<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 26, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
DELAWARE 4832 75-2451687
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of incorporation or
organization) Classification Code Number) Identification Number)
</TABLE>
---------------------
<TABLE>
<S> <C>
(FOR CO-REGISTRANTS, PLEASE SEE "TABLE OF CO-REGISTRANTS" ON THE FOLLOWING PAGE)
SCOTT K. GINSBURG
CHIEF EXECUTIVE OFFICER
433 EAST LAS COLINAS BOULEVARD 433 EAST LAS COLINAS BOULEVARD
IRVING, TEXAS 75039 IRVING, TEXAS 75039
(972) 869-9020 (972) 869-9020
(Address, including zip code, and telephone
number, (Name, address, including zip code, telephone
including area code, of registrant's principal number, including area code, of agent for
executive offices) service)
</TABLE>
---------------------
Copies to
JOHN D. WATSON, JR., ESQ.
LATHAM & WATKINS
1001 PENNSYLVANIA AVENUE, N.W., SUITE 1300
WASHINGTON, D.C. 20004-2505
(202) 637-2200
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ------------------
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=====================================================================================================================
PROPOSED MAXIMUM
TITLE OF SHARES AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED OFFERING PRICE PER NOTE PRICE(1) REGISTRATION FEE(1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8 3/4% Senior Subordinated Notes
Due 2007, Series B............ $200,000,000 100% $200,000,000 $60,606.06
- ------------------------------------------------------------------------------------------------------------------
Guarantees of the 8 3/4% Senior
Subordinated Notes due 2007,
Series B(2)................... N/A N/A N/A N/A
==================================================================================================================
</TABLE>
(1) The registration fee has been calculated pursuant to Rule 457(a) and Rule
457(f)(2) under the Securities Act of 1933, as amended. The Proposed Maximum
Aggregate Offering Price is estimated solely for the purpose of calculating
the registration fee.
(2) Represents the guarantees of the 8 3/4% Senior Subordinated Notes due 2007,
Series B to be issued by the Co-Registrants. Pursuant to Rule 457(n), no
additional registration fee is being paid in respect of the guarantees. The
guarantees are not traded separately.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
================================================================================
<PAGE> 2
TABLE OF CO-REGISTRANTS
<TABLE>
<CAPTION>
PRIMARY STANDARD IRS
STATE OR OTHER INDUSTRIAL EMPLOYER
JURISDICTION OF CLASSIFICATION IDENTIFICATION
NAME INCORPORATION CODE NUMBER NUMBER
---- --------------- ---------------- --------------
<S> <C> <C> <C>
Evergreen Media Corporation of Chicago FM......... Delaware 4832 99-0248292
WLUP-FM License Corp.............................. Delaware 4832 75-2449662
Evergreen Media Corporation of the Bay Area....... Delaware 4832 59-2312787
KIOI License Corp................................. Delaware 4832 75-2449654
Evergreen Media Corporation of Illinois........... Delaware 4832 75-2490925
WRCX License Corp................................. Delaware 4832 75-2528716
Evergreen Media Corporation of Chicago AM......... Delaware 4832 59-2412802
WMVP-AM License Corp.............................. Delaware 4832 75-2449660
Evergreen Media Corporation of Dade County........ Delaware 4832 59-2312792
WVCG License Corp................................. Delaware 4832 75-2449668
Evergreen Media/Pyramid Corporation............... Delaware 4832 04-3221315
Evergreen Media/Pyramid Holdings Corporation...... Delaware 4832 04-3221316
Broadcast Architecture, Inc....................... Delaware 4832 04-3096275
Evergreen Media Corporation of Massachusetts...... Delaware 4832 04-3216274
WJMN License Corp................................. Delaware 4832 04-3216272
Evergreen Media Corporation of the Nation's
Capital......................................... Delaware 4832 75-2699485
WWRC License Corp................................. Delaware 4832 75-2697127
Evergreen Media Partners Corporation.............. Delaware 4832 13-3467127
Evergreen Media Corporation of Gotham............. Delaware 4832 36-3905992
Evergreen Media Corporation of New York........... Delaware 4832 54-1475267
WYNY License Corp................................. Delaware 4832 36-3906005
Evergreen Media Corporation of Detroit............ Delaware 4832 36-2826680
WKQI/WDOZ/WNIC License Corp....................... Delaware 4832 36-3906004
Evergreen Media Corporation of Chicagoland........ Delaware 4832 36-3604824
WEJM/WEJM-FM/WVAZ License Corp.................... Delaware 4832 36-3905998
Evergreen Media Corporation of Charlotte.......... Delaware 4832 62-1364794
WIOQ License Corp................................. Delaware 4832 36-3906002
Evergreen Media Corporation of Dallas............. Delaware 4832 75-2245927
KSKY License Corp................................. Delaware 4832 36-3906008
Evergreen Media Corporation of San Francisco...... Delaware 4832 75-2449639
KMEL License Corp................................. Delaware 4832 75-2449650
Evergreen Media Corporation of Houston............ Delaware 4832 75-2486583
Evergreen Media of Houston Limited Partnership.... Delaware 4832 75-2486577
KTRH License Limited Partnership.................. Delaware 4832 75-2486581
KLOL License Limited Partnership.................. Delaware 4832 75-2486580
Evergreen Media Corporation of Tiburon............ Delaware 4832 75-2674715
KKSF License Corp................................. Delaware 4832 75-2674717
KDFC (AM) License Corp............................ Delaware 4832 75-2674719
KDFC (FM) License Corp............................ Delaware 4832 75-2674720
Evergreen Media Corporation of Washington, D.C.... Delaware 4832 75-243256
Evergreen Media Corporation of St. Louis.......... Delaware 4832 75-2449637
WTOP License Limited Partnership.................. Delaware 4832 75-2528718
WASH License Limited Partnership.................. Delaware 4832 75-2528721
Evergreen Media Corporation of the Motor City..... Delaware 4832 75-2666019
WJLB License Corp................................. Delaware 4832 75-2666024
Evergreen Media Corporation of Michigan........... Delaware 4832 75-2666017
WMXD License Corp................................. Delaware 4832 75-2666023
</TABLE>
<PAGE> 3
TABLE OF CO-REGISTRANTS -- (CONTINUED)
<TABLE>
<CAPTION>
PRIMARY STANDARD IRS
STATE OR OTHER INDUSTRIAL EMPLOYER
JURISDICTION OF CLASSIFICATION IDENTIFICATION
NAME INCORPORATION CODE NUMBER NUMBER
---- --------------- ---------------- --------------
<S> <C> <C> <C>
WAXQ Inc.......................................... Delaware 4832 13-3387794
WAXQ License Corp................................. Delaware 4832 N/A
WMZQ Inc.......................................... Delaware 4832 04-2981015
WMZQ License Corp................................. Delaware 4832 N/A
Evergreen Media Corporation of the Liberty City... Delaware 4832 75-2674728
WDAS (FM) License Corp............................ Delaware 4832 75-2674731
WDAS (AM) License Corp............................ Delaware 4832 75-2674729
Riverside Broadcasting Co. Inc.................... Delaware 4832 13-2688382
WLTW License Corp................................. Delaware 4832 N/A
Evergreen Media Corporation of the Great Lakes.... Delaware 4832 75-2674722
WWWW/WDFN License Corp............................ Delaware 4832 75-2674723
VBE, Inc.......................................... Delaware 4832 13-3767758
Evergreen Media Corporation of the Capital City... Delaware 4832 75-2647157
WGAY License Corp................................. Delaware 4832 75-2647158
Evergreen Media Corporation of Chicago............ Delaware 4832 75-2708878
WPNT License Corp................................. Delaware 4832 75-2708647
Chancellor Broadcasting Licensee Company.......... Delaware 4832 75-2544625
Trefoil Communications, Inc....................... Delaware 4832 95-3278846
Shamrock Broadcasting, Inc........................ Delaware 4832 95-4068583
Shamrock Radio Licenses, Inc...................... Delaware 4832 95-4501833
Shamrock Broadcasting of Texas, Inc............... Texas 4832 71-0527506
Shamrock Broadcasting Licenses of Denver, Inc..... Delaware 4832 75-2688376
KIBB Inc.......................................... Delaware 4832 13-3930133
KYSR Inc.......................................... Delaware 4832 13-3547704
WLIT Inc.......................................... Delaware 4832 13-3930134
WDRQ Inc.......................................... Delaware 4832 13-3930136
Radio 100 L.L.C................................... Delaware 4832 N/A
Evergreen Media Corporation of Pennsylvania....... Delaware 4832 04-3216281
WJJZ License Corp................................. Delaware 4832 04-3216283
Evergreen Media Corporation of Miami.............. Delaware 4832 04-3216285
WEDR License Corp................................. Delaware 4832 04-3216278
Evergreen Media Corporation of Boston............. Delaware 4832 04-3221317
WXKS (AM) License Corp............................ Delaware 4832 04-3221319
WXKS (FM) License Corp............................ Delaware 4832 04-3221318
Evergreen Media Corporation of the Windy City..... Delaware 4832 04-3221712
WNUA License Corp................................. Delaware 4832 04-3221714
Evergreen Media Corporation of Philadelphia....... Delaware 4832 04-3221716
Evergreen Media Corporation of the Keystone
State........................................... Delaware 4832 04-3221374
KYLD License Corp................................. Delaware 4832 04-3221371
WYXR License Corp................................. Delaware 4832 04-3221718
WUSL License Corp................................. Delaware 4832 04-3221375
Evergreen Media Corporation of Rochester.......... Delaware 4832 04-3221755
KKBT License Corp................................. Delaware 4832 75-2449648
</TABLE>
<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 26, 1997
PROSPECTUS
OFFER TO EXCHANGE
8 3/4% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B FOR ALL OUTSTANDING
8 3/4% SENIOR SUBORDINATED NOTES DUE 2007, SERIES A
OF
CHANCELLOR MEDIA CORPORATION
OF LOS ANGELES
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1997, UNLESS EXTENDED
------------------------------
Chancellor Media Corporation of Los Angeles ("CMCLA", and together with its
subsidiaries, the "Company") hereby offers (the "Exchange Offer"), upon the
terms and subject to the conditions set forth in this Prospectus and the
accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange
its outstanding 8 3/4% Senior Subordinated Notes due 2007, Series A (the
"Original Notes"), of which an aggregate of $200,000,000 in principal amount is
outstanding as of the date hereof, for an equal principal amount of newly issued
8 3/4% Senior Subordinated Notes due 2007, Series B (the "Exchange Notes"). The
form and terms of the Exchange Notes will be the same as the form and terms of
the Original Notes except that (i) the Exchange Notes will be registered under
the Securities Act of 1933, as amended (the "Securities Act") and hence will not
bear legends restricting the transfer thereof; and (ii) the holders of the
Exchange Notes will not be entitled to certain rights of the holders of Original
Notes under the Registration Rights Agreement, which rights will terminate upon
the consummation of the Exchange Offer. The Exchange Notes will evidence the
same debt as the Original Notes and will be entitled to the benefits of an
indenture dated as of June 24, 1997, governing the Original Notes and the
Exchange Notes (the "Indenture"). The Indenture provides for the issuance of
both the Exchange Notes and the Original Notes. The Exchange Notes and the
Original Notes are sometimes referred to herein collectively as the "Notes".
------------------------------
The Exchange Notes will mature on June 15, 2007. Interest on the Exchange
Notes will be payable semi-annually on each June 15 and December 15 commencing
December 15, 1997, at the rate of 8 3/4% per annum. The Exchange Notes will be
redeemable, in whole or in part, at the option of the Company, on or after June
15, 2002 at the redemption prices set forth herein, plus accrued and unpaid
interest, if any, to the date of redemption. In addition, on or prior to June
15, 2000, the Company may, at its option, redeem the Exchange Notes, in part,
with the net cash proceeds of one or more Public Equity Offerings (as defined),
at the redemption price set forth herein, plus accrued and unpaid interest, if
any, to the date of redemption; provided, however, that after any such
redemption the aggregate principal amount of the Exchange Notes outstanding must
equal at least 75% of the aggregate principal amount of the Exchange Notes
originally issued in the Exchange Offer.
The Exchange Notes will be general unsecured obligations of the Company and
will rank pari passu in right of payment to the 9 3/8% Senior Subordinated Notes
due 2004 (the "9 3/8% Notes") of the Company, and will be subordinated in right
of payment to all existing and future Senior Debt of the Company. As of June 30,
1997, on a pro forma basis, approximately $1.93 billion of Senior Debt and
$200.0 million of debt ranking pari passu to the Exchange Notes would have been
outstanding. The Exchange Notes will be fully and unconditionally guaranteed on
a senior subordinated basis by certain of the Company's direct and indirect
subsidiaries (the "Guarantors").
Upon a Change of Control (as defined), (i) the Company will have the option,
at any time on or prior to June 15, 2000, to redeem the Exchange Notes, in whole
but not in part, at a redemption price equal to 100% of the principal amount
thereof plus the Applicable Premium (as defined), together with accrued and
unpaid interest, if any, to the date of redemption, and (ii) if the Company does
not so redeem the Exchange Notes or if such Change of Control occurs after June
15, 2000, each holder will have the right to require the Company to repurchase
such holder's Exchange Notes at a price equal to 101% of their principal amount,
plus accrued and unpaid interest to the date of repurchase. In addition, the
Company will be obligated to offer to repurchase the Exchange Notes at 100% of
their principal amount, plus accrued and unpaid interest, if any, to the date of
repurchase, in the event of certain asset sales. See "Description of the
Exchange Notes."
(Continued on next page)
------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN
FACTORS WHICH HOLDERS OF ORIGINAL NOTES AND PROSPECTIVE PURCHASERS OF EXCHANGE
NOTES SHOULD CONSIDER IN CONNECTION WITH THIS EXCHANGE OFFER.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE> 5
(Continued from previous page)
The Company will accept for exchange any and all validly tendered Original
Notes on or prior to 5:00 p.m., New York City time, on , 1997 (if
and as extended, the "Expiration Date"). Tenders of Original Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date. The Exchange Offer is not conditioned upon any minimum principal amount of
notes being tendered for exchange. The Original Notes may be tendered only in
integral multiples of $1,000. In the event the Company terminates the Exchange
Offer and does not accept for exchange any Original Notes, the Company will
promptly return all previously tendered Original Notes to the holders thereof.
The Original Notes were originally issued and sold on June 24, 1997 in a
transaction not registered under the Securities Act in reliance upon the
exemption provided in Rule 144A and Regulation S of the Securities Act (the
"Offering"). Accordingly, the Original Notes may not be reoffered, resold or
otherwise pledged, hypothecated or transferred in the United States unless so
registered or unless an applicable exemption from the registration requirements
of the Securities Act is available. Based upon interpretations by the staff (the
"Staff") of the Securities and Exchange Commission (the "Commission") set forth
in no-action letters issued to third parties, the Company believes that the
Exchange Notes issued pursuant to the Exchange Offer in exchange for the
Original Notes may be offered for resale, resold and otherwise transferred by
holders thereof (other than any such holder which is (i) an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act, (ii) a
broker-dealer who acquired the Original Notes directly from the Company or (iii)
a broker-dealer who acquired the Original Notes as a result of market making or
other trading activities) without compliance with the registration and
prospectus delivery requirements of the Securities Act provided that such
Exchange Notes are acquired in the ordinary course of such holder's business and
such holder is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a distribution
of such Exchange Notes. Each broker-dealer that receives the Exchange Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. Broker-dealers who
acquired Original Notes as a result of market making or other trading activities
may use this Prospectus, as supplemented or amended, in connection with resales
of the Exchange Notes. The Company has agreed that, for a period not to exceed
180 days after the Expiration Date, it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution." Any holder that cannot rely upon such interpretations must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction.
Any Original Notes not tendered and accepted in the Exchange Offer will
remain outstanding. To the extent that Original Notes are tendered and accepted
in the Exchange Offer, a holder's ability to sell untendered, or tendered but
unaccepted, Original Notes could be adversely affected. Following consummation
of the Exchange Offer, the holders of Original Notes will continue to be subject
to the existing restrictions on transfer thereof and the Company will have no
further obligation to such holders to provide for the registration under the
Securities Act of the Original Notes except under certain limited circumstances.
No assurance can be given as to the liquidity of the trading market for either
the Original Notes or the Exchange Notes.
The Company believes that none of the registered holders of the Original
Notes (the "Registered Holders") is an affiliate (as such term is defined in
Rule 405 under the Securities Act) of the Company. Prior to this Exchange Offer,
there has been no public market for the Original Notes. The Company does not
intend to list the Exchange Notes on any securities exchange or to seek approval
for quotation through any automated quotation system. There can be no assurance
that an active market for the Exchange Notes will develop. To the extent that a
market for the Exchange Notes does develop, the market value of the Exchange
Notes will depend on market conditions (such as yields on alternative
investments), general economic conditions, the Company's financial condition and
other conditions. Such conditions might cause the Exchange Notes, to the extent
that they are actively traded, to trade at a significant discount from face
value. See "Risk Factors -- Absence of Public Market for the Exchange Notes."
The Company will not receive any proceeds from this Exchange Offer. The
Company has agreed to bear the expenses of this Exchange Offer. No underwriter
is being used in connection with this Exchange Offer.
ii
<PAGE> 6
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF THE ORIGINAL NOTES IN ANY JURISDICTION
IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
---------------------
Until , 1997, all dealers effecting transactions in the
Exchange Notes, whether or not participating in this Exchange Offer, may be
required to deliver a Prospectus.
---------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THIS EXCHANGE OFFER COVERED BY THIS PROSPECTUS OR THE
ACCOMPANYING LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS AND THE ACCOMPANYING LETTER OR TRANSMITTAL DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN
ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH AN
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE
ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act with respect to the Exchange Offer. As permitted by
the rules and regulations of the Commission, this Prospectus omits certain
information, exhibits and undertakings contained in the Registration Statement.
For further information with respect to the Company and this Exchange Offer,
reference is made to the Registration Statement, including the exhibits thereto
and the financial statements, notes and schedules filed as a part thereof.
The Company is subject to the informational requirements of the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy materials and other information with the
Commission. The reports, proxy materials and other information filed by the
Company with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Regional Offices of the Commission at Seven World Trade
Center, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials also can be
obtained from the Public Reference Section of the Commission, Washington, D.C.
20549 at prescribed rates. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of such
site is http://www.sec.gov. The Indenture requires the Company to file with the
Commission and provide to holders of the Notes the reports and other information
required to be filed with the Commission by the Exchange Act, whether or not the
Company is then subject to such requirements. See "Description of Exchange
Notes -- Reports."
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the request of any such person, a copy of any or all
of the above documents incorporated herein by reference (other than exhibits to
such documents, unless such exhibits are specially incorporated by reference
into the documents that this Prospectus incorporates). Requests should be
directed to Chancellor Media Corporation of Los Angeles, 433 East Las Colinas
Blvd., Suite 1130, Irving, Texas 75039 (telephone (972) 869-9020).
iii
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Certain terms used in this Prospectus are defined
herein under the caption "Description of the Exchange Notes." As used herein,
unless the context otherwise requires, the term "Company" refers to Chancellor
Media Corporation of Los Angeles ("CMCLA") and its subsidiaries.
THE COMPANY
On September 5, 1997, pursuant to an Amended and Restated Agreement and
Plan of Merger, dated as of February 19, 1997 and amended and restated on July
31, 1997 (the "Chancellor Merger Agreement"), among Chancellor Broadcasting
Company ("Chancellor"), Chancellor Radio Broadcasting Company ("CRBC"),
Evergreen Media Corporation ("Evergreen"), Evergreen Mezzanine Holdings
Corporation ("EMHC") and Evergreen Media Corporation of Los Angeles ("EMCLA"),
among other things, (i) Chancellor was merged with and into EMHC, a direct and
wholly-owned subsidiary of Evergreen, with EMHC surviving the merger, and (ii)
CRBC was merged with and into EMCLA, a direct and wholly-owned subsidiary of
EMHC, with EMCLA surviving the merger (collectively, the "Chancellor Merger").
Following the Chancellor Merger, Evergreen changed its name to Chancellor Media
Corporation ("Chancellor Media"), EMHC changed its name to Chancellor Mezzanine
Holdings Corporation ("CMHC") and EMCLA changed its name to Chancellor Media
Corporation of Los Angeles ("CMCLA"). Chancellor Media and CMHC are holding
companies. The Company is the operating subsidiary of Chancellor Media.
The Company is the largest pure play radio broadcasting company in the
United States based on gross revenues, with a portfolio at September 5, 1997
consisting of 89 radio stations (63 FM and 26 AM) in 22 large markets, including
each of the nation's 12 largest radio revenue markets. The Company's portfolio
includes the first or second ranked station cluster in terms of revenue share in
15 of its 22 markets. On a pro forma basis, the Company had net revenue and
broadcast cash flow (as defined) of approximately $396.0 million and $166.6
million, respectively, for the six months ended June 30, 1997, and its pro forma
broadcast cash flow margin for such period would have been 42%.
The Company's strategy is to secure the leading clusters of radio stations
in each of the markets in which it operates. The Company's station portfolio
includes a total of 11 station clusters of four or five FM stations
("superduopolies"), with seven in the 12 largest radio markets -- Los Angeles,
New York, Chicago, San Francisco, Philadelphia, Washington, D.C. and
Detroit -- and four in other large markets -- Denver, Minneapolis/St. Paul,
Phoenix and Orlando. Consummation of the Pending Transactions (as defined below)
will add 15 stations (12 FM and three AM) (without taking into account stations
to be disposed or exchanged in the Pending Transactions) to the Company's
portfolio, including five stations in its superduopoly markets, and will
increase the number of superduopoly markets from 11 to 12. Approximately 78% of
pro forma 1996 net revenue would have been generated by the superduopoly
markets.
The Company's portfolio is geographically diversified and employs a wide
variety of programming formats, including adult contemporary, contemporary hit
radio, urban, jazz, country, oldies, news/talk, rock and sports. Each of the
Company's stations targets a specific demographic audience within a market, with
the majority of the stations appealing primarily to 18 to 34 or 25 to 54 year
old men and/or women, the demographic groups most sought after by advertisers.
Management believes that, because of the size and diversity of its station
portfolio, the Company is not unduly reliant on the performance of any one
station or market. No single market to be served by the Company represented more
than 12.0% of the Company's pro forma 1996 broadcast cash flow.
The Company's principal executive office is located at 433 East Las Colinas
Boulevard, Suite 1130, Irving, Texas 75039, and its telephone number is (972)
869-9020.
1
<PAGE> 8
BUSINESS STRATEGY
The Company's senior management team, led by Scott K. Ginsburg and James de
Castro, has extensive experience in acquiring and operating large market radio
station groups. The Company's business strategy is to assemble and operate radio
station clusters in order to maximize broadcast cash flow generated in each
market. This strategy relies on the following six key elements.
Create Large Market Superduopolies. The Company seeks to be the owner and
operator of the leading superduopoly in the largest markets in the United
States. Management believes that the large revenue base in these markets, in
conjunction with operating synergies achievable through the operation of
multiple stations, will enable it to appeal to a wider universe of national and
local advertisers and to achieve a greater degree of profitability than that of
operators and broadcasters in smaller markets. The Pending Transactions will
complement the Company's existing stations in the Los Angeles, New York,
Chicago, Dallas, Houston, Denver and Nassau/Suffolk (Long Island) markets. The
Company expects to continue to selectively pursue acquisition opportunities in
the major markets in which it will compete as well as in other markets.
Maximize Superduopoly Revenue and Expense Synergies. The Company seeks to
capitalize on the revenue growth and expense savings opportunities of
superduopolies that have been created or that will be created by the Viacom
Acquisition (as defined), the Chancellor Merger and the Pending Transactions.
Superduopolies have only been permissible since the passage of the
Telecommunications Act of 1996 (the "1996 Act") in January 1996. Management
believes that substantial benefits can be derived from the successful
integration of these station cluster groups. Management also believes that radio
station clusters can attract increased revenues in a market by delivering larger
combined audiences to advertisers and by engaging in joint marketing and
promotional activities. In addition, management expects to realize significant
expense savings through the consolidation of facilities and through the
economies of scale created in areas such as national representation commissions,
employee benefits, insurance premiums and other operating costs.
Establish Strong Listener Loyalty. Management believes that strong
listener familiarity with a given radio station produces listener loyalty.
Management seeks to establish this familiarity through a variety of programming
and marketing techniques, including the development of high-profile on-air
personalities and creative station-sponsored promotional events, all of which
are designed to secure heightened listener awareness. The Company also conducts
extensive market research to help identify programming format opportunities and
attract new listeners, as has been the case with WKTU-FM in New York. After
operating WKTU-FM for nine months under the call letters and country music
format inherited from a prior operator, in February 1996 the Company began to
operate WKTU-FM as a rhythmic contemporary hits station. According to Arbitron,
WKTU-FM was ranked eleventh in its target demographic group as a country
station, and was ranked first in several key demographic groups (including its
target demographic group) in the first full ranking period after the station
changed its format. The station has continued to rank among the top five
stations in its target demographic group in subsequent periods. Management
believes that institutionalizing its radio stations in their markets through
programming, marketing and research ensures steady long-term audience share
ratings.
Maintain Strict Cost Controls. Management maintains a company-wide focus
on cost controls in an effort to maximize broadcast cash flow margins.
Management reviews station spending on a monthly basis. In addition, corporate
level employees maintain weekly sales reporting systems designed to enable
management to evaluate station performance on a current basis. The Company's
focus on maximizing superduopoly revenues and maintaining cost controls is
reflected by the fact that, for the last two years, the Company has achieved
broadcast cash flow margins of 40% or more. The Company also carefully monitors
capital expenditures.
Develop Experienced, Incentivized Management Team. The Company believes
that management depth is critical to achieving superior operating performance in
a portfolio as large as the Company's. The Company's senior management team of
Scott K. Ginsburg and James de Castro collectively have an aggregate of more
than 30 years of radio industry operating experience. This senior management
team is supported by an experienced team of veteran group operators and station
general managers. At the station level, the Company seeks to incentivize its
individual radio station managers and sales forces to outperform revenue and
broadcast
2
<PAGE> 9
cash flow budget expectations by granting quarterly and annual performance
measurement-based bonuses. The Company believes that the incentives it offers to
its employees, as well as its stature in the radio industry, will enable it to
continue to be successful in recruiting top industry employees.
Maximize Free Cash Flow. By emphasizing the revenue and expense synergies
achievable through the assembly and operation of superduopolies and by carefully
monitoring operating costs and capital expenditures, the Company seeks to
maximize broadcast cash flow and, ultimately, free cash flow (broadcast cash
flow less corporate general and administrative expenses, debt service, tax
payments, dividend requirements and capital expenditures). This focus on free
cash flow should facilitate reduction of leverage without undue dependence on
capital markets and position the Company to pursue attractive acquisitions.
3
<PAGE> 10
RECENT DEVELOPMENTS
For a further discussion of the transactions described below, see "Business
and Properties" and "Pro Forma Financial Information."
THE CHANCELLOR MERGER
- - On September 5, 1997, Evergreen, EMHC, EMCLA, Chancellor and CRBC
consummated the transactions contemplated by the Chancellor Merger
Agreement. Pursuant to the Chancellor Merger Agreement, (i) Chancellor was
merged (the "Parent Merger") with and into EMHC, a direct, wholly-owned
subsidiary of Evergreen, with EMHC remaining as the surviving corporation
and (ii) CRBC was merged (the "Subsidiary Merger") with and into EMCLA, a
direct, wholly-owned subsidiary of EMHC, with EMCLA remaining as the
surviving corporation. Upon the consummation of the Parent Merger, Evergreen
was renamed Chancellor Media Corporation ("Chancellor Media") and EMHC was
renamed Chancellor Mezzanine Holdings Corporation ("CMHC"). Upon the
consummation of the Subsidiary Merger, EMCLA was renamed Chancellor Media
Corporation of Los Angeles ("CMCLA"). Consummation of the Chancellor Merger
added 52 radio stations (36 FM and 16 AM) to the Company's portfolio of
stations, including 13 stations in markets in which the Company previously
operated.
COMPLETED EVERGREEN TRANSACTIONS
- - Between January 1, 1997 and the date of the completion of the Chancellor
Merger, EMCLA and its subsidiaries had completed (i) the acquisition of 17
radio stations for a net purchase price of approximately $1.14 billion, (ii)
the exchange of six stations for three stations and $9.5 million in cash,
(iii) the sale or other disposition of 10 radio stations for $269.3 million
in cash and a promissory note for $18.0 million and (iv) the disposition of
one radio station for net proceeds of $80.0 million which are being held by
a qualified intermediary pending the completion of the deferred exchange of
the disposed station for one or more radio stations.
COMPLETED CHANCELLOR TRANSACTIONS
- - Between January 1, 1997 and the date of the completion of the Chancellor
Merger, CRBC and its subsidiaries had completed (i) the acquisition of 24
radio stations for a net purchase price of approximately $1.07 billion, (ii)
the exchange of three stations for one station and $33.0 million in cash and
(iii) the sale of five radio stations for $108.3 million in cash.
PENDING TRANSACTIONS
- - THE GANNETT ACQUISITION. On April 4, 1997, EMCLA entered into three
separate asset purchase agreements (the "Gannett Agreements") with Pacific
and Southern Company, Inc., a subsidiary of Gannett Co., Inc. ("P&S"), under
which EMCLA agreed to acquire one FM and one AM station in Chicago, one FM
and one AM station in Houston and one FM station in Dallas, for an aggregate
purchase price of $340.0 million in cash, subject to an upward adjustment of
up to $10.0 million, depending on the timing of the consummation of the
transaction (the "Gannett Acquisition").
- - BONNEVILLE ACQUISITION. On June 24, 1997, EMCLA entered into an agreement to
acquire two FM stations in Dallas for an aggregate purchase price of $83.5
million (the "Bonneville Acquisition").
- - BONNEVILLE OPTION. On August 6, 1997, Evergreen and Chancellor paid $3.0
million to Bonneville International Corporation ("Bonneville") for an option
to exchange three stations in Los Angeles and Washington, D.C. plus an
additional $57.0 million in cash for three stations in New York, Los Angeles
and Houston (the "Bonneville Option").
4
<PAGE> 11
- - DENVER ACQUISITION. On July 30, 1997, CRBC entered into an agreement to
acquire one FM station in Denver for $26.0 million in cash (the "Denver
Acquisition").
- - SFX EXCHANGE. On July 1, 1996, CRBC entered into an agreement to exchange
two FM stations in Jacksonville and $11.0 million in cash in return for four
stations (three FM and one AM) in Nassau/ Suffolk (Long Island) (the "SFX
Exchange").
Upon the consummation of all the Pending Transactions, the Company's
portfolio will consist of 99 radio stations (73 FM and 26 AM).
THE FINANCING TRANSACTIONS
The financing for the Completed Evergreen Transactions, the Completed
Chancellor Transactions and the Pending Transactions has included:
- - EVERGREEN PREFERRED STOCK OFFERING. In June 1997, Evergreen issued and sold
5,990,000 shares of its $3.00 Convertible Exchangeable Preferred Stock (the
"$3.00 Convertible Preferred Stock") which generated net proceeds of $287.8
million which were contributed to EMCLA.
- - EMCLA SENIOR CREDIT FACILITY. On April 25, 1997, EMCLA and a syndicate of
commercial banks and financial institutions amended and restated EMCLA's
senior loan agreement (as amended on June 26, 1997 and August 7, 1997, the
"Senior Credit Facility") to, among other things, provide for a total
commitment of $1.75 billion, consisting of a $1.25 billion reducing
revolving credit facility and a $500.0 million term loan facility. The
commitments under the revolving credit facility and the term loan facility
were increased to $1.60 billion and $900.0 million, respectively, upon
consummation of the Chancellor Merger, and at such time, CMCLA borrowed
under the Senior Credit Facility to repay all amounts then outstanding under
the CRBC Restated Credit Agreement and the Chancellor Interim Financing (as
each term is defined below).
- - CRBC SUBORDINATED NOTES OFFERING. On June 24, 1997, CRBC issued and sold the
Original Notes, the net proceeds of $194.1 million of which were used to
repay borrowings under CRBC's previous senior credit agreement.
- - CRBC RESTATED CREDIT AGREEMENT. On July 2, 1997, CRBC and a syndicate of
commercial banks and financial institutions amended and restated CRBC's
senior credit facility (as amended, the "CRBC Restated Credit Agreement")
to, among other things, provide for a total commitment of $750.0 million.
- - CHANCELLOR INTERIM FINANCING. On July 2, 1997, Chancellor borrowed funds
under an interim loan of $170.0 million (the "Chancellor Interim
Financing").
- - STATION SALES PROCEEDS. The cash proceeds of radio station dispositions
totaling $490.6 million.
5
<PAGE> 12
THE EXCHANGE OFFER
The Exchange Offer......... The Company is offering to exchange up to $200
million aggregate principal amount of Exchange
Notes for a like principal amount of Original
Notes. The Exchange Notes may be exchanged only in
multiples of $1,000 principal amount. The Company
will issue the Exchange Notes on or promptly after
the Expiration Date. See "The Exchange Offer."
Based on interpretations by the Staff of the
Commission set forth in no-action letters issued to
third parties, the Company believes that the
Exchange Notes issued pursuant to the Exchange
Offer in exchange for the Original Notes may be
offered for resale, resold and otherwise
transferred by any holder thereof (other than any
such holder which is (i) an "affiliate" of the
Company within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who acquired
the Original Notes directly from the Company or
(iii) a broker-dealer who acquired the Original
Notes as a result of market making or other trading
activities) without compliance with the
registration and prospectus delivery requirements
of the Securities Act, provided that such Exchange
Notes are acquired in the ordinary course of such
holder's business and such holder is not engaged
in, and does not intend to engage in, and has no
arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes. Each broker-dealer that receives the
Exchange Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale
of such Exchange Notes. See "Plan of Distribution."
To comply with the securities laws of certain
jurisdictions, it may be necessary to qualify for
sale or register the Exchange Notes prior to
offering or selling such Exchange Notes. If a
holder of Original Notes does not exchange such
Original Notes pursuant to the Exchange Offer, such
Original Notes will continue to be subject to the
restrictions on transfer contained in the legend
thereon. In general, the Original Notes may not be
offered or sold, unless registered under the
Securities Act, except pursuant to an exemption
from, or in a transaction not subject to the
Securities Act and applicable state securities
laws. See "The Exchange Offer -- Consequences of
Failure to Exchange" and "Description of Exchange
Notes".
Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1997, unless
extended in which case the term "Expiration Date"
shall mean the latest date and time to which the
Exchange Offer is so extended.
Conditions to the Exchange
Offer.................... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company in
whole or in part and from time to time in its sole
discretion. See "The Exchange Offer -- Certain
Conditions to the Exchange Offer." The Exchange
Offer is not conditioned upon any minimum aggregate
principal amount of Original Notes being tendered
for exchange.
Procedures for Tendering
the Original Notes......... Each registered holder of Original Notes (a
"Registered Holder") wishing to tender such
Original Notes in the Exchange Offer must complete,
sign and date the Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein, and
6
<PAGE> 13
mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with such
Original Notes and any other required
documentation, to the Exchange Agent at the address
set forth herein. By executing the Letter of
Transmittal, each holder of the Original Notes
(other than Participating Broker-Dealers (as
defined)) must represent to the Company that, among
other things, (i) the Exchange Notes to be acquired
pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person
receiving such Exchange Notes, whether or not the
holder of the Original Notes, (ii) neither the
holder of the Original Notes nor any such other
person has an arrangement or understanding with any
person to participate in the distribution of such
Original Notes and (iii) neither the holder nor any
such person is an "affiliate," as defined in Rule
405 under the Securities Act, of the Company. Each
Registered Holder whose Original Notes are held
through DTC (as defined) and wishes to participate
in the Exchange Offer may do so through DTC's
Automated Tender Offer Program ("ATOP") by which
each tendering participant will agree to be bound
by the Letter of Transmittal. Any Original Notes
not accepted for exchange for any reason will be
returned without expense to the tendering holder
thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
See "The Exchange Offer -- Procedures for
Tendering Original Notes."
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Original Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender such Original Notes should
contact such Registered Holder promptly and
instruct such Registered Holder to tender on such
beneficial owner's behalf. If such beneficial
holder wishes to tender on its own behalf, such
beneficial holder must, prior to completing and
executing the Letter of Transmittal and delivering
its Original Notes, either make appropriate
arrangements to register ownership of the Original
Notes in such holder's name or obtain a properly
completed bond power from the Registered Holder.
The transfer of registered ownership may take
considerable time and may not be able to be
completed prior to the Expiration Date. See "The
Exchange Offer -- Procedures for Tendering
Original Notes."
Guaranteed Delivery
Procedures............... Holders of Original Notes who wish to tender their
Original Notes and whose Original Notes are not
immediately available or who cannot deliver their
Original Notes or any other documents required by
the Letter of Transmittal to the Exchange Agent
prior to the Expiration Date, must tender their
Original Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer --
Guaranteed Delivery Procedures."
Withdrawal Rights.......... Tenders of Original Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the
Expiration Date. For a withdrawal to be effective,
a written or facsimile notice of withdrawal must be
received by the Exchange Agent at its address set
forth herein. Such notice must (i) specify the name
of the person having tendered the Original Notes to
be withdrawn; (ii) identify the Original Notes to
be withdrawn (including the certificate number or
numbers and principal amount of Original Notes to
be withdrawn); (iii) be signed by the holder
7
<PAGE> 14
in the same manner as the original signature on the
Letter of Transmittal by which such Original Notes
were tendered; and (iv) specify the name in which
the Original Notes are to be registered; if
different from that of the withdrawing holder. See
"The Exchange Offer -- Withdrawal Rights."
Acceptance of Original
Notes and Delivery of
Exchange Notes........... Subject to the satisfaction or waiver of the
conditions to the Exchange Offer, the Company will
accept for exchange any and all Original Notes
which are properly tendered in the Exchange Offer
prior to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Notes issued pursuant
to the Exchange Offer will be delivered promptly
following the Expiration Date. See "The Exchange
Offer -- Terms of the Exchange Offer."
Consequences of Failure to
Exchange................. Holders of Original Notes who do not exchange their
Original Notes for the Exchange Notes pursuant to
the Exchange Offer will continue to be subject to
the restrictions on transfer of such Original Notes
as set forth in the legend thereon. In general,
Original Notes that are not exchanged pursuant to
the Exchange Offer may not be offered or sold
except pursuant to a registration statement filed
under the Securities Act or an exemption from
registration thereunder and in compliance with
applicable state securities laws. In the event the
Company completes the Exchange Offer, the interest
rate on Original Notes will remain as stated
thereon and holders of Original Notes will have no
further rights under the Registration Rights
Agreements (as defined below).
Certain Tax
Considerations............. Latham & Watkins, counsel to the Company, has
advised the Company that because the Exchange Notes
should not be considered to differ materially from
the Original Notes, the exchange of Original Notes
for Exchange Notes should not result in any
material federal income tax consequences to holders
exchanging Original Notes for Exchange Notes. For a
full description of the basis of, and limitations
on, this opinion, see "Material Federal Income Tax
Considerations."
Registration Rights
Agreement.................. Pursuant to a registration rights agreement (the
"Registration Rights Agreement") among CRBC and the
initial purchasers of the Original Notes (the
"Initial Purchasers"), CRBC has agreed (i) to file
a registration statement within 120 days after the
Issue Date with respect to an offer to exchange the
Original Notes for a like amount of Exchange Notes
and (ii) to use its reasonable best efforts to
cause such registration statement to become
effective under the Securities Act within 180 days
after the Issue Date. The Exchange Offer is
intended to satisfy the rights of holders of
Original Notes under the Registration Rights
Agreement, which rights terminate upon consummation
of the Exchange Offer. The holders of the Exchange
Notes are not entitled to any exchange or
registration rights with respect to the Exchange
Notes.
Exchange Agent............. [ ] is the Exchange Agent for the Exchange
Offer. The address and telephone number of the
Exchange Agent are set forth in the "The Exchange
Offer -- Exchange Agent."
8
<PAGE> 15
SUMMARY OF TERMS OF THE EXCHANGE NOTES
The Exchange Offer applies to $200.0 million aggregate principal amount of
the Original Notes. The form and terms of the Exchange Notes will be the same as
the form and terms of the Original Notes except that (i) the Exchange Notes will
be registered under the Securities Act, and, therefore, will not bear legends
restricting the transfer thereof and (ii) the holders of the Exchange Notes will
not be entitled to certain rights of the holders of the Original Notes under the
Registration Rights Agreement, which rights will terminate upon consummation of
the Exchange Offer. The Exchange Notes will evidence the same debt as the
Original Notes and both series of Notes will be entitled to the benefits of the
Indenture and treated as a single class of debt securities.
Issuer..................... Chancellor Media Corporation of Los Angeles, as
successor by merger with CRBC.
Securities Offered......... $200,000,000 aggregate principal amount of 8 3/4%
Senior Subordinated Notes due 2007, Series B.
Maturity Date.............. June 15, 2007.
Interest Rate and Payment
Dates.................... The Exchange Notes will bear interest at a rate of
8 3/4% per annum. Interest on the Exchange Notes
will accrue from June 24, 1997 and will be payable
semi-annually on each June 15 and December 15,
commencing December 15, 1997.
Optional Redemption........ The Exchange Notes will be redeemable, in whole or
in part, at the option of the Company on or after
June 15, 2002 at the redemption prices set forth
herein, plus accrued and unpaid interest to the
date of redemption. In addition, on or prior to
June 15, 2000, the Company may, at its option,
redeem the Exchange Notes, in part, with the net
cash proceeds of one or more Public Equity
Offerings, at the redemption price set forth
herein, plus accrued and unpaid interest, if any,
to the date of redemption; provided, however, that
after any such redemption the aggregate principal
amount of Exchange Notes outstanding must equal at
least 75% of the aggregate principal amount of
Exchange Notes originally issued in the Exchange
Offer. See "Description of the Exchange
Notes -- Optional Redemption."
Change of Control.......... If a Change of Control (as defined) occurs, (i) the
Company will have the option, at any time on or
prior to June 15, 2000, to redeem the Exchange
Notes in whole but not in part at a redemption
price equal to 100% of the principal amount thereof
plus the Applicable premium, plus accrued and
unpaid interest, if any, to the date of redemption,
and (ii) if the Company does not so redeem the
Exchange Notes or if such Change of Control occurs
after June 15, 2000, the Company will be required
to offer to repurchase all outstanding Exchange
Notes at a price equal to 101% of their principal
amount, plus accrued and unpaid interest, if any,
to the date of repurchase. There can be no
assurance that the Company will have sufficient
funds to purchase all the Exchange Notes in the
event of a Change of Control or that the Company
would be able to obtain financing for such purpose
on favorable terms, if at all. In addition, the
Senior Credit Facility will restrict the Company's
ability to repurchase the Exchange Notes, including
pursuant to a Change of Control Offer (as defined).
The Senior Credit Facility also contains certain
other provisions relating to a change of control of
the Company. These provisions are generally broader
than the Change of Control provisions of the
Indenture. Consequently, certain events that may
give rise to a change of control under the Senior
Credit Facility may not give rise to a Change of
Control under the Indenture. See "Risk
Factors -- Change of
9
<PAGE> 16
Control" and "Description of the Exchange
Notes -- Change of Control."
Offers to Purchase......... In the event of certain assets sales, the Company
will be required to offer to repurchase the
Exchange Notes (to the extent of any net proceeds
remaining following the Company's offer to purchase
the 9 3/8% Notes) at a price equal to 100% of their
principal amount, plus accrued and unpaid interest,
if any, to the date of repurchase. See "Description
of the Exchange Notes -- Certain
Covenants -- Limitation on Asset Sales."
Ranking.................... The Exchange Notes will be general unsecured
obligations of the Company and will rank pari passu
in right of payment to the Company's 9 3/8% Notes
and will be subordinated in right of payment to all
existing and future Senior Debt. As of June 30,
1997, on a pro forma basis after giving effect to
the Completed Transactions completed after such
date, the Chancellor Merger, the Pending
Transactions and the Financing Transactions and the
application of the net proceeds therefrom,
approximately $1.93 billion of Senior Debt
(represented by borrowings under the Senior Credit
Facility) would have been outstanding and
approximately $200.0 million of debt ranking pari
passu to the Exchange Notes would have been
outstanding. See "Description of the Exchange
Notes -- Subordination."
Guarantees................. The Exchange Notes will be fully and
unconditionally guaranteed (the "Guarantees") on a
senior subordinated basis by the Guarantors. The
obligation of the Guarantors with respect to the
Guarantees will be subordinated in right of
payment, to the same extent as the obligations of
the Company in respect of the Exchange Notes are
subordinated to all existing and future Senior
Debt, to all existing and future Guarantor Senior
Debt (as defined)(which includes the guarantee by
the guarantors of the Company's borrowings under
the Senior Credit Facility), and will rank pari
passu to the Guarantors' guarantee of the 9 3/8%
Notes. See "Description of the Exchange
Notes -- Guarantees."
Certain Covenants.......... The Indenture will impose certain limitations on
the ability of the Company and its subsidiaries to,
among other things, incur additional indebtedness,
incur liens, pay dividends or make certain other
restricted payments, consummate certain asset
sales, enter into certain transactions with
affiliates, engage in certain asset swaps, incur
indebtedness that is subordinate in right of
payment to any Senior Debt and senior in right of
payment to the Exchange Notes, impose restrictions
on the ability of a subsidiary to pay dividends or
make certain payments to the Company, enter into
sale and leaseback transactions, conduct business
other than the ownership and operation of radio
broadcast stations, merge or consolidate with any
other person or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially
all of the assets of the Company. See "Description
of the Exchange Notes -- Certain Covenants.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes pursuant to this Prospectus.
RISK FACTORS
See "Risk Factors" beginning on page 13 for a discussion of certain factors
that should be considered carefully in evaluating the Exchange Offer.
10
<PAGE> 17
SUMMARY PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial statements, a complete
set of which are included on pages P-1 through P-29 of this Prospectus, are
presented using the purchase method of accounting for all acquisitions and
reflect (i) the combination of consolidated historical financial data of EMCLA,
CRBC, each of the stations acquired in the Completed Evergreen Transactions and
the Completed Chancellor Transactions (collectively, the "Completed
Transactions") and each of the stations to be acquired in the Pending
Transactions and (ii) the elimination of the consolidated historical data of the
stations sold by EMCLA and CRBC in the Completed Evergreen Transactions and the
Completed Chancellor Transactions and stations to be sold or swapped by the
Company in the Pending Transactions.
The summary pro forma financial information set forth below under Company
Pro Forma Combined presents adjustments for (i) in the case of the Operating
Data and Other Data, the Completed Transactions, the 1996 Evergreen Offering (as
defined), the 1996 Preferred Stock Conversion (as defined), the Chancellor
Offerings (as defined), the Pending Transactions and the Financing Transactions
as if such transactions had occurred on January 1, 1996 and (ii) in the case of
the Balance Sheet Data, for the Completed Transactions consummated after June
30, 1997, the Chancellor Merger, the Pending Transactions and the Financing
Transactions as if such transactions had occurred on June 30, 1997. No
adjustments are presented to the unaudited pro forma condensed combined balance
sheet data or the unaudited pro forma condensed combined statement of operations
data in respect of the Katz Acquisition (as defined) because it is presently
contemplated that the operations of Katz (as defined) will not be combined with
the Company upon consummation, and that Chancellor Media will operate Katz as a
separate, stand-alone subsidiary.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1997
---------------------- -----------------------
COMPANY COMPANY
PRO FORMA PRO FORMA
HISTORICAL COMBINED HISTORICAL COMBINED
---------- --------- ---------- ----------
(IN THOUSANDS EXCEPT MARGIN DATA)
<S> <C> <C> <C> <C>
OPERATING DATA:
Net revenues............................ $ 293,850 $ 731,201 $ 188,261 $ 395,969
Station operating expenses excluding
depreciation and amortization......... 174,344 420,706 111,162 229,396
Operating income (loss)................. 17,960 (43,421) 17,536 (10,275)
Interest expense........................ 37,527 171,326 22,741 85,847
Net loss................................ (16,194) (152,547) (491) (60,147)
Preferred stock dividends............... -- 38,400 -- 19,626
Net loss attributable to common stock... (16,194) (190,947) (491) (79,773)
OTHER DATA:
Broadcast cash flow(1).................. $ 119,506 $ 310,495 $ 77,099 $ 166,573
Broadcast cash flow margin.............. 41% 42% 41% 42%
EBITDA(1)............................... $ 111,709 $ 296,581 $ 71,448 $ 157,409
Ratio of earnings to fixed charges(2)... -- -- 1.33x --
BALANCE SHEET DATA (END OF PERIOD):
Working capital, excluding current
portion of long-term debt............. $ 67,921 N/A $ 79,345 $ 130,146
Intangible assets, net.................. 853,643 N/A 1,183,569 4,220,730
Total assets............................ 1,020,959 N/A 1,483,513 4,631,247
Long-term debt (including current
portion).............................. 358,000 N/A 525,000 2,326,553
Redeemable preferred stock.............. -- N/A -- 328,444
Stockholder's equity.................... 549,411 N/A 836,603 1,522,190
</TABLE>
11
<PAGE> 18
- ---------------
(1) Broadcast cash flow consists of station operating income excluding
depreciation and amortization, and corporate general and administrative
expense and non-cash stock option compensation expense. EBITDA consists of
operating income before depreciation, amortization and non-cash stock option
compensation expense. Although broadcast cash flow and EBITDA are not
calculated in accordance with generally accepted accounting principles, the
Company believes that broadcast cash flow and EBITDA are widely used in the
broadcast industry as a measure of a station group's operating performance.
Nevertheless, these measures should not be considered in isolation or as a
substitute for operating income, cash flows from operating activities or any
other measure for determining the Company's operating performance or
liquidity that is calculated in accordance with generally accepted
accounting principles. Broadcast cash flow and EBITDA do not take into
account the Company's debt service requirements and other commitments and,
accordingly, broadcast cash flow and EBITDA are not necessarily indications
of amounts that may be available for reinvestment in the Company's business
or other discretionary uses.
(2) For purposes of this calculation, "earnings" consist of income (loss) before
income taxes and fixed charges. "Fixed charges" consist of interest,
amortization of debt issuance costs and the component of rental expense
believed by management to be representative of the interest factor thereon.
Earnings were insufficient to cover fixed charges by $19,090 for the year
ended December 31, 1996. On a pro forma basis after giving effect to the
Completed Transactions, the Chancellor Merger, the 1996 Evergreen Offering,
the 1996 Preferred Stock Conversion, the Chancellor Offerings, the Pending
Transactions and the Financing Transactions, earnings were insufficient to
cover fixed charges by $213,600 and $81,990 for the year ended December 31,
1996 and the six months ended June 30, 1997, respectively.
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RISK FACTORS
Holders of Original Notes that are considering participating in the
Exchange Offer and prospective purchasers of Exchange Notes should carefully
consider, in addition to the other information contained in this Prospectus, the
following risk factors.
SUBSTANTIAL LEVERAGE; HISTORY OF NET LOSSES AND INSUFFICIENCY OF EARNINGS TO
COVER FIXED CHARGES
The Company has consolidated indebtedness that is substantial in relation
to its stockholders equity. The Company is subject to the terms of the Senior
Credit Facility, the indenture governing the 9 3/8% Notes (the "9 3/8%
Indenture"), the Indenture governing the Notes and the certificates of
designation governing two series of preferred stock, the 12 1/4% Senior
Cumulative Exchangeable Preferred Stock (the "12 1/4% Preferred Stock") and the
12% Exchangeable Preferred Stock (the "12% Preferred Stock"). The Senior Credit
Facility, the 9 3/8% Indenture, the Indenture and such certificates of
designation limit, but do not prohibit, the incurrence of additional
indebtedness by the Company. As of June 30, 1997, EMCLA and CRBC had outstanding
long-term indebtedness (including current portion) of approximately $525.0
million and $547.3 million, respectively. As of June 30, 1997, on a pro forma
basis after giving effect to those Completed Transactions consummated after such
date, the Chancellor Merger, the Pending Transactions and the Financing
Transactions, the Company would have had outstanding long term indebtedness
(including current portion) of approximately $2.33 billion, redeemable preferred
stock with an aggregate liquidation preference of approximately $328.4 million,
an accumulated deficit of $110.8 million and stockholder's equity of $1.52
billion. See "Capitalization." In addition, the Company expects to borrow up to
$180.0 million under the Senior Credit Facility to be distributed ultimately to
Chancellor Media to be used by Chancellor Media as the equity capital required
to finance the Katz Acquisition (as defined). See "-- Katz Acquisition".
The degree to which the Company is leveraged could have material
consequences to the Company and the holders of the Exchange Notes, including,
but not limited to the following: (i) its ability to obtain additional financing
in the future for acquisitions, working capital, capital expenditures, and
general corporate or other purposes may be impaired, (ii) a substantial portion
of its cash flow will be required for debt service under the Senior Credit
Facility, the 9 3/8% Notes and the Notes and, as a result, will not be available
for other purposes, (iii) commencing in February 2001, the Company will have
substantial cash dividend requirements on the 12 1/4% Preferred Stock and,
commencing in January 2002, on the 12% Preferred Stock, (iv) the Company's level
of indebtedness could make it more vulnerable to economic downturns, limit its
ability to withstand competitive pressures and reduce its flexibility in
responding to changing business and economic conditions and (v) the agreements
governing its long-term debt (and, to a lesser extent, the 12 1/4% Preferred
Stock and the 12% Preferred Stock) contain numerous restrictive operating and
financial covenants with which it must comply. The failure by the Company to
comply with the covenants in such debt instruments could result in an event of
default thereunder, which could permit acceleration of the debt under such
instruments and in some cases acceleration of debt under other instruments that
contain cross-default or cross-acceleration provisions. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," "Description of Capital Stock,"
"Description of Certain Indebtedness" and "Description of the Exchange Notes."
The ability of the Company to satisfy its obligations under the Senior
Credit Facility, the 9 3/8% Indenture, the Indenture, and the certificates of
designation governing the 12 1/4% Preferred Stock and the 12% Preferred Stock
will depend upon the Company's future operating performance. Such operating
performance will be affected by prevailing economic conditions and financial,
business and other factors, certain of which are beyond the Company's control.
The Company anticipates that its operating cash flow, together with borrowings
under the Senior Credit Facility, will be sufficient to meet its operating
expenses and to service its debt and preferred stock dividend requirements as
they become due. However, if the Company is unable to service its indebtedness,
whether upon acceleration of such indebtedness or in the ordinary course of
business, it will be forced to pursue one or more alternative strategies such as
selling assets, restructuring or refinancing its indebtedness, or seeking
additional equity capital. There can be no assurance that any of these
strategies could be effected on satisfactory terms, if at all, or that the
approval of the FCC could be obtained on a timely basis, or at all, for the
transfer of any of the stations' licenses in connection with a proposed sale of
assets.
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The Company has historically experienced, on a consolidated basis, net
losses, principally as a result of significant interest charges, certain
non-recurring expenses and depreciation and amortization charges relating to the
acquisition of radio broadcasting stations. EMCLA's net loss attributable to
common stock for the years ended December 31, 1994, 1995 and 1996 and for the
six months ended June 30, 1997 was $3.5 million, $5.9 million, $16.2 million and
$0.5 million, respectively. CRBC's net loss attributable to common stock for the
years ended December 31, 1994, 1995 and 1996 and for the six months ended June
30, 1997 was $0.1 million, $11.5 million, $35.0 million and $30.4 million,
respectively. On a pro forma basis, after giving effect to the Completed
Transactions consummated after such date, the Chancellor Merger, the Pending
Transactions and the Financing Transactions the Company's net loss attributable
to common stock for the year ended December 31, 1996 and the six months ended
June 30, 1997 would have been $190.9 million and $79.8 million, respectively.
The acquisition of radio broadcasting stations has been and will continue to be
an important part of the Company's operating strategy, and the Company expects
that amortization charges and interest expenses relating to past and possible
future acquisitions will continue to have a significant adverse effect on the
Company's reported results.
NECESSITY OF GOVERNMENTAL REVIEWS AND APPROVALS PRIOR TO CONSUMMATION OF THE
PENDING TRANSACTIONS
Approval of the FCC is required for the issuance, renewal or transfer of
radio broadcast station operating licenses. In addition, the consummation of
each of the Pending Transactions is conditioned upon the expiration or
termination of the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"). To date, (i) the
FCC has approved the Gannett Acquisition, the Bonneville Acquisition and the SFX
Exchange, and the approvals for each of these transactions has become final,
nonappealable orders, (ii) the waiting periods required under the HSR Act for
the Gannett Acquisition, the Bonneville Acquisition, the Denver Acquisition and
the Bonneville Option have expired or been terminated, and (iii) the waiting
period required under the HSR Act for the SFX Exchange has not expired or been
terminated.
There can be no assurance that any governmental agency, including the FCC,
will approve or take any other required action with respect to any of the
Pending Transactions for which approval has not been given or actions not taken
or, if approvals are received or actions are taken, that such approvals or
actions will not require further, possibly numerous divestitures, or be
conditioned upon matters that would cause the Company to abandon one or more of
the Pending Transactions or that no action will be brought challenging such
approvals or actions, or, if such challenge is made, as to the result thereof.
INTEGRATION OF ACQUISITIONS
The Company holds a significantly larger portfolio of radio stations than
the Company has held in the past. In addition, management is regularly involved
in discussions with third parties regarding potential acquisitions, and the
Company may pursue an active acquisition strategy that could result in
additional expansion in the future. As a result of the Company's acquisition
strategy, the Company's management will be required to manage a substantially
larger radio station group than historically has been the case. The Company's
future operations and earnings will be largely dependent on the Company's
ability to integrate the stations proposed to be acquired thereunder. The
Company must, among other things, integrate management and employee personnel
and combine certain administrative procedures. The integration of the stations
proposed to be acquired involve numerous other risks, including the potential
loss of key employees of acquired stations. There can be no assurance that the
Company will successfully integrate the stations proposed to be acquired, and
the failure to do so could have a material adverse effect on its results of
operations and financial condition. In addition, the need to focus management's
attention on the integration of these stations may limit the ability of the
Company to successfully pursue other opportunities for a period of time.
The acquisition strategy of the Company involves numerous other risks,
including increasing leverage and debt service requirements, the diversion of
management's attention from other business concerns and the potential loss of
key employees of acquired stations. The availability of additional acquisition
financing cannot be assured, and depending on the terms of the proposed
acquisitions and financings, could be restricted by the
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<PAGE> 21
terms of the Senior Credit Facility, the 9 3/8% Indenture, the Indenture, the
certificates of designation for the 12 1/4% Preferred Stock and the 12%
Preferred Stock, or the certificates of designation for Chancellor Media's 7%
Convertible Preferred Stock and $3.00 Convertible Preferred Stock. There can be
no assurance that any future acquisitions will not have a material adverse
effect on the Company's financial condition and results of operations.
KATZ ACQUISITION
On July 14, 1997, Evergreen, Chancellor and Katz Media Group, Inc. ("Katz")
entered into an agreement pursuant to which a jointly-owned affiliate of
Evergreen and Chancellor would acquire Katz, a full-service media representation
firm, in a tender offer transaction valued at approximately $373 million (the
"Katz Acquisition"). The United States Department of Justice (the "DOJ") has
issued a second request for information under the HSR Act in connection with the
Katz Acquisition. Assuming that the Katz Acquisition may ultimately be
completed, as a result of the delay caused by such second request for
information, Katz would be acquired by a wholly-owned subsidiary of Chancellor
Media (but not of the Company). Upon any consummation of the Katz Acquisition,
Chancellor Media intends, at least in the near term, to operate Katz as a
separate, stand-alone subsidiary of Chancellor Media and not as a subsidiary of
CMHC or CMCLA. Accordingly, neither the assets nor the results of operations of
Katz will be reflected in the consolidated financial statements of CMCLA.
Holders of Exchange Notes should not assume that CMCLA will have any interest in
the business or operations of Katz. Chancellor Media is presently exploring
whether, assuming the consummation of the Katz Acquisition, Katz should be
combined with CMCLA. However, at this time, no definitive decision has been made
whether to pursue such a combination.
COMPETITIVE NATURE OF RADIO BROADCASTING
The radio broadcasting industry is a highly competitive business. The
success of each of the Company's stations will be dependent, to a significant
degree, upon its audience ratings and share of the overall advertising revenue
within its market. The Company's stations will compete for listeners and
advertising revenue directly with other radio stations, as well as with other
media, within their respective markets. The Company also will compete with other
broadcasting operators for acquisition opportunities, and prices for radio
stations in major markets have increased significantly in recent periods. To the
extent that the rapid pace of consolidation in the radio broadcasting industry
continues, certain competitors may emerge with larger portfolios of major market
radio stations, greater ability to deliver large audiences to advertisers and
more access to capital resources than the Company. The audience ratings and
market share for the Company are and will be subject to change and any adverse
change in a particular market could have a material and adverse effect on the
revenue of their stations located in that market. There can be no assurance that
any one of the Company's stations will be able to maintain or increase its
current audience ratings or advertising revenue market share.
The radio broadcasting industry is also subject to competition from new
media technologies that are being developed or introduced, such as the delivery
of audio programming by cable television systems, direct broadcast satellite
("DBS") systems and other digital audio broadcasting formats to local and
national audiences. In addition, the FCC has auctioned spectrum for a new
satellite-delivered Digital Audio Radio Service ("DARS"). These actions may
result in the introduction of several new national or regional multi-channel and
multi-format satellite radio services with sound quality equivalent to compact
discs. Another possible competitor to traditional radio is In Band On Channel
("IBOC") digital radio. IBOC could provide multi-channel, multi-format digital
radio services in the same band width currently occupied by traditional AM and
FM radio services. The Company cannot predict at this time the effect, if any,
that any such new technologies may have on the radio broadcasting industry.
ANTITRUST MATTERS
As a result of the recent consolidation of ownership in the radio broadcast
industry, the DOJ has been giving closer scrutiny to acquisitions in the
industry, including certain transactions involving the Company. The consummation
of the Pending Transactions are subject to notification filing requirements,
applicable
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waiting periods and possible review by the DOJ or the United States Federal
Trade Commission (the "FTC") under the HSR Act. To date, the waiting periods for
all such transactions except the SFX Exchange have expired or been terminated.
See "-- Necessity of Governmental Reviews and Approvals Prior to Consummation of
the Pending Transactions" above and "Business and Properties -- Federal
Regulation of Radio Broadcasting Industry." The DOJ has issued a second request
for additional information in connection with the SFX Exchange (as well as for
the Katz Acquisition, as described above). DOJ review of certain transactions
has caused, and may continue to cause, delays in anticipated consummations of
certain transactions and, in some cases, may result in attempts by DOJ to enjoin
such transactions or negotiate modifications of the proposed transactions. Such
delays, injunctions and modifications could have an adverse effect on the
Company and may result in the abandonment of some otherwise attractive
transactions.
The DOJ has stated publicly that it has established certain revenue and
audience share concentration benchmarks with respect to radio station
acquisitions, above which a transaction may receive additional antitrust
scrutiny. However, to date, the DOJ has also investigated transactions that do
not meet or exceed these benchmarks and has cleared transactions that do exceed
the benchmarks. Given this uncertainty, the Company cannot predict whether it
will be required by the DOJ or the FTC to dispose of certain stations to be
acquired as a result of the Pending Transactions. Although the Company does not
believe that its acquisition strategy as a whole will be adversely affected in
any material respect by antitrust review (including review under the HSR Act) or
by additional divestitures that the Company may have to make as a result of
antitrust review, there can be no assurance that this will be the case.
RADIO BROADCASTING INDUSTRY SUBJECT TO FEDERAL REGULATION
The radio broadcasting industry is subject to extensive regulation by the
FCC under the Communications Act of 1934 as amended (as amended by the 1996 Act,
the "Communications Act"). Approval of the FCC is required for the issuance,
renewal or transfer of radio broadcast station operating licenses. See
"-- Necessity of Governmental Reviews and Approvals Prior to Consummation of the
Pending Transactions" above. In particular, the Company's business is dependent
upon its continuing to hold radio broadcasting licenses from the FCC that are
issued for terms of up to eight years. While in the vast majority of cases such
licenses are renewed by the FCC, there can be no assurance that any of the
stations' licenses will be renewed at their expiration dates, or that renewals,
if granted, will not include conditions or qualifications that could adversely
affect the Company's operations. In addition, the Communications Act and FCC
rules restrict alien ownership and voting of capital stock of, and
participations in the affairs of the Company. Moreover, laws, regulations and
policies may be changed significantly over time and there can be no assurance
that such changes will not have a material adverse affect on the business,
financial condition and results of operations of the Company.
The 1996 Act, which amended the Communications Act in a number of important
respects, has created significant new opportunities for radio broadcasters, but
also has created uncertainties as to how the FCC and the courts will enforce and
interpret the 1996 Act. Although the 1996 Act eliminated the national ownership
ceiling previously applicable to radio broadcasters and also loosened
restrictions previously applicable to ownership within single markets,
significant restrictions remain on permitted levels of local ownership. In
markets with 45 or more stations, ownership is limited to eight stations, no
more than five of which can be FM or AM; in markets with 30-44 stations,
ownership is limited to seven stations, no more than four of which can be FM or
AM; in markets with 15-29 stations, ownership is limited to six stations, no
more than four of which can be FM or AM; and in markets with 14 or fewer
stations, ownership is limited to no more than 50% of the market's total and no
more than three AM or FM. Compliance with the FCC's multiple ownership rules is
expected to cause the Company and other radio broadcasters to forego acquisition
opportunities that they might otherwise wish to pursue. Compliance with these
rules by third parties may also have a significant impact on the Company as, for
example, in precluding the consummation of swap transactions that would cause
such third parties to violate multiple ownership rules.
SUBORDINATION
The payment of principal, premium, if any, and interest on, and any other
amounts owing in respect of, the Exchange Notes will be subordinated to the
prior payment in full of all existing and future Senior Debt of
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<PAGE> 23
the Company. The Guarantors' Guarantees also will be subordinated in right of
payment to Guarantor Senior Debt of any Guarantor. Guarantor Senior Debt will
include all existing and future indebtedness of the Guarantors not expressly
subordinated to other indebtedness of the Guarantors, including indebtedness
represented by the guarantee of the Guarantors under the Credit Agreement. As of
June 30, 1997, on a pro forma basis after giving effect to the Completed
Transactions consummated after such date, the Chancellor Merger, the Pending
Transactions and the Financing Transactions, approximately $1.93 billion of
Senior Debt would have been outstanding (represented by borrowings under the
Senior Credit Facility) and approximately $570.0 million would have been
available for additional borrowing under the Revolving Loan Facility. The 9 3/8%
Indenture and the Indenture limit the incurrence by the Company and the
Guarantors of additional Senior Debt and Guarantor Senior Debt, respectively. In
the event of the bankruptcy, liquidation, dissolution, reorganization or other
winding up of the Company, the assets of the Company will be available to pay
obligations on the Exchange Notes only after all Senior Debt has been paid in
full, and there may not be sufficient assets remaining to pay amounts due on any
or all of the Exchange Notes. In addition, under certain circumstances, the
Company may not pay principal of, premium, if any, or interest on, or any other
amounts owing in respect of, the Exchange Notes, or purchase, redeem or
otherwise retire the Exchange Notes, if a payment default or a non-payment
default exists with respect to certain Senior Debt, including Senior Debt under
the Senior Credit Facility and, in the case of non-payment default, if a payment
blockage notice has been received by the Trustee (as defined). See "Description
of the Notes -- Subordination" and "Description of Indebtedness -- Senior Credit
Facility."
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Senior Credit Facility, the 9 3/8% Indenture, the Indenture and the
certificates of designations for the Company's preferred stock and the Senior
Credit Facility each contain certain covenants that restrict, among other
things, the Company's and its subsidiaries' ability to incur additional
indebtedness, incur liens, pay dividends or make certain other restricted
payments, consummate certain asset sales, enter into certain transactions with
affiliates, incur indebtedness that is subordinate in right of payment to any
Senior Debt and senior in right of payment to the Exchange Notes, impose
restrictions on the ability of a subsidiary to pay dividends or make certain
payments to the Company, enter into sale and leaseback transactions, conduct
business other than the ownership and operation of radio broadcast stations,
merge or consolidate with any other person or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of the assets of the
Company. The Senior Credit Facility requires the Company to maintain specified
financial ratios and to satisfy certain financial condition tests. The Company's
ability to meet those financial ratios and financial condition tests can be
affected by events beyond its control, and there can be no assurance that the
Company will meet those tests. A breach of any of these covenants could result
in a default under the Senior Credit Facility, the 9 3/8% Indenture, the
Indenture and other financial documents. In the event of an event of default
under the Senior Credit Facility, the 9 3/8% Indenture or the Indenture, the
lenders thereunder could elect to declare all amounts outstanding thereunder,
together with accrued interest, to be immediately due and payable. In the case
of the Senior Credit Facility, if the Company were unable to repay those
amounts, the lenders thereunder could proceed against the collateral granted to
them to secure that indebtedness. If the Senior Credit Facility indebtedness
were to be accelerated, there can be no assurance that the assets of the Company
would be sufficient to repay in full that indebtedness and the other
indebtedness of the Company, including the Exchange Notes. Substantially all the
assets of the Company and its subsidiaries have been pledged as security under
the Senior Credit Facility. See "Description of the Exchange Notes -- Certain
Covenants" and "Description of Indebtedness."
DEPENDENCE ON KEY PERSONNEL
The Company's business will be dependent upon the performance of certain
key individuals, including Thomas O. Hicks, the Chairman of the Company, Scott
K. Ginsburg, the President and Chief Executive Officer of the Company; James de
Castro, the Chief Operating Officer of the Company, and Matthew E. Devine, the
Chief Financial Officer of the Company. The loss of the services of Mr. Hicks,
Mr. Ginsburg, Mr. de Castro or Mr. Devine could have a material and adverse
effect on the Company. Additionally, Steven Dinetz, the Company's former
Co-Chief Operating Officer, has accepted a position as chief operating officer
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of another radio broadcaster affiliated with Hicks Muse (as defined), and there
can be no assurance that the loss of Mr. Dinetz as Co-Chief Operating Officer of
the Company will not have a material and adverse effect on the Company.
CONTROL OF THE COMPANY
Affiliates of Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse") hold
approximately 15% of the outstanding primary shares of the Common Stock of
Chancellor Media and Mr. Ginsburg holds approximately 4% of the outstanding
primary shares of Common Stock of Chancellor Media. As the largest shareholder
of Chancellor Media, Hicks Muse will have substantial influence on all matters
submitted to a vote of the holders of Common Stock, and the combined voting
power of Hicks Muse and Mr. Ginsburg may have the effect of discouraging certain
types of transactions involving an actual or potential change of control of
Chancellor Media or the Company.
FRAUDULENT CONVEYANCE
Various fraudulent conveyance laws have been enacted for the protection of
creditors and may be utilized by a court to subordinate or avoid the Exchange
Notes or the Guarantees in favor of other existing or future creditors of the
Company or the Guarantors.
If a court in a lawsuit on behalf of any unpaid creditor of the Company or
a representative of the Company's creditors were to find that, at the time the
Company issued the Exchange Notes, the Company (x) intended to hinder, delay or
defraud any existing or future creditor or contemplated insolvency with a design
to prefer one or more creditors to the exclusion in whole or in part of others
or (y) did not receive fair consideration or reasonably equivalent value for
issuing such Exchange Notes and the Company (i) was insolvent, (ii) was rendered
insolvent by reason of such issuance, (iii) was engaged or about to engage in a
business or transaction for which its remaining assets constituted unreasonably
small capital to carry on its business or (iv) intended to incur, or believed
that it would incur, debts beyond its ability to pay such debts as they matured,
such court could void the Company's obligations under the Exchange Notes and
void such transactions. Alternatively, in such event, claims of the holders of
such Exchange Notes could be subordinated to claims of the other creditors of
the Company.
The Company's obligations under the Exchange Notes will be guaranteed by
each of the Guarantors. To the extent that a court were to find that (x) the
guarantee was incurred by the Guarantor with intent to hinder, delay or defraud
any present or future creditor or the Guarantor contemplated insolvency with a
design to prefer one or more creditors to the exclusion in whole or in part of
others or (y) the Guarantor did not receive fair consideration or reasonably
equivalent value for issuing the Guarantee and the Guarantor (i) was insolvent,
(ii) was rendered insolvent by reason of the issuance of the Guarantee, (iii)
was engaged or about to engage in a business or transaction for which the
remaining assets of the Guarantor constituted unreasonably small capital to
carry on its business or (iv) intended to incur, or believed that it would
incur, debts beyond its ability to pay such debts as they matured, the court
could void or subordinate the Guarantee in favor of such Guarantor's creditors.
Among other things, a legal challenge of any Guarantee on fraudulent conveyance
grounds may focus on the benefits, if any, realized by a Guarantor as a result
of the issuance by the Company of the Exchange Notes.
To the extent that any Guarantee is avoided as a fraudulent conveyance or
held unenforceable for any other reason, holders of the Exchange Notes would
cease to have any claim in respect of such Guarantor and would be creditors
solely of the Company and the other Guarantors, if any. In such event, the
claims of the holders of the Exchange Notes against such Guarantor would be
subject to the prior payment of all liabilities and preferred stock claims of
the Guarantor. There can be no assurance that, after providing for all prior
claims and preferred stock interests, if any, there would be sufficient assets
to satisfy the claims of the holders of the Exchange Notes relating to any
voided portion of a guarantee.
Based upon financial and other information currently available to it,
management of the Company believes that the Exchange Notes and the Guarantees
are being incurred for proper purposes and in good faith and that the Company
and each of the Guarantors (i) are solvent and will continue to be solvent after
giving
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effect to the issuance of the Exchange Notes or Guarantee, as the case may be,
(ii) will have sufficient capital for carrying on its business after such
issuance, and (iii) will be able to pay its debts as they mature. See
"Management's Discussions and Analysis of Results of Operations and Financial
Condition -- Liquidity and Capital Resources."
CHANGE OF CONTROL
Upon a Change of Control, the Company may be required to offer to purchase
all of the Exchange Notes then outstanding at 101% of their principal amount,
plus accrued interest to the date of repurchase. If a Change of Control were to
occur, there can be no assurance that the Company would have sufficient funds to
pay the purchase price for all the Exchange Notes that the Company might be
required to purchase. In the event that the Company were required to purchase
Exchange Notes pursuant to a Change of Control Offer, the Company expects that
it would need to seek third-party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can be no
assurance that the Company would be able to obtain such financing on favorable
terms, if at all. In addition, the various financing arrangements of the Company
will restrict the Company's ability to repurchase the Exchange Notes, including
pursuant to a Change of Control Offer. Also, a Change of Control will result in
an event of default under the Senior Credit Facility and may cause the
acceleration of other Senior Debt, if any, in which case the subordination
provisions of the Exchange Notes would require payment in full of the Senior
Credit Facility and any such Senior Debt before repurchase of the Exchange
Notes. In addition, a Change of Control may result in the Company being required
to offer to redeem the 12 1/4% Preferred Stock and 12% Preferred Stock, and may
result in Chancellor Media being required to offer to redeem the 7% Convertible
Preferred Stock and the $3.00 Convertible Preferred Stock. See "Description of
the Exchange Notes -- Change of Control," "Description of the Exchange
Notes -- Subordination" and "Description of Indebtedness -- Senior Credit
Facility -- Change of Control." The inability to repay Senior Debt, if
accelerated, and to purchase all of the tendered Exchange Notes, would
constitute an event of default under the Indenture.
CONSEQUENCES OF FAILURE TO EXCHANGE ORIGINAL NOTES
The Exchange Notes will be issued in exchange for Original Notes only after
timely receipt by the Exchange Agent of such Original Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documents. Therefore, holders of Original Notes desiring to tender such Original
Notes in exchange for the Exchange Notes should allow sufficient time to ensure
timely delivery. Neither the Exchange Agent nor the Company is under any duty to
give notification of defects or irregularities with respect to tenders of
Original Notes for exchange. Original Notes that are not tendered or are
tendered but not accepted will, following consummation of the Exchange Offer,
continue to be subject to the existing restrictions upon transfer thereof. in
addition, any holder of Original Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes will be
required to comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each broker-dealer
that receives Exchange Notes for its own account in exchange for Original Notes,
where such Original Notes were acquired by such broker-dealer as a result of
market-making activities or any other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution." To the extent that Original Notes are
tendered and accepted in the Exchange Offer, the trading market for untendered
and tendered but unaccepted Original Notes could be adversely affected. See
"Exchange Offer."
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES
The Original Notes have not been registered under the Securities Act and
are subject to significant restrictions. The Exchange Notes will constitute a
new issue of securities with no established trading market. The Company does not
intend to list the Exchange Notes on any national securities exchange or to seek
the admission thereof to trading in the National Association of Securities
Dealers Automated Quotation system. The Company has been advised by the Initial
Purchasers (as defined) that they intend to make a market in the Exchange Notes.
However, the Initial Purchasers are not obligated to do so, and any
market-making
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<PAGE> 26
activity with respect to the Exchange Notes may be discontinued at any time
without notice. In addition, such market-making activity will be subject to the
limits imposed by the Exchange Act, and may be limited during the Exchange
Offer. If a trading market does not develop or is not maintained, holders of the
Exchange Notes may experience difficulty in reselling the Exchange Notes or may
be unable to sell them at all. If a trading market does not develop or is not
maintained, holders of the Exchange Notes may experience difficulty in reselling
the Exchange Notes or may be unable to sell them at all. If a market for the
Exchange Notes develops, any such market may be discontinued at any time. If a
public trading market develops for the Exchange Notes, future trading prices of
the Exchange Notes will depend on many factors, including, among other things,
prevailing interest rates, the Company's results of operations and the market
for similar securities. Depending on prevailing interest rates, the market for
similar securities and other factors, including the financial condition of the
Company, the Exchange Notes may trade at a discount from their principal amount.
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THE EXCHANGE OFFER
PURPOSE AND EFFECTS OF THE EXCHANGE OFFER
The Original Notes were sold by CRBC on June 24, 1997 (the "Issue Date") to
the Initial Purchasers. The Initial Purchasers subsequently placed the Original
Notes with qualified institutional buyers in transactions not requiring
registration under the Securities Act or applicable state securities laws,
including sales pursuant to Rule 144A and Regulation S under the Securities Act.
As a condition to the sale of the Original Notes, CRBC and the Initial
Purchasers entered into the Registration Rights Agreement on June 24, 1997.
Pursuant to the Registration Rights Agreement, CRBC agreed that unless the
Exchange Offer is not permitted by applicable law or Commission policy, it would
(i) use its reasonable best efforts, within 120 days after the Issue Date, to
file with the Commission a registration statement (the "Registration Statement")
with respect to a registered offer to exchange the Original Notes for Exchange
Notes, (ii) use its reasonable best efforts to cause such Registration Statement
to be declared effective under the Securities Act within 180 days after the
Issue Date and (iii) use its reasonable best efforts to consummate the Exchange
Offer within 225 days after the Issue Date. The Company, as successor to CRBC
after the Chancellor Merger, has assumed CRBC's obligations under the Indenture
and the Registration Rights Agreement. A copy of the Registration Rights
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. The Registration Statement of which this Prospectus
is a part is intended to satisfy certain of the Company's obligations under the
Registration Rights Agreement.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company, upon the Registration Statement
being declared effective, will accept any and all Original Notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on the
Expiration Date and exchange them for Exchange Notes. The Company will issue
$1,000 principal amount of Exchange Notes in exchange for each $1,000 principal
amount of outstanding Original Notes accepted in the Exchange Offer. Holders may
tender some or all of their Original Notes pursuant to the Exchange Offer.
However, the Original Notes may be tendered only in integral multiples of
$1,000.
The Company will keep the Exchange Offer open for not less than 20 business
days or longer if required by applicable law, after the date notice of the
Exchange Offer is mailed to holders of the Original Notes.
The Exchange Notes will evidence the same debt as the Original Notes for
which they are exchanged, and are entitled to the benefits of the Indenture. The
form and terms of the Exchange Notes are the same as the form and terms of the
Original Notes except that the Exchange Notes have been registered under the
Securities Act and hence will not bear legends restricting the transfer thereof.
Holders do not have an appraisal or dissenters' rights under the Delaware
General Corporation Law or under the Indenture in connection with the Exchange
Offer. The Company intends to conduct the Exchange Offer in accordance with the
applicable requirements of Regulation 14E under the Exchange Act.
The Company shall be deemed to have accepted validly tendered Exchange
Notes when, as and if, the Company has given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
Holders for the purpose of receiving the Exchange Notes from the Company.
If any tendered Original Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Original Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders whose Original Notes are not tendered or are tendered but not
accepted in the Exchange Offer will continue to hold such Original Notes and
will be entitled to all the rights and preferences and subject to the
limitations applicable thereto under the Indenture. Following consummation of
the Exchange Offer, the holders will continue to be subject to the existing
restrictions upon transfer thereof and the Company will have no further
obligation to such holders to provide for the registration under the Securities
Act of the Original
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Notes held by them. To the extent that Original Notes are tendered and accepted
in the Exchange Offer, the trading market for untendered and tendered but
unaccepted original Notes could be adversely affected.
Holders who tender Original Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of the
Original Notes pursuant to the Exchange Offer. The Company will pay all charges
and expenses, other than certain applicable taxes, in connection with the
Exchange Offer. See "-- Fees and Expenses; Solicitation of Tenders."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean , 1997 unless the Company,
in its sole discretion extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date to which the Exchange Offer is so
extended.
In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
Registered Holders an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. Such announcement may state that the Company is extending the Exchange
Offer for a specified period of time or on a daily basis until 5:00 p.m., New
York City time, on the date on which a specified percentage of Original Notes
are tendered.
The Company reserves the right (i) to delay accepting any Original Notes,
to extend the Exchange Offer or to terminate the Exchange Offer and not accept
Original Notes not previously accepted if any of the conditions set forth below
under "-- Certain Conditions to the Exchange Offer" shall have occurred and
shall not have been waived by the Company, by giving oral or written notice of
such delay, extension or termination to the Exchange Agent, or (ii) to amend the
terms of the Exchange Offer in any manner deemed by it to be advantageous to the
holders. Any such delay in acceptance, extension, termination or amendment will
be followed as promptly as practicable by oral or written notice thereof to the
holders. If the Exchange Offer is amended in a manner determined by the Company
to constitute a material change, the Company will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to all
Registered Holders, and the Company will extend the Exchange Offer for a period
of five to ten business days, depending upon the significance of the amendment
and the manner of disclosure to Registered Holders, if the Exchange Offer would
otherwise expire during such five to ten business day period. During any
extension of the Expiration Date, all Original Notes previously tendered will
remain subject to the Exchange Offer and may be accepted for exchange by the
Company.
Without limiting the manner in which the Company may choose to make public
announcement of any extension, amendment or termination of the Exchange Offer,
the Company shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
INTEREST ON THE SENIOR NOTES
Interest accrues on the Original Notes, and will accrue on the Exchange
Notes, in each case, from June 24, 1997, at the rate of 8 3/4% per annum and
will be payable in cash semiannually in arrears on each June 15 and December 15,
commencing on December 15, 1997. No interest will be payable on the Original
Notes on the date of the exchange for the Exchange Notes and therefore no
interest will be paid thereon to the holders at such time.
PROCEDURES FOR TENDERING ORIGINAL NOTES
The tender to the Company of the Original Notes by a holder thereof as set
forth below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a holder who wishes to tender
the Original Notes for exchange pursuant to the Exchange Offer must transmit a
properly completed and duly executed Letter of
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Transmittal, including all other documents required by such Letter of
Transmittal, to the Exchange Agent at one of the addresses set forth below under
"-- Exchange Agent" on or prior to the Exchange Dates or, in the alternative,
comply with The Depositary Trust Company's ("DTC") ATOP procedures described
below. In addition, either (i) certificates for such Original Notes must be
received by the Exchange Agent along with the Letter of Transmittal, (ii) a
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of
such Original Notes, if such procedure is available, into the Exchange Agent's
account at DTC pursuant to the procedure for book-entry transfer described
below, or properly transmitted Agent's Message (as defined below), must be
received by the Exchange Agent prior to the Expiration Date, or (iii) the holder
must comply with the guaranteed delivery procedures described below. THE METHOD
OF DELIVERY OF THE ORIGINAL NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY
MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
INSURE TIMELY DELIVERY. NO LETTER OF TRANSMITTAL OR ORIGINAL NOTES SHOULD BE
SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Original Notes surrendered for
exchange pursuant thereto are tendered (i) by a Registered Holder of the
Original Notes who has not completed the boxes entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution (as defined below). In the event
that signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, are required to be guaranteed, such guarantees must be by a firm
(an "Eligible Institution") that is a member of a recognized signature guarantee
medallion program (an "Eligible Program") within the meaning of Rule 17Ad-15
under the Exchange Act. If the Exchange Notes and/or Original Notes not
exchanged are to be delivered to an address other than that of the Registered
Holder appearing on the note register for the Original Notes, the signature on
the Letter of Transmittal must be guaranteed by an Eligible Institution. If the
Original Notes are registered in the name of a person other than the person
signing the Letter of Transmittal, the Original Notes surrendered for exchange
must be endorsed by, or be accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by the Company in its
sole discretion, duly executed by the Registered Holder with the signature
thereon guaranteed by an Eligible Institution.
Any beneficial owner whose Original Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Original Notes should contact the Registered Holder promptly and
instruct such Registered Holder to tender Original Notes on such beneficial
owner's behalf. If such beneficial owner wishes to tender such Original Notes
himself, such beneficial owner must, prior to completing and executing the
Letter of Transmittal and delivering such Original Notes in such beneficial
owner's name, either make appropriate arrangements to register ownership of the
Original Notes in such beneficial owner's name or obtain a properly completed
bond power from the Registered Holder of the Original Notes. The transfer of
registered ownership may take considerable time and may not be able to be
completed prior to the Expiration Date.
The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may utilize DTC's ATOP to tender.
Accordingly, participants in DTC's ATOP may, in lieu of physically completing
and signing the Letter of Transmittal and delivering it to the Exchange Agent,
electronically transmit their acceptance of the Exchange Offer by causing the
Depositary to transfer the Original Notes to the Exchange Agent in accordance
with the Depositary's ATOP procedures for transfer. The Depositary will then
send an Agent's Message to the Exchange Agent.
The term "Agent's Message" means a message transmitted by DTC received by
the Exchange Agent and forming part of the Book-Entry Confirmation, which states
that the Depositary has received an express acknowledgement from a participant
in DTC's ATOP that is tendering Original Notes which are the subject of such
book entry confirmation, that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal (or, in the case of an Agent's
Message relating to guaranteed delivery, that such
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participant has received and agrees to be bound by the applicable Notice of
Guaranteed Delivery), and that the agreement may be enforced against such
participant.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of the Original Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and all
tenders of any particular Original Note not properly tendered or to not accept
any particular Original Note which acceptance might, in the judgment of the
Company or its counsel, be unlawful. The Company also reserves the absolute
right at its sole discretion to waive any defects or irregularities or
conditions of the Exchange Offer as to any particular Original Note either
before or after the Expiration Date (including the right to waive the
ineligibility of any holder who seeks to tender the Original Notes in the
Exchange Offer). The interpretation of the terms and conditions of the Exchange
Offer as to any particular Original Note either before or after the Expiration
Date (including the Letter of Transmittal and instructions thereto) by the
Company shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with the tenders of Original Notes for exchange
must be cured within such reasonable period of time as the Company shall
determine. Neither the Company, the Exchange Agent nor any other person shall be
under any duty to give notification of any defect or irregularity with respect
to any tender of the Original Notes for exchange, nor shall any of them incur
any liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or person other than the
Registered Holder or holders of Original Notes, such Original Notes must be
endorsed or accompanied by a properly completed bond power, in either case
signed exactly as the names of the Registered Holder or holders that appear on
the Original Notes with the signature thereon guaranteed by an Eligible
Institution.
If the Letter of Transmittal or any Original Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such person should so indicate when signing and, unless waived by the
Company, proper evidence satisfactory to the Company of their authority to so
act must be submitted with the Letter of Transmittal.
By tendering, each holder will represent to the Company that, among other
things, the Exchange Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the holder, that neither the
holder nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such Exchange Notes and that
neither the holder nor any such other person is an "affiliate," as defined in
Rule 405 under the Securities Act, of the Company.
ACCEPTANCE OF ORIGINAL NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Original Notes
properly tendered and will issue the Exchange Notes promptly after acceptance of
the Original Notes. See "-- Certain Conditions to the Exchange Offer" below. For
purposes of the Exchange Offer, the Company shall be deemed to have accepted
properly tendered Original Notes for exchange when, and if, the Company has
given oral or written notice thereof to the Exchange Agent.
In all cases, issuance of Exchange Notes for Original Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of certificates for such Original Notes or
a timely Book-Entry Confirmation of such Original Notes into the Exchange
Agent's account at DTC, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Original Notes are
not accepted for any reason set forth in the terms and conditions of the
Exchange Offer or if certificates representing the Original Notes are submitted
for a greater principal amount than the holder desires to exchange, such
unaccepted or non-exchanged Original Notes will be returned without expense to
the tendering holder thereof (or, in the case of Original Notes tendered by
book-entry transfer into the Exchange Agent's account at DTC pursuant to the
book-entry transfer procedures
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described below, such non-exchanged Original Notes will be credited to an
account maintained with DTC) as promptly as practicable after the expiration or
termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Original Notes at DTC for purposes of the Exchange Offer within two
business days after the date of this Prospectus, and any financial institution
that is a participant in DTC's systems may make book-entry delivery of the
Original Notes by causing DTC to transfer such Original Notes into the Exchange
Agent's account at DTC in accordance with DTC's procedure for transfer. However,
although delivery of the Original Notes may be effected through book-entry
transfer at DTC, the Letter of Transmittal or a facsimile thereof, with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "-- Exchange Agent" on or prior to the
Expiration Date or the guaranteed delivery procedures described below must be
complied with. Delivery of documents to the book-entry transfer facility does
not constitute delivery to the Exchange Agent.
THE METHOD OF DELIVERY OF ORIGINAL NOTES AND ALL OTHER DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE BE
OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE
TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the Exchange Agent will
be required to withhold, and will withhold, 31% of the gross proceeds otherwise
payable to a holder pursuant to the Exchange Offer if the holder does not
provide its taxpayer identification number (social security number or employer
identification number) and certify that such number is correct. Each tendering
holder should complete and sign the main signature form and the Substitute Form
W-9 included as part of the Letter of Transmittal, so as to provide the
information and certification necessary to avoid backup withholding, unless an
applicable exemption exists and is proved in a manner satisfactory to the
Company and the Exchange Agent.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Original Notes desires to tender such
Original Notes and the Original Notes are not immediately available, or time
will not permit such holder's Original Notes or other required documents to
reach the Exchange Agent before the Expiration Date, or the procedure for
book-entry transfer cannot be completed on a timely basis, a tender may be
effected if (i) the tender is made through an Eligible Institution, (ii) prior
to the Expiration Date, the Exchange Agent receives from such Eligible
Institution a properly completed and duly executed Letter of Transmittal (or a
facsimile thereof) and Notice of Guaranteed Delivery (be telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of the Original Notes and the principal amount of Original
Notes tendered, stating that the tender is being made thereby and guaranteeing
that within three business days after the date of execution of the Notice of
Guaranteed Delivery, the certificates for all physically tendered Original
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Age, and (iii) the
certificates for all physically tendered Original Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and all other
documents required by the Letter of Transmittal, are received by the Exchange
Agent within three business days after the date of execution of the Notice and
Guaranteed Delivery. Unless Original Notes being tendered by the above-described
method (or a timely Book-Entry Confirmation) are deposited with the Exchange
Agent within the time period set forth above (accompanied or preceded by a
properly completed Letter of Transmittal and any other required documents), the
Company may, at its option, reject the tender. Copies of a Notice of Guaranteed
Delivery which may be used by Eligible Institutions for the purposes described
in this paragraph are being delivered with this Prospectus and the related
Letter of Transmittal.
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A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Original Notes (or a timely Book-Entry Confirmation) is
received by the Exchange Agent. Issuances of Exchange Notes in exchange for
Original Notes tendered pursuant to a Notice of Guaranteed Delivery or letter,
telegram or facsimile transmissions to similar effect (as provided above) by an
Eligible Institution will be made only against deposit of the Letter of
Transmittal (and any other required documents) by an Eligible Institution will
be made only against deposit of the Letter of Transmittal (and any other
required documents) and the tendered Original Notes (or a timely book-Entry
Confirmation).
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Original Notes for exchange (the "Transferor")
exchanges, assigns and transfers the Original Notes to the Company and
irrevocably constitutes and appoints the Exchange Agent as the Transferor's
agent and attorney-in-fact to cause the Original Notes to be assigned,
transferred and exchanged. The transferor represents and warrants that it has
full power and authority to tender, exchange, assign and transfer the Original
Notes and to acquire Exchange Notes issuable upon the exchange of such tendered
Original Notes, and that, when the same are accepted for exchange, the Company
will acquire good and unencumbered title to the tendered Original Notes, free
and clear of all liens, restriction, charges and encumbrances and not subject to
any adverse claim. The Transferor also warrants that it will, upon request,
execute and deliver any additional documents deemed by the Company to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered Original Notes. The Transferor further agrees that acceptance of any
tendered Original Notes by the Company and the issuance of Exchange Notes in
exchange therefor shall constitute performance in full by the Company of its
obligations under the Registration Rights Agreement and that the company shall
have no further obligations or liabilities thereunder (except in certain limited
circumstances). All authority conferred by the Transferor will survive the death
or incapacity of the Transferor and every obligation of the Transferor shall be
binding upon the heirs, legal representatives, successors, assigns, executors
and administrators of such Transferor.
By tendering Original Notes, the Transferor certifies (a) that it is not an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act, that it is not a broker-dealer that owns Original Notes acquired directly
from the Company or an affiliate of the Company, that it is acquiring the
Exchange Notes offered hereby in the ordinary course of such Transferor's
business and that such Transferor has no arrangement with any person to
participate in the distribution of such Exchange Notes or (b) that it is an
"affiliate" (as so defined) of the Company or of the Initial Purchasers, and
that it will comply with the registration and prospectus delivery requirements
of the Securities Act to the extent applicable to it.
WITHDRAWAL RIGHTS
Tenders of Original Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date.
For a withdrawal to be effective, (i) a written or facsimile notice of
withdrawal must be received by the Exchange Agent at its address set forth below
under "-- Exchange Agent" or (ii) holders must comply with the appropriate
procedures of DTC's ATOP. Any such notice of withdrawal must (i) specify the
name of the person having tendered the Original Notes to be withdrawn, (ii)
identify the Original Notes to be withdrawn (including the serial number or
numbers and the principal amount of Original Notes to be withdrawn), (iii) be
signed by the holder in the same manner as the original signature on the Letter
of Transmittal by which such Original Notes were tendered and (iv) specify the
name in which such Original Notes are to be registered, if different from that
of the withdrawing holder. If Original Notes have been tendered pursuant to the
procedure for book-entry described above, any notice of withdrawal must specify,
in lieu of certificate numbers, the name and number of the account at DTC to be
credited with the withdrawn Original Notes and otherwise comply with the
procedures of such facility. Any questions as to the validity, form and
eligibility
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(including time of receipt) of such notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Original
Notes so withdrawn will be deemed not to have been validly tendered for exchange
for purposes of the Exchange Offer. Any Original Notes which have been tendered
for exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder (or, in the case of Original Notes
tendered by book-entry transfer into the Exchange Agent's account at DTC
pursuant to the book-entry transfer procedures described above, such Original
Notes will be credited to an account maintained with DTC for the Original Notes)
as soon as practicable after withdrawal, rejection of tender or termination of
the Exchange Offer. Properly withdrawn Original Notes may be retendered by
following one of the procedures described under "-- Procedures for Tendering
Original Notes" above at any time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company's
obligation to accept for exchange, or exchange Exchange Notes for, any Original
Notes not theretofore accepted for exchange is subject to the following
conditions:
(a) no action or proceeding having been instituted or threatened in
any court or by or before any governmental agency with respect to the
Exchange Offer which, in the judgment of the Company, might impair the
ability of the Company to proceed with the Exchange Offer or have a
material adverse effect on the Company or there shall not have occurred any
material adverse development in any existing action or proceeding with
respect to the Company or any of its subsidiaries;
(b) there shall not have been any material change, or development
involving a prospective change, in the business or financial affairs of the
Company or any of its subsidiaries which, in the judgment of the Company,
would materially impair the Company's ability to consummate the Exchange
Offer or have a material adverse impact on the Company if the Exchange
Offer is consummated;
(c) there shall not have been proposed, adopted or enacted any law,
statute, rule or regulation which, in the judgment of the Company, might
materially impair the ability of the Company to proceed with the Exchange
Offer or have a material adverse effect on the Company if the Exchange
Offer is consummated; or
(d) all governmental approvals which the Company shall deem necessary
for the consummation of the Exchange Offer as contemplated hereby shall
have been obtained.
If the Company determines in good faith that any of the conditions are not
met, the Company may (i) refuse to accept any Original Notes and return all
tendered Original Notes to exchanging Holders, (ii) extend the Exchange Offer
and retain all Original Notes tendered prior to the expiration of the Exchange
Offer, subject, however, to the rights of holders to withdraw such Original
Notes (see "-- Withdrawal Rights") or (iii) waive certain of such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Original Notes which have not been withdrawn or revoked. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to all Registered Holders.
Holders have certain rights and remedies against the Company under the
Registration Rights Agreement. If, notwithstanding a failure of the conditions
stated above, (i) a registration statement concerning the Exchange Offer has not
been filed on or prior to the 120th day after the Closing Date, (ii) such
registration statement is not declared by the Commission on or prior to the
180th day after the Closing Date, (iii) such registration statement is declared
effective by the Commission and the Company does not exchange the Exchange Notes
for all Original Notes validly tendered on or prior to the 225th day after the
Closing Date or (iv) a registration statement for an offering to be made on a
continuous basis pursuant to Rule 415 under the Securities Act has been declared
effective by the Commission and ceases to be effective or usable during the 24
months after the Closing Date without being cured on the same day (each, a
"Registration Default"), then with respect to the first 90-day period following
the date on which such Registration Default occurs, Holders have the right to
receive, as liquidated damages, additional interest of 0.5% per annum until the
Registration
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Default has been cured. The amount of such additional interest shall increase by
0.5% per annum at the beginning of each subsequent 90-day period until all
Registration Defaults are cured; provided, that such additional interest shall
not exceed 1.0% per annum at any one time. Such conditions are not intended to
modify those rights or remedies in any respect.
The foregoing conditions are for the benefit of the Company and may be
asserted by the Company in good faith regardless of the circumstances giving
rise to such conditions or may be waived by the Company in whole or in part at
any time and from time to time in its discretion. The failure by the Company at
any time to exercise the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time. In addition, the Company has
reserved the right, notwithstanding the satisfaction of each of the foregoing,
to terminate or amend the Exchange Offer.
EXCHANGE AGENT
has been appointed as Exchange Agent for the Exchange Offer.
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
By Registered or Certified Mail; By Overnight Courier; or By Hand:
[TO COME]
By Facsimile:
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES; SOLICITATION OF TENDERS
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$.7 million and include fees and expenses of the Exchange Agent and accounting
and legal fees.
The Company will pay all transfer taxes, if any, applicable to the exchange
of the Original Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes, or the Original Notes not tendered or tendered but
not accepted for exchange, are to be delivered to, or are to be registered or
issued in the name of, any person other than the Registered Holder of the
Original Notes tendered, or if tendered Original Notes are registered in the
name of any person other than the person signing the Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of the
Original Notes pursuant to the Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the original Registered Holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus or the accompanying Letter of Transmittal.
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<PAGE> 35
If given or made, such information or representations must not be relied upon as
having been authorized by the Company. This Prospectus and/or the accompanying
Letter of Transmittal does not constitute an offer to sell, or a solicitation of
an offer to buy, the Exchange Notes in any jurisdiction where, or to any person
to whom, it is unlawful to make such an offer or a solicitation. Neither the
deliver of the Prospectus or the accompanying Letter of Transmittal, nor any
sale made thereunder shall, under any circumstances, create any implication that
there has not been any change in the facts set forth in this Prospectus or in
the affairs of the Company since the date hereof.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Original Notes, which is face value, as reflected in the Company's accounting
records on the date of the exchange. Accordingly, no gain or loss for accounting
purposes will be recognized. The costs of the Exchange Offer will be expensed
over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Original Notes who do not exchange their Original Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Original Notes as set forth in the legend
thereon. In general, the Original Notes may not be offered or sold, unless
registered under the Securities Act, except pursuant to an exemption from, or in
a transaction not subject to, the Securities Act and applicable state securities
laws. The Company does not intend to register the Original Notes under the
Securities Act. The Company believes that, based upon interpretations contained
in no-actin letters issued to third parties by the Staff, the Exchange Notes
issued pursuant to the Exchange Offer in exchange for Original Notes may be
offered for resale, resold or otherwise transferred by holders thereof (other
than any such holder which is (i) an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act, (ii) a broker-dealer who acquired
the Original Notes directly from the Company or (iii) a broker-dealer who
acquired the Original Notes as a result of market making or other trading
activities) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holders' business and such holder is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes. Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution." If any Holder (other than a broker-dealer described in the
preceding sentence) has any arrangement or understanding with respect to the
distribution of the Exchange Notes to be acquired pursuant to the Exchange
Offer, such Holder (i) may not rely on the applicable interpretations of the
Staff and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction. In
addition, to comply with the securities laws of certain jurisdictions, if
applicable, the Exchange Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with.
FEDERAL INCOME TAX CONSEQUENCES
The exchange of Original Notes for Exchange Notes by holders will not be a
taxable exchange for federal income tax purposes, and holders should not
recognize any taxable gain or loss or any interest income as a result of such
exchange. See "Material Federal Income Tax Considerations."
OTHER
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Original Notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
To the extent that Original Notes are tendered and accepted in the Exchange
Offer, the trading market, if any, for the Original Notes could be adversely
affected. See "Risk Factors -- Consequences of Failure to Exchange Original
Notes." The Company may in the future seek to acquire untendered Original Notes
in
29
<PAGE> 36
open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Company has no present plan to acquire any Original
Notes which are not tendered in the Exchange Offer.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes. In consideration for issuing the Exchange Notes as contemplated
in this Prospectus, the Company will receive in exchange Original Notes in like
principal amount, which will be cancelled and as such will not result in any
increase in indebtedness of the Company.
30
<PAGE> 37
CAPITALIZATION
The following table sets forth (i) the actual capitalization of EMCLA at
June 30, 1997 and (ii) such capitalization as adjusted to give effect to those
Completed Transactions consummated since June 30, 1997, the Chancellor Merger,
the Pending Transactions and the Financing Transactions. See "Unaudited Pro
Forma Condensed Combined Financial Statements."
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term Debt:
Senior Credit Facility(1)................................. $ 525,000 $1,926,553
9 3/8% Senior Subordinated Notes due 2004................. -- 200,000
8 3/4% Senior Subordinated Notes due 2007................. -- 200,000
---------- ----------
Total Long-term Debt.............................. 525,000 2,326,553
Redeemable Preferred Stock:
12 1/4% Series A Senior Cumulative Exchangeable Preferred
Stock(2)............................................... -- 117,670
12% Exchangeable Preferred Stock(3)....................... -- 210,774
Stockholder's equity:
Common Stock.............................................. 1 1
Additional Paid-in Capital................................ 951,304 1,632,954
Accumulated Deficit....................................... (114,702) (110,765)
---------- ----------
Total Stockholder's Equity............................. 836,603 1,522,190
---------- ----------
Total Capitalization.............................. $1,361,603 $4,177,187
========== ==========
</TABLE>
- ---------------
(1) On April 25, 1997, EMCLA entered into the Senior Credit Facility (as amended
on June 26, 1997 and August 7, 1997), which amended and restated its prior
senior credit facility and repaid all amounts outstanding under its 11.59%
Senior Secured Notes due 1999 with borrowings under the Senior Credit
Facility. Upon the consummation of the Chancellor Merger, the total
commitment under the Senior Credit Facility was increased to $2,500,000.
(2) The stated value of such securities includes $17,670 of accreted dividends.
Such dividends will continue to accrete if not paid in cash through February
15, 2001, at which time the Company will be required to pay such dividends
in cash.
(3) The stated value of such securities includes $10,774 of accreted dividends.
Such dividends will continue to accrete if not paid in cash through January
15, 2002, at which time the Company will be required to pay such dividends
in cash.
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<PAGE> 38
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The selected consolidated historical financial data presented below as of
and for each of the five years in the period ended December 31, 1996 have been
derived from the annual audited consolidated financial statements of EMCLA and
its subsidiaries, which consolidated financial statements have been audited by
KPMG Peat Marwick LLP, independent certified public accountants. The selected
consolidated historical financial data as of June 30, 1996 and 1997 and for the
six months ended June 30, 1996 and 1997 have been derived from the unaudited
historical consolidated financial statements of EMCLA and its subsidiaries. In
the opinion of management of the Company, the unaudited consolidated financial
data reflect all adjustments, which are of a normal recurring nature, necessary
for a fair presentation of the financial position and results of operations for
the unaudited periods. The historical results of operations for the six months
ended June 30, 1997, are not necessarily indicative of the results to be
expected for the full year. The consolidated historical financial results of
EMCLA and its subsidiaries are not comparable from period to period because of
the acquisition and disposition of various radio stations by EMCLA and its
subsidiaries during the periods covered (See "Pro Forma Financial Statements").
The following data should be read in conjunction with the historical
consolidated financial statements of EMCLA and its subsidiaries and the related
notes thereto, the unaudited pro forma condensed consolidated financial
statements of the Company and the related notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1996 1997
--------- -------- -------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT RATIO, MARGIN AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Gross Revenues.......................... $ 61,935 $106,813 $125,478 $ 186,365 $ 337,405 $ 144,614 $ 216,177
Net Revenues............................ 53,969 93,504 109,516 162,931 293,850 126,362 188,261
Station operating expenses excluding
depreciation and amortization......... 34,968 60,656 68,852 97,674 174,344 80,313 111,162
Depreciation and amortization........... 11,596 33,524 30,596 47,005 93,749 44,012 53,912
Corporate general and administrative
expenses.............................. 1,717 2,378 2,672 4,475 7,797 3,198 5,651
Other nonrecurring costs(1)............. -- 7,002 -- -- -- -- --
--------- -------- -------- --------- --------- --------- ---------
Operating income (loss)................. 5,688 (10,056) 7,396 13,777 17,960 (1,161) 17,536
Interest expense........................ 10,112 13,878 13,809 19,199 37,527 19,039 22,741
Other (income) expense, net(2).......... 565 (3,185) (6,452) 236 (477) -- (13,323)
--------- -------- -------- --------- --------- --------- ---------
Income (loss) before income taxes and
extraordinary income.................. (4,989) (20,749) 39 (5,658) (19,090) (20,200) 8,118
Income tax expense (benefit)............ -- -- -- 192 (2,896) (3,705) 4,259
--------- -------- -------- --------- --------- --------- ---------
Income (loss) before extraordinary
item.................................. (4,989) (20,749) 39 (5,850) (16,194) (16,495) 3,859
Extraordinary loss on early
extinguishment of debt(3)............. 1,798 -- 3,585 -- -- -- 4,350
--------- -------- -------- --------- --------- --------- ---------
Net loss attributable to common stock... $ (6,787) $(20,749) $ (3,546) $ (5,850) $ (16,194) $ (16,495) $ (491)
========= ======== ======== ========= ========= ========= =========
OTHER DATA:
Broadcast cash flow(4).................. $ 19,001 $ 32,848 $ 40,664 $ 65,257 $ 119,506 $ 46,049 $ 77,099
Broadcast cash flow margin.............. 35% 35% 37% 40% 41% 36% 41%
EBITDA(4)............................... $ 17,284 $ 23,468 $ 37,992 $ 60,782 $ 111,709 $ 42,851 $ 71,448
Capital expenditures.................... 867 1,735 5,227 2,642 6,543 1,761 3,547
Ratio of earnings to fixed charges(5)... -- -- 1.0x -- -- -- 1.33x
BALANCE SHEET DATA (END OF PERIOD):
Working capital, excluding current
portion of long-term debt............. $ 13,456 $ 18,498 $ 19,952 $ 34,556 $ 67,921 $ 49,041 $ 79,345
Intangible assets, net.................. 181,022 212,517 233,494 458,787 853,643 779,237 1,183,569
</TABLE>
32
<PAGE> 39
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1996 1997
--------- -------- -------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT RATIO, MARGIN AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets............................ 234,852 283,505 297,990 552,347 1,020,959 956,544 1,483,513
Long-term debt (including current
portion).............................. 165,000 152,000 174,000 201,000 358,000 554,000 525,000
Stockholders' equity.................... 2,905 120,968 112,353 304,577 549,411 286,194 836,603
CASH FLOW DATA:
Net cash provided by operating
activities............................ $ 5,379 $ 14,959 $ 19,880 $ 40,387 $ 48,050 $ 17,365 $ 36,165
Net cash used in investing activities... (101,248) (76,163) (32,928) (192,112) (461,938) (365,969) (478,407)
Net cash provided by financing
activities............................ 97,329 62,043 11,683 153,939 413,518 347,051 444,068
</TABLE>
- ---------------
(1) Consists of a non-cash charge resulting from the grant of employee stock
options prior to Evergreen's initial public offering.
(2) Includes gain on dispositions of assets of $3,392, $6,991 and $13,323 in
1993, 1994 and the six months ended June 30, 1997 respectively.
(3) In connection with its debt refinancing in 1992, 1994 and the six months
ended June 30, 1997, EMCLA wrote off the unamortized balance of deferred
debt issuance costs of $1,798, $3,585 and $4,350, respectively, as an
extraordinary charge.
(4) Broadcast cash flow consists of station operating income excluding
depreciation and amortization, and corporate general and administrative
expense and non-cash stock option compensation expense. EBITDA consists of
operating income before depreciation, amortization and non-cash stock option
compensation expense. Although broadcast cash flow and EBITDA are not
calculated in accordance with generally accepted accounting principles, the
Company believes that broadcast cash flow and EBITDA are widely used in the
broadcast industry as a measure of a station group's operating performance.
Nevertheless, these measures should not be considered in isolation or as a
substitute for operating income, cash flows from operating activities or any
other measure for determining EMCLA's operating performance or liquidity
that is calculated in accordance with generally accepted accounting
principles. Broadcast cash flow and EBITDA do not take into account the
Company's debt service requirements and other commitments and, accordingly,
broadcast cash flow and EBITDA are not necessary indications of amounts that
may be available for reinvestment in the Company's business or other
discretionary uses.
(5) For purposes of this calculation, "earnings" consist of income (loss) before
income taxes and fixed charges. "Fixed charges" consist of interest,
amortization of debt issuance costs and the component of rental expense
believed by management to be representative of the interest factor thereon.
Earnings were insufficient to cover fixed charges by $4,989, $20,749, $5,658
and $19,090 for the years ended December 31, 1992, 1993, 1995, and 1996,
respectively and by $20,200 for the six months ended June 30, 1996.
33
<PAGE> 40
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Since the acquisition in May of 1995 of Broadcasting Partners, Inc.
("BPI"), an eleven-station radio broadcasting group owning eight stations in the
nation's ten largest radio markets (the "BPI Acquisition"), the Company has
engaged in an acquisition strategy concentrating on expanding the Company's
presence in the nation's largest radio markets. Implementation of this
acquisition strategy was significantly accelerated in 1996 and 1997 due to
passage of the 1996 Act and the associated relaxation of national and local
ownership limits. For a discussion of the various transactions completed and
agreements entered into since January 1, 1996 as part of the Company's
acquisition strategy, see "Pro Forma Financial Information" and "Business and
Properties -- Recent Developments."
The Company's results of operations from period to period have not
historically been comparable because of the impact of the various station
acquisitions and dispositions that the Company has completed. The chart below
summarizes the acquisitions and dispositions that the Company has completed from
January 1, 1994 through June 30, 1997:
<TABLE>
<CAPTION>
DATE OF NUMBER OF COST (PROCEEDS)
TRANSACTION TRANSACTION STATIONS MARKET(S) (IN THOUSANDS)
----------- ----------- -------------- --------- ---------------
<S> <C> <C> <C> <C>
Exchange 4/94 2 FM in return Exchanged Jacksonville for San Francisco $ 25,421
for 1 FM
BPI Acquisition 5/95 7 FM/4 AM New York, Chicago, Dallas, Detroit, 258,634
Charlotte
Pyramid Acquisition 1/96 9 FM/3 AM Chicago, Philadelphia, Boston, 316,343
Charlotte, Buffalo
Acquisition 5/96 1 FM Boston 34,000
Disposition 7/96 1 FM/1 AM Buffalo (19,500)
Disposition 8/96 1 FM Buffalo (12,500)
Acquisition 8/96 1 FM San Francisco 44,000
Acquisition 10/96 1 FM Miami 65,000
Exchange 11/96 1 FM in return Exchanged Boston for Washington, D.C. N/A
for 1 FM
Acquisition 1/97 1 FM/1 AM Detroit 30,000
Acquisition 1/97 2 FM/1 AM San Francisco 115,000
Acquisition 4/97 2 FM Detroit 168,000
Acquisition/Exchange 4/97 1 AM Washington, D.C. 22,500
Acquisition 5/97 1 FM/1 AM Philadelphia N/A
Disposition 5/97 1 FM Charlotte (10,000)
Acquisition 5/97 1 FM Chicago 75,750
Disposition 6/97 1 FM Chicago (75,000)
Disposition 6/97 1 FM Chicago (80,000)
</TABLE>
In the following analysis, management discusses the broadcast cash flow of
its radio station group. The performance of a radio station group is customarily
measured by its ability to generate broadcast cash flow. The two components of
broadcast cash flow are gross revenues (net of agency commissions) and operating
expenses (excluding depreciation and amortization, corporate general and
administrative expense and non-cash stock option compensation expense). The
primary source of revenues is the sale of broadcasting time for advertising. The
Company's most significant operating expenses for purposes of the computation of
broadcast cash flow are employee salaries and commissions, programming expenses,
and advertising and promotion expenses. The Company strives to control these
expenses by working closely with local station management. The Company's
revenues vary throughout the year. As is typical in the radio broadcasting
industry, the Company's first calendar quarter generally produces the lowest
revenues, and the fourth quarter generally produces the highest revenues.
Data on broadcast cash flow, although not calculated in accordance with
generally accepted accounting principles, is widely used in the broadcast
industry as a measure of a company's operating performance. Nevertheless, this
measure should not be considered in isolation or as a substitute for operating
income, cash
34
<PAGE> 41
flows from operating activities or any other measure for determining the
Company's operating performance or liquidity that is calculated in accordance
with generally accepted accounting principles. Broadcast cash flow does not take
into account the Company's debt service requirements and other commitments and,
accordingly, broadcast cash flow is not necessarily indicative of amounts that
may be available for dividends, reinvestment in the Company's business or other
discretionary uses.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
The Company's results of operations for the six months ended June 30, 1997
are not comparable to the results of operations for the six months ended June
30, 1996 due to the impact of various station dispositions and acquisitions
discussed elsewhere in this Prospectus and reflected in the table above.
Net revenues for the six months ended June 30, 1997 increased 49.0% to
$188.3 million compared to $126.4 for the six months ended June 30, 1996.
Station operating expenses excluding depreciation and amortization for the six
months ended June 30, 1997 increased 38.4% to $111.2 million compared to $80.3
million for the six months ended June 30, 1996. Station operating income
excluding depreciation and amortization and corporate, general and
administrative expense (broadcast cash flow) for the six months ended June 30,
1997 increased 67.4% to $77.1 million compared to $46.0 million for the six
months ended June 30, 1996.
The increase in net revenues, station operating expenses, and broadcast
cash flow for the six months ended June 30, 1997 was primarily attributable to
the impact of the various station acquisitions, dispositions, and time brokerage
agreements, in addition to the overall net operational improvements realized by
the Company's radio stations.
Depreciation and amortization for the six months ended June 30, 1997
increased 22.5% to $53.9 million compared to $44.0 million for the same period
in 1996. The increase represents additional depreciation and amortization due to
the impact of recent acquisitions, offset by decreases due to certain
intangibles which became fully amortized in 1996 and 1997.
Corporate general and administrative expenses for the six months ended June
30, 1997 increased 78.1% to $5.7 million compared to $3.2 million for the same
period in 1996. The increase is due to the growth of the Company, and the
related increase in properties and staff, primarily due to recent acquisitions.
As a result of the above factors, the Company realized $17.5 million of
operating income for the six months ended June 30, 1997 compared to an operating
loss of $1.2 million for the same period in 1996.
Interest expense for the six months ended June 30, 1997 increased 19.4% to
$22.7 million compared to $19.0 million for the same period in 1996. The net
increase in interest expense is due to additional bank borrowings to finance the
acquisitions discussed above offset by repayment of borrowings under the Senior
Credit Facility from the net proceeds of the dispositions discussed above, the
1996 Evergreen Offering and the Convertible Preferred Stock Offering.
The Company recorded a gain on disposition of assets of $13.3 million for
the six months ended June 30, 1997, related to the dispositions of WNKS-FM in
Charlotte ($3.5 million), WPNT-FM in Chicago ($0.5 million), and WEJM-FM in
Chicago ($9.3 million).
The income tax expense for the six months ended June 30, 1997 is comprised
of current federal and state tax expense and a deferred federal income tax
benefit.
The Company recorded an extraordinary charge of $4.4 million (net of a tax
benefit of $2.3 million) for the six months ended June 30, 1997, consisting of
the write-off of the unamortized balance of deferred debt issuance costs related
to the amendment and restatement of the Company's Senior Credit Facility on
April 25, 1997.
Dividends paid to Evergreen to enable Evergreen to pay dividends on its
preferred stock were $0.7 million for the six months ended June 30, 1997
compared to $2.4 million for the same period in 1996. The decrease in dividends
is due to the conversion of a total of 1,608,297 shares of Evergreen's formerly
outstanding
35
<PAGE> 42
convertible exchangeable preferred stock into a total of 5,025,916 shares of
Class A Common Stock and the redemption by Evergreen of the remaining 1,703
shares during 1996, offset by dividends paid to Evergreen to enable Evergreen to
pay dividends on its $3.00 Convertible Preferred Stock issued in June 1997.
The net loss attributable to common stock for the six months ended June 30,
1997 was $.5 million compared to a $16.5 million net loss for the same period in
1996. The increase is primarily due to a $13.3 million gain on the disposition
of assets offset by a $4.4 million extraordinary charge related to the write-off
of bank loan fees recorded in the second quarter of 1997.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
The Company's results of operations for the year ended December 31, 1996
are not comparable to the results of operations for the year ended December 31,
1995 due to the impact of the various station acquisitions and dispositions
discussed elsewhere in this Prospectus and reflected in the table above.
Net revenues for the year ended December 31, 1996 increased 80.4% to $293.9
million compared to $162.9 million for the year ended December 31, 1995. Station
operating expenses excluding depreciation and amortization for 1996 increased
78.5% to $174.3 million compared to $97.7 million in 1995. Station operating
income excluding depreciation and amortization and corporate general and
administrative expense (broadcast cash flow) for 1996 increased 83.1% or $54.2
million to $119.5 million compared to $65.3 million in 1995. The increase in net
revenues, station operating expenses, and broadcast cash flow was primarily
attributable to the impact of the various station acquisitions and dispositions
described elsewhere in this Prospectus, in addition to the overall net
operational improvements realized by the Company's radio stations.
Depreciation and amortization for 1996 increased 99.4% to $93.7 million
compared to $47.0 million in 1995. The increase represents additional
depreciation and amortization expenses due to the impact of recent acquisitions,
offset by decreases due to certain intangibles which became fully amortized in
1995 and 1996.
Corporate general and administrative expenses for 1996 increased 74.2% to
$7.8 million compared to $4.5 million in 1995. The increase is due to the growth
of the Company, and related increase in properties and staff, primarily due to
recent acquisitions.
As a result of the above factors, operating income for 1996 increased 30.4%
to $18.0 million compared to $13.8 million in 1995.
Interest expense for 1996 increased 95.5% to $37.5 million compared to
$19.2 million in 1995. The net increase in interest expense was primarily due to
additional bank borrowings required to finance the acquisition of Pyramid
Communications, Inc. (the "Pyramid Acquisition"), a radio broadcasting company
with nine FM and three AM radio stations in five radio markets, as well as the
other station acquisitions referred to above, offset by repayment of borrowings
under the revolving credit portion of the Company's prior senior credit
agreement from the net proceeds of the 1996 Evergreen Offering, contributed to
the Company in an equity contribution, and an overall decrease in the Company's
borrowing rates.
The provision for income tax expense for the year ended December 31, 1996
is comprised of current federal and state taxes of $.5 million and $1.0 million,
respectively, and a deferred federal income tax benefit of $4.4 million. The
Company from time to time seeks to defer recognition of taxable gains upon the
disposition of radio properties by structuring dispositions as like-kind
exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended,
under appropriate circumstances.
Dividends paid to Evergreen to enable Evergreen to pay dividends on its
preferred stock decreased $1.0 million to $3.8 million in 1996 compared to $4.8
million in 1995. The decrease in dividends is due to the conversion by Evergreen
of a total of 1,608,297 shares of Evergreen's formerly outstanding convertible
exchangeable preferred stock into a total of 5,025,916 shares of Evergreen's
Class A Common Stock and the redemption of the remaining 1,703 shares of
formerly outstanding convertible exchangeable preferred stock during 1996.
As a result of the above factors, the Company incurred a $16.2 million net
loss attributable to common stock in 1996 compared to a $5.9 million net loss in
1995.
36
<PAGE> 43
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
The Company's results of operations for the year ended December 31, 1995
are not comparable to the results of operations for the year ended December 31,
1994 due to the impact of the BPI Acquisition. The BPI Acquisition resulted in
the addition of seven FM and four AM radio stations, eight of which are in the
nation's ten largest radio markets.
Net revenues for the year ended December 31, 1995 increased 48.8% to $162.9
million compared to $109.5 million for the year ended December 31, 1994. Station
operating expenses excluding depreciation and amortization for 1995 increased
41.9% to $97.7 million compared to $68.9 million in 1994. Station operating
income excluding depreciation and amortization (broadcast cash flow) for 1995
increased 60.5% or $24.6 million to $65.3 million compared to $40.7 million in
1994. The increase in net revenues, station operating expenses, and broadcast
cash flow was attributable to the overall net operational improvements realized
by the Company's radio stations, in addition to the impact of the consolidation
of the results of operations of BPI since the consummation of the BPI
Acquisition on May 12, 1995.
Depreciation and amortization for 1995 increased 53.6% to $47.0 million
compared to $30.6 million in 1994. The net increase represents additional
depreciation and amortization expenses due to the impact of the BPI Acquisition
on May 12, 1995, offset by decreases due to certain intangible assets which
became fully amortized in 1995 and 1994.
Corporate general and administrative expenses for 1995 increased 67.5% to
$4.5 million compared to $2.7 million in 1994. The increase is due to the growth
of the Company primarily related to the BPI Acquisition.
As a result of the above factors, operating income for 1995 increased 86.3%
to $13.8 million compared to $7.4 million in 1994.
Interest expense for 1995 increased 39.0% to $19.2 million compared to
$13.8 million in 1994. The net increase in interest expense was due to
additional bank borrowings of approximately $186.0 million required to finance
the BPI Acquisition in May 1995, offset by the application of net proceeds of
approximately $132.7 million from Evergreen's public offering of Class A Common
Stock in July 1995, contributed to the Company in an equity contribution, and
overall decline in the Company's borrowing rates. The net proceeds from the
public offering were used to repay borrowings under the revolving credit portion
of the Company's prior senior credit agreement, which borrowings had been
incurred to finance the BPI Acquisition.
Other income (expense) comprised of interest income, gain on disposition of
assets and other expense, net was a $.2 million charge in 1995 compared to $6.5
million in income in 1994. Other income (expense) for the year ended December
31, 1994 includes a gain of approximately $7.3 million on the disposition of
WAPE-FM and WFYV-FM in Jacksonville, Florida, which closed in April 1994.
The provision for income tax expense for the year ended December 31, 1995
is comprised of current federal and state taxes of $.3 million and $.4 million,
respectively, and a deferred federal income tax benefit of $.5 million.
In connection with the restructuring of the Company's senior credit
agreement on November 29, 1994, the Company recorded an extraordinary charge of
$3.6 million, consisting of a write-off of the unamortized balance of deferred
debt issuance costs related to the debt retirement.
Dividends paid to Evergreen to enable Evergreen to pay dividends on its
preferred stock were $4.8 million in 1995 and 1994.
As a result of the above factors, the Company incurred a $5.9 million net
loss attributable to common stock in 1995 compared to an $3.5 million net loss
in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has generated sufficient cash flow from operations
to finance its existing operational requirements and debt service requirements,
and the Company anticipates that this will continue
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to be the case. The Company historically has used the proceeds of bank debt and
public equity offerings, supplemented by cash flow from operations not required
to fund operational requirements and debt service, to fund implementation of the
Company's acquisition strategy.
The total cash financing required to consummate the Pending Transactions
(assuming exercise of the Bonneville Option) is expected to be $520.5 million
(excluding a possible upward adjustment of $10.0 million for the Gannett
Acquisition). Of this amount, approximately $10.0 million has already been
advanced by the Company in the form of escrow deposits, $80.0 million is held by
a financial intermediary in connection with the deferred exchange of WLUP-FM for
one or more stations to be acquired by the Company and $3.0 million was paid to
Bonneville for the Bonneville Option. Accordingly, the Company will require at
least $427.5 million in additional financing to consummate the Pending
Transactions (assuming exercise of the Bonneville Option). The Company
anticipates that it will obtain any additional financing needed to complete the
Pending Transactions through borrowings under the Senior Credit Facility. In
addition to the foregoing long-term indebtedness, the Company expects to borrow
up to $180.0 million under the Senior Credit Facility to be ultimately
distributed to Chancellor Media, to be used by Chancellor Media as the equity
capital to finance the Katz Acquisition. See "Risk Factors -- Katz Acquisition."
On April 25, 1997, EMCLA entered into the Senior Credit Facility which
amended and restated its prior senior credit facility. Under the amended
agreement, EMCLA established a $1.25 billion revolving facility (the "Revolving
Loan Facility") and a $500.0 million term loan facility (the "Term Loan
Facility"). Upon consummation of the Chancellor Merger, the aggregate
commitments under the Revolving Loan Facility and the Term Loan Facility were
increased to $1.60 billion and $900.0 million, respectively. The capital stock
of CMHC, CMCLA and CMCLA's subsidiaries are pledged to secure performance of the
Company's obligations under the Senior Credit Facility and CMHC's guarantee
thereof. At September 5, 1997, the Company had drawn $900.0 million of the Term
Loan Facility and $565.0 million of the Revolving Loan Facility. Required
repayments of principal amounts outstanding under the Term Loan Facility and
commitment reductions under the Revolving Loan Facility commence on September
30, 2000. See "Description of Certain Indebtedness -- Senior Credit Facility."
The Company's ability to make additional borrowings under the Senior Credit
Facility is subject to compliance with certain financial ratios and other
conditions set forth in the Senior Credit Facility. For additional information
regarding the Senior Credit Facility, see "Description of Certain
Indebtedness -- Senior Credit Facility." The Company from time to time may
explore other financing alternatives to supplement the financing available under
the Senior Credit Facility, including the public or private issuance of debt,
common equity or preferred equity securities.
After giving pro forma effect to those Completed Transactions consummated
after June 30, 1997, the Chancellor Merger, the Pending Transactions and the
Financing Transactions, at June 30, 1997, the Company would have had $2.33
billion in long term debt outstanding, of which $1.93 billion would have
consisted of the Company's borrowings under the Senior Credit Facility. In
addition to debt service requirements under the Senior Credit Facility, the
Company is required to pay interest on the 9 3/8% Notes and the Notes. The
12 1/4% Preferred Stock and the 12% Preferred Stock of the Company do not
require the payment of cash dividends through February 14, 2001 and January 14,
2002, respectively, although the Company will issue additional shares of such
preferred stock, or incur accretion, respectively, in lieu of cash dividends
until such times. Cash dividend requirements of Chancellor Media on its $3.00
Convertible Preferred Stock and its 7% Convertible Preferred Stock are $25.7
million per year. Because Chancellor Media is a holding company with no
significant assets other than the common stock of CMHC, Chancellor Media will
rely solely on dividends from CMHC, which in turn is expected to distribute
dividends paid to it by CMCLA to Chancellor Media, to permit Chancellor Media to
pay cash dividends on the $3.00 Convertible Preferred Stock and the 7%
Convertible Preferred Stock. The Senior Credit Facility, the 9 3/8% Indenture,
the Indenture and the certificates of designation for the 12% Preferred Stock
and the 12 1/4% Preferred Stock will limit, but not prohibit, the Company from
paying such dividends to CMHC.
Pursuant to the Senior Credit Facility, CMCLA is required to enter into
interest hedging agreements that result in the fixing or placing a cap on
CMCLA's floating rate debt so that not less than 50% of the principal amount of
total debt outstanding has a fixed or capped rate.
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RECENTLY ISSUED ACCOUNTING PRINCIPLES
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125, "Transfers of Financial Assets and
Extinguishments of Liabilities" ("SFAS No. 125"). SFAS No. 125 provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities. The provisions of SFAS No. 125 are
generally effective for transactions occurring after December 31, 1996. The
adoption of SFAS No. 125 is not expected to have a material impact on the
Company's financial statements.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No.
128"), which establishes new standards for computing and presenting earnings per
share. SFAS No. 128 is effective for financial statements issued for periods
ending after December 15, 1997 and requires restatement of all prior-period
earnings per share data. Early application of SFAS No. 128 is not permitted. The
Company's adoption of the provisions of SFAS No. 128 will result in the dual
presentation of basic and diluted earnings per share on the Company's income
statement. Diluted earnings per share as calculated under SFAS No. 128 is not
expected to materially differ from primary earnings per share amounts previously
presented.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 129, "Disclosure of Information about
Capital Structure" ("SFAS No. 129"). SFAS No. 129 is applicable to all entities
and requires that disclosure about an entity's capital structure include a brief
discussion of rights and privileges for securities outstanding. SFAS No. 129 is
effective for financial statements for periods ending after December 15, 1997.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
No. 130"). SFAS No. 130 requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. SFAS No. 130 is effective for financial statement
periods ending after December 15, 1997. Management does not anticipate that SFAS
No. 130 will have any effect on the Company's consolidated financial statements.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131 establishes
standards for reporting information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial reports issued to stockholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. SFAS No. 131 is effective for financial
statement periods ending after December 15, 1997. Management does not anticipate
that SFAS No. 131 will have any effect on the Company's consolidated financial
statements.
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BUSINESS AND PROPERTIES
On September 5, 1997, pursuant to the Chancellor Merger Agreement, among
other things, (i) Chancellor was merged with and into EMHC, a direct and
wholly-owned subsidiary of Evergreen, with EMHC surviving the merger, and (ii)
CRBC was merged with and into EMCLA, a direct and wholly-owned subsidiary of
EMHC, with EMCLA surviving the merger. Following the Chancellor Merger,
Evergreen changed its name to Chancellor Media Corporation, EMHC changed its
name to Chancellor Mezzanine Holdings Corporation and EMCLA changed its name to
Chancellor Media Corporation of Los Angeles. Chancellor Media and CMHC are
holding companies. The Company is the operating subsidiary of Chancellor Media.
The Company is the largest pure play radio broadcasting company in the
United States based on gross revenues, with a portfolio at September 5, 1997
consisting of 89 radio stations (63 FM and 26 AM) in 22 large markets, including
each of the nation's 12 largest radio revenue markets. The Company's portfolio
includes the first or second ranked station cluster in terms of revenue share in
15 of its 22 markets. On a pro forma basis, the Company had net revenue and
broadcast cash flow (as defined) of approximately $396.0 million and $166.6
million, respectively, for the six months ended June 30, 1997, and its pro forma
broadcast cash flow margin for such period would have been 42%.
The Company's strategy is to secure the leading clusters of radio stations
in each of the markets in which it operates. The Company's station portfolio
includes a total of 11 superduopolies, with seven in the 12 largest radio
markets -- Los Angeles, New York, Chicago, San Francisco, Philadelphia,
Washington, D.C. and Detroit -- and four in other large markets -- Denver,
Minneapolis/St. Paul, Phoenix and Orlando. Consummation of the Pending
Transactions will add 15 stations (12 FM and three AM) (without taking into
account stations to be disposed or exchanged in the Pending Transactions) to the
Company's portfolio, including five stations in its superduopoly markets.
Approximately 78% of pro forma 1996 net revenue would have been generated by the
superduopoly markets.
The Company's portfolio is geographically diversified and employs a wide
variety of programming formats, including adult contemporary, contemporary hit
radio, urban, jazz, country, oldies, news/talk, rock and sports. Each of the
Company's stations targets a specific demographic audience within a market, with
the majority of the stations appealing primarily to 18 to 34 or 25 to 54 year
old men and/or women, the demographic groups most sought after by advertisers.
Management believes that, because of the size and diversity of its station
portfolio, the Company is not unduly reliant on the performance of any one
station or market. No single market to be served by the Company represented more
than 12.0% of the Company's pro forma 1996 broadcast cash flow.
The Company's principal executive office is located at 433 East Las Colinas
Boulevard, Suite 1130, Irving, Texas 75039, and its telephone number is (972)
869-9020.
RECENT DEVELOPMENTS
CHANCELLOR MERGER
On September 5, 1997, Evergreen, EMHC, EMCLA, Chancellor and CRBC
consummated the transactions contemplated by the Chancellor Merger Agreement.
Pursuant to the Chancellor Merger Agreement, (i) Chancellor was merged with and
into EMHC, a direct, wholly-owned subsidiary of Evergreen, with EMHC remaining
as the surviving corporation and (ii) CRBC was merged with and into EMCLA, a
direct, wholly-owned subsidiary of EMHC, with EMCLA remaining as the surviving
corporation. Upon the consummation of the Parent Merger, Evergreen was renamed
Chancellor Media Corporation and EMHC was renamed Chancellor Mezzanine Holdings
Corporation. Upon the consummation of the Subsidiary Merger, EMCLA was renamed
Chancellor Media Corporation of Los Angeles. Consummation of the Chancellor
Merger added 52 radio stations (36 FM and 16 AM) to the Company's portfolio of
stations, including 13 stations in markets in which the Company previously
operated.
At the effective time of the Parent Merger (the "Parent Merger Effective
Time"), (i) each share of Evergreen's Class A Common Stock, par value $.01 per
share, and each share of Evergreen's Class B
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Common Stock, par value $.01 per share, outstanding immediately prior to the
Parent Merger Effective Time were reclassified, changed and converted into one
share of Common Stock of Chancellor Media, (ii) each share of Chancellor's Class
A Common Stock, par value $.01 per share, and each share of Chancellor's Class B
Common Stock, par value $.01 per share, outstanding immediately prior to the
Parent Merger Effective Time were converted into the right to receive 0.9091
shares of Common Stock of Chancellor Media, (iii) each share of Chancellor's 7%
Convertible Preferred Stock, par value $.01 per share, outstanding immediately
prior to the Parent Merger Effective Time was converted into the right to
receive one share of 7% Convertible Preferred Stock of Chancellor Media with
substantially identical powers, preferences and relative rights and (iv)
Evergreen assumed all options to acquire shares of Chancellor's Class A Common
Stock outstanding immediately prior to the Parent Merger Effective Time held by
certain officers, directors, employees and consultants of Chancellor and its
subsidiaries. Approximately 17.3 million shares of Chancellor Media Common Stock
were issued in the Parent Merger to the former common stockholders of
Chancellor, and approximately 1.8 million shares of Chancellor Media Common
Stock may be issued from time to time upon the exercise of the options assumed
by Chancellor Media in the Parent Merger. In addition, at the Parent Merger
Effective Time, CMHC repaid all amounts outstanding under the Chancellor Interim
Financing, in the principal amount of $133.0 million.
Furthermore, at the effective time of the Subsidiary Merger (the
"Subsidiary Merger Effective Time"), (i) each share of CRBC's 12 1/4% Series A
Senior Cumulative Exchangeable Preferred Stock, par value $.01 per share,
outstanding immediately prior to the Subsidiary Merger Effective Time was
converted into the right to receive one share of 12 1/4% Series A Senior
Cumulative Exchangeable Preferred Stock of CMCLA with substantially identical
powers, preferences and relative rights, (ii) each share of CRBC's 12%
Exchangeable Preferred Stock, par value $.01 per share, outstanding immediately
prior to the Subsidiary Merger Effective Time was converted into the right to
receive one share of 12% Exchangeable Preferred Stock of CMCLA with
substantially identical powers, preferences and relative rights, (iii) CMCLA
assumed all of the obligations under CRBC's $200,000,000 aggregate principal
amount 9 3/8% Notes and the 9 3/8% Indenture governing such securities, (iv)
CMCLA assumed all of the obligations under CRBC's $200,000,000 aggregate
principal amount Original Notes and the Indenture governing such securities and
(v) CMCLA refinanced, through additional borrowings under the Senior Credit
Facility, all amounts outstanding under the CRBC Restated Credit Agreement. The
aggregate amount of borrowings under the CRBC Restated Credit Agreement
refinanced by CMCLA consisted of principal in the amount of $416.0 million, plus
accrued interest.
COMPLETED EVERGREEN TRANSACTIONS
Between January 1, 1997 and the date of the completion of the Chancellor
Merger, EMCLA and its subsidiaries had completed (i) the acquisition of 17 radio
stations for a net purchase price of approximately $1.14 billion, (ii) the
exchange of six stations for three stations and $9.5 million in cash, (iii) the
sale or other disposition of 10 radio stations for $269.3 million in cash and a
promissory note for $18.0 million and (iv) the disposition of one radio station
for net proceeds of $80.0 million which are being held by a qualified
intermediary pending the completion of the deferred exchange of the disposed
station for one or more radio stations.
On January 31, 1997, EMCLA acquired WWWW-FM and WDFN-AM in Detroit from
affiliates of Chancellor for $30.0 million in cash plus various other direct
acquisition costs (the "WWWW/WDFN Acquisition"). EMCLA had previously provided
certain sales and promotional functions to WWWW-FM and WDFN-AM under a joint
sales agreement since February 14, 1996 and subsequently operated the stations
under a time brokerage agreement since April 1, 1996.
On January 31, 1997, EMCLA acquired KKSF-FM and KDFC-FM/AM in San Francisco
from affiliates of The Brown Organization for $115.0 million in cash plus
various other direct acquisition costs (the "KKSF/KDFC Acquisition"). EMCLA had
previously been operating KKSF-FM and KDFC-FM/AM under a time brokerage
agreement since November 1, 1996. On July 21, 1997, EMCLA sold KDFC-FM to
Bonneville for $50.0 million in cash (the "Bonneville/KDFC Disposition"). The
assets of KDFC-FM are classified as assets held for sale on June 30, 1997 in
connection with the purchase price allocation of KKSF-FM and KDFC-FM/AM and no
gain or loss was recognized by EMCLA upon consummation of the sale.
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On April 1, 1997, EMCLA acquired WJLB-FM and WMXD-FM in Detroit from Secret
Communications L.P. ("Secret") for $168.0 million in cash plus various other
direct acquisition costs (the "Secret/ Detroit Acquisition"). EMCLA had
previously been operating WJLB-FM and WMXD-FM under time brokerage agreements
since September 1, 1996.
On April 3, 1997, EMCLA exchanged WQRS-FM in Detroit (which EMCLA acquired
on April 3, 1997 from Secret for $32.0 million in cash plus various other direct
acquisition costs) to affiliates of Greater Media Radio, Inc. ("Greater Media")
in return for WWRC-AM in Washington, D.C. and $9.5 million in cash (the "Greater
Media Exchange"). The net purchase price to EMCLA of WWRC-AM was therefore $22.5
million. EMCLA had previously been operating WWRC-AM under a time brokerage
agreement since June 17, 1996.
On May 1, 1997, EMCLA acquired WDAS-FM/AM in Philadelphia from affiliates
of Beasley FM Acquisition Corp. ("Beasley") for $103.0 million in cash plus
various other direct acquisition costs (the "Beasley Acquisition").
On May 15, 1997, EMCLA exchanged five of its six stations in Charlotte,
North Carolina (WPEG-FM, WBAV-FM/AM, WRFX-FM and WFNZ-AM) for two FM stations
(WIOQ-FM and WUSL-FM) owned by EZ Communications, Inc. ("EZ") in Philadelphia
(the "EZ Exchange"), and also sold EMCLA's sixth radio station in Charlotte,
WNKS-FM, to EZ for $10.0 million in cash and recognized a gain of $3.5 million
(the "EZ Sale" and, collectively with the EZ Exchange, the "EZ Transaction").
On May 30, 1997, EMCLA acquired WPNT-FM in Chicago from affiliates of
Century Broadcasting Company ("Century") for $75.7 million in cash (including
$2.0 million for the purchase of the station's account receivables) plus various
other direct acquisition costs (the "Century Acquisition"). On June 19, 1997,
EMCLA sold WPNT-FM in Chicago to Bonneville for $75.0 million in cash and
recognized a gain of $0.5 million (the "Bonneville/WPNT Disposition").
On June 3, 1997, EMCLA sold WEJM-FM in Chicago to affiliates of Crawford
Broadcasting ("Crawford") for $14.8 million in cash and recognized a gain of
$9.3 million (the "Crawford Disposition").
On July 2, 1997, EMCLA acquired WLTW-FM and WAXQ-FM in New York and
WMZQ-FM, WJZW-FM, WZHF-AM and WBZS-AM in Washington, D.C. from Viacom
International, Inc. ("Viacom") for approximately $612.4 million (including
various direct acquisition costs) (the "Evergreen Viacom Acquisition"). On July
7, 1997, EMCLA sold WJZW-FM in Washington, D.C. to affiliates of Capital
Cities/ABC Radio ("ABC") for $68.0 million in cash (the "ABC/Washington
Disposition"). The assets of WJZW-FM were accounted for as assets held for sale
in connection with the purchase price allocation of the Evergreen Viacom
Acquisition and no gain or loss was recognized by EMCLA upon consummation of the
sale.
On July 7, 1997, EMCLA sold the FCC authorizations and certain transmission
equipment previously used in the operation of KYLD-FM in San Francisco to
Susquehanna Radio Corp. ("Susquehanna") for $44.0 million in cash (the "San
Francisco Frequency Disposition"). Simultaneously therewith, CRBC sold the call
letters "KSAN-FM" (which CRBC previously used in San Francisco) to Susquehanna.
On July 7, 1997, EMCLA and CRBC entered a time brokerage agreement to enable
EMCLA to operate KYLD-FM on the frequency previously assigned to KSAN-FM, which
has an improved broadcast signal in the San Francisco market, and on July 7,
1997, CRBC changed the call letters of KSAN-FM to KYLD-FM. Upon the consummation
of the Chancellor Merger, EMCLA permanently changed the format of the frequency
previously assigned to KSAN-FM to the format operated on KYLD-FM.
On July 14, 1997, EMCLA completed the disposition of WLUP-FM in Chicago to
Bonneville (the "Bonneville/WLUP Disposition" and, collectively with the
Bonneville/KDFC Disposition and the Bonneville/WPNT Disposition, the "Bonneville
Dispositions") and it is expected that this transaction will result in a
deferred exchange for one or more radio stations within 180 days after July 14,
1997. In the event that such exchange does not take place, EMCLA will receive
gross proceeds from the disposition of WLUP-FM of $80.0 million in cash.
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On August 13, 1997, EMCLA sold KDFC-AM in San Francisco and WBZS-AM and
WZHF-AM in Washington, D.C. to affiliates of Douglas Broadcasting ("Douglas")
for $18.0 million in the form of a promissory note (the "Douglas AM
Dispositions"). The promissory note bears interest at 7 3/4%, with a balloon
principal payment due four years after closing. At closing, Douglas was required
to post a $1.0 million letter of credit for the benefit of EMCLA that will
remain outstanding until all amounts due under the promissory note are paid.
On August 27, 1997, EMCLA sold WEJM-AM in Chicago to Douglas for $7.5
million in cash (the "Douglas Chicago Disposition").
The foregoing transactions, together with (i) the acquisition on January
17, 1996 of Pyramid Communications, Inc. for approximately $316.3 million; (ii)
the acquisition on May 3, 1996 of WKLB-FM in Boston for $34.0 million in cash;
(iii) the acquisition on August 14, 1996 of KYLD-FM in San Francisco for $44.0
million in cash; (iv) the acquisition on October 18, 1996 of WEDR-FM in Miami
for $65.0 million in cash; (v) the exchange on November 26, 1996 of WKLB-FM in
Boston for WGAY-FM in Washington, D.C.; and (vi) the dispositions on July 19,
1996 and August 1, 1996 of WHTT-FM/AM and WSJZ-FM in Buffalo for $32.0 million
are referred to as the "Completed Evergreen Transactions."
COMPLETED CHANCELLOR TRANSACTIONS
Since January 1, 1997, CRBC has completed (i) the acquisition of 24 radio
stations for a net purchase price of approximately $1.07 billion, (ii) the
exchange of three stations for one station and $33.0 million in cash and (iii)
the sale of five stations for $108.3 million in cash.
On January 23, 1997, CRBC acquired Colfax Communications, a radio
broadcasting company with eight FM stations and four AM stations located in four
markets (Minneapolis/St. Paul, Phoenix, Washington, D.C. and Milwaukee) (the
"Colfax Acquisition") for $383.7 million in cash (including acquisition costs).
On March 31, 1997, CRBC sold WMIL-FM and WOKY-AM in Milwaukee, which were
acquired as part of the Colfax Acquisition, for $41.3 million in cash (the
"Milwaukee Disposition").
On January 31, 1997, CRBC sold WWWW-FM and WDFN-AM in Detroit to EMCLA for
$30.0 million in cash plus various other direct transaction costs (the
"WWWW/WDFN Disposition").
On February 13, 1997, CRBC acquired three FM stations in Orlando, two FM
stations and one AM station in West Palm Beach and two FM stations in
Jacksonville from OmniAmerica Group for $166.0 million in cash (including
acquisition costs) and common stock of Chancellor valued at $15.0 million (the
"Omni Acquisition"). CRBC had been operating the Orlando stations acquired in
the Omni Acquisition pursuant to a time brokerage agreement since July 1, 1996.
On March 24, 1997, CRBC exchanged WEAT-FM/AM and WOLL-FM in West Palm Beach,
which were acquired as part of the Omni Acquisition, for KSTE-FM in Sacramento
and $33.0 million in cash (the "West Palm Beach Exchange"). CRBC had previously
been operating KSTE-FM under a time brokerage agreement since August 1, 1996.
Prior to consummating the West Palm Beach Exchange, CRBC had sold all of the
broadcast time on WEAT-FM/AM and WOLL-FM pursuant to a time brokerage agreement
since July 1, 1996.
On July 2, 1997, CRBC acquired KIBB-FM and KYSR-FM in Los Angeles, WLIT-FM
in Chicago and WDRQ-FM in Detroit from Viacom for approximately $500.8 million
(including various direct acquisition costs) (the "Chancellor Viacom
Acquisition" and, together with the Evergreen Viacom Acquisition, the "Viacom
Acquisition"). On August 11, CRBC sold WDRQ-FM in Detroit, to ABC for $37.0
million in cash (the "ABC/Detroit Disposition" and, together with the
ABC/Washington Disposition, the "ABC Dispositions").
The forgoing transactions, together with (i) the acquisition by CRBC on
February 14, 1996 of Trefoil Communications, Inc. and its wholly owned
subsidiary, Shamrock Broadcasting, Inc. (collectively, "Shamrock Broadcasting"),
a radio broadcasting company with 11 FM stations and 8 AM stations in 10 markets
for $408.0 million in cash (including acquisition costs) (the "Shamrock
Acquisition"), (ii) the exchange by CRBC on July 31, 1996 of KTBZ-FM in Houston
(which was acquired as part of the Shamrock Acquisition) and $5.6 million in
cash for KIMN-FM and KALC-FM in Denver (the "Houston/Denver Exchange") and
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(iii) the acquisition by CRBC on November 22, 1996 of WKYN-AM in Cincinnati for
$1.4 million in cash are referred to as the "Completed Chancellor Transactions."
The Completed Evergreen Transactions and the Completed Chancellor Transactions
are referred to collectively as the "Completed Transactions."
PENDING TRANSACTIONS
Gannett Acquisition
On April 4, 1997, EMCLA entered into the Gannett Agreements with P&S,
pursuant to which EMCLA will acquire WGCI-AM and WGCI-FM in Chicago for $140.0
million, KKBQ-AM and KKBQ-FM in Houston for $110.0 million, and KHKS-FM in
Dallas for $90.0 million. The aggregate purchase price is subject to an upward
adjustment of up to $10.0 million depending on the timing of the closings. The
Gannett Agreements are independent with respect to each market and may be
consummated at different times. On April 10, 1997, EMCLA issued letters of
credit for the benefit of P&S in the aggregate amount of $34.0 million to secure
EMCLA's obligations under the Gannett Agreements.
The Company expects that it will ultimately borrow the funds necessary to
complete the Gannett Acquisition from the Senior Credit Facility. However, if
the Company does not have sufficient borrowing capacity under the Senior Credit
Facility or otherwise to consummate the Gannett Acquisition within the time
period specified in the Gannett Agreements, Chancellor Media has agreed,
pursuant to an alternative financing facility with certain lenders, to issue
common equity securities for the account of those lenders if the alternative
facility is drawn. The Company presently expects that it will be able to
consummate the Gannett Acquisition by drawing on the Senior Credit Facility and
that, as a result, Chancellor Media will not be required to make any draw under
an alternative facility.
Although there can be no assurances, the Company expects that the Gannett
Acquisition will be completed in the fourth quarter of 1997 or the first quarter
of 1998.
Bonneville Acquisition. On June 24, 1997, EMCLA entered into an agreement
to acquire KZPS-FM and KDGE-FM in Dallas from Bonneville for $83.5 million in
cash (the "Bonneville Acquisition"). EMCLA also entered into an agreement to
operate KZPS-FM and KDGE-FM under a time brokerage agreement effective as of
August 1, 1997. Although there can be no assurance, the Company expects that the
Bonneville Acquisition will be completed in the third or fourth quarter of 1997.
Denver Acquisition. On July 30, 1997, CRBC entered into an agreement to
acquire KXPK-FM in Denver from Ever Green Wireless LLC (which is unrelated to
the Company) for $26.0 million in cash (including $1.7 million paid by CRBC in
escrow) (the "Denver Acquisition"). CRBC also entered into an agreement to
operate KXPK-FM under a time brokerage agreement effective as of September 1,
1997. Although there can be no assurance, the Company expects that the Denver
Acquisition will be completed in the first quarter of 1998.
SFX Exchange. On July 1, 1996, CRBC entered into an agreement with SFX
pursuant to which CRBC agreed to exchange WAPE-FM and WFYV-FM in Jacksonville
and $11.0 million in cash to SFX Broadcasting Inc. ("SFX") in return for
WBAB-FM, WBLI-FM, WHFM-FM and WGBB-AM in Nassau/Suffolk (Long Island). CRBC has
been operating WBAB-FM, WBLI-FM, WHFM-FM and WGBB-FM pursuant to a time
brokerage agreement effective July 1, 1996 and SFX has been operating WAPE-FM
and WFYV-FM pursuant to time brokerage agreements each effective July 1, 1996.
The Company is unable to predict whether or when it will consummate the SFX
Exchange, as it is pending review by the DOJ under the HSR Act. CRBC and SFX
have entered into an amendment to the agreement extending the time for which the
transactions are to be consummated to July 31, 1997, after which either party
may terminate the agreement. The Company cannot currently predict whether the
agreement will be further extended, whether the SFX Exchange will be consummated
as previously planned or whether the terms thereof will be modified.
Bonneville Option. On August 6, 1997, Evergreen and Chancellor announced
that they had paid $3.0 million to Bonneville for an option to exchange EMCLA's
station WTOP-AM in Washington and CRBC's stations KZLA-FM in Los Angeles and
WGMS-FM in Washington and $57.0 million in cash for Bonneville's stations
WDBZ-FM in New York, KLDE-FM in Houston and KBIG-FM in Los Angeles. The
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Company is currently negotiating time brokerage agreements relating to these
stations, which are expected to become effective on October 1, 1997.
FINANCING TRANSACTIONS
In addition to the various radio station dispositions described above,
Chancellor, CRBC, Evergreen and EMCLA have undertaken the following financing
transactions:
On April 25, 1997, EMCLA entered into the Senior Credit Facility (as
amended on June 26, 1997 and August 7, 1997) with certain banks and financial
institutions and Toronto Dominion (Texas), Inc. as Administrative Agent for such
lenders. Pursuant to the Senior Credit Facility, EMCLA's previous facility was
refinanced and increased to a total commitment of $1.75 billion and, upon
consummation of the Chancellor Merger, such total commitment increased to $2.50
billion.
On June 16, 1997 Evergreen completed its private offering of 5,500,000
shares of $3.00 Convertible Preferred Stock for aggregate gross proceeds of
$275.0 million and on June 20, 1997, the initial purchasers of the $3.00
Convertible Preferred Stock exercised an over-allotment option granted by
Evergreen to acquire an additional 490,000 shares of the $3.00 Convertible
Preferred Stock for additional gross proceeds of $24.5 million. The net proceeds
of $287.8 million were contributed to the Company and were used to repay
borrowings under the Senior Credit Facility and subsequently were reborrowed as
part of the financing of the Evergreen Viacom Acquisition.
On June 24, 1997, CRBC completed its private offering of the Original
Notes. The net proceeds of the offering of Original Notes of $194.1 million were
used to repay borrowings under CRBC's previous senior credit agreement.
On July 2, 1997, CRBC entered into the CRBC Restated Credit Agreement with
certain lenders and Bankers Trust Company as Managing Agent for such lenders.
Pursuant to the CRBC Restated Credit Agreement, CRBC's credit facility was
refinanced and increased to a total commitment of $750.0 million. Additionally,
on July 2, 1997 Chancellor borrowed funds under an interim loan of $170.0
million. These financing transactions were used to finance the Chancellor Viacom
Acquisition. Upon consummation of the Chancellor Merger, all borrowings under
the CRBC Restated Credit Agreement and the Chancellor Interim Financing were
refinanced or repaid by CMHC and the Company. See "Management's Discussion and
Analysis of Financial Conditions and Results of Operations -- Liquidity and
Capital Resources."
The foregoing transactions are referred to collectively as the "Financing
Transactions."
45
<PAGE> 52
BROADCAST PROPERTIES
The following table sets forth selected information with respect to the
portfolio of radio stations that are owned by the Company as of September 22,
1997.
<TABLE>
<CAPTION>
RANKING OF
STATION'S STATION RANKING
MARKET BY AUDIENCE TARGET IN TARGET
MARKET(1) REVENUE(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(4)
- ------------------------ ---------- ----------- ----------- --------------------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Los Angeles, CA 1 KKBT-FM 4.5 Urban Contemporary Women 18-34 2
KYSR-FM 2.8 Hot Adult Contemporary Persons 18
25-54
KIBB-FM 1.6 Rhythmic Adult Persons 18
Contemporary 25-54
KLAC-AM 2.2 Adult Standards/Sports Persons 21
35-64
KZLA-FM++ 2.5 Country Persons 10
25-54
New York, NY 2 WKTU-FM 4.7 Rhythmic Contemporary Hits Persons 5
25-54
WLTW-FM 6.0 Soft Adult Contemporary Persons 1
25-54
WAXQ-FM 2.0 Classic Rock Persons 12
25-54
WHTZ-FM 3.5 Contemporary Hit Radio Persons 6
18-34
Chicago, IL 3 WMVP-AM 1.4 Personality/Sports Men 25-54 18
WRCX-FM 3.2 Mainstream Rock Men 18-34 1
WVAZ-FM 4.2 Black Adult Women 25-54 3
WNUA-FM 3.9 Contemporary Jazz Persons 5
25-54
WLIT-FM 4.8 Soft Adult Contemporary Persons 1
25-54
San Francisco, CA 4 KIOI-FM 3.2 Adult Contemporary Women 25-54 2
KMEL-FM 3.9 Contemporary Hits Persons 1
18-34
KKSF-FM 3.6 Contemporary Jazz Persons 4
25-54
KNEW-AM 1.0 Country/Sports Persons 34
25-54
KYLD-FM 4.2 Contemporary Hits Persons 13
18-34
KABL-AM 2.5 Adult Standards Persons 12
35-64
KISQ-FM 2.7 70's Oldies Persons 8
25-54
Dallas, TX 5 KSKY-AM 0.1 Inspirational N/M N/M
Philadelphia, PA 6 WYXR-FM 3.5 Adult Contemporary Women 18-49 3
WJJZ-FM 3.9 Contemporary Jazz Persons 4
35-54
WDAS-FM 4.9 Urban Contemporary Persons 2
25-54
WDAS-AM 1.2 Gospel N/M N/M
WUSL-FM 5.0 Urban Contemporary Women 18-34 1
WIOQ-FM 3.6 Contemporary Hit Women 18-34 3
Radio/Dance
Houston, TX 7 KTRH-AM 4.5 News/Sports Men 25-54 3
KLOL-FM 3.2 Album Rock Men 18-34 2
Washington, D.C. 8 WTOP-AM++ 2.9 News/Sports Men 25-54 10
WASH-FM 4.6 Adult Contemporary Women 25-54 2
WGAY-FM 3.9 Adult Contemporary Persons 6
35-64
WWRC-AM 0.9 News/Talk Persons 24
35-64
WMZQ-FM 5.0 Country Persons 5
25-54
WBIG-FM 4.7 Oldies Persons 2
25-54
WGMS-FM++ 4.1 Classical Persons 3
35-64
WTEM-AM 1.0 Sports/Talk Men 18-49 18
Boston, MA 9 WJMN-FM 6.3 Contemporary Hits Women 18-24 2
WXKS-FM 6.2 Contemporary Hits Women 25-34 1
WXKS-AM 1.7 Nostalgia Women 45-54 12
Atlanta, GA 10 WFOX-FM 4.3 Oldies Persons 10
25-54
Detroit, MI 11 WKQI-FM 4.7 Adult Contemporary Women 25-54 4
WNIC-FM 7.2 Adult Contemporary Women 25-54 1
WYUR-AM(5) N/M Adult Contemporary Women 25-54 N/M
WWWW-FM 3.6 Country Women 25-54 9
WDFN-AM 1.3 Sports/Talk Men 25-49 11
WJLB-FM 8.1 Urban Contemporary Persons 1
18-34
WMXD-FM 4.3 Black Adult Persons 4
25-54
</TABLE>
46
<PAGE> 53
<TABLE>
<CAPTION>
RANKING OF
STATION'S STATION RANKING
MARKET BY AUDIENCE TARGET IN TARGET
MARKET(1) REVENUE(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(4)
- ------------------------ ---------- ----------- ----------- --------------------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Miami/Ft. Lauderdale, FL 12 WVCG-AM 0.6 Brokered(6) N/M N/M
WEDR-FM 4.9 Urban Contemporary Persons 6
25-54
Denver, CO 15 KRRF-AM 0.6 Talk Men 25-54 18
KXKL-FM 4.2 Oldies Persons 7
25-54
KVOD-FM 1.8 Classical Persons 19
25-54
KIMN-FM 2.7 70's Oldies Persons 13
25-54
KALC-FM 4.8 Hot Adult Contemporary Persons 1
18-34
Minneapolis/St. Paul, MN 16 KTCZ-FM 4.4 Progressive Album Rock Men 25-49 2
KTCJ-AM(7) 0.2 Progressive Album Rock Men 25-49 20
KDWB-FM 6.9 Contemporary Hit Radio Persons 2
18-34
KFAN-AM 1.8 Sports Men 18-49 11
KEEY-FM 6.9 Country Persons 3
25-54
KQQL-FM 5.0 Oldies Persons 4
25-54
WRQC-FM(8) 4.5 Young Country Persons 7
18-49
Phoenix, AZ 17 KMLE-FM 6.0 Country Persons 3
25-54
KISO-AM 0.8 Urban Adult Contemporary Persons 25
25-54
KOOL-FM 6.0 Oldies Persons 2
25-54
KOY-AM 5.1 Adult Standards Persons 10
35-64
KYOT-FM 3.1 Contemporary Jazz Persons 13
25-54
KZON-FM 3.7 Alternative Rock Persons 4
18-34
Cincinnati, OH 20 WUBE-FM(9) 8.6 Country Persons 1
25-54
WUBE-AM 0.4 Nostalgia Persons 24
35-64
WYGY-FM(9) 3.3 Young Country Men 18-34 8
WKYN-AM 0.7 Sports/Talk Men 18-49 15
Pittsburgh, PA 24 WWSW-AM(10) 0.3 Oldies Persons 24
25-54
WWSW-FM 5.6 Oldies Persons 4
25-54
Sacramento, CA 25 KGBY-FM 3.8 Adult Contemporary Women 25-54 2
KHYL-FM 4.1 Oldies Persons 6
25-54
KFBK-AM 10.5 News/Talk Persons 2
25-54
KSTE-AM 2.9 Talk Persons 15
25-54
Orlando, FL 26 WOCL-FM 4.4 Oldies Persons 10
25-54
WOMX-FM 4.7 Adult Contemporary Persons 1
25-54
WJHM-FM 8.2 Urban Contemporary Persons 1
18-34
WXXL-FM 6.9 Contemporary Hit Radio Persons 2
18-34
Nassau/Suffolk (Long
Island) NY(11) 44 WALK-FM 6.2 Adult Contemporary Persons 1
25-54
WALK-AM 0.3 Adult Contemporary Persons 38
35-64
Jacksonville, FL 47 WAPE-FM+ 8.1 Contemporary Hit Radio Women 18-34 1
WFYV-FM+ 8.6 Album Oriented Rock Men 25-54 1
Riverside/ San
Bernardino, CA 64 KGGI-FM 6.2 Contemporary Hit Radio Persons 1
18-34
KMRZ-AM 0.4 Oldies Men 25-54 32
</TABLE>
- ---------------
N/M: Not meaningful
+ Indicates station to be disposed in a Pending Transaction.
++ Includes station that would be disposed if the Bonneville Option is
exercised.
(1) Actual city of license may differ from metropolitan market served in
certain cases.
(2) Ranking of principal radio market served by the station among all U.S.
radio broadcast markets by aggregate 1996 gross radio broadcasting revenue
as reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.).
(3) Information derived from The Arbitron Company, Spring 1997, Local Market
Reports in the specified markets for listeners age 12+, Monday to Sunday,
6:00 a.m. to Midnight. Copyright, The Arbitron Company.
(4) Information derived from The Arbitron Company, Spring 1997, Local Market
Reports in the specified markets for the Target Demographics specified for
listening Monday to Sunday, 6:00 a.m. to Midnight. Copyright, The Arbitron
Company.
(5) The Company has historically brokered WYUR-AM to third parties.
(6) The Company sells airtime on WVCG-AM to third parties for broadcast of
specialty programming on a variety of topics.
47
<PAGE> 54
(7) Programming provided to KTCJ-AM via simulcast of programming broadcast on
KTCZ-FM. The format of KTCJ-AM was changed to Classic Country with a
target demographic of Persons 35-64 effective April 25, 1997.
(8) The format of WRQC-FM was changed to Album Rock with a target demographic
of Men 18-34 effective April 15, 1997.
(9) WUBE-FM and WYGY-FM are sold in combination.
(10) Programming provided to WWSW-AM via simulcast of programming broadcast on
WWSW-FM.
(11) Nassau/Suffolk (Long Island) may be considered part of the greater New
York market, although it is reported separately as a matter of convention.
PENDING ACQUISITIONS
The following table sets forth selected information with respect to the
radio stations that will be acquired by the Company in the Pending Transactions
(assuming exercise of the Bonneville Option).
<TABLE>
<CAPTION>
RANKING OF
STATION'S STATION RANKING
MARKET BY AUDIENCE TARGET IN TARGET
MARKET(1) REVENUE(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(4)
- --------------------- ---------- ----------- ----------- ------------------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Los Angeles, CA 1 KBIG-FM+ 2.4 Adult Contemporary Persons 14
25-54
New York, NY 2 WDBZ-FM+ 1.2 Modern Adult Contemporary Women 25-44 12
Chicago, IL 3 WGCI-AM 1.4 Urban/R&B Persons 25
18-34
WGCI-FM 5.6 Urban Oldies Persons 2
25-54
Dallas, TX 5 KHKS-FM 8.0 Contemporary Hits Women 18-34 1
KZPS-FM 3.8 Classic Rock Persons 4
25-54
KDGE-FM 3.0 Alternative Rock Persons 5
18-34
Houston, TX 7 KKBQ-AM 0.2 Country Persons 34
25-54
KKBQ-FM 4.3 Fresh Country Persons 6
25-54
KLDE-FM+ 7.2 Oldies Persons 2
25-54
Denver, CO 15 KXPK-FM 3.1 Alternative Persons 11
18-49
Nassau/Suffolk (Long
Island) NY 44 WBAB-FM 2.8 Album Rock Men 25-49 3
WBLI-FM 3.9 Adult Contemporary Women 25-54 2
WHFM-FM N/M Album Rock Men 25-49 N/M
WGBB-AM N/M News/Talk Persons N/M
25-54
</TABLE>
- ---------------
N/M: Not meaningful
+ Includes station that would be acquired if the Bonneville Option is
exercised.
(1) Actual city of license may differ from metropolitan market served in
certain cases.
(2) Ranking of principal radio market served by the station among all U.S.
radio broadcast markets by aggregate 1996 gross radio broadcasting revenue
as reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.).
(3) Information derived from The Arbitron Company, Spring 1997, Local Market
Reports in the specified markets for listeners age 12+, Monday to Sunday,
6:00 a.m. to Midnight. Copyright, The Arbitron Company.
(4) Information derived from The Arbitron Company, Spring 1997, Local Market
Reports in the specified markets for the Target Demographics specified for
listening Monday to Sunday, 6:00 a.m. to Midnight. Copyright, The Arbitron
Company.
COMPANY STRATEGY
The Company's senior management team, led by Scott K. Ginsburg and James de
Castro has extensive experience in acquiring and operating large market radio
station groups. The Company's business strategy is to assemble and operate radio
station clusters in order to maximize broadcast cash flow generated in each
market. This strategy relies on the following six key elements.
Create Large Market Superduopolies. The Company seeks to be the owner and
operator of the leading superduopoly in the largest markets in the United
States. Management believes that the large revenue base in these markets, in
conjunction with operating synergies achievable through the operation of
multiple stations, will enable it to appeal to a wider universe of national and
local advertisers and to achieve a greater degree of profitability than that of
operators and broadcasters in smaller markets. The Pending Transactions will
complement the Company's existing stations in the Los Angeles, New York,
Chicago, San Francisco, Dallas, Houston, Denver and Nassau/Suffolk (Long Island)
markets. The Company expects to continue to
48
<PAGE> 55
selectively pursue acquisition opportunities in the major markets in which it
will compete as well as in other markets.
Maximize Superduopoly Revenue and Expense Synergies. The Company seeks to
capitalize on the revenue growth and expense savings opportunities of
superduopolies that have been created or that will be created by the Viacom
Acquisition, the Chancellor Merger and the Pending Transactions. Superduopolies
have only been permissible since the passage of the 1996 Act in January 1996.
Management believes that substantial benefits can be derived from the successful
integration of these station cluster groups. Management also believes that radio
station clusters can attract increased revenues in a market by delivering larger
combined audiences to advertisers and by engaging in joint marketing and
promotional activities. In addition, management expects to realize significant
expense savings through the consolidation of facilities and through the
economies of scale created in areas such as national representation commissions,
employee benefits, insurance premiums and other operating costs.
Establish Strong Listener Loyalty. Management believes that strong
listener familiarity with a given radio station produces listener loyalty.
Management seeks to establish this familiarity through a variety of programming
and marketing techniques, including the development of high-profile on-air
personalities and creative station-sponsored promotional events, all of which
are designed to secure heightened listener awareness. The Company also conducts
extensive market research to help identify programming format opportunities and
attract new listeners, as has been the case with WKTU-FM in New York. After
operating WKTU-FM for nine months under the call letters and country music
format inherited from a prior operator, in February 1996 the Company began to
operate WKTU-FM as a rhythmic contemporary hits station. According to Arbitron,
WKTU-FM was ranked eleventh in its target demographic group as a country
station, and was ranked first in several key demographic groups (including its
target demographic group) in the first full ranking period after the station
changed its format. The station has continued to rank among the top five
stations in its target demographic group in subsequent periods. Management
believes that institutionalizing its radio stations in their markets through
programming, marketing and research ensures steady long-term audience share
ratings.
Maintain Strict Cost Controls. Management maintains a company-wide focus
on cost controls in an effort to maximize broadcast cash flow margins.
Management reviews station spending on a monthly basis. In addition, corporate
level employees maintain weekly sales reporting systems designed to enable
management to evaluate station performance on a current basis. The Company's
focus on maximizing superduopoly revenues and maintaining cost controls is
reflected by the fact that, for the last two years, the Company has achieved
broadcast cash flow margins of 40% or more. The Company also carefully monitors
capital expenditures.
Develop Experienced, Incentivized Management Team. The Company believes
that management depth is critical to achieving superior operating performance in
a portfolio as large as the Company's. The Company's senior management team of
Scott K. Ginsburg and James de Castro collectively have an aggregate of more
than 30 years of radio industry operating experience This senior management team
is supported by an experienced team of veteran group operators and station
general managers. At the station level, the Company seeks to incentivize its
individual radio station managers and sales forces to outperform revenue and
broadcast cash flow budget expectations by granting quarterly and annual
performance measurement-based bonuses. The Company believes that the incentives
it offers to its employees, as well as its stature in the radio industry, will
enable it to continue to be successful in recruiting top industry employees.
Maximize Free Cash Flow. By emphasizing the revenue and expense synergies
achievable through the assembly and operation of superduopolies and by carefully
monitoring operating costs and capital expenditures, the Company seeks to
maximize broadcast cash flow and, ultimately, free cash flow (broadcast cash
flow less corporate general and administrative expenses, debt service, tax
payments, dividend requirements and capital expenditures). This focus on free
cash flow should facilitate reduction of leverage without undue dependence on
capital markets and position the Company to pursue attractive acquisitions.
49
<PAGE> 56
ADVERTISING
The primary source of the Company's revenues is the sale of broadcasting
time for local, regional and national advertising. On a pro forma basis
approximately 71% of the Company's gross revenues would have been generated from
the sale of local advertising in 1996. The Company believes that radio is one of
the most efficient, cost-effective means for advertisers to reach specific
demographic groups. The advertising rates charged by the Company's radio
stations are based primarily on (i) a station's ability to attract audiences in
the demographic groups targeted by its advertisers (as measured principally by
quarterly Arbitron rating surveys that quantify the number of listeners tuned to
the station at various times) and (ii) the supply of and demand for radio
advertising time. Advertising rates generally are the highest during morning and
evening drive-time hours.
Depending on the format of a particular station, there are predetermined
numbers of advertisements that are broadcast each hour. The Company determines
the number of advertisements broadcast hourly that can maximize available
revenue dollars without jeopardizing listening levels. Although the number of
advertisements broadcast during a given time period may vary, the total number
of advertisements broadcast on a particular station generally does not vary
significantly from year to year.
A station's sales staff generates most of its local and regional
advertising sales. To generate national advertising sales, the Company engages
an advertising representative for each of its stations that specializes in
national sales and is compensated on a commission-only basis. Most advertising
contracts are short-term and generally run only for a few weeks.
COMPETITION
The radio broadcasting industry is a highly competitive business. The
success of each of the Company's stations is dependent, to a significant degree,
upon its audience ratings and share of the overall advertising revenue within
its market. The Company's radio stations compete for listeners and advertising
revenues directly with other radio stations, as well as with other media, within
their respective markets. Radio stations compete for listeners primarily on the
basis of program content and by hiring on-air talent that appeals to a
particular demographic group. By building a strong listener base comprised of a
specific demographic group in each of its markets, the Company is able to
attract advertisers who seek to reach those listeners. Other media, including
broadcast television, cable television, newspapers, magazines, direct mail
coupons and billboard advertising also compete with the Company's stations for
advertising revenues. The Company also competes with other broadcasting
operators for acquisition opportunities, and prices for radio stations in major
markets have increased significantly in recent periods. To the extent that the
rapid pace of consolidation in the radio broadcasting industry continues,
certain competitors may emerge with larger portfolios of major market radio
stations, greater ability to deliver large audiences to advertisers and more
access to capital resources than does the Company. The audience ratings and
market share for the Company are and will be subject to change and any adverse
change in a particular market could have a material and adverse effect on the
revenue of its stations located in that market. There can be no assurance that
any one of the Company's stations will be able to maintain or increase its
current audience ratings or advertising revenue market share.
The radio broadcasting industry is also subject to competition from new
media technologies that are being developed or introduced, such as the delivery
of audio programming by cable television systems, direct broadcast satellite
("DBS") systems and other digital audio broadcasting formats to local and
national audiences. In addition, the FCC has auctioned spectrum for a new
satellite-delivered Digital Audio Radio Service ("DARS"). These actions may
result in the introduction of several new national or regional satellite radio
services with sound quality equivalent to compact discs. Another possible
competitor to traditional radio is In Band On Channel ("IBOC") digital radio.
IBOC could provide multi-channel, multi-format digital radio services in the
same band width currently occupied by traditional AM and FM radio services. The
Company cannot predict at this time the effect, if any, that any such new
technologies may have on the radio broadcasting industry.
50
<PAGE> 57
FEDERAL REGULATION OF RADIO BROADCASTING INDUSTRY
Introduction. The radio broadcasting industry is subject to extensive and
changing regulation over, among other things, program content, technical
operations and business and employment practices.
The ownership, operation and sale of radio broadcast stations (including
those licensed to the Company) are subject to the jurisdiction of the FCC, which
acts under authority granted by the Communications Act. The Communications Act
prohibits the assignment or transfer of control of an FCC license without the
prior consent of the FCC. In determining whether to grant requests for consent
to such assignments or transfers, and in determining whether to grant or renew a
radio broadcast license, the FCC considers a number of factors pertaining to the
licensee (and proposed licensee), including: limitations on alien ownership and
the common ownership of television broadcast, radio broadcast and daily
newspaper properties, the "character" of the licensee (and proposed licensee)
and those persons or entities that have "attributable" interests, and compliance
with the Anti-Drug Abuse Act of 1988. Among other things, the FCC assigns
frequency bands for radio broadcasting; determines the particular frequencies,
locations and operating power of radio broadcast stations; issues, renews,
revokes and modifies radio broadcast station licenses; regulates equipment used
by radio broadcast stations; adopts and implements regulations and policies that
directly or indirectly affect the ownership, operation, program content and
employment and business practices of radio broadcast stations; and has the power
to impose penalties for violations of its rules and the Communications Act.
The following is a brief summary of certain provisions of the
Communications Act and specific FCC rules and policies. Reference should be made
to the Communications Act, FCC rules, and the public notices and rulings of the
FCC for further information concerning the nature and extent of federal
regulation of radio broadcast stations.
Failure to observe these or other FCC rules and policies may result in the
imposition of various sanctions, including admonishment, monetary forfeitures,
the grant of "short" (less than the maximum eight-year term) renewal terms or,
for particularly egregious violations, the denial of a license renewal
application, the revocation of FCC licenses, or the denial of FCC consent to
acquire additional broadcast properties.
License Renewal. Radio broadcast licenses are granted for maximum terms of
up to eight years. They may be renewed through an application to the FCC, and,
in certain instances, licensees are entitled to renewal expectancies. During
certain periods when a renewal application is pending, competing applicants may
file for the radio frequency being used by the renewal applicant, although the
FCC is prohibited from considering such competing applications if the existing
license has satisfied certain obligations. Petitions to deny license renewals
can be filed by interested parties, including members of the public. The FCC is
required to hold hearings on a renewal application in certain circumstances.
The following table sets forth, for the portfolio of stations that are or
will be owned by the Company, (assuming the consummation of all Pending
Transactions and the exercise by the Company of the Bonneville Option) (i) the
date of acquisition by the Company (if applicable), (ii) the frequency of each
station and (iii) the date of expiration of each station's main FCC broadcast
license:
<TABLE>
<CAPTION>
DATE OF EXPIRATION DATE
STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE
------- --------- ----------- ---------- ----------------
<S> <C> <C> <C> <C>
KKBT-FM Los Angeles, CA 5/89 92.3 MHz 12/97
KYSR-FM Los Angeles, CA 9/97 98.7 MHz 12/97
KIBB-FM Los Angeles, CA 9/97 100.3 MHz 12/97
KLAC-AM Los Angeles, CA 9/97 570 kHz 12/97
KZLA-FM++ Los Angeles, CA 9/97 93.9 MHz 12/97
KBIG-FM+++ Los Angeles, CA Pending 104.3 MHz 12/97
WKTU-FM New York, NY 5/95 103.5 MHz 6/98
WLTW-FM New York, NY 7/97 106.7 MHz 6/98
WAXQ-FM New York, NY 7/97 104.3 MHz 6/98
WHTZ-FM New York, NY 9/97 100.3 MHz 6/98
WDBZ-FM+++ New York, NY Pending 105.1 MHz 6/98
</TABLE>
51
<PAGE> 58
<TABLE>
<CAPTION>
DATE OF EXPIRATION DATE
STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE
------- --------- ----------- ---------- ----------------
<S> <C> <C> <C> <C>
WMVP-AM Chicago, IL 5/84 1000 kHz 12/03
WRCX-FM Chicago, IL 12/93 103.5 MHz 12/96*
WVAZ-FM Chicago, IL 5/95 102.7 MHz 12/03
WNUA-FM Chicago, IL 1/96 95.5 MHz 12/03
WLIT-FM Chicago, IL 9/97 93.9 MHz 12/03
WGCI-FM++++ Chicago, IL Pending 107.5 MHz 12/03
WGCI-AM++++ Chicago, IL Pending 1390 kHz 12/03
KIOI-FM San Francisco, CA 4/94 101.3 MHz 12/97*
KMEL-FM San Francisco, CA 11/92 106.1 MHz 12/97*
KKSF-FM San Francisco, CA 1/97 103.7 MHz 12/97*
KNEW-AM San Francisco, CA 9/97 910 kHz 12/97*
KYLD-FM(2) San Francisco, CA 9/97 94.9 MHz 12/97*
KABL-AM San Francisco, CA 9/97 960 kHz 12/97*
KISQ-FM San Francisco, CA 9/97 98.1 MHz 12/97*
KSKY-AM Dallas, TX 5/95 660 kHz 8/05
KHKS-FM++++ Dallas, TX Pending 106.1 MHz 8/05
KDGE-FM++++ Dallas, TX Pending 94.5 MHz 8/05
KZPS-FM++++ Dallas, TX Pending 92.5 MHz 8/05
WYXR-FM Philadelphia, PA 1/96 104.5 MHz 8/98
WJJZ-FM Philadelphia, PA 1/96 106.1 MHz 8/98
WDAS-AM Philadelphia, PA 5/97 1480 kHz 8/98
WDAS-FM Philadelphia, PA 5/97 105.3 MHz 8/98
WIOQ-FM Philadelphia, PA 5/97 102.1 MHz 8/98
WUSL-FM Philadelphia, PA 5/97 98.9 MHz 8/98
KTRH-AM Houston, TX 6/93 740 kHz 8/05
KLOL-FM Houston, TX 6/93 101.1 MHz 8/05
KKBQ-FM++++ Houston, TX Pending 92.9 MHz 8/05
KKBQ-AM++++ Houston, TX Pending 790 kHz 8/05
KLDE-FM+++ Houston, TX Pending 94.5 MHz 8/05
WTOP-AM++ Washington, D.C. 11/92 1500 kHz 10/02
WASH-FM Washington, D.C. 11/92 97.1 MHz 10/02
WGAY-FM Washington, D.C. 11/96 99.5 MHz 10/02
WWRC-AM Washington, D.C. 4/97 980 kHz 10/02
WMZQ-FM Washington, D.C. 7/97 98.7 MHz 10/02
WBIG-FM Washington, D.C. 9/97 100.3 MHz 10/03
WGMS-FM++ Washington, D.C. 9/97 103.5 MHz 10/03
WTEM-AM Washington, D.C. 9/97 570 kHz 10/03
WJMN-FM Boston, MA 1/96 94.5 MHz 4/98
WXKS-FM Boston, MA 1/96 107.9 MHz 4/98
WXKS-AM Boston, MA 1/96 1430 kHz 4/98
WFOX-FM Atlanta, GA 9/97 97.1 MHz 4/03
WKQI-FM Detroit, MI 5/95 95.5 MHz 10/03
WNIC-FM Detroit, MI 5/95 100.3 MHz 10/03
WYUR-AM Detroit, MI 5/95 1310 kHz 10/03
WWWW-FM Detroit, MI 1/97 106.7 MHz 10/03
WDFN-AM Detroit, MI 1/97 1130 kHz 10/03
WJLB-FM Detroit, MI 4/97 97.9 MHz 10/03
WMXD-FM Detroit, MI 4/97 92.3 MHz 10/03
WVCG-AM Miami/Ft. Lauderdale, FL 7/83 1080 kHz 2/03
WEDR-FM Miami/Ft. Lauderdale, FL 10/96 99.1 MHz 2/03
KRRF-AM Denver, CO 9/97 1280 kHz 4/05
KXKL-FM Denver, CO 9/97 105.1 MHz 4/05
KVOD-FM Denver, CO 9/97 92.5 MHz 4/05
KIMN-FM Denver, CO 9/97 100.3 MHz 4/05
KALC-FM Denver, CO 9/97 105.9 MHz 4/97*
KXPK-FM++++ Denver, CO Pending 96.5 MHz 4/05
</TABLE>
52
<PAGE> 59
<TABLE>
<CAPTION>
DATE OF EXPIRATION DATE
STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE
------- --------- ----------- ---------- ----------------
<S> <C> <C> <C> <C>
KTCZ-FM Minneapolis/St. Paul, MN 9/97 97.1 MHz 4/05
KTCJ-AM Minneapolis/St. Paul, MN 9/97 690 kHz 4/05
KDWB-FM Minneapolis/St. Paul, MN 9/97 101.3 MHz 4/05
KFAN-AM Minneapolis/St. Paul, MN 9/97 1130 kHz 4/05
KEEY-FM Minneapolis/St. Paul, MN 9/97 102.1 MHz 4/05
KQQL-FM Minneapolis/St. Paul, MN 9/97 107.9 MHz 4/05
WRCQ-FM Minneapolis/St. Paul, MN 9/97 100.3 MHz 4/05
KMLE-FM Phoenix, AZ 9/97 107.9 MHz 10/97*
KISO-AM Phoenix, AZ 9/97 1230 kHz 10/97*
KOOL-FM Phoenix, AZ 9/97 94.5 MHz 10/97*
KOY-AM Phoenix, AZ 9/97 550 kHz 10/97*
KYOT-FM Phoenix, AZ 9/97 95.5 MHz 10/97*
KZON-FM Phoenix, AZ 9/97 101.5 MHz 10/97*
WUBE-FM Cincinnati, OH 9/97 105.1 MHz 10/03
WUBE-AM Cincinnati, OH 9/97 1230 kHz 10/03
WYGY-FM Cincinnati, OH 9/97 96.5 MHz 10/03
WKYN-AM Cincinnati, OH 9/97 1160 kHz 10/03
WWSW-AM Pittsburgh, PA 9/97 970 kHz 8/98
WWSW-FM Pittsburgh, PA 9/97 94.5 MHz 8/98
KGBY-FM Sacramento, CA 9/97 92.5 MHz 12/97*
KHYL-FM Sacramento, CA 9/97 101.1 MHz 12/97*
KFBK-AM Sacramento, CA 9/97 1530 kHz 12/97*
KSTE-AM Sacramento, CA 9/97 650 kHz 12/97*
WOCL-FM Orlando, FL 9/97 105.9 MHz 2/03
WOMX-FM Orlando, FL 9/97 105.1 MHz 2/03
WJHM-FM Orlando, FL 9/97 101.9 MHz 2/03
WXXL-FM Orlando, FL 9/97 106.7 MHz 2/03
WALK-FM Nassau/Suffolk
(Long Island), NY 9/97 97.5 MHz 6/98
WALK-AM Nassau/Suffolk
(Long Island), NY 9/97 1370 kHz 6/98
WBAB-FM++++ Nassau/Suffolk
(Long Island), NY Pending 102.3 MHz 6/98
WBLI-FM++++ Nassau/Suffolk
(Long Island), NY Pending 106.1 MHz 6/98
WHFM-FM++++ Nassau/Suffolk
(Long Island), NY Pending 95.3 MHz 6/98
WGBB-AM++++ Nassau/Suffolk
(Long Island), NY Pending 1240 kHz 6/98
WAPE-FM+ Jacksonville, FL 9/97 95.1 MHz 2/03
WFYV-FM+ Jacksonville, FL 9/97 104.5 MHz 2/03
KGGI-FM Riverside/San Bernardino, CA 9/97 99.1 MHz 12/97*
KMRZ-AM Riverside/San-Bernardino, CA 9/97 1290 kHz 12/97*
</TABLE>
- ---------------
* Indicates pending renewal application.
+ Indicates station to be disposed in a Pending Transaction.
++ Indicates station that would be disposed if the Bonneville Option is
exercised.
+++ Indicates station that would be acquired if the Bonneville Option is
exercised.
++++ Indicates station to be acquired in a Pending Transaction.
(1) Actual city of license may differ from metropolitan market served in certain
cases.
Ownership Matters. Under the Communications Act, a broadcast license may
not be granted to or held by any corporation that has more than one-fifth of its
capital stock owned or voted by aliens or their representatives, by foreign
governments or their representatives, or by non-U.S. corporations. Under the
Communications Act, a broadcast license also may not be granted to or held by
any corporation that is controlled, directly or indirectly, by any other
corporation more than one-fourth of whose capital stock is owned or voted by
aliens or their representatives, by foreign governments or their
representatives, or by non-
53
<PAGE> 60
U.S. corporations, if the FCC finds that the public interest will be served by
the refusal or revocation of such license. The Company has been advised that the
FCC staff has interpreted this provision of the Communications Act to require an
affirmative public interest finding before a broadcast license may be granted to
or held by any such corporation and that the FCC has made such an affirmative
finding only in limited circumstances. These restrictions apply in modified form
to other forms of business organizations, including partnerships. The Company,
which serves as a holding company for its direct and indirect radio station
subsidiaries, therefore may be restricted from having more than one-fourth of
its stock owned or voted by aliens, foreign governments or non-U.S.
corporations. The respective Certificates of Incorporation of Chancellor Media,
CMHC and the Company prohibit alien ownership and control that are intended to
facilitate compliance with the provisions of the Communications Act applicable
to alien ownership. The Company believes that in light of current levels of
alien ownership of the Company's capital stock, the foregoing restrictions are
not likely to have a material impact on Chancellor Media, CMHC or the Company.
The Communications Act and FCC rules also generally prohibit the common
ownership, operation or control of a radio broadcast station and a television
broadcast station serving the same local market, and of a radio broadcast
station and a daily newspaper serving the same local market. Under these
"cross-ownership" rules, absent waivers, the Company would not be permitted to
acquire any daily newspaper or television broadcast station (other than
low-power television) in a local market where it then owned any radio broadcast
station. In October 1996, the Commission issued a Notice of Inquiry to explore
possible changes in the newspaper/broadcast cross-ownership waiver policy with
respect to newspaper/radio combinations, including the possibility of adopting a
waiver policy based on market size or on the number of independently owned media
in a market.
The 1996 Act eliminated national ownership caps on ownership of AM and FM
radio stations. Prior to the 1996 Act, radio groups were limited to ownership of
20 FM stations and 20 AM stations on a national basis. Additionally, the 1996
Act increased local ownership limits. Prior to the 1996 Act, a single owner was
limited to owning two FMs and two AMs in a single large radio market with common
ownership of three stations, including two in the same service, permitted in
smaller markets. After the 1996 Act, local ownership limits were increased as
follows: in markets with 45 or more stations, ownership is limited to eight
stations, no more than five of which can be in the same service; in markets with
30-44 stations, ownership is limited to seven stations, no more than four of
which can be in the same service; in markets with 15-29 stations, ownership is
limited to six stations, no more than four of which can be in the same service;
and in markets with 14 or fewer stations, ownership is limited to no more than
50% of the market's total with no more than three stations in the same service.
Because of these multiple ownership rules and the cross-interest policy
described below, a purchaser of Chancellor Media's common stock who acquires an
attributable interest in the Company may violate the FCC's rules if it also has
an "attributable" interest in other television or radio stations, or in daily
newspapers, depending on the number and location of those radio or television
stations or daily newspapers. Such a purchaser also may be restricted in the
companies in which it may invest, to the extent that those investments give rise
to an attributable interest. If an attributable stockholder of the Company
violates any of these ownership rules, the Company may be unable to obtain from
the FCC one or more authorizations needed to conduct its radio station business
and may be unable to obtain FCC consents for certain future acquisitions.
The FCC generally applies its television/radio/newspaper cross-ownership
rules, and its broadcast multiple ownership rules, by considering the
"attributable," or cognizable, interests held by a person or entity. A person or
entity can have an interest in a radio station, television station or daily
newspaper by being an officer, director, partner or stockholder of a company
that owns that station or newspaper. Whether that interest is cognizable under
the FCC's ownership rules is determined by the FCC's attribution rules. If an
interest is attributable, the FCC treats the person or entity who holds that
interest as the "owner" of the radio station, television station or daily
newspaper in question, and therefore subject to the FCC's ownership rules.
In the case of corporations, the interest of officers, directors and
persons or entities that directly or indirectly have the right to vote 5% or
more of the corporation's voting stock (or 10% or more of such stock in the case
of insurance companies, investment companies, bank trust departments and certain
other "passive
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<PAGE> 61
investors" that hold such stock for investment purposes only) are generally
attributed with ownership of whatever radio stations, television stations, and
daily newspapers the corporation owns. Likewise, the interest of an officer or a
director of a corporate parent (as well as the corporate parent) is generally
attributed with ownership of whatever the subsidiary owns.
In the case of a partnership, the interest of a general partner is
attributable, as is the interest of any limited partner who is "materially
involved" in the media-related activities of the partnership. Debt instruments,
non-voting stock, options and warrants for voting stock that have not yet been
exercised, limited partnership interests where the limited partner is not
"materially involved" in the media-related activities of the partnership, and
minority voting stock interests in corporations where there is a single holder
of more than 50% of the outstanding voting stock, generally do not subject their
holders to attribution.
The FCC has issued a Notice of Proposed Rulemaking (the "NPRM") that
contemplates tightening attribution standards where parties have multiple
nonattributable interests in and relationships with stations that would be
prohibited by the FCC's cross-interest rules, if the interests/relationships
were attributable. The NPRM contemplates that this change in attribution will
apply only to persons holding debt or equity interests that exceed certain
benchmarks.
In addition, the FCC has a "cross-interest" policy that under certain
circumstances could prohibit a person or entity with an attributable interest in
a broadcast station or daily newspaper from having a "meaningful"
nonattributable interest in another broadcast station or daily newspaper in the
same local market. Among other things, "meaningful" interests could include
significant equity interests (including non-voting stock, voting stock, and
limited partnership interests) and significant employment positions. This policy
may limit the permissible investments that an equity investor in the Company may
make or hold. If the FCC determines that a stockholder of the Company has
violated this cross-interest policy, the Company may be unable to obtain from
the FCC one or more authorizations needed to conduct its radio station business
and may be unable to obtain FCC consents for certain future acquisitions.
Programming and Operation. The Communications Act requires broadcasters to
serve the "public interest." The FCC has gradually relaxed or eliminated many of
the more formalized procedures it had developed in the past to promote the
broadcast of certain types of programming responsive to the needs of a station's
community of license. A licensee continues to be required, however, to present
programming that is responsive to community problems, needs and interests and to
maintain certain records demonstrating such responsiveness. Complaints from
listeners concerning a station's programming often will be considered by the FCC
when it evaluates the licensee's renewal application, but such complaints may be
filed and considered at any time. Stations also must follow various FCC rules
that regulate, among other things, political advertising, sponsorship
identification, and technical operations (including limits on radio frequency
radiation). In addition, licensees must develop and implement programs designed
to promote equal employment opportunities. The broadcast of obscene and indecent
material and the advertisement of contests and lotteries are regulated by FCC
rules, as well as by state and other federal laws.
Time Brokerage Agreements. Over the past three years, a number of radio
stations, including certain of the Company's stations, have entered into what
commonly are referred to as "Time Brokerage Agreements," or "TBAs" (certain
types of these agreements also are known as "Local Marketing Agreements," or
"LMAs"). These agreements may take various forms. Separately-owned and licensed
stations may agree to function cooperatively in terms of programming,
advertising sales, and other matters, subject to the licensee of each station
maintaining independent control over the programming and other operations of its
own station and compliance with the requirements of antitrust laws. One typical
type of TBA is a programming agreement between two separately-owned radio
stations that serve a common service area, whereby the licensee of one station
programs substantial portions of the broadcast day on the other licensee's
station (subject to ultimate editorial and other controls being exercised by the
latter licensee), and sells advertising time during those program segments. The
FCC staff has held that such agreements do not violate the Communications Act as
long as the licensee of the station that is being substantially programmed by
another entity maintains complete responsibility for, and control over,
operations of its broadcast station and otherwise ensures compliance with
applicable FCC rules and policies.
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<PAGE> 62
A station that brokers more than 15% of the broadcast time, on a weekly
basis, on another station in the same market will be considered to have an
attributable ownership interest in the brokered station for purposes of the
FCC's ownership rules, discussed above. As a result, a broadcast station may not
enter into a TBA that allows it to program more than 15% of the broadcast time,
on a weekly basis, of another local station that it could not own under the
FCC's local multiple ownership rules. FCC rules also prohibit a broadcast
licensee from simulcasting more than 25% of its programming on another station
in the same broadcast service (i.e., AM-AM or FM-FM) where the two stations
serve substantially the same geographic area, whether the licensee owns the
stations or owns and programs the other through a TBA arrangement.
Proposed Changes. The FCC is considering various proposals to modify its
broadcast "attribution" rules. Among the proposals are (i) raising the basic
benchmark for attributing ownership from 5% to 10% of the licensee's voting
stock, (ii) raising the attribution benchmark for certain institutional
investors from 10% to 20%, (iii) limiting the applicability of the single
majority shareholder rule (discussed above) to treat as attributable large stock
interests coupled with other debt or securities and (iv) treating non-voting
stock as attributable in certain circumstances. The FCC is also considering
changes to its multiple ownership rules to encourage minority ownership of radio
and television broadcast stations.
The FCC has under consideration, and may in the future consider and adopt,
new laws, regulations and policies regarding a wide variety of matters that
could, directly or indirectly, affect the operation, ownership and financial
performance of the Company's radio broadcast stations, result in the loss of
audience share and advertising revenues for the Company's radio broadcast
stations, and affect the ability of the Company to acquire additional radio
broadcast stations or finance such acquisitions. Such matters include: changes
to the license renewal process; the FCC's equal employment opportunity rules and
other matters relating to minority and female involvement in the broadcasting
industry; proposals to change rules relating to political broadcasting;
technical and frequency allocation matters; AM stereo broadcasting; proposals to
permit expanded use of FM translator stations; proposals to restrict or prohibit
the advertising of beer, wine and other alcoholic beverages on radio; changes in
the FCC's cross-interest, multiple ownership and cross-ownership policies;
changes to broadcast technical requirements; proposals to allow telephone
companies to deliver audio and video programming to the home through existing
phone lines; proposals to limit the tax deductibility of advertising expenses by
advertisers; proposals to auction to the highest bidder the right to use the
radio broadcast spectrum, instead of granting FCC licenses and subsequent
license renewals; and proposals to reinstate the "Fairness Doctrine" which
requires a station to present coverage of opposing views in certain
circumstances. It is also possible that Congress may enact additional
legislation that could have a material impact on the operation, ownership and
financial performance of the Company's radio stations over and above the already
substantial impact of the 1996 Act.
The FCC has taken initial steps to authorize the use of a new technology,
DARS, to deliver audio programming by satellite. The FCC is also considering
various proposals for terrestrial DARS. DARS may provide a medium for the
delivery of multiple new audio programming formats to local and national
audiences. It is not known at this time whether this technology also may be used
in the future by existing radio broadcast stations either on existing or
alternate broadcasting frequencies.
The Company cannot predict what other matters might be considered in the
future, nor can it judge in advance what impact, if any, the implementation of
any of these proposals or changes might have on its business.
Federal Antitrust Laws. The FTC and the DOJ evaluate transactions
requiring a pre-acquisition filing under the HSR Act to determine whether those
transactions should be challenged under the federal antitrust laws. These
agencies (particularly the DOJ) recently have been increasingly active in their
review of radio station acquisitions where an operator proposes to acquire new
stations in its existing markets.
As part of its increased scrutiny of radio station acquisitions, the DOJ
has stated publicly that it believes that TBAs and other similar agreements
customarily entered into in connection with radio station transfers prior to the
expiration of the waiting period under the HSR Act could violate the HSR Act.
Since then, the DOJ has stated publicly that it will apply its new policy
prohibiting TBAs in connection with purchase agreements until the expiration or
termination of the HSR waiting period on a prospective basis.
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<PAGE> 63
The DOJ has stated publicly that it has established certain revenue and
audience share concentration benchmarks with respect to radio station
acquisitions, above which a transaction may receive additional antitrust
scrutiny. However, to date, the DOJ has also investigated transactions that do
not meet or exceed these benchmarks and has cleared transactions that do exceed
the benchmarks. Given this uncertainty, the Company cannot predict whether it
will be required by the DOJ or the FTC to dispose of certain stations to be
acquired as a result of the Pending Transactions. Although the Company does not
believe that its acquisition strategy as a whole will be adversely affected in
any material respect by antitrust review (including review under the HSR Act) or
by additional divestitures that the Company may have to make as a result of
antitrust review, there can be no assurance that this will be the case.
EMPLOYEES
The Company has approximately 3,900 employees. Certain employees at the
Company's stations in New York, Los Angeles, Chicago, San Francisco, Washington,
D.C., Philadelphia, Detroit and Cincinnati (approximately 300 employees), are
represented by unions. The Company believes that its relations with its
employees and these unions are generally good.
The Company employs several high-profile on-air personalities who have
large, loyal audiences in their respective markets. The Company believes that
its relationships with its on-air talent are valuable, and it generally enters
into employment agreements with these individuals.
PROPERTIES AND FACILITIES
The types of properties required to support each of the Company's existing
or to be acquired radio stations include offices, studios, transmitter sites and
antenna sites. A station's studio is generally housed with its office in a
downtown or business district. A station's transmitter sites and antenna sites
generally are located in a manner that provides maximum market coverage.
The studios and offices of the Company's stations and its corporate
headquarters are located in leased or owned facilities. The terms of these
leases expire in one to ten years. The Company either owns or leases its
transmitter and antenna sites. These leases have expiration dates that range
from one to eight years.
The Company does not anticipate any difficulties in renewing those leases
that expire within the next several years or in leasing other space, if
required.
No one property is material to the Company's overall operations. The
Company believes that its properties are in good condition and suitable for its
operations. The Company owns substantially all of the equipment used in its
radio broadcasting business.
The principal executive offices of the Company are located at 433 East Las
Colinas Boulevard, Suite 1130, Irving, Texas 75039. The telephone number of the
Company at that address is (972) 869-9020.
LEGAL PROCEEDINGS
In August 1993, the Company terminated an agreement with Sagittarius
Broadcasting Company (an affiliate of Infinity Broadcasting Corporation) and One
Twelve, Inc. (collectively, the "Claimants") pursuant to which programming
featuring radio personality Howard Stern was broadcast on radio station WLUP-AM
(now WMVP-AM) in Chicago. The Claimants allege that termination of the agreement
was wrongful and have sued the Company in the Supreme Court of the State of New
York, County of New York (the "Court"). The agreement required payments to the
Claimants in the amount of $2.6 million plus five percent of advertising
revenues generated by the programming over the three-year term of the agreement.
A total of approximately $680,000 was paid to the Claimants pursuant to the
agreement prior to termination. Claimants' complaint alleged claims for breach
of contract, indemnification, breach of fiduciary duty and fraud. Claimants'
aggregate prayer for relief totaled $45.0 million. On July 12, 1994, the Court
granted the Company's motion to dismiss Claimants' claims for fraud and breach
of fiduciary duty. On June 6, 1995, the Court denied the Claimants' motion for
summary judgment on their contract and indemnification claims and this order has
been affirmed on appeal. On May 17, 1996, after the close of discovery, the
Company filed a
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motion for summary judgment, seeking the dismissal of the remaining claims in
the original complaint. On July 1, 1996, Claimants moved for leave to amend
their complaint in order to add claims for breach of the covenant of good faith
and fair dealing, tortious interference with business advantage and prima facie
tort. In the proposed amended complaint, Claimants seek compensatory and
punitive damages in excess of $25.0 million. On March 13, 1997, the Court denied
the Company's motion for summary judgment, allowed Claimants' request to amend
the complaint to add a claim for breach of the covenant of good faith and fair
dealing and denied Claimants' request to amend the complaint to add claims for
tortious interference with business advantage and prima facia tort. On April 25,
1997, the Company filed a notice of appeal of the denial of the Company's motion
for summary judgment. On September 11, a five-judge panel in the N.Y. State
Court of Appeals heard oral arguments on this matter. The Company believes that
it acted within its rights in terminating the agreement.
The Company is also involved in various other claims and lawsuits which are
generally incidental to its business. The Company is vigorously contesting all
such matters and believes that their ultimate resolution will not have a
material adverse effect on its consolidated financial position or results of
operations.
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MANAGEMENT AND BOARD OF DIRECTORS
The directors and executive officers of Chancellor Media, CMHC and CMCLA
are:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Thomas O. Hicks........................... 50 Chairman of the Board and Director
Scott K. Ginsburg......................... 44 President, Chief Executive Officer and
Director
James E. de Castro........................ 44 Chief Operating Officer and Director
Matthew E. Devine......................... 48 Chief Financial Officer and Chief Accounting
Officer, Secretary
Thomas J. Hodson.......................... 53 Director
Perry Lewis............................... 59 Director
Jeffrey A. Marcus......................... 50 Director
John H. Massey............................ 57 Director
Eric C. Neuman............................ 52 Director
Lawrence D. Stuart, Jr.................... 52 Director
Steven Dinetz............................. 49 Director
</TABLE>
THOMAS O. HICKS
Mr. Hicks was elected Chairman of the Board and a director of Chancellor
Media, CMHC and CMCLA upon the consummation of the Chancellor Merger. He had
been Chairman and a director of Chancellor and CRBC prior to the Chancellor
Merger, since April 1996. Mr. Hicks is Chairman of the Board and Chief Executive
Officer of Hicks Muse, a private investment firm located in Dallas, St. Louis,
New York and Mexico City specializing in strategic investments, leveraged
acquisitions and recapitalizations. From 1984 to May 1989, Mr. Hicks was
Co-Chairman of the Board and Co-Chief Executive Officer of Hicks & Haas,
Incorporated, a Dallas based private investment firm. Mr. Hicks serves as a
director of Sybron International Corporation, Inc., Berg Electronics Corp.,
Neodata Corporation, D.A.C. Vision Inc. and Olympus Real Estate Corporation.
SCOTT K. GINSBURG
Mr. Ginsburg was elected President, Chief Executive Officer and a director
of Chancellor Media, CMHC and CMCLA upon the consummation of the Chancellor
Merger. Mr. Ginsburg had been Chairman of the Board, Chief Executive Officer and
a director of Evergreen prior to the Chancellor Merger. He had been Chairman of
Evergreen since 1990, and Chief Executive Officer of Evergreen since 1988. Mr.
Ginsburg was President of Evergreen from 1988 to 1993 and held various positions
with H&G Communications, Inc. from 1987 to 1988. Mr. Ginsburg entered the radio
broadcasting business in 1983.
JAMES E. DE CASTRO
Mr. de Castro was elected Co-Chief Operating Officer and a director of
Chancellor Media, CMHC and CMCLA upon the consummation of the Chancellor Merger.
Mr. de Castro was previously President of Evergreen since 1993 and Chief
Operating Officer and a director of Evergreen since 1989. From 1987 to 1988, Mr.
de Castro held various positions with H&G Communications, Inc. and predecessor
entities. From 1981 to 1989, Mr. de Castro was general manager of radio stations
WLUP-FM and WLUP-AM (now known as WMVP-AM) in Chicago, and from 1989 to 1992,
Mr. de Castro was general manager of radio station KKBT-FM in Los Angeles.
MATTHEW E. DEVINE
Mr. Devine was elected Chief Financial Officer, Chief Accounting Officer
and Secretary of Chancellor Media, CMHC and CMCLA upon consummation of the
Chancellor Merger. Prior thereto, Mr. Devine had been an Executive Vice
President of Evergreen since 1993, Chief Financial Officer, Treasurer and
Secretary of Evergreen since 1988 and a director of Evergreen since 1989.
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THOMAS J. HODSON
Mr. Hodson became a director of Chancellor Media, CMHC and CMCLA upon
consummation of the Chancellor Merger. Mr. Hodson had previously served as a
director of Evergreen since 1992. Mr. Hodson became President of Columbia Falls
Aluminum Company in 1994. He had been a Vice President of Stephens, Inc. from
1986 through 1993.
PERRY LEWIS
Mr. Lewis became a director of Chancellor Media, CMHC and CMCLA upon
consummation of the Chancellor Merger. Mr. Lewis had previously served as a
director of Evergreen since Evergreen acquired Broadcasting Partners, Inc.
("BPI") in 1995. Mr. Lewis was the Chairman of BPI from its inception in 1988
until its merger with Evergreen, and was Chief Executive Officer of BPI from
1993 to 1995. Mr. Lewis is a founder of Morgan, Lewis, Githens & Ahn, an
investment banking and leveraged buyout firm which was established in 1982. Mr.
Lewis serves as director of Aon Corporation, ITI Technologies, Inc., Gradall
Industries, Inc. and Stuart Entertainment, Inc.
JEFFREY A. MARCUS
Mr. Marcus became a director of Chancellor Media, CMHC and CMCLA upon
consummation of the Chancellor Merger. Mr. Marcus currently serves as the
Chairman and Chief Executive Officer of Marcus Cable Company, the ninth largest
cable television multiple system operator (MSO) in the United States which
serves over 1.2 million customers and which Mr. Marcus formed in 1990. Until
November 1988, Mr. Marcus served as Chairman and Chief Executive Officer of
WestMarc Communications, Inc., an MSO formed through the merger in 1987 of
Marcus Communications, Inc. and Western TeleCommunications, Inc. Mr. Marcus has
more than 29 years experience in the cable television business. Mr. Marcus is a
co-owner of the Texas Rangers Baseball Club and serves as a director or trustee
of several charitable and civic organizations.
JOHN H. MASSEY
Mr. Massey became a director of Chancellor Media, CMHC and CMCLA upon
consummation of the Chancellor Merger. Until August 2, 1996, Mr. Massey served
as the Chairman of the Board and Chief Executive Officer of Life Partners Group,
Inc., an insurance holding company, having assumed those offices in October
1994. Prior to joining Life Partners, he served, since 1992, as the Chairman of
the Board of, and currently serves as a director of, FSW Holdings, Inc., a
regional investment banking firm. Since 1986, Mr. Massey has served as a
director of Gulf-California Broadcast Company, a private holding company that
was sold in May 1996. From 1986 to 1992, he also was President of
Gulf-California Broadcast Company. From 1976 to 1986, Mr. Massey was President
of Gulf Broadcast Company, which owned and operated 6 television stations and 11
radio stations in major markets in the United States. Mr. Massey currently
serves as a director of Central Texas Bankshare Holdings, Inc., Hill Bank and
Trust Co., Hill Bancshares Holdings, Inc., Bank of The Southwest of Dallas,
Texas, Columbus State Bank, Columbine JDS Systems, Inc., The Paragon Group,
Inc., the Brazos Fund Group Inc. and Sunrise Television Group, Inc.
ERIC C. NEUMAN
Mr. Neuman became a director of Chancellor Media, CMHC and CMCLA upon
consummation of the Chancellor Merger. Mr. Neuman previously served as a
director of Chancellor and CRBC since April 1996. Since May 1993, Mr. Neuman has
been an officer of Hicks Muse and is currently serving as Senior Vice President.
From 1985 to 1993, Mr. Neuman was a Managing General Partner of Communications
Partners, Ltd., a private investment firm specializing in media and
communications businesses.
LAWRENCE D. STUART, JR.
Mr. Stuart became a director of Chancellor Media, CMHC and CMCLA upon
consummation of the Chancellor Merger. Mr. Stuart previously served as a
director of Chancellor and CRBC since January 1997.
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Since October 1995, Mr. Stuart has served as a Managing Director and Principal
of Hicks Muse. Prior to joining Hicks Muse, from 1990 to 1995 he served as the
managing partner of the Dallas office of the law firm Weil, Gotshal & Manges
LLP.
STEVEN DINETZ
Mr. Dinetz was elected Co-Chief Operating Officer and a director of
Chancellor Media, CMHC, and CMCLA upon the consummation of the Chancellor
Merger. On September 22, 1997, Mr. Dinetz indicated to the Company that he was
accepting a position as chief operating officer of a radio broadcaster
affiliated with Hicks Muse; accordingly, Mr. Dinetz no longer serves as Co-Chief
Operating Officer of Chancellor Media, CMHC and CMCLA, but continues to serve as
a director for each such entity. Mr. Dinetz previously served as President,
Chief Executive Officer and a Director of Chancellor and CRBC since its
formation and prior thereto was the President and Chief Executive Officer and a
Director of Chancellor Communications, a predecessor entity of Chancellor. Prior
to joining Chancellor Communications, Mr. Dinetz served as a radio broadcasting
consultant and, from October 1988 to January 1993, as the President and Chief
Executive Officer of D&D Broadcasting, which Mr. Dinetz formed to acquire
KOSI-FM and KEZW-AM in Denver, Colorado from Group W. Broadcasting, Inc. in a
leveraged acquisition. Mr. Dinetz has more than 20 years experience in the radio
broadcasting industry and has previously managed 14 radio stations throughout
the United States, including stations in top 40 radio markets such as New York
City, Miami-Fort Lauderdale, Dallas-Fort Worth and Denver.
COMPENSATION OF DIRECTORS
Directors who are also officers of Chancellor Media, CMHC and CMCLA receive
no additional compensation for their services as directors. Effective for the
1997 fiscal year, directors of Chancellor Media, CMHC and CMCLA who are not
officers will receive (i) a fee of $12,000 per annum, (ii) a $1,000 fee for
attendance at meetings or, if applicable, a $500 fee for attendance at meetings
by telephone, (iii) a $500 fee for attendance at a committee meeting held on the
same day as a regularly scheduled meeting and (iv) a $750 fee for attendance at
a committee meeting held on a day other than a regularly scheduled meeting day.
Directors of Chancellor Media, CMHC and CMCLA are also reimbursed for travel
expenses and other out-of-pocket costs incurred in connection with such
meetings. Additionally, all non-employee directors of Chancellor Media, CMHC and
CMCLA in office on the day of Chancellor Media's annual stockholders meeting are
entitled to an award of options to purchase 7,500 shares of Common Stock at an
exercise price equal to the fair market value of such shares on the date of
grant.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth all compensation, including bonuses, stock
option awards and other payments, paid or accrued by the Company for the three
fiscal years ending December 31, 1996, to the individuals serving as the
Company's Chief Executive Officer and each of the Company's other executive
officers serving in such capacity at the end of the last completed fiscal year
whose total annual salary and bonus exceeded $100,000 during the fiscal year
ended December 31, 1996. Each of these individuals has been and continues to be
an employee of the Company, and the compensation amounts in the following tables
represent all compensation paid to each such individual in connection with his
or her position with the Company and its subsidiaries taken as a whole.
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<PAGE> 68
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------- ------------- SECURITIES
NAME AND OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) STOCK AWARDS OPTIONS PAYOUTS COMPENSATION
------------------ ---- -------- -------- --------------- ------------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Scott K. Ginsburg.... 1996 $750,000 $956,000 -- -- 187,500 -- $9,776(2)
Chairman and Chief 1995 650,000 -- -- -- -- -- 7,663(2)
Executive Officer 1994 574,000 50,000 -- -- -- 11,020(2)
James E. de Castro... 1996 $750,000 $704,000 -- -- 37,500 -- $2,455(2)
President and Chief 1995 650,000 125,000 -- -- 150,000 -- 2,455(2)
Operating Officer 1994 500,000 50,000 -- -- 75,000 -- 27,455(3)
Matthew E. Devine.... 1996 $300,000 $352,000 -- -- 18,750 -- --
Executive Vice 1995 275,000 63,000 -- -- 75,000 -- --
President, Chief 1994 194,000 25,000 -- -- 75,000 -- --
Financial Officer,
and
Treasurer
Kenneth J. O'Keefe... 1996 $250,000(4) $210,000 -- -- 150,000 -- --
Executive Vice 1995 -- -- -- -- -- -- --
President Operations 1994 -- -- -- -- -- -- --
</TABLE>
- ---------------
(1) The aggregate annual amount of prerequisites and other personal benefits,
securities or property does not exceed $50,000 or 10% of the total of the
annual salary and bonus for the named officer.
(2) Payment of term life insurance policy.
(3) Includes payment of a term life insurance policy and payments to Mr. de
Castro as compensation to offset increased costs and other expenses
associated with Mr. de Castro's temporary relocation to Los Angeles,
California, undertaken at the request of the Company. These amounts were
$2,455 and $25,000, respectively.
(4) Represents compensation for the period beginning March 1, 1996, when Mr.
O'Keefe joined the Company.
62
<PAGE> 69
Option Grants in Last Fiscal Year. The following table sets forth
information regarding options to purchase Evergreen's formerly outstanding Class
A Common Stock (each share of which has been reclassified, changed and converted
into one share of Common Stock of Chancellor Media) granted by the Company to
its Chief Executive Officer and the other executive officers named in the
Summary Compensation Table during the 1996 fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS GRANT DATE VALUE
---------------------------------------------- --------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED TO GRANT DATE
GRANTED EMPLOYEES IN EXERCISE OR BASE PRESENT VALUE
NAME (#)(1)(2) FISCAL YEAR PRICE ($/SHARE) EXPIRATION DATE ($)(4)
---- ---------- ------------ ---------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Scott K. Ginsburg........ 150,000 25.5% $21.33(2) 12/31/05 $1,792,500
37,500 6.4% 24.50(3) 12/31/05 478,125
James E. de Castro....... 37,500 6.4% 24.50(3) 12/31/04 436,875
Matthew E. Devine........ 18,750 3.2% 24.50(3) 12/31/04 218,438
Kenneth J. O'Keefe....... 150,000 25.5% 21.33(2) 03/01/06 1,545,000
</TABLE>
- ---------------
(1) Represents options to purchase shares of Common Stock granted under
Chancellor Media's 1995 Stock Option Plan for Executive Officers and Key
Employees (the "1995 Stock Option Plan"). The options awarded to Mr.
Ginsburg are exercisable in whole or part beginning on January 1, 2001, and
expire on December 31, 2005. The options awarded to Mr. de Castro and Mr.
Devine are exercisable in whole or part beginning January 1, 2000, and
expire on December 31, 2004. The options awarded to Mr. O'Keefe are
exercisable in whole or part beginning February 28, 1999, and expire on
March 1, 2006. The Compensation Committee of Chancellor Media under certain
circumstances has the discretion to accelerate the exercisability of the
options in connection with the occurrence of a change in control of
Chancellor Media. The options may expire earlier upon the occurrence of
certain merger or consolidation transactions involving Chancellor Media.
Chancellor Media is not required to issue and deliver any certificate for
shares of Common Stock purchased upon exercise of the option or any portion
thereof prior to fulfillment of certain conditions, including the completion
of registration or qualification of such shares of Common Stock under
federal or state securities laws and the payment to Chancellor Media of all
amounts required to be withheld upon exercise of the options under any
federal, state or local tax law. The holder of an option has no rights or
privileges of a stockholder in respect of any shares of Common Stock
purchasable upon exercise of the options unless and until certificates
representing such shares shall have been issued by Chancellor Media to such
holder. Once exercisable, the options are exercisable by the holder or, upon
the death of such holder, by his personal representatives or by any person
empowered to do so under such holder's will or under the applicable laws of
descent and distribution. The options are not transferable except by will or
by the applicable laws of descent and distribution.
(2) Represents the estimated fair value of Class A Common Stock of Evergreen on
December 29, 1995, the last trading day before December 31, 1995, the date
of the grant.
(3) Represents the estimated fair value of Class A Common Stock of Evergreen on
December 30, 1996, the last trading day before December 31, 1996, the date
of the grant.
(4) The present value of each grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions: dividend yield of 0% for all years; expected volatility of
44.5%; risk-free interest rate of 6.0% and expected life of seven years.
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<PAGE> 70
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END VALUES
The following table sets forth information concerning option exercises in
the year ended December 31, 1996 by the Company's Chief Executive Officer and
the other executive officers named in the Summary Compensation Table, and the
value of each such executive officer's unexercised options at December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Scott K. Ginsburg.......... -- -- -- 187,500 -- 475,500
James E. de Castro......... 15,000 418,050 547,500 187,500 12,608,775 475,500
Matthew E. Devine.......... -- -- 150,000 93,750 2,874,000 237,750
Kenneth J. O'Keefe......... -- -- -- 150,000 -- 475,500
</TABLE>
- ---------------
(1) Based upon a per share price for Common Stock of $24.50. This price
represents the closing price for the Class A Common Stock of Evergreen on
the Nasdaq National Market System on December 30, 1996.
EMPLOYMENT AGREEMENTS
Ginsburg Employment Agreement
On September 4, 1997, Evergreen and EMCLA entered into a new employment
agreement (the "Ginsburg Employment Agreement") with Mr. Ginsburg, President and
Chief Executive Officer of Chancellor Media, CMHC and CMCLA, to be effective on
the closing date of the Chancellor Merger. The Ginsburg Employment Agreement,
which has a term that extends through September 5, 2002 and which Mr. Ginsburg
may extend for an additional five-year term, provides for an initial annual base
salary of $1,000,000 for the first year of the employment agreement, to be
increased each year by a percentage equal to the percentage change in the
consumer price index during the preceding year. In addition, the Ginsburg
Employment Agreement provides for an annual bonus of up to $3,000,000 based upon
a percentage of the amount by which Chancellor Media exceeds certain annual
performance targets which are defined in the Ginsburg Employment Agreement. The
Ginsburg Employment Agreement provides that, on the closing date of the
Chancellor Merger and on each of the first four anniversaries thereof on which
Mr. Ginsburg remains employed by Chancellor Media, Mr. Ginsburg shall be granted
options to purchase 100,000 shares of Chancellor Media Common Stock. If Mr.
Ginsburg's employment is terminated without "cause" (as defined in the Ginsburg
Employment Agreement) or if Mr. Ginsburg terminates his employment for "good
reason" (as defined in the Ginsburg Employment agreement) prior to the fifth
annual anniversary of the consummation of the Chancellor Merger, Mr. Ginsburg
will receive on such termination date a number of options equal to 500,000 minus
the number of options previously granted to Mr. Ginsburg pursuant to the
preceding sentence prior to such date. In addition, in recognition of Mr.
Ginsburg's rights under his prior employment agreement, the Company granted Mr.
Ginsburg an option to acquire an additional 150,000 shares of Chancellor Media
Common Stock on the closing date of the Chancellor Merger. The Ginsburg
Employment Agreement provides that all options granted pursuant to the Ginsburg
Employment Agreement will be exercisable for ten years from the date of grant of
the option (notwithstanding any termination of employment), at a price per share
equal to the market price for Chancellor Media Common Stock at the close of
trading on the day immediately preceding the date of the grant. The Ginsburg
Employment Agreement provides that, in the event of termination of Mr.
Ginsburg's employment by Chancellor Media without "cause" or by Mr. Ginsburg
with "good reason," the Company shall make a one-time cash payment to Mr.
Ginsburg in a gross amount such that the net payments retained by Mr. Ginsburg
(after payment by the Company of any excise taxes imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended, with respect to such payment) shall
equal $20,000,000. The Ginsburg Employment Agreement further provides that, in
the event of termination of Mr. Ginsburg's employment by reason of expiration or
non-renewal of the Ginsburg Employment Agreement, the Company shall make a
one-time cash payment to Mr. Ginsburg equal to two times the amount of his
annual base salary for the immediately preceding ended contract year. The
Ginsburg Employment Agreement
64
<PAGE> 71
provides that Mr. Ginsburg will have registration rights with respect to all
Chancellor Media Common Stock acquired by Mr. Ginsburg at any time which rights
are no less favorable to Mr. Ginsburg as the registration rights held by Hicks
Muse and its affiliates with respect to the common stock of Chancellor
immediately prior to the consummation of the Chancellor Merger.
de Castro Employment Agreement
On September 4, 1997, Evergreen and EMCLA entered into a new employment
agreement (the "de Castro Employment Agreement") with Mr. de Castro, Co-Chief
Operating Officer of Chancellor Media, CMHC and CMCLA, to be effective on the
closing date of the Chancellor Merger. The de Castro Employment Agreement, which
has a term that extends through September 5, 2002, provides for an initial
annual base salary of $900,000 for the first year of the employment agreement,
to be increased each year by a percentage equal to the percentage change in the
consumer price index during the preceding year. In addition, the de Castro
Employment Agreement provides for an annual bonus of up to $3,000,000 based upon
a percentage of the amount by which Chancellor Media exceeds certain annual
performance targets which are defined in the de Castro Employment Agreement. The
de Castro Employment Agreement provides that, on the closing date of the
Chancellor Merger and on each of the first four anniversaries thereof on which
Mr. de Castro remains employed by Chancellor Media, Mr. de Castro shall be
granted options to purchase 100,000 shares of Chancellor Media Common Stock. If
Mr. de Castro's employment is terminated without "cause" (as defined in the de
Castro Employment Agreement) or if Mr. de Castro terminates his employment for
"good reason" (as defined in the de Castro Employment agreement) prior to the
fifth annual anniversary of the consummation of the Chancellor Merger, Mr. de
Castro will receive on such termination date a number of options equal to
500,000 minus the number of options previously granted to Mr. de Castro pursuant
to the preceding sentence prior to such date. In addition, in recognition of Mr.
de Castro's rights under his prior employment agreement, the Company granted Mr.
de Castro an option to acquire an additional 112,500 shares of Chancellor Media
Common Stock on the closing date of the Chancellor Merger. The de Castro
Employment Agreement provides that all options granted pursuant to the de Castro
Employment Agreement will be exercisable for ten years from the date of grant of
the option (notwithstanding any termination of employment), at a price per share
equal to the market price for Chancellor Media Common Stock at the close of
trading on the day immediately preceding the date of the grant. The de Castro
Employment Agreement provides that, in the event of termination of Mr. de
Castro's employment by Chancellor Media without "cause" or by Mr. de Castro with
"good reason," the Company shall make a one-time cash payment to Mr. de Castro
in a gross amount such that the net payments retained by Mr. de Castro (after
payment by Chancellor Media of any excise taxes imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended, with respect to such payment) shall
equal $5,000,000. The de Castro Employment Agreement further provides that, in
the event of termination of Mr. de Castro's employment by Mr. de Castro for
other than "good reason," Chancellor Media shall continue to pay Mr. de Castro
his applicable base salary through the fifth anniversary of the closing date of
the Chancellor Merger. In such event, Chancellor Media has the right, in return
for the payment at the end of each calendar year until September 5, 2002, of an
annual amount equal to the product of Mr. de Castro's average bonus multiplied
by the fraction of each such calendar year which precedes the fifth anniversary
of the consummation of the Chancellor Merger, to require that Mr. de Castro not
be employed by or perform activities on behalf of any radio broadcasting station
serving the same market as any radio station owned by Chancellor Media and its
subsidiaries. The de Castro Employment Agreement further provides that if Mr. de
Castro's employment is terminated by reason of expiration or non-renewal of the
de Castro Employment Agreement, Chancellor Media shall make a one-time cash
payment to Mr. de Castro equal to two times the amount of his annual base salary
for the immediately preceding contract year.
Devine Employment Agreement
On September 4, 1997, Evergreen and EMCLA entered into a new employment
agreement (the "Devine Employment Agreement") with Mr. Devine, Chief Financial
Officer of Chancellor Media, CMHC and CMCLA, to be effective on the closing date
of the Chancellor Merger. The Devine Employment Agreement, which has a term that
extends through September 5, 2002, provides for an initial annual base salary of
65
<PAGE> 72
$500,000 for the first year of the employment agreement, to be increased each
year by $25,000. In addition, the Devine Employment Agreement provides for an
annual bonus of up to $1,000,000 based upon a percentage of the amount by which
Chancellor Media exceeds certain annual performance targets which are defined in
the Devine Employment Agreement. The Devine Employment Agreement provides that,
on the closing date of the Chancellor Merger and on each of the first four
anniversaries thereof on which Mr. Devine remains employed by Chancellor Media,
Mr. Devine shall be granted options to purchase 75,000 shares of Chancellor
Media Common Stock. If Mr. Devine's employment is terminated without "cause" (as
defined in the Devine Employment Agreement) or if Mr. Devine terminates his
employment for "good reason" (as defined in the Devine Employment Agreement)
prior to the fifth annual anniversary of the consummation of the Chancellor
Merger, Mr. Devine will receive on such termination date a number of options
equal to 375,000 minus the number of options previously granted to Mr. Define
pursuant to the preceding sentence prior to such date. In addition, in
recognition of Mr. Devine's rights under his prior employment agreement, the
Company granted Mr. Devine an option to acquire an additional 56,250 shares of
Chancellor Media Common Stock on the closing date of the Chancellor Merger. The
Devine Employment Agreement provides that all options granted pursuant to the
Devine Employment Agreement will be exercisable for ten years from the date of
grant of the option (notwithstanding any termination of employment), at a price
per share equal to the market price for Chancellor Media Common Stock at the
close of trading on the day immediately preceding the date of the grant. The
Devine Employment Agreement provides that, in the event of termination of Mr.
Devine's employment by Chancellor Media without "cause" or by Mr. Devine with
"good reason," the Company shall make a one-time cash payment to Mr. Devine in a
gross amount such that the net payments retained by Mr. Devine (after payment by
Chancellor Media of any excise taxes imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended, with respect to such payment) shall equal
$2,000,000. The Devine Employment Agreement further provides that, in the event
of termination of Mr. Devine's employment by Mr. Devine for other than "good
reason," Chancellor Media shall continue to pay Mr. Devine his applicable base
salary through the earlier of the fifth anniversary of the closing date of the
Chancellor Merger or the second anniversary of the termination of employment
(the "Cessation Date"). In such event, Chancellor Media also has the right, in
return for the payment at the end of each calendar year until the Cessation Date
of an annual amount equal to the product of Mr. Devine's average bonus
multiplied by the fraction of each such calendar year which precedes the
Cessation Date, to require that Mr. Devine not be employed by or perform
activities on behalf of any radio broadcasting station serving the same market
as any radio station owned by Chancellor Media and its subsidiaries. The Devine
Employment Agreement further provides that if Mr. Devine's employment is
terminated by reason of expiration or non-renewal of the Devine Employment
Agreement, Chancellor Media shall make a one-time cash payment to Mr. Devine
equal to two times the amount of his annual base salary for the immediately
preceding contract year.
Dinetz Employment Agreement
Mr. Dinetz has previously entered into an employment agreement (the "Dinetz
Employment Agreement") with Chancellor and CRBC pursuant to which he served as
President and Chief Executive Officer of Chancellor and CRBC. The Dinetz
Employment Agreement is currently scheduled to expire on December 31, 2000,
unless earlier terminated, and provides for a base salary of $500,000 per year
plus an annual bonus of up to $200,000 based on performance criteria established
by Chancellor's Board of Directors at the beginning of each fiscal year. Each
December 31 during the term of the Dinetz Employment Agreement, Mr. Dinetz's
base salary for the next succeeding year shall be adjusted based upon the
Consumer Price Index, provided that his annual base salary shall never be less
than $500,000. Unless either party gives written notice to the contrary prior to
December 31 of each year the Dinetz Employment Agreement is in effect the
employment agreement will automatically be extended for an additional year so
that, as of each December 31, the remaining term of the Dinetz Employment
Agreement will be five years. The employment agreement also provides for
participation by Mr. Dinetz in all benefit programs maintained by Chancellor or
its subsidiaries and provides for certain life, health and disability insurance
coverage for Mr. Dinetz.
The Dinetz Employment Agreement may be terminated by Chancellor and CRBC at
any time prior to the completion of the five year stated term. If Chancellor and
CRBC terminate the Dinetz Employment Agreement other than for cause (as defined
in the Dinetz Employment Agreement), or if Mr. Dinetz
66
<PAGE> 73
voluntarily terminates the Dinetz Employment Agreement for good reason (as
defined in the Dinetz Employment Agreement), Chancellor and CRBC must pay Mr.
Dinetz severance compensation equal to two years of Mr. Dinetz's base salary;
provided, however, that if the decision to terminate the Dinetz Employment
Agreement results from the failure of Chancellor or CRBC to meet certain
specified financial performance criteria, Mr. Dinetz will be entitled to receive
severance compensation equal to one year of Mr. Dinetz's base salary.
In 1994, pursuant to his former employment agreement with Chancellor, Mr.
Dinetz was granted options (the "Dinetz Options") to purchase 5,976,415 shares
of nonvoting stock, including (i) options vesting equally over five years (from
January 10, 1994) to purchase up to 3,307,722 shares at an exercise price of
$1.00 per share and (ii) options vesting equally over five years (from October
12, 1994) to purchase up to 2,668,582 shares at an exercise price of $1.25 per
share, in each case with such exercise price to increase at a compound rate of
9% per annum. Of the options granted, options for 1,062,004 shares contained a
feature which conditioned their exercise upon CRBC's attaining certain rates of
return ("IRR Options"). In September 1995, CRBC agreed with Mr. Dinetz to amend
the IRR Options to remove the rate of return feature. CRBC further agreed to
amend the exercise price for the Dinetz Options to provide that all options
previously exercisable at $1.00 per share will be exercisable at $1.25 per share
and that all options previously exercisable at $1.25 per share will be
exercisable at $1.40 per share. The Dinetz Options were also amended to remove
the annual compounding of the exercise price. In accordance with their terms,
the Dinetz Options were adjusted in connection with the recapitalization of
Chancellor's common stock immediately prior to the consummation of the initial
public offering of Chancellor's Class A Common Stock. In addition, on February
9, 1996, Mr. Dinetz was granted options to purchase 75,000 shares of
Chancellor's Class A Common Stock pursuant to Chancellor's Stock Award Plan.
The Company expects to honor the terms of Mr. Dinetz' employment agreement
in connection with his change of position on September 22, 1997. See "Management
and Board of Directors -- Steven Dinetz" above.
O'Keefe Employment Agreement
In February of 1996, Evergreen entered into an employment agreement (the
"O'Keefe Employment Agreement") with Mr. O'Keefe that has a term through
February 28, 1999 and provides for an annual base salary beginning at $300,000
in 1996 and increasing incrementally to $350,000 in 1998. Mr. O'Keefe was
nominated for election to the Board of Directors of Evergreen pursuant to the
terms of his employment agreement. In addition, the agreement provides for Mr.
O'Keefe to receive an annual incentive bonus based upon a percentage of the
amount by which Evergreen exceeds certain annual performance targets as defined
in the agreement. The agreement also provides that Mr. O'Keefe is eligible for
certain options to purchase Common Stock. Pursuant to the agreement, Mr. O'Keefe
was awarded options to purchase 150,000 shares of Common Stock. The stock
options vest and become exercisable subject to Mr. O'Keefe's continued
employment by Evergreen through February 28, 1999. However, Mr. O'Keefe may be
eligible to exercise the options on a pro rata basis in the event he is
terminated prior to February 28, 1999 upon certain events specified in his
employment agreement, including Mr. O'Keefe's death or disability, a change in
control of Evergreen, termination without cause and a material breach of the
employment agreement by Evergreen leading to the resignation of Mr. O'Keefe. The
agreement terminates upon the death of Mr. O'Keefe and may be terminated by
Evergreen upon the disability of Mr. O'Keefe or for or without "cause" (as
defined in the agreement). During the term of the agreement, Mr. O'Keefe is
prohibited from engaging in certain activities competitive with the business of
Evergreen. However, with the approval of Evergreen, Mr. O'Keefe may engage in
activities not directly competitive with the business of Evergreen as long as
such activities do not materially interfere with Mr. O'Keefe's employment
obligations. On March 1, 1997, Evergreen and Mr. O'Keefe amended the O'Keefe
Employment Agreement in order to make certain provisions of the O'Keefe
Employment Agreement comparable to those contained in Mr. de Castro's and Mr.
Devine's former employment agreement.
On September 4, 1997, Evergreen and EMCLA entered into an employment
agreement (the "O'Keefe Amendment") with Mr. O'Keefe, Executive Vice
President -- Operations of Chancellor Media, CMHC and
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<PAGE> 74
CMCLA. As a result of the O'Keefe Amendment, the O'Keefe Employment Agreement is
to expire as of December 31, 1997, and the O'Keefe Amendment is intended to be
effective on January 1, 1998. The O'Keefe Amendment, which has a term through
December 31, 2000, provides for an initial annual base salary of $500,000 for
the first year of the employment agreement, to be increased each year by
$25,000. In addition, the O'Keefe Amendment provides for an annual bonus of up
to $600,000, based upon a percentage of the amount by which Chancellor Media
exceeds certain annual performance targets which are defined in the O'Keefe
Amendment. The O'Keefe Amendment provides that, on January 1, 1998, 1999 and
2000, assuming that Mr. O'Keefe remains employed by Chancellor Media on such
dates, Mr. O'Keefe shall be granted options to purchase 50,000 shares of
Chancellor Media Common Stock. Furthermore, with respect to the option to
purchase 150,000 shares of Chancellor Media Common Stock granted under the
O'Keefe Employment Agreement, (i) all such options will become exercisable on
February 28, 1999 if Mr. O'Keefe remains employed by Chancellor Media on such
date, (ii) if Mr. O'Keefe's employment is terminated as a result of Mr.
O'Keefe's death or disability or resignation by Mr. O'Keefe following a material
breach of the O'Keefe Amendment by Chancellor Media, a prorated portion of such
options will become exercisable and (iii) if Mr. O'Keefe's employment is
terminated without "cause" (as defined in the O'Keefe Amendment) or there is a
"change of control" (as defined in the O'Keefe Amendment), all such options
shall become exercisable. The O'Keefe Amendment provides that all options
granted pursuant to the O'Keefe Amendment will be exercisable for seven years
from the date of grant of the option, at a price per share equal to the market
price for Chancellor Media Common Stock on the date of the grant. The O'Keefe
Amendment provides that, in the event of termination of Mr. O'Keefe's employment
by Chancellor Media without "cause," Chancellor Media shall pay Mr. O'Keefe his
base salary and a prorated annual bonus and provide health and life insurance
coverage until the earlier of the expiration of the term of the O'Keefe
Amendment or the date on which Mr. O'Keefe becomes employed in a position
providing similar compensation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The members of the compensation committee of Chancellor Media, CMHC and
CMCLA have not yet been determined. It is expected that the members of the
compensation committee of Chancellor Media CMHC and CMCLA will be determined at
an upcoming meeting of the Board of Directors of Chancellor Media, CMHC and
CMCLA.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
All of the common stock of CMCLA is held beneficially and of record by
CMHC. All of the common stock of CMHC is held beneficially and of record by
Chancellor Media. The following table lists information regarding beneficial
ownership of Chancellor Media Common Stock by directors and executive officers
of Chancellor Media and their affiliates, as well as all directors and executive
officers as a group. As a result of the consummation of the Chancellor Merger,
Chancellor Media is uncertain as to the status of ownership of the former
stockholders of Evergreen and Chancellor that beneficially owned 5% or more of
the respective classes of common stock, which 5% stockholders are not directors
or executive officers of Chancellor Media.
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<PAGE> 75
Accordingly, Chancellor Media believes that such information would not be useful
to investors, and no information regarding such non-affiliated stockholders is
attempted to be presented below.
<TABLE>
<CAPTION>
NAME OF STOCKHOLDER SHARES PERCENT(1)
------------------- ------ ----------
<S> <C> <C>
Scott K. Ginsburg.......................................... 2,364,066(2) 4.4%
James E. de Castro......................................... 660,000(3) *
Steven Dinetz.............................................. 432,493(4) *
Matthew E. Devine.......................................... 281,250(5) *
Thomas O. Hicks............................................ 9,363,525(6) 15.7%
Perry J. Lewis............................................. 59,274(7) *
Thomas J. Hodson........................................... 7,500(8) *
Eric C. Neuman............................................. 909 *
John H. Massey............................................. 21,212(9) *
Jeffrey A. Marcus.......................................... 43,939(10) *
Lawrence D. Stuart, Jr. ................................... 4,955 *
Hicks, Muse Affiliates..................................... 9,363,525(11) 15.7%
All directors and executive officers as a group............ 13,164,123(12) 21.5%
</TABLE>
- ---------------
* Less than one percent.
(1) Assumes that 59,613,500 primary shares of Chancellor Media Common Stock
were issued and outstanding immediately after consummation of the
Chancellor Merger.
(2) Includes option to purchase 250,000 shares and 7,200 shares that are held
by Mr. Ginsburg as custodian for his children.
(3) Consists of options to purchase 660,000 shares.
(4) Includes (i) options to purchase 424,175 shares, (ii) 545 shares held by an
individual retirement account for the benefit of Mr. Dinetz and (iii) 500
shares held by Mr. Dinetz's daughter. Mr. Dinetz disclaims beneficial
ownership of the shares of Chancellor Media Common Stock that are not owned
by him of record.
(5) Consists of options to purchase 281,250 shares.
(6) Includes 312,423 shares owned of record by Mr. Hicks, 173,376 shares owned
of record by Mr. Hicks as trustee for certain trusts of which his children
are beneficiaries and 3,050 shares owned of record by Mr. Hicks as
co-trustee of a trust for the benefit of unrelated parties. Also includes
1,224,376 shares owned of record by the Chancellor Business Trust and
7,650,289 shares owned by five limited partnerships of which the ultimate
general partners are entities controlled by Mr. Hicks or Hicks Muse. Mr.
Hicks is the controlling stockholder of Hicks Muse and serves as Chairman
of the Board, President, Chief Executive Officer, Chief Operating Officer
and Secretary of Hicks Muse. Accordingly, Mr. Hicks may be deemed to be the
beneficial owner of all or a portion of the stock owned of record by such
limited partnerships. Mr. Hicks disclaims beneficial ownership of shares of
stock not owned of record by him.
(7) Consists of 51,774 shares owned of record by Mr. Lewis and options to
purchase 7,500 shares.
(8) Consists of options to purchase 7,500 shares.
(9) Consists of options to purchase 12,121 shares and 9,091 shares held by Mr.
Massey's wife as her separate property.
(10) Includes options to purchase 12,121 shares.
(11) Includes 312,423 shares owned of record by Thomas O. Hicks, 173,376 shares
owned by Mr. Hicks as trustee for certain trusts of which his children are
beneficiaries, 3,050 shares owned of record by Mr. Hicks as co-trustee of a
trust for the benefit of unrelated parties, 1,224,376 shares owned of
record by the Chancellor Business Trust and 7,650,289 shares owned of
record by five limited partnerships of which the ultimate general partners
are entities controlled by Mr. Hicks or Hicks Muse. Mr. Hicks is the
controlling stockholder of Hicks Muse and serves as Chairman of the Board,
President, Chief
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<PAGE> 76
Executive Officer, Chief Operating Officer and Secretary of Hicks Muse.
Accordingly, Mr. Hicks may be deemed to be the beneficial owner of all or a
portion of the stock owned of record by such limited partnerships. John R.
Muse, Charles W. Tate, Jack D. Furst, Lawrence D. Stuart, Jr., Michael J.
Levitt and Alan B. Menkes are officers, directors and minority stockholders
of Hicks Muse and as such may be deemed to share with Mr. Hicks the power
to vote or dispose of shares of stock to be held by such partnerships.
Messrs. Hicks, Muse, Tate, Furst, Stuart, Levitt and Menkes disclaim the
existence of a group and each of them disclaims beneficial ownership of
shares of stock not owned of record by him.
(12) Includes options to purchase 1,654,667 shares.
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<PAGE> 77
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Financial Monitoring and Oversight Agreement. Chancellor Media, CMHC and
CMCLA are subject to a financial monitoring and oversight agreement, dated April
1, 1996, as amended on September 4, 1997, (the "Financial Monitoring and
Oversight Agreement") with Hicks, Muse & Co. Partners, L.P. ("Hicks Muse
Partners"), an affiliate of Hicks Muse. Pursuant thereto, the Company pays to
Hicks Muse Partners an annual fee adjustable upward or downward at the end of
each fiscal year to an amount not less than $1.0 million, subject to increase,
but not decrease, based upon changes in the Consumer Price Index. Hicks Muse
Partners is also entitled to reimbursement for any out-of-pocket expenses
incurred by it in connection with rendering services under the Financial
Monitoring and Oversight Agreement. In addition, Hicks Muse Partners, its
affiliates and shareholders, and their respective directors, officers, agents,
employees and affiliates are indemnified from and against all claims, actions,
proceedings, demands, liabilities, damages, judgments, assessments, losses and
costs, including fees and expenses, arising out of or in connection with the
services rendered by Hicks Muse Partners in connection with the Financial
Monitoring and Oversight Agreement.
The Financial Monitoring and Oversight Agreement provides that the
agreement will terminate at such time as Thomas O. Hicks and his affiliates
collectively cease to beneficially own at least two-thirds of the number of
shares of Common Stock beneficially owned by them, collectively, immediately
following the Parent Merger Effective Time.
Termination of Financial Advisory Agreement. In connection with the
consummation of the Chancellor Merger Agreement, a Financial Advisory Agreement
among Chancellor, CRBC and HM2/Management Partners, L.P. ("HM2/Management"), an
affiliate of Hicks Muse, was terminated. In consideration thereof, in lieu of
any payments required to be made under the Financial Advisory Agreement in
respect of the transactions contemplated by the Chancellor Merger Agreement,
HM2/Management was paid a fee of $10.0 million in cash upon consummation of the
Chancellor Merger Agreement.
Registration Rights. Chancellor Media is subject to that certain Amended
and Restated Stockholders Agreement, dated as of February 14, 1996, as amended
on September 4, 1997 (the "Chancellor Stockholders Agreement"), among Chancellor
and certain holders of the Common Stock held by former stockholders of
Chancellor, which provides for certain registration rights for the shares of
Common Stock held by such holders. In addition, Chancellor Media is subject to
two additional registration rights agreements relating to the Common Stock held
by former stockholders of Chancellor (collectively with the Chancellor
Stockholders Agreement, the "Registration Rights Agreements"). Each of the
Registration Rights Agreements relates to shares of Common Stock held by certain
affiliates of Hicks Muse.
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<PAGE> 78
DESCRIPTION OF THE EXCHANGE NOTES
The Exchange Notes will be issued under an indenture, dated as of June 24,
1997, by and among CRBC, the Guarantors named therein and U.S. Trust Company of
Texas, N.A., as trustee (the "Trustee"), as supplemented by that First
Supplemental Indenture, dated as of September 5, 1997, by and among the Company,
the Guarantors named therein and the Trustee (as supplemented, the "Indenture").
A copy of the Indenture may be obtained from the Company upon written request.
The following summary of all of the provisions of the Indenture considered by
the Company to be material to a prospective investor in the Exchange Notes does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, the Trust Indenture Act of 1939, as amended (the "TIA"), and to
all of the provisions of the Indenture, including the definitions of certain
terms therein, and those terms made a part of the Indenture by reference to the
TIA as in effect on the date of the Indenture. The definitions of certain terms
used in the following summary are set forth below under "-- Certain
Definitions." The Trustee also serves as trustee under (i) the 9 3/8% Indenture,
(ii) the Indenture, dated February 26, 1996, between CRBC and the Trustee, as
supplemented by that First Supplemental Indenture, dated September 5, 1997,
between the Company and the Trustee, governing the 12 1/4% Subordinated Exchange
Debentures due 2008 of the Company and (iii) the Indenture, dated January 23,
1997, between CRBC and the Trustee, as supplemented by that First Supplemental
Indenture, dated September 5, 1997, between the Company and the Trustee,
governing the 12% Subordinated Exchange Debentures due 2009 of the Company.
The Exchange Notes will be unsecured obligations of the Company and will
rank pari passu in right of payment to the 9 3/8% Notes and will be subordinated
in right of payment to all Senior Debt of the Company. The Exchange Notes will
be guaranteed on a senior subordinated basis by the Guarantors.
The Exchange Notes will be issued in fully registered form only, without
coupons, in denominations of $1,000 and integral multiples thereof. Initially,
the Trustee will act as paying agent and registrar for the Exchange Notes. The
Exchange Notes may be presented for registration or transfer and exchange at the
offices of the registrar, which initially will be the Trustee's corporate trust
office. The Company may change any paying agent and registrar without notice to
the holders. The Company will pay principal (and premium, if any) on the
Exchange Notes at the Trustee's corporate office in New York, New York. At the
Company's option, such amounts may be paid at the Trustee's corporate trust
office or by check mailed to the registered address of the holders.
PRINCIPAL, MATURITY AND INTEREST
The Exchange Notes will be limited to $200,000,000 aggregate principal
amount and will mature on June 15, 2007. Interest on the Exchange Notes will
accrue at the rate of 8 3/4% per annum and will be payable semiannually on each
June 15 and December 15, commencing on December 15, 1997, to the persons who are
registered holders at the close of business on the June 1 and December 1
immediately preceding the applicable interest payment date. Interest on the
Exchange Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the Issue Date. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
OPTIONAL REDEMPTION
The Exchange Notes will be redeemable, at the Company's option, in whole at
any time or in part from time to time, on and after June 15, 2002, at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the twelve-month period commencing on June 15 of the years
set forth below, plus, in each case, accrued and unpaid interest thereon to the
date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C> <C>
2002............................................................. 104.375%
2003............................................................. 102.917
2004............................................................. 101.458
2005 and thereafter.............................................. 100.000
</TABLE>
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<PAGE> 79
In addition, on or prior to June 15, 2000, the Company may, at its option,
use the net cash proceeds of one or more Public Equity Offerings (as defined
below) to redeem the Exchange Notes, in part, at a redemption price equal to
108.75% of the principal amount thereof plus accrued and unpaid interest thereon
to the date of redemption; provided, however, that after any such redemption the
aggregate principal amount of the Exchange Notes outstanding must equal at least
75% of the aggregate principal amount of the Exchange Notes originally issued in
the Exchange Offer. In order to effect a redemption with proceeds of a Public
Equity Offering, the Company shall send the redemption notice in the manner
specified in the Indenture not later than 60 days after the consummation of such
Public Equity Offering.
In addition, at any time on or prior to June 15, 2000, the Exchange Notes
may also be redeemed as a whole at the option of the Company upon the occurrence
of a Change of Control (as defined below), upon not less than 30 nor more than
60 days prior notice (but in no event more than 90 days after the occurrence of
such Change of Control) mailed by first-class mail to each holder's registered
address, at a redemption price equal to 100% of the principal amount thereof
plus the Applicable Premium (as defined below) as of, and accrued and unpaid
interest, if any, to, the date of redemption (the "Redemption Date") (subject to
the right of holders of record on the relevant record date to receive interest
due on the relevant interest payment date in respect of then outstanding
Exchange Notes).
"Applicable Premium" means, with respect to an Exchange Note at any
Redemption Date, the greater of (i) 1.0% of the principal amount of such
Exchange Note and (ii) (a) the present value of all remaining required interest
and principal payments due on such Exchange Note and all premium payments
relating thereto assuming a redemption date of June 15, 2002, computed using a
discount rate equal to the Treasury Rate (as defined below) plus 100 basis
points minus (b) the then outstanding principal amount of such Exchange Note
minus (c) accrued interest paid on the redemption date.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519)
("Statistical Release") which has become publicly available at least two
business days prior to the Redemption Date (or, if such Statistical Release is
no longer published, any publicly available source or similar market data)) most
nearly equal to the period from the Redemption Date to June 15, 2002; provided,
however, that if the period from the Redemption Date to June 15, 2002 is not
equal to the constant maturity of a United States Treasury security for which a
weekly average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the period from the Redemption Date to June 15, 2002 is
less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
Selection. In the case of any partial redemption, selection of the Exchange
Notes for redemption will be made by the Trustee on a pro rata basis, by lot or
by such other method as the Trustee in its sole discretion shall deem to be fair
and appropriate, although no Exchange Note of $1,000 in original principal
amount or less will be redeemed in part. If any Exchange Note is to be redeemed
in part only, the notice of redemption relating to such Exchange Note shall
state the portion of the principal amount thereof to be redeemed. A new Exchange
Note in principal amount equal to the unredeemed portion thereof will be issued
in the name of the holder thereof upon cancellation of the original Exchange
Note.
The Senior Credit Facility restricts the Company's ability to optionally
redeem the Exchange Notes.
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control,
each holder may have the right to require that the Company repurchase all or a
portion of such holder's Exchange Notes pursuant to the offer described below
(the "Change of Control Offer"), at a purchase price equal to 101% of the
principal amount thereof plus accrued interest, if any, to the date of
repurchase.
The Indenture provides that, prior to the mailing of the notice referred to
below, but in any event within 30 days following the date on which a Change of
Control occurs, the Company covenants to (i) repay in full
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<PAGE> 80
all Indebtedness under the Credit Agreement (and terminate all commitments
thereunder) or offer to repay in full all such Indebtedness (and terminate all
such commitments) and to repay the Indebtedness owed to (and terminate the
commitments of) each lender which has accepted such offer or (ii) obtain the
requisite consents under the Credit Agreement to permit the repurchase of the
Exchange Notes as provided below. The Company will first comply with the
covenant in the preceding sentence before it will be required to repurchase
Exchange Notes pursuant to the provisions described below; provided that the
Company's failure to comply with the covenant described in the preceding
sentence shall constitute an Event of Default described under clause (iii) under
"-- Events of Default."
Within 30 days following the date upon which a Change of Control occurs,
the Company must send, by first class mail, a notice to each holder, with a copy
to the Trustee, which notice shall govern the terms of the Change of Control
Offer. Such notice will state, among other things, the purchase date, which must
be no earlier than 30 days nor later than 45 days from the date such notice is
mailed, other than as may be required by law (the "Change of Control Payment
Date"). Upon compliance by the Company with the covenant described in the
immediately preceding paragraph, the Company's failure to make a Change of
Control Offer in accordance with this "Change of Control" covenant, and, upon
the making of a Change of Control Offer, the failure of the Company to pay, on
or before the Change of Control Payment Date, the purchase price for the
Exchange Notes validly tendered pursuant to the Change of Control Offer, shall
constitute an Event of Default described under clauses (iii) and (ii),
respectively, under "-- Events of Default." Holders electing to have a Exchange
Note purchased pursuant to a Change of Control Offer will be required to
surrender the Exchange Note, properly endorsed for transfer together with such
other customary documents as the Company may reasonably request, to the paying
agent at the address specified in the notice prior to the close of business on
the business day prior to the Change of Control Payment Date.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of Exchange Notes pursuant to a Change of Control Offer.
This "Change of Control" covenant will not apply in the event of (i)
certain transactions with Permitted Holders (as defined below) and (ii) changes
in a majority of the Board of Directors of Chancellor Media, CMHC or CMCLA so
long as a majority of each such Board of Directors continues to consist of
Continuing Directors (as defined below). In addition, this covenant is not
intended to afford holders of the Exchange Notes protection in the event of
certain highly leveraged transactions, reorganizations, restructurings, mergers
and other similar transactions that might adversely affect the holders of the
Exchange Notes but would not constitute a Change of Control. However, the
Indenture contains limitations on the ability of the Company to incur additional
Indebtedness and to engage in certain mergers, consolidations and sales of
assets, whether or not a Change of Control is involved. See "-- Certain
Covenants -- Limitation on Incurrence of Additional Indebtedness," "-- Certain
Covenants -- Limitation on Asset Sales," "-- Certain Covenants -- Limitation on
Asset Swaps" and "-- Certain Covenants -- Merger, Consolidation and Sale of
Assets."
If a Change of Control were to occur, there can be no assurance that the
Company would have sufficient funds to pay the purchase price for all Exchange
Notes that the Company might be required to purchase. In the event that the
Company were required to purchase Exchange Notes pursuant to a Change of Control
Offer, the Company expects that it would need to seek third-party financing to
the extent it does not have available funds to meet its purchase obligations.
However, there can be no assurance that the Company would be able to obtain such
financing on favorable terms, if at all. In addition, the Senior Credit Facility
restricts the Company's ability to repurchase the Exchange Notes, including
pursuant to a Change of Control Offer. See "Description of
Indebtedness -- Senior Credit Facility."
With respect to the sale of assets, the phrase "all or substantially all"
as used in the Indenture varies according to the facts and circumstances of the
subject transaction, has no clearly established meaning under relevant law and
is subject to judicial interpretation. Accordingly, in certain circumstances
there may be a degree of uncertainty in ascertaining whether a particular
transaction would involve a disposition of "all or substantially all" of the
assets of a person and therefore it may be unclear whether a Change of Control
has occurred and whether the Exchange Notes are subject to a Change of Control
Offer.
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<PAGE> 81
Without the consent of each holder of the Exchange Notes affected thereby,
after the mailing of the notice of the Change of Control Offer, no amendment to
the Indenture may, directly or indirectly, affect the Company's obligation to
purchase the Exchange Notes or amend, modify or change the obligation of the
Company to consummate a Change of Control Offer or waive any default in the
performance thereof or modify any of the provisions or definitions with respect
to any such offer. In addition, the Trustee may not waive the right of any
holder of the Exchange Notes to require the repurchase of his or her Exchange
Notes upon a Change of Control.
SUBORDINATION
The payment of all Obligations on the Exchange Notes is subordinated and
junior in right of payment to the prior payment in full in cash or Cash
Equivalents (or such payment duly provided for to the satisfaction of the
holders of Senior Debt) of all Obligations on Senior Debt. Upon any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, to creditors upon any liquidation, dissolution, winding
up, reorganization, assignment for the benefit of creditors or marshalling of
assets of the Company or in a bankruptcy, reorganization, insolvency,
receivership or other similar proceeding relating to the Company or its
property, whether voluntary or involuntary, all Obligations due or to become due
upon all Senior Debt will first be paid in full in cash or Cash Equivalents (or
such payment duly provided for to the satisfaction of the holders of Senior
Debt) before any payment or distribution of any kind or character is made on
account of any Obligations on the Exchange Notes, or for the acquisition of any
of the Exchange Notes for cash or property or otherwise. If any default occurs
and is continuing in the payment when due, whether at maturity, upon any
redemption, by declaration or otherwise, of any principal of, or interest on, or
any other amounts owing with respect to any Senior Debt, no payment of any kind
or character (except (i) in Qualified Capital Stock issued by the Company to pay
interest on the Exchange Notes or issued in exchange for the Exchange Notes,
(ii) in securities substantially identical to the Exchange Notes issued by the
Company in payment of interest accrued thereon or (iii) in securities issued by
the Company which are subordinated to the Senior Debt at least to the same
extent as the Exchange Notes and having a Weighted Average Life to Maturity at
least equal to the remaining Weighted Average Life to Maturity of the Exchange
Notes (the issuance of such subordinated securities to be consented to by the
holders of at least a majority of the outstanding amount of Senior Debt
consisting of each class of Designated Senior Debt then outstanding, which
subordinated securities will be issued in exchange for outstanding Exchange
Notes or to pay interest accrued on outstanding Exchange Notes)), will be made
by the Company or any other Person on behalf of the Company with respect to any
Obligations on the Exchange Notes or to acquire any of the Exchange Notes for
cash or property or otherwise. In addition, if any other event of default occurs
and is continuing (or if such an event of default would occur upon any payment
with respect to the Exchange Notes or would arise upon the passage of time as a
result of such payment) with respect to any Designated Senior Debt (as such
event of default is defined in the instrument creating or evidencing such
Designated Senior Debt) and such event of default permits the holders of such
Designated Senior Debt then outstanding to accelerate the maturity thereof and
if the Representative for the respective issue of Designated Senior Debt gives
written notice of the event of default to the Trustee (a "Default Notice"),
then, unless and until all such events of default have been cured or waived or
have ceased to exist or the Company and the Trustee receive notice from the
Representative for the respective issue of Designated Senior Debt terminating
the Blockage Period (as defined below), during the 180 days after the delivery
of such Default Notice (the "Blockage Period"), neither the Company nor any
other Person on behalf of the Company will make any payment of any kind or
character (except (i) in Qualified Capital Stock issued by the Company to pay
interest on the Exchange Notes or issued in exchange for the Exchange Notes,
(ii) in securities substantially identical to the Exchange Notes issued by the
Company in payment of interest accrued thereon or (iii) in securities issued by
the Company which are subordinated to the Senior Debt at least to the same
extent as the Exchange Notes and having a Weighted Average Life to Maturity at
least equal to the remaining Weighted Average Life to Maturity of the Exchange
Notes (the issuance of such subordinated securities to be consented to by the
holders of at least a majority of the outstanding amount of Senior Debt
consisting of each class of Designated Senior Debt then outstanding, which
subordinated securities will be issued in exchange for outstanding Exchange
Notes or to pay interest accrued on outstanding Exchange Notes)) with respect to
any Obligations on the Exchange Notes or to
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<PAGE> 82
acquire any of the Exchange Notes for cash or property or otherwise.
Notwithstanding anything herein to the contrary, in no event will a Blockage
Period extend beyond 180 days from the date the payment on the Exchange Notes
was due and only one such Blockage Period may be commenced within any 360
consecutive days. No event of default which existed or was continuing on the
date of the commencement of any Blockage Period with respect to the Designated
Senior Debt initiating such Blockage Period shall be, or be made, the basis for
commencement of a second Blockage Period by the Representative of such
Designated Senior Debt whether or not within a period of 360 consecutive days,
unless such event of default has been cured or waived for a period of not less
than 90 consecutive days (it being acknowledged that any subsequent action, or
any breach of any financial covenants for a period commencing after the date of
commencement of such Blockage Period that, in either case, would give rise to an
event of default pursuant to any provision under which an event of default
previously existed or was continuing, shall constitute a new event of default
for this purpose).
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Debt, including
the holders of the Exchange Notes, may recover less, ratably, than holders of
Senior Debt.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants.
Limitation on Incurrence of Additional Indebtedness. The Indenture provides
that neither the Company nor any of its Subsidiaries will, directly or
indirectly, create, incur, assume, guarantee, acquire or become liable for,
contingently or otherwise (collectively "incur"), any Indebtedness other than
Permitted Indebtedness. Notwithstanding the foregoing limitations, the Company
or any Subsidiary may incur Indebtedness if on the date of the incurrence of
such Indebtedness, after giving effect to the incurrence of such Indebtedness
and the receipt and application of the proceeds thereof, the Company's Leverage
Ratio is less than 7.0 to 1.
Limitation on Restricted Payments. The Indenture provides that neither the
Company nor any of its Subsidiaries will, directly or indirectly, (a) declare or
pay any dividend or make any distribution (other than dividends or distributions
payable in Qualified Capital Stock of the Company) on shares of the Company's
Capital Stock, (b) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any warrants, rights or options to acquire
shares of any class of such Capital Stock, other than the exchange of such
Capital Stock or any warrants, rights or options to acquire shares of any class
of such Capital Stock for Qualified Capital Stock or warrants, rights or options
to acquire Qualified Capital Stock, (c) make any principal payment on, purchase,
defease, redeem, prepay, decrease or otherwise acquire or retire for value,
prior to any scheduled final maturity, scheduled repayment or scheduled sinking
fund payment, any Indebtedness of the Company or its Subsidiaries that is
subordinate or junior in right of payment to the Exchange Notes, or (d) make any
Investment (other than Permitted Investments) (each of the foregoing prohibited
actions set forth in clauses (a), (b), (c) and (d) being referred to as a
"Restricted Payment"), if, at the time of such Restricted Payment or immediately
after giving effect thereto, (i) a Default or an Event of Default has occurred
and is continuing, (ii) the Company is not able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in compliance with
the "Limitation on Incurrence of Additional Indebtedness" covenant, or (iii) the
aggregate amount of Restricted Payments made subsequent to the 9 3/8% Notes
Issue Date (the amount expended for such purposes, if other than in cash, being
the fair market value of such property as determined by the Board of Directors
of the Company in good faith) exceeds the sum of: (A) (x)100% of the aggregate
Consolidated EBITDA of the Company (or, in the event such Consolidated EBITDA
shall be a deficit, minus 100% of such deficit) accrued subsequent to the 9 3/8%
Notes Issue Date to the most recent date for which financial information is
available to the Company, taken as one accounting period, less (y) 1.4 times
Consolidated Interest Expense for the same period plus (B) 100% of the aggregate
net proceeds, including the fair market value of property other than cash as
determined by the Board of Directors of the Company in good faith, received by
the Company from any Person (other than a Subsidiary of the Company) from the
issuance and sale on or after the 9 3/8% Notes Issue Date of Qualified Capital
Stock of the Company (excluding any net proceeds from issuances and sales
financed directly or indirectly using funds borrowed from the Company or any
Subsidiary of the Company, until and to the extent such borrowing is repaid, but
including the proceeds from the issuance and sale of any securities convertible
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<PAGE> 83
into or exchangeable for Qualified Capital Stock to the extent such securities
are so converted or exchanged and including any additional proceeds received by
the Company upon such conversion or exchange) plus (C) without duplication of
any amounts included in clause (iii)(B) above, 100% of the aggregate net
proceeds, including the fair market value of property other than cash (valued as
provided in clause (iii)(B) above), received by the Company as a capital
contribution (excluding any net proceeds from a Public Equity Offering by
Chancellor to the extent used to redeem the Exchange Notes) on or after the
9 3/8% Notes Issue Date.
Notwithstanding the foregoing, these provisions do not prohibit: (1) the
payment of any dividend or the making of any distribution within 60 days after
the date of its declaration if the dividend or distribution would have been
permitted on the date of declaration; (2) the acquisition of Capital Stock or
warrants, options or other rights to acquire Capital Stock either (i) solely in
exchange for shares of Qualified Capital Stock or warrants, options or other
rights to acquire Qualified Capital Stock, or (ii) through the application of
the net proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of the Company) of shares of Qualified Capital Stock or warrants,
options or other rights to acquire Qualified Capital Stock; (3) the acquisition
of Indebtedness of the Company that is subordinate or junior in right of payment
to the Exchange Notes, either (i) solely in exchange for shares of Qualified
Capital Stock (or warrants, options or other rights to acquire Qualified Capital
Stock) or for Indebtedness of the Company which is subordinate or junior in
right of payment to the Exchange Notes, at least to the extent that the
Indebtedness being acquired is subordinated to the Exchange Notes and has a
Weighted Average Life to Maturity no less than that of the Indebtedness being
acquired or (ii) through the application of the net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Company) of shares
of Qualified Capital Stock (or warrants, options or other rights to acquire
Qualified Capital Stock) or Indebtedness of the Company which is subordinate or
junior in right of payment to the Exchange Notes, at least to the extent that
the Indebtedness being acquired is subordinated to the Exchange Notes and has a
Weighted Average Life to Maturity no less than that of the Indebtedness being
refinanced; (4) payments by the Company to fund the operating expenses of CMHC
in an amount not to exceed $500,000 per annum; (5) payments by the Company to
CMHC to enable CMHC to make payments pursuant to (a) the Financial Monitoring
and Oversight Agreements or (b) the Tax Sharing Agreement; (6) payments by the
Company to repurchase, or enable CMHC to repurchase, Capital Stock or other
securities of CMHC from employees of CMHC or the Company in an aggregate amount
not to exceed $5.0 million subsequent to the 9 3/8% Notes Issue Date; (7)
payments to enable CMHC to redeem or repurchase stock purchase or similar rights
in an aggregate amount not to exceed $500,000 subsequent to the 9 3/8% Notes
Issue Date; (8) payments, not to exceed $100,000 in the aggregate subsequent to
the 9 3/8% Notes Issue Date, to enable CMHC to make cash payments to holders of
its Capital Stock in lieu of the issuance of fractional shares of its Capital
Stock; and (9) payments made pursuant to any merger, consolidation or sale of
assets effected in accordance with the "Merger, Consolidation and Sale of
Assets" covenant; provided, however, that no such payment may be made pursuant
to this clause (9) unless, after giving effect to such transaction (and the
incurrence of any Indebtedness in connection therewith and the use of the
proceeds thereof), the Company would be able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant such that after
incurring that $1.00 of additional Indebtedness, the Leverage Ratio would be
less than 5.5 to 1; provided, however, that in the case of clauses (5)(a), (6),
(7), (8) and (9), no Default or Event of Default shall have occurred or be
continuing at the time of such payment or as a result thereof. In determining
the aggregate amount of Restricted Payments made subsequent to the Issue Date,
amounts expended pursuant to clauses (1), (2), (3) (but only to the extent that
Indebtedness is acquired in exchange for, or with the net proceeds from, the
issuance of Qualified Capital Stock or warrants, options or other rights to
acquire Qualified Capital Stock), (5)(a), (6), (7), (8) and (9) shall be
included in such calculation.
Limitation on Asset Sales. The Indenture provides that neither the Company
nor any of its Subsidiaries will consummate an Asset Sale unless (i) the Company
or the applicable Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the fair market value of the assets
sold or otherwise disposed of (as determined in good faith by management of the
Company or, if such Asset Sale involves consideration in excess of $2,500,000 by
the Board of Directors, as evidenced by a board resolution), (ii) at least 75%
of the consideration received by the Company or the Subsidiary, as the case may
be, from
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such Asset Sale is cash or Cash Equivalents (other than in the case where the
Company is exchanging all or substantially all the assets of one or more
broadcast businesses operated by the Company (including by way of the transfer
of capital stock) for all or substantially all the assets (including by way of
the transfer of capital stock) constituting one or more broadcast businesses
operated by another Person, in which event the foregoing requirement with
respect to the receipt of cash or Cash Equivalents shall not apply) and is
received at the time of such disposition and (iii) upon the consummation of an
Asset Sale, the Company applies, or causes such Subsidiary to apply, such Net
Cash Proceeds within 180 days of receipt thereof either (A) to repay the
principal of any Senior Debt (and, to the extent such Senior Debt relates to
principal under a revolving credit or similar facility, to obtain a
corresponding reduction in the commitments thereunder), (B) to reinvest, or to
be contractually committed to reinvest pursuant to a binding agreement, in
Productive Assets and, in the latter case, to have so reinvested within 360 days
of the date of receipt of such Net Cash Proceeds, or (C) to purchase Exchange
Notes and 9 3/8% Notes (pro rata among the holders of Exchange Notes and 9 3/8%
Notes tendered to the Company for purchase, based upon the aggregate principal
amount of the Exchange Notes and the 9 3/8% Notes so tendered) tendered to the
Company for purchase at a price equal to 100% of the principal amount thereof,
plus accrued interest thereon to the date of purchase, pursuant to an offer to
purchase made by the Company as set forth below (a "Net Proceeds Offer");
provided, however, that, prior to making any Net Proceeds Offer, the Company
shall, to the extent required pursuant to the 9 3/8% Indenture as in effect on
the Issue Date, offer to use such Net Cash Proceeds to repurchase and use all or
a portion of such Net Cash Proceeds to repurchase 9 3/8% Notes, in which event
the Company shall be required to use only the Net Cash Proceeds remaining after
such repurchase to make the Net Proceeds Offer contemplated by this covenant;
provided further, that if at any time any non-cash consideration received by the
Company or any Subsidiary of the Company, as the case may be, in connection with
any Asset Sale is converted into or sold or otherwise disposed of for cash, then
such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
clause (iii) above; provided, further that the Company may defer making a Net
Proceeds Offer until the aggregate Net Cash Proceeds from Asset Sales (taking
into account any Net Cash Proceeds used to repurchase 9 3/8% Notes pursuant to
the second immediately preceding proviso) to be applied equals or exceeds
$5,000,000.
Subject to the deferral right set forth in the final proviso of the
preceding paragraph, each notice of a Net Proceeds Offer will be mailed, by
first class mail, to holders of Exchange Notes as shown on the applicable
register of holders of Exchange Notes not more than 180 days after the relevant
Asset Sale or, in the event the Company or a Subsidiary has entered into a
binding agreement as provided in (B) above, within 180 days following the
termination of such agreement but in no event later than 360 days after the
relevant Asset Sale. Such notice will specify, among other things, the purchase
date (which will be no earlier than 30 days nor later than 45 days from the date
such notice is mailed, except as otherwise required by law) and will otherwise
comply with the procedures set forth in the Indenture. Upon receiving notice of
the Net Proceeds Offer, holders of Exchange Notes may elect to tender their
Exchange Notes in whole or in part in integral multiples of $1,000. To the
extent holders properly tender Exchange Notes and 9 3/8% Notes in an amount
exceeding the Net Proceeds Offer, subject to the limitations set forth in the
immediately preceding paragraph, the Company shall select the 9 3/8% Notes and
the Exchange Notes to be repurchased on a pro rata basis (based upon the
aggregate principal amount of Exchange Notes and 9 3/8% Notes tendered). To the
extent that the aggregate principal amount of Exchange Notes and 9 3/8% Notes
tendered pursuant to any Net Proceeds Offer is less than the amount of Net Cash
Proceeds subject to such Net Proceeds Offer, the Company may use any remaining
portion of such Net Cash Proceeds not required to fund the repurchase of
tendered Exchange Notes for any purposes otherwise permitted by the Indenture.
Upon the consummation of any Net Proceeds Offer, the amount of Net Cash Proceeds
subject to any future Net Proceeds Offer from the Asset Sales giving rise to
such Net Cash Proceeds shall be deemed to be zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Exchange Notes pursuant to a Net Proceeds Offer.
Limitation on Asset Swaps. The Indenture provides that the Company will
not, and will not permit any Subsidiary to, engage in any Asset Swaps, unless:
(i) at the time of entering into the agreement to swap assets
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and immediately after giving effect to the proposed Asset Swap, no Default or
Event of Default shall have occurred and be continuing or would occur as a
consequence thereof; (ii) the Company would, after giving pro forma effect to
the proposed Asset Swap, have been permitted to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in compliance with
the "Limitation on Incurrence of Additional Indebtedness" covenant; (iii) the
respective fair market values of the assets being purchased and sold by the
Company or any of its Subsidiaries (as determined in good faith by the
management of the Company or, if such Asset Swap includes consideration in
excess of $2,500,000, by the Board of Directors, as evidenced by a board
resolution) are substantially the same at the time of entering into the
agreement to swap assets; and (iv) at the time of the consummation of the
proposed Asset Swap, the percentage of any decline in the fair market value
(determined as aforesaid) of the asset or assets being acquired by the Company
and its Subsidiaries shall not be significantly greater than the percentage of
any decline in the fair market value (determined as aforesaid) of the assets
being disposed of by the Company, calculated from the time the agreement to swap
assets was entered into; provided, however, that this covenant shall not apply
to any of the Pending Transactions.
Limitations on Transactions with Affiliates. The Indenture provides that
neither the Company nor any of its Subsidiaries will, directly or indirectly,
enter into or permit to exist any transaction (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with or for the benefit of any of its Affiliates (other than
transactions between the Company and a Wholly-Owned Subsidiary of the Company or
among Wholly-Owned Subsidiaries of the Company) (an "Affiliate Transaction"),
other than Affiliate Transactions on terms that are no less favorable than those
that might reasonably have been obtained in a comparable transaction on an
arm's-length basis from a person that is not an Affiliate; provided, however,
that for a transaction or series of related transactions involving value of
$1,000,000 or more, such determination will be made in good faith by a majority
of members of the Board of Directors of the Company and by a majority of the
disinterested members of the Board of Directors of the Company, if any;
provided, further, that for a transaction or series of related transactions
involving value of $5,000,000 or more, the Board of Directors of the Company has
received an opinion from a nationally recognized investment banking firm that
such Affiliate Transaction is fair, from a financial point of view, to the
Company or such Subsidiary. The foregoing restrictions will not apply to
reasonable and customary directors' fees, indemnification and similar
arrangements and payments thereunder, or to any obligations of the Company under
the Financial Monitoring and Oversight Agreements, the Tax Sharing Agreement or
any employment agreement with any officer of the Company (provided that each
amendment of any of the foregoing agreements shall be subject to the limitations
of this covenant), as well as reasonable and customary investment banking,
financial advisory, commercial banking and similar fees and expenses paid to BT
Securities Corporation and its Affiliates.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Indenture provides that neither the Company nor any of its
Subsidiaries will, directly or indirectly, create or otherwise cause or permit
to exist or become effective any encumbrance or restriction on the ability of
any Subsidiary to (a) pay dividends or make any other distributions on its
Capital Stock; (b) make loans or advances or pay any Indebtedness or other
obligation owed to the Company or any of its Subsidiaries; or (c) transfer any
of its property or assets to the Company, except for such encumbrances or
restrictions existing under or by reason of: (1) applicable law, (2) the
Indenture, (3) customary non-assignment provisions of any lease governing a
leasehold interest of the Company or any Subsidiary, (4) any instrument
governing Acquired Indebtedness, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, (5) agreements
permitted under the 9 3/8% Indenture existing on the Issue Date (including the
Senior Credit Facility), as such agreements are from time to time in effect;
provided, however, that any amendments or modifications of such agreements which
affect the encumbrances or restrictions of the types subject to this covenant
shall not result in such encumbrances or restrictions being less favorable to
the Company in any material respect, as determined in good faith by the Board of
Directors of the Company, than the provisions as in effect before giving effect
to the respective amendment or modification, (6) an agreement effecting a
refinancing, replacement or substitution of Indebtedness issued, assumed or
incurred pursuant to an agreement referred to in clause (2), (4) or (5) above or
any other agreement evidencing Indebtedness permitted under the Indenture;
provided, however, that the provisions relating to such encumbrance or
restriction contained in any such refinancing, replacement or
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substitution agreement or any such other agreement are not less favorable to the
Company in all material respects as determined in good faith by the Board of
Directors of the Company than the provisions relating to such encumbrance or
restriction contained in agreements referred to in such clause (2), (4) or (5),
or (7) restrictions on the transfer of assets subject to any Lien permitted
under the Indenture imposed by the holder of such Lien.
Prohibition on Incurrence of Senior Subordinated Debt. The Indenture
prohibits the Company from incurring or suffering to exist Indebtedness that is
senior in right of payment to the Exchange Notes and is expressly subordinate in
right of payment to any other Indebtedness of the Company.
Limitation on Preferred Stock of Subsidiaries. The Indenture provides that
the Company will not permit any of its Subsidiaries to issue any Preferred Stock
(other than to the Company or to a Wholly-Owned Subsidiary of the Company) or
permit any Person (other than the Company or a Wholly-Owned Subsidiary of the
Company) to own any Preferred Stock (other than Acquired Preferred Stock;
provided that at the time the issuer of such Acquired Preferred Stock becomes a
Subsidiary of the Company or merges with the Company or any of its Subsidiaries,
and after giving effect to such transaction, the Company shall be able to incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional Indebtedness"
covenant).
Limitation on Liens. The Indenture provides that neither the Company nor
any of its Subsidiaries will create, incur, assume or suffer to exist any Liens
upon any of their respective assets, except for (a) Permitted Liens, (b) Liens
to secure Senior Debt or guarantees thereof permitted under the Indenture, (c)
Liens permitted under the 9 3/8% Indenture existing on the Issue Date, (d) Liens
in favor of the Trustee, (e) Liens to secure Guarantor Senior Debt permitted
under the Indenture, and (f) any Lien to secure the replacement, refunding,
extension or renewal, in whole or in part, of any Indebtedness described in the
foregoing clauses; provided that, to the extent any such clause limits the
amount secured or the asset subject to such Liens, no extension or renewal will
increase the assets subject to such Liens or the amount secured thereby beyond
the assets or amounts set forth in such clauses.
Limitation on Sale and Leaseback Transactions. The Indenture provides that
neither the Company nor any of its Subsidiaries will enter into any Sale and
Leaseback Transaction, except that the Company or any Subsidiary may enter into
a Sale and Leaseback Transaction if, immediately prior thereto, and after giving
effect to such Sale and Leaseback Transaction (the Indebtedness thereunder being
equivalent to the Attributable Value thereof) the Company could incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional Indebtedness"
covenant.
Guarantees of Certain Indebtedness. The Indenture provides that the Company
will not permit any of its Subsidiaries, directly or indirectly, to incur,
guarantee or secure through the granting of Liens, the payment of any
Indebtedness under the Credit Agreement or any refunding or refinancing thereof,
in each case, unless such Subsidiary, the Company and the Trustee execute and
deliver a supplemental indenture pursuant to which such Subsidiary becomes a
Guarantor of the Exchange Notes and which evidences such Subsidiary's Guarantee
of the Exchange Notes, such Guarantee to be a senior subordinated unsecured
obligation of such Subsidiary. Neither the Company nor any such Guarantor shall
be required to make a notation on the Exchange Notes or its Guarantee to reflect
any such subsequent Guarantee. Nothing in this covenant shall be construed to
permit any Subsidiary of the Company to incur Indebtedness otherwise prohibited
by the "Limitation of Incurrence of Additional Indebtedness" covenant.
Limitation on Line of Business. The Indenture provides that for so long as
any Exchange Notes are outstanding, the Company and its Subsidiaries will engage
solely in the ownership and operation of broadcast businesses or businesses
reasonably related thereto.
Merger, Consolidation and Sale of Assets. The Indenture provides that the
Company may not, in a single transaction or a series of related transactions,
consolidate with or merge with or into, or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its assets to, another
Person or adopt a plan of liquidation unless (i) either (A) the Company is the
survivor of such merger or consolidation or (B) the surviving or transferee
Person is a corporation, partnership or trust organized and existing under the
laws of the
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United States, any state thereof or the District of Columbia and such surviving
or transferee Person expressly assumes by supplemental indenture all of the
obligations of the Company under the Exchange Notes and the Indenture; (ii)
immediately after giving effect to such transaction and the use of proceeds
therefrom (on a pro forma basis, including any Indebtedness incurred or
anticipated to be incurred in connection with such transaction), the Company or
the surviving or transferee Person is able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant; (iii)
immediately after giving effect to such transaction (including any Indebtedness
incurred or anticipated to be incurred in connection with the transaction) no
Default or Event of Default has occurred and is continuing; and (iv) the Company
has delivered to the Trustee an Officers' Certificate and Opinion of Counsel,
each stating that such consolidation, merger or transfer complies with the
Indenture, that the surviving Person agrees by supplemental indenture to be
bound thereby, and that all conditions precedent in the Indenture relating to
such transaction have been satisfied. For purposes of the foregoing, the
transfer (by lease, assignment, sale or otherwise, in a single transaction or
series of related transactions) of all or substantially all of the properties
and assets of one or more Subsidiaries, the Capital Stock of which constitutes
all or substantially all of the properties and assets of the Company, will be
deemed to be the transfer of all or substantially all of the properties and
assets of the Company.
GUARANTEES
Each Guarantor fully and unconditionally guarantees, jointly and severally,
to each holder and the Trustee, subject to subordination provisions
substantially the same as those described above, the full and prompt payment of
principal of and interest on the Exchange Notes, and of all other obligations
under the Indenture.
The Indebtedness evidenced by each Guarantee (including the payment of
principal of, premium, if any, and interest on the Exchange Notes) is
subordinated to Guarantor Senior Debt (defined with respect to the Indebtedness
of a Guarantor in the same manner as Senior Debt is defined with respect to the
Company) on the same terms as the Exchange Notes are subordinated to Senior Debt
and will rank pari passu to the Guarantor's guarantee of the 9 3/8% Notes. See
"-- Subordination." In addition, the Guarantors have substantial additional
Guarantor Senior Debt (relating to guarantees of the borrowings under the Credit
Agreement).
The obligations of each Guarantor are limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Guarantor (including, without limitation, any guarantees under the Credit
Agreement) and after giving effect to any collections from or payments made by
or on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Guarantee or pursuant to its contribution obligations under
the Indenture, result in the obligations of the Guarantor under the Guarantee
not constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. Each Guarantor that makes a payment or distribution under a Guarantee
are entitled to a contribution from each other Guarantor in a pro rata amount
based on the Adjusted Net Assets of each Guarantor.
Each Guarantor may consolidate with or merge into or sell its assets to the
Company or to another Guarantor without limitation. Each Guarantor may
consolidate with or merge into or sell all or substantially all its assets to a
corporation, partnership or trust other than the Company or another Guarantor
(whether or not affiliated with the Guarantor). Upon the sale or disposition of
a Guarantor (or all or substantially all of its assets) to a Person (whether or
not an Affiliate of such Guarantor) which is not a Subsidiary of the Company,
which is otherwise in compliance with the Indenture, such Guarantor shall be
deemed released from all its obligations under the Indenture and its Guarantee
and such Guarantee shall terminate; provided, however, that any such termination
shall occur only to the extent that all obligations of such Guarantor under the
Credit Agreement and all of its guarantees of, and under all of its pledges of
assets or other security interests which secure, Indebtedness of the Company
shall also terminate upon such release, sale or transfer; provided, further,
that the consideration received by the Company in connection with such sale or
other disposition shall be applied in accordance with the covenant. See
"-- Certain Covenants -- Limitation on Asset Sales."
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EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) the failure to pay interest on the Exchange Notes when the same becomes due
and payable and the Default continues for a period of 30 days (whether or not
such payment is prohibited by the subordination provisions of the Indenture);
(ii) the failure to pay the principal on any Exchange Notes, when such principal
becomes due and payable, at maturity, upon redemption or otherwise (whether or
not such payment is prohibited by the subordination provisions of the
Indenture); (iii) a default in the observance or performance of any other
covenant or agreement contained in the Exchange Notes or the Indenture which
default continues for a period of 30 days after the Company receives written
notice thereof specifying the default from the Trustee or holders of at least
25% in aggregate principal amount of outstanding Exchange Notes; (iv) the
failure to pay at the final stated maturity (giving effect to any extensions
thereof) the principal amount of any Indebtedness of the Company or any
Subsidiary of the Company, or the acceleration of the final stated maturity of
any such Indebtedness, if the aggregate principal amount of such Indebtedness,
together with the aggregate principal amount of any other such Indebtedness in
default for failure to pay principal at the final stated maturity (giving effect
to any extensions thereof) or which has been accelerated, aggregates $5,000,000
or more at any time, in each case after a 10-day period during which such
default shall not have been cured or such acceleration rescinded; (v) one or
more judgments in an aggregate amount in excess of $5,000,000 (which are not
covered by insurance as to which the insurer has not disclaimed coverage) being
rendered against the Company or any of its Significant Subsidiaries and such
judgments remain undischarged or unstayed for a period of 60 days after such
judgment or judgments become final and non-appealable; and (vi) certain events
of bankruptcy, insolvency or reorganization affecting the Company or any of its
Significant Subsidiaries.
Upon the happening of any Event of Default specified in the Indenture, the
Trustee may, and the Trustee upon the request of holders of 25% in principal
amount of the Exchange Notes shall, or the holders of at least 25% in principal
amount of outstanding Exchange Notes may, declare the principal of and accrued
but unpaid interest, if any, on all the Exchange Notes to be due and payable by
notice in writing to the Company and the Trustee specifying the respective Event
of Default and that it is a "notice of acceleration" (the "Acceleration
Notice"), and the same (i) shall become immediately due and payable or (ii) if
there are any amounts outstanding under the Credit Agreement, will become due
and payable upon the first to occur of an acceleration under the Credit
Agreement or five Business Days after receipt by the Company and the
Representative under the Credit Agreement of such Acceleration Notice (unless
all Events of Default specified in such Acceleration Notice have been cured or
waived). If an Event of Default with respect to bankruptcy proceedings relating
to the Company occurs and is continuing, then such amount will ipso facto become
and be immediately due and payable without any declaration or other act on the
part of the Trustee or any holder of the Exchange Notes.
The Indenture provides that, at any time after a declaration of
acceleration with respect to the Exchange Notes as described in the preceding
paragraph, the holders of a majority in principal amount of the Exchange Notes
then outstanding (by notice to the Trustee) may rescind and cancel such
declaration and its consequences if (i) the rescission would not conflict with
any judgment or decree of a court of competent jurisdiction, (ii) all existing
Events of Default have been cured or waived except nonpayment of principal or
interest on the Exchange Notes that has become due solely by such declaration of
acceleration, (iii) to the extent the payment of such interest is lawful,
interest (at the same rate specified in the Exchange Notes) on overdue
installments of interest and overdue payments of principal which has become due
otherwise than by such declaration of acceleration, has been paid, (iv) the
Company has paid the Trustee its reasonable compensation and reimbursed the
Trustee for its expenses, disbursements and advances and (v) in the event of the
cure or waiver of a Default or Event of Default of the type described in clause
(vi) of the description of Events of Default in the first paragraph above, the
Trustee has received an Officers' Certificate and an Opinion of Counsel that
such Default or Event of Default has been cured or waived. The holders of a
majority in principal amount of the Exchange Notes may waive any existing
Default or Event of Default under the Indenture, and its consequences, except a
default in the payment of the principal of or interest on any Exchange Notes.
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The Company is required to deliver to the Trustee, within 120 days after
the end of the Company's fiscal year, a certificate indicating whether the
signing officers know of any Default or Event of Default that occurred during
the previous year and whether the Company has complied with its obligations
under the Indenture. In addition, the Company will be required to notify the
Trustee of the occurrence and continuation of any Default or Event of Default
within five business days after the Company becomes aware of the same.
Subject to the provisions of the Indenture relating to the duties of the
Trustee in case an Event of Default thereunder should occur and be continuing,
the Trustee will be under no obligation to exercise any of the rights or powers
under the Indenture at the request or direction of any of the holders of the
Exchange Notes unless such holders have offered to the Trustee reasonable
indemnity or security against any loss, liability or expense. Subject to such
provision for security or indemnification and certain limitations contained in
the Indenture, the holders of a majority in principal amount of the outstanding
Exchange Notes have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on the Trustee.
SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
The Company may terminate its obligations under the Indenture at any time,
and the obligations of the Guarantors with respect thereto shall terminate, by
delivering all outstanding Exchange Notes to the Trustee for cancellation and
paying all sums payable by it thereunder. The Company, at its option, (i) will
be discharged from any and all obligations with respect to the Exchange Notes,
and each Guarantor will be discharged from any and all obligations with respect
to its Guarantee, (except for certain obligations of the Company to register the
transfer or exchange of such Exchange Notes, replace stolen, lost or mutilated
Exchange Notes, maintain paying agencies and hold moneys for payment in trust)
or (ii) need not comply with certain of the restrictive covenants with respect
to the Indenture, if the Company deposits with the Trustee, in trust, U.S. Legal
Tender or U.S. Government Obligations or a combination thereof which, through
the payment of interest thereon and principal in respect thereof in accordance
with their terms, will be sufficient to pay all the principal of and interest on
the Exchange Notes on the dates such payments are due in accordance with the
terms of such Exchange Notes as well as the Trustee's fees and expenses. To
exercise either such option, the Company is required to deliver to the Trustee
(A) an Opinion of Counsel or a private letter ruling issued to the Company by
the IRS to the effect that the holders of the Exchange Notes will not recognize
income, gain or loss for federal income tax purposes as a result of the deposit
and related defeasance and will be subject to federal income tax on the same
amount and in the same manner and at the same times as would have been the case
if such option had not been exercised and, in the case of an Opinion of Counsel
furnished in connection with a Discharge pursuant to clause (i) above,
accompanied by a private letter ruling issued to the Company by the IRS to such
effect, (B) subject to certain qualifications, an Opinion of Counsel to the
effect that funds so deposited will not be subject to avoidance under applicable
Bankruptcy Law, and (C) an Officers' Certificate and an Opinion of Counsel to
the effect that the Company has complied with all conditions precedent to the
defeasance. Notwithstanding the foregoing, the Opinion of Counsel required by
clause (A) above need not be delivered if all Exchange Notes not therefore
delivered to the Trustee for cancellation (i) have become due and payable, (ii)
will become due and payable on the maturity date within one year, or (iii) are
to be called for redemption within one year under arrangements satisfactory to
the Trustee for the giving of notice of redemption by the Trustee in the name,
and at the expense, of the Company.
REPORTS TO HOLDERS
The Company will file with the Trustee and provide to the holders of the
Exchange Notes, within 15 days after it files them with the Commission, copies
of the annual reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission may by rules
and regulations prescribe) which the Company files with the Commission pursuant
to Section 13 or 15(d) of the Exchange Act. In the event the Company is no
longer required to furnish such reports to its securityholders pursuant to the
Exchange Act, the Company will cause its consolidated financial statements,
comparable to
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those which would have been required to appear in annual or quarterly reports,
to be delivered to the holders of the Exchange Notes.
MODIFICATION OF THE INDENTURE
From time to time, the Company and the Trustee, together, without the
consent of the holders of the Exchange Notes, may amend or supplement the
Indenture for certain specified purposes, including curing ambiguities, defects
or inconsistencies. Other modifications and amendments of the Indenture may be
made with the consent of the holders of a majority in principal amount of the
then outstanding Exchange Notes, except that, without the consent of each holder
of the Exchange Notes affected thereby, no amendment may, directly or
indirectly: (i) reduce the amount of Exchange Notes whose holders must consent
to an amendment; (ii) reduce the rate of or change the time for payment of
interest, including defaulted interest, on any Exchange Notes; (iii) reduce the
principal of or change the fixed maturity of any Exchange Notes, or change the
date on which any Exchange Notes may be subject to redemption or repurchase, or
reduce the redemption or repurchase price therefor; (iv) make any Exchange Notes
payable in money other than that stated in the Exchange Notes; (v) make any
change in provisions of the Indenture protecting the right of each holder of a
Note to receive payment of principal of and interest on such Note on or after
the due date thereof or to bring suit to enforce such payment or permitting
holders of a majority in principal amount of the Exchange Notes to waive
Defaults or Events of Default; or (vi) after the Company's obligation to
purchase the Exchange Notes arises under the Indenture, amend, modify or change
the obligation of the Company to make or consummate a Change of Control Offer or
a Net Proceeds Offer or waive any default in the performance thereof or modify
any of the provisions or definitions with respect to any such offers.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"9 3/8% Notes" means the $200.0 million aggregate principal amount of
9 3/8% Senior Subordinated Notes due 2004 of CRBC, issued pursuant to an
indenture, dated as of February 14, 1996, as the same may be modified or amended
from time to time and future refinancings thereof.
"9 3/8% Notes Issue Date" means February 14, 1996.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Subsidiary of the
Company or at the time it merges or consolidates with the Company or any of its
Subsidiaries or assumed in connection with the acquisition of assets from such
Person and not incurred by such Person in connection with, or in anticipation or
contemplation of, such Person becoming a Subsidiary of the Company or such
acquisition, merger or consolidation.
"Acquired Preferred Stock" means Preferred Stock of any Person at the time
such Person becomes a Subsidiary of the Company or at the time it merges or
consolidates with the Company or any of its Subsidiaries and not issued by such
Person in connection with, or in anticipation or contemplation of, such
acquisition, merger or consolidation.
"Adjusted Net Assets" of a Guarantor at any date shall mean the lesser of
the amount by which (x) the fair value of the property of such Guarantor exceeds
the total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date), but excluding liabilities under the Guarantee
of such Guarantor at such date, and (y) the present fair salable value of the
assets of such Guarantor at such date exceeds the amount that will be required
to pay the probable liability of such Guarantor on its debts (after giving
effect to all other fixed and contingent liabilities incurred or assumed on such
date and after giving effect to any collection from any Subsidiary of such
Guarantor in respect of the obligations of such Subsidiary under the Guarantee),
excluding debt in respect of the Guarantee, as they become absolute and matured.
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"Affiliate" means a Person who, directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Company. The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Asset Acquisition" means (i) an Investment by the Company or any
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company or shall be consolidated or merged with
the Company or any Subsidiary of the Company or (ii) the acquisition by the
Company or any Subsidiary of the Company of assets of any Person comprising a
division or line of business of such Person.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Subsidiaries (excluding any Sale and Leaseback Transaction or any pledge of
assets or stock by the Company or any of its Subsidiaries) to any Person other
than the Company or a Wholly-Owned Subsidiary of the Company of (i) any Capital
Stock of any Subsidiary of the Company or (ii) any other property or assets of
the Company or any Subsidiary of the Company other than in the ordinary course
of business; provided, however, that for purposes of the "Limitation on Asset
Sales" covenant, Asset Sales shall not include (a) a transaction or series of
related transactions for which the Company or its Subsidiaries receive aggregate
consideration of less than $500,000, (b) transactions permitted under the
"Limitation on Asset Swaps" covenant or (c) transactions permitted under the
"Merger, Consolidation and Sale of Assets" covenant.
"Asset Swap" means the execution of a definitive agreement, subject only to
FCC approval and other customary closing conditions, that the Company in good
faith believes will be satisfied, for a substantially concurrent purchase and
sale, or exchange, of Productive Assets between the Company or any of its
Subsidiaries and another Person or group of affiliated Persons; provided that
any amendment to or waiver of any closing condition which individually or in the
aggregate is material to the Asset Swap shall be deemed to be a new Asset Swap.
"Attributable Value" in respect of a sale and leaseback arrangement of any
property means, as at the time of determination, the greater of (i) the fair
market value of the property subject to such arrangement (as determined in good
faith by the Board of Directors of the Company) or (ii) the present value
(discounted at the interest rate borne by the Exchange Notes, compounded
annually) of the total obligations of the lessee for rental payments during the
remaining term of the lease included in such arrangement.
"Capitalized Lease Obligation" means, as to any Person, the obligation of
such Person to pay rent or other amounts under a lease to which such Person is a
party that is required to be classified and accounted for as a capital lease
obligation under GAAP and, for purposes of this definition, the amount of such
obligation at any date shall be the capitalized amount of such obligation at
such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated) of capital stock, including each class of common stock and Preferred
Stock of such Person and (ii) with respect to any Person that is not a
corporation, any and all partnership or other equity interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation or Moody's Investors
Service, Inc.; (iii) commercial paper maturing no more than one year from the
date of creation thereof and, at the time of acquisition, having a rating of at
least A-1 from Standard & Poor's Corporation or at least P-1 from Moody's
Investors Service, Inc.; (iv) certificates of deposit or bankers' acceptances
maturing within one year from the date of acquisition thereof issued by any
commercial bank
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organized under the laws of the United States of America or any state thereof or
the District of Columbia or any U.S. branch of a foreign bank having at the date
of acquisition thereof combined capital and surplus of not less than
$200,000,000; (v) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clause (i) above entered
into with any bank meeting the qualifications specified in clause (iv) above;
and (vi) investments in money market funds which invest substantially all their
assets in securities of the types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company to any Person or group of related Persons for purposes of Section 13(d)
of the Exchange Act (a "Group") (whether or not otherwise in compliance with the
provisions of the Indenture), other than (x) in the event the Chancellor Merger
is not consummated, to Hicks Muse or any of its Affiliates, officers and
directors or to Steven Dinetz and (y) if the Chancellor Merger is consummated,
from and after the effective date thereof, to Hicks Muse or any of its
Affiliates, officers and directors or to Steven Dinetz or Scott K. Ginsburg (the
"Permitted Holders"); or (ii) a majority of the Board of Directors of Chancellor
Media, CMHC or CMCLA shall consist of Persons who are not Continuing Directors;
or (iii) the acquisition by any Person or Group (other than the Permitted
Holders) of the power, directly or indirectly, to vote or direct the voting of
securities having more than 50% of the ordinary voting power for the election of
directors of Chancellor Media, CMHC or CMCLA.
"Commodity Agreement" means any commodity futures contract, commodity
option or other similar agreement or arrangement entered into by the Company or
any of its Subsidiaries designed to protect the Company or any of its
Subsidiaries against fluctuations in the price of commodities actually used in
the ordinary course of business of the Company and its Subsidiaries.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes of
such Person and its Subsidiaries paid or accrued in accordance with GAAP for
such period (other than income taxes attributable to extraordinary or
nonrecurring gains or losses), (B) Consolidated Interest Expense and (C)
Consolidated Non-Cash Charges, all as determined on a consolidated basis for
such Person and its Subsidiaries in conformity with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication, the sum of (i) the interest expense of such Person
and its Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP, including, without limitation, (a) any amortization of
debt discount, (b) the net cost under Interest Swap Obligations (including any
amortization of discounts), (c) the interest portion of any deferred payment
obligation, (d) all commissions, discounts and other fees and charges owed with
respect to letters of credit, bankers' acceptance financing or similar
facilities, and (e) all accrued interest and (ii) the interest component of
Capitalized Lease Obligations paid or accrued by such person and its
Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Income" of any Person means, for any period, the
aggregate net income (or loss) of such Person and its Subsidiaries for such
period on a consolidated basis, determined in accordance with GAAP; provided
that there shall be excluded therefrom, without duplication, (a) gains and
losses from Asset Sales (without regard to the $500,000 limitation set forth in
the definition thereof) or abandonments or reserves relating thereto and the
related tax effects, (b) items classified as extraordinary or nonrecurring gains
and losses, and the related tax effects according to GAAP, (c) the net income
(or loss) of any Person acquired in a pooling of interests transaction accrued
prior to the date it becomes a Subsidiary of such first referred to Person or is
merged or consolidated with it or any of its Subsidiaries, (d) the net income of
any Subsidiary to the extent that the declaration of dividends or similar
distributions by that Subsidiary of that income is restricted by contract,
operation of law or otherwise and (e) the net income of any Person, other than a
Subsidiary, except to the extent of the lesser of (x) dividends or distributions
paid to such first referred to Person or its Subsidiary by such Person and (y)
the net income of such Person (but in no event less than zero), and the net loss
of such Person shall be included only to the extent of the aggregate Investment
of the first referred to Person or a consolidated Subsidiary of such Person.
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"Consolidated Non-Cash Charges" means, with respect to any Person for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Subsidiaries reducing Consolidated Net Income of such Person
and its Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP (excluding any such charges constituting an extraordinary
or nonrecurring item).
"Continuing Director" means, as of the date of determination, any Person
who (i) was a member of the Board of Directors of Chancellor or CRBC on the date
of the Indenture or becomes a director upon consummation of the Chancellor
Merger, (ii) was nominated for election or elected to the Board of Directors of
Chancellor Media, CMHC or CMCLA with the affirmative vote of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination or election, or (iii) is a representative of a Permitted Holder.
"Credit Agreement" means the Credit Agreement, dated on or about February
14, 1996, as amended and restated as of January 23, 1997, among Chancellor,
CRBC, the lenders from time to time party thereto and Bankers Trust Company as
managing agent, together with the related documents thereto (including, without
limitation, any guarantee agreements and security documents), in each case, as
such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including by way of adding Subsidiaries of CRBC as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness under
such agreement or any successor or replacement agreement and whether by the same
or any other agent, lender or group of lenders.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"Designated Guarantor Senior Debt" means (i) Indebtedness guaranteed by a
Guarantor under or in respect of the Credit Agreement and (ii) any other
Indebtedness constituting Guarantor Senior Debt which, at the time of
determination, has an aggregate principal amount of at least $25,000,000 and is
specifically designated in the instrument evidencing such Guarantor Senior Debt
as "Designated Guarantor Senior Debt" by the Guarantor.
"Designated Senior Debt" means (i) Indebtedness under or in respect of the
Credit Agreement and (ii) any other Indebtedness constituting Senior Debt which,
at the time of determination, has an aggregate principal amount of at least
$25,000,000 and is specifically designated in the instrument evidencing such
Senior Debt as "Designated Senior Debt" by the Company.
"Disqualified Capital Stock" means any Capital Stock which, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures (excluding any
maturity as the result of an optional redemption by the issuer thereof) or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof (except, in each case,
upon the occurrence of a Change of Control), in whole or in part, on or prior to
the final maturity date of the Exchange Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Financial Monitoring and Oversight Agreements" means the Financial
Monitoring and Oversight Agreement among Hicks, Muse & Co. Partners, L.P., CRBC
and Chancellor, as in effect on the Issue Date, and the Financial Advisory
Agreement among HM2/Management Partners, L.P., CRBC and Chancellor, as in effect
on the 9 3/8% Notes Issue Date, or as amended in connection with the Chancellor
Merger as described under "Certain Relationships and Related
Transactions -- Financial Monitoring and Oversight Agreement" and
"-- Termination of Financial Advisory Agreement."
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"GAAP" means generally accepted accounting principles as in effect in the
United States of America as of the Issue Date.
"Guarantors" mean (i) initially, Chancellor Broadcasting Licensee Company,
Trefoil Communications, Inc., Shamrock Broadcasting, Inc., Shamrock Broadcasting
of Texas, Inc., Shamrock Radio Licenses, Inc., and Shamrock Broadcasting
Licenses of Denver, Inc., and (ii) each of the Company's Subsidiaries that in
the future executes a supplemental indenture in which such Subsidiary agrees to
be bound by the terms of the Indenture as a Guarantor; provided that any Person
constituting a Guarantor as described above shall cease to constitute a
Guarantor when its respective Guarantee is released in accordance with the terms
thereof.
"Guarantor Senior Debt" means any Indebtedness of a Guarantor (including
any interest accruing subsequent to the filing of a petition of bankruptcy at
the rate provided for in the documentation with respect thereto, whether or not
such interest is an allowed claim under applicable law), whether outstanding on
the Issue Date or thereafter created, incurred or assumed, unless, in the case
of any particular Indebtedness, the instrument creating or evidencing the same
or pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Guarantees. Without
limiting the generality of the foregoing, "Guarantor Senior Debt" shall also
include the principal of, premium, if any, interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, and all other amounts
owing in respect of, and all monetary obligations of every nature under, (x) the
Credit Agreement, including, without limitation, obligations to pay principal
and interest, reimbursement obligations under letters of credit, fees, expenses
and indemnities, and (y) all Interest Swap Obligations. Notwithstanding the
foregoing, "Guarantor Senior Debt" shall not include any of the following
amounts (whether or not constituting Indebtedness as defined in this Indenture):
(i) any Indebtedness of a Guarantor to a Subsidiary of such Guarantor; (ii)
Indebtedness and other amounts owing to trade creditors incurred in connection
with obtaining goods, materials or services; (iii) Indebtedness represented by
Disqualified Capital Stock; (iv) any liability for federal, state, local or
other taxes owed or owing by a Guarantor; (v) any Indebtedness which is, by its
express terms, subordinated in right of payment to any other Indebtedness of
such Guarantor; and (vi) guarantees of the 9 3/8% Notes.
"Indebtedness" means with respect to any Person, without duplication, any
liability of such Person (i) for borrowed money, (ii) evidenced by bonds,
debentures, notes or other similar instruments, (iii) constituting Capitalized
Lease Obligations, (iv) incurred or assumed as the deferred purchase price of
property, or pursuant to conditional sale obligations and title retention
agreements (but excluding trade accounts payable arising in the ordinary course
of business), (v) for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (vi) for Indebtedness of
others guaranteed by such Person, (vii) for Interest Swap Obligations, Commodity
Agreements and Currency Agreements and (viii) for Indebtedness of any other
Person of the type referred to in clauses (i) through (vii) which are secured by
any Lien on any property or asset of such first referred to Person, the amount
of such Indebtedness being deemed to be the lesser of the value of such property
or asset or the amount of the Indebtedness so secured. The amount of
Indebtedness of any Person at any date shall be the outstanding principal amount
of all unconditional obligations described above, as such amount would be
reflected on a balance sheet prepared in accordance with GAAP, and the maximum
liability at such date of such Person for any contingent obligations described
above.
"Interest Swap Obligations" means the obligations of any Person under any
interest rate protection agreement, interest rate future, interest rate option,
interest rate swap, interest rate cap or other interest rate hedge or
arrangement.
"Investment" means (i) any transfer or delivery of cash, stock or other
property of value in exchange for Indebtedness, stock or other security or
ownership interest in any Person by way of loan, advance, capital contribution,
guarantee or otherwise and (ii) an investment deemed to have been made by the
Company at the time any entity which was a Subsidiary of the Company ceases to
be such a Subsidiary in an amount equal to the value of the loans and advances
made, and any remaining ownership interest in, such entity immediately following
such entity ceasing to be a Subsidiary of the Company. The amount of any
non-cash Investment shall be the fair market value of such Investment, as
determined conclusively in good faith by management of
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the Company unless the fair market value of such Investment exceeds $1.0
million, in which case the fair market value shall be determined conclusively in
good faith by the Board of Directors of the Company at the time such Investment
is made.
"Issue Date" means the date of original issuance of the Original Notes.
"Leverage Ratio" shall mean, as to any Person, the ratio of (i) the sum of
the aggregate outstanding amount of Indebtedness of such Person and its
Subsidiaries as of the date of calculation on a consolidated basis in accordance
with GAAP to (ii) the Consolidated EBITDA of such Person for the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
determination.
For purposes of this definition, the aggregate outstanding principal amount
of Indebtedness of the Person and its Subsidiaries for which such calculation is
made shall be determined on a pro forma basis as if the Indebtedness giving rise
to the need to perform such calculation had been incurred and the proceeds
therefrom had been applied, and all other transactions in respect of which such
Indebtedness is being incurred had occurred, on the last day of the Four Quarter
Period. In addition to the foregoing, for purposes of this definition,
"Consolidated EBITDA" shall be calculated on a pro forma basis after giving
effect to (i) the incurrence of the Indebtedness of such Person and its
Subsidiaries (and the application of the proceeds therefrom) giving rise to the
need to make such calculation and any incurrence (and the application of the
proceeds therefrom) or repayment of other Indebtedness, other than the
incurrence or repayment of Indebtedness pursuant to working capital facilities,
at any time subsequent to the beginning of the Four Quarter Period and on or
prior to the date of determination, as if such incurrence (and the application
of the proceeds thereof), or the repayment, as the case may be, occurred on the
first day of the Four Quarter Period and (ii) any Asset Sales or Asset
Acquisitions (including, without limitation, any Asset Acquisition giving rise
to the need to make such calculation as a result of such Person or one of its
Subsidiaries (including any Person who becomes a Subsidiary as a result of such
Asset Acquisition) incurring, assuming or otherwise becoming liable for
Indebtedness) at any time on or subsequent to the first day of the Four Quarter
Period and on or prior to the date of determination, as if such Asset Sale or
Asset Acquisition (including the incurrence, assumption or liability for any
such Indebtedness and also including any Consolidated EBITDA associated with
such Asset Acquisition) occurred on the first day of the Four Quarter Period.
Furthermore, in calculating "Consolidated Interest Expense" for purposes of the
calculation of "Consolidated EBITDA," (i) interest on Indebtedness determined on
a fluctuating basis as of the date of determination (including Indebtedness
actually incurred on the date of the transaction giving rise to the need to
calculate the Leverage Ratio) and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness as in effect on the date of
determination and (ii) notwithstanding (i) above, interest determined on a
fluctuating basis, to the extent such interest is covered by Interest Swap
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents (including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents)
received by the Company or any of its Subsidiaries from such Asset Sale net of
(i) reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales commissions, recording fees, title insurance premiums, appraisers fees
and costs reasonably incurred in preparation of any asset or property for sale),
(ii) taxes paid or reasonably estimated to be payable (calculated based on the
combined state, federal and foreign statutory tax rates applicable to the
Company or the Subsidiary engaged in such Asset Sale) and (iii) repayment of
Indebtedness secured by assets subject to such Asset Sale; provided that if the
instrument or agreement governing such Asset Sale requires the transferor to
maintain a portion of the purchase price in escrow (whether as a reserve for
adjustment of the purchase price or otherwise) or to indemnify the transferee
for specified liabilities in a maximum specified amount, the portion of the cash
or Cash Equivalents that is actually placed in escrow or segregated and set
aside by the transferor for such indemnification obligation shall
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not be deemed to be Net Cash Proceeds until the escrow terminates or the
transferor ceases to segregate and set aside such funds, in whole or in part,
and then only to the extent of the proceeds released from escrow to the
transferor or that are no longer segregated and set aside by the transferor.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing, or otherwise relating to, any
Indebtedness.
"Permitted Indebtedness" means, without duplication, (i) the Exchange
Notes; (ii) the Guarantees; (iii) Indebtedness of the Company incurred pursuant
to the Credit Agreement in an aggregate principal amount at any time outstanding
not to exceed the sum of the aggregate commitments pursuant to the Credit
Agreement as initially in effect on the 9 3/8% Notes Issue Date reduced by the
aggregate principal amount permanently repaid with the proceeds of Asset Sales;
(iv) Indebtedness outstanding on the 9 3/8% Notes Issue Date; (v) Interest Swap
Obligations; provided that such Interest Swap Obligations are entered into to
protect the Company from fluctuations in interest rates of its Indebtedness;
(vi) additional Indebtedness of the Company or any of its Subsidiaries not to
exceed $10,000,000 in principal amount outstanding at any time (which amount
may, but need not, be incurred under the Credit Agreement); (vii) Refinancing
Indebtedness; (viii) Indebtedness owed by the Company to any Wholly-Owned
Subsidiary or by any Subsidiary to the Company or any Wholly-Owned Subsidiary of
the Company; and (ix) guarantees by Subsidiaries of any Indebtedness permitted
to be incurred pursuant to the Indenture.
"Permitted Investments" means (i) Investments by the Company or any
Subsidiary to acquire the stock or assets of any Person (or Indebtedness of such
Person acquired in connection with a transaction in which such Person becomes a
Subsidiary of the Company) engaged in the broadcast business or businesses
reasonably related thereto; provided that if any such Investment or series of
related Investments involves an Investment by the Company in excess of
$5,000,000, the Company is able, at the time of such Investment and immediately
after giving effect thereto, to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with the "Limitation on
Incurrence of Additional Indebtedness" covenant, (ii) Investments received by
the Company or its Subsidiaries as consideration for a sale of assets, including
an Asset Sale effected in compliance with the "Limitation on Asset Sales"
covenant, (iii) Investments by the Company or any Wholly-Owned Subsidiary of the
Company in any Wholly-Owned Subsidiary of the Company (whether existing on the
Issue Date or created thereafter) or any Person that after such Investments, and
as a result thereof, becomes a Wholly-Owned Subsidiary of the Company and
Investments in the Company by any Wholly-Owned Subsidiary of the Company, (iv)
cash and Cash Equivalents, (v) Investments in securities of trade creditors,
wholesalers or customers received pursuant to any plan of reorganization or
similar arrangement and (vi) additional Investments in an aggregate amount not
to exceed $2,500,000 at any time outstanding.
"Permitted Liens" means (i) Liens for taxes, assessments and governmental
charges to the extent not required to be paid under the Indenture, (ii)
statutory Liens of landlords and carriers, warehousemen, mechanics, suppliers,
materialmen, repairmen or other like Liens to the extent not required to be paid
under the Indenture, (iii) pledges or deposits to secure lease obligations or
nondelinquent obligations under workers' compensation, unemployment insurance or
similar legislation, (iv) Liens to secure the performance of public statutory
obligations that are not delinquent, performance bonds or other obligations of a
like nature (other than for borrowed money), in each case incurred in the
ordinary course of business, (v) easements, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or encumbrances
incurred in the ordinary course of business not interfering in any material
respect with the business of the Company or its Subsidiaries, (vi) Liens upon
specific items of inventory or other goods and proceeds of any Person securing
such Person's obligations in respect of letters of credit or bankers'
acceptances issued or created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods in the ordinary
course of business, (vii) judgment and attachment Liens not giving rise to an
Event of Default, (viii) leases or subleases granted to others in the ordinary
course of business consistent with past practice not interfering in any material
respect with the business of the Company or its Subsidiaries, (ix) any interest
or title of a lessor in the property subject to any lease, whether characterized
as capitalized or operating other than any such interest or title resulting from
or arising out of a default by the Company or its Subsidiaries of
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its obligations under such lease and (x) Liens arising from filing UCC financing
statements for precautionary purposes in connection with true leases of personal
property that are otherwise permitted under the Indenture and under which the
Company or any of its Subsidiaries is a lessee.
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Productive Assets" means assets of a kind used or usable by the Company
and its Subsidiaries in broadcast businesses or businesses reasonably related
thereto, and specifically includes assets acquired through Asset Acquisitions.
"Public Equity Offering" means an underwritten public offering of Capital
Stock (other than Disqualified Capital Stock) of the Company or Chancellor,
pursuant to an effective registration statement filed with the Commission in
accordance with the Securities Act; provided, however, that, in the case of a
Public Equity Offering by Chancellor, Chancellor contributes to the capital of
the Company net cash proceeds in an amount at least sufficient to redeem the
Exchange Notes and the 9 3/8% Notes, if any, called for redemption in accordance
with the terms thereof.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Refinancing Indebtedness" means any refinancing by the Company of
Indebtedness of the Company or any of its Subsidiaries incurred in accordance
with the "Limitation on Incurrence of Additional Indebtedness" covenant (other
than pursuant to clause (iii) or (iv) of the definition of Permitted
Indebtedness) that does not (i) result in an increase in the aggregate principal
amount of Indebtedness (such principal amount to include, for purposes of this
definition, any premiums, penalties or accrued interest paid with the proceeds
of the Refinancing Indebtedness) of such Person or (ii) create Indebtedness with
(A) a Weighted Average Life to Maturity that is less than the Weighted Average
Life to Maturity of the Indebtedness being refinanced or (B) a final maturity
earlier than the final maturity of the Indebtedness being refinanced.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Subsidiary of any property, whether owned by the
Company or any Subsidiary at the Issue Date or later acquired, which has been or
is to be sold or transferred by the Company or such Subsidiary to such Person or
to any other Person from whom funds have been or are to be advanced by such
Person on the security of such property.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Senior Credit Facility" means the Company's senior credit facility among
EMCLA and a syndicate of commercial lenders on April 25, 1997, as amended or
amended and restated, which originally provided for a commitment of $1.75
billion, consisting of a $1.25 billion reducing revolving credit facility and a
$500.0 million term loan facility, with the commitment increased to $2.5 billion
upon consummation of the Chancellor Merger, as such agreements may be amended
(including any amendment and restatement thereof), supplemented or otherwise
modified from time to time, including any agreement extending the maturity of,
refinancing, replacing or otherwise restructuring (including by way of adding
Subsidiaries of the Company as additional borrowers or guarantors thereunder)
all or any portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
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"Senior Debt" means any Indebtedness of the Company (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law), whether outstanding on the
Issue Date or thereafter created, incurred or assumed, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Exchange Notes.
Without limiting the generality of the foregoing, "Senior Debt" shall also
include the principal of, premium, if any, interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, and all other amounts
owing in respect of, and all monetary obligations of every nature under, (x) the
Credit Agreement, including, without limitation, obligations to pay principal
and interest, reimbursement obligations under letters of credit, fees, expenses
and indemnities, and (y) all Interest Swap Obligations. Notwithstanding the
foregoing, Senior Debt shall not include any of the following amounts (whether
or not constituting Indebtedness as defined in the Indenture): (i) any
Indebtedness of the Company to a Subsidiary of the Company, (ii) Indebtedness
and other amounts owing to trade creditors incurred in connection with obtaining
goods, materials or services, (iii) Indebtedness represented by Disqualified
Capital Stock, (iv) any liability for federal, state, local or other taxes owed
or owing by the Company, (v) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of the Company,
including the 9 3/8% Notes, the 12 1/4% Subordinated Exchange Debentures due
2008 and the 12% Subordinated Exchange Debentures due 2009 of the Company.
"Significant Subsidiary" means for any Person each Subsidiary of such
Person which (i) for the most recent fiscal year of such Person accounted for
more than 5% of the consolidated net income of such Person or (ii) as at the end
of such fiscal year, was the owner of more than 5% of the consolidated assets of
such Person.
"Subsidiary," with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
Notwithstanding anything in the Indenture to the contrary, all references to the
Company and its consolidated Subsidiaries or to financial information prepared
on a consolidated basis in accordance with GAAP shall be deemed to include the
Company and its Subsidiaries as to which financial statements are prepared on a
combined basis in accordance with GAAP and to financial information prepared on
such a combined basis. Notwithstanding anything in the Indenture to the
contrary, an Unrestricted Subsidiary shall not be deemed to be a Subsidiary for
purposes of the Indenture.
"Tax Sharing Agreement" means the Tax Sharing Agreement between CRBC and
Chancellor, as in effect on the 9 3/8% Notes Issue Date.
"Unrestricted Subsidiary" means a Subsidiary of the Company created after
the 9 3/8% Notes Issue Date and so designated by a resolution adopted by the
Board of Directors of the Company, provided that (a) neither the Company nor any
of its other Subsidiaries (other than Unrestricted Subsidiaries) (1) provides
any credit support for any Indebtedness of such Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness) or (2) is
directly or indirectly liable for any Indebtedness of such Subsidiary, (b) the
creditors with respect to Indebtedness for borrowed money of such Subsidiary,
having a principal amount in excess of $5,000,000, have agreed in writing that
they have no recourse, direct or indirect, to the Company or any other
Subsidiary of the Company (other than Unrestricted Subsidiaries), including,
without limitation, recourse with respect to the payment of principal of or
interest on any Indebtedness of such Subsidiary and (c) at the time of
designation of such Subsidiary such Subsidiary has no property or assets (other
than de minimis assets resulting from the initial capitalization of such
Subsidiary). Any such designation by the Board of Directors of the Company shall
be evidenced to the Trustee by the filing with the Trustee of a certified copy
of the resolution of the Company's Board of Directors giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
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"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the total of the
product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
BOOK-ENTRY; DELIVERY AND FORM
Except as described in the next paragraph, the Exchange Notes initially
will be represented by a single permanent global certificate in definitive,
fully registered form (the "Global Certificate"). The Global Certificate will be
deposited with, or on behalf of, The Depository Trust Company, New York, New
York ("DTC") and registered in the name of a nominee of DTC.
Exchange Notes (i) originally purchased by or transferred to "foreign
purchasers" or (ii) held by QIBs who elect to take physical delivery of their
certificates instead of holding their interest through the Global Certificate
(and which are thus ineligible to trade through DTC) (collectively referred to
herein as the "Non-Global Purchasers") will be issued in registered form (the
"Certificated Security"). Upon the transfer to a QIB of any Certificated
Security initially issued to a Non-Global Purchaser, such Certificated Security
will, unless the transferee requests otherwise or the Global Certificates have
previously been exchanged in whole for Certificated Securities, be exchanged for
an interest in the Global Certificates.
The Global Certificate. The Company expects that pursuant to procedures
established by DTC (i) upon the issuance of the Global Certificate, DTC or its
custodian will credit, on its internal system, the aggregate principal amount of
Exchange Notes of the individual beneficial interests represented by such global
securities to the respective accounts of persons who have accounts with such
depositary and (ii) ownership of beneficial interests in the Global Certificate
will be shown on, and the transfer of such ownership will be effected only
through, records maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants). Ownership of beneficial interests in the
Global Certificate will be limited to persons who have accounts with DTC
("participants") or persons who hold interests through participants. QIBs may
hold their interests in the Global Certificate directly through DTC if they are
participants in such system, or indirectly through organizations that are
participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of the
Exchange Notes, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Exchange Notes represented by such Global
Certificate for all purposes. No beneficial owner of an interest in the Global
Certificate will be able to transfer that interest except in accordance with
DTC's procedures, in addition to those procedures provided for in the Indenture.
Payments of the principal of, premium, if any, and interest on the Global
Certificate will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. None of the Company, the Trustee nor the Paying Agent
and Registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Certificate or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interest.
The Company expects that DTC, or its nominee, upon receipt of any payment
of principal, premium, if any, and interest in respect of the Global
Certificate, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the Global Certificate as shown on the records of DTC or its nominee. The
Company also expects that payments by participants to owners of beneficial
interests in the Global Certificate held through such participants will be
governed by standing instructions and customary practice, as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.
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Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in clearinghouse funds. If a
holder requires physical delivery of a Certificated Security for any reason,
including to sell Exchange Notes to persons in states that require physical
delivery of the Certificate, or to pledge such securities, such holder must
transfer its interest in the Global Certificate, in accordance with the normal
procedures of DTC and with the procedures set forth in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Exchange Notes (including the presentation of Exchange
Notes for exchange as described below) only at the direction of one or more
participants to whose account the DTC interests in the Global Certificate are
credited and only in respect of such Exchange Notes as to which such participant
or participants has or have given such direction.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Certificate among participants of DTC, it
is under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
obligations under the rules and procedures governing their operations.
Certificated Securities. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Certificate and a successor depositary
is not appointed by the Company within 90 days, Certificated Securities will be
issued in exchange for the Global Certificate.
DESCRIPTION OF CERTAIN INDEBTEDNESS
SENIOR CREDIT FACILITY
On April 25, 1997, the Company closed its Second Amended and Restated Loan
Agreement (as amended from time to time, the "Senior Credit Facility") with TD
Securities (USA) Inc. as arranging agent, The Bank of New York and Bankers Trust
Company, as co-syndication agents, NationsBank of Texas, N.A. and Union Bank of
California, as co-documentation agents, Toronto Dominion (Texas), Inc., as
administrative agent (the "Administrative Agent"), and the financial
institutions party thereto (the "Lenders"). The Senior Credit Facility initially
provided for a maximum commitment of $1.75 billion, and upon consummation of the
Chancellor Merger, the aggregate commitment under the Senior Credit Facility was
increased to $2.50 billion. Loans under the Senior Credit Facility consist of
(i) a $900.0 million term loan facility (the "Term Loan Facility") and (ii) a
$1.60 billion revolving loan facility (the "Revolving Loan Facility" and,
collectively with the Term Loan Facility, the "Loans").
The following description of certain provisions of the Senior Credit
Facility does not purport to be complete and is qualified in its entirety by
reference to the full text of the Senior Credit Facility, a copy of which is
available from the Company on request.
Term Loan Facility
The Term Loan Facility matures on June 30, 2005. The Term Loan Facility
requires scheduled annual reductions of the principal balance of the Term Loan
Facility outstanding on June 30, 2000, payable quarterly in equal quarterly
amounts, commencing on September 30, 2000 in the following percentages: (i) from
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9/30/00 through and including 6/30/01, 15.00%; (ii) from 9/30/01 through and
including 6/30/02, 20.00%; (iii) from 9/30/02 through and including 6/30/03,
20.00%; (iv) from 9/30/03 through and including 6/30/04, 20.00%; and (v) from
9/30/04 through and including 6/30/05, 25.00%. Mandatory or optional prepayments
made by the Company against the Term Loan Facility will not affect the reduction
percentages set forth above.
Revolving Loan Facility
The Revolving Loan Facility matures on June 30, 2005. The Revolving Loan
Facility requires scheduled annual reductions of the Revolving Loan Commitment
(as defined in the Senior Credit Facility) as of June 30, 2000, payable
quarterly in equal quarterly amounts, commencing on September 30, 2000 in the
following percentages: (i) from 9/30/00 through and including 6/30/01, 15.00%;
(ii) from 9/30/01 through and including 6/30/02, 20.00%; (iii) from 9/30/02
through and including 6/30/03, 20.00%; (iv) from 9/30/03 through and including
6/30/04, 20.00%; and (v) from 9/30/04 through and including 6/30/05, 25.00%.
Voluntary reductions of the Revolving Loan Commitment made by the Company shall
not affect the reduction percentages set forth above.
Additional Facility Indebtedness
The Company has the ability to incur additional indebtedness ("Additional
Facility Indebtedness") in a principal amount not to exceed $250.0 million from
one or more of the Lenders or any other institution acceptable to the
Administrative Agent that agrees to extend such credit, provided that certain
conditions under the Senior Credit Facility are complied with. As of the date
hereof, the Company has not requested, and no Lender has issued, any commitment
to extend such Additional Facility Indebtedness to the Company.
Interest Rate
The Loans bear interest at a rate equal to, at the Company's option, (i)
the Prime Rate (as defined in the Senior Credit Facility) in effect from time to
time plus the Applicable Margin (as defined) (a "Prime Rate Loan") or (ii) the
Eurodollar Rate (as defined in the Senior Credit Facility) as determined by the
Administrative Agent for the respective interest period plus the Applicable
Margin (a "Eurodollar Loan"). The Applicable Margin is calculated based on the
Company's Total Leverage Ratio (as defined in the Senior Credit Facility)
according to the table set forth below:
<TABLE>
<CAPTION>
PRIME RATE EURODOLLAR RATE
TOTAL LEVERAGE RATIO APPLICABLE MARGIN APPLICABLE MARGIN
-------------------- ----------------- -----------------
<S> <C> <C>
Greater than 6.75..................................... 1.000% 2.000%
Greater than 6.50 but less than or equal to 6.75...... 0.750% 1.750%
Greater than 6.00 but less than or equal to 6.50...... 0.375% 1.375%
Greater than 5.50 but less than or equal to 6.00...... 0.125% 1.125%
Greater than 5.00 but less than or equal to 5.50...... 0.000% 0.875%
Greater than 4.50 but less than or equal to 5.00...... 0.000% 0.625%
Greater than 4.00 but less than or equal to 4.50...... 0.000% 0.500%
Less than or equal to 4.00............................ 0.000% 0.400%
</TABLE>
Fees
The Company is required to pay commitment fees on the aggregate unused
amount of the Available Revolving Loan Commitment (as defined in the Senior
Credit Facility) based on the Total Leverage Ratio for the most recent fiscal
quarter end. If the Total Leverage Ratio is greater than or equal to 5.50, the
corresponding commitment fee is 0.375%; if the Total Leverage Ratio is less than
5.50, the corresponding commitment fee is 0.250%. The Administrative Agent will
also receive such other customary fees as have been separately agreed upon with
the Company. The Company also is required to pay fees for outstanding letters of
credit drawn under the Senior Credit Facility at a rate per annum on the amount
of the Letter of
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Credit Obligations (as defined in the Senior Credit Facility) equal to the
Applicable Margin for Eurodollar Loans plus an issuing bank fee of $2,000 for
issuing, amending or renewing any letter of credit.
Security and Guarantees
The Senior Credit Facility is secured by (i) a pledge of all capital stock
owned by CMCLA and its subsidiaries, (ii) a pledge of all capital stock of CMCLA
owned by CMHC, (iii) a non-recourse pledge of all capital stock of CMHC owned by
Chancellor Media, (iv) a pledge of all debt and equity securities of persons
engaged in any Non-Core Business (as defined in the Senior Credit Facility)
purchased by the Company, (v) a collateral assignment of all partnership
interests held by the subsidiaries of CMCLA, (vi) a collateral assignment of all
trust interests held by the subsidiaries of CMCLA, (vii) a collateral assignment
of all limited liability company interests held by CMCLA, (viii) a downstream
guarantee provided by CMHC and (ix) upstream guarantees provided by the
subsidiaries of CMCLA.
Covenants
The Senior Credit Facility contains customary restrictive covenants, which,
among other things and with certain exceptions, limit the ability of the Company
to incur additional indebtedness and liens in connection therewith, enter into
certain transactions with affiliates, pay dividends, consolidate, merge or
effect certain asset sales, issue additional stock, effect an asset swap, make
acquisitions and make capital expenditures and enter new lines of business.
Under the Senior Credit Facility, the Company is required to maintain
specified financial ratios, based on its Senior Leverage Ratio and Total
Leverage Ratio (in each case, as defined in the Senior Credit Facility), for
specified periods of time. Under the Senior Credit Facility, the Company must
not exceed the following ratios during the following periods of time:
<TABLE>
<CAPTION>
PERIOD ENDING SENIOR LEVERAGE RATIO TOTAL LEVERAGE RATIO
------------- --------------------- --------------------
<S> <C> <C>
4/25/97 through 12/31/97.......................... 6.50 to 1.00 7.00 to 1.00
1/1/98 through 12/31/98........................... 5.75 to 1.00 6.75 to 1.00
1/1/99 through 12/31/99........................... 5.00 to 1.00 6.00 to 1.00
1/1/00 through 12/31/00........................... 4.25 to 1.00 5.25 to 1.00
1/1/01 and thereafter............................. 4.00 to 1.00 5.00 to 1.00
</TABLE>
In the event that Chancellor Media, CMHC or CMCLA issues Subordinated
Indebtedness (as defined in the Senior Credit Facility), other than the
assumption or refinancing of the 9 3/8% Notes and the Original Notes, the Senior
Leverage Ratio will be permanently reduced by 0.50.
Under the Senior Credit Facility, the Company may not, as of the end of any
fiscal quarter, allow its ratio of the sum of Operating Cash Flow plus the
Available Revolving Commitment (in each case, as defined in the Senior Credit
Facility) during the last fiscal four-quarter period to Pro Forma Fixed Changes
(as defined in the Senior Credit Facility) for the four-quarter period beginning
on the day following that fiscal quarter end, to be less than 1.05 to 1.00.
Under the Senior Credit Facility, the Company also is required to comply
with certain other financial tests, such as a specified ratio of Operating Cash
Flow to Cash Interest Expense (as each such term is defined in the Senior Credit
Facility).
Use of Proceeds
The Senior Credit Facility requires that the Net Proceeds from any
Permitted Asset Sale (in each case, as defined in the Senior Credit Facility) be
applied, at the Company's election, to the Term Loan Facility or the Revolving
Loan Facility or any combination thereof. In the alternative, the Company may
elect to make an acquisition with the Net Proceeds, so long as the Company has
entered into a contract for such acquisition within 12 months from the date of
such Permitted Asset Sale and has concluded the purchase with 18 months from the
date of such Permitted Asset Sale. In addition, 50% of Net Proceeds from any
Subordinated
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Indebtedness issued by the Company, other than the assumption or refinancing of
the 9 3/8% Notes and the Original Notes, must be applied, at the Company's
election, to the Term Loan Facility or the Revolving Loan Facility or any
combination thereof. To the extent that the Company elects to apply any amounts
described in this paragraph to the Revolving Loan Facility, the commitments
under such facility will not be permanently reduced and will be available for
subsequent borrowing by the Company.
Events of Default
The Senior Credit Facility contains customary events of default, including
(i) the default in the payment of any interest, reimbursement amounts with
respect to letters of credit, or fees or other amounts payable to the Lenders
(other than principal) when due which is not cured within five days from the
date that such payment was due, (ii) the default in the payment of any principal
amount when due, (iii) the default in the performance or observance of certain
representations, warranties, covenants and agreements contained in the Senior
Credit Facility, (iv) a Senior Credit Facility Change of Control (as defined
below), (v) the entry of an order for relief, winding-up or liquidation under
Title 11 of the United States Code or similar federal or state laws against
Chancellor Media, CMHC or the Company, (vi) the voluntary commencement by the
Company of bankruptcy proceedings under Title 11 of the United States Code or
similar federal or state laws, or the commencement of involuntary bankruptcy
proceedings against the Company, which are not diligently contested or which
continue undismissed for a period of 45 consecutive days, (vii) the entry of a
judgment against the Company which, individually or when aggregated with other
such judgments, exceeds $10 million, (viii) the failure to satisfy certain
minimum employee benefit funding standards, (ix) the acceleration of the
maturity of (a) Subordinated Indebtedness of the Company or (b) any other
indebtedness of the Company in an aggregate principal amount exceeding $3
million, (x) any event which would permit the acceleration of such subordinated
indebtedness or such other indebtedness which has not been cured within any
applicable cure period or waived in writing, (xi) any event which does not
permit acceleration of such Subordinated Indebtedness or such other indebtedness
but requires the Company to purchase or acquire such Subordinated Indebtedness
or such other indebtedness, (xii) any material default under any Interest Hedge
Agreement (as defined in the Senior Credit Facility) with a notional principal
amount of $6 million or more, (xii) the issuance by the FCC of a revocation
order based on alleged alien ownership of the Company, (xiii) the final,
non-appealable termination or revocation of any material FCC license or failure
to renew any such license, (xiv) the failure of any security document or note
under the Senior Credit Facility to be in effect, or (xv) the breach by CMHC of
the guarantee or stock pledge made by it pursuant to the Senior Credit Facility.
A "Senior Credit Facility Change of Control" will be deemed to have
occurred under the Senior Credit Facility if (i) any Person (as defined in the
Senior Credit Facility), other than Scott K. Ginsburg, Matthew Devine, Kenneth
J. O'Keefe, James de Castro and Hicks Muse and its affiliates, shall
individually or collectively control more than 51% on a fully diluted basis of
the voting power of Chancellor Media or (ii) CMHC shall cease to own all of the
issued and outstanding common stock of CMCLA.
9 3/8% NOTES
The 9 3/8% Notes mature on October 1, 2004. Interest on the 9 3/8% Notes
accrue at the rate of 9 3/8% per annum and is payable semiannually. The 9 3/8%
Notes are unsecured obligations of the Company, ranking subordinate in right of
payment to all Senior Debt (as defined in the 9 3/8% Indenture) of the Company,
and will rank pari passu with the Exchange Notes.
The Company's subsidiaries fully and unconditionally guarantee the full and
prompt payment of principal of all interest on the 9 3/8% Notes, and of all
other obligations under the 9 3/8% Indenture. The indebtedness evidenced by each
such guarantee are subordinated to each guarantor's Senior Debt on the same
terms as the 9 3/8% Notes are subordinated to the Company's Senior Debt.
Prior to January 31, 1999 the Company may redeem the 9 3/8% Notes with the
net cash proceeds of one or more Public Equity Offerings (as defined in the
9 3/8% Indenture) at a redemption price of 108.203% or 107.031% of the principal
amount thereof, plus, in each case, accrued and unpaid interest to the
redemption date, during the respective 12-month periods commencing on February
1, 1997 and 1998; provided, however, that after any such redemption at least 75%
of the aggregate principal amount of the 9 3/8% Notes originally
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issued must be outstanding. The Company's ability to optionally redeem the
9 3/8% Notes are subject to restrictions contained in the Senior Credit
Facility, which limits the amount of debt subordinate to the indebtedness under
the Senior Credit Facility that may be redeemed by the Company.
Under the 9 3/8% Indenture, in the event of a change of control (as defined
in the 9 3/8% Indenture) of the Company, each holder of 9 3/8% Notes will have
the right to require the Company to repurchase, in whole or in part, such
holder's 9 3/8% Notes at a purchase price equal to 101% of their principal
amount, plus accrued and unpaid interest, if any to the date of repurchase.
The 9 3/8% Indenture contains certain restrictive covenants which, among
other things, impose limitations (subject to certain exceptions) on the Company
with respect to (i) the payment of dividends or other distributions on capital
stock and the purchase, redemption or retirement for value of shares of capital
stock as any warrants, options or other rights for shares of capital stock; (ii)
the incurrence of additional indebtedness; (iii) the incurrence of subsidiary
indebtedness; (iv) the repayment of redemption of subordinated indebtedness
other than in accordance with its scheduled repayment; (v) sales of assets by
the Company; (vi) asset swaps; (vii) transactions with stockholders and
affiliates; (viii) the restriction of certain payments by subsidiaries to their
respective parents; (ix) the creation of liens on the assets of the Company or
its subsidiaries; (x) the incurrence of indebtedness senior to the 9 3/8% Notes
and subordinate to other indebtedness of the Company; (xi) investments by the
Company or its subsidiaries; (xii) the issuance of preferred stock by any of the
Company's subsidiaries; (xiii) sales and leasebacks by the Company or its
subsidiaries; (xiv) the guarantee of indebtedness; (xv) the conduct of business
other than the ownership and operation of radio broadcast stations; and (xvi)
the merger or sale of all or substantially all the assets of the Company. Upon
the happening of certain events of default specified in the 9 3/8% Indenture,
the trustee for the 9 3/8% Notes may, and the trustee upon the request of
holders of 25% in principal amount then outstanding of the 9 3/8% Notes shall,
or the holders of at least 25% in principal amount of outstanding 9 3/8% Notes
may, declare the principal amount then outstanding of and accrued but unpaid
interest, if any, on all of such 9 3/8% Notes to be due and payable. Upon the
happening of certain other events of default specified in the 9 3/8% Notes
Indenture, the unpaid principal of and accrued but unpaid interest on all
outstanding 9 3/8% Notes will automatically become due and payable without any
action by the trustee or the holders of the 9 3/8% Notes.
The Company may terminate its obligations under the 9 3/8% Indenture at any
time, and the obligations of the guarantors with respect thereto shall
terminate, by delivering all outstanding 9 3/8% Notes of the appropriate series
to the appropriate trustee for cancellation and paying all sums payable by it
thereunder. The Company, at its option, (i) will be discharged from any and all
obligations with respect to the 9 3/8% Notes delivered, and the guarantor will
be discharged from any and all obligations with respect to its guarantee of such
9 3/8% Notes, (except for certain obligations of the Company to register the
transfer or exchange of such 9 3/8% Notes, replace stolen, lost or mutilated
9 3/8% Notes, maintain paying agencies and hold moneys for payment in trust) or
(ii) need not comply with certain of the restrictive covenants with respect to
the 9 3/8% Indenture, in each case, if the Company, in addition to satisfying
certain other obligations, deposits with the appropriate trustee, in trust, U.S.
legal tender or U.S. Government Obligations (in each case, as defined in the
9 3/8% Indenture) or a combination thereof which, through the payment of
interest thereon and principal in respect thereof in accordance with their
terms, will be sufficient to pay all the principal of and interest on 9 3/8%
Notes to be defeased on the dates such payments are due in accordance with the
terms of 9 3/8% Notes as well as the trustee's fees and expenses.
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DESCRIPTION OF CAPITAL STOCK
CHANCELLOR MEDIA
COMMON STOCK
Chancellor Media's authorized common stock consists of 250,000,000 shares
of Common Stock, par value $0.01 per share (the "Common Stock"), approximately
59,613,500 of which were issued and outstanding as of September 5, 1997 and
75,000,000 shares of Class A Common Stock, par value $0.01 per share (the "Class
A Common Stock"), none of which were issued and outstanding as of September 5,
1997.
The shares of Common Stock currently outstanding are validly issued, fully
paid and nonassessable.
It is not contemplated that any shares of Class A Common Stock will be
issued at any time. The Amended and Restated Certificate of Incorporation of
Chancellor Media provides that the issuance of any shares of Class A Common
Stock will require the unanimous affirmative vote of the Board of Directors of
Chancellor Media. Chancellor Media presently expects that the Board of Directors
of Chancellor Media will submit a proposal at the 1998 annual meeting of
stockholders in order to eliminate the authorized shares of Class A Common
Stock.
Dividends
Holders of shares of Common Stock and Class A Common Stock are entitled to
receive such dividends as may be declared by the Board of Directors of
Chancellor Media out of funds legally available for such purpose. The Senior
Credit Facility and the certificates of designation governing the $3.00
Convertible Preferred Stock and the 7% Convertible Preferred Stock each directly
restrict, and the 9 3/8% Indenture, the Indenture and the certificates of
designation governing the 12% Preferred Stock and the 12 1/4 Preferred Stock
will each indirectly restrict, Chancellor Media's ability to pay cash dividends
on the Common Stock and Class A Common Stock.
Neither Evergreen nor Chancellor has declared or paid any dividends with
respect to its respective formerly outstanding common stock in the past, and it
is not anticipated that Chancellor Media will pay any cash dividends on the
Common Stock and Class A Common Stock in the foreseeable future.
Voting Rights
Holders of shares of Common Stock and Class A Common Stock, each voting as
a separate class, shall be entitled to vote on all matters submitted to a vote
of the stockholders, except as otherwise provided by law. Each share of Common
Stock and Class A Common Stock is entitled to one vote per share. Holders of
Common Stock and Class A Common Stock are not entitled to cumulative votes in
the election of directors.
Under Delaware law, the affirmative vote of the holders of a majority of
the outstanding shares of any class of capital stock of Chancellor Media is
required to approve any amendment to the Amended and Restated Certificate of
Incorporation of Chancellor Media that would increase or decrease the aggregate
number of authorized shares of any class, increase or decrease the par value of
the shares of any class, or modify or change the powers, preferences or special
rights of the shares of any class so as to affect such class adversely.
Liquidation Rights
Upon liquidation, dissolution, or winding-up of Chancellor Media, the
holders of Common Stock and Class A Common Stock are entitled to share ratably
in all assets available for distribution after payment in full of creditors and
the holders of preferred stock of Chancellor Media.
Transfer Agent
The Bank of New York serves as the Transfer Agent and Registrar for the
Common Stock.
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Alien Ownership
Chancellor Media's Amended and Restated Certificate of Incorporation
restricts the ownership and voting of Chancellor Media's capital stock,
including its Common Stock, in accordance with the Communications Act and the
rules of the FCC, to prohibit ownership of more than 25% of Chancellor Media's
outstanding capital stock (or control of more than 25% of the voting power it
represents) by or for the account of aliens, foreign governments, or non-U.S.
corporations or corporations otherwise subject to control by such persons or
entities. The Certificate of Incorporation also prohibits any transfer of
Chancellor Media's capital stock that would cause Chancellor Media to violate
this prohibition. In addition, the Amended and Restated Certificate of
Incorporation of Chancellor Media authorizes the Board of Directors of
Chancellor Media to adopt such provisions as its deems necessary to enforce
these prohibitions.
Other Provisions
The holders of Common Stock and Class A Common Stock are not entitled to
preemptive or similar rights. The shares of Common Stock are not subject to
redemption or a sinking fund.
No single shareholder of Chancellor Media holds more than 50.0% of the
combined voting power of Chancellor Media. See "Risk Factors -- Control of the
Company." As a result, a holder of an "attributable" interest in Chancellor
Media may violate the FCC's multiple ownership rules or cross interest rules if
such holder also has an "attributable" interest (or, in some cases, a
"meaningful" nonattributable interest) in other television or radio stations, or
in daily newspapers, depending on the number and location of those radio or
television stations or daily newspapers. Such a stockholder may also be
restricted in the companies in which such stockholder may invest. See "Business
and Properties -- Federal Regulation of Radio Broadcasting Industry -- Ownership
Matters."
$3.00 CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
Dividends
Holders of $3.00 Convertible Preferred Stock are entitled to receive, when,
as and if declared by the Board of Directors out of legally available funds,
cash dividends at an annual rate of $3.00 per share, payable quarterly in
arrears on March 15, June 15, September 15 and December 15 of each year (each a
"Dividend Payment Date"), beginning September 15, 1997. If a Dividend Payment
Date is a Saturday, Sunday or day in which banking institutions are legally
authorized to close in the City of New York, however, the dividend will be
payable on the next business day. Dividends will accrue and be cumulative from
the most recent date to which dividends have been paid or, if none have been
paid, from the date of first issuance of the $3.00 Convertible Preferred Stock
and will be payable to holders of record on the March 1, June 1, September 1 and
December 1 immediately preceding the relevant Dividend Payment Date. No
interest, or sum of money in lieu of interest, will be payable in respect of any
accrued and unpaid dividends.
The $3.00 Convertible Preferred Stock has priority as to dividends over the
Common Stock and any other series or class of the Company's stock that ranks
junior to the $3.00 Convertible Preferred Stock as to dividends ("Junior
Dividend Stock"). Notwithstanding the foregoing, the $3.00 Convertible Preferred
Stock shall rank junior as to dividends and rights upon a liquidation,
dissolution or winding-up of the Company to any and all classes or series of
capital stock (other than Common Stock) of the Company, whether currently issued
or issued in the future, that does not by its terms expressly provide that it
ranks on a parity with or junior to the $3.00 Convertible Preferred Stock as to
dividends and rights upon a liquidation, dissolution or winding-up of the
Company.
No dividend (other than dividends payable solely in Common Stock, any
Junior Dividend Stock or warrants or other rights to acquire such Common Stock
or Junior Dividend Stock) may be paid or set apart for payment on, and no
purchase, redemption or other acquisition shall be made by the Company of, the
Common Stock or Junior Dividend Stock unless all accrued and unpaid dividends on
the $3.00 Convertible Preferred Stock, including the full dividend for the
then-current quarterly dividend period, shall have been paid or declared and set
apart for payment without interest.
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Except as provided below, the Company may not pay dividends on any class or
series of stock, if hereafter issued, having parity with the $3.00 Convertible
Preferred Stock as to dividends ("Parity Dividend Stock") unless it has paid or
declared and set apart for payment or contemporaneously pays or declares and
sets apart for payment all accrued and unpaid dividends for all prior dividend
payment periods on the Convertible Preferred Stock. The 7% Convertible Preferred
Stock constitutes Parity Dividend Stock. In addition, except as provided below,
the Company may not pay dividends on the $3.00 Convertible Preferred Stock
unless it has paid or declared and set apart for payment or contemporaneously
pays or declares and sets apart for payment all accrued and unpaid dividends for
all prior dividend payment periods on the Parity Dividend Stock. Whenever all
accrued dividends in respect of prior dividend payment periods are not paid in
full on the $3.00 Convertible Preferred Stock and on any Parity Dividend Stock,
all dividends declared on the $3.00 Convertible Preferred Stock and the Parity
Dividend Stock will be declared and make pro rata so that the amount of
dividends declared on the $3.00 Convertible Preferred Stock and the Parity
Dividend Stock will bear the same ratio that accrued and unpaid dividends in
respect of prior dividend payment periods on the $3.00 Convertible Preferred
Stock and the Parity Dividend Stock bear to each other.
Chancellor Media may not purchase any shares of the $3.00 Convertible
Preferred Stock or any Parity Dividend Stock (except for consideration payable
in Common Stock or Junior Dividend Stock) or redeem fewer than all the shares of
the $3.00 Convertible Preferred Stock and Parity Dividend Stock then outstanding
if the Company has failed to pay any accrued dividend on the $3.00 Convertible
Preferred Stock or any Parity Dividend Stock on a stated payment date.
Notwithstanding the foregoing, in such event, the Company may purchase or redeem
fewer than all the shares of the $3.00 Convertible Preferred Stock and Parity
Dividend Stock if such repurchase or redemption is made pro rata so that the
amounts purchased or redeemed bear to each other the same ratio that the
required redemption payments on the shares of the $3.00 Convertible Preferred
Stock and any Parity Dividend Stock then outstanding bear to each other.
If Chancellor Media hereafter issues any series or class of stock that
ranks senior as to dividends to the $3.00 Convertible Preferred Stock ("Senior
Dividend Stock") and fails to pay or declare and set apart for payment accrued
and unpaid dividends on any Series Dividend Stock (except to the extent allowed
by the terms of the Senior Dividend Stock), Chancellor Media may not pay or
declare and set apart for payment any dividend on the $3.00 Convertible
Preferred Stock unless and until all accrued and unpaid dividends on the Senior
Dividend Stock, including the full dividends for the then current dividend
period, have been paid or declared and set apart for payment without interest.
Chancellor Media has no Senior Dividend Stock outstanding on the date of this
Prospectus.
The dividend payable on $3.00 Convertible Preferred Stock for each
quarterly dividend period will be computed by dividing the annual dividend
amount by four. The amount of dividends payable for the initial dividend period
and for any period shorter than a full dividend period will be computed on the
basis of a 360-day year of twelve 30-day months. No interest will be payable on
any $3.00 Convertible Preferred Stock dividend that may be in arrears.
Under Delaware law, Chancellor Media may declare and pay dividends or make
other distributions on its capital stock only out of surplus, as defined in the
Delaware General Corporation law (the "DGCL"), or if no surplus is available,
out of its net profits for the fiscal year in which the dividend or distribution
is declared and the preceding fiscal year. No dividends or distributions may be
declared or paid if Chancellor Media is or would be rendered insolvent by virtue
of the dividend or distribution, or if the declaration, payment or distribution
would contravene Chancellor Media's Amended and Restated Certificate of
Incorporation as then in effect. Chancellor Media's ability to pay dividends on
its capital stock, including the $3.00 Convertible Preferred Stock, is dependent
upon the receipt of funds from its subsidiaries.
Liquidation Rights
In the case of the voluntary or involuntary liquidation dissolution or
winding-up of Chancellor Media, subject to the payment in full, or until
provision has been made for the payment in full, of all claims of creditors of
Chancellor Media, holders of $3.00 Convertible Preferred Stock are entitled to
receive the liquidation preference of $50.00 per share, plus an amount equal to
any accrued and unpaid dividends, whether
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or not declared, to the payment date, before any payment or distribution is made
to the holders of Common Stock or any other series or class of stock hereafter
issued that ranks junior as to liquidation rights to the $3.00 Convertible
Preferred Stock ("Junior Liquidation Stock"). Holders of $3.00 Convertible
Preferred Stock will not be entitled to receive the liquidation preference of
their shares until the liquidation preference of any other series or class of
stock hereafter issued that ranks senior as to liquidation rights to the $3.00
Convertible Preferred Stock ("Senior Liquidation Stock"), if any has been paid
in full. The holders of $3.00 Convertible Preferred Stock and any series or
class of stock hereafter issued that ranks on a parity as to liquidation rights
with the $3.00 Convertible Preferred Stock ("Parity Liquidation Stock") are
entitled to share ratably, in accordance with the respective preferential
amounts payable on their stock, in any distribution (after payment of the
liquidation preference on any Senior Liquidation Stock) that is not sufficient
to pay in full the aggregate liquidation preference on both the $3.00
Convertible Preferred Stock and any Parity Liquidation Stock. The 7% Convertible
Preferred Stock constitutes Parity Liquidation Stock.
After payment in full of the liquidation preference plus any accrued and
unpaid dividends on the $3.00 Convertible Preferred Stock, the holders will not
be entitled to any further participation in any distribution of assets by
Chancellor Media. Neither a consolidation or merger of Chancellor Media with
another entity nor a sale or transfer or all or part of Chancellor Media's
assets for cash, securities or other property will be considered a liquidation,
dissolution or winding up of Chancellor Media.
Voting Rights
The holders of $3.00 Convertible Preferred Stock will have no voting rights
except as described below or as required by law. In exercising any voting
rights, each outstanding share of $3.00 Convertible Preferred Stock will be
entitled to one vote, although shares held by Chancellor Media or any entity
controlled by Chancellor Media will have no voting rights.
Whenever dividends on the $3.00 Convertible Preferred Stock are in arrears
in an aggregate amount equal to at least six quarterly dividends (whether or not
consecutive), the size of Chancellor Media's board of directors will be
increased by two, and the holders of $3.00 Convertible Preferred Stock, voting
separately as a class together with holders of any Parity Dividend Stock then
having voting rights, will be entitled to elect two additional directors to the
Board of Directors at, subject to certain limitations, any annual meeting of
stockholders at which directors are to be elected held during the period when
the dividends remain in arrears or, under certain circumstances, at a special
meeting of stockholders. These voting rights will terminate when all dividends
in arrears and for the current quarterly period have been paid in full or
declared and set apart for payment. The term of office of the additional
directors so elected will terminate immediately upon that payment or provision
for payment.
In addition, so long as any $3.00 Convertible Preferred Stock is
outstanding,Chancellor Media will not, without the affirmative vote or consent
of the holders of at least 66 2/3% of all outstanding shares of $3.00
Convertible Preferred Stock and outstanding Parity Dividend Stock, voting as a
single class (i) amend, alter or repeal (by merger or otherwise) any provision
of the Certificate of Incorporation or the by-laws of Chancellor Media so as to
affect adversely the relative rights, preferences, qualifications, limitations
or restrictions of the $3.00 Convertible Preferred Stock or (ii) effect any
reclassification of the $3.00 Convertible Preferred Stock.
Under Delaware law, holders of the $3.00 Convertible Preferred Stock will
be entitled to vote as a class upon a proposed amendment to Chancellor Media's
Certificate of Incorporation, whether or not entitled to vote thereon by the
Certificate of Incorporation, if the amendment would increase or decrease the
aggregate number of authorized shares of such class, increase or decrease the
par value of the shares of such class, or alter or change the powers,
preferences, or special rights of the shares of such class so as to affect them
adversely.
Optional Redemption
The $3.00 Convertible Preferred Stock may not be redeemed prior to June 16,
1999. Thereafter, the $3.00 Convertible Preferred Stock may be redeemed by
Chancellor Media, at its option, in whole or in part at any time, if redeemed
during the 12-month period beginning June 15 of any year specified below (June
16 in
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the case of 1999) at the following redemption prices (expressed as percentages
of the liquidation preference thereof):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1999........................................................ 104.80%
2000........................................................ 104.20
2001........................................................ 103.60
2002........................................................ 103.00
2003........................................................ 102.40
2004........................................................ 101.80
2005........................................................ 101.20
2006........................................................ 100.60
2007 and thereafter......................................... 100.00
</TABLE>
plus in each case accrued and unpaid dividends, whether or not declared, to the
redemption date.
The foregoing is subject to the proviso that on or prior to June 15, 2000
the $3.00 Convertible Preferred Stock may not be redeemed at the option of
Chancellor Media unless the closing price of Chancellor Media's Common Stock has
equalled or exceeded 150% of the conversion price at such time for at least 20
out of any 30 consecutive trading days ending within 15 days before the notice
of redemption is first mailed.
If fewer than all the outstanding shares of $3.00 Convertible Preferred
Stock are to be redeemed, Chancellor Media will select those shares to be
redeemed pro rata or in such other manner as the Board of Directors may
determine. There is no mandatory or sinking fund obligation for the $3.00
Convertible Preferred Stock. In the event that Chancellor Media has failed to
pay accrued and unpaid dividends on the $3.00 Convertible Preferred Stock, it
may not redeem less than all of the outstanding shares of the $3.00 Convertible
Preferred Stock until all accrued and unpaid dividends have been paid in full.
Notice of redemption will be mailed at least 15 days but not more than 60
days before the redemption date to each holder of record of $3.00 Convertible
Preferred Stock to be redeemed at the address shown on the stock transfer books.
After the redemption date, dividends will cease to accrue on the shares of $3.00
Convertible Preferred Stock called for redemption and all rights of the holders
of those shares will terminate, except the conversion rights to the extent
described below and the right to receive the redemption price plus accrued and
unpaid dividends, whether or not declared, to the redemption date, without
interest.
Conversion Rights
Each holder of $3.00 Convertible Preferred Stock will have the right at any
time at the holder's option to convert any and all shares of $3.00 Convertible
Preferred Stock into Common Stock at a conversion price (subject to adjustment
as described below) of $50.00 per share of underlying Common Stock (equivalent
to a conversion rate of 1.00 share of Common Stock per share of $3.00
Convertible Preferred Stock). If the $3.00 Convertible Preferred Stock is called
for redemption, the conversion right will terminate at the close of business on
the redemption date fixed by the Board of Directors.
If shares of $3.00 Convertible Preferred Stock not called for redemption
are surrendered for conversion during the period between the close of business
on any dividend record date and the opening of business on any corresponding
Dividend Payment date such shares so surrendered must be accompanied by payment
of an amount equal to the dividend payable on such shares on such Dividend
Payment Date. No such payment will be required to accompany shares of $3.00
Convertible Preferred Stock called for redemption and surrendered during such
period. A holder of shares of $3.00 Convertible Preferred Stock on a dividend
record date who (or whose transferee) tenders any such shares for conversion
into shares of Common Stock on such dividend payment date will receive the
dividend payable by Chancellor Media on such shares of $3.00 Convertible
Preferred Stock on such date, and the converting holder need not include payment
of the amount of such dividend upon surrender of shares of $3.00 Convertible
Preferred Stock for conversion. Except for shares of $3.00 Convertible Preferred
Stock surrendered for conversion on a dividend payment date, Chancellor Media
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will make no payment or allowance for accrued and unpaid dividends, whether or
not in arrears, on converted shares or for dividends on the shares of Common
Stock issued upon such conversion. No fractional shares of Common Stock will be
issued upon conversions but, in lieu thereof, an appropriate amount will be paid
in cash based on the last reported sale price for the Common Stock on the day of
conversion.
The conversion price will be subject to adjustment in certain events,
including (i) the payment of a dividend on any class of Chancellor Media's
capital stock in shares of Common Stock; (ii) subdivisions or combinations of
the Common Stock; (iii) the issuance to all holders of Common Stock or of
certain rights or warrants (expiring within 45 days after the record date for
determining stockholders entitled to receive them) to subscribe for or purchase
shares of Common Stock of any class at less than current market price; or (iv)
the payment of a dividend to all holders of Common Stock of any shares of
capital stock of Chancellor Media or its subsidiaries (other than shares of
Common Stock of any class) or evidences of indebtedness, cash (excluding cash
dividends payable solely in cash that may from time to time be fixed by the
Board of Directors, or dividends or distributions in connection with
liquidation, dissolution or winding up of Chancellor Media), other assets or
rights or warrants to subscribe for or purchase any securities (other than those
referred to above); or (v) the issuance to all holder of Common Stock of
securities convertible into or exchangeable for shares of Common Stock of any
class (other than pursuant to transactions described above) for a consideration
per share of Common Stock deliverable upon a conversion or exchange of the
securities less than the current market price per share on the date of issuance
of the securities. No adjustment of the conversion price will be required to be
made until cumulative adjustments amount to 1% or more of the conversion price
as last adjusted, and any adjustment below 1% will be carried forward.
Chancellor Media from time to time may reduce the Conversion Price by any
amount for any period of time if the period is at least 20 days and if the
reduction is irrevocable during the period. Whenever the Conversion Price is so
reduced, Chancellor Media shall mail to holders of record of the Convertible
Preferred Stock a notice of the reduction at least 15 days before the date the
reduced Conversion Price takes effect, stating the reduced Conversion Price and
the period it will be in effect.
In case of any reclassification of the Common Stock, any consolidation of
Chancellor Media with, or merger of Chancellor Media into, any other entity, any
merger of any entity into Chancellor Media (other than a merger that does not
result in a reclassification, conversion, exchange or cancellation of the
outstanding shares of Common Stock), any sale or transfer of all or
substantially all of the assets of Chancellor Media or any compulsory share
exchange whereby the Common Stock is converted into other securities, cash or
other property, then the holder of each share of $3.00 Convertible Preferred
Stock then outstanding shall have the right thereafter, during the period that
the share of $3.00 Convertible Preferred Stock shall be convertible, to convert
that share only into the kind and amount of securities, cash and other property
receivable upon the reclassification, consolidation, merger, sale, transfer or
share exchange by a holder of the number of shares of Common Stock into which
share of $3.00 Convertible Preferred Stock would have been convertible
immediately prior to the reclassification, consolidation, merger, sale, transfer
or share exchange.
Change of Control. If there occurs a Change of Control with respect to
Chancellor Media, then shares of the $3.00 Convertible Preferred Stock may be
converted, at the option of the holder thereof at any time from the date of such
Change of Control until the expiration of 45 days after the date of a note by
the Company to all holders of the $3.00 Convertible Preferred Stock of the
occurrence of the Change of Control, into the number of shares of Common Stock
determined by dividing (i) the redemption price for the $3.00 Convertible
Preferred Stock (see "-- Optional Redemption") in effect on the date of the
Change of Control by (ii) the adjusted conversion price. The adjusted conversion
price is the greater of (i) the average closing price per share of the Common
Stock for the last five trading days before the Change of Control or (ii)
66 2/3% of the last reported sales price of the Common Stock before the date
hereof (as adjusted for stock splits or combinations). If the Change of Control
occurs on or before June 16, 1999, the redemption price then in effect for the
optional redemption by Chancellor Media shall, for purposes of the special
conversion rights, be deemed to be the redemption price applicable beginning
immediately after June 16, 1999. The special conversion rights will exist upon
the occurrence of any Change of Control whether or not the transaction relating
thereto has been approved by the Board of Directors of Chancellor Media and may
not be waived by the Board of Directors.
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Exercise of the special conversion rights by the holder of a share of $3.00
Convertible Preferred Stock will be irrevocable. If the Change of Control
involves a consolidation, merger or sale of assets of the Company, the holders
of $3.00 Convertible Preferred Stock exercising their special conversion rights
will be entitled to receive the same consideration as received for the number of
shares of Common Stock into which their shares of $3.00 Convertible Preferred
Stock would have been converted pursuant to the special conversion rights. The
special conversion rights are in addition to the regular conversion rights that
apply to the $3.00 Convertible Preferred Stock.
Chancellor Media may, at its option, elect to pay holders of the $3.00
Convertible Preferred Stock exercising their special conversion rights an amount
in cash equal to 101% of the liquidation preference of the $3.00 Convertible
Preferred Stock plus any accrued and unpaid dividends. The Senior Credit
Facility limits Chancellor Media's ability to pay cash upon election of the
holders of the $3.00 Convertible Preferred Stock to exercise their special
conversion rights.
The special conversion rights may deter certain mergers, tender offers or
other takeover attempts and may thereby adversely affect the market price of the
Common Stock.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of
Chancellor Media to any Person or group of related Persons for purposes of
Section 13(d) of the Exchange Act (a "Group"), other than to the Permitted
Holders (as defined); or (ii) a majority of the Board of Directors of Chancellor
Media shall consist of Persons who are not Continuing Directors (as defined); or
(iii) the acquisition by any Person or Group (other than the Permitted Holders)
of the power, directly or indirectly, to vote or direct the voting of securities
having more than 50% of the ordinary voting power for the election of directors
of Chancellor Media.
"Continuing Director" means, as of the date of determination, any Person
who (i) was a member of the Board of Directors of Evergreen on June 10, 1997 or
who became a director of Chancellor Media upon consummation of the Chancellor
Merger, (ii) was nominated for election or elected to the Board of Directors of
Chancellor Media with the affirmative vote of a majority of the Continuing
Directors who were members of such Board of Directors at the time of such
nomination or election, or (iii) is a representative of a Permitted Holder.
"Permitted Holders" means (i) if the Chancellor Merger is not consummated,
Scott K. Ginsburg and (ii) if the Chancellor Merger is consummated from and
after the effective date thereof, Scott K. Ginsburg, Hicks Muse or any of its
affiliates, officers and directors, or Steven Dinetz.
This "Change of Control" covenant will not apply in the event of (a)
changes in a majority of the Board of Directors of the Company so long as a
majority of such Board of Directors continues to consist of Continuing Directors
and (b) certain transactions with Permitted Holders. In addition, this covenant
is not intended to afford holders of shares of $3.00 Convertible Preferred Stock
protection in the event of certain highly leveraged transactions,
reorganizations, restructurings, mergers and other similar transactions that
might adversely affect the holders of shares of $3.00 Convertible Preferred
Stock, but would not constitute a Change of Control. Chancellor Media could in
the future, enter into transactions including certain recapitalizations of
Chancellor Media, that would not constitute a Change of Control but would
increase the amount of indebtedness outstanding at such time.
With respect to the sale of "all or substantially all" of the assets of
Chancellor Media, which would constitute a Change of Control for proposes of the
certificate of designation for the $3.00 Convertible Preferred Stock, the
meaning of the phrase "all or substantially all" varies according to the facts
and circumstances of the subject transaction, has no clearly established meaning
under relevant law and is subject to judicial interpretation. Accordingly, in
certain circumstances there may be a degree of uncertainty in ascertaining
whether a particular transaction would involve a disposition of "all or
substantially all" of the assets of Chancellor Media and, therefore, it may be
unclear whether a Change of Control has occurred and whether the $3.00
Convertible Preferred Stock is subject to a Change of Control Offer.
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None of the provisions in the certificate of designation for the $3.00
Convertible Preferred Stock relating to the special conversion rights upon a
Change of Control are waiveable by the Board of Directors of Chancellor Media.
Exchange
Shares of $3.00 Convertible Preferred Stock will be exchangeable at the
option of Chancellor Media, in whole but not in part, on any March 15, June 15,
September 15 or December 15, commencing September 15, 2000 (a "Debenture
Exchange Date"), through the issuance of Chancellor Media's 6% Subordinated
Exchange Debentures due 2012 (the "6% Exchange Debentures") in redemption of and
in exchange for shares of $3.00 Convertible Preferred Stock, provided certain
conditions are met. Holders of the $3.00 Convertible Preferred Stock will be
entitled to receive 6% Exchange Debentures at the rate of $50.00 principal
amount of 6% Exchange Debentures for each share of $3.00 Convertible Preferred
Stock. Since 6% Exchange Debentures will only be issued in denominations of
$1,000 or any multiple thereof, holders of $3.00 Convertible Preferred Stock
holding less than such a multiple will receive in cash the liquidation
preference of the $3.00 Convertible Preferred Stock not so exchanged. No shares
of $3.00 Convertible Preferred Stock may be exchanged for 6% Exchange Debentures
unless Chancellor Media has paid or set aside for the benefit of the holders of
the $3.00 Convertible Preferred Stock all accrued and unpaid dividends on the
$3.00 Convertible Preferred Stock to the Debenture Exchange Date. The Senior
Credit Facility may limit Chancellor Media's ability to cause the exchange of
the $3.00 Convertible Preferred Stock for 6% Exchange Debentures. The ability of
Chancellor Media to exchange $3.00 Convertible Preferred Stock for 6% Exchange
Debentures is also subject to certain conditions contained in the indenture
relating to the 6% Exchange Debentures and to limitations imposed under the DGCL
and by applicable laws protecting the rights of creditors.
The holders of 6% Exchange Debentures will be entitled at any time through
the close of business on the maturity date thereof, subject to prior redemption,
to convert any 6% Exchange Debentures or portions thereof (in denominations of
$1,000 or multiples thereof) into Common Stock of Chancellor Media, at the
conversion price per share of Common Stock in effect for the $3.00 Convertible
Preferred Stock at the Debenture Exchange Date, subject to adjustment. Holders
of 6% Exchange Debentures will not be entitled to any payment or adjustment on
account of accrued and unpaid interest upon conversion of the 6% Exchange
Debentures or dividends on any Common Stock issued. 6% Exchange Debentures
called for redemption will not be convertible after the close of business on the
business day preceding the date fixed for redemption, unless Chancellor Media
defaults in payment of the redemption price. No fractional shares of Common
Stock will be issued as a result of conversion, but in lieu thereof, in the sole
discretion of the Board, either (i) such fractional interest will be rounded up
to the next whole share or (ii) an appropriate amount will be paid in cash by
Chancellor Media.
7% CONVERTIBLE PREFERRED STOCK
Dividends
Holders of 7% Convertible Preferred Stock are entitled to receive, when, as
and if declared by the Board of Directors of Chancellor Media out of legally
available funds, cash dividends at an annual rate equal to 7% of the liquidation
preference per share, payable quarterly.
The 7% Convertible Preferred Stock has priority as to dividends over the
Common Stock and Class A Common Stock of Chancellor Media and any other series
or class of Chancellor Media's stock that ranks junior to the 7% Convertible
Preferred Stock as to dividends (the "Junior Dividend Stock"). Notwithstanding
the foregoing, the 7% Convertible Preferred Stock shall rank junior as to
dividends, redemption payments and rights upon a liquidation, dissolution or
winding-up of Chancellor Media to any and all classes or series of capital stock
(other than common stock) of Chancellor Media, issued in the future, that does
not by its terms expressly provide that it ranks on a parity with or junior to
the 7% Convertible Preferred Stock as to dividends and rights upon a
liquidation, dissolution or winding-up of Chancellor Media.
No dividend (other than dividends payable solely in common stock, any
Junior Dividend Stock or warrants or other rights to acquire such common stock
or Junior Dividend Stock) may be paid or declared and
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<PAGE> 113
set apart for payment on, and no purchase, redemption or other acquisition shall
be made by Chancellor Media of, the Common Stock of Chancellor Media or Junior
Dividend Stock unless all accrued and unpaid dividends on the 7% Convertible
Preferred Stock, including the full dividend for the then-current quarterly
dividend period, shall have been paid or declared and set apart for payment
without interest.
Except as provided below, Chancellor Media may not pay dividends on any
class or series of stock issued in the future having parity with the 7%
Convertible Preferred Stock as to dividends ("Parity Dividend Stock") unless it
has paid or declared and set apart for payment or contemporaneously pays or
declares and sets apart for payment all accrued and unpaid dividends for all
prior dividend payment periods on the 7% Convertible Preferred Stock. In
addition, except as provided below, Chancellor Media may not pay dividends on
the 7% Convertible Preferred Stock unless it has paid or declared and set apart
for payment or contemporaneously pays or declares and sets apart for payment all
accrued and unpaid dividends for all prior dividend payment periods on the
Parity Dividend Stock. Whenever all accrued dividends in respect of prior
dividend payment periods are not paid in full on 7% Convertible Preferred Stock
and on any Parity Dividend Stock, all dividends declared on the 7% Convertible
Preferred Stock and the Parity Dividend Stock will be declared and made pro rata
so that the amount of dividends declared on the 7% Convertible Preferred Stock
and the Parity Dividend Stock will bear the same ratio that accrued and unpaid
dividends in respect of prior dividend payment periods on the 7% Convertible
Preferred Stock and the Parity Dividend Stock bear to each other. The $3.00
Convertible Preferred Stock constitutes "Parity Dividend Stock" for purposes of
the 7% Convertible Preferred Stock.
Chancellor Media may not purchase any shares of the 7% Convertible
Preferred Stock or any Parity Dividend Stock (except for consideration payable
in common stock or Junior Dividend Stock) or redeem fewer than all the shares of
the 7% Convertible Preferred Stock and Parity Dividend Stock then outstanding if
Chancellor Media has failed to pay any accrued dividend on the 7% Convertible
Preferred Stock or on any Parity Dividend Stock on a stated payment date.
Notwithstanding the foregoing, in such event, Chancellor Media may purchase or
redeem fewer than all the shares of the 7% Convertible Preferred Stock and
Parity Dividend Stock if such repurchase or redemption is made pro rata so that
the amounts purchased or redeemed bear to each other the same ratio that the
required redemption payments on the shares of the 7% Convertible Preferred Stock
and any Parity Dividend Stock then outstanding bear to each other.
If Chancellor Media issues any series or class of stock that ranks senior
as to dividends to the 7% Convertible Preferred Stock ("Senior Dividend Stock")
and fails to pay or declare and set apart for payment accrued and unpaid
dividends on any Senior Dividend Stock (except to the extent allowed by the
terms of the Senior Dividend Stock), Chancellor Media may not pay or declare and
set apart for payment any dividend on the 7% Convertible Preferred Stock unless
and until all accrued and unpaid dividends on the Senior Dividend Stock,
including the full dividends for the then current dividend period, have been
paid or declared and set apart for payment without interest.
Liquidation Rights
In the case of the voluntary or involuntary liquidation, dissolution or
winding up of Chancellor Media, subject to the payment in full, or until
provision has been made for the payment in full, of all claims of creditors of
Chancellor Media, holders of 7% Convertible Preferred Stock are entitled to
receive the liquidation preference of the 7% Convertible Preferred Stock, plus
an amount equal to any accrued and unpaid dividends, whether or not declared, to
the payment date, before any payment or distribution is made to the holders of
common stock or any other series or class of stock issued in the future that
ranks junior as to liquidation rights to the 7% Convertible Preferred Stock
("Junior Liquidation Stock"). Holders of 7% Convertible Preferred Stock will not
be entitled to receive the liquidation preference of their shares until the
liquidation preference of any other series or class of stock that ranks senior
as to liquidation rights to the 7% Convertible Preferred Stock ("Senior
Liquidation Stock"), if any, and any creditors of Chancellor Media have been
paid in full. The holders of 7% Convertible Preferred Stock and any series or
class of stock that ranks on a parity as to liquidation rights with the 7%
Convertible Preferred Stock ("Parity Liquidation Stock") are entitled to share
ratably, in accordance with the respective preferential amounts payable on their
stock, in any distribution (after payment of the liquidation preference on any
Senior Liquidation Stock) that is
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<PAGE> 114
not sufficient to pay in full the aggregate liquidation preference on both the
7% Convertible Preferred Stock and on any Parity Liquidation Stock. The $3.00
Convertible Preferred Stock constitutes "Parity Liquidation Stock" for purposes
of the 7% Convertible Preferred Stock.
Voting Rights
The holders of 7% Convertible Preferred Stock will have no voting rights
except as described below or as required by law.
Whenever dividends on the 7% Convertible Preferred Stock are in arrears in
aggregate amount equal to at least six quarterly dividends (whether or not
consecutive), the size of Chancellor Media's Board of Directors will be
increased by two, and the holders of 7% Convertible Preferred Stock, voting
separately as a class together with holders of any Parity Dividend Stock of
Chancellor Media then having voting rights, will be entitled to elect two
additional directors to the Board of Directors of Chancellor Media at, subject
to certain limitations, any annual meeting of stockholders at which directors
are to be elected held during the period when the dividends remain in arrears
or, under certain circumstances, at a special meeting of stockholders. These
voting rights will terminate when all dividends in arrears and for the current
quarterly period have been paid in full or declared and set apart for payment.
The term of office of the additional directors so elected will terminate
immediately upon that payment or provision for payment.
In addition, so long as any 7% Convertible Preferred Stock is outstanding,
Chancellor Media may not, without the affirmative vote or consent of the holders
of at least 66 2/3% of all outstanding shares of 7% Convertible Preferred Stock
and outstanding Parity Dividend Stock, voting as a single class (i) amend, alter
or repeal (by merger or otherwise) any provision of the certificate of
designation for the 7% Convertible Preferred Stock, the Certificate of
Incorporation of Chancellor Media or the bylaws of Chancellor Media so as to
affect adversely the relative rights, preferences, qualifications, limitations
of restrictions of the 7% Convertible Preferred Stock or (ii) effect any
reclassification of the 7% Convertible Preferred Stock.
Change of Control
The certificate of designation for the 7% Convertible Preferred Stock
provides that, upon the occurrence of a change of control (as defined in such
certificate of designation), each holder will have the right to require that
Chancellor Media purchase all or a portion of such holder's 7% Convertible
Preferred Stock in cash at a purchase price equal to 101% of the liquidation
preference thereof, plus, without duplication, all accumulated and unpaid
dividends per share to the date of repurchase. If the repurchase of the 7%
Preferred Stock would violate or constitute a default under the Senior Credit
Facility or other indebtedness of Chancellor Media, then, pursuant to the
certificate of designation for the 7% Convertible Preferred Stock, Chancellor
Media will either (A) repay in full all such indebtedness or (B) obtain the
requisite consents, if any, under such indebtedness required to permit the
repurchase of the 7% Convertible Preferred Stock.
Redemption at Option of Chancellor Media
The 7% Convertible Preferred Stock may not be redeemed prior to January 19,
2000. Thereafter, the 7% Convertible Preferred Stock may be redeemed by
Chancellor Media, at its option (subject to contractual and other restrictions
with respect thereto, including limitations under the Senior Credit Facility,
the 9 3/8% Indenture and the Indenture and to the legal availability of funds
therefor), in whole or in part at any time, if redeemed during the 12-month
period beginning January 15 (January 19 in the case of 2000), of any year
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<PAGE> 115
specified below at the following redemption prices (expressed as percentages of
the liquidation preference thereof):
<TABLE>
<CAPTION>
YEAR DIVIDEND
---- --------
<S> <C>
2000........................................................ 104.90%
2001........................................................ 104.20
2002........................................................ 103.50
2003........................................................ 102.80
2004........................................................ 102.10
2005........................................................ 101.40
2006........................................................ 100.70
2007 and thereafter......................................... 100.00
</TABLE>
plus in each case accrued and unpaid dividends, whether or not declared, to the
redemption date.
Conversion Rights
Each holder of 7% Convertible Preferred Stock will have the right, at the
holder's option, to convert any or all shares of 7% Convertible Preferred Stock
into Common Stock at any time at a conversion price (subject to adjustment) of
$36.19 per share of underlying Common Stock. If the 7% Convertible Preferred
Stock is called for redemption, the conversion right, with respect to the called
shares of 7% Convertible Preferred Stock, will terminate at the close of
business on the redemption date fixed by the Board of Directors of Chancellor
Media.
CMCLA
The authorized capital stock of CMCLA consists of 1,000 shares of common
stock, par value $.01 per share, all of which are owned of record and
beneficially by CMHC, and 10,000,000 shares of preferred stock, par value $.01
per share, 1,000,000 of which are designated 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock (the "12 1/4% Preferred Stock"), of which 1,000,000
shares are issued and outstanding, and 3,600,000 of which are designated 12%
Exchangeable Preferred Stock (the "12% Preferred Stock"), of which 2,117,629
shares are issued and outstanding.
12 1/4% PREFERRED STOCK
Dividends. Holders of the 12 1/4% Preferred Stock are entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of funds
legally available therefor, dividends on each share of 12 1/4% Preferred Stock
at a rate per annum equal to 12 1/4% of the then effective liquidation
preference per share of the 12 1/4% Preferred Stock, payable quarterly. If any
dividend payable on any dividend payment date on or before February 15, 2001 is
not declared or paid in full in cash on such dividend payment date, the amount
not paid on such dividend payment date will be added to the liquidation
preference of the 12 1/4% Preferred Stock on such dividend payment date and will
be deemed paid in full and will not accumulate. After February 15, 2001,
dividends may be paid only in cash out of funds legally available therefor.
Ranking. The 12 1/4% Preferred Stock ranks, with respect to dividend
rights and distribution rights on liquidation, winding-up and dissolution (a)
senior to the common stock of the Company, to the 12% Preferred Stock and to
each other class of capital stock or series of preferred stock that may in the
future be established by the Board of Directors of the Company the terms of
which do not expressly provide that it ranks senior to or on a parity with the
12 1/4% Preferred Stock, (b) on a parity with each other class of capital stock
or series of preferred stock that may in the future be established by the Board
of Directors of the Company the terms of which expressly provide that such class
or series will rank on a parity with the 12 1/4% Preferred Stock and (c) junior
to each class of capital stock or series of preferred stock that may in the
future be established by the Board of Directors of the Company the terms of
which expressly provide that such class or series will rank senior to the
12 1/4% Preferred Stock.
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<PAGE> 116
Optional Redemption. The 12 1/4% Preferred Stock is redeemable (subject to
contractual and other restrictions with respect thereto, including limitations
under the Senior Credit Facility, the 9 3/8% Indenture and the Indenture, and to
the legal availability of funds therefor), in whole or in part at any time on
and after February 15, 2001 at the option of the Board of Directors of the
Company, at the redemption prices (expressed as percentages of the then
effective liquidation preference thereof) set forth below, if redeemed during
the twelve-month period commencing on February 15 of each of the years set forth
below, plus accumulated and unpaid dividends to the date of redemption:
<TABLE>
<CAPTION>
YEAR DIVIDEND
---- --------
<S> <C>
2001........................................................ 106.125%
2002........................................................ 104.900
2003........................................................ 103.675
2004........................................................ 102.450
2005........................................................ 101.225
2006 and thereafter......................................... 100.000
</TABLE>
In addition, on or prior to February 15, 1999, the Company may, at its
option, use the net cash proceeds of any Public Equity Offering (as defined in
the certificate of designation for the 12 1/4% Preferred Stock) to redeem the
12 1/4% Preferred Stock, in part, at a redemption price equal to 111.025% of the
then effective liquidation preference if redeemed during the twelve-month period
commencing on February 15, 1997 and 109.8% of the then effective liquidation
preference if redeemed during the twelve-month period commencing on February 15,
1998, plus, in each case, accumulated and unpaid dividends to the date of
redemption; provided, however, that after any such redemption from the proceeds
of a Public Equity Offering, the shares of 12 1/4% Preferred Stock outstanding
must equal at least 75% of the aggregate number of shares of 12 1/4% Preferred
Stock originally issued; provided further, that any such redemption must occur
on or prior to 60 days after receipt by the Company of the proceeds of the
Public Equity Offering.
Mandatory Redemption. The 12 1/4% Preferred Stock is subject to mandatory
redemption (subject to contractual and other restrictions with respect thereto
and to the legal availability of funds therefor) in whole on February 15, 2008,
at a price equal to the then effective liquidation preference thereof, plus all
accumulated and unpaid dividends to the date of redemption.
Voting Rights. Holders of the 12 1/4% Preferred Stock have no voting
rights except as otherwise required by law; provided that the Company may not
authorize any class of capital stock that ranks senior to or on a parity with
the 12 1/4% Preferred Stock and may not, subject to certain exceptions, effect a
merger or sale of substantially all of its assets, without the affirmative vote
of holders of at least a majority of the shares of 12 1/4% Preferred Stock then
outstanding voting or consenting, as the case may be, as one class and, provided
further, that the holders of 12 1/4% Preferred Stock, voting together as a
single class, shall have the right to elect the lesser of two directors and that
number of directors constituting 25% of the Board of Directors of the Company
upon the occurrence of certain events including, but not limited to, the failure
by the Company on or after February 15, 2001 to pay cash dividends in full on
the 12 1/4% Preferred Stock for six or more quarterly dividend periods, whether
or not consecutive, the failure by the Company to discharge any mandatory
redemption or repayment obligation with respect to the 12 1/4% Preferred Stock,
the failure by the Company to make a Change of Control Offer (as defined in the
certificate of designation for the 12 1/4% Preferred Stock), the breach or
violation of one or more of the covenants contained in the certificate of
designation for the 12 1/4% Preferred Stock or the failure the Company to repay
at final stated maturity, or the acceleration of the final stated maturity of
certain indebtedness of the Company (including indebtedness under the Senior
Credit Facility, the 9 3/8% Notes and the Original Notes (and, assuming
consummation of the Exchange Offer, the Exchange Notes).
Change of Control. The certificate of designation for the 12 1/4%
Preferred Stock provides that, upon the occurrence of a Change of Control (as
defined below), each holder will have the right to require that the Company
repurchase all or a portion of such holder's 12 1/4% Preferred Stock in cash at
a purchase price equal to 101% of the then current effective liquidation
preference thereof, plus an amount in cash equal to all accumulated and unpaid
dividends per share to the date of repurchase. If the repurchase of the 12 1/4%
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<PAGE> 117
Preferred Stock would violate or constitute a default under the Senior Credit
Facility, the 9 3/8% Indenture, or other indebtedness of the Company, then
pursuant to the certificate of designation for the 12 1/4% Preferred Stock, the
Company will either (A) repay in full all such indebtedness and terminate all
commitments outstanding under the Senior Credit Facility or (B) obtain the
requisite consents, if any, under the Senior Credit Facility, the 9 3/8%
Indenture, or such other indebtedness required to permit the repurchase of
12 1/4% Preferred Stock. In an offer by the Company to repurchase the 12 1/4%
Preferred Stock at the holder's option upon a Change of Control, the Company
will comply with Section 14(e) of the Exchange Act and the rules and regulations
promulgated thereunder, as then in effect.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or
series of related transactions) of all or substantially all of the assets of the
Company to any Person or group of related Persons for purposes of Section 13(d)
of the Exchange Act (a "Group"), other than to Hicks Muse or any of its
affiliates, officers and directors or to Steven Dinetz (the "Permitted
Holders"); or (ii) a majority of the Board of Directors of Chancellor Media,
CMHC or CMCLA shall consist of Persons who are not Continuing Directors (as
defined below); or (iii) the acquisition by any Person or Group (other than the
Permitted Holders) of the power, directly or indirectly, to vote or direct the
voting of securities having more than 50% of the ordinary voting power for the
election of directors of Chancellor Media, CMHC or CMCLA.
"Continuing Director" means, as of the date of determination, any Person
who (i) was a member of the Board of Directors of CRBC on February 26, 1996,
(ii) was nominated for election or elected to the Board of Directors of the
Company with the affirmative vote of a majority of the Continuing Directors who
were members of such Board of Directors at the time of such nomination or
election, or (iii) is a representative of a Permitted Holder.
With respect to the sale of "all or substantially all" of the assets of the
Company, which would constitute a Change of Control for purposes of the
certificate of designation for the 12 1/4% Preferred Stock, the meaning of the
phrase "all or substantially all" varies according to the facts and
circumstances of the subject transaction, has no clearly established meaning
under relevant law and is subject to judicial interpretation. Accordingly, in
certain circumstances there may be a degree of uncertainty in ascertaining
whether a particular transaction would involve a disposition of "all or
substantially all" of the assets of the Company and, therefore, it may be
unclear whether a Change of Control has occurred and whether the 12 1/4%
Preferred Stock is subject to a Change of Control Offer.
Certain Covenants. The certificate of designation for the 12 1/4%
Preferred Stock contains covenants customary for securities comparable to the
12 1/4% Preferred Stock, including covenants that restrict the ability of CMCLA
and its subsidiaries to incur additional indebtedness, pay dividends and make
certain other restricted payments, and merge or consolidate with any other
person or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially of the assets of the Company.
Exchange. The Company may, at its option, subject to certain conditions,
including its ability to incur additional indebtedness under the 9 3/8%
Indenture and the Senior Credit Facility, on any scheduled dividend payment
date, exchange the 12 1/4% Preferred Stock, in whole but not in part, for its
12 1/4% Subordinated Exchange Debentures due 2008 (the "12 1/4% Exchange
Debentures"). Holders of the 12 1/4% Preferred Stock will be entitled to receive
$1.00 principal amount of 12 1/4% Exchange Debentures for each $1.00 in
liquidation preference of 12 1/4% Preferred Stock including, to the extent
necessary, 12 1/4% Exchange Debentures in principal amounts of less than $1,000.
The 12 1/4% Exchange Debentures, if issued, will be issued under an
indenture (the "12 1/4% Exchange Indenture") between CRBC and U.S. Trust Company
of Texas, N.A., as Trustee (as supplemented, the "12 1/4% Exchange Debenture
Trustee"). The 12 1/4% Exchange Debentures will be unsecured obligations of the
Company, ranking subordinate in right of payment to all senior indebtedness of
the Company, including the 9 3/8% Notes, the Notes and the indebtedness under
the Senior Credit Facility. Interest on the 12 1/4% Exchange Debentures will
accrue at the same rate per annum as the stated dividend rate on the 12 1/4%
Preferred Stock. The 12 1/4% Exchange Debentures will be redeemable, at the
Company's option, in whole at any time or in part from time to time, after an
initial period, at redemption prices equivalent to those relating to the
optional
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<PAGE> 118
redemption of the 12 1/4% Preferred Stock. The 12 1/4% Exchange Indenture
provides that upon the occurrence of a change of control of the Company (as
defined therein), each holder will have the right to require that the Company
repurchase all or a portion of such holder's 12 1/4% Exchange Debentures at a
purchase price equal to 101% of the principal amount thereof plus accrued
interest, if any, to the date of repurchase. The 12 1/4% Exchange Indenture
contains certain customary covenants for securities comparable to the 12 1/4%
Exchange Debentures, including covenants restricting the incurrence of
additional indebtedness, the issuance of subsidiary preferred stock, the making
of certain restricted payments, the creation of dividend and other payment
restrictions affecting subsidiaries, certain transactions with affiliates, and
the lines of business in which the Company and its subsidiaries may be engaged.
12% PREFERRED STOCK
Dividends. Holders of the 12% Preferred Stock are entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of funds
legally available therefor, dividends on each share of 12% Preferred Stock at a
rate per annum equal to 12%, subject to increase in certain circumstances of the
then effective liquidation preference per share of the 12% Preferred Stock,
payable semi-annually. All dividends on the 12% Preferred Stock are cumulative.
The Company, at its option, may pay dividends on any dividend payment date
occurring on or before January 15, 2002 either in cash or in additional shares
of 12% Preferred Stock. After January 15, 2002, dividends may be paid only in
cash out of funds legally available therefor.
Ranking. The 12% Preferred Stock ranks with respect to dividend rights and
rights on liquidation, winding-up and dissolution, (a) senior to the common
stock of the Company and to each other class of capital stock or series of
preferred stock that may in the future be established by the Board of Directors
of the Company the terms of which expressly provide that it ranks junior to or
on a parity with the 12% Preferred Stock, (b) on a parity with each other class
of capital stock or series of preferred stock that may in the future be
established by the Board of Directors of the Company the terms of which
expressly provide that such class or series will rank on a parity with the 12%
Preferred Stock and (c) junior to the 12 1/4% Preferred Stock and to each class
of capital stock or series of preferred stock that may in the future be
established by the Board of Directors of the Company the terms of which do not
expressly provide that such class or series will rank junior to the 12 1/4%
Preferred Stock.
Optional Redemption. The 12% Preferred Stock is redeemable (subject to
contractual and other restrictions with respect thereto, including limitations
under the Senior Credit Facility, the 9 3/8% Indenture and the Indenture, and to
the legal availability of funds therefor), in whole or in part at any time on or
after January 15, 2002 at the option of the Company, at the redemption prices
(expressed as percentages of the then effective liquidation preference thereof)
set forth below, if redeemed during the twelve-month period commencing on
January 15 of each of the years set forth below, plus accumulated and unpaid
dividends to the date of redemption:
<TABLE>
<CAPTION>
YEAR DIVIDEND
---- --------
<S> <C>
2002........................................................ 106.00%
2003........................................................ 104.80%
2004........................................................ 103.60%
2005........................................................ 102.40%
2006........................................................ 101.20%
2007 and thereafter......................................... 100.00%
</TABLE>
In addition, on or prior to January 15, 2000, the Company may, at its option,
use the net cash proceeds of any Public Equity Offering (as defined in the
certificate of designation for the 12% Preferred Stock) to redeem the 12%
Preferred Stock, in part, at a redemption price equal to 112% of the then
effective liquidation preference, plus, in each case, accumulated and unpaid
dividends to the date of redemption; provided, however, that after any such
redemption from the proceeds of a Public Equity Offering, there must be at least
$150.0 million aggregate liquidation preference of 12% Preferred Stock
outstanding; provided further, that any such redemption must occur on or prior
to 60 days after receipt by the Company of the proceeds of the Public Equity
Offering.
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<PAGE> 119
Mandatory Redemption. The 12% Preferred Stock is also be subject to
mandatory redemption (subject to contractual and other restrictions with respect
thereto and to the legal availability of funds therefor) in whole on January 15,
2009 at a price equal to the then effective liquidation preference thereof, plus
all accumulated and unpaid dividends to the date of redemption.
Voting Rights. Holders of the 12% Preferred Stock will have no voting
rights except as otherwise required by law; provided that the Company may not
authorize any class of capital stock that is senior to or on a parity with the
12% Preferred Stock (subject to an exception for the authorization of up to $50
million initial liquidation preference of Parity Stock) and may not, subject to
certain exceptions, effect a merger or sale of substantially all of its assets,
without the affirmative vote of holders of at least a majority of the shares of
12% Preferred Stock then outstanding voting or consenting, as the case may be,
as one class and, provided further, that the holders of 12% Preferred Stock,
voting together as a single class, shall have the right to elect the lesser of
two directors or that number of directors constituting 25% of the members of the
Board of Directors of the Company upon the occurrence of certain events
including, but not limited to, the failure by the Company on or after January
15, 2002 to pay cash dividends in full on the 12% Preferred Stock for three or
more quarterly dividend periods, whether or not consecutive, the failure by the
Company to discharge any mandatory redemption or repayment obligation with
respect to the 12% Preferred Stock, the failure by the Company to make a Change
of Control Offer (as defined in the certificate of designation for the 12%
Preferred Stock), the breach or violation of one or more of the covenants
contained in the certificate of designation for the 12% Preferred Stock or the
failure by the Company to repay at final stated maturity, or the acceleration of
the first stated maturity of certain indebtedness of the Company, whether or not
consecutive (including indebtedness under the Senior Credit Facility, the 9 3/8%
Notes and the Original Notes (and, assuming consummation of the Exchange Offer,
the Exchange Notes)).
Change of Control. The certificate of designation for the 12% Preferred
Stock provides that, upon the occurrence of a change of control (which is
defined identically to the definition of "change of control" applicable to the
12 1/4% Preferred Stock), each holder will have the right to require that the
Company repurchase all or a portion of such holder's 12% Preferred Stock in cash
at a purchase price equal to 101% of the then current effective liquidation
preference thereof, plus an amount in cash equal to all accumulated and unpaid
dividends per share to the date of repurchase. If the repurchase of the 12%
Preferred Stock would violate or constitute a default under the certificate of
designation for the 12 1/4% Preferred Stock, the Senior Credit Facility, the
9 3/8% Indenture, or other indebtedness of the Company, then pursuant to the
certificate of designation for the 12% Preferred Stock, the Company will either
(A) repay in full all such indebtedness and terminate all commitments
outstanding under the Senior Credit Facility or (B) obtain the requisite
consents, if any, under the Senior Credit Facility, the 9 3/8% Indenture, or
such other indebtedness required to permit the repurchase of the 12% Preferred
Stock. In an offer by the Company to repurchase the 12% Preferred Stock at the
holder's option upon a Change of Control, the Company will comply with Section
14(e) of the Exchange Act and the rules and regulations promulgated thereunder,
as then in effect.
Certain Covenants. The certificate of designation of the 12% Preferred
Stock contains covenants customary for securities comparable to the 12%
Preferred Stock, including covenants that restrict the ability of the Company
and its subsidiaries to incur additional indebtedness, pay dividends and make
certain other restricted payments, and merge or consolidate with any other
person or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially of the assets of the Company.
Exchange. The Company may, at its option, subject to certain conditions,
including its ability to incur additional indebtedness under the 9 3/8%
Indenture and the 12% Senior Credit Facility, on any scheduled dividend payment
date, exchange the 12% Preferred Stock, in whole but not in part, for its 12%
Subordinated Exchange Debentures due 2009 (the "12% Exchange Debentures").
Holders of the 12% Preferred Stock will be entitled to receive $1.00 principal
amount of 12% Exchange Debentures for each $1.00 in liquidation preference of
12% Preferred Stock including, to the extent necessary, 12% Exchange Debentures
in principal amounts of less than $1,000.
The 12% Exchange Debentures, if issued, will be issued under an indenture
(the "12% Exchange Indenture") between CRBC and U.S. Trust Company of Texas,
N.A., as Trustee (as supplemented, the "12%
113
<PAGE> 120
Exchange Debenture Trustee"). The 12% Exchange Debentures will be unsecured
obligations of the Company, ranking subordinate in right of payment to all
senior indebtedness of the Company, including the 9 3/8% Notes, the Notes and
the indebtedness under the Senior Credit Facility. Interest on the 12% Exchange
Debentures will accrue at the same rate per annum as the stated dividend rate on
the 12% Preferred Stock. The 12% Exchange Debentures will be redeemable, at the
Company's option, in whole at any time or in part from time to time, after an
initial period, at redemption prices equivalent to those relating to the
optional redemption of the 12% Preferred Stock. The 12% Exchange Indenture
provides that upon the occurrence of a change of control (as defined therein) of
the Company, each holder will have the right to require that the Company
repurchase all or a portion of such holder's 12% Exchange Debentures at a
purchase price equal to 101% of the principal amount thereof plus accrued
interest, if any, to the date of repurchase. The 12% Exchange Indenture contains
certain customary covenants for securities comparable to the 12% Exchange
Debentures, including covenants restricting the incurrence of additional
indebtedness, the issuance of subsidiary preferred stock, the making of certain
restricted payment, the creation of dividend and other repayment restrictions
affecting subsidiaries, certain transactions with affiliates, and the lines of
business in which the Company and its subsidiaries may be engaged.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
Latham & Watkins, counsel to the Company, has advised the Company that the
following discussion expresses its opinion as to the material federal income tax
consequences expected to result to Holders whose Original Notes are exchanged
for the Exchange Notes in the Exchange Offer. The signed opinion of Latham &
Watkins is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. Such opinion is based upon current provisions of the
Internal Revenue Code of 1986, as amended, applicable Treasury regulations,
judicial authority and administrative rulings and practice. There can be no
assurance that the Internal Revenue Service (the "Service") will not take a
contrary view, and no ruling from the Service has been or will be sought.
Legislative, judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conclusions set forth
herein. Any such changes or interpretations may or may not be retroactive and
could affect the tax consequences to holders. Certain Holders (including
insurance companies, tax-exempt organizations, financial institutions,
broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States) may be subject to special rules not discussed
below. EACH HOLDER OF THE ORIGINAL NOTES SHOULD CONSULT HIS OR HER OWN TAX
ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF EXCHANGING THE ORIGINAL NOTES
FOR THE EXCHANGE NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE,
LOCAL OR FOREIGN TAX LAWS.
The exchange of the Original Notes for the Exchange Notes should be treated
as a "non-event" for federal income tax purposes because the Exchange Notes
should not be considered to differ materially in kind or extent from the
Original Notes. As a result, no material federal income tax consequences should
result to holders exchanging Original Notes for Exchange Notes.
114
<PAGE> 121
PLAN OF DISTRIBUTION
Each broker-dealer that participates in the Exchange Offer ("Participating
Broker-Dealer") and receives the Exchange Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with the resale of the Exchange Notes received in
exchange for the Original Notes where such Original Notes were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that for a period of 180 days after the Expiration Date, it will make
this Prospectus, as amended or supplemented, available for any Participating
Broker-Dealer for use in connection with any such resale. In addition, until
, 1997, all dealers effecting transactions in the Exchange Notes may
be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of the Exchange
Notes by Participating Broker-Dealers. The Exchange Notes received by
Participating Broker-Dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Notes or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any Participating
Broker-Dealer and/or the purchasers of any such Exchange Notes. Any
Participating Broker-Dealer that resells Exchange Notes that were received by it
for its own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a Participating Broker-Dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker-Dealer that requests
such documents in the Letter of Transmittal.
The Company has agreed in the Registration Rights Agreement to indemnify
each Participating Broker-Dealer reselling the Exchange Notes pursuant to this
Prospectus, and their officers, directors and controlling persons, against
certain liabilities in connection with the offer and sale of the Exchange Notes,
including liabilities under the Securities Act, or to contribute to payments
that such Participating Broker-Dealers may be required to make in respect
thereof.
LEGAL MATTERS
Legal matters in connection with the issue and sale of the Exchange Notes
will be passed upon for the Company by Latham & Watkins. Eric L. Bernthal is a
partner of Latham & Watkins and owns options to purchase 2,500 shares of Common
Stock.
115
<PAGE> 122
EXPERTS
The consolidated financial statements of Evergreen Media Corporation of Los
Angeles and subsidiaries, the combined financial statements of WMZQ Inc. and
Viacom Broadcasting East Inc., the financial statements of WDRQ Inc., the
combined financial statements of Riverside Broadcasting Co., Inc. and WAXQ Inc.,
the financial statements of WLIT Inc., the combined financial statements of KYSR
Inc. and KIBB Inc., the financial statements of WDAS-AM/FM (station owned and
operated by Beasley FM Acquisition Corp.), and the financial statements of
KKSF-FM/KDFC-FM and AM (stations owned and operated by The Brown Organization),
included in the Prospectus have been audited by KPMG Peat Marwick LLP,
independent certified public accountants, to the extent and for the periods
indicated in their reports thereon. Such financial statements have been included
in reliance upon said firm as experts in accounting and auditing.
The consolidated financial statements of Chancellor Radio Broadcasting
Company and Subsidiaries as of December 31, 1996 and 1995 and for each of the
three years in the period ended December 31, 1996 included in this Prospectus,
have been included herein in reliance on the report of Coopers & Lybrand,
L.L.P., independent accountants, given on the authority of that firm as experts
in accounting and auditing.
The consolidated statements of operations, changes in common stockholders'
equity and cash flows of Trefoil Communications, Inc. and Subsidiaries for the
period January 1, 1996 through February 13, 1996 included in this Prospectus,
have been included herein in reliance on the report of Coopers & Lybrand,
L.L.P., independent accountants, given on the authority of that firm as experts
in accounting and auditing.
The financial statements of Century Chicago Broadcasting, L.P. as of and
for the year ended December 31, 1996 included in this Prospectus have been so
included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The combined financial statements of WJLB/WMXD, Detroit, as of December 31,
1996 and for the year then ended included in this Prospectus have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.
The financial statements of Trefoil Communications, Inc., as of and for the
years ended December 31, 1995 and 1994 included in this Prospectus have been so
included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
116
<PAGE> 123
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial statements are
presented using the purchase method of accounting for all acquisitions and
reflect (i) the combination of consolidated historical financial data of EMCLA,
CRBC, each of the stations acquired in the Completed Evergreen Transactions and
the Completed Chancellor Transactions and each of the stations to be acquired by
the Company in the Pending Transactions and (ii) the elimination of the
consolidated historical data of the stations sold by EMCLA and CRBC in the
Completed Evergreen Dispositions and the Completed Chancellor Dispositions and
stations to be sold or swapped by the Company in the Pending Transactions. The
unaudited pro forma condensed combined balance sheet data at June 30, 1997
presents adjustments for those Completed Transactions consummated since such
date, the Pending Transactions and the Financing Transactions as if each such
transaction had occurred at June 30, 1997. The unaudited pro forma condensed
combined statements of operations data for the twelve months ended December 31,
1996 and the six months ended June 30, 1997 present adjustments for the
following transactions as if each had occurred on January 1, 1996: (i) the
Completed Transactions, (ii) the 1996 Evergreen Offering, (iii) the 1996
Preferred Stock Conversion, (iv) the Chancellor Offerings, (v) the Pending
Transactions and (vi) the Financing Transactions. No adjustments are presented
in respect of the Katz Acquisition because it is presently contemplated that the
operations of Katz will not be combined with the Company upon consummation, and
that Chancellor Media will operate Katz as a separate, stand-alone subsidiary.
The purchase method of accounting has been used in the preparation of the
unaudited pro forma condensed combined financial statements. Under this method
of accounting, the aggregate purchase price is allocated to assets acquired and
liabilities assumed based on their estimated fair values. For purposes of the
unaudited pro forma condensed combined financial statements, the purchase prices
of the stations acquired and to be acquired in the Completed Transactions and
the Pending Transactions have been allocated based primarily on information
furnished by management of the acquired stations. The final allocation of the
respective purchase prices of the stations acquired and to be acquired in the
Completed Transactions and the Merger are determined a reasonable time after
consummation of such transactions and are based on a complete evaluation of the
assets acquired and liabilities assumed. Accordingly, the information presented
herein may differ from the final purchase price allocation.
In the opinion of the Company's management, all adjustments have been made
that are necessary to present fairly the pro forma data.
The unaudited pro forma condensed combined financial statements should be
read in conjunction with the respective financial statements and related notes
thereto of CRBC and EMCLA which are included elsewhere in this Prospectus. The
unaudited pro forma condensed combined financial statements are presented for
illustrative purposes only and are not necessarily indicative of the results of
operations or financial position that would have been achieved had the
transactions reflected therein been consummated as of the dates indicated, or of
the results of operations or financial positions for any future periods or
dates.
P-1
<PAGE> 124
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AT JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
EMCLA AS CRBC AS PRO FORMA COMPANY AS PRO FORMA
ADJUSTED FOR ADJUSTED FOR ADJUSTMENTS ADJUSTED FOR ADJUSTMENTS
1997 COMPLETED 1997 COMPLETED FOR THE THE FOR THE
EVERGREEN CHANCELLOR CHANCELLOR COMPLETED PENDING
TRANSACTIONS(1) TRANSACTIONS(2) MERGER TRANSACTIONS TRANSACTIONS
--------------- --------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets...................... $ 125,837 $ 83,334 $ -- $ 209,171 $ --
Property and equipment, net......... 67,239 74,321 -- 141,560 11,457(5)
Intangible assets, net.............. 1,652,404 1,421,770 434,068(3) 3,791,687 429,043(5)
283,445(4)
Other assets........................ 37,038 20,824 (1,183)(3) 56,679 (8,350)(5)
---------- ---------- -------- ---------- --------
Total assets...................... $1,882,518 $1,600,249 $716,330 $4,199,097 $432,150
========== ========== ======== ========== ========
LIABILITIES AND STOCKHOLDER'S
EQUITY:
Liabilities
Other current liabilities........... $ 42,883 $ 36,142 $ -- $ 79,025 $ --
Long-term debt, excluding current
portion........................... 908,059 824,344 162,000(3) 1,894,403 432,150(5)
Deferred tax liabilities (assets)... 90,134 (443) 283,445(4) 373,136 --
Other liabilities................... 902 997 -- 1,899 --
---------- ---------- -------- ---------- --------
Total liabilities................. 1,041,978 861,040 445,445 2,348,463 432,150
Redeemable preferred stock.......... -- 317,162 11,282(3) 328,444 --
STOCKHOLDER'S EQUITY:
Common stock........................ 1 1 (1)(3) 1 --
Additional paid in capital.......... 951,304 453,516 228,134(3) 1,632,954 --
Accumulated deficit................. (110,765) (31,470) 31,470(3) (110,765) --
---------- ---------- -------- ---------- --------
Total stockholder's equity........ 840,540 422,047 259,603 1,522,190 --
---------- ---------- -------- ---------- --------
Total liabilities and
stockholder's equity........... $1,882,518 $1,600,249 $716,330 $4,199,097 $432,150
========== ========== ======== ========== ========
<CAPTION>
COMPANY
PRO FORMA
COMBINED
----------
<S> <C>
ASSETS:
Current assets...................... $ 209,171
Property and equipment, net......... 153,017
Intangible assets, net.............. 4,220,730(6)
Other assets........................ 48,329
----------
Total assets...................... $4,631,247
==========
LIABILITIES AND STOCKHOLDER'S
EQUITY:
Liabilities
Other current liabilities........... $ 79,025
Long-term debt, excluding current
portion........................... 2,326,553
Deferred tax liabilities (assets)... 373,136
Other liabilities................... 1,899
----------
Total liabilities................. 2,780,613
Redeemable preferred stock.......... 328,444
STOCKHOLDER'S EQUITY:
Common stock........................ 1
Additional paid in capital.......... 1,632,954
Accumulated deficit................. (110,765)
----------
Total stockholder's equity........ 1,522,190
----------
Total liabilities and
stockholder's equity........... $4,631,247
==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
P-2
<PAGE> 125
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
EMCLA AS CRBC AS PRO FORMA COMPANY
ADJUSTED FOR ADJUSTED FOR ADJUSTMENTS AS ADJUSTED
COMPLETED COMPLETED FOR THE FOR THE
EVERGREEN CHANCELLOR CHANCELLOR COMPLETED
YEAR ENDED DECEMBER 31, 1996 TRANSACTIONS(7) TRANSACTIONS(8) MERGER TRANSACTIONS
---------------------------- --------------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Gross revenues.................................... $441,266 $328,522 $ -- $ 769,788
Less: agency commissions.......................... (58,631) (43,553) -- (102,184)
-------- -------- --------- ---------
Net revenues...................................... 382,635 284,969 -- 667,604
Station operating expenses excluding depreciation
and amortization................................ 216,340 172,729 -- 389,069
Depreciation and amortization..................... 156,605 46,909 104,803(9) 308,317
Corporate general and administrative expenses..... 8,065 5,657 (832)(10) 12,890
Stock option compensation......................... -- 3,800 -- 3,800
-------- -------- --------- ---------
Operating income (loss)........................... 1,625 55,874 (103,971) (46,472)
Interest expense.................................. 70,229 72,680 (2,051)(12) 140,858
Other (income) expense............................ (1,359) (148) -- (1,507)
-------- -------- --------- ---------
Income (loss) before income taxes................. (67,245) (16,658) (101,920) (185,823)
Income tax expense (benefit)...................... (17,930) (2,663) (30,738)(13) (51,331)
-------- -------- --------- ---------
Net income (loss)................................. (49,315) (13,995) (71,182) (134,492)
Preferred stock dividends......................... -- 38,400 -- 38,400
-------- -------- --------- ---------
Income (loss) attributable to common stock........ $(49,315) $(52,395) $ (71,182) $(172,892)
======== ======== ========= =========
Broadcast cash flow............................... $166,295 $112,240 $ -- $ 278,535
======== ======== ========= =========
<CAPTION>
PRO FORMA
ADJUSTMENTS
PENDING FOR THE COMPANY
TRANSACTIONS PENDING PRO FORMA
YEAR ENDED DECEMBER 31, 1996 HISTORICAL(14) TRANSACTIONS COMBINED
---------------------------- -------------- ------------ ---------
<S> <C> <C> <C>
Gross revenues.................................... $ 77,200 $ (1,963)(15) $ 845,025
Less: agency commissions.......................... (11,640) -- (113,824)
-------- -------- ---------
Net revenues...................................... 65,560 (1,963) 731,201
Station operating expenses excluding depreciation
and amortization................................ 35,637 (4,000)(15) 420,706
Depreciation and amortization..................... 2,468 25,417(16) 336,202
Corporate general and administrative expenses..... 1,024 -- 13,914
Stock option compensation......................... -- -- 3,800
-------- -------- ---------
Operating income (loss)........................... 26,431 (23,380) (43,421)
Interest expense.................................. (367) 30,835(17) 171,326
Other (income) expense............................ 360 -- (1,147)
-------- -------- ---------
Income (loss) before income taxes................. 26,438 (54,215) (213,600)
Income tax expense (benefit)...................... -- (9,722)(18) (61,053)
-------- -------- ---------
Net income (loss)................................. 26,438 (44,493) (152,547)
Preferred stock dividends......................... -- -- 38,400
-------- -------- ---------
Income (loss) attributable to common stock........ $ 26,438 $(44,493) $(190,947)
======== ======== =========
Broadcast cash flow............................... $ 29,923 $ 2,037 $ 310,495
======== ======== =========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
P-3
<PAGE> 126
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
EMCLA AS CRBC AS PRO FORMA COMPANY
ADJUSTED FOR ADJUSTED FOR ADJUSTMENTS AS ADJUSTED
COMPLETED COMPLETED FOR THE FOR THE
EVERGREEN CHANCELLOR CHANCELLOR COMPLETED
SIX MONTHS ENDED JUNE 30, 1997 TRANSACTIONS(7) TRANSACTIONS(8) MERGER TRANSACTIONS
- ------------------------------ --------------- --------------- ----------- ------------
<S> <C> <C> <C> <C>
Gross revenues.................................... $249,578 $176,189 $ -- $425,767
Less: agency commissions.......................... (32,722) (22,252) -- (54,974)
-------- -------- -------- --------
Net revenues...................................... 216,856 153,937 -- 370,793
Station operating expenses excluding depreciation
and amortization................................ 121,767 91,833 -- 213,600
Depreciation and amortization..................... 77,061 23,237 52,969(9) 153,267
Corporate general and administrative expenses..... 5,781 4,058 (675)(10) 9,164
Merger expense.................................... -- 2,515 (2,515)(11) --
Stock option compensation......................... -- 1,900 -- 1,900
-------- -------- -------- --------
Operating income (loss)........................... 12,247 30,394 (49,779) (7,138)
Interest expense.................................. 33,946 35,626 857(12) 70,429
Other (income) expense............................ (12,460) (1,607) -- (14,067)
-------- -------- -------- --------
Income (loss) before income taxes................. (9,239) (3,625) (50,636) (63,500)
Income tax expense (benefit)...................... (431) 550 (15,490)(13) (15,371)
-------- -------- -------- --------
Net income (loss)................................. (8,808) (4,175) (35,146) (48,129)
Preferred stock dividends......................... -- 19,626 -- 19,626
-------- -------- -------- --------
Income (loss) attributable to common stock........ $ (8,808) $(23,801) $(35,146) $(67,755)
======== ======== ======== ========
Broadcast cash flow............................... $ 95,089 $ 62,104 $ -- $157,193
======== ======== ======== ========
<CAPTION>
PRO FORMA
ADJUSTMENTS
PENDING FOR THE COMPANY
TRANSACTIONS PENDING PRO FORMA
SIX MONTHS ENDED JUNE 30, 1997 HISTORICAL(14) TRANSACTIONS COMBINED
- ------------------------------ -------------- ------------ ---------
<S> <C> <C> <C>
Gross revenues..................... $31,881 $ (2,000)(15) $455,648
Less: agency commissions........... (4,705) -- (59,679)
------- -------- --------
Net revenues....................... 27,176 (2,000) 395,969
Station operating expenses excludin
and amortization................. 18,272 (2,476)(15) 229,396
Depreciation and amortization...... (370) 12,887(16) 165,784
Corporate general and administrativ -- -- 9,164
Merger expense..................... -- -- --
Stock option compensation.......... -- -- 1,900
------- -------- --------
Operating income (loss)............ 9,274 (12,411) (10,275)
Interest expense................... -- 15,418(17) 85,847
Other (income) expense............. (65) -- (14,132)
------- -------- --------
Income (loss) before income taxes.. 9,339 (27,829) (81,990)
Income tax expense (benefit)....... -- (6,472)(18) (21,843)
------- -------- --------
Net income (loss).................. 9,339 (21,357) (60,147)
Preferred stock dividends.......... -- -- 19,626
------- -------- --------
Income (loss) attributable to commo $ 9,339 $(21,357) $(79,773)
======= ======== ========
Broadcast cash flow................ $ 8,904 $ 476 $166,573
======= ======== ========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
P-4
<PAGE> 127
ADJUSTMENTS TO EMCLA'S HISTORICAL CONDENSED COMBINED BALANCE SHEET RELATED TO
THE 1997 COMPLETED EVERGREEN TRANSACTIONS COMPLETED AFTER JUNE 30, 1997
(1) The historical balance sheet of EMCLA at June 30, 1997 and the pro forma
adjustments related to the 1997 Completed Evergreen Transactions that were
completed after June 30, 1997 is summarized below:
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS EMCLA AS
FOR ADJUSTED FOR
EMCLA 1997 COMPLETED 1997 COMPLETED
HISTORICAL EVERGREEN EVERGREEN
AT 6/30/97 TRANSACTIONS TRANSACTIONS
---------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Current assets............................... $ 112,339 $ 13,498(a) $ 125,837
Property and equipment, net.................. 64,817 2,422(a) 67,239
Intangible assets, net....................... 1,183,569 468,835(a) 1,652,404
Assets held for sale......................... 50,000 (50,000)(a) --
Other assets................................. 72,788 (35,750)(a) 37,038
---------- -------- ----------
Total assets.............................. $1,483,513 $399,005 $1,882,518
========== ======== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY:
Liabilities:
Other current liabilities.................... $ 32,994 $ 9,889(a) $ 42,883
Long-term debt, excluding current portion.... 525,000 383,059(a) 908,059
Deferred tax liability....................... 88,014 2,120(a) 90,134
Other liabilities............................ 902 -- 902
---------- -------- ----------
Total liabilities......................... 646,910 395,068 1,041,978
Stockholder's equity:
Common stock................................. 1 -- 1
Additional paid-in capital................... 951,304 -- 951,304
Accumulated deficit.......................... (114,702) 3,937(a) (110,765)
---------- -------- ----------
Total stockholder's equity................ 836,603 3,937 840,540
---------- -------- ----------
Total liabilities and stockholder's
equity.................................. $1,483,513 $399,005 $1,882,518
========== ======== ==========
</TABLE>
P-5
<PAGE> 128
(a) Reflects the 1997 Completed Evergreen Transactions that were completed after
June 30, 1997 as follows:
<TABLE>
<CAPTION>
PURCHASE PRICE ALLOCATION
------------------------------------------------------------------
PURCHASE PROPERTY AND ASSETS
1997 COMPLETED PRICE/(SALES CURRENT EQUIPMENT, HELD INTANGIBLE
EVERGREEN TRANSACTIONS PRICE) ASSETS NET(I) FOR SALE ASSETS, NET(I)
- ---------------------- ------------ ------- ------------ -------- ---------------
<S> <C> <C> <C> <C> <C>
Evergreen Viacom
Acquisition(ii)..... $612,388 $13,498 $3,607 $ 81,000 $518,093
WJZW-FM(iii).......... (68,000) -- -- (68,000) --
San Francisco
Frequency(iv)....... (44,000) -- (262) -- (41,012)
KDFC-FM(v)............ (50,000) -- -- (50,000) --
WBZS-AM, WZHF-AM,
KDFC-AM(vi)......... (18,000) -- (198) (13,000) (4,802)
WEJM-AM(vii).......... (7,500) -- (725) -- (3,444)
-------- ------- ------ -------- --------
Total.......... $424,888 $13,498 $2,422 $(50,000) $468,835
======== ======= ====== ======== ========
<CAPTION>
PURCHASE PRICE ALLOCATION FINANCING
--------------------------------------- ----------------------------------------
(INCREASE) INCREASE INCREASE
DEFERRED DECREASE IN (DECREASE) IN
1997 COMPLETED CURRENT TAX ACCUMULATED IN OTHER CURRENT LONG-TERM
EVERGREEN TRANSACTIONS LIABILITIES LIABILITIES DEFICIT ASSETS LIABILITIES DEBT
- ---------------------- ----------- ----------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Evergreen Viacom
Acquisition(ii)..... $(3,810) $ -- $ -- $ 53,750 $ 6,079 $552,559
WJZW-FM(iii).......... -- -- -- -- -- (68,000)
San Francisco
Frequency(iv)....... -- (954) (1,772) -- -- (44,000)
KDFC-FM(v)............ -- -- -- -- -- (50,000)
WBZS-AM, WZHF-AM,
KDFC-AM(vi)......... -- -- -- (18,000) -- --
WEJM-AM(vii).......... -- (1,166) (2,165) -- -- (7,500)
------- ------- ------- -------- ------- --------
Total.......... $(3,810) $(2,120) $(3,937) $ 35,750 $ 6,079 $383,059
======= ======= ======= ======== ======= ========
</TABLE>
P-6
<PAGE> 129
- ---------------
(i) EMCLA has assumed that historical balances of net property and
equipment acquired approximate fair value for the preliminary
allocation of the purchase price. Such amounts are based primarily
on information provided by the management of Viacom. EMCLA, on a
preliminary basis, has allocated the $518,093 of intangible assets
related to the Evergreen Viacom Acquisition to broadcast licenses.
This preliminary allocation is based on historical information
from prior acquisitions.
(ii) On July 2, 1997, EMCLA acquired, in the Evergreen Viacom
Acquisition, WLTW-FM and WAXQ-FM in New York and WMZQ-FM, WJZW-FM,
WZHF-AM, and WBZS-AM in Washington, D.C. for approximately
$612,388 in cash including various other direct acquisition costs.
The Evergreen Viacom Acquisition was financed with (i) bank
borrowings under the Senior Credit Facility of $552,559; (ii)
$53,750 in escrow funds paid by Evergreen on February 19, 1997 and
classified as other assets at June 30, 1997 and (iii) $6,079
financed through working capital. In June 1997, Evergreen issued
5,990,000 shares of $3.00 Convertible Exchangeable Preferred Stock
for net proceeds of approximately $287,808 which were used to
repay borrowings under the Senior Credit Facility and subsequently
were reborrowed on July 2, 1997 and contributed to EMCLA by
Evergreen as part of the financing of the Evergreen Viacom
Acquisition. The assets of WJZW-FM, WZHF-AM, and WBZS-AM in
Washington, D.C. are classified as assets held for sale in
connection with the purchase price allocation of the Evergreen
Viacom Acquisition (see (iii) and (vi) below).
(iii) On July 7, 1997, EMCLA sold, in the ABC/Washington Disposition,
WJZW-FM in Washington (acquired as part of the Evergreen Viacom
Acquisition) for $68,000 in cash. The assets of WJZW-FM are
classified as assets held for sale in connection with the purchase
price allocation of the Evergreen Viacom Acquisition and no gain
or loss was recognized by EMCLA upon consummation of the sale.
(iv) On July 7, 1997, EMCLA sold, in the San Francisco Frequency
Disposition, the San Francisco 107.7 MHz FM dial position and
transmission facility and the call letters from CRBC's KSAN-FM in
San Francisco for $44,000 in cash and recognized a gain of $1,772,
net of taxes of $954.
(v) On July 21, 1997, EMCLA sold, in the Bonneville/KDFC Disposition,
KDFC-FM in San Francisco for $50,000 in cash. The assets of KDFC-FM
are classified as assets held for sale at June 30, 1997 in
connection with the purchase price allocation of the acquisition of
KKSF-FM/KDFC-FM/AM on January 31, 1997 and no gain or loss was
recognized by EMCLA upon consummation of the KDFC-FM sale.
(vi) On August 13, 1997, EMCLA sold, in the Douglas AM Dispositions,
WBZS-AM and WZHF-AM in Washington (acquired as part of the
Evergreen Viacom Acquisition) and KDFC-AM in San Francisco for
$5,500, $7,500 and $5,000, respectively, payable in the form of a
promissory note in the aggregate amount of $18,000. The assets of
WBZS-AM and WZHF-AM are classified as assets held for sale in
connection with the purchase price allocation of the Evergreen
Viacom Acquisition and no gain or loss was recognized by EMCLA upon
consummation of the sale.
(vii) On August 26, 1997, EMCLA sold, in the Douglas Chicago
Disposition, WEJM-AM in Chicago for $7,500 in cash and recognized
a gain of $2,165, net of taxes of $1,166.
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<PAGE> 130
ADJUSTMENTS TO CRBC'S HISTORICAL CONDENSED COMBINED BALANCE SHEET RELATED TO THE
1997 COMPLETED CHANCELLOR TRANSACTIONS COMPLETED AFTER JUNE 30, 1997
(2) The historical balance sheet of CRBC at June 30, 1997 and the pro forma
adjustments related to the 1997 Completed Chancellor Transactions that were
completed after June 30, 1997 are summarized below:
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS CRBC AS
FOR ADJUSTED FOR
CRBC 1997 COMPLETED 1997 COMPLETED
HISTORICAL CHANCELLOR CHANCELLOR
AT 6/30/97 TRANSACTIONS TRANSACTIONS
---------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Current assets............................... $ 72,352 $ 10,982(a) $ 83,334
Property and equipment, net.................. 69,581 4,740(a) 74,321
Intangible assets, net....................... 970,080 451,690(a) 1,421,770
Other assets................................. 71,760 (53,750)(a) 20,824
2,814(c)
---------- -------- ----------
Total assets............................... $1,183,773 $416,476 $1,600,249
========== ======== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY:
Liabilities:
Current portion of long-term debt............ $ 1,928 $ (1,928)(b) $ --
Other current liabilities.................... 26,939 9,203(a) 36,142
---------- -------- ----------
Total current liabilities.................. 28,867 7,275 36,142
Long-term debt, excluding current portion.... 545,335 273,159(a) 824,344
3,922(c)
1,928(b)
Deferred tax liability....................... -- (443)(c) (443)
Other liabilities............................ 997 -- 997
---------- -------- ----------
Total liabilities.......................... 575,199 285,841 861,040
Redeemable preferred stock................... 317,162 -- 317,162
STOCKHOLDER'S EQUITY:
Common stock................................. 1 -- 1
Additional paid-in capital................... 322,216 131,300(a) 453,516
Accumulated deficit.......................... (30,805) (665)(c) (31,470)
---------- -------- ----------
Total stockholder's equity................. 291,412 130,635 422,047
---------- -------- ----------
Total liabilities and stockholder's
equity.................................. $1,183,773 $416,476 $1,600,249
========== ======== ==========
</TABLE>
(a) Reflects the 1997 Completed Chancellor Transactions that were completed
after June 30, 1997 as follows:
<TABLE>
<CAPTION>
FINANCING
PURCHASE PRICE ALLOCATION ----------------------
----------------------------------------------------------
PROPERTY INCREASE
PURCHASE/ AND ASSETS INTANGIBLE DECREASE IN
1997 COMPLETED (SALES) CURRENT EQUIPMENT, HELD ASSETS, CURRENT IN OTHER CURRENT
CHANCELLOR TRANSACTIONS PRICE ASSETS NET FOR SALE NET LIABILITIES ASSETS LIABILITIES
----------------------- --------- ------- ---------- -------- ---------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Chancellor Viacom
Acquisition(i)........... $500,789 $10,982 $4,740 $ 37,000 $451,690 $(3,623) $53,750 $5,580
WDRQ-FM(ii)................ (37,000) -- -- (37,000) -- -- -- --
-------- ------- ------ -------- -------- ------- ------- ------
Total.............. $463,789 $10,982 $4,740 $ -- $451,690 $(3,623) $53,750 $5,580
======== ======= ====== ======== ======== ======= ======= ======
<CAPTION>
FINANCING
---------------------------
INCREASE
INCREASE IN (DECREASE) IN
LONG- ADDITIONAL
1997 COMPLETED TERM PAID-IN
CHANCELLOR TRANSACTIONS DEBT CAPITAL
----------------------- ----------- -------------
<S> <C> <C>
Chancellor Viacom
Acquisition(i)........... $273,159 $168,300
WDRQ-FM(ii)................ -- (37,000)
-------- --------
Total.............. $273,159 $131,300
======== ========
</TABLE>
- ---------------
(i) On July 2, 1997, CRBC acquired, in the Chancellor Viacom Acquisition,
KIBB-FM and KYSR-FM in Los Angeles, WLIT-FM in Chicago and WDRQ-FM in
Detroit for approximately $500,789 in cash including various other
direct acquisition costs. The Chancellor Viacom Acquisition was
financed with (i) bank borrowings of $273,159 under the CRBC Restated
Credit Agreement; (ii) borrowings under the Chancellor Interim
Financing of $168,300 which was contributed to CRBC by Chancellor;
(iii) escrow funds of $53,750 paid by CRBC on February 19, 1997 and
classified as other assets at June 30, 1997 and
P-8
<PAGE> 131
(iv) $5,580 financed through working capital. The assets of WDRQ-FM in
Detroit are classified as assets held for sale in connection with the
purchase price allocation of the Chancellor Viacom Acquisition (see
(ii) below). CRBC has assumed that historical balances of net property
and equipment approximate fair value for the preliminary allocation of
the purchase price. Such amounts are based primarily on information
provided by the management of Viacom. The intangible assets of $451,690
have been allocated to broadcast licenses on a preliminary basis. This
preliminary allocation is based on historical information from prior
acquisitions.
(ii) On August 11, 1997, CRBC sold, in the ABC/Detroit Disposition, WDRQ-FM
in Detroit (acquired as part of the Chancellor Viacom Acquisition) for
$37,000 in cash. The net proceeds from the sale of WDRQ-FM were
distributed by CRBC to Chancellor to repay borrowings under the
Chancellor Interim Financing. The assets of WDRQ-FM are classified as
assets held for sale in connection with the purchase price allocation
of the Chancellor Viacom Acquisition and no gain or loss was
recognized by CRBC upon consummation of the sale.
(b) On July 2, 1997, CRBC refinanced its senior credit agreement (the "CRBC
Restated Credit Agreement") in connection with the Chancellor Viacom
Acquisition. The CRBC Restated Credit Agreement consists of a $400,000 term
loan facility and a $350,000 revolving loan facility. Reflects the $1,928
adjustment to decrease current maturities of long-term debt under the CRBC
Restated Credit Agreement to $0.
(c) Reflects (i) the adjustment to write-off the unamortized balance of deferred
loan fees of $665 (net of a tax benefit of $443) at June 30, 1997 related to
CRBC's previous senior credit agreement as an extraordinary item and (ii)
the adjustment to record new loan fees of $3,922 incurred in connection with
the CRBC Restated Credit Agreement and financed through additional bank
borrowings under such agreement.
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE CHANCELLOR MERGER
(3) Merger Purchase Price Information. In connection with the Chancellor Merger,
each outstanding share of Chancellor Common Stock was converted into the
right to receive 0.9091 shares of Chancellor Media Common Stock. For
purposes of the unaudited pro forma condensed combined financial statements,
the fair market value of Chancellor Media Common Stock is calculated by
using $31.00 per share which is based on the market price of Evergreen Class
A Common Stock on or around the announcement date of the Chancellor Merger
on February 19, 1997. The aggregate purchase price is summarized below:
<TABLE>
<S> <C>
EXCHANGE OF CHANCELLOR COMMON STOCK:
Shares of Chancellor Common Stock outstanding............... 18,991,513
Exchange ratio.............................................. .9091
----------
Shares of Chancellor Media Common Stock issued in connection
with the Chancellor Merger................................ 17,265,184
==========
</TABLE>
P-9
<PAGE> 132
<TABLE>
<S> <C> <C>
AGGREGATE PURCHASE PRICE:
Chancellor debt and equity assumed at fair values:
Estimated fair value of Chancellor Media Common Stock issued in
connection with the Chancellor Merger (17,265,184 shares @ $31.00
per share)......................................................... $ 535,221
7% Convertible Preferred Stock....................................... 111,604
Stock options issued by Chancellor................................... 34,825
Chancellor Interim Financing......................................... 133,000
CRBC debt and equity assumed at fair values:
Long-term debt outstanding:
Term Loan.............................................. 424,344
9 3/8% Senior Subordinated Notes due 2004.............. 200,000
8 3/4% Senior Subordinated Notes due 2007.............. 200,000
-------
Total long-term debt outstanding................................... 824,344
12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock.... 117,670
12% Junior Exchangeable Preferred Stock............................ 210,774
Financial advisors, legal, accounting and other professional
fees............................................................ 29,000
----------
Aggregate purchase price........................................... $1,996,438
==========
</TABLE>
To record the aggregate purchase price of the Chancellor Merger and
eliminate certain CRBC historical balances as follows:
<TABLE>
<CAPTION>
ELIMINATION
OF CRBC
PURCHASE HISTORICAL CHANCELLOR
PRICE BALANCES MERGER NET
ALLOCATION AS ADJUSTED FINANCING ADJUSTMENT
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Current assets........................ $ 83,334 $ (83,334) $ -- $ --
Property and equipment, net(a)........ 74,321 (74,321) -- --
Intangible assets(a).................. 1,855,838 (1,421,770) -- 434,068
Other assets(b)....................... 19,641 (20,824) -- (1,183)
Current liabilities................... (36,142) 36,142 -- --
Long-term debt........................ -- 824,344 (986,344)(c) (162,000)
Deferred tax liability................ 443 (443) -- --
Other liabilities..................... (997) 997 -- --
Redeemable preferred stock............ -- 317,162 (328,444)(d) (11,282)
Common stock.......................... -- 1 -- 1
Additional paid-in capital............ -- 453,516 (681,650)(e) (228,134)
Accumulated deficit................... -- (31,470) -- (31,470)
---------- ----------- ----------- ---------
Aggregate Purchase Price.............. $1,996,438 $ -- $(1,996,438) $ --
========== =========== =========== =========
</TABLE>
- ---------------
(a) EMCLA has assumed that historical balances of net property and equipment
acquired approximate fair value for the preliminary allocation of the
purchase price. EMCLA, on a preliminary basis, has allocated the $1,855,838
of intangible assets to broadcast licenses. This preliminary allocation is
based upon historical information from prior acquisitions and appraisals
provided by the management of CRBC.
(b) The difference in the estimated fair value of other assets and the
historical balance of other assets represents CRBC's historical deferred tax
asset balance of $1,183 at June 30, 1997. The deferred tax liability will be
revalued to reflect the difference between the financial statement carrying
amount and the tax basis of CRBC acquired assets (see (4)).
(c) Reflects the adjustment to record debt assumed or incurred by Chancellor
Media including (i) CRBC's long-term debt of $824,344; (ii) the Chancellor
Interim Financing of $133,000 retired by EMHC through bank borrowings under
the Senior Credit Facility distributed by EMCLA to EMHC and (iii) additional
bank
P-10
<PAGE> 133
borrowings of $29,000 required to finance estimated financial advisors,
legal, accounting and other professional fees.
(d) Reflects the adjustment to record the estimated fair value of redeemable
preferred stock to be issued (a) by CMCLA in exchange for (i) CRBC's 12 1/4%
Series A Senior Cumulative Exchangeable Preferred Stock of $117,670
(including accrued and unpaid dividends of $17,670) and (ii) CRBC's 12%
Junior Exchangeable Preferred Stock of $210,774 (including accrued and
unpaid dividends of $10,774).
(e) Reflects the portion of the Aggregate Purchase Price contributed by
Evergreen on behalf of EMCLA to consummate the Merger, including (i)
additional paid-in capital of $535,221 related to 17,265,184 shares of the
Chancellor Media Common Stock issued in connection with the Chancellor
Merger, (ii) Chancellor's 7% Convertible Preferred Stock of $111,604
(including accrued and unpaid dividends of $1,604) and (iii) the fair value
of stock options assumed by Chancellor Media of $34,825. The $34,825 fair
value of the Chancellor Stock Options was estimated using the Black-Scholes
option pricing model and the Chancellor Merger exchange ratio of .9091
applied to Chancellor's outstanding options and exercise prices. At June 30,
1997, Chancellor had 1,990,259 options outstanding with exercise prices
ranging from $7.50 to $36.75.
(4) To record a $283,445 deferred tax liability related to the difference
between the financial statement carrying amount and the tax basis of CRBC
acquired assets.
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE PENDING CHANCELLOR MEDIA TRANSACTIONS
(5) Reflects the Pending Chancellor Media Transactions as follows:
<TABLE>
<CAPTION>
DECREASE
PROPERTY AND IN INCREASE IN
PURCHASE EQUIPMENT, INTANGIBLE OTHER LONG-TERM
PENDING CHANCELLOR MEDIA TRANSACTIONS PRICE NET(a) ASSETS, NET(a) ASSETS DEBT
------------------------------------- -------- ------------ --------------- -------- -----------
<S> <C> <C> <C> <C> <C>
WBAB-FM, WBLI-FM, WBGG-AM,
WHFM-FM(b)......................................... $ 11,000 $ 1,494 $ 9,506 $ -- $ 11,000
Gannett(c)........................................... 340,000 5,376 334,624 -- 340,000
Chicago/Dallas Exchange(d)........................... 3,500 3,255 245 8,350 (4,850)
KXPK-FM(e)........................................... 26,000 477 25,523 -- 26,000
Bonneville Option(f)................................. 60,000 855 59,145 -- 60,000
-------- ------- -------- ------ --------
Total........................................ $440,500 $11,457 $429,043 $8,350 $432,150
======== ======= ======== ====== ========
</TABLE>
- ---------------
(a) Chancellor Media has assumed that historical balances of net property and
equipment acquired approximate fair value for the preliminary allocation of
the purchase price. Such amounts are based primarily on information provided
by management of the respective stations to be acquired in the Chancellor
Media Pending Transactions. Chancellor Media, on a preliminary basis, has
allocated the $429,043 of intangible assets related to the Chancellor Media
Pending Transactions to broadcast licenses. This preliminary allocation is
based on historical information from prior acquisitions.
(b) On July 1, 1996, CRBC entered into an agreement to exchange, in the SFX
Exchange, WAPE-FM and WFYV-FM in Jacksonville, Florida (which were acquired
as part of the Omni Acquisition on February 13, 1997, see 8 (e) below), and
$11,000 in cash for WBAB-FM, WBLI-FM, WGBB-AM, and WHFM-FM in Long Island.
The amounts allocated to net property and equipment and net intangible
assets (consisting of broadcast licenses) are based upon preliminary
appraisals of the assets to be acquired.
(c) On April 4, 1997, EMCLA entered into an agreement to acquire, in the Gannett
Acquisition, 5 radio stations in 3 major markets from P&S, including
WGCI-FM/AM in Chicago, KHKS-FM in Dallas, and KKBQ-FM/AM in Houston for
$340,000 in cash. The pro forma combined financial statements assume that
the transaction will close by December 26, 1997 and that no upward
adjustment in the purchase price will occur.
(d) On June 24, 1997, EMCLA entered into an agreement to acquire, in the
Bonneville Acquisition, KZPS-FM and KDGE-FM in Dallas for $83,500 in cash.
On June 29, 1997, EMCLA paid $8,350 in escrow funds which are classified as
other assets at June 30, 1997. On July 14, 1997, EMCLA completed the
disposition of
P-11
<PAGE> 134
WLUP-FM in Chicago to Bonneville and placed $80,000 in a trust pending the
completion of the deferred exchange of the WLUP-FM in Chicago and an
additional $3,500 in cash for KZPS-FM and KDGE-FM in Dallas (the
"Chicago/Dallas Exchange"). The Chicago/Dallas Exchange will be accounted
for as a like-kind exchange and no gain or loss will be recognized upon the
consummation of the exchange. The decrease in long-term debt of $4,850
represents the refund of $8,350 in escrow funds previously paid by EMCLA
less $3,500 in cash boot owed to Bonneville.
(e) On July 30, 1997, CRBC entered into an agreement to acquire, in the Denver
Acquisition, KXPK-FM in Denver from Evergreen Wireless LLC (which is
unrelated to Evergreen) for $26,000 in cash and paid $1,650 in escrow funds
which were classified as other assets.
(f) On August 6, 1997, Evergreen and Chancellor announced that they had paid
$3,000 to Bonneville for an option to exchange EMCLA's station WTOP-AM in
Washington and CRBC's stations KZLA-FM in Los Angeles and WGMS-FM in
Washington plus an additional $57,000 in cash for Bonneville's stations
WDBZ-FM in New York, KLDE-FM in Houston and KBIG-FM in Los Angeles (the
"Bonneville Option"). As of September 10, 1997, the Bonneville Option had
not been exercised. The Bonneville Option expires on December 31, 1997.
(6) The Company Pro Forma Combined intangible assets of $4,220,730 consists of
the following at June 30, 1997:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE
-----------
<S> <C> <C>
Broadcast licenses.......................................... 15-40 $3,663,914
Goodwill.................................................... 15-40 413,612
Other intangibles........................................... 1-40 382,179
----------
$4,459,705
Less: accumulated amortization.............................. (238,975)
----------
Net intangible assets....................................... $4,220,730
==========
</TABLE>
EMCLA discloses broadcast license value separately from goodwill and
amortizes such intangible assets over an estimated average life of 15 years,
whereas, CRBC groups all broadcast license value with goodwill and amortizes
such intangibles assets over an estimated average life of 40 years. In
connection with the application of purchase accounting for the Chancellor
Merger, broadcast license value and goodwill have been separately identified and
disclosed and amortized over an estimated average life of 15 years in accordance
with EMCLA's policies and procedures. The intangible assets have been treated in
a consistent manner for the Combined Company in the Unaudited Combined Condensed
Pro Forma Financial Statements and, following the consummation of the Chancellor
Merger, will be accounted for similarly in the Chancellor Media's financial
statements.
EMCLA amortizes such intangible assets using the straight-line method over
estimated useful lives ranging from 1 to 40 years. EMCLA continually evaluates
the propriety of the carrying amount of goodwill and other intangible assets as
well as the amortization period to determine whether current events or
circumstances warrant adjustments to the carrying value and/or revised estimates
of useful lives. This evaluation consists of the projection of undiscounted
operating income before depreciation, amortization, nonrecurring charges and
interest for each of EMCLA's radio stations over the remaining amortization
periods of the related intangible assets. The projections are based on a
historical trend line of actual results since the acquisitions of the respective
stations adjusted for expected changes in operating results. To the extent such
projections indicate that undiscounted operating income is not expected to be
adequate to recover the carrying amounts of the related intangible assets, such
carrying amounts are written down by charges to expense.
P-12
<PAGE> 135
EMCLA'S HISTORICAL CONDENSED COMBINED STATEMENTS OF OPERATIONS AND ADJUSTMENTS
RELATED TO THE COMPLETED EVERGREEN TRANSACTIONS
(7) EMCLA's historical condensed combined statement of operations for the year
ended December 31, 1996 and the six months ended June 30, 1997 and pro forma
adjustments related to the Completed Evergreen Transactions are summarized
below:
<TABLE>
<CAPTION>
ACQUISITIONS
-----------------------------------------------------------------------------------
WWRC-AM WWWW-FM/ KKSF-FM/
PYRAMID KYLD-FM WGAY-FM WEDR-FM WDFN-AM KDFC-FM/AM
EMCLA HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
HISTORICAL 1/1-1/17(a) 1/1-4/30(b) 1/1-6/17(c) 1/1-10/18(d) 1/1-2/14(e) 1/1-10/31(f)
---------- ----------- ----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Gross revenues................ $337,405 $2,144 $ 2,308 $ 3,264 $ 7,933 $ 839 $13,646
Less: agency commissions...... (43,555) (216) (363) (409) (1,066) (102) (1,746)
-------- ------ ------- ------- ------- ----- -------
Net revenues.................. 293,850 1,928 1,945 2,855 6,867 737 11,900
Station operating expenses
excluding depreciation and
amortization................ 174,344 1,489 1,885 3,493 2,933 815 6,358
Depreciation and
amortization................ 93,749 502 749 314 29 45 2,351
Corporate general and
administrative expenses..... 7,797 123 256 477 1,401 -- --
-------- ------ ------- ------- ------- ----- -------
Operating income (loss)....... 17,960 (186) (945) (1,429) 2,504 (123) 3,191
Interest expense.............. 37,527 343 1,094 -- -- -- 429
Other (income) expense........ (477) (5) (97) 5 (15) -- (48)
-------- ------ ------- ------- ------- ----- -------
Income (loss) before income
taxes....................... (19,090) (524) (1,942) (1,434) 2,519 (123) 2,810
Income tax expense
(benefit)................... (2,896) -- -- (453) -- -- --
-------- ------ ------- ------- ------- ----- -------
Income (loss) attributable to
common stock................ $(16,194) $ (524) $(1,942) $ (981) $ 2,519 $(123) $ 2,810
======== ====== ======= ======= ======= ===== =======
Broadcast Cash Flow........... $119,506 $ 439 $ 60 $ (638) $ 3,934 $ (78) $ 5,542
======== ====== ======= ======= ======= ===== =======
<CAPTION>
ACQUISITIONS
--------------------------------------------------------
EVERGREEN
WJLB-FM/ WUSL-FM VIACOM
WMXD-FM WDAS-FM/AM WIOQ-FM ACQUISITION
HISTORICAL HISTORICAL HISTORICAL HISTORICAL
1/1-8/31(g) 1/1-12/31(h) 1/1-12/31(i) 1/1-12/31(j)
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Gross revenues................ $15,408 $16,809 $20,152 $66,726
Less: agency commissions...... (1,881) (2,142) (2,369) (10,493)
------- ------- ------- -------
Net revenues.................. 13,527 14,667 17,783 56,233
Station operating expenses
excluding depreciation and
amortization................ 5,721 7,759 9,519 26,598
Depreciation and
amortization................ 2,415 2,763 -- 6,267
Corporate general and
administrative expenses..... 1,005 620 533 1,617
------- ------- ------- -------
Operating income (loss)....... 4,386 3,525 7,731 21,751
Interest expense.............. 1,406 79 3,001 --
Other (income) expense........ -- (39) 58 (741)
------- ------- ------- -------
Income (loss) before income
taxes....................... 2,980 3,485 4,672 22,492
Income tax expense
(benefit)................... 180 -- -- 10,612
------- ------- ------- -------
Income (loss) attributable to
common stock................ $2,800 $ 3,485 $ 4,672 $11,880
======= ======= ======= =======
Broadcast Cash Flow........... $7,806 $ 6,908 $ 8,264 $29,635
======= ======= ======= =======
</TABLE>
P-13
<PAGE> 136
<TABLE>
<CAPTION>
DISPOSITIONS
-------------------------------------------------------------------------
WPEG-FM
WBAV-FM/AM
WRFX-FM SAN FRANCISCO
WFNZ-FM WNKS-FM WEJM-FM/AM WJZW-FM FREQUENCY
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
1/1-12/31(i) 1/1-12/31(k) 1/1-12/31(l) 1/1-12/31(m) 1/1-12/31(n)
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Gross revenues..................... $(20,818) $ (3,303) $(2,690) $(8,443) $(2,736)
Less: agency commissions........... 2,733 337 293 1,311 358
-------- -------- ------- ------- -------
Net revenues....................... (18,085) (2,966) (2,397) (7,132) (2,378)
Station operating expenses
excluding depreciation and
amortization..................... (9,509) (2,461) (2,217) (3,998) (3,159)
Depreciation and amortization...... -- (548) (1,719) (589) (3,826)
Corporate general and
administrative expenses.......... -- -- -- (206) --
-------- -------- ------- ------- -------
Operating income (loss)............ (8,576) 43 1,539 (2,339) 4,607
Interest expense................... -- -- -- -- --
Other (income) expense............. -- -- -- -- --
-------- -------- ------- ------- -------
Income (loss) before income
taxes............................ (8,576) 43 1,539 (2,339) 4,607
Income tax expense (benefit)....... -- -- -- (913) --
-------- -------- ------- ------- -------
Income (loss) attributable to
common stock..................... $ (8,576) $ 43 $ 1,539 $(1,426) $ 4,607
======== ======== ======= ======= =======
Broadcast Cash Flow................ $ (8,576) $ (505) $ (180) $(3,134) $ 781
======== ======== ======= ======= =======
<CAPTION>
DISPOSITIONS
---------------------------
WBZS-AM EMCLA AS
WZHF-AM ADJUSTED FOR
KDFC-FM KDFC-AM COMPLETED
HISTORICAL HISTORICAL PRO FORMA EVERGREEN
1/1-12/31(o) 1/1-12/31(p) ADJUSTMENTS TRANSACTIONS
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Gross revenues..................... $(5,138) $(2,240) $ -- $441,266
Less: agency commissions........... 643 36 -- (58,631)
------- ------- -------- --------
Net revenues....................... (4,495) (2,204) -- 382,635
Station operating expenses
excluding depreciation and
amortization..................... (2,300) (930) -- 216,340
Depreciation and amortization...... (853) (30) 54,986(r) 156,605
Corporate general and
administrative expenses.......... -- (43) (5,515)(s) 8,065
------- ------- -------- --------
Operating income (loss)............ (1,342) (1,201) (49,471) 1,625
Interest expense................... -- -- 26,350(t) 70,229
Other (income) expense............. -- -- (1,359)
------- ------- -------- --------
Income (loss) before income
taxes............................ (1,342) (1,201) (75,821) (67,245)
Income tax expense (benefit)....... -- (271) (24,189)(u) (17,930)
------- ------- -------- --------
Income (loss) attributable to
common stock..................... $(1,342) $ (930) $(51,632) $(49,315)
======= ======= ======== ========
Broadcast Cash Flow................ $(2,195) $(1,274) $ -- $166,295
======= ======= ======== ========
</TABLE>
P-14
<PAGE> 137
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
---------------------------------------------------- -------------------------
WPEG-FM
EVERGREEN WBAV-FM/AM
WUSL-FM VIACOM WRFX-FM
WDAS-FM/AM WIOQ-FM ACQUISITION WFNZ-FM WNKS-FM
EMCLA HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
SIX MONTHS ENDED JUNE 30, 1997 HISTORICAL 1/1-4/30(h) 1/1-5/15(i) 1/1-6/30(j) 1/1-5/15(i) 1/1-5/15(k)
------------------------------ ---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues.......................... $216,177 $5,028 $7,088 $38,972 $(7,788) $(1,332)
Less: agency commissions................ (27,916) (680) (829) (5,470) 1,029 142
-------- ------ ------ ------- ------- -------
Net revenues............................ 188,261 4,348 6,259 33,502 (6,759) (1,190)
Station operating expenses excluding
depreciation and amortization......... 111,162 2,533 3,649 14,936 (3,569) (994)
Depreciation and amortization........... 53,912 875 -- 2,279 -- (212)
Corporate general and administrative
expenses.............................. 5,651 172 141 682 -- --
-------- ------ ------ ------- ------- -------
Operating income (loss)................. 17,536 768 2,469 15,605 (3,190) 16
Interest expense........................ 22,741 19 990 -- -- --
Other (income) expense.................. (13,323) 863 -- -- -- --
-------- ------ ------ ------- ------- -------
Income (loss) before income taxes....... 8,118 (114) 1,479 15,605 (3,190) 16
Income tax expense
(benefit)............................. 4,259 -- -- 5,892 -- --
-------- ------ ------ ------- ------- -------
Income (loss) attributable to common
stock................................. $ 3,859 $ (114) $1,479 $ 9,713 $(3,190) $ 16
======== ====== ====== ======= ======= =======
Broadcast cash flow..................... $ 77,099 $1,815 $2,610 $18,566 $(3,190) $ (196)
======== ====== ====== ======= ======= =======
<CAPTION>
DISPOSITIONS
----------------------------------------------------------------------------------
SAN WBZS-AM
WEJM- WJZW-FM FRANCISCO WZHF-AM
WPNT-FM FM/AM HISTORICAL FREQUENCY KDFC-FM KDFC-AM
HISTORICAL HISTORICAL 1/1- HISTORICAL HISTORICAL HISTORICAL
SIX MONTHS ENDED JUNE 30, 1997 5/30-6/19(q) 1/1-6/30(l) 6/30(m) 1/1-6/30(n) 1/1-1/31(o) 1/1-6/30(p)
------------------------------ ------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues.......................... $(567) $(1,153) $(4,137) $(1,341) $(278) $(1,091)
Less: agency commissions................ 93 119 567 174 26 23
----- ------- ------- ------- ----- -------
Net revenues............................ (474) (1,034) (3,570) (1,167) (252) (1,068)
Station operating expenses excluding
depreciation and amortization......... (285) (1,001) (2,161) (1,614) (224) (665)
Depreciation and amortization........... (279) (289) (315) (214) -- (54)
Corporate general and administrative
expenses.............................. -- -- (70) -- -- (18)
----- ------- ------- ------- ----- -------
Operating income (loss)................. 90 256 (1,024) 661 (28) (331)
Interest expense........................ -- -- -- -- -- --
Other (income) expense.................. -- -- -- -- -- --
----- ------- ------- ------- ----- -------
Income (loss) before income taxes....... 90 256 (1,024) 661 (28) (331)
Income tax expense
(benefit)............................. -- -- (260) -- -- (98)
----- ------- ------- ------- ----- -------
Income (loss) attributable to common
stock................................. $ 90 $ 256 $ (764) $ 661 $ (28) $ (233)
===== ======= ======= ======= ===== =======
Broadcast cash flow..................... $(189) $ (33) $(1,409) $ 447 $ (28) $ (403)
===== ======= ======= ======= ===== =======
<CAPTION>
EMCLA AS
ADJUSTED FOR
COMPLETED
PRO FORMA EVERGREEN
SIX MONTHS ENDED JUNE 30, 1997 ADJUSTMENTS TRANSACTIONS
------------------------------ ----------- ------------
<S> <C> <C>
Gross revenues.......................... $ -- $249,578
Less: agency commissions................ -- (32,722)
-------- --------
Net revenues............................ -- 216,856
Station operating expenses excluding
depreciation and amortization......... -- 121,767
Depreciation and amortization........... 21,358(r) 77,061
Corporate general and administrative
expenses.............................. (777)(s) 5,781
-------- --------
Operating income (loss)................. (20,581) 12,247
Interest expense........................ 10,196(t) 33,946
Other (income) expense.................. -- (12,460)
-------- --------
Income (loss) before income taxes....... (30,777) (9,239)
Income tax expense
(benefit)............................. (10,224)(u) (431)
-------- --------
Income (loss) attributable to common
stock................................. $(20,553) $ (8,808)
======== ========
Broadcast cash flow..................... $ -- $ 95,089
======== ========
</TABLE>
P-15
<PAGE> 138
(a) On January 17, 1996, EMCLA acquired Pyramid Communications, Inc.
("Pyramid"), a radio broadcasting company with 12 radio stations (9 FM and 3
AM) in five markets (Chicago, Philadelphia, Boston, Charlotte, and Buffalo)
(the "Pyramid Acquisition"). The total purchase price, including acquisition
costs, allocated to net assets acquired was approximately $316,343 of which
$315,500 was financed through additional borrowings under EMCLA's prior
senior credit facility. The historical financial data of Pyramid for the
period of January 1, 1996 to January 17, 1996 excludes the combined net
losses of approximately $60 for WHTT-FM, WHTT-AM and WSJZ-FM in Buffalo (the
"Buffalo Transactions") which were sold in 1996 for $32,000 in cash.
(b) On August 14, 1996, EMCLA acquired KYLD-FM in San Francisco for $44,000 in
cash. EMCLA had previously been operating KYLD-FM under a time brokerage
agreement since May 1, 1996.
(c) On November 26, 1996, EMCLA exchanged WKLB-FM in Boston (which EMCLA
acquired on May 3, 1996 for $34,000 in cash) for WGAY-FM in Washington, D.C.
On April 3, 1997, EMCLA exchanged, in the Greater Media Exchange, WQRS-FM in
Detroit (which EMCLA acquired on April 3, 1997 for $32,000 in cash) for
WWRC-AM in Washington, D.C. and $9,500 in cash. The net purchase price to
EMCLA of WWRC-AM was therefore $22,500. EMCLA had previously been operating
WGAY-FM and WWRC-AM under time brokerage agreements since June 17, 1996.
(d) On October 18, 1996, EMCLA acquired WEDR-FM in Miami for $65,000 in cash.
(e) On January 31, 1997, EMCLA acquired, in the WWWW/WDFN Acquisition, WWWW-FM
and WDFN-AM in Detroit from CRBC for $30,000 in cash (of which $1,500 was
paid as escrow funds in January 1996). EMCLA had previously provided certain
sales and promotional functions to WWWW-FM and WDFN-AM under a joint sales
agreement since February 14, 1996 and subsequently operated the stations
under a time brokerage agreement since April 1, 1996.
(f) On January 31, 1997, EMCLA acquired, in the KKSF/KDFC Acquisition, KKSF-FM
and KDFC-FM/AM in San Francisco for $115,000 in cash (of which $10,000 was
paid as escrow funds in November 1996). EMCLA had previously been operating
the stations under a time brokerage agreement since November 1, 1996.
(g) On April 1, 1997, EMCLA acquired, in the Secret/Detroit Acquisition, WJLB-FM
and WMXD-FM in Detroit for $168,000 in cash. EMCLA had previously been
operating the stations under a time brokerage agreement since September 1,
1996.
(h) On May 1, 1997, EMCLA acquired, in the Beasley Acquisition, WDAS-FM/AM in
Philadelphia for $103,000 in cash.
(i) On May 15, 1997, EMCLA exchanged, in the EZ Exchange, 5 of its 6 stations in
the Charlotte market (WPEG-FM, WBAV-FM/AM, WRFX-FM and WFNZ-AM) for WUSL-FM
and WIOQ-FM in Philadelphia.
(j) On July 2, 1997, EMCLA acquired, in the Evergreen Viacom Acquisition,
WLTW-FM and WAXQ-FM in New York and WMZQ-FM, WJZW-FM, WZHF-AM, and WBZS-AM
in Washington, D.C. for approximately $612,388 in cash including various
other direct acquisition costs. The Evergreen Viacom Acquisition was
financed with (i) bank borrowings under the EMCLA Senior Credit Facility of
$552,559; (ii) $53,750 in escrow funds paid by Evergreen on February 19,
1997 and classified as other assets at June 30, 1997 and (iii) $6,079
financed through working capital. In June 1997, Evergreen issued 5,990,000
shares of $3.00 Convertible Exchangeable Preferred Stock for net proceeds of
approximately $287,808 which were used to repay borrowings under the EMCLA
Senior Credit Facility and subsequently were reborrowed on July 2, 1997 and
contributed to EMCLA by Evergreen as part of the financing of the Evergreen
Viacom Acquisition. The assets of WJZW-FM, WZHF-AM, and WBZS-AM in
Washington, D.C. are classified as assets held for sale in connection with
the purchase price allocation of the Evergreen Viacom Acquisition. The
Viacom results of operations for the year ended December 31, 1996 reflect
the financial performance of WAXQ-FM for six months of the year that the
station was
P-16
<PAGE> 139
operated by Viacom (July 1, 1996 to December 31, 1996) combined with net
income of $851 for the first half of the year when the station was under
prior ownership.
(k) On May 15, 1997, EMCLA sold, in the EZ Sale, WNKS-FM in Charlotte for
$10,000 in cash.
(l) On June 3, 1997, EMCLA sold, in the Crawford Disposition, WEJM-FM in Chicago
for $14,750 in cash. On August 26, 1997, EMCLA sold, in the Douglas Chicago
Disposition, WEJM-AM in Chicago for $7,500 in cash.
(m) On July 7, 1997, EMCLA sold, in the ABC/Washington Disposition, WJZW-FM in
Washington (acquired as part of the Evergreen Viacom Acquisition) for
$68,000 in cash.
(n) On July 7, 1997, EMCLA sold, in the San Francisco Frequency Disposition, the
San Francisco 107.7 MHz FM dial position and transmission facility and the
call letters from CRBC's KSAN-FM in San Francisco for $44,000 in cash.
(o) On January 31, 1997, EMCLA acquired, in the KKSF/KDFC Acquisition, KKSF-FM
and KDFC-FM/AM in San Francisco for $115,000 in cash. EMCLA had previously
been operating KKSF-FM and KDFC-FM/AM under a time brokerage agreement since
November 1, 1996. On July 21, 1997, EMCLA sold, in the Bonneville/KDFC
Disposition, KDFC-FM in San Francisco for $50,000 in cash. The assets of
KDFC-FM are classified as assets held for sale in connection with the
purchase price allocation of the acquisition of KKSF-FM/KDFC-FM/AM.
Accordingly, KDFC-FM net income of approximately $791 for the period
February 1, 1997 through June 30, 1997 has been excluded from EMCLA's
historical condensed statement of operations. Therefore, the KDFC-FM
condensed statement of operations includes the results of operations for
January 1, 1997 through January 31, 1997 (the time brokerage agreement
holding period in 1997) for the six months ended June 30, 1997.
(p) On August 13, 1997, EMCLA sold, in the Douglas AM Dispositions, WBZS-AM and
WZHF-AM in Washington (acquired as part of the Evergreen Viacom Acquisition)
and KDFC-AM in San Francisco for $5,500, $7,500 and $5,000, respectively,
payable in the form of a promissory note.
(q) On May 30, 1997, EMCLA acquired, in the Century Acquisition, WPNT-FM in
Chicago for $75,750 in cash (including $2,000 for the purchase of the
station's accounts receivable) of which $5,500 was paid as escrow funds in
July 1996. On June 19, 1997, EMCLA sold, in the Bonneville/WPNT Disposition,
WPNT-FM in Chicago for $75,000 in cash and recognized a gain of $500.
(r) Reflects incremental amortization related to the Completed Evergreen
Transactions and is based on the following allocation to intangible assets:
<TABLE>
<CAPTION>
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
COMPLETED EVERGREEN TRANSACTIONS AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1996 PERIOD(I) NET EXPENSE(I) EXPENSE INCREASE
-------------------------------- ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Pyramid Acquisition (ii)........ 1/1-1/17 $ 325,871 $ 1,026 $ 409 $ 617
KYLD-FM......................... 1/1-8/14 43,659 1,811 640 1,171
WEDR-FM......................... 1/1-10/18 63,757 3,400 -- 3,400
WGAY-FM......................... 1/1-11/26 32,538 1,964 -- 1,964
WWWW-FM/WDFN-AM................. 1/1-12/31 26,590 1,773 7 1,766
KKSF-FM (iii)................... 1/1-12/31 58,698 3,913 868 3,045
WJLB-FM/WMXD-FM................. 1/1-12/31 165,559 11,037 2,145 8,892
WWRC-AM......................... 1/1-12/31 16,808 1,121 -- 1,121
WDAS-FM/AM...................... 1/1-12/31 98,185 6,546 2,470 4,076
Evergreen Viacom Acquisition.... 1/1-12/31 518,093 34,540 5,606 28,934
---------- ------- ------- -------
Total........................... $1,349,758 $67,131 $12,145 $54,986
========== ======= ======= =======
</TABLE>
P-17
<PAGE> 140
<TABLE>
<CAPTION>
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
COMPLETED EVERGREEN TRANSACTIONS AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
SIX MONTHS ENDED JUNE 30, 1997 PERIOD(I) NET EXPENSE(I) EXPENSE INCREASE
-------------------------------- ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
WWWW-FM/WDFN-AM................... 1/1-1/31 $ 26,590 $ 148 $ -- $ 148
KKSF-FM (iii)..................... 1/1-1/31 58,698 326 -- 326
WJLB-FM/WMXD-FM................... 1/1-3/31 165,559 2,759 -- 2,759
WWRC-AM........................... 1/1-4/2 16,808 286 -- 286
WDAS-FM/AM........................ 1/1-4/30 98,185 2,182 820 1,362
Evergreen Viacom Acquisition...... 1/1-6/30 518,093 17,270 793 16,477
-------- ------- ------ -------
Total............................. $883,933 $22,971 $1,613 $21,358
======== ======= ====== =======
</TABLE>
- ---------------
(i) Intangible assets are amortized on a straight-line basis over an
estimated average 15 year life. The incremental amortization period
represents the period of the year that the station was not owned by
Evergreen.
(ii) Intangible assets for the Pyramid Acquisition of $325,871 includes
$61,218 resulting from the recognition of deferred tax liabilities and
excludes approximately $29,915 of the purchase price allocated to the
Buffalo Stations which were sold during the year ended December 31,
1996.
(iii) Intangible assets for KKSF-FM excludes (1) $50,000 of the purchase
price allocated to KDFC-FM which has been classified as assets held
for sale, (2) $1,500 to be reimbursed by the buyers of KDFC-FM for
costs incurred in connection with relocating KKSF and (3) $4,802 of
the purchase price allocated to KDFC-AM which was sold, in the
Douglas AM Dispositions, on August 13, 1997.
Historical depreciation expense of the Completed Evergreen Transactions is
assumed to approximate depreciation expense on a pro forma basis. Actual
depreciation and amortization may differ based upon final purchase price
allocations.
(s) Reflects the elimination of duplicate corporate expenses of $5,515 for the
year ended December 31, 1996 and $777 for the six months ended June 30, 1997
related to the Completed Evergreen Transactions.
(t) Reflects the adjustment to interest expense in connection with the
consummation of the Completed Evergreen Transactions, the 1996 Evergreen
Offering and the amendment and restatement of EMCLA's senior credit
agreement:
P-18
<PAGE> 141
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 JUNE 30, 1997
----------------- ----------------
<S> <C> <C>
Additional bank borrowings related to:
Completed Acquisitions.......................... $1,577,559 $1,103,559
Completed Dispositions.......................... (301,250) (269,250)
New Loan Fees................................... 10,473 10,473
---------- ----------
Total additional bank borrowings.................. $1,286,782 $ 844,782
========== ==========
Interest expense at 7.0%.......................... $ 67,096 $ 20,160
Less: historical interest expense................. (5,596) (674)
---------- ----------
Net increase in interest expense.................. 61,500 19,486
Reduction in interest expense on bank debt related
to the application of net proceeds of the
following at 7.0%:
1996 Evergreen Offering contributed to EMCLA of
$264,236 for the period January 1, 1996 to
October 22, 1996............................. (15,003) --
Convertible Preferred Stock Offering contributed
to EMCLA of $287,808 for the year ended
December 31, 1996 and for the period January
1, 1997 to June 16, 1997..................... (20,147) (9,290)
---------- ----------
Total adjustment for net increase in interest
expense......................................... $ 26,350 $ 10,196
========== ==========
</TABLE>
(u) Reflects the income tax benefit related to pro forma adjustments. The
adjustment to income taxes reflects the application of the estimated
effective tax rate on a pro forma basis to income (loss) before income
taxes for historical and pro forma adjustment amounts.
P-19
<PAGE> 142
ADJUSTMENTS TO CRBC'S HISTORICAL CONDENSED COMBINED STATEMENT OF OPERATIONS
RELATED TO THE COMPLETED CHANCELLOR TRANSACTIONS
(8) CRBC's historical condensed combined statement of operations for the year
ended December 31, 1996 and the six months ended June 30, 1997 and pro forma
adjustments related to the Completed Chancellor Transactions is summarized
below:
<TABLE>
<CAPTION>
ACQUISITIONS
-----------------------------------------------------------------------------------------------
KIMN-FM/
SHAMROCK KALC-FM COLFAX KOOL-FM SUNDANCE OMNI
CRBC HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
YEAR ENDED DECEMBER 31, 1996(a) HISTORICAL 1/1-2/14(b) 1/1-3/31(c) 1/1-12/31(d) 1/1-3/31(d) 1/1-9/12(d) 1/1-6/30(e)
- ------------------------------- ---------- ----------- ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross revenues................. $203,188 $ 9,698 $2,010 $51,745 $1,665 $13,844 $ 8,710
Less: agency commissions....... (24,787) (1,234) (259) (6,626) (234) (1,740) (1,211)
-------- ------- ------ ------- ------ ------- -------
Net revenues................... 178,401 8,464 1,751 45,119 1,431 12,104 7,499
Station operating expenses
excluding depreciation and
amortization.................. 111,210 7,762 1,523 28,584 852 7,678 4,985
Depreciation and
amortization.................. 20,877 595 511 4,494 229 1,242 1,458
Corporate general and
administrative expenses....... 4,845 2,215 -- -- -- -- --
Stock option compensation...... 3,800 -- -- -- -- -- --
-------- ------- ------ ------- ------ ------- -------
Operating income (loss)........ 37,669 (2,108) (283) 12,041 350 3,184 1,056
Interest expense............... 35,704 1,380 -- 4,369 299 -- --
Other (income) expense......... 68 49 312 (179) -- 25 (404)
-------- ------- ------ ------- ------ ------- -------
Income (loss) before income
taxes......................... 1,897 (3,537) (595) 7,851 51 3,159 1,460
Income tax expense (benefit)... 4,612 -- -- -- -- -- --
-------- ------- ------ ------- ------ ------- -------
Net income (loss).............. (2,715) (3,537) (595) 7,851 51 3,159 1,460
Preferred stock dividends...... 11,557 -- -- -- -- -- --
-------- ------- ------ ------- ------ ------- -------
Income (loss) attributable to
common stock.................. $(14,272) $(3,537) $ (595) $ 7,851 $ 51 $ 3,159 $ 1,460
======== ======= ====== ======= ====== ======= =======
Broadcast Cash Flow............ $ 67,191 $ 702 $ 228 $16,535 $ 579 $ 4,426 $ 2,514
======== ======= ====== ======= ====== ======= =======
<CAPTION>
ACQUISITIONS DISPOSITIONS
--------------------------- -------------------------------------------------------
CHANCELLOR
VIACOM WWWW-FM/ WMIL-FM/
KSTE-FM ACQUISITION WDFN-AM KTBZ-FM WOKY-AM WDRQ-FM
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
YEAR ENDED DECEMBER 31, 1996(a) 1/1-7/31(f) 1/1-12/31(g) 1/1-2/14(h) 1/1-2/14(c) 1/1-12/31(i) 1/1-12/31(j)
- ------------------------------ ------------ ------------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues................ $1,411 $58,806 $(839) $(399) $(9,552) $(6,743)
Less: agency commissions...... (149) (9,588) 102 48 1,070 1,055
------ ------- ----- ----- ------- -------
Net revenues.................. 1,262 49,218 (737) (351) (8,482) (5,688)
Station operating expenses
excluding depreciation and
amortization................. 1,244 25,416 (815) (521) (4,896) (4,530)
Depreciation and
amortization................. 375 4,640 (45) (42) (539) (354)
Corporate general and
administrative expenses...... -- 1,501 -- -- -- (178)
Stock option compensation..... -- -- -- -- -- --
------ ------- ----- ----- ------- -------
Operating income (loss)....... (357) 17,661 123 212 (3,047) (626)
Interest expense.............. -- 6,374 -- -- -- --
Other (income) expense........ -- -- -- -- (19) --
------ ------- ----- ----- ------- -------
Income (loss) before income
taxes........................ (357) 11,287 123 212 (3,028) (626)
Income tax expense (benefit).. -- 4,748 -- -- -- (326)
------ ------- ----- ----- ------- -------
Net income (loss)............. (357) 6,539 123 212 (3,028) (300)
Preferred stock dividends..... -- -- -- -- -- --
------ ------- ----- ----- ------- -------
Income (loss) attributable to
common stock................. $ (357) $ 6,539 $ 123 $ 212 $(3,028) $ (300)
====== ======= ===== ===== ======= =======
Broadcast Cash Flow........... $ 18 $23,802 $ 78 $ 170 $(3,586) $(1,158)
====== ======= ===== ===== ======= =======
<CAPTION>
PRO FORMA
ADJUSTMENTS CRBC AS
FOR THE ADJUSTED FOR
COMPLETED COMPLETED
CHANCELLOR CHANCELLOR
YEAR ENDED DECEMBER 31, 1996(a) TRANSACTIONS TRANSACTIONS
- ------------------------------ ------------ ------------
<S> <C> <C>
Gross revenues................ $ (5,022)(k) $328,522
Less: agency commissions...... -- (43,553)
-------- --------
Net revenues.................. (5,022) 284,969
Station operating expenses
excluding depreciation and
amortization................. (5,763)(k) 172,729
Depreciation and
amortization................. 15,022(l) 46,909
(1,554)(m)
Corporate general and
administrative expenses...... (2,726)(n) 5,657
Stock option compensation..... -- 3,800
-------- --------
Operating income (loss)....... (10,001) 55,874
Interest expense.............. 24,554(o) 72,680
Other (income) expense........ -- (148)
-------- --------
Income (loss) before income
taxes........................ (34,555) (16,658)
Income tax expense (benefit).. (11,697)(p) (2,663)
-------- --------
Net income (loss)............. (22,858) (13,995)
Preferred stock dividends..... 26,843(q) 38,400
-------- --------
Income (loss) attributable to
common stock................. $(49,701) $(52,395)
======== ========
Broadcast Cash Flow........... $ 741 $112,240
======== ========
</TABLE>
P-20
<PAGE> 143
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
------------------------- ------------ PRO FORMA
CHANCELLOR ADJUSTMENTS CRBC AS
VIACOM FOR THE ADJUSTED FOR
COLFAX ACQUISITION WDRQ-FM COMPLETED COMPLETED
SIX MONTHS ENDED CRBC HISTORICAL HISTORICAL HISTORICAL CHANCELLOR CHANCELLOR
JUNE 30, 1997(A) HISTORICAL 1/1-1/23(d) 1/1-6/30(g) 1/1-6/30(j) TRANSACTIONS TRANSACTIONS
---------------- ---------- ----------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues............................ $147,015 $3,183 $29,214 $(2,395) $ (828)(k) $176,189
Less: agency commissions.................. (18,073) (384) (4,046) 251 -- (22,252)
-------- ------ ------- ------- -------- --------
Net revenues.............................. 128,942 2,799 25,168 (2,144) (828) 153,937
Station operating expenses excluding
depreciation and amortization........... 79,852 1,872 13,326 (1,986) (1,231)(k) 91,833
Depreciation and amortization............. 16,714 -- 2,370 (186) 4,421(l) 23,237
(82)(m)
Corporate general and administrative
expenses................................ 3,934 -- 520 (42) (354)(n) 4,058
Merger expense............................ 2,515 -- -- -- -- 2,515
Stock option compensation................. 1,900 -- -- -- -- 1,900
-------- ------ ------- ------- -------- --------
Operating income (loss)................... 24,027 927 8,952 70 (3,582) 30,394
Interest expense.......................... 23,908 -- 3,178 -- 8,540(o) 35,626
Other (income) expense.................... (1,607) -- -- -- -- (1,607)
-------- ------ ------- ------- -------- --------
Income (loss) before income taxes......... 1,726 927 5,774 70 (12,122) (3,625)
Income tax expense (benefit).............. 3,327 -- 1,558 18 (4,353) 550
-------- ------ ------- ------- -------- --------
Net income (loss)......................... (1,601) 927 4,216 52 (7,769) (4,175)
Preferred stock dividends................. 18,122 -- -- -- 1,504(q) 19,626
-------- ------ ------- ------- -------- --------
Income (loss) attributable to common
stock................................... $(19,723) $ 927 $ 4,216 $ 52 $ (9,273) $(23,801)
======== ====== ======= ======= ======== ========
Broadcast Cash Flow....................... $ 49,090 $ 927 $11,842 $ (158) $ 403 $ 62,104
======== ====== ======= ======= ======== ========
</TABLE>
P-21
<PAGE> 144
(a) On November 22, 1996, CRBC acquired WKYN-AM in Cincinnati for $1,400 in
cash. CRBC had been previously operating WKYN-AM under a time brokerage
agreement since January 1, 1996. Therefore, CRBC's historical results of
operations for the year ended December 31, 1996 and the six months ended
June 30, 1997 include the results of operations of WKYN-AM.
(b) On February 14, 1996, CRBC acquired Shamrock Broadcasting, Inc., a radio
broadcasting company with 19 radio stations (11 FM and 8 AM) located in 10
markets (Los Angeles, New York, San Francisco, Houston, Atlanta, Detroit,
Denver, Minneapolis-St. Paul, Phoenix and Pittsburgh). The total purchase
price, including acquisition costs, allocated to net assets acquired was
approximately $408,000.
(c) On July 31, 1996, CRBC exchanged KTBZ-FM in Houston (which was acquired on
February 14, 1996 as part of the Shamrock Acquisition) and $5,600 in cash
for KIMN-FM and KALC-FM in Denver. CRBC had previously entered into a time
brokerage agreement to sell substantially all of the broadcast time of
KTBZ-FM effective February 14, 1996. In addition, CRBC had been previously
operating KIMN-FM and KALC-FM under a time brokerage agreement since April
1, 1996.
(d) On January 23, 1997, CRBC acquired Colfax Communications, a radio
broadcasting company, with 12 radio stations (8 FM and 4 AM) located in 4
markets (Minneapolis-St. Paul, Phoenix, Washington, D.C. and Milwaukee
markets). The total purchase price, including acquisition costs, allocated
to net assets acquired was approximately $383,700. The Colfax Acquisition
was financed through (i) a private placement by CRBC of the CRBC 12% Junior
Exchangeable Preferred Stock for net proceeds of $191,817; (ii) a private
placement by Chancellor of $110,000 of 7% Convertible Preferred Stock for
net proceeds of $105,546; (iii) additional bank borrowings under CRBC's
previous senior credit agreement of $65,937 and (iv) $20,400 in escrow
funds. The historical financial data of Colfax for the year ended December
31, 1996 excludes the combined net income of approximately $224 for KLTB-FM,
KARO-FM and KIDO-AM in Boise, Idaho which CRBC did not acquire as part of
the Colfax Acquisition. The Colfax historical condensed statement of
operations for the year ended December 31, 1996, does not include the
results of operations of the following: (i) KOOL-FM for the period January
1, 1996 to March 31, 1996 and (ii) WMIL-FM and WOKY-AM in Milwaukee and
KZON-FM, KISO-AM, KYOT-FM and KOY-AM in Phoenix which were owned and
operated by Sundance Broadcasting, Inc. ("Sundance") for the period January
1, 1996 to September 12, 1996. On March 31, 1997, CRBC sold WMIL-FM and
WOKY-AM in Milwaukee for $41,253 in cash. The assets of WMIL-FM and WOKY-AM
are classified as assets held for sale in connection with the purchase price
allocation of the Colfax Acquisition. Accordingly, WMIL-FM and WOKY-AM net
income of approximately $41 for the period January 23, 1997 through March
31, 1997 has been excluded from the Colfax historical condensed statement of
operations for the six months ended June 30, 1997.
(e) On February 13, 1997, CRBC acquired substantially all of the assets and
assumed certain liabilities of the OmniAmerica Group including 8 radio
stations (7 FM and 1 AM) located in 3 markets (Orlando, West Palm Beach and
Jacksonville). The total purchase price, including acquisition costs,
allocated to net assets acquired was approximately $181,046. The Omni
Acquisition was financed through (i) additional bank borrowings under CRBC's
previous senior credit agreement of $166,046 and (ii) the issuance of
555,556 shares of the Chancellor Class A Common Stock valued at $15,000 or
$27.00 per share which was contributed by CRBC by Chancellor. Prior to the
consummation of the Omni Acquisition, CRBC had entered into an agreement to
operate the stations under a time brokerage agreement effective July 1,
1996. Additionally, prior to consummation of the West Palm Beach Exchange
(see (f) below) on March 28, 1997 and the SFX Exchange (see note 14(a)),
CRBC entered into time brokerage agreements to sell substantially all of the
broadcast time of WEAT-FM/AM and WOLL-FM in West Palm Beach and WAPE-FM and
WFYV-FM in Jacksonville effective July 1, 1996. The historical financial
data of Omni for the period January 1, 1996 to June 30, 1996 represents the
results of operations for the Orlando stations (WOMX-FM, WXXL-FM and
WJHM-FM). The results of operations for WEAT-FM/AM and WOLL-FM in West Palm
Beach and WAPE-FM and WFYV-FM in Jacksonville are not included as the
acquisition and disposition of these stations is deemed to have occurred on
January 1, 1996.
P-22
<PAGE> 145
(f) On March 28, 1997, CRBC exchanged, in the West Palm Beach Exchange,
WEAT-FM/AM and WOLL-FM in West Palm Beach, Florida, which were acquired as
part of the Omni Acquisition, for KSTE-FM in Sacramento and $33,000 in cash.
CRBC had previously been operating KSTE-FM under a time brokerage agreement
since August 1, 1996.
(g) On July 2, 1997, CRBC acquired, in the Chancellor Viacom Acquisition,
KIBB-FM and KYSR-FM in Los Angeles, WLIT-FM in Chicago and WDRQ-FM in
Detroit for approximately $500,789 in cash including various other direct
acquisition costs. The Chancellor Viacom Acquisition was financed with (i)
bank borrowings of $273,159 under the CRBC Restated Credit Agreement; (ii)
borrowings under the Chancellor Interim Financing of $168,300 which was
contributed to CRBC by Chancellor; (iii) escrow funds of $53,750 paid by
CRBC on February 19, 1997 and classified as other assets at June 30, 1997
and (iv) $5,580 financed through working capital. The assets of WDRQ-FM in
Detroit are classified as assets held for sale in connection with the
purchase price allocation of the Chancellor Viacom Acquisition.
(h) On January 31, 1997, CRBC sold, in the WWWW/WDFN Disposition, WWWW-FM and
WDFN-AM in Detroit, which were acquired on February 14, 1996 as part of the
Shamrock Acquisition, to EMCLA for $30,000 in cash. Prior to the completion
of the sale, CRBC had entered into a joint sales agreement effective
February 14, 1996 and a time brokerage agreement effective April 1, 1996 to
sell substantially all of the broadcast time of WWWW-FM and WDFN-AM to EMCLA
pending the completion of the sale.
(i) On March 31, 1997, CRBC sold, in the Milwaukee Disposition, WMIL-FM and
WOKY-AM in Milwaukee, which were acquired as part of the Colfax Acquisition
on January 23, 1997, for $41,253 in cash.
(j) On August 11, 1997, CRBC sold, in the ABC/Detroit Disposition, WDRQ-FM in
Detroit (acquired as part of the Chancellor Viacom Acquisition) for $37,000
in cash.
(k) Reflects the elimination of time brokerage agreement fees received and paid
by CRBC as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 MARKET PERIOD REVENUE EXPENSE
- --------------------------------------------------- --------------- ------------ ------- -------
<S> <C> <C> <C> <C>
WWWW-FM/WDFN-AM.................................... Detroit 2/14 -- 12/31 $(2,937) $ (598)
KTBZ-FM............................................ Houston 2/14 -- 7/31 (1,113) (265)
WOMX-FM, WXXL-FM, WJHM-FM.......................... Orlando 7/1 -- 12/31 -- (3,900)
WEAT-FM/AM, WOLL-FM................................ West Palm Beach 7/1 -- 12/31 (972) (1,000)
------- -------
Total adjustment for decrease in gross
revenues and expenses $(5,022) $(5,763)
======= =======
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997 MARKET PERIOD REVENUE EXPENSE
- --------------------------------------------------- --------------- ------------ ------- -------
<S> <C> <C> <C> <C>
WWWW-FM/WDFN-AM.................................... Detroit 1/1 -- 1/31 $ (235) $ (16)
WOMX-FM, WXXL-FM, WJHM-FM.......................... Orlando 1/1 -- 2/13 -- (911)
WEAT-FM/AM, WOLL-FM................................ West Palm Beach 1/1 -- 3/28 (593) (304)
------- -------
Total adjustment for decrease in gross
revenues and expenses $ (828) $(1,231)
======= =======
</TABLE>
Gross revenues of the Completed Chancellor Transactions exclude any time
brokerage agreement payments received from CRBC.
(l) Reflects incremental amortization related to the Completed Chancellor
Transactions and is based on the following allocation to intangible assets:
P-23
<PAGE> 146
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
COMPLETED CHANCELLOR TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1996 PERIOD ASSETS, NET EXPENSE (1) EXPENSE INCREASE
--------------------------------- ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Shamrock......................... 1/1 - 2/14 $ 361,425 $ 1,104 $ 393 $ 711
KIMN-FM/KALC-FM.................. 1/1 - 3/31 8,285 52 341 (289)
Omni............................. 1/1 - 12/31 171,837 4,296 161 4,135
Colfax........................... 1/1 - 12/31 317,894 7,947 3,861 4,086
KSTE-FM.......................... 1/1 - 12/31 (32,475) (812) -- (812)
Chancellor Viacom Acquisition.... 1/1 - 12/31 451,690 11,292 4,101 7,191
---------- ------- ------ -------
Total.................. $1,278,656 $23,879 $8,857 $15,022
---------- ------- ------ -------
</TABLE>
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
COMPLETED CHANCELLOR TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
SIX MONTHS ENDED JUNE 30, 1997 PERIOD ASSETS, NET EXPENSE (1) EXPENSE INCREASE
--------------------------------- ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Omni............................. 1/1 - 2/13 $ 171,837 $ 525 $ -- $ 525
Colfax........................... 1/1 - 1/23 317,894 508 -- 508
KSTE-FM.......................... 1/1 - 3/28 (32,475) (198) -- (198)
Chancellor Viacom Acquisition.... 1/1 - 6/30 451,690 5,646 2,060 3,586
---------- ------- ------ -------
Total.................. $ 908,946 $ 6,481 $2,060 $ 4,421
---------- ------- ------ -------
</TABLE>
- ---------------
(1) Intangible assets are amortized on a straight-line basis over an
estimated average 40 year life by CRBC. In connection with purchase
accounting for the Chancellor Merger, intangible assets will be
amortized over an estimated average life of 15 years in accordance with
EMCLA's accounting policies and procedures.
Historical depreciation expense of the Completed Chancellor Transactions is
assumed to approximate depreciation expense on a pro forma basis. Actual
depreciation and amortization may differ based upon final purchase price
allocations.
(m) Reflects the elimination of disposed stations' historical depreciation and
amortization expense of $1,554 for the year ended December 31, 1996 (KTBZ-FM
of $642 and WWWW-FM/WDFN-AM of $912 for the period of February 14, 1996 to
December 31, 1996) and $82 for the six months ended June 30, 1997
(WWWW-FM/WDFN-AM for the period of January 1, 1997 to January 31, 1997)
recognized by CRBC during the time brokerage agreement holding period.
(n) Reflects the elimination of duplicate corporate expenses of $2,726 for the
year ended December 31, 1996 and $354 for the six months ended June 30, 1997
related to the Completed Chancellor Transactions.
P-24
<PAGE> 147
(o) Reflects the adjustment to interest expense in connection with the
consummation of the Completed Chancellor Transactions, the February 1996 and
August 1996 equity offerings of Chancellor (the "Chancellor Offerings"), the
issuance of the CRBC 12 1/4% Series A Senior Cumulative Exchangeable
Preferred Stock, the refinancing of CRBC's previous senior credit agreement
on January 23, 1997 and the offering by CRBC of the 8 3/4% Senior
Subordinated Notes due 2007:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 JUNE 30, 1997
----------------- -------------
<S> <C> <C>
Additional bank borrowings related to:
Completed Acquisitions.................................... $ 994,292 $ 558,892
Completed Dispositions.................................... (104,253) (104,253)
New Loan Fees............................................. 6,873 6,873
--------- ---------
Total additional bank borrowings............................ $ 896,912 $ 461,512
========= =========
Interest expense on additional bank borrowings at 7.5%...... $ 39,651 $ 11,260
Less: historical interest expense of the stations acquired
in the Completed Chancellor Transactions.................. (12,422) (3,178)
--------- ---------
Net increase in interest expense............................ 27,229 8,082
Reduction in interest expense on bank debt related to the
application of net proceeds of the following at 7.5%:
February 1996 Offering proceeds contributed to CRBC by
Chancellor of $155,475 for the period January 1, 1996 to
February 14, 1996......................................... (1,425) --
August 1996 Offering proceeds contributed to CRBC by
Chancellor of $23,050 for the period January 1, 1996 to
August 9, 1996............................................ (1,052) --
CRBC 12 1/4% Series A Senior Cumulative Exchangeable
Preferred Stock proceeds of $96,171 for the period
January 1, 1996 to February 14, 1996................... (902) --
CRBC 8 3/4% Senior Subordinated Notes Offering proceeds of
$194,083 for the year ended December 31, 1996 and for
the period January 1, 1997 to June 24, 1997............ (14,556) (7,036)
Reduction in interest expense resulting from the redemption
of CRBC's 12.5% Senior Subordinated Notes of $60,000...... (7,500) (3,229)
Interest expense on $70,133 additional bank borrowings at
7.5% related to the redemption of CRBC's 12.5% Senior
Subordinated Notes on June 5, 1997........................ 5,260 2,265
Interest expense on $200,000 8 3/4% Senior Subordinated
Notes issued June 24, 1997................................ 17,500 8,458
--------- ---------
Total adjustment for net increase in interest expense....... $ 24,554 $ 8,540
========= =========
</TABLE>
(p) Reflects the income tax benefit related to pro forma adjustments. The
adjustment to income taxes reflects the application of the estimated
effective tax rate on a pro forma basis to income (loss) before income taxes
for historical and pro forma adjustment amounts.
(q) Reflects incremental dividends and accretion on preferred stock as follows:
<TABLE>
<CAPTION>
SIX MONTHS
DATE OF YEAR ENDED ENDED
ISSUANCE DECEMBER 31, 1996 JUNE 30, 1997
----------------- ----------------- -------------
<S> <C> <C> <C>
12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock.............. February 26, 1996 $ 1,441 $ --
12% Junior Exchangeable Preferred Stock..... January 23, 1997 25,402 1,504
------- ------
Total dividends and accretion............... $26,843 $1,504
======= ======
</TABLE>
P-25
<PAGE> 148
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
RELATED
TO THE CHANCELLOR MERGER
(9) Reflects incremental amortization related to the Chancellor Merger and is
based on the allocation of the total consideration as follows:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 JUNE 30, 1997
----------------- -------------
<S> <C> <C>
Amortization expense on $2,139,283 additional
intangible assets, which includes $1,855,838 of
intangible assets and $283,445 resulting from the
recognition of deferred tax liabilities, amortized on
a straight-line basis over a period of 15 years...... $142,619 $ 71,309
Less: Historical amortization expense.................. (37,816) (18,340)
-------- --------
Adjustment for net increase in amortization expense.... $104,803 $ 52,969
======== ========
</TABLE>
Historical depreciation expense, of CRBC, is assumed to approximate
depreciation expense on a pro forma basis. Actual depreciation and
amortization may differ based upon final purchase price allocations.
(10) Reflects the elimination of duplicate corporate expenses of $832 for the
year ended December 31, 1996 and $675 for the six months ended June 30,
1997 related to the Chancellor Merger.
(11) Reflects the elimination of merger expenses of $2,515 for the six months
ended June 30, 1997 incurred by CRBC in connection with the Chancellor
Merger.
(12) Reflects the adjustment to interest expense in connection with the
consummation of the Merger:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 JUNE 30, 1997
----------------- -------------
<S> <C> <C>
Interest expense on $162,000 additional bank borrowings
related
to (i) the retirement of Chancellor Interim Financing
of $133,000 and (ii) estimated financial advisors,
legal, accounting and other professional fees of
$29,000 at 7.0%...................................... $ 11,340 $ 5,670
Reduction in interest expense related to the
application of the
7.0% interest rate to EMCLA's bank debt prior to the
refinancing of the Senior Credit Facility and to
CRBC's bank
debt prior to consummation of the Chancellor
Merger............................................... (13,391) (4,813)
-------- --------
Net increase in interest expense....................... $ (2,051) $ 857
======== ========
</TABLE>
(13) Reflects the income tax benefit related to pro forma adjustments. The
adjustment to income taxes reflects the application of the estimated
effective tax rate on a pro forma basis to income (loss) before income
taxes for historical and pro forma adjustment amounts.
P-26
<PAGE> 149
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
RELATED TO THE PENDING
CHANCELLOR MEDIA TRANSACTIONS
(14) The detail of the historical financial data of the stations to be acquired
or disposed of in the Pending Chancellor Media Transactions for the year
ended December 31, 1996 and the six months ended June 30, 1997 has been
obtained from the historical financial statements of the respective
stations and is summarized below:
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
--------------------------------------------------------------------------- ------------
WBAB-FM
WBLI-FM
WBGG-AM KZPS-FM BONNEVILLE
WHFM-FM GANNETT KDGE-FM KXPK-FM OPTION WFLN-FM
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
YEAR ENDED DECEMBER 31, 1996 1/1-6/30(a) 1/1-12/31(b) 1/1-12/31(c) 1/1-12/31(d) 1/1-12/31(e) 9/1-12/31(f)
- ------------------------------- ------------- ------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues................. $ 5,726 $ 52,028 $12,174 $5,624 $55,482 $(1,455)
Less: agency commissions....... (619) (6,819) (1,758) (780) (8,683) 159
------- -------- ------- ------ ------- -------
Net revenues................... 5,107 45,209 10,416 4,844 46,799 (1,296)
Station operating expenses
excluding depreciation and
amortization.................. 3,676 25,031 8,585 3,947 25,678 (725)
Depreciation and
amortization.................. 2,141 1,760 475 477 -- (800)
Corporate general and
administrative................ 1,024 -- -- -- -- --
------- -------- ------- ------ ------- -------
Operating income (loss)........ (1,734) 18,418 1,356 420 21,121 229
Interest expense............... -- -- -- 195 -- --
Other (income) expense......... -- -- 408 (49) (8) --
------- -------- ------- ------ ------- -------
Income (loss) before income
taxes......................... (1,734) 18,418 948 274 21,129 229
Income tax expense (benefit)... -- -- -- -- -- --
------- -------- ------- ------ ------- -------
Net income (loss).............. $(1,734) $ 18,418 $ 948 $ 274 $21,129 $ 229
======= ======== ======= ====== ======= =======
Broadcast Cash Flow............ $ 1,431 $ 20,178 $ 1,831 $ 897 $21,121 $ (571)
======= ======== ======= ====== ======= =======
<CAPTION>
DISPOSITIONS
---------------------------
BONNEVILLE
WLUP-FM OPTION PENDING
HISTORICAL HISTORICAL TRANSACTIONS
YEAR ENDED DECEMBER 31, 1996 1/1-12/31(c) 1/1-12/31(e) HISTORICAL
- ------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Gross revenues................. $(17,024) $(35,355) $ 77,200
Less: agency commissions....... 2,332 4,528 (11,640)
-------- -------- --------
Net revenues................... (14,692) (30,827) 65,560
Station operating expenses
excluding depreciation and
amortization.................. (11,697) (18,858) 35,637
Depreciation and
amortization.................. (1,585) -- 2,468
Corporate general and
administrative................ -- -- 1,024
-------- -------- --------
Operating income (loss)........ (1,410) (11,969) 26,431
Interest expense............... -- (562) (367)
Other (income) expense......... -- 9 360
-------- -------- --------
Income (loss) before income
taxes......................... (1,410) (11,416) 26,438
Income tax expense (benefit)... -- -- --
-------- -------- --------
Net income (loss).............. $ (1,410) $(11,416) $ 26,438
======== ======== ========
Broadcast Cash Flow............ $ (2,995) $(11,969) $ 29,923
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
--------------------------------------------------------- ------------
KZPS-FM BONNEVILLE
GANNETT KDGE-FM KXPK-FM OPTION WFLN-FM
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
SIX MONTHS ENDED JUNE 30, 1997 1/1-3/30(b) 1/1-6/30(c) 1/1-6/30(d) 1/1-6/30(e) 1/1-4/30(f)
- --------------------------------------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Gross revenues............................... $28,594 $6,613 $2,454 $22,226 $(1,298)
Less: agency commissions..................... (3,683) (952) (336) (3,377) 134
------- ------ ------ ------- -------
Net revenues................................. 24,911 5,661 2,118 18,849 (1,164)
Station operating expenses excluding
depreciation and amortization............... 13,904 4,474 2,041 13,570 (728)
Depreciation and amortization................ 254 236 198 -- (800)
Corporate general and administrative......... -- -- -- -- --
------- ------ ------ ------- -------
Operating income (loss)...................... 10,753 951 (121) 5,279 364
Interest expense............................. -- -- -- -- --
Other (income) expense....................... -- 4 (81) 4 --
------- ------ ------ ------- -------
Income (loss) before income taxes............ 10,753 947 (40) 5,275 364
Income tax expense (benefit)................. -- -- -- -- --
------- ------ ------ ------- -------
Net income (loss)............................ $10,753 $ 947 $ (40) $ 5,275 $ 364
======= ====== ====== ======= =======
Broadcast Cash Flow.......................... $11,007 $1,187 $ 77 $ 5,279 $ (436)
======= ====== ====== ======= =======
<CAPTION>
DISPOSITIONS
---------------------------
BONNEVILLE
WLUP-FM OPTION PENDING
HISTORICAL HISTORICAL TRANSACTIONS
SIX MONTHS ENDED JUNE 30, 1997 1/1-6/30(c) 1/1-6/30(e) HISTORICAL
- --------------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Gross revenues............................... $(6,613) $(20,095) $31,881
Less: agency commissions..................... 890 2,619 (4,705)
------- -------- -------
Net revenues................................. (5,723) (17,476) 27,176
Station operating expenses excluding
depreciation and amortization............... (5,249) (9,740) 18,272
Depreciation and amortization................ (258) -- (370)
Corporate general and administrative......... -- -- --
------- -------- -------
Operating income (loss)...................... (216) (7,736) 9,274
Interest expense............................. -- -- --
Other (income) expense....................... -- 8 (65)
------- -------- -------
Income (loss) before income taxes............ (216) (7,744) 9,339
Income tax expense (benefit)................. -- -- --
------- -------- -------
Net income (loss)............................ $ (216) $ (7,744) $ 9,339
======= ======== =======
Broadcast Cash Flow.......................... $ (474) $ (7,736) $ 8,904
======= ======== =======
</TABLE>
(a) On July 1, 1996, CRBC entered into an agreement to exchange, in the SFX
Exchange, WAPE-FM and WFYV-FM in Jacksonville, Florida (which were acquired
as part of the Omni Acquisition) (see 8(e)), and $11,000 in cash for
WBAB-FM, WBLI-FM, WGBB-AM, and WHFM-FM in Long Island.
(b) On April 4, 1997, EMCLA entered into an agreement to acquire, in the
Gannett Acquisition, 5 radio stations in 3 major markets from P&S including
WGCI-FM/AM in Chicago, KHKS-FM in Dallas, and KKBQ-FM/AM in Houston
("Gannett") for $340,000 in cash.
P-27
<PAGE> 150
(c) On June 24, 1997, EMCLA entered into an agreement to acquire, in the
Bonneville Acquisition, KZPS-FM and KDGE-FM in Dallas for $83,500 in cash.
On June 29, 1997, EMCLA paid $8,350 in escrow funds which are classified as
other assets at June 30, 1997. It is expected that this transaction will
result in an exchange for WLUP-FM in Chicago. On July 14, 1997, EMCLA
completed the disposition of WLUP-FM in Chicago to Bonneville and placed
$80,000 in a trust pending the completion of the deferred exchange of the
WLUP-FM in Chicago and $3,500 in cash for KZPS-FM and KDGE-FM in Dallas
(the "Chicago/Dallas Exchange"). The Chicago/Dallas Exchange will be
accounted for as a like-kind exchange and no gain or loss will be
recognized upon the consummation of the exchange. EMCLA began operating
KZPS-FM and KDGE-FM under a time brokerage agreement on August 1, 1997.
(d) On July 30, 1997, CRBC entered into an agreement to acquire, in the Denver
Acquisition, KXPK-FM in Denver from Evergreen Wireless LLC (which is
unrelated to Evergreen) for $26,000 in cash (including $1,650 paid by
Chancellor in escrow). CRBC began operating KXPK-FM under a time brokerage
agreement on September 1, 1997.
(e) On August 6, 1997, EMCLA and CRBC announced that they had paid $3,000 to
Bonneville for an option to exchange EMCLA's station WTOP-AM in Washington
and CRBC's stations KZLA-FM in Los Angeles and WGMS-FM in Washington plus
an additional $57,000 in cash for Bonneville's stations WDBZ-FM in New
York, KLDE-FM in Houston and KBIG-FM in Los Angeles (the "Bonneville
Option"). As of September 10, 1997, the Bonneville Option had not been
exercised. The Bonneville Option expires on December 31, 1997.
(f) On August 12, 1996, EMCLA entered into an agreement to acquire WFLN-FM in
Philadelphia from Secret for $37,750 in cash. EMCLA also entered into an
agreement to operate WFLN-FM under a time brokerage agreement effective
September 1, 1996. EMCLA subsequently entered into an agreement to sell
WFLN-FM to Greater Media for $41,800 in cash. On May 1, 1997, EMCLA
assigned its time brokerage agreement to operate WFLN-FM to Greater Media.
On July 16, 1997, Secret purported to terminate the sale of WFLN-FM to
EMCLA. Evergreen subsequently brought suit against Secret to enforce its
right to acquire WFLN-FM. In August 1997, pursuant to a court settlement,
EMCLA, Secret and Greater Media agreed that (i) Secret would sell WFLN-FM
directly to Greater Media for $37,750, (ii) Greater Media would deposit
$4,050 (the difference between EMCLA's proposed acquisition price for
WFLN-FM from Secret and EMCLA's proposed sale price for WFLN-FM to Greater
Media) with the court and (iii) EMCLA and Secret would litigate each
party's entitlement to the amount deposited with the court. As of the date
hereof, no further resolution to this dispute has occurred.
(15) Reflects the elimination of time brokerage agreement fees received and paid
by CRBC as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 MARKET PERIOD REVENUE EXPENSE
---------------------------- ----------- --------- ------- -------
<S> <C> <C> <C> <C>
WAPE-FM, WFYV-FM................................ Jacksonville 7/1-12/31 $(1,963) $(2,000)
WBAB-FM, WBLI-FM, WGBB-AM, WHFM-FM.............. Long Island 7/1-12/31 -- (2,000)
------- -------
Total adjustment for decrease in gross revenues and expenses............ $(1,963) $(4,000)
======= =======
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997 MARKET PERIOD REVENUE EXPENSE
------------------------------ ----------- --------- ------- -------
<S> <C> <C> <C> <C>
WAPE-FM, WFYV-FM................................ Jacksonville 1/1-3/31 $(2,000) $ (476)
WBAB-FM, WBLI-FM, WGBB-AM, WHFM-FM.............. Long Island 1/1-3/31 -- (2,000)
------- -------
Total adjustment for decrease in gross revenues and expenses............ $(2,000) $(2,476)
======= =======
</TABLE>
P-28
<PAGE> 151
(16) Reflects incremental amortization related to the Pending Chancellor Media
Transactions and is based on the allocation of the total consideration as
follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1997
----------------- ----------------
<S> <C> <C>
Amortization expense on $429,043 additional intangible
assets amortized on a straight-line basis over a 15
year period.......................................... $28,603 $14,301
Less: historical amortization expense.................. (3,186) (1,414)
------- -------
Adjustment for net increase in amortization expense.... $25,417 $12,887
======= =======
</TABLE>
Historical depreciation expense, of the Pending Chancellor Media
Transactions, is assumed to approximate depreciation expense on a pro forma
basis. Actual depreciation and amortization may differ based upon final
purchase price allocations.
(17) Reflects the adjustment to interest expense in connection with the
consummation of the Pending Transactions:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1997
----------------- ----------------
<S> <C> <C>
Additional bank borrowings related to:
Pending Acquisitions................................. $440,500 $440,500
======== ========
Interest expense on additional bank borrowings at
7.0%................................................. $ 30,835 $ 15,418
======== ========
</TABLE>
(18) Reflects the income tax benefit related to pro forma adjustments. The
adjustment to income taxes reflects the application of the estimated
effective tax rate on a pro forma basis to income (loss) before income
taxes for historical and pro forma adjustment amounts.
P-29
<PAGE> 152
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
Independent Auditors' Report.............................. F-4
Consolidated Balance Sheets as of December 31, 1995 and
1996 and June 30, 1997
(unaudited)............................................ F-5
Consolidated Statements of Operations for the years ended
December 31, 1994, 1995 and
1996 and for the six months ended June 30, 1996 and
1997 (unaudited)....................................... F-6
Consolidated Statements of Stockholder's Equity for the
years ended December 31, 1994, 1995 and 1996 and for
the six months ended June 30, 1997 (unaudited)......... F-7
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and
1996 and for the six months ended June 30, 1996 and
1997 (unaudited)....................................... F-8
Notes to Consolidated Financial Statements................ F-9
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
Report of Independent Accountants......................... F-23
Consolidated Balance Sheets as of December 31, 1995 and
1996................................................... F-24
Consolidated Statements of Operations for the years ended
December 31, 1994, 1995 and
1996................................................... F-25
Consolidated Statements of Changes in Common Stockholder's
Equity for the years ended December 31, 1994, 1995 and
1996................................................... F-26
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and
1996................................................... F-27
Notes to Consolidated Financial Statements................ F-28
Unaudited Consolidated Balance Sheets as of December 31,
1996 and June 30, 1997................................. F-44
Unaudited Consolidated Statements of Operations for the
six months ended June 30, 1996 and 1997................ F-45
Unaudited Consolidated Statements of Changes in
Stockholder's Equity for the six months ended June 30,
1997................................................... F-46
Unaudited Consolidated Statements of Cash Flows for the
six months ended June 30, 1996 and 1997................ F-47
Notes to Unaudited Consolidated Financial Statements...... F-48
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
Independent Auditors' Report.............................. F-54
Combined Balance Sheets as of December 31, 1995 and 1996
and June 30, 1997
(unaudited)............................................ F-55
Combined Statements of Earnings for the years ended
December 31, 1994, 1995 and 1996 and the six months
ended June 30, 1996 and 1997 (unaudited)............... F-56
Combined Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996 and the six months
ended June 30, 1996 and 1997 (unaudited)............... F-57
Notes to Combined Financial Statements.................... F-58
</TABLE>
F-1
<PAGE> 153
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
WMZQ INC. AND VIACOM BROADCASTING EAST INC.:
Independent Auditors' Report.............................. F-63
Combined Balance Sheets as of December 31, 1995 and 1996
and June 30, 1997
(unaudited)............................................ F-64
Combined Statements of Earnings for the years ended
December 31, 1994, 1995 and 1996 and the six months
ended June 30, 1996 and 1997 (unaudited)............... F-65
Combined Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996 and the six months
ended June 30, 1996 and 1997 (unaudited)............... F-66
Notes to Combined Financial Statements.................... F-67
KKSF-FM/KDFC-FM AND AM (A DIVISION OF THE BROWN
ORGANIZATION):
Independent Auditors' Report.............................. F-72
Balance Sheets as of December 31, 1995 and 1996........... F-73
Statements of Earnings and Division Equity for the years
ended December 31, 1995 and 1996....................... F-74
Statements of Cash Flows for the years ended December 31,
1995 and 1996.......................................... F-75
Notes to Financial Statements............................. F-76
WDAS-AM/FM (STATION OWNED AND OPERATED BY BEASLEY FM
ACQUISITION CORP.):
Independent Auditors' Report.............................. F-81
Balance Sheets as of December 31, 1996 and March 31, 1997
(unaudited)............................................ F-82
Statements of Earnings and Station Equity for the year
ended December 31, 1996 and the three months ended
March 31, 1996 and 1997 (unaudited).................... F-83
Statements of Cash Flows for the year ended December 31,
1996 and the three months ended March 31, 1996 and 1997
(unaudited)............................................ F-84
Notes to Financial Statements............................. F-85
CENTURY CHICAGO BROADCASTING, L.P.:
Report of Independent Accountants......................... F-89
Balance Sheets as of December 31, 1996 and March 31, 1997
(unaudited)............................................ F-90
Statements of Operations and Partners' Deficit for the
year ended December 31, 1996 and the three months ended
March 31, 1996 and 1997 (unaudited).................... F-91
Statements of Cash Flows for the year ended December 31,
1996 and the three months ended March 31, 1996 and 1997
(unaudited)............................................ F-92
Notes to Financial Statements............................. F-93
WJLB/WMXD, DETROIT:
Report of Independent Public Accountants.................. F-98
Combined Balance Sheets as of December 31, 1996 and March
31, 1997 (unaudited)................................... F-99
Combined Statements of Operations for the year ended
December 31, 1996 and for the three months ended March
31, 1996 and 1997 (unaudited).......................... F-100
Combined Statements of Cash Flows for the year ended
December 31, 1996 and for the three months ended March
31, 1996 and 1997 (unaudited).......................... F-101
Notes to Combined Financial Statements.................... F-102
KYSR INC. AND KIBB INC.:
Independent Auditors' Report.............................. F-107
Combined Balance Sheets as of December 31, 1995 and 1996
and June 30, 1997
(unaudited)............................................ F-108
Combined Statements of Operations for the years ended
December 31, 1994, 1995 and 1996 and the six months
ended June 30, 1996 and 1997 (unaudited)............... F-109
Combined Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996 and the six months
ended June 30, 1996 and 1997 (unaudited)............... F-110
Notes to Combined Financial Statements.................... F-111
</TABLE>
F-2
<PAGE> 154
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
WLIT INC.:
Independent Auditors' Report.............................. F-116
Balance Sheets as of December 31, 1995 and 1996 and June
30, 1997 (unaudited)................................... F-117
Statements of Earnings for the years ended December 31,
1994, 1995 and 1996 and the six months ended June 30,
1996 and 1997 (unaudited).............................. F-118
Statements of Cash Flows for the years ended December 31,
1994, 1995 and 1996 and the six months ended June 30,
1996 and 1997 (unaudited).............................. F-119
Notes to Financial Statements............................. F-120
WDRQ INC.:
Independent Auditors' Report.............................. F-125
Balance Sheets as of December 31, 1995 and 1996 and June
30, 1997 (unaudited)................................... F-126
Statements of Earnings for the years ended December 31,
1994, 1995 and 1996 and the six months ended June 30,
1996 and 1997 (unaudited).............................. F-127
Statements of Cash Flows for the years ended December 31,
1994, 1995 and 1996 and the six months ended June 30,
1996 and 1997 (unaudited).............................. F-128
Notes to Financial Statements............................. F-129
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
Report of Independent Accountants......................... F-134
Report of Independent Accountants......................... F-135
Consolidated Balance Sheets as of December 31, 1994 and
1995................................................... F-136
Consolidated Statements of Operations for the years ended
December 31, 1994 and 1995 and the period ended
February 13, 1996...................................... F-137
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1994 and 1995 and for the
period ended February 13, 1996......................... F-138
Consolidated Statements of Cash Flows for the years ended
December 31, 1994 and 1995 and for the period ended
February 13, 1996...................................... F-139
Notes to Consolidated Financial Statements................ F-140
COLFAX COMMUNICATIONS, INC. RADIO GROUP
Report of Independent Public Accountants.................. F-149
Combined Balance Sheets as of December 31, 1996, 1995, and
1994................................................... F-150
Combined Statements of Income for the years ended December
31, 1996, 1995, and 1994............................... F-151
Combined Statements of Changes in Partners' Equity for the
years ended December 31, 1996, 1995, and 1994.......... F-152
Combined Statements of Cash Flows for the years ended
December 31, 1996, 1995, and 1994...................... F-153
Notes to Consolidated Financial Statements................ F-154
</TABLE>
F-3
<PAGE> 155
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Evergreen Media Corporation of Los Angeles:
We have audited the accompanying consolidated balance sheets of Evergreen
Media Corporation of Los Angeles and subsidiaries as of December 31, 1995 and
1996, and the related consolidated statements of operations, stockholder's
equity and cash flows for each of the years in the three-year period ended
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Evergreen
Media Corporation of Los Angeles and subsidiaries as of December 31, 1995 and
1996, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1996 in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
January 31, 1997, except for note 2(c),
which is as of February 19, 1997
F-4
<PAGE> 156
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1995 1996 1997
-------- ---------- -----------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR
SHARE DATA)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............................... $ 3,430 $ 3,060 $ 4,886
Accounts receivable, less allowance for doubtful
accounts of $2,000 in 1995, $2,292 in 1996 and $4,386
in 1997.............................................. 45,413 85,159 99,654
Prepaid expenses and other.............................. 2,146 6,352 7,799
-------- ---------- ----------
Total current assets............................ 50,989 94,571 112,339
Property and equipment, net (note 3)...................... 37,839 48,193 64,817
Intangible assets, net (note 4)........................... 458,787 853,643 1,183,569
Assets held for sale...................................... -- -- 50,000
Other assets, net......................................... 4,732 24,552 72,788
-------- ---------- ----------
$552,347 $1,020,959 $1,483,513
======== ========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses (note 5).......... $ 15,892 $ 26,366 $ 32,895
Current portion of long-term debt (note 6).............. 4,000 26,500 --
Other current liabilities............................... 541 284 99
-------- ---------- ----------
Total current liabilities....................... 20,433 53,150 32,994
Long-term debt, excluding current portion (note 6)........ 197,000 331,500 525,000
Deferred tax liabilities (note 8)......................... 29,233 86,098 88,014
Other liabilities......................................... 1,104 800 902
-------- ---------- ----------
Total liabilities............................... 247,770 471,548 646,910
-------- ---------- ----------
Stockholder's equity (notes 2 and 7):
Common stock, $.01 par value. Authorized shares 1,000;
issued and outstanding 1,000 shares.................. 1 1 1
Paid-in capital......................................... 398,074 662,922 951,304
Accumulated deficit..................................... (93,498) (113,512) (114,702)
-------- ---------- ----------
Total stockholder's equity...................... 304,577 549,411 836,603
Commitments and contingencies (notes 2, 6 and 10).........
-------- ---------- ----------
$552,347 $1,020,959 $1,483,513
======== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE> 157
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Gross revenues.......................... $125,478 $186,365 $337,405 $144,614 $216,177
Less agency commissions............... 15,962 23,434 43,555 18,252 27,916
-------- -------- -------- -------- --------
Net revenues.................. 109,516 162,931 293,850 126,362 188,261
-------- -------- -------- -------- --------
Operating expenses:
Station operating expenses excluding
depreciation and amortization...... 68,852 97,674 174,344 80,313 111,162
Depreciation and amortization......... 30,596 47,005 93,749 44,012 53,912
Corporate general and
administrative..................... 2,672 4,475 7,797 3,198 5,651
-------- -------- -------- -------- --------
Operating expenses............ 102,120 149,154 275,890 127,523 170,725
-------- -------- -------- -------- --------
Operating income (loss)....... 7,396 13,777 17,960 (1,161) 17,536
-------- -------- -------- -------- --------
Nonoperating income (expenses):
Interest expense...................... (13,809) (19,199) (37,527) 19,039 22,741
Gain on disposition of assets (note
2)................................. 6,991 -- -- -- (13,323)
Other income (expense), net........... (539) (236) 477 -- --
-------- -------- -------- -------- --------
Nonoperating expenses, net.... (7,357) (19,435) (37,050) 19,039 9,418
-------- -------- -------- -------- --------
Income (loss) before income
taxes and extraordinary
item........................ 39 (5,658) (19,090) (20,200) 8,118
Income tax expense (benefit) (note 8)... -- 192 (2,896) (3,705) 4,259
-------- -------- -------- -------- --------
Income (loss) before
extraordinary item.......... 39 (5,850) (16,194) (16,495) 3,859
Extraordinary item -- loss on
extinguishment of debt (note 6)....... (3,585) -- -- -- (4,350)
-------- -------- -------- -------- --------
Net loss...................... $ (3,546) $ (5,850) $(16,194) $(16,495) $ (491)
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 158
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
--------------- PAID-IN ACCUMULATED STOCKHOLDER'S
AMOUNT SHARES CAPITAL DEFICIT EQUITY
------ ------ ------- ----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1993............. $1 1,000 195,409 (74,442) 120,968
Distribution to Parent.................. -- -- (239) -- (239)
Dividend to Parent...................... -- -- -- (4,830) (4,830)
Net loss........................ -- -- -- (3,546) (3,546)
-- ------ ------- -------- -------
Balances at December 31, 1994............. 1 1,000 195,170 (82,818) 112,353
Net capital contributed by Parent....... -- -- 202,904 -- 202,904
Dividend to Parent...................... -- -- -- (4,830) (4,830)
Net loss........................ -- -- -- (5,850) (5,850)
-- ------ ------- -------- -------
Balances at December 31, 1995............. 1 1,000 398,074 (93,498) 304,577
Net capital contributed by Parent....... -- -- 264,848 -- 264,848
Dividend to Parent...................... -- -- -- (3,820) (3,820)
Net loss........................ -- -- -- (16,194) (16,194)
-- ------ ------- -------- -------
Balances at December 31, 1996............. 1 1,000 662,922 (113,512) 549,411
Net capital contributed by Parent....... -- -- 288,382 -- 288,382
Dividend to Parent...................... -- -- -- (699) (699)
Net loss........................ -- -- -- (491) (491)
-- ------ ------- -------- -------
Balances at June 30, 1997 (unaudited)..... $1 1,000 951,304 (114,702) 836,603
== ====== ======= ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 159
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------- ---------------------
1994 1995 1996 1996 1997
-------- --------- --------- --------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.............................. $ (3,546) $ (5,850) $ (16,194) $ (16,495) $ (491)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation....................... 4,528 5,508 7,707 3,479 5,074
Amortization of goodwill,
intangible assets and other
assets........................... 26,068 41,497 86,042 40,533 48,838
Provision for doubtful accounts.... 754 904 2,179 723 2,388
Deferred income tax (benefit)
expense.......................... - (479) (4,353) (3,705) 4,259
Gain on disposition of assets...... (6,991) - - - (13,323)
Loss on extinguishment of debt..... 3,585 - - - 4,350
Changes in certain assets and
liabilities, net of effects of
acquisitions:
Accounts receivable.............. (5,051) (6,628) (28,146) (9,448) (14,893)
Prepaid expenses and other
current assets................ 84 724 (2,804) (2,798) (5,102)
Accounts payable and accrued
expenses...................... 1,194 4,405 4,560 5,669 4,992
Other assets..................... (724) (184) (354) (604) (29)
Other liabilities................ (21) 490 (587) 11 102
-------- --------- --------- --------- ---------
Net cash provided by operating
activities.................. 19,880 40,387 48,050 17,365 36,165
-------- --------- --------- --------- ---------
Cash flows from investing activities:
Acquisitions, net of cash acquired.... (44,921) (188,004) (457,764) (348,826) (447,240)
Assets held for sale.................. 19,101 -- 32,000 -- (50,000)
Escrow deposits on pending
acquisitions....................... -- -- (17,000) (13,000) (62,100)
Proceeds from sale of assets.......... -- -- -- -- 99,750
Capital expenditures.................. (5,227) (2,642) (6,543) (1,761) (3,547)
Other................................. (1,881) (1,466) (12,631) (2,382) (15,270)
-------- --------- --------- --------- ---------
Net cash used by investing
activities.................. (32,928) (192,112) (461,938) (365,969) (478,407)
-------- --------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term
debt............................... 36,000 186,000 447,750 365,750 584,250
Principal payments on long-term
debt............................... (14,000) (159,000) (290,750) (12,750) (417,250)
Payments on other liabilities......... (646) (694) (569) (227) (185)
Cash contributed by Parent............ -- 132,766 264,848 528 288,382
Cash distributed to Parent............ (239) -- -- -- --
Dividend to Parent.................... (4,830) (4,830) (3,820) (2,415) (699)
Payments for debt issuance costs...... (4,602) (303) (3,941) (3,835) (10,430)
-------- --------- --------- --------- ---------
Net cash provided by financing
activities.................. 11,683 153,939 413,518 347,051 444,068
-------- --------- --------- --------- ---------
Increase (decrease) in cash and cash
equivalents........................... (1,365) 2,214 (370) (1,553) 1,826
Cash and cash equivalents at beginning
of period............................. 2,581 1,216 3,430 3,430 3,060
-------- --------- --------- --------- ---------
Cash and cash equivalents at end of
period................................ $ 1,216 $ 3,430 $ 3,060 $ 1,877 $ 4,886
======== ========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 160
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES IN THOUSANDS OF DOLLARS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Evergreen Media Corporation of Los Angeles and subsidiaries, (a
wholly-owned subsidiary of Evergreen Media Corporation ("Evergreen" or
"Parent")), own and operate commercial radio stations in various geographical
regions across the United States, primarily in the top ten radio revenue
markets.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of Evergreen
Media Corporation of Los Angeles and its subsidiaries (collectively, the
"Company") all of which are wholly owned. Significant intercompany balances and
transactions have been eliminated in consolidation.
(c) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets. Repair and maintenance costs are charged to expense when
incurred.
(d) Intangible Assets
Intangible assets consist primarily of broadcast licenses, goodwill and
other identifiable intangible assets. The Company amortizes such intangible
assets using the straight-line method over estimated useful lives ranging from 1
to 40 years. The Company continually evaluates the propriety of the carrying
amount of goodwill and other intangible assets as well as the amortization
period to determine whether current events or circumstances warrant adjustments
to the carrying value and/or revised estimates of useful lives. This evaluation
consists of the projection of undiscounted operating income before depreciation,
amortization, nonrecurring charges and interest for each of the Company's radio
stations over the remaining amortization periods of the related intangible
assets. The projections are based on a historical trend line of actual results
since the acquisitions of the respective stations adjusted for expected changes
in operating results. To the extent such projections indicate that undiscounted
operating income is not expected to be adequate to recover the carrying amounts
of the related intangible assets, such carrying amounts are written down by
charges to expense. At this time, the Company believes that no significant
impairment of goodwill and other intangible assets has occurred and that no
reduction of the estimated useful lives is warranted.
(e) Debt Issuance Costs
The costs related to the issuance of debt are capitalized and amortized to
expense over the lives of the related debt. During the years ended December 31,
1994, 1995 and 1996, the Company recognized amortization of debt issuance costs
of $712,000, $631,000 and $1,113,000, respectively, which amounts are included
in amortization expense in the accompanying consolidated statements of
operations.
(f) Barter Transactions
The Company trades commercial air time for goods and services used
principally for promotional, sales and other business activities. An asset and
liability is recorded at the fair market value of the goods or services
received. Barter revenue is recorded and the liability relieved when commercials
are broadcast and barter expense is recorded and the asset relieved when goods
or services are received or used. Barter amounts are not significant to the
Company's consolidated financial statements.
F-9
<PAGE> 161
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(g) Income Taxes
Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable earnings. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount more likely than not to be
realized. Income tax expense is the total of tax payable for the period and the
change during the period in deferred tax assets and liabilities.
The Company is included in the consolidated federal income tax returns
filed by Evergreen. Federal taxes are calculated on a separate return basis in
the accompanying consolidated financial statements.
(h) Revenue Recognition
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
Fees received or paid pursuant to various time brokerage agreements are
recognized as gross revenues or amortized to expense, respectively, over the
term of the agreement using the straight-line method.
(i) Statements of Cash Flows
For purposes of the statements of cash flows, the Company considers
temporary cash investments purchased with original maturities of Six months or
less to be cash equivalents.
The Company paid approximately $12,852,000, $19,134,000 and $37,042,000 for
interest in 1994, 1995 and 1996, respectively. The Company paid approximately
$733,000 for income taxes in 1996.
(j) Derivative Financial Instruments
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. They are used to manage
well-defined interest rate risks related to interest on the Company's
outstanding debt.
As interest rates change under interest rate swap and cap agreements, the
differential to be paid or received is recognized as an adjustment to interest
expense. The Company is not exposed to credit loss as its interest rate swap
agreements are with the participating banks under the Company's senior credit
facility.
(k) Omission of Per Share Information
Net loss per share is not presented as such information is not meaningful.
All 1,000 issued and outstanding shares of the Company's common stock are owned
by Evergreen during the three-year period ended December 31, 1996.
(l) Disclosure of Certain Significant Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
In the opinion of management, credit risk with respect to trade receivables
is limited due to the large number of diversified customers and the geographic
diversification of the Company's customer base. The Company performs ongoing
credit evaluations of its customers and believes that adequate allowances for
any
F-10
<PAGE> 162
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
uncollectible trade receivables are maintained. At December 31, 1995 and 1996,
no receivable from any customer exceeded 5% of stockholder's equity and no
customer accounted for more than 10% of net revenues in 1994, 1995 or 1996.
(m) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. The adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
(n) Stock-Based Compensation
The Company does not have any stock compensation plans under which it
grants stock awards to employees. Evergreen grants stock options to the
Company's officers and other key employees on behalf of the Company.
Prior to January 1, 1996, Evergreen accounted for its' stock option plans
in accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, Accounting for Stock Issued to Employees, and related interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
January 1, 1996, Evergreen adopted SFAS No. 123, Accounting for Stock-Based
Compensation, which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based method defined in SFAS No. 123 had been
applied. Evergreen has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosures of SFAS No. 123.
(o) Unaudited Interim Financial Information
In the opinion of management, the unaudited interim consolidated financial
statements as of and for the six months ended June 30, 1996 and 1997, reflect
all adjustments, consisting of only normal and recurring items, which are
necessary for a fair presentation of the results for the interim periods
presented. The results for the interim periods ended June 30, 1996 and 1997 are
not necessarily indicative of results to be expected for any other interim
period or for the full year.
(2) ACQUISITIONS AND DISPOSITIONS
(a) Completed Transactions
In April 1994, the Company acquired radio station KIOI-FM in San Francisco,
California for cash consideration of approximately $44,921,000. This acquisition
was funded with proceeds received from the sale of stations WAPE-FM and WFYV-FM
in Jacksonville (which sale closed in April 1994) and additional borrowings
under the Company's senior credit facility. The Company received proceeds of
$19,500,000 less closing costs from the sale of WAPE-FM and WFYV-FM and
recognized a gain of $7,328,000 on such sale.
F-11
<PAGE> 163
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In May 1995, the Company and Evergreen acquired Broadcasting Partners, Inc.
("BPI"), a publicly traded radio broadcasting company with seven FM and four AM
radio stations, eight of which are in the nation's ten largest radio markets
(the "BPI Acquisition"). The BPI Acquisition was effected through the merger of
a wholly-owned subsidiary of the Company with and into BPI, with BPI surviving
the merger as a wholly-owned subsidiary of the Company. The BPI Acquisition
included the conversion of each outstanding share of BPI common stock into the
right to receive $12.00 in cash and .69 shares of Evergreen's Class A Common
Stock, resulting in total cash payments of $94,813,000 and the issuance of
5,611,009 shares of Evergreen's Class A Common Stock valued at $12.50 per share.
In addition, the Company retired existing BPI debt of $81,926,000 and incurred
various other direct acquisition costs. The total purchase price, including
closing costs, allocated to net assets acquired was approximately $258,634,000.
On January 17, 1996, the Company and Evergreen acquired Pyramid
Communications, Inc. ("Pyramid"), a radio broadcasting company with nine FM and
three AM radio stations in five radio markets (Chicago, Philadelphia, Boston,
Charlotte and Buffalo) (the "Pyramid Acquisition"). The Pyramid Acquisition was
effected through the merger of a wholly-owned subsidiary of the Company with and
into Pyramid with Pyramid surviving the merger as a wholly-owned subsidiary of
the Company. The total purchase price, including closing costs, allocated to net
assets acquired was approximately $316,343,000 in cash.
On May 3, 1996, the Company acquired WKLB-FM in Boston for $34,000,000 in
cash plus various other direct acquisition costs. On November 26, 1996, the
Company exchanged WKLB-FM in Boston (now known as WROR-FM) for WGAY-FM in
Washington, D.C. The Company had previously been operating WGAY-FM under a time
brokerage agreement and selling substantially all of the broadcast time of
WKLB-FM under a time brokerage agreement, in each case since June 17, 1996,
pending completion of the exchange.
On July 19, 1996, the Company sold WHTT-FM and WHTT-AM in Buffalo for
$19,500,000 in cash and on August 1, 1996, the Company sold WSJZ-FM in Buffalo
for $12,500,000 in cash (collectively, the "Buffalo Stations"). The assets of
the Buffalo Stations were classified as assets held for sale in the Pyramid
Acquisition and no gain or loss was recognized by the Company upon consummation
of the sales. The combined net income of the Buffalo stations of approximately
$733,000 has been excluded from the consolidated statement of operations for the
year ended December 31, 1996. The excess of the proceeds over the carrying
amounts at the dates of sale approximated $2,561,000 (including interest costs
during the holding period of approximately $1,169,000) and has been accounted
for as an adjustment to the original purchase price of the Pyramid Acquisition.
The Company had previously entered into time brokerage agreements (effective
April 15, 1996 for WSJZ-FM and April 25, 1996 for WHTT-FM and WHTT-AM) to sell
substantially all of the broadcast time of these stations pending completion of
the sales.
On August 14, 1996, the Company acquired KYLD-FM in San Francisco for
$44,000,000 in cash plus various other direct acquisition costs. The Company had
previously been operating KYLD-FM under a time brokerage agreement since May 1,
1996.
On October 18, 1996, the Company acquired WEDR-FM in Miami for $65,000,000
in cash plus various other direct acquisition costs.
On January 31, 1997, the Company acquired WWWW-FM and WDFN-AM in Detroit
for $30,000,000 in cash plus various other direct acquisition costs. The Company
had previously provided certain sales and promotional functions to WWWW-FM and
WDFN-AM under a joint sales agreement since February 14, 1996 and subsequently
operated the stations under a time brokerage agreement since April 1, 1996.
On January 31, 1997, the Company acquired KKSF-FM, KDFC-FM and KDFC-AM in
San Francisco for $115,000,000 in cash plus various other direct acquisitions
costs. The Company had previously been operating KKSF-FM and KDFC-FM under a
time brokerage agreement since November 1, 1996.
F-12
<PAGE> 164
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The acquisitions discussed above were accounted for as purchases.
Accordingly, the accompanying consolidated financial statements include the
results of operations of the acquired entities from the dates of acquisition.
A summary of the net assets acquired follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- -------- --------
<S> <C> <C> <C>
Working capital, including cash of $492 in 1995 and
$1,011 in 1996...................................... $ (79) $ 12,012 $ 11,218
Property and equipment................................ 1,762 11,684 11,519
Assets held for sale.................................. -- -- 32,000
Intangible assets..................................... 43,238 264,650 465,824
Deferred tax liability................................ -- (29,712) (61,218)
------- -------- --------
$44,921 $258,634 $459,343
======= ======== ========
</TABLE>
The consolidated condensed pro forma results of operations data for 1995
and 1996, as if the 1995 and 1996 acquisitions and dispositions occurred at
January 1, 1995, follow:
<TABLE>
<CAPTION>
1995 1996
-------- --------
(UNAUDITED)
<S> <C> <C>
Net revenues................................................ $263,569 $306,388
Operating income (loss)..................................... (1,540) 15,531
Net loss.................................................... (21,471) (8,030)
</TABLE>
(b) Pending Transactions
On June 13, 1996, the Company entered into an agreement to acquire WWRC-AM
in Washington, D.C. for $22,500,000 in cash. The Company has subsequently agreed
with the owner of WWRC-AM to exchange WQRS-FM in Detroit (which, as discussed
below, the Company has agreed to acquire in a separate purchase for $32,000,000
in cash) in return for WWRC-AM and $9,500,000 in cash. The Company has been
operating WWRC-AM under a time brokerage agreement since June 17, 1996.
On July 15, 1996, the Company entered into an agreement to acquire WPNT-FM
in Chicago for $73,750,000 in cash.
On August 12, 1996, the Company entered into an agreement to acquire
WMXD-FM and WJLB-FM in Detroit for $168,000,000 in cash and WFLN-FM in
Philadelphia for $37,750,000 in cash. The Company also entered into an agreement
to operate WMXD-FM, WJLB-FM and WFLN-FM under time brokerage agreements
effective September 1, 1996. The Company and Evergreen also entered into a
separate agreement on August 12, 1996 to acquire WQRS-FM in Detroit for
$32,000,000 in cash. As discussed above, the Company will immediately swap
WQRS-FM at closing in return for WWRC-AM in Washington and $9,500,000 in cash.
On September 4, 1996, the Company entered into a binding letter of intent
to swap five of its six stations in the Charlotte, N.C. market (WPEG-FM,
WBAV-FM, WBAV-AM, WRFX-FM and WFNZ-AM), which were acquired as part of the BPI
Acquisition and the Pyramid Acquisition, for WIOQ-FM and WUSL-FM in
Philadelphia. As part of this transaction, the Company has also agreed to sell
its sixth radio station in Charlotte, WNKS-FM, for $10,000,000 in cash. On
December 5, 1996, the Company entered into definitive agreements regarding these
stations.
On September 19, 1996, the Company entered into an agreement to acquire
WDAS-FM and WDAS-AM in Philadelphia for $103,000,000 in cash.
F-13
<PAGE> 165
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consummation of each Pending Transaction is subject to various conditions,
including approval from the FCC and the expiration or early termination under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). The Company believes that such conditions will be satisfied in the
ordinary course, but there can be no assurance that this will be the case.
Completion of the above pending transactions would result in the Company's
ownership of six FM stations in the Chicago and Philadelphia markets, or one
station in each market in excess of the maximum number of FM stations under
common ownership permitted by the Telecommunications Act of 1996 (the "1996
Act"). Therefore, the Company will be required to divest one FM station in each
market in order to comply with the 1996 Act.
Escrow funds of $17,000,000 paid by the Company in connection with the
completed transactions subsequent to year end and the pending transactions have
been classified as other assets at December 31, 1996 in the accompanying
consolidated balance sheet.
(c) Chancellor Broadcasting Merger and Viacom Acquisition
On February 16, 1997, the Company entered into a stock purchase agreement
with Viacom International, Inc. ("Viacom") whereby the Company agreed to acquire
all of the issued and outstanding capital stock of certain subsidiaries of
Viacom ("Viacom Subsidiaries") for an aggregate purchase price of $1,075,000,000
in cash. The Viacom Subsidiaries own and operate ten radio stations in five
major markets.
On February 19, 1997, the Company and Evergreen entered into an agreement
to merge with Chancellor Broadcasting Company ("Chancellor") and Chancellor
Radio Broadcasting Company, in a stock-for-stock transaction with the Company
remaining as the surviving corporation.
On February 19, 1997, the Company and Evergreen and Chancellor entered into
a joint purchase agreement whereby in the event that consummation of the
Company's stock purchase agreement with Viacom occurs prior to consummation of
the transaction with Chancellor, Chancellor will be required to purchase the
Viacom Subsidiaries that own and operate four of the ten stations for
$480,000,000 and the Company will purchase the Viacom Subsidiaries that own and
operate the remaining six stations for $595,000,000. In the event consummation
of the stock purchase agreement with Viacom occurs after the consummation of the
transaction with Chancellor, the surviving corporation will acquire the stock of
the Viacom Subsidiaries.
Completion of the Chancellor Merger and the Viacom Acquisition would result
in the Company's ownership of a number of stations in the Chicago, San
Francisco, Washington, D.C., Detroit and Sacramento markets in excess of the
maximum number of stations under common ownership permitted by the 1996 Act.
Therefore, the Company will be required to divest the following stations in
order to comply with the 1996 Act: (i) one FM station in the Chicago market;
(ii) two FM stations in the San Francisco market; (iii) one FM station and two
AM stations in the Washington, D.C. market; (iv) one FM station in the Detroit
market; and (v) one AM station in the Sacramento market.
F-14
<PAGE> 166
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1995 and
1996:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1995 1996
----------- ------- -------
<S> <C> <C> <C>
Broadcast and other equipment........................ 3-15 years $36,428 $47,937
Buildings and improvements........................... 3-20 years 8,570 11,735
Furniture and fixtures............................... 5- 7 years 6,429 8,392
Land................................................. -- 6,524 7,379
------- -------
57,951 75,443
Less accumulated depreciation........................ 20,112 27,250
------- -------
$37,839 $48,193
======= =======
</TABLE>
(4) INTANGIBLE ASSETS
Intangible assets consist of the following at December 31, 1995 and 1996:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1995 1996
----------- -------- ----------
<S> <C> <C> <C>
Broadcast licenses.............................. 15-40 years $187,024 $ 498,766
Goodwill........................................ 15-40 years 70,317 131,775
Other intangibles............................... 1-40 years 291,203 397,062
-------- ----------
548,544 1,027,603
Less accumulated amortization................... 89,757 173,960
-------- ----------
$458,787 $ 853,643
======== ==========
</TABLE>
In addition to broadcast licenses and goodwill, categories of other
intangible assets include: (i) premium advertising revenue base (the value of
the higher radio advertising revenues in certain of the Company's markets as
compared to other markets of similar population); (ii) advertising client base
(the value of the well-established advertising base in place at the time of
acquisition of certain stations); (iii) talent contracts (the value of
employment contracts between certain stations and their key employees); (iv)
fixed asset delivery premium (the benefit expected from the Company's ability to
operate fully constructed and operational stations from the date of
acquisition), and (v) premium audience growth pattern (the value of expected
above-average population growth in a given market).
(5) ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following at December
31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Accounts payable............................................ $11,081 $20,311
Accrued payroll............................................. 1,816 4,413
Accrued interest............................................ 1,304 1,642
Accrued dividends........................................... 1,020 --
Accrued income taxes........................................ 671 --
------- -------
$15,892 $26,366
======= =======
</TABLE>
F-15
<PAGE> 167
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(6) LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Senior Credit Facility (a).................................. $187,000 $348,000
Senior Notes (b)............................................ 14,000 10,000
-------- --------
Total long-term debt........................................ 201,000 358,000
Less current portion........................................ 4,000 26,500
-------- --------
$197,000 $331,500
======== ========
</TABLE>
(a) Senior Credit Facility
On November 6, 1992, the Company entered into a variable rate loan
agreement with a group of banks providing for a $115,000,000 term loan and a
revolving loan of up to $55,000,000. On November 28, 1994, amounts outstanding
under this agreement were retired with borrowings under a new senior credit
facility (the "Senior Credit Facility") which provided for a $150,000,000 term
loan ("Term Loan") and a revolving loan of up to $200,000,000 ("Revolving
Loan"). In connection with this debt restructuring, the Company wrote off the
unamortized balance of deferred debt issuance costs of $3,585,000 as an
extraordinary charge.
In connection with the Pyramid Acquisition, the Company amended and
restated the Senior Credit Facility. Under the amended agreement, dated January
17, 1996, the $150,000,000 Term Loan and $200,000,000 Revolving Loan remained in
place, and the Company also established an additional revolving facility of up
to $275,000,000 (the "New Revolving Loan").
Borrowings under the Senior Credit Facility bear interest at a rate based,
at the option of the Company, on the participating banks' prime rate or
Eurodollar rate, plus an incremental rate. Without giving effect to the interest
rate swap and cap agreements described in the following paragraph, the interest
rate on the $150,000,000 outstanding under the Term Loan at December 31, 1996
was 7.03% on a blended basis, based on Eurodollar rates, and the interest rates
on $185,000,000 and $5,000,000 of advances outstanding under the Revolving Loan
were 7.17% and 8.625% at December 31, 1996, based on the Eurodollar and prime
rates, respectively. The interest rate on the $8,000,000 outstanding under the
New Revolving Loan at December 31, 1996 was 7.13% on a blended basis, based on
Eurodollar rates. The Company pays fees of 1/2% per annum on the aggregate
unused portion of the loan commitment, in addition to an annual agent's fee.
As required by the terms of the Senior Credit Facility, the Company has
entered into interest rate swap agreements with certain of the participating
banks under the Senior Credit Facility. These swap agreements have the effect of
reducing the impact of changes in interest rates on the Company's floating rate
debt under the Senior Credit Facility. At December 31, 1996, interest rate swap
agreements covering a notional balance of $425,000,000 were outstanding. These
outstanding swap agreements mature from 1997 through 1999 and require the
Company to pay fixed rates of 4.96%-6.38% plus an incremental rate while the
counterparty pays a floating rate based on the six-month London Interbank
Borrowing Offered Rate ("LIBOR"). In addition to these swap agreements, in
connection with the BPI Acquisition the Company assumed interest rate cap
agreements. The outstanding interest rate cap agreement at December 31, 1996
covers a notional balance of $10,000,000 and provides for a fixed rate of 8.0%
and matures during 1997. During the years ended December 31, 1995 and 1996, the
Company recognized charges (income) under its interest rate swap and cap
agreements of $(275,000) and $110,584, respectively. Because the interest rate
swap and cap agreements are with banks that are lenders under the Senior Credit
Facility, the Company is not exposed to credit loss.
The Term Loan is payable in quarterly installments beginning June 30, 1997
and ending June 30, 2002, while availability under the Revolving Loan reduces
quarterly commencing June 30, 1997 and ending June 30,
F-16
<PAGE> 168
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2002. Availability under the New Revolving Loan reduces quarterly beginning June
30, 1998 and ending December 31, 2002.
(b) Senior Notes
The Company issued $20,000,000 of senior notes (the "Senior Notes") in
1989. The Senior Notes bear interest at 11.59% per annum payable quarterly and
principal is payable in equal quarterly installments of $1,000,000 through May
1999.
(c) Other
The Senior Credit Facility and the Senior Notes each contain certain
financial and operational covenants and other restrictions with which the
Company must comply, including, among others, limitations on capital
expenditures, corporate overhead and the incurrence of additional indebtedness,
restrictions on the use of borrowings, paying cash dividends and redeeming or
repurchasing Evergreen's capital stock, and requirements to maintain certain
financial ratios, including cash flow and debt service coverage (as defined).
The Senior Credit Facility also separately restricts the Company from making
certain acquisitions without the prior consent of the lenders. If the Company
increases its leverage beyond certain specified levels in order to effect an
acquisition, the Senior Notes require that the Company prepay all principal and
accrued interest thereunder, together with a "make whole" premium equal to the
amount of unearned interest, based on current market rates, through the original
maturity date.
Substantially all of the Company's assets are pledged as security for the
Senior Credit Facility and Senior Notes under the loan agreements. The
obligations of the Company under the Senior Credit Facility and Senior Notes
rank pari passu.
A summary of the future maturities of long-term debt follows:
<TABLE>
<S> <C>
1997........................................................ $26,500
1998........................................................ 76,500
1999........................................................ 63,250
2000........................................................ 70,000
2001........................................................ 72,500
Thereafter.................................................. 49,250
</TABLE>
(7) STOCK COMPENSATION
Evergreen has established the 1992, 1993 and 1995 Key Employee Stock Option
Plans (the "Employee Option Plans") which provide for the issuance of stock
options to officers and other key employees of the Company and its subsidiaries.
The Employee Option Plans make available for issuance an aggregate of 1,957,500
shares of Evergreen's Class A Common Stock. Options issued under the Employee
Option Plans have varying vesting periods as provided in separate stock option
agreements and generally carry an expiration date of ten years subsequent to the
date of issuance. Options issued under the 1993 and 1995 Employee Option Plans
are required to have exercise prices equal to or in excess of the fair market
value of Evergreen's Class A Common Stock on the date of issuance.
In May 1995, Evergreen also established the Stock Option Plan for
Non-Employee Directors (the "Director Plan") which provides for the issuance of
stock options to non-employee directors of the Company. The Director Plan makes
available for issuance an aggregate of 225,000 shares of Class A Common Stock.
Options issued under the Director Plan have exercise prices equal to the fair
market value of the Evergreen Class A Common Stock on the date of issuance, vest
over a three year period and have an expiration date of ten years subsequent to
the date of issuance.
F-17
<PAGE> 169
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the BPI Acquisition, Evergreen assumed outstanding
options to purchase 94,000 shares of BPI common stock held by BPI employees.
Options to purchase approximately 87,000 shares of the Evergreen's Class A
Common Stock vested and became exercisable on May 12, 1996.
Evergreen applies APB Opinion No. 25 in accounting for its Employee Option
Plans and, accordingly, no compensation cost has been recognized for its stock
options in the consolidated financial statements. Had Evergreen determined
compensation cost based on the fair value at the grant date for its stock
options under SFAS No. 123, the Company's net loss would have been increased to
the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1995 1996
------- --------
<S> <C> <C>
Net loss:
As reported............................................... $(5,850) $(16,194)
Pro forma................................................. (8,787) (20,969)
</TABLE>
Pro forma net loss reflects only options granted in 1995 and 1996.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net loss amounts presented
above because compensation cost is reflected over the options' vesting period of
one year and compensation cost for options granted during 1994 is not
considered.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1995 and 1996: dividend yield of 0% for all
years; expected volatility of 44.5%; risk-free interest rate of 6.0% and
expected lives ranging from three to seven years.
Following is a summary of activity in the employee option plans and
agreements discussed above for the years ended December 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
-------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year.......................... 877,500 $ 0.01 978,000 $ 3.10 1,289,874 $ 6.91
Granted....................... 280,500 10.67 413,138 16.17 587,250 23.12
Exercised..................... (180,000) 0.01 (25,500) 1.29 (83,403) 8.54
Canceled...................... - - (75,764) 8.59 (13,729) 9.91
-------- ------ --------- ------ --------- ------
Outstanding at end of year...... 978,000 $ 3.10 1,289,874 $ 6.91 1,779,992 $11.93
======== ====== ========= ====== ========= ======
Options exercisable at year
end........................... 697,500 945,000 967,742
======== ========= =========
Weighted average fair value of
options granted during the
year.......................... $ 8.54 $ 9.76
====== ======
</TABLE>
F-18
<PAGE> 170
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED
OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
1996 LIFE PRICE 1996 PRICE
-------------- ----------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
$0.01......................... 660,000 6.3 years $ 0.01 660,000 $ 0.01
$9.69 to 12.33................ 307,742 7.9 years 10.49 307,742 10.49
$21.33 to 26.75............... 812,250 8.8 years 22.49 - -
--------- ------ ------- ------
1,779,992 $11.93 967,742 $ 3.29
========= ====== ======= ======
</TABLE>
(8) INCOME TAXES
Income tax expense attributed to loss from continuing operations consists
of:
<TABLE>
<CAPTION>
1995 1996
----- -------
<S> <C> <C>
Current tax expense:
Federal................................................... $ 246 $ 485
State..................................................... 425 972
----- -------
Total current tax expense......................... 671 1,457
Deferred federal benefit.................................... (479) (4,353)
----- -------
Total income tax expense (benefit)................ $ 192 $(2,896)
===== =======
</TABLE>
The Company did not incur significant tax expense during the years ended
December 31, 1994 as its operations did not generate taxable income.
Total income tax expense (benefit) differed from the amount computed by
applying the U.S. federal statutory income tax rate of 35% to loss from
continuing operations for the years ended December 31, 1994, 1995 and 1996 as a
result of the following:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Computed "expected" tax benefit........................... $(1,172) $(1,980) $(6,682)
Amortization of goodwill.................................. 355 788 2,477
Net operating loss carryforwards for which no tax benefit
was recognized.......................................... 760 923 --
State income taxes, net of federal benefit................ -- 276 632
Other, net................................................ 57 185 677
------- ------- -------
$ -- $ 192 $(2,896)
======= ======= =======
</TABLE>
F-19
<PAGE> 171
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1995 and
1996 are presented below:
<TABLE>
<CAPTION>
1995 1996
-------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 18,748 $ 13,519
Accrued compensation primarily relating to stock
options................................................ 1,787 1,687
Other..................................................... 649 1,215
-------- ---------
Total deferred tax assets......................... 21,184 16,421
-------- ---------
Deferred tax liabilities:
Property and equipment and intangibles, primarily
resulting from difference in bases from BPI and Pyramid
Acquisitions........................................... (49,884) (101,761)
Other....................................................... (533) (758)
-------- ---------
Total deferred tax liabilities.................... (50,417) (102,519)
-------- ---------
Net deferred tax liability........................ $(29,233) $ (86,098)
======== =========
</TABLE>
Deferred tax assets and liabilities are computed by applying the U.S.
federal income tax rate in effect to the gross amounts of temporary differences
and other tax attributes, such as net operating loss carryforwards. As a result
of the application of purchase accounting to the BPI Acquisition in May 1995,
the Company recognized deferred tax assets of $15,380,000, which had not been
recognized by the Company in previous periods. Recognition of these assets
effectively reduced goodwill resulting from the acquisitions by a corresponding
amount.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. The Company expects the
deferred tax assets at December 31, 1996 to be realized as a result of the
reversal during the carryforward period of existing taxable temporary
differences giving rise to deferred tax liabilities, the generation of taxable
income in the carryforward period and the disposition of one or more of its
stations.
At December 31, 1996, the Company has net operating loss carryforwards
available to offset future taxable income of approximately $38,600,000 which
begin to expire in 2004. Approximately $29,700,000 of such net operating loss
carryforwards are subject to annual use limitations of up to $2,800,000 per
year.
(9) OPERATING LEASES
The Company has noncancelable operating leases, primarily for office space.
These leases generally contain renewal options for periods ranging from one to
ten years and require the Company to pay all executory costs such as maintenance
and insurance. Rental expense for operating leases (excluding those with lease
terms of one month or less that were not renewed) was approximately $2,193,000,
$3,073,000 and $5,462,000 during 1994, 1995 and 1996, respectively.
F-20
<PAGE> 172
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31, 1996
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- ------------------------
<S> <C>
1997.................................. $4,658
1998.................................. 4,001
1999.................................. 4,015
2000.................................. 3,625
2001.................................. 3,559
</TABLE>
(10) COMMITMENTS AND CONTINGENCIES
In August 1993, Evergreen terminated an agreement with Sagittarius
Broadcasting Company (an affiliate of Infinity Broadcasting Corporation) and One
Twelve, Inc. (collectively, the "Claimants" or the "Plaintiffs") pursuant to
which programming featuring radio personality Howard Stern was broadcast on
radio station WLUP-AM (now WMVP-AM) in Chicago. The Claimants allege that
termination of the agreement was wrongful and have sued Evergreen in the Supreme
Court of the State of New York, County of New York (the "Court"). The agreement
required payments to the Claimants in the amount of $2,600,000 plus five percent
of advertising revenues generated by the programming over the three-year term of
the agreement. A total of approximately $680,000 was paid to the Claimants
pursuant to the agreement prior to termination. Claimants' original complaint
alleged claims for breach of contract, indemnification, breach of fiduciary duty
and fraud. Plaintiffs' aggregate prayer for relief in the original complaint
totaled $45,000,000. On July 12, 1994, the Court granted the Evergreen's motion
to dismiss Plaintiffs' claims for fraud and breach of fiduciary duty. On June 6,
1995, the Court denied the Plaintiff's motion for summary judgment on their
contract and indemnification claims and this order has been affirmed on appeal.
On May 17, 1996, after the close of discovery, Evergreen filed a motion for
summary judgment, seeking the dismissal of the remaining claims in the original
complaint. On July 1, 1996, Plaintiffs moved for leave to amend their complaint
in order to add claims for breach of the covenant of good faith and fair
dealing, tortious interference with business advantage and prima facia punitive
damages in excess of $25,000,000. On March 13, 1997, the Court denied the
Evergreen's motion for summary judgment, allowed Plaintiffs' request to amend
the complaint to add a claim for breach of the covenant of good faith and fair
dealing, and denied Plaintiffs' request to amend the complaint to add claims for
tortious interference with business advantage and prima facia tort. Evergreen
believes that it acted within its rights in terminating the agreement.
The Company and Evergreen are also involved in various other claims and
lawsuits which are generally incidental to its business. The Company is
vigorously contesting all such matters and believes that their ultimate
resolution will not have a material adverse effect on its consolidated financial
position, results of operations or cash flows.
Evergreen offers substantially all of its employees voluntary participation
in a 401(k) Plan. The Company may make discretionary contributions to the plan;
however, no such contributions were made by the Company during 1994, 1995 or
1996.
F-21
<PAGE> 173
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments for which the estimated fair value of the
instrument differs significantly from its carrying amounts at December 31, 1995
and 1996. The fair value of a financial instrument is defined as the amount at
which the instrument could be exchanged in a current transaction between willing
parties.
<TABLE>
<CAPTION>
1995 1996
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest rate swaps..................... $ -- $ 272 $ -- $ (199)
Long-term debt -- Senior Notes.......... (14,000) (15,443) (10,000) (10,572)
</TABLE>
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument:
Cash and cash equivalents, accounts receivable and accounts
payable: The carrying amount of these assets and liabilities approximates
fair value because of the short maturity of these instruments.
Interest rate swaps: The fair value of the interest rate swap and cap
contracts is estimated by obtaining quotations from brokers. The fair value
is an estimate of the amounts that the Company would receive (pay) at the
reporting date if the contracts were transferred to other parties or
canceled by the broker. The carrying amounts of receivables (payables)
under interest rate swaps and caps are included in accrued expenses in the
accompanying consolidated balance sheets.
Long-term debt: The fair values of the Company's Senior Notes are
based on discounted cash flows under the Senior Notes using interest rates
currently available to the Company for similar debt issues. As amounts
outstanding under the Company's Senior Credit Facility agreements bear
interest at current market rates, their carrying amounts approximate fair
market value.
(12) SUBSEQUENT EVENTS (UNAUDITED)
On April 1, 1997, the Company swapped WQRS-FM in Detroit (which the Company
acquired on the same date for $32.0 million in cash), in exchange for WWRC-AM in
Washington, D.C. and $9.5 million in cash.
On May 1, 1997, the Company acquired WDAS-FM/AM in Philadelphia for $103.0
million in cash plus various other direct acquisition costs.
On April 25, 1997, the Company and a syndicate of commercial banks entered
into a second Amended and Restated Loan Agreement (as amended, the "Senior
Credit Facility") with a total current commitment of $1.75 billion. The Senior
Credit Facility consists of a $1.25 billion revolving credit facility and a $500
million term loan facility. The loans bear interest at a rate based, at the
option of the Company, on the participating banks' prime rate or Eurodollar rate
plus an incremental rate.
F-22
<PAGE> 174
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Chancellor Radio Broadcasting Company:
We have audited the accompanying consolidated balance sheets of Chancellor
Radio Broadcasting Company and Subsidiaries (collectively the "Company") as of
December 31, 1995 and 1996 and the related consolidated statements of
operations, changes in common stockholder's equity, and cash flows for each of
the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company as of December 31, 1995 and 1996 and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
February 13, 1997,
except for Note 15 as
to which the date is
February 19, 1997
F-23
<PAGE> 175
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1996
------------ ------------
<S> <C> <C>
Current assets:
Cash...................................................... $ 1,314,214 $ 3,788,546
Accounts receivable, net of allowance for doubtful
accounts of $263,528 and $1,023,660, respectively...... 13,243,292 46,584,705
Prepaid expenses and other................................ 546,405 2,753,731
------------ ------------
Total current assets.............................. 15,103,911 53,126,982
Restricted cash........................................... -- 20,363,329
Property and equipment, net............................... 17,925,845 49,122,932
Intangibles and other, net................................ 203,808,395 551,406,094
Deferred financing costs, net............................. 4,284,413 16,723,346
------------ ------------
Total assets...................................... $241,122,564 $690,742,683
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................... $ 1,873,888 $ 4,409,389
Accrued liabilities....................................... 4,692,948 12,529,831
Accrued interest.......................................... 2,710,891 6,868,839
Current portion of long-term debt......................... 4,062,500 400,000
------------ ------------
Total current liabilities......................... 13,340,227 24,208,059
Long-term debt............................................ 168,107,242 354,913,499
Deferred income taxes..................................... 4,952,361 2,606,314
Other..................................................... -- 801,572
------------ ------------
Total liabilities................................. 186,399,830 382,529,444
------------ ------------
Commitments (Note 11)
Redeemable senior cumulative exchangeable preferred stock,
par value $.01 per share; 1,000,000 shares authorized,
none and 1,000,000 shares issued and outstanding,
respectively; preference in liquidation of $109,110,301... -- 107,222,416
Common stockholder's equity:
Common stock, par value $.01 per share; 2,000 shares
authorized, 1,000 shares issued and outstanding,
respectively........................................... 10 10
Additional paid-in capital................................ 66,359,990 219,520,102
Accumulated deficit....................................... (11,637,266) (18,529,289)
------------ ------------
Total common stockholder's equity................. 54,722,734 200,990,823
------------ ------------
Total liabilities and stockholder's equity........ $241,122,564 $690,742,683
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-24
<PAGE> 176
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1994 1995 1996
----------- ------------ ------------
<S> <C> <C> <C>
Gross broadcasting revenues............. $30,080,829 $ 73,278,860 $203,188,125
Less agency commissions................. 3,763,734 8,956,717 24,786,594
----------- ------------ ------------
Net revenues.................. 26,317,095 64,322,143 178,401,531
----------- ------------ ------------
Operating expenses:
Programming, technical and news....... 5,678,829 11,734,285 40,987,411
Sales and promotion................... 7,137,039 17,556,256 47,026,490
General and administrative............ 2,844,284 8,174,189 23,195,565
Depreciation and amortization......... 2,954,159 8,256,268 20,877,374
Corporate expenses.................... 599,657 1,815,535 4,844,985
Stock option compensation............. -- 6,360,000 3,800,000
----------- ------------ ------------
19,213,968 53,896,533 140,731,825
----------- ------------ ------------
Income from operations........ 7,103,127 10,425,610 37,669,706
Other (income) expense:
Interest expense...................... 5,246,827 18,114,549 35,703,862
Other, net............................ (19,265) 42,402 68,419
----------- ------------ ------------
Income (loss) before provision
for income taxes and
extraordinary loss.......... 1,875,565 (7,731,341) 1,897,425
Provision for income taxes.............. 1,163,716 3,799,955 4,612,551
----------- ------------ ------------
Net income (loss) before
extraordinary loss.......... 711,849 (11,531,296) (2,715,126)
Extraordinary loss on early
extinguishment of debt, net of income
tax benefit........................... 817,819 -- 4,176,897
----------- ------------ ------------
Net loss...................... (105,970) (11,531,296) (6,892,023)
Dividends and accretion on preferred
stock................................. -- -- 11,556,943
Loss on repurchase of preferred stock... -- -- 16,570,065
----------- ------------ ------------
Net loss attributable to
common stock................ $ (105,970) $(11,531,296) $(35,019,031)
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-25
<PAGE> 177
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
---------------- ADDITIONAL ACCUMULATED
SHARES AMOUNT PAID-IN CAPITAL DEFICIT TOTAL
------ ------ --------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993.............. -- -- -- -- --
Issuance of common stock on January
10, 1994........................... 1,000 $ 10 $ 25,499,990 -- $ 25,500,000
Issuance of common stock on October
12, 1994........................... 1,000 10 34,499,990 -- 34,500,000
Net loss.............................. -- -- -- $ (105,970) (105,970)
------ ---- ------------ ------------ ------------
Balance, December 31, 1994.............. 2,000 20 59,999,980 (105,970) 59,894,030
Stock option compensation............. -- -- 6,360,000 -- 6,360,000
Contribution of stock held by
affiliate of Hicks, Muse, Tate &
Furst.............................. (1,000) (10) 10 -- --
Net loss.............................. -- -- -- (11,531,296) (11,531,296)
------ ---- ------------ ------------ ------------
Balance, December 31, 1995.............. 1,000 10 66,359,990 (11,637,266) 54,722,734
Loss on repurchase of preferred
stock.............................. -- -- (16,570,065) -- (16,570,065)
Dividends and accretion on preferred
stock.............................. -- -- (11,556,943) -- (11,556,943)
Capital contributions................. -- -- 181,287,120 -- 181,287,120
Net loss.............................. -- -- -- (6,892,023) (6,892,023)
------ ---- ------------ ------------ ------------
Balance, December 31, 1996.............. 1,000 $ 10 $219,520,102 $(18,529,289) $200,990,823
====== ==== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-26
<PAGE> 178
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1994 1995 1996
------------- ------------ -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss......................................... $ (105,970) $(11,531,296) $ (6,892,023)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................. 2,954,159 8,256,268 20,877,374
Amortization of deferred financing costs...... 226,000 791,000 2,633,583
Stock option compensation..................... -- 6,360,000 3,800,000
Deferred income taxes......................... 1,490,716 3,788,877 4,548,481
Extraordinary loss............................ 490,819 -- 4,176,897
Changes in assets and liabilities, net of the
effects of acquired businesses:
Accounts receivable, net.................... (9,675,567) (2,343,520) (13,408,364)
Prepaids and other.......................... 216,036 (214,868) (982,637)
Accounts payable............................ 1,509,064 (541,914) 1,429,070
Accrued liabilities......................... 1,334,397 447,196 3,706,725
Accrued interest............................ 2,251,654 459,237 4,157,948
------------- ------------ -------------
Net cash provided by operating
activities............................. 691,308 5,470,980 24,047,054
------------- ------------ -------------
Cash flows from investing activities:
Purchases of broadcasting properties............. (204,509,849) (24,351,529) (439,533,609)
Purchases of other property and equipment........ (238,648) (1,709,897) (3,208,553)
------------- ------------ -------------
Net cash used in investing activities.... (204,748,497) (26,061,426) (442,742,162)
------------- ------------ -------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt......... 168,910,299 -- 277,627,630
Proceeds from borrowings under revolving debt
facility...................................... 5,639,237 54,458,819 101,966,762
Repayment of long-term debt...................... (25,000,000) (2,437,500) (109,816,233)
Repayments of borrowings under revolving debt
facility...................................... (3,975,539) (31,633,467) (105,540,183)
Issuance of preferred stock...................... -- -- 175,412,322
Repurchase of preferred stock.................... -- -- (95,462,423)
Additional capital contributions................. 60,000,000 -- 178,525,254
Distribution of additional paid in capital....... -- -- (1,038,134)
Payment of preferred stock dividends............. -- -- (505,555)
------------- ------------ -------------
Net cash provided by financing
activities............................. 205,573,997 20,387,852 421,169,440
------------- ------------ -------------
Net increase (decrease) in cash.......... 1,516,808 (202,594) 2,474,332
Cash, at beginning of year......................... -- 1,516,808 1,314,214
------------- ------------ -------------
Cash, at end of year............................... $ 1,516,808 $ 1,314,214 $ 3,788,546
============= ============ =============
Supplemental Disclosure of Cash Flow Information
(Note 5):
Cash paid during the period for:
Interest......................................... $ 2,769,173 $ 16,864,312 $ 28,912,331
Income taxes..................................... $ -- $ -- $ 62,407
Non-cash financing:
Dividends and accretion on preferred stock....... $ -- $ -- $ 11,556,943
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-27
<PAGE> 179
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
Chancellor Radio Broadcasting Company, formerly Chancellor Broadcasting
Company ("Chancellor Radio Broadcasting") and its wholly owned subsidiaries
(collectively, the "Company") operate in a single industry segment, which
segment encompasses the ownership and management of radio broadcast stations
located in markets throughout the United States. Chancellor Radio Broadcasting,
a wholly owned subsidiary of Chancellor Broadcasting Company, formerly
Chancellor Corporation ("Chancellor"), was formed in June 1994 to acquire and
operate radio stations owned by American Media, Inc. and two corporations and
one partnership affiliated with American Media, Inc. (collectively, the
"American Media Station Group") and by Chancellor Communications Corporation
("Chancellor Communications"). That transaction was consummated on October 12,
1994. Chancellor Communications was formed in 1993 to acquire and operate radio
stations KGBY-FM and KFBK-AM. That transaction closed on January 10, 1994 and
the consolidated financial statements include the activity of all the stations
since their respective dates of acquisition.
In June 1995, the 1,000 shares of common stock of Chancellor Communications
held by an affiliate of Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse")
were exchanged for additional shares of common stock of Chancellor, which
subsequently contributed these shares to Chancellor Radio Broadcasting as an
additional capital contribution. As a result, Chancellor Communications became a
wholly owned subsidiary of Chancellor Radio Broadcasting. Chancellor
Communications was then merged with the Company. The transactions had no effect
on the financial position or results of operations of the Company.
Chancellor Broadcasting Licensee Company is a wholly-owned non-operating
legal entity formed to hold title to the Company's broadcast licenses. Such
entity has no significant other assets and no material liabilities,
contingencies or commitments. Consistent with industry practice for financial
reporting purposes, no material value has been specifically allocated to the
licenses. Accordingly, no financial statement information has been provided
herein due to its immateriality to investors.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Chancellor
and its subsidiaries Chancellor Broadcasting and Chancellor Broadcasting
Licensee Company for all periods presented, and its subsidiaries Trefoil
Communications, Inc., Shamrock Broadcasting Inc., Shamrock Radio Licenses, Inc.,
Shamrock Broadcasting Licenses of Denver, Inc. and Shamrock Broadcasting of
Texas, Inc. from their date of acquisition. All significant intercompany
accounts and transactions have been eliminated.
Cash
The Company maintains cash in demand deposits with financial institutions.
The Company had no cash equivalents during the periods presented. All highly
liquid investments with an original maturity of less than Six months are
considered cash equivalents.
Property and Equipment
Property and equipment is stated at cost, less accumulated depreciation and
amortization. Depreciation is determined using the straight-line method over the
estimated useful lives of the various classes of assets, which range from three
to twenty-five years. Leasehold improvements are amortized over the shorter of
their useful lives or the terms of the related leases. Costs of repairs and
maintenance are charged to operations as incurred.
F-28
<PAGE> 180
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Intangibles
Goodwill represents the excess of cost over the fair values of the
identifiable tangible and other intangible net assets acquired and is being
amortized over the straight-line method over forty years. Other intangible
assets comprise amounts paid for pending acquisitions, agreements not to
compete, a tower lease advantage and organization costs incurred in the
incorporation of the Company. Other intangibles, excluding pending acquisition
costs, are being amortized by the straight-line method over their estimated
useful lives ranging from three to ten years. Pending acquisition costs are
deferred and capitalized as part of completed acquisitions or expensed in the
period in which the pending acquisition is terminated.
The Company evaluates intangible assets for potential impairment by
analyzing the operating results, future cash flows on an undiscounted basis,
trends and prospects of the Company's stations, as well as by comparing them to
their competitors. The Company also takes into consideration recent acquisition
patterns within the broadcast industry, the impact of recently enacted or
potential FCC rules and regulations and any other events or circumstances which
might indicate potential impairment.
Deferred Financing Costs
Costs associated with obtaining debt financing are capitalized and
amortized using the interest method over the term of the related debt. As a
result of refinancing the Company's original credit facility, during the year
ended December 31, 1994 unamortized deferred financing costs of approximately
$818,000 were expensed as an extraordinary item in the consolidated statements
of operations. As a result of refinancing the Company's second credit facility,
the early redemption of $20.0 million of its existing notes (defined) and the
prepayment of $18.7 million of it's a Term Loan Facility (defined) from its
third credit facility, during the year ended December 31, 1996 unamortized
deferred financing costs of $3.4 million, less $543,500 of tax benefit, were
expensed as an extraordinary item in the consolidated statements of operations.
Approximately $5.1 million, $118,000 and $18.6 million of new financing costs
were incurred for the years ended December 31, 1994, 1995 and 1996,
respectively. Accumulated amortization at December 31, 1995 and 1996, amounted
to approximately $959,000 and $2.8 million, respectively.
Revenue Recognition
Broadcasting operations derive revenue primarily from the sale of program
time and commercial announcements to local, regional and national advertisers.
Revenue is recognized when the programs and commercial announcements are
broadcast.
Barter Transactions
Barter transactions represent advertising time exchanged for promotional
items, advertising, supplies, equipment, and services. Barter revenue is
recorded at the fair value of the goods or services received and is recognized
in income when the advertisements are broadcast. Goods or services are charged
to expense when received or used. Advertising time owed and goods or services
due the Company are included in accounts payable and accounts receivable,
respectively.
Advertising Costs
The Company incurs various marketing and promotional costs to add and
maintain listenership. These costs are expensed as incurred and totaled
approximately $1.4 million, $4.2 million and $16.2 million for the years ended
December 31, 1994, 1995 and 1996, respectively.
F-29
<PAGE> 181
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock Option Compensation
Stock option compensation expense is recognized in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees".
Income Taxes
Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year-end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable earnings. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount more likely than not to be
realized. Income tax expense is the tax payable for the period and the change
during the period in deferred tax assets and liabilities.
Chancellor, Chancellor Radio Broadcasting and Chancellor Broadcasting
Licensee Company have elected to file consolidated federal income tax returns
(the "Chancellor Group") and Trefoil Communications, Inc., Shamrock Broadcasting
Inc., Shamrock Radio Licenses, Inc., Shamrock Broadcasting Licenses of Denver,
Inc. and Shamrock Broadcasting of Texas, Inc. have elected to file consolidated
federal income tax returns (the "Shamrock Group"). Each of these groups have
entered into a tax sharing agreement governing the allocation of any
consolidated federal income tax liability among its members. In general, each
subsidiary allocates and pays income taxes computed as if each subsidiary filed
a separate federal income tax return. Similar principles apply to any
consolidated state and local income tax liabilities.
Concentration of Credit Risk
The Company's revenue and accounts receivable primarily relate to
advertising of products and services within the radio stations' broadcast areas.
The Company performs ongoing credit evaluations of its customers' financial
condition and, generally, requires no collateral from its customers. Credit
losses have been within management's expectations and adequate allowances for
any uncollectible trade receivables are maintained.
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current year's presentation.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996
----------- -----------
<S> <C> <C>
Land....................................................... $ 1,572,229 $ 3,036,663
Building and building improvements......................... 3,159,848 9,202,378
Towers and antenna systems................................. 3,689,972 14,476,104
Studio, technical and transmitting equipment............... 7,830,375 23,026,564
Office equipment, furniture and fixtures................... 2,484,261 5,521,010
Record library............................................. 1,800,510 2,193,236
Vehicles................................................... 362,787 1,117,908
Construction in progress................................... 503,504 78,877
----------- -----------
21,403,486 58,652,740
Less accumulated depreciation.............................. (3,477,641) (9,529,808)
----------- -----------
$17,925,845 $49,122,932
=========== ===========
</TABLE>
F-30
<PAGE> 182
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Depreciation expense for the years ended December 31, 1994, 1995 and 1996
was $0.9 million, $2.6 million and $6.5 million, respectively.
4. INTANGIBLE AND OTHER ASSETS
Intangible and other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1996
------------ ------------
<S> <C> <C>
Goodwill................................................. $205,971,820 $567,377,120
Noncompete agreements.................................... 1,950,000 2,025,000
Tower lease advantage.................................... 305,000 305,000
Pending acquisition costs................................ 3,246,265 2,620,474
Other.................................................... 45,718 626,220
------------ ------------
211,518,803 572,953,814
Less accumulated amortization............................ (7,710,408) (21,547,720)
------------ ------------
$203,808,395 $551,406,094
============ ============
</TABLE>
Amortization expense for intangible assets for the years ended December 31,
1994, 1995 and 1996 was $2.0 million, $5.7 million and $14.3 million,
respectively.
5. ACQUISITIONS AND DISPOSITIONS OF BROADCASTING PROPERTIES
On January 9, 1994, Chancellor Communications purchased substantially all
the assets and assumed certain liabilities of KGBY-FM and KFBK-AM for
approximately $49.5 million, including acquisition costs. Liabilities assumed
were limited to certain ongoing contractual rights and obligations. The
acquisition has been accounted for as a purchase and, accordingly, the results
of operations associated with the acquired assets have been included in the
accompanying statements from the date of acquisition.
The acquisition is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired and liabilities assumed:
Property and equipment.................................... $ 4,921
Goodwill and other intangibles............................ 44,401
Prepaid expenses and other assets......................... 413
Accrued liabilities....................................... (205)
-------
Total acquisition................................. $49,530
=======
</TABLE>
On October 12, 1994, Chancellor Radio Broadcasting purchased substantially
all the assets and assumed certain liabilities consisting solely of accrued
expenses and future payments under ongoing contracts of the American Media
Station Group (other than KHYL-FM in Sacramento, California) for approximately
$139.5 million in cash, including acquisition costs and payments in respect of
agreements not to compete. On the same date, Chancellor Communications purchased
all the assets and certain liabilities consisting solely of accrued expenses and
future payments under ongoing contracts of KHYL-FM for approximately $15.5
million in cash, including acquisition costs and payments in respect of an
agreement not to compete. These acquisitions have been accounted for as
purchases and, accordingly, the results of operations associated with the
acquired assets have been included in the accompanying statements from the date
of acquisition.
F-31
<PAGE> 183
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The acquisition is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired and liabilities assumed:
Property and equipment.................................... $ 12,671
Goodwill and other intangibles............................ 142,618
Prepaid expenses and other assets......................... 353
Accrued liabilities....................................... (662)
--------
Total acquisition................................. $154,980
========
</TABLE>
Simultaneously with the closing of these transactions, Chancellor acquired
all of Chancellor Communications' outstanding nonvoting stock in exchange for
newly issued shares of Chancellor's nonvoting stock. Chancellor contributed all
the acquired shares of Chancellor Communication's nonvoting stock to Chancellor
Radio Broadcasting, as a result of which Chancellor Communications became a
subsidiary of Chancellor Radio Broadcasting. Because these entities are under
common management and control, this exchange has been accounted for at
historical cost in a manner similar to a pooling of interests.
On July 31, 1995, the Company purchased substantially all the assets and
assumed certain liabilities of KDWB-FM for approximately $22.6 million,
including acquisition costs. Liabilities assumed were limited to certain ongoing
contractual rights and obligations. The acquisition has been accounted for as a
purchase and, accordingly, the results of operations associated with the
acquired assets have been included in the accompanying statements from the date
of acquisition.
The acquisition is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired and liabilities assumed:
Property and equipment................ $ 1,866
Goodwill and other intangibles........ 21,032
Prepaid expenses and other assets..... 82
Other liabilities..................... (383)
-------
Total acquisition............. $22,597
=======
</TABLE>
On February 14, 1996, the Company acquired all of the outstanding capital
stock of Trefoil Communications, Inc. ("Trefoil") for approximately $408.0
million, including acquisition costs. Trefoil is a holding company, the sole
asset of which is the capital stock of Shamrock Broadcasting, Inc. ("Shamrock
Broadcasting"). The acquisition of Trefoil was financed through a new credit
agreement, new senior subordinated notes, Chancellor's initial public stock
offering, senior exchangeable preferred stock and the issuance of unregistered
common stock of Chancellor. The acquisition of Trefoil was accounted for as a
purchase for financial accounting purposes and a non-taxable business
combination for tax purposes and, accordingly, the results of operations
associated with the acquired assets have been included in the accompanying
statements from the date of acquisition.
F-32
<PAGE> 184
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The acquisition is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired and liabilities assumed:
Cash.................................. $ 38
Accounts receivable, net.............. 18,636
Prepaid expenses and other assets..... 1,274
Property and equipment................ 36,429
Goodwill and other intangibles........ 361,425
Deferred tax asset.................... 5,464
Accrued liabilities................... (14,564)
Other noncurrent liabilities.......... (702)
--------
Total acquisition............. $408,000
========
</TABLE>
Simultaneously with the acquisition of Trefoil, the Company entered into a
time brokerage agreement with Evergreen Media Corporation for the outsourcing of
certain limited functions of WWWW-FM and WDFN-AM, both Detroit stations acquired
with Trefoil, and an option to purchase such stations for $30.0 million of cash.
These stations were operated pursuant to this agreement until January 30, 1997,
the date on which the disposition of these stations occurred. Subsequent to the
acquisition of Trefoil, KTBZ-FM, a Houston station acquired with Trefoil, was
operated by Secret Communications, L.P. ("Secret") under a Local Marketing
Agreement ("LMA")/Exchange Agreement with the Company. In March 1996, the
Company entered into an agreement to exchange KTBZ-FM and $5.6 million of cash
to Secret for KALC-FM and KIMN-FM, Denver, Colorado. The Company began managing
certain limited functions of these stations, pursuant to an LMA, effective April
1, 1996 and closed on the exchange of the stations effective July 31, 1996. The
exchange has been accounted for using the fair values of the assets exchanged
plus the $5.6 million of additional cash and $0.8 million of additional
acquisition costs, and was allocated to the net assets acquired based upon their
estimated fair market values. The excess of the purchase price over the
estimated fair value of net assets acquired amounted to approximately $28.7
million, which has been accounted for as goodwill and is being amortized over 40
years using the straight line method.
The exchange is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired and liabilities assumed:
Prepaid expenses and other assets......................... $ 163
Property and equipment.................................... 2,363
Goodwill and other intangibles............................ 28,657
Accrued liabilities....................................... (138)
-------
Total acquisition................................. $31,045
=======
</TABLE>
On May 15, 1996, the Company entered into an agreement to acquire
substantially all the assets and certain liabilities of OmniAmerica Group
("Omni") for an aggregate price of $178.0 million, including $163.0 million of
cash and $15.0 million of Chancellor's Class A Common Stock. On June 24, 1996,
the Company entered into an agreement with American Radio Systems Corporation
("American Radio") whereby it will exchange the West Palm Beach, Florida
stations acquired from Omni for American Radio's KSTE-AM and $33.0 million of
cash. KSTE-AM is located in Rancho Cordova, California and is part of the
Sacramento market. On July 1, 1996, Chancellor entered into an agreement with
SFX Broadcasting, Inc. ("SFX") whereby it will exchange the Jacksonville,
Florida stations being acquired pursuant to the Omni acquisition agreement and
$11.0 million of cash for SFX's WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM,
Nassau-Suffolk, New York. Pursuant to various agreements, the Company began
managing certain limited functions of the remaining Omni stations and the SFX
stations beginning July 1, 1996, and station KSTE-AM beginning August 1, 1996.
F-33
<PAGE> 185
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On November 22, 1996, the Company acquired substantially all the assets of
WKYN-AM, Florence, Kentucky, for approximately $1.4 million, including
transaction costs. WKYN-AM serves the Cincinnati, Ohio market.
On January 23, 1997, the Company acquired substantially all the assets and
certain liabilities of Colfax Communications ("Colfax") for an aggregate price
of $373.0 million. Liabilities assumed were limited to certain ongoing
contractual rights and obligations. The acquisition will be 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, Wisconsin stations acquired
from Colfax, to Clear Channel Radio, Inc. for $40.0 million in cash.
On February 13, 1997, the Company acquired substantially all the assets and
certain liabilities of Omni. Liabilities assumed were limited to certain ongoing
contractual rights and obligations. The acquisition will be accounted for as a
purchase.
The following summarizes the unaudited consolidated pro forma data as
though the acquisitions of KDWB-FM, Shamrock Broadcasting Company and KIMN-FM
and KALC-FM had occurred as of the beginning of 1995 (in thousands):
<TABLE>
<CAPTION>
1995 1996
------------------------ ------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- ----------- ---------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net revenue............................... $ 64,322 $162,360 $178,402 $187,198
Net income (loss) before extraordinary
loss.................................... (11,531) (8,319) (2,715) (310)
Net loss.................................. (11,531) (8,319) (6,892) (310)
</TABLE>
The following summarizes the unaudited consolidated pro forma balance sheet
as of December 31, 1996 as though the acquisition of Colfax, the issuance of the
Exchangeable Preferred Stock, the issuance of Chancellor's Convertible Preferred
Stock (including the over-allotment), and the New Credit Agreement had occurred
on that date (in thousands):
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------- -----------
(UNAUDITED)
<S> <C> <C>
Total assets................................................ $690,743 $1,053,833
======== ==========
Current liabilities......................................... $ 24,208 $ 40,598
Long-term liabilities....................................... 358,322 410,359
Preferred stock............................................. 107,222 404,585
Common stockholder's equity................................. 200,991 198,291
-------- ----------
Total liabilities and stockholders' equity.................. $690,743 $1,053,833
======== ==========
</TABLE>
6. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1996
---------- -----------
<S> <C> <C>
Salaries................................................... $ 534,297 $ 3,697,072
Sales commissions.......................................... 889,010 2,149,167
Rep commissions............................................ 561,189 1,549,048
Other...................................................... 2,708,452 5,134,544
---------- -----------
$4,692,948 $12,529,831
========== ===========
</TABLE>
F-34
<PAGE> 186
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1996
------------ ------------
<S> <C> <C>
Term loan............................................... $ 67,562,500 $ 74,968,527
Revolving credit loan................................... 24,607,242 20,344,972
Subordinated notes due 2004............................. 80,000,000 260,000,000
------------ ------------
172,169,742 355,313,499
Less current portion.................................... 4,062,500 400,000
------------ ------------
$168,107,242 $354,913,499
============ ============
</TABLE>
The Company's term and revolving credit facilities were refinanced on
January 23, 1997, in conjunction with the acquisition of Colfax Communications
under a new bank credit agreement (the "New Credit Agreement") with Bankers
Trust Company, as administrative agent, and other institutions party thereto.
The New Credit Agreement includes a $225.0 million term loan facility (the "Term
Loan Facility") and a revolving loan facility (the "Revolving Loan Facility"
and, together with the Term Loan, the "New Bank Financing"). The Revolving Loan
Facility originally provides for borrowings up to $120.0 million, which is
subsequently reduced as and when the Company receives the net cash proceeds of
the pending station swaps and dispositions. In connection with the refinancing
of the term and revolving loan facilities, the Company incurred an extraordinary
charge to write-off deferred finance costs of approximately $4.5 million.
The New Bank Financing 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 New Bank Financing also is guaranteed
by the subsidiaries of Chancellor and Chancellor Radio Broadcasting, whose
guarantees are collateralized by a first priority perfected pledge of the
capital stock Chancellor Radio Broadcasting.
The Term Loan Facility is due in increasing quarterly installments
beginning in 1997 and matures in January 2003. All outstanding borrowings under
the Revolving Facility mature in January 2003. 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 December 31, 1996
accrued interest at the prime rate plus 1.25% (9.5%) on $3.3 million and the
LIBOR rate plus 2.50% (8.125%) on $92.0 million of borrowings.
In connection with the IPO (defined), the Company redeemed 25% of its
Existing Notes (defined) for approximately $22.2 million. The redemption was
completed in March 1996 and resulted in an extraordinary charge of $2.8 million.
The remaining $60.0 million 12 1/2% Senior Subordinated Notes due 2004 (the
"Existing Notes") mature October 1, 2004, and bear interest at 12.5% per annum.
On February 14, 1996, in conjunction with the acquisition of Trefoil
Communications, Inc., the Company issued $200.0 million aggregate principal
amount of 9 3/8% Senior Subordinated Notes due 2004 (the "New Notes" and,
together with the Existing Notes, the "Notes"), which mature on October 1, 2004,
and bear interest at 9.375% per annum. Interest on the Notes is paid
semi-annually. The Existing and New Notes are redeemable, in whole or in part,
at the option of the Company on or after October 1, 1999 and February 1, 2000,
respectively, at redemption prices expressed as a percentage of the principal
amount, ranging from 100.000% to 105.556%,
F-35
<PAGE> 187
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
plus accrued interest thereon to the date of acquisition. In addition, prior to
January 31, 1999, the Company may redeem up to 25% of the original aggregate
principal amount of the New Notes with the net proceeds of one or more public
equity offerings. The Notes are unsecured obligations of the Company, ranking
subordinate in right of payment to all senior debt of the Company. The New Notes
rank pari passu in right of payment to the Existing Notes. The Notes are
guaranteed on a senior subordinated basis by Chancellor Radio Broadcasting
Company's subsidiaries.
Scheduled debt maturities for the Company's outstanding long-term debt at
December 31, 1996 for each of the next five years and thereafter are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 400,000
1998........................................................ 400,000
1999........................................................ 9,874,886
2000........................................................ 11,296,119
2001........................................................ 17,469,864
Thereafter.................................................. 315,872,630
------------
$355,313,499
============
</TABLE>
See Note 5 for pro forma effects of the New Bank Financing subsequent to
year end. Both the New Bank Financing and Notes indentures contain certain
covenants, including, among others, limitations on the incurrence of additional
debt, in the case of the New Bank Financing; requirements to maintain certain
financial ratios; and restrictions on the payment of dividends to stockholders
and from the subsidiaries to Chancellor.
8. CAPITAL STRUCTURE
In February 1996, Chancellor sold 7.7 million shares of its Class A Common
Stock, par value $.01 per share (the "Class A Common Stock"), in an initial
public offering, (the "IPO"), which generated net proceeds of $142.4 million,
and in a private placement, issued $100.0 million of exchangeable redeemable
preferred stock (the "Acquisition Preferred Stock") of Chancellor Radio
Broadcasting and 742,192 shares of Class A common stock of Chancellor to an
affiliated entity and other investors.
Immediately prior to the IPO, Chancellor effected a recapitalization of its
current capital stock. Pursuant to the recapitalization, each six shares of
Chancellor's Nonvoting Stock were reclassified into one share of Class A Common
Stock. Each six shares of Chancellor's Voting Stock were reclassified into one
share of Class B Common Stock and each six shares of Convertible Nonvoting Stock
were reclassified into one share of Class C Common Stock. In connection with the
recapitalization, 63,334 shares of Class A Common Stock were exchanged for an
equal number of shares of Class B Common Stock, and an additional 8,484,410
shares of Class A Common Stock were exchanged for an equal number of shares of
Class C Common Stock. The recapitalization has been given retroactive effect in
the financial statements.
In February 1996, subsequent to the IPO, the Company completed a private
placement of $100.0 million of newly authorized Senior Cumulative Exchangeable
Preferred Stock (the "Old Preferred Stock"). Upon completion, the proceeds of
the Old Preferred Stock were used to redeem the Acquisition Preferred Stock and
55,664 shares of Class A Common Stock. The redemption resulted in a charge to
net loss attributable to common stock of approximately $16.6 million and an
additional reduction of paid-in capital of approximately $1.0 million.
In June 1996, the holders of Chancellor's Class C Common Stock filed an
application with the FCC to convert the stock into Chancellor's Class B Common
Stock. The holders of Class C Common Stock received approval of their
applications and subsequently converted their stock on October 22, 1996.
F-36
<PAGE> 188
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In August 1996 pursuant to an agreement entered into at the time of the
IPO, Chancellor sold 1.2 million shares of Class A Common Stock in a private
placement to an affiliated entity, which generated proceeds of $23.0 million
which were contributed to Chancellor Radio Broadcasting.
In September 1996, the Company completed an exchange offering whereby it
exchanged the Old Preferred Stock for 1,000,000 shares of 12 1/4% Series A
Senior Cumulative Exchangeable Preferred Stock (the "Senior Exchangeable
Preferred Stock") in a transaction registered under the Securities Act of 1933,
as amended. The terms of the Senior Exchangeable Preferred Stock are
substantially identical to those of the Old Preferred Stock. Dividends on the
Senior Exchangeable Preferred Stock accrue from its date of issuance and are
payable quarterly commencing November 15, 1996, at a rate per annum of 12 1/4%
of the then effective liquidation preference per share. Dividends may be paid,
at the Company's option, on any dividend payment date occurring on or prior to
February 15, 2001 either in cash or by adding such dividends to the then
effective liquidation preference of the Senior Exchangeable Preferred Stock. The
Senior Exchangeable Preferred Stock is redeemable at the Company's option, in
whole or in part at any time on or after February 15, 2001, at various
redemption prices, plus, accumulated and unpaid dividends to the date of
redemption. In addition, prior to February 15, 1999, the Company may, at its
option, redeem the Senior Exchangeable Preferred Stock with the net cash
proceeds from one or more Public Equity Offerings (as defined), at various
redemption prices, plus, accumulated and unpaid dividends to the redemption
date; provided, however, that after any such redemption there is outstanding at
least 75% of the number of shares of Senior Exchangeable Preferred Stock
originally issued.
The Company is required, subject to certain conditions, to redeem all of
the Senior Exchangeable Preferred Stock outstanding on February 15, 2008, at a
redemption price equal to 100% of the then effective liquidation preference
thereof, plus, accumulated and unpaid dividends to the date of redemption. Upon
the occurrence of a change of control (as defined), the Company must offer to
purchase all of the then outstanding shares of Senior Exchangeable Preferred
Stock at a price equal to 101% of the then effective liquidation preference
thereof, plus, accumulated and unpaid dividends to the date of purchase. Subject
to certain conditions, the Senior 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 1/4% subordinated exchange debentures due 2008.
On January 23, 1997, Chancellor completed a private placement of $100.0
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 liquidation preference
of the Convertible Preferred Stock is $50.00 per share, and requires cash
dividends of $7.7 million per year. Because Chancellor is a holding company with
no assets other than the common stock of the Company, Chancellor will rely
solely on the dividends from the Company to satisfy its dividend payment
obligation on the 7% Convertible Preferred Stock. 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.
F-37
<PAGE> 189
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 liquidation preference of the Exchangeable Preferred Stock
will be $100.00 per share. 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 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, the Convertible Preferred Stock and the
Exchangeable Preferred Stock includes or will include 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.
9. INCOME TAXES
All of the Company's revenues were generated in the United States. The
provision for income taxes for continuing operations consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Current:
State.................................................... $ -- $ 11,098 $ 64,070
Deferred:
Federal.................................................. 1,267,109 3,220,528 3,866,209
State.................................................... 223,607 568,329 682,272
---------- ---------- ----------
Total provision.................................. $1,490,716 $3,799,955 $4,612,551
========== ========== ==========
</TABLE>
F-38
<PAGE> 190
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income tax expense differs from the amount computed by applying the federal
statutory income tax rate of 34% to income before income taxes for the following
reasons:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1994 1995 1996
---------- ----------- ----------
<S> <C> <C> <C>
U.S. federal income tax at statutory
rate.................................. $ 637,692 $(2,628,656) $ 645,125
State income taxes, net of federal
benefit............................... 112,533 (463,880) 113,846
Valuation allowance provided for loss
carryforward generated during the
current period........................ 720,490 6,589,750 307,000
Reconciliation of return to estimate.... -- 71,510 --
Permanent difference.................... 20,001 231,231 3,546,580
---------- ----------- ----------
$1,490,716 $ 3,799,955 $4,612,551
========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1996
----------- ------------
<S> <C> <C>
The deferred tax assets (liabilities)
consist of the following:
Loss carryforwards expiring 2009 and
2010............................... $ 4,766,240 $ 11,806,985
Deferred stock option compensation
deduction.......................... 2,544,000 4,064,000
Tax credits........................... -- 2,951,555
Other................................. 105,411 680,819
----------- ------------
Gross deferred tax assets.......... 7,415,651 19,503,359
----------- ------------
Depreciation and amortization......... (5,057,772) (21,488,463)
----------- ------------
Deferred tax assets valuation
allowance.......................... (7,310,240) (621,210)
----------- ------------
Net deferred tax liabilities....... $(4,952,361) $ (2,606,314)
=========== ============
</TABLE>
The deferred tax valuation allowance was originally established due to the
uncertainty surrounding the realizability of the Company's deferred tax assets
using the "more likely than not" criteria. During the fourth quarter of 1996,
the Company revised its estimate of the likelihood that it will realize the
majority of its deferred tax assets and adjusted its valuation allowance
accordingly. This revised estimate was the direct result of the acquisition of
Trefoil. Reversal of the valuation allowance related to deferred tax assets
which existed on the date of acquisition or which were acquired as a result of
the Trefoil acquisition were credited against the original purchase accounting
allocation to goodwill. The reversal of the valuation allowance related to
deferred tax assets generated subsequent to the acquisition were credited as a
reduction of income tax expense and extraordinary losses as appropriate.
The Company's tax credits and net operating loss carryforwards at December
31, 1996 begin expiring in 1997 and 2001, respectively. The Company has provided
a valuation allowance for those tax credits which do not meet a "more likely
than not" realizability test.
10. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) Savings Plan, whereby eligible employees can
contribute up to either 15% of their salary, per year, subject to certain
maximum contribution amounts. Prior to 1996, the Company had not made any
contributions to the plan, nor is it required to in future periods. However, the
Company did elect to make a discretionary match for 1996 of approximately
$250,000. Employees become eligible to participate in the plan after the
completion of one year of service and the attainment of age twenty-one.
F-39
<PAGE> 191
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. COMMITMENTS
The Company leases real property, office space, broadcasting equipment and
office equipment under various noncancellable operating leases. Certain of the
Company's leases contain escalation clauses, renewal options and/or purchase
options. In addition, the Company assumed lease obligations in connection with
the acquisition of Trefoil on February 14, 1996. The Company also has employment
and rating survey agreements in excess of one year, and has entered into a
twelve-year financial monitoring and oversight agreement with Hicks Muse & Co.
Partners, L.P., which is an affiliate of Hicks, Muse, Tate & Furst Incorporated.
Future minimum payments under the noncancellable operating lease agreements
at December 31, 1996 are approximately as follows:
<TABLE>
<S> <C>
1997........................................................ $ 6,023,586
1998........................................................ 4,865,095
1999........................................................ 4,277,779
2000........................................................ 3,564,247
2001........................................................ 2,805,282
Thereafter.................................................. 13,080,261
-----------
$34,616,250
===========
</TABLE>
Rent expense was approximately $227,000, $1.3 million and $4.8 million for
the years ended December 31, 1994, 1995 and 1996, respectively.
12. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
For cash, short-term debt, and other current amounts receivable and
payable, and the variable-rate term debt, the carrying amount approximates fair
value.
For the fixed-rate long-term debt, the fair value is estimated based on
quoted market prices. The carrying values at December 31, 1995 and 1996 was
$80.0 million and $260.0 million, respectively, and the estimated fair values at
each date were $85.4 million and $267.8 million, respectively.
For Chancellor Radio Broadcasting's Senior Exchangeable Preferred Stock,
the fair value of $113.75 per share at December 31, 1996 is estimated based on
quoted market prices.
13. STOCK-BASED COMPENSATION
During 1994, Chancellor's Board of Directors granted options to purchase
996,068 shares of its common stock to the senior management of the Company at
exercise prices of $6.00 and $7.50. The option agreements vest over a five year
period and originally contained certain performance criteria and indexed
exercise prices. On September 30, 1995, Chancellor entered into an agreement
with its senior management to substantially revise and amend these option
agreements to eliminate certain of the performance criteria provisions and to
adjust and fix the exercise prices at $7.50 and $8.40, respectively. Management
developed an estimate of the fair value of the stock options in the amount of
$19.0 million. Based upon this estimate and the applicable vesting periods, the
Company recognized stock option compensation expense and a corresponding credit
to equity of $6.4 million in 1995, with the remaining amount to be amortized
over an approximate four year period.
During 1994, Chancellor's Board of Directors adopted a stock option plan
for its non-employee directors providing for the grant of options and stock
awards for up to 480,000 shares of its common stock. Upon
F-40
<PAGE> 192
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
election to the Board of Directors, each person shall be granted a stock option
to purchase a number of shares of common stock equal to the number of shares of
common stock acquired by purchase by such person upon their initial election to
the Board of Directors. Each option shall be immediately vested, will have a
maximum term of ten years and an exercise price, as determined by the plan
committee, equal to or greater than the fair market value of the common stock on
the respective dates of grant.
In February 1996, Chancellor's Board of Directors adopted a stock award
plan for the Company's management, employees and non-employee directors, elected
after the date of adoption of the plan, providing for the grant of options and
stock awards for up to 916,456 shares of Chancellor's Class A Common Stock. The
Company's compensation committee has the sole authority to grant stock options
and to establish option exercise prices and vesting schedules. However,
per-share exercise prices shall not be less than the fair market value of the
stock on the respective date of grant and if the compensation committee does not
determine a vesting schedule, such option shall vest 20% on the first
anniversary of the respective date of grant and the remaining 80% shall vest pro
rata on a monthly basis over the four-year period following the first
anniversary of the date of grant. Non-employee directors elected after the
effective date of this plan automatically are granted a fully-vested option to
purchase 5,000 shares of Chancellor's Class A Common Stock on the date he or she
first becomes a member of the Board of Directors. Terms of all options are
limited to ten years.
A summary of the Company's option activity follows. The Company has elected
to continue expense recognition under Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" and accordingly, has included
certain required pro forma information. Estimates of weighted-average grant-date
fair values of options granted and pro forma option compensation amounts were
determined using the Black-Scholes Single Option approach assuming an expected
option term of 6 years, interest rates ranging from 5.5% to 7.2%, a dividend
yield of zero and a volatility factor of .4 (zero for options issued prior to
the Company's initial public offering in February 1996).
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------
1996 1994 1995
-------------------------- ---------------------------- ----------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------- ---------------- --------- ---------------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Beginning of year.... -- $ -- 996,068 $7.27 1,022,734 $ 7.89
Granted:
Exercise price:
equals FMV...... 996,068 7.27 26,666 7.50 713,916 26.03
less than FMV... -- -- 996,068 7.90 -- --
Exercised.......... -- -- -- -- -- --
Canceled........... -- -- (996,068) 7.27 (9,000) 24.51
------- ------ --------- ------ --------- -------
End of year.......... 996,068 $7.27 1,022,734 $7.89 1,727,650 $15.30
======= ====== ========= ====== ========= =======
Exercisable as of end
of year............ -- $ -- 225,879 $7.85 431,758 $ 8.06
======= ====== ========= ====== ========= =======
Weighted-average
grant-date fair
value of options
granted:
Exercise price:
equals FMV...... -- 3.59 12.69
less than FMV... -- 21.56 --
</TABLE>
F-41
<PAGE> 193
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------- ---------------------------
WEIGHTED AVERAGE
---------------------------
RANGE OF REMAINING EXERCISE WEIGHTED AVERAGE
EXERCISE PRICES SHARES CONTRACTUAL LIFE PRICE SHARES EXERCISE PRICE
- --------------- --------- ---------------- -------- ------- -----------------
<S> <C> <C> <C> <C> <C>
$ 7.50 -- $ 7.50 577,971 7.06 $ 7.50 247,188 $7.50
8.40 -- 8.40 444,763 7.83 8.40 177,904 8.40
20.00 -- 25.25 431,916 9.14 20.51 6,666 20.00
31.00 -- 36.75 273,000 9.75 34.81 -- --
--------- ----- ------ ------- ------
$ 7.50 -- $36.75 1,727,650 8.20 $15.30 431,758 $8.06
========= ===== ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
Historical net loss................................. $(11,531,296) $(6,892,023)
Pro forma adjustment for stock option
compensation...................................... (781,465) (1,524,302)
Pro forma tax benefit............................... 312,586 609,721
------------ -----------
Pro forma net loss.................................. $(12,000,175) $(7,806,604)
============ ===========
</TABLE>
14. RELATED PARTY TRANSACTIONS
The Company has entered into a twelve-year agreement (the "Financial
Monitoring and Oversight Agreement") with Hicks Muse & Co. Partners, L.P.
("Hicks Muse Partners") and HM2/Management Partners, L.P. ("HM2"), each of which
is an affiliate of Hicks Muse. Chancellor and the Company paid Hicks Muse
Partners an annual fee of $82,000, $200,000 and $408,000 for financial oversight
and monitoring services for the years ended December 31, 1994, 1995 and 1996,
respectively. The annual fee is adjustable each December 31, according to a
formula based on changes in the consumer price index. HM2 received fees of
approximately $0.3 million, $2.4 million and $6.2 million upon consummation of
the acquisitions of KDWB-FM, the American Media Station Group and Trefoil
Communications, Inc., respectively, and is entitled to receive a fee equal to
1.5% of the transaction value (as defined) upon the consummation of each add-on
transaction (as defined) involving Chancellor or any of its subsidiaries.
Effective April 1, 1996, the Company entered into a revised financial
monitoring and oversight agreement with Hicks & Muse & Co. Partners, L.P. and
HM2/Management Partners, L.P., each of which is an affiliate of Hicks, Muse,
Tate & Furst Incorporated. The annual fee for financial oversight and monitoring
services to the Company has been adjusted to $500,000. The annual fee is
adjustable each January 1, to an amount equal to the budgeted consolidated
annual net sales of the Company for the then-current fiscal year, multiplied by
0.25%, provided, however, that in no event shall the annual fee be less than
$500,000.
The Financial Monitoring and Oversight Agreement makes available the
resources of HM2 and Hicks Muse Partners concerning a variety of financial
matters. The services that have been and will continue to be provided by HM2 and
Hicks Muse Partners could not otherwise be obtained by Chancellor and the
Company without the addition of personnel or the engagement of outside
professional advisors.
In February of 1996, the Company lent $200,000 to an affiliate of the
Company. The loan is unsecured, does not bear interest and will be forgiven
during the next three years.
15. SUBSEQUENT EVENTS
On February 14, 1997, Chancellor Radio Broadcasting completed a private
placement of an additional $10.0 million of Convertible Preferred Stock pursuant
to its over-allotment option. The net proceeds of this offering were used to
repay borrowings under the Revolving Credit Facility.
F-42
<PAGE> 194
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 Media Corporation ("Evergreen") in a
stock-for-stock transaction (the "Merger"), with Evergreen remaining as the
surviving corporation (the "Surviving Company"). 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.
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") occurs
prior to the consummation of the Merger, the Company will be required to
purchase the Viacom subsidiaries which own four of the ten Viacom stations for
$480.0 million and Evergreen will be required to purchase the Viacom
subsidiaries which own six of the ten Viacom stations for $595.0 million. In the
event that consummation of the stock purchase agreement between Evergreen and
Viacom occurs after the consummation of the Merger, the Surviving Company will
acquire the stock of certain Viacom subsidiaries which own and operate ten radio
stations in five major markets. Consummation of the transaction is dependent
upon certain closing conditions, including regulatory approval.
16. UNCERTAINTIES AND THE USE OF ESTIMATES AND ASSUMPTIONS
On February 8, 1996, the President signed into law the Telecommunications
Act of 1996. Among other things, this legislation requires the Federal
Communications Commission (the "FCC"), to relax its numerical restrictions on
local ownership and affords renewal applicants significant new protections from
competing applications for their broadcast licenses. The new legislation will
enable the Company to retain all of its radio stations and to acquire more
properties; at the same time, this legislation will also allow other broadcast
entities to increase their ownership in markets where the Company currently
operates stations. The Company's management is unable to determine the ultimate
effect of this legislation on its competitive environment.
The pending acquisition, exchange and merger agreements are subject to
various governmental approvals, including the Department of Justice under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
Federal Communications Commission.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual amounts could differ from those estimates.
17. RECENT ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board issued SFAS No. 128, "Earnings Per
Share" in March 1997, which establishes standards for computing and presenting
earnings per share. The disclosure requirements of SFAS No. 128 will be
effective for the Company's financial statements beginning in 1997. Management
has not yet determined the impact that the adoption of SFAS No. 128 will have on
the financial statements of the Company.
F-43
<PAGE> 195
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ ----------
<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 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.
F-44
<PAGE> 196
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.
F-45
<PAGE> 197
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
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.
F-46
<PAGE> 198
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.
F-47
<PAGE> 199
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.
F-48
<PAGE> 200
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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>
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 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.
F-49
<PAGE> 201
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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).
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 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
F-50
<PAGE> 202
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
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>
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
F-51
<PAGE> 203
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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 SIX MONTHS ENDED
ENDED JUNE 30, 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.
F-52
<PAGE> 204
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
F-53
<PAGE> 205
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Evergreen Media Corporation:
We have audited the accompanying combined balance sheets of Riverside
Broadcasting Co., Inc. and WAXQ Inc. as of December 31, 1995 and 1996, and the
related combined statements of earnings and cash flows for each of the years in
the three-year period ended December 31, 1996. These combined financial
statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Riverside
Broadcasting Inc. and WAXQ Inc. as of December 31, 1995 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996 in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
March 14, 1997
F-54
<PAGE> 206
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Accounts receivable, less allowance
for doubtful accounts of $99 in
1995, $208 in 1996 and $170 in
1997............................... $ 5,507 $ 9,713 $10,489
Prepaid expenses and other current
assets............................. 178 381 162
Deferred income taxes................. 45 829 829
------- ------- -------
Total current assets.......... 5,730 10,923 11,480
Property and equipment, net (note 4).... 1,075 4,177 2,668
Intangible assets, net (note 5)......... 47,422 66,626 74,038
------- ------- -------
$54,227 $81,726 $88,186
======= ======= =======
LIABILITIES AND EQUITY
Current liabilities -- accounts payable
and accrued expenses.................. $ 1,167 $ 3,669 $2,894
Deferred income taxes................... 222 4,373 4,373
Equity (note 9)......................... 52,838 73,684 80,919
Commitments and contingencies (note
10)...................................
------- ------- -------
$54,227 $81,726 $88,186
======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-55
<PAGE> 207
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
COMBINED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gross revenues.......................... $28,254 $25,862 $36,121 $14,274 $25,135
Less agency commissions and national
rep fees........................... 4,700 4,342 5,892 2,107 3,652
------- ------- ------- ------- -------
Net revenues.................. 23,554 21,520 30,229 12,167 21,483
------- ------- ------- ------- -------
Operating expenses:
Station operating expenses excluding
depreciation and amortization...... 9,212 9,069 12,447 5,192 8,893
Depreciation and amortization......... 1,662 1,676 4,528 838 1,290
Corporate general and
administrative..................... 945 980 943 510 442
------- ------- ------- ------- -------
Operating expenses................. 11,819 11,725 17,918 6,540 10,625
------- ------- ------- ------- -------
Operating income................... 11,735 9,795 12,311 5,627 10,858
Other (income) expense (note 3)......... -- -- (741) -- --
------- ------- ------- ------- -------
Earnings before income taxes....... 11,735 9,795 13,052 5,627 10,858
Income tax expense (note 6)............. 6,053 5,154 6,683 2,881 4,336
------- ------- ------- ------- -------
Net earnings.................. $ 5,682 $ 4,641 $ 6,369 $ 2,746 $ 6,522
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-56
<PAGE> 208
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows provided by operating activities:
Net earnings................................... $ 5,682 $ 4,641 $ 6,369 $ 2,746 $ 6,522
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation................................ 153 168 286 84 266
Amortization of goodwill.................... 1,509 1,508 1,811 754 1,024
Changes in certain assets and liabilities:
Deferred income taxes..................... 32 110 (603) -- --
Accounts receivable, net.................. (676) 659 (4,172) (984) (776)
Prepaid expenses and other current
assets................................. 12 103 (203) 128 219
Accounts payable and accrued expenses..... (192) (483) 2,502 765 (775)
------- ------- ------- ------- -------
Net cash provided by operating
activities........................... 6,520 6,706 5,990 3,493 6,480
------- ------- ------- ------- -------
Cash flows used by investing activities --capital
expenditures................................... (150) (129) (695) (250) (417)
------- ------- ------- ------- -------
Net cash used by financing
activities -- distribution to parent........... (6,370) (6,577) (5,295) (3,243) (6,063)
------- ------- ------- ------- -------
Increase (decrease) in cash...................... -- -- -- -- --
Cash at beginning of period...................... -- -- -- -- --
------- ------- ------- ------- -------
Cash at end of period............................ $ -- $ -- $ -- $ -- $ --
======= ======= ======= ======= =======
Noncash financing activities -- contribution of
radio station net assets by parent (note 3).... $ -- $ -- $19,772 $ -- $ --
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-57
<PAGE> 209
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) ORGANIZATION AND BASIS OF PRESENTATION
The accompanying combined financial statements include the accounts of
Riverside Broadcasting Co., Inc. and WAXQ Inc. (collectively, the "Company").
The Company owns and operates two commercial radio stations in the New York City
market -- WLTW-FM and WAXQ-FM and is wholly owned by Viacom International Inc.
("Viacom" or "Parent"), a wholly owned subsidiary of Viacom, Inc. Significant
intercompany accounts and transactions have been eliminated in combination.
On February 16, 1997, Viacom entered into a stock purchase agreement to
sell all the issued and outstanding shares of capital stock of WAXQ Inc. and
Riverside Broadcasting Co., Inc. in the New York City market, KYSR Inc. and KIBB
Inc. in the Los Angeles market, Viacom Broadcasting East Inc. and WMZQ Inc. in
the Washington, DC market, WLIT Inc. in the Chicago market and WDRQ Inc. in the
Detroit market (collectively, the "Viacom Radio Properties") to Evergreen Media
Corporation of Los Angeles ("Evergreen"), for $1.075 billion in cash ("Proposed
Transaction"). The Proposed Transaction is expected to close after the
expiration or termination of the applicable waiting periods under the HSR Act
and approval by the Federal Communications Commission ("FCC"). Contemporaneous
with this transaction, Evergreen entered into a joint purchase agreement with
Chancellor Broadcasting Company ("Chancellor") under which Chancellor agreed to
acquire the Chicago, Detroit and Los Angeles Viacom radio properties referred to
above for $480 million from Evergreen or from Viacom directly.
The accompanying combined financial statements reflect the carve-out
historical results of operations and financial position of Riverside
Broadcasting Co., Inc. and WAXQ Inc. These financial statements are not
necessarily indicative of the results that would have occurred if the Company
had been a separate stand-alone entity during the periods presented.
The financial statements do not include Viacom's corporate assets or
liabilities not specifically identifiable to the Company. Corporate overhead
allocations have been included in the accompanying statements of earnings in
corporate general and administrative expense and station operating expenses.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets. Repair and maintenance costs are charged to expense when
incurred.
(b) Intangible Assets
Intangible assets consist primarily of broadcast licenses. The Company
amortizes such intangible assets using the straight-line method over 40 years.
The Company continually evaluates the propriety of the carrying amount of
intangible assets as well as the amortization period to determine whether
current events or circumstances warrant adjustments to the carrying value and/or
revised estimates of useful lives. This evaluation consists of the projection of
undiscounted operating income before depreciation, amortization, nonrecurring
charges and interest over the remaining amortization periods of the related
intangible assets. At this time, the Company believes that no significant
impairment of intangible assets has occurred and that no reduction of the
estimated useful lives is warranted.
(c) Barter Transactions
The Company trades commercial air time for goods and services used
principally for promotional, sales and other business activities. An asset and
liability are recorded at the fair market value of the goods or
F-58
<PAGE> 210
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
services to be received. Barter revenue is recorded and the liability relieved
when commercials are broadcast and barter expense is recorded and the asset
relieved when goods or services are received or used.
(d) Revenue Recognition
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
(e) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable earnings. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount more likely than not to be realized. Income
tax expense is the total of tax payable for the period and the change during the
period in deferred tax assets and liabilities.
(f) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. The adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
(g) Fair Value
The carrying amount of accounts receivable and accounts payable
approximates fair value because of the short maturity of these instruments.
(h) Disclosure of Certain Significant Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
In the opinion of management, credit risk with respect to trade receivables
is limited due to the large number of diversified customers in the Company's
customer base. The Company performs ongoing credit evaluations of its customers
and believes that adequate allowances for any uncollectible trade receivables
are maintained. No one customer accounted for more than 10% of net revenues in
1994, 1995, or 1996.
(i) Unaudited Interim Financial Information
In the opinion of management, the unaudited interim combined financial
statements as of and for the six months ended June 30, 1996 and 1997, reflect
all adjustments, consisting of only normal and recurring items,
F-59
<PAGE> 211
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
which are necessary for a fair presentation of the results for the interim
periods presented. The results for the interim periods ended June 30, 1996 and
1997 are not necessarily indicative of results to be expected for any other
interim period or for the full year.
(3) ACQUISITIONS AND DISPOSITIONS
On August 1, 1996, Viacom exchanged the assets of KBSG-AM/FM and KNDD-FM in
Seattle for the assets of WAXQ-FM in New York. The transaction was accounted for
as a nonmonetary exchange and was based on the recorded amounts of the
nonmonetary assets relinquished. For the period from July 1, 1996 to July 31,
1996, Viacom operated WAXQ-FM under a time brokerage agreement.
Station start-up costs, including fees paid pursuant to the time brokerage
agreement, amounting to $2,431,000, were capitalized and amortized during 1996.
Acquisition-related costs are reflected in the accompanying financial statements
as other expense.
A summary of net assets relinquished by Viacom in connection with the
exchange is as follows:
<TABLE>
<S> <C>
Working capital............................................. $ 34
Property and equipment...................................... 2,693
Intangible assets........................................... 21,015
Deferred taxes.............................................. (3,970)
-------
$19,772
=======
</TABLE>
(4) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1995 and
1996:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1995 1996
----------- ------ ------
<S> <C> <C> <C>
Broadcast facilities.................................. 8-20 years $1,971 $4,783
Office equipment and other............................ 5-8 years 557 754
Construction in progress.............................. 10 389
------ ------
2,538 5,926
Accumulated depreciation.............................. 1,463 1,749
------ ------
$1,075 $4,177
====== ======
</TABLE>
(5) INTANGIBLE ASSETS
Intangible assets at December 31, 1995 and 1996 consist of broadcast
licenses which are being amortized over forty years and are presented net of
accumulated amortization of $13,177 and $14,988, respectively.
(6) INCOME TAXES
The Company's results of operations are included in the combined U.S.
federal and certain combined and separate state income tax returns of Viacom
International Inc.
The tax provisions and deferred tax liabilities presented have been
determined as if the Company were a stand-alone business filing separate tax
returns. Current tax liabilities are recorded through the equity account with
Viacom.
F-60
<PAGE> 212
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Current:
Federal.................................................. $3,889 $3,258 $4,672
State and local.......................................... 2,132 1,786 2,614
Deferred:
Federal.................................................. 21 71 (356)
State.................................................... 11 39 (247)
------ ------ ------
$6,053 $5,154 $6,683
====== ====== ======
</TABLE>
A reconciliation of the U.S. Federal statutory tax rate to the Company's
effective tax rate on earnings before income taxes is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. tax rate..................................... 35.0% 35.0% 35.0%
Amortization of intangibles................................. 4.6 5.4 4.3
State and local taxes, net of federal tax benefit........... 11.9 12.1 11.8
Other, net.................................................. 0.1 0.1 0.1
---- ---- ----
Effective tax rate........................................ 51.6% 52.6% 51.2%
==== ==== ====
</TABLE>
Deferred tax assets and liabilities are computed by applying the U.S.
federal income tax rate in effect to the gross amounts of temporary differences
and other tax attributes. These temporary differences are primarily the result
of fixed asset basis differences and bad debt expense.
(7) DEBT AND INTEREST COST
Viacom has not allocated any portion of its debt or related interest cost
to the Company, and no portion of Viacom's debt is specifically related to the
operations of the Company. Accordingly, the Company's financial statements
include no charges for interest.
(8) RELATED PARTY TRANSACTIONS
Intercompany balances between the Company and Viacom resulting from normal
trade activity are reflected in Equity in the accompanying combined financial
statements (see note 9).
Viacom provides services for the Company in management, accounting and
financial reporting, human resources and information systems. The allocation of
these expenses, which is generally based on revenue dollars, is reflected in the
accompanying combined financial statements as corporate general and
administrative expense. Management believes that the method of allocation of
corporate overhead is reasonable.
Viacom has a noncontributory pension plan covering substantially all of its
employees, including the employees of the Company. Costs related to these plans
are allocated to the Company based on payroll dollars. The Company recognized
expense related to these costs in the amounts of $63, $41 and $97 for 1994, 1995
and 1996, respectively. The assets and the related benefit obligation of the
plans will not be transferred to the Company upon consummation of the Proposed
Transaction, therefore, such assets and obligations are not included in the
notes to the Company's combined financial statements.
Viacom utilizes a centralized cash management system. As a result, the
Company carries minimal cash. Disbursements are funded by the Parent upon demand
and cash receipts are transferred to the Parent daily.
F-61
<PAGE> 213
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Company, from time to time, enters into transactions with companies
owned by or affiliated with Viacom. Generally, services received from such
related parties are charged to the Company at amounts which would be incurred in
transactions between unrelated entities.
(9) EQUITY
Equity represents Viacom's ownership interest in the recorded net assets of
the Company. All cash transactions and intercompany transactions flow through
the equity account. A summary of the activity is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of period.......... $ 55,462 $ 54,774 $ 52,838
Net earnings............................ 5,682 4,641 6,369
Net intercompany activity............... (6,370) (6,577) 14,477
-------- -------- --------
Balance at end of period................ $ 54,774 $ 52,838 $ 73,684
======== ======== ========
</TABLE>
(10) COMMITMENTS AND CONTINGENCIES
The Company has noncancelable operating leases, primarily for office space.
These leases generally contain renewal options for periods ranging from one to
ten years and require the Company to pay all executory costs such as maintenance
and insurance. Rental expense for operating leases (excluding those with lease
terms of one month or less that were not renewed) was approximately $192, $155
and $442 during 1994, 1995 and 1996, respectively.
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31, 1996
are as follows:
<TABLE>
<S> <C>
Year ending December 31:
1997.................................... $ 709
1998.................................... 722
1999.................................... 759
2000.................................... 795
2001.................................... 818
Thereafter.............................. 2,411
------
$6,214
======
</TABLE>
F-62
<PAGE> 214
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Evergreen Media Corporation:
We have audited the accompanying combined balance sheets of WMZQ Inc. and
Viacom Broadcasting East Inc. as of December 31, 1995 and 1996, and the related
combined statements of earnings and cash flows for each of the years in the
three-year period ended December 31, 1996. These combined financial statements
are the responsibility of the Companies' management. Our responsibility is to
express an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of WMZQ Inc.
and Viacom Broadcasting East Inc. as of December 31, 1995 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996 in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
March 14, 1997, except for note 10,
which is as of April 14, 1997
F-63
<PAGE> 215
WMZQ INC. AND VIACOM BROADCASTING EAST INC.
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
------------------ JUNE 30,
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Accounts receivable, less allowance
for doubtful accounts of $150 in
1995, $235 in 1996 and $136 in
1997............................... $ 4,893 $ 5,401 $ 5,407
Prepaid expenses and other current
assets............................. 467 629 55
Deferred income taxes (note 5)........ 60 94 94
------- ------- -------
Total current assets.......... 5,420 6,124 5,556
Property and equipment, net (note 3).... 2,407 2,316 2,408
Intangible assets, net (note 4)......... 50,204 48,695 50,399
------- ------- -------
$58,031 $57,135 $58,363
======= ======= =======
LIABILITIES AND EQUITY
Current liabilities -- accounts payable
and accrued expenses.................. $ 2,411 $ 2,458 $ 1,814
Deferred income taxes (note 5).......... 1,899 2,121 2,123
Equity (note 8)......................... 53,721 52,556 54,426
Commitments and contingencies (note
9)....................................
------- ------- -------
$58,031 $57,135 $58,363
======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-64
<PAGE> 216
WMZQ INC. AND VIACOM BROADCASTING EAST INC.
COMBINED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gross revenues................................... $21,389 $25,656 $26,584 $13,422 $13,837
Less agency commissions and national rep
fees........................................ 3,321 4,131 4,075 1,624 1,818
------- ------- ------- ------- -------
Net revenues........................... 18,068 21,525 22,509 11,798 12,019
------- ------- ------- ------- -------
Operating expenses:
Station operating expenses excluding
depreciation and amortization............... 10,398 11,445 11,362 6,394 6,043
Depreciation and amortization.................. 1,798 1,814 1,884 906 989
Corporate general and administrative........... 694 940 674 436 240
------- ------- ------- ------- -------
Operating expenses.......................... 12,890 14,199 13,920 7,736 7,272
------- ------- ------- ------- -------
Earnings before income taxes................ 5,178 7,326 8,589 4,062 4,747
Income tax expense (note 5)...................... 2,607 3,437 3,929 1,858 1,556
------- ------- ------- ------- -------
Net earnings........................... $ 2,571 $ 3,889 $ 4,660 $ 2,204 $ 3,191
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-65
<PAGE> 217
WMZQ INC. AND VIACOM BROADCASTING EAST INC.
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows provided by operating
activities:
Net earnings.......................... $ 2,571 $ 3,889 $ 4,660 $ 2,204 $ 3,191
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation....................... 289 305 375 150 237
Amortization of goodwill........... 1,509 1,509 1,509 756 752
Deferred income tax expense........ 323 302 188 -- --
Changes in certain assets and
liabilities, net of effects of
acquisitions:
Accounts receivable, net......... 179 (1,485) (508) (445) (6)
Prepaid expenses and other
current assets................ 14 (121) (162) (730) 574
Accounts payable and accrued
expenses...................... (559) 20 47 2,446 (644)
------- ------- ------- ------- -------
Net cash provided by operating
activities.................. 4,326 4,419 6,109 4,381 4,104
------- ------- ------- ------- -------
Cash flows used by investing
activities -- capital expenditures.... (194) (491) (284) (142) (232)
------- ------- ------- ------- -------
Cash flows used by financing
activities -- distribution to
Parent................................ (4,132) (3,928) (5,825) (4,239) (3,872)
------- ------- ------- ------- -------
Increase (decrease) in cash............. -- -- -- -- --
Cash at beginning of period............. -- -- -- -- --
------- ------- ------- ------- -------
Cash at end of period................... $ -- $ -- $ -- $ -- $ --
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-66
<PAGE> 218
WMZQ INC. AND VIACOM BROADCASTING EAST INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) ORGANIZATION AND BASIS OF PRESENTATION
The accompanying combined financial statements include the accounts of WMZQ
Inc. and Viacom Broadcasting East Inc. (collectively, the "Company"). The
Company owns and operates four commercial radio stations in the Washington, DC
market, WMZQ-FM, WJZW-FM, WBZS-AM and WZHF-AM, and is wholly owned by Viacom
International Inc. ("Viacom" or "Parent"), a wholly owned subsidiary of Viacom,
Inc. Significant intercompany accounts and transactions have been eliminated in
combination.
On February 16, 1997, Viacom International Inc. entered into a stock
purchase agreement to sell all the issued and outstanding shares of capital
stock of WAXQ Inc. and Riverside Broadcasting Co., Inc. in the New York City
market, KYSR Inc. and KIBB Inc. in the Los Angeles market, Viacom Broadcasting
East Inc. and WMZQ Inc. in the Washington, DC market, WLIT Inc. in the Chicago
market and WDRQ Inc. in the Detroit market (collectively the "Viacom Radio
Properties") to Evergreen Media Corporation for $1.075 billion in cash
("Proposed Transaction"). The Proposed Transaction is expected to close after
the expiration or termination of the applicable waiting periods under the HSR
Act and approval by the Federal Communications Commission ("FCC").
Contemporaneous with this transaction, Evergreen entered into a joint purchase
agreement with Chancellor Broadcasting Company ("Chancellor"), under which
Chancellor agreed to acquire the Chicago, Detroit and Los Angeles Viacom Radio
Properties referred to above for $480 million from Evergreen or from Viacom
directly.
The accompanying combined financial statements reflect the carve-out
historical results of operations and financial position of WMZQ Inc. and Viacom
Broadcasting East, Inc. These financial statements are not necessarily
indicative of the results that would have occurred if the Company had been a
separate stand-alone entity during the periods presented.
The financial statements do not include Viacom's corporate assets or
liabilities not specifically identifiable to the Company. Corporate overhead
allocations have been included in the accompanying statements of earnings in
corporate general and administrative expense and station operating expenses.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets. Repair and maintenance costs are charged to expense when
incurred.
(b) Intangible Assets
Intangible assets consist primarily of broadcast licenses. The Company
amortizes such intangible assets using the straight-line method over 40 years.
The Company continually evaluates the propriety of the carrying amount of
intangible assets as well as the amortization period to determine whether
current events or circumstances warrant adjustments to the carrying value and/or
revised estimates of useful lives. This evaluation consists of the projection of
undiscounted operating income before depreciation, amortization, nonrecurring
charges and interest over the remaining amortization periods of the related
intangible assets. At this time, the Company believes that no significant
impairment of intangible assets has occurred and that no reduction of the
estimated useful lives is warranted.
(c) Barter Transactions
The Company trades commercial air time for goods and services used
principally for promotional, sales and other business activities. An asset and
liability are recorded at the fair market value of the goods or
F-67
<PAGE> 219
WMZQ INC. AND VIACOM BROADCASTING EAST INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
services to be received. Barter revenue is recorded and the liability relieved
when commercials are broadcast and barter expense is recorded and the asset
relieved when goods or services are received or used.
(d) Revenue Recognition
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
(e) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable earnings. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount more likely than not to be realized. Income
tax expense is the total of tax payable for the period and the change during the
period in deferred tax assets and liabilities.
(f) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. The adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
(g) Fair Value
The carrying amount of accounts receivable and accounts payable
approximates fair value because of the short maturity of these instruments.
(h) Disclosure of Certain Significant Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
In the opinion of management, credit risk with respect to trade receivables
is limited due to the large number of diversified customers in the Company's
customer base. The Company performs ongoing credit evaluations of its customers
and believes that adequate allowances for any uncollectible trade receivables
are maintained. No one customer accounted for more than 10% of net revenues in
1994, 1995, or 1996.
(i) Unaudited Interim Financial Information
In the opinion of management, the unaudited interim combined financial
statements as of and for the six months ended June 30, 1996 and 1997, reflect
all adjustments, consisting of only normal and recurring items,
F-68
<PAGE> 220
WMZQ INC. AND VIACOM BROADCASTING EAST INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
which are necessary for a fair presentation of the results for the interim
periods presented. The results for the interim periods ended June 30, 1996 and
1997 are not necessarily indicative of results to be expected for any other
interim period or for the full year.
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1995 and
1996:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1995 1996
--------------- ------ ------
<S> <C> <C> <C>
Broadcast facilities................................... 8 - 20 years $2,268 $2,366
Land................................................... 440 440
Building............................................... 30 - 40 years 146 146
Office equipment and other............................. 5 - 8 years 1,866 1,808
Construction in progress............................... -- 5
------ ------
4,720 4,765
------ ------
Accumulated depreciation............................... 2,313 2,449
------ ------
$2,407 $2,316
====== ======
</TABLE>
(4) INTANGIBLE ASSETS
Intangible assets at December 31, 1995 and 1996 consist of broadcast
licenses which are being amortized over forty years and are presented net of
accumulated amortization of $10,714 and $12,223, respectively.
(5) INCOME TAXES
The Company's results of operations are included in the U.S. federal and
certain combined and separate state income tax returns of Viacom International
Inc.
The tax provisions and deferred tax liabilities presented have been
determined as if the Company were a stand-alone business filing separate tax
returns. Current tax liabilities are recorded through the equity account with
Viacom.
Income tax expense consists of:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Current:
Federal................................................... $1,704 $2,434 $2,943
State and local........................................... 580 701 798
Deferred federal and state.................................. 323 302 188
------ ------ ------
$2,607 $3,437 $3,929
====== ====== ======
</TABLE>
F-69
<PAGE> 221
WMZQ INC. AND VIACOM BROADCASTING EAST INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the U.S. Federal statutory tax rate to the Company's
effective tax rate on earnings before income taxes is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. tax rate................. 35.0% 35.0% 35.0%
Amortization of intangibles............. 7.4 5.2 4.5
State and local taxes, net of federal
tax benefit........................... 7.9 6.7 6.2
Other, net.............................. 0.0 0.0 0.0
---- ---- ----
Effective tax rate.................... 50.3% 46.9% 45.7%
==== ==== ====
</TABLE>
Deferred tax assets and liabilities are computed by applying the U.S.
federal income tax rate in effect to the gross amounts of temporary differences
and other tax attributes. These temporary differences are primarily the result
of fixed asset basis differences and bad debt expense. Deferred tax assets and
liabilities relating to state income taxes are not material.
(6) DEBT AND INTEREST COST
Viacom has not allocated any portion of its debt or related interest cost
to the Company, and no portion of Viacom's debt is specifically related to the
operations of the Company. Accordingly, the Company's financial statements
include no charges for interest.
(7) RELATED PARTY TRANSACTIONS
Intercompany balances between the Company and Viacom resulting from normal
trade activity are reflected in Equity in the accompanying combined financial
statements (see note 8).
Viacom provides services for the Company in management, accounting and
financial reporting, human resources, information systems, legal, taxes and
other corporate services. The allocation of these expenses, which is generally
based on revenue dollars, is reflected in the accompanying financial statements
as corporate general and administrative expense. Management believes that the
method of allocation of corporate overhead is reasonable.
Viacom has a noncontributory pension plan covering substantially all of its
employees, including the employees of the Company. Costs related to these plans
are allocated to the Company based on payroll dollars and are included in
station operating expenses. The Company recognized expense related to these
costs in the amounts of $77, $74 and $242 for 1994, 1995 and 1996, respectively.
The assets and the related benefit obligation of the plans will not be
transferred to the Company upon consummation of the Proposed Transaction,
therefore, such assets and obligations are not included in the notes to the
Company's financial statements.
Viacom utilizes a centralized cash management system. As a result, the
Company carries minimal cash. Disbursements are funded centrally upon demand and
cash receipts are transferred to the Parent daily.
The Company, from time to time, enters into transactions with companies
owned by or affiliated with Viacom. Generally, services received from such
related parties are charged to the Company at amounts which would be incurred in
transactions between unrelated entities.
F-70
<PAGE> 222
WMZQ INC. AND VIACOM BROADCASTING EAST INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(8) EQUITY
Equity represents Viacom's ownership interest in the recorded net assets of
the Company. All cash transactions and intercompany transactions flow through
the equity account. A summary of the activity is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Balance at beginning of period............................ $55,321 $53,760 $53,721
Net earnings.............................................. 2,571 3,889 4,660
Net intercompany activity................................. (4,132) (3,928) (5,825)
------- ------- -------
Balance at end of period.................................. $53,760 $53,721 $52,556
======= ======= =======
</TABLE>
(9) COMMITMENTS AND CONTINGENCIES
The Company has noncancelable operating leases, primarily for office space.
These leases generally contain renewal options for periods ranging from 1 to 10
years and require the Company to pay all executory costs such as maintenance and
insurance. Rental expense for operating leases (excluding those with lease terms
of one month or less that were not renewed) was approximately $332, $356 and
$373 during 1994, 1995 and 1996, respectively.
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31, 1996
are as follows:
<TABLE>
<S> <C>
Year ending December 31:
1997........................................................ $ 506
1998........................................................ 523
1999........................................................ 310
2000........................................................ 222
2001........................................................ 200
Thereafter.................................................. 814
------
$2,575
======
</TABLE>
(10) SUBSEQUENT EVENT
On April 14, 1997, Evergreen Media Corporation and Chancellor Broadcasting
Company entered into an agreement with ABC Radio ("ABC"), a division of The Walt
Disney Company, whereby ABC will purchase from Evergreen and Chancellor two
radio stations, WDRQ-FM and WJZW-FM for a total of $105 million.
F-71
<PAGE> 223
INDEPENDENT AUDITORS' REPORT
The Board of Directors
The Brown Organization:
We have audited the accompanying balance sheets of KKSF-FM/KDFC-FM and AM
(A Division of The Brown Organization) as of December 31, 1996 and 1995, and the
related statements of earnings and division equity and cash flows for the years
then ended. These financial statements are the responsibility of the Division's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of KKSF-FM/KDFC-FM and AM (A
Division of The Brown Organization) as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included in
Schedule 1 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly presented in all material respects in
relation to the basic financial statements taken as a whole.
KPMG Peat Marwick LLP
Dallas, Texas
April 25, 1997
F-72
<PAGE> 224
KKSF-FM/KDFC-FM AND AM
(A DIVISION OF THE BROWN ORGANIZATION)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Current assets:
Cash...................................................... $ 53 $ 131
Accounts receivable, less allowance for doubtful accounts
of $62 in 1996 and $92 in 1995......................... 1,345 3,110
Due from Evergreen Media Corporation (note 5)............. 1,323 --
Prepaid expenses and other................................ 50 77
------- -------
Total current assets.............................. 2,771 3,318
------- -------
Property and equipment, net (note 2)........................ 1,992 2,434
Intangible assets, net (note 3)............................. 12,622 14,448
Other assets................................................ 115 106
------- -------
Total assets...................................... $17,500 $20,306
======= =======
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accounts payable.......................................... $ 69 $ 57
Accrued expenses.......................................... 625 963
------- -------
Total current liabilities......................... 694 1,020
Intercompany payable to Parent (note 4)..................... 5,000 7,700
Deferred compensation (note 5).............................. 365 198
Division equity:
Advances from Parent...................................... 10,647 11,746
Accumulated equity (deficit).............................. 794 (358)
------- -------
Total division equity............................. 11,441 11,388
Commitments and contingencies (note 5)
------- -------
Total liabilities and division equity............. $17,500 $20,306
======= =======
</TABLE>
See accompanying notes to financial statements.
F-73
<PAGE> 225
KKSF-FM/KDFC-FM AND AM
(A DIVISION OF THE BROWN ORGANIZATION)
STATEMENTS OF EARNINGS AND DIVISION EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Revenues:
Gross revenues (note 5)................................... $14,896 $13,739
Less agency commissions................................... 1,746 1,773
------- -------
Net revenues...................................... 13,150 11,966
------- -------
Operating expenses:
Station operating expenses, excluding depreciation and
amortization........................................... 6,780 7,088
Participation agreement expense (note 5).................. 2,486 1,405
Depreciation and amortization............................. 2,351 2,283
------- -------
Total operating expenses.......................... 11,617 10,776
------- -------
Operating income.................................. 1,533 1,190
Non-operating income (expenses):
Intercompany interest expense (note 4).................... (429) (796)
Other, net................................................ 48 54
------- -------
Non-operating expense, net........................ (381) (742)
------- -------
Net earnings...................................... $ 1,152 $ 448
======= =======
Pro forma information (unaudited) (note 1(h)):
Income tax expense........................................ (461) (179)
------- -------
Pro forma net earnings............................ $ 691 $ 269
======= =======
Division equity, beginning of year.......................... 11,388 8,025
Net earnings................................................ 1,152 448
Net investment by (distribution to) parent.................. (1,099) 2,915
------- -------
Division equity, end of year................................ $11,441 $11,388
======= =======
</TABLE>
See accompanying notes to financial statements.
F-74
<PAGE> 226
KKSF-FM/KDFC-FM AND AM
(A DIVISION OF THE BROWN ORGANIZATION)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net earnings.............................................. $1,152 $ 448
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 2,351 2,283
Gain on sale of assets................................. (4) (38)
Deferred compensation.................................. 167 60
Accrued intercompany interest.......................... 429 796
Participation agreement expense........................ 2,486 1,405
Changes in operating assets and liabilities:
Accounts receivable, net............................. 442 (684)
Prepaid expenses and other........................... 18 16
Accounts payable and accrued expenses................ (326) 51
------ ------
Net cash provided by operating activities......... 6,715 4,337
------ ------
Cash flows used in investing activities:
Acquisition of property and equipment..................... (83) (1,239)
Proceeds from sale of equipment........................... 4 5
------ ------
Net cash used in investing activities............. (79) (1,234)
------ ------
Cash flows used in financing activities -- distributions to
parent.................................................... (6,714) (3,300)
------ ------
Decrease in cash............................................ (78) (197)
Cash at beginning of year................................... 131 328
------ ------
Cash at end of year......................................... $ 53 $ 131
====== ======
Noncash financing activities -- intercompany note payable
principal and interest payments made by the Company....... $3,129 $5,543
====== ======
</TABLE>
See accompanying notes to financial statements.
F-75
<PAGE> 227
KKSF-FM/KDFC-FM AND AM
(A DIVISION OF THE BROWN ORGANIZATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
KKSF-FM/KDFC-FM and AM (the "Division") is a division of The Brown
Organization (the "Company"). The Division is the operator of radio stations
KKSF-FM and KDFC-FM and AM. The accompanying financial statements reflect the
assets and liabilities related to the Division's operations and do not include
corporate management and administrative expenses.
(b) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets. Repairs and maintenance are charged to expense when
incurred.
(c) Goodwill and Intangible Assets
The excess of the purchase price of the acquired radio stations over the
fair value of the net tangible assets acquired is reflected in the accompanying
financial statements as intangible assets. Intangible assets are amortized over
the estimated useful lives ranging from 3 to 40 years.
The Division continually evaluates the propriety of the carrying amount of
goodwill as well as the amortization period to determine whether current events
or circumstances warrant adjustments to the carrying value and/or revised
estimates of useful lives. This evaluation of goodwill consists of the
projection of undiscounted operating income before depreciation, amortization,
nonrecurring charges and interest over the remaining amortization periods of the
related intangible assets. The projections are based on a historical trend line
of actual results since the acquisitions of the respective stations adjusted for
expected changes in operating results. To the extent such projections indicate
that undiscounted operating income is not expected to be adequate to recover the
carrying amounts of the related goodwill, such carrying amounts are written down
by charges to expense. At this time, the Division believes that no significant
impairment of goodwill has occurred and that no reduction of the estimated
useful lives is warranted.
(d) Barter Transactions
The Division trades commercial air time for goods and services used
principally for promotional sales and other business activities. Barter revenue
is recognized when the commercials are broadcast. Barter expense is recognized
when goods or services are received or used. Barter revenues and expenses were
approximately $123,000 and $166,000 during the years ended December 31, 1996 and
1995, respectively.
(e) Revenue Recognition
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
(f) Impairment of Long-Lived Tangible and Intangible Assets
The Division adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
F-76
<PAGE> 228
KKSF-FM/KDFC-FM AND AM
(A DIVISION OF THE BROWN ORGANIZATION)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceed the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell. The adoption of this Statement did not have a material impact on
the Division's financial position, results of operations or liquidity.
(g) Disclosure of Certain Significant Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that reflect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Because of the use of estimates inherent
in the financial reporting process, actual results could differ from those
estimates.
In the opinion of management, credit risk with respect to trade receivables
is limited due to the large number of diversified customers and the geographic
diversification of the Division's national revenue customer base. The Division
performs ongoing credit evaluations of its customers and believes that adequate
allowances for any uncollectible trade receivables are maintained. At December
31, 1996, no receivable from any customer exceeded 5% of Division equity and no
customer accounted for more than 10% of net revenues in 1996.
(h) Income Taxes
As the Company is an "S" Corporation, income taxes are the responsibility
of its individual stockholders. Accordingly, no income tax expense or deferred
income tax assets or liabilities are recognized in the accompanying financial
statements of the Division.
The pro forma information assumes the Division is subject to state and
federal income taxes computed on a separate return basis.
(i) Financial Instruments
The carrying amount of cash, accounts receivable, accounts payable and
accrued liabilities approximates fair value because of the short maturity of
these instruments. The floating interest rate on the Company's longterm bank
debt reflects current market rates and, accordingly, its carrying value
approximates fair value.
(2) PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following at December 31, 1996
and 1995 (thousands of dollars):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C> <C>
Leasehold improvements................................. 10 years $ 718 $ 709
Broadcast equipment.................................... 5-10 years 2,315 2,299
Furniture, fixtures and office equipment............... 3-10 years 797 746
Record library......................................... 7 years 148 148
Automobiles............................................ 3 years 42 42
------ ------
4,020 3,944
Less accumulated depreciation and amortization......... 2,028 1,510
------ ------
$1,992 $2,434
====== ======
</TABLE>
F-77
<PAGE> 229
KKSF-FM/KDFC-FM AND AM
(A DIVISION OF THE BROWN ORGANIZATION)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(3) INTANGIBLE ASSETS
Intangible assets is comprised of the following at December 31, 1996 and
1995 (thousands of dollars):
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1996 1995
----------- ------- -------
<S> <C> <C> <C>
KKSF-FM Acquisition
FCC license......................................... 40 years $ 4,500 $ 4,500
Residual value...................................... 40 years 533 533
Lease costs......................................... 13 years 900 900
Format and music research........................... 9 years 6,320 6,320
------- -------
12,253 12,253
Less accumulated amortization............... 7,938 7,160
------- -------
4,315 5,093
------- -------
KDFC Acquisition
Covenant not to compete............................. 5 years 3,000 3,000
Goodwill and going concern value.................... 40 years 2,245 2,245
Customer list....................................... 5 years 1,226 1,226
FCC license......................................... 40 years 5,000 5,000
Contracts........................................... 3 years 72 72
------- -------
11,543 11,543
Less accumulated amortization............... 3,236 2,188
------- -------
8,307 9,355
------- -------
Net intangibles....................................... $12,622 $14,448
======= =======
</TABLE>
(4) RELATED PARTY TRANSACTIONS
The Division is provided management and administrative services by
personnel at the Company's headquarter's office located in Los Angeles,
California and by the president of the Company's radio station operations. The
cost of these services has not been charged to the Division's operations.
The Division maintains an intercompany note payable with the Company that
bears interest at a rate equivalent to the Company's rate on its bank borrowings
(7.3% and 7.6% at December 31, 1996 and 1995, respectively) (see note 5).
(5) COMMITMENTS AND CONTINGENCIES
On September 19, 1996, the Company, on behalf of the Division, entered into
an agreement to sell its radio broadcasting assets to Evergreen Media
Corporation ("Evergreen"). On November 1, 1996, the Company and Evergreen
commenced a time brokerage agreement ("the TBA") whereby substantially all of
the Company's broadcast time was sold to Evergreen. The monthly fees for
November and December 1996 amounted to $1,250,000. In addition, the TBA required
that Evergreen reimburse the Company for certain expenses that the Company
incurred during the term of the TBA. The Division incurred approximately
$422,000 in nonreimbursable station operating expenses during November and
December 1996. The TBA continued until the sale to Evergreen was consummated on
January 31, 1997. Proceeds of $115,000,000 were paid by Evergreen to the Company
which included the liquidation of the intercompany note payable (see note 4).
F-78
<PAGE> 230
KKSF-FM/KDFC-FM AND AM
(A DIVISION OF THE BROWN ORGANIZATION)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1996, the amounts due from the Evergreen Media Corporation
approximating $1,323,000 primarily relates to funds collected by Evergreen for
advertising revenue generated before the effective date of the brokerage
agreement.
The Company, on behalf of the Division, entered into a time brokerage
agreement whereby substantially all of the broadcast time of radio station
KDFC-FM was sold to another broadcaster ("the broadcaster") for a monthly fee of
$41,667. The agreement is for a period of three years commencing October 5,
1995. The broadcaster may extend the agreement an additional two years. The
agreement may be terminated under certain conditions.
The Company has entered into an agreement with a key Division employee
whereby said employee participates in the Division's appreciation of net assets
through participation percentages. The key employee's percentage of
participation is greater if he is employed by the Company at the time that the
station is sold than if his employment is terminated prior to sale for reasons
other than the employee's death or disability. The balance due to this employee
is payable only upon the earlier of the termination of employment or sale of the
radio station. The Company recognized approximately $2,486,000 and $1,405,000 in
compensation expense related to this agreement during 1996 and 1995,
respectively.
During 1989 the Company adopted a deferred compensation plan for the
benefit of the radio stations' general managers. Compensation expense of
$167,000 and $60,000 was recognized in the accompanying Division financial
statements in 1996 and 1995, respectively.
The Company, on behalf of the Division, was lessee under noncancelable
operating leases for studio space and transmitter sites. Rental expense
recognized in the Division financial statements was approximately $340,000 and
$298,000 during 1996 and 1995, respectively.
Future minimum lease payments under noncancelable operating leases as of
December 31, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
1997........................................................ $ 353
1998........................................................ 312
1999........................................................ 370
2000........................................................ 231
2001........................................................ 331
------
Total............................................. $1,597
======
</TABLE>
F-79
<PAGE> 231
SCHEDULE 1
KKSF-FM/KDFC-FM AND AM
(A DIVISION OF THE BROWN ORGANIZATION)
SUPPLEMENTARY SCHEDULE -- OPERATIONS INFORMATION
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
KKSF-FM/
KDFC-AM KDFC-FM TOTAL
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Gross revenues.............................................. $9,759 $5,137 $14,896
Less agency commissions................................... 1,103 643 1,746
------ ------ -------
Net revenues...................................... $8,656 $4,494 $13,150
====== ====== =======
Operating expenses:
Station operating expenses excluding depreciation......... $4,480 $2,300 $ 6,780
====== ====== =======
</TABLE>
- ---------------
Note: Certain expenses included in station operating expenses excluding
depreciation -- other corporate general and administrative were allocated
between KKSF-FM/KDFC-AM and KDFC-FM based on various factors. General and
administrative expenses were allocated 66% and 34% to KKSF-FM/KDFC-AM and
KDFC-FM, respectively. Sales commission and salaries were allocated 73%
and 23% and technical and engineering expenses were allocated 60% and 40%
to KKSF-FM/KDFC-AM and KDFC-FM, respectively, based on estimated time
spent per day by Division personnel.
See accompanying independent auditors' report.
F-80
<PAGE> 232
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Beasley FM Acquisition Corp.:
We have audited the accompanying balance sheet of WDAS-AM/FM (station owned
and operated by Beasley FM Acquisition Corp.) as of December 31, 1996, and the
related statements of earnings and station equity and cash flows for the year
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of WDAS-AM/FM as of December
31, 1996, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
St. Petersburg, Florida
March 28, 1997
F-81
<PAGE> 233
WDAS-AM/FM
(STATION OWNED AND OPERATED BY
BEASLEY FM ACQUISITION CORP.)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash...................................................... $ 2,111 $ 2,805
Accounts receivable, less allowance for doubtful accounts
of $166 and $138 in 1996 and 1997...................... 3,693 2,938
Trade sales receivable.................................... 359 29
Prepaid expense and other................................. 150 130
------- -------
Total current assets.............................. 6,313 5,902
Property and equipment, net (note 2)........................ 3,297 3,523
Notes receivable from related parties (note 5).............. 2,766 3,625
Intangibles, less accumulated amortization.................. 17,738 17,122
------- -------
$30,114 $30,172
======= =======
LIABILITIES AND STATION EQUITY
Current liabilities:
Current installments of long-term debt (note 3)........... $ 49 $ 49
Notes payable to related parties (note 5)................. 352 494
Accounts payable.......................................... 269 191
Accrued expenses.......................................... 515 313
Trade sales payable....................................... 39 12
------- -------
Total current liabilities......................... 1,224 1,059
Long-term debt, less current installments (note 3).......... 627 627
------- -------
Total liabilities................................. 1,851 1,686
Station equity.............................................. 28,263 28,486
Commitments and related party transactions (notes 4 and
5)........................................................
------- -------
$30,114 $30,172
======= =======
</TABLE>
See accompanying notes to financial statements.
F-82
<PAGE> 234
WDAS-AM/FM
(STATION OWNED AND OPERATED BY
BEASLEY FM ACQUISITION CORP.)
STATEMENTS OF EARNINGS AND STATION EQUITY
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, ------------------
1996 1996 1997
------------ ------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Net revenues............................................... $14,667 $ 2,623 $ 3,000
------- ------- -------
Costs and expenses:
Program and production................................... 2,028 445 620
Technical................................................ 212 59 50
Sales and advertising.................................... 3,514 660 802
General and administrative............................... 2,005 497 459
------- ------- -------
7,759 1,661 1,931
------- ------- -------
Operating income, excluding items shown
separately
below.......................................... 6,908 962 1,069
Management fees (note 5)................................... (620) (156) (128)
Depreciation and amortization.............................. (2,763) (651) (657)
Interest income (expense), net............................. (40) (13) 7
Other...................................................... -- -- (78)
------- ------- -------
Net income....................................... 3,485 142 213
Station equity, beginning of period........................ 25,367 25,367 28,273
Forgiveness of related party note receivable (note 5)...... (589) -- --
------- ------- -------
Station equity, end of period.............................. $28,263 $25,509 $28,486
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-83
<PAGE> 235
WDAS-AM/FM
(STATION OWNED AND OPERATED BY BEASLEY FM ACQUISITION CORP.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, -------------------------------
1996 1996 1997
------------ --------------- -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................... $ 3,485 $ 142 $ 213
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 2,763 651 657
Allowance for doubtful accounts................... 8 (56) (28)
Decrease (increase) in receivables................ (398) 792 1,113
(Increase) decrease) in prepaid expense and other
assets.......................................... (96) (104) 20
Decrease in payables and accrued expenses......... (507) (331) (297)
------- ----- ------
Net cash provided by operating activities.... 5,255 1,094 1,678
------- ----- ------
Cash flows from investing activities -- capital
expenditures for property and equipment.............. (775) (572) (267)
------- ----- ------
Cash flows from financing activities:
Proceeds from issuance of indebtedness............... 676 - -
Principal payments on indebtedness................... (820) - -
Payment of loan fees................................. (6) - -
Net change in borrowings to/from affiliates.......... (2,647) (305) (717)
------- ----- ------
Net cash used in financing activities........ (2,797) (305) (717)
------- ----- ------
Net increase in cash................................... 1,683 217 694
Cash at beginning of period............................ 428 428 2,111
------- ----- ------
Cash at end of period.................................. $ 2,111 $ 645 $2,805
======= ===== ======
Noncash transactions:
Forgiveness of related note receivable
Release of WDAS-AM/FM's obligations under a note
payable which related to obtaining an easement.
WDAS-AM/FM is now directly responsible for the costs
necessary to obtain this easement and has included
these costs in accrued expenses in the accompanying
balance sheet........................................ $ 350
=======
</TABLE>
See accompanying notes to financial statements.
F-84
<PAGE> 236
WDAS-AM/FM
(STATION OWNED AND OPERATED BY BEASLEY FM ACQUISITION CORP.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(IN THOUSANDS)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization
WDAS-AM/FM (the Station) is a radio station operating in Philadelphia,
Pennsylvania. The assets, liabilities and operations of WDAS-AM/FM are part of
Beasley FM Acquisition Corp. (BFMA). These financial statements reflect only the
assets, liabilities and operations relating to radio station WDAS-AM/FM and are
not representative of the financial statements of BFMA.
(b) Revenue Recognition
Revenue is recognized as advertising air time is broadcast and is net of
advertising agency commissions.
(c) Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated using
the straight-line method over the estimated lives of the assets, which range
from 5 to 31 years.
(d) Intangibles
Intangibles consist primarily of FCC licenses, which are amortized
straight-line over ten years. Other intangibles are amortized straight-line over
5 to 10 years.
(e) Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of
BFMA adopted the provisions of Statement of Financial Accounting Standards
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of, on January 1, 1996. This Statement requires that
long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceed the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. Adoption of this Statement did not have
a material impact on the Station's financial position, results of operations, or
liquidity.
(f) Barter Transactions
Trade sales are recorded at the fair value of the products or services
received and totaled approximately $676 for the year ended December 31, 1996.
Products and services received and expensed totaled approximately $449 for the
year ended December 31, 1996.
(g) Income Taxes
BFMA has elected to be treated as an "S" Corporation under provisions of
the Internal Revenue Code. Under this corporate status, the stockholders of BFMA
are individually responsible for reporting their share of taxable income or
loss. Accordingly, no provision for federal or state income taxes has been
reflected in the accompanying financial statements.
F-85
<PAGE> 237
WDAS-AM/FM
(STATION OWNED AND OPERATED BY BEASLEY FM ACQUISITION CORP.)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(h) Defined Contribution Plan
BFMA has a defined contribution plan which conforms with Section 401(k) of
the Internal Revenue Code. Under this plan, employees may contribute a minimum
of 1% of their compensation (no maximum) to the Plan. The Internal Revenue Code,
however, limited contributions to $9,500 in 1996. There are no employer matching
contributions.
(i) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from these estimates. To the
extent management's estimates prove to be incorrect, financial results for
future periods may be adversely affected.
(j) Interim Financial Statements
In the opinion of management, the accompanying unaudited interim financial
statements contain all adjustments, consisting of normal recurring accruals,
necessary to present fairly the financial position, results of operations, and
cash flows of the Station for the three-month periods ended March 31, 1997 and
1996 and as of June 30, 1997.
(2) PROPERTY AND EQUIPMENT
Property and equipment, at cost, is comprised of the following at December
31, 1996:
<TABLE>
<S> <C>
Land, buildings, and improvements........................... $2,204
Broadcast equipment......................................... 1,200
Office equipment and other.................................. 477
Transportation equipment.................................... 79
------
3,960
Less accumulated depreciation..................... (663)
------
$3,297
======
</TABLE>
(3) LONG-TERM DEBT
BFMA and six affiliates (the Group) refinanced their $100,000 revolving
credit loan on June 24, 1996. Under terms of the new agreement, the Group was
provided a revolving credit loan with an initial maximum commitment of $115,000.
The credit agreement was subsequently amended and the maximum commitment was
increased to $120,000. The Group's borrowings under the revolving credit loan
totaled $115,784 at December 31, 1996, of which $676 was allocated to
WDAS-AM/FM. The loan bears interest at either the base rate or LIBOR plus a
margin which is determined by the Group's debt to cash flow ratio. The base rate
is equal to the higher of the prime rate or the overnight federal funds
effective rate plus 0.5%. At December 31, 1996, the revolving credit loan
carried interest at an average rate of 8.61%. Interest is generally payable
monthly. The Group has entered into interest rate hedge agreements as discussed
in note 6.
The amount available under the Group's revolving credit loan will be
reduced quarterly beginning September 30, 1997 through its maturity on December
31, 2003. The loan agreement includes restrictive covenants and requires the
Group to maintain certain financial ratios. The loans are secured by the common
stock and substantially all assets of the Group.
F-86
<PAGE> 238
WDAS-AM/FM
(STATION OWNED AND OPERATED BY BEASLEY FM ACQUISITION CORP.)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Annual maturities on the Group's revolving credit loan for the next five
years are as follows:
<TABLE>
<CAPTION>
DEBT
MATURITIES
----------
<S> <C>
1997........................................................ $ 8,434
1998........................................................ 12,650
1999........................................................ 13,800
2000........................................................ 14,950
2001........................................................ 15,525
Thereafter.................................................. 50,425
--------
Total............................................. $115,784
========
</TABLE>
S-AM/FM paid interest of approximately $79 in 1996.
(4) COMMITMENTS
On September 19, 1996, BFMA entered into an asset purchase agreement (APA)
with Evergreen Media Corporation of Los Angeles (Evergreen) for the sale of
WDAS-AM/FM. Under the terms of the APA, BFMA will convey substantially all of
the assets used in the operation of the station to Evergreen in exchange for a
purchase price of $103,000, subject to adjustment, to be paid in cash. BFMA
expects to close on this sale before July 1, 1997.
WDAS-AM/FM leases facilities and a tower under 10-year operating leases
which expire in July 2004 and January 2007, respectively. WDAS-AM/FM also leases
certain other office equipment on a month-to-month basis. Lease expense was
approximately $215 in 1996. Future minimum lease payments by year are summarized
as follows:
<TABLE>
<S> <C>
1997........................................................ $ 236
1998........................................................ 247
1999........................................................ 258
2000........................................................ 270
2001........................................................ 283
Thereafter.................................................. 1,275
------
$2,569
======
</TABLE>
In the normal course of business, the Station is party to various legal
matters. The ultimate disposition of these matters will not, in management's
judgment, have a material adverse effect on the Station's financial position.
(5) RELATED PARTY TRANSACTIONS
The Company has a management agreement with Beasley Management Company, an
affiliate of the Company's principal stockholder. Management fee expense under
the agreement was $620 in 1996.
The notes receivable from/payable to related parties are non-interest
bearing and are due on demand. A note receivable due from a related party of
$589 was forgiven in 1996.
F-87
<PAGE> 239
WDAS-AM/FM
(STATION OWNED AND OPERATED BY BEASLEY FM ACQUISITION CORP.)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(6) FINANCIAL INSTRUMENTS
WDAS-AM/FM's significant financial instruments and the methods used to
estimate their fair value are as follows:
Revolving credit loan -- The fair value approximates carrying value
due to the loan being refinanced on June 24, 1996 and the interest rate
being based on current market rates.
Notes receivable from/payable to related parties -- It is not
practicable to estimate the fair value of these notes payable due to their
related party nature.
Interest rate swap, cap and collar agreements -- The Group entered
into an interest rate swap agreement with a notional amount of $15,000, an
interest rate cap agreement with a notional amount of $3,100, and an
interest rate collar agreement with a notional amount of $15,000 to act as
a hedge by reducing the potential impact of increases in interest rates on
the revolving credit loan. These agreements expire on various dates in
1999. The Group is exposed to credit loss in the event of nonperformance by
the other parties to the agreements. The Group, however, does not
anticipate nonperformance by the counterparties. The fair value of the
interest rate swap agreement is estimated using the difference between the
present value of discounted cash flows using the base rate stated in the
swap agreement (5.37%) and the present value of discounted cash flows using
the LIBOR rate at December 31, 1996. The fair values of the interest rate
cap agreement, which establishes a maximum base rate of 7.50%, and the
interest rate collar agreement, which establishes a minimum base rate of
4.93% and a maximum base rate of 6%, are estimated based on the amounts the
Group would expect to receive or pay to terminate the agreement. The
estimated fair value of each of these agreements is negligible.
F-88
<PAGE> 240
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Century Chicago Broadcasting, L.P.
In our opinion, the accompanying balance sheet and the related statements
of operations and partners' deficit and of cash flows present fairly, in all
material respects, the financial position of Century Chicago Broadcasting, L.P.
at December 31, 1996, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Chicago, Illinois
May 2, 1997
F-89
<PAGE> 241
CENTURY CHICAGO BROADCASTING, L.P.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, 1997 1996
-------------- ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 1,707,114 $ 1,832,410
Accounts receivable, net of allowance for doubtful
accounts of $286,000 and $283,000, respectively........ 2,030,226 2,504,875
Prepaid expenses and other assets......................... 227,876 217,353
------------ ------------
Total current assets.............................. 3,965,216 4,554,638
------------ ------------
Property and equipment:
Technical equipment....................................... 1,188,953 1,188,953
Office furniture and fixtures............................. 370,442 370,075
Leasehold improvements.................................... 212,814 212,814
------------ ------------
1,772,209 1,771,842
Less -- Accumulated depreciation.......................... (1,145,799) (1,101,549)
------------ ------------
Total property and equipment...................... 626,410 670,293
------------ ------------
Intangible assets, net (Note 4)............................. 1,934,838 1,946,778
------------ ------------
Deferred financing costs, net............................... 424,860 465,360
------------ ------------
Total assets...................................... $ 6,951,324 $ 7,637,069
============ ============
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Promissory note (Note 6).................................. $ 6,210,342 $ 6,036,785
Accounts payable and accrued expenses (Note 5)............ 898,072 968,424
Due to Century Broadcasting Corporation (Note 3).......... 10,298,226 11,203,224
Deferred option payment (Note 2).......................... 5,000,000 5,000,000
------------ ------------
Total current liabilities......................... 22,406,640 23,208,433
------------ ------------
Commitments and contingencies (Note 7)
------------ ------------
Partners' deficit, per accompanying statement............... (15,455,316) (15,571,364)
------------ ------------
Total liabilities and partners' deficit........... $ 6,951,324 $ 7,637,069
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-90
<PAGE> 242
CENTURY CHICAGO BROADCASTING, L.P.
STATEMENTS OF OPERATIONS AND PARTNERS' DEFICIT
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
---------------------------- DECEMBER 31,
1997 1996 1996
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Revenues:
Gross revenues................................. $ 1,973,026 $ 1,454,573 $ 8,638,346
Less -- Agency commissions..................... (262,854) (198,089) (1,163,350)
------------ ------------ ------------
Net revenues........................... 1,710,172 1,256,484 7,474,996
------------ ------------ ------------
Operating expenses:
Programming.................................... 331,673 333,289 1,386,231
Selling........................................ 572,530 549,536 2,525,100
Promotion -- Television advertising............ -- 344,000 770,473
Promotion -- Other............................. 23,561 28,802 324,305
Technical...................................... 54,241 8,802 58,135
General and administrative..................... 303,947 278,093 1,148,298
Corporate overhead allocation.................. 45,000 45,000 181,000
Depreciation and amortization.................. 56,190 56,190 222,378
------------ ------------ ------------
Total operating expenses............... 1,387,142 1,643,712 6,615,920
------------ ------------ ------------
Income (loss) from operations.................... 323,030 (387,228) 859,076
Interest income.................................. 14,848 -- 63,572
Interest expense................................. (221,830) (316,010) (1,065,825)
------------ ------------ ------------
Net income (loss)................................ 116,048 (703,238) (143,177)
------------ ------------ ------------
Partners' deficit:
Beginning of period............................ (15,571,364) (15,428,187) (15,428,187)
------------ ------------ ------------
End of period.................................. $(15,455,316) $(16,131,425) $(15,571,364)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-91
<PAGE> 243
CENTURY CHICAGO BROADCASTING, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
----------------------- DECEMBER 31,
1997 1996 1996
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)....................................... $ 116,048 $ (703,238) $ (143,177)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization expense................ 56,190 56,190 222,378
Corporate overhead allocation........................ 45,000 45,000 181,000
Amortization of deferred financing costs............. 40,500 39,000 161,581
Changes in assets and liabilities:
Accounts receivable, prepaid expenses and other
current assets.................................. 464,126 590,997 (400,707)
Accounts payable and accrued expenses.............. (70,352) (688,764) (1,231,606)
---------- ---------- -----------
Net cash provided by (used in) operating
activities.................................... 651,512 (660,815) (1,210,531)
---------- ---------- -----------
Cash flows from investing activities:
Additions to property and equipment..................... (367) (17,684) (36,758)
Deferred option payment................................. -- -- 5,000,000
---------- ---------- -----------
Net cash provided by (used in) investing
activities.................................... (367) (17,684) 4,963,242
---------- ---------- -----------
Cash flows from financing activities:
Repayment of promissory note............................ -- -- (4,500,000)
Deferred financing costs................................ -- (76,707) (87,421)
Increase (decrease) in due to Century Broadcasting
Corporation.......................................... (949,998) (385,001) 987,635
Proceeds from issuance of promissory note............... 173,557 1,109,219 1,646,004
---------- ---------- -----------
Net cash provided by (used in) financing
activities.................................... (776,441) 647,511 (1,953,782)
---------- ---------- -----------
Net change in cash and cash equivalents................... (125,296) (30,988) 1,798,929
Cash and cash equivalents:
Beginning of period..................................... 1,832,410 33,481 33,481
---------- ---------- -----------
End of period........................................... $1,707,114 $ 2,493 $ 1,832,410
---------- ---------- -----------
Cash paid for interest.................................... -- -- $ 100,000
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-92
<PAGE> 244
CENTURY CHICAGO BROADCASTING, L.P.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION:
Century Chicago Broadcasting, L.P. (CCBLP) is a limited partnership and the
licensee of Chicago radio station WPNT-FM (the Station). The general partner of
CCBLP is Century Broadcasting Corporation (Century) and the two limited partners
of CCBLP are directors and controlling stockholders of Century.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Interim financial data (unaudited)
The interim financial data as of March 31, 1997 and for each of the three
months ended March 31, 1997 and 1996 is unaudited. The accompanying unaudited
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with Rule 10-01 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 necessary
for a fair presentation of results of the interim periods have been made and
such adjustments were of a normal and recurring nature. The results of
operations and cash flows for the three months ended March 31, 1997 are not
necessarily indicative of the results that can be expected for the entire fiscal
year ending December 31, 1997.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and cash equivalents
CCBLP considers all highly liquid investments with an original maturity of
90 days or less to be cash equivalents.
Revenue recognition
Revenues for radio time sales, which are generated primarily from clients
in the greater Chicago metropolitan area, are recognized when commercials are
broadcast. Accounts receivable are unsecured.
Property and equipment
Property and equipment are stated at cost. Maintenance and repairs are
charged against operations as incurred. Improvements and renewals are
capitalized. Depreciation is computed on a straight-line basis over the
estimated useful lives of the assets, generally ten years.
Intangible assets
Intangible assets represent goodwill and a broadcasting license. Intangible
assets related to acquisitions since 1971 are being amortized on a straight-line
basis over 40 years. Intangible assets of $347,137 related to the pre-1971
license acquisition are not being amortized as CCBLP believes there has been no
diminution of value. CCBLP periodically evaluates the carrying value of
intangible assets in relation to the future undiscounted cash flows of the
Station.
F-93
<PAGE> 245
CENTURY CHICAGO BROADCASTING, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Impairment of long-lived assets
Effective January 1, 1996, CCBLP adopted the provisions of Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" (SFAS No. 121).
This Statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. SFAS No. 121 requires an impairment loss to be
recognized if the sum of expected future cash flows (undiscounted and without
interest charges) is less than the carrying amount of the asset. Otherwise, an
impairment loss is not recognized. This Statement requires that long-lived
assets and certain identifiable intangibles to be disposed of be reported at the
lower of carrying amount or fair value less cost to sell. The adoption of SFAS
No. 121 did not have any impact on CCBLP's financial statements.
Deferred option payment
On June 27, 1996, CCBLP granted Evergreen Media Corporation of Los Angeles
(Evergreen) an option to purchase the Station. Under the terms of the option
agreement, Evergreen paid $5,000,000 to CCBLP in exchange for CCBLP's agreement
to sell the Station to Evergreen under the terms of a July 1, 1996 letter of
intent. The option price, which is non-refundable, has been recorded as a
deferred credit in the December 31, 1996 and March 31, 1997 balance sheets. See
Note 8.
Deferred financing costs
Deferred financing costs are amortized over the term of the related
indebtedness by the interest method. Such amortization totaled $161,581 in 1996
and is included in interest expense in the accompanying statement of operations.
The original cost of deferred financing costs being amortized was $753,658 at
December 31, 1996.
Income taxes
No provision for income taxes has been provided in the accompanying
financial statements because the tax effects of CCBLP's operations accrue
directly to its partners.
Fair value of financial instruments
CCBLP's financial instruments include cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses and a promissory note.
Management believes that the fair values of these financial instruments
approximate their respective carrying values.
NOTE 3 -- RELATED PARTY TRANSACTIONS:
Cash provided by or required for CCBLP's operations is transferred between
CCBLP and Century on a periodic basis. The amount recorded as Due to Century
Broadcasting Corporation is non-interest bearing and is not subject to stated
repayment terms. Accordingly, the financial statements do not reflect any
interest costs on the Due to Century Broadcasting Corporation balance. The
average Due to Century Broadcasting balance was $11,052,000 during the year
ended December 31, 1996.
Century provides certain managerial, treasury, accounting, tax and legal
services to CCBLP. An allocation of the estimated cost of these services has
been reflected in the accompanying statements of operations based on the
estimated time spent by Century personnel providing such services. In the
opinion of management, the costs allocated to CCBLP for services provided by
Century are reasonable.
F-94
<PAGE> 246
CENTURY CHICAGO BROADCASTING, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- INTANGIBLE ASSETS:
Intangible assets as of December 31 consist of the following:
<TABLE>
<CAPTION>
1996
----------
<S> <C>
Broadcasting license........................................ $2,035,081
Goodwill.................................................... 222,137
----------
2,257,218
Less -- Accumulated amortization............................ (310,440)
----------
$1,946,778
==========
</TABLE>
Amortization expense related to these intangibles was $47,760 for the year
ended December 31, 1996.
NOTE 5 -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses at December 31 consist of the
following:
<TABLE>
<CAPTION>
1996
--------
<S> <C>
Accounts payable............................................ $ 31,098
Accrued interest and loan fees.............................. 473,558
Accrued employee compensation............................... 188,520
Other accrued expenses...................................... 275,248
--------
$968,424
========
</TABLE>
NOTE 6 -- PROMISSORY NOTE:
On March 15, 1991, CCBLP entered into a Loan Agreement with a financial
institution. This Loan Agreement was amended and supplemented at various times
since its inception.
As of January 31, 1996, an amendment was executed to provide CCBLP the
ability to borrow an additional $1,000,000 ($845,000 for working capital
purposes and $155,000 for the payment of interest). Additionally, the amendment
provided that upon the consummation of Century's sale of its Denver radio
stations CCBLP would prepay $4,500,000 of the promissory note. The sale and
prepayment were completed in June 1996. Following the prepayment, the lender
made an additional $1,000,000 available to CCBLP to fund future debt service and
interest payments to the lender. During 1996, interest payments of $901,100 were
made by CCBLP of which $100,000 was paid in cash and the remaining balance was
paid through additional borrowings under the amended agreement. At December 31,
1996 and March 31, 1997, CCBLP had additional available line of credit totaling
$463,000 and $289,000, respectively, subject to the terms and conditions of the
agreement.
Interest, payable quarterly, accrues at a Formula Rate which varies based
upon certain financial measures. Such Formula Rate generally ranges from the
prime lending rate (8.25% at December 31, 1996) plus 2% to the prime lending
rate plus 3%. As of December 31, 1996, the Formula Rate in effect for CCBLP was
11.25%.
Principal payments on the promissory note are due in twelve consecutive,
quarterly installments beginning on April 1, 1997 with aggregate annual
principal payments of $450,000 in 1997, $750,000 in 1998, $950,000 in 1999 and
any remaining amounts (including principal, interest and the remaining $300,000
of Loan Fees) due on January 1, 2000.
The Loan Agreement contains various restrictive covenants that, among other
things, require CCBLP, an affiliated limited partnership and Century to
individually (and on a consolidated basis with respect to
F-95
<PAGE> 247
CENTURY CHICAGO BROADCASTING, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Century) maintain minimum levels of operating cash flow, limit distributions
from CCBLP and/or an affiliated limited partnership to their respective partners
and place restrictions on the assumption and payment of Century expenses by
CCBLP or the affiliated limited partnership.
Upon notification from the lender, a prepayment equal to 50% of the
adjusted cash flow, as defined in the Loan Agreement, may be required provided
that such payment does not reduce cash on hand to a level below $1,000,000. The
promissory note evidencing CCBLP's obligation to the lender is secured by
substantially all of the assets of CCBLP and Century (including, but not limited
to, its partnership interests in CCBLP and an affiliated limited partnership)
and is guaranteed by Century and one of CCBLP's limited partners. Additionally,
both of CCBLP's limited partners have pledged their respective interests in
CCBLP as well as an affiliated limited partnership.
As more fully discussed in Note 8, CCBLP has entered into an agreement to
sell the Station and intends to use a portion of the proceeds to prepay the
promissory note in full. Additionally, certain technical covenant violations
have not been waived and there is uncertainty as to whether CCBLP and Century
will be able to meet such covenants prospectively. As such, the amounts
outstanding under the promissory note have been classified as current
liabilities in the accompanying balance sheets.
In the event that the promissory note is not prepaid in conjunction with
the aforementioned sale of the Station, management believes that operating cash
flows together with funds obtained from the additional borrowings as well as
from the option payment discussed above will provide sufficient working capital
to fund CCBLP's current operations. Additionally, management believes that the
lender will continue to forbear and not require CCBLP to repay the obligations
under the promissory note in advance of the stated maturities. Furthermore,
management believes in the event that operating cash flows were not sufficient
to support the Station's current operations and the sale of the Station were not
to be completed that additional financing would be available either from its
current lender or from other sources.
NOTE 7 -- COMMITMENTS:
CCBLP leases certain office space and equipment under various operating
leases. Rent expense included in the accompanying statement of operations for
the year ended December 31, 1996 in connection with these various operating
leases totaled $388,000. Future minimum rentals under noncancelable operating
leases in existence at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ---------
<S> <C>
1997........................................................ $ 375,000
1998........................................................ 370,000
1999........................................................ 339,000
2000........................................................ 248,000
2001........................................................ 288,000
Thereafter.................................................. 1,151,000
</TABLE>
CCBLP has entered into certain noncancelable agreements for ratings and
news services that require aggregate payments of approximately $358,000 in 1997,
$355,000 in 1998 and $172,000 in 1999.
F-96
<PAGE> 248
CENTURY CHICAGO BROADCASTING, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 -- STATION SALE:
On July 15, 1996, CCBLP entered into an Asset Purchase Agreement with
Evergreen Media Corporation of Chicago (Evergreen of Chicago) to sell
substantially all of the assets of the Station to Evergreen of Chicago for
approximately $68,750,000 in cash plus 96% of the accounts receivable balance at
the time of closing, as detailed in the Purchase Agreement, subject to certain
closing adjustments. In April 1997, the Federal Communications Commission
approved the transfer of the Station's broadcasting license to Evergreen of
Chicago. The sale of the Station is expected to close in the second quarter of
1997. On April 10, 1997, Evergreen of Chicago announced that it had entered into
an agreement with Bonneville International Corp. (Bonneville) to sell the assets
of the Station to Bonneville.
F-97
<PAGE> 249
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Secret Communications Limited Partnership:
We have audited the accompanying combined balance sheet of WJLB/WMXD,
DETROIT, as further described in Note 1, as of December 31, 1996, and the
related combined statements of operations and cash flows for the year then
ended. These financial statements are the responsibility of the Station's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the accompanying combined financial statements referred to
above present fairly, in all material respects, the financial position of
WJLB/WMXD, DETROIT as of December 31, 1996, and the results of their operations
and their cash flows for the year then ended, in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois
May 8, 1997
F-98
<PAGE> 250
WJLB/WMXD, DETROIT
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1996, AND MARCH 31, 1997 (UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............. $ 1,194 $ 1,212
Accounts receivable (net of allowance
for doubtful accounts of $96,119).. 589,346 419,688
Trade receivables..................... 18,394 18,394
Prepaid expenses and other assets..... 3,939 3,539
----------- -----------
Total current assets.......... 612,873 442,833
----------- -----------
PROPERTY AND EQUIPMENT, net (note 3).... 1,020,324 950,086
INTANGIBLE ASSETS, net (note 4)......... 40,812,180 40,276,029
----------- -----------
TOTAL ASSETS.................. $42,445,377 $41,668,948
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable and accrued
expenses........................... $ 892,756 $ 1,320,212
Trade payables........................ 1,875 1,875
Interest payable...................... 72,732 19,652
Current maturities of long-term
debt............................... 1,252,950 1,494,617
----------- -----------
Total current liabilities..... 2,220,313 2,836,356
----------- -----------
LONG-TERM DEBT, less current maturities
(note 6).............................. 18,527,663 18,285,996
COMMITMENTS AND CONTINGENCIES (note 7)
PARTNERS' CAPITAL AND STATION EQUITY
Balance, beginning of period.......... 26,766,919 21,697,401
Net amounts transferred to central
office............................. (13,398,406) (3,296,193)
Contributed capital................... 1,526,531 2,453,168
Net income for the period............. 6,802,357 (307,780)
----------- -----------
Balance, end of period................ 21,697,401 20,546,596
----------- -----------
TOTAL LIABILITIES AND
PARTNERS' CAPITAL.......... $42,445,377 $41,668,948
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-99
<PAGE> 251
WJLB/WMXD, DETROIT
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
AND FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
DECEMBER 31, ----------------------------
1996 1996 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
REVENUES
Advertising revenues.................. $15,408,285 $4,500,863 $ --
LMA and other income.................. 4,000,000 -- 2,421,000
----------- ---------- ----------
Gross income.......................... 19,408,285 4,500,863 2,421,000
Less: agency commissions.............. 1,880,637 523,792 --
----------- ---------- ----------
Net revenues.................. 17,527,648 3,977,071 2,421,000
----------- ---------- ----------
OPERATING EXPENSES:
Station operating expenses excluding
depreciation and amortization...... 5,720,605 2,026,514 254,278
Depreciation and amortization......... 2,414,614 600,888 606,388
Central office general and
administrative (note 8)............ 1,004,379 145,558 535,522
----------- ---------- ----------
Operating expenses............ 9,139,598 2,772,960 1,396,188
----------- ---------- ----------
OPERATING INCOME........................ 8,388,050 1,204,111 1,024,812
NONOPERATING EXPENSES:
Interest expense (note 6)............. 1,405,693 1,401,785 1,312,592
----------- ---------- ----------
Non operating expenses........ 1,405,693 1,401,785 1,312,592
----------- ---------- ----------
Income before taxes..................... 6,982,357 (197,674) (287,780)
Provision for state income taxes (note
2).................................... 180,000 41,400 20,000
----------- ---------- ----------
Net income.................... $ 6,802,357 $ (239,074) $ (307,780)
=========== ========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-100
<PAGE> 252
WJLB/WMXD, DETROIT
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
DECEMBER 31, -----------------------
1996 1996 1997
------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)..................... $ 6,802,357 ($ 239,074) ($ 307,780)
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization...... 2,414,614 600,888 606,388
Loss on sale of equipment.......... 1,800 -- --
Changes in assets and liabilities:
Decrease in receivables, net..... 3,883,442 1,164,150 169,659
Decrease (increase) in prepaid
expenses...................... 25,952 (50,134) 400
(Decrease) increase in payables
and accrued expenses.......... (902,306) (431,298) 427,456
Increase (decrease) in interest
payable....................... 21,984 37,092 (53,080)
----------- ---------- ----------
Net cash provided by operating
activities.................. 12,247,843 1,081,624 843,043
----------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................. (116,092) (12,715) --
----------- ---------- ----------
Net cash (used in) investing
activities.................. (116,092) (12,715) --
----------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in amounts transferred to
central office..................... (13,398,406) (2,429,287) (3,296,193)
Net (payments) of long-term debt...... (261,417) (261,417) --
Capital contributions................. 1,526,531 1,813,070 2,453,168
----------- ---------- ----------
Net cash (used in) financing
activities.................. (12,133,292) (877,634) (843,025)
----------- ---------- ----------
NET (DECREASE)/INCREASE IN CASH AND CASH
EQUIVALENTS........................... (1,541) 191,275 18
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD............................. 2,735 2,737 1,194
----------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD................................ $ 1,194 $ 194,012 $ 1,212
=========== ========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-101
<PAGE> 253
WJLB/WMXD, DETROIT
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) BUSINESS AND BASIS OF PRESENTATION:
Secret Communications Limited Partnership ("Secret") owns WJLB-FM and
WMXD-FM (the "Stations"). The Stations are licensed to and serve Detroit,
Michigan. The accompanying combined financial statements include the accounts of
the Stations after eliminating all significant intercompany accounts and
transactions.
Secret was formed in 1994 and on August 1, 1994, the general partners of
Secret contributed substantially all of the assets and debt of several radio
stations to Secret. The Stations were among those included in this initial
contribution.
As further described in Note 5, Secret entered into an agreement to sell
substantially all of the assets of the Stations to Evergreen Media Corporation
of Los Angeles ("Evergreen").
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) Cash Equivalents
Cash equivalents include overnight repurchase agreements backed by United
States securities.
(b) Trade Agreements
The Stations have entered into trade agreements which provide for the
exchange of advertising time for merchandise or services and are recorded at the
estimated fair market value of the goods or services to be received. Trade
receivables and trade payables represent the outstanding obligations of the
parties to the trade agreements as of the end of the year. Trade revenues are
recognized as the advertisements are broadcast. Trade expenses are recognized as
the services or merchandise is used.
(c) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets. Repair and maintenance costs are charged to expense when
incurred.
(d) Intangible Assets
Intangible assets are recorded at their appraised values and are amortized
using the straight-line method over estimated periods of benefit up to 40 years.
Should events or circumstances occur subsequent to the acquisition of a station
which bring into question the realizable value or impairment of the related
goodwill and intangibles, Secret will evaluate the remaining useful life and
balance of intangibles and make appropriate adjustments. Secret's principal
considerations in determining impairment include the strategic benefit to Secret
of the particular station and the current and expected future operating income
and cash flow levels of that particular station.
(e) Revenue Recognition
Advertising revenues are recognized as advertisements are broadcast.
(g) Income Taxes
The accompanying combined financial statements do not reflect provisions
for federal income taxes which are reported by the partners of Secret.
F-102
<PAGE> 254
WJLB/WMXD, DETROIT
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(h) Statement of Cash Flows
Cash of $1,383,709 was paid for interest during the year ended December 31,
1996. Cash of $184,278 was paid for state income taxes during the year ended
December 31, 1996.
(i) Use of Estimates
The preparation of these combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
(3) PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following at December 31, 1996:
<TABLE>
<CAPTION>
ESTIMATED USEFUL
1996 LIVES
----------- ----------------
<S> <C> <C>
Land.................................... $ 25,000 --
Buildings and leasehold improvements.... 526,618 5 -- 31.5 years
Broadcasting equipment.................. 554,611 5 -- 15 years
Furniture and fixtures.................. 189,678 5 years
Business equipment...................... 290,665 5 years
Vehicles................................ 50,507 5 years
-----------
1,637,079
Less: Accumulated depreciation.......... (616,755)
-----------
$ 1,020,324
===========
</TABLE>
(4) INTANGIBLE ASSETS:
Intangible assets consisted of the following at December 31, 1996:
<TABLE>
<CAPTION>
ESTIMATED USEFUL
1996 LIVES
----------- ----------------
<S> <C> <C>
FCC Licenses............................ $42,195,591 25 years
Advertiser relationships................ 3,069,763 7 years
Goodwill................................ 729,704 40 years
-----------
45,995,058
Less: Accumulated amortization.......... (5,182,878)
-----------
$40,812,180
===========
</TABLE>
(5) SALE OF STATIONS:
On August 12, 1996, Secret entered into a definitive agreement to sell
substantially all of the assets of the Stations to Evergreen. The agreement
closed on April 1, 1997. The assets sold included fixed assets and intangible
assets. In addition, Secret entered into a noncompete agreement covering the
Detroit market for three years. In consideration for the assets of the Stations
and the noncompete agreement, Evergreen paid Secret $168,000,000 on the closing
date. While this transaction was pending, Secret entered into a time brokerage
agreement with respect to the Stations which allowed Evergreen to purchase
substantially all of the broadcast time on the Stations. The agreement commenced
September 1, 1996 and expired on April 1, 1997. The revenue related to this
agreement is reflected in the combined statement of operations as LMA Income.
F-103
<PAGE> 255
WJLB/WMXD, DETROIT
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Stations agreed to pay bonuses to certain executives and key employees
if the individuals were employed by the Stations upon the close of the sale.
These bonuses were accrued ratably from the commitment date, October 1, 1996, to
the close date, April 1, 1997. At December 31, 1996, $400,500 is accrued for
these stay bonuses, with the related expense reflected in central office general
and administrative expenses. On April 1, 1997, the Stations paid $801,000 for
stay bonuses.
(6) LONG-TERM DEBT:
Long-term debt consisted of a senior reducing revolving credit facility at
December 31, 1996, which was used to recapitalize debt and to fund working
capital for Secret at August 1, 1994. The debt was allocated to the Stations
based on the ratio of the Stations' fair market value as compared to the total
fair market value of Secret at August 1, 1994. Additional borrowings and
repayments were allocated based on the same ratio if these borrowings and
repayments were related to the general operations of all the Secret stations.
Interest expense for the year ended December 31, 1996, was allocated to the
Stations based on the same ratio.
Borrowings under the revolving loans bear interest, at the option of Secret
at LIBOR or prime, plus a margin. The margin over LIBOR or prime varies from
time to time depending on Secret's ratio of debt to cash flow as defined in the
agreement. The interest rate on the reducing revolver at December 31, 1996,
ranged from 7.00% to 8.50%, with a weighted interest rate of 7.10%.
Amounts outstanding under the reducing revolver are payable in quarterly
installments beginning as early as June 30, 1995, and ending December 31, 2001.
The amounts payable depend on the amounts then outstanding and correspondingly
reduce the amount available to be borrowed. Based on debt outstanding, there
were no amortization payments required to be made in 1996. Amounts outstanding
under the revolving credit/term loan convert on June 30, 1997, to a term loan
payable in quarterly installments ending December 31, 2001. In addition to
scheduled amortization, Secret is required to repay revolving credit borrowings
each calendar year of up to 50% of the excess cash flow for that calendar year
as defined in the agreement, commencing with the year ending December 31, 1995.
Based on financial ratios at December 31, 1996, there is no excess cash flow
repayment due in 1997.
The senior credit facility limits indebtedness, capital expenditures, and
payment of distributions and requires certain financial ratios to be maintained
among other restrictions. At December 31, 1996, Secret was in compliance with
all provisions of its credit agreement. The senior credit facility is secured by
substantially all of the assets of Secret.
The future maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1997.................................... $ 1,252,950
1998.................................... 3,532,252
1999.................................... 4,198,715
2000.................................... 4,865,178
2001.................................... 5,931,518
-----------
$19,780,613
===========
</TABLE>
The fair value of the debt is equal to its carrying value.
On April 1, 1997, Secret repaid all amounts outstanding under its senior
credit facility.
F-104
<PAGE> 256
WJLB/WMXD, DETROIT
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(7) COMMITMENTS AND CONTINGENCIES:
The Stations have entered into operating leases with initial or remaining
non-cancelable terms in excess of one year. The future minimum rental payments
required for all such leases as of December 31, 1996, are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1997.................................. $221,372
1998.................................. 221,372
1999.................................. 75,237
2000.................................. 46,009
2001.................................. 46,009
Future years.......................... 251,505
--------
Total minimum payments required......... $861,504
========
</TABLE>
Rent expense was $252,013 for the year ended December 31, 1996.
(8) RELATED PARTY TRANSACTIONS:
Central office general and administrative expenses represent an allocation
of charges incurred by Secret's headquarters for various administrative and
management services, including, but not limited to, salaries, bonuses,
management fees and service fees. The charges are allocated to the Stations
based on the total number of markets in which Secret owns stations. Amounts
charged to the Stations do not necessarily represent the amounts that would have
been incurred had the Stations operated as an unaffiliated entity. However,
management believes that these charges result in a reasonable level of general
and administrative expenses for the Stations.
Included in the central office general and administrative expenses are fees
charged to Secret by the two general partners for management and consulting
services provided to Secret. In addition, Lane Industries, Inc., a related party
to the administrative general partner of Secret, provides certain tax, legal,
financial, risk management and employee benefits services for an annual fee. The
amount allocated to the Stations for all such services provided by the general
partners amounted to $180,405 for the year ended December 31, 1996.
As described in Note 6, a portion of Secret's senior debt and interest
expense has been allocated to the Stations as of December 31, 1996, and for the
year then ended.
The Partners' Capital and Station Equity section of the Balance Sheet
consists of intercompany accounts, capital contributed by the partners and
retained earnings. These accounts reflect the original acquisition of the
Stations and the activity between the Stations and Secret, such as cash
transfers and expense allocations.
(9) DEFERRED SAVINGS PLAN:
Secret maintains a 401(k) savings plan in which the employees of the
Stations participate. Employees must have reached age 21 and have completed one
year of consecutive service to participate in the plan. Employees may contribute
up to 15% of their salaries in accordance with IRS limitations. Secret matches
employee contributions at a rate of 75% (up to 6%) of the employee's salary.
Secret's contribution to the plan related to the Stations was $70,694 for the
year ended December 31, 1996.
(10) NOTE TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
The accompanying unaudited interim combined financial statements have been
prepared in accordance with generally accepted accounting practices for interim
periods. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
F-105
<PAGE> 257
WJLB/WMXD, DETROIT
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
statements. It is suggested that these interim combined financial statements be
read in conjunction with the financial statements and notes thereto.
In the opinion of management, the unaudited interim combined financial
statements reflect all adjustments consisting of normal recurring adjustments
necessary to present fairly the combined financial position of the Stations as
of March 31, 1997, and the interim combined results of operations and cash flows
for all periods presented.
F-106
<PAGE> 258
INDEPENDENT AUDITORS' REPORT
---------------------------------------------
The Board of Directors
Chancellor Broadcasting Company:
We have audited the accompanying combined balance sheets of KYSR Inc. and
KIBB Inc. as of December 31, 1995 and 1996, and the related combined statements
of operations and cash flows for each of the years in the three-year period
ended December 31, 1996. These combined financial statements are the
responsibility of the Companies' management. Our responsibility is to express an
opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of KYSR Inc.
and KIBB Inc. as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Dallas, Texas
March 14, 1997
F-107
<PAGE> 259
KYSR INC. AND KIBB INC.
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1995 1996 1997
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Accounts receivable, less allowance for doubtful
accounts of $218 in 1995 and $246 in 1996 and $321 in
1997................................................. $ 6,253 $ 7,283 $ 7,403
Prepaid expenses and other.............................. 412 609 18
Deferred income taxes (note 5).......................... 89 101 101
-------- -------- --------
Total current assets............................ 6,754 7,993 7,522
Property and equipment, net (note 3)...................... 4,172 4,082 4,195
Intangible assets, net (note 4)........................... 116,946 113,644 111,984
Other assets, net......................................... 22 22 22
-------- -------- --------
$127,894 $125,741 $123,723
======== ======== ========
LIABILITIES AND EQUITY
Current liabilities -- accounts payable and accrued
expenses................................................ $ 3,883 $ 3,624 $ 2,082
Deferred income taxes (note 5)............................ 9,683 11,027 11,027
Equity (note 8)........................................... 114,328 111,090 110,614
Commitments and contingencies (note 9)....................
-------- -------- --------
$127,894 $125,741 $123,723
======== ======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-108
<PAGE> 260
KYSR INC. AND KIBB INC.
COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gross revenues.......................... $28,590 $30,571 $33,769 $15,762 $16,784
Less agency commissions and national
rep fees........................... 4,490 4,882 5,462 2,196 2,385
------- ------- ------- ------- -------
Net revenues.................. 24,100 25,689 28,307 13,566 14,399
------- ------- ------- ------- -------
Operating expenses:
Station operating expenses, excluding
depreciation and amortization...... 13,407 12,901 13,378 6,834 7,119
Depreciation and amortization......... 3,640 3,661 3,627 1,826 1,844
Corporate general and
administrative..................... 892 1,094 844 542 302
------- ------- ------- ------- -------
Operating expenses................. 17,939 17,656 17,849 9,202 9,265
------- ------- ------- ------- -------
Operating income................... 6,161 8,033 10,458 4,364 5,134
Interest expense (note 7)............... 6,374 6,374 6,374 3,187 3,178
------- ------- ------- ------- -------
Earnings (loss) before income taxes... (213) 1,659 4,084 1,177 1,956
Income tax expense (benefit) (note 5)... (70) 699 1,694 494 296
------- ------- ------- ------- -------
Net earnings (loss)........... $ (143) $ 960 $ 2,390 $ 683 $ 1,660
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-109
<PAGE> 261
KYSR INC. AND KIBB INC.
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------ -----------------
1994 1995 1996 1996 1997
------ ------ ------ ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows provided by operating activities:
Net earnings (loss)........................... $ (143) $ 960 $2,390 $ 683 $ 1,660
Adjustments to reconcile net earnings (loss)
to net cash provided by operating
activities:
Depreciation............................... 338 359 325 175 193
Amortization of intangibles................ 3,302 3,302 3,302 1,651 1,651
Deferred tax expense....................... 1,597 1,412 1,332 -- --
Changes in certain assets and liabilities:
Accounts receivable, net................. (1,452) (120) (1,030) (330) (120)
Prepaid expenses and other current
assets................................ 372 (149) (197) (1,468) 591
Accounts payable and accrued expenses.... (345) 265 (259) 2,236 (1,542)
------ ------ ------ ------- -------
Net cash provided by operating
activities.......................... 3,669 6,029 5,863 2,947 2,433
------ ------ ------ ------- -------
Cash used by investing activities -- capital
expenditures.................................. (280) (223) (235) (80) (296)
------ ------ ------ ------- -------
Cash flows used by financing
activities -- distributions to Parent......... (3,389) (5,806) (5,628) (2,867) (2,137)
------ ------ ------ ------- -------
Increase (decrease) in cash..................... -- -- -- -- --
Cash at beginning of period..................... -- -- -- -- --
------ ------ ------ ------- -------
Cash at end of period........................... $ -- $ -- $ -- $ -- $ --
====== ====== ====== ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-110
<PAGE> 262
KYSR INC. AND KIBB INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) ORGANIZATION AND BASIS OF PRESENTATION
The accompanying combined financial statements include the accounts of KYSR
Inc. and KIBB Inc. (collectively, the "Company"). The Company owns and operates
two commercial radio stations in the Los Angeles market, KYSR-FM and KIBB-FM,
and is wholly owned by Viacom International Inc. ("Viacom" or "Parent"), a
wholly owned subsidiary of Viacom, Inc. Significant intercompany balances and
transactions have been eliminated in combination.
On February 16, 1997, Viacom entered into a stock purchase agreement to
sell all the issued and outstanding shares of capital stock of WAXQ Inc. and
Riverside Broadcasting Co., Inc. in the New York City market, KYSR Inc. and KIBB
Inc. in the Los Angeles market, Viacom Broadcasting East Inc. and WMZQ Inc. in
the Washington, DC market, WLIT Inc. in the Chicago market and WDRQ Inc. in the
Detroit market (collectively, the "Viacom Radio Properties") to Evergreen Media
Corporation of Los Angeles ("Evergreen"), for $1.075 billion in cash ("Proposed
Transaction"). The Proposed Transaction is expected to close after the
expiration or termination of the applicable waiting periods under the HRS Act
and approval by the Federal Communications Commission ("FCC"). Contemporaneous
with this transaction, Evergreen entered into a joint purchase agreement with
Chancellor Broadcasting Company ("Chancellor") under which Chancellor agreed to
acquire the Chicago, Detroit and Los Angeles Viacom Radio Properties referred to
above for $480 million from Evergreen or from Viacom directly.
The accompanying combined financial statements reflect the carve-out
historical results of operations and financial position of KYSR Inc. and KIBB
Inc. These financial statements are not necessarily indicative of the results
that would have occurred if the Company had been a separate stand-alone entity
during the period presented.
The combined financial statements do not include Viacom's corporate assets
or liabilities not specifically identifiable to the Company. Corporate overhead
allocations have been included in the accompanying combined statements of
earnings in corporate general and administrative expense and station operating
expenses.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets. Repair and maintenance costs are charged to expense when
incurred.
(b) Intangible Assets
Intangible assets consist primarily of broadcast licenses. The Company
amortizes such intangible assets using the straight-line method over 40 years.
The Company continually evaluates the propriety of the carrying amount of
intangible assets as well as the amortization period to determine whether
current events or circumstances warrant adjustments to the carrying value and/or
revised estimates of useful lives. This evaluation consists of the projection of
undiscounted operating income before depreciation, amortization, nonrecurring
charges and interest over the remaining amortization periods of the related
intangible assets. At this time, the Company believes that no significant
impairment of intangible assets has occurred and that no reduction of the
estimated useful lives is warranted.
F-111
<PAGE> 263
KYSR INC. AND KIBB INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(c) Barter Transactions
The Company trades commercial air time for goods and services used
principally for promotional, sales and other business activities. An asset and
liability are recorded at the fair market value of the goods or services to be
received. Barter revenue is recorded and the liability relieved when commercials
are broadcast and barter expense is recorded and the asset relieved when goods
or services are received or used.
(d) Revenue Recognition
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
(e) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable earnings. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount more likely than not to be realized. Income
tax expense is the total of tax payable for the period and the change during the
period in deferred tax assets and liabilities.
(f) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. The adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
(g) Fair Value
The carrying amount of accounts receivable and accounts payable
approximates fair value because of the short maturity of these instruments.
(h) Disclosure of Certain Significant Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
In the opinion of management, credit risk with respect to trade receivables
is limited due to the large number of diversified customers in the Company's
customer base. The Company performs ongoing credit evaluations of its customers
and believes that adequate allowances for any uncollectible trade receivables
are maintained. No one advertiser accounted for more than 10% of net revenues in
1994, 1995, or 1996. Certain
F-112
<PAGE> 264
KYSR INC. AND KIBB INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
advertisers purchase the advertising of the stations through a third party
buying service. Approximately 22%, 20% and 19% of total revenue was derived
through the use of this service in 1994, 1995 and 1996, respectively.
(i) Unaudited Interim Financial Information
In the opinion of management, the unaudited interim combined financial
statements as of and for the six months ended June 30, 1996 and 1997, reflect
all adjustments, consisting of only normal and recurring items, which are
necessary for a fair presentation of the results for the interim periods
presented. The results for the interim periods ended June 30, 1996 and 1997 are
not necessarily indicative of results to be expected for any other interim
period or for the full year.
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1995 and
1996:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1995 1996
----------- ------ ------
<S> <C> <C> <C>
Land.................................................. $2,875 $2,875
Building.............................................. 40 years 474 474
Broadcast facilities.................................. 8-20 years 1,501 1,572
Office equipment and other............................ 5-8 years 725 902
Construction in progress.............................. 36 24
------ ------
5,611 5,847
Accumulated depreciation.............................. 1,439 1,765
------ ------
$4,172 $4,082
====== ======
</TABLE>
(4) INTANGIBLE ASSETS
Intangible assets at December 31, 1995 and 1996 consist of broadcast
licenses which are being amortized over forty years and are presented net of
accumulated amortization of $15,148 and $18,450, respectively.
(5) INCOME TAXES
The Company's results of operations are included in the combined U.S.
federal and certain combined and separate state income tax returns of Viacom
International Inc.
The tax provisions and deferred tax liabilities presented have been
determined as if the Company were a stand-alone business filing separate tax
returns. Current tax liabilities are recorded through the equity account with
Viacom.
Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
1994 1995 1996
------- ----- ------
<S> <C> <C> <C>
Current:
Federal................................................ $(1,289) $(551) $ 278
State and local........................................ (378) (162) 84
Deferred federal......................................... 1,597 1,412 1,332
------- ----- ------
$ (70) $ 699 $1,694
======= ===== ======
</TABLE>
F-113
<PAGE> 265
KYSR INC. AND KIBB INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the U.S. Federal statutory tax rate to the Company's
effective tax rate on earnings (loss) before income taxes is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
----- ---- ----
<S> <C> <C> <C>
Statutory U.S. tax rate..................................... (35.0)% 35.0% 35.0%
State and local taxes, net of federal tax benefit........... 6.2 6.2 6.1
Other, net.................................................. (8.3) 0.9 0.4
----- ---- ----
Effective tax rate.......................................... (32.9)% 42.1% 41.5%
===== ==== ====
</TABLE>
Deferred tax assets and liabilities are computed by applying the U.S.
federal income tax rate in effect to the gross amounts of temporary differences
and other tax attributes. These temporary differences are primarily the result
of fixed asset basis differences and bad debt expense. Deferred tax assets and
liabilities relating to state income taxes are not material.
(6) DEBT AND INTEREST COST
Viacom has not allocated any portion of its debt or related interest cost
to the Company, and no portion of Viacom's debt is specifically related to the
operations of the Company.
(7) RELATED PARTY TRANSACTIONS
Intercompany balances between the Company and Viacom resulting from normal
trade activity are reflected in Equity in the accompanying combined financial
statements (see note 8).
On January 25, 1990, KYSR, Inc., formerly KXEZ, Inc., issued an
intercompany demand note to Viacom in the amount of $66,400. The note bears
interest at 9.6% per year payable on the last day of each calendar year. The
principal and final interest payment are payable on January 25, 2000. However,
immediately prior to closing of the Proposed Transaction, all debts between the
Company and Viacom will be canceled. As such, the promissory note issued to
Viacom is reflected as an increase to equity and included in intercompany
activity in the amount of $66,400 at December 31, 1995 and 1996 (see note 8).
Viacom provides services for the Company in management, accounting and
financial reporting, human resources, information systems, legal, taxes and
other corporate services. The allocation of these expenses, which is generally
based on revenue dollars, is reflected in the accompanying combined financial
statements as corporate general and administrative expense. Management believes
that the method of allocation of overhead is reasonable.
Viacom has a noncontributory pension plan covering substantially all of its
employees, including the employees of the Company. Costs related to this plan
are allocated to the Company based on payroll dollars and are included in
station operating expenses. The Company recognized expense related to this plan
in the amounts of $70, $56 and $191 for 1994, 1995 and 1996, respectively. The
assets and the related benefit obligation of the plan will not be transferred to
the Company upon consummation of the Proposed Transaction, therefore, such
assets and obligations are not included in the notes to the Company's combined
financial statements.
Viacom utilizes a centralized cash management system. As a result, the
Company carries minimal cash. Disbursements are funded by the Parent upon demand
and cash receipts are transferred to the Parent daily.
The Company, from time to time, enters into transactions with companies
owned by or affiliated with Viacom. Generally, services rendered from such
related parties are charged to the Company at amounts which would be incurred in
transactions between unrelated entities.
F-114
<PAGE> 266
KYSR INC. AND KIBB INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(8) EQUITY
Equity represents Viacom's ownership interest in the recorded net assets of
the Company. All cash transactions and intercompany transactions flow through
the equity account. A summary of the activity is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of period..................... $122,706 $119,174 $114,328
Net earnings (loss)................................ (143) 960 2,390
Net intercompany activity.......................... (3,389) (5,806) (5,628)
-------- -------- --------
Balance at end of period........................... $119,174 $114,328 $111,090
======== ======== ========
</TABLE>
(9) COMMITMENTS AND CONTINGENCIES
The Company has noncancelable operating leases, primarily for office space.
These leases generally contain renewal options for periods ranging from one to
ten years and require the Company to pay all executory costs such as maintenance
and insurance. Rental expense for operating leases (excluding those with lease
terms of one month or less that were not renewed) was approximately $377, $365
and $405 during 1994, 1995 and 1996, respectively.
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31, 1996
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- ------------------------
<S> <C> <C>
1997............................................................... $ 365
1998............................................................... 366
1999............................................................... 312
2000............................................................... 19
Thereafter......................................................... --
------
$1,062
======
</TABLE>
F-115
<PAGE> 267
INDEPENDENT AUDITORS' REPORT
---------------------------------------------
The Board of Directors
Chancellor Broadcasting Company:
We have audited the accompanying balance sheets of WLIT Inc. as of December
31, 1995 and 1996, and the related statements of earnings and cash flows for
each of the years in the three-year period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of WLIT Inc. as of December 31,
1995 and 1996, and the results of its operations and its cash flows for each of
the years in the three-year period ended December 31, 1996, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
March 14, 1997
F-116
<PAGE> 268
WLIT INC.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Accounts receivable, less allowance for doubtful accounts
of $79 in 1995 and $87 in 1996 and $110 in 1997........ $ 3,110 $ 3,627 $ 3,836
Prepaid expenses and other current assets................. 592 490 200
Deferred income taxes (note 5)............................ 37 44 44
------- ------- -------
Total current assets.............................. 3,739 4,161 4,080
Property and equipment, net (note 3)........................ 461 457 545
Intangible assets, net (note 4)............................. 16,958 16,415 16,143
------- ------- -------
$21,158 $21,033 $20,768
======= ======= =======
LIABILITIES AND EQUITY
Current liabilities -- accounts payable and accrued
expenses.................................................. $ 1,442 $ 1,195 $ 1,376
Deferred income taxes (note 5).............................. 58 53 53
Equity (note 8)............................................. 19,658 19,785 19,339
Commitment and contingencies (note 9).......................
------- ------- -------
$21,158 $21,033 $20,768
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-117
<PAGE> 269
WLIT INC.
STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------- ----------------
1994 1995 1996 1996 1997
------- ------- ------- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gross revenues................................ $14,367 $16,720 $18,294 $8,080 $10,035
Less agency commissions and national rep
fees..................................... 2,523 2,848 3,071 1,144 1,410
------- ------- ------- ------ -------
Net revenues........................ 11,844 13,872 15,223 6,936 8,625
------- ------- ------- ------ -------
Operating expenses:
Station operating expenses excluding
depreciation and amortization............ 6,555 6,977 7,508 3,839 4,221
Depreciation and amortization............... 655 653 659 327 340
Corporate general and administrative........ 478 630 479 274 172
------- ------- ------- ------ -------
Operating expenses....................... 7,688 8,260 8,646 4,440 4,733
------- ------- ------- ------ -------
Earnings before income taxes............. 4,156 5,612 6,577 2,496 3,892
Income tax expense (note 5)................... 1,804 2,359 2,728 1,048 1,280
------- ------- ------- ------ -------
Net earnings........................ $ 2,352 $ 3,253 $ 3,849 $1,448 $ 2,612
======= ======= ======= ====== =======
</TABLE>
See accompanying notes to financial statements.
F-118
<PAGE> 270
WLIT INC.
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEARS ENDED DECEMBER 31, 30,
--------------------------- ----------------------
1994 1995 1996 1996 1997
------- ------- ------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows provided by operating
activities:
Net earnings.......................... $ 2,352 $ 3,253 $ 3,849 $ 1,448 $ 2,612
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation....................... 114 114 116 55 68
Amortization of intangibles........ 541 539 543 272 272
Deferred income taxes.............. (13) 5 (8) -- --
Changes in certain assets and
liabilities:
Accounts receivable, net......... (73) (460) (517) (476) (209)
Prepaid expenses and other
current assets................ (101) (181) 98 (577) 295
Accounts payable and accrued
expenses...................... (384) 173 (247) 1,461 (1,542)
------- ------- ------- ------- -------
Net cash provided by operating
activities.................. 2,436 3,443 3,834 2,183 1,496
------- ------- ------- ------- -------
Cash flows used by investing
activities -- capital expenditures.... (180) (110) (112) (45) (156)
------- ------- ------- ------- -------
Cash flows used by financing
activities -- distributions to
Parent................................ (2,256) (3,333) (3,722) (2,138) (1,340)
------- ------- ------- ------- -------
Increase (decrease) in cash............. -- -- -- -- --
Cash at beginning of period............. -- -- -- -- --
------- ------- ------- ------- -------
Cash at end of period................... $ -- $ -- $ -- $ -- $ --
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-119
<PAGE> 271
WLIT INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) ORGANIZATION AND BASIS OF PRESENTATION
The accompanying financial statements include the accounts of WLIT Inc.
(the "Company"). The Company owns and operates a commercial radio station in the
Chicago market, WLIT-FM, and is wholly owned by Viacom International Inc.
("Viacom" or "Parent"), a wholly owned subsidiary of Viacom, Inc.
On February 16, 1997, Viacom International Inc. entered into a stock
purchase agreement to sell all the issued and outstanding shares of capital
stock of WAXQ Inc. and Riverside Broadcasting Co., Inc. in the New York City
market, KYSR Inc. and KIBB Inc. in the Los Angeles market, Viacom Broadcasting
East Inc. and WMZQ Inc. in the Washington, DC market, WLIT Inc. in the Chicago
market and WDRQ Inc. in the Detroit market (collectively, the "Viacom Radio
Properties") to Evergreen Media Corporation ("Evergreen") for $1.075 billion in
cash ("Proposed Transaction"). The Proposed Transaction is expected to close
after the expiration or termination of the applicable waiting periods under the
HSR Act and approval by the Federal Communications Commission ("FCC").
Contemporaneous with this transaction, Evergreen entered into a joint purchase
agreement with Chancellor Broadcasting Company ("Chancellor"), under which
Chancellor agreed to acquire the Chicago, Detroit and Los Angeles Viacom Radio
Properties referred to above for $480 million from Evergreen or from Viacom
directly.
The accompanying financial statements reflect the carve-out historical
results of operations and financial position of WLIT Inc. These financial
statements are not necessarily indicative of the results that would have
occurred if the Company had been a separate stand-alone entity during the
periods presented.
The financial statements do not include Viacom's corporate assets or
liabilities not specifically identifiable to the Company. Corporate overhead
allocations have been included in the accompanying statements of earnings in
corporate general and administrative expense and station operating expenses.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets. Repair and maintenance costs are charged to expense when
incurred.
(b) Intangible Assets
Intangible assets consist primarily of broadcast licenses. The Company
amortizes such intangible assets using the straight-line method over 40 years.
The Company continually evaluates the propriety of the carrying amount of
intangible assets as well as the amortization period to determine whether
current events or circumstances warrant adjustments to the carrying value and/or
revised estimates of useful lives. This evaluation consists of the projection of
undiscounted operating income before depreciation, amortization, nonrecurring
charges and interest over the remaining amortization periods of the related
intangible assets. At this time, the Company believes that no significant
impairment of intangible assets has occurred and that no reduction of the
estimated useful lives is warranted.
(c) Barter Transactions
The Company trades commercial air time for goods and services used
principally for promotional, sales and other business activities. An asset and
liability are recorded at the fair market value of the goods or services to be
received. Barter revenue is recorded and the liability relieved when commercials
are broadcast and barter expense is recorded and the asset relieved when goods
or services are received or used.
F-120
<PAGE> 272
WLIT INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(d) Revenue Recognition
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
(e) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable earnings. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount more likely than not to be realized. Income
tax expense is the total of tax payable for the period and the change during the
period in deferred tax assets and liabilities.
(f) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. The adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
(g) Fair Value
The carrying amount of accounts receivable and accounts payable
approximates fair value because of the short maturity of these instruments.
(h) Disclosure of Certain Significant Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
In the opinion of management, credit risk with respect to trade receivables
is limited due to the large number of diversified customers in the Company's
customer base. The Company performs ongoing credit evaluations of its customers
and believes that adequate allowances for any uncollectible trade receivables
are maintained. No one customer accounted for more than 10% of net revenues in
1994, 1995, or 1996.
(i) Unaudited Interim Financial Information
In the opinion of management, the unaudited interim combined financial
statements as of and for the six months ended June 30, 1996 and 1997, reflect
all adjustments, consisting of only normal and recurring items, which are
necessary for a fair presentation of the results for the interim periods
presented. The results for the interim periods ended June 30, 1996 and 1997 are
not necessarily indicative of results to be expected for any other interim
period or for the full year.
F-121
<PAGE> 273
WLIT INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1995 and
1996:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1995 1996
----------- ------ ------
<S> <C> <C> <C>
Broadcast facilities.................................. 8-20 years $1,116 $1,141
Office equipment and other............................ 5-8 years 791 868
Construction in progress.............................. 13 13
------ ------
1,920 2,022
Accumulated depreciation.............................. 1,459 1,565
------ ------
$ 461 $ 457
====== ======
</TABLE>
(4) INTANGIBLE ASSETS
Intangible assets at December 31, 1995 and 1996 consist of broadcast
licenses which are being amortized over forty years and are presented net of
accumulated amortization of $5,585 and $6,128, respectively.
(5) INCOME TAXES
The Company's results of operations are included in the U.S. federal and
certain combined and separate state income tax returns of Viacom International
Inc.
The tax provisions and deferred tax liabilities presented have been
determined as if the Company were a stand-alone business filing separate tax
returns. Current tax liabilities are recorded through the equity account with
Viacom.
Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Current:
Federal................................................ $1,588 $2,058 $2,391
State and local........................................ 229 296 345
Deferred federal......................................... (13) 5 (8)
------ ------ ------
$1,804 $2,359 $2,728
====== ====== ======
</TABLE>
A reconciliation of the U.S. Federal Statutory tax rate to the Company's
effective tax rate on earnings before income taxes is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. tax rate..................................... 35.0% 35.0% 35.0%
Amortization of intangibles................................. 4.7 3.4 2.9
State and local taxes, net of federal tax benefit........... 3.6 3.4 3.4
Other, net.................................................. 0.2 0.2 0.2
---- ---- ----
Effective tax rate................................ 43.5% 42.0% 41.5%
==== ==== ====
</TABLE>
Deferred tax assets and liabilities are computed by applying the U.S.
federal income tax rate in effect to the gross amounts of temporary differences
and other tax attributes. These temporary differences are primarily the result
of fixed asset basis differences and bad debt expense. Deferred tax assets and
liabilities relating to state income taxes are not material.
F-122
<PAGE> 274
WLIT INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(6) DEBT AND INTEREST COST
Viacom has not allocated any portion of its debt or related interest cost
to the Company, and no portion of Viacom's debt is specifically related to the
operations of the Company. Accordingly, the Company's financial statements
include no charges for interest.
(7) RELATED PARTY TRANSACTIONS
Intercompany balances between the Company and Viacom resulting from normal
trade activity are reflected in Equity in the accompanying financial statements
(see note 8).
Viacom provides services for the Company in management, accounting and
financial reporting, human resources, information systems, legal, tax and other
corporate services. The allocation of these expenses, which is generally based
on revenue dollars, is reflected in the accompanying financial statements as
corporate general and administrative expense. Management believes that the
method of allocation of corporate overhead is reasonable.
Viacom has a noncontributory pension plan covering substantially all of its
employees, including the employees of the Company. Costs related to this plan
are allocated to the Company based on payroll dollars. The Company recognized
expense related to this plan in the amounts of $67, $46 and $126 for 1994, 1995
and 1996, respectively. The assets and the related benefit obligation of the
plan will not be transferred to the Company upon consummation of the Proposed
Transaction, therefore, such assets and obligations are not included in the
notes to the Company's financial statements.
Viacom utilizes a centralized cash management system. As a result, the
Company carries minimal cash. Disbursements are funded by the Parent upon demand
and cash receipts are transferred to the Parent daily.
The Company, from time to time, enters into transactions with companies
owned by or affiliated with Viacom. Generally, services received from such
related parties are charged to the Company at amounts which would be incurred in
transactions between unrelated entities.
(8) EQUITY
Equity represents Viacom's ownership interest in the recorded net assets of
the Company. All cash transactions and intercompany transactions flow through
the equity account. A summary of the activity is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Balance at beginning of period........................ $19,642 $19,738 $19,658
Net earnings.......................................... 2,352 3,253 3,849
Net intercompany activity............................. (2,256) (3,333) (3,722)
------- ------- -------
Balance at end of period.............................. $19,738 $19,658 $19,785
======= ======= =======
</TABLE>
F-123
<PAGE> 275
WLIT INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(9) COMMITMENTS AND CONTINGENCIES
The Company has noncancelable operating leases, primarily for office space.
These leases generally contain renewal options for periods ranging from 1 to 10
years and require the Company to pay all executory costs such as maintenance and
insurance. Rental expense for operating leases (excluding those with lease terms
of one month or less that were not renewed) was approximately $319, $337 and
$327 during 1994, 1995 and 1996, respectively.
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31, 1996
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- ------------------------
<S> <C> <C>
1997............................................................... $ 266
1998............................................................... 291
1999............................................................... 298
2000............................................................... 287
2001............................................................... 296
Thereafter......................................................... 103
------
$1,541
======
</TABLE>
F-124
<PAGE> 276
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Evergreen Media Corporation:
We have audited the accompanying balance sheets of WDRQ Inc. as of December
31, 1995 and 1996, and the related statements of earnings and cash flows for
each of the years in the three-year period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of WDRQ Inc. as of December 31,
1995 and 1996, and the results of its operations and its cash flows for each of
the years in the three-year period ended December 31, 1996, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
March 14, 1997, except for note 10,
which is as of April 14, 1997
F-125
<PAGE> 277
WDRQ INC.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
1995 1996 1997
------- ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Accounts receivable, less allowance
for doubtful accounts of $82 in
1995, $72 in 1996 and $79 in
1997............................... $ 1,541 $ 809 $ 793
Prepaid expenses and other current
assets............................. 80 90 6
Deferred income taxes (note 5)........ 30 26 26
------- ------ ------
Total current assets.......... 1,651 925 825
Property and equipment, net (note 3).... 489 500 606
Intangible assets, net (note 4)......... 8,430 8,174 8,009
------- ------ ------
$10,570 $9,599 $9,440
======= ====== ======
LIABILITIES AND EQUITY
Current liabilities -- accounts payable
and accrued expenses.................. $ 766 $ 792 $ 459
Deferred income taxes (note 5).......... 98 80 80
Equity (note 8)......................... 9,706 8,727 8,901
Commitments and contingencies (note
9)....................................
------- ------ ------
$10,570 $9,599 $9,440
======= ====== ======
</TABLE>
See accompanying notes to financial statements.
F-126
<PAGE> 278
WDRQ INC.
STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------ -----------------
1994 1995 1996 1996 1997
------ ------ ------ ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gross revenues........................................ $7,461 $8,081 $6,743 $3,839 $2,395
Less agency commissions and national rep fees....... 1,227 1,273 1,055 609 296
------ ------ ------ ------ ------
Net revenues................................ 6,234 6,808 5,688 3,230 2,099
------ ------ ------ ------ ------
Operating expenses:
Station operating expenses excluding depreciation
and amortization................................. 4,362 4,412 4,530 2,126 1,986
Depreciation and amortization....................... 300 336 354 173 186
Corporate general and administrative................ 249 308 178 142 42
------ ------ ------ ------ ------
Operating expenses.......................... 4,911 5,056 5,062 2,441 2,214
------ ------ ------ ------ ------
Earnings (loss) before income taxes......... 1,323 1,752 626 789 (115)
Income tax expense (benefit) (note 5)................. 582 737 326 410 (18)
------ ------ ------ ------ ------
Net earnings (loss)......................... $ 741 $1,015 $ 300 $ 379 $ (97)
====== ====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-127
<PAGE> 279
WDRQ INC.
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1994 1995 1996
----- ------- -------
<S> <C> <C> <C>
Cash flows provided by operating
activities:
Net earnings.......................... $ 741 $ 1,015 $ 300
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation....................... 44 80 98
Amortization of intangibles........ 256 256 256
Deferred income tax (benefit)
expense.......................... (4) 3 (14)
Changes in certain assets and
liabilities:
Accounts receivable, net......... (122) (140) 732
Prepaid expenses and other
current assets................ 1 9 (10)
Accounts payable and accrued
expenses...................... (217) 73 26
----- ------- -------
Net cash provided by operating
activities.................. 699 1,296 1,388
----- ------- -------
Cash flows used by investing
activities -- capital expenditures.... (38) (138) (109)
----- ------- -------
Cash flows provided by (used in)
financing activities -- contribution
by (distribution to) parent........... (661) (1,158) (1,279)
----- ------- -------
Increase (decrease) in cash............. -- -- --
Cash at beginning of period............. -- -- --
----- ------- -------
Cash at end of period................... $ -- $ -- $ --
===== ======= =======
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------
1996 1997
------- ------
(UNAUDITED)
<S> <C> <C>
Cash flows provided by operating
activities:
Net earnings.......................... $ 379 $ (97)
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation....................... 45 58
Amortization of intangibles........ 128 128
Deferred income tax (benefit)
expense.......................... -- --
Changes in certain assets and
liabilities:
Accounts receivable, net......... 91 16
Prepaid expenses and other
current assets................ (794) 84
Accounts payable and accrued
expenses...................... 1,034 (333)
------ -----
Net cash provided by operating
activities.................. 883 (144)
------ -----
Cash flows used by investing
activities -- capital expenditures.... (50) (192)
------ -----
Cash flows provided by (used in)
financing activities -- contribution
by (distribution to) parent........... (833) 336
------ -----
Increase (decrease) in cash............. -- --
Cash at beginning of period............. -- --
------ -----
Cash at end of period................... $ -- $ --
====== =====
</TABLE>
See accompanying notes to financial statements.
F-128
<PAGE> 280
WDRQ INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) ORGANIZATION AND BASIS OF PRESENTATION
The accompanying financial statements include the accounts of WDRQ Inc.
(the "Company"). The Company owns and operates a commercial radio station in
Detroit, WDRQ-FM, and is wholly owned by Viacom International Inc. ("Viacom" or
"Parent"), a wholly owned subsidiary of Viacom, Inc.
On February 16, 1997, Viacom entered into a stock purchase agreement to
sell all the issued and outstanding shares of capital stock of WAXQ Inc. and
Riverside Broadcasting Co., Inc. in the New York City market, KYSR Inc. and KIBB
Inc. in the Los Angeles market, Viacom Broadcasting East Inc. and WMZQ Inc. in
the Washington, DC market, WLIT Inc. in the Chicago market and WDRQ Inc. in the
Detroit market (collectively the "Viacom Radio Properties") to Evergreen Media
Corporation of Los Angeles ("Evergreen") for $1.075 billion in cash ("Proposed
Transaction"). The Proposed Transaction is expected to close after the
expiration or termination of the applicable waiting periods under the HSR Act
and approval by the Federal Communications Commission ("FCC"). Contemporaneous
with this transaction, Evergreen entered into a joint purchase agreement with
Chancellor Broadcasting Company ("Chancellor") under which Chancellor agreed to
acquire the Chicago, Detroit and Los Angeles Viacom Radio Properties referred to
above for $480.0 million from Evergreen or from Viacom directly.
The accompanying combined financial statements reflect the carve-out
historical results of operations and financial position of WDRQ Inc. These
financial statements are not necessarily indicative of the results that would
have occurred if the Company had been a separate stand-alone entity during the
periods presented.
The financial statements do not include Viacom's corporate assets or
liabilities not specifically identifiable to the Company. Corporate overhead
allocations have been included in the accompanying statements of earnings in
corporate general and administrative expense and station operating expenses.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets. Repair and maintenance costs are charged to expense when
incurred.
(b) Intangible Assets
Intangible assets consist primarily of broadcast licenses. The Company
amortizes such intangible assets using the straight-line method over 40 years.
The Company continually evaluates the propriety of the carrying amount of
intangible assets as well as the amortization period to determine whether
current events or circumstances warrant adjustments to the carrying value and/or
revised estimates of useful lives. This evaluation consists of the projection of
undiscounted operating income before depreciation, amortization, nonrecurring
charges and interest over the remaining amortization periods of the related
intangible assets. At this time, the Company believes that no significant
impairment of intangible assets has occurred and that no reduction of the
estimated useful lives is warranted.
(c) Barter Transactions
The Company trades commercial air time for goods and services used
principally for promotional, sales and other business activities. An asset and
liability are recorded at the fair market value of the goods or services to be
received. Barter revenue is recorded and the liability relieved when commercials
are broadcast and barter expense is recorded and the asset relieved when goods
or services are received or used.
F-129
<PAGE> 281
WDRQ INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(d) Revenue Recognition
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
(e) Income Taxes
Income taxes are accounted for under the asset and liabilities method.
Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable earnings. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount more likely than not to be realized. Income
tax expense is the total of tax payable for the period and the change during the
period in deferred tax assets and liabilities.
(f) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. The adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
(g) Fair Value
The carrying amount of accounts receivable and accounts payable
approximates fair value because of the short maturity of these instruments.
(h) Disclosure of Certain Significant Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
In the opinion of management, credit risk with respect to trade receivables
is limited due to the large number of diversified customers in the Company's
customer base. The Company performs ongoing credit evaluations of its customers
and believes that adequate allowances for any uncollectible trade receivables
are maintained. No one customer accounted for more than 10% of net revenues in
1994, 1995, or 1996.
(i) Unaudited Interim Financial Information
In the opinion of management, the unaudited interim combined financial
statements as of and for the six months ended June 30, 1996 and 1997, reflect
all adjustments, consisting of only normal and recurring items, which are
necessary for a fair presentation of the results for the interim periods
presented. The results for the interim periods ended June 30, 1996 and 1997 are
not necessarily indicative of results to be expected for any other interim
period or for the full year.
F-130
<PAGE> 282
WDRQ INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1995 and
1996:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1995 1996
----------- ------ ------
<S> <C> <C> <C>
Broadcast facilities.................... 8-20 years $ 754 $ 787
Office equipment and other.............. 5-8 years 333 496
Construction in progress................ 110 23
------ ------
1,197 1,306
Accumulated depreciation................ 708 806
------ ------
$ 489 $ 500
====== ======
</TABLE>
(4) INTANGIBLE ASSETS
Intangible assets at December 31, 1995 and 1996 consist of broadcast
licenses which are being amortized over forty years and are presented net of
accumulated amortization of $1,814 and $2,070, respectively.
(5) INCOME TAXES
The Company's results of operations are included in the U.S. federal and
certain combined and separate state income tax returns of Viacom International
Inc.
The tax provisions and deferred tax liabilities presented have been
determined as if the Company were a stand-alone business filing separate tax
returns. Current tax liabilities are recorded through the equity account with
Viacom.
Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Current:
Federal................................. $549 $689 $319
State and local......................... 37 45 21
Deferred.................................. (4) 3 (14)
---- ---- ----
$582 $737 $326
==== ==== ====
</TABLE>
A reconciliation of the U.S. Federal statutory tax rate to the Company's
effective tax rate on earnings before income taxes is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. tax rate..................................... 35.0% 35.0% 35.0%
Amortization of intangibles................................. 6.8 5.1 14.3
State and local taxes, net of federal tax benefit........... 1.8 1.7 2.1
Other, net.................................................. 0.4 0.3 0.7
---- ---- ----
Effective tax rate........................................ 44.0% 42.1% 52.1%
==== ==== ====
</TABLE>
Deferred tax assets and liabilities are computed by applying the U.S.
federal income tax rate in effect to the gross amounts of temporary differences
and other tax attributes. These temporary differences are primarily the result
of fixed asset basis differences and bad debt expense. Deferred tax assets and
liabilities relating to state income taxes are not material.
F-131
<PAGE> 283
WDRQ INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(6) DEBT AND INTEREST COST
Viacom has not allocated any portion of its debt or related interest cost
to the Company, and no portion of Viacom's debt is specifically related to the
operations of the Company. Accordingly, the Company's financial statements
include no charges for interest.
(7) RELATED PARTY TRANSACTIONS
Intercompany balances between the Company and Viacom resulting from normal
trade activity are reflected in equity in the accompanying financial statements
(see note 8).
Viacom provides services for the Company in management, accounting and
financial reporting, human resources, information systems, legal, taxes and
other corporate services. The allocation of these expenses, which is generally
based on revenue dollars, is reflected in the accompanying financial statements
as corporate general and administrative expense. Management believes that the
method of allocation of corporate overhead is reasonable.
Viacom has a noncontributory pension plan covering substantially all of its
employees, including the employees of the Company. Costs related to these plans
are allocated to the Company based on payroll dollars and are included in
station operating expenses. The Company recognized expense related to these
costs in the amounts of $31, $33 and $82 for 1994, 1995 and 1996, respectively.
The assets and the related benefit obligation of the plans will not be
transferred to the Company upon consummation of the Proposed Transaction,
therefore, such assets and obligations are not included in the notes to the
Company's financial statements.
Viacom utilizes a centralized cash management system. As a result, the
Company carries minimal cash. Disbursements are funded by the Parent upon demand
and cash receipts are transferred to the Parent daily.
The Company, from time to time, enters into transactions with companies
owned by or affiliated with Viacom. Generally, services received from such
related parties are charged to the Company at amounts which would be incurred in
transactions between unrelated entities.
(8) EQUITY
Equity represents Viacom's ownership interest in the recorded net assets of
the Company. All cash transactions and intercompany transactions flow through
the Equity account. A summary of the activity is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------- -------
<S> <C> <C> <C>
Balance at beginning of period.......... $9,769 $ 9,849 $ 9,706
Net earnings............................ 741 1,015 300
Net intercompany activity............... (661) (1,158) (1,279)
------ ------- -------
Balance at end of period................ $9,849 $ 9,706 $ 8,727
====== ======= =======
</TABLE>
(9) COMMITMENTS AND CONTINGENCIES
The Company has noncancelable operating leases, primarily for office space.
These leases generally contain renewal options for periods ranging from one to
ten years and require the Company to pay all executory costs such as maintenance
and insurance. Rental expense for operating leases (excluding those with lease
terms of one month or less that were not renewed) was approximately $335, $338
and $347 during 1994, 1995 and 1996, respectively.
F-132
<PAGE> 284
WDRQ INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31, 1996
are as follows:
<TABLE>
<S> <C>
Year ending December 31:
1997.................................... $ 336
1998.................................... 346
1999.................................... 355
2000.................................... 364
2001.................................... 323
Thereafter.............................. 183
------
$1,907
======
</TABLE>
The Company is involved with certain claims and lawsuits which are
generally incidental to its business. Management believes that any ultimate
liability resulting from those actions or claims will not have a material
adverse effect on the Company's results of operations, financial position or
cash flows.
(10) SUBSEQUENT EVENT
On April 14, 1997, Evergreen Media Corporation and Chancellor Broadcasting
Company entered into an agreement with ABC Radio ("ABC"), a division of The Walt
Disney Company, whereby ABC will purchase from Evergreen and Chancellor two
radio stations, WDRQ-FM and WJZW-FM for a total of $105 million.
F-133
<PAGE> 285
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
of Trefoil Communications, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, stockholders' equity and cash
flows, present fairly, in all material respects, the financial position of
Trefoil Communications, Inc. and its subsidiaries at December 31, 1995 and 1994,
and the results of their operations and their cash flows for each of the two
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 16 to the financial statements, the Company was sold
to Chancellor Radio Broadcasting Company, formerly Chancellor Broadcasting
Company, on February 14, 1996.
PRICE WATERHOUSE LLP
Los Angeles, California
February 14, 1996
F-134
<PAGE> 286
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Chancellor Broadcasting Company:
We have audited the accompanying consolidated statements of operations,
changes in common stockholders' equity, and cash flows of Trefoil
Communications, Inc. and Subsidiaries for the period January 1, 1996 through
February 13, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of their
operations and their cash flows for the period January 1, 1996 through February
13, 1996, in conformity with generally accepted accounting principles.
As discussed in Note 16 to the financial statements, the Company was sold
to Chancellor Radio Broadcasting Company on February 14, 1996.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
March 24, 1997
F-135
<PAGE> 287
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
-------- --------
<S> <C> <C>
Current assets:
Cash.................................. $ 9,639 $ 4,857
Receivables, net of allowance for
doubtful accounts of $1,535 and
$1,630, respectively............... 22,468 22,397
Prepaid expenses and other current
assets............................. 1,312 917
-------- --------
Total current assets.......... 33,419 28,171
Property and equipment, at cost, net of
accumulated depreciation and
amortization (Note 4)................. 18,308 17,204
Intangible assets, net of accumulated
amortization of $16,705 and $22,071,
respectively.......................... 184,470 184,197
Other assets............................ 9,751 7,918
-------- --------
$245,948 $237,490
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt..... $ 7,000 $ 6,500
Accounts payable...................... 2,771 2,233
Accrued expenses (Note 4)............. 6,066 5,715
Income taxes payable.................. 298 96
-------- --------
Total current liabilities..... 16,135 14,544
Long-term debt (Note 6)................. 98,000 92,500
Convertible senior notes (Note 8)....... 30,000 30,000
Payable to affiliates (Note 14)......... 16,241 20,613
Deferred income taxes (Note 10)......... 18,877 19,218
Other long-term liabilities (Note 4).... 14,747 19,129
-------- --------
194,000 196,004
Mandatorily redeemable preferred stock
(Note 9):
7.5% Series A cumulative convertible
preferred stock $.10 par value;
authorized, issued and outstanding
70,000 shares...................... 70,000 70,000
Stockholders' equity:
Preferred stock $.10 par value;
authorized 30,000 shares; none
issued and outstanding
Common stock $.10 par value; authorized
50,000 shares; issued and outstanding
10,364 shares......................... 1 1
Additional paid-in capital............ 41,656 41,656
Accumulated deficit................... (59,709) (70,171)
-------- --------
(18,052) (28,514)
Commitments and contingencies (Notes 12
and 15)...............................
-------- --------
$245,948 $237,490
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-136
<PAGE> 288
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PERIOD ENDED
------------------------ FEBRUARY 13,
1994 1995 1996
---------- ---------- ------------
<S> <C> <C> <C>
Gross broadcasting revenues.............................. $109,219 $108,849 $ 9,698
Less agency commissions.................................. 14,332 14,244 1,234
-------- -------- -------
Net revenues................................... 94,887 94,605 8,464
-------- -------- -------
Costs and expenses:
Station operating expenses............................. 75,427 73,720 7,762
Corporate expenses..................................... 3,355 3,139 2,215
Depreciation and amortization.......................... 3,038 2,992 349
Amortization of intangibles............................ 5,961 5,759 672
-------- -------- -------
87,781 85,610 10,998
-------- -------- -------
Operating income (loss)................................ 7,106 8,995 (2,534)
-------- -------- -------
Other income (expenses):
Interest expense....................................... (12,923) (14,703) (1,651)
Gain (loss) on sale of broadcast assets (Note 11)...... 5,462 -- --
Miscellaneous, net..................................... (4) 78 (49)
-------- -------- -------
(7,465) (14,625) (1,700)
-------- -------- -------
Loss before income taxes and extraordinary loss.......... (359) (5,630) (4,234)
Income tax benefit (expense) (Note 10)................... (1,355) 1,287 1,694
-------- -------- -------
Loss before extraordinary loss......................... (1,714) (4,343) (2,540)
Extraordinary loss on early extinguishment of debt....... -- -- (4,451)
-------- -------- -------
Net loss................................................. (1,714) (4,343) (6,991)
Dividends on mandatorily redeemable preferred stock...... (5,619) (6,119) (809)
-------- -------- -------
Loss applicable to common stock.......................... $ (7,333) $(10,462) $(7,800)
======== ======== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-137
<PAGE> 289
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
$0.10 PAR VALUE ADDITIONAL
---------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------- ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993.................... 10,364 $ 1 $ 41,656 $(52,376) $(10,719)
Net loss.................................... (1,714) (1,714)
Mandatorily redeemable preferred dividend... (5,619) (5,619)
------- ----- -------- -------- --------
Balance, December 31, 1994.................... 10,364 1 41,656 (59,709) (18,052)
Net loss.................................... (4,343) (4,343)
Mandatorily redeemable preferred dividend... (6,119) (6,119)
------- ----- -------- -------- --------
Balance, December 31, 1995.................... 10,364 1 41,656 (70,171) (28,514)
Additional capital contributions............ 156,326 156,326
Net loss.................................... (6,991) (6,991)
Mandatorily redeemable preferred dividend... (809) (809)
------- ----- -------- -------- --------
Balance, February 13, 1996.................... 10,364 $ 1 $197,982 $(77,971) $120,012
======= ===== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-138
<PAGE> 290
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PERIOD ENDED
----------------------- FEBRUARY 13,
1994 1995 1996
---------- --------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................ $ (1,714) $(4,343) $ (6,991)
Adjustments to reconcile net loss to cash provided by
operating activities:
Depreciation of property and equipment............... 3,038 2,992 349
Amortization of intangible and other assets.......... 6,736 6,569 672
(Gain) loss on disposal of assets.................... (5,462) -- --
Deferred income taxes................................ (279) (168) 1,694
Non-cash interest expense............................ 3,180 4,479 81
Non-cash extraordinary loss.......................... -- -- 4,451
Changes in assets and liabilities which increase
(decrease) cash:
Receivables........................................ 263 71 3,379
Prepaid expenses and other current assets.......... (8) 395 (342)
Accounts payable, accrued expenses and income taxes
payable......................................... (2,356) (1,078) 1,568
Other net.......................................... 358 (529) --
-------- ------- ---------
Cash from operating activities.................. 3,756 8,388 4,861
-------- ------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Station acquisitions.................................... -- (5,528) --
Purchase of property and equipment...................... (3,341) (1,642) --
Proceeds from disposal of broadcast assets.............. 22,802 -- --
-------- ------- ---------
Cash from (used in) investing activities........ 19,461 (7,170) --
-------- ------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from affiliate borrowings...................... 6,000 -- --
Additional capital contributions........................ -- -- 156,326
Principal payments of long-term debt.................... (24,000) (6,000) (151,252)
Dividends paid.......................................... -- -- (14,753)
-------- ------- ---------
Cash used in financing activities............... (18,000) (6,000) (9,679)
-------- ------- ---------
Net increase (decrease) in cash........................... 5,217 (4,782) (4,818)
Cash beginning of period.................................. 4,422 9,639 4,857
-------- ------- ---------
Cash end of period........................................ $ 9,639 $ 4,857 $ 39
======== ======= =========
</TABLE>
SEE NOTE 5 FOR NON-CASH DISCLOSURE.
The accompanying notes are an integral part of the financial statements.
F-139
<PAGE> 291
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- THE COMPANY
The accompanying consolidated financial statements of Trefoil
Communications, Inc. (the "Company", formerly Shamrock Holdings, Inc.) include
the accounts of the Company and its subsidiaries. All significant intercompany
transactions and balances have been eliminated. As of December 31, 1995, the
Company's broadcasting subsidiary ("Broadcasting") owned and operated ten radio
properties in major markets across the United States. In August 1995, the
Company's shareholders entered into an agreement to sell their interest in the
Company, see Note 16.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue recognition
Broadcasting revenues are derived primarily from the sale of program time
and commercial announcements to local, regional and national advertisers.
Revenue is recognized when programs and commercial announcements are broadcast.
Barter transactions
The Company trades certain advertising time for various goods and services.
These transactions are recorded at the estimated fair value of the goods or
services received. The related revenue is recognized when commercials are
broadcast; goods or services received are recorded as assets or expenses when
received or used, respectively.
Use of estimates in preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Property and equipment
Expenditures for additions, renewals and betterments are capitalized.
Expenditures for maintenance and repairs are charged to expense as incurred.
Depreciation is computed on the straight-line method based on the estimated
useful lives of the assets.
Intangible assets
Intangible assets represent the purchase price of broadcasting properties
in excess of the fair value of net tangible assets acquired and include value
allocated to FCC broadcasting licenses and goodwill. Intangible assets are
amortized on the straight-line basis over forty years.
The Company evaluates intangible assets for potential impairment by
analyzing the operating results, trends and prospects of the Company's stations,
as well as by comparing them to their competitors. The Company also takes into
consideration recent acquisition patterns within the broadcast industry, the
impact of recently enacted or potential FCC rules and regulations and any other
events or circumstances which might indicate potential impairment.
Income taxes
The Company files a consolidated federal income tax return and combined
California franchise tax return with its subsidiaries. Effective January 1,
1993, the Company prospectively adopted Statement of Financial
F-140
<PAGE> 292
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." The
adoption of SFAS 109 changed the Company's method of accounting for income taxes
from the deferred method (APB 11) to an asset and liability approach. The asset
and liability approach requires the recognition of deferred tax liabilities and
assets for the expected future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities.
NOTE 3 -- ACQUISITION
In February 1995, the Company acquired for $5.5 million cash (including
acquisition costs) the broadcast license and assets of a second FM radio station
in Denver, Colorado. The acquisition has been accounted for as a purchase and
resulted in an excess of acquisition costs over fair value of the net assets
acquired of $5 million which has been allocated to intangible assets, primarily
FCC broadcasting licenses and goodwill. Pro forma results for the acquisition of
the Denver station are not presented as they are not materially different from
historical results.
NOTE 4 -- COMPOSITION OF CERTAIN BALANCE SHEET ACCOUNTS
<TABLE>
<CAPTION>
DECEMBER 31,
USEFUL LIFE ---------------------------
IN YEARS 1994 1995
----------- ------------ ------------
<S> <C> <C> <C>
PROPERTY AND EQUIPMENT
Land and land improvements............ $ 2,874,000 $ 2,828,000
Buildings and leasehold
improvements....................... 10-40 6,183,000 6,274,000
Transmittal and technical equipment... 4-20 17,872,000 18,703,000
Furniture and fixtures................ 5-10 4,167,000 4,811,000
Automotive............................ 2-5 622,000 645,000
Construction in progress.............. 175,000 138,000
------------ ------------
31,893,000 33,399,000
Less: Accumulated depreciation and
amortization.......................... (13,585,000) (16,195,000)
------------ ------------
$ 18,308,000 $ 17,204,000
============ ============
ACCRUED EXPENSES
Salaries and other employee
compensation....................... $ 3,300,000 $ 2,794,000
Interest.............................. 461,000 383,000
Payable to affiliate.................. 802,000 1,346,000
Other................................. 1,503,000 1,192,000
------------ ------------
$ 6,066,000 $ 5,715,000
============ ============
OTHER LONG-TERM LIABILITIES
Deferred compensation................. $ 3,689,000 $ 3,547,000
Dividends payable on mandatorily
redeemable preferred stock......... 7,825,000 13,944,000
Interest.............................. 1,034,000 1,140,000
Other................................. 2,199,000 498,000
------------ ------------
$ 14,747,000 $ 19,129,000
============ ============
</TABLE>
F-141
<PAGE> 293
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 -- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
DECEMBER 31, PERIOD ENDED
------------------------ FEBRUARY 13,
1994 1995 1996
---------- ---------- ------------
<S> <C> <C> <C>
Cash paid (received) during the period
for:
Interest.............................. $9,763,000 $9,562,000 $2,034,000
Income taxes.......................... 1,397,000 217,000 --
Station acquisitions:
Property and equipment................ -- 434,000 --
FCC licenses and goodwill............. -- 5,094,000 --
Other assets.......................... -- -- --
Net working capital................... -- -- --
Common stock issued................... -- -- --
</TABLE>
NOTE 6 -- LONG-TERM DEBT
Long-term debt comprises the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1995
------------ -----------
<S> <C> <C>
Revolving bank credit at varying
interest rates; payable quarterly.
Principal payments in varying amounts
quarterly; final installment due
2003.................................. -- $99,000,000
Bank term loans at varying interest
rates; payable quarterly. Principal
payments in varying amounts quarterly;
final installment due 2000............ $ 95,500,000 --
Revolving bank credit at varying
interest rates; payable quarterly.
Principal payments in varying amounts
quarterly; final installment due
2001.................................. 9,500,000 --
------------ -----------
105,000,000 99,000,000
Less: Current portion................... (7,000,000) (6,500,000)
------------ -----------
$ 98,000,000 $92,500,000
============ ===========
</TABLE>
In August 1995, the Company restructured and amended its existing bank
credit agreement by entering into an eight year, $105 million revolving credit
agreement which extended the final maturity to 2003 and modified quarterly
principal repayments. Costs of $954,000 related to the amended credit agreement
and of $4.8 million incurred when the credit agreement was entered into were
capitalized and are being amortized over 8 years. These costs are included in
other assets in the balance sheet.
Borrowings under the credit agreement are secured by substantially all of
the Company's assets. Interest is charged at varying rates according to
alternatives selected by the Company at the time funds are borrowed. Currently,
interest accrues at floating rates (8.31% and 9.13% at December 31, 1995 and
1994, respectively). As borrowings under the credit agreement are at market
interest rates, the carrying value of the Company's long-term debt reflects its
fair value.
The credit agreement imposes restrictive covenants on the Company with
respect to, among other things, the maintenance of certain financial ratios and
limits on capital expenditures, new indebtedness, investments, disposition of
assets and declaration of cash dividends.
F-142
<PAGE> 294
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1995, aggregate scheduled mandatory principal reductions of
the Company's bank debt and borrowings from affiliates (Note 14) are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNTS
---- ------------
<S> <C>
1996.................................... $ 6,500,000
1997.................................... 10,000,000
1998.................................... 10,000,000
1999.................................... 15,000,000
2000.................................... 15,000,000
After 2000.............................. 63,113,000
------------
$119,613,000
============
</TABLE>
NOTE 7 -- STOCKHOLDERS' EQUITY
During 1993, the number of authorized shares of common stock was increased
to 50,000 shares, 10,364 of which were outstanding at December 31, 1995. The
Company has reserved 3,658 and 8,535 shares of common stock for issuance upon
the conversion of the convertible senior notes ("Senior Notes", Note 8) and
Series A cumulative convertible preferred stock ("Series A Preferred Stock",
Note 9), respectively.
NOTE 8 -- CONVERTIBLE SENIOR NOTES
On July 30, 1993, the Company issued $30 million in ten-year Senior Notes
to Trefoil Capital Investors, L.P. ("Trefoil"). The notes are convertible into
shares of the Company's common stock at a conversion rate of $8,201 per share,
subject to certain anti-dilution adjustments, and are redeemable by the Company
at any time on or after July 30, 1996, initially at a specified premium to par,
declining to par for redemptions on or after July 30, 2001. Mandatory
redemptions of $7.5 million and $11.25 million are due July 30, 2001 and 2002,
respectively, and any remaining unpaid principal is due in 2003.
Interest accrues at the rate of 7.5% per annum and is payable semi-annually
on January 31 and July 31. Interest is payable in cash, however, through January
31, 1998, the Company may elect to pay interest by issuing additional
paid-in-kind notes ("PIK Notes"). PIK Notes are not convertible and must be
redeemed on a pro rata basis in accordance with the redemption schedule of the
Senior Notes. Interest on the PIK Notes accrues at 10% per annum, which payment
terms are identical to the Senior Notes, including the option to issue
additional PIK Notes for interest obligations.
PIK Notes of $4.9 million were outstanding as of December 31, 1995. Accrued
interest on the Senior Notes as of December 31, 1995 and 1994 has been included
in payable to affiliates and classified as a long-term liability.
Based on the transaction described in Note 16, management considers the
fair market value of the Senior Notes to approximate their carrying value.
NOTE 9 -- MANDATORILY REDEEMABLE PREFERRED STOCK
Concurrent with the sale of the Senior Notes, the Company issued 70,000
shares of Series A Preferred Stock to Trefoil for $70 million.
With respect to dividend rights and rights on liquidation, dissolution and
winding up, Series A Preferred Stock ranks senior to the common stock and senior
to any other series or class of preferred stock which may be issued by the
Company (collectively, "Junior Securities").
F-143
<PAGE> 295
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In the event of any liquidation, dissolution or winding up of the Company,
holders of Series A Preferred Stock will be entitled to receive in preference to
holders of Junior Securities an amount equal to $1,000 per share plus all
accrued but unpaid dividends.
As long as shares of Series A Preferred Stock remain outstanding, the
holders of such shares are entitled to receive, when, as and if declared by the
Board of Directors, out of assets of the Company legally available therefore,
cumulative cash dividends at an annual rate of 7.5% (if in arrears, compounded
quarterly at a rate of 8.625% per annum with respect to dividends in arrears,
through the date of payment of such arrearages), payable quarterly in arrears on
the last business day of each calendar quarter.
Each share of Series A Preferred Stock is convertible at the option of the
holder into one share of common stock at $8,201 per common share, subject to
certain antidilution adjustments (the "Conversion Price").
The Series A Preferred Stock may be redeemed by the Company any time after
the third anniversary of the issuance date (in integral multiples having an
aggregate stated value of at least $7 million) if (i) all quarterly dividends on
the Series A Preferred Stock have been paid in full, (ii) the Company has
consummated an initial public offering for its common stock and (iii) the market
price of the common stock is equal to at least 165% of the Conversion Price for
at least twenty out of thirty consecutive trading days preceding the notice of
redemption. In any such event, the redemption price per share will be equal to
$1,000, plus accrued and unpaid dividends to the redemption date.
The Company is required to redeem 14,000 shares of the original issue on
July 30, 2003, 28,000 shares on July 30, 2004 and any remaining outstanding
shares in 2005. The number of shares to be redeemed by the Company on any
mandatory redemption date shall be reduced by the number of shares optionally
redeemed by the Company prior to such date, to the extent such shares have not
previously been credited against the Company's mandatory redemption obligations.
If the Company shall fail to redeem shares of Series A Preferred Stock when
required, the annual dividend rate on the outstanding shares of Series A
Preferred Stock will be increased to 9.375% (compounded quarterly with respect
to dividends in arrears at a rate of 10.780% per annum) of the stated value of
such shares plus accrued and unpaid dividends from the date of failure to redeem
through the date of redemption. If less than all of the outstanding shares of
Series A Preferred Stock are to be redeemed, the shares of Series A Preferred
Stock to be redeemed shall be selected pro rata.
Although not declared by the Company's Board of Directors, dividends on the
Series A Preferred Stock have been accrued in the accompanying financial
statements. Based on management intentions, including restrictions on the
payment of dividends imposed by the Company's bank credit agreement, accrued
dividends have been classified as a long-term liability.
Based on the transaction described in Note 16, management considers the
fair market value of the Series A Preferred Stock to approximate their carrying
value.
F-144
<PAGE> 296
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10 -- INCOME TAXES
All of the Company's revenues were generated in the United States. The
income tax benefit (expense) on income from continuing operations is comprised
of the following:
<TABLE>
<CAPTION>
DECEMBER 31, PERIOD ENDED
------------------------- FEBRUARY 13,
1994 1995 1996
----------- ---------- ------------
<S> <C> <C> <C>
Current:
Federal............................... $ (578,000) $1,025,000 $ 321,000
State................................. (1,056,000) 94,000 29,000
----------- ---------- ----------
(1,634,000) 1,119,000 350,000
Deferred:
Federal............................... (501,000) 168,000 1,150,200
State................................. 780,000 -- 193,800
----------- ---------- ----------
279,000 168,000 1,344,000
----------- ---------- ----------
$(1,355,000) $1,287,000 $1,694,000
=========== ========== ==========
</TABLE>
Deferred tax liabilities (assets) are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1995
----------- -----------
<S> <C> <C>
Deferred gain........................... $15,549,000 $15,358,000
Amortization of FCC licenses and other
intangibles........................... 5,519,000 5,687,000
Depreciation............................ 3,194,000 2,741,000
Other................................... 519,000 560,000
----------- -----------
Gross deferred tax liabilities........ 24,781,000 24,346,000
----------- -----------
Net operating loss carryforward......... (878,000) (584,000)
AMT and other credit carryforward....... (3,316,000) (2,943,000)
Deferred compensation and other
deductions............................ (2,586,000) (2,627,000)
----------- -----------
Gross deferred tax assets............. (6,780,000) (6,154,000)
Valuation allowance................... 876,000 1,026,000
----------- -----------
Net deferred tax assets............... (5,904,000) (5,128,000)
----------- -----------
$18,877,000 $19,218,000
=========== ===========
</TABLE>
The Company has a federal net operating loss (NOL) carryover of $1.7
million, subject to various limitations on its utilization. The Company also has
AMT Credit and Investment Tax Credit carryforwards for tax purposes of $2.2
million and $734,000, respectively. The above carryovers expire in the years
2000 through 2003, except the AMT credit which has no expiration. Under SFAS
109, the Company has recorded valuation allowances against the realization of
the federal tax benefits from net operating losses and investment tax credits in
the amounts of $292,000 and $734,000, respectively. The valuation allowances are
based on management's estimates and analysis, which include the impact of tax
laws which may limit the Company's ability to utilize such loss carryforwards
and tax credits.
F-145
<PAGE> 297
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The principal items causing an effective rate which differs from the
Federal statutory rate are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------- PERIOD ENDED
1994 1995 FEBRUARY 13, 1996
----------- ----------- -----------------
<S> <C> <C> <C>
Federal statutory rate....................... $ 125,000 $ 1,971,000 $1,440,000
Amortization of intangibles.................. (1,703,000) (1,627,000) (190,000)
State taxes, net of federal benefit.......... (180,000) 61,000 214,000
Reduction of tax reserve..................... -- 1,109,000 --
SFAS 109 rate adjustment..................... -- -- --
Recognition of net operating loss
carryover.................................. 504,000 -- --
Other, net................................... (101,000) (227,000) 230,000
----------- ----------- ----------
$(1,355,000) $ 1,287,000 $1,694,000
=========== =========== ==========
</TABLE>
NOTE 11 -- RADIO BROADCASTING DISPOSITIONS
In April 1994, the Company sold the broadcast license and assets of its
radio stations in Cleveland, Ohio for $12.1 million (excluding disposal costs).
This sale resulted in a gain of $670,000, before related income taxes. A portion
of the sale proceeds was utilized to reduce bank debt by $11 million.
In June 1994, the Company sold the broadcast license and assets of its
radio station in Seattle, Washington for $12.0 million (excluding disposal
costs). This sale resulted in a gain of $4.8 million, before related income
taxes. A portion of the sale proceeds was utilized to reduce bank debt by $11
million.
NOTE 12 -- COMMITMENTS
The following are the future minimum rental payments under operating leases
(net of minimum rentals under noncancelable subleases) that have initial or
remaining lease terms in excess of one year:
<TABLE>
<CAPTION>
YEAR AMOUNTS
---- -----------
<S> <C>
1996.................................................... $ 3,290,000
1997.................................................... 3,029,000
1998.................................................... 2,422,000
1999.................................................... 1,701,000
2000.................................................... 1,314,000
After 2000.............................................. 5,604,000
-----------
$17,360,000
===========
</TABLE>
Certain leases contain renewal options with the same lease terms, except
that rentals may be adjusted to current market rates at the time of renewal.
Rental expense under operating leases for the period ended February 13, 1996 and
the years ended December 31, 1995 and 1994 aggregated $0.3 million, $2.9 million
and $3.3 million, respectively.
NOTE 13 -- EMPLOYEE BENEFIT PLANS
The Company maintains an elective Employees' Savings Plan for all employees
not covered by a collective bargaining agreement and who have one or more years
of continuous employment. The Company contributes 50% of the annual
contributions made by employees up to a maximum of 3% of each participating
employee's compensation. Participants are at all times fully vested in their
contributions, and the Company's contribution becomes fully vested to the
participant after seven years of continuous employment. The
F-146
<PAGE> 298
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company's contributions for the period ended February 13, 1996 and the years
ended December 31, 1995 and 1994 aggregated $0, $453,000 and $568,000,
respectively.
The Company also maintains a non-qualified, unfunded incentive compensation
plan for certain key employees providing for payments upon separation of
employment, death or disability. As of December 31, 1995 the liability recorded
for the value of amounts awarded to participants under the plan was
approximately $3.5 million.
NOTE 14 -- AFFILIATE TRANSACTIONS
Both Shamrock Holdings of California ("SHOC") and Trefoil are related
parties of the Company through commonality of certain officers and directors. In
addition to the financing transactions described at Notes 8 and 9, the Company
made payments to SHOC for interest on cash advances, office space rent and an
executive management fee in the aggregate of $20,000, $175,000 and $174,000 for
the period ended February 13, 1996 and the years ended December 31, 1995 and
1994, respectively. In July 1993, the Company entered into an executive
management agreement with Trefoil in consideration for a fee based on the
Company's broadcasting revenues. For the period ended February 13, 1996 and the
years ended December 31, 1995 and 1994, the statement of operations includes in
corporate expenses a charge of $63,000, $544,000 and $544,000, respectively, for
fees payable to Trefoil. In connection with the issuance of the Senior Notes and
the Series A Preferred Stock, the Company paid Trefoil $3 million for financial
advisory services. These costs were capitalized and are being amortized over the
term of the Senior Notes and Series A Preferred Stock. These costs are included
in other assets in the balance sheet.
Payable to affiliates comprises the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1995
----------- -----------
<S> <C> <C>
Note payable to affiliate at varying interest rates;
payable quarterly. No stated maturity................... $ 7,898,000 $ 9,007,000
Note payable to affiliate at varying interest rates;
payable quarterly. No stated maturity................... 6,030,000 6,750,000
PIK notes (Note 8)........................................ 2,313,000 4,856,000
----------- -----------
$16,241,000 $20,613,000
=========== ===========
</TABLE>
On December 16, 1994, the Company issued a $6 million promissory note to
Trefoil, $5.75 million of which was used in 1995 for the acquisition of a radio
station in Denver. The note bears interest at LIBOR plus 7% (12.938% at December
31, 1995) and has no stated maturity. Accrued interest is added to the principal
of the note at the end of each calendar quarter and, accordingly, the
outstanding balances at December 31, 1995 and December 31, 1994 include $720,000
and $30,000 of interest expensed in 1995 and 1994, respectively.
On September 29, 1993, the Company issued a $7 million promissory note to
SHOC and used the proceeds to reduce Broadcasting's bank debt. The note bears
interest at LIBOR plus 7% (12.938% at December 31, 1995) and has no stated
maturity. Accrued interest is added to the principal of the note at the end of
each calendar quarter and, accordingly is included in the outstanding balance at
December 31, 1995 and 1994. Interest expense includes for the period ended
February 13, 1996 and the years ended December 31, 1995 and 1994 $129,000,
$1,109,000 and $747,000, respectively.
Based on the transaction described in Note 16, management considers the
fair market value of these notes to approximate their carrying value.
F-147
<PAGE> 299
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15 -- LITIGATION
The Company is a plaintiff or defendant in several legal actions, the
probable outcome of which are not considered material, either individually or in
the aggregate.
NOTE 16 -- SUBSEQUENT EVENT -- SALE OF THE COMPANY
On February 14, 1996, the Company's shareholders completed the sale of all
issued and outstanding shares of the Company to Chancellor Radio Broadcasting
Company, formerly Chancellor Broadcasting Company, ("Chancellor") for $395
million in cash. A portion of the proceeds was utilized to pay-off bank debt,
convertible senior notes, payable to affiliates and redeem outstanding preferred
stock and pay dividends payable thereon. As of the closing date, the Company,
along with Broadcasting, became wholly-owned subsidiaries of Chancellor. No
accounts in the accompanying financials have been adjusted for the effects of
this transaction; however, the statement of operations for the period ended
February 13, 1996 includes an extraordinary loss on the early extinguishment of
debt of $2.5 million, net of tax of $1.7 million, resulting from the early
extinguishment of bank debt and convertible senior notes discussed above.
F-148
<PAGE> 300
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Colfax Communications, Inc. Radio Group:
We have audited the accompanying combined balance sheets of the Colfax
Communications, Inc. Radio Group (the "Company") as of December 31, 1996, 1995,
and 1994, and the related combined statements of income (loss), changes in
partners' equity and cash flows for each of the three years in the period ended
December 31, 1996. These combined financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In January 1997, substantially all of the assets and liabilities of the
Company were sold.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Colfax
Communications, Inc. Radio Group as of December 31, 1996, 1995, and 1994, and
the results of its operations and its cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
Washington, D.C.
June 30, 1997
F-149
<PAGE> 301
COLFAX COMMUNICATIONS, INC. RADIO GROUP
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Current assets:
Cash............................................. $ 1,718,589 $ 682,672 $ 216,414
Accounts receivable, net of allowance for
doubtful accounts of $710,813, $441,889, and
$238,801, respectively........................ 15,514,187 7,626,579 8,978,881
Prepaid expenses and other current assets........ 520,358 286,774 343,441
------------ ----------- -----------
Total current assets..................... 17,753,134 8,596,025 9,538,736
Property and equipment at cost, net of
depreciation..................................... 14,508,097 8,675,724 9,608,603
Intangibles and other noncurrent assets at cost,
net of amortization.............................. 147,579,599 32,383,587 37,653,803
------------ ----------- -----------
Total assets............................. $179,840,830 $49,655,336 $56,801,142
============ =========== ===========
Liabilities:
Accounts payable and accrued expenses............ $ 5,116,890 $ 3,224,139 $ 3,883,242
Current maturities of long-term debt............. -- -- 900,000
------------ ----------- -----------
Total current liabilities................ 5,116,890 3,224,139 4,783,242
Long-term debt................................... 55,650,000 39,225,000 7,100,000
------------ ----------- -----------
Total liabilities........................ 60,766,890 42,449,139 11,883,242
------------ ----------- -----------
Commitments (Note 8):
Partners' equity:
Radio Acquisition Associates..................... (1,141,558) (2,783,226) (3,121,671)
Equity Group Holdings............................ 119,013,080 9,888,902 47,558,478
Colfax Communications, Inc....................... 1,202,418 100,521 481,093
Class B Limited Partners......................... -- -- --
------------ ----------- -----------
Total partners' equity................... 119,073,940 7,206,197 44,917,900
------------ ----------- -----------
Total liabilities and partners' equity... $179,840,830 $49,655,336 $56,801,142
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-150
<PAGE> 302
COLFAX COMMUNICATIONS, INC. RADIO GROUP
COMBINED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Advertising revenues:
Local sponsors.................................... $37,496,454 $23,425,588 $24,147,363
National sponsors................................. 12,885,713 9,151,724 8,221,228
Other............................................. 2,518,200 1,910,483 2,090,737
----------- ----------- -----------
Gross advertising revenues................ 52,900,367 34,487,795 34,459,328
Less -- Commissions............................... (6,785,322) (4,345,062) (4,283,386)
----------- ----------- -----------
Net advertising revenues.................. 46,115,045 30,142,733 30,175,942
----------- ----------- -----------
Operating expenses:
Programming....................................... 7,675,793 5,461,691 9,604,067
Sales and advertising............................. 14,507,662 11,360,597 10,885,717
General and administrative........................ 5,793,377 4,332,286 3,651,832
Engineering....................................... 1,260,447 1,014,375 1,084,282
Depreciation and amortization..................... 4,617,958 6,505,492 7,599,901
----------- ----------- -----------
Total operating expenses.................. 33,855,237 28,674,441 32,825,799
----------- ----------- -----------
Income (loss) from operations............. 12,259,808 1,468,292 (2,649,857)
Interest expense.................................... 4,368,669 655,795 531,387
Loss on sale of fixed assets........................ -- 770,689 --
Other expense (income).............................. (184,289) -- 75,364
----------- ----------- -----------
Net income (loss)......................... $ 8,075,428 $ 41,808 $(3,256,608)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-151
<PAGE> 303
COLFAX COMMUNICATIONS, INC. RADIO GROUP
COMBINED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
RADIO EQUITY CLASS B
ACQUISITION COLFAX GROUP LIMITED
ASSOCIATES COMM., INC. HOLDINGS PARTNERS TOTAL
----------- ----------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1993..................... $(2,464,398) $ 528,938 $ 52,305,936 $-- $ 50,370,476
Capital contributions
from partners......... 368,281 60,023 5,949,744 -- 6,378,048
Capital distributions to
partners.............. (1,678,638) (68,618) (6,826,760) -- (8,574,016)
Net income (loss)........ 653,084 (39,250) (3,870,442) -- (3,256,608)
----------- ---------- ------------ --- ------------
Balance, December 31,
1994..................... (3,121,671) 481,093 47,558,478 -- 44,917,900
Capital contributions
from partners......... -- 5,735 567,746 -- 573,481
Capital distributions to
partners.............. (1,031,464) (372,709) (36,922,819) -- (38,326,992)
Net income (loss)........ 1,369,909 (13,598) (1,314,503) -- 41,808
----------- ---------- ------------ --- ------------
Balance, December 31,
1995..................... (2,783,226) 100,521 9,888,902 -- 7,206,197
Capital contributions
from partners......... 5,104 1,130,725 111,941,654 -- 113,077,483
Capital distributions to
partners.............. (981,106) (82,845) (8,221,217) -- (9,285,168)
Net income (loss)........ 2,617,670 54,017 5,403,741 -- 8,075,428
----------- ---------- ------------ --- ------------
Balance, December 31,
1996..................... $(1,141,558) $1,202,418 $119,013,080 $-- $119,073,940
=========== ========== ============ === ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-152
<PAGE> 304
COLFAX COMMUNICATIONS, INC. RADIO GROUP
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).............................. $ 8,075,428 $ 41,808 $(3,256,608)
Adjustments to reconcile net loss to net cash
used in operating activities --
Depreciation and amortization............... 4,617,958 6,505,492 7,599,901
Loss on asset disposal...................... -- 770,689 57,398
Restructuring charge........................ -- 737,729 --
Change in assets and liabilities:
(Increase) decrease in accounts
receivable............................. (7,888,416) 1,352,302 (1,664,323)
(Increase) decrease in prepaid expenses
and other current assets............... (233,584) 56,667 170,619
Increase (decrease) in accounts payable
and accrued expenses................... 1,892,751 (1,396,832) 708,448
------------- ------------ -----------
Net cash provided by operating
activities........................... 6,464,137 8,067,855 3,615,435
------------- ------------ -----------
Cash flows from investing activities:
Cash paid for acquisition of intangibles and
other noncurrent assets..................... (126,017,951) (363,174) (12,944)
Payments for additions to property and
equipment................................... (5,907,584) (823,737) (968,929)
Disposal of intangible assets.................. 6,280,000 -- --
Disposal of fixed assets....................... -- 113,825 --
------------- ------------ -----------
Net cash used in investing
activities........................... (125,645,535) (1,073,086) (981,873)
------------- ------------ -----------
Cash flows from financing activities:
Repayment of note payable...................... (5,800,000) (8,000,000) (800,000)
Loan proceeds.................................. 22,225,000 39,225,000 --
Capital contributions from partners............ 113,077,483 573,481 6,378,048
Capital distributions to partners.............. (9,285,168) (38,326,992) (8,190,101)
------------- ------------ -----------
Net cash provided by (used in)
financing activities................. 120,217,315 (6,528,511) (2,612,053)
------------- ------------ -----------
Net increase (decrease) in cash.................. 1,035,917 466,258 21,509
Cash, beginning of period........................ 682,672 216,414 194,905
------------- ------------ -----------
Cash, end of period.............................. $ 1,718,589 $ 682,672 $ 216,414
============= ============ ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest......... $ 4,391,300 $ 615,900 $ 514,213
============= ============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-153
<PAGE> 305
COLFAX COMMUNICATIONS, INC. RADIO GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996, 1995, AND 1994
1. BASIS OF PRESENTATION:
The accompanying combined financial statements include the radio station
holdings of Colfax Communications, Inc. ("Colfax"), a Maryland Corporation.
Three of the stations serve the Washington, D.C., market: WGMS-FM (classical
format), WBIG-FM (oldies format), and WTEM(AM) (all-sports format). Two
stations, WBOB-FM (country format) and KQQL(FM) (oldies format), serve the
Minneapolis-St. Paul market. Five of the stations serve the Phoenix market:
KOOL-FM (oldies format), KOY(AM) (nostalgia format), KZON-FM (alternative
format), KISO(AM) (urban adult contemporary format), and KYOT-FM (new adult
contemporary format). Two stations serve the Milwaukee market: WMIL-FM (country
format) and WOKY(AM) (adult standard format). Three stations serve the Boise
market: KIDO(AM) (news/talk format), KLTB(FM) (oldies format), and KARO(FM)
(class rock format). All stations are owned by entities under the common control
of Colfax and its affiliates.
2. DESCRIPTION OF COLFAX COMMUNICATIONS, INC., RADIO GROUP:
Classical Acquisition Limited Partnership
Classical Acquisition Limited Partnership ("CALP") is a Maryland limited
partnership formed to acquire and operate radio stations WGMS(AM) (currently
WTEM(AM)) and WGMS-FM. Radio Acquisition Associates Limited Partnership, a
Maryland limited partnership, had a 98.04 percent general partner interest and
Equity Group Holdings, a District of Columbia general partnership, had a 1.96
percent limited partner interest in CALP prior to the admission of the Class B
Limited Partners as discussed below. Radio Acquisition Associates Limited
Partnership has Colfax as a 1 percent general partner and Equity Group Holdings
as a 99 percent limited partner.
Certain Class B Limited Partners were admitted to the partnership on
January 1, 1993 and on January 1, 1995. The Class B Limited Partners have a
13.25 percent interest in CALP and Equity Group Holdings' limited partnership
interest in CALP was reduced to 1.813 percent effective January 1, 1993. Radio
Acquisition Associates' Limited Partnership general partnership interest was
reduced to 90.687 percent and 84.937 percent effective January 1, 1993 and
January 1, 1995, respectively.
Radio 570 Limited Partnership
Radio 570 Limited Partnership ("Radio 570") is a Maryland limited
partnership formed on December 10, 1991, to operate radio station WTEM-AM
(formerly WGMS-AM). Radio 570 was formed by Colfax as the 1 percent general
partner and Equity Group Holdings as the 99 percent limited partner. WTEM began
broadcasting on May 24, 1992.
Effective January 1, 1993, certain Class B Limited Partners were admitted
to the partnership. On September 15, 1995, a Class B Limited Partner was
redeemed of his partnership interest. As of December 31, 1996 and 1995, the
Class B Limited Partners had a 9.25 percent interest and Equity Group Holdings
had an 89.75 percent Class A Limited Partnership interest.
Radio 100 Limited Partnership
Radio 100 Limited Partnership ("Radio 100") was formed on August 11, 1992,
to acquire and operate radio stations. Radio 100 was formed by Colfax as the 1
percent general partner and Equity Group Holdings as the 99 percent limited
partner.
In 1993, Radio 100 completed its acquisition of two radio stations in
Minnesota for $25,500,000. WBOB-FM (formerly WCTS-FM) and KQQL(FM) began on-air
operations under Radio 100 ownership on May 7, 1993, and February 18, 1993,
respectively.
F-154
<PAGE> 306
COLFAX COMMUNICATIONS, INC. RADIO GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Effective January 1, 1993, certain Class B Limited Partners were admitted
to the partnership. The Class B Limited Partners have a 10.25 percent interest
and the Equity Group Holdings Class A Limited Partnership interest was reduced
to 88.75 percent.
Radio 100 of Maryland Limited Partnership
Radio 100 of Maryland Limited Partnership ("Radio 100 of Maryland") was
formed on December 2, 1992 to acquire and operate radio stations. Radio 100 of
Maryland was formed by Colfax as the 1 percent general partner and Equity Group
Holdings as the 99 percent limited partner.
On June 3, 1993, Radio 100 of Maryland acquired WBIG-FM (formerly WJZE-FM)
in Washington, D.C. for $19,500,000.
Effective January 1, 1993, certain Class B Limited Partners were admitted
to the partnership. On September 15, 1995, a Class B Limited Partner was
redeemed of his partnership interest. On October 1, 1995, a Class B Limited
Partner was admitted to the partnership. As of December 31, 1996 and 1995, the
Class B Limited Partners had an 11.25 percent interest and Equity Group Holdings
had an 87.75 percent Class A Limited Partnership interest.
Radio 94 of Phoenix Limited Partnership
Radio 94 of Phoenix Limited Partnership ("Radio 94") was formed on January
3, 1996, to acquire and operate radio stations. Radio 94 was formed by Colfax as
the 1 percent general partner and Equity Group Holdings as the 99 percent
limited partner. On April 1, 1996, Radio 94 acquired KOOL(AM) and KOOL-FM in
Phoenix, Arizona for $35,000,000. Effective April 5, 1996, certain Class B
Limited Partners were admitted to the partnership. The Class B Limited Partners
have an 8.25 percent interest and the Equity Group Holdings Class A Limited
Partnership interest was reduced to 90.75 percent. On October 4, 1996, Radio 94
sold KOOL(AM) to Salem Media of Arizona, Inc.
Radio 95 of Phoenix Limited Partnership
Radio 95 of Phoenix Limited Partnership ("Radio 95") was formed on May 3,
1996, to acquire and operate radio stations. Radio 95 was formed by Colfax as
the 1 percent general partner and Equity Group Holdings as the 99 percent
limited partner. On September 12, 1996, Radio 95 acquired KYOT-FM, KZON-FM,
KOY(AM), and KISO(AM), each in Phoenix, Arizona; KIDO(AM) and KLTB(FM), each in
Boise, Idaho; KARO(FM) in Caldwell, Idaho; WMIL-FM in Waukesha, Wisconsin; and
WOKY(AM) in Milwaukee, Wisconsin, for $95,000,000.
F-155
<PAGE> 307
COLFAX COMMUNICATIONS, INC. RADIO GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Sale of Stations
On August 24, 1996, Chancellor Radio Broadcasting Company ("Chancellor"), a
Delaware Corporation, agreed to purchase substantially all of the assets of
CALP, Radio 570, Radio 100, Radio 100 of Maryland, Radio 94 (with the exception
of KOOL(AM)), and Radio 95 (with the exception of KIDO(AM), KLTB(FM), and
KARO(FM)) for total consideration of $365,000,000 plus the net working capital
of the stations. The transaction closed on January 23, 1997. The agreement
stipulates that the purchase price for the assets be allocated among the limited
partnerships as follows:
<TABLE>
<CAPTION>
<S> <C>
CALP........................................................ $ 50,000,000
Radio 570................................................... 21,000,000
Radio 100................................................... 85,000,000
Radio 100 of Maryland....................................... 90,000,000
Radio 94.................................................... 30,000,000
Radio 95.................................................... 89,000,000
------------
$365,000,000
============
</TABLE>
On October 28, 1996, Jacor Broadcasting of Idaho, Inc., an Ohio
corporation, entered into an agreement to purchase substantially all of the
assets of radio stations KIDO(AM), KLTB(FM), and KARO(FM) for $11,000,000. The
transaction closed on January 31, 1997.
Partnership Allocations
The partnerships distribute cash from operations and allocate net profits
or losses to the partners, in general, in accordance with their stated interests
except that no partner shall receive any distribution from a partnership until
such time as the net invested capital of the general partner and Class A Limited
Partner have been distributed, along with a cumulative priority return on the
average net invested capital at an annual rate equal to the prime rate plus one
quarter of one percent compounded monthly.
In accordance with the Company's debt agreement (described below)
distributions to partners may be permitted on a quarterly basis if certain
requirements are met.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Accounting
The accompanying financial statements are prepared on the accrual basis of
accounting in accordance with generally accepted accounting principles.
Barter Transactions
The partnerships enter into barter transactions in which they provide
on-air advertising in exchange for goods and services. Revenues and expenses
from barter transactions are presented in the accompanying statement of revenues
and expenses based on the estimated fair market value of the goods or services
received. Barter revenue approximated $1,925,000, $1,590,000, and $1,870,000 for
the years ended December 31, 1996, 1995, and 1994, respectively; while barter
expense approximated $1,763,000, $1,486,000, and $1,520,000 for the years ended
December 31, 1996, 1995, and 1994, respectively.
Income Taxes
Provision for Federal and state income taxes has not been made in the
accompanying financial statements since the partnerships do not pay Federal and
state income taxes but rather allocate profits and losses to the partners for
inclusion in their respective income tax returns.
F-156
<PAGE> 308
COLFAX COMMUNICATIONS, INC. RADIO GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Buildings and Leasehold Improvements
Buildings and leasehold improvements are recorded at cost or appraised
value at acquisition. Depreciation is recorded using the straight-line method
over 31.5 or 40 years as prescribed by the Internal Revenue Code.
Furniture, Fixtures and Equipment
Furniture, fixtures and equipment are recorded at cost or appraised value
at acquisition. Depreciation is recorded using the straight-line method over the
estimated useful life of the assets, which is typically 5 to 7 years.
Intangible Assets
Intangible assets are recorded at cost or appraised value at acquisition.
Amortization is recorded over their useful lives. The estimated useful lives of
intangible assets as of December 31, 1996, are as follows:
<TABLE>
<CAPTION>
USEFUL LIFE
-----------
<S> <C>
FCC Licenses................................................ 7-25 years
Covenants Not to Compete.................................... 3 years
Employment Agreements....................................... 2 years
Organizational Costs........................................ 5 years
Start-up Costs.............................................. 5 years
</TABLE>
Land
Certain partners have contributed to Radio 570 a parcel of land in
Germantown, Maryland which is being used as the site for a new array of
broadcasting towers. The land has been recorded at its original purchase price
plus costs related to preparing the land for its intended use.
Radio 100 of Maryland acquired a parcel of land and property in Washington,
D.C., in connection with the acquisition of WJZE-FM. This parcel of land was
recorded at its appraised value at acquisition. This land was sold in February
1995.
Radio 100 acquired a parcel of land in Nowthen, Minnesota, through the
purchase of KQQL-FM. This parcel of land was recorded at its appraised value at
acquisition.
Radio 95 acquired various parcels of land located in Phoenix, Milwaukee,
and Boise in connection with its purchase of nine stations during 1996. These
parcels of land were recorded at their estimated market value at acquisition.
Estimates
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
In 1995 the Company adopted Statement of Financial Accounting Standard
("SFAS") No. 107, "Disclosure about Fair Value of Financial Instruments," which
requires disclosures of fair value information about financial instruments,
whether or not recognized in the balance sheet.
F-157
<PAGE> 309
COLFAX COMMUNICATIONS, INC. RADIO GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The carrying amount reported in the balance sheets for cash, accounts
receivable, accounts payable and accrued liabilities, approximate their fair
value due to the immediate or short-term maturity of such instruments. The
carrying amount reported for long-term debt approximates fair value due to the
debt being priced at floating rates (see Note 7 for additional information).
4. PROPERTY AND EQUIPMENT:
The components of property and equipment at December 31, 1996 and 1995, are
summarized below:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Land.................................... $ 3,719,572 $ 1,901,663 $ 2,233,341
Buildings............................... 1,372,161 26,453 604,927
Construction in progress................ 27,660 27,232 201,404
Furniture, fixtures and equipment....... 11,323,175 8,520,853 7,690,841
Leasehold improvements.................. 835,407 816,031 522,806
----------- ----------- -----------
17,277,975 11,292,232 11,253,319
Less -- Accumulated depreciation........ (2,769,878) (2,616,508) (1,644,716)
----------- ----------- -----------
$14,508,097 $ 8,675,724 $ 9,608,603
=========== =========== ===========
</TABLE>
5. FCC LICENSES AND OTHER NONCURRENT ASSETS:
The components of FCC licenses and other noncurrent assets at December 31,
1996 and 1995, are summarized below:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
FCC licenses............................ $163,988,330 $ 39,505,773 $ 39,505,773
Covenants not to compete................ 1,931,834 8,493,147 8,493,147
Start-up and organization costs......... 2,489,973 2,132,587 2,153,036
Other................................... 1,376,763 958,245 1,891,395
------------ ------------ ------------
169,786,900 51,089,752 52,043,351
Less -- Accumulated amortization........ (22,207,301) (18,706,165) (14,389,548)
------------ ------------ ------------
$147,579,599 $ 32,383,587 $ 37,653,803
============ ============ ============
</TABLE>
6. RELATED-PARTY TRANSACTIONS:
Each partnership is involved in certain transactions with other
partnerships in the radio group related to sharing of services and purchasing.
These transactions are settled on a current basis through adjustments to
partners' equity accounts.
On January 18, 1995, CALP and Radio 100 of Maryland each entered into a 10
year agreement to lease tower space from Colfax Towers, Inc. The annual rental
payment for CALP equaled $31,200 and $30,000 for the years ended December 31,
1996 and 1995, respectively. The annual rental payment for Radio 100 of Maryland
equaled $37,200 and $36,000 for the years ended December 31, 1996 and 1995,
respectively. Colfax Towers, Inc., is owned by the shareholders of Colfax
Communications, Inc.
Employees of Colfax perform activities on behalf of and oversee the
operations of the radio stations included in the radio group. Colfax does not
charge any fees to the radio stations for the performance of such services.
Corporate expenses of $1,240,253, $1,354,296, and $1,144,082 related to those
services are not included in the financial statements of the radio group for the
years ending December 31, 1996, 1995, and 1994, respectively. These corporate
expenses were funded directly by the owners of Colfax Communications, Inc.
F-158
<PAGE> 310
COLFAX COMMUNICATIONS, INC. RADIO GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
7. LONG-TERM DEBT:
On December 27, 1995, CALP, Radio 570, Radio 100, and Radio 100 of Maryland
entered into a $40 million revolving loan agreement. On April 2, 1996, under an
amendment to the loan agreement, CALP, Radio 570, Radio 100, Radio 100 of
Maryland, and Radio 94 (collectively, the "Borrowers") increased the amount
available under the revolving loan agreement to $60 million. At December 31,
1996, $55,650,000 was outstanding under this agreement. The proceeds were
allocated to each borrower on the basis of each station's capital account as
follows:
<TABLE>
<S> <C>
CALP........................................................ $ 5,702,360
Radio 570................................................... 4,156,587
Radio 100................................................... 16,423,860
Radio 100 of Maryland....................................... 9,214,544
Radio 94.................................................... 20,152,649
-----------
$55,650,000
===========
</TABLE>
The initial proceeds were used to repay the indebtedness of CALP to make
certain permitted distributions to partners of the Borrowers, and for working
capital purposes in the operations of the Borrowers. Borrowings under this
agreement bear interest at floating rates equal to prime and/or LIBOR (as
defined in the loan agreement) plus an applicable margin determined by a
leverage ratio. The expiration date of the loan agreement is December 31, 2002.
Under the loan agreement, the Borrowers are required to maintain a specific
leverage ratio and certain ratios pertaining to cash flow coverage.
In connection with the sale of the stations (discussed in Note 2), the debt
was repaid in full in January 1997.
8. COMMITMENTS:
The Radio Group has entered into various contracts for exclusive radio
broadcasting rights and other programming. In addition, the partnerships lease
office space and have entered into various service contracts, including certain
personal service contracts. These broadcasting rights, leases and service
contracts expire over periods ranging from 1997 to 2012. The minimum future
commitments under these agreements, leases and service contracts are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 3,766,028
1998........................................................ 2,826,433
1999........................................................ 1,178,594
2000........................................................ 1,140,345
2001........................................................ 646,234
Thereafter.................................................. 2,077,616
-----------
$11,635,250
===========
</TABLE>
9. RESTRUCTURING CHARGES:
During 1995, the Radio Group recorded restructuring costs of $737,729 at
certain radio stations. These costs included severance and salary payments to
terminated employees of $357,563, costs related to hiring a new general manager
at one of the radio stations of $135,519 and costs related to a loss on space
vacated by one of the radio stations of $244,647.
F-159
<PAGE> 311
======================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY (AS DEFINED HEREIN). THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY
OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES, BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information....................... iii
Prospectus Summary.......................... 1
Risk Factors................................ 13
The Exchange Offer.......................... 21
Use of Proceeds............................. 30
Capitalization.............................. 31
Selected Consolidated Historical Financial
Data...................................... 32
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................ 34
Business and Properties..................... 41
Management and Board of Directors........... 60
Security Ownership of Certain Beneficial
Owners.................................... 69
Certain Relationships and Related
Transactions.............................. 72
Description of the Exchange Notes........... 73
Book-Entry; Delivery and Form............... 94
Description of Certain Indebtedness......... 95
Description of Capital Stock................ 100
Material Federal Income Tax
Considerations............................ 115
Plan of Distribution........................ 116
Legal Matters............................... 116
Experts..................................... 117
Pro Forma Financial Information............. P-1
Index to Financial Statements............... F-1
</TABLE>
UNTIL (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT PARTICIPATING IN
THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS WHEN SELLING
EXCHANGE NOTES RECEIVED IN EXCHANGE FOR ORIGINAL NOTES HELD FOR THEIR OWN
ACCOUNT. SEE "PLAN OF DISTRIBUTION."
======================================================
======================================================
CHANCELLOR MEDIA CORPORATION OF
LOS ANGELES
OFFER TO EXCHANGE
8 3/4% SENIOR SUBORDINATED
NOTES DUE 2007, SERIES B
FOR ALL OUTSTANDING 8 3/4%
SENIOR SUBORDINATED NOTES
DUE 2007, SERIES A
---------------------------
PROSPECTUS
---------------------------
SEPTEMBER , 1997
======================================================
<PAGE> 312
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law empowers a Delaware
corporation to indemnify any person who is, or is threatened to be made, a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of such corporation) by reason of the fact that such person is or was
an officer or director of such corporation, or is or was serving at the request
of such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided that he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. A Delaware corporation may indemnify officers
and directors in an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation. Where an officer
or director is successful on the merits or otherwise in the defense of any
action referred to above, the corporation must indemnify him against the
expenses which he actually and reasonably incurred in connection therewith.
The Company's Certificate of Incorporation provides that no director of the
Company shall be liable to the Company or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit.
The Company's Bylaws provide that the Company shall indemnify every person
who is or was a party or is or was threatened to be made a party to any action
suit, or proceeding, whether civil, criminal, administrative or investigative,
by reason of the fact that he is or was a director or officer of the Corporation
or, while a director or officer or employee of the Corporation, is or was
serving at the request of the Corporation as a director, officer, employee,
agent or trustee of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including counsel
fees), judgments, fines and amounts paid in settlement actually and reasonable
incurred by him in connection with such action, suit or proceeding, to the full
extent permitted by applicable law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
A. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.9(f) -- Plan of Reorganization and Merger by and between
Evergreen Media Corporation and Broadcasting Partners,
Inc., dated as of January 31, 1995, as amended, including
the Form of Registration Rights Agreement among MLGA Fund
I, L.P., MLGA Fund II, L.P., MLGA/BPI Partners I, L.P.,
MLGAL Partners, Limited Partnership and Evergreen Media
Corporation (see table of contents for a list of omitted
schedules).
2.9A(g) -- Agreement dated as of January 31, 1995 among Evergreen
Media Corporation, Broadcasting Partners, Inc., the
holders of the shares of capital stock of Broadcasting
Partners, Inc. and Scott K. Ginsburg, holder of shares of
capital stock of Evergreen Media Corporation.
</TABLE>
II-1
<PAGE> 313
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.10(f) -- Plan and Agreement of Merger among Evergreen Media
Partners Corporation, Evergreen Media Corporation and
Broadcasting Partners, Inc., dated as of April 12, 1995.
2.11(h) -- Agreement and Plan of Merger by and among Pyramid
Communications, Inc., Evergreen Media Corporation and
Evergreen Media/Pyramid Corporation dated as of July 14,
1995 (see table of contents for list of omitted exhibits
and schedules).
2.11A(i) -- Amendment to Plan and Agreement of Merger by and among
Pyramid Communications, Inc., Evergreen Media Corporation
and Evergreen Media/Pyramid Corporation dated September
7, 1995.
2.11B(i) -- Amendment to Plan and Agreement of Merger by and among
Pyramid Communications, Inc., Evergreen Media Corporation
and Evergreen Media/Pyramid Corporation dated January 11,
1996.
2.12(j) -- Purchase Agreement between Fairbanks Communications, Inc.
and Evergreen Media Corporation dated October 12, 1995
(see table of contents for list of omitted exhibits and
schedules).
2.13(n) -- Option Agreement dated as of January 9, 1996 between
Chancellor Broadcasting Company and Evergreen Media
Corporation (including Form of Advertising Brokerage
Agreement and Form of Asset Purchase Agreement).
2.14(o) -- Asset Purchase Agreement dated April 4, 1996 between
American Radio Systems Corporation and Evergreen Media
Corporation of Buffalo (see table of contents for list of
omitted exhibits and schedules).
2.15(o) -- Asset Purchase Agreement dated April 11, 1996 between
Mercury Radio Communications, L.P. and Evergreen Media
Corporation of Los Angeles, Evergreen Media/Pyramid
Holdings Corporation, WHTT (AM) License Corp. and WHTT
(FM) License Corp. (see table of contents for list of
omitted exhibits and schedules).
2.16(o) -- Asset Purchase Agreement dated April 19, 1996 between
Crescent Communications L.P. and Evergreen Media
Corporation of Los Angeles (see table of contents for
list of omitted exhibits and schedules).
2.17(p) -- Asset Purchase Agreement dated June 13, 1996 between
Evergreen Media Corporation of Los Angeles and Greater
Washington Radio, Inc. (see table of contents for list of
omitted exhibits and schedules).
2.18(p) -- Asset Exchange Agreement dated June 13, 1996 among
Evergreen Media Corporation of Los Angeles, Evergreen
Media Corporation of the Bay State, WKLB License Corp.,
Greater Media Radio, Inc. and Greater Washington Radio,
Inc. (see table of contents for list of omitted exhibits
and schedules).
2.19(p) -- Purchase Agreement dated June 27, 1996 between WEDR,
Inc., Seller and Evergreen Media Corporation of Los
Angeles, Buyer. (See table of contents for list of
omitted schedules)
2.20(p) -- Time Brokerage Agreement dated July 10, 1996 by and
between Evergreen Media Corporation of Detroit, as
Licensee, and Kidstar Interactive Media Incorporated, as
Time Broker.
2.21(p) -- Asset Purchase Agreement dated July 15, 1996 by and among
Century Chicago Broadcasting L.P., an Illinois limited
partnership, ("Seller"), Century Broadcasting
Corporation, a Delaware Corporation ("Century"),
Evergreen Media Corporation of Los Angeles, a Delaware
Corporation ("Parent"), and Evergreen Media Corporation
of Chicago, a Delaware Corporation ("Buyer").
</TABLE>
II-2
<PAGE> 314
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.22(p) -- Asset Purchase Agreement dated August 12, 1996 by and
among Chancellor Broadcasting Company, Shamrock
Broadcasting, Inc. and Evergreen Media Corporation of the
Great Lakes.
2.23(p) -- Asset Purchase Agreement dated as of August 12, 1996
between Secret Communications Limited Partnership and
Evergreen Media Corporation of Los Angeles (WQRS-FM).
(See table of contents for list of omitted exhibits and
schedules)
2.24(p) -- Asset Purchase Agreement dated as of August 12, 1996
between Secret Communications Limited Partnership and
Evergreen Media Corporation of Los Angeles. (See table of
contents for list of omitted schedules)
2.25(q) -- Letter of intent dated August 27, 1996 between EZ
Communications, Inc. and Evergreen Media Corporation.
2.26(q) -- Asset Purchase Agreement dated September 19, 1996 between
Beasley-FM Acquisition Corp., WDAS License Limited
Partnership and Evergreen Media Corporation of Los
Angeles.
2.27(q) -- Asset Purchase Agreement dated September 19, 1996 between
The Brown Organization and Evergreen Media Corporation of
Los Angeles.
2.28(r) -- Stock Purchase Agreement by and between Viacom
International Inc. and Evergreen Media Corporation of Los
Angeles, dated February 16, 1997 (See table of contents
for omitted schedules and exhibits).
2.29(r) -- Agreement and Plan of Merger, by and among Evergreen
Media Corporation, Chancellor Broadcasting Company and
Chancellor Radio Broadcasting Company, dated as of
February 19, 1997.
2.30(r) -- Stockholders Agreement, by and among Chancellor
Broadcasting Company, Evergreen Media Corporation, Scott
K. Ginsburg (individually and as custodian for certain
shares held by his children), HM2/Chancellor, L.P.,
Hicks, Muse, Tate & First Equity Fund II, L.P., HM2/HMW,
L.P., The Chancellor Business Trust, HM2/HMD Sacramento
GP, L.P., Thomas O. Hicks, as Trustee of the William Cree
Hicks 1992 Irrevocable Trust, Thomas O. Hicks, as Trustee
of the Catherine Forgave Hicks 1993 Irrevocable Trust,
Thomas O. Hicks, as Trustee of the John Alexander Hicks
1984 Trust, Thomas O. Hicks, as Trustee of the Mack
Hardin Hicks 1984 Trust, Thomas O. Hicks, as Trustee of
Robert Bradley Hicks 1984 Trust, Thomas O. Hicks, as
Trustee of the Thomas O. Hicks, Jr. 1984 Trust, Thomas O.
Hicks and H. Rand Reynolds, as Trustees for the Muse
Children's GS Trust, and Thomas O. Hicks, dated as of
February 19, 1997.
2.31(r) -- Joint Purchase Agreement, by and among Chancellor Radio
Broadcasting Company, Chancellor Broadcasting Company,
Evergreen Media Corporation of Los Angeles, and Evergreen
Media Corporation, dated as of February 19, 1997.
2.32(s) -- Asset Exchange Agreement, by and among EZ Communications,
Inc., Professional Broadcasting Incorporated, EZ
Philadelphia, Inc., Evergreen Media Corporation of Los
Angeles, Evergreen Media Corporation of Charlotte,
Evergreen Media Corporation of the East, Evergreen Media
Corporation of Carolinaland, WBAV/WBAV-FM/WPEG License
Corp. and WRFX License Corp., dated as of December 5,
1996 (See table of contents for list of omitted
schedules).
</TABLE>
II-3
<PAGE> 315
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.33(s) -- Asset Purchase Agreement, by and among EZ Communications,
Inc., Professional Broadcasting Incorporated, EZ
Charlotte, Inc., Evergreen Media Corporation of Los
Angeles, Evergreen Media Corporation of the East and
Evergreen Media Corporation of Carolinaland, dated as of
December 5, 1996 (See table of contents for list of
omitted schedules).
2.34(t) -- Asset Purchase Agreement by and between Pacific and
Southern Company, Inc. and Evergreen Media Corporation of
Los Angeles (re: WGCI-AM and WGCI-FM), dated as of April
4, 1997 (see table of contents for list of omitted
schedules and exhibits).
2.35(t) -- Asset Purchase Agreement by and between Pacific and
Southern Company, Inc. and Evergreen Media Corporation of
Los Angeles (re: KKBQ-AM and KKBQ-FM), dated as of April
4, 1997 (see table of contents for list of omitted
schedules and exhibits)
2.36(t) -- Asset Purchase Agreement by and between Pacific and
Southern Company, Inc. and Evergreen Media Corporation of
Los Angeles (re: KHKS-FM), dated as of April 4, 1997 (see
table of contents for list of omitted schedules and
exhibits).
2.41(y) -- Amended and Restated Agreement and Plan of Merger among
Chancellor Broadcasting Company, Chancellor Radio
Broadcasting Company, Evergreen Media Corporation,
Evergreen Mezzanine Holdings Corporation and Evergreen
Media Corporation of Los Angeles, dated as of February
19, 1997, amended and restated as of July 31, 1997.
2.42(gg) -- Option Agreement, by and among Evergreen Media
Corporation, Chancellor Broadcasting Company, Bonneville
International Corporation and Bonneville Holding Company,
dated as of August 6, 1997.
3.3(ff) -- Certificate of Incorporation of Evergreen Media
Corporation of Los Angeles.
3.3A+ -- Amendment to Certificate of Incorporation of Evergreen
Media Corporation of Los Angeles, filed September 5,
1997.
3.4(ff) -- Bylaws of Chancellor Media Corporation of Los Angeles.
4.10(t) -- Second Amended and Restated Loan Agreement dated as of
April 25, 1997 among Evergreen Media Corporation of Los
Angeles, the financial institutions whose names appear as
Lenders on the signature pages thereof (the "Lenders"),
Toronto Dominion Securities, Inc., as Arranging Agent,
The Bank of New York and Bankers Trust Company, as
Co-Syndication Agents, NationsBank of Texas, N.A. and
Union Bank of California, as Co-Documentation Agents, and
Toronto Dominion (Texas), Inc., as Administrative Agent
for the Lenders, together with certain collateral
documents attached thereto as exhibits, including
Assignment of Partnership Interests, Assignment of Trust
Interests, Borrower's Pledge Agreement, Parent Company
Guaranty, Stock Pledge Agreement, Subsidiary.
4.11(z) -- First Amendment to Second Amended and Restated Loan
Agreement, dated June 26, 1997, among Evergreen Media
Corporation of Los Angeles, the Lenders, the Agents and
the Administrative Agent.
4.15(aa) -- Indenture, dated as of February 14, 1996, governing the
9 3/8% Senior Subordinated Notes due 2004 of Chancellor
Radio Broadcasting Company.
4.16(bb) -- 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 of
Chancellor Radio Broadcasting Company.
</TABLE>
II-4
<PAGE> 316
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
4.17(cc) -- Indenture, dated as of February 26, 1996, governing the
12 1/4% Subordinated Exchange Debentures due 2008 of
Chancellor Radio Broadcasting Company.
4.18(dd) -- Indenture, dated as of January 23, 1997, governing the
12% Subordinated Exchange Debentures due 2009 of
Chancellor Radio Broadcasting Company.
4.19(ee) -- Indenture, dated as of June 24, 1997, governing the
8 3/4% Senior Subordinated Notes due 2004 of Chancellor
Radio Broadcasting Company.
4.25+ -- Second Amendment to Second Amended and Restated Loan
Agreement, dated August 7, 1997, among Evergreen Media
Corporation of Los Angeles, the Lenders, the Agents and
the Administrative Agent.
4.26(hh) -- 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 of
Chancellor Radio Broadcasting Company.
4.27+ -- Third Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of
Chancellor Radio Broadcasting Company.
4.28+ -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated June 24, 1997, governing the
8 3/4% Senior Subordinated Notes due 2007 of Chancellor
Radio Broadcasting Company.
4.29+ -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated February 26, 1997, governing
the 12 1/4% Subordinated Exchange Debentures due 2008 of
Chancellor Radio Broadcasting Company.
4.30+ -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated January 23, 1997, governing
the 12% Subordinated Exchange Debentures due 2009 of
Chancellor Radio Broadcasting Company.
5.1* -- Opinion of Latham & Watkins.
8.1* -- Tax Matters Opinion of Latham & Watkins.
10.23(f) -- Evergreen Media Corporation Stock Option Plan for
Non-employee Directors.
10.26(n) -- Employment Agreement dated February 9, 1996 by and
between Evergreen Media Corporation and Kenneth J.
O'Keefe.
10.28(o) -- 1995 Stock Option Plan for executive officers and key
employees of Evergreen Media Corporation.
10.30+ -- First Amendment to Employment Agreement dated March 1,
1997 by and between Evergreen Media Corporation and
Kenneth J. O'Keefe.
10.31+ -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and Scott K. Ginsburg.
10.32+ -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and James de Castro.
10.33+ -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and Matthew E. Devine.
10.34+ -- Second Amendment to Employment Agreement dated September
4, 1997 by and among Evergreen Media Corporation,
Evergreen Media Corporation of Los Angeles and Kenneth J.
O'Keefe.
10.35(ii) -- Employment Agreement dated February 14, 1996 by and among
Chancellor Broadcasting Company, Chancellor Radio
Broadcasting Company and Steven Dinetz.
10.36(jj) -- Chancellor Broadcasting Company 1996 Stock Award Plan.
</TABLE>
II-5
<PAGE> 317
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------------------------ ------------------------------------------------------------------------------------------
<C> <S>
10.37(kk) -- Chancellor Holdings Corp. 1994 Director Stock Option Plan.
10.38(ll) -- Stock Option Grant Letter dated September 30, 1995 from Chancellor Corporation to
Steven Dinetz.
10.39(mm) -- Stock Option Grant Letter dated September 30, 1995 from Chancellor Corporation to Eric
W. Neumann.
10.40(nn) -- Stock Option Grant Letter dated September 30, 1995 from Chancellor Corporation to
Marvin Dinetz.
10.41(oo) -- Stock Option Grant Letter dated February 14, 1997 from Chancellor Broadcasting Company
to Carl M. Hirsch.
10.42* -- Registration Rights Agreement, dated June 24, 1997, by and among Chancellor Radio
Broadcasting Company and the initial purchasers of the 8 3/4% Senior Subordinated Notes
due 2007.
12.1+ -- Chancellor Media Corporation of Los Angeles Computation of Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends.
21.1+ -- Subsidiaries of Chancellor Media Corporation of Los Angeles.
23.1* -- Consent of Latham & Watkins (included as part of their opinion listed as Exhibit 5.1).
23.2+ -- Consent of KPMG Peat Marwick LLP, independent accountants.
23.3+ -- Consent of KPMG Peat Marwick LLP, independent accountants.
23.4+ -- Consent of Price Waterhouse LLP, independent accountants.
23.5+ -- Consent of Arthur Andersen LLP, independent accountants.
23.6+ -- Consent of Coopers & Lybrand L.L.P., independent accountants.
23.7+ -- Consent of Coopers & Lybrand L.L.P., independent accountants.
23.8+ -- Consent of Price Waterhouse LLP, independent accountants.
23.9+ -- Consent of Arthur Andersen LLP, independent accountants.
23.10* -- Consent of Latham & Watkins (included as part of their opinion listed as Exhibit 8.1).
24.1+ -- Powers of Attorney (included on signature pages)
25.1+ -- Statement of Eligibility on Form T-1 of U.S. Trust Company of Texas, N.A. under the
Indenture.
99.1* -- Letter Of Transmittal for the Exchange Offer.
99.2* -- Notice of Guaranteed Delivery for the Exchange Offer.
99.3+ -- Independent Auditors' Report on Financial Statement Schedule.
99.3(a)+ -- Evergreen Media Corporation of Los Angeles Schedule II -- Valuation and Qualifying
Accounts for the years ended December 31, 1994, 1995 and 1996.
</TABLE>
B. Financial Statements
1. Consolidated Financial Statements of Evergreen Media Corporation of
Los Angeles and Subsidiaries as of December 31, 1995 and 1996 and
June 30, 1997 and for the years ended December 31, 1994, 1995 and
1996 and for the six months ended June 30, 1996 and 1997.
2. Consolidated Financial Statements of Chancellor Radio Broadcasting
Company and Subsidiaries as of December 31, 1995 and 1996 and for the
years ended December 31, 1994, 1995 and 1996.
3. Consolidated Financial Statements of Chancellor Radio Broadcasting
Company and Subsidiaries as of December 31, 1996 and June 30, 1997
and for the six months ended June 30, 1996 and 1997.
II-6
<PAGE> 318
4. Combined Financial Statements of Riverside Broadcasting Co., Inc. and
WAXQ Inc. as of December 31, 1995 and 1996 and June 30, 1997 and for
the years ended December 31, 1994, 1995 and 1996 and the six months
ended June 30, 1996 and 1997.
5. Combined Financial Statements of WMZQ Inc. and Viacom Broadcasting
East, Inc. as of December 31, 1995 and 1996 and June 30, 1997 and for
the years ended December 31, 1994, 1995 and 1996 and the six months
ended June 30, 1996 and 1997.
6. Financial Statements of KKSF-FM/KDFC-FM and AM (A Division of the
Brown Organization) as of December 31, 1995 and 1996 and for the
years ended December 31, 1995 and 1996.
7. Financial Statements of WDAS-AM/FM (Station owned and operated by
Beasley FM Acquisition Corp.) as of December 31, 1996 and March 31,
1997 and for the year ended December 31, 1996 and the three months
ended March 31, 1996 and 1997.
8. Financial Statements of Century Chicago Broadcasting, L.P. as of
December 31, 1996 and March 31, 1997 and for the year ended December
31, 1996 and the three months ended March 31, 1996 and 1997.
9. Combined Financial Statements of WJLB/WMXD, DETROIT as of December
31, 1996 and March 31, 1997 and for the year ended December 31, 1996
and the three months ended March 31, 1996 and 1997.
10. Combined Financial Statements of KYSR Inc. and KIBB Inc. as of
December 31, 1995 and 1996 and June 30, 1997 and for the years ended
December 31, 1994, 1995 and 1996 and the six months ended June 30,
1996 and 1997.
11. Financial Statements of WLIT, Inc. as of December 31, 1995 and 1996
and June 30, 1997 and for the years ended December 31, 1994, 1995 and
1996 and the six months ended June 30, 1996 and 1997.
12. Financial Statements of WDRQ, Inc. as of December 31, 1995 and 1996
and June 30, 1997 and for the years ended December 31, 1994, 1995 and
1996 and the six months ended June 30, 1996 and 1997.
13. Consolidated Financial Statements of Trefoil Communications, Inc. and
Subsidiaries as of December 31, 1994 and 1995 and for the years ended
December 31, 1994 and 1995 and for the period ended February 13,
1996.
14. Combined Financial Statements of Colfax Communications, Inc. Radio
Group as of December 31, 1994, 1995 and 1996 and for the years ended
December 31, 1994, 1995 and 1996.
- ---------------
* To be filed by amendment.
+ Filed herewith.
(a) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-1, as amended (Reg. No.
33-60036).
(f) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-4, as amended (Reg. No.
33-89838).
(g) Incorporated by reference to Exhibit No. 4.8 to Evergreen's Registration
Statement on Form S-4, as amended (Reg. No. 33-89838).
(h) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated July 14, 1995.
(i) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated January 17, 1996.
(j) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ending
September 30, 1995.
II-7
<PAGE> 319
(k) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-1, as amended (Reg. No.
33-69752).
(n) Incorporated by reference to the identically numbered exhibit to
Evergreen's Annual Report on Form 10-K for the fiscal year ended December
31, 1995.
(o) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ending
March 31, 1996.
(p) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1996.
(q) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-3, as amended (Reg. No.
333-12453).
(r) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated February 16, 1997 and filed
March 9, 1997.
(s) Incorporated by reference to the identically numbered exhibit to
Evergreen's Annual Report on Form 10-K for the fiscal year ended December
31, 1996.
(t) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated April 1, 1997 and filed May 9,
1997.
(y) Incorporated by reference to the identically numbered exhibit of
Evergreen's Registration Statement on Form S-4, filed August 1, 1997.
(z) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated July 7, 1997 and filed July
31, 1997.
(aa) Incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K
of Chancellor Broadcasting Company and Chancellor Radio Broadcasting
Company, as filed on February 29, 1996.
(bb) Incorporated by reference to Exhibit 4.5 to the Annual Report on Form 10-K
of Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company
and Chancellor Broadcasting Licensee Company for the fiscal year ended
December 31, 1995.
(cc) Incorporated by reference to Exhibit 4.6 to the Current Report on Form 8-K
of Chancellor Broadcasting Company and Chancellor Radio Broadcasting
Company, as filed on February 29, 1996.
(dd) Incorporated by reference to Exhibit 4.7 to the Current Report on Form 8-K
of Chancellor Radio Broadcasting Company, as filed on February 6, 1997.
(ee) Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K
of Chancellor Broadcasting Company and Chancellor Radio Broadcasting
Company as filed on July 17, 1997.
(ff) Incorporated by reference to the identically-numbered exhibit to EMCLA's
Registration Statement on Form S-4 (Reg. No. 333-32259), dated July 29,
1997, as amended.
(gg) Incorporated by reference to the identically-numbered exhibit to the
Quarterly Report on Form 10-Q of Evergreen and EMCLA for the quarterly
period ending June 30, 1997.
(hh) Incorporated by reference to Exhibit 4.8 to the Quarterly Report on Form
10-Q of Chancellor and CRBC for the quarterly period ending March 31, 1997.
(ii) Incorporated by reference to Exhibit 10.6 to Chancellor's Registration
Statement on Form S-1 (Reg. No. 333-02782) filed February 9, 1996.
(jj) Incorporated by reference to Exhibit 4.22 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(kk) Incorporated by reference to Exhibit 4.23 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September 5,
1997.
(ll) Incorporated by reference to Exhibit 4.24 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(mm) Incorporated by reference to Exhibit 4.25 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September 5,
1997.
II-8
<PAGE> 320
(nn) Incorporated by reference to Exhibit 4.26 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September 5,
1997.
(oo) Incorporated by reference to Exhibit 4.27 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September 5,
1997.
The Company hereby agrees to furnish supplementarily a copy of any omitted
schedule or exhibit to the Commission upon request.
ITEM 22. UNDERTAKINGS.
A. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 20 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expense incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted against the registrant by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's Annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's Annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
D. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
E. (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145, the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-9
<PAGE> 321
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Irving, State of Texas,
on September 26, 1997.
CHANCELLOR MEDIA CORPORATION
OF LOS ANGELES
By: /s/ MATTHEW E. DEVINE
----------------------------------
Matthew E. Devine
Senior Vice President and
Chief Financial Officer
POWERS OF ATTORNEY
Each person whose signature appears below constitutes and appoints Matthew
E. Devine and Scott K. Ginsburg as his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for such person and
in his name, place and stead, in any and all capacities, to sign any or all
further amendment (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1933, AS
AMENDED, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ THOMAS O. HICKS Chairman of the Board September 26, 1997
- -----------------------------------------------------
Thomas O. Hicks
/s/ SCOTT K. GINSBURG President, Chief Executive September 26, 1997
- ----------------------------------------------------- Officer and Director
Scott K. Ginsburg (Principal Executive
Officer)
/s/ JAMES E. DE CASTRO Chief Operating Officer and September 26, 1997
- ----------------------------------------------------- Director
James E. de Castro
/s/ MATTHEW E. DEVINE Senior Vice President and September 26, 1997
- ----------------------------------------------------- Chief Financial Officer
Matthew E. Devine (Principal Financial
Officer and Principal
Accounting Officer)
/s/ THOMAS J. HODSON Director September 26, 1997
- -----------------------------------------------------
Thomas J. Hodson
/s/ PERRY J. LEWIS Director September 26, 1997
- -----------------------------------------------------
Perry J. Lewis
/s/ ERIC C. NEUMAN Director September 26, 1997
- -----------------------------------------------------
Eric C. Neuman
/s/ JOHN H. MASSEY Director September 26, 1997
- -----------------------------------------------------
John H. Massey
</TABLE>
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<PAGE> 322
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ JEFFREY A. MARCUS Director September 26, 1997
- -----------------------------------------------------
Jeffrey A. Marcus
/s/ LAWRENCE D. STUART, JR. Director September 26, 1997
- -----------------------------------------------------
Lawrence D. Stuart, Jr.
Director
- -----------------------------------------------------
Steven Dinetz
</TABLE>
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<PAGE> 323
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each
co-registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Irving,
State of Texas, on September 25, 1997.
THE CO-REGISTRANTS LISTED ON
ATTACHMENT A HERETO
By: /s/ MATTHEW E. DEVINE
----------------------------------
Matthew E. Devine
Vice President
of Each Co-Registrant
POWERS OF ATTORNEY
Each person whose signature appears below constitutes and appoints Matthew
E. Devine and Scott K. Ginsburg as his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for such person and
in his name, place and stead, in any and all capacities, to sign any or all
further amendment (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1933, AS
AMENDED, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ SCOTT K. GINSBURG Chief Executive Officer, September 25, 1997
- ----------------------------------------------------- President and Director of
Scott K. Ginsburg Each Co-Registrant
(Principal Executive
Officer of Each
Co-Registrant)
/s/ MATTHEW E. DEVINE Vice President of Each September 25, 1997
- ----------------------------------------------------- Co-Registrant (Principal
Matthew E. Devine Financial Officer and
Principal Accounting
Officer of Each
Co-Registrant)
</TABLE>
II-12
<PAGE> 324
ATTACHMENT A
<TABLE>
<CAPTION>
NAME
<S> <C> <C> <C>
Evergreen Media Corporation of Chicago FM
WLUP-FM License Corp.
Evergreen Media Corporation of the Bay Area
KIOI License Corp.
Evergreen Media Corporation of Illinois
WRCX License Corp.
Evergreen Media Corporation of Chicago AM
WMVP-AM License Corp.
Evergreen Media Corporation of Dade County
WVCG License Corp.
Evergreen Media/Pyramid Corporation
Evergreen Media/Pyramid Holdings Corporation
Broadcast Architecture, Inc.
Evergreen Media Corporation of Massachusetts
WJMN License Corp.
</TABLE>
Evergreen Media Corporation of the Nation's
Capital
WWRC License Corp.
Evergreen Media Partners Corporation
Evergreen Media Corporation of Gotham
Evergreen Media Corporation of New York
WYNY License Corp.
Evergreen Media Corporation of Detroit
WKQI/WDOZ/WNIC License Corp.
Evergreen Media Corporation of Chicagoland
WEJM/WEJM-FM/WVAZ License Corp.
Evergreen Media Corporation of Charlotte
WIOQ License Corp.
Evergreen Media Corporation of Dallas
KSKY License Corp.
Evergreen Media Corporation of San Francisco
KMEL License Corp.
Evergreen Media Corporation of Houston
Evergreen Media of Houston Limited Partnership
(through its general partner, Evergreen Media
Corporation of Houston)
KTRH License Limited Partnership (through its
general partner, Evergreen Media Corporation of
Houston)
KLOL License Limited Partnership (through its
general partner, Evergreen Media Corporation of
Houston)
Evergreen Media Corporation of Tiburon
KKSF License Corp.
KDFC (AM) License Corp.
KDFC (FM) License Corp.
Evergreen Media Corporation of Washington, D.C.
Evergreen Media Corporation of St. Louis
WTOP License Limited Partnership (through its
general partner, Evergreen Media Corporation of
Washington, D.C.)
WASH License Limited Partnership (through its
general partner, Evergreen Media Corporation of
Washington, D.C.)
Evergreen Media Corporation of the Motor City
II-13
<PAGE> 325
ATTACHMENT A -- (CONTINUED)
<TABLE>
<CAPTION>
NAME
<S> <C> <C> <C>
WJLB License Corp.
Evergreen Media Corporation of Michigan
WMXD License Corp.
WAXQ Inc.
WAXQ License Corp.
WMZQ Inc.
WMZQ License Corp.
Evergreen Media Corporation of the Liberty City
WDAS (FM) License Corp.
WDAS (AM) License Corp.
Riverside Broadcasting Co. Inc.
WLTW License Corp.
Evergreen Media Corporation of the Great Lakes
WWWW/WDFN License Corp.
VBE, Inc.
Evergreen Media Corporation of the Capital City
WGAY License Corp.
Evergreen Media Corporation of Chicago
WPNT License Corp.
Chancellor Broadcasting Licensee Company
Trefoil Communications, Inc.
Shamrock Broadcasting, Inc.
Shamrock Radio Licenses, Inc.
Shamrock Broadcasting of Texas, Inc.
Shamrock Broadcasting Licenses of Denver, Inc.
KIBB Inc.
KYSR Inc.
WLIT Inc.
WDRQ Inc.
Radio 100 L.L.C. (through its sole member,
Chancellor Media Corporation of Los Angeles)
Evergreen Media Corporation of Pennsylvania
WJJZ License Corp.
Evergreen Media Corporation of Miami
WEDR License Corp.
Evergreen Media Corporation of Boston
WXKS (AM) License Corp.
WXKS (FM) License Corp.
Evergreen Media Corporation of the Windy City
WNUA License Corp.
Evergreen Media Corporation of Philadelphia
Evergreen Media Corporation of the Keystone State
KYLD License Corp.
WYXR License Corp.
WUSL License Corp.
Evergreen Media Corporation of Rochester
KKBT License Corp.
</TABLE>
II-14
<PAGE> 326
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.9(f) -- Plan of Reorganization and Merger by and between
Evergreen Media Corporation and Broadcasting Partners,
Inc., dated as of January 31, 1995, as amended, including
the Form of Registration Rights Agreement among MLGA Fund
I, L.P., MLGA Fund II, L.P., MLGA/BPI Partners I, L.P.,
MLGAL Partners, Limited Partnership and Evergreen Media
Corporation (see table of contents for a list of omitted
schedules).
2.9A(g) -- Agreement dated as of January 31, 1995 among Evergreen
Media Corporation, Broadcasting Partners, Inc., the
holders of the shares of capital stock of Broadcasting
Partners, Inc. and Scott K. Ginsburg, holder of shares of
capital stock of Evergreen Media Corporation.
2.10(f) -- Plan and Agreement of Merger among Evergreen Media
Partners Corporation, Evergreen Media Corporation and
Broadcasting Partners, Inc., dated as of April 12, 1995.
2.11(h) -- Agreement and Plan of Merger by and among Pyramid
Communications, Inc., Evergreen Media Corporation and
Evergreen Media/Pyramid Corporation dated as of July 14,
1995 (see table of contents for list of omitted exhibits
and schedules).
2.11A(i) -- Amendment to Plan and Agreement of Merger by and among
Pyramid Communications, Inc., Evergreen Media Corporation
and Evergreen Media/Pyramid Corporation dated September
7, 1995.
2.11B(i) -- Amendment to Plan and Agreement of Merger by and among
Pyramid Communications, Inc., Evergreen Media Corporation
and Evergreen Media/Pyramid Corporation dated January 11,
1996.
2.12(j) -- Purchase Agreement between Fairbanks Communications, Inc.
and Evergreen Media Corporation dated October 12, 1995
(see table of contents for list of omitted exhibits and
schedules).
2.13(n) -- Option Agreement dated as of January 9, 1996 between
Chancellor Broadcasting Company and Evergreen Media
Corporation (including Form of Advertising Brokerage
Agreement and Form of Asset Purchase Agreement).
2.14(o) -- Asset Purchase Agreement dated April 4, 1996 between
American Radio Systems Corporation and Evergreen Media
Corporation of Buffalo (see table of contents for list of
omitted exhibits and schedules).
2.15(o) -- Asset Purchase Agreement dated April 11, 1996 between
Mercury Radio Communications, L.P. and Evergreen Media
Corporation of Los Angeles, Evergreen Media/Pyramid
Holdings Corporation, WHTT (AM) License Corp. and WHTT
(FM) License Corp. (see table of contents for list of
omitted exhibits and schedules).
2.16(o) -- Asset Purchase Agreement dated April 19, 1996 between
Crescent Communications L.P. and Evergreen Media
Corporation of Los Angeles (see table of contents for
list of omitted exhibits and schedules).
2.17(p) -- Asset Purchase Agreement dated June 13, 1996 between
Evergreen Media Corporation of Los Angeles and Greater
Washington Radio, Inc. (see table of contents for list of
omitted exhibits and schedules).
2.18(p) -- Asset Exchange Agreement dated June 13, 1996 among
Evergreen Media Corporation of Los Angeles, Evergreen
Media Corporation of the Bay State, WKLB License Corp.,
Greater Media Radio, Inc. and Greater Washington Radio,
Inc. (see table of contents for list of omitted exhibits
and schedules).
</TABLE>
<PAGE> 327
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.19(p) -- Purchase Agreement dated June 27, 1996 between WEDR,
Inc., Seller and Evergreen Media Corporation of Los
Angeles, Buyer. (See table of contents for list of
omitted schedules)
2.20(p) -- Time Brokerage Agreement dated July 10, 1996 by and
between Evergreen Media Corporation of Detroit, as
Licensee, and Kidstar Interactive Media Incorporated, as
Time Broker.
2.21(p) -- Asset Purchase Agreement dated July 15, 1996 by and among
Century Chicago Broadcasting L.P., an Illinois limited
partnership, ("Seller"), Century Broadcasting
Corporation, a Delaware Corporation ("Century"),
Evergreen Media Corporation of Los Angeles, a Delaware
Corporation ("Parent"), and Evergreen Media Corporation
of Chicago, a Delaware Corporation ("Buyer").
2.22(p) -- Asset Purchase Agreement dated August 12, 1996 by and
among Chancellor Broadcasting Company, Shamrock
Broadcasting, Inc. and Evergreen Media Corporation of the
Great Lakes.
2.23(p) -- Asset Purchase Agreement dated as of August 12, 1996
between Secret Communications Limited Partnership and
Evergreen Media Corporation of Los Angeles (WQRS-FM).
(See table of contents for list of omitted exhibits and
schedules)
2.24(p) -- Asset Purchase Agreement dated as of August 12, 1996
between Secret Communications Limited Partnership and
Evergreen Media Corporation of Los Angeles. (See table of
contents for list of omitted schedules)
2.25(q) -- Letter of intent dated August 27, 1996 between EZ
Communications, Inc. and Evergreen Media Corporation.
2.26(q) -- Asset Purchase Agreement dated September 19, 1996 between
Beasley-FM Acquisition Corp., WDAS License Limited
Partnership and Evergreen Media Corporation of Los
Angeles.
2.27(q) -- Asset Purchase Agreement dated September 19, 1996 between
The Brown Organization and Evergreen Media Corporation of
Los Angeles.
2.28(r) -- Stock Purchase Agreement by and between Viacom
International Inc. and Evergreen Media Corporation of Los
Angeles, dated February 16, 1997 (See table of contents
for omitted schedules and exhibits).
2.29(r) -- Agreement and Plan of Merger, by and among Evergreen
Media Corporation, Chancellor Broadcasting Company and
Chancellor Radio Broadcasting Company, dated as of
February 19, 1997.
2.30(r) -- Stockholders Agreement, by and among Chancellor
Broadcasting Company, Evergreen Media Corporation, Scott
K. Ginsburg (individually and as custodian for certain
shares held by his children), HM2/Chancellor, L.P.,
Hicks, Muse, Tate & First Equity Fund II, L.P., HM2/HMW,
L.P., The Chancellor Business Trust, HM2/HMD Sacramento
GP, L.P., Thomas O. Hicks, as Trustee of the William Cree
Hicks 1992 Irrevocable Trust, Thomas O. Hicks, as Trustee
of the Catherine Forgave Hicks 1993 Irrevocable Trust,
Thomas O. Hicks, as Trustee of the John Alexander Hicks
1984 Trust, Thomas O. Hicks, as Trustee of the Mack
Hardin Hicks 1984 Trust, Thomas O. Hicks, as Trustee of
Robert Bradley Hicks 1984 Trust, Thomas O. Hicks, as
Trustee of the Thomas O. Hicks, Jr. 1984 Trust, Thomas O.
Hicks and H. Rand Reynolds, as Trustees for the Muse
Children's GS Trust, and Thomas O. Hicks, dated as of
February 19, 1997.
</TABLE>
<PAGE> 328
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.31(r) -- Joint Purchase Agreement, by and among Chancellor Radio
Broadcasting Company, Chancellor Broadcasting Company,
Evergreen Media Corporation of Los Angeles, and Evergreen
Media Corporation, dated as of February 19, 1997.
2.32(s) -- Asset Exchange Agreement, by and among EZ Communications,
Inc., Professional Broadcasting Incorporated, EZ
Philadelphia, Inc., Evergreen Media Corporation of Los
Angeles, Evergreen Media Corporation of Charlotte,
Evergreen Media Corporation of the East, Evergreen Media
Corporation of Carolinaland, WBAV/WBAV-FM/WPEG License
Corp. and WRFX License Corp., dated as of December 5,
1996 (See table of contents for list of omitted
schedules).
2.33(s) -- Asset Purchase Agreement, by and among EZ Communications,
Inc., Professional Broadcasting Incorporated, EZ
Charlotte, Inc., Evergreen Media Corporation of Los
Angeles, Evergreen Media Corporation of the East and
Evergreen Media Corporation of Carolinaland, dated as of
December 5, 1996 (See table of contents for list of
omitted schedules).
2.34(t) -- Asset Purchase Agreement by and between Pacific and
Southern Company, Inc. and Evergreen Media Corporation of
Los Angeles (re: WGCI-AM and WGCI-FM), dated as of April
4, 1997 (see table of contents for list of omitted
schedules and exhibits).
2.35(t) -- Asset Purchase Agreement by and between Pacific and
Southern Company, Inc. and Evergreen Media Corporation of
Los Angeles (re: KKBQ-AM and KKBQ-FM), dated as of April
4, 1997 (see table of contents for list of omitted
schedules and exhibits)
2.36(t) -- Asset Purchase Agreement by and between Pacific and
Southern Company, Inc. and Evergreen Media Corporation of
Los Angeles (re: KHKS-FM), dated as of April 4, 1997 (see
table of contents for list of omitted schedules and
exhibits).
2.41(y) -- Amended and Restated Agreement and Plan of Merger among
Chancellor Broadcasting Company, Chancellor Radio
Broadcasting Company, Evergreen Media Corporation,
Evergreen Mezzanine Holdings Corporation and Evergreen
Media Corporation of Los Angeles, dated as of February
19, 1997, amended and restated as of July 31, 1997.
2.42(gg) -- Option Agreement, by and among Evergreen Media
Corporation, Chancellor Broadcasting Company, Bonneville
International Corporation and Bonneville Holding Company,
dated as of August 6, 1997.
3.3(ff) -- Certificate of Incorporation of Evergreen Media
Corporation of Los Angeles.
3.3A+ -- Amendment to Certificate of Incorporation of Evergreen
Media Corporation of Los Angeles, filed September 5,
1997.
3.4(ff) -- Bylaws of Chancellor Media Corporation of Los Angeles.
4.10(t) -- Second Amended and Restated Loan Agreement dated as of
April 25, 1997 among Evergreen Media Corporation of Los
Angeles, the financial institutions whose names appear as
Lenders on the signature pages thereof (the "Lenders"),
Toronto Dominion Securities, Inc., as Arranging Agent,
The Bank of New York and Bankers Trust Company, as
Co-Syndication Agents, NationsBank of Texas, N.A. and
Union Bank of California, as Co-Documentation Agents, and
Toronto Dominion (Texas), Inc., as Administrative Agent
for the Lenders, together with certain collateral
documents attached thereto as exhibits, including
Assignment of Partnership Interests, Assignment of Trust
Interests, Borrower's Pledge Agreement, Parent Company
Guaranty, Stock Pledge Agreement, Subsidiary.
</TABLE>
<PAGE> 329
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
4.11(z) -- First Amendment to Second Amended and Restated Loan
Agreement, dated June 26, 1997, among Evergreen Media
Corporation of Los Angeles, the Lenders, the Agents and
the Administrative Agent.
4.15(aa) -- Indenture, dated as of February 14, 1996, governing the
9 3/8% Senior Subordinated Notes due 2004 of Chancellor
Radio Broadcasting Company.
4.16(bb) -- 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 of
Chancellor Radio Broadcasting Company.
4.17(cc) -- Indenture, dated as of February 26, 1996, governing the
12 1/4% Subordinated Exchange Debentures due 2008 of
Chancellor Radio Broadcasting Company.
4.18(dd) -- Indenture, dated as of January 23, 1997, governing the
12% Subordinated Exchange Debentures due 2009 of
Chancellor Radio Broadcasting Company.
4.19(ee) -- Indenture, dated as of June 24, 1997, governing the
8 3/4% Senior Subordinated Notes due 2004 of Chancellor
Radio Broadcasting Company.
4.25+ -- Second Amendment to Second Amended and Restated Loan
Agreement, dated August 7, 1997, among Evergreen Media
Corporation of Los Angeles, the Lenders, the Agents and
the Administrative Agent.
4.26(hh) -- 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 of
Chancellor Radio Broadcasting Company.
4.27+ -- Third Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of
Chancellor Radio Broadcasting Company.
4.28+ -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated June 24, 1997, governing the
8 3/4% Senior Subordinated Notes due 2007 of Chancellor
Radio Broadcasting Company.
4.29+ -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated February 26, 1997, governing
the 12 1/4% Subordinated Exchange Debentures due 2008 of
Chancellor Radio Broadcasting Company.
4.30+ -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated January 23, 1997, governing
the 12% Subordinated Exchange Debentures due 2009 of
Chancellor Radio Broadcasting Company.
5.1* -- Opinion of Latham & Watkins.
8.1* -- Tax Matters Opinion of Latham & Watkins.
10.23(f) -- Evergreen Media Corporation Stock Option Plan for
Non-employee Directors.
10.26(n) -- Employment Agreement dated February 9, 1996 by and
between Evergreen Media Corporation and Kenneth J.
O'Keefe.
10.28(o) -- 1995 Stock Option Plan for executive officers and key
employees of Evergreen Media Corporation.
10.30+ -- First Amendment to Employment Agreement dated March 1,
1997 by and between Evergreen Media Corporation and
Kenneth J. O'Keefe.
10.31+ -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and Scott K. Ginsburg.
10.32+ -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and James de Castro.
</TABLE>
<PAGE> 330
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------------------------ ------------------------------------------------------------------------------------------
<C> <S>
10.33+ -- Employment Agreement dated September 4, 1997 by and among Evergreen Media Corporation,
Evergreen Media Corporation of Los Angeles and Matthew E. Devine.
10.34+ -- Second Amendment to Employment Agreement dated September 4, 1997 by and among Evergreen
Media Corporation, Evergreen Media Corporation of Los Angeles and Kenneth J. O'Keefe.
10.35(ii) -- Employment Agreement dated February 14, 1996 by and among Chancellor Broadcasting
Company, Chancellor Radio Broadcasting Company and Steven Dinetz.
10.36(jj) -- Chancellor Broadcasting Company 1996 Stock Award Plan.
10.37(kk) -- Chancellor Holdings Corp. 1994 Director Stock Option Plan.
10.38(ll) -- Stock Option Grant Letter dated September 30, 1995 from Chancellor Corporation to
Steven Dinetz.
10.39(mm) -- Stock Option Grant Letter dated September 30, 1995 from Chancellor Corporation to Eric
W. Neumann.
10.40(nn) -- Stock Option Grant Letter dated September 30, 1995 from Chancellor Corporation to
Marvin Dinetz.
10.41(oo) -- Stock Option Grant Letter dated February 14, 1997 from Chancellor Broadcasting Company
to Carl M. Hirsch.
10.42* -- Registration Rights Agreement, dated June 24, 1997, by and among Chancellor Radio
Broadcasting Company and the initial purchasers of the 8 3/4% Senior Subordinated Notes
due 2007.
12.1+ -- Chancellor Media Corporation of Los Angeles Computation of Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends.
21.1+ -- Subsidiaries of Chancellor Media Corporation of Los Angeles.
23.1* -- Consent of Latham & Watkins (included as part of their opinion listed as Exhibit 5.1).
23.2+ -- Consent of KPMG Peat Marwick LLP, independent accountants.
23.3+ -- Consent of KPMG Peat Marwick LLP, independent accountants.
23.4+ -- Consent of Price Waterhouse LLP, independent accountants.
23.5+ -- Consent of Arthur Andersen LLP, independent accountants.
23.6+ -- Consent of Coopers & Lybrand L.L.P., independent accountants.
23.7+ -- Consent of Coopers & Lybrand L.L.P., independent accountants.
23.8+ -- Consent of Price Waterhouse LLP, independent accountants.
23.9+ -- Consent of Arthur Andersen LLP, independent accountants.
23.10* -- Consent of Latham & Watkins (included as part of their opinion listed as Exhibit 8.1).
24.1+ -- Powers of Attorney (included on signature pages)
25.1+ -- Statement of Eligibility on Form T-1 of U.S. Trust Company of Texas, N.A. under the
Indenture.
99.1* -- Letter Of Transmittal for the Exchange Offer.
99.2* -- Notice of Guaranteed Delivery for the Exchange Offer.
99.3+ -- Independent Auditors' Report on Financial Statement Schedule.
99.3(a)+ -- Evergreen Media Corporation of Los Angeles Schedule II -- Valuation and Qualifying
Accounts for the years ended December 31, 1994, 1995 and 1996.
</TABLE>
<PAGE> 331
- ---------------
* To be filed by amendment.
+ Filed herewith.
(a) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-1, as amended (Reg. No.
33-60036).
(f) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-4, as amended (Reg. No.
33-89838).
(g) Incorporated by reference to Exhibit No. 4.8 to Evergreen's Registration
Statement on Form S-4, as amended (Reg. No. 33-89838).
(h) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated July 14, 1995.
(i) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated January 17, 1996.
(j) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ending
September 30, 1995.
(k) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-1, as amended (Reg. No.
33-69752).
(n) Incorporated by reference to the identically numbered exhibit to
Evergreen's Annual Report on Form 10-K for the fiscal year ended December
31, 1995.
(o) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ending
March 31, 1996.
(p) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1996.
(q) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-3, as amended (Reg. No.
333-12453).
(r) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated February 16, 1997 and filed
March 9, 1997.
(s) Incorporated by reference to the identically numbered exhibit to
Evergreen's Annual Report on Form 10-K for the fiscal year ended December
31, 1996.
(t) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated April 1, 1997 and filed May 9,
1997.
(y) Incorporated by reference to the identically numbered exhibit of
Evergreen's Registration Statement on Form S-4, filed August 1, 1997.
(z) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated July 7, 1997 and filed July
31, 1997.
(aa) Incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K
of Chancellor Broadcasting Company and Chancellor Radio Broadcasting
Company, as filed on February 29, 1996.
(bb) Incorporated by reference to Exhibit 4.5 to the Annual Report on Form 10-K
of Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company
and Chancellor Broadcasting Licensee Company for the fiscal year ended
December 31, 1995.
(cc) Incorporated by reference to Exhibit 4.6 to the Current Report on Form 8-K
of Chancellor Broadcasting Company and Chancellor Radio Broadcasting
Company, as filed on February 29, 1996.
(dd) Incorporated by reference to Exhibit 4.7 to the Current Report on Form 8-K
of Chancellor Radio Broadcasting Company, as filed on February 6, 1997.
(ee) Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K
of Chancellor Broadcasting Company and Chancellor Radio Broadcasting
Company as filed on July 17, 1997.
<PAGE> 332
(ff) Incorporated by reference to the identically-numbered exhibit to EMCLA's
Registration Statement on Form S-4 (Reg. No. 333-32259), dated July 29,
1997, as amended.
(gg) Incorporated by reference to the identically-numbered exhibit to the
Quarterly Report on Form 10-Q of Evergreen and EMCLA for the quarterly
period ending June 30, 1997.
(hh) Incorporated by reference to Exhibit 4.8 to the Quarterly Report on Form
10-Q of Chancellor and CRBC for the quarterly period ending March 31, 1997.
(ii) Incorporated by reference to Exhibit 10.6 to Chancellor's Registration
Statement on Form S-1 (Reg. No. 333-02782) filed February 9, 1996.
(jj) Incorporated by reference to Exhibit 4.22 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(kk) Incorporated by reference to Exhibit 4.23 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September 5,
1997.
(ll) Incorporated by reference to Exhibit 4.24 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(mm) Incorporated by reference to Exhibit 4.25 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September 5,
1997.
(nn) Incorporated by reference to Exhibit 4.26 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September 5,
1997.
(oo) Incorporated by reference to Exhibit 4.27 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September 5,
1997.
<PAGE> 1
EXHIBIT 3.3A
ARTICLE FIRST SHALL BE AMENDED AND RESTATED IN ITS ENTIRETY TO READ AS FOLLOWS:
FIRST: The name of the corporation is Chancellor Media
Corporation of Los Angeles (the "Corporation").
ARTICLE FOURTH SHALL BE AMENDED AND RESTATED IN ITS ENTIRETY TO READ AS
FOLLOWS:
FOURTH: The total number of shares of all classes of capital
stock which the Corporation shall have authority to issue is 10,001,000 shares
consisting of (a) 10,000,000 shares of preferred stock, par value $.01 per
share (the "Preferred Stock") and (b) 1,000 shares of Common Stock, par value
$.01 per share (the "Common Stock").
The designations, powers, preferences, rights, qualifications,
limitations, and restrictions of the Preferred Stock and the Common Stock are
as follows:
1. Provisions Relating to the Preferred Stock.
(a) The Preferred Stock may be issued from time to time in one
or more classes or series, the shares of each class or series to have such
designations, powers, preferences and rights and such qualifications,
limitations and restrictions thereof as are stated and expressed herein and in
the resolution or resolutions providing for the issue of such class or series
adopted by the Board of Directors of the Corporation (the "Board of Directors")
as hereafter prescribed.
(b) Authority is hereby expressly granted to and vested in the
Board of Directors to authorize the issuance of the Preferred Stock from time
to time in one or more classes or series, and with respect to each class or
series of the Preferred Stock, to fix and state by the resolution or
resolutions from time to time adopted providing for the issuance thereof the
following:
(i) whether or not the class or series is to have
voting rights, full, special or limited, or is to be without voting
rights, and whether or not such class or series is to be entitled to
vote as a separate class either alone or together with the holders of
one or more other classes or series of stock;
(ii) the number of shares to constitute the class or
series and the designations thereof;
(iii) the preferences and relative, participating,
optional or other special rights, if any, and the qualifications,
limitations or restrictions thereof, if any, with respect to any class
or series;
(iv) whether or not the shares of any class or series
shall be redeemable at the option of the Corporation or the holders
thereof or upon the
1
<PAGE> 2
happening of any specified event, and, if redeemable, the redemption
price or prices (which may be payable in the form of cash, notes,
securities or other property) and the time or times at which, and the
terms and conditions upon which, such shares shall be redeemable and
the manner of redemption;
(v) whether or not the shares of a class or series
shall be subject to the operation of retirement or sinking funds to be
applied to the purchase or redemption of such shares for retirement,
and, if such retirement or sinking fund or funds are to be
established, the annual amount thereof and the terms and provisions
relative to the operation thereof;
(vi) the dividend rate, whether dividends are payable
in cash, securities of the Corporation or other property, the
conditions upon which and the times when such dividends are payable,
the preference to or the relation to the payment of dividends payable
on any other class or classes or series of stock, whether or not such
dividends shall be cumulative or noncumulative and, if cumulative, the
date or dates from which such dividends shall accumulate;
(vii) the preferences, if any, and the amounts
thereof which the holders of any class or series thereof shall be
entitled to receive upon the voluntary or involuntary dissolution of,
or upon any distribution of the assets of, the Corporation;
(viii) whether or not the shares of any class or
series, at the option of the Corporation or the holder thereof or upon
the happening of any specified event, shall be convertible into or
exchangeable for the shares of any other class or classes or of any
other series of the same or any other class or classes of stock,
securities, or other property of the Corporation and the conversion
price or prices or ratio or ratios or the rate or rates at which such
exchange may be made, with such adjustments, if any, as shall be
stated and expressed or provided for in such resolution or
resolutions; and
(ix) such other special rights and protective
provisions with respect to any class or series as may to the Board of
Directors seem advisable.
(c) The shares of each class or series of the Preferred Stock
may vary from the shares of any other class or series thereof in any or all of
the foregoing respects. The Board of Directors may increase the number of
shares of the Preferred Stock designated for any existing class or series by a
resolution adding to such class or series authorized and unissued shares of the
Preferred Stock not designated for any other class or series. The Board of
Directors may decrease the number of shares of the Preferred Stock designated
for any existing class or series by a resolution subtracting from such class or
series authorized and unissued shares of the Preferred Stock designated for
such existing class or series, and the shares so subtracted shall become
authorized, unissued and undesignated shares of the Preferred Stock.
2
<PAGE> 3
(d) The number of authorized shares of Preferred Stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the Common
Stock, without a vote of a majority of the holders of the Preferred Stock, or
of any class or series thereof, unless a vote of any such holders is required
pursuant to the certificate or certificates establishing such class or series
of Preferred Stock.
2. Provisions Relating to the Common Stock.
(a) Each share of Common Stock of the Corporation shall have
identical rights and privileges in every respect. The holders of shares of
Common Stock shall be entitled to vote upon all matters submitted to a vote of
the stockholders of the Corporation and shall be entitled to one vote for each
share of Common Stock held.
(b) Subject to the prior rights and preferences, if any,
applicable to shares of the Preferred Stock or any series thereof, the holders
of shares of the Common Stock shall be entitled to receive such dividends
(payable in cash, stock, or otherwise) as may be declared thereon by the board
of directors at any time and from time to time out of any funds of the
Corporation legally available therefor.
(c) In the event of any voluntary or involuntary liquidation,
dissolution, or winding-up of the Corporation, after distribution in full of
the preferential amounts, if any, to be distributed to the holders of shares of
the Preferred Stock or any series thereof, the holders of shares of the Common
Stock shall be entitled to receive all of the remaining assets of the
Corporation available for distribution to its stockholders, ratably in
proportion to the number of shares of the Common Stock held by them. A
liquidation, dissolution, or winding-up of the Corporation, as such terms are
used in this Paragraph (c), shall not be deemed to be occasioned by or to
include any consolidation or merger of the Corporation with or into any other
corporation or corporations or other entity or a sale, lease, exchange, or
conveyance of all or a part of the assets of the Corporation.
3. General.
(a) Subject to the foregoing provisions of this Certificate of
Incorporation, the Corporation may issue shares of its Common Stock from time
to time for such consideration (not less than the par value thereof) as may be
fixed by the Board of Directors, which is expressly authorized to fix the same
in its absolute and uncontrolled discretion subject to the foregoing
conditions. Shares so issued for which the consideration shall have been paid
or delivered to the Corporation shall be deemed fully paid stock and shall not
be liable to any further call or assessment thereon, and the holders of such
shares shall not be liable for any further payments in respect of such shares.
(b) The Corporation shall have authority to create and issue
rights and options entitling their holders to purchase shares of the
Corporation's capital stock of any class or series or other securities of the
Corporation, and such rights and options shall be evidenced by instrument(s)
approved by the Board of Directors. The Board of Directors shall be empowered
to set the exercise price, duration, times for exercise, and other terms of
such options or rights;
3
<PAGE> 4
provided, however, that the consideration to be received for any shares of
capital stock subject thereto shall not be less than the par value thereof.
ARTICLE SEVENTH SHALL BE AMENDED AND RESTATED IN ITS ENTIRETY TO READ AS
FOLLOWS:
SEVENTH: The Corporation shall indemnify any Person who was,
is, or is threatened to be made a party to a proceeding (as hereinafter
defined) by reason of the fact that he or she (i) is or was a director,
officer, employee or agent of the Corporation, or (ii) is or was serving at the
request of the Corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent, or similar functionary of another foreign
or domestic corporation, partnership, joint venture, sole proprietorship,
trust, employee benefit plan, or other enterprise, to the fullest extent
permitted under the General Corporation Law of the State of Delaware, as the
same exists or may hereafter be amended. Such right shall be a contract right
and as such shall run to the benefit of any director or officer who is elected
and accepts the position of director or officer of the Corporation or elects to
continue to serve as a director or officer of the Corporation while this
Article Seventh is in effect. Any repeal or amendment of this Article Seventh
shall be prospective only and shall not limit the rights of any such director
or officer or the obligations of the Corporation with respect to any claim
arising from or related to the services of such director or officer in any of
the foregoing capacities prior to any such repeal or amendment to this Article
Seventh. Such right shall include the right to be paid by the Corporation
expenses incurred in investigating or defending any such proceeding in advance
of its final disposition to the maximum extent permitted under the General
Corporation Law of the State of Delaware, as the same exists or may hereafter
be amended. To the extent that a director, officer, employee or agent of the
corporation shall be successful on the merits or otherwise in defense of any
proceeding, or in defense of any claim, issue, or matter therein, he or she
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith. If a claim for
indemnification or advancement of expenses hereunder is not paid in full by the
Corporation within sixty (60) days after a written claim has been received by
the Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim, and if successful in
whole or in part, the claimant shall also be entitled to be paid the expenses
of prosecuting such claim. It shall be a defense to any such action that such
indemnification or advancement of costs of defense is not permitted under the
General Corporation Law of the State of Delaware, but the burden of proving
such defense shall be on the Corporation. None of (i) the failure of the
Corporation (including its board of directors or any committee thereof,
independent legal counsel, or stockholders) to have made its determination
prior to the commencement of such action that indemnification of, or
advancement of costs of defense to, the claimant is permissible in the
circumstances, (ii) an actual determination by the Corporation (including its
board of directors or any committee thereof, independent legal counsel, or
stockholders) that such indemnification or advancement is not permissible, or
(iii) the termination of any proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall be a
defense to the action or create a presumption that such indemnification or
advancement is not permissible. In the event of the death of any Person having
a right of indemnification under the foregoing provisions, such right shall
inure to the benefit of his or her heirs, executors, administrators, and
personal representatives. The rights conferred above shall not be exclusive of
any other right which any
4
<PAGE> 5
Person may have or hereafter acquire under any statute, bylaw, resolution of
stockholders or directors, agreement, or otherwise.
The Corporation may additionally indemnify any employee or
agent of the Corporation to the fullest extent permitted by law.
Without limiting the generality of the foregoing, to the
extent permitted by then applicable law, the grant of mandatory indemnification
pursuant to this Article Seventh shall extend to proceedings involving the
negligence of such Person.
The Board of Directors may authorize, by a vote of a majority
of a quorum of the Board of Directors, the Corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise against any liability asserted against him or
her and incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not the Corporation would have the power to
indemnify him or her against such liability under the provisions of this
Article Seventh.
As used herein, the term "proceeding" means any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, arbitrative, or investigative, any appeal in such an action,
suit, or proceeding, and any inquiry or investigation that could lead to such
an action, suit, or proceeding. "Person" as used herein means any corporation,
partnership, association, firm, trust, joint venture, political subdivision or
instrumentality.
A NEW ARTICLE SHALL BE ADDED AS ARTICLE TENTH TO READ AS FOLLOWS:
TENTH: The following provisions are included for the purpose
of ensuring that control and management of the Corporation remains with loyal
citizens of the United States and/or corporations formed under the laws of the
United States or any of the states of the United States, as required by the
Communications Act of 1934, as the same may be amended from time to time:
(c) The Corporation shall not issue to (i) a person who is a
citizen of a country other than the United States; (ii) any entity organized
under the laws of a government other than the government of the United States
or any state, territory, or possession of the United States; (iii) a government
other than the government of the United States or of any state, territory, or
possession of the United States; or (iv) a representative of, or an individual
or entity controlled by, any of the foregoing (individually, an "Alien";
collectively, "Aliens") in excess of 25% of the total number of shares of
capital stock of the Corporation outstanding at any time and shall not permit
the transfer on the books of the corporation of any capital stock to any Alien
that would result in the total number of shares of such capital stock held by
Aliens exceeding such 25% limit.
5
<PAGE> 6
(d) No Alien or Aliens shall be entitled to vote or direct or
control the vote of more than 25% of (i) the total number of shares of capital
stock of the Corporation outstanding and entitled to vote at any time and from
time to time, or (ii) the total voting power of all shares of capital stock of
the Corporation outstanding and entitled to vote at any time and from time to
time.
(e) No Alien shall be qualified to act as an officer of the
Corporation, and no more than one-fourth of the total number of directors of
the Corporation at any time and from time to time may be Aliens.
(f) The Board of Directors of the Corporation shall have all
powers necessary to implement the provisions of this Article Tenth.
6
<PAGE> 1
EXHIBIT 4.25
SECOND AMENDMENT
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED LOAN
AGREEMENT (this "Amendment") made as of the 7th day of August, 1997 among
Evergreen Media Corporation of Los Angeles, a Delaware corporation (the
"Borrower"), the financial institutions whose names appear as Lenders on the
signature pages hereto (collectively, the "Lenders"), Toronto Dominion (Texas),
Inc., Bankers Trust Company, The Bank of New York, NationsBank of Texas, N.A.
and Union Bank of California (collectively, the "Managing Agents"), Toronto
Dominion Securities (USA), Inc. (the "Syndication Agent") and Toronto Dominion
(Texas), Inc., as administrative agent for the Lenders (the "Administrative
Agent"),
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders, the Managing Agents, the
Syndication Agent and the Administrative Agent are parties to that certain
Second Amended and Restated Loan Agreement dated as of April 25, 1997, as
modified and amended by that certain First Amendment to Second Amended and
Restated Loan Agreement dated as of June 26, 1997 (as amended, the "Loan
Agreement"); and
WHEREAS, pursuant to the terms of the Merger Agreement,
Chancellor Broadcasting Company, a Delaware corporation ("CBC"), desires to
merge with and into Evergreen Media Holdings Corporation, a Delaware
corporation ("EMHC"), and Chancellor Radio Broadcasting Company, a Delaware
corporation and a Subsidiary of CBC ("CRBC"), desires to merge with and into
the Borrower, with EMHC and the Borrower being the surviving corporations, and
in connection with the Merger, EMHC and the Borrower shall assume all of the
respective obligations of CBC and CRBC; and
WHEREAS, the Borrower and the Parent Company have asked and
the Lenders have agreed to amend the Loan Agreement as set forth herein in
order to permit certain transactions contemplated in connection with the
Merger, including, without limitation, the assumption by the Borrower of the
obligations of CRBC evidenced by those certain 8- 3/4% Senior Subordinated
Notes due 2007 issued on June 24, 1997, in the aggregate principal amount of
$200,000,000;
NOW, THEREFORE, for and in consideration of the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, the
parties agree that all capitalized terms used herein shall have the meanings
ascribed thereto in the Loan Agreement except as otherwise defined or limited
herein, and further agree as follows:
1. Amendments to Article 1.
(a) Article 1 of the Loan Agreement, Definitions, is
hereby modified and amended by deleting the definition of "CRBC
Subordinated Indebtedness" and by substituting the following in lieu
thereof:
"CRBC Subordinated Indebtedness" shall mean all
subordinated Indebtedness for Money Borrowed issued by CRBC,
which shall be in an aggregate principal amount not to exceed
$400,000,000 and which shall include
<PAGE> 2
the following: (i) that certain subordinated Indebtedness for
Money Borrowed in an aggregate principal amount not to exceed
$200,000,000 issued by CRBC and evidenced by those certain
9-3/8% Senior Subordinated Notes due 2004, and (ii) that
certain subordinated Indebtedness for Money Borrowed in an
aggregate principal amount not to exceed $200,000,0000 issued
by CRBC and evidenced by those certain 8- 3/4% Senior
Subordinated Notes due 2007."
(b) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by deleting the word
"Subordinated" from the seventeenth line, and by inserting "for Money
Borrowed" after the word "Indebtedness" in the eighteenth line, of the
definition of "Pro Forma Fixed Charges."
(c) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by inserting "and its
Subsidiaries" after the words "Parent Company" in the eighth line, and
by inserting ", whose Indebtedness for Money Borrowed is without
recourse to the Parent Company" after the words "Unrestricted
Subsidiary" in the parenthetical in the ninth line, of the definition
of "Total Leverage Ratio."
(d) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by deleting the definition of
"Unrestricted Subsidiary" in its entirety and by substituting the
following in lieu thereof:
"'Unrestricted Subsidiary' shall mean any Subsidiary
or Subsidiaries of the Parent Company, other than EMHC, the
Borrower and any Subsidiary or Subsidiaries of EMHC or the
Borrower."
(e) Article 1 of the Loan Agreement, Definitions, is
hereby further modified and amended by adding the following paragraph
at the conclusion of such Article:
"For purposes of this Agreement and all other Loan
Documents, Indebtedness for Borrowed Money of an Unrestricted
Subsidiary supported, as to the Parent Company, solely by a
non-recourse pledge by the Parent Company of its equity
interest in such Unrestricted Subsidiary, shall be deemed to
be 'without recourse to the Parent Company.'"
2. Amendments to Exhibit H-2.
(a) Exhibit H-2 to the Loan Agreement, Form of Parent
Company Pledge Agreement, is hereby modified and amended by adding the
following at the end of paragraph 8 thereof:
"Without limiting the generality of the foregoing, the Pledgor agrees
that until each and every one of the covenants and agreements of this
Agreement is fully performed, the Pledgor's undertakings hereunder
shall not be released, in whole or in part, by any action or thing
which might, but for this paragraph of this Agreement, be deemed a
legal or equitable discharge of a surety or guarantor, or by reason of
any waiver, omission of the Collateral Agent, the Administrative
Agent, the Lenders and the Issuing Bank, or any of them, or their
failure to proceed promptly or otherwise, or by reason of any action
taken or omitted by the Collateral Agent, the Administrative Agent,
the Lenders and the Issuing Bank, or any of them, whether or not such
action
- 2 -
<PAGE> 3
or failure to act varies or increases the risk of, or affects the
rights or remedies of, the Pledgor or by reason of any further
dealings between the Borrower, the Collateral Agent, the
Administrative Agent, the Lenders and the Issuing Bank, or any of
them, or any other guarantor or surety, and the Pledgor hereby
expressly waives and surrenders any defense to its liability
hereunder, or any right of counterclaim or offset of any nature or
description which it may have or which may exist based upon, and shall
be deemed to have consented to, any of the foregoing acts, omissions,
things, agreements or waivers."
(b) Exhibit H-2 to the Loan Agreement, Form of Parent
Company Pledge Agreement, is hereby further modified and amended by
deleting the words "the Pledgor" from, and by inserting "of EMHC or
the Borrower" after the words "any other Subsidiary" in, the last line
of paragraph 11 thereof.
3. No Other Amendments or Waivers. Except for the amendments set
forth above, the text of the Loan Agreement and the other Loan Documents shall
remain unchanged and in full force and effect, and the Lenders and the
Administrative Agent expressly reserve the right to require strict compliance
with the terms of the Loan Agreement and the other Loan Documents.
4. Effectiveness; Conditions Precedent. Upon execution of this
Amendment by the Required Lenders, the provisions of this Amendment shall be
effective subject only to the prior fulfillment of each of the following
conditions:
(a) The representations and warranties of the Borrower
under the Loan Agreement and of other obligors under the other Loan Documents
shall be true and correct as of the date hereof; and
(b) The Administrative Agent's receipt of all such other
certificates, reports, statements, or other documents as the Administrative
Agent, any Managing Agent, or any Lender may reasonably request.
5. Counterparts. This Amendment may be executed in multiple
counterparts, each of which shall be deemed to be an original and all of which,
taken together, shall constitute one and the same agreement.
6. Governing Law. This Amendment shall be deemed to be made
pursuant to the laws of the State of New York with respect to agreements made
and to be performed wholly in the State of New York and shall be construed,
interpreted, performed and enforced in accordance therewith.
7. Loan Document. This Amendment shall be deemed to be a Loan
Document for all purposes under the Loan Agreement.
[Remainder of this page intentionally left blank.]
- 3 -
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused their respective
duly authorized officers or representatives to execute and deliver this
Amendment as of the day and year first above written.
BORROWER: EVERGREEN MEDIA CORPORATION OF
LOS ANGELES, a Delaware corporation
By: /s/ [ILLEGIBLE]
-----------------------------------------
Name:
------------------------------------
Its: Chief Financial Officer
Attest: /s/ [ILLEGIBLE]
----------------------------------
Name:
-----------------------------
Its: Vice President
ADMINISTRATIVE AGENT: TORONTO DOMINION (TEXAS), INC., a
Delaware corporation
By: /s/ KIMBERLY BURLESON
-----------------------------------------
Name:
------------------------------------
Its: Vice President
COLLATERAL AGENT: TORONTO DOMINION (TEXAS), INC., a
Delaware corporation
By: /s/ KIMBERLY BURLESON
-----------------------------------------
Name:
------------------------------------
Its: Vice President
ISSUING BANK: THE TORONTO-DOMINION BANK
By: /s/ KIMBERLY BURLESON
-----------------------------------------
Name:
------------------------------------
Its: Manager
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SECOND AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 1
<PAGE> 5
MANAGING AGENTS TORONTO DOMINION (TEXAS), INC., a
AND LENDERS: Delaware corporation
By: /s/ KIMBERLY BURLESON
-----------------------------------------
Name:
------------------------------------
Its: Vice President
THE BANK OF NEW YORK
By: /s/ JAY P. MATTEO
-----------------------------------------
Name: J. P. Matteo
------------------------------------
Its: Vice President
NATIONSBANK OF TEXAS, N.A.
By: /s/ THOMAS E. CARTER
-----------------------------------------
Name: THOMAS E. CARTER
------------------------------------
Its: Senior Vice President
UNION BANK OF CALIFORNIA
By: /s/ BRYAN G. PETERMANN
-----------------------------------------
Name: Bryan G. Petermann
------------------------------------
Its: Vice President
BANKERS TRUST COMPANY
By: /s/ ANTHONY LOGRIPPO
-----------------------------------------
Name: ANTHONY LOGRIPPO
------------------------------------
Its: Vice President
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By: /s/ ANTHONY R. CLEMENTE
-----------------------------------------
Name: ANTHONY R. CLEMENTE
------------------------------------
Its: Authorized Signatory
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SECOND AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 2
<PAGE> 6
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By: /s/ [ILLEGIBLE]
-----------------------------------------
Name:
------------------------------------
Its: Senior Vice President & Director
BANK OF AMERICA NT&SA
By: /s/ MATTHEW J. KOEING
-----------------------------------------
Name: MATTHEW J. KOEING
------------------------------------
Its: Vice President
BANKBOSTON, N.A.
By: /s/ ROBERT F. MILORDI
-----------------------------------------
Name: ROBERT F. MILORDI
------------------------------------
Its: Director
BANQUE PARIBAS, LOS ANGELES AGENCY
By: /s/ HARRY COLLYNS
-----------------------------------------
Name: Harry Collyns
------------------------------------
Its: Vice President
By: /s/ TOM BRANDT
-----------------------------------------
Name: Tom Brandt
------------------------------------
Its: Group Vice President
BARCLAYS BANK PLC
By: /s/ JAMES K. DOWNEY
-----------------------------------------
Name: James K. Downey
------------------------------------
Its: Associate Director
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SECOND AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 3
<PAGE> 7
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE
By: /s/ MARCUS EDWARD
-----------------------------------------
Name: Marcus Edward
------------------------------------
Its: Vice President
By: /s/ BRIAN O'LEARY
-----------------------------------------
Name: Brian O'Leary
------------------------------------
Its: Vice President
CREDIT LYONNAIS, NEW YORK BRANCH
By:
-----------------------------------------
Name:
------------------------------------
Its: Vice President
CREDIT SUISSE FIRST BOSTON
By: /s/ JOSEPH A. CONEENY
-----------------------------------------
Name: JOSEPH A. CONEENY
------------------------------------
Its: Managing Director
By: /s/ TODD C. MORGAN
-----------------------------------------
Name: TODD C. MORGAN
------------------------------------
Its: Vice President
THE DAI-ICHI KANGYO BANK, LTD.
By: /s/ KAZUKI SHIMIZU
-----------------------------------------
Name: KAZUKI SHIMIZU
------------------------------------
Its: Vice President
KEY CORPORATE CAPITAL INC.
By: /s/ JASON R. WEAVER
-----------------------------------------
Name: Jason R. Weaver
------------------------------------
Its: Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SECOND AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 4
<PAGE> 8
SOCIETE GENERALE
By: /s/ MARK VIGIL
-----------------------------------------
Name: MARK VIGIL
------------------------------------
Its: Vice President
BANK OF MONTREAL
By: /s/ W. T. CALDER
-----------------------------------------
Name: W. T. Calder
------------------------------------
Its: Director, Head of Financing
CORESTATES BANK, N.A.
By: /s/ DOUGLAS BLACKMAN
-----------------------------------------
Name: Douglas Blackman
------------------------------------
Its: Vice President
FLEET NATIONAL BANK
By: /s/ CHRISTINE CAMPANELLI
-----------------------------------------
Name: Christine Campanelli
------------------------------------
Its: Assistant Vice President
THE FUJI BANK, LIMITED, HOUSTON AGENCY
By: /s/ PHILIP C. LAUINGER III
-----------------------------------------
Name: PHILIP C. LAUINGER III
------------------------------------
Its: Vice President & Manager
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, NEW YORK BRANCH
By: /s/ SADAO MURAOKA
-----------------------------------------
Name: SADAO MURAOKA
------------------------------------
Its: HEAD OF SOUTHWEST REGION
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SECOND AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 5
<PAGE> 9
MELLON BANK, N.A.
By: /s/ LISA M. PELLOW
-----------------------------------------
Name: Lisa M. Pellow
------------------------------------
Its: Vice President
PNC BANK, NATIONAL ASSOCIATION
By: /s/ JEFFREY E. HAUSER
-----------------------------------------
Name: JEFFREY E. HAUSER
------------------------------------
Its: Vice President
SANWA BANK LIMITED
By: /s/ MATTHEW G. PATRICK
-----------------------------------------
Name: MATTHEW G. PATRICK
------------------------------------
Its: Vice President
THE BANK OF NOVA SCOTIA
By: /s/ VINCENT J. FITZGERALD, JR.
-----------------------------------------
Name: Vincent J. Fitzgerald, Jr.
------------------------------------
Its: Authorized Signatory
THE SUMITOMO BANK, LTD.
By: /s/ KIRK L. STITES
-----------------------------------------
Name: Kirk L. Stites
------------------------------------
Its: Vice President and Manager
By: /s/ JULIE A. SCHELL
-----------------------------------------
Name: Julie A. Schell
------------------------------------
Its: Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SECOND AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 6
<PAGE> 10
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By: /s/ JANET P. SAMMONS
-----------------------------------------
Name: Janet P. Sammons
------------------------------------
Its: Vice President
ABN-AMRO BANK, N.V. - HOUSTON AGENCY
By: /s/ LILA JORDAN
-----------------------------------------
Name: Lila Jordan
------------------------------------
Its: Group Vice President
By: /s/ STEPHANIE BALETTE
-----------------------------------------
Name: Stephanie Balette
------------------------------------
Its: Sr. Credit Analyst
DRESDNER BANK AG, NEW YORK BRANCH
By: /s/ BRIAN HAUGHNEY
-----------------------------------------
Name: Brian Haughney
------------------------------------
Its: Assistant Treasurer
By: /s/ JANE A. MAJESKI
-----------------------------------------
Name: Jane A. Majeski
------------------------------------
Its: Vice President
SUMMIT BANK
By: /s/ HENRY G. KUSH, JR.
-----------------------------------------
Name: Henry G. Kush, Jr.
------------------------------------
Its: Vice President
THE TOKAI BANK, LIMITED
By: /s/ KAORU ODA
-----------------------------------------
Name: Kaoru Oda
------------------------------------
Its: Assistant General Manager
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SECOND AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 7
<PAGE> 11
UNION BANK OF SWITZERLAND, NEW YORK
BRANCH
By: /s/ STEPHEN A. CAYER
-----------------------------------------
Name: STEPHEN A. CAYER
------------------------------------
Its: ASSISTANT VICE PRESIDENT
-------------------------------------
By: /s/ EDUARDO SALAZAR
-----------------------------------------
Name: Eduardo Salazar
------------------------------------
Its: Vice President
-------------------------------------
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION
By: /s/ KYLE G. HRANICKY
-----------------------------------------
Name: Kyle G. Hranicky
------------------------------------
Its: Assistant Vice President
BANK OF IRELAND
By: /s/ [ILLEGIBLE]
-----------------------------------------
Name: [ILLEGIBLE]
------------------------------------
Its: Account Manager
CAISSE NATIONALE DE CREDIT AGRICOLE
By: /s/ KATHERINE L. ABBOTT
-----------------------------------------
Name: KATHERINE L. ABBOTT
------------------------------------
Its: FIRST VICE PRESIDENT
CRESTAR BANK
By: /s/ J. ERIC MILLHAM
-----------------------------------------
Name: J. Eric Millham
------------------------------------
Its: Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SECOND AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 8
<PAGE> 12
MERITA BANK, LTD., NEW YORK BRANCH
By: /s/ CLIFFORD ABRAMSKY
-----------------------------------------
Name: Clifford Abramsky
------------------------------------
Its: Vice President
By: /s/ ERIC MANN
-----------------------------------------
Name: Eric Mann
------------------------------------
Its: Vice President
NATIONAL CITY BANK
By: /s/ ANDREW J. WALSHAW
-----------------------------------------
Name: Andrew J. Walshaw
------------------------------------
Its: Account Officer
THE ROYAL BANK OF SCOTLAND PLC
By: /s/ KAREN STEFANCIC
-----------------------------------------
Name: KAREN STEFANCIC
------------------------------------
Its: Vice President
RIGGS BANK, N.A.
By: /s/ [ILLEGIBLE]
-----------------------------------------
Name:
------------------------------------
Its: Vice President
THE SUMITOMO TRUST & BANKING CO.,
LTD., NEW YORK BRANCH
By: /s/ SURAJ P. BHATIA
-----------------------------------------
Name: SURAJ P. BHATIA
------------------------------------
Its: Senior Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SECOND AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 9
<PAGE> 13
THE YASUDA TRUST AND BANKING CO., LTD.
By: /s/ NORIO MIYASHITA
-----------------------------------------
Name: Norio Miyashita
------------------------------------
Its: Deputy General Manager
NATIONAL BANK OF CANADA
By: /s/ THERESA CAMASEO
-----------------------------------------
Name: Theresa Camaseo
------------------------------------
Its: Vice President
By: /s/ THERESA WHITE
-----------------------------------------
Name: Theresa White
------------------------------------
Its: Assistant Vice President
CITY NATIONAL BANK
By: /s/ DAVID BURDGE
-----------------------------------------
Name: David Burdge
------------------------------------
Its: Senior Vice President
SENIOR DEBT PORTFOLIO
BY: Boston Management and Research as
Investment Advisor
By: /s/ SCOTT H. PAGE
-----------------------------------------
Name: Scott H. Page
------------------------------------
Its: Vice President
-------------------------------------
BANK OF SCOTLAND
By: /s/ ANNIE CHIN TAT
-----------------------------------------
Name: ANNIE CHIN TAT
------------------------------------
Its: VICE PRESIDENT
-------------------------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SECOND AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 10
<PAGE> 14
BANQUE FRANCAISE DU COMMERCE EXTERIEUR
By:
-----------------------------------------
Name:
------------------------------------
Its:
-------------------------------------
HELLER FINANCIAL, INC.
By: /s/ PATRICK HAYES
-----------------------------------------
Name: PATRICK HAYES
------------------------------------
Its: VICE PRESIDENT
-------------------------------------
GOLDMAN SACHS CREDIT PARTNERS, L.P.
By: /s/ STEPHEN B. KING
-----------------------------------------
Name: STEPHEN B. KING
------------------------------------
Its: AUTHORIZED SIGNATORY
-------------------------------------
BEAR STEARNS INVESTMENT PRODUCTS, INC.
By: /s/ DONALD R. MULLEN
-----------------------------------------
Name: Donald R. Mullen
------------------------------------
Its: President
-------------------------------------
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By:
-----------------------------------------
Name:
------------------------------------
Its:
-------------------------------------
GULF INTERNATIONAL BANK B.S.C.
By: /s/ THOMAS E. FITZHERBERT
-----------------------------------------
Name: THOMAS E. FITZHERBERT
------------------------------------
Its: VICE PRESIDENT
-------------------------------------
By: /s/ ISSA N. BACONI
-----------------------------------------
Name: ISSA N. BACONI
------------------------------------
Its: SVP & BRANCH MANAGER
-------------------------------------
SECOND AMENDMENT TO EVERGREEN LOAN AGREEMENT
Signature Page 11
<PAGE> 1
EXHIBIT 4.27
================================================================================
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
as Issuer
AND
the Guarantors named herein
AND
U.S. TRUST COMPANY OF TEXAS, N.A.,
as Trustee
-------------------------
THIRD SUPPLEMENTAL INDENTURE
Dated as of September 5, 1997
to
Indenture
Dated as of February 14, 1996
-------------------------
$200,000,000
9-3/8% Senior Subordinated Notes
due 2004
================================================================================
<PAGE> 2
THIRD SUPPLEMENTAL INDENTURE dated as of September 5, 1997,
among CHANCELLOR MEDIA CORPORATION OF LOS ANGELES, a Delaware corporation (the
"Company"), CHANCELLOR BROADCASTING LICENSEE COMPANY, a Delaware corporation,
TREFOIL COMMUNICATIONS, INC., a Delaware corporation, SHAMROCK BROADCASTING,
INC., a Delaware corporation, SHAMROCK RADIO LICENSES, INC., a Delaware
corporation, and SHAMROCK BROADCASTING OF TEXAS, INC., a Texas corporation
(collectively, the "Existing Guarantors"), the subsidiaries identified on
Exhibit A and Exhibit B hereto (collectively, the "Subsidiaries") and U.S.
TRUST COMPANY OF TEXAS, N.A., a national banking association, as Trustee (the
"Trustee").
WHEREAS, Chancellor Radio Broadcasting Company ("CRBC")
(which, prior to February 14, 1996, was known as Chancellor Broadcasting
Company) and Chancellor Broadcasting Licensee Company have heretofore executed
and delivered to the Trustee an Indenture dated as of February 14, 1996, as
amended by that certain First Supplemental Indenture, dated as of February 14,
1996, by and among CRBC, the Existing Guarantors and the Trustee and that
certain Second Supplemental Indenture, dated as of April 15, 1997, by and among
CRBC, the Existing Guarantors and the Trustee (as so previously amended, the
"Indenture"), providing for the issuance of $200,000,000 aggregate principal
amount of CRBC's 9-3/8% Senior Subordinated Notes due 2004 (the "Securities");
WHEREAS, pursuant to that certain Amended and Restated
Agreement and Plan of Merger by and among Chancellor Broadcasting Company,
CRBC, Evergreen Media Corporation, Evergreen Mezzanine Holdings Corporation and
Evergreen Media Corporation of Los Angeles, dated as of February 19, 1997 and
amended and restated as of July 31, 1997 (the "Merger Agreement"), among other
things, (i) Chancellor Broadcasting Company merged with and into Evergreen
Mezzanine Holdings Corporation (the "Parent Merger") and (ii) CRBC merged with
and into Evergreen Media Corporation of Los Angeles (the "Subsidiary Merger").
Upon completion of the Parent Merger, Evergreen Media Corporation changed its
name to Chancellor Media Corporation and Evergreen Mezzanine Holdings
Corporation changed its name to Chancellor Mezzanine Holdings Corporation.
Upon completion of the Subsidiary Merger, Evergreen Media Corporation of Los
Angeles changed its name to Chancellor Media Corporation of Los Angeles;
WHEREAS, the Company, the Existing Guarantors, the
Subsidiaries and the Trustee desire by this Third Supplemental Indenture, (i)
pursuant to and as contemplated by Section 5.01(a)(1)(B) of the Indenture, that
the Company expressly assume all of the obligations of CRBC under the
Securities and the Indenture and (ii) pursuant to and as contemplated by
Sections 4.19 and 9.01 of the Indenture, that each of the Subsidiaries become a
Guarantor thereunder;
WHEREAS, the Company, the Existing Guarantors, the
Subsidiaries and the Trustee desire by this Third Supplemental Indenture,
pursuant to and as contemplated by Section 9.01 of the Indenture, to amend
certain provisions therein;
2
<PAGE> 3
WHEREAS, the execution and delivery of this Third Supplemental
Indenture has been authorized by resolutions of the Boards of Directors of the
Company, the Existing Guarantors and the Subsidiaries; and
WHEREAS, all conditions and requirements necessary to make
this Third Supplemental Indenture a valid, binding legal instrument in
accordance with its terms have been performed and fulfilled by the parties
hereto and the execution and delivery thereof have been in all respects duly
authorized by the parties hereto.
NOW, THEREFORE, in consideration of the above premises, each
party agrees, for the benefit of the others and for the equal and ratable
benefit of the holders of the Securities, as follows:
ARTICLE 1.
ASSUMPTION OF OBLIGATIONS AS ISSUER
Section 1.01. Assumption. The Company hereby expressly and
unconditionally assumes each and every covenant, agreement and undertaking of
CRBC in the Indenture as of the date of this Third Supplemental Indenture, and
also hereby expressly and unconditionally assumes each and every covenant,
agreement and undertaking of CRBC in each Security outstanding on the date of
this Third Supplemental Indenture.
ARTICLE 2.
ASSUMPTION OF OBLIGATIONS AS GUARANTOR
Section 2.01. Assumption. Each of the Subsidiaries hereby
expressly and unconditionally assumes each and every covenant, agreement and
undertaking of a Guarantor in the Indenture as of the date of this Third
Supplemental Indenture, and also hereby expressly and unconditionally assumes
each and every covenant, agreement and undertaking of a Guarantor in each
Security outstanding on the date of this Third Supplemental Indenture.
ARTICLE 3.
ADDITIONAL AMENDMENTS
Section 3.01. Change of Control. Pursuant to Section
9.01(1) of the Indenture, as a result of an ambiguity created by the completion
of the transactions contemplated by the Merger Agreement, the definition of
"Change of Control" in Section 1.01 of the Indenture is hereby amended and
restated in its entirety to read as follows:
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons for
purposes of Section 13(d) of the Exchange Act (a "Group") (whether or not
3
<PAGE> 4
otherwise in compliance with the provisions of the Indenture), other than to
Hicks Muse or any of its Affiliates, officers and directors or to Steven Dinetz
(the "Permitted Holders"); or (ii) a majority of the Board of Directors of
Chancellor Media Corporation, Chancellor Mezzanine Holdings Corporation or the
Company shall consist of Persons who are not Continuing Directors; or (iii) the
acquisition by any Person or Group (other than the Permitted Holders) of the
power, directly or indirectly, to vote or direct the voting of securities
having more than 50% of the ordinary voting power for the election of directors
of Chancellor Media Corporation, Chancellor Mezzanine Holdings Corporation or
the Company.
Section 3.02. Continuing Director. Pursuant to Section
9.01(1) of the Indenture, as a result of an ambiguity created by the completion
of the transactions contemplated by the Merger Agreement, the definition of
"Continuing Director" in Section 1.01 of the Indenture is hereby amended and
restated in its entirety to read as follows:
"Continuing Director" means, as of the date of determination,
any Person who (i) was a member of the Board of Directors of Holdings or CRBC
on February 14, 1996, (ii) was nominated for election or elected to the Board
of Directors of Chancellor Media Corporation, Chancellor Mezzanine Holdings
Corporation or the Company with the affirmative vote of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination or election, or (iii) is a representative of a Permitted
Holder.
Section 3.03. Additional Definitions. Pursuant to Section
9.01(1) of the Indenture, as a result of an ambiguity created by the completion
of the transactions contemplated by the Merger Agreement, Section 1.01 of the
Indenture is hereby amended as follows to include the following definitions:
"Chancellor Media Corporation" means Chancellor Media
Corporation, a Delaware corporation, and its successors.
"Chancellor Mezzanine Holdings Corporation" means Chancellor
Mezzanine Holdings Corporation, a Delaware corporation, and its successors.
ARTICLE 4.
MISCELLANEOUS PROVISIONS
Section 4.01. Terms Defined. For all purposes of this
Third Supplemental Indenture, except as otherwise defined or unless the context
otherwise requires, terms used in capitalized form in this Third Supplemental
Indenture and defined in the Indenture have the meanings specified in the
Indenture.
Section 4.02. Indenture. Except as amended hereby, the
Indenture and the Securities are in all respects ratified and confirmed and all
the terms shall remain in full force and effect.
4
<PAGE> 5
Section 4.03. Governing Law. This Third Supplemental
Indenture shall be governed by and construed in accordance with the laws of the
State of New York, as applied to contracts made and performed within the State
of New York, without regard to principles of conflict of laws.
Section 4.04. Successors. All agreements of the Company,
the Existing Guarantors and the Subsidiaries in this Third Supplemental
Indenture and the Securities shall bind their successors. All agreements of
the Trustee in this Third Supplemental Indenture shall bind its successors.
Section 4.05. Duplicate Originals. All parties may sign
any number of copies of this Third Supplemental indenture. Each signed copy
shall be an original, but all of them together shall represent the same
agreement.
Section 4.06. Severability. In case any one or more of the
provisions in this Third Supplemental Indenture or in the Securities shall be
held invalid, illegal or unenforceable, in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions shall not in any way be affected or
impaired thereby, it being intended that all of the provisions hereof shall be
enforceable to the full extent permitted by law.
Section 4.07. Trustee Disclaimer. The Trustee accepts the
amendment of the Indenture effected by this Third Supplemental Indenture and
agrees to execute the trust created by the Indenture as hereby amended, but on
the terms and conditions set forth in the Indenture, including the terms and
provisions defining and limiting the liabilities and responsibilities of the
Trustee, which terms and provisions shall in like manner define and limit its
liabilities and responsibilities in the performance of the trust created by the
Indenture as hereby amended, and without limiting the generality of the
foregoing, the Trustee shall not be responsible in any manner whatsoever for or
with respect to any of the recitals or statements contained herein, all of
which recitals or statements are made solely by the Company and the
Subsidiaries, or for or with respect to (i) the validity or sufficiency of this
Third Supplemental Indenture or any of the terms or provisions hereof, (ii) the
proper authorization hereof by the Company, the Existing Guarantors and the
Subsidiaries by corporate action or otherwise, (iii) the due execution hereof
by the Company, the Existing Guarantors and the Subsidiaries or (iv) the
consequences (direct or indirect and whether deliberate or inadvertent) of any
amendment herein provided for, and the Trustee makes no representation with
respect to any such matters.
Section 4.08. Effectiveness.
(a) This Third Supplemental Indenture shall
become effective once executed upon fulfillment of the conditions set forth in
Section 4.08(b) below.
(b) This Third Supplemental Indenture shall not
become effective until receipt by the Trustee of the following, in each case
dated no earlier than the date hereof.
5
<PAGE> 6
(i) a certificate of an appropriate
officer of the Company, substantially in the form of Exhibit C hereto;
and
(ii) an opinion of Latham & Watkins,
counsel to the Company, substantially in the form of Exhibit D hereto.
(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be duly executed as of the day and year written
above.
CHANCELLOR MEDIA CORPORATION
OF LOS ANGELES, as Issuer
----------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:
--------------------
Title:
U.S. TRUST COMPANY OF TEXAS,
N.A., as Trustee
----------------------------------
By:
-----------------------------
Title:
--------------------------
Attest:
--------------------
Title:
7
<PAGE> 8
EVERGREEN MEDIA CORPORATION OF CHICAGO FM,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WLUP-FM LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF THE BAY AREA,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KIOI LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
8
<PAGE> 9
EVERGREEN MEDIA CORPORATION OF ILLINOIS,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WRCX LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF CHICAGO AM,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WMVP LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
9
<PAGE> 10
EVERGREEN MEDIA CORPORATION OF DADE COUNTY
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WVCG LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA/PYRAMID CORPORATION,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA/PYRAMID HOLDINGS,
CORPORATION, as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
10
<PAGE> 11
BROADCAST ARCHITECTURE, INC.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF
MASSACHUSETTS, as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WJMN LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION
OF PENNSYLVANIA, as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
11
<PAGE> 12
WJJZ LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
-------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF MIAMI,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WEDR LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF BOSTON,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
12
<PAGE> 13
WXKS (AM) LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WXKS (FM) LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF THE
WINDY CITY, as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WNUA LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
13
<PAGE> 14
EVERGREEN MEDIA CORPORATION OF PHILADELPHIA,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION
OF THE KEYSTONE STATE,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KYLD LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WYXR LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
14
<PAGE> 15
WUSL LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF ROCHESTER,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KKBT LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION
OF THE NATION'S CAPITAL, as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
15
<PAGE> 16
WWRC LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA PARTNERS CORPORATION,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF GOTHAM,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF NEW YORK,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
16
<PAGE> 17
WYNY LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF DETROIT,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WKQI/WDOZ/WNIC LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF CHICAGOLAND,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
17
<PAGE> 18
WEJM/WEJM-FM/WVAZ LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF CHARLOTTE,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WIOQ LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF DALLAS,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
18
<PAGE> 19
KSKY LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF SAN FRANCISCO,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KMEL LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF HOUSTON,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
19
<PAGE> 20
EVERGREEN MEDIA OF HOUSTON LIMITED
PARTNERSHIP, as Guarantor
By: Evergreen Media Corporation of Houston
Its: General Partner
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KTRH LICENSE LIMITED PARTNERSHIP,
as Guarantor
By: Evergreen Media Corporation of Houston
Its: General Partner
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KLOL LICENSE LIMITED PARTNERSHIP,
as Guarantor
By: Evergreen Media Corporation of Houston
Its: General Partner
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
20
<PAGE> 21
EVERGREEN MEDIA CORPORATION OF TIBURON,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KKSF LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KDFC (AM) LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KDFC (FM) LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
21
<PAGE> 22
EVERGREEN MEDIA CORPORATION
OF WASHINGTON, D.C.
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF ST. LOUIS,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WTOP LICENSE LIMITED PARTNERSHIP,
as Guarantor
By: Evergreen Media Corporation of
Washington, D.C.
Its: General Partner
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
22
<PAGE> 23
WASH LICENSE LIMITED PARTNERSHIP,
as Guarantor
By: Evergreen Media Corporation of
Washington, D.C.
Its: General Partner
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF THE
MOTOR CITY, as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WJLB LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF MICHIGAN,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
23
<PAGE> 24
WMXD LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WAXQ INC.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WAXQ LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WMZQ INC.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
24
<PAGE> 25
WMZQ LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF THE
LIBERTY CITY, as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WDAS (FM) LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WDAS (AM) LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
25
<PAGE> 26
RIVERSIDE BROADCASTING CO., INC.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WLTW LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF THE
GREAT LAKES, as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WWWW/WDFN LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
26
<PAGE> 27
VBE, INC.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF THE
CAPITAL CITY, as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WGAY LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF CHICAGO,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
27
<PAGE> 28
WPNT LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KIBB INC.,
as Guarantor
++
-------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
Attest:***
------------------------------------
Title:
KYSR INC.,
as Guarantor
++
-------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
Attest:***
------------------------------------
Title:
WLIT INC.,
as Guarantor
++
-------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
Attest:***
------------------------------------
Title:
28
<PAGE> 29
WDRQ INC.,
as Guarantor
++
-------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
Attest:***
------------------------------------
Title:
RADIO 100 L.L.C.,
as Guarantor
By: Chancellor Radio Broadcasting Company
Its: Sole Member
++
-------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
Attest:***
------------------------------------
Title:
TREFOIL COMMUNICATIONS, INC.,
as Guarantor
++
-------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
Attest:***
------------------------------------
Title:
SHAMROCK BROADCASTING, INC.,
as Guarantor
++
-------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
Attest:***
------------------------------------
Title:
29
<PAGE> 30
SHAMROCK RADIO LICENSES, INC.,
as Guarantor
++
-------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
Attest:***
------------------------------------
Title:
SHAMROCK BROADCASTING OF TEXAS, INC.,
as Guarantor
++
-------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
Attest:***
------------------------------------
Title:
SHAMROCK BROADCASTING LICENSES OF DENVER,
INC., as Guarantor
++
-------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
Attest:***
------------------------------------
Title:
CHANCELLOR BROADCASTING LICENSEE COMPANY,
as Guarantor
++
-------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
Attest:***
------------------------------------
Title:
30
<PAGE> 31
----------------------------------
+Matthew E. Devine
(signing in his capacity as Vice
President of the above Companies)
Attest:
--------------------------------
By: **Omar Choucair
Title: Vice President
----------------------------------
++Eric Neumann
(signing in his capacity as Vice
President of the above Companies)
Attest:
--------------------------------
By: ***
Title:
31
<PAGE> 32
Exhibit A
CERTAIN SUBSIDIARIES OF
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
1. Evergreen Media Corporation of Chicago FM
2. WLUP-FM License Corp.
3. Evergreen Media Corporation of the Bay Area
4. KIOI License Corp.
5. Evergreen Media Corporation of Illinois
6. WRCX License Corp.
7. Evergreen Media Corporation of Chicago AM
8. WMVP License Corp.
9. Evergreen Media Corporation of Dade County
10. WVCG License Corp.
11. Evergreen Media/Pyramid Corporation
12. Evergreen Media/Pyramid Holdings Corporation
13. Broadcast Architecture, Inc.
14. Evergreen Media Corporation of Massachusetts
15. WJMN License Corp.
16. Evergreen Media Corporation of Pennsylvania
17. WJJZ License Corp.
18. Evergreen Media Corporation of Miami
19. WEDR License Corp.
32
<PAGE> 33
20. Evergreen Media Corporation of Boston
21. WXKS (AM) License Corp.
22. WXKS (FM) License Corp.
23. Evergreen Media Corporation of the Windy City
24. WNUA License Corp.
25. Evergreen Media Corporation of Philadelphia
26. Evergreen Media Corporation of the Keystone State
27. KYLD License Corp.
28. WYXR License Corp.
29. WUSL License Corp.
30. Evergreen Media Corporation of Rochester
31. KKBT License Corp.
32. Evergreen Media Corporation of the Nation's Capital
33. WWRC License Corp.
34. Evergreen Media Partners Corporation
35. Evergreen Media Corporation of Gotham
36. Evergreen Media Corporation of New York
37. WYNY License Corp.
38. Evergreen Media Corporation of Detroit
39. WKQI/WDOZ/WNIC License Corp.
40. Evergreen Media Corporation of Chicagoland
41. WEJM/WEJM-FM/WVAZ License Corp.
33
<PAGE> 34
42. Evergreen Media Corporation of Charlotte
43. WIOQ License Corp.
44. Evergreen Media Corporation of Dallas
45. KSKY License Corp.
46. Evergreen Media Corporation of San Francisco
47. KMEL License Corp.
48. Evergreen Media Corporation of Houston
49. Evergreen Media of Houston Limited Partnership
50. KTRH License Limited Partnership
51. KLOL License Limited Partnership
52. Evergreen Media Corporation of Tiburon
53. KKSF License Corp.
54. KDFC (AM) License Corp.
55. KDFC (FM) License Corp.
56. Evergreen Media Corporation of Washington, D.C.
57. Evergreen Media Corporation of St. Louis
58. WTOP License Limited Partnership
59. WASH License Limited Partnership
60. Evergreen Media Corporation of the Motor City
61. WJLB License Corp.
62. Evergreen Media Corporation of Michigan
63. WMXD License Corp.
64. WAXQ Inc.
34
<PAGE> 35
65. WAXQ License Corp.
66. WMZQ Inc.
67. WMZQ License Corp.
68. Evergreen Media Corporation of the Liberty City
69. WDAS (FM) License Corp.
70. WDAS (AM) License Corp.
71. Riverside Broadcasting Co. Inc.
72. WLTW License Corp.
73. Evergreen Media Corporation of the Great Lakes
74. WWWW/WDFN License Corp.
75. VBE, Inc.
76. Evergreen Media Corporation of the Capital City
77. WGAY License Corp.
78. Evergreen Media Corporation of Chicago
79. WPNT License Corp.
35
<PAGE> 36
Exhibit B
CERTAIN SUBSIDIARIES OF
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
1. KIBB Inc.
2. KYSR Inc.
3. WLIT Inc.
4. WDRQ Inc.
5. Radio 100 L.L.C.
6. Shamrock Broadcasting Licenses of Denver, Inc.
36
<PAGE> 1
EXHIBIT 4.28
================================================================================
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
as Issuer
AND
the Guarantors named herein
AND
U.S. TRUST COMPANY OF TEXAS, N.A.,
as Trustee
-------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of September 5, 1997
to
Indenture
Dated as of June 24, 1997
-------------------------
$200,000,000
8-3/4% Senior Subordinated Notes
due 2007
================================================================================
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE dated as of September 5, 1997,
among CHANCELLOR MEDIA CORPORATION OF LOS ANGELES, a Delaware corporation (the
"Company"), CHANCELLOR BROADCASTING LICENSEE COMPANY, a Delaware corporation,
TREFOIL COMMUNICATIONS, INC., a Delaware corporation, SHAMROCK BROADCASTING,
INC., a Delaware corporation, SHAMROCK RADIO LICENSES, INC., a Delaware
corporation, SHAMROCK BROADCASTING OF TEXAS, INC., a Texas corporation, and
SHAMROCK BROADCASTING LICENSES OF DENVER, a Delaware corporation (collectively,
the "Existing Guarantors"), the subsidiaries identified on Exhibit A and
Exhibit B hereto (collectively, the "Subsidiaries") and U.S. TRUST COMPANY OF
TEXAS, N.A., a national banking association, as Trustee (the "Trustee").
WHEREAS, Chancellor Radio Broadcasting Company ("CRBC") and
the Existing Guarantors have heretofore executed and delivered to the Trustee
an Indenture dated as of June 24, 1997, (the "Indenture"), providing for the
issuance of $200,000,000 aggregate principal amount of CRBC's 8-3/4% Senior
Subordinated Notes due 2007 (the "Securities");
WHEREAS, pursuant to that certain Amended and Restated
Agreement and Plan of Merger by and among Chancellor Broadcasting Company,
CRBC, Evergreen Media Corporation, Evergreen Mezzanine Holdings Corporation and
Evergreen Media Corporation of Los Angeles, dated as of February 19, 1997 and
amended and restated as of July 31, 1997 (the "Merger Agreement"), among other
things, (i) Chancellor Broadcasting Company merged with and into Evergreen
Mezzanine Holdings Corporation (the "Parent Merger") and (ii) CRBC merged with
and into Evergreen Media Corporation of Los Angeles (the "Subsidiary Merger").
Upon completion of the Parent Merger, Evergreen Media Corporation changed its
name to Chancellor Media Corporation and Evergreen Mezzanine Holdings
Corporation changed its name to Chancellor Mezzanine Holdings Corporation.
Upon completion of the Subsidiary Merger, Evergreen Media Corporation of Los
Angeles changed its name to Chancellor Media Corporation of Los Angeles;
WHEREAS, the Company, the Existing Guarantors, the
Subsidiaries and the Trustee desire by this First Supplemental Indenture, (i)
pursuant to and as contemplated by Section 5.01(a)(1)(B) of the Indenture, that
the Company expressly assume all of the obligations of CRBC under the
Securities and the Indenture and (ii) pursuant to and as contemplated by
Sections 4.19 and 9.01 of the Indenture, that each of the Subsidiaries become a
Guarantor thereunder;
WHEREAS, the Company, the Existing Guarantors, the
Subsidiaries and the Trustee desire by this First Supplemental Indenture,
pursuant to and as contemplated by Section 9.01 of the Indenture, to amend
certain provisions therein;
WHEREAS, the execution and delivery of this First Supplemental
Indenture has been authorized by resolutions of the Boards of Directors of the
Company and the Subsidiaries; and
2
<PAGE> 3
WHEREAS, all conditions and requirements necessary to make
this First Supplemental Indenture a valid, binding legal instrument in
accordance with its terms have been performed and fulfilled by the parties
hereto and the execution and delivery thereof have been in all respects duly
authorized by the parties hereto.
NOW, THEREFORE, in consideration of the above premises, each
party agrees, for the benefit of the others and for the equal and ratable
benefit of the holders of the Securities, as follows:
ARTICLE 1.
ASSUMPTION OF OBLIGATIONS AS ISSUER
Section 1.01. Assumption. The Company hereby expressly and
unconditionally assumes each and every covenant, agreement and undertaking of
CRBC in the Indenture as of the date of this First Supplemental Indenture, and
also hereby expressly and unconditionally assumes each and every covenant,
agreement and undertaking of CRBC in each Security outstanding on the date of
this First Supplemental Indenture.
ARTICLE 2.
ASSUMPTION OF OBLIGATIONS AS GUARANTOR
Section 2.01. Assumption. Each of the Subsidiaries hereby
expressly and unconditionally assumes each and every covenant, agreement and
undertaking of a Guarantor in the Indenture as of the date of this First
Supplemental Indenture, and also hereby expressly and unconditionally assumes
each and every covenant, agreement and undertaking of a Guarantor in each
Security outstanding on the date of this First Supplemental Indenture.
ARTICLE 3.
ADDITIONAL AMENDMENTS
Section 3.01. Change of Control. Pursuant to Section
9.01(1) of the Indenture, as a result of an ambiguity created by the completion
of the transactions contemplated by the Merger Agreement, the definition of
"Change of Control" in Section 1.01 of the Indenture is hereby amended and
restated in its entirety to read as follows:
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons for
purposes of Section 13(d) of the Exchange Act (a "Group") (whether or not
otherwise in compliance with the provisions of the Indenture), other than (x)
in the event that the Evergreen Merger is not consummated, to Hicks Muse or any
of its Affiliates, officers and directors or to Steven Dinetz and (y) if the
Evergreen Merger is consummated, from and after the
3
<PAGE> 4
effective date of the Evergreen Merger, to Hicks Muse or any of its Affiliates,
officers and directors or to Steven Dinetz or Scott K. Ginsburg (the
"Permitted Holders"); or (ii) a majority of the Board of Directors of
Chancellor Media Corporation, Chancellor Mezzanine Holdings Corporation or the
Company shall consist of Persons who are not Continuing Directors; or (iii) the
acquisition by any Person or Group (other than the Permitted Holders) of the
power, directly or indirectly, to vote or direct the voting of securities
having more than 50% of the ordinary voting power for the election of directors
of Chancellor Media Corporation, Chancellor Mezzanine Holdings Corporation or
the Company.
Section 3.02. Continuing Directors. Pursuant to Section
9.01(1) of the Indenture, as a result of an ambiguity created by the completion
of the transactions contemplated by the Merger Agreement, the definition of
"Continuing Director" in Section 1.01 of the Indenture is hereby amended and
restated in its entirety to read as follows:
"Continuing Director" means, as of the date of determination,
any Person who (i) was a member of the Board of Directors of Holdings or CRBC
on June 24, 1997 or becomes a director upon consummation of the Evergreen
Merger, (ii) was nominated for election or elected to the Board of Directors of
Chancellor Media Corporation, Chancellor Mezzanine Holdings Corporation or the
Company with the affirmative vote of a majority of the Continuing Directors who
were members of such Board of Directors at the time of such nomination or
election, or (iii) is a representative of a Permitted Holder.
Section 3.03. Additional Definitions. Pursuant to Section
9.01(1) of the Indenture, as a result of an ambiguity created by the completion
of the transactions contemplated by the Merger Agreement, Section 1.01 of the
Indenture is hereby amended as follows to include the following definitions:
"Chancellor Media Corporation" means Chancellor Media
Corporation, a Delaware corporation, and its successors.
"Chancellor Mezzanine Holdings Corporation" means Chancellor
Mezzanine Holdings Corporation, a Delaware corporation, and its successors.
ARTICLE 4.
MISCELLANEOUS PROVISIONS
Section 4.01. Terms Defined. For all purposes of this First
Supplemental Indenture, except as otherwise defined or unless the context
otherwise requires, terms used in capitalized form in this First Supplemental
Indenture and defined in the Indenture have the meanings specified in the
Indenture.
Section 4.02. Indenture. Except as amended hereby, the
Indenture and the Securities are in all respects ratified and confirmed and all
the terms shall remain in full force and effect.
4
<PAGE> 5
Section 4.03. Governing Law. This First Supplemental
Indenture shall be governed by and construed in accordance with the laws of the
State of New York, as applied to contracts made and performed within the State
of New York, without regard to principles of conflict of laws.
Section 4.04. Successors. All agreements of the Company,
the Existing Guarantors and the Subsidiaries in this First Supplemental
Indenture and the Securities shall bind their successors. All agreements of
the Trustee in this First Supplemental Indenture shall bind its successors.
Section 4.05. Duplicate Originals. All parties may sign any
number of copies of this First Supplemental indenture. Each signed copy shall
be an original, but all of them together shall represent the same agreement.
Section 4.06. Severability. In case any one or more of the
provisions in this First Supplemental Indenture or in the Securities shall be
held invalid, illegal or unenforceable, in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions shall not in any way be affected or
impaired thereby, it being intended that all of the provisions hereof shall be
enforceable to the full extent permitted by law.
Section 4.07. Trustee Disclaimer. The Trustee accepts the
amendment of the Indenture effected by this First Supplemental Indenture and
agrees to execute the trust created by the Indenture as hereby amended, but on
the terms and conditions set forth in the Indenture, including the terms and
provisions defining and limiting the liabilities and responsibilities of the
Trustee, which terms and provisions shall in like manner define and limit its
liabilities and responsibilities in the performance of the trust created by the
Indenture as hereby amended, and without limiting the generality of the
foregoing, the Trustee shall not be responsible in any manner whatsoever for or
with respect to any of the recitals or statements contained herein, all of
which recitals or statements are made solely by the Company and the
Subsidiaries, or for or with respect to (i) the validity or sufficiency of this
First Supplemental Indenture or any of the terms or provisions hereof, (ii) the
proper authorization hereof by the Company, the Existing Guarantors and the
Subsidiaries by corporate action or otherwise, (iii) the due execution hereof
by the Company, the Existing Guarantors and the Subsidiaries or (iv) the
consequences (direct or indirect and whether deliberate or inadvertent) of any
amendment herein provided for, and the Trustee makes no representation with
respect to any such matters.
Section 4.08. Effectiveness.
(a) This First Supplemental Indenture shall
become effective once executed upon fulfillment of the conditions set forth in
Section 4.08(b) below.
(b) This First Supplemental Indenture shall not
become effective until receipt by the Trustee of the following, in each case
dated no earlier than the date hereof.
5
<PAGE> 6
(i) a certificate of an appropriate
officer of the Company, substantially in the form of Exhibit C hereto;
and
(ii) an opinion of Latham & Watkins,
counsel to the Company, substantially in the form of Exhibit D hereto.
(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the day and year written
above.
CHANCELLOR MEDIA CORPORATION
OF LOS ANGELES, as Issuer
--------------------------
By: Matthew E. Devine
Title: Vice President
Attest:
------------------------
Title:
U.S. TRUST COMPANY OF TEXAS,
N.A., as Trustee
--------------------------
By:
---------------------
Title:
------------------
Attest:
------------------------
Title:
7
<PAGE> 8
EVERGREEN MEDIA CORPORATION OF CHICAGO FM,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WLUP-FM LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF THE BAY AREA,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KIOI LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
8
<PAGE> 9
EVERGREEN MEDIA CORPORATION OF ILLINOIS,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WRCX LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF CHICAGO AM,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WMVP LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
9
<PAGE> 10
EVERGREEN MEDIA CORPORATION OF DADE COUNTY
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WVCG LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA/PYRAMID CORPORATION,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA/PYRAMID HOLDINGS,
CORPORATION, as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
10
<PAGE> 11
BROADCAST ARCHITECTURE, INC.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF
MASSACHUSETTS, as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WJMN LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION
OF PENNSYLVANIA, as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
11
<PAGE> 12
WJJZ LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
-------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF MIAMI,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WEDR LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF BOSTON,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
12
<PAGE> 13
WXKS (AM) LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WXKS (FM) LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF THE
WINDY CITY, as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WNUA LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
13
<PAGE> 14
EVERGREEN MEDIA CORPORATION OF PHILADELPHIA,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION
OF THE KEYSTONE STATE,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KYLD LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WYXR LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
14
<PAGE> 15
WUSL LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF ROCHESTER,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KKBT LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION
OF THE NATION'S CAPITAL, as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
15
<PAGE> 16
WWRC LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA PARTNERS CORPORATION,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF GOTHAM,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF NEW YORK,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
16
<PAGE> 17
WYNY LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF DETROIT,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WKQI/WDOZ/WNIC LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF CHICAGOLAND,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
17
<PAGE> 18
WEJM/WEJM-FM/WVAZ LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF CHARLOTTE,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WIOQ LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF DALLAS,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
18
<PAGE> 19
KSKY LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF SAN FRANCISCO,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KMEL LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF HOUSTON,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
19
<PAGE> 20
EVERGREEN MEDIA OF HOUSTON LIMITED
PARTNERSHIP, as Guarantor
By: Evergreen Media Corporation of Houston
Its: General Partner
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KTRH LICENSE LIMITED PARTNERSHIP,
as Guarantor
By: Evergreen Media Corporation of Houston
Its: General Partner
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KLOL LICENSE LIMITED PARTNERSHIP,
as Guarantor
By: Evergreen Media Corporation of Houston
Its: General Partner
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
20
<PAGE> 21
EVERGREEN MEDIA CORPORATION OF TIBURON,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KKSF LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KDFC (AM) LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KDFC (FM) LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
21
<PAGE> 22
EVERGREEN MEDIA CORPORATION
OF WASHINGTON, D.C.
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF ST. LOUIS,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WTOP LICENSE LIMITED PARTNERSHIP,
as Guarantor
By: Evergreen Media Corporation of
Washington, D.C.
Its: General Partner
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
22
<PAGE> 23
WASH LICENSE LIMITED PARTNERSHIP,
as Guarantor
By: Evergreen Media Corporation of
Washington, D.C.
Its: General Partner
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF THE
MOTOR CITY, as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WJLB LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF MICHIGAN,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
23
<PAGE> 24
WMXD LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WAXQ INC.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WAXQ LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WMZQ INC.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
24
<PAGE> 25
WMZQ LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF THE
LIBERTY CITY, as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WDAS (FM) LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WDAS (AM) LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
25
<PAGE> 26
RIVERSIDE BROADCASTING CO., INC.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WLTW LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF THE
GREAT LAKES, as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WWWW/WDFN LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
26
<PAGE> 27
VBE, INC.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF THE
CAPITAL CITY, as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
WGAY LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
EVERGREEN MEDIA CORPORATION OF CHICAGO,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
27
<PAGE> 28
WPNT LICENSE CORP.,
as Guarantor
+
-------------------------------------------
By: Matthew E. Devine
Title: Vice President
Attest:**
------------------------------------
Title: Vice President
KIBB INC.,
as Guarantor
++
-------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
Attest:***
------------------------------------
Title:
KYSR INC.,
as Guarantor
++
-------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
Attest:***
------------------------------------
Title:
WLIT INC.,
as Guarantor
++
-------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
Attest:***
------------------------------------
Title:
28
<PAGE> 29
WDRQ INC.,
as Guarantor
++
-------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
Attest:***
------------------------------------
Title:
RADIO 100 L.L.C.,
as Guarantor
By: Chancellor Radio Broadcasting Company
Its: Sole Member
++
-------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
Attest:***
------------------------------------
Title:
TREFOIL COMMUNICATIONS, INC.,
as Guarantor
++
-------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
Attest:***
------------------------------------
Title:
SHAMROCK BROADCASTING, INC.,
as Guarantor
++
-------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
Attest:***
------------------------------------
Title:
29
<PAGE> 30
SHAMROCK RADIO LICENSES, INC.,
as Guarantor
++
-------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
Attest:***
------------------------------------
Title:
SHAMROCK BROADCASTING OF TEXAS, INC.,
as Guarantor
++
-------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
Attest:***
------------------------------------
Title:
SHAMROCK BROADCASTING LICENSES OF DENVER,
INC., as Guarantor
++
-------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
Attest:***
------------------------------------
Title:
CHANCELLOR BROADCASTING LICENSEE COMPANY,
as Guarantor
++
-------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
Attest:***
------------------------------------
Title:
30
<PAGE> 31
--------------------------
+Matthew E. Devine
(signing in his capacity as
Vice President of the above
Companies)
Attest:
------------------------------------
By: **Omar Choucair
Title: Vice President
--------------------------
++Eric Neumann
(signing in his capacity as
Vice President of the above
Companies)
Attest:
------------------------------------
By: ***
Title:
31
<PAGE> 32
Exhibit A
CERTAIN SUBSIDIARIES OF
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
1. Evergreen Media Corporation of Chicago FM
2. WLUP-FM License Corp.
3. Evergreen Media Corporation of the Bay Area
4. KIOI License Corp.
5. Evergreen Media Corporation of Illinois
6. WRCX License Corp.
7. Evergreen Media Corporation of Chicago AM
8. WMVP License Corp.
9. Evergreen Media Corporation of Dade County
10. WVCG License Corp.
11. Evergreen Media/Pyramid Corporation
12. Evergreen Media/Pyramid Holdings Corporation
13. Broadcast Architecture, Inc.
14. Evergreen Media Corporation of Massachusetts
15. WJMN License Corp.
16. Evergreen Media Corporation of Pennsylvania
17. WJJZ License Corp.
18. Evergreen Media Corporation of Miami
19. WEDR License Corp.
32
<PAGE> 33
20. Evergreen Media Corporation of Boston
21. WXKS (AM) License Corp.
22. WXKS (FM) License Corp.
23. Evergreen Media Corporation of the Windy City
24. WNUA License Corp.
25. Evergreen Media Corporation of Philadelphia
26. Evergreen Media Corporation of the Keystone State
27. KYLD License Corp.
28. WYXR License Corp.
29. WUSL License Corp.
30. Evergreen Media Corporation of Rochester
31. KKBT License Corp.
32. Evergreen Media Corporation of the Nation's Capital
33. WWRC License Corp.
34. Evergreen Media Partners Corporation
35. Evergreen Media Corporation of Gotham
36. Evergreen Media Corporation of New York
37. WYNY License Corp.
38. Evergreen Media Corporation of Detroit
39. WKQI/WDOZ/WNIC License Corp.
40. Evergreen Media Corporation of Chicagoland
41. WEJM/WEJM-FM/WVAZ License Corp.
33
<PAGE> 34
42. Evergreen Media Corporation of Charlotte
43. WIOQ License Corp.
44. Evergreen Media Corporation of Dallas
45. KSKY License Corp.
46. Evergreen Media Corporation of San Francisco
47. KMEL License Corp.
48. Evergreen Media Corporation of Houston
49. Evergreen Media of Houston Limited Partnership
50. KTRH License Limited Partnership
51. KLOL License Limited Partnership
52. Evergreen Media Corporation of Tiburon
53. KKSF License Corp.
54. KDFC (AM) License Corp.
55. KDFC (FM) License Corp.
56. Evergreen Media Corporation of Washington, D.C.
57. Evergreen Media Corporation of St. Louis
58. WTOP License Limited Partnership
59. WASH License Limited Partnership
60. Evergreen Media Corporation of the Motor City
61. WJLB License Corp.
62. Evergreen Media Corporation of Michigan
63. WMXD License Corp.
64. WAXQ Inc.
34
<PAGE> 35
65. WAXQ License Corp.
66. WMZQ Inc.
67. WMZQ License Corp.
68. Evergreen Media Corporation of the Liberty City
69. WDAS (FM) License Corp.
70. WDAS (AM) License Corp.
71. Riverside Broadcasting Co. Inc.
72. WLTW License Corp.
73. Evergreen Media Corporation of the Great Lakes
74. WWWW/WDFN License Corp.
75. VBE, Inc.
76. Evergreen Media Corporation of the Capital City
77. WGAY License Corp.
78. Evergreen Media Corporation of Chicago
79. WPNT License Corp.
35
<PAGE> 36
Exhibit B
CERTAIN SUBSIDIARIES OF
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
1. KIBB Inc.
2. KYSR Inc.
3. WLIT Inc.
4. WDRQ Inc.
5. Radio 100 L.L.C.
36
<PAGE> 1
EXHIBIT 4.29
================================================================================
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
as Issuer
AND
U.S. TRUST COMPANY OF TEXAS, N.A.,
as Trustee
--------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of September 5, 1997
to
Indenture
Dated as of February 26, 1996
--------------------------
$100,000,000
12-1/4% Subordinated Exchange Debentures
due 2008
================================================================================
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE dated as of September 5, 1997,
among CHANCELLOR MEDIA CORPORATION OF LOS ANGELES, a Delaware corporation, (the
"Company") and U.S. TRUST COMPANY OF TEXAS, N.A., a national banking
association, as Trustee (the "Trustee").
WHEREAS, Chancellor Radio Broadcasting Company ("CRBC") has
heretofore executed and delivered to the Trustee an Indenture dated as of
February 26, 1996, (the "Indenture"), providing for the issuance of
$100,000,000 aggregate principal amount of CRBC's 12 1/4% Subordinated Exchange
Debentures due 2008 (the "Securities");
WHEREAS, pursuant to that certain Amended and Restated
Agreement and Plan of Merger by and among Chancellor Broadcasting Company,
CRBC, Evergreen Media Corporation, Evergreen Mezzanine Holdings Corporation and
Evergreen Media Corporation of Los Angeles, dated as of February 19, 1997 and
amended and restated as of July 31, 1997 (the "Merger Agreement"), among other
things, (i) Chancellor Broadcasting Company merged with and into Evergreen
Mezzanine Holdings Corporation (the "Parent Merger") and (ii) CRBC merged with
and into Evergreen Media Corporation of Los Angeles (the "Subsidiary Merger").
Upon completion of the Parent Merger, Evergreen Media Corporation changed its
name to Chancellor Media Corporation and Evergreen Mezzanine Holdings
Corporation changed its name to Chancellor Mezzanine Holdings Corporation.
Upon completion of the Subsidiary Merger, Evergreen Media Corporation of Los
Angeles changed its name to Chancellor Media Corporation of Los Angeles;
WHEREAS, the Company and the Trustee desire by this First
Supplemental Indenture, pursuant to and as contemplated by Section
5.01(a)(1)(B) of the Indenture, that the Company expressly assume all of the
obligations of CRBC under the Securities and the Indenture;
WHEREAS, the Company and the Trustee desire by this First
Supplemental Indenture, pursuant to and as contemplated by Section 9.01 of the
Indenture, to amend certain provisions therein;
WHEREAS, the execution and delivery of this First Supplemental
Indenture has been authorized by a resolution of the Board of Directors of the
Company; and
WHEREAS, all conditions and requirements necessary to make
this First Supplemental Indenture a valid, binding legal instrument in
accordance with its terms have been performed and fulfilled by the parties
hereto and the execution and delivery thereof have been in all respects duly
authorized by the parties hereto.
NOW, THEREFORE, in consideration of the above premises, each
party agrees, for the benefit of the others and for the equal and ratable
benefit of the holders of the Securities, as follows:
2
<PAGE> 3
ARTICLE 1.
ASSUMPTION OF OBLIGATIONS AS ISSUER
Section 1.01. Assumption. The Company hereby expressly and
unconditionally assumes each and every covenant, agreement and undertaking of
CRBC in the Indenture as of the date of this First Supplemental Indenture.
ARTICLE 2.
ADDITIONAL AMENDMENTS
Section 2.01. Change of Control. Pursuant to Section
9.01(1) of the Indenture, as a result of an ambiguity created by the completion
of the transactions contemplated by the Merger Agreement, the definition of
"Change of Control" in Section 1.01 of the Indenture is hereby amended and
restated in its entirety to read as follows:
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons for
purposes of Section 13(d) of the Exchange Act (a "Group") (whether or not
otherwise in compliance with the provisions of the Indenture), other than to
Hicks Muse or any of its Affiliates, officers and directors or to Steven Dinetz
(the "Permitted Holders"); or (ii) a majority of the Board of Directors of
Chancellor Media Corporation, Chancellor Mezzanine Holdings Corporation or the
Company shall consist of Persons who are not Continuing Directors; or (iii) the
acquisition by any Person or Group (other than the Permitted Holders) of the
power, directly or indirectly, to vote or direct the voting of securities
having more than 50% of the ordinary voting power for the election of directors
of Chancellor Media Corporation, Chancellor Mezzanine Holdings Corporation or
the Company.
Section 2.02. Continuing Director. Pursuant to Section
9.01(1) of the Indenture, as a result of an ambiguity created by the completion
of the transactions contemplated by the Merger Agreement, the definition of
"Continuing Director" in Section 1.01 of the Indenture is hereby amended and
restated in its entirety to read as follows:
"Continuing Director" means, as of the date of determination,
any Person who (i) was a member of the Board of Directors of Holdings or CRBC
on February 26, 1996, (ii) was nominated for election or elected to the Board
of Directors of Chancellor Media Corporation, Chancellor Mezzanine Holdings
Corporation or the Company with the affirmative vote of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination or election, or (iii) is a representative of a Permitted
Holder.
Section 2.03. Additional Definitions. Pursuant to Section
9.01(1) of the Indenture, as a result of an ambiguity created by the completion
of the transactions contemplated by the Merger Agreement, Section 1.01 of the
Indenture is hereby amended as follows to include the following definitions:
3
<PAGE> 4
"Chancellor Media Corporation" means Chancellor Media
Corporation, a Delaware corporation, and its successors.
"Chancellor Mezzanine Holdings Corporation" means Chancellor
Mezzanine Holdings Corporation, a Delaware corporation, and its successors.
ARTICLE 3.
MISCELLANEOUS PROVISIONS
Section 3.01. Terms Defined. For all purposes of this
First Supplemental Indenture, except as otherwise defined or unless the context
otherwise requires, terms used in capitalized form in this First Supplemental
Indenture and defined in the Indenture have the meanings specified in the
Indenture.
Section 3.02. Indenture. Except as amended hereby, the
Indenture and the Securities are in all respects ratified and confirmed and all
the terms shall remain in full force and effect.
Section 3.03. Governing Law. This First Supplemental
Indenture shall be governed by and construed in accordance with the laws of the
State of New York, as applied to contracts made and performed within the State
of New York, without regard to principles of conflict of laws.
Section 3.04. Successors. All agreements of the Company in
this First Supplemental Indenture and the Securities shall bind its successors.
All agreements of the Trustee in this First Supplemental Indenture shall bind
its successors.
Section 3.05. Duplicate Originals. All parties may sign
any number of copies of this First Supplemental indenture. Each signed copy
shall be an original, but all of them together shall represent the same
agreement.
Section 3.06. Severability. In case any one or more of the
provisions in this First Supplemental Indenture or in the Securities shall be
held invalid, illegal or unenforceable, in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions shall not in any way be affected or
impaired thereby, it being intended that all of the provisions hereof shall be
enforceable to the full extent permitted by law.
Section 3.07. Trustee Disclaimer. The Trustee accepts the
amendment of the Indenture effected by this First Supplemental Indenture and
agrees to execute the trust created by the Indenture as hereby amended, but on
the terms and conditions set forth in the Indenture, including the terms and
provisions defining and limiting the liabilities and responsibilities of the
Trustee, which terms and provisions shall in like manner define and limit its
liabilities and responsibilities in the performance of the trust created by the
Indenture as
4
<PAGE> 5
hereby amended, and without limiting the generality of the foregoing, the
Trustee shall not be responsible in any manner whatsoever for or with respect
to any of the recitals or statements contained herein, all of which recitals or
statements are made solely by the Company, or for or with respect to (i) the
validity or sufficiency of this First Supplemental Indenture or any of the
terms or provisions hereof, (ii) the proper authorization hereof by the
Company, by corporate action or otherwise, (iii) the due execution hereof by
the Company or (iv) the consequences (direct or indirect and whether deliberate
or inadvertent) of any amendment herein provided for, and the Trustee makes no
representation with respect to any such matters.
Section 3.08. Effectiveness.
(a) This First Supplemental Indenture shall
become effective once executed upon fulfillment of the conditions set forth in
Section 3.08(b) below.
(b) This First Supplemental Indenture shall not
become effective until receipt by the Trustee of the following, in each case
dated no earlier than the date hereof.
(i) a certificate of an appropriate
officer of the Company, substantially in the form of Exhibit A hereto;
and
(ii) an opinion of Latham & Watkins,
counsel to the Company, substantially in the form of Exhibit B hereto.
(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed as of the day and year written
above.
CHANCELLOR MEDIA CORPORATION
OF LOS ANGELES, as Issuer
By:
-----------------------------
Title:
--------------------------
Attest:
--------------------------
Title:
U.S. TRUST COMPANY OF TEXAS,
N.A., as Trustee
By:
-----------------------------
Title:
--------------------------
Attest:
--------------------------
Title:
6
<PAGE> 1
EXHIBIT 4.30
================================================================================
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
as Issuer
AND
U.S. TRUST COMPANY OF TEXAS, N.A.,
as Trustee
-------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of September 5, 1997
to
Indenture
Dated as of January 23, 1997
-------------------------
$360,000,000
12% Subordinated Exchange Debentures
due 2009
================================================================================
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE dated as of September 5, 1997,
among CHANCELLOR MEDIA CORPORATION OF LOS ANGELES, a Delaware corporation, (the
"Company") and U.S. TRUST COMPANY OF TEXAS, N.A., a national banking
association, as Trustee (the "Trustee").
WHEREAS, Chancellor Radio Broadcasting Company ("CRBC") has
heretofore executed and delivered to the Trustee an Indenture dated as of
January 23, 1997, (the "Indenture"), providing for the issuance of $360,000,000
aggregate principal amount of CRBC's 12% Subordinated Exchange Debentures due
2009 (the "Securities");
WHEREAS, pursuant to that certain Amended and Restated
Agreement and Plan of Merger by and among Chancellor Broadcasting Company,
CRBC, Evergreen Media Corporation, Evergreen Mezzanine Holdings Corporation and
Evergreen Media Corporation of Los Angeles, dated as of February 19, 1997 and
amended and restated as of July 31, 1997 (the "Merger Agreement"), among other
things, (i) Chancellor Broadcasting Company merged with and into Evergreen
Mezzanine Holdings Corporation (the "Parent Merger") and (ii) CRBC merged with
and into Evergreen Media Corporation of Los Angeles (the "Subsidiary Merger").
Upon completion of the Parent Merger, Evergreen Media Corporation changed its
name to Chancellor Media Corporation and Evergreen Mezzanine Holdings
Corporation changed its name to Chancellor Mezzanine Holdings Corporation.
Upon completion of the Subsidiary Merger, Evergreen Media Corporation of Los
Angeles changed its name to Chancellor Media Corporation of Los Angeles;
WHEREAS, the Company and the Trustee desire by this First
Supplemental Indenture, pursuant to and as contemplated by Section
5.01(a)(1)(B) of the Indenture, that the Company expressly assume all of the
obligations of CRBC under the Securities and the Indenture;
WHEREAS, the Company and the Trustee desire by this First
Supplemental Indenture, pursuant to and as contemplated by Section 9.01 of the
Indenture, to amend certain provisions therein;
WHEREAS, the execution and delivery of this First Supplemental
Indenture has been authorized by a resolution of the Board of Directors of the
Company; and
WHEREAS, all conditions and requirements necessary to make
this First Supplemental Indenture a valid, binding legal instrument in
accordance with its terms have been performed and fulfilled by the parties
hereto and the execution and delivery thereof have been in all respects duly
authorized by the parties hereto.
NOW, THEREFORE, in consideration of the above premises, each
party agrees, for the benefit of the others and for the equal and ratable
benefit of the holders of the Securities, as follows:
2
<PAGE> 3
ARTICLE 1.
ASSUMPTION OF OBLIGATIONS AS ISSUER
Section 1.01. Assumption. The Company hereby expressly and
unconditionally assumes each and every covenant, agreement and undertaking of
CRBC in the Indenture as of the date of this First Supplemental Indenture.
ARTICLE 2.
ADDITIONAL AMENDMENTS
Section 2.01. Change of Control. Pursuant to Section
9.01(1) of the Indenture, as a result of an ambiguity created by the completion
of the transactions contemplated by the Merger Agreement, the definition of
"Change of Control" in Section 1.01 of the Indenture is hereby amended and
restated in its entirety to read as follows:
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons for
purposes of Section 13(d) of the Exchange Act (a "Group") (whether or not
otherwise in compliance with the provisions of the Indenture), other than to
Hicks Muse or any of its Affiliates, officers and directors or to Steven Dinetz
(the "Permitted Holders"); or (ii) a majority of the Board of Directors of
Chancellor Media Corporation, Chancellor Mezzanine Holdings Corporation or the
Company shall consist of Persons who are not Continuing Directors; or (iii) the
acquisition by any Person or Group (other than the Permitted Holders) of the
power, directly or indirectly, to vote or direct the voting of securities
having more than 50% of the ordinary voting power for the election of directors
of Chancellor Media Corporation, Chancellor Mezzanine Holdings Corporation or
the Company.
Section 2.02. Continuing Director. Pursuant to Section
9.01(1) of the Indenture, as a result of an ambiguity created by the completion
of the transactions contemplated by the Merger Agreement, the definition of
"Continuing Director" in Section 1.01 of the Indenture is hereby amended and
restated in its entirety to read as follows:
"Continuing Director" means, as of the date of determination,
any Person who (i) was a member of the Board of Directors of Holdings or CRBC
on January 23, 1997, (ii) was nominated for election or elected to the Board of
Directors of Chancellor Media Corporation, Chancellor Mezzanine Holdings
Corporation or the Company with the affirmative vote of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination or election, or (iii) is a representative of a Permitted
Holder.
Section 2.03. Additional Definitions. Pursuant to Section
9.01(1) of the Indenture, as a result of an ambiguity created by the completion
of the transactions contemplated by the Merger Agreement, Section 1.01 of the
Indenture is hereby amended as follows to include the following definitions.
3
<PAGE> 4
"Chancellor Media Corporation" means Chancellor Media
Corporation, a Delaware corporation, and its successors.
"Chancellor Mezzanine Holdings Corporation" means Chancellor
Mezzanine Holdings Corporation, a Delaware corporation, and its successors.
ARTICLE 3.
MISCELLANEOUS PROVISIONS
Section 3.01. Terms Defined. For all purposes of this
First Supplemental Indenture, except as otherwise defined or unless the context
otherwise requires, terms used in capitalized form in this First Supplemental
Indenture and defined in the Indenture have the meanings specified in the
Indenture.
Section 3.02. Indenture. Except as amended hereby, the
Indenture and the Securities are in all respects ratified and confirmed and all
the terms shall remain in full force and effect.
Section 3.03. Governing Law. This First Supplemental
Indenture shall be governed by and construed in accordance with the laws of the
State of New York, as applied to contracts made and performed within the State
of New York, without regard to principles of conflict of laws.
Section 3.04. Successors. All agreements of the Company in
this First Supplemental Indenture and the Securities shall bind its successors.
All agreements of the Trustee in this First Supplemental Indenture shall bind
its successors.
Section 3.05. Duplicate Originals. All parties may sign
any number of copies of this First Supplemental indenture. Each signed copy
shall be an original, but all of them together shall represent the same
agreement.
Section 3.06. Severability. In case any one or more of the
provisions in this First Supplemental Indenture or in the Securities shall be
held invalid, illegal or unenforceable, in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions shall not in any way be affected or
impaired thereby, it being intended that all of the provisions hereof shall be
enforceable to the full extent permitted by law.
Section 3.07. Trustee Disclaimer. The Trustee accepts the
amendment of the Indenture effected by this First Supplemental Indenture and
agrees to execute the trust created by the Indenture as hereby amended, but on
the terms and conditions set forth in the Indenture, including the terms and
provisions defining and limiting the liabilities and responsibilities of the
Trustee, which terms and provisions shall in like manner define and limit its
liabilities and responsibilities in the performance of the trust created by the
Indenture as
4
<PAGE> 5
hereby amended, and without limiting the generality of the foregoing, the
Trustee shall not be responsible in any manner whatsoever for or with respect
to any of the recitals or statements contained herein, all of which recitals or
statements are made solely by the Company, or for or with respect to (i) the
validity or sufficiency of this First Supplemental Indenture or any of the
terms or provisions hereof, (ii) the proper authorization hereof by the Company
by corporate action or otherwise, (iii) the due execution hereof by the Company
or (iv) the consequences (direct or indirect and whether deliberate or
inadvertent) of any amendment herein provided for, and the Trustee makes no
representation with respect to any such matters.
Section 3.08. Effectiveness.
(a) This First Supplemental Indenture shall
become effective once executed upon fulfillment of the conditions set forth in
Section 3.08(b) below.
(b) This First Supplemental Indenture shall not
become effective until receipt by the Trustee of the following, in each case
dated no earlier than the date hereof.
(i) a certificate of an appropriate
officer of the Company, substantially in the form of Exhibit A hereto;
and
(ii) an opinion of Latham & Watkins,
counsel to the Company, substantially in the form of Exhibit B hereto.
(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed as of the day and year written
above.
CHANCELLOR MEDIA CORPORATION OF
LOS ANGELES, as Issuer
By:
----------------------------
Title:
----------------------------
Attest:
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Title:
U.S. TRUST COMPANY OF TEXAS,
N.A., as Trustee
By:
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Title:
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Attest:
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Title:
6
<PAGE> 1
EXHIBIT 10.30
AMENDMENT TO EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of this 1st day of March,
1997 by and between Evergreen Media Corporation, a Delaware corporation (the
"Company"), and Kenneth J. O'Keefe, an individual (the "Employee").
WITNESSETH
WHEREAS, the Company and the Employee are parties to an Employment
Agreement dated February 12, 1996 (the "Employment Agreement");
WHEREAS, the Company and the Employee desire to amend the Employment
Agreement in certain respects;
NOW THEREFORE, the parties hereby agree to amend the Employment
Agreement as follows:
1. Effective January 1, 1997, Section 5 of the Employment Agreement is
amended in its entirety to read as follows:
"5. Potential Bonus Compensation.
(a) The Executive shall be entitled to an Annual Bonus for each
Contract Year ending during the Employment Term for which Annual Broadcast Cash
Flow equals or exceeds the Broadcast Cash Flow Target. The amount of Annual
Bonus payable for any Contract Year that begins on or after January 1, 1997
shall be equal to two and one-half percent (2.5%) of the excess, if any, of
Annual Broadcast Cash Flow for such Contract Year over the Broadcast Cash Flow
Target for such Contract Year. The Executive's Annual Bonus earned with respect
to each Contract Year shall be paid at the same time as annual incentive
bonuses with respect to that Contract Year are paid to other senior executives
of the Company generally.
(b) "Annual Broadcast Cash Flow" for any Contract Year shall mean
station operating income for such Contract Year for the stations owned by the
Company as of the last day of such Contract Year on a consolidated basis
excluding depreciation, amortization and corporate, general and administrative
expenses, calculated in a manner consistent with the presentation of "broadcast
cash flow" in the Company's periodic reports filed with the Securities Exchange
Commission, with respect to the stations owned by the Company as of the last
day of such Contract Year.
(c) "Broadcast Cash Flow Target" for any Contract Year shall mean 105%
of the station operating income for the immediately preceding Contact Year on a
consolidated basis excluding depreciation, amortization and corporate, general
and administrative expenses, calculated in a manner consistent with the
presentation of "broadcast cash flow" in the
<PAGE> 2
Company's periodic reports filed with the Securities Exchange Commission, with
respect to the stations owned by the Company as of the last day of the Contract
Year for which the Broadcast Cash Flow Target is calculated."
2. Effective as of January 1, 1997, a new 9(e) is added to the
Employment Agreement after Section 9(d) to read as follows:
"(e) For purposes of Sections 9(a) and (c), the pro rated Annual Bonus
for the Contract Year in which occurs the Executive's termination of employment
shall equal the Annual Bonus, if any, that would be payable hereunder on the
basis of a Contract Year commencing January 1 of the year of termination of
employment and ending on the last day of the Terminal Month in such year. For
the sole purpose of calculating the pro rated Annual Bonus, if any, payable
pursuant to Sections 9(a) and (c) and this Section 9(e), the Broadcast Cash
Flow Target for the Contract Year in which such termination of employment
occurs shall be calculated on the basis of an assumed Contract Year that
commenced on January 1 of the year prior to the year of termination of
employment and ended on the last day of the Terminal Month in such year, on the
basis of the stations owned by the Company as of the last day of the Terminal
Month in the year of termination of employment. "Terminal Month" shall mean the
last complete calendar month ending coincident with or prior to the Executive's
termination of employment hereunder."
3. Effective as of January 1, 1997, Section 7(b) of the Employment
Agreement is hereby modified in its entirety to read as follows:
"(b) (i) To the extent the Option has not otherwise become
unexercisable and subject to Employee's employment with the Company on February
28, 1999, the Option shall be exercisable in full on such date.
(ii) To the extent the Option has not otherwise become unexercisable,
the Option shall be exercisable in full as of the effective date, if prior to
the expiration of the Term, of a Change in Control (as defined in Section
7(d)).
(iii) To the extent the Option has not otherwise become unexercisable,
in the event Employee's employment is terminated during the Tenn (A) due to
Employee's death or disability (as defined in Section 9 below), (B) due to a
termination by the Company without Cause (as defined in Section 9), or (C) due
to Employee's resignation of employment with Company following the Company's
material breach of this Agreement which breach is not cured within 30 days
following notice from Employee to Company of such breach, then as of such date
of termination of employment, the Option shall be exercisable as to that
portion of the 100,000 shares of Common Stock subject to the Option equal to
the ratio of (X) the number of full months Employee is actually employed by the
Company hereunder over (Y) 36."
4. Except as modified hereby, all terms of Employment Agreement shall
remain in full force and effect.
[signature page follows]
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IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date first written above.
EVERGREEN MEDIA CORPORATION
By: /s/ ILLEGIBLE
---------------------------------
Title:
/s/ KENNETH J. O'KEEFE
---------------------------------------
Kenneth J. O'Keefe
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<PAGE> 1
EXHIBIT 10.31
EMPLOYMENT AGREEMENT
BETWEEN CHANCELLOR MEDIA CORPORATION AND SCOTT K. GINSBURG
This Employment Agreement ("Agreement") is made and entered
into on September 4, 1997, effective as of the closing date of the Merger (the
"Effective Date"), between Evergreen Media Corporation, a Delaware corporation
("Evergreen," but to be known, following the Merger, as Chancellor Media
Corporation and referred to herein, both before and after the Merger, as the
"Company"), Evergreen Media Corporation of Los Angeles, a Delaware corporation
(to be known, following the Merger, as Chancellor Media Corporation of Los
Angeles and referred to herein, both before and after the Merger, as "Los
Angeles") and Scott K. Ginsburg (the "Executive"), residing at 17340 Club Hill
Drive, Dallas Texas 75248.
WITNESSETH:
WHEREAS, Evergreen and the Executive are parties to an
existing Employment Agreement effective January 1, 1996;
WHEREAS, in connection with the merger of Chancellor
Broadcasting Company and Chancellor Radio Broadcasting Company (collectively
"Chancellor") with and into subsidiaries of Evergreen and Evergreen's
subsequent change of name to Chancellor Media Corporation (collectively, the
"Merger") and a Memorandum of Agreement between the Company and the Executive
dated February 19, 1997, the Company and the Executive desire to amend and
restate the existing Employment Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and obligations hereinafter set forth, the parties agree as
follows:
<PAGE> 2
1. DEFINITIONS
The following terms used in this Agreement shall have the
meaning specified below unless the context clearly indicates the contrary:
"Annual Bonus" shall mean the annual incentive bonus payable
to the Executive described in Section 4.
"Base Salary" shall mean the annual base salary payable to the
Executive at the rate set forth in Section 4.
"Board" shall mean the Board of Directors of the Company.
"Broadcast Cash Flow" for any accounting period shall mean
station operating income for such accounting period for the stations owned or
operated by the Company as of the last day of such accounting period on a
consolidated basis excluding depreciation, amortization and corporate, general
and administrative expenses, calculated in a manner consistent with the
presentation of "broadcast cash flow" in the Company's periodic reports filed
with the Securities Exchange Commission.
"Broadcast Cash Flow Target" for any accounting period shall
mean the product of (i) the station operating income for the corresponding
accounting period falling twelve months earlier on a consolidated basis
excluding depreciation, amortization and corporate, general and administrative
expenses, calculated in a manner consistent with the presentation of "broadcast
cash flow" in the Company's periodic reports filed with the Securities Exchange
Commission, with respect to the stations owned or operated by the Company as of
the last day of the accounting period for which the Broadcast Cash Flow Target
is calculated, and (ii) the ratio of the Consumer Price Index for the last
month of such accounting period to the Consumer Price Index for the last month
of such twelve month earlier accounting period.
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"Budgeted Cash Flow" for any accounting period shall mean the
amount designated by the Compensation Committee as the Company's budgeted
Broadcast Cash Flow for such period.
"Budgeted Cash Flow Bonus" shall be as defined in Section
2(b)(i).
"Cash Flow Ratio" shall be as defined in Section 2(b)(i).
"Cause" shall mean the Executive's (a) habitual neglect of his
material duties or failure to perform his material obligations under this
Agreement, (b) refusal or failure to follow lawful directives of Board, (c)
commission of an act of fraud, theft or embezzlement, or (d) conviction of a
felony or other crime involving moral turpitude; provided, however, that the
Company shall give the Executive written notice of any actions alleged to
constitute Cause under subsections (a) and (b) above, and the Executive shall
have a reasonable opportunity (as specified by the Compensation Committee) to
cure any such alleged Cause.
"Change in Control" shall mean (a) the sale, lease or other
transfer of all or substantially all of the assets of the Company to any person
or group (as such term is used in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended); (b) the adoption by the stockholders of the Company
of a plan relating to the liquidation or dissolution of the Company; (c) the
merger or consolidation of the Company with or into another entity or the
merger of another entity into the Company or any subsidiary thereof with the
effect that immediately after such transaction the stockholders of the Company
immediately prior to such transaction (or their Related Parties) hold less than
fifty percent (50%) of the total voting power of all securities generally
entitled to vote in
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<PAGE> 4
the election of directors, managers or trustees of the entity surviving such
merger of consolidation; (d) the acquisition by any person or group of more
than fifty percent (50%) of the voting power of all securities of the Company
generally entitled to vote in the election of directors of the Company; or (e)
that the majority of the Board is composed of members who (i) have served less
than twelve months and (ii) were not approved by a majority of the Board at the
time of their election or appointment.
"Change in Operations" shall mean a change in the business
operating strategies of the Company (e.g. material cost controls or other
material restrictions on the Company's ability to increase its gross revenues)
which are imposed upon the Executive without his consent, and, in his
reasonable judgement, are fundamentally different from the business operating
strategies in effect at Evergreen Media Corporation during the five year period
preceding the Effective Date. Any dispute as to whether a Change of Operations
has occurred shall be resolved pursuant to Section 15.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Common Stock" shall mean $0.01 par value common stock of the
Company.
"Compensation Committee" shall mean the Compensation Committee
of the Board.
"Consumer Price Index" shall mean the Consumer Price Index for
All Urban Consumers (1982-84=100) for all cities as reported by the United
States Bureau of Labor Statistics.
"Contract Year" shall mean each twelve consecutive month
period during the Employment Term which begins on the Effective Date or an
anniversary thereof.
"Employment Term" shall mean the period beginning on the
Effective Date and ending on the close of business on the effective date of the
Executive's termination of employment with the Company.
"Excise Tax" shall mean the taxes imposed by Code Section
4999.
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"Good Reason" shall mean (a) the Company's material breach of
any provision hereof, (b) any adverse change in the Executive's job
responsibilities, duties, functions, reporting relationships, status, offices,
title, perquisites or support staff, (c) relocation of the Executive's regular
work address without his consent, (d) a Change in Operations; (e) the
Executive's failure, at any time, to be permitted to serve as a member of the
Board or (f) a Change in Control, provided, however, that the Executive shall
give the Company written notice of any actions (other than those set out in
subsections (e) or (f) above) alleged to constitute Good Reason and the Company
shall have a reasonable opportunity to cure any such alleged Good Reason.
"Initial Termination Date" shall be as defined in Section
2(a).
"Option Agreement" shall mean the agreement between the
Executive and the Company pursuant to which any Option is granted to the
Executive.
"Option Plan" shall mean the Company's 1995 Non-Qualified
Stock Option Plan, as amended from time to time, and any successor thereto.
"Options" shall mean the non-qualified stock options to be
granted to the Executive hereunder.
"Permanent Disability" shall mean the Executive's inability to
perform the duties contemplated by this Agreement by reason of a physical or
mental disability or infirmity which has continued for more than 90 working
days (excluding vacation) in any twelve consecutive month period as determined
by the Board. The Executive agrees to submit such medical evidence regarding
such disability or infirmity as is reasonably requested by the Board.
"Related Parties" shall mean with respect to any person (a)
the spouse and lineal ascendants and descendants of such person, and any
sibling of any of such persons and (b) any trust, corporation, partnership or
other entity, the beneficiaries, stockholders, partners, owners or
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persons beneficially holding an eighty percent (80%) or more controlling
interest of which consist of persons referred to in subsection (a) above.
"Target Cash Flow Bonus" shall be as defined in Section
4(b)(ii).
"Termination of Employment" shall mean the first to occur of
the following events:
(a) the date of death of the Executive;
(b) the effective date specified in the Company's written
notice to the Executive of the termination of his employment as a result of his
Permanent Disability, which effective date shall not be earlier than the 91st
working day (excluding vacation) following the commencement of the Executive's
inability to perform his duties hereunder;
(c) the effective date specified in the Company's written
notice to the Executive of the Company's termination of his employment without
Cause;
(d) the effective date specified in the Company's written
notice to the Executive of the Company's termination of his employment for
Cause;
(e) the effective date specified in the Executive's
written notice to the Company of the Executive's termination of his employment
for Good Reason;
(f) the effective date specified in the Executive's
written notice to the Company of the Executive's termination of his employment
without Good Reason; and
(g) the date the Executive's employment terminates
pursuant to Section 2.
"Termination without Cause" shall mean a termination by the
Company of the Executive's employment without Cause.
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2. EMPLOYMENT
The Company agrees to continue the employment of the
Executive, and the Executive agrees to continue to provide services to the
Company from the date of this Agreement until either
(a) the close of business on the fifth anniversary of the
Effective Date (the "Initial Termination Date"), or
(b) if the Executive gives notice to such effect to the
Company no later than 60 days prior to the Initial Termination Date, the close
of business on the tenth anniversary of the Effective Date, unless the
Executive's employment is earlier terminated pursuant to a Termination of
Employment. The Executive will serve the Company subject to the general
supervision, advice and direction of the Board and upon the terms and
conditions set forth in this Agreement.
3. DUTIES
(a) During the Employment Term, and while serving as
President and Chief Executive Officer of the Company, the Executive shall have
such authority and duties as are customary in such position, and shall perform
such other services and duties as the Board may from time to time designate
consistent with such position. During the Employment Term, the Company shall
also nominate the Executive to serve as a member of the Board and upon such
nomination Executive shall agree to so serve.
(b) The Executive shall report solely to the Board. All
senior officers of the Company shall report, directly or indirectly through
other senior officers, to the Executive, and the Executive shall be responsible
for reviewing the performance of the other senior officers of the Company, and
shall from time to time advise the Board of his recommendations for any
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adjustments to the salaries of and bonus payments to such officers. The
Executive shall be responsible for, and, subject to discussion with and
ratification by the Board, have the authority to enter into, employment
contracts on behalf of the Company with other executives of the Company.
(c) The Executive shall devote his full business time and
best efforts to the business affairs of the Company; however, the Executive may
devote reasonable time and attention to:
(i) serving as a director of, or member of a
committee of the directors of, any not-for-profit organization or engaging in
other charitable or community activities; and
(ii) serving as a director of, or member of a
committee of the directors of, the corporations or organizations for which the
Executive presently serves in such capacity, and such other corporations and
organizations that the Board may from time to time approve in the future,
provided, that except as specified above, the Executive may not accept
employment with any other individual or other entity, or engage in any other
venture which is indirectly or directly in conflict or competition with the
then existing business of the Company.
4. COMPENSATION AND BENEFITS
(a) Base Compensation. During the Employment Term,
the Company shall pay the Executive, in installments according to the Company's
regular payroll practice, Base Salary at the annual rate of One Million Dollars
($1,000,000) for the first Contract Year; and for each subsequent Contract Year
an amount equal to the product of
(i) the Base Salary for the immediately preceding
Contract Year and
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(ii) the ratio of the Consumer Price Index for
the last complete calendar month in such preceding Contract Year to the
Consumer Price Index for the same month in the year preceding such preceding
Contract Year.
(b) Annual Incentive Bonus. The Executive shall be
entitled to an Annual Bonus for each calendar year on the last day of which he
is employed hereunder and also for the calendar year, if any, in which this
contract expires pursuant to Sections 2(a) or (b). Such Annual Bonus for any
such calendar year shall be equal to the sum of the Budgeted Cash Flow Bonus
and the Target Cash Flow Bonus, each as defined below, but in no event more
than the product of Three Million Dollars ($3,000,000) and the fraction of such
calendar year contained within the Employment Term.
(i) The Budgeted Cash Flow Bonus for an
accounting period shall be determined on the basis of the ratio of the
Broadcast Cash Flow to the Budgeted Cash Flow (the "Cash Flow Ratio") for such
period, rounded to the nearest one-hundredth, and shall be equal to the product
of the fraction of a calendar year contained within such accounting period and:
(A) if the Cash Flow Ratio is less than
.85, then $0;
(B) if the Cash Flow Ratio is greater
than .84 but less than 1.00, then the product of Ten Million
Dollars ($10,000,000) and the excess of the Cash Flow Ratio
over .84;
(C) if the Cash Flow Ratio is greater
than .99, but less than 1.15, then One Million Five Hundred
Thousand Dollars ($1,500,000) plus the product of Four Million
Dollars ($4,000,000) and the excess of the Cash Flow Ratio
over 0.99; and
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(D) if the Cash Flow Ratio is greater
than 1.14, then Two Million One Hundred Forty Thousand Dollars
($2,140,000).
(ii) The Target Cash Flow Bonus for an accounting
period shall be equal to the product of the fraction of a calendar year
contained within such accounting period and the lesser of (A) seven and one-
half percent (7.5%) of the excess, if any, of Broadcast Cash Flow for such
accounting period over the Broadcast Cash Flow Target for such accounting
period, and (B) Two Million Dollars ($2,000,000).
The Executive's Annual Bonus earned with respect to each calendar year shall be
paid at the same time as annual incentive bonuses with respect to that calendar
year are paid to other senior executives of the Company generally, but in no
event later than March 31 of the following calendar year.
(c) Stock Options.
(i) On the Effective Date and each of the first
four anniversaries thereof on which the Executive remains employed hereunder
the Executive shall be granted an Option to purchase 100,000 shares of Common
Stock. In the event that the Executive's employment hereunder is terminated by
the Company without Cause or by the Executive for Good Reason prior to the
Initial Termination Date, the Executive shall be granted, as of the date of
such Termination of Employment, a number of Options equal to 500,000 minus the
number of Options granted pursuant to the immediately preceding sentence. If
the Employment Term continues beyond the Initial Termination Date, the
Compensation Committee shall have discretion to grant additional Options to
Executive with respect to such additional employment.
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(ii) In recognition of the Executive's rights
under Section 4(c)(i) of his existing Employment Agreement, on the Effective
Date the Company shall grant the Executive an Option to purchase 150,000 shares
of Common Stock.
(iii) All Options described in paragraphs (i) and
(ii) shall be granted subject to the following terms and conditions: (A) the
Options shall be granted under and subject to the Option Plan; (B) the exercise
price of the Options shall be the last reported sale price of the Common Stock
on the Nasdaq National Market (or other principal trading market for the Common
Stock) at the close of the trading day immediately preceding the date as of
which the grant is made; (C) each Option shall be vested on the date of grant;
(D) each Option shall be exercisable for the ten year period following the date
of grant subject, however, to such approval by the shareholders of the Company
as is sufficient to satisfy the requirements for listing of the common stock of
Chancellor Media Corporation on the Nasdaq National Market System; and (E) each
Option shall be evidenced by, and subject to, an Option Agreement.
(iv) The Option Agreements shall specify that the
Options shall remain exercisable for the periods described in paragraph (iii)
above notwithstanding any Termination of Employment.
(d) Vacation. During each complete twelve month period of
the Employment Term, the Executive shall be entitled to no fewer than four
weeks of paid vacation (unless, based on his length of service with the Company
and his position with the Company, the Executive is entitled to a greater
number of weeks of paid vacation under the Company's generally applicable
vacation policy, as determined by the Compensation Committee).
(e) Employee Benefit Plans. During the Employment Term,
the Executive shall be entitled to participate in all pension, profit sharing
and other retirement plans, all
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incentive compensation plans and all group health, hospitalization and
disability insurance plans and other employee welfare benefit plans in which
other senior executives of the Company may participate on terms and conditions
no less favorable than those which apply to such other senior executives of the
Company.
(f) Company Payment of Health Benefit Coverage. During the
Employment Term, the Company shall pay the amount of premiums or other cost
incurred for coverage of the Executive and his eligible spouse and dependent
family members under the applicable Company health benefits arrangement
(consistent with the terms of such arrangement).
(g) Life Insurance Policy. In addition to the insurance
coverage contemplated by Section 4(e), during the Employment Term the Company
shall maintain in effect term life insurance coverage for the Executive with a
death benefit of at least Five Hundred Thousand Dollars ($500,000), subject to
the Executive's insurability at standard rates and with the beneficiary or
beneficiaries thereof designated by the Executive. Notwithstanding Section 10
of this Agreement, such life insurance policy or policies may be assigned to a
trust for the benefit of any beneficiary designated by the Executive.
(h) Automobile and Parking Allowance; Other Benefits.
(i) During the Employment Term, the Company
shall either provide the Executive with, or pay or reimburse the Executive for
(A) his purchase or lease of an automobile of the size and class of the
Executive's current Company-provided automobile; and (B) parking space at the
Company's corporate office maintained in Irving, Texas.
(ii) During the Employment Term, the Company
shall provide the Executive with, or pay or reimburse the Executive for, the
cost incurred for membership of the
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Executive and his spouse and dependent family members in the athletic club of
Executive's choosing and in the country club of Executive's choosing.
5. REIMBURSEMENT OF EXPENSES
In addition to the compensation provided for under Section 4
hereof, upon submission of proper vouchers, the Company will pay or reimburse
the Executive for all normal and reasonable travel and entertainment expenses
incurred by the Executive during the Employment Term in connection with the
Executive's responsibilities to the Company.
6. TERMINATION BENEFITS
(a) Upon the termination of the Executive's employment
with the Company for any reason, the Company shall provide the Executive (or,
in the case of his death, his estate or other legal representative), any Annual
Bonus earned but not yet paid with respect to the preceding calendar year, all
benefits due him under the Company's benefits plans and policies for his
services rendered to the Company prior to the date of such termination
(according to the terms of such plans and policies), and, not later than 90
days after such termination, in a lump sum, all Base Salary earned through the
date of such termination. The Executive shall be entitled to the payments and
benefits described below only as each is applicable to such termination of
employment.
(b) In the event that the Executive's employment hereunder
is terminated by the Company without Cause or by the Executive for Good Reason
(but not by reason of expiration or non-renewal of this Agreement), and subject
to this subsection (b), the Company shall make a one-time cash payment to the
Executive in a gross amount such that the net payments retained by Executive
after payment of any Excise Tax with respect to such payment shall equal Twenty
Million Dollars ($20,000,000). Such payment shall be made at the time of
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any such termination without Cause or within 30 days of any such resignation
for Good Reason. Such payment shall be in full satisfaction of all obligations
of the Company to Executive hereunder (other than those obligations set forth
in subsection (a)) and shall be conditioned on Executive giving a general
release of the Company and affiliates in the form used generally by the Company
in the case of the termination of employment of senior executives.
(c) In the event that the Executive's employment is
terminated by reason of expiration or non-renewal of this Agreement the Company
shall make a one time cash payment to the Executive equal to two times the
amount of his annual Base Salary payable for the Contract Year ending on (or in
which falls) the date of Termination of Employment. Such payment shall be made
at the time of such Termination of Employment. Such payment shall be in full
satisfaction of all obligations of the Company to Executive hereunder (other
than those obligations set forth in subsection (a)) and shall be conditioned on
Executive giving a general release of the Company and affiliates in the form
used generally by the Company in the case of the termination of employment of
senior executives.
(d) In the event of any Termination of Employment, the
Executive shall not be required to seek other employment to mitigate damages,
and any income earned by the Executive from other employment or self- employment
shall not be offset against any obligations of the Company to the Executive
under this Agreement.
7. REGISTRATION RIGHTS
The Company and the Executive shall enter into a Registration
Rights Agreement providing for the Executive to have registration rights with
respect to all common stock of the Company acquired by the Executive at any
time which rights are no less favorable to Executive
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than the rights held by Hicks, Muse, Tate & Furst Incorporated and its
affiliates with respect to common stock of Chancellor immediately prior to the
Merger.
8. PROTECTED INFORMATION; PROHIBITED SOLICITATION
(a) The Executive hereby recognizes and acknowledges that
during the course of his employment by the Company, the Company will furnish,
disclose or make available to the Executive confidential or proprietary
information related to the Company's business, including, without limitation,
customer lists, ideas and formatting and programming concepts and plans, that
such confidential or proprietary information has been developed and will be
developed through the Company's expenditure of substantial time and money, and
that all such confidential information could be used by the Executive and others
to compete with the Company. The Executive hereby agrees that all such
confidential or proprietary information shall constitute trade secrets, and
further agrees to use such confidential or proprietary information only for the
purpose of carrying out his duties with the Company and not to disclose such
information unless required to do so by subpoena or other legal process. No
information otherwise in the public domain (other than by an act of Executive in
violation hereof) shall be considered confidential. The Executive agrees that
all memoranda, notices, files, records and other documents concerning the
business of the Company, made or compiled by the Executive during the period of
his employment or made available to him, shall be the Company's property and
shall be delivered to the Company upon its request therefor and in any event
upon the termination of the Executive's employment with the Company, provided,
however, that the Executive shall be permitted to retain copies of personal
correspondence generated or received by him during the Employment Term, subject
to the use restrictions of this Section 8(a).
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(b) The Executive hereby agrees, in consideration of his
employment hereunder and in view of the confidential position to be held by the
Executive hereunder, that after any Termination of Employment, and through the
Initial Termination Date (or, if the Executive gives the notice described in
Section 2(b), the tenth anniversary of the Effective Date) the Executive will
not directly or indirectly
(i) be employed by or perform activities on
behalf of, or have an ownership interest in, any radio broadcasting station
serving the same "Area of Dominant Influence" (as reported by Arbitron) as any
of the radio broadcasting stations owned by the Company or its subsidiaries or
affiliates or the subsidiaries or affiliates of the Company's direct or indirect
stockholders (collectively the "Protected Companies"), at the effective time of
such Termination of Employment (other than beneficial ownership of up to five
percent (5%) of the outstanding voting stock of a publicly traded company that
owns such a competitor); or
(ii) induce any employee of any of the Protected
Companies to terminate such employment or to become employed by any other radio
broadcasting station.
(c) The restrictions in this Section 8 shall survive the
termination of this Agreement and shall be in addition to any restrictions
imposed upon the Executive by statute or at common law.
(d) The parties hereby acknowledge that the restrictions
in this Section 8 have been specifically negotiated and agreed to by the parties
hereto and are limited only to those restrictions necessary to protect the
Protected Companies from unfair competition. The parties hereby agree that if
the scope or enforceability of any provision, paragraph or subparagraph of this
Section 8 is in any way disputed at any time, and should a court find that such
restrictions are overly broad, the court may modify and enforce the covenant to
the extent that it believes to
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be reasonable under the circumstances. Each provision, paragraph and
subparagraph of this Section 8 is separable from every other provision,
paragraph, and subparagraph and constitutes a separate and distinct covenant.
The Executive acknowledges that the Protected Companies operate in major and
medium sized markets throughout the United States and that the effect of
subsection 8(b) may be to prevent him from working in the radio business after
his termination of employment hereunder.
9. INJUNCTIVE RELIEF
The Executive hereby expressly acknowledges that any breach or
threatened breach by the Executive of any of the terms set forth in Section 8
of this Agreement may result in significant and continuing injury to the
Company, the monetary value of which would be impossible to establish.
Therefore, the Executive agrees that the Company shall be entitled to apply for
injunctive relief in a court of appropriate jurisdiction. The provisions of
this Section 9 shall survive the Employment Term.
10. PARTIES BENEFITED; ASSIGNMENTS
This Agreement shall be binding upon the Executive, his heirs
and his personal representative or representatives, and upon the Company and
Los Angeles and their respective successors and assigns. Neither this
Agreement nor any rights or obligations hereunder may be assigned by the
Executive, other than by will or by the laws of descent and distribution.
11. NOTICES
Any notice required or permitted by this Agreement shall be in
writing, sent by registered or certified mail, return receipt requested,
addressed to the Board and the Company at its then principal office, or to the
Executive at the address set forth in the preamble, as the case may be, or to
such other address or addresses as any party hereto may from time to time
specify
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in writing for the purpose in a notice given to the other parties in compliance
with this Section 11. Notices shall be deemed given when received.
12. GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICT OF LAW PRINCIPLES.
13. INDEMNIFICATION AND INSURANCE; LEGAL EXPENSES
The Company shall indemnify the Executive to the fullest
extent permitted by the laws of the State of Delaware, as in effect at the time
of the subject act or omission, and shall advance to the Executive reasonable
attorney's fees and expenses as such fees and expenses are incurred (subject to
an undertaking from the Executive to repay such advances if it shall be finally
determined by a judicial decision which is not subject to further appeal that
the Executive was not entitled to the reimbursement of such fees and expenses)
and he will be entitled to the protection of any insurance policies the Company
may elect to maintain generally for the benefit of its directors and officers
("Directors and Officers Insurance") against all costs, charges and expenses
incurred or sustained by him in connection with any action, suit or proceeding
to which he may be made a party by reason of his being or having been a
director, officer or employee of the Company or any of its subsidiaries or his
serving or having served any other enterprise as a director, officer or
employee at the request of the Company (other than any dispute, claim or
controversy arising under or relating to this Agreement). The Company
covenants to maintain during the Employment Term for the benefit of the
Executive (in his capacity as an officer and director of the Company) Directors
and Officers Insurance providing benefits to the Executive no less favorable,
taken as a whole, than the benefits provided to the Executive by the Directors
and
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Officers Insurance maintained by the Company on the date hereof; provided,
however, that the Board may elect to terminate Directors and Officers Insurance
for all officers and directors, including the Executive, if the Board
determines in good faith that such insurance is not available or is available
only at unreasonable expense.
14. REPRESENTATIONS AND WARRANTIES OF EXECUTIVE
Executive represents and warrants to Company that (a)
Executive is under no contractual or other restriction which is inconsistent
with the execution of this Agreement, the performance of his duties hereunder
or the other rights of Company hereunder, and (b) Executive is under no
physical or mental disability that would hinder the performance of his duties
under this Agreement.
15. DISPUTES
Any dispute or controversy arising under, out of, in
connection with or in relation to this Agreement shall, at the election and
upon written demand of either the Executive or the Company, be finally
determined and settled by arbitration in the city of the Company's headquarters
in accordance with the rules and procedures of the American Arbitration
Association, and judgment upon the award may be entered in any court having
jurisdiction thereof. The Company shall pay the costs and expenses of such
arbitration but shall only pay the fees of the Executive's counsel and experts
if the finder of fact determines that the Executive is the prevailing party in
such arbitration.
16. FACILITY OF PAYMENT
All cash payments to be made by the Company to or on behalf of
the Executive hereunder shall be an obligation of and made by Los Angeles.
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17. PRIOR EMPLOYMENT AGREEMENT
Except as specifically described herein, all of Executive's
and Company's rights and obligations under the prior Employment Agreement are
extinguished upon the effectiveness of this Agreement.
18. MISCELLANEOUS
The provisions of this Agreement shall survive the termination
of the Executive's employment with the Company. This Agreement contains the
entire agreement of the parties relating to the subject matter hereof. This
Agreement supersedes any prior written or oral agreements or understandings
between the parties relating to the subject matter hereof. No modification or
amendment of this Agreement shall be valid unless in writing and signed by or
on behalf of the parties hereto. A waiver of the breach of any term or
condition of this Agreement shall not be deemed to constitute a waiver of any
subsequent breach of the same or any other term or condition. This Agreement
is intended to be performed in accordance with, and only to the extent
permitted by, all applicable laws, ordinances, rules and regulations. If any
provision of this Agreement, or the application thereof to any person or
circumstance, shall, for any reason and to any extent, be held invalid or
unenforceable, such invalidity and unenforceability shall not affect the
remaining provisions hereof and the application of such provisions to other
persons or circumstances, all of which shall be enforced to the greatest extent
permitted by law. The compensation provided to the Executive pursuant to this
Agreement shall be subject to any withholdings and deductions required by any
applicable tax laws. Any amounts payable under this Agreement to the Executive
after the death of the Executive shall be paid to the Executive's estate or
legal representative. The headings in this Agreement are
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inserted for convenience of reference only and shall not be a part of or
control or affect the meaning of any provision hereof.
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IN WITNESS WHEREOF, the parties have duly executed and
delivered this Agreement as of the date first written above.
Evergreen Media Corporation
By:
------------------------------------
By: Matthew E. Devine
Title: Chief Financial Officer
Evergreen Media Corporation of Los Angeles
By:
------------------------------------
By: Matthew E. Devine
Title: Chief Financial Officer
----------------------------------------
Scott K. Ginsburg
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EXHIBIT 10.32
EMPLOYMENT AGREEMENT
BETWEEN CHANCELLOR MEDIA CORPORATION AND JAMES E. DE CASTRO
This Employment Agreement ("Agreement") is made and entered into on
September 4, 1997, effective as of the closing date of the Merger (the
"Effective Date"), between Evergreen Media Corporation, a Delaware corporation
("Evergreen," but to be known, following the Merger, as Chancellor Media
Corporation and referred to herein, both before and after the Merger, as the
"Company"), Evergreen Media Corporation of Los Angeles, a Delaware corporation
(to be known, following the Merger, as Chancellor Media Corporation of Los
Angeles and referred to herein, both before and after the Merger, as "Los
Angeles") and James E. de Castro (the "Executive"), residing at 1025 Seneca
Road, Wilmette, Illinois 60091.
WITNESSETH:
WHEREAS, Evergreen and the Executive are parties to an existing
Employment Agreement effective January 1, 1995;
WHEREAS, in connection with the merger of Chancellor Broadcasting
Company and Chancellor Radio Broadcasting Company (collectively "Chancellor")
with and into subsidiaries of Evergreen and Evergreen's subsequent change of
name to Chancellor Media Corporation (collectively, the "Merger"), the Company
and the Executive desire to amend and restate the existing Employment
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and obligations hereinafter set forth, the parties agree as follows:
<PAGE> 2
1. DEFINITIONS
The following terms used in this Agreement shall have the meaning
specified below unless the context clearly indicates the contrary:
"Annual Bonus" shall mean the annual incentive bonus payable to the
Executive described in Section 4.
"Average Bonus" shall mean (a) the total of the Annual Bonuses paid
hereunder with respect to the Employment Term, divided by (b) the length of
such portion of the Employment Term in years (including fractions) as falls on
or prior to the last December 31 thereof.
"Base Salary" shall mean the annual base salary payable to the
Executive at the rate set forth in Section 4.
"Board" shall mean the Board of Directors of the Company.
"Broadcast Cash Flow" for any accounting period shall mean station
operating income for such accounting period for the stations owned or operated
by the Company as of the last day of such accounting period on a consolidated
basis excluding depreciation, amortization and corporate, general and
administrative expenses, calculated in a manner consistent with the
presentation of "broadcast cash flow" in the Company's periodic reports filed
with the Securities Exchange Commission.
"Broadcast Cash Flow Target" for any accounting period shall mean one
hundred five percent (105%) of the station operating income for the
corresponding accounting period falling twelve months earlier on a consolidated
basis excluding depreciation, amortization and corporate, general and
administrative expenses, calculated in a manner consistent with the
presentation of "broadcast cash flow" in the Company's periodic reports filed
with the Securities
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Exchange Commission, with respect to the stations owned or operated by the
Company as of the last day of the accounting period for which the Broadcast
Cash Flow Target is calculated.
"Cause" shall mean the Executive's (a) habitual neglect of his
material duties or failure to perform his material obligations under this
Agreement, (b) refusal or failure to follow lawful directives of Board, (c)
commission of an act of fraud, theft or embezzlement, or (d) conviction of a
felony or other crime involving moral turpitude; provided, however, that the
Company shall give the Executive written notice of any actions alleged to
constitute Cause under subsections (a) and (b) above, and the Executive shall
have a reasonable opportunity (as specified by the Compensation Committee) to
cure any such alleged Cause.
"Change in Control" shall mean (a) the sale, lease or other transfer
of all or substantially all of the assets of the Company to any person or group
(as such term is used in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended); (b) the adoption by the stockholders of the Company of a
plan relating to the liquidation or dissolution of the Company; (c) the merger
or consolidation of the Company with or into another entity or the merger of
another entity into the Company or any subsidiary thereof with the effect that
immediately after such transaction the stockholders of the Company immediately
prior to such transaction (or their Related Parties) hold less than fifty
percent (50%) of the total voting power of all securities generally entitled to
vote in the election of directors, managers or trustees of the entity surviving
such merger of consolidation; (d) the acquisition by any person or group of
more than fifty percent (50%) of the voting power of all securities of the
Company generally entitled to vote in the election of directors of the Company;
or (e) that the majority of the Board is composed of members who
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(i) have served less than twelve months and (ii) were not approved by a
majority of the Board at the time of their election or appointment.
"Change in Operations" shall mean a change in the business operating
strategies of the Company (e.g. material cost controls or other material
restrictions on the Company's ability to increase its gross revenues) which are
imposed upon the Executive without his consent, and, in his reasonable
judgement, are fundamentally different from the business operating strategies
in effect at Evergreen Media Corporation during the five year period preceding
the Effective Date. Any dispute as to whether a Change of Operations has
occurred shall be resolved pursuant to Section 14.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean $0.01 par value common stock of the Company.
"Compensation Committee" shall mean the Compensation Committee of the
Board.
"Consumer Price Index" shall mean the Consumer Price Index for All
Urban Consumers (1982-84=100) for all cities as reported by the United States
Bureau of Labor Statistics.
"Contract Year" shall mean each twelve consecutive month period during
the Employment Term which begins on the Effective Date or an anniversary
thereof.
"Employment Term" shall mean the period beginning on the Effective
Date and ending on the close of business on the effective date of the
Executive's termination of employment with the Company.
"Excise Tax" shall mean the taxes imposed by Code Section 4999.
"Expiration Date" shall be as defined in Section 2.
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"Good Reason" shall mean (a) the Company's material breach of any
provision hereof, (b) the Executive no longer directly reporting to Scott K.
Ginsburg, (c) any adverse change in the Executive's job responsibilities,
duties, functions, status, offices, title, perquisites or support staff, (d)
relocation of the Executive's regular work address without his consent, (e) a
Change in Operations; (f) the Executive's failure, at any time, to be permitted
to serve as a member of the Board or (g) a Change in Control, provided,
however, that the Executive shall give the Company written notice of any
actions (other than those set out in subsections (f) or (g) above) alleged to
constitute Good Reason and the Company shall have a reasonable opportunity to
cure any such alleged Good Reason.
"Option Agreement" shall mean the agreement between the Executive and
the Company pursuant to which any Option is granted to the Executive.
"Option Plan" shall mean the Company's 1995 Non-Qualified Stock Option
Plan, as amended from time to time, and any successor thereto.
"Options" shall mean the non-qualified stock options to be granted to
the Executive hereunder.
"Permanent Disability" shall mean the Executive's inability to perform
the duties contemplated by this Agreement by reason of a physical or mental
disability or infirmity which has continued for more than 90 working days
(excluding vacation) in any twelve consecutive month period as determined by
the Board. The Executive agrees to submit such medical evidence regarding such
disability or infirmity as is reasonably requested by the Board.
"Related Parties" shall mean with respect to any person (a) the spouse
and lineal ascendants and descendants of such person, and any sibling of any of
such persons and (b) any
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trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or persons beneficially holding an eighty
percent (80%) or more controlling interest of which consist of persons referred
to in subsection (a) above.
"Termination of Employment" shall mean the first to occur of the
following events:
(a) the date of death of the Executive;
(b) the effective date specified in the Company's written notice to
the Executive of the termination of his employment as a result of his Permanent
Disability, which effective date shall not be earlier than the 91st working day
(excluding vacation) following the commencement of the Executive's inability to
perform his duties hereunder;
(c) the effective date specified in the Company's written notice to
the Executive of the Company's termination of his employment without Cause;
(d) the effective date specified in the Company's written notice to
the Executive of the Company's termination of his employment for Cause;
(e) the effective date specified in the Executive's written notice to
the Company of the Executive's termination of his employment for Good Reason;
(f) the effective date specified in the Executive's written notice to
the Company of the Executive's termination of his employment without Good
Reason; and
(g) the date the Executive's employment terminates pursuant to
Section 2.
"Termination without Cause" shall mean a termination by the Company of
the Executive's employment without Cause.
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2. EMPLOYMENT
The Company agrees to continue the employment of the Executive, and
the Executive agrees to continue to provide services to the Company from the
date of this Agreement until the close of business on the fifth anniversary of
the Effective Date (the "Expiration Date"), unless the Executive's employment
is earlier terminated pursuant to a Termination of Employment. The Executive
will serve the Company subject to the general supervision, advice and direction
of the Board and the Chief Executive Officer and upon the terms and conditions
set forth in this Agreement.
3. TITLE AND DUTIES
(a) The Executive's job title shall be Senior Vice-President and Chief
Operating Officer of the Company. During the Employment Term the Executive
shall have such authority and duties as are customary in such position, and
shall perform such other services and duties as the Board may from time to time
designate consistent with such position. During the Employment Term, the
Company shall also nominate the Executive to serve as a member of the Board and
upon such nomination Executive shall agree to so serve.
(b) The Executive shall report solely to the Chief Executive Officer.
All other senior radio operating executives of the Company shall report (not
necessarily exclusively), directly or indirectly through other senior officers,
to the Executive, and the Executive shall be responsible for reviewing the
performance of such senior radio operating executives of the Company.
(c) The Executive shall devote his full business time and best efforts
to the business affairs of the Company; however, the Executive may devote
reasonable time and attention to:
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(i) serving as a director of, or member of a committee of
the directors of, any not-for-profit organization or engaging in other
charitable or community activities;
(ii) serving as a director of, or member of a committee of
the directors of, the corporations or organizations for which the Executive
presently serves in such capacity, and such other corporations and
organizations that the Board may from time to time approve in the future; and
(iii) with the approval of the Board, which approval shall
not be withheld unreasonably, engaging in certain ancillary activities not
directly competitive with the business of the Company (such as the
establishment of a satellite broadcasting business in association with the
Company or the establishment or purchase of stations in such municipalities as
are mutually agreed to by the Executive and the Board for activities such as
simulcasting of programming provided by the Company), so long as such
activities do not interfere unreasonably with the Executive's duties hereunder;
provided, that except as specified above, the Executive may not accept
employment with any other individual or other entity, or engage in any other
venture which is indirectly or directly in conflict or competition with the
then existing business of the Company.
4. COMPENSATION AND BENEFITS
(a) Base Compensation. During the Employment Term, the Company shall
pay the Executive, in installments according to the Company's regular payroll
practice, Base Salary at the annual rate of Nine Hundred Thousand Dollars
($900,000) for the first Contract Year; and for each subsequent Contract Year
an amount equal to the product of
(i) the Base Salary for the immediately preceding Contract
Year and
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(ii) the ratio of the Consumer Price Index for the last
complete calendar month in such preceding Contract Year to the Consumer Price
Index for the same month in the year preceding such preceding Contract Year.
(b) Annual Incentive Bonus. The Executive shall be entitled to an
Annual Bonus for each calendar year on the last day of which he is employed
hereunder and also for the calendar year, if any, in which this contract
expires pursuant to Section 2. Such Annual Bonus for any such calendar year
shall be equal to five percent (5%) of the excess, if any, of Broadcast Cash
Flow for the portion of such calendar year which precedes the Expiration Date
over the Broadcast Cash Flow Target for such accounting period, but in no event
more than the product of Three Million Dollars ($3,000,000) and the fraction of
such calendar year which precedes the Expiration Date. The Executive's Annual
Bonus earned with respect to each calendar year shall be paid at the same time
as annual incentive bonuses with respect to that calendar year are paid to
other senior executives of the Company generally, but in no event later than
March 31 of the following calendar year.
(c) Stock Options.
(i) On the Effective Date and each of the first four
anniversaries thereof on which the Executive remains employed hereunder the
Executive shall be granted an Option to purchase 100,000 shares of Common
Stock. In the event that the Executive's employment hereunder is terminated by
the Company without Cause or by the Executive for Good Reason prior to the
Expiration Date, the Executive shall be granted, as of the date of such
Termination of Employment, a number of Options equal to 500,000 minus the
number of Options granted pursuant to the immediately preceding sentence.
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(ii) In recognition of the Executive's rights under Section
4(c)(i) of his existing Employment Agreement, on the Effective Date the Company
shall grant the Executive an Option to purchase 112,500 shares of Common Stock.
(iii) All Options described in paragraphs (i) and (ii) shall
be granted subject to the following terms and conditions: (A) the Options shall
be granted under and subject to the Option Plan; (B) the exercise price of the
Options shall be the last reported sale price of the Common Stock on the Nasdaq
National Market (or other principal trading market for the Common Stock) at the
close of the trading day immediately preceding the date as of which the grant
is made; (C) each Option shall be vested on the date of grant; (D) each Option
shall be exercisable for the ten year period following the date of grant
subject, however, to such approval by the shareholders of the Company as is
sufficient to satisfy the requirements for listing of the common stock of
Chancellor Media Corporation on the Nasdaq National Market System; and (E) each
Option shall be evidenced by, and subject to, an Option Agreement.
(iv) The Option Agreements shall specify that the Options
shall remain exercisable for the periods described in paragraph (iii) above
notwithstanding any Termination of Employment.
(d) Vacation. During each complete 12 month period of the Employment
Term, the Executive shall be entitled to no fewer than four weeks of paid
vacation (unless, based on his length of service with the Company and his
position with the Company, the Executive is entitled to a greater number of
weeks of paid vacation under the Company's generally applicable vacation
policy, as determined by the Compensation Committee).
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(e) Employee Benefit Plans. During the Employment Term, the Executive
shall be entitled to participate in all pension, profit sharing and other
retirement plans, all incentive compensation plans and all group health,
hospitalization and disability insurance plans and other employee welfare
benefit plans in which other senior executives of the Company may participate
on terms and conditions no less favorable than those which apply to such other
senior executives of the Company.
(f) Company Payment of Health Benefit Coverage. During the Employment
Term, the Company shall pay the amount of premiums or other cost incurred for
coverage of the Executive and his eligible spouse and dependent family members
under the applicable Company health benefits arrangement (consistent with the
terms of such arrangement).
(g) Life Insurance Policy. In addition to the insurance coverage
contemplated by Section 4(e), during the Employment Term the Company shall
maintain in effect term life insurance coverage for the Executive with a death
benefit of at least Five Hundred Thousand Dollars ($500,000), subject to the
Executive's insurability at standard rates and with the beneficiary or
beneficiaries thereof designated by the Executive. Notwithstanding Section 9 of
this Agreement, such life insurance policy or policies may be assigned to a
trust for the benefit of any beneficiary designated by the Executive.
(h) Automobile and Parking Allowance; Other Benefits.
(i) During the Employment Term, the Company shall either
provide the Executive with, or pay or reimburse the Executive for (A) his
purchase or lease of an automobile of the size and class of the Executive's
current Company-provided automobile; and (B) parking space at the Company's
corporate office maintained in Chicago, Illinois.
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(ii) During the Employment Term, the Company shall provide
the Executive with, or pay or reimburse the Executive for, the cost incurred
for membership of the Executive and his spouse and dependent family members in
the athletic club of Executive's choosing and in the country club of
Executive's choosing.
5. REIMBURSEMENT OF EXPENSES
In addition to the compensation provided for under Section 4 hereof,
upon submission of proper vouchers, the Company will pay or reimburse the
Executive for all normal and reasonable travel and entertainment expenses
incurred by the Executive during the Employment Term in connection with the
Executive's responsibilities to the Company.
6. TERMINATION BENEFITS
(a) Upon the termination of the Executive's employment with the
Company for any reason, the Company shall provide the Executive (or, in the
case of his death, his estate or other legal representative), any Annual Bonus
earned but not yet paid with respect to the preceding calendar year, all
benefits due him under the Company's benefits plans and policies for his
services rendered to the Company prior to the date of such termination
(according to the terms of such plans and policies), and, not later than 90
days after such termination, in a lump sum, all Base Salary earned through the
date of such termination. The Executive shall be entitled to the payments and
benefits described below only as each is applicable to such termination of
employment.
(b) In the event that the Executive's employment hereunder is
terminated by the Company without Cause or by the Executive for Good Reason
(but not by reason of expiration or non-renewal of this Agreement), and subject
to this subsection (b), the Company shall make a
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one-time cash payment to the Executive in a gross amount such that the net
payments retained by Executive after payment of any Excise Tax with respect to
such payment shall equal Five Million Dollars ($5,000,000). Such payment shall
be made at the time of any such termination without Cause or within 30 days of
any such resignation for Good Reason. Such payment shall be in full
satisfaction of all obligations of the Company to Executive hereunder (other
than those obligations set forth in subsection (a)) and shall be conditioned on
Executive giving a general release of the Company and affiliates in the form
used generally by the Company in the case of the termination of employment of
senior executives.
(c) (i) In the event that the Executive elects to terminate his
employment hereunder other than for Good Reason, the Company, in consideration
for the Executive's agreement in subsection 7(b), shall continue to pay him his
Base Salary as set forth in Section 4(a) through the fifth anniversary of the
Effective Date.
(ii) In addition, in such event, the Company may, by written
notice to the Executive given no later than 15 days following his termination
of employment, elect to require the Executive to observe the provisions of
Section 7(c) hereof. In such event, the Company shall, on the last day of each
calendar year through December 31, 2002 make a payment to him equal to the
product of his Average Bonus and the fraction of such calendar year which
precedes the Expiration Date.
(d) In the event that the Executive's employment is terminated by
reason of expiration or non-renewal of this Agreement the Company shall make a
one time cash payment to the Executive equal to two times the amount of his
annual Base Salary payable for the Contract Year ending on (or in which falls)
the date of Termination of Employment. Such payment shall be made at the time
of such Termination of Employment. Such
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payment shall be in full satisfaction of all obligations of the Company to
Executive hereunder (other than those obligations set forth in subsection (a))
and shall be conditioned on Executive giving a general release of the Company
and affiliates in the form used generally by the Company in the case of the
termination of employment of senior executives.
(e) In the event of any Termination of Employment, the Executive shall
not be required to seek other employment to mitigate damages, and any income
earned by the Executive from other employment or self-employment shall not be
offset against any obligations of the Company to the Executive under this
Agreement.
7. PROTECTED INFORMATION; PROHIBITED SOLICITATION
(a) The Executive hereby recognizes and acknowledges that during the
course of his employment by the Company, the Company will furnish, disclose or
make available to the Executive confidential or proprietary information related
to the Company's business, including, without limitation, customer lists, ideas
and formatting and programming concepts and plans, that such confidential or
proprietary information has been developed and will be developed through the
Company's expenditure of substantial time and money, and that all such
confidential information could be used by the Executive and others to compete
with the Company. The Executive hereby agrees that all such confidential or
proprietary information shall constitute trade secrets, and further agrees to
use such confidential or proprietary information only for the purpose of
carrying out his duties with the Company and not to disclose such information
unless required to do so by subpoena or other legal process. No information
otherwise in the public domain (other than by an act of Executive in violation
hereof) shall be considered confidential.
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The Executive agrees that all memoranda, notices, files, records and other
documents concerning the business of the Company, made or compiled by the
Executive during the period of his employment or made available to him, shall
be the Company's property and shall be delivered to the Company upon its
request therefor and in any event upon the termination of the Executive's
employment with the Company, provided, however, that the Executive shall be
permitted to retain copies of personal correspondence generated or received by
him during the Employment Term, subject to the use restrictions of this Section
7(a).
(b) The Executive hereby agrees, in consideration of his employment
hereunder and in view of the confidential position to be held by the Executive
hereunder, that after any Termination of Employment, and through the Expiration
Date the Executive will not directly or indirectly induce any employee of any
of the Protected Companies (as defined below) to terminate such employment or
to become employed by any other radio broadcasting station.
(c) Should the Company make the election set forth in Section
6(c)(ii), the Executive further agrees that, from and after the Termination of
Employment and through the Expiration Date, he shall not be employed by or
perform activities on behalf of, or have an ownership interest in, any radio
broadcasting station serving the same "Area of Dominant Influence" (as reported
by Arbitron) as any of the radio broadcasting stations owned by the Company or
its subsidiaries or affiliates, or the subsidiaries or affiliates of the
Company's direct or indirect stockholders (collectively the "Protected
Companies"), at the effective time of such Termination of Employment (other
than beneficial ownership of up to five percent (5%) of the outstanding voting
stock of a publicly traded company that owns such a competitor).
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(d) The restrictions in this Section 7 shall survive the termination
of this Agreement and shall be in addition to any restrictions imposed upon the
Executive by statute or at common law.
(e) The parties hereby acknowledge that the restrictions in this
Section 7 have been specifically negotiated and agreed to by the parties hereto
and are limited only to those restrictions necessary to protect the Protected
Companies from unfair competition. The parties hereby agree that if the scope
or enforceability of any provision, paragraph or subparagraph of this Section 7
is in any way disputed at any time, and should a court find that such
restrictions are overly broad, the court may modify and enforce the covenant to
the extent that it believes to be reasonable under the circumstances. Each
provision, paragraph and subparagraph of this Section 7 is separable from every
other provision, paragraph, and subparagraph and constitutes a separate and
distinct covenant. The Executive acknowledges that the Protected Companies
operate in major and medium sized markets throughout the United States and that
the effect of subsection 7(c) may be to prevent him from working in the radio
business after his termination of employment hereunder.
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8. INJUNCTIVE RELIEF
The Executive hereby expressly acknowledges that any breach or
threatened breach by the Executive of any of the terms set forth in Section 7
of this Agreement may result in significant and continuing injury to the
Company, the monetary value of which would be impossible to establish.
Therefore, the Executive agrees that the Company shall be entitled to apply for
injunctive relief in a court of appropriate jurisdiction. The provisions of
this Section 8 shall survive the Employment Term.
9. PARTIES BENEFITED; ASSIGNMENTS
This Agreement shall be binding upon the Executive, his heirs and his
personal representative or representatives, and upon the Company and Los
Angeles and their respective successors and assigns. Neither this Agreement nor
any rights or obligations hereunder may be assigned by the Executive, other
than by will or by the laws of descent and distribution.
10. NOTICES
Any notice required or permitted by this Agreement shall be in
writing, sent by registered or certified mail, return receipt requested,
addressed to the Board and the Company at its then principal office, or to the
Executive at the address set forth in the preamble, as the case may be, or to
such other address or addresses as any party hereto may from time to time
specify in writing for the purpose in a notice given to the other parties in
compliance with this Section 10. Notices shall be deemed given when received.
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11. GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT
OF LAW PRINCIPLES.
12. INDEMNIFICATION AND INSURANCE; LEGAL EXPENSES
The Company shall indemnify the Executive to the fullest extent
permitted by the laws of the State of Delaware, as in effect at the time of the
subject act or omission, and shall advance to the Executive reasonable
attorney's fees and expenses as such fees and expenses are incurred (subject to
an undertaking from the Executive to repay such advances if it shall be finally
determined by a judicial decision which is not subject to further appeal that
the Executive was not entitled to the reimbursement of such fees and expenses)
and he will be entitled to the protection of any insurance policies the Company
may elect to maintain generally for the benefit of its directors and officers
("Directors and Officers Insurance") against all costs, charges and expenses
incurred or sustained by him in connection with any action, suit or proceeding
to which he may be made a party by reason of his being or having been a
director, officer or employee of the Company or any of its subsidiaries or his
serving or having served any other enterprise as a director, officer or
employee at the request of the Company (other than any dispute, claim or
controversy arising under or relating to this Agreement). The Company covenants
to maintain during the Employment Term for the benefit of the Executive (in his
capacity as an officer and director of the Company) Directors and Officers
Insurance providing benefits to the Executive no less favorable, taken as a
whole, than the benefits provided to the Executive by the Directors and
Officers Insurance maintained by the Company on the date hereof; provided,
however, that the
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Board may elect to terminate Directors and Officers Insurance for all officers
and directors, including the Executive, if the Board determines in good faith
that such insurance is not available or is available only at unreasonable
expense.
13. REPRESENTATIONS AND WARRANTIES OF EXECUTIVE
Executive represents and warrants to Company that (a) Executive is
under no contractual or other restriction which is inconsistent with the
execution of this Agreement, the performance of his duties hereunder or the
other rights of Company hereunder, and (b) Executive is under no physical or
mental disability that would hinder the performance of his duties under this
Agreement.
14. DISPUTES
Any dispute or controversy arising under, out of, in connection with
or in relation to this Agreement shall, at the election and upon written demand
of either the Executive or the Company, be finally determined and settled by
arbitration in the city of the Company's headquarters in accordance with the
rules and procedures of the American Arbitration Association, and judgment upon
the award may be entered in any court having jurisdiction thereof. The Company
shall pay the costs and expenses of such arbitration but shall only pay the
fees of the Executive's counsel and experts if the finder of fact determines
that the Executive is the prevailing party in such arbitration.
15. FACILITY OF PAYMENT
All cash payments to be made by the Company to or on behalf of the
Executive hereunder shall be an obligation of and made by Los Angeles.
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16. PRIOR EMPLOYMENT AGREEMENT
Except as specifically described herein, all of Executive's and
Company's rights and obligations under the prior Employment Agreement are
extinguished upon the effectiveness of this Agreement.
17. MISCELLANEOUS
The provisions of this Agreement shall survive the termination of the
Executive's employment with the Company. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof. This Agreement
supersedes any prior written or oral agreements or understandings between the
parties relating to the subject matter hereof. No modification or amendment of
this Agreement shall be valid unless in writing and signed by or on behalf of
the parties hereto. A waiver of the breach of any term or condition of this
Agreement shall not be deemed to constitute a waiver of any subsequent breach
of the same or any other term or condition. This Agreement is intended to be
performed in accordance with, and only to the extent permitted by, all
applicable laws, ordinances, rules and regulations. If any provision of this
Agreement, or the application thereof to any person or circumstance, shall, for
any reason and to any extent, be held invalid or unenforceable, such invalidity
and unenforceability shall not affect the remaining provisions hereof and the
application of such provisions to other persons or circumstances, all of which
shall be enforced to the greatest extent permitted by law. The compensation
provided to the Executive pursuant to this Agreement shall be subject to any
withholdings and deductions required by any applicable tax laws. Any amounts
payable under this Agreement to the Executive after the death of the Executive
shall be paid to the Executive's estate or legal representative. The headings
in this Agreement are
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inserted for convenience of reference only and shall not be a part of or
control or affect the meaning of any provision hereof.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date first written above.
Evergreen Media Corporation
By
----------------------------------------
By: Scott K. Ginsburg
Title: Chief Executive Officer
Evergreen Media Corporation of Los Angeles
By
----------------------------------------
By: Scott K. Ginsburg
Title: Chief Executive Officer
-------------------------------------------
James E. de Castro
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EXHIBIT 10.33
EMPLOYMENT AGREEMENT
BETWEEN CHANCELLOR MEDIA CORPORATION AND MATT DEVINE
This Employment Agreement ("Agreement") is made and entered into on
September 4, 1997, effective as of the closing date of the Merger (the
"Effective Date"), between Evergreen Media Corporation, a Delaware corporation
("Evergreen," but to be known, following the Merger, as Chancellor Media
Corporation and referred to herein, both before and after the Merger, as the
"Company"), Evergreen Media Corporation of Los Angeles, a Delaware corporation
(to be known, following the Merger, as Chancellor Media Corporation of Los
Angeles and referred to herein, both before and after the Merger, as "Los
Angeles") and Matt Devine (the "Executive"), residing at 3101 Cumberland Court,
Colleyville, TX 76034.
WITNESSETH:
WHEREAS, Evergreen and the Executive are parties to an existing
Employment Agreement effective January 1, 1995;
WHEREAS, in connection with the merger of Chancellor Broadcasting
Company and Chancellor Radio Broadcasting Company (collectively "Chancellor")
with and into subsidiaries of Evergreen and Evergreen's subsequent change of
name to Chancellor Media Corporation (collectively, the "Merger"), the Company
and the Executive desire to amend and restate the existing Employment
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and obligations hereinafter set forth, the parties agree as follows:
<PAGE> 2
1. DEFINITIONS
The following terms used in this Agreement shall have the meaning
specified below unless the context clearly indicates the contrary:
"Annual Bonus" shall mean the annual incentive bonus payable to the
Executive described in Section 4.
"Average Bonus" shall mean (a) the total of the Annual Bonuses paid
hereunder with respect to the Employment Term, divided by (b) the length of
such portion of the Employment Term in years (including fractions) as falls on
or prior to the last December 31 thereof.
"Base Salary" shall mean the annual base salary payable to the
Executive at the rate set forth in Section 4.
"Board" shall mean the Board of Directors of the Company.
"Broadcast Cash Flow" for any accounting period shall mean station
operating income for such accounting period for the stations owned or operated
by the Company as of the last day of such accounting period on a consolidated
basis excluding depreciation, amortization and corporate, general and
administrative expenses, calculated in a manner consistent with the
presentation of "broadcast cash flow" in the Company's periodic reports filed
with the Securities Exchange Commission.
"Broadcast Cash Flow Target" for any accounting period shall mean one
hundred five percent (105%) of the station operating income for the
corresponding accounting period falling twelve months earlier on a consolidated
basis excluding depreciation, amortization and corporate, general and
administrative expenses, calculated in a manner consistent with the
presentation of "broadcast cash flow" in the Company's periodic reports filed
with the Securities
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Exchange Commission, with respect to the stations owned or operated by the
Company as of the last day of the accounting period for which the Broadcast
Cash Flow Target is calculated.
"Cause" shall mean the Executive's (a) habitual neglect of his
material duties or failure to perform his material obligations under this
Agreement, (b) refusal or failure to follow lawful directives of Board, (c)
commission of an act of fraud, theft or embezzlement, or (d) conviction of a
felony or other crime involving moral turpitude; provided, however, that the
Company shall give the Executive written notice of any actions alleged to
constitute Cause under subsections (a) and (b) above, and the Executive shall
have a reasonable opportunity (as specified by the Compensation Committee) to
cure any such alleged Cause.
"Change in Control" shall mean (a) the sale, lease or other transfer
of all or substantially all of the assets of the Company to any person or group
(as such term is used in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended); (b) the adoption by the stockholders of the Company of a
plan relating to the liquidation or dissolution of the Company; (c) the merger
or consolidation of the Company with or into another entity or the merger of
another entity into the Company or any subsidiary thereof with the effect that
immediately after such transaction the stockholders of the Company immediately
prior to such transaction (or their Related Parties) hold less than fifty
percent (50%) of the total voting power of all securities generally entitled to
vote in the election of directors, managers or trustees of the entity surviving
such merger of consolidation; (d) the acquisition by any person or group of
more than fifty percent (50%) of the voting power of all securities of the
Company generally entitled to vote in the election of directors of the Company;
or (e) that the majority of the Board is composed of members who (i) have
served less than twelve months and (ii) were not approved by a majority of the
Board at the time of their election or appointment.
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"Change in Operations" shall mean a change in the business operating
strategies of the Company (e.g. material cost controls or other material
restrictions on the Company's ability to increase its gross revenues) which are
imposed upon the Executive without his consent, and, in his reasonable
judgement, are fundamentally different from the business operating strategies
in effect at Evergreen Media Corporation during the five year period preceding
the Effective Date. Any dispute as to whether a Change of Operations has
occurred shall be resolved pursuant to Section 14.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean $0.01 par value common stock of the Company.
"Compensation Committee" shall mean the Compensation Committee of the
Board.
"Consumer Price Index" shall mean the Consumer Price Index for All
Urban Consumers (1982-84=100) for all cities as reported by the United States
Bureau of Labor Statistics.
"Contract Year" shall mean each twelve consecutive month period during
the Employment Term which begins on the Effective Date or an anniversary
thereof.
"Employment Term" shall mean the period beginning on the Effective
Date and ending on the close of business on the effective date of the
Executive's termination of employment with the Company.
"Excise Tax" shall mean the taxes imposed by Code Section 4999.
"Expiration Date" shall be as defined in Section 2.
"Good Reason" shall mean (a) the Company's material breach of any
provision hereof, (b) the Executive no longer directly reporting to Scott K.
Ginsburg, (c) any adverse change in the Executive's job responsibilities,
duties, functions, status, offices, title, perquisites or support staff, (d)
relocation of the Executive's regular work address without his consent, (e) a
Change in
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Operations or (f) a Change in Control, provided, however, that the Executive
shall give the Company written notice of any actions (other than that set out
in subsection (f) above) alleged to constitute Good Reason and the Company
shall have a reasonable opportunity to cure any such alleged Good Reason.
"Option Agreement" shall mean the agreement between the Executive and
the Company pursuant to which any Option is granted to the Executive.
"Option Plan" shall mean the Company's 1995 Non-Qualified Stock Option
Plan, as amended from time to time, and any successor thereto.
"Options" shall mean the non-qualified stock options to be granted to
the Executive hereunder.
"Permanent Disability" shall mean the Executive's inability to perform
the duties contemplated by this Agreement by reason of a physical or mental
disability or infirmity which has continued for more than 90 working days
(excluding vacation) in any twelve consecutive month period as determined by
the Board. The Executive agrees to submit such medical evidence regarding such
disability or infirmity as is reasonably requested by the Board.
"Related Parties" shall mean with respect to any person (a) the spouse
and lineal ascendants and descendants of such person, and any sibling of any of
such persons and (b) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or persons beneficially holding
an eighty percent (80%) or more controlling interest of which consist of
persons referred to in subsection (a) above.
"Termination of Employment" shall mean the first to occur of the
following events:
(a) the date of death of the Executive;
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(b) the effective date specified in the Company's written notice to
the Executive of the termination of his employment as a result of his Permanent
Disability, which effective date shall not be earlier than the 91st working day
(excluding vacation) following the commencement of the Executive's inability to
perform his duties hereunder;
(c) the effective date specified in the Company's written notice to
the Executive of the Company's termination of his employment without Cause;
(d) the effective date specified in the Company's written notice to
the Executive of the Company's termination of his employment for Cause;
(e) the effective date specified in the Executive's written notice to
the Company of the Executive's termination of his employment for Good Reason;
(f) the effective date specified in the Executive's written notice to
the Company of the Executive's termination of his employment without Good
Reason; and
(g) the date the Executive's employment terminates pursuant to Section
2.
"Termination without Cause" shall mean a termination by the Company of
the Executive's employment without Cause.
2. EMPLOYMENT
The Company agrees to continue the employment of the Executive, and
the Executive agrees to continue to provide services to the Company from the
date of this Agreement until the close of business on the fifth anniversary of
the Effective Date (the "Expiration Date"), unless the Executive's employment
is earlier terminated pursuant to a Termination of Employment. The Executive
will serve the Company subject to the general supervision, advice and direction
of
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the Board and the Chief Executive Officer and upon the terms and conditions
set forth in this Agreement.
3. TITLE AND DUTIES
(a) The Executive's job title shall be Senior Vice-President and Chief
Financial Officer of the Company. During the Employment Term the Executive
shall have such authority and duties as are customary in such position, and
shall perform such other services and duties as the Board may from time to time
designate consistent with such position.
(b) The Executive shall report solely to the Chief Executive Officer.
Certain other senior officers of the Company, designated from time to time by
the Chief Executive Officer, may report, directly or indirectly through other
senior officers designated from time to time by the Chief Executive Officer, to
the Executive, and the Executive shall be responsible for reviewing the
performance of such senior officers of the Company.
(c) The Executive shall devote his full business time and best efforts
to the business affairs of the Company; however, the Executive may devote
reasonable time and attention to:
(i) serving as a director of, or member of a committee of the
directors of, any not-for-profit organization or engaging in other
charitable or community activities; and
(ii) serving as a director of, or member of a committee of the
directors of, the corporations or organizations for which the
Executive presently serves in
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such capacity, and such other corporations and organizations that the
Board may from time to time approve in the future; provided, that
except as specified above, the Executive may not accept employment
with any other individual or other entity, or engage in any other
venture which is indirectly or directly in conflict or competition
with the then existing business of the Company.
4. COMPENSATION AND BENEFITS
(a) Base Compensation. During the Employment Term, the Company shall
pay the Executive, in installments according to the Company's regular payroll
practice, Base Salary at the annual rate of Five Hundred Thousand Dollars
($500,000) for the first Contract Year with increases of Twenty Five Thousand
Dollars ($25,000) per year for each subsequent Contract Year.
(b) Annual Incentive Bonus. The Executive shall be entitled to an
Annual Bonus for each calendar year on the last day of which he is employed
hereunder and also for the calendar year, if any, in which this contract
expires pursuant to Section 2. Such Annual Bonus for any such calendar year
shall be equal to two and one-half percent (2.5%) of the excess, if any, of
Broadcast Cash Flow for the portion of such calendar year which precedes the
Expiration Date over the Broadcast Cash Flow Target for such accounting period,
but in no event more than the product of One Million Dollars ($1,000,000) and
the fraction of such calendar year which precedes the Expiration Date. The
Executive's Annual Bonus earned with respect to each calendar year shall be
paid at the same time as annual incentive bonuses with respect to that calendar
year are paid to other senior executives of the Company generally, but in no
event later than March 31 of the following calendar year.
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(c) Stock Options.
(i) On the Effective Date and each of the first four
anniversaries thereof on which the Executive remains employed
hereunder the Executive shall be granted an Option to purchase 75,000
shares of Common Stock. In the event that the Executive's employment
hereunder is terminated by the Company without Cause or by the
Executive for Good Reason prior to the Expiration Date, the Executive
shall be granted, as of the date of such Termination of Employment, a
number of Options equal to 375,000 minus the number of Options granted
pursuant to the immediately preceding sentence.
(ii) In recognition of the Executive's rights under Section
4(c)(i) of his existing Employment Agreement, on the Effective Date
the Company shall grant the Executive an Option to purchase 56,250
shares of Common Stock.
(iii) All Options described in paragraphs (i) and (ii) shall be
granted subject to the following terms and conditions: (A) the Options
shall be granted under and subject to the Option Plan; (B) the
exercise price of the Options shall be the last reported sale price of
the Common Stock on the Nasdaq National Market (or other principal
trading market for the Common Stock) at the close of the trading day
immediately preceding the date as of which the grant is made; (C) each
Option shall be vested on the date of grant; (D) each Option shall be
exercisable for the ten year period following the date of grant
subject, however, to such approval by the shareholders of the Company
as is sufficient to satisfy the requirements for listing of the common
stock of Chancellor Media Corporation on
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the Nasdaq National Market System; and (E) each Option shall be
evidenced by, and subject to, an Option Agreement.
(iv) The Option Agreements shall specify that the Options shall
remain exercisable for the periods described in paragraph (iii) above
notwithstanding any Termination of Employment.
(d) Vacation. During each complete 12 month period of the Employment
Term, the Executive shall be entitled to no fewer than four weeks of paid
vacation (unless, based on his length of service with the Company and his
position with the Company, the Executive is entitled to a greater number of
weeks of paid vacation under the Company's generally applicable vacation
policy, as determined by the Compensation Committee).
(e) Employee Benefit Plans. During the Employment Term, the Executive
shall be entitled to participate in all pension, profit sharing and other
retirement plans, all incentive compensation plans and all group health,
hospitalization and disability insurance plans and other employee welfare
benefit plans in which other senior executives of the Company may participate
on terms and conditions no less favorable than those which apply to such other
senior executives of the Company.
(f) Company Payment of Health Benefit Coverage. During the Employment
Term, the Company shall pay the amount of premiums or other cost incurred for
coverage of the Executive and his eligible spouse and dependent family members
under the applicable Company health benefits arrangement (consistent with the
terms of such arrangement).
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(g) Life Insurance Policy. In addition to the insurance coverage
contemplated by Section 4(e), during the Employment Term the Company shall
maintain in effect term life insurance coverage for the Executive with a death
benefit of at least Five Hundred Thousand Dollars ($500,000), subject to the
Executive's insurability at standard rates and with the beneficiary or
beneficiaries thereof designated by the Executive. Notwithstanding Section 9 of
this Agreement, such life insurance policy or policies may be assigned to a
trust for the benefit of any beneficiary designated by the Executive.
(h) Automobile and Parking Allowance; Other Benefits.
(i) During the Employment Term, the Company shall either provide
the Executive with, or pay or reimburse the Executive for (A) his
purchase or lease of an automobile of the size and class of the
Executive's current Company-provided automobile; and (B) parking space
at the Company's corporate office maintained in Irving, Texas.
(ii) During the Employment Term, the Company shall provide the
Executive with, or pay or reimburse the Executive for, the cost
incurred for membership of the Executive and his spouse and dependent
family members in the athletic club of Executive's choosing and in the
country club of Executive's choosing.
5. REIMBURSEMENT OF EXPENSES
In addition to the compensation provided for under Section 4 hereof,
upon submission of proper vouchers, the Company will pay or reimburse the
Executive for all normal and reasonable travel and entertainment expenses
incurred by the Executive during the Employment Term in connection with the
Executive's responsibilities to the Company.
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6. TERMINATION BENEFITS
(a) Upon the termination of the Executive's employment with the
Company for any reason, the Company shall provide the Executive (or, in the
case of his death, his estate or other legal representative), any Annual Bonus
earned but not yet paid with respect to the preceding calendar year, all
benefits due him under the Company's benefits plans and policies for his
services rendered to the Company prior to the date of such termination
(according to the terms of such plans and policies), and, not later than 90
days after such termination, in a lump sum, all Base Salary earned through the
date of such termination. The Executive shall be entitled to the payments and
benefits described below only as each is applicable to such termination of
employment.
(b) In the event that the Executive's employment hereunder is
terminated by the Company without Cause or by the Executive for Good Reason
(but not by reason of expiration or non-renewal of this Agreement), and subject
to this subsection (b), the Company shall make a one-time cash payment to the
Executive in a gross amount such that the net payments retained by Executive
after payment of any Excise Tax with respect to such payment shall equal Two
Million Dollars ($2,000,000). Such payment shall be made at the time of any
such termination without Cause or within 30 days of any such resignation for
Good Reason. Such payment shall be in full satisfaction of all obligations of
the Company to Executive hereunder (other than those obligations set forth in
subsection (a)) and shall be conditioned on Executive giving a general release
of the Company and affiliates in the form used generally by the Company in the
case of the termination of employment of senior executives.
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(c) (i) In the event that the Executive elects to terminate his
employment hereunder other than for Good Reason, the Company, in consideration
for the Executive's agreement in subsection 7(b), shall continue to pay him his
Base Salary as set forth in Section 4(a) through the earlier of (A) the fifth
anniversary of the Effective Date or (B) the second anniversary of such
termination of employment (the earlier of such dates, the "Cessation Date").
(ii) In addition, in such event, the Company may, by written
notice to the Executive given no later than 15 days following his termination
of employment, elect to require the Executive to observe the provisions of
Section 7(c) hereof. In such event, the Company shall, on the last day of each
calendar year through the calendar year which includes the Cessation Date make
a payment to him equal to the product of his Average Bonus and the fraction of
such calendar year which precedes the Cessation Date.
(d) In the event that the Executive's employment is terminated by
reason of expiration or non-renewal of this Agreement the Company shall make a
one time cash payment to the Executive equal to two times the amount of his
annual Base Salary payable for the Contract Year ending on (or in which falls)
the date of Termination of Employment. Such payment shall be made at the time
of such Termination of Employment. Such payment shall be in full satisfaction
of all obligations of the Company to Executive hereunder (other than those
obligations set forth in subsection (a)) and shall be conditioned on Executive
giving a general release of the Company and affiliates in the form used
generally by the Company in the case of the termination of employment of senior
executives.
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(e) In the event of any Termination of Employment, the Executive shall
not be required to seek other employment to mitigate damages, and any income
earned by the Executive from other employment or self-employment shall not be
offset against any obligations of the Company to the Executive under this
Agreement.
7. PROTECTED INFORMATION; PROHIBITED SOLICITATION
(a) The Executive hereby recognizes and acknowledges that during the
course of his employment by the Company, the Company will furnish, disclose or
make available to the Executive confidential or proprietary information related
to the Company's business, including, without limitation, customer lists, ideas
and formatting and programming concepts and plans, that such confidential or
proprietary information has been developed and will be developed through the
Company's expenditure of substantial time and money, and that all such
confidential information could be used by the Executive and others to compete
with the Company. The Executive hereby agrees that all such confidential or
proprietary information shall constitute trade secrets, and further agrees to
use such confidential or proprietary information only for the purpose of
carrying out his duties with the Company and not to disclose such information
unless required to do so by subpoena or other legal process. No information
otherwise in the public domain (other than by an act of Executive in violation
hereof) shall be considered confidential. The Executive agrees that all
memoranda, notices, files, records and other documents concerning the business
of the Company, made or compiled by the Executive during the period of his
employment or made available to him, shall be the Company's property and shall
be delivered to the Company upon its request therefor and in any event upon the
termination of the Executive's employment with the Company, provided,
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however, that the Executive shall be permitted to retain copies of personal
correspondence generated or received by him during the Employment Term, subject
to the use restrictions of this Section 7(a).
(b) The Executive hereby agrees, in consideration of his employment
hereunder and in view of the confidential position to be held by the Executive
hereunder, that after any Termination of Employment, and through the Expiration
Date the Executive will not directly or indirectly induce any employee of any
of the Protected Companies (as defined below) to terminate such employment or
to become employed by any other radio broadcasting station.
(c) Should the Company make the election set forth in Section
6(c)(ii), the Executive further agrees that, from and after the Termination of
Employment and through the Expiration Date, he shall not be employed by or
perform activities on behalf of, or have an ownership interest in, any radio
broadcasting station serving the same "Area of Dominant Influence" (as reported
by Arbitron) as any of the radio broadcasting stations owned by the Company or
its subsidiaries or affiliates, or the subsidiaries or affiliates of the
Company's direct or indirect stockholders (collectively the "Protected
Companies"), at the effective time of such Termination of Employment (other
than beneficial ownership of up to five percent (5%) of the outstanding voting
stock of a publicly traded company that owns such a competitor).
(d) The restrictions in this Section 7 shall survive the termination
of this Agreement and shall be in addition to any restrictions imposed upon the
Executive by statute or at common law.
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(e) The parties hereby acknowledge that the restrictions in this
Section 7 have been specifically negotiated and agreed to by the parties hereto
and are limited only to those restrictions necessary to protect the Protected
Companies from unfair competition. The parties hereby agree that if the scope
or enforceability of any provision, paragraph or subparagraph of this Section 7
is in any way disputed at any time, and should a court find that such
restrictions are overly broad, the court may modify and enforce the covenant to
the extent that it believes to be reasonable under the circumstances. Each
provision, paragraph and subparagraph of this Section 7 is separable from every
other provision, paragraph, and subparagraph and constitutes a separate and
distinct covenant. The Executive acknowledges that the Protected Companies
operate in major and medium sized markets throughout the United States and that
the effect of subsection 7(c) may be to prevent him from working in the radio
business after his termination of employment hereunder.
8. INJUNCTIVE RELIEF
The Executive hereby expressly acknowledges that any breach or
threatened breach by the Executive of any of the terms set forth in Section 7
of this Agreement may result in significant and continuing injury to the
Company, the monetary value of which would be impossible to establish.
Therefore, the Executive agrees that the Company shall be entitled to apply for
injunctive relief in a court of appropriate jurisdiction. The provisions of
this Section 8 shall survive the Employment Term.
9. PARTIES BENEFITED; ASSIGNMENTS
This Agreement shall be binding upon the Executive, his heirs and his
personal representative or representatives, and upon the Company and Los
Angeles and their respective
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successors and assigns. Neither this Agreement nor any rights or obligations
hereunder may be assigned by the Executive, other than by will or by the laws
of descent and distribution.
10. NOTICES
Any notice required or permitted by this Agreement shall be in
writing, sent by registered or certified mail, return receipt requested,
addressed to the Board and the Company at its then principal office, or to the
Executive at the address set forth in the preamble, as the case may be, or to
such other address or addresses as any party hereto may from time to time
specify in writing for the purpose in a notice given to the other parties in
compliance with this Section 10. Notices shall be deemed given when received.
11. GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT
OF LAW PRINCIPLES.
12. INDEMNIFICATION AND INSURANCE; LEGAL EXPENSES
The Company shall indemnify the Executive to the fullest extent
permitted by the laws of the State of Delaware, as in effect at the time of the
subject act or omission, and shall advance to the Executive reasonable
attorney's fees and expenses as such fees and expenses are incurred (subject to
an undertaking from the Executive to repay such advances if it shall be finally
determined by a judicial decision which is not subject to further appeal that
the Executive was not entitled to the reimbursement of such fees and expenses)
and he will be entitled to the protection of any insurance policies the Company
may elect to maintain generally for the benefit of its directors and officers
("Directors and Officers Insurance") against all costs, charges and expenses
incurred or sustained by him in connection with any action, suit or proceeding
to which
17
<PAGE> 18
he may be made a party by reason of his being or having been a director,
officer or employee of the Company or any of its subsidiaries or his serving or
having served any other enterprise as a director, officer or employee at the
request of the Company (other than any dispute, claim or controversy arising
under or relating to this Agreement). The Company covenants to maintain during
the Employment Term for the benefit of the Executive (in his capacity as an
officer or director of the Company) Directors and Officers Insurance providing
benefits to the Executive no less favorable, taken as a whole, than the
benefits provided to the Executive by the Directors and Officers Insurance
maintained by the Company on the date hereof; provided, however, that the Board
may elect to terminate Directors and Officers Insurance for all officers and
directors, including the Executive, if the Board determines in good faith that
such insurance is not available or is available only at unreasonable expense.
13. REPRESENTATIONS AND WARRANTIES OF EXECUTIVE
Executive represents and warrants to Company that (a) Executive is
under no contractual or other restriction which is inconsistent with the
execution of this Agreement, the performance of his duties hereunder or the
other rights of Company hereunder, and (b) Executive is under no physical or
mental disability that would hinder the performance of his duties under this
Agreement.
14. DISPUTES
Any dispute or controversy arising under, out of, in connection with
or in relation to this Agreement shall, at the election and upon written demand
of either the Executive or the Company, be finally determined and settled by
arbitration in the city of the Company's headquarters in accordance with the
rules and procedures of the American Arbitration Association, and judgment upon
the award may be entered in any court having jurisdiction
18
<PAGE> 19
thereof. The Company shall pay the costs and expenses of such arbitration but
shall only pay the fees of the Executive's counsel and experts if the finder of
fact determines that the Executive is the prevailing party in such arbitration.
15. FACILITY OF PAYMENT
All cash payments to be made by the Company to or on behalf of the
Executive hereunder shall be an obligation of and made by Los Angeles.
16. PRIOR EMPLOYMENT AGREEMENT
Except as specifically described herein, all of Executive's and
Company's rights and obligations under the prior Employment Agreement are
extinguished upon the effectiveness of this Agreement.
17. MISCELLANEOUS
The provisions of this Agreement shall survive the termination of the
Executive's employment with the Company. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof. This Agreement
supersedes any prior written or oral agreements or understandings between the
parties relating to the subject matter hereof. No modification or amendment of
this Agreement shall be valid unless in writing and signed by or on behalf of
the parties hereto. A waiver of the breach of any term or condition of this
Agreement shall not be deemed to constitute a waiver of any subsequent breach
of the same or any other term or condition. This Agreement is intended to be
performed in accordance with, and only to the extent permitted by, all
applicable laws, ordinances, rules and regulations. If any provision of this
Agreement, or the application thereof to any person or circumstance, shall, for
any reason and to any extent, be held invalid or unenforceable, such invalidity
and unenforceability shall not affect the remaining provisions hereof and the
application of such provisions to other persons or circumstances, all of which
shall be enforced to the greatest extent permitted by law. The compensation
provided to the Executive pursuant to this Agreement shall be subject to any
withholdings and deductions required by any applicable tax laws. Any amounts
payable under this Agreement to the Executive after the death of the Executive
shall be paid to the Executive's estate or legal representative. The headings
in this Agreement are inserted for convenience of reference only and shall not
be a part of or control or affect the meaning of any provision hereof.
19
<PAGE> 20
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date first written above.
Evergreen Media Corporation
By
--------------------------------------
By: Scott K. Ginsburg
Title: Chief Executive Officer
Evergreen Media Corporation of Los Angeles
By
--------------------------------------
By: Scott K. Ginsburg
Title: Chief Executive Officer
-----------------------------------------
Matt Devine
20
<PAGE> 1
EXHIBIT 10.34
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into on
September 4, 1997, effective January 1, 1998, between Evergreen Media
Corporation, a Delaware corporation ("Evergreen," but to be known, following
the Merger, as Chancellor Media Corporation and referred to herein, both before
and after the Merger, as the "Company"), Evergreen Media Corporation of Los
Angeles, a Delaware corporation (to be known, following the Merger, as
Chancellor Media Corporation of Los Angeles and referred to herein, both before
and after the Merger, as "Los Angeles") and Kenneth J. O'Keefe, an individual
("Employee"). WITNESSETH
WHEREAS, Evergreen and the Executive are parties to an existing
Employment Agreement effective March 1, 1996 and amended March 1, 1997;
WHEREAS, in connection with the merger of Chancellor Broadcasting
Company and Chancellor Radio Broadcasting Company (collectively "Chancellor")
with and into subsidiaries of Evergreen and Evergreen's subsequent change of
name to Chancellor Media Corporation (collectively, the "Merger"), the Company
and the Executive desire the existing Employment Agreement to expire as of
December 31, 1997 and desire to enter into a new employment agreement effective
January 1, 1998;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and obligations hereinafter set forth, the parties agree as follows:
1. Employment. The Company hereby agrees to continue to employ the
Employee and the Employee hereby accepts continued employment from the Company
as the Company's Executive Vice President - Operations for the Term and under
the conditions described herein.
<PAGE> 2
2. Performance of Duties. During the Term of employment and subject to
the other provisions of this Agreement including without limitation Section 11,
the Employee will devote all of his business time, services and attention to
the Company as its Executive Vice President - Operations and shall perform all
of his duties conscientiously and to the full extent of his abilities. Employee
shall have such duties, powers and authority as are customary for such position
and shall perform such other duties as may be reasonably required by the
Company. Employee shall report to the Company's Chief Executive Officer and
Chief Operating Officer. The Company shall not require Employee to relocate
from his current area of residence. However, Employee understands and agrees
that he will be required to engage in reasonable travel in order to perform his
job duties.
3. Term of Employment. This Agreement shall commence January 1, 1998
and shall continue until December 31, 2000 inclusive, subject to the other
provisions of this Agreement ("Term"). Each "Contract Year" shall commence on
January 1 and end on the December 31 of the same calendar year.
4. Base Salary. Subject to the provisions contained elsewhere in this
Agreement, Company shall pay Employee the following "Base Salary."
<TABLE>
<CAPTION>
PERIOD ANNUALIZED BASE SALARY
<S> <C>
1/01/98 - 12/31/98 ("Contract Year One") $500,000
1/01/99 - 12/31/99 ("Contract Year Two") $525,000
1/01/00 - 12/31/00 ("Contract Year Three") $550,000
</TABLE>
Base Salary shall be payable, minus all lawful deductions, in accordance with
the Company's standard policy for payment of salary to management personnel.
2
<PAGE> 3
5. Potential Bonus Compensation
(a) For each Contract Year during the Term, Employee shall be eligible
to receive an annual bonus (the "Annual Bonus") determined on the basis of the
ratio of Broadcast Cash Flow for such Contract Year to the Cash Flow Target for
such year (the "BCF Ratio") as follows:
(i) if the BCF Ratio is less than 95% then the Annual Bonus
shall be $0;
(ii) if the BCF Ratio is greater than or equal to 95% but less
than 100% then the Annual Bonus shall be $150,000;
(iii) if the BCF Ratio is greater than or equal to 100% but less
than 105% then the Annual Bonus shall be $300,000;
(iv) if the BCF Ratio is greater than or equal to 105% but less
than 110% then the Annual Bonus shall be $400,000;
(v) if the BCF Ratio is greater than or equal to 110% then the
Annual Bonus shall be $600,000.
(b) "Annual Broadcast Cash Flow" for a Contract Year shall mean
station operating income for such Contract Year for the stations owned by the
Company as of the last day of such Contract Year on a consolidated basis
excluding depreciation, amortization and corporate, general and administrative
expense, calculated in a manner consistent with the presentation of "broadcast
cash flow" in the Company's periodic reports filed with the Securities and
Exchange Commission
(c) "Broadcast Cash Flow Target" for each Contract Year shall mean the
amount designated by the Company as the Company's Broadcast Cash Flow Target
for such
3
<PAGE> 4
Contract Year and shall be based on the targets established during the
Company's budgeting process for stations owned by the Company at the beginning
of such Contract Year. The Company may modify the Broadcast Cash Flow Target
during the Contract Year to reflect the purchase or sale of stations during the
Contract Year and the cash flow targets for such acquired or sold stations.
(d) Except as provided in Section 9 herein, in order to earn an Annual
Bonus, Employee must be employed by the Company during the entire Contract Year
for which the Bonus applies. Any bonus payments under this Section 5 shall be
paid at the same time annual incentive bonuses are paid to the Company's
executives generally and shall be reduced by deductions authorized by law.
6. Additional Benefits.
(a) General Benefits. During the Term, Employee shall be entitled to
participate in all pension, profit sharing and other retirement plans, all
group health, hospital, life and disability insurance plans, and all other
employee welfare benefit plans in which other executive employees of the
Company at the level of Executive Vice President or below may participate.
Employee's participation shall be on terms and conditions no less favorable
than those terms and conditions which apply to other senior executives of the
Company.
(b) Expenses. The Employee shall be reimbursed for entertainment,
travel and other business related expenses reasonably and necessarily incurred
and advanced by him in performing his duties for the Company, in accordance
with Company policy as it exists from time to time regarding expense
reimbursement.
(c) Vacation. The Employee shall be entitled to four (4) weeks (20
business days) of paid vacation during each year. Selection of days of vacation
shall be taken
4
<PAGE> 5
subject to approval of the Company which approval shall not be
unreasonably withheld. Vacations cannot be carried over from year to year and
are forfeited if not taken prior to the end of the year.
(d) Automobile Allowance. During the Term, the Company will provide
the Employee with an automobile allowance of $800 per month or, at its option,
may provide to Employee an automobile for his use which in Employee's
reasonable discretion is acceptable.
(e) Club Dues. During the Term, the Company shall reimburse Employee
for the reasonable membership dues for Employee to belong to an athletic club
and country club of his choice. Such reimbursement shall be in accordance with
the Company's expense reimbursement policy.
7. Stock Options.
(a) Subject to subsection (b), on February 9, 1996 the Company granted
Employee non-qualified stock options ("Options") for the purchase of (taking
account of a subsequent stock split) 150,000 shares of the Class A common stock
of the Company ("Common Stock") with an exercise price (split adjusted) of
$21.33.
(b) (i) To the extent that such Options have not otherwise become
unexercisable, and subject to the Employee's employment under this Agreement on
February 28, 1999, such Options shall become exercisable in full on such date.
(ii) To the extent that such Options have not otherwise become
unexercisable, in the event Employee's employment is terminated
during the Term
5
<PAGE> 6
(A) due to Employee's death or Disability (as defined in
Section 9 below), or
(B) due to the Employee's resignation of employment with
the Company following the Company's material breach of this
Agreement which breach is not cured within 30 days following
notice from Employee to Company of such breach,
then as of such date of termination of employment the Option shall be
exercisable as to that portion of the 150,000 shares of Common Stock subject to
the Option equal to the ratio of (x) the number of full months Employee is
actually employed by the Company from and after March 1, 1996 hereunder (and
under the prior Employment Agreement) divided by (y) 36.
(iii) To the extent that such Options have not otherwise become
unexercisable, in the event that
(C) Employee's employment hereunder is terminated without
Cause (as defined in Section 9 below), or
(D) there is a Change in Control (as defined in Section
7(e) below),
all of such Options shall thereupon become exercisable.
(c) In addition, on each of the following dates on which the Employee
is employed hereunder, the Company shall grant him fully exercisable
non-qualified stock options for the purchase of 50,000 shares of Common Stock,
with an exercise price, in each case, equal to the fair market value of a share
of Common Stock on the date of grant:
(i) January 1, 1998;
6
<PAGE> 7
(ii) January 1, 1999.
(d) All stock options described in this Section 7 shall be exercisable
for seven years from the date of grant and] shall be subject to: (i) the
approval of the Company's shareholders; (ii) a definitive Stock Option
Agreement ("Option Agreement") between the parties which will set forth all of
the rights, duties, and obligations regarding such stock options; and (iii) the
terms and conditions contained in the Company's 1995 Non-Qualified Option Plan
as amended from time to time in the Company's sole discretion and its
successors ("Option Plan").
(e) "Change in Control" shall mean (i) the sale, lease or other
transfer of all or substantially all of the assets of the Company to any person
or group (as such term is used in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended); (ii) the adoption by the stockholders of the Company
of a plan relating to the liquidation or dissolution of the Company; (iii) the
merger or consolidation of the Company with or into another entity or the
merger of another entity into the Company or any subsidiary thereof with the
effect that immediately after such transaction the stockholders of the Company
immediately prior to such transaction (or their Related Parties) hold less than
fifty percent (50%) of the total voting power of all securities generally
entitled to vote in the election of directors, managers or trustees of the
entity surviving such merger of consolidation; (iv) the acquisition by any
person or group of more than fifty percent (50%) of the voting power of all
securities of the Company generally entitled to vote in the election of
directors of the Company; or (v) that the majority of the Board of Directors of
the Company (the "Board") is composed of members who (A) have served less than
twelve months and (B) were not approved by a majority of the Board at the time
of their election or appointment.
7
<PAGE> 8
(f) "Related Parties" shall mean with respect to any person (i) the
spouse and lineal ascendents and descendants of such person, and any sibling of
such person and (ii) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or persons beneficially holding
an 80% or more controlling interest of which consists of persons and/or other
persons referred to in clause (i) of this paragraph.
8. Company Policies.Except where in conflict with other terms of this
Agreement, Employees shall comply with all reasonable present and future
policies and requirements of the Company in connection with the Company's
business and will fully comply with all requirements, rules and regulations of
the Federal Communications Commission applicable to any phase of Employee's
duties or undertakings.
9. Termination
(a) Death or Disability.This Agreement shall terminate immediately
upon Employee's death or Disability and, subject to Section 7, the Company's
sole obligation will be to pay Employee his Base Salary through the last day
worked and a pro rata share of any Annual Bonus earned for the portion of the
Contract Year which Employee worked prior to such termination. For purposes of
this Agreement, Disability shall mean the Employee's inability to perform the
essential functions of his job because of ill health, injury, physical or
mental disability or for other medical causes for a cumulative total of more
than twelve (12) weeks (whether or not consecutive) during any twelve month
period.
(b) Cause.This Agreement shall terminate without any liability to or
upon the Company other than to pay Base Salary for services rendered prior to
the date of termination if Employee is terminated for "Cause." "Cause" shall be
defined as (i) Employee's theft or embezzlement or attempted theft or
embezzlement of money or tangible or intangible
8
<PAGE> 9
assets or property of the Company; (ii) any act or acts of moral turpitude by
Employee which materially and negatively affects the interest, property,
operations, business or reputation of the Company, (iii) Employee's violation
of a federal, state or local law or the rules of the Federal Communications
Commission, any of which materially and negatively affects the interest,
property, operations, business or reputation of the Company, (iv) gross
negligence or material misconduct in the performance of Employee's duties; (v)
Employee's material failure to perform his duties under this Agreement, and/or
(vi) a material breach of this Agreement. Prior to a termination for Cause, the
Company shall give Employee notice of such Cause for termination and, if such
Cause is curable, ten business days during which to cure such Cause to the
Company's satisfaction.
(c) Without Cause.If the Company discharges Employee without Cause
during the Term, then, subject to Section 7, the Company's sole liability shall
be as severance to continue to pay Employee his Base Salary and to provide
health and life insurance coverage (on the same basis that such benefits are
provided to the Company's executive employee) until the earlier of the
expiration of the Term or the date on which Employee becomes employed by
another person or entity in a position providing substantially similar
compensation as provided under this Agreement. In addition, Employee shall be
entitled to a pro rata share of any Annual Bonus earned for the portion of the
Contract Year worked prior to such termination.
(d) Resignation.In the event Employee resigns his employment
hereunder, the Company's sole liability shall be to pay Employee his Base
Salary and any accrued benefits through the last day worked.
(e) Proration.For purposes of Sections 9(a) and (c), the pro-rated
Annual Bonus for the Contract Year in which occurs the Executive's termination
of employment
9
<PAGE> 10
shall be equal to the product of the (i) the fraction of such Contract Year
during which the Employee is employed hereunder and (ii) the Annual Bonus, if
any, that would be payable hereunder on the basis of a Contract Year commencing
January 1 of the year of termination of employment and ending on the last day
of the Terminal Month in such year. For the sole purpose of calculating the
pro-rated Annual Bonus, if any, payable pursuant to Sections 9(a), (c) and (e),
the Cash Flow Target for such deemed short Contract Year shall be determined by
the Company in a manner analogous to the determination of Cash Flow Target for
a full Contract Year. "Terminal Month" shall mean the last complete calendar
month ending coincident with or prior to the Executive's termination of
employment hereunder.
10. Confidential Information.
(a) The term "Confidential Information" shall mean information and
data not generally known outside the Company (unless as a result of a breach of
any of the obligations imposed by this Agreement) concerning the Company's
business, including, without limitation, information relating to: (i) the
identities of its customers and their purchasing habits, needs, credit
histories, contact personnel and other information; (ii) suppliers' and
vendors' costs, products, discounts, margins, contact personnel and other
information; (iii) the Company's trade secrets, price lists, margins,
discounts, financial and marketing data, personnel and compensation
information, and business plans; (iv) information or data regarding the
Company's research, techniques, and equipment; and (v) the Company's
programming ideas, formatting, concepts and plans. Employee acknowledges that
the Company has expended substantial time and money to develop Confidential
Information and that all such Confidential Information would be of value to a
competitor of the Company. Confidential Information is solely the property of
the Company.
10
<PAGE> 11
(b) Except as otherwise herein provided, Employee agrees that during
the period of his employment by the Company, and thereafter, he will hold in
strictest confidence and will not use or disclose to any person or entity
without the written authorization of the Board or its designated officer, any
of the Company's Confidential Information, except as such use or disclosure may
be required in connection with his work for the Company or by operation of law,
or to the extent that such information becomes known in the public or trade
other than as a result of Employee's actions or failure to act. Employees
understands that this Agreement applies to art work and music, computerized and
written information and to other information, whether or not in written form.
(c) Employee agrees that he will not take with him any Confidential
Information, whether in written, computerized, machine readable, model, sample,
or other form capable of physical delivery, upon or after the termination for
any reason of his employment with the Company, without the prior written
consent of the Board or its designated officer. Employee also agrees that upon
the expiration of the Term, the termination for any reason of his employment
with the Company or at any other time that the Company may request, he shall
deliver promptly and return to the Company all such documents and materials,
along with any other Confidential information and all other property of the
Company and property relating to the Company's suppliers, customers and
business, in his possession or control.
11. Exclusive Services. During the term of this Agreement, the
Employee shall devote his full time, attention, knowledge, skills and efforts
exclusively to the business and affairs of the Company and shall do his utmost
to promote its interest. During such times the Employee shall not, directly or
indirectly, in any manner or capacity, own, manage, consult with, operate,
join, control, be employed full or part time by or otherwise participate in, or
have any
11
<PAGE> 12
beneficial interest in, the ownership, management, operation or control of any
business or in any activity which, in the reasonable discretion of the Board or
its designated officer, is competitive with the business of the Company or
which may conflict with the full and faithful performance of Employee's duties
with the Company; provided however, that the ownership of up to one percent of
the outstanding stock of any publicly traded company shall not, in and if
itself, constitute a violation of this Agreement, so long as Employee does not
participate in the management of such company. Employee may spend reasonable
time in charity work and in managing his own investments so long as such
activities do not materially interfere with his duties hereunder. Employee may
also serve on the boards of directors of corporations which do not compete with
the Company with the prior approval of the Board or its designated officer,
such approval not to be unreasonably withheld. The Company acknowledges that
Employee may engage in the limited activities necessary to wind up the affairs
of KISS, L.P.
12. Restrictive Covenants.
(a) Non-Competition. During the Term of this Agreement and for a
period of ninety (90) days after the termination of Employee's employment under
this Agreement for any reason including without limitation the expiration of
this Agreement ("Restrictive Period"), Employee agrees that he will not be
employed by, consult with, perform activities on behalf of, or have an
ownership interest in any radio broadcasting station or any owner or operator
of any radio broadcasting station(s) serving the same Area of Dominant
Influence ("ADI") as any of the radio broadcasting stations which are owned by
the Company or any of its subsidiaries at the time of such employment
termination; provided however, that the ownership of up to one percent of the
outstanding stock of any publicly traded company shall
12
<PAGE> 13
not, in and of itself, constitute a violation of this Agreement, so long as
Employee does not participate in the management of such company.
(b) Non-Solicitation. The Employee agrees that during the Restrictive
Period, he will not on his own behalf or on behalf of any other person or
entity, without the express written consent of the Board or its designated
officer, solicit or attempt to solicit any then current employee,
representative or on-air talent of the Company to terminate or modify his or
her employment or business relationship with the Company.
13. Indemnification. The Company will provide defense costs and legal
counsel to the Employee and will indemnify him from any liability if he is sued
in connection with the performance of his duties as Executive Vice
President-Operations for the Company to the extent such indemnification is
permitted under the laws of the state of Delaware as in effect at the time of
the subject act or omission; provided that this indemnification shall not
extend to allegations of willful and wanton misconduct or gross negligence by
the Employee. In the event that the Company advances any fees or expenses for
the benefit of Employee under this Section 13 and it is determined by a court
of competent jurisdiction that Employee was not entitled to such advances or
indemnification under the circumstances, Employee agrees to repay any amounts
advanced by the Company.
14. Non-Waiver of Rights. Failure to insist upon strict compliance with
any of the terms, provisions or covenants of this Agreement shall not be deemed
to be a waiver of any such term, provision or covenant, nor shall any one or
more waivers or relinquishments of any rights or powers provided in this
Agreement be deemed to be a waiver or relinquishment of such rights or powers
at any other time.
13
<PAGE> 14
15. Remedies and Arbitration.
(a) Remedies. Employee acknowledges that Sections 10 through 12 of
this Agreement have been specifically negotiated by the parties and are
reasonable and necessary for the protection of the Company's confidential
information and its legitimate business interests. The Employee acknowledges
that any violation of any of Sections 10 through 12 could not reasonably and
adequately be compensated by damages in an action at law, and therefore, a
breach or threat of breach of such Sections shall give the Company, in addition
to other remedies it may have, the absolute right to injunctive or other
equitable relief. Certain of the terms of this Agreement, including without
limitation Sections 10 through 12 and 15, shall remain effective and shall
survive any termination or expiration of this Agreement.
(b) Arbitration. Except for the Company's rights to damages and/or
injunctive relief under Section 15(a) above, relating to a violation of any of
Sections 10 through 12 above, any disputes or disagreements between the parties
relating to the terms of this Agreement or the alleged breach thereof shall be
submitted to arbitration. If the parties are unable to agree upon an arbitrator
in 7 days, an arbitrator shall be selected from a panel furnished by the
American Arbitration Association in accordance with its procedures. The award
of the arbitrator shall be final and binding upon all parties. The arbitrator
shall have no authority to order specific performance or to add to, subtract
from or modify this Agreement, but shall have the authority only to interpret
this Agreement. The arbitrator's fee and other common expense of the
arbitration shall be borne equally by the parties, except that each party shall
be responsible for its own attorney's fees and the fee of the court reporter,
if any.
(c) Notice. All notices required to be given or which may be given
under this Agreement shall be in writing and shall be deemed given when
personally delivered or
14
<PAGE> 15
four (4) days after being mailed by certified mail, postage prepaid, return
receipt requested, addressed to the parties as follows:
If to the Company:
Evergreen Media Corporation
875 North Michigan Avenue
Chicago, Illinois 60611
Attention: James de Castro
with a copy to
Jed W. Brickner
Latham & Watkins
885 Third Avenue
Suite 1000
New York, NY 10022
If to Employee:
Mr. Kenneth J. O'Keefe
76 Royalston Road
Wellesley, Massachusetts 02181
Either party may change the address to which such notices are to be addressed
by notice thereof to the other party in the manner set forth above.
16. Amendments: Any amendment of this Agreement must be in writing and
signed by the parties.
17. Construction. This Agreement shall be construed in accordance with
the laws of the State of Illinois.
18. Severability.
(a) If any provision of this Agreement is ruled to be invalid or
unenforceable, the remaining provisions shall not be affected.
(b) If any court of competent jurisdiction determines that the scope,
area, or time limits contained in any of the restrictive covenants in this
Agreement are
15
<PAGE> 16
unenforceable under the circumstances then existing, the court shall modify
such provision to the maximum scope, area or time limit reasonable under such
circumstances.
19. No Conflicting Contracts. Employee represents and warrants that he
is not subject to any non-compete covenant in any contract and no contract,
agreement, other commitment or matter exists which would prevent his full
performance of this Agreement.
20. Successors and Assigns. The Company shall have the right to assign
this Agreement to any affiliated entity or any successor-in-interest to the
Company or its assigns only with the mutual consent of the parties.
21. Entire Agreement. This Agreement reflects the entire understanding
of the parties and supersedes any and all other agreements, either oral or
written, regarding Employee's employment by the Company. This Agreement may be
executed in one or more counterparts.
22. Prior Employment Agreement. The prior Employment Agreement shall
remain in full force and effect through December 31, 1997 and thereafter,
except as specifically set forth herein, shall be of no force and effect.
23. Facility of Payment. All cash payments to be made by the Company
to or on behalf of the Executive hereunder shall be an obligation of and made
by Los Angeles.
16
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date and at the place hereinabove specified.
Evergreen Media Corporation
By:
-------------------------------------
By: Scott K. Ginsburg
Title: Chief Executive Officer
Evergreen Media Corporation of Los Angeles
By:
-------------------------------------
By: Scott K. Ginsburg
Title: Chief Executive Officer
-----------------------------------------
Kenneth J. O'Keefe
17
<PAGE> 1
EXHIBIT 12.1
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACTUAL ACTUAL PRO FORMA PRO FORMA
SIX SIX COMBINED COMBINED
MONTHS MONTHS YEAR SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED ENDED ENDED ENDED
------------------------------------------------- JUNE 30, JUNE 30, DECEMBER 31, JUNE 30,
1992 1993 1994 1995 1996 1996 1997 1996 1997
------- -------- ------- ------- -------- -------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Net income (loss) before
income taxes.......... $(4,989) $(20,749) $ 39 $(5,658) $(19,090) $(20,200) $ 8,118 $(213,600) $(81,990)
Fixed charges........... 11,030 15,086 15,252 20,854 40,461 20,124 24,413 176,429 88,485
------- -------- ------- ------- -------- -------- ------- --------- --------
Earnings as
adjusted(A)........... $ 6,041 $ (5,663) $15,291 $15,196 $ 21,371 $ (76) $32,531 $ (37,171) $ 6,495
======= ======== ======= ======= ======== ======== ======= ========= ========
Fixed Charges:
Interest expense........ $10,112 $ 13,878 $13,809 $19,199 $ 37,527 $ 19,039 $22,741 $ 171,326 $ 85,847
Amortization of deferred
financing costs....... 398 728 712 631 1,113 316 590 1,113 558
Rents under leases
representative of an
interest factor(1).... 520 480 731 1,024 1,821 769 1,082 3,990 2,080
------- -------- ------- ------- -------- -------- ------- --------- --------
Fixed charges as
adjusted(B)............. 11,030 15,086 15,252 20,854 40,461 20,124 24,413 176,429 88,485
======= ======== ======= ======= ======== ======== ======= ========= ========
Ratio of earnings to fixed
charges (A) divided by
(B)..................... -- -- 1.0 -- -- -- 1.33 -- --
Deficiency of earnings to
fixed charges........... $ 4,989 $ 20,749 $ -- $ 5,658 $ 19,090 $ 20,200 $ -- $ 213,600 $ 81,990
</TABLE>
- ---------------
(1) Management of CMCLA believes approximately one-third of rental and lease
expense is representative of the interest component of rent expense.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
<TABLE>
<CAPTION>
NAME JURISDICTION OF FORMATION
---- -------------------------
<S> <C>
Evergreen Media Corporation of the Bay Area................. DE
Evergreen Media Corporation of Chicago AM................... DE
Evergreen Media Corporation of Chicago FM................... DE
Evergreen Media Corporation of Dade County.................. DE
Evergreen Media Corporation of Houston...................... DE
Evergreen Media Corporation of Illinois..................... DE
Evergreen Media Corporation of San Francisco................ DE
Evergreen Media Corporation of Washington, D.C.............. DE
Evergreen Media of Houston Limited Partnership.............. DE
KIOI License Corp........................................... DE
KKBT License Corp........................................... DE
KLOL License Limited Partnership............................ DE
KMEL License Corp........................................... DE
KTRH License Limited Partnership............................ DE
WASH License Limited Partnership............................ DE
WMVP-AM License Corp........................................ DE
WLUP-FM License Corp........................................ DE
WTOP License Limited Partnership............................ DE
WVCG License Corp........................................... DE
WRCX License Corp........................................... DE
Evergreen Media Corporation of St. Louis.................... DE
Evergreen Media Partners Corporation........................ DE
Evergreen Media Corporation of Dallas....................... DE
KSKY License Corp........................................... DE
</TABLE>
Evergreen Media Corporation of Chicagoland.................. DE
WEJM/WEJM-FM/WVAZ License Corp.............................. DE
Evergreen Media Corporation of Charlotte.................... DE
WIOQ License Corp........................................... DE
Evergreen Media Corporation of Detroit...................... DE
WKQI/WDOZ/WNIC License Corp................................. DE
Evergreen Media Corporation of New York..................... DE
WYNY License Corp........................................... DE
Evergreen Media Corporation of Gotham....................... DE
Evergreen Media/Pyramid Corporation......................... DE
Evergreen Media/Pyramid Holdings Corporation................ DE
Broadcast Architecture Inc.................................. MA
Evergreen Media Corporation of Rochester.................... DE
Evergreen Media Corporation of Massachusetts................ DE
WJMN License Corporation.................................... DE
Evergreen Media Corporation of Pennsylvania................. DE
WJJZ License Corp........................................... DE
Evergreen Media Corporation of Miami........................ DE
WEDR License Corp........................................... DE
Evergreen Media Corporation of Boston....................... DE
WXKS(AM) License Corp....................................... DE
WXKS(FM) License Corp....................................... DE
Evergreen Media Corporation of the Windy City............... DE
<PAGE> 2
<TABLE>
<CAPTION>
NAME JURISDICTION OF FORMATION
---- -------------------------
<S> <C>
WNUA License Corp........................................... DE
KYLD License Corp........................................... DE
Evergreen Media Corporation of Philadelphia................. DE
WYXR License Corp........................................... DE
WUSL License Corp........................................... DE
Evergreen Media Corporation of the Capital City............. DE
WGAY License Corp........................................... DE
Evergreen Media Corporation of the Great Lakes.............. DE
WWWW/WDFN License Corp...................................... DE
Evergreen Media Corporation of Tiburon...................... DE
KKSF License Corp........................................... DE
KDFC(AM) License Corp....................................... DE
KDFC(FM) License Corp....................................... DE
Evergreen Media Corporation of the Liberty City............. DE
WDAS(FM) License Corp....................................... DE
Evergreen Media Corporation of the Keystone State........... DE
WDAS(AM) License Corp....................................... DE
Evergreen Media Corporation of Michigan..................... DE
WMXD License Corp........................................... DE
Evergreen Media Corporation of the Motor City............... DE
WJLB License Corp........................................... DE
Evergreen Media Corporation of the Nation's Capital......... DE
WWRC License Corp........................................... DE
Evergreen Media Corporation of Chicago...................... DE
WPNT License Corp........................................... DE
Evergreen Media Corporation of the Prairie State............ DE
Evergreen Media Corporation of Brotherly Love............... DE
WFLN License Corp........................................... DE
WAXQ License Corp........................................... DE
WLTW License Corp........................................... DE
WMZQ License Corp........................................... DE
WAXQ Inc.................................................... DE
WMZQ Inc.................................................... DE
Riverside Broadcasting Co., Inc............................. DE
VBE, Inc.................................................... DE
Chancellor Broadcasting Licensee Company.................... DE
Trefoil Communications, Inc................................. DE
Shamrock Broadcasting, Inc.................................. DE
Shamrock Radio Licenses, Inc................................ DE
Shamrock Broadcasting of Texas, Inc......................... TX
Shamrock Broadcasting Licenses of Denver, Inc............... DE
KIBB Inc.................................................... DE
KYSR Inc.................................................... DE
WLIT Inc.................................................... DE
WDRQ Inc.................................................... DE
Radio 100 L.L.C............................................. DE
</TABLE>
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Chancellor Media Corporation of Los Angeles:
We consent to the use of our reports herein on the following financial
statements: 1) the consolidated balance sheets of Evergreen Media Corporation of
Los Angeles as of December 31, 1995 and 1996 and the related consolidated
statements of operations, stockholder's equity and cash flows for each of the
years in the three-year period ended December 31, 1996; 2) the combined balance
sheets of WMZQ Inc. and Viacom Broadcasting East, Inc. as of December 31, 1995
and 1996 and the related combined statements of earnings and cash flows for each
of the years in the three-year period ended December 31, 1996; 3) the combined
balance sheets of Riverside Broadcasting Co., Inc. and WAXQ Inc. as of December
31, 1995 and 1996 and the related combined statements of earnings and cash flows
for each of the years in the three-year period ended December 31, 1996; 4) the
balance sheets of KKSF-FM/KDFC-FM and AM (A Division of the Brown Organization)
as of December 31, 1995 and 1996 and the related statements of earnings and
division equity and cash flows for the years then ended; (5) the balance sheets
of WLIT Inc. as of December 31, 1995 and 1996 and the related statements of
earnings and cash flows for each of the years in the three-year period ended
December 31, 1996; (6) the combined balance sheets of KYSR Inc. and KIBB Inc. as
of December 31, 1995 and 1996 and the related combined statements of operations
and cash flows for each of the years in the three-year period ended December 31,
1996; and (7) the balance sheets of WDRQ Inc. as of December 31, 1995 and 1996
and the related statements of earnings and cash flows for each of the years in
the three-year period ended December 31, 1996. We also consent to the reference
of our firm under the headings "Experts" and "Selected Consolidated Historical
Financial Data" in the Registration Statement.
KPMG Peat Marwick LLP
Dallas, Texas
September 23, 1997
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Chancellor Media Corporation of Los Angeles:
We consent to the use of our report dated March 28, 1997, relating to the
balance sheets of WDAS-AM/FM (station owned and operated by Beasley FM
Acquisition Corp.) as of December 31, 1996 and the related statements of
earnings and station equity and cash flows for the year ended December 31, 1996,
and the reference to our firm under the heading "Experts" in the Registration
Statement.
KPMG Peat Marwick LLP
St. Petersburg, Florida
September 23, 1997
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 (No. 333- ) of Chancellor Media
Corporation of Los Angeles of our report dated May 2, 1997 relating to the
financial statements of Century Chicago Broadcasting, L.P., which appears in
such Prospectus. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Chicago, Illinois
September 25, 1997
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated May 8, 1997, (and to all references to our Firm) included in this
Registration Statement on Form S-4 dated September 25, 1997 of Chancellor Media
Corporation of Los Angeles.
Arthur Andersen LLP
Chicago, Illinois
September 25, 1997
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Chancellor Media Corporation of Los Angeles:
We consent to the inclusion in this Registration Statement on Form S-4 of
Chancellor Media Corporation of Los Angeles of our report dated February 13,
1997, except for Note 15 as to which the date is February 19, 1997, on our
audits of the consolidated financial statements of Chancellor Radio Broadcasting
Company and Subsidiaries as of December 31, 1995 and 1996 and for each of the
three years in the period ended December 31, 1996. We also consent to the
reference to our firm under the caption "Experts".
Coopers & Lybrand L.L.P.
Dallas, Texas
September 25, 1997
<PAGE> 1
EXHIBIT 23.7
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Chancellor Media Corporation of Los Angeles:
We consent to the inclusion in this Registration Statement on Form S-4 of
Chancellor Media Corporation of Los Angeles of our report dated March 24, 1997,
on our audit of the consolidated statements of operations, changes in common
stockholders' equity and cash flows of Trefoil Communications, Inc. and
Subsidiaries for the period January 1, 1996 through February 13, 1996. We also
consent to the reference to our firm under the caption "Experts".
Coopers & Lybrand L.L.P.
Dallas, Texas
September 25, 1997
<PAGE> 1
EXHIBIT 23.8
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Chancellor Media Corporation of Los
Angeles of our report dated February 14, 1996 relating to the consolidated
financial statements of Trefoil Communications, Inc., which appears in such
Prospectus. We also consent to the reference to us under the heading "Experts"
in such Prospectus.
Price Waterhouse LLP
Los Angeles, California
September 25, 1997
<PAGE> 1
EXHIBIT 23.9
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Chancellor Media Corporation of Los Angeles:
As independent public accountants, we hereby consent to the use of our report
dated March 31, 1997 (and to all references to our Firm) included in this
Registration Statement on Form S-4 dated September 25, 1997 of Chancellor Media
Corporation of Los Angeles.
Arthur Andersen LLP
Washington, D.C.
September 25, 1997
<PAGE> 1
EXHIBIT 25.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF
1939 OF A CORPORATION DESIGNATED TO ACT AS
TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2)_________
----------
U.S. TRUST COMPANY OF TEXAS, N.A.
(Exact name of trustee as specified in its charter)
75-2353745
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
2001 Ross Avenue, Suite 2700 75201-2936
Dallas, Texas (Zip Code)
(Address of trustee's
principal executive offices)
Compliance Officer
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201-2936
(214) 754-1200
(Name, address and telephone number of agent for service)
----------
Chancellor Media Corporation of Los Angeles
(Exact name of obligor as specified in its charter)
Delaware 75-2451687
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
433 East Las Colinas Boulevard
Suite 1130
Irving, Texas 75039 75243
(Address of principal executive offices) (Zip Code)
----------
8 3/4% Senior Subordinated Notes due 2007
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
GENERAL
1. General Information.
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Reserve Bank of Dallas (11th District),
Dallas, Texas (Board of Governors of the
Federal Reserve System)
Federal Deposit Insurance Corporation, Dallas, Texas
The Office of the Comptroller of the Currency,
Dallas, Texas
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust
powers.
2. Affiliations with Obligor and Underwriters.
If the obligor or any underwriter for the obligor is an affiliate of
the Trustee, describe each such affiliation.
None.
3. Voting Securities of the Trustee.
Furnish the following information as to each class of voting
securities of the Trustee:
<TABLE>
<CAPTION>
As of September 15, 1997
- ------------------------------------------------------------------------------------------------------------
Col A. Col B.
- ------------------------------------------------------------------------------------------------------------
Title of Class Amount Outstanding
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Capital Stock - par value $100 per share 5,000 shares
</TABLE>
4. Trusteeships under Other Indentures.
9 3/8% Senior Subordinated Notes due 2004
12 1/4% Subordinated Exchange Debentures due 2004
12% Exchange Debentures due 2009
5. Interlocking Directorates and Similar Relationships with the Obligor
or Underwriters.
Not Applicable
<PAGE> 3
6. Voting Securities of the Trustee Owned by the Obligor or its
Officials.
Not Applicable
7. Voting Securities of the Trustee Owned by Underwriters or their
Officials.
Not Applicable
8. Securities of the Obligor Owned or Held by the Trustee.
Not Applicable
9. Securities of Underwriters Owned or Held by the Trustee.
Not Applicable
10. Ownership or Holdings by the Trustee of Voting Securities of Certain
Affiliates or Security Holders of the Obligor.
Not Applicable
11. Ownership or Holdings by the Trustee of any Securities of a Person
Owning 50 Percent or More of the Voting Securities of the Obligor.
Not Applicable
12. Indebtedness of the Obligor to the Trustee.
Not Applicable
13. Defaults by the Obligor.
Not Applicable
14. Affiliations with the Underwriters.
Not Applicable
15. Foreign Trustee.
Not Applicable
16. List of Exhibits.
T-1.1 - A copy of the Articles of Association of U.S. Trust Company
of Texas, N.A.; incorporated herein by reference to Exhibit
T-1.1 filed with Form T-1 Statement, Registration No.
22-21897.
<PAGE> 4
16. (con't.)
T-1.2 - A copy of the certificate of authority of the Trustee to
commence business; incorporated herein by reference to
Exhibit T-1.2 filed with Form T-1 Statement, Registration
No. 22-21897.
T-1.3 - A copy of the authorization of the Trustee to exercise
corporate trust powers; incorporated herein by reference to
Exhibit T-1.3 filed with Form T-1 Statement, Registration
No. 22-21897.
T-1.4 - A copy of the By-laws of the U.S. Trust Company of Texas,
N.A., as amended to date; incorporated herein by reference
to Exhibit T-1.4 filed with Form T-1 Statement,
Registration No. 22-21897.
T-1.6 - The consent of the Trustee required by Section 321(b) of
the Trust Indenture Act of 1939.
T-1.7 - A copy of the latest report of condition of the Trustee
published pursuant to law or the requirements of its
supervising or examining authority.
NOTE
As of September 15, 1997, the Trustee had 5,000 shares of Capital Stock
outstanding, all of which are owned by U.S. T.L.P.O. Corp. As of September
15, 1997, U.S. T.L.P.O. Corp. had 35 shares of Capital Stock outstanding, all
of which are owned by U.S. Trust Corporation. U.S. Trust Corporation had
outstanding 19,185,828 shares of $1 par value Common Stock as of September,
1997.
The term "Trustee" in Items 2, 5, 6, 7, 8, 9, 10 and 11 refers to each of U.S
Trust Company of Texas, N.A., U.S. T.L.P.O. Corp. and U.S. Trust Corporation.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of
all the facts on which to base responsive answers to Items 2, 5, 6, 7, 9, 10
and 11, the answers to said Items are based upon incomplete information. Items
2, 5, 6, 7, 9, 10 and 11 may, however, be considered correct unless amended by
an amendment to this Form T-1.
In answering any items in this Statement of Eligibility and Qualification which
relates to matters peculiarly within the knowledge of the obligors or their
directors or officers, or an underwriter for the obligors, the Trustee has
relied upon information furnished to it by the obligors and will rely on
information to be furnished by the obligors or such underwriter, and the
Trustee disclaims responsibility for the accuracy or completeness of such
information.
_______________
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee,
U.S Trust Company of Texas, N.A., a national banking association organized
under the laws of the United States of America, has duly caused this statement
of eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Dallas, and State of Texas on the
15th day of September 1997.
U.S. Trust Company of Texas, N.A.,
Trustee
By: /s/ BILL BARBER
------------------------------
Bill Barber
Vice President
<PAGE> 6
Exhibit T-1.6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939 as amended in connection with the proposed issue of Chancellor Radio
Broadcasting Company 8 3/4% Senior Subordinated Notes due 2007, we hereby
consent that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefore.
U.S. Trust Company of Texas, N.A.
By: /s/ BILL BARBER
------------------------------
Bill Barber
Vice President
<PAGE> 1
EXHIBIT 99.3
INDEPENDENT AUDITORS' REPORT ON
FINANCIAL STATEMENT SCHEDULE
The Board of Directors
Evergreen Media Corporation:
Under the date of January 31, 1997, except for note 2(c), which is as of
February 19, 1997, we reported on the consolidated balance sheets of Evergreen
Media Corporation of Los Angeles and subsidiaries as of December 31, 1995 and
1996, and the related consolidated statements of operations, stockholder's
equity and cash flows for each of the years in the three-year period ended
December 31, 1996. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related financial
statement schedule. This financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.
In our opinion the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Dallas, Texas
January 31, 1997
<PAGE> 1
EXHIBIT 99.3(A)
SCHEDULE II
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS ADDITIONS
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS WRITEOFFS OF PERIOD
----------- ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1996........... $ 2,000 2,179 156(1) 2,043 2,292
======= ===== ======= ===== ======
Year ended December 31, 1995........... $ 835 904 1,644(1) 1,383 2,000
======= ===== ======= ===== ======
Year ended December 31, 1994........... $ 734 754 -- 653 835
======= ===== ======= ===== ======
Deferred tax asset valuation allowance:
Year ended December 31, 1996........... $ -- -- -- -- --
======= ===== ======= ===== ======
Year ended December 31, 1995........... $14,458 -- (14,458)(1) -- --
======= ===== ======= ===== ======
Year ended December 31, 1994........... $13,979 -- 479 -- 14,458
======= ===== ======= ===== ======
</TABLE>
- ---------------
(1) Additions (deductions) result from the application of purchase accounting
relating to the BPI acquisition in 1995 and the Pyramid Acquisition in 1996.
