Broadcasting Subsidiary's radio stations; (d) establishing a programming
format for the Company's and the Broadcasting Subsidiary's radio stations;
(e) establishing a pricing policy for advertising; (f) ensuring compliance
with all applicable laws, including but not limited to the rules and
regulations of the Federal Communications Commission; and (g) signing checks
and entering into agreements in the ordinary course of business.
2. EMPLOYMENT PERIOD. The period of the Employee's employment under this
Agreement (the "EMPLOYMENT PERIOD") shall commence on the date of the
Acquisition and shall end upon the earliest of (i) the attainment of age 65 by
the Employee, (ii) the termination of this Agreement as contemplated by Section
6 below and (iii) December 31, 2000; provided, however, that unless the Company
or the Employee gives the other written notice to the contrary not more than 90
days and not less than 30 days prior to December 31 of each year, commencing
December 31, 1996, the term of this Agreement automatically shall be extended so
that, as of each December 31, the remaining term of this Agreement, subject to
clauses (i) and (ii) above, shall be five years.
3. COMPENSATION. As compensation for all services rendered and to be
rendered pursuant to this Agreement, the Company and the Broadcasting Subsidiary
agree to pay Employee:
(i) a base salary (pro rata for any partial year) at the rate of
$500,000 per year (the "BASE SALARY"); and
(ii) an annual bonus of up to $200,000 for each fiscal year of the
Company subsequent to 1995 calculated based upon criteria established by the
Board of Directors at the beginning of each fiscal year and adjusted from time
to time to reflect acquisitions or dispositions of the
2
<PAGE>
Company's and the Broadcasting Subsidiary's assets (the "BONUS").
The Base Salary, when payable pursuant to the terms hereof, shall be
payable in semi-monthly installments in accordance with the payroll practices of
the Company and the Broadcasting Subsidiary as in effect from time to time. The
Bonuses, when payable pursuant to the terms hereof, shall be payable within
ninety days after the end of the applicable periods. To the extent the Company
and the Broadcasting Subsidiary desire, the amounts payable under this Agreement
may be paid by one or more subsidiaries of the Company or the Broadcasting
Subsidiary. The party making such payment shall have the right to deduct from
any compensation and other amounts paid under this Agreement all taxes and other
amounts which may be required to be deducted or withheld by law (including, but
not limited to, income tax withholding and social security payments), whether
such laws are now in effect or become effective after the date of this
Agreement.
Notwithstanding anything herein to the contrary, on December 31, 1996, and
on each December 31 thereafter during the term of this Agreement (each an
"Adjustment Date"), the Base Salary for the next succeeding year shall be
adjusted to be equal to (i) the amount of the Base Salary in effect for the year
ended on such Adjustment Date multiplied by (ii) a fraction (A) the numerator of
which shall be equal to the Consumer Price Index for all Urban Consumers, U.S.
City Average, for All Items (1982-84 = 100), as published in the Bureau of Labor
Statistics of the Department of Labor (the "CPI") and as reflected in the most
recent such publication prior to the Adjustment Date and (B) the denominator of
which shall be equal to the CPI as reflected in the most recent such publication
prior to the immediately preceding Adjustment Date, or in the case of the
initial Adjustment Date, as reflected in the most recent such publication prior
to the date of this Agreement; PROVIDED that the Base Salary shall in no event
be less than $500,000 per year.
4. BUSINESS EXPENSES. The Company and the Broadcasting Subsidiary shall
reimburse Employee for all reasonable and necessary business expenses incurred
by Employee on behalf of or for the benefit of the Company, the Broadcasting
Subsidiary or their radio stations, upon presentation of proof of such expenses.
Such expenses may include, but shall not necessarily be limited to, the
following: use of a luxury automobile (and attendant costs), travel and
entertainment, promotions, professional or industry licenses and membership fees
and attendance at conventions. Employee agrees to comply with all Internal
3
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Revenue Service regulations relating to documentation of such expenses. In the
event of termination of Employee's employment hereunder for any reason, Employee
shall have the right to use such luxury automobile for thirty (30) days
following termination.
5. EMPLOYMENT BENEFITS. During the Employment Period, Employee shall be
entitled to participate, at the Company's and the Broadcasting Subsidiary's
expense (subject to any employee contribution requirements applicable to
employees generally) in all employee benefit programs maintained by the Company
and/or the Broadcasting Subsidiary, which shall include a major medical policy
for Employee and his dependents that shall provide disability insurance of not
less than $5,000 per month with no more than a 30-day waiting period. In
addition, during the Employment Period, the Company and the Broadcasting
Subsidiary will reimburse Employee for the premium cost of a term life insurance
policy for the benefit of Employee's beneficiary or beneficiaries with a death
benefit of not less than $1,000,000.
6. TERMINATION OF EMPLOYMENT. (a) The Employment Period shall terminate
on the fifth anniversary of the Acquisition Date (the "BASE TERM") unless
earlier terminated pursuant to any, singularly or in combination, of the
following provisions in this Section 6.
(b) The Employment Period may be terminated at any time by the Company and
the Broadcasting Subsidiary by written notice to the Employee. Notwithstanding
anything to the contrary contained herein, if such termination is with Cause (as
defined below), all of the Employee's rights to compensation and other rights
under Sections 3, 4 and 5 above shall terminate upon such termination, except
the right to payment for amounts accrued in respect of periods prior to such
termination, which amounts, if any, shall be paid in a lump sum. If such
termination is with Financial Cause (as defined below) (but without Cause), the
Company and the Broadcasting Subsidiary shall pay to the Employee, in monthly
installments equal to Employee's monthly Base Salary at the time of termination,
an amount equal to (x) any amounts accrued in respect of periods prior to such
termination plus (y) one years' Base Salary. If such termination is without
Cause or Financial Cause, the Company and the Broadcasting Subsidiary shall pay
to the Employee, in a lump sum, an amount equal to (x) any amounts accrued in
respect of periods prior to such termination plus (y) his aggregate Base Salary
for two years from the date of termination. "CAUSE" shall mean (i) fraud,
dishonesty,
4
<PAGE>
unethical practices or gross misconduct in office on the part of the
Employee, (ii) a material breach by the Employee of any of his obligations
hereunder which is not cured within 30 days after written notice from the
Company to Employee, (iii) a material failure to perform Employee's duties as
an employee of the Company, the Broadcasting Subsidiary or any of their
subsidiaries, as determined by the Board of Directors, which failure is not
cured within 60 days after written notice from the Board of Directors to
Employee, or (iv) conviction of the Employee for fraud, misappropriation,
embezzlement or any felony. "FINANCIAL CAUSE" shall mean (i) that either (A)
the Company, the Broadcasting Subsidiary or any of their subsidiaries shall
violate any financial covenant contained in any debt instrument or agreement
to which the Company, the Broadcasting Subsidiary or any of its subsidiaries
is a party or by which it may be bound or (B) the Employee shall act or fail
to act with respect to a matter for which Employee is directly responsible,
in either case with the result that such violation, action, or failure to act
(x) results in the acceleration of the maturity of any debt of the Company,
the Broadcasting Subsidiary or any of their subsidiaries or (y) enables (or,
with the giving of notice or lapse of time or both, would enable) the holder
or holders of such debt to accelerate the maturity thereof and such
violation, action or failure to act remains uncured for a period of 91
consecutive days, or (ii) the Company or the Broadcasting Subsidiary shall
fail to meet at least 90% of its budgeted operating income, as approved by
the Board of Directors, for two consecutive fiscal years.
(c) The Employment Period may be terminated at any time by the Employee
for Good Reason (as defined below) by written notice to the Company and the
Broadcasting Subsidiary. "GOOD REASON" shall mean: (i) any change in the
Employee's functions, duties or responsibilities from his position on the
Employment Date without Employee's consent if such change would (A) reduce the
Employee's functions, duties, or responsibilities from those in effect on the
Employment Date or the date of amendment, whichever is applicable, to a level
that is not commensurate with those of an executive in the Employee's position
prior to such change (it being understood that the reassignment of any of
Employee's functions, duties, or responsibilities (other than those customarily
performed by a chief executive officer of a business of comparable size and
complexity) to one or more other persons who report directly or indirectly to
Employee shall not be considered a reduction of Employee's functions, duties or
responsibilities), or (B) cause the Employee's position with the Company and the
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<PAGE>
Broadcasting Subsidiary to become one of lesser importance or scope; and (ii)
any material breach of this Agreement by the Company or the Broadcasting
Subsidiary which is not cured within 30 days after written notice from Employee
to the Company and the Broadcasting Subsidiary. If the Employment Period is
terminated by the Employee for Good Reason, the Company and the Broadcasting
Subsidiary shall pay to the Employee, in monthly installments equal to
Employee's monthly Base Salary at the time of termination, the same amount
Employee would have been paid had the Company and the Broadcasting Subsidiary
terminated his employment without Cause or Financial Cause. If Employee
voluntarily terminates his employment without Good Reason, all his rights to
compensation and other rights under Sections 3, 4 and 5 shall terminate
immediately.
(d) If Employee shall die during the Employment Period, the Employment
Period shall terminate, and the Company and the Broadcasting Subsidiary shall
pay, in monthly installments equal to Employee's monthly Base Salary at the time
of termination, to any beneficiary or beneficiaries designated by the Employee
in writing or, if none, to his estate or legal representative an amount equal to
(x) any amounts accrued in respect of periods prior to Employee's death plus (y)
six months' Base Salary.
(e) If Employee is unable to discharge his duties hereunder for a period
of six consecutive months, or for a total of six months in any 12-month period,
by reason of physical or mental illness, injury or incapacity, the Company and
the Broadcasting Subsidiary may, by written notice to Employee, terminate the
Employment Period. In such case, the Company and the Broadcasting Subsidiary
shall pay to the Employee, in monthly installments equal to Employee's monthly
Base Salary at the time of termination, an amount equal to (x) any amounts
accrued in respect of periods prior to Employee's death plus (y) six months'
Base Salary less (z) the amount of any and all proceeds received or receivable
by the Employee from any disability insurance policies maintained by the Company
and the Broadcasting Subsidiary.
(f) Any amounts payable to the Employee in installments pursuant to this
Section 6 may, at the Company's and the Broadcasting Subsidiary's option, be
paid in a lump sum rather than installments as provided above. In any event,
all such amounts (whether paid in installments or in a lump sum) shall be
considered severance payments and be in full and complete satisfaction of the
obligation of the Company and the Broadcasting Subsidiary to Employee in
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<PAGE>
connection with the termination of the Employee. For purposes of this Section
6, Employee's right to Bonus payments shall accrue only on the date the Board of
Directors awards such Bonus. During the period any payments are being made to
Employee pursuant to this Section 6, Employee shall be entitled to continue to
participate in all employee benefit plans available to employees of the Company
and the Broadcasting Subsidiary generally and to continuation of any perquisites
provided the Employee by the Company and the Broadcasting Subsidiary at the time
of termination (except that Employee will be required to return the automobile
provided by the Company and the Broadcasting Subsidiary pursuant hereto within
30 days of Employee's termination).
7. NONCOMPETITION; CONFIDENTIALITY. (a) During the Employment Period and
for an additional period of two years (or with respect to item (iii) below for
that period of time for which Employee receives or is scheduled to receive
payment pursuant to Section 6 unless Employee is terminated (i) with Cause, in
which case for six months or (ii) without Cause or Financial Cause, in which
case for two years, notwithstanding the lump sum severance payment required by
Section 6) immediately following the Employment Period (the "RESTRICTION
PERIOD"), Employee shall not, directly or indirectly, (i) induce any employee of
the Company or any of its subsidiaries to terminate his or her employment with
the Company or any of its subsidiaries, (ii) hire any such employee of the
Company or any of its subsidiaries, or (iii) directly or indirectly (as an
employee, owner, operator, consultant, or otherwise) engage in any aspect of the
radio broadcasting business (AM or FM) in competition with any radio station (AM
or FM) owned by the Company or any subsidiary of the Company at the time the
Employee's employment terminates (the "PROTECTED STATIONS"); provided, that
nothing in this sentence shall prevent Employee from owning 1% or less of any
class of securities of a corporation having securities registered under the
Securities Exchange Act of 1934, as amended. A radio station shall be deemed in
competition with a Protected Station if such station competes principally in the
same "area of dominant influence" (as reflected in the Arbitron ratings) as any
Protected Station.
(b) During the Employment Period and for an additional period of five
years thereafter, Employee shall not use for his personal benefit, or disclose,
communicate or divulge to, or use for the direct or indirect benefit of any
person, firm, association or company other than the Company or its subsidiaries,
any Confidential Information. "CONFIDENTIAL
7
<PAGE>
INFORMATION" means information relating to the services or operations of the
Company or any subsidiary thereof that is not generally known, is proprietary
to the Company or such subsidiary and is made known to Employee or learned or
acquired by Employee while in the employ of the Company or the Broadcasting
Subsidiary, including, without limitation, (i) information relating to
research, development, purchasing, accounting, marketing, merchandising,
advertising, selling, leasing, finance and business methods and techniques
and (ii) customer lists and other information relating to past, present or
prospective customers. However, Confidential Information shall not include
under any circumstances any information with respect to the foregoing matters
that becomes publicly available through no fault of Employee or is available
to Employee from other sources who have not secured such information on a
confidential basis from the Company or any affiliate thereof. All materials
or articles of information of any kind furnished to Employee by the Company
or any of its subsidiaries or developed by Employee in the course of his
employment hereunder are and shall remain the sole property of the Company or
such subsidiary, as applicable; and if the Company or such subsidiary, as
applicable, requests the return of such information at any time during, upon
or after the termination of Employee's employment, Employee shall immediately
deliver the same to the Company or such subsidiary, as applicable.
(c) Employee acknowledges that, in view of the nature of the business in
which the Company and its subsidiaries are engaged, the restrictions contained
in Sections 7(a) and 7(b) above (the "RESTRICTIONS") are reasonable and
necessary in order to protect the legitimate interests of the Company and its
subsidiaries, and that any violation thereof would result in irreparable
injuries to the Company and its subsidiaries, and Employee therefore further
acknowledges that, in the event Employee violates, or threatens to violate, any
of such Restrictions, the Company and its subsidiaries shall be entitled to
obtain from any court of competent jurisdiction, without the posting of any bond
or other security, preliminary and permanent injunctive relief as well as
damages and an equitable accounting of all earnings, profits and other benefits
arising from such violation, which rights shall be cumulative and in addition to
any other rights or remedies in law or equity to which the Company or its
subsidiaries may be entitled.
(d) If any Restriction, or any part thereof, shall be determined in any
judicial or administrative proceeding to be invalid or unenforceable, the
remainder of the
8
<PAGE>
Restrictions shall not thereby be affected and shall be given full effect,
without regard to the invalid provisions. If the period of time or the area
specified in the Restrictions shall be determined in any judicial or
administrative proceeding to be unreasonable, then the court or
administrative body shall have the power to reduce the period of time or the
area covered and, in its reduced form, such provisions shall then be
enforceable and shall be enforced.
(e) If Employee violates any of the Restrictions, the applicable
Restrictive Period shall be tolled from the time of the commencement of any such
violation until such time as such violation shall be cured by Employee to the
reasonable satisfaction of the Company or its subsidiaries, as applicable.
8. REPRESENTATIONS BY EMPLOYEE. The Employee hereby represents and
warrants to the Company and the Broadcasting Subsidiary that (a) the Employee's
execution and delivery of this Agreement and his performance of his duties and
obligations hereunder will not conflict with, or cause a default under, or give
any party a right to damages under, or to terminate, any other agreement to
which the Employee is a party or by which he is bound, and (b) there are no
agreements or understandings that would make unlawful the Employee's execution
or delivery of this Agreement or his employment hereunder.
9. NOTICES. All notices and other communications required or permitted
hereunder will be in writing and, unless otherwise provided in this Agreement,
will be deemed to have been duly given when delivered in person or when
dispatched by electronic facsimile transfer (confirmed in writing by mail
simultaneously dispatched) or one business day (if sent to and from locations in
the same country) or three business days (if sent to or from the United States
from or to any other territory) after having been dispatched by a nationally
recognized overnight courier service to the appropriate party at the address
specified below:
If to the Company or the Broadcasting Company:
12655 N. Central Expressway, Suite 405
Dallas, Texas 75243
Fax No.: 214/239-0220
with copies to:
Hicks, Muse, Tate & Furst Incorporated
9
<PAGE>
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attention: Eric C. Neuman
Fax No.: 214/740-7355
and
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
Attention: R. Scott Cohen
Fax No.: 214/746-7777
and, in the case of the Employee, at his business address at:
12655 N. Central Expressway, Suite 405
Dallas, Texas 75243
Fax No.: 214/239-0220
with a copy to:
Leibowitz & Associates, P.A.
One SE Third Avenue, Suite 1450
Miami, Florida 33131-1715
Attention: Matthew Leibowitz
Fax No.: 305/530-1322
Either party may designate a different address by giving notice of change
of address in the manner provided above.
10. WAIVER. No waiver or modification in whole or in part of this
Agreement, or any term or condition hereof, shall be effective against any party
unless in writing and duly signed by the party sought to be bound. Any waiver of
any breach of any provisions hereof or any right or power by any party on one
occasion shall not be construed as a waiver of, or a bar to, the exercise of
such right or power on any other occasion or as a waiver of any subsequent
breach.
11. BINDING EFFECT; SUCCESSORS. This Agreement shall be binding upon and
shall inure to the benefit of the Company and the Broadcasting Subsidiary and
their respective successors and assigns, and shall inure to the benefit of and
be binding on upon the Employee and his executors, administrators, heirs and
legal representatives. Because the Employee's duties and services hereunder are
special, personal and unique in nature, the Employee may not
10
<PAGE>
transfer, sell or otherwise assign his rights, obligations or benefits under
this Agreement.
12. CONTROLLING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas applicable to contracts made and
to be performed therein.
13. SEVERABILITY. If any provision of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
or impair the validity or enforceability of the remaining provisions of this
Agreement, which shall remain in full force and effect and the parties hereto
shall continue to be bound thereby.
14. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties relating to the subject matter hereof and shall supersede
all previous agreements (including the Original Employment Agreement) between
the parties, whether written or oral, with respect to the subject matter hereof.
This Agreement cannot be modified, altered or amended except by a writing signed
by all the parties hereto.
[Remainder of Page Left Blank Intentionally].
11
<PAGE>
IN WITNESS WHEREOF, the Company, the Broadcasting Subsidiary and the
Employee have executed this Agreement as of the day and year first above
written.
COMPANY:
CHANCELLOR BROADCASTING COMPANY
By: /S/ JACQUES D. KERREST
------------------------------------
Name: Jacques D. Kerrest
Title: Senior Vice President and
Chief Financial Officer
BROADCASTING SUBSIDIARY:
CHANCELLOR RADIO BROADCASTING COMPANY
By: /S/ JACQUES D. KERREST
------------------------------------
Name: Jacques D. Kerrest
Title: Senior Vice President and
Chief Financial Officer
EMPLOYEE:
/s/ Steven Dinetz
-----------------------------------------
Steven Dinetz
12
<PAGE>
EXHIBIT 11.1
CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1995 1996
----------- ------------
<S> <C> <C>
Computation for statements of operations:
Net loss before extraordinary loss $(3,483,369) $ (7,585,314)
Loss on repurchase of preferred stock of subsidiary -- (16,570,065)
----------- ------------
Loss before extraordinary loss applicable to
common stock (3,483,369) (24,155,379)
Extraordinary loss -- (4,645,921)
----------- ------------
Net loss applicable to common stock $(3,483,369) $(28,801,300)
----------- ------------
----------- ------------
Computation for weighted average common shares
outstanding:
Weighted average common shares outstanding 8,850,033 13,191,626
Incremental common shares applicable to common
stock options based on the estimated fair value
of the stock 16,557 199,935
Common stock options excluded based on
anti-dilutive effect (16,557) (199,935)
----------- ------------
Weighted average common shares 8,850,033 13,191,626
----------- ------------
----------- ------------
Loss per common share:
Primary and fully diluted
Loss before extraordinary loss $ (0.39) $ (1.83)
Extraordinary loss -- (0.35)
----------- ------------
Net loss $ (0.39) $ (2.18)
----------- ------------
----------- ------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED FINANCIAL STATEMENTS FOR THE THREE MONTHS PERIOD ENDED MARCH 31, 1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001002909
<NAME> CHANCELLOR BROADCASTING COMPANY
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,515
<SECURITIES> 0
<RECEIVABLES> 28,052
<ALLOWANCES> 600
<INVENTORY> 0
<CURRENT-ASSETS> 32,353
<PP&E> 72,108
<DEPRECIATION> 4,890
<TOTAL-ASSETS> 673,387
<CURRENT-LIABILITIES> 22,584
<BONDS> 260,000
97,652
0
<COMMON> 173
<OTHER-SE> 161,546
<TOTAL-LIABILITY-AND-EQUITY> 873,287
<SALES> 0
<TOTAL-REVENUES> 25,642
<CGS> 0
<TOTAL-COSTS> 23,477
<OTHER-EXPENSES> 6
<LOSS-PROVISION> 151
<INTEREST-EXPENSE> 7,146
<INCOME-PRETAX> (4,986)
<INCOME-TAX> 838
<INCOME-CONTINUING> (7,585)
<DISCONTINUED> 0
<EXTRAORDINARY> 4,646
<CHANGES> 0
<NET-INCOME> (12,231)
<EPS-PRIMARY> (2.18)
<EPS-DILUTED> (2.18)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED FINANCIAL STATEMENTS FOR THE THREE MONTHS PERIOD ENDED MARCH 31, 1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000925744
<NAME> CHANCELLOR RADIO BROADCASTING COMPANY
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,515
<SECURITIES> 0
<RECEIVABLES> 29,052
<ALLOWANCES> 600
<INVENTORY> 0
<CURRENT-ASSETS> 32,353
<PP&E> 72,108
<DEPRECIATION> 4,890
<TOTAL-ASSETS> 673,287
<CURRENT-LIABILITIES> 22,584
<BONDS> 260,000
97,652
0
<COMMON> 1
<OTHER-SE> 181,546
<TOTAL-LIABILITY-AND-EQUITY> 673,287
<SALES> 0
<TOTAL-REVENUES> 25,642
<CGS> 0
<TOTAL-COSTS> 23,477
<OTHER-EXPENSES> 6
<LOSS-PROVISION> 151
<INTEREST-EXPENSE> 7,146
<INCOME-PRETAX> (4,986)
<INCOME-TAX> 939
<INCOME-CONTINUING> (7,585)
<DISCONTINUED> 0
<EXTRAORDINARY> 4,646
<CHANGES> 0
<NET-INCOME> (10,571)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED FINANCIAL STATEMENTS FOR THE THREE MONTHS PERIOD ENDED MARCH 31, 1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000925752
<NAME> CHANCELLOR BRAODCASTING LICENSEE COMPANY
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,515
<SECURITIES> 0
<RECEIVABLES> 29,052
<ALLOWANCES> 600
<INVENTORY> 0
<CURRENT-ASSETS> 32,353
<PP&E> 72,108
<DEPRECIATION> 4,890
<TOTAL-ASSETS> 673,287
<CURRENT-LIABILITIES> 22,584
<BONDS> 260,000
97,652
0
<COMMON> 1
<OTHER-SE> 181,718
<TOTAL-LIABILITY-AND-EQUITY> 673,287
<SALES> 0
<TOTAL-REVENUES> 25,642
<CGS> 0
<TOTAL-COSTS> 23,477
<OTHER-EXPENSES> 6
<LOSS-PROVISION> 151
<INTEREST-EXPENSE> 7,146
<INCOME-PRETAX> (4,986)
<INCOME-TAX> 939
<INCOME-CONTINUING> (5,925)
<DISCONTINUED> 0
<EXTRAORDINARY> 4,646
<CHANGES> 0
<NET-INCOME> (10,571)
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
