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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
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Commission File No. 0-27726 Commission File No. 33-80534 Commission File No. 33-80534
CHANCELLOR BROADCASTING CHANCELLOR RADIO CHANCELLOR BROADCASTING
COMPANY BROADCASTING COMPANY LICENSEE COMPANY
(Exact Name of Registrant (Exact Name of Registrant (Exact Name of Registrant
as Specified in Its Charter) as Specified in Its Charter) as Specified in Its Charter)
DELAWARE DELAWARE DELAWARE
(State or other jurisdiction of (State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization) incorporation or organization)
75-2538487 75-2544623 75-2544625
(I.R.S. Employer Identification (I.R.S. Employer Identification (I.R.S. Employer Identification
Number) Number) Number)
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12655 N. CENTRAL EXPRESSWAY, SUITE 405, DALLAS, TEXAS 75243
(Address of Principal Executive Offices, Including Zip Code)
AREA CODE (972) 239-6220
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether Chancellor Broadcasting Company,
Chancellor Radio Broadcasting Company and Chancellor Broadcasting Licensee
Company (1) have filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) have been subject to such filing requirements for the past 90 days.
Yes [ ] No [ ]
As of August 14, 1997, 10,454,219 shares of the Class A Common Stock, par
value $.01 per share and 8,547,910 shares of the Class B Common Stock, par
value $.01 per share of Chancellor Broadcasting Company were outstanding. As of
August 14, 1997, 1,000 shares of common stock, par value $.01 per share, of
Chancellor Radio Broadcasting Company and 1,000 shares of common stock, par
value $.01 per share, of Chancellor Broadcasting Licensee Company were
outstanding.
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TABLE OF CONTENTS
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PAGE
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets (unaudited) as of December 31, 1996 and
June 30, 1997 .................................................................... 1
Consolidated Statements of Operations (unaudited) for the three and six months
ended June 30, 1996 and 1997 ..................................................... 2
Consolidated Statement of Changes in Stockholders' Equity (unaudited)
for the six months ended June 30, 1997 ........................................... 3
Consolidated Statements of Cash Flows (unaudited) for the six months
ended June 30, 1996 and 1997 ..................................................... 4
Notes to Consolidated Financial Statements (unaudited) ........................... 5
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets (unaudited) as of December 31, 1996 and
June 30, 1997 .................................................................... 10
Consolidated Statements of Operations (unaudited) for the three and six
months ended June 30, 1996 and 1997 .............................................. 11
Consolidated Statement of Changes in Stockholder's Equity (unaudited) for
the six months ended June 30, 1997 ............................................... 12
Consolidated Statements of Cash Flows (unaudited) for the six months
ended June 30, 1996 and 1997 ..................................................... 13
Notes to Consolidated Financial Statements (unaudited) ........................... 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS .................................................. 19
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ..................................................... 22
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
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DECEMBER 31, JUNE 30,
ASSETS 1996 1997
--------- -----------
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Current assets:
Cash ........................................................................ $ 3,789 $ 5,889
Accounts receivable, net of allowance for doubtful accounts
of $1,024 and $1,182, respectively ........................................ 46,585 63,576
Prepaid expenses and other .................................................. 2,754 2,887
--------- -----------
Total current assets ................................................... 53,128 72,352
Restricted cash ............................................................... 20,363 53,750
Property and equipment, net ................................................... 49,123 69,581
Intangibles and other, net .................................................... 551,406 970,080
Deferred financing costs, net ................................................. 16,723 16,827
Deferred income tax benefit ................................................... -- 1,183
--------- -----------
Total assets ........................................................... $ 690,743 $ 1,183,773
========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................................ $ 4,409 $ 4,989
Accrued liabilities ......................................................... 12,530 16,248
Accrued interest ............................................................ 6,869 5,702
Current portion of long-term debt ........................................... 400 1,928
--------- -----------
Total current liabilities .............................................. 24,208 28,867
Long-term debt ................................................................ 354,914 545,335
Deferred income taxes ......................................................... 2,606 --
Other ......................................................................... 802 997
--------- -----------
Total liabilities ...................................................... 382,530 575,199
--------- -----------
Redeemable senior cumulative exchangeable preferred stock of
subsidiary, par value $.01 per share; 1,000,000 shares authorized,
issued and outstanding; preference in liquidation of $117,670 .............. 107,222 114,271
Redeemable cumulative exchangeable preferred stock of subsidiary,
par value $.01 per share; none and 3,600,000 shares authorized,
respectively, none and 2,000,000 shares issued and outstanding,
respectively; preference in liquidation of $210,774 ........................ -- 202,891
Convertible cumulative preferred stock, par value $.01 per share; none and
2,200,000 shares authorized, issued and outstanding, respectively;
preference in liquidation of $111,604 ..................................... -- 107,150
Common stockholders' equity:
Class A common stock, par value $.01 per share, 40,000,000 shares authorized,
9,937,320 and 10,499,267 shares issued, respectively,
and 9,881,656 and 10,443,603 shares outstanding, respectively ............. 99 104
Class B common stock, par value $.01 per share, 10,000,000 shares
authorized and 8,547,910 shares issued and outstanding .................... 85 85
Additional paid-in capital .................................................. 231,931 245,595
Accumulated deficit ......................................................... (30,086) (60,484)
Treasury stock .............................................................. (1,038) (1,038)
--------- -----------
Total stockholders' equity ............................................. 200,991 184,262
--------- -----------
Total liabilities and stockholders' equity ............................. $ 690,743 $ 1,183,773
========= ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
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CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
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THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1996 1997 1996 1997
----------- ----------- ----------- -----------
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Gross broadcasting revenues ................................ $ 50,759 $ 83,538 $ 79,848 $ 147,015
Less agency commissions .................................... 6,333 10,450 9,780 18,073
----------- ----------- ----------- -----------
Net revenues ........................................ 44,426 73,088 70,068 128,942
----------- ----------- ----------- -----------
Operating expenses:
Programming, technical and news .......................... 7,865 12,829 13,010 26,700
Sales and promotion ...................................... 12,367 20,785 19,310 36,748
General and administrative ............................... 6,002 8,051 10,405 16,404
Depreciation and amortization ............................ 5,148 8,605 9,675 16,714
Corporate expenses ....................................... 832 2,222 1,839 3,934
Merger expense ........................................... -- 459 -- 2,515
Stock option compensation ................................ 950 950 1,900 1,900
----------- ----------- ----------- -----------
33,164 53,901 56,139 104,915
----------- ----------- ----------- -----------
Income from operations .............................. 11,262 19,187 13,929 24,027
Other (income) expense:
Interest expense ......................................... 9,680 12,488 17,327 23,908
Other, net ............................................... 92 25 98 (1,607)
----------- ----------- ----------- -----------
Income (loss) before provision for income taxes,
minority interest and extraordinary loss .......... 1,490 6,674 (3,496) 1,726
Provision for income taxes ................................. 662 3,727 1,601 3,327
Dividends and accretion on preferred stock of subsidiary ... 3,183 9,987 4,843 18,122
----------- ----------- ----------- -----------
Loss before extraordinary loss ...................... (2,355) (7,040) (9,940) (19,723)
Extraordinary loss on early extinguishment of debt, net of
income tax benefit ..................................... -- 7,926 4,646 10,675
----------- ----------- ----------- -----------
Net loss ............................................ (2,355) (14,966) (14,586) (30,398)
Loss on repurchase of preferred stock ...................... -- -- 16,570 --
Dividends on preferred stock ............................... -- 1,925 -- 3,379
----------- ----------- ----------- -----------
Net loss attributable to common stock ............... $ (2,355) $ (16,891) $ (31,156) $ (33,777)
=========== =========== =========== ===========
Loss applicable to common stock:
Loss before extraordinary loss ........................... $ (0.14) $ (0.47) $ (1.74) $ (1.23)
Extraordinary loss ....................................... -- (0.42) (0.31) (0.56)
----------- ----------- ----------- -----------
Net loss ................................................. $ (0.14) $ (0.89) $ (2.05) $ (1.79)
=========== =========== =========== ===========
Weighted average number of shares outstanding .............. 17,241,728 18,988,353 15,216,677 18,854,763
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
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CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
(DOLLARS IN THOUSANDS)
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CLASS A CLASS B
COMMON STOCK COMMON STOCK
SHARES AMOUNT SHARES AMOUNT
---------- ---------- ---------- ----------
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Balance, January 1, 1997 .......... 9,881,656 $ 99 8,547,910 $ 85
Stock option compensation ......... -- -- -- --
Dividends and accretion on
preferred stock ................ -- -- -- --
Issuance of common stock on
February 13, 1997 .............. 555,556 5 -- --
Exercise of common stock options .. 6,391 -- -- --
Net loss .......................... -- -- -- --
---------- ---------- ---------- ----------
Balance, June 30, 1997 ............ 10,443,603 $ 104 8,547,910 $ 85
---------- ---------- ---------- ----------
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ADDITIONAL
PAID-IN ACCUMULATED TREASURY
CAPITAL DEFICIT STOCK TOTAL
---------- ---------- ---------- ----------
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Balance, January 1, 1997 .......... $ 231,931 $(30,086) $ (1,038) $ 200,991
Stock option compensation ......... 1,900 -- -- 1,900
Dividends and accretion on
preferred stock ................ (3,379) -- -- (3,379)
Issuance of common stock on
February 13, 1997 .............. 15,015 -- -- 15,020
Exercise of common stock options .. 128 -- -- 128
Net loss .......................... -- (30,398) -- (30,398)
---------- ---------- ---------- ----------
Balance, June 30, 1997 ............ $ 245,595 $(60,484) $ (1,038) $ 184,262
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
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CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
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SIX MONTHS ENDED JUNE 30,
-------------------------------
1996 1997
------------- --------------
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Cash flows from operating activities:
Net loss .................................................................. $ (14,586) $ (30,398)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ........................................... 9,675 16,714
Amortization of deferred financing costs................................. 1,393 1,236
Stock option compensation ............................................... 1,900 1,900
Deferred income taxes ................................................... 1,539 3,327
Dividends and accretion on preferred stock of subsidiary ................ 4,843 18,122
Gain on disposition of stations ......................................... -- (1,409)
Extraordinary loss ...................................................... 4,646 10,675
Changes in assets and liabilities, net of the effects of acquired businesses:
Accounts receivable, net .............................................. (2,632) (3,741)
Prepaids and other .................................................... (1,380) 365
Accounts payable ...................................................... (87) (806)
Accrued liabilities ................................................... (66) 1,564
Accrued interest ...................................................... 4,243 (1,167)
------------- --------------
Net cash provided by operating activities ........................... 9,488 16,382
------------- --------------
Cash flows from investing activities:
Purchases of broadcasting properties ...................................... (406,140) (582,383)
Dispositions of broadcasting properties ................................... -- 103,259
Purchases of other property and equipment ................................. (1,374) (3,690)
------------- --------------
Net cash used in investing activities ............................... (407,514) (482,814)
------------- --------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt .................................. 277,628 417,632
Proceeds from borrowings under revolving debt facility .................... 46,764 255,441
Repayments fo long-term debt .............................................. (90,885) (342,856)
Repayments of borrowings under revolving debt facility .................... (68,432) (157,399)
Issuances of preferred stock .............................................. 175,119 297,361
Repurchase of preferred stock of subsidiary ............................... (95,462) --
Issuance of common stock .................................................. 155,475 128
Repurchase of common stock ................................................ (1,038) --
Payment of preferred stock dividends ...................................... (506) (1,775)
-------------- --------------
Net cash provided by financing activities ........................... 398,663 468,532
------------- --------------
Net increase in cash ................................................ 637 2,100
Cash, at beginning of period ................................................ 1,314 3,789
------------- --------------
Cash, at end of period ...................................................... $ 1,951 $ 5,889
============= ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
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CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of
Chancellor Broadcasting Company ("Chancellor") and its subsidiaries (the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three and six
month periods ended June 30, 1997 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1997. Certain prior year
amounts have been reclassified to conform with the current year's presentation,
which had no effect on net income or stockholders' equity.
2. ACQUISITIONS AND DISPOSITIONS
On January 23, 1997, the Company acquired substantially all the assets
and certain liabilities of Colfax Communications, Inc. and its affiliates
("Colfax") for an aggregate price of $383.7 million. Liabilities assumed were
limited to certain ongoing contractual rights and obligations. The acquisition
was accounted for as a purchase. Pursuant to the acquisition agreement, at
December 31, 1996 the Company had $20.4 million of cash in a restricted escrow
account which was remitted to Colfax at closing. On January 29, 1997, the
Company entered into an agreement to sell WMIL-FM and WOKY-AM, Milwaukee
stations acquired in this transaction, to Clear Channel Radio, Inc. for $41.3
million in cash. Accordingly, theses stations were recorded as assets held for
sale with no results of operations or gain or loss recognized. Interest
capitalized on this investment amounted to $580,000. The disposition of these
stations was completed on March 31, 1997.
The acquisition is summarized as follows (in thousands):
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Assets acquired and liabilities assumed:
Accounts receivable, net......................... $ 13,234
Prepaid and other assets......................... 470
Property and equipment........................... 14,624
Goodwill and other intangibles................... 317,894
Other noncurrent assets.......................... 46
Assets held for sale............................. 41,253
Accrued liabilities.............................. (3,821)
------------
$ 383,700
</TABLE>
On January 31, 1997, the Company completed the sale of WWWW-FM and
WDFN-AM in Detroit to Evergreen Media Corporation ("Evergreen") for $30.0
million in cash. The pre-tax gain of $1.4 million is included in other income.
On February 13, 1997, the Company acquired substantially all the assets
and certain liabilities of OmniAmerica Group ("Omni") for $166.0 million of
cash and $15.0 million of Chancellor Class A Common Stock. Liabilities assumed
were limited to certain ongoing contractual rights and obligations. The
acquisition was accounted for as a purchase.
The acquisition is summarized as follows (in thousands):
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Assets acquired and liabilities assumed:
Property and equipment...................... $ 9,209
Goodwill and other intangibles.............. 171,837
-------------
$ 181,046
</TABLE>
On February 19, 1997, Chancellor and Chancellor Radio Broadcasting
entered into an agreement to merge with Evergreen in a stock-for-stock
transaction (the "Merger"), with Evergreen remaining as the surviving
corporation. Pursuant to the agreement, shareholders of the Company's common
stock will receive 0.9091 shares of Evergreen's common stock. Consummation of
the merger is subject to shareholder approval and certain other
5
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CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
closing conditions including regulatory approval. The Company has incurred
certain costs related to the Merger which have been expensed in the period
incurred.
On February 19, 1997, the Company and Evergreen entered into a joint
purchase agreement whereby in the event that consummation of the stock purchase
agreement between Evergreen and Viacom International, Inc. ("Viacom") occurred
prior to the consummation of the Merger, the Company would be required to
purchase the Viacom subsidiaries which own four of the ten Viacom stations for
$480.0 million, plus net working capital, and Evergreen would be required to
purchase the Viacom subsidiaries which own six of the ten Viacom stations for
$595.0 million, plus net working capital. On July 2, 1997, the Company acquired
KIBB-FM and KYSR-FM in Los Angeles, WLIT-FM in Chicago and WDRQ-FM in Detroit
from Viacom for approximately $489.8 million, plus various other direct
acquisition costs (the "Chancellor Viacom Acquisition").
On March 24, 1997, the Company exchanged the West Palm Beach stations
acquired from Omni for one AM station in Sacramento and approximately $33.0
million in cash from American Radio Systems Corporation (the "American Radio
Exchange").
On July 7, 1997, the Company entered into a time brokerage agreement with
Evergreen whereby Evergreen began managing certain limited functions of the
Company's station in San Francisco which broadcasts on frequency 94.9 (formerly
KSAN-FM).
On July 14, 1997, the Company and Evergreen entered into an agreement
pursuant to which a jointly-owned affiliate of Evergreen and the Company will
acquire Katz Media Group, Inc. ("Katz"), a full-service media representation
firm, in a tender offer transaction valued at approximately $373.0 million.
Debt of Katz of approximately $218.0 million will also be assumed in the
transaction.
On July 21, 1997, the Company entered into a time brokerage agreement
with Evergreen whereby Evergreen began managing certain limited functions of
the Company's stations KBGG-FM, KNEW-AM and KABL-AM in San Francisco.
On July 30, 1997, the Company entered into an agreement to acquire
KXPK-FM in Denver from Evergreen Wireless LLC (which is unrelated to Evergreen)
for $26.0 million in cash (including $1.7 million paid by the Company in
escrow). The Company also entered into an agreement to operate KXPK-FM under a
time brokerage agreement to be effective upon receipt of HSR Act approval.
Although there can be no assurance, the Company expects that the acquisition
will be completed in the first quarter of 1998, after completion of the Merger.
On August 7, 1997, the Company and Evergreen announced that they had
acquired, for $3.0 million, an option from Bonneville International Corporation
("Bonneville") to exchange Evergreen's station WTOP-AM in Washington, the
Company's stations KZLA-FM in Los Angeles and WGMS-FM in Washington and $57.0
million of cash for Bonneville's stations WDBZ-FM in New York, KLDE-FM in
Houston and KBIG-FM in Los Angeles. The option expires on December 31, 1997.
On August 11, 1997, the Company completed the sale of WDRQ-FM in Detroit
to Capital Cities/ABC for $37.0 million. The proceeds were used to repay
borrowings under Chancellor's Interim Loan (as defined).
6
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CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
The following summarizes the unaudited consolidated pro forma data as
though the acquisitions of Shamrock Broadcasting Company, KIMN-FM and KALC-FM,
Colfax, Omni and KSTE-AM, the dispositions of KTBZ-FM, WWWW-FM and WDFN-AM and
the related financing transactions had occurred as of the beginning of 1996 (in
thousands, except per share amounts):
<TABLE>
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SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1997
----------------------- ---------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- --------- ---------- ---------
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Net revenue ......................................... $ 70,068 $ 109,422 $ 128,942 $ 131,149
Loss before extraordinary loss ...................... (9,940) (28,148) (19,723) (22,687)
Net loss attributable to common stock................ (31,156) (31,998) (33,777) (26,537)
Loss before extraordinary loss per common share ..... (1.74) (1.68) (1.23) (1.40)
Net loss per common share ........................... (2.05) (1.68) (1.79) (1.40)
</TABLE>
3. LONG-TERM DEBT
The Company's term and revolving credit facilities were refinanced on
January 23, 1997, in conjunction with the acquisition of Colfax under a new
bank credit agreement. In connection with the refinancing of the term and
revolving loan facilities in January 1997, the Company incurred an
extraordinary charge to write-off deferred finance costs of $4.6 million.
On June 5, 1997, the Company closed on the tender offer for all $60.0
million of its outstanding 12 1/2% Senior Subordinated Notes for approximately
$70.1 million, which included a premium. The redemption was funded through
additional borrowings under the bank credit agreement and resulted in an
extraordinary charge of $11.8 million.
On June 24, 1997, the Company completed its private offering of $200.0
million of Chancellor Radio Broadcasting Company's 8 3/4% Senior Notes, which
mature on June 15, 2007 and bear interest at 8.75% per annum. The proceeds were
used to pay down borrowings under the bank credit agreement, which resulted in
an extraordinary charge to write-off deferred finance costs of $1.4 million.
On July 2, 1997, the Company entered into a restated credit agreement
(the "Restated Credit Agreement") in order to finance the Chancellor Viacom
Acquisition. The Restated Credit Agreement consists of a $400.0 million term
loan facility and a $350.0 million revolving loan facility. Also, Chancellor
received an interim loan of $170.0 million (the "Interim Loan"), the proceeds
from which were contributed to Chancellor Radio Broadcasting in connection with
the Viacom acquisition.
The Restated Credit Agreement is collateralized 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 Restated Credit
Agreement is also guaranteed by the subsidiaries of Chancellor and Chancellor
Radio Broadcasting, whose guarantees are collateralized by a first priority
perfected pledge of the capital stock of Chancellor Radio Broadcasting. The
term loan facility is due in increasing quarterly installments beginning in
1997 and matures in June 2004. All outstanding borrowings under the revolving
facility mature in June 2004. The facilities bear interest at a rate equal to,
at the Company's option, 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 either .375% or .250% per annum on the
unused portion of the Revolving Facility, depending upon whether the Company's
leverage ratio is equal to or greater than 4.5:1 or less than 4.5:1,
respectively. The bank financing facilities which existed on June 30, 1997
accrued interest at the prime rate plus 1.00% (9.50%) on $11.9 million and the
LIBOR rate plus 2.00% (7.6875%) on $135.4 million of borrowings.
7
<PAGE> 10
CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
The Interim Loan is an unsecured obligation of Chancellor and is due on
the earlier of the consummation of the Merger or July 2, 1999. Outstanding
borrowings under the Interim Loan bear interest at a rate equal to the
three-month LIBOR plus an applicable margin rate beginning at 3.25% and
increasing to 9.00% at various intervals during the loan period.
Scheduled debt maturities for the Company's outstanding long-term debt
under the Restated Credit Agreement as of July 2, 1997, after completion of the
Chancellor Viacom Acquisition, for each of the next five calendar years and
thereafter were as follows, in thousands:
<TABLE>
<S> <C> <C>
1997 .......................................... $ --
1998 .......................................... 20,000
1999 .......................................... 50,000
2000 .......................................... 60,000
2001 .......................................... 60,000
2002 .......................................... 70,000
Thereafter .................................... 153,000
-----------
$ 413,000
===========
</TABLE>
4. CAPITAL STRUCTURE
During the first quarter of 1997, Chancellor completed a private
placement of $110.0 million of newly authorized 7% Convertible Preferred Stock
(the "Convertible Preferred Stock") and Chancellor Radio Broadcasting completed
a private placement of $200.0 million of newly authorized 12% Exchangeable
Preferred Stock (the "Exchangeable Preferred Stock").
Dividends on the Convertible Preferred Stock accrue from its date of
issuance and are payable quarterly commencing April 15, 1997, at a rate per
annum of 7% of the liquidation preference per share. The Convertible Preferred
Stock is convertible at the option of the holder at any time after March 23,
1997, unless previously redeemed, into Class A Common Stock of Chancellor at a
conversion price of $32.90 per share of Class A Common Stock, subject to
adjustment in certain events. In addition, after January 19, 2000, the Company
may, at its option, redeem the Convertible Preferred Stock, in whole or in
part, at specified redemption prices plus accrued and unpaid dividends through
the redemption date. Upon the occurrence of a change of control (as defined),
Chancellor must, subject to certain conditions, offer to purchase all of the
then outstanding shares of Convertible Preferred Stock at a price equal to 101%
of the liquidation preference thereof, plus accrued and unpaid dividends to the
date of purchase.
Dividends on the Exchangeable Preferred Stock will accrue from the date
of its issuance and will be payable semi-annually commencing July 15, 1997, at
a rate per annum of 12% of the liquidation preference per share. Dividends may
be paid, at the Company's option, on any dividend payment date occurring on or
prior to January 15, 2002 either in cash or in additional shares of
Exchangeable Preferred Stock. The Exchangeable Preferred Stock is redeemable at
the Company's option, in whole or in part at any time on or after January 15,
2002, at the redemption prices set forth herein, plus accrued and unpaid
dividends to the date of redemption. In addition, prior to January 15, 2000,
the Company may, at its option, redeem the Exchangeable Preferred Stock with
the net cash proceeds from one or more Public Equity Offerings (as defined), at
various redemption prices plus accrued and unpaid dividends to the redemption
date; provided, however, that after any such redemption there is outstanding at
least $150.0 million aggregate liquidation preference of Exchangeable Preferred
Stock. The Company is required, subject to certain conditions, to redeem all of
the Exchangeable Preferred Stock outstanding on January 15, 2009, at a
redemption price equal to 100% of the liquidation preference thereof, plus
accrued 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
Exchangeable Preferred Stock at a price equal to 101% of the liquidation
preference thereof, plus accrued and unpaid dividends to the repurchase date.
In addition, prior to January 15, 1999, upon the occurrence of a Change of
Control, the Company will have the option to redeem the Exchangeable Preferred
Stock in whole but not in part at a redemption price equal to 112% of the
liquidation preference thereof, plus accrued and unpaid dividends to the date
of redemption. The Exchangeable Preferred Stock
8
<PAGE> 11
CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
will, with respect to dividend rights and rights on liquidation, rank junior to
the Company's 12 1/4% Senior Cumulative Exchangeable Preferred Stock (the
"Senior Exchangeable Preferred Stock"). Subject to certain conditions, the
Exchangeable 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%
subordinated exchange debentures due 2009, including any such securities paid
in lieu of cash interest.
In addition to the accrued dividends discussed above, the recorded value
of the Senior Exchangeable Preferred Stock and the Exchangeable Preferred Stock
includes an amount for the accretion of the difference between the stock's fair
value at date of issuance and its mandatory redemption amount, calculated using
the effective interest method.
5. INCOME TAXES
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, minority interest and extraordinary loss for the following reasons,
dollars in thousands:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1996 1997 1996 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. federal income tax at statutory rate ............. $ 507 $ 2,269 $ (1,189) $ 587
State income taxes, net of federal benefit ............ 89 401 (210) 104
Valuation allowance provided for loss carryforward
generated during the current period ................ (59) -- 2,750 --
Permanent difference .................................. -- 1,072 -- 2,636
Other ................................................. 125 (15) 250 --
----------- ----------- ----------- -----------
$ 662 $ 3,727 $ 1,601 $ 3,327
=========== =========== =========== ===========
</TABLE>
6. SUBSEQUENT EVENT
In July 1997, the Company incurred non-cash stock option and severance
compensation of approximately $685,000 and $1.4 million, respectively, for
terminations associated with the Merger. In addition, the Company paid $945,000
for a two year consulting and non-compete agreement which will be deferred and
amortized over the related period.
7. NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standard No. 128, "Earnings per Share"
was issued in February 1997, which establishes standards for computing and
presenting earnings per share (EPS) and applies to entities with publicly held
common stock or potential common stock. The disclosure requirements of SFAS No.
128 will be effective for the Company's financial statements beginning with the
annual report for 1997. Management does not believe that the implementation of
SFAS 128 will have a material effect on its financial statements.
Statement of Financial Accounting Standard No. 130, "Reporting
Comprehensive Income" was issued in June 1997, which establishes standards for
reporting and display of comprehensive income and its components (revenues,
expenses, gains, and losses) in a full set of general-purpose financial
statements. The reporting and display requirements of SFAS No. 130 will be
effective for the Company's financial statements beginning with the first
quarterly report for 1998. Management does not believe that the implementation
of SFAS 130 will have a material effect on its financial statements.
9
<PAGE> 12
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
----------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash ...................................................................... $ 3,789 $ 5,889
Accounts receivable, net of allowance for doubtful accounts
of $1,024 and $1,182, respectively ...................................... 46,585 63,576
Prepaid expenses and other ................................................ 2,754 2,887
----------- -----------
Total current assets ................................................. 53,128 72,352
Restricted cash ............................................................. 20,363 53,750
Property and equipment, net ................................................. 49,123 69,581
Intangibles and other, net .................................................. 551,406 970,080
Deferred financing costs, net ............................................... 16,723 16,827
Deferred income tax benefit ................................................. -- 1,183
----------- -----------
Total assets ......................................................... $ 690,743 $ 1,183,773
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable .......................................................... $ 4,409 $ 4,989
Accrued liabilities ....................................................... 12,530 16,248
Accrued interest .......................................................... 6,869 5,702
Current portion of long-term debt ......................................... 400 1,928
----------- -----------
Total current liabilities ............................................ 24,208 28,867
Long-term debt .............................................................. 354,914 545,335
Deferred income taxes........................................................ 2,606 --
Other ....................................................................... 802 997
----------- -----------
Total liabilities .................................................... 382,530 575,199
----------- -----------
Redeemable senior cumulative exchangeable preferred stock , par value $.01 per
share; 1,000,000 shares authorized, issued and outstanding, preference
in liquidation of $117,670 ............................................... 107,222 114,271
Redeemable cumulative exchangeable preferred stock, par value $.01 per share;
none and 3,600,000 shares authorized, respectively, none and 2,000,000
shares issued and outstanding, respectively,
preference in liquidation of $210,774 .................................... -- 202,891
Common stockholder's equity:
Common stock, par value $.01 per share, 2,000 shares authorized, 1,000
shares issued and outstanding ........................................... 1 1
Additional paid-in capital ................................................ 219,519 322,216
Accumulated deficit ....................................................... (18,529) (30,805)
----------- -----------
Total common stockholder's equity .................................... 200,991 291,412
----------- -----------
Total liabilities and stockholder's equity ........................... $ 690,743 $ 1,183,773
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE> 13
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------- -------------------------
1996 1997 1996 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Gross broadcasting revenues ................................ $ 50,759 $ 83,538 $ 79,848 $ 147,015
Less agency commissions .................................... 6,333 10,450 9,780 18,073
----------- ----------- ----------- -----------
Net revenues ........................................ 44,426 73,088 70,068 128,942
----------- ----------- ----------- -----------
Operating expenses:
Programming, technical and news .......................... 7,865 12,829 13,010 26,700
Sales and promotion ...................................... 12,367 20,785 19,310 36,748
General and administrative ............................... 6,002 8,051 10,405 16,404
Depreciation and amortization ............................ 5,148 8,605 9,675 16,714
Corporate expenses ....................................... 832 2,222 1,839 3,934
Merger expense ........................................... -- 459 -- 2,515
Stock option compensation ................................ 950 950 1,900 1,900
----------- ----------- ----------- -----------
33,164 53,901 56,139 104,915
----------- ----------- ----------- -----------
Income from operations .............................. 11,262 19,187 13,929 24,027
Other (income) expense:
Interest expense ......................................... 9,680 12,488 17,327 23,908
Other, net ............................................... 92 25 98 (1,607)
----------- ----------- ----------- -----------
Income (loss) before provision for income taxes
and extraordinary loss ............................ 1,490 6,674 (3,496) 1,726
Provision for income taxes ................................. 662 3,727 1,601 3,327
----------- ----------- ----------- -----------
Income (loss) before extraordinary loss ............. 828 2,947 (5,097) (1,601)
Extraordinary loss on early extinguishment of debt, net of
income tax benefit ..................................... -- 7,926 4,646 10,675
----------- ----------- ----------- -----------
Net income (loss) ................................... 828 (4,979) (9,743) (12,276)
Loss on repurchase of preferred stock ...................... -- -- 16,570 --
Dividends and accretion on preferred stock ................. 3,183 9,987 4,843 18,122
----------- ----------- ----------- -----------
Net loss attributable to common stock ............... $ (2,355) $ (14,966) $ (31,156) $ (30,398)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE> 14
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ---------- ----------- -----
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997..................... 1,000 $ 1 $ 219,519 $ (18,529) $ 200,991
Dividends and accretion on preferred
stock..................................... -- -- (18,122) -- (18,122)
Capital contributions, net .................. -- -- 120,819 -- 120,819
Net loss .................................... -- -- -- (12,276) (12,276)
--------- ------ ----------- ---------- ---------
Balance, June 30, 1997 ...................... 1,000 $ 1 $ 322,216 $ (30,805) $ 291,412
========= ====== =========== =========== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE> 15
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------------
1996 1997
------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss .................................................................. $ (9,743) $ (12,276)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ........................................... 9,675 16,714
Amortization of deferred financing costs................................. 1,393 1,236
Stock option compensation ............................................... 1,900 1,900
Deferred income taxes ................................................... 1,539 3,327
Gain on disposition of stations ......................................... -- (1,409)
Extraordinary loss ...................................................... 4,646 10,675
Changes in assets and liabilities, net of the effects of acquired businesses:
Accounts receivable ................................................... (2,734) (3,741)
Prepaids and other .................................................... (1,380) 365
Accounts payable ...................................................... (87) (806)
Accrued liabilities ................................................... (66) 1,564
Accrued interest ...................................................... 4,243 (1,167)
------------- --------------
Net cash provided by operating activities ........................... 9,488 16,382
------------- --------------
Cash flows from investing activities:
Purchases of broadcasting properties ...................................... (406,140) (582,383)
Dispositions of broadcasting properties ................................... -- 103,259
Purchases of other property and equipment ................................. (1,374) (3,690)
------------- --------------
Net cash used in investing activities ............................... (407,514) (482,814)
------------- --------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt .................................. 277,628 417,632
Proceeds from borrowings under revolving debt facility .................... 46,764 255,441
Repayments of long-term debt .............................................. (90,885) (342,856)
Repayments of borrowings under revolving debt facility .................... (68,432) (157,399)
Issuances of preferred stock .............................................. 175,119 191,817
Repurchase of preferred stock ............................................. (95,462) --
Additional capital contributions .......................................... 155,475 105,672
Distribution of additional paid in capital ................................ (1,038) (1,775)
Payment of preferred stock dividends ...................................... (506) --
------------- --------------
Net cash provided by financing activities ........................... 398,663 468,532
------------- --------------
Net increase in cash ................................................ 637 2,100
Cash, at beginning of period ................................................ 1,314 3,789
------------- --------------
Cash, at end of period ...................................................... $ 1,951 $ 5,889
============= ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE> 16
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of
Chancellor Radio Broadcasting Company ("Chancellor Radio Broadcasting") and its
subsidiaries (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and six month periods ended June 30, 1997 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. Chancellor Radio Broadcasting is a direct subsidiary
of Chancellor Broadcasting Company ("Chancellor"). Certain prior year amounts
have been reclassified to conform with the current year's presentation, which
had no effect on net income or stockholder's equity.
2. ACQUISITIONS AND DISPOSITIONS
On January 23, 1997, the Company acquired substantially all the assets
and certain liabilities of Colfax Communications, Inc. and its affiliates
("Colfax") for an aggregate price of $383.7 million. Liabilities assumed were
limited to certain ongoing contractual rights and obligations. The acquisition
was accounted for as a purchase. Pursuant to the acquisition agreement, at
December 31, 1996 the Company had $20.4 million of cash in a restricted escrow
account which was remitted to Colfax at closing. On January 29, 1997, the
Company entered into an agreement to sell WMIL-FM and WOKY-AM, Milwaukee
stations acquired in this transaction, to Clear Channel Radio, Inc. for $41.3
million in cash. Accordingly, theses stations were recorded as assets held for
sale with no results of operations or gain or loss recognized. Interest
capitalized on this investment amounted to $580,000. The disposition of these
stations was completed on March 31, 1997.
The acquisition is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired and liabilities assumed:
Accounts receivable, net................................ $ 13,234
Prepaid and other assets................................ 470
Property and equipment.................................. 14,624
Goodwill and other intangibles.......................... 317,894
Other noncurrent assets................................. 46
Assets held for sale.................................... 41,253
Accrued liabilities..................................... (3,821)
------------
$ 383,700
============
</TABLE>
On January 31, 1997, the Company completed the sale of WWWW-FM and
WDFN-AM in Detroit to Evergreen Media Corporation ("Evergreen") for $30.0
million in cash. The pre-tax gain of $1.4 million is included in other income.
On February 13, 1997, the Company acquired substantially all the assets
and certain liabilities of OmniAmerica Group ("Omni") for $166.0 million of
cash and $15.0 million of Chancellor Class A Common Stock. Liabilities assumed
were limited to certain ongoing contractual rights and obligations. The
acquisition was accounted for as a purchase.
The acquisition is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired and liabilities assumed:
Property and equipment.................................. $ 9,209
Goodwill and other intangibles.......................... 171,837
-------------
$ 181,046
=============
</TABLE>
14
<PAGE> 17
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On February 19, 1997, Chancellor and Chancellor Radio Broadcasting
entered into an agreement to merge with Evergreen in a stock-for-stock
transaction (the "Merger"), with Evergreen remaining as the surviving
corporation. Pursuant to the agreement, shareholders of the Company's common
stock will receive 0.9091 shares of Evergreen's common stock. Consummation of
the merger is subject to shareholder approval and certain other closing
conditions including regulatory approval. The Company has incurred certain
costs related to the Merger which have been expensed in the period incurred.
On February 19, 1997, the Company and Evergreen entered into a joint
purchase agreement whereby in the event that consummation of the stock purchase
agreement between Evergreen and Viacom International, Inc. ("Viacom") occurred
prior to the consummation of the Merger, the Company would be required to
purchase the Viacom subsidiaries which own four of the ten Viacom stations for
$480.0 million, plus net working capital, and Evergreen would be required to
purchase the Viacom subsidiaries which own six of the ten Viacom stations for
$595.0 million, plus net working capital. On July 2, 1997, the Company acquired
KIBB-FM and KYSR-FM in Los Angeles, WLIT-FM in Chicago and WDRQ-FM in Detroit
from Viacom for approximately $489.8 million, plus various other direct
acquisition costs (the "Chancellor Viacom Acquisition").
On March 24, 1997, the Company exchanged the West Palm Beach stations
acquired from Omni for one AM station in Sacramento and approximately $33.0
million in cash from American Radio Systems Corporation (the "American Radio
Exchange").
On July 7, 1997, the Company entered into a time brokerage agreement with
Evergreen whereby Evergreen began managing certain limited functions of the
Company's station in San Francisco which broadcasts on frequency 94.9 (formerly
KSAN-FM).
On July 21, 1997, the Company entered into a time brokerage agreement
with Evergreen whereby Evergreen began managing certain limited functions of
the Company's stations KBGG-FM, KNEW-AM and KABL-AM in San Francisco.
On July 30, 1997, the Company entered into an agreement to acquire
KXPK-FM in Denver from Evergreen Wireless LLC (which is unrelated to Evergreen)
for $26.0 million in cash (including $1.7 million paid by the Company in
escrow). The Company also entered into an agreement to operate KXPK-FM under a
time brokerage agreement to be effective upon receipt of HSR Act approval.
Although there can be no assurance, the Company expects that the acquisition
will be completed in the first quarter of 1998, after completion of the Merger.
On August 7, 1997, the Company and Evergreen announced that they had
acquired, for $3.0 million, an option from Bonneville International Corporation
("Bonneville") to exchange Evergreen's station WTOP-AM in Washington, the
Company's stations KZLA-FM in Los Angeles and WGMS-FM in Washington and $57.0
million of cash for Bonneville's stations WDBZ-FM in New York, KLDE-FM in
Houston and KBIG-FM in Los Angeles. The option expires on December 31, 1997.
On August 11, 1997, the Company completed the sale of WDRQ-FM in Detroit
to Capital Cities/ABC for $37.0 million. The proceeds were distributed to
Chancellor as a return of capital and used to repay borrowings under
Chancellor's Interim Loan (as defined).
15
<PAGE> 18
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following summarizes the unaudited consolidated pro forma data as
though the acquisitions of Shamrock Broadcasting Company, KIMN-FM and KALC-FM,
Colfax, Omni and KSTE-AM, the dispositions of KTBZ-FM, WWWW-FM and WDFN-AM and
the related financing transactions had occurred as of the beginning of 1996 (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1997
-------------------- ---------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Net revenue ......................................... $ 70,068 $109,422 $128,942 $131,149
Loss before extraordinary loss ...................... (5,097) (9,428) (1,601) (1,687)
Net loss attributable to common stock................ (31,156) (28,148) (30,398) (22,687)
</TABLE>
3. LONG-TERM DEBT
The Company's term and revolving credit facilities were refinanced on
January 23, 1997, in conjunction with the acquisition of Colfax under a new
bank credit agreement. In connection with the refinancing of the term and
revolving loan facilities in January 1997, the Company incurred an
extraordinary charge to write-off deferred finance costs of $4.6 million.
On June 5, 1997, the Company closed on the tender offer for all $60.0
million of its outstanding 12 1/2% Senior Subordinated Notes for approximately
$70.1 million, which included a premium. The redemption was funded through
additional borrowings under the bank credit agreement and resulted in an
extraordinary charge of $11.8 million.
On June 24, 1997, the Company completed its private offering of $200.0
million of Chancellor Radio Broadcasting Company's 8 3/4% Senior Notes, which
mature on June 15, 2007 and bear interest at 8.75% per annum. The proceeds were
used to repay borrowings under the bank credit agreement, which resulted in an
extraordinary charge to write-off deferred finance costs of $1.4 million.
On July 2, 1997, the Company entered into a restated credit agreement
(the "Restated Credit Agreement") in order to finance the Chancellor Viacom
Acquisition. The Restated Credit Agreement consists of a $400.0 million term
loan facility and a $350.0 million revolving loan facility. Also, Chancellor
received an interim loan of $170.0 million (the "Interim Loan"), the proceeds
from which were contributed to Chancellor Radio Broadcasting in connection with
the Viacom acquisition.
The Restated Credit Agreement is collateralized 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 Restated Credit
Agreement is also guaranteed by the subsidiaries of Chancellor and Chancellor
Radio Broadcasting, whose guarantees are collateralized by a first priority
perfected pledge of the capital stock of Chancellor Radio Broadcasting. The
term loan facility is due in increasing quarterly installments beginning in
1997 and matures in June 2004. All outstanding borrowings under the revolving
facility mature in June 2004. The facilities bear interest at a rate equal to,
at the Company's option, 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 either .375% or .250% per annum on the
unused portion of the Revolving Facility, depending upon whether the Company's
leverage ratio is equal to or greater than 4.5:1 or less than 4.5:1,
respectively. The bank financing facilities which existed on June 30, 1997
accrued interest at the prime rate plus 1.00% (9.50%) on $11.9 million and the
LIBOR rate plus 2.00% (7.6875%) on $135.4 million of borrowings.
The Interim Loan is an unsecured obligation of Chancellor and is due on
the earlier of the consummation of the Merger or July 2, 1999. Outstanding
borrowings under the Interim Loan bear interest at a rate equal to the
16
<PAGE> 19
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
three-month LIBOR plus an applicable margin rate beginning at 3.25% and
increasing to 9.00% at various intervals during the loan period.
Scheduled debt maturities for the Company's outstanding long-term debt
under the Restated Credit Agreement as of July 2, 1997, after completion of the
Chancellor Viacom Acquisition, for each of the next five calendar years and
thereafter were as follows, in thousands:
<TABLE>
<S> <C> <C>
1997 ...................................... $ --
1998 ...................................... 20,000
1999 ...................................... 50,000
2000 ...................................... 60,000
2001 ...................................... 60,000
2002 ...................................... 70,000
Thereafter ................................ 153,000
-----------
$ 413,000
===========
</TABLE>
4. CAPITAL STRUCTURE
During the first quarter of 1997, Chancellor completed a private
placement of $110.0 million of newly authorized 7% Convertible Preferred Stock
(the "Convertible Preferred Stock") and Chancellor Radio Broadcasting completed
a private placement of $200.0 million of newly authorized 12% Exchangeable
Preferred Stock (the "Exchangeable Preferred Stock").
Dividends on the Convertible Preferred Stock accrue from its date of
issuance and are payable quarterly commencing April 15, 1997, at a rate per
annum of 7% of the liquidation preference per share. The Convertible Preferred
Stock is convertible at the option of the holder at any time after March 23,
1997, unless previously redeemed, into Class A Common Stock of Chancellor at a
conversion price of $32.90 per share of Class A Common Stock, subject to
adjustment in certain events. In addition, after January 19, 2000, the Company
may, at its option, redeem the Convertible Preferred Stock, in whole or in
part, at specified redemption prices plus accrued and unpaid dividends through
the redemption date. Upon the occurrence of a change of control (as defined),
Chancellor must, subject to certain conditions, offer to purchase all of the
then outstanding shares of Convertible Preferred Stock at a price equal to 101%
of the liquidation preference thereof, plus accrued and unpaid dividends to the
date of purchase.
Dividends on the Exchangeable Preferred Stock will accrue from the date of
its issuance and will be payable semi-annually commencing July 15, 1997, at a
rate per annum of 12% of the liquidation preference per share. Dividends may be
paid, at the Company's option, on any dividend payment date occurring on or
prior to January 15, 2002 either in cash or in additional shares of Exchangeable
Preferred Stock. The Exchangeable Preferred Stock is redeemable at the Company's
option, in whole or in part at any time on or after January 15, 2002, at the
redemption prices set forth herein, plus accrued and unpaid dividends to the
date of redemption. In addition, prior to January 15, 2000, the Company may, at
its option, redeem the Exchangeable Preferred Stock with the net cash proceeds
from one or more Public Equity Offerings (as defined), at various redemption
prices plus accrued and unpaid dividends to the redemption date; provided,
however, that after any such redemption there is outstanding at least $150.0
million aggregate liquidation preference of Exchangeable Preferred Stock. The
Company is required, subject to certain conditions, to redeem all of the
Exchangeable Preferred Stock outstanding on January 15, 2009, at a redemption
price equal to 100% of the liquidation preference thereof, plus accrued 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 Exchangeable Preferred Stock at a
price equal to 101% of the liquidation preference thereof, plus accrued and
unpaid dividends to the repurchase date. In addition, prior to January 15, 1999,
upon the occurrence of a Change of Control, the Company will have the option to
redeem the Exchangeable Preferred Stock in whole but not in part at a redemption
price equal to 112% of the liquidation preference thereof, plus accrued and
unpaid dividends to the date of redemption. The Exchangeable Preferred Stock
will, with respect to dividend rights and rights on liquidation, rank junior to
the Company's 12 1/4% Senior Cumulative Exchangeable Preferred Stock (the
"Senior Exchangeable Preferred Stock"). Subject to certain conditions, the
Exchangeable Preferred Stock is exchangeable in whole, but not in part, at
17
<PAGE> 20
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the option of the Company, on any dividend payment date for the Company's 12%
subordinated exchange debentures due 2009, including any such securities paid in
lieu of cash interest.
In addition to the accrued dividends discussed above, the recorded value
of the Senior Exchangeable Preferred Stock and the Exchangeable Preferred Stock
includes an amount for the accretion of the difference between the stock's fair
value at date of issuance and its mandatory redemption amount, calculated using
the effective interest method.
5. INCOME TAXES
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 and extraordinary loss for the following reasons, dollars in thousands:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1996 1997 1996 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. federal income tax at statutory rate ............. $ 507 $ 2,269 $ (1,189) $ 587
State income taxes, net of federal benefit ............ 89 401 (210) 104
Valuation allowance provided for loss carryforward
generated during the current period ................ (59) -- 2,750 --
Permanent difference .................................. -- 1,072 -- 2,636
Other ................................................. 125 (15) 250 --
----------- ----------- ----------- -----------
$ 662 $ 3,727 $ 1,601 $ 3,327
=========== =========== =========== ===========
</TABLE>
6. SUBSEQUENT EVENT
In July 1997, the Company incurred non-cash stock option and severance
compensation of approximately $685,000 and $1.4 million, respectively, for
terminations associated with the Merger. In addition, the Company paid $945,000
for a two year consulting and non-compete agreement which will be deferred and
amortized over the related period.
7. NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standard No. 128, "Earnings per Share"
was issued in February 1997, which establishes standards for computing and
presenting earnings per share (EPS) and applies to entities with publicly held
common stock or potential common stock. The disclosure requirements of SFAS No.
128 will be effective for the Company's financial statements beginning with the
annual report for 1997. Management does not believe that the implementation of
SFAS 128 will have a material effect on its financial statements.
Statement of Financial Accounting Standard No. 130, "Reporting
Comprehensive Income" was issued in June 1997, which establishes standards for
reporting and display of comprehensive income and its components (revenues,
expenses, gains, and losses) in a full set of general-purpose financial
statements. The reporting and display requirements of SFAS No. 130 will be
effective for the Company's financial statements beginning with the first
quarterly report for 1998. Management does not believe that the implementation
of SFAS 130 will have a material effect on its financial statements.
18
<PAGE> 21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis of results of operations and
financial condition of the Company should be read in conjunction with the
consolidated financial statements and related notes thereto of the Company
included elsewhere in this document. Periodically, the Company 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; the non-renewal of one or more of the Company's broadcasting
licenses; and those risk factors listed from time to time in documents filed by
the Company with the Securities and Exchange Commission (the "Commission").
The Company has grown largely through acquisitions, as well as through
internally generated growth. Upon completion of the pending transactions,
excluding the Merger, the Company will own and operate 55 radio stations
serving the following markets: New York, New York; Nassau-Suffolk (Long
Island), New York; Los Angeles, California; San Francisco, California;
Washington, D.C.; Atlanta, Georgia; Riverside-San Bernardino, California;
Minneapolis-St. Paul, Minnesota; Phoenix, Arizona; Pittsburgh, Pennsylvania;
Denver, Colorado; Cincinnati, Ohio; Sacramento, California; Chicago, Illinois;
and Orlando, Florida. The Company cannot currently predict whether it will be
able to consummate all of its pending transactions; the closing of each of such
transactions is subject to FCC approval, and other governmental approvals,
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.
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 charges for stock option compensation,
dividends and accretion on preferred stock 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 attributable
to common stock for the foreseeable future, which losses may be greater than
those historically experienced by the Company.
19
<PAGE> 22
RESULTS OF OPERATIONS
The Company's acquisitions, including the Shamrock Acquisition in
February 1996, the Denver Exchange in July 1996, the acquisition of WKYN-AM in
November 1996, the acquisition of 12 stations from Colfax Communications in
January 1997, the acquisition of 8 stations from OmniAmerica Radio Group (the
"Omni Acquisition") in February 1997, and the American Radio Exchange in March
1997, have all been accounted for using the purchase method of accounting. In
addition, pursuant to local marketing agreements the Company began managing
stations WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM in Nassau-Suffolk, New York and
stations WOMX-FM, WXXL-FM and WJHM-FM in Orlando, Florida effective July 1,
1996, and station KSTE-AM in Rancho Cordova, California effective August 1,
1996. As a result of the acquisition, disposition and exchange activity and the
local marketing agreements, the Company's results of operations are not
directly comparable from period to period.
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996
Net revenues increased 64.5% to $73.1 million for the three months ended
June 30, 1997 from $44.4 million for the same period in 1996. Station operating
expenses increased 58.8% to $41.7 million for the three months ended June 30,
1997 from $26.2 million for the same period in 1996. The majority of these
increases were due to the acquisitions of Colfax Communications, OmniAmerica
Group, and various operating agreements with SFX Broadcasting and American
Radio Systems.
Depreciation and amortization increased 67.2% to $8.6 million for the
three months ended June 30, 1997 from $5.1 million for the same period in 1996.
Corporate expenses increased to $2.2 million for the three months ended June
30, 1997 from $0.8 million for the same period in 1996, as a result of
additional personnel and overhead costs associated with the acquisitions of
Shamrock Broadcasting, Colfax Communications, OmniAmerica Group, KIMN-FM and
KALC-FM, and various operating agreements with Secret Communications, SFX
Broadcasting and American Radio Systems. Interest expense increased 29.0% to
$12.5 million from $9.6 million for the same period in 1996. These increases
were primarily attributable to the acquisitions mentioned above and the
resulting change in the capital structure from their financing.
During the second quarter of 1995, the Company developed an estimate of
the fair value of its outstanding stock options in the amount of $19.0 million.
Based upon this estimate and the applicable vesting periods, the Company
recognized approximately $1.0 million of non-cash stock option compensation
expense during the second quarter of both years.
Dividends and accretion on preferred stock of its subsidiary increased
substantially to $9.9 million for the three months ended June 30, 1997 from
$3.2 million for the same period in 1996. The majority of this increase is the
result of the prior year preferred stock being outstanding for the entire
current year period and the issuance of $200.0 million of new preferred stock
of its subsidiary in January 1997.
As a result of the foregoing, income from operations increased 70.4% to
$19.2 million, including $0.5 million of merger expense, for the three months
ended June 30, 1997 from $11.3 million for the same period in 1996. The Company
had a net loss of $15.0 million compared with a net loss of $2.4 million for
the same period in 1996.
Broadcast cash flow increased 72.7% to $31.4 million for the three months
ended June 30, 1997 from $18.2 million for the same period in 1996. Broadcast
cash flow as a percentage of net revenues increased to 43.0% for the 1997
period from 40.9% for the 1996 period. These changes were primarily the result
of the acquisitions and exchange activity discussed above.
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Net revenues increased 84.0% to $128.9 million for the six months ended
June 30, 1997 from $70.1 million for the same period in 1996. Station operating
expenses increased 86.9% to $79.9 million for the six months ended June 30,
1997 from $42.7 million for the same period in 1996. The majority of these
increases were due to the acquisitions of Shamrock Broadcasting, Colfax
Communications, OmniAmerica Group, KIMN-FM and KALC-FM, and various operating
agreements with Secret Communications, SFX Broadcasting and American Radio
Systems.
Depreciation and amortization increased 72.8% to $16.7 million for the
first six months of 1997 from $9.7 million for the same period in 1996.
Corporate expenses increased to $3.9 million for the first six months of 1997
from $1.8 million for the same period in 1996, as a result of additional
personnel and overhead costs associated with the acquisitions of Shamrock
Broadcasting, Colfax Communications, OmniAmerica Group, KIMN-FM and KALC-FM,
and various operating agreements with Secret Communications, SFX Broadcasting
and American Radio Systems. Interest expense increased 38.0% to $23.9 million
from $17.3 million for the same period in 1996. These
20
<PAGE> 23
increases were primarily attributable to the acquisitions mentioned above and
the resulting change in the capital structure from their financing.
During the second quarter of 1995, the Company developed an estimate of
the fair value of its outstanding stock options in the amount of $19.0 million.
Based upon this estimate and the applicable vesting periods, the Company
recognized $1.9 million of non-cash stock option compensation expense during
the first six months of both years.
Dividends and accretion on preferred stock of its subsidiary increased
substantially to $18.1 million for the first six months of 1997 from $4.8
million for the same period in 1996. The majority of this increase is the
result of the prior year preferred stock being outstanding for the entire
current year period and the issuance of $200.0 million of new preferred stock
of its subsidiary in January 1997. 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.
As a result of the foregoing, income from operations increased 72.5% to
$24.0 million, including $2.5 million of merger expense, for the first six
months of 1997 from $13.9 million for the same period in 1996. The Company had
a net loss of $30.4 million compared with a net loss of $14.6 million for the
same period in 1996.
Broadcast cash flow increased 79.5% to $49.1 million for the six months
ended June 30, 1997 from $27.3 million for the same period in 1996. Broadcast
cash flow as a percentage of net revenues were consistent for both periods.
These changes were primarily the result of the acquisitions and exchange
activity discussed above.
LIQUIDITY AND CAPITAL RESOURCES
On July 2, 1997, the Company acquired four radio properties from Viacom,
for approximately $489.8 million, plus various other direct acquisition costs.
The acquisition was financed with the $53.8 million restricted cash deposit,
and the proceeds from Chancellor's Interim Loan and the Company's Restated
Credit Agreement (Note 3). The proceeds from the sale of WDRQ-FM in Detroit to
Disney/ABC Radio for $37.0 million were used to repay borrowings under
Chancellor's Interim Loan.
As a result of the financing of its acquisitions, the Company has a
substantial amount of long-term indebtedness, and for the foreseeable future,
principal and interest payments under the Company's credit agreement and
interest payments under the Company's outstanding subordinated notes will be
the Company's principal uses of cash. In addition to debt service requirements
under the Company's credit agreement, the Company will require $36.3 million
per annum to pay interest on the subordinated notes. The senior exchangeable
preferred stock does not require the payment of cash dividends through May 14,
2001. Similarly, the exchangeable preferred stock does not require cash
dividends through April 14, 2002, although Chancellor Radio Broadcasting will
issue additional shares of exchangeable preferred stock in lieu of cash
dividends. The convertible preferred stock will require cash dividends of $7.0
million per year, plus any additional dividends which accrue pursuant to the
registration rights agreement. Because Chancellor is a holding company with no
assets other than the common stock of Chancellor Radio Broadcasting, Chancellor
will rely on dividends from Chancellor Radio Broadcasting, to permit Chancellor
to pay cash dividends in full on the convertible preferred stock. The Company's
Restated Credit Agreement, the indentures, the Senior Exchangeable Preferred
Certificate of Designations and the terms of the Exchangeable Preferred Stock
generally will limit but will not prohibit Chancellor Radio Broadcasting, from
paying such dividends.
Management believes that cash from operating activities and revolving
loans under the Company's credit agreement should be sufficient to permit the
Company to meet its financial obligations and fund its operations. Changes in
interest rates affect the Company to the extent that it has borrowings under
its term and revolving credit facilities or it makes additional borrowings
under new agreements.
Net cash provided by operating activities was $16.4 million and $9.5
million for the six months ended June 30, 1997 and 1996, respectively. Changes
in the Company's net cash provided by operation activities are primarily the
result of the Company's completed acquisitions and station operating agreements
entered into during the periods.
Net cash used in investing activities was $482.8 million and $407.5
million for the six months ended June 30, 1997 and 1996, respectively. Net cash
provided by financing activities was $468.5 million and $398.7 million for the
six months ended June 30, 1997 and 1996, respectively. These cash flows
primarily reflect the borrowings, capital contributions and expenditures for
station acquisitions, dispositions and swaps.
21
<PAGE> 24
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
2.1 Asset Purchase Agreement, dated as of April 11, 1997, between
Chancellor Radio Broadcasting Company and ABC, Inc. *
2.2 Merger Agreement, dated as of July 14, 1997, among Chancellor
Broadcasting Company, Evergreen Media Corporation, Morris Acquisition
Corporation and Katz Media Group, Inc. (1)
2.3 Joint Bidding Agreement, dated as of July 14, 1997, between Chancellor
Broadcasting Company and Evergreen Media Corporation (1)
2.4 Stockholder Tender Agreement, dated as of July 14, 1997, among
Chancellor Broadcasting Company, Evergreen Media Corporation, Morris
Acquisition Corporation and certain stockholders of Katz Media Group,
Inc. (1)
2.5 Management Tender Agreement, dated as of July 14, 1997, among
Chancellor Broadcasting Company, Evergreen Media Corporation, Morris
Acquisition Corporation and certain stockholders of Katz Media Group,
Inc. (1)
2.6 Amended and Restated Merger Agreement, dated as of July 31, 1997,
among Chancellor Broadcasting Company, Chancellor Radio Broadcasting
Company, Evergreen Media Corporation, Evergreen Mezzanine Holdings
Corporation and Evergreen Media Corporation of Los Angeles (2)
3.7 Second Restated Certificate of Incorporation of Chancellor
Broadcasting Company, as amended (3)
3.8 Certificate of Incorporation of Chancellor Radio Broadcasting Company,
as amended (4)
3.9 Certificate of Incorporation of Chancellor Broadcasting Licensee
Company (5)
3.10 Second Restated Bylaws of Chancellor Broadcasting Company (3)
3.11 Bylaws of Chancellor Radio Broadcasting Company, as amended (5)
3.12 Bylaws of Chancellor Broadcasting Licensee Company (5)
3.13 Certificate of Designations for the 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock of Chancellor Radio Broadcasting Company
(6)
3.14 Certificate of Designations for the 12% Exchangeable Preferred Stock
of Chancellor Radio Broadcasting Company (7)
3.15 Certificate of Designations for the 7% Convertible Preferred Stock of
Chancellor Broadcasting Company (8)
4.16 Indenture, dated as of February 14, 1996, governing the outstanding
9 3/8% Senior Subordinated Notes due 2004 (9)
4.17 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 (3)
4.18 Indenture, dated as of February 26, 1996, governing the 12 1/4%
Subordinated Exchange Debentures due 2008 (3)
4.19 Indenture, dated as of January 23, 1997, governing the 12%
Subordinated Exchange Debentures due 2009 (7)
22
<PAGE> 25
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
4.5 Second Supplemental Indenture, dated as of April 15, 1997, to the
Indenture dated February 14, 1996, governing the 9 3/8% Senior
Subordinated Notes due 2004 (10)
4.6 Indenture, dated as of June 24, 1996, governing the 83/4% Senior
Subordinated Notes due 2007 (11)
10.7 Amended and Restated Credit Agreement, dated as of February 14, 1996
and amended and restated as of January 23, 1997 and further amended
and restated as of July 2, 1997, among Chancellor Broadcasting
Company, Chancellor Radio Broadcasting Company, Various Banks, Goldman
Sachs Credit Partners L.P., as documentation agent, NationsBank of
Texas, N.A., as syndication agent, Toronto Dominion (Texas), Inc., as
syndication agent, and Bankers Trust Company, as managing agent and
arranger (11)
10.8 Senior Credit Agreement, dated as of June 26, 1997, among Chancellor
Broadcasting Company, as borrower, the lenders named therein, and
Bankers Trust New York Corporation, as agent (11)
11.1 Statement RE Computation of Per Share Earnings for Chancellor
Broadcasting Company *
27.1 Financial Data Schedule for Chancellor Broadcasting Company *
27.2 Financial Data Schedule for Chancellor Radio Broadcasting Company *
27.3 Financial Data Schedule for Chancellor Broadcasting Licensee Company *
- ------------------------------
* Filed herewith.
(1) Incorporated by reference to the Schedule 14D-1 of Chancellor
Broadcasting Company, Evergreen Media Corporation and Morris
Acquisition Corporation with respect to the common stock of Katz Media
Group, Inc., filed with the Securities and Exchange Commission on July
18, 1997.
(2) Incorporated by reference to the Form S-4 of Evergreen Media
Corporation, as filed with the Securities and Exchange Commission on
August 1, 1997.
(3) Incorporated by reference to the Annual Report on Form 10-K of
Chancellor Broadcasting Company (File No. 0-27726), Chancellor Radio
Broadcasting Company and Chancellor Broadcasting Licensee Company for
the fiscal year ended December 31, 1995.
(4) Incorporated by reference to the Annual Report on Form 10-K of
Chancellor Broadcasting Company (File No. 0-27726), Chancellor Radio
Broadcasting Company and Chancellor Broadcasting Licensee Company for
the fiscal year ended December 31, 1996.
(5) Incorporated by reference to the Registration Statement on Form S-1
(File No. 33-80534) of Chancellor Broadcasting Company as filed with
the Securities and Exchange Commission.
(6) Incorporated by reference to the Quarterly Report on Form 10-Q of
Chancellor Broadcasting Company (File No. 0-27726) for the fiscal
quarter ended September 30, 1996.
(7) Incorporated by reference to the Form 8-K filed by Chancellor Radio
Broadcasting Company (File No. 33-98334) on February 6, 1997.
(8) Incorporated by reference to the Form 8-K filed by Chancellor
Broadcasting Company (File No. 0-27726) on February 6, 1997.
(9) Incorporated by reference from the Form 8-K of Chancellor Broadcasting
Company (File No. 0-27726) and Chancellor Radio Broadcasting Company
(File No. 33-98334) as filed with the Securities and Exchange
Commission on February 29, 1996.
(10) Incorporated by reference from the Form 10-Q filed by Chancellor
Broadcasting (File No. 0-27726), Chancellor Radio Broadcasting Company
and Chancellor Broadcasting Licensee Company for the fiscal quarter
ended March 31, 1997.
(11) Incorporated by reference to the Form 8-K filed by Chancellor
Broadcasting Company (File No. 0-27726) and Chancellor Radio
Broadcasting Company on July 17, 1997.
(b) REPORTS ON FORM 8-K.
A Current Report on Form 8-K was filed with the Securities and Exchange
Commission on May 13, 1997, by Chancellor Radio Broadcasting Company reporting
the commencement of a tender offer for its outstanding 12 1/2% Senior
Subordinated Notes due 2004 ("12 1/2% Notes") and reporting certain pro forma
financial information contained in the tender offer materials that were mailed
to the holders of the 12 1/2% Notes.
23
<PAGE> 26
A Current Report on Form 8-K was filed with the Securities and Exchange
Commission on June 4, 1997 on behalf of Chancellor Broadcasting Company which
included the audited financial statements of Colfax Communications, Inc. and
its affiliates ("Colfax") as of December 31, 1994, 1995 and 1996, and for each
of the three years ended December 31, 1996, and the audited financial
statements as of December 31, 1995 and 1996, and for each of the three years
ended December 31, 1996 and the unaudited financial statements as of March 31,
1997 and for the three months ended March 31, 1996 and 1997 for KYSR Inc. and
KIBB Inc., WLIT Inc. and WDRQ Inc., which were subsequently acquired from
Viacom International, Inc.
A Current Report on Form 8-K was filed with the Securities and Exchange
Commission on June 25, 1997 on behalf of Chancellor Broadcasting Company and
Chancellor Radio Broadcasting Company reporting the private offering and sale
by Chancellor Radio Broadcasting Company of $200,000,000 aggregate principal
amount of its 8 3/4% Senior Subordinated Notes due 2007. In addition, the
report contained pro forma condensed statements of operations for the year
ended December 31, 1996 and for the three months ended March 31, 1997, and a
pro forma condensed balance sheet as of March 31, 1997, that were included in
the final offering memorandum relating to the offering.
A Current Report on Form 8-K was filed with the Securities and Exchange
Commission on July 17, 1997 on behalf of Chancellor Broadcasting Company and
Chancellor Radio Broadcasting Company reporting the acquisitions by Chancellor
Radio Broadcasting Company of all of the issued and outstanding capital stock
of certain subsidiaries of Viacom International, Inc. for an aggregate purchase
price of $480.0 million, plus approximately $9.8 million of working capital.
These subsidiaries own and operate the assets involved in the operation of four
radio broadcast stations. In connection with the acquisitions, Chancellor Radio
Broadcasting Company entered into an amended and restated credit agreement as
of July 2, 1997, which provides for aggregate borrowings of up to $750.0
million. In addition, Chancellor Broadcasting Company entered into a senior
credit agreement as of June 26, 1997, that provides for aggregate borrowings of
up to $170.0 million, which were received by Chancellor Broadcasting Company on
July 2, 1997, and the net proceeds were contributed to the capital of
Chancellor Radio Broadcasting Company.
24
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant and each co-registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CHANCELLOR BROADCASTING COMPANY
AND EACH CO-REGISTRANT
Date: August 14, 1997 By / s / Eric W. Neumann
-----------------------------
Eric W. Neumann
Senior Vice President -- Finance
(Duly Authorized Officer and
Principal Financial and
Accounting Officer of Registrant
and each co-registrant)
25
<PAGE> 28
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
------- -----------------------
<S> <C>
2.1 Asset Purchase Agreement, dated as of April 11, 1997, between
Chancellor Radio Broadcasting Company and ABC, Inc. *
2.2 Merger Agreement, dated as of July 14, 1997, among Chancellor
Broadcasting Company, Evergreen Media Corporation, Morris Acquisition
Corporation and Katz Media Group, Inc. (1)
2.3 Joint Bidding Agreement, dated as of July 14, 1997, between Chancellor
Broadcasting Company and Evergreen Media Corporation (1)
2.4 Stockholder Tender Agreement, dated as of July 14, 1997, among
Chancellor Broadcasting Company, Evergreen Media Corporation, Morris
Acquisition Corporation and certain stockholders of Katz Media Group,
Inc. (1)
2.5 Management Tender Agreement, dated as of July 14, 1997, among
Chancellor Broadcasting Company, Evergreen Media Corporation, Morris
Acquisition Corporation and certain stockholders of Katz Media Group,
Inc. (1)
2.6 Amended and Restated Merger Agreement, dated as of July 31, 1997,
among Chancellor Broadcasting Company, Chancellor Radio Broadcasting
Company, Evergreen Media Corporation, Evergreen Mezzanine Holdings
Corporation and Evergreen Media Corporation of Los Angeles (2)
3.7 Second Restated Certificate of Incorporation of Chancellor
Broadcasting Company, as amended (3)
3.8 Certificate of Incorporation of Chancellor Radio Broadcasting Company,
as amended (4)
3.9 Certificate of Incorporation of Chancellor Broadcasting Licensee
Company (5)
3.10 Second Restated Bylaws of Chancellor Broadcasting Company (3)
3.11 Bylaws of Chancellor Radio Broadcasting Company, as amended (5)
3.12 Bylaws of Chancellor Broadcasting Licensee Company (5)
3.13 Certificate of Designations for the 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock of Chancellor Radio Broadcasting Company
(6)
3.14 Certificate of Designations for the 12% Exchangeable Preferred Stock
of Chancellor Radio Broadcasting Company (7)
3.15 Certificate of Designations for the 7% Convertible Preferred Stock of
Chancellor Broadcasting Company (8)
4.16 Indenture, dated as of February 14, 1996, governing the outstanding
9 3/8% Senior Subordinated Notes due 2004 (9)
4.17 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 (3)
4.18 Indenture, dated as of February 26, 1996, governing the 12 1/4%
Subordinated Exchange Debentures due 2008 (3)
4.19 Indenture, dated as of January 23, 1997, governing the 12%
Subordinated Exchange Debentures due 2009 (7)
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
------- -----------------------
<S> <C>
4.5 Second Supplemental Indenture, dated as of April 15, 1997, to the
Indenture dated February 14, 1996, governing the 9 3/8% Senior
Subordinated Notes due 2004 (10)
4.6 Indenture, dated as of June 24, 1996, governing the 83/4% Senior
Subordinated Notes due 2007 (11)
10.7 Amended and Restated Credit Agreement, dated as of February 14, 1996
and amended and restated as of January 23, 1997 and further amended
and restated as of July 2, 1997, among Chancellor Broadcasting
Company, Chancellor Radio Broadcasting Company, Various Banks, Goldman
Sachs Credit Partners L.P., as documentation agent, NationsBank of
Texas, N.A., as syndication agent, Toronto Dominion (Texas), Inc., as
syndication agent, and Bankers Trust Company, as managing agent and
arranger (11)
10.8 Senior Credit Agreement, dated as of June 26, 1997, among Chancellor
Broadcasting Company, as borrower, the lenders named therein, and
Bankers Trust New York Corporation, as agent (11)
11.1 Statement RE Computation of Per Share Earnings for Chancellor
Broadcasting Company *
27.1 Financial Data Schedule for Chancellor Broadcasting Company *
27.2 Financial Data Schedule for Chancellor Radio Broadcasting Company *
27.3 Financial Data Schedule for Chancellor Broadcasting Licensee Company *
</TABLE>
- ---------------
* Filed herewith.
(1) Incorporated by reference to the Schedule 14D-1 of Chancellor
Broadcasting Company, Evergreen Media Corporation and Morris
Acquisition Corporation with respect to the common stock of Katz Media
Group, Inc., filed with the Securities and Exchange Commission on July
18, 1997.
(2) Incorporated by reference to the Form S-4 of Evergreen Media
Corporation, as filed with the Securities and Exchange Commission on
August 1, 1997.
(3) Incorporated by reference to the Annual Report on Form 10-K of
Chancellor Broadcasting Company (File No. 0-27726), Chancellor Radio
Broadcasting Company and Chancellor Broadcasting Licensee Company for
the fiscal year ended December 31, 1995.
(4) Incorporated by reference to the Annual Report on Form 10-K of
Chancellor Broadcasting Company (File No. 0-27726), Chancellor Radio
Broadcasting Company and Chancellor Broadcasting Licensee Company for
the fiscal year ended December 31, 1996.
(5) Incorporated by reference to the Registration Statement on Form S-1
(File No. 33-80534) of Chancellor Broadcasting Company as filed with
the Securities and Exchange Commission.
(6) Incorporated by reference to the Quarterly Report on Form 10-Q of
Chancellor Broadcasting Company (File No. 0-27726) for the fiscal
quarter ended September 30, 1996.
(7) Incorporated by reference to the Form 8-K filed by Chancellor Radio
Broadcasting Company (File No. 33-98334) on February 6, 1997.
(8) Incorporated by reference to the Form 8-K filed by Chancellor
Broadcasting Company (File No. 0-27726) on February 6, 1997.
(9) Incorporated by reference from the Form 8-K of Chancellor Broadcasting
Company (File No. 0-27726) and Chancellor Radio Broadcasting Company
(File No. 33-98334) as filed with the Securities and Exchange
Commission on February 29, 1996.
(10) Incorporated by reference from the Form 10-Q filed by Chancellor
Broadcasting (File No. 0-27726), Chancellor Radio Broadcasting Company
and Chancellor Broadcasting Licensee Company for the fiscal quarter
ended March 31, 1997.
(11) Incorporated by reference to the Form 8-K filed by Chancellor
Broadcasting Company (File No. 0-27726) and Chancellor Radio
Broadcasting Company on July 17, 1997.
<PAGE> 1
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
dated as of April 11, 1997
between
CHANCELLOR RADIO BROADCASTING COMPANY
and
ABC, INC.
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TABLE OF CONTENTS
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ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.01. Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.02. Other Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1.03. Terms Generally. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE II. PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.01. Purchase and Sale of the Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.02. Purchase Price; Assumption of Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.03. Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.04. Allocation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.05. Interest Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.06. Closing Deliveries by Seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.07. Closing Deliveries by Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.08. Prorations and Adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.01. Incorporation and Authority of Seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.02. No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.03. Consents and Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.04. Absence of Certain Changes or Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.05. Absence of Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.06. Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.07. Licenses and Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.08. The Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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Section 3.09. Leased Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.10. Employee Benefit Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.11. Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.12. Intangible Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.13. Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.14. Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.15. Environmental Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.16. Financial Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.17. EXCLUSIVITY OF REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.01. Incorporation and Authority of Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.02. No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.03. Consents and Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.04. Absence of Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.05. FCC Qualification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.06. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.07. EXCLUSIVITY OF REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE V. ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.01. Conduct of Business Prior to the Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.02. Access to Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.03. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.04. Regulatory and Other Authorizations: Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.05. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.06. Notification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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Section 5.07. No Other Bids. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.08. Covenant Not to Compete. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.09. Non-Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.10. Seller's Modifications to Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . 22
Section 5.11. Further Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VI. EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.01. Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.02. Retirement Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.03. No Third Party Beneficiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VII. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.01. Conditions to Obligations of Seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.02. Conditions to Obligations of Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.01. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.02. Results of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8.03. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE IX. POST CLOSING OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 9.01. Indemnification by Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 9.02. Indemnification by Seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 9.03. Notification of Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 9.04. Certain Exclusive Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 9.05. Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 9.06. Post-Closing Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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ARTICLE X. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 10.01. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 10.02. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.03. Assignment by Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.04. Assignment by Seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.05. Like-Kind Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.06. Risk of Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.07. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 10.08. Public Announcements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 10.09. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 10.10. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 10.11. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 10.12. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 10.13. No Third-Party Beneficiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 10.14. Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 10.15. Sections and Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 10.16. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 10.17. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 10.18. No Presumption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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THIS ASSET PURCHASE AGREEMENT, dated as of April 11, 1997,
between CHANCELLOR RADIO BROADCASTING COMPANY, a Delaware corporation
("Seller"), and ABC, INC., a New York corporation ("Purchaser").
BACKGROUND:
1. Viacom International, Inc. ("VII") is the owner and
operator of WDRQ(FM), 93.1 Mhz, Detroit, Michigan (the "Station"), pursuant to
certain authorizations issued by the Federal Communications Commission (the
"Commission" or "FCC"), and owns certain assets used or held for use in
connection with the operation of the Station.
2. Viacom Broadcasting East, Inc. ("VBE") is the owner
and operator of WJZW(FM), 105.9 Mhz, Woodbridge, Virginia, pursuant to certain
authorizations issued by the FCC, and owns certain assets used or held for use
in connection with the operation of WJZW.
3. Evergreen Media Corporation of Los Angeles ("EMCLA")
and VII have entered into a Stock Purchase Agreement, dated as of February 16,
1997 (the "Viacom Stock Purchase Agreement"), pursuant to which VII has agreed
to sell and EMCLA has agreed to purchase and assume all of the issued and
outstanding stock of VBE and WDRQ, Inc., each a wholly owned subsidiary of VII,
and VII has agreed to transfer all of its right, title and interest in and to
certain property and assets used or held for use in the operation of the
Station to WDRQ, Inc. prior to the consummation of the Viacom Stock Purchase
Agreement (VII and WDRQ, Inc. are referred to collectively herein as "Viacom").
4. Seller and Chancellor Broadcasting Company
(collectively, "Chancellor") and EMCLA and Evergreen Media Corporation
("Evergreen") have entered into a Joint Purchase Agreement, dated as of
February 19, 1997, pursuant to which Seller has agreed, among other things, to
assume EMCLA's rights under the Viacom Stock Purchase Agreement with respect to
the acquisition of all of the issued and outstanding stock of WDRQ, Inc.
5. Contingent upon the consummation of the Viacom Stock
Purchase Agreement (the "Viacom Transaction"), Seller desires to sell and
assign and Purchaser desires to purchase and acquire certain property and
assets used or held for use in the operation of the Station upon the terms set
forth in this Agreement (the "Transaction").
6. Simultaneously with the execution hereof, EMCLA and
Purchaser are entering into an Asset Purchase Agreement pursuant to which EMCLA
will agree to sell and assign and Purchaser will agree to purchase and acquire
certain property and assets used or held for use in the operation of WJZW(FM)
(the "WJZW Purchase Agreement") upon the terms set forth therein.
7. The parties acknowledge that the license issued by
the Commission for the operation of the Station may not be assigned without the
prior written consent of the Commission.
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Accordingly, in consideration of the foregoing and of the
mutual promises, covenants, and conditions set forth below, the parties agree
as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. Certain Defined Terms.
As used in this Agreement, the following terms shall have the
following meanings:
"Accounts Receivable" means Seller's interest in its accounts
receivable for cash for services performed or provided by Seller prior to the
Closing Date.
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any
other Person who or which, directly or indirectly through one or more
intermediaries, Controls, is Controlled by or is under common Control with such
specified Person.
"Agreement" means this Agreement, including the Disclosure
Schedule, all exhibits and schedules hereto, all documents, certificates and
instruments delivered pursuant hereto and all amendments hereto made in
accordance with Section 10.14.
"Assets" means all assets, tangible and intangible, personal,
real or mixed, used or useful in connection with the business and operation of
the Station owned by, or leased or licensed to Viacom, including the following
(but excluding the Excluded Assets):
(i) the goodwill relating to the Station;
(ii) all rights in respect of the Real Property;
(iii) all furniture, fixtures, equipment, machinery
and other tangible personal property, including the transmitters,
broadcast related transmission equipment, studio equipment and music
library, used or held for use in the operation of the Station listed
under the heading Tangible Personal Property in the Disclosure
Schedule (the "Tangible Personal Property) and any manufacturer's,
distributor's or other warranties relating thereto;
(iv) the Station's public inspection file,
engineering data, transmission logs and user and/or operational
documents for the Assets and all sales and promotional literature,
customer lists and other sales related materials of the Station;
(v) all intellectual property used in connection
with the operation of the Station, together with all registrations,
applications and rights relating thereto (the "Intangible Assets")
including those listed in Section 3.12 of the Disclosure Schedule;
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(vi) the following contracts entered into in
connection with the operation of the Station (collectively, the
"Contracts"):
(a) (i) the licenses, sublicenses,
agreements, leases, employment contracts and other agreements listed in Section
3.11 of the Disclosure Schedule, and (ii) those entered into after the date
hereof and prior to the Closing in accordance with Section 5.01 hereof;
provided that the aggregate amount of the obligations under such contracts
included in clause (ii) hereof shall not exceed $500,000.
(b) all contracts or commitments for the sale
of time on the Station for cash or trade, including Trade Agreements; and
(c) additional contracts or commitments
entered into prior to the date hereof neither listed in Section 3.11 of the
Disclosure Schedule nor otherwise described in this definition that involve
less than $250,000 in the aggregate.
(d) notwithstanding the foregoing, any
agreement entered into with the actual or deemed consent of Purchaser in
accordance with Section 5.01(c)(iii) shall be a Contract and shall not be
subject to the monetary limitations set forth in this definition.
(vii) all of the FCC Licenses and Station
Applications; and
(viii) all municipal, state and federal franchises,
permits, licenses, agreements, waivers and authorizations and all
applications therefore, to the extent transferable.
"Business Day" means any day that is not a Saturday, a Sunday
or other day on which banks are required or authorized by Law to be closed in
the City of New York.
"Cash" means the aggregate of all of Seller's cash on hand as
of the Closing and any of Seller's interests in its cash equivalents and bank
accounts in connection with the operation of the Station.
"Code" means the Internal Revenue Code of 1986, as amended.
"Communications Act" means the Communications Act of 1934, as
amended.
"Control" means, as to any Person, the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise. The term
"Controlled" shall have a correlative meaning.
"Disclosure Schedule" means the Disclosure Schedule attached
hereto.
"Environmental Laws" means any applicable federal, state or
local law, rule or regulation relating to the environment, natural resources,
or public health and safety.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Excluded Assets" means certain of the assets of the Station
that shall not be among the Assets purchased pursuant to this Agreement. The
Excluded Assets include, but are not limited to, the following:
(a) Seller's Cash, Accounts Receivable, securities,
investments, deposits, prepayments (including prepaid taxes and insurance),
refunds and overpayments of any Taxes for periods prior to the Closing Date;
and
(b) any insurance policies and proceeds thereof,
promissory notes, amounts due from employees, bonds, letters of credit,
certificates of deposits or other similar items and cash surrender value in
regard thereto.
"FCC Application" means the requisite applications and other
necessary documents or instruments requesting the FCC Consent.
"FCC Consent" means the FCC's grant of its consent to the
transfer of the FCC Licenses to Purchaser pursuant to this Agreement.
"FCC Licenses" means all of the licenses, permits,
authorizations and call letters granted and issued from time to time by the FCC
to the licensee of the Station for the operation of the Station as currently
operated.
"Governmental Authority" means any United States federal,
state or local or any foreign government, governmental, regulatory or
administrative authority, agency or commission or any court, tribunal, or
judicial or arbitral body.
"Governmental Order" means any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or with any
Governmental Authority.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations thereunder.
"Interest Amount" means, as of any date of determination, the
aggregate amount of interest accrued on the Base Price pursuant to Section 2.05
as of such date of determination.
"Interest Payment Date" means the earlier of the (i) Closing
Date, (ii) the fifth Business Day following the date of the termination, if
any, of this Agreement pursuant to Section 8.01 (other than clauses (a) and (d)
thereof), and (iii) the ninetieth day following the termination of this
Agreement pursuant to Section 8.01(d).
"Interest Rate" means 8% per annum.
"IRS" means the Internal Revenue Service.
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"knowledge of Seller", "Seller's knowledge" or "best of
Seller's knowledge" means the actual knowledge of Mr. Scott K. Ginsburg,
President of EMCLA, Mr. Matthew E. Devine, Senior Vice President and Chief
Financial Officer of EMCLA, Mr. James de Castro, Chief Operating Officer of
EMCLA, and Mr. Kenneth J. O'Keefe, Vice President, of EMCLA in each case
without specific investigation.
"Law" means any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, order, other requirement or rule of law.
"liabilities" means all liabilities or obligations, with
respect to the Assets or Station, whether direct or indirect, matured or
unmatured or absolute, contingent or otherwise.
"Lien" means any mortgage, deed or trust, pledge,
hypothecation, security interest, encumbrance, claim, lien, lease (including
any capitalized lease) or charge of any kind, whether voluntarily incurred or
arising by operation of Law or otherwise, affecting any assets or property,
including any agreement to give or grant any of the foregoing, any conditional
sale or other title retention agreement and the filing of or agreement to give
any financing statement with respect to any assets or property under the
Uniform Commercial Code of any state or comparable Law of any U.S.
jurisdiction.
"Material Adverse Effect" means a material adverse effect on
the Assets, taken as a whole, or on the results of operations or the condition
(financial or otherwise) of the Station; provided, however, that any material
adverse effect arising out of or resulting from an event or series of events or
circumstances affecting (i) the radio broadcast industry generally or (ii) the
market in which the Station operates, shall not constitute a Material Adverse
Effect.
"Permitted Liens" means the following Liens: (a) Liens for
Taxes, assessments or other governmental charges or levies not yet due; (b)
statutory Liens of landlords and Liens of carriers, warehousemen, mechanic,
material and other Liens imposed by Law and on a basis consistent with past
practice for amounts not yet due; (c) Liens arising under any Contract; (d)
Liens not created by Seller or, after the consummation of the Viacom
Transaction, by WDRQ, Inc., which affect the underlying fee interest of any
Leased Real Property; and (e) Liens incurred in connection with Seller's Senior
Credit Facility to be removed on or prior to the Closing.
"Person" means any natural person, general or limited
partnership, corporation, limited liability company, firm, association or other
legal entity.
"Securities Act" means the Securities Act of 1933, as amended.
"Station Applications" means all applications for
modification, extension or renewal of any FCC License and any pending
applications for any new FCC Licenses.
"Tax" or "Taxes" means all income, excise, gross receipts, ad
valorem, sales, use, employment, franchise, profits, gains, property, transfer,
payroll, intangibles or other taxes, fees, stamp taxes, duties, charges, levies
or assessments of any kind whatsoever (whether payable
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directly or by withholding), together with any interest and any penalties,
additions to tax or additional amounts imposed by any Tax authority with
respect thereto.
"Tax Returns" means all returns and reports (including
elections, declarations, disclosures, schedules, estimates and information
returns) required to be supplied to a Tax authority relating to Taxes.
"Trade Agreements" means contracts or commitments for the sale
of advertising time on the Station in exchange for goods and services.
Section 1.02. Other Defined Terms. The following terms
have the meanings defined for such terms in the Sections set forth below:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Acquisition Proposal 5.07
Adjustment Time 2.07
Alternative Disposition 8.02(b)
Alternative Disposition Payment 8.02(b)
Alternative Disposition Purchase Price 8.02(b)
Assumed Liabilities 2.02
Base Price 2.02
Broker 3.14
Chancellor Recitals
Closing 2.03
Closing Date 2.03
Closing Date Adjustments 2.07
COBRA 6.02(d)
Collection Period 9.05(b)
Commission Recitals
Continuation Period 6.01(d)
EMCLA Recitals
Employee Plans 3.10(a)
Escrow Agent 2.02
Escrow Agreement 2.02
Escrow Deposit 2.02
Evergreen Recitals
FCC Recitals
Indemnified Party 9.03(a)
Indemnifying Party 9.03(a)
Losses 9.03(a)
Outside Date 8.01(b)
Payment Date 2.07
Purchase Price 2.02
Purchase Price Reduction 5.10
</TABLE>
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<PAGE> 12
<TABLE>
<S> <C>
Purchaser Preamble
Purchaser's DC Plan 6.02(b)
Purchaser Indemnified Parties 9.02(a)
Purchaser's Proposed Purchase Price
Reduction 5.10
Real Property 3.10
Receivable Statement 9.05(a)
Seller Preamble
Seller Existing Stations 5.08
Seller Indemnified Parties 9.01(a)
Seller's DC Plan 6.02(a)
Seller's Modifications 6.04
Seller's Proposed Purchase Price Reduction 5.10
Station Recitals
Station Employees 6.01(b)
Transaction Recitals
Transferred Employees 6.01(b)
VBE Recitals
Viacom Recitals
Viacom Employees 6.01(a)
Viacom Stock Purchase Agreement Recitals
Viacom Transaction Recitals
VII Recitals
VIP 6.02(a)
Warranty Period 10.01
WJZW Purchase Agreement Recitals
</TABLE>
Section 1.03. Terms Generally. (a) Words in the singular
shall be held to include the plural and vice versa and words of one gender
shall be held to include the other genders as the context requires, (b) the
term "hereof," "herein," and "herewith" and words of similar import shall,
unless otherwise stated, be construed to refer to this Agreement and not to any
particular provision of this Agreement, and Article, Section, paragraph,
Exhibit and Schedule references are to the Articles, Sections, paragraphs,
Exhibits and Schedules to this Agreement unless otherwise specified, (c) the
word "including" and words of similar import when used in this Agreement means
"including, without limitation," unless otherwise specified, and (d) the word
"or" shall not be exclusive.
ARTICLE II.
PURCHASE AND SALE
Section 2.01. Purchase and Sale of the Assets. On the
terms and subject to the conditions set forth in this Agreement, at the
Closing, Seller shall sell or shall cause WDRQ, Inc. to sell, convey, assign,
transfer and deliver to Purchaser, and Purchaser shall purchase, acquire
7
<PAGE> 13
and accept from Seller or, if applicable, WDRQ, Inc., the Assets (free and
clear of all liens other than as permitted by this Agreement).
Section 2.02. Purchase Price; Assumption of Liabilities.
(a) Subject to the adjustments set forth in Section 2.08, at the Closing
Purchaser shall pay THIRTY-SEVEN MILLION DOLLARS ($37,000,000) (the "Base
Price") in cash to Seller as follows: (i) an escrow deposit equal to THREE
MILLION SEVEN HUNDRED THOUSAND DOLLARS ($3,700,000) (the "Escrow Deposit")
shall be deposited with the Escrow Agent (as hereinafter defined) upon the
execution of this Agreement pursuant to an escrow agreement to be entered into
by Purchaser, Seller and an escrow agent reasonably acceptable to Purchaser and
Seller (the "Escrow Agent") in substantially the form attached hereto as
Exhibit A (the "Escrow Agreement") which Escrow Agreement shall provide that
the interest earned on the Escrow Deposit shall be paid periodically to
Purchaser by the Escrow Agent unless or until a claim to the Escrow Deposit is
made by Seller, and unless it is otherwise released prior to Closing pursuant
to Section 8.02 hereof, the Escrow Deposit shall be transferred to Seller by
wire transfer at the Closing and credited to the Purchase Price and (ii) (x)
the balance of the Base Price, and (y) if applicable, the Interest Amount
provided by Section 2.05 at the Closing as provided in Section 2.07(a) (the
Base Price and the Interest Amount are referred to collectively herein as the
"Purchase Price").
(b) At the Closing, Purchaser shall assume only the
liabilities and obligations of Seller or, if applicable, WDRQ, Inc. pursuant to
the Contracts to be performed after the Closing Date and as otherwise expressly
set forth in this Agreement (the "Assumed Liabilities").
(c) Except as expressly provided in Section 2.02(b) and
Article VI hereof, Purchaser shall not and does not assume any liability or
obligation of Seller or Viacom, fixed or contingent, disclosed or undisclosed,
including without limitation, lease or contractual obligations, employment
contracts or commitments, obligations to employ any employee of Seller or
Viacom or for pensions, severance or other employee benefit plans programs or
practices, Tax liabilities, any other claims against Seller or Viacom of any
kind or nature whatsoever involving facts, events or circumstances arising on
or prior to the Closing, no matter when raised. Except as expressly provided
in this Section 2.02(c), Purchaser shall not be required to defend any suit or
claim arising out of any act, event or transaction occurring on or prior to the
Closing Date or out of any condition existing on or prior to the Closing Date,
in connection with the ownership or operation of the Station, including without
limitation, any successor or transferee liability, not expressly assumed by
Purchaser hereunder.
Section 2.03. Closing. Subject to the terms and conditions
of this Agreement, the sale and purchase of the Assets contemplated hereby
shall take place at a closing (the "Closing") to be held at 10:00 A.M.
(Washington, D.C. time) on the later to occur of (i) the date of the Closing of
the Viacom Transaction, or (ii) the tenth (10th) Business Day following the
later to occur of (x) the expiration or termination of the applicable waiting
periods under the HSR Act and (y) the satisfaction or waiver of the other
conditions to the obligations of the parties set forth in Article VII, at the
offices of Seller's counsel, Latham & Watkins, 1001 Pennsylvania Avenue, N.W.,
Suite 1300, Washington, D.C. 20004, or at such other time or on such other date
8
<PAGE> 14
or at such other place as Seller and Purchaser may mutually agree upon in
writing (the day on which the Closing takes place being the "Closing Date").
The Closing shall be effective as of 11:59 p.m. on the Closing Date.
Section 2.04. Allocation. The Purchase Price shall be
allocated among the Assets in accordance with an appraisal performed by a
qualified appraiser jointly selected by Seller and Purchaser, the fees of which
shall be divided equally between Seller and Purchaser. Each of Seller and
Purchaser agree (i) in accordance with Section 1060(a) of the Code and the
regulations thereunder, to jointly complete and separately file Form 8594 with
its federal income tax return for the tax year in which the Closing occurs and
(ii) that neither Seller nor Purchaser will take a position on any income,
transfer or gains tax return before any governmental agency charged with the
collection of any such tax or in any judicial proceeding that is in any manner
inconsistent with the terms of any such allocation without the written consent
of the other.
Section 2.05. Interest Amount. If the Closing shall not
have occurred on or prior to the 120th day following the date hereof due, in
whole or primarily, to an issue arising under the Commission's multiple
ownership rules or policies with respect to Purchaser's ownership (directly or
through an Affiliate) of the Oakland Press, Pontiac, Michigan, then interest
shall commence to accrue on the Base Price at the Interest Rate from such date
through the Interest Payment Date. Purchaser shall pay the Interest Amount to
Seller on the Interest Payment Date.
Section 2.06. Closing Deliveries by Seller. At the
Closing, Seller shall deliver or cause to be delivered to Purchaser:
(a) One or more assignments transferring to Purchaser all
of the interests of Seller or, if applicable, WDRQ, Inc. in and to the FCC
Licenses, and all other licenses, permits, and authorizations issued by any
other governmental authorities that are used in or necessary for the lawful
operation of the Station.
(b) One or more bills of sale conveying to Purchaser the
Tangible Personal Property.
(c) Opinions of Seller's Counsel substantially in the
form of Exhibit B, subject to customary qualifications.
(d) One or more assignments of the Contracts.
(e) One or more assignments of the Intangible Assets.
(f) A receipt for the Purchase Price.
(g) The certificates and other documents required to be
delivered pursuant to Section 7.02.
Section 2.07. Closing Deliveries by Purchaser. At the
Closing, Purchaser shall deliver to Seller:
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<PAGE> 15
(a) The balance of the Purchase Price after the
application of the Escrow Deposit thereto by wire transfer in immediately
available funds pursuant to wire instructions that Seller shall deliver to
Purchaser prior to Closing.
(b) The certificates and other documents required to be
delivered pursuant to Section 7.01.
(c) An opinion of Purchaser's counsel substantially in
the form of Exhibit C subject to customary qualifications.
All deliveries under Sections 2.06 and 2.07 shall occur simultaneously.
Section 2.08. Prorations and Adjustments. The operation of
the Station and the income and all expenses, including without limitation
assumed liabilities and prepaid expenses, attributable thereto through 11:59
p.m. on the Closing Date (the "Adjustment Time") shall be for the account of
Seller and thereafter for the account of Purchaser. Expenses for goods or
services received both before and after the Adjustment Time, taxes and
assessments, power and utilities charges, and rents and similar prepaid and
deferred items shall be prorated between Seller and Purchaser as of the
Adjustment Time (the "Closing Date Adjustments"). All special assessments and
similar charges or liens imposed against the Assets in respect of any period of
time up to the Adjustment Time, whether then due or are payable thereafter (in
installments or otherwise), shall be the responsibility of Seller, and amounts
payable with respect to such special assessments, charges or liens in respect
of any period of time after the Adjustment Time shall be the responsibility of
Purchaser, and such charges shall be adjusted as required hereunder. Five (5)
days prior to the Closing Date Seller shall deliver a statement of all known
proratable items and the net amount due one party to the other as a result
thereof (which statement shall set forth in reasonable detail the basis for
those amounts). At the Closing, Purchaser shall pay to Seller, or Seller shall
pay to Purchaser, as the case may be, the net amount due as a result of the
apportionments (excluding any item that is in dispute). Within thirty (30)
days after the Closing (the "Payment Date"), Purchaser shall deliver to Seller
a statement of any additional proratable items, together with the
apportionments for any such additional proratable items and Purchaser shall pay
to Seller, or Seller shall pay to Purchaser, as the case may be, any amount due
as a result of the adjustment (or, if there is any dispute, the undisputed
amount). If Seller disputes Purchaser's determinations, or if at any time
after delivery of Purchaser's statement of determinations, either party
determines that any item included in the apportionments is inaccurate, or that
an additional item should be included in the apportionments, the party shall
confer with regard to the matter and an appropriate adjustment and payment
shall be made as agreed upon by the parties. If the parties are unable to
resolve the matter, the matter shall be resolved by Arthur Andersen LLP, whose
decision on the matter shall be rendered in writing within thirty (30) days
following submission of the dispute to them and whose fees and expenses shall
be borne equally by the parties. Such decision shall be binding upon the
parties. All amounts due pursuant to this subsection that are not paid by the
Payment Date shall bear interest from the Payment Date until paid at a rate per
annum equal to generally prevailing prime interest rate (as reported by The
Wall Street Journal) plus five percent (5%). Notwithstanding the
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<PAGE> 16
foregoing, there shall be no proration for liabilities for air time or rights
to receive goods or services or otherwise under the Trade Agreements.
ARTICLE III.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER
Seller represents and warrants to Purchaser as follows:
Section 3.01. Incorporation and Authority of Seller.
Seller is a corporation duly incorporated, validly existing and in good
standing under the Laws of the State of Delaware and has all necessary
corporate power and authority to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
Should the consummation of the Viacom Transaction occur prior to the Closing
Date and if necessary, Seller shall be duly qualified to do business in the
State of Michigan prior to the Closing. The execution and delivery of this
Agreement by Seller, the performance by Seller of its obligations hereunder and
the consummation by Seller of the transactions contemplated hereby have been
duly authorized by all requisite corporate action on the part of Seller. This
Agreement has been duly executed and delivered by Seller and (assuming due
authorization, execution and delivery by Purchaser) this Agreement constitutes
the legal, valid and binding obligation of Seller, enforceable against Seller
in accordance with its terms, subject, as to enforceability, to the effect of
any applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent
conveyance or similar Laws affecting creditors' rights generally and to the
effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at Law).
Section 3.02. No Conflict. Assuming all consents,
approvals, authorizations and other actions described in Section 3.03 have been
obtained and all filings and notifications listed in Section 3.03 of the
Disclosure Schedule have been made, and except as may result from any facts or
circumstances relating solely to Purchaser or as described in Section 3.02 of
the Disclosure Schedule, the execution, delivery and performance of this
Agreement by Seller do not and will not (a) violate or conflict with the
Certificate of Incorporation or By-laws of Seller, (b) conflict with or violate
any Law or Governmental Order applicable to Seller, except as would not,
individually or in the aggregate, have a Material Adverse Effect or prohibit
Seller from consummating the purchase and sale of the Assets as contemplated
hereby or (c) result in any breach of, or constitute a default (or event which
with the giving of notice or lapse of time, or both, would become a default)
under, or give to any Person any rights of termination, amendment, acceleration
or cancellation of, or result in the creation of any Lien on any of the Assets
pursuant to any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument to which Seller or by which, to
the knowledge of Seller, the Assets are bound or affected, except as would not,
individually or in the aggregate, have a Material Adverse Effect or prohibit
Seller from consummating the purchase and sale of the Assets as contemplated
hereby.
Section 3.03. Consents and Approvals. The execution and
delivery of this Agreement by Seller do not, and the performance of this
Agreement by Seller will not, require any consent, approval, authorization or
other action by, or filing with or notification to, any
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<PAGE> 17
Governmental Authority or other Person except (a) as described in Section 3.03
of the Disclosure Schedule, (b) the notification requirements of the HSR Act,
(c) for consents required from the FCC prior to the Closing and those notices
to be filed with the FCC after the Closing, (d) where failure to obtain such
consent, approval, authorization or action, or to make such filing or
notification, would not prohibit Seller from consummating the purchase and sale
of the Assets as contemplated hereby, (e) as would not have a Material Adverse
Effect and (f) as may be necessary as a result of any facts or circumstances
relating solely to Purchaser or its Affiliates.
Section 3.04. Absence of Certain Changes or Events. (a)
Since December 31, 1996, except as disclosed in Section 3.04 of the Disclosure
Schedule, to Seller's knowledge, the business of the Station has been conducted
in the ordinary course and consistent with past practice.
(b) Since December 31, 1996 and, except as set forth in
Section 3.04 of the Disclosure Schedule or as contemplated by this Agreement or
in the ordinary course of business, to Seller's knowledge, there has not been:
(i) a Material Adverse Effect;
(ii) the creation of any material Lien on the
Assets, other than Permitted Liens;
(iii) any establishment or material increase in any
bonus, insurance, severance, deferred compensation, pension,
retirement, profit sharing, or other employee benefit plans, or other
material increase in the compensation payable or to become payable to
any officer or key employee of the Station by Seller or Viacom,
except, in any case described above, as may be required by Law,
existing contracts or applicable collective bargaining agreements;
(iv) any employment or severance agreement
providing for annual compensation or severance payments in excess of
$100,000 entered into by Seller or Viacom with any of the Station
Employees;
(v) any sale, assignment, transfer, lease or
other disposition or agreement by Seller or Viacom to sell, assign,
transfer, lease or otherwise dispose of any of the Assets having an
aggregate replacement value exceeding $100,000;
Section 3.05. Absence of Litigation. Except as set forth
in Section 3.05 of the Disclosure Schedule, to Seller's knowledge, there are no
Actions pending, or threatened in writing, against Seller or Viacom, or to
which any of the Assets are subject, before any Governmental Authority that,
individually or in the aggregate, would have a Material Adverse Effect or would
prohibit Seller from consummating the purchase and sale of the Assets as
contemplated hereby.
Section 3.06. Compliance with Laws. Except as set forth in
Section 3.06 of the Disclosure Schedule, to the knowledge of Seller, neither
Seller nor Viacom is in material
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<PAGE> 18
violation of any Law or Governmental Order applicable to the Station or any
material Asset, or by which either the Station or any material Asset is bound.
Section 3.07. Licenses and Permits. To the best of
Seller's knowledge, Viacom holds and is in material compliance with all FCC
Licenses necessary to operate as currently operated the Station, each of which
is listed in Section 3.07 of the Disclosure Schedule. On the Closing Date,
Seller, WDRQ, Inc. or their Affiliate will hold and be in material compliance
with the FCC Licenses. Except as set forth in Section 3.07 of the Disclosure
Schedule, to the best of Seller's knowledge, no governmental qualifications,
registrations, filings, privileges, franchises, licenses, permits, approvals or
authorizations other than the FCC Licenses are required to operate the Station
as a radio broadcast station in substantially the same manner as the Station is
being operated as of the date hereof, other than those that the failure to hold
or obtain would not, individually or in the aggregate, have a material adverse
effect on the results of operations or financial condition of the Station.
Except as set forth in Section 3.07 of the Disclosure Schedule, to the best of
Seller's knowledge, no application, action or proceeding is pending for the
renewal or modification of any of the FCC Licenses, and, except for actions or
proceedings affecting radio broadcast stations generally, no application,
complaint, action or proceeding is pending, or threatened in writing, that
would reasonably be expected to result in (i) the denial of an application for
renewal of any of the FCC Licenses, (ii) the revocation, modification,
nonrenewal or suspension of any of the FCC Licenses, (iii) the issuance of a
cease-and-desist order with respect to any of the FCC Licenses or (iv) the
imposition of any material administrative or judicial sanction with respect to
Seller or the Station. To Seller's knowledge, there is no fact or circumstance
relating to Seller, or any of Seller's Affiliates or Viacom that would cause
the FCC to deny the FCC Application.
Section 3.08. The Assets. (a) Except as set forth in
Section 3.08 of the Disclosure Schedule, to Seller's knowledge, the Assets
include all of the assets, properties and rights of every type and description,
real, personal and mixed, tangible and intangible, that are owned, leased or
licensed by Viacom and are used exclusively or held for use exclusively in the
operation of the Station as of the date hereof. To Seller's knowledge, and
except as set forth in Section 3.08 of the Disclosure Schedule, (i) all of the
Tangible Personal Property material to the operation of the Station is in good
operating condition and repair, subject to normal wear and maintenance, except
to the extent the failure to be in such condition or repair would not result in
a Material Adverse Effect, and (ii) the Assets constitute all of the assets
necessary for the continued operation of the Station in substantially the same
manner as conducted on the date of this Agreement.
(b) To Seller's knowledge, Viacom holds, and at the
Closing Seller will hold, directly or through WDRQ, Inc., good title to or have
valid leasehold interests in all of the Assets (other than the Leased Real
Property as to which the provisions of Section 3.09 apply), free and clear of
any and all Liens, except (i) as disclosed in Section 3.08 of the Disclosure
Schedule, (ii) for Permitted Liens and (iii) for Liens created by or through
Purchaser or any of its Affiliates.
Section 3.09. Leased Real Property. Each parcel of real
property, including those properties set forth in Section 3.09 (which lists
leased real property, the "Real Property") of
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the Disclosure Schedule, (i) to Seller's knowledge, is held pursuant to a valid
leasehold estate by Viacom, and (ii) at the Closing, will be held pursuant to a
valid leasehold estate by Seller directly or through WDRQ, Inc., free and clear
of all Liens, except (a) as disclosed in Section 3.09, of the Disclosure
Schedule, (b) for Permitted Liens and (c) for Liens created by or through
Purchaser or any of its Affiliates.
Section 3.10. Employee Benefit Matters. (a) Seller does
not as of the date of this Agreement maintain, contribute to, sponsor or have
any obligation under any employee benefit plans (within the meaning of Section
3(3) of ERISA) or any bonus, incentive, deferred compensation, supplemental
retirement, severance or other benefit plans, programs or arrangements
(collectively, the "Employee Plans") for the benefit of any current employee of
the Station, other than plans, programs, arrangements, contracts or agreements
for which no benefits are payable after the Closing. To the extent that Seller
determines to maintain, contribute to, sponsor or accrue any obligation under
any such Employee Plan, Seller shall provide Purchaser with a Section 3.10 to
the Disclosure Schedule which lists all such Employee Plans and shall deliver
to Purchaser a true and complete copy of each Employee Plan and a true and
complete copy of each of the following documents, to the extent applicable,
prepared in connection with each such Employee Plan: (i) a copy of each trust
or other funding arrangement, (ii) the most recently filed IRS Form 5500 and
(iii) the most recently received IRS determination letter.
(b) To Seller's knowledge, there are no collective
bargaining agreements that relate to the employees of the Station and there has
been no union activity or attempts to organize.
Section 3.11. Contracts. To the best of Seller's
knowledge, each of the Contracts that is material to the operation of the
Station is in full force and effect and is unimpaired by any breach of Viacom,
Seller or their Affiliates that would give any other party thereto the right to
terminate such contract or receive damages from Purchaser after the Closing
Date. To the knowledge of Seller, no other party to any Contract is in
material default of its obligations under such Contract.
Section 3.12. Intangible Assets. To the best of Seller's
knowledge, other than as set forth in Section 3.12 of the Disclosure Schedule
and other than the name "Viacom," there are no material patents, patent
applications, trademarks, trade names, service marks, copyright registrations
or copyright applications licensed or used by or registered in the name of
Viacom or Seller which apply to the Station. To the best of Seller's
knowledge, Viacom owns and at Closing Seller will own directly or through WDRQ,
Inc. all right and interest in, and right and authority to use in connection
with the conduct of the business of the Station as presently conducted, without
infringing or the rights of any party, all of the Intangible Assets.
Section 3.13. Payment of Taxes. To Seller's knowledge,
Viacom has fully paid all Taxes that have been assessed against Viacom with
respect to the Station and its operation, except for Taxes contested in good
faith by Viacom and has timely filed all Tax Returns.
Section 3.14. Brokers. Except for Star Media Group, Inc.
("Broker"), no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in
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connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Seller. Seller is solely responsible for
the fees and expenses of Broker.
Section 3.15. Environmental Compliance. Except as set
forth in Section 3.15 of the Disclosure Schedule or as would not result in a
Material Adverse Effect, (i) to Seller's knowledge, the operation of the
Station is in compliance with all Environmental Laws, (ii) from the date of the
consummation of the Viacom transaction to the Closing Date, Seller shall
operate and shall cause WDRQ, Inc. to operate the Station in compliance with
all Environmental Laws and (iii) there are no judicial or administrative
actions, proceedings or investigations pending or, to Seller's knowledge,
threatened in writing against Seller, or, to Seller's knowledge, against Viacom
or any real property operated or leased by Viacom in connection with its
operation of the Station alleging the violation of or seeking to impose
liability pursuant to any Environmental Law.
Section 3.16. Financial Information. Section 3.16 of the
Disclosure Schedule sets forth the Unaudited Balance Sheet and the related
Unaudited Statement of Income for the Station for the year ended December 31,
1996 as provided to Seller by Viacom pursuant to the Viacom Stock Purchase
Agreement. Nothing has come to Seller's attention which would lead Seller to
believe that such Balance Sheet or Statement of Income is materially
inaccurate.
Section 3.17. EXCLUSIVITY OF REPRESENTATIONS. THE
REPRESENTATIONS AND WARRANTIES MADE BY SELLER IN THIS AGREEMENT ARE IN LIEU OF
AND ARE EXCLUSIVE OF ALL OTHER REPRESENTATIONS AND WARRANTIES, INCLUDING ANY
IMPLIED WARRANTIES. SELLER HEREBY DISCLAIMS ANY SUCH OTHER OR IMPLIED
REPRESENTATIONS OR WARRANTIES, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO
PURCHASER OR ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES OF
ANY DOCUMENTATION OR OTHER INFORMATION (INCLUDING, WITHOUT LIMITATION, ANY
FINANCIAL PROJECTIONS OR OTHER SUPPLEMENTAL DATA).
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
Section 4.01. Incorporation and Authority of Purchaser.
Purchaser is a corporation duly incorporated, validly existing and in good
standing under the Laws of its jurisdiction of incorporation or organization,
is and at Closing will be duly qualified to do business in and in good standing
under the laws of the State of Michigan and has all necessary corporate power
and authority to enter into this Agreement, to carry out its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by Purchaser, the performance by
Purchaser of its obligations hereunder and the consummation by Purchaser of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of Purchaser. This Agreement has been duly
executed and delivered by Purchaser and (assuming due authorization, execution
and delivery by Seller) constitutes the legal, valid and binding obligation of
Purchaser enforceable against
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Purchaser in accordance with its terms, subject, as to enforceability, to the
effect of any applicable bankruptcy, reorganization, insolvency, moratorium,
fraudulent conveyance or similar Laws affecting creditors' rights generally and
to the effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at Law).
Section 4.02. No Conflict. Except as may result from any
facts or circumstances relating solely to Seller, the execution, delivery and
performance of this Agreement by Purchaser do not and will not (a) violate or
conflict with the Certificate of Incorporation or By-laws (or other similar
applicable documents) of Purchaser, (b) conflict with or violate any Law or
Governmental Order applicable to Purchaser or (c) result in any breach of, or
constitute a default (or event which with the giving of notice or lapse of
time, or both, would become a default) under, or give to any Person any rights
of termination, amendment, acceleration or cancellation of, or result in the
creation of any Lien on any of the assets or properties of Purchaser pursuant
to, any material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument relating to such assets or
properties to which Purchaser is a party or by which any of such assets or
properties is bound or affected, except as would not, individually or in the
aggregate, prohibit Purchaser from consummating the purchase and sale of the
Assets as contemplated hereby.
Section 4.03. Consents and Approvals. The execution and
delivery of this Agreement by Purchaser do not, and the performance of this
Agreement by Purchaser will not, require any consent, approval, authorization
or other action by, or filing with or notification to, any Governmental
Authority or other Person, except (a) as described in a writing delivered to
Seller by Purchaser on the date hereof, (b) the notification requirements of
the HSR Act, (c) for consents required from the FCC prior to the Closing and
those notices to be filed with the FCC after the Closing, (d) where failure to
obtain such consent, approval, authorization or action, or to make such filing
or notification, would not prohibit Purchaser from consummating the purchase
and sale of the Assets as contemplated hereby and (e) as may be necessary as a
result of any facts or circumstances relating solely to Seller or its
Affiliates.
Section 4.04. Absence of Litigation. There are no Actions
pending against Purchaser before any Governmental Authority that, individually
or in the aggregate, would prohibit Purchaser from consummating the purchase
and sale of the Assets as contemplated hereby.
Section 4.05. FCC Qualification. Except as described in a
letter referencing this Section 4.05 delivered to Seller by Purchaser on the
date hereof, Purchaser is legally, technically, financially and otherwise
qualified under the Communications Act and all rules, regulations and policies
of the FCC to acquire the FCC Licenses and own and operate the Station. Except
as described in a letter referencing this Section 4.05 delivered to Seller by
Purchaser on the date hereof, there are no proceedings pending or, to the
knowledge of Purchaser, threatened in writing, or facts, which could reasonably
be expected to disqualify Purchaser under the Communications Act or otherwise
from acquiring the FCC Licenses or owning and operating the Station or would
cause the FCC not to approve the assignment of the FCC Licenses to Purchaser.
There is no fact or circumstance relating to Purchaser or any of its Affiliates
that could (i) cause
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the FCC to deny the FCC application for assignment of the FCC Licenses as
provided for in this Agreement or (ii) delay processing of the FCC application
for the assignment of the FCC Licenses as provided for in this Agreement
because the FCC is considering whether acts or omissions of Purchaser or any of
its Affiliates warrant admonishing Purchaser or any of its Affiliates, or
imposing a fine, forfeiture, or other penalty against Purchaser or any of its
Affiliates.
Section 4. 06. Brokers. No broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Purchaser.
Section 4. 07. EXCLUSIVITY OF REPRESENTATIONS. THE
REPRESENTATIONS AND WARRANTIES MADE BY PURCHASER IN THIS AGREEMENT ARE IN LIEU
OF AND ARE EXCLUSIVE OF ALL OTHER REPRESENTATIONS AND WARRANTIES, INCLUDING ANY
IMPLIED WARRANTIES. PURCHASER HEREBY DISCLAIMS ANY SUCH OTHER OR IMPLIED
REPRESENTATIONS OR WARRANTIES, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO
SELLER OR ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES OF ANY
DOCUMENTATION OR OTHER INFORMATION.
ARTICLE V.
ADDITIONAL AGREEMENTS
Section 5.01. Conduct of Business Prior to the Closing.
(a) Between the date hereof and the Closing Date, Purchaser shall not directly
or indirectly control, supervise or direct, or attempt to control, supervise or
direct, the operation of the Station. Such operation, including complete
control and supervision of all programs, employees and policies of the Station
shall be the sole responsibility of Viacom prior to the consummation of the
Viacom Transaction and Seller from the date of such consummation. Neither
title nor right to possession of the Assets or the Station shall pass to
Purchaser until the Closing, but Seller shall use its reasonable best efforts
to provide to Purchaser opportunity for reasonable inspection of the Station
and the Assets (upon reasonable prior notice) during normal business hours with
the purpose that an uninterrupted and efficient transfer thereof may be
accomplished.
(b) Unless Purchaser otherwise agrees in writing and
except as otherwise set forth herein or in the Disclosure Schedule, between the
date hereof and the date of the consummation of the Viacom Transaction Seller
shall use its best efforts to cause Viacom to abide by its obligations under
Section 5.01(b) of the Viacom Stock Purchase Agreement and between the date of
the consummation of the Viacom Transaction and the Closing Date, Seller shall
and shall cause WDRQ, Inc. to, (i) conduct the business of the Station only in
the ordinary course consistent with past practice, (ii) use commercially
reasonable efforts to keep available to Purchaser the services of the key
employees and on-air talent of the Station, (iii) use commercially reasonable
efforts to preserve the current relationships of the Station with its
customers, suppliers, distributors and other Persons with which the Station has
significant
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business relationships, and (iv) pay and discharge all material liabilities of
the Station substantially in accordance with their terms (other than
liabilities being contested in good faith).
(c) Unless Purchaser otherwise agrees in writing and
except as otherwise set forth herein, between the date hereof and date of the
consummation of the Viacom Transaction, Seller shall use its best efforts to
cause Viacom to abide by its obligations under Section 5.01(c) of the Viacom
Stock Purchase Agreement and between the date of the consummation of the Viacom
Transaction and the Closing Date, Seller shall not do and shall not permit
WDRQ, Inc. to do any of the following without the prior written consent of
Purchaser: (i) grant any Lien on any Asset, other than Permitted Liens, or
incur any liabilities other than, in either such case, in the ordinary course
of business consistent with past practice, (ii) sell, assign, lease or
otherwise transfer or dispose of any material Asset other than in the ordinary
course of business, consistent with past practices of the Station, (iii)
acquire any program rights or enter into any contract, agreement, commitment,
license or understanding therefore except in the ordinary course of business
and consistent with past business practices of the Station and involving
aggregate payments or obligations not to exceed $100,000 individually or
$500,000 in the aggregate for all such contracts which shall be assumed by
Purchaser; provided, however, that in the event that Purchaser does not respond
to Seller's notice of its intent to enter into any such agreement within five
(5) business days of its receipt thereof, Seller may proceed to enter into the
agreement set forth in such notice, (iv) knowingly take any action which could
jeopardize the validity or enforceability of or rights under the FCC Licenses,
other material authorizations or material Contracts.
Section 5.02. Access to Information. From the date hereof
until the consummation of the Viacom Transaction, Seller shall use its best
efforts to cause Viacom to and, from the date of the consummation of the Viacom
Transaction to the Closing Date, Seller shall, upon reasonable notice from
Purchaser (i) afford the officers, employees and agents and representatives of
Purchaser reasonable access, during normal business hours, to the offices,
properties, books and records of the Station and (ii) furnish to the officers,
employees and authorized agents and representatives of Purchaser such
additional financial and operating data and other information regarding the
Business and the Assets as Purchaser may from time to time reasonably request;
provided, however, that such investigation shall not unreasonably interfere
with the business of the Station or any of the businesses or operations of
Seller. Between the date of this Agreement and the Closing, Seller agrees to
forward to Purchaser promptly upon receipt (i) copies of any Supplemental
Financial Statements (as defined in Section 5.07 of the Viacom Stock Purchase
Agreement) or portions thereof relating to the Station that Seller receives
pursuant to Section 5.07 of the Viacom Stock Purchase Agreement, and (ii) any
additional notices or disclosure that Seller may receive from Viacom with
respect to the Station.
Section 5.03. Confidentiality. Each party agrees that any
and all information learned or obtained by it from the other (and that is not
otherwise public or known in the radio broadcast industry) shall be
confidential and agrees not to disclose any such information to any person
whatsoever other than as is necessary for the purpose of effecting the
Transaction or as otherwise required by law. In the event this Agreement is
terminated, all confidential information provided by Seller to Purchaser shall
be returned to Seller, unless the same is
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reasonably retained in connection with litigation or other proceedings between
the parties relating to this Agreement.
Section 5.04. Regulatory and Other Authorizations:
Consents. (a) Each party hereto shall use its reasonable best efforts to
obtain all authorizations, consents, orders and approvals of all Governmental
Authorities that may be or become necessary for its execution and delivery of,
and the performance of its obligations pursuant to, this Agreement and will
cooperate fully with the other party in promptly seeking to obtain all such
authorizations, consents, orders and approvals. The parties hereto will not
knowingly take any action that would have the effect of delaying, impairing or
impeding the receipt of any required approval.
(b) Seller and Purchaser shall prepare and file with the
FCC as soon as practicable, but in no event later than seven (7) Business Days
after the execution of this Agreement, the FCC Applications. After the
aforesaid FCC Applications have been filed with the FCC, Seller and Purchaser
shall prosecute such applications with all reasonable diligence to obtain the
requisite FCC Consent; provided, however, except as provided in the following
sentence, that neither Seller nor Purchaser shall be required to pay
consideration to any third party to obtain the FCC Consent. Purchaser and
Seller shall share equally the cost of all FCC filing fees relating to the
Transaction.
(c) Each party hereto agrees to make an appropriate
filing of a Notification and Report Form pursuant to the HSR Act with respect
to the transactions contemplated hereby within fifteen (15) Business Days after
the date hereof and to supply promptly any additional information and
documentary material that may be requested pursuant to the HSR Act. Purchaser
shall bear all filing fees associated with the HSR filings.
(d) Each party hereto agrees to cooperate in obtaining
any other consents and approvals which may be required in connection with the
transactions contemplated by this Agreement; provided, however, that Seller in
cooperation with Purchaser shall use its commercially reasonable efforts to
obtain each consent identified in Section 3.03 of the Disclosure Schedule prior
to the Closing Date. Notwithstanding the foregoing, neither Seller nor
Purchaser shall be required to pay consideration to any third party to obtain
any such consent or approval.
Section 5.05. Insurance. Seller shall maintain all
existing insurance policies, or comparable coverage, for the Station and the
Assets, as listed in Section 5.05 of the Disclosure Schedule.
Section 5.06. Notification. Seller shall notify
Purchaser, and Purchaser shall notify Seller, of any litigation, arbitration or
administrative proceeding pending or, to Seller's knowledge, threatened in
writing against Seller, or, to Seller's knowledge, Viacom, on one hand, or
Purchaser, on the other hand, which challenges the transactions contemplated
hereby.
Section 5.07. No Other Bids. From and after the date
hereof, neither Seller nor any of Seller's Affiliates shall, nor shall it
authorize or permit any officer, director or employee of, or any investment
banker, attorney or other advisor or representative of Seller or any of
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Seller's Affiliates to, directly or indirectly, (a) solicit, initiate or
encourage the submission of any Acquisition Proposal (as hereinafter defined)
or (b) participate in any discussions or negotiations regarding, or furnish to
any person any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes an
Acquisition Proposal, except as provided in Section 8.02(b) hereof. For
purposes of this Agreement, "Acquisition Proposal" means any proposal with
respect to a merger, consolidation, share exchange or similar transaction or
business combination involving the Station, or any proposal or offer to acquire
in any manner a substantial equity interest in the Station or any proposal or
offer to purchase of all or any significant portion of the Assets, other than
the transactions contemplated hereby.
Section 5.08. Covenant Not to Compete. Seller covenants
and agrees that for a period of twenty-four (24) months from the Closing Date,
neither Seller nor any of its Affiliates shall operate a commercial FM radio
broadcast station or provide programming to a commercial FM radio broadcasting
station in the Detroit, Michigan metropolitan area radio market with a
programming format that is substantially similar to the programming format of
the Station; provided, however, that this Section 5.08 shall not (i) require
Seller to change the current format of any station owned by it or its
Affiliates, to which Seller or its Affiliates currently provides programming,
or to be acquired by Seller or EMCLA in connection with the Viacom Transaction
or the merger Chancellor with and into Evergreen pursuant to that certain
Agreement and Plan of Merger between Chancellor and Evergreen, dated as of
February 19, 1997 in the Detroit, Michigan metropolitan area radio market
("Seller Existing Stations"), (ii) limit Seller's ability to program "dance
sets" or features on any Seller Existing Station consistent with the current
format and programming of such Seller Existing Station, nor (iii) to the extent
necessary to facilitate a group acquisition by Seller, limit Seller's ability
to acquire a commercial FM radio broadcast station in the Detroit, Michigan
metropolitan area radio market, as part of a group acquisition, with an
existing programming format substantially similar to the programming format of
the Station; provided that Seller shall hold such station for no longer than
six (6) months after the consummation of such group acquisition. For the
purposes hereof, a programming format substantially similar to the programming
format of the Station shall mean that described by industry publications as
"dance."
Section 5.09. Non-Solicitation. For a period of ninety
(90) days from the Closing Date, Seller will not solicit or offer employment to
any general manager, general sales manager, on-air talent or program director
who is then a Transferred Employee and Purchaser shall not solicit or offer
employment to any general manager, general sales manager, on-air talent or
program director who is then an employee of a Seller Existing Station, except
that a general solicitation through advertisement will not constitute a
violation of this Section.
Section 5.10. Seller's Modifications to Representations and
Warranties. Seller may modify in writing any representation or warranty made
with qualification as to Seller's knowledge (and related sections of the
Disclosure Schedule) to the extent necessary to cause such representation,
warranty or section of the Disclosure Schedule to be accurate in light of
information of which Seller becomes aware after the date of this Agreement
("Seller's Modifications"); provided, however, that (i) Seller's Modifications
shall not modify the definition of Contracts or Section 3.11 of the Disclosure
Schedule and (ii) should Seller's
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Modifications constitute a Material Adverse Effect and should Seller offer to
reduce the Purchase Price to reflect the impact of the Material Adverse Effect
on the value of the Station to the extent that such amount exceeds the
indemnification threshold set forth in Section 9.02(b) ("Purchase Price
Reduction"), then Purchaser shall agree to waive the condition set forth in
Section 7.02(a)(iv) hereof and proceed to consummate the transactions
contemplated hereby. The amount offered by Seller pursuant to the preceding
sentence is referred to herein as the "Seller's Proposed Purchase Price
Reduction." Upon receipt of Seller's Proposed Purchase Price Reduction,
Purchaser shall have ten (10) Business Days within which to either accept
Seller's Proposed Purchase Price Reduction or give notice to Seller of its
proposed Purchase Price Reduction ("the "Purchaser's Proposed Purchase Price
Reduction"). Upon receipt of Purchaser's Proposed Purchase Price Reduction,
Seller shall have ten (10) Business Days in which to either accept Purchaser's
Proposed Purchase Price Reduction or to notify Purchaser of its intent to
submit the matter to an independent arbitor jointly selected by Purchaser and
Seller for resolution. Within ten (10) Business Days of Seller's arbitration
notice, Purchaser shall submit the Purchaser's Proposed Purchase Price
Reduction together with supporting materials and Seller shall submit Seller's
Proposed Purchase Price Reduction together with any supporting materials to
such independent arbitor and thereafter, the independent arbitor shall have
twenty (20) days to determine the amount of the Purchase Price Reduction. In
determining the amount of the Purchase Price Reduction, the arbitor may only
select either Seller's Proposed Purchase Price Reduction or Purchaser's
Proposed Purchase Price Reduction and shall not make an independent
determination of value. The decision of the independent arbitor shall be
binding upon the parties and neither party shall seek review or appeal thereof.
Section 5.11. Further Action. Each of the parties hereto
shall execute and deliver such documents and other papers and take such further
actions as may be reasonably required to carry out the provisions of this
Agreement and give effect to the transactions contemplated hereby.
ARTICLE VI.
EMPLOYEE MATTERS
Section 6.01. Employees. (a) To Seller's knowledge, set
forth in Section 6.01(a) of the Disclosure Schedule is a true and complete list
showing the names and current annual salary rates of all of the employees and
on-air talent of the Station as of the date hereof (the "Viacom Employees"),
which includes for such employees the amounts paid or payable as a base salary
and lists any other compensation arrangements for such employees for 1996,
including bonuses or other compensation arrangements. To Seller's knowledge,
such employees constitute all of the on-air talent and personnel working at the
Station (whether full-time or part-time) or otherwise involved in the
operations of the Station.
(b) Except as provided in a letter referring to this
Section 6.01(b) executed by the parties on the date hereof, Purchaser shall
offer to employ each of the Viacom Employees that are employed at the Station
on the Closing Date, together with any employees of Seller or its Affiliates
employed at the Station on the Closing Date (together with the Viacom
Employees, the "Station Employees") either by assumption of those of the
Contracts that are employment
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agreements or, in the case of Station Employees not subject to such agreements,
by offering employment at the Station on substantially the same terms as each
such Station Employee is employed at Closing. For the purposes hereof, those
Station Employees who accept employment with Purchaser at the Station in
connection with the Closing are hereinafter referred to collectively as the
"Transferred Employees."
(c) For the one-year period commencing on the Closing
Date (the "Continuation Period"), Purchaser agrees to provide the Transferred
Employees with employee benefits that in the aggregate are substantially
equivalent to those provided to such Transferred Employees immediately prior to
the Closing. Notwithstanding anything to the contrary herein, Purchaser shall
not have any obligation to provide any equity, equity based or similar
compensation or benefit to any Transferred Employee with respect to the equity
of Purchaser or its Affiliates, and no equity or equity based compensation or
benefits provided to Transferred Employees immediately prior to the Closing
shall be taken into account for purposes of this Section 6.01(c) in determining
substantial equivalence.
(d) To the extent that service is relevant for
eligibility, vesting, benefit accrual, benefit contributions, benefit
calculations or allowances (including entitlements to vacation and sick days
but not for any purpose under any retirement plan), under any employee benefit
plan, program or arrangement established or maintained by Purchaser for the
benefit of Transferred Employees, such plan, program or arrangement shall
credit such Transferred Employees for service on or prior to the Closing with
Seller, Viacom or any Affiliate thereof; provided, however, that Purchaser
shall not be obligated to give credit for such service to the extent it (i)
would result in duplication of any benefits to which a Transferred Employee is
entitled to under any comparable plans, programs or arrangements maintained by
Seller or any of its Affiliates on or prior to the Closing Date or by Purchaser
after the Closing Date or (ii) was not a service which was recognized for
purposes of such comparable plans, programs or arrangements. In addition,
Purchaser shall waive any pre-existing conditions and recognize for purposes of
annual deductible and out-of-pocket limits under its medical and dental plans,
claims of Transferred Employees incurred during the year in which the Closing
Date occurs and prior to the Closing Date. Seller shall cooperate with
Purchaser, and shall use reasonable efforts to cause Viacom to cooperate with
Purchaser in determining the expenses incurred by the Transferred Employees.
Section 6.02. Retirement Plan. (a) Viacom has advised
Seller that it maintains the Viacom Investment Plan (the "VIP") and that
certain of the Viacom Employees may be participants in the VIP. The Viacom
Stock Purchase Agreement obligates Seller to designate a defined contribution
plan ("Seller's DC Plan") that will accept account balances and loan
obligations in the VIP of any Viacom Employee who remains employed at the
Station after the consummation of the Viacom Transaction. Seller's DC Plan may
also be available to other Station Employees.
(b) Purchaser will cooperate with Seller to provide
Seller and Viacom such current information regarding Transferred Employees as
may be necessary to administer the VIP or Seller's DC Plan. Seller will
cooperate with Purchaser and will use its reasonable efforts to
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cause Viacom to cooperate with Purchaser to provide Purchaser with information
of the tax qualified status of the VIP and Seller's DC Plan.
(c) Purchaser agrees that it shall designate a defined
contribution plan ("Purchaser's DC Plan") that will accept a direct rollover,
within the meaning of Section 401(a)(31) of the Code and subject to the
requirements of the Code and applicable law, of the account balances of
Transferred Employees in the VIP and Seller's DC Plan, including any loan
obligation that a Transferred Employee may have in his or her account in the
VIP or Seller's DC Plan. To the extent that a Transferred Employee transfers a
loan obligation to Purchaser's DC Plan, Purchaser's DC Plan shall continue to
accept repayments of such loan amounts and shall otherwise administer such
loans in accordance with their terms and the terms of ERISA until such loan
amounts are repaid or are foreclosed upon.
(d) Purchaser shall provide continuation health care
coverage to all Transferred Employees and their qualified beneficiaries who
incur a qualifying event after the Closing in accordance with the continuation
health care coverage requirements of Section 4980D of the Code and Sections 601
through 608 of ERISA ("COBRA"). Seller shall be responsible for providing
continuation coverage to the extent required by law (i) to any Transferred
Employee who incurs a "qualifying event" under COBRA on or before the Closing
Date and (ii) to any employee who is not a Transferred Employee who incurs a
"qualifying event" under COBRA on or before the Closing Date.
Section 6.03. No Third Party Beneficiaries. Nothing in
this Article VI or elsewhere in this Agreement shall be deemed to make any of
the Station Employees, Viacom or any other third party, third party
beneficiaries of this Agreement.
ARTICLE VII.
CONDITIONS TO CLOSING
Section 7.01. Conditions to Obligations of Seller. The
obligations of Seller to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver, at or prior to the
Closing, of each of the following conditions:
(a) Representations, Warranties and Covenants. (i) The
representations and warranties of Purchaser contained in Article IV (A) that
are qualified as to materiality, shall be true and correct and (B) that are not
qualified as to materiality, shall be true and correct in all material
respects, in each case as of the Closing, other than representations and
warranties made as of another date, which representations and warranties shall
have been true and correct, or true and correct in all material respects, as
the case may be, as of such date; (ii) the obligations, covenants and
agreements of Purchaser contained in this Agreement to be performed or complied
with on or prior to the Closing Date (A) that are qualified as to materiality
shall have been performed or complied with and (B) that are not qualified as to
materiality shall have been performed or complied with in all material
respects, in each case on or prior to the Closing Date, and (iii) Seller shall
have received a certificate to such effect signed by a duly authorized officer
of Purchaser;
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(b) Communications Act. The FCC Consent shall have been
issued and shall contain no provision materially adverse to Seller;
(c) HSR Act. Any waiting period (and any extension
thereof) under the HSR Act applicable to the purchase and sale of the Assets
contemplated hereby shall have expired or shall have been terminated;
(d) No Governmental Order. There shall be no
Governmental Order in existence which restrains or which materially and
adversely affects the transactions contemplated by this Agreement or is likely
to render it impossible or unlawful to consummate such transactions; and
(e) Resolutions. Seller shall have received a true and
complete copy, certified by the Secretary or an Assistant Secretary of
Purchaser, of the resolutions duly and validly adopted by the Board of
Directors of Purchaser evidencing its authorization of the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby.
(f) Consummation of Viacom Transaction. The transactions
contemplated by the Viacom Stock Purchase Agreement shall have been
consummated.
Section 7.02. Conditions to Obligations of Purchaser. The
obligations of Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver, at or prior to the
Closing, of each of the following conditions:
(a) Representations. Warranties and Covenants. (i) The
representations and warranties of Seller contained in this Agreement (A) that
are qualified as to materiality, shall be true and correct and (B) that are not
qualified as to materiality, shall be true and correct in all material
respects, in each case as of the Closing, other than representations and
warranties made as of another date, which representations and warranties shall
have been true and correct, or true and correct in all material respects, as
the case may be, as of such date; provided, however, that any representations
and warranties of Seller contained in this Agreement that are qualified as to
knowledge shall be subject to Seller's Modifications; (ii) the obligations,
covenants and agreements of Seller contained in this Agreement to be performed
or complied with on or prior to the Closing Date (A) that are qualified as to
materiality, shall have been performed or complied with and (B) that are not
qualified as to materiality, shall have been performed or complied with in all
material respects, in each case on or prior to the Closing Date; (iii)
Purchaser shall have received a certificate to such effect signed by a duly
authorized officer of Seller; and (iv) none of Seller's Modifications shall
constitute a Material Adverse Effect, provided that Purchaser shall waive the
condition contained in this clause (iv) in the event that Seller shall agree to
indemnify Purchaser with respect to such matter or matters pursuant to Section
5.10 of this Agreement.
(b) Validity of Station Licenses. On the Closing Date,
Seller directly or through WDRQ, Inc. or an assignee of Seller, shall be the
owner and holder of the Station Licenses to the extent that such authorizations
can be owned or held by Seller or such assignee under the Communications Act of
1934, as amended; the Station Licenses shall be in unconditional full force and
effect, valid for the balance of the current license term expiring at
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3:00 a.m., E.S.T., October 1, 2003, and the Station Licenses shall be
unimpaired by any acts or omissions of Seller or Seller's employees, agents,
officers, directors or shareholders.
(c) Communications Act. The FCC Consent shall have been
issued and shall contain no provision materially adverse to Purchaser.
(d) HSR Act. Any waiting period (and any extension
thereof) under the HSR Act applicable to the purchase and sale of the Assets
contemplated hereby shall have expired or shall have been terminated;
(e) No Governmental Order. There shall be no
Governmental Order in existence which restrains or which materially and
adversely affects the transactions contemplated by this Agreement or is likely
to render it impossible or unlawful to consummate such transactions and no
Action by a federal Governmental Authority seeking to obtain such a
Governmental Order shall be pending;
(f) Resolutions. Purchaser shall have received a true
and complete copy, certified by the Secretary or an Assistant Secretary of
Seller, of the resolutions duly and validly adopted by the Board of Directors
of Seller evidencing its authorization of the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby; and
(g) Consents. (i) Seller shall have obtained and
delivered to Purchaser all material consents (in writing and signed by the
applicable lessor) required in connection with the consummation of the
transactions contemplated hereby with respect to any lease pursuant to which
Seller leases a main transmission facility and (ii) to the extent Seller has
not obtained and delivered to Purchaser on or prior to the Closing Date all
material consents required in connection with the consummation of the
transactions contemplated hereby with respect to any lease pursuant to which
Seller leases the Station studio site, (A) then Seller shall provide Purchaser
with the benefits arising under any such lease after the Closing Date, (B)
Purchaser shall perform any obligations under, including the payment to Seller
of any rent or other fees arising under, such lease arising after the Closing
Date, and (C) Seller shall continue to perform and pay any obligation or
liability due under such lease to the other party to such lease, unless or
until such lease may be assigned to Purchaser.
ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
Section 8.01. Termination. This Agreement may be
terminated at any time prior to the Closing as follows:
(a) by the mutual written consent of Seller and
Purchaser;
(b) by either Seller or Purchaser, if the Closing shall
not have occurred prior to January 31, 1998 (the "Outside Date"); provided,
however, that the right to terminate this Agreement under this Section 8.01(b)
shall be suspended as to any party whose failure to fulfill any material
obligation under this Agreement shall have been the cause of, or shall have
resulted
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in, the failure of the Closing to occur prior to such date, until the 10th day
after such failure has been cured.
(c) by Seller in the event that (i) any representation or
warranty of Purchaser made hereunder (A) that are qualified as to materiality,
shall be inaccurate or breached or (B) that are not qualified as to
materiality, shall be materially inaccurate or breached or (ii) Purchaser shall
have failed to comply with or satisfy, in all material respects, its covenants
and agreements made hereunder; provided that written notice of such material
inaccuracy, breach or failure shall have been given to Purchaser and Purchaser
shall not have cured the same within ten (10) Business Days of receipt of such
notice, except that Seller shall be entitled to terminate this Agreement and
there shall be no cure period for any breach, whether or not material, for a
failure by Purchaser to deliver the Purchase Price pursuant to Section 2.07;
(d) by Seller in the event that on the earlier of (i)
ninety (90) days from the date upon which all conditions to the obligations of
EMCLA and Purchaser to consummate the transactions contemplated by the WJZW
Purchase Agreement have either been satisfied or waived by the parties, or (ii)
the Outside Date, Purchaser is unable to consummate the Transaction due in
whole or primarily to an issue arising under the Commission's multiple
ownership rules or policies with respect to Purchaser's ownership (directly or
through an Affiliate) of the Oakland Press, Pontiac, Michigan.
(e) by Purchaser in the event that (i) any representation
or warranty of Seller made hereunder (A) that are qualified as to materiality,
shall be inaccurate or breached or (B) that are not qualified as to
materiality, shall be materially inaccurate or breached; provided, however,
that any representation or warranty qualified as to Seller's knowledge shall be
subject to Seller's Modifications, or (ii) Seller shall fail to comply with or
satisfy, in all material respects, its covenants and agreements made hereunder
provided that written notice of such material inaccuracy, breach or failure
shall have been given to Seller and Seller shall not have cured the same within
ten (10) Business Days of receipt of such notice, except that Purchaser shall
be entitled to terminate this Agreement, and there shall be no cure period for
any breach, whether or not material, for a failure by Seller to deliver the
Assets pursuant to Section 2.06;
(f) by either Seller or Purchaser in the event of the
issuance of a final, nonappealable Governmental Order restraining or
prohibiting the transactions contemplated herein; provided, however, no right
to terminate this Agreement under this Section 8.01(f) shall accrue to any
party whose failure to fulfill any material obligation under this Agreement
shall have been the cause of, or shall have resulted in, the issuance of such
Governmental Order; or
(g) pursuant to Section 10.06 hereof.
Notwithstanding the foregoing, neither party may terminate this Agreement
pursuant to clauses (c) or (d) of this Section 8.01 if any representation or
warranty of the party seeking to terminate is materially inaccurate or breached
or such party has failed to comply with or satisfy, in all material respects,
its covenants and agreements made hereunder.
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Section 8.02. Results of Termination. (a) If this
Agreement is terminated pursuant to Section 8.01(c) or by Seller pursuant to
Section 8.01(f), then (i) Seller shall instruct, and at the same time notify
Purchaser in writing of its intent to instruct the Escrow Agent to disburse all
amounts held by the Escrow Agent pursuant to the Escrow Agreement to Seller,
provided that the Escrow Agent shall not disburse such amounts to Purchaser
pursuant to this Section 8.02(a) if it receives a written objection from
Purchaser within ten (10) days of Seller's notice to Purchaser, (ii) if
applicable, Purchaser shall pay the Interest Amount to Seller on the Interest
Payment Date.
(b) If on the earlier of (i) ninety (90) days from the
date upon which all conditions to the obligations of EMCLA and Purchaser to
consummate the transactions contemplated by the WJZW Purchase Agreement have
either been satisfied or waived by the parties, or (ii) the Outside Date,
Purchaser is unable to consummate the Transaction due in whole or primarily to
an issue arising under the Commission's multiple ownership rules or policies
with respect to Purchaser's ownership (directly or through an Affiliate) of the
Oakland Press, Pontiac, Michigan, then Seller may solicit Acquisition Proposals
as set forth below and the Escrow Deposit shall continue to be held by the
Escrow Agent pursuant to the Escrow Agreement until such time as Seller is able
to solicit an Acquisition Proposal and consummate the sale of the Station
pursuant to such Acquisition Proposal (the "Alternative Disposition"). Upon
the consummation of the Alternative Disposition, Seller and Purchaser shall
jointly instruct the Escrow Agent to release to Seller an amount (the
"Alternative Disposition Payment") equal to the Purchase Price minus the
purchase price received by Seller pursuant to the Alternative Disposition (the
"Alternative Disposition Purchase Price"). Purchaser shall not be entitled to
receive any amount by which the Alternative Disposition Purchase Price exceeds
the Purchase Price due hereunder. Should the amount of the Alternative
Disposition Payment exceed the amount of the Escrow Deposit, Purchaser shall
deliver the balance of the Alternative Disposition Payment by wire transfer in
immediately available funds, pursuant to wire instructions to be delivered to
Purchaser, to Seller on the date of the consummation of the Alternative
Disposition. Should the amount of the Escrow Deposit exceed the amount of the
Alternative Disposition Payment, Purchaser and Seller shall jointly instruct
the Escrow Agent to release such excess to Purchaser. In soliciting an
Acquisition Proposal and in consummating an Alternative Disposition pursuant
hereto, Seller shall utilize commercially reasonable practices customary in the
sale of radio broadcast stations.
(c) If this Agreement is terminated (i) by Purchaser
pursuant to Sections 8.01(b), 8.01(e), 8.01(f) or 8.01(g), (ii) by either party
pursuant to Section 8.01(a), or (iii) is terminated by Seller other than in
compliance with the terms of this Agreement , then Purchaser shall instruct,
and at the same time notify Seller in writing of its intent to instruct, the
Escrow Agent to disburse all amounts held by the Escrow Agent pursuant to the
Escrow Agreement provided that the Escrow Agent shall not disburse such amounts
to Purchaser pursuant to this Section 8.02(c) if it receives a written
objection from Seller within ten (10) days of Purchaser's notice to Seller.
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(d) In the event of the termination of this Agreement as
provided in Sections 8.01, this Agreement shall forthwith become void and there
shall be no liability on the part of any party hereto, except as set forth in
Sections 3.14, 5.03, 8.02 and 10.02.
(e) The parties recognize that if, prior to Closing,
Seller breaches this Agreement and refuses to perform under the provisions of
this Agreement, monetary damages would not be adequate to compensate Purchaser
for its injury. Purchaser shall therefore, in lieu of any other remedies which
may be available prior to Closing, including monetary damages, be entitled to
obtain specific performance of the terms of this Agreement. If any action is
brought by Purchaser to enforce this Agreement prior to Closing, Seller shall
waive the defense that there is an adequate remedy at law.
(f) If this Agreement is terminated by Seller and Section
8.02(a) applies, then the payment to Seller pursuant to Section 8.02(a) shall
be liquidated damages and shall constitute full payment and exclusive remedy
for any damages suffered by Seller. Seller and Purchaser agree in advance that
actual damages would be difficult to ascertain and that the amount of the
payment to be made to Seller pursuant to Section 8.02(a) is a fair and
equitable amount to reimburse Seller for damages sustained due to Purchaser's
breach of this Agreement.
Section 8.03. Waiver. At any time prior to the Closing,
any party may (a) extend the time for the performance of any of the obligations
or other acts of any other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party hereto contained herein or in
any document delivered pursuant hereto or (c) waive compliance by the other
party hereto with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party to be bound thereby.
ARTICLE IX.
POST CLOSING OBLIGATIONS
The parties covenant and agree as follows with respect to the
period subsequent to the Closing Date:
Section 9.01. Indemnification by Purchaser. (a) Subject
to Section 10.01, Purchaser shall indemnify and hold Seller, its Affiliates and
their respective employees, officers and directors (collectively, the "Seller
Indemnified Parties") harmless from and against, and agrees to promptly defend
any Seller Indemnified Party from and reimburse any Seller Indemnified Party
for, any and all losses, damages, costs, expenses, liabilities, obligations and
claims of any kind (including any Action brought by any Governmental Authority
or Person and including reasonable attorneys' fees and expenses reasonably
incurred) (collectively, "Losses"), which such Seller Indemnified Party may at
any time suffer or incur, or become subject to, as a result or in connection
with:
(i) the inaccuracy as of the date of this
Agreement or the Closing Date of any representations and warranties
made by Purchaser in or
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pursuant to this Agreement or in any instrument or certificate
delivered by Purchaser at the Closing in accordance herewith;
(ii) any failure by Purchaser to carry out,
perform, satisfy and discharge any of its covenants, agreements,
undertakings, liabilities or obligations under this Agreement or under
any of the documents and/or other instruments delivered by Purchaser
pursuant to this Agreement;
(iii) any liabilities expressly assumed by
Purchaser pursuant to Section 2.02(b) hereof, or
(iv) events or circumstances occurring after the
Closing Date, arising out of, relating to or resulting from the
business of Purchaser, or relating to or resulting from the Assets or
the business or operations of the Station after the Closing Date.
(b) Notwithstanding any other provision to the contrary,
Purchaser shall not be required to indemnify and hold harmless any Seller
Indemnified Party pursuant to Section 9.01(a)(x) unless Seller has asserted a
claim with respect to such matters within the applicable survival period set
forth in Section 10.01, and (y) until the aggregate amount of Seller
Indemnified Parties' Losses exceeds an amount equal to One Million Five Hundred
Thousand Dollars ($1,500,000) after which Purchaser shall be obligated for all
Losses of Seller Indemnified Parties in excess of such amount; provided,
however, that the cumulative indemnification obligation of Purchaser under
Section 9.01(a)(i) of this Article IX shall in no event exceed Eleven Million
Five Hundred Thousand Dollars ($11,500,000).
Section 9.02. Indemnification by Seller. (a) Subject to
Section 10.01 hereof, Seller shall indemnify and hold Purchaser, its Affiliates
and their respective employees, officers and directors (collectively, the
"Purchaser Indemnified Parties") harmless from and against, and agrees to
promptly defend any Purchaser Indemnified Party from and reimburse any
Purchaser Indemnified Party for, any and all Losses which such Purchaser
Indemnified Party may at any time suffer or incur, or become subject to, as a
result or in connection with:
(i) the inaccuracy as of the date of this
Agreement or the Closing Date of any representations and warranties
made by Seller in or pursuant to this Agreement or in any instrument
or certificate delivered by Seller at the Closing in accordance
herewith;
(ii) any failure by Seller to carry out, perform,
satisfy and discharge any of its covenants, agreements, undertakings,
liabilities or obligations under this Agreement or under any of the
documents and/or other instruments delivered by Seller pursuant to
this Agreement;
(iii) any liabilities not expressly assumed by
Purchaser pursuant to Section 2.02(b) hereof, or
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(iv) events or circumstances occurring on or prior
to the Closing Date, arising out of, relating to or resulting from the
business of Seller or Viacom, or relating to or resulting from the
Assets or the business or operations of the Station prior to the
Closing Date.
(b) Notwithstanding any other provision to the contrary,
Seller shall not be required to indemnify and hold harmless any Purchaser
Indemnified Party pursuant to Section 9.02(a) (x) unless Purchaser has asserted
a claim with respect to such matters within the applicable survival period set
forth in Section 10.01, and (y) until the aggregate amount of Purchaser
Indemnified Parties' Losses exceeds an amount equal to One Million Five Hundred
Thousand Dollars ($1,500,000) after which Seller shall be obligated for all
Losses of Purchaser Indemnified Parties in excess of such amount; provided,
however, that the cumulative indemnification obligation of Seller under this
Article X shall in no event exceed Eleven Million Five Hundred Thousand Dollars
($11,500,000).
(c) For purposes of calculating the amount of Losses
subject to indemnification pursuant to Sections 9.01 and 9.02, it is understood
and agreed between the parties hereto that to determine if there has been an
inaccuracy or breach of a representation or warranty (i) which is qualified as
to materiality by the party making such representation or warranty or contains
an exception for matters that would not have a Material Adverse Effect, then
such representation or warranty shall be read as if it were not so qualified or
contained no such exception, or (ii) which is qualified as to knowledge by the
Seller (except those representations and warranties made (x) in Sections 3.05,
3.07 and 3.15 as to threatened litigation or proceedings, (y) those made in the
last sentence of Section 3.07 and in Sections 3.02 and 3.06 as to matters
relating to Viacom, and (z) those made in Section 3.16) shall be read as if it
were not so qualified.
Section 9.03. Notification of Claims. (a) A party
entitled to be indemnified pursuant to Section 9.01 or 9.02 (the "Indemnified
Party") shall promptly notify the party liable for such indemnification (the
"Indemnifying Party") in writing of any claim or demand which the Indemnified
Party has determined has given or could give rise to a right of indemnification
under this Agreement; provided, however, that a failure to give prompt notice
or to include any specified information in any notice will not affect the
rights or obligations of any party hereunder except and only to the extent
that, as a result of such failure, any party which was entitled to receive such
notice was damaged as a result of such failure. Subject to the Indemnifying
Party's right to defend in good faith third party claims as hereinafter
provided, the Indemnifying Party shall satisfy its obligations under this
Article IX within 30 days after the receipt of written notice thereof from the
Indemnified Party.
(b) If the Indemnified Party shall notify the
Indemnifying Party of any claim or demand pursuant to Section 9.03(a), and if
such claim or demand relates to a claim or demand asserted by a third party
against the Indemnified Party which the Indemnifying Party acknowledges is a
claim or demand for which it must indemnify or hold harmless the Indemnified
Party under Section 9.01 or 9.02, the Indemnifying Party shall have the right
to employ counsel reasonably acceptable to the Indemnified Party to defend any
such claim or
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demand asserted against the Indemnified Party for so long as the Indemnifying
Party shall continue in good faith to diligently defend against such action or
claim. The Indemnified Party shall have the right to participate in the
defense of any such claim or demand at its own expense. The Indemnifying Party
shall notify the Indemnified Party in writing, as promptly as possible (but in
any case five Business Days before the due date for the answer or response to a
claim) after the date of the notice of claim given by the Indemnified Party to
the Indemnifying Party under Section 9.03(a) of its election to defend in good
faith any such third party claim or demand. So long as the Indemnifying Party
is defending in good faith any such claim or demand asserted by a third party
against the Indemnified Party, the Indemnified Party shall not settle or
compromise such claim or demand without the consent of the Indemnifying Party,
which consent shall not be unreasonably withheld, and the Indemnified Party
shall make available to the Indemnifying Party or its agents all records and
other material in the Indemnified Party's possession reasonably required by it
for its use in contesting any third party claim or demand. Whether or not the
Indemnifying Party elects to defend any such claim or demand, the Indemnified
Party shall have no obligations to do so. In the event the Indemnifying Party
elects not to defend such claim or action or if the Indemnifying Party elects
to defend such claim or action but fails to diligently defend such claim or
action in good faith, the Indemnified Party shall have the right to settle or
compromise such claim or action without the consent of the Indemnifying Party,
except that the Indemnified Party shall not settle or compromise any such claim
or demand, unless the Indemnifying Party is given a full and complete release
of any and all liability by all relevant parties relating thereto.
Section 9.04. Certain Exclusive Remedies. Seller and
Purchaser acknowledge and agree that, after the Closing, the indemnification
provisions of Article IX shall be the sole and exclusive remedies of Seller and
Purchaser, respectively, for any breach of the representations or warranties
herein or nonperformance of any covenants and agreements herein of the other
party.
Section 9.05. Accounts Receivable. (a) At the Closing,
Seller may assign to Purchaser for purposes of collection the Accounts
Receivable and with any such assignment Seller shall deliver to Purchaser a
complete and detailed statement of each assigned Accounts Receivable (the
"Receivable Statement"). The Receivable Statement will show all commissions
owing with respect to such receivables, if any. Seller may amend the
Receivables Statement within ten (10) business days after the Closing to
reflect any additional accounts of which it becomes aware.
(b) For a period of 120 days following the Closing Date
(the "Collection Period") Purchaser will collect the Accounts Receivable, in
the same manner and with the same diligence Purchaser uses to collect its own
accounts receivable; provided, however, that Purchaser shall not be obligated
to institute litigation, employ any collection agency, legal counsel or other
third party, or take any other extraordinary means of collection. During the
Collection Period, Seller will not solicit or institute litigation for the
collection of the Accounts Receivable, except with respect to Accounts
Receivable reassigned to Seller for collection as set forth below.
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(c) Purchaser shall remit to Seller by the 15th day after
the end of each month during the Collection Period all collections received
during that prior month, together with an accounting thereof. Purchaser may
deduct from such collections any commission which may be due with respect to
the collected receivable (as indicated on the Receivable Statement) and, if so,
shall promptly notify Seller of the deduction and remit such commission to the
appropriate person. Purchaser shall not make any other deductions from such
collections other than the resolution or an application of credit balances as
set forth in the Receivables Statement. In the event that Seller is entitled
to a refund of any commission paid with respect to the Accounts Receivable,
Purchaser shall use its reasonable efforts to obtain and promptly remit such
refund. All amounts received by Purchaser from account debtors included among
the Accounts Receivable shall be applied first to such Accounts Receivable,
unless the account debtor specifically and in good faith disputes an Account
Receivable and instructs that the payment be otherwise applied. If during the
Collection Period an account debtor disputes an account included among the
Accounts Receivable, Seller may request Purchaser to reassign that account to
Seller for collection. At the conclusion of the Collection Period, Purchaser
shall reassign to Seller any remaining uncollected Accounts Receivable, and
thereafter Purchaser shall have no further obligation to the other with respect
to such Accounts Receivable.
Section 9.06. Post-Closing Access. (a) Purchaser, for a
period of five (5) years following the Closing Date, shall make available
during normal business hours, for audit and inspection by Seller and its
representatives, for any reasonable purpose and upon reasonable notice, all
records, files, documents and correspondence transferred to it hereunder with
respect to taxes, regulations and litigations, provided that Purchaser's
business operations will not thereby be unreasonably interfered with.
Purchaser shall at no time dispose of or destroy any such records, files,
documents and correspondence without first giving (30) days prior notice to
Seller to permit Seller, at its expense, to examine, duplicate or take
possession of and title to such records, files, documents and correspondence.
All personnel records shall be maintained as confidential if required by any
applicable state or federal law.
(b) Seller, for a period of five (5) years following the
Closing Date, shall make available during normal business hours, for audit and
inspection by Purchaser and its representatives for any reasonable business
purpose and upon reasonable notice, all records, files, documents and
correspondence retained by it with respect to Taxes, regulations and
litigations relating to the Station or the Assets, provided that Seller's
business operations will not thereby be unreasonably interfered with. Seller
shall not and shall use its reasonable efforts to cause Viacom not to dispose
or destroy any such records, files, documents and correspondence without first
giving thirty (30) days prior notice to Purchaser to permit Purchaser, at its
expense, to examine, duplicate or take possession of and title to such records,
files, documents and correspondence. All personnel records, shall be
maintained as confidential if required by any applicable state or federal law.
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ARTICLE X.
GENERAL PROVISIONS
Section 10.01. Survival. The representations, warranties,
covenants and agreements of Seller and Purchaser contained in or made pursuant
to this Agreement or in any certificate furnished pursuant hereto shall
terminate at the Closing, except that the representations and warranties made
in Article III and Article IV and the covenants and agreements to be performed
prior to the Closing made herein shall survive in full force and effect until
eighteen months after the Closing Date (the "Warranty Period") and in addition
shall survive and shall be unaffected by (and shall not be deemed waived by)
any investigation, audit, appraisal, or inspection at any time made by or on
behalf of any party hereto. Covenants and agreements contained in this
Agreement identifying a specific time period, shall survive for such applicable
time period. Otherwise, covenants and agreements made by the parties to be
performed after the Closing Date shall survive until three years after the
Closing Date. Any claims for indemnification made by a party in accordance
with Section 9 prior to the expiration of the applicable Warranty Period shall
survive and shall not be extinguished by the expiration of such period.
Section 10.02. Expenses. Except as may be otherwise
specified herein, all costs and expenses, including fees and disbursements of
counsel, financial advisors and accountants, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses, whether or not the Closing shall have
occurred. All recording costs for instruments of transfer, filing fees and
similar fees and all sales, use and transfer taxes shall be paid by Purchaser.
Section 10.03. Assignment by Purchaser. Purchaser may not
assign its rights or obligations hereunder except (i) to a corporation,
partnership or other business entity that controls, is controlled by or is
under common control with Purchaser, or (ii), as a collateral assignment, to
any lender who provides funds to Purchaser for the acquisition or operation of
the Station, provided, however, that any such assignment shall not delay
Closing and shall be effected in a manner that does not adversely impact the
Tax effects on Seller or its affiliates of any transaction undertaken pursuant
to Section 10.05 hereof.
Section 10.04. Assignment by Seller. Seller may assign its
rights under this Agreement to any person or entity, including but not limited
to a trust (the "Trust"), provided that such assignment does not delay the
Closing Date.
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Section 10.05. Like-Kind Exchange. Seller may at any time
at or prior to Closing assign its rights under this Agreement to a "qualified
intermediary" as defined in Treasury Reg. Section 1.1031(k)-1(g)(4), subject to
all of Purchaser's rights and obligations hereunder, in which event Seller
shall promptly provide written notice of such assignment to Purchaser.
Purchaser shall cooperate with all reasonable requests of Seller and such
qualified intermediary in arranging and effecting the exchange as one which
qualifies under Section 1031 of the Internal Revenue Code, as amended,
provided, however, that Purchaser shall not incur any Tax disadvantage as a
result of its cooperation and the Closing shall not be delayed.
Section 10.06. Risk of Loss. The risk of loss or damage by
fire or other casualty or cause to the Assets until the Closing shall be borne
by Seller. In the event of such loss or damage on or prior to the Closing,
Seller shall use commercially reasonable efforts to promptly restore, replace
or repair the damaged assets to their previous condition at Seller's sole cost
and expense; provided however, that Seller shall have no obligation hereunder
to restore, replace, or repair any of the Assets to the extent such
restoration, replacement or repair is not covered by the insurance proceeds.
In the event such loss or damage shall not be restored, replaced or repaired by
the Closing Date:
(a) If the loss or damage that has not been restored,
replaced or repaired does not cause a Material Adverse Effect, Purchaser shall
proceed with the Closing, receive all insurance proceeds to which Seller would
be entitled as a result of such remaining loss or damage, and receive from
Seller reimbursement for the reasonable costs of restoration, replacement or
repair of such remaining loss or damage to the extent such costs exceed the
amount of insurance proceeds received by Purchaser pursuant to this Section
10.06(a); or
(b) If the loss or damage that has not been restored,
replaced or repaired does cause a Material Adverse Effect, (i) Purchaser may,
at its option proceed with the Closing and receive all insurance proceeds to
which Seller would be entitled as a result of such loss or damage; or (ii) in
the event that Purchaser does not elect to close under clause (b)(i) hereof,
Seller may, at its option, either terminate this Agreement or defer the Closing
Date until such restorations, replacements or repairs are made such that any
remaining damage does not cause a Material Adverse Effect but in no event shall
such deferral exceed ninety (90) days (provided that no such deferral shall
affect the rights of the parties hereto to terminate this Agreement pursuant to
the provisions of Article VIII hereof). Upon completion of such restorations,
replacements or repairs, Seller shall send a notice of completion to Purchaser
and provided Purchaser does not reasonably object to such completion notice
within five (5) days of its receipt thereof, the Closing Date shall be set for
ten (10) Business Days from the date of such completion notice; provided that
if any damage remains, Purchaser shall have the rights provided in Section
10.06(a) hereto. In the event that Seller is unable to complete such
restorations, replacements or repairs such that any remaining damage does not
cause a Material Adverse Effect within the ninety (90) day period, this
Agreement shall terminate.
Section 10.07. Notices. All notices, requests, claims,
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given or made when delivered in person one Business
Day after having been dispatched via a nationally
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recognized overnight courier service, when dispatched by facsimile, or three
Business Days after being sent by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 10.06):
(a) if to Seller
Chancellor Radio Broadcast Company
12655 N. Central Expressway
Suite 405
Dallas, Texas 75039
Attention: Steven Dinetz, President
With copy to:
Jeremy W. Dickens, Esq.
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
and
Eric L. Bernthal, Esq.
Kevin C. Boyle, Esq.
Latham & Watkins
Suite 1300
1001 Pennsylvania Avenue., N.W.
Washington, D.C. 20004
(b) if to Purchaser:
ABC, Inc.
77 West 66th Street, 21st Floor
New York, New York 10023
Attention: Robert Callahan
Telecopier: (212) 456-3666
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With a copy to:
ABC, Inc.
77 West 66th Street, 16th Floor
New York, New York 10023
Attention: Franco Garcia, Esq.
Telecopier: (212) 456-6202
Section 10.08. Public Announcements. Except as may be
required by Law or stock exchange rules, no party to this Agreement shall make
any public announcements in respect of this Agreement or the transactions
contemplated hereby or otherwise communicate with any news media without prior
notification to the other party, and the parties shall cooperate as to the
timing and contents of any such announcement.
Section 10.09. Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 10.10. Severability. If any term or other provision
of this Agreement is invalid, illegal or incapable of being enforced because of
any Law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party hereto. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the greatest extent possible.
Section 10.11. Entire Agreement. This Agreement constitutes
the entire agreement of the parties hereto with respect to the subject matter
hereof and thereof and supersedes all prior agreements and undertakings, both
written and oral, between Seller and Purchaser with respect to the subject
matter hereof and thereof, except as otherwise expressly provided herein.
Section 10.12. Successors and Assigns. This Agreement will
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns but will not be assignable or
delegable by any party without the prior written consent of the other party
which shall not be unreasonably withheld.
Section 10.13. No Third-Party Beneficiaries. Except as
expressly provided in Articles IX, this Agreement is for the sole benefit of
the parties hereto and their permitted assigns and nothing herein, express or
implied, is intended to or shall confer upon any other Person or entity any
legal or equitable right, benefit or remedy of any nature whatsoever under or
by reason of this Agreement.
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Section 10.14. Amendment. This Agreement may not be amended
or modified except by an instrument in writing signed by Seller and Purchaser.
Section 10.15. Sections and Schedules. Any disclosure with
respect to a Section or Schedule of this Agreement shall be deemed to be
disclosure for all other Sections and Schedules of this Agreement.
Section 10.16. Governing Law. This Agreement shall be
governed by, and construed in accordance with, the Laws of the State of New
York. All actions and proceedings arising out of or relating to this Agreement
shall be heard and determined in a New York state or federal court sitting in
the City of New York, and the parties hereto hereby irrevocable submit to the
nonexclusive jurisdiction of such courts in any such action or proceeding and
irrevocably waive the defense of an inconvenient forum to the maintenance of
any such action or proceeding.
Section 10.17. Counterparts. This Agreement may be executed
in one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of
this Agreement.
Section 10.18. No Presumption. This Agreement shall be
construed without regard to any presumption or rule requiring construction or
interpretation against the party drafting or causing any instrument to be
drafted.
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IN WITNESS WHEREOF, the Seller and the Purchaser have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
CHANCELLOR RADIO BROADCASTING COMPANY
By: /s/ STEVEN DINETZ
-----------------------------------
Steven Dinetz
President
ABC, INC.
By: /s/ ROBERT CALLAHAN
-----------------------------------
Robert Callahan
President, Radio Division
<PAGE> 44
EXHIBIT A
ESCROW AGREEMENT
This Escrow Agreement ("Agreement") is entered into this ___
day of April, 1997, by and among CHANCELLOR RADIO BROADCASTING COMPANY
("Seller"), ABC, Inc. ("Purchaser"), and FIRST NATIONAL BANK OF MARYLAND, as
escrow agent ("Escrow Agent").
Seller and Purchaser have entered into an Asset Purchase
Agreement (the "Purchase Agreement") dated as of the date hereof for the sale
by Seller to Purchaser of certain property and assets used and useful in the
operation of station WDRQ(FM), Detroit, Michigan (the "Station"). Pursuant to
the Purchase Agreement, Purchaser is required on this date to deposit THREE
MILLION SEVEN HUNDRED THOUSAND DOLLARS ($3,700,000) in escrow to secure its
obligations under the Purchase Agreement. Purchaser and Seller desire that
Escrow Agent hold these funds as provided in this Agreement.
Accordingly, in consideration of the mutual covenants
contained herein, the parties, intending to be legally bound, hereby agree as
follows:
1. Receipt of Escrow Deposit. By its signature below,
Escrow Agent acknowledges receipt of THREE MILLION SEVEN HUNDRED THOUSAND
DOLLARS ($3,700,000) (the "Escrow Deposit") from Purchaser.
2. Investment of Escrow Deposit. The Escrow Deposit
shall be invested by Escrow Agent in interest bearing bank accounts or
certificates of deposit of federally insured financial institutions or in
treasury bills or such other investments as may be directed by the joint
written instructions of Seller and Purchaser. All interest earned on the
Escrow Deposit shall be paid periodically to Purchaser unless or until a claim
to the Escrow Deposit is made by Seller. Upon and after Seller's notice of
claim thereto, all interest earned on the Escrow Deposit shall become part of
the Escrow Deposit.
3. Release of Escrow Deposit. Escrow Agent shall
release the Escrow Deposit only pursuant to (a) the written instructions of
Seller including a certification that a copy of such instructions have been
delivered to Purchaser, provided that the Escrow Agent does not receive a
written objection from Purchaser within ten (10) days of Seller's notice of
such instructions, (b) the written instructions of Purchaser including a
certification that a copy of such instructions have been delivered to Seller,
provided that the Escrow Agent does not receive a written objection from Seller
within ten (10) days of Purchaser's notice of such instructions,(c) joint
written instructions executed by Seller and Purchaser, or (d) a final order of
a court of competent jurisdiction. Escrow Agent shall release the Escrow
Deposit in accordance with such joint written instructions or final order
within two (2) business days of its receipt thereof or in accordance with the
separate written instructions of Seller or Purchaser at the expiration of the
ten (10) day period provided above. An order shall be deemed "final" when, by
a lapse of time or otherwise, it is no longer subject to administrative or
judicial reconsideration or review.
<PAGE> 45
Escrow Agent shall be authorized to act on any document believed to be genuine
and to be signed by the proper party or parties, and will incur no liability in
so acting. In the event of any disagreement or presentation of adverse claims
or demands in connection with the Escrow Deposit, Escrow Agent may act as
stake-holder and deposit the item in dispute with the registry of the court
having jurisdiction over the dispute.
4. Indemnity. Seller and Purchaser agree to indemnify
and hold Escrow Agent harmless against any loss, claim, damage, liability, or
expense incurred in connection with any action, suit, proceeding, claim or
alleged liability arising from this Agreement; provided, however, that Escrow
Agent shall not be so indemnified or held harmless for its gross negligence or
acts in bad faith by it or any of its agents or employees, nor for its breach
of this Agreement.
5. Expenses. All expenses incurred by Escrow Agent in
the administration of this Agreement, including reasonable legal costs incurred
by Escrow Agent, shall be shared equally by Seller and Purchaser. Any expenses
incurred by Seller or Purchaser in connection with this Agreement shall be
borne by the parties incurring the expenses. If there arises a dispute
concerning a party's entitlement to some or all of the Escrow Deposit, the
prevailing party shall be entitled to recover its reasonable costs (including
attorneys' fees) incurred in connection with such dispute.
6. Notices. All notices and other communications
required or permitted pursuant to this Escrow Agreement shall be in writing and
be deemed to have been duly given and delivered if mailed by certified mail,
return receipt requested, postage prepaid, as follows:
If to Seller:
Chancellor Radio Broadcast Company
12655 N. Central Expressway
Suite 405
Dallas, Texas 75039
Attention: Steven Dinetz, President
with copy to:
Jeremy W. Dickens, Esq.
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
2
<PAGE> 46
and
Eric L. Bernthal, Esq.
Kevin C. Boyle, Esq.
Latham & Watkins
Suite 1300
1001 Pennsylvania Avenue., N.W.
Washington, D.C. 20004
If to Purchaser:
ABC, Inc.
77 West 66th Street, 21st Floor
New York, New York 10023
Attention: Robert Callahan
Telecopier: (212) 456-3666
With a copy to:
ABC, Inc.
77 West 66th Street, 16th Floor
New York, New York 10023
Attention: Franco Garcia, Esq.
Telecopier: (212) 456-6202
If to Escrow Agent:
First National Bank of Maryland
601 13th Street, NW, Suite 1000N
Washington, DC 20005
Attn: John G. Wise
or to such other address as such party shall specify by written notice to the
other parties hereto. Any notice sent to Escrow Agent shall also be sent to
the other party to this Agreement.
7. Duties of Escrow Agent. The duties and
responsibilities of Escrow Agent shall be limited to those expressly set forth
herein.
8. Assignment. Purchaser and Seller may assign their
rights under this Agreement to the same extent they are permitted to assign
their rights and obligations under the Purchase Agreement.
3
<PAGE> 47
9. Miscellaneous. This Agreement, and with respect to
Purchaser and Seller, the Purchase Agreement embody the entire agreement and
understanding of the parties concerning the Escrow Deposit. This Agreement may
be amended only by a writing signed by the party against whom enforcement is
sought. The headings in this Agreement are intended solely for convenience or
reference and shall be given no effect in the construction or interpretation of
this Agreement. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the choice
of law rules utilized in that state. This Agreement shall bind and inure to
the benefit of the parties hereto and their respective, heirs, personal
representatives, successors and permitted assigns.
To evidence their agreement, the parties have caused this
Agreement to be executed on the date first written above.
CHANCELLOR RADIO BROADCASTING
COMPANY
By:
------------------------------------
Steven Dinetz
President
ABC, INC.
By:
------------------------------------
Robert Callahan
President, Radio Division
FIRST NATIONAL BANK OF MARYLAND
By:
------------------------------------
4
<PAGE> 48
EXHIBIT B
OPINION OF SELLER'S COUNSEL
Seller shall deliver to Purchaser the written opinion of
Seller's counsel and/or special counsel, dated the Closing Date, in scope and
form reasonably satisfactory to Purchaser, to the following effect:
(1) Seller is a corporation duly organized, validly
existing and in good standing, under the laws of the jurisdiction of its
organization, with full power under its certificate of incorporation to enter
into and perform its respective obligations under the Agreement. Based solely
on certificates from public officials, such counsel shall confirm that Seller,
WDRQ, Inc. or their Affiliate, as applicable, is qualified to do business in
the State of Michigan.
(2) The Agreement and the other documents executed by
Seller pursuant thereto (the "Related Documents") have been duly executed by
Seller and such action has been duly authorized by all necessary corporate
action. The Agreement and the Related Documents, constitute the legal, valid,
and binding obligations of Seller enforceable in accordance with their terms
except as their enforceability may be limited by bankruptcy, insolvency,
moratorium or other laws relating to or affecting creditors' rights generally
and the exercise of judicial discretion in accordance with general equitable
principles; provided however, that no opinion is given with respect to the
enforceability of the provisions contained in Sections 5.08 and 5.09 of the
Purchase Agreement.
(3) None of (i) the execution and delivery of the
Agreement or the Related Documents by Seller, (ii) the sale of the Station and
the Assets by Seller, or (iii) compliance with the terms and conditions of the
Agreement or the Related Documents on the Closing Date will conflict with,
breach the terms and conditions of, constitute a default under, or violate
Seller's Certificate of Incorporation and Bylaws, or any judgment, decree,
order, agreement, lease or other instrument known to counsel to which Seller is
a party or by which Seller is legally bound.
(4) To the knowledge of counsel, there is no order, writ,
judgment, injunction, decree, stipulation, determination or award entered by or
with any United States federal, state or local or any foreign government,
governmental, regulatory or administrative authority, agency or commission or
any court, tribunal, or judicial or arbitral body in existence which restrains
or which materially and adversely affects the transactions contemplated by the
Purchase Agreement or is likely to render it impossible or unlawful to
consummate such transactions.
(5) The Station Licenses are all the authorizations,
licenses and permits issued by the FCC with respect to the operation of the
Station, such Station Licenses are in full force and effect, and none of the
Station Licenses is the subject of a pending license renewal application.
<PAGE> 49
(6) The Commission has granted its consent to the
assignment to Purchaser of the Station Licenses (the "FCC Approval").
(7) Except for the FCC Approval and the approval of the
FCC to the Viacom Transaction, no consent, approval or authorization of, or
declaration, registration or filing with, the FCC is required in connection
with the execution and delivery of the Agreement or the performance of Seller's
obligations under the Agreement.
The foregoing opinions shall be for the benefit of and may be
relied on by Purchaser, Purchaser's counsel, and any institutional lender who
provides funds to Purchaser for the acquisition or operation of the Station.
In rendering such opinions, Seller's counsel may rely upon such corporate
records of Seller, such certificates of public officials and officers of
Seller, and such opinions of special or associate counsel as Seller's counsel
deems appropriate.
2
<PAGE> 50
EXHIBIT C
OPINION OF PURCHASER'S COUNSEL
Purchaser shall deliver to Seller the written opinion of
Purchaser's counsel, dated the Closing Date, in scope and form reasonably
satisfactory to Seller, subject to customary qualifications, to the following
effect:
(1) Purchaser is a corporation duly incorporated, validly
existing and in good standing, under the laws of the jurisdiction of its
incorporation, with full power under its respective articles of incorporation
and by-laws to enter into and perform its respective obligations under the
Agreement. Based solely on certificates from public officials, such counsel
shall confirm that Purchaser is qualified to do business in the State of
Michigan.
(2) The Agreement and the other documents executed by
Purchaser at Closing pursuant thereto (the "Related Documents") have been duly
executed by Purchaser, and such action has been duly authorized by all
necessary corporate action. The Agreement and the Related Documents, constitute
the legal, valid, and binding obligations of Purchaser enforceable in
accordance with their terms except as their enforceability may be limited by
bankruptcy, insolvency, moratorium or other laws relating to or affecting
creditors' rights generally and the exercise of judicial discretion in
accordance with general equitable principles; provided however, that no opinion
is given with respect to the enforceability of the provisions contained in
Sections 5.08 and 5.09 of the Purchase Agreement.
(3) None of (i) the execution and delivery of the
Agreement or the Related Documents by Purchaser, (ii) the purchase of the
Assets by Purchaser, or (iii) compliance with the terms and conditions of the
Agreement or the Related Documents on the Closing Date will conflict with,
breach the terms and conditions of, constitute a default under, or violate
Purchaser's or articles of incorporation or bylaws, respectively, or any
judgment, decree, order, agreement, lease or other instrument known to counsel
to which Purchaser is a party or by which Purchaser is legally bound.
(4) To the knowledge of counsel, there is no order, writ,
judgment, injunction, decree, stipulation, determination or award entered by or
with any United States federal, state or local or any foreign government,
governmental, regulatory or administrative authority, agency or commission or
any court, tribunal, or judicial or arbitral body in existence which restrains
or which materially and adversely affects the transactions contemplated by the
Purchase Agreement or is likely to render it impossible or unlawful to
consummate such transactions.
In rendering such opinions, Purchaser's counsel may rely upon
such corporate records of Purchaser, such certificates of public officials and
officers of Purchaser, and such opinions of special or associate counsel as
Purchaser's counsel deems appropriate.
<PAGE> 1
EXHIBIT 11.1
CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(dollars in thousands, except for share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------- ----------------------------
1996 1997 1996 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Computation for statements of operations:
Loss before extraordinary loss ............. $ (2,355) $ (7,040) $ (9,940) $ (19,723)
Loss on repurchase of preferred stock
of subsidiary ............................ -- -- (16,570) --
Dividends on preferred stock ............... -- (1,925) -- (3,379)
------------- ------------- ------------- -------------
Loss before extraordinary loss
applicable to common stock .......... (2,355) (8,965) (26,510) (23,102)
Extraordinary loss ......................... -- (7,926) (4,646) (10,675)
------------- ------------- ------------- -------------
Net loss applicable to common stock ... $ (2,355) $ (16,891) $ (31,156) $ (33,777)
============= ============= ============= =============
Computation for weighted average common shares outstanding:
Weighted average common shares
outstanding .............................. 17,241,728 18,988,353 15,216,677 18,854,763
Incremental common shares applicable
to common stock options based on
the estimated fair value of the stock .... 1,060,357 641,205 944,121 592,914
Common stock options excluded based
on anti-dilutive effect .................. (1,060,357) (641,205) (944,121) (592,914)
------------- ------------- ------------- -------------
Weighted average common shares ............. 17,241,728 18,988,353 15,216,677 18,854,763
============= ============= ============= =============
Loss per common share:
Primary and fully diluted
Loss before extraordinary loss $ (0.14) $ (0.47) $ (1.74) $ (1.23)
Extraordinary loss -- (0.42) (0.31) (0.56)
------------- ------------- ------------- -------------
Net loss $ (0.14) $ (0.89) $ (2.05) $(1.79)
============= ============= ============= ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001002909
<NAME> CHANCELLOR BROADCASTING COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,889
<SECURITIES> 0
<RECEIVABLES> 64,758
<ALLOWANCES> 1,182
<INVENTORY> 0
<CURRENT-ASSETS> 72,352
<PP&E> 83,477
<DEPRECIATION> 13,895
<TOTAL-ASSETS> 1,183,773
<CURRENT-LIABILITIES> 28,867
<BONDS> 400,000
424,312
0
<COMMON> 189
<OTHER-SE> 184,073
<TOTAL-LIABILITY-AND-EQUITY> 1,183,773
<SALES> 0
<TOTAL-REVENUES> 128,942
<CGS> 0
<TOTAL-COSTS> 104,915
<OTHER-EXPENSES> (2)
<LOSS-PROVISION> 325
<INTEREST-EXPENSE> 23,908
<INCOME-PRETAX> 1,726
<INCOME-TAX> 3,327
<INCOME-CONTINUING> (19,723)
<DISCONTINUED> 0
<EXTRAORDINARY> 10,675
<CHANGES> 0
<NET-INCOME> (30,398)
<EPS-PRIMARY> (1.79)
<EPS-DILUTED> (1.79)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000925744
<NAME> CHANCELLOR RADIO BROADCASTING COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,889
<SECURITIES> 0
<RECEIVABLES> 64,758
<ALLOWANCES> 1,182
<INVENTORY> 0
<CURRENT-ASSETS> 72,352
<PP&E> 83,477
<DEPRECIATION> 13,895
<TOTAL-ASSETS> 1,183,773
<CURRENT-LIABILITIES> 28,867
<BONDS> 400,000
424,312
0
<COMMON> 1
<OTHER-SE> 291,411
<TOTAL-LIABILITY-AND-EQUITY> 1,183,773
<SALES> 0
<TOTAL-REVENUES> 128,942
<CGS> 0
<TOTAL-COSTS> 104,915
<OTHER-EXPENSES> (2)
<LOSS-PROVISION> 325
<INTEREST-EXPENSE> 23,908
<INCOME-PRETAX> 1,726
<INCOME-TAX> 3,327
<INCOME-CONTINUING> (1,601)
<DISCONTINUED> 0
<EXTRAORDINARY> 10,675
<CHANGES> 0
<NET-INCOME> (12,276)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000925752
<NAME> CHANCELLOR BROADCASTING LICENSEE COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,889
<SECURITIES> 0
<RECEIVABLES> 64,758
<ALLOWANCES> 1,182
<INVENTORY> 0
<CURRENT-ASSETS> 72,352
<PP&E> 83,477
<DEPRECIATION> 13,895
<TOTAL-ASSETS> 1,183,773
<CURRENT-LIABILITIES> 28,867
<BONDS> 400,000
424,312
0
<COMMON> 1
<OTHER-SE> 291,411
<TOTAL-LIABILITY-AND-EQUITY> 1,183,773
<SALES> 0
<TOTAL-REVENUES> 128,942
<CGS> 0
<TOTAL-COSTS> 104,915
<OTHER-EXPENSES> (2)
<LOSS-PROVISION> 325
<INTEREST-EXPENSE> 23,908
<INCOME-PRETAX> 1,726
<INCOME-TAX> 3,327
<INCOME-CONTINUING> (1,601)
<DISCONTINUED> 0
<EXTRAORDINARY> 10,675
<CHANGES> 0
<NET-INCOME> (12,276)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
