<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 7, 1996
REGISTRATION NO. 333-02782
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CHANCELLOR RADIO BROADCASTING COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4832 75-2544623
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
12655 N. CENTRAL EXPRESSWAY, SUITE 405 STEVEN DINETZ
DALLAS, TEXAS 75243 12655 N. CENTRAL EXPRESSWAY, SUITE 405
(214) 239-6220 DALLAS, TEXAS 75243
(Address, including zip code, and telephone (214) 239-6220
number, including area code, of co-registrants' (Name, address, including zip code, and telephone
principal executive offices) number, including area code, of agent for service)
</TABLE>
Copies to:
JEREMY W. DICKENS
WEIL, GOTSHAL & MANGES LLP
100 CRESCENT COURT, SUITE 1300
DALLAS, TEXAS 75201
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
--------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
----------------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
CHANCELLOR RADIO BROADCASTING COMPANY
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM
NUMBER CAPTION LOCATION IN PROSPECTUS
- ------ ------------------------------------------ -----------------------------------------
<C> <S> <C>
1. Forepart of the Registration and Outside
Front Cover Page of Prospectus.......... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus........................... Inside Front and Outside Back Cover
Pages; Available Information
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges...... Prospectus Summary; Risk Factors;
Selected Historical Financial Data;
Supplemental Historical Financial Data;
Management's Discussion and Analysis of
Results of Operations and Financial
Condition
4. Use of Proceeds........................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price........... *
6. Dilution.................................. *
7. Selling Security Holders.................. *
8. Plan of Distribution...................... Outside Front Cover Page; The Exchange
Offer; Plan of Distribution
9. Description of Securities to be
Registered.............................. Outside Front Cover Page; Prospectus
Summary; Description of the New
Preferred Stock and Exchange Debentures
10. Interests of Named Experts and Counsel.... *
11. Information with Respect to the
Registrant.............................. Outside Front Cover Page; Certain
Definitions and Market and Industry Data;
Prospectus Summary; Risk Factors;
Recent Developments; Use of Proceeds;
Capitalization; Pro Forma Financial
Information; Selected Historical
Financial Data; Supplemental Historical
Financial Data; Management's Discussion
and Analysis of Results of Operations
and Financial Condition; Business;
Management and Board of Directors;
Security Ownership of Certain
Beneficial Owners; Certain
Transactions; Description of the New
Preferred Stock and Exchange
Debentures; Description of
Indebtedness; Description of Capital
Stock; Legal Matters; Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. *
</TABLE>
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* Omitted from Prospectus because item is inapplicable.
<PAGE> 3
***************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY *
* NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH *
* SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH *
* STATE. *
* *
***************************************************************************
SUBJECT TO COMPLETION, DATED AUGUST 7, 1996
PROSPECTUS
OFFER TO EXCHANGE ALL OUTSTANDING
12 1/4% SENIOR CUMULATIVE EXCHANGEABLE PREFERRED STOCK
FOR
12 1/4% SERIES A SENIOR CUMULATIVE EXCHANGEABLE PREFERRED STOCK
OF
CHANCELLOR RADIO BROADCASTING COMPANY
---------------------
Chancellor Radio Broadcasting Company ("Chancellor Radio Broadcasting" and,
together with its subsidiaries, the "Company"), a wholly-owned subsidiary of
Chancellor Broadcasting Company ("Chancellor"), hereby offers, upon the terms
and subject to the conditions set forth in this Prospectus and the accompanying
Letter of Transmittal (which together constitute the "Exchange Offer"), to
exchange one share of 12 1/4% Series A Senior Cumulative Exchangeable Preferred
Stock (the "New Preferred Stock") issued by the Company for each outstanding
share of 12 1/4% Senior Cumulative Exchangeable Preferred Stock (the "Old
Preferred Stock") issued by the Company, of which 1,000,000 shares are
outstanding. The powers, preferences and relative rights of the New Preferred
Stock are substantially identical to the Old Preferred Stock except that the
shares of New Preferred Stock have been registered under the Securities Act of
1933, as amended (the "Securities Act"), and will not bear any legends
restricting their transfer. The Exchange Offer is being made in order to satisfy
certain contractual obligations of the Company. See "The Exchange Offer" and
"Description of the New Preferred Stock and Exchange Debentures."
Dividends on the New Preferred Stock will accrue from the date of the last
payment (or deemed payment) of dividends on the Old Preferred Stock and will be
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 the redemption prices set
forth herein, plus, without duplication, 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 the redemption prices set forth
herein, plus, without duplication, 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 in the Exchange Offer. 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, without duplication, accumulated and
unpaid dividends to the date of redemption. Upon the occurrence of a Change of
Control (as defined), the Company will, subject to certain conditions, offer to
purchase all of the then outstanding shares of New Preferred Stock at a price
equal to 101% of the then effective liquidation preference thereof, plus,
without duplication, 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
(including any such securities paid in lieu of cash interest, as described
herein, the "Exchange Debentures"). Interest on the Exchange Debentures will be
payable at a rate of 12 1/4% per annum and will accrue from the date of issuance
thereof. Interest on the Exchange Debentures will be payable semi-annually in
cash or, at the option of the Company, on or prior to February 15, 2001 in
additional Exchange Debentures, in arrears on each February 15 and August 15,
commencing on the first such date after the exchange of the Exchange Debentures
for the New Preferred Stock. The Exchange Debentures mature on February 15, 2008
and are redeemable, at the option of the Company, in whole or in part, on or
after February 15, 2001, at the redemption prices set forth herein, plus accrued
and unpaid interest to the date of redemption. In addition, prior to February
15, 1999, the Company may, at its option, redeem the Exchange Debentures with
the net cash proceeds from one or more Public Equity Offerings at the redemption
prices set forth herein, plus, without duplication, accrued and unpaid interest
to the redemption date; provided, however, that after any such redemption the
aggregate principal amount of the Exchange Debentures outstanding must equal at
least $75,000,000.
The Exchange Debentures will be subordinated to all existing and future
Senior Debt (as defined) of the Company and will rank pari passu with or senior
to all future Indebtedness (as defined) of the Company that expressly provides
that it ranks pari passu with or junior to the Exchange Debentures. On a pro
forma basis, after giving effect to the Denver Exchange and the Pending
Transactions (in each case, as defined) and, in each case, the financing
thereof, as though such transactions had occurred on March 31, 1996, there would
have been $454.7 million of Senior Debt of the Company outstanding and no
Indebtedness of the Company that would be pari passu with or subordinated to the
Exchange Debentures.
---------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE NEW
PREFERRED STOCK OFFERED HEREBY.
---------------------
The Company will accept for exchange any and all shares of Old Preferred
Stock validly tendered and not withdrawn prior to 5:00 p.m., New York City time,
on , 1996, unless extended by the Company (as so extended, the
"Expiration Date"). Tenders of shares of Old Preferred Stock may be withdrawn at
any time prior to the Expiration Date. The Exchange Offer is subject to certain
customary conditions. See "The Exchange Offer."
Each broker-dealer that receives shares of New Preferred Stock for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such shares of New Preferred Stock.
The letter of transmittal accompanying this Prospectus (the "Letter of
Transmittal") states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of shares of New Preferred Stock received in exchange for shares of
Old Preferred Stock acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed, for a period of
180 days after the Expiration Date, to make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
No public market has existed for the Old Preferred Stock before the Exchange
Offer. The Company currently does not intend to list the New Preferred Stock on
any securities exchange or to seek approval for quotation through any automated
quotation system, and no active public market for the New Preferred Stock is
currently anticipated. The Company will pay all the expenses incident to the
Exchange Offer.
The Exchange Offer is not conditioned upon any minimum number of shares of
Old Preferred Stock being tendered for exchange pursuant to the Exchange Offer.
Following the completion of the Exchange Offer, holders of shares of Old
Preferred Stock not tendered will not have any further registration rights and
such shares will continue to be subject to restrictions on transfer.
Accordingly, the liquidity of the market for a holder's shares of Old Preferred
Stock could be adversely affected if the holder does not participate in the
Exchange Offer.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is August , 1996.
<PAGE> 4
CERTAIN DEFINITIONS AND MARKET AND INDUSTRY DATA
As used in this Prospectus, unless the context otherwise requires, (i)
"Chancellor Radio Broadcasting" refers to Chancellor Radio Broadcasting Company
(including its predecessor, Chancellor Communications); (ii) the "Company"
refers to Chancellor Radio Broadcasting and its subsidiaries, collectively;
(iii) "Chancellor" refers to Chancellor Broadcasting Company, parent of
Chancellor Radio Broadcasting; (iv) "Chancellor Communications" refers to
Chancellor Communications Corporation and its subsidiaries, collectively, which
were acquired by the Company in October 1994 and which merged with and into
Chancellor Radio Broadcasting in December 1995; (v) "Old Chancellor
Communications" refers to KFBK-AM/KGBY-FM, a division of Group W Radio, Inc.
(Cal), which Chancellor Communications acquired in January 1994; (vi) the
"American Media Station Group" refers to the group of 11 radio stations acquired
from American Media, Inc. and certain of its affiliates in October 1994; (vii)
"Shamrock Broadcasting" refers to Trefoil Communications, Inc. and its wholly
owned subsidiary, Shamrock Broadcasting, Inc., and their respective
subsidiaries, collectively, acquired in February 1996; (viii) "Secret" refers to
Secret Communications Limited Partnership with which the Company has entered
into a radio station exchange agreement; (ix) "SFX" refers to SFX Broadcasting,
Inc. with which the Company has entered into a radio station exchange agreement;
(x) "Evergreen" refers to Evergreen Media Corporation with which the Company has
entered into a radio station sales agreement; (xi) "Omni" refers to the
OmniAmerica Group from whom the Company has agreed to acquire 8 radio stations;
(xii) "American Radio" refers to American Radio Systems Corporation with which
the Company has entered into a radio station exchange agreement; (xiii) the
"Omni Stations" refers to the three radio stations in Orlando, Florida, being
acquired from Omni, which the Company intends to retain; and (xiv) "Other
Pending Acquisitions" refers, collectively, to six other radio stations (3 FM
and 3 AM) the Company has agreed to acquire plus KIMN-FM and KALC-FM in Denver,
Colorado, which the Company acquired in July 1996.
The term "LMA" is referred to in various places in this Prospectus. "LMA"
refers to a local marketing agreement, whereby a radio station outsources the
management of certain limited functions of its operations. The agreements take
varying forms; however, the FCC requires that, in all cases, the licensee
maintain independent control over the programming and operations of the station.
The terms "broadcast cash flow" and "EBITDA" are referred to in various
places in this Prospectus. "Broadcast cash flow" consists of operating income
before depreciation and amortization, corporate expenses and non-cash stock
option compensation expense. EBITDA consists of operating income before
depreciation, amortization and non-cash stock option compensation expense.
Although broadcast cash flow and EBITDA are not measures of performance
calculated in accordance with generally accepted accounting principles ("GAAP"),
management believes that broadcast cash flow is useful to a prospective investor
because it is a measure widely used in the broadcast industry to evaluate a
broadcast company's operating performance and that EBITDA is generally accepted
as providing useful information regarding a company's ability to service and/or
incur debt. Neither broadcast cash flow nor EBITDA should be considered in
isolation or as a substitute for net income, cash flows from operating
activities and other income and cash flow statement data prepared in accordance
with GAAP or as a measure of liquidity or profitability.
The term "duopoly" as used in this Prospectus refers to the ownership,
management or common control of two FM or two AM stations that provide
overlapping service in a single market.
Unless otherwise indicated herein, (i) metropolitan statistical area
("MSA") ranking by population, market ranking by radio advertising revenue,
market radio advertising revenue and the number of viable radio stations per
market have been obtained from Duncan's Radio Market Guide (1996 ed.)
("Duncan's"); (ii) total industry, listener and revenue levels have been
obtained from the Radio Advertising Bureau ("RAB"); (iii) all audience share
data and audience rankings, except where specifically stated to the contrary,
have been derived from surveys of persons, 25 to 54, listening Monday through
Sunday, 6 a.m. to 12 midnight, and are based on the average of the four most
recent survey periods, as reported by Arbitron, Radio Market Reports, Metro
Audience Trends, The Arbitron Company (copyright 1995) ("Arbitron"); and (iv)
revenue share data and revenue rankings in the Company's markets have been
obtained from the Miller, Kaplan Market Revenue Report (published monthly), a
publication of Miller, Kaplan, Arase & Co., Certified Public Accountants
("Miller Kaplan"), except with respect to the Nassau-Suffolk (Long Island),
Pittsburgh and Detroit markets for all periods presented, the Minneapolis-St.
Paul market in 1990, and the Cincinnati market in 1990 and 1991, for which, in
each case, revenue share data and revenue rankings were obtained from Hungerford
Radio Revenue Report (published monthly), a publication of Hungerford, Aldrin,
Nichols & Carter, Certified Public Accountants ("Hungerford"). Duncan's defines
"viable stations" as stations which are active and viable competitors for
advertising dollars in the market. The Company considers revenues per viable
station to be an indicator of the relative level of competition in a given
market for radio advertising revenue.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Certain capitalized terms used in this Prospectus
are defined herein under the captions "Certain Definitions and Market and
Industry Data" and "Description of the New Preferred Stock and Exchange
Debentures -- Certain Definitions." Unless the context otherwise requires,
references herein to the New Preferred Stock following the consummation of the
Exchange Offer assume that all outstanding shares of Old Preferred Stock are
tendered and exchanged for shares of New Preferred Stock in the Exchange Offer.
THE COMPANY
The Company is one of the leading "pure play" radio broadcasting companies
in the United States. Upon completion of its pending acquisitions, station swaps
and divestitures (collectively, the "Pending Transactions"), the Company will
own and operate 41 radio stations (27 FM and 14 AM) located in 13 of the 40
largest MSAs in the country, including five of the top ten MSAs. The Company is
committed to acquiring and operating radio stations that management believes
will benefit from its strategies to maximize broadcast cash flow by increasing
revenues and controlling operating expenses. On a pro forma basis, after giving
effect to the Shamrock Acquisition (as defined), the Denver Exchange (as
defined) and the Pending Transactions as though all such transactions had
occurred on January 1, 1995, the Company would have had net revenue and
broadcast cash flow of $181.6 million and $68.4 million, respectively, for the
year ended December 31, 1995.
The Company focuses on owning and operating radio stations in the top 40
U.S. markets, which account for a disproportionately large percentage of radio
advertising revenue. The Company believes that the large revenue base in these
markets generally enables operators to achieve a greater degree of profitability
than operators in smaller markets. The Company also believes that because it
employs a variety of programming formats, including country, oldies, news/talk,
adult contemporary, progressive album rock, contemporary hit radio, sports and
classical, it is less susceptible to changes in listening preferences.
Furthermore, management believes that the number and diversity of its stations
and markets reduces the Company's dependence upon any local economy or
advertiser category. For the year ended December 31, 1995, on a pro forma basis
after giving effect to the Shamrock Acquisition, the Denver Exchange and the
Pending Transactions, no single market in which the Company operates would have
provided more than 12.2% of the Company's revenues.
As the following chart illustrates, upon completion of the Pending
Transactions, the Company's portfolio will consist of 41 stations, including AM
and FM duopolies in San Francisco and Minneapolis-St. Paul, and FM duopolies in
Long Island, Denver, Cincinnati, Sacramento and Orlando:
<TABLE>
<CAPTION>
NUMBER OF STATIONS
3-YEAR ------------------------
METROPOLITAN MARKET RADIO OWNED PENDING
STATISTICAL REVENUE COMPOUND ---------- ----------
MARKET AREA RANK ANNUAL GROWTH RATE AM FM AM FM
- -------------------------------------------------------- ------------ ------------------ --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
New York................................................ 1 8.8% -- 1 -- --
Los Angeles............................................. 2 6.0 1 1 -- --
San Francisco........................................... 4 5.8 2 2 -- --
Atlanta................................................. 9 17.2 -- 1 -- --
Riverside-San Bernardino................................ 10 10.0 1 1 -- --
Minneapolis-St. Paul(2)................................. 12 9.0 2 3 -- --
Nassau-Suffolk(2)....................................... 14 3.5 1 1 1 3
(Long Island, N.Y.)
Phoenix................................................. 17 12.2 -- 1 -- --
Pittsburgh(2)........................................... 19 6.8 1 1 -- --
Denver.................................................. 26 13.2 1 4 -- --
Cincinnati.............................................. 30 9.5 1 2 1 --
Sacramento.............................................. 34 7.4 1 2 1 --
Orlando................................................. 40 11.8 -- 1 -- 3
</TABLE>
- ---------------
(1) For the year ended December 31, 1995.
(2) Includes one AM/FM simulcast combination.
3
<PAGE> 6
OPERATING STRATEGY
The Company's senior management team, led by Steven Dinetz, its President
and Chief Executive Officer, has extensive experience in acquiring and improving
the operations of radio stations and radio station groups. Management's primary
operating strategy is to maximize station revenue through the development of
large, focused local sales forces dedicated to obtaining the largest possible
share of local radio advertising revenue in each market and the use of effective
inventory management systems. Management also seeks to increase audience share
by using targeted programming and active promotional and marketing efforts.
Management complements its revenue and programming strategies by strictly
controlling costs and developing skilled, decentralized local management and
staff whose compensation is linked directly to station operating performance.
Prior to the February 14, 1996 Shamrock Acquisition, the Company had
completed three acquisitions of radio stations or radio station groups, and in
each case had employed its operating strategy to improve the revenues and
broadcast cash flows of these acquired stations. The Company completed the first
of these acquisitions in January 1994 by purchasing KFBK-AM and KGBY-FM in
Sacramento. Since this acquisition, the Company has changed these stations'
sales management, separated and increased the size of the stations' local sales
forces, improved inventory management systems and eliminated unprofitable
programming. These strategies helped to increase broadcast cash flow for these
stations for the year ended December 31, 1994 by 32.9% over 1993 and for the
year ended December 31, 1995 by 29.5% over 1994.
In October 1994, the Company completed its second acquisition by acquiring
the 11 stations comprising the American Media Station Group. Since that
acquisition, the Company has undertaken several initiatives to maximize the
operating performance of these stations, including increasing the size of local
sales forces, changing formats, reducing costs and reprogramming certain
simulcast stations. As a result, for the year ended December 31, 1995, the
American Media Station Group's net revenue increased 6.3%, from $40.0 million to
$42.5 million, and broadcast cash flow increased 12.5%, from $16.0 million to
$18.0 million, over 1994. Broadcast cash flow margins improved to 42.3% for 1995
compared to 39.9% for 1994.
In February 1995, the Company entered into a local marketing agreement
("LMA") with respect to, and in July 1995 subsequently acquired, KDWB-FM in
Minneapolis-St. Paul, which provided the Company with an FM duopoly in the
Minneapolis-St. Paul market. As a result of the reconfiguration of KDWB's sales
management, better utilization of its available inventory and cost savings
realized by the Company's management during the period the LMA was in effect,
KDWB's broadcast cash flow margin for the year ended December 31, 1995 was 27.5%
as compared to 21.4% for 1994.
On February 14, 1996, the Company acquired Shamrock Broadcasting (the
"Shamrock Acquisition"), the owner and operator of 19 stations (12 FM and 7 AM)
in 10 of the largest markets in the United States, including stations in 7 of
the top 10 MSAs. The stations acquired from Shamrock (the "Shamrock Stations")
historically were operated, on average, at substantially lower broadcast cash
flow margins and had lower market revenue shares than the Company's stations.
Management intends to increase the revenues of the 16 Shamrock Stations it
programs and operates (the "Core Shamrock Stations") through improved local and
national sales operations, programming improvements and more focused marketing
strategies. In addition, the Company believes that it can apply its cost control
strategies to the Core Shamrock Stations to improve their broadcast cash flow
margins. In this regard, for the year ended December 31, 1995, the Company has
identified $11.4 million of pro forma cost savings at the Core Shamrock Stations
resulting from the elimination of redundant operating expenses, including the
elimination of certain station management positions, the standardization of
employee benefits and compensation practices and the implementation of operating
strategies currently utilized by the Company's management. Had these savings
been realized on January 1, 1995, they would have increased the broadcast cash
flow margins of the Core Shamrock Stations, without giving effect to any
potential increases in revenues, for the year ended December 31, 1995 from 24.6%
to 38.4%.
4
<PAGE> 7
ACQUISITION STRATEGY
The Company's acquisition strategy is to purchase radio stations or radio
station groups operating in top 40 markets that possess programming,
demographic, technical and operating attributes that management believes it can
exploit. The Company's primary focus is the acquisition of multiple stations in
a single market. Management believes that the ownership of multiple stations in
a market benefits radio operators by giving them greater knowledge of the radio
broadcasting and advertising environment in that market. In addition, multiple
station ownership enables operators to reduce costs through the consolidation of
administrative, engineering and management functions and to reduce the risk of
direct format competition. As part of this strategy, the Company will explore
options, such as station-for-station exchanges with other operators, to increase
the Company's presence in those markets where management believes there may be
an opportunity to create or otherwise attain multiple station ownership. It is
the Company's practice to seek to enter into LMAs in order to sell advertising
time and provide other services to the stations its has contracted to purchase
during the pendency of an acquisition. The Company has also entered into similar
arrangements with respect to stations it is divesting pursuant to which it
outsources limited functions of these stations to the future acquiror.
Management believes that LMAs, when the Company is the buyer, provide an
opportunity to introduce its operating strategies at an earlier time than in
traditional acquisitions and, when the Company is the seller, enable management
to focus its efforts on stations that are more important to the Company's
ongoing strategy.
RECENT DEVELOPMENTS
On February 14, 1996, the Company completed the Shamrock Acquisition for
approximately $408.0 million, including acquisition costs. Simultaneously with
the Shamrock Acquisition, (i) Chancellor completed its $154.1 million initial
public offering (the "Initial Public Offering") of shares of its Class A Common
Stock ("Class A Common Stock"), (ii) Chancellor Radio Broadcasting entered into
a new, $135 million credit agreement (the "Credit Agreement"), (iii) Chancellor
Radio Broadcasting issued and sold $200.0 million aggregate principal amount of
its 9 3/8% Senior Subordinated Notes due 2004 (the "Notes") and (iv) Chancellor
Radio Broadcasting issued and sold $100.0 million initial liquidation preference
of exchangeable redeemable preferred stock (the "Acquisition Preferred Stock")
and, in connection therewith, Chancellor issued and sold 742,192 shares of Class
A Common Stock to the purchasers of the Acquisition Preferred Stock (the
"Preferred Stock Financing"). The Acquisition Preferred Stock was partially
repurchased and the remainder redeemed with the proceeds of the sale of Old
Preferred Stock. In addition, in connection with the Shamrock Acquisition and
the financing thereof, Hicks, Muse, Tate & Furst Equity Fund II, L.P. ("HM Fund
II"), an affiliate of Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse"),
advised the Company that, on or before September 30, 1996, it would sell all of
its capital stock of its affiliate, HMW Communications, Inc. ("HMW"), or would
cause HMW to sell all or substantially all of its assets (which consisted
primarily of six radio broadcast stations), and that it or HMW would invest the
net proceeds in Class A Common Stock (the "Hicks Muse Equity Investment"). HM
Fund II has further agreed that, to the extent that such net proceeds are less
than $23.0 million, it will purchase additional shares of Class A Common Stock
in order that, in the aggregate, Chancellor will receive net proceeds of $23.0
million through the Hicks Muse Equity Investment. In June 1996, HMW effected the
sale of five of its radio stations to an affiliate of SFX and concurrently
entered into an asset purchase agreement with respect to the sale of its
remaining station. HM Fund II has advised Chancellor that it intends to
consummate the Hicks Muse Equity Investment on or about August 9, 1996. The
proceeds from the Hicks Muse Equity Investment will be contributed by Chancellor
to the capital of Chancellor Radio Broadcasting and are expected to be used to
fund part of the cash purchase price of the Pending Transactions.
On July 31, 1996, the Company exchanged (the "Denver Exchange") KTBZ-FM in
Houston, plus approximately $6.0 million in cash, for Secret's KALC-FM and
KIMN-FM (the "Denver Stations") in Denver, Colorado. The Company had been
providing certain services to the Denver Stations pursuant to an LMA since April
1, 1996.
In January 1996, the Company entered into an agreement (the "Detroit Option
Agreement") with Evergreen pursuant to which the Company granted Evergreen the
option to buy, and Evergreen granted the Company the option to sell, WWWW-FM and
WDFN-AM in Detroit (the "Detroit Stations") for $30.0 million in cash (the
"Detroit Disposition"). Pursuant to the Detroit Option Agreement, the Company
outsourced to Evergreen certain limited functions of the Detroit Stations in
exchange for an annual fee of
5
<PAGE> 8
$2.6 million to be paid to the Company. The Company anticipates that it will
enter into an definitive purchase agreement with Evergreen Media with respect to
the sale of the Detroit Stations. The proceeds of the Detroit Disposition are
expected to be used to fund part of the cash purchase price for the Pending
Transactions.
On May 15, 1996, the Company entered into an agreement to acquire eight
Florida radio stations from 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 (the "OmniAmerica Acquisition"). On June 24, 1996, the Company
entered into a letter of intent with American Radio under which, subject to
negotiation of a definitive agreement, the Company has agreed to exchange the
West Palm Beach, Florida stations being acquired from Omni for American Radio's
AM station in Sacramento, California, plus $33.0 million in cash. On July 1,
1996, the Company entered into an agreement with SFX under which the Company
will exchange the Jacksonville, Florida stations being acquired from Omni and
$11.0 million in cash for SFX's three FM stations and one AM station in Long
Island, New York. These acquisition and exchange agreements are subject, among
other things, to FCC approval. Pursuant to LMAs, the Company began managing
certain limited functions of the Omni Orlando stations and the SFX Long Island
stations on July 1, 1996, and will begin managing certain limited functions of
American Radio's Sacramento AM station beginning August 1, 1996. Similarly,
beginning July 1, 1996, SFX began managing limited functions of the Jacksonville
stations it has agreed to acquire from the Company, and it is anticipated that
American Radio will agree to manage certain functions of the West Palm Beach
stations once a definitive agreement is reached with the Company. After giving
effect to all of the foregoing transactions, the Company will own four FM
stations in Orlando, Florida, four FM and two AM stations in Long Island, New
York and two FM and two AM stations in Sacramento, California. The aggregate net
purchase price for the eight new stations to be acquired, in the aggregate, from
Omni, SFX and American Radio will be approximately $156.0 million, excluding
acquisition costs.
The Detroit Disposition, the acquisition of the Omni Stations and the
consummation of the station exchanges with SFX and American Radio are
collectively referred to in this Prospectus as the "Pending Transactions."
The Company anticipates that it will consummate all the Pending
Transactions by the end of January 1997. However, the closing of each of those
transactions is subject to FCC approval and other closing conditions, certain of
which are beyond the Company's control, and there can be no assurance when those
transactions will be completed or that they will be completed on the terms
described herein, or at all. The Company intends to finance the cash portion of
the purchase price for the Pending Transactions with the proceeds from the Hicks
Muse Equity Investment, the proceeds from the Detroit Disposition, cash flow
from operations, financing under the Credit Agreement and additional bank
financing. There can be no assurance that these sources of funds will be
sufficient or that additional sources of financing will be available to the
Company on terms considered favorable by management, if at all.
6
<PAGE> 9
THE EXCHANGE OFFER
The Exchange Offer......... One share of New Preferred Stock in exchange for
each outstanding share of Old Preferred Stock. As
of the date hereof, 1,000,000 shares of Old
Preferred Stock are issued and outstanding. The
New Preferred Stock offered hereby is identical
in all material respects to the Old Preferred
Stock, except that shares of New Preferred Stock
will be freely transferable by the holders
thereof except as otherwise provided herein. See
"Description of the New Preferred Stock and
Exchange Debentures."
Based on an interpretation by the Commission's
staff set forth in no-action letters issued to
third parties unrelated to the Company, the
Company believes that shares of New Preferred
Stock issued pursuant to the Exchange Offer in
exchange for Old Preferred Stock may be offered
for sale, sold and otherwise transferred by any
person receiving the New Preferred Stock, whether
or not that person is the registered holder
(other than any such holder or such other person
that is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act),
without compliance with the registration and
prospectus delivery provisions of the Securities
Act, provided that (i) the shares of New
Preferred Stock are acquired in the ordinary
course of business of that holder or such other
person, (ii) neither the holder nor such other
person is engaging in or intends to engage in a
distribution of the New Preferred Stock, and
(iii) neither the holder nor such other person
has an arrangement or understanding with any
person to participate in the distribution of the
New Preferred Stock. See "The Exchange
Offer -- Purpose and Effect." Each broker-dealer
that receives New Preferred Stock for its own
account in exchange for Old Preferred Stock,
where those shares of Old Preferred Stock were
acquired by the broker-dealer as a result of its
market-making activities or other trading
activities, must acknowledge that it will deliver
a prospectus in connection with any resale of
such shares of New Preferred Stock. See "Plan of
Distribution."
Registration Rights
Agreement................ The shares of Old Preferred Stock were sold by the
Company on February 26, 1996, in a private
placement in reliance on Section 4(2) of the
Securities Act and immediately resold by the
initial purchasers thereof in reliance on Rule
144A under the Securities Act (the "Original
Offering"). In connection with the sale, the
Company entered into a Registration Rights
Agreement with the initial purchasers of the Old
Preferred Stock (the "Registration Rights
Agreement") requiring the Company to make the
Exchange Offer. The Registration Rights Agreement
further provides that the Company must use its
best efforts to (i) cause the Registration
Statement with respect to the Exchange Offer to
be declared effective on or before August 24,
1996 and (ii) consummate the Exchange Offer on or
before October 8, 1996. See "The Exchange
Offer -- Purpose and Effect."
Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New
York City time, , 1996, or such later
date and time to which it is extended by the
Company.
Withdrawal................. The tender of shares of Old Preferred Stock
pursuant to the Exchange Offer may be withdrawn
at any time prior to 5:00 p.m., New York City
time, on the Expiration Date. Any shares of Old
Preferred Stock not
7
<PAGE> 10
accepted for exchange for any reason will be
returned without expense to the tendering holder
thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
Dividends on the New
Preferred Stock and Old
Preferred Stock.......... Dividends on each share of New Preferred Stock will
accrue from the date of issuance of the Old
Preferred Stock for which the New Preferred Stock
is exchanged or from the date of the last
dividend payment (or deemed dividend payment) on
such Old Preferred Stock, whichever is later. No
additional dividends will be paid on Old
Preferred Stock tendered and accepted for
exchange.
Conditions to the Exchange
Offer.................... The Exchange Offer is subject to certain customary
conditions, certain of which may be waived by the
Company. See "The Exchange Offer -- Certain
Conditions to Exchange Offer."
Procedures for Tendering
Old Preferred Stock........ Each holder of shares of Old Preferred Stock
wishing to accept the Exchange Offer must
complete, sign and date the Letter of
Transmittal, or a copy thereof, in accordance
with the instructions contained herein and
therein, and mail or otherwise deliver the Letter
of Transmittal, or copy thereof, together with
certificates representing the shares of Old
Preferred Stock and any other required
documentation, to the Exchange Agent (as defined)
at the address set forth herein. Persons holding
shares of Old Preferred Stock through the
Depository Trust Company ("DTC") and wishing to
accept the Exchange Offer must do so pursuant to
the DTC's Automated Tender Offer Program, by
which each tendering participant will agree to be
bound by the Letter of Transmittal. By executing
or agreeing to be bound by the Letter of
Transmittal, each holder will represent to the
Company that, among other things, (i) the shares
of New Preferred Stock acquired pursuant to the
Exchange Offer are being obtained in the ordinary
course of business of the person receiving such
New Preferred Stock, whether or not such person
is the registered holder of the Old Preferred
Stock, (ii) neither the holder nor any such other
person is engaging in or intends to engage in a
distribution of such New Preferred Stock, (iii)
neither the holder nor any such other person has
an arrangement or understanding with any person
to participate in the distribution of such New
Preferred Stock, and (iv) neither the holder nor
any such other person is an "affiliate," as
defined under Rule 405 promulgated under the
Securities Act, of the Company. Pursuant to the
Registration Rights Agreement, the Company is
required to file a "shelf" registration statement
for a continuous offering pursuant to Rule 415
under the Securities Act in respect of the Old
Preferred Stock if (i) because of any change in
law or in currently prevailing interpretations of
the staff of the Commission, the Company is not
permitted to effect the Exchange Offer, (ii) the
Exchange Offer is not consummated within 225 days
of the Original Offering, (iii) any holder of
Private Exchange Preferred Stock (as defined)
requests at any time after the consummation of
the Private Exchange (as defined), (iv) the
holders of not less than a majority of shares of
the Old Preferred Stock determine that the
interests of the holders would be adversely
affected by consummation of the Exchange Offer,
or (v) any holder of Old Preferred Stock
participates in the Exchange Offer and
8
<PAGE> 11
does not receive freely transferrable shares of
New Preferred Stock in exchange for Old Preferred
Stock (other than as a result of the status of
such holders as an "affiliate" of the Company
within the meaning of the Securities Act). See
"The Exchange Offer -- Purpose and Effect."
Acceptance of Old Preferred
Stock and Delivery of New
Preferred Stock.......... The Company will accept for exchange any and all
shares of Old Preferred Stock which are properly
tendered (and not withdrawn) in the Exchange
Offer prior to 5:00 p.m., New York City time, on
the Expiration Date. The New Preferred Stock
issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date.
See "The Exchange Offer -- Terms of the Exchange
Offer."
Exchange Agent............. KeyCorp Shareholder Services, Inc. is serving as
Exchange Agent (the "Exchange Agent") in
connection with the Exchange Offer.
Federal Income Tax
Considerations........... The exchange pursuant to the Exchange Offer should
not be a taxable event for federal income tax
purposes. See "Certain Federal Income Tax
Considerations."
Effect of Not Tendering.... Shares of Old Preferred Stock that are not tendered
or that are tendered but not accepted will,
following the completion of the Exchange Offer,
continue to be subject to the existing
restrictions upon transfer thereof. The Company
will have no further obligation to provide for
the registration under the Securities Act of such
shares of Old Preferred Stock.
THE NEW PREFERRED STOCK
Securities Offered......... 1,000,000 shares (the "Shares") of 12 1/4% Series A
Senior Cumulative Exchangeable Preferred Stock,
par value $.01 per share (the "New Preferred
Stock").
Liquidation Preference..... Initially equal to the liquidation value per share
of Old Preferred Stock at the date of exchange,
plus accumulated and unpaid dividends.
Optional Redemption........ The New Preferred Stock is redeemable, at the
option of the Company, in whole or in part, at
any time on or after February 15, 2001 at the
redemption prices set forth herein, plus, without
duplication, accumulated and unpaid dividends to
the date of redemption. In addition, prior to
February 15, 1999, the Company may, at its
option, use the net cash proceeds of one or more
Public Equity Offerings to redeem the New
Preferred Stock at the redemption prices set
forth herein, plus, without duplication,
accumulated and unpaid dividends to the date of
redemption; provided, however, that after any
such redemption, the number of shares of New
Preferred Stock outstanding must equal at least
75% of the shares of New Preferred Stock
originally issued in the Exchange Offer.
Mandatory Redemption....... 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,
without duplication, accumulated and unpaid
dividends to the date of redemption.
9
<PAGE> 12
Dividends.................. At a rate equal to 12 1/4% per annum of the then
effective liquidation preference per share,
cumulative and, when declared, payable quarterly
beginning November 15, 1996 and accumulating from
August 15, 1996. The Company, at its option, may
pay dividends on any dividend payment date
occurring on or before February 15, 2001 either
in cash or by adding such dividends to the then
effective liquidation preference of the New
Preferred Stock.
Dividend Payment Dates..... February 15, May 15, August 15 and November 15,
commencing November 15, 1996.
Voting..................... The New Preferred Stock will be non-voting, except
as otherwise required by law and except in
certain circumstances described herein, including
(i) amending certain rights of the holders of the
New Preferred Stock and (ii) the issuance of any
class of equity securities that ranks on a parity
with or senior to the New Preferred Stock. In
addition, if after February 15, 2001 the Company
(i) fails to pay dividends in respect of six or
more quarters in the aggregate, (ii) fails to
make a mandatory redemption or a Change of
Control Offer (as defined) or (iii) fails to
comply with certain covenants or make certain
payments on its Indebtedness, holders of a
majority of the outstanding shares of New
Preferred Stock, voting as a class, will be
entitled to elect the lesser of two directors or
that number of directors constituting at least
25% of the Company's board of directors.
Exchange Provisions........ Exchangeable into the Exchange Debentures, at the
Company's option, subject to certain conditions,
in whole, but not in part, on any scheduled
dividend payment date.
Ranking.................... The New Preferred Stock will, with respect to
dividend rights and rights on liquidation,
winding-up and dissolution of the Company, rank
senior to all other classes of equity securities
of the Company outstanding upon consummation of
the Exchange Offer.
Change of Control.......... In the event of a Change of Control, the Company
will, subject to certain conditions, offer to
purchase all outstanding shares of New Preferred
Stock at a purchase price equal to 101% of the
then effective liquidation preference thereof,
plus, without duplication, accumulated and unpaid
dividends to the date of purchase. There can be
no assurance that the Company will have
sufficient funds to purchase all of the New
Preferred Stock in the event of a Change of
Control or that the Company would be able to
obtain financing for such purpose on favorable
terms, if at all. In addition, the Credit
Agreement restricts the Company's ability to
repurchase the New Preferred Stock, including
pursuant to a Change of Control Offer.
Furthermore, a Change of Control will result in a
default under the Credit Agreement. The Credit
Agreement also contains certain other provisions
relating to a change of control of the Company.
These provisions are generally broader than the
Change of Control provisions of the Certificate
of Designation governing the New Preferred Stock
(the "Certificate of Designation"). Consequently,
certain events that may give rise to change of
control under the Credit Agreement may not give
rise to a Change of Control for purposes of the
Certificate of Designation. See "Risk
Factors -- Change of Control" and "Description of
the New
10
<PAGE> 13
Preferred Stock and Exchange Debentures -- New
Preferred Stock -- Change of Control."
Certain Restrictive
Provisions............... The Certificate of Designation will contain certain
restrictive provisions that, among, other things,
limit the ability of the Company and its
subsidiaries to incur additional Indebtedness,
pay dividends or make certain other restricted
payments, or merge or consolidate with or sell
all or substantially all of their assets to any
other person.
THE EXCHANGE DEBENTURES
Issue...................... 12 1/4% Subordinated Exchange Debentures due 2008
issuable in exchange for the New Preferred Stock
in an aggregate principal amount equal to the
then effective liquidation preference of the New
Preferred Stock, plus, without duplication,
accumulated and unpaid dividends to the date
fixed for the exchange thereof (the "Exchange
Date"), plus any additional Exchange Debentures
issued in lieu of cash interest.
Maturity................... February 15, 2008.
Interest Rate and Payment
Dates.................... The Exchange Debentures will bear interest at a
rate of 12 1/4% per annum. Interest will accrue
from the date of issuance or from the most recent
interest payment date to which interest has been
paid or provided for or, if no interest has been
paid or provided for, from the Exchange Date.
Interest will be payable semi-annually in cash
(or, at the option of the Company, on or prior to
February 15, 2001, in additional Exchange
Debentures) in arrears on each February 15 and
August 15, commencing with the first such date
after the Exchange Date.
Optional Redemption........ The Exchange Debentures are redeemable, at the
option of the Company, in whole or in part, at
any time on or after February 15, 2001 at the
redemption prices set forth herein, plus accrued
and unpaid interest to the date of redemption. In
addition, prior to February 15, 1999, the Company
may, at its option, use the net cash proceeds of
one or more Public Equity Offerings to redeem the
Exchange Debentures at the redemption prices set
forth herein, plus accrued and unpaid interest to
the date of redemption; provided, however, that
after any such redemption, the aggregate
principal amount of the Exchange Debentures
outstanding must equal at least $75,000,000.
Ranking.................... The Exchange Debentures will be subordinated to all
existing and future Senior Debt of the Company.
In addition, the Exchange Debentures will be
effectively subordinated to all existing and
future Indebtedness of the Company's
subsidiaries. The Exchange Debentures will rank
pari passu or senior to any class or series of
Indebtedness that expressly provides that it
ranks pari passu or subordinate to the Exchange
Debentures, as the case may be. On a pro forma
basis, as if the Denver Exchange and the Pending
Transactions and, in each case, the financing
thereof, had occurred on March 31, 1996, there
would have been $454.7 million of Senior Debt
outstanding and no Indebtedness pari passu with
or junior to the Exchange Debentures.
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<PAGE> 14
Change of Control.......... In the event of a Change of Control, the Company
will, subject to certain conditions, be required
to offer to purchase all outstanding Exchange
Debentures at a purchase price equal to 101% of
the principal amount thereof, plus accrued and
unpaid interest to the date of purchase. There
can be no assurance that the Company will have
sufficient funds to purchase all the Exchange
Debentures in the event of a Change of Control or
that the Company would be able to obtain
financing for such purpose on favorable terms, if
at all. In addition, the Credit Agreement
restricts the Company's ability to repurchase the
Exchange Debentures, including pursuant to a
Change of Control Offer. Furthermore, a Change of
Control will result in a default under the Credit
Agreement. The Credit Agreement also contains
certain other provisions relating to a change of
control of the Company. These provisions are
generally broader than the Change of Control
provisions of the indenture governing the
Exchange Debentures (the "Exchange Indenture").
Consequently, certain events that may give rise
to change of control under the Credit Agreement
may not give rise to a Change of Control under
the Exchange Indenture. See "Risk
Factors -- Change of Control" and "Description of
the New Preferred Stock and Exchange
Debentures -- Exchange Debentures -- Change of
Control."
Certain Covenants.......... The Exchange Indenture contains certain covenants
that, among other things, limit the ability of
the Company and its subsidiaries to incur
additional Indebtedness, pay dividends or make
certain other restricted payments, sell or swap
assets, enter into certain transactions with
affiliates or merge or consolidate with or sell
all or substantially all of their assets to any
other person.
USE OF PROCEEDS
There will be no cash proceeds to the Company from the exchange pursuant to
the Exchange Offer.
The net proceeds from the Original Offering were used to repurchase and
redeem all the shares of Acquisition Preferred Stock. See "Use of Proceeds."
RISK FACTORS
An investment in the New Preferred Stock involves certain risks that a
prospective investor should carefully consider. See "Risk Factors."
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<PAGE> 15
SUMMARY HISTORICAL FINANCIAL DATA
The following tables present summary historical financial data of the
Company and Old Chancellor Communications. The following financial information
should be read in conjunction with the Consolidated Financial Statements of
Chancellor Radio Broadcasting and the Consolidated Financial Statements of Old
Chancellor Communications and, in each case, the related notes included
elsewhere in this Prospectus.
THE COMPANY AND OLD CHANCELLOR COMMUNICATIONS
<TABLE>
<CAPTION>
OLD CHANCELLOR COMMUNICATIONS THE COMPANY(1)
------------------------------- -----------------------------------------------
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net revenues.......................... $10,372 $12,121 $14,717 $ 26,317 $ 64,322 $ 13,082 $ 25,642
Station operating expenses............ 8,168 8,738 9,738 15,660 37,464 8,536 16,492
Depreciation and amortization......... 1,034 1,102 1,014 3,180 9,047 2,359 5,028
Corporate expenses.................... 565 544 568 600 1,816 370 1,008
Stock option compensation
expense(2).......................... -- -- -- -- 6,360 -- 950
Operating income...................... 605 1,737 3,397 6,877 9,635 1,817 2,165
Interest expense...................... 961 724 700 5,021 17,324 4,114 7,146
Net income (loss)..................... (366) 399 1,464 (106) (11,531) (3,483) (10,571)
OTHER DATA:
Broadcast cash flow................... $ 2,204 $ 3,383 $ 4,979 $ 10,657 $ 26,858 $ 4,546 $ 9,150
Broadcast cash flow margin............ 21.2% 27.9% 33.8% 40.5% 41.8% 34.8% 35.7%
EBITDA................................ $ 1,639 $ 2,839 $ 4,411 $ 10,057 $ 25,042 $ 4,176 $ 8,143
Capital expenditures.................. 460 86 8 239 1,710 337 820
Ratio of earnings to fixed
charges(3).......................... -- 2.17x 4.51x 1.35x -- -- --
Deficiency of earnings to fixed
charges(3).......................... $ 359 $ -- $ -- $ -- $ 7,731 $ 2,288 $ 6,646
BALANCE SHEET DATA (END OF PERIOD):
Working capital, excluding current
portion of long-term debt........... $ 2,292 $ 2,304 $ 1,739 $ 6,178 $ 5,826 $ 4,189 $ 14,169
Goodwill and intangible assets, net... 13,433 13,056 12,679 189,982 208,093 188,325 587,357
Total assets.......................... 21,611 20,542 19,275 219,576 241,123 217,565 673,287
Long-term debt (including current
portion)............................ -- -- -- 151,664 172,170 150,000 357,128
Total common stockholders' equity..... 20,703 19,084 17,145 59,894 54,723 56,411 181,719
</TABLE>
- ---------------
(1) The historical financial data set forth for the Company includes the results
of operations of the American Media Station Group from its date of
acquisition in October 1994, of KDWB-FM from February 1995, the time the
Company began programming that station under an LMA, and the results of
operations of Shamrock Broadcasting from its date of acquisition in February
1996.
(2) Consists of a non-cash charge resulting from the grant of employee stock
options in 1994.
(3) For purposes of this calculation, "earnings" consist of income (loss) before
income taxes and fixed charges. "Fixed charges" consist of interest,
amortization of deferred financing costs and the component of rental expense
believed by management to be representative of the interest factor thereon.
Preferred stock dividends and accretion are included in Fixed charges where
appropriate.
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<PAGE> 16
RISK FACTORS
Prospective investors should consider carefully the following factors
regarding an investment in the New Preferred Stock.
SUBSTANTIAL LEVERAGE, HISTORY OF NET LOSSES AND INSUFFICIENCY OF EARNINGS TO
COVER FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The Company has consolidated indebtedness that is substantial in relation
to its stockholder's equity. As of March 31, 1996, the Company had outstanding
long-term indebtedness (including current portions) of approximately $357.1
million. As of March 31, 1996, on a pro forma basis after giving effect to the
consummation of the Denver Exchange and the Pending Transactions and, in each
case, the financing thereof, the Company would have had outstanding long-term
indebtedness (including current portions) of approximately $454.7 million,
exchangeable preferred stock with an aggregate liquidation preference of $100.0
million (plus accrued and unpaid dividends thereon) and stockholder's equity of
$219.7 million. See "Capitalization." The Credit Agreement, the indentures
governing the Notes and the 12 1/2% Senior Subordinated Notes due 2004
(collectively, the "Subordinated Notes" and such indentures collectively being
the "Indentures") limit the incurrence of additional indebtedness by the
Company.
The Company had a net loss of $11.5 million and $10.6 million for the year
ended December 31, 1995 and the three months ended March 31, 1996, respectively,
and had a deficit in retained earnings of $22.2 million at March 31, 1996. On a
pro forma basis, after giving effect to the acquisition of KDWB-FM, the Shamrock
Acquisition, the Denver Exchange and the consummation of the Pending
Transactions, in each case including the financing thereof, as though all those
transactions had occurred on January 1, 1995, the Company would have had a net
loss of $20.8 million and $9.0 million for the year ended December 31, 1995 and
the three months ended March 31, 1996, respectively. Consequently, on that pro
forma basis, the Company's earnings would have been insufficient to cover fixed
charges and preferred stock dividend and accretion requirements by $28.7 million
and $11.3 million for the year ended December 31, 1995 and the three months
ended March 31, 1996, respectively. The Company expects to continue to
experience net losses in the foreseeable future, principally as a result of
non-cash charges for depreciation and amortization expense related to fixed
assets and goodwill acquired in the past and in the Shamrock Acquisition, which
losses may be greater than those historically experienced by the Company. See
"Pro Forma Financial Information."
The level of the Company's indebtedness could have several important
consequences to the holders of the New Preferred Stock, including, but not
limited to, the following: (i) a significant portion of the Company's cash flow
from operations will be dedicated to debt service and will not be available for
other purposes; (ii) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions, general
corporate or other purposes may be limited; (iii) the Company's leveraged
position and the covenants contained in the Indentures and the Credit Agreement
could limit the Company's ability to compete, as well as its ability to expand
and make capital improvements and (iv) the Company's level of indebtedness could
make it more vulnerable to economic downturns, limit its ability to withstand
competitive pressures and reduce its flexibility in responding to changing
business and economic conditions.
The Company's ability to pay cash dividends on, and to satisfy the
redemption obligations in respect of, the New Preferred Stock and to satisfy its
debt obligations will depend upon its future operating performance, which will
be affected by prevailing economic conditions and financial, business and other
factors, certain of which are beyond its control. The Company anticipates that
its operating cash flow, together with borrowings under the Credit Agreement,
will be sufficient to meet its operating expenses and to service its debt
requirements as they become due. However, if the Company is unable to service
its indebtedness, whether upon acceleration of such indebtedness or in the
ordinary course of business, the Company will be forced to pursue one or more
alternative strategies such as selling assets, restructuring or refinancing its
indebtedness, or seeking additional equity capital. There can be no assurance
that any of these strategies could be effected on satisfactory terms, if at all,
or that the approval of the Federal Communications Commission (the "FCC") could
be obtained on a timely basis, or at all, for the transfer of any of the
stations' licenses in connection with a proposed sale of assets. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition -- Liquidity and Capital Resources" and "Description of Indebtedness."
14
<PAGE> 17
LIMITATIONS ON ABILITY TO PAY DIVIDENDS
The Credit Agreement prohibits the payment of cash dividends on the New
Preferred Stock through the maturity of the borrowings under the Credit
Agreement in 2004. However, for all dividend payment dates through and including
February 15, 2001, the Company may, at its option, pay dividends by adding the
amount of a dividend payment to the then effective liquidation preference of the
New Preferred Stock in lieu of paying cash dividends. After February 15, 2001,
if the Company is in arrears in the payment of dividends for six or more
quarterly dividend periods, the holders of the New Preferred Stock will be
permitted to elect the lesser of two or that number of directors constituting
25% of the board of directors of the Company.
In addition to the limitations imposed on the payment of dividends by the
Credit Agreement, under Delaware law the Company is permitted to pay dividends
on its capital stock, including the New Preferred Stock, only out of its surplus
or, in the event that it has no surplus, out its net profits for the year in
which a dividend is declared or for the immediately preceding fiscal year.
Surplus is defined as the excess of a company's total assets over the sum of its
total liabilities plus the par value of its outstanding capital stock. In order
to pay dividends in cash, the Company must have surplus or net profits equal to
the full amount of the cash dividend at the time such dividend is declared.
In determining the Company's ability to pay dividends, Delaware law permits
the board of directors of the Company to revalue the Company's assets and
liabilities from time to time to their fair market values in order to create
surplus. The Company cannot predict what the value of its assets or the amount
of its liabilities will be in the future and, accordingly, there can be no
assurance that the Company will be able to pay cash dividends on the New
Preferred Stock.
SUBORDINATION OF EXCHANGE DEBENTURES
The payment of principal, premium, if any, and interest on, and any other
amounts owing in respect of, the Exchange Debentures, if issued, will be
subordinated to the prior payment in full of all existing and future Senior Debt
of the Company. As of March 31, 1996, on a pro forma basis after giving effect
to the Denver Exchange and the consummation of the Pending Transactions and, in
each case, the financing thereof, approximately $454.7 million of Senior Debt
would have been outstanding (represented by borrowings under the Credit
Agreement and/or a new credit facility, and the Subordinated Notes). In the
event of the bankruptcy, liquidation, dissolution, reorganization or other
winding up of the Company, the assets of the Company will be available to pay
obligations on the Exchange Debentures only after all Senior Debt has been paid
in full, and there may not be sufficient assets remaining to pay amounts due on
any or all of the Exchange Debentures. In addition, under certain circumstances,
the Company may not pay principal of, premium, if any, or interest on, or any
other amounts owing in respect of, the Exchange Debentures, or purchase, redeem
or otherwise retire the Exchange Debentures, if a payment default or a
non-payment default exists with respect to certain Senior Debt, including Senior
Debt under the Indentures and the Credit Agreement and, in the case of
non-payment default, if a payment blockage notice has been received by the
Trustee (as defined). See "Description of the New Preferred Stock and Exchange
Debentures -- The Exchange Debentures -- Subordination."
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Indentures and the Credit Agreement contain certain covenants that
restrict, among other things, the Company's ability to incur additional
indebtedness, incur liens, pay dividends or make certain other restricted
payments, consummate certain asset sales or asset swaps, enter into certain
transactions with affiliates, incur indebtedness that is subordinate in right of
payment to any Senior Debt and senior in right of payment to the Subordinated
Notes, impose restrictions on the ability of a subsidiary to pay dividends or
make certain payments to Chancellor, enter into sale and leaseback transactions,
conduct business other than the ownership and operation of radio broadcast
stations, merge or consolidate with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of the assets of
the Company. In addition, the Credit Agreement contains covenants requiring that
the $23.0 million Hicks Muse Equity Investment be made on or before September
30, 1996, and prohibits the Company from prepaying its indebtedness other than
15
<PAGE> 18
under the Credit Agreement. The Credit Agreement also requires the Company to
maintain specified financial ratios and to satisfy certain financial condition
tests. The Company's ability to meet those financial ratios and financial
condition tests can be affected by events beyond its control, and there can be
no assurance that the Company will meet those tests. A breach of any of these
covenants could result in a default under the Credit Agreement or the
Indentures. In the event of an event of default under the Credit Agreement or
the Indentures, the lenders thereunder could elect to declare all amounts
outstanding thereunder, together with accrued interest, to be immediately due
and payable. In the case of the Credit Agreement, if the Company were unable to
repay those amounts, the lenders thereunder could proceed against the collateral
granted to them to secure that indebtedness. If the Credit Agreement
indebtedness were to be accelerated, there can be no assurance that the assets
of the Company would be sufficient to repay in full that indebtedness and the
other indebtedness of the Company. Substantially all of the assets of the
Company and its subsidiaries have been pledged as security under the Credit
Agreement. See "Description of Indebtedness."
RISKS ASSOCIATED WITH ACQUISITION STRATEGY
The Company's plans with respect to the stations it acquires involve, to a
substantial degree, strategies to increase net revenue while at the same time
reducing the operating expenses. Although the Company believes that its
strategies are reasonable, there can be no assurance that it will be able to
implement its plans without delay or that, when implemented, its efforts will
result in the increased broadcast cash flow or other benefits currently
anticipated by the Company's management. In addition, there can be no assurance
that the Company will not encounter unanticipated problems or liabilities in
connection with such stations. The integration of acquired stations into the
Company will require substantial attention from the Company's senior management,
which may limit the amount of time available to be devoted to the Company's
other stations.
In addition to the risks associated with the acquisition of radio stations,
the Company also is aware that the Federal Trade Commission and the United
States Department of Justice, which evaluate transactions requiring a
pre-acquisition filing under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, to determine whether those transaction should be challenged
under the federal antitrust laws, recently have been increasingly active in
their review of radio station acquisitions, particularly where an operator
proposes to acquire new stations in its existing markets. Management is aware
that these federal authorities currently are evaluating the transactions
pursuant to which Omni will acquire two of the Orlando stations to be sold to
the Company, which may result in a review of the Company's proposed acquisition
of the Omni stations. The Company is unable to predict whether it will face or,
if received, overcome regulatory challenges to any of the Pending Transactions.
The Company is unable to predict what effect the current enhanced antitrust
scrutiny of radio station acquisitions will have on its ability to continue its
acquisition strategy.
DEPENDENCE ON KEY PERSONNEL
The Company's business is dependent upon the services of certain key
executives, including Steven Dinetz, its President and Chief Executive Officer.
Mr. Dinetz has agreed to enter into a five-year employment agreement with the
Company. The Company believes that the loss of the services of Mr. Dinetz could
have a material adverse effect on the Company. The Company does not currently
maintain key-man life insurance coverage for Mr. Dinetz. See "Management and
Board of Directors -- Employment Agreements -- Dinetz Employment Agreement."
CONTROL OF THE COMPANY
Chancellor owns all of the outstanding capital stock of the Company. After
giving pro forma effect to the Hicks Muse Equity Investment, Steven Dinetz, the
President and Chief Executive Officer of the Company, owns common stock of
Chancellor representing approximately 90.1% of the total voting power of
Chancellor's outstanding common stock. In addition, affiliates of Hicks Muse own
non-voting common stock of Chancellor that will be convertible into shares of
Chancellor's voting common stock (the "Conversion"), at the option of those
affiliates, subject to the occurrence of certain conditions, including the
issuance by the FCC of a final order approving the Conversion. In June 1996,
Hicks Muse and its affiliates filed an application with the FCC
16
<PAGE> 19
to convert their shares of Class C Common Stock into shares of Class B Common
Stock. Upon the Conversion and after giving pro forma effect to the Hicks Muse
Equity Investment, affiliates of Hicks Muse and Mr. Dinetz will own common stock
of Chancellor representing approximately 90.3% and 1.0%, respectively, of the
total voting power of Chancellor's outstanding common stock.
Prior to the Conversion, Mr. Dinetz controls, and immediately after the
Conversion, Hicks Muse and its affiliates will control, the vote on all matters
submitted to the vote of stockholders of Chancellor, except as required by
applicable law and except that the holders of Chancellor's Class A Common Stock,
voting as a separate class, are entitled to elect two members of Chancellor's
board of directors. Therefore, Mr. Dinetz is able and, upon the Conversion,
Hicks Muse will be able, to direct the management and policies of Chancellor
and, through its ownership of the Company's common stock, the Company. See
"Security Ownership of Certain Beneficial Owners" and "Description of Capital
Stock -- Common Stock -- Voting Rights."
In the event that the Conversion has not occurred on or before the earlier
of (i) the date on which Hicks Muse and its affiliates cease to own beneficially
more than 50% of the Class C Common Stock owned beneficially by Hicks Muse and
its affiliates upon consummation of the Initial Public Offering and (ii) the
third anniversary of the consummation of the Initial Public Offering, then,
subject to prior FCC approval, each share of Class B Common Stock shall
automatically be entitled to one vote per share and the holders of Class A
Common Stock and Class B Common Stock thereafter shall vote together as a single
class upon the election of all directors. In such event the holders of the Class
A Common Stock, along with the other holders of Class A Common Stock, could
attain voting control of the Company. The acquisition of voting control of the
Company by the holders of the Class A Common Stock could, but would not
necessarily, result in a Change of Ownership (as defined under the Credit
Agreement), a default event thereunder, or a Change of Control, which would
require the Company to offer to repurchase all the Subordinated Notes and New
Preferred Stock and which would result in a default under the Credit Agreement.
See "Description of the New Preferred Stock and Exchange Debentures -- New
Preferred Stock -- Change of Control" and "Description of Indebtedness -- Credit
Agreement -- Change of Control" and "-- Senior Subordinated Notes."
COMPETITION
The radio broadcasting industry is highly competitive. The Company's
stations compete for listeners and advertising revenue directly with other radio
stations, as well as with other media, within their respective markets. Several
of the stations with which the Company competes are subsidiaries of large
national or regional companies that have substantially greater resources than
the Company. In addition, certain of the Company's stations compete, and in the
future other of the Company's stations may compete, with duopolies or other
combinations of stations operated by a single operator. The success of each of
the Company's stations depends to a large degree upon its audience ratings and
its share of the overall radio advertising revenue within its market. An adverse
change in a particular market could have a material adverse effect on the
revenue of the Company's stations in that market. Although the Company believes
that each of its stations can compete effectively in its market, there can be no
assurance that any one of the Company's stations will be able to maintain or
increase its current audience share or revenue share. See
"Business -- Competition; Changes in the Broadcast Industry."
Radio broadcasting is also subject to competition from new media
technologies that are being developed or introduced, such as the delivery of
audio programming by cable television systems or the introduction of digital
audio broadcasting ("DAB"). DAB may deliver by satellite to nationwide and
regional audiences, multi-channel, multi-format digital radio services with
sound quality equivalent to compact discs. The Company cannot predict the
effect, if any, that any such new technologies may have on the radio
broadcasting industry or the Company. See "Business -- Competition; Changes in
the Broadcasting Industry."
GOVERNMENT REGULATION
Each of the Company's radio stations operates pursuant to one or more
licenses issued by the FCC, each of which must be renewed periodically. All of
such licenses are subject to renewal at various times during the
17
<PAGE> 20
next three years. The Company may apply to renew those licenses, and third
parties may challenge those applications or file competing applications.
Although the Company has no reason to believe that its licenses will not be
renewed in the ordinary course, there can be no assurance that the FCC will
renew the licenses. The non-renewal or revocation of one or more of the
Company's FCC licenses could have a material adverse effect on the Company's
results of operations.
The radio broadcasting industry is subject to extensive and changing
regulation. Among other things, the Communications Act and FCC rules and
policies require FCC consent to assignments of FCC licenses and transfers of
control of FCC licensees. See "Business -- Federal Regulation of Radio
Broadcasting."
FRAUDULENT CONVEYANCE
Various fraudulent conveyance laws have been enacted for the protection of
creditors and may be utilized by a court to subordinate or avoid the Exchange
Debentures in favor of other existing or future creditors of the Company. If a
court in a lawsuit on behalf of any unpaid creditor of the Company or a
representative of the Company's creditors were to find that, at the time the
Company issued the Exchange Debentures, the Company (x) intended to hinder,
delay or defraud any existing or future creditor or contemplated insolvency with
a design to prefer one or more creditors to the exclusion in whole or in part of
others or (y) did not receive fair consideration or reasonably equivalent value
for issuing such Exchange Debentures and the Company (i) was insolvent, (ii) was
rendered insolvent by reason of such issuance, (iii) was engaged or about to
engage in a business or transaction for which its remaining assets constituted
unreasonably small capital to carry on its business or (iv) intended to incur,
or believed that it would incur, debts beyond its ability to pay such debts as
they matured, such court could void the Company's obligations under the Exchange
Debentures and void such transactions. Alternatively, in such event, claims of
the holders of such Exchange Debentures could be subordinated to claims of the
other creditors of the Company.
CHANGE OF CONTROL
Upon a Change of Control, the Company will be required to offer to purchase
all of the shares of New Preferred Stock then outstanding at 101% of their then
effective liquidation preference, plus, without duplication, accumulated and
unpaid dividends to the repurchase date. If a Change of Control were to occur,
there can be no assurance that the Company would have sufficient funds to pay
the purchase price for all the shares of New Preferred Stock that the Company
might be required to purchase. Moreover, as of the date of this Prospectus, the
Company would not have sufficient funds available to purchase all of the
outstanding shares of New Preferred Stock pursuant to a Change of Control Offer
(as defined). In the event that the Company were required to purchase shares of
New Preferred Stock pursuant to a Change of Control Offer, the Company expects
that it would need to seek third-party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can be no
assurance that the Company would be able to obtain such financing on favorable
terms, if at all. In addition, the Credit Agreement restricts the Company's
ability to repurchase the shares of New Preferred Stock, including pursuant to a
Change of Control Offer. Also, a Change of Control will result in an event of
default under the Credit Agreement and will require the Company to offer to
repurchase all the outstanding Subordinated Notes. The inability of the Company
to repay the Credit Agreement, if the borrowings thereunder are accelerated upon
a Change of Control, or to repurchase all Subordinated Notes tendered in
response to the change of control offer required by the Indentures, would result
in an event of default under the Indentures and could result in the acceleration
of the Indebtedness thereunder. In such event, it is unlikely that the Company
would be able to repurchase shares of New Preferred Stock tendered in response
to a Change of Control Offer. See "Description of Indebtedness -- Credit
Agreement -- Change of Control" and "-- Senior Subordinated Notes".
LACK OF ESTABLISHED MARKET FOR THE NEW PREFERRED STOCK
Prior to the Exchange Offer, there has been no market for the Old Preferred
Stock. The Company does not intend to list the New Preferred Stock on any
securities exchange. BT Securities Corporation, CS First Boston Corporation,
Smith Barney Inc. and NationsBanc Capital Markets, Inc., the initial purchasers
of the Old Preferred Stock (the "Initial Purchasers"), have advised the Company
that they currently make a market
18
<PAGE> 21
in the Old Preferred Stock and intend to make a market in the New Preferred
Stock, but they are not obligated to do so and may discontinue market making
activities at any time. Accordingly, no assurance can be given as to (i) the
likelihood that an active market for the New Preferred Stock will develop, (ii)
the liquidity of any such market, (iii) the ability of holders to sell their New
Preferred Stock or (iv) the prices that they may obtain for their New Preferred
Stock upon any sale. Future trading prices for the New Preferred Stock will
depend upon many factors, including, among others, the Company's operating
results, the market for similar securities and fluctuating interest rates.
RECENT DEVELOPMENTS
On February 14, 1996, the Company completed the Shamrock Acquisition for
approximately $408.0 million, including acquisition costs.
On July 31, 1996, the Company exchanged, KTBZ-FM in Houston, plus
approximately $6.0 million in cash, for Secret's KALC-FM and KIMN-FM in Denver,
Colorado. The Company had been managing certain functions for the Denver
Stations pursuant to an LMA since April 1, 1996.
In January 1996, the Company entered into the Detroit Option Agreement with
Evergreen pursuant to which the Company granted Evergreen the option to buy, and
Evergreen Media granted the Company the option to sell, WWWW-FM and WDFN-AM in
Detroit for $30.0 million in cash. Pursuant to the Detroit Option Agreement, the
Company outsourced to Evergreen certain limited functions of the Detroit
Stations in exchange for an annual fee of $2.6 million to be paid to the
Company. The Company anticipates that it will enter into an definitive purchase
agreement shortly with Evergreen Media with respect to the sale of the Detroit
Stations. The proceeds of the sale of the Detroit Stations are expected to be
used to fund part of the purchase price for the Omni Stations.
On May 15, 1996, the Company entered into an agreement to acquire eight
Florida radio stations from Omni for an aggregate price of $178.0 million,
including $163.0 million of cash and $15.0 million of Chancellor's Class A
Common Stock. On June 24, 1996, the Company entered into a letter of intent with
American Radio under which, subject to negotiation of a definitive agreement,
the Company has agreed to exchange the West Palm Beach, Florida stations being
acquired from Omni for American Radio's AM station in Sacramento, California,
plus $33.0 million in cash. On July 1, 1996, the Company entered into an
agreement with SFX under which the Company will exchange the Jacksonville,
Florida stations being acquired from Omni and $11.0 million in cash for SFX's
three FM stations and one AM station in Long Island, New York. These acquisition
and exchange agreements are subject, among other things, to FCC approval.
Pursuant to LMAs, the Company began managing certain limited functions of the
Omni Orlando stations and the SFX Long Island stations on July 1, 1996, and will
begin managing certain limited functions of American Radio's Sacramento AM
station beginning August 1, 1996. Similarly, beginning July 1, 1996, SFX began
managing limited functions of the Jacksonville stations it has agreed to acquire
from the Company, and it is anticipated that American Radio will agree to manage
certain functions of the West Palm Beach stations once a definitive agreement is
reached with the Company. After giving effect to all of the foregoing
transactions, the Company will own four FM stations in Orlando, Florida, four FM
and two AM stations in Long Island, New York and two FM and two AM stations in
Sacramento, California. The aggregate net purchase price for the eight new
stations to be acquired, in the aggregate, from Omni, SFX and American Radio
will be approximately $156.0 million, excluding acquisition costs.
19
<PAGE> 22
USE OF PROCEEDS
The Company will not receive any cash proceeds from the exchange pursuant
to the Exchange Offer.
The net proceeds of the Original Offering (approximately $96.0 million)
were used to repurchase a portion of the Acquisition Preferred Stock from
affiliates of certain Initial Purchasers, together with the repurchase by
Chancellor of certain shares of its Class A Common Stock issued to affiliates of
the Initial Purchasers in connection with their purchase of the Acquisition
Preferred Stock, pursuant to an option (the "Repurchase Option") granted to the
Company and Chancellor by such purchasers at the time of the Preferred Stock
Financing, and to redeem all the remaining shares of Acquisition Preferred Stock
at a purchase and redemption price each equal to 96.5% of the effective
liquidation preference thereof, plus, without duplication, accumulated and
unpaid dividends thereon through the respective repurchase and redemption dates.
The Company issued and sold the Acquisition Preferred Stock in connection with
the financing of the Shamrock Acquisition. Affiliates of the Initial Purchasers
and of Hicks Muse were the purchasers of the Acquisition Preferred Stock. See
"Certain Transactions -- Purchase of Exchangeable Preferred Stock."
20
<PAGE> 23
CAPITALIZATION
The following table sets forth (i) the historical capitalization of the
Company at March 31, 1996 and (ii) the capitalization of the Company at March
31, 1996 on a pro forma basis after giving effect to the Denver Exchange and the
consummation of the Pending Transactions and, in each case, the financing
thereof. No effect has been given for other acquisition costs as they are not
currently estimable. This table should be read in conjunction with the
Consolidated Financial Statements of Chancellor Radio Broadcasting Company and
its Subsidiary and the Pro Forma Financial Information, and, in each case, the
related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------
ACTUAL PRO FORMA
-------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term Debt (including current maturities):
Credit Agreement:(1)
Revolving Loan Facility................................... $ 2,128 $ 4,428
Term Loan Facilities...................................... 95,000 190,000
12.5% Senior Subordinated Notes due 2004..................... 60,000 60,000
9.375% Senior Subordinated Notes due 2004.................... 200,000 200,000
-------- --------
Total Long-term Debt................................. 357,128 454,428
-------- --------
Old Preferred Stock ($100,000 initial liquidation
preference)(2)............................................... 97,652 --
New Preferred Stock ($100,000 initial liquidation
preference)(3)............................................... -- 97,452
-------- --------
Common Stockholder's Equity:
Common Stock................................................. 1 1
Paid-in Capital.............................................. 203,926 241,926
Accumulated Deficit.......................................... (22,208) (22,208)
-------- --------
Total Common Stockholder's Equity.................... 181,719 219,719
-------- --------
Total Capitalization................................. $636,499 $ 771,599
======== ========
</TABLE>
- ---------------
(1) The Credit Agreement currently provides for borrowings of up to $40.0
million under the Revolving Loan Facility and provides for a $95.0 million
Term Loan. See "Description of Indebtedness -- Credit Agreement." Based on
conversations with its agent bank, the Company believes it could obtain
additional term loan financing in an amount sufficient to fund the purchase
price of the Pending Transactions, after taking into account the receipt of
the proceeds from the Hicks Muse Equity Investment and the Detroit
Disposition. Accordingly, the table above reflects $95.0 million of
additional term loans and $2.3 million of borrowings under the Revolving
Loan Facility, which the Company would have been required to incur to fund
the Denver Exchange, the Pending Transactions and estimable acquisition
costs, had they occurred on March 31, 1996.
(2) The $100.0 million initial liquidation preference of the Old Preferred Stock
has been reduced to its carrying value by approximately $3.5 million of
estimated transaction costs and discounts and increased by approximately
$1.2 million of dividends and accretion.
(3) The $100.0 million initial liquidation preference of the New Preferred Stock
has been reduced to its carrying value by approximately $3.7 million of
estimated transaction costs and discounts and increased by approximately
$1.2 million of dividends and accretion.
21
<PAGE> 24
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information (the "Pro Forma
Financial Information") is based on the historical financial statements of the
Company, KDWB-FM, Shamrock Broadcasting, the Omni Stations and the Other Pending
Acquisitions, and has been prepared to illustrate the effects of the
acquisitions described below and the related financing transactions. The
historical financial statements of the Company, KDWB-FM, Shamrock Broadcasting
and the Omni Stations are included elsewhere in this Prospectus. The Pro Forma
Financial Information and accompanying notes should be read in conjunction with
such financial statements. No separate financial information is provided in this
Prospectus for the Other Pending Acquisitions because these acquisitions,
individually and in the aggregate, do not meet the minimum significance levels
under the Securities Act and the rules and regulations thereunder for purposes
of including financial information for businesses being acquired.
The pro forma condensed statements of operations for the year ended
December 31, 1995 and for the three months ended March 31, 1996 give effect to
(i) the acquisition of KDWB-FM and the related financing transactions, which
occurred on July 31, 1995, (ii) the Shamrock Acquisition, including certain
identified cost savings and the related financing transactions, which occurred
on February 14, 1996, (iii) the Denver Exchange and the financing thereof and
(iv) the Pending Transactions and the financing thereof, as if each such
transaction had occurred on January 1, 1995. The pro forma balance sheet as of
March 31, 1996 has been prepared as if the Denver Exchange and the Pending
Transactions and, in each case, the financing thereof, had occurred on that
date. The Pro Forma Financial Information is not necessarily indicative of
either future results of operations or the results that might have occurred if
the foregoing transactions had been consummated on the indicated dates.
The Denver Exchange will be accounted for using the historical cost of the
Houston station and the additional cash consideration paid. The Pending
Transactions will be accounted for using the purchase method of accounting. The
total purchase costs of the acquisitions and exchanges will be allocated to the
tangible and intangible assets and liabilities acquired based upon their
respective fair values. The allocation of the aggregate purchase price reflected
in the Pro Forma Financial Information is preliminary. The final allocation of
the purchase price is contingent upon the receipt of final appraisals of the
acquired assets; however, such allocation is not expected to differ materially
from the preliminary allocation. The purchases of KDWB-FM and Shamrock
Broadcasting were accounted for using the purchase method of accounting.
22
<PAGE> 25
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------------------------------
CHANCELLOR OTHER PRO
RADIO SHAMROCK OMNI PENDING FORMA
BROADCASTING BROADCASTING KDWB-FM(A) STATIONS ACQUISITIONS ADJUSTMENTS TOTAL
------------ ------------ ---------- -------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues....................... $ 64,322 $ 94,605 $ 893 $13,468 $ 20,713 $ (540)(B) $181,579
(11,882)(C)
--------- ------- ----- ------- ------- ----------- ---------
Station operating expenses......... 37,464 73,720 473 9,128 15,536 (540)(B) 113,226
(11,114)(C)
(11,441)(D)
Depreciation and amortization...... 9,047 8,751 518 1,576 3,802 5,900 (E) 29,594
Corporate expenses................. 1,816 3,139 -- -- 1,460 (2,615)(F) 3,800
Stock option compensation
expense.......................... 6,360 -- -- -- -- 6,360
--------- ------- ----- ------- ------- ----------- ---------
Operating income (loss).......... 9,635 8,995 (98) 2,764 (85) 7,388 28,599
Interest expense................... 17,324 14,703 -- 25 12,398 (G) 44,450
Other (income) expense............. 42 (78) 23 (264) (10) (287)
--------- ------- ----- ------- ------- ----------- ---------
Loss before provision for income
taxes and extraordinary loss... (7,731) (5,630) (121) 3,028 (100) (5,010) (15,564)
Provision for income taxes......... 3,800 (1,287) (93) -- -- 2,830 (H) 5,250
--------- ------- ----- ------- ------- ----------- ---------
Net income (loss)................ $(11,531) $ (4,343) $ (28) $ 3,028 $ (100) $ (7,840) (20,814)
========= ======= ===== ======= ======= ===========
Dividends and accretion on
preferred stock(I)............... 13,168
---------
Loss applicable to common shares... $(33,982)
=========
Deficiency of earnings to fixed
charges and preferred stock
dividends and accretion.......... $ 7,731 $ 28,732
</TABLE>
THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------------------------
CHANCELLOR OTHER PRO
RADIO SHAMROCK OMNI PENDING FORMA
BROADCASTING BROADCASTING STATIONS ACQUISITIONS ADJUSTMENTS TOTAL
------------ ------------ -------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Net revenues.................................... $ 25,642 $ 7,376 $3,436 $4,160 $(1,030)(C) $ 39,584
------- ------- ------ ------ ------- --------
Station operating expenses...................... 16,492 6,426 2,322 3,613 (448)(C) 26,505
(1,900)(D)
Depreciation and amortization................... 5,028 508 437 956 469 (E) 7,398
Corporate expenses.............................. 1,007 2,215 -- 87 (2,334)(F) 975
Stock option compensation expense............... 950 -- -- -- -- 950
------- ------- ------ ------ ------- --------
Operating income (loss)....................... 2,165 (1,773) 677 (496) 3,183 3,756
Interest expense................................ 7,145 1,380 10 2,578 (G) 11,113
Other (income) expense.......................... 6 49 1 314 -- 370
------- ------- ------ ------ ------- --------
Loss before provision for income taxes and
extraordinary loss.......................... (4,986) (3,202) 676 (820) 605 (7,727)
Provision for income taxes...................... 939 -- -- -- 374 (H) 1,313
------- ------- ------ ------ ------- --------
Net income (loss) before extraordinary loss... $ (5,925) $ (3,202) $ 676 $ (820) $ 231 (9,040)
======= ======= ====== ====== =======
Dividends and accretion on preferred stock(I)... 1,660 1,881 (N) 3,541
Loss on repurchase of preferred stock........... 16,570 (16,570)(O)
------- --------
Loss applicable to common shares................ (28,801) $(12,581)
======= ========
Deficiency of earnings to fixed charges and
preferred stock dividends and accretion....... $ 6,646 $ 11,268
</TABLE>
See Accompanying Notes to Pro Forma Financial Information.
23
<PAGE> 26
UNAUDITED PRO FORMA BALANCE SHEET
MARCH 31, 1996
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------
CHANCELLOR OTHER
RADIO OMNI PENDING PRO FORMA
BROADCASTING STATIONS ACQUISITIONS ADJUSTMENTS TOTAL
------------ -------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash............................................... $ 2,515 $ 877 $ 201 $ 3,593
Accounts receivable, net........................... 28,452 3,003 4,262 35,717
Prepaid expenses and other......................... 1,386 83 200 1,669
-------- ---- ---- -------- --------
Total current assets....................... 32,353 3,963 4,663 -- 40,979
Property and equipment, net.......................... 53,577 2,524 6,291 2,677(J) 65,069
Intangible and other assets, net..................... 587,357 18,794 42,674 55,954(J) 704,779
-------- ---- ---- -------- --------
Total assets............................... $673,287 $ 25,281 $ 53,628 $ 58,631 $810,827
======== ==== ==== ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt.................. $ 4,400 -- $ 4,400
Accounts payable and other accrued expenses........ 18,184 426 1,598 20,208
-------- ---- ---- -------- --------
Total current liabilities.................. 22,584 426 1,598 -- 24,608
Long-term debt....................................... 352,728 -- 97,540(K) 450,268
Deferred tax liability............................... 17,836 -- 17,836
Other................................................ 768 99 77 944
-------- ---- ---- -------- --------
Total liabilities.......................... 393,916 525 1,675 97,540 493,656
Old Preferred Stock ($100,000 initial liquidation
preference)........................................ 97,652 (97,652)(L) --
New Preferred Stock ($100,000 initial liquidation
preference)........................................ -- 97,452(L) 97,452
Common Stockholder's equity.......................... 181,719 24,756 51,953 (38,709)(M) 219,719
-------- ---- ---- -------- --------
Total liabilities and stockholder's
equity................................... $673,287 $ 25,281 $ 53,628 $ 58,631 $810,827
======== ==== ==== ======== ========
</TABLE>
See Accompanying Notes to Pro Forma Financial Information
24
<PAGE> 27
NOTES TO PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
(A) Includes amounts attributable to Midcontinent Radio of Minnesota, Inc. under
the terms of the local marketing agreement through the date of acquisition
of KDWB-FM by the Company. All other revenue and expense amounts for the
year are included in the historical amounts for the Company.
(B) The adjustment represents the elimination of time brokerage fees paid by the
Company in 1995 to Midcontinent Radio of Minnesota, Inc. from February 1,
1995 to July 31, 1995 pursuant to an LMA relating to KDWB-FM.
(C) Adjustment reflects the elimination of net revenues and station operating
expenses of the Houston station involved in the Denver Exchange and the
Detroit Stations involved in the Detroit Disposition.
(D) The adjustment reflects cost savings resulting from the elimination of
redundant operating expenses arising from the combination of the Company and
Shamrock Broadcasting, including the elimination of certain station
management positions, the standardization of employee benefits and
compensation practices and the implementation of operating strategies
currently utilized by the Company's management. The pro forma cost savings
are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1995 MARCH 31, 1996
----------------- ------------------
<S> <C> <C>
Selling expenses................................................... $ 3,135 $ 523
Programming and technical.......................................... 2,297 383
Advertising and promotions......................................... 2,554 422
General and administrative......................................... 3,455 572
------- ------
Total...................................................... $11,441 $1,900
======= ======
</TABLE>
(E) The adjustment reflects (i) a change in depreciation and amortization
resulting from conforming the estimated useful lives of the acquired
stations and (ii) the additional depreciation and amortization expense
resulting from the allocation of the purchase price of the acquired
stations, net of stations exchanged and sold, including an increase in
property and equipment and intangible assets to their estimated fair market
value and the recording of goodwill associated with the acquisitions.
Goodwill is amortized over 40 years.
(F) The adjustment reflects cost savings anticipated to be achieved by operating
all of the stations under the Company's decentralized management strategy
and from the elimination of redundant management costs.
(G) Represents the adjustment to historical interest expense as a result of the
notes issued in connection with the American Media Station Group ($60,000),
the Notes issued in conjunction with the Shamrock Acquisition ($200,000),
borrowings under the Credit Agreement, and anticipated new borrowings for
the pending acquisitions and exchanges under either the existing or a new
bank credit agreement (average outstanding principal balance of $193,969)
with an assumed blended annual interest rate of 9.8% for the year ended
December 31, 1995 and 9.4% for the three months ended March 31, 1996.
(H) The adjustment reflects the increase in the provision for income taxes
resulting from the deferred tax liabilities generated during the period for
the Company, the Omni Stations and the Other Pending Acquisitions, offset by
the reversal of book/tax basis differences of Shamrock Broadcasting during
the period.
(I) The adjustment reflects the dividends and accretion on the New Preferred
Stock.
(J) The adjustment reflects the allocation of the purchase price of the Omni
Stations and the Other Pending Acquisitions, net of the historical book
values of the Houston station exchanged, to the assets acquired and
liabilities assumed resulting in an increase in property and equipment and
intangible assets to their estimated fair values and the recording of
goodwill associated with the acquisitions.
<TABLE>
<S> <C>
Cash................................................................................... $ 1,078
Accounts receivable.................................................................... 7,265
Prepaid expenses and other............................................................. 283
Property and equipment................................................................. 11,492
Intangible and other assets............................................................ 117,422
Accounts payable and other accrued expenses............................................ (2,024)
Other liabilities...................................................................... (176)
--------
Total purchase price........................................................... $135,340
========
</TABLE>
(K) The adjustment represents the additional $95,000 of borrowings under the
existing or a new bank credit agreement that the Company anticipates
obtaining to finance the Pending Transactions.
(L) The adjustment reflects the exchange of the Old Preferred Stock for the New
Preferred Stock and the payment of related transaction costs.
(M) The adjustment reflects the issuance of the Chancellor's Class A Common
Stock in conjunction with acquisition of the Omni Stations ($15,000) and the
Hicks Muse Equity Investment ($23,000), offset by the elimination of the
historical stockholders' equity of the entities being acquired, as these
acquisitions will be accounted for using the purchase method of accounting.
(N) Represents the adjustment to historical dividends and accretion on preferred
stock resulting from the Old Preferred Stock and New Preferred Stock issued
in connection with the Shamrock Acquisition and the Exchange Offer,
respectively.
(O) The adjustment reflects the elimination of the "one-time" loss on repurchase
of preferred stock in connection with the repurchase and redemption of the
Acquisition Preferred Stock.
25
<PAGE> 28
SELECTED HISTORICAL FINANCIAL DATA
The selected financial data presented in the following tables has been
derived from audited financial statements (for the years ended December 31,
1992, 1993, 1994 and 1995) and from unaudited financial statements for the year
ended December 31, 1991 and for the three months ended March 31, 1995 and 1996.
In management's opinion, the unaudited financial statements from which such data
have been derived include all adjustments (consisting only of normal, recurring
adjustments) necessary to present fairly, in all material respects, the results
of operations and financial condition of the respective entities as of and for
the periods presented.
The following financial information should be read in conjunction with
"Management's Discussion and Analysis of Results of Operations and Financial
Condition," "Business," the Consolidated Financial Statements of Chancellor
Radio Broadcasting Company, and the Financial Statements of Old Chancellor
Communications and, in each case. the related notes thereto, included elsewhere
in this Prospectus.
THE COMPANY AND OLD CHANCELLOR COMMUNICATIONS
The selected financial data for the Company in the following table reflect
(i) the results of Old Chancellor Communications for the years ended December
31, 1991, 1992 and 1993 and (ii) the results of operations of the Company from
January 10, 1994. The Company acquired KFBK-AM and KGBY-FM on January 10, 1994,
the American Media station Group on October 12, 1994, KDWB-FM on July 31, 1995,
and Shamrock Broadcasting on February 13, 1996 and, accordingly, the results of
their operations are included in those of the Company since such dates,
respectively. In addition, the Company programmed and sold advertising for
KDWB-FM pursuant to an LMA from February 1, 1995 until its acquisition.
Accordingly, the revenues of KDWB and the fee paid under the LMA from February
1, 1995 through July 31, 1995 are reflected in the Company's results of
operations for 1995.
<TABLE>
<CAPTION>
OLD CHANCELLOR THE COMPANY(1)
COMMUNICATIONS -----------------------------------------
--------------------------- THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net revenues.................................. $10,372 $12,121 $14,717 $ 26,317 $ 64,322 $ 13,082 $ 25,642
Station operating expenses.................... 8,168 8,738 9,738 15,660 37,464 8,536 16,492
Depreciation and amortization................. 1,034 1,102 1,014 3,180 9,047 2,359 5,028
Corporate expenses............................ 565 544 568 600 1,816 370 1,008
Stock option compensation expense(2).......... -- -- -- -- 6,360 -- 950
Operating income.............................. 605 1,737 3,397 6,877 9,635 1,817 2,165
Interest expense.............................. 961 724 700 5,021 17,324 4,114 7,146
Net income (loss)............................. (366) 399 1,464 (106) (11,531) (3,483) (10,571)
OTHER DATA:
Broadcast cash flow........................... $ 2,204 $ 3,383 $ 4,979 $ 10,657 $ 26,858 $ 4,546 $ 9,150
Broadcast cash flow margin.................... 21.2% 27.9% 33.8% 40.5% 41.8% 34.8% 35.7%
EBITDA........................................ $ 1,639 $ 2,839 $ 4,411 $ 10,057 $ 25,042 $ 4,176 $ 8,143
Capital expenditures.......................... 460 86 8 239 1,710 337 820
Ratio of earnings to fixed charges(3)......... -- 2.17x 4.51x 1.35x -- -- --
Deficiency of earnings to fixed charges(3).... $ 359 $ -- $ -- $ -- $ 7,731 $ 2,288 $ 6,646
BALANCE SHEET DATA (END OF PERIOD):
Working capital, excluding current portion of
long-term debt.............................. $ 2,292 $ 2,304 $ 1,739 $ 6,178 $ 5,826 $ 4,189 $ 14,169
Goodwill and intangible assets, net........... 13,433 13,056 12,679 189,982 208,093 188,325 587,357
Total assets.................................. 21,611 20,542 19,275 219,576 241,123 217,565 673,287
Long-term debt (including current portion).... -- -- -- 151,664 172,170 150,000 357,128
Total common stockholder's equity............. 20,703 19,084 17,145 59,894 54,723 56,411 181,719
</TABLE>
- ---------------
(1) The historical financial data set forth for the Company includes the results
of operations of the American Media Station Group from its date of
acquisition in October 1994, of KDWB-FM from February 1995, the time the
Company began programming that station under an LMA, and the results of
operations of Shamrock Broadcasting from its date of acquisition in February
1996.
(2) Consists of a non-cash charge resulting from the grant of employee stock
options in 1994.
(3) For purposes of this calculation, "earnings" consist of income (loss) before
income taxes and fixed charges. "Fixed charges" consist of interest,
amortization of deferred financing costs and the component of rental expense
believed by management to be representative of the interest factor thereon.
Preferred Stock dividends and accretion are included in Fixed charges where
appropriate.
26
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
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 Prospectus. Periodically, the Company may make
statements about trends, future plans and the Company's prospects. Actual
results may differ materially from those described in such forward looking
statements based on the risks and uncertainties facing the Company, including
but not limited to, the following: business conditions and growth in the radio
broadcasting industry and general economy; competitive factors; changes in
interest rates; that one or more of the Company's broadcasting licenses may not
be renewed; and those 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 the Pending Transactions, the
Company will own and operate 41 radio stations serving the following top 40
markets: New York, New York; Los Angeles, California; San Francisco, California;
Atlanta, Georgia; Riverside-San Bernardino, California; Minneapolis-St. Paul,
Minnesota; Nassau-Suffolk (Long Island), New York; Phoenix, Arizona; Pittsburgh,
Pennsylvania; Denver, Colorado; Cincinnati, Ohio; Sacramento, California; and
Orlando, Florida. See "Recent Developments" for a more detailed description of
the Pending Transactions.
In the following analysis, management discusses the "broadcast cash flow"
of its 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.
A radio broadcast company's revenues come primarily from the sale of time
to local and national advertisers. Those revenues are affected by the
advertising rates that a radio station is able to charge and the number of
advertisements that can be broadcast without jeopardizing listener levels (and
the resulting ratings). Advertising rates tend to be based upon a station's
demand for its inventory and its ability to attract audiences in targeted
demographic groups, as measured principally by Arbitron. Radio stations attempt
to maximize revenues by adjusting advertising rates based upon local market
conditions, controlling inventory and creating demand and audience ratings.
Seasonal revenue fluctuations are common in the radio broadcasting industry
and are due primarily to fluctuations in advertising expenditures by local and
national advertisers, with revenues typically being lowest in the first quarter
and highest in the second and fourth quarters of each year. A radio station's
operating results in any period also may be affected by the occurrence of
advertising and promotional expenditures that do not produce commensurate
revenues in the period in which the expenditures are made. Because Arbitron
reports audience ratings on a quarterly basis, a radio station's ability to
realize revenues as a result of increased advertising and promotional expenses
and any resulting audience ratings improvements may be delayed for several
months.
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
its 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.
27
<PAGE> 30
RESULTS OF OPERATIONS
The Company's acquisitions, including the acquisition of KFBK-AM and
KGBY-FM in January 1994, the 11-station American Media Station Group in October
1994, the acquisition of KDWB-FM in July 1995, and the Shamrock Acquisition in
February 1996, have all been accounted for using the purchase method of
accounting. As a result of this acquisition activity, the Company's results of
operations are not directly comparable from period to period.
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31,
1995
Net revenues increased 96.0% to $25.6 million for the three months ended
March 31, 1996 from $13.1 million for the same period in 1995. The majority of
this increase was due to the acquisition of Shamrock Broadcasting. Revenue
growth for the Company's existing operations was approximately 6.3%.
Station operating expenses increased 93.2% to $16.5 million for the quarter
ended March 31, 1996 from $8.5 million for the quarter ended March 31, 1995. The
majority of this increase was due to the acquisition of Shamrock Broadcasting.
Operating expenses for existing operations increased approximately 3.4%.
In the first quarter of 1996, the Company recorded non-cash stock option
compensation expense related to compensatory stock options of Chancellor
Broadcasting Company granted in 1994. There was no corresponding charge for the
prior year.
Depreciation and amortization increased 113.2% to $5.0 million for the
first quarter of 1996 from $2.4 million for the same period in the prior year.
Interest expense increased 73.7% to $7.1 million from $4.1 million for the same
period. These increases, and the extraordinary loss on early extinguishment of
debt of $4.6 million in 1996, were primarily attributable to the acquisition of
Shamrock Broadcasting and the resulting change in capital structure from its
financing. Corporate expenses increased 172.6% to $1.0 million for the first of
Trefoil Communications, Inc. and its wholly owned subsidiary Shamrock
Broadcasting, Inc. ("Shamrock Broadcasting"), which owned and operated 19 radio
stations,three months of 1996 from approximately $370,000 for the same period in
1995, as a result of additional personnel and overhead costs associated with the
acquisition of Shamrock Broadcasting.
During the first quarter of 1996, the Company incurred a one-time loss of
$16.6 million on the repurchase of preferred stock of its subsidiary and
incurred charges for dividends and accretion on the repurchased and newly issued
preferred stock of its subsidiary of $0.5 million and $1.2 million,
respectively.
As a result of the foregoing, income from operations increased 19.2% to
$2.2 million for the first quarter of 1996 from $1.8 million over the same
period in 1995. The Company had a net loss of $12.2 million compared with a net
loss of $3.5 million for the first quarter of the prior year.
Broadcast cash flow increased 101.3% to $9.2 million for the three months
ended March 31, 1996 from $4.5 million for the comparable 1995 period. Broadcast
cash flow as a percentage of net revenues increased to 37.2% for 1996 from 34.7%
for 1995. Broadcast cash flow for existing operations increased 11.6% to $5.2
million for the three months ended March 31, 1996 from $4.7 million for the
comparable 1995 period. Broadcast cash flow as a percentage of net revenues for
existing operations increased to 36.6% for 1996 from 34.9% for 1995.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Net revenues increased 144.4% to $64.3 million for the year ended December
31, 1995 from $26.3 million for the year ended December 31, 1994. Station
operating expenses increased 139.2% to $37.5 million for the year ended December
31, 1995 from $15.7 million for the quarter ended March 31, 1995. The majority
of these increases were due to the acquisition of the American Media stations in
October 1994 and the acquisition/LMA for KDWB-FM beginning February 1, 1995.
In 1995 there was a $6.4 million non-cash stock option compensation expense
related to compensatory stock options of Chancellor Broadcasting Company granted
in 1994.
28
<PAGE> 31
Depreciation and amortization increased 184.5% to $9.0 million for the year
ended December 31, 1995 from $3.2 million for the same period in the prior year.
Interest expense increased 245.0% to $17.3 million for 1995 from $5.0 million
for the 1994 period. These increases, and the extraordinary loss on early
extinguishment of debt of $490,819 in 1994, were primarily attributable to the
acquisition of the American Media stations and the resulting change in capital
structure from its financing. See the discussion of "Liquidity and Capital
Resources" below. Corporate expenses increased 202.8% to $1.8 million for the
year ended December 31, 1995 from approximately $600,000 for the same period in
1994, as a result of additional personnel and overhead costs associated with the
acquisition of the American Media stations and the LMA for KDWB-FM.
As a result of the foregoing, income from operations increased 40.1% to
$9.6 million for the year ended December 31, 1995 from $6.9 million for the same
1994 period. The Company had a net loss of $11.5 million compared with a net
loss of $106,000 for the prior year.
Broadcast cash flow increased 152.0% to $26.9 million for the year ended
December 31, 1995 from $10.7 million for 1994. Broadcast cash flow as a
percentage of net revenues increased to 41.8% for 1995 from 40.5% for 1994.
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
Net revenues increased 78.8% to $26.3 million for the year ended December
31, 1994 from $14.7 million for the year ended December 31, 1993. Station
operating expenses increased 60.8% to $15.7 million for the year ended December
31, 1994 from $9.7 million for the year ended December 31, 1993. The majority of
these increases were due to the acquisition of the American Media stations in
October 1994.
Depreciation and amortization increased 213.6% to $3.2 million for the year
ended December 31, 1994 from $1.0 million for the same period in the prior year.
Interest expense increased 617.3% to $5.0 million for 1994 from $700,000 for the
same 1993 period. These increases, and the extraordinary loss on early
extinguishment of debt of $490,819 in 1994, were primarily attributable to the
acquisition of the American Media stations and the resulting change in capital
structure from its financing. Corporation expenses were relatively unchanged for
the two periods.
As a result of the foregoing, income from operations increased 102.4% to
$6.9 million for the year ended December 31, 1994 from $3.4 million for the same
prior year period. The Company had a net loss of $106,000 for the year ended
December 31, 1994 as compared to net income of $1.5 million for the year ended
December 31, 1993.
Broadcast cash flow increased 114.0% to $10.7 million for the year ended
December 31, 1994 from $5.0 million for 1993. Broadcast cash flow as a
percentage of net revenues increased to 40.5% for 1994 from 33.8% for 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company anticipates that it will consummate all of the Pending
Transactions by the end of January 1997. However, the closing of each of those
transactions is subject to FCC approval and other 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 finance the cash portion of
the Pending Transactions with the Hicks Muse Equity Investment proceeds
discussed below, the proceeds from the Detroit Disposition, cash flow from
operations, financing under its current credit agreement and new bank financing.
There can be no assurance that these sources of funds will be sufficient or that
additional sources of financing will be available to the Company on terms
considered favorable by management, if at all.
For the foreseeable future, excluding acquisitions, interest payments on
the Subordinated Notes and interest and principal payments under the Credit
Agreement will be the Company's principal uses of cash. The Company will not be
obligated to pay cash dividends on the New Preferred Stock through February 15,
2001. The Subordinated Notes require semiannual interest payments of $13.2
million, payable on each April 1 and
29
<PAGE> 32
October 1. Borrowings under the Credit Agreement bear interest at floating rates
and require interest payments on varying dates depending on the interest rate
option selected by the Company. The Credit Agreement consists of a $60.0 million
A Term Loan Facility, a $35.0 million B Term Loan Facility and a $40.0 million
Revolving Loan Facility. The A Term Loan Facility requires scheduled annual
principal payments, payable quarterly, of $4.0 million in the first year
following the Borrowing Date (February 14, 1996), $6.0 million in the second
year following the Borrowing Date, $10.0 million in each of the third and fourth
years following the Borrowing Date, $12.0 million in each of the fifth and sixth
years following the Borrowing Date and $6.0 million in the seventh year
following the Borrowing Date. The B Term Loan Facility requires scheduled annual
principal payments, payable quarterly, of $0.4 million in each of the first five
years following the Borrowing Date, $8.0 million in the sixth year following the
Borrowing Date, $14.0 million in the seventh year following the Borrowing Date
and $11.0 million in the eighth year following the Borrowing Date. All revolving
loans then outstanding will mature in 2002. See "Description of
Indebtedness -- Credit Agreement."
In connection with the Shamrock Acquisition and the financing thereof, HM
Fund II, an affiliate of Hicks Muse, advised the Company that, on or before
September 30, 1996, it would sell all of its capital stock in its affiliate,
HMW, or would cause HMW to sell all or substantially all of its assets (which
consisted primarily of six radio broadcast stations), and that it or HMW would
reinvest the net proceeds of such sale in Class A Common Stock of Chancellor. HM
Fund II has further agreed that, to the extent that such net proceeds are less
than $23.0 million, it will purchase additional shares of Class A Common Stock
in order that, in the aggregate, Chancellor will receive net proceeds of $23.0
million through the Hicks Muse Equity Investment. Chancellor has agreed to sell
to HM Fund II and/or to HMW, as appropriate, for $23.0 million in cash, that
number of shares of Class A Common Stock obtained by dividing (A) the difference
between (i) $23.0 million and (ii) interest on the notional amount of $23.0
million, which accrues from February 14, 1996 to, but not including, the date on
which the Hicks Muse Equity Investment is made at the lowest rate of interest
per annum paid or accrued under the Credit Agreement during such period, by (B)
the initial public offering price per share in the Initial Public Offering, less
the underwriting discount and commission per share. In June 1996, HMW effected
the sale of five of its radio stations to an affiliate of SFX and concurrently
entered into an asset purchase agreement with respect to the sale of its
remaining station. HM Fund II has advised Chancellor that it intends to
consummate the Hicks Muse Equity Investment on or about August 9, 1996. The
proceeds of the Hicks Muse Equity Investment will be contributed by Chancellor
to the capital of Chancellor Radio Broadcasting and are expected to be used to
fund part of the purchase price for the Pending Transactions. See "Certain
Transactions -- Hicks Muse Equity Investment."
Net cash flows from operating activities were $5.5 million and $0.7 million
for the year ended December 31, 1995 and 1994, respectively. Changes in the
Company's net cash flow from operating activities are primarily the result of
changes in advertising revenue, which have increased during these periods, and
the timing of its revenue receipts and its operating expense and interest
payments. The Company's revenues also experience some seasonal variations, with
revenues in the first quarter typically being the lowest for each year. The
Company mitigates these variations with revolving credit borrowings under its
existing credit agreement.
Net cash flows used in investing activities were $26.1 million and $204.7
million for the year ended December 31, 1995 and 1994, respectively. Net cash
flows from financing activities were $20.4 million and $205.6 million for the
year ended December 31, 1995 and 1994, respectively. These cash flows primarily
reflect the borrowings, capital contributions and expenditures for acquisitions.
In addition to acquisitions and debt service, the Company's principal
liquidity requirements will be for working capital and general corporate
purposes, including capital expenditures, which are not expected to be material
in amount. In addition to the Pending Transactions, the Company frequently
evaluates potential acquisitions of stations and station groups, including
station swap opportunities. The Company expects that any required financing for
acquisitions will be provided through the incurrence of debt, the sale of equity
securities, internally generated funds or a combination of the foregoing. There
can be no assurance, however, that external financing will be available to the
Company on terms considered favorable by management or that cash flow from
operations will be sufficient to fund the Company's acquisition strategy.
30
<PAGE> 33
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of " in March 1995, which establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. SFAS No. 121 will be effective for
the Company's financial statements beginning in 1996. The Company evaluates
intangible assets for potential impairment by analyzing the operating results,
trends and prospects of the Company's stations, as well as by comparing them to
their competitors. The Company also takes into consideration recent acquisition
patterns within the broadcast industry, the impact of recently enacted or
potential FCC rules and regulations and any other events or circumstances which
might indicate potential impairment. As a result of continued strong growth in
radio advertising revenue, and based upon recent valuations of various station
acquisitions in many of the Company's markets, management does not believe that
the implementation of SFAS No. 121 will have a material effect on its financial
statements.
The Financial Accounting Standards Board issued SFAS No. 123, "Accounting
for Stock Based Compensation" 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 in 1996. Management does not believe that the
implementation of SFAS 123 will have a material effect on its financial
statements.
31
<PAGE> 34
BUSINESS
GENERAL
The Company is one of the leading "pure play" radio broadcasting companies
in the United States. Upon completion of the Pending Transactions, the Company
will own and operate 41 radio stations (27 FM and 14 AM) located in 13 of the 40
largest MSAs in the country, including five of the top ten MSAs. The Company is
committed to acquiring and operating radio stations that management believes
will benefit from its strategies to maximize broadcast cash flow by increasing
revenues and controlling operating expenses. On a pro forma basis, after giving
effect to the Shamrock Acquisition, the Denver Exchange and the Pending
Transactions as if all such transactions had occurred on January 1, 1995, the
Company would have had net revenue and broadcast cash flow of $181.6 million and
$68.4 million, respectively, for the year ended December 31, 1995.
The Company focuses on owning and operating radio stations in the top 40
U.S. markets, which account for a disproportionately large percentage of radio
advertising revenue. The Company believes that the large revenue base in these
markets generally enables operators to achieve a greater degree of profitability
than operators in smaller markets. The Company also believes that because it
employs a variety of programming formats, including country, oldies, news/talk,
adult contemporary, progressive album rock, contemporary hit radio, sports and
classical, it is less susceptible to changes in listening preferences.
Furthermore, management believes that the number and diversity of its stations
and markets reduces the Company's dependence upon any local economy or
advertiser category. For the year ended December 31, 1995, on a pro forma basis
after giving effect to the Shamrock Acquisition, the Denver Exchange and the
Pending Transactions, no single market in which the Company operates would have
provided more than 12.2% of the Company's revenues.
The following table summarizes certain information relating to the
Company's stations as of December 31, 1995, assuming the consummation of the
Pending Transactions, and their respective markets.
<TABLE>
<CAPTION>
AUDIENCE
RADIO SHARE IN TARGET
METROPOLITAN REVENUE TARGET TARGET DEMO- STATION
MARKET AND STATION STATISTICAL MARKET DEMOGRAPHIC DEMO- GRAPHIC REVENUE
CALL LETTERS(1) AREA RANK RANK(2) GROUP GRAPHIC(3) RANK(3) RANK(3) FORMAT
- ------------------------------ ------------ ------- ----------- ---------- ------- ------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
New York 1 2
Adults
WHTZ-FM 18-34 7.2% 2 15 Contemporary Hit Radio
Los Angeles 2 1
Adults
KLAC-AM 25-54 2.3% 15(tie) 19 Country
KZLA-FM Women 25-54 2.3% 17(tie) N/A(4) Adult Standards
San Francisco 4 5
Adults
KNEW-AM 25-54 0.5% 39 N/A(4) Country/Sports
Adults
KSAN-FM 25-54 2.3% 14(tie) 16 Country
Adults
KABL-AM 35-64 1.9% 14(tie) N/A(4) Adult Standards
Adults
KBGG-FM 25-54 2.6% 12 13 70's Oldies
Atlanta 9 10
Adults
WFOX-FM 25-54 5.2% 9 10 Oldies
Riverside-San Bernardino 10 64
Adults
KGGI-FM 18-34 7.2% 2 2 Contemporary Hit Radio
KMEN-AM Men 25-54 -- -- -- Oldies
Minneapolis-St. Paul 12 14
KTCZ-FM* Men 25-49 5.4% 8 11 Progressive Album Rock
KTCJ-AM*
Adults
KDWB-FM 18-34 10.2% 3 6 Contemporary Hit Radio
Adults
KEEY-FM 25-54 6.1% 6(tie) 4 Country
KFAN-AM Men 18-49 3.7% 12 Sports
Nassau-Suffolk 14 44
(Long Island, N.Y.)
Adults
WALK-FM* 25-54 7.7% 1 1 Adult Contemporary
WALK-AM*
Adults
WBAB-FM(6)*+ 18-34 4.5% 7 2 Album Rock
WHFM-FM(6)*+ 12 Album Rock
WBLI-FM(6)+ Women 25-54 6.6% 2 4 Hot Adult Contemporary
Adults
WGBB-AM(6)+ 25-54 9 News/Talk
Phoenix 17 17
Adults
KMLE-FM 25-54 7.4% 1 3 Country
Pittsburgh 19 24
Adults
WWSW-AM* 25-54 9.2% 2 3 Oldies
WWSW-FM*
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
AUDIENCE
RADIO SHARE IN TARGET
METROPOLITAN REVENUE TARGET TARGET DEMO- STATION
MARKET AND STATION STATISTICAL MARKET DEMOGRAPHIC DEMO- GRAPHIC REVENUE
CALL LETTERS(1) AREA RANK RANK(2) GROUP GRAPHIC(3) RANK(3) RANK(3) FORMAT
- ------------------------------ ------------ ------- ----------- ---------- ------- ------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Denver 26 14
Adults
KXKL-AM* 25-54 6.6% 4 5 Oldies
KXKL-FM*
Adults
KVOD-FM 25-54 2.1% 14 14 Classical
Adults
KIMN-FM 25-54 5.5% 6 10 70's Oldies
Adults
KALC-FM 18-34 7.6% 5 9 Alternative CHR
Cincinnati 30 20
Adults
WUBE-FM 25-54 10.2% 2 2 Country
WUBE-AM Men 18-49 -- -- -- Sports
WYGY-FM Men 18-34 4.8% 7 N/A(5) Young Country
Adults
WKYN-AM+ 35-64 -- -- -- Retrospective Radio
Sacramento 34 25
KGBY-FM Women 25-54 10.6% 1 2 Adult Contemporary
Adults
KHYL-FM 25-54 6.7% 4 4 Oldies
Adults
KFBK-AM 25-54 8.3% 1 1 News/Talk
Adults
KSTE-AM(7)+ 25-54 3.9% 11 12 News/Talk
Orlando 39 26
Adults
WOCL-FM 25-54 6.9% 5 3 Oldies
WOMX-FM(8)+ Women 25-54 12.4% 1 2 Adult Contemporary
Adults
WJHM-FM(8)+ 25-54 5.4% 7 8 Urban
Adults
WXXL-FM(8)+ 18-34 10.1% 2 5 Contemporary Hit Radio
</TABLE>
- ---------------
* AM and FM stations are simulcasted.
+ Pending transaction.
(1) City of license may be different from metropolitan market served.
(2) Ranking by 1994 aggregate gross radio advertising revenue of the principal
MSA served by the station. Source: Duncan's.
(3) Audience share and ranking information pertains to the simulcasted stations
as a combination. Revenue rank for 1994 as reported by Miller Kaplan and
Hungerford (in the case of Nassau-Suffolk). Average Quarter Hour Share
Estimates, Monday through Sunday, 6 A.M. to Midnight for persons in the
target demographic and in the applicable Metro Survey Area. Source: Arbitron
Radio Market Report, based on the average of the four quarterly survey
periods consisting of Winter, Spring, Summer and Fall 1994.
(4) Station revenue reported in combination.
(5) WUBE-FM and WYGY-FM are sold in combination and rank second in revenue.
(6) The Company currently manages certain limited functions of stations WBAB-FM,
WBLI-FM, WHFM-FM and WGBB-AM in Nassau-Suffolk, New York, pursuant to an
LMA.
(7) The Company currently manages certain limited functions of station KSTE-AM
pursuant to an LMA.
(8) The Company manages certain limited functions of stations WOMX-FM, WHJM-FM
and WXXL-FM in Orlando, Florida, pursuant to an LMA.
33
<PAGE> 36
OPERATING STRATEGY
The Company's operating strategy is to maximize broadcast cash flow by
enhancing its stations' selling, programming and promotional efforts while
maintaining strict cost controls. The principal elements of this strategy are
set forth below.
Increased Emphasis on Sales. The Company emphasizes the development of
local sales forces dedicated to obtaining the largest possible share of the
radio advertising revenue in each market. Management monitors the size and
effectiveness of each station's sales force and, where appropriate, increases
the staffing level to support greater market coverage. Management believes that
higher staffing levels typically enable a station to better serve its existing
client base and to reach a greater number of potential advertisers, which
results in increased sales of the station's commercial time. In addition, the
Company continually evaluates its stations' inventory management practices to
ensure that pricing is maximized. The Company also implements training programs
designed to teach its sales personnel more effective selling techniques and to
promote more proactive market coverage and calling efforts. The Company utilizes
a sales reporting system to track the productivity of its sales personnel by
monitoring their daily calling frequency and success rate. Management receives
daily sales reports that track individual station booked sales for the current
and subsequent month. The Company believes that this reporting system increases
the sales force's accountability and enables management to increase the
effectiveness of each station's sales force. The Company's sales force is
primarily compensated through commissions on sales. Commission paid to sales
personnel range from 5% to 18% of net local revenue depending on the market and
the category (i.e., direct, agency, vendor) of revenue that a sales person
generates.
Targeted Programming Formats. The Company believes that consistent, focused
programming is a key element in sustaining high audience shares within its
targeted demographics. Therefore, management works closely with each station's
program director and engages outside consultants and research organizations to
evaluate and refine each station's overall programming, including its music
selection, on-air announcers, advertising campaigns and promotional efforts. In
addition, the Company evaluates whether an AM station that is simulcast with an
FM station has technical attributes that would allow it to be operated as a
stand-alone station with a separate format to take advantage of programming
niches and, consequently, revenue opportunities that might be available in a
market.
Focused Marketing and Promotional Efforts. The listening public's awareness
of and participation in contests and promotions of a station is vital to its
success. An effective promotional effort plays a significant role in a station's
success in adding new listeners and increasing time spent listening. The Company
allocates a large percentage of its promotional budget to cost-effective
activities such as on-air giveaways and contests, which management considers to
be effective in building public awareness and increasing audience time spent
listening, in contrast to marketing activities that are primarily aimed at
maintaining a station's image.
Skilled Local Staff and Management. In operating its stations, the Company
concentrates on developing experienced, highly motivated local management teams.
Local management is responsible for the day-to-day operations of the stations,
including the preparation of annual operating budgets in conjunction with
corporate management. The Company seeks to decentralize decision making so that
local managers have the flexibility to develop policies that they consider to be
effective in improving station performance in their respective markets. To
further motivate senior station management, compensation is linked to each
station's operating performance. The Company believes that this operating style
enhances local management's creativity and supports its ability to attract and
retain skilled management.
Strict Cost Control. Management believes that it is critical to increase
employee productivity and to maintain the lowest possible cost structure
compatible with its revenue enhancement strategy. Strict financial reporting
standards and cost control measures have been implemented to ensure a focus on
profitability throughout the organization. Management receives daily cash
reports that track station-level revenues, collections and expenses. This
enables management to monitor station performance and to establish greater
accountability throughout the station group.
34
<PAGE> 37
Selective Acquisitions. The Company has grown largely through acquisitions,
as well as through internally generated growth. The Company's acquisition
strategy is to purchase radio stations or radio station groups operating in top
40 markets that possess programming, demographic, technical and operating
attributes that management believes it can exploit.
DEVELOPMENT OF THE COMPANY
The Company conducts its operations through Chancellor Radio Broadcasting
and its subsidiaries. Chancellor and Chancellor Radio Broadcasting were formed
in June 1994 to facilitate the acquisition by an investor group led by Steven
Dinetz and Hicks Muse of Chancellor Communications, which was formed by Mr.
Dinetz and Hicks Muse in December 1993 as a vehicle for the acquisition of
KFBK-AM and KGBY-FM in Sacramento.
The Company and its predecessor, Chancellor Communications, which was
merged into the Company in December 1995, have completed four acquisitions of
radio stations or radio station groups since the beginning of 1994. The first of
these acquisitions was completed in January 1994 by Chancellor Communications,
which purchased KFBK-AM and KGBY-FM in Sacramento, two of the leading stations
in that market. In October 1994, the Company acquired the capital stock of
Chancellor Communications and contemporaneously completed the acquisition of the
11 radio stations comprising the American Media Station Group, which enabled the
Company to enter five additional top 40 markets, to create an FM duopoly in
Sacramento and to acquire an existing FM duopoly in Cincinnati. In February
1995, the Company entered into an LMA with respect to, and in July 1995
subsequently acquired, KDWB-FM in Minneapolis-St. Paul, which created the
Company's third duopoly and enhanced its competitive position in that market. In
February 1996, the Company completed the acquisition of Shamrock Broadcasting,
the owner and operator of 19 stations (including stations in nine markets where
the Company had no previous operations) in 10 of the largest markets in the
United States, including stations in seven of the top ten MSAs. For a discussion
of the Company's pending acquisition and divestiture transactions, see "Recent
Developments."
INDUSTRY OVERVIEW
Radio stations generate the majority of their revenue from the sale of
advertising time to local and national spot advertisers and national network
advertisers. Radio serves primarily as a medium for local advertising. During
the past decade, local advertising revenue as a percentage of total radio
advertising revenue in a given market has ranged from approximately 74% to 78%.
The growth in total radio advertising revenue tends to be fairly stable and has
generally grown at a rate faster than the Gross National Product ("GNP"). With
the exception of 1991, when total radio advertising revenue fell by
approximately 3.1% compared to the prior year, advertising revenue has risen in
each of the past 15 years more rapidly than either inflation or the GNP. Total
advertising revenue in 1994 of $11.0 billion, as reported by RAB, was its
highest level in the industry's history.
Radio is considered an efficient means of reaching specifically identified
demographics. Stations are typically classified by their on-air format, such as
country, adult contemporary, oldies and news/talk. A station's format and style
of presentation enable it to target certain demographics and psychographics. By
capturing a specific listening audience share of a market's radio audience, with
particular concentration in a targeted demographic, a station is able to market
its broadcasting time to advertisers seeking to reach a specific audience.
Advertisers and stations utilize data published by audience measuring services,
such as Arbitron, to estimate how many people within particular geographical
markets and demographics listen to specific stations.
Stations determine the number of advertisements broadcast hourly that they
believe will maximize available revenue dollars without jeopardizing listening
levels. Although the number of advertisements broadcast during a given time
period may vary, the total number of advertisements broadcast on a particular
station generally does not vary significantly from year to year.
A station's local sales staff generates the majority of its local and
regional advertising sales through direct solicitations of local advertising
agencies and businesses. To generate national advertising sales, a station will
35
<PAGE> 38
engage a firm that specializes in soliciting radio advertising sales on a
national level. National sales representatives obtain advertising principally
from advertising agencies located outside the station's market and receive
commissions based on the revenue from the advertising obtained.
According to the RAB's Radio Marketing Guide and Fact Book for Advertisers,
1993-1994, each week, radio reaches approximately 96% of all Americans over the
age of 12. More than one-half of all radio listening is done outside the home,
in contrast to other advertising mediums, and three out of four adults are
reached by car radio each week. The average listener spends approximately three
hours and 20 minutes per day listening to radio. The highest portion of radio
listenership occurs during the morning, particularly between the time a listener
wakes up and the time the listener reaches work. This "morning drive time"
period reaches more than 85% of people over 12 years of age and, as a result,
radio advertising sold during this period achieves premium advertising rates.
Radio listeners have gradually shifted over the years from AM (amplitude
modulation) to FM (frequency modulation) stations. FM reception, as compared to
AM, is generally clearer and provides greater tonal range and higher fidelity.
FM's listener share is now in excess of 75%, despite the fact that the number of
AM and FM commercial stations in the United States is approximately equal.
COMPETITION; CHANGES IN THE BROADCASTING INDUSTRY
The radio broadcasting industry is a highly competitive business. The
success of each of the Company's stations depends largely upon its audience
ratings and its share of the overall advertising revenue within its market. The
Company's stations compete for listeners and advertising revenue directly with
other radio stations within their respective markets. Radio stations compete for
listeners primarily on the basis of program content, that appeals to a target
demographic. By building a strong listener base consisting of a specific
demographic in each of its markets, the Company is able to attract advertisers
seeking to reach those listeners.
Factors that are material to a station's competitive position include
management experience, the station's rank in its market, transmitter power,
assigned frequency, audience characteristics, local program acceptance, and the
number and characteristics of other stations in the market area. The Company
attempts to improve its competitive position with promotional campaigns aimed at
the demographics targeted by its stations and by sales efforts designed to
attract advertisers. Recent changes in the FCC's policies and rules permit
increased ownership and operation of multiple local radio stations. Management
believes that radio stations which elect to take advantage of these joint
arrangements may in certain circumstances have lower operating costs and may be
able to offer advertisers more attractive rates and services. Although the
Company operates two or more FM or AM stations in Cincinnati, Denver,
Minneapolis-St. Paul, Sacramento, and San Francisco and, assuming the
consummation of the Pending Transactions, Long Island and Orlando, the Company's
competitors in certain markets include operators of multiple stations in those
markets or operators who already have entered into local marketing agreements.
Although the radio broadcasting industry is highly competitive, some
barriers to entry exist. The operation of a radio broadcast station requires a
license from the FCC and the number of radio stations that can operate in a
given market is limited by the availability of FM and AM radio frequencies
allotted by the FCC to communities in that market, as well as by the FCC's
multiple ownership rules, which regulate the number of stations that may be
owned and controlled by a single entity. The FCC's multiple ownership rules have
changed significantly as a result of the Telecommunications Act of 1996 (the
"Telecom Act"), enacted into law in February 1996. For a discussion of FCC
regulation and the provisions of the Telecom Act, see "Business -- Federal
Regulation of Radio Broadcasting."
The Company's stations also compete for advertising revenue with other
media, including newspapers, broadcast television, cable television, magazines,
direct mail, coupons and outdoor advertising. In addition, the radio
broadcasting industry is subject to competition from new media technologies that
are being developed or introduced, such as the delivery of audio programming by
cable television systems, by satellite and by digital audio broadcasting
("DAB"). The radio broadcasting industry historically has grown despite the
introduction of new technologies for the delivery of entertainment and
information, such as broadcast television, cable television, audio tapes and
compact disks. A growing population and greater availability of radios,
particularly car and portable radios, have contributed to this growth. There can
be no assurance, however, that the development or introduction in the future of
any new media technology will not have an adverse effect on the radio
broadcasting industry.
36
<PAGE> 39
The FCC is currently considering whether to authorize the use of DAB to
deliver audio programming. DAB may provide a medium for the delivery by
satellite or terrestrial means of multiple new, high quality audio programming
formats to local and national audiences. This technology also may be used in the
future by radio broadcast stations either on existing or alternate broadcasting
frequencies or on new frequency bands. In addition, the FCC has authorized an
additional 100 kHz of band width for the AM band and has allocated frequencies
in this new band to certain existing AM station licensees. Each such licensee,
at the end of a five-year transition period for the licensee, which period may
be extended through FCC waivers, is required to return to the FCC either the
license for their existing AM band station or the license for the expanded AM
band station.
The Company cannot predict what other matters might be considered in the
future by the FCC, nor can it assess in advance what impact, if any, the
implementation of any of these changes might have on its business.
FEDERAL REGULATION OF RADIO BROADCASTING
The ownership, operation and sale of radio stations are subject to the
jurisdiction of the FCC, which acts under authority granted by the
Communications Act of 1934, as amended (the "Communications Act"). Among other
things, the FCC assigns frequency bands for broadcasting; determines the
particular frequencies, locations and operating power of stations; issues,
renews, revokes and modifies station licenses; determines whether to approve
changes in ownership or control of station licenses; regulates equipment used by
stations; and adopts and implements regulations and policies that directly
affect the ownership, operation and employment practices of stations. The FCC
has the power to impose penalties for violation of its rules or the
Communications Act.
The following is a brief summary of certain provisions of the
Communications Act and of specific FCC regulations and policies. Reference
should be made to the Communications Act, FCC rules and the public notices and
rulings of the FCC for further information concerning the nature and extent of
federal regulation of radio stations.
FCC Licenses. Radio stations operate pursuant to broadcasting licenses that
are presently granted by the FCC for maximum terms of seven years and are
subject to renewal upon application to the FCC. The FCC licenses for the
Company's stations are held by certain of the Company's subsidiaries. During
certain periods when a renewal application is pending, petitions to deny license
renewals can be filed by interested parties, including members of the public.
Historically, the Company's management has not experienced any material
difficulty in renewing any licenses for stations under its control. The FCC is
required to hold hearings on a station's renewal application if a substantial or
material question of fact exists as to whether (a) the station has served the
public interest, convenience or necessity or (b) there have been serious
violations of the Communications Act or the FCC rules thereunder or (c) there
have been other violations of the Communications Act or the FCC rules thereunder
which, taken together, constitute a patter of abuse.
The FCC classifies each AM and FM station. An AM station operates on either
a clear channel, regional channel or local channel. A clear channel is one on
which AM stations are assigned to serve wide areas. Clear channel AM stations
are classified as either: Class A stations, which operate unlimited time and are
designated to render primary and secondary service over an extended area; Class
B stations; which operate unlimited time and are designed to render service only
over a primary service area; and Class D stations, which operate either daytime,
limited time, or unlimited time with low nighttime power. A regional channel is
one on which Class B and Class D AM stations may operate and serve primarily a
principal center of population and the rural areas contiguous to it. A local
channel is one on which AM stations operate unlimited time and serve primarily a
community and the suburban and rural areas immediately contiguous thereto. Class
C AM stations operate on a local channel and are designed to render service only
over a primary service area that may be reduced as a consequence of
interference.
The minimum and maximum facilities requirements for an AM station are
determined by its class. FM class designations depend upon the geographic zone
in which the transmitter of the FM station is located. In
37
<PAGE> 40
general, commercial FM stations are classified as follows, in order of
increasing power and antenna height: Class A, B1, B, C1 or C stations.
The following table sets forth the market, FCC license classification,
antenna height above average terrain (HAAT), power and frequency of each of the
Company's stations, assuming the consummation of the Pending Transactions, and
the date on which each station's FCC license expires. Each of the Company's AM
stations is a regional channel station other than WUBE-AM and WGBB-AM, which are
local channel stations, and KFBK-AM which is a clear channel station.
<TABLE>
<CAPTION>
HAAT
FCC IN POWER IN EXPIRATION DATE
MARKET(1) STATION CLASS FEET KILOWATTS(2) FREQUENCY OF FCC LICENSE
- ------------------------------------------------- ----- ---- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
New York WHTZ-FM B 1362 6.0 100.3 Mhz June 1998
Los Angeles KLAC-AM B N/A 5.0 570 kHz December 1997
KZLA-FM B 3137 18.7 93.9 Mhz December 1997
San Francisco KNEW-AM B N/A 5.0 910 kHz December 1997
KSAN-FM(3) B 1211 30.0 94.9 Mhz December 1997
KABL-AM B N/A 5.0 960 kHz December 1997
KBGG-FM B 961 100.0 98.1 Mhz December 1997
Atlanta WFOX-FM C 1572 97.0 97.1 Mhz April 2003
Riverside- KGGI-FM B 1844 2.6 99.1 Mhz December 1997
San Bernardino KMEN-AM B N/A 5.0 1290 kHz December 1997
Minneapolis-St. Paul KTCZ-FM C 1034 100.0 97.1 Mhz April 1997
KTCJ-AM B N/A 0.5/0.004 690 kHz April 1997
KDWB-FM C 1034 100.0 101.3 Mhz April 1997
KFAN-AM(4) B N/A 50.0/25.0 1130 kHz April 1997
KEEY-FM C 1034 100.0 102.1 Mhz April 1997
Nassau-Suffolk WALK-FM B 554 39.0 97.5 Mhz June 1998
WALK-AM B N/A 0.5/0.1 1370 kHz June 1998
WBAB-FM(5)+ A 269 3.0 102.3 Mhz June 1998
WBLI-FM(5)+ B 499 48.5 106.1 Mhz June 1998
WHFM-FM(5)+ A 354 5.0 95.3 Mhz June 1998
WGBB-AM(5)+ C N/A 1.0 1240 kHz June 1998
Phoenix KMLE-FM C 1736 96.0 107.9 Mhz October 1997
Pittsburgh WWSW-AM B N/A 5.0 970 kHz August 1998
WWSW-FM B 810 50.0 94.5 Mhz August 1998
Denver KXKL-AM B N/A 5.0 1280 kHz April 1997
KXKL-FM C 1168 100.0 105.1 Mhz April 1997
KVOD-FM C1 1237 57.0 92.5 Mhz April 1997
KIMN-FM C 1152 97.0 100.3 Mhz April 1997
KALC-FM C 1470 99.0 105.9 Mhz April 1997
Cincinnati WUBE-FM B 915 14.5 105.1 Mhz October 1996
WUBE-AM C N/A 1.0 1230 kHz October 1996
WYGY-FM B 810 19.5 96.5 Mhz October 1996
WKYN-AM(6)+ B N/A 5.0/0.9 1160 kHz October 1996
Sacramento KGBY-FM B 449 50.0 92.5 Mhz December 1997
KHYL-FM B 557 36.0 101.1 Mhz December 1997
KFBK-AM A N/A 50.0 1530 kHz December 1997
KSTE-AM(7)+ B N/A 21.0/0.9 650 kHz December 1997
Orlando WOCL-FM(8)+ C 1581 100.0 105.9 Mhz February 2003
WOMX-FM(8)+ C 1598 100.0 105.1 Mhz February 2003
WJHM-FM(8)+ C1 1585 28.2 101.9 Mhz February 2003
WXXL-FM(8)+ C1 824 100.0 106.7 Mhz February 2003
</TABLE>
- ---------------
+ Pending transaction.
(1) Actual city of license may be different from metropolitan market served.
38
<PAGE> 41
(2) Pursuant to FCC rules and regulations, many AM radio stations are licensed
to operate at a reduced power during nighttime broadcasting hours, which
results in reducing the radio station's coverage area during those hours of
operation. Both power ratings are shown, where applicable.
(3) Station KSAN-FM is currently operating under special temporary authority
("STA") from an alternate antenna site while its tower is being rebuilt.
(4) Station KFAN-AM is currently operating under an STA with parameters at
variance from its license while repairs are being made to its antenna
system.
(5) The Company currently performs and manages certain limited functions of the
Nassau-Suffolk stations pursuant to an LMA.
(6) The Company manages certain limited functions of Station WKYN-AM pursuant
to an LMA.
(7) The Company currently manages certain limited functions of station KSTE-AM
pursuant to an LMA.
(8) The Company manages certain limited functions of stations WOMX-FM, WHJM-FM
and WXXL-FM in Orlando, Florida, pursuant to an LMA.
Ownership Matters. The Communications Act prohibits the assignment of a
license or the transfer of control of a broadcast licensee without the prior
approval of the FCC. In determining whether to grant or renew a broadcast
license, the FCC considers a number of factors pertaining to the licensee,
including compliance with the various rules limiting common ownership of
broadcast, cable and newspaper properties, the "character" of the licensee and
those persons holding "attributable" interests therein, and compliance with the
Communications Act's limitations on alien ownership as well as compliance with
other FCC policies, including its equal employment opportunity requirements.
Historically, FCC licenses have generally been renewed. The Company has no
reason to believe that its licenses will not be renewed in the ordinary course,
although there can be no assurance to that effect. The non-renewal of one or
more of the Company's licenses could have a material and adverse effect on the
Company's results of operations, financial condition and cash flow.
In response to the Telecommunications Act, the FCC amended its multiple
ownership rules to eliminate the national limits on ownership of AM and FM
stations, i.e., the former 20 stations per service ownership cap. Additionally,
it established new local ownership rules that use a sliding scale of permissible
ownership, depending on market size. In radio markets with 45 or more commercial
radio stations, a licensee may own up to eight stations, no more than five of
which can be in a single radio service (i.e., no more than 5 AM or 5 FM). In
radio markets with 30 to 44 commercial radio stations, a licensee may own up to
seven stations, no more than four of which are in a single radio service. In
radio markets having 15 to 29 commercial radio stations, a licensee may own up
to six radio stations, no more than four of which are in a single radio service.
Finally, with respect to radio markets having 14 or fewer commercial radio
stations, a licensee may own up to five radio stations, no more than three of
which are in the same service; provided that the licensee may not own more than
one half of the radio stations in the market.
The Communications Act and FCC rules also prohibit the common ownership,
operation or control of a radio broadcast station and a television broadcast
station serving the same geographic market (subject to a waiver of such
prohibition if certain conditions are satisfied) and of a radio broadcast
station and a daily newspaper serving the same geographic market. Under these
rules, absent waivers, the Company would not be permitted to acquire any
newspaper or television broadcast station (other than low-power television) in
any geographic market in which it now owns radio broadcast properties.
The FCC generally applies its ownership limits to "attributable" interests
held by an individual, corporation, partnership or other association. In the
case of corporations holding broadcast licenses, the interest of officers,
directors and those who, directly or indirectly, have the right to vote 5% or
more of the corporation's voting stock (or 10% or more of such stock in the case
of insurance companies, investment companies and bank trust departments) are
generally attributable, as are positions as an officer or director of a
corporate parent of a broadcast licensee.
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<PAGE> 42
The Communications Act prohibits the issuance of broadcast licenses to, or
the holding of a broadcast license by, any corporation of which more than 20% of
the capital stock is owned of record or voted by non-U.S. citizens or their
representatives or by a foreign government or a representative thereof, or by
any corporation organized under the laws of a foreign country (collectively,
"Aliens"). The Communications Act also authorizes the FCC, if the FCC determines
that it would be in the public interest, to prohibit the issuance of a broadcast
license to, or the holding of a broadcast license by, any corporation directly
or indirectly controlled by any other corporation of which more than 25% of the
capital stock is owned of record or voted by non-U.S. citizens or their
representatives or by a foreign government or representative thereof, or by any
corporation organized under the laws of a foreign country. The Company has been
advised that the FCC staff has interpreted this provision to require a public
interest finding in favor of such a grant or holding before a broadcast license
may be granted to or held by any such corporation and have made such a finding
only in limited circumstances. The FCC has issued interpretations of existing
law under which these restrictions in modified form apply to other forms of
business organizations, including partnerships. As a result of these provisions,
the licenses granted to the radio station subsidiaries of the Company by the FCC
could be revoked if, among other restrictions imposed by the FCC, more than 25%
of the Company's stock was owned or voted by Aliens. Accordingly, Chancellor's
Second Restated Certificate of Incorporation restricts the ownership, voting and
transfer of the Company's capital stock, in accordance with the Communications
Act and the rules of the FCC, which prohibits ownership of more than 25% of
Chancellor's outstanding capital stock (or more than 25% of the voting rights it
represents) by or for the account of Aliens or corporations otherwise subject to
domination or control by Aliens. In addition, the Second Restated Certificate of
Incorporation of Chancellor authorizes its board of directors to adopt such
provisions as it deems necessary to enforce these prohibitions.
Local Marketing Agreements. Over the past three years, a number of radio
stations have entered into what have commonly been referred to as "local
marketing agreements," or "LMAs." While these agreements may take varying forms,
under a typical LMA, separately owned and licensed radio stations agree to enter
into cooperative arrangements of varying sorts, subject to compliance with the
requirements of antitrust laws and with the FCC's rules and policies. Under
these arrangements, separately-owned stations could agree to function
cooperatively in programming, advertising, sales and similar matters, subject to
the licensee of each station maintaining independent control over the
programming and operations of its own station. One typical type of LMA is a
programming agreement between two separately-owned radio stations serving a
common service area, where the licensee of one station programs substantial
portions of the broadcast day on the other licensee's station, subject to
ultimate editorial and other controls being exercised by the latter licensee,
and sells advertising time during those program segments. Such arrangements are
an extension of the concept of "time brokerage" agreements, under which a
licensee of a station sells blocks of time on its station to an entity or
entities that program the blocks of time and sell their own commercial
advertising announcements during the time periods in question.
In the past, the FCC has determined that issues of joint advertising sales
should be left to enforcement by antitrust authorities and has specifically
revised its so-called "cross-interest" policy to make that policy inapplicable
to time brokerage arrangements (under this policy, the FCC in certain
circumstances may prohibit one party from acquiring non-attributable economic
interests in two broadcast stations in the same market). Furthermore, in recent
years, the staff of the FCC's Mass Media Bureau has held that LMAs are not
contrary to the Communications Act provided that the licensee of the station
that is being substantially programmed by another entity maintains complete
responsibility for, and control over, programming and operations of its
broadcast station and assures compliance with applicable FCC rules and policies.
The FCC's multiple ownership rules specifically permit radio station LMAs
to continue to be entered into and implemented, but provide that a station
brokering more than 15% of the weekly broadcast time on another station serving
the same market will be considered to have an attributable ownership interest in
the brokered station for purposes of the FCC's multiple ownership rules. As a
result, the Company would not be permitted to enter into an LMA with another
local radio station that it could not own under the revised local ownership
rules, unless the Company's programming could constitute 15% or less of the
other local station's programming time on a weekly basis. The FCC rules also
prohibit a broadcast licensee from simulcasting more than 25% of its programming
on another station in the same broadcast service (i.e., AM-AM or FM-FM) through
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<PAGE> 43
a time brokerage or LMA arrangement where the brokered and brokering stations
which it owns or programs serve substantially the same area.
Programming and Operation. The Communications Act requires broadcasters to
serve the "public interest." The FCC gradually has relaxed or eliminated many of
the more formalized procedures it had developed in the past to promote the
broadcast of certain types of programming responsive to the needs of a station's
community of license. A licensee continues to be required, however, to present
programming that is responsive to issues of the station's community, and to
maintain certain records demonstrating such responsiveness. Complaints from
listeners concerning a station's programming often will be considered by the FCC
when it evaluates renewal applications of a licensee, although listener
complaints may be filed at any time and generally may be considered by the FCC
at any time. Stations also must follow various rules promulgated under the
Communications Act that regulate, among other things, political advertising,
sponsorship identifications, the advertisement of contests and lotteries,
obscene and indecent broadcasts, and technical operations, including limits on
radio frequency radiation. In addition, licensees must develop and implement
affirmative action programs designed to promote equal employment opportunities
and must submit reports to the FCC with respect to these matters on an annual
basis and in connection with a renewal application.
Failure to observe these or other rules and policies can result in the
imposition of various sanctions, including monetary forfeitures, the grant of
"short term" (less than the full term) renewal or, for particularly egregious
violations, the denial of a license renewal application or the revocation of a
license.
Proposed and Recent Changes. On December 15, 1994, the FCC solicited
updated comment on whether it should liberalize its radio and television
broadcast ownership "attribution" rules by (i) raising the basic benchmark for
attributing ownership in a corporate licensee from 5% to 10% of the licensee's
voting stock; (ii) increasing from 10% to 20% of the licensee's voting stock the
attribution benchmark for "passive investors" in corporate licensees; and (iii)
exempting certain widely-held limited partnership interests from attribution
where each individual interest represents an insignificant percentage of total
partnership equity. The same proceeding also solicits comment on proposals that
may limit broadcast ownership rules by considering minority stockholdings in
corporations with a single majority shareholder or non-voting stock interests
that have heretofore been unattributable.
Moreover, Congress and the FCC have under consideration, and in the future
may consider and adopt new rules, regulations and policies regarding a wide
variety of matters that could affect, directly or indirectly, the operation,
ownership and profitability of the Company's radio stations, result in the loss
of audience share and advertising revenues for the Company's radio stations, and
affect the ability of the Company to acquire additional radio stations or to
finance those acquisitions. Such matters include: spectrum use or other fees on
FCC licenses; revisions to the FCC's equal employment opportunity rules and
other matters relating to political broadcasting; technical and frequency
allocation matters; proposals to restrict or prohibit the advertising of beer,
wine and other alcoholic beverages on radio; changes in the FCC's
cross-interest, multiple ownership and cross-ownership policies; changes to
broadcast technical requirements; proposals to allow telephone companies to
deliver audio and video programming to the home through existing phone lines;
new technologies such as DAB; proposals to limit the tax deductibility of
advertising expenses by advertisers; and proposals to auction the right to use
the radio broadcast spectrum to the highest bidder, instead of granting FCC
licenses and subsequent license renewals.
The Company cannot predict what other matters might be considered in the
future, nor can it judge in advance what impact, if any, the implementation of
any of these proposals or changes might have on its business.
Federal Antitrust Laws. In addition to the risks associated with the
acquisition of radio stations, the Company also is aware that the Federal Trade
Commission and the United States Department of Justice, which evaluate
transactions requiring a pre-acquisition filing under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, to determine whether those
transaction should be challenged under the federal antitrust laws, recently have
been increasingly active in their review of radio station acquisitions where an
operator proposes to acquire new stations in its existing markets. Management is
aware that these federal
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authorities currently are evaluating the transactions pursuant to which Omni
will acquire two of the Orlando stations to be sold to the Company, which is
likely, in turn, to result in a review of the Company's acquisition of those
stations. The Company is unable to predict whether it will face or, if received,
overcome regulatory challenges to any of the Pending Transactions. The Company
is unable to predict what effect the current enhanced antitrust scrutiny of
radio station acquisitions will have on its ability to continue its acquisition
strategy.
SEASONALITY
Seasonal revenue fluctuations are common in the radio broadcasting industry
and are due primarily to fluctuations in advertising expenditures by retailers.
The Company's revenues and broadcast cash flows are typically lowest in the
first quarter and highest in the second and fourth quarters.
EMPLOYEES
As of June 30, 1996, the Company employed 698 full-time and 247 part-time
employees, 79 of whom are represented by American Federation of Television and
Radio Announcers ("AFTRA") locals in San Francisco, Cincinnati, Los Angeles,
Detroit and New York. The union contracts of the Company expire at various dates
commencing in 1996. The Company considers its employee relations to be good.
The Company employs several on-air personalities with large loyal audiences
in their respective markets. The Company enters into employment agreements with
these personalities to protect their interests in those relationships that it
believes to be valuable. The loss of one of these personalities could result in
a short-term loss of audience share, but the Company does not believe that any
such loss would have a material adverse effect on the Company's financial
condition or results of operations.
PROPERTIES AND FACILITIES
The Company's corporate offices are located in Dallas, Texas. The types of
properties required to support each of the Company's radio stations include
offices, studios, transmitter sites and antenna sites. A station's studios are
generally housed with its offices in downtown or business districts. The
transmitter sites and antenna sites generally are located so as to provide
maximum market coverage.
The Company owns transmitter and antenna sites in Atlanta, Denver, Detroit,
Los Angeles, Minneapolis-St. Paul, Phoenix, Pittsburgh, Sacramento,
Nassau-Suffolk (Long Island) and Riverside-San Bernardino. The Company also
leases transmitter and antenna sites in the Minneapolis-St. Paul, Detroit and
Riverside-San Bernardino markets and in the markets in which it does not own
transmitter and antenna sites. The Company typically leases studio and office
space, although it owns its facilities in Nassau-Suffolk and Detroit. Although
the Company expects to relocate certain of its offices and studios to reduce
costs or improve station operations, the Company generally considers its
facilities to be suitable and of adequate sizes for its current and intended
purposes. The Company does not anticipate any difficulties in renewing any
facility leases or in leasing additional space, if required.
The Company owns substantially all its other equipment, consisting
principally of transmitting antennae, transmitters, studio equipment and general
office equipment. The towers, antennae and other transmission equipment used by
the Company's stations are generally in good condition, although opportunities
to upgrade facilities are continuously reviewed.
The principal executive offices of the Company are located at 12655 N.
Central Expressway, Suite 405, Dallas, Texas 75243. The telephone number of the
Company at that address is (214) 239-6220.
LITIGATION
The Company is involved in litigation from time to time in the ordinary
course of its business. In management's opinion, the litigation in which the
Company is currently involved, individually and in the aggregate, is not
material to the Company's financial condition or results of operations.
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MANAGEMENT AND BOARD OF DIRECTORS
The directors and executive officers of the Company are listed below. Each
of the directors will hold office until the next annual meeting of stockholders
and until his or her successor is duly elected and qualified. Each of the
persons below also holds a comparable position with Chancellor.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------- ---- ----------------------------------------------------------------
<S> <C> <C>
Steven Dinetz 49 President, Chief Executive Officer and Director
George C. Toulas 45 Executive Vice President and Regional Manager
Rick Eytcheson 46 Executive Vice President and Regional Manager
Samuel L. Weller 40 Executive Vice President, General Manager and Regional Manager
Jacques Kerrest 49 Senior Vice President and Chief Financial Officer
Eric W. Neumann 30 Senior Vice President -- Finance
Thomas O. Hicks 50 Chairman of the Board and Director
Matrice 35 Director
Ellis-Kirk
Jeffrey A. Marcus 49 Director
John H. Massey 57 Director
Eric C. Neuman 52 Director
</TABLE>
Steven Dinetz
President, Chief Executive Officer and Director
Mr. Dinetz has served as President, Chief Executive Officer and a Director
of the Company since its formation and prior thereto was the President and Chief
Executive Officer and a Director of Chancellor Communications. Prior to joining
Chancellor Communications, Mr. Dinetz served as a radio broadcasting consultant
and, from October 1988 to January 1993, as the President and Chief Executive
Officer of D&D Broadcasting, which Mr. Dinetz formed to acquire KOSI-FM and
KEZW-AM in Denver, Colorado, from Group W Broadcasting, Inc. in a leveraged
acquisition. Mr. Dinetz has more than 18 years experience in the radio
broadcasting industry and has previously managed 14 radio stations throughout
the United States, including stations in top 40 radio markets such as New York
City, Miami-Fort Lauderdale, Dallas-Fort Worth, and Denver.
George C. Toulas
Executive Vice President and Regional Manager
Mr. Toulas has served as Executive Vice President of the Company since
October 1994. Since that time he has also served as Regional Manager of the
Company's Minneapolis-St. Paul and Orlando markets and was General Manager of
the Company's Cincinnati stations from October 1994 to February 1996. Prior to
his employment with the Company, Mr. Toulas was with the American Media Station
Group, which he joined in 1983. During his tenure with the American Media
Station Group, Mr. Toulas served as Regional Vice President for Cincinnati,
Minneapolis-St. Paul and Orlando, as General Manager of WUBE-AM/FM and WYGY-FM
in Cincinnati from 1989 to his departure and as General Manager of WOCL-FM in
Orlando from 1986 to 1989.
Rick Eytcheson
Executive Vice President and Regional Manager
Mr. Eytcheson has served as Executive Vice President of the Company and as
Regional Manager of the Company's Riverside-San Bernardino market since October
1994. He also served as General Manager of the Company's Sacramento stations
from the time of their acquisition by Chancellor Communications in January 1994
to February 1996. Prior to joining Chancellor Communications, Mr. Eytcheson had
been the General Manager of KFBK-AM and KGBY-FM under their two previous owners,
having held that position since 1985. Prior to joining KFBK/KGBY, Mr. Eytcheson
was the Vice President and General Manager of KOSO-FM in Modesto, California and
KKNU-FM in Fresno, California, with additional responsibility for the
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<PAGE> 46
operation of four radio stations located in Washington, Indiana and Wisconsin.
Mr. Eytcheson joined KOSO as General Sales Manager in 1980, became General
Manager in 1982 and assumed his group management responsibilities in 1983.
Samuel L. Weller
Executive Vice President, General Manager and Regional Manager
Mr. Weller joined the Company in February 1996 and has served as Executive
Vice President, General Manager and Regional Manager since March 25, 1996. Prior
to joining the Company, Mr. Weller was the Vice President and General Manager of
KOSI-FM, KEZW-AM and KVOD-FM in Denver, Colorado, which are currently owned by
the Tribune Company. Mr. Weller also served as Vice President of Sales and
Marketing of KOSI-FM and KEZW-AM under their previous owner D&D Broadcasting,
which was formed by Steven Dinetz.
Jacques Kerrest
Senior Vice President and Chief Financial Officer
Mr. Kerrest joined the Company in December 1995 and has served as Senior
Vice President and the Chief Financial Officer of the Company since February 9,
1996. Previously he had been Chief Financial Officer of Positive Communications,
Inc. ("Positive") since July 1993 and Secretary of Positive since September
1994. Prior to joining Positive, he served as the President of Plenum
Associates, Inc., a financial consulting company, from April 1990 until June
1993. He had previously been associated with Chemical Bank for 16 years, most
recently as a Vice President, where he was involved in corporate finance and
media transactions.
Eric W. Neumann
Senior Vice President -- Finance
Mr. Neumann has served as a Senior Vice President of the Company since its
formation. From that time until February 1996, Mr. Neumann was also Chief
Financial Officer of the Company. Mr. Neumann has been associated with Mr.
Dinetz since 1991, when he joined D&D Broadcasting as its controller. Mr.
Neumann is a certified public accountant.
Thomas O. Hicks
Chairman of the Board and Director
Mr. Hicks was elected Chairman of the Board and a director of the Company
in April 1996. Mr. Hicks is Chairman of the Board and Chief Executive Officer of
Hicks, Muse, Tate & Furst Incorporated, a private investment firm located in
Dallas, St. Louis and New York specializing in strategic investments, leveraged
acquisitions and recapitalizations. From 1984 to May 1989, Mr. Hicks was
Co-Chairman of the Board and Co-Chief Executive Officer of Hicks & Haas
Incorporated, a Dallas based private investment firm. Mr. Hicks serves as a
director of HMW Communications, Inc., Sybron Corporation, Inc., Dr Pepper
Bottling Company of Texas, Desa Holdings Corporation, Berg Electronics Corp. and
Neodata Corporation.
Matrice Ellis-Kirk
Director
Ms. Ellis-Kirk was appointed to the Company's Board of Directors on January
10, 1996. Ms. Ellis-Kirk currently serves as Chairman of the Board of Grant
Lambeth & Karelsen, Inc., a management consulting firm specializing in long
range and strategic planning. Prior thereto, Ms. Ellis-Kirk served as Vice
President and Office Manager of Apex Securities, which she joined in 1992. From
1987 to 1992, Ms. Ellis-Kirk served in various capacities at the Dallas Area
Rapid Transit Authority, most recently serving as the Director of Office of
Management and Budget. Ms. Ellis-Kirk serves as a director or trustee of several
charitable organizations.
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Jeffrey A. Marcus
Director
Mr. Marcus currently serves as the President and Chief Executive Officer of
Marcus Cable Company, the ninth largest cable television multiple system
operator (MSO) in the United States, which serves over one million customers and
which Mr. Marcus formed in 1990. Until November 1988, Mr. Marcus served as
Chairman and Chief Executive Officer of WestMarc Communications, Inc., an MSO
formed through the merger in 1987 of Marcus Communications, Inc. and Western
TeleCommunications, Inc. Mr. Marcus has more than 27 years of experience in the
cable television business. Mr. Marcus is a co-owner of the Texas Rangers
Baseball Club and serves as a director or trustee of several charitable and
civic organizations.
John H. Massey
Director
Mr. Massey serves as the Chairman of the Board and Chief Executive Officer
of Life Partners Group, Inc., an insurance holding company, having assumed those
offices in October 1994. Prior to joining Life Partners, he served, since 1992,
as the Chairman of the Board of, and currently serves as a director of, First
Southwest Asset Management, Inc., a regional investment banking firm. Since
1986, Mr. Massey has served as a director of Gulf-California Broadcast Company,
a private holding company. From 1986 to 1992, he also was President of
Gulf-California Broadcast Company. From 1976 to 1986, Mr. Massey was President
of Gulf Broadcast Company, which owned and operated 6 television stations and 11
radio stations in major markets in the United States. Mr. Massey currently
serves as a director of Central Texas Bankshare Holdings, Inc., Hill Bank and
Trust Co., Hill Bancshares Holdings, Inc., Life Partners Group, Inc., Columbus
State Bank, Columbine JOS Systems, Inc. and The Paragon Group, Inc.
Eric C. Neuman
Director
Mr. Neuman became a director of the Company in April 1996. Since May 1993,
Mr. Neuman has been a Vice President of Hicks, Muse, Tate & Furst Incorporated.
From 1985 to 1993, Mr. Neuman was a Managing General Partner of Communications
Partners, Ltd., a private investment firm specializing in media and
communications businesses.
ELECTION OF DIRECTORS
The Second Restated Certificate of Incorporation of Chancellor provides
that the Board of Directors shall consist of at least five but no more than nine
directors, two of whom shall be elected by the holders of the Class A Common
Stock (the "Class A Directors"), voting as a class, and the remainder of whom
(the "Classified Directors") shall be elected by the holders of the Class A
Common Stock and the Class B Common Stock, voting together as a single class.
There is currently one vacant Class A directorship. The Classified Directors are
divided into three classes of directors, designated as Class I, Class II and
Class III directors. The Class A Directors will be elected for one-year terms at
each annual meeting of Chancellor's stockholders commencing after the Offering.
The Classified Directors will be elected for three-year terms. The initial term
of office of the Class I directors expires at the 1997 annual meeting of
Chancellor's stockholders, the initial term of the Class II directors expires at
the 1998 annual meeting of stockholders and the initial term of the Class III
directors expires at the 1999 annual meeting of stockholders. Beginning with the
1997 annual meeting, and at each annual meeting of Chancellor's stockholders
thereafter, Classified Directors in the class to be elected at such meeting will
be elected to succeed those directors whose terms expire at such meeting. The
Board of Directors of Chancellor has established an Audit Committee, to which
Messrs. Marcus and Massey and Ms. Ellis-Kirk have been appointed, and a
Compensation Committee to which Messrs. Marcus and Massey have been appointed.
Directors of the Company are elected by Chancellor, the sole stockholder of the
Company.
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<PAGE> 48
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth all compensation, including bonuses, stock
option awards and other payments, paid or accrued by the Company for the year
ended December 31, 1995, to or for the Company's Chief Executive Officer and the
Company's other most highly compensated executive officers (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
--------------
ANNUAL COMPENSATION AWARDS
------------------------------- --------------
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)(1)
- -------------------------------------------------- ----- --------- -------- --------------
<S> <C> <C> <C> <C>
Steven Dinetz..................................... 1995 250,000 90,000 --
President, Chief Executive Officer and 1994
Director(2) 218,117 90,000 863,319
Rick Eytcheson.................................... 1995 243,000 95,616 --
Executive Vice President, General Manager and 1994 195,000 64,739 --
Regional Manager
George C. Toulas.................................. 1995 250,000 55,000 --
Executive Vice President, General Manager and 1994 54,167 15,109 --
Regional Manager(3)
Eric W. Neumann................................... 1995 129,100 15,000
Senior Vice President and Chief Financial 1994
Officer(4) 80,882 15,000 88,500
</TABLE>
- ---------------
(1) Gives effect to the reclassification of Chancellor's common stock on a
1-for-6 basis immediately prior to the consummation of the Initial Public
Offering.
(2) Effective February 14, 1996, Mr. Dinetz's annual salary became $500,000.
(3) For 1994, represents compensation for the period beginning October 12, 1994,
when Mr. Toulas joined the Company, to December 31, 1994.
(4) Effective October 12, 1994, Mr. Neumann began to receive an annual salary of
$130,000. Effective February 14, 1996, Mr. Neumann's annual salary became
$175,000.
EMPLOYMENT AGREEMENTS
Dinetz Employment Agreement
Mr. Dinetz has entered into a new employment agreement with Chancellor and
Chancellor Radio Broadcasting pursuant to which he serves as President and Chief
Executive Officer of Chancellor and Chancellor Radio Broadcasting. The new
employment agreement is currently scheduled to expire on December 31, 2000,
unless earlier terminated, and provides for a base salary of $500,000 per year
plus an annual bonus of up to $200,000 based on performance criteria established
by Chancellor's Board of Directors at the beginning of each fiscal year. Each
December 31 during the term of the employment agreement, Mr. Dinetz's base
salary for the next succeeding year shall be adjusted based upon the Consumer
Price Index, provided that his annual base salary shall never be less than
$500,000. Unless either party gives written notice to the contrary prior to
December 31 of each year the employment agreement is in effect, the employment
agreement will automatically be extended for an additional year so that, as of
each December 31, the remaining term of the employment agreement will be five
years. The employment agreement also provides for participation by Mr. Dinetz in
all benefit programs maintained by Chancellor or its subsidiaries and to provide
for certain life, health and disability insurance coverage for Mr. Dinetz.
The employment agreement may be terminated by Chancellor and Chancellor
Radio Broadcasting at any time prior to the completion of the stated term. If
Chancellor and Chancellor Radio Broadcasting terminate Mr. Dinetz's employment
agreement other than for cause (as defined), or if Mr. Dinetz voluntarily
terminates his employment agreement for good reason (as defined), Chancellor and
Chancellor Radio Broadcasting must
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<PAGE> 49
pay Mr. Dinetz severance compensation equal to two years of Mr. Dinetz's base
salary; provided, however, that if the decision to terminate his employment
agreement results from the failure of Chancellor or Chancellor Radio
Broadcasting to meet certain specified financial performance criteria, Mr.
Dinetz will be entitled to receive severance compensation equal to one year of
Mr. Dinetz's base salary.
In 1994, pursuant to his former employment agreement Mr. Dinetz was granted
options (the "Dinetz Options") to purchase 5,976,415 shares of Nonvoting Stock,
including (i) options vesting equally over five years (from January 10, 1994) to
purchase up to 3,307,722 shares at an exercise price of $1.00 per share and (ii)
options vesting equally over five years (from October 12, 1994) to purchase up
to 2,668,582 shares at an exercise price of $1.25 per share, in each case with
such exercise price to increase at a compound rate of 9% per annum. Of the
options granted, options for 1,062,004 shares contained a feature which
conditioned their exercise upon the Company's attaining certain rates of return
(the "IRR Options"). In September 1995, the Company agreed with Mr. Dinetz to
amend the IRR Options to remove the rate of return feature. The Company further
agreed to amend the exercise price for the Dinetz Options to provide that all
options previously exercisable at $1.00 per share will be exercisable at $1.25
per share and that all options previously exercisable at $1.25 per share will be
exercisable at $1.40 per share. The Dinetz Options were also amended to remove
the annual compounding of the exercise price. In accordance with their terms,
the Dinetz Options were adjusted in connection with the recapitalization of
Chancellor's common stock immediately prior to the consummation of the Initial
Public Offering. Accordingly, Mr. Dinetz owns, on an adjusted basis, options
exercisable for 487,555 shares having an option exercise price of $7.50 per
share and options exercisable for 375,764 shares having an option exercise price
of $8.40 per share. In addition, on February 9, 1996, Mr. Dinetz was granted
options to purchase 75,000 shares of Class A Common Stock pursuant to the Stock
Award Plan (as defined).
Mr. Dinetz's 1995 compensation was paid under the terms of his former
employment agreement.
Eytcheson Employment Agreement
Mr. Eytcheson is a party to an employment agreement with Chancellor and
Chancellor Radio Broadcasting pursuant to which he serves as Regional Manager of
KZLA-FM and KLAC-AM in Los Angeles, KSAN-FM, KNEW-AM, KBGG-FM and KABL-AM in San
Francisco, KGGI-FM and KMEN-AM in Riverside-San Bernardino, and KFBK-AM, KGBY-FM
and KHYL-FM in Sacramento. Mr. Eytcheson is also an Executive Vice President of
Chancellor and Chancellor Radio Broadcasting. Mr. Eytcheson's employment
agreement is for a two year term commencing on February 14, 1996, and is subject
to automatic successive one-year renewal terms that take effect unless notice of
non-renewal is given by the Company to Mr. Eytcheson within 30 days prior to the
expiration of the then-current term. Mr. Eytcheson's current base salary is
$325,000 per year. Mr. Eytcheson is also entitled to receive an annual bonus of
up to 50% of his then base salary for each fiscal year, beginning in fiscal year
ending December 31, 1996, based on achievement of broadcast cash flow
projections established by the board of directors of Chancellor. The broadcast
cash flow projections will be adjusted based upon acquisitions or dispositions
of stations under the supervision of Mr. Eytcheson. Mr. Eytcheson is also
entitled to the use and paid expenses of an automobile, allowance for a fitness
or similar club, and participation in all employee benefit plans maintained by
Chancellor or any of its subsidiaries. Mr. Eytcheson's employment agreement also
contains a noncompetition provision pursuant to which Mr. Eytcheson has agreed
that during the term of his employment contract and for one year thereafter he
will not engage in the radio broadcasting business within a specified geographic
location surrounding the Company's stations under Mr. Eytcheson's supervision
pursuant to the employment agreement. On February 14, 1996, concurrently with
the consummation of the Initial Public Offering, the Company lent $200,000 to
Mr. Eytcheson to enable him to purchase shares of Chancellor's Class A Common
Stock in the Initial Public Offering. The loan will be an unsecured, non-
interest bearing loan, which will be forgiven during the next three years. The
Company made this loan to Mr. Eytcheson in satisfaction of a provision of his
former employment agreement providing for a possible cash payment to Mr.
Eytcheson based on the value of the Company's Sacramento stations at a specified
future date.
Mr. Eytcheson's 1995 compensation was paid under the terms of his former
employment agreement.
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Toulas Employment Agreement
Mr. Toulas is currently a party to an employment agreement with the Company
pursuant to which he serves as Executive Vice President of Chancellor and the
Company, General Manager of the Cincinnati stations and Regional Manager of the
Minneapolis-St. Paul and Orlando markets. The initial term of the employment
agreement commenced on January 1, 1995 and continues for two years, subject to
automatic successive one-year renewal terms that take effect unless notice of
non-renewal is given by the Company or Mr. Toulas at least 30 days prior to the
end of the then current employment term. The employment agreement provides for
an initial base salary of $250,000 per year, which Mr. Toulas received in the
fiscal year ended December 31, 1995. Mr. Toulas is also entitled to receive an
annual bonus based on the percentage of the annual budgeted broadcast cash flow
achieved by the stations for which Mr. Toulas has responsibility. The employment
agreement also provides that the Company will supply Mr. Toulas with other
customary benefits, including the use of a car and insurance, disability and
medical benefits. The employment agreement also contains a noncompetition
provision pursuant to which Mr. Toulas has agreed, subject to certain
exceptions, that during the term of his employment contract and for six months
thereafter he will not engage in the broadcasting business within any community
or Arbitron MSA served by those stations managed or overseen by him. On March 8,
1996, the Company made a one-time, $100,000 cash payment to Mr. Toulas in
satisfaction of the Company's obligation under a former provision of his
employment agreement providing for a possible cash payment to Mr. Toulas based
on the value of the Company's Cincinnati stations at a specified future date.
Mr. Toulas, Chancellor and Chancellor Radio Broadcasting are currently in
the process of negotiating a new employment agreement, whereby Mr. Toulas would
serve as Executive Vice President and Regional Manager of the Company's
Cincinnati, Minneapolis-St. Paul, Orlando, Pittsburgh and Atlanta stations. In
February 1996, Mr. Toulas began receiving a base salary of $375,000 per year.
STOCK OPTIONS
The following table shows the value, as of December 31, 1995, of stock
options of Chancellor held by its Chief Executive Officer and the other Named
Executive Officers. No stock options were granted or exercised during the year
ended December 31, 1995.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR-END AT FISCAL YEAR-END
(#) ($)
------------------------- -------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ----------------------------------------------- ------------------------- -------------------------
<S> <C> <C>
Steven Dinetz.................................. 172,664/690,655 2,304,564/9,218,256
Rick Eytcheson................................. 0/0 0/0
George Toulas.................................. 0/0 0/0
Eric W. Neumann................................ 17,700/70,800 234,000/936,000
</TABLE>
- ---------------
(1) Assuming a fair market value at December 31, 1995 of $20.00 per share, which
was the initial public offering price per share of Class A Common Stock in
the Initial Public Offering.
CHANCELLOR BROADCASTING COMPANY STOCK AWARD 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). The terms of the plan are as follows.
Summary. The Chancellor Broadcasting Company Stock Award Plan (the "Stock
Award Plan") is intended to provide incentives to the key employees and
non-employee directors of Chancellor and its subsidiaries and to align their
interests with those of the stockholders of Chancellor through the awarding of
48
<PAGE> 51
stock options, restricted stock and stock bonuses. The Stock Award Plan is
administered by the Compensation Committee of the Chancellor's Board of
Directors. The composition of the Compensation Committee is intended to satisfy
the requirements for (i) disinterested administration under Rule 16b-3 under the
Exchange Act and (ii) "outside directors" under Section 162(m) of the Code. The
Compensation Committee has the authority, subject to the terms of the Stock
Award Plan (including the formula grant provisions and the provisions relating
to "incentive stock options" contained therein), to determine when and to whom
to make grants or awards under the plan, the number of shares to be covered by
the grants or awards, the types and terms of the grants and awards, and in the
case of grants of stock options, the exercise price of stock options. Moreover,
the Compensation Committee has the authority, subject to the provisions of the
Stock Award Plan, to establish such rules and regulations as it deems necessary
for the proper administration of the Stock Award Plan and to make such
determinations and interpretations and to take such action in connection with
the Stock Award Plan and any grants and awards thereunder as it deems necessary
or advisable. The Compensation Committee's determinations and interpretations
under the Stock Award Plan are binding and conclusive on all participants and
their legal representatives and need not be uniform and may be made by the
Compensation Committee selectively among persons who receive, or are eligible to
receive, grants and awards under the Stock Award Plan. The number of shares of
Class A Common Stock that may be granted or awarded to an individual participant
under the Stock Award Plan will be limited to (i) 500,000 shares in any one
fiscal year and (ii) 500,000 shares over the life of the plan. Such limitation
will not apply to stock or stock-based awards made outside the Stock Award Plan.
To date, options to purchase 537,500 shares of Class A Common Stock have been
granted under the Stock Award Plan.
Chancellor's Board of Directors may amend, suspend or terminate the Stock
Award Plan at any time except that, unless approved by stockholders of
Chancellor, no such amendment may (i) materially increase the maximum number of
shares as to which awards may be granted under the Stock Award Plan, except for
adjustments to reflect stock dividends or other recapitalizations affecting the
number or kind of outstanding shares, (ii) materially increase the benefits
accruing to Stock Award Plan participants or (iii) materially change the
requirements as to eligibility for participation in the Stock Award Plan. In
addition, no amendment to the Stock Award Plan may be made without approval of
the stockholders if the amendment would disqualify any "incentive stock options"
granted under the Stock Award Plan. By mutual agreement between Chancellor and a
participant, awards may be made under the Stock Award Plan in substitution and
cancellation of benefits previously granted to the participant under the Stock
Award Plan. Benefits granted under the Stock Award Plan are subject to
adjustment in the event of certain changes affecting the Class A Common Stock.
In the event of a Change in Control (as defined in the Stock Award Plan),
all outstanding restricted stock awards will become immediately transferable and
all outstanding stock options will become immediately exercisable. The
Compensation Committee may, in its sole discretion, determine that, upon the
occurrence of a Change in Control of Chancellor, certain outstanding stock
options will terminate within a specified number of days after notice to the
holder, and such holder shall receive, with respect to each share of Class A
Common Stock subject to such stock option, an amount equal to the excess of the
fair market value of such shares of Class A Common Stock immediately prior to
the occurrence of such Change in Control over the exercise price per share of
such stock option, such amount to be payable in cash, in one or more kinds of
property (including the property, if any, payable in the transaction) or in a
combination thereof, as the Compensation Committee, in its discretion, will
determine.
The Compensation Committee may grant "incentive stock options" within the
meaning of Section 422 of the Code and "nonqualified options" in respect of
shares of Class A Common Stock to Stock Award Plan participants alone or in
tandem with other awards under the Stock Award Plan. The exercise price of a
stock option may not be less than 100% of the fair market value of the
underlying shares of the Class A Common Stock on the date of grant. The exercise
period for stock options will be determined by the Compensation Committee and
may not exceed 10 years from the date of grant (except upon death of an optionee
or grantee in the last year of the term, in which case, the expiration date may
be one year after death). If the Compensation Committee does not determine a
vesting schedule with respect to a stock option grant, twenty percent of a stock
option grant will become exercisable on the first anniversary of the date of
grant, and the
49
<PAGE> 52
remaining 80% will vest pro rata on a monthly basis over the four-year period
following the first anniversary of the date of grant.
Stock options may be transferred by a participant only by will or by the
laws of descent and distribution, and may be exercised only by the participant
during his lifetime. If a participant dies and the applicable award agreement so
provides, options may be exercised by the person or persons to whom the
participant's rights pass within one year after the participant's death. In no
case (other than in the event of the participant's death) may options be
exercised later than the expiration date of the stock options specified in the
grant.
Following a participant's termination of employment other than a
termination of employment due to death, stock options will be exercisable only
for the three-month period following the date of termination of employment;
however, in the event a participant's employment is terminated for cause, all
stock options held by such participant will immediately be cancelled as of the
date of termination of employment for cause. The Compensation Committee may, in
its sole discretion, extend the post-employment exercise period beyond the
three-month period, so long as the post-employment exercise period ends prior to
the original option expiration date. In addition, the Compensation Committee
may, at the time of grant and in its sole discretion, subject the exercise of
any stock option after termination of employment to the satisfaction of the
conditions precedent that the participant neither (i) competes with, or takes
other employment with or renders services to a competitor of, Chancellor, its
subsidiaries or affiliates without the written consent of Chancellor, nor (ii)
conducts himself or herself in a manner adversely affecting Chancellor.
The option exercise price may be paid in cash or, in the discretion of the
Compensation Committee, by the delivery of shares of Class A Common Stock of
Chancellor then owned by the participant, or by a combination of these methods.
Also, in the discretion of the Compensation Committee, payment may also be made
by delivering a properly executed exercise notice to Chancellor together with a
copy of irrevocable instructions to a broker to deliver promptly to Chancellor
the amount of sale or loan proceeds to pay the exercise price. The Compensation
Committee may, at the time of grant, provide for the grant of a subsequent
Restoration Stock Option (as defined) if the exercise price is paid for by
delivering previously owned shares of Class A Common Stock of Chancellor.
Restoration Stock Options (i) may be granted in respect of no more than the
number of shares of Class A Common Stock tendered in exercising the predecessor
stock option, (ii) will have an exercise price equal to the fair market value of
the underlying stock on the date the Restoration Stock Option is granted, and
(iii) may have an exercise period that does not extend beyond the remaining term
of the predecessor stock option.
The Compensation Committee may grant stock awards, in such amounts and
subject to such terms and conditions as the Compensation Committee will
determine. The vesting of a stock award granted under the Stock Award Plan may
be conditioned upon the completion of a specified period of service, upon the
attainment of specified performance goals and/or upon such other criteria, if
any, as the Compensation Committee may determine. In addition, the right to vote
and receive dividends on the shares of Class A Common Stock subject to a stock
award will be determined by the Compensation Committee.
New non-employee directors who do not represent an investor who owns more
than 10 percent of the Class A Common Stock automatically will be granted an
option to purchase 5,000 shares of Class A Common Stock on the date he or she
first becomes a member of the Board. These stock options will (i) be fully
exercisable on the date of grant, (ii) be granted with an exercise price equal
to 100 percent of fair market value of the underlying stock on the date of
grant, and (iii) expire on the tenth anniversary of the date of grant. If a
non-employee director ceases to be a director of Chancellor for any reason other
than due to death or disability, these stock options will remain exercisable
only for the three-month period following the date the non-employee director
ceases to be a director of Chancellor.
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<PAGE> 53
The following table sets forth information with respect to option grants
that have been made under the Stock Award Plan as of the date of this
Prospectus. All options shown in the table were granted by the Board of
Directors with exercise prices equal to the fair market value per share of Class
A Common Stock on the respective grant dates.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
NUMBER
OF UNITS
--------
<S> <C>
Named Executive Officers:
Steven Dinetz, President, Chief Executive Officer and Director................... 75,000
George C. Toulas, Executive Vice President and Regional Manager.................. 40,000
Rick Eytcheson, Executive Vice President and Regional Manager.................... 25,000
Eric W. Neumann, Senior Vice President -- Finance................................ --
Executive Group.................................................................... 180,000
Non-Executive Director Group....................................................... --
Non-Executive Officer Employee Group............................................... 357,500
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There was no compensation committee of the Board of Directors during 1995.
Compensation decisions in 1995 were made by the entire Board of Directors, the
members of which were Messrs. Dinetz (the Company's President and Chief
Executive Officer), Marcus and Massey. For 1996, Messrs. Marcus and Massey have
been appointed to the Compensation Committee of the Board of Directors, of which
Mr. Marcus will act as chairman.
Mr. Marcus is the President and Chief Executive Officer of Marcus Cable
Company, a cable television multiple system operator. An affiliate of Hicks Muse
has invested approximately $115.0 million in limited partnership interests in
Marcus Cable Company and is one of its largest limited partners.
COMPENSATION OF DIRECTORS
The non-employee directors of Chancellor (other than Messrs. Hicks and
Neuman) receive an annual retainer of $12,000 for serving as directors of
Chancellor and its subsidiaries. Non-employee directors also receive attendance
fees of $1,000 ($500 in the case of telephonic meetings) for each meeting which
they attend. Directors who are officers or employees of Chancellor or the
Company are not presently expected to receive compensation for their services as
directors. Directors of Chancellor are entitled to reimbursement of their
reasonable out-of-pocket expenses in connection with their travel to and
attendance at meetings of the Board of Directors or committees thereof.
Each of Messrs. Marcus and Massey has been granted fully vested options to
purchase up to 13,333 shares of Chancellor's Class A Common Stock at an exercise
price of $7.50 per share. These options will expire on October 12, 2004, unless
exercised prior to that date. Upon her appointment to the Board of Directors in
January 1996, Ms. Ellis-Kirk was granted a right to purchase up to 2,500 shares
of Class A Common Stock at a price per share equal to the Initial Public
Offering price per share. As of the date of this Prospectus, Ms. Ellis-Kirk has
purchased 1,300 of such shares. In addition, Ms. Ellis-Kirk has been granted
fully vested options to purchase up to 6,666 shares of Class A Common Stock at
an exercise price equal to $20.00 per share. Those options will expire on
January 10, 2006 unless exercised prior to their expiration.
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<PAGE> 54
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The table below sets forth, as of July 31, 1996, (i) the number and
percentage of outstanding shares of each class of the capital stock of
Chancellor that are beneficially owned by (a) each person or group known by the
Company to own beneficially more than 5% of any class of the capital stock of
Chancellor, (b) each director of Chancellor, (c) each Named Executive Officer
and (d) all directors and executive officers of Chancellor as a group and (ii)
the combined percentage of all classes of the capital stock of Chancellor that
is beneficially owned by each of such person or group of persons. Except as
noted below, each individual or entity named below is believed to have sole
investment and voting power with respect to all the shares of capital stock
reflected below.
<TABLE>
<CAPTION>
PERCENT OF
CLASS A CLASS B CLASS C VOTING POWER(3)
COMMON STOCK(1) COMMON STOCK(2) COMMON STOCK(3) ----------------------
------------------- ------------------- ------------------- BEFORE AFTER
NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT CLASS C CLASS C PERCENT OF
OF SHARES OF CLASS OF SHARES OF CLASS OF SHARES OF CLASS CONVERSION CONVERSION ECONOMIC INTEREST
--------- -------- --------- -------- --------- -------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5% STOCKHOLDERS
Thomas O. Hicks(4)...... 1,418,365 14.3% -- -- 8,484,410 100% 1.5% 90.3% 53.7%
c/o Hicks, Muse, Tate
&
Furst Incorporated,
200 Crescent Court
Suite 1600
Dallas, Texas 75201
HM Parties(5)........... 1,276,903 12.9% -- -- 8,484,410 100% 1.4% 90.3% 53.0%
c/o Hicks, Muse, Tate
&
Furst Incorporated,
200 Crescent Court
Suite 1600
Dallas, Texas 75201
OFFICERS AND DIRECTORS
Thomas O. Hicks(4)...... 1,418,365 14.3% -- -- 8,484,410 100% 1.5% 90.3% 53.7%
Steven Dinetz(6)........ 278,324 3.1% 63,500 100% -- -- 90.1% 1.0% 2.0%
George C. Toulas........ 18,333 * -- -- -- -- * * *
Rick Eytcheson(7)....... 23,333 * -- -- -- -- * * *
Eric W. Neumann(8)...... 27,483 * -- -- -- -- * * *
Jeffrey A. Marcus(9).... 23,333 * -- -- -- -- * * *
John H. Massey(9)....... 26,666 * -- -- -- -- * * *
Matrice Ellis-Kirk(9)... 9,166 * -- -- -- -- * * *
Eric C. Neuman.......... 2,333 * -- -- -- -- * * *
All directors and
executive officers of
Chancellor and the
Company as a
group(4)(10)(11)...... 1,848,002 18.1% 63,500 100% 8,484,410 100% 91.3% 91.3% 55.4%
</TABLE>
- ---------------
* Less than one percent.
(1)The holders of Class A Common Stock are entitled to one vote per share on
all matters submitted to a vote of stockholders of Chancellor. In addition,
the holders of the Class A Common Stock are entitled as a class to elect two
members of the Board of Directors of Chancellor. See "Description of Capital
Stock."
(2) The holders of the Class B Common Stock are entitled to vote with the
holders of the Class A Common Stock on all matters submitted to a vote of
stockholders of Chancellor, except with respect to the election of the
Class A Directors, certain "going private" transactions and as otherwise
required by law and except under the circumstances described under
"Description of Capital Stock -- Chancellor -- Common Stock -- Conversion
of Class C Common Stock." Prior to the Conversion, each share of Class B
Common Stock will be entitled to 1,350 votes per share, and after the
Conversion will be entitled to ten votes per share, on all matters
submitted to a vote of stockholders. See "Description of Capital Stock."
(3) The holders of shares of Class C Common Stock are not entitled to vote,
except as required by law and except with respect to mergers,
consolidations and the sale of all or substantially all the assets of
Chancellor. The shares of Class C Common Stock are convertible in whole, at
the option of the holder or holders thereof, into the same number of shares
of Class B Common Stock. In June 1996, the holders of the Class C Common
Stock filed an application with the FCC to convert the shares of Class C
Common Stock into an identical number of shares of Class B Common Stock.
See "Description of Capital Stock."
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<PAGE> 55
(4) Includes 69,872 shares owned of record by Thomas O. Hicks, 68,234 shares
owned of record by Mr. Hicks as the trustee for certain trusts of which his
children are beneficiaries, 3,356 shares owned of record by Mr. Hicks as
the co-trustee of a trust for the benefit of an unrelated party and
1,185,521 shares of Class A Common Stock related to the Hicks Muse Equity
Investment which a limited partnership controlled by Hicks Muse has the
right to purchase within 60 days of the date of this Prospectus. Also
includes 1,346,801 shares of Class C Common Stock owned of record by the
Chancellor Business Trust (as defined) and 91,382 shares of Class A Common
Stock and 7,137,609 shares of Class C Common Stock owned by two limited
partnerships of which the ultimate general partners are entities controlled
by Hicks Muse. Thomas O. Hicks is the controlling stockholder of Hicks Muse
and serves as Chairman of the Board, President, Chief Executive Officer,
Chief Operating Officer and Secretary of Hicks Muse. Accordingly, Mr. Hicks
may be deemed to be the beneficial owner of all of the stock owned of
record by such limited partnerships. Mr. Hicks disclaims beneficial
ownership of the shares of Class A Common Stock and Class C Common Stock
not owned by him of record.
(5) Includes 1,346,801 shares of Class C Common Stock owned of record by the
Chancellor Business Trust, 91,382 shares of Class A Common Stock and
7,137,609 shares owned by two limited partnerships of which the ultimate
general partners are entities controlled by Hicks Muse and 1,185,521 shares
of Class A Common Stock related to the Hicks Muse Equity Investment which a
limited partnership controlled by Hicks Muse has the right to purchase
within 60 days of the date of this Prospectus. Thomas O. Hicks is the
controlling stockholder of Hicks Muse and serves as Chairman of the Board,
President, Chief Executive Officer, Chief Operating Officer and Secretary
of Hicks Muse. Accordingly, Mr. Hicks may be deemed to be the beneficial
owner of all of the stock owned of record by such limited partnerships.
John R. Muse, Charles W. Tate, Jack D. Furst and Lawrence D. Stuart, Jr.
are officers, directors and minority stockholders of Hicks Muse and as such
may be deemed to share with Mr. Hicks the power to vote or dispose of
shares of stock held by such partnerships. Messrs. Hicks, Muse, Tate, Furst
and Stuart own of record 141,462, 21,522, 24,338, 20,551 and 2,951 shares
of Class A Common Stock, respectively. Each of Messrs. Hicks, Muse, Tate,
Furst and Stuart disclaims the existence of a group and disclaims
beneficial ownership of shares of stock not owned of record by him. See
"Certain Transactions -- Chancellor Business Trust and Related Registration
Rights Agreement."
(6) Includes (i) options presently exercisable and exercisable within 60 days
of the date of this Prospectus to purchase up to 270,174 shares of Class A
Common Stock, (ii) 600 shares held in an individual retirement account for
the benefit of Mr. Dinetz and (iii) 550 shares held by Mr. Dinetz's
daughter. Mr. Dinetz disclaims beneficial ownership of the shares of Class
A Common Stock not owned by him of record.
(7) Includes 6,667 shares held in an individual retirement account for the
benefit of Mr. Eytcheson.
(8) Includes options presently exercisable and exercisable within 60 days of
the date of this Prospectus to purchase up to 26,200 shares of Class A
Common Stock.
(9) Includes (i) options presently exercisable and exercisable within 60 days
of the date of this Prospectus by each of Mr. Marcus, Mr. Massey and Ms.
Ellis-Kirk, to purchase up to 13,333, 13,333 and 6,666 shares,
respectively, of Class A Common Stock, (ii) in the case of Mr. Massey,
13,333 shares of Class A Common Stock held by his wife as her separate
property and (iii) in the case of Ms. Ellis-Kirk, a right to purchase up to
1,200 shares of Class A Common Stock. Mr. Massey disclaims beneficial
ownership of stock not owned of record by him.
(10) Includes rights and options presently exercisable and exercisable within 60
days of the date of this Prospectus to purchase up to 330,906 shares of
Class A Common Stock. Also includes, 1,185,521 shares of Class A Common
Stock related to the Hicks Muse Equity Investment which a limited
partnership controlled by Hicks Muse has the right to purchase within 60
days of the date of this Prospectus.
(11) Jacques Kerrest, Senior Vice President and Chief Financial Officer of the
Company, beneficially owns 14,666 shares of Class A Common Stock. Samuel L.
Weller, Executive Vice President of the Company, beneficially owns 6,000
shares of Class A Common Stock. Each of Messrs. Kerrest and Weller were
elected to their respective offices of the Company as of February 9, 1996.
53
<PAGE> 56
CERTAIN TRANSACTIONS
Financial Monitoring and Oversight Agreement
Chancellor and Chancellor Radio Broadcasting have entered into a financial
monitoring and oversight agreement (the "Financial Monitoring and Oversight
Agreement") with Hicks, Muse & Co. Partners, L.P. ("Hicks Muse Partners"), an
affiliate of Hicks Muse. Pursuant thereto, Chancellor and Chancellor Radio
Broadcasting pay to Hicks Muse Partners an annual fee of $500,000 for ongoing
financial oversight and monitoring services. The annual fee is adjustable upward
or downward at the end of each fiscal year to a fee equal to 0.25% of the
budgeted consolidated annual net sales of the Company, provided, that such fee
shall at no time be less than $500,000 per year. In the event that Chancellor or
any of its subsidiaries acquires another entity or business during the term of
the Financial Monitoring and Oversight Agreement, the annual fee for the
calendar year in which such acquisition occurs shall be adjusted prospectively
as of the closing of such acquisition to an annual amount equal to 0.25% of the
pro forma combined budgeted consolidated annual net sales of the Company
(including the sales of the acquired entity or business for such entire fiscal
year on a pro forma basis). The payment of the annual fee pursuant to the
Financial Monitoring and Oversight Agreement may be reduced under certain
circumstances, but not below $200,000 per year is subject to certain
restrictions contained in Chancellor Radio Broadcasting's indenture, and all
past due amounts shall bear interest of the prime rate plus 5.0%.
Hicks Muse Partners is also entitled to reimbursement for any out-of-pocket
expenses incurred by it in connection with rendering services under the
Financial Monitoring and Oversight Agreement. In addition, Chancellor and
Chancellor Radio Broadcasting have agreed to indemnify Hicks Muse Partners, its
affiliates and shareholders, and their respective directors, officers, agents,
employees and affiliates from and against all claims, actions, proceedings,
demands, liabilities, damages, judgments, assessments, losses and costs,
including fees and expenses, arising out of or in connection with the services
rendered by Hicks Muse Partners in connection with the Financial Monitoring and
Oversight Agreement.
The Financial Monitoring and Oversight Agreement makes available on an
ongoing basis the resources of Hicks Muse Partners concerning a variety of
financial matters. The services that have been and will continue to be provided
by Hicks Muse Partners could not otherwise be obtained by Chancellor and
Chancellor Radio Broadcasting without the addition of personnel or the
engagement of outside professional advisors. The Financial Monitoring and
Oversight Agreement expires on the earlier of (i) the date on which a Change of
Control (as defined) occurs and (ii) the date on which HM Fund II is dissolved,
liquidated and wound up, in each case, subject to automatic annual renewals
thereafter.
Financial Advisory Agreement
Chancellor and Chancellor Radio Broadcasting are parties to an agreement
(the "Financial Advisory Agreement") with HM2/Management Partners, L.P. ("HM2").
Pursuant to the Financial Advisory Agreement, HM2 received cash financial
advisory fees of approximately $330,000 and $6.2 million, respectively, upon the
closings of the acquisitions of KDWB in July 1995 and of Shamrock Broadcasting
in February 1996 as compensation for its services as financial advisor for such
acquisitions. In addition, it is expected that HM2 will receive approximately
$2.3 million in cash financial advisory fees in connection with the OmniAmerica
Acquisition. HM2 also is entitled to receive a fee equal to 1.5% of the
transaction value (as defined) for each add-on transaction (as defined) in which
Chancellor, Chancellor Radio Broadcasting or any of their subsidiaries is
involved. HM2 is also entitled to reimbursement for any out-of-pocket expenses
incurred by it in connection with rendering services under the Financial
Advisory Agreement. The term "transaction value" means the total value of any
add-on transaction, including without limitation, the aggregate amount of the
funds required to complete the add-on transaction (excluding any fees payable
pursuant to the Financial Advisory Agreement, but including the amount of any
indebtedness, preferred stock or similar items assumed or remaining
outstanding). The term "add-on transaction" means any future proposal for a
tender offer, acquisition, sale, merger, exchange offer, recapitalization,
restructuring or other similar transaction directly or indirectly involving
Chancellor, Chancellor Radio Broadcasting or any of their respective
subsidiaries and any other person or entity. In addition, Chancellor and
Chancellor Radio Broadcasting have agreed to indemnify HM2, its affiliates and
shareholders, and their respective directors,
54
<PAGE> 57
officers, agents, employees and affiliates from and against all claims, actions,
proceedings, demands, liabilities, damages, judgments, assessments losses and
costs, including fees and expenses, arising out of or in connection with the
services rendered by HM2 in connection with the Financial Advisory Agreement.
Pursuant to the Financial Advisory Agreement HM2 provides investment
banking, financial advisory and other similar services with respect to the
add-on transactions in which the Company is involved. Such transactions require
additional attention beyond that required to monitor and advise the Company on
an ongoing basis and accordingly the Company pays separate financial advisory
fees with respect to such matters in addition to those paid in connection with
the Financial Monitoring and Oversight Agreement. The services that have been
and will continue to be provided by HM2 could not otherwise be obtained by
Chancellor and Chancellor Radio Broadcasting without the addition of personnel
or the engagement of outside professional advisors. The Financial Advisory
Agreement will terminate concurrently with the termination of the Financial
Monitoring and Oversight Agreement.
Stockholders Agreement
Certain stockholders of Chancellor have entered into a stockholders
agreement (the "Stockholders Agreement") with Chancellor, which provides, among
other things, that such stockholders, which include certain affiliates of Hicks
Muse, may require Chancellor, subject to certain registration volume
limitations, to effect up to three demand registrations under the Securities Act
for the sale of such stockholders' shares of Common Stock. The Stockholders
Agreement also provides that in the event Chancellor proposes to register any
shares of its Common Stock under the Securities Act, whether or not for its own
account, the stockholders that are parties to the Stockholders Agreement shall
be entitled, with certain exceptions, to include their shares of Common Stock in
such registration.
Chancellor Business Trust and Related Registration Rights Agreement
At the time of the acquisition of the American Media Station Group,
affiliates of Hicks Muse and certain investment funds operated by Fidelity
Investments formed a business trust (the "Chancellor Business Trust") to hold
shares of the capital stock of Chancellor. The Chancellor Business Trust
currently holds 15.9% of the Class C Common Stock. HM2/GP Partners, L.P., an
affiliate of Hicks Muse (the "Hicks Muse Manager"), acts as manager for, and has
a beneficial interest in, the Chancellor Business Trust. Prior to its
dissolution, the Chancellor Business Trust is entitled to registration rights
under the Stockholders Agreement for the shares of Common Stock held by it. Upon
dissolution of the Chancellor Business Trust and the distribution to the
beneficiaries thereof of (other than the Hicks Muse Manager) the Class C Common
Stock or the Class B Common Stock, as the case may be, held by the Chancellor
Business Trust, such stock will automatically convert into Class A Common Stock.
Such beneficiaries, including the Hicks Muse Manager, will be entitled to
certain registration rights set forth in a Registration Rights Agreement between
Chancellor and the trust unitholders. Under that agreement, the trust
unitholders, subject to certain limitations, are entitled to require Chancellor
to effect a "shelf" registration under the Securities Act and to keep effective
the registration statement for such offering for a period of 36 months for the
purpose of allowing such trust unitholders to dispose of the shares of Common
Stock held by them. In addition, after the dissolution of the Chancellor
Business Trust and the distribution of the Common Stock held thereby, the trust
unitholders are entitled to participate, subject to certain limitations, in any
offering registered under the Securities Act effected by the Company for its own
account. The Chancellor Business Trust may be dissolved at any time by the Hicks
Muse Manager. The Chancellor Business Trust dissolves by its terms on February
9, 1998.
Hicks Muse Equity Investment
In connection with the Shamrock Acquisition and the financing thereof, HM
Fund II advised Chancellor and Chancellor Radio Broadcasting that on or before
September 30, 1996, it would sell all of its capital stock in its affiliate,
HMW, or would cause HMW to sell all or substantially all of its assets (which
consisted primarily of six radio broadcast stations), and that it or HMW would
invest the net proceeds of such sale, in the Class A Common Stock of Chancellor.
HM Fund II has further agreed that, to the extent that such net proceeds are
less than $23.0 million, it will purchase additional shares of Class A Common
Stock in order that, in the aggregate, Chancellor will receive net proceeds of
$23.0 million through the Hicks Muse Equity
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Investment. Chancellor has agreed to sell to HM Fund II and/or to HMW, as
appropriate, for $23.0 million in cash, the number of shares of Class A Common
Stock obtained by dividing (A) the difference between (i) $23.0 million and (ii)
an amount equal to accrued interest on the notional amount of $23.0 million,
which shall be deemed to have accrued from the closing date of the Shamrock
Acquisition to, but not including, the date on which the Hicks Muse Equity
Investment is made at the lowest rate of interest per annum paid or accrued
under the Credit Agreement during such period, by (B) the initial public
offering price per share for the Class A Common Stock, less the underwriting
discount and commission per share for such offering. Chancellor has been advised
that in June 1996, HMW effected the sale of five of its radio stations to an
affiliate of SFX and concurrently entered into an asset purchase agreement with
respect to the sale of its remaining station. HM Fund II has advised Chancellor
that it intends to consummate the Hicks Muse Equity Investment on or about
August 9, 1996. The proceeds of the Hicks Muse Equity Investment will be
contributed by Chancellor to the capital of Chancellor Radio Broadcasting and
are expected to be used to fund part of the purchase price of pending
acquisitions.
Purchase of Exchangeable Preferred Stock
In connection with the Preferred Stock Financing, HM Fund II and one of its
affiliates purchased $12.5 million initial liquidation preference of the
Acquisition Preferred Stock for a purchase price of approximately $11.9 million
(or 95% of the initial liquidation preference of such shares) and received in
connection therewith an aggregate of 92,774 shares of Class A Common Stock. The
shares of Class A Common Stock issued to HM Fund II represent approximately 1.0%
of the Class A Common Stock after giving effect to the Hicks Muse Equity
Investment. The net proceeds of the Original Offering were used to fund the
Repurchase Option and to redeem the remaining shares of Acquisition Preferred
Stock at a redemption price equal to 96.5% of the then effective liquidation
value thereof, plus, without duplication, accumulated and unpaid dividends to
the redemption date. HM Fund II, along with the other purchasers in the
Preferred Stock Financing, is entitled to registration rights for the sale of
the shares of Class A Common Stock issued in the Preferred Stock Financing.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT
The shares of Old Preferred Stock were sold by the Company on February 26,
1996, in the Original Offering. In connection with that placement, the Company
entered into the Registration Rights Agreement, which requires the Company to
file a registration statement under the Securities Act with respect to the New
Preferred Stock and, upon the effectiveness of that registration statement, to
offer to the holders of the Old Preferred Stock the opportunity to exchange
their shares of Old Preferred Stock for the same number of shares of New
Preferred Stock, which will be issued without a restrictive legend and which may
be reoffered and resold by the holder without registration under the Securities
Act. The Registration Rights Agreement further provides that the Company must
use its best efforts to (i) cause the Registration Statement with respect to the
Exchange Offer to be declared effective on or before August 24, 1996 and (ii)
consummate the Exchange Offer on or before October 8, 1996. Except as provided
below, upon the completion of the Exchange Offer, the Company's obligations with
respect to the registration of the Old Preferred Stock and the New Preferred
Stock will terminate. A copy of the Registration Rights Agreement has been filed
as an exhibit to the Registration Statement of which this Prospectus is a part
and the summary herein of certain provisions thereof does not purport to be
complete and is subject to, and is qualified in its entirety by reference
thereto. As a result of the filing and the effectiveness of the Registration
Statement, certain additional dividends provided for in the certificate of
designations governing the Old Preferred Stock will not become payable by the
Company. Following the completion of the Exchange Offer (except as set forth in
the paragraph immediately below), holders of shares of Old Preferred Stock not
tendered will not have any further registration rights and those shares of Old
Preferred Stock will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for the Old Preferred Stock could be
adversely affected upon completion of the Exchange Offer.
In order to participate in the Exchange Offer, a holder must represent to
the Company, among other things, that (i) the shares of New Preferred Stock
acquired pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving the New Preferred Stock, (ii) neither
the holder nor any such other person is engaging in or intends to engage in a
distribution of the New Preferred Stock, (iii) neither the holder nor any such
other person has an arrangement or understanding with any person to participate
in the distribution of the New Preferred Stock, and (iv) neither the holder nor
any such other person is an "affiliate," as defined under Rule 405 promulgated
under the Securities Act, of the Company. Pursuant to the Registration Rights
Agreement, the Company is required to file a "shelf" registration statement for
a continuous offering pursuant to Rule 415 under the Securities Act in respect
of the Old Preferred Stock if (i) because of any change in law or in currently
prevailing interpretations of the staff of the Commission, the Company is not
permitted to effect the Exchange Offer, (ii) the Exchange Offer is not
consummated within 225 days of the Original Offering, (iii) any holder of
Private Exchange Preferred Stock (as defined) requests at any time after the
consummation of the Private Exchange (as defined), (iv) the holders of not less
than a majority of shares of Old Preferred Stock determine that the interests of
the holders would be adversely affected by the consummation of the Exchange
Offer, or (v) any holder of Old Preferred Stock participates in the Exchange
Offer and does not receive freely transferrable shares of New Preferred Stock in
exchange for Old Preferred Stock (other than as a result of the status of such
holder as an "affiliate" of the Company within the meaning of the Securities
Act). In the event that the Company is obligated to file a "shelf" registration
statement, it will be required to keep such "shelf" registration statement
effective for at least three years. Other than as set forth in this paragraph,
no holder will have the right to participate in the "shelf" registration
statement nor otherwise to require that the Company register such holder's
shares of Old Preferred Stock under the Securities Act. See "-- Procedures for
Tendering."
Based on an interpretation by the Commission's staff set forth in no-action
letters issued to third-parties unrelated to the Company, the Company believes
that, with the exceptions set forth below, shares of New Preferred Stock issued
pursuant to the Exchange Offer in exchange for Old Preferred Stock may be
offered for resale, resold and otherwise transferred by any person receiving
such New Preferred Stock, whether or not such person is the holder (other than
any such holder or such other person which is an "affiliate" of the
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Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that the shares of New Preferred Stock are acquired in
the ordinary course of business of the holder or such other person and neither
the holder nor such other person has an arrangement or understanding with any
person to participate in the distribution of such New Preferred Stock. Any
holder who tenders in the Exchange Offer for the purpose of participating in a
distribution of the New Preferred Stock cannot rely on this interpretation by
the Commission's staff and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction. Each broker-dealer that receives shares of New Preferred
Stock for its own account in exchange for Old Preferred Stock, where the shares
of Old Preferred Stock were acquired by that broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Preferred
Stock. See "Plan of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
Following the completion of the Exchange Offer (except as set forth in the
second paragraph under "-- Purpose and Effect" above), holders of shares of Old
Preferred Stock not tendered will not have any further registration rights and
untendered shares of Old Preferred Stock will continue to be subject to certain
restrictions on transfer. Accordingly, the liquidity of the market for a
holder's shares of Old Preferred Stock could be adversely affected upon
completion of the Exchange Offer if the holder does not participate in the
Exchange Offer.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all shares of
Old Preferred Stock validly tendered and not withdrawn prior to 5:00 p.m., New
York City time, on the Expiration Date. The Company will issue one share of New
Preferred Stock in exchange for each share of outstanding Old Preferred Stock
accepted in the Exchange Offer. Holders may tender some or all of their shares
of Old Preferred Stock pursuant to the Exchange Offer.
The powers, preferences and relative rights of the New Preferred Stock are
substantially the same as those of the Old Preferred Stock except that the
shares of New Preferred Stock have been registered under the Securities Act and
will not bear legends restricting their transfer.
As of August 5, 1996, 1,000,000 shares of Old Preferred Stock were issued
and outstanding and there was one registered holder, a nominee of DTC. This
Prospectus, together with the Letter of Transmittal, is being sent to such
registered Holder and to others believed to have beneficial interests in the Old
Preferred Stock. Holders of shares of Old Preferred Stock do not have any
appraisal or dissenters' rights under the General Corporation Law of the State
of Delaware in connection with the Exchange Offer. The Company intends to
conduct the Exchange Offer in accordance with the applicable requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder.
The Company shall be deemed to have accepted validly tendered shares of Old
Preferred Stock when, as, and if the Company has given oral or written notice
thereof to the Exchange Agent. The Exchange Agent will act as agent for the
tendering holders for the purpose of receiving the shares of New Preferred Stock
from the Company. If any tendered shares of Old Preferred Stock are not accepted
for exchange because of an invalid tender, the occurrence of certain other
events set forth herein or otherwise, certificates for any such unaccepted
shares of Old Preferred Stock will be returned, without expense, to the
tendering holder thereof as promptly as practicable after the Expiration Date.
Holders who tender shares of Old Preferred Stock in the Exchange Offer will
not be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to the
exchange of shares of Old Preferred Stock pursuant to the Exchange Offer. The
Company will pay all charges and expenses, other than certain applicable taxes,
in connection with the Exchange Offer. See "The Exchange Offer -- Fees and
Expenses."
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EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 pm., New York City time, on
, 1996, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended. In order to extend the
Exchange Offer, the Company will notify the Exchange Agent and issue a notice of
such extension by press release or other public announcement prior to 9:00 am.,
New York City time, on the next business day after the previously scheduled
Expiration Date. The Company reserves the right, in its sole discretion, (i) to
delay accepting any shares of Old Preferred Stock, to extend the Exchange Offer
or, if any of the conditions set forth under "The Exchange Offer -- Certain
Conditions to Exchange Offer" shall not have been satisfied, to terminate the
Exchange Offer, by giving oral or written notice of such delay, extension or
termination to the Exchange Agent, or (ii) to amend the terms of the Exchange
Offer in any manner.
PROCEDURES FOR TENDERING
Only a registered holder of shares of Old Preferred Stock may tender the
Old Preferred Stock in the Exchange Offer. Except as set forth under "The
Exchange Offer -- Book Entry Transfer," to tender in the Exchange Offer a holder
must complete, sign, and date the Letter of Transmittal, or a copy thereof, have
the signatures thereon guaranteed if required by the Letter of Transmittal, and
mail or otherwise deliver the Letter of Transmittal or copy thereof to the
Exchange Agent prior to the Expiration Date. In addition, either (i)
certificates for such shares of Old Preferred Stock must be received by the
Exchange Agent along with the Letter of Transmittal, or (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such
shares of Old Preferred Stock, if that procedure is available, into the Exchange
Agent's account at DTC (the "Book-Entry Transfer Facility") pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date, or (iii) the holder must comply
with the guaranteed delivery procedures described below. To be tendered
effectively, the Letter of Transmittal and other required documents must be
received by the Exchange Agent at the address set forth under "The Exchange
Offer -- Exchange Agent" prior to the Expiration Date.
Tender of Old Preferred Stock by a holder that is not withdrawn before the
Expiration Date will constitute an agreement between that holder and the Company
in accordance with the terms and subject to the conditions set forth herein and
in the Letter of Transmittal.
THE METHOD OF DELIVERY OF SHARES OF OLD PREFERRED STOCK AND THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED
THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD PREFERRED STOCK SHOULD BE SENT
TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES, OR NOMINEES TO EFFECT THESE TRANSACTIONS FOR
SUCH HOLDERS.
Any beneficial owner whose shares of Old Preferred Stock are registered in
the name of a broker, dealer, commercial bank, trust company, or other nominee
and who wishes to tender should contact the registered holder promptly and
instruct the registered holder to tender on the beneficial owner's behalf. If
the beneficial owner wishes to tender on the owner's own behalf, the owner must,
prior to completing and executing the Letter of Transmittal and delivering the
owner's shares of Old Preferred Stock, either make appropriate arrangements to
register ownership of the Old Preferred Stock in the beneficial owner's name or
obtain a properly completed stock power from the registered holder. The transfer
of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless shares of Old Preferred Stock tendered pursuant thereto are tendered (i)
by a registered holder who has not completed the box entitled "Special Delivery
Instructions"
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on the Letter of Transmittal or (ii) for the account of an Eligible Institution.
If signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, the guarantee must be by any eligible
guarantor institution that is a member of or participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Program, the Stock Exchange Medallion Program, or an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act
(an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any shares of Old Preferred Stock listed therein, the
shares of Old Preferred Stock must be endorsed or accompanied by a properly
completed stock power, signed by the registered holder as that registered
holder's name appears on the Old Preferred Stock.
If the Letter of Transmittal or any shares of Old Preferred Stock or stock
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations, or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal unless waived by the Company.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance, and withdrawal of tendered shares of Old Preferred Stock
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject any
and all shares of Old Preferred Stock not properly tendered or any shares of Old
Preferred Stock the Company's acceptance of which would, in the opinion of
counsel for the Company, be unlawful. The Company also reserves the right to
waive any defects, irregularities, or conditions of tender as to particular
shares of Old Preferred Stock. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of shares of Old Preferred
Stock must be cured within such time as the Company shall determine. Although
the Company intends to notify holders of defects or irregularities with respect
to tenders of shares of Old Preferred Stock, neither the Company, the Exchange
Agent, nor any other person shall incur any liability for failure to give such
notification. Tenders of shares of Old Preferred Stock will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any shares of Old Preferred Stock received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering holders,
unless otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any shares of Old Preferred Stock that remain
outstanding after the Expiration Date or, as set forth under "The Exchange
Offer -- Conditions," to terminate the Exchange Offer and, to the extent
permitted by applicable law, purchase shares of Old Preferred Stock in the open
market, in privately negotiated transactions, or otherwise. The terms of any
such purchases or offers could differ from the terms of the Exchange Offer.
By tendering, each holder will represent to the Company that, among other
things, (i) the shares of New Preferred Stock acquired pursuant to the Exchange
Offer are being obtained in the ordinary course of business of the person
receiving such New Preferred Stock, whether or not such person is the registered
holder, (ii) neither the holder nor any such other person is engaging in or
intends to engage in a distribution of such New Preferred Stock, (iii) neither
the holder nor any such other person has an arrangement or understanding with
any person to participate in the distribution of such New Preferred Stock, and
(iv) neither the holder nor any such other person is an "affiliate," as defined
under Rule 405 of the Securities Act, of the Company.
In all cases, issuance of shares of New Preferred Stock for Old Preferred
Stock that are accepted for exchange pursuant to the Exchange Offer will be made
only after timely receipt by the Exchange Agent of certificates for such shares
of Old Preferred Stock or a timely Book-Entry Confirmation of such shares of Old
Preferred Stock into the Exchange Agent's account at the Book-Entry Transfer
Facility, a properly completed and duly executed Letter of Transmittal (or, with
respect to the DTC and its participants, electronic instructions in which the
tendering holder acknowledges its receipt of and agreement to be bound by the
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Letter of Transmittal), and all other required documents. If any tendered shares
of Old Preferred Stock are not accepted for any reason set forth in the terms
and conditions of the Exchange Offer or if certificates representing Old
Preferred Stock are submitted for a greater number of shares than the holder
desires to exchange, such unaccepted or non-exchanged shares of Old Preferred
Stock will be returned without expense to the tendering Holder thereof (or, in
the case of shares of Old Preferred Stock tendered by book-entry transfer into
the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described below, such nonexchanged shares of Old
Preferred Stock will be credited to an account maintained with such Book-Entry
Transfer Facility) as promptly as practicable after the expiration or
termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Preferred Stock at the Book-Entry Transfer Facility for purposes of
the Exchange Offer within two business days after the date of this Prospectus,
and any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Preferred Stock being
tendered by causing the Book-Entry Transfer Facility to transfer such Old
Preferred Stock into the Exchange Agent's account at the Book-Entry Transfer
Facility in accordance with such Book-Entry Transfer Facility's procedures for
transfer. However, although delivery of shares of Old Preferred Stock may be
effected through book-entry transfer at the Book-Entry Transfer Facility, the
Letter of Transmittal or copy thereof, with any required signature guarantees
and any other required documents, must, in any case other than as set forth in
the following paragraph, be transmitted to and received by the Exchange Agent at
the address set forth under "The Exchange Offer -- Exchange Agent" on or prior
to the Expiration Date or the guaranteed delivery procedures described below
must be complied with.
DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through DTC. To accept the Exchange Offer through
ATOP, participants in DTC must send electronic instructions to DTC through DTC's
communication system in lieu of sending a signed, hard copy Letter of
Transmittal. DTC is obligated to communicate those electronic instructions to
the Exchange Agent. To tender shares of Old Preferred Stock through ATOP, the
electronic instructions sent to DTC and transmitted by DTC to the Exchange Agent
must contain the character by which the participant acknowledges its receipt of,
and agrees to be bound by the terms of, the Letter of Transmittal.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the shares of Old Preferred Stock desires to
tender such Old Preferred Stock and the shares of Old Preferred Stock are not
immediately available, or time will not permit such holder's Old Preferred Stock
or other required documents to reach the Exchange Agent before the Expiration
Date, or the procedure for book-entry transfer cannot be completed on a timely
basis, a tender may be effected if (i) the tender is made through an Eligible
Institution, (ii) prior to the Expiration Date, the Exchange Agent received from
such Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form provided by the Company (by telegram, telex, facsimile
transmission, mail or hand delivery), setting forth the name and address of the
holder of shares of Old Preferred Stock and the amount of shares of Old
Preferred Stock tendered, stating that the tender is being made thereby and
guaranteeing that within three New York Stock Exchange ("NYSE") trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered shares of Old Preferred Stock, in
proper form for transfer, or a Book-Entry Confirmation, as the case may be, and
any other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent, and (iii) the certificates for
all physically tendered shares of Old Preferred Stock, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and all other
documents required by the Letter of Transmittal, are received by the Exchange
Agent within three NYSE trading days after the date of execution of the Notice
of Guaranteed Delivery.
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WITHDRAWAL RIGHTS
Tenders of shares of Old Preferred Stock may be withdrawn at any time prior
to 5:00 pm., New York City time, on the Expiration Date.
For a withdrawal of a tender of shares of Old Preferred Stock to be
effective, a written or (for DTC participants) electronic ATOP transmission
notice of withdrawal must be received by the Exchange Agent at its address set
forth on the back cover page of this Prospectus prior to 5:00 pm., New York City
time, on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the shares of Old Preferred Stock to be
withdrawn (the "Depositor"), (ii) identify the shares of Old Preferred Stock to
be withdrawn (including the certificate number or numbers and principal amount
of such shares of Old Preferred Stock), (iii) be signed by the holder in the
same manner as the original signature on the Letter of Transmittal by which such
shares of Old Preferred Stock were tendered (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to have the
Trustee register the transfer of such Old Preferred Stock into the name of the
person withdrawing the tender, and (iv) specify the name in which any such
shares of Old Preferred Stock are to be registered, if different from that of
the Depositor. All questions as to the validity, form, and eligibility
(including time of receipt) of such notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any shares of Old
Preferred Stock so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Any shares of Old Preferred
Stock which have been tendered for exchange but which are not exchanged for any
reason will be returned to the holder thereof without cost to such holder as
soon as practicable after withdrawal, rejection of tender, or termination of the
Exchange Offer. Properly withdrawn shares of Old Preferred Stock may be
retendered by following one of the procedures under "The Exchange
Offer -- Procedures for Tendering" at any time on or prior to the Expiration
Date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue shares of New
Preferred Stock in exchange for, any shares of Old Preferred Stock and may
terminate or amend the Exchange Offer if at any time before the acceptance of
such Old Preferred Stock for exchange or the exchange of the New Preferred Stock
for such Old Preferred Stock, the Company determines that the Exchange Offer
violates applicable law, any applicable interpretation of the staff of the
Commission or any order of any governmental agency or court of competent
jurisdiction.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, the Company will not accept for exchange any shares of Old
Preferred Stock tendered, and no shares of New Preferred Stock will be issued in
exchange for any such Old Preferred Stock, if at such time any stop order shall
be threatened or in effect with respect to the Registration Statement of which
this Prospectus constitutes a part. In any such event the Company is required to
use every reasonable effort to obtain the withdrawal of any stop order at the
earliest possible time.
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EXCHANGE AGENT
All executed Letters of Transmittal should be directed to the Exchange
Agent. KeyCorp Shareholder Services, Inc. has been appointed as Exchange Agent
for the Exchange Offer. Questions, requests for assistance and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
For Information by Telephone:
(214) 658-0201 By Hand, Mail or Overnight Delivery:
By Facsimile Transmission 5 Hanover Square
(214) 658-0222 10th Floor
(For Eligible Institutions Only) New York, New York 10004
Confirm by Telephone: Attention: Bob Krol
(214) 658-0201
</TABLE>
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the Company.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
approximately $435,000, which includes fees and expenses of the Exchange Agent,
accounting, legal, printing, and related fees and expenses.
TRANSFER TAXES
Holders who tender their Old Preferred Stock for exchange will not be
obligated to pay any transfer taxes in connection therewith, except that holders
who instruct the Company to register shares of New Preferred Stock in the name
of, or request that shares of Old Preferred Stock not tendered or not accepted
in the Exchange Offer be returned to, a person other than the registered
tendering holder will be responsible for the payment of any applicable transfer
tax thereon.
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DESCRIPTION OF THE NEW PREFERRED STOCK
AND EXCHANGE DEBENTURES
NEW PREFERRED STOCK
The summary contained herein of certain provisions of the New Preferred
Stock to be issued by the Company does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, all of the provisions of
the Certificate of Designation relating thereto, copies of which may be obtained
from the Company upon request. The definitions of certain capitalized terms used
in the following summary are set forth under "-- Certain Definitions" below.
Other capitalized terms used herein and not otherwise defined under "-- Certain
Definitions" below are defined in the Certificate of Designation.
GENERAL
At the consummation of the Exchange Offer, the Company will be authorized
to issue 2,000,000 shares of preferred stock, $0.01 par value per share, and
there will be 1,000,000 shares of preferred stock, issued and outstanding and
designated as New Preferred Stock. Subject to certain conditions, the New
Preferred Stock will be exchangeable for the Exchange Debentures at the option
of the Company on any dividend payment date on or after the Issue Date. The New
Preferred Stock, when issued in accordance with the terms of the Exchange Offer,
will be fully paid and non-assessable and the holders thereof will not have any
subscription or preemptive rights in connection therewith.
RANKING
The New Preferred Stock will, with respect to dividend rights and rights on
liquidation, winding-up and dissolution, rank (i) senior to all classes of
common stock and to each other class of Capital Stock or series of Preferred
Stock established hereafter by the board of directors of the Company the terms
of which do not expressly provide that it ranks senior to, or on a parity with,
the New Preferred Stock as to dividend rights and rights on liquidation,
winding-up and dissolution of the Company (collectively referred to, together
with all classes of common stock of the Company, as "Junior Stock"); (ii)
subject to certain conditions, on a parity with each other class of Capital
Stock or series of Preferred Stock established hereafter by the board of
directors of the Company the terms of which expressly provide that such class or
series will rank on a parity with the New Preferred Stock as to dividend rights
and rights on liquidation, winding-up and dissolution (collectively referred to
as "Parity Stock"); and (iii) subject to certain conditions, junior to each
class of Capital Stock or series of Preferred Stock established after the date
hereof by the board of directors of the Company the terms of which expressly
provide that such class or series will rank senior to the New Preferred Stock as
to dividend rights and rights upon liquidation, winding-up and dissolution of
the Company (collectively referred to as the "Senior Stock"). The Company may
not authorize any new class of Parity Stock or Senior Stock without the approval
of the holders of at least a majority of the shares of New Preferred Stock then
outstanding, voting or consenting, as the case may be, as one class.
DIVIDENDS
Holders of the outstanding shares of New Preferred Stock will be entitled
to receive, when, as and if declared by the board of directors of the Company,
out of funds legally available therefor, cash dividends on the New Preferred
Stock at a rate per annum equal to 12 1/4% of the then effective liquidation
preference per share of New Preferred Stock, payable quarterly. In the event
that, after February 15, 2001, cash dividends on the New Preferred Stock are in
arrears and unpaid for six or more quarterly dividends periods (whether or not
consecutive), holders of New Preferred Stock will be entitled to certain voting
rights. See "-- Voting Rights" below. All dividends will be cumulative, whether
or not earned or declared, on a daily basis from August 15, 1996 and will be
payable quarterly in arrears on February 15, May 15, August 15 and November 15
of each year (each a "Dividend Payment Date"), commencing on November 15, 1996
to holders of record on the February 1, May 1, August 1 and November 1
immediately preceding the relevant Dividend Payment Date. The Credit Agreement
prohibits the Company from paying cash dividends on its Capital Stock, including
the
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New Preferred Stock, and the Indentures limit the Company's ability to pay cash
dividends on its Capital Stock. See "Description of Indebtedness."
If any dividend payable on any Dividend Payment Date on or before February
15, 2001 is not declared or paid in full in cash on such Dividend Payment Date,
the amount payable as dividends on such Dividend Payment Date that is not paid
in cash on such Dividend Payment Date will be added to the liquidation
preference of the New Preferred Stock on such Dividend Payment Date and will be
deemed paid in full and will not accumulate. All dividends paid with respect to
shares of the New Preferred Stock pursuant to the foregoing shall be paid pro
rata to the Holders entitled thereto.
No full dividends may be declared or paid or funds set apart for the
payment of dividends on any Parity Stock for any period unless full cumulative
dividends shall 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 sufficient for such payment set apart for such payment on the New Preferred
Stock. If full dividends are not so paid, the New Preferred Stock will share
dividends pro rata with the Parity Stock. No dividends may be paid or set apart
for such payment on Junior Stock (except dividends on Junior Stock payable in
additional shares of Junior Stock) and no Junior Stock or Parity Stock may be
repurchased, redeemed or otherwise retired nor may funds be set apart for
payment with respect thereto, if full cumulative dividends have not been paid in
full (or deemed paid) on the New Preferred Stock. Dividends on account of
arrears for any past Dividend Period and dividends in connection with any
optional redemption 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 Company. So long as any shares of the New Preferred
Stock are outstanding, the Company 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 Parity Stock or Junior
Stock or any warrants, rights, calls or options exercisable for or convertible
into any of the Parity Stock or Junior Stock, and shall not permit any
corporation or other entity directly or indirectly controlled by the Company to
purchase or redeem any of the Parity Stock or Junior Stock or any such warrants,
rights, calls or options unless full cumulative dividends determined in
accordance herewith on the New Preferred Stock have been paid (or are deemed
paid) in full.
OPTIONAL REDEMPTION
The New Preferred Stock may be redeemed (subject to contractual and other
restrictions with respect thereto and to the legal availability of funds
therefor) at any time on or after February 15, 2001, in whole or in part, at the
option of the Company, at the redemption prices (expressed in percentages of the
then effective liquidation preference thereof) set forth below, plus, 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), if redeemed during the 12-month period
beginning February 15 of each of the years set forth below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C> <C>
2001............................................................... 106.125%
2002............................................................... 104.900
2003............................................................... 103.675
2004............................................................... 102.450
2005............................................................... 101.225
2006 and thereafter................................................ 100.000
</TABLE>
In addition, prior to February 15, 1999, the Company may, at its option,
use the net cash proceeds of one or more Public Equity Offerings to redeem the
New Preferred Stock, in part, at a redemption price of 112.250% 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
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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); provided,
however, that after any such redemption, the number of shares of New Preferred
Stock outstanding must equal at least 75% of the shares of New Preferred Stock
originally issued in the Exchange Offer. Any such redemption will be required to
occur on or prior to 60 days after the receipt by the Company of the proceeds of
each Public Equity Offering. In the event of a redemption of only a portion of
the then outstanding shares of the New Preferred Stock, the Company shall effect
such redemption on a pro rata basis, except that the Company 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 Company.
The Indentures and the Credit Agreement restrict the ability of the Company
to redeem the New Preferred Stock. See "Description of Indebtedness."
MANDATORY REDEMPTION
The New Preferred Stock will also be subject to mandatory redemption
(subject to the legal availability of funds therefor) in whole on February 15,
2008, at a price equal to 100% of the then effective liquidation preference
thereof, plus, without duplication, all accumulated and unpaid dividends to the
date of redemption. Future agreements of the Company may restrict or prohibit
the Company from redeeming the New Preferred Stock.
PROCEDURE FOR REDEMPTION
On and after the redemption date, unless the Company defaults in the
payment of the applicable redemption price, dividends will cease to accumulate
on shares of New Preferred Stock called for redemption and all rights of holders
of such shares will terminate except for the right to receive the redemption
price, without interest; provided, however, that if a notice of redemption shall
have been given as provided in the succeeding sentence and the funds necessary
for redemption (including an amount in respect of all dividends that will accrue
to the redemption date) shall have been segregated and irrevocably set apart by
the Company, in trust for the benefit of the holders of the shares called for
redemption, then dividends shall cease to accumulate on the redemption date on
the shares to be redeemed and, at the close of business on the day or when such
funds are segregated and set apart, the holders of the shares to be redeemed
shall cease to be stockholders of the Company and shall be entitled only to
receive the redemption price for such shares. The Company will send a written
notice of redemption by first class mail to each holder of record of shares of
New Preferred Stock, not fewer than 30 days nor more than 60 days prior to the
date fixed for such redemption at its registered address. Shares of New
Preferred Stock issued and reacquired will, upon compliance with the applicable
requirements of Delaware law, have the status of authorized but unissued shares
of preferred stock of the Company undesignated as to series and may, with any
and all other authorized but unissued shares of preferred stock of the Company,
be designated or redesignated and issued or reissued, as the case may be, as
part of any series of preferred stock of the Company, except that any issuance
or reissuance of shares of New Preferred Stock must be in compliance with the
Certificate of Designation.
EXCHANGE
The Company may, at its option, subject to certain conditions, on any
scheduled Dividend Payment Date occurring on or after the Issue Date, exchange
the New Preferred Stock, in whole but not in part, for the Exchange Debentures;
provided that (i) on the date of such exchange there are no accumulated and
unpaid dividends on the New Preferred Stock (including the dividend payable on
such date) or other 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 (each as defined in the
Exchange Indenture) would exist under the Exchange Indenture and no default or
event of default would exist under the Indentures or the Credit Agreement. After
giving effect to the Original Offering and the application of the net proceeds
therefrom, the exchange of the New Preferred Stock into Exchange Debentures
would be
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restricted by covenants contained in the Indentures and the Credit Agreement, in
each case, relating, among other things, to the incurrence of indebtedness.
Upon any exchange pursuant to the preceding paragraph, holders of
outstanding shares of New Preferred Stock will be entitled to receive, subject
to the second succeeding sentence, $1.00 principal amount of Exchange Debentures
for each $1.00 liquidation preference of New Preferred Stock held by them. The
Exchange Debentures will be issued in registered form, without coupons. Exchange
Debentures issued in exchange for New Preferred Stock will be issued in
principal amounts of $1,000 and integral multiples thereof to the extent
possible, and will also be issued in principal amounts less than $1,000 so that
each holder of New Preferred Stock will receive certificates representing the
entire amount of Exchange Debentures to which such holder's shares of New
Preferred Stock entitle such holder; provided that the Company may pay cash in
lieu issuing an Exchange Debenture in a principal amount less than $1,000. The
Company will send a written notice of exchange by mail to each holder of record
of shares of New Preferred Stock not fewer than 30 days nor more than 60 days
before the date fixed for such exchange. On and after the date of exchange,
dividends will cease to accrue on the outstanding shares of New Preferred Stock,
and all rights of the holder of New Preferred Stock (except the right to receive
the Exchange Debentures, an amount in cash, to the extent applicable, equal to
the accumulated and unpaid dividends to the exchange date and, if the Company so
elects, cash in lieu of any Exchange Debenture that is in a principal amount
that is not an integral multiple of $1,000) will terminate. The person entitled
to receive the Exchange Debentures issuable upon such exchange will be treated
for all purposes as the registered holder of such Exchange Debentures. See
"-- The Exchange Debentures."
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the Company, holders of New Preferred Stock will be entitled to be paid, out of
the assets of the Company available for distribution to stockholders, the then
effective liquidation preference per share of New Preferred Stock, plus, without
duplication, an amount in cash equal to all 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 distribution is made on any Junior Stock, including, without
limitation, common stock of the Company. If, upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the amounts payable with
respect to the New Preferred Stock and all other Parity Stock are not paid in
full, the holders of the New Preferred Stock and the Parity Stock will share
equally and ratably in any distribution of assets of the Company in proportion
to the full liquidation preference to which each is entitled. After payment of
the full amount of the liquidation preference and accumulated and unpaid
dividends to which they are entitled, the holders of shares of New Preferred
Stock will not be entitled to any further participation in any distribution of
assets of the Company. However, neither the sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other consideration) of all
or substantially all of the property or assets of the Company nor the
consolidation or merger of the Company with one or more entities shall be deemed
to be a liquidation, dissolution or winding-up of the Company.
The Certificate of Designation for the New Preferred Stock does not contain
any provision requiring funds to be set aside to protect the liquidation
preference of the New Preferred Stock, although such liquidation preference will
be substantially in excess of the par value of such shares of New Preferred
Stock. In addition, the Company is not aware of any provision of Delaware law or
any controlling decision of the courts of the State of Delaware (the state of
incorporation of the Company) that requires a restriction upon the surplus of
the Company solely because the liquidation preference of the New Preferred Stock
will exceed its par value. Consequently, there is no restriction upon the
surplus of the Company solely because the liquidation preference of the New
Preferred Stock will exceed its par value and there are no remedies available to
holders of the New Preferred Stock before or after the payment of any dividend,
other than in connection with the liquidation of the Company, solely by reason
of the fact that such dividend would reduce the surplus of the Company to an
amount less than the difference between the liquidation preference of the New
Preferred Stock and its par value.
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<PAGE> 70
VOTING RIGHTS
The holders of New Preferred Stock, except as otherwise required under
Delaware law or as set forth below, shall not be entitled or permitted to vote
on any matter required or permitted to be voted upon by the stockholders of the
Company.
The Certificate of Designation provides that if (i) after February 15,
2001, cash dividends on the New Preferred Stock are in arrears and unpaid for
six or more quarterly dividend periods (whether or not consecutive); (ii) the
Company fails to redeem the New Preferred Stock on February 15, 2008 or fails to
otherwise discharge any redemption obligation with respect to the New Preferred
Stock; (iii) the Company fails to make a Change of Control Offer if such offer
is required by the provisions set forth under "-- Change of Control" below or
fails to purchase shares of New Preferred Stock from holders who elect to have
such shares purchased pursuant to the Change of Control Offer; (iv) a breach or
violation of any of the provisions described under the caption "-- Certain
Covenants" occurs and the breach or violation continues for a period of 30 days
or more after the Company receives notice thereof specifying the default from
the holders of at least 25% of the shares of New Preferred Stock then
outstanding; or (v) the Company fails to pay at the final stated maturity
(giving effect to any extensions thereof) the principal amount of any
Indebtedness of the Company or any Subsidiary of the Company, or the 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 which has
been accelerated, aggregates $5,000,000 or more at any time, in each case, after
a 10-day period during which such default shall not have been cured or such
acceleration rescinded, then the number of directors constituting the board of
directors will be adjusted to permit the holders of a majority of the then
outstanding shares of New Preferred Stock, voting separately and as a class, to
elect the lesser of two directors and that number of directors constituting 25%
of the members of the Board of Directors of the Company. Such voting rights will
continue until such time as, in the case of a dividend default, all dividends in
arrears on the New Preferred Stock are paid in full in cash and, in all other
cases, any failure, breach or default giving rise to such voting rights is
remedied or waived by the holders of at least a majority of the shares of New
Preferred Stock then outstanding, at which time the term of any directors
elected pursuant to the provisions of this paragraph shall terminate. Each such
event described in clauses (i) through (v) above is referred to herein as a
"Voting Rights Triggering Event." The voting rights provided herein shall be the
holder's exclusive remedy at law or in equity.
The Certificate of Designation will also provide that the Company will not
authorize any class of Senior Stock or Parity Stock without the affirmative vote
or consent of holders of at least a majority of the shares of New Preferred
Stock then outstanding, voting or consenting, as the case may be, as one class.
In addition, the Certificate of Designation provides that the Company may not
authorize the issuance of any additional shares of New Preferred Stock without
the affirmative vote or consent of the holders of at least a majority of the
then outstanding shares of New Preferred Stock, voting or consenting, as the
case may be, as one class. The Certificate of Designation also provides that,
except as set forth above, (a) the creation, authorization or issuance of any
shares of Junior Stock, Parity Stock or Senior Stock, including the designation
of a series thereof within the existing class of New Preferred Stock, or (b) the
increase or decrease in the amount of authorized Capital Stock of any class,
including any preferred stock, shall not require the consent of the holders of
New Preferred Stock and shall not be deemed to affect adversely the rights,
preferences, privileges or voting rights of shares of New Preferred Stock.
Under Delaware law, holders of preferred stock are entitled to vote as a
class upon a proposed amendment to the certificate of incorporation, whether or
not entitled to vote thereon by the certificate of incorporation, if the
amendment would increase or decrease the par value of the shares of such class,
or alter or change the powers, preferences or special rights of the shares of
such class so as to affect them adversely.
CHANGE OF CONTROL
The Certificate of Designation will provide that, upon the occurrence of a
Change of Control, each holder will have the right to require that the Company
purchase all or a portion of such holder's New Preferred Stock
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<PAGE> 71
in cash pursuant to the offer described below (the "Change of Control Offer"),
at a purchase price equal to 101% of the then effective liquidation preference
thereof, plus, without duplication, all accumulated and unpaid dividends per
share to the Change of Control Payment Date (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 (as defined below) to the Change of
Control Payment Date).
The Certificate of Designation will provide that, prior to the mailing of
the notice referred to below, but in any event within 30 days following the date
on which the Company becomes aware that a Change of Control has occurred, the
Company covenants that if the purchase of the New Preferred Stock would violate
or constitute a default under the Credit Agreement, the Indentures or other
Indebtedness of the Company, then the Company shall either (i) repay all such
Indebtedness and terminate all commitments outstanding under the Credit
Agreement or (ii) obtain the requisite consents, if any, under the Credit
Agreement, the Indentures or such Indebtedness required to permit the purchase
of the New Preferred Stock as provided below. The Company will first comply with
the covenant in the preceding sentence before it will be required to make the
Change of Control Offer or purchase the New Preferred Stock pursuant to the
provisions described below.
Within 30 days following the date on which the Company becomes aware that a
Change of Control has occurred, the Company must send, by first class mail
postage prepaid, a notice to each holder of New Preferred Stock, which notice
shall govern the terms of the Change of Control Offer. Such notice shall state,
among other things, the purchase date, which must be no earlier than 30 days nor
later than 45 days from the date such notice is mailed, other than as may be
required by law (the "Change of Control Payment Date"). Holders electing to have
any shares of New Preferred Stock purchased pursuant to a Change of Control
Offer will be required to surrender such shares of New Preferred Stock, properly
endorsed for transfer, together with such other customary documents as the
Company and the transfer agent may reasonably request, to the transfer agent and
registrar for the New Preferred Stock at the address specified in the notice
prior to the close of business on the business day prior to the Change of
Control Payment Date.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act to the extent applicable in connection with the purchase of shares
of New Preferred Stock pursuant to a Change of Control Offer.
This "Change of Control" covenant will not apply in the event of (a)
changes in a majority of the board of directors of the Company or Chancellor so
long as a majority of each such board of directors continues to consist of
Continuing Directors and (b) certain transactions with Permitted Holders. In
addition, this covenant is not intended to afford holders of shares of New
Preferred Stock protection in the event of certain highly leveraged
transactions, reorganizations, restructuring, mergers and other similar
transactions that might adversely affect the holders of shares of New Preferred
Stock, but would not constitute a Change of Control. The Company could, in the
future, enter into certain transactions including certain recapitalizations of
the Company, that would not constitute a Change of Control with respect to the
Change of Control purchase feature of the New Preferred Stock, but would
increase the amount of indebtedness outstanding at such time. However, the
Certificate of Designation will contain limitations on the ability of the
Company to incur additional Indebtedness and to engage in certain mergers,
consolidations and sales of assets, whether or not a Change of Control is
involved. See "-- Certain Covenants -- Limitation on Additional Indebtedness"
and "-- Certain Covenants -- Merger, Consolidation and Sale of Assets" below.
If a Change of Control were to occur, there can be no assurance that the
Company would have sufficient funds to pay the purchase price for all shares of
New Preferred Stock that the Company might be required to purchase. Moreover, as
of the date hereof, after giving effect to the Original Offering and the
application of the proceeds therefrom, the Company would not have sufficient
funds available to purchase all of the outstanding shares of New Preferred Stock
pursuant to a Change of Control Offer. In the event that the Company were
required to purchase outstanding shares of New Preferred Stock pursuant to a
Change of Control Offer, the Company expects that it would need to seek
third-party financing to the extent it does not have available funds to meet its
purchase obligations. However, there can be no assurance that the Company would
be able to obtain such financing on favorable terms, if at all. In addition, the
Indentures and the Credit
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Agreement restrict the Company's ability to purchase the New Preferred Stock,
including pursuant to a Change of Control Offer. See "Description of
Indebtedness."
With respect to the sale of "all or substantially all" the assets of the
Company, which would constitute a Change of Control for proposes of the
Certificate of Designation, the meaning of the phrase "all or substantially all"
varies according to the facts and circumstances of the subject transaction, has
no clearly established meaning under relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of the Company and,
therefore, it may be unclear whether a Change of Control has occurred and
whether the New Preferred Stock is subject to a Change of Control Offer.
None of the provisions in the Certificate of Designation relating to a
purchase of New Preferred Stock upon a Change of Control are waivable by the
board of directors of the Company. Without the consent of each holder of New
Preferred Stock affected thereby, after the mailing of the notice of a Change of
Control Offer, no amendment to the Certificate of Designation may, directly or
indirectly, affect the Company's obligation to purchase the outstanding New
Preferred Stock or amend, modify or change the obligation of the Company to
consummate a Change of Control Offer or waive any default in the performance
thereof or modify any of the provisions of the definitions with respect to any
such offer.
CERTAIN COVENANTS
Limitation on Incurrence of Additional Indebtedness. The Certificate of
Designation will provide that neither the Company nor any of its Subsidiaries
will, directly or indirectly, create, incur, assume, guarantee, acquire or
become liable for, contingently or otherwise (collectively, "incur"), any
Indebtedness other than Permitted Indebtedness. Notwithstanding the foregoing
limitation, the Company or any Subsidiary may incur Indebtedness if, on the date
of the incurrence of such Indebtedness, after giving effect to the incurrence of
such Indebtedness and the receipt and application of the proceeds thereof, the
Company's Leverage Ratio is less than 7.0 to 1.
Limitation on Restricted Payments. (a) The Certificate of Designation will
provide that neither the Company nor any of its Subsidiaries will, directly or
indirectly, make any Restricted Payment if at the time of such Restricted
Payment and immediately after giving effect thereto:
(i) any Voting Rights Triggering Event shall have occurred and be
continuing; or
(ii) the Company is not able to incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with the "Limitation on
Incurrence of Additional Indebtedness" covenant; or
(iii) the aggregate amount of Restricted Payments made 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 of the Company in good faith) exceeds the sum of
(a) (x) 100% of the aggregate Consolidated EBITDA of the Company (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 Company, taken as one
accounting period, less (y) 1.4 times Consolidated Interest Expense for the
same period, plus (b) 100% of the aggregate net proceeds, including the
fair market value of property other than cash as determined by the board of
directors of the Company in good faith, received by the Company from any
Person (other than a Subsidiary of the Company) from the issuance and sale
on or subsequent to February 14, 1996 of Qualified Capital Stock of the
Company (excluding any net proceeds from issuances and sales financed
directly or indirectly using funds borrowed from the Company or any
Subsidiary of the Company, until and to the extent such borrowing is
repaid, but including the proceeds from the issuance and sale of any
securities convertible into or exchangeable for Qualified Capital Stock to
the extent such securities are so converted or exchanged and including any
additional proceeds received by the Company upon such conversion or
exchange), plus (c) without duplication of any amount included in clause
(iii)(b) above, 100% of the
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aggregate net proceeds, including the fair market value of property other
than cash (valued as provided in clause (iii)(b) above), received by the
Company as a capital contribution on or after February 14, 1996 (excluding
the net proceeds from a Public Equity Offering by Chancellor to the extent
used to redeem the New Preferred Stock), plus (d) $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
been permitted on the date of declaration; (2) the purchase, redemption or other
acquisition or retirement of any Capital Stock of the Company or any warrants,
options or other rights to acquire shares of any class of such Capital Stock
either (x) solely in exchange for shares of Qualified Capital Stock or other
rights to acquire Qualified Capital Stock or (y) through the application of the
net proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of the Company) of shares of Qualified Capital Stock or warrants,
options or other rights to acquire Qualified Capital Stock; (3) payments by the
Company to fund the operating expenses of Chancellor in an amount not to exceed
$500,000 per annum; (4) payments by the Company to Chancellor to enable
Chancellor to make payments pursuant to (x) the Financial Monitoring and
Oversight Agreements or (y) the Tax Sharing Agreement; (5) payments by the
Company to repurchase, or enable Chancellor to repurchase, Capital Stock or
other securities of Chancellor from employees of Chancellor or the Company 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 Company 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 the "Merger, Consolidation and Sale of Assets" covenant; 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 Company would be
able to incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with the "Limitation on Incurrence of Additional
Indebtedness" covenant such that after incurring that $1.00 of additional
Indebtedness, the Leverage Ratio would be less than 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.
Merger, Consolidation and Sale of Assets. The Certificate of Designation
will provide that, without the affirmative vote of the holders of a majority of
the issued and outstanding shares of New Preferred Stock, voting or consenting,
as the case may be, as a separate class, the Company may not, in a single
transaction or a series of related transactions, consolidate with or merge with
or into, or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets to, another Person or adopt a plan of
liquidation unless (i) either (1) the Company is the surviving or continuing
Person or (2) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the person that acquires by
conveyance, transfer or lease the properties and assets of the Company
substantially as an entirety or in the case of a plan of liquidation, the Person
to which assets of the Company 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; (ii) the New 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 New Preferred Stock had
immediately prior to such transaction; (iii) immediately after given 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 Company (in the case of
clause (1) of the foregoing clause (i)) or such Person (in the case of clause
(2) of the foregoing clause (i)) shall be able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant; (iv) immediately
after giving effect to such transactions, no
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Voting Rights Triggering Event shall have occurred or be continuing; and (v) the
Company has delivered to the transfer agent for the New 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 transfer
complies with the Certificate of Designation and that all conditions precedent
in the Certificate of Designation relating to such transaction have been
satisfied. For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of related transactions) of
all or substantially all of the properties and assets of one or more
Subsidiaries, the Capital Stock of which constitutes all or substantially all of
the properties or assets of the Company, will be deemed to be the transfer of
all or substantially all of the properties and assets of the Company.
Limitation on Preferred Stock of Subsidiaries. The Certificate of
Designation will provide that the Company will not permit any of its
Subsidiaries to issue any Preferred Stock (other than to the Company or to a
Wholly Owned Subsidiary of the Company) or permit any Person (other than the
Company or a Wholly Owned Subsidiary of the Company) to own any Preferred Stock
of a Subsidiary of the Company (other than Acquired Preferred Stock; provided
that at the time the issuer of such Acquired Preferred Stock becomes a
Subsidiary of the Company or merges with the Company or any of its Subsidiaries,
and after giving effect to such transaction, the Company shall be able to incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional Indebtedness"
covenant).
Reports. The Certificate of Designation will provide that the Company will
provide to the holders of New 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 Company
files with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
In the event that the Company is no longer required to furnish such reports to
its securityholders pursuant to the Exchange Act, the Company will cause its
consolidated financial statements, comparable to those that would have been
required to appear in annual or quarterly reports, to be delivered to the
holders of New Preferred Stock.
TRANSFER AGENT AND REGISTRAR
KeyCorp Shareholder Services, Inc. will be the transfer agent and registrar
for the New Preferred Stock.
EXCHANGE DEBENTURES
The Exchange Debentures, if issued, will be issued under the Exchange
Indenture, dated as of February 26, 1996, by and between the Company and U.S.
Trust Company of Texas, N.A., as Trustee (the "Trustee"). A copy of the Exchange
Indenture is available from the Company upon request. The following summary of
certain provisions of the Exchange Indenture does not purport to be complete and
is subject to, and is qualified in its entirety by reference to, the Trust
Indenture Act of 1939, as amended (the "TIA"), and to all of the provisions of
the Exchange Indenture, including the definitions of certain terms therein and
those terms made a part of the Exchange Indenture by reference to the TIA as in
effect on the date of the Exchange Indenture. The definitions of certain terms
used in the following summary are set forth below under "-- Certain
Definitions." The Credit Agreement and the Indentures limit the Company's
ability to issue the Exchange Debentures.
The Exchange Debentures will be general unsecured obligations of the
Company and will be limited in aggregate principal amount to the liquidation
preference of the New Preferred Stock, plus, without duplication, accumulated
and unpaid dividends, on the Exchange Date of the New Preferred Stock into
Exchange Debentures (plus any additional Exchange Debentures issued in lieu of
cash interest as described herein). The Exchange Debentures will be issued in
fully registered form only in denominations of $1,000 and integral multiples
thereof (other than as described in "-- New Preferred Stock -- Exchange" or with
respect to additional Exchange Debentures issued in lieu of cash interest as
described herein). The Exchange Debentures will be subordinated to all existing
and future Senior Debt of the Company.
Principal of, and premium, if any, and interest on the Exchange Debentures
will be payable, and the Exchange Debentures may be presented for registration
of transfer or exchange, at the office of the Paying
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Agent and Registrar. At the Company's option, interest, to the extent paid in
cash, may be paid by check mailed to the registered address of holders of the
Exchange Debentures as shown on the register for the Exchange Debentures. The
Trustee will initially act as Paying Agent and Registrar. The Company may change
any Paying Agent and Registrar without prior notice to holders of the Exchange
Debentures. Holders of the Exchange Debentures must surrender Exchange
Debentures to the Paying Agent to collect principal payments.
The Exchange Debentures will mature on February 15, 2008. Each Exchange
Debenture will bear interest at the rate of 12 1/4% per annum from the Exchange
Date or from the most recent interest payment date to which interest has been
paid or provided for or, if no interest has been paid or provided for, from the
Exchange Date. Interest will be payable semi-annually in cash (or, on or prior
to February 15, 2001, in additional Exchange Debentures, at the option of the
Company) in arrears on each February 15 and August 15 commencing with the first
such date after the Exchange Date. Interest on the Exchange Debentures will be
computed on the basis of a 360-day year comprised of twelve 30-day months and
the actual number of days elapsed.
OPTIONAL REDEMPTION
The Exchange Debentures will be redeemable, at the Company's option, in
whole at any time or in part from time to time, on and after February 15, 2001,
at the redemption prices (expressed as percentages of the principal amount
thereof) set forth below if redeemed during the 12-month period beginning on
February 15 of each of the years set forth below, plus, without duplication, in
each case, accrued and unpaid interest thereon to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C> <C>
2001............................................................... 106.125%
2002............................................................... 104.900
2003............................................................... 103.675
2004............................................................... 102.450
2005............................................................... 101.225
2006 and thereafter................................................ 100.000
</TABLE>
In addition, prior to February 15, 1999, the Company may, at its option,
use the net cash proceeds of one or more Public Equity Offerings to redeem the
Exchange Debentures, in part, at a redemption price of 112.250% of the principal
amount thereof if redeemed during the twelve-month period commencing on February
15, 1996, 111.025% of the principal amount thereof if redeemed during the
twelve-month period commencing on February 15, 1997 and 109.800% of the
principal amount thereof if redeemed during the twelve-month period commencing
on February 15, 1998, plus, in each case, accrued and unpaid interest thereon to
the date of redemption; provided, however, that after any such redemption, the
aggregate principal amount of the Exchange Debentures outstanding must equal at
least $75,000,000. Any such redemption will be required to occur on or prior to
60 days after the receipt by the Company of the proceeds of each Public Equity
Offering.
The Indentures and the Credit Agreement restrict the ability of the Company
to optionally redeem the Exchange Debentures. See "Description of Indebtedness."
CHANGE OF CONTROL
The Exchange Indenture will provide that upon the occurrence of a Change of
Control, each holder will have the right to require that the Company repurchase
all or a portion of such holder's Exchange Debentures pursuant to the offer
described below (the "Debenture Change of Control Offer"), at a purchase price
equal to 101% of the principal amount thereof plus, without duplication, accrued
interest, if any, to the date of repurchase.
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The Exchange Indenture will provide that, prior to the mailing of the
notice referred to below, but in any event within 30 days following the date on
which the Company becomes aware that a Change of Control has occurred, the
Company covenants to (i) repay in full all Indebtedness under the Credit
Agreement (and terminate all commitments thereunder), the Indentures and any
other agreement relating to Indebtedness that would prohibit the Debenture
Change of Control Offer or offer to repay in full all such Indebtedness (and
terminate all such commitments) and repay the Indebtedness owed to (and
terminate the commitments of) each lender which has accepted such offer or (ii)
obtain the requisite consents under the Credit Agreement, the Indentures and any
other agreement governing such other Indebtedness to permit the repurchase of
the Exchange Debentures as provided below. The Company will first comply with
the covenant in the preceding sentence before it will be required to repurchase
Exchange Debentures pursuant to the provisions described below; provided that
the Company's failure to comply with the covenant described in the preceding
sentence shall constitute an Event of Default described under clause (iii) under
" -- Events of Default" below.
Within 30 days following the date upon which the Company becomes aware that
a Change of Control has occurred, the Company must send, by first class mail
postage prepaid, a notice to each holder of Exchange Debentures, with a copy to
the Trustee, which notice shall govern the terms of the Debenture Change of
Control Offer. Such notice will state, among other things, the purchase date,
which must be no earlier than 30 days nor later than 45 days from the date such
notice is mailed, other than as may be required by law (the "Debenture Change of
Control Payment Date"). Holders electing to have an Exchange Debenture purchased
pursuant to a Debenture Change of Control Offer will be required to surrender
the Exchange Debenture, properly endorsed for transfer together with such other
customary documents as the Company may reasonably request, to the paying agent
at the address specified in the notice prior to the close of business on the
business day prior to the Debenture Change of Control Payment Date.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act to the extent applicable in connection with the purchase of
Exchange Debentures pursuant to a Debenture Change of Control Offer.
This "Change of Control" covenant will not apply in the event of (i)
changes in a majority of the board of directors of the Company or Chancellor so
long as a majority of each such board of directors continues to consist of
Continuing Directors and (ii) certain transactions with Permitted Holders. In
addition, this covenant is not intended to afford holders of the Exchange
Debentures protection in the event of certain highly leveraged transactions,
reorganizations, restructurings, mergers and other similar transactions that
might adversely affect the holders of Exchange Debentures but would not
constitute a Change of Control. The Company could, in the future, enter into
certain transactions, including certain recapitalizations of the Company, that
would not constitute a Change of Control, but would increase the amount of
Indebtedness outstanding at such time. However, the Exchange Indenture will
contain limitations on the ability of the Company to incur additional
Indebtedness and to engage in certain mergers, consolidations, sales of assets
and swaps of assets, whether or not a Change of Control is involved. See
"-- Limitation on Additional Indebtedness," "-- Limitation on Asset Sales",
"-- Limitation on Asset Swaps" and "-- Merger, Consolidation and Sale of
Assets."
If a Change of Control were to occur, there can be no assurance that the
Company would have sufficient funds to pay the purchase price for all Exchange
Debentures that the Company might be required to purchase. Moreover, as of the
date hereof, after giving effect to the Original Offering and the application of
the proceeds therefrom, the Company would not have sufficient funds available to
purchase all the outstanding Exchange Debentures, if they were outstanding,
pursuant to a Debenture Change of Control Offer. In the event that the Company
were required to purchase Exchange Debentures pursuant to a Debenture Change of
Control Offer, the Company expects that it would need to seek third-party
financing to the extent it does not have available funds to meet its purchase
obligations. However, there can be no assurance that the Company would be able
to obtain such financing on favorable terms, if at all. In addition, the
Indentures and the Credit Agreement restrict the Company's ability to purchase
the Exchange Debentures, including pursuant to a Debenture Change of Control
Offer. See "Description of Indebtedness."
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With respect to the sale of assets, the phrase "all or substantially all"
as used in the Exchange Indenture varies according to the facts and
circumstances of the subject transaction, has no clearly established meaning
under relevant law and is subject to judicial interpretation. Accordingly, in
certain circumstances there may be a degree of uncertainty in ascertaining
whether a particular transaction would involve a disposition of "all or
substantially all" of the assets of the Company and, therefore, it may be
unclear whether a Change of Control has occurred and whether the Exchange
Debentures are subject to a Debenture Change of Control Offer.
None of the provisions relating to a purchase of Exchange Debentures upon a
Change of Control are waivable by the board of directors of the Company. Without
the consent of each holder of the Exchange Debentures affected thereby, after
the mailing of the notice of the Debenture Change of Control Offer, no amendment
to the Exchange Indenture may, directly or indirectly, affect the Company's
obligation to purchase the Exchange Debentures or amend, modify or change the
obligation of the Company to consummate a Debenture Change of Control Offer or
waive any default in the performance thereof or modify any of the provisions or
definitions with respect to any such offer. In addition, the Trustee may not
waive the right of any holder of the Exchange Debentures to require the
repurchase of its Exchange Debentures upon a Change of Control.
SUBORDINATION
The payment of all Obligations on the Exchange Debentures is subordinated
and junior in right of payment to the prior payment in full in cash or Cash
Equivalents (or such payment shall be duly provided for to the satisfaction of
the holders of the Senior Debt) of all Obligations on Senior Debt. Upon any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of creditors
or marshalling of assets of the Company or in a bankruptcy, reorganization,
insolvency, receivership or other similar proceeding relating to the Company or
its property, whether voluntary or involuntary, all Obligations due or to become
due upon all Senior Debt will first be paid in full in cash or Cash Equivalents
(or such payment duly provided for to the satisfaction of the holders of the
Senior Debt) before any payment or distribution of any kind or character is made
on account of any Obligations on the Exchange Debentures, or for the acquisition
of any of the Exchange Debentures for cash or property or otherwise. If any
default occurs and is continuing in the payment when due, whether at maturity,
upon any redemption, by declaration or otherwise, of any principal of, or
interest on, or any other amounts owing with respect to any Senior Debt, no
payment of any kind or character (except (i) in Qualified Capital Stock issued
by the Company to pay interest on the Exchange Debentures or issued in exchange
for the Exchange Debentures, (ii) in securities substantially identical to the
Exchange Debentures issued by the Company in payment of interest accrued thereon
or (iii) in securities issued by the Company which are subordinated to the
Senior Debt at least to the same extent as the Exchange Debentures and having a
Weighted Average Life to Maturity at least equal to the remaining Weighted
Average Life to Maturity of the Exchange Debentures (the issuance of such
subordinated securities to be consented to by the holders of at least a majority
of the outstanding amount of Senior Debt consisting of each class of Designated
Senior Debt then outstanding, which subordinated securities will be issued in
exchange for outstanding Exchange Debentures or to pay interest accrued on
outstanding Exchange Debentures)) will be made by the Company or any other
Person on behalf of the Company with respect to any obligations on the Exchange
Debentures or to acquire any of the Exchange Debentures for cash or property or
otherwise. In addition, if any other event of default occurs and is continuing
(or if such an event of default would occur upon any payment with respect to the
Exchange Debentures or would arise upon the passage of time as a result of such
payment) with respect to any Designated Senior Debt (as such event of default is
defined in the instrument creating or evidencing such Designated Senior Debt)
and such event of default permits the holders of such Designated Senior Debt
then outstanding to accelerate the maturity thereof and if the Representative
for the respective issue of Designated Senior Debt gives written notice of the
event of default to the Trustee (a "Default Notice"), then, unless and until all
such events of default have been cured or waived or have ceased to exist or the
Company and the Trustee receive notice from the Representative for the
respective issue of Designated Senior Debt terminating the Blockage Period (as
defined below), during the 180 days after the delivery of such Default Notice
(the "Blockage Period"), neither the Company nor any other Person on behalf of
the Company will make any
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payment of any kind or character (except (i) in Qualified Capital Stock issued
by the Company to pay interest on the Exchange Debentures or issued in exchange
for the Exchange Debentures, (ii) in securities substantially identical to the
Exchange Debentures issued by the Company in payment of interest accrued thereon
or (iii) in securities issued by the Company that are subordinated to the Senior
Debt at least to the same extent as the Exchange Debentures and having a
Weighted Average Life to Maturity at least equal to the remaining Weighted
Average Life to Maturity of the Exchange Debentures (the issuance of such
subordinated securities to be consented to by the holders of at least a majority
of the outstanding amount of Senior Debt consisting of each class of Designated
Senior Debt then outstanding, which subordinated securities will be issued in
exchange for outstanding Exchange Debentures or to pay interest accrued on
outstanding Exchange Debentures)) with respect to any Obligations on the
Exchange Debentures or to acquire any of the Exchange Debentures for cash or
property or otherwise. Notwithstanding anything herein to the contrary, in no
event will a Blockage Period extend beyond 180 days from the date the payment on
the Exchange Debentures was due and only one such Blockage Period may be
commenced within any 360 consecutive days. No event of default which existed or
was continuing on the date of the commencement of any Blockage Period with
respect to the Designated Senior Debt initiating such Blockage Period shall be,
or be made, the basis for commencement of a second Blockage Period by the
Representative of such Designated Senior Debt whether or not within a period of
360 consecutive days, unless such event of default has been cured or waived for
a period of not less than 90 consecutive days (it being acknowledged that any
subsequent action or any breach of any financial covenants for a period
commencing after the date of commencement of such Blockage Period that, in
either case, would give rise to an event of default pursuant to any provision
under which an event of default previously existed or was continuing shall
constitute a new event of default for this purpose).
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Debt, including
the holders of the Exchange Debentures, may recover less, ratably, than holders
of Senior Debt.
On a pro forma basis as of March 31, 1996, after giving effect to the
consummation of the Denver Exchange and the Pending Transactions and, in each
case, the financing thereof, the Company would have had approximately $454.7
million of Senior Debt outstanding (represented by the Subordinated Notes and
borrowings under the Credit Agreement). In addition, on the same pro forma basis
as of such date, approximately $35.6 million would have been available for
borrowing under the Revolving Loan Facility.
CERTAIN COVENANTS
The Exchange Indenture contains, among others, the following covenants.
Limitation on Incurrence of Additional Indebtedness. The Exchange Indenture
provides that neither the Company nor any of its Subsidiaries will, directly or
indirectly, incur any Indebtedness other than Permitted Indebtedness.
Notwithstanding the foregoing limitation, the Company or any Subsidiary may
incur Indebtedness if on the date of the incurrence of such Indebtedness, after
giving effect to the incurrence of such Indebtedness and the receipt and
application of the proceeds thereof, the Company's Leverage Ratio is less than
7.0 to 1.
Limitation on Restricted Payments. (a) The Exchange Indenture provides that
neither the Company nor any of its Subsidiaries will, directly or indirectly,
make any Restricted Payment if, at the time of such Restricted Payment and
immediately after giving effect thereto:
(i) any Default or Event of Default shall have occurred and be
continuing; or
(ii) the Company is not able to incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with the "Limitation on
Incurrence of Additional Indebtedness" covenant; or
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<PAGE> 79
(iii) 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 of the Company in good faith) exceeds the sum of (a) (x)
100% of the aggregate Consolidated EBITDA of the Company (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 Company, taken as one accounting
period, less (y) 1.4 times Consolidated Interest Expense for the same
period, plus (b) 100% of the aggregate net proceeds, including the fair
market value of property other than cash as determined by the board of
directors of the Company in good faith, received by the Company from any
Person (other than a Subsidiary of the Company) from the issuance and sale
on or subsequent to February 14, 1996 of Qualified Capital Stock of the
Company (excluding any net proceeds from issuances and sales financed
directly or indirectly using funds borrowed from the Company or any
Subsidiary of the Company, until and to the extent such borrowing is
repaid, but including the proceeds from the issuance and sale of any
securities convertible into or exchangeable for Qualified Capital Stock to
the extent such securities are so converted or exchanged and including any
additional proceeds received by the Company upon such conversion or
exchange), plus (c) without duplication of any amount included in clause
(iii)(b) above, 100% of the aggregate net proceeds, including the fair
market value of property other than cash (valued as provided in clause
(iii)(b) above), received 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 Exchange Debentures), plus
(d) $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
been permitted on the date of declaration; (2) the acquisition of any Capital
Stock of the Company or any warrants, options or other rights to acquire shares
of any class of such Capital Stock either (x) solely in exchange for shares of
Qualified Capital Stock or other rights to acquire Qualified Capital Stock or
(y) through the application of the net proceeds of a substantially concurrent
sale for cash (other than to a Subsidiary of the Company) of shares of Qualified
Capital Stock or warrants, options or other rights to acquire Qualified Capital
Stock; (3) the acquisition of Indebtedness of the Company that is subordinate or
junior in right of payment to the Exchange Debentures either (x) solely in
exchange for shares of Qualified Capital Stock (or warrants, options or other
rights to acquire Qualified Capital Stock) or for Indebtedness of the Company
that is subordinate or junior in right of payment to the Exchange Debentures, at
least to the extent that the Indebtedness being acquired is subordinated to the
Exchange Debentures and has a Weighted Average Life to Maturity no less than
that of the Indebtedness being acquired or (y) through the application of the
net proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of the Company) of shares of Qualified Capital Stock (or warrants,
options or other rights to acquire Qualified Capital Stock) or Indebtedness of
the Company which is subordinate or junior in right of payment to the Exchange
Debentures, at least to the extent that the Indebtedness being acquired is
subordinated to the Exchange Debentures and has a Weighted Average Life to
Maturity no less than that of the Indebtedness being refinanced; (4) payments by
the Company to fund the operating expenses of the Chancellor in an amount not to
exceed $500,000 per annum; (5) payments by the Company to Chancellor to enable
Chancellor to make payments pursuant to (x) the Financial Monitoring and
Oversight Agreement or (y) the Tax Sharing Agreement; (6) payments by the
Company to repurchase, or enable Chancellor to repurchase, Capital Stock or
other securities of Chancellor from employees of Chancellor or the Company in an
aggregate amount not to exceed $5,000,000; (7) payments to enable Chancellor to
redeem or repurchase stock purchase or similar rights in an aggregate amount not
to exceed $500,000; (8) payments, not to exceed $100,000 in the aggregate, to
enable the Company to make cash payments to holders of its Capital Stock in lieu
of the issuance of fractional shares of its Capital Stock; and (9) payments made
pursuant to any merger, consolidation or sale of assets effected in accordance
with the "Merger, Consolidation and Sale of Assets" covenant; provided, however,
that no such payment may be made pursuant to this clause (9) unless, after
giving effect to such transaction (and the incurrence of any Indebtedness in
connection therewith and the use of the proceeds thereof), the Company would be
able to incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with the "Limitation on Incurrence of Additional
Indebtedness" covenant such that after incurring that $1.00
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of additional Indebtedness, the Leverage Ratio would be less than 6.0 to 1;
provided, further, that in the case of clauses (5)(x), (6), (7), (8) and (9), no
Default or Event of Default shall have occurred or be continuing at the time of
such payment or as a result thereof. In determining the aggregate amount of
Restricted Payments made subsequent to the Issue Date, amounts expended pursuant
to clauses (1), (2), (3) (but only to the extent that Indebtedness is acquired
in exchange for, or with the net proceeds from, the issuance of Qualified
Capital Stock, or warrants, options or other rights to acquire Qualified Capital
Stock), (5)(x), (6), (7), (8) and (9) shall be included in such calculation.
Limitation on Asset Sales. The Exchange Indenture provides that neither the
Company nor any of its Subsidiaries will consummate an Asset Sale unless (i) the
Company or the applicable Subsidiary, as the case may be, receives consideration
at the time of such Asset Sale at least equal to the fair market value of the
assets sold or otherwise disposed of (as determined in good faith by management
of the Company or, if such Asset Sale involves consideration in excess of
$2,500,000, by the board of directors, as evidenced by a board resolution), (ii)
at least 75% of the consideration received by the Company or such Subsidiary, as
the case may be, from such Asset Sale is cash or Cash Equivalents (other than in
the case where the Company is exchanging all or substantially all the assets of
one or more broadcast businesses operated by the Company (including by way of
the transfer of capital stock) for all or substantially all the assets
(including by way of the transfer of capital stock) constituting one or more
broadcast businesses operated by another Person, in which event the foregoing
requirement with respect to the receipt of cash or Cash Equivalents shall not
apply) and is received at the time of such disposition and (iii) upon the
consummation of an Asset Sale, the Company applies, or causes such Subsidiary to
apply, such Net Cash Proceeds within 180 days of receipt thereof either (A) to
repay the principal of any Senior Debt (and, to the extent such Senior Debt
relates to principal under a revolving credit or similar facility, to obtain a
corresponding reduction in the commitments thereunder), (B) to reinvest, or to
be contractually committed to reinvest pursuant to a binding agreement, in
Productive Assets and, in the latter case, to have so reinvested within 360 days
of the date of receipt of such Net Cash Proceeds, or (C) to purchase Exchange
Debentures tendered to the Company for purchase at a price equal to 100% of the
principal amount thereof plus accrued interest thereon to the date of purchase
pursuant to an offer to purchase made by the Company as set forth below (a "Net
Proceeds Offer"); provided, however, that, prior to making any such Net Proceeds
Offer the Company may, to the extent required pursuant to the Indentures as in
effect on the Exchange Date, offer to use such Net Cash Proceeds to repurchase
and use all or a portion of such Net Cash Proceeds to repurchase the
Subordinated Notes and any other Senior Debt of the Company incurred after the
Exchange Date containing a provision comparable to this "Limitations on Asset
Sales" covenant, in which event the Company shall be required to use only the
Net Cash Proceeds remaining after such other repurchases to make the Net
Proceeds Offer contemplated hereby; provided, further, that if at any time any
non-cash consideration received by the Company or any Subsidiary of the Company,
as the case may be, in connection with any Asset Sale is converted into or sold
or otherwise disposed of for cash, then such conversion or disposition shall be
deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof
shall be applied in accordance with clause (iii) above; provided, further that
the Company may defer making a Net Proceeds Offer until the aggregate Net Cash
Proceeds from Asset Sales (taking into account any Net Cash Proceeds used to
repurchase the Subordinated Notes or other Senior Debt pursuant to the second
immediately preceding proviso) to be applied equal or exceed $5,000,000.
Subject to the deferral right set forth in the final proviso of the
preceding paragraph, each notice of a Net Proceeds Offer will be mailed, by
first class mail, to holders of Exchange Debentures as shown on the applicable
register of holders of Exchange Debentures not more than 180 days after the
relevant Asset Sale or, in the event the Company or a Subsidiary has entered
into a binding agreement as provided in (B) above, within 180 days following the
termination of such agreement but in no event later than 360 days after the
relevant Asset Sale. Such notice will specify, among other things, the purchase
date (which will be no earlier than 30 days nor later than 45 days from the date
such notice is mailed, except as otherwise required by law) and will otherwise
comply with the procedures set forth in the Exchange Indenture. Upon receiving
notice of the Net Proceeds Offer, holders of Exchange Debentures may elect to
tender their Exchange Debentures in whole or in part in integral multiples of
$1,000. To the extent holders properly tender Exchange Debentures in an amount
exceeding the Net Proceeds Offer, Exchange Debentures of tendering holders will
be repurchased on a pro rata basis (based upon the principal amount tendered).
To the extent that the aggregate principal
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amount of Exchange Debentures tendered pursuant to any Net Proceeds Offer is
less than the amount of Net Cash Proceeds subject to such Net Proceeds Offer,
the Company may use any remaining portion of such Net Cash Proceeds not required
to fund the repurchase of tendered Exchange Debentures for any purposes
otherwise permitted by the Exchange Indenture. Upon the consummation of any Net
Proceeds Offer, the amount of Net Cash Proceeds subject to any future Net
Proceeds Offer from the Asset Sales giving rise to such Net Cash Proceeds shall
be deemed to be zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act to the extent applicable in connection with the repurchase of
Exchange Debentures pursuant to a Net Proceeds Offer.
Limitation on Asset Swaps. The Exchange Indenture provides that the Company
will not, and will not permit any Subsidiary to, engage in any Asset Swaps,
unless: (i) at the time of entering into the agreement to swap assets and
immediately after giving effect to the proposed Asset Swap, no Default or Event
of Default shall have occurred and be continuing or would occur as a consequence
thereof; (ii) the Company would, after giving pro forma effect to the proposed
Asset Swap, have been permitted to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant; (iii) the
respective fair market values of the assets being purchased and sold by the
Company or any of its Subsidiaries (as determined in good faith by the
management of the Company or, if such Asset Swap includes consideration in
excess of $2,500,000, by the board of directors, as evidenced by a board
resolution) are substantially the same at the time of entering into the
agreement to swap assets; and (iv) at the time of the consummation of the
proposed Asset Swap, the percentage of any decline in the fair market value
(determined as aforesaid) of the asset or assets being acquired by the Company
and its Subsidiaries shall not be significantly greater than the percentage of
any decline in the fair market value (determined as aforesaid) of the assets
being disposed of by the Company, calculated from the time the agreement to swap
assets was entered into.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Exchange Indenture provides that neither the Company nor any
of its Subsidiaries will, directly or indirectly, create or otherwise cause to
permit to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary to (a) pay dividends or make any other distributions
on its Capital Stock; (b) make loans or advances or pay any Indebtedness or
other obligation owed to the Company or any of its Subsidiaries; or (c) transfer
any of its property or assets to the Company, except for such encumbrances or
restrictions existing under or by reason of: (1) applicable law, (2) the
Exchange Indenture, (3) customary non-assignment provisions of any lease
governing a leasehold interest of the Company or any Subsidiary, (4) any
instrument governing Acquired Indebtedness, which encumbrance or restriction is
not applicable to any Person, or the properties or assets of any Person, other
than the Person, or the property or assets of the Person, so acquired, (5)
agreements existing on the Exchange Date (including the Credit Agreement) as
such agreements are from time to time in effect; provided, however, that any
amendments or modifications of such agreements which affect the encumbrances or
restrictions of the types subject to this covenant shall not result in such
encumbrances or restrictions being less favorable to the Company in any material
respect, as determined in good faith by the board of directors of the Company,
than the provisions as in effect before giving effect to the respective
amendment or modification, (6) an agreement effecting a refinancing, replacement
or substitution of Indebtedness issued, assumed or incurred pursuant to an
agreement referred to in clause (2), (4) or (5) above or any other agreement
evidencing Indebtedness permitted under the Exchange Indenture; provided,
however, that the provisions relating to such encumbrance or restriction
contained in any such refinancing, replacement or substitution agreement or any
such other agreement are not less favorable to the Company in any material
respect as determined in good faith by the board of directors of the Company
than the provisions relating to such encumbrance or restriction contained in
agreements referred to in such clause (2), (4) or (5), or (7) restrictions on
the transfer of the assets subject to any Lien imposed by the holder of such
Lien.
Limitation on Preferred Stock of Subsidiaries. The Exchange Indenture
provides that the Company will not permit any of its Subsidiaries to issue any
Preferred Stock (other than to the Company or to a Wholly Owned Subsidiary of
the Company) or permit any Person (other than the Company or a Wholly Owned
Subsidiary of the Company) to own any Preferred Stock of a Subsidiary of the
Company (other than Acquired Preferred Stock; provided that at the time the
issuer of such Acquired Preferred Stock becomes a
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Subsidiary of the Company or merges with the Company or any of its Subsidiaries,
and after giving effect to such transaction, the Company shall be able to incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional Indebtedness"
covenant).
Limitations on Transactions with Affiliates. The Exchange Indenture
provides that neither the Company nor any of its Subsidiaries will, directly or
indirectly, enter into or permit to exist any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with or for the benefit of any of its Affiliates
(other than transactions between the Company and a Wholly Owned Subsidiary of
the Company or among Wholly Owned Subsidiaries of the Company) (an "Affiliate
Transaction"), other than Affiliate Transactions on terms that are no less
favorable than those that might reasonably have been obtained in a comparable
transaction on an arm's-length basis from a person that is not an Affiliate;
provided, however, that for a transaction or series of related transactions
involving value of $1,000,000 or more, such determination will be made in good
faith by a majority of members of the board of directors of the Company and by a
majority of the disinterested members of the Board of Directors of the Company,
if any; provided, further, that for a transaction or series of related
transactions involving value of $5,000,000 or more, the board of directors of
the Company has received an opinion from a nationally recognized investment
banking firm that such Affiliate Transaction is fair, from a financial point of
view, to the Company or such Subsidiary. The foregoing restrictions will not
apply to reasonable and customary directors' fees, indemnification and similar
arrangements and payments thereunder, or to any obligations of the Company under
the Financial Monitoring and Oversight Agreements, the Tax Sharing Agreement or
any employment agreement with any officer of the Company (provided that each
amendment of any of the foregoing agreements shall be subject to the limitations
of this covenant), as well as reasonable and customary investment banking,
financial advisory, commercial banking and similar fees and expenses paid to BT
Securities Corporation and its Affiliates.
Merger, Consolidation and Sale of Assets. The Exchange Indenture provides
that the Company may not, in a single transaction or series of related
transactions, consolidate with or merge with or into, or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its assets to,
another Person or adopt a plan of liquidation unless (i) either (1) the Company
is the survivor of such merger or consolidation or (2) the surviving or
transferee Person is a corporation, partnership or trust organized and existing
under the laws of the United States, any state thereof or the District of
Columbia and such surviving or transferee Person expressly assumes by
supplemental indenture all the obligations of the Company under the Exchange
Debentures and the Exchange Indenture; (ii) immediately after giving effect to
such transaction and the use of proceeds therefrom (on a pro forma basis,
including any Indebtedness incurred or anticipated to be incurred in connection
with such transaction), the Company or the surviving or transferee Person is
able to incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with the "Limitation on Incurrence of Additional
Indebtedness" covenant; (iii) immediately after giving effect to such
transaction (including any Indebtedness incurred or anticipated to be incurred
in connection with the transaction) no Default or Event of Default has occurred
and is continuing; and (iv) the Company has delivered to the Trustee an
Officers' Certificate and Opinion of Counsel, each stating that such
consolidation, merger or transfer complies with the Exchange Indenture, that the
surviving Person agrees by supplemental indenture to be bound thereby, and that
all conditions precedent in the Exchange Indenture relating to such transaction
have been satisfied. For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of related
transactions) of all or substantially all of the properties and assets of one or
more Subsidiaries the Capital Stock of which constitutes all or substantially
all of the properties and assets of the Company will be deemed to be the
transfer of all or substantially all of the properties and assets of the
Company.
EVENTS OF DEFAULT
The following events are defined in the Exchange Indenture as "Events of
Default": (i) the failure to pay interest on the Exchange Debentures when the
same becomes due and payable and the Default continues for a period of 30 days
(whether or not such payment is prohibited by the subordination provisions of
the Exchange Indenture); (ii) the failure to pay the principal on any Exchange
Debentures when such principal becomes
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due and payable, at maturity, upon redemption or otherwise (whether or not such
payment is prohibited by the subordination provisions of the Exchange
Indenture); (iii) a default in the observance or performance of any other
covenant or agreement contained in the Exchange Debentures or the Exchange
Indenture which default continues for a period of 30 days after the Company
receives written notice thereof specifying the default from the Trustee or
holders of at least 25% in aggregate principal amount of outstanding Exchange
Debentures; (iv) the failure to pay at the final stated maturity (giving effect
to any extensions thereof) the principal amount of any Indebtedness of the
Company or any Subsidiary of the Company, or the acceleration of the final
stated maturity of any such Indebtedness, if the aggregate principal amount of
such Indebtedness, together with the aggregate principal amount of any other
such Indebtedness in default for failure to pay principal at the final stated
maturity (giving effect to any extensions thereof) or which has been
accelerated, aggregates $5,000,000 or more at any time in each case after a
10-day period during which such default shall not have been cured or such
acceleration rescinded; (v) one or more judgments in an aggregate amount in
excess of $5,000,000 (which are not covered by insurance as to which the insurer
has not disclaimed coverage) being rendered against the Company or any of its
Significant Subsidiaries and such judgment or judgments remain undischarged or
unstayed for a period of 60 days after such judgment or judgments become final
and non-appealable; and (vi) certain events of bankruptcy, insolvency or
reorganization affecting the Company or any of its Significant Subsidiaries.
Upon the happening of any Event of Default specified in the Exchange
Indenture, the Trustee may, and the Trustee upon the request of holders of 25%
in principal amount of the Exchange Debentures shall, or the holders of at least
25% in principal amount of outstanding Exchange Debentures may, declare the
principal of and accrued but unpaid interest, if any, on all the Exchange
Debentures to be due and payable by notice in writing to the Company and the
Trustee specifying the respective Event of Default and that it is a "notice of
acceleration" (the "Acceleration Notice"), and the same (i) shall become
immediately due and payable or (ii) if there are any amounts outstanding under
the Credit Agreement, will become due and payable upon the first to occur of an
acceleration under the Credit Agreement or five Business Days after receipt by
the Company and the Representative under the Credit Agreement of such
Acceleration Notice (unless all Events of Default specified in such Acceleration
Notice have been cured or waived). If an Event of Default with respect to
bankruptcy proceedings relating to the Company occurs and is continuing, then
such amount will ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any holder of the
Exchange Debentures.
The Exchange Indenture provides that, at any time after a declaration of
acceleration with respect to the Exchange Debentures as described in the
preceding paragraph, the holders of a majority in principal amount of the
Exchange Debentures then outstanding (by notice to the Trustee) may rescind and
cancel such declaration and its consequences if (i) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction, (ii)
all existing Events of Default have been cured or waived except nonpayment of
principal or interest on the Exchange Debentures that has become due solely by
such declaration of acceleration, (iii) to the extent the payment of such
interest is lawful, interest (at the same rate specified in the Exchange
Debentures) on overdue installments of interest and overdue payments of
principal which has become due otherwise than by such declaration of
acceleration has been paid, (iv) the Company has paid the Trustee its reasonable
compensation and reimbursed the Trustee for its expenses, disbursements and
advances and (v) in the event of the cure or waiver of a Default or Event of
Default of the type described in clause (vi) of the description of Events of
Default in the first paragraph above, the Trustee has received an Officers'
Certificate and Opinion of Counsel that such Default or Event of Default has
been cured or waived. The holders of a majority in principal amount of the
Exchange Debentures may waive any existing Default or Event of Default under the
Exchange Indenture, and its consequences, except a default in the payment of the
principal of or interest on any Exchange Debentures.
The Company is required to deliver to the Trustee, within 120 days after
the end of the Company's fiscal year, a certificate indicating whether the
signing officers know of any Default or Event of Default that occurred during
the previous year and whether the Company has complied with its obligations
under the Exchange Indenture. In addition, the Company will be required to
notify the Trustee of the occurrence and continuation of any Default or Event of
Default within five business days after the Company becomes aware of the same.
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Subject to the provisions of the Exchange Indenture relating to the duties
of the Trustee in case an Event of Default thereunder should occur and be
continuing, the Trustee will be under no obligation to exercise any of the
rights or powers under the Exchange Indenture at the request or direction of any
of the holders of the Exchange Debentures unless such holders have offered to
the Trustee reasonable indemnity or security against any loss, liability or
expense. Subject to such provision for security or indemnification and certain
limitations contained in the Exchange Indenture, the holders of a majority in
principal amount of the outstanding Exchange Debentures have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on the Trustee.
SATISFACTION AND DISCHARGE OF EXCHANGE INDENTURE; DEFEASANCE
The Company may terminate its obligations under the Exchange Indenture at
any time by delivering all outstanding Exchange Debentures to the Trustee for
cancellation and paying all sums payable by it thereunder. The Company, at its
option, (i) will be discharged from any and all obligations with respect to the
Exchange Debentures (except for certain obligations of the Company to register
the transfer or exchange of such Exchange Debentures, replace stolen, lost or
mutilated Exchange Debentures, maintain paying agencies and hold moneys for
payment in trust) or (ii) need not comply with certain of the restrictive
covenants with respect to the Exchange Indenture, if the Company deposits with
the Trustee, in trust, U.S. Legal Tender or U.S. Government Obligations or a
combination thereof which, through the payment of interest thereon and principal
in respect thereof in accordance with their terms, will be sufficient to pay all
the principal of and interest on the Exchange Debentures on the dates such
payments are due in accordance with the terms of such Exchange Debentures as
well as the Trustee's fees and expenses. To exercise either such option, the
Company is required to deliver to the Trustee (A) an Opinion of Counsel or a
private letter ruling issued to the Company by the Internal Revenue Service (the
"IRS") to the effect that the holders of the Exchange Debentures will not
recognize income, gain or loss for federal income tax purposes as a result of
the deposit and related defeasance and will be subject to federal income tax on
the same amount and in the same manner and at the same times as would have been
the case if such option had not been exercised and, in the case of an Opinion of
Counsel furnished in connection with a discharge pursuant to clause (i) above,
accompanied by a private letter ruling issued to the Company by the IRS to such
effect, (B) subject to certain qualifications, an Opinion of Counsel to the
effect that funds so deposited will not be subject to avoidance under applicable
bankruptcy law, and (C) an Officers' Certificate and an Opinion of Counsel to
the effect that the Company has complied with all conditions precedent to the
defeasance. Notwithstanding the foregoing, the Opinion of Counsel required by
clause (A) above need not be delivered if all Exchange Debentures not
theretofore delivered to the Trustee for cancellation (i) have become due and
payable, (ii) will become due and payable on the maturity date within one year,
or (iii) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company.
REPORTS TO HOLDERS
The Company will file with the Trustee and provide to the holders of
Exchange Debentures, within 15 days after it files them with the Commission,
copies of the annual reports and of the information, documents and other reports
(or copies of such portions of any of the foregoing as the Commission may by
rules and regulations prescribe) which the Company files with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act. In the event the Company is
no longer required to furnish such reports to its securityholders pursuant to
the Exchange Act, the Company will cause its consolidated financial statements,
comparable to those which would have been required to appear in annual or
quarterly reports, to be delivered to the holders of the Exchange Debentures.
MODIFICATION OF THE EXCHANGE INDENTURE
From time to time, the Company and the Trustee, together, without the
consent of the holders of the Exchange Debentures, may amend or supplement the
Exchange Indenture for certain specified purposes, including curing ambiguities,
defects or inconsistencies, so long as such change does not adversely affect the
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rights of any of the holders in any material respect. Other modifications and
amendments of the Exchange Indenture may be made with the consent of the holders
of a majority in principal amount of the then outstanding Exchange Debentures
(or, prior to the Exchange Date, with the consent of the holders of a majority
of the shares of New Preferred Stock then outstanding), except that, without the
consent of each holder of the Exchange Debentures (or, prior to the Exchange
Date, without the consent of each holder of New Preferred Stock) affected
thereby, no amendment may, directly or indirectly: (i) reduce the amount of
Exchange Debentures whose holders must consent to an amendment; (ii) reduce the
rate of or change the time for payment of interest, including defaulted
interest, on any Exchange Debentures; (iii) reduce the principal of or change
the fixed maturity of any Exchange Debentures, or change the date on which any
Exchange Debentures may be subject to redemption or repurchase, or reduce the
redemption or repurchase price therefor; (iv) make any Exchange Debentures
payable in money other than that stated in the Exchange Debentures and the
Exchange Indenture; (v) make any change in provisions of the Exchange Indenture
protecting the right of each holder of an Exchange Debenture to receive payment
of principal of and interest on such Exchange Debenture on or after the due date
thereof or to bring suit to enforce such payment or permitting holders of a
majority in principal amount of the Exchange Debentures to waive Default or
Event of Default; or (vi) after the Company's obligation to purchase the
Exchange Debentures arises under the Exchange Indenture, amend, modify or change
the obligation of the Company to make or consummate a Debenture Change of
Control Offer or a Net Proceeds Offer or waive any default in the performance
thereof or modify any of the provisions or definitions with respect to any such
offers.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Certificate of Designation and/or the Exchange Indenture. Reference is made to
the Certificate of Designation and/or the Exchange Indenture for the full
definition of all such terms, as well as any other terms used herein for which
no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Subsidiary of the
Company or at the time it merges or consolidates with the Company or any of its
Subsidiaries or assumed in connection with the acquisition of assets from such
Person and not incurred by such Person in connection with, or in anticipation or
contemplation of, such Person becoming a Subsidiary of the Company or such
acquisition, merger or consolidation.
"Acquired Preferred Stock" means Preferred Stock of any Person at the time
such Person becomes a Subsidiary of the Company or at the time it merges or
consolidates with the Company or any of its Subsidiaries and not issued by such
Person in connection with, or in anticipation or contemplation of, such
acquisition, merger or consolidation.
"Affiliate" means a Person who, directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Company. The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Asset Acquisition" means (i) an Investment by the Company or any
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company or shall be consolidated or merged with
the Company or any Subsidiary of the Company or (ii) the acquisition by the
Company or any Subsidiary of the Company of assets of any Person comprising a
division or line of business of such Person.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Subsidiaries (excluding any Sale and Leaseback Transaction or any pledge of
assets or stock by the Company or any of its Subsidiaries) to any Person other
than the Company or a Wholly Owned Subsidiary of the Company of (i) any Capital
Stock of any Subsidiary of the Company or (ii) any other property or assets of
the Company or any Subsidiary of the Company other than in the ordinary course
of business; provided, however, that for purposes of the "Limitation on Asset
Sales" covenant, Asset Sales shall
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not include (a) a transaction or series of related transactions in which the
Company or its Subsidiaries receive aggregate consideration of less than
$500,000, (b) transactions permitted under the "Limitation on Asset Swaps"
covenant or (c) transactions permitted under the "Merger, Consolidation and Sale
of Assets" covenant.
"Asset Swap" means the execution of a definitive agreement, subject only to
FCC approval and other customary closing conditions, that the Company in good
faith believes will be satisfied, for a substantially concurrent purchase and
sale, or exchange, of Productive Assets between the Company or any of its
Subsidiaries and another Person or group of affiliated Persons; provided that
any amendment to or waiver of any closing condition which individually or in the
aggregate is material to the Asset Swap shall be deemed to be a new Asset Swap.
"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.
"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.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company to any Person or group of related Persons for purposes of Section 13(d)
of the Exchange Act (a "Group") (whether or not otherwise in compliance with the
provisions of the 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
Company shall consist of Persons who are not Continuing Directors; or (iii) the
acquisition by any Person or Group (other than the Permitted Holders) of the
power, directly or indirectly, to vote or direct the voting of securities having
more than 50% of the ordinary voting power for the election of directors of
Chancellor or the Company.
"Commodity Agreement" means any commodity futures contract, commodity
option or other similar agreement or arrangement entered into by the Company or
any of its Subsidiaries designed to protect the Company or any of its
Subsidiaries against fluctuations in the price of commodities actually used in
the ordinary course of business of the Company and its Subsidiaries.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been
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reduced thereby, (A) all income taxes of such Person and its Subsidiaries paid
or accrued in accordance with GAAP for such period (other than income taxes
attributable to extraordinary or nonrecurring gains or losses), (B) Consolidated
Interest Expense and (C) Consolidated Non-Cash Charges, all as determined on a
consolidated basis for such Person and its Subsidiaries in conformity with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication, the sum of (i) the interest expense of such Person
and its Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP, including, without limitation, (a) any amortization of
debt discount, (b) the net cost under Interest Swap Obligations (including any
amortization of discounts), (c) the interest portion of any deferred payment
obligation, (d) all commissions, discounts and other fees and charges owed with
respect to letters of credit, bankers' acceptance financing or similar
facilities, and (e) all accrued interest and (ii) the interest component of
Capitalized Lease Obligations paid or accrued by such Person and its
Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Income" of any Person means, for any period, the
aggregate net income (or loss) of such Person and its Subsidiaries for such
period on a consolidated basis, determined in accordance with GAAP; provided
that there shall be excluded therefrom, without duplication, (a) gains and
losses from Asset Sales (without regard to the $500,000 limitation set forth in
the definition thereof) or abandonments or reserves relating thereto and the
related tax effects, (b) items classified as extraordinary or nonrecurring gains
and losses, and the related tax effects according to GAAP, (c) the net income
(or loss) of any Person acquired in a pooling of interests transaction accrued
prior to the date it becomes a Subsidiary of such first referred to Person or is
merged or consolidated with it or any of its Subsidiaries, (d) the net income of
any Subsidiary to the extent that the declaration of dividends or similar
distributions by that Subsidiary of that income is restricted by contract,
operation of law or otherwise and (e) the net income of any Person, other than a
Subsidiary, except to the extent of the lesser of (x) dividends or distributions
paid to such first referred to Person or its Subsidiary by such Person and (y)
the net income of such Person (but in no event less than 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 Company on
the date of the Exchange Indenture, (ii) was nominated for election or elected
to the Board of Directors of Chancellor or the Company with the affirmative vote
of a majority of the Continuing Directors who were members of such Board of
Directors at the time of such nomination or election, or (iii) is a
representative of a Permitted Holder.
"Credit Agreement" means the Credit Agreement, dated February 14, 1996
among Chancellor, the Company, 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 Company as additional borrowers or guarantors thereunder) all or any portion
of the Indebtedness under such agreement or any successor or replacement
agreement and whether by the same or any other agent, lender or group of
lenders.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values.
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"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"Designated Senior Debt" means (i) Indebtedness under or in respect of the
Credit Agreement and the Subordinated Notes and (ii) any other Indebtedness
constituting Senior Debt which, at the time of determination, has an aggregate
principal amount of at least $25,000,000 and is specifically designated in the
instrument evidencing such Senior Debt as "Designated Senior Debt" by the
Company.
"Disqualified Capital Stock" means any Capital Stock which, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures (excluding any
maturity as the result of an optional redemption by the issuer thereof) or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof (except, in each case,
upon the occurrence of a Change of Control), in whole or in part, on or prior to
(i) the mandatory redemption date, in the case of the New Preferred Stock, or
(ii) the final maturity date of the Exchange Debentures, in the case of the
Exchange Debentures.
"Exchange Date" means the date of original issuance of the Exchange
Debentures.
"Financial Monitoring and Oversight Agreements" means, collectively, the
Financial Monitoring and Oversight Agreement among Hicks, Muse & Co. Partners,
L.P., the Company and Chancellor, as in effect on the Issue Date, and the
Financial Advisory Agreement among HM/2 Management Partners, L.P., the Company
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.
"Indebtedness" means with respect to any Person, without duplication, any
liability of such Person (i) for borrowed money, (ii) evidenced by bonds,
debentures, notes or other similar instruments, (iii) constituting Capitalized
Lease Obligations, (iv) incurred or assumed as the deferred purchase price of
property, or pursuant to conditional sale obligations and title retention
agreements (but excluding trade accounts payable arising in the ordinary course
of business), (v) for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (vi) for Indebtedness of
others guaranteed by such Person, (vii) for Interest Swap Obligations, Commodity
Agreements and Currency Agreements and (viii) for Indebtedness of any other
Person of the type referred to in clauses (i) through (vii) which 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.
"Interest Swap Obligations" means the obligations of any Person under any
interest rate protection agreement, interest rate future, interest rate option,
interest rate swap, interest rate cap or other interest rate hedge or
arrangement.
"Investment" means (i) any transfer or delivery of cash, stock or other
property of value in exchange for Indebtedness, stock or other security or
ownership interest in any Person by way of loan, advance, capital contribution,
guarantee or otherwise and (ii) an investment deemed to have been made by the
Company at the time any entity which was a Subsidiary of the Company ceases to
be such a Subsidiary in an amount equal to the value of the loans and advances
made, and any remaining ownership interest in, such entity immediately following
such entity ceasing to be a Subsidiary of the Company. The amount of any
non-cash Investment shall be the fair market value of such Investment, as
determined conclusively in good faith by management of the Company unless the
fair market value of such Investment exceeds $1,000,000, in which case the fair
market value shall be determined conclusively in good faith by the Board of
Directors of the Company at the time such Investment is made.
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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 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).
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents (including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents)
received by the Company or any of its Subsidiaries from such Asset Sale net of
(i) reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales commissions, recording fees, title insurance premiums appraisers fees
and costs reasonably incurred in preparation of any asset or property for sale),
(ii) taxes paid or reasonably estimated to be payable (calculated based on the
combined state, federal and foreign statutory tax rates applicable to the
Company or the Subsidiary engaged in such Asset Sale) and (iii) repayment of
Indebtedness secured by assets subject to such Asset Sale; provided that if the
instrument or agreement governing such Asset Sale requires the transferor to
maintain a portion of the purchase price in escrow (whether as a reserve for
adjustment of the purchase price or otherwise) or to indemnify the transferee
for specified liabilities in a maximum specified amount, the portion of the cash
or Cash Equivalents that is actually placed in escrow or segregated and set
aside by the transferor for such indemnification obligation shall not be deemed
to be Net Cash Proceeds until the escrow terminates or the transferor ceases to
segregate and set aside such funds, in whole or in part, and then only to the
extent of the proceeds released from escrow to the transferor or that are no
longer segregated and set aside by the transferor.
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"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing, or otherwise relating to, any
Indebtedness.
"Permitted Indebtedness" means, without duplication, (i) Indebtedness
outstanding on the Issue Date, including, without limitation, the Subordinated
Notes, and guarantees thereof; (ii) Indebtedness of the Company incurred
pursuant to the Credit Agreement in an aggregate principal amount at any time
outstanding not to exceed the sum of the aggregate commitments pursuant to the
Credit Agreement as initially in effect, provided that, in the case of the
Exchange Indenture, reduced by the aggregate principal amount permanently repaid
with the proceeds of Asset Sales; (iii) Indebtedness evidenced by or arising
under the Exchange Debentures and the Exchange Indenture, 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 Company from
fluctuations in interest rates of its Indebtedness; (v) additional Indebtedness
of the Company or any of its Subsidiaries not to exceed $10,000,000 in principal
amount outstanding at any time (which amount may, but need not, be incurred
under the Credit Agreement); (vi) Refinancing Indebtedness; (vii) Indebtedness
owed by the Company to any Wholly Owned Subsidiary or by any Subsidiary to the
Company or any Wholly Owned Subsidiary of the Company; and (viii) guarantees by
Subsidiaries of any Indebtedness permitted to be incurred pursuant to the
Exchange Indenture.
"Permitted Investments" means (i) Investments by the Company or any
Subsidiary to acquire the stock or assets of any Person (or Indebtedness of such
Person acquired in connection with a transaction in which such Person becomes a
Subsidiary of the Company) engaged in the broadcast business or businesses
reasonably related thereto; provided that if any such Investment or series of
related Investments involves an Investment by the Company in excess of
$5,000,000, the Company is able, at the time of such investment and immediately
after giving effect thereto, to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with the "Limitation on
Incurrence of Additional Indebtedness and Issuance of Preferred Stock" covenant,
(ii) Investments received by the Company or its Subsidiaries as consideration
for a sale of assets, (iii) Investments by the Company or any Wholly Owned
Subsidiary of the Company in any Wholly Owned Subsidiary of the Company (whether
existing on the Issue Date or created thereafter) or any Person that after such
Investments, and as a result thereof, becomes a Wholly Owned Subsidiary of the
Company and Investments in the Company by any Wholly Owned Subsidiary of the
Company, (iv) cash and Cash Equivalents, (v) Investments in securities of trade
creditors, wholesalers or customers received pursuant to any plan of
reorganization or similar arrangement and (vi) additional Investments in an
aggregate amount not to exceed $2,500,000 at any time outstanding.
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Productive Assets" means assets of a kind used or usable by the Company
and its Subsidiaries in broadcast businesses or businesses reasonably related
thereto, and specifically includes assets acquired through Asset Acquisitions.
"Public Equity Offering" means an underwritten public offering of Capital
Stock (other than Disqualified Capital Stock) of the Company 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 Company net cash proceeds in an amount sufficient to redeem the New
Preferred Stock or the Exchange Debentures, as the case may be, called for
redemption in accordance with the terms thereof.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Refinancing Indebtedness" means any refinancing by the Company of
Indebtedness of the Company or any of its Subsidiaries incurred in accordance
with the "Limitation on Incurrence of Additional Indebtedness"
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covenant (other than pursuant to clause (iii) or (iv) of the definition of
Permitted Indebtedness) that does not (i) result in an increase in the aggregate
principal amount of Indebtedness (such principal amount to include, for purposes
of this definition, any premiums, penalties or accrued interest paid with the
proceeds of the Refinancing Indebtedness) of such Person or (ii) create
Indebtedness with (A) a Weighted Average Life to Maturity that is less than the
Weighted Average Life to Maturity of the Indebtedness being refinanced or (B) a
final maturity earlier than the final maturity of the Indebtedness being
refinanced.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt.
"Restricted Payment" means the following:
(A) For purposes of the Exchange Indenture, (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
the Company's Capital Stock, (ii) the purchase, redemption, retirement or
other acquisition for value of any Capital Stock of the Company, or any
warrants, rights or options to acquire shares of Capital Stock of the
Company, other than through the exchange of such Capital Stock or any
warrants, rights or options to acquire shares of any class of such Capital
Stock for Qualified Capital Stock or warrants, rights or options to acquire
Qualified Capital Stock, (iii) the making of any principal payment on, or
the purchase, defeasance, redemption, prepayment, decrease or other
acquisition or retirement for value, prior to any scheduled final maturity,
scheduled repayment or scheduled sinking fund payment, of, any Indebtedness
of the Company or its Subsidiaries that is subordinated or junior in right
of payment to the Exchange Debentures or (iv) the making of any Investment
(other than a Permitted Investment).
(B) For purposes of the Certificate of Designation, (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 the Company's Junior Stock, (ii) any purchase,
redemption, retirement or other acquisition for value of any Junior Stock
of the Company, or any warrants, rights or options to acquire shares of
Junior Stock of the Company, 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).
"Senior Debt" means any Indebtedness of the Company (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law), whether outstanding on the
Issue Date or thereafter created, incurred or assumed, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Exchange Debentures.
Without limiting the generality of the foregoing, "Senior Debt" shall also
include the principal of, premium, if any, interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, and all other amounts
owing in respect of, and all monetary obligations of every nature under, (w) the
Credit Agreement, including, without limitation, obligations to pay principal
and interest, reimbursement obligations under letters of credit, fees, expenses
and indemnities, (x) all Interest Swap Obligations and (y) the Subordinated
Notes. Notwithstanding the foregoing, Senior Debt shall not include any of the
following amounts (whether or not constituting Indebtedness as defined in the
Exchange Indenture): (i) any Indebtedness of the Company to a Subsidiary of the
Company; (ii) Indebtedness and other amounts owing to trade creditors incurred
in connection with obtaining goods, materials or services, (iii) Indebtedness
represented by Disqualified Capital Stock and (iv) any liability for federal,
state, local or other taxes owed or owing by the Company.
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"Significant Subsidiary" means for any Person each Subsidiary of such
Person which (i) for the most recent fiscal year of such Person accounted for
more than 5% of the consolidated net income of such Person or (ii) as at the end
of such fiscal year, was the owner of more than 5% of the consolidated assets of
such Person.
"Subsidiary," with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
Notwithstanding anything in the Exchange Indenture to the contrary, all
references to the Company and its consolidated Subsidiaries or to financial
information prepared on a consolidated basis in accordance with GAAP shall be
deemed to include the Company and its Subsidiaries as to which financial
statements are prepared on a combined basis in accordance with GAAP and to
financial information prepared on such a combined basis. Notwithstanding
anything in the Certificate of Designation or the Exchange Indenture to the
contrary, an Unrestricted Subsidiary shall not be deemed to be a Subsidiary for
purposes of the Certificate of Designation or the Exchange Indenture.
"Tax Sharing Agreement" means the Tax Sharing Agreement between the Company
and Chancellor, as in effect on the Issue Date.
"Unrestricted Subsidiary" means a Subsidiary of the Company created after
the Issue Date and so designated by a resolution adopted by the Board of
Directors of the Company, provided that (a) neither the Company nor any of its
other Subsidiaries (other than Unrestricted Subsidiaries) (1) provides any
credit support for any Indebtedness of such Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness) or (2) is
directly or indirectly liable for any Indebtedness of such Subsidiary, (b) the
creditors with respect to Indebtedness for borrowed money of such Subsidiary,
having a principal amount in excess of $5,000,000, have agreed in writing that
they have no recourse, direct or indirect, to the Company or any other
Subsidiary of the Company (other than Unrestricted Subsidiaries), including,
without limitation, recourse with respect to the payment of principal of or
interest on any Indebtedness of such Subsidiary and (c) at the time of
designation of such Subsidiary such Subsidiary has no property or assets (other
than de minimis assets resulting from the initial capitalization of such
Subsidiary). Any such designation by the Board of Directors of the Company shall
be evidenced to the Trustee by the filing with the Trustee of a certified copy
of the resolution of the Company's Board of Directors giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the total of the
product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Subsidiary" of any Person means any Subsidiary of such Person
of which all the outstanding voting securities (other than directors' qualifying
shares) which normally have the right to vote in the election of directors are
owned by such Person or any Wholly-Owned Subsidiary of such Person.
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DESCRIPTION OF INDEBTEDNESS
CREDIT AGREEMENT
Chancellor Radio Broadcasting entered into the Credit Agreement with
Bankers Trust Company, as administrative agent (the "Agent"), and the other
institutions party thereto (the "Banks"), on February 14, 1996. The Credit
Agreement provides for loans of up to $135.0 million. Loans under the Credit
Agreement consist of (i) a $60.0 million term loan facility (the "A Term Loan
Facility"); (ii) a $35.0 million term loan facility (the "B Term Loan Facility"
and, together with the A Term Loan Facility, the "Term Loans") and (iii) a $40.0
million revolving loan facility (the "Revolving Loan Facility" and, together
with the Term Loans, the "Bank Financing"). The following description of certain
provisions of the Credit Agreement does not purport to be complete and is
qualified in its entirety by reference to the full text of the Credit Agreement,
a copy of which is available from the Company on request.
Term Loans
The A Term Loan Facility matures 6 1/2 years, and the B Term Loan Facility
matures 7 1/2 years, after February 14, 1996 (the "Borrowing Date"). The A Term
Loan Facility requires scheduled annual principal payments, payable quarterly,
of $4.0 million in the first year following the Borrowing Date, $6.0 million in
the second year following the Borrowing Date, $10.0 million in each of the third
and fourth years following the Borrowing Date, $12.0 million in each of the
fifth and sixth years following the Borrowing Date and $6.0 million in the
seventh year following the Borrowing Date. The B Term Loan Facility requires
scheduled annual principal payments, payable quarterly, of $0.4 million in each
of the first five years following the Borrowing Date, $8.0 million in the sixth
year following the Borrowing Date, $14.0 million in the seventh year following
the Borrowing Date and $11.0 million in the eighth year following the Borrowing
Date. Voluntary prepayments of the Term Loans will be applied (i) pro rata
between the A Term Loan Facility and the B Term Loan Facility and (ii) pro rata
to subsequent scheduled repayments of the Term Loans based on the remaining
number of scheduled payments after giving effect to all prior repayments;
provided that the Company may elect to use the proceeds from the underwriters'
exercise of the over-allotment option in the Initial Public Offering (the "Green
Shoe Proceeds") to reduce the remaining scheduled repayments of the A Term Loans
through December 1998 in the direct order of maturity with any remaining Green
Shoe Proceeds to be applied to reduce the remaining number of scheduled
repayments of A Term Loans pro rata based on the remaining number of scheduled
repayments of A Term Loans. Mandatory prepayments of the Term Loans will be
required upon (i) the occurrence of certain events such as issuances of debt or
equity securities or certain asset sales and (ii) in the amount of 50% of excess
cash flow (as defined in the Credit Agreement). Mandatory prepayments of the
Term Loans will be applied to the remaining scheduled amortizations of the Term
Loans, in the case of mandatory prepayments attributable to issuances of certain
debt or equity securities or asset sales, in inverse order of maturity and, in
the case of mandatory prepayments attributable to excess cash flow, on a pro
rata basis, based on the remaining amount of scheduled payments. Mandatory
prepayments of Term Loans will be applied pro rata to the A Term Loan Facility
and the B Term Loan Facility; provided that repayments required to be made with
the proceeds of the Hicks Muse Equity Investment shall be applied to the A Term
Loans scheduled to be repaid through December 1998 in the direct order of
maturity with any remaining portion of the Hicks Muse Equity Investment to be
applied to reduce the remaining number of scheduled repayments of A Term Loans
pro rata based on the remaining number of scheduled repayments of A Term Loans.
Mandatory repayments of the A Term Loans with the Hicks Muse Equity Investment
will be required if, on the date of receipt thereof, the Company has not
theretofore used the Green Shoe Proceeds to either redeem the Acquisition
Preferred Stock and consummate the Repurchase Option, as permitted by the Credit
Agreement, or voluntarily prepay A Term Loans, as permitted by the Credit
Agreement, in an amount equal to the amount of the Green Shoe Proceeds less the
amount of the Green Shoe Proceeds applied to either redeem the Acquisition
Preferred Stock and consummate the Repurchase Option or prepay A Term Loans.
Because the Credit Agreement generally prohibits the Company from retaining cash
or cash equivalents of in excess of $2.0 million, the effect of the foregoing
will be to require the Company to use any portion of the Hicks Muse Equity
Investment not used to prepay A Term Loans to repay Revolving Loans (as
defined).
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Revolving Loan Facility
The Revolving Loan Facility provides for revolving credit loans (the
"Revolving Loans" and, together with the Term Loans, the "Loans") of up to $40.0
million (the "Revolving Credit Commitment"). Revolving Loans of $20.0 million
were drawn to consummate the Shamrock Acquisition, including payments in respect
of certain transaction fees and expenses. Thereafter, up to $40.0 million of
Revolving Loans (including any part of the Revolving Loans borrowed on the
closing date of the Shamrock Acquisition which is subsequently repaid) may be
borrowed to finance working capital needs and for general corporate purposes of
the Company. The Revolving Loan Facility matures 6 1/2 years from the Borrowing
Date with the Revolving Loans then outstanding to be repaid in full on such
date.
Interest Rate
The Loans will bear interest at a rate equal to, at Chancellor Radio
Broadcasting's option, (i) the Base Rate (as defined) in effect from time to
time plus the Applicable Margin (as defined) (the "Base Rate Loans") or (ii) the
Eurodollar Rate (as defined in the Credit Agreement) (adjusted for maximum
reserves) as determined by the Administrative Agent for the respective interest
period plus the Applicable Margin (the "Eurodollar Loans"). The Applicable
Margin for A Term Loans and Revolving Loans is 2.0% for Base Rate Loans and
3.25% for Eurodollar Loans. The Applicable Margin for B Term Loans is the
Applicable Margin for Revolving Loans of such type plus 0.25%. Notwithstanding
the foregoing, the Applicable Margin will be reduced based upon Chancellor Radio
Broadcasting's Leverage Ratio (as defined in the Credit Agreement) by the
percentage set forth below:
<TABLE>
<CAPTION>
INTEREST RATE
LEVERAGE RATIO REDUCTION
------------------------------------------------------------------------- -------------
<S> <C>
Equal to or greater than 7.0 to 1........................................ 0.00%
Equal to or greater than 6.5 to 1 but less than 7.0 to 1................. 0.25
Equal to or greater than 6.0 to 1 but less than 6.5 to 1................. 0.50
Equal to or greater than 5.5 to 1 but less than 6.0 to 1................. 0.75
Equal to or greater than 5.0 to 1 but less than 5.5 to 1................. 1.00
Equal to or greater than 4.0 to 1 but less than 5.0 to 1................. 1.25
Less than 4.0 to 1....................................................... 1.50
</TABLE>
Notwithstanding the foregoing, the Applicable Margin for B Term Loans (i)
maintained as Base Rate Loans shall not be less than 1.25% or greater than 2.00%
or (ii) maintained as Eurodollar Loans shall not be less than 2.00% or greater
than 3.25%.
"Base Rate" shall mean the higher of (i) 1/2 of 1% in excess of the Federal
Reserve reported certificate of deposit rate and (ii) the rate that the
Administrative Agent announces from time to time as its prime lending rate, as
in effect from time to time. Interest on Base Rate Loans will be payable
quarterly in arrears. Interest on Eurodollar Loans will be payable on the last
day of the applicable interest period and, in the case of interest periods in
excess of three months, on the applicable three-month anniversary of the related
borrowing. Interest periods of one, two, three and six months will be available
for Eurodollar Loans.
Fees
Chancellor Radio Broadcasting is required to pay commitment fees of 1/2 of
1% per annum of the unutilized total commitments under the Credit Agreement, as
in effect from time to time, to the Agent for the account of the Banks for the
period commencing on February 14, 1996 to and including the date of termination
of the commitments, payable quarterly in arrears and upon the termination of the
Credit Agreement. The Agent shall receive such other customary fees as have been
separately agreed upon with the Agent. It is anticipated that letters of credit
will also be issued under the Credit Agreement and fees in connection with such
letters of credit will be payable by Chancellor Radio Broadcasting in an amount
equal to the Applicable Margin from time to time for Eurodollar Revolving Loans
on the outstanding stated amounts
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of such letters of credit less a facing fee for the account of the letter of
credit issuers of 1/4 of 1% on such outstanding amounts.
Security and Guarantees
The Bank Financing is secured by (i) a first priority perfected pledge of
all capital stock and notes owned by the Company and (ii) a first priority
perfected security interest in all other assets (including receivables,
contracts, contract rights, securities, patents, trademarks, other intellectual
property, inventory, equipment and real estate) owned by the Company, excluding
FCC licenses, leasehold interests in studio or office space and leasehold and
partnership interests in tower or transmitter sites in which necessary consents
to the granting of a security interest cannot be obtained without payments to
any other party or on a timely basis. The Bank Financing also is guaranteed by
the subsidiaries of Chancellor Radio Broadcasting and Chancellor, whose
guarantees are secured by a first priority perfected pledge of the capital stock
of Chancellor Radio Broadcasting.
Change of Control
The Credit Agreement provides that a "Change of Ownership" among other
things, will be an Event of Default (as defined in the Credit Agreement). Under
the Credit Agreement a "Change of Ownership" shall occur if (i) Chancellor shall
cease to own beneficially 100% of the capital stock (other than the Exchangeable
Preferred Stock) of Chancellor Radio Broadcasting, or Chancellor Radio
Broadcasting or a Wholly-Owned Subsidiary (as defined in the Credit Agreement)
of Chancellor Radio Broadcasting shall cease to own beneficially 100% of the
capital stock of Chancellor Broadcasting Licensee, (ii) for any reason
whatsoever (x) Hicks Muse and its affiliates (exclusive of Mr. Dinetz) shall own
beneficially less than 25% of the outstanding common stock of Chancellor that is
owned beneficially by Hicks Muse and its affiliates on the Initial Borrowing
Date (as defined) and, (y) any "Person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), excluding Hicks Muse and its
affiliates, is or becomes the "beneficial owner" (as defined in Rules 13(d)-3
and 13(d)-5 under the Exchange Act), directly or indirectly, of a greater
percentage of the outstanding Voting Stock of Chancellor than is owned
beneficially by Hicks Muse and its affiliates, (iii) the Board of Directors of
Chancellor shall cease to consist of a majority of Continuing Directors (as
defined) or (iv) a "Change of Control" under and as defined in the Indentures,
the Certificate of Designation for the Exchangeable Preferred Stock and, if
issued, under the Exchange Indenture shall have occurred.
Covenants
The Credit Agreement contains customary restrictive covenants, which, among
other things and with certain exceptions, limit the ability of the Company to
incur additional indebtedness and liens in connection therewith, enter into
certain transactions with affiliates, pay dividends, consolidate merge or effect
certain asset sales, issue additional stock, make capital expenditures and enter
new lines of business. In addition, the Credit Agreement contains a covenant
requiring that the $23.0 million Hicks Muse Equity Investment be consummated on
or prior to September 30, 1996. Under the Credit Agreement, Chancellor Radio
Broadcasting also is required to satisfy certain financial covenants, which
require it to maintain specified financial ratios and to comply with certain
financial tests, such as minimum leverage ratio, minimum consolidated EBITDA and
minimum EBITDA to consolidated net cash interest expense.
Events of Default
The Credit Agreement contains customary events of default, including: (i)
the default in the payment of any principal of any loan or note thereunder when
due or any Unpaid Drawings (as defined) or interest or fees (as defined)
thereunder which continues not remedied within three days; (ii) default in the
performance or observance of certain covenants and agreements contained in the
Credit Agreement; (iii) certain defaults, including payment defaults, by
Chancellor or its subsidiaries under other agreements relating to indebtedness;
(iv) the acceleration of certain indebtedness of Chancellor or subsidiaries
prior to its stated maturity; (v) the voluntary commencement by Chancellor or
one of its subsidiaries of bankruptcy proceedings under Title 11 of
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the United States Code or an involuntary commencement of such a proceeding not
contested within 10 days or dismissed in 60 days; or the commencement of a
proceeding under similar laws not dismissed for 60 days or the appointment of a
custodian for the Company under certain circumstances or the adjudication of
Chancellor or any of subsidiaries as insolvent or bankrupt or any order of
relief for the foregoing is entered; (vi) the failure to satisfy certain minimum
employee benefit funding standards; (vii) the failure of certain security
documents or guarantees under the Credit Agreement to be in effect; (viii) a
Change of Ownership (as defined); (ix) the entry of an unvacated judgment
against Chancellor or its subsidiaries in excess $2,000,000 and (x) the failure
of the Environmental Indemnity Agreement to be in effect or certain defaults of
covenants thereunder.
SENIOR SUBORDINATED NOTES
The following summary of certain terms of the Subordinated Notes and the
Indentures does not purport to be complete and is qualified in its entirety by
reference to the Trust Indenture Act of 1939, as amended, and to all the
provisions of the Indentures, copies of which are available from the Company
upon request.
There are outstanding $60.0 million aggregate principal amount of 12 1/2%
Senior Subordinated Notes and $200.0 million aggregate principal amount of
Notes. The Subordinated Notes have substantially the same covenants, except that
the indenture governing the 12 1/2 Senior Subordinated Notes prohibits the
Company from incurring additional Indebtedness (other than Permitted
Indebtedness) on or after March 31, 1997 if the Company's Leverage Ratio (as
defined) would exceed 6.5 to 1.
The Subordinated Notes will mature on October 1, 2004. Interest on the
12 1/2% Senior Subordinated Notes and the Notes will accrue at the rates of
12 1/2% and 9 3/8% per annum, respectively, and will be payable semiannually.
The Notes will be unsecured obligations of Chancellor Radio Broadcasting,
ranking pari passu in right of payment to each other and subordinate in right of
payment to all Senior Debt (as defined in the Indentures) of Chancellor Radio
Broadcasting.
Chancellor Radio Broadcasting's subsidiaries will fully and unconditionally
guarantee the full and prompt payment of principal of and interest on the
Subordinated Notes, and of all other obligations under the Indentures. The
indebtedness evidenced by each such guarantee will be subordinated to each
guarantor's Senior Debt (as defined in the Indentures) on the same terms as the
Notes are subordinated to Chancellor Radio Broadcasting's Senior Debt.
Chancellor Radio Broadcasting may redeem the 12 1/2% Senior Subordinated
Notes, in whole at any time or in part from time to time on and after October 1,
1999 at a redemption price declining from 105.556% of the principal amount
thereof during the 12-month period beginning October 1, 1999, to 100% of the
principal amount thereof on or after October 1, 2003, plus, in each case,
accrued and unpaid interest. Except as described in the next succeeding
sentence, the Notes are not redeemable prior to February 1, 2000 and thereafter
are redeemable at Chancellor Radio Broadcasting's option, in whole at any time
or part from time to time at redemption price declining from 104.688% of the
principal amount thereof during the 12-month period beginning February 1, 2000,
to 100% of the principal amount thereof on or after February 1, 2003, plus, in
each case, accrued and unpaid interest. In addition, prior to February 1, 1999,
Chancellor Radio Broadcasting may redeem up to 25% of the aggregate principal
amount of the Notes with the net cash proceeds of one or more Public Equity
Offerings at a redemption price of 109.375%, 108.203% or 107.031% of the
principal amount thereof, plus, in each case, accrued and unpaid interest to the
redemption date, during the respective 12-month periods commencing on February
1, 1996, 1997 and 1998; provided, however, that after any such redemption at
least 75% of the aggregate principal amount of the Notes originally issued must
be outstanding. Chancellor Radio Broadcasting's ability to optionally redeem the
Notes is subject to restrictions contained in the Credit Agreement, which
provides that Chancellor Radio Broadcasting may not redeem any debt subordinate
to the indebtedness under the Credit Agreement.
Under the Indentures, in the event of a Change of Control (as defined
below) of Chancellor Radio Broadcasting, each holder of Subordinated Notes will
have the right to require Chancellor Radio Broadcasting to repurchase, in whole
or in part, such holder's Subordinated Notes at a purchase price equal to 101%
of their
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principal amount, plus accrued and unpaid interest, if any to the date of
repurchase. The Indentures provide that a "Change of Control" will occur in the
event that any one or more of the following events occurs:
(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 Chancellor Radio Broadcasting and its subsidiaries 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 Indentures), 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 Chancellor Radio
Broadcasting shall consist of Persons who are not directors who held such
position on the date of the Indentures or directors who were nominated to,
or elected by a majority of such directors or representatives of Permitted
Holders; or (iii) the acquisition by any Person or Group (other than the
Permitted Holders) of the power, directly or indirectly, to vote or direct
the voting of securities having more than 50% of the ordinary voting power
for the election of directors of Chancellor or the Company.
The Indentures contain certain restrictive covenants which, among other
things, impose limitations (subject to certain exceptions) on Chancellor Radio
Broadcasting with respect to (i) the payment of dividends or other distributions
on capital stock and the purchase, redemption or retirement for value of shares
of capital stock as any warrants, options or other rights for shares of capital
stock; (ii) the incurrence of additional indebtedness; (iii) the incurrence of
subsidiary indebtedness; (iv) the repayment or redemption of subordinated
indebtedness other in accordance with its scheduled repayment; (v) sales of
assets by Chancellor Radio Broadcasting and its subsidiaries; (vi) in the case
of the indenture governing the Notes, asset swaps; (vii) transactions with
stockholders and affiliates; (viii) the restriction of certain payments by
subsidiaries to their respective parents; (ix) the existence of liens on the
assets of Chancellor Radio Broadcasting or its subsidiaries; (x) the incurrence
of indebtedness senior to the Notes and subordinate to other indebtedness of
Chancellor Radio Broadcasting; (xi) investments by Chancellor Radio Broadcasting
and its subsidiaries; (xii) the issuance of preferred stock by any of Chancellor
Radio Broadcasting subsidiaries; (xiii) sales and leasebacks by Chancellor Radio
Broadcasting and its subsidiaries; (xiv) the guarantee of indebtedness; (xv) the
conduct of business other than the ownership and operation of radio broadcast
stations; and (xvi) the merger or sale of all or substantially all the assets of
Chancellor Radio Broadcasting.
Under the Indentures, the following events constitute "Events of Default":
(i) the failure to pay interest on the Subordinated Notes when the same becomes
due and payable and the default continues for a period of 30 days (whether or
not such payment is prohibited by the subordination provisions of the
Indentures); (ii) the failure to pay the principal on any Subordinated Notes,
when such principal becomes due and payable, at maturity, upon redemption or
otherwise (whether or not such payment is prohibited by the subordination
provisions of the Indentures); (iii) a default in the observance or performance
of any other covenant or agreement contained in the Subordinated Notes or the
Indentures, which default continues for a period of 30 days after Chancellor
Radio Broadcasting receives written notice thereof specifying the default from
the Trustee or holders of at least 25% in aggregate principal amount of the
affected series of Subordinated Notes; (iv) the failure to pay at the final
stated maturity (giving effect to any extensions thereof) the principal amount
of any Indebtedness of Chancellor Radio Broadcasting or any subsidiary of
Chancellor Radio Broadcasting, or the acceleration of the final stated maturity
of any such Indebtedness if the aggregate principal amount of such Indebtedness,
together with the aggregate principal amount of any other such Indebtedness in
default for failure to pay principal at the final stated maturity (giving effect
to any extensions thereof) or which has been accelerated, aggregates $5,000,000
or more at any time in each case after a 10-day period during which such default
shall not have been cured or such acceleration rescinded; (v) one or more
judgments in an aggregate amount in excess of $5,000,000 (which are not covered
by insurance as to which the insurer has not disclaimed coverage) being rendered
against Chancellor Radio Broadcasting or any of its Significant Subsidiaries and
such judgments remain undischarged or unstayed for a period of 60 days after
such judgment or judgments become final and non-appealable; and (vi) certain
events of bankruptcy, insolvency or reorganization affecting Chancellor Radio
Broadcasting or any of its Significant Subsidiaries.
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Upon the happening of any Event of Default specified in the Indentures,
each trustee may, and the appropriate trustee upon the request of holders of 25%
in principal amount of the Notes or the 12 1/2% Senior Subordinated Notes, as
the case may be, in default shall or the holders of at least 25% in principal
amount of outstanding Notes or 12 1/2% Senior Subordinated Notes in default may,
declare the principal of and accrued but unpaid interest, if any, on all of such
Subordinated Notes to be due and payable.
The Company may terminate its obligations under the Indentures at any time,
and the obligations of the guarantors with respect thereto shall terminate, by
delivering all outstanding Subordinated Notes of the appropriate series to the
appropriate trustee for cancellation and paying all sums payable by it
thereunder. The Company, at its option, (i) will be discharged from any and all
obligations with respect to the Subordinated Notes delivered, and the guarantor
will be discharged from any and all obligations with respect to its guarantee of
such Subordinated Notes, (except for certain obligations of the Company to
register the transfer or exchange of such Subordinated Notes, replace stolen,
lost or mutilated Subordinated Notes, maintain paying agencies and hold moneys
for payment in trust) or (ii) need not comply with certain of the restrictive
covenants with respect to the Indentures, if the Company deposits with the
appropriate trustee, in trust, U.S. legal tender or U.S. Government Obligations
or a combination thereof which, through the payment of interest thereon and
principal in respect thereof in accordance with their terms, will be sufficient
to pay all the principal of and interest on the Subordinated Notes to be
defeased on the dates such payments are due in accordance with the terms of such
Subordinated Notes as well as the applicable trustee's fees and expenses.
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DESCRIPTION OF CAPITAL STOCK
CHANCELLOR BROADCASTING
The authorized capital stock of the Company consists of 1,000 shares of
common stock, par value $.01 per share, all of which are owned of record and
beneficially by Chancellor, and 2,000,000 shares of preferred stock, par value
$.01 per share, 1,000,000 of which will be issued and outstanding upon
consummation of the Exchange Offer and designated as New Preferred Stock.
CHANCELLOR
As of the date hereof, the authorized capital stock of Chancellor consists
of (i) 40,000,000 shares of Class A Common Stock, of which 8,694,935 shares are
issued and outstanding; (ii) 10,000,000 shares of Class B Common Stock, of which
63,500 shares are issued and outstanding; (iii) 10,000,000 shares of Class C
Common Stock, of which 8,484,410 shares are issued and outstanding; and (iv)
10,000,000 shares of preferred stock, none of which are outstanding.
Common Stock
The rights of holders of the Common Stock are identical in all respects,
except for voting rights. All the outstanding shares of Class A Common Stock,
Class B Common Stock and Class C Common Stock are validly issued, fully paid and
nonassessable.
Dividends. Subject to the right of the holders of any class of preferred
stock, holders of shares of Common Stock are entitled to receive such dividends
as may be declared by Chancellor's board of directors out of funds legally
available for such purpose. No dividend may be declared or paid in cash or
property on any share of any class of Common Stock unless simultaneously the
same dividend is declared or paid on each share of the other class of Common
Stock, provided that, in the event of stock dividends, holders of a specific
class of Common Stock shall be entitled to receive only additional shares of
such class.
Voting Rights. The Class A Common Stock and the Class B Common Stock vote
together as a single class on all matters submitted to a vote of stockholders,
with each share of Class A Common Stock entitled to one vote and each share of
Class B Common Stock entitled to 1,350 votes, and after the Conversion, if any,
to ten votes, except (i) that the holders of Class A Common Stock, voting as a
separate class, are entitled initially to elect two members of the board of
directors of Chancellor; (ii) with respect to any proposed "going private"
transaction (as defined in Rule 13e-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), with Hicks Muse or Steven Dinetz or any of
their affiliates (a "Rule 13e-3 Transaction"), each share of Class A Common
Stock and Class B Common Stock shall be entitled to one vote; and (iii) as
otherwise required by law. The Class C Common Stock has no voting rights except
as otherwise required by law and except that the holders of the Class C Common
Stock, voting as class, shall be entitled to vote upon any merger or
consolidation involving Chancellor or any sale (or series of related sales) of
all or substantially all the assets of Chancellor.
In the election of directors, the holders of Class A Common Stock, voting
as a separate class, will be entitled to elect two persons to Chancellor's board
of directors, each of whom must be an "independent director." For this purpose,
an "independent director" means a person who is not an officer or employee of
the Company or its subsidiaries, and who does not have a relationship which, in
the opinion of the Board of Directors, would interfere with the exercise of
independent judgement in carrying out the responsibilities of a Director. There
is currently one serving Class A Director. Chancellor anticipates that the
additional Class A Director will be elected by the holders of the Class A Common
Stock at the 1997 annual meeting of stockholders. Chancellor's current Class A
Director will also be subject to reelection at that time. The holders of Class A
Common Stock and Class B Common Stock of Chancellor, voting as a single class,
are entitled to elect the remaining directors. Holders of Common Stock are not
entitled to cumulate votes in the election of directors.
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Under Delaware law, the affirmative vote of the holders of a majority of
the outstanding shares of any class of common stock is required to approve any
amendment to the certificate of incorporation of Chancellor that would increase
or decrease the aggregate number of authorized shares of such class, increase or
decrease the par value of the shares of such class, or modify or change the
powers, preferences or special rights of the shares of any class so as to affect
such class adversely.
Liquidation Rights. Upon liquidation, dissolution or winding-up of
Chancellor, the holders of the Common Stock are entitled to ratably share in all
assets available for distribution after payment in full of creditors and holders
of the preferred stock of Chancellor, if any.
Conversion of Class B Common Stock. Upon the sale or other transfer of any
share or shares of Class B Common Stock to any person other than Steven Dinetz
or Hicks Muse and its affiliates, each share so sold or transferred shall
automatically be converted into one share of Class A Common Stock.
Conversion of Class C Common Stock. The shares of Class C Common Stock are
convertible, in whole but not in part, at the option of the holder or holders
thereof at any time into a like number of shares of Class B Common Stock. Upon
the sale or other transfer of any share or shares of Class C Common Stock to any
person (subject to certain exceptions) other than Steven Dinetz or Hicks Muse
and its affiliates, each share so sold or transferred shall automatically be
converted into one share of Class A Common Stock.
Chancellor has been advised that Hicks Muse's affiliates intend to convert
their shares of Class C Common Stock into shares of Class B Common Stock (the
"Conversion"), subject to the prior consent of the FCC. In June 1996, Hicks
Muse's affiliates filed an application with the FCC requesting consent to the
Conversion.
Notwithstanding the foregoing, in the event the Conversion has not occurred
on or before the earlier of (i) the date on which Hicks Muse ceases to own
beneficially more than 50% of the number of shares of Class C Common Stock
beneficially owned by them upon the consummation of the Initial Public Offering
(calculated without regard to any change in Hicks Muse's and its affiliates,
beneficial ownership resulting from the dissolution of the Chancellor Business
Trust) and (ii) the third anniversary date of the consummation of the Initial
Public Offering, then, subject to prior FCC approval, each share of Class B
Common Stock shall be entitled to one vote per share. The Second Restated
Certificate of Incorporation of Chancellor provides that (i) promptly (but in
any event not more than 10 days) after the receipt of written notice from Hicks
Muse and its affiliates of their intention to transfer such number of shares of
Class C Common Stock as, when added to all shares of Class C Common Stock
theretofore transferred by Hicks Muse, would exceed 50% of the number of shares
of Class C Common Stock beneficially owned by them (calculated without reference
to the shares held by the Chancellor Business Trust) upon the consummation of
the Initial Public Offering or (ii), if earlier, upon the 180th day prior to the
third anniversary date of the consummation of the Initial Public Offering,
Chancellor shall file and diligently prosecute an application with the FCC
seeking an order of the FCC permitting the holders of the Class A Common Stock
of Chancellor to acquire control of Chancellor. Upon such order becoming final,
each share of Class B Common Stock shall automatically become entitled to one
vote per share, and the holders of the Class A Common Stock and the Class B
Common Stock thereafter shall vote together as a single class upon all matters
submitted to a vote of stockholders, including the election of all the
directors. The acquisition of control of Chancellor by the public could result
in an event of default under the Credit Agreement and could constitute a Change
of Control under the Indentures and the Exchange Indenture entitling the holders
of the Subordinated Notes and the Exchange Debenture, if issued, to have their
securities repurchased as provided in the Indentures and the Exchange Indenture.
Other Provisions. The holders of Common Stock are not entitled to
preemptive or similar rights. In any merger, consolidation or business
combination, the consideration received per share by holders of Class A Common
Stock, Class B Common Stock and Class C Common Stock must be economically
identical, except that in any such transaction in which shares of common stock
are distributed, such shares may differ as to rights to the extent that rights
now differ among the classes of Common Stock.
Transfer Agent. KeyCorp Shareholder Services, Inc. is the Transfer Agent
and Registrar for the Class A Common Stock.
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Preferred Stock
Chancellor is authorized to issue 10,000,000 shares of preferred stock, par
value $.01 per share. The board of directors of Chancellor, in its sole
discretion, may designate and issue one or more series of preferred stock from
the authorized and unissued shares of preferred stock. Subject to limitations
imposed by law or Chancellor's Second Restated Certificate of Incorporation, the
board of directors is empowered to determine the designation of and the number
of shares constituting a series of preferred stock, the dividend rate for the
series, the terms and conditions of any voting and conversion rights for the
series, the amounts payable on the series upon redemption or upon the
liquidation, dissolution or winding-up of Chancellor, the provisions of any
sinking fund for the redemption or purchase of shares of any series, and the
preferences and relative rights among the series of preferred stock. Such
rights, preferences, privileges and limitations could adversely effect the
rights of holders of Common Stock. There are currently no shares of preferred
stock outstanding.
FOREIGN OWNERSHIP
Chancellor's Second Restated Certificate of Incorporation restricts the
ownership, voting and transfer of the Company's capital stock, including the
Common Stock, in accordance with the Communications Act and the rules of the
FCC, which prohibit ownership of more than 25% of Chancellor's outstanding
capital stock (or more than 25% of the voting rights it represents) by or for
the account of aliens or corporations otherwise subject to domination or control
by aliens. The Second Restated Certificate of Incorporation also prohibits any
transfer of Chancellor's capital stock that would cause a violation of this
prohibition. In addition, the certificate authorizes the board of directors of
Chancellor to adopt such provisions as it deems necessary to enforce these
prohibitions, including the inclusion of a legend regarding restrictions on
foreign ownership of such stock on the certificates representing the Common
Stock.
CERTAIN PROVISIONS OF THE SECOND RESTATED CERTIFICATE OF INCORPORATION AND
SECOND RESTATED BYLAWS OF CHANCELLOR
Chancellor's Second Restated Certificate of Incorporation and Second
Restated Bylaws includes certain provisions that could have an anti-takeover
effect. These provisions are intended to enhance the likelihood of continuity
and stability in the composition of the board of directors of Chancellor and in
the policies formulated by the board of directors. These provisions also are
intended to help ensure that the board of directors of Chancellor, if confronted
by a surprise proposal from a third party which has acquired a block of stock of
the Company, will have sufficient time to review the proposal and appropriate
alternatives to the proposal and to act in what it believes to be the best
interests of the stockholders.
The following is a summary of the provisions to be included in the Second
Restated Certificate of Incorporation and Second Restated Bylaws of Chancellor
and is qualified in its entirety by reference to such documents, copies of which
are available from the Company on request. The board of directors of Chancellor
has no current plans to formulate or effect additional measures that could have
an anti-takeover effect.
Classified Board of Directors. In addition to the Class A Directors, the
Second Restated Certificate of Incorporation provides for three additional
classes of directors, which serve staggered three-year terms and which shall be
elected by the holders of the Class A Common Stock and Class B Common Stock,
voting as a single class. Under certain circumstances, the classification of
directors has the effect of making it more difficult for stockholders to change
the composition of the board of directors of Chancellor in a relatively short
period of time. At least two annual meetings of stockholders, instead of one,
will generally be required to effect a change in a majority of the board of
directors of Chancellor at any time Chancellor has seven or more directors. See
"Management and Board of Directors."
Advance Notice Requirements for Stockholder Proposals and Director
Nominees. The Second Restated Bylaws include an advance notice procedure with
regard to business proposed to be submitted by a stockholder at any annual or
special meeting of stockholders of the Company, including the nomination of
candidates for election as directors. The procedure provides that a notice of
proposed stockholder business must be timely given in writing to the Secretary
of the Company prior to the meeting. In all cases, to be timely, notice relating
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to an annual meeting must be received at the principal executive office of the
Company not less than 60 days nor more than 90 days before the first anniversary
of the prior year's annual meeting.
Notice to Chancellor from a stockholder who proposes to nominate a person
at a meeting for election as a director must contain all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors pursuant to Regulation 14A under the Exchange Act,
including such person's written consent to being named in the proxy statement as
a nominee and to serve as a director if elected.
Blank Check Preferred Stock. Chancellor's Second Restated Certificate of
Incorporation provides that the Board of Directors of Chancellor may authorize
the issuance of up to 10,000,000 shares of preferred stock in one or more
classes or series and may designate the dividend rate, voting rights and other
rights, preferences and restrictions of each such class or series. The board of
directors of Chancellor has no present intention to issue any preferred stock;
however, the board of directors of Chancellor has the authority, without further
shareholder approval, to issue one or more series of preferred stock that could,
depending on the terms of such series, either impede or facilitate the
completion or a merger, tender offer or other takeover attempt. Although the
board of directors of Chancellor is required to make any determination to issue
such stock based on its judgment as to the best interests of the stockholders of
Chancellor, the board of directors of Chancellor could act in a manner that
would discourage an acquisition attempt or other transaction that some, or a
majority, of the stockholders might believe to be in their best interests or in
which stockholders might receive a premium for their stock over the then market
price of such stock. The board of directors of Chancellor does not intent to
seek stockholder approval prior to any issuance of such stock, unless otherwise
required by law.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Generally, Section 203 of the Delaware General Corporation Law prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless one
of the following events occurs: (i) prior to the date of the business
combination, the transaction is approved by the board of directors of the
corporation, (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owns
at least 85% of the outstanding voting stock or (iii) on or after such date the
business combination is approved by the board and by the affirmative vote of at
least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder. A "business combination" includes mergers, asset sales
and other transactions resulting in a financial benefit to the stockholder. An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years, did own) 15% or more of the
corporation's voting stock.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material federal income tax
considerations generally applicable to the exchange of Old Preferred Stock for
New Preferred Stock, but does not purport to be a complete analysis of all
potential tax consequences. The discussion is based upon the Internal Revenue
Code of 1986, as amended (the "Code"), Treasury Regulations, Internal Revenue
Service ("IRS") rulings and pronouncements and judicial decisions now in effect,
all of which are subject to change at any time by legislative, judicial or
administrative action. Any such changes may be applied retroactively in a manner
that could adversely affect a holder participating in the Exchange Offer. In
addition, the description does not consider the effect of any applicable
foreign, state, local or other tax laws or estate or gift tax considerations.
THE FOLLOWING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSIDERATIONS DOES
NOT CONSIDER THE FACTS AND CIRCUMSTANCES OF ANY PARTICULAR HOLDER'S SITUATION OR
STATUS. ACCORDINGLY, EACH HOLDER OF OLD PREFERRED STOCK SHOULD CONSULT ITS OWN
TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO IT OF EXCHANGING OLD
PREFERRED STOCK FOR NEW PREFERRED STOCK, INCLUDING THOSE UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS.
EXCHANGE OF THE OLD PREFERRED STOCK PURSUANT TO THE EXCHANGE OFFER
An exchange of Old Preferred Stock for New Preferred Stock pursuant to the
Exchange Offer should not result in a taxable event to a holder for federal
income tax purposes. Accordingly, the New Preferred Stock should be regarded for
federal income tax purposes as a continuation of the Old Preferred Stock, and a
holder should have the same adjusted basis and holding period in the New
Preferred Stock upon receipt as it had in the Old Preferred Stock immediately
before the exchange.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Preferred Stock for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Preferred Stock. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of New Preferred Stock received in
exchange for Old Preferred Stock where such Old Preferred Stock were acquired as
a result of market-making activities or other trading activities. The Company
has agreed that, for a period of 180 days after the Expiration Date, it will
make this Prospectus, as amended or supplemented, available to any broker-dealer
for use in connection with any such resale.
The Company will not receive any proceeds from any sale of New Preferred
Stock by broker-dealers. New Preferred Stock received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Preferred Stock or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such New
Preferred Stock. Any broker-dealer that resells shares of New Preferred Stock
that it received for its own account pursuant to the Exchange Offer and any
broker or dealer that participates in a distribution of such New Preferred Stock
may be deemed to be an "underwriter" within the meaning of the Securities Act,
and any profit on any such resale of New Preferred Stock and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the
101
<PAGE> 104
Exchange Offer (including the expenses of one counsel for the holders of the Old
Preferred Stock) other than commissions or concessions of any brokers or dealers
and will indemnify holders of the Old Preferred Stock (including any
broker-dealers) against certain liabilities, including certain liabilities under
the Securities Act.
LEGAL MATTERS
The validity of and other matters related to the New Preferred Stock will
be passed upon for the Company by Weil, Gotshal & Manges LLP. Partners of Weil,
Gotshal & Manges LLP own, in the aggregate, 4,332 shares of the Class A Common
Stock of Chancellor.
EXPERTS
The consolidated financial statements of Chancellor Radio Broadcasting
Company, formerly Chancellor Broadcasting Company, at December 31, 1995 and 1994
and for the years then ended, the statements of operations, division equity and
cash flows of Old Chancellor Communications for the year ended December 31,
1993, the financial statements of KDWB-FM at December 31, 1994 and for the year
then ended, and the combined financial statements of the Omni Stations at
December 31, 1995 and for the year then ended, have been included herein and
elsewhere in the Prospectus and Registration Statement in reliance upon the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of said firm as experts in accounting and auditing.
The financial statements of Trefoil Communications, Inc. as of December 31,
1995 and 1994 and for each of the three years in the period ended December 31,
1995 included in the Prospectus and Registration Statement have been so included
in reliance on the report of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports and other information with the
Securities and Exchange Commission (the "Commission"). Such reports and other
information may be inspected and copied at the public reference facilities of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Commission's regional offices at 500 West Madison Street,
Suite 1400, Chicago, Illinois 60611, and 7 World Trade Center, 13th Floor, New
York, New York 10048. Copies of such material can also be obtained at prescribed
rates by writing to the Public Reference Section of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company has filed with the Commission a Registration Statement under
the Securities Act, with respect to the New Preferred Stock. This Prospectus
does not contain all the information set forth in the Registration Statement on
Form S-1 (the "Registration Statement") and the exhibits and schedules thereto,
certain portions of which have been omitted pursuant to the rules and
regulations of the Commission. Statements made in this Prospectus as to the
contents of any contract, agreement or other document are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement, reference is hereby made to such
exhibit for a more complete description of the matter involved, and each such
statement shall be deemed qualified in its entirety by such reference. Copies of
the Registration Statement and the exhibits thereto are on file with the
Commission and may be examined without charge at the public reference facilities
of the Commission described above. Copies of such materials can also be obtained
at prescribed rates by writing to the Public Reference Section of the Commission
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company is required by the Certificate of Designation for the New
Preferred Stock to furnish the holders of the New Preferred Stock with copies of
the annual reports and of the information, documents and other reports specified
in Sections 13 and 15(d) of the Exchange Act, as long as any shares of New
Preferred Stock are outstanding.
102
<PAGE> 105
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARY
Report of Independent Accountants................................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and March 31, 1996
(unaudited)...................................................................... F-3
Consolidated Statements of Operations for the years ended December 31, 1994 and 1995
and the three months ended March 31, 1995 (unaudited) and 1996 (unaudited)....... F-4
Consolidated Statements of Changes in Common Stockholder's Equity for the years
ended December 31, 1994 and 1995 and the three months ended March 31, 1996
(unaudited)...................................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1994 and 1995
and the three months ended March 31, 1995 (unaudited) and 1996 (unaudited)....... F-6
Notes to Consolidated Financial Statements.......................................... F-7
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
Report of Independent Accountants................................................... F-19
Consolidated Balance Sheets as of December 31, 1994 and 1995........................ F-20
Consolidated Statements of Operations for the years ended December 31, 1993, 1994
and 1995......................................................................... F-21
Consolidated Statements of Stockholders' Equity for the years ended December 31,
1993, 1994 and 1995.............................................................. F-22
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994
and 1995......................................................................... F-23
Notes to Consolidated Financial Statements.......................................... F-24
OMNI STATIONS
Report of Independent Accountants................................................... F-34
Combined Statements of Net Assets as of December 31, 1995 and March 31, 1996
(unaudited)...................................................................... F-35
Combined Statements of Revenues, Direct Expenses and Other Income (Expense) for the
Year Ended December 31, 1995 and the three months ended March 31, 1995
(unaudited) and 1996 (unaudited)................................................. F-36
Combined Statements of Changes in Net Assets for the year ended December 31, 1995
and the three months ended March 31, 1995 (unaudited) and 1996 (unaudited)....... F-37
Combined Statements of Cash Flows for the year ended December 31, 1995 and the three
months ended March 31, 1995 (unaudited) and 1996 (unaudited)..................... F-38
Notes to Combined Financial Statements.............................................. F-39
OLD CHANCELLOR COMMUNICATIONS
Report of Independent Accountants................................................... F-42
Statement of Operations and Division Equity for the year ended December 31, 1993.... F-43
Statement of Cash Flows for the year ended December 31, 1993........................ F-44
Notes to Financial Statements....................................................... F-45
KDWB-FM
Report of Independent Accountants................................................... F-50
Balance Sheet at December 31, 1994.................................................. F-51
Statements of Operations for the year ended December 31, 1994 and (unaudited) for
the seven months ended July 31, 1995............................................. F-52
Statements of Changes in Net Assets for the year ended December 31, 1994 and
(unaudited) for the seven months ended July 31, 1995............................. F-53
Statements of Cash Flows for the year ended December 31, 1994 and (unaudited) for
the seven months ended July 31, 1995............................................. F-54
Notes to Financial Statements....................................................... F-55
</TABLE>
F-1
<PAGE> 106
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Chancellor Radio Broadcasting Company:
We have audited the accompanying consolidated balance sheets of Chancellor
Radio Broadcasting Company and Subsidiary, formerly Chancellor Broadcasting
Company, (collectively the "Company") as of December 31, 1995 and 1994 and the
related consolidated statements of operations, changes in stockholder's equity,
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company as of December 31, 1995 and 1994 and the consolidated results of
their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
February 14, 1996, except for Note 5,
paragraphs five, six, and seven;
Note 6 paragraphs two, three, and four, and
Note 7 as to which the date is March 21, 1996.
F-2
<PAGE> 107
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- MARCH 31,
1994 1995 1996
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash............................................. $ 1,516,808 $ 1,314,214 $ 2,514,868
Accounts receivable, net of allowance for
doubtful accounts of $118,844, $263,528, and
$600,000, respectively........................ 10,851,311 13,243,292 28,452,064
Prepaid expenses and other....................... 299,105 546,405 1,386,131
------------ ------------ ------------
Total current assets..................... 12,667,224 15,103,911 32,353,063
Property and equipment, net...................... 16,926,765 17,925,845 53,577,273
Intangibles and other, net....................... 185,025,280 203,808,395 567,567,151
Deferred financing costs, net.................... 4,956,743 4,284,413 19,789,495
------------ ------------ ------------
Total assets............................. $219,576,012 $241,122,564 $673,286,982
============ ============ ============
LIABILITIES AND COMMON STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable................................. $ 2,415,802 $ 1,873,888 $ 3,603,589
Accrued liabilities.............................. 1,822,230 4,692,948 8,301,175
Accrued interest................................. 2,251,654 2,710,891 6,279,140
Current portion of long-term debt................ 2,437,500 4,062,500 4,400,000
------------ ------------ ------------
Total current liabilities................ 8,927,186 13,340,227 22,583,904
Long-term debt................................... 149,226,198 168,107,242 352,727,945
Deferred income taxes............................ 1,163,504 4,952,361 17,836,384
Other............................................ 365,094 -- 767,319
------------ ------------ ------------
Total liabilities........................ 159,681,982 186,399,830 393,915,552
------------ ------------ ------------
Commitments (Note 11)
Redeemable senior cumulative exchangeable preferred
stock, par value $.01 per share, 1,000,000 shares
authorized, none, none and 1,000,000 issued and
outstanding, respectively; preference in
liquidation of $100,000,000...................... -- -- 97,652,032
------------ ------------ ------------
Common stockholder's equity:
Common Stock, par value $.01 per share, 2,000
shares authorized, 2,000, 1,000 and 1,000
issued and outstanding, respectively.......... 20 10 10
Additional paid-in capital....................... 59,999,980 66,359,990 203,927,620
Accumulated deficit.............................. (105,970) (11,637,266) (22,208,232)
------------ ------------ ------------
Total common stockholder's equity........ 59,894,030 54,722,734 181,719,398
------------ ------------ ------------
Total liabilities and stockholder's
equity................................. $219,576,012 $241,122,564 $673,286,982
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 108
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEAR ENDED DECEMBER 31, 31,
--------------------------- ---------------------------
1994 1995 1995 1996
----------- ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Gross broadcasting revenues............ $30,080,829 $ 73,278,860 $14,860,968 $ 29,089,515
Less agency commissions................ 3,763,734 8,956,717 1,779,413 3,447,276
----------- ------------ ----------- ------------
Net revenues................. 26,317,095 64,322,143 13,081,555 25,642,239
----------- ------------ ----------- ------------
Operating expenses:
Programming, technical and news...... 5,678,829 11,734,285 2,762,245 5,144,760
Sales and promotion.................. 7,137,039 17,556,256 3,600,241 6,943,078
General and administrative........... 2,844,284 8,174,189 2,173,704 4,403,750
Depreciation and amortization........ 3,180,159 9,047,268 2,358,655 5,027,608
Corporate expenses................... 599,657 1,815,535 369,567 1,007,597
Stock option compensation............ -- 6,360,000 -- 950,000
----------- ------------ ----------- ------------
19,439,968 54,687,533 11,264,412 23,476,793
----------- ------------ ----------- ------------
Income from operations....... 6,877,127 9,634,610 1,817,143 2,165,446
Other (income) expense:
Interest expense..................... 5,020,827 17,323,549 4,113,507 7,145,506
Other, net........................... (19,265) 42,402 (7,933) 5,624
----------- ------------ ----------- ------------
Loss before provision for
income taxes and
extraordinary loss......... 1,875,565 (7,731,341) (2,288,431) (4,985,684)
Provision for income taxes............. 1,163,716 3,799,955 1,194,938 939,361
----------- ------------ ----------- ------------
Net income (loss) before
extraordinary loss......... 711,849 (11,531,296) (3,483,369) (5,925,045)
Extraordinary loss on early
extinguishment of debt............... 817,819 -- -- 4,645,921
----------- ------------ ----------- ------------
Net loss..................... (105,970) (11,531,296) (3,483,369) (10,570,966)
Dividends and accretion on preferred
stock................................ -- -- -- 1,660,269
Loss on repurchase of preferred
stock................................ -- -- -- 16,570,065
----------- ------------ ----------- ------------
Net loss attributable to
common stock............... $ (105,970) $(11,531,296) $(3,483,369) $(28,801,300)
=========== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 109
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
----------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994.... -- -- -- -- --
Issuance of common stock on
January 10, 1994............ 1,000 $ 10 $ 25,499,990 -- $ 25,500,000
Issuance of common stock on
October 12, 1994............ 1,000 10 34,499,990 -- 34,500,000
Net loss...................... -- -- -- $ (105,970) (105,970)
------ ---- ------------ ------------ ------------
Balance, December 31, 1994.... 2,000 20 59,999,980 (105,970) 59,894,030
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
Capital contributions
(unaudited)................. -- -- 155,797,964 -- 155,797,964
Loss on repurchase of
preferred stock
(unaudited)................. -- -- (16,570,065) (16,570,065)
Dividends and accretion on
preferred stock
(unaudited)................. -- -- (1,660,269) -- (1,660,269)
Net loss (unaudited).......... -- -- -- (10,570,966) (10,570,966)
------ ---- ------------ ------------ ------------
Balance, March 31, 1996
(unaudited)................. 1,000 $ 10 $203,927,620 $(22,208,232) $181,719,398
====== ==== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 110
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEAR ENDED DECEMBER 31, 31,
---------------------------- ---------------------------
1994 1995 1995 1996
------------- ------------ ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss............................. $ (105,970) $(11,531,296) $(3,483,369) $ (10,570,966)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization..... 3,180,159 9,047,268 2,358,655 5,027,608
Provision for doubtful accounts... 118,844 144,684 104,535 150,722
Stock option compensation......... -- 6,360,000 -- 950,000
Deferred income taxes............. 1,490,716 3,788,877 1,194,938 939,361
Extraordinary loss................ 490,819 -- -- 4,645,921
Changes in assets and liabilities,
net of the effects of acquired
businesses:
Accounts receivable............. (9,794,411) (2,488,204) (380,713) 2,798,074
Prepaids and other.............. 216,036 (214,868) (62,293) 56,513
Accounts payable................ 1,509,064 (541,914) (675,805) 761,323
Accrued liabilities............. 1,334,397 447,196 102,658 458,404
Accrued interest................ 2,251,654 459,237 2,519,248 3,568,249
------------- ------------ ----------- -------------
Net cash provided by
operating activities....... 691,308 5,470,980 1,677,854 8,785,209
------------- ------------ ----------- -------------
Cash flows from investing activities:
Purchases of broadcasting
properties........................ (204,509,849) (24,351,529) (22,976) (405,566,199)
Purchases of other property and
equipment......................... (238,648) (1,709,897) (337,437) (820,314)
------------- ------------ ----------- -------------
Net cash used in investing
activities................. (204,748,497) (26,061,426) (360,413) (406,386,513)
------------- ------------ ----------- -------------
Cash flows from financing activities:
Proceeds from issuance of
long-term debt.................... 168,910,299 -- -- 277,957,527
Proceeds from borrowings under
revolving debt facility........... 5,639,237 54,458,819 1,995,395 28,609,148
Repayment of long-term debt.......... (25,000,000) (2,437,500) -- (89,784,500)
Repayments of borrowings under
revolving debt facility........... (3,975,539) (31,633,467) (3,659,093) (52,249,879)
Issuance of preferred stock.......... -- -- -- 175,389,677
Repurchase of preferred stock........ -- -- -- (95,462,423)
Additional capital contributions..... 60,000,000 -- -- 155,886,098
Distribution of additional paid in
capital........................... -- -- -- (1,038,134)
Payment of preferred stock
dividends......................... -- -- -- (505,556)
------------- ------------ ----------- -------------
Net cash provided by
financing activities....... 205,573,997 20,387,852 (1,663,698) 398,801,958
------------- ------------ ----------- -------------
Net increase (decrease) in
cash....................... 1,516,808 (202,594) (346,257) 1,200,654
Cash, at beginning of period........... -- 1,516,808 1,516,808 1,314,214
------------- ------------ ----------- -------------
Cash, at end of period................. $ 1,516,808 $ 1,314,214 $ 1,170,551 $ 2,514,868
============= ============ =========== =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest............................. $ 2,769,173 $ 16,864,312 $ 1,594,259 $ 3,577,257
Income taxes......................... $ -- $ -- $ -- $ --
Non-cash investing activities:
Liabilities assumed in connection
with acquisitions of broadcasting
properties........................ $ 867 $ 383 $ -- $ 4,817,200
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 111
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AS OF MARCH 31, 1996 AND THE THREE MONTHS
ENDED MARCH 31, 1995 AND 1996)
1. BUSINESS AND ORGANIZATION
Chancellor Radio Broadcasting Company, formerly Chancellor Broadcasting
Company ("Chancellor Radio Broadcasting") and its wholly-owned subsidiary,
Chancellor Broadcasting Licensee Company, (collectively, the "Company") operate
in a single industry segment, which segment encompasses the ownership and
management of radio broadcast stations located in markets throughout the United
States. Chancellor Radio Broadcasting, a wholly owned subsidiary of Chancellor
Broadcasting Company, formerly Chancellor Corporation ("Chancellor"), was formed
in June 1994 to acquire and operate radio stations owned by American Media, Inc.
and two corporations and one partnership affiliated with American Media, Inc.
(collectively, the "American Media Station Group") and by Chancellor
Communications Corporation ("Chancellor Communications"). That transaction was
consummated on October 12, 1994. Chancellor Communications was formed in 1993 to
acquire and operate radio stations KGBY-FM and KFBK-AM. That transaction closed
on January 10, 1994 and the consolidated financial statements include the
activity of all the stations since their respective dates of acquisition.
In June 1995, the 1,000 shares of common stock of Chancellor Communications
held by an affiliate of Hicks, Muse, Tate & Furst Incorporated were exchanged
for additional shares of common stock of Chancellor, which subsequently
contributed these shares to Chancellor Radio Broadcasting as an additional
capital contribution. As a result, Chancellor Communications became a wholly
owned subsidiary of Chancellor Radio Broadcasting. Chancellor Communications was
then merged with the Company. The transactions had no effect on the financial
position or results of operations of the Company.
Chancellor Broadcasting Licensee Company is a wholly owned non-operating
legal entity formed to hold title to the Company's broadcast licenses. Such
entity has no significant other assets and no material liabilities,
contingencies or commitments other than its full and unconditional guarantee of
Chancellor Radio Broadcasting's debt. Consistent with industry practice for
financial reporting purposes, no material value has been specifically allocated
to the licenses. Accordingly, no financial statement information has been
provided herein due to its immateriality to investors.
Interim Periods
The consolidated balance sheet as of March 31, 1996 and the related
consolidated statements of operations, changes in common stockholder's equity
and cash flows for the three month periods ended March 31, 1995 and 1996 are
unaudited. However, in the opinion of management, all adjustments necessary for
a fair presentation of such financial statements have been included. Interim
results are not necessarily indicative of results for a full year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Chancellor
Radio Broadcasting, and its wholly-owned subsidiary Chancellor Broadcasting
Licensee Company. All significant intercompany accounts and transactions have
been eliminated.
Revenue Recognition
Broadcasting operations derive revenue primarily from the sale of program
time and commercial announcements to local, regional and national advertisers.
Revenue is recognized when the programs and commercial announcements are
broadcast.
F-7
<PAGE> 112
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS OF MARCH 31, 1996 AND THE THREE MONTHS
ENDED MARCH 31, 1995 AND 1996)
Barter Transactions
Barter transactions represent advertising time exchanged for promotional
items, advertising, supplies, equipment, and services. Barter revenue is
recorded at the fair value of the goods or services received and is recognized
in income when the advertisements are broadcast. Goods or services are charged
to expense when received or used. Advertising time owed and goods or services
due the Company are included in accounts payable and accounts receivable,
respectively.
Cash
The Company maintains cash in demand deposits with financial institutions.
The Company had no cash equivalents during the period presented. All highly
liquid investments with an original maturity of less than three months are
considered cash equivalents.
Property and Equipment
Property and equipment is stated at cost, less accumulated depreciation and
amortization. Depreciation is determined using the straight-line method over the
estimated useful lives of the various classes of assets, which range from three
to twenty-five years. Leasehold improvements are amortized over the shorter of
their useful lives or the terms of the related leases of seven years. Costs of
repairs and maintenance are charged to operations as incurred.
Intangibles
Goodwill represents the excess of cost over the fair values of the
identifiable tangible and other intangible net assets acquired and is being
amortized over the straight-line method over forty years. Other intangible
assets comprise amounts paid for agreements not to compete, a tower lease
advantage and organization costs incurred in the incorporation of the Company.
Other intangibles are being amortized by the straight-line method over their
estimated useful lives ranging from three to ten years.
The Company evaluates intangible assets for potential impairment by
analyzing the operating results, trends and prospects of the Company's stations,
as well as by comparing them to their competitors. The Company also takes into
consideration recent acquisition patterns within the broadcast industry, the
impact of recently enacted or potential FCC rules and regulations and any other
events or circumstances which might indicate potential impairment.
Deferred Financing Costs
Costs associated with obtaining debt financing are capitalized and
amortized using the interest method over the term of the related debt. As a
result of refinancing the Company's credit facility, during the year ended
December 31, 1994 unamortized deferred financing costs of approximately $818,000
were expensed as an extraordinary item in the consolidated statements of
operations and approximately $5.1 million and $118,000 of new financing costs
were incurred for the years ended December 31, 1994 and 1995, respectively.
Accumulated amortization at December 31, 1994 and 1995, amounted to
approximately $168,000 and $959,000, respectively.
Income Taxes
Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year-end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable earnings. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount more likely than not to be
realized. Income tax expense is the tax payable for the period and the change
during the period in deferred tax assets and liabilities.
F-8
<PAGE> 113
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS OF MARCH 31, 1996 AND THE THREE MONTHS
ENDED MARCH 31, 1995 AND 1996)
Chancellor, Chancellor Radio Broadcasting and its subsidiary have elected
to file consolidated federal income tax returns (the "Chancellor Group") and
have entered into a tax sharing agreement (the "Tax Sharing Agreement")
governing the allocation of any consolidated federal income tax liability of the
Chancellor Group among its members. In general, each subsidiary allocates and
pays to Chancellor income taxes computed as if each subsidiary filed a separate
federal income tax return. Similar principles will apply to any consolidated
state and local income tax liabilities.
Advertising Costs
The Company incurs various marketing and promotional costs to add and
maintain listenership. These costs are expensed as incurred or deferred and
amortized over the interim periods which they benefit and totaled approximately
$1.4 million and $4.2 million for the years ended December 31, 1994 and 1995,
respectively.
Concentration of Credit Risk
The Company's revenue and accounts receivable primarily relate to
advertising of products and services within the radio stations' broadcast areas.
The Company performs ongoing credit evaluations of its customers' financial
condition and, generally, requires no collateral from its customers. Credit
losses have been within management's expectations and adequate allowances for
any uncollectible trade receivables are maintained.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1995
----------- -----------
<S> <C> <C>
Land...................................................... $ 1,572,229 $ 1,572,229
Building and building improvements........................ 2,454,921 3,159,848
Towers and antenna systems................................ 3,032,691 3,689,972
Studio, technical and transmitting equipment.............. 6,961,492 7,830,375
Office equipment, furniture and fixtures.................. 1,814,901 2,484,261
Record library............................................ 1,755,396 1,800,510
Vehicles.................................................. 282,289 362,787
Construction in progress.................................. 503,504
----------- -----------
17,873,919 21,403,486
Less accumulated depreciation............................. (947,154) (3,477,641)
----------- -----------
$16,926,765 $17,925,845
========== ==========
</TABLE>
Depreciation expense for the years ended December 31, 1994 and 1995 was
$947,154 and $2.6 million, respectively.
F-9
<PAGE> 114
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS OF MARCH 31, 1996 AND THE THREE MONTHS
ENDED MARCH 31, 1995 AND 1996)
4. INTANGIBLE AND OTHER ASSETS
Intangible and other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1994 1995
------------ ------------
<S> <C> <C>
Goodwill................................................ $184,702,759 $205,971,820
Noncompete agreements................................... 1,950,000 1,950,000
Towers lease advantage.................................. 305,000 305,000
Organization costs...................................... 45,718 45,718
Other................................................... 28,453 3,246,265
------------ ------------
187,031,930 211,518,803
Less accumulated amortization........................... (2,006,650) (7,710,408)
------------ ------------
$185,025,280 $203,808,395
=========== ===========
</TABLE>
Amortization expense for intangible assets for the years ended December 31,
1994 and 1995 was $2.0 million and $5.7 million, respectively.
5. ACQUISITIONS OF BROADCASTING PROPERTIES
On January 9, 1994, Chancellor Communications purchased substantially all
the assets and assumed certain liabilities of KGBY-FM and KFBK-AM for
approximately $49.5 million, including acquisition costs. Liabilities assumed
were limited to certain ongoing contractual rights and obligations. The
acquisition has been accounted for as a purchase and, accordingly, the results
of operations associated with the acquired assets have been included in the
accompanying statements from the date of acquisition.
The acquisition is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired and liabilities assumed:
Property and equipment........................................... $ 4,921
Goodwill and other intangibles................................... 44,401
Prepaid expenses and other assets................................ 413
Accrued liabilities.............................................. (205)
-------
Total acquisition............................................. $49,530
=======
</TABLE>
On October 12, 1994, Chancellor Radio Broadcasting purchased substantially
all the assets and assumed certain liabilities consisting solely of accrued
expenses and future payments under ongoing contracts of the American Media
Station Group (other than KHYL-FM in Sacramento, California) for approximately
$139.5 million in cash, including acquisition costs and payments in respect of
agreements not to compete. On the same date, Chancellor Communications purchased
all the assets and certain liabilities consisting solely of accrued expenses and
future payments under ongoing contracts of KHYL-FM for approximately $15.5
million in cash, including acquisition costs and payments in respect of an
agreement not to compete. These
F-10
<PAGE> 115
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS OF MARCH 31, 1996 AND THE THREE MONTHS
ENDED MARCH 31, 1995 AND 1996)
acquisitions have been accounted for as purchases and, accordingly, the results
of operations associated with the acquired assets have been included in the
accompanying statements from the date of acquisition.
The acquisition is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired and liabilities assumed:
Property and equipment.......................................... $ 12,671
Goodwill and other intangibles.................................. 142,618
Prepaid expenses and other assets............................... 353
Accrued liabilities............................................. (662)
--------
Total acquisition....................................... $154,980
========
</TABLE>
Simultaneously with the closing of these transactions, Chancellor acquired
all of Chancellor Communications' outstanding nonvoting stock in exchange for
newly issued shares of Chancellor's nonvoting stock. Chancellor contributed all
the acquired shares of Chancellor Communication's nonvoting stock to Chancellor
Radio Broadcasting, as a result of which Chancellor Communications became a
subsidiary of Chancellor Radio Broadcasting. Because these entities are under
common management and control, this exchange has been accounted for at
historical cost in a manner similar to a pooling of interests.
On July 31, 1995, the Company purchased substantially all the assets and
assumed certain liabilities of KDWB-FM for approximately $22.6 million,
including acquisition costs. Liabilities assumed were limited to certain ongoing
contractual rights and obligations. The acquisition has been accounted for as a
purchase and, accordingly, the results of operations associated with the
acquired assets have been included in the accompanying statements from the date
of acquisition.
The acquisition is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired and liabilities assumed:
Property and equipment................................................... $ 1,866
Goodwill and other intangibles........................................... 21,032
Prepaid expenses and other assets........................................ 82
Other liabilities........................................................ (383)
-------
Total acquisition................................................ $22,597
=======
</TABLE>
F-11
<PAGE> 116
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS OF MARCH 31, 1996 AND THE THREE MONTHS
ENDED MARCH 31, 1995 AND 1996)
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 and, accordingly, the results of operations
associated with the acquired assets have been included in the accompanying
statements from the date of acquisition.
The acquisition is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired and liabilities assumed:
Cash.................................................................... $ 38
Accounts receivable, net................................................ 18,636
Prepaid expenses and other assets....................................... 1,274
Property and equipment.................................................. 36,429
Goodwill and other intangibles.......................................... 383,786
Accrued liabilities..................................................... (14,564)
Deferred tax liability.................................................. (16,897)
Other Noncurrent liabilities............................................ (702)
--------
Total acquisition............................................... $408,000
========
</TABLE>
The following summarizes the unaudited consolidated pro forma data for the
year ended December 31, 1995 and 1994 as though the acquisitions of the American
Media Station, KDWB-FM and Trefoil had occurred as of January 1, 1994 (in
thousands):
<TABLE>
<CAPTION>
1994 1995
------------------------- -------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- ----------- ---------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net revenue............................... $ 26,317 $ 145,388 $ 64,322 $ 152,023
Net income before extraordinary loss...... 712 (11,206) (11,531) (4,288)
Net loss.................................. (106) (11,206) (11,531) (4,288)
</TABLE>
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, subject to FCC approval, to exchange KTBZ-FM
and approximately $6.0 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 intends to close on
the exchange of the stations effective July 31, 1996. Additionally, the Company
also manages certain limited functions pursuant to an LMA and has entered into
an asset purchase agreement to acquire certain assets of WKYN-AM in Florence,
Kentucky for approximately $1.0 million of cash.
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 Radio Broadcasting Company's Class A Common
shares. Liabilities assumed will be limited to certain ongoing contractual
rights and obligations. On June 24,
F-12
<PAGE> 117
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS OF MARCH 31, 1996 AND THE THREE MONTHS
ENDED MARCH 31, 1995 AND 1996)
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.
6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1995
------------ ------------
<S> <C> <C>
Term Loan................................................. $ 70,000,000 $ 67,562,500
Revolving credit loan..................................... 1,663,698 24,607,242
Subordinated notes due 2004............................... 80,000,000 80,000,000
------------ ------------
151,663,698 172,169,742
Less current portion...................................... 2,437,500 4,062,500
------------ ------------
$149,226,198 $168,107,242
============ ============
</TABLE>
The Company's $70.0 million term loan facility and $35.0 million revolving
loan facility were refinanced on February 14, 1996, in conjunction with the
acquisition of Trefoil Communications, Inc. under a new bank credit agreement
(the "New Credit Agreement") with Bankers Trust Company, as administrative
agent, and other institutions party thereto. In connection with the refinancing
of the term loan and revolving loan facility, the Company incurred an
extraordinary charge to write-off deferred finance costs of approximately $1.2
million, net of approximately $0.8 million of tax benefit. The New Credit
Agreement includes a $60.0 million term loan facility (the "A Term Loan
Facility"), a $35.0 million term loan facility (the "B Term Loan Facility" and,
together with the A Term Loan Facility, the "Term Loans") and a $40.0 million
revolving loan facility (the "Revolving Loan Facility" and, together with the
Term Loans, the "New Bank Financing"). The New Bank Financing is collateralized
by (i) a first priority perfected pledge of all capital stock and notes owned by
Chancellor and its subsidiaries and (ii) a first priority perfected security
interest in all other assets (including receivables, contracts, contract rights,
securities, patents, trademarks, other intellectual property, inventory,
equipment and real estate) owned by Chancellor and its subsidiaries, excluding
FCC licenses, leasehold interests in studio or office space and certain
leasehold and partnership interests in tower or transmitter sites. The A and B
Term Loan Facilities are due in increasing quarterly installments beginning in
1996 and mature in August 2002 and 2003, respectively. All outstanding
borrowings under the Revolving 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 Facility. As of
December 31, 1995, the original Bank Financing facilities accrued interest at
LIBOR rate plus 3% (8.94%) on $92.2 million of borrowings.
The Company's $80.0 million 12 1/2% Senior Subordinated Notes due 2004 (the
"Existing Notes") mature October 1, 2004, and bear interest at 12.5% per annum.
On February 14, 1996, in conjunction with the acquisition of Trefoil
Communications, Inc., the Company issued $200 million aggregate principal amount
of
F-13
<PAGE> 118
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS OF MARCH 31, 1996 AND THE THREE MONTHS
ENDED MARCH 31, 1995 AND 1996)
Senior Subordinated Notes due 2004 (the "New Notes" and, together with the
Existing Notes, the "Notes"), which mature on October 1, 2004, and bear interest
at 9 3/8% per annum. Interest on the Notes is paid semi-annually. The Existing
and New Notes are redeemable, in whole or in part, at the option of the Company
on or after October 1, 1999 and February 1, 2000, respectively. In addition,
prior to January 31, 1999, the Company may redeem up to 25% of the original
aggregate principal amount of the New Notes with the net proceeds of one or more
public equity offerings. The Notes are unsecured obligations of the Company,
ranking subordinate in right of payment to all senior debt of the Company. The
New Notes rank pari passu in right of payment to the Existing Notes. The Notes
are guaranteed on a senior subordinated basis by the Company's subsidiary.
In connection with the IPO (as defined), the Company initiated a redemption
(the "Redemption") of 25% of the Existing Notes for approximately $22.0 million.
The Redemption was completed in March 1996 and resulted in an extraordinary
charge to write-off deferred finance costs of approximately $1.7 million, net of
approximately $1.1 million of tax benefit.
Scheduled debt maturities for the Company's long-term debt adjusted to
reflect the New Notes, the Redemption, and the New Credit Agreement for each of
the next five years and thereafter are as follows:
<TABLE>
<S> <C>
1996........................................................... $ 3,300,000
1997........................................................... 5,900,000
1998........................................................... 9,400,000
1999........................................................... 10,400,000
2000........................................................... 11,900,000
Thereafter................................................ 342,719,000
------------
$383,619,000
============
</TABLE>
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.
7. CAPITAL STRUCTURE
In February 1996, Chancellor sold 7.7 million shares of Class A common
stock in an initial public offering, (the "IPO"), which generated net proceeds
of $142.4 million, and in a private placement, issued $100.0 million of
exchangeable redeemable preferred stock (the "Acquisition Preferred Stock") of
Chancellor Radio Broadcasting and 742,192 shares of Class A common stock of
Chancellor to an affiliated entity and other investors.
In February 1996, subsequent to the IPO, the Company completed a private
placement of $100.0 million of newly authorized Senior Cumulative Exchangeable
Preferred Stock (the "Old Preferred Stock"). Upon completion, the proceeds of
the Old Preferred Stock were used to redeem the Acquisition Preferred Stock and
55,664 shares of Class A common stock issued in connection with the acquisition
of Trefoil. The redemption resulted in a charge to net loss applicable to common
stock of approximately $16.6 million and an additional reduction of paid-in
capital of approximately $1.0 million.
In March 1996, the Company commenced an exchange offering to exchange the
Old Preferred Stock for 1,000,000 shares of public, 12 1/4% Senior Cumulative
Exchangeable Preferred Stock (the "New Preferred Stock"). The terms of the New
Preferred Stock are substantially identical to those of the Old Preferred Stock.
Dividends on the New Preferred Stock will accrue from its date of issuance and
will be payable quarterly commencing May 15, 1996, at a rate per annum of
12 1/4% of the then effective liquidation preference per share. Dividends may be
paid, at the Company's option, on any dividend payment date occurring on or
prior to February 15, 2001 either in cash or by adding such dividends to the
then effective liquidation preference of the
F-14
<PAGE> 119
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS OF MARCH 31, 1996 AND THE THREE MONTHS
ENDED MARCH 31, 1995 AND 1996)
New Preferred Stock. The initial liquidation preference of the New Preferred
Stock will be $100.00 per share. The New Preferred Stock is redeemable at the
Company's option, in whole or in part at any time on or after February 15, 2001,
at various redemption prices (as defined), plus, accumulated and unpaid
dividends to the date of redemption. In addition, prior to February 15, 1999,
the Company may, at its option, redeem the New Preferred Stock with the net cash
proceeds from one or more Public Equity Offerings (as defined), at various
redemption prices (as defined), plus, accumulated and unpaid dividends to the
redemption date; provided, however, that after any such redemption there is
outstanding at least 75% of the number of shares of New Preferred Stock
originally issued.
The Company is required, subject to certain conditions, to redeem all of
the New Preferred Stock outstanding on February 15, 2008, at a redemption price
equal to 100% of the then effective liquidation preference thereof, plus,
accumulated and unpaid dividends to the date of redemption. Upon the occurrence
of a change of control (as defined), the Company will offer to purchase all of
the then outstanding shares of New Preferred Stock at a price equal to 101% of
the then effective liquidation preference thereof, plus, accumulated and unpaid
dividends to the date of purchase. Subject to certain conditions, the New
Preferred Stock is exchangeable in whole, but not in part, at the option of the
Company, on any dividend payment date for the Company's 12 1/4% subordinated
exchange debentures due 2008.
In addition to the accrued dividends discussed above, the recorded value of
the Old Preferred Stock includes an amount for the accretion of the difference
between the Old Preferred Stock's fair value at date of issuance and its
mandatory redemption amount, calculated using the effective interest method.
Immediately prior to the IPO, Chancellor effected a recapitalization of its
current capital stock. Pursuant to the recapitalization, each six shares of
Chancellor's Nonvoting Stock were reclassified into one share of Class A Common
Stock. Each six shares of Chancellor's Voting Stock were reclassified into one
share of Class B Common Stock and each six shares of Convertible Nonvoting Stock
were reclassified into one share of Class C Common Stock. In connection with the
recapitalization, 63,333 shares of Class A Common Stock were exchanged for an
equal number of shares of Class B Common Stock, and an additional 8,483,078
shares of Class A Common Stock were exchanged for an equal number of shares of
Class C Common Stock. The recapitalization has been given retroactive effect in
the financial statements.
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 is subject to FCC approval as it results in a change of
control.
8. 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 537,500 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.
F-15
<PAGE> 120
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS OF MARCH 31, 1996 AND THE THREE MONTHS
ENDED MARCH 31, 1995 AND 1996)
9. INCOME TAXES
All of the Company's revenues were generated in the United States. The
provision for income taxes for continuing operations consists entirely of
deferred taxes, as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1995
---------- ----------
<S> <C> <C>
Current:
State..................................................... $ -- $ 11,098
Deferred:
Federal................................................... 940,109 3,220,528
State..................................................... 223,607 568,329
---------- ----------
Total provision................................... $1,163,716 $3,799,955
========== ==========
</TABLE>
Income tax expense (benefit) differs from the amount computed by applying
the federal statutory income tax rate of 34% to income (loss) before income
taxes for the following reasons:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------- -------------------------
1994 1995 1995 1996
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. federal income tax at
statutory rate................... $ 359,634 $(2,628,656) $ (778,067) $(3,274,746)
State income taxes, net of federal
benefit.......................... 63,465 (463,880) (137,306) (577,896)
Valuation allowance provided for
loss carryforward generated
during the current period........ 720,616 6,589,750 1,998,800 4,667,003
Reconciliation of return to
estimate......................... -- 71,510 -- --
Other.............................. 20,001 231,231 111,511 125,000
---------- ----------- ---------- -----------
$1,163,716 $ 3,799,955 $1,194,938 $ 939,361
========== =========== ========== ===========
</TABLE>
The deferred tax liability consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1995
---------- -----------
<S> <C> <C>
Depreciation and amortization.............................. $1,211,042 $ 5,057,772
---------- -----------
Loss carryforwards expiring 2009 and 2010.................. (720,490) (4,766,240)
Deferred stock option compensation deduction............... -- (2,544,000)
Reserve for doubtful accounts.............................. (47,538) (105,411)
---------- -----------
Gross deferred tax asset......................... (768,028) (7,415,651)
---------- -----------
Deferred tax asset valuation allowance..................... 720,490 7,310,240
---------- -----------
Net deferred tax liability....................... $1,163,504 $ 4,952,361
========== ===========
</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. The Company had net
operating loss carryforwards expiring in 2009 and 2010 of approximately $11.9
million at December 31, 1995.
10. EMPLOYEE BENEFIT PLAN
The Company has two 401(k) Savings Plans, whereby eligible employees can
contribute up to either 15% or 20% of their salary, per year, subject to certain
maximum contribution amounts. The Company has not made any contributions to the
plans in the year presented, nor is it required to in future periods. Employees
become eligible to participate in the plans after the completion of one year of
service and the attainment of age twenty-one.
F-16
<PAGE> 121
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS OF MARCH 31, 1996 AND THE THREE MONTHS
ENDED MARCH 31, 1995 AND 1996)
11. COMMITMENTS
The Company leases real property, office space, broadcasting equipment and
office equipment under various noncancellable operating leases. Certain of the
Company's leases contain escalation clauses, renewal options and/or purchase
options. In addition, the Company assumed lease obligations in connection with
the acquisition of Trefoil on February 14, 1996. The Company also has employment
and rating survey agreements in excess of one year, and has entered into a
twelve-year financial monitoring and oversight agreement with Hicks Muse & Co.
Partners, L.P., which is an affiliate of Hicks, Muse, Tate & Furst Incorporated.
The future minimum payments under the noncancellable operating lease
agreements adjusted to reflect the acquisition of Trefoil at December 31, 1995
are approximately as follows:
<TABLE>
<S> <C>
1996............................................................ $ 4,325,485
1997............................................................ 4,027,932
1998............................................................ 3,223,054
1999............................................................ 2,485,662
2000............................................................ 2,126,624
Thereafter...................................................... 11,045,015
-----------
$27,233,772
===========
</TABLE>
Rent expense for the Company was approximately $227,000, and $1.2 million
for the year ended December 31, 1994 and 1995, respectively.
12. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
For cash, short-term debt, and other current amounts receivable and
payable, and the variable-rate term debt, the carrying amount approximates fair
value.
For the fixed-rate long-term debt, the fair value is estimated based on
quoted market prices. The carrying value at December 31, 1994 and December 31,
1995 was $80.0 million and the estimated fair values at each date were $78.8
million and $85.4 million, respectively.
13. STOCK OPTION AGREEMENTS
During 1994, Chancellor granted options to purchase approximately 952,000
shares of its common stock to the senior management of the Company at exercise
prices of $6.00 and $7.50. The option agreements vest over a five year period
and originally contained certain performance criteria and indexed exercise
prices. On September 30, 1995, Chancellor entered into an agreement with its
senior management to substantially revise and amend these option agreements to
eliminate certain of the performance criteria provisions and to adjust and fix
the exercise prices at $7.50 and $8.40, respectively. Management developed an
estimate of the fair value of the stock options in the amount of $19.0 million.
Based upon this estimate and the applicable vesting periods, the Company
recognized stock option compensation expense and a corresponding equity
contribution from Chancellor of $6.4 million in 1995, with the remaining amount
to be amortized over an approximate four year period.
14. RELATED PARTY TRANSACTIONS
The Company has entered into a twelve-year agreement (the "Financial
Monitoring and Oversight Agreement") with Hicks Muse & Co. Partners, L.P.
("Hicks Muse Partners") and HM2/Management Partners, L.P. ("HM2"), each of which
is an affiliate of Hicks Muse. Chancellor and the Company pay Hicks Muse
Partners an annual fee of $200,000 for financial oversight and monitoring
services to Chancellor and the
F-17
<PAGE> 122
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS OF MARCH 31, 1996 AND THE THREE MONTHS
ENDED MARCH 31, 1995 AND 1996)
Company. The actual expense included in the financial statements for both 1994
periods and 1995 was approximately $82,000 and $200,000, respectively. The
annual fee is adjustable each December 31, according to a formula based on
changes in the consumer price index. HM2 received a fee of approximately $0.3
million, $2.4 million and $6.2 million upon consummation of the acquisition of
KDWB-FM, the American Media Station Group and Trefoil Communications, Inc.,
respectively, and is entitled to receive a fee equal to 1.5% of the transaction
value (as defined) upon the consummation of each add-on transaction (as defined)
involving Chancellor or any of its subsidiaries.
Effective April 1, 1996, the Company entered into a revised financial
monitoring and oversight agreement with Hicks & Muse & Co. Partners, L.P. and
HM2/Management Partners, L.P., each of which is an affiliate of Hicks, Muse,
Tate & Furst Incorporated. The annual fee for financial oversight and monitoring
services to the Company has been adjusted to $500,000. The annual fee is
adjustable each January 1, to an amount equal to the budgeted consolidated
annual net sales of the Company for the then-current fiscal year, multiplied by
0.25%, provided, however, that in no event shall the annual fee be less than
$500,000.
The Financial Monitoring and Oversight Agreement makes available the
resources of HM2 and Hicks Muse Partners concerning a variety of financial
matters. The services that have been and will continue to be provided by HM2 and
Hicks Muse Partners could not otherwise be obtained by Chancellor and the
Company without the addition of personnel or the engagement of outside
professional advisors.
In February of 1996, the Company lent $200,000 to an affiliate of the
Company. The loan is unsecured, does not bear interest and will be forgiven
during the next three years.
15. UNCERTAINTIES AND THE USE OF ESTIMATES AND ASSUMPTIONS
On February 8, 1996, the President signed into law the Telecommunications
Act of 1996. Among other things, this legislation requires the Federal
Communications Commission (the "FCC"), to relax its numerical restrictions on
local ownership and affords renewal applicants significant new protections from
competing applications for their broadcast licenses. The new legislation will
enable the Company to retain all of its radio stations and to acquire more
properties; at the same time, this legislation will also allow other broadcast
entities to increase their ownership in markets where the Company currently
operates stations. The Company's management is unable to determine the ultimate
effect of this legislation on its competitive environment.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual amounts could differ from those estimates.
F-18
<PAGE> 123
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
of Trefoil Communications, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, stockholders' equity and cash
flows, present fairly, in all material respects, the financial position of
Trefoil Communications, Inc. and its subsidiaries at December 31, 1995 and 1994,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Notes 2 and 10 to the financial statements, the Company
changed its method of accounting for income taxes in 1993.
As discussed in Note 17 to the financial statements, the Company was sold
to Chancellor Radio Broadcasting Company, formerly Chancellor Broadcasting
Company, on February 14, 1996.
PRICE WATERHOUSE LLP
Los Angeles, California
February 14, 1996
F-19
<PAGE> 124
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash................................................................. $ 9,639 $ 4,857
Receivables, net of allowance for doubtful accounts of $1,535 and
$1,630, respectively.............................................. 22,468 22,397
Prepaid expenses and other current assets............................ 1,312 917
-------- --------
Total current assets......................................... 33,419 28,171
Property and equipment, at cost, net of accumulated depreciation and
amortization (Note 4)................................................ 18,308 17,204
Intangible assets, net of accumulated amortization of $16,705 and
$22,071, respectively................................................ 184,470 184,197
Other assets........................................................... 9,751 7,918
-------- --------
$245,948 $237,490
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.................................... $ 7,000 $ 6,500
Accounts payable..................................................... 2,771 2,233
Accrued expenses (Note 4)............................................ 6,066 5,715
Income taxes payable................................................. 298 96
-------- --------
Total current liabilities.................................... 16,135 14,544
Long-term debt (Note 6)................................................ 98,000 92,500
Convertible senior notes (Note 8)...................................... 30,000 30,000
Payable to affiliates (Note 15)........................................ 16,241 20,613
Deferred income taxes (Note 10)........................................ 18,877 19,218
Other long-term liabilities (Note 4)................................... 14,747 19,129
-------- --------
194,000 196,004
Mandatorily redeemable preferred stock (Note 9):
7.5% Series A cumulative convertible preferred stock $.10 par value;
authorized, issued and outstanding 70,000 shares.................. 70,000 70,000
Stockholders' equity:
Preferred stock $.10 par value; authorized 30,000 shares; none issued
and outstanding
Common stock $.10 par value; authorized 50,000 shares; issued and
outstanding 10,364 shares......................................... 1 1
Additional paid-in capital........................................... 41,656 41,656
Accumulated deficit.................................................. (59,709) (70,171)
-------- --------
(18,052) (28,514)
Commitments and contingencies (Notes 13 and 16)
-------- --------
$245,948 $237,490
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-20
<PAGE> 125
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Broadcasting revenues........................................ $ 82,447 $109,219 $108,849
Less agency commissions...................................... 10,707 14,332 14,244
-------- -------- --------
Net revenues............................................... 71,740 94,887 94,605
-------- -------- --------
Costs and expenses:
Station operating expenses................................. 61,043 75,427 73,720
Corporate expenses......................................... 4,550 3,355 3,139
Depreciation and amortization.............................. 2,295 3,038 2,992
Amortization of intangibles................................ 3,866 5,961 5,759
-------- -------- --------
71,754 87,781 85,610
-------- -------- --------
Operating income (loss).................................... (14) 7,106 8,995
-------- -------- --------
Other income (expenses):
Interest expense........................................... (7,133) (12,923) (14,703)
Gain (loss) on sale of broadcast assets (Note 11).......... (40) 5,462 --
Miscellaneous, net......................................... (623) (4) 78
-------- -------- --------
(7,796) (7,465) (14,625)
-------- -------- --------
Loss from continuing operations before income taxes and
discontinued operations.................................... (7,810) (359) (5,630)
Income tax benefit (expense) (Note 10)....................... 1,889 (1,355) 1,287
-------- -------- --------
Loss from continuing operations.............................. (5,921) (1,714) (4,343)
Discontinued operations (Note 12):
Loss of television division, net of income tax benefit of
$90..................................................... (170) -- --
Loss of investment operations, net of income tax benefit of
$3,501.................................................. (5,744) -- --
-------- -------- --------
Net loss..................................................... (11,835) (1,714) (4,343)
Dividends on mandatorily redeemable preferred stock.......... (2,206) (5,619) (6,119)
-------- -------- --------
Loss applicable to common stock.............................. $(14,041) $ (7,333) $(10,462)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-21
<PAGE> 126
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
$0.10 PAR VALUE $0.10 PAR VALUE ADDITIONAL
--------------- --------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------ ------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992........ 2,000 $ -- 8,964 $ 1 $ 31,656 $ (12,035) $ 19,622
Net loss........................ (11,835) (11,835)
Preferred dividend.............. (90) (90)
Shares exchanged................ (2,000) -- 181 -- -- --
Asset distribution.............. (26,210) (26,210)
Mandatorily redeemable preferred
dividend..................... (2,206) (2,206)
Shares issued................... 1,219 -- 10,000 10,000
------ ------ ------ ----- --------- ---------- ----------
Balance, December 31, 1993........ -- -- 10,364 1 41,656 (52,376) (10,719)
Net loss........................ (1,714) (1,714)
Mandatorily redeemable preferred
dividend..................... (5,619) (5,619)
------ ------ ------ ----- --------- ---------- ----------
Balance, December 31, 1994........ -- -- 10,364 1 41,656 (59,709) (18,052)
Net loss........................ (4,343) (4,343)
Mandatorily redeemable preferred
dividend..................... (6,119) (6,119)
------ ------ ------ ----- --------- ---------- ----------
Balance, December 31, 1995........ -- $ -- 10,364 $ 1 $ 41,656 $ (70,171) $ (28,514)
====== ======= ====== ===== ========= ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-22
<PAGE> 127
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
--------- -------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................................ $ (11,835) $ (1,714) $(4,343)
Adjustments to reconcile net loss to cash provided by operating
activities:
Depreciation of property and equipment........................... 2,295 3,038 2,992
Amortization of intangible and other assets...................... 4,843 6,736 6,569
(Gain) loss on disposal of assets................................ 40 (5,462) --
Deferred income taxes............................................ (2,039) (279) (168)
Non-cash interest expense........................................ 1,095 3,180 4,479
Changes in assets and liabilities which increase (decrease) cash:
Receivables.................................................... (328) 263 71
Prepaid expenses and other current assets...................... (364) (8) 395
Accounts payable, accrued expenses and income taxes payable.... 3,652 (2,356) (1,078)
Other assets................................................... (9,349) -- --
Other, net..................................................... 1,207 358 (529)
Discontinued operations:
Loss of television division...................................... 170 -- --
Loss of investment operations.................................... 5,744 -- --
Increase in net assets........................................... (22,285) -- --
--------- -------- -------
Cash from (used in) operating activities....................... (27,154) 3,756 8,388
--------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Station acquisitions................................................ (173,603) -- (5,528)
Purchase of property and equipment.................................. (1,118) (3,341) (1,642)
Proceeds from disposal of broadcast assets.......................... 2,244 22,802 --
--------- -------- -------
Cash from (used in) investing activities....................... (172,477) 19,461 (7,170)
--------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt........................................ 138,000 -- --
Proceeds from convertible senior notes.............................. 30,000 -- --
Proceeds from preferred stock....................................... 70,000 -- --
Proceeds from affiliate borrowings.................................. 7,000 6,000 --
Principal payments of long-term debt................................ (42,500) (24,000) (6,000)
Dividends paid...................................................... (90) -- --
--------- -------- -------
Cash from (used in) financing activities....................... 202,410 (18,000) (6,000)
--------- -------- -------
Net increase (decrease) in cash..................................... 2,779 5,217 (4,782)
Cash beginning of year.............................................. 1,643 4,422 9,639
--------- -------- -------
Cash end of year.................................................... $ 4,422 $ 9,639 $ 4,857
========= ======== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-23
<PAGE> 128
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- THE COMPANY
The accompanying consolidated financial statements of Trefoil
Communications, Inc. (the "Company", formerly Shamrock Holdings, Inc.) include
the accounts of the Company and its subsidiaries. All significant intercompany
transactions and balances have been eliminated. As of December 31, 1995, the
Company's broadcasting subsidiary ("Broadcasting") owned and operated ten radio
properties in major markets across the United States. In August 1995, the
Company's shareholders entered into an agreement to sell their interest in the
Company, see Note 17. As discussed in Note 12, the Company divested its
television division, previously operated by Broadcasting, and its other
subsidiary, Shamrock Holdings of California ("SHOC"), in July 1993. The
divestiture was accomplished through a spin-off to certain of the Company's
shareholders. At the time of the spin-off, the television division consisted of
two stations and SHOC's activities included investing in marketable securities,
real estate and various other limited partnerships.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
To more accurately present the ongoing broadcasting operations, all of the
Company's non-radio broadcasting activities have been classified as discontinued
operations, net of tax, in the accompanying financial statements.
Revenue recognition
Broadcasting revenues are derived primarily from the sale of program time
and commercial announcements to local, regional and national advertisers.
Revenue is recognized when programs and commercial announcements are broadcast.
Barter transactions
The Company trades certain advertising time for various goods and services.
These transactions are recorded at the estimated fair value of the goods or
services received. The related revenue is recognized when commercials are
broadcast; goods or services received are recorded as assets or expenses when
received or used, respectively.
Use of estimates in preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Property and equipment
Expenditures for additions, renewals and betterments are capitalized.
Expenditures for maintenance and repairs are charged to expense as incurred.
Depreciation is computed on the straight-line method based on the estimated
useful lives of the assets.
Intangible assets
Intangible assets represent the purchase price of broadcasting properties
in excess of the fair value of net tangible assets acquired and include value
allocated to FCC broadcasting licenses and goodwill. Intangible assets are
amortized on the straight-line basis over forty years.
F-24
<PAGE> 129
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company evaluates intangible assets for potential impairment by
analyzing the operating results, trends and prospects of the Company's stations,
as well as by comparing them to their competitors. The Company also takes into
consideration recent acquisition patterns within the broadcast industry, the
impact of recently enacted or potential FCC rules and regulations and any other
events or circumstances which might indicate potential impairment.
Income taxes
The Company files a consolidated federal income tax return and combined
California franchise tax return with its subsidiaries. Effective January 1,
1993, the Company prospectively adopted Statement of Financial Accounting
Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." The adoption of
SFAS 109 changed the Company's method of accounting for income taxes from the
deferred method (APB 11) to an asset and liability approach. The asset and
liability approach requires the recognition of deferred tax liabilities and
assets for the expected future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities.
NOTE 3 -- ACQUISITIONS
In February 1995, the Company acquired for $5.5 million cash (including
acquisition costs) the broadcast license and assets of a second FM radio station
in Denver, Colorado. The acquisition has been accounted for as a purchase and
resulted in an excess of acquisition costs over fair value of the net assets
acquired of $5 million which has been allocated to intangible assets, primarily
FCC broadcasting licenses and goodwill.
Effective July 30, 1993, the Company acquired five radio properties from
Malrite Communications Group, Inc. ("Malrite") for an aggregate purchase price
of $183.5 million. The purchase price consisted of 1,219 shares of common stock
valued at $10 million with the remainder paid in cash generated from net bank
borrowings of $104.5 million and proceeds from the issuance of convertible
senior notes and preferred stock (see Notes 8 and 9).
The acquisition has been accounted for as a purchase transaction and,
accordingly, the assets and liabilities acquired have been recorded at their
estimated fair value at the date of acquisition. Total consideration paid,
inclusive of certain transaction costs, resulted in an excess of acquisition
costs over net assets acquired of approximately $165.9 million which has been
allocated to intangible assets, primarily FCC broadcasting licenses and
goodwill.
The operating results of this acquisition are included in the Company's
consolidated results of operations from the date of acquisition. The following
unaudited pro forma summary presents the consolidated results of operations as
if the Malrite acquisition had occurred at the beginning of 1993, after giving
effect to certain adjustments, including amortization of goodwill, interest
expense on the acquisition debt and related income tax effects. Pro forma
results for the acquisition of the Denver station are not presented as they are
not materially different from historical results. These pro forma results have
been prepared for comparative purposes only and do not purport to be indicative
of what would have occurred had the acquisition been made as of January 1, 1993,
or of results which may occur in the future.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1993
------------
<S> <C>
Net revenues........................................................... $100,561,000
Loss from continuing operations........................................ (8,838,000)
Net loss............................................................... (14,752,000)
</TABLE>
F-25
<PAGE> 130
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- COMPOSITION OF CERTAIN BALANCE SHEET ACCOUNTS
<TABLE>
<CAPTION>
DECEMBER 31,
USEFUL LIFE ---------------------------
IN YEARS 1994 1995
----------- ------------ ------------
<S> <C> <C> <C>
PROPERTY AND EQUIPMENT
Land and land improvements............................ $ 2,874,000 $ 2,828,000
Buildings and leasehold improvements.................. 10 -- 40 6,183,000 6,274,000
Transmittal and technical equipment................... 4 -- 20 17,872,000 18,703,000
Furniture and fixtures................................ 5 -- 10 4,167,000 4,811,000
Automotive............................................ 2 -- 5 622,000 645,000
Construction in progress.............................. 175,000 138,000
------------ ------------
31,893,000 33,399,000
Less: Accumulated depreciation and amortization....... (13,585,000) (16,195,000)
------------ ------------
$ 18,308,000 $ 17,204,000
============ ============
ACCRUED EXPENSES
Salaries and other employee compensation........................... $ 3,300,000 $ 2,794,000
Interest........................................................... 461,000 383,000
Payable to affiliate............................................... 802,000 1,346,000
Other.............................................................. 1,503,000 1,192,000
------------ ------------
$ 6,066,000 $ 5,715,000
============ ============
OTHER LONG-TERM LIABILITIES
Deferred compensation.............................................. $ 3,689,000 $ 3,547,000
Dividends payable on mandatorily redeemable preferred stock........ 7,825,000 13,944,000
Interest........................................................... 1,034,000 1,140,000
Other.............................................................. 2,199,000 498,000
------------ ------------
$ 14,747,000 $ 19,129,000
============ ============
</TABLE>
NOTE 5 -- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1993 1994 1995
------------ ---------- ----------
<S> <C> <C> <C>
Cash paid (received) during the period for:
Interest................................................. $ 4,022,000 $9,763,000 $9,562,000
Income taxes............................................. 293,000 1,397,000 217,000
Station acquisitions:
Property and equipment................................. 12,310,000 -- 434,000
FCC licenses and goodwill.............................. 165,896,000 -- 5,094,000
Other assets........................................... 1,218,000 -- --
Net working capital.................................... 4,179,000 -- --
Common stock issued.................................... (10,000,000) -- --
</TABLE>
F-26
<PAGE> 131
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- LONG-TERM DEBT
Long-term debt comprises the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1994 1995
----------- ------------
<S> <C> <C>
Revolving bank credit at varying interest rates; payable
quarterly. Principal payments in varying amounts
quarterly; final installment due 2003.................. -- $ 99,000,000
Bank term loans at varying interest rates; payable
quarterly. Principal payments in varying amounts
quarterly; final installment due 2000.................. $95,500,000 --
Revolving bank credit at varying interest rates; payable
quarterly. Principal payments in varying amounts
quarterly; final installment due 2001.................. 9,500,000 --
----------- ------------
105,000,000 99,000,000
Less: Current portion.................................... (7,000,000) (6,500,000)
----------- ------------
$98,000,000 $ 92,500,000
=========== ============
</TABLE>
In August 1995, the Company restructured and amended its existing bank
credit agreement by entering into an eight year, $105 million revolving credit
agreement which extended the final maturity to 2003 and modified quarterly
principal repayments. Costs of $954,000 related to the amended credit agreement
and of $4.8 million incurred when the credit agreement was entered into were
capitalized and are being amortized over 8 years. These costs are included in
other assets in the balance sheet.
In July 1993, Broadcasting entered into an eight-year, $140 million bank
credit agreement. $138 million was borrowed and used to pay off an existing
revolving bank credit totalling $33.5 million and to fund a portion of the
acquisition of Malrite (Note 3).
Borrowings under the credit agreement are secured by substantially all of
the Company's assets. Interest is charged at varying rates according to
alternatives selected by the Company at the time funds are borrowed. Currently,
interest accrues at floating rates (8.31% and 9.13% at December 31, 1995 and
1994, respectively). As borrowings under the credit agreement are at market
interest rates, the carrying value of the Company's long-term debt reflects its
fair value.
The credit agreement imposes restrictive covenants on the Company with
respect to, among other things, the maintenance of certain financial ratios and
limits on capital expenditures, new indebtedness, investments, disposition of
assets and declaration of cash dividends.
At December 31, 1995, aggregate scheduled mandatory principal reductions of
the Company's bank debt and borrowings from affiliates (Note 15) are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNTS
--------------------------------------------------------------- ------------
<S> <C>
1996........................................................... $ 6,500,000
1997........................................................... 10,000,000
1998........................................................... 10,000,000
1999........................................................... 15,000,000
2000........................................................... 15,000,000
After 2000..................................................... 63,113,000
------------
$119,613,000
============
</TABLE>
F-27
<PAGE> 132
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7 -- STOCKHOLDERS' EQUITY
During 1993, the number of authorized shares of common stock was increased
to 50,000 shares, 10,364 of which were outstanding at December 31, 1995. The
Company has reserved 3,658 and 8,535 shares of common stock for issuance upon
the conversion of the convertible senior notes ("Senior Notes", Note 8) and
Series A cumulative convertible preferred stock ("Series A Preferred Stock",
Note 9), respectively.
Authorized preferred shares were also increased in 1993 to 100,000 shares,
70,000 shares of which were designated as Series A Preferred Stock. Prior to
this allotment, holders of previously issued preferred stock returned all 2,000
shares outstanding at that time in exchange for 181 shares of newly issued
common stock. Cumulative preferred dividends totalling $90,000 were paid in cash
at the time of the share exchange.
NOTE 8 -- CONVERTIBLE SENIOR NOTES
On July 30, 1993, the Company issued $30 million in ten-year Senior Notes
to Trefoil Capital Investors, L.P. ("Trefoil"). The notes are convertible into
shares of the Company's common stock at a conversion rate of $8,201 per share,
subject to certain anti-dilution adjustments, and are redeemable by the Company
at any time on or after July 30, 1996, initially at a specified premium to par,
declining to par for redemptions on or after July 30, 2001. Mandatory
redemptions of $7.5 million and $11.25 million are due July 30, 2001 and 2002,
respectively, and any remaining unpaid principal is due in 2003.
Interest accrues at the rate of 7.5% per annum and is payable semi-annually
on January 31 and July 31. Interest is payable in cash, however, through January
31, 1998, the Company may elect to pay interest by issuing additional
paid-in-kind notes ("PIK Notes"). PIK Notes are not convertible and must be
redeemed on a pro rata basis in accordance with the redemption schedule of the
Senior Notes. Interest on the PIK Notes accrues at 10% per annum, which payment
terms are identical to the Senior Notes, including the option to issue
additional PIK Notes for interest obligations.
PIK Notes of $4.9 million were outstanding as of December 31, 1995. Accrued
interest on the Senior Notes as of December 31, 1995 and 1994 has been included
in payable to affiliates and classified as a long-term liability.
Based on the transaction described in Note 17, management considers the
fair market value of the Senior Notes to approximate their carrying value.
NOTE 9 -- MANDATORILY REDEEMABLE PREFERRED STOCK
Concurrent with the sale of the Senior Notes, the Company issued 70,000
shares of Series A Preferred Stock to Trefoil for $70 million.
With respect to dividend rights and rights on liquidation, dissolution and
winding up, Series A Preferred Stock ranks senior to the common stock and senior
to any other series or class of preferred stock which may be issued by the
Company (collectively, "Junior Securities").
In the event of any liquidation, dissolution or winding up of the Company,
holders of Series A Preferred Stock will be entitled to receive in preference to
holders of Junior Securities an amount equal to $1,000 per share plus all
accrued but unpaid dividends.
As long as shares of Series A Preferred Stock remain outstanding, the
holders of such shares are entitled to receive, when, as and if declared by the
Board of Directors, out of assets of the Company legally available therefore,
cumulative cash dividends at an annual rate of 7.5% (if in arrears, compounded
quarterly at a rate of 8.625% per annum with respect to dividends in arrears,
through the date of payment of such arrearages), payable quarterly in arrears on
the last business day of each calendar quarter.
F-28
<PAGE> 133
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Each share of Series A Preferred Stock is convertible at the option of the
holder into one share of common stock at $8,201 per common share, subject to
certain antidilution adjustments (the "Conversion Price").
The Series A Preferred Stock may be redeemed by the Company any time after
the third anniversary of the issuance date (in integral multiples having an
aggregate stated value of at least $7 million) if (i) all quarterly dividends on
the Series A Preferred Stock have been paid in full, (ii) the Company has
consummated an initial public offering for its common stock and (iii) the market
price of the common stock is equal to at least 165% of the Conversion Price for
at least twenty out of thirty consecutive trading days preceding the notice of
redemption. In any such event, the redemption price per share will be equal to
$1,000, plus accrued and unpaid dividends to the redemption date.
The Company is required to redeem 14,000 shares of the original issue on
July 30, 2003, 28,000 shares on July 30, 2004 and any remaining outstanding
shares in 2005. The number of shares to be redeemed by the Company on any
mandatory redemption date shall be reduced by the number of shares optionally
redeemed by the Company prior to such date, to the extent such shares have not
previously been credited against the Company's mandatory redemption obligations.
If the Company shall fail to redeem shares of Series A Preferred Stock when
required, the annual dividend rate on the outstanding shares of Series A
Preferred Stock will be increased to 9.375% (compounded quarterly with respect
to dividends in arrears at a rate of 10.780% per annum) of the stated value of
such shares plus accrued and unpaid dividends from the date of failure to redeem
through the date of redemption. If less than all of the outstanding shares of
Series A Preferred Stock are to be redeemed, the shares of Series A Preferred
Stock to be redeemed shall be selected pro rata.
Although not declared by the Company's Board of Directors, dividends on the
Series A Preferred Stock have been accrued in the accompanying financial
statements. Based on management intentions, including restrictions on the
payment of dividends imposed by the Company's bank credit agreement, accrued
dividends have been classified as a long-term liability.
Based on the transaction described in Note 17, management considers the
fair market value of the Series A Preferred Stock to approximate their carrying
value.
NOTE 10 -- INCOME TAXES
As discussed in Note 2, the Company prospectively adopted SFAS 109 as of
January 1, 1993. The cumulative effect of this change in accounting for income
taxes was determined to be immaterial with respect to continuing operations.
Upon adoption, a $3.7 million tax benefit was recorded relating to SHOC which
has been included in discontinued operations (Note 12).
The income tax benefit (expense) on income from continuing operations is
comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1993 1994 1995
---------- ----------- ----------
<S> <C> <C> <C>
Current:
Federal.............................................. $ -- $ (578,000) $1,025,000
State................................................ (150,000) (1,056,000) 94,000
---------- ----------- ----------
(150,000) (1,634,000) 1,119,000
---------- ----------- ----------
Deferred:
Federal.............................................. 1,849,000 (501,000) 168,000
State................................................ 190,000 780,000 --
---------- ----------- ----------
2,039,000 279,000 168,000
---------- ----------- ----------
$1,889,000 $(1,355,000) $1,287,000
========== =========== ==========
</TABLE>
F-29
<PAGE> 134
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred tax liabilities (assets) are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1994 1995
------------ -----------
<S> <C> <C>
Deferred gain............................................ $ 15,549,000 $15,358,000
Amortization of FCC licenses and other
intangibles............................................ 5,519,000 5,687,000
Depreciation............................................. 3,194,000 2,741,000
Other.................................................... 519,000 560,000
------------ -----------
Gross deferred tax liabilities......................... 24,781,000 24,346,000
------------ -----------
Net operating loss carryforward.......................... (878,000) (584,000)
AMT and other credit carryforward........................ (3,316,000) (2,943,000)
Deferred compensation and other deductions............... (2,586,000) (2,627,000)
------------ -----------
Gross deferred tax assets.............................. (6,780,000) (6,154,000)
Valuation allowance.................................... 876,000 1,026,000
------------ -----------
Net deferred tax assets................................ (5,904,000) (5,128,000)
------------ -----------
$ 18,877,000 $19,218,000
============ ===========
</TABLE>
The Company has a federal net operating loss (NOL) carryover of $1.7
million, subject to various limitations on its utilization. The Company also has
AMT Credit and Investment Tax Credit carryforwards for tax purposes of $2.2
million and $734,000, respectively. The above carryovers expire in the years
2000 through 2003, except the AMT credit which has no expiration. Under SFAS
109, the Company has recorded valuation allowances against the realization of
the federal tax benefits from net operating losses and investment tax credits in
the amounts of $292,000 and $734,000, respectively. The valuation allowances are
based on management's estimates and analysis, which include the impact of tax
laws which may limit the Company's ability to utilize such loss carryforwards
and tax credits.
The principal items causing an effective rate which differs from the
Federal statutory rate are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1993 1994 1995
---------- ----------- -----------
<S> <C> <C> <C>
Federal statutory rate................................... $2,734,000 $ 125,000 $ 1,971,000
Amortization of intangibles.............................. (939,000) (1,703,000) (1,627,000)
State taxes, net of federal benefit...................... (98,000) (180,000) 61,000
Reduction of tax reserve................................. -- -- 1,109,000
SFAS 109 rate adjustment................................. (504,000) -- --
Recognition of net operating loss carryover.............. 538,000 504,000 --
Other, net............................................... 158,000 (101,000) (227,000)
---------- ----------- -----------
$1,889,000 $(1,355,000) $ 1,287,000
========== =========== ===========
</TABLE>
NOTE 11 -- RADIO BROADCASTING DISPOSITIONS
In April 1994, the Company sold the broadcast license and assets of its
radio stations in Cleveland, Ohio for $12.1 million (excluding disposal costs).
This sale resulted in a gain of $670,000, before related income taxes. A portion
of the sale proceeds was utilized to reduce bank debt by $11 million.
F-30
<PAGE> 135
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In June 1994, the Company sold the broadcast license and assets of its
radio station in Seattle, Washington for $12.0 million (excluding disposal
costs). This sale resulted in a gain of $4.8 million, before related income
taxes. A portion of the sale proceeds was utilized to reduce bank debt by $11
million.
In September 1993, the Company sold the broadcast licenses and assets of
its radio stations in Kansas City for cash of $3.5 million (excluding disposal
costs) and a $1.5 million note due in five years with interest, at prime, paid
quarterly. This sale resulted in a loss of $40,000, before related income taxes.
A portion of the sale proceeds was utilized to reduce bank debt by $2 million.
NOTE 12 -- DISCONTINUED OPERATIONS
In July 1993, in conjunction with the Malrite acquisition, the Company spun
off its television and investing operations to certain of its shareholders.
Results of these activities have been segregated from continuing operations and
are presented, net of tax, as discontinued operations.
Operating results applicable to the television division for the seven
months ended July 30, 1993 are as follows:
<TABLE>
<CAPTION>
1993
----------
<S> <C>
Broadcast revenues, net.................................................. $4,511,000
Costs and expenses....................................................... 4,692,000
----------
Operating loss........................................................... (181,000)
Other expenses........................................................... (79,000)
----------
Loss before income taxes................................................. $ (260,000)
==========
</TABLE>
Results applicable to SHOC for the seven months ended July 30, 1993 are as
follows:
<TABLE>
<CAPTION>
1993
-----------
<S> <C>
Net realized and unrealized gains on marketable securities.............. $ 1,411,000
Interest and dividend income............................................ 621,000
Gain from investments................................................... 513,000
Corporate, general and administrative................................... (8,035,000)
Interest expense........................................................ (3,755,000)
-----------
Loss before income taxes................................................ $(9,245,000)
===========
</TABLE>
At the time of the spin off, net assets of the television division and SHOC
totalled $26.2 million. The distribution has been treated as a dividend and the
Company has recorded a charge to equity.
F-31
<PAGE> 136
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13 -- COMMITMENTS
The following are the future minimum rental payments under operating leases
(net of minimum rentals under noncancelable subleases) that have initial or
remaining lease terms in excess of one year:
<TABLE>
<CAPTION>
YEAR AMOUNT
------------------------------------------------------------------ ----------
<S> <C>
1996.............................................................. $3,290,000
1997.............................................................. 3,029,000
1998.............................................................. 2,422,000
1999.............................................................. 1,701,000
2000.............................................................. 1,314,000
After 2000........................................................ 5,604,000
</TABLE>
Certain leases contain renewal options with the same lease terms, except
that rentals may be adjusted to current market rates at the time of renewal.
Rental expense under operating leases for the years ended December 31, 1995,
1994 and 1993 aggregated $2.9 million, $3.3 million and $2.8 million,
respectively.
NOTE 14 -- EMPLOYEE BENEFIT PLANS
The Company maintains an elective Employees' Savings Plan for all employees
not covered by a collective bargaining agreement and who have one or more years
of continuous employment. The Company contributes 50% of the annual
contributions made by employees up to a maximum of 3% of each participating
employee's compensation. Participants are at all times fully vested in their
contributions, and the Company's contribution becomes fully vested to the
participant after seven years of continuous employment. The Company's
contributions for the years ended December 31, 1995, 1994 and 1993 aggregated
$453,000, $568,000 and $379,000, respectively.
The Company also maintains a non-qualified, unfunded incentive compensation
plan for certain key employees providing for payments upon separation of
employment, death or disability. As of December 31, 1995 the liability recorded
for the value of amounts awarded to participants under the plan was
approximately $3.5 million.
NOTE 15 -- AFFILIATE TRANSACTIONS
Both SHOC and Trefoil are related parties of the Company through
commonality of certain officers and directors. In addition to the financing
transactions described at Notes 8 and 9, the Company made payments to SHOC for
interest on cash advances, office space rent and an executive management fee in
the aggregate of $175,000, $174,000 and $325,000 for the years ended December
31, 1995, 1994 and 1993, respectively. In July 1993, the Company entered into an
executive management agreement with Trefoil in consideration for a fee based on
the Company's broadcasting revenues. For the years ended December 31, 1995, 1994
and 1993, the statement of operations includes in corporate expenses a charge of
$544,000, $544,000 and $258,000, respectively, for fees payable to Trefoil. In
connection with the issuance of the Senior Notes and the Series A Preferred
Stock, the Company paid Trefoil $3 million for financial advisory services.
These costs were capitalized and are being amortized over the term of the Senior
Notes and Series A Preferred Stock. These costs are included in other assets in
the balance sheet.
F-32
<PAGE> 137
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Payable to affiliates comprises the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1995
----------- -----------
<S> <C> <C>
Note payable to affiliate at varying interest rates;
payable quarterly. No stated maturity................... $ 7,898,000 $ 9,007,000
Note payable to affiliate at varying interest rates;
payable quarterly. No stated maturity................... 6,030,000 6,750,000
PIK notes (Note 8)........................................ 2,313,000 4,856,000
----------- -----------
$16,241,000 $20,613,000
=========== ===========
</TABLE>
On December 16, 1994, the Company issued a $6 million promissory note to
Trefoil, $5.75 million of which was used in 1995 for the acquisition of a radio
station in Denver. The note bears interest at LIBOR plus 7% (12.938% at December
31, 1995) and has no stated maturity. Accrued interest is added to the principal
of the note at the end of each calendar quarter and, accordingly, the
outstanding balances at December 31, 1995 and December 31, 1994 include $720,000
and $30,000 of interest expensed in 1995 and 1994, respectively.
On September 29, 1993, the Company issued a $7 million promissory note to
SHOC and used the proceeds to reduce Broadcasting's bank debt. The note bears
interest at LIBOR plus 7% (12.938% at December 31, 1995) and has no stated
maturity. Accrued interest is added to the principal of the note at the end of
each calendar quarter and, accordingly is included in the outstanding balance at
December 31, 1995 and 1994. Interest expense includes for the years ended
December 31, 1995, 1994 and 1993 $1,109,000, $747,000 and $151,000,
respectively.
Based on the transaction described in Note 17, management considers the
fair market value of these notes to approximate their carrying value.
NOTE 16 -- LITIGATION
The Company is a plaintiff or defendant in several legal actions, the
probable outcome of which are not considered material, either individually or in
the aggregate.
NOTE 17 -- SUBSEQUENT EVENT -- SALE OF THE COMPANY
On February 14, 1996, the Company's shareholders completed the sale of all
issued and outstanding shares of the Company to Chancellor Radio Broadcasting
Company, formerly Chancellor Broadcasting Company, ("Chancellor") for $395
million in cash. A portion of the proceeds was utilized to pay-off bank debt,
convertible senior notes, payable to affiliates and redeem outstanding preferred
stock and pay dividends payable thereon. As of the closing date, the Company,
along with Broadcasting, became wholly-owned subsidiaries of Chancellor. No
accounts in the accompanying financials have been adjusted for the effects of
this transaction.
F-33
<PAGE> 138
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Chancellor Broadcasting Company:
We have audited the accompanying combined statements of net assets of The
Omni Stations (combination of three radio stations to be acquired), as defined
in Note 1, as of December 31, 1995 and the related combined statements of
revenues, direct expenses and other income (expense), changes in net assets, and
cash flows for the year then ended. These financial statements are the
responsibility of the Omni Stations' management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the Omni Stations
at December 31, 1995, and the combined results of their revenues, direct
expenses and other income (expense), changes in net assets and their cash flows
for the year then ended, in conformity with generally accepted accounting
principles.
Dallas, Texas
July 31, 1996
F-34
<PAGE> 139
THE OMNI STATIONS
(COMBINATION OF THREE RADIO STATIONS TO BE ACQUIRED)
COMBINED STATEMENTS OF NET ASSETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash............................................................. $ 560,469 $ 876,965
Accounts receivable (less allowance for doubtful accounts of
$70,222 and $104,052, respectively)........................... 2,841,017 3,003,030
Prepaid expenses and other....................................... 55,888 82,727
------------ -----------
Total current assets..................................... 3,457,374 3,962,722
Property and equipment, net of accumulated depreciation of
$2,791,865 and $3,228,676, respectively.......................... 2,619,041 2,524,187
Goodwill and FCC license agreements, net of accumulated
amortization of $5,656,887 and $5,979,718, respectively.......... 19,110,675 18,787,844
Other.............................................................. 9,750 6,350
------------ -----------
Total assets............................................. $ 25,196,840 $25,281,103
============ ===========
LIABILITIES AND NET ASSETS
Current liabilities:
Trade accounts payable........................................... $ 456,298 $ 158,191
Other accrued liabilities........................................ 317,538 267,971
------------ -----------
Total current liabilities................................ 773,836 426,162
Long-term liabilities:
Deferred rent.................................................... 100,264 99,077
------------ -----------
Total liabilities........................................ 874,100 525,239
Net assets......................................................... 24,322,740 24,755,864
------------ -----------
Total liabilities and net assets......................... $ 25,196,840 $25,281,103
============ ===========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-35
<PAGE> 140
THE OMNI STATIONS
(COMBINATION OF THREE RADIO STATIONS TO BE ACQUIRED)
COMBINED STATEMENTS OF REVENUES, DIRECT EXPENSES
AND OTHER INCOME (EXPENSE)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, -------------------------
1995 1995 1996
------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Broadcasting revenues................................. $ 15,553,877 $3,077,451 $3,992,914
Less agency commissions............................... 2,086,292 409,926 557,088
------------ ---------- ----------
Net revenues................................ 13,467,585 2,667,525 3,435,826
------------ ---------- ----------
Operating expenses:
Programming, technical and news..................... 2,614,297 529,312 731,692
Sales and promotion................................. 4,173,793 805,601 931,028
General and administrative.......................... 2,339,724 502,548 659,190
Depreciation and amortization....................... 1,575,738 229,519 436,811
------------ ---------- ----------
Total operating expenses.................... 10,703,552 2,066,980 2,758,721
------------ ---------- ----------
Gain on sale of WOMX-AM station assets................ 247,187 -- --
Other income (expense), net........................... 16,759 (22,233) (743)
------------ ---------- ----------
Excess of revenues over expenses...................... $ 3,027,979 $ 578,312 $ 676,362
============ ========== ==========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-36
<PAGE> 141
THE OMNI STATIONS
(COMBINATION OF THREE RADIO STATIONS TO BE ACQUIRED)
COMBINED STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<S> <C>
Balance at January 1, 1995....................................................... $ 9,748,726
Capital contribution to acquire WXXL-FM........................................ 15,000,000
Net income..................................................................... 3,027,979
Distributions to owners........................................................ (3,453,965)
-----------
Balance at December 31, 1995..................................................... 24,322,740
Excess of revenues over expenses (unaudited)................................... 676,362
Distributions to owners (unaudited)............................................ (243,238)
-----------
Balance at March 31, 1996 (unaudited)............................................ $24,755,864
===========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-37
<PAGE> 142
THE OMNI STATIONS
(COMBINATION OF THREE RADIO STATIONS TO BE ACQUIRED)
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, -----------------------
1995 1995 1996
------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Excess of revenues over expenses..................... $ 3,027,979 $ 578,312 $ 676,362
Adjustment to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization..................... 1,575,737 229,520 436,811
Provision for doubtful accounts................... 94,056 33,022 10,677
Gain on sale of assets............................ (247,187) -- --
Changes in operating assets and liabilities:
Accounts receivable............................. (878,265) (160,850) (172,690)
Prepaid expenses and other...................... (23,039) (6,644) (1,339)
Accounts payable................................ 294,793 37,464 (298,107)
Other accrued liabilities....................... (335) (58,873) (50,754)
------------ --------- ---------
Net cash provided by operating activities.... 3,843,739 651,951 600,960
------------ --------- ---------
Cash flows used in investing activities:
Purchases of property and equipment.................. (770,483) (162,244) (41,226)
Purchase of WXXL-FM.................................. (15,000,000) -- --
Proceeds from sale of WOMX-AM station assets......... 500,000 -- --
------------ --------- ---------
Net cash used in investing activities........ (15,270,483) (162,244) (41,226)
------------ --------- ---------
Cash flows from financing activities:
Capital distributions to owners...................... (3,453,965) (437,927) (243,238)
Contribution to acquire WXXL-FM...................... 15,000,000 -- --
------------ --------- ---------
Net cash provided by (used in) financing
activities...................................... 11,546,035 (437,927) (243,238)
------------ --------- ---------
Net increase in cash................................... 119,291 51,780 316,496
Cash at beginning of the period........................ 441,178 441,178 560,469
------------ --------- ---------
Cash at end of the period.............................. $ 560,469 $ 492,958 $ 876,965
============ ========= =========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-38
<PAGE> 143
THE OMNI STATIONS
(COMBINATION OF THREE RADIO STATIONS TO BE ACQUIRED)
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION:
The accompanying combined financial statements include the accounts of
three radio stations (the "Omni Stations" or the "Station") operated by three
corporations (the "Companies") as follows:
- Omni America Group ("Omni") owns and operates WXXL-FM in Orlando,
Florida.
- Nationwide Communications, Incorporated ("Nationwide") owns and operates
WOMX-FM in Orlando, Florida.
- Beasley FM Acquisition Corporation ("Beasley") owns and operates WJHM-FM
in Orlando, Florida.
The Omni Stations operate in a single industry segment, which segment
encompasses the ownership and management of radio broadcast stations located in
the Orlando market.
In March of 1996, Omni entered into an LMA and purchase agreement with
Beasley relating to radio station WJHM-FM. In July of 1996, Omni entered into an
LMA and purchase agreement with Nationwide relating to radio station WOMX-FM.
Under the LMA agreements, Beasley and Nationwide maintain ownership of their
respective stations and receive a fee in exchange for Omni's right to operate
the stations. The LMA's will terminate upon consummation of the purchase
agreements which is expected to take place in August of 1996.
On May 14, 1996, Omni entered into an asset purchase agreement (the
"Agreement") to sell substantially all the assets of the Omni Stations (the
"Omni Transaction") to Chancellor Radio Broadcasting Company ("Chancellor"). The
closing of the Omni Transaction, which is subject to various conditions and
approvals as defined in the Agreement, is expected to take place in the first
quarter of 1997.
These financial statements include the historical cost basis of assets,
liabilities and operations of the Stations. All significant intercompany
accounts and transactions have been eliminated in combination of the individual
stations. Unallocated amounts such as corporate overhead, interest, amortization
of deferred finance costs and taxes, which are not directly attributable to
radio station operations, have been excluded from these statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
dates of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
On February 8, 1996, the President signed into law the Telecommunications
Act of 1996. Among other things, this legislation requires the Federal
Communications Commission (the "FCC") to relax its numerical restrictions on
local ownership and affords renewal applicants significant new protections from
competing applications for their broadcast licenses. The ultimate effect of this
legislation on the competitive environment is currently undeterminable.
REVENUE RECOGNITION
Broadcasting operations derive revenue primarily from the sale of program
time and commercial announcements to local, regional and national advertisers.
Revenue is recognized when the program and commercial announcements are
broadcast.
F-39
<PAGE> 144
THE OMNI STATIONS
(COMBINATION OF THREE RADIO STATIONS TO BE ACQUIRED)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
BARTER TRANSACTIONS
Barter transactions represent advertising time exchanged for promotional
items, advertising, supplies, equipment and services. The fair value of trade
agreement transactions is included in revenue and is expensed or capitalized, as
appropriate.
CASH
The Omni Stations maintain cash in demand deposits with financial
institutions. There were no cash equivalents during the period presented. All
highly liquid investments with an original maturity of less than three months
are considered cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is determined using
the straight-line method based upon the estimated useful lives of the various
classes of assets ranging from five to thirty-one years. Leasehold improvements
are amortized over the shorter of their useful lives or the terms of the related
leases.
INTANGIBLE ASSETS
Intangible assets are stated at cost and are being amortized on a
straight-line basis over the estimated useful life of the various bases of
assets ranging from ten to forty years as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Goodwill............................................. 15-40
Licenses, permits and other assets................... 10
</TABLE>
The Stations evaluate intangible assets for potential impairment by
analyzing the operating results, trends and prospects of the Stations, as well
as by comparing them to their competitors. The Stations also takes into
consideration recent acquisition patterns within the broadcast industry, the
impact of recently enacted or potential FCC rules and regulations and any other
events or circumstances which might indicate potential impairment.
ADVERTISING COSTS
The Stations incur various marketing and promotional costs to add and
maintain listenership. These costs are expensed as incurred or deferred and
amortized over the interim periods which they benefit and totaled approximately
$1,063,000 for the year ended December 31, 1995.
CONCENTRATION OF CREDIT RISK
The Stations' revenue and accounts receivable primarily relate to
advertising of products and services within the radio stations' broadcast areas.
The Stations perform ongoing credit evaluations of their customers' financial
condition and, generally, require no collateral from their customers.
F-40
<PAGE> 145
THE OMNI STATIONS
(COMBINATION OF THREE RADIO STATIONS TO BE ACQUIRED)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
INTERIM FINANCIAL INFORMATION
The combined statements of net assets and changes in net assets as of and
for the period ended March 31, 1996; and the combined statements of revenues,
direct expenses and other income (expense), and cash flows for the three months
ended March 31, 1996 and 1995 are unaudited. However, in the opinion of
management, all adjustments necessary for a fair presentation of such financial
statements have been included and are of a normal recurring basis. Interim
results are not necessarily indicative of results for a full year.
3. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following:
<TABLE>
<S> <C>
Land.................................................................... $ 29,192
Buildings and leasehold improvements.................................... 301,040
Towers and ground systems............................................... 1,355,196
Studio, technical and transmitting equipment............................ 2,884,520
Furniture and fixtures.................................................. 729,728
Vehicles................................................................ 111,230
-----------
5,410,906
Less accumulated depreciation and amortization.......................... (2,791,865)
-----------
$ 2,619,041
===========
</TABLE>
4. LEASES:
The Stations lease their facilities and certain equipment under various
operating leases. Rental expense under operating leases for the year ended
December 31, 1995 was approximately $522,000.
At December 31, 1995, future minimum lease payments due under operating and
capital leases with initial or remaining noncancelable lease terms in excess of
one year are as follows:
<TABLE>
<CAPTION>
YEAR ENDING OPERATING
DECEMBER 31, LEASES
- ------------ ----------
<S> <C>
1996............................................................. $ 478,037
1997............................................................. 406,182
1998............................................................. 341,405
1999............................................................. 313,600
2000............................................................. 319,381
Thereafter....................................................... 845,308
Total minimum lease payments..................................... $2,703,913
</TABLE>
5. SALE OF ASSETS:
In April of 1995, Nationwide sold WOMX assets related to its AM broadcast
for $500,000 and recorded a gain on the sale of approximately $247,000.
F-41
<PAGE> 146
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Chancellor Radio Broadcasting Company:
We have audited the accompanying statements of operations, division equity,
and cash flows for the year ended December 31, 1993 of KFBK/KGBY, a division of
Group W Radio, Inc. (CAL) ("Old Chancellor Communications"). These financial
statements are the responsibility of the Division's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows for the year
ended December 31, 1993, of Old Chancellor Communications, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND
Sacramento, California
June 14, 1994
F-42
<PAGE> 147
OLD CHANCELLOR COMMUNICATIONS
STATEMENT OF OPERATIONS AND DIVISION EQUITY
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1993
------------
<S> <C>
Broadcasting revenues............................................................ $ 17,477,827
Less agency commissions.......................................................... 2,761,231
------------
Net revenues................................................................... 14,716,596
------------
Operating expenses:
Programming, technical and news................................................ 4,394,861
Sales and promotion............................................................ 3,490,483
General and administrative..................................................... 1,852,486
Depreciation and amortization.................................................. 1,013,803
Corporate expenses............................................................. 567,984
------------
11,319,617
------------
Income from operations................................................. 3,396,979
Other income (expense):
Interest expense............................................................... (699,800)
Other.......................................................................... 1,438
------------
Income before provision for income taxes......................................... 2,698,617
Provision for income taxes....................................................... 1,234,613
------------
Net income....................................................................... 1,464,004
Division equity, beginning of the period......................................... 19,083,866
Equity withdrawals, net.......................................................... (3,402,450)
------------
Division equity, end of the period............................................... $ 17,145,420
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-43
<PAGE> 148
OLD CHANCELLOR COMMUNICATIONS
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER
31, 1993
----------
<S> <C>
Cash flows from operating activities:
Net income..................................................................... $1,464,004
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization............................................... 1,013,803
Loss on disposal of fixed assets............................................ --
Provision for doubtful accounts............................................. 164,331
Increase in accounts receivable............................................. (441,076)
(Increase) decrease in due from trade agreements............................ 142,599
Decrease in prepaids and other.............................................. 590,799
(Decrease) increase in accounts payable..................................... 202,423
Increase (decrease) in accrued liabilities.................................. (41,553)
Increase (decrease) in obligation related to trade agreements............... (172,601)
Increase in income taxes payable to Parent.................................. 683,293
----------
Net cash provided by operating activities................................... 3,606,022
----------
Cash flows from investing activities:
Acquisition of equipment and leasehold improvements............................ (7,508)
----------
Cash flows from financing activities:
Equity withdrawals, net........................................................ (3,402,450)
----------
Net increase (decrease) in cash............................................. 196,064
Cash, at beginning of the period................................................. 46,190
----------
Cash, at end of the period....................................................... $ 242,254
==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for income taxes paid to Parent.................... $ 551,320
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-44
<PAGE> 149
OLD CHANCELLOR COMMUNICATIONS
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
In January 1994, Chancellor Communications Corporation ("Chancellor
Communications") acquired KFBK-AM and KGBY-FM radio broadcasting stations
(collectively referred to as "Old Chancellor Communications" or the "Division")
located in Sacramento, California from Group W Radio, Inc. (CAL.) (referred to
herein as "Group W" or the "Parent"), a subsidiary of Westinghouse Broadcasting,
Inc. Westinghouse Broadcasting, Inc. is a wholly owned subsidiary of
Westinghouse Electric Corporation (Westinghouse). Group W Radio, Inc. (CAL.) had
owned and operated the Old Chancellor Communications since 1987.
Cash
Old Chancellor utilizes Westinghouse centralized cash management services.
Under such services arrangements, accounts receivable are collected and cash is
invested centrally. Additionally, disbursing operations are funded centrally
upon demand. As a result, Old Chancellor carries little cash but receives
charges and credits against Parent company investment for cash used and
collected through a central clearing house arrangement.
Sports Rights
Sports rights consist of rights to broadcast all games of the Sacramento
Kings from the 1991 through 1994 seasons. The rights are amortized over the life
of the agreement.
Property and Equipment
Property and equipment is stated at cost, less accumulated depreciation and
amortization. Depreciation is computed using the straight-line method over the
estimated useful lives, which range from three to forty-five years. Leasehold
and land improvements are amortized on the straight-line method over the shorter
of the lease term or their useful life. Amortization periods range from seven to
twenty years. Gains and losses from disposals of property, plant and equipment
are reflected in other income and expense. Expenditures for additions and
improvements are capitalized, and costs of repairs and maintenance are charged
to operations as incurred.
Goodwill
Goodwill arose in 1987 from the allocation of the purchase price in
connection with the acquisition of the stations and is being amortized using the
straight-line method over forty years.
Division Equity
Division equity represents the original investment in Old Chancellor
Communications by the Parent for acquisition of the stations, plus accumulated
net income less net equity withdrawals since 1987. Cash receipts are transferred
to the Parent by daily cash sweeps and the Parent makes funds available for
payment of Old Chancellor Communications' bills. The difference between cash
sweeps and payment of Old Chancellor Communications' bills is the net equity
withdrawal or infusion.
Corporate Services and Group Overhead Allocations
Old Chancellor Communications uses, and is charged directly for, certain
services that Westinghouse provides to its business units. These services
include telephone services, information systems support, certain accounting
functions, legal services, environmental affairs and benefit administration.
F-45
<PAGE> 150
OLD CHANCELLOR COMMUNICATIONS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Westinghouse centrally developed, negotiated and administered Old
Chancellor Communications' insurance programs. The insurance includes a broad
all-risk coverage for real and personal property and third party liability
coverage, and employer's liability coverage, automobile liability, general
product liability and other standard liability coverage. Westinghouse also
maintains a program of self-insurance for workers' compensation. A portion of
the cost of this program is charged to the Division based on claims history.
All of the charges described above are included as costs of Old Chancellor
Communications' operation in these financial statements. Such charges by
Westinghouse to Old Chancellor Communications are based on either a direct cost
pass through or a percentage allocation of total costs for the services
provided. Where percentage allocations are used, such allocations are based on
Old Chancellor Communications' percent utilization compared to that of all
Westinghouse organizations. These costs have been allocated to Old Chancellor
Communications on a basis that management believes is reasonable. However,
management believes it is possible that the terms of these transactions may
differ from those that would result from transactions among unrelated parties.
Westinghouse also allocates a certain portion of its corporate expenses to
each business unit. These allocated costs include Westinghouse executive
management and corporate overhead; benefit costs associated with retired
employees; corporate related pension charges; audit, tax and treasury services;
and other support and executive functions. Corporate expenses are allocated to
Old Chancellor Communications primarily based on payroll dollars.
In addition, Group W provides various services to Old Chancellor
Communications. These include computer support, executive management services,
accounting services, human resource services and other group support costs.
Charges for such services are allocated as part of assessed overhead based on a
methodology applicable to the services provided.
Allocations of Westinghouse corporate expenses and Group W service charges
are not necessarily indicative of actual results had the Division operated as a
separate stand-alone entity. It is not practical for management to estimate the
level of expenses that might have been incurred had the Division operated as a
separate stand-alone entity.
Upon sale of the Division in January 1994 (Note 8), Old Chancellor
Communications' employees terminated participation in the Westinghouse benefit
plans and became covered by Chancellor Communications plans which primarily
consist of health and workers' compensation insurance and availability of a
401(k) plan to which employees can contribute.
Interest
The Division receives a charge from Westinghouse for the carrying cost of
Parent company investment in the form of interest expense. The charge is based
on the Parent's average total investment in the Division during the relevant
period and is adjusted annually. The allocated interest expense was $724,400 in
1992 and $699,800 in 1993. The effective annual percentage rate for interest
expense was approximately 10 percent over the three years. For purposes of these
financial statements, interest paid is assumed to equal interest expense.
Income Taxes
In accordance with the Parent's intercompany tax sharing agreement with its
parent, taxes are charged to the Division at the statutory federal and state tax
rates applied to taxable accounting basis income. Because intercompany taxes are
based on accounting basis income and are settled currently between Old
Chancellor Communications and the Parent, there are no deferred taxes at the Old
Chancellor Communications level.
F-46
<PAGE> 151
OLD CHANCELLOR COMMUNICATIONS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Concentration of Credit Risk
Old Chancellor revenues and accounts receivable relate primarily to
advertising of products and services in the greater Sacramento region. Revenues
are recognized when advertisements are broadcast. Credit losses have been within
management's expectations.
Trade Transactions
Trade transactions represent advertising time exchanged for promotional
items, advertising, supplies, equipment, and services. The fair value of trade
agreement transactions is included in revenue and is expensed or capitalized, as
appropriate.
2. RELATED-PARTY TRANSACTIONS
Related-party transactions, in addition to those disclosed elsewhere in
these financial statements, amounted to:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1993
------------
<S> <C>
Corporate overhead expenses and divisional activities charged by the
Parent................................................................ $567,984
Interest expense charged by the Parent.................................. $699,800
Employee benefits charged by the Parent................................. $497,609
</TABLE>
3. INCOME TAXES
Amounts allocated by the Parent to Old Chancellor Communications as the
provision for income taxes consist of:
<TABLE>
<CAPTION>
1993
----------
<S> <C>
Federal.......................................................... $ 948,552
State............................................................ 286,061
----------
$1,234,613
==========
</TABLE>
The allocation for income taxes varies from the normal statutory federal
tax rate as a result of:
<TABLE>
<CAPTION>
1993
----
<S> <C>
Federal statutory rate.............................................. 34.0%
Nondeductible expenses:
Amortization of goodwill.......................................... 5.6
State taxes......................................................... 6.1
----
Provisions........................................................ 45.7%
====
</TABLE>
4. COMMITMENTS AND CONTINGENCIES
Operating Leases
Old Chancellor Communications leases its facilities and certain equipment
under long-term noncancelable lease agreements which have been accounted for as
operating leases. The leases require that Old Chancellor Communications pay all
property taxes, insurance costs, repairs and common area maintenance
F-47
<PAGE> 152
OLD CHANCELLOR COMMUNICATIONS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
expense associated with its portion of the facilities. As of December 31, 1993,
future minimum payments by year under long-term, noncancellable operating leases
approximate:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1994............................................................. $ 219,000
1995............................................................. 225,000
1996............................................................. 207,000
1997............................................................. 205,000
1998............................................................. 205,000
Thereafter....................................................... 579,000
----------
$1,640,000
==========
</TABLE>
Rental expense charged to operations for all operating leases amounted to
approximately $205,000 for the year ended December 31, 1993.
Program Rights
In the ordinary course of business, Old Chancellor Communications enters
into programming contracts which require various payment terms including flat
rates per broadcast and cooperative revenue sharing arrangements. The agreements
are generally cancelable upon notice of up to 90 days.
Employment Contracts
Old Chancellor Communications has entered into employment agreements with
certain of its employees. These agreements provide for the payment of contracted
amounts remaining under employment contracts as of the date of termination, if
any. The amount remaining under these contracts at December 31, 1993 is
$525,000.
Litigation
Old Chancellor Communications is subject to various legal actions and
administrative proceedings related to four former employees who allege
discrimination and other matters. These contingencies were retained by the
Parent in connection with the sale of assets as described in Note 6.
5. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Westinghouse sponsors defined benefit postretirement plans that provide
medical, dental, and life insurance benefits for eligible retirees and
dependents, including the Division's eligible retirees located in the U.S.,
Puerto Rico and Canada. During 1992, Westinghouse adopted SFAS 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," on the immediate
recognition basis. This statement requires employers that sponsor
single-employer defined benefit postretirement plans to recognize net periodic
postretirement benefit costs during an employee's service to the employer and,
when adopted on the immediate recognition basis, a transition obligation for
postretirement benefits accumulated by employees in earlier periods. However,
for the purposes of these financial statements, the Division is considered to
have participated in a multi-employer postretirement benefit plan as defined in
SFAS 106. Therefore, no provision has been made in these financial statements to
recognize an obligation for accumulated postretirement benefits.
For multi-employer plans, employers are required to recognize as net
postretirement benefit costs, total contributions for the period. For 1992 and
1993 the Division's net postretirement cost for the multi-employer
F-48
<PAGE> 153
OLD CHANCELLOR COMMUNICATIONS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
plan was not separately identified by Westinghouse. Allocations for employee
benefits (Note 4) encompasses all benefit plans of Westinghouse.
6. SUBSEQUENT EVENTS
On January 10, 1994, certain assets including substantially all land,
buildings, equipment, assets under trade agreements, broadcast rights and
licenses and certain other intangible assets of Old Chancellor Communications
were sold to Chancellor Communications for approximately $48,000,000.
Liabilities assumed by Chancellor Communications were limited to certain ongoing
contractual rights and obligations.
F-49
<PAGE> 154
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Chancellor Radio Broadcasting Company:
We have audited the accompanying balance sheet of KDWB-FM (Radio Station of
Midcontinent Radio of Minnesota, Inc. to be purchased by Chancellor Broadcasting
Company) as of December 31, 1994 and the related statements of operations,
changes in net assets and cash flows for the year ended December 31, 1994. These
financial statements are the responsibility of Midcontinent Radio of Minnesota,
Inc.'s management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of KDWB-FM (Radio Station of
Midcontinent Radio of Minnesota, Inc. to be purchased by Chancellor Broadcasting
Company) at December 31, 1994, and the results of its operations and its cash
flows for the year ended December 31, 1994, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
June 23, 1995
F-50
<PAGE> 155
KDWB-FM
(RADIO STATION OF MIDCONTINENT RADIO OF MINNESOTA, INC.
TO BE PURCHASED BY CHANCELLOR BROADCASTING COMPANY)
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
1994
------------
<S> <C>
Current assets:
Cash.......................................................................... $ 501
Accounts receivable, (less allowance for doubtful accounts of $28,958)........ 1,106,166
Prepaid expenses and other.................................................... 200,312
----------
Total current assets.................................................. 1,306,979
Property and equipment, net..................................................... 948,685
----------
Intangible and other assets:
Goodwill...................................................................... 2,414,455
Regulatory licenses and permits............................................... 3,580,722
Other assets.................................................................. 2,864,578
----------
8,859,755
Less accumulated amortization................................................. 3,919,558
----------
Net intangible and other assets................................................. 4,940,197
----------
Total assets.......................................................... $7,195,861
==========
LIABILITIES AND NET ASSETS
Current liabilities:
Accounts payable.............................................................. $ 40,489
Accrued salaries.............................................................. 135,234
Accrued commissions........................................................... 28,138
Accrued income taxes.......................................................... 25,706
Other accrued expenses........................................................ 154,653
----------
Total current liabilities............................................. 384,220
Net assets...................................................................... 6,811,641
----------
Total liabilities and net assets...................................... $7,195,861
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-51
<PAGE> 156
KDWB-FM
(RADIO STATION OF MIDCONTINENT RADIO OF MINNESOTA, INC.
TO BE PURCHASED BY CHANCELLOR BROADCASTING COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SEVEN MONTHS
YEAR ENDED ENDED JULY 31,
DECEMBER 31, 1995
1994 ------------
------------ (UNAUDITED)
<S> <C> <C>
Broadcasting revenues.............................................. $6,396,000 $ 943,624
Less agency commissions............................................ 729,000 50,200
---------- ----------
Net revenues............................................. 5,667,000 893,424
---------- ----------
Operating expenses:
Programming, technical and news.................................. 1,319,500 151,732
Sales and promotion.............................................. 2,157,500 204,277
General and administrative....................................... 976,000 117,292
Depreciation and amortization.................................... 1,198,086 518,156
---------- ----------
5,651,086 991,457
Other expense.................................................... -- 23,000
---------- ----------
Income (loss) before provision for income taxes.................... 15,914 (121,033)
Provision (benefit) for income taxes............................... 6,365 (93,000)
---------- ----------
Net income (loss)........................................ $ 9,549 $ (28,033)
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-52
<PAGE> 157
KDWB-FM
(RADIO STATION OF MIDCONTINENT RADIO OF MINNESOTA, INC.
TO BE PURCHASED BY CHANCELLOR BROADCASTING COMPANY)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<S> <C>
Balance, December 31, 1993...................................................... $7,897,934
Distribution to MRI............................................................. (1,095,842)
Net income...................................................................... 9,549
----------
Balance, December 31, 1994...................................................... 6,811,641
Distribution to MRI (unaudited)................................................. (1,237,060)
Net income (unaudited).......................................................... (28,033)
----------
Balance, July 31, 1995 (unaudited).............................................. $5,546,548
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-53
<PAGE> 158
KDWB-FM
(RADIO STATION OF MIDCONTINENT RADIO OF MINNESOTA, INC.
TO BE PURCHASED BY CHANCELLOR BROADCASTING COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SEVEN MONTHS
ENDED
YEAR ENDED JULY 31,
DECEMBER 31, 1994 1995
----------------- ------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................. $ 9,549 $ (28,033)
----------- ----------
Adjustment to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.............................. 1,198,086 518,156
Provision for losses on accounts receivable................ 5,801 --
Loss on disposal of fixed assets........................... 6,208 --
Changes in operating assets and liabilities:
Accounts receivable...................................... (230,407) 1,106,166
Prepaid expenses and other............................... 42,488 (49,394)
Accounts payable and accrued liabilities................. 79,262 (106,184)
----------- ----------
Total adjustments..................................... 1,101,438 1,468,744
----------- ----------
Net cash provided by operating activities............. 1,110,987 1,440,711
----------- ----------
Cash flows from investing activities:
Additions to property and equipment........................... (15,145) (12,459)
----------- ----------
Net cash used in investing activities................. (15,145) (12,459)
----------- ----------
Cash flows from financing activities:
Distribution to MRI........................................... (1,095,842) (1,428,753)
----------- ----------
Net cash used in financing activities................. (1,095,842) (1,428,753)
----------- ----------
Net increase in cash............................................ -- (501)
Cash at beginning of the period................................. 501 501
----------- ----------
Cash at end of the period....................................... $ 501 $ --
=========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-54
<PAGE> 159
KDWB-FM
(RADIO STATION OF MIDCONTINENT RADIO OF MINNESOTA, INC.
TO BE PURCHASED BY CHANCELLOR BROADCASTING COMPANY)
(UNAUDITED WITH RESPECT TO THE SEVEN MONTHS ENDED JULY 31, 1995)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
The financial statements include the accounts of KDWB-FM, (the "Company") a
radio station which is wholly owned by Midcontinent Radio of Minnesota, Inc.
("MRI"). On February 1, 1995, MRI entered into an asset purchase agreement (the
"Agreement") to sell substantially all the assets of KDWB-FM to Chancellor
Broadcasting Company for $22,000,000 in cash. The transaction ("Purchase
Transaction") closed on July 31, 1995. These financial statements include the
historical basis of assets, liabilities and operations of KDWB-FM. During 1994,
cash distributions representing a return of investment of $1,095,842 were made
to MRI. The statements do not reflect any corporate charges or management fees
of MRI.
Interim Financial Information
In the opinion of management, the unaudited interim financial information
of the station contains all adjustments, consisting only of those of a normal
recurring nature, necessary to present fairly the station's financial position
as of July 31, 1995 and the results of its operations and cash flows for the
seven months ended July 31, 1995, and changes in net assets for the seven months
then ended. The results of operations for the seven months ended July 31, 1995
are not necessarily indicative of the results to be expected for the full year.
On February 1, 1995, the Company entered into a local marketing agreement or
"LMA" with Chancellor Broadcasting Company. Under an LMA, a third-party provides
programming and sells advertising for a specified fee. Accordingly, from
February 1, 1995 through July 31, 1995 substantially all activity of the Company
consists of revenue received under the LMA of $540,000.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Broadcasting operations derive revenue primarily from the sale of program
time and commercial announcements to local, regional and national advertisers.
Revenue is recognized when the program and commercial announcements are
broadcast.
Property and Equipment
For financial statement reporting purposes, depreciation of property and
equipment is determined using the straight-line method based upon the estimated
useful lives of the various classes of assets ranging from five to fifteen years
and leasehold improvements are amortized over the shorter of their useful lives
or the terms of the related leases.
Intangible and Other Assets
Intangible and other assets are stated at cost and are being amortized on a
straight-line basis as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Goodwill.............................................................. 40
Regulatory licenses and permits....................................... 40
Other assets.......................................................... 6-12
</TABLE>
The Company evaluates intangible assets for potential impairment by
analyzing the operating results, trends and prospects of the Company's stations,
as well as by comparing them to their competitors. The Company also takes into
consideration recent acquisition patterns within the broadcast industry, the
impact of recently enacted or potential FCC rules and regulations and any other
events or circumstances which might indicate potential impairment.
F-55
<PAGE> 160
KDWB-FM
(RADIO STATION OF MIDCONTINENT RADIO OF MINNESOTA, INC.
TO BE PURCHASED BY CHANCELLOR BROADCASTING COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Concentration of Credit Risk
Revenue and accounts receivable primarily relate to advertising of products
and services within the radio station's broadcast area in Minnesota. Revenue is
recognized when the advertisement is broadcast. Credit losses have been within
management's expectations.
Trade Transactions
Trade transactions represent advertising time exchanged for promotional
items, advertising, supplies, equipment and services. The fair value of trade
agreement transactions is included in revenue and is expensed or capitalized, as
appropriate.
Income Taxes
The Company files consolidated federal income tax returns as a part of
Midcontinent Media, Inc., the parent of MRI. Deferred income taxes are
recognized for the tax consequences in future years of differences between the
tax bases of assets of liabilities and their financial reporting amounts at year
end based on enacted tax laws and statutory tax rates applicable to the periods
in which the differences are expected to affect taxable earnings. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount more likely than not to be realized. Income tax expense is the tax
payable for the period and the change during the period in deferred tax assets
and liabilities.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<S> <C>
Leasehold improvements.......................................... $ 197,019
Towers and antenna systems...................................... 1,324,757
Studio, technical and transmitting equipment.................... 1,278,251
Office equipment, furniture and fixtures........................ 366,016
Vehicles........................................................ 137,180
----------
3,303,223
Less accumulated depreciation and amortization.................. (2,354,538)
----------
$ 948,685
==========
</TABLE>
4. INCOME TAXES
Income tax expense for the year ended December 31, 1994 consists entirely
of current tax expense of which $5,410 is federal tax expense and $955 is state
tax expense.
F-56
<PAGE> 161
KDWB-FM
(RADIO STATION OF MIDCONTINENT RADIO OF MINNESOTA, INC.
TO BE PURCHASED BY CHANCELLOR BROADCASTING COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. COMMITMENT
The Company leases office space and office equipment under various
noncancelable operating leases. In addition, the Company has agreements with
companies which provide rating surveys. The future minimum payments under these
agreements at December 31, 1994 were approximately as follows:
<TABLE>
<CAPTION>
OTHER
LEASE NONCANCELABLE
COMMITMENTS COMMITMENTS
----------- -------------
<S> <C> <C>
1995................................................ $ 212,422 $62,007
1996................................................ 215,985 --
1997................................................ 219,599 --
1998................................................ 158,609 --
--------- ----------
$ 806,615 $62,007
========= ==========
</TABLE>
Rent expense was approximately $213,831 for the year ended December 31,
1994.
F-57
<PAGE> 162
================================================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE NEW
PREFERRED STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY THE NEW PREFERRED STOCK BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE SUCH DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain Definitions and Market and
Industry Data....................... 2
Prospectus Summary.................... 3
Risk Factors.......................... 14
Recent Developments................... 19
Use of Proceeds....................... 20
Capitalization........................ 21
Pro Forma Financial Information....... 22
Selected Historical Financial Data.... 26
Management's Discussion and Analysis
of Results of Operations and
Financial Condition................. 27
Business.............................. 32
Management and Board of Directors..... 43
Security Ownership of Certain
Beneficial Owners................... 52
Certain Transactions.................. 54
The Exchange Offer.................... 57
Description of the New Preferred
Stock and Exchange Debentures....... 64
Description of Indebtedness........... 91
Description of Capital Stock.......... 97
Certain Federal Income Tax
Considerations...................... 101
Plan of Distribution.................. 101
Legal Matters......................... 102
Experts............................... 102
Available Information................. 102
Index to Financial Statements......... F-1
</TABLE>
================================================================================
================================================================================
OFFER TO EXCHANGE ALL
OUTSTANDING 12 1/4%
SENIOR CUMULATIVE
EXCHANGEABLE PREFERRED STOCK
FOR
12 1/4% SERIES A SENIOR
CUMULATIVE EXCHANGEABLE
PREFERRED STOCK
OF
CHANCELLOR RADIO
BROADCASTING COMPANY
-------------------------
PROSPECTUS
-------------------------
, 1996
================================================================================
<PAGE> 163
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses in connection with the issuance and distribution of the securities
being registered are estimated (other than with respect to the SEC registration
fee) to be as follows:
<TABLE>
<S> <C>
SEC Registration Fee.................................................... $ 34,482.76
Printing and Engraving Expenses......................................... 150,000.00
Accounting Fees and Expenses............................................ 200,000.00
Legal Fees and Expenses................................................. 40,000.00
Blue Sky Fees and Expenses (including fees of counsel).................. 5,000.00
Miscellaneous (including expenses of Exchange Agent).................... 5,000.00
-----------
Total......................................................... $434,482.76
===========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation of Chancellor Radio Broadcasting Company
(the "Registrant"), as amended, provides for the mandatory indemnification of
the directors and officers to the fullest extent permitted by the General
Corporation Law of the State of Delaware (the "Delaware Code"). Pursuant to
Section 145 of the Delaware Code, the Registrant has the discretionary power to
indemnify its present and former directors and officers against expenses
actually and reasonably incurred by them in connection with any suit (other than
an action by or in the right of the Registrant) to which such directors and
officers were, are, or are threatened to be made, a party by reason of their
serving in such positions, so long as they acted in good faith and in a manner
they reasonably believed to be in, or not opposed to, the best interest of the
corporation for which they served in such positions, and with respect to any
criminal action, they had no reasonable cause to believe their conduct was
unlawful.
Under the Delaware Code, a corporation may also indemnify any person who
was or is a party to an action brought by or in the right of the Registrant, but
only for actual or reasonable defense and settlement expenses and not for any
satisfaction of a judgment or settlement of the claim itself, and with the
further limitation that in such actions no indemnification shall be made in the
event of any adjudication that such director or officer is liable to the
corporation unless the court, upon application, finds that in light of all the
circumstances such person is fairly and reasonably entitled to indemnity for
such expenses. The Delaware Code further provides that the indemnification
authorized thereby shall not be deemed exclusive of any other rights to which
any such officer or director may be entitled under any bylaws, agreements, vote
of stockholders or disinterested directors, or otherwise.
The above discussion of the Certificate of Incorporation of the Registrant
and of Section 145 of the Delaware Code is not intended to be exhaustive and is
qualified in its entirety by such Certificate of Incorporation and the Delaware
Code.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referred to in this Item 14, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
II-1
<PAGE> 164
whether such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In June 1994, the Registrant issued 1,000 shares of its common stock, par
value $.01 per share, to Chancellor Broadcasting Company in a private
transaction for a cash purchase price of $1,000 in reliance on the exemption,
set forth in Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), from the registration requirement set forth in Section 5 of
the Securities Act.
On February 14, 1996, the Registrant sold 1,000,000 shares of its 14%
Redeemable Exchangeable Preferred Stock in a private placement in reliance on
Section 4(2) of the Securities Act for a cash purchase price of $95,000,000.
On February 26, 1996, the Registrant sold 1,000,000 shares of its 12 1/4%
Senior Cumulative Exchangeable Preferred Stock (the "Old Preferred Stock") in a
private placement in reliance on Section 4(2) under the Securities Act, for a
cash purchase price of $100,000,000. The shares of Old Preferred Stock were
immediately resold by the initial purchasers thereof in reliance on Rule 144A
under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ---------------------
<C> <S>
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)
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)
</TABLE>
II-2
<PAGE> 165
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ---------------------
<C> <S>
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 Radio Broadcasting Company and Chancellor
Broadcasting Company*
2.12 -- Local Marketing Agreement, dated as of June 28, 1996, among
OmniAmerica Group, Chancellor Radio Broadcasting Company and
Chancellor Broadcasting Company*
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*
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*
3.1 -- Certificate of Incorporation of Chancellor Radio Broadcasting
Company, as amended(1)(4)
3.2 -- Bylaws of Chancellor Radio Broadcasting Company, as amended(1)
3.3 -- Certificate of Designation for the 14% Redeemable Exchangeable
Preferred Stock(5)
-- Certificate of Amendment to Certificate of Designation for the 14%
Redeemable Exchangeable Preferred Stock(5)
3.4 -- Certificate of Designation for the Old Preferred Stock(4)
3.5 -- Form of 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)
-- 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)
-- 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)
4.2 -- Indenture, dated as of February 14, 1996, governing the outstanding
9 3/8% Senior Subordinated Notes due 2004(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)
4.3 -- Indenture, dated as of February 26, 1996, governing the Exchange
Debentures(4)
5.1 -- Opinion of Weil, Gotshal & Manges LLP as to the validity of the
issuance of the New Preferred Stock*
7.1 -- Opinion of Weil, Gotshal & Manges LLP as to the liquidation
preference of the New Preferred Stock*
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)
</TABLE>
II-3
<PAGE> 166
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ---------------------
<C> <S>
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 Broadcasting Company,
Chancellor Radio Broadcasting Company and Steven Dinetz*
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 Radio Broadcasting Company and Hicks, Muse
& Co. Partners, L.P.(2)
10.10 -- Tax Sharing Agreement between Chancellor Holdings Corp. and
Chancellor Radio Broadcasting Company(2)
10.11 -- Financial Advisory Agreement among Chancellor, Chancellor Radio
Broadcasting and HM2/Management Partners, L.P.(3)
10.12 -- Credit Agreement dated as of February 14, 1996, among Chancellor,
Chancellor Radio Broadcasting, various banks and Bankers Trust
Company, as agent(5)
10.13 -- Amended and Restated Monitoring and Oversight Agreement, dated as of
January 1, 1996, among Chancellor, Chancellor Radio Broadcasting and
Hicks, Muse & Co. Partners, L.P.(3)
10.14 -- Sales Agreement, dated as of July 1, 1996, among OmniAmerica Group,
Chancellor Radio Broadcasting Company and Chancellor Broadcasting
Company*
10.15 -- Program Consulting Agreement, dated as of June 28, 1996, among
OmniAmerica Group, Chancellor Radio Broadcasting Company and
Chancellor Broadcasting Company*
10.16 -- Consulting Agreement, dated as of May 14, 1996, among Chancellor
Radio Broadcasting Company, Chancellor Broadcasting Company and
Anthony S. Ocepek*
10.17 -- Consulting Agreement, dated as of May 14, 1996, among Chancellor
Radio Broadcasting Company, Chancellor Broadcasting Company and Carl
E. Hirsch*
10.18 -- Consulting Agreement, dated as of May 14, 1996, among Chancellor
Radio Broadcasting Company, Chancellor Broadcasting Company and H.
Dean Thacker*
10.19 -- Non-Competition Agreement, dated as of May 14, 1996, among Chancellor
Radio Broadcasting Company, Chancellor Broadcasting Company and Carl
E. Hirsch*
10.20 -- 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*
10.21 -- Employment Agreement, dated as of February 1, 1996, between
Chancellor Radio Broadcasting Company and Samuel Weller*
10.22 -- Amended and Restated Monitoring and Oversight Agreement, dated as of
April 1, 1996, among Chancellor, Chancellor Radio Broadcasting and
Hicks, Muse & Co. Partners, L.P.
</TABLE>
II-4
<PAGE> 167
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ---------------------
<C> <S>
12.1 -- Computation of Ratio of Earnings to Fixed Charges of Chancellor Radio
Broadcasting Company*
12.2 -- Computation of Ratio of Earnings to Fixed Charges of Pro Forma
results.*
21.1 -- Subsidiaries of Chancellor Radio Broadcasting Company(3)
23.1 -- Consent of Weil, Gotshal & Manges LLP (included in Exhibits 5.1 and
7.1)
23.2 -- Consent of Coopers & Lybrand, L.L.P., independent public accountants*
23.3 -- Consent of Price Waterhouse LLP, independent accountants*
24.1 -- Power of Attorney#
25.1 -- Statement of Eligibility and Qualifications of U.S. Trust Company of
Texas, N.A., on Form T-1*
99.1 -- Form of Letter of Transmittal#
99.2 -- Form of Notice of Guaranteed Delivery#
</TABLE>
- ---------------
# Previously filed.
* Filed herewith.
+ To be filed by amendment.
(1) Incorporated by reference to the Registration Statement on Form S-1 (File
No. 33-80534) of Chancellor Radio Broadcasting Company as filed with the
Securities and Exchange Commission.
(2) Incorporated by reference to the Quarterly Report on Form 10-Q of Chancellor
Radio 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 Radio Broadcasting Company as filed with the
Securities and Exchange Commission.
(4) Incorporated by reference to the Annual Report on Form 10-K of Chancellor
Radio Broadcasting Company (File No. 33-80534) for the fiscal year ended
December 31, 1995.
(5) Incorporated by reference to the Current Report on Form 8-K of Chancellor
Radio Broadcasting Company (File No. 33-98334) as filed with the Securities
and Exchange Commission on February 29, 1996.
(b) Financial Statement Schedules:
The following financial statement schedules are included in this
Registration Statement:
Chancellor Radio Broadcasting Company and Related Companies:
<TABLE>
<S> <C>
Report of Independent Accountants
II. -- Valuation and Qualifying Accounts
</TABLE>
Trefoil Communications, Inc.
<TABLE>
<S> <C>
II. -- Valuation and Qualifying Accounts
</TABLE>
Old Chancellor Communications
<TABLE>
<S> <C>
Report of Independent Accountants
II. -- Valuation and Qualifying Accounts
</TABLE>
All other schedules are omitted since the required information is not
present or is not present in the amounts sufficient to require submission of the
schedules, or because the information required is included in the financial
statements and notes thereto.
II-5
<PAGE> 168
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(h) See Item 14.
II-6
<PAGE> 169
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas, State of Texas,
on August 7, 1996.
CHANCELLOR RADIO BROADCASTING COMPANY
By: /s/ JACQUES KERREST
---------------------------------------
Jacques Kerrest,
Senior Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------------ ----------------
<C> <S> <C>
* President and Chief Executive August 7, 1996
- --------------------------------------------- Officer; Director (Principal
Steven Dinetz Executive Officer)
/s/ JACQUES KERREST Chief Financial Officer August 7, 1996
- --------------------------------------------- (Principal Accounting and
Jacques Kerrest Financial Officer)
* Director August 7, 1996
- ---------------------------------------------
Jeffrey A. Marcus
* Director August 7, 1996
- ---------------------------------------------
John H. Massey
* Director August 7, 1996
- ---------------------------------------------
Matrice Ellis-Kirk
/s/ THOMAS O. HICKS Director August 7, 1996
- ---------------------------------------------
Thomas O. Hicks
/s/ ERIC C. NEUMAN Director August 7, 1996
- ---------------------------------------------
Eric. C. Neuman
/s/ JACQUES KERREST
- ---------------------------------------------
Jacques Kerrest
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 170
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Chancellor Radio Broadcasting Company:
In connection with our audits of the financial statements of Chancellor
Radio Broadcasting Company and Subsidiary as of December 31, 1995 and 1994, and
for the years then ended, which financial statements are included in the
Registration Statement, we have also audited the financial statement schedule of
Chancellor Radio Broadcasting Company and Subsidiary listed in Item 16(b)
herein.
In our opinion, this financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
February 14, 1996
S-1
<PAGE> 171
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
BALANCE CHARGED
AT TO BALANCE
BEGINNING COSTS AT END
OF AND OF
PERIOD EXPENSES DEDUCTIONS PERIOD
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Three months ended March 31, 1996
(unaudited)
Allowance for doubtful accounts........... $263,528 $574,335 $237,863 $600,000
Year ended December 31, 1995
Allowance for doubtful accounts........... $118,844 $341,840 $78,312 (A) $263,528
Year ended December 31, 1994:
Allowance for doubtful accounts........... $ 0 $213,249 $94,405 (A) $118,844
</TABLE>
- ---------------
(A) Charge-off of uncollectible accounts.
S-2
<PAGE> 172
TREFOIL COMMUNICATIONS, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- --------- -------------------- -------- ---------
ADDITIONS DEDUCTIONS
BALANCE -------------------- -------- BALANCE
AT CHARGED AMOUNTS AT
BEGINNING TO AMOUNTS WRITTEN- END OF
DESCRIPTION OF YEAR EXPENSE ACQUIRED OFF YEAR
- ------------------------------------ --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1995...... $1,535,000 $650,000 $ -- $555,000 $1,630,000
Year ended December 31, 1994...... 1,553,000 673,000 -- 691,000 (1) 1,535,000
Year ended December 31, 1993...... 536,000 433,000 924,000 340,000 (1) 1,553,000
</TABLE>
- ---------------
(1) Uncollectible accounts written off, net of recoveries.
S-3
<PAGE> 173
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Chancellor Radio Broadcasting Company:
In connection with our audits of the financial statements of KFBK/KGBY, a
division of Group W Radio, Inc. (CAL) ("Old Chancellor Communications") for the
year ended December 31, 1993, which financial statements are included in the
Registration Statement, we have also audited the financial statement schedule of
Old Chancellor Communications listed in Item 16(b) herein.
In our opinion, this financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.
COOPERS & LYBRAND
Sacramento, California
June 14, 1994
S-4
<PAGE> 174
OLD CHANCELLOR COMMUNICATIONS
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------------------------------------------- -------- -------- -------- --------
BALANCE CHARGED
AT TO BALANCE
BEGINNING COSTS AT END
OF AND OF
PERIOD EXPENSES DEDUCTIONS PERIOD
-------- -------- ---------- --------
<S> <C> <C> <C> <C>
Year ended December 31, 1993:
Allowance for doubtful accounts........... $77,858 $164,331 $125,995(A) $116,194
</TABLE>
- ---------------
(A) Charge-off of uncollectible accounts.
S-5
<PAGE> 175
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
- ---------- ----------------------------------------------------------------------- ------------
<C> <S> <C>
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)
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 Radio Broadcasting Company and Chancellor
Broadcasting Company*
2.12 -- Local Marketing Agreement, dated as of June 28, 1996, among
OmniAmerica Group, Chancellor Radio Broadcasting Company and
Chancellor Broadcasting Company*
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*
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*
3.1 -- Certificate of Incorporation of Chancellor Radio Broadcasting
Company, as amended(1)(4)
3.2 -- Bylaws of Chancellor Radio Broadcasting Company, as amended(1)
3.3 -- Certificate of Designation for the 14% Redeemable Exchangeable
Preferred Stock(5)
-- Certificate of Amendment to Certificate of Designation for the 14%
Redeemable Exchangeable Preferred Stock(5)
3.4 -- Certificate of Designation for the Old Preferred Stock(4)
3.5 -- Form of Certificate of Designation for the New Preferred Stock*
</TABLE>
<PAGE> 176
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
- ---------- ----------------------------------------------------------------------- ------------
<C> <S> <C>
4.1 -- Indenture, dated October 1, 1994, governing the outstanding 12 1/2%
Senior Subordinated Notes due 2004(1)
-- 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)
-- 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)
4.2 -- Indenture, dated as of February 14, 1996, governing the outstanding
9 3/8% Senior Subordinated Notes due 2004(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)
4.3 -- Indenture, dated as of February 26, 1996, governing the Exchange
Debentures(4)
5.1 -- Opinion of Weil, Gotshal & Manges LLP as to the validity of the
issuance of the New Preferred Stock*
7.1 -- Opinion of Weil, Gotshal & Manges LLP as to the liquidation
preference of the New Preferred Stock*
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 Broadcasting Company,
Chancellor Radio Broadcasting Company and Steven Dinetz*
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 Radio Broadcasting Company and Hicks, Muse
& Co. Partners, L.P.(2)
10.10 -- Tax Sharing Agreement between Chancellor Holdings Corp. and
Chancellor Radio Broadcasting Company(2)
10.11 -- Financial Advisory Agreement among Chancellor, Chancellor Radio
Broadcasting and HM2/Management Partners, L.P.(3)
10.12 -- Credit Agreement dated as of February 14, 1996, among Chancellor,
Chancellor Radio Broadcasting, various banks and Bankers Trust
Company, as agent(5)
10.13 -- Amended and Restated Monitoring and Oversight Agreement, dated as of
January 1, 1996, among Chancellor, Chancellor Radio Broadcasting and
Hicks, Muse & Co. Partners, L.P.(3)
</TABLE>
<PAGE> 177
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
- ---------- ----------------------------------------------------------------------- -----------
<C> <S> <C>
10.14 -- Sales Agreement, dated as of July 1, 1996, among OmniAmerica Group,
Chancellor Radio Broadcasting Company and Chancellor Broadcasting
Company*
10.15 -- Program Consulting Agreement, dated as of June 28, 1996, among
OmniAmerica Group, Chancellor Radio Broadcasting Company and
Chancellor Broadcasting Company*
10.16 -- Consulting Agreement, dated as of May 14, 1996, among Chancellor
Radio Broadcasting Company, Chancellor Broadcasting Company and
Anthony S. Ocepek*
10.17 -- Consulting Agreement, dated as of May 14, 1996, among Chancellor
Radio Broadcasting Company, Chancellor Broadcasting Company and Carl
E. Hirsch*
10.18 -- Consulting Agreement, dated as of May 14, 1996, among Chancellor
Radio Broadcasting Company, Chancellor Broadcasting Company and H.
Dean Thacker*
10.19 -- Non-Competition Agreement, dated as of May 14, 1996, among Chancellor
Radio Broadcasting Company, Chancellor Broadcasting Company and Carl
E. Hirsch*
10.20 -- 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*
10.21 -- Employment Agreement, dated as of February 1, 1996, between
Chancellor Radio Broadcasting Company and Samuel Weller*
10.22 -- Amended and Restated Monitoring and Oversight Agreement, dated as of
April 1, 1996, among Chancellor, Chancellor Radio Broadcasting and
Hicks, Muse & Co. Partners, L.P.
12.1 -- Computation of Ratio of Earnings to Fixed Charges of Chancellor Radio
Broadcasting Company*
12.2 -- Computation of Ratio of Earnings to Fixed Charges of Pro Forma
results.*
21.1 -- Subsidiaries of Chancellor Radio Broadcasting Company(3)
23.1 -- Consent of Weil, Gotshal & Manges LLP (included in Exhibits 5.1 and
7.1)
23.2 -- Consent of Coopers & Lybrand, L.L.P., independent public accountants*
23.3 -- Consent of Price Waterhouse LLP, independent accountants*
24.1 -- Power of Attorney#
25.1 -- Statement of Eligibility and Qualifications of U.S. Trust Company of
Texas, N.A., on Form T-1*
99.1 -- Form of Letter of Transmittal#
99.2 -- Form of Notice of Guaranteed Delivery#
</TABLE>
- ---------------
# Previously filed.
* Filed herewith.
+ To be filed by amendment.
(1) Incorporated by reference to the Registration Statement on Form S-1 (File
No. 33-80534) of Chancellor Radio Broadcasting Company as filed with the
Securities and Exchange Commission.
(2) Incorporated by reference to the Quarterly Report on Form 10-Q of Chancellor
Radio 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 Radio Broadcasting Company as filed with the
Securities and Exchange Commission.
(4) Incorporated by reference to the Annual Report on Form 10-K of Chancellor
Radio Broadcasting Company (File No. 33-80534) for the fiscal year ended
December 31, 1995.
(5) Incorporated by reference to the Current Report on Form 8-K of Chancellor
Radio Broadcasting Company (File No. 33-98334) as filed with the Securities
and Exchange Commission on February 29, 1996.
<PAGE> 1
EXHIBIT 2.11
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), made as of May 14,
1996, is by and among OMNIAMERICA GROUP, a Massachusetts general partnership
("Omni"); WAPE-FM LICENSE PARTNERSHIP, an Ohio general partnership; WFYV-FM
LICENSE PARTNERSHIP, an Ohio general partnership; WEAT-AM LICENSE PARTNERSHIP,
an Ohio general partnership; WEAT-FM LICENSE PARTNERSHIP, an Ohio general
partnership; WXXL LICENSE PARTNERSHIP, an Ohio general partnership; WOLL
LICENSE PARTNERSHIP, an Ohio general partnership; and WJHM-FM LICENSE
PARTNERSHIP, an Ohio general partnership (collectively referred to as the
"License Partnerships"); (Omni and the License Partnerships are, individually
and collectively, referred to as "Sellers" in this agreement); and CHANCELLOR
BROADCASTING COMPANY, A DELAWARE CORPORATION, (HEREINAFTER REFERRED TO AS
"CBC") AND CHANCELLOR RADIO BROADCASTING COMPANY, a Delaware corporation
(hereinafter, individually and collectively referred to as "Buyers").
WITNESSETH:
WHEREAS, Sellers own certain assets, which are used in connection with
the operation of radio stations WEAT- AM/FM, West Palm Beach, Florida; WOLL
(FM), Riviera Beach, Florida; WXXL (FM), Tavares, Florida; WAPE-FM,
Jacksonville, Florida; and WFYV(FM) Atlantic Beach, Florida (the "Owned
Stations"); and
WHEREAS, Sellers have entered into a certain Asset Purchase Agreement,
dated February 16, 1996, between Beasley FM Acquisition Corp. and OmniAmerica
Group (the "Beasley Purchase Agreement") to acquire radio station WJHM(FM),
Daytona Beach, Florida ("WJHM"); and
WHEREAS, Sellers have entered into a certain Asset Exchange Agreement,
dated April 19, 1996 between Nationwide Communications, Inc. ("NCI") and
OmniAmerica Group (the "NCI Purchase Agreement") to acquire radio station
WOMX(FM) in Orlando, Florida ("WOMX"); and
WHEREAS, Sellers desire to sell the Owned Stations, WJHM and WOMX
(collectively referred to as the "Stations") and Buyers desire to purchase
substantially all of the assets of Sellers used in connection with the
operation of the Stations in accordance with the terms and conditions set forth
in this Agreement; and
WHEREAS, (i) effective July 1, 1996, Sellers and Buyers shall enter
into local marketing agreements with respect to the Owned Stations ("Owned
Station LMAs"); and (ii) effective July 1, 1996, Buyers and Sellers shall enter
into an Advertising Agreement and a Programming Consulting Agreement
(collectively referred to as the "WJHM AA") with respect to WJHM which shall be
superseded by an LMA upon closing of the Beasley Purchase Agreement; and (iii)
Sellers shall use their commercially reasonable efforts to assign or provide on
terms reasonably satisfactory to Buyers, as soon as practicable after the
execution of the Agreement, but no sooner than July 1, 1996, the
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<PAGE> 2
rights of Sellers under the local marketing agreement, if executed, currently
being negotiated by Sellers and NCI with respect to WOMX (the local marketing
agreement with respect to WOMX being the "Assigned LMA") (the effective dates
of the Owned Stations LMAs, the WJHM AA, and the Assigned LMA (the "LMAs") are,
individually and collectively, as the context requires, referred to herein as
the "LMA Commencement Date");
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements hereinafter set forth, the parties hereto,
intending to be legally bound hereby agree as follows:
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<PAGE> 3
ARTICLE 1
PURCHASE OF ASSETS
1.1. Transfer of Assets. On the terms and subject to the conditions
hereof and subject to Section 1.2, on the Closing Date (as hereinafter
defined), Sellers shall assign, transfer, convey and deliver to Buyers and
Buyers shall acquire and assume from Sellers, all of the right, title and
interest of Sellers in and to all of the following assets, properties,
interests and rights of Sellers (collectively the "Stations Assets") free and
clear of all liens, claims, or encumbrances other than Permitted Liens (as
defined in Section 6.1.10);
1.1.1 All of Sellers' rights in and to the licenses, permits
and other authorizations issued to Sellers by any governmental authority,
including those issued by the Federal Communications Commission (the "FCC")
(hereafter referred to as the "Stations Licenses"), used in connection with the
operation of the Stations, along with renewals or modifications of such items
between the date hereof and the Closing Date, including but not limited to
those listed in Schedule 1.1.1 hereto;
1.1.2 All equipment, office furniture and fixtures, office
materials and supplies, inventory, spare parts and all other tangible personal
property of every kind and description, and Sellers' rights therein, owned,
leased or held by Sellers and used in connection with the operations of the
Stations, including but not limited to those items described or listed in
Schedule 1.1.2 hereto, together with any replacements thereof, improvements or
additions thereto made between the date hereof and the Closing Date, and less
any retirements or dispositions thereof made between the date hereof and the
Closing Date in the ordinary course of business of Sellers;
1.1.3 All of Sellers' rights in and under those contracts,
agreements, leases and legally binding contractual rights of any kind, written
or oral, relating to the operation of the Stations ("Contracts") listed in
Schedule 1.1.3 hereto and (i) those Contracts entered into by Sellers between
the date hereof and the Closing Date in the ordinary course of business of
Sellers, subject to Section 1.2.4 and Section 8.1 hereto; (ii) all Contracts
for the sale of advertising time, subject to Section 8.1 hereto; and (iii) all
Contracts for consideration other than cash, such as merchandise, services or
promotional consideration ("Trade Agreements"), subject to Section 8.1 hereto.
1.1.4 All of Sellers' rights in and to all call letters,
trademarks, trade names, service marks, franchises, copyrights, Internet domain
names, including registrations and applications for registration of any of
them, computer software programs and programming material of whatever form or
nature, jingles, slogans, the Stations' logos and all other logos or licenses
to use same and all other intangible property rights of Sellers, which are used
in connection with the operation of the Stations, including but not limited to
those listed in Schedule 1.1.4 hereto (collectively, the "Intellectual
Property") together with any associated good will and any additions thereto
between the date hereof and the Closing Date;
1.1.5 All of Sellers' rights in and to all the files,
documents, records, and books of
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<PAGE> 4
account relating to the operation of the Stations or to the Stations Assets,
including, without limitation, each Station's public files, programming
information and studies, technical information and engineering data, news and
advertising studies or consulting reports, marketing and demographic data,
sales correspondence, lists of advertisers, promotional materials, credit and
sales reports and filings with the FCC, originals of all written Contracts to
be assigned hereunder, logs, software programs and books and records relating
to employees, financial, accounting, operation and technical matters; but
excluding records relating solely to any Excluded Asset (as hereinafter
defined);
1.1.6 All of Sellers' rights under manufacturers' and vendors'
warranties relating to items included in the Stations Assets and all similar
rights against third parties relating to items included in the Stations Assets;
1.1.7 All real property owned by Sellers together with all
appurtenant easements thereunto and all structures, fixtures and improvements
located thereon used in connection with the Stations operations as more fully
described in Schedule 1.1.7 hereto, together with any additions thereto between
the date hereof and the Closing Date ("Owned Real Estate");
1.1.8 All rights and interests of Sellers under any and all of
the leases of real property used in connection with the Stations operations
(the "Leased Real Estate") (collectively with the Owned Real Estate, the "Real
Estate") which Leased Real Estate is identified and described in Schedule
1.1.8.
1.1.9 All such other assets, properties, interests and rights
owned by Sellers that are used in connection with the business and operation of
the Stations or that are located as of the Closing Date on the Real Estate,
except Excluded Assets.
1.1.10 All of Sellers' rights in and to all causes of action
for any past infringement of any of the Intellectual Property.
1.2 Excluded Assets. Notwithstanding anything to the
contrary contained herein, it is expressly understood and agreed that the
Stations Assets shall not include the following assets or any right, title or
interest therein (the "Excluded Assets"):
1.2.1 All cash, marketable securities, and cash equivalents of
Sellers on hand and/or in banks;
1.2.2 All accounts receivable or notes receivable of Sellers.
1.2.3 All tangible and intangible personal property of Sellers
disposed of or consumed in the ordinary course of business of Sellers between
the date hereof and the Closing Date, as permitted hereunder;
1.2.4 All Contracts that have terminated or expired on or
prior to the Closing Date
4
<PAGE> 5
in the ordinary course of business of Sellers;
1.2.5 Sellers' corporate seals, minute books, charter and/or
partnership documents, corporate stock record books and such other books and
records as pertain to the organization, existence, share capitalization or
partnership interests of Sellers and duplicate copies of such financial records
as are necessary to enable Sellers to file their tax returns and reports as
well as any other records or materials relating to Sellers generally;
1.2.6 Contracts of insurance and all insurance proceeds or
claims made by Sellers arising or related to the Stations' Assets prior to
Closing (except to the extent made after the date hereof with respect to
Stations Assets);
1.2.7 The Employee Benefit Plans (as defined hereinafter) and
the assets thereof;
1.2.8 Any right to use the names "OmniAmerica Group" or
"OmniAmerica Communications" and any variations thereof;
1.2.9 The studio site located at 100 Blue Herron Blvd.,
Riviera Beach, Florida, which Sellers are in the process of donating to the
State of Florida;
1.2.10 Any assets used or associated with WJHM or WOMX that
are not acquired by Sellers pursuant to the Beasley Purchase Agreement or the
NCI Purchase Agreement;
1.2.11 Those specific assets identified on the Excluded
Assets Schedule attached to this Agreement as Schedule 1.2.11;
1.2.12 Except as described in Section 1.1.10, all of
Sellers' rights in and to all causes of action;
1.2.13 All tax refunds relating to the period prior to the
Closing; and
1.2.14 Assets located in Sellers' Cleveland, Ohio and, or
Los Angeles, California offices used for general and administrative services
and other assets of radio stations and other businesses, other than the
Stations, owned by Sellers or their affiliates.
ARTICLE 2
ASSUMPTION OF OBLIGATIONS
2.1 Assumption of Obligations. Subject to the provisions of
this Section 2.1 and Section 2.2, on the Closing Date, Buyers shall assume the
obligations of Sellers arising or to be performed after the Closing Date under
the Contracts referred to in Section 1.1.3 hereto in effect on the Closing
Date, all liabilities and obligations that arise from the ownership or
operation of the Stations Assets
5
<PAGE> 6
after the Closing Date and the post-closing obligations of Seller under
Sections 6.13, 6.15, 16 and 17 of the Beasley Purchase Agreement and Sections
3.B, 3.D, and 24 of the NCI Purchase Agreement; provided, however, that with
respect to Sellers' obligations under Section 3.B of the NCI Purchase Agreement
and Section 17 of the Beasley Purchase Agreement, Buyers only obligation shall
be to provide assistance to Sellers and the selling parties under each of those
purchase agreements and Buyers shall have no obligation to make any payments
which Sellers may be obligated to make pursuant to such Section 3.B and Section
17. All of the foregoing liabilities and obligations shall be referred to
herein collectively as the "Assumed Liabilities."
2.2 Retained Liabilities. Notwithstanding anything contained
in this Agreement to the contrary, Buyers do 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 or any document delivered at the
execution of this Agreement, or as a result of the consummation of the
transactions contemplated by this Agreement, to have assumed, or to have agreed
to pay, satisfy, discharge or perform, any liability or obligation of the
Sellers other than the Assumed Liabilities, including any of the following
liabilities or obligations of the Sellers (the "Retained Liabilities"):
(a) all obligations or liabilities of Sellers or any
predecessor or Affiliate of Sellers which relate to any of the Excluded Assets;
(b) Other than taxes expressly allocated pursuant to
other provisions of this Agreement, tax liabilities of any and all kinds
(federal, state, local, and foreign) of Sellers including, without limitation,
any liabilities for taxes on or measured by income, liabilities for withheld
federal and state income taxes and employee F.I.C.A. (Federal Insurance
Contribution Act) or employer F.I.C.A., and liabilities for income taxes
arising as a result of the transfer of the Stations Assets or otherwise by
virtue of the consummation of the transactions contemplated hereby.
(c) all liabilities or obligations of Sellers owed to any
of Sellers or its Affiliates (as hereinafter defined);
(d) all liabilities or obligations arising out of any
breach by Sellers or any predecessor or Affiliate of any of the terms or
conditions of any provision of any Contract;
(e) all liabilities and obligations of Sellers or any
predecessor or Affiliate of Sellers resulting from, caused by or arising out
of, any violation of law;
(f) any claims, liabilities, and obligations of Sellers
as an employer, including, without limitation, liabilities for wages,
supplemental unemployment benefits, vacation benefits, severance benefits,
retirement benefits, COBRA benefits, FAMLA benefits, WARN obligations and
liabilities, or any other employee benefits, withholding tax liabilities,
workers' compensation, or unemployment compensation benefits or premiums,
hospitalization or medical claims, occupational disease or disability claims,
or other claims attributable in whole or in part to employment or termination
by Sellers or arising out of any labor matter involving Sellers as an employer,
and any
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<PAGE> 7
claims, liabilities and obligations arising from or relating to the Employee
Benefit Plans.
(g) Any claims, liabilities, losses, damages, or expenses
relating to any litigation, proceeding, or investigation of any nature arising
out of the operations of the Stations on or prior to the Closing Date
including, without limitation, any claims against or any liabilities for injury
to or death of persons or damage to or destruction of property, any workers'
compensation claims, and any warranty claims; provided, however, that Buyers
shall have sole responsibility for such claims, liabilities, losses, damages or
expenses to the extent that they arise out of Buyers' operation of the Stations
under or in accordance with the LMAs.
(h) Except as provided in Section 3.3, any accounts
payable, other indebtedness, obligations or accrued liabilities of Sellers.
(i) Any liabilities or obligations resulting from the
failure to comply with or imposed pursuant to any environmental protection,
health, or safety laws or regulations or resulting from the generation,
storage, treatment, transportation, handling, disposal, release of hazardous
substances, solid wastes, and liquid and gaseous matters by Sellers and by any
other person in relation to Sellers or the Stations, including, without
limitation, any liability or obligation for cleaning up waste disposal sites
from or related to acts or omissions on or prior to the Closing Date.
(j) Any fees and expenses incurred by Sellers in
connection with negotiating, preparing, closing, and carrying out this
Agreement and the transactions contemplated by this Agreement, including,
without limitation, the fees and expenses of Sellers' attorneys, accountants,
consultants and brokers.
ARTICLE 3
CONSIDERATION
3.1 Delivery of Consideration. In exchange for the Stations
Assets, in addition to the assumption of certain obligations of Sellers
pursuant to Section 2.1 above, Buyers shall, subject to Articles 11 and 12
hereof, at the Closing (as hereinafter defined) deliver to Sellers: One Hundred
Seventy-eight-Million Dollars ($178,000,000.00) (subject to adjustment, the
"Purchase Price"); consisting of (i) One Hundred Sixty-three Million Dollars
($163,000,000.00) by wire transfer of immediately available funds, subject to
adjustment pursuant to the provisions of Section 3.3 below ( the "Cash Price")
and (ii) one or more stock certificates representing Fifteen Million Dollars
($15,000,000.00) of CBC's Class A common stock, par value $.01 per share,
the precise number of shares to be determined at Closing according to the
average closing price of CBC's Class A common stock on the NASDAQ National
Market over the preceding thirty (30) trading days ended on the second
business day preceding the Closing Date (the "Average Closing Price");
provided, however, that if (x) the Average Closing Price is less than 80% of
the closing price of the Class A common stock on the Nasdaq National Market on
the date hereof (the "Floor Stock Price") then in no event shall the number of
shares of Class A common stock issued pursuant to this Agreement be
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<PAGE> 8
greater than the number of shares determined based on the Floor Stock Price or
(y) the Average Closing Price is greater than 120% of the closing price of the
Class A common stock on the Nasdaq National Market on the date hereof (the "Cap
Stock Price"), then in no event shall the number of shares of Class A common
stock issued pursuant to this Agreement be less than the number of shares
determined based on the Cap Stock Price. The shares of Class A common stock
issued pursuant to this Agreement shall be entitled to the benefits of the
Registration Rights Agreement attached as Exhibit A hereto (the "Registration
Rights Agreement"). At Sellers' option, the Purchase Price shall be paid to
Sellers, either (a) at Closing in the manner described above; or (b) at Closing
by delivery of Buyers promissory note, bearing interest at a fixed rate equal
to Buyers' lowest cost of funds to Sellers in the amount of the Cash Price
with a payment date of not later than January 31, 1997, and a letter of credit
securing payment of the promissory note, in each case in form and substance
reasonably satisfactory to the parties, in which case Sellers shall reimburse
Buyers for all costs associated with procuring the letter of credit. Buyers
shall also deliver the stock certificates (as described above) on the maturity
date of the promissory note.
3.2 Allocation of Consideration. Sellers and Buyers shall
mutually retain BIA Consulting, Inc. to determine the allocation of the total
consideration among the Stations Assets and its decision on the allocations
will be final 60 days prior to the Closing Date (the "Allocation"). Buyers and
Sellers agree to prepare and file all income tax returns (including, if
applicable, Form 8594) in a manner consistent with the Allocation and will not
in connection with the filing of such returns make any allocation that is
contrary to the Allocation. Buyers and Sellers agree to consult with each
other with respect to all issues related to the Allocation in connection with
any tax audits, controversy or litigation. The fees for BIA Consulting, Inc.
shall be borne by Buyers.
3.3 Allocations and Prorations.
3.3.1 Subject to the Owned Stations LMAs, the WJHM AA, and
the Assigned LMA, the operation of the Stations and the income and expenses
attributable thereto through 11:59 p.m. on the Closing Date (the "Effective
Time") shall be for the account of Sellers and thereafter shall be for the
account of Buyers. 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 Sellers' sole
responsibility for all taxable periods ending prior to and including the
Closing Date, and those taxes arising from the sale and transfer of the
Stations Assets, which shall be paid as set forth in Section 13.2), income and
expenses under the 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 shall be
prorated between Sellers and Buyers in accordance with the foregoing.
Notwithstanding the foregoing, no proration shall be made with respect to (i)
severance or sick leave with respect to any employee or (ii) any prepaid
expense or other deferred item unless Buyers will receive a benefit in respect
of such prepayment or deferral after the Effective Time. For purposes of this
Section 3.3.1, ad valorem and
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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 by Sellers in good faith in appropriate
proceedings and are secured by Liens on the 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).
3.3.2 Allocation and proration of the items set forth in
Subsection 3.3.1 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).
ARTICLE 4
CLOSING
4.1. Closing. The consummation of the transactions contemplated
herein (the "Closing") shall occur, except as otherwise mutually agreed upon by
Buyers and Sellers (i) within ten (10) business days after the FCC Consents (as
hereinafter defined) to the assignments of the Stations Licenses have become
Final Orders (as hereinafter defined) or (ii) at such later date that all
other terms and conditions as set forth in Articles 11 and 12 have been
satisfied, or such other date as may be mutually agreed to by the parties
("Closing Date"), it being agreed that Buyers shall have the right to delay the
Closing Date for up to 30 days (but in no case beyond July 1, 1997) if, on or
during the 5 business days preceding any scheduled Closing Date, there has
occurred or is continuing any Financial Market Event (as hereinafter defined).
Except as provided below in this Section 4.1, the parties agree that the
transaction contemplated by this Agreement is one sale and purchase of the
Owned Stations, WJHM, and WOMX, collectively, and that the Sellers' inability
to transfer the assets of WJHM or WOMX, due to the non-occurrence of the
closing under the Beasley Purchase
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Agreement or the NCI Purchase Agreement, shall not constitute a default by
Sellers and this Agreement shall terminate; provided, however, if the Beasley
Purchase Agreement or the NCI Purchase Agreement is terminated by the other
party (i.e. Beasley or NCI) as a result of Sellers' breach of a representation
or warranty or Sellers' default under a covenant or failure to satisfy a
closing condition within its control, then the non-occurrence of such closing
shall constitute a default under this Agreement. If the Closing shall not have
occurred before May 1, 1997 because Sellers are unable to transfer the Stations
Assets of WJHM, the parties agree that they shall attempt to negotiate in good
faith a reduction in the Purchase Price (to be allocated proportionately
between the Cash Price and the Stock Price) based on the fair market value of
WJHM as of such date and, if they reach such agreement, the parties shall
consummate the sale of all the Stations Assets except for the Stations Assets
of WJHM, which Sellers shall not thereafter be obligated to sell and which
Buyers shall not thereafter be obligated to purchase. For purposes of the
Agreement, "Final Order" means action by the FCC consenting to the assignments
contemplated by this Agreement which is not reversed, stayed, enjoined, set
aside, annulled or suspended, and with respect to which action no timely
request for stay, petition for rehearing, or reconsideration, application for
review or appeal is pending, and as to which the time for filing any such
request, petition or appeal or reconsideration by the FCC on its own motion has
expired. A "Financial Market Event" shall have occurred if (x) trading
generally in securities on any national securities exchange or in the Nasdaq
National Market is suspended or materially limited, (y) or a banking moratorium
shall have been declared by New York state or federal governmental authorities
or (z) there shall have been (A) an outbreak or escalation of hostilities
between the United States and any foreign power or (B) an outbreak or
escalation of any other insurrection or armed conflict involving the United
States or any other national or international calamity or emergency, or (C) any
material change in the financial markets of the United States which makes it
impracticable for the Buyers to obtain financing for the purchase of the
Stations Assets on terms at least as favorable as the terms on which such
financing could have been obtained on the date hereof. The Closing shall be
held in the offices of Chancellor Radio Broadcasting Company, 12655 North
Central Expressway, Suite 405, Dallas, Texas 75243, or at such place as the
parties hereto may agree.
ARTICLE 5
GOVERNMENTAL CONSENTS
5.1 FCC Consent. It is specifically understood and agreed by
Buyers and Sellers that the Closing and the assignments of the Stations
Licenses and the transfer of the Stations Assets are expressly conditioned on
and are subject to the prior consent and approval of the FCC ("FCC Consents").
5.2 FCC Applications. Within ten (10) business days after
the execution of this Agreement or such earlier time as shall be agreed to by
all of the parties hereto, Buyers and Sellers shall file applications with the
FCC for the FCC Consent ("FCC Applications"). Buyers and Sellers shall
prosecute the FCC Applications with all reasonable diligence and otherwise use
their best efforts to obtain the FCC Consent as expeditiously as practicable,
(but neither Buyers nor Sellers shall have any obligation to satisfy
complainants or the FCC by taking any steps which would have a material
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adverse effect upon Buyers or Sellers).
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SELLERS
6.1 Representations and Warranties of Sellers. Sellers,
jointly and severally, represent and warrant to the Buyers the following:
6.1.1 Organization, Good Standing, Etc. (a) Each
of Sellers is a general partnership duly organized and validly existing under
the laws of its jurisdiction of incorporation or organization, has all
requisite corporate and/or partnership power and authority to own, lease and
operate its properties and to carry on its business as now being conducted and
is duly qualified to do business in each jurisdiction (to the extent general
partnerships are required to so qualify) in which the nature of its business or
the ownership or leasing of its properties makes such qualification necessary,
other than in such jurisdictions where the failure to so qualify has not had
and could not reasonably be expected to have a material adverse effect on the
Stations Assets, the Assumed Liabilities or the business of the Stations (taken
as a whole), or on Sellers' ability to consummate the transactions contemplated
by this Agreement (a "Material Adverse Effect").
(b) The Sellers have all requisite corporate or
partnership power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by Sellers and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary partnership action on the
part of Sellers. This Agreement has been duly executed and delivered by
Sellers and constitutes the legal, valid and binding obligations of each
Seller, enforceable against it in accordance with its terms.
6.1.2 Authority. Assuming the consents contemplated
by Sections 6.1.2 and 6.1.14 are obtained, neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
(i) violate, conflict with or result in any breach of any provision of the
Certificates or Articles of Incorporation or Bylaws or partnership agreements
(whether written or oral) of Sellers, (ii) violate, conflict with or will
result in a violation or breach of, or constitute a default (with or without
due notice or lapse of time or both) under, or permit the termination of, or
will result in the acceleration of, or entitle any party to accelerate (whether
as a result of the sale of the Stations Assets or otherwise) any material
obligation, or result in the loss of any material benefit, or give rise to the
creation of any material lien, charge, security interest or encumbrance upon
any of the properties or assets of Sellers or any of their subsidiaries under
any of the terms, conditions or provisions of any loan or credit agreement,
note, bond, mortgage, indenture or deed of trust, or any material license,
lease, agreement or other material instrument or obligation to which any of
them are a party or by which they or any of their properties or assets may be
bound or affected, except, in the case of each of the foregoing matters covered
by this clause (ii) for those that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect, or (iii) violate any
order, writ, judgment, injunction, decree, statute, rule or regulation, of any
court, administrative
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agency or commission or other governmental authority or instrumentality (a
"Governmental Entity") applicable to Sellers or any of their respective
properties or assets, except for those violations that individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
No consent, approval, order or authorization of, or registration, declaration
or filing with, any Governmental Entity is required by or with respect to the
Sellers in connection with the execution and delivery of this Agreement by the
Sellers or the consummation by the Sellers of the transactions contemplated
hereby, except for (i) the filing of a premerger notification report under the
Hart-Scott- Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and (ii) the consents of the FCC to the assignments of the Stations
Licenses (as defined in Section 1.1.1).
6.1.3 Financial Statements. Attached as Schedule 6.1.3
are copies of the Owned Stations' unaudited balance sheet as of December 31,
1995, and the related income statements and proforma broadcast cash flow
analyses (such unaudited financial statements collectively being referred to as
the "Sellers' Financial Statements"). The Sellers' Financial Statements,
except for the pro forma broadcast cash flow analyses, were prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods covered thereby and present fairly, in
all material respects, the consolidated financial position, results of
operations and changes in cash flows of the Owned Stations as of such dates
and for the periods then ended (subject, in the case of the unaudited Sellers'
Financial Statements, to the absence of notes and to normal, recurring
adjustments that would not be material in the aggregate).
6.1.4 Absence of Undisclosed Liabilities. There are no
material liabilities of Sellers of any kind whatsoever with respect to the
Owned Stations (whether absolute, accrued, contingent or otherwise, and whether
due or to become due) that are required to be reflected on, or disclosed in the
notes to, a consolidated balance sheet of Sellers prepared in accordance with
GAAP, other than liabilities and obligations (x) provided for or reserved
against in the Sellers' Financial Statements or (y) arising after December 31,
1995, in the ordinary course of business and consistent with past experience
and which have not had and could not reasonably be expected to have a Material
Adverse Effect.
6.1.5 Compliance with Applicable Laws; FCC Matters. (i)
Except as permitted or contemplated hereby, the operations of the Owned
Stations have been and now are being conducted in substantial compliance with
each law, ordinance, regulation, judgment, decree, injunction, rule or order of
the FCC or any other Governmental Entity binding on Sellers, the Owned
Stations or their respective properties or assets to the extent failure to so
comply could be reasonably expected to have a Material Adverse Effect. No
investigation or review by any Governmental Entity with respect to Sellers or
the Owned Stations is pending or, to the Seller's knowledge, is threatened.
Without limiting the generality of the foregoing to Sellers' actual knowledge
(as defined in Section 8.6) with respect to the Owned Stations, Sellers have
complied in all material respects with the Communications Act of 1934, as
amended (the "Communications Act"), all rules, regulations and written policies
of the FCC thereunder, all obligations with respect to equal opportunity under
applicable law, and all rules and regulations of the Federal Aviation
Administration and ANSI Radiation Standards C95.1-192 applicable to the towers
used by the Stations. In addition, Sellers have duly and timely filed, or
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caused to be filed, with the appropriate Governmental Entities all reports,
statements, documents, registrations, filings or submissions with respect to
the operations of the Owned Stations 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. To Sellers' actual
knowledge, 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. To Sellers' actual knowledge, all the material required by 47
C.F.R. Section 73.3526 to be kept in the public inspection files of the Owned
Stations is in such files. Except as disclosed on Schedule 6.1.5, Sellers have
no knowledge of any fact or circumstance relating to Sellers or the Owned
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 the Sellers
from assigning the Stations Licenses to the Buyers or (b) prevent or delay the
consummation by them of the transactions contemplated by this Agreement.
(ii) Schedule 1.1.1 lists (x) all licenses, permits and
other authorizations (including all STL licenses and construction permits)
issued to Sellers by the FCC relating to the Owned Stations and held by them as
of the date of this Agreement and (y) all licenses, permits, or authorizations
issued to Sellers by any other Governmental Entities which are material to the
operations of the Owned Stations and held by them as of the date of this
Agreement. Such licenses, permits and authorizations, and all applications for
modification, extension or renewal thereof or for new licenses, permits,
permissions or authorizations that would be material to the operations of the
Owned Stations, are collectively referred to herein as the Station Licenses (as
further defined in Section 1.1.1), each of which is in full force and effect.
The Owned Stations have been operated in all material respects in accordance
with the terms of the Station Licenses. Except for proceedings affecting the
radio broadcast industry generally, there are no proceedings pending or, to the
Sellers' knowledge, threatened with respect to Sellers' ownership or operation
of the Owned Stations which reasonably may be expected to result in the
revocation, material adverse modification, non-renewal or suspension of any of
the Station Licenses, the denial of any pending applications for Station
Licenses, the issuance against any Seller of any cease and desist order, or the
imposition of any administrative actions by the FCC or any other Governmental
Entity with respect to the Station Licenses, or which reasonably may be
expected to adversely affect the Owned Stations' ability to operate as
currently operated or the Buyer's ability to obtain assignment of the Station
Licenses. With the exception of operations pursuant to the existing STAs set
out in Section 1.1.1 hereto, and with the further exception of such temporary
reduced power operations as are necessary for routine maintenance, the Stations
operate (a) in conformity with their licenses; and (b) within the operating
power tolerances specified in 47 C.F.R. Section 73.1560(b). To the Sellers'
actual knowledge, no other broadcast station or radio communications facility
is causing interference to the Owned Stations' transmissions beyond that which
is allowed by FCC rules and regulations.
6.1.6 Litigation. Except as disclosed on Schedule
6.1.6, there is no action, suit, inquiry, judicial or administrative
proceeding, or arbitration pending or, to the knowledge of the Sellers,
threatened against any Seller or any of their respective properties or assets
by or before any arbitrator or Governmental Entity nor, to the Sellers' actual
knowledge, are there any investigations
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relating to Sellers or any of their respective properties or assets pending or
threatened by or before any arbitrator or Governmental Entity that has had or
that reasonably could be expected to have a Material Adverse Effect. There is
no judgment, decree, injunction, or order of any Governmental Entity or
arbitrator outstanding against any of Sellers or any of their respective
properties or assets that has had or that reasonably could be expected to have
a Material Adverse Effect. There is no action, suit, inquiry, judicial or
administrative proceeding pending or, to the actual knowledge of the Sellers,
threatened against any of the Sellers by a third party relating to the
transactions contemplated by this Agreement.
6.1.7 Insurance. Schedule 6.1.7 sets forth a list of
all fire, liability and other forms of insurance and all fidelity bonds held by
or applicable to the Owned Stations setting forth in respect of each such
policy the policy name, policy number, carrier, term, type of coverage and
annual premium. To Sellers' actual knowledge, no event has occurred,
including, without limitation, the failure by Sellers to give any notice or
information, or the delivery of any inaccurate or erroneous notice or
information, which limits or impairs the rights of Sellers under any such
insurance policies. Sellers shall keep comparable policies of insurance in
effect for acts, omissions and events occurring on or prior to the Closing
Date.
6.1.8. Real Estate. With respect to the Owned
Stations, Sellers have good and marketable title to the Owned Real Estate and,
except as set forth on Schedule 1.1.8, valid leaseholds in the Leased Real
Estate, free and clear of any Liens except for the Permitted Liens. With
respect to the Owned Stations, the buildings (or portions thereof),
improvements and fixtures that are included in the Real Estate are suitable
for their intended use. Sellers own, or have a valid contractual right to use
adequate routes of ingress and egress to, from and over all of the Real Estate
necessary to operate the Owned Stations. With respect to the Owned Stations,
other than Permitted Liens, no improvement on any of the Real Estate encroaches
upon any adjacent real property of any other person or entity. With respect to
the Owned Stations, Schedule 1.1.7 lists the street address and/or legal
descriptions of the Owned Real Estate and Schedule 1.1.8 lists the street
addresses and/or legal descriptions of the Leased Real Estate.
6.1.9 Personal Property. Schedule 1.1.2 hereto
contains a list of all material tangible personal property and assets owned or
held by Sellers and used in the conduct of the business and operations of the
Owned Stations (other than Real Property, which is addressed in the foregoing
Section 6.1.8). Except as disclosed in Schedule 1.1.2 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 Liens, other than Permitted Liens. The
tangible personal property and fixtures owned or used by Sellers necessary for
the operation of the Owned Stations (each taken as a whole), are in good
operating condition (subject to normal wear and tear) 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 valid leases all of the
tangible personal property and fixtures necessary to conduct the business of
the Owned Stations as presently conducted. The Stations Assets to be
transferred hereunder constitute all of the assets,
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rights and properties that are required for the operation of the Owned Stations
as they are now conducted.
6.1.10 Liens and Encumbrances. All properties and assets,
including leases, owned by Sellers relating to the Owned Stations are free and
clear of all liens, pledges, claims, security interests, restrictions,
mortgages, tenancies and other possessory interests, conditional sale or other
title retention agreements, assessments, easements, rights of way, covenants,
restrictions, rights of first refusal, defects in title, encroachments and
other burdens, options or encumbrances of any kind (collectively, "Liens")
except (a) statutory Liens securing payments not yet delinquent or the validity
of which are being contested in good faith by appropriate actions, (b) purchase
money Liens arising in the ordinary course, (c) Liens for taxes not yet
delinquent, (d) Liens securing indebtedness, all of which Liens will be
discharged at the Closing upon repayment of all amounts due and owing, (e)
Liens which in the aggregate do not materially detract from the value or
materially impair the present and continued use of the properties or assets
subject thereto in the usual and normal conduct of the business of the
Stations, (f) Liens on leases arising from the provisions of such leases and
(g) zoning ordinances (the Liens referred to in clauses (a) through (g) being
"Permitted Liens").
6.1.11 Environmental Matters
On the date of this Agreement, except as disclosed on Schedule
6.1.11:
(i) The Real Estate used in connection with the
Owned Stations and the operations thereon is, and to Sellers' actual knowledge
with respect to any predecessor or prior owner, operator or lessee (each a
"Predecessor") has been, in substantial compliance with all applicable federal,
state and local statutes, codes, rules or regulations as well as common law
decisions relating to the environment, natural resources and public or employee
health and safety ("Environmental Laws");
(ii) No judicial or administrative proceedings are
pending or, to the Sellers' knowledge, threatened against Sellers, or any of
the Real Estate used in connection with the Owned Stations alleging the
violation of or seeking to impose liability pursuant to any Environmental Law.
No notice or claim from any Governmental Entity or other person has been given
to Sellers claiming violation of or alleging any liability under remediation
of any Environmental Laws in connection with any of the Real Estate used in
connection with the Owned Stations or operations thereon;
(iii) There are no facts, circumstances or
conditions on the Real Estate or the operations thereon used in connection
with the Owned Stations or the operations thereon that are reasonably likely to
give rise to an environmental claim or result in Environmental Costs and
Liabilities;
(iv) All substances, materials or waste that are
regulated by federal, state or local government, as well as any petroleum or
petroleum derived product, used or generated by
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Sellers or to Sellers' actual knowledge, by any Predecessor in connection with
the Real Estate used in connection with the Owned Stations ("Hazardous
Substances"), have been stored, used, treated, and disposed of by such persons
or on their behalf in such manner as not to result in any material
Environmental Costs or Liabilities. "Environmental Costs and Liabilities"
means any losses, including environmental remediation costs, liabilities,
obligations, damages, fines, penalties or judgments, arising from or under any
Environmental Law or order of or agreement with any Governmental Entity or
other person;
(v) There are not now, nor have there been in the
past, on, in or under any Real Estate used in connection with the Owned
Stations when owned, leased or operated by Sellers or, to the Sellers'
knowledge, when owned, leased or operated by any Predecessor, any of the
following: any (w) underground storage tanks, above-ground storage tanks, dikes
or impoundments containing Hazardous Substances, (x) asbestos containing
materials, (y) polychlorinated biphenyls or (z) radioactive substances; and
(vi) The Owned Stations' operations do not have a
significant environmental impact, as defined by 47 C.F.R. Section 1.1307.
Notwithstanding anything herein to the contrary, any representations or
warranties made in this Section 6.1.12 by Sellers with respect to any
"multi-tenant" facilities and the real property on which such facilities are
located where Sellers or their respective Predecessors are or were lessees are
limited to those portions of the multi-tenant facilities leased by Sellers
and, as to all other portions of for all multi-tenant facilities, the foregoing
representations and warranties are made to Sellers' actual knowledge.
6.1.12 Taxes. (a) All Tax Returns (as defined in
sub-section (g) below) that are required to be filed on or before the execution
of this Agreement by Sellers have been duly filed on a timely basis under the
statutes, rules and regulations of each applicable jurisdiction. All such Tax
Returns are complete and accurate. Except as set forth on Schedule 6.1.12, all
Taxes, whether or not reflected on the Tax Returns, which are due with respect
to Sellers and any Affiliates have been timely paid by Sellers and/or any such
Affiliates, whether or not such Taxes are disputed. For the purposes of this
Section, Affiliates shall mean any entity that files a consolidated tax return
with Sellers.
(b) No claim for assessment or collection of
Taxes has been asserted against Sellers or any Affiliates. None of Sellers and
its Affiliates are a party to any pending audit, action, proceeding or
investigation by any Governmental Entity for the assessment or collection of
Taxes nor do Sellers or any Affiliates have knowledge of any threatened audit,
action, proceeding or investigation.
(c) None of Sellers and its Affiliates have
waived or extended any statutes of limitation for the assessment or collection
of Taxes. No claim has ever been made by a Governmental Entity in a
jurisdiction where Sellers or any Affiliates do not currently file Tax Returns
that it is or may be subject to taxation by that jurisdiction nor are Sellers
or any Affiliates aware that
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any such assertion of jurisdiction is pending or threatened. No Liens, other
than Permitted Liens (whether filed or arising by operation of law) have been
imposed upon or asserted against any of the assets of the Owned Stations as a
result of or in connection with any failure, or alleged failure to pay any Tax.
(d) Sellers have withheld and paid all Taxes
required to be withheld in connection with any amounts paid or owing to any
employee, creditor, independent contractor or other third party.
(e) Sellers are not foreign persons within the
meaning of Section 1445 of the Internal Revenue Code (the "Code").
(f) No payment described in this Agreement is
subject to Section 280G of the Code.
(g) For purposes of this Agreement, the terms
"Tax" and "Taxes" shall mean all federal, state, local, or foreign income,
payroll, Medicare, withholding, unemployment insurance, social security, sales,
use, service, service use, leasing, leasing use, excise, franchise, gross
receipts, value added, alternative or add-on minimum, estimated, occupation,
real and personal property, stamp, duty, transfer, workers' compensation,
severance, windfall profits, environmental (including taxes under Section 59A
of the Code), other tax, charge, fee, levy or assessment of the same or of a
similar nature, including any interest, penalty, or addition thereto, whether
disputed or not. The term "Tax Return" means any return, declaration, report,
claim for refund, or information return or statement relating to Taxes or any
amendment thereto, and including any schedule or attachment thereto.
(h) The Sellers shall, at the Closing, deliver to
Buyers a certificate (or certificates) in a form reasonably acceptable to
Buyer's counsel stating that No Tax subject to any applicable transferee or
successor liability Tax provision (Fla. Statutes) is due from the Sellers (the
"No Tax Due Certificate") arising from the operations of the Stations prior to
the LMA Commencement Date.
6.1.13 Personnel. Attached as Schedule 6.1.13 is a
complete and correct list as of March 31, 1996 of the names, positions, and
location of all employees or other station and broadcast personnel (whether
employees or independent contractors) of the Owned Stations and WJHM, which
sets forth the current salaries of all such employees and the other
compensation arrangements with all 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 Owned Stations and
WJHM and indicates which of those employees, Station Management or on-the-air
broadcast personnel is a party to an employment or consulting or similar
contract with Sellers that is not terminable upon not more than 60 days notice
without additional cost to Sellers.
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6.1.14 Certain Agreements The Contracts are the only
contractual agreements necessary to carry out the business and operations of
the Owned Stations as currently conducted. Each material Contract (as
identified on Schedule 1.1.3) with respect to the Owned Stations is a valid and
binding obligation of Sellers, as the case may be, and is in full force and
effect. Each of Sellers, as the case may be, and, to the knowledge of the
Sellers, each other party to such material Contract with respect to the Owned
Stations, has performed in all material respects the obligations required to be
performed by it and is not (with or without lapse of time or the giving of
notice, or both) in material breach or default thereunder. Schedule 1.1.3
identifies, as to each Contract with respect to the Owned Stations listed
thereon, whether the consent of the other party thereto is required in order
for such Contract to continue in full force and effect upon the consummation of
the transactions contemplated hereby.
6.1.15 ERISA Compliance. Neither any of Sellers nor
any other trades or businesses under common control within the meaning of
Section 4001(b)(1) of ERISA (collectively, the "ERISA Group") has contributed
or been obligated to contribute to any "multi employer plan" as such term is
defined in Section 3(37) or Section 4001 (a)(3) of ERISA except as disclosed on
Schedule 6.1.15. Schedule 6.1.15 lists all "employee benefit plans" within the
meaning of Section 3(3) of ERISA and bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, insurance or other plan or arrangement or
understanding providing benefits to any present or former employee or
contractor of the Owned Stations maintained by Sellers or as to which Sellers
(with respect to such individuals) have any liability or obligation
(collectively, "Employee Benefit Plans").
6.1.16 Labor 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 6.1.16, since June 30, 1994, each of
the Sellers with respect to the Owned Stations (a) is and has been in
substantial compliance with all applicable laws regarding employment and
employment practices, terms and conditions of employment, wages and hours, and
plant closing, occupational safety and health and workers' compensation and is
not engaged, nor has it engaged, in any unfair labor practices, (b) has no, and
has not had any unfair labor practice charges or complaints pending or, to the
Sellers' knowledge, threatened against it before the National Labor Relations
Board, (c) has no and has not had any grievances pending or; to the Sellers'
actual knowledge, threatened against it and (d) has no, and has not had any
charges pending or, to Sellers' actual knowledge, threatened against it before
the Equal Employment Opportunity Commission or any state or local agency
responsible for the prevention of unlawful employment practices. There is no
labor strike, slowdown, work stoppage or lockout actually pending or, to the
actual knowledge of the Sellers, threatened against or affecting Sellers' Owned
Stations or WJHM. To Sellers' actual knowledge, no union organizational
campaign or representation petition is currently pending with respect to the
employees of Sellers working for the Owned Stations or WJHM.
6.1.17 Patents, Trademarks, Etc. Schedule 1.1.4 sets
forth all call letters, patents,
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patent applications, trademarks, trade names, Internet domain names, service
marks, trade secrets, applied for, issued, owned or used copyrights and other
proprietary Intellectual Property used in the operation of the Owned Stations
(whether owned, leased or licensed by Sellers). Sellers have not received any
notice of any claimed conflict, violation or infringement of such Intellectual
Property rights, and to the Sellers' actual knowledge, none of such material
Intellectual Property rights are being infringed by any third party.
6.1.18 Absence of Certain Changes or Events. Except as
contemplated or expressly permitted by this Agreement, since December 31, 1995
there has not been (i) any material damage, destruction or loss of any kind
with respect to the Owned Stations not covered by valid and collectible
insurance which has had or reasonably could be expected to have a Material
Adverse Effect; (ii) with respect to the Owned Stations and WJHM the execution
of any agreement with any Station management or broadcast personnel (whether
an employee or independent contractor) providing for his/her employment, or any
increase in compensation or severance or termination of benefits payable or to
become payable by Sellers to any officer, Station management, or broadcast
personnel (whether an employee or independent contractor), or any increase in
benefits under any collective bargaining agreement, except in any case in the
ordinary course of business consistent with prior practice and except as
permitted by Section 8.1.1 (x) or (iii) any change by Sellers in their
financial or tax accounting principles or methods, except insofar as required
by GAAP, applicable law or circumstances which did not exist as of the date of
the Financial Statements.
6.1.19 Commission or Finder's Fees. Neither Sellers nor
any entity acting on behalf of Sellers have agreed to pay a commission,
finder's fee or similar payment in connection with this Agreement or any matter
related hereto to any person or entity, other than to Star Media.
6.1.20 Investment Representations. Each Seller that will
receive securities pursuant to this Agreement represents that it is acquiring
such securities solely for its own account, not as nominee or agent for any
other person, and with no present intention of distributing or reselling such
securities or any part thereof in any transaction that would be in violation of
the securities laws of the United States of America or any state thereof. Each
such Seller represents and warrants that it is an "accredited investor" within
the meaning of Rule 501(a) under the Securities Act of 1933, as amended (the
"Securities Act") and that it is not a "broker" or a "dealer" as those terms
are defined in the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Each Seller that will be acquiring any shares of Class A common stock
pursuant to this Agreement acknowledges that it has received all documents and
information relating to the CBC Class A Common Stock as it has requested and
that it is able to bear the economic risk of its investment in the CBC Class A
Common Stock for an indefinite period of time. In addition, each such Seller
represents and warrants that it is aware that the CBC Common Stock has not been
registered under the Securities Act or any securities or "Blue Sky" laws of any
state in reliance on applicable exemptions and that none of the Class A common
stock may be offered, sold, transferred, pledged, hypothecated, or otherwise
assigned unless they are registered under the Securities Act or an exemption
from such registration is available, in each case in accordance with any
applicable securities or "Blue Sky" laws of any state. Each such Seller
consents to the imprinting on the certificates representing its portion of the
Class
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A common stock of a legend to the effect of the foregoing.
6.1.21 Representations and Warranties as to WOMX and WJHM.
Sellers previously have delivered to Buyers true, correct and complete copies
of the executed Beasley Purchase Agreement and NCI Purchase Agreement
(together with all disclosure schedules, exhibits, and annexes thereto). With
respect to WJHM and WOMX, Sellers hereby, jointly and severally, make to Buyers
each and every of the representations and warranties of the selling entities
that are parties to those agreements, each of which is incorporated herein by
reference as though contained herein. Sellers make no additional
representations or warranties with respect to WJHM or WOMX, except to the
extent that the representations and warranties in Section 6.1.13, 6.1.16, and
6.1.18(ii) refer to WJHM or WOMX.
6.1.22 Full Disclosure. No representation or warranty by Sellers
contained in this Agreement (including the Disclosure Schedules hereto) or in
any certificate furnished pursuant to this Agreement contains or will contain
any untrue statement of a material fact, or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading.
6.1.23 Sellers' Financial Condition. No insolvency proceedings of
any character, including, without limitation, bankruptcy, receivership,
reorganization, composition or arrangement with creditors, voluntary or
involuntary, affecting Sellers of any of its respective assets or properties
are pending, or to the best of Sellers' knowledge, threatened, and Sellers have
made no assignment for the benefit of creditors, nor taken any action with a
view to, or which would constitute a basis for, the institution of any such
insolvency proceedings. Sellers shall use the proceeds received under this
agreement to pay or to make appropriate provision for the payment of any and
all creditors of Sellers prior to making any distribution to its partners.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF BUYERS
7.1 Organization and Standing. Buyers are corporations duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
7.2 Authorization and Binding Obligation. Buyers have all
necessary corporate power and authority to enter into and perform this
Agreement and the transactions contemplated hereby, and to own or lease the
Stations Assets and to carry on the business of the Stations upon the
consummation of the transactions contemplated by this Agreement. Buyers'
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 Buyers and constitutes the valid and binding
obligation of Buyers, enforceable against them in accordance with its terms.
7.3 Qualification. To Buyers' knowledge, there is no fact,
allegation, condition, or
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circumstance that could reasonably be expected to prevent the prompt grant of
the FCC Order. Buyer knows of no fact that would, under the Communications Act
of 1934, as amended, or the rules, regulations and policies of the FCC,
disqualify Buyers from becoming the licensee of the Stations. There are no
proceedings, complaints, notices of forfeiture, claims, or investigations
pending or, to the knowledge of Buyers, threatened against any or in respect of
any of the broadcast stations licensed to Buyers or their affiliates that would
materially impair the qualifications of Buyers to become a licensee of the
Stations or delay the FCC's processing of the FCC Applications.
7.4 Absence of Conflicting Agreements or Required Consents.
Except as set forth in Schedule 7.4 hereof, the execution, delivery and
performance of this Agreement by Buyers: (a) do not violate or conflict with
any of the terms, conditions or provisions of the Certificate of Incorporation
or By-Laws of Buyers; (b) do not require the consent of any third party not
affiliated with Buyers; (c) will not violate any applicable law, judgment,
order, injunction, decree, rule, regulation or ruling of any governmental
authority to which Buyers are 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 Buyers are now subject.
7.5 Litigation: Compliance with Law. Except as disclosed in
Schedule 7.5, there is no litigation, administrative action, arbitration or
other proceeding, or petition, complaint or investigation before any court or
governmental body, pending against Buyers that would adversely affect Buyers'
ability to perform their obligations pursuant to this Agreement or the
agreements to be executed by Buyers in connection herewith. Buyers have
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 Buyers or their ability to perform their respective
obligations pursuant to this Agreement or the agreements to be executed in
connection herewith.
7.6 Commission or Finder's Fees. Neither the Buyers nor any
entity acting on behalf of Buyers have agreed to pay a commission, finder's
fee or similar payment in connection with this Agreement or any matter related
hereto to any person or entity.
7.7 CBC Common Stock. The shares of CBC's Class A common stock
to be issued pursuant to this Agreement have been duly authorized and, when
issued in accordance with the terms of this Agreement, will be validly issued,
fully paid and nonassessable and will not have been issued in violation of any
preemptive rights.
7.8 SEC Reports. Since January 1, 1996, Chancellor Broadcasting
Company has filed all forms, reports, statements and other documents required
to be filed with the Securities and Exchange Commission ("SEC") pursuant to the
Exchange Act, including, without limitation (i) all Annual Reports on Form
10-K, (ii) all Quarterly Reports on Form 10- Q, (iii) all proxy statements
relating to meetings of stockholders (whether annual or special), (iv) all
Reports on Form 8-K, and (v) all amendments thereto (collectively, the "SEC
Reports"). The SEC Reports, including all SEC Reports filed after the date of
this Agreement and prior to the Closing Date, (x) were or will be prepared in
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all material respects in accordance with the requirements of applicable law and
(y) did not at the time they were filed, or will not at the time they are
filed, contain any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
7.9 Full Disclosure. No representation or warranty by Buyers
contained in this Agreement (including the Disclosure Schedules hereto) or in
any certificate furnished pursuant to this Agreement contains or will contain
any untrue statement of a material fact, or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading.
ARTICLE 8
COVENANTS OF SELLERS
8.1 Conduct of Station Prior to the Closing Date:
8.1.1 Sellers covenant and agree with Buyers that between
the date of this Agreement and (except as otherwise noted below) the LMA
Commencement Date, each of the Sellers with respect to the Owned Stations
shall:
(i) use commercially reasonable efforts to
maintain its present business organization, keep available the services of its
present employees and independent contractors, preserve its relationships with
its customers and others having business relationships with it, and refrain
from materially and adversely changing any of its 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 its books of account and records in
the usual and ordinary manner and in accordance with generally accepted
accounting principles;
(iii) notify Buyers if the regular broadcast
transmission of any of the Stations from its main transmitting facilities at
full authorized effective radiated power is interrupted for a period of more
than five consecutive hours or for an aggregate of 10 or more hours in any
continuous three-day period;
(iv) operate in the usual and ordinary course of
business in accordance with past practice and conduct its business in all
material respects in compliance with the terms of the Stations Licenses and all
applicable laws, rules, and regulations, including, without limitation, the
applicable rules and regulations of the FCC through the Closing Date;
(v) use, repair, and, if necessary, replace any
Stations' 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;
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(vi) maintain insurance in accordance with
Section 6.1.7 through the Closing Date;
(vii) not incur any debts, obligations, or
liabilities (absolute, accrued, contingent, or otherwise) that include
obligations (monetary or otherwise) to be performed by Buyers that exceeds
Ten-thousand Dollars ($10,000) individually or Twenty-five Thousand Dollars
($25,000) in the aggregate through the Closing Date;
(viii) not lease, mortgage, pledge, or subject to a
lien, claim, or encumbrance (other than Permitted Liens ) any of the Stations
Assets or sell or transfer any of the Stations Assets without replacing such
Stations Assets with an asset of substantially the same value and utility;
(ix) without the prior consent of Buyers, which
consent shall not be unreasonably withheld or delayed, (x) not modify or
extend any Contracts or (y) enter into any new Contract the payments under
which exceeds Ten-thousand Dollars ($10,000) individually or Twenty-five
Thousand Dollars ($25,000) in the aggregate through the Closing Date;
(x) not make or grant any general wage or salary
increase or generally materially modify the employees' terms and conditions of
employment, and with respect to any Station Management and on-air personnel,
Sellers shall not make or grant any wage or salary increase or modify any terms
and conditions of employment without the prior consent of Buyers; provided,
however, that Sellers shall be permitted to make bonus payments to any
employees including Station Management and on-air personnel;
(xi) not make any change in the accounting
principles, methods, or practices followed by it or depreciation or
amortization policies or rates;
(xii) not make any loans or make any dividends or
distributions other than of Excluded Assets;
(xiii) 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;
(xiv) not disclose to any person (other than Buyers
and their representatives) any confidential or proprietary information;
(xv) use their commercially reasonable efforts to
maintain the present format of the Stations and with programming consistent
with past practices;
(xvi) other than in the ordinary course of
business, not increase the number of regularly scheduled commercial units run
during the day-parts on the Owned Stations (other than changes in the number
of commercial units run during any day-part as a result of operating
difficulties
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that require commercial units to be broadcast at times other than as
scheduled); or
(xvii) agree to do any of the foregoing.
8.1.2 For purposes of compliance with Section 11.2, any
violation of the above-referenced covenants resulting in liabilities to Buyers,
in the aggregate, less than the Indemnification Basket as defined in the
Escrow Agreement, shall not be deemed material. Such liabilities shall
nevertheless constitute Damages for purposes of the indemnification agreement
contained in the Escrow Agreement.
8.2 Sellers shall give or cause the Stations to (i) give Buyers
and Buyers' counsel, accountants, engineers and other representatives,
including environmental consultants, reasonable access during normal business
hours to all of Sellers' properties, books, Contracts, Trade Agreements,
reports and records including financial information and tax returns relating to
the Stations, and to all real estate, buildings and equipment relating to the
Stations, in order that Buyers may have full opportunity to make such
investigation, including but not limited to, environmental assessments, as it
desires of the affairs of the Stations and (ii) furnish Buyers 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 Stations, that
Buyers may reasonably request. The rights of Buyers under this Section shall
not be exercised in such a manner as to interfere unreasonably with the
business of the Stations.
8.2.1 Interim Financial Statements. Sellers shall
promptly deliver to Buyers copies of any monthly, quarterly or annual financial
statements relating to the Stations' operations that may be prepared by it
during the period from the date hereof through the LMA Commencement Date. Such
financial statements shall fairly present the financial position and results of
operations of the Stations as at the dates and for the periods indicated, and
shall be prepared on a basis consistent and in accordance with the basis upon
which the financial statements in Section 6.1.3 were prepared.
8.3 Other Consents. Sellers will use commercially reasonable
efforts to obtain all necessary consents of their senior lenders, and Sellers
shall use commercially reasonable efforts to obtain any other consent,
authorizations, or approvals required for the consummation of the transactions
contemplated by this Agreement.
8.4 No Inconsistent Action. Sellers shall not take any action
which is materially inconsistent with their obligations under this Agreement.
8.5 Notification. Sellers shall promptly notify Buyers in
writing of (i) the failure of Sellers or any employee or agent of Sellers to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with hereunder; (ii) the occurrence of any event that
would entitle Buyers to terminate this Agreement pursuant to Sections 18.1; or
(iii) of any overt threat or actual resignation or termination of any Station
Management or over-the-air personnel at any of the Stations prior to the LMA
Commencement Date.
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8.6 Updating of Schedules. Whenever a particular representation
or warranty of Sellers is made in this Agreement "to Sellers' actual knowledge"
(or any correlative phrase), the parties understand and agree that such term
means (i) as of the date hereof, to the actual knowledge of Carl E. Hirsch,
Steve Smith and Anthony S. Ocepek (the "Corporate Executives") and (ii) at any
time thereafter, the actual knowledge, after reasonable inquiry, of the
Corporate Executives and of the General Manager, Station Managers and Business
Managers of the Owned Stations (collectively, the "Station Executives"). Not
later than ten business days after the execution of this Agreement, Sellers
shall deliver to Buyers a certificate signed by a general partner of Sellers
certifying that, as of the date of such certificate, all representations and
warranties of Sellers made to Sellers' actual knowledge are made with the
meaning given that term in clause (ii) of the immediately preceding sentence.
Such certificate may be accompanied, if necessary, by any supplemental or
amended schedules hereto as may be necessary to correct any errors or omissions
therein because of the failure of Sellers to require the Station Executives to
review this Agreement and the schedules hereto prior to the execution hereof.
To the extent the parties mutually agree in good faith that such corrections
would have been unobjectionable to Buyers during their pre-signing review of
the Schedules had such corrections originally been properly reflected, such
corrections shall be deemed to have been made prior to the execution of this
Agreement, and shall not give rise to any claim for breach, termination, or
damages. In making such determination, the parties shall consider the nature of
the items to which no objection was made on the original Schedules and the
amount of any additional liability related to such items. To the extent that
the parties do not agree after making good faith attempts, such corrections
shall be deemed amendments to the Schedules not giving Buyers any termination
rights or rights with respect to misrepresentations prior to the Closing, but
giving Buyers rights to indemnity to the extent provided in the Escrow
Agreement.
From time to time prior to the Closing, Sellers 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.
8.7 Enforcement of Agreements. Sellers shall use their
reasonable best efforts to perform and carry out all their respective
obligations under, and, if necessary, Sellers shall seek the specific
performance of the transactions contemplated by the Beasley Purchase Agreement
and the NCI Purchase Agreement. Sellers shall use their 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 local marketing
agreements relating to WJHM and, if executed, WOMX. Sellers shall use
reasonable efforts to enter into the Assigned LMA and to cause it to be
assigned, or to provide the rights of Sellers thereunder to Buyers by July 1,
1996 or as soon as practicable thereafter.
8.8 FCC Reports. Sellers 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 Stations Licenses. Copies of each such report and
document filed between the date hereof and the Closing Date shall be furnished
to Buyer promptly after its filing.
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8.9 Updating of Information. Between the date of this Agreement
and the LMA Commencement Date, Sellers will deliver to Buyer, on a monthly
basis within 30 days of the end of each month, information relating to the
operation of the Stations, including weekly sales reports and such other
financial information that may be reasonably requested.
ARTICLE 9
COVENANTS OF BUYERS
9.1 Notification. Buyers shall promptly notify Sellers in
writing of (i) any litigation, arbitration or administrative proceeding pending
or, to its knowledge, threatened against Buyers which challenges the
transactions contemplated hereby or (ii) the failure of Buyers, or any employee
or agent of Buyers 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
Sellers to terminate this Agreement pursuant to Sections 18.1;
9.2 No Inconsistent Action. Buyers shall not take any action
which is materially inconsistent with its obligations under this Agreement.
9.3 Post-Closing Access. Buyers, for a period of five (5)
years following the Closing Date, shall make available during normal business
hours for audit and inspection by Sellers and their 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. Buyers shall at no time dispose of or destroy any such records, files,
documents and correspondence without giving thirty (30) days prior notice to
Sellers to permit Sellers, at their 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 9.3 shall be kept confidential.
9.4 Buyers 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.
ARTICLE 10
JOINT COVENANTS
Buyers and Sellers covenant and agree that , they shall act in
accordance with the following:
10.1 Confidentiality. Each of the Buyers and Sellers shall
each keep confidential all information obtained by it with respect to the other
parties hereto in connection with this Agreement
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and the negotiations preceding this Agreement, and will use such information
solely in connection with the transactions contemplated by this Agreement, and
if the transactions contemplated hereby are not consummated for any reason,
each shall return to each other party hereto, without retaining a copy thereof,
any schedules, documents or other written information obtained from such other
party in connection with this Agreement and the transactions contemplated
hereby 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 or (v) is required to be disclosed under applicable law or
rule, as determined by counsel for the receiving party.
10.2 Cooperation. Buyers and Sellers 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.
10.3 Control of Stations. Prior to Closing, Buyers shall not,
directly or indirectly, control or direct the operations of the Stations. Such
operations, including complete control over Stations programming, employees and
policies, shall be the sole responsibility of Sellers.
10.4 Bulk Sales Laws. Buyers hereby waive compliance by
Sellers with the provisions of the "bulk sales" or similar laws of any state.
Sellers agree to indemnify Buyers and hold them harmless from any and all loss,
cost, damage and expense (including but not limited to, reasonable attorney's
fees) sustained by Buyers as a result of any failure of Sellers to comply with
any "bulk sales" or similar laws.
10.5 Public Announcements. Neither Buyers nor Sellers 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.
10.6 Hart-Scott-Rodino Sellers and Buyers 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.
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10.7 Consulting Agreements. Prior to the execution of this
Agreement, Buyers shall enter into consulting agreements with Messrs. Hirsch,
Ocepek and Thacker.
10.8 Employee Matters. (a) Commencing subsequent to the
execution of the LMAs, Sellers shall make available each Owned Stations' and
WJHM's personnel during normal business hours for Buyers to interview prior to
the LMA Commencement Date, as defined herein. Buyers shall notify Sellers of
the names of the employees to whom Buyers shall offer employment (herein
referred to as "Transferred Employees"). Sellers hereby consent to Buyers
making such offers of employment relating to the Stations subject to the
effectiveness of the LMAs between the parties of even date herewith. Sellers
shall be responsible for all obligations or liabilities to those employees not
offered employment by Buyers, and Buyers shall have no obligations with respect
to those employees (herein referred to as Retained Employees). Buyers agree to
hire Errol Dangler on such terms and conditions as they mutually agree.
(b) Prior to the LMA Commencement Date, as defined
herein, Buyers shall submit confirmation letters to Stations Management,
on-air talent and other key employees which it intends to offer employment to
under Section 10.8, which confirmation letters shall set forth the terms of
employment currently in effect between said employee and Sellers, including,
but not limited to, matters concerning salary, bonuses, vacation time,
non-compete provisions (if any), benefits, termination rights, loans (if any)
and any other pertinent provisions thereof. Receipt of the confirmation
letters signed by the respective management, on-air talent and other key
employees is a condition precedent to Buyers making any offers of continued
employment.
10.9 Condition of Real Estate. Buyers may, at their sole
expense, conduct environmental studies, title examinations, and land surveys
(the "Studies") of the Real Estate. If Buyers notify Sellers within forty-five
(45) days of the date of this Agreement that the Studies disclose an
environmental liability constituting a breach of the representations in Section
6.1.11, evidence encroachments that materially and adversely affect the use
(for the purpose currently used) of the Real Estate, or any other matters that
materially and adversely affect title to the Real Estate, Sellers shall
promptly commence remedial action at their expense to cure the condition giving
rise to such matter and attempt to cure such condition prior to the Closing;
provided that Sellers shall not be obligated to spend (but may choose to spend)
more than $100,000 in the aggregate in its attempts to cure all such
conditions. Sellers shall notify Buyers within thirty (30) days after their
receipt of Buyers' Studies if they determine that they are unable to cure such
conditions for $100,000 or less and chooses not to attempt to cure such
conditions, in which case Buyers may elect (i) to terminate this Agreement or
(ii) to waive such obligations and receive a $100,000 credit at the Closing. If
this Agreement is terminated in accordance with the immediately preceding
sentence, no party shall have any liability to the other with respect to such
termination. Either party may extend the Closing by not more than thirty (30)
days if either reasonably determines that any necessary remedial action can be
completed during such period.
10.10 Compliance with LMAs. Sellers and Buyers shall perform in all
material respects their obligations under the LMAs, when executed. The material
economic terms of the LMAs are attached
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as Exhibit D. The parties shall use best efforts to negotiate in good faith and
execute the Owned Stations LMA and the WJHM AA within 10 business days of the
date hereof.
ARTICLE 11
CONDITIONS OF CLOSING BY BUYER
The obligations of Buyers hereunder are, at their option, subject to
satisfaction, at or prior to the Closing Date, of all of the following
conditions:
11.1 Representations, Warranties and Covenants. All
representations and warranties of Sellers 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.
11.2 Compliance with Agreement. All of the terms, covenants and
conditions to be complied with and performed by Sellers on or prior to the
Closing Date shall have been complied with or performed in all material
respects.
11.3 Third Party Consents and Approvals; Estoppel Certificates.
Sellers have obtained all third-party consents and approvals, if any, required
for the transfer or continuance, as the case may be, of the , Contracts
designated as "essential" on Schedule 1.1.3 (and contracts that would have been
on Schedule 1.1.3 had they been in existence on the date of this Agreement and
that the parties have designated "essential" for purposes of this Section
11.3), and, if requested by Buyers within 30 days of the date of this
Agreement, such third parties have provided estoppel certificates,
non-disturbance agreements, and/or written clarifications of the rights of
Buyers thereunder, all in form and substance reasonably satisfactory to Buyers.
11.4 Closing Certificates. Buyers shall have received a
certificate, dated as of the Closing Date, from each of the Sellers, executed
by a general partner of Sellers to the effect of Sections 11.1 and 11.2.
11.5 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 15.1(e), below, and each such FCC consent shall
have become a Final Order (as defined in Section 4.1).
(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
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contemplated by this Agreement shall have been obtained.
11.6 Adverse Proceedings. No injunction, order, decree or
judgment of any court, agency or other Governmental Entities shall have been
rendered against Sellers or Buyers which would render it unlawful, as of the
Closing Date, to effect the transactions contemplated by this Agreement in
accordance with its terms.
11.7 Closing Documents. Sellers shall have delivered or
caused to be delivered to Buyers, on the Closing Date, all special warranty
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 Buyers, effecting the sale,
transfer, assignment and conveyance of the Stations Assets to Buyers.
11.8 Lodestar Lease. Sellers shall deliver written confirmation
satisfactory to Buyers that (i) the FM License Agreement, dated May ___, 1990,
by and between Lodestar Tower Orlando, Ltd. and Sellers, as successor in
interest to Augusta Broadcasters, Inc. (The "Lodestar Lease") has been renewed
in accordance with Article Twenty of the Lodestar Lease, (ii) that the
representations and warranties set forth in Section 6.1.21 of this Agreement
are true as of the Closing Date with respect to the Lodestar Lease (without
exception), and (iii) the terms and conditions of the renewed Lodestar Lease
are substantially similar to the terms and conditions of the original Lodestar
Lease.
11.9 WOMX/WJHM. Sellers shall have consummated the transactions
contemplated by the NCI Purchase Agreement and, subject to Section 4.1, the
transactions contemplated by the Beasley Purchase Agreement.
ARTICLE 12
CONDITIONS OF CLOSING BY SELLERS
The obligations of Sellers hereunder are, at their option, subject to
satisfaction, at or prior to the Closing Date, of all of the following
conditions:
12.1 Representations, Warranties and Covenants. All representations
and warranties of Buyers 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.
12.2 Compliance with Agreement. All the terms, covenants, and
conditions to be complied with and performed by Buyers on or prior to the
Closing Date shall have been complied with or performed in all material
respects.
12.2.1 Certifications, etc. Sellers shall have received
a certificate, dated as of the Closing Date, from each of the Buyers, executed
by an executive officer of Buyers to the effect of
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Sections 12.1 and 12.2.
12.3 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 4.1).
(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.
12.4 Adverse Proceedings. No injunction, decree or judgment of
any court, agency or other governmental entities shall have been rendered
against Buyers or Sellers which would render it unlawful, as of the Closing
date, to effect the transactions contemplated by this Agreement in accordance
with its terms.
12.5 Registration Rights. CBC shall have executed and delivered
the Registration Rights Agreement attached hereto as Exhibit A.
12.6 Closing Documents. Sellers shall have delivered or
caused to be delivered to Buyers, on the Closing Date, an assumption agreement
with respect to Assumed Liability reasonably satisfactory in form and substance
to Sellers.
12.7 WOMX/WJHM. Sellers shall have consummated the transactions
contemplated by the NCI Purchase Agreement and, subject to Section 4.1, the
transactions contemplated by the Beasley Purchase Agreement.
ARTICLE 13
TRANSFER TAXES: FEES AND EXPENSES
13.1 Expenses. Except as set forth in Sections 13.2 and,
13.3 below, each party hereto shall be solely responsible for all costs and
expense incurred by it in connection with the negotiation, preparation and
performance of and compliance with the terms of this Agreement.
13.2 Transfer Taxes and Similar Charges. All costs of
transferring the Stations Assets in accordance with this Agreement, including
recordation, transfer and documentary taxes and fees, and any excise, sales or
use taxes, shall be borne equally by Buyers and Sellers. Buyers and Sellers
shall, in good faith, attempt to calculate all such taxes and fees prior to
Closing and to settle their respective
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obligations therefore on or before the Closing Date.
13.3 Governmental Filing or Grant Fees. Any filing or grant
fees imposed by any governmental authority the consent of which is required for
the consummation of the transactions contemplated hereby, including but not
limited to, the FCC, the FTC, and the Department of Justice shall be borne
equally by Buyers and Sellers.
ARTICLE 14
LIQUIDATED DAMAGES, SPECIFIC PERFORMANCE, LETTER OF CREDIT
14.1 (a) If this Agreement is terminated by Sellers pursuant to
Section 15.1(b)(ii) the parties agree and acknowledge that Sellers will suffer
damages that are not practicable to ascertain. Accordingly, in such event,
Sellers shall be entitled to the sum of $18,000,000 as liquidated damages,
payable solely and exclusively by drawing upon the Earnest Money Letter of
Credit and through the delivery to Sellers, of the sum of $8,000,000 via wire
transfer of immediately available funds. 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 15.1(b)(ii). In such event, Buyers shall
immediately instruct the Earnest Money Escrow Agent to deliver the Escrow Money
Letter of Credit to Sellers to permit it to draw upon the Earnest Money Letter
of Credit and shall deliver to Sellers , via wire transfer of immediately
available funds, the sum of $8,000,000 to be disbursed by Sellers among the
Sellers as they shall agree. Sellers agree that, to the fullest extent
permitted by law, the right to draw upon the Earnest Money Letter of Credit and
to receive the additional sum of $8,000,000 from Buyer as provided in this
Section 14.1 shall be their sole and exclusive remedy if the Closing does not
occur with respect to any damages whatsoever that Sellers may suffer or allege
to suffer 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 of Buyers contained in this Agreement and to be made or performed at
or prior to the Closing. Except for a termination pursuant to Section
15.1(b)(ii) (for which the sole recourse of Sellers shall be as provided in
this Section 14.1) or pursuant to Section 15.1(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 to their breaches
of this Agreement occurring prior to such termination.
14.2 Specific Performance. In addition to any other remedies which
Buyers may have at law or in equity, Sellers hereby acknowledge that the
Stations Assets are unique, and that the harm to Buyers resulting from a breach
by Sellers of their obligations to sell the Stations Assets to Buyers cannot be
adequately compensated by damages. Accordingly, Sellers agree that Buyers
shall have the right to have this Agreement specifically performed by Sellers
and hereby agree not to assert any objections to the imposition of the remedy
of specific damages by any court of competent jurisdiction.
14.3 Letter of Credit.
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<PAGE> 33
14.3.1 Not later than five business days after the execution
of this Agreement, Buyers shall deposit an original, irrevocable letter of
credit, which shall be in a form reasonably satisfactory to Buyers and Sellers
(the "Earnest Money Letter of Credit"), issued by Bankers Trust Company or
another lender reasonably acceptable to Sellers, for the sum of $10,000,000
with an escrow agent reasonably satisfactory to Buyers and Sellers (the
"Earnest Money Escrow Agent") to be held in escrow in accordance with the
Earnest Money Escrow Agreement substantially ~ the form of Exhibit B hereto to
be entered into on or before such date of deposit by and among Buyers, Sellers
and the Earnest Money Escrow Agent.
14.3.2 The Earnest Money Letter of Credit shall be held by
the Earnest Money Escrow Agent in accordance with the terms of the Earnest
Money Escrow Agreement. Subject to satisfaction of the conditions to the
Sellers' obligations set forth in Article 12, at the Closing Sellers shall
instruct the Earnest Money Escrow Agent to release and return the Earnest Money
Letter of Credit to Buyers for cancellation.
14.3.3 If this Agreement is terminated as provided in
Section 15.1(b)(ii), Buyers shall instruct the Earnest Money Escrow Agent to
release the Earnest Money Letter of Credit to Sellers, all as provided in
Section 14.1. In all other events, Sellers shall join in instructions to the
Earnest Money Escrow Agent to return the Earnest Money Letter of Credit to
Buyers.
ARTICLE 15
TERMINATION RIGHTS
15.1 Termination. This Agreement may be terminated at any time
prior to Closing as follows:
(a) by the mutual consent of Buyers and Sellers;
(b) by written notice of (i) Buyers to Sellers if Sellers
breach in any material respect any of their representations or warranties or
default in any material respect in the observance or in the due and timely
performance of any of their 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 Buyers or (ii) Sellers to the Buyers if
Buyers breach in any material respect any of their representations or
warranties or default in any material respect in the observance or in the due
and timely performance of any of their 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 Sellers; but such notice and cure period
shall not apply in the case of Buyers' or Sellers' failure to consummate the
transactions in accordance with the terms and times specified in Section 4.1 of
this Agreement.
(c) by Buyers 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
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<PAGE> 34
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 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 Buyers to Sellers if the FCC
Consents contain a condition on Buyers that (i) is unrelated to Buyers'
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;
(f) by written notice of Buyers to Sellers, or by Sellers
to the Buyers, if the Closing shall not have been consummated on or before June
1, 1997, subject to extensions as provided in Sections 4.1, 10.9 and 16.1;
Notwithstanding the foregoing, no party hereto may effect a termination hereof
if such party is in material default or breach of this Agreement.
ARTICLE 16
16.1 Risk of Loss. The risk of loss or damage to the Stations
Assets shall be upon Sellers at all times prior to the Closing Date. In the
event of loss or damage, Sellers shall promptly notify Buyers thereof and if
the lost or damaged Stations Assets are capable of being replaced or repaired
for an aggregate amount less than $100,000, then Sellers shall, at their sole
cost and expense, replace or repair such Stations Assets prior to the Closing
Date or deliver to Buyer at the Closing an amount in cash equal to the cost of
replacement or repair of such Station Assets, as mutually agreed in good faith
by Buyers and Sellers. Notwithstanding the foregoing, if the amount required
to replace or repair such Station Assets exceeds $100,000, Sellers may elect
not to replace or repair such Station Assets, provided, however, that in such
event Buyers, at their options, may elect to terminate this Agreement (such
termination to have the effect specified in Section 14.1) or agree to accept
from Seller, at the Closing, an amount in cash equal to the cost to replace or
repair such Station Assets, as mutually agreed in good faith by Buyers and
Sellers and waive any default or breach with respect to the loss or damage.
Sellers shall use their best efforts to avoid any of the Stations being off the
air for three (3) or more consecutive days or five (5) or more days in any
thirty (30) day period. Either party may extend the Closing Date by up to 30
days in order to allow Sellers to complete the repair or replacement. With
respect to Acts of God which may adversely affect Stations operations, Sellers
shall use their best efforts to reinstate Stations operations within 30 days
and shall have all of the Stations operating at not less than seventy percent
(70%) of maximum authorized effective radiated power by the Closing Date.
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<PAGE> 35
ARTICLE 17
MISCELLANEOUS PROVISIONS
17.1 Survival of Representations and Warranties. The
representations and warranties contained in this Agreement, and in any
schedule, instrument or certificate delivered pursuant hereto, shall survive
the Closing until the later of March 31, 1998 or one year after the Closing
Date; provided, however, that (a) the representations and warranties
incorporated by reference from the Beasley Purchase Agreement pursuant to
Section 6.1.21 shall expire 11 months after the closing under that agreement
and (b) the representations and warranties incorporated by reference from the
NCI Purchase Agreement pursuant to Section 6.1.21 shall expire 11 months after
the closing under that agreement. Sellers shall not have any liability in
respect of breaches of the representations and warranties contained herein
except to the extent specified in the Escrow Agreement for claims asserted
prior to such expiration dates in accordance with the Escrow Agreement. The
Escrow Agreement shall be in substantially the form of Exhibit C hereto and
shall be entered into among Buyers, Sellers and an escrow agent reasonably
satisfactory to Buyers and Sellers.
17.2 Certain Interpretive Matters and Definitions. Unless the
context otherwise requires, (i) all references to Sections, Articles or
Schedules are to Sections, Articles or Schedules of or to this Agreement, (ii)
each term defined in this Agreement has the meaning assigned to it, (iii) each
accounting term not otherwise defined in this Agreement has the meaning
assigned to it in accordance with generally accepted accounting principles as
in effect on the date hereof, (iv) "or" is disinjunctive but not necessarily
exclusive, and (v) words in the singular include the plural and vice versa, and
(vi) the term "Affiliate" has the meaning given it in Rule 12b-2 of Regulation
12B under the Securities Exchange Act of 1934, as amended. All references to
"$" or dollar amounts will be to lawful currency of the United States of
America.
17.3 Further Assurances. At and after the Closing, Sellers
shall from time to time, at the request of and without further cost or expense
to Buyers, execute and deliver such other instruments of assignment, conveyance
and transfer and take such other actions as may reasonably be requested in
order to more effectively consummate the transactions contemplated hereby, and
Buyers shall from time to time, at the request of and without further cost or
expense to Sellers, execute and deliver such other instruments and take such
other actions as may reasonably be requested in order to more effectively
assume the Assumed Liabilities.
17.4 Audited Financial Statements. At all times after the date
hereof, Sellers shall, and shall cause their representatives (including their
independent public accountants) to, cooperate in all reasonable respects with
the efforts of Buyers and their independent auditors to prepare such audited
and interim unaudited financial statements of the Stations as Buyers may
determine are necessary in connection with any filing required to be made by it
or CBC under the Exchange Act or the Securities Act. Sellers shall execute and
deliver to Buyers' independent accountants such customary management
representation letters as they may require as a condition to their ability to
sign an unqualified report upon the audited financial statements of the
Stations for the periods for which such
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<PAGE> 36
financial statements are required under the Exchange Act or the Securities Act.
Sellers shall cause their independent public accountants to make available to
Buyers and its representatives all of their work papers related to the
financial statements or Tax Returns of Sellers (to the extent they relate to
the Stations) and to provide Buyers' independent public accountants with full
access to those personnel who previously have been involved in the audit or
review of Sellers' financial statements or Tax Returns.
17.5 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 Buyers from any of their obligations or liabilities hereunder
(a) nothing in this Agreement shall limit Buyers' or CBC's ability to sell or
transfer any or all of their respective assets (whether by sale of stock or
assets, or by merger, consolidation or otherwise) without the consent of
Sellers, (b) nothing in this Agreement shall limit Buyers' ability to assign
the Station Licenses (including the right to acquire the Station Licenses at
the Closing) to Chancellor Broadcasting Licensee Company or any other
subsidiary of Buyers without the consent of Sellers, and (c) nothing in this
Agreement shall limit Buyers' ability to make a collateral assignment of its
rights under this Agreement to any institutional lender that provides funds to
Buyers without the consent of Sellers. Sellers shall execute an acknowledgment
of such assignment(s) and collateral assignments in such forms as Buyers 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 Buyers 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 Buyers' and/or CBC's successors and assigns.
17.6 Amendments. No amendment, waiver of compliance with any
provision or condition hereof or consent pursuant to this Agreement shall be
effective unless evidenced by an instrument in writing signed by the party
against whom enforcement of any waiver, amendment, change, extension or
discharge is sought.
17.7 Headings. The headings set forth in this Agreement are
for convenience only and will not control or affect the meaning or construction
of the provisions of this Agreement.
17.8 Governing Law; The construction and performance of this
Agreement shall be governed by the laws of the State of New York without
giving effect to the choice of law provisions thereof.
17.9 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 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:
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<PAGE> 37
(a) In the case of Sellers, to:
Carl E. Hirsch
Chairman, President and CEO
OmniAmerica Communications, Inc.
11111 Santa Monica Boulevard
Los Angeles, California 90025
With a copy to:
F. Howard Mandel, Esq.
Thompson Hine & Flory, P.L.L.
3900 Society Center
127 Public Square
Cleveland, Ohio 44114
(b) In the case of Buyers and/or CBC, to:
Steven Dinetz
President & Chief Executive Officer
Chancellor Broadcasting Company
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, FL 33131
and
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attention: Lawrence D. Stuart, Jr.
and
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<PAGE> 38
Weil, Gotshal & Manges, LLP
100 Crescent Court
Suite 1300
Dallas, Texas 75201
Attention: Jeremy W. Dickens
17.10 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 Buyers under this Agreement is $100,000 (or more) greater than
the value of the consideration to be received by Buyers on or after the LMA
Commencement Date with respect to the Stations, Sellers shall pay Buyers the
excess (other than the first $100,000) within 30 days after the LMA
Commencement Date.
17.11 Schedules. The schedules and exhibits attached to this
Agreement and the other documents delivered pursuant hereto are hereby made a
part of this Agreement as if set forth in full herein.
17.12 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.
17.13 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.
17.14 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.
17.15 Collection of Accounts Receivable. (a) The accounts
receivable of the Stations generated prior to the LMA Commencement Date (the
"Pre-LMA Receivables") shall be and remain the property of Sellers. Within 5
business days after the LMA Commencement Date, Sellers shall furnish Buyers
with a list (certified by the Chief Financial Officer of Sellers to be a true
and complete list) of all accounts receivable of Sellers which remain
outstanding as of the LMA Commencement Date. Buyers agree that if, after the
LMA Commencement Date , they shall receive payment, directed to Sellers, in
respect to any Pre-LMA Receivable, Buyers shall remit to Sellers, within five
(5) business days after the end of each month, any amounts received by Buyers
during the preceding month (whether or not directed on their face to Sellers),
which are in payment for advertising broadcast by the Stations prior to the LMA
Commencement Date.
(b) During the period commencing on the LMA
Commencement Date and ending ninety (90) days thereafter Buyers shall use
reasonable efforts, consistent with Sellers'
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<PAGE> 39
current billing and collection practices and in the ordinary course of the
business, to assist Sellers in the collection of any outstanding Pre- LMA
Receivables; provided, however, that, notwithstanding the foregoing, Buyers
shall be under no obligation to commence litigation, employ counsel or engage
the services of a collection agency to effect collection. Buyers shall not
make any compromise, adjustment, concession or settlement of any Pre-LMA
Receivable without Sellers' express written consent and Buyers shall be under
no obligation to compromise, adjust, concede or settle any accounts receivable
generated after the LMA 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 Buyers after
the LMA 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).
(c) Sellers agree to remit to Buyers within 5
business days after the end of each month, any amounts received by Sellers
during the preceding month (whether or not directed on their face to Buyers)
which are in payment for advertising broadcast by the Stations after the LMA
Commencement Date.
(d) Buyers shall not set-off any claim or amount
against any of the Pre-LMA Receivables.
17.16 Indemnification by Buyers. From and after the Closing,
but subject to the conditions and limitations set forth in this Agreement,
Sellers and their respective successors and assigns and their officers,
directors, stockholders, partners, employees and agents (collectively, the
"Indemnitees") shall be entitled to reimbursement from the Buyers, jointly and
severally, for any and all losses, costs, damages, claims, fines, penalties,
expenses (including, without limitation, reasonable attorneys' fees and
expenses), amounts paid in settlement, court costs, out-of-pocket costs, costs
of investigation, and reasonable costs of litigation (including, without
limitation, reasonable fees and expenses of accountants, investment bankers and
other experts) (collectively, "Damages") actually incurred or suffered by an
Indemnitee to the extent resulting from (a) any inaccuracy in any
representation or warranty of Buyers contained in this Agreement or in any
schedule, instrument or certificate delivered pursuant thereto, (b) any breach
of any covenant or agreement of the Buyers contained in the Agreement and
required to be performed by the Buyers at or prior to the Closing and (c) any
Assumed Liabilities.
17.17 Recapitalization, etc. In the event that, on or prior to the
Closing Date, (i) CBC engages in any recapitalization of its common stock or
(ii) merges or consolidates with any other person, or sells all or
substantially all its assets to any other person, then the Sellers shall
receive (on a per-share equivalent basis, as determined in good faith by the
Board of Directors of CBC or the surviving, resulting or transferee person), in
lieu of the shares of CBC Class A common stock to be delivered pursuant to
Section 3.1 hereof, consideration identical to the consideration paid to the
holders of the CBC Class A common stock in such recapitalization, merger,
consolidation or asset
39
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sale.
17.18 Effect of LMAs. Buyers shall not have any claim or right,
including, without limitation, any right to terminate this Agreement or any
claim for Damages (as defined in the Escrow Agreement), to the extent that
Buyers' operation of the Stations under or in accordance with the LMAs (i)
causes any representation or warranty of the Sellers to be rendered inaccurate
or (ii) conflicts with any covenant to be complied with by Sellers on or prior
to the Closing Date.
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<PAGE> 41
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed and delivered as of the date first above written.
OMNIAMERICA GROUP
By: OmniAmerica Communications, Inc.
Its Managing General Partner
By: /s/ CARL E. HIRSCH
-------------------------------------
Carl E. Hirsch, President and
Chief Executive Officer
WAPE-FM LICENSE PARTNERSHIP
By: Its Managing General Partner
By: /s/ CARL E. HIRSCH
-------------------------------------
Name: CARL E. HIRSCH
-----------------------------------
WFYV-FM LICENSE PARTNERSHIP
By: Its Managing General Partner
By: /s/ CARL E. HIRSCH
-------------------------------------
Name: CARL E. HIRSCH
-----------------------------------
WEAT-AM LICENSE PARTNERSHIP
By: Its Managing General Partner
By: /s/ CARL E. HIRSCH
-------------------------------------
Name: CARL E. HIRSCH
-----------------------------------
41
<PAGE> 42
(continued) WEAT-FM LICENSE PARTNERSHIP
By: Its Managing General Partner
By: /s/ CARL E. HIRSCH
-------------------------------------
Name: CARL E. HIRSCH
-----------------------------------
WXXL LICENSE PARTNERSHIP
By: Its Managing General Partner
By: /s/ CARL E. HIRSCH
-------------------------------------
Name: CARL E. HIRSCH
-----------------------------------
WOLL LICENSE PARTNERSHIP
By: Its Managing General Partner
By: /s/ CARL E. HIRSCH
-------------------------------------
Name: CARL E. HIRSCH
-----------------------------------
WJHM-FM LICENSE PARTNERSHIP
By: Its Managing General Partner
By: /s/ CARL E. HIRSCH
-------------------------------------
CHANCELLOR BROADCASTING COMPANY
By: /s/ STEVEN DINETZ
-------------------------------------
Steven Dinetz
President and
Chief Executive Officer
42
<PAGE> 43
(continued) CHANCELLOR RADIO BROADCASTING COMPANY
By: /s/ STEVEN DINETZ
-------------------------------------
Steven Dinetz
President and
Chief Executive Officer
43
<PAGE> 44
PROGRAM CONSULTING AGREEMENT
THIS PROGRAM CONSULTING AGREEMENT ("Agreement") is dated June 28, 1996,
and is entered into between CHANCELLOR BROADCASTING COMPANY and CHANCELLOR
RADIO BROADCASTING COMPANY, both Delaware corporations (collectively,
"Chancellor"), and OMNIAMERICA GROUP, a Massachusetts General Partnership
("OmniAmerica").
RECITALS:
A. OmniAmerica entered into an Asset Purchase Agreement, dated
February 16, 1996, with Beasley FM Acquisition Corp. ("Beasley") to acquire
radio station WJHM(FM), Daytona Beach, Florida ("WJHM" or "Station").
B. OmniAmerica has entered into a Local Marketing Agreement for
WJHM with Beasley ("Beasley LMA"), dated March 15, 1996, providing Beasley
makes available to OmniAmerica substantially all of the broadcast time of the
Station pending the consummation of the transactions between Beasley and
OmniAmerica.
C. Chancellor has entered into an Asset Purchase Agreement
("Purchase Agreement"), dated May 14, 1996, with OmniAmerica Group.
D. Chancellor has entered into a Sales Agreement with OmniAmerica
with respect to radio station WJHM-FM in concert with this Agreement.
E. OmniAmerica wishes to retain Chancellor to provide programming
consulting 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,
including the requirement that ultimate control by the Station must be
maintained by the Licensee.
THEREFORE, in consideration of the mutual covenants herein contained,
the parties agree as follows:
1. Agreement Term. The term of this Agreement will begin on July
1, 1996 (the "Commencement Date"), and will continue until OmniAmerica acquires
the assets of the Station unless earlier terminated in accordance with the
provisions set forth herein.
2. Services. During the term of this Agreement, Chancellor shall
provide OmniAmerica with consultation on programming including, but not limited
to format, music selection, program development, program acquisition, on-air
talent, program production, and program equipment and facilities.
<PAGE> 45
Program Consulting Agreement
Page 2
- ----------------------------
3. Compensation. Omni agrees that it will pay to Chancellor
compensation as set forth in Schedule A for the services provided as set forth
in paragraph 2 above.
4. OmniAmerica and Chancellor agree to conform the Station's
policies and practices to FCC rules and regulations, including the requirement
that the Licensee will maintain complete control of the Station and its
programming.
5. Chancellor acknowledges that during the course of its regular
duties as a consultant, it will have access to confidential information and
trade secrets including, but not limited to financial information relating to
the Station and OmniAmerica; data relating to formats; music studies
commissioned by OmniAmerica; concepts; strategies; acquisitions; OmniAmerica's
business decisions affecting the said Station or Company's plans regarding
OmniAmerica's structure; financing, personnel; plans of mergers; acquisitions;
sale of Station(s) owned by OmniAmerica, information relating to format changes
in any radio station owned by OmniAmerica; methods of doing business and other
"know how" or business information which is not in the public domain, which
said information Chancellor acknowledges to be a valuable trade asset
("Confidential Information") of OmniAmerica, except for common general
practices in the radio industry or knowledge in the public domain. Chancellor
shall not at any time during the term of this Agreement or at any time
thereafter for any reason, directly or indirectly, use for itself or others, or
divulge to others any said trade secrets or Confidential Information or data of
OmniAmerica or Beasley obtained as a result of his employment. Chancellor
acknowledges that OmniAmerica is without an adequate remedy at law in the event
this covenant of confidentiality is violated. In the event this
covenant of confidentiality is violated, Chancellor agrees that OmniAmerica
shall be entitled to exercise any other rights or remedies it may have at law
or in equity in addition to injunctive relief to prevent the continued
violation of this provision. OmniAmerica's remedies as provided in this
paragraph 5 shall be OmniAmerica's sole and exclusive remedies for Chancellor's
breach of this Agreement.
6. All such notices and other communications which are required
or permitted hereunder will be effective upon receipt and shall be given to the
following addresses:
If to Chancellor:
----------
One copy to: One copy to:
Steven Dinetz Matthew Leibowitz
President & CEO Leibowitz & Associates, P.A.
Chancellor Radio Broadcasting Company One S.E. Third Avenue
12655 N. Central Expressway Suite 1450
Suite 405 Miami, Florida 33131
Dallas, Texas 75243
<PAGE> 46
Program Consulting Agreement
Page 3
- ----------------------------
If to OmniAmerica:
-----------
One copy to: One copy to:
Carl E. Hirsch F. Howard Mandel
Chairman, President & CEO Thompson Hine & Flory, P.L.L.
OmniAmerica Communications, Inc. 3900 Society Center
11111 Santa Monica Blvd. 127 Public Square
Suite 220 Cleveland, Ohio 44114-1216
Los Angeles, CA 9005
7. This Agreement shall not be assigned by either party.
8. This Agreement constitutes the entire understanding of the
parties with respect to the subject matter hereof, and shall not be modified,
supplemented or terminated except in writing signed by Chancellor and
OmniAmerica.
9. No failure on the part of any party hereto to exercise and no
delay in exercising any right, power or remedy hereunder will operate as a
waiver thereof, nor will any single or partial exercise of any right, power or
remedy.
10. This Agreement shall be deemed to have been executed and
entered into in the State of New York and shall be construed, enforced and
performed in accordance with the laws thereof.
11. It is the intention of the parties that this Agreement operate
as a sealed instrument.
12. This Agreement shall be void and of no further effect in the
event the Purchase Agreement is terminated prior to the occurrence of the
Closing thereunder.
<PAGE> 47
Program Consulting Agreement
Page 4
- ----------------------------
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed, all as of the date first written above.
Witness: CHANCELLOR BROADCASTING COMPANY
By:
- -------------------------------- -----------------------------------------
Steven Dinetz
President & CEO
Witness: CHANCELLOR RADIO
BROADCASTING COMPANY
By:
- -------------------------------- -----------------------------------------
Steven Dinetz
President & CEO
Witness: OMNIAMERICA GROUP
By:
- -------------------------------- -----------------------------------------
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Program Consulting Agreement
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SCHEDULE A
[INTENTIONALLY LEFT BLANK]
<PAGE> 49
SALES AGREEMENT
This SALES AGREEMENT ("Agreement") is made and entered into as of the
Commencement Date set out in Paragraph 3 below, by and between OMNIAMERICA
GROUP, a Massachusetts General Partnership ("OmniAmerica"); and CHANCELLOR
BROADCASTING COMPANY and CHANCELLOR RADIO BROADCASTING COMPANY, both Delaware
Corporations (collectively, "Chancellor").
WHEREAS, on February 16, 1996, OmniAmerica entered into that certain
Asset Purchase Agreement (the "Beasley Purchase Agreement") with WJHM-FM
License Limited Partnership and Beasley FM Acquisition Corp. (collectively,
"Licensee"), the licensee of radio station WJHM(FM), licensed to Daytona Beach,
Florida (the "Station") pursuant to a license issued by the Federal
Communications Commission ("FCC"), providing for the purchase by OmniAmerica of
all assets which are used or useful in connection with the operation of the
Station;
WHEREAS, on March 15, 1996, OmniAmerica entered into that certain
Local Marketing Agreement (the "Beasley LMA") with Licensee, providing that
Licensee makes available to OmniAmerica substantially all of the broadcast time
of the Station pending the consummation of the transactions contemplated by the
Beasley Purchase Agreement;
WHEREAS, on May 14, 1996, OmniAmerica and Chancellor entered into an
Asset Purchase Agreement (the "OmniAmerica/Chancellor Asset Purchase
Agreement"), providing for, among other things, the purchase of the Station by
Chancellor from OmniAmerica subsequent to the purchase of the Station by
OmniAmerica;
WHEREAS, OmniAmerica has available commercial advertising time on the
Station under the provisions of the Beasley LMA; and
WHEREAS, Chancellor desires to purchase the Station's commercial
advertising time inventory in bulk for the purpose of reselling such inventory
on a retail basis pending the consummation of the transactions contemplated by
the OmniAmerica/Chancellor Asset Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, and intending to be fully bound hereby, OmniAmerica and
Chancellor hereby agree as follows:
1. Commercial Time Sale.
In order that the Station may more efficiently serve the
public interest, convenience and necessity, Chancellor shall acquire all
available commercial advertising time on the Station and shall have the
exclusive right to resell such time to third parties. The commercial
advertising time that is being sold to Chancellor for resale to third parties
is described on Attachment A to this Agreement. The parties agree that at no
time will the Station be operated so as to cause the advertising time to
constitute more than fifteen percent (15%) of the total broadcast time of the
Station in any seven (7)
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WJHM Sales Agreement
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day period. All advertising provided to OmniAmerica for broadcast shall be
placed in current station breaks and OmniAmerica agrees to modify the current
schedule of station breaks as Chancellor may reasonably request. The
advertising shall be sold and placed by Chancellor at breaks in the Station's
programming. In the event OmniAmerica preempts, deletes or otherwise rejects
any commercial advertising provided by Chancellor, or if Chancellor's
commercial advertising is not broadcast due to a technical failure of
facilities, OmniAmerica shall attempt in good faith to broadcast "makegood"
commercial announcements or to provide a pro rata reduction in Chancellor's
monthly payments for each unaired commercial announcement as determined by
Chancellor. During the term of this Agreement, OmniAmerica shall not sell any
airtime on the Station, and shall air, subject to OmniAmerica's review and
preemption rights stated herein, the material contained in the commercial
advertising time sold by Chancellor. Chancellor agrees to furnish OmniAmerica
with copies of all advertising contracts entered into with respect to the sale
of advertising on the Station.
2. Payments.
In consideration of the sale to Chancellor of the commercial
advertising on the Station, Chancellor agrees to pay OmniAmerica the amounts
set forth at the terms described in Attachment B hereto.
3. Term.
The term of this Agreement shall commence on July 1, 1996 (the
"Commencement Date") and shall end on the earlier of: (i) the date of
consummation of the transaction contemplated in the OmniAmerica/Chancellor
Asset Purchase Agreement; or (ii) the date of termination of the
OmniAmerica/Chancellor Asset Purchase Agreement in accordance with the terms
thereof. Notwithstanding the foregoing, this Agreement may be terminated by
either party in the event of a material breach of any of the terms of this
Agreement by the other party, which breach is not cured within ten (10)
business days following delivery of written notice of such breach together with
a demand that it be cured.
4. OmniAmerica Control and Obligations.
(a) Notwithstanding any contrary provision contained in
this Agreement, and consistent with OmniAmerica's obligations pursuant to the
Communications Act of 1934, as amended (the "Act"), and the rules, regulations
and policies of the FCC promulgated thereunder, as well as the terms of the
Beasley LMA, OmniAmerica shall have the right to delete, preempt or demand
notification of any commercial advertising provided by Chancellor which it
regards as being unsuitable for broadcast or the broadcast of which it believes
would be contrary to the public interest.
(b) During the term of this Agreement, decisions
regarding the program format of the Station, including the presentation of
news, information, public service messages and other
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WJHM Sales Agreement
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program content, shall remain the sole and exclusive province and
responsibility of Licensee. it is further understood and agreed that Licensee
shall continue to retain authority and control over the operational respects of
the Station during the term of this Agreement, to respond to any telephone
calls or other inquiries relating to the Station's operation, to be responsible
for the assessment of the needs and interests of the community and the
broadcast of programs responsive to such needs and interests. In addition,
Licensee shall insure that all programming continues to meet all federal, state
and local laws, including those that govern political broadcast time,
presentation of lottery material, proper sponsor identification, and other
programming in the public interest. Chancellor agrees that all such commercial
advertising time sold by Chancellor will be in compliance with all such
applicable rules and regulations, and Chancellor will cooperate with
OmniAmerica in meeting such obligations.
(i) Any commercial advertising time sold by Chancellor
under this Agreement for broadcast by OmniAmerica which contains material that
deals with contests, similar commercial promotions and related schemes, public
ballot or referendum questions, or addresses controversial issues of public
importance shall be available for review to OmniAmerica at least two (2)
business days in advance of any scheduled broadcast.
(ii) Chancellor agrees that it will at all times proceed
in good faith to assure compliance with the Federal Trade Commission rulings on
installment sales and other advertising practices.
5. Accounts Receivable.
(a) The accounts receivable of the Station generated
prior to the Commencement Date (the "Pre-Sales Agreement Receivables") shall be
and remain the property of OmniAmerica. Within 5 business days after the
Commencement Date, OmniAmerica shall furnish Chancellor with a list (certified
by the Chief Financial Officer of OmniAmerica to be a true and complete list)
of all accounts receivable of OmniAmerica which remain outstanding as of the
Commencement Date. Chancellor agrees that if, after the Commencement Date, it
shall receive payment, directed to OmniAmerica, in respect to any Pre-Sales
Agreement Receivable, Chancellor shall remit to OmniAmerica, 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
OmniAmerica), which are in payment for advertising broadcast by the Station
prior to the Commencement Date.
(b) During the period commencing on the Commencement Date
and ending ninety (90) days thereafter Chancellor shall use reasonable efforts,
consistent with OmniAmerica's current billing and collection practices and in
the ordinary course of the business, to assist OmniAmerica in the collection of
any outstanding Pre-Sales Agreement 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-Sales Agreement
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WJHM Sales Agreement
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Receivable without OmniAmerica'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-Sales Agreement Receivable. Absent
written evidence that an account debtor owing a Pre-Sales Agreement Receivable
is disputing in good faith any portion of such Pre-Sales Agreement 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-Sales Agreement Receivable which is then outstanding (with each
such payment received from such account debtor to be applied first to the
most-aged Pre-Sales Agreement Receivable then owing from such account debtor).
(c) OmniAmerica agrees to remit to Chancellor within 5
business days after the end of each month, any amounts received by OmniAmerica
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-Sales Agreement Receivables.
6. Sales and Related Functions.
Chancellor shall maintain its own staff whose functions shall
include, but not be limited to selling advertising availabilities on the
Station, marketing, traffic, promotions, billing and collections. Chancellor
shall be solely responsible for the compensation and supervision of its
employees.
7. Force Majeure.
Subject to any credits owed to Chancellor, neither Chancellor
nor OmniAmerica shall incur any liability to each other or any other party
because of Chancellor's failure to sell airtime or deliver commercial matter or
OmniAmerica's failure to broadcast any or all commercial matter provided to
OmniAmerica because of: (a) failure of facilities; (b) labor disputes; or (c)
causes beyond the control of the party so failing to broadcast or deliver.
8. Indemnification.
(a) Chancellor agrees to defend, indemnify and hold
harmless OmniAmerica for any claim, loss, liability, forfeiture, obligation and
attorneys' fees incurred by OmniAmerica as a direct or indirect result of
Chancellor's provision of advertising to the Station or as a direct or indirect
result of a breach of any of Chancellor's obligations under this Agreement, and
against any liability, damage
<PAGE> 53
WJHM Sales Agreement
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or loss for libel, defamation of character, any violation of rights of privacy
or infringement of copyrights or proprietary rights or any other cause of
action or any forfeiture imposed by the FCC or other governmental authority to
the extent arising from Chancellor's provision of advertising to the Station.
This indemnification shall survive termination of this Agreement.
(b) OmniAmerica agrees to defend, indemnify and hold
harmless Chancellor for any claim, loss, liability, forfeiture, obligation and
attorneys' fees incurred by Chancellor as a direct or indirect result of
OmniAmerica's provision of programming to the Station or as a direct or
indirect result of a breach of any of OmniAmerica's obligations under this
Agreement, and against any liability, damage or loss for libel, defamation of
character, any violation of rights of privacy or infringement of copyrights or
proprietary rights or any other cause of action or any forfeiture imposed by
the FCC or other governmental authority to the extent arising from
OmniAmerica's provision of programming to the Station. This indemnification
shall survive termination of this Agreement.
9. 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 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:
IF TO OMNIAMERICA:
Carl E. Hirsch
Chairman, President and CEO
OmniAmerica Communications, Inc.
11111 Santa Monica Boulevard
Los Angeles, California 90025
WITH COPY (WHICH SHALL NOT CONSTITUTE NOTICE):
F. Howard Mandel, Esq.
Thompson Hine & Flory P.L.L.
3900 Society Center
127 Public Square
Cleveland, Ohio 44114-1216
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WJHM Sales Agreement
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IF TO CHANCELLOR:
Steven Dinetz
President & CEO
Chancellor Broadcasting Company
12655 N. Central Expressway, Suite 405
Dallas, Texas 75243
WITH COPY (WHICH SHALL NOT CONSTITUTE NOTICE):
Matthew L. Leibowitz, Esq.
Leibowitz & Associates, P.A.
One Southeast Third Avenue, Suite 1450
Miami, Florida 33131-1715
10. Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida (without regard to conflict of
law principles) and is intended to be fully consistent with the Act and all
rules and regulations of the FCC as applicable. Both OmniAmerica and
Chancellor therefore agree that if there has been a change in FCC rules,
policies or case law precedent that would cause this Agreement or any provision
thereof to be in violation thereof, and such change is not the subject of an
appeal or further administrative review, then both parties will proceed in good
faith to seek to amend this Agreement as necessary to comply with such rules or
policies. If this Agreement cannot be amended to comply with such rules or
policies to the satisfaction of both parties, this Agreement shall be deemed to
be terminated by both parties.
11. No Partnership Or Joint Venture Credited.
Chancellor is acting as an independent contractor hereunder
and nothing in this Agreement shall be construed to make OmniAmerica and
Chancellor partners or joint venturers or to make OmniAmerica or Chancellor the
agent of the other or to afford any rights to any third party other than as
expressly provided herein.
12. Severability.
In the event any term or provision of this Agreement is
declared to be invalid or illegal for any reason, this Agreement shall remain
in full force and effect and the same shall be interpreted as though such
invalid and illegal provision were not a part hereof. The remaining provisions
shall be construed to preserve the intent and purpose of this Agreement and the
parties shall negotiate in good faith to modify the provisions held to be
invalid or illegal to preserve each party's anticipated
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WJHM Sales Agreement
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benefits thereunder.
13. Counterpart Signatures.
This Agreement may be signed in counterpart originals, which
collectively shall have the same legal effect as if all signatures had appeared
on the same physical document. This Agreement may be signed and exchanged by
facsimile transmission, with the same legal effect as if the signatures had
appeared in original handwriting on the same physical document.
14. Assignment.
Neither Chancellor nor OmniAmerica may assign this Agreement
without the written consent of the other party, such consent not to be
unreasonably withheld; provided, however, that each party can assign its rights
and responsibilities under this Agreement to an entity controlled by or under
common control with that party, and shall provide written notice of the
assignment to the other party within FOURTEEN (14) days of the assignment.
15. Headings.
The headings contained in this Agreement are included for
convenience only and no such heading shall in any way alter the meaning of any
provision.
16. Entire Agreement Modification Waiver
This Agreement supersedes any prior agreements between the
parties and contains all of the terms agreed upon with respect to the subject
matter hereof. No modification or waiver of any provision of this Agreement
shall in any event be affected unless the same shall be in writing and signed
by the party adversely affected by the waiver or modification, and then such
waiver and consent shall be effective only in the specific instance and for the
purpose for which given. If Licensee claims that the execution, delivery, or
performance of this Agreement is inconsistent with, or could result in a breach
under any agreements between OmniAmerica and Licensee, then, at OmniAmerica's
request, the parties shall attempt to recast this Agreement in accordance with
the procedures of Paragraph 10 above, but notwithstanding any other covenant or
representation made in this Agreement, if negotiations and this Agreement are
terminated in accordance therewith, neither party shall be liable to the other
with respect to the termination of this Agreement.
17. Confidentiality.
The Confidentiality provisions contained in Section 10.1 of
the OmniAmerica/Chancellor Asset Purchase Agreement are specifically
incorporated by reference herein in connection with the terms of this Agreement
and the negotiations preceding this Agreement.
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WJHM Sales Agreement
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IN WITNESS WHEREOF, the parties have executed this Agreement below on
the dates indicated.
OMNIAMERICA GROUP
By: OmniAmerica Communications, Inc.
its Managing General Partner
Date: By:
----------------------- ------------------------------------
CHANCELLOR BROADCASTING
COMPANY
Date: By:
----------------------- ------------------------------------
Steven Dinetz
its President
and Chief Executive Officer
CHANCELLOR RADIO BROADCASTING
COMPANY
Date: By:
----------------------- ------------------------------------
Steven Dinetz
its President
and Chief Executive Officer
<PAGE> 57
WJHM Sales Agreement
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ATTACHMENT A
All available advertising time consistent with the Station's current
spot load inventory, other than advertising time (a) previously sold by
Licensee or OmniAmerica, (b) required for trade agreements previously entered
into by Licensee or OmniAmerica, (c) exchanged for programming provided to the
Station. Advertising time covered by (a), (b) and (c) above shall be handled
in the manner set forth in this Agreement.
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ATTACHMENT B
During each month of the term of this Agreement, for so long as the
Beasley LMA remains in effect, Chancellor shall pay to OmniAmerica in cash or
by check in advance on the first day of each calendar month a sum equal to the
amount of OmniAmerica's obligation to pay Licensee under the Beasley LMA,
subject to adjustment on a monthly basis between the parties.
<PAGE> 1
EXHIBIT 2.12
LOCAL MARKETING AGREEMENT
THIS LOCAL MARKETING AGREEMENT ("LMA" or "Agreement"), made as of June 28, 1996
by and between OMNIAMERICA GROUP, a Massachusetts general partnership
("OmniAmerica") and CHANCELLOR BROADCASTING COMPANY and CHANCELLOR RADIO
BROADCASTING COMPANY, (collectively, "Chancellor" or "Programmer") both
Delaware Corporations.
RECITALS
A. OmniAmerica owns and operates radio stations WEAT-AM/FM, West Palm
Beach, Florida; WOLL(FM), Riviera Beach, Florida; WXXL(FM), Tavares, Florida;
WAPE-FM, Jacksonville, Florida; and WFYV-FM, Atlantic Beach, Florida (the
"Stations") (as of the closing of the acquisition of WJHM-FM, Daytona Beach,
Florida by OmniAmerica and WJHM-FM License Partnership, WJHM-FM shall be
included in the definition of "Stations.")
B. OmniAmerica entered into an Asset Exchange Agreement, dated April 19,
1996 with Nationwide Communications, Inc. ("NCI") to acquire radio station
WOMX(FM), Orlando, Florida ("WOMX").
C. OmniAmerica wishes to retain Chancellor to provide programming for
certain of the Stations pursuant to the terms and conditions set forth in this
Agreement and in conformity with the Stations' policies and practices and the
Federal Communications Commission's ("FCC") rules and regulations concerning
such arrangements.
D. Chancellor will broadcast such programming and sell advertising that
is in conformance with the Stations' policies and all FCC rules and
regulations, including the requirement that the ultimate control of the
Stations be maintained by OmniAmerica.
E. Chancellor and OmniAmerica and its affiliates entered into an Asset
Purchase Agreement dated May 14, 1996 (the "Purchase Agreement"), pursuant to
which OmniAmerica has agreed to transfer to Chancellor, and Chancellor has
agreed to acquire from OmniAmerica, substantially all of the assets and
businesses of the Stations and WOMX.
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 July 1, 1996 and will
continue until the Programmer acquires the assets of the Stations unless
earlier terminated in accordance with the provisions set forth herein. This
Agreement initially shall apply to WXXL only and shall apply to WJHM
immediately upon WJHM becoming a "Station" as defined in the recitals to this
Agreement.
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This Agreement shall apply to other Station(s) on the date(s) (each, a "New
Commencement Date") specified in writing by Programmer, from time to time,
which dates shall neither be prior to August 1, 1996 nor sooner than ten
business days after notice to OmniAmerica (any such notice being a "Station
Commencement Notice"). As used in this Agreement, "Commencement Date" shall
mean July 1, 1996 with respect to WXXL, the date WJHM becomes a Station with
respect to WJHM, and the respective New Commencement Date(s) with respect to
each Station for which a Station Commencement Notice is given.
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
Stations twenty-four (24) hours per day Monday through Friday and for
forty-eight (48) hours during Saturday through Sunday, provided that
OmniAmerica may broadcast up to two (2) hours of programming for the Stations
which is aimed at serving the needs and interests of the Stations' community 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, OmniAmerica hereby grants to Programmer the right for the term of
this Agreement to use substantially all of the equipment located in the
Stations' studios and currently used by OmniAmerica for broadcasting programs
on the Stations. In addition, Programmer shall have, and OmniAmerica hereby
grants to Programmer, a license to enter on the premises currently occupied by
the Stations for the purpose of producing its programming hereunder; provided,
however, that OmniAmerica shall maintain, for its use, sufficient space at the
Stations' studios to enable OmniAmerica to conduct its operations and originate
programming. Accordingly, Programmer shall hold OmniAmerica harmless from all
costs, fees and expenses incurred with respect to any personal injury suffered
by any employee or agent of Programmer while on the property of OmniAmerica.
Programmer shall also be responsible for and shall reimburse OmniAmerica for
any damage to the property of OmniAmerica caused by Programmers' employees or
agents.
3. Representations.
Each of OmniAmerica 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 OmniAmerica 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
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Local Marketing Agreement
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policies.
4. Consideration.
During the term of this Agreement, Programmer shall pay
OmniAmerica the payments set forth on the Payment Schedule executed in
connection herewith.
5. Collection of Accounts Receivable.
(a) The accounts receivable of the Stations generated
prior to the Commencement Date (the "Pre-LMA Receivables") shall be and remain
the property of OmniAmerica. Within 5 business days after the Commencement
Date, OmniAmerica shall furnish Chancellor with a list (certified by the Chief
Financial Officer of OmniAmerica to be a true and complete list) of all
accounts receivable of OmniAmerica which remain outstanding as of the
Commencement Date. Chancellor agrees that if, after the Commencement Date, it
shall receive payment, directed to OmniAmerica, in respect to any Pre-LMA
Receivable, Chancellor shall remit to OmniAmerica, 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 OmniAmerica), which
are in payment for advertising broadcast by the Station prior to the
Commencement Date.
(b) During the period commencing on the Commencement Date
and ending ninety (90) days thereafter, Chancellor shall use reasonable
efforts, consistent with OmniAmerica's current billing and collection practices
and in the ordinary course of the business, to assist OmniAmerica 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
OmniAmerica'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).
(c) OmniAmerica agrees to remit to Chancellor within 5
business days after the end of each month, any amounts received by OmniAmerica
during the preceding month (whether or not directed on their face to
Chancellor) which are in payment for advertising broadcast by the
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Stations after the Commencement Date.
(d) Chancellor shall not set-off any claim or amount
against any of the Pre-LMA Receivables.
6. OmniAmerica Control of the Stations.
(a) OmniAmerica will have full authority, power and
control over the management and operations of the Stations during the term of
this Agreement. OmniAmerica will bear all responsibility for the Stations'
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 Stations, including the right to preempt programming which in
its good faith judgment it deems unsuitable or contrary to the public interest.
OmniAmerica 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 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 OmniAmerica
in complying with all FCC rules and regulations.
(b) OmniAmerica retains ultimate control over the
Stations and their premises. Accordingly, all employees of Programmer present
at the Stations or on their premises must comply with the policies and rules
promulgated by OmniAmerica. In no event shall Programmer, or Programmer's
employees, represent, depict, describe or portray Programmer as the Licensee of
the Stations. To this end, all employees of Programmer, whose work involves
the Stations, shall be informed as to OmniAmerica's ultimate control over the
Stations and Programmer's subordinate capacity, and all printed materials and
promotional announcements shall accurately describe all of the roles and
responsibilities of OmniAmerica and Programmer.
(c) The Stations' transmission equipment shall be
maintained by OmniAmerica 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 expense of OmniAmerica in a timely fashion.
(d) OmniAmerica shall employ at its expense a
management-level employee at the Stations and such other person for each
Station as necessary to fulfill OmniAmerica's duties hereunder and its
obligations under the FCC's rules. The manager shall direct the day-to-day
operations of the Station and shall report to and be accountable to
OmniAmerica. OmniAmerica shall be responsible for the salaries, taxes,
insurance and related costs for all personnel it employs at the
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Stations.
(e) OmniAmerica shall pay all regulatory fees, file all
necessary applications, maintain the Stations' local public inspection files
within the Stations' communities of license and shall prepare and place in such
inspection file all required documents including, but not limited to the
Stations' 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 Stations (including
telephone expenses and expenses related to sales, marketing, promotion,
advertising, billing and collections, and traffic), except that OmniAmerica
shall be responsible for the costs as provided in Section 6 hereof. Programmer
shall cooperate fully with OmniAmerica 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 Stations 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
Stations or its operations, Programmer shall promptly notify OmniAmerica 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 Stations to transmit any
required tests of the Emergency Broadcast System or successor Emergency Alert
System at such times as are directed by OmniAmerica.
(d) Programmer shall maintain and deliver to OmniAmerica
all records and information required by the FCC to be placed in the public
inspection files of the Stations 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. Programmer also shall consult with
OmniAmerica and adhere strictly to all applicable statutes and the rules,
regulations and policies of the FCC, as announced from time to time, with
respect to the carriage of political advertisements and programming (including,
without limitation, the rights of candidates and, as appropriate, other to
"equal opportunities") and the charges permitted therefor. Programmer shall
furnish within its programming, on behalf of OmniAmerica, all Stations
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
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area served by the Stations so as to assist OmniAmerica in the preparation of
any required programming reports, and provide other information to enable
OmniAmerica 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
OmniAmerica from and after the Commencement Date under the contracts and
agreements listed in the Schedules to the Purchase Agreement. In addition,
Programmer shall perform and discharge all obligations of the Stations under
all trade agreements from and after the Commencement Date. Any receivables
generated prior to the Commencement Date shall be remitted to OmniAmerica
pursuant to Section 17.15 of the Purchase Agreement. Programmer will not enter
into any third-party contracts, leases or agreements which will bind
OmniAmerica in any way except with OmniAmerica'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 Stations as of May 15,
1996. Pursuant to Section 10.8 of the Purchase 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 Stations who was
employed by OmniAmerica at or before the Commencement Date.
10. Public Affairs Programming.
Notwithstanding any other provision of this Agreement,
Programmer recognizes that OmniAmerica has certain obligations to broadcast
programming to meet the needs and interests of the community of license for the
Stations. OmniAmerica 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 OmniAmerica 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, OmniAmerica may broadcast public affairs programming as outlined
in Section 2 hereof. OmniAmerica 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.
11. Additional License Obligations.
Although both parties shall cooperate in the broadcast of
emergency information over
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the Stations, OmniAmerica 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 OmniAmerica, is of overriding public importance.
OmniAmerica shall also coordinate with Programmer the Stations' hourly Stations
identification announcements to be aired in accordance with FCC rules.
OmniAmerica shall continue to maintain a main studio, as that term is defined
by the FCC, within each Station's principal community contour and shall staff
it as required by the FCC. OmniAmerica shall be responsible for the salaries,
taxes, insurance and related costs for all personnel it employs at the Stations
and shall maintain insurance at its present levels covering the Stations'
transmission facilities. In addition, OmniAmerica shall pay any federal
regulatory fees, maintain its local public inspection file within the Stations'
community of license and shall prepare and place in such inspection file all
required documents including, but not limited to, its quarterly issues and
program lists on a timely basis. OmniAmerica shall also receive and respond to
telephone inquiries from the general public. Programmer shall provide
OmniAmerica with information with respect to certain of Programmer's programs
which may be included in OmniAmerica's quarterly issues and programs lists.
12. Broadcast Stations Programming Policy Statement.
OmniAmerica has adopted and will enforce a Broadcast Stations
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 OmniAmerica 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
OmniAmerica reasonably determines that a program, commercial or other material
supplied by Programmer does not comply with the Policy Statement, or if
OmniAmerica 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
OmniAmerica.
13. Compliance with Copyright Act.
Programmer represents and warrants to OmniAmerica that
Programmer has full authority to broadcast its programming on the Stations 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. OmniAmerica will maintain as appropriate
its own ASCAP, BMI and SESAC licenses for the performance of Programmer's
programs and Programmer shall
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reimburse OmniAmerica for the costs of such licenses obtained by OmniAmerica
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
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 OmniAmerica with
payola Affidavits from itself, and all of its employees and agents who are
involved with providing programming on the Stations, at such times as
OmniAmerica 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 OmniAmerica and pay all
expenses attributable thereto. Programmer may sell advertising, consistent
with applicable rules, regulations and the Policy Statement, on the Stations 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 OmniAmerica.
OmniAmerica shall retain all revenues from the sale of the Stations'
advertising during the hours each week in which OmniAmerica airs its own
nonentertainment programming.
16. Local Marketing Agreement Challenge.
If this Agreement is challenged at the FCC, counsel for
and counsel for Programmer shall defend the Agreement and the parties'
performance thereunder throughout all FCC proceedings with Programmer and
OmniAmerica 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 OmniAmerica's or Programmer's option, seek reversal
of the staff decision and approval from the full Commission on appeal.
17. Confidential Review.
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Prior to the provision of any programming by Programmer to
OmniAmerica under this Agreement, Programmer shall acquaint OmniAmerica with
the nature and type of the programming to be provided. OmniAmerica, solely for
the purpose of ensuring Programmer's compliance with the law, FCC rules and the
Stations' 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 reasonably request, including all rate cards and
disclosure statements related to Programmer's political advertising.
Programmer shall promptly provide OmniAmerica 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 Stations
in accordance with Section 2 hereof;
(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. OmniAmerica'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 OmniAmerica under this Agreement:
(a) Except as otherwise provided for in this Agreement,
the failure of OmniAmerica to broadcast the programs supplied by Programmer in
accordance with Section 2 hereof;
(b) Any termination of this Agreement by OmniAmerica
other than as permitted
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in Section 18.4 or 18.5; or
(c) In the event of a voluntary filing by OmniAmerica (or
involuntary filing with respect to OmniAmerica 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 OmniAmerica must be received by OmniAmerica within five (5) days after
OmniAmerica 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 OmniAmerica described in
Section 18.2(b) hereof.
(c) Programs and Broadcast Matters. With respect to
Programmer's failure to provide programs referred to in Section 18.1(b) hereof
or OmniAmerica'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-defaulting party does not exercise such right of
termination by giving such written notice within such sixty (60) day period,
<PAGE> 11
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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 Purchase
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 OmniAmerica's federal, state, and local tax
liabilities associated with Programmer's payments to OmniAmerica as provided
herein. Upon termination pursuant to Sections 18.4 or 18.5 hereto, OmniAmerica
shall be under no further obligation to make available to Programmer any
broadcast time or broadcast transmission facilities, provided that OmniAmerica
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 following the termination date. At the date of
termination, Programmer shall return to OmniAmerica any equipment or property
of the Stations used by Programmer, its employees or agents, in substantially
the same condition as such equipment existed on the Commencement Date, shall
restore OmniAmerica's technical facilities to substantially the same condition
as such facilities existed on the Commencement Date, ordinary wear and tear
excepted, shall reassign to OmniAmerica all contracts and agreements relating
to the Stations listed on the Schedules to the Asset Purchase 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 Purchase 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 OmniAmerica 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 Stations, and all amounts
which have been prepaid to OmniAmerica for any partial month beyond the
termination shall be immediately due and payable to Programmer. Programmer
shall return all confidential information with respect to the Stations to the
OmniAmerica. Programmer shall reassign all of OmniAmerica's accounts
receivable to OmniAmerica. Programmer shall remit to OmniAmerica all amounts
collected with respect to OmniAmerica's accounts receivable within five (5)
business days of termination hereunder.
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Upon termination, Programmer shall be responsible for debts
and obligations resulting from the use of the Stations' 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 Stations.
21. OmniAmerica's Indemnification.
OmniAmerica 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) OmniAmerica's operation of the Stations (not
including the operation of the Stations by Programmer) under this Agreement,
and
(b) breach of any warranty, representation, covenant,
agreement or obligation of OmniAmerica contained in this Agreement.
22. Programmer's Indemnification.
Programmer shall indemnify, defend, hold and save OmniAmerica
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) 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.
<PAGE> 13
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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:
(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;
(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
<PAGE> 14
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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.
25. Programmer's Remedies for Operational Deficiencies.
Except as set forth in 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
Stations are operating from its authorized auxiliary antenna, if any of the
normal broadcast transmissions of the Stations are interrupted, interfered
with, or in any way impaired with so that the Stations are not operating at
full licensed power and antenna height or are off the air, or in the event that
OmniAmerica 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 Stations' operations are deficient, the
Stations' programming is preempted or the Stations are off the air.
26. Force Majeure.
Any failure or impairment of the Stations' 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 governmental
authority, civil riot, floods and any other cause not reasonably within the
control of OmniAmerica (including any obligation of OmniAmerica to reduce power
or suspend operation to avoid occupational exposure to harmful RF radiation),
shall not constitute a breach of this Agreement and OmniAmerica will not be
liable to Programmer.
27. Other Agreements.
During the term of this Agreement, OmniAmerica will not enter
into any other local marketing, program provision, local management or similar
agreement with any third party with respect to the Stations.
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 Stations from OmniAmerica. Neither party may assign its
rights without the prior written consent of the other
<PAGE> 15
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party which consent shall not be unreasonably withheld.
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.
OmniAmerica 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.
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 OmniAmerica 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 New York.
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 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
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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 OmniAmerica: OmniAmerica Communications, Inc.
11111 Santa Monica Boulevard
Los Angeles, CA 90025
Telecopier number: (310) 445-4606
Copy to: F. Howard Mandel, Esq.
Thompson Hine & Flory, P.L.L.
3900 Society Center
127 Public Square
Cleveland, OH 44114
Telecopier number: (216) 566-5800
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.
34. Severability.
If any provision of this Agreement or the application thereof
to any person or
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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 Stations. OmniAmerica hereby verifies
that it will maintain control of the Stations and their facilities, including
specifically control over the Stations' 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.
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.
CHANCELLOR BROADCASTING COMPANY
By: /s/ STEVEN DINETZ
-------------------------------------
Steven Dinetz
President
CHANCELLOR RADIO BROADCASTING COMPANY
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By: /s/ STEVEN DINETZ
-------------------------------------
Steven Dinetz
President
OMNIAMERICA GROUP
By: OmniAmerica Communications, Inc.
By: /s/ CARL E. HIRSCH
-------------------------------------
Carl E. Hirsch
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PAYMENT SCHEDULE
In exchange for the air time supplied to Programmer pursuant to this
Agreement, Programmer shall pay OmniAmerica
Dollars ($ ) per month. The first
monthly payment to OmniAmerica 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
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ATTACHMENT I
BROADCAST STATIONS PROGRAMMING POLICY STATEMENT
Programmer agrees to cooperate with OmniAmerica 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
Stations 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.
II. Political Broadcasting.
Within thirty (30) days of the Commencement Date, Programmer
shall provide OmniAmerica 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 Stations' general manager the rate 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 Stations policy.
III. Required Announcements.
Programmer shall broadcast (i) an announcement in a form
satisfactory to OmniAmerica at the beginning of each hour to identify the
Stations and (ii) any other announcements that may be required by law,
regulation or OmniAmerica's Stations policy.
IV. No Illegal Announcements.
No announcements, broadcasts or promotions prohibited by
federal, state or local law shall be made over the Stations. 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
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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. OmniAmerica Discretion Paramount.
In accordance with OmniAmerica's responsibility under the
Communications Act of 1934, as amended, and the Rules and Regulations of the
Federal Communications Commission, OmniAmerica reserves the right to reject or
terminate any advertising proposed to be presented or being presented over the
Stations which is in conflict with Stations policy or which in OmniAmerica or
its general manager's reasonable judgement would not serve the public interest.
In any case where questions of policy or interpretation arise,
Programmer should submit the same to OmniAmerica for decision before making any
commitments in connection therewith.
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ATTACHMENT II
PAYOLA AFFIDAVIT
City of )
County of )
Sate 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.
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 Stations
is a crime, unless the agreed payment is disclosed to the Stations 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 Stations.
----------------------------------------
Affiant
The foregoing instrument was acknowledged before me this
day of , 1996 by , who is personally known
to me or who has produced
<PAGE> 24
Local Marketing Agreement
Page 24
- -------------------------
as identification.
----------------------------------------
Notary Public
My commission expires:
------------------------------
<PAGE> 1
EXHIBIT 2.13
E X C H A N G E A G R E E M E N T
BETWEEN
CHANCELLOR RADIO BROADCASTING COMPANY
WAPE-FM JACKSONVILLE, FLORIDA
WFYV-FM ATLANTIC BEACH, FLORIDA
AND
SFX BROADCASTING, INC.
WBLI, INC.
WBLI-FM, INC.
WBLI-FM PATCHOGUE, NEW YORK
WHFM, INC.
WHFM-FM SOUTHAMPTON, NEW YORK
WBAB, INC.
WBAB-FM BABYLON, NEW YORK
WGBB, INC.
WGBB-AM FREEPORT, NEW YORK
July 1, 1996
<PAGE> 2
EXCHANGE AGREEMENT
TABLE OF CONTENTS
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Section 1. Asset Purchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.1 Florida Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
Section 2. Exchange of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
2.1 Tax Free Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
2.2 Transfer of Assets to SFX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
2.2.1 FCC Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
2.2.2 Other Governmental Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
2.2.3 Tangible Personal Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
2.2.9 All Other Jacksonville Station Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
2.3 Excluded Jacksonville 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
2.3.9 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
2.3.10 Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
2.3.11 Tax Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
2.4.6 Station Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
2.4.7 Manufacturer/Vendor Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
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2.4.8 Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
2.4.9 All Other Long Island Stations Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
2.5 Excluded Long Island Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
2.5.1 Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
2.5.2 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
2.5.3 Consumed Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
2.5.4 Terminated Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
2.5.5 Corporate Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
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 Jacksonville Stations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
2.6.2 Long Island Stations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
Section 3. Consideration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
3.1 Consideration From Chancellor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
3.1.1 Florida Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
3.2 Consideration From SFX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
3.2.1 Long Island Transaction Approved. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
3.3 Adjustments to Cash Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
3.3.1 Adjustments for Long Island Stations Operations . . . . . . . . . . . . . . . . . . . . . . -8-
3.3.2 Adjustments for Jacksonville Station Operations . . . . . . . . . . . . . . . . . . . . . . -8-
3.3.3 Definition of Buyer and Seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
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 Long Island Stations' Barter and Trade. . . . . . . . . . . . . . . . . . . . . . . . . . -10-
3.4.2 Jacksonville Stations' Barter and Trade. . . . . . . . . . . . . . . . . . . . . . . . . -10-
Section 4. Assumption of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
4.1 Long Island Assumed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
4.2 Long Island Retained Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
4.3 Jacksonville Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
4.4 Florida Retained Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
Section 5. Sole Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
5.1 Omni's Failure to Close. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
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5.1.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
5.1.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
5.2 Chancellor's Failure to Transfer Jacksonville Assets . . . . . . . . . . . . . . . . . . . . . . . -12-
5.2.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
5.2.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
5.3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
5.3.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
5.4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
Section 6. Government Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
6.1 FCC Consent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
6.2 FCC Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
6.3 Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
Section 7. Local Marketing Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
7.1 Long Island Local Marketing Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
7.2 Jacksonville Local Marketing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
Section 8. Collection of Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
8.1 Long Island Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
8.2 Jacksonville Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
Section 9. Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
9.1 Long Island Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
9.2 Florida Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
9.3 Failure to Obtain Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
Section 10. Representations and Warranties of Chancellor . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
10.1 Organization and Standing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
10.2 Authorization and Binding Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
10.3 Qualification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
10.4 Absence of Conflicting Agreements or Required Consents . . . . . . . . . . . . . . . . . . . . . . -18-
10.5 Litigation: Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
10.6 Broker/Finder Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
10.7 Representations and Warranties as to the Jacksonville Stations . . . . . . . . . . . . . . . . . . -19-
Section 11. Representation and Warranties of SFX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
11.1 Organization and Standing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
11.2 Authorization and Binding Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
11.3 Qualification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
11.4 Absence of Conflicting Agreements or Required Consents . . . . . . . . . . . . . . . . . . . . . . -19-
11.5 Litigation: Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
11.6 Broker/Finder Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
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11.7 Representations and Warranties as to the Long Island Stations. . . . . . . . . . . . . . . . . . . -20-
Section 12. Covenants of Chancellor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
12.1 Conduct of Station: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
12.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
12.3 No Inconsistent Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
12.4 Updating of Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
12.5 Enforcement of Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
12.6 FCC Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
12.7 Notification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
12.8 Post-Closing Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
12.9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
Section 13. Covenants of SFX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
13.1 Conduct of Station . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
13.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
13.3 No Inconsistent Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
13.4 Updating of Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
13.5 Enforcement of Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
13.6 FCC Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
13.7 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
13.8 Post-Closing Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
13.9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
Section 14. Joint Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
14.1 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
14.2 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
14.3 Control of Stations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
14.4 Bulk Sales Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
14.5 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
14.6 Hart-Scott-Rodino. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
14.7 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
Section 15. Conditions of Closing by Chancellor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
15.1 Representations, Warranties and Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
15.2 Compliance with Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
15.3 Third Party Consents and Approvals; Estoppel Certificates. . . . . . . . . . . . . . . . . . . . . -29-
15.4 Closing Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
15.5 Governmental Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
15.6 Adverse Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
15.7 Closing Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
15.8 Environmental Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
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Section 16. Conditions of Closing by SFX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
16.1 Representations, Warranties and Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
16.2 Compliance with Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
16.3 Third Party Consents and Approvals; Estoppel Certificates. . . . . . . . . . . . . . . . . . . . . -30-
16.4 Closing Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
16.5 Governmental Approval. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
16.6 Adverse Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
16.7 Closing Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
16.8 Environmental Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
Section 17. Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
17.1 Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
17.2 Deliveries By Chancellor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
17.3 Delivery By SFX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
Section 18. Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
18.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
Section 19. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
19.1 Indemnification by Chancellor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
19.2 Indemnification by SFX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
19.3 Limitation on Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
19.4 Procedure for Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
Section 20. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
20.1 Right to Terminate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
Section 21. Expenses, Transfer Taxes, and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
21.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
21.2 Transfer Taxes and Similar Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
21.3 Governmental Filing or Grant Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
Section 22. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
22.1 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
22.2 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
22.3 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
22.4 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
22.5 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
22.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
22.7 Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
22.8 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
22.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
22.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
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22.11 Binding Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
22.12 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
Signature Pages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
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<PAGE> 8
EXCHANGE AGREEMENT
This Exchange Agreement is made effective as of July 1, 1996 by and
among WBLI, Inc., a New York corporation, WBLI-FM, Inc, a Delaware corporation,
WHFM, Inc., a New York corporation, WBAB, Inc., a New York corporation, and
WGBB, Inc., a New York corporation, each subsidiaries of SFX Broadcasting,
Inc., a Delaware corporation (collectively, "SFX"), and Chancellor Radio
Broadcasting Company, a Delaware corporation ("Chancellor").
RECITALS
WHEREAS, SFX owns substantially all of the assets used or useful in
the operation of WBAB-FM, Babylon, New York; WBLI-FM, Patchogue, New York;
WGBB-AM, Freeport, New York; and WHFM-FM, Southampton, New York (the "Long
Island Stations"), including the related broadcast licenses and authorizations
issued by the Federal Communications Commission ("FCC");
WHEREAS, Chancellor is a party to a certain Asset Purchase Agreement
("Florida 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 Station WAPE-FM, Jacksonville, Florida and Station WFYV-FM,
Atlantic Beach, Florida (collectively, the "Jacksonville Stations"), including
the related FCC broadcast licenses and authorizations;
WHEREAS, Chancellor and SFX desire to exchange the assets of the
Jacksonville Stations for the assets of the Long Island Stations plus a cash
payment by Chancellor as provided herein;
WHEREAS, the parties intend the exchange of the Jacksonville Stations
and the Long Island Stations 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 "Jacksonville LMA Commencement
Date"), (i) Chancellor and SFX shall enter into Local Marketing Agreements
("LMAs") with respect to the Jacksonville Stations ("Jacksonville Stations
LMA"); and (ii) effective July 1, 1996, (the "Long Island LMA Commencement
Date") Chancellor and SFX shall enter into an LMA with respect to the Long
Island Stations ("Long Island Stations 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 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 Jacksonville
Stations from Omni at the earliest practicable time and in the manner
contemplated in the Florida Agreement. Insofar as the Florida Agreement
relates to the Jacksonville Stations, Chancellor shall not amend in any
material respect the Florida Agreement or waive any right thereunder without
the prior written consent of SFX. This prior written consent shall not be
unreasonably withheld by SFX. Chancellor shall enforce any and all of its
material rights under the Florida Agreement and shall have the capacity and
ability at all times to perform its obligations 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. Additionally, at SFX's sole option, SFX may
prior to Closing elect to receive in lieu of the Long Island Cash Purchase
Price (as hereinafter defined), a conveyance of other investment or like-kind
property in order to qualify as a tax-deferred exchange under the
non-recognition of gain provisions of Internal Revenue Code Section 1031 and
regulations promulgated thereunder; provided, however, that the consummation of
this Agreement is not predicated or conditioned on such exchange. Further, in
the event SFX has not by Closing selected suitable like-kind property for such
exchange, SFX may elect to have Chancellor pay the Long Island Cash Purchase
Price to a third party independent escrow agent to retain such funds in
accordance with a suitable escrow agreement to be executed at such time.
Chancellor agrees to cooperate in such exchange procedures and to execute and
deliver such documents as may be reasonably requested by SFX or required to
effect any such exchange, including any assignments by SFX, of any of its
interest under this Agreement, provided that Chancellor shall incur no
additional costs, expenses, delays or liabilities in this transaction as a
result of or connected with the exchange; and provided further that SFX shall
reimburse and hold harmless Chancellor for all reasonable costs and expenses
attributable to their cooperation.
2.2 Transfer of Assets to SFX. Subject to the terms,
conditions and limitations contained herein, on the Closing Date as defined in
Section 17.1, Chancellor shall convey to SFX and SFX shall acquire from
Chancellor (to the extent Chancellor acquires the same from Omni) all of the
following assets, properties, interests and rights (the "Jacksonville Assets")
free and clear of liens and encumbrances except the Jacksonville 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 used in
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connection with the Jacksonville Stations (the "Jacksonville Licenses"),
including those authorizations for the Jacksonville Stations identified in the
pertinent portions of Schedule 2.2.1 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 operation of the Jacksonville
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 Jacksonville 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 Jacksonville Stations ("Jacksonville
Contracts"), listed in Schedule 2.2.4 or entered into before the Closing Date
in the ordinary course of business of the Jacksonville Stations and in
accordance with this Agreement;
2.2.5 Intellectual Property. All trademarks, trade
names, service marks (including the Call Signs WAPE-FM and WFYV-FM),
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 Jacksonville 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 Jacksonville Stations,
including but not limited to those listed in Schedule 2.2.5 (collectively, the
"Jacksonville 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
Jacksonville Stations or to the Jacksonville Assets, including without
limitation the Jacksonville 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
manufacturers' and vendors' warranties relating to items included in the
Jacksonville Assets and all similar rights against third
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parties relating to items included in the Jacksonville Assets;
2.2.8 Real Estate. All real property used in
operating the Jacksonville 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 Jacksonville Real Estate"); and
2.2.9 All Other Jacksonville Station Assets.
Except for Excluded Jacksonville Assets, such other assets, properties,
interests and rights that are used exclusively in connection with the operation
of the Jacksonville Stations or that are located as of the Closing Date on the
Jacksonville Real Estate.
2.3 Excluded Jacksonville Assets. Notwithstanding
anything to the contrary contained herein, it is expressly understood and
agreed that the Jacksonville Assets shall not include the following assets
along with all rights, title and interest therein (the "Excluded Jacksonville
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 accounts receivable or notes
receivable of Chancellor;
2.3.3 Consumed Property. All tangible and
intangible personal property related to the Jacksonville 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 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 SFX 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
Jacksonville Assets or the operation or operations of the Jacksonville
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
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arrangement and the assets thereof, if any, maintained by Chancellor;
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 Rights. All of Chancellor's rights in and to
all causes of action;
2.3.11 Tax Refunds. All tax refunds relating to
the period prior to the Closing; and
2.3.12 Other Assets. 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
Jacksonville Assets or used or useful, as determined by Chancellor, in the
operation or operations of the Jacksonville Stations.
2.4 Transfer of Assets to Chancellor. Subject to the
terms, conditions and limitations contained herein, on the Closing Date, SFX
shall convey to Chancellor and Chancellor shall acquire from SFX all of the
following assets, properties, interests and rights (the "Long Island Assets")
free and clear of liens and encumbrances except the Long Island 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 used in connection with the Long Island
Stations (the "Long Island Licenses"), including those authorizations for the
Long Island Stations identified in Schedule 2.4.1 to this 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 Long Island Stations.
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 SFX's rights therein, owned, leased or held by SFX and used in connection
with the operations of the Long Island Stations, 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.
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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 Long Island Stations ("Long Island Contracts"), listed
in Schedule 2.4.4 or entered into before the Closing Date in the ordinary
course of business of the Long Island Stations, and in accordance with this
Agreement.
2.4.5 Intellectual Property. All trademarks, trade
names, service marks (including the Call Signs WBAB-FM, WBLI-FM, WGBB-FM and
WHFM-FM), 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 Long Island
Stations' logos and all other logos or licenses to use same and all other
intangible property rights of SFX, which are used exclusively in connection
with the operation of the Long Island Stations, including but not limited to
those listed Schedule 2.4.5 (collectively, the "Long Island 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 Long
Island Stations or to the Long Island Assets, including without limitation the
Long Island 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 Long Island Assets;
2.4.7 Manufacturer/Vendor Warranties. All
manufacturers' and vendors' warranties relating to items included in the Long
Island Assets and all similar rights against third parties relating to items
included in the Long Island Assets;
2.4.8 Real Estate. All real property used in
operating the Long Island Stations 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 "Long Island Real Estate"); and
2.4.9 All Other Long Island Stations Assets.
Except for Excluded Long Island Assets, such other assets, properties,
interests and rights that are used exclusively in connection with the operation
of the Long Island Stations or that are located as of the Closing Date on the
Long Island Real Estate.
2.5 Excluded Long Island Assets. Notwithstanding
anything to the contrary contained herein, it is expressly understood and
agreed that the Long Island Assets shall not include the following assets along
with all rights, title and interest therein (the "Excluded Long Island
Assets"):
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2.5.1 Cash. All cash, marketable securities and
cash equivalents of SFX on hand and/or in banks;
2.5.2 Receivables. All accounts receivable or
notes receivable of SFX;
2.5.3 Consumed Property. All tangible and
intangible personal property related to the Long Island Stations disposed of or
consumed in the ordinary course of business of SFX 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 SFX and as permitted hereunder;
2.5.5 Corporate Records. SFX'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 SFX and duplicate copies of all books and records transferred
to Chancellor hereunder as are necessary to enable SFX to file its tax returns
and reports as well as any other records or materials relating to SFX or its
business and not involving or relating to the Long Island Assets or the
operation or operations of the Long Island Stations;
2.5.6 Insurance. Contracts of insurance and all
insurance proceeds or claims made by SFX;
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 SFX; and
2.5.8 Any right, to use the name "SFX" or "SFX
Broadcasting, Inc." 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 SFX'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 Long Island
Agreement that are not specifically listed in this Agreement as the Long Island
Assets or used or useful, as determined by SFX, in the operation or operations
of the Long Island Stations.
2.6 Permitted Liens.
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2.6.1 Jacksonville Stations. The Jacksonville
Assets shall be conveyed to SFX free and clear of all liens and encumbrances
except the liens and encumbrances listed in Schedule 2.6.1 (the "Jacksonville
Permitted Liens").
2.6.2 Long Island Stations. The Long Island 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 "Long Island
Permitted Liens").
SECTION 3. CONSIDERATION.
3.1 Consideration From Chancellor.
3.1.1 Florida Agreement. If the Florida Agreement
closes and Chancellor acquires the Jacksonville Assets and the FCC approves
SFX's acquisition of the Jacksonville Stations, then the consideration
delivered by Chancellor to SFX shall consist of (a) the Jacksonville Assets
described in Section 2.2; and (b) the sum of Eleven Million Dollars
($11,000,000), subject to any adjustments provided herein (the "Long Island
Cash Purchase Price"). This Long Island Cash Purchase Price shall be paid to
SFX or its designee at Closing by wire transfer of immediately available funds.
Further and subject to the limitations contained in Section 4.1, Chancellor
shall assume the Long Island Assumed Liabilities
3.2 Consideration From SFX.
3.2.1 Long Island Transaction Approved. If the FCC
approves Chancellor's acquisition of the Long Island Stations, the
consideration delivered by SFX to Chancellor shall consist of the Long Island
Assets described in Section 2.4 less any Excluded Long Island Assets described
in Section 2.5. Further and subject to the limitations contained in Section
4.3, SFX shall assume the Jacksonville Assumed Liabilities.
3.3 Adjustments to Cash Payments. The cash payment(s)
contemplated in Sections 3.1 and 3.2 shall be adjusted as follows:
3.3.1 Adjustments for Long Island Stations
Operations. Subject to the Long Island Stations LMA to be entered into
pursuant to Section 7.1 herein, income and expenses from the operation of the
Long Island Stations shall be allocated to the parties on the principle that
(i) SFX shall be entitled to all income attributable to, and shall be
responsible for all expenses arising out of, the operation of the Long Island
Stations 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 Long Island
Stations after the Effective Time. Overlapping items of income and expense
shall be prorated as of the Effective Time.
3.3.2 Adjustments for Jacksonville Station
Operations. Subject to the
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Jacksonville Stations LMA to be entered into pursuant to Section 7.2, herein,
income and expenses from the operation of the Jacksonville Stations shall be
allocated to the parties on the principle that (i) Chancellor shall be entitled
to all income attributable to, and shall be responsible for all expenses
arising out of, the operation of the Jacksonville Stations up to the Effective
Time and (ii) SFX shall be entitled to all income attributable to, and shall be
responsible for all expenses arising out of, the operation of the Jacksonville
Stations 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 Long Island
Stations and (ii) SFX with respect to the Jacksonville Stations.
(b) For purposes of Section 3.3.3 -
3.3.6, only, Seller means (i) SFX with respect to the Long Island Stations and
(ii) Chancellor with respect to the Jacksonville 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 Jacksonville Assets or
the Long Island 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.
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 Long Island Assets or Jacksonville 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).
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3.3.6 Dispute Procedure for Allocations.
Allocation and proration of the items set forth in Subsection 3.3.4 above to
the extent practicable shall be made by Buyers and Sellers on the Closing Date,
but in no event shall the allocation and proration of the items set forth in
Subsection 3.3.4 above be made more than thirty (30) days after the Closing
Date. If the parties cannot reach agreement within thirty (30) days after the
Closing Date on 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 Fifty-four Million Dollars ($54,000,000). Forty-three
Million Dollars ($43,000,000) of the consideration exchanged shall be allocated
to the Jacksonville Assets. The allocation of consideration among each item
included in the Long Island Assets and the Jacksonville Assets shall be made by
Arthur Andersen, L.L.P. on the basis of its independent appraisal of the Long
Island Assets and the Jacksonville 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 Long Island 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 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 Long Island LMA Commencement Date with respect to
the Long Island Stations, SFX shall pay Chancellor the excess (other than the
first $50,000) within 30 days after the Long Island LMA Commencement Date.
3.4.2 Jacksonville 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 SFX under this Agreement is
$50,000 (or more) greater than the value of the consideration to be received by
SFX on or after the Jacksonville LMA Commencement Date with respect to the
Jacksonville Stations, Chancellor shall pay SFX the excess (other than the
first $50,000) within 30 days after the Jacksonville LMA Commencement Date.
SECTION 4. ASSUMPTION OF OBLIGATIONS
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4.1 Long Island Assumed Liabilities. Subject to the
provisions of this Section 4, and subject to the Long Island Stations LMA as
set forth in Section 7.1, hereof, Chancellor shall assume the obligations of
SFX arising or to be performed under such of the Long Island Contracts as are
listed in Schedule 2.4.4 hereto and all liabilities and obligations from the
ownership or operation of the Stations Assets (the "Long Island Assumed
Liabilities") after the Closing Date.
4.2 Long Island 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 SFX of any nature whatsoever whether
accrued, absolute, contingent or otherwise and whether or not disclosed to
Chancellor, other than the Long Island Assumed Liabilities. All of such
liabilities and obligations shall be referred to herein collectively as the
"Long Island Retained Liabilities".
4.3 Jacksonville Assumed Liabilities. Subject to the
provisions of this Section 4, and subject to the Jacksonville Stations LMA, SFX
shall assume the obligations of Chancellor arising or to be performed on or
after the Closing Date under such of the Jacksonville Contracts as are listed
in Schedule 2.2.4 hereto and all liabilities and obligations from the ownership
or operation of the Stations Assets (the "Jacksonville Assumed Liabilities")
after the Closing Date. In addition, SFX 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 SFX 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, SFX 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 Chancellor of any nature whatsoever
whether accrued, absolute, contingent or otherwise and whether or not disclosed
to SFX, other than the Jacksonville Assumed Liabilities. All such liabilities
and obligations shall be referred to herein collectively as the "Florida
Retained Liabilities."
SECTION 5. SOLE REMEDIES
5.1 Omni's Failure to Close. In the event the Florida
Agreement between Chancellor and Omni fails to close and SFX is not in material
breach of this Agreement:
(a) SFX has the right to compel Chancellor to use
its reasonable best efforts to close the Florida Agreement in the event all
conditions of Closing the Florida Agreement have been met. However, Chancellor
shall not have any obligation to waive any closing conditions
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or breaches of Omni under the Florida Agreement.
(b) SFX has twelve (12) months to designate an
alternative radio broadcast station or stations to exchange under the terms
similar to this Agreement in substitution for the Jacksonville Stations and the
parties will delay closing on the Long Island Stations for this period of time.
The parties agree to extend the Long Island Stations LMA for this same period
of time. Further, SFX, has the right to extend this twelve month designation
period and the corresponding time periods under this Subsection for a period
not to exceed twelve additional months. During this time period, or extended
time period, SFX may increase the Long Island Stations LMA monthly payment fee
to Five Hundred Thousand Dollars ($500,000). In the event SFX fails to
designate an alternative radio broadcast station(s) as referred above, and/or
fails to close on said station(s) within the twenty-four (24) month period set
forth above, SFX agrees to transfer the Long Island Stations to Chancellor for
the cash consideration of Fifty-four Million Dollars ($54,000,000) subject to
any adjustments provided herein, to be paid by wire transfer of immediately
available funds at Closing;
5.1.1 The above remedies set forth in Subsections
5.1(a) and (b) are independent and mutually exclusive.
5.1.2 In the event Chancellor fails to cooperate
with SFX pursuant to Subsections 5.1 (a) or (b), then SFX has the right to
bring suit against Chancellor to seek direct compensatory damages up to an
amount not to exceed Twenty-five Million Dollars ($25,000,000) as a Break-up
Fee.
5.2 Chancellor's Failure to Transfer Jacksonville Assets.
Assuming Chancellor has closed on the Florida Agreement, if all conditions of
closing this Agreement have been met (Chancellor shall not have any obligation
to waive any closing conditions or breaches of SFX under this Agreement), and
Chancellor fails to transfer the Jacksonville Assets under the terms and
conditions of this Agreement, for any reason other than the failure of the FCC
to grant its consent to the assignment of the licenses, or the time period for
all applicable notifications and waiting period requirements under the HSR Act
have not been satisfied, and SFX is not in material breach of this Agreement;
(a) SFX may bring suit against Chancellor to
compel specific performance by Chancellor of the terms of this Agreement; or
(b) SFX may bring suit against Chancellor to seek
direct compensatory damages in an amount not to exceed Twenty-five Million
Dollars ($25,000,000) as a Break-up Fee; or
(c) SFX may require Chancellor to sell to it the
assets of WALK AM/FM, Patchogue, New York, under terms similar to the terms
herein but for cash consideration of Seventy-Five Million Six Hundred Thousand
Dollars ($75,600,000). In addition, the parties shall enter into
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an LMA which provides that SFX will program WALK AM/FM under terms similar to
the Long Island Stations LMA with a Fair Market Value (FMV) monthly LMA fee.
In the event the parties cannot agree on an LMA fee, Arthur Andersen shall be
retained to determine said fee and the costs shall be borne equally by the
parties.
(d) The Jacksonville Stations LMA and the Long
Island Stations LMA shall terminate upon SFX exercising its rights under
subsection (a), (b) or (c) above.
5.2.1 The above remedies set forth in Subsections
5.2(a), (b) and (c) are independent and mutually exclusive.
5.2.2 In the event SFX elects any of the above
remedies set forth in Section 5.2, the parties agree to extend the Long Island
LMA until such time as SFX closes on the Jacksonville Station or WALK AM/FM,
and SFX may increase the Long Island Stations LMA monthly payment fee to Five
Hundred Thousand Dollars ($500,000).
5.3 SFX's Failure to Transfer the Long Island Assets. If
all conditions of closing of this Agreement have been met (SFX shall not have
any obligation to waive any closing conditions or breaches of Chancellor under
this Agreement), and SFX fails to transfer the Long Island Assets under the
terms and conditions of this Agreement, for any reason other than the failure
of the FCC not granting consent to the assignment of licenses, or the time
period for all applicable notification and waiting period requirements under
the HSR Act have not been satisfied, and Chancellor is not in material breach
of this Agreement;
(a) Chancellor may bring suit against SFX to
compel specific performance by SFX of the terms of this Agreement; or
(b) Chancellor may bring suit against SFX to seek
direct compensatory damages in an amount not to exceed Twenty-five Million
Dollars ($25,000,000) as a break-up fee; or
(c) Chancellor may require SFX to sell to it the
assets of radio stations WIVY-FM, WOKV- AM, WPDQ-AM and WKQL-FM, Jacksonville,
Florida (collectively referred to as the "Substitute Jacksonville Stations")
under terms similar to the terms herein for consideration of Eleven Million One
Hundred Thousand Dollars ($11,100,000). In addition, the parties shall enter
into an LMA which provides that Chancellor will program the Substitute
Jacksonville Stations under terms similar to the Jacksonville Stations LMA with
a FMV monthly LMA fee. In the event the parties cannot agree on an LMA fee,
Arthur Andersen shall be retained to determine said fee and the costs shall be
borne equally by the parties.
(d) The Jacksonville Stations LMA and the Long
Island Stations LMA shall terminate upon Chancellor exercising its rights under
subsection (a), (b) or (c) above.
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5.3.1 The above remedies set forth in Subsections
5.3(a), (b) and (c) are independent and mutually exclusive.
5.4 The remedies listed in this Section 5 are the sole
and exclusive remedies of the parties for failure to transfer either the
Jacksonville or the Long Island Stations' Assets. These remedies are
independent of the remedies available to the parties for breach of the
representations and warranties set forth in Section 19 herein.
SECTION 6. GOVERNMENT CONSENTS
6.1 FCC Consent. The closing on the purchase and sale of
the Long Island Assets and the Jacksonville 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.
6.2 FCC Applications. Within thirty (30) days after the
execution of this Agreement or such earlier time as shall be agreed to by all
of the parties hereto, Chancellor and SFX shall file the applications with the
FCC for FCC Consent ("FCC Applications") to assign the Long Island Stations'
Licenses to Chancellor and the Jacksonville Stations' Licenses to SFX.
Chancellor and SFX 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 SFX shall have any
obligation to satisfy complainants or the FCC by taking any steps which would
have a material adverse effect upon Chancellor or SFX, or upon any of their
Affiliates). If the FCC Consents impose any condition on Chancellor or SFX
such party shall use its reasonable efforts to comply with such condition;
provided, however, that neither Chancellor nor SFX shall be required hereunder
to comply with any condition that would have a material adverse effect upon it
or any of its Affiliates. If reconsideration or judicial review is sought with
respect to the FCC 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 SFX 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
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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
SFX 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 Long Island Local Marketing Agreement. On or before
July 1, 1996, the parties shall enter into a Long Island Local Marketing
Agreement (the "Long Island Stations LMA") substantially in the form of the LMA
appended hereto as Exhibit 7.1. Chancellor 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 Chancellor's operation of the Long Island
Stations under or in accordance with the Long Island Stations LMA (i) causes
any representation or warranty of the SFX to be rendered inaccurate or (ii)
conflicts with any covenant to be complied with by SFX on or prior to the
Closing Date.
7.2 Jacksonville Local Marketing Agreement. On or before
August 1, 1996, the parties shall enter into a Jacksonville Local Marketing
Agreement (the "Jacksonville 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 Jacksonville Stations LMA to effectuate its purposes, Chancellor
shall use its commercially reasonable efforts to obtain Omni's execution and
performance of the Jacksonville Stations LMA and to assign or provide on terms
reasonably satisfactory to SFX, as soon as practicable after the execution of
the Agreement, but no sooner than August 1, 1996, the rights of Chancellor
under the Local Marketing Agreement, if executed, currently being negotiated by
Chancellor and Omni with respect to the Florida Stations. SFX 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 SFX's operation of the
Jacksonville Stations under or in accordance with the Jacksonville 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 Long Island Accounts Receivable.
(a) Within five (5) business days after the Long
Island LMA Commencement Date, SFX shall deliver to Chancellor a full and
detailed list of the accounts receivable relating to the Long Island Stations
and its operations prior to the Long Island LMA Commencement Date ("Long Island
Accounts Receivable"), designating with respect to each account receivable any
portion thereof attributable to services to be rendered by Chancellor after the
Long
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Island LMA Commencement Date. The Long Island Accounts Receivable shall not be
purchased by Chancellor and Chancellor agrees, however, that for a period of
one hundred twenty (120) days following the Commencement Date (the "Collection
Period"), it shall act as SFX's agent for purposes of the collection of the
Long Island Accounts Receivable and shall use reasonable efforts to collect the
Long Island Accounts Receivable for the benefit of SFX. Chancellor shall remit
to SFX all amounts collected by Chancellor for SFX's benefit within fifteen
(15) days after the end of each month. 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 Long
Island Accounts Receivable which shall remain uncollected by Chancellor at the
conclusion of the Collection Period shall remain SFX's assets and Chancellor's
obligations under this Section 8.1 shall terminate. Chancellor shall have no
liability to SFX for the uncollectability of any of the Long Island Accounts
Receivable.
(b) Chancellor agrees that it may not settle,
discount payment of, extend the terms of, or otherwise compromise any of the
Long Island Accounts Receivable, except as consented to in writing by SFX. If
at the Long Island LMA Commencement Date or at any time during the Collection
Period an account debtor is in bankruptcy, reorganization or similar
proceeding, SFX will assume the full collection responsibility as to such
account and such account will no longer be deemed a Long Island Account
Receivable for purposes of this Agreement. Following the Long Island LMA
Commencement Date, Chancellor will give prompt notice to SFX of any such
bankruptcy, reorganization or other proceeding affecting any debtor of the Long
Island Accounts Receivable after receiving notice thereof.
(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 Long Island Account
Receivable, unless the account debtor disputes such Long Island Account
Receivable, appropriately documents such dispute in writing, and prompt notice
(including all written documentation) of such dispute is given by Chancellor to
SFX. After the end of the Collection Period, Chancellor shall forward to SFX
all payments received that are reasonably identifiable (by invoice number, date
of service or other unambiguous reference) with the Long Island Accounts
Receivable, within twenty (20) days of receipt.
(d) Chancellor does not guarantee the collection
of the whole or any part of the Long Island Accounts Receivable.
8.2 Jacksonville Accounts Receivable.
(a) Within five (5) business days of the
Jacksonville LMA Commencement Date, Chancellor shall deliver to SFX a full and
detailed list of the accounts receivable relating to the Jacksonville Stations
and its operations prior to the Jacksonville LMA Commencement Date
("Jacksonville Accounts Receivable"), designating with respect to each account
receivable any portion thereof attributable to services to be rendered by SFX
after the Jacksonville LMA
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Commencement Date. The Jacksonville Accounts Receivable shall not be purchased
by SFX and SFX agrees, however, that for a period of 120 days following the
Jacksonville LMA Commencement Date (the "Collection Period"), it shall act as
Chancellor's agent for purposes of the collection of the Jacksonville Accounts
Receivable and shall use reasonable efforts to collect the Jacksonville
Accounts Receivable for the benefit of the Chancellor. SFX shall remit to
Chancellor all amounts collected by SFX for Chancellor's benefit within fifteen
(15) days after the end of the month. The collection responsibilities imposed
on SFX 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 Jacksonville Accounts Receivable
which shall remain uncollected by SFX at the conclusion of the Collection
Period shall remain Chancellor's assets and SFX's obligations under this
Section 8.2 shall terminate. SFX shall have no liability to Chancellor for the
uncollectability of any of the Jacksonville Accounts Receivable.
(b) SFX agrees that it may not settle, discount
payment of, extend the terms of, or otherwise compromise any of the
Jacksonville Accounts Receivable, except as consented to in writing by
Chancellor. If at the Jacksonville LMA 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 Jacksonville
Account Receivable for purposes of this Agreement. Following the Jacksonville
LMA Commencement Date, SFX will give prompt notice to Chancellor of any such
bankruptcy, reorganization or other proceeding affecting any debtor of the
Jacksonville Accounts Receivable after receiving notice thereof.
(c) During the Collection Period, any and all
amounts paid to SFX by an account debtor with respect to an account receivable
shall be applied first payment to the Jacksonville 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 SFX to Chancellor. After the end of
the Collection Period, SFX shall forward to Chancellor all payments received
that are reasonably identifiable (by invoice number, date of service or other
unambiguous reference) with the Jacksonville Accounts Receivable, within twenty
(20) days.
(d) SFX does not guarantee the collection of the
whole or any part of the Jacksonville Accounts Receivable.
SECTION 9. THIRD PARTY CONSENTS
9.1 Long Island Consents. SFX shall use its reasonable
best efforts to obtain all third party consents necessary for the conveyance of
the Long Island Assets to Chancellor without the imposition of any conditions
that would be adverse to Chancellor.
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9.2 Florida Consents. Chancellor shall use its
reasonable best efforts to obtain all third party consents necessary for the
conveyance of the Jacksonville Assets to SFX without the imposition of any
conditions that would be adverse to SFX.
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 SFX the financial and business benefits SFX would have
enjoyed had the consent been given and (ii), upon the request of SFX, to
enforce in its name for the account of SFX any rights that would otherwise have
been available to SFX had the consent been granted.
(b) If SFX fails to obtain any of the Consents
referenced in Section 9.1, SFX 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.
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. At the Closing,
Chancellor's execution, delivery and performance of this Agreement and the
transactions contemplated hereby will be duly and validly authorized by all
necessary corporate action on behalf of Chancellor and this Agreement will
constitute a valid and binding obligation of Chancellor, enforceable in
accordance with its terms.
10.3 Qualification. To Chancellor's knowledge (as used in
this Section 10 or Section 11, "knowledge" means to the best knowledge of the
Officers, Directors, and senior management of either party to this Agreement,
including Station Managers), 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
Jacksonville Stations or the Long Island Stations. 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
Jacksonville Stations or the Long Island Stations or that would delay the FCC's
processing of the FCC Applications.
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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 SFX has any
liability. Chancellor is solely responsible for Star Media Group's fee.
10.7 Representations and Warranties as to the Jacksonville
Stations. Chancellor previously has delivered to SFX true, correct and
complete copies of the executed Florida Agreement together will all disclosure
schedules, exhibits, and annexes thereto. With respect to the Jacksonville
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 SFX 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 Jacksonville Stations.
SECTION 11. REPRESENTATION AND WARRANTIES OF SFX
11.1 Organization and Standing. WBLI-FM, Inc. is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. WBLI, Inc., WHFM, Inc., WBAB, Inc., and WGBB,
Inc. are corporations duly organized, validly existing and in good standing
under the laws of the State of New York.
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11.2 Authorization and Binding Obligation. SFX has all
necessary corporate power and authority to enter into and perform this
Agreement and the transactions contemplated hereby. SFX'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
SFX and this Agreement constitutes a valid and binding obligation of SFX,
enforceable in accordance with its terms.
11.3 Qualification. To SFX's knowledge, there is no fact,
allegation, condition, or circumstance that could reasonably be expected to
prevent the prompt grant of the FCC Consent. SFX knows of no fact that would,
under the Communications Act of 1934, as amended, or the rules, regulations and
policies of the FCC, disqualify SFX from becoming the licensee of the
Jacksonville Stations. There are no proceedings, complaints, notices of
forfeiture, claims, or investigations pending or, to the knowledge of SFX
threatened against any or in respect of any of the broadcast stations licensed
to SFX or its affiliates that would materially impair the qualifications of SFX
to become the licensee of the Jacksonville Stations 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 SFX: (a) do not violate or
conflict with any of the terms, conditions or provisions of the Certificate of
Incorporation or By-Laws of SFX or any of its affiliates, WBLI, Inc., WBLI-FM,
Inc., WHFM, Inc., WBAB, Inc. and WGBB, Inc.; (b) do not require the consent of
any third party not affiliated with SFX; (c) will not violate any applicable
law, judgment, order, injunction, decree, rule, regulation or ruling of any
governmental authority to which SFX 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 SFX 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 SFX that would adversely affect
SFX's ability to perform its obligations pursuant to this Agreement or the
agreements to be executed by SFX in connection herewith. SFX 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 SFX or its ability to perform its respective 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. SFX 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 Long Island
Stations. SFX
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previously has delivered to Chancellor true, correct and complete copies of the
executed agreements associated with the Long Island Stations together will all
disclosure schedules, exhibits, and annexes thereto. With respect to the Long
Island Stations, SFX to the best of its knowledge, hereby makes to Chancellor
each and every of the representations and warranties contained in the Liberty
Stock Purchase Agreement among Liberty Broadcasting, Incorporated, et. al. and
SFX Broadcasting, Inc., dated November 15, 1995 (the "Liberty Agreement") which
are incorporated herein by reference as though contained herein. In addition,
SFX makes each and every of the representations and warranties contained in the
Liberty Agreement to Chancellor for the period after the Liberty Closing when
SFX acquires the Long Island Stations and the Closing Date hereunder, subject
to the Long Island Stations LMA.
SECTION 12. COVENANTS OF CHANCELLOR
12.1 Conduct of Station:
12.1.1 Subject to the Jacksonville Stations LMA,
Chancellor covenants and agrees with SFX that between the date hereof and the
Jacksonville LMA Commencement Date (except as otherwise noted below),
Chancellor with respect to the Jacksonville Stations (to the extent that it is
programming the Jacksonville 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 Jacksonville Stations' present business organization, keep
available the services of the Jacksonville Stations' employees and independent
contractors, preserve the Jacksonville Stations' relationships with the
Jacksonville Stations' customers and others having business relationships with
the Jacksonville Stations, and refrain from materially and adversely changing
any of the Jacksonville Stations' 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 Jacksonville Stations'
books of account and records in the usual and ordinary manner and in accordance
with generally accepted accounting principles;
(iii) operate the Jacksonville Stations in
the usual and ordinary course of business in accordance with past practice and
conduct the Jacksonville Stations' business in all material respects in
compliance with the terms of the Jacksonville 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 WAPE-FM's or WFYV-FM's studios and the Jacksonville Stations'
transmission assets in a reasonable manner consistent with historical practice
and maintain its assets in substantially their current condition,
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ordinary wear and tear excepted;
(v) maintain appropriate insurance for
the Jacksonville Stations through the Closing Date;
(vi) not incur any debts or obligations
to be performed by SFX 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 Jacksonville Assets or sell or transfer any of the Jacksonville Assets
without replacing such Jacksonville Assets with an asset of substantially the
same value and utility;
(viii) without the prior consent of SFX,
which consent shall not be unreasonably withheld or delayed, (x) not modify or
extend any Jacksonville Stations' Contracts or (y) enter into any new
Jacksonville 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 Jacksonville Stations'
employees' terms and conditions of employment;
(x) not make any change in the
Jacksonville Stations' 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 Jacksonville
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 SFX, all representations, warranties and covenants of Omni under the
Florida Agreement insofar as such representations, warranties and covenants
affect or relate to the Jacksonville Assets. The quantity, identity,
character, quality of and title to the Jacksonville Assets conveyed by
Chancellor to SFX hereunder shall be substantially the same as the quantity,
identity, character and quality of and title to the assets of the Jacksonville
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
SFX, in the aggregate, less than the
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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 Jacksonville
Stations to (i) give SFX and SFX'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 Jacksonville Stations, and to all real estate,
buildings and equipment relating to the Jacksonville Stations, in order that
SFX may have full opportunity to make such investigation at the sole expense of
SFX, including but not limited to, environmental assessments, as it desires of
the affairs of the Jacksonville Stations and (ii) furnish SFX 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 Jacksonville
Stations, that SFX may reasonably request. The rights of SFX under this Section
shall not be exercised in such a manner as to interfere unreasonably with the
business of the Jacksonville 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 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 Jacksonville 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 Jacksonville Stations'
Licenses. Copies of each such report and document filed between the date hereof
and the Closing Date shall be furnished to SFX promptly after its filing.
12.7 Notification. Chancellor shall promptly notify SFX
in writing of (i) any
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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 SFX 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 SFX 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 SFX to permit SFX, 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 SFX under this Section 12.7 shall
be kept confidential by SFX.
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.
SECTION 13. COVENANTS OF SFX
13.1 Conduct of Station:
13.1.1 Subject to the Long Island Stations LMA, SFX
covenants and agrees with Chancellor that between the date hereof (except as
otherwise noted below), SFX with respect to the Long Island Stations shall:
(i) use commercially reasonable efforts
to maintain the Long Island Stations' present business organization, keep
available the services of the Long Island Stations' employees and independent
contractors, preserve the Long Island Stations' relationships with the Long
Island Stations' customers and others having business relationships with the
Long Island Stations, and refrain from materially and adversely changing any of
the Long Island Stations' 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 Long Island Stations'
books of account and records in the usual and ordinary manner and in accordance
with generally accepted accounting
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principles;
(iii) operate in the usual and ordinary
course of business in accordance with past practice and conduct the Long Island
Stations' business in all material respects in compliance with the terms of the
Long Island 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 Long Island Stations 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 Long Island Stations through the Closing Date;
(vi) not incur any debts or obligations
to be performed by Chancellor 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 Long Island Assets or sell or transfer any of the Long Island Assets
without replacing such Long Island Assets with an asset of substantially the
same value and utility;
(viii) without the prior consent of
Chancellor, which consent shall not be unreasonably withheld or delayed, (x)
not modify or extend any Long Island Stations Contracts or (y) enter into any
new Long Island 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 Long Island Stations'
employees' terms and conditions of employment;
(x) not make any change in the Long
Island Stations' 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 Long Island
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;
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(xiii) SFX shall enforce, in its own name
and for the benefit of Chancellor, all representations, warranties and
covenants insofar as such representations, warranties and covenants affect or
relate to the Long Island Assets.
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 SFX shall give or cause the Long Island Stations 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 SFX's properties, books, Contracts, Trade
Agreements, reports and records including financial information and tax returns
relating to the Long Island Stations, and to all real estate, buildings and
equipment relating to the Long Island Stations, 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 Long Island
Stations 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 Long Island Stations, that Chancellor may
reasonably request. The rights of Chancellor under this Section shall not be
exercised in such a manner as to interfere unreasonably with the business of
the Long Island Stations.
13.3 No Inconsistent Action. SFX 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, SFX 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. SFX shall use its
reasonable best efforts to perform and carry out all their respective
obligations under this Agreement. SFX 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
Long Island Stations.
13.6 FCC Reports. From the Time of Closing on the Long
Island Stations until the Closing Date hereunder, SFX 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 Long Island Stations Licenses.
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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. SFX shall promptly notify Chancellor
in writing of (i) any litigation, arbitration or administrative proceeding
pending or, to its knowledge, threatened against SFX which challenges the
transactions contemplated hereby or (ii) the failure of SFX, or any employee or
agent of SFX 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. SFX, 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-closing period. SFX 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 SFX 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 SFX covenant and agree that they shall act in
accordance with the following:
14.1 Confidentiality. Each of Chancellor and SFX 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
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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, provided
the recipient of said information has executed a confidentiality agreement for
such a transaction.
14.2 Cooperation. Chancellor and SFX 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.
14.3 Control of Stations. Prior to Closing, Chancellor
shall not, directly or indirectly, control or direct the operations of the Long
Island Stations, and SFX shall not, directly or indirectly, control or direct
the operations of the Jacksonville Stations. Such operations, including
complete control over the Jacksonville Stations' or the Long Island Stations'
programming, employees and policies, shall be the sole responsibility of
current licensees.
14.4 Bulk Sales Laws. Chancellor hereby waives
compliance by SFX and SFX hereby waives compliance by Chancellor with the
provisions of the "bulk sales" or similar laws of any state. SFX agrees to
indemnify Chancellor and Chancellor agrees to indemnify SFX 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 SFX
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. SFX 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 Jacksonville Stations
and the Long Island Stations subject to the
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effectiveness of the LMAs between the parties. As of the commencement date of
either the Jacksonville Stations LMA or the Long Island Stations LMA, the
current employees of those respective stations (other than a general manager
and one staff employee of each station) will become employees of the party
programming the stations. SFX shall be responsible for all obligations or
liabilities to those employees not offered employment by Chancellor (herein
referred to as "Retained Long Island Employees"), and Chancellor shall have no
obligations with respect to the retained Long Island Employees except as
specifically set forth below. Chancellor shall be responsible for all
obligations or liabilities to those employees not offered employment by SFX
(hereinafter referred to as the "Retained Jacksonville Employees"), and SFX
shall have no obligations with respect to the Retained Jacksonville Employees
except as specifically set forth below. Chancellor agrees that SFX may
terminate employees of the Jacksonville Stations without cause thirty (30) days
from this Agreement; and SFX agrees that Chancellor may terminate employees of
the Long Island Stations without cause thirty (30) days from this Agreement,
but if the number of employees exceeds ten (10) or in the aggregate, the
severance liability amount at either the Jacksonville Stations or the Long
Island Stations exceeds One Hundred Thousand Dollars ($100,000), then
Chancellor with respect to the Long Island Stations and SFX with respect to the
Jacksonville Stations shall be responsible to pay for any severance amounts
exceeding the first One Hundred Thousand Dollars ($100,000). SFX with respect
to the Long Island Stations and Chancellor with respect to the Jacksonville
Stations shall be responsible to pay for any severance amounts associated with
only the first ten (10) terminated employees, as designated by the party
programming the station, but in no event will SFX with respect to the Long
Island Stations and Chancellor with respect to the Jacksonville Stations be
liable for any severance amounts exceeding One Hundred Thousand Dollars
($100,000). The above thirty (30) day time period is subject to the rights of
the parties pursuant to Section 22.11.
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 warranties of SFX 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 SFX 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. SFX has obtained all 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
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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 SFX, executed by an
appropriate officer of SFX 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), unless finality
has been waived by mutual agreement of the parties.
(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 SFX 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. SFX shall have delivered or
caused to be delivered to Chancellor, 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 Chancellor, effecting the sale, transfer, assignment
and conveyance of the Long Island Stations' Assets to Chancellor.
15.8 Environmental Condition. Chancellor shall have been
satisfied in its sole discretion that any environmental conditions identified
in the Phase I environmental audit report with respect to the Long Island Real
Estate and operations of the Long Island Stations and the environmental and
industrial hygiene and safety condition of the Long Island Real Estate and
operations of the Long Island Stations shall have been or is scheduled to be
satisfactorily remediated.
SECTION 16. CONDITIONS OF CLOSING BY SFX
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The obligations of SFX 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 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 SFX 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 SFX thereunder, all in form and
substance reasonably satisfactory to SFX.
16.4 Closing Certificates. SFX 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),
unless finality has been waived by mutual agreement of the parties.
(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.
16.6 Adverse Proceedings. No injunction, decree or
judgment of any court, agency or other governmental entities shall have been
rendered against Chancellor or SFX which would render it unlawful, as of the
Closing date, to effect the transactions contemplated by this Agreement in
accordance with its terms.
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16.7 Closing Documents. Chancellor shall have delivered
or caused to be delivered to SFX, 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 SFX, effecting the sale, transfer,
assignment and conveyance of the Florida Station's Assets to SFX.
16.8 Environmental Condition. SFX shall have been
satisfied in its sole discretion that any environmental conditions identified
in the Phase I environmental audit report with respect to the Jacksonville Real
Estate and operations of the Jacksonville Stations and the environmental and
industrial hygiene and safety condition of the Jacksonville Real Estate and
operations of the Jacksonville Stations shall have been or is scheduled to be
satisfactorily remediated.
SECTION 17. CLOSING
17.1 Time and Place. A closing on the exchange and sale
of the Long Island Assets and the Jacksonville 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
HSR Act (the "Closing Date"). The parties acknowledge that the Florida
Agreement shall not close until after January 1, 1997, and therefore, SFX and
Chancellor agree to use their reasonable best efforts to close this Exchange
Agreement on or about the same date and time as the Florida Agreement.
17.2 Deliveries By Chancellor. At closing, Chancellor
shall deliver to SFX by wire transfer of available funds the cash payments
specified in Section 3.1. In addition, Chancellor shall deliver documents
conveying title to the Jacksonville Assets to SFX in substantially the same
manner as Chancellor received title to the Jacksonville Assets from Omni, it
being the intention of the parties to vest in SFX all of Chancellor's rights,
title and interest in the Jacksonville Assets received from Omni such that the
Jacksonville Assets conveyed to SFX are substantially the same Jacksonville
Assets (in terms of identity, quantity, quality, utility, value, nature of
title conveyed, etc.) as the Jacksonville Assets that were conveyed to
Chancellor by Omni pursuant to the Florida Agreement. The deliveries from
Chancellor to SFX shall include:
(a) An Assignment of Government Authorizations
conveying the Jacksonville Licenses and all other governmental permits,
licences and authorizations used in the operation of the Jacksonville Stations.
(b) A Bill of Sale for all items of personal
property included in the Jacksonville Assets.
(c) Deeds conveying title to all Jacksonville
Real Estate owned in fee simple by Chancellor and used in the operation of the
Jacksonville Stations.
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(d) Assignments of leases conveying all of
Chancellor's right, title and interest in all Jacksonville Real Estate leased
by Chancellor.
(e) All other conveyances, assignments and
documents reasonably necessary to vest in SFX title to the Jacksonville Assets
as contemplated in this Agreement.
17.3 Delivery By SFX. At Closing, SFX shall deliver to
Chancellor documents conveying title to the Long Island Assets. The deliveries
from SFX to Chancellor shall include:
(a) An Assignment of Government Authorizations
conveying the Long Island Licenses and all other governmental permits,
licences and authorizations used in the operation of the Long Island Stations.
(b) A Bill of Sale for all items of personal
property included in the Long Island Assets.
(c) Deeds conveying title to all Long Island Real
Estate owned in fee simple by SFX and used in the operation of the Long Island
Stations.
(d) Assignments of leases conveying all of SFX's
right, title and interest in all Long Island Real Estate leased by SFX.
(e) All other conveyances, assignments and
documents reasonably necessary to vest in Chancellor's title to the Long Island
Assets as contemplated in this Agreement.
SECTION 18. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
18.1 Survival of Representations and Warranties. The
representations and warranties contained in this Agreement, and in any
schedule, instrument or certificate delivered pursuant hereto, shall survive
the Closing until the earlier of March 31, 1998, or one year after the closing
of the Florida Agreement.
SECTION 19. INDEMNIFICATION
19.1 Indemnification by Chancellor.
(a) Chancellor shall indemnify and hold SFX and
its stockholders, employees, officers, directors, affiliates and agents
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 (i) Chancellor's ownership or operation of the Long Island
Stations, (ii) the Jacksonville Retained Liabilities after the Closing Date
(which shall not be subject to Section 19.3);
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(iii) any inaccuracy in any representation or warranty of Chancellor contained
in this Agreement or in any schedule, instrument or certificate delivered
pursuant thereto; and (iv) any breach of any covenant or agreement of
Chancellor contained in this Agreement and required to be performed by
Chancellor with the exception of matters specifically referred to in Section 5
hereof.
(b) Chancellor shall enforce, in its own name and
for the benefit of SFX, all indemnification provisions of the Florida Agreement
specifically pertaining to the Jacksonville Stations or Assets.
19.2 Indemnification by SFX.
(a) SFX shall indemnify and hold Chancellor and
its stockholders, employees, officers, directors, affiliates and agents
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 (i) SFX's ownership or operation of the Jacksonville
Stations, (ii) the Long Island Retained Liabilities after the Closing Date
(which shall not be subject to Section 19.3); (iii) any inaccuracy in any
representation or warranty of SFX contained in this Agreement or in any
schedule, instrument or certificate delivered pursuant thereto; and (iv) any
breach of any covenant or agreement of SFX contained in this Agreement and
required to be performed by SFX with the exceptions of matters specifically
referred to in Section 5 hereof.
(b) SFX shall enforce, in its own name and for
the benefit of Chancellor, all indemnification provisions of the Long Island
Stations and any agreement in which the Long Island Stations have entered into
prior to the Closing Date.
19.3 Limitation on Reimbursement.
(a) Except as provided in Section 5, neither
Chancellor nor SFX 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 Three Hundred Thousand Dollars
($300,000) (the "Indemnification Basket"). The individual parties shall not be
entitled to reimbursement for damages in excess of Five Million Dollars
($5,000,000)in the 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
19 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
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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 19 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 (at the Indemnified Party's expense), unless the
Indemnified Party is advised by counsel that representation of the Indemnitor
and the Indemnified Party by one firm of counsel would constitute a conflict of
interest under applicable codes of professional conduct in which event the
reasonable fees and expenses of such separate counsel shall be paid by the
Indemnitor. 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.
(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:
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(a) by the mutual consent of the parties;
(b) by written notice of (i) Chancellor to SFX,
if SFX 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
or in either the Jacksonville Stations LMA or the Long Island Stations LMA
(together, the "LMA Agreements") 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 such lesser period provided for under the LMA Agreements), or
(ii) SFX 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 or in either of the LMA Agreements and such breach
or default shall not be cured within thirty (30) days of the notice of breach
or default served by SFX (or such lesser period provided for under the LMA
Agreements), but such notice and cure period shall not apply in the case of
Chancellor's or SFX's failure to consummate the transactions in accordance with
the terms and times specified in Section 17 of this Agreement.
(c) by Chancellor or SFX 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 SFX or by
SFX to Chancellor unless extended pursuant to Section 5, if the Closing shall
not have been consummated on or before July 1, 1997 as provided in Section
17.1;
(f) pursuant to Section 22.11 of this Agreement;
(g) by Chancellor in the event it does not
receive its Board of Directors approval of the Agreement within two (2) days of
the execution of this Agreement. Said termination shall be without liability
to Chancellor.
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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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 Jacksonville Assets in accordance with this Agreement,
including recordation, transfer and documentary taxes and fees, the Long Island
Assets, and any excise, sales or use taxes, shall be borne equally by SFX and
Chancellor. All costs of transferring the Long Island Stations 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 SFX 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 SFX.
SECTION 22. MISCELLANEOUS
22.1 Risk of Loss. Prior to Closing, risk of loss to the
Jacksonville Stations shall be borne by Chancellor and risk of loss to the
Long Island Stations shall be borne by SFX.
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) without the consent of the
other party, (b) nothing in this Agreement shall limit Chancellor's ability to
assign the Long Island Licenses (including the right to acquire the Long Island
Licenses at the Closing) to Chancellor Broadcasting Licensee Company or any
other subsidiary of Chancellor without the consent of Sellers, (c) nothing in
this Agreement shall limit SFX's ability to assign the Jacksonville Station
Licenses (including the right to acquire Jacksonville Licenses at the Closing)
to SFX Broadcasting, Inc. or any other wholly owned subsidiary of SFX without
the consent of Sellers, and (d) 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
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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 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 SFX to:
Robert F. X. Sillerman
SFX Broadcasting, Inc.
150 E. 58th Street
New York, NY 10155
Telecopier number: (212) 753-3188
With a copy to:
Richard A. Liese, Esq.
SFX Broadcasting, Inc.
150 E. 58th Street
New York, NY 10155
Telecopier number: (212) 753-3188
(b) In the case of Chancellor, to:
Steven Dinetz
President and Chief Executive Officer
Chancellor Broadcasting Company
12655 N. Central Expressway
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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.
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.
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22.11 Binding Agreement. The parties 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
of 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 SFX
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.
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IN WITNESS WHEREOF, the parties have caused this Exchange
Agreement to be executed effective as of the date first written above.
CHANCELLOR RADIO BROADCASTING COMPANY
By: /s/ STEVEN DINETZ
--------------------------
Steven Dinetz
President
SFX BROADCASTING, INC.
By: /s/ ROBERT F. X. SILLERMAN
--------------------------
Robert F. X. Sillerman
Executive Chairman & CEO
WBLI, INC.
WBLI-FM, INC.
By: /s/ ROBERT F. X. SILLERMAN
--------------------------
Robert F. X. Sillerman
Executive Chairman & CEO
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WHFM, INC.
By: /s/ ROBERT F. X. SILLERMAN
--------------------------
Robert F. X. Sillerman
Executive Chairman & CEO
WBAB, INC.
By: /s/ ROBERT F. X. SILLERMAN
--------------------------
Robert F. X. Sillerman
Executive Chairman & CEO
WGBB, INC.
By: /s/ ROBERT F. X. SILLERMAN
--------------------------
Robert F. X. Sillerman
Executive Chairman & CEO
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EXHIBIT 2.14
CHANCELLOR RADIO BROADCASTING COMPANY
LOCAL MARKETING AGREEMENT
WITH
WBLI, INC.
WBLI-FM, INC.
WHFM, INC.
WBAB, INC.
WGBB, INC.
FOR
WBAB-FM, BABYLON, NEW YORK
WBLI-FM, PATCHOGUE, NEW YORK
WGBB-AM, FREEPORT, NEW YORK
WHFM-FM, SOUTHAMPTON, NEW YORK
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. Agreement Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Programmer's Purchase of Airtime and Provision of Programming. . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Representations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4. Consideration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5. Collection of Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6. SFX Control of the Stations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
7. Programmer Responsibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
8. Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
9. Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
10. Public Affairs Programming. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
11. Additional License Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
12. Broadcast Stations Programming Policy Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
13. Compliance with Copyright Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
14. Payola. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
15. Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
16. Local Marketing Agreement Challenge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
17. Confidential Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
18. Major Defaults: Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
18.1. Programmer's Major Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
18.2. SFX's Major Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
18.3. Cure Periods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
18.4. Termination Upon Occurrence of Major Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
18.5. Termination Upon Failure of Consummation of Exchange Agreement. . . . . . . . . . . . . . . . . . . 12
</TABLE>
i
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<TABLE>
<S> <C>
19. Liabilities Upon Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
20. No Format Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
21. SFX's Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
22. Programmer's Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
23. Procedure for Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
24. Dispute Over Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
25. Programmer's Remedies for Operational Deficiencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
26. Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
27. Other Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
28. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
29. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
30. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
31. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
32. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
33. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
34. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
35. Certifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(a) Control of Stations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(b) Compliance with Ownership Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
36. No Joint Venture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
37. Beneficiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
PAYMENT SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SCHEDULE B - EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
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<TABLE>
<S> <C>
ATTACHMENT I - BROADCAST STATIONS PROGRAMMING POLICY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
I. No Plugola or Payola. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
II. Political Broadcasting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
III. Required Announcements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
IV. No Illegal Announcements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
V. SFX Discretion Paramount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ATTACHMENT II - PAYOLA AFFIDAVIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
iii
<PAGE> 5
LOCAL MARKETING AGREEMENT
THIS LOCAL MARKETING AGREEMENT ("LMA" or "Agreement"), made as of July 1, 1996
by and between WBLI, Inc., a New York corporation, WBLI-FM, Inc., a Delaware
corporation, WHFM, Inc., a New York Corporation, WBAB, Inc., a New York
corporation, and WGBB, Inc., a New York corporation (collectively, "SFX" or
"Owner" or "Licensee") and CHANCELLOR RADIO BROADCASTING COMPANY, ("Chancellor"
or "Programmer") a Delaware corporation.
RECITALS
WHEREAS, SFX owns and operates radio stations WBAB-FM, Babylon, New
York; WBLI-FM, Patchogue, New York; WGBB- AM, Freeport, New York; and WHFM-FM,
Southampton, New York (the "Long Island Stations");
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, 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 Station WAPE-FM, Jacksonville, Florida, and Station WFYV-FM,
Atlantic Beach, Florida (collectively, the "Jacksonville Stations"), including
the related FCC broadcast licenses and authorizations. That Purchase Agreement
is hereafter referred to as the "Florida Agreement".
WHEREAS, SFX wishes to retain Chancellor to provide programming for
the Stations pursuant to the terms and conditions set forth in this Agreement
and in conformity with the Stations' 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 Stations' policies and all FCC
rules and regulations, including the requirement that the ultimate control of
the Stations be maintained by SFX; and
WHEREAS, Chancellor and SFX have entered into an Asset Exchange
Agreement dated July 1, 1996 (the "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 SFX has agreed to
transfer to Chancellor, and Chancellor has agreed to acquire from SFX,
substantially all of the assets and businesses of the Long Island Stations; and
Chancellor has agreed to transfer to SFX, and SFX has agreed to acquire from
Chancellor, substantially all of the assets and businesses of the Jacksonville
Stations.
NOW THEREFORE, for and in consideration of the mutual covenants herein
contained, the parties,
<PAGE> 6
SFX and Chancellor
Local Marketing Agreement
Page 2
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intending to be legally bound, agree as follows:
1. Agreement Term.
The term of this Agreement will begin on July 1, 1996
("Commencement Date") and will continue until the Programmer acquires the
assets of the Long Island Stations and the Owner acquires the assets of the
Jacksonville Stations in accordance with the terms of the Exchange Agreement,
unless earlier terminated in accordance with the provisions set forth herein.
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
Long Island Stations twenty-four (24) hours per day Monday through Friday and
for forty-eight (48) hours during Saturday through Sunday, provided that SFX
may broadcast up to two (2) hours of programming for the Long Island Stations
which is aimed at serving the needs and interests of the Long Island Stations'
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, SFX hereby grants to Programmer the right for the term of this
Agreement to use substantially all of the equipment located in the Stations'
studios and currently used by SFX for broadcasting programs on the Stations.
In addition, Programmer shall have, and SFX hereby grants to Programmer,
a license to enter on the premises currently occupied by the Stations
for the purpose of producing its programming hereunder; provided, however,
that SFX shall maintain, for its use, sufficient space at the Stations'
studios to enable SFX to conduct its operations and originate programming.
Accordingly, Programmer shall hold SFX harmless from all costs, fees and
expenses incurred with respect to any personal injury suffered by any employee
or agent of Programmer while on the property of SFX. Programmer shall also
be responsible for and shall reimburse SFX for any damage to the property of
SFX caused by Programmers' employees or agents.
3. Representations.
Each of SFX 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 SFX
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,
<PAGE> 7
SFX and Chancellor
Local Marketing Agreement
Page 3
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including but not limited to the Act and the Commission's rules, regulations
and policies.
4. Consideration.
During the term of this Agreement, Programmer shall pay SFX
the payments set forth on the Payment Schedule annexed hereto.
5. Collection of Accounts Receivable.
(a) The accounts receivable of the Long Island Stations
generated prior to the Commencement Date (the "Pre-LMA Receivables") shall be
and remain the property of SFX. Within fifteen (15) days after the
Commencement Date, SFX shall furnish Chancellor with a list (certified by the
Chief Financial Officer of SFX to be a true and complete list) of all accounts
receivable of SFX which remain outstanding as of the Commencement Date.
Chancellor agrees that if, after the Commencement Date, it shall receive
payment, in respect to any Pre-LMA Receivable, Chancellor shall remit to SFX,
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 SFX), which are in payment for advertising broadcast by the Station prior to
the Commencement Date.
(b) During the period starting on the Commencement Date
and ending one hundred twenty (120) days thereafter, Chancellor shall use
reasonable efforts, consistent with SFX's current billing and collection
practices and in the ordinary course of the business, to assist SFX 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 SFX'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).
(c) SFX agrees to remit to Chancellor within 5 business
days after the end of each month, any amounts received by SFX during the
preceding month (whether or not directed on their face to Chancellor) which are
in payment for advertising generated by the Stations after the Commencement
Date.
<PAGE> 8
SFX and Chancellor
Local Marketing Agreement
Page 4
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(d) Chancellor shall not set-off any claim or amount
against any of the Pre-LMA Receivables.
6. SFX Control of the Stations.
(a) SFX will have full authority, power and control over
the management and operations of the Long Island Stations during the term of
this Agreement. SFX will bear all responsibility for the Long Island Stations'
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 Long Island Stations, including the right to preempt
programming which in its good faith judgment it deems unsuitable or contrary to
the public interest. SFX 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 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 SFX in complying with all FCC rules and regulations.
(b) SFX retains ultimate control over the Long Island
Stations and their premises. Accordingly, all employees of Programmer present
at the Long Island Stations or on their premises must comply with the policies
and rules promulgated by SFX. In no event shall Programmer, or Programmer's
employees, represent, depict, describe or portray Programmer as the Licensee of
the Long Island Stations. To this end, all employees of Programmer, whose work
involves the Long Island Stations, shall be informed as to SFX's ultimate
control over the Long Island Stations and Programmer's subordinate capacity,
and all printed materials and promotional announcements shall accurately
describe all of the roles and responsibilities of SFX and Programmer.
(c) The Long Island Stations' transmission equipment
shall be maintained by SFX 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 expense of SFX in a timely fashion.
(d) SFX shall employ at its expense a management-level
employee at the Long Island Stations and such other person for each Long Island
Station as necessary to fulfill SFX's duties hereunder and its obligations
under the FCC's rules. A manager shall direct the day-to-day operations of
each Long Island Station and shall report to and be accountable to SFX. SFX
shall be responsible for the salaries, taxes, insurance and related costs for
all personnel it employs at the Long Island Stations.
<PAGE> 9
SFX and Chancellor
Local Marketing Agreement
Page 5
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(e) SFX shall pay all regulatory fees, file all necessary
applications, maintain the Long Island Stations' local public inspection files
within the Long Island Stations' communities of license and shall prepare and
place in such inspection file all required documents including, but not limited
to the Long Island Stations' 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 Long Island Stations
(including telephone expenses and expenses related to sales, marketing,
promotion, advertising, billing and collections, and traffic), except that SFX
shall be responsible for the costs as provided in Section 6 hereof. Programmer
shall cooperate fully with SFX 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 Long Island Stations 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
Long Island Stations or its operations, Programmer shall promptly notify SFX 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 Long Island Stations to
transmit any required tests of the Emergency Broadcast System or successor
Emergency Alert System at such times as are directed by SFX.
(d) Political Advertising and Announcements. Programmer
shall maintain and deliver to SFX all records and information required by the
FCC to be placed in the public inspection files of the Long Island Stations
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 Long Island Stations 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).
<PAGE> 10
SFX and Chancellor
Local Marketing Agreement
Page 6
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2. When required by law, Programmer shall sell
such political advertising time only at the Stations' lowest unit rate. Within
seven (7) days after the broadcast of political advertising, Programmer shall
review the commercial spots that have aired on the Long Island Stations, 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 (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 Long Island 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 Long Island 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 SFX, all of the Long Island Stations' 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 Long Island Stations so as
to assist SFX in the preparation of any required programming reports, and
provide other information to enable SFX 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 SFX
from and after the Commencement Date under the contracts and agreements listed
in the Schedules to the Exchange Agreement as being assumed by Programmer on
the Commencement Date. In addition, Programmer shall perform and discharge all
obligations of the Long Island Stations under all trade agreements from and
after the Commencement Date. Programmer will not enter into any third-party
contracts, leases or agreements which will bind SFX in any way except with
SFX's prior written approval.
9. Employees.
Schedule B hereto contains a listing of the name, salary or
compensation and job
<PAGE> 11
SFX and Chancellor
Local Marketing Agreement
Page 7
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description of all employees of the Long Island Stations as of June 17, 1996.
Pursuant to Section 14.7 of the Exchange Agreement as of the Commencement Date,
the current Long Island Stations employees will become employees of the
Programmer; however, Programmer may terminate current employees of the Long
Island Stations without cause thirty (30) days from the execution of the
Exchange Agreement. If the number of terminated employees exceeds ten (10) or
in the aggregate the severance liability amount of the terminated employees
from the Long Island Stations exceeds One Hundred Thousand Dollars ($100,000),
then the Programmer shall be responsible to pay for any severance amounts
exceeding the first One Hundred Thousand Dollars ($100,000). Owner shall be
responsible to pay for any severance amounts associated with only the first ten
(10) terminated employees, as designated by Programmer, but in no event will
Owner be liable for any severance amounts exceeding One Hundred Thousand
Dollars ($100,000). Owner agrees to maintain at its own expense one management
level employee and one other employee for each Long Island Station.
Commencing subsequent to the execution of the LMAs, Owner shall make
available to each of the Long Island Stations' personnel during normal business
hours for Programmer to interview prior to the Commencement Date. Programmer
shall notify Owner of the names of employees to whom Programmer shall offer
employment (herein referred to as "Transferred Employees"). Owner hereby
consents to Programmer making such offers of employment relating to the Long
Island Stations subject to the effectiveness of the LMAs between the parties.
Owner shall be responsible for all obligations or liabilities to those
employees not offered employment by Programmer, and Programmer shall have no
obligations with respect to those employees (herein referred to as "Retained
Employees").
No earlier than thirty (30) days after the execution of the Exchange
Agreement, Programmer shall submit confirmation letters to the Long Island
Stations' Management, on-air talent and other key employees which it intends to
offer employment, to which confirmation letters shall set forth the terms of
employment currently in effect between said employee and Owner, including, but
not limited to, matters concerning salary, bonuses, vacation time, non-compete
provisions (if any), benefits, termination rights, loans (if any) and any other
pertinent provisions thereof. Receipt of the confirmation letters signed by
the perspective management, on-air talent and other key employees is a
condition precedent to Programmer making any offers of continued employment.
10. Public Affairs Programming.
Notwithstanding any other provision of this Agreement,
Programmer recognizes that SFX has certain obligations to broadcast programming
to meet the needs and interests of the community of license for the Long Island
Stations. SFX 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 SFX 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
<PAGE> 12
SFX and Chancellor
Local Marketing Agreement
Page 8
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of the public. Accordingly, SFX may broadcast public affairs programming as
outlined in Section 2 hereof. SFX 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.
11. Additional License Obligations.
Although both parties shall cooperate in the broadcast of
emergency information over the Stations, SFX 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 SFX, is of overriding public
importance. SFX shall also coordinate with Programmer the Long Island
Stations' hourly station identification announcements to be aired in accordance
with FCC rules. SFX shall continue to maintain a main studio, as that term is
defined by the FCC, within each of the Long Island Stations' principal
community contours and shall staff it as required by the FCC. SFX shall be
responsible for the salaries, taxes, insurance and related costs for all
personnel it employs at the Long Island Stations and shall maintain insurance
at its present levels covering the Long Island Stations' transmission
facilities. In addition, SFX shall pay any federal regulatory fees, maintain
its local public inspection file within the Long Island Stations' 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. SFX shall also receive and respond to
telephone inquiries from the general public. Programmer shall provide SFX with
information with respect to certain of Programmer's programs which may be
included in SFX's quarterly issues and programs lists.
12. Broadcast Stations Programming Policy Statement.
SFX has adopted and will enforce a Broadcast Stations
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 SFX 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 SFX
reasonably determines that a program, commercial or other material supplied by
Programmer does not comply with the Policy Statement, or if SFX 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 SFX.
13. Compliance with Copyright Act.
<PAGE> 13
SFX and Chancellor
Local Marketing Agreement
Page 9
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Programmer represents and warrants to SFX that Programmer has
full authority to broadcast its programming on the Long Island Stations 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. SFX will maintain as appropriate its own
ASCAP, BMI and SESAC licenses for the performance of Programmer's programs and
Programmer shall reimburse SFX for the costs of such licenses obtained by SFX
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
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 SFX with payola
Affidavits from itself, and all of its employees and agents who are involved
with providing programming on the Long Island Stations, at such times as SFX
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 SFX and pay all expenses
attributable thereto. Programmer may sell advertising, consistent with
applicable rules, regulations and the Policy Statement, on the Long Island
Stations 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 SFX. SFX
shall retain all revenues from the sale of the Long Island Stations'
advertising during the hours each week in which SFX airs its own
nonentertainment programming.
16. Local Marketing Agreement Challenge.
If this Agreement is challenged at the FCC, counsel for SFX
and counsel for
<PAGE> 14
SFX and Chancellor
Local Marketing Agreement
Page 10
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Programmer shall defend the Agreement and the parties' performance thereunder
throughout all FCC proceedings with Programmer and SFX 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 SFX's or
Programmer's option, seek reversal of the staff decision and approval from the
full Commission on appeal.
17. Confidential Review.
Prior to providing any programming by Programmer to SFX under
this Agreement, Programmer shall acquaint SFX with the nature and type of the
programming to be provided. SFX, solely for the purpose of ensuring
Programmer's compliance with the law, FCC rules and the Long Island Stations'
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 reasonably request, including all rate cards and disclosure
statements related to Programmer's political advertising. Programmer shall
promptly provide SFX 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 annexed hereto
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 Long
Island Stations in accordance with Section 2 hereof;
(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. SFX's Major Defaults. The occurrence of any of the
following, after the
<PAGE> 15
SFX and Chancellor
Local Marketing Agreement
Page 11
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expiration of the applicable cure periods, if any, will be deemed to be a
"Major Default" by SFX under this Agreement:
(a) Except as otherwise provided for in this Agreement,
the failure of SFX to broadcast the programs supplied by Programmer in
accordance with Section 2 hereof;
(b) Any termination of this Agreement by SFX other than
as permitted in Section 18.4 or 18.5; or
(c) In the event of a voluntary filing by SFX (or
involuntary filing with respect to SFX 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 SFX must be received by SFX within five (5) days after SFX 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 SFX described in Section
18.2(b) hereof.
(c) Programs and Broadcast Matters. With respect to
Programmer's failure to provide programs referred to in Section 18.1(b) hereof
or SFX's failure to broadcast programs referred to in Section 18.2(a) hereof,
the period allowed for cure shall be three (3) 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 ten (10) 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
<PAGE> 16
SFX and Chancellor
Local Marketing Agreement
Page 12
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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-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 SFX's federal, state, and local tax liabilities
associated with Programmer's payments to SFX as provided herein. Upon
termination pursuant to Sections 18.4 or 18.5 hereto, SFX shall be under no
further obligation to make available to Programmer any broadcast time or
broadcast transmission facilities, provided that SFX 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
following the termination date. At the date of termination, Programmer shall
return to SFX any equipment or property of the Long Island Stations used by
Programmer, its employees or agents, in substantially the same condition as
such equipment existed on the Commencement Date, shall restore SFX's technical
facilities to substantially the same condition as such facilities existed on
the Commencement Date, ordinary wear and tear excepted, shall reassign to SFX
all contracts and agreements relating to the Long Island Stations 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 SFX 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 Long Island Stations, and all
amounts which have been prepaid to SFX for any partial month beyond the
termination shall be immediately due and payable to Programmer. Programmer
shall return all confidential information with respect to the Long Island
Stations to the SFX. Programmer shall reassign all of SFX's accounts
receivable
<PAGE> 17
EXHIBIT 3.5
FORM OF
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 [INSERT
LIQUIDATION PREFERENCE OF OLD PREFERRED STOCK AT TIME OF EXCHANGE] 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
<PAGE> 18
Stock." The initial liquidation preference of the Series A Senior Exchangeable
Preferred Stock shall be [INSERT LIQUIDATION PREFERENCE OF OLD PREFERRED STOCK
AT TIME OF EXCHANGE] 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
2
<PAGE> 19
Exchangeable Preferred Stock, payable quarterly. No interest shall be
payable in respect of any dividends that may be in arrears. All
dividends shall be cumulative, whether or not earned or declared, on a
daily basis from [MAY 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.
3
<PAGE> 20
(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> 21
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> 22
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:
<TABLE>
<S> <C>
2001 . . . . . . . . . . . . . . . . . . . . . . . . . 106.125%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . 104.900%
2003 . . . . . . . . . . . . . . . . . . . . . . . . . 103.675%
2004 . . . . . . . . . . . . . . . . . . . . . . . . . 102.450%
2005 . . . . . . . . . . . . . . . . . . . . . . . . . 101.225%
2006 and thereafter . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
; 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%
6
<PAGE> 23
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> 24
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
8
<PAGE> 25
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
9
<PAGE> 26
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
10
<PAGE> 27
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
11
<PAGE> 28
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
12
<PAGE> 29
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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<PAGE> 33
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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<PAGE> 34
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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<PAGE> 35
(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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<PAGE> 36
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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<PAGE> 38
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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<PAGE> 39
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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<PAGE> 45
"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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<PAGE> 46
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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<PAGE> 47
"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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<PAGE> 48
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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<PAGE> 49
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
33
<PAGE> 50
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> 52
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> 53
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.
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IN WITNESS WHEREOF, said Chancellor Radio Broadcasting
Company, has caused this Certificate to be signed by Jacques Kerrest, its
Senior Vice President, this ___ day of __________, 1996.
CHANCELLOR RADIO BROADCASTING COMPANY
By:
-----------------------------------
Name: Jacques Kerrest
Title: Senior Vice President
38
<PAGE> 55
SFX and Chancellor
Local Marketing Agreement
Page 13
- -------------------------
to SFX. Programmer shall remit to SFX all amounts collected with respect to
SFX'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 Long Island Stations' air time
and equipment by Programmer including, without limitation, accounts payable and
net barter balances in excess of Fifty Thousand Dollars ($ 50,000), 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.
Until such time has elapsed pursuant to Section 22.11 to
terminate this Agreement, Programmer shall not materially change the
entertainment format of the Long Island Stations.
21. SFX's Indemnification.
SFX 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) SFX's operation of the Long Island Stations (not
including the operation of the Long Island Stations by Programmer) under this
Agreement, and
(b) breach of any warranty, representation, covenant,
agreement or obligation of SFX contained in this Agreement.
22. Programmer's Indemnification.
Programmer shall indemnify, defend, hold and save SFX 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) the programming furnished by Programmer under this
Agreement,
(b) the actions or failure to act of its employees or
agents under this Agreement
<PAGE> 56
SFX and Chancellor
Local Marketing Agreement
Page 14
- -------------------------
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:
(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;
(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
<PAGE> 57
SFX and Chancellor
Local Marketing Agreement
Page 15
- -------------------------
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.
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 Long Island Stations are operating from its authorized
auxiliary antenna, if any of the normal broadcast transmissions of the Long
Island Stations are interrupted, interfered with, or in any way impaired with
so that the Long Island Stations are not operating at full licensed power and
antenna height or are off the air, or in the event that SFX 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 Long Island Stations' operations are deficient, the Long
Island Stations' programming is preempted or the Long Island Stations are off
the air.
26. Force Majeure.
Any failure or impairment of the Long Island Stations'
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
governmental authority, civil riot, floods and any other cause not reasonably
within the control of SFX (including any obligation of SFX to reduce power or
suspend operation to avoid occupational exposure to harmful RF radiation),
shall not constitute a breach of this Agreement and SFX will not be liable to
Programmer.
27. Other Agreements.
During the term of this Agreement, SFX will not enter into any
other local marketing,
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SFX and Chancellor
Local Marketing Agreement
Page 16
- -------------------------
program provision, local management or similar agreement with any third party
with respect to the Long Island Stations.
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 Long Island Stations from SFX. Neither party may assign
its rights without the prior written consent of the other party which consent
shall not be unreasonably withheld.
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.
SFX 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.
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 SFX 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 New York.
33. Notices.
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SFX and Chancellor
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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 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 SFX: Robert F.X. Sillerman
SFX Broadcasting, Inc.
150 E. 58th Street
New York, NY 10155
Telecopier number: (212) 753-3188
Copy to: Richard A. Liese, Esq.
SFX Broadcasting, Inc.
150 E. 58th Street
New York, NY 10155
Telecopier number: (212) 753-3188
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;
<PAGE> 60
SFX and Chancellor
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(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.
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 Stations. SFX hereby verifies that it
will maintain control of the Long Island Stations and their facilities,
including specifically control over the Long Island Stations' 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.
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.
<PAGE> 61
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Local Marketing Agreement
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
CHANCELLOR RADIO BROADCASTING COMPANY
By: /s/ STEVEN DINETZ
-------------------------------------
Steven Dinetz
President
WBLI, Inc.
By: /s/ ROBERT F. X. SILLERMAN
-------------------------------------
Robert F. X. Sillerman
Executive Chairman & CEO
WBLI-FM, Inc.
By: /s/ ROBERT F. X. SILLERMAN
-------------------------------------
Robert F. X. Sillerman
Executive Chairman & CEO
<PAGE> 62
SFX and Chancellor
Local Marketing Agreement
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WHFM, Inc.
By: /s/ ROBERT F. X. SILLERMAN
-------------------------------------
Robert F. X. Sillerman
Executive Chairman & CEO
WBAB, Inc.
By: /s/ ROBERT F. X. SILLERMAN
-------------------------------------
Robert F. X. Sillerman
Executive Chairman & CEO
WGBB, Inc.
By: /s/ ROBERT F. X. SILLERMAN
-------------------------------------
Robert F. X. Sillerman
Executive Chairman & CEO
<PAGE> 63
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PAYMENT SCHEDULE
In exchange for the air time supplied to Programmer pursuant to this
Agreement, Programmer shall pay SFX Three Hundred Seventy Five Thousand Dollars
($375,000) per month until the Jacksonville Stations LMA goes into effect.
Once the Jacksonville Stations LMA goes into effect, the amounts payable to SFX
shall be reduced to Twenty Five Thousand Dollars ($25,000) per month. If the
Jacksonville Stations LMA is implemented before November 1, 1996, the monthly
payment obligation after November 1, 1996 shall be zero dollars ($0.00). In
the event that the Jacksonville Stations LMA is never entered into, the monthly
payments will remain at Three Hundred Seventy Five Thousand Dollars ($375,000)
per month. The first monthly payment to SFX 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.
Long Island LMA & Facility Fee
Monthly LMA Fee - Jul $ 375,000
Monthly LMA Fee - Aug $ 25,000
Monthly LMA Fee - Sep $ 25,000
Monthly LMA Fee - Oct $ 25,000
Monthly LMA Fee - Nov - ~ $ 0
Technical:
Salaries - Engineers/Managers $ 6,567
Utilities - Transmitter Sites $ 12,300
Maintenance - Transmitter Sites $ 3,108
Leases - Transmitter Sites $ 3,275
Total Technical $ 25,250
General & Administrative:
Salaries - Receptionist $ 1,917
Payroll - 8.5% Average $ 558
Health Insurance estimate $ 750
Office/Studio Rent $ 1,258
Office/Studio Maintenance $ 3,958
Office/Studio Utilities $ 0
Office/Studio Tax $ 0
<PAGE> 64
SFX and Chancellor
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Property Tax $ 8,567
General Insurance $ 7,167
Workmans Comp (3 employees est.) $ 200
Total General and Administrative $ 24,375
Monthly Facility Fee $ 49,625
Annualized Facility Fee $595,498
<PAGE> 65
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Local Marketing Agreement
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SCHEDULE B
EMPLOYEES
[Copy of Employees' Summaries for each Long Island Station to be provided.]
<PAGE> 66
SFX and Chancellor
Local Marketing Agreement
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ATTACHMENT I
BROADCAST STATIONS PROGRAMMING POLICY STATEMENT
Programmer agrees to cooperate with SFX 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
Long Island Stations 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.
II. Political Broadcasting.
Within thirty (30) days of the Commencement Date, Programmer
shall provide SFX 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 Long Island
Stations' 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 Stations policy.
III. Required Announcements.
Programmer shall broadcast (i) an announcement in a form
satisfactory to SFX at the beginning of each hour to identify the Long Island
Stations and (ii) any other announcements that may be required by law,
regulation or SFX's Stations policy.
IV. No Illegal Announcements.
No announcements, broadcasts or promotions prohibited by
federal, state or local law shall be made over the Long Island Stations. 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
<PAGE> 67
SFX and Chancellor
Local Marketing Agreement
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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. SFX Discretion Paramount.
In accordance with SFX's responsibility under the
Communications Act of 1934, as amended, and the Rules and Regulations of the
Federal Communications Commission, SFX reserves the right to reject or
terminate any advertising proposed to be presented or being presented over the
Long Island Stations, which is in conflict with Long Island Stations' policies
or which SFX or its general manager's reasonable judgement would not serve the
public interest.
In any case where questions of policy or interpretation arise,
Programmer should submit the same to SFX for decision before making any
commitments in connection therewith.
<PAGE> 68
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Local Marketing Agreement
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ATTACHMENT II
PAYOLA AFFIDAVIT
City of )
County of )
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.
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 Stations
is a crime, unless the agreed payment is disclosed to the Stations 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 Stations.
-------------------------------------
Affiant
The foregoing instrument was acknowledged before me this
day of , 1996
<PAGE> 69
SFX and Chancellor
Local Marketing Agreement
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by , who is personally known to me or who has produced
as identification.
-----------------------------------
Notary Public
My commission expires:
-----------------------------
<PAGE> 1
EXHIBIT 3.5
FORM OF
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 [INSERT
LIQUIDATION PREFERENCE OF OLD PREFERRED STOCK AT TIME OF EXCHANGE] 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
<PAGE> 2
Stock." The initial liquidation preference of the Series A Senior Exchangeable
Preferred Stock shall be [INSERT LIQUIDATION PREFERENCE OF OLD PREFERRED STOCK
AT TIME OF EXCHANGE] 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
2
<PAGE> 3
Exchangeable Preferred Stock, payable quarterly. No interest shall be
payable in respect of any dividends that may be in arrears. All
dividends shall be cumulative, whether or not earned or declared, on a
daily basis from [MAY 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.
3
<PAGE> 4
(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> 5
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> 6
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:
<TABLE>
<S> <C>
2001 . . . . . . . . . . . . . . . . . . . . . . . . . 106.125%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . 104.900%
2003 . . . . . . . . . . . . . . . . . . . . . . . . . 103.675%
2004 . . . . . . . . . . . . . . . . . . . . . . . . . 102.450%
2005 . . . . . . . . . . . . . . . . . . . . . . . . . 101.225%
2006 and thereafter . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
; 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%
6
<PAGE> 7
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> 8
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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<PAGE> 14
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
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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> 37
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> 38
IN WITNESS WHEREOF, said Chancellor Radio Broadcasting
Company, has caused this Certificate to be signed by Jacques Kerrest, its
Senior Vice President, this ___ day of __________, 1996.
CHANCELLOR RADIO BROADCASTING COMPANY
By:
-----------------------------------
Name: Jacques Kerrest
Title: Senior Vice President
38
<PAGE> 1
EXHIBIT 5.1
[Letterhead of Weil, Gotshal & Manges LLP]
August 7, 1996
Chancellor Radio Broadcasting Company
12655 N. Central Expressway, Suite 405
Dallas, Texas 75243
Ladies and Gentlemen:
We have acted as counsel to Chancellor Radio Broadcasting Company, a
Delaware corporation (the "Company"), in connection with the preparation and
filing by the Company with the Securities and Exchange Commission of a
Registration Statement on Form S-1 (Registration No. 333-02782) (the
"Registration Statement"), under the Securities Act of 1933, as amended, with
respect to the offer and sale of (a) up to 1,000,000 shares of 12 1/4% Series A
Senior Cumulative Exchangeable Preferred Stock, par value $0.01 per share (the
"New Preferred Stock") issuable by the Company pursuant to the Company's offer
to exchange one share of New Preferred Stock for each share of its outstanding
12 1/4% Senior Cumulative Exchangeable Preferred Stock, par value $0.01 per
share (the "Old Preferred Stock") and (b) up to $189,930,000 aggregate
principal amount of 12 1/4% Subordinated Exchange Debentures due 2008 (the
"Exchange Debentures") of the Company which the Company may, subject to certain
conditions, exchange for the shares of New Preferred Stock and thereafter issue
in payment of interest on outstanding Exchange Debentures from time to time
(the "Additional Debentures"). The Exchange Debentures will be governed by the
Indenture, dated as of February 26, 1996, between the Company and U.S. Trust
Company of Texas, N.A., as trustee (the "Trustee"), filed as Exhibit 4.3 to the
Registration Statement (the "Indenture").
In so acting, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of (i) the Registration Statement,
(ii) the form of the Certificate of Designation of the powers, preferences and
relative, participating, optional and other special rights of the 12 1/4%
Series A Senior Cumulative Exchangeable Preferred Stock of the Company filed as
Exhibit 3.5 to the Registration Statement (the "Certificate of Designation"),
(iii) the Indenture, (iv) the form of Exchange Debenture contained in the
Indenture and (v) such corporate records, agreements, documents, and other
instruments, and such certificates
<PAGE> 2
Chancellor Radio Broadcasting Company
August 7, 1996
Page 2
or comparable documents of public officials and of officers and representatives
of the Company, and have made such inquiries of such officers and
representatives, as we have deemed relevant and necessary as a basis for the
opinions hereinafter set forth.
In such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such latter documents. As to all questions of
fact material to the opinions expressed herein that have not been independently
established, we have relied upon certificates of officers and representatives
of the Company. In addition, we have assumed that the Certificate of
Designation relating to the New Preferred Stock will be duly authorized,
executed and filed with the Secretary of State of the State of Delaware in
substantially the form thereof filed as an exhibit to the Registration
Statement.
Based on the foregoing, and subject to the qualifications stated
herein, we are of the opinion that:
1. Upon the filing of the Certificate of Designation with the
Secretary of State of the State of Delaware, the New Preferred Stock will be
duly authorized, and when issued and delivered against receipt of the shares of
Old Preferred Stock surrendered in exchange therefor in accordance with the
terms of the Exchange Offer (as defined in the prospectus included in the
Registration Statement), will be validly issued, fully paid and non-assessable.
2. The Exchange Debentures have been duly authorized by the
Company for issuance and, when executed and authenticated in accordance with
the terms of the Indenture, and delivered to the holders of the New Preferred
Stock in exchange therefor as provided in the Certificate of Designation, will
constitute legal, valid and binding obligations of the Company, enforceable
against it in accordance with their terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
effecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity) and subject to the
qualification that we express no opinion as to the effect on the Exchange
Debentures of the laws of any jurisdiction other than the State of New York,
including laws which limit the rates of interest legally chargeable or
collectible.
3. The Additional Debentures have been duly authorized by the
Company and, when executed and authenticated in accordance with the terms of
the Indenture, and delivered
<PAGE> 3
Chancellor Radio Broadcasting Company
August 7, 1996
Page 3
to the holders of the Exchange Debentures in payment of accrued and unpaid
interest thereon in accordance with the terms of the Exchange Debentures, will
constitute legal, valid and binding obligations of the Company, enforceable
against it in accordance with their terms, subject to the qualifications stated
in paragraph 2 above.
The opinions expressed herein are limited to the laws of the State of
New York and the corporate laws of the State of Delaware, and we express no
opinion as to the effect on the matters covered by this letter of the laws of
any other jurisdiction.
The opinions expressed herein are rendered solely for your benefit in
connection with the transactions described herein. Those opinions may not be
used or relied upon by any other person, nor may this letter or any copies
thereof be furnished to any third party, filed with a governmental agency,
quoted, cited or otherwise referred to without our prior written consent,
except that we consent to the use of this letter as an exhibit to the
Registration Statement. Consent is also given to the reference to our firm
under the caption "Legal Matters" in the prospectus contained in the
Registration Statement.
Very truly yours,
/s/ Weil, Gotshal & Manges LLP
<PAGE> 1
EXHIBIT 7.1
[Letterhead of Weil, Gotshal & Manges LLP]
August 7, 1996
Chancellor Radio Broadcasting Company
12655 N. Central Expressway, Suite 405
Dallas, Texas 75243
Ladies and Gentlemen:
We have acted as counsel to Chancellor Radio Broadcasting Company, a
Delaware corporation (the "Company"), in connection with the preparation and
filing by the Company with the Securities and Exchange Commission of a
Registration Statement on Form S-1 (File No. 333-02782) (the "Registration
Statement"), under the Securities Act of 1933, as amended, with respect to the
offer and sale of (a) up to 1,000,000 shares of 12 1/4% Series A Senior
Cumulative Exchangeable Preferred Stock, par value $.01 per share (the "New
Preferred Stock") issuable by the Company pursuant to the Company's offer to
exchange one share of New Preferred Stock for each share of its outstanding 12
1/4% Senior Cumulative Exchangeable Preferred Stock, par value $.01 per share
(the "Old Preferred Stock") and (b) up to $189,930,000 aggregate principal
amount of 12 1/4% Subordinated Exchange Debentures due 2008 (the "Exchange
Debentures") of the Company which the Company may, subject to certain
conditions, exchange for the shares of New Preferred Stock or issue in payment
of interest on outstanding Exchange Debentures from time to time. The Exchange
Debentures will be governed by the Indenture, dated as of February 26, 1996,
between the Company and U.S. Trust Company of Texas, N.A., as trustee (the
"Trustee"), filed as Exhibit 4.3 to the Registration Statement (the
"Indenture").
In so acting, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of (i) the Registration Statement,
(ii) the form of the Certificate of Designation of the powers, preferences and
relative, participating, optional and other special rights of the 12 1/4%
Series A Senior Cumulative Exchangeable Preferred Stock of the Company filed as
Exhibit 3.5 to the Registration Statement (the "Certificate of Designation"),
(iii) the Indenture, (iv) the form of Exchange Debenture contained in the
Indenture and (v) such corporate records, agreements, documents, and other
instruments, and such certificates or comparable documents of public officials
and of officers and representatives of the Company, and have made such
inquiries of
<PAGE> 2
Chancellor Radio Broadcasting Company
August 7, 1996
Page 2
such officers and representatives, as we have deemed relevant and necessary as
a basis for the opinions hereinafter set forth.
In such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. As to all questions of
fact material to this opinion that have not been independently established, we
have relied upon certificates of officers and representatives of the Company.
We have also assumed for the purposes hereof that the Certificate of
Designation will be executed substantially in the form filed as an exhibit to
the Registration Statement and that the Certificate of Designation will be duly
filed with the Secretary of State of Delaware before the issuance of the New
Preferred Stock.
Each share of New Preferred Stock will have an initial liquidation
preference of at least One Hundred Dollars ($100.00) per share plus any
accumulated and unpaid dividends that such holders are entitled to receive,
before any distribution or payment is made to the holders of shares of any
other series of stock issued by the Company ranking junior to the New Preferred
Stock. Each share of New Preferred Stock will have a par value of $0.01.
Based on the foregoing, and subject to the qualifications stated
herein, we are of the opinion that there are no restrictions upon the use by
the Company of its surplus for payment of dividends by reason of the fact that
the aggregate liquidation preference of the New Preferred Stock is in excess of
the aggregate par value thereof, and, in view of the foregoing, no remedies
will be available to securityholders before or after payment of any dividend on
the New Preferred Stock solely because such dividend would reduce the surplus
of the Company to an amount less than the amount of such excess.
The foregoing opinion is based upon the facts that (i) Section 170 of
the General Corporation Law of the State of Delaware (the "DGCL") expressly
provides that the board of directors of a Delaware corporation, subject to any
restrictions contained in its certificate of incorporation, may declare and pay
dividends upon the shares of its capital stock out of surplus, as defined and
computed in accordance with Sections 154 and 244 thereof and (ii) no provision
of the DGCL (including but not limited to Sections 154, 170 and 244 thereof),
the Certificate of Incorporation of the Company, as amended, or the Certificate
of Designation contains any restriction on the amount of surplus that may be
used to pay dividends on a class of capital stock or requires reduction of
surplus by, or otherwise dictates the manner of accounting for, the excess of
the liquidation value of a class of capital stock over the par value thereof.
The opinion expressed herein is limited to the DGCL and the
Constitution of the State of Delaware and we express no opinion as to the
effect on the matters covered by this letter of the laws of any other
jurisdiction.
2
<PAGE> 3
Chancellor Radio Broadcasting Company
August 7, 1996
Page 3
The opinion expressed herein is rendered solely for your benefit in
connection with the transactions described herein. That opinion may not be
used or relied upon by any other person, nor may this letter or any copies
thereof be furnished to a third party, filed with a governmental agency,
quoted, cited or otherwise referred to without our prior written consent,
except that we consent to the filing of this letter as an exhibit to the
Registration Statement. Consent is also given to the reference to our firm
under the caption "Legal Matters" in the prospectus contained in the
Registration Statement.
Very truly yours,
/s/ Weil, Gotshal & Manges LLP
3
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into
effective as of February 14, 1996, between Chancellor Broadcasting Company, a
Delaware corporation (the "Company"), Chancellor Radio Broadcasting Company, a
Delaware corporation (the "Broadcasting Subsidiary"), and Steven Dinetz (the
"Employee)";
W I T N E S S E T H:
WHEREAS, the Company and the Broadcasting Subsidiary desire to
employ Employee, and Employee desires to be employed by the Company and the
Broadcasting Subsidiary, in accordance with the terms and conditions set forth
herein;
WHEREAS, the Broadcasting Subsidiary has entered into a Stock
Purchase Agreement dated as of August 3, 1995, pursuant to which the
Broadcasting Subsidiary is to acquire all of the capital stock of Trefoil
Communications, Inc. (the "Acquisition" and the date on which the Acquisition
is consummated being the "Acquisition Date");
WHEREAS, Employee is currently employed by Chancellor pursuant
to an Employment Agreement dated as of October 12, 1994 (the "Original
Employment Agreement");
NOW, THEREFORE, subject to the consummation of the Acquisition
(it being understood and agreed that if the Acquisition shall not have been
consummated on or before February 29, 1996, this Agreement shall be void and of
no force and effect, ab initio) the Company, the Broadcasting Subsidiary and
the Employee hereby agree as follows:
1. Employment. The Company and the Broadcasting
Subsidiary hereby employ Employee for the Employment Period specified in
Section 2 below in the capacity of President and Chief Executive Officer or
such other comparable management position or positions as designated by the
Board of Directors of the Company (the "Board of Directors") from time to time.
The Employee hereby accepts such employment and, unless otherwise agreed to by
the Board of Directors, agrees to devote his full business time and efforts to
the performance of his duties hereunder and as an employee of the Company and
the Broadcasting Subsidiary or their respective subsidiaries, as directed by
the Board of Directors; provided, however, that nothing contained in this
Section 1 shall be construed to prevent the Employee from
<PAGE> 2
devoting a reasonable amount of time to personal business and civic activities.
Subject to approval by the Board of Directors, Employee shall be responsible
for supervising the day-to-day operations of the Company and the Broadcasting
Subsidiary, and in such capacity his duties shall include, without limitation,
(a) preparing an annual budget, business plan, and financial projections, all
in reasonable detail and setting forth the principal assumptions upon which
such information was based; (b) hiring, firing, and managing the performance of
all employees of the Company, the Broadcasting Subsidiary and their
subsidiaries; (c) directing matters relating to public relations and promotions
of the Company's and the Broadcasting Subsidiary's radio stations; (d)
establishing a programming format for the Company's and the Broadcasting
Subsidiary's radio stations; (e) establishing a pricing policy for advertising;
(f) ensuring compliance with all applicable laws, including but not limited to
the rules and regulations of the Federal Communications Commission; and (g)
signing checks and entering into agreements in the ordinary course of business.
2. Employment Period. The period of the Employee's employment
under this Agreement (the "Employment Period") shall commence on the date of
the Acquisition and shall end upon the earliest of (i) the attainment of age 65
by the Employee, (ii) the termination of this Agreement as contemplated by
Section 6 below and (iii) December 31, 2000; provided, however, that unless the
Company or the Employee gives the other written notice to the contrary not more
than 90 days and not less than 30 days prior to December 31 of each year,
commencing December 31, 1996, the term of this Agreement automatically shall be
extended so that, as of each December 31, the remaining term of this Agreement,
subject to clauses (i) and (ii) above, shall be five years.
3. Compensation. As compensation for all services rendered and
to be rendered pursuant to this Agreement, the Company and the Broadcasting
Subsidiary agree to pay Employee:
(i) a base salary (pro rata for any partial year) at the
rate of $500,000 per year (the "Base Salary"); and
(ii) an annual bonus of up to $200,000 for each fiscal
year of the Company subsequent to 1995 calculated based upon criteria
established by the Board of Directors at the beginning of each fiscal year and
adjusted from time to time to reflect acquisitions or dispositions of the
<PAGE> 3
Company's and the Broadcasting Subsidiary's assets (the "Bonus").
The Base Salary, when payable pursuant to the terms hereof, shall be
payable in semi-monthly installments in accordance with the payroll practices
of the Company and the Broadcasting Subsidiary as in effect from time to time.
The Bonuses, when payable pursuant to the terms hereof, shall be payable within
ninety days after the end of the applicable periods. To the extent the Company
and the Broadcasting Subsidiary desire, the amounts payable under this
Agreement may be paid by one or more subsidiaries of the Company or the
Broadcasting Subsidiary. The party making such payment shall have the right to
deduct from any compensation and other amounts paid under this Agreement all
taxes and other amounts which may be required to be deducted or withheld by law
(including, but not limited to, income tax withholding and social security
payments), whether such laws are now in effect or become effective after the
date of this Agreement.
Notwithstanding anything herein to the contrary, on December 31, 1996,
and on each December 31 thereafter during the term of this Agreement (each an
"Adjustment Date"), the Base Salary for the next succeeding year shall be
adjusted to be equal to (i) the amount of the Base Salary in effect for the
year ended on such Adjustment Date multiplied by (ii) a fraction (A) the
numerator of which shall be equal to the Consumer Price Index for all Urban
Consumers, U.S. City Average, for All Items (1982-84 = 100), as published in
the Bureau of Labor Statistics of the Department of Labor (the "CPI") and as
reflected in the most recent such publication prior to the Adjustment Date and
(B) the denominator of which shall be equal to the CPI as reflected in the most
recent such publication prior to the immediately preceding Adjustment Date, or
in the case of the initial Adjustment Date, as reflected in the most recent
such publication prior to the date of this Agreement; provided that the Base
Salary shall in no event be less than $500,000 per year.
4. Business Expenses. The Company and the Broadcasting
Subsidiary shall reimburse Employee for all reasonable and necessary business
expenses incurred by Employee on behalf of or for the benefit of the Company,
the Broadcasting Subsidiary or their radio stations, upon presentation of proof
of such expenses. Such expenses may include, but shall not necessarily be
limited to, the following: use of a luxury automobile (and attendant costs),
travel and entertainment, promotions, professional or industry licenses and
membership fees and attendance at conventions. Employee agrees to comply with
all Internal
3
<PAGE> 4
Revenue Service regulations relating to documentation of such expenses. In the
event of termination of Employee's employment hereunder for any reason,
Employee shall have the right to use such luxury automobile for thirty (30)
days following termination.
5. Employment Benefits. During the Employment Period, Employee
shall be entitled to participate, at the Company's and the Broadcasting
Subsidiary's expense (subject to any employee contribution requirements
applicable to employees generally) in all employee benefit programs maintained
by the Company and/or the Broadcasting Subsidiary, which shall include a major
medical policy for Employee and his dependents that shall provide disability
insurance of not less than $5,000 per month with no more than a 30-day waiting
period. In addition, during the Employment Period, the Company and the
Broadcasting Subsidiary will reimburse Employee for the premium cost of a term
life insurance policy for the benefit of Employee's beneficiary or
beneficiaries with a death benefit of not less than $1,000,000.
6. Termination of Employment. (a) The Employment Period shall
terminate on the fifth anniversary of the Acquisition Date (the "Base Term")
unless earlier terminated pursuant to any, singularly or in combination, of the
following provisions in this Section 6.
(b) The Employment Period may be terminated at any time by the
Company and the Broadcasting Subsidiary by written notice to the Employee.
Notwithstanding anything to the contrary contained herein, if such termination
is with Cause (as defined below), all of the Employee's rights to compensation
and other rights under Sections 3, 4 and 5 above shall terminate upon such
termination, except the right to payment for amounts accrued in respect of
periods prior to such termination, which amounts, if any, shall be paid in a
lump sum. If such termination is with Financial Cause (as defined below) (but
without Cause), the Company and the Broadcasting Subsidiary shall pay to the
Employee, in monthly installments equal to Employee's monthly Base Salary at
the time of termination, an amount equal to (x) any amounts accrued in respect
of periods prior to such termination plus (y) one years' Base Salary. If such
termination is without Cause or Financial Cause, the Company and the
Broadcasting Subsidiary shall pay to the Employee, in a lump sum, an amount
equal to (x) any amounts accrued in respect of periods prior to such
termination plus (y) his aggregate Base Salary for two years from the date of
termination. "Cause" shall mean (i) fraud, dishonesty,
4
<PAGE> 5
unethical practices or gross misconduct in office on the part of the Employee,
(ii) a material breach by the Employee of any of his obligations hereunder
which is not cured within 30 days after written notice from the Company to
Employee, (iii) a material failure to perform Employee's duties as an employee
of the Company, the Broadcasting Subsidiary or any of their subsidiaries, as
determined by the Board of Directors, which failure is not cured within 60 days
after written notice from the Board of Directors to Employee, or (iv)
conviction of the Employee for fraud, misappropriation, embezzlement or any
felony. "Financial Cause" shall mean (i) that either (A) the Company, the
Broadcasting Subsidiary or any of their subsidiaries shall violate any
financial covenant contained in any debt instrument or agreement to which the
Company, the Broadcasting Subsidiary or any of its subsidiaries is a party or
by which it may be bound or (B) the Employee shall act or fail to act with
respect to a matter for which Employee is directly responsible, in either case
with the result that such violation, action, or failure to act (x) results in
the acceleration of the maturity of any debt of the Company, the Broadcasting
Subsidiary or any of their subsidiaries or (y) enables (or, with the giving of
notice or lapse of time or both, would enable) the holder or holders of such
debt to accelerate the maturity thereof and such violation, action or failure
to act remains uncured for a period of 91 consecutive days, or (ii) the Company
or the Broadcasting Subsidiary shall fail to meet at least 90% of its budgeted
operating income, as approved by the Board of Directors, for two consecutive
fiscal years.
(c) The Employment Period may be terminated at any time by the
Employee for Good Reason (as defined below) by written notice to the Company
and the Broadcasting Subsidiary. "Good Reason" shall mean: (i) any change in
the Employee's functions, duties or responsibilities from his position on the
Employment Date without Employee's consent if such change would (A) reduce the
Employee's functions, duties, or responsibilities from those in effect on the
Employment Date or the date of amendment, whichever is applicable, to a level
that is not commensurate with those of an executive in the Employee's position
prior to such change (it being understood that the reassignment of any of
Employee's functions, duties, or responsibilities (other than those customarily
performed by a chief executive officer of a business of comparable size and
complexity) to one or more other persons who report directly or indirectly to
Employee shall not be considered a reduction of Employee's functions, duties or
responsibilities), or (B) cause the Employee's position with the Company and
the
5
<PAGE> 6
Broadcasting Subsidiary to become one of lesser importance or scope; and (ii)
any material breach of this Agreement by the Company or the Broadcasting
Subsidiary which is not cured within 30 days after written notice from Employee
to the Company and the Broadcasting Subsidiary. If the Employment Period is
terminated by the Employee for Good Reason, the Company and the Broadcasting
Subsidiary shall pay to the Employee, in monthly installments equal to
Employee's monthly Base Salary at the time of termination, the same amount
Employee would have been paid had the Company and the Broadcasting Subsidiary
terminated his employment without Cause or Financial Cause. If Employee
voluntarily terminates his employment without Good Reason, all his rights to
compensation and other rights under Sections 3, 4 and 5 shall terminate
immediately.
(d) If Employee shall die during the Employment Period, the
Employment Period shall terminate, and the Company and the Broadcasting
Subsidiary shall pay, in monthly installments equal to Employee's monthly Base
Salary at the time of termination, to any beneficiary or beneficiaries
designated by the Employee in writing or, if none, to his estate or legal
representative an amount equal to (x) any amounts accrued in respect of periods
prior to Employee's death plus (y) six months' Base Salary.
(e) If Employee is unable to discharge his duties hereunder for a
period of six consecutive months, or for a total of six months in any 12-month
period, by reason of physical or mental illness, injury or incapacity, the
Company and the Broadcasting Subsidiary may, by written notice to Employee,
terminate the Employment Period. In such case, the Company and the
Broadcasting Subsidiary shall pay to the Employee, in monthly installments
equal to Employee's monthly Base Salary at the time of termination, an amount
equal to (x) any amounts accrued in respect of periods prior to Employee's
death plus (y) six months' Base Salary less (z) the amount of any and all
proceeds received or receivable by the Employee from any disability insurance
policies maintained by the Company and the Broadcasting Subsidiary.
(f) Any amounts payable to the Employee in installments pursuant
to this Section 6 may, at the Company's and the Broadcasting Subsidiary's
option, be paid in a lump sum rather than installments as provided above. In
any event, all such amounts (whether paid in installments or in a lump sum)
shall be considered severance payments and be in full and complete satisfaction
of the obligation of the Company and the Broadcasting Subsidiary to Employee in
6
<PAGE> 7
connection with the termination of the Employee. For purposes of this Section
6, Employee's right to Bonus payments shall accrue only on the date the Board
of Directors awards such Bonus. During the period any payments are being made
to Employee pursuant to this Section 6, Employee shall be entitled to continue
to participate in all employee benefit plans available to employees of the
Company and the Broadcasting Subsidiary generally and to continuation of any
perquisites provided the Employee by the Company and the Broadcasting
Subsidiary at the time of termination (except that Employee will be required to
return the automobile provided by the Company and the Broadcasting Subsidiary
pursuant hereto within 30 days of Employee's termination).
7. Noncompetition; Confidentiality. (a) During the Employment
Period and for an additional period of two years (or with respect to item (iii)
below for that period of time for which Employee receives or is scheduled to
receive payment pursuant to Section 6 unless Employee is terminated (i) with
Cause, in which case for six months or (ii) without Cause or Financial Cause,
in which case for two years, notwithstanding the lump sum severance payment
required by Section 6) immediately following the Employment Period (the
"Restriction Period"), Employee shall not, directly or indirectly, (i) induce
any employee of the Company or any of its subsidiaries to terminate his or her
employment with the Company or any of its subsidiaries, (ii) hire any such
employee of the Company or any of its subsidiaries, or (iii) directly or
indirectly (as an employee, owner, operator, consultant, or otherwise) engage
in any aspect of the radio broadcasting business (AM or FM) in competition with
any radio station (AM or FM) owned by the Company or any subsidiary of the
Company at the time the Employee's employment terminates (the "Protected
Stations"); provided, that nothing in this sentence shall prevent Employee from
owning 1% or less of any class of securities of a corporation having securities
registered under the Securities Exchange Act of 1934, as amended. A radio
station shall be deemed in competition with a Protected Station if such station
competes principally in the same "area of dominant influence" (as reflected in
the Arbitron ratings) as any Protected Station.
(b) During the Employment Period and for an additional period of
five years thereafter, Employee shall not use for his personal benefit, or
disclose, communicate or divulge to, or use for the direct or indirect benefit
of any person, firm, association or company other than the Company or its
subsidiaries, any Confidential Information. "Confidential
7
<PAGE> 8
Information" means information relating to the services or operations of the
Company or any subsidiary thereof that is not generally known, is proprietary
to the Company or such subsidiary and is made known to Employee or learned or
acquired by Employee while in the employ of the Company or the Broadcasting
Subsidiary, including, without limitation, (i) information relating to
research, development, purchasing, accounting, marketing, merchandising,
advertising, selling, leasing, finance and business methods and techniques and
(ii) customer lists and other information relating to past, present or
prospective customers. However, Confidential Information shall not include
under any circumstances any information with respect to the foregoing matters
that becomes publicly available through no fault of Employee or is available to
Employee from other sources who have not secured such information on a
confidential basis from the Company or any affiliate thereof. All materials or
articles of information of any kind furnished to Employee by the Company or any
of its subsidiaries or developed by Employee in the course of his employment
hereunder are and shall remain the sole property of the Company or such
subsidiary, as applicable; and if the Company or such subsidiary, as
applicable, requests the return of such information at any time during, upon or
after the termination of Employee's employment, Employee shall immediately
deliver the same to the Company or such subsidiary, as applicable.
(c) Employee acknowledges that, in view of the nature of the
business in which the Company and its subsidiaries are engaged, the
restrictions contained in Sections 7(a) and 7(b) above (the "Restrictions") are
reasonable and necessary in order to protect the legitimate interests of the
Company and its subsidiaries, and that any violation thereof would result in
irreparable injuries to the Company and its subsidiaries, and Employee
therefore further acknowledges that, in the event Employee violates, or
threatens to violate, any of such Restrictions, the Company and its
subsidiaries shall be entitled to obtain from any court of competent
jurisdiction, without the posting of any bond or other security, preliminary
and permanent injunctive relief as well as damages and an equitable accounting
of all earnings, profits and other benefits arising from such violation, which
rights shall be cumulative and in addition to any other rights or remedies in
law or equity to which the Company or its subsidiaries may be entitled.
(d) If any Restriction, or any part thereof, shall be determined
in any judicial or administrative proceeding to be invalid or unenforceable,
the remainder of the
8
<PAGE> 9
Restrictions shall not thereby be affected and shall be given full effect,
without regard to the invalid provisions. If the period of time or the area
specified in the Restrictions shall be determined in any judicial or
administrative proceeding to be unreasonable, then the court or administrative
body shall have the power to reduce the period of time or the area covered and,
in its reduced form, such provisions shall then be enforceable and shall be
enforced.
(e) If Employee violates any of the Restrictions, the applicable
Restrictive Period shall be tolled from the time of the commencement of any
such violation until such time as such violation shall be cured by Employee to
the reasonable satisfaction of the Company or its subsidiaries, as applicable.
8. Representations by Employee. The Employee hereby represents
and warrants to the Company and the Broadcasting Subsidiary that (a) the
Employee's execution and delivery of this Agreement and his performance of his
duties and obligations hereunder will not conflict with, or cause a default
under, or give any party a right to damages under, or to terminate, any other
agreement to which the Employee is a party or by which he is bound, and (b)
there are no agreements or understandings that would make unlawful the
Employee's execution or delivery of this Agreement or his employment hereunder.
9. Notices. All notices and other communications required or
permitted hereunder will be in writing and, unless otherwise provided in this
Agreement, will be deemed to have been duly given when delivered in person or
when dispatched by electronic facsimile transfer (confirmed in writing by mail
simultaneously dispatched) or one business day (if sent to and from locations
in the same country) or three business days (if sent to or from the United
States from or to any other territory) after having been dispatched by a
nationally recognized overnight courier service to the appropriate party at the
address specified below:
If to the Company or the Broadcasting Company:
12655 N. Central Expressway, Suite 405
Dallas, Texas 75243
Fax No.: 214/239-0220
with copies to:
Hicks, Muse, Tate & Furst Incorporated
9
<PAGE> 10
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attention: Eric C. Neuman
Fax No.: 214/740-7355
and
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
Attention: R. Scott Cohen
Fax No.: 214/746-7777
and, in the case of the Employee, at his business address at:
12655 N. Central Expressway, Suite 405
Dallas, Texas 75243
Fax No.: 214/239-0220
with a copy to:
Leibowitz & Associates, P.A.
One SE Third Avenue, Suite 1450
Miami, Florida 33131-1715
Attention: Matthew Leibowitz
Fax No.: 305/530-1322
Either party may designate a different address by giving notice of
change of address in the manner provided above.
10. Waiver. No waiver or modification in whole or in part of this
Agreement, or any term or condition hereof, shall be effective against any
party unless in writing and duly signed by the party sought to be bound. Any
waiver of any breach of any provisions hereof or any right or power by any
party on one occasion shall not be construed as a waiver of, or a bar to, the
exercise of such right or power on any other occasion or as a waiver of any
subsequent breach.
11. Binding Effect; Successors. This Agreement shall be binding
upon and shall inure to the benefit of the Company and the Broadcasting
Subsidiary and their respective successors and assigns, and shall inure to the
benefit of and be binding on upon the Employee and his executors,
administrators, heirs and legal representatives. Because the Employee's duties
and services hereunder are special, personal and unique in nature, the Employee
may not
10
<PAGE> 11
transfer, sell or otherwise assign his rights, obligations or benefits under
this Agreement.
12. Controlling Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas applicable to
contracts made and to be performed therein.
13. Severability. If any provision of this Agreement shall be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect or impair the validity or enforceability of the remaining provisions
of this Agreement, which shall remain in full force and effect and the parties
hereto shall continue to be bound thereby.
14. Entire Agreement. This Agreement contains the entire
agreement between the parties relating to the subject matter hereof and shall
supersede all previous agreements (including the Original Employment Agreement)
between the parties, whether written or oral, with respect to the subject
matter hereof. This Agreement cannot be modified, altered or amended except by
a writing signed by all the parties hereto.
[Remainder of Page Left Blank Intentionally].
11
<PAGE> 12
IN WITNESS WHEREOF, the Company, the Broadcasting Subsidiary and the
Employee have executed this Agreement as of the day and year first above
written.
COMPANY:
CHANCELLOR BROADCASTING COMPANY
By: /s/ JACQUES D. KERREST
------------------------------------
Name: Jacques D. Kerrest
Title: Senior Vice President and
Chief Financial Officer
BROADCASTING SUBSIDIARY:
CHANCELLOR RADIO BROADCASTING COMPANY
By: /s/ JACQUES D. KERREST
------------------------------------
Name: Jacques D. Kerrest
Title: Senior Vice President and
Chief Financial Officer
EMPLOYEE:
/s/ STEVEN DINETZ
----------------------------------------
Steven Dinetz
12
<PAGE> 1
EXHIBIT 10.14
SALES AGREEMENT
This SALES AGREEMENT ("Agreement") is made and entered into as of the
Commencement Date set out in Paragraph 3 below, by and between OMNIAMERICA
GROUP, a Massachusetts General Partnership ("OmniAmerica"); and CHANCELLOR
BROADCASTING COMPANY and CHANCELLOR RADIO BROADCASTING COMPANY, both Delaware
Corporations (collectively, "Chancellor").
WHEREAS, on February 16, 1996, OmniAmerica entered into that certain
Asset Purchase Agreement (the "Beasley Purchase Agreement") with WJHM-FM
License Limited Partnership and Beasley FM Acquisition Corp. (collectively,
"Licensee"), the licensee of radio station WJHM(FM), licensed to Daytona Beach,
Florida (the "Station") pursuant to a license issued by the Federal
Communications Commission ("FCC"), providing for the purchase by OmniAmerica of
all assets which are used or useful in connection with the operation of the
Station;
WHEREAS, on March 15, 1996, OmniAmerica entered into that certain
Local Marketing Agreement (the "Beasley LMA") with Licensee, providing that
Licensee makes available to OmniAmerica substantially all of the broadcast time
of the Station pending the consummation of the transactions contemplated by the
Beasley Purchase Agreement;
WHEREAS, on May 14, 1996, OmniAmerica and Chancellor entered into an
Asset Purchase Agreement (the "OmniAmerica/Chancellor Asset Purchase
Agreement"), providing for, among other things, the purchase of the Station by
Chancellor from OmniAmerica subsequent to the purchase of the Station by
OmniAmerica;
WHEREAS, OmniAmerica has available commercial advertising time on the
Station under the provisions of the Beasley LMA; and
WHEREAS, Chancellor desires to purchase the Station's commercial
advertising time inventory in bulk for the purpose of reselling such inventory
on a retail basis pending the consummation of the transactions contemplated by
the OmniAmerica/Chancellor Asset Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, and intending to be fully bound hereby, OmniAmerica and
Chancellor hereby agree as follows:
1. Commercial Time Sale.
In order that the Station may more efficiently serve the
public interest, convenience and necessity, Chancellor shall acquire all
available commercial advertising time on the Station and shall have the
exclusive right to resell such time to third parties. The commercial
advertising time that is being sold to Chancellor for resale to third parties
is described on Attachment A to this Agreement. The parties agree that at no
time will the Station be operated so as to cause the advertising time to
constitute more than fifteen percent (15%) of the total broadcast time of the
Station in any seven (7)
<PAGE> 2
WJHM Sales Agreement
Page 2
- --------------------
day period. All advertising provided to OmniAmerica for broadcast shall be
placed in current station breaks and OmniAmerica agrees to modify the current
schedule of station breaks as Chancellor may reasonably request. The
advertising shall be sold and placed by Chancellor at breaks in the Station's
programming. In the event OmniAmerica preempts, deletes or otherwise rejects
any commercial advertising provided by Chancellor, or if Chancellor's
commercial advertising is not broadcast due to a technical failure of
facilities, OmniAmerica shall attempt in good faith to broadcast "makegood"
commercial announcements or to provide a pro rata reduction in Chancellor's
monthly payments for each unaired commercial announcement as determined by
Chancellor. During the term of this Agreement, OmniAmerica shall not sell any
airtime on the Station, and shall air, subject to OmniAmerica's review and
preemption rights stated herein, the material contained in the commercial
advertising time sold by Chancellor. Chancellor agrees to furnish OmniAmerica
with copies of all advertising contracts entered into with respect to the sale
of advertising on the Station.
2. Payments.
In consideration of the sale to Chancellor of the commercial
advertising on the Station, Chancellor agrees to pay OmniAmerica the amounts
set forth at the terms described in Attachment B hereto.
3. Term.
The term of this Agreement shall commence on July 1, 1996 (the
"Commencement Date") and shall end on the earlier of: (i) the date of
consummation of the transaction contemplated in the OmniAmerica/Chancellor
Asset Purchase Agreement; or (ii) the date of termination of the
OmniAmerica/Chancellor Asset Purchase Agreement in accordance with the terms
thereof. Notwithstanding the foregoing, this Agreement may be terminated by
either party in the event of a material breach of any of the terms of this
Agreement by the other party, which breach is not cured within ten (10)
business days following delivery of written notice of such breach together with
a demand that it be cured.
4. OmniAmerica Control and Obligations.
(a) Notwithstanding any contrary provision contained in
this Agreement, and consistent with OmniAmerica's obligations pursuant to the
Communications Act of 1934, as amended (the "Act"), and the rules, regulations
and policies of the FCC promulgated thereunder, as well as the terms of the
Beasley LMA, OmniAmerica shall have the right to delete, preempt or demand
notification of any commercial advertising provided by Chancellor which it
regards as being unsuitable for broadcast or the broadcast of which it believes
would be contrary to the public interest.
(b) During the term of this Agreement, decisions
regarding the program format of the Station, including the presentation of
news, information, public service messages and other
<PAGE> 3
WJHM Sales Agreement
Page 3
- --------------------
program content, shall remain the sole and exclusive province and
responsibility of Licensee. it is further understood and agreed that Licensee
shall continue to retain authority and control over the operational respects of
the Station during the term of this Agreement, to respond to any telephone
calls or other inquiries relating to the Station's operation, to be responsible
for the assessment of the needs and interests of the community and the
broadcast of programs responsive to such needs and interests. In addition,
Licensee shall insure that all programming continues to meet all federal, state
and local laws, including those that govern political broadcast time,
presentation of lottery material, proper sponsor identification, and other
programming in the public interest. Chancellor agrees that all such commercial
advertising time sold by Chancellor will be in compliance with all such
applicable rules and regulations, and Chancellor will cooperate with
OmniAmerica in meeting such obligations.
(i) Any commercial advertising time sold by Chancellor
under this Agreement for broadcast by OmniAmerica which contains material that
deals with contests, similar commercial promotions and related schemes, public
ballot or referendum questions, or addresses controversial issues of public
importance shall be available for review to OmniAmerica at least two (2)
business days in advance of any scheduled broadcast.
(ii) Chancellor agrees that it will at all times proceed
in good faith to assure compliance with the Federal Trade Commission rulings on
installment sales and other advertising practices.
5. Accounts Receivable.
(a) The accounts receivable of the Station generated
prior to the Commencement Date (the "Pre-Sales Agreement Receivables") shall be
and remain the property of OmniAmerica. Within 5 business days after the
Commencement Date, OmniAmerica shall furnish Chancellor with a list (certified
by the Chief Financial Officer of OmniAmerica to be a true and complete list)
of all accounts receivable of OmniAmerica which remain outstanding as of the
Commencement Date. Chancellor agrees that if, after the Commencement Date, it
shall receive payment, directed to OmniAmerica, in respect to any Pre-Sales
Agreement Receivable, Chancellor shall remit to OmniAmerica, 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
OmniAmerica), which are in payment for advertising broadcast by the Station
prior to the Commencement Date.
(b) During the period commencing on the Commencement Date
and ending ninety (90) days thereafter Chancellor shall use reasonable efforts,
consistent with OmniAmerica's current billing and collection practices and in
the ordinary course of the business, to assist OmniAmerica in the collection of
any outstanding Pre-Sales Agreement 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-Sales Agreement
<PAGE> 4
WJHM Sales Agreement
Page 4
- --------------------
Receivable without OmniAmerica'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-Sales Agreement Receivable. Absent
written evidence that an account debtor owing a Pre-Sales Agreement Receivable
is disputing in good faith any portion of such Pre-Sales Agreement 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-Sales Agreement Receivable which is then outstanding (with each
such payment received from such account debtor to be applied first to the
most-aged Pre-Sales Agreement Receivable then owing from such account debtor).
(c) OmniAmerica agrees to remit to Chancellor within 5
business days after the end of each month, any amounts received by OmniAmerica
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-Sales Agreement Receivables.
6. Sales and Related Functions.
Chancellor shall maintain its own staff whose functions shall
include, but not be limited to selling advertising availabilities on the
Station, marketing, traffic, promotions, billing and collections. Chancellor
shall be solely responsible for the compensation and supervision of its
employees.
7. Force Majeure.
Subject to any credits owed to Chancellor, neither Chancellor
nor OmniAmerica shall incur any liability to each other or any other party
because of Chancellor's failure to sell airtime or deliver commercial matter or
OmniAmerica's failure to broadcast any or all commercial matter provided to
OmniAmerica because of: (a) failure of facilities; (b) labor disputes; or (c)
causes beyond the control of the party so failing to broadcast or deliver.
8. Indemnification.
(a) Chancellor agrees to defend, indemnify and hold
harmless OmniAmerica for any claim, loss, liability, forfeiture, obligation and
attorneys' fees incurred by OmniAmerica as a direct or indirect result of
Chancellor's provision of advertising to the Station or as a direct or indirect
result of a breach of any of Chancellor's obligations under this Agreement, and
against any liability, damage
<PAGE> 5
WJHM Sales Agreement
Page 5
- --------------------
or loss for libel, defamation of character, any violation of rights of privacy
or infringement of copyrights or proprietary rights or any other cause of
action or any forfeiture imposed by the FCC or other governmental authority to
the extent arising from Chancellor's provision of advertising to the Station.
This indemnification shall survive termination of this Agreement.
(b) OmniAmerica agrees to defend, indemnify and hold
harmless Chancellor for any claim, loss, liability, forfeiture, obligation and
attorneys' fees incurred by Chancellor as a direct or indirect result of
OmniAmerica's provision of programming to the Station or as a direct or
indirect result of a breach of any of OmniAmerica's obligations under this
Agreement, and against any liability, damage or loss for libel, defamation of
character, any violation of rights of privacy or infringement of copyrights or
proprietary rights or any other cause of action or any forfeiture imposed by
the FCC or other governmental authority to the extent arising from
OmniAmerica's provision of programming to the Station. This indemnification
shall survive termination of this Agreement.
9. 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 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:
IF TO OMNIAMERICA:
Carl E. Hirsch
Chairman, President and CEO
OmniAmerica Communications, Inc.
11111 Santa Monica Boulevard
Los Angeles, California 90025
WITH COPY (WHICH SHALL NOT CONSTITUTE NOTICE):
F. Howard Mandel, Esq.
Thompson Hine & Flory P.L.L.
3900 Society Center
127 Public Square
Cleveland, Ohio 44114-1216
<PAGE> 6
WJHM Sales Agreement
Page 6
- --------------------
IF TO CHANCELLOR:
Steven Dinetz
President & CEO
Chancellor Broadcasting Company
12655 N. Central Expressway, Suite 405
Dallas, Texas 75243
WITH COPY (WHICH SHALL NOT CONSTITUTE NOTICE):
Matthew L. Leibowitz, Esq.
Leibowitz & Associates, P.A.
One Southeast Third Avenue, Suite 1450
Miami, Florida 33131-1715
10. Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida (without regard to conflict of
law principles) and is intended to be fully consistent with the Act and all
rules and regulations of the FCC as applicable. Both OmniAmerica and
Chancellor therefore agree that if there has been a change in FCC rules,
policies or case law precedent that would cause this Agreement or any provision
thereof to be in violation thereof, and such change is not the subject of an
appeal or further administrative review, then both parties will proceed in good
faith to seek to amend this Agreement as necessary to comply with such rules or
policies. If this Agreement cannot be amended to comply with such rules or
policies to the satisfaction of both parties, this Agreement shall be deemed to
be terminated by both parties.
11. No Partnership Or Joint Venture Credited.
Chancellor is acting as an independent contractor hereunder
and nothing in this Agreement shall be construed to make OmniAmerica and
Chancellor partners or joint venturers or to make OmniAmerica or Chancellor the
agent of the other or to afford any rights to any third party other than as
expressly provided herein.
12. Severability.
In the event any term or provision of this Agreement is
declared to be invalid or illegal for any reason, this Agreement shall remain
in full force and effect and the same shall be interpreted as though such
invalid and illegal provision were not a part hereof. The remaining provisions
shall be construed to preserve the intent and purpose of this Agreement and the
parties shall negotiate in good faith to modify the provisions held to be
invalid or illegal to preserve each party's anticipated
<PAGE> 7
WJHM Sales Agreement
Page 7
- --------------------
benefits thereunder.
13. Counterpart Signatures.
This Agreement may be signed in counterpart originals, which
collectively shall have the same legal effect as if all signatures had appeared
on the same physical document. This Agreement may be signed and exchanged by
facsimile transmission, with the same legal effect as if the signatures had
appeared in original handwriting on the same physical document.
14. Assignment.
Neither Chancellor nor OmniAmerica may assign this Agreement
without the written consent of the other party, such consent not to be
unreasonably withheld; provided, however, that each party can assign its rights
and responsibilities under this Agreement to an entity controlled by or under
common control with that party, and shall provide written notice of the
assignment to the other party within FOURTEEN (14) days of the assignment.
15. Headings.
The headings contained in this Agreement are included for
convenience only and no such heading shall in any way alter the meaning of any
provision.
16. Entire Agreement Modification Waiver
This Agreement supersedes any prior agreements between the
parties and contains all of the terms agreed upon with respect to the subject
matter hereof. No modification or waiver of any provision of this Agreement
shall in any event be affected unless the same shall be in writing and signed
by the party adversely affected by the waiver or modification, and then such
waiver and consent shall be effective only in the specific instance and for the
purpose for which given. If Licensee claims that the execution, delivery, or
performance of this Agreement is inconsistent with, or could result in a breach
under any agreements between OmniAmerica and Licensee, then, at OmniAmerica's
request, the parties shall attempt to recast this Agreement in accordance with
the procedures of Paragraph 10 above, but notwithstanding any other covenant or
representation made in this Agreement, if negotiations and this Agreement are
terminated in accordance therewith, neither party shall be liable to the other
with respect to the termination of this Agreement.
17. Confidentiality.
The Confidentiality provisions contained in Section 10.1 of
the OmniAmerica/Chancellor Asset Purchase Agreement are specifically
incorporated by reference herein in connection with the terms of this Agreement
and the negotiations preceding this Agreement.
<PAGE> 8
WJHM Sales Agreement
Page 8
- --------------------
IN WITNESS WHEREOF, the parties have executed this Agreement below on
the dates indicated.
<TABLE>
<S> <C>
OMNIAMERICA GROUP
By: OmniAmerica Communications, Inc.
its Managing General Partner
Date: By:
---------------------- -----------------------------------------
CHANCELLOR BROADCASTING
COMPANY
Date: By:
---------------------- -----------------------------------------
Steven Dinetz
its President and Chief Executive Officer
CHANCELLOR RADIO BROADCASTING
COMPANY
Date: By:
---------------------- -----------------------------------------
Steven Dinetz
its President and Chief Executive Officer
</TABLE>
<PAGE> 9
WJHM Sales Agreement
Page 9
- --------------------
ATTACHMENT A
All available advertising time consistent with the Station's current
spot load inventory, other than advertising time (a) previously sold by
Licensee or OmniAmerica, (b) required for trade agreements previously entered
into by Licensee or OmniAmerica, (c) exchanged for programming provided to the
Station. Advertising time covered by (a), (b) and (c) above shall be handled
in the manner set forth in this Agreement.
<PAGE> 10
WJHM Sales Agreement
Page 10
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ATTACHMENT B
During each month of the term of this Agreement, for so long as the
Beasley LMA remains in effect, Chancellor shall pay to OmniAmerica in cash or
by check in advance on the first day of each calendar month a sum equal to the
amount of OmniAmerica's obligation to pay Licensee under the Beasley LMA,
subject to adjustment on a monthly basis between the parties.
<PAGE> 1
EXHIBIT 10.15
PROGRAM CONSULTING AGREEMENT
THIS PROGRAM CONSULTING AGREEMENT ("Agreement") is dated ______, 1996,
and is entered into between CHANCELLOR BROADCASTING COMPANY and CHANCELLOR
RADIO BROADCASTING COMPANY, both Delaware corporations (collectively,
"Chancellor"), and OMNIAMERICA GROUP, a Massachusetts General Partnership
("OmniAmerica").
RECITALS:
A. OmniAmerica entered into an Asset Purchase Agreement, dated
February 16, 1996, with Beasley FM Acquisition Corp. ("Beasley") to acquire
radio station WJHM(FM), Daytona Beach, Florida ("WJHM" or "Station").
B. OmniAmerica has entered into a Local Marketing Agreement for
WJHM with Beasley ("Beasley LMA"), dated March 15, 1996, providing Beasley
makes available to OmniAmerica substantially all of the broadcast time of the
Station pending the consummation of the transactions between Beasley and
OmniAmerica.
C. Chancellor has entered into an Asset Purchase Agreement
("Purchase Agreement"), dated May 14, 1996, with OmniAmerica Group.
D. Chancellor has entered into a Sales Agreement with OmniAmerica
with respect to radio station WJHM-FM in concert with this Agreement.
E. OmniAmerica wishes to retain Chancellor to provide programming
consulting 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,
including the requirement that ultimate control by the Station must be
maintained by the Licensee.
THEREFORE, in consideration of the mutual covenants herein contained,
the parties agree as follows:
1. Agreement Term. The term of this Agreement will begin on July
1, 1996 (the "Commencement Date"), and will continue until OmniAmerica acquires
the assets of the Station unless earlier terminated in accordance with the
provisions set forth herein.
2. Services. During the term of this Agreement, Chancellor shall
provide OmniAmerica with consultation on programming including, but not limited
to format, music selection, program development, program acquisition, on-air
talent, program production, and program equipment and facilities.
<PAGE> 2
Program Consulting Agreement
Page 2
- ----------------------------
3. Compensation. Omni agrees that it will pay to Chancellor
compensation as set forth in Schedule A for the services provided as set forth
in paragraph 2 above.
4. OmniAmerica and Chancellor agree to conform the Station's
policies and practices to FCC rules and regulations, including the requirement
that the Licensee will maintain complete control of the Station and its
programming.
5. Chancellor acknowledges that during the course of its regular
duties as a consultant, it will have access to confidential information and
trade secrets including, but not limited to financial information relating to
the Station and OmniAmerica; data relating to formats; music studies
commissioned by OmniAmerica; concepts; strategies; acquisitions; OmniAmerica's
business decisions affecting the said Station or Company's plans regarding
OmniAmerica's structure; financing, personnel; plans of mergers; acquisitions;
sale of Station(s) owned by OmniAmerica, information relating to format changes
in any radio station owned by OmniAmerica; methods of doing business and other
"know how" or business information which is not in the public domain, which
said information Chancellor acknowledges to be a valuable trade asset
("Confidential Information") of OmniAmerica, except for common general
practices in the radio industry or knowledge in the public domain. Chancellor
shall not at any time during the term of this Agreement or at any time
thereafter for any reason, directly or indirectly, use for itself or others, or
divulge to others any said trade secrets or Confidential Information or data of
OmniAmerica or Beasley obtained as a result of his employment. Chancellor
acknowledges that OmniAmerica is without an adequate remedy at law in the event
this covenant of confidentiality is violated. In the event this
covenant of confidentiality is violated, Chancellor agrees that OmniAmerica
shall be entitled to exercise any other rights or remedies it may have at law
or in equity in addition to injunctive relief to prevent the continued
violation of this provision. OmniAmerica's remedies as provided in this
paragraph 5 shall be OmniAmerica's sole and exclusive remedies for Chancellor's
breach of this Agreement.
6. All such notices and other communications which are required
or permitted hereunder will be effective upon receipt and shall be given to the
following addresses:
If to Chancellor:
----------
One copy to: One copy to:
Steven Dinetz Matthew Leibowitz
President & CEO Leibowitz & Associates, P.A.
Chancellor Radio Broadcasting Company One S.E. Third Avenue
12655 N. Central Expressway Suite 1450
Suite 405 Miami, Florida 33131
Dallas, Texas 75243
<PAGE> 3
Program Consulting Agreement
Page 3
- ----------------------------
If to OmniAmerica:
-----------
One copy to: One copy to:
Carl E. Hirsch F. Howard Mandel
Chairman, President & CEO Thompson Hine & Flory, P.L.L.
OmniAmerica Communications, Inc. 3900 Society Center
11111 Santa Monica Blvd. 127 Public Square
Suite 220 Cleveland, Ohio 44114-1216
Los Angeles, CA 9005
7. This Agreement shall not be assigned by either party.
8. This Agreement constitutes the entire understanding of the
parties with respect to the subject matter hereof, and shall not be modified,
supplemented or terminated except in writing signed by Chancellor and
OmniAmerica.
9. No failure on the part of any party hereto to exercise and no
delay in exercising any right, power or remedy hereunder will operate as a
waiver thereof, nor will any single or partial exercise of any right, power or
remedy.
10. This Agreement shall be deemed to have been executed and
entered into in the State of New York and shall be construed, enforced and
performed in accordance with the laws thereof.
11. It is the intention of the parties that this Agreement operate
as a sealed instrument.
12. This Agreement shall be void and of no further effect in the
event the Purchase Agreement is terminated prior to the occurrence of the
Closing thereunder.
<PAGE> 4
Program Consulting Agreement
Page 4
- ----------------------------
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed, all as of the date first written above.
Witness: CHANCELLOR BROADCASTING COMPANY
By:
- -------------------------------- -----------------------------------------
Steven Dinetz
President & CEO
Witness: CHANCELLOR RADIO
BROADCASTING COMPANY
By:
- -------------------------------- -----------------------------------------
Steven Dinetz
President & CEO
Witness: OMNIAMERICA GROUP
By:
- -------------------------------- -----------------------------------------
<PAGE> 5
Program Consulting Agreement
Page 5
- ----------------------------
SCHEDULE A
[INTENTIONALLY LEFT BLANK]
<PAGE> 1
EXHIBIT 10.16
CONSULTING AGREEMENT
THIS AGREEMENT is dated May 14, 1996, and is entered into between
CHANCELLOR BROADCASTING COMPANY and CHANCELLOR RADIO BROADCASTING COMPANY,
(collectively, "Chancellor"), and ANTHONY S. OCEPEK ("Ocepek").
WITNESSETH:
WHEREAS, Ocepek is the Executive Vice President and Treasurer of
OmniAmerica Communications, Inc.; and
WHEREAS, pursuant to an Asset Purchase Agreement dated May 14, 1996,
between OMNIAMERICA GROUP, a Massachusetts general partnership; WAPE-FM
LICENSE PARTNERSHIP, an Ohio general partnership; WFYV-FM LICENSE PARTNERSHIP,
an Ohio general partnership; WEAT-AM LICENSE PARTNERSHIP, an Ohio general
partnership; WEAT-FM LICENSE PARTNERSHIP, an Ohio general partnership; WXXL
LICENSE PARTNERSHIP, an Ohio general partnership; WOLL LICENSE PARTNERSHIP, an
Ohio general partnership; and WJHM-FM LICENSE PARTNERSHIP, an Ohio general
partnership; and Chancellor (the "Purchase Agreement"), which proposes to
sell to Chancellor substantially all of the assets of radio stations WAPE-FM,
Jacksonville, Florida; WFYV-FM, Atlantic Beach; Florida, WEAT-AM, West Palm
Beach, Florida; WEAT-FM, West Palm Beach, Florida; WXXL-FM, Tavares, Florida;
WOLL-FM, Riviera Beach, Florida; WJHM-FM, Daytona Beach, Florida; and WOMX- FM,
Orlando, Florida, (collectively the "Stations"); and
WHEREAS, Ocepek has served a critical role in the Stations' success;
and
WHEREAS, Chancellor desires to obtain certain consulting services from
Ocepek following the Closing of the Purchase Agreement and, accordingly,
desires to enter into this Agreement with Ocepek.
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree as follows:
1. Ocepek agrees that commencing upon the Closing of the Purchase
Agreement and for a period of two years after the Closing Date, Ocepek will be
available at reasonable, mutually-agreeable times to provide to Chancellor up
to forty (40) hours per month of broadcast-related consulting services.
Consulting hours not used by Chancellor in any month shall not be owed by
Ocepek in any subsequent month. Consulting services shall be rendered in
locations requested by Chancellor provided that travel time shall be considered
and included as hours of consultation. Notwithstanding the foregoing,
Chancellor acknowledges that Ocepek has other work obligations and will not be
expected to be available on any specific date; however, he will serve his
obligations in good faith.
<PAGE> 2
2. Chancellor agrees that, upon closing of the Purchase
Agreement, it will pay to Ocepek, annually, One Hundred Thousand Dollars
($100,000.00) in equal monthly installments of Eight Thousand Three Hundred
Thirty-Three Dollars and Thirty-Three Cents ($8,333.33) per month for two
years.
3. Chancellor shall reimburse all reasonable expenses incurred by
Ocepek in providing the consulting services requested by Chancellor hereunder.
4. In the event that during the term of this Agreement, Ocepek
becomes incapable of performing his consulting duties as a result of a
disability or death, Ocepek will have no further obligations to provide
consulting services hereunder.
5. From the Closing Date until this Agreement terminates in
accordance with Section 1 or is earlier canceled pursuant to Section 8, Ocepek
shall not solicit for employment any employees of Chancellor or its Affiliates.
6. Ocepek hereby acknowledges that any breach by him of any of
the covenant contained in Paragraph 5, above, (the "Covenant") may result in
irreparable injury to Chancellor for which money damages could not adequately
compensate Chancellor. In the event of any such breach, Chancellor shall be
entitled to have an injunction issued by any competent court enjoining and
restraining Ocepek and/or any other Person involved therein from continuing
such breach. If Chancellor prevails in litigation to enforce the Covenant
breached by Ocepek, then the duration of the breached Covenant shall be
extended by a period of time equal to the duration of such breach, commencing
the last day of the Restricted Period. Chancellor's equitable remedies as
provided in this Paragraph 6 shall be Chancellor's sole and exclusive remedies
for Ocepek's breach of this Agreement.
7. Ocepek acknowledges that in his capacity as consultant to
Chancellor, its officers, directors, employees and agents, including Ocepek,
may receive or produce Confidential Information (as defined herein). At all
times after the date hereof, Chancellor will prohibit Ocepek, except with the
express prior written consent of Chancellor, from directly or indirectly
communicating, disclosing or divulging to any Person other than employees,
contractors or agents of Chancellor, any Confidential Information, which Ocepek
may have acquired, no matter from whom or in what manner such Confidential
Information may have been acquired, heretofore, or hereafter, concerning the
conduct and details of the business of Chancellor (or any of its Affiliates).
For purposes of this Agreement, "Confidential Information" means any
information or material which Chancellor or any Affiliates (as defined herein)
of Chancellor treats as proprietary or designates as "Confidential," which is
not generally known by non-employer personnel, and to which Ocepek obtains
knowledge or access as a result of Ocepek's relationship with Chancellor.
Confidential Information includes, but is not limited to, discoveries, ideas,
concepts, techniques, data, documentation, research, procedures, knowhow,
marketing techniques, materials, plans, names of customers and advertisers, and
information relating to past and perspective customers' and advertisers' cost
data, pricing policies and financial information, received, originated or
<PAGE> 3
Consulting Agreement
Anthony S. Ocepek
Page 3
discovered by employees or agents. Confidential information does not include
any information (i) ascertained or obtained other than from Chancellor or (ii)
which is or becomes known to the public other than through a breach of this
Agreement.
Ocepek shall deliver to Chancellor all originals and copies of
materials containing Confidential Information in his possession, custody or
control immediately upon request by Chancellor. Ocepek acknowledges that all
files, records, documents and information relating to the business of
Chancellor whether prepared by Ocepek or otherwise, coming into its own
possession, shall remain the exclusive property of Chancellor and shall not be
removed from the premises (except as required in the course of his performance
of his duties for Chancellor).
Notwithstanding the last sentence of Paragraph 6, in the event this
covenant of confidentiality is violated and Chancellor is damaged as a direct
result thereby, Ocepek agrees that Chancellor shall be entitled to seek
recovery for such damages, but shall not be entitled to recoup or offset any
amounts paid or owing to Ocepek pursuant to the terms of this Agreement as such
payment obligations of Chancellor shall not be dependent on Ocepek's compliance
with this Paragraph 7.
8. This Agreement will remain in effect for at least ninety (90)
days from the Closing Date and shall be cancelable by either party on thirty
(30) days notice without cause.
9. If any portion of the Covenants or the application thereof is
construed to be invalid or unenforceable, then the other portion(s) of the
Covenants or the application thereof will not be affected thereby and shall be
given full force and effect without regard to the invalid or unenforceable
portions. If any of the Covenants is determined to be unenforceable because of
the geographical area covered thereby, the duration thereof or the scope
thereof, then such Covenant shall be interpreted to extend only for the maximum
geographical area, duration or other scope as to which it may be enforceable.
10. All such notices and other communications which are required
or permitted hereunder will be effective upon receipt and shall be given to the
following addresses:
<PAGE> 4
Consulting Agreement
Anthony S. Ocepek
Page 4
If to Chancellor:
One copy to: One copy to:
Steven Dinetz Matthew Leibowitz
President & CEO Leibowitz & Associates, P.A.
Chancellor Radio Broadcasting Company One S.E. 3rd Avenue
12655 N. Central Expressway Suite 1450
Suite 405 Miami, Florida 33131
Dallas, Texas 75243
If to Consultant:
One copy to: One copy to:
Anthony S. Ocepek F. Howard Mandel
Executive Vice President & Treasurer Thompson Hine & Flory, P.L.L.
OmniAmerica Communications, Inc. 3900 Society Center
11111 Santa Monica Blvd. 127 Public Square
Suite 220 Cleveland, Ohio 44114-1216
Los Angeles, CA 9005
11. This Agreement will be binding upon, inure to the benefit of,
and be enforceable by the successors and assigns of Chancellor. Chancellor
shall not assign this Agreement without the consent of Ocepek, which shall not
be unreasonably withheld; however, Chancellor shall assign this Agreement
including Chancellor's payment obligations to any purchaser of all or
substantially all of the assets or stock (by merger or otherwise) of
Chancellor. This Agreement shall not be assigned by Ocepek, except that his
right to receive payments may be assigned or conveyed to his estate or
otherwise.
12. This Agreement constitutes the entire understanding of the
parties with respect to the subject matter hereof, and shall not be modified,
supplemented or terminated except in writing signed by Chancellor and Ocepek.
13. No failure on the part of any party hereto to exercise and no
delay in exercising any right, power or remedy hereunder will operate as a
waiver thereof, nor will any single or partial exercise of any right, power or
remedy.
<PAGE> 5
Consulting Agreement
Anthony S. Ocepek
Page 5
14. As used herein:
(a) "Person" shall mean a natural person, corporation,
partnership, trust, estate, joint venture, solo proprietorship, government (and
any branch or subdivision thereof), governmental agency, association,
cooperative or other entity.
(b) "Affiliate" of any Person shall mean any corporation
or other entity of which the majority of equity interests are owned, directly
or indirectly, by such Person.
15. This Agreement shall be deemed to have been executed and
entered into in the State of New York and shall be construed, enforce and
performed in accordance with the laws thereof.
16. It is the intention of the parties that this Agreement operate
as a sealed instrument.
17. All of the rights and obligations of parties hereto pursuant
to this Agreement are contingent upon the occurrence of the Closing under the
Purchase Agreement. This Agreement shall be void and of no further effect in
the event the Purchase Agreement is terminated prior to the occurrence of the
Closing thereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed, all as of the date first written above.
Witness: CHANCELLOR BROADCASTING
COMPANY
By
- ---------------------------- ------------------------------------
Steven Dinetz
President & CEO
<PAGE> 6
Consulting Agreement
Anthony S. Ocepek
Page 6
Witness: CHANCELLOR RADIO BROADCASTING
COMPANY
By
- ---------------------------- ------------------------------------
Steven Dinetz
President & CEO
Witness:
- ---------------------------- --------------------------------------
ANTHONY S. OCEPEK
<PAGE> 1
EXHIBIT 10.17
CONSULTING AGREEMENT
THIS AGREEMENT is dated May 14, 1996, and is entered into between
CHANCELLOR BROADCASTING COMPANY and CHANCELLOR RADIO BROADCASTING COMPANY,
(collectively, "Chancellor"), and CARL E. HIRSCH ("Hirsch").
WITNESSETH:
WHEREAS, Hirsch is the Chairman, President, and Chief Executive
Officer of OmniAmerica Communications, Inc.; and
WHEREAS, pursuant to an Asset Purchase Agreement dated May 14, 1996,
between OMNIAMERICA GROUP, a Massachusetts general partnership; WAPE-FM
LICENSE PARTNERSHIP, an Ohio general partnership; WFYV-FM LICENSE PARTNERSHIP,
an Ohio general partnership; WEAT-AM LICENSE PARTNERSHIP, an Ohio general
partnership; WEAT-FM LICENSE PARTNERSHIP, an Ohio general partnership; WXXL
LICENSE PARTNERSHIP, an Ohio general partnership; WOLL LICENSE PARTNERSHIP, an
Ohio general partnership; and WJHM-FM LICENSE PARTNERSHIP, an Ohio general
partnership; and Chancellor (the "Purchase Agreement"), which proposes to
sell to Chancellor substantially all of the assets of radio stations WAPE-FM,
Jacksonville, Florida; WFYV-FM, Atlantic Beach; Florida, WEAT-AM, West Palm
Beach, Florida; WEAT-FM, West Palm Beach, Florida; WXXL-FM, Tavares, Florida;
WOLL-FM, Riviera Beach, Florida; WJHM-FM, Daytona Beach, Florida; and WOMX- FM,
Orlando, Florida, (collectively the "Stations"); and
WHEREAS, Hirsch has served a critical role in the Stations' success;
and
WHEREAS, Chancellor desires to obtain certain consulting services from
Hirsch following the Closing of the Purchase Agreement and, accordingly,
desires to enter into this Agreement with Hirsch.
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree as follows:
1. Hirsch agrees that commencing upon the Closing of the Purchase
Agreement and for a period of two years after the Closing, Hirsch will be
available at reasonable, mutually-agreeable times to provide to Chancellor up
to forty (40) hours per month of broadcast-related consulting services.
Consulting hours not used by Chancellor in any month shall not be owed by
Hirsch in any subsequent month. Consulting services shall be rendered in
locations requested by Chancellor provided that travel time shall be considered
and included as hours of consultation. Notwithstanding the foregoing,
Chancellor acknowledges that Hirsch has other work obligations and will not be
expected to be available on any specific date; however, he will serve his
obligations in good faith.
<PAGE> 2
2. Chancellor agrees that, upon closing of the Purchase
Agreement, it will pay to Hirsch One Hundred Thousand Dollars ($100,000.00).
3. In addition to any amount reimbursable pursuant to Paragraph 4
of the Non-Competition Agreement of even date herewith (the "Non-Competition
Agreement"), Chancellor shall reimburse all reasonable expenses incurred by
Hirsch in providing the consulting services requested by Chancellor hereunder.
4. Hirsch shall be appointed or elected, as the case may be, to
the Board of Directors of Chancellor Broadcasting Company for a two year term
prior to the first meeting of Chancellor's Board of Directors to be held after
the closing of the Purchase Agreement.
5. In the event that during the term of this Agreement, Hirsch
becomes incapable of performing his consulting duties as a result of a
disability or death, Hirsch will have no further obligations to provide
consulting services hereunder.
6. From the Closing Date until this Agreement terminates in
accordance with Paragraph 1 or is earlier canceled pursuant to Paragraph 9,
Hirsch shall not solicit for employment any employees of Chancellor or its
Affiliates.
7. Hirsch hereby acknowledges that any breach by him of any of
the covenants contained in Paragraph 6, above, (the "Covenant") may result in
irreparable injury to Chancellor for which money damages could not adequately
compensate Chancellor. In the event of any such breach, Chancellor shall be
entitled, in addition to any other rights and remedies which it may have at law
or in equity, to have an injunction issued by any competent court enjoining and
restraining Hirsch and/or any other Person involved therein from continuing
such breach. If Chancellor prevails in litigation to enforce any of the
Covenants breached by Hirsch, then the duration of the breached Covenant shall
be extended by a period of time equal to the duration of such breach,
commencing the last day of the Restricted Period. Chancellor's equitable
remedies as provided in this Paragraph 7 shall be Chancellor's sole and
exclusive remedies for Hirsch's breach of this Agreement.
8. Hirsch acknowledges that in his capacity as consultant to
Chancellor, its officers, directors, employees and agents, including Hirsch,
may receive or produce Confidential Information (as defined herein). At all
times after the date hereof, Chancellor will prohibit Hirsch, except with the
express prior written consent of Chancellor, from directly or indirectly
communicating, disclosing or divulging to any Person other than employees,
contractors or agents of Chancellor, any Confidential Information, which Hirsch
may have acquired, no matter from whom or in what manner such Confidential
Information may have been acquired, heretofore, or hereafter, concerning the
conduct and details of the business of Chancellor (or any of its Affiliates).
For purposes of this Agreement, "Confidential Information" means any
information or material which Chancellor or any Affiliates (as defined herein)
of Chancellor treats as proprietary
<PAGE> 3
Consulting Agreement
Carl E. Hirsch
Page 3
or designates as "Confidential," which is not generally known by non-employer
personnel, and to which Hirsch obtains knowledge or access as a result of
Hirsch's relationship with Chancellor. Confidential Information includes, but
is not limited to, discoveries, ideas, concepts, techniques, data,
documentation, research, procedures, knowhow, marketing techniques, materials,
plans, names of customers and advertisers, and information relating to past and
perspective customers' and advertisers' cost data, pricing policies and
financial information, received, originated or discovered by employees or
agents. Confidential information does not include any information (i)
ascertained or obtained other than from Chancellor or (ii) which is or becomes
known to the public other than through a breach of this Agreement.
Hirsch shall deliver to Chancellor all originals and copies of
materials containing Confidential Information in his possession, custody or
control immediately upon request by Chancellor. Hirsch acknowledges that all
files, records, documents and information relating to the business of
Chancellor whether prepared by Hirsch or otherwise, coming into its own
possession, shall remain the exclusive property of Chancellor and shall not be
removed from the premises (except as required in the course of his performance
of his duties for Chancellor).
Notwithstanding the last sentence of Paragraph 7, in the event this
covenant of confidentiality is violated and Chancellor is damaged as a direct
result thereby, Hirsch agrees that Chancellor shall be entitled to seek
recovery for such damages, but shall not be entitled to recoup or offset any
amounts paid or owing to Hirsch pursuant to the terms of this Agreement as such
payment obligations of Chancellor shall not be dependent on Hirsch's compliance
with this Paragraph 8.
9. If any portion of the Covenants or the application thereof is
construed to be invalid or unenforceable, then the other portion(s) of the
Covenants or the application thereof will not be affected thereby and shall be
given full force and effect without regard to the invalid or unenforceable
portions. If any of the Covenants is determined to be unenforceable because of
the geographical area covered thereby, the duration thereof or the scope
thereof, then such Covenant shall be interpreted to extend only for the maximum
geographical area, duration or other scope as to which it may be enforceable.
10. All such notices and other communications which are required
or permitted hereunder will be effective upon receipt and shall be given to the
following addresses:
If to Chancellor:
One copy to: One copy to:
<PAGE> 4
Consulting Agreement
Carl E. Hirsch
Page 4
Steven Dinetz Matthew Leibowitz
President & CEO Leibowitz & Associates, P.A.
Chancellor Radio Broadcasting Company One S.E. 3rd Avenue
12655 N. Central Expressway Suite 1450
Suite 405 Miami, Florida 33131
Dallas, Texas 75243
If to Consultant:
One copy to: One copy to:
Carl E. Hirsch F. Howard Mandel
Chairman, President, & CEO Thompson Hine & Flory, P.L.L.
OmniAmerica Communications, Inc. 3900 Society Center
11111 Santa Monica Blvd. 127 Public Square
Suite 220 Cleveland, Ohio 44114-1216
Los Angeles, CA 9005
11. This Agreement will be binding upon, inure to the benefit of,
and be enforceable by the successors and assigns of Chancellor. Chancellor
shall not assign this Agreement without the consent of Hirsch, which shall not
be unreasonably withheld; however, Chancellor shall assign this Agreement
including Chancellor's payment obligations to any purchaser of all or
substantially all of the assets or stock (by merger or otherwise) of
Chancellor. This Agreement shall not be assigned by Hirsch, except that his
right to receive payments may be assigned or conveyed to his estate or
otherwise.
12. This Agreement and the Non-Competition Agreement constitute
the entire understanding of the parties with respect to the subject matter
hereof, and shall not be modified, supplemented or terminated except in writing
signed by Chancellor and Hirsch.
13. No failure on the part of any party hereto to exercise and no
delay in exercising any right, power or remedy hereunder will operate as a
waiver thereof, nor will any single or partial exercise of any right, power or
remedy.
14. As used herein:
(a) "Person" shall mean a natural person, corporation,
partnership, trust,
<PAGE> 5
Consulting Agreement
Carl E. Hirsch
Page 5
estate, joint venture, solo proprietorship, government (and any branch or
subdivision thereof), governmental agency, association, cooperative or other
entity.
(b) "Affiliate" of any Person shall mean any corporation
or other entity of which the majority of equity interests are owned, directly
or indirectly, by such Person.
15. This Agreement shall be deemed to have been executed and
entered into in the State of New York and shall be construed, enforce and
performed in accordance with the laws thereof.
16. It is the intention of the parties that this Agreement operate
as a sealed instrument.
17. All of the rights and obligations of parties hereto pursuant
to this Agreement are contingent upon the occurrence of the Closing under the
Purchase Agreement. This Agreement shall be void and of no further effect in
the event the Purchase Agreement is terminated prior to the occurrence of the
Closing thereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed, all as of the date first written above.
Witness: CHANCELLOR BROADCASTING COMPANY
By
- ------------------------------ ----------------------------------
Steven Dinetz
President & CEO
Witness: CHANCELLOR RADIO BROADCASTING
COMPANY
By
- ------------------------------ ----------------------------------
<PAGE> 6
Steven Dinetz
President & CEO
Witness:
By
- -------------------------- ----------------------------------
CARL E. HIRSCH
<PAGE> 1
EXHIBIT 10.18
CONSULTING AGREEMENT
THIS AGREEMENT is dated May 14, 1996, and is entered into between
CHANCELLOR BROADCASTING COMPANY and CHANCELLOR RADIO BROADCASTING COMPANY,
(collectively, "Chancellor"), and H. DEAN THACKER ("Thacker").
WITNESSETH:
WHEREAS, Thacker is the Executive Vice President of OmniAmerica
Communications, Inc.; and
WHEREAS, pursuant to an Asset Purchase Agreement dated May 14, 1996,
between OMNIAMERICA GROUP, a Massachusetts general partnership; WAPE-FM
LICENSE PARTNERSHIP, an Ohio general partnership; WFYV-FM LICENSE PARTNERSHIP,
an Ohio general partnership; WEAT-AM LICENSE PARTNERSHIP, an Ohio general
partnership; WEAT-FM LICENSE PARTNERSHIP, an Ohio general partnership; WXXL
LICENSE PARTNERSHIP, an Ohio general partnership; WOLL LICENSE PARTNERSHIP, an
Ohio general partnership; and WJHM-FM LICENSE PARTNERSHIP, an Ohio general
partnership; and Chancellor (the "Purchase Agreement"), which proposes to
sell to Chancellor substantially all of the assets of radio stations WAPE-FM,
Jacksonville, Florida; WFYV-FM, Atlantic Beach; Florida, WEAT-AM, West Palm
Beach, Florida; WEAT-FM, West Palm Beach, Florida; WXXL-FM, Tavares, Florida;
WOLL-FM, Riviera Beach, Florida; WJHM-FM, Daytona Beach, Florida; and WOMX-FM,
Orlando, Florida, (collectively the "Stations"); and
WHEREAS, Thacker has served a critical role in the Stations' success; and
WHEREAS, Chancellor desires to obtain certain consulting services from
Thacker following the Closing of the Purchase Agreement and, accordingly,
desires to enter into this Agreement with Thacker.
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree as follows:
1. Thacker agrees that commencing upon the Closing of the
Purchase Agreement and for a period of two years after the Closing Date,
Thacker will be available at reasonable, mutually-agreeable times to provide to
Chancellor up to forty (40) hours per month of broadcast-related consulting
services. Consulting hours not used by Chancellor in any month shall not be
owed by Thacker in any subsequent month. Consulting services shall be rendered
in locations requested by Chancellor provided that travel time shall be
considered and included as hours of consultation. Notwithstanding the
foregoing, Chancellor acknowledges that Thacker has other work obligations and
will not be expected to be available on any specific date; however, he will
serve his obligations in good faith.
<PAGE> 2
2. Chancellor agrees that, upon closing of the Purchase
Agreement, it will pay to Thacker, annually, One Hundred Thousand Dollars
($100,000.00) in equal monthly installments of Eight Thousand Three Hundred
Thirty-Three Dollars and Thirty-Three Cents ($8,333.33) per month for two
years.
3. Chancellor shall reimburse all reasonable expenses incurred by
Thacker in providing the consulting services requested by Chancellor hereunder.
4. In the event that during the term of this Agreement, Thacker
becomes incapable of performing his consulting duties as a result of a
disability or death, Thacker will have no further obligations to provide
consulting services hereunder.
5. From the Closing Date until this Agreement terminates in
accordance with Paragraph 1 or is earlier canceled pursuant to Paragraph 8,
Thacker shall not or solicit for employment any employees of Chancellor or its
Affiliates.
6. Thacker hereby acknowledges that any breach by him of any of
the covenant contained in Paragraph 5, above, (the "Covenant") may result in
irreparable injury to Chancellor for which money damages could not adequately
compensate Chancellor. In the event of any such breach, Chancellor shall be
entitled to have an injunction issued by any competent court enjoining and
restraining Thacker and/or any other Person involved therein from continuing
such breach. If Chancellor prevails in litigation to enforce any of the
Covenant breached by Thacker, then the duration of the breached Covenant shall
be extended by a period of time equal to the duration of such breach,
commencing the last day of the Restricted Period. Chancellor's equitable
remedies as provided in this Paragraph 6 shall be Chancellor's sole and
exclusive remedies for Thacker's breach of this Agreement.
7. Thacker acknowledges that in his capacity as consultant to
Chancellor, its officers, directors, employees and agents, including Thacker,
may receive or produce Confidential Information (as defined herein). At all
times after the date hereof, Chancellor will prohibit Thacker, except with the
express prior written consent of Chancellor, from directly or indirectly
communicating, disclosing or divulging to any Person other than employees,
contractors or agents of Chancellor, any Confidential Information, which
Thacker may have acquired, no matter from whom or in what manner such
Confidential Information may have been acquired, heretofore, or hereafter,
concerning the conduct and details of the business of Chancellor (or any of its
Affiliates).
For purposes of this Agreement, "Confidential Information" means any
information or material which Chancellor or any Affiliates (as defined herein)
of Chancellor treats as proprietary or designates as "Confidential," which is
not generally known by non-employer personnel, and to which Thacker obtains
knowledge or access as a result of Thacker's relationship with Chancellor.
Confidential Information includes, but is not limited to, discoveries, ideas,
concepts, techniques, data, documentation, research, procedures, knowhow,
marketing techniques, materials, plans, names of customers and advertisers, and
information relating to past and perspective customers' and advertisers' cost
data, pricing policies and financial information, received, originated or
<PAGE> 3
Consulting Agreement
H. Dean Thacker
Page 3
discovered by employees or agents. Confidential information does not include
any information (i) ascertained or obtained other than from Chancellor or (ii)
which is or becomes known to the public other than through a breach of this
Agreement.
Thacker shall deliver to Chancellor all originals and copies of
materials containing Confidential Information in his possession, custody or
control immediately upon request by Chancellor. Thacker acknowledges that all
files, records, documents and information relating to the business of
Chancellor whether prepared by Thacker or otherwise, coming into its own
possession, shall remain the exclusive property of Chancellor and shall not be
removed from the premises (except as required in the course of his performance
of his duties for Chancellor).
Notwithstanding the last sentence of Paragraph 6, in the event this
covenant of confidentiality is violated and Chancellor is damaged as a direct
result thereby, Thacker agrees that Chancellor shall be entitled to seek
recovery for such damages, but shall not be entitled to recoup or offset any
amounts paid or owing to Thacker pursuant to the terms of this Agreement as
such payment obligations of Chancellor shall not be dependent on Thacker's
compliance with this Paragraph 7.
8. This Agreement will remain in effect for at least ninety (90)
days from the Closing Date and shall be cancelable by either party on thirty
(30) days notice without cause.
9. If any portion of the Covenants or the application thereof is
construed to be invalid or unenforceable, then the other portion(s) of the
Covenants or the application thereof will not be affected thereby and shall be
given full force and effect without regard to the invalid or unenforceable
portions. If any of the Covenants is determined to be unenforceable because of
the geographical area covered thereby, the duration thereof or the scope
thereof, then such Covenant shall be interpreted to extend only for the maximum
geographical area, duration or other scope as to which it may be enforceable.
10. All such notices and other communications which are required
or permitted hereunder will be effective upon receipt and shall be given to the
following addresses:
<PAGE> 4
Consulting Agreement
H. Dean Thacker
Page 4
<TABLE>
<S> <C>
If to Chancellor:
One copy to: One copy to:
Steven Dinetz Matthew Leibowitz
President & CEO Leibowitz & Associates, P.A.
Chancellor Radio Broadcasting Company One S.E. 3rd Avenue
12655 N. Central Expressway Suite 1450
Suite 405 Miami, Florida 33131
Dallas, Texas 75243
If to Consultant:
One copy to: One copy to:
H. Dean Thacker F. Howard Mandel
Executive Vice President Thompson Hine & Flory, P.L.L.
OmniAmerica Communications, Inc. 3900 Society Center
11111 Santa Monica Blvd. 127 Public Square
Suite 220 Cleveland, Ohio 44114-1216
Los Angeles, CA 9005
</TABLE>
11. This Agreement will be binding upon, inure to the benefit of,
and be enforceable by the successors and assigns of Chancellor. Chancellor
shall not assign this Agreement without the consent of Thacker, which shall not
be unreasonably withheld; however, Chancellor shall assign this Agreement
including Chancellor's payment obligations to any purchaser of all or
substantially all of the assets or stock (by merger or otherwise) of
Chancellor. This Agreement shall not be assigned by Thacker, except that his
right to receive payments may be assigned or conveyed to his estate or
otherwise.
12. This Agreement constitutes the entire understanding of the
parties with respect to the subject matter hereof, and shall not be modified,
supplemented or terminated except in writing signed by Chancellor and Thacker.
13. No failure on the part of any party hereto to exercise and no
delay in exercising any right, power or remedy hereunder will operate as a
waiver thereof, nor will any single or partial exercise of any right, power or
remedy.
<PAGE> 5
Consulting Agreement
H. Dean Thacker
Page 5
14. As used herein:
(a) "Person" shall mean a natural person, corporation,
partnership, trust, estate, joint venture, solo proprietorship, government (and
any branch or subdivision thereof), governmental agency, association,
cooperative or other entity.
(b) "Affiliate" of any Person shall mean any corporation
or other entity of which the majority of equity interests are owned, directly
or indirectly, by such Person.
15. This Agreement shall be deemed to have been executed and
entered into in the State of New York and shall be construed, enforce and
performed in accordance with the laws thereof.
16. It is the intention of the parties that this Agreement operate
as a sealed instrument.
17. All of the rights and obligations of parties hereto pursuant
to this Agreement are contingent upon the occurrence of the Closing under the
Purchase Agreement. This Agreement shall be void and of no further effect in
the event the Purchase Agreement is terminated prior to the occurrence of the
Closing thereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed, all as of the date first written above.
Witness: CHANCELLOR BROADCASTING
COMPANY
By
- ------------------------- -------------------------------------
Steven Dinetz
President & CEO
<PAGE> 6
Consulting Agreement
H. Dean Thacker
Page 6
Witness: CHANCELLOR RADIO BROADCASTING
COMPANY
By
- ------------------------- -------------------------------------
Steven Dinetz
President & CEO
Witness:
- -------------------------- ------------------------------------
H. DEAN THACKER
<PAGE> 1
EXHIBIT 10.19
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (this "Agreement"), made as of May 14,
1996, is by and among CARL E. HIRSCH ("Hirsch") and CHANCELLOR BROADCASTING
COMPANY, a Delaware Corporation, and CHANCELLOR RADIO BROADCASTING COMPANY, a
Delaware Corporation ("collectively, Chancellor").
WITNESSETH:
WHEREAS, Hirsch is the Chairman, President, and Chief Executive
Officer of OmniAmerica Communications, Inc.; and
WHEREAS, pursuant to an Asset Purchase Agreement dated May 14, 1996,
between OMNIAMERICA GROUP, a Massachusetts general partnership; WAPE-FM
LICENSE PARTNERSHIP, an Ohio general partnership; WFYV-FM LICENSE PARTNERSHIP,
an Ohio general partnership; WEAT-AM LICENSE PARTNERSHIP, an Ohio general
partnership; WEAT-FM LICENSE PARTNERSHIP, an Ohio general partnership; WXXL
LICENSE PARTNERSHIP, an Ohio general partnership; WOLL LICENSE PARTNERSHIP, an
Ohio general partnership; and WJHM-FM LICENSE PARTNERSHIP, an Ohio general
partnership; and Chancellor (the "Purchase Agreement"), which proposes to
sell to Chancellor substantially all of the assets of radio stations WAPE-FM,
Jacksonville, Florida; WFYV-FM, Atlantic Beach; Florida, WEAT-AM, West Palm
Beach, Florida; WEAT-FM, West Palm Beach, Florida; WXXL-FM, Tavares, Florida;
WOLL-FM, Riviera Beach, Florida; WJHM-FM, Daytona Beach, Florida; and WOMX- FM,
Orlando, Florida, (collectively the "Stations"); and
WHEREAS, Hirsch has served a critical role in the Stations' success;
and
WHEREAS, Hirsch shall provide to Chancellor certain consulting
services following the Closing of the Purchase Agreement pursuant to the
Consulting Agreement dated May 14, 1996 between the parties (the "Consulting
Agreement"); and
WHEREAS, Hirsch shall be appointed or elected, as the case may be, as
a member of the Board of Directors of Chancellor Broadcasting Company and
Chancellor Radio Broadcasting Company prior to the first meeting of the Board
of Directors after the Closing of the Purchase Agreement.
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree as follows:
1. During the period that Hirsch is serving as a Director of
Chancellor Broadcasting Company, Hirsch agrees not (a) to solicit for
employment any employees of Chancellor or its
<PAGE> 2
Non-Competition Agreement
Carl E. Hirsch
Page 2
Affiliates or (b) to directly or indirectly, either as an employee, employer,
consultant, contractor, agent, principal, partner, stockholder, corporate
officer or director, or in any other individual or representative capacity,
engage or participate in any radio station that has a studio or main
transmission facility within any metropolitan statistical area as defined by
Arbitron in which Chancellor or its Affiliates owns or is the licensee of a
radio station, to the extent that Hirsch's said relationship conflicts with any
of the ownership or attribution rules of the Federal Communications Commission.
In the event that Hirsch is in violation of Paragraph 1, section (b), he shall
be given a reasonable opportunity to either divest such ownership interest or
resign from the Board of Directors. In the event that Hirsch resigns as a
member of the Board of Directors of Chancellor Broadcasting Company, the
restrictions recited in this Paragraph shall have no further force or effect
and shall release Hirsch from any and all obligations under it.
2. During the period from the closing under the Purchase
Agreement until the second anniversary thereof, Hirsch shall not (i) solicit
for employment any employees of Chancellor or its Affiliates that work
primarily in the Orlando, Florida Metropolitan Statistical Area as defined by
Arbitron ("Orlando MSA") or (ii) directly or indirectly, either as an
employee, employer, consultant, contractor, agent, principal, partner,
stockholder, corporate officer or director, or in any other individual or
representative capacity, engage or participate in or render any service to a
radio station that has a studio or main transmission facility within the
Orlando MSA, unless Chancellor ceases to own radio stations within this area.
3. In consideration of this Agreement, the Consulting Agreement
and other valuable consideration provided and to be provided by Hirsch,
Chancellor agrees to grant Hirsch an Option to purchase Seventy-Five Thousand
Shares (75,000) of Chancellor Broadcasting Company's Class A Common Stock or a
successor's shares as provided in Section 17.17 of the Purchase Agreement, with
an Option price of $22.50. Said shares shall be fully vested as of the Closing
Date of the Purchase Agreement.
4. In further consideration of this Agreement and other valuable
consideration provided and to be provided by Hirsch and in addition to any
amount reimbursable pursuant to Paragraph 3 of the Consulting Agreement,
Chancellor agrees to reimburse Hirsch or his designee for office and related
expenses in the amount of One Hundred Fifty Thousand Dollars ($150,000.00) per
year for a period of two years, payable in equal monthly installments. Hirsch
will provide substantiation for all office and related expenses.
5. In further consideration of this Agreement and other valuable
consideration provided and to be provided by Hirsch, Chancellor agrees to pay
Hirsch an additional Three Hundred Thousand Dollars ($300,000.00) on the
Closing Date of the Purchase Agreement.
<PAGE> 3
Non-Competition Agreement
Carl E. Hirsch
Page 3
6. Hirsch hereby acknowledges that any breach by him of any of
the covenants contained in Paragraphs 1 and 2 above (the "Covenants") may
result in irreparable injury to Chancellor for which money damages could not
adequately compensate Chancellor. In the event of any such breach, Chancellor
shall be entitled to have an injunction issued by any competent court enjoining
and restraining Hirsch and/or any other Person involved therein from continuing
such breach. If Chancellor prevails in litigation to enforce any of the
Covenants breached by Hirsch, then the duration of the breached Covenant shall
be extended by a period of time equal to the duration of such breach,
commencing the last day of the Restricted Period. Chancellor's equitable
remedies as provided in this Paragraph 6 shall be Chancellor's sole and
exclusive remedies for Hirsch's breach of this Agreement.
7. Hirsch acknowledges that in his capacity as consultant to
Chancellor, its officers, directors, employees and agents, including Hirsch,
may receive or produce Confidential Information (as defined herein). At all
times after the date hereof, Chancellor will prohibit Hirsch, except with the
express prior written consent of Chancellor, from directly or indirectly
communicating, disclosing or divulging to any Person other than employees,
contractors or agents of Chancellor, any Confidential Information, which Hirsch
may have acquired, no matter from whom or in what manner such Confidential
Information may have been acquired, heretofore, or hereafter, concerning the
conduct and details of the business of Chancellor (or any of its Affiliates).
For purposes of this Agreement, "Confidential Information" means any
information or material which Chancellor or any Affiliates (as defined herein)
of Chancellor treats as proprietary or designates as "Confidential," which is
not generally known by non-employer personnel, and to which Hirsch obtains
knowledge or access as a result of Hirsch's relationship with Chancellor.
Confidential Information includes, but is not limited to, discoveries, ideas,
concepts, techniques, data, documentation, research, procedures, knowhow,
marketing techniques, materials, plans, names of customers and advertisers, and
information relating to past and perspective customers' and advertisers' cost
data, pricing policies and financial information, received, originated or
discovered by employees or agents. Confidential information does not include
any information (i) ascertained or obtained other than from Chancellor or (ii)
which is or becomes known to the public other than through a breach of this
Agreement.
Hirsch shall deliver to Chancellor all originals and copies of
materials containing Confidential Information in his possession, custody or
control immediately upon request by Chancellor. Hirsch acknowledges that all
files, records, documents and information relating to the business of
Chancellor whether prepared by Hirsch or otherwise, coming into its own
possession, shall remain the exclusive property of Chancellor and shall not be
removed from the premises (except as required in the course of his performance
of his duties for Chancellor).
<PAGE> 4
Non-Competition Agreement
Carl E. Hirsch
Page 4
Notwithstanding the last sentence of Paragraph 6, in the event this
covenant of confidentiality is violated and Chancellor is damaged as a direct
result thereby, Hirsch agrees that Chancellor shall be entitled to seek
recovery for such damages, but shall not be entitled to recoup or offset any
amounts paid or owing to Hirsch pursuant to the terms of this Agreement as such
payment obligations of Chancellor shall not be dependent on Hirsch's compliance
with this Paragraph 7.
8. If any portion of the Covenants or the application thereof is
construed to be invalid or unenforceable, then the other portion(s) of the
Covenants or the application thereof will not be affected thereby and shall be
given full force and effect without regard to the invalid or unenforceable
portions. If any of the Covenants is determined to be unenforceable because of
the geographical area covered thereby, the duration thereof or the scope
thereof, then such Covenant shall be interpreted to extend only for the maximum
geographical area, duration or other scope as to which it may be enforceable.
9. All such notices and other communications which are required
or permitted hereunder will be effective upon receipt and shall be given to the
following addresses:
If to Chancellor:
One copy to: One copy to:
Steven Dinetz Matthew Leibowitz
President & CEO Leibowitz & Associates, P.A.
Chancellor Radio Broadcasting Company One S.E. 3rd Avenue
12655 N. Central Expressway Suite 1450
Suite 405 Miami, Florida 33131
Dallas, Texas 75243
<PAGE> 5
Non-Competition Agreement
Carl E. Hirsch
Page 5
If to Consultant:
One copy to: One copy to:
Carl E. Hirsch F. Howard Mandel
Chairman, President, & CEO Thompson Hine & Flory, P.L.L.
OmniAmerica Communications, Inc. 3900 Society Center
11111 Santa Monica Blvd. 127 Public Square
Suite 220 Cleveland, Ohio 44114-1216
Los Angeles, CA 9005
10. This Agreement will be binding upon, inure to the benefit of,
and be enforceable by the successors and assigns of Chancellor. Chancellor
shall not assign this Agreement without the consent of Hirsch, whose consent
shall not be unreasonably withheld. However, Chancellor shall assign this
Agreement including Chancellor's payment obligations to any purchaser of all or
substantially all of the assets or stock (by merger or otherwise) of
Chancellor. This Agreement shall not be assigned by Hirsch, except that his
right to receive payments may be assigned or conveyed to his estate or
otherwise.
11. This Agreement and the Consulting Agreement constitute the
entire understanding of the parties with respect to the subject matter hereof,
and shall not be modified, supplemented or terminated except in writing signed
by Chancellor and Hirsch.
12. No failure on the part of any party hereto to exercise and no
delay in exercising any right, power or remedy hereunder will operate as a
waiver thereof, nor will any single or partial exercise of any right, power or
remedy.
13. As used herein:
(a) "Person" shall mean a natural person, corporation,
partnership, trust, estate, joint venture, solo proprietorship, government (and
any branch or subdivision thereof), governmental agency, association,
cooperative or other entity.
(b) "Affiliate" of any Person shall mean any corporation
or other entity of which the majority of equity interests are owned, directly
or indirectly, by such Person.
13. This Agreement shall be deemed to have been executed and
entered into in the State of New York and shall be construed, enforced and
performed in accordance with the laws
<PAGE> 6
Non-Competition Agreement
Carl E. Hirsch
Page 6
thereof.
14. It is the intention of the parties that this Agreement operate
as a sealed instrument.
15. All of the rights and obligations of parties hereto pursuant
to this Agreement are contingent upon the occurrence of the Closing under the
Purchase Agreement. This Agreement shall be void and of no further effect in
the event the Purchase Agreement is terminated prior to the occurrence of the
Closing thereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed, all as of the date first written above.
Witness: CHANCELLOR BROADCASTING COMPANY
By
- --------------------------------- -----------------------------------
Steven Dinetz
President & CEO
Witness: CHANCELLOR RADIO BROADCASTING
COMPANY
By
- --------------------------------- -----------------------------------
Steven Dinetz
President & CEO
Witness:
- --------------------------------- --------------------------------------
CARL E. HIRSCH
<PAGE> 1
EXHIBIT 10.20
FIRST CONSENT AND AMENDMENT
FIRST CONSENT AND AMENDMENT (the "Amendment"), dated as of May 13,
1996, among CHANCELLOR BROADCASTING COMPANY ("Holdings"), CHANCELLOR RADIO
BROADCASTING COMPANY (the"Borrower"), the financial institutions party to the
Credit Agreement referred to below (the "Banks") and Bankers Trust Company, as
Managing Agent. All capitalized terms used herein and not otherwise defined
shall have the respective meanings provided such terms in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, Holdings, the Borrower, the Banks and the Agent are parties
to a Credit Agreement, dated as of February 14, 1996 (the "Credit Agreement");
and
WHEREAS, the parties hereto wish to amend certain provisions of the
Credit Agreement as herein provided;
NOW THEREFORE, it is agreed:
1. Effective as of the First Amendment Effective Date (as defined
herein) Holdings, the Borrower, each Subsidiary Guarantor and each undersigned
Bank (i) consents to the entering into of that asset purchase agreement (the
"Purchase Agreement") by OmniAmerica Communications ("Omni"), one or more
affiliates of Omni, the Borrower and one or more of affiliates of the Borrower
in the form previously delivered to the Managing Agent and subject to the
reasonable satisfaction of the Managing Agent, provided that such consent is
limited to the entering into of the Purchase Agreement and shall not be deemed
a consent to the consummation of the transactions contemplated in the Purchase
Agreement and (ii) waives the provisions of the Credit Agreement which would
prohibit the foregoing transactions.
2. On and after the First Amendment Effective Date, Section 1.02
of the Credit Agreement shall be amended by deleting the second sentence in its
entirety and inserting the following new sentence in lieu thereof:
"The aggregate principal amount of each Borrowing of Revolving Loans
shall not be less than $250,000 and, if greater, shall be in an integral
multiple of $50,000
<PAGE> 2
or, if less, the then remaining Total Revolving Loan commitment."
3. On and after the First Amendment Effective Date, Section
2.01(c) of the Credit Agreement shall be amended by deleting the amount
"$2,500,000" contained therein and inserting the amount "$20,000,000" in lieu
thereof.
4. On and after the First Amendment Effective Date, Section 4.01
of the Credit Agreement shall be amended by deleting the amount "$250,000"
contained therein and inserting the amount "$25,000" in lieu thereof.
5. On and after the First Amendment Effective Date, Section 9.11
of the Credit Agreement shall be amended by inserting immediately after the
reference "Section 4.02(d)" contained in the first proviso therein the
following proviso:
"provided further" that the Borrower may redeem Existing Subordinated
Notes so long as the amount used to redeem the Existing Subordinated Notes does
not exceed $20,000,000 in the aggregate,"
6. On and after the First Amendment Effective Date, the
definition of "L/C Supportable Obligations" under Section 11.01 of the Credit
Agreement shall be amended by inserting before the final period thereof the
following new phrase:
"(including, but not limited to, obligations of the Borrower to
provide an earnest money deposit in an amount not to exceed $10,000,000
pursuant to that Asset Purchase Agreement, dated as of May 14, 1996, among
Holdings, the Borrower, OmniAmerica Group and each of the other sellers named
therein)"
7. On and after the First Amendment Effective Date, Section 13.15
of the Credit Agreement shall be amended by deleting the reference "Section
2.06" contained therein and inserting the reference "Section 2.05" in lieu
thereof.
8. In order to induce the Banks to enter into this Amendment,
each of Holdings and the Borrower hereby represents and warrants that (i) the
representations, warranties and agreements contained in Section 7 of the Credit
Agreement are true and correct in all material respects on and as of the First
Amendment Effective Date (except with respect to any representations and
warranties
-2-
<PAGE> 3
limited by their terms to a specific date, which shall be true and correct in
all material respects as of such date) and (ii) there exists no Default or
Event of Default on the First Amendment Effective Date in each case both before
and after giving effect to this Amendment.
9. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Credit Agreement or any other Credit Document.
10. This Amendment may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with each of Holdings, the Borrower and the
Managing Agent.
11. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
12. This Amendment shall become effective on the date (the "First
Amendment Effective Date") when each of Holdings, the Borrower, each Subsidiary
Guarantor and the Required Banks shall have signed a copy hereof (whether the
same or different copies) and shall have delivered (including by way of
facsimile) the same to the Managing Agent at the Notice Office.
13. From and after the First Amendment Effective Date, all
references in the Credit Agreement and the other Credit Documents to the Credit
Agreement shall be deemed to be references to such Credit Agreement as modified
hereby.
-3-
<PAGE> 4
IN WITNESSES WHEREOF, the parties hereto have caused their
duly authorized officers to execute and deliver this Amendment as of the date
first above written.
CHANCELLOR BROADCASTING COMPANY
By: [ILLEGIBLE]
------------------------------------------
Title: Sr. Vice President of Finance
CHANCELLOR RADIO BROADCASTING COMPANY
By: [ILLEGIBLE]
------------------------------------------
Title: Sr. Vice President of Finance
BANKERS TRUST COMPANY,
Individually and
as Managing Agent
By: [ILLEGIBLE]
------------------------------------------
Title: MANAGING DIRECTOR
CHEMICAL BANK
By: [ILLEGIBLE]
------------------------------------------
Title: MANAGING DIRECTOR
NATIONSBANK OF TEXAS, N.A.
By: [ILLEGIBLE]
------------------------------------------
Title: VP
BANK OF AMERICA NT & SA
By: /s/ MATTHEW J. KOENIG - Matthew J. Koenig
------------------------------------------
Title: VP
-4-
<PAGE> 5
THE FIRST NATIONAL BANK OF BOSTON
By: ILLEGIBLE
----------------------------------------
Title: VP
UNION BANK
By: /s/ MICHAEL K. MCSHANE
----------------------------------------
Title: Michael K. McShane
Vice President
BANQUE PARIBAS
By: /s/ JOHN CARE
----------------------------------------
Title: John Care
Group Vice President
By: /s/ THOMAS G. BRANDT
----------------------------------------
Title: Thomas G. Brandt
Vice President
CIBC INC.
By: ILLEGIBLE
----------------------------------------
Title: M.D.
SOCIETE GENERALE
By:
----------------------------------------
Title:
ABAN AMRO BANK N.V.,
HOUSTON AGENCY,
by ABN Amro North America as Agent
By: /s/ LAURIE TUZO
----------------------------------------
Title: Laurie Tuzo
Vice President & Director
By: /s/ RON MAHLE
----------------------------------------
Title: Ron Mahle
Group Vice President & Director
-5-
<PAGE> 6
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By:
----------------------------------------
Title:
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By: /s/ JEFFREY W. MAILLET
----------------------------------------
Title: Jeffrey W. Maillet
Sr. Vice Pres. - Portolio Mgr.
PRIME INCOME TRUST
By:
----------------------------------------
Title:
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By:
----------------------------------------
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
By:
----------------------------------------
Title:
-6-
<PAGE> 7
ACKNOWLEDGMENT AND AGREEMENT
The undersigned, each being a Subsidiary Guarantor, hereby
acknowledges and agrees to the First Amendment to the Credit Agreement which
precedes this Acknowledgment and Agreement.
CHANCELLOR BROADCASTING LICENSEE COMPANY
By: ILLEGIBLE
-------------------------------------
Title: Senior Vice President of Finance
TREFOIL COMMUNICATIONS, INC.
By: ILLEGIBLE
-------------------------------------
Title: Senior Vice President of Finance
SHAMROCK BROADCASTING, INC.
By: ILLEGIBLE
-------------------------------------
Title: Senior Vice President of Finance
SHAMROCK RADIO LICENSES, INC.
By: ILLEGIBLE
-------------------------------------
Title: Senior Vice President of Finance
SHAMROCK BROADCASTING OF TEXAS, INC.
By: ILLEGIBLE
-------------------------------------
Title: Senior Vice President of Finance
<PAGE> 1
EXHIBIT 10.21
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT executed this 1st day of February, 1996, by and
between CHANCELLOR RADIO BROADCASTING COMPANY, a Delaware corporation and a
subsidiary of Chancellor Broadcasting Company ("EMPLOYER") and SAMUEL WELLER
("EMPLOYEE");
WITNESSETH:
WHEREAS, the EMPLOYER is the owner and operator of radio broadcast stations
KXKL-AM & FM and KZDG-FM or that certain station located at 92.5 MHz in Denver,
Colorado (the "Denver Stations"), and KMLE-FM, Phoenix, Arizona (the "Phoenix
Station") (together the "STATIONS") and desires to employ EMPLOYEE as
Executive Vice President and General Manager of the Denver Stations; and
further as Executive Vice President and Regional Manager of the STATIONS; and
WHEREAS, EMPLOYEE desires to be employed by EMPLOYER in such capacity and
under such terms and conditions as hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants and promises made
by the parties and intending to be legally bound, the parties agree as follow:
1. EMPLOYMENT. EMPLOYER hereby employs EMPLOYEE in the capacity of a
full-time Executive Vice-President and General Manager of the Denver Stations
and Executive Vice President and Regional Manager of the Phoenix Station and
EMPLOYEE accepts employment upon the terms and conditions hereinafter set
forth.
2. TERM. The basic term of this Agreement shall be for a term of
twenty-three (23) months commencing February 1, 1996, and terminating at 12:00
midnight on December 31, 1997. EMPLOYEE hereby accepts such employment for
such term, subject however to prior termination as herein provided.
3. EMPLOYMENT AND DUTIES.
(a) The EMPLOYER agrees to employ EMPLOYEE in the capacity as
Executive Vice-President and General Manager of the Denver Stations and
Regional Manager of the Phoenix Station. EMPLOYEE shall diligently devote his
full time and efforts to the business and affairs of the EMPLOYER. The
EMPLOYEE shall have such duties and powers that are commensurate and consistent
with those of an Executive Vice-President, Regional Manager and General Manager
in the radio industry subject to the authority and direction of the President,
Chief Executive Officer or other authorized person(s) of EMPLOYER. EMPLOYEE
shall report directly to Steven Dinetz, President and Chief Executive Officer
of EMPLOYER. In addition, EMPLOYEE shall assume such other corporate
responsibilities, duties and authority as may be delegated to him from
time-to-time by the EMPLOYER.
Page 1
<PAGE> 2
(b) During the term hereunder, EMPLOYEE shall devote all of his skills
solely to the business interest of EMPLOYER. EMPLOYEE shall not, during the
term hereof, be interested, directly or indirectly, in any manner, as a
partner, officer, director, stockholder, advisor, investor, creditor, or
employee in any other broadcast station, cable television operator, or daily
newspaper or in any business competitive with the EMPLOYER'S business;
provided, however, that nothing contained shall be deemed to prevent EMPLOYEE
from investing his personal funds in the capital stock or other securities of
any corporation whose stock or securities are publicly owned or are regularly
traded on any public exchange, provided he does not own more than two percent
(2%) thereof.
(c) During the term of this Agreement, EMPLOYEE shall notify EMPLOYER
within forty-eight (48) hours of any solicitation of EMPLOYEE for employment,
including any oral or written contract, offer or inquiry in which a position of
employment, consulting arrangement or affiliation is discussed. During the
term of this Agreement, EMPLOYEE will not enter into, nor engage in
negotiations for agreements, whether oral or written, relating to employment,
consulting or affiliation and/or any other arrangements with or for any radio
broadcast station or broadcast company located in the markets in which the
Company owns or operates any radio station.
4. COMPENSATION. As compensation for EMPLOYEE services, EMPLOYER
hereby agrees to pay EMPLOYEE, and EMPLOYEE agrees to accept:
(a) BASE SALARY ("SALARY"). Payable in equal monthly amounts (in
accordance with EMPLOYER'S payroll policies) at the following rates: for the
period commencing on February 1, 1996, up through and including December 31,
1996, a base salary at an annual rate of Two Hundred Fifty Thousand Dollars
($250,000.00); and for the period commencing on January 1, 1997, up through and
including December 31, 1997, at an annual rate of Two Hundred Sixty-Two
Thousand and Five Hundred Dollars ($262,500.00). That at 12:00 P.M. (midnight)
on December 31, 1997, the employment relationship between the EMPLOYER and
EMPLOYEE shall automatically terminate, unless terminated previously pursuant
to the terms of this Agreement and/or extended in writing and signed by the
parties. That upon automatic termination, the EMPLOYER shall not be obligated
to pay the Employee any further salary, benefits, other than bonuses that may
have been earned to date.
(b) QUARTERLY PERFORMANCE BONUS. EMPLOYEE shall be eligible,
beginning with the commencement of this Agreement, to earn a Quarterly
Performance Bonus Compensation award based upon certain Broadcast Cash Flow
("BCF") projections subject to state and federal taxes, for each quarter, until
the termination of this Agreement on December 31, 1997, and/or prior thereto,
in accordance with the terms hereof. The EMPLOYEE must have fully completed
two (2) full months of employment of each quarter during the term of this
Agreement to be eligible for any Quarterly Performance Bonus. The said
Quarterly Performance Bonus shall be up to Twenty Thousand Dollars ($20,000.00)
per quarter and shall be earned if each of the STATIONS achieve the Broadcast
Cash Flow ("BCF") projections as are set forth in EXHIBIT "A" which is attached
hereto, on an annualized basis. The Employee acknowledges the said projections
and accepts them as the standard upon which the Quarterly Performance Bonus
shall be calculated subject to Paragraph 4(e) below.
Page 2
<PAGE> 3
(c) OVERRIDE BONUS. EMPLOYEE shall be eligible to earn a ten percent
(10%) Override Bonus for the Denver Stations only of that portion of the BCF
that exceeds $2,741,000.00 for the period commencing on the date of this
Agreement up through and including December 31, 1996. In order to be eligible
for said Override Bonus, EMPLOYEE must be employed by EMPLOYER on September 30
of each contract year and have completed at least three (3) complete quarters
of employment in any contract year.
Any Quarterly Performance Bonus shall be paid in the last payroll period in the
month following the end of the said quarter(1). The Override Bonus earned by
EMPLOYEE under this section, shall be paid no later than April 30 of the
following year.
(d) PAYMENT OR NON-PAYMENT OF BONUSES IN THE EVENT OF TERMINATION OF
EMPLOYMENT: FOR "CAUSE", WITHOUT "CAUSE" OR BASED ON DEATH/DISABILITY.
Notwithstanding the foregoing, the said Quarterly Performance Bonus and
Override Bonus payable with respect to any contract year, in the event of
termination shall be paid/not paid as follows:
(i) If EMPLOYEE is terminated for "cause" (Paragraph 10)
or voluntarily resigns before the end of any contract year, the EMPLOYEE shall
not be paid any Quarterly Bonus or Override Bonus for the quarter in which said
termination takes place nor will the employee earn the Override.
(ii) If EMPLOYEE'S employment hereunder is terminated
without cause pursuant to Paragraph 11, or for Disability or Death pursuant to
Paragraph 9 and subject to the eligibility requirements to earn Quarterly
Performance and Override Bonuses, he shall be paid a pro rata share of any
Quarterly Performance Bonus or Override Bonus earned during the portion of the
contract year prior to such termination date (the "Pro Rata period") which
shall be based on the projections as are set forth in Exhibit "A".
(e) For purposes of this Agreement, BCF shall be defined as the
STATIONS' cash operating income before depreciation; amortization of non-cash
items, interest and federal and state income taxes, and corporate expenses as
calculated by EMPLOYER, in its sole discretion. The BCF budget as set forth in
Exhibit "A" shall be the STATIONS targeted BCF for the contract year, as
established by EMPLOYER, in its sole discretion, at the beginning of each
contract year.
- -------------
(1) Quarterly Performance Bonus to be paid as follows: i.e. End of quarter is
March 30 and Bonus to be paid by April 30 and the same for each quarter
thereafter, except for the Quarterly Performance earned for the quarter
ending December 31, which said Bonus shall be paid on or before April 30
of the following year.
5. BENEFITS. The EMPLOYER shall provide the benefits to the
EMPLOYEE set forth below, which said benefits may be modified from
time-to-time, in the EMPLOYER'S sole discretion, i.e. EMPLOYER may select a
different health care provider with competitive rates, provided that comparable
benefits are offered to EMPLOYEE.
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<PAGE> 4
(a) Automobile The EMPLOYER shall provide the EMPLOYEE with the use
of an automobile (and attendant costs) for business purposes, which EMPLOYER
shall provide pursuant to a Trade Agreement. For the purposes of this
Agreement, a "Trade Agreement" involves goods and services obtained from
sponsors who pay for advertising on the STATIONS with such goods or services in
lieu of cash. All such Trade Agreements must be for business purposes and must
be approved in advance, in writing, by EMPLOYER.
(b) Health and Medical The EMPLOYER shall provide EMPLOYEE and his
immediate family with hospitalization and Major Medical coverage.
6. VACATION. EMPLOYEE shall be given three (3) weeks of paid vacation
each calendar year. All vacation requests must be approved in writing by the
EMPLOYER at least two (2) weeks in advance. Vacation must be taken within each
contract year or be forfeited; vacation time cannot be carried over from one
contract year to another.
7. OTHER BENEFITS. EMPLOYEE shall be entitled to such other benefits
provided by the EMPLOYER, pursuant to its general policies as set forth in the
Employee Policy Handbook. Said benefits may be changed from time-to-time in
the EMPLOYER'S sole business discretion.
8. REIMBURSEMENT FOR EXPENSES. EMPLOYEE shall be reimbursed for all
reasonable and necessary business expenses for travel and entertainment in
connection with EMPLOYER'S business; provided, however, that no reimbursement
shall be made for any expenses unless said expenses are properly deductible to
the EMPLOYER for federal income tax purposes and consistent with EMPLOYER'S
policies, as established by EMPLOYER from time-to-time. As a condition for
reimbursement of said expenses, the EMPLOYEE must submit any and all supporting
documents together with his expense report, prior to the EMPLOYER'S obligation
to reimburse said expenses.
9. DEATH OR DISABILITY. This Agreement shall terminate automatically
and immediately upon EMPLOYEE'S death. In the event the EMPLOYEE shall become
"disabled", as defined herein, EMPLOYER shall have the right to terminate this
Agreement as of the date not less than seven (7) days from the date of written
notice to EMPLOYEE and EMPLOYEE shall be entitled to receive his earned salary
to date, as well as any Pro Rata earned Quarterly Performance Bonus and/or any
earned Override Bonus. EMPLOYEE shall be deemed to have become disabled if,
because of ill health, physical or mental disability or for other causes beyond
his control he shall have been unable or unwilling or shall have failed to
perform his duties hereunder for a cumulative total of three (3) months within
any one contract year, or if he shall have been unable or unwilling or shall
have failed to perform his duties for a period of not less than sixty (60)
consecutive days.
10. RIGHT OF EMPLOYER TO TERMINATE FOR "CAUSE".
(a) In addition to the EMPLOYER'S right to terminate EMPLOYEE'S
employment as provided in Paragraph 11 hereof, EMPLOYEE'S employment may be
terminated by EMPLOYER in writing, immediately, at any time, with written
notice, upon the occurrence of one or more of the following events; if:
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<PAGE> 5
(aa) EMPLOYEE fails, neglects or refuses to perform in any
material aspect any of his obligations hereunder at the time and in the manner
set forth herein;
(bb) EMPLOYEE conducts himself in a degrading manner or engages
in any immoral practices or activities which may insult or offend the community
and therefore be materially detrimental to the reputation, well-being or
properties of EMPLOYER, its officers, directors, shareholders or affiliated
companies;
(cc) EMPLOYEE materially breaches this Agreement;
(dd) EMPLOYEE materially jeopardizes EMPLOYER'S ability to
operate its business;
(ee) EMPLOYEE manifests negligence or incompetence in the
discharge of his duties hereunder;
(ff) EMPLOYEE violates local, state or federal laws, rules or
policies of the Federal Communications Commission (FCC) or any other
governmental agency which may regulate EMPLOYER'S business or fails;
(gg) EMPLOYEE refuses to comply with the EMPLOYER'S policies,
standards and regulations as set forth in the Employer's Handbook or announced
from time-to-time by EMPLOYER'S management;
(hh) EMPLOYEE is intoxicated or uses, possesses, sells, trades
in, or delivers, or is under the influence of any illegal drug while performing
his duties or while on EMPLOYER'S premises or otherwise at anytime while
employed by EMPLOYER;
(ii) EMPLOYEE becomes "disabled" as defined in paragraph 9
herein;
(jj) EMPLOYEE is guilty of fraud, dishonesty, disloyalty,
willful misconduct or material dereliction in rendering services on behalf of
EMPLOYER.
(kk) Employee fails to achieve eighty-five percent (85%) of the
BCF for the Stations in any calendar year as set forth in Exhibit "A".
(b) In the event of termination pursuant to this Paragraph 10,
EMPLOYER shall have no obligation to continue to pay EMPLOYEE the compensation
set forth in Paragraph 4 above, or any severance pay and specifically, the
EMPLOYER shall be relieved from any and all payments or other liabilities to
EMPLOYEE as required by this Agreement, including any Quarterly Performance
Bonus and/or Override Bonus award. Notwithstanding the termination of
EMPLOYEE'S employment, either by expiration of its term or by termination for
any other reason, whether for cause or without cause, the provisions of
Paragraphs 14 through 17 shall remain binding and in full force and effect.
11. TERMINATION WITHOUT CAUSE AND SEVERANCE PAY. In the event this
Agreement is terminated by the EMPLOYER without cause, upon written notice,
then EMPLOYEE shall be entitled to receive and EMPLOYER shall pay the following
sums as Severance Pay:
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(a) If EMPLOYEE is terminated without cause PRIOR to December 31,
1997, EMPLOYEE shall receive as severance pay, an amount equal to the remaining
balance of Base Salary which would have been paid under this Agreement through
December 31, 1997. Said payment shall be paid either in a lump sum or in equal
monthly amounts at the discretion of the EMPLOYER. EMPLOYEE shall also receive,
if eligible, any earned Pro Rata Quarterly Performance Bonus and any earned Pro
Rata Override Bonus.
(b) The payment to the EMPLOYEE of the Severance Pay and the Pro Rata
earned Bonuses, shall be in full and complete satisfaction of any and all
payments to be made to EMPLOYEE and the EMPLOYER shall have no further
obligation to pay to the EMPLOYEE any other sums other than the Severance Pay
and said Bonuses.
12. PAY OR USE OF SERVICES. Nothing herein shall be deemed to obligate
EMPLOYER to use EMPLOYEE's services hereunder and EMPLOYER shall have fully
discharged its obligations under this Agreement by making the base salary
payments in Paragraph 4(a).
13. "PAYOLA." EMPLOYEE represents and warrants that he has not agreed to
accept and that he will not accept any money or other form of consideration for
the inclusion of any commercial material, plug or reference in any program on
any broadcast station owned by or licensed to EMPLOYER, other than the
compensation payable to him under this Agreement or under any program approved
by EMPLOYER. In addition, EMPLOYEE will comply with EMPLOYER'S policies which
prohibit employees from 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 matters;
(b) accepting any favors, loans, entertainment or other consideration
from persons seeking the airing of any broadcast matter in return therefore;
and
(c) promoting over the air (except by means of an appropriate logged
commercial announcement) any activity or matter in which the EMPLOYEE has a
direct or indirect financial interest.
Violation of this Section shall constitute cause for termination under
Paragraph 10 above.
14. CONFIDENTIAL INFORMATION AND TRADE SECRETS. EMPLOYEE acknowledges
that during the course of his regular duties, he will have access to
confidential information and trade secrets, including, but not limited to
financial information relating to the STATIONS and EMPLOYER; data relating to
formats, promotion, hiring plans, market studies commissioned by EMPLOYER,
concepts strategies, acquisitions; EMPLOYER'S business decisions affecting the
said STATION or Company; plans regarding EMPLOYER'S structure; financing,
personnel; plans of mergers; acquisitions; sales of STATION(S) owned by
EMPLOYER; information relating to format changes in any radio station owned by
EMPLOYER; methods of doing business and other "know how", or business
information which is not in the public domain, which said information EMPLOYEE
acknowledges to be a valuable trade asset of EMPLOYER, except for common
general
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practices in the radio industry or knowledge in the public domain. EMPLOYEE
shall not at any time during the term of this Agreement or at any time after
termination of employment for any reason, directly or indirectly, use for
himself or others, or divulge to others any said trade secrets or confidential
information or data of EMPLOYER obtained as a result of his employment.
In the event this covenant is violated EMPLOYER shall be entitled to
injunctive relief to prevent the continued violation of this provision.
15. PUBLIC STATEMENTS.
EMPLOYEE agrees not to directly or indirectly publish, circulate, utter or
disseminate, or cause to be published, circulated, uttered or disseminated, in
a manner or by any means whatsoever, to any person or persons whomsoever, any
statements, comments, or material whatsoever, which could or would, in any
manner whatsoever, either reflect unfavorably on the reputation of EMPLOYER or
harm, damage or impair the business or operations of EMPLOYER unless required
by law or by a valid Order of a Court of competent jurisdiction.
16. EMPLOYER'S CONFIDENTIAL DOCUMENTS AND PROPERTY.
Upon termination or the natural expiration of EMPLOYEE'S agreement with
EMPLOYER, EMPLOYEE shall turn over immediately to EMPLOYER any property
belonging to the EMPLOYER including but not limited to cellular phones, credit
cards, keys, trade cards, computers, computer disks and records, automobiles,
membership cards, all business correspondence, letters, papers, reports, files,
customers' lists, financial data or any other writings, records or property in
the possession or control of EMPLOYEE which relate to the business of the
STATION or EMPLOYER, all of which writings and records are and will continue to
be the sole and exclusive property of EMPLOYER.
17. COVENANT NOT TO COMPETE - INDEPENDENT CLAUSE.
EMPLOYEE acknowledges that during the course of his employment, he may
receive specialized training, specific knowledge in the management of stations,
access to trade secrets and confidential information, participate in decisions,
have access to specific information regarding advertising accounts and ad
agencies, rates charged, advertising budgets for accounts; methods of packaging
inventory; past, present and future marketing, promotional and sales strategies
for said accounts; sales presentations, programming decisions and plans as they
relate to sales, format changes, hiring decisions; research information; music
and market studies, station revenues, acquisitions and other information of a
confidential nature not known publicly or by other radio stations. EMPLOYEE
further understands and acknowledges that station has and will devote its
resources to develop and maintain an identity between EMPLOYEE and station in
order to advance stations' advertising efforts, revenue and BCF and promote its
business and that it would be impossible for EMPLOYEE to work for a competitive
radio station or other competitor without using and divulging this valuable
confidential information. EMPLOYEE acknowledges that EMPLOYER is without an
adequate remedy at law in the event this covenant is violated.
EMPLOYEE further acknowledges that this covenant not to compete is an
independent covenant within this Agreement. That this covenant shall survive
this Agreement and shall be treated as an independent covenant for the purposes
of enforcement. EMPLOYEE acknowledges he has
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actually received good and valuable consideration for the purpose of executing
this covenant, as well as other consideration stated herein.
The EMPLOYEE recognizes that the terms of this covenant are reasonable and
necessary for the protection of the EMPLOYER'S business because the value of
EMPLOYEE'S services will be enhanced by his association with EMPLOYER.
EMPLOYEE agrees that he shall not for the period of six (6) months after
termination of his employment under this Agreement or any renewal or extension
of this Agreement, whether said termination is by voluntary
termination/resignation of EMPLOYEE, expiration of the original term and/or any
extension thereof, or by termination for cause or without cause of this
Agreement and/or for any other reason, including the sale of the assets of the
STATION or EMPLOYER are sold regardless of whether this contract is assigned to
purchaser or not, he will not directly or indirectly for himself or as an
employee of any other person or organization engaged in the business of
broadcasting, be employed by, own, manage, operate, control, associate with,
advise, consult, be publicly identified with, lend money to, guarantee the
obligation of, participate or be connected in any manner as an officer, stock
holder, employee, partner, director, consultant or otherwise of any radio or
television broadcast station licensed to or whose transmitter is located within
any community or area within either the Denver Total Survey Area (as defined by
Arbitron), or within the market of any broadcast station owned by EMPLOYER
including, but not limited to, any market in which EMPLOYER then currently owns
and/or operates any radio or broadcast station at the time of said termination,
except that EMPLOYEE may own no more than two (2) percent of the capital stock
of any publicly held corporation.
In the event that, despite the express agreement of EMPLOYEE and EMPLOYER,
any provision stated herein shall be determined by any court or other tribunal
of competent jurisdiction to be unenforceable for any reason whatsoever, the
parties agree that the provision shall be interpreted to extend only over the
maximum period of time for which it may be enforceable; and/or over the maximum
geographical area to which it may be enforceable, and/or to the maximum extent
in any and all other respects to which it may be enforceable, all as determined
by such court or tribunal.
If EMPLOYEE violates the restrictions set forth in this Agreement, then the
duration of the restrictions under this Paragraph 16, shall be extended for an
amount of time equal to the number of days that EMPLOYEE violated the Agreement
until the date that EMPLOYER obtains an order enjoining the EMPLOYEE for said
violation.
In the event that EMPLOYEE challenges this Agreement and an injunction is
issued staying the implementation of the restrictions imposed herein, the time
remaining on the restrictions shall be tolled until the challenge is resolved
by final adjudication, settlement or otherwise, except that the time remaining
on the restrictions shall not be tolled during any period in which EMPLOYEE is
unemployed. If a court finds in favor of EMPLOYER, the restrictions will be
imposed for the amount of time that remains on the restrictions at the time
they were tolled, or at the time of the court's decision of the restrictions
were not tolled, as the case may be.
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In addition, during the term of this Agreement and for a period of one (1)
year after expiration or termination, regardless of whether terminated with or
without cause, either by EMPLOYER or EMPLOYEE, EMPLOYEE agrees he shall not
directly or indirectly solicit, attempt to solicit, induce or attempt to induce
any officer, full-time or part-time EMPLOYEE or consultant of EMPLOYER to
terminate their employment with EMPLOYER or (directly or indirectly employ,
hire, retain or) assist in the employing, hiring or retaining or be associated
in any manner in any business with a person who within one (1) year prior to
such employment, hiring or retainer was employed or connected with in any
manner, the EMPLOYER or any of its stations.
The provisions of this Paragraph 16 of this Agreement, as well as the
period of time, geographical areas and types and scope of restrictions of
EMPLOYEE'S activities specified herein are intended to be divisible; and, in
the event any provision herein shall be deemed invalid or unenforceable in any
respect, as to any one or more periods of time, geographical areas, business or
activities, the remaining provisions shall not thereby be affected but shall
remain in full force and effect; and this Agreement shall be deemed to be
amended without further action by the parties hereto to the extent necessary to
render it valid and enforceable.
The EMPLOYEE further acknowledges and agrees that in the event of a breach,
or threatened breach of this covenant, the EMPLOYER will suffer immediate and
irreparable harm which said harm is presumed to occur, and that EMPLOYER shall
be entitled to receive from a Court of competent jurisdiction, a temporary
restraining order with or without notice to EMPLOYEE, as well as the entry of a
preliminary and permanent injunction. Said right to an injunction shall be in
addition to and not in limitation of any other rights or remedies EMPLOYER may
have for damages or otherwise.
EMPLOYEE acknowledges that this covenant is independent and the existence
of any agreement or cause of action of EMPLOYEE against EMPLOYER, whether
predicated on this agreement or otherwise, shall not constitute a defense to
the enforcement by EMPLOYER of this Agreement not to compete.
It is further expressly understood and agreed that the provisions of
Paragraph 13 through 16 inclusive of this Agreement shall apply whether this
Agreement is terminated by EMPLOYER or EMPLOYEE or upon its expiration or
termination and/or assignment of this Agreement upon the sale of said STATIONS.
EMPLOYEE recognizes and agrees that EMPLOYER does not have a remedy at law
adequate to protect its "Trade Secrets and Confidential Information" and other
rights and interests and therefore, EMPLOYEE agrees that EMPLOYER shall have
the right to an injunction enjoining him/her from violating Paragraphs 13
through 16 of this Agreement.
If the EMPLOYEE breaches this provision and the EMPLOYER seeks an
injunction or other legal remedy to interpret or enforce this covenant, then
the EMPLOYEE agrees to pay all reasonable attorneys' fees and costs of the
EMPLOYER both for the trial and any appeal.
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EMPLOYEE HEREBY AGREES AND ACCEPTS THE TERMS OF THE
INDEPENDENT COVENANT NOT TO COMPETE.
EMPLOYEE:
__________________________
SAMUEL WELLER
18. FREEDOM TO CONTRACT. The EMPLOYEE represents and warrants that he has
the right to negotiate and enter into this Agreement, and the grant of the
rights herein granted and that this Agreement does not breach, interfere with
or conflict with any other contractual agreement, covenant not to compete,
option, right of first refusal, or other existing business relationship.
EMPLOYEE acknowledges that this representation is a material inducement to
EMPLOYEE entering into this Agreement and in the event EMPLOYEE breaches this
warranty, EMPLOYEE agreed to indemnify and hold harmless EMPLOYER from any and
all claims, actions, losses, damages; including but not limited to, reasonable
attorney's fees and costs.
19. ASSIGNMENT. The obligations and rights under this Agreement shall be
assignable by EMPLOYER to the purchaser of said STATIONS/EMPLOYER.
Notwithstanding anything contained herein to the contrary, in the event
that EMPLOYER shall sell the STATIONS ("Sale") individually or as part of the
assets of EMPLOYER, then EMPLOYEE'S employment under this Agreement may
terminate as set forth in Paragraph 11 as of the last day of the first month in
which EMPLOYER no longer owns said STATIONS, unless this Agreement is assigned
to Purchaser. In the event of assignment of this Agreement, all terms and
conditions set forth herein shall be binding on EMPLOYEE and Purchaser. In the
event the Agreement is not assigned, the provisions of Paragraphs 14 through 17
shall remain in full force and effect, and specifically the EMPLOYEE shall be
bound by the covenant not to compete set forth in Paragraph 17.
20. INDEMNITY. EMPLOYEE shall indemnify and hold harmless EMPLOYER, its
employees, officers, directors, stockholders and agents, and the STATIONS,
against any and all loss, cost, liability, damage and expenses occasioned by or
in connection with any claim, demand, suit, proceedings, action or cause of
action asserted or instituted by any other person, firm or corporation,
relating to the violation of infringement of the rights of such other person,
firm or corporation, arising out of or in connection with EMPLOYEE'S
performance of the services contemplated hereunder, or the breach by EMPLOYEE
of any of the provisions of this Agreement.
21. OBLIGATION TO RENEGOTIATE CONTRACT IN GOOD FAITH. Provided EMPLOYEE'S
employment is not otherwise terminated prior to October 1, 1997, then the
EMPLOYER and EMPLOYEE shall enter into good faith negotiations for a renewal of
this Agreement upon terms acceptable to both parties. EMPLOYER and EMPLOYEE
shall have a two (2) week period to agree upon a renewal of this Agreement. If
at the expiration of said two (2) week period, and no later than December 15,
1997, the EMPLOYER and EMPLOYEE have not agreed upon the terms to renew this
Agreement, then in that event, the EMPLOYEE'S employment shall
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automatically terminate upon the expiration of this Agreement on midnight
December 31, 1997, unless sooner terminated pursuant to the terms contained
herein.
22. ARBITRATION. Except for breaches or threatened breaches of the
provisions of Paragraphs 13 through 16 relating to equitable relief, any
controversy or claim arising out of or in any way between the EMPLOYEE and
EMPLOYER, for any cause or event, including but not limited to claims arising
out of the employment relationship and/or termination of the employment with
the EMPLOYEE, including without limitation: claims for wages or other
compensation; claims for breach of any contract or covenant (except for
violations of Paragraphs 13 through 16); all tort claims; claims of
constructive discharge; claims for discrimination; including but not limited to
any and all past or present controversies, claims, disputes or issues of which
EMPLOYEE is or should be aware of against EMPLOYER which are related to or
arise out of the employment relationship, including claims for discrimination
relating to race, sex, religion, national origin, age, marital status, medical
condition, handicap disability or veteran status; claims for benefits,
including pension and benefit plans; claims for any violation of any federal,
state, local or governmental law, statute, regulation or ordinance; claims
relating to tort claims, including but not limited to defamation, liable,
slander, intentional interference with contractual or business relations;
claims relating to or regarding the arbitrability of any controversy, claim,
dispute or issue under the EMPLOYER'S arbitration policies. Said Arbitration
shall be conducted pursuant to the Company's Arbitration Policies, if any, and
the provisions of the Federal Arbitration Act, 9 U.S.C. Section 1 et. seq. In
the event of any litigation or arbitration proceeding, the same shall occur
solely in Dallas County, Texas. In the event of litigation or arbitration
arising out of this Agreement or the employment relationship or any other claim
between EMPLOYER and EMPLOYEE, the prevailing party shall be entitled to
recover any and all reasonable attorney's fees and costs incurred both on the
trail and appellate level as well as the arbitration level and/or any appeal of
the arbitration.
23. GOVERNING LAY, VENUE AND WAIVER OF JURY TRIAL. This Agreement,
including any disputes hereunder and the interpretation, validity and/or
enforcement of any provision thereof, shall be governed by the laws of the
State of Texas. Any action brought involving the Arbitration and/or
enforcement of any of the covenants of this Agreement shall be brought only in
a Court of competent jurisdiction in and for Dallas County, Texas and the
parties agree to waive any claim relating to forum non convienes. The parties
further agree and hereby waive and release any right to a trail by jury in any
action arising out of the interpretation, enforcement or breach of this
Agreement or any arbitration provision.
24. ENTIRE AGREEMENT. This Agreement contains the entire understanding
between the parties and supersedes and replaces any and all previous agreements
and/or oral negotiations. The parties stipulate and agree that neither of them
has made any representations concerning the execution and delivery of this
Agreement except such representations as specifically set forth herein and that
all the terms and conditions of this Employment Agreement are set forth in this
writing, and there are no representations or agreements that are not so
contained herein and that neither party is relying upon any representation made
by the other that is not contained herein in connection with the negotiations
and the terms of this Agreement. That this Agreement may only be changed by an
Agreement in writing signed by both parties.
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25. ANTI-COERCION CLAUSE. Each of the parties hereto has entered into
this Agreement without undue influence, fraud, coercion, duress,
misrepresentation or any restraint having been practiced upon them by any other
party and further acknowledges that each party has been represented by counsel
of their own selection, who are counsel of their own choice and have relied
upon the advise of their respective counsel, or have elected not to rely upon
the advise of their own counsel and hereby acknowledges that each party, has
completely read and understands the terms and conditions of this Agreement, and
voluntarily accept said terms.
26. SEVERABILITY. The invalidity or unenforceability of any term or
provision of this Agreement shall not affect the validity or enforceability of
any other terms of provisions and this Agreement shall be construed in all
other respects as if the invalid or unenforceable term or provision were
omitted.
27. WAIVER. A waiver by either party of any term or condition of this
Agreement in any instance shall not be construed as a waiver of any other term
or condition. All remedies, rights and obligations contained in this Agreement
shall be cumulative, and none of them shall be in limitation of any other
remedy, right or obligation of either party.
28. HEADINGS. The headings used in this Agreement are used for reference
purposes only and are not deemed controlling with respect to the contents
thereof.
29. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart shall for all purposes be deemed to be
an original.
30. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties and it may not be changed except by written
document signed by all of the parties hereto.
31. BINDING EFFECT. The terms of this Agreement shall be binding upon and
inure to the benefit of and shall be enforceable by the respective successors,
assigns, heirs, beneficiaries and personal representatives.
32. NOTICES. Any notices to be given hereunder by either party to the
other shall be in writing and shall be deemed given when personally delivered
or five (5) days after having been mailed by Federal Express or other overnight
mail service, or by certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to EMPLOYER:
CHANCELLOR BROADCASTING COMPANY
12655 N. Central Expressway Suite 405
Dallas, Texas 75243
Attention: Steven Dinetz, President
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With a copy to:
MATTHEW LEIBOWITZ
One Southeast Third Avenue, Suite 1450
Miami, Florida 33131
If to EMPLOYEE:
SAMUEL WELLER
5555 Pine Court
Greenwood Village, Colorado 80121
IN WITNESS WHEREOF, the parties hereto have set their hands and seals on
the day and year first above written.
Signed, sealed and delivered
in the presence of:
EMPLOYER:
CHANCELLOR BROADCASTING COMPANY
- --------------------------------- -----------------------------------
Witness BY: STEVEN DINETZ, President
- ---------------------------------
Witness
EMPLOYEE:
- --------------------------------- -----------------------------------
Witness SAMUEL WELLER
- ---------------------------------
Witness
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EXHIBIT "A"
Quarterly Performance Bonus BCF Projections
Denver Stations
---------------
$60,000 for achieving $2,741,000
$59,400 for achieving $2,714,000
$58,800 for achieving $2,686,000
$58,200 for achieving $2,659,000
$57,600 for achieving $2,631,000
$57,000 for achieving $2,604,000
Phoenix Station
---------------
$20,000 for achieving $4,386,000
$19,800 for achieving $4,342,000
$19,600 for achieving $4,298,000
$19,400 for achieving $4,254,000
$19,200 for achieving $4,211,000
$19,000 for achieving $4,167,000
<TABLE>
<CAPTION>
BCF 1996 Monthly Projections - Denver BCF 1996 Monthly Projections - Phoenix
<S> <C> <C> <C>
February $ 50,000 February $ 99,000
March 88,000 March 225,000
April 179,000 April 283,000
May 301,000 May 454,000
June 271,000 June 412,000
July 271,000 July 411,000
August 321,000 August 507,000
September 313,000 September 496,000
October 310,000 October 492,000
November 352,000 November 577,000
December 284,000 December 430,000
------- -------
$2,741,000 $4,386,000
</TABLE>
Page 14
<PAGE> 1
EXHIBIT 10.22
AMENDED AND RESTATED
MONITORING AND OVERSIGHT AGREEMENT
THIS AMENDED AND RESTATED MONITORING AND OVERSIGHT AGREEMENT (this
"Agreement") is made and entered into effective as of April 1, 1996, among
Chancellor Broadcasting Corporation, a Delaware corporation (together with its
successors, by merger or otherwise, "the Company"), Chancellor Radio
Broadcasting Company, a Delaware corporation (together with its successors, by
merger or otherwise, the "Subsidiary"), and Hicks, Muse & Co. Partners, L.P., a
Texas limited partnership (together with its successors, "HMCo").
WHEREAS, the Hicks, Muse, Tate & Furst Equity Fund II, L.P. ("HMTF")
and its affiliates (as such term is defined in Rule 12b-2 of Regulation 12B
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) own
a majority of the outstanding common stock of the Company.
WHEREAS, the Company, the Subsidiary, HMCo and HM2 Management Partners,
L.P. ("HM2") (HMCo and HM2 each being an affiliate of HMTF), are parties to a
Financial Monitoring and Oversight Agreement dated as of October 12, 1994 (as
amended to the date hereof, the "October 1994 Oversight Agreement") pursuant to
which HMCo renders certain financial monitoring services to the Company and the
Subsidiary and HM2 renders certain financial advisory services to the Company
and the Subsidiary.
WHEREAS, currently herewith, HM2, the Company and the Subsidiary have
previously entered into a separate financial advisory agreement; and
WHEREAS, HMCo, the Company and the Subsidiary desire in connection
therewith to amend and restate the terms the October 1994 Oversight Agreement;
NOW, THEREFORE, in consideration of the services to be rendered by HMCo
to the Company and Subsidiary, and to evidence the obligations of the Company
and the Subsidiary to HMCo and the mutual covenants herein contained, the
Company and the Subsidiary hereby jointly and severally agree as follows:
1. Retention. The Company and the Subsidiary hereby acknowledge
that they have retained HMCo, and HMCo acknowledges that, subject to reasonable
advance notice in order to accommodate scheduling, HMCo will provide financial
oversight and monitoring services to the Company and the Subsidiary as
requested by the board of directors of each of the Company and the Subsidiary
during the term of this Agreement.
2. Term. The term of this Agreement shall continue until the
earlier of (i) the tenth anniversary of the date hereof, or (ii) the date on
which HMTF and its affiliates cease to own beneficially, directly or
indirectly, any securities of the Company.
3. Compensation.
(a) As compensation for HMCo's services under this Agreement,
the Company and the Subsidiary shall be jointly and severally obligated to pay
to HMCo an annual fee (the "Monitoring Fee") of $500,000 (the "Base Fee"),
subject to adjustment pursuant to paragraphs (b) and (c) below and prorated on
a daily basis for any partial calendar year during the term of this
Agreement. The Monitoring Fee shall be payable in equal quarterly installments
on each January 1, April 1, July 1, and October 1 during the term of this
Agreement (each a "Payment Date"), beginning with the first Payment Date
following the date hereof. All payments shall be made by wire transfer of
immediately available funds to the account described on Exhibit A hereto (or
such other account as HMCo may hereafter designate in writing). Concurrently
with the execution hereof, the Subsidiary shall pay HMCo all amounts due HMCo
under the October 1994 Oversight Agreement.
<PAGE> 2
(b) On January 1 of each calendar year during the term of this
Agreement, the Monitoring Fee shall be adjusted to an annual amount equal to
(i) the budgeted consolidated annual net sales of the Company and its
subsidiaries for the then-current fiscal year, multiplied by (ii) 0.25% (the
"Percentage"); provided, however, that in no event shall the annual Monitoring
Fee be less than the Base Fee.
(c) On each occasion that the Company or any of its
subsidiaries shall acquire another entity or business during the term of this
Agreement, the annual Monitoring Fee for the calendar year in which such
acquisition occurs shall be adjusted prospectively (i.e., for periods
subsequent to such acquisition until the next adjustment pursuant to clause (b)
above), as of the closing of such acquisition, to an annual amount equal to (i)
the proforma combined budgeted consolidated annual net sales of the Company and
its subsidiaries for the entire then-current fiscal year of the Company
(including the sales of the acquired entity or business for such entire fiscal
year, on a proforma basis), multiplied by (ii) the Percentage; provided,
however, that in no event shall the annual Monitoring Fee be less than the Base
Fee.
(d) All past due payments in respect of the Monitoring Fee
shall bear interest at the lesser of the highest rate of interest which may be
charged under applicable law or the prime commercial lending rate per annum of
Chemical Bank, N.A. (which rate is a reference rate and is not necessarily its
lowest or best rate of interest actually charged to any customer) (the "Prime
Rate") is in effect from time to time, plus five percent (5%), from the due
date of such payment to and including the date on which payment is made in full,
including such interest accrued therein, the HMCo.
(e) Anything herein to the contrary notwithstanding, so long as
Section 4.11 of the Indenture dated as of October 12, 1994 by and between the
Subsidiary and U.S. Trust Company of Texas, N.A., as amended from time to time,
is in effect, in the event the aggregate payments required hereunder exceed at
any time the aggregate payments that would have been required by the company
and the Subsidiary under Section 3(b) of the October 1994 Oversight Agreement
(any such excess, the "Fee Differential") by more than $2.5 million, then,
subject to paragraph (f) below, the Monitoring and Oversight Fee shall
thereupon automatically be adjusted (the "Fee Differential Adjustment") to be
equal to (i) $200,000, multiplied by (ii) a fraction (A) the numerator of which
shall be equal to the Consumer Price Index for all Urban Consumers, U.S. City
Average, for All Items (1982-84=100), as published in the Bureau of Labor
Statistics of the Department of Labor (the "CPI") and as reflected in the most
recent such publication prior to the date of such adjustment and (B) the
denominator of which shall be equal to the CPI as reflected in the most recent
such publication prior to the date of this Agreement; provided that the
Monitoring and Oversight Fee shall in no event be less than $200,000 per year.
Subject to paragraph (g) below, on each January 1 after the Fee Differential
Adjustment during the term of this Agreement (each a "CPI Adjustment Date"),
the Monitoring and Oversight Fee in effect for the year ended immediately
preceding such CPI Adjustment Date multiplied by (ii) a fraction (A) the
numerator of which shall be equal to the Consumer Price Index for all Urban
Consumers, U.S. City Average, for All Items (1982-84=100), as published in the
Bureau of Labor Statistics of the Department of Labor (the "CPI") and as
reflected in the most recent such publication prior to the CPI Adjustment Date
and (B) the denominator of which shall be equal to the CPI as reflected in
the most recent such publication prior to the immediately preceding January 1;
provided that the Monitoring and Oversight Fee shall in no event be less than
$200,000 per year.
(f) Promptly following any adjustment of the Monitoring and
Oversight Fee pursuant to paragraph (e) above, the Company and the Subsidiary
shall retain a nationally recognized investment banking firm to render, if such
investment banking firm is capable of doing so, an opinion to the effect that
the terms of this Agreement, without giving effect to paragraph (e) above, are
fair to the Subsidiary and the Company from a financial point of view. In the
event that the Subsidiary and the Company are unable to obtain such an opinion,
the Monitoring and Oversight Fee shall thereafter continue to be calculated in
accordance with paragraph (e). In the event, however, that the Company and the
Subsidiary shall obtain such an opinion, then the amount of the Monitoring and
Oversight Fee shall be adjusted, with retroactive effect to date on which the
Fee Differential Adjustment occurred, to that amount which would have been in
effect had the adjustment specified in paragraph (e) never occurred, and the
Subsidiary and the Company shall promptly (and in event not more than 5 business
<PAGE> 3
days after the receipt of such fairness opinion) pay HMCo any amount owing to it
as a result of the retroactive adjustment required by this paragraph (e).
4. Reimbursement of Expenses. In addition to the compensation to
be paid pursuant to Section 3 hereof, the Company and the Subsidiary agree to
reimburse HMCo for all reasonable disbursements and out-of-pocket expenses
(including fees and disbursements of counsel) incurred by HMCo in connection
with the performance by it of the services contemplated by Section 1 hereof
(the "Reimbursable Expenses"). On each Payment Date, the Subsidiary shall pay
HMCo, by wire transfer of immediately available funds to the account described
on Exhibit A hereto, the Reimbursable expenses for which HMCo has provided the
Subsidiary invoices or reasonably detailed descriptions not less than 30 days
prior to such Payment Date. All past due payments in respect of the
Reimbursable Expenses shall bear interest at the lesser of the highest rate of
interest which may be charged under applicable law or the Prime Rate from the
Payment Date to and including the date on which such Reimbursable Expenses plus
accrued interest therein, are paid to HMCo.
5. Indemnification. The Company and the Subsidiary jointly and
severally shall indemnify and hold harmless each of HMC, its affiliates, and
their respective directors, officers, controlling persons (within the meaning of
Section 15 of the Securities Act of 1933 or Section 20(a) of the Securities
Exchange Act of 1934), if any, agents and employees (HMCo, its affiliates, and
such other specified persons being collectively referred to as "Indemnified
Persons" and individually as an "Indemnified Person") from and against any and
all claims, liabilities, losses, damages and expenses incurred by any
Indemnified Person (including fees and disbursements of the respective
Indemnified Person's counsel) which (A) are related to or arise out of (i)
actions taken or omitted to be taken (including any untrue statements made or
any statements omitted to be made) by the Company and/or the Subsidiary or (ii)
actions taken or omitted to be taken by an Indemnified Person with the Company's
or the Subsidiary's consent or in conformity with the Company's or the
Subsidiary's instructions or the Company's or the Subsidiary's actions or
omissions or (B) are otherwise related to or arise out of HMCo's engagement, and
will reimburse each Indemnified Person for all costs and expenses, including
fees of any indemnified Person's counsel, as they are incurred, in connection
with investigating, preparing for, defending, or appealing any action, formal or
informal claim, investigation, inquiry or other proceeding, whether or not in
connection with pending or threatened litigation, caused by or arising out of
or in connection with HMCo's acting pursuant to the engagement, whether or not
any Indemnified Person is named as a party thereto and whether or not any
liability results therefrom. Neither the Company nor the Subsidiary will,
however, be responsible for any claims, liabilities, losses, damages, or
expenses pursuant to clause (B) of the preceding sentence that have resulted
primarily from HMCo's bad faith, gross negligence or willful misconduct. The
Company and the Subsidiary also agree that neither HMCo nor any other
Indemnified Person shall have any liability to the Company or the Subsidiary for
or in connection with such engagement except for any such liability for claims,
liabilities, losses, damages, or expenses incurred by the Company and/or the
Subsidiary that have resulted primarily from HMCo's bad faith, gross negligence
or willful misconduct. the Company and the Subsidiary further agree that neither
of them will, without the prior written consent of HMCo, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim, action,
suit or proceeding in respect of which indemnification may be sought hereunder
(whether or not any Indemnified Person is an actual or potential party to such
claim, action, suit or proceeding) unless such settlement, compromise or consent
includes an unconditional release of HMCo and each other Indemnified Person
hereunder from all liability arising out of such claim, action, suit or
proceeding.
The foregoing right to indemnity shall be in addition to any rights
that HMCo and/or any other Indemnified Person may have at common law or
otherwise and shall remain in full force and effect following the completion or
any termination of the engagement. The Company and the Subsidiary hereby
consent to personal jurisdiction and to service and venue in any court in which
any claim which is subject to this agreement is brought against HMCo or any
other Indemnified Person.
It is understood that, in connection with HMCo's engagement, HMCo may
also be engaged to act for the Company and/or the Subsidiary in one or more
additional capacities, and that the terms of this engagement or any such
additional engagement may be embodied in one or more separate written
agreements. This
<PAGE> 4
indemnification shall apply to the engagement specified in the first paragraph
hereof as well as to any such additional engagement(s) (whether written or
oral) and any modification of said engagement or such additional engagement(s)
and shall remain in full force and effect following the completion or
termination of said engagement or such additional engagements.
6. Confidential Information. In connection with the performance of
the services hereunder, HMCo agrees not to divulge any confidential
information, secret processes or trade secrets disclosed by the Company or the
Subsidiary to it solely in its capacity as a financial advisor, unless the
Company and the Subsidiary consents to the divulging thereof or such
information, secret processes, or trade secrets are publicly available or
otherwise available to HMCo without restriction or breach of any
confidentiality agreement or unless required by any governmental authority or
in response to any valid legal process.
7. Governing Law. This Agreement shall be construed, interpreted,
and enforced in accordance with the laws of the State of Texas, excluding any
choice-of-law provisions thereof.
8. Assignment. This Agreement and all provisions contained herein
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, neither this Agreement
nor any of the rights, interests, or obligations hereunder shall be assigned
(other than with respect to the rights and obligations of HMCo, which may be
assigned to any one or more of its principals or affiliates) by any of the
parties without the prior written consent of the other parties.
9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and the signature of any
party to any counterpart shall be deemed a signature to, and may be appended
to, any other counterpart.
10. Other Understandings. All discussions, understandings, and
agreements theretofore made between any of the parties hereto with respect to
the subject matter hereof are merged in this Agreement, which alone fully and
completely expresses the Agreement of the parties hereto.
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
HICKS, MUSE & CO. PARTNERS, L.P.
By: HM PARTNERS INC.,
its General Partner
By:_________________________
Name:_______________________
Title:______________________
HM2/MANAGEMENT PARTNERS, L.P.
By: HICKS, MUSE & CO. PARTNERS, L.P.,
its General Partner
By: HM PARTNERS INC.,
its General Partner
By:_________________________
Name:_______________________
Title:______________________
CHANCELLOR CORPORATION
By:_________________________________________
Name:_______________________________________
Title:______________________________________
CHANCELLOR BROADCASTING COMPANY
By:_________________________________________
Name:_______________________________________
Title:______________________________________
<PAGE> 1
EXHIBIT 12.1
CHANCELLOR RADIO BROADCASTING COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------- ------------------
1993 1994 1995 1995 1996
------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Fixed Charges:
Interest expense............................. $ 700 $5,021 $17,324 $ 4,114 $ 7,146
Implicit interest in rent.................... 68 76 276 91 35
Amortization of deferred finance charges..... -- 226 791 201 677
------ ------ ------- ------- -------
Total Fixed Charges.................. 768 5,323 18,391 4,406 7,858
Preferred stock dividends and accretion...... -- -- -- -- 1,660
------ ------ ------- ------- -------
Total fixed charges and preferred
stock dividends and accretion...... $ 768 $5,323 $18,391 $ 4,406 $ 9,518
====== ====== ======= ======= =======
Earnings before provision for income taxes
from continuing operations................ $2,699 $1,876 $(7,731) $(2,288) $(4,986)
Fixed charges................................ 768 5,323 18,391 4,406 7,858
------ ------ ------- ------- -------
Earnings, as defined................. $3,467 $7,199 $10,660 $ 2,118 $ 2,872
====== ====== ======= ======= =======
Ratio of earnings to fixed charges............. 4.51 1.35 -- -- --
====== ====== ======= ======= =======
Deficiency of earnings to fixed charges and
preferred stock dividend and accretion
requirement.................................. $ -- $ -- $ 7,731 $ 2,288 $ 6,646
====== ====== ======= ======= =======
</TABLE>
<PAGE> 1
EXHIBIT 12.2
PRO FORMA COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1995 MARCH 31, 1996
----------------- --------------
<S> <C> <C>
Fixed Charges:
Interest expense............................................ $ 44,450 $ 11,113
Implicit interest in rent................................... 850 213
Amortization of deferred finance charges.................... 3,604 901
--------- --------
Total Fixed Charges................................. 48,904 12,227
Preferred stock dividends and accretion..................... 13,168 3,541
--------- --------
Total fixed charges and preferred stock dividends
and accretion..................................... $ 62,072 $ 15,768
========= ========
Earnings before provision for income taxes.................. $ (15,564) $ (7,727)
Fixed charges............................................... 48,904 12,227
--------- --------
Earnings, as defined................................ $ 33,340 $ 4,500
========= ========
Ratio of earnings to fixed charges............................ -- --
========= ========
Deficiency of earnings to fixed charges and preferred stock
dividend and accretion requirement.......................... $ 28,732 $ 11,268
========= ========
</TABLE>
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 (No.
333-02782) and the related Prospectus of our reports dated February 14, 1996,
except for Note 5, paragraphs five, six, and seven; Note 6, paragraphs two,
three, and four; and Note 7, as to which the date is March 21, 1996; July 31,
1996; June 14, 1994; and June 23, 1995 on our audits of the financial statements
and financial statement schedules of Chancellor Radio Broadcasting Company and
Subsidiary; the American Media Station Group; Old Chancellor Communications; and
KDWB-FM, respectively. We also consent to the references to our firm under the
caption "Experts."
COOPERS & LYBRAND L.L.P.
Dallas, Texas
August 6, 1996
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated February 14, 1996
relating to the financial statements of Trefoil Communications, Inc., which
appears in such Prospectus. We also consent to the application of such report to
the Financial Statement Schedules for the three years ended December 31, 1995
listed under Item 16(b) of this Registration Statement when such schedules are
read in conjunction with the financial statements referred to in our report. The
audits referred to in such report also included these schedules. We also consent
to the reference to us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Los Angeles, California
August 6, 1996
<PAGE> 1
EXHIBIT 25.1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2)
---------------
U.S. TRUST COMPANY OF TEXAS, N.A.
(Exact name of trustee as specified in its charter)
75-2353745
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
2001 Ross Avenue, Suite 2700 75201-2936
Dallas, Texas (Zip Code)
(Address of trustee's
principal executive offices)
Compliance Officer
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201-2936
(214) 754-1200
(Name, address and telephone number of agent for service)
---------------
Chancellor Radio Broadcasting Company
(Exact name of obligor as specified in its charter)
Delaware 73-2544623
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
12655 North Central Expressway
Dallas, Texas 75243
(Address of principal executive offices) (Zip Code)
---------------
12 1/4% Subordinated Exchange Debentures due 2008
(Title of the indenture securities)
================================================================================
<PAGE> 2
GENERAL
1. General Information.
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of Dallas (llth District), Dallas, Texas
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Dallas, Texas
The Office of the Comptroller of the Currency, Dallas, Texas
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
2. Affiliations with Obligor and Underwriters.
If the obligor or any underwriter for the obligor is an affiliate of the
Trustee, describe each such affiliation.
None.
3. Voting Securities of the Trustee.
Furnish the following information as to each class of voting securities of
the Trustee:
As of July 31, 1996
- --------------------------------------------------------------------------------
Col A. Col B.
- --------------------------------------------------------------------------------
Title of Class Amount Outstanding
- --------------------------------------------------------------------------------
Capital Stock - par value $100 per share 5,000 shares
4. Trusteeships under Other Indentures.
Not Applicable
5. Interlocking Directorates and Similar Relationships with the Obligor or
Underwriters.
Not Applicable
<PAGE> 3
6. Voting Securities of the Trustee Owned by the Obligor or its Officials.
Not Applicable
7. Voting Securities of the Trustee Owned by Underwriters or their Officials.
Not Applicable
8. Securities of the Obligor Owned or Held by the Trustee.
Not Applicable
9. Securities of Underwriters Owned or Held by the Trustee.
Not Applicable
10. Ownership or Holdings by the Trustee of Voting Securities of Certain
Affiliates or Security Holders of the Obligor.
Not Applicable
11. Ownership or Holdings by the Trustee of any Securities of a Person Owning
50 Percent or More of the Voting Securities of the Obligor.
Not Applicable
12. Indebtedness of the Obligor to the Trustee.
Not Applicable
13. Defaults by the Obligor.
Not Applicable
14. Affiliations with the Underwriters.
Not Applicable
15. Foreign Trustee.
Not Applicable
16. List of Exhibits.
T-1.1 - A copy of the Articles of Association of U.S. Trust Company of
Texas, N.A.; incorporated herein by reference to Exhibit T-1.1
filed with Form T-1 Statement, Registration No. 22-21897.
<PAGE> 4
16. (con't.)
T-1.2 - A copy of the certificate of authority of the Trustee to
commence business; incorporated herein by reference to Exhibit
T-1.2 filed with Form T-1 Statement, Registration No. 22-21897.
T-1.3 - A copy of the authorization of the Trustee to exercise corporate
trust powers; incorporated herein by reference to Exhibit T-1.3
filed with Form T-1 Statement, Registration No. 22-21897.
T-1.4 - A copy of the By-laws of the U.S. Trust Company of Texas, N.A.,
as amended to date; incorporated herein by reference to Exhibit
T-1.4 filed with Form T-1 Statement, Registration No. 22-21897.
T-1.6 - The consent of the Trustee required by Section 321(b) of the
Trust Indenture Act of 1939.
T-1.7 - A copy of the latest report of condition of the Trustee
published pursuant to law or the requirements of its supervising
or examining authority.
NOTE
As of July 31, 1996 the Trustee had 5,000 shares of Capital Stock outstanding,
all of which are owned by U.S. T.L.P.O. Corp. As of July 31, 1996 U.S. T.L.P.O.
Corp. had 35 shares of Capital Stock outstanding, all of which are owned by U.S.
Trust Corporation. U.S. Trust Corporation had outstanding 9,778,128 shares of $5
par value Common Stock as of July 31, 1996.
The term "Trustee" in Items 2, 5, 6, 7, 8, 9, 10 and 11 refers to each of U.S
Trust Company of Texas, N.A., U.S. T.L.P.O. Corp. and U.S. Trust Corporation.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of
all the facts on which to base responsive answers to Items 2, 5, 6, 7, 9, 10 and
11, the answers to said Items are based upon incomplete information. Items 2, 5,
6, 7, 9, 10 and 11 may, however, be considered correct unless amended by an
amendment to this Form T-1.
In answering any items in this Statement of Eligibility and Qualification which
relates to matters peculiarly within the knowledge of the obligors or their
directors or officers, or an underwriter for the obligors, the Trustee has
relied upon information furnished to it by the obligors and will rely on
information to be furnished by the obligors or such underwriter, and the Trustee
disclaims responsibility for the accuracy or completeness of such information.
- -------------------------
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, U.S
Trust Company of Texas, N.A., a national banking association organized under the
laws of the United States of America, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Dallas, and State of Texas on the
31st day of July, 1996.
U.S. Trust Company of Texas, N.A.,
Trustee
By: /s/ BILL BARBER
--------------------------------
Bill Barber
Vice President
<PAGE> 6
Exhibit T-1.6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939 as amended in connection with the proposed issue of Chancellor Radio
Broadcasting Company 12 1/4% Subordinated Exchange Debentures due 2008, we
hereby consent that reports of examination by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities and
Exchange Commission upon request therefore.
U.S. Trust Company of Texas, N.A.
By: /s/ BILL BARBER
--------------------------------
Bill Barber
Vice President
<PAGE> 7
<TABLE>
<S> <C>
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Federal Financial Institutions Examination Council Expires March 31, 1999
- -------------------------------------------------------------------------------------------------------------------------
1
[LOGO] Please Refer to Page i,
Table of Contents, for
the required disclosure
of estimated burden
- -------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC OFFICES ONLY AND
TOTAL ASSETS OF LESS THAN $100 MILLION - FFIEC 034
REPORT AT THE CLOSE OF BUSINESS JUNE 30, 1996 (960630)
-----------
(RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 (State This report form is to be filed by banks with
member banks); 12 U.S.C. Section 1817 (State nonmember domestic offices only. Banks with branches and
banks); and 12 U.S.C. Section 161 (National banks). consolidated subsidiaries in U.S. territories and
possessions, Edge or Agreement subsidiaries, foreign
branches, consolidated foreign subsidiaries, or
International Banking Facilities must file FFIEC 031.
- -------------------------------------------------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by The Reports of Condition and Income are to be
an authorized officer and the Report of Condition must be prepared in accordance with Federal Regulatory
attested to by not less than two directors (trustees) for authority instructions. NOTE: These instructions may
State nonmember banks and three directors for State member in some cases differ from generally accepted
and National banks. accounting principles.
I, Alfred B. Childs, Senior Vice President & Cashier We, the undersigned directors (trustees), attest to
-------------------------------------------------------- the correctness of this Report of Condition
Name and Title of Officer Authorized to Sign Report (including the supporting schedules) and declare that
it has been examined by us and to the best of our
of the named bank do hereby declare that these Reports of knowledge and belief has been prepared in conformance
Condition and Income (including the supporting schedules) with the instructions issued by the appropriate
have been prepared in conformance with the instructions Federal regulatory authority and is true and correct.
issued by the appropriate Federal regulatory authority and
are true to the best of my knowledge and belief. /s/ [ILLEGIBLE]
-----------------------------------------------------
Director (Trustee)
/s/ ALFRED B. CHILDS
- ------------------------------------------------------------- /s/ [ILLEGIBLE]
Signature of Officer Authorized to Sign Report -----------------------------------------------------
Director (Trustee)
7/17/96 /s/ [ILLEGIBLE]
- ------------------------------------------------------------- -----------------------------------------------------
Date of Signature Director (Trustee)
- -------------------------------------------------------------------------------------------------------------------------
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANKS: Return the original and one copy to the NATIONAL BANKS: Return the original only in the
appropriate Federal Reserve District Bank. special return address envelope provided. If express
mail is used in lieu of the special return address
STATE NONMEMBER BANKS: Return the original only in the envelope, return the original only to the FDIC, c/o
special return address envelope provided. If express mail is Quality Data Systems, 2127 Espey Court, Suite 204,
used in lieu of the special return address envelope, return Crofton, MD 21114.
the original only to the FDIC, c/o Quality Data Systems,
2127 Espey Court, Suite 204, Crofton, MD 21114.
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FDIC Certificate Number CALL NO. 196 34 6-30-96
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(RCRI 9050) STBK: 48-6797 13264 STCERT: 48-33217
U.S. TRUST COMPANY OF TEXAS, NATIONAL
2001 ROSS AVENUE, SUITE 2700
DALLAS, TX 75201
Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency
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