<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 FISCAL QUARTER ENDED SEPTEMBER 30, 1996
<TABLE>
<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 (972) 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 /X/ No / /
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 November 5, 1996, 9,881,656 shares of the Class A Common Stock, par
value $.01 per share, 8,547,910 shares of the Class B Common Stock, par value
$.01 per share, and zero shares of the Class C Common Stock, par value $.01 per
share, of Chancellor Broadcasting Company were outstanding. As of November 5,
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
ITEM 1. FINANCIAL STATEMENTS PAGE
----
CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets as of December 31, 1995
and September 30, 1996 ...................................... 1
Consolidated Statements of Operations for the three and
nine months ended September 30, 1995 and 1996 ............... 2
Consolidated Statements of Changes in Common Stockholders'
Equity for the year ended December 31, 1995 and the nine
months ended September 30, 1996 ............................. 3
Consolidated Statements of Cash Flows for the nine months
ended September 30, 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
September 30, 1996 .......................................... 10
Consolidated Statements of Operations for the three and
nine months ended September 30, 1995 and 1996 ............... 11
Consolidated Statements of Changes in Common Stockholder's
Equity for the year ended December 31, 1995 and the nine
months ended September 30, 1996 ............................. 12
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1995 and 1996 ........................... 13
Notes to Consolidated Financial Statements .................. 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ............................ 19
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES .......................................... 23
ITEM 5. OTHER INFORMATION .............................................. 23
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ............................... 23
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------- -------------
ASSETS
<S> <C> <C>
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,314,214 $ 5,111,562
Accounts receivable, net of allowance for doubtful accounts
of $263,528 and $816,273, respectively . . . . . . . . . . . . . . . 13,243,292 42,172,355
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . 546,405 1,954,575
------------- -------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 15,103,911 49,238,492
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 20,000,000
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . 17,925,845 49,081,835
Intangibles and other, net . . . . . . . . . . . . . . . . . . . . . . . 203,808,395 569,497,264
Deferred financing costs, net . . . . . . . . . . . . . . . . . . . . . 4,284,413 17,366,400
------------- -------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 241,122,564 $ 705,183,991
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,873,888 $ 3,240,120
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 4,692,948 10,938,346
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,710,891 309,017
Current portion of long-term debt . . . . . . . . . . . . . . . . . . 4,062,500 400,000
------------- -------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . 13,340,227 14,887,483
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,107,242 364,707,969
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 4,952,361 19,036,384
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 821,153
------------- -------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 186,399,830 399,452,989
------------- -------------
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 $104,815,994 . . . . . . . . -- 103,852,579
Common stockholders' equity:
Class A common stock, par value $.01 per share, 40,000,000 shares
authorized, 302,289 and 9,881,656 shares issued and outstanding,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,023 99,373
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 . . . . . . . . . . . . . . . . . . . . . . 66,271,498 230,980,331
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . (11,637,266) (28,248,626)
Treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (1,038,134)
------------- -------------
Total common stockholders' equity . . . . . . . . . . . . . . . . . 54,722,734 201,878,423
------------- -------------
Total liabilities and stockholders' equity . . . . . . . . . . . . . $ 241,122,564 $ 705,183,991
------------- -------------
------------- -------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
1
<PAGE>
CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------- ------------------------------
1995 1996 1995 1996
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Gross broadcasting revenues. . . . . . . . . $19,515,762 $59,994,400 $54,596,491 $139,842,841
Less agency commissions . . . . . . . . . . 2,406,254 7,223,986 6,675,879 17,004,520
----------- ----------- ----------- ------------
Net revenues. . . . . . . . . . . . . . . 17,109,508 52,770,414 47,920,612 122,838,321
----------- ----------- ----------- ------------
Operating expenses:
Programming, technical and news . . . . . . 3,036,246 14,031,128 8,852,738 27,040,895
Sales and promotion . . . . . . . . . . . . 4,260,413 12,235,546 12,991,570 31,545,504
General and administrative. . . . . . . . . 2,029,870 5,930,066 6,275,387 16,335,444
Depreciation and amortization . . . . . . . 2,240,302 6,636,000 6,708,382 17,703,939
Corporate expenses. . . . . . . . . . . . . 435,334 1,538,183 1,291,778 3,377,389
Stock option compensation . . . . . . . . . 950,000 950,000 5,410,000 2,850,000
----------- ----------- ----------- ------------
12,952,165 41,320,923 41,529,855 98,853,171
----------- ----------- ----------- ------------
Income from operations. . . . . . . . . . 4,157,343 11,449,491 6,390,757 23,985,150
Other expense:
Interest expense. . . . . . . . . . . . . . 4,492,057 8,535,341 12,780,304 24,468,693
Other, net. . . . . . . . . . . . . . . . . 30,919 32,188 81,135 130,164
----------- ----------- ----------- ------------
Income (loss) before provision for
income taxes, minority interest
and extraordinary loss . . . . . . . . . (365,633) 2,881,962 (6,470,682) (613,707)
Provision for income taxes . . . . . . . . . 744,288 600,000 2,828,846 2,201,361
Dividends and accretion on preferred
stock of subsidiary . . . . . . . . . . . . -- 3,343,766 -- 8,187,104
----------- ----------- ----------- ------------
Net loss before extraordinary loss. . . . (1,109,921) (1,061,804) (9,299,528) (11,002,172)
Extraordinary loss on early
extinguishment of debt . . . . . . . . . . -- 963,267 -- 5,609,188
----------- ----------- ----------- ------------
Net loss. . . . . . . . . . . . . . . . . (1,109,921) (2,025,071) (9,299,528) (16,611,360)
Loss on repurchase of preferred stock
of subsidiary . . . . . . . . . . . . . . . -- -- -- 16,570,065
----------- ----------- ----------- ------------
Net loss attributable to common stock . . $(1,109,921) $(2,025,071) $(9,299,528) $(33,181,425)
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
Loss applicable to common stock:
Loss before extraordinary loss. . . . . . . $ (0.13) $ (0.06) $ (1.05) $ (1.71)
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
Extraordinary loss. . . . . . . . . . . . . $ -- $ (0.05) $ -- $ (0.35)
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
Net loss. . . . . . . . . . . . . . . . . . $ (0.13) $ (0.11) $ (1.05) $ (2.06)
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
Weighted average number of
shares outstanding . . . . . . . . . . . . 8,849,851 17,925,622 8,849,851 16,125,754
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
<TABLE>
CLASS A CLASS B CLASS C
COMMON STOCK COMMON STOCK COMMON STOCK ADDITIONAL
------------------- --------------- ------------------ PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
--------- ------- ------ ------ --------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995 . . 302,107 $ 3,021 63,500 $635 8,484,244 $84,842 $ 59,911,502 $ (105,970)
Stock option compensation . -- -- -- -- -- -- 6,360,000 --
Issuance of common stock on
June 29, 1995 . . . . . . . -- -- -- -- 166 2 (2) --
Net loss . . . . . . . . . . -- -- -- -- -- -- -- (11,531,296)
--------- ------- ------ ---- --------- ------- ------------ ------------
Balance, December 31, 1995 . 302,107 3,021 63,500 635 8,484,410 84,844 66,271,500 (11,637,266)
Stock option compensation . -- -- -- -- -- -- 2,850,000 --
Issuance of common stock on
February 14, 1996 . . . . . 8,447,192 84,472 -- -- -- -- 155,390,776 --
Loss on repurchase of
preferred stock of
subsidiary on February 21,
1996. . . . . . . . . . . . -- -- -- -- -- -- (16,570,065) --
Repurchase of common stock
on February 21, 1996 . . . -- -- -- -- -- -- -- --
Issuance of common stock
on August 9, 1996 . . . . . 1,185,521 11,855 -- -- -- -- 22,988,145 --
Issuance of common stock
on August 20, 1996 . . . . 2,500 25 -- -- -- -- 49,975 --
Net loss . . . . . . . . . . -- -- -- -- -- -- -- (16,611,360)
--------- ------- ------ ---- --------- ------- ------------ ------------
Balance, September 30, 1996 9,937,320 $99,373 63,500 $635 8,484,410 $84,844 $230,980,331 $(28,248,626)
--------- ------- ------ ---- --------- ------- ------------ ------------
--------- ------- ------ ---- --------- ------- ------------ ------------
TREASURY
STOCK TOTAL
----------- ------------
<S> <C> <C>
Balance, January 1, 1995 . . $ -- $ 59,894,030
Stock option compensation . -- 6,360,000
Issuance of common stock on
June 29, 1995 . . . . . . . -- --
Net loss . . . . . . . . . . -- (11,531,296)
----------- ------------
Balance, December 31, 1995 . -- 54,722,734
Stock option compensation . -- 2,850,000
Issuance of common stock on
February 14, 1996 . . . . . -- 155,475,248
Loss on repurchase of
preferred stock of
subsidiary on February 21,
1996. . . . . . . . . . . . -- (16,570,065)
Repurchase of common stock
on February 21, 1996 . . . (1,038,134) (1,038,134)
Issuance of common stock
on August 9, 1996 . . . . . -- 23,000,000
Issuance of common stock
on August 20, 1996 . . . . -- 50,000
Net loss . . . . . . . . . . -- (16,611,360)
----------- ------------
Balance, September 30, 1996 $(1,038,134) $201,878,423
----------- ------------
----------- ------------
</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>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1995 1996
------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (9,299,528) $ (16,611,360)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . 6,708,382 17,703,939
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . 211,124 315,483
Stock option compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,410,000 2,850,000
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,817,768 2,139,361
Dividends and accretion on preferred stock of subsidiary . . . . . . . . . . . . -- 8,187,104
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 5,609,188
Changes in assets and liabilities, net of the effects of acquired businesses:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,847,664) (9,278,829)
Prepaids and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (469,570) (533,086)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,050,787) 259,801
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,096,599 2,077,604
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,003,083 (2,401,874)
------------- --------------
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . 5,579,407 10,317,331
------------- --------------
Cash flows from investing activities:
Purchases of broadcasting properties . . . . . . . . . . . . . . . . . . . . . . . (23,070,804) (433,144,911)
Purchases of other property and equipment . . . . . . . . . . . . . . . . . . . . (1,173,387) (2,116,978)
------------- --------------
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . (24,244,191) (435,261,889)
------------- --------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . -- 277,627,630
Proceeds from borrowings under revolving debt facility . . . . . . . . . . . . . . 42,943,940 92,586,362
Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,625,000) (109,716,233)
Repayments of borrowings under revolving debt facility . . . . . . . . . . . . . . (22,916,160) (88,338,256)
Issuance of preferred stock of subsidiary . . . . . . . . . . . . . . . . . . . . -- 175,412,322
Repurchase of preferred stock of subsidiary . . . . . . . . . . . . . . . . . . . -- (95,462,423)
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 178,176,193
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (1,038,134)
Payment of preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . -- (505,555)
------------- --------------
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . 18,402,780 428,741,906
------------- --------------
Net increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . . . . (262,004) 3,797,348
Cash, at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,516,808 1,314,214
------------- --------------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (9,299,528) $ (16,611,360)
Cash, at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,254,804 $ 5,111,562
------------- --------------
------------- --------------
</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 notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended
September 30, 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 and may be revised at a later date.
Simultaneously with the acquisition of Trefoil, the Company entered into a
joint sales agreement with Evergreen Media Corporation for the outsourcing of
certain limited functions of WWWW-FM and WDFN-AM, both Detroit stations, and an
option to purchase such stations for $30.0 million of cash. Subsequent to the
acquisition of Trefoil, KTBZ-FM, a Houston station acquired from Trefoil, was
operated by Secret Communications, L.P. ("Secret") under a Local Marketing
Agreement ("LMA")/Exchange Agreement with Chancellor. In March of 1996, the
Company entered into an agreement to exchange KTBZ-FM and $5.6 million of cash
to Secret for KALC-FM and KIMN-FM, Denver, Colorado. The Company began managing
certain limited functions of these stations, pursuant to an LMA, effective
April 1, 1996 and closed on the exchange of the stations effective July 31,
1996. The exchange has been accounted for using the book values of the assets
exchanged plus the $5.6 million of additional cash and $0.8 million of
additional acquisition costs, and was allocated to the net assets acquired based
upon their estimated fair market values. The excess of the purchase price over
the estimated fair value of net assets acquired amounted to approximately
$28.7 million, which has been accounted for as goodwill and is being amortized
over 40 years using the straight line method. This allocation was based on
preliminary estimates and may be revised at a later date.
The exchange is summarized as follows (in thousands):
Assets acquired and liabilities assumed:
Property and equipment ................... $ 2,363
Goodwill and other intangibles ........... 28,657
Prepaid expenses and other assets ........ 163
Accrued liabilities ...................... (138)
--------
Total acquisition ..................... $ 31,045
--------
--------
On May 15, 1996, the Company entered into an agreement to acquire
substantially all the assets and certain liabilities of OmniAmerica Group
("Omni") for an aggregate price of $178.0 million, including $163.0 million of
cash and $15.0 million of Chancellor's Class A Common Stock. Liabilities
assumed will be limited to certain ongoing contractual rights and obligations.
Pursuant to the acquisition agreement, the Company has provided an irrevocable
letter of credit in the amount of $10.0 million which it will be required to pay
to Omni in the event the Company is in material breach of its obligations under
the acquisition agreement and Omni chooses not to complete the acquisition in
5
<PAGE>
CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accordance with the terms of the agreement, absent regulatory impediments or
other circumstances specified in the agreement.
On June 24, 1996, the Company entered into an agreement with American Radio
Systems Corporation ("American Radio") whereby it will exchange the West Palm
Beach, Florida stations being acquired pursuant to the Omni acquisition
agreement for American Radio's KSTE-AM and $33.0 million of cash. KSTE-AM is
located in Rancho Cordova, California and is part of the Sacramento market.
On July 1, 1996, Chancellor entered into an agreement with SFX
Broadcasting, Inc. ("SFX") whereby it will exchange the Jacksonville, Florida
stations being acquired pursuant to the Omni acquisition agreement and $11.0
million of cash for SFX's WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM, Nassau-Suffolk,
New York. These acquisition and exchange agreements are subject to FCC approval.
Pursuant to various agreements, the Company began managing certain limited
functions of the remaining Omni stations and the SFX stations beginning July 1,
1996, and station KSTE-AM beginning August 1, 1996.
On August 24, 1996, the Company entered into an agreement to acquire
substantially all the assets and certain liabilities of Colfax Communications
("Colfax") for an aggregate price of $365.0 million plus working capital.
Liabilities assumed will be limited to certain ongoing contractual rights and
obligations. Pursuant to the acquisition agreement, the Company has deposited
$20.0 million of cash in a restricted escrow account to be remitted to Colfax at
closing.
The following summarizes the unaudited consolidated historical and pro
forma data for the nine months ended September 30, 1995 and 1996, as though
the Company's acquisitions of KDWB-FM and Trefoil, and the exchange of
KTBZ-FM for KIMN-FM and KALC-FM, had occurred as of the beginning of 1995 (in
thousands):
<TABLE>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1996
---------------------- ----------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- --------- ---------- ---------
<S> <C> <C>
Net revenues .......................................... $ 47,921 $ 116,232 $122,838 $129,576
Net loss before extraordinary loss .................... (9,300) (22,836) (11,002) (12,001)
Net loss .............................................. (9,300) (22,836) (16,611) (12,001)
Net loss per common share before extraordinary loss ... (1.05) (1.24) (1.71) (0.65)
Net loss per common share ............................. (1.05) (1.24) (2.06) (0.65)
</TABLE>
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 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 originally included 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 Revolving Loan Facility was
increased to $55.0 million in August 1996 in conjunction with the Company's
$18.7 million prepayment of its A Term Loan Facility. The Company realized an
extraordinary loss on early extinguishment of debt of $1.0 million related to
this prepayment.
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 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
6
<PAGE>
CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
were originally due in increasing quarterly installments beginning in 1996
and mature in August 2002 and 2003, respectively. As a result of the partial
prepayment of the A Term Loan Facility, it is now due in increasing quarterly
installments beginning in 1999. 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 from 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 September
30, 1996, the New Bank Financing facilities accrued interest at prime rate
plus 1.25% (9.50%) on $15.0 million of borrowings and LIBOR rate plus 2.50%
(8.00%) and 2.75% (8.19%) on $55.3 million and $34.9 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 9 3/8% Senior Subordinated Notes due 2004 (the "New Notes" and, together with
the Existing Notes, the "Notes"), which mature on October 1, 2004, and bear
interest at 9.375% per annum. Interest on the Notes is paid semi-annually. The
Existing and New Notes are redeemable, in whole or in part, at the option of the
Company on or after October 1, 1999 and February 1, 2000, respectively. 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 its Class A Common
Stock, par value $.01 per share (the "Class A Common Stock"), in an initial
public offering (the "IPO"), which generated net proceeds of $142.4 million, and
in a private placement, issued $100.0 million of exchangeable redeemable
preferred stock (the "Acquisition Preferred Stock") of Chancellor Radio
Broadcasting 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 12-1/4% 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 repurchase 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.
In August 1996 pursuant to an agreement entered into at the time of the
IPO, Chancellor sold 1.2 million shares of Class A Common Stock in a private
placement to an affiliated entity, which generated proceeds of $23.0 million.
In September 1996, the Company completed an exchange offering whereby it
exchanged the Old Preferred Stock for 1,000,000 shares of 12-1/4% Series A
Senior Cumulative Exchangeable Preferred Stock (the "New Preferred Stock") in a
transaction registered under the Securities Act of 1933, as amended. The terms
of the New Preferred Stock are substantially identical to those of the Old
Preferred Stock. Dividends on the New Preferred Stock accrue from its date of
issuance and are payable quarterly commencing November 15, 1996, at a rate per
annum of 12-1/4% of the then effective liquidation preference per share.
Dividends may be paid, at the Company's option, on any dividend payment date
occurring on or prior to February 15, 2001 either in cash or by adding such
dividends to the then effective liquidation preference of the New Preferred
Stock. The initial liquidation preference per share of New Preferred Stock
7
<PAGE>
CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
will be the liquidation preference per share of Old Preferred Stock on the
date of exchange therefor. 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, 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, 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 Old Preferred Stock's fair value at date of issuance and the New
Preferred Stock's 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 its Class B Common Stock, $.01 par value ("Class B Common Stock"), and
each six shares of Convertible Nonvoting Stock were reclassified into one share
of its Class C Common Stock, $.01 par value ("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.
In June 1996, the holders of the Class C Common Stock filed an application
with the FCC to convert the stock into Chancellor's Class B Common Stock. This
conversion was subject to FCC approval, as it resulted in a change of control,
and was approved by the FCC and subsequently consummated on October 22, 1996.
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). During 1996, the Board of Directors
has granted options to purchase a total of 725,750 shares of Class A Common
Stock with various exercise prices equal to the fair market value of the stock
on the respective dates of grant.
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:
8
<PAGE>
CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
<TABLE>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------- ------------------------------
1995 1996 1995 1996
--------- -------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. federal income tax at statutory rate. . . $(124,315) $979,867 $(2,200,032) $ (208,660)
State income taxes, net of federal benefit . . (21,938) 172,918 (388,241) (36,822)
Valuation allowance provided for loss
carryforward generated during
the current period. . . . . . . . . . . . . 699,989 (677,785) 5,146,565 2,071,843
Reconciliation of return to estimate . . . . . 71,510 -- 71,510 --
Other. . . . . . . . . . . . . . . . . . . . . 119,042 125,000 199,044 375,000
--------- -------- ----------- ----------
$ 744,288 $600,000 $ 2,828,846 $2,201,361
--------- -------- ----------- ----------
--------- -------- ----------- ----------
</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. RELATED PARTY TRANSACTION
Effective April 1, 1996, the Company entered into a revised financial
monitoring and oversight agreement with Hicks Muse & Co. Partners, L.P. and
HM2/Management Partners, L.P., each of which is an affiliate of Hicks, Muse,
Tate & Furst Incorporated. The annual fee for financial oversight and
monitoring services to the Company has been adjusted to $500,000. The annual
fee is adjustable each January 1, to an amount equal to the budgeted
consolidated annual net sales of the Company for the then-current fiscal
year, multiplied by 0.25%; provided, however, that in no event shall the
annual fee be less than $500,000.
8. 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.
9
<PAGE>
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ ------------
ASSETS
<S> <C> <C>
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,314,214 $ 5,111,562
Accounts receivable, net of allowance for doubtful accounts
of $263,528 and $816,273, respectively. . . . . . . . . . . . . . . . 13,243,292 42,172,355
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . 546,405 1,954,575
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 15,103,911 49,238,492
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 20,000,000
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . 17,925,845 49,081,835
Intangibles and other, net. . . . . . . . . . . . . . . . . . . . . . . 203,808,395 569,497,264
Deferred financing costs, net . . . . . . . . . . . . . . . . . . . . . 4,284,413 17,366,400
------------ ------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $241,122,564 $705,183,991
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,873,888 $ 3,240,120
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 4,692,948 10,938,346
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,710,891 309,017
Current portion of long-term debt . . . . . . . . . . . . . . . . . . 4,062,500 400,000
------------ ------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . 13,340,227 14,887,483
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,107,242 364,707,969
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 4,952,361 19,036,384
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 821,153
------------ ------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 186,399,830 399,452,989
------------ ------------
Redeemable Senior Cumulative Exchangeable Preferred Stock,
par value $.01 per share; 1,000,000 shares authorized, issued
and outstanding; preference in liquidation of $104,815,994 . . . . . . -- 103,852,579
Common stockholder's equity:
Common stock, par value $.01 per share, 1,000 shares
authorized, issued and outstanding. . . . . . . . . . . . . . . . . . 10 10
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . 66,359,990 221,939,935
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . (11,637,266) (20,061,522)
------------ ------------
Total common stockholder's equity . . . . . . . . . . . . . . . . . 54,722,734 201,878,423
------------ ------------
Total liabilities and stockholder's equity . . . . . . . . . . . . . $241,122,564 $705,183,991
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
1995 1996 1995 1996
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Gross broadcasting revenues. . . . . . . . . $19,515,762 $59,994,400 $54,596,491 $139,842,841
Less agency commissions . . . . . . . . . . 2,406,254 7,223,986 6,675,879 17,004,520
----------- ----------- ----------- ------------
Net revenues . . . . . . . . . . . . . . 17,109,508 52,770,414 47,920,612 122,838,321
----------- ----------- ----------- ------------
Operating expenses:
Programming, technical and news . . . . . 3,036,246 14,031,128 8,852,738 27,040,895
Sales and promotion . . . . . . . . . . . 4,260,413 12,235,546 12,991,570 31,545,504
General and administrative . . . . . . . . 2,029,870 5,930,066 6,275,387 16,335,444
Depreciation and amortization . . . . . . 2,240,302 6,636,000 6,708,382 17,703,939
Corporate expenses . . . . . . . . . . . . 435,334 1,538,183 1,291,778 3,377,389
Stock option compensation . . . . . . . . 950,000 950,000 5,410,000 2,850,000
----------- ----------- ----------- ------------
12,952,165 41,320,923 41,529,855 98,853,171
----------- ----------- ----------- ------------
Income from operations . . . . . . . . . 4,157,343 11,449,491 6,390,757 23,985,150
Other expense:
Interest expense . . . . . . . . . . . . . 4,492,057 8,535,341 12,780,304 24,468,693
Other, net . . . . . . . . . . . . . . . . 30,919 32,188 81,135 130,164
----------- ----------- ----------- ------------
Income (loss) before provision for
income taxes and extraordinary
loss . . . . . . . . . . . . . . . . . (365,633) 2,881,962 (6,470,682) (613,707)
Provision for income taxes . . . . . . . . . 744,288 600,000 2,828,846 2,201,361
----------- ----------- ----------- ------------
Net income (loss) before
extraordinary loss . . . . . . . . . . (1,109,921) 2,281,962 (9,299,528) (2,815,068)
Extraordinary loss on early
extinguishment of debt . . . . . . . . . . -- 963,267 -- 5,609,188
----------- ----------- ----------- ------------
Net income (loss) . . . . . . . . . . . (1,109,921) 1,318,695 (9,299,528) (8,424,256)
Dividends and accretion on preferred stock . -- 3,343,766 -- 8,187,104
Loss on repurchase of preferred stock . . . -- -- -- 16,570,065
----------- ----------- ----------- ------------
Net loss attributable to common stock . $(1,109,921) $(2,025,071) $(9,299,528) $(33,181,425)
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDER'S EQUITY
<TABLE>
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 . . . . . . . . . . . . . . . . -- -- (8,187,104) -- (8,187,104)
Capital contributions . . . . . . . . -- -- 180,337,114 -- 180,337,114
Net loss . . . . . . . . . . . . . . -- -- -- (8,424,256) (8,424,256)
------ ---- ------------ ------------ ------------
Balance, September 30, 1996 . . . . . 1,000 $ 10 $221,939,935 $(20,061,522) $201,878,423
------ ---- ------------ ------------ ------------
------ ---- ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1995 1996
------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (9,299,528) $ (8,424,256)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . 6,708,382 17,703,939
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . 211,124 315,483
Stock option compensation . . . . . . . . . . . . . . . . . . . . . . . . . 5,410,000 2,850,000
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,817,768 2,139,361
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 5,609,188
Changes in assets and liabilities, net of the effects of acquired businesses:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,847,664) (9,278,829)
Prepaids and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . (469,570) (533,086)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,050,787) 259,801
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,096,599 2,077,604
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,003,083 (2,401,874)
------------ ------------
Net cash provided by operating activities . . . . . . . . . . . . . . . 5,579,407 10,317,331
------------ ------------
Cash flows from investing activities:
Purchases of broadcasting properties . . . . . . . . . . . . . . . . . . . . . (23,070,804) (433,144,911)
Purchases of other property and equipment . . . . . . . . . . . . . . . . . . (1,173,387) (2,116,978)
------------ ------------
Net cash used in investing activities . . . . . . . . . . . . . . . . . (24,244,191) (435,261,889)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . -- 277,627,630
Proceeds from borrowings under revolving debt facility . . . . . . . . . . . . 42,943,940 92,586,362
Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . (1,625,000) (109,716,233)
Repayments of borrowings under revolving debt facility . . . . . . . . . . . . (22,916,160) (88,338,256)
Issuance of preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . -- 175,412,322
Repurchase of preferred stock . . . . . . . . . . . . . . . . . . . . . . . . -- (95,462,423)
Additional capital contributions . . . . . . . . . . . . . . . . . . . . . . . -- 178,176,193
Distribution of additional paid in capital . . . . . . . . . . . . . . . . . . -- (1,038,134)
Payment of preferred stock dividends . . . . . . . . . . . . . . . . . . . . . -- (505,555)
------------ ------------
Net cash provided by financing activities . . . . . . . . . . . . . . . 18,402,780 428,741,906
------------ ------------
Net increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . (262,004) 3,797,348
Cash, at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . 1,516,808 1,314,214
------------ ------------
Cash, at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,254,804 $ 5,111,562
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<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 notes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and nine month periods ended September 30, 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.
Simultaneously with the acquisition of Trefoil, the Company entered into a
joint sales agreement with Evergreen Media Corporation for the outsourcing of
certain limited functions of WWWW-FM and WDFN-AM, both Detroit stations, and an
option to purchase such stations for $30.0 million of cash. Subsequent to the
acquisition of Trefoil, KTBZ-FM, a Houston station acquired from Trefoil, was
operated by Secret Communications, L.P. ("Secret") under a Local Marketing
Agreement ("LMA")/Exchange Agreement with Chancellor. In March of 1996, the
Company entered into an agreement to exchange KTBZ-FM and $5.6 million of cash
to Secret for KALC-FM and KIMN-FM, Denver, Colorado. The Company began managing
certain limited functions of these stations, pursuant to an LMA, effective April
1, 1996 and closed on the exchange of the stations effective July 31, 1996. The
exchange has been accounted for using the book values of the assets exchanged
plus the $5.6 million of additional cash and $0.8 million of additional
acquisition costs, and was allocated to the net assets acquired based upon their
estimated fair market values. The excess of the purchase price over the
estimated fair value of net assets acquired amounted to approximately $28.7
million, which has been accounted for as goodwill and is being amortized over 40
years using the straight line method. This allocation was based on preliminary
estimates and may be revised at a later date.
The exchange is summarized as follows (in thousands):
Assets acquired and liabilities assumed:
Property and equipment . . . . . . . . . . . . . $ 2,363
Goodwill and other intangibles . . . . . . . . . 28,657
Prepaid expenses and other assets. . . . . . . . 163
Accrued liabilities. . . . . . . . . . . . . . . (138)
-------
Total acquisition. . . . . . . . . . . . . . . $31,045
-------
-------
On May 15, 1996, the Company entered into an agreement to acquire
substantially all the assets and certain liabilities of OmniAmerica Group
("Omni") for an aggregate price of $178.0 million, including $163.0 million
of cash and $15.0 million of Chancellor's Class A Common Stock. Liabilities
assumed will be limited to certain ongoing contractual rights and
obligations. Pursuant to the acquisition agreement, the Company has provided
an irrevocable letter of credit in the amount of $10.0 million which it will
be required to pay to Omni in the event the Company is in material breach of
its obligations under the acquisition agreement and Omni chooses not to
complete the acquisition in
14
<PAGE>
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
accordance with the terms of the agreement, absent regulatory impediments or
other circumstances specified in the agreement.
On June 24, 1996, the Company entered into an agreement with American Radio
Systems Corporation ("American Radio") whereby it will exchange the West Palm
Beach, Florida stations being acquired pursuant to the Omni acquisition
agreement for American Radio's KSTE-AM and $33.0 million of cash. KSTE-AM is
located in Rancho Cordova, California and is part of the Sacramento market.
On July 1, 1996, Chancellor entered into an agreement with SFX Broadcasting,
Inc. ("SFX") whereby it will exchange the Jacksonville, Florida stations being
acquired pursuant to the Omni acquisition agreement and $11.0 million of cash
for SFX's WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM, Nassau-Suffolk, New York.
These acquisition and exchange agreements are subject to FCC approval. Pursuant
to various agreements, the Company began managing certain limited functions of
the remaining Omni stations and the SFX stations beginning July 1, 1996, and
station KSTE-AM beginning August 1, 1996.
On August 24, 1996, the Company entered into an agreement to acquire
substantially all the assets and certain liabilities of Colfax Communications
("Colfax") for an aggregate price of $365.0 million plus working capital.
Liabilities assumed will be limited to certain ongoing contractual rights and
obligations. Pursuant to the acquisition agreement, the Company has deposited
$20.0 million of cash in a restricted escrow account to be remitted to Colfax at
closing.
The following summarizes the unaudited consolidated historical and pro forma
data for the nine months ended September 30, 1995 and 1996, as though the
Company's acquisitions of KDWB-FM and Trefoil, and the exchange of KTBZ-FM for
KIMN-FM and KALC-FM, had occurred as of the beginning of 1995 (in thousands):
<TABLE>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1996
---------------------- ---------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Net revenues . . . . . . . . . . . . . $47,921 $116,232 $122,838 $129,576
Net loss before extraordinary loss . . (9,300) (13,114) (2,815) (1,065)
Net loss . . . . . . . . . . . . . . . (9,300) (13,114) (8,424) (1,065)
</TABLE>
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 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 originally included 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 Revolving Loan Facility was
increased to $55.0 million in August 1996 in conjunction with the Company's
$18.7 million prepayment of its A Term Loan Facility. The Company realized an
extraordinary loss on early extinguishment of debt of $1.0 million related to
this prepayment.
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 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 were
originally due in increasing quarterly installments beginning in 1996 and mature
in August 2002 and 2003, respectively. As a result of the partial prepayment of
the A Term Loan Facility, it is now due in increasing quarterly
15
<PAGE>
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
installments beginning in 1999. 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 from 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 September
30, 1996, the New Bank Financing facilities accrued interest at prime rate
plus 1.25% (9.50%) on $15.0 million of borrowings and LIBOR rate plus 2.50%
(8.00%) and 2.75% (8.19%) on $55.3 million and $34.9 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 9-3/8% Senior Subordinated Notes due 2004 (the "New Notes" and, together with
the Existing Notes, the "Notes"), which mature on October 1, 2004, and bear
interest at 9.375% per annum. Interest on the Notes is paid semi-annually. The
Existing and New Notes are redeemable, in whole or in part, at the option of the
Company on or after October 1, 1999 and February 1, 2000, respectively. 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 the 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 its Class A Common
Stock, par value $.01 per share (the "Class A Common Stock"), in an initial
public offering (the "IPO"), which generated net proceeds of $142.4 million, and
in a private placement, issued $100.0 million of exchangeable redeemable
preferred stock (the "Acquisition Preferred Stock") of Chancellor Radio
Broadcasting 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 12-1/4% 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 repurchase 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.
In August 1996 pursuant to an agreement entered into at the time of the IPO,
Chancellor sold 1.2 million shares of Class A Common Stock in a private
placement to an affiliated entity, which generated proceeds of $23.0 million.
In September 1996, the Company completed an exchange offering whereby it
exchanged the Old Preferred Stock for 1,000,000 shares of 12-1/4% Series A
Senior Cumulative Exchangeable Preferred Stock (the "New Preferred Stock") in
a transaction registered under the Securities Act of 1933, as amended. The
terms of the New Preferred Stock are substantially identical to those of the
Old Preferred Stock. Dividends on the New Preferred Stock accrue from its
date of issuance and are payable quarterly commencing November 15, 1996, at a
rate per annum of 12-1/4% of the then effective liquidation preference per
share. Dividends may be paid, at the Company's option, on any dividend
payment date occurring on or prior to February 15, 2001 either in cash or by
adding such dividends to the then effective liquidation preference of the New
Preferred Stock. The initial liquidation preference per share of New
Preferred Stock will be the liquidation preference per share of Old Preferred
Stock on the date of exchange therefor. 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, plus, accumulated and
unpaid dividends to the date of redemption. In addition, prior to February
15,
16
<PAGE>
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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, 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 Old Preferred Stock's fair value at date of issuance and the New
Preferred Stock's mandatory redemption amount, calculated using the effective
interest method.
In June 1996, the holders of Chancellor's Class C Common Stock filed an
application with the FCC to convert the stock into Chancellor's Class B Common
Stock. This conversion was subject to FCC approval, as it resulted in a change
of control, and was approved by the FCC and subsequently consummated on October
22, 1996.
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). During 1996, the Board of Directors
has granted options to purchase a total of 725,750 shares of Class A Common
Stock with various exercise prices equal to the fair market value of the stock
on the respective dates of grant.
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>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- ------------------------------
1995 1996 1995 1996
--------- --------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. federal income tax at statutory rate . . . . $(124,315) $ 979,867 $(2,200,032) $ (208,660)
State income taxes, net of federal benefit . . . (21,938) 172,918 (388,241) (36,822)
Valuation allowance provided for loss
carryforward generated during
the current period . . . . . . . . . . . . . . . 699,989 (677,785) 5,146,565 2,071,843
Reconciliation of return to estimate . . . . . . 71,510 -- 71,510 --
Other . . . . . . . . . . . . . . . . . . . . . . 119,042 125,000 199,044 375,000
--------- --------- ----------- ----------
$ 744,288 $ 600,000 $ 2,828,846 $2,201,361
--------- --------- ----------- ----------
--------- --------- ----------- ----------
</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. RELATED PARTY TRANSACTION
Effective April 1, 1996, Chancellor and the Company entered into a revised
financial monitoring and oversight agreement with Hicks Muse & Co. Partners,
L.P. and HM2/Management Partners, L.P., each of which is an affiliate
17
<PAGE>
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
of Hicks, Muse, Tate & Furst Incorporated. The annual fee for financial
oversight and monitoring services to Chancellor and the Company has been
adjusted to $500,000. The annual fee is adjustable each January 1, to an
amount equal to the budgeted consolidated annual net sales of the Company for
the then-current fiscal year, multiplied by 0.25%; provided, however, that in
no event shall the annual fee be less than $500,000.
8. 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.
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis of results of operations and
financial condition of the Company should be read in conjunction with the
consolidated financial statements and related notes thereto of the Company
included elsewhere in this document. 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; that pending
acquisitions and dispositions may not be approved by the Federal
Communications Commission ("FCC"), the Federal Trade Commission ("FTC") or
the U.S. Department of Justice, Antitrust Division (the "DOJ" and, together
with the FTC, the "Antitrust Agencies"); and the risk factors listed from
time to time in documents filed by the Company with the Securities and
Exchange Commission.
The Company has grown largely through acquisitions, as well as through
internally generated growth. Upon completion of its pending acquisition,
exchange and sales agreements, the Company will own and operate 53 radio
stations serving the following top 40 markets: New York, New York; Los
Angeles, California; San Francisco, California; Washington, District of
Columbia; 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; Milwaukee, Wisconsin and Orlando, Florida. See
the "Acquisition" note to the financial statements for a more detailed
description of the pending agreements.
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 for the three and nine months ended September 30, 1995
and 1996 of the Company and Shamrock Broadcasting, and the following where
not already included in the Company's results of operations per the terms of
the respective operating agreements: 1) Midcontinent Radio of Minnesota Inc.
related to radio station KDWB-FM, 2) Secret related to radio stations KIMN-FM
and KALC-FM, 3) Omni related to radio stations WXXL-FM, WOMX-FM and WJHM-FM,
4) SFX and Liberty Broadcasting Inc. related to radio stations WBAB-FM,
WGBB-AM, WBLI-FM and WHFM-FM and 5) American Radio related to KSTE-AM.
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 $90,000 and $540,000, paid by the Company to
Midcontinent Radio of Minnesota Inc. in 1995, for the three and nine months
ended September 30, 1995, respectively, and the Omni and SFX LMA fees of $2.0
million and $1.1 million paid by the Company to Omni and SFX, respectively,
for the three months ended September 30, 1996, have been eliminated from net
revenues and operating expenses:
<TABLE>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------- ------------------------------
1995 1996 1995 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net revenues $47,691,024 $51,525,034 $135,835,908 $144,422,561
Operating expenses 30,026,545 27,833,477 93,860,888 88,350,802
----------- ----------- ------------ ------------
Broadcast cash flow $17,664,479 $23,691,557 $ 41,975,020 $ 56,071,759
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
</TABLE>
19
<PAGE>
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, which losses may be greater
than those historically experienced by the Company.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1995
Net revenues increased 208.4% to $52.8 million for the three months ended
September 30, 1996 from $17.1 million for the same period in 1995. The
majority of this increase was due to the acquisition of Shamrock Broadcasting
and KIMN-FM and KALC-FM, and the various operating agreements with Omni,
Secret, SFX and American Radio. On a same station basis, net revenues
increased 8.0% to $51.5 million for the third quarter of 1996 from $47.7
million for the third quarter of 1995.
Station operating expenses increased 245.1% to $32.2 million for the
quarter ended September 30, 1996 from $9.3 million for the quarter ended
September 30, 1995. The majority of this increase was due to the acquisition
of Shamrock Broadcasting and KIMN-FM and KALC-FM, and the various operating
agreements with Omni, Secret, SFX and American Radio. On a same station
basis, station operating expenses decreased 7.3% to $27.8 million for the
three months ended September 30, 1996 from $30.0 million over the same period
of 1995.
Depreciation and amortization increased 196.2% to $6.6 million for the
third quarter of 1996 from $2.2 million for the same period in the prior
year. Corporate expenses increased 253.3% to $1.5 million for the third
quarter of 1996 from approximately $435,000 for the same period in 1995, as a
result of additional personnel and overhead costs associated with the
acquisition of Shamrock Broadcasting and KIMN-FM and KALC-FM, and the various
operating agreements with Omni, Secret, SFX and American Radio. Interest
expense increased 90.0% to $8.5 million from $4.5 million for the same
period. These increases were primarily attributable to the acquisition of
Shamrock Broadcasting and the resulting change in capital structure from its
financing. During the third quarter of 1996, the Company incurred an
extraordinary loss on early extinguishment of debt of $1.0 million as a
result of the partial prepayment of its A Term Loan Facility. See the
discussion of "Liquidity and Capital Resources" below.
During the second quarter of 1995, the Company developed an estimate of
the fair value of its outstanding stock options in the amount of $19.0
million. Based upon this estimate and the applicable vesting periods, the
Company recognized $5.4 million of non-cash stock option compensation
expense, with the remaining amount to be amortized over an approximate four
year period. During the third quarter of 1996, the Company recognized
non-cash stock option compensation expense of $950,000 and non-cash charges
for dividends and accretion on the preferred stock of its subsidiary of $3.3
million.
As a result of the foregoing, income from operations for the third quarter
of 1996 was $11.4 million compared to $4.2 million for the same period in
1995. Chancellor Broadcasting Company had a net loss of $2.0 million compared
with a net loss of $1.1 million for the third quarter of the prior year.
On a same station basis, broadcast cash flow increased 34.1% to $23.7
million for the three months ended September 30, 1996, from $17.7 million
over the comparable 1995 period. Same station broadcast cash flow as a
percentage of net revenues increased to 46.0% for 1996 from 37.0% for 1995.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1995
Net revenues increased 156.3% to $122.8 million for the nine months ended
September 30, 1996 from $47.9 million over the same period in 1995. The
majority of this increase was due to the acquisition of Shamrock Broadcasting
and KIMN-FM and KALC-FM, and the various operating agreements with Omni,
Secret, SFX and American Radio. On a same station basis, net revenues
increased 6.3% to $144.4 million for the first nine months of 1996 from
$135.8 million over the first nine months of 1995.
Station operating expenses increased 166.4% to $74.9 million for the nine
months ended September 30, 1996 from $28.1 million for the same period in
1995. The majority of this increase was due to the acquisition of Shamrock
Broadcasting and KIMN-FM and KALC-FM, and the various operating agreements
with Omni, Secret, SFX and American Radio. On a same station basis, station
operating expenses decreased 5.9% to $88.4 million for the nine months ended
September 30, 1996 from $93.9 million for the same period in 1995.
20
<PAGE>
Depreciation and amortization increased 163.9% to $17.7 million for the
first nine months of 1996 from $6.7 million over the same period in the prior
year. Corporate expenses increased 161.5% to $3.4 million for the first nine
months of 1996 from $1.3 million over the same period in 1995, as a result of
additional personnel and overhead costs associated with the acquisition of
Shamrock Broadcasting and KIMN-FM and KALC-FM, and the various operating
agreements with Omni, Secret, SFX and American Radio. Interest expense
increased 91.5% to $24.5 million from $12.8 million for the same period.
These increases, and the extraordinary loss on early extinguishment of debt
of $5.6 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.
During the second quarter of 1995, the Company developed an estimate of
the fair value of its outstanding stock options in the amount of $19.0
million. Based upon this estimate and the applicable vesting periods, the
Company recognized $5.4 million of non-cash stock option compensation expense
during the first nine months of 1995, with the remaining amount to be
amortized over an approximate four year period. During the first nine months
of 1996, the Company recognized non-cash stock option compensation expense of
$2.9 million, a one-time loss of $16.6 million on the repurchase of preferred
stock of its subsidiary and incurred non-cash charges for dividends and
accretion on the repurchased and newly issued preferred stock of its
subsidiary of $8.2 million.
As a result of the foregoing, income from operations for the first nine
months of 1996 was $24.0 million compared to $6.4 million for the same period
in 1995. Chancellor Broadcasting Company had a net loss of $16.6 million
compared with a net loss of $9.3 million for the first nine months of the
prior year.
On a same station basis, broadcast cash flow increased 33.6% to $56.1
million for the nine months ended September 30, 1996, from $42.0 million over
the comparable 1995 period. Same station broadcast cash flow as a percentage
of net revenues increased to 38.8% for 1996 from 30.9% 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 Shamrock
Broadcasting, on February 14, 1996. The acquisition of Shamrock Broadcasting
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.
Hicks, Muse, Tate & Furst Equity Fund II, L.P. ("HM Fund II") had advised
the Company that on or before September 30, 1996, it would sell all of its
capital stock in an affiliate or cause such affiliate to sell all or
substantially all of its assets (which consist primarily of eight radio
broadcast stations), and that it would invest the net proceeds of such sale
in Class A Common Stock of Chancellor. On August 9, 1996, the Company sold
1,185,521 shares of Chancellor's Class A Common Stock to an affiliate of HM
Fund II for cash proceeds of $23.0 million, pursuant to this agreement made
at the time of Chancellor's IPO. Pursuant to its bank credit agreement, the
Company used a portion of these proceeds to prepay a portion of its A Term
Loan Facility.
On May 15, 1996, the Company entered into an agreement to acquire
substantially all the assets and certain liabilities of Omni. Pursuant to
the acquisition agreement, the Company has provided an irrevocable letter of
credit in the amount of $10.0 million which it will be required to pay to
Omni in the event the Company is in material breach of its obligations under
the acquisition agreement and Omni chooses not to complete the acquisition in
accordance with the terms of the agreement, absent regulatory impediments or
other circumstances specified in the agreement. This letter of credit
resulted in a corresponding decrease in the Company's availability under its
Revolving Loan Facility.
On August 24, 1996, the Company entered into an agreement to acquire
substantially all the assets and certain liabilities of Colfax. Pursuant to
the acquisition agreement, the Company has deposited $20.0 million of cash in
a restricted escrow account to be remitted to Colfax at closing or, in
certain circumstances, if the Company does not complete the acquisition,
absent regulatory impediments or other circumstances specified in the
agreement.
In conjunction with the A Term Loan Facility prepayment, the Company
arranged for an increase in its Revolving Loan Facility from $40.0 million to
$55.0 million. Management believes that 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, exclusive of the pending acquisitions.
21
<PAGE>
The Company anticipates that it will consummate all of its pending
acquisition, exchange and disposition agreements by early 1997. However, the
closing of each of the transactions is subject to FCC and the Antitrust
Agencies approval and certain closing conditions, certain of which are beyond
the Company's control, and there can be no assurance as to when such
transactions will be completed or that they will be completed on the terms
described herein, or at all. The Company intends to fund the cash portion of
its pending acquisitions with the proceeds from the sale of the Detroit
stations, cash flow from operations, financing under its current credit
agreement, new bank financing and new equity. There can be no assurance
regarding the availability of cash flow from operations or that bank
financing or equity will be available to the Company on commercially
acceptable terms, if at all.
22
<PAGE>
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On February 14, 1996, Chancellor consummated the IPO of its Class A Common
Stock. 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, as
amended, to elect, voting as a class, two members of the Board of Directors of
Chancellor.
ITEM 5. OTHER INFORMATION
On October 22, 1996, HM2/Chancellor, L.P., a Texas limited partnership,
Hicks, Muse, Tate & Furst Equity Fund II, L.P., a Delaware limited partnership,
HM2/Chancellor Trust, a Delaware business trust, HM2/HMD Sacramento GP, L.P., a
Delaware limited partnership, and Hicks, Muse GP Partners, L.P., a Texas limited
partnership (collectively "Hicks Muse Parties") consummated the conversion (the
"Conversion") of all 8,484,410 of the outstanding shares of the Class C Common
Stock of Chancellor into an equal number of shares of Chancellor's Class B
Common Stock, all in accordance with Chancellor's Second Restated Certificate of
Incorporation, as amended (the "Charter"). As a result of the Conversion, the
Hicks Muse Parties, together with the 1,277,625 shares of Chancellor's Class A
Common Stock held by them, collectively control approximately 90.3% of the
voting power of Chancellor and therefore also indirectly control each of
Chancellor Radio Broadcasting Company, a Delaware corporation and wholly owned
subsidiary of Chancellor ("Chancellor Radio Broadcasting") and Chancellor
Broadcasting Licensee Company, a Delaware corporation and wholly owned
subsidiary of Chancellor Radio Broadcasting ("Licensee"). Prior to the
Conversion, the Hicks Muse Parties controlled approximately 1.4% of the voting
power of Chancellor.
Thomas O. Hicks is the Chairman of the Board, President, Chief Executive
Officer, Chief Operating Officer, Secretary and controlling stockholder of the
ultimate general or managing partner of each of the Hicks Muse Parties and
therefore may be deemed to be the beneficial owner of all of the shares of Class
A Common Stock and Class B Common Stock owned by such entities. As a result,
together with 140,740 shares of Class A Common Stock owned of record by Mr.
Hicks individually and as trustee, Mr. Hicks may be deemed to control
approximately 90.3% of the voting power of Chancellor and therefore also
indirectly control each of Chancellor Radio Broadcasting and Licensee. Mr.
Hicks disclaims beneficial ownership of all shares of Class A Common Stock and
Class B Common Stock not held of record by him.
Prior to the Conversion, Steven Dinetz, the President, Chief Executive
Officer and Secretary of Chancellor, owned beneficially and of record all of the
outstanding shares of Class B Common Stock and, together with the shares of
Class A Common Stock beneficially owned by him, controlled approximately 90.1%
of the voting power of Chancellor and therefore indirectly controlled Chancellor
Radio Broadcasting and Licensee. As a result of the Conversion, Mr. Dinetz now
controls approximately 1.0% of the voting power of Chancellor.
In accordance with the terms of the Class C Common Stock set forth in the
Charter, no additional consideration was paid by the Hicks Muse Parties in
connection with the Conversion.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- ------- -----------------------
2.1 Asset Purchase Agreement dated as of April 19, 1994, between American
Media, Inc. and Chancellor Holdings Corp. (formerly, MBD Broadcasting,
Inc.) (1)
2.2 Asset Purchase Agreement dated as of April 19, 1994, among SanRiver
Radio, Inc., Mid-Florida Radio, Inc. and Chancellor Holdings Corp.
(formally MBD Broadcasting, Inc.) (1)
2.3 Asset Purchase Agreement dated as of April 19, 1994, between National
Radio Partners, L.P. and Chancellor Holdings Corp. (formerly, MBD
Broadcasting, Inc.) (1)
23
<PAGE>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- ------- -----------------------
2.4 Asset Purchase Agreement dated as of April 19, 1994, between National
Radio Partners, L.P. and Chancellor Communications Corporation (1)
2.5 Local Programming and Marketing Agreement dated February 1, 1995,
between Midcontinent Radio of Minnesota, Inc., as Licensee, Radio
Station KDWB-FM, and Chancellor Broadcasting Company(2)
2.6 Asset Purchase Agreement dated February 1, 1995, between Midcontinent
Radio of Minnesota, Inc., Chancellor Broadcasting Company and
Chancellor Broadcasting Licensee Company (2)
2.7 Escrow Agreement dated February 7, 1995, between Midcontinent Radio of
Minnesota, Inc., Chancellor Broadcasting Company and NationsBank of
Texas, N.A. (2)
2.8 Stock Purchase Agreement dated as of August 3, 1995, among Chancellor
Broadcasting Company, Trefoil Communications, Inc., and the Selling
Securityholders named therein (3)
2.9 Option Agreement dated January 9, 1996 by and between Chancellor
Broadcasting Company and Evergreen Media Corporation (3)
2.10 Option Agreement dated January 9, 1996 by and between Chancellor
Broadcasting Company and Secret Communications (3)
2.11 Asset Purchase Agreement dated as of May 14, 1996, among
OmniAmerica Group, WAPE-FM License Partnership, WFYV-FM License
Partnership, WEAT-FM License Partnership, WEAT-AM License
Partnership, WXXL License Partnership, WOLL License Partnership,
WJHM-FM License Partnership, Chancellor Broadcasting Company and
Chancellor Radio Broadcasting Company (7)
2.12 Local Marketing Agreement dated as of June 28, 1996, among
OmniAmerica Group, Chancellor Broadcasting Company and Chancellor
Radio Broadcasting Company (7)
2.13 Exchange Agreement dated as of July 1, 1996, among WBLI, Inc.,
WBLI-FM, Inc., WHFM, Inc., WBAB, Inc., WGBB, Inc., SFX
Broadcasting, Inc. and Chancellor Radio Broadcasting Company (7)
2.14 Local Marketing Agreement dated as of July 1, 1996, among WBLI,
Inc., WBLI-FM, Inc., WHFM, Inc., WBAB, Inc., WGBB, Inc. and
Chancellor Radio Broadcasting Company (7)
2.15 Exchange Agreement dated as of June 24, 1996, among America Radio
Systems Corporation and Chancellor Radio Broadcasting Company *
2.16 Local Marketing Agreement dated as of June 24, 1996, among
America Radio Systems Corporation and Chancellor Broadcasting
Company and Chancellor Radio Broadcasting Company *
2.17 Asset Purchase Agreement dated as of August 24, 1996 by and among
Classical Acquisition Limited Partnership, Radio 100 of Maryland
Limited Partnership, Radio 100 Limited Partnership, Radio 570
Limited Partnership, Radio 94 of Phoenix Limited Partnership, and
Radio 95 of Phoenix Limited Partnership and Chancellor Radio
Broadcasting Company *
3.1 Certificate of Incorporation of Chancellor Broadcasting Company, as
amended and restated (1) (4)
3.2 Certificate of Incorporation of Chancellor Radio Broadcasting Company,
as amended (1) (4)
3.3 Certificate of Incorporation of Chancellor Broadcasting Licensee
Company (1)
3.4 Bylaws of Chancellor Broadcasting Company, as amended and
restated (1) (4)
3.5 Bylaws of Chancellor Radio Broadcasting Company, as amended (1) (4)
3.6 Bylaws of Chancellor Broadcasting Licensee Company (1)
3.7 Certificate of Designations for the 14% Redeemable Exchangeable
Preferred Stock (5)
3.8 Certificate of Amendment to Certificate of Designations for the 14%
Redeemable Exchangeable Preferred Stock (4)
24
<PAGE>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- ------- -----------------------
3.9 Certificate of Designation for the Old Preferred Stock (4)
3.10 Certificate of Designation for the New Preferred Stock *
4.1 Indenture, dated October 1, 1994, governing the outstanding 12-1/2%
Senior Subordinated Notes due 2004 (1)
4.2 First Supplemental Indenture, dated as of February 14, 1996, to the
Indenture dated October 1, 1994, governing the 12-1/2% Senior
Subordinated Notes due 2004 (4)
4.3 Second Supplemental Indenture, dated as of February 14, 1996, to the
Indenture dated October 1, 1994, governing the 12-1/2% Senior
Subordinated Notes due 2004 (4)
4.4 Indenture, dated as of February 14, 1996, governing the outstanding
9-3/8% Senior Subordinated Notes due 2004 (5)
4.5 First Supplemental Indenture, dated as of February 14, 1996, to the
Indenture dated February 14, 1996, governing the 9-3/8% Senior
Subordinated Notes due 2004 (4)
4.6 Indenture, dated as of February 26, 1996, governing the Exchange
Debentures (4)
10.1 Credit Agreement, including certain ancillary documents thereto, dated
October 12, 1994 among Chancellor Holdings Corp., Chancellor
Broadcasting Company and Bankers Trust Company, as agent, and the
lenders party thereto (2)
10.2 Lease Agreement dated as of May 22, 1989, between Kruse Microwave and
SanRiver Radio, Inc., as amended (1)
10.3 License Agreement dated as of March 1, 1974, between City of New Hope,
Minnesota and National Radio Partners, L.P., as assignee of American
Media, Inc. (1)
10.4 Tower Lease Agreement dated as of November 23, 1988, between United
Television and Shoreview FM Group, a Minnesota general partnership (1)
10.5 Partnership Agreement dated as of November 23, 1988, of Shoreview FM
Group, a Minnesota general partnership (1)
10.6 Employment Agreement between Chancellor Holdings Corp., Chancellor
Broadcasting Company and Steven Dinetz (2)
10.7 Employment Agreement between Chancellor Broadcasting Company and
George C. Toulas (2)
10.8 Employment Agreement dated as of January 10, 1994 between Chancellor
Communications Corporation and Rick Eytcheson, as amended (1)
10.9 Financial Monitoring and Oversight Agreement among Chancellor Holdings
Corp., Chancellor Broadcasting Company and Hicks, Muse & Co. Partners,
L.P. (2)
10.10 Tax Sharing Agreement between Chancellor Holdings Corp. and Chancellor
Broadcasting Company(2)
10.11 Financial Advisory Agreement among Chancellor Broadcasting Company,
Chancellor Radio Broadcasting Company and HM2/Management Partners,
L.P. (4)
10.12 Credit Agreement dated as of February 14, 1996, among Chancellor
Broadcasting Company, Chancellor Radio Broadcasting Company, various
banks and Bankers Trust Company, as agent (5)
10.13 Amended and Restated Monitoring and Oversight Agreement between
Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company
and HM2/Management Partners, L.P. (4)
10.14 Amended and Restated Stockholders Agreement dated February 14, 1996
among Chancellor Broadcasting Company and certain Holders named
therein (4)
25
<PAGE>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- ------- -----------------------
10.15 Stockholders Agreement dated as of October 12, 1994 between Chancellor
Broadcasting Company and the Holders named therein (6)
10.16 Registration Rights Agreement dated October 12, 1994 between
Chancellor Broadcasting Company and the Holders named therein (6)
10.17 Letter Agreement dated February 9, 1996 regarding Hicks Muse Equity
Investment among Chancellor Broadcasting Company and HM Fund II (4)
10.18 Sales Agreement, dated as of July 1, 1996, among OmniAmerica Group,
Chancellor Broadcasting Company and Chancellor Radio Broadcasting
Company (7)
10.19 Program Consulting Agreement, dated as of June 28, 1996, among
OmniAmerica Group, Chancellor Broadcasting Company and Chancellor
Radio Broadcasting Company (7)
10.20 Consulting Agreement, dated as of May 14, 1996, among Chancellor
Broadcasting Company, Chancellor Radio Broadcasting Company and
Anthony S. Ocepek (7)
10.21 Consulting Agreement, dated as of May 14, 1996, among Chancellor
Broadcasting Company, Chancellor Radio Broadcasting Company and Carl
E. Hirsch (7)
10.22 Consulting Agreement dated as of May 14, 1996, among Chancellor
Broadcasting Company, Chancellor Radio Broadcasting Company and H.
Dean Thacker (7)
10.23 Non-Competition Agreement dated as of May 14, 1996, among Chancellor
Broadcasting Company, Chancellor Radio Broadcasting Company and Carl
E. Hirsch (7)
10.24 First Consent and Amendment dated as of May 13, 1996, among Chancellor
Radio Broadcasting Company, the Banks party thereto and Bankers Trust
Company, as managing agent (7)
10.25 Employment Agreement dated as of February 1, 1996, between Chancellor
Radio Broadcasting Company and Samuel Weller (7)
10.26 Employment Agreement dated as of February 14, 1996, between Chancellor
Radio Broadcasting Company and Rick Eytcheson *
11.1 Statement RE Computation of Per Share Earnings for Chancellor
Broadcasting Company *
21.1 Subsidiaries of Chancellor Broadcasting Company (4)
27.1 Financial Data Schedule for Chancellor Broadcasting Company*
27.2 Financial Data Schedule for Chancellor Radio Broadcasting Company*
27.3 Financial Data Schedule for Chancellor Broadcasting Licensee Company*
- -------------------
* Filed herewith.
(1) Incorporated by reference to the Registration Statement on Form S-1 (File
No. 33-80534) of Chancellor Broadcasting Company as filed with the
Securities and Exchange Commission.
(2) Incorporated by reference to the Quarterly Report on Form 10-Q of
Chancellor Broadcasting Company (File No. 33-80534) for the fiscal quarter
ended March 31, 1995.
(3) Incorporated by reference to the Registration Statement on Form S-1 (File
No. 33-98334) of Chancellor Broadcasting Company as filed with the
Securities and Exchange Commission.
(4) Incorporated by reference to the Annual Report on Form 10-K of Chancellor,
Chancellor Broadcasting and Broadcasting Licensee for the fiscal year 1995.
(5) Incorporated by reference from the Form 8-K of Chancellor Broadcasting
Company (File No. 0-27726) and Chancellor Radio Broadcasting Company (File
No. 33-98334) as filed with the Securities and Exchange Commission on
February 29, 1996.
26
<PAGE>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- ------- -----------------------
(6) Incorporated by reference from the Registration Statement on Form S-1 (File
No. 33-98336) of Chancellor Broadcasting Company as filed with the
Securities and Exchange Commission.
(7) Incorporated by reference from the Registration Statement on Form S-1 (File
No. 333-02782) of Chancellor Radio Broadcasting Company as filed with the
Securities and Exchange Commission.
(b) REPORTS ON FORM 8-K.
None.
27
<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: November 5, 1996 By /s/ Jacques D. Kerrest
------------------------------------
Jacques D. Kerrest
Senior Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal Financial
and Accounting Officer of Registrant and each
co-registrant)
28
<PAGE>
E X C H A N G E A G R E E M E N T
BETWEEN
CHANCELLOR RADIO BROADCASTING COMPANY
WEAT-AM/FM, WEST PALM BEACH, FLORIDA
WOLL-FM, RIVIERA BEACH, FLORIDA
AND
AMERICAN RADIO SYSTEMS CORPORATION
KSTE-AM, RANCHO CORDOVA, CALIFORNIA
<PAGE>
EXCHANGE AGREEMENT
TABLE OF CONTENTS
Section 1. Asset Purchase Agreements . . . . . . . . . . . . . . . . . . .-1-
1.1 CALIFORNIA AGREEMENT. . . . . . . . . . . . . . . . . . . . . .-1-
1.2 FLORIDA AGREEMENT.. . . . . . . . . . . . . . . . . . . . . . .-2-
Section 2. Exchange of Assets. . . . . . . . . . . . . . . . . . . . . . .-2-
2.1 TAX FREE EXCHANGE.. . . . . . . . . . . . . . . . . . . . . . .-2-
2.2 TRANSFER OF ASSETS TO ARS.. . . . . . . . . . . . . . . . . . .-2-
2.2.1 FCC LICENSES . . . . . . . . . . . . . . . . . . . . . .-2-
2.2.2 OTHER GOVERNMENTAL AUTHORIZATIONS. . . . . . . . . . . .-2-
2.2.3 TANGIBLE PERSONAL PROPERTY . . . . . . . . . . . . . . .-2-
2.2.4 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . .-3-
2.2.5 INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . .-3-
2.2.6 STATION RECORDS. . . . . . . . . . . . . . . . . . . . .-3-
2.2.7 MANUFACTURER/VENDOR WARRANTIES . . . . . . . . . . . . .-3-
2.2.8 REAL ESTATE. . . . . . . . . . . . . . . . . . . . . . .-3-
2.2.9 ALL OTHER FLORIDA STATION ASSETS . . . . . . . . . . . .-3-
2.3 EXCLUDED FLORIDA ASSETS.. . . . . . . . . . . . . . . . . . . .-4-
2.3.1 CASH . . . . . . . . . . . . . . . . . . . . . . . . . .-4-
2.3.2 RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . .-4-
2.3.3 CONSUMED PROPERTY. . . . . . . . . . . . . . . . . . . .-4-
2.3.4 TERMINATED CONTRACTS . . . . . . . . . . . . . . . . . .-4-
2.3.5 CORPORATE RECORDS. . . . . . . . . . . . . . . . . . . .-4-
2.3.6 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . .-4-
2.3.7 EMPLOYEE PLANS . . . . . . . . . . . . . . . . . . . . .-4-
2.3.8 CORPORATE NAME . . . . . . . . . . . . . . . . . . . . .-4-
2.3.9 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . .-4-
2.3.10. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-4-
2.3.11. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-4-
2.3.12. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-5-
2.4 TRANSFER OF ASSETS TO CHANCELLOR. . . . . . . . . . . . . . . .-5-
2.4.1 FCC LICENSES . . . . . . . . . . . . . . . . . . . . . .-5-
2.4.2 OTHER GOVERNMENTAL AUTHORIZATIONS. . . . . . . . . . . .-5-
2.4.3 TANGIBLE PERSONAL PROPERTY . . . . . . . . . . . . . . .-5-
2.4.4 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . .-5-
2.4.5 INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . .-5-
2.4.6 STATION RECORDS. . . . . . . . . . . . . . . . . . . . .-5-
2.4.7 MANUFACTURER/VENDOR WARRANTIES . . . . . . . . . . . . .-6-
i
<PAGE>
2.4.8 REAL ESTATE. . . . . . . . . . . . . . . . . . . . . . .-6-
2.4.9 ALL OTHER CALIFORNIA STATION ASSETS. . . . . . . . . . .-6-
2.5 EXCLUDED CALIFORNIA ASSETS. . . . . . . . . . . . . . . . . . .-6-
2.5.1 CASH . . . . . . . . . . . . . . . . . . . . . . . . . .-6-
2.5.2 RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . .-6-
2.5.3 CONSUMED PROPERTY. . . . . . . . . . . . . . . . . . . .-6-
2.5.4 TERMINATED CONTRACTS . . . . . . . . . . . . . . . . . .-6-
2.5.5 CORPORATE RECORDS. . . . . . . . . . . . . . . . . . . .-6-
2.5.6 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . .-7-
2.5.7 EMPLOYEE PLANS . . . . . . . . . . . . . . . . . . . . .-7-
2.5.8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-7-
2.5.9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-7-
2.5.10. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-7-
2.5.11. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-7-
2.5.12. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-7-
2.6 PERMITTED LIENS.. . . . . . . . . . . . . . . . . . . . . . . .-7-
2.6.1 FLORIDA STATIONS . . . . . . . . . . . . . . . . . . . .-7-
2.6.2 CALIFORNIA STATION . . . . . . . . . . . . . . . . . . .-7-
Section 3. CONSIDERATION.. . . . . . . . . . . . . . . . . . . . . . . . .-7-
3.1 CONSIDERATION FROM CHANCELLOR.. . . . . . . . . . . . . . . . .-7-
3.1.1 FLORIDA AGREEMENT. . . . . . . . . . . . . . . . . . . .-7-
3.1.2 FLORIDA AGREEMENT FAILS TO CLOSE . . . . . . . . . . . .-8-
3.2 CONSIDERATION FROM ARS. . . . . . . . . . . . . . . . . . . . .-8-
3.3 ADJUSTMENTS TO CASH PAYMENTS. . . . . . . . . . . . . . . . . .-8-
3.3.1 ADJUSTMENTS FOR CALIFORNIA STATION OPERATIONS. . . . . .-8-
3.3.2 ADJUSTMENTS FOR FLORIDA STATION OPERATIONS.. . . . . . .-8-
3.3.3 DEFINITION OF BUYER AND SELLER.. . . . . . . . . . . . .-8-
3.3.4 ITEMS SUBJECT TO ADJUSTMENT. . . . . . . . . . . . . . .-9-
3.3.5 AD VALOREM OF REAL ESTATE TAXES. . . . . . . . . . . . .-9-
3.3.6 DISPUTE PROCEDURE FOR ALLOCATIONS. . . . . . . . . . . .-9-
3.4 ALLOCATION OF CONSIDERATION. . . . . . . . . . . . . . . . . -10-
3.4.1 CALIFORNIA STATION'S BARTER AND TRADE. . . . . . . . . -10-
3.4.2 FLORIDA STATIONS' BARTER AND TRADE.. . . . . . . . . . -10-
Section 4. Assumption of Obligations . . . . . . . . . . . . . . . . . . -10-
4.1 CALIFORNIA ASSUMED LIABILITIES. . . . . . . . . . . . . . . . -10-
4.2 CALIFORNIA RETAINED LIABILITIES. . . . . . . . . . . . . . . -10-
4.3 FLORIDA ASSUMED LIABILITIES.. . . . . . . . . . . . . . . . . -11-
4.4 FLORIDA RETAINED LIABILITIES. . . . . . . . . . . . . . . . . -11-
ii
<PAGE>
Section 5. Escrow Deposits . . . . . . . . . . . . . . . . . . . . . . . -11-
5.1 CALIFORNIA ESCROW.. . . . . . . . . . . . . . . . . . . . . . -11-
5.2 FLORIDA ESCROW. . . . . . . . . . . . . . . . . . . . . . . . -11-
Section 6. Government Consents . . . . . . . . . . . . . . . . . . . . . -12-
6.1 FCC CONSENT.. . . . . . . . . . . . . . . . . . . . . . . . . -12-
6.2 FCC APPLICATIONS. . . . . . . . . . . . . . . . . . . . . . . -12-
6.3 FILINGS.. . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
Section 7. Local Marketing Agreements. . . . . . . . . . . . . . . . . . -12-
7.1 CALIFORNIA LOCAL MARKETING AGREEMENT. . . . . . . . . . . . . -12-
7.2 FLORIDA LOCAL MARKETING AGREEMENT.. . . . . . . . . . . . . . -13-
Section 8. Collection of Accounts Receivable . . . . . . . . . . . . . . -13-
8.1 CALIFORNIA ACCOUNTS RECEIVABLE. . . . . . . . . . . . . . . . -13-
8.2 FLORIDA ACCOUNTS RECEIVABLE.. . . . . . . . . . . . . . . . . -14-
Section 9. Third Party Consents. . . . . . . . . . . . . . . . . . . . . -15-
9.1 CALIFORNIA CONSENTS.. . . . . . . . . . . . . . . . . . . . . -15-
9.2 FLORIDA CONSENTS. . . . . . . . . . . . . . . . . . . . . . . -15-
9.3 FAILURE TO OBTAIN CONSENTS. . . . . . . . . . . . . . . . . . -15-
Section 10. Representations and Warranties of Chancellor. . . . . . . . . -15-
10.1 ORGANIZATION AND STANDING.. . . . . . . . . . . . . . . . . . -15-
10.2 AUTHORIZATION AND BINDING OBLIGATION. . . . . . . . . . . . . -16-
10.3 QUALIFICATION . . . . . . . . . . . . . . . . . . . . . . . . -16-
10.4 ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS. . . . -16-
10.5 LITIGATION: COMPLIANCE WITH LAW. . . . . . . . . . . . . . . -16-
10.6 BROKER/FINDER FEES. . . . . . . . . . . . . . . . . . . . . . -16-
10.7 REPRESENTATIONS AND WARRANTIES AS TO THE FLORIDA STATIONS.. . -17-
Section 11. Representation and Warranties of ARS. . . . . . . . . . . . . -17-
11.1 ORGANIZATION AND STANDING . . . . . . . . . . . . . . . . . . -17-
11.2 AUTHORIZATION AND BINDING OBLIGATION. . . . . . . . . . . . . -17-
11.3 QUALIFICATION . . . . . . . . . . . . . . . . . . . . . . . . -17-
11.4 ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS. . . . -17-
11.5 LITIGATION: COMPLIANCE WITH LAW. . . . . . . . . . . . . . . -17-
11.6 BROKER/FINDER FEES. . . . . . . . . . . . . . . . . . . . . . -18-
11.7 REPRESENTATIONS AND WARRANTIES AS TO THE CALIFORNIA STATION.. -18-
iii
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Section 12. Covenants of Chancellor . . . . . . . . . . . . . . . . . . . -18-
12.1 CONDUCT OF STATION: . . . . . . . . . . . . . . . . . . . . . -18-
12.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
12.3 NO INCONSISTENT ACTION. . . . . . . . . . . . . . . . . . . . -20-
12.4 UPDATING OF SCHEDULES . . . . . . . . . . . . . . . . . . . . -20-
12.5 ENFORCEMENT OF AGREEMENTS . . . . . . . . . . . . . . . . . . -20-
12.6 FCC REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . -20-
12.7 NOTIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . -21-
12.8 POST-CLOSING ACCESS . . . . . . . . . . . . . . . . . . . . . -21-
12.9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
Section 13. Covenants of ARS. . . . . . . . . . . . . . . . . . . . . . . -21-
13.1 CONDUCT OF STATION. . . . . . . . . . . . . . . . . . . . . . -21-
13.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
13.3 NO INCONSISTENT ACTION. . . . . . . . . . . . . . . . . . . . -23-
13.4 UPDATING OF SCHEDULES.. . . . . . . . . . . . . . . . . . . . -23-
13.5 ENFORCEMENT OF AGREEMENTS. . . . . . . . . . . . . . . . . . -23-
13.6 FCC REPORTS.. . . . . . . . . . . . . . . . . . . . . . . . . -24-
13.7 NOTIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . -24-
13.8 POST-CLOSING ACCESS.. . . . . . . . . . . . . . . . . . . . . -24-
13.9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
Section 14. Joint Covenants . . . . . . . . . . . . . . . . . . . . . . . -24-
14.1 CONFIDENTIALITY.. . . . . . . . . . . . . . . . . . . . . . . -24-
14.2 COOPERATION.. . . . . . . . . . . . . . . . . . . . . . . . . -25-
14.3 CONTROL OF STATIONS.. . . . . . . . . . . . . . . . . . . . . -25-
14.4 BULK SALES LAWS.. . . . . . . . . . . . . . . . . . . . . . . -25-
14.5 PUBLIC ANNOUNCEMENTS. . . . . . . . . . . . . . . . . . . . . -25-
14.6 HART-SCOTT-RODINO.. . . . . . . . . . . . . . . . . . . . . . -25-
14.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . -26-
Section 15. Conditions of Closing by Chancellor . . . . . . . . . . . . . -26-
15.1 REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . -26-
15.2 COMPLIANCE WITH AGREEMENT.. . . . . . . . . . . . . . . . . . -26-
15.3 THIRD PARTY CONSENTS AND APPROVALS; ESTOPPEL CERTIFICATES . . -26-
15.4 CLOSING CERTIFICATES. . . . . . . . . . . . . . . . . . . . . -26-
15.5 GOVERNMENTAL CONSENTS.. . . . . . . . . . . . . . . . . . . . -26-
15.6 ADVERSE PROCEEDINGS.. . . . . . . . . . . . . . . . . . . . . -27-
15.7 CLOSING DOCUMENTS.. . . . . . . . . . . . . . . . . . . . . . -27-
iv
<PAGE>
Section 16. Conditions of Closing by ARS. . . . . . . . . . . . . . . . . -27-
16.1 REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . -27-
16.2 COMPLIANCE WITH AGREEMENT.. . . . . . . . . . . . . . . . . . -27-
16.3 THIRD PARTY CONSENTS AND APPROVALS; ESTOPPEL CERTIFICATES . . -27-
16.4 CLOSING CERTIFICATES. . . . . . . . . . . . . . . . . . . . . -28-
16.5 GOVERNMENTAL APPROVAL.. . . . . . . . . . . . . . . . . . . . -28-
16.6 ADVERSE PROCEEDINGS.. . . . . . . . . . . . . . . . . . . . . -28-
16.7 CLOSING DOCUMENTS.. . . . . . . . . . . . . . . . . . . . . . -28-
Section 17. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
17.1 TIME AND PLACE. . . . . . . . . . . . . . . . . . . . . . . . -28-
17.2 DELIVERIES BY CHANCELLOR. . . . . . . . . . . . . . . . . . . -28-
17.3 DELIVERY BY ARS.. . . . . . . . . . . . . . . . . . . . . . . -29-
17.4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
Section 18. Survival of Representations and Warranties. . . . . . . . . . -30-
18.1 REPRESENTATIONS AND WARRANTIES OF CHANCELLOR. . . . . . . . . -30-
18.2 REPRESENTATIONS AND WARRANTIES OF ARS.. . . . . . . . . . . . -30-
Section 19. Indemnification . . . . . . . . . . . . . . . . . . . . . . . -30-
19.1 INDEMNIFICATION BY CHANCELLOR.. . . . . . . . . . . . . . . . -30-
19.2 INDEMNIFICATION BY ARS. . . . . . . . . . . . . . . . . . . . -30-
19.3 LIMITATION ON REIMBURSEMENT . . . . . . . . . . . . . . . . . -31-
19.4 PROCEDURE FOR INDEMNIFICATION.. . . . . . . . . . . . . . . . -31-
Section 20. Termination . . . . . . . . . . . . . . . . . . . . . . . . . -32-
20.1 RIGHT TO TERMINATE. . . . . . . . . . . . . . . . . . . . . . -32-
20.2 LIQUIDATED DAMAGES/SPECIFIC PERFORMANCE . . . . . . . . . . . -33-
Section 21. Expenses, Transfer Taxes, and Fees. . . . . . . . . . . . . . -34-
21.1 EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
21.2 TRANSFER TAXES AND SIMILAR CHARGES. . . . . . . . . . . . . . -34-
21.3 GOVERNMENTAL FILING OR GRANT FEES.. . . . . . . . . . . . . . -34-
Section 22. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . -34-
22.1 RISK OF LOSS. . . . . . . . . . . . . . . . . . . . . . . . . -34-
22.2 ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . -34-
22.3 AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . -35-
22.4 HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
22.5 GOVERNING LAW.. . . . . . . . . . . . . . . . . . . . . . . . -35-
22.6 NOTICES.. . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
22.7 SCHEDULES.. . . . . . . . . . . . . . . . . . . . . . . . . . -36-
22.8 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . -36-
v
<PAGE>
22.9 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . -36-
22.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . -36-
22.11 BINDING AGREEMENT . . . . . . . . . . . . . . . . . . . . . . -36-
22.12 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . -37-
vi
<PAGE>
EXCHANGE AGREEMENT
This Exchange Agreement is made effective as of July ___, 1996 by and among
America Radio Systems Corporation, a Delaware corporation ("ARS"), and
Chancellor Radio Broadcasting Company, a Delaware corporation ("Chancellor").
RECITALS
WHEREAS, ARS is a party to a certain Asset Purchase Agreement dated March
26, 1996 between ARS and Fuller-Jeffrey Broadcasting Companies, Inc. ("FBC")
pursuant to which ARS has purchased substantially all of FBC's assets used or
useful in the operation of AM broadcast station KSTE, Rancho Cordova, California
(the "California Station"), including the related KSTE broadcast licenses and
authorizations issued by the Federal Communications Commission ("FCC"). That
Asset Purchase Agreement hereafter is referred to as the "California Agreement".
WHEREAS, Chancellor is a party to a certain Asset Purchase Agreement, dated
May 14, 1996 among Chancellor and Chancellor Broadcasting Company and
OmniAmerica Group, WAPE-FM License Partnership, WFYV-FM License Partnership,
WEAT-AM License Partnership, WEAT-FM License Partnership, WXXL License
Partnership, WOLL License Partnership and WJHM-FM License Partnership
(collectively, "Omni") contemplating, INTER ALIA, the purchase by Chancellor of
substantially all of Omni's assets used or useful in the operation of Stations
WEAT AM and FM, West Palm Beach, Florida, and Station WOLL (FM), Riviera Beach,
Florida (collectively, the "Florida Stations"), including the related FCC
broadcast licenses and authorizations. That Asset Purchase Agreement is
hereafter referred to as the "Florida Agreement".
WHEREAS, Chancellor and ARS desire to exchange the assets of the Florida
Stations for the assets of the California Station plus a cash payment by ARS as
provided herein.
WHEREAS, the parties intend the exchange of the Florida Stations and the
California Station to qualify as a tax free exchange of like-kind assets
pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended (the
"Code");
WHEREAS, effective August 1, 1996, (the "LMA Commencement Date"), (i)
Chancellor and ARS shall enter into Local Marketing Agreements ("LMAs") with
respect to the Florida Stations ("Florida Stations LMA"); and (ii) Chancellor
and ARS shall enter into a LMA with respect to the California Station
("California Station LMA").
Now, therefore, in contemplation of the recitals set out above and in
consideration of the mutual covenants and agreements contained herein, the
parties, intending to be contractually bound, agree as follows:
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SECTION 1. ASSET PURCHASE AGREEMENTS
1.1 CALIFORNIA AGREEMENT. ARS has complied in a timely fashion with
all material requirements of the California Agreement and has acquired the
assets of the California Station from FBC in the manner contemplated in the
California Agreement. ARS did not amend in any material respect the California
Agreement or waive any right thereunder and shall not waive any continuing right
thereunder without the prior written consent of Chancellor. This prior written
consent shall not be unreasonably withheld by Chancellor. ARS shall enforce any
and all of its material rights under the California Agreement.
1.2 FLORIDA AGREEMENT. Chancellor shall comply in a timely fashion
with all material requirements of the Florida Agreement and shall use its
reasonable best efforts to acquire the assets of the Florida Stations from Omni
at the earliest practicable time and in the manner contemplated in the Florida
Agreement. Chancellor shall not amend in any material respect the Florida
Agreement or waive any right thereunder without the prior written consent of
ARS. This prior written consent shall not be unreasonably withheld by ARS.
Chancellor shall enforce any and all of its material rights under the Florida
Agreement.
SECTION 2. EXCHANGE OF ASSETS
2.1 TAX FREE EXCHANGE. The parties intend for this transaction to
qualify as a tax-free exchange under Section 1031 of the Code. In order to
attain this goal, the parties will, to the extent possible, exchange (i)
depreciable personal property in the same General Asset Class or Product Class,
as those terms are used in Treas. Regulation 1.1031(a)-2(b); and (ii) non-
depreciable personal property and intangible personal property for other
property of a like kind.
2.2 TRANSFER OF ASSETS TO ARS. Subject to the terms, conditions and
limitations contained herein, on the Closing Date as defined in Section 13.1,
Chancellor shall convey to ARS and ARS shall acquire from Chancellor (to the
extent Chancellor acquires the same from Omni) all of the following assets,
properties, interests and rights (the "Florida Assets") free and clear of liens
and encumbrances except the Florida Permitted Liens allowed under Section 2.6.1:
2.2.1 FCC LICENSES. All licenses, permits, special temporary
authority, program test authority and authorizations of any type whatsoever
issued by the FCC, and any pending applications thereof, and used in connection
with the Florida Stations (the "Florida Licenses"), including those
authorizations for the Florida Stations identified in the pertinent portions of
Schedule 2.1.1 of this Agreement and any renewals or modifications thereof;
2.2.2 OTHER GOVERNMENTAL AUTHORIZATIONS. All licenses,
permits, and other authorizations of any nature whatsoever issued by a
governmental authority and used in the
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<PAGE>
operation of the Florida Stations;
2.2.3 TANGIBLE PERSONAL PROPERTY. 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
Chancellor's rights therein, owned, leased or held by Chancellor and used in
connection with the operations of the Florida Stations, including but not
limited to those items described or listed in Schedule 2.2.3, together with any
replacements thereof and additions thereto, made before the Closing Date, and
less any retirements or dispositions thereof made before the Closing Date in the
ordinary course of business;
2.2.4 CONTRACTS. All contracts, agreements, leases and
legally binding contractual rights of any kind, written or oral, relating to the
operation of the Florida Stations ("Florida Contracts"), listed in Schedule
2.2.4 or entered into before the Closing Date in the ordinary course of business
of the Florida Stations;
2.2.5 INTELLECTUAL PROPERTY. All trademarks, trade names,
service marks (including the Call Signs WEAT, WEAT-FM and WOLL), franchises,
copyrights, Internet domain names and addresses, including registrations and
applications for registration of any of them, computer software programs and
programming material of whatever form or nature, jingles, slogans, the Florida
Stations' logos and all other logos or licenses to use same and all other
intangible property rights of Chancellor, which are used exclusively in
connection with the operation of the Florida Stations, including but not limited
to those listed in Schedule 2.2.5 (collectively, the "Florida Intellectual
Property") together with any associated good will and any additions thereto
before the Closing Date;
2.2.6 STATION RECORDS. All of the files, documents, records,
and books of account relating to the operation of the Florida Stations or to the
Florida Assets, including without limitation the Florida Stations' public files,
programming information and studies, technical information and engineering data,
news and advertising studies or consulting reports, marketing studies,
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);
2.2.7 MANUFACTURER/VENDOR WARRANTIES. All manufacturer's and
vendors' warranties relating to items included in the Florida Assets and all
similar rights against third parties relating to items included in the Florida
Assets;
2.2.8 REAL ESTATE. All real property used in operating the
Florida Stations together with all appurtenant easements thereunto and all
structures, fixtures and improvements located thereon as more fully described in
Schedule 2.2.8, together with any additions thereto before the Closing Date
("the Florida Real Estate"); provided however that the
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<PAGE>
studios for Station WOLL located on Blue Heron Boulevard in Riviera Beach,
Florida shall not be conveyed to ARS and are excluded from the Florida Real
Estate, as Omni is in the process of donating them to the State of Florida.
2.2.9 ALL OTHER FLORIDA STATION ASSETS. Except for Excluded
Assets, such other assets, properties, interests and rights that are used
exclusively in connection with the operation of the Florida Stations or that are
located as of the Closing Date on the Florida Real Estate.
2.3 EXCLUDED FLORIDA ASSETS. Notwithstanding anything to the
contrary contained herein, it is expressly understood and agreed that the
Florida Assets shall not include the following assets along with all rights,
title and interest therein (the "Excluded Florida Assets"):
2.3.1 CASH. All cash, marketable securities and cash
equivalents of Chancellor on hand and/or in banks;
2.3.2 RECEIVABLES. All cash accounts receivable or notes
receivable of Chancellor;
2.3.3 CONSUMED PROPERTY. All tangible and intangible
personal property related to the Florida Stations disposed of or consumed in the
ordinary course of business of Chancellor or Omni before the Closing Date, or as
permitted hereunder;
2.3.4 TERMINATED CONTRACTS. All non-assumed Contracts or
Contracts that have terminated or expired prior to the Closing Date in the
ordinary course of business of Chancellor or Omni or ARS as permitted hereunder;
2.3.5 CORPORATE RECORDS. Chancellor's corporate seal, minute
books, charter documents, corporate stock record book and such other books and
records as pertain to the organization, existence or share capitalization of
Chancellor and duplicate copies of all books and records transferred to ARS
hereunder as are necessary to enable Chancellor to file its tax returns and
reports, as well as any other contracts, records or materials relating to
Chancellor or its business and not involving or relating to the Florida Assets
or the operation or operations of the Florida Stations;
2.3.6 INSURANCE. Contracts of insurance and all insurance
proceeds or claims made by Chancellor;
2.3.7 EMPLOYEE PLANS. 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 Chancellor;
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<PAGE>
2.3.8 CORPORATE NAME. Any right to use the names
"Chancellor," "Chancellor Broadcasting Company," or "Chancellor Radio
Broadcasting Company" and any variations thereof;
2.3.9 EXCLUDED ASSETS. Those specific assets identified on
the Excluded Assets Schedule attached to this Agreement as Schedule 2.3.9;
2.3.10 All of Chancellor's rights in and to all causes of
action;
2.3.11 All tax refunds relating to the period prior to the
Closing; and
2.3.12 All other assets or Contracts, including but not
limited to those assets or Contracts associated with the Florida Agreement, that
are not specifically listed in this Agreement as the Florida Assets or used or
useful, as determined by Chancellor, in the operation or operations of the
Florida Stations.
2.4 TRANSFER OF ASSETS TO CHANCELLOR. Subject to the terms,
conditions and limitations contained herein, on the Closing Date, ARS shall
convey to Chancellor and Chancellor shall acquire from ARS ( to the extent ARS
acquires the same from FBC) all of the following assets, properties, interests
and rights (the "California Assets") free and clear of liens and encumbrances
except the California Permitted Liens under Section 2.6.2:
2.4.1 FCC LICENSES. All licenses, permits, special temporary
authority, program test authority and authorizations of any type whatsoever
issued by the FCC and any pending applications thereof, and used in connection
with the California Station (the "California Licenses"), including those
authorizations for the California Station identified in Schedule 2.4.1 to the
California Agreement and any renewals or modifications thereof.
2.4.2 OTHER GOVERNMENTAL AUTHORIZATIONS. All licenses,
permits, and other authorizations of any nature whatsoever issued by a
governmental authority and used in the operation of the California Station.
2.4.3 TANGIBLE PERSONAL PROPERTY. 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
ARS's rights therein, owned, leased or held by ARS and used in connection with
the operations of the California Station, including but not limited to those
items described or listed in Schedule 2.4.3, together with any replacements
thereof and additions thereto, made before the Closing Date, and less any
retirements or dispositions thereof made before the Closing Date in the ordinary
course of business.
2.4.4 CONTRACTS. All contracts, agreements, leases and
legally binding contractual rights of any kind, written or oral, relating to the
operation of the California Station ("California Contracts"), listed in Schedule
2.4.4 or entered into before the Closing Date in the ordinary course of business
of the California Station.
-5-
<PAGE>
2.4.5 INTELLECTUAL PROPERTY. All trademarks, trade names,
service marks (including the Call Sign KSTE), 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 California Station's logos and all other logos or licenses to use
same and all other intangible property rights of ARS, which are used exclusively
in connection with the operation of the California Station, including but not
limited to those listed Schedule 2.4.5 (collectively, the "California
Intellectual Property") together with any associated good will and any additions
thereto before the Closing Date;
2.4.6 STATION RECORDS. All of the files, documents, records,
and books of account relating to the operation of the California Station or to
the California Assets, including without limitation the California Station's
public files, programming information and studies, technical information and
engineering data, news and advertising studies or consulting reports, marketing
studies, 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 California Asset;
2.4.7 MANUFACTURER/VENDOR WARRANTIES. All manufacturers' and
vendors' warranties relating to items included in the California Assets and all
similar rights against third parties relating to items included in the
California Assets;
2.4.8 REAL ESTATE. All real property used in operating the
California Station together with all appurtenant easements thereunto and all
structures, fixtures and improvements located thereon as more fully described in
Schedule 2.4.8, together with any additions thereto before the Closing Date (the
"California Real Estate"); and
2.4.9 ALL OTHER CALIFORNIA STATION ASSETS. Except for
Excluded California Assets, such other assets, properties, interests and rights
that are used exclusively in connection with the operation of the California
Station or that are located as of the Closing Date on the California Real
Estate.
2.5 EXCLUDED CALIFORNIA ASSETS. Notwithstanding anything to the
contrary contained herein, it is expressly understood and agreed that the
California Assets shall not include the following assets along with all rights,
title and interest therein (the "Excluded California Assets"):
2.5.1 CASH. All cash, marketable securities and cash
equivalents of ARS on hand and/or in banks;
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<PAGE>
2.5.2 RECEIVABLES. All cash accounts receivable or notes
receivable of ARS;
2.5.3 CONSUMED PROPERTY. All tangible and intangible
personal property related to the California Station disposed of or consumed in
the ordinary course of business of ARS or FBC before the Closing Date, or as
permitted under the terms hereof;
2.5.4 TERMINATED CONTRACTS. All non-assumed Contracts or
Contracts that have terminated or expired prior to the Closing Date in the
ordinary course of business of ARS or FBC and as permitted hereunder;
2.5.5 CORPORATE RECORDS. ARS's corporate seal, minute books,
charter documents, corporate stock record book and such other books and records
as pertain to the organization, existence or share capitalization of ARS and
duplicate copies of all books and records transferred to Chancellor hereunder as
are necessary to enable ARS to file its tax returns and reports as well as any
other records or materials relating to ARS or its business and not involving or
relating to the California Assets or the operation or operations of the
California Station;
2.5.6 INSURANCE. Contracts of insurance and all insurance
proceeds or claims made by ARS;
2.5.7 EMPLOYEE PLANS. 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 ARS; and
2.5.8 Any right, to use the name "ARS" or "American Radio" or
"American Radio Systems Corporation" and any variations thereof;
2.5.9 Those specific assets identified on the Excluded Assets
Schedule attached to this Agreement as Schedule 2.5.9;
2.5.10 All of ARS's rights in and to all causes of action;
2.5.11 All tax refunds relating to the period prior to the
Closing; and
2.5.12 All other assets or Contracts, including but not
limited to those assets or Contracts associated with the California Agreement
that are not specifically listed in this Agreement as the California Assets or
used or useful, as determined by ARS, in the operation or operations of the
California Station.
-7-
<PAGE>
2.6 PERMITTED LIENS.
2.6.1 FLORIDA STATIONS. The Florida Assets shall be conveyed
to ARS free and clear of all liens and encumbrances except the liens and
encumbrances listed in Schedule 2.6.1 (the "Florida Permitted Liens").
2.6.2 CALIFORNIA STATION. The California Assets shall be
conveyed to Chancellor free and clear of all liens and encumbrances except the
liens and encumbrances listed in Schedule 2.6.2 (the "California Permitted
Liens").
SECTION 3. CONSIDERATION.
3.1 CONSIDERATION FROM CHANCELLOR.
3.1.1 FLORIDA AGREEMENT. If the Florida Agreement closes and
Chancellor acquires the Florida Assets, then the consideration delivered by
Chancellor to ARS shall consist of the Florida Assets described in Section 2.2.
Further, and subject to the limitations contained in Section 4.1, Chancellor
shall assume the California Assumed Liabilities.
3.1.2 FLORIDA AGREEMENT FAILS TO CLOSE. If the Florida
Agreement does not close and Chancellor does not acquire the Florida Assets,
then the consideration delivered by Chancellor to ARS for the purchase of the
California Assets shall consist of Seven Million Dollars ($7,000,000), subject
to any adjustments provided herein (the "Alternative California Cash Purchase
Price"). The Alternative California Purchase Price shall be paid to ARS at
Closing by wire transfer of immediately available funds. Further and subject to
the limitations contained in Section 4.1, Chancellor shall assume the California
Assumed Liabilities.
3.2 CONSIDERATION FROM ARS.
The consideration delivered by ARS to Chancellor shall consist
of:
(a) the California Assets described in Section 2.4 less any
Excluded California Assets described in Section 2.5. Further and subject to
the limitations contained in Section 4.3, ARS shall assume the Florida Assumed
Liabilities; and
(b) the sum of Thirty-three Million Dollars ($33,000,000),
subject to any adjustments provided herein (the "Florida Cash Purchase Price").
This Florida Cash Purchase Price shall be paid to Chancellor at Closing by wire
transfer of immediately available funds.
3.3 ADJUSTMENTS TO CASH PAYMENTS. The cash payment(s) contemplated
in Sections 3.1 and 3.2 shall be adjusted as follows:
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3.3.1 ADJUSTMENTS FOR CALIFORNIA STATION OPERATIONS. Subject
to the California Station LMA to be entered into pursuant to Section 7.1 herein,
income and expenses from the operation of the California Station shall be
allocated to the parties on the principle that (i) ARS shall be entitled to all
income attributable to, and shall be responsible for all expenses arising out
of, the operation of the California Station up to 11:59 PM on the Closing Date
(the "Effective Time") and (ii) Chancellor shall be entitled to all income
attributable to, and shall be responsible for all expenses arising out of, the
operation of the California Station after the Effective Time. Overlapping items
of income and expense shall be prorated as of the Effective Time.
3.3.2 ADJUSTMENTS FOR FLORIDA STATION OPERATIONS. Subject to
the Florida Station LMA to be entered into pursuant to Section 7.2, herein,
income and expenses from the operation of the California Station shall be
allocated to the parties on the principle that (i) ARS shall be entitled to all
income attributable to, and shall be responsible for all expenses arising our
of, the operation of the California Station up to the Effective Time and (ii)
Chancellor shall be entitled to all income attributable to, and shall be
responsible for all expenses arising out of, the operation of the California
Station after the Effective Time. Overlapping items of income and expense shall
be prorated as of the Effective Time.
3.3.3 DEFINITION OF BUYER AND SELLER.
(a) For purposes of Section 3.3.3 - 3.3.6, only, Buyer
means (i) Chancellor with respect to the California Station and (ii) ARS with
respect to the Florida Stations.
(b) For purposes of Section 3.3.3 - 3.3.6, only, Seller
means (i) ARS with respect to the California Station and (ii) Chancellor with
respect to the Florida Stations.
3.3.4 ITEMS SUBJECT TO ADJUSTMENT. Items subject to
adjustment pursuant to Sections 3.3.1 and 3.3.2 include, but are not limited to,
expenses for goods and services received both before and after the Effective
Time, utilities charges, ad valorem, real estate, property and other taxes
(other than income taxes, which shall be Seller's sole responsibility for all
taxable periods ending prior to and including the Closing Date, and those taxes
arising from the sale and transfer of any of the Florida Stations' or the
California Station's assets, which shall be paid as set forth in Section 21.2),
income and expenses under the various assumed contracts (other than Trade
Agreements), prepaid expenses, music and other license fees (including any
retroactive adjustments thereof), wages, salaries, and other employee benefit
expenses (whether such wages, salaries or benefits are current or deferred
expenses) (including, without limitation, liabilities accrued up to the
Effective Time for bonuses, commissions, vacation pay, payroll taxes, workers'
compensation and social security taxes) and rents and similar prepaid and
deferred items.
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3.3.5 AD VALOREM OF REAL ESTATE TAXES. Ad valorem and other
real estate taxes shall be apportioned on the basis of the taxes assessed for
the most recently-completed calendar year, with a reapportionment as promptly as
practicable after the tax rates and real property valuations for the calendar
year in which the Closing occurs can be ascertained. In addition, Buyers shall
be entitled to a credit in this proration process for the amount of any taxes
(or other governmental charges) that are due and payable by Sellers, but are
being contested in good faith in appropriate proceedings and are secured by
Liens on the California Station's or Florida Stations' Assets that have not been
removed as of or before the Closing (but once such amounts are finally
determined, Buyers shall use such credit to remove such liens and return to
Sellers the excess of (i) the amount of such credit MINUS (ii) the amount of
such taxes or other governmental charges as finally determined, or Sellers shall
pay to Buyers the deficiency, as appropriate).
3.3.6 DISPUTE PROCEDURE FOR ALLOCATIONS. Allocation and
proration of the items set forth in Subsection 3.3.4 above shall be made by
Buyers and a statement thereof given to Sellers within thirty (30) days after
the Closing Date. Sellers shall give written notice of any objection thereto
within twenty (20) business days after delivery of such statement, detailing the
reason for such objection and stating the amount of the proposed final
allocation and proration. if a timely objection is made and the parties cannot
reach agreement within thirty (30) days after receipt of the objection as to the
amount of the final allocation and proration, the matter shall be referred to
Arthur Andersen, L.L.P. (the "Independent Auditor") to resolve the matter, whose
decision will be final and binding on the parties, and whose fees and expenses
shall be borne by Buyers and Sellers in accordance with the following: each
party shall pay an amount equal to the sum of all fees and expenses of the
Independent Auditor on a proportional basis taking into account the amount of
the net allocation and proration proposed by each of Buyers and Sellers and the
amount of the final allocation and proration determined by the Independent
Auditor (for example, if Buyers proposed a payment of $10 to Sellers, Sellers
proposed a payment of $100, and the Independent Auditor proposed a payment of
$30, Buyers would pay 20/90ths of the Independent Auditor's fees and Sellers
would pay 70/90ths of those fees based on the $90 in dispute between the
parties).
3.4 ALLOCATION OF CONSIDERATION. The value of the consideration
(including cash) that each party is exchanging under this Exchange Agreement is
Forty Million Dollars ($40,000,000). Seven Million Dollars ($7,000,000) of the
consideration exchanged shall be allocated to the California Assets. The
allocation of consideration among each item included in the California Assets
and the Florida Assets shall be made by Broadcast Investment Analysts, Inc. on
the basis of its independent appraisal of the California Assets and the Florida
Assets. This independent appraisal shall be paid for equally by the parties and
shall be considered binding by the parties. The parties shall use such
appraisal for all purposes, including for purposes of the federal and state
income tax returns.
3.4.1 CALIFORNIA STATION'S BARTER AND TRADE. If the value of
trade, barter and similar arrangements for the sale of advertising time for
other than cash that are assumed by
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Chancellor under this Agreement is $50,000 (or more) greater than the value
of the consideration to be received by Chancellor on or after the California
LMA Commencement Date with respect to the California Station, ARS shall pay
Chancellor the excess (other than the first $50,000) within 30 days after the
California LMA Commencement Date.
3.4.2 FLORIDA STATIONS' BARTER AND TRADE. If the value of
trade, barter and similar arrangements for the sale of advertising time for
other than cash that are assumed by ARS under this Agreement is $150,000 (or
more) greater than the value of the consideration to be received by ARS on or
after the Florida LMA Commencement Date with respect to the Florida Stations,
Chancellor shall pay ARS the excess (other than the first $150,000) within 30
days after the Florida LMA Commencement Date.
SECTION 4. ASSUMPTION OF OBLIGATIONS
4.1 CALIFORNIA ASSUMED LIABILITIES. Subject to the provisions of
this Section 4, and subject to the California Station LMA as set forth in
Section 7.1, hereof, Chancellor shall assume the obligations of ARS arising or
to be performed under such of the California Contracts as are listed in Schedule
4.1 hereto (the "California Assumed Liabilities"). In addition, Chancellor
shall assume ARS's post-closing obligations under Section 8 of the California
Agreement; however, such obligations shall be limited to providing assistance to
ARS and the selling party, and Chancellor shall have no obligation to provide
any payments which ARS may be obligated to make under the California Agreement.
4.2 CALIFORNIA RETAINED LIABILITIES. Notwithstanding anything
contained in this Agreement to the contrary, Chancellor 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 ARS of any nature whatsoever whether accrued,
absolute, contingent or otherwise and whether or not disclosed to Chancellor,
other than the California Assumed Liabilities. All of such liabilities and
obligations shall be referred to herein collectively as the "California Retained
Liabilities".
4.3 FLORIDA ASSUMED LIABILITIES. Subject to the provisions of this
Section 4, ARS shall assume the obligations of Chancellor arising or to be
performed on or after the Closing Date under such of the Florida Contracts as
are listed in Schedule 4.3 hereto (the "Florida Assumed Liabilities"). In
addition, ARS shall assume Chancellor's post-closing obligations under Article
11 of the Florida Agreement, however, such obligations shall be limited to
providing assistance to Chancellor and the selling party, and ARS shall have no
obligation to provide any payments which Chancellor may be obligated to make
under the Florida Agreement.
4.4 FLORIDA RETAINED LIABILITIES. Notwithstanding anything contained
in this Agreement to the contrary, ARS expressly does not, and shall not, assume
or agree to pay,
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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 Chancellor of any nature whatsoever whether accrued, absolute,
contingent or otherwise and whether or not disclosed to ARS, other than the
Florida Assumed Liabilities. All such liabilities and obligations shall be
referred to herein collectively as the "Florida Retained Liabilities".
SECTION 5. ESCROW DEPOSITS
5.1 CALIFORNIA ESCROW. Upon execution of this Agreement, Chancellor
shall deposit Three Hundred Fifty Thousand Dollars ($350,000) (the "California
Cash Deposit") or an original, irrevocable letter of credit, which should be in
a form reasonably satisfactory to ARS, issued by Banker's Trust Company for a
sum equal to the California Cash Deposit, with Star Media Group to be held
pursuant to the terms of the California Escrow Agreement appended hereto as
Exhibit 5.1. The California Deposit plus accrued interest shall be returned to
Chancellor at Closing. Further, if this Agreement terminates for any reason
other than a material breach of the Agreement by Chancellor, the California
Deposit plus accrued interest shall be returned to Chancellor.
5.2 FLORIDA ESCROW. Upon Execution of this Agreement, ARS shall
deposit Two Million Dollars ($2,000,000) (the "Florida Cash Deposit") or an
original, irrevocable letter of credit, which should be in a form reasonably
satisfactory to Chancellor, issued by Bank of New York for a sum equal to the
Florida Cash Deposit with Star Media Group to be held pursuant to the terms of
the Florida Escrow Agreement appended hereto as Exhibit 4.2. The Florida
Deposit plus accrued interest shall be paid to Chancellor at Closing and
credited against the cash payment required under Section 2.5 of this Agreement.
If this Agreement terminates for any reason other than a material breach of the
Agreement by ARS, the Florida Deposit plus accrued interest shall be returned to
ARS.
SECTION 6. GOVERNMENT CONSENTS
6.1 FCC CONSENT. The closing on the purchase and sale of the
California Assets and the Florida Assets is subject to and conditioned upon (a)
the parties obtaining the prior consent of the FCC to the transaction
contemplated in this Agreement ("FCC Consent") and (b) the FCC action granting
its consent becoming a "Final Order," IN ESSENCE, an action unappealable by
virtue of (x) the expiration of the period within which a timely request for
appeal, review or reconsideration could be filed and (y) the expiration of the
period within which the FCC or a Court could review the action on its own
motion, such periods having expired without the filing of any request for
appeal, review or reconsideration and without the review of the action on the
FCC's or Court's own motion.
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6.2 FCC APPLICATIONS. Within 10 days after the execution of this
Agreement or such earlier time as shall be agreed to by all of the parties
hereto, Chancellor and ARS shall file the applications with the FCC for FCC
Consent ("FCC Applications") to assign the California Station License to
Chancellor and the Florida Stations Licenses to ARS. Chancellor and ARS
shall prosecute the FCC Applications with all reasonable diligence and
otherwise use their best efforts to obtain the FCC Consents as expeditiously
as practicable (but neither Chancellor nor ARS shall have any obligation to
satisfy complainants or the FCC by taking any steps which would have a
material adverse effect upon Chancellor or ARS, or upon any of their
Affiliates). If the FCC Consents imposes any condition on Chancellor or ARS
such party shall use its reasonable efforts to comply with such condition;
provided, however, that neither Chancellor nor ARS 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 of judicial
review is sought with respect to the FCC Consents, 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 Section 20 hereof.
6.3 FILINGS. As promptly as practicable after the execution of
this Agreement, Chancellor and ARS 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. These efforts
shall include, without limitation, filing any reports or notifications that
may be required to be filed by Chancellor and ARS 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. Each
party 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.
SECTION 7. LOCAL MARKETING AGREEMENTS
7.1 CALIFORNIA LOCAL MARKETING AGREEMENT. On or before August 1,
1996, the parties shall enter into a California Local Marketing Agreement
(the "California Station LMA") substantially in the form of the LMA appended
hereto as Exhibit 7.1.
7.2 FLORIDA LOCAL MARKETING AGREEMENT. On or before August 1,
1996, the parties shall enter into a Florida Local Marketing Agreement (the
"Florida Stations LMA") substantially in the form of the LMA appended hereto
as Exhibit 7.2. To the extent that Omni is required to be a party to the
Florida Stations LMA to effectuate its purposes, Chancellor shall use its
commercially reasonable efforts to obtain Omni's execution and performance of
the Florida Stations LMA and to assign or provide on terms reasonably
satisfactory to ARS, as soon as practicable after the execution of the
Agreement, but no sooner than August 1, 1996, the rights of
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Chancellor under the Local Marketing Agreement, if executed, currently being
negotiated by Chancellor and Omni with respect to the Florida Stations. ARS
shall not have any claim or right, including, without limitation, any right
to terminate this Agreement or any claim for damages, to the extent that
ARS's operation of the Florida Stations under or in accordance with the
Florida Stations LMA (i) causes any representation or warranty of Chancellor
to be rendered inaccurate or (ii) conflicts with any covenant to be complied
with by Chancellor on or prior to the Closing Date.
SECTION 8. COLLECTION OF ACCOUNTS RECEIVABLE
8.1 CALIFORNIA ACCOUNTS RECEIVABLE.
(a) Within five (5) days after the commencement of the
California Station LMA, ARS shall deliver to Chancellor a full and detailed
list of the accounts receivable relating to the California Station and its
operations prior to the Commencement Date ("California Accounts Receivable"),
designating with respect to each account receivable any portion thereof
attributable to services to be rendered by Chancellor after the Commencement
Date. The California Accounts Receivable shall not be purchased by
Chancellor and Chancellor agrees, however, that for a period of 90 days
following the Commencement Date (the "Collection Period"), it shall act as
ARS's agent for purposes of the collection of the California Accounts
Receivable and shall use reasonable efforts to collect the California
Accounts Receivable for the benefit of the ARS. Chancellor shall remit to
the ARS all amounts collected by the Chancellor for the ARS's benefit fifteen
days after the conclusion of the 90 day collection period. The collection
responsibilities imposed on Chancellor hereunder shall not require the
institution of suit or referral to a collection or similar agency, or the
institution of any proceeding against an account debtor under any bankruptcy,
insolvency, or similar law affecting the rights of creditors generally. Any
of the California Accounts Receivable which shall remain uncollected by
Chancellor at the conclusion of the Collection Period shall remain ARS's
assets and Chancellor's obligations under this Section 8.1 shall terminate.
Chancellor shall have no liability to ARS for the uncollectability of any of
the California Accounts Receivable.
(b) Chancellor agrees that it may not settle, discount
payment of, extend the terms of, or otherwise compromise any of the
California Accounts Receivable, except as consented to in writing by ARS. If
at the Commencement Date or at any time during the Collection Period an
account debtor is in bankruptcy, reorganization or similar proceeding, ARS
will assume the full collection responsibility as to such account and such
account will no longer be deemed a California Account Receivable for purposes
of this Agreement. Following the Commencement Date, Chancellor will give
prompt notice to ARS of any such bankruptcy, reorganization or other
proceeding affecting any debtor of the California Accounts Receivable after
receiving notice thereof.
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(c) During the Collection Period, any and all amounts
paid to Chancellor by an account debtor with respect to an account receivable
shall be applied first to payment of the California Account Receivable,
unless the account debtor disputes such California Account Receivable,
appropriately documents such dispute in writing, and prompt notice (including
all written documentation) of such dispute is given by Chancellor to ARS.
After the end of the Collection Period, Chancellor shall forward to ARS all
payments received that are reasonably identifiable (by invoice number, date
of service or other unambiguous reference) with the California Accounts
Receivable, within twenty (20) days of receipt.
(d) Chancellor does not guarantee the collection of the whole
or any part of the California Accounts Receivable.
8.2 FLORIDA ACCOUNTS RECEIVABLE.
(a) Within five (5) days of the Commencement of the Florida
Stations LMA, Chancellor shall deliver to ARS a full and detailed list of the
accounts receivable relating to the Florida Stations and its operations prior
to the Commencement Date ("Florida Accounts Receivable"), designating with
respect to each account receivable any portion thereof attributable to
services to be rendered by ARS after the Commencement Date. The Florida
Accounts Receivable shall not be purchased by ARS and ARS agrees, however,
that for a period of 90 days following the Commencement Date (the "Collection
Period"), it shall act as Chancellor's agent for purposes of the collection
of the Florida Accounts Receivable and shall use reasonable efforts to
collect the Florida Accounts Receivable for the benefit of the Chancellor.
ARS shall remit to Chancellor all amounts collected by ARS for Chancellor's
benefit fifteen days after the conclusion of the 90 day Collection Period.
The collection responsibilities imposed on ARS hereunder shall not require
the institution of suit or referral to a collection or similar agency, or the
institution of any proceeding against an account debtor under any bankruptcy,
insolvency, or similar law affecting the rights of creditors generally. Any
of the Florida Accounts Receivable which shall remain uncollected by ARS at
the conclusion of the Collection Period shall remain Chancellor's assets and
ARS's obligations under this Section 8.2 shall terminate. ARS shall have no
liability to Chancellor for the uncollectability of any of the Florida
Accounts Receivable.
(b) ARS agrees that it may not settle, discount payment
of, extend the terms of, or otherwise compromise any of the Florida Accounts
Receivable, except as consented to in writing by Chancellor. If at the
Commencement Date or at any time during the Collection Period an account
debtor is in bankruptcy, reorganization or similar proceeding, Chancellor
will assume the full collection responsibility as to such account and such
account will no longer be deemed a Florida Account Receivable for purposes of
this Agreement. Following the Commencement Date, ARS will give prompt notice
to Chancellor of any such bankruptcy, reorganization or other proceeding
affecting any debtor of the Florida Accounts Receivable after receiving
notice thereof.
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(c) During the Collection Period, any and all amounts
paid to ARS by an account debtor with respect to an account receivable shall
be applied first payment to the Florida Accounts Receivable, unless the
account debtor disputes such Florida Account Receivable, appropriately
documents such dispute in writing, and prompt notice (including all written
documentation) of such dispute is given by ARS to Chancellor. After the end
of the Collection Period, ARS shall forward to Chancellor all payments
received that are reasonably identifiable (by invoice number, date of service
or other unambiguous reference) with the Florida Accounts Receivable, within
twenty (20) days.
(d) ARS does not guarantee the collection of the whole or any
part of the Florida Accounts Receivable.
SECTION 9. THIRD PARTY CONSENTS
9.1 CALIFORNIA CONSENTS. ARS shall use its reasonable best
efforts to obtain all third party consents necessary for the conveyance of
the California Assets to Chancellor without the imposition of any conditions
that would be adverse to Chancellor.
9.2 FLORIDA CONSENTS. Chancellor shall use its reasonable best
efforts to obtain all third party consents necessary for the conveyance of
the Florida Assets to ARS without the imposition of any conditions that would
be adverse to ARS.
9.3 FAILURE TO OBTAIN CONSENTS.
(a) If Chancellor fails to obtain any of the Consents
referenced in Section 9.2, Chancellor shall use its reasonable best efforts
(i) to provide ARS the financial and business benefits ARS would have enjoyed
had the consent been given and (ii), upon the request of ARS, to enforce in
its name for the account of ARS any rights that would otherwise have been
available to ARS had the consent been granted.
(b) If ARS fails to obtain any of the Consents
referenced in Section 9.2, ARS shall use its reasonable best efforts (i) to
provide Chancellor the financial and business benefits Chancellor would have
enjoyed had the consent been given and (ii), upon the request of Chancellor,
to enforce in its name for the account of Chancellor any rights that would
otherwise have been available to Chancellor had the consent been granted.
SECTION 10. REPRESENTATIONS AND WARRANTIES OF CHANCELLOR
10.1 ORGANIZATION AND STANDING. Chancellor is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and is qualified to conduct business in the States of Florida and
California.
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10.2 AUTHORIZATION AND BINDING OBLIGATION. Chancellor has all
necessary corporate power and authority to enter into and perform this
Agreement and the transactions contemplated hereby. Chancellor's execution,
delivery and performance of this Agreement and the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate
action on behalf of Chancellor and this Agreement constitutes a valid and
binding obligation of Chancellor, enforceable in accordance with its terms.
10.3 QUALIFICATION. To Chancellor's knowledge, there is no fact,
allegation, condition, or circumstance that could reasonably be expected to
prevent the prompt grant of the FCC Consent. Chancellor knows of no fact
that would, under the Communications Act of 1934, as amended, or the rules,
regulations and policies of the FCC, disqualify Chancellor from becoming the
licensee of either the Florida Stations or the California Station. There are
no proceedings, complaints, notices of forfeiture, claims, or investigations
pending or, to the knowledge of Chancellor threatened against any or in
respect of any of the broadcast stations licensed to Chancellor or its
affiliates that would materially impair the qualifications of Chancellor to
become a licensee of the Florida Stations or the California Station or that
would delay the FCC's processing of the FCC Applications.
10.4 ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS.
Except as set forth in Schedule 10.4 hereof, the execution, delivery and
performance of this Agreement by Chancellor: (a) do not violate or conflict
with any of the terms, conditions or provisions of the Certificate of
Incorporation or By-Laws of Chancellor; (b) do not require the consent of any
third party not affiliated with Chancellor; (c) will not violate any
applicable law, judgment, order, injunction, decree, rule, regulation or
ruling of any governmental authority to which Chancellor is a party; and (d)
will not either alone or with the giving of notice or the passage of time,
violate the terms, conditions or provisions of, or constitute a default
under, any agreement, instrument, license or permit to which Chancellor is
now subject.
10.5 LITIGATION: COMPLIANCE WITH LAW. Except as disclosed in
Schedule 10.5, there is no litigation, administrative action, arbitration or
other proceeding, or petition, complaint or investigation before any court or
governmental body, pending against Chancellor that would adversely affect
Chancellor's ability to perform its obligations pursuant to this Agreement or
the agreements to be executed by Chancellor in connection herewith.
Chancellor 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 its ability to perform
their respective obligations pursuant to this Agreement or the agreements to
be executed in connection herewith.
10.6 BROKER/FINDER FEES. Star Media Group is the sole and
exclusive broker in this transaction. Chancellor has not incurred any
obligation or liability, contingent or otherwise, for brokerage or finders
fees or agents' commissions or other like payment in connection with this
Agreement or the transactions contemplated hereby for which ARS has any
liability.
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Chancellor is solely responsible for Star Media Group's fee.
10.7 REPRESENTATIONS AND WARRANTIES AS TO THE FLORIDA STATIONS.
Chancellor previously has delivered to ARS true, correct and complete copies
of the executed Florida Agreement together will all disclosure schedules,
exhibits, and annexes thereto. With respect to the Florida Stations,
Chancellor to the best of its knowledge, hereby makes (as of the date or
dates on which those representations and warranties were made to Chancellor
by Omni) to ARS each and every of the representations and warranties of Omni
each of which is incorporated herein by reference as though contained herein.
Chancellor makes no additional representations or warranties with respect to
the Florida Stations.
SECTION 11. REPRESENTATION AND WARRANTIES OF ARS
11.1 ORGANIZATION AND STANDING. ARS is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and is qualified to conduct business in the States of Florida and
California.
11.2 AUTHORIZATION AND BINDING OBLIGATION. ARS has all necessary
corporate power and authority to enter into and perform this Agreement and
the transactions contemplated hereby. ARS's execution, delivery and
performance of this Agreement and the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action on behalf
of ARS and this Agreement constitutes a valid and binding obligation of ARS,
enforceable in accordance with its terms.
11.3 QUALIFICATION. To ARS's knowledge, there is no fact,
allegation, condition, or circumstance that could reasonably be expected to
prevent the prompt grant of the FCC Consent. ARS knows of no fact that
would, under the Communications act of 1934, as amended, or the rules,
regulations and policies of the FCC, disqualify ARS from becoming the
licensee of the Florida Stations. There are no proceedings, complaints,
notices of forfeiture, claims, or investigations pending or, to the knowledge
of ARS threatened against any or in respect of any of the broadcast stations
licensed to ARS or its affiliates that would materially impair the
qualifications of ARS to become a licensee of the Florida Stations or remain
the licensee of the California Station or that would delay the FCC's
processing of the FCC Applications.
11.4 ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS.
Except as set forth in Schedule 11.4 hereof, the execution, delivery and
performance of this Agreement by ARS: (a) do not violate or conflict with
any of the terms, conditions or provisions of the Certificate of
Incorporation or By-Laws of ARS; (b) do not require the consent of any third
party not affiliated with ARS; (c) will not violate any applicable law,
judgment, order, injunction, decree, rule, regulation or ruling of any
governmental authority to which ARS is a party; and (d) will not either alone
or with the giving of notice or the passage of time, violate the terms,
conditions or provisions of, or constitute a default under, any agreement,
instrument, license or
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permit to which ARS is now subject.
11.5 LITIGATION: COMPLIANCE WITH LAW. Except as disclosed in
Schedule 11.5, there is no litigation, administrative action, arbitration or
other proceeding, or petition, complaint or investigation before any court or
governmental body, pending against ARS that would adversely affect ARS's
ability to perform its obligations pursuant to this Agreement or the
agreements to be executed by ARS in connection herewith. ARS 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 ARS or its ability to perform its obligations pursuant to
this Agreement or the agreements to be executed in connection herewith.
11.6 BROKER/FINDER FEES. Star Media Group is the sole and
exclusive broker in this transaction. ARS has not incurred any obligation or
liability, contingent or otherwise, for brokerage or finders fees or agents'
commissions or other like payment in connection with this Agreement or the
transactions contemplated hereby for which Chancellor has any liability.
Chancellor is solely responsible for Star Media Group's fee.
11.7 REPRESENTATIONS AND WARRANTIES AS TO THE CALIFORNIA STATION.
ARS previously has delivered to Chancellor true, correct and complete copies
of the executed California Agreement together will all disclosure schedules,
exhibits, and annexes thereto. With respect to the California Station, ARS
to the best of its knowledge, hereby makes to Chancellor each and every of
the representations and warranties contained in the California Agreement,
each of which is incorporated herein by reference as though contained herein.
In addition, ARS makes each and every of the representations and warranties
contained in the California Agreement to Chancellor for the period after the
FBC Closing when ARS acquired the California Station and the Closing Date
hereunder, subject to the California Station LMA.
SECTION 12. COVENANTS OF CHANCELLOR
12.1 CONDUCT OF STATION:
12.1.1 Chancellor covenants and agrees with ARS that
between the date hereof and the Florida Stations LMA Commencement Date
(except as otherwise noted below), Chancellor with respect to the Florida
Stations (to the extent that it is programming the Florida Stations pursuant
to a local marketing agreement with Omni and is authorized under that said
local marketing agreement to do so) shall:
(i) use commercially reasonable efforts to
maintain the Florida Stations present business organization, keep available
the services of the Florida Stations' employees and independent contractors,
preserve the Florida Stations' relationships with the Florida Stations'
customers and others having business relationships with the Florida Stations,
and refrain from materially and adversely changing any of the Florida
Stations'
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business policies including but not limited to advertising (including
substantially the same amount of cash expenditure), marketing, pricing,
purchasing, personnel, sales, and budget policies);
(ii) maintain the Florida Stations' books of
account and records in the usual and ordinary manner and in accordance with
generally accepted accounting principles;
(iii) operate the Florida Stations in the usual
and ordinary course of business in accordance with past practice and conduct
the Florida Stations' business in all material respects in compliance with
the terms of the Florida Licenses and all applicable laws, rules, and
regulations, including, without limitation, the applicable rules and
regulations of the FCC through the Closing Date;
(iv) use, repair, and, if necessary, replace
any of WEAT (AM)/(FM)'s, and WOLL (FM)'s studios and the Florida Stations'
transmission assets in a reasonable manner consistent with historical
practice and maintain its assets in substantially their current condition,
ordinary wear and tear excepted;
(v) maintain appropriate insurance for the
Florida Stations through the Closing Date;
(vi) not incur any debts or obligations to be
performed by ARS pursuant to the Florida Agreement that exceeds Ten-thousand
Dollars ($10,000) individually or Twenty-five Thousand Dollars ($25,000) in
the aggregate through the Closing Date;
(vii) not lease, mortgage, pledge, or subject to
a lien, claim, or encumbrance (other than Permitted Liens ) any of the
Florida Assets or sell or transfer any of the Florida Assets without
replacing such Florida Assets with an asset of substantially the same value
and utility;
(viii) without the prior consent of ARS, which
consent shall not be unreasonably withheld or delayed, (x) not modify or
extend any Florida Stations' Contracts or (y) enter into any new Florida
Stations' Contract the payments under which exceeds Ten-thousand Dollars
($10,000) individually or Twenty-five Thousand Dollars ($25,000) in the
aggregate through the Commencement Date;
(ix) not make or grant any general wage or
salary increase or generally materially modify the Florida Stations'
employees' terms and conditions of employment;
(x) not make any change in the Florida
Stations' accounting principles, methods, or practices followed by it or
depreciation or amortization policies or rates;
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(xi) not make any loans or make any dividends
or distributions other than of Excluded Assets of the Florida Stations;
(xii) other than in the ordinary course of
business, not cancel or compromise any debt or claim, or waive or release any
right, of material value;
(xiii) enforce, in its own name and for the
benefit of ARS, all representations, warranties and covenants of Omni under
the Florida Agreement insofar as such representations, warranties and
covenants affect or relate to the Florida Assets. The quantity, identity,
character, quality of and title to the Florida Assets conveyed by Chancellor
to ARS hereunder shall be substantially the same as the quantity, identity,
character and quality of and title to the assets of the Florida Stations
received by Chancellor from Omni pursuant to the Florida Agreement.
12.1.2 For purposes of compliance with Section 12.1, any
violation of the above-referenced covenants resulting in liabilities to ARS,
in the aggregate, less than the Indemnification Basket as defined in Section
19.3 below, shall not be deemed material. Such liabilities shall nevertheless
constitute Damages for purposes of the indemnification agreement contained in
the Section 19 hereof.
12.2 Chancellor shall give or cause the Florida Stations to (i)
give ARS and ARS's counsel, accountants, engineers and other representatives,
including environmental consultants, reasonable access during normal
business hours to all of Chancellor's properties, books, Contracts, Trade
Agreements, reports and records including financial information and tax
returns relating to the Florida Stations, and to all real estate, buildings
and equipment relating to the Florida Stations, in order that ARS may have
full opportunity to make such investigation at the sole expense of ARS,
including but not limited to, environmental assessments, as it desires of the
affairs of the Florida Stations and (ii) furnish ARS 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 Florida Stations, that ARS may
reasonably request. The rights of ARS under this Section shall not be
exercised in such a manner as to interfere unreasonably with the business of
the Florida Stations.
12.3 NO INCONSISTENT ACTION. Chancellor shall not take any action
that is materially inconsistent with its obligations under this Agreement.
12.4 UPDATING OF SCHEDULES. From time to time prior to the
Closing, Chancellor will supplement or amend the Schedules delivered in
connection herewith with respect to any matter which exists or occurs after
the date of this Agreement and which, if existing or occurring at or prior to
the date of this Agreement, would have been required to be set forth or
described in such Schedules or which is necessary to correct any information
in such Schedules which has been rendered inaccurate thereby. No matter so
disclosed shall affect the
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requirements of Section 16.1, but if the Closing hereunder shall occur, no
said matter disclosed pursuant to Section 12.3 shall have the basis for any
claims for indemnification hereunder.
12.5 ENFORCEMENT OF AGREEMENTS. Chancellor shall use its
reasonable best efforts to perform and carry out all their respective
obligations under, and, if necessary, Chancellor shall seek the specific
performance of the transactions contemplated by the Florida Agreement.
Chancellor shall use its reasonable best efforts to perform and carry out,
and to cause the other parties thereto to perform and carry out, all their
respective obligations under the LMA's relating to the Florida Stations.
12.6 FCC REPORTS. From the Time of Closing on the Florida
Agreement until the Closing Date hereunder, Chancellor shall file on a
current basis until the Closing Date all material reports and documents
required to be filed with the FCC with respect to the Florida Stations'
Licenses. Copies of each such report and document filed between the date
hereof and the Closing Date shall be furnished to ARS promptly after its
filing.
12.7 NOTIFICATION. Chancellor shall promptly notify ARS in writing
of (i) any litigation, arbitration or administrative proceeding pending or,
to its knowledge, threatened against Chancellor which challenges the
transactions contemplated hereby or (ii) the failure of Chancellor, or any
employee or agent of Chancellor to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfy
in any material respect any covenant, condition or agreement to be complied
with or satisfied by it hereunder and (iii) the occurrence of any event that
would entitle ARS to terminate this Agreement pursuant to Section 20. No
matter so disclosed shall affect the requirements of Section 16.1, but if the
Closing hereunder shall occur, no said matter disclosed pursuant to Section
12.3 shall have the basis for any claims for indemnification hereunder.
12.8 POST-CLOSING ACCESS. Chancellor, for a period of five (5)
years following the Closing Date, shall make available during normal business
hours for audit and inspection by ARS and its representatives, for any
reasonable purpose and upon reasonable notice, all records, files, documents
and correspondence transferred to it hereunder relating to the pre-closing
period. Chancellor shall at no time dispose of or destroy any such records,
files, documents and correspondence without giving thirty (30) days prior
notice to ARS to permit ARS, at its expense, to examine, duplicate or take
possession of and title to such records, files, documents and correspondence.
All information, records, files, documents and correspondence made available
or disclosed to ARS under this Section 12.7 shall be kept confidential by ARS.
12.9 Chancellor will use commercially reasonable efforts to obtain
all necessary consents, authorizations, or approvals, in each case, required
for the consummation of the transactions contemplated by this Agreement.
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SECTION 13. COVENANTS OF ARS
13.1 CONDUCT OF STATION:
13.1.1 ARS covenants and agrees with Chancellor that
between the date hereof and the California Station LMA Commencement Date
(except as otherwise noted below), ARS with respect to the California Station
shall:
(i) use commercially reasonable efforts to
maintain the California Station's present business organization, keep
available the services of the California Station's employees and independent
contractors, preserve the California Station's relationships with the
California Station's customers and others having business relationships with
the California Station, and refrain from materially and adversely changing
any of the California Station's business policies including but not limited
to advertising (including substantially the same amount of cash expenditure),
marketing, pricing, purchasing, personnel, sales, and budget policies);
(ii) maintain the California Station's books
of account and records in the usual and ordinary manner and in accordance
with generally accepted accounting principles;
(iii) operate in the usual and ordinary
course of business in accordance with past practice and conduct the
California Station's business in all material respects in compliance with the
terms of the California Licenses and all applicable laws, rules, and
regulations, including, without limitation, the applicable rules and
regulations of the FCC through the Closing Date;
(iv) use, repair, and, if necessary, replace
any California Station studio and transmission assets in a reasonable manner
consistent with historical practice and maintain its assets in substantially
their current condition, ordinary wear and tear excepted;
(v) maintain appropriate insurance for the
California Station through the Closing Date;
(vi) not incur any debts or obligations to
be performed by Chancellor pursuant to the California Agreement that exceeds
Five Thousand Dollars ($5,000) individually or Ten Thousand Dollars ($10,000)
in the aggregate through the Closing Date;
(vii) not lease, mortgage, pledge, or subject
to a lien, claim, or encumbrance (other than Permitted Liens ) any of the
California Assets or sell or transfer any of the California Assets without
replacing such California Assets with an asset of substantially the same
value and utility;
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(viii) without the prior consent of Chancellor, which
consent shall not be unreasonably withheld or delayed, (x) not modify or extend
any California Station Contracts or (y) enter into any new California Station
Contract the payments under which exceeds Five Thousand Dollars ($5,000)
individually or Ten Thousand Dollars ($10,000) in the aggregate through the
Commencement Date;
(ix) not make or grant any general wage or salary increase
or generally materially modify the California Station's employees' terms and
conditions of employment;
(x) not make any change in the California Station's
accounting principles, methods, or practices followed by it or depreciation or
amortization policies or rates;
(xi) not make any loans or make any dividends or
distributions other than of Excluded Assets of the California Station;
(xii) other than in the ordinary course of business, not
cancel or compromise any debt or claim, or waive or release any right, of
material value;
(xiii) ARS shall enforce, in its own name and for the
benefit of Chancellor, all representations, warranties and covenants of FBC
under the California Agreement insofar as such representations, warranties and
covenants affect or relate to the California Assets. The quantity, identity,
character, quality of and title to the California Assets conveyed by ARS to
Chancellor hereunder shall be substantially the same as the quantity, identity,
character and quality of and title to the assets of the California Station
received by ARS from FBC pursuant to the California Agreement.
13.1.2 For purposes of compliance with Section 13.1, any
violation of the above-referenced covenants resulting in liabilities to
Chancellor, in the aggregate, less than the Indemnification Basket as defined
in Section 19.3 below, shall not be deemed material. Such liabilities shall
nevertheless constitute Damages for purposes of the indemnification agreement
contained in Section 19 hereof.
13.2 ARS shall give or cause the California Station to (i) give
Chancellor and Chancellor's counsel, accountants, engineers and other
representatives, including environmental consultants, reasonable access during
normal business hours to all of ARS's properties, books, Contracts, Trade
Agreements, reports and records including financial information and tax returns
relating to the California Station, and to all real estate, buildings and
equipment relating to the California Station, in order that Chancellor may have
full opportunity to make such investigation, including but not limited to,
environmental assessments, as it desires of the affairs of the California
Station and (ii) 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 California Station,
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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 California Station.
13.3 NO INCONSISTENT ACTION. ARS shall not take any action that is
materially inconsistent with its obligations under this Agreement.
13.4 UPDATING OF SCHEDULES. From time to time prior to the Closing,
ARS will supplement or amend the Schedules delivered in connection herewith with
respect to any matter which exists or occurs after the date of this Agreement
and which, if existing or occurring at or prior to the date of this Agreement,
would have been required to be set forth or described in such Schedules or which
is necessary to correct any information in such Schedules which has been
rendered inaccurate thereby. No matter so disclosed shall affect the
requirements of Section 16.1, but if the Closing hereunder shall occur, no said
matter disclosed pursuant to Section 12.3 shall have the basis for any claims
for indemnification hereunder.
13.5 ENFORCEMENT OF AGREEMENTS. ARS shall use its reasonable best
efforts to perform and carry out all their respective obligations under, the FBC
Agreement. ARS shall use its reasonable best efforts to perform and carry out,
and to cause the other parties thereto to perform and carry out, all their
respective obligations under the LMA's relating to the California Station.
13.6 FCC REPORTS. From the Time of Closing on the California Station
until the Closing Date hereunder, ARS shall file on a current basis until the
Closing Date all material reports and documents required to be filed with the
FCC with respect to the California Station Licenses. Copies of each such report
and document filed between the date hereof and the Closing Date shall be
furnished to Chancellor promptly after its filing.
13.7 NOTIFICATION. ARS shall promptly notify Chancellor in writing of
(i) any litigation, arbitration or administrative proceeding pending or, to its
knowledge, threatened against ARS which challenges the transactions contemplated
hereby or (ii) the failure of ARS, or any employee or agent of ARS to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it hereunder and (iii) the
occurrence of any event that would entitle Chancellor to terminate this
Agreement pursuant to Section 20. No matter so disclosed shall affect the
requirements of Section 16.1, but if the Closing hereunder shall occur, no said
matter disclosed pursuant to Section 12.3 shall have the basis for any claims
for indemnification hereunder.
13.8 POST-CLOSING ACCESS. ARS, for a period of five (5) years
following the Closing Date, shall make available during normal business hours
for audit and inspection by Chancellor and its representatives, for any
reasonable purpose and upon reasonable notice, all records, files, documents
and correspondence transferred to it hereunder relating to the pre-
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closing period. ARS shall at no time dispose of or destroy any such records,
files, documents and correspondence without giving thirty (30) days prior
notice to Chancellor to permit Chancellor, at its expense, to examine,
duplicate or take possession of and title to such records, files, documents
and correspondence. All information, records, files, documents and
correspondence made available or disclosed under this Section 13.8 shall be
kept confidential.
13.9 ARS will use commercially reasonable efforts to obtain all
necessary consents, authorizations, or approvals, in each case, required for the
consummation of the transactions contemplated by this Agreement.
SECTION 14. JOINT COVENANTS
Chancellor and ARS covenant and agree that they shall act in accordance
with the following:
14.1 CONFIDENTIALITY. Each of Chancellor and ARS 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 the
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 except to the extent
required or useful in connection with any claim made with respect to the
transactions contemplated by this Agreement or the negotiation thereof.
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 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 government authority (provided the non-disclosing party is given
reasonable prior notice such that it may seek, at its expense, confidential
treatment of the information to be disclosed), (iv) is developed by the
receiving party independently of the disclosure by the disclosing party, (v) is
required to be disclosed under applicable law or rule, as determined by counsel
for the receiving party or (vi) is required to be disclosed in connection with
any sale, in whole or in party of the assets, stock or business of Chancellor or
Chancellor Broadcasting Company or ARS, respectively, provided the recipient of
said information has executed a confidentiality agreement for such a
transaction.
14.2 COOPERATION. Chancellor and ARS 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.
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14.3 CONTROL OF STATIONS. Prior to Closing, Chancellor shall not,
directly or indirectly, control or direct the operations of the California
Station, and ARS shall not, directly or indirectly, control or direct the
operations of the Florida Stations. Such operations, including complete control
over the Florida Stations' or the California Station's programming, employees
and policies, shall be the sole responsibility of current licensees.
14.4 BULK SALES LAWS. Chancellor hereby waives compliance by ARS
and ARS hereby waives compliance by Chancellor with the provisions of the "bulk
sales" or similar laws of any state. ARS agrees to indemnify Chancellor and
Chancellor agrees to indemnify ARS and each party agrees to hold the other
harmless from any and all loss, cost, damage and expense (including but not
limited to, reasonable attorney's fees) sustained by one party as a result of
any failure of the other party to comply with any "bulk sales" or similar laws.
14.5 PUBLIC ANNOUNCEMENTS. Neither Chancellor nor ARS 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.
14.6 HART-SCOTT-RODINO. ARS and Chancellor shall submit to the United
States Department of Justice and the United States Federal Trade Commission not
later than 15 business days after the date of this Agreement all of the forms
and information applicable to this transaction required under the Hart-Scott-
Rodino Act (the "HSR Act") and will use commercially reasonable efforts to
respond promptly to any request by them for additional information.
14.7 EMPLOYEE MATTERS. Each party hereby consents to the other
making such offers of employment relating to the Florida Stations and the
California Station subject to the effectiveness of the LMAs between the parties
of even date herewith. ARS 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 the employees (herein
referred to as "Retained Employees"). Chancellor shall be responsible for all
obligations or liabilities to those employees not offered employment by ARS, and
ARS shall have no obligations with respect to the Retained Employees.
SECTION 15. CONDITIONS OF CLOSING BY CHANCELLOR
The obligations of Chancellor hereunder are, at its option, subject to
satisfaction, at or prior to the Closing Date, of all of the following
conditions:
15.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations
and
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warranties of ARS made in this Agreement or in any Exhibit, Schedule or
document delivered pursuant hereto, shall be true and complete in all
material respects 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 except those given as of a
specified date.
15.2 COMPLIANCE WITH AGREEMENT. All of the terms, covenants and
conditions to be complied with and performed by ARS on or prior to the Closing
Date shall have been complied with or performed in all material respects.
15.3 THIRD PARTY CONSENTS AND APPROVALS; ESTOPPEL CERTIFICATES. ARS
has obtained all material third-party consents and approvals, if any, required
for the transfer or continuance, as the case may be, of the Contracts on
Schedule 2.4.4 (and contracts that would have been on Schedule 2.4.4 had they
been in existence on the date of this Agreement) and, if requested by Chancellor
prior to 45 days of the date of the Closing, such third parties have provided
estoppel certificates, non-disturbance agreements, and/or written clarifications
of the rights of Chancellor thereunder, all in form and substance reasonably
satisfactory to Chancellor.
15.4 CLOSING CERTIFICATES. Chancellor shall have received a
certificate, dated as of the Closing Date, from ARS, executed by an appropriate
officer of ARS to the effect of Sections 15.1 and 15.2.
15.5 GOVERNMENTAL CONSENTS.
(a) The FCC Consents shall have been issued by the FCC without
any conditions that would otherwise permit Buyers to terminate this Agreement
pursuant to Section 20.1(e), below, and each such FCC consent shall have become
a Final Order (as defined in Section 6.1).
(b) All applicable notification and waiting period requirements
under the HSR Act shall have been satisfied.
(c) All other material authorizations, consents, approvals, and
clearances of federal, state, or local Governmental Entities required to permit
the consummation of the transactions contemplated by this Agreement shall have
been obtained.
15.6 ADVERSE PROCEEDINGS. No injunction, order, decree or judgment
of any court, agency or other Governmental Entities shall have been rendered
against Chancellor or ARS which would render it unlawful, as of the Closing
Date, to effect the transactions contemplated by this Agreement in accordance
with its terms.
15.7 CLOSING DOCUMENTS. ARS shall have delivered or caused to be
delivered to Chancellor, on the Closing Date, all deeds, bills of sale,
endorsements, assignments and other
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instruments of conveyance and transfer consistent with the terms hereof and
otherwise reasonably satisfactory in form and substance to Chancellor,
effecting the sale, transfer, assignment and conveyance of the California
Station's Assets to Chancellor.
SECTION 16. CONDITIONS OF CLOSING BY ARS
The obligations of ARS hereunder are, at its option, subject to
satisfaction, at or prior to the Closing Date, of all of the following
conditions:
16.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations
and warranties of Chancellor made in this Agreement or in any Exhibit, Schedule
or document delivered pursuant hereto, shall be true and complete in all
material respects 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 except those given as of a
specified date.
16.2 COMPLIANCE WITH AGREEMENT. All the terms, covenants, and
conditions to be complied with and performed by Chancellor on or prior to the
Closing Date shall have been complied with or performed in all material
respects.
16.3 THIRD PARTY CONSENTS AND APPROVALS; ESTOPPEL CERTIFICATES.
Chancellor has obtained all material third-party consents and approvals, if any,
required for the transfer or continuance, as the case may be, of the , Contracts
on Schedule 2.2.4 (and contracts that would have been on Schedule 2.2.4 had
they been in existence on the date of this Agreement) and, if requested by ARS
prior to 45 days of the date of the Closing, such third parties have provided
estoppel certificates, non-disturbance agreements, and/or written clarifications
of the rights of ARS thereunder, all in form and substance reasonably
satisfactory to ARS.
16.4 CLOSING CERTIFICATES. ARS shall have received a certificate,
dated as of the Closing Date, from Chancellor, executed by an appropriate
officer of Chancellor to the effect of Sections 16.1 and 16.2.
16.5 GOVERNMENTAL APPROVAL.
(a) The FCC Consents shall have been issued by the FCC and each
shall have become a Final Order (as defined in Section 6.1).
(b) All applicable notification and waiting period requirements
under the HSR Act shall have been satisfied.
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(c) All other material authorizations, consents, approvals, and
clearances of federal, state or local Governmental Entities required to permit
the consummation of the transactions contemplated by this Agreement shall have
been obtained.
16.6 ADVERSE PROCEEDINGS. No injunction, decree or judgment of any
court, agency or other governmental entities shall have been rendered against
Chancellor or ARS which would render it unlawful, as of the Closing date, to
effect the transactions contemplated by this Agreement in accordance with its
terms.
16.7 CLOSING DOCUMENTS. Chancellor shall have delivered or caused to
be delivered to ARS, 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 ARS, effecting the sale, transfer, assignment and conveyance of
the Florida Station's Assets to ARS.
SECTION 17. CLOSING
17.1 TIME AND PLACE. A closing on the exchange and sale of the
California assets and the Florida Assets shall take place at 12655 North Central
Expressway, Suite 405, Dallas, Texas on the date agreed on by the parties, said
date to be within ten days after the latter of (x) all necessary FCC action(s)
approving the transactions contemplated herein become Final Orders and (y) the
expiration or termination of the waiting period under the H.S.R. Act (the
"Closing Date").
17.2 DELIVERIES BY CHANCELLOR. At closing, Chancellor shall deliver
to ARS documents conveying title to the Florida Assets to ARS in substantially
the same manner as Chancellor received title to the Florida Assets from Omni, it
being the intention of the parties to vest in ARS all of Chancellor's rights,
title and interest in the Florida Assets received from Omni such that the
Florida Assets conveyed to ARS are substantially the same Florida Assets (in
terms of identity, quantity, quality, utility, value, nature of title conveyed,
etc.) as the Florida Assets that were conveyed to Chancellor by Omni pursuant to
the Florida Agreement. The deliveries from Chancellor to ARS shall include:
(a) An Assignment of Government Authorizations conveying the
Florida Licenses and all other governmental permits, licences and authorizations
used in the operation of the Florida Stations.
(b) A Bill of Sale for all items of personal property included
in the Florida Assets.
(c) Deeds conveying title to all Florida Real Estate owned in
fee simple by Chancellor and used in the operation of the Florida Stations.
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(d) Assignments of leases conveying all of Chancellor's right,
title and interest in all Florida Real Estate leased by Chancellor.
(e) All other conveyances, assignments and documents reasonably
necessary to vest in ARS title to the Florida Assets as contemplated in this
Agreement.
17.3 DELIVERY BY ARS. At Closing, ARS shall deliver to Chancellor by
wire transfer of available funds the cash payment specified in Section 3.2. In
addition, ARS shall deliver to Chancellor documents conveying title to the
California Assets in substantially the same manner as ARS received title to the
California Assets from FBC, it being the intention of the parties to vest in
Chancellor all of ARS's rights, title and interest in and to the California
Assets received from FBC such that the California Assets conveyed to Chancellor
are substantially the same California Assets (in terms of identity, quality,
quantity, utility, value, nature of title conveyed, etc.) as the California
Assets that were conveyed to ARS by FBC pursuant to the California Agreement.
The deliveries from ARS to Chancellor shall include:
(a) An Assignment of Government Authorizations conveying the
California Licenses and all other governmental permits, licences and
authorizations used in the operation of the California Station.
(b) A Bill of Sale for all items of personal property included
in the California Assets.
(c) Deeds conveying title to all Florida Real Estate owned in
fee simple by ARS and used in the operation of the California Station.
(d) Assignments of leases conveying all of ARS's right, title
and interest in all Florida Real Estate leased by ARS.
(e) All other conveyances, assignments and documents reasonably
necessary to vest in Chancellor's title to the California Assets as contemplated
in this Agreement.
17.4 If the Closing shall not have occurred before July 1, 1997
because ARS is unable to transfer the California Station's Assets or Chancellor
is unable to convey the Florida Station's Assets, the parties shall consummate
the sale of all the assets of the California Station or the Florida Stations
separately for a cash price of Seven Million Dollars ($7,000,000) and Forty
Million Dollars ($40,000,000) respectively.
SECTION 18. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
18.1 REPRESENTATIONS AND WARRANTIES OF CHANCELLOR. The
representations and warranties made in the Florida Agreement by Omni to
Chancellor with respect to the Florida
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Assets shall survive for the period specified in the Florida Agreement.
Chancellor shall enforce these representations and warranties in its name for
the benefit of ARS. No other representations or warranties shall survive
Closing.
18.2 REPRESENTATIONS AND WARRANTIES OF ARS. The representations and
warranties made in the California Agreement by FBC to ARS with respect to the
California Assets shall survive for the period specified in the California
Agreement. ARS shall enforce these representations and warranties in its name
for the benefit of Chancellor. No other representations or warranties shall
survive closing.
SECTION 19. INDEMNIFICATION
19.1 INDEMNIFICATION BY CHANCELLOR.
(a) Chancellor shall indemnify and hold ARS harmless from all
damages, losses, costs, suits, actions, causes of action and liabilities of any
nature whatsoever, including costs of suit and attorneys fees, arising out of
Chancellor's ownership or operation of the California Station and, the Florida
Retained Liabilities and the Chancellor covenants hereunder after the Closing
Date.
(b) Chancellor shall enforce, in its own name and for the
benefit of ARS, all indemnification provisions of the Florida Agreement.
19.2 INDEMNIFICATION BY ARS.
(a) ARS shall indemnify and hold Chancellor harmless from all
damages, losses, costs, suits, actions, causes of action and liabilities of any
nature whatsoever, including costs of suit and attorneys fees, arising out of
ARS's ownership or operation of the Florida Stations and the California Retained
Liabilities and ARS's covenants hereunder.
(b) ARS shall enforce, in its own name and for the benefit of
Chancellor, all indemnification provisions of the California Agreement.
19.3 LIMITATION ON REIMBURSEMENT.
(a) Neither Chancellor nor ARS shall be entitled to
reimbursement for damages incurred or suffered with respect to its respective
claims until and only to the extent that the aggregate damages with respect to
its respective claims to which it is otherwise entitled to reimbursement exceeds
$________________ (the "Indemnification Basket"). The individual parties shall
not be entitled to reimbursement for damages in excess of $_____________ in the
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aggregate.
(b) For all purposes of this Agreement, the amount of damages,
and the amount reimbursable with respect thereto, shall be reduced to the extent
of any insurance proceeds or other third party recovery received with respect to
such damages.
19.4 PROCEDURE FOR INDEMNIFICATION.
(a) If any claim or proceeding covered by Section 15 to
indemnify and hold harmless shall arise, the Party who seeks indemnification
(the "Indemnified Party") shall give written notice thereof to the other Party
(the "Indemnitor") promptly but in no event more than ten (10) days after the
Indemnified Party learns of the existence of such claim or proceeding. Any
claim for indemnification hereunder shall be accompanied by evidence
demonstrating the Indemnified Party's right or possible right to
indemnification, including a copy of all supporting documents relevant thereto.
After the Indemnitor acknowledges its obligation to defend against or settle any
such claim or proceeding, the Indemnitor shall not be liable to the Indemnified
Party under this Section 15 for any legal or other expenses subsequently
incurred by the Indemnified Party in connection with the defense thereof;
provided, however, that the Indemnified Party shall have the right to employ
counsel to represent it if, in the Indemnified Party's sole judgment, it is
advisable for the Indemnified Party to be represented by separate counsel, in
which event the reasonable fees and expenses of such separate counsel shall be
paid by the Indemnified Party. The Parties shall fully cooperate in the defense
of each claim or proceeding and shall make available to each other all books or
records necessary or appropriate for such defense.
(b) The Indemnitor shall have the right to employ counsel
reasonably acceptable to the Indemnified Party to defend against the claim or
proceeding or to compromise, settle or otherwise dispose of the same; provided,
however, that no settlement or compromise shall be effected without the express
prior written consent of the Indemnified Party, which consent shall not be
unreasonably withheld or delayed; and, provided further, that if the Indemnified
Party does not consent to a BONA FIDE offer of settlement made by a third party
and the settlement involves only the payment of money, then the Indemnitor may,
in lieu of payment of that amount to such third party, pay that amount to the
Indemnified Party. After such payment to the Indemnified Party, the Indemnitor
shall have no further liability with respect to that claim or proceeding and the
Indemnified Party shall assume full responsibility for the defense, payment or
settlement of such claim or proceeding.
(c) If the Indemnitor fails to acknowledge in writing its
obligation to defend against or settle any claim or proceeding within twenty
(20) days after receiving notice of the claim or proceeding from the Indemnified
Party (or such shorter time specified in the notice as the circumstances of the
matter may dictate), the Indemnified Party shall be free to dispose of the
matter, at the expense of the Indemnitor, in any way that the Indemnified Party
deems in its best interest, subject to the Indemnitor's right subsequently to
contest through appropriate proceedings its obligation to provide
indemnification.
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(d) The Indemnitor shall be subrogated to all rights of the
Indemnified Party against any third party with respect to any claim for which
indemnification is paid by the Indemnitor to the extent of such payment.
SECTION 20. TERMINATION
20.1 RIGHT TO TERMINATE. This Agreement may be terminated at any time
prior to closing as follows:
(a) by the mutual consent of the parties;
(b) by written notice of (i) Chancellor to ARS if ARS 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 (ii) ARS to Chancellor if Chancellor breaches in
any material respect any of its representations or warranties or default 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 notice of breach or default served
by ARS; but such notice and cure period shall not apply in the case of
Chancellor's or ARS's failure to consummate the transactions in accordance with
the terms and times specified in Section 22.11 of this Agreement.
(c) by Chancellor or ARS by written notice to the other, if a
court of competent jurisdiction or other Governmental Entity shall have issued
an order, decree or ruling or taken any other action (which order, decree or
ruling the parties hereto shall use their best efforts to lift), in each case
permanently restraining, permanently enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling or
other action shall have become final and nonappealable;
(d) by the party whose qualifications are not at issue, if, for
any reason, the FCC denies or dismisses any of the FCC Applications and the time
for reconsideration or court review under the Communications Act with respect to
such denial or dismissal has expired and there is not pending with respect
thereto a timely filed petition for reconsideration or request for review;
(e) by written notice of Chancellor to ARS or by ARS to
Chancellor, if the Closing shall not have been consummated on or before July
1, 1997; Notwithstanding the foregoing, no party hereto may effect a
termination hereof if such party is in material default or breach of this
Agreement.
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20.2 LIQUIDATED DAMAGES/SPECIFIC PERFORMANCE.
20.2.1 If this Agreement is terminated pursuant to Section
20.1(b) the parties agree and acknowledge that the parties will suffer damages
that are not practicable to ascertain. Accordingly, in the event this Agreement
is terminated pursuant to Section 20.1(b)(i), Chancellor shall be entitled to
the sum of Two Million Dollars ($2,000,000) as liquidated damages, payable
solely and exclusively by drawing upon the Escrow Deposit pursuant to the Escrow
Agreement. In the event this Agreement is terminated pursuant to Section
20.1(b)(ii), ARS shall be entitled to the sum of Three Hundred Fifty Thousand
Dollars ($350,000) as liquidated damages payable solely and exclusively by
drawing upon the Escrow Deposit pursuant to the Escrow Agreement. The parties
agree that the foregoing liquidated damages are reasonable considering all the
circumstances existing as of the date hereof and constitute the parties' good
faith estimate of the actual damages reasonably expected to result from the
termination of this Agreement pursuant to Section 20.1(b). Section 20.2.1 shall
be their sole and exclusive remedy if the Closing does not occur with respect to
any damages whatsoever as a result of any claim or cause of action asserted by
Sellers relating to or arising from breaches of the representations, warranties
or covenants contained in this Agreement and to be made or performed at or prior
to the Closing. Except for a termination pursuant to Section 20.1(b) (for which
the sole recourse of ARS, as the Seller of the California Station, or
Chancellor, as the Seller of the Florida Stations shall be as provided in this
Section 20.2.1 or pursuant to Section 20.1(a) (for which no party shall have any
liability to the other), the termination of this Agreement shall not relieve the
parties for any liability or obligation relating the their breaches of this
Agreement occurring prior to such termination.
20.2.2 The parties hereto agree that the broadcast stations
subject to this Exchange Agreement are unique and the harm to either ARS, as the
Florida Stations' Buyer, or Chancellor, as the California Station's Buyer from
breach by ARS, as the California Station's Seller, or Chancellor, as the Florida
Stations' Seller, cannot adequately be compensated by damages. Therefore, the
parties hereto agree that either party shall have the right to have this
Exchange Agreement specifically performed by the other party as a Seller as
follows:
(a) In the event of an uncured breach by ARS, as Seller of
the California Station or Chancellor, as Buyer of the California Station, shall
have the right to seek specific performance.
(b) In the event of an uncured breach by Chancellor, as
Seller of the Florida Station, ARS, as Buyer of the Florida Stations shall have
the right to seek specific performance. To the extent that Chancellor's breach
relates to a failure to enforce Chancellor's rights under the Florida
Agreement, ARS may seek specific performance compelling Chancellor to enforce
the Florida Agreement.
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SECTION 21. EXPENSES, TRANSFER TAXES, AND FEES
21.1 EXPENSES. Except as set forth in Sections 21.2 and, 21.3 below,
each party hereto shall be solely responsible for all costs and expenses
incurred by it in connection with the negotiation, preparation and performance
of and compliance with the terms of this Agreement.
21.2 TRANSFER TAXES AND SIMILAR CHARGES. All costs of transferring
the Florida Assets in accordance with this Agreement, including recordation,
transfer and documentary taxes and fees, an any excise, sales or use taxes,
shall be borne by ARS. All costs of transferring the California Station 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. Chancellor and ARS shall, in good faith, attempt to calculate all
such taxes and fees prior to Closing and to settle their respective obligations
therefore on or before the Closing Date.
21.3 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, including but not limited
to, the FCC, the FTC, and the Department of Justice shall be borne equally by
Chancellor and ARS.
SECTION 22. MISCELLANEOUS
22.1 RISK OF LOSS. Prior to Closing, risk of loss to the Florida
Stations shall be borne by Chancellor and risk of loss to the California Station
shall be borne by ARS.
22.2 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, whether by operation of law or otherwise; provided, however, that
without releasing the Parties from any of their obligations or liabilities
hereunder (a) nothing in this Agreement shall limit any Party's ability to sell
or transfer any or all of its respective assets (whether by sale of stock or
assets, or by merger, consolidation or otherwise) or its respective rights under
this Agreement without the consent of the other party, (b) nothing in this
agreement shall limit (i) Chancellor's ability to assign the California Licenses
(including the right to acquire the California Licenses at the Closing) to
Chancellor Broadcasting Licensee Company or any other subsidiary of Chancellor
without the consent of Sellers, or (ii) ARS's ability to assign the Florida
Licenses to American Radio Systems License Corp. or any other subsidiary of ARS
without the consent of Sellers, and (c) nothing in this Agreement shall limit a
party's ability to make a collateral assignment of its rights under this
Agreement to any institutional lender that provides funds to that party without
the consent of the other. Each party shall execute an acknowledgment of such
assignment(s) and collateral assignments in such forms as the other party or its
institutional lenders may from time to time reasonably request; provided,
however, that unless written notice is given to a party that any such collateral
assignment has been foreclosed upon, that party shall be entitled to deal
exclusively with the other party as to any matters arising under this Agreement
or any of the
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<PAGE>
other agreements delivered pursuant hereto. In the event of such an
assignment, the provisions of this Agreement shall inure to the benefit of
and be binding on all parties' successors and assigns.
22.3 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.
22.4 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.
22.5 GOVERNING LAW. The construction and performance of this
Agreement shall be governed by the laws of the State of Florida without giving
effect to the choice of law provisions thereof.
22.6 NOTICES. Any notice, demand or request required or permitted to
be given under the provisions of this Agreement shall be in writing and shall be
deemed to have been duly delivered and received on the date of personal delivery
or on the third day after deposit in the U.S. mail if mailed by registered or
certified mail, postage prepaid and return receipt requested; or on the day
after delivery to a nationally recognized overnight courier service if sent by
an overnight delivery service for next morning delivery, and shall be addressed
to the following addresses:
(a) In the case of ARS to:
American Radio Systems Corporation
116 Huntington Avenue
Boston, MA 02116
Attn: Steven B. Dodge, Chairman
With a copy to:
Michael B. Milsom
Vice President and General Counsel
American Radio Systems Corporation
116 Huntington Avenue
Boston, MA 02116
(b) In the case of Chancellor, to:
Steven Dinetz
President and Chief Executive Officer
Chancellor Radio Broadcasting Company
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<PAGE>
12655 N. Central Expressway
Suite 405
Dallas, TX 75243
With a copy to:
Matthew L. Leibowitz, Esq.
Leibowitz & Associates, P.A.
One S.E. Third Avenue, Suite 1450
Miami, Florida 33131
and
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, TX 75201
Attention: Lawrence D. Stuart, Jr.
and
Weil, Gotshal & Manges, LLP
100 Crescent Court
Suite 1300
Dallas, Texas 75201
Attention: Jeremy W. Dickens
22.7 SCHEDULES. The schedules and exhibits attached to this Agreement
are hereby made a part of this Agreement as if set forth in full herein.
22.8 ENTIRE AGREEMENT. This Agreement contains the entire agreement
among the parties hereto with respect to its subject matter and supersedes all
negotiations, prior discussions, agreements, letters of intent, and
understandings, written or oral, relating to the subject matter of this
Agreement.
22.9 SEVERABILITY. If any provision of this Agreement is held to be
unenforceable, invalid, or void to any extent for any reason, that provision
shall remain in force and effect to the maximum extent allowable, and the
enforceability and validity of the remaining provisions of this Agreement shall
not be affected thereby.
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<PAGE>
22.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together shall constitute but one and the same instrument.
22.11 BINDING AGREEMENT. The parities shall each have fifteen
(15) days from the execution of this Agreement to deliver all Schedules
associated herewith. The parties shall each have thirty (30) days from the
execution of this agreement to conduct an investigation that includes, but is
not limited to, reviewing the Schedules to this Exchange agreement, reviewing
the Stations' financial performance, real estate, contracts, environmental
compliance, equipment, studio, transmitter, engineering, litigation, licenses
and all other aspects of the Stations' assets and their ownership, performance
and operations reasonably examinable in such an investigation. If either
party's investigation reveals a material misrepresentation or a material
omission made by the Selling party, then the purchasing party shall give notice
to the defects to the selling party, who will then have fifteen (15) days to
cure the defects. If the selling party does not cure such a defect within the
allowed period, the affected purchasing party may terminate this Agreement by
giving notice to the other party within fifteen (15) days after the allowed cure
period without recourse to the selling party.
22.12 GOVERNING LAW. The obligations of Chancellor and ARS are
subject to applicable federal, state and local law, rules and regulations,
including, but not limited to the Communications Act and the rules and
regulations of the Federal Communications Commission. The construction and
performance of this Agreement will be governed by the laws of the State of
Delaware.
IN WITNESS WHEREOF, the parties have caused this Exchange Agreement to
be executed effective as of the date first written above.
CHANCELLOR RADIO AMERICAN RADIO
BROADCASTING COMPANY SYSTEMS CORPORATION
By: By:
-------------------------- -----------------------------
Steven Dinetz Steven B. Dodge
President President
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<PAGE>
CHANCELLOR RADIO BROADCASTING COMPANY
LOCAL MARKETING AGREEMENT
WITH
AMERICAN RADIO SYSTEMS CORPORATION
FOR
KSTE-AM, RANCHO CORDOVA, CALIFORNIA
<PAGE>
TABLE OF CONTENTS
1. AGREEMENT TERM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. PROGRAMMER'S PURCHASE OF AIRTIME AND PROVISION OF PROGRAMMING . . . . . . 3
3. REPRESENTATIONS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. CONSIDERATION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. COLLECTION OF ACCOUNTS RECEIVABLE.. . . . . . . . . . . . . . . . . . . . 5
6. ARS CONTROL OF THE STATION. . . . . . . . . . . . . . . . . . . . . . . . 7
7. PROGRAMMER RESPONSIBILITY . . . . . . . . . . . . . . . . . . . . . . . . 9
8. CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9. EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10. PUBLIC AFFAIRS PROGRAMMING . . . . . . . . . . . . . . . . . . . . . . . 13
11. ADDITIONAL LICENSE OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . 14
12. BROADCAST STATION PROGRAMMING POLICY STATEMENT . . . . . . . . . . . . . 15
13. COMPLIANCE WITH COPYRIGHT ACT . . . . . . . . . . . . . . . . . . . . . . 16
14. PAYOLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
15. SALES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
16. LOCAL MARKETING AGREEMENT CHALLENGE . . . . . . . . . . . . . . . . . . . 18
17. CONFIDENTIAL REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
18. MAJOR DEFAULTS: TERMINATION . . . . . . . . . . . . . . . . . . . . . . . 19
18.1. PROGRAMMER'S MAJOR DEFAULTS . . . . . . . . . . . . . . . . . . . . 19
18.2. ARS'S MAJOR DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . 20
18.3. CURE PERIODS . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
18.4. TERMINATION UPON OCCURRENCE OF MAJOR DEFAULT. . . . . . . . . . . . 22
18.5. TERMINATION UPON FAILURE OF CONSUMMATION OF EXCHANGE AGREEMENT. . . 22
i
<PAGE>
19. LIABILITIES UPON TERMINATION . . . . . . . . . . . . . . . . . . . . . . 23
20. NO FORMAT CHANGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
21. ARS'S INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . 25
22. PROGRAMMER'S INDEMNIFICATION.. . . . . . . . . . . . . . . . . . . . . . 26
23. PROCEDURE FOR INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . 26
24. DISPUTE OVER INDEMNIFICATION.. . . . . . . . . . . . . . . . . . . . . . 28
25. PROGRAMMER'S REMEDIES FOR OPERATIONAL DEFICIENCIES . . . . . . . . . . . 29
26. FORCE MAJEURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
27. OTHER AGREEMENTS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
28. ASSIGNMENT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
29. ENTIRE AGREEMENT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
30. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
31. HEADINGS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
32. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
33. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
34. SEVERABILITY.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
35. CERTIFICATIONS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(a) CONTROL OF STATION . . . . . . . . . . . . . . . . . . . . . . . . . 35
(b) COMPLIANCE WITH OWNERSHIP RULES. . . . . . . . . . . . . . . . . . . 35
36. NO JOINT VENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
37. BENEFICIARIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
PAYMENT SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ii
<PAGE>
SCHEDULE B - EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ATTACHMENT I - BROADCAST Station PROGRAMMING POLICY STATEMENT . . . . . . . 40
I. NO PLUGOLA OR PAYOLA . . . . . . . . . . . . . . . . . . . . 40
II. POLITICAL BROADCASTING . . . . . . . . . . . . . . . . . . . 40
III. REQUIRED ANNOUNCEMENTS . . . . . . . . . . . . . . . . . . . 41
IV. NO ILLEGAL ANNOUNCEMENTS . . . . . . . . . . . . . . . . . . 41
V. ARS DISCRETION PARAMOUNT . . . . . . . . . . . . . . . . . 42
ATTACHMENT II - PAYOLA AFFIDAVIT . . . . . . . . . . . . . . . . . . . . . . 43
iii
<PAGE>
LOCAL MARKETING AGREEMENT
THIS LOCAL MARKETING AGREEMENT ("LMA" or "Agreement"), made as of June ________,
1996 by and between AMERICAN RADIO SYSTEMS CORPORATION ("ARS" or "Owner" or
"Licensee") and CHANCELLOR BROADCASTING COMPANY and CHANCELLOR RADIO
BROADCASTING COMPANY, (collectively, "Chancellor" or "Programmer") both Delaware
corporations.
RECITALS
WHEREAS, ARS is a party to a certain Asset Purchase Agreement dated March
26, 1996 between ARS and Fuller-Jeffrey Broadcasting Companies, Inc. ("FBC")
contemplating the purchase by ARS of substantially all of FBC's assets used or
useful in the operation of AM broadcast station KSTE, Rancho Cordova, California
(the "Station"), including the related KSTE broadcast licenses and
authorizations issued by the Federal Communications Commission ("FCC"). That
Asset Purchase Agreement hereafter is referred to as the "California Agreement".
WHEREAS, Chancellor is a party to a certain Asset Purchase Agreement
("Purchase Agreement") dated May 14, 1996 among Chancellor and Chancellor
Broadcasting Company and OmniAmerica Group, WAPE-FM License Partnership, WFYV-
FM License Partnership,
<PAGE>
Chancellor/ARS
Local Marketing Agreement
Page 2
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WEAT-AM License Partnership, WEAT-FM License Partnership, WXXL License
Partnership, WOLL License Partnership and WJHM-FM License Partnership
(collectively "Omni") contemplating, INTER ALIA, the purchase by Chancellor
of substantially all of Omni's assets used or useful in the operation of
Stations WEAT-AM/FM, West Palm Beach, Florida and Station WOLL-FM, Riviera
Beach, Florida (collectively, the "West Palm Beach Stations"), including the
related FCC broadcast licenses and authorizations. That Purchase Agreement
is hereafter referred to as the "Florida Agreement".
WHEREAS, ARS wishes to retain Chancellor to provide programming for the
Station pursuant to the terms and conditions set forth in this Agreement and in
conformity with the Station's policies and practices and the Federal
Communications Commission's ("FCC") rules and regulations concerning such
arrangements;
WHEREAS, Chancellor will broadcast such programming and sell advertising
that is in conformance with the Station's policies and all FCC rules and
regulations, including the requirement that the ultimate control of the Station
be maintained by ARS; and
WHEREAS, Chancellor and ARS intend to enter into an Exchange Agreement (the
<PAGE>
Chancellor/ARS
Local Marketing Agreement
Page 3
- -------------------------
"Exchange Agreement"), which would qualify as a tax free exchange of like-kind
assets pursuant to Section 1031 of the Internal Revenue Code of 1986, as
amended, pursuant to which ARS will agree to transfer to Chancellor, and
Chancellor has agreed to acquire from ARS, substantially all of the assets and
businesses of the Station; and Chancellor will agree to transfer to ARS, and ARS
has agreed to acquire from Chancellor, substantially all of the assets and
businesses of the West Palm Beach Stations.
NOW THEREFORE, for and in consideration of the mutual covenants herein
contained, the parties, intending to be legally bound, agree as follows:
1. AGREEMENT TERM.
The term of this Agreement will begin on August 1, 1996 ("Commencement
Date") and will continue until the Programmer acquires the assets of the Station
unless earlier terminated in accordance with the provisions set forth herein.
<PAGE>
Chancellor/ARS
Local Marketing Agreement
Page 4
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2. PROGRAMMER'S PURCHASE OF AIRTIME AND PROVISION OF PROGRAMMING.
(a) During the term of this Agreement, Programmer shall transmit
programming, including commercials, that it produces or owns to the Station
twenty-four (24) hours per day Monday through Friday and for forty-eight (48)
hours during Saturday through Sunday, provided that ARS may broadcast up to two
(2) hours of programming for the Station which is aimed at serving the needs and
interests of the Station's communities of license during the morning(s) of
Saturday and/or Sunday subject to Section 10 hereto.
(b) To facilitate delivery of programming by Programmer hereunder,
ARS hereby grants to Programmer the right for the term of this Agreement to use
substantially all of the equipment located in the Station's studios and
currently used by ARS for broadcasting programs on the Station. In addition,
Programmer shall have, and ARS hereby grants to Programmer, a license to enter
on the premises currently occupied by the Station for the purpose of producing
its programming hereunder; provided, however, that ARS shall maintain, for its
use, sufficient space at the Station's studios to enable ARS to conduct its
operations and originate programming. Accordingly, Programmer shall hold ARS
harmless from all costs, fees and expenses incurred with respect to any personal
injury suffered by any employee or agent of
<PAGE>
Chancellor/ARS
Local Marketing Agreement
Page 5
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Programmer while on the property of ARS. Programmer shall also be
responsible for and shall reimburse ARS for any damage to the property of ARS
caused by Programmers' employees or agents.
3. REPRESENTATIONS.
Each of ARS and Programmer represent as to itself that it is
authorized to enter into this Agreement and that this Agreement constitutes the
legal, valid and binding obligation of such party, enforceable against it in
accordance with its terms. Programmer hereby represents and warrants to ARS
that Programmer is an experienced radio broadcast station owner and operator and
is fully familiar with all pertinent legal requirements, including but not
limited to, the Communications Act of 1934, as amended (the "Act"), and the
Commission's rules, regulations and policies governing the operation of radio
broadcast stations. Programmer will comply with all legal requirements,
including but not limited to the Act and the Commission's rules, regulations and
policies.
<PAGE>
Chancellor/ARS
Local Marketing Agreement
Page 6
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4. CONSIDERATION.
During the term of this Agreement, Programmer shall pay ARS the
payments set forth on the Payment Schedule executed in connection herewith.
5. COLLECTION OF ACCOUNTS RECEIVABLE.
(a) The accounts receivable of the Station generated prior to the
Commencement Date (the "Pre-LMA Receivables") shall be and remain the property
of ARS. Within 5 business days after the Commencement Date, ARS shall furnish
Chancellor with a list (certified by the Chief Financial Officer of ARS to be a
true and complete list) of all accounts receivable of ARS which remain
outstanding as of the Commencement Date. Chancellor agrees that if, after the
Commencement Date, it shall receive payment, directed to ARS, in respect to any
Pre-LMA Receivable, Chancellor shall remit to ARS, within five (5) business days
after the end of each month, any amounts received by Chancellor during the
preceding month (whether or not directed on their face to ARS), which are in
payment for advertising broadcast by the Station prior to the Commencement Date.
<PAGE>
Chancellor/ARS
Local Marketing Agreement
Page 7
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(b) During the period starting on the Commencement Date and ending
ninety (90) days thereafter, Chancellor shall use reasonable efforts, consistent
with ARS's current billing and collection practices and in the ordinary course
of the business, to assist ARS in the collection of any outstanding Pre-LMA
Receivables; provided, however, that, notwithstanding the foregoing, Chancellor
shall be under no obligation to commence litigation, employ counsel or engage
the services of a collection agency to effect collection. Chancellor shall not
make any compromise, adjustment, concession or settlement of any Pre-LMA
Receivable without ARS's express written consent and Chancellor shall be under
no obligation to compromise, adjust, concede or settle any accounts receivable
generated after the Commencement Date or otherwise grant any credit or allowance
to effect collection of a Pre-LMA Receivable. Absent written evidence that an
account debtor owing a Pre-LMA Receivable is disputing in good faith any portion
of such Pre-LMA Receivable, any payments received by Chancellor after the
Commencement Date from such account debtor shall be presumed to represent
payment on any undisputed portion of such Pre-LMA Receivable which is then
outstanding (with each such payment received from such account debtor to be
applied first to the most-aged Pre-LMA Receivable then owing from such account
debtor).
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(c) ARS agrees to remit to Chancellor within 5 business days after
the end of each month, any amounts received by ARS during the preceding month
(whether or not directed on their face to Chancellor) which are in payment for
advertising broadcast by the Station after the Commencement Date.
(d) Chancellor shall not set-off any claim or amount against any of
the Pre-LMA Receivables.
6. ARS CONTROL OF THE STATION.
(a) ARS will have full authority, power and control over the
management and operations of the Station during the term of this Agreement. ARS
will bear all responsibility for the Station's compliance with all applicable
provisions of the Act, the rules, regulations and policies of the FCC and all
other applicable laws, including without limitation, the retention of control
over the policies, programming and operation of the Station, including the right
to preempt programming which in its good faith judgment it deems unsuitable or
contrary to the public interest. ARS shall be solely responsible for and pay in
a timely manner all real and personal property taxes, mortgage fees and expenses
and other real property costs, all studio and
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transmitter site leases, any utilities (excluding telephone charges), and all
costs and expenses for the maintenance of all transmitter equipment.
Programmer shall cooperate with and assist ARS in complying with all FCC
rules and regulations.
(b) ARS retains ultimate control over the Station and their premises.
Accordingly, all employees of Programmer present at the Station or on their
premises must comply with the policies and rules promulgated by ARS. In no
event shall Programmer, or Programmer's employees, represent, depict, describe
or portray Programmer as the Licensee of the Station. To this end, all
employees of Programmer, whose work involves the Station, shall be informed as
to ARS's ultimate control over the Station and Programmer's subordinate
capacity, and all printed materials and promotional announcements shall
accurately describe all of the roles and responsibilities of ARS and Programmer.
(c) The Station's transmission equipment shall be maintained by ARS
in a condition consistent with good engineering practices and in compliance in
all material respects with the Act and all other applicable rules, regulations
and technical standards of the FCC. All capital expenditures reasonably
required to maintain the technical quality of the transmission equipment and its
compliance with applicable laws and regulations shall be made at the sole
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expense of ARS in a timely fashion.
(d) ARS shall employ at its expense a management-level employee at
the Station and such other person for each Station as necessary to fulfill ARS's
duties hereunder and its obligations under the FCC's rules. A manager shall
direct the day-to-day operations of each Station and shall report to and be
accountable to ARS. ARS shall be responsible for the salaries, taxes, insurance
and related costs for all personnel it employs at the Station.
(e) ARS shall pay all regulatory fees, file all necessary
applications, maintain the Station's local public inspection files within the
Station's communities of license and shall prepare and place in such inspection
file all required documents including, but not limited to the Station's
quarterly issues and program lists on a timely basis.
7. PROGRAMMER RESPONSIBILITY.
(a) Programmer shall be solely responsible for all expenses incurred
in the origination and/or delivery of programming from any remote location and
for all operating expenses of the Station (including telephone expenses and
expenses related to sales, marketing,
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promotion, advertising, billing and collections, and traffic), except that
ARS shall be responsible for the costs as provided in Section 6 hereof.
Programmer shall cooperate fully with ARS in responding to any questions,
comment, inquiry or complaint from any third party, including any
governmental authority or agent thereof, that may relate to or arise from the
Station or its operations, including the programming. In the event of
Programmer's receipt of any question, comment inquiry or complaint that may
relate to or arise from the Station or its operations, Programmer shall
promptly notify ARS of the same.
(b) Programmer shall employ and be solely responsible for the
salaries, taxes, insurance and related costs for all personnel employed by
Programmer (including, without limitation, salespeople, traffic personnel, board
operators and programming staff).
(c) Programmer shall cause the Station to transmit any required tests
of the Emergency Broadcast System or successor Emergency Alert System at such
times as are directed by ARS.
(d) Political Advertising and Announcements. Programmer shall
maintain and deliver to ARS all records and information required by the FCC to
be placed in the public
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inspection files of the Station pertaining to the broadcast of political
programming and advertisements, in accordance with the provisions of Sections
73.1940 and 73.3526 of the FCC's rules and agrees to broadcast sponsored
programming addressing political issues, in accordance with the provisions of
Section 73.1212 of the FCC's rules.
1. Programmer's sale or use of commercial time on the Station
shall conform to all federal and state laws governing the sale of political
advertising on radio stations. At least ninety (90) days before the start of
any primary or general election campaign, Programmer will clear with Licensee
the rates to be charged political candidates for public office and rate cards to
be sure that the rates and the rate cards are in conformance with all laws,
including requirements for providing reasonable time to state and local
candidates (as determined by the Licensee).
2. When required by law, Programmer shall sell such political
advertising time only at the Station's lowest unit rate. Within seven (7) days
after the broadcast of political advertising, Programmer shall review the
commercial spots that have aired on the Station, so as to insure that each
political candidate was charged the lowest unit rate. In the event a refund or
credit is due, Programmer shall pay such refund or provide such credits within
seven
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(7) days. The Programmer recognizes candidates' need to maximize their
campaign funds, and thus will provide such rebates or credits on a more
expeditious basis as the election day approaches.
3. Within twenty-four (24) hours of any request to purchase
time on any Station on behalf of a candidate for public office or to support or
urge defeat of an issue on an election ballot, Programmer will provide
documentation of the request, and its disposition, to Licensee so that
appropriate records can be placed in the Station's public file.
4. In the event that Programmer fails to provide adequate
broadcast time for the broadcast of paid political programming or advertising by
political candidates, Licensee shall have the right to preempt commercial
announcements supplied by Programmer to make time available to these political
candidates.
5. Programmer shall furnish within its programming, on behalf
of ARS, all of the Station's identification announcements required by the FCC's
rules. Programmer shall provide information with respect to any of its
programming which is responsive to the public needs and interests of the area
served by the Station so as to assist ARS in the preparation
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of any required programming reports, and provide other information to enable
ARS to prepare other records, reports and logs required by the FCC or other
local, state or federal governmental agencies.
8. CONTRACTS.
Programmer shall perform and discharge the obligations of ARS from and
after the Commencement Date under the contracts and agreements listed in the
Schedules to the Exchange Agreement. In addition, Programmer shall perform and
discharge all obligations of the Station under all trade agreements from and
after the Commencement Date. Any receivables generated prior to the
Commencement Date shall be remitted to ARS pursuant to Section _____ of the
Exchange Agreement. Programmer will not enter into any third-party contracts,
leases or agreements which will bind ARS in any way except with ARS's prior
written approval.
9. EMPLOYEES.
SCHEDULE B hereto contains a listing of the name, salary or
compensation and job description of all employees of the Station as of _______.
Pursuant to Section _____ of the
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Exchange Agreement, Programmer may, but shall not be obligated to (other than
through its own actions independent of any provisions of this Agreement or
through the assumption of any employment contracts hereunder), offer
employment to any employee of the Station who was employed by ARS at or
before the Commencement Date.
10. PUBLIC AFFAIRS PROGRAMMING.
Notwithstanding any other provision of this Agreement, Programmer
recognizes that ARS has certain obligations to broadcast programming to meet the
needs and interests of the community of license for the Station. ARS shall have
the right to air specific programming on issues of importance to the local
community. Nothing in this Agreement shall abrogate the unrestricted authority
of ARS to discharge its obligations to the public and to comply with the law,
rules and policies of the FCC with respect to meeting the ascertained needs and
interests of the public. Accordingly, ARS may broadcast public affairs
programming as outlined in Section 2 hereof. ARS may air this programming in
either one two (2) hour block or any combination of half hour or full hour
blocks of time during the hours of 6 a.m. to 9 a.m. on Saturday and/or Sunday.
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11. ADDITIONAL LICENSE OBLIGATIONS.
Although both parties shall cooperate in the broadcast of emergency
information over the Station, ARS shall also retain the right to interrupt
Programmer's programming in case of an emergency or for programming which, in
the reasonable good faith judgment of ARS, is of overriding public importance.
ARS shall also coordinate with Programmer the Station's hourly station
identification announcements to be aired in accordance with FCC rules. ARS
shall continue to maintain a main studio, as that term is defined by the FCC,
within each of the Station's principal community contours and shall staff it as
required by the FCC. ARS shall be responsible for the salaries, taxes,
insurance and related costs for all personnel it employs at the Station and
shall maintain insurance at its present levels covering the Station's
transmission facilities. In addition, ARS shall pay any federal regulatory
fees, maintain its local public inspection file within the Station's communities
of license and shall prepare and place in such public inspection file all
required documents including, but not limited to, its quarterly issues and
program lists on a timely basis. ARS shall also receive and respond to
telephone inquiries from the general public. Programmer shall provide ARS with
information with respect to certain of Programmer's programs which may be
included in ARS's quarterly issues and programs lists.
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12. BROADCAST STATION PROGRAMMING POLICY STATEMENT.
ARS has adopted and will enforce a Broadcast Station Programming
Policy Statement (the "Policy Statement"), a copy of which appears as ATTACHMENT
I hereto and which may be amended to meet changing regulatory requirements by
ARS upon reasonable advance written notice to Programmer. Programmer agrees and
covenants to comply in all material respects with the Policy Statement and with
all rules and regulations of the FCC. If ARS reasonably determines that a
program, commercial or other material supplied by Programmer does not comply
with the Policy Statement, or if ARS reasonably believes that some or all of a
program, commercial or other material is unsuitable or contrary to the public
interest, it may suspend or cancel such program, commercial or other material
and shall provide written notice to Programmer of such decision. Programmer
shall provide programs only in accordance with the Policy Statement and FCC
requirements. All advertising spots and promotional material or announcements
shall comply with applicable federal, state and local regulation and policies
and the Policy Statement, and shall be produced in accordance with quality
standards established by ARS.
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13. COMPLIANCE WITH COPYRIGHT ACT.
Programmer represents and warrants to ARS that Programmer has full
authority to broadcast its programming on the Station and the Programmer shall
not broadcast any material in violation of any law, rule, regulation or the
Copyright Act. All music supplied by Programmer shall be: (i) licensed by
ASCAP, SESAC or BMI; (ii) in the public domain; or (iii) cleared at the source
by Programmer. ARS will maintain as appropriate its own ASCAP, BMI and SESAC
licenses for the performance of Programmer's programs and Programmer shall
reimburse ARS for the costs of such licenses obtained by ARS within thirty (30)
days when paid. The right to use the programming and to authorize its use in
any manner shall be and remain vested in Programmer.
14. PAYOLA.
Programmer agrees that neither it nor its employees or agents will
accept any consideration, compensation, gift or gratuity of any kind whatsoever,
regardless of its value or form, including, but not limited to, a commission,
discount, bonus, material, supplies or other merchandise, services or labor
(collectively, "Consideration"), whether or not pursuant to written
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contracts or agreements between Programmer and merchants or advertisers,
unless the third party providing such compensation, gift or gratuity is
identified in the program for which Consideration was provided as having paid
for or furnished such Consideration, in accordance with the Communications
Act and FCC requirements. Programmer agrees to execute and to provide ARS
with payola Affidavits from itself, and all of its employees and agents who
are involved with providing programming on the Station, at such times as ARS
may reasonably request, substantially in the form attached hereto as
ATTACHMENT II.
15. SALES.
Programmer shall retain all revenues from the sale of advertising time
within the programming it provides to ARS and pay all expenses attributable
thereto. Programmer may sell advertising, consistent with applicable rules,
regulations and the Policy Statement, on the Station in combination with any
other broadcast stations of its choosing. Programmer shall be responsible for
payment of the commissions due to any national sales representative engaged by
it for the purpose of selling national advertising which is carried during the
programming it provides to ARS. ARS shall retain all revenues from the sale of
the Station's advertising during the hours each week in which ARS airs its own
nonentertainment programming.
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16. LOCAL MARKETING AGREEMENT CHALLENGE.
If this Agreement is challenged at the FCC, counsel for ARS and
counsel for Programmer shall defend the Agreement and the parties' performance
thereunder throughout all FCC proceedings with Programmer and ARS each being
responsible for its own costs. If portions of this Agreement do not receive the
approval of the FCC staff, then the parties shall reform the Agreement subject
to their respective reasonable business judgment and advise of counsel or, at
ARS's or Programmer's option, seek reversal of the staff decision and approval
from the full Commission on appeal.
17. CONFIDENTIAL REVIEW.
Prior to the provision of any programming by Programmer to ARS under
this Agreement, Programmer shall acquaint ARS with the nature and type of the
programming to be provided. ARS, solely for the purpose of ensuring
Programmer's compliance with the law, FCC rules and the Station's policies,
shall be entitled to review and pre-empt at its discretion from time to time on
a confidential basis any programming material and any other documents it may
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reasonably request, including all rate cards and disclosure statements related
to Programmer's political advertising. Programmer shall promptly provide ARS
with copies of all correspondence and complaints received from the public as
well as copies of all program logs and promotional materials.
18. MAJOR DEFAULTS: TERMINATION.
18.1. PROGRAMMER'S MAJOR DEFAULTS. The occurrence of any of the
following, after the expiration of the applicable cure periods, if any, will be
deemed to be a "Major Default" by Programmer under this Agreement:
(a) Programmer's failure to timely pay any of the consideration
provided for in Section 4 and the Payment Schedule executed in connection
herewith or other payments required hereunder;
(b) Except as otherwise provided for in this Agreement, the failure
of Programmer to supply the programs for broadcast on the Station in accordance
with Section 2 hereof;
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(c) Any termination of this Agreement by Programmer other than as
permitted in Section 18.4 or 18.5; or
(d) In the event of a voluntary filing by Programmer (or involuntary
filing with respect to Programmer not vacated with ninety (90) days after such
filing) of a petition for reorganization or dissolution under federal bankruptcy
laws or under substantially equivalent state laws.
18.2. ARS'S MAJOR DEFAULTS. The occurrence of any of the following,
after the expiration of the applicable cure periods, if any, will be deemed to
be a "Major Default" by ARS under this Agreement:
(a) Except as otherwise provided for in this Agreement, the failure
of ARS to broadcast the programs supplied by Programmer in accordance with
Section 2 hereof;
(b) Any termination of this Agreement by ARS other than as permitted
in Section 18.4 or 18.5; or
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(c) In the event of a voluntary filing by ARS (or involuntary filing
with respect to ARS not vacated with ninety (90) days after such filing) of a
petition for reorganization or dissolution under federal bankruptcy laws or
under substantially equivalent state laws.
18.3. CURE PERIODS. The cure periods before any event listed in
Section 18.1 or 18.2 shall become a Major Default are as follows:
(a) PAYMENT BY PROGRAMMER. The consideration to be paid to ARS must
be received by ARS within five (5) days after ARS gives written notice of non-
payment to Programmer.
(b) CERTAIN MATTERS. There shall be no cure period for:
(i) a termination by Programmer described in Section 18.1(c); or
(ii) a termination by ARS described in Section 18.2(b) hereof.
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(c) PROGRAMS AND BROADCAST MATTERS. With respect to Programmer's
failure to provide programs referred to in Section 18.1(b) hereof or ARS's
failure to broadcast programs referred to in Section 18.2(a) hereof, the period
allowed for cure shall be ten (10) business days from the giving of written
notice of such failure to the defaulting party by the non-defaulting party.
(d) OTHER MATTERS. With respect to all matters capable of being
cured other than those described in Sections 18.3(a), 18.3(b) or 18.3(c) above,
the cure period shall be twenty (20) business days after written notice to the
defaulting party is given by the non-defaulting party or, with respect to
matters that through the exercise of reasonable diligence cannot be cured within
such ten (10) day period, such longer period not to exceed ninety (90) days as
is reasonably necessary to effect such cure through the exercise of reasonable
diligence.
18.4. TERMINATION UPON OCCURRENCE OF MAJOR DEFAULT. Upon the
occurrence and continuation of a Major Default the non-defaulting party may
terminate this Agreement by giving written notice to the defaulting party within
sixty (60) days of such occurrence, provided that the non-defaulting party has
not also committed a Major Default hereunder which has not been waived. Such
written notice shall specify a termination date which is not less than seven (7)
days nor more than ninety (90) days from the date such notice is given. In the
event the non-
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defaulting party does not exercise such right of termination by giving such
written notice within such sixty (60) day period, then the Major Default
giving rise to such right of termination shall be deemed waived and the
Agreement shall continue in full force and effect.
18.5. TERMINATION UPON FAILURE OF CONSUMMATION OF EXCHANGE
AGREEMENT. Notwithstanding any other provision hereof, this Agreement may be
terminated by either party at any time following termination of the Exchange
Agreement.
19. LIABILITIES UPON TERMINATION.
(a) Programmer shall be solely responsible for all of its
liabilities, debts and obligations incident to its purchase of broadcast time
hereunder, including, without limitation, accounts payable and unaired
advertisements, but not for ARS's federal, state, and local tax liabilities
associated with Programmer's payments to ARS as provided herein. Upon
termination pursuant to Sections 18.4 or 18.5 hereto, ARS shall be under no
further obligation to make available to Programmer any broadcast time or
broadcast transmission facilities, provided that ARS agrees that it will
cooperate reasonably with Programmer to discharge in exchange for reasonable
compensation any remaining obligations of Programmer in the form of air time
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following the termination date. At the date of termination, Programmer shall
return to ARS any equipment or property of the Station used by Programmer, its
employees or agents, in substantially the same condition as such equipment
existed on the Commencement Date, shall restore ARS's technical facilities to
substantially the same condition as such facilities existed on the Commencement
Date, ordinary wear and tear excepted, shall reassign to ARS all contracts and
agreements relating to the Station listed on the Schedules to the Exchange
Agreement which were assumed by Programmer upon the Commencement Date, and shall
otherwise take such actions to restore to the extent then practicable the
parties hereto to their respective positions prior to the Commencement Date.
(b) Upon termination of this Agreement pursuant to this Section 18 or
as a result of the expiration of the term of this Agreement other than by the
Closing under the Exchange Agreement, each party shall be free to pursue any and
all remedies available to it at law, in equity or otherwise. All amounts
accrued or payable to ARS up to the date of termination which have not been paid
shall be immediately due and payable. Programmer shall, in addition to its
other legal and equitable rights and remedies under this Agreement or under
applicable law, be entitled immediately to cease providing any further programs
to be broadcast on the Station, and all amounts which have been prepaid to ARS
for any partial month beyond the termination
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shall be immediately due and payable to Programmer. Programmer shall return
all confidential information with respect to the Station to the ARS.
Programmer shall reassign all of ARS's accounts receivable to ARS.
Programmer shall remit to ARS all amounts collected with respect to ARS's
accounts receivable within five (5) business days of termination hereunder.
Upon termination, Programmer shall be responsible for debts and
obligations resulting from the use of the Station's air time and equipment by
Programmer including, without limitation, accounts payable and net barter
balances in excess of _________________ dollars ($_____________), relating
to the period on and after the date of this Agreement and up to the termination
of this Agreement and shall be entitled to the revenues and other credits for
that period.
20. NO FORMAT CHANGES.
During this Agreement, Programmer shall not materially change the
entertainment format of the Station.
21. ARS'S INDEMNIFICATION.
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ARS shall indemnify, defend, hold and save Programmer harmless from
and against any and all claims, losses, costs, liabilities, damages, FCC
forfeitures, and expenses, including counsel fees, of every kind, nature, and
description, including libel, slander, illegal competition or trade practices,
or infringement of trade marks or program titles, violation of rights of
privacy, and infringement of copyrights and proprietary rights arising out of:
(a) ARS's operation of the Station (not including the operation of
the Station by Programmer) under this Agreement, and
(b) breach of any warranty, representation, covenant, agreement or
obligation of ARS contained in this Agreement.
22. PROGRAMMER'S INDEMNIFICATION.
Programmer shall indemnify, defend, hold and save ARS harmless from
and against any and all claims, losses, costs, liabilities, damages, FCC
forfeitures, and expenses, including counsel fees, of every kind, nature, and
description, including libel, slander, illegal competition or trade practices,
or infringement of trade marks or program titles, violation of rights of
privacy, and infringement of copyrights and proprietary rights arising out of:
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(a) the programming furnished by Programmer under this Agreement,
(b) the actions or failure to act of its employees or agents under
this Agreement and
(c) breach of any warranty, representation, covenant, agreement or
obligation of Programmer contained in this Agreement.
23. PROCEDURE FOR INDEMNIFICATION.
The party seeking indemnification under this paragraph ("Indemnitee")
shall give the party from whom it seeks indemnification ("Indemnitor") prompt
notice, as provided herein, of the assertion of such a claim provided, however,
that the failure to give notice of a claim within a reasonable time shall only
relieve the Indemnitor of liability to the extent it is materially prejudiced
thereby. Promptly after receipt of written notice, as provided herein, of a
claim by a person or entity not a party to this Agreement, the Indemnitor shall
assume the defense of such claim; provided, however, that:
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(a) If the Indemnitor fails, within a reasonable time after receipt
of notice of such claim, to assume the defense thereof, the Indemnitee shall
have the right to undertake the defense, compromise, and settlement of such
claim on behalf of and for the account and risk of Indemnitor, subject to the
right of the Indemnitor (upon notifying the Indemnitee of its election to do so)
to assume the defense of such claim at any time prior to the settlement,
compromise, judgment, or other final determination thereof;
(b) If in the reasonable judgment of the Indemnitee, based upon the
advise of its counsel, a direct or indirect conflict of interest exists between
the Indemnitee and Indemnitor, the Indemnitee shall (upon notifying the
Indemnitor of its election to do so) have the right to undertake the defense,
compromise, and settlement of such claim on behalf of and for the account and
risk of Indemnitor (it being understood and agreed that the Indemnitor shall not
be entitled to assume the defense of such claim);
(c) If the Indemnitee in its sole discretion elects, it shall (upon
notifying the Indemnitor of its election to do so) be entitled to employ
separate counsel and to participate in the defense of such claim, but the fee
and expenses of counsel so employed shall (except as contemplated by clauses (a)
and (b) above) be borne solely by Indemnitee;
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(d) The Indemnitor shall not settle or compromise any claim or
consent to the entry of any judgment that does not include as an unconditional
term thereof the grant by the claimant or plaintiff to each Indemnitee of a
release from any and all liability in respect thereof; and
(e) The Indemnitor shall not settle or compromise any claim in any
manner, or consent to the entry of any judgment, that could reasonably be
expected to have a material adverse effect on the Indemnitee.
24. DISPUTE OVER INDEMNIFICATION.
If upon presentation of a claim for indemnity hereunder, the
Indemnitor does not agree that all, or part, of such claim is subject to the
indemnification obligations imposed upon it pursuant to this Agreement, it shall
promptly so notify the Indemnitee. Thereupon, the parties shall attempt to
resolve their dispute, including where appropriate reaching an agreement as to
that portion of the claim, if any, which both concede is subject to
indemnification. To the extent that the parties are unable to reach some
compromise within thirty (30) days thereafter, the parties shall be free to
pursue all appropriate legal and equitable remedies.
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25. PROGRAMMER'S REMEDIES FOR OPERATIONAL DEFICIENCIES.
Except as set forth in this Section 25, and except for reductions in
power or interruptions occurring between the hours of 12:00 midnight and 6:00
a.m. as a result of maintenance or repairs or during such periods that the
Station are operating from its authorized auxiliary antenna, if any of the
normal broadcast transmissions of the Station are interrupted, interfered with,
or in any way impaired with so that the Station are not operating at full
licensed power and antenna height or are off the air, or in the event that ARS
preempts Chancellor's programming, Programmer shall be entitled to an equitable
reduction in the amount of its monthly fee which is proportionate to the period
of time that the Station's operations are deficient, the Station's programming
is preempted or the Station are off the air.
26. FORCE MAJEURE.
Any failure or impairment of the Station's facilities or any delay or
interruption in the broadcast of programs, or failure at any time to furnish
facilities, in whole or in part, for broadcast due to Acts of God, strikes,
lockouts, material or labor restrictions by any
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governmental authority, civil riot, floods and any other cause not reasonably
within the control of ARS (including any obligation of ARS to reduce power or
suspend operation to avoid occupational exposure to harmful RF radiation),
shall not constitute a breach of this Agreement and ARS will not be liable to
Programmer.
27. OTHER AGREEMENTS.
During the term of this Agreement, ARS will not enter into any other
local marketing, program provision, local management or similar agreement with
any third party with respect to the Station.
28. ASSIGNMENT.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto, their successors and assignees, including specifically any
purchaser of the Station from ARS. Neither party may assign its rights without
the prior written consent of the other party which consent shall not be
unreasonably withheld.
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29. ENTIRE AGREEMENT.
This Agreement, and the Attachments hereto, embody the entire
agreement and understanding of the parties and supersede any and all prior
agreements, arrangements and understandings relating to matters provided for
herein. No amendment, waiver of compliance with any provision or condition
hereof, or consent pursuant to this Agreement will be effective unless evidenced
by an instrument in writing signed by the parties.
30. TAXES.
ARS and Programmer shall each pay its own ad valorem taxes, if any,
which may be assessed on such party's respective personal property for the
periods that such items are owned by such party. Each party shall be
responsible for any sales tax imposed on advertising aired during the
programming provided by that party.
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31. HEADINGS.
The headings are for convenience only and will not control or affect
the meaning or construction of the provisions of this Agreement.
32. GOVERNING LAW.
The obligations of ARS and Programmer are subject to applicable
federal, state and local law, rules and regulations, including, but not limited
to, the Act and the Rules and Regulations of the FCC. The construction and
performance of the Agreement will be governed by the laws of the State of
California.
33. NOTICES.
Any notice, demand or request required or permitted to be given under
the provisions of this Agreement shall be in writing 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
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after delivery to a nationally recognized overnight courier service if sent
by an overnight delivery service for next morning delivery and shall be
addressed to the following addresses:
To Programmer: Chancellor Broadcasting Company
12655 N. Central Expressway, Suite 321
Dallas, Texas 75243
Attention: Mr. Steven Dinetz
Telecopier number: (214) 239-0220
Copy to: Matthew L. Leibowitz, Esq.
Leibowitz & Associates
One S.E. Third Avenue, Suite 1450
Miami, FL 33131
Telephone number: (305) 530-1322
Telecopier number: (305) 530-9417
To ARS:
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Copy to:
The date of any such notice and service thereof shall be deemed to be:
(a) the day of delivery if hand delivered or delivered by overnight
courier;
(b) the day of delivery as indicated on the return receipt if
dispatched by mail, or
(c) the date of telecopy transmission as indicated on the telecopier
transmission report provided that any telecopy transmission shall not be
effective unless a paper copy sent by overnight courier on the date of the
telecopy transmission is delivered.
Either party may change its address for the purpose of notice by
giving notice of such change in accordance with the provisions of this
paragraph.
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34. SEVERABILITY.
If any provision of this Agreement or the application thereof to any
person or circumstances shall be invalid or unenforceable to any extent, the
remainder of this Agreement and the application of such provision to other
persons or circumstances shall not be affected thereby and shall be enforced to
the greatest extent permitted by law.
35. CERTIFICATIONS.
(a) CONTROL OF STATION. ARS hereby verifies that it will maintain
control of the Station and their facilities, including specifically control over
the Station's finances, personnel and programming during the term of this
Agreement.
(b) COMPLIANCE WITH OWNERSHIP RULES. Programmer hereby verifies that
the arrangement contemplated by this Agreement complies with the provisions of
Section 73.3555(a) of the rules and regulations of the FCC.
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36. NO JOINT VENTURE.
The parties agree that nothing herein shall constitute a joint venture
or partnership between them.
37. BENEFICIARIES.
Nothing in this Agreement, express or implied, is intended to confer
on any person other than the parties hereto and their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
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CHANCELLOR BROADCASTING COMPANY
By:
------------------------------
Steven Dinetz
President
CHANCELLOR RADIO BROADCASTING COMPANY
By:
---------------------------
Steven Dinetz
President
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AMERICAN RADIO SYSTEMS CORPORATION
By:
---------------------------
Steven B. Dodge
President
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PAYMENT SCHEDULE
In exchange for the air time supplied to Programmer pursuant to this
Agreement, Programmer shall pay ARS _______________________ Dollars
($_______) per month. The first monthly payment to ARS is due and payable on
July 1, 1996, and each successive payment is due on the first day of each
month thereafter. The monthly fee shall be reduced PRO RATA for any partial
month at the beginning or end of the term of this Agreement.
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SCHEDULE B
EMPLOYEES
[Copy of Employees' Summaries for KSTE-AM to be provided.]
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ATTACHMENT I
BROADCAST STATION PROGRAMMING POLICY STATEMENT
Programmer agrees to cooperate with ARS in the broadcasting of programs of
the highest possible standard of excellence and for this purpose to observe the
following regulations in the preparation, writing and broadcasting of its
programs. Further Programmer agrees that all material broadcast on the Station
shall comply with all federal, state and local applicable laws, rules and
regulation.
I. NO PLUGOLA OR PAYOLA.
The broadcast of any material for which any money, service or other
valuable consideration is directly or indirectly paid, or promised to or charged
or accepted by, the Programmer, from any person, shall be prohibited, unless, at
the time the same is broadcast, it is announced as paid for or furnished by such
person.
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II. POLITICAL BROADCASTING.
Within thirty (30) days of the Commencement Date, Programmer shall
provide ARS with a written political advertising disclosure statement which
fully and accurately discloses how the Programmer sells programming and
advertising time and which makes parties purchasing political programming and
advertising time fully aware of the lowest unit charge provisions of Section 315
of the Act. In addition, at least thirty (30) days before the start of any
primary or election campaign, Programmer will clear with the Station's general
managers the rates Programmer will charge for the time to be sold to candidates
to make certain that the rate charges is in conformance with the applicable law
and Station policy.
III. REQUIRED ANNOUNCEMENTS.
Programmer shall broadcast (i) an announcement in a form satisfactory
to ARS at the beginning of each hour to identify the Station and (ii) any other
announcements that may be required by law, regulation or ARS's Station policy.
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IV. NO ILLEGAL ANNOUNCEMENTS.
No announcements, broadcasts or promotions prohibited by federal,
state or local law shall be made over the Station. This prohibition
specifically includes, but is not limited to, any and all programming or other
broadcast material concerning tobacco or alcohol related products which are
unlawful. The airing of any broadcast material concerning contests, lotteries
or games must be conducted in accordance with all applicable law, including FCC
rules and regulations. Any obscene, indecent, or fraudulent programming is
prohibited. All sponsored programming or other broadcast material must be
identified in accordance with applicable law, including FCC rules and
regulations.
V. ARS DISCRETION PARAMOUNT.
In accordance with ARS's responsibility under the Communications Act
of 1934, as amended, and the Rules and Regulations of the Federal Communications
Commission, ARS reserves the right to reject or terminate any advertising
proposed to be presented or being presented over the Station, which is in
conflict with Station's policies or which ARS or its general manager's
reasonable judgement would not serve the public interest.
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In any case where questions of policy or interpretation arise, Programmer
should submit the same to ARS for decision before making any commitments in
connection therewith.
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ATTACHMENT II
PAYOLA AFFIDAVIT
City of __________________________)
County of ________________________) Section :
State of _________________________)
I, ______________________, having first been duly sworn, hereby state
that I have read and will comply with the provisions of Section 317 and 507
of the Communications Act of 1934, as amended, copies of which are attached
hereto, I also have read and will comply with the provisions of the
Commission's Sponsorship Identification Rule (73.1212), a copy of which is
attached hereto.
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I also will comply with the policy of this Station, __________________
(insert call letters here), which prohibits every employee having any voice
in the selection of broadcast matter from (a) engaging in any outside
business or economic activity which would create a conflict of interest in
the selection of broadcast matter; (b) accepting any favors, loans,
entertainment or other consideration from persons seeking the airing of any
broadcast matter in return thereof, and (c) promoting over the air (except by
means of an appropriate commercial announcement) any activity or matter in
which the employee has a direct or indirect financial interest.
I understand that receiving or agreeing to receive anything of value from a
third party for the broadcast of any program material over the Station is a
crime, unless the agreed payment is disclosed to the Station before broadcast of
the program material. This crime, commonly called "payola", is punishable by
one year in prison and a fine of up to $10,000.
During the past year, I have not been promised or paid anything of value
directly or indirectly by a third party for the broadcast of any programming
material over the Station.
------------------------------------
Affiant
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The foregoing instrument was acknowledged before me this ____ day of
_______________, 1996 by __________________________________, who is
personally known to me or who has produced _________________________ as
identification.
---------------------------------------
Notary Public
My commission expires:
----------------------------------
<PAGE>
ASSET PURCHASE AGREEMENT
BY AND AMONG
CLASSICAL ACQUISITION LIMITED PARTNERSHIP
RADIO 100 OF MARYLAND LIMITED PARTNERSHIP
RADIO 100 LIMITED PARTNERSHIP
RADIO 570 LIMITED PARTNERSHIP
RADIO 94 OF PHOENIX LIMITED PARTNERSHIP
RADIO 95 OF PHOENIX LIMITED PARTNERSHIP
as Sellers
AND
CHANCELLOR RADIO BROADCASTING COMPANY
as Buyer
Dated as of August 24, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE 1. DEFINITIONS AND REFERENCES . . . . . . . . . . 2
ARTICLE 2 SALE AND PURCHASE OF ASSETS;
ESCROW DEPOSIT; PURCHASE PRICE; AMOUNTS;
ASSUMPTION OF LIABILITIES. . . . . . . . . . . . . . . 3
2.1. Asset Sale and Purchase of Assets . . . . . . . . 3
2.1.1. FCC Licenses . . . . . . . . . . . . . 3
2.1.2. Real and Leased Property
Interests . . . . . . . . . . . . . . 3
2.1.3. Tangible Personal Property. . . . . . . 4
2.1.4. Intellectual Property . . . . . . . . . 4
2.1.5. Program Contracts . . . . . . . . . . . 4
2.1.6. Trade-out Agreements. . . . . . . . . . 4
2.1.7. Broadcast Time Sales Agreement. . . . . 5
2.1.8. Operating Contracts . . . . . . . . . . 5
2.1.9. Prepaid Items . . . . . . . . . . . . . 5
2.1.10. Vehicles. . . . . . . . . . . . . . . . 5
2.1.11. Files and Records . . . . . . . . . . . 5
2.1.12. Permits and Licenses. . . . . . . . . . 5
2.1.14. Accounts Receivable . . . . . . . . . . 6
2.2. Excluded Assets . . . . . . . . . . . . . . . . . 6
2.2.1. Cash. . . . . . . . . . . . . . . . . . 6
2.2.2. Personal Property Disposed Of . . . . . 6
2.2.3. Insurance . . . . . . . . . . . . . . . 6
2.2.4. Employee Plans and Assets . . . . . . . 6
2.2.5. Right to Tax Refunds. . . . . . . . . . 6
2.2.6. Certain Books and Records . . . . . . . 6
2.2.7. Third-Party Claims. . . . . . . . . . . 7
2.2.8. Rights Under this Agreement . . . . . . 7
2.2.9. Securities. . . . . . . . . . . . . . . 7
2.2.10. Name. . . . . . . . . . . . . . . . . . 7
2.2.11. Other Assets. . . . . . . . . . . . . . 7
2.2.12. Excluded Contracts and
Unrelated Assets. . . . . . . . . . . 8
2.3. Escrow Deposit. . . . . . . . . . . . . . . . . . 8
2.4. Purchase Price. . . . . . . . . . . . . . . . . . 8
2.5. Payment of Purchase Price . . . . . . . . . . . . 8
2.6. Net Working Capital Amount and
Proration Amount. . . . . . . . . . . . . . . . 9
2.7. Allocation of Purchase Price. . . . . . . . . . .10
2.8. Assumption of Liabilities . . . . . . . . . . . .11
2.9. Sundance Stations . . . . . . . . . . . . . . . .11
ARTICLE 3. REPRESENTATIONS AND WARRANTIES BY SELLER . . .12
3.1. Organization and Standing . . . . . . . . . . . .12
3.2. Authorization . . . . . . . . . . . . . . . . . .12
3.3. Compliance with Laws. . . . . . . . . . . . . . .13
3.4. Consents and Approvals; No Conflicts. . . . . . .13
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3.5. Financial Statements; Undisclosed
Liabilities . . . . . . . . . . . . . . . . . 13
3.6. Absence of Certain Changes or Events. . . . . . 14
3.7. Absence of Litigation . . . . . . . . . . . . . 15
3.8. Assets. . . . . . . . . . . . . . . . . . . . . 15
3.9. FCC Matters . . . . . . . . . . . . . . . . . . 15
3.10. Real Property . . . . . . . . . . . . . . . . . 16
3.11. Condition of Tangible Assets. . . . . . . . . . 17
3.12. Intellectual Property . . . . . . . . . . . . . 17
3.13. Station Contracts . . . . . . . . . . . . . . . 18
3.14. Taxes . . . . . . . . . . . . . . . . . . . . . 18
3.15. Employee Benefit Plans. . . . . . . . . . . . . 19
3.16. Labor Relations . . . . . . . . . . . . . . . . 20
3.17. Environmental Matters . . . . . . . . . . . . . 21
3.18. Transactions With Affiliates. . . . . . . . . . 22
3.19. Insurance . . . . . . . . . . . . . . . . . . . 22
ARTICLE 4. REPRESENTATIONS AND WARRANTIES BY BUYER . . . 22
4.1. Organization and Standing . . . . . . . . . . . 22
4.2. Authorization . . . . . . . . . . . . . . . . . 23
4.3. Compliance with Laws. . . . . . . . . . . . . . 23
4.4. Consents and Approvals; No Conflicts. . . . . . 23
4.5. Availability of Funds . . . . . . . . . . . . . 23
4.6. Qualification of Buyer. . . . . . . . . . . . . 23
4.7. No Outside Reliance . . . . . . . . . . . . . . 24
ARTICLE 5. PRE-CLOSING FILINGS . . . . . . . . . . . . . 24
5.1. Applications for FCC Consent. . . . . . . . . . 24
5.2. Hart-Scott-Rodino . . . . . . . . . . . . . . . 25
ARTICLE 6. COVENANTS AND AGREEMENTS OF SELLER. . . . . . 26
6.1. Negative Covenants. . . . . . . . . . . . . . . 26
6.1.1. Dispositions; Mergers . . . . . . . . 26
6.1.2. Accounting Principles and
Practices . . . . . . . . . . . . . 26
6.1.3. Program Contracts . . . . . . . . . . 26
6.1.4. Broadcast Time Sales Agreements . . . 26
6.1.5. Additional Agreements . . . . . . . . 26
6.1.6. Employee Matters. . . . . . . . . . . 26
6.2. Affirmative Covenants . . . . . . . . . . . . . 26
6.2.1. Preserve Existence. . . . . . . . . . 26
6.2.2. Normal Operations . . . . . . . . . . 26
6.2.3. Maintain FCC Licenses . . . . . . . . 28
6.2.4. Station Contracts . . . . . . . . . . 28
6.2.5. Taxes . . . . . . . . . . . . . . . . 28
6.2.6. Partnership Action. . . . . . . . . . 28
6.2.7. Access. . . . . . . . . . . . . . . . 28
6.2.8. Insurance . . . . . . . . . . . . . . 29
6.2.9. Financial Statements. . . . . . . . . 29
ii
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TABLE OF CONTENTS (continued)
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6.2.10. Consents. . . . . . . . . . . . . . . 29
6.2.11. Preparation of Financial
Statements. . . . . . . . . . . . . 29
6.3. Confidentiality . . . . . . . . . . . . . . . . 30
ARTICLE 7. COVENANTS AND AGREEMENTS OF BUYER . . . . . . 31
7.1. Confidentiality . . . . . . . . . . . . . . . . 31
7.2. Corporate Action. . . . . . . . . . . . . . . . 31
7.3. Access. . . . . . . . . . . . . . . . . . . . . 31
7.4 Pending Renewal Applications. . . . . . . . . . 32
7.5 Inconsistent Actions. . . . . . . . . . . . . . 32
ARTICLE 8. MUTUAL COVENANTS AND UNDERSTANDINGS
OF SELLER AND BUYER . . . . . . . . . . . . . . . . . 32
8.1. Possession and Control. . . . . . . . . . . . . 32
8.2. Risk of Loss. . . . . . . . . . . . . . . . . . 32
8.3. Public Announcements. . . . . . . . . . . . . . 33
8.4. Employee Matters. . . . . . . . . . . . . . . . 33
8.5. Allocation of Purchase Price. . . . . . . . . . 34
8.6. Disclosure Schedules. . . . . . . . . . . . . . 34
8.7. Bulk Sales Laws . . . . . . . . . . . . . . . . 35
8.8. Due Diligence And Disclosure Schedule
Delivery. . . . . . . . . . . . . . . . . . . 35
ARTICLE 9. CONDITIONS PRECEDENT TO BUYER'S
OBLIGATION TO CLOSE . . . . . . . . . . . . . . . . . 35
9.1. Representations and Covenants . . . . . . . . . 36
9.2. Required Consents . . . . . . . . . . . . . . . 36
9.3. Delivery of Documents . . . . . . . . . . . . . 36
9.4. FCC Order . . . . . . . . . . . . . . . . . . . 36
9.5. Hart-Scott-Rodino . . . . . . . . . . . . . . . 36
9.6 Legal Proceedings . . . . . . . . . . . . . . . 36
9.7. Sundance Consummation . . . . . . . . . . . . . 37
ARTICLE 10. CONDITIONS PRECEDENT TO SELLER'S
OBLIGATION TO CLOSE . . . . . . . . . . . . . . . . . 37
10.1. Representations and Covenants . . . . . . . . . 37
10.2. Delivery by Buyer . . . . . . . . . . . . . . . 37
10.3. FCC Order . . . . . . . . . . . . . . . . . . . 37
10.4. Hart-Scott-Rodino . . . . . . . . . . . . . . . 37
10.5. Legal Proceedings . . . . . . . . . . . . . . . 38
ARTICLE 11. THE CLOSING. . . . . . . . . . . . . . . . . 38
11.1. Closing . . . . . . . . . . . . . . . . . . . . 38
11.2. Delivery by Seller. . . . . . . . . . . . . . . 38
11.2.1. Agreements and Instruments. . . . . . 38
11.2.2. Consents. . . . . . . . . . . . . . . 39
11.2.3. Certified Resolutions . . . . . . . . 39
11.2.4. Officers' Certificates. . . . . . . . 39
11.2.5. Deposit . . . . . . . . . . . . . . . 39
11.3. Delivery by Buyer . . . . . . . . . . . . . . . 39
11.3.1. Purchase Price Payment. . . . . . . . 39
11.3.2. Assumption Agreement. . . . . . . . . 40
11.3.3. Certified Resolutions . . . . . . . . 40
11.3.4. Officers' Certificate . . . . . . . . 40
iii
<PAGE>
TABLE OF CONTENTS (continued)
PAGE
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ARTICLE 12. SURVIVAL; INDEMNIFICATION. . . . . . . . . . 40
12.1. Survival of Representations. . . . . . . . . . 40
12.2. Indemnification by Sellers . . . . . . . . . . 40
12.3. Indemnification by Buyer . . . . . . . . . . . 41
12.4. Limitation on Indemnification. . . . . . . . . 41
12.5. Conditions of Indemnification. . . . . . . . . 42
12.6. Cure of Breach . . . . . . . . . . . . . . . . 44
ARTICLE 13. TERMINATION. . . . . . . . . . . . . . . . . 44
13.1. Termination. . . . . . . . . . . . . . . . . . 44
13.3. Effect of Termination. . . . . . . . . . . . . 46
ARTICLE 14. REMEDIES . . . . . . . . . . . . . . . . . . 47
14.1. Default by Buyer . . . . . . . . . . . . . . . 47
14.2. Default by Seller. . . . . . . . . . . . . . . 47
14.3. Liquidated Damages . . . . . . . . . . . . . . 47
14.4. Specific Performance . . . . . . . . . . . . . 48
ARTICLE 15. GENERAL PROVISIONS . . . . . . . . . . . . . 48
15.1. Additional Actions, Documents and
Information. . . . . . . . . . . . . . . . . 48
15.2. Brokers. . . . . . . . . . . . . . . . . . . . 48
15.3. Expenses and Taxes . . . . . . . . . . . . . . 49
15.4. Notices. . . . . . . . . . . . . . . . . . . . 49
15.5. Waiver . . . . . . . . . . . . . . . . . . . . 51
15.6. Benefit and Assignment . . . . . . . . . . . . 51
15.7. Entire Agreement; Amendment. . . . . . . . . . 52
15.8. Severability . . . . . . . . . . . . . . . . . 52
15.9. Headings . . . . . . . . . . . . . . . . . . . 53
15.10. Governing Law. . . . . . . . . . . . . . . . . 53
15.11. Signature in Counterparts. . . . . . . . . . . 53
iv
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as
of this 24th day of August, 1996 by and among CLASSICAL ACQUISITION LIMITED
PARTNERSHIP, a Maryland limited partnership ("Classical"), RADIO 100 OF
MARYLAND LIMITED PARTNERSHIP, a Maryland limited partnership ("Radio
Maryland"), RADIO 100 LIMITED PARTNERSHIP, a Maryland limited partnership
("Radio 100"), RADIO 570 LIMITED PARTNERSHIP, a Maryland limited partnership
("Radio 570"), RADIO 94 OF PHOENIX LIMITED PARTNERSHIP, a Maryland limited
partnership ("Radio 94"), and RADIO 95 OF PHOENIX LIMITED PARTNERSHIP, a
Maryland limited partnership ("Radio 95") (each of the foregoing entities
shall be referred to herein individually as a "Seller" and collectively as
the "Sellers") and CHANCELLOR RADIO BROADCASTING COMPANY, a Delaware
corporation ("Buyer").
WHEREAS, Classical is the licensee of radio broadcast stations
WGMS-FM, Washington, D.C. ("WGMS") and WTEM(AM), Bethesda, Maryland ("WTEM"),
pursuant to certain authorizations issued by the Federal Communications
Commission ("FCC") and Classical operates WGMS and owns or leases certain
assets used in connection with the operation of WGMS and WTEM;
WHEREAS, Radio 570 operates WTEM and owns or leases certain assets
used in connection with the operation of WTEM;
WHEREAS, Radio Maryland is the licensee of radio broadcast station
WBIG-FM, Washington, D.C. ("WBIG"), pursuant to certain authorizations issued
by the FCC and Radio Maryland operates WBIG and owns or leases certain assets
used in connection with the operation of WBIG;
WHEREAS, Radio 100 is the licensee of radio broadcast stations
KQQL(FM), Anoka, Minnesota ("KQQL"), and WBOB-FM, Minneapolis, Minnesota
("WBOB"), pursuant to certain authorizations issued by the FCC and Radio 100
operates each of KQQL and WBOB and owns or leases certain assets used in
connection with the operation of KQQL and WBOB;
WHEREAS, Radio 94 is the licensee of radio broadcast station
KOOL-FM, Phoenix, Arizona ("KOOL"), pursuant to certain authorizations issued
by the FCC and Radio 94 operates KOOL and owns or leases certain assets used
in connection with the operation of KOOL;
<PAGE>
WHEREAS, Radio 95 has entered into an Asset
Purchase Agreement, dated as of May 3, 1996 (the "Radio 95
Asset Purchase Agreement"), by and among Radio 95, as buyer,
Sundance Broadcasting, Inc., Sundance Broadcasting of Idaho,
Inc., David E. Reese and Louise F. Reese, as sellers
(collectively, the "Sundance Parties"), pursuant to which,
among other things, Radio 95 has agreed to acquire from the
Sundance Parties the assets owned, leased or used by the
Sundance Parties in connection with the operation of radio
broadcast stations KYOT-FM, Phoenix, Arizona ("KYOT"), KZON-
FM, Phoenix, Arizona ("KZON"), KOY(AM), Phoenix, Arizona
("KOY"), KISO(AM), Phoenix, Arizona ("KISO"), WMIL-FM,
Waukesha, Wisconsin ("WMIL"), and WOKY(AM), Milwaukee,
Wisconsin ("WOKY," and, together with KYOT, KZON, KOY, KISO,
and WMIL, the "Sundance Stations");
WHEREAS, in connection with the Radio 95 Asset
Purchase Agreement, the FCC has approved the assignment of
the radio broadcast licenses to Radio 95 for each of KYOT,
KZON, KOY, KISO, WMIL, and WOKY; and
WHEREAS, Sellers desire to sell, assign and
transfer the FCC authorizations for WGMS, WBIG, WTEM, KQQL,
WBOB, KOOL, KYOT, KZON, KOY, KISO, WMIL and WOKY (each a
"Station" and collectively, the "Stations") and the assets
and businesses of the Stations as described below, and Buyer
desires to acquire the Stations, the FCC authorizations for
the Stations, and the assets and businesses of the Stations
as described below, all on the terms described in this
Agreement;
NOW, THEREFORE, in consideration of the foregoing
and of the mutual covenants and agreements hereinafter set
forth, the parties hereto
hereby agree as follows:
ARTICLE 1.
DEFINITIONS AND REFERENCES
Capitalized terms used herein without definition
shall have the respective meanings assigned thereto in
ANNEX I attached hereto and incorporated herein for all
purposes of this Agreement (such definitions to be equally
applicable to both the singular and plural forms of the
terms defined). Unless otherwise specified, all references
herein to "Articles" or "Sections" are to Articles or
Sections of this Agreement.
-2-
<PAGE>
ARTICLE 2
SALE AND PURCHASE OF ASSETS; ESCROW DEPOSIT;
PURCHASE PRICE; AMOUNTS; ASSUMPTION OF LIABILITIES
2.1. ASSET SALE AND PURCHASE OF ASSETS.
Subject to the terms and conditions hereof and in
reliance upon the representations, warranties and agreements
contained herein, upon the Closing, each Seller shall sell,
assign, transfer, convey and deliver to Buyer, free of all
Encumbrances (other than Permitted Encumbrances), and Buyer
shall purchase, acquire, pay for and accept from each
Seller, all of each Seller's right, title and interest in,
to and under all real, personal and mixed assets, rights,
benefits and privileges, both tangible and intangible,
wheresoever located, owned, leased or used (or to be owned,
leased or used), by each Seller in connection with the
business and operations of the Stations (collectively, the
"Assets"); but excluding the Excluded Assets described in
SECTION 2.2.
The Assets shall include, without limitation, all
of each Seller's right, title and interest in, to and under
the following:
2.1.1. FCC LICENSES.
All licenses, permits and other
authorizations issued by the FCC to any Seller for the
operation of the Stations (the "FCC Licenses"), including
without limitation those listed in SCHEDULE 2.1.1, and all
applications therefor, together with any pending
applications, renewals, extensions or modifications thereof
and additions thereto.
2.1.2. REAL AND LEASED PROPERTY INTERESTS.
(a) All the real property of any Seller
including, without limitation, all land, fee interests,
easements and other interests of every kind and description
in real property, buildings, structures, fixtures,
appurtenances, towers and antennae, and other improvements
thereon owned by any Seller and used in connection with the
business and operations of the Stations ("Real Property"),
all of which are listed or described in SCHEDULE 2.1.2.
(b) All the real property leasehold
interests of any Seller including, without limitation,
leases and subleases of any land, easements and other real
property leasehold interests of every kind and description
in real property, buildings, structures, fixtures,
appurtenances, towers and antennae, and other improvements
thereon leased by any Seller in connection with the business
and operations of the Stations ("Leased Property"), all of
which are listed or described in SCHEDULE 2.1.2.
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2.1.3. TANGIBLE PERSONAL PROPERTY.
All of the furniture, fixtures,
furnishings, machinery, computers, equipment, inventory,
spare parts, supplies, office materials and other tangible
property of every kind and description maintained, owned,
leased or used by any Seller in connection with the business
and operations of the Stations, together with any
replacements thereof and additions thereto made before the
Closing, and less any retirements or dispositions thereof
made before the Closing in the Ordinary Course of Business,
including, without limitation, those items set forth and
identitifed in SCHEDULE 2.1.3 for WGMS, WBIG and WTEM with a
book value in excess of $20,000, and those items at the
other Stations with a book value in excess of $5,000.
2.1.4. INTELLECTUAL PROPERTY.
All of the service marks, copyrights,
franchises, software, licenses (other than the FCC
Licenses), trademarks, trade names, internet domain names,
jingles, slogans, logotypes and other similar intangible
assets maintained, owned or used by any Seller in connection
with the business and operations of the Stations (including
any and all applications, registrations, extensions and
renewals relating thereto) (the "Intellectual Property"),
and all of the rights, benefits and privileges associated
therewith including, without limitation, those set forth and
identified in SCHEDULE 2.1.4 and the right to use the call
letters for the Stations and the right to sue for past
infringement of Intellectual Property to the extent
necessary to enforce Buyer's rights to such Intellectual
Property.
2.1.5. PROGRAM CONTRACTS.
The program (cash and non-cash) licenses
and contracts under which any Seller is authorized to
broadcast programs on the Stations and listed on
SCHEDULE 2.1.5, and any other such program licenses, and
contracts that are entered into between the date of this
Agreement and the Closing Date in accordance with the terms
of this Agreement (collectively the "Program Contracts").
2.1.6. TRADE-OUT AGREEMENTS.
The contracts and agreements (excluding
Program Contracts) summarized in SCHEDULE 2.1.6, pursuant to
which any Seller has sold, traded or bartered commercial air
time on the Stations in consideration for any property or
services in lieu of or in addition to cash (collectively,
the "Trade-out Agreements").
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2.1.7. BROADCAST TIME SALES AGREEMENT.
All contracts and agreements pursuant to
which any Seller has sold air time on the Stations for cash
(collectively the "Time Sales Agreements").
2.1.8. OPERATING CONTRACTS.
The other contracts and agreements listed
on SCHEDULE 2.1.8 (including, without limitation, employment
agreements and talent contracts, collective bargaining
agreements, network affiliation agreements and national and
local advertising representation agreements for the
Stations), together with all contracts and agreements that
may be entered into between the date of this Agreement and
the Closing Date in accordance with the terms of this
Agreement (collectively, the "Operating Contracts" together
with the Program Contracts, and the Trade-out Agreements and
the Time Sales Agreements, but excluding any contract or
agreement constituting an Excluded Asset set forth in
SCHEDULE 2.2.12, the "Station Contracts").
2.1.9. PREPAID ITEMS.
All deposits and prepaid expenses of the
Stations, including, without limitation, those set forth and
described in SCHEDULE 2.1.9.
2.1.10. VEHICLES.
All automotive equipment and motor
vehicles maintained, owned, leased or otherwise used by any
Seller in connection with the business and operations of the
Stations, including, without limitation, those set forth and
described in SCHEDULE 2.1.10.
2.1.11. FILES AND RECORDS.
All engineering, business and other
books, papers, logs, files and records pertaining to the
business and operations of the Stations, but not the
organizational documents and records or other partnership
records of any Seller or other books and records which are
Excluded Assets.
2.1.12. PERMITS AND LICENSES.
All permits, approvals, orders,
authorizations, consents, licenses, certificates,
franchises, exemptions of, or filings or registrations with,
any court or Governmental Authority (other than the FCC) in
any jurisdiction, which have been issued or granted to or
are owned or used by any Seller in connection with the
business and operations of the Stations and all applications
therefor,
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together with any pending applications, extensions
or modifications thereof and additions thereto.
2.1.13. ACCOUNTS RECEIVABLE.
All Accounts Receivable arising out of the
business and operations of the Stations.
2.2. EXCLUDED ASSETS.
Notwithstanding anything to the contrary in this
Agreement, there shall be excluded from the Assets and
retained by Sellers, to the extent in existence at 12:01
a.m.(Washington, D.C. local time) on the Closing Date, the
following assets (collectively, the "Excluded Assets"):
2.2.1. CASH.
All cash and cash equivalents held by any
Seller, all interest payable in connection with any such
cash, cash equivalents or short term investments, bank
balances and rights in and to bank accounts, and marketable
and other securities of any Seller.
2.2.2. PERSONAL PROPERTY DISPOSED OF.
All tangible personal property disposed of
or consumed in the Ordinary Course of Business as permitted
by this Agreement.
2.2.3. INSURANCE.
All contracts of insurance and all
insurance plans and the assets thereof.
2.2.4. EMPLOYEE PLANS AND ASSETS.
All Plans, Benefit Arrangements,
Qualified Plans and Welfare Plans and the assets thereof.
2.2.5. RIGHT TO TAX REFUNDS.
Any and all claims of any Seller with
respect to any Tax refunds.
2.2.6. CERTAIN BOOKS AND RECORDS.
(a) All of each Seller's organizational
documents and other partnership records, and originals of
account books of original entry, (b) duplicated copies of
any books, records, accounts, checks, payment records, Tax
records
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(including payroll, unemployment, real estate and
other Tax records) and other similar books, records and
information of any Seller relating to such Seller's
operation of the business of the Stations prior to the
Closing, (c) all records prepared by or on behalf of Sellers
in connection with the sale of the Stations, and (d) all
records and documents relating to any Excluded Assets.
2.2.7. THIRD-PARTY CLAIMS.
All rights and claims of any Seller
whether mature, contingent or otherwise, against third
parties relating to the Assets or the Stations, whether in
tort, contract, or otherwise other than rights and claims
relating to past infringement of Intellectual Property to
the extent necessary to enforce Buyer's rights to such
Intellectual Property.
2.2.8. RIGHTS UNDER THIS AGREEMENT.
All of each Seller's rights under or
pursuant to this Agreement or any other rights in favor of
Sellers pursuant to the other agreements contemplated
hereby.
2.2.9. SECURITIES.
All capital stock or other securities in
respect of any Seller or any affiliate or partner of any Seller.
2.2.10. NAME.
All rights to the name "Colfax
Communications" or any logo or variation thereof and the
goodwill associated therewith.
2.2.11. OTHER ASSETS.
Any interests, contracts, agreements and
other assets owned, leased or used, or to be owned, leased
or used in connection with the business and operations of
the following radio broadcast stations (none of which items
are used exclusively in the business and operations of the
Stations):
(a) KOOL(AM), Phoenix, Arizona (it being
understood that the assets of KOOL(AM) are being transferred
by Sellers to Salem Media of Arizona, Inc.);
(b) KLTB(FM), Boise, Idaho;
(c) KARO(FM), Caldwell, Idaho; and
(d) KIDO(AM), Boise, Idaho.
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2.2.12. EXCLUDED CONTRACTS AND UNRELATED ASSETS.
The contracts, agreements and any other Assets listed on
SCHEDULE 2.2.12, including certain real estate of Sellers not used in the
business and operations of the Stations.
2.3. ESCROW DEPOSIT.
For and in partial consideration of the execution and delivery of
this Agreement, simultaneously with the execution and delivery of this
Agreement, Buyer is depositing in escrow with the Deposit Escrow Agent an
amount equal to Twenty Million Dollars ($20,000,000) in cash, such cash to be
held as an earnest money deposit (the "Deposit"), in accordance with the
terms and conditions of the Deposit Escrow Agreement.
2.4. PURCHASE PRICE.
For and in consideration of the conveyances and assignments
described herein and in addition to the assumption of Liabilities as set
forth in SECTION 2.8, Buyer agrees to pay to Sellers, and Sellers agree to
accept from Buyer, an amount equal to Three Hundred Sixty Five Million
Dollars ($365,000,000) (the "Base Purchase Price"), PLUS or MINUS (as the
case may be) (a) the Net Working Capital Amount as provided for in SECTION
2.6, (b) the Proration Amount as provided for in SECTION 2.6 and (c) the
amount of any of the Stations' net trade balance at Closing, if and to the
extent any such balance is positive or negative by an amount in excess of
$25,000 per Station (in the event any such balance is positive in excess of
$25,000, then the Purchase Price shall be increased by such excess; in the
event any such balance is negative in excess of $25,000, then the Purchase
price shall be decreased by such excess) (collectively, the "Purchase
Price"). The Purchase Price shall be payable as described in SECTION 2.5.
The Purchase Price shall be allocated among the Assets in accordance with
SECTION 8.5. The Purchase Price shall be allocated among the Sellers in
accordance with SECTION 2.7.
2.5. PAYMENT OF PURCHASE PRICE.
At the Closing, subject to the satisfaction or waiver of all the
conditions to the Buyer's obligations hereunder, Buyer shall deliver the Base
Purchase Price, plus or minus (as the case may be) the Estimated Net Working
Capital (as defined in SECTION 2.6.1), the initial Proration Amount
determined in accordance with SECTION 2.6.3, and the adjustment set forth in
SECTION 2.4(C), by wire transfer of immediately available federal funds to an
account which will be identified by Sellers not less than two (2) days prior
to the Closing Date, and Seller
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shall cause the Deposit Escrow Agent to return the Deposit to Buyer (or its
agent) contemporaneously with the Closing.
2.6. NET WORKING CAPITAL AMOUNT AND PRORATION AMOUNT.
2.6.1. ESTIMATED NET WORKING CAPITAL AMOUNT. At least three (3)
days prior to the Closing Date, Sellers shall deliver to Buyer in writing and
in reasonable detail a good faith estimate of the Net Working Capital (the
"Estimated Net Working Capital") as of the Closing Date. The Purchase Price
shall be (a) increased by the amount, if any, by which the Estimated Net
Working Capital exceeds zero dollars ($0), or (b) decreased by the amount, if
any, by which the Estimated Net Working Capital is less than zero dollars
($0) (such increase or decrease, as the case may be, is referred to herein as
the "Estimated Net Working Capital Amount").
2.6.2. FINAL NET WORKING CAPITAL AMOUNT. Within ninety (90) days
after the Closing Date, Buyer shall deliver to Sellers in writing and in
reasonable detail a good faith final determination of the Net Working Capital
as of the Closing Date ("Final Net Working Capital Amount"). Sellers shall
assist Buyer in making such determination and Buyer shall provide Sellers
with reasonable access to the properties, books and records relating to the
Stations for the purpose of determining the Final Net Working Capital Amount.
Sellers shall have the right to review the computations and workpapers used
in connection with Buyer's preparation of the Final Net Working Capital
Amount. If Sellers disagree with the amount of the Final Net Working Capital
Amount determined by Buyer, Sellers shall so notify Buyer in writing within
forty-five (45) days after the date of receipt of Buyer's Final Net Working
Capital Amount, specifying in detail any point of disagreement; provided,
however, if Sellers fail to notify Buyer in writing of Sellers' disagreement
within such forty-five (45) day period, Buyer's determination of the Final
Net Working Capital Amount shall be final, conclusive and binding on Sellers
and Buyer. After the receipt of any notice of disagreement, Buyer and
Sellers shall negotiate in good faith to resolve any disagreements regarding
the Final Net Working Capital Amount. If any such disagreement cannot be
resolved by Sellers and Buyer within forty-five (45) days after Buyer has
received notice from Sellers of the existence of such disagreement, Buyer and
Sellers shall jointly select KPMG Peat Marwick, or another nationally
recognized independent public accounting firm (which has not performed any
service since January 1, 1992 for either Buyer or Sellers or any of their
respective subsidiaries), (the "Accounting Firm") to review the Buyer's
determination of the Final Net Working Capital Amount and to resolve as soon
as possible all points of disagreement raised by Sellers. All determinations
made by the Accounting Firm with respect to the Final Net Working Capital
Amount shall be final, conclusive and binding on Buyer and Sellers. The fees
and expenses of the Accounting Firm incurred in connection with any such
determination shall be shared one-half by Buyer and one-half by Sellers.
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If the Final Net Working Capital Amount is such that Buyer's
payment of the Estimated Net Working Capital Amount is an underpayment to
Sellers for the actual Net Working Capital, then Buyer shall pay Sellers in
cash, within two (2) business days following the final determination by the
Accounting Firm as set forth in the immediately preceding paragraph of the
Final Net Working Capital Amount, an amount equal to such underpayment plus
interest at the rate of eight percent (8%) per annum from the Closing Date to
the payment date. If the Final Net Working Capital Amount is such that
Buyer's payment of the Estimated Net Working Capital Amount is an overpayment
to Sellers for the actual Net Working Capital, then Sellers shall pay Buyer
in cash within two (2) business days following the determination of the Final
Net Working Capital Amount an amount equal to such overpayment, plus interest
thereon at the rate of eight percent (8%) per annum from the Closing to the
payment date. Any amounts paid pursuant to this SECTION 2.6.2 shall be by
wire transfer of immediately available funds for credit to the recipient at a
bank account identified by such recipient in writing.
Buyer and Sellers agree that prior to the date of the final
determination of the Final Net Working Capital Amount pursuant to this
SECTION 2.6.2 (by the Accounting Firm or otherwise), neither party will
destroy any records pertaining to, or necessary for, the final determination
of the Final Net Working Capital Amount.
2.6.3. PRORATION AMOUNT. To the extent not otherwise adjusted for
in the determination of the Net Working Capital, at least three (3) days
prior to the Closing Date, Sellers shall make a good faith estimate of the
adjustment to the Purchase Price customary in radio broadcast station
transactions for Proration Items (the "Proration Amount") to reflect that all
Proration Items of the Stations shall be apportioned between Buyer and
Sellers so that all such Proration Items attributable to the business and
operation of the Stations for the period prior to the Closing Date are for
the account of Sellers and for the period on and after the Closing Date are
for the account of Buyer. After the Closing Date, the Proration Amount shall
be finally determined in accordance with the provisions for final
determination of the Net Working Capital set forth in SECTION 2.6.2 and all
disagreements regarding the Proration Amount shall be negotiated in good
faith by Buyer and Sellers and otherwise settled in accordance with the
provisions for the resolution for disagreements regarding the Final Net
Working Capital set forth in SECTION 2.6.2. Any overpayment or underpayment
of the Proration Amount determined in accordance with this SECTION 2.6.3
shall be paid in the same manner as amounts paid pursuant to SECTION 2.6.2.
2.7. ALLOCATION OF PURCHASE PRICE.
Sellers and Buyer agree to allocate the Base Purchase Price among
the Sellers for all purposes (including financial, accounting and Tax
purposes) as follows:
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(a) Classical $50,000,000.00
(b) Radio Maryland $90,000,000.00
(c) Radio 570 $21,000,000.00
(d) Radio 100 $85,000,000.00
(e) Radio 94 $30,000,000.00
(f) Radio 95 $89,000,000.00
The Purchase Price shall be allocated among the classes of Assets as provided
for in SECTION 8.5.
2.8. ASSUMPTION OF LIABILITIES.
2.8.1. At the Closing, Buyer shall assume, discharge, agree to
perform and indemnify Sellers from (a) all Liabilities relating to the
ownership and operation of the Stations and the Assets for the period on and
after the Closing Date, which shall include, without limitation, all
Liabilities arising on and after the Closing with respect to the Station
Contracts, and (b) current Liabilities for which there has been an adjustment
to the Purchase Price in connection with the determination of the Final Net
Working Capital Amount (collectively, the "Assumed Liabilities").
2.8.2. Except for the Assumed Liabilities expressly assumed by
Buyer pursuant to SECTION 2.8.1 hereof, Buyer assumes no other Liabilities of
any kind or description.
2.9. SUNDANCE STATIONS.
2.9.1. Buyer acknowledges and agrees that the consummation of the
purchase by Radio 95 of the Sundance Stations is scheduled to occur during
September 1996 (the "Sundance Closing"). Notwithstanding anything to the
contrary set forth herein or otherwise, neither Radio 95 nor any other Seller
shall make or be deemed to make any representations, warranties, covenants or
agreements regarding the Sundance Stations until the consummation of the
Sundance Closing and thereafter any representations, warranties, covenants or
agreements regarding the Sundance Stations shall only relate to Radio 95's
period of ownership of the Sundance Stations.
2.9.2. To the extent assignable, Sellers agree to assign all of
Sellers' right, title and interest in, to and under the Radio 95 Asset
Purchase Agreement. In the event that any such rights and interests are not
assignable, Sellers shall use commercially reasonable efforts (a) to provide
Buyer the financial and business benefits Buyer would have enjoyed had such
rights and interests been
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assignable and (b) upon the request of Buyer, to enforce in Sellers' name for
the account of Buyer any rights that would otherwise have been available to
Buyer had the rights and interests under the Radio 95 Asset Purchase
Agreement been assignable.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES BY SELLER
Except as set forth in the Schedules to be delivered pursuant to
this Agreement as provided for in SECTION 8.8 (which Schedules may be updated
in accordance with SECTION 8.6), each Seller, with respect to such Seller and
with respect to the Station and Assets owned by such Seller, represents and
warrants to Buyer as follows:
3.1. ORGANIZATION AND STANDING.
Seller is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Maryland and is duly
qualified to do business as a foreign limited partnership and is in good
standing in each jurisdiction where such qualification is necessary, except
for those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect. Seller has
the full partnership power and authority to own, lease and otherwise to hold
and operate the Assets, to carry on the business of the Stations as now
conducted, and to enter into and perform the terms of this Agreement, the
other Seller Documents and the transactions contemplated hereby and thereby.
3.2. AUTHORIZATION.
The execution, delivery and performance of this Agreement and of
the other Seller Documents, and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary action of the partners of Seller and by any other necessary limited
partnership actions of Seller (none of which actions has been modified or
rescinded and all of which actions are in full force and effect). This
Agreement and the Deposit Escrow Agreement constitute, and upon execution and
delivery each other Seller Document will constitute, valid and binding
agreements and obligations of Seller, enforceable against Seller in
accordance with their respective terms, except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws of
general applicability relating to or affecting creditors' rights generally
and by the application of general principles of equity.
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3.3. COMPLIANCE WITH LAWS.
Except as permitted or contemplated hereby, the operations of the
Stations have been and are now being conducted by Sellers in material
compliance with all Laws of the FCC or any other Governmental Authority
binding on Sellers, the Stations or their respective properties or Assets,
except to the extent the failure to so comply would not be reasonably
expected to have a Material Adverse Effect. Except as set forth in SCHEDULE
3.3, no investigation or review by any Governmental Authority with respect to
the Sellers or the Stations is pending or, to Sellers' Knowledge, threatened.
Without limiting the generality of the foregoing, Sellers have complied in
all material respects with the Communications Act, and all rules, regulations
and written policies of the FCC thereunder.
3.4. CONSENTS AND APPROVALS; NO CONFLICTS.
3.4.1. The execution and delivery of this Agreement, and the other
Seller Documents and the performance of the transactions contemplated herein
by Seller, will not require any consent, approval, authorization or other
action by, or filing with or notification to, any Person or Governmental
Authority where the failure to make such filing or obtain such consent will
have a Material Adverse Effect, except as follows: (a) filings required under
Hart-Scott-Rodino, (b) consents to the assignment of the FCC Licenses to
Buyer by the FCC, (c) filings, if any, with respect to real estate transfer
taxes, and (d) certain of the Station Contracts may be assigned only with the
consent of third parties, as specified in SCHEDULE 3.4.1.
3.4.2. Assuming all consents, approvals, authorizations and other
actions described in SECTION 3.4.1. have been obtained and all filings and
notifications described in SECTION 3.4.1. have been made, the execution,
delivery and performance of this Agreement and the other Seller Documents by
Seller do not and will not (a) conflict with or violate any Law applicable to
Seller, the Assets or the Stations or by which any of the Assets or Stations
is subject or affected, (b) conflict with or result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) of any contract or agreement to which Seller is a
party or by which Seller is bound or to which any of the Assets or any
Station is subject or affected, (c) result in the creation of any Encumbrance
upon the Assets, or (d) conflict with or violate the organizational documents
of Seller; except where any such conflict, violation or breach would not,
individually or in the aggregate, have a Material Adverse Effect.
3.5. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
3.5.1. Sellers have delivered to Buyer the following financial
statements: (a) combined audited balance sheets of WGMS, WTEM, WBIG, WBOB and
KQQL (collectively, the "Five Station Group") as of the end of the fiscal
year ending December 31, 1995, and the combined statements of income and cash
flows
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for such fiscal year; (b) unaudited balance sheets of each Station in the
Five Station Group as of the end of the seven-month period ending July 31,
1996; (c) combined unaudited balance sheets of KOOL and KOOL(AM), Phoenix,
Arizona ("KOOL(AM)"), as of the end of the fiscal year ending December 31,
1995, and the statement of income and cash flows for such fiscal year; (d)
combined unaudited balance sheets of KOOL and KOOL(AM) as of July 31, 1996;
(e) audited balance sheets of the Sundance Stations as of the end of the
fiscal year ending December 31, 1995, and the statements of income and cash
flows for such fiscal year; and (f) unaudited balance sheets of the Sundance
Stations as of the end of the six-month period ending June 30, 1996. The
financial statements referred to in SECTION 3.5.1(a), SECTION 3.5.1(b) and
SECTION 3.5.1(d): (i) present fairly in all material respects the financial
condition of the Stations to which such financial statements are applicable
as of the respective dates and the results of operations and cash flows for
the respective periods indicated, and (ii) have been prepared on the accrual
basis of accounting used by Sellers in the preparation of Sellers' federal
income tax returns (except that unaudited financial statements do not contain
all footnotes and are subject to year-end audit adjustments).
3.5.2. Except as set forth in SCHEDULE 3.5.2, there exist no
Liabilities of either the Five Station Group or KOOL relating to, or arising
out of, the business or operations of such Stations, contingent or absolute,
matured or unmatured, known or unknown, except (a) as reflected on the
unaudited balance sheets as of July 31, 1996 (the "Current Balance Sheet
Date") included in SCHEDULE 3.5.1 and (b) for Liabilities that (i) were
incurred after the Current Balance Sheet Date in the Ordinary Course of
Business or (ii) individually and in the aggregate have not resulted, and
could not reasonably be expected to result, in any Material Adverse Effect.
3.6. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as set forth and described in SCHEDULE 3.6, since the
Current Balance Sheet Date, there has been no Material Adverse Effect (or any
event that reasonably could be expected to have a Material Adverse Effect)
relating to the Five Station Group and KOOL taken as a whole. Except as set
forth and described in SCHEDULE 3.6, since the Current Balance Sheet Date,
Seller has conducted the business of the Five Station Group and KOOL in the
Ordinary Course of Business, and (except for events which would not,
individually or in the aggregate, have a Material Adverse Effect) Seller has
not (a) incurred loss of, or injury to, any of the Assets as the result of
any fire, explosion, flood, windstorm, earthquake, labor trouble, riot,
accident, act of God or public enemy or armed forces, or other casualty; (b)
incurred, or become subject to, any Liability, except current Liabilities
incurred in the Ordinary Course of Business; (c) discharged or satisfied any
Encumbrance or paid any Liability other than current Liabilities shown in the
balance sheets furnished pursuant to SECTION 3.5.1(a), SECTION 3.5.1(b) or
SECTION 3.5.1(d), and current Liabilities incurred since the Current Balance
Sheet Date in the Ordinary
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Course of Business; (d) mortgaged, pledged or subjected to any Encumbrance
any of its Assets except as shown in the balance sheets furnished pursuant to
SECTION 3.5.1(a), SECTION 3.5.1(b) or SECTION 3.5.1(d); (e) sold, exchanged,
transferred or otherwise disposed of any of its Assets, or canceled any debts
or claims; (f) written down the value of any Assets or written off as
uncollectible any Accounts Receivable, except write downs and write-offs in
the Ordinary Course of Business; (g) entered into any transactions other than
in the Ordinary Course of Business; (h) made any material change in any
method of accounting or accounting practice; or (i) made any agreement to do
any of the foregoing.
3.7. ABSENCE OF LITIGATION.
Except as set forth on SCHEDULE 3.7 as of the date hereof, there is
no action, suit, investigation, claim, arbitration or litigation pending or,
to Seller's Knowledge, threatened against Seller, the Assets, or the Stations
before any Governmental Authority that, individually or in the aggregate,
would be reasonably likely to (a) have a Material Adverse Effect, or (b)
challenge or seek to prevent, enjoin, alter or materially delay the
transaction contemplated hereby.
3.8. ASSETS.
Except for the Excluded Assets, the Assets include all of the
assets or property used in the business of the Stations as presently
operated. Except for leased or licensed Assets, Seller is the owner of, and
has good title to, the Assets free and clear of any Encumbrances, except for
and subject only to (a) the Permitted Encumbrances, and (b) those
Encumbrances listed in SCHEDULE 3.8 which shall be discharged and removed on
or prior to the Closing Date. At the Closing, Buyer shall acquire good title
to, and all right, title and interest in and to the Assets, free and clear of
all Encumbrances, except for the Permitted Encumbrances.
3.9. FCC MATTERS.
3.9.1. Seller holds the FCC Licenses listed as held by Seller on
SCHEDULE 2.1.1. The FCC Licenses constitute all of the licenses, permits and
authorizations from the FCC that are required for the business and operations
of the Stations as currently operated. The FCC Licenses are valid and in
full force and effect through the dates set forth on SCHEDULE 2.1.1,
unimpaired by any condition which would reasonably be likely to have,
individually or in the aggregate, a Material Adverse Effect. Except as set
forth in SCHEDULE 3.9, no application, action or proceeding is pending for
the renewal or modification of any of the FCC Licenses, and, except for
actions or proceedings affecting radio broadcast stations generally, no
application, complaint, action or proceeding is pending or, to Seller's
Knowledge, threatened that may result in the (a) the revocation,
modification, non-renewal or suspension of any of the FCC Licenses, (b) the
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issuance of a cease-and-desist order, or (c) the imposition of any
administrative or judicial sanction with respect to the Stations. Seller has
no Knowledge of any facts, conditions or events relating to Seller or the
Stations that would reasonably be expected to cause the FCC to deny the
assignment of the FCC Licenses as provided for in this Agreement.
3.9.2. Seller has duly and timely filed, or caused to be filed
with the appropriate Governmental Authorities all material reports,
statements, documents, registrations, filings or submissions with respect to
the operations of the Stations in the Five Station Group and the ownership
thereof, including, without limitation, applications for renewal of authority
required by applicable law to be filed to the extent the failure to so file
could reasonably be expected to have a Material Adverse Effect. All such
filings complied in all material respects with applicable laws when made and
no material deficiencies have been asserted with respect to any such filings.
Except as disclosed in SCHEDULE 3.9, there are no facts or circumstances
relating to Seller or the Stations arising from noncompliance with the
Communications Act, or the rules, regulations or written policies of the FCC
in effect on the date of this Agreement that could reasonably be expected to
(a) disqualify Seller from assigning the FCC Licenses to Buyer or (b) prevent
or delay the consummation by Buyer of the transactions contemplated by this
Agreement. The Stations have been operated in all material respects in
accordance with the terms of the FCC Licenses. To Seller's Knowledge, with
the exception of operations set forth in SCHEDULE 3.9, and with the further
exception of such temporary reduced power operations as are necessary for
routine maintenance, each Station operates within the operating power
tolerances specified in 47 C.F.R. Section 73.1560(b). To Seller's Knowledge,
no other broadcast station or radio communications facility is causing
interference to the Stations' transmissions beyond that which is allowed by
FCC rules and regulations.
3.10. REAL PROPERTY.
3.10.1. Sellers have (or shall have as of the Closing Date) good
and marketable title to the Real Property listed in SCHEDULE 2.1.2, free and
clear of all Encumbrances, except for (a) those items listed in SCHEDULE
3.10.1, and (b) Permitted Encumbrances.
3.10.2. Sellers have (or shall have as of the Closing Date) a
valid leasehold interest in all Leased Property listed as leased by Sellers
in SCHEDULE 2.1.2. SCHEDULE 2.1.2 lists all leases and subleases pursuant to
which any of the Leased Property is leased by Sellers. Sellers are (or shall
be as of the Closing Date) the owners and holders of all the Leased Property
purported to be granted by such leases and subleases. Each such lease and
sublease is in full force and effect and constitutes a legal, valid and
binding obligation of, and is legally enforceable against Sellers, and to the
Knowledge of Sellers, each other party thereto and grants the leasehold
interest it purports to grant. Sellers have complied with all of
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the material provisions of such leases and subleases and are not in default
thereunder in any material respect, and to Sellers' Knowledge, there has not
occurred any event which (whether with or without notice, lapse of time or
the happening or occurrence of any other event) would constitute such a
default.
3.10.3 The Real Property and the Leased Property listed in
SCHEDULE 2.1.2 constitute all of the real property owned, leased or used by
any Seller in the business and operations of the Stations.
3.10.4. To the Knowledge of Sellers, all buildings, structures,
fixtures and other improvements on the Real Property are in good operating
condition (ordinary wear and tear excepted) and are suitable for present uses.
3.10.5. To the Knowledge of Sellers, no portion of the Real
Property or any building, structure, fixture or improvement thereon is the
subject of, or affected by, any condemnation, eminent domain or inverse
condemnation proceeding currently instituted or pending or threatened.
3.11. CONDITION OF TANGIBLE ASSETS.
SCHEDULE 2.1.3 hereto contains a list of material tangible Assets
owned or held by Sellers and used in the conduct of the business and
operations of the Stations (other than Real Property, which is addressed in
the foregoing SECTION 3.10). Except for tangible Assets used by Sellers
under leases or contracts, Sellers own and will have on the Closing Date good
and marketable title to all property referred to in the immediately preceding
sentence and none of such property is, or at the Closing will be, subject to
any Encumbrances, other than Permitted Encumbrances. The tangible Assets and
fixtures owned or used by Sellers necessary for the operation of the
Stations, are in good operating condition (ordinary wear and tear excepted)
and are sufficient to permit the conduct of the business of the Stations in
material compliance with FCC rules and regulations. Sellers own or hold
under leases or contracts all of the tangible personal property and fixtures
required to conduct the business of the Stations as presently conducted. The
Assets to be transferred hereunder constitute all of the assets, rights and
properties that are required for the business and operations of the Stations
as presently conducted.
3.12. INTELLECTUAL PROPERTY.
SCHEDULE 2.1.4 contains a true, correct and complete listing of
all Intellectual Property owned or licensed by or registered in the name of
Seller which is used in the business and operations of the Stations, all of
which is transferable to Buyer by the sole act and deed of Seller; and except
as set forth in SCHEDULE 3.12 no consent on the part of any other person is
necessary to validate the transfer to Buyer of such Intellectual Property.
Except as set forth in SCHEDULE 3.12, Seller
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pays no royalty to anyone with respect to the Intellectual Property. Seller
owns or possesses all rights to use all such Intellectual Property material
to the conduct of the business of the Stations. Seller does not have any
Knowledge and Seller has not received any notice to the effect that any
service rendered by Seller relating to the business of the Stations may
infringe on any Intellectual Property right or other legally protectable
right of another. Seller has the right to the use of the call letters of the
Stations pursuant to the rules and regulations of the FCC.
3.13. STATION CONTRACTS.
The Station Contracts set forth in SCHEDULES 2.1.5, 2.1.6 and
2.1.8 are all of the contracts and agreements relating to the Assets, to the
Stations or to the business and operations thereof, other than (a) contracts
and agreements for the sale of broadcast time for cash entered into in the
Ordinary Course of Business for less than one year; (b) contracts and
agreements which are terminable by Seller on no more than ninety (90) days
notice; and (c) contracts and agreements which do not require payments of
more than $25,000 each or $150,000 in the aggregate per Station. Complete
and correct copies of all such Station Contracts have been made available to
Buyer and except as set forth on SCHEDULE 3.13, (a) each such Station
Contract is in full force and effect; (b) Seller is not in material breach or
default of the terms of any Station Contract; (c) none of the material rights
of Seller under any such Station Contract will be subject to termination or
modification, nor will a default occur, as a result of the consummation of
the transactions contemplated hereby, except to the extent that failure to
obtain the prior consent to assignment thereof of any party thereto shall or
could be interpreted to constitute a termination or modification of or a
default under any such Station Contract; and (d) to the Knowledge of Seller,
no other party to any such Station Contract is in material breach or default
of the terms thereunder.
3.14. TAXES.
3.14.1. Seller has (or, in the case of returns becoming due after
the date hereof and on or before the Closing Date, will have prior to the
Closing Date) duly filed all Seller Tax Returns required to be filed by
Seller on or before the Closing Date with respect to all applicable Taxes.
In the case of any Seller Tax Returns which receive an extension for their
date of filing, such Seller Tax Returns will be considered due on, and not
considered required to be filed before, the extended due date. To the
Seller's Knowledge, all of Seller Tax Returns are (or, in the case of returns
becoming due after the date hereof and on or before the Closing Date, will
be) true and complete in all material respects. Seller: (a) has paid all
Taxes due to any Governmental Authority in connection with any of Seller Tax
Returns; or (b) has established (or, in the case of amounts becoming due
after the date hereof, prior to the Closing Date will have established)
adequate reserves (in
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conformity with generally accepted accounting principles consistently
applied) for the payment of such Taxes.
3.14.2. There is no action, suit, proceeding, audit,
investigation or claim pending or, to the Knowledge of Seller, threatened in
respect of any Taxes associated with, or which would become a lien against,
the Assets or operations of the Stations for which Seller may become liable,
nor has any deficiency or claim for any such Taxes been proposed, asserted
or, to the Knowledge of Seller, threatened. There is no Station Contract,
waiver or consent providing for an extension of time with respect to the
assessment or collection of any Taxes associated with, or which would become
a lien against, the Assets or operations of the Stations against Seller, and
no power of attorney granted by Seller with respect to any related tax
matters is currently in force.
3.15. EMPLOYEE BENEFIT PLANS.
3.15.1. SCHEDULE 3.15 lists all Plans and Benefit Arrangements
maintained by or contributed to by Seller for the benefit of the employees of
the Stations (collectively, the "Benefit Plans"). Each Benefit Plan has been
maintained in substantial compliance with its terms and with the requirements
prescribed by applicable Law, including, without limitation, ERISA and the
Code.
3.15.2. SCHEDULE 3.15 sets forth a list of all Qualified Plans.
All Qualified Plans and any related trust agreements or annuity agreements
(or any other funding document) have been maintained in compliance with ERISA
and the Code (including, without limitation, the requirements for Tax
qualification described in Section 401 thereof). The trusts established under
such Plans are exempt from federal income taxes under Section 501(a) of the
Code.
3.15.3. SCHEDULE 3.15 lists all funded Welfare Plans that provide
benefits to current or former employees of Seller or its beneficiaries. The
funding under each Welfare Plan does not exceed and has not exceeded the
limitations under Sections 419A(b) and 419A(c) of the Code. Seller is not
subject to taxation on the income of any Welfare Plan's welfare benefit fund
(as such term is defined in Section 419(e) of the Code) under Section 419A(g)
of the Code.
3.15.4. SCHEDULE 3.15 (a) identifies all post-retirement
medical, life insurance or other benefits promised, provided or otherwise due
now or in the future to current, former or retired employees of Seller, (b)
identifies the method of funding (including, without limitation, any
individual accounting) for all such benefits, (c) discloses the funded status
of the Plans providing or promising such benefits, and (d) sets forth the
method of accounting for such benefits to any key employees (as defined in
Section 416(i) of the Code) of Seller.
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3.15.5. Seller has (a) filed or caused to be filed all returns
and reports on the Plans that it is required to file and (b) paid or made
adequate provision for all fees, interest, penalties, assessments or
deficiencies that have become due pursuant to those returns or reports or
pursuant to any assessment or adjustment that has been made relating to those
returns or reports. All other fees, interest, penalties and assessments that
are payable by or for Seller have been timely reported, fully paid and
discharged. There are no unpaid fees, penalties, interest or assessments due
from Seller or from any other person that are or could become an Encumbrance
on any Asset or could otherwise adversely affect the businesses or Assets.
Seller has collected or withheld all amounts that are required to be
collected or withheld by it to discharge its obligations, and all of those
amounts have been paid to the appropriate Governmental Authority or set aside
in appropriate accounts for future payment when due. Seller has furnished to
Buyer true and complete copies of all documents setting forth the terms and
funding of each Plan.
3.15.6. Seller has not loaned any money to any employee of Seller
or the Stations.
3.16. LABOR RELATIONS.
3.16.1. Except as set forth in SCHEDULE 3.16, there are no
strikes, work stoppages, grievance proceedings, union organization efforts,
or other controversies pending or threatened between Seller and any union.
Except as set forth in SCHEDULE 3.16, Sellers have not agreed to recognize
any union or other collective bargaining unit, nor has any union or other
collective bargaining unit been certified as representing any of their
employees. Except as disclosed on SCHEDULE 3.16, Seller with respect to the
Stations (a) has no unfair labor practices or complaints pending or, to
Seller's Knowledge, threatened against it before the National Labor Relations
Board, (b) has no material grievances pending or, to Sellers' Knowledge,
threatened against it and (c) has no material charges pending or, to Sellers'
Knowledge, threatened against it before the Equal Employment Opportunity
Commission or any state or local agency responsible for the prevention of
unlawful employment practices.
3.16.2. On or prior to August 28, 1996, Seller shall provide to
Buyer true and complete lists of the employees of Seller who perform
significant services (a) at the Five Station Group Stations and KOOL dated as
of July 31, 1996 and (b) at the Sundance Stations dated as of May 1, 1996;
each such list sets forth the names, positions, and location of all employees
or other Station and broadcast personnel and the current salaries of all such
employees. SCHEDULE 3.16 sets forth any other compensation arrangements with
respect to General Managers, Station Managers, General Sales Managers, Local
Sales Managers, National Sales Managers, Program Directors, Business
Managers, and Traffic Managers (collectively "Station Management") and all
on-the-air broadcast personnel of the
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Stations and indicates which of those employees, Station Management, or
on-the-air broadcast personnel is a party of an employment or consulting or
similar contract with Sellers that is not terminable upon not more than sixty
(60) days' notice without additional costs to Sellers.
3.17. ENVIRONMENTAL MATTERS.
3.17.1 Sellers have furnished to Buyer all information in any
Seller's possession, custody or control pertaining to the environmental
history of the Real Property or the environment, natural resources, and
occupational safety at any of the Stations, including, without limitation,
all environmental assessments.
3.17.2. Except as set forth in SCHEDULE 3.17, to the Knowledge of
Sellers, Sellers are in material compliance with, and the Real Property and
all improvements and operations thereon are in material compliance with, all
Environmental Laws.
3.17.3 Except as set forth in SCHEDULE 3.17, there are no pending
or, to the Knowledge of Sellers, threatened actions, suits, claims,
investigations, or other legal proceedings based on (and Seller has not
received any notice of any complaint, order, directive, citation, notice of
responsibility, notice of potential responsibility, or information request
from any Governmental Authority arising out of or attributable to): (a) the
current or past presence at any part of the Real Property of Hazardous
Materials; (b) the current or past release or threatened release into the
environment from the Real Property (including, without limitation, into any
storm drain, sewer, septic system or publicly owned treatment works) of any
Hazardous Materials; (c) the off-site disposal of Hazardous Materials
originating on or from the Real Property or the businesses or Assets of
Seller; (d) any facility operations or procedures of Sellers which do not
conform to requirements of the Environmental Laws; or (e) any violation of
Environmental Laws at any part of the Real Property arising from Sellers'
activities involving Hazardous Materials. Sellers have been duly issued all
permits, licenses, certificates and approvals required under any
Environmental Law, except for such permits the failure to obtain, will not
have, individually or in the aggregate, a Material Adverse Effect.
3.17.4 Sellers have obtained and currently maintain all permits,
licenses, certificates and approvals required under any Environmental Law,
and are and have been in compliance therewith except for such permits the
failure to obtain, maintain or comply with, will not have, individually or in
the aggregate, a Material Adverse Effect.
3.17.5 Except as set forth in SCHEDULE 3.17, there is not now nor
in the past has been on, under, or at any of the Real Property any
underground storage tanks, underground piping associated with such tanks,
impoundments
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containing Hazardous Materials, above-ground storage tanks, dikes, any
asbestos-containing materials or any polychlorinated biphenyls.
3.17.6 Except as disclosed on SCHEDULE 3.17 and to Seller's
Knowledge, no facts, circumstances, or conditions with respect to Hazardous
Materials exist at any Real Property or the operations thereon that could
reasonably be expected to have a Material Adverse Effect.
3.18. TRANSACTIONS WITH AFFILIATES
Except as set forth in SCHEDULE 3.18 attached hereto, Seller is
not now, and since January 1, 1996, has not been, a party, directly or
indirectly, to any contract, lease, arrangement or transaction which is
material to the business or operations of any Station, whether for the
purchase, lease or sale of property, for the rendition of services or
otherwise, with any affiliate of Seller, or any officer, director, employee,
proprietor, partner or shareholder of Seller. The terms and conditions of
the transactions involving Seller and any affiliate of Seller which are
identified on SCHEDULE 3.18 are described briefly therein.
3.19. INSURANCE.
SCHEDULE 3.19 contains a list and brief summary of all policies of
title, property, fire, casualty, liability, life, workmen's compensation,
libel and slander, and other forms of insurance of any kind relating to the
Assets or the business and operations of the Stations and held by Seller.
All such policies are in full force and effect.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES BY BUYER
Buyer represents, warrants and covenants to Sellers as follows:
4.1. ORGANIZATION AND STANDING.
Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the state of Delaware and by the Closing Date
will be duly qualified to do business in each jurisdiction where such
qualification is necessary for the ownership and operation of the Stations.
Buyer has the full power and authority to enter into and perform the terms of
this Agreement and the other Buyer Documents and to carry out the
transactions contemplated hereby and thereby.
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4.2. AUTHORIZATION.
The execution, delivery and performance of this Agreement and of
the other Buyer Documents, and the consummation of the transactions
contemplated hereby and thereby, have been duly and validly authorized by all
necessary actions of Buyer (none of which actions has been modified or
rescinded and all of which actions are in full force and effect). This
Agreement constitutes, and upon execution and delivery each such other Buyer
Document will constitute, a valid and binding agreement and obligation of
Buyer, enforceable against Buyer in accordance with its respective terms,
except as the same may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights generally and by the application of general
principles of equity.
4.3. CONSENTS AND APPROVALS; NO CONFLICTS.
4.3.1. The execution and delivery of this Agreement, and the
performance of the transactions contemplated herein by Buyer, will not
require any consent, approval, authorization or other action by, or filing
with or notification to, any Person or Governmental Authority where the
failure to make such filing or obtain such consent will have a Material
Adverse Effect, except as follows: (a) filings required under
Hart-Scott-Rodino, (b) approvals of the assignment of the FCC Licenses to
Buyer by the FCC; and (c) filings under the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended.
4.3.2. Assuming all consents, approvals, authorizations and other
actions described in SECTION 4.3.1 have been obtained and all filings and
notifications described in SECTION 4.3.1 have been made, the execution,
delivery and performance of this Agreement and the other Buyer Documents by
Buyer do not and will not (a) conflict with or violate any Law applicable to
Buyer, (b) conflict with or result in any breach of or constitute a default
(or an event which with notice or lapse of time or both would become a
default) of any contract or agreement to which Buyer is a party or by which
Buyer is bound, or (c) conflict with or violate the organizational documents
of Buyer.
4.4. AVAILABILITY OF FUNDS.
Buyer will have available on the Closing Date sufficient funds to
enable it to consummate the transactions contemplated hereby.
4.5. QUALIFICATION OF BUYER.
Buyer is, and pending Closing will be legally, technically,
financially and otherwise qualified under the Communications Act and all
rules, regulations
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and policies of the FCC to acquire and operate the Stations. There are no
facts or proceedings which would reasonably be expected to disqualify Buyer
under the Communications Act or otherwise from acquiring or operating any of
the Stations or would cause the FCC not to approve the assignment of the FCC
Licenses to Buyer. Buyer has no knowledge of any fact or circumstance
relating to Buyer or any of Buyer's affiliates that would reasonably be
expected to (a) cause the filing of any objection to the assignment of the
FCC Licenses to Buyer, or (b) lead to a delay in the processing by the FCC of
the applications for such assignment. No waiver of any FCC rule or policy is
necessary to be obtained for the grant of the applications for the assignment
of the FCC Licenses to Buyer, nor will processing pursuant to any exception
or rule of general applicability be requested or required in connection with
the consummation of the transactions herein.
4.6. NO OUTSIDE RELIANCE.
Buyer has not relied and is not relying on any statement,
representation or warranty not made in this Agreement, any Schedule hereto or
any certificate to be delivered to Buyer at the Closing pursuant to this
Agreement. Buyer is not relying on any projections or other predictions
contained or referred to in the Schedules or other materials that have been
or may hereafter be provided to Buyer or any of its Affiliates, agents or
representatives, and Sellers make no representations or warranties with
respect to any such projections or other predictions.
ARTICLE 5.
PRE-CLOSING FILINGS
5.1. APPLICATIONS FOR FCC CONSENT.
As promptly as practicable and no later than September 25, 1996,
Sellers and Buyer shall jointly file applications with the FCC requesting its
consent to the assignment of the FCC Licenses for the Stations from Sellers
to Buyer. Sellers and Buyer will diligently take, or fully cooperate in the
taking of, all necessary and proper steps, and provide any additional
information reasonably requested in order to obtain promptly the requested
consents and approvals of the applications by the FCC; provided, however,
that none of the parties hereto shall have any obligation to take any steps
which would be reasonably expected to have a material adverse effect on the
business, assets or financial condition of such party taken as a whole.
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5.2. HART-SCOTT-RODINO.
As promptly as practicable and no later than fifteen (15) business
days following the execution of this Agreement, Sellers and Buyer shall
complete any filing that may be required pursuant to Hart-Scott-Rodino (each
an "HSR Filing"), or shall mutually agree that no such filing is required.
Sellers and Buyer shall diligently take, or fully cooperate in the taking of,
all necessary and proper steps, and provide any additional information
reasonably requested in order to comply with, the requirements of
Hart-Scott-Rodino.
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ARTICLE 6.
COVENANTS AND AGREEMENTS OF SELLER
Each Seller covenants and agrees with Buyer as follows:
6.1. NEGATIVE COVENANTS.
Pending and prior to the Closing, Seller will not directly or
indirectly, without the prior consent of Buyer, which consent will not be
unreasonably withheld or delayed, do or agree to do any of the following:
6.1.1. DISPOSITIONS; MERGERS.
Sell, assign, lease or otherwise transfer or dispose of any
of the Assets other than in the Ordinary Course of Business without replacing
such asset with an asset of substantially the same value and utility; or
merge or consolidate with or into any other entity or enter into any
contracts or agreements relating thereto.
6.1.2. ACCOUNTING PRINCIPLES AND PRACTICES.
Change or modify any of Seller's accounting principles or
practices or any method of applying such principles or practices.
6.1.3. PROGRAM CONTRACTS.
Acquire or enter into any new Program Contracts or renew,
extend, amend, alter, modify or otherwise change any existing Program
Contract, except in the Ordinary Course of Business, or except for such
Program Contracts the payments under which exceed Ten Thousand Dollars
($10,000) individually or Fifty Thousand Dollars ($50,000) in the aggregate
or except for such Program Contracts that are not cancelable without penalty
with ninety (90) days' notice.
6.1.4. BROADCAST TIME SALES AGREEMENTS.
Enter into any Time Sales Agreement, except in the Ordinary
Course of Business, but in no event longer than one (1) year.
6.1.5. ADDITIONAL AGREEMENTS.
Acquire or enter into any new Station Contracts not
referred to in SECTIONS 6.1.3, 6.1.4 or 6.1.5 above, or renew, extend, amend,
alter, modify or otherwise change any existing Station Contract, except in
the Ordinary Course of Business, or except for such Station Contracts the
payments under which exceed Ten Thousand Dollars ($10,000) individually or
Fifty Thousand Dollars ($50,000) in the aggregate through the Closing Date
(collectively, "Additional Agreements").
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6.1.6. EMPLOYEE MATTERS.
Enter into or become subject to any employment, labor,
union, or professional service contract not terminable at will, or any bonus,
pension, insurance, profit sharing, incentive, deferred compensation,
severance pay, retirement, hospitalization, employee benefit, or other
similar plan; or increase the compensation payable or to become payable to
any employee, or pay or arrange to pay any bonus payment to any employee,
except in the Ordinary Course of Business.
6.1.7. INCONSISTENT ACTIONS.
Seller shall not take any action that is materially
inconsistent with its obligations under this Agreement.
6.2. AFFIRMATIVE COVENANTS.
Pending and prior to the Closing Date, each Seller will:
6.2.1. PRESERVE EXISTENCE.
Preserve its partnership existence and business
organization intact, maintain its existing franchises and licenses, use
commercially reasonable efforts to preserve for the Buyer the relationships
of the Stations with suppliers, customers, employees and others with whom the
Stations have business relationships and refrain from materially and
adversely changing any business policies including, but not limited to,
advertising (including substantially the same amount of cash expenditure),
marketing, pricing, purchasing, personnel, sales, and budget policies, and
keep all Assets substantially in their present condition, ordinary wear and
tear excepted.
6.2.2. NORMAL OPERATIONS.
Subject to the terms and conditions of this Agreement
(including, without limitation, SECTION 6.1), (a) carry on the businesses and
activities of the Stations, including without limitation, the sale of
advertising time, entering into other contracts and agreements, or purchasing
and scheduling of programming, in the Ordinary Course of Business; (b) pay or
otherwise satisfy all obligations (cash and barter) of the Stations in the
Ordinary Course of Business; (c) maintain its books of account, records, and
files in substantially the same manner as heretofore; (d) maintain its Assets
in customary repair, maintenance and condition, except to the extent of
normal wear and tear, and repair or replace, consistently with the Ordinary
Course of Business, any Asset that may be damaged or destroyed and (e)
continue to collect and write-off Accounts Receivables in the Ordinary Course
of Business.
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6.2.3. MAINTAIN FCC LICENSES.
Maintain the validity of the FCC Licenses, and comply in
all material respects with all requirements of the FCC Licenses and the rules
and regulations of the FCC and all other applicable laws, rules and
regulations.
6.2.4. STATION CONTRACTS.
Pay and perform its obligations in the Ordinary Course of
Business under the Station Contracts and under any Additional Agreements that
shall be entered into between the date hereof and the Closing pursuant to
SECTION 6.1.6, in accordance with the respective terms and conditions of such
Station Contracts.
6.2.5. TAXES.
Pay or discharge all Taxes when due and payable in the
Ordinary Course of Business.
6.2.6. PARTNERSHIP ACTION.
Take all partnership action (including, without limitation,
all partner action) under the Laws of any state having jurisdiction over
Seller necessary to effectuate the transactions contemplated by this
Agreement and by the other Seller Documents.
6.2.7. ACCESS.
Cause to be afforded to representatives of Buyer, including
without limitation legal counsel, auditors and environmental and engineering
consultants, reasonable access during normal business hours to offices,
properties, assets, books and records, contracts and reports of the Stations,
as Buyer shall from time to time reasonably request; PROVIDED, HOWEVER, that
such investigation shall only be upon reasonable notice and shall not
unreasonably disrupt the personnel or operations of Seller or the Stations.
All requests for access to the offices, properties, assets, books and
records, contracts and reports of the Stations shall be made to such
representatives as Seller shall designate in writing, who shall be solely
responsible for coordinating all such requests and all access permitted
hereunder. Buyer acknowledges and agrees that neither Buyer nor its
representatives shall contact any of the employees, customers, suppliers,
partners, or other associates or affiliates of Seller or the Stations, in
connection with the transactions contemplated hereby, whether in person or by
telephone, mail or other means of communication, without the specific prior
written authorization of such representatives of Seller, and shall not be
unreasonably withheld or delayed. Prior to the Sundance Closing, Sellers
acknowledge and agree that Sellers shall use all commercially reasonable
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efforts to allow Buyer to have access to the Sundance Stations for the
purpose of due diligence.
6.2.8. INSURANCE.
Maintain in full force and effect all of its existing
casualty, liability, and other insurance policies, or comparable policies,
through the day following the Closing Date in amounts not less than those in
effect on the date hereof.
6.2.9. FINANCIAL STATEMENTS.
Provide Buyer with unaudited monthly statements of assets
and liabilities of Seller relating to the business and operations of the
Stations, and statements of revenues and expenses reflecting the results of
business and operations of the Stations for August, 1996 and for each month
thereafter, within thirty (30) days after the end of each such month.
6.2.10. CONSENTS.
Seller shall use commercially reasonable efforts to obtain
all consents, approvals and agreements of any third parties necessary to
authorize, approve or permit the consummation of the transactions
contemplated by this Agreement, including, without limitation, any consent of
the parties to the Station Contracts designated as necessary in SCHEDULE
3.4.1 in order to consummate the transactions contemplated hereby
(collectively, the "Restricted Contracts"). Notwithstanding anything to the
contrary set forth in this Agreement or otherwise, to the extent that the
consent or approval of any third party is required under any Restricted
Contract, Seller shall only be required to use reasonable efforts (not
involving the payment by Seller of any money to any party to any such
Restricted Contract) to obtain such consents and approvals, and in the event
that Seller fails to obtain any such consent or approval (other than the
consents and approvals set forth on SCHEDULE 9.2), Buyer shall have no right
to terminate this Agreement.
6.2.11. PREPARATION OF FINANCIAL STATEMENTS.
Subject to and in accordance with Sellers' agreement
regarding access to the Stations and the Assets as set forth in SECTION
6.2.7., Sellers shall, and shall cause their representatives, (and after the
Sundance Closing, Sellers shall use commercially reasonable efforts to cause
the Sundance Parties and their representatives) to cooperate in all
reasonable respects with the efforts of Buyer and Buyer's independent
auditors to prepare such audited and interim unaudited financial statements
of the Stations as Buyer may reasonably determine are necessary to satisfy
Buyer's public company reporting requirements pursuant to the Securities Act
of 1933 or the Securities Exchange Act of 1934. Sellers shall (and, after
the Sundance Closing, Sellers shall use commercially reasonable efforts
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to cause the Sundance Parties to) execute and deliver to Buyer's independent
auditors such customary management representation letters as the auditors may
require as a condition to such auditors ability to deliver an unqualified
report upon the audited financial statements of the Stations for the periods
for which such financial statements are required under the Securities Act of
1933 or the Securities Exchange Act of 1934. Sellers shall cause their
independent public accountants (and, after the Sundance Closing, Sellers
shall use commercially reasonable efforts to cause the independent public
accountants for the Sundance Parties) to make available to Buyer and Buyer's
representatives all of the work papers related to the financial statements or
tax returns of Sellers (or the Sundance Parties, as the case may be), but
only to the extent the same relate to the Stations, and to provide Buyer's
independent auditors with reasonable access to those personnel (to the extent
reasonably available) who previously have been involved in the audit or
review of such financial statements and tax returns. Under no circumstances
shall the preparation of the financial statements described in this SECTION
6.2.13.: (a) require any Seller or any Sundance Party to change or modify
any accounting policy, (b) cause any unreasonable disruption in the business
or operations of the Station, or (c) cause any delay in any internal
reporting requirements of Sellers. All cost and expenses incurred in
connection with the preparation of (and assimilation of relevant information
for) the financial statements described in this SECTION 6.2.13 shall be paid
by Buyer.
6.3. CONFIDENTIALITY.
Seller shall, at all times, maintain strict confidentiality with
respect to all documents and information furnished to Sellers by or on behalf
of Buyer. Nothing shall be deemed to be confidential information that: (a) is
known to Sellers at the time of its disclosure to Sellers and is not subject
to any other confidentiality agreement or arrangement; (b) becomes publicly
known or available other than through disclosure by Sellers; (c) is received
by Sellers from a third party not actually known by Sellers to be bound by a
confidentiality agreement with or obligation to Buyer; or (d) is
independently developed by Sellers. Notwithstanding the foregoing provisions
of this SECTION 6.3, Sellers may disclose such confidential information (a)
to the extent required or deemed advisable to comply with applicable Laws;
(b) to its officers, directors, employees, representatives, financial
advisors, attorneys, accountants, and agents with respect to the transactions
contemplated hereby (so long as such parties agree to maintain the
confidentiality of such information); and (c) to any Governmental Authority
in connection with the transactions contemplated hereby. In the event this
Agreement is terminated, Sellers will return to Buyer all documents and other
material prepared or furnished by Buyer relating to the transactions
contemplated hereunder, whether obtained before or after the execution of
this Agreement.
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ARTICLE 7.
COVENANTS AND AGREEMENTS OF BUYER
Buyer covenants and agrees with Sellers as follows:
7.1. CONFIDENTIALITY.
Buyer shall, at all times prior to the Closing, maintain strict
confidentiality with respect to all documents and information furnished to
Buyer by or on behalf of Sellers. Nothing shall be deemed to be confidential
information that: (a) is known to Buyer at the time of its disclosure to
Buyer and is not subject to any other confidentiality agreement or
arrangement; (b) becomes publicly known or available other than through
disclosure by Buyer; (c) is received by Buyer from a third party not actually
known by Buyer to be bound by a confidentiality agreement with or obligation
to Sellers; or (d) is independently developed by Buyer. Notwithstanding the
foregoing provisions of this SECTION 7.1, Buyer may disclose such
confidential information (a) to the extent required or deemed advisable to
comply with applicable Laws; (b) to its officers, directors, partners,
employees, representatives, financial advisors, attorneys, accountants,
agents, underwriters, lenders, investors and any other potential sources of
financing with respect to the transactions contemplated hereby (so long as
such parties agree to maintain the confidentiality of such information); and
(c) to any Governmental Authority in connection with the transactions
contemplated hereby or the financing thereof. In the event this Agreement is
terminated, Buyer will return to Sellers all documents and other material
prepared or furnished by Sellers relating to the transactions contemplated by
this Agreement, whether obtained before or after the execution of this
Agreement.
7.2. CORPORATE ACTION.
Prior to the Closing, Buyer shall take all corporate action
(including, without limitation, all shareholder action) under the Laws of any
state having jurisdiction over Buyer necessary to effectuate the transactions
contemplated by this Agreement and the other Buyer Documents.
7.3. ACCESS.
From and after the Closing Date, Buyer shall cause to be afforded
to representatives of Sellers reasonable access during normal business hours
to offices, books and records, contracts and reports of the Stations, as
Sellers shall from time to time reasonably request; PROVIDED, HOWEVER, that
such investigation shall only be upon reasonable notice and shall not disrupt
the personnel or operations of Buyer or the Stations. All requests for
access to the offices, books and records, contracts and reports of the
Stations shall be made to such representatives as Buyer shall
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designate in writing, who shall be solely responsible for coordinating all
such requests and all access permitted hereunder.
7.4. PENDING RENEWAL APPLICATIONS.
Buyer hereby agrees that in the event that any applications to
renew the FCC Licenses of any of the Stations are pending at the time of the
Closing, Buyer shall succeed to the place of Sellers as the licensee of the
Stations with respect to such pending renewal applications and will accept
any and all liabilities and obligations associated therewith.
Notwithstanding any action of Buyer pursuant to this SECTION 7.4, Buyer shall
retain all rights to seek indemnification from Sellers as provided for in
ARTICLE 12.
7.5. INCONSISTENT ACTIONS.
Buyer shall not take any action that is materially inconsistent
with its obligations under this Agreement.
ARTICLE 8.
MUTUAL COVENANTS AND UNDERSTANDINGS
OF SELLER AND BUYER
8.1. POSSESSION AND CONTROL.
Between the date hereof and the Closing Date, Buyer shall not
directly or indirectly control, supervise or direct, or attempt to control,
supervise or direct, the business and operations of the Stations, and such
operation, including complete control and supervision over all programming,
finances and personnel, shall be the sole responsibility of Sellers. On and
after the Closing Date, Sellers shall have no control over, or right to
intervene, supervise, direct or participate in, the business and operations
of the Stations.
8.2. RISK OF LOSS.
The risk of loss or damage by fire or other casualty or cause to
the Assets until the Closing Date shall be upon Sellers. In the event of a
loss or damage to the Assets which results in a Material Adverse Effect prior
to the Closing Date which shall not be restored, replaced, or repaired as of
the Closing Date, Buyer shall proceed with the Closing and receive at
Closing, the insurance proceeds or an assignment of the right to receive such
insurance proceeds, as applicable, to which Sellers otherwise would be
entitled, whereupon Sellers shall have no further liability to Buyer for such
loss or damage.
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8.3. PUBLIC ANNOUNCEMENTS.
Sellers and Buyer shall consult with each other before issuing any
press release or otherwise making any public statements with respect to this
Agreement or the transactions contemplated herein and shall not issue any
such press release or make any such public statement without the prior
written consent of the other party, which shall not be unreasonably withheld.
Notwithstanding the foregoing, nothing herein shall limit or prevent any
party hereto from making such public announcement or disclosure required by
applicable law or by obligations pursuant to any listing agreement with any
securities exchange or the NASDAQ Stock Market if such party has used all
reasonable efforts to consult with the other party and to obtain such party's
consent but has been unable to do so in a timely manner.
8.4. EMPLOYEE MATTERS.
8.4.1. Upon consummation of the Closing hereunder, Buyer shall
offer employment to each of the employees of the Stations at a comparable
salary, position and place of employment as held by each such employee
immediately prior to the Closing. To the extent such employees accept
employment with Buyer (collectively, "Transferred Employees"), such
Transferred Employees will be included in Buyer's then-existing employee
welfare benefit plans and will be subject to Buyer's then-existing employment
policies, as generally applicable to Buyer's employees who are similarly
situated. Buyer shall satisfy and discharge any Liability of Sellers or
Buyer (including any Liabilities for severance, health or other benefit
plans) arising out of the termination of any Transferred Employee and Buyer
agrees that it shall not terminate any Transferred Employee without cause
during the ninety (90) day period immediately following the Closing. Upon
consummation of the Closing, Buyer shall assume and be responsible for all
Liabilities of Sellers to Transferred Employees with respect to severance
pay, sick leave, accrued vacation and other similar liabilities and
obligations.
8.4.2. As between Buyer and Sellers, Sellers agree to be
responsible and liable for any medical, disability or other benefits owed
under Sellers' benefit plans for the period prior to the Closing Date.
Sellers will be responsible for providing, at its cost, all medical, life and
other insurance coverage and benefits, and disability benefits to which any
employee of Sellers who retired or was terminated from service with Sellers
prior to the Closing Date or who was disabled prior to the Closing Date is
entitled under Sellers' benefit plans or otherwise.
8.4.3. Buyer agrees that it will permit those Transferred
Employees, at each such Transferred Employee's option, to transfer as a
direct rollover to Buyer's 401(k) Plan their respective pre-tax account
balances under Sellers' 401(k) Plan, provided that such plan is a
tax-qualified plan under
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Section 401(a) and 401(k) of the Code and that the transfer of any such
pre-tax account balance will not affect the tax qualified status of Buyer's
401(k) Plan. Sellers agree that if any such Transferred Employee elects to
transfer its pre-tax account balance to Buyer's 401(k) Plan, Sellers will
cause the trustees of Sellers' 401(k) Plan to transfer each such electing
Transferred Employee's account to the trustee of Buyer's 401(k) Plan.
8.4.4. Buyer agrees to provide any Transferred Employees with
their accrued vacation and sick pay to the extent the Liabilities in respect
of the accrued vacation and sick pay have been included in calculating the
Net Working Capital Amount.
8.4.5. After the date of this Agreement, Sellers hereby agree to
cooperate with Buyer's efforts to secure for Buyer's benefit the employment
of Sellers' employees effective as of the Closing Date; provided, however,
that Seller shall have no obligation to incur any cost or expense in
connection with such cooperation.
8.5. ALLOCATION OF PURCHASE PRICE.
Sellers and Buyer each represent, warrant, covenant, and agree
with each other that the Purchase Price shall be allocated among the Stations
and classes of Assets for each Station, as agreed by the parties within
thirty (30) days after the date hereof and as set forth in the SCHEDULE 8.5,
which shall be prepared and agreed to within such thirty (30) day period.
Sellers and Buyer agree, pursuant to Section 1060 of the Code that the
Purchase Price shall be allocated in accordance with this SECTION 8.5, and
that all Tax returns and reports shall be filed consistent with such
allocation. Notwithstanding any other provision of this Agreement, the
provisions of this SECTION 8.5 shall survive the Closing Date without
limitation.
If Sellers and Buyer are unable to agree on such allocation,
within thirty (30) days following execution of this Agreement, Sellers and
Buyer agree to retain Broadcast Investment Analysts (the "Appraisal Firm") to
appraise the classes of Assets of each Station in accordance with the
allocation among the Sellers set forth in SECTION 2.7. The Appraisal Firm
shall be instructed to perform an appraisal of the classes of Assets of each
Station and deliver a report to Sellers and Buyer as soon as reasonably
practicable (the "Appraisal Report"). Sellers and Buyer shall each pay
one-half of the fees, costs and expenses of the Appraisal Firm whether or not
the transactions contemplated hereby are consummated.
8.6. DISCLOSURE SCHEDULES.
Sellers and Buyer acknowledge and agree that Sellers shall have
the right and obligation from time to time after the date hereof to update or
correct the Schedules attached hereto to reflect changes in the business
condition of the Sellers
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after the date hereof, omissions from the Schedules or other matters;
provided, however, in the event that any such update or correction,
individually or in the aggregate, results in a Material Adverse Effect, Buyer
shall nevertheless retain all rights of Buyer hereunder as a result of such
Material Adverse Effect. The inclusion of any fact or item on a Schedule
referenced by a particular section in this Agreement shall, should the
existence of the fact or item or its contents, be relevant to any other
section, be deemed to be disclosed with respect to such other section whether
or not an explicit cross-reference appears in the Schedules.
8.7. BULK SALES LAWS.
Buyer hereby waives compliance by Sellers, in connection with
the transactions contemplated hereby, with the provisions of any applicable
bulk transfer laws.
8.8. DUE DILIGENCE AND DISCLOSURE SCHEDULE DELIVERY.
(a) Sellers hereby acknowledge that Buyers have not had any
reasonable opportunity to perform due diligence with respect to the Assets
and the Stations and the respective business and operations thereof, as well
as Liabilities being conveyed and/or assigned to Buyer pursuant to this
Agreement. Accordingly, Buyer shall have until 5:00 p.m. (Washington, D.C.
local time) on September 11, 1996 to conduct an investigation that includes,
but is not limited to, reviewing the Schedules to this Agreement, reviewing
the Stations' financial performance, equipment, studio, transmitter,
engineering, litigation, licenses, and all other aspects of the Assets and
the Stations' ownership, performance, and operations.
(b) Sellers shall cooperate in Buyer's due diligence and shall
provide to Buyer an initial due diligence response no later than August 24,
1996 and shall diligently thereafter provide the remaining due diligence
materials. Buyer hereby acknowledges that for business and legal reasons,
Sellers have not been able to deliver the Schedules referred to in this
Agreement prior to the date hereof. Sellers covenant to deliver to Buyer (i)
initial drafts of the Schedules (constituting substantially all of such
Schedules) prior to 5:00 p.m. (Washington, D.C. local time) on August 26,
1996 and (ii) final Schedules prior to 12:00 a.m. (Washington, D.C. local
time) on August 28, 1996.
ARTICLE 9.
CONDITIONS PRECEDENT TO
BUYER'S OBLIGATION TO CLOSE
The obligations of Buyer to purchase the Assets and to proceed
with the Closing are subject to the satisfaction (or waiver in writing by
Buyer) at or prior to the Closing of each of the following conditions:
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9.1. REPRESENTATIONS AND COVENANTS.
The representations and warranties of Sellers made in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date with the same effect as though such representations and
warranties had been made on and as of the Closing Date, except as modified by
the Schedules updated after the date hereof and except for representations
and warranties that speak as of a specific date or time other than the
Closing Date (which need only be true and correct in all material respects as
of such date or time), and the covenants and agreements of Sellers required
to be performed on or before the Closing Date in accordance with the terms of
this Agreement shall have been performed in all material respects.
9.2. REQUIRED CONSENTS.
Sellers shall have obtained prior to the Closing Date all
consents, authorizations or approvals necessary to effect valid assignments
to Buyer of those Station Contracts listed on SCHEDULE 9.2, which shall
include all leases of real property and towers for the Stations which require
consents or approvals to effect valid assignment.
9.3. DELIVERY OF DOCUMENTS.
At or prior to the Closing, Sellers shall have delivered to Buyer
all contracts, agreements, instruments and documents identified in SECTION
11.2.
9.4. FCC ORDER.
The FCC Order shall have been issued and become a Final Order with
respect to the Stations.
9.5. HART-SCOTT-RODINO.
All applicable waiting periods under Hart-Scott-Rodino shall have
expired or terminated.
9.6 LEGAL PROCEEDINGS.
No injunction, restraining order or decree of any nature of any
court or Governmental Authority of competent jurisdiction shall be in effect
that restrains or prohibits the transactions contemplated by this Agreement.
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9.7 SUNDANCE CONSUMMATION.
Sellers shall have consummated the transactions contemplated by
the Radio 95 Asset Purchase Agreement.
ARTICLE 10.
CONDITIONS PRECEDENT TO
SELLER'S OBLIGATION TO CLOSE
The obligations of Sellers to sell, transfer, convey and deliver
the Assets and to proceed with the Closing are subject to the satisfaction
(or waiver in writing by Sellers) at or prior to the Closing of each of the
following conditions:
10.1. REPRESENTATIONS AND COVENANTS.
The representations and warranties of Buyer made in this Agreement
shall be true and correct in all material respects on and as of the Closing
Date with the same effect as though such representations and warranties had
been made on and as of the Closing Date except for representations and
warranties that speak as of a specific date or time other than the Closing
Date (which need only be true and correct in all material respects as of such
date or time), and the covenants and agreements of Buyer required to be
performed on or before the Closing Date in accordance with the terms of this
Agreement shall have been performed in all material respects.
10.2. DELIVERY BY BUYER.
At or prior to the Closing, Buyer shall have delivered to Sellers
the Purchase Price, to the extent required to be paid on the Closing Date
pursuant to SECTION 2.5, and all contracts, agreements, instruments and
documents identified in SECTION 11.3.
10.3. FCC ORDER.
The FCC Order shall have been issued and become a Final Order with
respect to the Stations.
10.4. HART-SCOTT-RODINO.
All applicable waiting periods under Hart-Scott-Rodino shall have
expired or terminated.
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10.5. LEGAL PROCEEDINGS.
No injunction, restraining order or decree of any nature of any
court or Governmental Authority of competent jurisdiction shall be in effect
that restrains or prohibits the transactions contemplated by this Agreement.
ARTICLE 11.
THE CLOSING
11.1. CLOSING.
The Closing hereunder shall be held on a date specified by Buyer
that is not later than ten (10) days following the date that the FCC Order
has become a Final Order (the "Closing Date"); PROVIDED, HOWEVER, in no event
shall the Closing take place prior to January 1, 1997. The Closing shall be
held at 10:00 A.M. local time at the offices of Hogan & Hartson L.L.P., 555
13th Street, N.W., Washington, D.C. or at such other time and place as the
parties may agree. The effective time of the Closing shall be deemed to be
12:01 a.m. local time on the Closing Date.
11.2. DELIVERY BY SELLER.
At or before the Closing, Sellers shall deliver to Buyer in
accordance with SECTION 9.3 the following:
11.2.1. AGREEMENTS AND INSTRUMENTS
The following bills of sale, assignments and other
instruments of transfer, dated as of the Closing Date and duly executed by
Sellers:
(a) the Bill of Sale;
(b) the Assignment of FCC Licenses;
(c) the Assignment of Contracts and Leases;
(d) the Assignment of Intellectual Property;
(e) the Assumption Agreement;
(f) certificates of title with respect to the motor vehicles
listed on SCHEDULE 2.1.9 or if any such motor vehicles are leased by
Sellers, an assignment of such lease;
(g) special or limited warranty deeds for all Real Property
owned by Sellers in a form commonly used in the jurisdictions where such
Real Property is located.
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11.2.2. CONSENTS.
(a) Seller shall use its commercially reasonable efforts
to obtain all third party consents necessary for the conveyance of the
Stations and the Assets to Buyer without the imposition of any conditions
that would be adverse to Buyer.
(b) If Sellers fail to obtain any of the consents
referenced in SECTION 11.2.2, Sellers shall use commercially reasonable
efforts (i) to provide Buyer the financial and business benefits Buyer would
have enjoyed had the consent been given and (ii) upon the request of Buyer,
to enforce in Seller's name for the account of Buyer any rights that would
otherwise have been available to Buyer had the consent been granted.
11.2.3. CERTIFIED RESOLUTIONS.
A copy of the approval of the partners of Sellers,
certified as being correct and complete and then in full force and effect,
authorizing the execution, delivery and performance of this Agreement, and of
the other Sellers Documents, and the consummation of the transactions
contemplated hereby and thereby.
11.2.4. OFFICERS' CERTIFICATES.
(a) A certificate of an officer of the general partner
of Sellers certifying the matters set forth in SECTION 9.1; and
(b) a certificate of an officer of the general partner
of Sellers as to the incumbency of the representatives of Sellers
executing this Agreement or any of the other Seller Documents on behalf
of Sellers.
11.2.5. DEPOSIT.
The Deposit in accordance with the Deposit Escrow Agreement.
11.3. DELIVERY BY BUYER.
At or before the Closing, Buyer shall deliver to Sellers the
following:
11.3.1. PURCHASE PRICE PAYMENT.
The Purchase Price in the amount and manner set forth in
SECTION 2.
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11.3.2. ASSUMPTION AGREEMENT.
The Assumption Agreement dated as of the Closing Date and
duly executed by Buyer.
11.3.3. CERTIFIED RESOLUTIONS.
Copies of the resolutions of the directors of Buyer,
certified as being correct and complete and then in full force and effect,
authorizing the execution, delivery and performance of this Agreement and of
the other Buyer Documents, and the consummation of the transactions
contemplated hereby and thereby.
11.3.4. OFFICERS' CERTIFICATE.
(a) A certificate of Buyer signed by an officer of Buyer
certifying the matters set forth in SECTION 10.1; and
(b) a certificate signed by the Secretary of Buyer as to
the incumbency of the officers of Buyer executing this Agreement or any
of the other Buyer Documents on behalf of Sellers.
ARTICLE 12.
SURVIVAL; INDEMNIFICATION
12.1. SURVIVAL OF REPRESENTATIONS.
Unless otherwise set forth herein, all representations and
warranties, covenants and agreements of Sellers and Buyer contained in or
made pursuant to this Agreement or in any certificate furnished pursuant
hereto shall survive the Closing Date and shall remain in full force and
effect to the following extent: (a) representations and warranties shall
survive for a period of fifteen (15) months after the Closing Date, (b) the
covenants and agreements in this ARTICLE 12 shall continue in full force and
effect until fully discharged (but not beyond the expiration of such fifteen
(15) months), and (c) any representation, or warranty that is the subject of
a claim which is asserted in a reasonably detailed writing prior to the
expiration of such fifteen (15) month period shall survive with respect to
such claim or dispute until the final resolution thereof.
12.2. INDEMNIFICATION BY SELLERS.
Subject to the conditions and provisions of SECTION 12.4 and
SECTION 12.5, from and after the Closing Date, Sellers, jointly and
severally, shall indemnify, defend and hold harmless Buyer and its officers,
directors, employees,
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agents, and shareholders (the "Buyer Indemnified Parties") from and against
and in any respect of any and all Losses, asserted against, resulting to,
imposed upon or incurred by any Buyer Indemnified Parties, directly or
indirectly, by reason of or resulting from: (a) the business or operations of
the Stations during the period prior to the Closing Date (except to the
extent Buyer has expressly assumed the Liability for any such Losses pursuant
hereto); (b) any misrepresentation or breach of the representations and
warranties of Sellers contained in or made pursuant to this Agreement or any
other Seller Document; or (c) any breach by Sellers of any covenants of
Sellers contained in or made pursuant to this Agreement or any other Seller
Document.
12.3. INDEMNIFICATION BY BUYER.
Subject to the conditions and provisions of SECTION 12.4 and
SECTION 12.5, from and after the Closing Date, Buyer hereby agrees to
indemnify, defend and hold harmless each Seller and the partners of each
Seller, and the officers, directors, employees, agents, and shareholders of
any of the foregoing (the "SELLER INDEMNIFIED PARTIES"), from, against and
with respect of, on a net after-tax basis, any and all Losses, asserted
against, resulting to, imposed upon or incurred by any Seller, directly or
indirectly, by reason of or resulting from: (a) any failure by Buyer to pay,
perform or discharge any Liabilities expressly assumed by Buyer pursuant
hereto or pursuant to the Assumption Agreement; (b) the business or
operations of the Stations during the period on and after the Closing Date;
(c) any misrepresentation or breach of the representations and warranties of
Buyer contained in or made pursuant to this Agreement or any other Buyer
Document; or (d) any breach by Buyer of any covenants of Buyer contained in
or made pursuant to this Agreement or any other Buyer Document.
12.4. LIMITATION ON INDEMNIFICATION
Notwithstanding any other provision of this Agreement to the
contrary, in no event shall Losses include a party's incidental or
consequential damages. Neither Sellers nor Buyer shall be liable to the
other in respect of any indemnification hereunder except to the extent that
(a) the aggregate Losses under this Agreement of Sellers (taken as a whole)
or Buyer, as the case may be, exceeds Five Hundred Thousand Dollars
($500,000) (the "Basket Amount"), and then only to the extent of the excess
over the Basket Amount, and (b) the aggregate amount of such indemnification,
together with all other indemnification payments by the indemnifying party,
for Losses is less than Three Million Dollars ($3,000,000) (the "Indemnity
Cap"); PROVIDED, HOWEVER, (i) any Losses incurred by Sellers in connection
with Buyer's failure to comply with the covenants, agreements and indemnities
set forth in SECTION 2.8.1 and (ii) any amounts owing in connection with the
Final Net Working Capital shall not be subject to the Basket Amount or the
Indemnity Cap. Notwithstanding anything to the contrary set forth herein or
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otherwise, Buyer acknowledges and agrees that the Basket Amount and the
Indemnity Cap shall be applicable to all of the Sellers on a collective basis
and not individually. Each party (a "recipient party") shall notify the
other party (the "representing party") reasonably promptly of any perceived
breach by the representing party of which the recipient party has knowledge
of any representations and warranties, covenants, and agreements and of any
Losses (including a brief description of the same) of the recipient party
caused thereby. In the event of any breach that is cured prior to the
Closing Date in accordance with the terms of this Agreement, the representing
party shall have no obligation under SECTION 12.2 or SECTION 12.3 or
otherwise to indemnify the recipient party with respect to such Losses. In
addition, each recipient party will specify in writing to the representing
party any perceived breach by the representing party of any representations
and warranties, covenants, and agreements and of any Losses (including a
brief description of the same) of the recipient party caused thereby. In the
event that the recipient party fails to so notify the representing party of
any such breach of which the recipient party has knowledge, the representing
party shall have no obligation under SECTION 12.2 or SECTION 12.3 or
otherwise to indemnify the recipient party with respect to such Losses.
12.5. CONDITIONS OF INDEMNIFICATION.
The obligations and liabilities of Sellers and of Buyer hereunder
with respect to their respective indemnities pursuant to this SECTION 12,
resulting from any Losses, shall be subject to the following terms and
conditions:
12.5.1. The party seeking indemnification (the "Indemnified
Party") must give the other party or parties, as the case may be (the
"Indemnifying Party"), notice of any such Losses promptly after the
Indemnified Party receives notice thereof; provided that the failure to give
such notice shall not affect the rights of the Indemnified Party hereunder
except to the extent that the Indemnifying Party shall have suffered actual
damage by reason of such failure.
12.5.2. The Indemnifying Party shall have the right to undertake,
by counsel or other representatives (reasonably satisfactory to the
Indemnified Party) of its own choosing, the defense of such Losses at the
Indemnifying Party's risk and expense.
12.5.3. In the event that the Indemnifying Party shall elect not
to undertake such defense, or, within a reasonable time after notice from the
Indemnified Party of any such Losses, shall fail to defend, the Indemnified
Party (upon further written notice to the Indemnifying Party) shall have the
right to undertake the defense, compromise or settlement of such Losses, by
counsel or other representatives of its own choosing, on behalf of and for
the account and risk of the Indemnifying Party (subject to the right of the
Indemnifying Party to assume defense of such Losses at any time prior to
settlement, compromise or final
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determination thereof). In such event, the Indemnifying Party shall pay to
the Indemnified Party, in addition to the other sums required to be paid
hereunder, the costs and expenses incurred by the Indemnified Party in
connection with such defense, compromise or settlement as and when such costs
and expenses are so incurred.
12.5.4. Anything in this SECTION 12.5 to the contrary
notwithstanding, (a) if there is a reasonable probability that Losses may
materially and adversely affect the Indemnified Party other than as a result
of money damages or other money payments, the Indemnified Party shall have
the right, at its own cost and expense, to participate in the defense,
compromise or settlement of any Losses and the Indemnifying Party and the
Indemnified Party and their respective counsel or other representatives shall
cooperate with respect to such Losses, (b) the Indemnifying Party shall not,
without the Indemnified Party's written consent, settle or compromise any
Losses or consent to entry of any judgment which does not 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 Losses
in form and substance satisfactory to the Indemnified Party, (c) in the event
that the Indemnifying Party undertakes defense of any Losses, the Indemnified
Party, by counsel or other representative of its own choosing and at its sole
cost and expense, shall have the right to consult with the Indemnifying Party
and its counsel or other representatives concerning such Losses and the
Indemnifying Party and the Indemnified Party and their respective counsel or
other representatives shall cooperate with respect to such Losses, (d) in the
event that the Indemnifying Party undertakes defense of any Losses, the
Indemnifying Party shall have an obligation to keep the Indemnified Party
informed of the status of the defense of such Losses and furnish the
Indemnified Party with all documents, instruments and information that the
Indemnified party shall reasonably request in connection therewith and (e) in
the event that both the Indemnified Party and the Indemnifying Party are
parties (directly or through interpleader) to any Losses giving rise to
indemnification hereunder and the Indemnified Party is advised by counsel
that there is or may be a conflict of interest in the representation of both
the Indemnified Party and the Indemnifying Party by one firm or counsel, the
Indemnified Party shall be entitled to assume, at the sole cost and expense
of the Indemnifying Party, the defense, compromise and settlement (subject to
clause (b) above) of such Loss with counsel (in addition to appropriate local
counsel) reasonably satisfactory to the Indemnifying Party.
12.5.5. In the event that an Indemnified Party has a claim for
indemnification which does not involve a claim against it by a third party (a
"Direct Claim"), the Indemnified Party shall notify the Indemnifying Party in
writing of such Direct Claim with reasonable promptness, specifying, to the
extent known, the nature, circumstances and amount of such Direct Claim (a
"Direct Claim Notice"), including with particularity the specific
representation and warranty or covenant and agreement alleged to have been
breached. If the Indemnifying Party notifies
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the Indemnified Party that it disputes an Indemnified Party's right of
indemnification with respect to a particular Direct Claim, the parties shall
use their reasonable efforts to negotiate a resolution of such dispute
promptly. Subject to the limitations on indemnification set forth in this
ARTICLE 12, nothing in this Section 12.5.5 shall be deemed to prevent any
Indemnified Party from initiating litigation under this Agreement with
respect to any Direct Claim disputed by the Indemnified Party for the purpose
of establishing the Indemnified Party's right to indemnification hereunder.
12.6. CURE OF BREACH
Notwithstanding any other provision of this Agreement to the
contrary, a breach by Sellers of any representations and warranties or a
failure to perform any covenant or agreement hereunder, if susceptible to
cure, may be cured prior to the Closing Date by Sellers (a) by reducing the
Purchase Price in an amount equal to the Losses as initially agreed to by
Sellers and Buyer) to Buyer caused by such breach, (b) by making payment to a
third party or taking other action to discharge the Losses, in which case
Seller shall secure a release in form reasonably satisfactory to Buyer, of
all liability of Buyer for the matter giving rise to such Losses, (c) by
placing an amount equal to the Losses in an escrow account under an escrow
arrangement reasonably satisfactory to Sellers and Buyer, or (d) a
combination of the foregoing reasonably satisfactory to Buyer and Sellers.
If the foregoing actions fully cure the breach, Sellers shall have no
obligation under SECTION 12.2 or otherwise to indemnify Buyer with respect to
the Losses caused by such breach; if such actions partially cure the breach,
Sellers shall continue to have an obligation under SECTION 12.2 to indemnify
Buyer with respect to the remaining portion of the Losses caused by such
breach.
ARTICLE 13.
TERMINATION
13.1. TERMINATION
13.1.1. This Agreement shall terminate, without any action by any
party hereto, and shall be of no further force or effect if the Deposit
Escrow Agent shall not have received the Deposit from Buyer prior to 5 p.m.
(Washington, D.C. local time) on August 26, 1996.
13.1.2 This Agreement may be terminated at any time prior to the
Closing as follows:
(a) by written notice of Buyer, in its sole and absolute
discretion, delivered to Sellers at any time prior to 12:01 p.m. (Washington,
D.C.
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local time) on September 3, 1996; in which event Buyer shall receive the
Deposit (and all interest accrued thereon);
(b) in the event that Buyer has not terminated this Agreement
pursuant to SECTION 13.1.2(a), by written notice of Buyer, in its sole and
absolute discretion, delivered to Sellers at any time prior to 5:00 p.m.
(Washington, D.C. local time) on September 11, 1996; in which event Sellers
shall receive the Deposit (and all interest accrued thereon) notwithstanding
any other provision contained herein to the contrary;
(c) by the mutual consent of Sellers and Buyer;
(d) by either Buyer or Sellers, by written notice of termination
delivered to the other, if (i) the FCC Order for the Stations has not become
a Final Order and/or the Closing has not occurred within twelve (12) months
after the date of this Agreement, provided, however, that the failure of the
FCC Order to become a Final Order or the failure of the Closing to have
occurred within twelve (12) months of the date of this Agreement shall not be
attributable to the breach of this Agreement by the party seeking termination
pursuant to this SECTION 13.1.2(d) or (ii) the FCC designates the
applications contemplated by SECTION 5.1 for an evidentiary hearing.
(e) by Buyer or Sellers by written notice to the other, if a
court of competent jurisdiction or other Governmental Entity shall have
issued an order, decree or ruling or taken any other action (which order,
decree, or ruling the parties hereto shall use their best efforts to lift),
in each case permanently restraining, permanently enjoining, or otherwise
prohibiting the transactions contemplated by this Agreement, and such order,
decree, ruling, or other action shall have become final and nonappealable;
(f) by the party whose qualifications are not at issue, if, for
any reason, the FCC denies or dismisses any of the applications and the time
for reconsideration or court review under the Communications Act with respect
to such denial or dismissal has expired and there is not pending with respect
thereto a timely filed petition for reconsideration or request for review;
(g) by written notice of Buyer to Sellers if the FCC Order
contains a condition on Buyer that (i) is unrelated to Buyer's
qualifications, (ii) applies to more than one of the Stations, and (iii) the
time for reconsideration or court review under the Communications Act with
respect to such condition(s) has expired without the filing with respect
thereto of a timely petition for reconsideration or request for review;
(h) Either Buyer or Sellers in accordance with the terms and
conditions of ARTICLE 14.
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13.2 EFFECT OF TERMINATION
13.2.1 In the event this Agreement is terminated as provided in
SECTIONS 13.1.1, this Agreement shall be deemed null, void and of no further
force or effect, and the parties hereto shall be released from all future
obligations hereunder; PROVIDED, HOWEVER, that the obligations of Buyer and
Sellers set forth in SECTIONS 6.3 and 7.1 (which relate to confidentiality),
and SECTION 15.3 (which relates to payment of certain expenses), shall
survive such termination and the parties hereto shall have any and all
remedies to enforce such obligations provided at law or in equity or
otherwise (including, without limitation, specific performance).
13.2.2 In the event this Agreement is terminated as provided in
SECTIONS 13.1.2(a), 13.1.2(c), 13.1.2(e) and 13.1.2(g), Buyer shall receive
the immediate return of the Deposit (and all interest accrued thereon) and
this Agreement shall be deemed null, void and of no further force or effect,
and the parties hereto shall be released from all future obligations
hereunder; PROVIDED, HOWEVER, that the obligations of Buyer and Sellers set
forth in SECTIONS 6.3 and 7.1 (which relate to confidentiality), and SECTION
15.3 (which relates to payment of certain expenses), shall survive such
termination and the parties hereto shall have any and all remedies to enforce
such obligations provided at law or in equity or otherwise (including,
without limitation, specific performance).
13.2.3 In the event this Agreement is terminated as provided in
SECTION 13.1.2(b), Sellers shall receive the immediate delivery of the
Deposit (and all interest accrued thereon) and this Agreement shall be deemed
null, void and of no further force or effect, and the parties hereto shall be
released from all future obligations hereunder; PROVIDED, HOWEVER, that the
obligations of Buyer and Sellers set forth in SECTIONS 6.3 and 7.1 (which
relate to confidentiality), and SECTION 15.3 (which relates to payment of
certain expenses), shall survive such termination and the parties hereto
shall have any and all remedies to enforce such obligations provided at law
or in equity or otherwise (including, without limitation, specific
performance).
13.2.4 In the event this Agreement is terminated as provided in
SECTIONS 13.1.2(d), 13.1.2(f) and 13.1.2(h), this Agreement shall be deemed
null, void and of no further force or effect, and the parties hereto shall be
released from all future obligations hereunder; PROVIDED, HOWEVER, that the
obligations of Buyer and Sellers set forth in SECTIONS 6.3 and 7.1 (which
relate to confidentiality), ARTICLE 14 (which relates to remedies and return
of the Deposit) and SECTION 15.3 (which relates to payment of certain
expenses), shall survive such termination and the parties hereto shall have
any and all remedies to enforce such obligations provided at law or in equity
or otherwise (including, without limitation, specific performance).
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ARTICLE 14.
REMEDIES
14.1. DEFAULT BY BUYER.
If Buyer shall materially default in the performance of its
obligations under this Agreement or if, as a result of Buyer's action or
failure to act (notwithstanding an obligation under this Agreement to take a
particular action), the conditions precedent to Sellers' obligation to close
specified in SECTION 10 are not satisfied, and shall not cure such default
within thirty (30) days of written notice of such default being given to it
by Sellers, and for such reason or reasons this Agreement is not consummated,
and provided that Sellers shall not then be in material default in the
performance of Sellers' obligations hereunder, Sellers shall be entitled, by
written notice to Buyer, to terminate this Agreement, and as Sellers' sole
remedy under this Agreement, to receive the Deposit as liquidated damages,
upon such payment Buyer shall be discharged from all further liability under
this Agreement.
14.2. DEFAULT BY SELLER.
If Sellers shall materially default in the performance of Sellers'
obligations under this Agreement, or if, as a result of Sellers' action or
failure to act (notwithstanding an obligation under this Agreement to take a
particular action), the conditions precedent to Buyer's obligation to close
specified in SECTION 9 are not satisfied, and shall not cure such default
within thirty (30) days of written notice of such default being given to it
by Buyer, and for such reason or reasons this Agreement is not consummated,
and provided that Buyer shall not then be in material default in the
performance of Buyer's obligations hereunder, Buyer shall be entitled, by
written notice to Sellers, to terminate this Agreement, to receive the
immediate return of the Deposit, and to pursue all other remedies Buyer has
at law or in equity or otherwise, except as otherwise provided in SECTION
14.4.
14.3. LIQUIDATED DAMAGES.
Sellers and Buyer have provided for the amount of the Deposit to
be liquidated damages as a remedy for Sellers after having considered
carefully the anticipated and actual harms and losses that would be incurred
if Buyer defaults and thus fails to perform its obligations to consummate the
transactions contemplated hereunder, the difficulty of ascertaining at this
time the actual amount of damages, special and general, that Sellers will
suffer in such event, and the inconvenience or nonfeasibility of otherwise
obtaining an adequate remedy in such event.
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14.4. SPECIFIC PERFORMANCE.
Sellers hereby acknowledge that the Assets are unique, and that
the harm to Buyer resulting from Sellers failure to perform their obligations
hereunder cannot be adequately compensated by damages. Accordingly, Sellers
agree that Buyer shall have the right to have all obligations, undertakings,
agreements, covenants and other provisions of this Agreement specifically
performed by Sellers, which shall be in addition to the right to receive
damages or seek any other remedy Buyer might otherwise have at law or in
equity or otherwise.
ARTICLE 15.
GENERAL PROVISIONS
15.1. ADDITIONAL ACTIONS, DOCUMENTS AND INFORMATION.
Buyer agrees that it will, at any time, prior to, at or after the
Closing Date, take or cause to be taken such further actions, and execute,
deliver and file or cause to be executed, delivered and filed such further
documents and instruments and obtain such consents, as may be reasonably
requested by Sellers in connection with the consummation of the purchase and
sale contemplated by this Agreement. Sellers agree that it will, at any time,
prior to, at or after the Closing Date, take or cause to be taken such
further actions, and execute, deliver and file or cause to be executed,
delivered and filed such further documents and instruments and obtain such
consents, as may be reasonably requested by Buyer in connection with the
consummation of the purchase and sale contemplated by this Agreement.
15.2. BROKERS.
Sellers represent to Buyer that, except for the brokerage fees
payable to Sellers' Broker (which fees are solely the responsibility of
Sellers), Sellers have not engaged, or incurred any unpaid liability (for any
brokerage fees, finders' fees, commissions or otherwise) to, any broker,
finder or agent in connection with the transactions contemplated by this
Agreement; Buyer represents to Sellers that Buyer has not engaged, or
incurred any unpaid liability (for any brokerage fees, finders' fees,
commissions or otherwise) to, any broker, finder or agent in connection with
the transactions contemplated by this Agreement; and Sellers agree to
indemnify Buyer, and Buyer agrees to indemnify Sellers, against any claims
asserted against the other parties for any such fees or commissions by any
person purporting to act or to have acted for or on behalf of the
indemnifying party. Notwithstanding any other provision of this Agreement,
this representation and warranty shall survive the Closing without limitation
and shall not be subject to the Basket Amount contained in SECTION 12.4.
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15.3. EXPENSES AND TAXES.
Each party hereto shall pay its own expenses incurred in
connection with this Agreement and in the preparation for and consummation of
the transactions provided for herein. Notwithstanding the foregoing, (a)
Buyer and Sellers shall each pay half of all sales (including, without
limitation, bulk sales), use, documentary, stamp, gross receipts,
registration, transfer, conveyance, excise, recording, license and other
similar Taxes and fees ("Transfer Taxes") applicable to, imposed upon or
arising out of the transactions contemplated hereby whether now in effect or
hereinafter adopted and regardless of which party such Transfer Tax is
imposed upon, (b) Sellers and Buyer shall each pay one-half of any FCC filing
fees incurred in connection with the assignment of the FCC Licenses, and (c)
Buyer shall pay any fees and expenses incurred in connection with any HSR
Filings; provided, however, Sellers agree to reimburse Buyer up to the amount
of $22,500 for any HSR Filing fees and expenses incurred by Buyer.
15.4. NOTICES.
All notices, demands, requests, or other communications which may
be or are required to be given or made by any party to any other party
pursuant to this Agreement shall be in writing and shall be hand delivered,
mailed by first-class registered or certified mail, return receipt requested,
postage prepaid, delivered by overnight air courier, or transmitted by
telegram, telex, or facsimile transmission 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, and on the same day if
transmitted by telegram, telex, or facsimile, addressed as follows:
If to Buyer:
Chancellor Radio Broadcasting Company
12655 N. Central Expressway, Suite 405
Dallas, Texas 75243
Attn: Steven Dinetz, President and CEO
Fax: 214/239-0220
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with copies (which shall not constitute
notice) to:
Leibowitz & Associates, P.A.
1 S.E. Third Avenue, Suite 1450
Miami, Florida 33131
Attn: Matthew L. Leibowitz
Fax: 305/530-9417
and
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attn: Lawrence D. Stuart, Jr.
Fax: 214/7470-7355
and
Weil, Gotshal & Manges, LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Attn: Jeremy W. Dickens
Fax: 214/746-7777
If to Sellers:
c/o Colfax Communications, Inc.
1250 24th Street, N.W.
Suite 800
Washington, D.C. 20037
Attn: Joseph O. Bunting, III
Fax: 202/828-0860
with copies (which shall not constitute
notice) to:
Hogan & Hartson, L.L.P.
111 South Calvert Street
Baltimore, Maryland 21202
Attn: Michael Silver
Fax: 410/539-6981
and
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Hogan & Hartson, L.L.P.
8300 Greensboro Drive
McLean, VA 22102
Attn: Richard T. Horan
Fax: 703/448-7650
and
Leventhal, Senter & Lerman
2000 K Street, N.W.
Suite 600
Washington, D.C. 20006
Attn: Steven A. Lerman
Fax: 202/293-7783
or such other address as the addressee may indicate by written notice to the
other parties.
15.5. WAIVER.
No delay or failure on the part of any party hereto in exercising
any right, power or privilege under this Agreement or under any other
instrument or document given in connection with or pursuant to this Agreement
shall impair any such right, power or privilege or be construed as a waiver
of any default or any acquiescence therein. No single or partial exercise of
any such right, power or privilege shall preclude the further exercise of
such right, power or privilege, or the exercise of any other right, power or
privilege. No waiver shall be valid against any party hereto unless made in
writing and signed by the party against whom enforcement of such waiver is
sought and then only to the extent expressly specified therein.
15.6. BENEFIT AND ASSIGNMENT.
Except as hereinafter specifically provided in this SECTION 15.6,
no party hereto shall assign this Agreement, in whole or in part, whether by
operation of law or otherwise, without the prior written consent of the other
party hereto, and any purported assignment contrary to the terms hereof shall
be null, void and of no force and effect. Without releasing Buyer from any of
its obligations or liabilities hereunder (a) nothing in this Agreement shall
limit Buyer's ability to assign, sell or transfer the Stations or the Assets
in connection with a sale of stock or all or substantially all of Buyer's
assets, or by merger, consolidation, or otherwise of Buyer or any affiliate
of Buyer with (or to) a third party without the consent of Sellers (b)
nothing in this Agreement shall limit Buyer's ability to assign the FCC
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Licenses (including the right to acquire the FCC Licenses at the Closing) to
Chancellor Broadcasting Licensee Company or any other wholly-owned subsidiary
of Buyer without the consent of Sellers, and (c) nothing in this Agreement
shall limit Buyer's ability to make a collateral assignment of its rights
under this Agreement to any institutional lender that provides funds to Buyer
without the consent of Sellers. Sellers shall execute an acknowledgment of
such collateral assignments in such forms as Buyer or its institutional
lenders may from time to time reasonably request; provided, however, that
unless written notice is given to Sellers that any such collateral assignment
has been foreclosed upon, Sellers shall be entitled to deal exclusively with
Buyer as to any matters arising under this Agreement or any of the other
agreements delivered pursuant hereto. In the event of such an assignment,
the provisions of this Agreement shall inure to the benefit of and be binding
on Buyer's and/or Chancellor Broadcasting Company's successors and assigns as
permitted hereunder. No person other than the parties hereto and the Seller
Indemnified Parties and the Buyer Indemnified Parties is or shall be entitled
to bring any action to enforce any provision of this Agreement against any of
the parties hereto, and the covenants and agreements set forth in this
Agreement shall be solely for the benefit of, and shall be enforceable only
by, the parties hereto and the Seller Indemnified Parties and the Buyer
Indemnified Parties or their respective successors and assigns as permitted
hereunder.
15.7. ENTIRE AGREEMENT; AMENDMENT.
This Agreement, including the Schedules and Exhibits hereto and
the other instruments and documents referred to herein or delivered pursuant
hereto, contains the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior oral or written agreements,
commitments or understandings with respect to such matters. No amendment,
modification or discharge of this Agreement shall be valid or binding unless
set forth in writing and duly executed by the party or parties against whom
enforcement of the amendment, modification or discharge is sought.
15.8. SEVERABILITY.
If any part of any provision of this Agreement or any other
contract, agreement, document or writing given pursuant to or in connection
with this Agreement shall be invalid or unenforceable under applicable law,
such part shall be ineffective to the extent of such invalidity or
unenforceability only, without in any way affecting the remaining parts of
such provisions or the remaining provisions of said contract, agreement,
document or writing.
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15.9. HEADINGS.
The headings of the sections and subsections contained in this
Agreement are inserted for convenience only and do not form a part or affect
the meaning, construction or scope thereof.
15.10. GOVERNING LAW.
This Agreement, the rights and obligations of the parties hereto,
and any claims or disputes relating thereto, shall be governed by and
construed under and in accordance with the laws of the State of Maryland,
excluding the choice of law rules thereof.
15.11. SIGNATURE IN COUNTERPARTS.
This Agreement may be executed in separate counterparts, none of
which need contain the signatures of all parties, each of which shall be
deemed to be an original, and all of which taken together constitute one and
the same instrument. It shall not be necessary in making proof of this
Agreement to produce or account for more than the number of counterparts
containing the respective signatures of, or on behalf of, all of the parties
hereto.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Asset Purchase Agreement, or has caused this Asset Purchase Agreement to be
duly executed and delivered in its name on its behalf, all as of the day and
year first above written.
CLASSICAL ACQUISITION LIMITED
PARTNERSHIP
By: Radio Acquisition Associates
Limited Partnership, its
general partner
By: Colfax Communications,
Inc., its general partner
By:
-------------------------------
Joseph O. Bunting, III
Vice President and Secretary
RADIO 100 OF MARYLAND LIMITED
PARTNERSHIP
By: Colfax Communications, Inc.,
its general partner
By:
-------------------------------
Joseph O. Bunting, III
Vice President and Secretary
RADIO 100 LIMITED PARTNERSHIP
By: Colfax Communications, Inc.,
its general partner
By:
-------------------------------
Joseph O. Bunting, III
Vice President and Secretary
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RADIO 570 LIMITED PARTNERSHIP
By: Colfax Communications, Inc.,
its general partner
By:
-------------------------------
Joseph O. Bunting, III
Vice President and Secretary
RADIO 94 OF PHOENIX LIMITED
PARTNERSHIP
By: Colfax Communications, Inc.,
its general partner
By:
-------------------------------
Joseph O. Bunting, III
Vice President and Secretary
RADIO 95 OF PHOENIX LIMITED
PARTNERSHIP
By: Colfax Communications, Inc.,
its general partner
By:
-------------------------------
Joseph O. Bunting, III
Vice President and Secretary
CHANCELLOR RADIO BROADCASTING
COMPANY
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
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The undersigned hereby guarantees to Buyer the payment and performance
of all of the obligations of Sellers under Article 12 of this Asset Purchase
Agreement.
COLFAX COMMUNICATIONS, INC.
:By:
--------------------------------------
Joseph O. Bunting, III
Vice President and Secretary
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ANNEX I
DEFINITIONS
"ACCOUNTING FIRM" shall have the meaning specified in SECTION 2.6.2.
"ACCOUNTS RECEIVABLE" means all accounts receivable with respect to
the Stations as of the end of the broadcast day immediately preceding the
Closing Date.
"ADDITIONAL AGREEMENTS" shall have the meaning specified in
SECTION 6.1.5.
"APPRAISAL FIRM" shall have the meaning set forth in SECTION 8.5.
"APPRAISAL REPORT" shall have the meaning set forth in SECTION 8.5.
"ASSETS" shall have the meaning set forth in SECTION 2.1.
"ASSIGNMENT OF CONTRACTS AND LEASES" means that certain Assignment
of Contracts and Leases, dated as of the Closing Date and executed by Sellers,
in a form reasonably acceptable to Buyer and Sellers.
"ASSIGNMENT OF FCC LICENSES" means that certain Assignment of FCC
Licenses, dated as of the Closing Date and executed by Sellers, in a form
reasonably acceptable to Buyer and Sellers.
"ASSUMED LIABILITIES" shall have the meaning specified in
SECTION 2.8.1.
"ASSUMPTION AGREEMENT" means that certain Assumption Agreement,
dated the Closing Date and executed by Buyer and Sellers, in a form
reasonably acceptable to Buyer and Sellers.
"BASE PURCHASE PRICE" shall have the meaning specified in SECTION 2.4.
"BASKET AMOUNT" shall have the meaning set forth in SECTION 12.4.
"BENEFIT ARRANGEMENT" means a benefit program or practice providing
for bonuses, incentive compensation, vacation pay, severance pay, insurance,
restricted stock, stock options, employee discounts, company cars, tuition
reimbursement or any other perquisite or benefit (including, without limitation,
any fringe benefit under Section 132 of the Code) to employees, officers or
independent contractors that is not a Plan.
"BENEFIT PLANS" shall have the meaning specified in SECTION 3.15.1.
<PAGE>
"BILL OF SALE" means that certain Bill of Sale and Assignment of
Assets, dated as of the Closing Date and executed by Sellers, in a form
reasonably acceptable to Buyer and Sellers.
"BUYER DOCUMENTS" shall mean, collectively, this Agreement, the
Deposit Escrow Agreement and the Assumption Agreement.
"BUYER INDEMNIFIED PARTIES" shall have the meaning in SECTION 12.2.
"CLOSING" means the closing of the purchase, assignment and sale
of the Assets contemplated hereunder.
"CLOSING DATE" means the time and date on which the Closing takes
place, as established by SECTION 11.1.
"CODE" means the Internal Revenue Code of 1986, as amended, and all
Laws promulgated pursuant thereto or in connection therewith.
"COMMUNICATIONS ACT" means the Communications Act of 1934, as amended.
"CURRENT BALANCE SHEET DATE" shall have the meaning specified in
SECTION 3.5.2.
"DEPOSIT" shall have the meaning specified in SECTION 2.3.
"DEPOSIT ESCROW AGENT" means George Mason Bank.
"DEPOSIT ESCROW AGREEMENT" means that certain Escrow Agreement
dated as of the date hereof by and among Buyer, Seller and the Deposit Escrow
Agent, in the form of EXHIBIT A attached hereto.
"ENCUMBRANCES" mean any mortgages, pledges, liens, security interests,
restrictions, defects in title, easements, encumbrances, and any other matters
affecting title.
"ENVIRONMENTAL LAWS" means any federal, state, local, or foreign
law (including common law), statute, code, ordinance, rule, regulation, or
other requirement relating to the environment, natural resources, public, or
employee health and safety, and Hazardous Materials generation, production,
use, storage, treatment, transportation or disposal, and includes, but is not
limited to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, ("CERCLA") as amended by the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), 42 U.S.C. Section 9601 ET SEQ.; the
Toxic Substances Control Act ("TSCA"), 15 U.S.C. Section 2601 ET SEQ.; the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1802 ET SEQ.; the
Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C.
ANNEX I-2
<PAGE>
Section 9601 ET SEQ.; the Clean Water Act ("CWA"), 33 U.S.C. Section 1251 ET
SEQ.; the Safe Drinking Water Act, 42 U.S.C. Section 300f ET SEQ.; the Clean
Air Act ("CAA"), 42 U.S.C. Section 7401 ET SEQ.; the Toxic Substances
Control, 15 U.S.C. Section 2601 et seq., the Federal Insecticide, Fungicide,
and Rodenticide Act, 7 U.S.C. Section 2701 et seq., and the Occupational
Safety and Health Act, 29 U.S.C. Section 651 et seq., as such laws have been
amended or supplemented, and the regulations promulgated pursuant thereto,
and all analogous state or local statues.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and all Laws promulgated pursuant thereto or in connection
therewith.
"ESTIMATED NET WORKING CAPITAL" shall have the meaning set forth in
SECTION 2.6.1.
"ESTIMATED NET WORKING CAPITAL AMOUNT" shall have the meaning set
forth in SECTION 2.6.1.
"EXCLUDED ASSETS" shall have the meaning specified in SECTION 2.2.
"FCC" means the Federal Communications Commission.
"FCC LICENSES" shall have the meaning specified in SECTION 2.1.1.
"FCC ORDER" means an order or orders of the FCC, or of the Chief,
Mass Media Bureau of the FCC, acting under delegated authority, consenting to
the assignment to Buyer of the FCC Licenses for the Stations.
"FINAL NET WORKING CAPITAL AMOUNT" shall have the meaning set forth
in SECTION 2.6.2.
"FINAL ORDER" means an FCC Order as to which the time for filing a
request for administrative or judicial review, or for instituting administrative
review SUA SPONTE, shall have expired without any such filing having been
made or notice of such review having been issued; or, in the event of such
filing or review SUA SPONTE, as to which such filing or review shall have
been disposed of favorably to the grant and the time for seeking further
relief with respect thereto shall have expired without any request for such
further relief having been filed.
"GOVERNMENTAL AUTHORITY" means any agency, board, bureau, court,
commission, department, instrumentality or administration of the United
States government, any state government or any local or other governmental
body in a state, territory or possession of the United States or the District
of Columbia.
ANNEX I-3
<PAGE>
"HART-SCOTT-RODINO" means the Hart-Scott-Rodino antitrust
Improvements Act of 1976, as amended, and all Laws promulgated pursuant
thereto or in connection therewith.
"HSR FILING" shall have the meaning specified in SECTION 5.2.
"HAZARDOUS MATERIALS" means any wastes, substances, or materials
(whether solids, liquids or gases) that are deemed hazardous, toxic,
pollutants, or contaminants, including without limitation, substances defined
as "hazardous wastes," "hazardous substances," "hazardous materials,"
"extremely hazardous waste," "toxic substances," "radioactive materials," or
other similar designations in, or otherwise subject to regulation under, any
Environmental Laws, which includes, but is not limited to, petroleum,
petroleum products, asbestos, urea formaldehyde and polychlorinated biphenyls.
"INDEMNIFIED PARTY" and "INDEMNIFYING PARTY" shall have the
respective meanings specified in SECTION 12.5.1.
"INDEMNITY CAP" shall have the meaning specified in SECTION 12.4.
"INTELLECTUAL PROPERTY" shall have the meaning specified in
SECTION 2.1.4.
"KNOWLEDGE" wherever used with respect to Sellers shall mean, (a) as
of the date of this Agreement, actual knowledge possessed by Steven Goldstein,
Carol Johnson, Teresa Baldwin and Joseph Bunting (the "Management Parties"),
and (b) as of August 28, 1996 and thereafter, actual knowledge possessed by
the Management Parties and the general managers of each of the Stations (each
a "General Manager") with respect to the Station for which such General
Manager serves as general manager.
"LAWS" means any federal, state or local law, (including common
law), statute, code, ordinance, regulation, order, writ, injunction, judgment
or decree applicable to the specified Person and to the businesses and assets
thereof.
"LEASED PROPERTY" shall have the meaning specified in SECTION 2.1.2.
"LIABILITIES" shall mean, as to any Person, all debts, adverse
claims, liabilities and obligations, direct, indirect, absolute or contingent
of such Person, whether accrued, vested or otherwise, whether in contract,
tort, strict liability or otherwise and whether or not actually reflected, or
required by generally accepted accounting principles to be reflected, in such
Person's balance sheets or other books and records.
"LOSSES" means any and all demands, claims, complaints, actions or
causes of action, suits, proceedings, investigations, arbitrations,
assessments,
ANNEX I-4
<PAGE>
losses, damages, liabilities, obligations (including those arising out of any
action, such as any settlement or compromise thereof or judgment or award
therein) and any costs and expenses, including, without limitation,
reasonable attorneys' fees and disbursements.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect on
the business, assets or financial condition of the Stations taken as a whole,
except for any adverse affect resulting from (a) economic conditions
applicable to the radio broadcasting industry in general, or (b) conditions
or assumed liabilities that are unique to the markets in which the Stations
operate, or (ii) a material adverse effect on Sellers' ability to consummate
the transactions contemplated by this Agreement.
"NET WORKING CAPITAL" shall mean as of any date of determination
(a) the sum of the balances of the current assets of the Stations (including
all deposits and prepaid expenses) as of such date exclusive of any cash or
any Excluded Assets, less (b) the sum of the balances of the current
liabilities of the Stations as of such date exclusive of any liabilities
related to any Excluded Assets and exclusive of the current portion of long
term debt.
"NET WORKING CAPITAL AMOUNT" shall mean, collectively, the
Estimated Net Working Capital Amount and the Final Net Working Capital Amount.
"OPERATING CONTRACTS" shall have the meaning specified in
SECTION 2.1.8.
"ORDINARY COURSE OF BUSINESS" means, with respect to Seller, the
ordinary course of business consistent with past practices of Seller; any
actions taken pursuant to the requirements of Law or Station Contracts
existing on the date hereof shall be deemed to be action in the Ordinary
Course of Business.
"PENSION PLAN" means an "employee pension benefit plan" as such
term is defined in Section 3(2) of ERISA.
"PERMITTED ENCUMBRANCES" means (a) Encumbrances arising in
connection with equipment financing or leasing, (b) Encumbrances on Real
Property that do not interfere with the use of the Real Property in the
operations or business of the Stations, (c) Encumbrances for Taxes not yet
due and payable or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on
Seller's books in accordance with generally accepted accounting principles,
(d) Encumbrances that, individually or in the aggregate, do not and would not
materially detract from the value of any of the Assets or materially
interfere with the use thereof as currently used, or (e) those matters
identified as permitted encumbrances on SCHEDULE 3.8 or SCHEDULE 3.10.
ANNEX I-5
<PAGE>
"PERSON" shall mean any individual, corporation, partnership,
limited liability company, joint venture, trust, unincorporated organization,
other form of business or legal entity or Governmental Authority.
"PLAN" means any plan, program or arrangement, whether or not
written, that is or was an "employee benefit plan" as such term is defined in
Section 3(3) of ERISA and (a) which was or is established or maintained by
Seller; (b) to which Seller contributed or was obligated to contribute or to
fund or provide benefits; or (c) which provides or promises benefits to any
person who performs or who has performed services for Seller and because of
those services is or has been (i) a participant therein or (ii) entitled to
benefits thereunder.
"PROGRAM CONTRACTS" shall have the meaning specified in
SECTION 2.1.5.
"PRORATION AMOUNT" shall have the meaning specified in SECTION 2.6.1.
"PRORATION ITEMS" shall mean any power and utility charges,
business and license fees, sales and service charges, commissions, special
assessments, and rental payments and personal and real estate taxes and
assessments with respect to the Real Property, and any other operating
expenses incurred in the Ordinary Course of Business.
"PURCHASE PRICE" shall have the meaning specified in SECTION 2.4.
"QUALIFIED PLAN" means a Pension Plan that satisfies, or is
intended by Seller to satisfy, the requirements for tax qualification
described in Section 401 of the Code.
"REAL PROPERTY" shall have the meaning specified in SECTION 2.1.2.
"RESTRICTED CONTRACTS" shall have the meaning specified in
SECTION 6.2.10.
"SCHEDULES" shall mean the disclosure schedules delivered by Seller
to Buyer in connection herewith.
"SELLER DOCUMENTS" shall mean, collectively, this Agreement, the
Deposit Escrow Agreement, the Assignment of Contracts and Leases, the Bill of
Sale, the Assignment of FCC Licenses and the Assumption Agreement.
"SELLER INDEMNIFIED PARTIES" shall have the meaning in SECTION 12.3.
"SELLER TAX RETURNS" means all federal, state, local, foreign and
other applicable Tax returns, declarations of estimated Tax reports required
to be
ANNEX I-6
<PAGE>
filed by any of Seller (without regard to extensions of time permitted by law
or otherwise).
"SELLER'S BROKER" means Merrill Lynch & Co.
"STATION CONTRACTS" shall have the meaning specified in SECTION 2.1.8.
"SUNDANCE CLOSING" shall have the meaning specified in SECTION 2.9.1.
"TAXES" means all federal, state and local taxes (including,
without limitation, income, profit, franchise, sales, use, real property,
personal property, ad valorem, excise, employment, social security and wage
withholding taxes) and installments of estimated taxes, assessments,
deficiencies, levies, imports, duties, license fees, registration fees,
withholdings, or other similar charges of every kind, character or
description imposed by any Governmental Authorities.
"TIME SALES AGREEMENTS" shall have the meaning specified in
SECTION 2.1.7.
"TRADE-OUT AGREEMENTS" shall have the meaning specified in
SECTION 2.1.6.
"TRANSFER TAXES" shall have the meaning specified in SECTION 15.3.
"TRANSFERRED EMPLOYEE" shall have the meaning specified in
Section 8.4.1.
"WELFARE PLAN" means an "employee welfare benefit plan" as such term
is defined in Section 3(1) of ERISA.
ANNEX I-7
<PAGE>
SCHEDULES
Schedule 2.1.1 FCC Licenses
Schedule 2.1.2 Real Property Interests
Schedule 2.1.3 Tangible Personal Property
Schedule 2.1.4 Intellectual Property
Schedule 2.1.5 Program Contracts
Schedule 2.1.6 Trade-out Agreements
Schedule 2.1.8 Operating Contracts
Schedule 2.1.9 Deposits; Prepaid Expenses
Schedule 2.1.10 Vehicles
Schedule 2.2.12 Excluded Contracts and Unrelated Assets
Schedule 3.4.1 Consents
Schedule 3.5.2 Liabilities
Schedule 3.6 Absence of Certain Changes or Events
Schedule 3.7 Litigation
Schedule 3.8 Encumbrances on Assets
Schedule 3.9 FCC Matters
Schedule 3.10.1 Encumbrances on Real Property
Schedule 3.11 Condition of Tangible Assets
Schedule 3.12 Intellectual Property
Schedule 3.13 Station Contracts
Schedule 3.14 Employee Benefit Plans
Schedule 3.16.1 Collective Bargaining Agreements
Schedule 3.17 Environmental Matters
Schedule 3.18 Transactions with Affiliates
Schedule 3.19 Insurance
Schedule 8.5 Allocation of Assets
Schedule 9.2 Required Consents and Approvals
<PAGE>
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF 12 1/4% SERIES A SENIOR
CUMULATIVE EXCHANGEABLE PREFERRED STOCK AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
- -------------------------------------------------------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
- -------------------------------------------------------------------------------
Chancellor Radio Broadcasting Company (the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware, does hereby certify that, pursuant to authority conferred
upon the board of directors of the Corporation (the "Board of Directors") by
its Certificate of Incorporation, as amended (hereinafter referred to as the
"Certificate of Incorporation"), and pursuant to the provisions of Section
151 of the General Corporation Law of the State of Delaware, said Board of
Directors, by unanimous written consent dated March 26, 1996, duly approved
and adopted the following resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by its Certificate of Incorporation, the Board of Directors
does hereby create, authorize and provide for the issuance of 12 1/4%
Series A Senior Cumulative Exchangeable Preferred Stock, par value
$.01 per share, with a stated value initially of $105.797951 per
share, consisting initially of 1,000,000 shares, having the
designations, preferences, relative, participating, optional and other
special rights and the qualifications, limitations and restrictions
thereof that are set forth in the Certificate of Incorporation and in
this Resolution as follows:
(a) DESIGNATION. There is hereby created out of the authorized
and unissued shares of Preferred Stock of the Corporation a class of
Preferred Stock designated as the "12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock". The number of shares constituting such class
shall be 1,000,000 and are referred to as the "Series A Senior Exchangeable
Preferred Stock." The initial liquidation preference of the Series A
<PAGE>
Senior Exchangeable Preferred Stock shall be $105.797951 per share; such
amount shall be subject to increase as provided in paragraph (c)(i).
(b) RANK. The Series A Senior Exchangeable Preferred Stock shall,
with respect to dividends and distributions upon liquidation, winding-up and
dissolution of the Corporation, rank (i) senior to all classes of common
stock of the Corporation (including, without limitation, the Common Stock)
and to each other class of Capital Stock of the Corporation or series of
Preferred Stock of the Corporation hereafter created the terms of which do
not expressly provide that it ranks senior to, or on a parity with, the
Series A Senior Exchangeable Preferred Stock as to dividends and
distributions upon liquidation, winding-up and dissolution of the Corporation
(collectively referred to, together with all classes of common stock of the
Corporation, as "Junior Stock"); (ii) on a parity with the Existing Preferred
Stock and any class of Capital Stock of the Corporation or series of
Preferred Stock of the Corporation hereafter created the terms of which
expressly provide that such class or series will rank on a parity with the
Series A Senior Exchangeable Preferred Stock as to dividends and
distributions upon liquidation, winding-up and dissolution (collectively
referred to as "Parity Stock"); provided that any such Parity Stock (other
than Existing Preferred Stock) that was not approved by the Holders in
accordance with paragraph (f)(ii)(A) hereof (to the extent such approval is
required) shall be deemed to be Junior Stock and not Parity Stock; and (iii)
junior to each class of Capital Stock of the Corporation or series of
Preferred Stock of the Corporation hereafter created that has been approved
by the Holders in accordance with paragraph (f)(ii)(B) hereof and the terms
of which expressly provide that such class or series will rank senior to the
Series A Senior Exchangeable Preferred Stock as to dividends and
distributions upon liquidation, winding-up and dissolution of the Company
(collectively referred to as "Senior Stock").
(c) DIVIDENDS.
(i) Beginning on the Issue Date, the Holders of the outstanding
shares of Series A Senior Exchangeable Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors, out of funds
legally available therefor, distributions in the form of cash dividends on
each share of Series A Senior Exchangeable Preferred Stock, at a rate PER
ANNUM equal to 12 1/4% of the then effective liquidation preference per
share of the Series A Senior Exchangeable Preferred Stock, payable
quarterly. No interest shall be payable in respect of any dividends that
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<PAGE>
may be in arrears. All dividends shall be cumulative, whether or not
earned or declared, on a daily basis from August 15, 1996 and shall be
payable quarterly in arrears on each Dividend Payment Date, commencing on
the first Dividend Payment Date after the Issue Date, PROVIDED that if any
dividend payable on any Dividend Payment Date on or before February 15,
2001 is not declared and paid in full in cash on such Dividend Payment
Date, the amount payable as dividends on such Dividend Payment Date that is
not paid in cash on such Dividend Payment Date shall be added to the
liquidation preference of the Series A Senior Exchangeable Preferred Stock
on such Dividend Payment Date and the amount so added to the liquidation
preference shall be deemed paid in full and shall not accumulate. Each
dividend shall be payable to, or added to the liquidation preference of as
herein provided, the Series A Senior Exchangeable Preferred Stock held by
Holders of record as they appear on the stock books of the Corporation on
the Dividend Record Date immediately preceding the related Dividend Payment
Date. Dividends shall cease to accumulate in respect of the Series A
Senior Exchangeable Preferred Stock on the Exchange Date or on the date of
their earlier redemption unless the Corporation shall have failed to issue
the appropriate aggregate principal amount of Exchange Debentures in
respect of the Series A Senior Exchangeable Preferred Stock on such
Exchange Date or shall have failed to pay the relevant redemption price on
the date fixed for redemption.
(ii) All dividends paid with respect to shares of the Series A Senior
Exchangeable Preferred Stock pursuant to paragraph (c)(i) shall be paid PRO
RATA to the Holders entitled thereto.
(iii) Nothing herein contained shall in any way or under any
circumstances be construed or deemed to require the Board of Directors to
declare, or the Corporation to pay or set apart for payment, any dividends
on shares of the Series A Senior Exchangeable Preferred Stock at any time.
(iv) Dividends on account of arrears for any past Dividend Period and
dividends in connection with any optional redemption pursuant to paragraph
(e)(i) may be declared and paid at any time, without reference to any
regular Dividend Payment Date, to Holders of record on such date, not more
than forty-five (45) days prior to the payment thereof, as may be fixed by
the Board of Directors of the Corporation.
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<PAGE>
(v) No full dividends shall be declared by the Board of Directors or
paid or set apart for payment by the Corporation on any Parity Stock for
any period unless full cumulative dividends have been or contemporaneously
are declared and paid (or are deemed declared and paid) in full, or
declared and, if payable in cash, a sum in cash set apart sufficient for
such payment, on the Series A Senior Exchangeable Preferred Stock for all
Dividend Periods terminating on or prior to the date of payment of such
full dividends on such Parity Stock. If any dividends are not so paid, all
dividends declared upon shares of the Series A Senior Exchangeable
Preferred Stock and any other Parity Stock shall be declared PRO RATA so
that the amount of dividends declared per share on the Series A Senior
Exchangeable Preferred Stock and such Parity Stock shall in all cases bear
to each other the same ratio that accrued dividends per share on the Series
A Senior Exchangeable Preferred Stock and such Parity Stock bear to each
other.
(vi) (A) Holders of shares of the Series A Senior Exchangeable
Preferred Stock shall be entitled to receive the dividends provided for in
paragraph (c)(i) hereof in preference to and in priority over any dividends
upon any of the Junior Stock.
(B) So long as any share of the Series A Senior Exchangeable
Preferred Stock is outstanding, the Corporation shall not declare, pay or
set apart for payment any dividend on any of the Junior Stock or make any
payment on account of, or set apart for payment money for a sinking or
other similar fund for, the purchase, redemption or other retirement of,
any of the Junior Stock or any warrants, rights, calls or options
exercisable for or convertible into any of the Junior Stock whether in
cash, obligations or shares of the Corporation or other property (other
than dividends in Junior Stock to the holders of Junior Stock), and shall
not permit any corporation or other entity directly or indirectly
controlled by the Corporation to purchase or redeem any of the Junior Stock
or any such warrants, rights, calls or options unless full cumulative
dividends determined in accordance herewith on the Series A Senior
Exchangeable Preferred Stock have been paid (or are deemed paid) in full.
(C) So long as any share of the Series A Senior Exchangeable
Preferred Stock is outstanding, the Corporation shall not make any payment
on account of, or set apart for payment money for a sinking or other
similar fund for, the purchase, redemption or other retirement of, any of
the
4
<PAGE>
Parity Stock or any warrants, rights, calls or options exercisable for
or convertible into any of the Parity Stock, and shall not permit any
corporation or other entity directly or indirectly controlled by the
Corporation to purchase or redeem any of the Parity Stock or any such
warrants, rights, calls or options unless full cumulative dividends
determined in accordance herewith on the Series A Senior Exchangeable
Preferred Stock have been paid (or are deemed paid) in full.
(vii) Dividends payable on the Series A Senior Exchangeable Preferred
Stock for any period less than a year shall be computed on the basis of a
360-day year of twelve 30-day months and the actual number of days elapsed
in the period for which payable.
(d) LIQUIDATION PREFERENCE.
(i) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the Holders of
shares of Series A Senior Exchangeable Preferred Stock then outstanding
shall be entitled to be paid out of the assets of the Corporation available
for distribution to its stockholders an amount in cash equal to the then
effective liquidation preference for each share outstanding, plus, without
duplication, an amount in cash equal to accumulated and unpaid dividends
thereon to the date fixed for liquidation, dissolution or winding up
(including an amount equal to a prorated dividend for the period from the
last Dividend Payment Date to the date fixed for liquidation, dissolution
or winding up) before any payment shall be made or any assets distributed
to the holders of any of the Junior Stock including, without limitation,
common stock of the Corporation. Except as provided in the preceding
sentence, Holders of Series A Senior Exchangeable Preferred Stock shall not
be entitled to any distribution in the event of any liquidation,
dissolution or winding up of the affairs of the Corporation. If the assets
of the Corporation are not sufficient to pay in full the liquidation
payments payable to the Holders of outstanding shares of the Series A
Senior Exchangeable Preferred Stock and all Parity Stock, then the holders
of all such shares shall share equally and ratably in such distribution of
assets in proportion to the full liquidation preference, including, without
duplication, all accrued and unpaid dividends to which each is entitled.
(ii) For the purposes of this paragraph (d), neither the sale,
conveyance, exchange or transfer (for cash, shares
5
<PAGE>
of stock, securities or other consideration) of all or substantially all
of the property or assets of the Corporation nor the consolidation or
merger of the Corporation with or into one or more entities shall be
deemed to be a liquidation, dissolution or winding up of the affairs of
the Corporation.
(e) REDEMPTION.
(i) OPTIONAL REDEMPTION. (A) The Corporation may, at the option of
the Board of Directors, redeem at any time on or after February 15, 2001,
subject to contractual and other restrictions with respect thereto and from
any source of funds legally available therefor, in whole or in part, in the
manner provided for in paragraph (e)(iii) hereof, any or all of the shares
of the Series A Senior Exchangeable Preferred Stock, at the redemption
prices (expressed as a percentage of the then effective liquidation
preference) set forth below plus, without duplication, an amount in cash
equal to all accumulated and unpaid dividends per share (including an
amount in cash equal to a prorated dividend for the period from the
Dividend Payment Date immediately prior to the Redemption Date to the
Redemption Date) (the "Optional Redemption Price") if redeemed during the
12-month period beginning February 15 of each of the years set forth below:
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . 106.125%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.900%
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.675%
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.450%
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.225%
2006 and thereafter. . . . . . . . . . . . . . . . . . . . 100.000%
; provided that no redemption pursuant to this paragraph (e)(i)(A) shall be
authorized or made unless prior thereto full accumulated and unpaid
dividends are declared and paid in full, or declared and a sum in cash set
apart sufficient for such payment, on the Series A Senior Exchangeable
Preferred Stock for all Dividend Periods terminating on or prior to the
Redemption Date.
(B) In addition to the foregoing paragraph (e)(i)(A), on or prior to
February 15, 1999, the Corporation may, at its option, use the net cash
proceeds of one or more Public Equity Offerings to redeem from any source
of funds legally available therefor, in the manner provided for in
paragraph (e)(iii) hereof, the Series A Senior Exchangeable Preferred
Stock, in part, at a redemption price of 112.250%
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<PAGE>
of the then effective liquidation preference thereof if redeemed during
the 12-month period commencing on February 15, 1996, 111.025% of the
then effective liquidation preference thereof if redeemed during the
12-month period commencing on February 15, 1997 and 109.800% of the then
effective liquidation preference thereof if redeemed during the 12-month
period commencing on February 15, 1998, plus, in each case, without
duplication, an amount in cash equal to all accumulated and unpaid
dividends to the redemption date (including an amount in cash equal to a
prorated dividend for the period from the Dividend Payment Date
immediately prior to the redemption date to the redemption date) (the
"Cash Proceeds Redemption Price"); PROVIDED, HOWEVER, that after any
such redemption, the number of shares of Series A Senior Exchangeable
Preferred Stock outstanding must equal at least 75% of the shares of
Series A Senior Exchangeable Preferred Stock originally issued on the
Issue Date. Any such redemption pursuant to this paragraph (e)(i)(B)
must occur on or prior to 60 days after the receipt by the Corporation
of the proceeds of each Public Equity Offering.
(C) In the event of a redemption pursuant to paragraph (e)(i)(A) or
(e)(i)(B) hereof of only a portion of the then outstanding shares of the
Series A Senior Exchangeable Preferred Stock, the Corporation shall effect
such redemption on a PRO RATA basis according to the number of shares held
by each Holder of the Series A Senior Exchangeable Preferred Stock, except
that the Corporation may redeem such shares held by Holders of fewer than
100 shares (or shares held by Holders who would hold less than 100 shares
as a result of such redemption), as may be determined by the Corporation.
(ii) MANDATORY REDEMPTION. On February 15, 2008, the Corporation
shall redeem, to the extent of funds legally available therefor, in the
manner provided for in paragraph (e)(iii) hereof, all of the shares of the
Series A Senior Exchangeable Preferred Stock then outstanding at a
redemption price equal to 100% of the then effective liquidation preference
per share, plus, without duplication, an amount in cash equal to all
accumulated and unpaid dividends per share (including an amount equal to a
prorated dividend for the period from the Dividend Payment Date immediately
prior to the Redemption Date to the Redemption Date) (the "Mandatory
Redemption Price").
(iii) PROCEDURES FOR REDEMPTION. (A) At least thirty (30) days and not
more than sixty (60) days prior to the
7
<PAGE>
date fixed for any redemption of the Series A Senior Exchangeable
Preferred Stock, written notice (the "Redemption Notice") shall be given
by first class mail, postage prepaid, to each Holder of record on the
record date fixed for such redemption of the Series A Senior
Exchangeable Preferred Stock at such Holder's address as it appears on
the stock books of the Corporation, PROVIDED that no failure to give
such notice nor any deficiency therein shall affect the validity of the
procedure for the redemption of any shares of Series A Senior
Exchangeable Preferred Stock to be redeemed except as to the Holder or
Holders to whom the Corporation has failed to give said notice or except
as to the Holder or Holders whose notice was defective. The Redemption
Notice shall state:
(1) whether the redemption is pursuant to paragraph (e)(i)(A),
(e)(i)(B) or (e)(ii) hereof;
(2) the Optional Redemption Price, the Mandatory Redemption
Price or the Cash Proceeds Redemption Price, as the case may be;
(3) whether all or less than all the outstanding shares of the
Series A Senior Exchangeable Preferred Stock are to be redeemed and
the total number of shares of the Series A Senior Exchangeable
Preferred Stock being redeemed;
(4) the date fixed for redemption;
(5) that the Holder is to surrender to the Corporation, in the
manner, at the place or places and at the price designated, his
certificate or certificates representing the shares of Series A Senior
Exchangeable Preferred Stock to be redeemed; and
(6) that dividends on the shares of the Series A Senior
Exchangeable Preferred Stock to be redeemed shall cease to accumulate
on such Redemption Date unless the Corporation defaults in the payment
of the Optional Redemption Price, the Mandatory Redemption Price or
the Cash Proceeds Redemption Price, as the case may be.
(B) Each Holder of Redeemable Preferred stock shall surrender the
certificate or certificates representing such shares of Series A Senior
Exchangeable Preferred Stock to the Corporation, duly endorsed (or
otherwise in proper form for transfer, as determined by the Corporation),
in the
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manner and at the place designated in the Redemption Notice, and on
the Redemption Date the full Optional Redemption Price, Mandatory
Redemption Price or Cash Proceeds Redemption Price, as the case may be, for
such shares shall be payable in cash to the Person whose name appears on
such certificate or certificates as the owner thereof, and each surrendered
certificate shall be canceled and retired. In the event that less than all
of the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(C) On and after the Redemption Date, unless the Corporation defaults
in the payment in full of the applicable redemption price, dividends on the
Series A Senior Exchangeable Preferred Stock called for redemption shall
cease to accumulate on the Redemption Date, and all rights of the Holders
of redeemed shares shall terminate with respect thereto on the Redemption
Date, other than the right to receive the Optional Redemption Price, the
Mandatory Redemption Price or the Cash Proceeds Redemption Price, as the
case may be, without interest; PROVIDED, HOWEVER, that if a notice of
redemption shall have been given as provided in paragraph (iii)(A) above
and the funds necessary for redemption (including an amount in respect of
all dividends that will accrue to the Redemption Date) shall have been
irrevocably deposited in trust for the equal and ratable benefit for the
Holders of the shares to be redeemed, then, at the close of business on the
day on which such funds are segregated and set aside, the Holders of the
shares to be redeemed shall cease to be stockholders of the Corporation and
shall be entitled only to receive the Optional Redemption Price, the
Mandatory Redemption Price or the Cash Redemption Price, as the case may
be, without interest.
(f) VOTING RIGHTS.
(i) The Holders of Series A Senior Exchangeable Preferred Stock,
except as otherwise required under Delaware law or as set forth in
paragraphs (ii), (iii) and (iv) below, shall not be entitled or permitted
to vote on any matter required or permitted to be voted upon by the
stockholders of the Corporation.
(ii) (A) So long as any shares of the Series A Senior Exchangeable
Preferred Stock are outstanding, the Corporation shall not authorize any
class of Parity Stock without the affirmative vote or consent of Holders of
at least a majority of the then outstanding shares of Series A
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Senior Exchangeable Preferred Stock, voting or consenting, as the case
may be, as one class, given in person or by proxy, either in writing or
by resolution adopted at an annual or special meeting.
(B) So long as any shares of the Series A Senior Exchangeable
Preferred Stock are outstanding, the Corporation shall not authorize any
class of Senior Stock without the affirmative vote or consent of Holders of
at least a majority of the outstanding shares of Series A Senior
Exchangeable Preferred Stock, voting or consenting, as the case may be, as
one class, given in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting.
(C) So long as any shares of the Series A Senior Exchangeable
Preferred Stock are outstanding, the Corporation shall not amend this
Certificate of Designation so as to affect adversely the specified rights,
preferences, privileges or voting rights of holders of shares of Series A
Senior Exchangeable Preferred Stock or to authorize the issuance of any
additional shares of Series A Senior Exchangeable Preferred Stock without
the affirmative vote or consent of Holders of at least a majority of the
issued and outstanding shares of Series A Senior Exchangeable Preferred
Stock, voting or consenting, as the case may be, as one class, given in
person or by proxy, either in writing or by resolution adopted at an annual
or special meeting.
(D) Prior to the exchange of Series A Senior Exchangeable Preferred
Stock for Exchange Debentures, the Corporation shall not amend or modify
the Indenture for the Exchange Debentures in the form executed on February
26, 1996 (the "Indenture") (except as expressly provided therein in respect
of amendments without the consent of Holders of Exchange Debentures)
without the affirmative vote or consent of Holders of at least a majority
of the shares of Series A Senior Exchangeable Preferred Stock then
outstanding, voting or consenting, as the case may be, as one class, given
in person or by proxy, either in writing or by resolution adopted at an
annual or special meeting.
(E) Except as set forth in paragraphs (f)(ii)(A), (f)(ii)(B) and
(f)(ii)(C) above, (x) the creation, authorization or issuance of any shares
of any Junior Stock, Parity Stock or Senior Stock or (y) the increase or
decrease in the amount of authorized Capital Stock of any class, including
Preferred Stock, shall not require the consent of Holders of Series A
Senior Exchangeable Preferred Stock and
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shall not be deemed to affect adversely the rights, preferences, privileges
or voting rights of Holders of Series A Senior Exchangeable Preferred
Stock.
(iii) Without the affirmative vote or consent of Holders of a majority
of the issued and outstanding shares of Series A Senior Exchangeable
Preferred Stock, voting or consenting, as the case may be, as one class,
given in person or by proxy, either in writing or by resolution adopted at
an annual or special meeting, the Corporation shall not, in a single
transaction or series of related transactions, consolidate or merge with or
into, or sell, assign, transfer, lease, convey or otherwise dispose of all
or substantially all of its assets to, another Person or adopt a plan of
liquidation unless: (A) either (1) the Corporation is the surviving or
continuing Person or (2) the Person (if other than the Corporation) formed
by such consolidation or into which the Corporation is merged or the Person
that acquires by conveyance, transfer or lease the properties and assets of
the Corporation substantially as an entirety or in the case of a plan of
liquidation, the Person to which assets of the Corporation have been
transferred, shall be a corporation, partnership or trust organized and
existing under the laws of the United States or any State thereof or the
District of Columbia; (B) the Series A Senior Exchangeable Preferred Stock
shall be converted into or exchanged for and shall become shares of such
successor, transferee or resulting Person, having in respect of such
successor, transferee or resulting Person the same powers, preferences and
relative, participating, optional or other special rights and the
qualifications, limitations or restrictions thereon, that the Series A
Senior Exchangeable Preferred Stock had immediately prior to such
transaction; (C) immediately after giving effect to such transaction and
the use of the proceeds therefrom (on a pro forma basis, including giving
effect to any Indebtedness incurred or anticipated to be incurred in
connection with such transaction), the Corporation (in the case of
clause (1) of the foregoing clause (A)) or such Person (in the case of
clause (2) of the foregoing clause (A)) shall be able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) under
paragraph (l)(i) hereof; (D) immediately after giving effect to such
transactions, no Voting Rights Triggering Event shall have occurred or be
continuing; and (E) the Corporation has delivered to the transfer agent for
the Series A Senior Exchangeable Preferred Stock prior to the consummation
of the proposed transaction an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger or
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transfer complies with the terms hereof and that all conditions precedent
herein relating to such transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of related
transactions) of all or substantially all of the properties or assets of
one or more Subsidiaries of the Corporation, the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Corporation shall be deemed to be the transfer of all or substantially all
of the properties and assets of the Corporation.
(iv) (A) If (1) after February 15, 2001 cash dividends on the Series A
Senior Exchangeable Preferred Stock are in arrears and unpaid for six or
more Dividend Periods (whether or not consecutive) (a "Dividend Default");
(2) the Corporation fails to redeem all of the then outstanding shares of
Series A Senior Exchangeable Preferred Stock on February 15, 2008 or
otherwise fails to discharge any redemption obligation with respect to the
Series A Senior Exchangeable Preferred Stock; (3) the Corporation fails to
make a Change of Control Offer (whether pursuant to the terms of
paragraph (h)(v) or otherwise) following a Change of Control if such Change
of Control Offer is required by paragraph (h) hereof or fails to purchase
shares of Series A Senior Exchangeable Preferred Stock from Holders who
elect to have such shares purchased pursuant to the Change of Control
Offer; (4) the Corporation breaches or violates one of the provisions set
forth in any of paragraphs (l)(i), (l)(ii) or (l)(iii) hereof and the
breach or violation continues for a period of 30 days or more after the
Corporation receives notice thereof specifying the default from the holders
of at least 25% of the shares of Series A Senior Exchangeable Preferred
Stock then outstanding or (5) the Corporation fails to pay at the final
stated maturity (giving effect to any extensions thereof) the principal
amount of any Indebtedness of the Corporation or any Subsidiary of the
Corporation, or the final stated maturity of any such Indebtedness is
accelerated, if the aggregate principal amount of such Indebtedness,
together with the aggregate principal amount of any other such Indebtedness
in default for failure to pay principal at the final stated maturity
(giving effect to any extensions thereof) or that has been accelerated,
aggregates $5,000,000 or more at one time, in each case, after a 10-day
period during which such default shall not have been cured or such
acceleration rescinded, then in the case of any of clauses (1)-(5) the
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number of directors constituting the Board of Directors shall be adjusted
by the number, if any, necessary to permit the Holders of Series A Senior
Exchangeable Preferred Stock, voting separately and as one class, to elect
the lesser of two directors or 25% of the members of the Board of
Directors. Each such event described in clauses (1), (2), (3), (4) and (5)
is a "Voting Rights Triggering Event." Holders of a majority of the issued
and outstanding shares of Series A Senior Exchangeable Preferred Stock,
voting separately and as one class, shall have the exclusive right to elect
the lesser of two directors or 25% of the members of the Board of Directors
at a meeting therefor called upon occurrence of such Voting Rights
Triggering Event, and at every subsequent meeting at which the terms of
office of the directors so elected by the Holders of the Series A Senior
Exchangeable Preferred Stock expire (other than as described in (f)(iv)(B)
below). The voting rights provided herein shall be the exclusive remedy at
law or in equity of the holders of the Series A Senior Exchangeable
Preferred Stock for any Voting Rights Triggering Event.
(B) The right of the Holders of Series A Senior Exchangeable
Preferred Stock voting together as a separate class to elect members of the
Board of Directors as set forth in subparagraph (f)(iv)(A) above shall
continue until such time as (x) in the event such right arises due to a
Dividend Default, all accumulated dividends that are in arrears on the
Series A Senior Exchangeable Preferred Stock are paid in full in cash; and
(y) in all other cases, the failure, breach or default giving rise to such
Voting Rights Triggering Event is remedied or waived by the holders of at
least a majority of the shares of Series A Senior Exchangeable Preferred
Stock then outstanding and entitled to vote thereon, at which time (1) the
special right of the Holders of Series A Senior Exchangeable Preferred
Stock so to vote as a class for the election of directors and (2) the term
of office of the directors elected by the Holders of the Series A Senior
Exchangeable Preferred Stock shall each terminate and the directors elected
by the holders of Common Stock shall constitute the entire Board of
Directors. At any time after voting power to elect directors shall have
become vested and be continuing in the Holders of Series A Senior
Exchangeable Preferred Stock pursuant to paragraph (f)(iv) hereof, or if
vacancies shall exist in the offices of directors elected by the Holders of
Series A Senior Exchangeable Preferred Stock, a proper officer of the
Corporation may, and upon the written request of the Holders of record of
at least twenty-five percent (25%) of the shares of Series A Senior
Exchangeable Preferred Stock then
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outstanding addressed to the secretary of the Corporation shall, call a
special meeting of the Holders of Series A Senior Exchangeable Preferred
Stock, for the purpose of electing the directors which such Holders are
entitled to elect. If such meeting shall not be called by a proper
officer of the Corporation within twenty (20) days after personal
service of said written request upon the secretary of the Corporation,
or within twenty (20) days after mailing the same within the United
States by certified mail, addressed to the secretary of the Corporation
at its principal executive offices, then the Holders of record of at
least twenty-five percent (25%) of the outstanding shares of Series A
Senior Exchangeable Preferred Stock may designate in writing one of
their number to call such meeting at the expense of the Corporation, and
such meeting may be called by the Person so designated upon the notice
required for the annual meetings of stockholders of the Corporation and
shall be held at the place for holding the annual meetings of
stockholders. Any Holder of Series A Senior Exchangeable Preferred
Stock so designated shall have, and the Corporation shall provide,
access to the lists of stockholders to be called pursuant to the
provisions hereof.
(C) At any meeting held for the purpose of electing directors at
which the Holders of Series A Senior Exchangeable Preferred Stock shall
have the right, voting together as a separate class, to elect directors as
aforesaid, the presence in person or by proxy of the Holders of at least a
majority of the outstanding shares of Series A Senior Exchangeable
Preferred Stock shall be required to constitute a quorum of such Series A
Senior Exchangeable Preferred Stock.
(D) Any vacancy occurring in the office of a director elected by the
Holders of Series A Senior Exchangeable Preferred Stock may be filled by
the remaining directors elected by the Holders of Series A Senior
Exchangeable Preferred Stock unless and until such vacancy shall be filled
by the Holders of Series A Senior Exchangeable Preferred Stock.
(v) In any case in which the Holders of Series A Senior Exchangeable
Preferred Stock shall be entitled to vote pursuant to this paragraph (f) or
pursuant to Delaware law, each Holder of Series A Senior Exchangeable
Preferred Stock entitled to vote with respect to such matter shall be
entitled to one vote for each share of Series A Senior Exchangeable
Preferred Stock held.
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(g) EXCHANGE.
(i) REQUIREMENTS. The outstanding shares of Series A Senior
Exchangeable Preferred Stock are exchangeable as a whole but not in part,
at the option of the Corporation and subject to the terms and conditions of
the Credit Agreement, the Note Indenture and the Existing Note Indenture,
at any time on any Dividend Payment Date for the Corporation's 12 1/4%
Subordinated Exchange Debentures due 2008 (the "Exchange Debentures") to be
substantially in the form of Exhibit A to the Indenture, a copy of which is
on file with the secretary of the Corporation, PROVIDED that any such
exchange may only be made if on or prior to the date of such exchange (i)
the Corporation has paid (or is deemed to have paid) all accumulated
dividends on the Series A Senior Exchangeable Preferred Stock (including
the dividends payable on the date of exchange) and there shall be no
contractual impediment to such exchange; (ii) there shall be funds legally
available sufficient therefor; and (iii) immediately after giving effect to
such exchange, no Default or Event of Default (as defined in the Indenture)
would exist under the Indenture and no default or event of default would
exist under the Credit Agreement, the Note Indenture or the Existing Note
Indenture. The exchange rate shall be $1.00 principal amount of Exchange
Debentures for each $1.00 of liquidation preference of Series A Senior
Exchangeable Preferred Stock, including, to the extent necessary, Exchange
Debentures in principal amounts less than $1,000, PROVIDED that the
Corporation shall have the right, at its option, to pay cash in an amount
equal to the principal amount of that portion of any Exchange Debenture
that is not an integral multiple of $1,000 instead of delivering an
Exchange Debenture in a denomination of less than $1,000.
(ii) PROCEDURE FOR EXCHANGE. (A) At least thirty (30) days and not
more than sixty (60) days prior to the date fixed for exchange, written
notice (the "Exchange Notice") shall be given by first-class mail, postage
prepaid, to each Holder of record on the record date fixed for such
exchange of the Series A Senior Exchangeable Preferred Stock at such
Holder's address as the same appears on the stock books of the Corporation,
PROVIDED that no failure to give such notice nor any deficiency therein
shall affect the validity of the procedure for the exchange of any shares
of Series A Senior Exchangeable Preferred Stock to be exchanged except as
to the Holder or Holders to whom the Corporation has failed to give said
notice or except as to the Holder or Holders whose notice was defective.
The Exchange Notice shall state:
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(1) the date fixed for exchange;
(2) that the Holder is to surrender to the Corporation, in the
manner and at the place or places designated, his certificate or
certificates representing the shares of Series A Senior Exchangeable
Preferred Stock to be exchanged;
(3) that dividends on the shares of Series A Senior Exchangeable
Preferred Stock to be exchanged shall cease to accrue on such Exchange
Date whether or not certificates for shares of Series A Senior
Exchangeable Preferred Stock are surrendered for exchange on such
Exchange Date unless the corporation shall default in the delivery of
Exchange Debentures; and
(4) that interest on the Exchange Debentures shall accrue from
the Exchange Date whether or not certificates for shares of Series A
Senior Exchangeable Preferred Stock are surrendered for exchange on
such Exchange Date.
(B) On or before the Exchange Date, each Holder of Series A Senior
Exchangeable Preferred Stock shall surrender the certificate or
certificates representing such shares of Series A Senior Exchangeable
Preferred Stock, in the manner and at the place designated in the Exchange
Notice. The Corporation shall cause the Exchange Debentures to be executed
on the Exchange Date and, upon surrender in accordance with the Exchange
Notice of the certificates for any shares of Series A Senior Exchangeable
Preferred Stock so exchanged, duly endorsed (or otherwise in proper form
for transfer, as determined by the Corporation), such shares shall be
exchanged by the Corporation into Exchange Debentures. The Corporation
shall pay interest on the Exchange Debentures at the rate and on the dates
specified therein from the Exchange Date.
(C) If notice has been mailed as aforesaid, and if before the
Exchange Date specified in such notice (1) the Indenture shall have been
duly executed and delivered by the Corporation and the trustee thereunder
and (2) all Exchange Debentures necessary for such exchange shall have been
duly executed by the Corporation and delivered to the trustee under the
Indenture with irrevocable instructions to authenticate the Exchange
Debentures necessary for such exchange, then the rights of the Holders of
Series A Senior Exchangeable Preferred Stock so exchanged as stockholders
of
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the Corporation shall cease (except the right to receive Exchange
Debentures, an amount in cash equal to the amount of accrued and unpaid
dividends to the Exchange Date and, if the Corporation so elects, cash in
lieu of any Exchange Debenture not an integral multiple of $1,000), and the
Person or Persons entitled to receive the Exchange Debentures issuable upon
exchange shall be treated for all purposes as the registered Holder or
Holders of such Exchange Debentures as of the Exchange Date.
(iii) NO EXCHANGE IN CERTAIN CASES. Notwithstanding the foregoing
provisions of this paragraph (g), the Corporation shall not be entitled to
exchange the Series A Senior Exchangeable Preferred Stock for Exchange
Debentures if such exchange, or any term or provision of the Indenture or
the Exchange Debentures, or the performance of the Corporation's
obligations under the Indenture or the Exchange Debentures, shall
materially violate or conflict with any applicable law or agreement or
instrument then binding on the Corporation or if, at the time of such
exchange, the Corporation is insolvent or if it would be rendered insolvent
by such exchange.
(h) CHANGE OF CONTROL.
(i) In the event of a Change of Control (the date of such occurrence
being the "Change of Control Date"), the Corporation shall notify the
Holders of the Series A Senior Exchangeable Preferred Stock in writing of
such occurrence and shall make an offer to purchase (the "Change of Control
Offer") all then outstanding shares of Series A Senior Exchangeable
Preferred Stock at a purchase price of 101% of the then effective
liquidation preference thereof plus, without duplication, an amount in cash
equal to all accumulated and unpaid dividends per share (including an
amount in cash equal to a prorated dividend for the period from the
Dividend Payment Date immediately prior to the Change of Control Payment
Date to the Change of Control Payment Date).
(ii) Within 30 days following the Change of Control Date, the
Corporation shall send, by first class mail, postage prepaid, a notice to
each Holder of Series A Senior Exchangeable Preferred Stock at such
Holder's address as it appears on the stock books of the Corporation, which
notice shall govern the terms of the Change of Control Offer. The notice
to the Holders shall contain all instructions and materials necessary to
enable such Holders to tender Series
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A Senior Exchangeable Preferred Stock pursuant to the Change of Control
Offer. Such notice shall state:
(A) that a Change of Control has occurred, that the Change of
Control Offer is being made pursuant to this paragraph (h) and that
all Series A Senior Exchangeable Preferred Stock validly tendered and
not withdrawn will be accepted for payment;
(B) the purchase price (including the amount of accrued
dividends, if any) and the purchase date (which shall be no earlier
than 30 days nor later than 45 days from the date such notice is
mailed, other than as may be required by law) (the "Change of Control
Payment Date");
(C) that any shares of Series A Senior Exchangeable Preferred
Stock not tendered will continue to accrue dividends;
(D) that, unless the Corporation defaults in making payment
therefor, any share of Series A Senior Exchangeable Preferred Stock
accepted for payment pursuant to the Change of Control Offer shall
cease to accrue dividends after the Change of Control Payment Date;
(E) that Holders electing to have any shares of Series A Senior
Exchangeable Preferred Stock purchased pursuant to a Change of Control
Offer will be required to surrender the certificate or certificates
representing such shares, properly endorsed for transfer together with
such customary documents as the Corporation and the transfer agent may
reasonably require, in the manner and at the place specified in the
notice prior to the close of business on the Business Day prior to the
Change of Control Payment Date;
(F) that Holders will be entitled to withdraw their election if
the Corporation receives, not later than five Business Days prior to
the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
number of shares of Series A Senior Exchangeable Preferred Stock the
Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such shares of Series A Senior
Exchangeable Preferred Stock purchased;
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(G) that Holders whose shares of Series A Senior Exchangeable
Preferred Stock are purchased only in part will be issued a new
certificate representing the unpurchased shares of Series A Senior
Exchangeable Preferred Stock; and
(H) the circumstances and relevant facts regarding such Change
of Control.
(iii) The Corporation will comply with any securities laws and
regulations, to the extent such laws and regulations are applicable to the
repurchase of the Series A Senior Exchangeable Preferred Stock in
connection with a Change of Control Offer.
(iv) On the Change of Control Payment Date the Corporation shall (A)
accept for payment the shares of Series A Senior Exchangeable Preferred
Stock validly tendered pursuant to the Change of Control Offer, (B) pay to
the Holders of shares so accepted the purchase price therefor in cash and
(C) cancel and retire each surrendered certificate. Unless the Corporation
defaults in the payment for the shares of Series A Senior Exchangeable
Preferred Stock tendered pursuant to the Change of Control Offer, dividends
will cease to accrue with respect to the shares of Series A Senior
Exchangeable Preferred Stock tendered and all rights of Holders of such
tendered shares will terminate, except for the right to receive payment
therefor, on the Change of Control Payment Date.
(v) If the purchase of the Series A Senior Exchangeable Preferred
Stock would violate or constitute a default under the Credit Agreement, the
Note Indenture, the Existing Note Indenture or other Indebtedness of the
Corporation, then, notwithstanding anything to the contrary contained
above, prior to complying with the foregoing provisions, but in any event
within 30 days following the Change of Control Date, the Corporation shall
either (A) repay in full all such Indebtedness and terminate all
commitments outstanding under the Credit Agreement or (B) obtain the
requisite consents, if any, under the Credit Agreement, the Note Indenture,
the Existing Note Indenture or such Indebtedness required to permit the
repurchase of Series A Senior Exchangeable Preferred Stock required by this
paragraph (h). Until the requirements of the immediately preceding
sentence are satisfied, the Corporation shall not make, and shall not be
obligated to make, any Change of Control Offer; PROVIDED that the
Corporation's failure to comply with the provisions of this
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paragraph (h)(v) shall constitute a Voting Rights Triggering Event.
(i) CONVERSION OR EXCHANGE. The Holders of shares of Series A Senior
Exchangeable Preferred Stock shall not have any rights hereunder to convert such
shares into or exchange such shares for shares of any other class or classes or
of any other series of any class or classes of Capital Stock of the Corporation.
(j) REISSUANCE OF SERIES A SENIOR EXCHANGEABLE PREFERRED STOCK.
Shares of Series A Senior Exchangeable Preferred Stock that have been issued and
reacquired in any manner, including shares purchased or redeemed or exchanged,
shall (upon compliance with any applicable provisions of the laws of Delaware)
have the status of authorized and unissued shares of Preferred stock
undesignated as to series and may be redesignated and reissued as part of any
series of Preferred Stock, PROVIDED that any issuance of such shares as Series A
Senior Exchangeable Preferred Stock must be in compliance with the terms hereof.
(k) BUSINESS DAY. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
(l) CERTAIN ADDITIONAL PROVISIONS.
(i) LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS. Neither the
Corporation nor any of its Subsidiaries shall, directly or indirectly,
create, incur, assume, guarantee, acquire or become liable for,
contingently or otherwise (collectively, "incur"), any Indebtedness other
than Permitted Indebtedness. Notwithstanding the foregoing limitation, the
Corporation or any Subsidiary may incur Indebtedness if, on the date of the
incurrence of such Indebtedness, after giving effect to the incurrence of
such Indebtedness and the receipt and application of the proceeds thereof,
the Corporation's Leverage Ratio is less than 7.0 to 1.
(ii) LIMITATION ON RESTRICTED PAYMENTS. (A) Neither the Corporation
nor any of its Subsidiaries shall, directly or indirectly, make any
Restricted Payment if immediately after giving effect thereto:
(1) any Voting Rights Triggering Event shall have occurred and
be continuing; or
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(2) the Corporation is not able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with
paragraph (l)(i) above; or
(3) the aggregate amount of Restricted Payments made subsequent
to the Issue Date (the amount expended for such purposes, if other
than in cash, being the fair market value of such property as
determined by the Board of Directors in good faith) exceeds the sum of
(I) (x) 100% of the aggregate Consolidated EBITDA of the Corporation
(or, in the event such Consolidated EBITDA shall be a deficit, minus
100% of such deficit) accrued subsequent to the Issue Date to the most
recent date for which financial information is available to the
Corporation, taken as one accounting period, less (y) 1.4 times
Consolidated Interest Expense for the same period, plus (II) 100% of
the aggregate net proceeds, including the fair market value of
property other than cash as determined by the Board of Directors in
good faith, received by the Corporation from any Person (other than a
Subsidiary of the Corporation) from the issuance and sale on or
subsequent to February 14, 1996 of Qualified Capital Stock of the
Corporation (excluding any net proceeds from issuances and sales
financed directly or indirectly using funds borrowed from the
Corporation or any Subsidiary of the Corporation, until and to the
extent such borrowing is repaid, but including the proceeds from the
issuance and sale of any securities convertible into or exchangeable
for Qualified Capital Stock to the extent such securities are so
converted or exchanged and including any additional proceeds received
by the Corporation upon such conversion or exchange), plus (III)
without duplication of any amount included in clause (3)(II) above,
100% of the aggregate net proceeds, including the fair market value of
property other than cash (valued as provided in clause (3)(II) above),
received by the Corporation as a capital contribution on or subsequent
to February 14, 1996 (excluding the net proceeds from a Public Equity
Offering by Chancellor to the extent used to redeem the Series A
Senior Exchangeable Preferred Stock); plus (IV) $2,500,000.
(B) Notwithstanding the foregoing, these provisions will not
prohibit: (1) the payment of any dividend or the making of any
distribution within 60 days after the date of its declaration if such
dividend or distribution would have
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been permitted on the date of declaration; (2) the acquisition of any
Capital Stock of the Corporation or any warrants, options or other rights
to acquire shares of any class of such Capital Stock either (I) solely
in exchange for shares of Qualified Capital Stock or other rights to
acquire Qualified Capital Stock or (II) through the application of the
net proceeds of a substantially concurrent sale for cash (other than to
a Subsidiary of the Corporation) of shares of Qualified Capital Stock or
warrants, options or other rights to acquire Qualified Capital Stock;
(3) payments by the Corporation to fund the operating expenses of
Chancellor in an amount not to exceed $500,000 per annum; (4) payments by
the Corporation to Chancellor to enable Chancellor to make payments
pursuant to (x) the Financial Monitoring and Oversight Agreement or (y) the
Tax Sharing Agreement; (5) payments by the Corporation to repurchase, or
enable Chancellor to repurchase, Capital Stock or other securities of
Chancellor from employees of Chancellor or the Corporation in
an aggregate amount not to exceed $5,000,000; (6) payments to enable
Chancellor to redeem or repurchase stock purchase or similar rights in an
aggregate amount not to exceed $500,000; (7) payments, not to exceed
$100,000 in the aggregate, to enable the Corporation to make cash payments
to holders of its Capital Stock in lieu of the issuance of fractional
shares of its Capital Stock; and (8) payments made pursuant to any merger,
consolidation or sale of assets effected in accordance with paragraph
(f)(iii) above; PROVIDED, HOWEVER, that no such payment may be made
pursuant to this clause (8) unless, after giving effect to such transaction
(and the incurrence of any Indebtedness in connection therewith and the use
of the proceeds thereof), the Corporation would be able to incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in compliance
with paragraph (l)(i) above such that after incurring that $1.00 of
additional Indebtedness, the Leverage Ratio would be less than 6.0 to 1;
provided, further, however, that in the case of clauses (4)(x), (5), (6),
(7) and (8), no Voting Rights Triggering Event shall have occurred or be
continuing at the time of such payment or as a result thereof. In
determining the aggregate amount of Restricted Payments made subsequent to
the Issue Date, amounts expended pursuant to clauses (1), (2), (4)(x), (5),
(6), (7) and (8) shall be included in such calculation.
(iii) LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES. The Corporation
shall not permit any of its Subsidiaries to issue any Preferred Stock
(other than to the Corporation or to a Wholly Owned Subsidiary of the
Corporation) or permit any Person (other than to the Corporation or a
Wholly Owned
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Subsidiary of the Corporation) to own any Preferred Stock of a Subsidiary
of the Corporation (other than Acquired Preferred Stock; provided that at
the time the issuer of such Acquired Preferred Stock becomes a Subsidiary
of the Corporation or merges with the Corporation or any of its
Subsidiaries, and after giving effect to such transaction, the Corporation
shall be able to incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with paragraph (l)(i) above).
(iv) REPORTS. So long as any shares of Series A Senior Exchangeable
Preferred Stock are outstanding, the Corporation will provide to the
holders of Series A Senior Exchangeable Preferred Stock, within 15 days
after it files them with the Commission, copies of the annual reports and
of the information, documents and other reports (or copies of such portions
of any of the foregoing as the Commission may by rules and regulations
prescribe) which the Corporation files with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act. In the event that the Corporation
is no longer required to furnish such reports to its securityholders
pursuant to the Exchange Act, the Corporation will cause its consolidated
financial statements, comparable to those which would have been required to
appear in annual or quarterly reports, to be delivered to the Holders of
Series A Senior Exchangeable Preferred Stock.
(m) DEFINITIONS. As used in this Certificate of Designation, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and VICE versa),
unless the context otherwise requires:
"ACQUIRED PREFERRED STOCK" means Preferred Stock of any Person at the
time such Person becomes a Subsidiary of the Corporation or at the time it
merges or consolidates with the Corporation or any of its Subsidiaries and
not issued by such Person in connection with, or in anticipation or
contemplation of, such Person becoming a Subsidiary of the Corporation or
such acquisition, merger or consolidation.
"AFFILIATE" means a Person who, directly or indirectly, through one or
more intermediaries, controls, or is controlled by, or is under common
control with, the Corporation. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of a Person,
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whether through the ownership of voting securities, by contract or
otherwise.
"ASSET ACQUISITION" means (i) an Investment by the Corporation or any
Subsidiary of the Corporation in any other Person pursuant to which such
Person shall become a Subsidiary of the Corporation or shall be
consolidated or merged with the Corporation or any Subsidiary of the
Corporation or (ii) the acquisition by the Corporation or any Subsidiary of
the Corporation of assets of any Person comprising a division or line of
business of such Person.
"ASSET SALE" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer for value by the
Corporation or any of its Subsidiaries (excluding any Sale and Leaseback
Transaction or any pledge of assets or stock by the Corporation or any of
its Subsidiaries) to any Person other than the Corporation or a Wholly
Owned Subsidiary of the Corporation of (i) any Capital Stock of any
Subsidiary of the Corporation or (ii) any other property or assets of the
Corporation or any Subsidiary of the Corporation other than in the ordinary
course of business.
"BOARD OF DIRECTORS" shall have the meaning ascribed to it in the
first paragraph of this Resolution.
"BUSINESS DAY" means any day except a Saturday, a Sunday, or any day
on which banking institutions in New York, New York are required or
authorized by law or other governmental action to be closed.
"CAPITAL STOCK" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other
equivalents (however designated) of capital stock of such Person and
(ii) with respect to any Person that is not a corporation. any and all
partnership or other equity interests of such Person.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the obligation
of such Person to pay rent or other amounts under a lease to which such
Person is a party that is required to be classified and accounted for as a
capital lease obligation under GAAP, and for purposes of this definition,
the amount of such obligation at any date shall be the capitalized amount
of such obligation at such date, determined in accordance with GAAP.
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"CASH EQUIVALENTS" means (i) marketable direct obligations issued by,
or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition
thereof; (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date
of acquisition thereof and, at the time of acquisition, having one of the
two highest ratings obtainable from either Standard & Poor's Corporation or
Moody's Investors Service, Inc.; (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from Standard & Poor's
Corporation or at least P-1 from Moody's Investors Service, Inc.; (iv)
certificates of deposit or bankers' acceptances maturing within one year
from the date of acquisition thereof issued by any commercial bank
organized under the laws of the United States of America or any state
thereof or the District of Columbia or any U.S. branch of a foreign bank
having at the date of acquisition thereof combined capital and surplus of
not less than $200,000,000; (v) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in
clause (i) above entered into with any bank meeting the qualifications
specified in clause (iv) above; and (vi) investments in money market funds
which invest substantially all their assets in securities of the types
described in clauses (i) through (v) above.
"CHANCELLOR" means Chancellor Broadcasting Company, a Delaware
corporation, and its successors.
"CHANGE OF CONTROL" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially
all of the assets of the Corporation to any Person or group of related
Persons for purposes of Section 13(d) of the Exchange Act (a "Group")
(whether or not otherwise in compliance with the provisions of the Exchange
Indenture), other than to Hicks Muse or any of its Affiliates, officers and
directors or to Steven Dinetz (the "Permitted Holders"); or (ii) a majority
of the Board of Directors of Chancellor or the Corporation shall consist of
Persons who are not Continuing Directors; or (iii) the acquisition by any
Person or Group (other than the Permitted Holders) of the power, directly
or indirectly, to vote or direct the voting of securities having more than
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50% of the ordinary voting power for the election of directors of
Chancellor or the Corporation.
"CHANGE OF CONTROL DATE" shall have the meaning ascribed to it in
paragraph (h) hereof.
"CHANGE OF CONTROL PAYMENT DATE" shall have the meaning ascribed to it
in paragraph (h) hereof.
"CHANGE OF CONTROL OFFER" shall have the meaning ascribed to it in
paragraph (h) hereof.
"COMMISSION" means the Securities and Exchange Commission.
"COMMODITY AGREEMENT" means any commodity futures contract, commodity
option or other similar agreement or arrangement entered into by the
Corporation or any of its Subsidiaries designed to protect the Corporation
or any of its Subsidiaries against fluctuations in the price of commodities
actually used in the ordinary course of business of the Corporation and its
Subsidiaries.
"CONSOLIDATED EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income and
(ii) to the extent Consolidated Net Income has been reduced thereby,
(a) all income taxes of such Person and its Subsidiaries paid or accrued in
accordance with GAAP for such period (other than income taxes attributable
to extraordinary or nonrecurring gains or losses), (b) Consolidated
Interest Expense and (c) Consolidated Non-Cash Charges, all as determined
on a consolidated basis for such Person and its Subsidiaries in conformity
with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for
any period, without duplication, the sum of (i) the interest expense of
such Person and its Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, including, without limitation,
(a) any amortization of debt discount, (b) the net cost under Interest Swap
Obligations (including any amortization of discounts), (c) the interest
portion of any deferred payment obligation, (d) all commissions, discounts
and other fees and charges owed with respect to letters of credit, bankers'
acceptance financing or similar facilities, and (e) all accrued interest
and (ii) the interest component of Capitalized Lease Obligations paid or
accrued by such Person
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and its Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" of any Person means, for any period, the
aggregate net income (or loss) of such Person and its Subsidiaries for such
period on a consolidated basis, determined in accordance with GAAP;
provided that there shall be excluded therefrom, without duplication,
(i) gains and losses from Asset Sales or abandonments or reserves relating
thereto and the related tax effects, (ii) items classified as extraordinary
or nonrecurring gains and losses, and the related tax effects according to
GAAP, (iii) the net income (or loss) of any Person acquired in a pooling of
interests transaction accrued prior to the date it becomes a Subsidiary of
such first referred to Person or is merged or consolidated with it or any
of its Subsidiaries, (iv) the net income of any Subsidiary to the extent
that the declaration of dividends or similar distributions by that
Subsidiary of that income is restricted by contract, operation of law or
otherwise and (v) the net income of any Person, other than a Subsidiary,
except to the extent of the lesser of (a) dividends or distributions paid
to such first referred to Person or its Subsidiary by such Person and (b)
the net income of such Person (but in no event less than zero), and the net
loss of such Person shall be included only to the extent of the aggregate
Investment of the first referred to Person or a consolidated Subsidiary of
such Person.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to any Person for
any period, the aggregate depreciation, amortization and other non-cash
expenses of such Person and its Subsidiaries reducing Consolidated Net
Income of such Person and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary or nonrecurring item).
"CONTINUING DIRECTOR" means, as of the date of determination, any
Person who (i) was a member of the Board of Directors of Chancellor or the
Corporation on the Issue Date, (ii) was nominated for election or elected
to the Board of Directors of Chancellor or the Corporation with the
affirmative vote of a majority of the Continuing Directors who were members
of such Board of Directors at the time of such nomination or election, or
(iii) is a representative of a Permitted Holder.
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"CREDIT AGREEMENT" means the Credit Agreement, dated February 14, 1996
among Chancellor, the Corporation, the lenders from time to time party
thereto and Bankers Trust Company as agent, together with the related
documents thereto (including, without limitation, any guarantee agreements
and security documents), in each case as such agreements may be amended
(including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
by way of adding subsidiaries of the Corporation as additional borrowers or
guarantors thereunder) all or any portion of the Indebtedness under such
agreement or any successor or replacement agreement and whether by the same
or any other agent, lender or group of lenders.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to
protect the Corporation or any of its Subsidiaries against fluctuations in
currency values.
"DISQUALIFIED CAPITAL STOCK" means any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, matures
(excluding any maturity as the result of an optional redemption by the
issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof (except, in each case, upon the occurrence of a Change of Control),
in whole or in part, on or prior to February 15, 2008.
"DIVIDEND PAYMENT DATE" means February 15, May 15, August 15 and
November 15, of each year.
"DIVIDEND PERIOD" means the Initial Dividend Period and, thereafter,
each Quarterly Dividend Period.
"DIVIDEND RECORD DATE" means February 1, May 1, August 1 and
November 1 of each year.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"EXCHANGE DATE" means a date on which shares of Series A Senior
Exchangeable Preferred Stock are exchanged by the Corporation for Exchange
Debentures.
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"EXCHANGE DEBENTURES" shall have the meaning ascribed to it in
paragraph (g) hereof.
"EXCHANGE NOTICE" shall have the meaning ascribed to it in paragraph
(g) hereof.
"EXISTING NOTES" means the Corporation's $60 million aggregate
principal amount of 12 1/2% Senior Subordinated Notes due 2004 as the same
may be modified or amended from time to time and future refinancings
thereof.
"EXISTING INDENTURE" means the Indenture governing the Existing Notes
as such Indenture may be amended or supplemented from time to time in
accordance with the terms thereof.
"EXISTING PREFERRED STOCK" means the Corporation's
12 1/4% Senior Cumulative Exchangeable Preferred Stock.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System, or any successor thereto.
"FINANCIAL MONITORING AND OVERSIGHT AGREEMENT" means, collectively,
the Financial Monitoring and Oversight Agreement among Hicks, Muse & Co.
Partners, L.P., the Corporation and Chancellor, as in effect on the Issue
Date, and the Financial Advisory Agreement among HM/2 Management Partners,
L.P., the Corporation and Chancellor, as in effect on the Issue Date.
"GAAP" means generally accepted accounting principles as in effect in
the United States of America as of the Issue Date.
"HOLDER" means a holder of shares of Series A Senior Exchangeable
Preferred Stock as reflected in the stock books of the Corporation.
"INDEBTEDNESS" means with respect to any Person, without duplication,
any liability of such Person (i) for borrowed money, (ii) evidenced by
bonds, debentures, notes or other similar instruments, (iii) constituting
Capitalized Lease Obligations, (iv) incurred or assumed as the deferred
purchase price of property, or pursuant to conditional sale obligations and
title retention agreements (but excluding trade accounts payable arising in
the ordinary course of business), (v) for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit transaction,
(vi) for Indebtedness of others guaranteed by
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such Person, (vii) for Interest Swap Obligations, Commodity Agreements
and Currency Agreements and (viii) for Indebtedness of any other Person
of the type referred to in clauses (i) through (vii) which is secured by
any Lien on any property or asset of such first referred to Person, the
amount of such Indebtedness being deemed to be the lesser of the value
of such property or asset or the amount of the Indebtedness so secured.
The amount of Indebtedness of any Person at any date shall be the
outstanding principal amount of all unconditional obligations described
above, as such amount would be reflected on a balance sheet prepared in
accordance with GAAP, and the maximum liability at such date of such
Person for any contingent obligations described above.
"INITIAL DIVIDEND PERIOD" means the dividend period commencing on the
Issue Date and ending on the first Dividend Payment Date to occur
thereafter.
"INTEREST SWAP OBLIGATIONS" means the obligations of any Person under
any interest rate protection agreement, interest rate future, interest rate
option, interest rate swap, interest rate cap or other interest rate hedge
or arrangement.
"INVESTMENT" means (i) any transfer or delivery of cash, stock or
other property of value in exchange for Indebtedness, stock or other
security or ownership interest in any Person by way of loan, advance,
capital contribution, guarantee or otherwise and (ii) an investment deemed
to have been made by the Corporation at the time any entity which was a
Subsidiary of the Corporation ceases to be such a Subsidiary in an amount
equal to the value of the loans and advances made, and any remaining
ownership interest in, such entity immediately following such entity
ceasing to be a Subsidiary of the Corporation. The amount of any non-cash
Investment shall be the fair market value of such Investment, as determined
conclusively in good faith by management of the Corporation unless the fair
market value of such Investment exceeds $1,000,000, in which case the fair
market value shall be determined conclusively in good faith by the Board of
Directors at the time such Investment is made.
"ISSUE DATE" means the date of original issuance of the Series A
Senior Exchangeable Preferred Stock.
"JUNIOR STOCK" shall have the meaning ascribed to it in paragraph (b)
hereof.
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"LEVERAGE RATIO" shall mean, as to any Person, the ratio of (i) the
sum of the aggregate outstanding amount of Indebtedness of such Person and
its Subsidiaries as of the date of calculation on a consolidated basis in
accordance with GAAP to (ii) the Consolidated EBITDA of such Person for the
four full fiscal quarters (the "Four Quarter Period") ending on or prior to
the date of determination.
For purposes of this definition, the aggregate outstanding principal
amount of Indebtedness of the Person and its Subsidiaries for which such
calculation is made shall be determined on a pro forma basis as if the
Indebtedness giving rise to the need to perform such calculation had been
incurred and the proceeds therefrom had been applied, and all other
transactions in respect of which such Indebtedness is being incurred had
occurred, on the last day of the Four Quarter Period. In addition to the
foregoing, for purposes of this definition, "Consolidated EBITDA" shall be
calculated on a pro forma basis after giving effect to (i) the incurrence
of the Indebtedness of such Person and its Subsidiaries (and the
application of the proceeds therefrom) giving rise to the need to make such
calculation and any incurrence (and the application of the proceeds
therefrom) or repayment of other Indebtedness, other than the incurrence or
repayment of Indebtedness pursuant to working capital facilities, at any
time subsequent to the beginning of the Four Quarter Period and on or prior
to the date of determination, as if such incurrence (and the application of
the proceeds thereof), or the repayment, as the case may be, occurred on
the first day of the Four Quarter Period and (ii) any Asset Sales or Asset
Acquisitions (including, without limitation, any Asset Acquisition giving
rise to the need to make such calculation as a result of such Person or one
of its Subsidiaries (including any Person that becomes a Subsidiary as a
result of such Asset Acquisition) incurring, assuming or otherwise becoming
liable for Indebtedness) at any time on or subsequent to the first day of
the Four Quarter Period and on or prior to the date of determination, as if
such Asset Sale or Asset Acquisition (including the incurrence, assumption
or liability for any such Indebtedness and also including any Consolidated
EBITDA associated with such Asset Acquisition) occurred on the first day of
the Four Quarter Period. Furthermore, in calculating "Consolidated Interest
Expense" for purposes of the calculation of "Consolidated EBITDA," (i)
interest on Indebtedness determined on a fluctuating basis as of the date
of determination (including Indebtedness actually incurred on the date of
the transaction giving rise to the need to calculate the
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Leverage Ratio) and which will continue to be so determined thereafter
shall be deemed to have accrued at a fixed rate per annum equal to the
rate of interest on such Indebtedness as in effect on the date of
determination and (ii) notwithstanding (i) above, interest determined on
a fluctuating basis, to the extent such interest is covered by Interest
Swap Obligations, shall be deemed to accrue at the rate per annum
resulting after giving effect to the operation of such agreements.
"LIEN" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale
or other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"MANDATORY REDEMPTION PRICE" shall have the meaning ascribed to it in
paragraph (e) hereof.
"NOTE INDENTURE" means the Indenture governing the Notes as such
Indenture may be amended or supplemented from time to time in accordance
with the terms thereof.
"NOTES" means the Corporation's $200.0 million aggregate principal
amount of 9 3/8% Senior Subordinated Notes due 2004 of the Corporation as
the same may be modified or amended from time to time and future
refinancings thereof.
"OBLIGATIONS" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing, or otherwise
relating to, any Indebtedness.
"OFFICERS' CERTIFICATE" means a certificate signed by two officers or
by an officer and either an Assistant Treasurer or an Assistant Secretary
of the Corporation which certificate shall include a statement that, in the
opinion of such signers all conditions precedent to be performed by the
Corporation prior to the taking of any proposed action have been taken. In
addition, such certificate shall include (i) a statement that the
signatories have read the relevant covenant or condition, (ii) a brief
statement of the nature and scope of such examination or investigation upon
which the statements are based, (iii) a statement that, in the opinion of
such signatories, they have made such examination or investigation as is
reasonably necessary to express an informed opinion and (iv) a statement as
to
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whether or not, in the opinion of the signatories, such relevant conditions
or covenants have been complied with.
"OPINION OF COUNSEL" means an opinion of counsel that, in such
counsel's opinion, all conditions precedent to be performed by the
Corporation prior to the taking of any proposed action have been taken.
Such opinion shall also include the statements called for in the second
sentence under "Officers' Certificate".
"OPTIONAL REDEMPTION PRICE" shall have the meaning ascribed to it in
paragraph (e)(i) hereof.
"PARITY STOCK" shall have the meaning ascribed to it in paragraph (b)
hereof.
"PERMITTED INDEBTEDNESS" means, without duplication, (i) Indebtedness
outstanding on the Issue Date, including, without limitation, the Notes,
the Existing Notes, and guarantees thereof; (ii) Indebtedness of the
Corporation incurred pursuant to the Credit Agreement in an aggregate
principal amount at any time outstanding not to exceed the sum of the
aggregate commitments pursuant to the Credit Agreement as initially in
effect reduced by the aggregate principal amount permanently repaid with
the proceeds of Asset Sales; (iii) Indebtedness evidenced by the Exchange
Debentures, including any Exchange Debentures issued in accordance with the
Exchange Indenture as the payment of interest on the Exchange Debentures;
(iv) Interest Swap Obligations; provided that such Interest Swap
Obligations are entered into to protect the Corporation from fluctuations
in interest rates of its Indebtedness; (v) additional Indebtedness of the
Corporation or any of its Subsidiaries not to exceed $10,000,000 in
principal amount outstanding at any time (which amount may, but need not,
be incurred under the Credit Agreement); (vi) Refinancing Indebtedness;
(vii) Indebtedness owed by the Corporation to any Wholly Owned Subsidiary
or by any Subsidiary to the Corporation or any Wholly Owned Subsidiary of
the Corporation; and (viii) guarantees by Subsidiaries of any Indebtedness
permitted to be incurred pursuant to the terms of paragraph (1)(i) hereof.
"PERMITTED INVESTMENTS" means (i) Investments by the Corporation or
any Subsidiary to acquire the stock or assets of any Person (or
Indebtedness of such Person acquired in connection with a transaction in
which such Person becomes a Subsidiary of the Corporation) engaged in the
broadcast business or businesses reasonably related thereto; provided
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that if any such Investment or series of related Investments involves an
Investment by the Corporation in excess of $5,000,000, the Corporation is
able, at the time of such investment and immediately after giving effect
thereto, to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with paragraph (l)(i) hereof, (ii)
Investments received by the Corporation or its Subsidiaries as
consideration for a sale of assets, (iii) Investments by the Corporation or
any Wholly Owned Subsidiary of the Corporation in any Wholly Owned
Subsidiary of the Corporation (whether existing on the Issue Date or
created thereafter) or any Person that after such Investments, and as a
result thereof, becomes a Wholly Owned Subsidiary of the Corporation and
Investments in the Corporation by any Wholly Owned Subsidiary of the
Corporation, (iv) cash and Cash Equivalents, (v) Investments in securities
of trade creditors, wholesalers or customers received pursuant to any plan
of reorganization or similar arrangement and (vi) additional Investments in
an aggregate amount not to exceed $2,500,000 at any time outstanding.
"PERSON" means an individual, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or
a governmental agency or political subdivision thereof.
"PREFERRED STOCK" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"PRO FORMA" means, unless otherwise provided herein, with respect to
any calculation made or required to be made pursuant hereto, a calculation
in accordance with Article II of Regulation S-X under the Securities Act.
"PUBLIC EQUITY OFFERING" means an underwritten public offering of
Capital Stock (other than Disqualified Capital Stock) of the Corporation or
Chancellor, pursuant to an effective registration statement filed with the
Commission in accordance with the Securities Act; provided, however, that,
in the case of a Public Equity Offering by Chancellor, Chancellor
contributes to the capital of the Corporation net cash proceeds in an
amount sufficient to redeem the Series A Senior Exchangeable Preferred
Stock called for redemption in accordance with the terms hereof.
"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not
Disqualified Capital Stock.
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"QUARTERLY DIVIDEND PERIOD" shall mean the quarterly period commencing
on each February 16, May 16, August 16 and November 16 and ending on the
next succeeding Dividend Payment Date, respectively.
"SERIES A SENIOR EXCHANGEABLE PREFERRED STOCK" shall have the meaning
ascribed to it in paragraph (a) hereof.
"REDEMPTION DATE", with respect to any shares of Series A Senior
Exchangeable Preferred Stock, means the date on which such shares of Series
A Senior Exchangeable Preferred Stock are redeemed by the Corporation.
"REDEMPTION NOTICE" shall have the meaning ascribed to it in paragraph
(e) hereof.
"REFINANCING INDEBTEDNESS" means any refinancing by the Corporation of
Indebtedness of the Corporation or any of its Subsidiaries incurred in
accordance with paragraph (l)(i) hereof (other than pursuant to clause (ii)
or (iv) of the definition of Permitted Indebtedness) that does not (i)
result in an increase in the aggregate principal amount of Indebtedness
(such principal amount to include, for purposes of this definition, any
premiums, penalties or accrued interest paid with the proceeds of the
Refinancing Indebtedness) of such Person or (ii) create Indebtedness with
(a) a Weighted Average Life to Maturity that is less than the Weighted
Average Life to Maturity of the Indebtedness being refinanced or (b) a
final maturity earlier than the final maturity of the Indebtedness being
refinanced.
"RESTRICTED PAYMENT" means (i) the declaration or payment of any
dividend or the making of any other distribution (other than dividends or
distributions payable in Qualified Capital Stock) on shares of Junior
Stock, (ii) any purchase, redemption, retirement or other acquisition for
value of any Junior Stock, or any warrants, rights or options to acquire
shares of Junior Stock, other than through the exchange of such Junior
Stock or any warrants, rights or options to acquire shares of any class of
such Junior Stock for Qualified Capital Stock or warrants, rights or
options to acquire Qualified Capital Stock or (iii) the making of any
Investment (other than a Permitted Investment).
"SALE AND LEASEBACK TRANSACTION" means any direct or indirect
arrangement with any Person or to which any such Person is a party,
providing for the leasing to the
35
<PAGE>
Corporation or a Subsidiary of any property, whether owned by the
Corporation or any Subsidiary at the Issue Date or later acquired, which
has been or is to be sold or transferred by the Corporation or such
Subsidiary to such Person or to any other Person from whom funds have
been or are to be advanced by such Person on the security of such
property.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SENIOR STOCK" shall have the meaning ascribed to it in paragraph (b)
hereof.
"SUBSIDIARY," with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary
circumstances shall at the time be owned, directly or indirectly, by such
Person or (ii) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or
indirectly, owned by such Person. Notwithstanding anything contained
herein to the contrary, all references to the Corporation and its
consolidated Subsidiaries or to financial information prepared on a
consolidated basis in accordance with GAAP shall be deemed to include the
Corporation and its Subsidiaries as to which financial statements are
prepared on a combined basis in accordance with GAAP and to financial
information prepared on such a combined basis. Notwithstanding anything
herein to the contrary, an Unrestricted Subsidiary shall not be deemed to
be a Subsidiary for purposes hereof.
"TAX SHARING AGREEMENT" means the Tax Sharing Agreement between the
Corporation and Chancellor, as in effect on the Issue Date.
"UNRESTRICTED SUBSIDIARY" means a Subsidiary of the Corporation
created after the Issue Date and so designated by a resolution adopted by
the Board of Directors, provided that (i) neither the Corporation nor any
of its other Subsidiaries (other than Unrestricted Subsidiaries) (a)
provides any credit support for any Indebtedness of such Subsidiary
(including any undertaking, agreement or instrument evidencing such
Indebtedness) or (b) is directly or indirectly liable for any Indebtedness
of such Subsidiary, (ii) the creditors with respect to Indebtedness for
borrowed money of such Subsidiary, having a principal
36
<PAGE>
amount in excess of $5,000,000, have agreed in writing that they have no
recourse, direct or indirect, to the Corporation or any other Subsidiary
of the Corporation (other than Unrestricted Subsidiaries), including,
without limitation, recourse with respect to the payment of principal of
or interest on any Indebtedness of such Subsidiary and (iii) at the time
of designation of such Subsidiary such Subsidiary has no property or
assets (other than de minimis assets resulting from the initial
capitalization of such Subsidiary). Any such designation by the Board
of Directors shall be evidenced by a resolution of the Board of
Directors giving effect to such designation.
"VOTING RIGHTS TRIGGERING EVENT" shall have the meaning ascribed to it
in paragraph f(iv) hereof.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding aggregate principal amount of such Indebtedness into (b)
the total of the product obtained by multiplying (i) the amount of each
then remaining installment, sinking fund, serial maturity or other required
payment of principal, including payment at final maturity, in respect
thereof, by (ii) the number of years (calculated to the nearest one-
twelfth) which will elapse between such date and the making of such
payment.
"WHOLLY OWNED SUBSIDIARY" of any Person means any Subsidiary of such
Person of which all the outstanding voting securities (other than
directors' qualifying shares) which normally have the right to vote m the
election of directors are owned by such Person.
37
<PAGE>
IN WITNESS WHEREOF, said Chancellor Radio Broadcasting Company, has
caused this Certificate to be signed by Jacques Kerrest, its Senior Vice
President, this 19th day of August 1996.
CHANCELLOR RADIO BROADCASTING COMPANY
By: /s/ JACQUES KERREST
----------------------------------------
Name: Jacques Kerrest
Title: Senior Vice President
38
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into effective
as of February 14, 1996, between Chancellor Broadcasting Company, a
Delaware corporation ("Holdings"), Chancellor Radio Broadcasting Company, a
Delaware corporation (the "Broadcasting Subsidiary"), and Rick Eytcheson
(the "Employee").
W I T N E S S E T H:
WHEREAS, Holdings and the Broadcasting Subsidiary (collectively, the
"Company") are engaged in the ownership and operation of radio broadcast
stations KZLA-FM and KLAC-AM in the Los Angeles, California market; KSAN-
FM, KNEW-AM, KBGG-FM and KABL-AM in the San Francisco, California market;
KHYL-FM, KFBK-AM and KGBY-FM in the Sacramento, California market; and
KGGI-FM and KMEN-AM in the Riverside-San Bernardino, California market
(collectively, the "Stations");
WHEREAS, the Company desires to employ the Employee in an executive
capacity to assume supervisory responsibilities of the Stations;
WHEREAS, the Employee desires to be employed by the Company in said
capacity;
WHEREAS, the Employee is currently employed by the Company pursuant to
an Employment Agreement dated January 10, 1994, which the parties hereto
desire to supersede by the execution and delivery of this Agreement; and
WHEREAS, the parties hereto desire to set forth in writing the terms
and conditions of their understandings and agreements.
NOW THEREFORE, in consideration of the foregoing, of the mutual
promises contained herein and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, do hereby agree as follows:
1
<PAGE>
1. TERM OF EMPLOYMENT. Unless earlier terminated in accordance
with the terms of this Agreement, the period of the Employee's employment
under this Agreement (the "Employment Term") shall commence on February 14,
1996 (the "Employment Date") and shall continue until February 14, 1998,
provided that the Employment Term shall automatically be renewed for
successive one-year terms unless the Company terminates this Agreement by
written notice to the Employee within 30 days prior to the expiration of
the then-current term.
2. DUTIES. The Employee shall serve as an Executive Vice
President of the Company and as Regional Manager of the Stations, with such
authority, duties, and responsibilities as are commensurate with such
positions, subject to the authority and direction of the Chief Executive
Officer and Board of Directors of the Company. During the term of this
Agreement the Employee shall devote his full business time and effort to
the diligent and faithful performance of his duties hereunder.
3. COMPENSATION.
3.1 SALARY. During the Employment Term, the Company shall pay
the Employee a base salary at an annual rate of $325,000 for a period from
the Employment Date through the first anniversary of the Employment Date
and at an annual rate of $342,000 thereafter. The Employee's base salary
shall be paid in accordance with the Company's regular payroll procedure,
but not less frequently than monthly. The Company shall be entitled to
withhold from all amounts payable to the Employee under this Agreement all
taxes and other sums required to be withheld by law. The Employee shall,
during the Employment Term, be entitled to participate in the employee
benefit plans of the Company in accordance with the Company's policies, as
changed from time to time.
3.2 BONUSES. During the Employment Term, the Company shall pay
the Employee an annual bonus of up to 50% of the Employee's Base Salary
(the "Broadcast Cash Flow Bonus") for each fiscal year of the Company
subsequent to 1995, based on the Stations achieving the broadcast cash flow
projections therefor outlined in Exhibit A attached hereto or otherwise
established therefor by the Board of Directors of the Company (the "BCF
Projections"), it being understood that the Employee shall be entitled to
receive within 20 days after the end of each fiscal quarter in which the
Stations achieve the BCF Projections therefor, as payment against the
2
<PAGE>
Broadcast Cash Flow Bonus for the fiscal year in which such fiscal quarter
occurred, an amount equaling one-eighth of the maximum possible Broadcast
Cash Flow Bonus for such fiscal year, with the remaining amount of the
Broadcast Cash Flow Bonus, if any, to be paid within 60 days after the end
of such fiscal year. The BCF Projections will be adjusted to reflect
acquisitions or dispositions of stations under the supervision of the
Employee, and the stations under the supervision of the Employee after any
such acquisition or disposition shall be deemed thereafter to be the
Stations for all purposes of this Agreement. In the event the Stations do
not achieve in any fiscal year the BCF Projections therefor but the
consolidated broadcast cash flow projection for the Company set forth in
Exhibit A or otherwise established for such year by the Board of Directors
of the Company (the "Consolidated BCF Projection") is achieved, the Chief
Executive Officer, subject to the authority of the Board Of Directors of
the Company, may elect to pay the Broadcast Cash Flow Bonus to the
Employee.
3.3 ADDITIONAL BENEFITS. (a) The Company will provide the
Employee with use of an automobile with a value of up to Sixty Thousand
Dollars ($60,000.00) and shall reimburse the Employee for taxes associated
with said automobile.
(b) The Employee shall be given three (3) weeks paid vacation
each calendar year, as well as personal leave, holiday leave and sick leave
in accordance with the general practice of the Company. Said vacation
shall not be taken for three (3) continuous weeks, but must be taken in
accordance with the Company's policies, as changed from time to time.
(c) The Company shall provide the Employee with a membership at
a tennis, fitness or business lunch club, or similar facility, the use of
which shall be for business purposes and the annual dues of which shall not
exceed Five Thousand Dollars ($5,000.00). The Company shall have the right
to approve such membership in advance and shall thereafter pay the cost and
expenses of such membership. The Employee's membership in said club shall
automatically terminate upon the termination of his employment for any
reason.
(d) The Employee shall be entitled to participate in the
Company's Stock Award Plan in accordance with the terms thereof and, at the
discretion of the Board of Directors of the Company, shall be granted
awards thereunder from time to time.
3
<PAGE>
4. TERMINATION OF EMPLOYMENT. The Employment Term under this
Agreement shall terminate immediately upon the first to occur of (i) his
voluntary resignation, (ii) his death, (iii) his disability which renders
him unable to perform his duties for more than 120 days in any 12-month
period, (iv) his termination for Cause (as hereinafter defined) or (v) the
sale of the Stations. The term "Cause" means (i) the Employee's engaging
in conduct which is materially damaging to the reputation of the Company or
which is inappropriate behavior for a senior management employee of the
Company, (ii) the Employee's inadequate performance of his duties or
failure to follow the directions of his superior officers or the Board of
Directors of the Company or (iii) the economic performance of the Stations
shall be materially unsatisfactory, all of the matters described in the
foregoing clauses (i) through (iii) to be conclusively determined by the
Company's Board of Directors acting in good faith.
5. NONCOMPETITION.
5.1 DURING EMPLOYMENT. The Employee agrees that during the
Employment Term, and for one year after the Employment Term terminates, he
shall not directly or indirectly accept employment with, be an owner or
investor in, serve as an advisor or consultant to, or otherwise participate
in any aspect of the radio broadcasting business (AM or FM) within a 50-
mile radius of the broadcast tower of any Station; PROVIDED, HOWEVER, that
nothing contained herein will be deemed to prohibit the Employee from
owning publicly-traded stock or other publicly-traded securities in which
the Employee's interest does not exceed 1% of the outstanding class of
securities or from owning a publicly-traded mutual fund or having an
interest in a publicly-traded trust owning such stock or securities in
excess of such level so long as the Employee has no direct control over
those investment decisions.
5.2 AFTER TERMINATION OF EMPLOYMENT. The Employee agrees that
if the Employment Term shall terminate for any reason, he shall not,
directly or indirectly, solicit any employee of the Company (or any of its
subsidiaries) for employment by any party other than the Company or its
subsidiaries for a period of three years.
5.3 CONFIDENTIAL INFORMATION AND TRADE SECRETS. The Employee
hereby acknowledges that he will have access to and become acquainted with
various trade secrets and proprietary information of the Company and its
subsidiaries not available to competitors of the Company or its
subsidiaries. The Employee covenants that he will not, directly or
indirectly, disclose or use such information during the Employment
4
<PAGE>
Term or thereafter, except as is necessary and appropriate in
connection with his employment by the Company or its subsidiaries;
PROVIDED, HOWEVER, that the Employee's obligations under this Section
5.3 shall end as to any information on such date as such information
becomes public other than by reason of the Employee's violation of this
Section 5.3.
5.4 REMEDIES. The Employee hereby acknowledges that damages are
not an adequate remedy for any breach by the Employee of Sections 5.1, 5.2,
or 5.3 and that the Company shall be entitled to injunctive relief (without
having to furnish any bond) in respect of any such breach, in addition to
such other rights and remedies as the Company may have at law or in equity.
In the event any of the covenants contained in Section 5.1, 5.2, or 5.3
shall be determined by any court of competent jurisdiction to be too broad
in scope or too long in duration, the parties intend that such covenant
shall not be void but shall instead be modified or reformed to the extent
deemed necessary by such court.
6. INDEMNITY. The Company shall indemnify the Employee, in his
capacity as an officer of the Company, pursuant to Article Ninth of
Holding's Second Restated Certificate of Incorporation, as in effect on the
Employment Date.
7. PAYMENTS UPON DEATH. In the event of the Employee's death
during the Employment Term, any accrued and unpaid compensation due the
Employee pursuant to Section 3 hereof at the time of his death shall be
paid to the Employee's estate.
8. GOVERNING LAW. The validity, interpretation and performance
of this Agreement shall be governed by the laws of the State of Texas.
9. NOTICE. Any written notice required to be given by one
party to the other party hereunder shall be deemed effective if mailed by
registered mail:
To the Company:
c/o Chancellor Broadcasting Company
12655 North Central Expressway
Suite 405
Dallas, Texas 75243
Attention: Steven Dinetz
5
<PAGE>
With a copy to:
Jeremy W. Dickens
Weil, Gotshal & Manges LLP
100 Crescent Court
Suite 1300
Dallas, Texas 75201
To the Employee at:
Rick Eytcheson
2238 Morley Way
Sacramento, California 95864
with a copy to:
Ralph Laird
Laird & Laird
P.O. Box 359
Waverly, Indiana 50677
or such other address as may be stated in notice given as hereinbefore
provided.
10. SEVERABILITY. If any one or more of the provisions
contained in this Agreement shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provisions hereof.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their personal
representatives, and, in the case of the Company, its successors and
assigns. The Company shall be a third party beneficiary of this Agreement.
12. ENTIRE AGREEMENT. This Agreement constitutes the full and
complete understanding and agreement of the parties, supersedes all prior
understandings and agreements as to terms and conditions of the employment
of the Employee and cannot be amended, changed, modified or terminated
without the consent, in writing, of the parties hereto.
6
<PAGE>
13. THE EMPLOYEE'S REPRESENTATION. The Employee hereby
represents and warrants to the Company that his execution, delivery, and
performance of this Agreement will not be a breach of any other agreement
to which the Employee is a party or by which he is bound.
7
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
CHANCELLOR BROADCASTING COMPANY
By:
---------------------------------------
Name: Jacques D. Kerrest
Title: Senior Vice President and
Chief Financial Officer
CHANCELLOR RADIO BROADCASTING
COMPANY
By:
---------------------------------------
Name: Jacques D. Kerrest
Title: Senior Vice President and Chief
Financial Officer
EMPLOYEE:
RICK EYTCHESON
8
<PAGE>
EXHIBIT 11.1
CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------- ------------------------------
1995 1996 1995 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Computation for statements of operations:
Net loss before extraordinary loss . . . . . . $ (1,109,921) $ (1,061,804) $ (9,299,528) $(11,002,172)
Loss on repurchase of preferred
stock of subsidiary . . . . . . . . . . . . . -- -- -- 16,570,065
------------ ------------ ------------ ------------
Loss before extraordinary loss
applicable to common stock. . . . . . . . . (1,109,921) (1,061,804) (9,299,528) (27,572,237)
Extraordinary loss . . . . . . . . . . . . . . -- 963,267 -- 5,609,188
------------ ------------ ------------ ------------
Net loss applicable to common stock. . . . . $ (1,109,921) $ (2,025,071) $ (9,299,528) $(33,181,425)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Computation for weighted average common shares outstanding:
Weighted average common shares
outstanding. . . . . . . . . . . . . . . . . 8,849,851 17,925,622 8,849,851 16,125,754
Incremental common shares applicable
to common stock options based on
the estimated fair value of the stock. . . . 219,595 716,939 309,398 401,925
Common stock options excluded based
on anti-dilutive effect. . . . . . . . . . . (219,595) (716,939) (309,398) (401,925)
------------ ------------ ------------ ------------
Weighted average common shares. . . . . . . . 8,849,851 17,925,622 8,849,851 16,125,754
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Loss per common share:
Primary and fully diluted
Loss before extraordinary loss . . . . . . . $ (0.13) $ (0.06) $ (1.05) $ (1.71)
Extraordinary loss . . . . . . . . . . . . . -- (0.05) -- (0.35)
------------ ------------ ------------ ------------
Net loss. . . . . . . . . . . . . . . . . . $ (0.13) $ (0.11) $ (1.05) $ (2.06)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001002909
<NAME> CHANCELLOR BROADCASTING COMPANY
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 5,111,562
<SECURITIES> 0
<RECEIVABLES> 42,988,628
<ALLOWANCES> 816,273
<INVENTORY> 0
<CURRENT-ASSETS> 49,238,492
<PP&E> 57,117,405
<DEPRECIATION> 8,035,570
<TOTAL-ASSETS> 705,183,991
<CURRENT-LIABILITIES> 14,887,483
<BONDS> 260,000,000
103,852,579
0
<COMMON> 184,854
<OTHER-SE> 201,693,569
<TOTAL-LIABILITY-AND-EQUITY> 705,183,991
<SALES> 0
<TOTAL-REVENUES> 122,838,321
<CGS> 0
<TOTAL-COSTS> 98,853,171
<OTHER-EXPENSES> 130,164
<LOSS-PROVISION> 482,624
<INTEREST-EXPENSE> 24,468,693
<INCOME-PRETAX> (613,707)
<INCOME-TAX> 2,201,361
<INCOME-CONTINUING> (11,002,172)
<DISCONTINUED> 0
<EXTRAORDINARY> 5,609,188
<CHANGES> 0
<NET-INCOME> (16,611,360)
<EPS-PRIMARY> (2.06)
<EPS-DILUTED> (2.06)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000925744
<NAME> CHANCELLOR RADIO BROADCASTING COMPANY
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 5,111,562
<SECURITIES> 0
<RECEIVABLES> 42,988,628
<ALLOWANCES> 816,273
<INVENTORY> 0
<CURRENT-ASSETS> 49,238,492
<PP&E> 57,117,405
<DEPRECIATION> 8,035,570
<TOTAL-ASSETS> 705,183,991
<CURRENT-LIABILITIES> 14,887,483
<BONDS> 260,000,000
103,852,579
0
<COMMON> 10
<OTHER-SE> 201,878,413
<TOTAL-LIABILITY-AND-EQUITY> 705,183,991
<SALES> 0
<TOTAL-REVENUES> 122,838,321
<CGS> 0
<TOTAL-COSTS> 98,853,171
<OTHER-EXPENSES> 130,164
<LOSS-PROVISION> 482,624
<INTEREST-EXPENSE> 24,468,693
<INCOME-PRETAX> (613,707)
<INCOME-TAX> 2,201,361
<INCOME-CONTINUING> (2,815,068)
<DISCONTINUED> 0
<EXTRAORDINARY> 5,609,188
<CHANGES> 0
<NET-INCOME> (8,424,256)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000925752
<NAME> CHANCELLOR BROADCASTING LICENSEE COMPANY
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 5,111,562
<SECURITIES> 0
<RECEIVABLES> 42,988,628
<ALLOWANCES> 816,273
<INVENTORY> 0
<CURRENT-ASSETS> 49,238,492
<PP&E> 57,117,405
<DEPRECIATION> 8,035,570
<TOTAL-ASSETS> 705,183,991
<CURRENT-LIABILITIES> 14,887,483
<BONDS> 260,000,000
103,852,579
0
<COMMON> 10
<OTHER-SE> 201,878,413
<TOTAL-LIABILITY-AND-EQUITY> 705,183,991
<SALES> 0
<TOTAL-REVENUES> 122,838,321
<CGS> 0
<TOTAL-COSTS> 98,853,171
<OTHER-EXPENSES> 130,164
<LOSS-PROVISION> 482,624
<INTEREST-EXPENSE> 24,468,693
<INCOME-PRETAX> (613,707)
<INCOME-TAX> 2,201,361
<INCOME-CONTINUING> (2,815,068)
<DISCONTINUED> 0
<EXTRAORDINARY> 5,609,188
<CHANGES> 0
<NET-INCOME> (8,424,256)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
