<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
(PURSUANT TO SECTION 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
KATZ MEDIA GROUP, INC.
(Name of Subject Company)
CHANCELLOR BROADCASTING COMPANY
EVERGREEN MEDIA CORPORATION
MORRIS ACQUISITION CORPORATION
(Bidders)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Tide of Class of Securities)
486112105
(CUSIP Number of Class of Securities)
---------------------
<TABLE>
<C> <C>
STEVEN DINETZ SCOTT K. GINSBURG
PRESIDENT AND CHIEF EXECUTIVE OFFICER CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
CHANCELLOR BROADCASTING COMPANY OFFICER
12655 NORTH CENTRAL EXPRESSWAY, SUITE 405 EVERGREEN MEDIA CORPORATION
DALLAS, TX 75243 433 EAST LAS COLINAS BOULEVARD, SUITE 1130
(972) 239-6220 IRVING, TX 75039
(972) 869-9020
(Name, Address and Telephone Number of Persons Authorized
to Receive Notices and Communications on Behalf of Bidders)
</TABLE>
---------------------
Copy To:
MARK D. GERSTEIN, ESQ.
LATHAM & WATKINS
5800 SEARS TOWER
CHICAGO, IL 60614
(312) 876-7700
CALCULATION OF FILING FEE:
<TABLE>
<CAPTION>
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TRANSACTION VALUATION* AMOUNT OF FILING FEE**
- -------------------------------------------------------------------------------------------------
<C> <C>
$166,526,459 $33,306
=================================================================================================
</TABLE>
* For the purpose of calculating the fee only, this amount assumes the purchase
of 15,138,769 shares of Common Stock, par value $.01 per share, of Katz Media
Group, Inc. at $11.00 per share. Such number of shares consists of (i)
13,617,328 shares issued and outstanding as of July 11, 1997 (not including
64,751 shares held in treasury as of such date), (ii) 1,475,768 shares
reserved for issuance upon the exercise of outstanding options as of such
date, and (iii) 45,673 shares reserved for issuance in connection with
restricted stock grants.
** The amount of the filing fee calculated in accordance with Regulation
240.0-11 of the Securities Exchange Act of 1934 equals 1/50th of 1% of the
value of the shares to be purchased.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Amount Previously Paid: Not applicable. Filing Party: Not applicable.
Form or Registration No.: Not applicable. Date Filed: Not applicable.
</TABLE>
================================================================================
(Continued on following page(s))
(Page 1 of 8 Pages)
<PAGE> 2
SCHEDULE 14D-1
CUSIP NO. 486112105 PAGE 2 OF 8 PAGES
- --------------------------------------------------------------------------------
(1) Name of reporting persons: Chancellor Broadcasting Company
S.S. or I.R.S. Identification No. of above person: 75-2538487
- --------------------------------------------------------------------------------
(2) Check the appropriate box if a member of a group (see instructions):
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
(3) SEC use only
- --------------------------------------------------------------------------------
(4) Source of funds (see instructions):
BK
- --------------------------------------------------------------------------------
(5) Check box if disclosure of legal proceedings is required pursuant to
Items 2(e) or 2(f)
[ ]
- --------------------------------------------------------------------------------
(6) Citizenship or place of organization:
Delaware
- --------------------------------------------------------------------------------
(7) Aggregate amount beneficially owned by each reporting person:
0
- --------------------------------------------------------------------------------
(8) Check box if the aggregate amount in Row (7) excludes certain shares
(see instructions):
[ ]
- --------------------------------------------------------------------------------
(9) Percent of class represented to amount in Row (7):
0%
- --------------------------------------------------------------------------------
(10) Type of reporting person (see instructions):
CO
- --------------------------------------------------------------------------------
<PAGE> 3
SCHEDULE 14D-1
CUSIP NO. 486112105 PAGE 3 OF 8 PAGES
- --------------------------------------------------------------------------------
(1) Name of reporting persons: Evergreen Media Corporation
S.S. or I.R.S. Identification No. of above person: 75-2247099
- --------------------------------------------------------------------------------
(2) Check the appropriate box if a member of a group (see instructions):
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
(3) SEC use only
- --------------------------------------------------------------------------------
(4) Source of funds (see instructions):
BK
- --------------------------------------------------------------------------------
(5) Check box if disclosure of legal proceedings is required pursuant to
Items 2(e) or 2(f)
[ ]
- --------------------------------------------------------------------------------
(6) Citizenship or place of organization:
Delaware
- --------------------------------------------------------------------------------
(7) Aggregate amount beneficially owned by each reporting person:
0
- --------------------------------------------------------------------------------
(8) Check box if the aggregate amount in Row (7) excludes certain shares
(see instructions):
[ ]
- --------------------------------------------------------------------------------
(9) Percent of class represented to amount in Row (7):
0%
- --------------------------------------------------------------------------------
(10) Type of reporting person (see instructions):
CO
- --------------------------------------------------------------------------------
<PAGE> 4
SCHEDULE 14D-1
CUSIP NO. 486112105 PAGE 4 OF 8 PAGES
- --------------------------------------------------------------------------------
(1) Name of reporting persons: Morris Acquisition Corporation
S.S. or I.R.S. Identification No. of above person:
I.R.S. Identification No. Applied for
- --------------------------------------------------------------------------------
(2) Check the appropriate box if a member of a group (see instructions):
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
(3) SEC use only
- --------------------------------------------------------------------------------
(4) Source of funds (see instructions):
AF
- --------------------------------------------------------------------------------
(5) Check box if disclosure of legal proceedings is required pursuant to
Items 2(e) or 2(f)
[ ]
- --------------------------------------------------------------------------------
(6) Citizenship or place of organization:
Delaware
- --------------------------------------------------------------------------------
(7) Aggregate amount beneficially owned by each reporting person:
0
- --------------------------------------------------------------------------------
(8) Check box if the aggregate amount in Row (7) excludes certain shares
(see instructions):
[ ]
- --------------------------------------------------------------------------------
(9) Percent of class represented to amount in Row (7):
0%
- --------------------------------------------------------------------------------
(10) Type of reporting person (see instructions):
CO
- --------------------------------------------------------------------------------
<PAGE> 5
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1")
relates to a tender offer by Morris Acquisition Corporation, a Delaware
corporation ("Purchaser") and a jointly owned subsidiary of Chancellor
Broadcasting Company, a Delaware corporation ("Chancellor"), and Evergreen Media
Corporation, a Delaware Corporation ("Evergreen" and together with Chancellor,
the "Parents"), to purchase any and all outstanding shares of Common Stock, par
value $.01 per share, of Katz Media Group, Inc., a Delaware corporation, not
currently directly or indirectly owned by Purchaser or either of the Parents,
for a purchase price of $11.00 per share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated July 18, 1997 (the "Offer to Purchase") and in the
related Letter of Transmittal (the "Letter of Transmittal" and together with the
Offer to Purchase, the "Offer"), and is intended to satisfy the reporting
requirements of Section 14(d) of the Securities Exchange Act of 1934, as
amended. Copies of the Offer to Purchase and the related Letter of Transmittal
are filed with this Schedule 14D-1 as Exhibits (a)(1), and (a)(2) hereto,
respectively.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Katz Media Group, Inc., a Delaware
corporation (the "Company"), which has its principal executive and operating
offices at 125 West 55th Street, New York, New York 10019.
(b) The title of the securities which are the subject of the Offer is the
Company's Common Stock, $.01 par value (the "Shares"), and the Offer is for any
and all outstanding Shares at a price of $11.00 per Share, net to the seller in
cash, without interest thereon. The information set forth in the "INTRODUCTION"
to the Offer to Purchase is incorporated herein by reference.
(c) The information set forth in Section 6 of the Offer to Purchase is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Schedule 14D-1 is being filed jointly by Purchaser and
the Parents. The information set forth in the "INTRODUCTION" to the Offer to
Purchase, in Section 9 of the Offer to Purchase and in Annex I to the Offer to
Purchase is incorporated herein by reference.
(e)-(f) During the last five (5) years, none of (i) Purchaser nor, to the
best of knowledge of Purchaser and the Parents, any executive officer or
director of Purchaser; (ii) Chancellor nor, to the best knowledge of Chancellor,
any executive officer or director of Chancellor; or (iii) Evergreen nor, to the
best knowledge of Evergreen, any executive officer or director of Evergreen, has
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) nor has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which such person
was or is subject to a judgment, decree or final order enjoining future
violations of, or, prohibiting or mandating activities subject to Federal or
state securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the "INTRODUCTION" to the Offer to
Purchase and in Sections 11, 12 and 13 of the Offer to Purchase is incorporated
herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth in Section 10 of the Offer to Purchase is
incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g) The information set forth in the "INTRODUCTION" to the Offer to
Purchase and in Sections 7 and 13 of the Offer to Purchase is incorporated
herein by reference.
5
<PAGE> 6
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
The information set forth in the "INTRODUCTION" to the Offer to Purchase
and in Sections 9 and 13 of the Offer to Purchase is incorporated herein by
reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the "INTRODUCTION" to the Offer to Purchase
and in Sections 9, 11 and 13 of the Offer to Purchase is incorporated herein by
reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the "INTRODUCTION" to the Offer to Purchase
and in Sections 11 and 17 of the Offer to Purchase is incorporated herein by
reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 of the Offer to Purchase is
incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 9 of the Offer to Purchase is
incorporated herein by reference.
(b)-(c) The information set forth in the Section 16 of the Offer to
Purchase is incorporated herein by reference.
(d) Not applicable.
(e) Not applicable.
(f) The information set forth in the entire Offer to Purchase and the
Letter of Transmittal, copies of which are filed with this Schedule 14D-1 as
Exhibits (a)(1) and (a)(2), respectively, is incorporated herein by reference.
6
<PAGE> 7
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
<C> <S>
(a)(1) -- Offer to Purchase.
(a)(2) -- Letter of Transmittal.
(a)(3) -- Notice of Guaranteed Delivery.
(a)(4) -- Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(5) -- Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(6) -- Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) -- Text of Press Release issued jointly by the Parents and
Purchaser and by the Company, dated July 14, 1997.
(a)(8) -- Summary Advertisement, dated July 18, 1996.
(b)(1) -- Amended and Restated Loan Agreement, dated as of January
17, 1996, by and among Evergreen Media Corporation of Los
Angeles, the financial institutions whose names appear as
Lenders on the signature pages thereof (the "Lenders"),
The Toronto Dominion Bank, The Bank of New York and
NationsBank of Texas, N.A., as Arranging Agents, The Bank
of New York, as Syndication Agent, NationsBank of Texas,
N.A., as Documentation Agent, 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, Borrower's Pledge Agreement, Parent Company
Guarantee, Security Agreement, Stock Pledge Agreement,
Subsidiary Guaranty, Subsidiary Pledge Agreement and
Subsidiary Security Agreement (incorporated by reference
to Exhibit 4.8 attached to Evergreen's Report on Form 8-K
dated January 17, 1996).
(b)(2) -- Amended and Restated Credit Agreement, dated as of
February 14, 1996 and amended and restated as of January
23, 1997, by and among Chancellor, Chancellor Radio
Broadcasting Company, various banks, Goldman Sachs Credit
Partners, L.P., as documentation agent, NationsBank of
Texas, N.A., as syndication agent, and Bankers Trust, as
managing agent and arranger (incorporated by reference to
Chancellor's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996).
(c)(1) -- Merger Agreement by and among the Parents, Purchaser and
the Company, dated as of July 14, 1997.
(c)(2) -- Stockholder Tender Agreement by and among the Parents,
Purchaser and certain stockholders of the Company, dated
as of July 14, 1997.
(c)(3) -- Management Tender Agreement by and among the Parents,
Purchaser and certain stockholders of the Company, dated
as of July 14, 1997.
(c)(4) -- Joint Bidding Agreement by and between Chancellor and
Evergreen, dated as of July 14, 1997.
(d) -- Not applicable.
(e) -- Not applicable.
(f) -- Not applicable.
</TABLE>
7
<PAGE> 8
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: July 18, 1997 MORRIS ACQUISITION CORPORATION
By: /s/ SCOTT K. GINSBURG
----------------------------------
Name: Scott K. Ginsburg
Title: President and Chief
Executive Officer
EVERGREEN MEDIA CORPORATION
By: /s/ SCOTT K. GINSBURG
----------------------------------
Name: Scott K. Ginsburg
Title: Chairman of the Board and
Chief Executive Officer
CHANCELLOR BROADCASTING COMPANY
By: /s/ STEVEN DINETZ
----------------------------------
Name: Steven Dinetz
Title: President and Chief
Executive Officer
<PAGE> 9
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
(a)(1) -- Offer to Purchase.
(a)(2) -- Letter of Transmittal.
(a)(3) -- Notice of Guaranteed Delivery.
(a)(4) -- Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(5) -- Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(6) -- Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) -- Text of Press Release issued jointly by the Parents and
Purchaser and by the Company, dated July 14, 1997.
(a)(8) -- Summary Advertisement, dated July 18, 1996.
(b)(1) -- Amended and Restated Loan Agreement, dated as of January
17, 1996, by and among Evergreen Media Corporation of Los
Angeles, the financial institutions whose names appear as
Lenders on the signature pages thereof (the "Lenders"),
The Toronto Dominion Bank, The Bank of New York and
NationsBank of Texas, N.A., as Arranging Agents, The Bank
of New York, as Syndication Agent, NationsBank of Texas,
N.A., as Documentation Agent, 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, Borrower's Pledge Agreement, Parent Company
Guarantee, Security Agreement, Stock Pledge Agreement,
Subsidiary Guaranty, Subsidiary Pledge Agreement and
Subsidiary Security Agreement (incorporated by reference
to Exhibit 4.8 attached to Evergreen's Report on Form 8-K
dated January 17, 1996).
(b)(2) -- Amended and Restated Credit Agreement, dated as of
February 14, 1996 and amended and restated as of January
23, 1997, by and among Chancellor, Chancellor Radio
Broadcasting Company, various banks, Goldman Sachs Credit
Partners, L.P., as documentation agent, NationsBank of
Texas, N.A., as syndication agent, and Bankers Trust, as
managing agent and arranger (incorporated by reference to
Chancellor's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996).
(c)(1) -- Merger Agreement by and among the Parents, Purchaser and
the Company, dated as of July 14, 1997.
(c)(2) -- Stockholder Tender Agreement by and among the Parents,
Purchaser and certain stockholders of the Company, dated
as of July 14, 1997.
(c)(3) -- Management Tender Agreement by and among the Parents,
Purchaser and certain stockholders of the Company, dated
as of July 14, 1997.
(c)(4) -- Joint Bidding Agreement by and between Chancellor and
Evergreen, dated as of July 14, 1997.
(d) -- Not applicable.
(e) -- Not applicable.
(f) -- Not applicable.
</TABLE>
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ANY AND ALL OUTSTANDING SHARES OF COMMON STOCK
OF
KATZ MEDIA GROUP, INC.
AT
$11.00 NET PER SHARE
BY
MORRIS ACQUISITION CORPORATION
A JOINTLY OWNED SUBSIDIARY OF
CHANCELLOR BROADCASTING COMPANY
AND
EVERGREEN MEDIA CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON THURSDAY, AUGUST 14, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS BEING MADE PURSUANT TO A MERGER AGREEMENT, DATED AS OF JULY 14,
1997, BY AND AMONG CHANCELLOR BROADCASTING COMPANY, EVERGREEN MEDIA CORPORATION,
MORRIS ACQUISITION CORPORATION (THE "PURCHASER") AND THE COMPANY.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE HAVING BEEN
VALIDLY TENDERED PURSUANT TO THE OFFER, AND NOT PROPERLY WITHDRAWN, THAT NUMBER
OF SHARES OF COMMON STOCK (THE "SHARES") OF KATZ MEDIA GROUP, INC. (THE
"COMPANY") REPRESENTING AT LEAST A MAJORITY OF THE OUTSTANDING SHARES ON A FULLY
DILUTED BASIS (THE "MINIMUM CONDITION"), (2) THE EXPIRATION OR TERMINATION OF
ANY APPLICABLE WAITING PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST
IMPROVEMENTS ACT OF 1976, AS AMENDED, AND (3) THE SATISFACTION OF CERTAIN OTHER
TERMS AND CONDITIONS.
THE BOARD OF DIRECTORS OF THE COMPANY AND THE DIRECTORS OF THE COMPANY WHO
ARE NEITHER EMPLOYEES OF THE COMPANY NOR EMPLOYEES OF ANY AFFILIATE OF THE
SELLING STOCKHOLDERS (AS HEREINAFTER DEFINED) HAVE SEPARATELY AND UNANIMOUSLY
APPROVED THE OFFER, THE MERGER, THE MERGER AGREEMENT, THE STOCKHOLDER TENDER
AGREEMENT AND THE MANAGEMENT TENDER AGREEMENT, HAVE DETERMINED THAT THE OFFER
AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S
STOCKHOLDERS AND RECOMMEND THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES PURSUANT TO THE OFFER.
CERTAIN STOCKHOLDERS OF THE COMPANY (THE "SELLING STOCKHOLDERS"), OWNING IN
THE AGGREGATE APPROXIMATELY 51.6% OF THE OUTSTANDING SHARES, INCLUDING THE
COMPANY'S LARGEST SHAREHOLDER, DLJ MERCHANT BANKING PARTNERS, L.P., AND CERTAIN
OF THE COMPANY'S EXECUTIVE OFFICERS, HAVE ENTERED INTO AGREEMENTS WITH
CHANCELLOR, EVERGREEN AND PURCHASER, PURSUANT TO WHICH SUCH STOCKHOLDERS HAVE
AGREED TO TENDER AND SELL ALL OF THEIR SHARES TO PURCHASER PURSUANT TO THE
OFFER.
IMPORTANT
Any stockholder desiring to tender all or a portion of such stockholder's
Shares should either (i) complete and sign the Letter of Transmittal or a
facsimile thereof in accordance with the instructions in the Letter of
Transmittal, have such stockholder's signature thereon guaranteed if required by
Instruction 1 to the Letter of Transmittal, and mail or deliver the Letter of
Transmittal together with the certificate(s) representing tendered Shares and
all other required documents to the Depositary, or tender such Shares pursuant
to the procedure for book-entry transfer set forth in Section 3 of this Offer to
Purchase or (ii) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for such stockholder.
Stockholders having Shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such person if they
desire to tender their Shares. Any stockholder who desires to tender Shares and
whose certificates representing such Shares are not immediately available, or
who cannot comply with the procedures for book-entry transfer on a timely basis,
may tender such Shares pursuant to the guaranteed delivery procedure set forth
in Section 3 of this Offer to Purchase.
Questions and requests for assistance may be directed to the Information
Agent or to the Dealer Manager at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase. Additional copies
of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed
Delivery and other related materials may be obtained from the Information Agent
or from brokers, dealers, commercial banks and trust companies.
The Dealer Manager for the Offer is:
SMITH BARNEY INC.
July 18, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION...............................................
1. Terms of the Offer......................................
2. Acceptance for Payment and Payment for Shares...........
3. Procedure for Tendering Shares..........................
4. Withdrawal Rights.......................................
5. Certain United States Federal Income Tax Consequences...
6. Price Range of Shares; Dividends........................
7. Certain Effects of the Transaction......................
8. Certain Information Concerning the Company..............
9. Certain Information Concerning the Parents and
Purchaser.................................................
10. Source and Amount of Funds..............................
11. Background of the Offer; Past Contacts, Transactions or
Negotiations with the Company.............................
12. Purpose of the Offer and the Merger; Plans for the
Company...................................................
13. Merger Agreement, Stockholder Tender Agreement and
Management Tender Agreement...............................
14. Dividends and Distributions.............................
15. Certain Conditions of the Offer.........................
16. Certain Regulatory and Legal Matters....................
17. Fees and Expenses.......................................
18. Miscellaneous...........................................
</TABLE>
ANNEX I -- Certain Information Concerning the Directors and Executive Officers
of the Parents and Purchaser
ANNEX II -- Section 262 of the General Corporation Law of the State of Delaware
<PAGE> 3
To the Holders of Common Stock of
Katz Media Group, Inc.
INTRODUCTION
Morris Acquisition Corporation, a Delaware corporation ("Purchaser") and a
jointly owned subsidiary of Chancellor Broadcasting Company, a Delaware
corporation ("Chancellor"), and Evergreen Media Corporation, a Delaware
corporation ("Evergreen" and together with Chancellor, the "Parents"), hereby
offers to purchase any and all outstanding shares of Common Stock, par value
$.01 per share (the "Shares"), of Katz Media Group, Inc., a Delaware corporation
("Katz" or the "Company"), at a purchase price of $11.00 per Share (the "Offer
Price"), net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the related
Letter of Transmittal (which, as amended and supplemented from time to time,
together constitute the "Offer").
EACH OF THE BOARD OF DIRECTORS OF THE COMPANY (THE "KATZ BOARD") AND THE
DIRECTORS OF THE COMPANY WHO ARE NEITHER EMPLOYEES OF THE COMPANY NOR EMPLOYEES
OF ANY AFFILIATE OF THE SELLING STOCKHOLDERS (AS HEREINAFTER DEFINED) HAVE
UNANIMOUSLY APPROVED THE OFFER, THE MERGER (AS HEREINAFTER DEFINED), THE MERGER
AGREEMENT (AS HEREINAFTER DEFINED), THE STOCKHOLDER TENDER AGREEMENT (AS
HEREINAFTER DEFINED) AND THE MANAGEMENT TENDER AGREEMENT (AS HEREINAFTER
DEFINED), HAVE DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE
BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS AND RECOMMEND THAT THE COMPANY'S
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE HAVING BEEN
VALIDLY TENDERED PURSUANT TO THE OFFER, AND NOT PROPERLY WITHDRAWN, THAT NUMBER
OF SHARES REPRESENTING AT LEAST A MAJORITY OF THE OUTSTANDING SHARES ON A FULLY
DILUTED BASIS, (II) THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING
PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS
AMENDED, AND (III) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS. SEE
SECTION 15 OF THIS OFFER TO PURCHASE.
IN ORDER TO INDUCE THE PARENTS AND PURCHASER TO ENTER INTO THE MERGER
AGREEMENT, CERTAIN STOCKHOLDERS OF THE COMPANY (THE "SELLING STOCKHOLDERS"),
OWNING IN THE AGGREGATE APPROXIMATELY 51.6% OF THE ISSUED AND OUTSTANDING
SHARES, HAVE, IN THE CASE OF DLJ MERCHANT BANKING PARTNERS, L.P., AND RELATED
INVESTORS, ENTERED INTO THE STOCKHOLDER TENDER AGREEMENT, DATED AS OF JULY 14,
1997 (THE "STOCKHOLDER TENDER AGREEMENT"), AND, IN THE CASE OF THOMAS F. OLSON,
JAMES E. BELOYIANIS AND STUART O. OLDS, THE MANAGEMENT TENDER AGREEMENT, DATED
AS OF JULY 14, 1997 (THE "MANAGEMENT TENDER AGREEMENT" AND TOGETHER WITH THE
STOCKHOLDER TENDER AGREEMENT, THE "STOCKHOLDER AGREEMENTS"), RESPECTIVELY, WITH
CHANCELLOR, EVERGREEN AND PURCHASER PURSUANT TO WHICH THE SELLING STOCKHOLDERS
HAVE AGREED TO TENDER AND SELL ALL OF THEIR SHARES TO PURCHASER PURSUANT TO THE
OFFER. ASSUMING OUTSTANDING OPTIONS (THE "OPTIONS") ARE, PURSUANT TO THE MERGER
AGREEMENT, CONVERTED TO CASH RATHER THAN EXERCISED AND TENDERED, UPON THE TENDER
(WITHOUT SUBSEQUENT WITHDRAWAL) OF THE SHARES WHICH ARE SUBJECT TO THE
STOCKHOLDER AGREEMENTS, THE MINIMUM CONDITION WILL BE SATISFIED.
Credit Suisse First Boston Corporation ("Credit Suisse First Boston") has
delivered to the Katz Board its opinion that, as of the date of such opinion,
the consideration to be received by the stockholders of the Company in the Offer
and the Merger was fair to such stockholders from a financial point of view. A
copy of such opinion is contained in the Company's Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Company's Schedule 14D-9") which is being
distributed to the Company's stockholders. Stockholders are urged to read the
written opinion of Credit Suisse First Boston, dated July 14, 1997, in its
entirety and the discussion thereof in the Company's Schedule 14D-9, which sets
forth the procedures followed, assumptions and qualifications made, matters
considered and the limitation of the review undertaken by Credit Suisse First
Boston in connection with the opinion.
The Offer is being made pursuant to a Merger Agreement, dated as of July
14, 1997 (the "Merger Agreement"), by and among the Parents, Purchaser and the
Company. The Merger Agreement provides that, among other things, as soon as
practicable after the purchase of Shares pursuant to the Offer and the
satisfaction of other conditions set forth in the Merger Agreement and in
accordance with the relevant
1
<PAGE> 4
provisions of the General Corporation Law of the State of Delaware (the "DGCL"),
Purchaser will be merged with and into the Company (the "Merger"). See Section
13 of this Offer to Purchase. Following consummation of the Merger, the Company
will continue as the surviving corporation (the "Surviving Corporation") and
will be a jointly owned subsidiary of the Parents. At the effective time of the
Merger (the "Effective Time"), by virtue of the Merger and without any action on
the part of the Company, the Parents or Purchaser, each issued and outstanding
Share (other than Shares owned directly or indirectly by the Company,
Chancellor, Evergreen or Purchaser or any subsidiary of Chancellor or Evergreen
or Shares with respect to which appraisal rights are properly exercised under
Delaware law ("Dissenting Shares")) will be converted into and represent the
right to receive $11.00 (or any other price that may be paid for each Share
pursuant to the Offer) in cash, without interest thereon (the "Merger
Consideration"). As of the Effective Time, all such converted Shares shall no
longer be outstanding and will automatically be canceled and retired and will
cease to exist, and each holder of a certificate representing any such Shares,
will, to the extent such certificate represents such Shares, cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration in cash in consideration therefor upon surrender of such
certificate. Pursuant to the Merger Agreement, the Company will not tender
Shares held by the Company in the Offer. All Shares that are owned directly or
indirectly by the Company, Chancellor, Evergreen, Purchaser or any subsidiary of
Chancellor or Evergreen at the Effective Time will be canceled, and no
consideration will be delivered in exchange therefor. See Section 5 of this
Offer to Purchase for a description of certain tax consequences of the Offer and
the Merger and Section 13 of this Offer to Purchase with respect to the Merger.
The Company has advised the Parents and Purchaser that, as of July 11,
1997, (i) 13,682,079 Shares were validly issued and outstanding, fully paid and
non-assessable (including 207,751 Shares held in treasury); (ii) 1,475,768
Shares were reserved for issuance upon the exercise of outstanding Options;
(iii) 45,673 Shares were reserved for issuance in connection with grants of
restricted stock; and (iv) no shares of preferred stock were issued and
outstanding. See Section 13 of this Offer to Purchase. As of the date hereof,
none of Purchaser, Chancellor or Evergreen beneficially own any Shares. The
Company has further advised the Parents and Purchaser that the Selling
Stockholders beneficially own an aggregate of 7,055,405 Shares (excluding Shares
issuable upon conversion of Options). Upon the satisfaction of the Minimum
Condition, Purchaser will have the ability to acquire and control a majority of
the outstanding Shares and will thus be able to approve the Merger without the
vote of any other stockholder. In the event Purchaser acquires 90% or more of
the outstanding Shares through the Offer or otherwise, Purchaser and the Parents
would be able to effect the Merger pursuant to the "short-form" merger
provisions of the DGCL, without prior notice to, or any action by, any other
stockholder of the Company. See Section 12 of this Offer to Purchase.
Purchaser is not offering to acquire outstanding Options in the Offer.
Pursuant to the Merger Agreement, all Options will be canceled in exchange for
the payment of the excess, if any, of the Offer Price over the exercise price
for such Options.
THIS OFFER TO PURCHASE AND RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE
OFFER.
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any extension or
amendment), Purchaser will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4 of this Offer to Purchase as soon as legally permitted
and practicable after the commencement of the Offer. The term "Expiration Date"
means 12:00 Midnight, New York City time, on Thursday, August 14, 1997, unless
Purchaser shall have extended the period of time for which the Offer is open, in
which event the term "Expiration Date" shall mean the latest time and date as of
which the Offer, as so extended by Purchaser, shall expire. UNDER NO
CIRCUMSTANCES WILL ANY INTEREST BE PAID ON THE OFFER PRICE FOR TENDERED SHARES,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
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<PAGE> 5
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM CONDITION. SEE
SECTIONS 13 AND 15 OF THIS OFFER TO PURCHASE. THE OFFER IS ALSO SUBJECT TO OTHER
TERMS AND CONDITIONS, INCLUDING THE EXPIRATION OR TERMINATION OF ANY APPLICABLE
WAITING PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976,
AS AMENDED (THE "HSR ACT"). SEE SECTION 16 OF THIS OFFER TO PURCHASE. Purchaser
reserves the right (but shall not be obligated), in accordance with applicable
rules and regulations of the United States Securities and Exchange Commission
(the "Commission"), subject to the limitations set forth in the Merger Agreement
and described below, to waive any condition of the Offer. The Minimum Condition
may not be waived without the written consent of the Company. Under the terms of
the Merger Agreement, Purchaser may not (except as described in the next
sentence), without the written consent of the Company, terminate the Offer or
make any change in the Offer which decreases the Offer Price, which decreases
the number of Shares being sought in the Offer, which changes the form of
consideration payable in the Offer (other than by adding consideration), which
imposes conditions to the Offer in addition to the conditions described in
Section 15 of this Offer to Purchase, or which otherwise amends the terms or
conditions of the Offer in a manner that is adverse to the holders of Shares.
Notwithstanding the foregoing, Purchaser may, without the consent of the
Company, increase the Offer Price and extend the Offer (i) if the Minimum
Condition or any of the other conditions, as described in Section 15 of this
Offer to Purchase, to Purchaser's obligation to accept for payment and pay for
Shares shall not be satisfied (or waived) by 12:00 Midnight, New York City time,
on Thursday, August 14, 1997 (or any other time then set as the Expiration
Date), until such time as such conditions are satisfied, for the period of time
Purchaser deems reasonably necessary to satisfy such conditions and (ii) to the
extent required by law. Assuming the prior satisfaction or waiver of the
conditions of the Offer and subject to the preceding sentence, Purchaser shall,
and the Parents shall cause Purchaser to, accept for payment and pay for Shares
validly tendered and not withdrawn pursuant to the Offer as soon as legally
permitted after the commencement thereof.
Subject to the limitations set forth in the Merger Agreement and described
above, Purchaser reserves the right (but will not be obligated), at any time or
from time to time in its sole discretion, to extend the period during which the
Offer is open by giving oral or written notice of such extension to the
Depositary and by making a public announcement of such extension. There can be
no assurance that Purchaser will exercise its right to extend the Offer. Any
extension of the period during which the Offer is open, delay in acceptance for
payment or payment, termination or amendment of the Offer will be followed, as
promptly as practicable, by public announcement thereof, such announcement, in
the case of an extension, to be issued not later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date in
accordance with the public announcement requirements of Rules 14d-4(c) and
14e-1(d) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Without limiting the obligation of Purchaser under such rules or the
manner in which Purchaser may choose to make any public announcement, Purchaser
currently intends to make announcements by issuing a press release to the Dow
Jones News Service and making any appropriate filing with the Commission.
Subject to the applicable rules and regulations of the Commission and
subject to the limitations set forth in the Merger Agreement, Purchaser also
expressly reserves the right, at any time and from time to time, in its sole
discretion, to delay payment for any Shares regardless of whether such Shares
were theretofore accepted for payment or, with the written consent of the
Company, to terminate the Offer and not to accept for payment or pay for any
Shares not theretofore accepted for payment or paid for, upon the occurrence of
any of the conditions set forth in Section 15 of this Offer to Purchase, by
giving oral or written notice of such delay or termination to the Depositary.
Purchaser's right to delay payment for any Shares or not to pay for any Shares
theretofore accepted for payment is subject to the applicable rules and
regulations of the Commission, including Rule 14e-1(c) of the Exchange Act,
relating to the Purchaser's obligation to pay for or return tendered Shares
promptly after the termination or withdrawal of the Offer.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, Purchaser will disseminate additional tender offer materials and extend
the Offer if and to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1
under the Exchange
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<PAGE> 6
Act or otherwise. The minimum period during which a tender offer must remain
open following material changes in the terms of the offer or the information
concerning the offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances, including the
relative materiality of the terms or information changes. With respect to a
change in price or a change in percentage of securities sought, a minimum ten
business day period is generally required to allow for adequate dissemination to
stockholders and investor response.
The Company has provided Purchaser with the Company's list of stockholders
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the Letter of Transmittal will be
mailed to record holders of Shares and will be furnished to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the list of stockholders or, if applicable, who are
listed as participants in a clearing agency's security position listing for
subsequent transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and will pay for, all Shares
validly tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4 of this Offer to Purchase promptly after the later to
occur of (a) the Expiration Date and (b) subject to compliance with the
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act, the satisfaction or waiver of the conditions set forth
in Section 15 of this Offer to Purchase. Subject to such compliance, Purchaser
expressly reserves the right to delay payment for Shares in order to comply in
whole or in part with any applicable law. In all cases, payment for Shares
accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of (i) certificates for such Shares or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company or the
Philadelphia Depository Trust Company (collectively, the "Book-Entry Transfer
Facilities"), pursuant to the procedures set forth in Section 3 of this Offer to
Purchase, (ii) a properly completed and duly executed Letter of Transmittal (or
a manually signed facsimile thereof) with all required signature guarantees or,
in the case of a book-entry transfer, an Agent's Message and (iii) any other
documents required by the Letter of Transmittal. The term "Agent's Message"
means a message transmitted by a Book-Entry Transfer Facility to, and received
by, the Depositary and forming a part of a Book-Entry Confirmation, which states
that such Book-Entry Transfer Facility has received an express acknowledgment
from the participant in such Book-Entry Transfer Facility tendering the Shares
that are the subject of the Book-Entry Confirmation that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that Purchaser may enforce such agreement against the participant.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as, if
and when Purchaser gives oral or written notice to the Depositary of Purchaser's
acceptance of such Shares for payment. In all cases, payment for Shares
purchased pursuant to the Offer will be made by deposit of the purchase price
with the Depositary, which will act as agent for tendering stockholders for the
purpose of receiving payment from Purchaser and transmitting such payment to
tendering stockholders. Upon the deposit of funds with the Depositary for the
purpose of making payments to tendering stockholders, Purchaser's obligation to
make such payment shall be satisfied, and tendering stockholders must thereafter
look solely to the Depositary for payment of amounts owed to them by reason of
the acceptance for payment of Shares pursuant to the Offer. If, for any reason
whatsoever, acceptance for payment of any Shares tendered pursuant to the Offer
is delayed, or Purchaser is unable to accept for payment Shares tendered
pursuant to the Offer, then, without prejudice to Purchaser's rights under this
Offer to Purchase, the Depositary may, nevertheless, on behalf of Purchaser,
retain tendered Shares, and, subject to compliance with the applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act,
such Shares may not be withdrawn, except to the extent that the tendering
stockholders are entitled to withdrawal rights as described in Section 4 of this
Offer to Purchase. UNDER NO
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<PAGE> 7
CIRCUMSTANCES WILL INTEREST BE PAID BY PURCHASER, REGARDLESS OF ANY EXTENSION OF
THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted
representing more Shares than are tendered, certificates representing such
unpurchased or untendered Shares will be returned, without expense to the
tendering stockholder (or, in the case of Shares delivered by book-entry
transfer to a Book-Entry Transfer Facility, such Shares will be credited to an
account maintained within such Book-Entry Transfer Facility), as promptly as
practicable after the expiration, termination or withdrawal of the Offer.
If, prior to the Expiration Date, Purchaser increases the price being paid
for Shares accepted for payment pursuant to the Offer, such increased
consideration will be paid to all stockholders whose Shares are purchased
pursuant to the Offer.
Purchaser reserves the right to transfer or assign, in whole or from time
to time in part, to one or more of its affiliates the right to purchase Shares
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve Purchaser of its obligations under the Offer or prejudice the rights of
tendering stockholders to receive payment for Shares validly tendered and
accepted for payment.
3. PROCEDURE FOR TENDERING SHARES
Valid Tenders. For Shares to be validly tendered pursuant to the Offer, a
properly completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof), with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message, and any other required documents, must
be received by the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase prior to the Expiration Date, or the tendering
stockholder must comply with the guaranteed delivery procedure set forth below.
In addition, either (i) certificates representing such Shares must be received
by the Depositary along with the Letter of Transmittal or such Shares must be
tendered pursuant to the procedure for book-entry transfer set forth below, and
a Book-Entry Confirmation must be received by the Depositary, in each case prior
to the Expiration Date or (ii) the guaranteed delivery procedure set forth below
must be complied with. No alternative, conditional or contingent tenders will be
accepted. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE
WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY
TO THE DEPOSITARY.
Book-Entry Transfer. The Depositary will make a request to establish an
account with respect to the Shares at each Book-Entry Transfer Facility for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in a Book-Entry
Transfer Facility's system may make book-entry delivery of Shares by causing a
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at a Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. Although delivery of Shares may be
effected through book-entry at a Book-Entry Transfer Facility prior to the
Expiration Date, (i) the Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer, and
any other required documents, must, in any case, be transmitted to and received
by the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase prior to the Expiration Date or (ii) the guaranteed delivery
procedures described below must be complied with.
Signature Guarantee. Signatures on the Letter of Transmittal must be
guaranteed by a member in good standing of the Securities Transfer Agents
Medallion Program, or by any other bank, broker, dealer, credit union, savings
association or other entity which is an "eligible guarantor institution," as
such term is defined in Rule 17Ad-15 under the Exchange Act (each of the
foregoing being referred to as an "Eligible Institution" and, collectively, as
"Eligible Institutions"), unless the Shares tendered thereby are tendered (i) by
a registered holder of Shares who has not completed either the box labeled
"Special Delivery Instructions" or the box labeled "Special Payment
Instructions" on the Letter of Transmittal or (ii) for the account of any
Eligible Institution. If the certificates evidencing Shares are registered in
the name of a person or persons
5
<PAGE> 8
other than the signer of the Letter of Transmittal, or if payment is to be made,
or delivered to, or certificates for unpurchased Shares are to be issued or
returned to, a person other than the registered owner or owners, then the
tendered certificates must be endorsed or accompanied by duly executed stock
powers, in either case signed exactly as the name or names of the registered
owner or owners appear on the certificates, with the signatures on the
certificates or stock powers guaranteed by an Eligible Institution as provided
in the Letter of Transmittal. See Instructions 1 and 5 to the Letter of
Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all of
the following guaranteed delivery procedures are duly complied with:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser herewith, is
received by the Depositary, as provided below, prior to the Expiration
Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation), together with a properly completed
and duly executed Letter of Transmittal (or a manually signed facsimile
thereof), and any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message, and any other documents required
by the Letter of Transmittal are received by the Depositary within three
New York Stock Exchange, Inc. ("NYSE") trading days after the date of
execution of such Notice of Guaranteed Delivery. A "trading day" is any day
on which the NYSE is open for business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE OPTION AND RISK OF THE STOCKHOLDER TENDERING SUCH SHARES. IF DELIVERY
IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for such Shares or a Book-Entry
Confirmation, (ii) a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile thereof), with all required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message and
(iii) any other documents required by the Letter of Transmittal.
Backup Federal Income Tax Withholding. To prevent backup federal income tax
withholding with respect to payment of the Offer Price of Shares purchased
pursuant to the offer, each tendering stockholder must provide the Depositary
with his or her correct taxpayer identification number ("TIN") and certify that
such stockholder is not subject to backup federal income tax withholding by
completing the Substitute Form W-9 included in the Letter of Transmittal. See
Section 5 of this Offer to Purchase and Instruction 8 of the Letter of
Transmittal. If the stockholder is a nonresident alien or foreign entity not
subject to back-up withholding, the stockholder must give the Depositary a
completed Form W-8 Certificate of Foreign Status prior to receipt of any
payments.
Determination of Validity. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by Purchaser, in its sole discretion,
and its determination will be final and binding on all parties. Purchaser
reserves the absolute right to reject any or all tenders of any Shares that are
determined by it not to be in proper form or the acceptance of or payment for
which may, in the opinion of Purchaser, be unlawful.
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<PAGE> 9
Purchaser also reserves the absolute right to waive any of the conditions of the
Offer, or any defect or irregularity in the tender of any Shares. Purchaser's
interpretation of the terms and conditions of the Offer (including the Letter of
Transmittal and the Instructions to the Letter of Transmittal) will be final and
binding on all parties. No tender of Shares will be deemed to have been validly
made until all defects and irregularities have been cured or waived. None of
Purchaser, the Parents, the Dealer Manager, the Depositary, the Information
Agent or any other person will be under any duty to give notification of any
defects or irregularities in tenders or incur any liability for failure to give
any such notification.
Appointment. By executing the Letter of Transmittal as set forth above
(including through delivery of an Agent's Message), a tendering stockholder
irrevocably appoints designees of Purchaser as such stockholder's
attorneys-in-fact and proxies, each with full power of substitution, in the
manner set forth in the Letter of Transmittal, to the full extent of such
stockholder's right with respect to the Shares tendered by such stockholder and
accepted for payment by Purchaser (and any and all other Shares or other
securities or rights issued or issuable in respect of such Shares on or after
July 14, 1997). All such powers of attorney and proxies shall be considered
coupled with an interest in the tendered Shares. This appointment is effective
upon the acceptance for payment of the Shares by Purchaser. Upon acceptance for
payment, all prior powers of attorney and proxies given by the stockholder with
respect to such Shares or other securities or rights will, without further
action, be revoked and no subsequent proxies may be given or written consent
executed (and, if given or executed, will not be deemed effective). The
designees of Purchaser will, with respect to the Shares and other securities or
rights, be empowered to exercise all voting and other rights of such stockholder
as they in their sole judgment deem proper in respect of any annual or special
meeting of the Company's stockholders, any adjournment or postponement thereof,
actions by written consent in lieu of such meeting or otherwise. Purchaser
reserves the right to require that, in order for Shares to be deemed validly
tendered, immediately upon Purchaser's acceptance for payment of such Shares,
Purchaser must be able to exercise full voting, consent and other rights with
respect to such Shares and the other securities or rights issued or issuable in
respect of such Shares, including voting at any meeting of stockholders (whether
annual or special or whether or not adjourned) or acting by written consent
without a meeting in respect of such Shares.
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering stockholder's acceptance of the terms and
conditions of the Offer, as well as the tendering stockholder's representation
and warranty that (i) such stockholder has the full power and authority to
tender, sell, assign and transfer the tendered Shares (and any and all other
Shares or other securities issued or issuable in respect of such Shares on or
after July 14, 1997), and (ii) when the same are accepted for payment by
Purchaser, Purchaser will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claims. Purchaser's acceptance for payment of Shares tendered
pursuant to the Offer will constitute a binding agreement between the tendering
stockholder and Purchaser upon the terms and subject to the conditions of the
Offer.
4. WITHDRAWAL RIGHTS
Except as otherwise provided in this section, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment pursuant to the Offer, may also be withdrawn at any time
after Monday, September 15, 1997. If purchase of or payment for Shares is
delayed for any reason or if Purchaser is unable to purchase or pay for Shares
for any reason, then, without prejudice to Purchaser's rights under the Offer,
tendered Shares may be retained by the Depositary on behalf of Purchaser and may
not be withdrawn except to the extent that tendering stockholders are entitled
to withdrawal rights as set forth in this section, subject to Rule 14e-1(c)
under the Exchange Act, which provides that no person who makes a tender offer
shall fail to pay the consideration offered or return the securities deposited
by or on behalf of security holders promptly after the termination or withdrawal
of the Offer.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase. Any notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name in which the certificates representing such
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<PAGE> 10
Shares are registered, if different from that of the person who tendered the
Shares. If certificates for Shares to be withdrawn have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and, unless such Shares have been tendered by an
Eligible Institution, the signatures on the notice of withdrawal must be
guaranteed by an Eligible Institution. If Shares have been tendered pursuant to
the procedure for book-entry transfer set forth in Section 3 of this Offer to
Purchase, any notice of withdrawal must also specify the name and number of the
account at the applicable Book-Entry Transfer Facility to be credited with the
withdrawn Shares. All questions as to the form and validity (including time of
receipt) of notices of withdrawal will be determined by Purchaser, in its sole
discretion, and its determination will be final and binding on all parties. None
of Purchaser, the Parents, the Dealer Manager, the Depositary, the Information
Agent or any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification.
Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be retendered at any subsequent time prior to the
Expiration Date by following any of the procedures described in Section 3 of
this Offer to Purchase.
5. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal federal income tax consequences
of the Offer and the Merger to holders whose Shares are purchased pursuant to
the Offer or whose Shares are converted to cash in the Merger (including
pursuant to the exercise of appraisal rights). This summary does not, however,
purport to be a complete analysis of all the potential tax effects of the Offer
and the Merger. This summary is based on current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), currently applicable Treasury
regulations and judicial and administrative decisions and rulings. There can be
no assurance that the Internal Revenue Service ("IRS") will not take a contrary
view, and no ruling from the IRS has been or will be sought. Legislative,
judicial or administrative changes may be forthcoming that could alter or modify
the statements and conclusions set forth herein. Any such changes or
interpretations could be retroactive and could affect the tax consequences to
holders whose Shares are purchased pursuant to the Offer. The discussion does
not purport to deal with all aspects of United States federal income taxation
that may affect any particular holder in light of such holder's individual
investment circumstances, and is not intended for certain types of holders
subject to special treatment under the United States federal income tax law
(e.g., holders of Shares in whose hands Shares are not capital assets, holders
who received their Shares pursuant to the exercise of employee stock options or
otherwise as compensation, financial institutions, broker-dealers, insurance
companies, tax-exempt organizations, nonUnited States persons or persons who
hold their Shares as part of a hedge, straddle, or conversion transaction).
EACH HOLDER OF SHARES SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO
DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH HOLDER AND THE
PARTICULAR TAX EFFECTS OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION
AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER INCOME TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger
(including pursuant to the exercise of appraisal rights) will be a taxable
transaction for federal income tax purposes under the Code, and also may be a
taxable transaction under applicable state, local, foreign and other income tax
laws. In general, for federal income tax purposes, a holder of Shares will
recognize gain or loss equal to the difference between his or her adjusted tax
basis in the Shares sold pursuant to the Offer or converted to cash in the
Merger and the amount of cash received therefor. Gain or loss must be determined
separately for each block of Shares (i.e., Shares acquired at the same cost in a
single transaction) sold pursuant to the Offer or converted to cash in the
Merger. Such gain or loss generally will be capital gain or loss provided the
Shares are a capital asset in the hands of the stockholders and will be
long-term capital gain or loss if, on the date of sale (or, if applicable, the
date of the Merger), the Shares were held for more than one year. If a holder
exercises such holder's appraisal rights and receives an amount treated as
interest for federal income tax purposes, such amount will be taxed as ordinary
income.
8
<PAGE> 11
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" at a rate of 31%. Backup withholding generally applies if
the holder (a) fails to furnish such holder's social security number or tax
payer identification number ("TIN"), (b) furnishes an incorrect TIN, (c) is
subject to backup withholding due to previous failures to file a federal income
tax return including reportable interest or dividend payments, or (d) under
certain circumstances, fails to provide a certified statement, signed under
penalties of perjury, that such holder is not subject to backup withholding due
to previous failures to file a federal income tax return including reportable
interest or dividend payments. Backup withholding is not an additional tax, but
rather it is an advance tax payment that is subject to refund if and to the
extent that it results in an overpayment of tax. Certain taxpayers are generally
exempt from backup withholding, including corporations and financial
institutions. Certain penalties apply for failure to furnish correct information
and for failure to include reportable payments in income. Each holder of Shares
should consult with his or her own tax advisor as to his or her qualification
for exemption from backup withholding and the procedure for obtaining such
exemption. Tendering holders of Shares may be able to prevent backup withholding
by completing the Substitute Form W-9 included in the Letter of Transmittal. See
Section 3 of this Offer to Purchase.
6. PRICE RANGE OF SHARES; DIVIDENDS
The Shares are listed and trade on The American Stock Exchange (the "AMEX")
under the symbol "KTZ." The following table sets forth for the quarterly fiscal
periods ended March 31, June 30, October 31 and December 31 the closing high and
low sale prices per Share as reported by AMEX for each of the quarters since the
commencement of the Company's initial public offering of 5,500,000 Shares in
April 1995.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal 1995:
Second Quarter............................................ $ 171/8 $145/8
Third Quarter............................................. 217/8 157/8
Fourth Quarter............................................ 201/4 147/8
Fiscal 1996:
First Quarter............................................. $ 173/4 $131/2
Second Quarter............................................ 161/2 131/2
Third Quarter............................................. 141/8 83/8
Fourth Quarter............................................ 111/2 81/8
Fiscal 1997:
First Quarter............................................. $ 11 $ 65/16
Second Quarter............................................ 415/16 67/8
Third Quarter (through July 18, 1997)..................... 107/8 61/8
</TABLE>
On July 11, 1997, the last full trading day prior to the date of the
execution of the Merger Agreement, the closing sale price per Share as reported
by the AMEX was $7 5/8. HOLDERS OF SHARES ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR THE SHARES.
The Company has publicly stated it has not paid, and does not intend to
pay, any cash dividends on the Shares. See Section 14 of this Offer to Purchase.
7. CERTAIN EFFECTS OF THE TRANSACTION
Board of Directors of the Company. Promptly upon Purchaser's acceptance for
payment of and payment for Shares tendered pursuant to the Offer in accordance
with the Offer, and from time to time thereafter as Shares are acquired by
Purchaser or its affiliates, Purchaser intends to take such steps as are
necessary to assure that Purchaser's designees constitute a majority or more of
the directors on the Katz Board, and is entitled, pursuant to the terms of the
Merger Agreement, to designate such number of directors, rounded up to the next
whole number, but at no time prior to the Effective Time more than three fewer
than the total number of directors on the Katz Board, equal to that number of
directors which equals the product of the total
9
<PAGE> 12
number of directors on the Katz Board (giving effect to the directors elected by
Purchaser) multiplied by the percentage that such number of Shares so accepted
for payment and paid for or otherwise acquired or owned by any of Purchaser or
the Parents bears to the number of Shares then outstanding. In such
circumstance, no prior notice of such action to shareholders of the Company or
the consent of any shareholder other than Purchaser is required to take such
action.
Effect upon the Shares. The purchase of the Shares by Purchaser pursuant to
the Offer will reduce the number of Shares that might otherwise trade publicly
and will reduce the number of holders of Shares, which could adversely affect
the liquidity and market value of the remaining Shares held by holders of Shares
other than Purchaser. According to the Company's 10-K for the fiscal year ended
December 31, 1996, as of March 20, 1997 there were approximately 348 holders of
record of the Shares.
Depending upon the number of Shares purchased pursuant to the Offer and the
aggregate market value of any Shares not purchased pursuant to the Offer, the
Shares may no longer meet the standards for continued listing on the AMEX and
may be delisted from the AMEX. The published guidelines of the AMEX indicate
that the AMEX would consider delisting the Shares if, among other things, the
number of publicly held Shares (exclusive of holdings of officers, directors,
controlling shareholders or other family or concentrated holdings) is less than
200,000 or if the total number of round lot public shareholders is less than 300
or if the aggregate market value of publicly held shares is less than
$1,000,000.
To the extent the Shares are delisted from any exchange, the market for
Shares could be adversely affected. If the AMEX were to delist the Shares, it is
possible that the Shares would continue to trade on another exchange or in the
over-the-counter market and that price quotations for the Shares would be
reported by other sources. The extent of the public market for the Shares and
the availability of such quotations would, however, depend on the number of
holders of Shares remaining at such time, the interest in maintaining a market
in the Shares on the part of securities firms, the possible termination of
registration of the Shares under the Exchange Act, as described below, and other
factors. Purchaser cannot predict whether the reduction in the number of Shares
that might otherwise trade publicly, if any, effected by the Offer would have an
adverse or beneficial effect on the market price for or marketability of the
Shares or whether it would cause future market prices to be greater or less than
the Offer Price.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the Commission
if there are fewer than 300 holders of record of Shares. It is the intention of
Purchaser to seek to cause an application for such termination to be made as
soon after consummation of the Offer as the requirements for termination of
registration of the Shares are met. If such registration were terminated, the
Company would no longer legally be required to disclose publicly in proxy
materials distributed to stockholders the information which it now must provide
under the Exchange Act or to make public disclosure of financial and other
information in annual, quarterly and other reports required to be filed with the
Commission under the Exchange Act; and the executive officers and directors of
the Company and beneficial owners of more than 10% of the Shares would no longer
be subject to the "short-swing" insider trading reporting and profit recovery
provisions of the Exchange Act. Furthermore, if such registration were
terminated, persons holding "restricted securities" of the Company may be
deprived of their ability to dispose of such securities under Rule 144 or 144A
promulgated under the Securities Act of 1933, as amended.
If registration of the Shares is not terminated and the Shares are not
delisted prior to the Merger, then the Shares will cease to be listed on the
AMEX and the registration of the Shares under the Exchange Act will be
terminated following the Merger.
Tax Sharing Agreement. In the event the Offer is consummated and Purchaser
owns 80% or more (but less than 100%) of the outstanding Shares, Evergreen may
determine to enter into a federal income tax sharing agreement with the Company
on customary terms. Such agreement is expected to provide for the filing of
consolidated federal income tax returns and would require the Company to make
payments to Purchaser in amounts equal to their tax liabilities computed on a
separate basis. If Evergreen generates losses or credits which actually reduce
the Company's consolidated federal income tax liability or which would have
resulted in a refund on a separate company basis during the period the Company
is a member of the affiliated group, such agreement would generally require the
Company to pay to Evergreen the amount of such
10
<PAGE> 13
reduction or refund. Such agreements would also address the timing of such
payments, the resolution of tax disputes and other similar matters.
8. CERTAIN INFORMATION CONCERNING THE COMPANY
Except as otherwise set forth herein, the information concerning the
Company contained in this Offer to Purchase, including financial information,
has been furnished by the Company or has been taken from or based upon publicly
available documents and records on file with the Commission and other public
sources. Although none of Purchaser, Chancellor, Evergreen or the Dealer Manager
has any knowledge that would indicate that statements contained herein based
upon such documents are untrue, none of Purchaser, Chancellor, Evergreen or the
Dealer Manager assumes any responsibility for the accuracy or completeness of
the information concerning the Company, furnished by the Company, or contained
in such documents and records or for any failure by the Company to disclose
events which may have occurred or may affect the significance or accuracy of any
such information but which are unknown to Purchaser, Chancellor, Evergreen or
the Dealer Manager.
According to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 (the "Company's 10K"), the Company is a holding company
which, through its wholly owned subsidiary Katz Media Corporation, a Delaware
Corporation ("KMC"), operates a full service media representation firm in the
United States, serving multiple types of electronic media, with leading market
shares in the representation of radio and television stations and cable
television systems. The Company is exclusively retained by over 2,000 radio
stations, 340 television stations and 1,500 cable systems to sell national spot
advertising air time throughout the United States. National spot advertising is
commercial air time sold by a radio or television station or cable system to
advertisers located outside its local market. The Company conducts its business
through 65 sales offices, located strategically throughout the United States,
serving broadcast and cable clients located in over 200 dominant market areas
("DMAs"). The Company represents at least one radio or one television station in
each of the 50 largest DMAs and in over 97% of all DMAs. The Company's client
stations include network owned, network affiliated and independent stations.
The Company's client stations have a combined national spot advertising
market share, measured as a percentage of gross billings of media representation
firms for 1996, of approximately 53% of the United States spot radio market
(based upon a market size estimated at approximately $1.5 billion for the same
period), approximately 24% of the United states spot television market (based
upon a market size estimated at approximately $7.0 billion for the same period)
and approximately 59% of the United States cable market (based upon a market
size estimated at approximately $200 million for the same period).
Set forth below is certain summary consolidated financial data with respect
to the Company excerpted or derived in part from financial information contained
in the Company's 10-K and the Company's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1997 (the "Company's 10-Q"). More comprehensive
financial information is included in such reports and other documents filed by
the Company with the Commission. For the periods covered by such reports, the
following summary is qualified in its entirety by reference to such reports and
such other documents and all the financial information (including any related
notes) contained therein. Such reports and other documents should be available
for inspection and copies thereof should be obtainable in the manner set forth
below.
11
<PAGE> 14
KATZ MEDIA GROUP, INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------------- ---------------------------
1997 1996 1996 1995
----------- ----------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating Revenues, net...................... $37,238 $38,282 $183,239 $184,667
Operating expenses........................... 36,325 36,634 152,585 154,992
Operating Income............................. 913 1,648 30,654 29,675
Interest expense........................... 5,380 4,975 20,901 25,042
Income (Loss) before income tax provision
(benefit) and extraordinary item........... (4,467) (3,327) 9,753 4,633
Income tax benefit......................... (3,983) (2,120) 7,381 4,495
Extraordinary item -- loss on early
extinguishment of debt, net of income
taxes................................... -- -- (6,993) (801)
Net Loss..................................... ($484) ($1,207) ($4,621) ($663)
PER SHARE DATA:
Income (Loss) before income tax provision
(benefit) and extraordinary item........ -- -- $.17 $.01
Extraordinary item -- loss on early
extinguishment of debt.................. -- -- (.50) (.06)
Net Loss..................................... ($.04) ($.09) ($.33) ($.05)
</TABLE>
<TABLE>
<CAPTION>
AT AT AT AT
MARCH 31, MARCH 31, DECEMBER 31, DECEMBER 31,
1997 1996 1996 1995
----------- ----------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total Assets............................... $436,426 $389,159 $435,731 $377,633
Total Liabilities.......................... 335,259 282,897 332,752 270,192
Stockholders' Equity....................... 101,167 106,262 102,979 107,441
</TABLE>
Projections
The Parents have received certain non-public information from the Company
(the "Projections"). The non-public information included certain financial
projections for the fiscal years 1997 through 2001, including income statement
and balance sheet projections which are summarized below. The Projections do not
take into account any of the potential effects of the transactions contemplated
by the Offer and the Merger.
12
<PAGE> 15
KATZ MEDIA GROUP, INC.
SELECTED PROJECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------
1997 1998 1999 2000 2001
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating revenues, net................ $181,226 $195,796 $209.946 $226,670 $239,560
Total operating expenses............... 158.231 167,484 177,614 185,664 188,131
Operating Income....................... 22,995 28,312 32,132 42,766 51,429
Interest expense....................... 21,093 20,463 19,702 17,346 15,236
Income before income tax provision..... 1,902 7,849 12,430 25,440 36,193
Income tax provision................... 3,380 5,871 7,795 13,259 17,775
Net Loss............................... $ (1,478) $ 1,978 $ 4,635 $ 12,181 $ 18,418
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------
1997 1998 1999 2000 2001
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Assets:
Total assets......................... $431,355 $410,550 $386,153 $365,478 $346,765
Liabilities and Stockholders' Equity:
Total current liabilities............ 66,314 51,292 40,979 40,843 41,153
Deferred income on sales of station
contracts......................... 3,350 2,526 1,526 776 276
Long-term debt....................... 219,000 218,500 204,500 176,500 143,500
Other liabilities -- primarily
related to contracts.............. 42,520 35,883 31,963 27,993 24,052
-------- -------- -------- -------- --------
Total liabilities.................... 331,184 308,001 278,968 246,112 208,981
Stockholder's equity................... $100,171 $102,548 $107,185 $119,366 $137,784
======== ======== ======== ======== ========
</TABLE>
THE PROJECTIONS SET FORTH ABOVE WERE NOT PREPARED BY ANY OF THE PARENTS,
PURCHASER OR WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH PUBLISHED
GUIDELINES OF THE COMMISSION OR THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC
ACCOUNTANTS FOR PROSPECTIVE FINANCIAL INFORMATION. NET REVENUES OF THE COMPANY
ARE INHERENTLY UNPREDICTABLE DUE TO THE NATURE AND TERMS OF THE COMPANY'S
REPRESENTATION AGREEMENTS. IN GENERAL, CLIENTS MAY TERMINATE SUCH AGREEMENTS
PRIOR TO THEIR STATED TERMINATION. MOST OFTEN A TERMINATION OCCURS IN CONNECTION
WITH A CHANGE IN STATION OR SYSTEM OWNERSHIP, AND THE LEVEL AND FREQUENCY OF
CHANGES IN OWNERSHIP AND TERMINATION OF THE COMPANY'S REPRESENTATION AGREEMENTS
HAVE INCREASED AS A RESULT OF THE LIBERALIZATION OF REGULATION AFFECTING
BROADCAST PROPERTIES. THE PROJECTIONS ARE INCLUDED HEREIN SOLELY BECAUSE SUCH
INFORMATION WAS FURNISHED TO THE PARENTS IN JULY 1997. ACCORDINGLY, THE
INCLUSION OF THE PROJECTIONS IN THIS OFFER TO PURCHASE SHOULD NOT BE REGARDED AS
AN INDICATION THAT THE PARENTS, PURCHASER OR THE COMPANY OR THEIR RESPECTIVE
FINANCIAL ADVISORS, OR THEIR RESPECTIVE OFFICERS AND DIRECTORS, CONSIDER SUCH
INFORMATION TO BE ACCURATE, RELIABLE OR ACHIEVABLE, AND NONE OF SUCH PERSONS OR
ENTITIES ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY THEREOF.
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files periodic reports, proxy statements and
other information with the Commission relating to its business, financial
condition and other matters. The Company is required to disclose in such proxy
statements certain information, as of particular dates, concerning the Company's
directors and officers, their remunera-
13
<PAGE> 16
tion, stock options granted to them, the principal holders of the Company's
securities and any material interests of such persons in transactions with the
Company. Such reports, proxy statements and other information may be inspected
at the public reference facilities maintained by the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of
the Commission located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60601. The Commission also maintains a World Wide Web site on
the internet at http://www.sec.gov that contains reports and other information
regarding registrants that file electronically with the Commission.
9. CERTAIN INFORMATION CONCERNING THE PARENTS AND PURCHASER
Evergreen. Evergreen owns and operates radio stations across the United
States, including stations in 11 of the nation's 12 largest radio markets. At
July 15, 1997, after giving effect to certain announced transactions in the
industry and as measured by gross revenues, Evergreen is the owner and operator
of the nation's second largest radio broadcasting group. The principal executive
offices of Evergreen are located at 433 East Las Colinas Boulevard, Suite 1130,
Irving, Texas 75039.
At July 15, 1997, Evergreen's portfolio of stations consisted of 42 radio
stations (28 FM and 14 AM) in the nation's 12 largest radio markets, including
clusters of between three and five FM stations ("superduopolies") in six of
these markets. Evergreen's portfolio is diversified in terms of format, target
demographics, geographic location and phase of development.
Set forth below is certain selected historical consolidated financial
information with respect to Evergreen excerpted or derived from financial
information contained in Evergreen's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996 and Evergreen's Quarterly Report on Form 10-Q for
the quarterly period ended March 31, 1997. More comprehensive financial
information is included in such reports and other documents filed by Evergreen
with the Commission, and the following summary is qualified in its entirety by
reference to such reports and such other documents and all the financial
information (including any related notes) contained therein.
EVERGREEN MEDIA CORPORATION
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------- -------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues......................... $109,516 $162,931 $293,850 $ 53,371 $81,897
Operating expenses................... 102,120 149,154 275,890 61,594 81,329
Operating income (loss).............. 7,396 13,777 17,960 (8,223) 568
Interest expense..................... 13,809 19,199 37,527 8,973 8,053
Other (income) expense............... (6,452) 236 (477) -- (165)
Income (loss) before income taxes and
extraordinary item................. 39 (5,658) (19,090) (17,196) (7,320)
Income tax expense (benefit)......... -- 192 (2,896) (2,923) (1,309)
Extraordinary loss on early
extinguishment of debt............. 3,585 -- -- -- --
Net income (loss).................... (3,546) (5,850) (16,194) (14,273) (6,011)
Net loss per common share............ $ (0.64) $ (0.52) $ (0.66) $ (0.55) $ (0.14)
</TABLE>
Evergreen is subject to the informational requirements of the Exchange Act
and in accordance therewith files periodic reports and other information with
the Commission relating to its business, financial condition and other matters.
Such reports and other information are available for inspection and copying at
the offices of
14
<PAGE> 17
the Commission in the same manner as set forth with respect to the Company in
Section 8 of this Offer to Purchase.
Chancellor. Chancellor owns and operates radio stations in 14 large markets
across the United States. At July 15, 1997, Chancellor's portfolio of stations
consisted of 55 radio stations (38 FM and 17 AM) in its 14 markets, including
superduopolies in six of these markets. Chancellor employs a wide variety of
programming formats, including country, oldies, news/talk, adult contemporary,
progressive album rock, contemporary hit radio, sports and classical. The
principal executive offices of Chancellor are located at 12655 North Central
Expressway, Suite 405, Dallas, Texas 75243.
Set forth below is certain selected historical consolidated financial
information with respect to Chancellor excerpted or derived from financial
information contained in Chancellor's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, as amended on Form 10 K/A dated May 15, 1997, and
Chancellor's Quarterly Report on Form 10-Q for the quarterly period ended March
31, 1997. More comprehensive financial information is included in such reports
and other documents filed by Chancellor with the Commission, and the following
summary is qualified in its entirety by reference to such reports and such other
documents and all the financial information (including any related notes)
contained therein.
CHANCELLOR BROADCASTING COMPANY
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------- -------------------
1994 1995 1996 1996 1997
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.............................. $26,317 $ 64,322 $178,401 $ 25,642 $ 55,854
Operating expenses........................ 19,214 53,896 140,732 22,975 51,014
Operating income (loss)................... 7,103 10,426 37,669 2,667 4,840
Interest expense.......................... 5,247 18,115 35,704 7,647 11,420
Other (income) expense.................... (20) 42 68 6 (1,632)
Income (loss) before income taxes and
extraordinary item...................... 1,876 (7,731) 1,897 (4,986) (4,948)
Income tax expense (benefit).............. 1,164 3,800 4,612 939 (400)
Dividends and accretion on preferred stock
of subsidiary........................... -- -- 11,557 1,660 8,135
Extraordinary loss on early extinguishment
of debt................................. 818 -- 4,177 4,646 2,749
Net income (loss)....................... (106) (11,531) (18,449) (12,231) (15,432)
Net loss per common share................. (0.02) (1.30) (2.10) (2.18) (0.90)
</TABLE>
Steven Dinetz, President and Chief Executive Officer of Chancellor, owns of
record a total of 800 Shares. Except with respect to the Shares owned by Mr.
Dinetz, or as otherwise set forth in this Offer to Purchase, none of Chancellor,
Evergreen or Purchaser, nor, to the best knowledge of Chancellor, Evergreen and
Purchaser, any of the persons listed in Annex I hereto owns or has any right to
acquire any Shares and none of them has effected any transaction in the Shares
during the past 60 days.
Except as set forth in this Offer to Purchase, none of Chancellor,
Evergreen or Purchaser, nor, to the best knowledge of Chancellor, Evergreen and
Purchaser, any of the persons listed in Annex I hereto has any contract,
arrangement, understanding or relationship with any other person with respect to
any securities of the Company, including, without limitation, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any securities of the Company, joint ventures, loan or option arrangements,
puts or calls, guaranties of loans, guaranties against loss or the giving or
withholding of proxies. Except as set forth in this Offer to Purchase, none of
Chancellor, Evergreen or Purchaser, nor, to the best knowledge of Chancellor,
15
<PAGE> 18
Evergreen and Purchaser, any of the persons listed in Annex I hereto has had any
transactions with the Company, or any of its executive officers, directors or
affiliates that would require reporting under the rules of the Commission.
Except as set forth in this Offer to Purchase, there have been no contacts,
negotiations or transactions between any of Chancellor, Evergreen or Purchaser,
or their respective subsidiaries, or, to the best knowledge of Chancellor,
Evergreen and Purchaser, any of the persons listed in Annex I hereto, on the one
hand, and the Company or its executive officers, directors or affiliates, on the
other hand, concerning a merger, consolidation or acquisition, tender offer or
other acquisition of securities, election of directors, or a sale or other
transfer of a material amount of assets.
Certain Business Relationships Between the Parents. Chancellor was
incorporated in late 1994 to acquire 11 radio stations from affiliates of
American Media Inc. and to acquire Chancellor Communications Corporation, which
owned and operated two radio stations in Sacramento, California. Since its
foundation, Chancellor has grown largely through the acquisition of radio
station groups. The pace of Chancellor's acquisitions accelerated in 1996 after
the passage of the Telecommunications Act of 1996 (the "1996 Act"), which
relaxed restrictions applicable to the ownership of radio stations within a
single market. Since January 1, 1997, Chancellor has completed (i) the
acquisition of 24 radio stations for a net purchase price of $1.06 billion, (ii)
the exchange of three stations for one station and $33 million in cash, and
(iii) the sale of four stations for $71.3 million.
Evergreen was incorporated in 1988 and initially owned and operated six
radio stations. From its formation through 1994, Evergreen expanded principally
through internal growth and through the acquisition of individual radio stations
or pairs of stations. In 1994, the Board of Directors of Evergreen (the
"Evergreen Board") conducted a broad-ranging review of Evergreen's strategic
alternatives in light of the ongoing consolidation in the radio broadcasting
industry. As a result of Evergreen's review of its strategic alternatives, the
Evergreen Board determined to pursue a strategy of substantial expansion of
Evergreen's ownership of major market radio stations through acquisitions of, or
mergers with, other radio station groups and, to a lesser extent, through
opportunistic acquisitions of individual major market stations where
appropriate. In 1995 and 1996, Evergreen aggressively pursued this acquisition
strategy, acquiring, on a net basis, 11 radio stations in 1995 (seven FM and
four AM) and 12 radio stations in 1996 (ten FM and two AM), including the
acquisition of seven FM and four AM stations through Evergreen's May 1995
acquisition of Broadcasting Partners Inc. and the acquisition of nine FM and
three AM radio stations through Evergreen's January 1996 acquisition of Pyramid
Communications, Inc. Since January 1, 1997, Evergreen has completed (i) the
acquisition of 17 radio stations for a net purchase price of $1.12 billion, (ii)
the exchange of five stations for two stations, and (iii) the sale of six radio
stations for $291.8 million.
As part of its growth strategy Chancellor routinely analyzes acquisition
opportunities. Similarly, in furtherance of Evergreen's expansion strategy,
Evergreen's management routinely analyzes the potential acquisition of broadcast
properties and holds discussions with other broadcasters concerning potential
business combinations or the potential acquisition of individual stations or
groups of stations. In 1996 and early 1997, Evergreen's senior management and
advisors held preliminary discussions with a number of major market radio
operators, including Chancellor and Viacom International, Inc. ("Viacom"),
concerning possible acquisitions of major market radio groups by Evergreen and
other potential transactions. During the fourth quarter of 1996, Evergreen was
informed that Chancellor's management and principal stockholder were considering
a potential sale of Chancellor, and Evergreen held preliminary discussions with
Chancellor concerning the possible acquisition of Chancellor by Evergreen for
cash. After further preliminary discussions with other radio station operators,
the Board of Directors of Chancellor (the "Chancellor Board") determined that it
would be in the best interests of Chancellor's stockholders for Chancellor to
continue to pursue its strategy of growth through strategic acquisitions. In
late 1996 and during January 1997, management teams from both Evergreen and
Chancellor separately contacted Viacom regarding possible acquisitions of radio
stations held by Viacom. Neither Evergreen nor Chancellor was able to reach
agreement with Viacom on such a transaction, and Viacom subsequently advised
Evergreen and Chancellor that it planned to conduct an auction for the sale of
its radio properties.
16
<PAGE> 19
Further discussions between the principals of Chancellor and Evergreen were
held in January and February 1997 regarding a possible business combination
involving the merger of Chancellor and Evergreen. During this time,
representatives of each of Evergreen and Chancellor also held discussions with
Credit Suisse First Boston, Viacom's financial advisor, regarding Viacom's
auction of its radio stations. On February 13, 1997, Evergreen submitted a bid
for the Viacom properties, and on February 14, 1997, Chancellor submitted a bid
for the Viacom properties. From February 14 through February 16, Evergreen and
Chancellor each conducted further discussions with Viacom regarding a definitive
agreement that would govern such an acquisition. On February 15, 1997,
Chancellor's legal advisors circulated to Evergreen and its outside legal
counsel an initial draft of a form of agreement and plan of merger relating to a
business combination between Chancellor and Evergreen. On February 16, 1997,
Viacom accepted Evergreen's proposal to acquire all of Viacom's radio stations.
Evergreen and Chancellor continued discussions regarding a possible business
combination and, on February 18, 1997, Chancellor and Evergreen entered into a
non-binding memorandum of understanding (the "Memorandum of Understanding")
providing for the merger of Chancellor into Evergreen, subject to, among other
things, the completion of negotiations concerning a definitive agreement and
plan of merger. Also on February 18, the parties publicly announced the
acquisition of the Viacom stations by Evergreen and the terms of the Memorandum
of Understanding between Chancellor and Evergreen. Chancellor and Evergreen
entered into a definitive agreement and plan of merger on February 19, 1997 (the
"Chancellor/Evergreen Merger Agreement"), as well as a joint purchase agreement
regarding the acquisition of the Viacom stations by Evergreen and Chancellor
should such acquisition be completed prior to the consummation of the
transactions contemplated by the Chancellor/Evergreen Merger Agreement. The
Viacom acquisition was in fact completed by Evergreen and Chancellor on July 2,
1997.
Evergreen and Chancellor are currently finalizing an amendment and
restatement of the Chancellor/ Evergreen Merger Agreement to modify the legal
structure of the transaction in order to, among other things, enhance
flexibility in connection with future debt or equity financings. Pursuant to the
Chancellor/Evergreen Merger Agreement as it is expected to be amended and
restated, (i) Chancellor will merge with and into Evergreen Mezzanine Holdings
Corporation ("EMHC"), a direct, wholly owned subsidiary of Evergreen, with EMHC
remaining as the surviving corporation and (ii) thereafter, Chancellor Radio
Broadcasting Company, a direct subsidiary of Chancellor ("CRBC"), will merge
with and into Evergreen Media Corporation of Los Angeles, an indirect, wholly
owned subsidiary of Evergreen ("EMCLA"), with EMCLA remaining as the surviving
corporation (collectively, the "Chancellor/Evergreen Merger"). Following the
Chancellor/Evergreen Merger, Evergreen will be renamed Chancellor Media
Corporation, EMHC will be renamed Chancellor Mezzanine Holdings Corporation and
EMCLA will be renamed Chancellor Media Corporation of Los Angeles. If the
Chancellor/Evergreen Merger is consummated, (i) each share of Evergreen Class A
Common Stock and Evergreen Class B Common Stock will be converted into one share
of Common Stock of Chancellor Media Corporation, (ii) each share (other than
treasury shares, which will be canceled) of Chancellor Class A Common Stock and
Chancellor Class B Common Stock will be converted into 0.9091 shares of Common
Stock of Chancellor Media Corporation, (iii) each share of 7% Convertible
Preferred Stock of Chancellor (other than shares for which appraisal rights have
been exercised) will be converted into one share of preferred stock of
Chancellor Media Corporation with identical powers, preferences and relative
rights, (iv) each share of 12 1/4% Series A Senior Cumulative Exchangeable
Preferred Stock of CRBC (other than shares for which appraisal rights have been
exercised) will be converted into one share of preferred stock of Chancellor
Media Corporation of Los Angeles with identical powers, preferences and relative
rights, and (v) each share of 12% Junior Exchangeable Preferred Stock of CRBC
(other than shares for which appraisal rights have been exercised) will be
converted into one share of preferred stock of Chancellor Media Corporation of
Los Angeles with identical powers, preferences and relative rights. In addition,
(i) Evergreen will assume currently outstanding options to purchase shares of
Chancellor Class A Common Stock and (ii) EMCLA will assume CRBC's $200,000,000
aggregate principal amount 8 3/4% Senior Subordinated Notes due 2007 and CRBC's
$200,000,000 aggregate principal amount 9 3/8% Senior Subordinated Notes due
2004. The Chancellor/Evergreen Merger Agreement contains various customary
representations and warranties made by each of the parties and contains various
customary covenants. The respective obligations of Evergreen, Chancellor, EMHC,
EMCLA and CRBC to consummate the Chancellor/ Evergreen Merger are subject to the
satisfaction or waiver, at or prior to the effective time of the Chancellor/
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Evergreen Merger, of a number of conditions. Pursuant to the
Chancellor/Evergreen Merger Agreement, each of Evergreen and Chancellor has
agreed to, among other things and subject to certain conditions and exceptions,
as soon as practicable following the date of the Chancellor/Evergreen Merger
Agreement, prepare and file with the Commission a Joint Proxy
Statement/Prospectus and a Registration Statement on Form S-4 (the "Registration
Statement") and to use its best efforts to have the Registration Statement
declared effective under the Securities Act of 1933, as amended, as promptly as
practicable after such filing, in order to facilitate prompt consummation of the
Chancellor/Evergreen Merger and the other transactions contemplated by the
Chancellor/Evergreen Merger Agreement. Although there can be no assurances,
Evergreen and Chancellor expect to complete the Chancellor/Evergreen Merger in
the third quarter of 1997.
After giving effect to the Chancellor/Evergreen Merger and other
transactions of Evergreen and Chancellor which are currently pending, Chancellor
Media Corporation will own and operate a radio station portfolio consisting of
98 radio stations (69 FM and 29 AM) in 21 large markets, including 58 stations
serving the nation's 12 largest radio revenue markets. Chancellor Media
Corporation's radio station portfolio will include a total of 13 superduopolies,
with eight in the 12 largest radio markets, and will include the first or second
ranked station cluster in terms of revenue share in 14 of its 21 markets.
Purchaser. Purchaser is a Delaware corporation and presently a wholly owned
subsidiary of Evergreen. To date, Purchaser has not conducted any business other
than that incident to its formation and the commencement of the Offer.
Chancellor has the right and obligation to acquire certain common stock
interests in Purchaser as described below in "-- The Joint Bidding Agreement".
The principal executive offices of Purchaser are located at 433 East Las Colinas
Boulevard, Suite 1130, Irving, Texas 75039.
The Joint Bidding Agreement.
Purchaser is presently a wholly owned subsidiary of Evergreen. Pursuant to
a Joint Bidding Agreement, dated as of July 14, 1997 (the "Joint Agreement"),
Chancellor and Evergreen have agreed that, immediately prior to acceptance of
the Shares for payment in the Offer, to respectively contribute (the "Capital
Contributions"), 20% and 80% of the funds required to be paid by Purchaser
pursuant to the Offer and the Merger (exclusive of the payment of transaction
fees and expenses), plus an additional $20 million (in the aggregate, the
"Equity Contribution Amount"). In exchange for Chancellor's Capital
Contribution, it will be issued non-voting common stock representing 20% of the
issued and outstanding shares of Purchaser.
Evergreen also has granted Chancellor and HM2/Chancellor L.P. certain
rights (the "Rights") to acquire from Evergreen an additional number of shares
of voting common stock of Purchaser or its successor holding company such that
upon exercise of such Rights, Chancellor would own voting shares representing
49.9% of the issued and outstanding shares of common stock of Purchaser or its
successor holding company and HM would own .1% of such shares. The exercise
price of the Rights is, in the case of Chancellor, 99.67% of the Base Amount (as
defined below) and, in the case of HM, .3% of the Base Amount. The Rights are
exercisable only during the 120 day period, if any, following the termination of
the Chancellor/Evergreen Merger Agreement, and such exercise will be subject to
any applicable waiting periods under the HSR Act. If the Rights are not
exercised within that period, Evergreen has the right (for 120 days) to acquire
the shares of Purchaser previously purchased by Chancellor at a price equal to
the amount of Chancellor's original Capital Contribution, upon which purchase
such shares would become voting common stock. Upon exercise of the Rights by
Chancellor and HM, all outstanding non-voting common stock would become voting
common stock.
The Joint Agreement also provides for (1) joint control over certain
matters arising under the Merger Agreement, (2) equal sharing by Chancellor and
Evergreen of the costs, expenses and liabilities associated with the Offer and
Merger, and (3) establishment of a stockholders agreement which (a) would create
a board for Purchaser or its successor holding company which, and if the Rights
are exercised, will be divided equally between designees of Chancellor and
Evergreen and (b) would require a supermajority stockholder approval for certain
corporate actions prior to the exercise of the Rights, and (4) establishment of
certain tax agreements.
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As used herein, "Base Amount" means an amount equal to the sum of the
Evergreen Funded Amount plus the Bridge Fee, plus an additional amount equal to
the Equity Funding Rate on the sum of the foregoing amounts and accruing from
the Equity Contribution Date to, but not including, the date of exercise of the
Rights.
"Bridge Fee" means an amount equal to 1% of the Evergreen Funded Amount.
"Evergreen Funded Amount" means an amount equal to 30% of the Equity
Contribution Amount.
"Equity Funding Rate" means the weighted average cost of funds under the
revolving credit component of the Senior Credit Facility of EMCLA during the
period(s) as to which such rate is calculated.
10. SOURCE AND AMOUNT OF FUNDS
The total amount of funds required by Purchaser to purchase all of the
Shares pursuant to the Offer is estimated to be approximately $155.0 million.
Fees and expenses related to the Offer and the Merger payable by Purchaser are
estimated not to exceed an additional $10.0 million. Purchaser plans to obtain
all funds needed for the Offer and the Merger, together with certain additional
funds that may be used by the Company for working capital and other purposes
following consummation of the Offer, through capital contributions from the
Parents. The total amount of these capital contributions is presently expected
to be approximately $180.0 million, of which approximately $144.0 million is
expected to be contributed to Purchaser by Evergreen and approximately $36.0
million is expected to be contributed to Purchaser by Chancellor.
Evergreen plans to obtain funds for its capital contribution to Purchaser
through borrowings under the Senior Credit Facility, dated as of April 25, 1997,
as amended, among EMCLA and the banks and other financial institutions named
therein (the "Senior Credit Facility"). It is currently anticipated that EMCLA
will borrow the necessary funds under the reducing revolving credit component of
the Senior Credit Facility and distribute such funds to Evergreen in the form of
a dividend and that Evergreen in turn will contribute such funds as a capital
contribution to Purchaser. The Senior Credit Facility provides for a total
current commitment of $1.75 billion, consisting of a $1.25 billion reducing
revolving credit facility and a $500.0 million term loan facility. The Senior
Credit Facility matures June 30, 2005, subject to periodic amortization
requirements commencing September 30, 2000. As of the date of this Offer to
Purchase, there was approximately $460.0 million outstanding under the reducing
revolving credit facility portion of the Senior Credit Facility and $500.0
million outstanding under the term loan portion of the Senior Credit Facility.
Loans under the Senior Credit Facility bear interest at a rate equal to, at
EMCLA's option, the Prime Rate in effect from time to time plus the Applicable
Margin or the Eurodollar Rate as determined by the administrative agent under
the Senior Credit Facility plus the Applicable Margin (as each of the Prime
Rate, the Eurodollar Rate and the Applicable Margin is defined in the Senior
Credit Facility). The Applicable Margin is calculated based on the total
leverage of EMCLA and Evergreen at the end of the most recently ended fiscal
quarter and ranges from 0% to 1.0% in the case of loans at the Prime Rate and
from 0.4% to 2.0% in the case of loans at the Eurodollar Rate. As of the date of
this Offer to Purchase, the weighted average interest rate on loans made to
EMCLA under the Senior Credit Facility was 6.8% per annum.
The Senior Credit Facility is secured by (i) a pledge of all capital stock
owned by EMCLA and its subsidiaries, (ii) a pledge of all capital stock of EMCLA
owned by Evergreen, (iii) a pledge of all debt and equity securities of persons
engaged in certain businesses purchased by EMCLA and its subsidiaries, (iv) a
collateral assignment of all partnership interests held by the subsidiaries of
EMCLA, (v) a collateral assignment of all trust interests held by the
subsidiaries of EMCLA, (vi) a downstream guarantee provided by Evergreen and
(vii) upstream guarantees provided by the subsidiaries of EMCLA. The Senior
Credit Facility has been amended to permit an intermediate holding company to be
interposed between Evergreen and EMCLA, whereupon the downstream guarantee of
the Senior Credit Facility by Evergreen would be released and replaced by a
non-recourse pledge of Evergreen's equity interest in the intermediate holding
company. In this event, the intermediate holding company would issue a guarantee
of EMCLA's obligations under the Senior Credit Facility and would pledge its
stock in EMCLA to secure the guarantee. This amendment is
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expected to become effective prior to consummation of the Offer, but it is not
effective as of the date of this Offer to Purchase.
The Senior Credit Facility contains customary restrictive covenants, which,
among other things and with certain exceptions, limit the ability of EMCLA 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 enter new lines of business.
The financial institutions providing the Senior Credit Facility are Toronto
Dominion (Texas), Inc., The Bank of New York, NationsBank of Texas, N.A., Union
Bank of California, Bankers Trust Company, Senior Debt Portfolio, Merrill Lynch
Senior Floating Rate Fund, Inc., Van Kampen American Capital Prime Rate Income
Trust, Bank of America NT&SA, The First National Bank of Boston, Banque Paribas,
Barclays Bank PLC, Compagnie Financiere de CIC et de L'Union Europeenne, Credit
Lyonnais, New York Branch, Credit Suisse First Boston, The Dai-Ichi Kangyo Bank,
Ltd., KeyBank National Association, Societe Generale, Bank of Montreal,
Corestates Bank, N.S., Fleet National Bank, The Fuji Bank, Limited, Houston
Agency, The Long-Term Credit Bank of Japan, Limited, New York Branch, Mellon
Bank, N.A., PNC Bank, National Association, Sanwa Bank, Dallas Agency, Bank of
Nova Scotia, The Sumitomo Bank, Ltd., Suntrust Bank, Central Florida, N.A., ABN
AMRO Bank, N.V. - Houston Agency, Dresdner Bank AG, New York Branch, Summit
Bank, The Tokai Bank, Limited, Union Bank of Switzerland, New York Branch, Wells
Fargo Bank (Texas), National Association, Bank of Ireland, Caisse Nationale de
Credit Agricole, Crestar Bank, Merita Bank, Ltd., New York Branch, National City
Bank, The Royal Bank of Scotland PLC, Riggs Bank, N.A., The Sumitomo Trust &
Banking Co., Ltd., New York Branch, The Yasuda Trust and Banking Co., Ltd.,
National Bank of Canada, City National Bank, Bank of Scotland, Banque Francaise
du Commerce Exterieur, Heller Financial, Goldman Sachs Credit Partners, L.P.,
Morgan Guaranty Trust Company of New York and Bear Stearns Investment Products,
Inc.
Although no definitive plan or arrangement for repayment of borrowings
under the Senior Credit Facility has been made, Evergreen anticipates such
borrowings will be repaid with internally generated funds and from other sources
which may include the proceeds of future bank refinancings or the public or
private sale of debt or equity securities. No decision has been made concerning
the method to be used to repay the borrowings under the Senior Credit Facility.
Such decision will be made based on Evergreen's review from time to time of the
advisability of particular actions, as well as prevailing interest rates,
financial and other economic conditions and such other factors as Evergreen may
deem appropriate.
Chancellor plans to obtain funds for its capital contribution to Purchaser
through borrowings under CRBC's Amended and Restated Credit Agreement (the "CRBC
Credit Agreement") with Bankers Trust Company, as managing agent (the "Agent"),
Goldman Sachs Credit Partners, L.P., as documentation agent, NationsBank of
Texas, N.A., and Toronto Dominion (Texas), Inc., as syndication agents, and the
other institutions party thereto (the "Banks"). It is anticipated that CRBC will
borrow the necessary funds under the revolving loan facility of the CRBC Credit
Agreement and distribute such funds to Chancellor, who will in turn contribute
such funds as a capital contribution to Purchaser. The CRBC Credit Agreement
provides for total loans of up to $750.0 million, consisting of a $400.0 million
term loan facility (the "CRBC Term Loan Facility") and a $350.0 million
revolving loan facility (the "CRBC Revolving Loan Facility" and together with
the CRBC Term Loan Facility, the "CRBC Credit Facility"). In order for
Chancellor to, among other things, use the proceeds of such borrowings to fund
Chancellor's capital contribution to Purchaser and participate in the Offer and
the Merger, (i) CRBC is required to obtain the consent of the lenders party to
the CRBC Credit Agreement and (ii) Chancellor is required to obtain the consent
of the lenders party to Chancellor's Senior Credit Agreement, of which Bankers
Trust New York Corporation is the agent. Chancellor intends promptly to seek
such consents following the date hereof. The CRBC Term Loan Facility provides
for a term loan that matures 7 years after July 2, 1997, subject to scheduled
annual principal payments, payable quarterly, along with provisions for both
voluntary and mandatory prepayments based upon the occurrence of specified
events. The CRBC Revolving Loan Facility provides for revolving credit loans
that mature 7 years after July 2, 1997, with the entire outstanding amount of
the CRBC Revolving Loan Facility to be repaid on that date. As of the date of
this Offer to Purchase, there was approximately $19.8 million
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outstanding under the CRBC Revolving Loan Facility and $400.0 million
outstanding under the CRBC Term Loan Facility.
The Loans under the CRBC Credit Agreement bear interest at a rate equal to,
at CRBC's option (i) the Base Rate (as defined in the CRBC Credit Agreement) in
effect from time to time plus the Applicable Margin (as defined in the CRBC
Credit Agreement) (the "Base Rate Loans"), or (ii) the Eurodollar Rate (as
defined in the CRBC Credit Agreement) (as adjusted for maximum reserves) as
determined by the Agent for the respective interest period plus the Applicable
Margin (the "Eurodollar Loans"). The Applicable Margin may range from 0.375% to
1.125% per annum for Base Rate Loans and from 0.375% to 2.125% per annum for
Eurodollar Loans, with the Applicable Margin to be reduced based upon CRBC's
Leverage Ratio (as defined in the CRBC Credit Agreement). As of the date of this
Offer to Purchase, the weighted average interest rate on loans outstanding under
the CRBC Credit Agreement was 7.8% per annum.
The CRBC Credit Agreement is secured by (i) a first priority perfected
pledge of all capital stock and notes owned by CRBC and its subsidiaries and
(ii) a first priority perfected security interest in all other assets (including
receivables, contracts, contract rights, securities, patents, trademarks, other
intellectual property, inventory, equipment and real estate) owned by CRBC and
its subsidiaries, excluding Federal Communication Commission licenses and
certain leasehold interests and partnership interests. The CRBC Credit Agreement
also is guaranteed by Chancellor and by the subsidiaries of CRBC, and
Chancellor's guarantee is secured by a first priority perfected pledge of the
common stock of CRBC.
The CRBC Credit Agreement contains customary restrictive covenants, which,
among other things and with certain exceptions, limit the ability of CRBC to
incur additional indebtedness and liens in connection therewith, enter into
certain transactions with affiliates, pay dividends, consolidate, merge or
effect certain asset sales, issue additional stock, make capital expenditures
and enter new lines of business, other than with the consent of the lenders
thereunder. CRBC is also required to satisfy certain financial covenants, which
require it to maintain specified financial ratios and to comply with certain
financial tests. The CRBC Credit Agreement contains customary events of default,
including, without limitation, (i) the default in the payment of principal of
any loan when due or the default in the payment of interest or fees, (ii)
default in the performance or observance of certain representations, warranties,
covenants and agreements contained in the CRBC Credit Agreement, (iii) certain
defaults under other agreements relating to indebtedness, and (iv) the
acceleration of certain indebtedness of Chancellor or its subsidiaries prior to
maturity.
The financial institutions providing the CRBC Credit Agreement are Bankers
Trust Company, NationsBank of Texas, N.A., Toronto Dominion (Texas), Inc.,
Goldman Sachs Credit Partners, L.P., ABN AMRO Bank N.V.-Houston Agency, Bank of
America National Trust and Savings Association, Bank of Montreal, The Bank of
New York, The Bank of Nova Scotia, Banque Francaise du Commerce Exterieur,
Banque Nationale de Paris, Banque Paribas, Barclays Bank PLC, Caisse Nationale
de Credit Agricole, The Chase Manhattan Bank, Compagnie Financiere de CIC et de
L'Union Europeenne, CoreStates Bank, N.A., Citibank, N.A., Credit Suisse First
Boston, KZH-ING-1 Corporation, Societe Generale, Fleet Bank, N.A., Merrill Lynch
Senior Floating Rate Fund, Inc., First Union National Bank, Heller Financial,
Inc., The Industrial Bank of Japan, Limited, New York Branch, The Fuji Bank,
Limited, BankBoston, N.A., Van Kampen American Capital Prime Rate Income Trust,
Union Bank of California, N.A., Paribas Capital Funding, LLC, Mellon Bank, N.A.,
The Mitsubishi Trust and Banking Corporation, Octagon Credit Investors Loan
Portfolio, The Long Term Credit Bank of Japan, Limited, The Dia Ichi Kangyo
Bank, Ltd. New York Branch and Merita Bank Ltd New York Branch.
All amounts outstanding under the CRBC Credit Agreement will be refinanced
by EMCLA under the Senior Credit Facility upon consummation of the
Chancellor/Evergreen Merger. The Senior Credit Facility provides that the
reducing revolving credit facility and the term loan facility under the Senior
Credit Facility will be increased to $1.60 billion and $900.0 million,
respectively, upon such consummation. Chancellor has made no definitive plan or
arrangement for repayment of borrowings under the CRBC Credit Agreement in the
event the Chancellor/Evergreen Merger is not consummated.
In addition to the funds required by Purchaser in connection with the
consummation of the Offer, Purchaser expects that concurrently therewith Katz
Media Corporation ("KMC"), an indirect, wholly owned
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subsidiary of the Company, may be required to refinance its senior secured
credit facility (the "KMC Credit Facility"). The KMC Credit Facility has a
maximum committed amount of $180.0 million, of which approximately $126.0
million is outstanding on the date of this Offer to Purchase. In addition, KMC
has outstanding $100.0 million in aggregate principal amount of 10 1/2% Senior
Subordinated Notes due 2007 (the "KMC Notes"), which contain a "change of
control" provision that, following consummation of the Offer, will require KMC
to offer to repurchase all of the KMC Notes at a purchase price equal to 101% of
the aggregate principal amount thereof plus accrued and unpaid interest to the
date of repurchase. The Parents and Purchaser are in active negotiations with a
number of financial institutions regarding the financing that may be required to
replace the KMC Credit Facility and to fund any required repurchase of KMC Notes
pursuant to the Change of Control provision. In that regard, Evergreen has
received from Toronto Dominion (Texas), Inc., NationsBank of Texas, N.A. and
Union Bank of California, N.A. (collectively, the "Prospective Lenders") a
letter to the effect that the Prospective Lenders are "highly confident" that,
subject to certain qualifications, (i) they can successfully arrange a credit
facility of not less than $180.0 million for KMC to replace the KMC Credit
Facility and (ii) they can successfully arrange a "backstop" facility to fund
any required repurchases of the KMC Notes. However, this letter does not
constitute an offer, agreement or commitment to underwrite or lend, and,
accordingly, as of the date hereof, the Parents do not have in place binding
commitments to provide any financing that may be required to replace the KMC
Credit Facility or to repurchase any KMC Notes tendered pursuant to the Change
of Control provision described above.
The Offer is not subject to any financing contingency.
11. BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH
THE COMPANY
Background of the Offer. By letter dated February 24, 1997, Thomas F.
Olson, President and Chief Executive Officer of the Company, contacted Mr.
Thomas O. Hicks, Chairman of Hicks, Muse, Tate & Furst Incorporated ("Hicks
Muse"), an affiliate of Chancellor, and suggested a meeting with representatives
of the Company. On March 20, 1997, at the Dallas offices of Hicks Muse, a
meeting took place which included Mr. Olson, Mr. Stewart O. Olds, President of
the Katz Radio Group, Mr. Hicks and Mr. Eric C. Neuman, Senior Vice President of
Hicks Muse and Vice President of Chancellor. Mr. Scott K. Ginsburg, Chairman of
the Board and Chief Executive Officer of Evergreen, and Mr. Matthew E. Devine,
Chief Financial Officer of Evergreen, joined the meeting later that day. During
the March 20 meeting, the possibility of a business combination among the
Company, Evergreen and Chancellor was discussed.
Following the March 20 meeting, Mr. Olson forwarded certain information
(including a draft confidentiality agreement) to Mr. Neuman.
On April 7, 1997, Hicks Muse signed a confidentiality agreement with the
Company in which it agreed to keep confidential information it received in the
course of evaluating the Company and negotiating with representatives of the
Company in connection with a possible transaction between the Company and Hicks
Muse or Chancellor.
On Monday, June 16, 1997, Mr. Ginsburg, Mr. Olds and Mr. George C. Toulas,
Senior Executive Vice President of Chancellor, met in Dallas to discuss the
Company and a possible transaction with the Company that would include
Chancellor Media Corporation, the entity to be formed after the
Chancellor/Evergreen Merger. See Section 9 of this Offer to Purchase for
information regarding the Chancellor/Evergreen Merger. At Mr. Olds' request, Mr.
Ginsburg agreed to contact Mr. Thompson Dean a Managing Director of DLJ Merchant
Banking Partners, L.P. ("DLJ MBP"), which, together with related investors, owns
approximately 49% of the Shares.
On Monday, June 23, 1997, Mr. Ginsburg had a telephone conversation with
Mr. Dean and Mr. Louis Friedman of Donaldson, Lufkin & Jenrette Securities
Corporation in which a business combination among the Company and Chancellor
Media Corporation was discussed. Several conversations took place thereafter
between Mr. Ginsburg, Mr. Dean and Mr. Friedman regarding the terms and
structure of a business combination that would involve a sale of the Company to
the Parents.
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On July 1, 1997, a meeting was held at the offices of Hicks Muse in Dallas.
In attendance at such meeting were Mr. Olson, Mr. Olds, Mr. Ginsburg, Mr.
Neuman, Mr. Hicks, Mr. Steven Dinetz, President and Chief Executive Officer of
Chancellor, Mr. Richard E. Vendig, Senior Vice President, Chief Financial &
Administrative Officer and Treasurer of the Company, and Mr. Friedman. At this
meeting management of the Company gave a presentation regarding the Company, the
parties discussed a possible transaction among the Company, Evergreen and
Chancellor, and the Parents conducted preliminary due diligence.
On July 2 and 3, various conversations took place among Mr. Ginsburg, Mr.
Dean and Mr. Friedman regarding the proposed terms of a transaction between the
Company and the Parents. On July 3, 1997, counsel to the Company, initiated
communications with counsel to the Parents and on Monday, July 7, 1997
distributed a first draft of a merger agreement.
On Monday, July 7, 1997, representatives of the Parents arrived at the
offices of counsel to the Company to conduct due diligence review on behalf of
the Parents. On July 7, 1997, the Katz Board met, at which meeting
representatives of DLJ MBP, the Company's financial advisor, reported to the
Katz Board about the July 1, 1997 meeting and the terms and conditions of the
preliminary proposal made by the Parents to acquire the Company, subject to a
number of conditions. The Katz Board also discussed the status of various other
potential transactions that the Company was considering and the process for
further discussion.
During the week of July 7, meetings and discussions were held regarding the
structure and the terms of a possible transaction between the Company and the
Parents among the representatives of the Company and the Parents, including
their respective financial advisors and counsel. The Company also retained
Credit Suisse First Boston to undertake an analysis and provide an opinion to
the Katz Board as to the fairness to the stockholders of the Company, from a
financial point of view, of the consideration to be received in the transaction
with the Parents that was under review by the Company.
On Saturday, July 12, counsel to the Parents met with representatives of
the Company at the New York offices of counsel to the Company to negotiate
additional terms for the transaction and to prepare a merger agreement.
Discussions among the Parents and their representatives and the Company and its
representatives were held throughout the day on Saturday, July 12, 1997 and on
Sunday, July 13, 1997. On the afternoon of Sunday, July 13, the Chancellor Board
approved an acquisition of the Company by the Parents.
On the evening of July 13, the Katz Board held another meeting to discuss
the most recent developments with the Parents and the potential courses of
action. The Katz Board further discussed the open issues. In addition, Credit
Suisse First Boston made an oral presentation of their evaluation of the
Company. In light of the open issues, the Katz Board agreed to reconvene the
next morning.
On the morning of Monday, July 14, 1997, the Evergreen Board met with their
financial advisor and their legal advisors, and approved the acquisition of the
Company. Further negotiations regarding the terms of such acquisition took place
throughout the day on Monday, July 14.
During the morning of July 14, the Katz Board also met and discussed the
pending negotiations with the Parents and the outstanding issues. The Katz Board
agreed to meet again as soon as developments warranted. Counsel to the Parents
and the Company continued to negotiate various other issues concerning
provisions of the Merger Agreement and Stockholder Agreements throughout the
day. The Katz Board reconvened in the early afternoon to discuss the fully
negotiated offer. Credit Suisse First Boston orally stated their views regarding
the fairness of the consideration to be paid to the stockholders of the Company.
The entire Katz Board and the directors of the Company who are neither employees
of the Company nor employees of any affiliate of the Selling Stockholders then
separately and unanimously approved the Offer, the Merger, the Merger Agreement,
the Stockholder Tender Agreement and the Management Tender Agreement, determined
that the Offer and the Merger are fair to and in the best interests of the
Company's stockholders and recommended that the Company's stockholders accept
the Offer and tender their Shares pursuant to the Offer.
The final Merger Agreement was signed on the evening of Monday July 14,
1997. That same evening the Parents and the Company issued a joint press release
regarding their agreement.
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Certain Business Relationships Between the Parents and the Company. The
Company currently maintains exclusive representation agreements (the "Parent
Representation Agreements") with Evergreen, Chancellor and Capstar Broadcasting
Partners, Inc., an affiliate of Chancellor ("Capstar"). Pursuant to such Parent
Representation Agreements, the Company has been retained to sell commercial air
time on behalf of Evergreen, Chancellor and Capstar and the radio stations
owned, respectively, by Evergreen, Chancellor and Capstar to national
advertising companies outside their respective local markets. Evergreen is the
Company's largest client. The Parent Representation Agreements between the
Company and Evergreen (the "Evergreen Agreements") were entered into beginning
in 1995 and currently cover approximately 46 radio stations owned by Evergreen.
Approximate annual revenues under the Evergreen Agreements for 1995, 1996 and
the first five months of 1997 were $3,148,177, $8,555,702 and $3,782,160,
respectively. The Parent Representation Agreements between the Company and
Chancellor (the "Chancellor Agreements") were entered into beginning in 1996 and
currently cover approximately 51 radio stations owned by Chancellor. Approximate
annual revenues under the Chancellor Agreements for 1996 and the first five
months of 1997 were $3,785,172 and $1,575,379, respectively. The Parent
Representation Agreements between the Company and Capstar (the "Capstar
Agreements") were entered into beginning in 1996 and currently cover
approximately 139 radio stations owned by Capstar. Approximate revenues under
these contracts with Capstar for 1996 and the first five months of 1997 were
$786,984 and $356,260, respectively.
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY
Purpose. The Offer is being made pursuant to the Merger Agreement. The
purpose of the Offer, the Merger and the Merger Agreement is to enable the
Parents to acquire joint control of, and to jointly own the entire equity
interest in, the Company. Upon consummation of the Merger, the Company (as the
Surviving Corporation) will become a jointly owned subsidiary of the Parents.
Upon consummation of the Merger, the Parents intend to manage and operate the
Surviving Corporation as a new independent operating unit. The Company will
ultimately, upon consummation of the Chancellor/Evergreen Merger, become a
wholly owned subsidiary of the surviving corporation of the Chancellor/Evergreen
Merger.
Under the DGCL and the Company's Certificate of Incorporation, the approval
of the Katz Board, and the affirmative vote of the holders of a majority of the
outstanding Shares are required to approve and adopt the Merger Agreement and
the transactions contemplated thereby, including the Merger. Section 203 of the
DGCL prevents certain "business combinations" with an "interested stockholder"
(generally, any person who owns or has the right to acquire 15% or more of a
corporation's outstanding voting stock) for a period of three years following
the time such person became an interested stockholder unless, among other
things, prior to the time the interested stockholder became such, the board of
directors of the corporation approved either the business combination or the
transaction in which the interested stockholder became such.
The Katz Board is comprised of nine members, including Messrs. Bob Marbut
and Steven J. Gilbert, who are neither employees of the Company nor employees of
any affiliates of the Selling Stockholders. The Katz Board has unanimously
approved the Offer, the Merger, the Merger Agreement and the Stockholder
Agreements and the transactions contemplated thereby for the purposes of Section
203 of the DGCL. Unless the Merger is consummated pursuant to the "short-form"
merger provisions under the DGCL described below (in which case no further
corporate action by the stockholders of the Company will be required to complete
the Merger), the only remaining required corporate action of the Company will be
the approval of the Merger by the affirmative vote of the holders of a majority
of the Shares. If the Minimum Condition is satisfied, Purchaser will have the
ability to approve and adopt the Merger Agreement by virtue of its ownership of
a majority of the Shares without the affirmative vote of any other shareholder
of the Company.
Plans for the Company after the Offer. Once the Offer is consummated, if
permitted by the AMEX and the Exchange Act, it is the intention of Purchaser and
the Parents to seek to cause the Company to file applications to withdraw the
Shares from listing on the AMEX and to terminate the registration of the Shares
under the Exchange Act. See Section 7 of this Offer to Purchase. In the event
that the Shares are no longer included in the AMEX, it is possible that the
Shares would continue to trade in the over-the-counter market and that price
quotations would be reported by other sources. The extent of the public market
for the Shares and the availability of such quotations would, however, depend on
the number of holders of Shares remaining
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at such time, the interests in maintaining a market in Shares on the part of
securities firms, the possible termination of registration of shares under the
Exchange Act, as described below, and other factors. To the extent the Shares
are delisted from the AMEX, the market for Shares could be adversely affected.
Further, none of Purchaser, Chancellor or Evergreen can predict whether the
reduction in the number of Shares that might otherwise trade publicly, if any,
effected by the Offer would have an adverse or beneficial effect on the market
price for or marketability of the Shares or whether it would cause future market
prices to be greater or less than the Offer Price. See Section 7 of this Offer
to Purchase.
If, following consummation of the Offer, Purchaser owns 90% or more of the
outstanding Shares, Purchaser intends, and the Parents intend to cause
Purchaser, to consummate the Merger as a "short form" merger pursuant to the
DGCL. Under such circumstances, the approval of any holder of Shares other than
Purchaser, or of the Katz Board, would not be required. Assuming outstanding
Options are converted, pursuant to the Merger Agreement, to cash rather than
exercised and tendered, upon the tender of Shares owned by the Selling
Stockholders, Purchaser will need to purchase an additional 5,241,296 Shares
pursuant to the Offer to reach the 90% ownership level necessary to effect such
a "short-form" merger.
Following consummation of the Offer and upon the satisfaction of the
Minimum Condition, Purchaser will have the power as a majority stockholder of
the Company to take such steps as are necessary to assure that designees of
Purchaser or either of the Parents constitute a majority or more of the
directors on the Katz Board, including the designation of new directors to the
Katz Board, and thus to indirectly seek to effect the Merger. Pursuant to the
terms of the Merger Agreement, Purchaser shall be entitled, promptly upon the
acceptance for payment of, and payment by Purchaser, in accordance with the
Offer, for Shares pursuant to the Offer, and from time to time thereafter as
Shares are acquired by Purchaser, to designate such number of directors, rounded
up to the next whole number, but at no time prior to the Effective Time more
than three fewer than the total number of directors on the Katz Board, equal to
that number of directors which equals the product of the total number of
directors on the Katz Board (giving effect to the directors elected by
Purchaser) multiplied by the percentage that such number of Shares so accepted
for payment and paid for or otherwise acquired or owned by Purchaser or the
Parents bears to the number of Shares outstanding. After completion or
termination of the Offer, Purchaser reserves the right, but has no current
intention, to acquire or sell Shares in open market or negotiated transactions.
There can be no assurance that Purchaser will acquire such additional Shares in
such circumstances or over what period of time such additional Shares, if any,
might be acquired. As a consequence, no assurance can be given as to when
Purchaser will cause the Merger to be consummated, and similarly no assurance
can be given as to when the Merger Consideration will be paid to stockholders
who do not tender their Shares in the Offer.
Pursuant to the Merger, each then outstanding Share (other than Shares
owned by any of the Parents or Purchaser, Shares held in the treasury of the
Company and Shares owned by stockholders who perfect any available appraisal
rights under the DGCL) shall be converted into the right to receive an amount in
cash equal to the Merger Consideration, without interest thereon. Each share of
common stock of Purchaser issued and outstanding at the Effective Time shall be
converted into ten shares of the Surviving Corporation. All Shares that are
owned directly or indirectly by the Company, the Parents, Purchaser or any
subsidiary of either Chancellor or Evergreen at the Effective Time shall be
canceled, and no consideration shall be delivered in exchange therefor.
Purchaser is not offering to acquire outstanding Options in the Offer.
Pursuant to the Merger Agreement, all Options will be canceled in exchange for
the payment of the excess, if any, of the Offer Price over the exercise price
for such Options, less applicable income and employment taxes required to be
withheld.
Following the Merger, the Company will be a jointly owned subsidiary of
Chancellor and Evergreen. Chancellor and Evergreen intend to seek to retain key
management personnel of the Company following consummation of the Offer and the
Merger. Pursuant to the Merger Agreement, the officers of the Company
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation. Except as set forth herein, none of Chancellor, Evergreen
or Purchaser have discussed with the Company's key management personnel, nor
reached any agreement with respect to, the terms of such employment.
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Except as otherwise described in this Offer to Purchase, Purchaser has no
current plans or proposals which relate to or would result in: (a) an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation involving the Company; (b) a sale or transfer of a material amount
of assets of the Company; (c) any change in the Katz Board or management of the
Company, including, but not limited to, any plan or proposal to change the
number or term of directors, to fill any existing vacancy on the Katz Board or
any change any material term of the employment contract of any executive
officer; (d) any material change in the present dividend rate or policy or
indebtedness or capitalization of the Company; (e) any other material change in
the Company's corporate structure or business; (f) a class of equity securities
of the Company becoming eligible for termination of registration pursuant to
Section 12(g)(4) of the Exchange Act; or (g) the suspension of the Company's
obligation to file reports pursuant to Section 15(d) of the Exchange Act.
13. MERGER AGREEMENT, STOCKHOLDER TENDER AGREEMENT AND MANAGEMENT TENDER
AGREEMENT
The following is a summary of the material terms of the Merger Agreement,
the Stockholder Tender Agreement and the Management Tender Agreement. Such
summary is not a complete description of these agreements and is qualified in
its entirety by reference to the complete texts of the agreements, copies of
which are filed as exhibits to the Tender Offer Statement on Schedule 14D-1
filed jointly with the Commission by the Parents and Purchaser, and are
incorporated by reference herein. Capitalized terms not otherwise defined herein
shall have the meanings set forth in the agreements.
THE MERGER AGREEMENT
The Offer. The Merger Agreement provides for the making of the Offer by
Purchaser. The obligation of Purchaser to accept for payment and pay for Shares
tendered pursuant to the Offer is subject to the satisfaction of the Minimum
Condition and certain other conditions that are described in Section 15 of this
Offer to Purchase. Purchaser has agreed that, without the written consent of the
Company, it may not terminate the Offer, and, in addition, without such consent,
no change in the Offer may be made which decreases the Offer Price, decreases
the number of Shares being sought in the Offer, changes the form of
consideration to be paid in the Offer other than to add consideration to the
Offer, or otherwise amends the terms of the Offer (including any of the
conditions set forth in Section 15 of this Offer to Purchase) in a manner that
is adverse to the holders of Shares. Purchaser may, without the consent of the
Company, extend the Offer if, at the scheduled expiration date of the Offer, any
condition to Purchaser's obligation to purchase Shares has not been satisfied
for the period of time Purchaser deems reasonably necessary to satisfy such
condition. Subject to the above described limitation, the conditions described
in Section 15 of this Offer to Purchase are for the sole benefit of the Parents
and the Purchaser and may be asserted by the Parents or Purchaser regardless of
the circumstances giving rise to any such condition or may be waived by the
Parents or Purchaser, in whole or in part at any time and from time to time, in
their sole discretion. The Parents have agreed to make available sufficient
funds to consummate the Offer and the Merger in accordance with the provisions
of the Merger Agreement and to pay related fees and expenses and to refinance
certain indebtedness of the Company described in the Merger Agreement.
The Merger Agreement provides that promptly upon the purchase by Purchaser
of the Shares pursuant to the Offer, and from time to time thereafter, Purchaser
shall be entitled to designate such number of directors, rounded up to the next
whole number, on the Katz Board that equals the product of (i) the total number
of directors on the Katz Board but at no time prior to the Effective Time more
than three fewer than the total number of directors on the Katz Board, and (ii)
the percentage that the aggregate number of Shares so accepted for payment by
Purchaser bears to the total number of Shares then outstanding, and the Company
shall, at such time, cause the Purchaser's designees to be so elected.
The Merger. The Merger Agreement provides that, subject to the terms and
conditions therein, and in accordance with the DGCL, at the Effective Time,
Purchaser will be merged with and into the Company. The Merger will become
effective at such time as a Certificate of Merger or, if applicable, a
Certificate of Ownership and Merger, is filed with the Secretary of State of the
State of Delaware, or at such later time as is specified therein. As a result of
the Merger, all of the properties, rights, privileges and franchises of the
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Company and Purchaser will vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Purchaser will become the debts,
liabilities and duties of the Surviving Corporation.
At the Effective Time, by virtue of the Merger and without any action on
the part of the Company, the Parents or Purchaser (i) all Shares that are owned
directly or indirectly by the Company, the Parents, Purchaser or any Subsidiary
of Chancellor or Evergreen will be canceled, and no consideration will be
delivered in exchange therefor; (ii) each share of Common Stock, par value $.01
per share, of Purchaser then outstanding will be converted into ten shares of
Common Stock, par value $.01 per share, of the Surviving Corporation; and (iii)
each Share outstanding immediately prior to the Effective Time will, except as
otherwise provided in (i) above and except for Shares held by stockholders
exercising appraisal rights pursuant to Section 262 of the DGCL, be converted
into the right to receive $11.00 in cash or any higher price per Share that may
be paid pursuant to the Offer, without interest thereon.
The Merger Agreement provides that the Certificate of Incorporation of the
Company will be amended at the Effective Time to read as set forth in Exhibit A
to the Merger Agreement, and the By-Laws of Purchaser at the Effective Time will
be the By-Laws of the Surviving Corporation. The Merger Agreement also provides
that at the Effective Time certain directors of the Company will resign and the
other directors of the Company immediately prior to the Effective Time shall
remain in office and be the directors of the Surviving Corporation, and the
officers of the Company at the Effective Time will be the officers of the
Surviving Corporation.
Stock Options. The Compensation Committee of the Katz Board will adopt
resolutions which, as of the Effective Time, provide for the cancellation of all
Options in exchange for the payment of the excess, if any, of the Offer Price
over the exercise price therefor, net of applicable income and employment taxes,
if any.
Recommendation. The Company represents and warrants in the Merger Agreement
that the Katz Board has, by the requisite vote of such Board of Directors and a
separate unanimous approval of the directors of the Company who are neither
employees of the Company nor employees of any Affiliate of DLJ Merchant Banking
Partners, L.P.: (i) determined that the Offer and the Merger, taken together,
are fair to, and in the best interest of, the holders of Shares; (ii) approved
the Offer and the Merger subject to the terms and conditions set forth in this
Offer to Purchase; (iii) resolved to recommend that the stockholders of the
Company accept the Offer and tender their Shares thereunder to Purchaser and
approve the Merger; (iv) approved and adopted the Merger, the Merger Agreement,
the Stockholder Tender Agreement and the Management Tender Agreement. This
recommendation of the Katz Board may be withdrawn, if the Katz Board decides to
accept a Superior Proposal (as hereinafter defined). Any Such withdrawal,
modification or amendment may give rise to certain termination rights on the
part of the Parents and Purchaser, as described below.
Interim Agreements of the Parents, Purchaser and the Company. Pursuant to
the Merger Agreement, the Company has covenanted and agreed that, between the
date of the Merger Agreement and the date on which Purchaser controls a majority
of the Katz Board (the "Change in Majority Directors"), the business of the
Company and its subsidiaries will be conducted only in, and the Company and the
subsidiaries will not take any action except in, the ordinary course of business
consistent with past practice. The Merger Agreement provides that the Company
will use its reasonable best efforts to preserve intact the Company's and the
subsidiaries' present lines of business, maintain their respective rights and
preserve their respective present relationships with customers, suppliers, and
other persons with which it has significant business relations. Except as
otherwise contemplated by the Merger Agreement, prior to the Effective Time, the
Company will not, nor will it permit any of its subsidiaries or other entities
controlled by it, between the date of the Merger Agreement and the Change in
Majority Directors, without the prior written consent of the Parents, to:
(i) Amend or otherwise change its certificate of incorporation or
bylaws, or equivalent organizational documents, or amend any material term
of any outstanding security;
(ii) (a) Declare or pay any dividends on or make or become obligated
to make other distributions in respect of any of its capital stock, except
dividends by wholly-owned subsidiaries of the Company in the ordinary
course of business consistent with past practice, (b) split, combine or
reclassify any of its capital
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stock or issue or authorize or propose the issuance of any other securities
in respect of, in lieu of or in substitution for, shares of its capital
stock, except for any such transaction by a wholly-owned subsidiary of the
Company which remains a wholly-owned subsidiary after consummation of such
transaction, or (c) repurchase, redeem or otherwise acquire any shares of
its capital stock or any securities convertible into or exercisable for any
shares of its capital stock;
(iii) Issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock of any class or any
securities convertible into or exercisable for, or any rights, warrants or
options to acquire, any such shares or enter into any agreement with
respect to any of the foregoing and shall not amend any equity-related
awards issued pursuant to any employee benefit plans of the Company, other
than the issuance of capital stock or other equity interests upon the
exercise of stock options issued prior to the date of the Merger Agreement;
(iv) (a) Incur or suffer to exist any indebtedness for borrowed money
other than under the Company's credit facility in the ordinary course of
business or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire any debt securities of the
Company or any of the Subsidiaries, or guarantee any debt securities of
other Persons other than indebtedness of the Company or any subsidiary of
the Company to the Company or any wholly-owned subsidiary of the Company
and other than in the ordinary course of business; or (b) make any loans,
advances or capital contributions to, any other Person, other than loans or
advances to employees not in excess of $250,000 in the aggregate in the
ordinary course of business consistent with past practices, other than by
the Company or a wholly-owned subsidiary of the Company to or in the
Company or any wholly-owned subsidiary of the Company;
(v) (a) Increase the compensation payable or to become payable to any
of its executive officers or employees; (b) adopt or amend (except as may
be required by law) any bonus, profit sharing, compensation, stock option,
pension, retirement, deferred compensation, employment or other employee
benefit plan, agreement, trust, fund or other arrangement (including any
employee benefit plan of the Company) for the benefit or welfare of any
director, executive officer or other employees or former director or
employees; (c) grant any new or modified severance or termination
arrangement or increase or accelerate any benefits payable under its
severance or termination pay policies in effect on the date hereof, except
to employees other than to any executive officer and not to exceed $250,000
in the aggregate; (d) effectuate a "plant closing" or "mass layoff", as
those terms are defined in the Worker Adjustment and Retraining
Notification Act of 1988, affecting in whole or in part any site of
employment, facility, operating unit or employee of the Company or any of
the Company's subsidiaries; or (e) take any action with respect to the
grant of any severance or termination pay, or stay, bonus or other
incentive arrangement (other than pursuant to benefit plans and policies in
effect on the date of the Merger Agreement), except in each case (1) any
such increases or grants made in the ordinary course of business and in
accordance with past practice, or (2) as otherwise provided in the Merger
Agreement;
(vi) Except in the ordinary course of business, consistent with past
practice, acquire (including, without limitation, for cash or shares of
stock or partnership interests, by merger, consolidation or acquisition of
stock or assets) any interest in any Person or other business organization
or division thereof or any assets, or make any investment either by
purchase of stock or securities, contributions of capital or property
transfer, or purchase any property or assets of any other Person, other
than such acquisitions or investments which in the aggregate do not exceed
$100,000;
(vii) Make any commitments for capital or other expenditures in excess
of $2 million;
(viii) Acquire by purchase Representation Agreements for amounts,
individually or in the aggregate, exceeding $2 million;
(ix) Modify, terminate, or enter into any material contract other than
as provided in the Merger Agreement or in the ordinary course of business,
consistent with past practice;
(x) Take any action with respect to accounting policies or procedures,
or with respect to taxes, elections, audits or controversies, other than in
the ordinary course of business and in a manner consistent with past
practices;
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(xi) Pay, discharge or satisfy any existing claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of due and
payable liabilities reflected or reserved against in its financial
statements, as appropriate, or liabilities incurred after the date thereof
in the ordinary course of business and consistent with past practice and
other than other claims, liabilities or obligations not exceeding $3
million in the aggregate;
(xii) (a) Enter into any material transaction with any executive
officer, director or Affiliate thereof; (b) pay or become obligated to pay
any material liability or obligation to any executive officer, director or
Affiliate, subject to certain limited exceptions; (c) or waive any rights
of material value or cancel any material debts or claims or any debts or
claims with respect to an officer, director or Affiliate;
(xiii) Except as otherwise permitted hereby, take any action that
could reasonably be expected to result in any of the representations and
warranties of the Company, becoming untrue in any material respect (the
"Surviving Representations") (except for a representation and warranties
which are expressly made as of a specified date and except for
representations and warranties concerning Representation Agreements,
litigation, material developments and undisclosed liabilities), or any of
the conditions to the obligations of Parents and Purchaser to consummate
the Merger not being satisfied; or
(xiv) Agree, in writing or otherwise, to take or authorize any of the
foregoing actions.
When used in the Merger Agreement, the term "Material Adverse Change (or
Effect)" means a change (or effect), in the condition (financial or otherwise),
properties, assets, liabilities, rights, obligations, operations, business or
prospects which change (or effect) individually or in the aggregate, is
materially adverse to such condition, properties, assets, liabilities, rights,
obligations, operations, business or prospects. With respect to any Person, a
Material Adverse Change (or Effect) refers to such Person and its subsidiaries.
Other Agreements of the Parents, Purchaser and the Company. In the Merger
Agreement, the Company has agreed that it will not, nor will it permit any of
its subsidiaries to (and the Company will use its best efforts to cause any
officer, director, employee, representative or agent of the Company or any of
the Company's subsidiaries not to): (i) solicit, initiate, or encourage the
submission of (including by way of furnishing information), any Takeover
Proposal; (ii) enter into any agreement with respect to any Takeover Proposal;
or (iii) participate in any discussions or negotiations regarding, or furnish to
any person any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Takeover Proposal; provided, however,
that prior to the acceptance for payment of Shares pursuant to the Offer, to the
extent required by the fiduciary obligations of the Katz Board under applicable
law (after consultation with counsel), the Company may, in response to a
Takeover Proposal which was unsolicited or which did not otherwise result from a
breach of the Merger Agreement, and subject to providing one full day's prior
written notice of its decision to the Parents, (x) furnish information with
respect to the Company to any person making such Takeover Proposal pursuant to a
customary confidentiality agreement (as determined by the Company's outside
counsel), and (y) participate in discussions and negotiations regarding such
Takeover Proposal; provided, however, that the Company may not enter into any
definitive agreement with any Person regarding such Takeover Proposal for the
lesser of (a) three days and (b) the time remaining until one full business day
prior to the expiration of the Offer; and provided, further, that nothing
contained in the Merger Agreement will prohibit the Company or the Katz Board
from disclosing to the Company's stockholders a position with respect to a
tender offer by a third party pursuant to Rules 14d-9 and 14e-2 of the Exchange
Act.
For purposes of the Merger Agreement and the Stockholder Agreements,
"Takeover Proposal" means any bona fide proposal or offer or public announcement
of a proposal, plan or intention to do (whether or not in writing and whether or
not delivered to the stockholders of the Company generally) a merger or other
business combination involving the Company or to acquire in any manner, directly
or indirectly, a material equity interest in, any voting securities of, or a
substantial portion of the assets of the Company and its Subsidiaries, other
than the transactions contemplated by the Merger Agreement.
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"Superior Proposal" means a Takeover Proposal made by a third party and its
subsidiaries, on terms that the Katz Board determines in good faith (based on
the advice of its counsel and financial advisors) to be more favorable to its
stockholders than the Offer, taking into account all legal, financial,
regulatory and other aspects of the proposal, including the financing for the
proposal (or contingencies therefor), the Person making the proposal, and the
certainty of consummation, and which the Katz Board determines in good faith
(after consultation with counsel) should be considered by the Katz Board in
order to prevent the Katz Board from breaching its fiduciary duties to
stockholders under applicable law.
The Company is required to advise the Parents orally and in writing of any
request for information or of any Takeover Proposal the material terms and
conditions of such request or Takeover Proposal and the identity of the Person
and its Affiliates (if known to the Company) making such request or Takeover
Proposal. Except in accordance with the terms of the Merger Agreement, neither
the Katz Board nor any committee thereof may (i) withdraw or modify, or propose
to withdraw or modify, in a manner adverse to the Parents or Purchaser the
approval or recommendation by the Katz Board of the Offer, the Merger or the
Merger Agreement, or (ii) approve or recommend, or propose to approve or
recommend, any Takeover Proposal. Notwithstanding the foregoing, nothing in the
Merger Agreement prevents the Katz Board from approving or recommending to the
Company's stockholders any unsolicited Takeover Proposal by a Third Party as
contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange Act in the
event any unsolicited Takeover Proposal shall have been made by a third party
and such Takeover Proposal is a Superior Proposal.
Pursuant to the Merger Agreement, between the date of the Merger Agreement
and the Effective Time, the Company is required to (and will cause its
subsidiaries and their respective officers, directors, employees, auditors,
counsel, representatives and agents to) afford the officers, employees,
auditors, counsel, representatives, and agents of the Parents reasonable access
at all reasonable times to its officers, employees, agents, properties, offices
and other facilities, books, records stockholders as soon as practicable for the
purpose of approving the Merger and for such purposes as may be necessary or
desirable. The Company will (i) subject to the terms of the Merger Agreement,
endorse the Offer and Merger and recommend to its stockholders the approval of
the Merger Agreement, the Merger and the transactions to be consummated
hereunder; and (ii) use its best efforts to obtain the necessary approvals by
its stockholders of the Merger Agreement and the Merger.
Pursuant to the Merger Agreement, the Company must cause a meeting of its
stockholders (the "Company Stockholder Meeting") to be duly called and held as
soon as practicable (provided Purchaser shall have accepted for payment Shares
tendered pursuant to the Offer) for the purposes of voting on the approval and
adoption of the Merger Agreement, the Merger and the transactions contemplated
thereby.
The Merger Agreement provides that, as soon as practicable, the Company
will prepare and file with the Commission under the Exchange Act a proxy
statement relating to the Company Stockholder Meeting (the "Proxy Statement")
and cause the Proxy Statement to be mailed to its stockholders at the earliest
practicable time and obtain necessary approvals by its stockholders of the
Merger Agreement. Notwithstanding the foregoing, in the event that Purchaser
acquires at least 90% of the outstanding Shares and the Parents so request, the
Parents, Purchaser and the Company will take all actions necessary and
appropriate to cause the Merger to become effective without a meeting of the
stockholders of the Company in accordance with Section 253 of the DGCL.
For six years after the Effective Time, the Parents have agreed to cause
the Surviving Corporation to, indemnify, defend and hold harmless the present
and former officers, directors, employees and agents of the Company and its
subsidiaries (each an "Indemnified Party") the full extent permitted by the
Company's certificate of incorporation, by-laws or indemnification agreements in
effect at the date hereof, including provisions relating to advancement of
expenses incurred in the defense of any action or suit; provided, that in the
event any claim or claims are asserted or made within such six year period, all
rights to indemnification in respect of any such claim or claims shall continue
until disposition of any and all such claims; provided, further, that any
determination required to be made with respect to whether an Indemnified Party's
conduct complies with the standards set forth under Delaware law, the Company's
certificate of incorporation or by-laws or such agreements, as the case may be,
shall be made by independent counsel mutually acceptable to the
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Parents and the Indemnified Party; and provided, further, that nothing in the
Merger Agreement shall impair any rights or obligations of any present or former
directors or officers of the Company. The Parents or the Surviving Corporation
shall maintain the Company's existing officers' and directors' liability
insurance policy ("D&O Insurance") for a period of six years after the Effective
Time; provided, that the Parents may substitute therefor policies of
substantially similar coverage and amounts containing terms no less advantageous
to such former directors or officers; provided, further that if the existing D&O
Insurance expires, is terminated or canceled during such period, the Parents or
the Surviving Corporation will use all reasonable efforts to obtain
substantially similar D&O Insurance; provided, further, however, that in no
event shall either the Parents or the Surviving Corporation be required to pay
aggregate premiums for insurance in excess of 200% of the aggregate premiums
paid by the Company in 1996.
The Merger Agreement provides that the Company, Purchaser and the Parents
will each use their best efforts to consummate the transactions contemplated by
the Merger Agreement.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto, including
without limitation, representations by the Company as to corporate status and
good standing, subsidiaries, power and authority, enforceability,
capitalization, no violation, reports and financial statements, no commissions,
material developments and absence of undisclosed liabilities, compliance with
law, taxes, employee benefit plans, litigation and environmental liabilities. In
addition, the Company represented to the Parents and Purchaser that the Katz
Board, at a meeting duly called and held, has (i) determined that the Offer and
the Merger, taken together, are fair to, and in the best interests of, the
stockholders of the Company, (ii) approved the Offer and the Merger, subject to
the terms and conditions set forth in the Merger Agreement, (iii) resolved to
recommend that the stockholders of the Company accept the Offer and tender their
Shares to Purchaser, and (iv) approved and adopted the Merger, the Merger
Agreement, the Stockholder Tender Agreement, and the Management Tender
Agreement, and (v) that the transactions contemplated by the Merger Agreement,
the Stockholder Tender Agreement and the Management Tender Agreement have been
approved for purposes of Section 203 of the DGCL.
Conditions to the Merger. The obligation of Purchaser and the Parents to
effect the Merger is subject to satisfaction of the conditions, unless waived by
the Parents that (i) the representations and warranties of the Company shall be
true and correct when made as of the date of the Merger Agreement, or any
Surviving Representation shall not have become untrue or incorrect, except for
failures that would not have a Material Adverse Effect, (ii) the Company shall
have delivered certain organizational documents to the Parents, (iii) the
Parents shall have received certain government consents to the Merger
contemplated by the Merger Agreement and (iv) there shall not be any order or
injunctions issued or in effect before any court or governmental body. The
obligation of the Company to effect the Merger is further subject, unless waived
by the Company, to (i) the representations and warranties of the Parents and
Purchaser being true and correct in all material respects when made as of the
date of the Merger Agreement, (ii) the Parents and Purchaser having performed
and complied in all material respects with their obligations contained in the
Merger Agreement required to be performed and complied with at or prior to the
Effective Time, (iii) approval of the Merger Agreement and the Merger by a
majority of the stockholders and (iv) there not being any order or injunction
issued or in effect before any court or governmental body.
Termination. The Merger Agreement may be terminated at any time prior to
the Effective Time: (a) by mutual written consent of all of the parties hereto
at any time prior to the consummation of the Merger (the "Closing"); (b) by the
Parents and Purchaser upon delivery of written notice to the Company in the
event of a material breach by the Company of any provisions of the Merger
Agreement which breach shall not be remedied within ten business days of written
notice specifying such breach in reasonable detail and demanding that the same
be remedied; (c) by the Company upon delivery of written notice to the Parents
in the event of a material breach by the Parents or Purchaser of any provision
of the Merger Agreement, which breach shall not be remedied within ten business
days of written notice specifying such breach in reasonable detail and demanding
that the same be remedied; (d) by the Parents, Purchaser, or the Company upon
delivery of written notice to the other parties, if the Closing shall not have
occurred by December 31, 1997, unless the failure of the Closing to occur is the
result of a breach by the terminating party that caused the Closing to be
delayed; (e) by any of the Parents, Purchaser or the Company if a court of
competent jurisdiction or
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governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action (which order, decree
or ruling each of the parties hereto shall use all reasonable efforts to lift),
in each case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by the Merger Agreement, and such order, decree,
ruling or other action shall have become final and nonappealable; (f) by the
Parents and Purchaser if, due to any event, occurrence or non-occurrence, as the
case may be, which results in or constitutes a failure to satisfy any condition
to the Offer set forth in the Merger Agreement, the Offer is terminated or
expires in accordance with its terms without Purchaser having purchased any
Shares thereunder; provided, that the Parents or Purchaser may not terminate if
any of them is in material breach of the Merger Agreement; (g) by the Parents
and Purchaser or the Company if the stockholders of the Company shall have
failed to approve the Merger Agreement, the Merger and the transactions
contemplated therein at the Company Stockholder Meeting, provided that prior to
or contemporaneous with such termination the Expenses (as hereinafter defined)
shall have been paid to Purchaser; (h) by the Parents and Purchaser if (i) the
Katz Board (A) shall withdraw or modify in any manner adverse to the Parents or
Purchaser its approval or recommendation of the Merger Agreement or the Merger
or the Stockholder Agreements, (B) in response to the commencement of any tender
offer or exchange offer for more than 25% of the outstanding Shares, shall have
not recommended rejection of such tender offer or exchange offer, (C) shall
approve or recommend any Takeover Proposal other than the Offer, or (D) shall
resolve to take any of the actions specified in clauses (A) or (C) above or (ii)
the stockholders party to the Stockholder Tender Agreement fail to tender their
Shares in the Offer unless permitted under the terms of the Stockholder Tender
Agreement (each, a "Takeover Proposal Termination"); (i) by the Company, if the
Parents or Purchaser terminate the Offer in accordance with the Merger
Agreement, or the Offer shall have expired without Purchaser purchasing any
Shares pursuant to the Offer; provided, that, the Company may not terminate if
it is in material breach of the Merger Agreement; or (j) by the Company, if the
Katz Board shall have determined to accept a Superior Proposal, provided that
prior to or contemporaneous with such termination the payments for Expenses and
the Termination Fee (as hereinafter defined) shall have been paid to Purchaser a
("Superior Proposal Termination"). Except for the provisions of the Merger
Agreement regarding confidentiality, publicity and payment of Expenses and the
Termination Fee, which shall survive any termination of the Merger Agreement, in
the event of termination of the Merger Agreement, the Merger Agreement shall
forthwith become void and of no further force and effect, and the parties shall
be released from any and all obligations hereunder; provided, however, that
nothing herein shall relieve any party from liability for the willful breach of
any of its representations, warranties, covenants or agreements set forth in the
Merger Agreement.
Termination Fee and Expenses. In addition to any other amounts which may be
payable or become payable pursuant to the Merger Agreement, the Company shall
(provided that neither the Parents nor Purchaser is then in material breach of
its obligations under this Merger Agreement), promptly, but in no event later
than the earlier of (A) the time specified in the termination section of the
Merger Agreement, if any, or (B) one business day after the termination of this
Merger Agreement, reimburse the Parents and Purchaser for all documented
Expenses up to $2 million.
As used in the Merger Agreement, "Expenses" includes all out-of-pocket
expenses (including, without limitation, all fees and expenses of all banks
(including commitment fees), investment banking firms and other financial
institutions, and their respective agents and counsel, and counsel, accountants,
experts and consultants to a party hereto and its affiliates) incurred by a
party or its affiliate on its or their behalf, whether incurred prior to, on or
after the date of the Merger Agreement, in connection with or related to the
authorization, preparation, negotiation, execution and performance of the Merger
Agreement and the transactions contemplated hereby and the financing thereof,
including the preparation, printing, filing and mailing of the documents
pursuant to which the Offer will be made and all other matters related to the
transactions contemplated hereby.
If (i) the Merger Agreement shall have been terminated by Parent and
Purchasers due to a material breach by the Company of the Merger Agreement or
due to the occurrence of the condition set forth in paragraph (a) of Section 15
of this Offer to Purchase, and either of the following shall have occurred prior
to such termination: (A)(x) any corporation, partnership, person, other entity
or "group" (as referred to in
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Section 13(d)(3) of the Exchange Act) other than Purchaser, the Parents, or any
of their respective Affiliates, but excluding the entities' signatory to the
Stockholder Tender Merger Agreement and their Affiliates or any "group" of which
any such Persons is a member, shall have become the beneficial owner of more
than 25% of the outstanding Shares, or (y) any Person (other than Purchaser, the
Parents, or any of their respective Affiliates or any "group" of which any such
Persons is a member) shall have made, or proposed, communicated or disclosed in
a manner which is or otherwise becomes public, a Takeover Proposal (including by
making such Takeover Proposal) and (B) on or prior to the eighteen-month
anniversary of the date of this Merger Agreement, the Company either consummates
with a Person referred to in (A)(x) or (y) a transaction the proposal of which
would otherwise qualify as a Takeover Proposal or enters into a definitive
agreement with respect to and subsequently consummates a transaction with a
Person referred to in (A)(x) or (y) the proposal of which would otherwise
qualify as a Takeover Proposal (a "Change in Control Event"); or (ii) this
Merger Agreement is terminated due to a Takeover Proposal Termination or a
Superior Proposal Termination, then in the case of clauses (i) or (ii) above,
the Company shall (1) in the case of clauses (i)(A)(x) above and (ii) above,
promptly, but in no event later than the earlier of (a) the time, if any,
specified in the termination section of the Merger Agreement, or (b) one
business day after the termination of the Merger Agreement and (2) in the case
of clause (i)(B) above, promptly, but in no event later than the date of the
event specified therein shall have occurred, pay Purchaser a fee of $8 million
in cash, which amount shall be payable in same day funds (the "Termination
Fee").
In the event a fee is or becomes payable pursuant to the terms of the
Merger Agreement, the Company agrees promptly, but in no event later than two
business days following written notice thereof, to reimburse Purchaser or its
designee for all reasonable out-of-pocket costs, fees and expenses, including,
without limitation, the reasonable fees and disbursements of counsel and the
expenses of litigation, incurred in connection with collecting the Expenses and
the Termination Fee pursuant to the Merger Agreement, as a result of any breach
by the Company of its obligations under the Merger Agreement.
Except as otherwise described herein, each of the parties hereto shall pay
all the fees and expenses incurred by it incident to preparing for, entering
into and carrying into effect this Merger Agreement and the transactions
contemplated herein; provided that the Company covenants and represents and
warrants that such fees and expenses incurred by the Company for services of
attorneys, accountants, investment bankers (including for the fairness opinion)
and all other advisors to the Company associated with the transactions
contemplated herein, will not exceed $5 million.
Amendments; Waiver. The Merger Agreement may not be modified, amended,
supplemented, canceled, or discharged, except by written instrument executed by
all parties, provided that, prior to the Effective Time, the consent of the
Company shall be given by the directors of the Company who were directors prior
to July 18, 1997. No failure to exercise and no delay in exercising, any right,
power or privilege under the Merger Agreement shall operate as a waiver, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude the exercise of any other right, power or privilege. No waiver of any
breach of any provision shall be deemed to be a waiver of any preceding or
succeeding breach of the same or any other provision, nor shall any waiver be
implied from any course of dealing between the parties. No extension of time for
performance of any obligations or other acts hereunder or under any other
agreement shall be deemed to be an extension of the time for performance of any
other obligations or any other acts.
THE STOCKHOLDER AGREEMENTS
Concurrently with the execution of the Merger Agreement, Purchaser and the
Parents entered into (a) the Stockholder Tender Agreement with certain of the
Selling Stockholders (the "DLJ Selling Stockholders") and (b) the Management
Tender Agreement with certain of the Selling Stockholders who are also officers
of the Company (the "Management Selling Stockholders"). The DLJ Selling
Stockholders own an aggregate of 6,666,668 Shares and the Management Selling
Stockholders own an aggregate of 388,737 Shares (excluding Shares issuable upon
conversion of Options). Pursuant to the Stockholder Agreements, each Seller
Stockholder has agreed to tender and sell all Shares owned by it to Purchaser
pursuant to and in accordance with the terms of the Offer.
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<PAGE> 36
During the term of the Stockholder Agreements, no Selling Stockholder shall
(a) offer to sell, sell, pledge or otherwise dispose of or transfer any interest
in or encumber with any lien any of such Selling Stockholder's Shares, except
for transfer or sale to any affiliate of such Selling Stockholder who agrees to
be bound by the respective Stockholder Agreement, (b) deposit such Selling
Stockholder's Shares into a voting trust, enter into a voting agreement or
arrangement with respect to such Shares or grant any proxy or power of attorney
with respect to such Shares, or (c) enter into any contract, option or other
arrangement or undertaking with respect to the direct or indirect acquisition or
sale, assignment or other disposition of or transfer of any interest in or the
voting of any Shares or any other securities of the Company.
During the term of the Stockholder Agreements, each Selling Stockholder
agrees not to directly or indirectly, initiate, solicit (including by way of
furnishing information), encourage or respond to or take any other action
knowingly to facilitate, any inquiries or the making of any proposal by any
person or entity (other than the Parents or any affiliate of either Parent) with
respect to the Company that reasonably may be expected to lead to a Takeover
Proposal, or enter into or maintain or continue discussions or negotiate with
any person or entity in furtherance of such inquiries or to obtain any Takeover
Proposal, or agree to or endorse any Takeover Proposal, or authorize or permit
any person or entity acting on behalf of such Selling Stockholder to do any of
the foregoing. If a Selling Stockholder receives any Takeover Proposal, such
Selling Stockholder agrees to promptly notify the Parents of that inquiry or
proposal and the details thereof.
During the term of the Stockholder Agreements, each Selling Stockholder
agrees to vote each of its Shares at any annual, special or adjourned meeting of
the stockholders of the Company (a) in favor of the Merger, the execution and
delivery by the Company of the Merger Agreement and the approval and adoption of
the terms thereof and of the Stockholder Agreements; (b) against any action or
agreement that would result in a breach in any respect of any covenant,
agreement, representation or warranty of the Company under the Merger Agreement;
and (c) against the following actions (other than the Merger and the other
transactions contemplated by the Merger Agreement): (i) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company or its subsidiaries; (ii) a sale, lease or
transfer of a material amount of assets of the Company or one of its
subsidiaries, or a reorganization, recapitalization, dissolution or liquidation
of the Company or its subsidiaries; (iii) (A) any change in a majority of the
persons who constitute the Katz Board as of the date hereof; (B) any change in
the present capitalization of the Company or any amendment of the Company's
certificate of incorporation or by-laws, as amended to date; (C) any other
material change in the Company's corporate structure or business; or (D) any
action that is intended, or could reasonably be expected, to impede, interfere
with, delay, postpone, or adversely affect the Merger and the other transactions
contemplated by the Stockholder Agreements and the Merger Agreement.
The Stockholder Agreements will terminate on the earlier of (a) the
purchase of all the Shares pursuant to the Offer and (b) the date on which the
Merger Agreement is terminated in accordance with its terms.
Notwithstanding the above paragraph, under the terms of the Stockholder
Tender Agreement, in the event (A) any DLJ Selling Stockholder disposes of its
Shares in breach of the Stockholder Tender Agreement or (B) the Merger Agreement
is terminated (i) due to a Takeover Proposal Termination or a Superior Proposal
Termination and at any time within twelve months of the date thereof a DLJ
Selling Stockholder or any of its Affiliates disposes of any interest in the
Shares to a party other than any Affiliate of such DLJ Selling Stockholder, the
Parents or any of their Affiliates, or (ii) in any other circumstance in which
the Termination Fee is payable to the Parents or Purchaser and at any time
within twelve months of the date thereof a DLJ Selling Stockholder or any of its
Affiliates disposes of any interest in the Shares to a party other than any
Affiliate of DLJ Selling Stockholder, Parents or any their Affiliates but while
a Change in Control Event is pending, then in each case of (A) or (B) such DLJ
Selling Stockholder shall pay promptly following receipt by such DLJ Selling
Stockholder or any of its Affiliates, to Parents as they jointly direct, (x)
100% of any consideration received by it for such interest in such Shares so
disposed that exceeds $11.00 per share up to $13.00 per share and (y) 75% of any
consideration received by it for such interest in such Shares so disposed that
exceeds $13.00 per share.
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CONFIDENTIALITY AGREEMENT
The Company has entered into a Confidentiality Agreement (the
"Confidentiality Agreement") with Hicks Muse, dated as of April 7, 1997, which
contains customary provisions pursuant to which, among other matters, Hicks Muse
agreed to keep confidential all information concerning the Company furnished to
it by the Company, to use such material solely for the purpose of evaluating and
implementing a possible acquisition or investment transaction between Hicks Muse
and the Company, and, except with the prior written consent of the Company, not
to disclose the fact that discussions or negotiations are taking place
concerning a possible transaction involving the Company. Except with the prior
written invitation of the Katz Board, Hicks Muse also agreed not to, for two
years after the date of the Confidentiality Agreement, acquire or offer to
acquire any securities or assets of the Company or enter into or propose to
enter into any business combination involving the Company or seek to influence
the management of the Company or solicit to employ any current employee of the
Company, so long as they are employed by the Company.
14. DIVIDENDS AND DISTRIBUTIONS
The Company has not paid and does not intend to pay dividends on the
Shares. The Merger Agreement provides that the Company will not, among other
things, (i) declare or pay any dividends on or make or become obligated to make
other distributions in respect of any of its capital stock, except dividends by
the Company's wholly owned subsidiaries in the ordinary course of business
consistent with past practice, (ii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of its
capital stock, except for any such transaction by a wholly owned subsidiary of
the Company which remains a wholly owned subsidiary after consummation of such
transaction, or (iii) repurchase, redeem or otherwise acquire any shares of its
capital stock or any securities convertible into or exercisable for any shares
of its capital stock.
15. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Merger Agreement or the Offer,
Purchaser shall not be required to accept for payment, purchase or pay for any
Shares tendered and may terminate or (subject to the terms of the Merger
Agreement) amend the Offer and may postpone the acceptance for payment of and
payment for any Shares, if prior to the time of acceptance for payment of Shares
tendered and if pursuant to the Offer (whether or not any Shares have
theretofore been accepted for payment or paid for pursuant to the Offer) (i) the
Minimum Condition shall not have been satisfied, (ii) any waiting period under
the HSR Act applicable to the purchase of Shares pursuant to the Offer shall not
have expired or been terminated, or (iii) any of the following shall occur:
(a) Any representation or warranty of the Company in the Merger
Agreement shall have been untrue or incorrect as of the date of the Merger
Agreement, or any Surviving Representation shall become untrue or
incorrect, except in each case for any failure that would not have a
Material Adverse Effect on the Company; or the Company shall have failed to
perform or comply in all material respects with certain obligations of the
Company pursuant to the Merger Agreement to be performed or complied with
prior to payment for any Shares tendered in the Offer;
(b) There shall have been instituted or be pending any action,
proceeding, application, claim or counterclaim by any government or
governmental authority or agency, domestic or foreign, before any court or
governmental regulatory or administrative agency, authority, or tribunal,
domestic or foreign, (i) challenging the acquisition by the Parents or
Purchaser of the Shares seeking to restrain or prohibit the making or
consummation of the Offer; (ii) seeking to obtain from the Parents or
Purchaser any material damages, fines or legal sanctions related to the
Offer or the Merger or the subsequent ownership or operation of the
Company; (iii) seeking to prohibit or limit the ownership or operation by
the Parents or Purchaser or any of their affiliates of any material portion
of the business or assets of the Company or to compel the Parents or
Purchaser or any of their affiliates to dispose of or forfeit material
incidents of control all or any material portion of the business or assets
of the Company or of Purchaser, (iv) seeking to impose limitations on the
ability of the Parents or Purchaser or any of their affiliates effectively
to
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exercise full rights of ownership of the Shares, including, without
limitation, the right to vote any Shares acquired or owned by the Parents
or Purchaser or any of their affiliates on all matters properly presented
to the Company's stockholders; or (v) seeking to require divestiture by the
Parents or Purchaser or any of their affiliates of any Shares;
(c) There shall be any statute, rule, regulation, legislation,
interpretation, judgment, order or injunction proposed, enacted,
promulgated, entered, enforced, issued or deemed applicable to the Offer,
the Merger or other similar business combination by Purchaser or any
affiliate of the Parents with the Company, or any other action shall have
been taken by any government, governmental authority or agency or court
with respect to a proceeding described in paragraph (b) above, domestic or
foreign, that has, or, in Parent's sole discretion, could be expected to
result in, any of the consequences referred to in paragraph (b) above;
(d) There shall have been instituted or be pending any action,
proceeding, application, claim or counterclaim by any Person (other than a
governmental authority or agency), before any court or governmental
regulatory or administrative agency, authority, or tribunal, domestic or
foreign, that (i) relates solely to the business of the Company or its
Subsidiaries (including employee related matters) prior to the date of the
Merger Agreement (and not in connection with or in contemplation of the
transactions contemplated by the Merger Agreements) and (ii) would if
adversely determined have a Material Adverse Effect; or
(e) There shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange,
Inc., the AMEX, or the Nasdaq Stock Market; (ii) the declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States (whether or not mandatory); (iii) a decline of at least 25%
in either the Dow Jones Average of Industrial Stocks or the Standard &
Poor's 500 Index from that existing at the close of business on July 11,
1997; or (iv) in the case of any of the foregoing existing at July 11,
1997, a material acceleration or worsening thereof.
The foregoing conditions are for the sole benefit of the Parents and
Purchaser and may be asserted by the Parents or Purchaser regardless of the
circumstances giving rise to any such conditions and may be waived by the
Parents or Purchaser, in whole or in part, at any time and from time to time, in
its sole discretion. The failure by the Parents or Purchaser at any time to
exercise any of the foregoing rights will not be deemed a waiver of any such
right and the waiver of such right with respect to any other facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances, and each such right will be deemed an ongoing right which may be
asserted at any time and from time to time. Any determination by the Parents or
Purchaser concerning the event described above will be final and binding upon
all parties.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered Shares not theretofore accepted for payment shall forthwith be returned
by the Depositary to the tendering stockholders.
16. CERTAIN REGULATORY AND LEGAL MATTERS
Except as set forth in this Section 16, the Parents and Purchaser are not
aware of any approval or other action by any governmental or administrative
agency which would be required for the acquisition or ownership of Shares by
Purchaser as contemplated herein. Should any such approval or other action be
required, it will be sought, but Purchaser has no current intention to delay the
purchase of Shares tendered pursuant to the Offer pending the outcome of any
such matter, subject, however, to Purchaser's right to decline to purchase
Shares if any of the conditions specified in Section 15 of this Offer to
Purchase shall have occurred. There can be no assurance that any such approval
or other action, if needed, would be obtained or would be obtained without
substantial conditions, or that adverse consequences might not result to the
Company's business or that certain parts of the Company's business might not
have to be disposed of if any such approvals were not obtained or other action
taken. If certain types of adverse action are taken with respect to the matters
discussed below, Purchaser could decline to accept for payment or pay for any
Shares tendered. See Section 15 of this Offer to Purchase for certain conditions
of the Offer.
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State Takeover Laws. The Company is incorporated under the laws of the
State of Delaware and operations are conducted through 65 sales offices
throughout the United States. A number of states throughout the United States
have enacted takeover statutes that purport, in varying degrees, to be
applicable to attempts to acquire securities of corporations that are
incorporated or have assets, stockholders, executive offices or principal places
of business in such states. In Edgar v. MITE Corp., the Supreme Court of the
United States held that the Illinois Business Takeover Act, which involved state
securities laws that made the takeover of certain corporations more difficult,
imposed a substantial burden on interstate commerce and therefore was
unconstitutional. In CTS Corp. v. Dynamics Corp. of America, however, the
Supreme Court of the United States held that a state may, as a matter of
corporate law and, in particular, those laws concerning corporate governance,
constitutionally disqualify a potential acquirer from voting on the affairs of a
target corporation without prior approval of the remaining stockholders,
provided that such laws were applicable only under certain conditions.
Subsequently, a number of Federal courts ruled that various state takeover
statutes were unconstitutional insofar as they apply to corporations
incorporated outside the state of enactment.
The Company is subject to the provisions of Section 203 of the DGCL with
respect to restrictions upon business combinations involving the Company and,
therefore, is subject to such provisions. In general, Section 203 of the DGCL
prevents an "interested stockholder" (e.g. a person who owns or has the right to
acquire 15% or more of a corporation's outstanding voting stock) from engaging
in a "business combination" (defined to include mergers and certain other
transactions) with a Delaware corporation for a period of three years following
the time such person became an interested stockholder unless, among other
things, the corporation's board of directors approves such business combination
or the transaction in which the interested stockholder becomes such prior to the
time the interested stockholder becomes such. The Katz Board has approved the
Offer, the Merger, the Merger Agreement and the Stockholder Agreements for the
purposes of Section 203 of the DGCL. Except as described above with respect to
Section 203 of the DGCL, the Parents and Purchaser have not attempted to comply
with any other state takeover laws in connection with the Offer and believes
none of such laws to be applicable to the Offer. Should any person seek to apply
any state takeover law, the Parents and Purchaser reserve the right to take such
action as then appears desirable, which may include challenging the validity or
applicability of any such statute allegedly applicable to the Offer in
appropriate court proceedings. Nothing in this Offer to Purchase nor any action
taken in connection herewith is intended as a waiver of that right. In the event
it is asserted that one or more state takeover laws is applicable to the Offer
or the Merger, and an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer, the Parents and Purchaser might
be required to file certain information with, or receive approvals from, the
relevant state authorities. In addition, if enjoined, Purchaser might be unable
to accept for payment or pay for any Shares tendered pursuant to the Offer, or
be delayed in continuing or consummating the Offer and the Merger. In such case,
Purchaser may not be obligated to accept for payment or pay for any Shares
tendered. See Section 15 of this Offer to Purchase.
Antitrust. Under the provisions of the HSR Act applicable to the Offer, the
acquisition of Shares under the Offer may be consummated only following the
expiration or early termination of the applicable waiting period under the HSR
Act.
Under the provisions of the HSR Act applicable to the purchase of Shares
pursuant to the Offer, such purchase may not be made until the expiration of a
15-calendar day waiting period following the required filing of a Notification
Report Form under the HSR Act by Evergreen, which Evergreen expects to submit on
July 18, 1997. Accordingly, if the Notification and Report Form is filed on July
18, 1997, the waiting period under the HSR Act would expire at 11:59 P.M., New
York City time, on August 5, 1997, unless early termination of the waiting
period is granted by the Federal Trade Commission ("FTC") and the Department of
Justice, Antitrust Division (the "Antitrust Division") or the Parents receive a
request for additional information or documentary material prior thereto. If
either the FTC or the Antitrust Division issues a request for additional
information or documentary material from Evergreen prior to the expiration of
the 15-day waiting period, the waiting period will be extended and will expire
at 11:59 P.M., New York City time, on the tenth calendar day after the date of
substantial compliance by Evergreen with such request unless terminated earlier
by the FTC and the Antitrust Division. If such a request is issued, the purchase
of and payment for Shares pursuant to the Offer will be deferred until the
additional waiting period expires or is terminated. Only
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one extension of such waiting period pursuant to a request for additional
information or documentary material is authorized by the rules promulgated under
the HSR Act. Thereafter, the waiting period can be extended only by court order
or by consent of Evergreen. Although the Company is required to file certain
information and documentary material with the Antitrust Division and the FTC in
connection with the Offer, neither the Company's failure to make such filings
nor a request to the Company from the Antitrust Division or the FTC for
additional information or documentary material will extend the waiting period.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of the
Company pursuant to the Offer. At any time before or after the Purchaser's
acquisition of Shares pursuant to the Offer, the Antitrust Division or the FTC
could take such action under the antitrust laws as either deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or the consummation of the Merger or seeking the
divestiture of Shares acquired by Purchaser or the divestiture of substantial
assets of the Company or its subsidiaries or the Parents or their subsidiaries.
Private parties and states Attorneys General may also bring legal action under
the antitrust laws under certain circumstances. There can be no assurance that a
challenge to the Offer on antitrust grounds will not be made, or, if such a
challenge is made, of the result thereof.
If the Antitrust Division, the FTC, a state or a private party raises
antitrust concerns in connection with a proposed transaction, the Parents and
Purchaser may engage in negotiations with the relevant governmental agency or
party concerning possible means of addressing these issues and may delay
consummation of the Offer or the Merger while such discussions are ongoing. The
Parents and the Company have agreed to use their respective best efforts to
resolve any antitrust issues.
Appraisal Rights. Holders of the Shares do not have appraisal rights as a
result of the Offer. However, if the Merger is consummated, holders of the
Shares in connection with the Merger will have certain rights pursuant to the
provisions of Section 262 of the DGCL to dissent and demand appraisal of their
Shares. Under Section 262, dissenting stockholders who comply with the
applicable statutory procedures will be entitled to receive a judicial
determination of the fair value of their Shares (exclusive of any element of
value arising from the accomplishment or expectation of the Merger) and to
receive payment of such fair value in cash, together with a fair rate of
interest, if any. Any such judicial determination of the fair value of the
Shares could be based upon factors other than, or in addition to, the price per
share to be paid in the Merger or the market value of the Shares. The value so
determined could be more or less than the price per share to be paid in the
Merger.
Legal Proceedings. The Parents and Purchaser are not aware of any pending
or overtly threatened legal proceedings which would affect the Offer or the
Merger. If any such matters were to arise, Purchaser could decline to accept for
payment or pay for any Shares tendered in the Offer. See Section 15 of this
Offer to Purchase.
17. FEES AND EXPENSES
The Parents and Purchaser have engaged Smith Barney as the Dealer Manager
in connection with the Offer. In addition, Smith Barney is acting as exclusive
financial advisor to each of the Parents on an independent basis in connection
with the proposed acquisition of the Company. Pursuant to the terms of Smith
Barney's engagement, the Parents have agreed to pay Smith Barney an aggregate
fee of $1,500,000 in connection with the Offer and the Merger. The Parents also
have agreed to reimburse Smith Barney for travel and other out-of-pocket
expenses, including reasonable legal fees and expenses, and to indemnify Smith
Barney and certain related parties against certain liabilities, including
liabilities under the federal securities laws, arising out of Smith Barney's
engagement. Smith Barney has in the past provided investment banking services to
Chancellor and the Company unrelated to the Offer and the Merger, for which
services Smith Barney has received compensation. In the ordinary course of
business, Smith Barney and its affiliates may actively trade or hold the
securities of the Parents and the Company for their own account or for the
account of customers and, accordingly, may at any time hold a long or short
position in such securities.
The Parents and Purchaser have retained MacKenzie Partners, Inc., as
Information Agent, and The Bank of New York, as Depositary, in connection with
the Offer. The Information Agent and the Depositary
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<PAGE> 41
will receive reasonable and customary compensation for their services hereunder
and reimbursement for their reasonable out-of-pocket expenses. The Information
Agent and the Depositary will also be indemnified by Purchaser against certain
liabilities in connection with the Offer.
None of Purchaser nor either Parent, nor any officer, director,
stockholder, agent or other representative of Purchaser or the Parents, will pay
any fees or commissions to any broker, dealer or other person (other than the
Information Agent and the Dealer Manager) for soliciting tenders of Shares
pursuant to the Offer. Brokers, dealers, commercial banks and trust companies
and other nominees will, upon request, be reimbursed by Purchaser for customary
mailing and handling expenses incurred by them in forwarding materials to their
customers.
18. MISCELLANEOUS
Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If Purchaser becomes aware of any valid state statute prohibiting the
making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will
make a good faith effort to comply with such state statute. If, after such good
faith effort, Purchaser cannot comply with such state statute, the Offer will
not be made to (nor will tenders be accepted from or on behalf of) the holders
of Shares in such state. In any jurisdiction where the securities, blue sky or
other laws require the offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of Purchaser by Merrill Lynch or one
or more registered brokers or dealers licensed under the laws of such
jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER OTHER THAN AS CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND, IF ANY SUCH INFORMATION OR
REPRESENTATION IS GIVEN OR MADE, IT SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY PURCHASER.
Purchaser and the Parents have jointly filed a Tender Offer Statement on
Schedule 14D-1 with the Commission, pursuant to Rule 14d-1 of the Exchange Act,
together with exhibits furnishing certain information with respect to the Offer.
Such Schedule 14D-1 and any amendments thereto, including all exhibits, may be
examined and copies may be obtained at the same places and in the same manner as
set forth with respect to the Company in Section 8 of this Offer to Purchase
(except that they may not be available at the regional offices of the
Commission).
MORRIS ACQUISITION CORPORATION
July 18, 1997
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<PAGE> 42
ANNEX I
CERTAIN INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS OF THE PARENTS AND PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF EVERGREEN. The names, present
principal occupation or employment, and material occupations, positions,
offices, or employments during the last five years of each director and
executive officer of Evergreen Media Corporation are set forth below. Unless
otherwise noted, the officers and directors have held the positions indicated
below with Evergreen for the last five years or have served Evergreen in various
administrative or executive capacities for at least that long. The business
address of each person listed below is 433 E. Las Colinas Boulevard, Suite 1130,
Irving, Texas, 75039, and each person is a citizen of the United States.
<TABLE>
<S> <C>
Scott K. Ginsburg.......... Mr. Ginsburg has been Chairman of the Board of Evergreen
Age: 44 since 1990. He has been Chief Executive Officer and a
director 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 has been President of Evergreen since 1993 and
Age: 44 Chief Operating Officer and a director 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 has been an Executive Vice President of Evergreen
Age: 48 since 1993, Chief Financial Officer, Treasurer and Secretary
of Evergreen since 1988 and a director since 1989.
Thomas J. Hodson........... Mr. Hodson has been a director of Evergreen since 1992. Mr.
Age: 53 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 has been a director of Evergreen since Evergreen
Age: 59 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, Quaker Fabric
Corporation, ITI Technologies, Inc., Gradall Industries,
Inc. and Stuart Entertainment, Inc.
Kenneth J. O'Keefe......... Mr. O'Keefe has been an Executive Vice President of the
Age: 42 Company since February of 1996, and a director since May of
1996. Mr. O'Keefe was a director, Chief Financial Officer,
and Executive Vice President of Pyramid Communications, Inc.
from March 1994 until Evergreen's acquisition of Pyramid
Communications, Inc. on January 17, 1996. Mr. O'Keefe served
Pyramid Communications, Inc. and its predecessors in various
capacities since 1991.
</TABLE>
40
<PAGE> 43
<TABLE>
<S> <C>
Joseph M. Sitrick.......... Mr. Sitrick has been a director of the Company since 1988.
Age: 75 Mr. Sitrick is a Vice President with Blackburn & Company,
Incorporated, a media brokerage firm, which he joined in
1958.
Eric L. Bernthal........... Mr. Bernthal has been a director of Evergreen since 1996.
Age: 50 Mr. Bernthal has been a partner with the law firm of Latham
& Watkins, Washington D.C., regular legal counsel to
Evergreen, since 1986.
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF CHANCELLOR. The names, present
principal occupation or employment, and material occupations, positions,
offices, or employments during the last five years of each director and
executive officer of Chancellor Broadcasting Company are set forth below. Unless
otherwise noted, the officers and directors have held the positions indicated
below with Chancellor for the last five years or have served Chancellor in
various administrative or executive capacities for at least that long. The
business address of each person listed below is 12655 North Central Expressway,
Suite 405, Dallas, Texas 75243, and each person is a citizen of the United
States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
DIRECTORS POSITION WITH CHANCELLOR AND FIVE-YEAR EMPLOYMENT HISTORY
--------- ---------------------------------------------------------
<S> <C>
Steven Dinetz.............. Mr. Dinetz has served as President, Chief Executive Officer
Age: 50 and a Director of Chancellor since its formation and prior
thereto was the President and Chief Executive Officer and a
Director of Chancellor Communications. Prior to joining
Chancellor Communications, Mr. Dinetz served as a radio
broadcasting consultant and, from October 1988 to January
1993, as the President and Chief Executive Officer of D&D
Broadcasting, which Mr. Dinetz formed to acquire KOSI-FM and
KEZW-AM in Denver, Colorado from Group W. Broadcasting, Inc.
in a leveraged acquisition. Mr. Dinetz has more than 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.
George C. Toulas........... Mr. Toulas has served as Senior Executive Vice President and
Age: 45 Regional Manager of Chancellor since November 1996. From
October 1994 to October 1996 he served as Executive Vice
President and Regional Manager of Chancellor and was
responsible for Chancellor's Cincinnati, Minneapolis-St.
Paul and Orlando markets and was General Manager of
Chancellor's Cincinnati stations. Since November 1996, Mr.
Eytcheson and Mr. Weller have been reporting to Mr. Toulas
and Mr. Dinetz, and Mr. Toulas has had direct responsibility
for Chancellor's stations in New York, Washington, D.C.,
Orlando, Atlanta, Minneapolis, St. Paul, Cincinnati and
Milwaukee. Prior to his employment with Chancellor, Mr.
Toulas was with American Media from 1983 to 1994. During his
tenure with American Media, Mr. Toulas served as Regional
Vice President for Cincinnati, Minneapolis-St. Paul and
Orlando and as General Manager of WUBE-AM/FM and WYGY-FM in
Cincinnati from 1989 to 1994 and as General Manager of
WOCL-FM in Orlando from 1986 to 1989. Mr. Toulas has over 20
years experience in broadcasting management.
</TABLE>
41
<PAGE> 44
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
DIRECTORS POSITION WITH CHANCELLOR AND FIVE-YEAR EMPLOYMENT HISTORY
--------- ---------------------------------------------------------
<S> <C>
Rick Eytcheson............. Mr. Eytcheson has served as Executive Vice President of
Age: 47 Chancellor, as Regional Manager of Chancellor's California
markets since October 1994 and as General Manager of
Chancellor's Sacramento stations from the time of their
acquisition by Chancellor Communications in January 1994 to
February 1996. Prior to joining Chancellor Communications,
Mr. Eytcheson had been the General Manager of KFBK-AM and
KGBY-FM under their two previous owners, having held that
position since 1985. Prior to joining KFBK/KGBY, Mr.
Eytcheson was the Vice President and General Manager of
KOSO-FM in Modesto, California and KKNU-FM in Fresno,
California, with additional responsibility for the operation
of four radio stations located in Washington, Indiana and
Wisconsin. Mr. Eytcheson joined KOSO-FM as General Sales
Manager in 1980, became General Manager in 1982 and assumed
his group management responsibilities in 1983. Mr. Eytcheson
has over 16 years of experience in broadcasting management.
Samuel L. Weller........... Mr. Weller joined Chancellor in February 1996 and has served
Age: 41 as Executive Vice President and Regional Manager of
Chancellor's Denver and Phoenix radio stations and General
Manager of the Denver Stations since February 1996. As of
November 1996, Mr. Weller assumed responsibility for the
Pittsburgh and Nassau-Suffolk stations as well as the
Phoenix cluster. Prior to joining Chancellor Mr. Weller was
the Vice President and General Manager of KOSI-FM, KEZW-AM
and the former KYOD-FM in Denver, Colorado, all of which
were owned by the Tribune Company. Mr. Weller also served as
Vice President of Sales and Marketing of KOSI-FM and KEZW-AM
under their previous owner D&D Broadcasting, which was
formed by Steven Dinetz. Mr. Weller has over 20 years
experience in broadcasting management.
Eric W. Neumann............ Mr. Neumann has served as a Senior Vice President of
Age: 31 Chancellor since its formation. From that time until
February 1996, Mr. Neumann was also Chief Financial Officer
of Chancellor. Mr. Neumann has been associated with Mr.
Dinetz since 1991, when he joined D&D Broadcasting as its
controller. Mr. Neumann is a certified public accountant.
Thomas O. Hicks............ Mr. Hicks was elected Chairman of the Board and a director
Age: 51 of Chancellor in April 1996. Mr. Hicks is Chairman of the
Board and Chief Executive Officer of Hicks, Muse, Tate &
Furst Incorporated, a private investment firm located in
Dallas, St. Louis, New York and Mexico City specializing in
strategic investments, leveraged acquisitions and
recapitlizations. 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.
</TABLE>
42
<PAGE> 45
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
DIRECTORS POSITION WITH CHANCELLOR AND FIVE-YEAR EMPLOYMENT HISTORY
--------- ---------------------------------------------------------
<S> <C>
Jeffrey A. Marcus.......... Mr. Marcus currently serves as the Chairman and Chief
Age: 56 Executive Officer of Marcus Cable Company, the ninth largest
cable television multiple system operation (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............. Until August 2, 1996, Mr. Massey served as the Chairman of
Age: 57 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. and The Paragon Group,
Inc.
Eric C. Neuman............. Mr. Neuman became a director of Chancellor in April 1996.
Age: 52 Since May 1993, Mr. Neuman has been an officer of Hicks,
Muse, Tate & Furst Incorporated 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 in January 1997.
Age: 52 Since October 1995, Mr. Stuart has served as a Managing
Director and Principal of Hicks, Muse, Tate & Furst
Incorporated. Prior to joining Hicks, Muse, Tate & Furst
Incorporated, from 1990 to 1995 he served as the managing
partner of the Dallas office of the law firm Weil, Gotshal &
Manges LLP.
</TABLE>
3. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. Unless otherwise
indicated, each person identified below has been employed by Evergreen for the
last five years and all information concerning the current business address,
present principal occupation or employment and five-year employment history for
each person is the same as the information given above. In addition to holding
the offices
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<PAGE> 46
indicated, each person identified below is also a director of Purchaser. All
persons listed below are citizens of the United States.
<TABLE>
<S> <C>
Scott K. Ginsburg................................ President and Chief
Executive Officer
James E. de Castro............................... Executive Vice President and
Chief Operating Officer
Matthew E. Devine................................ Executive Vice President and
Chief Financial Officer
Kenneth J. O'Keefe............................... Executive Vice President
</TABLE>
44
<PAGE> 47
ANNEX II
Set forth below is Section 262 of the General Corporation Law of the State
of Delaware regarding appraisal rights, which rights will only be available in
connection with the Second Step Merger.
SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
sec. 262 Appraisal Rights -- (a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to 228 of this title shall be entitled to an appraisal by the Court of
Chancery of the fair value of his shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec.sec. 251 (other than a merger effected pursuant to
subsection (g) of sec. 251), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000
holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
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<PAGE> 48
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section, provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within twenty days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not
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<PAGE> 49
more than 10 days prior to the date the notice is given; provided that, if
the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
47
<PAGE> 50
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal and certificates for Shares and any other required documents
should be sent or delivered by each stockholder of the Company or his broker,
dealer, commercial bank, trust company or other nominee to the Depositary at one
of the addresses set forth below:
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<C> <C> <C>
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
(for Eligible Institutions
Tender & Exchange Department Only) Tender & Exchange Department
P.O. Box 11248 (212) 815-6213 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
FOR CONFIRMATION TELEPHONE:
(800) 507-9357
</TABLE>
Any questions or requests for assistance or additional copies of the Offer
to Purchase and the related Letter of Transmittal, and other tender offer
materials, may be directed to the Dealer Manager or the Information Agent at
their respective telephone numbers and locations listed below. Stockholders may
also contact their broker, dealer, commercial bank, trust company or other
nominee for assistance concerning the Offer.
48
<PAGE> 51
THE DEALER MANAGER FOR THE OFFER IS:
SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
(212) 816-8820 or (212) 816-8781
THE INFORMATION AGENT FOR THE OFFER IS:
[MACKENZIE PARTNERS, INC. LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
CALL TOLL FREE (800) 322-2885
49
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
KATZ MEDIA GROUP, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED JULY 18, 1997
OF
MORRIS ACQUISITION CORPORATION
A JOINTLY OWNED SUBSIDIARY OF
CHANCELLOR BROADCASTING COMPANY
AND
EVERGREEN MEDIA CORPORATION
THIS OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON THURSDAY, AUGUST 14, 1997, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<C> <C> <C>
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
(for Eligible Institutions Only)
Tender & Exchange Department (212) 815-6213 Tender & Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
FOR CONFIRMATION TELEPHONE:
(800) 507-9357
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF
TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 PROVIDED
BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE(S))
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------------------------------
CERTIFICATE(S) TENDERED
(ATTACH ADDITIONAL LIST IF NECESSARY)
- --------------------------------------------------------------------------------------------------------
TOTAL NUMBER OF SHARES
CERTIFICATE NUMBER(S)* REPRESENTED BY CERTIFICATE(S)** NUMBER OF SHARES TENDERED**
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Total Shares.......................................................
- --------------------------------------------------------------------------------------------------------
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by any certificates
delivered to the Depositary are being tendered. See Instruction 4.
- --------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
This Letter of Transmittal is to be completed by stockholders of Katz Media
Group, Inc. (the "Company") if certificates representing Shares (as defined
below) ("Share Certificates") are to be forwarded herewith or, unless an Agent's
Message (as defined in the Offer to Purchase (as defined below)) is utilized, if
delivery of Shares is to be made by book-entry transfer to the Depositary's
account at The Depository Trust Company ("DTC") or the Philadelphia Depository
Trust Company ("PDTC") (hereinafter collectively referred to as the "Book-Entry
Transfer Facilities") pursuant to the procedures set forth in Section 3 of the
Offer to Purchase.
Stockholders whose Share Certificates are not immediately available or who
cannot deliver their Share Certificates and all other documents required hereby
to the Depositary prior to the Expiration Date (as defined in the Offer to
Purchase), or who cannot comply with the book-entry transfer procedures on a
timely basis, may nevertheless tender their Shares pursuant to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase. See
Instruction 2. Delivery of documents to a Book-Entry Transfer Facility in
accordance with such Book-Entry Transfer Facility's procedures does not
constitute delivery to the Depositary.
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution_______________________________________________
Check Box of Applicable Book-Entry Transfer Facility:
[ ] DTC [ ] PDTC
Account Number______________________________________________________________
Transaction Code Number_____________________________________________________
[ ] CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)_____________________________________________
Window Ticket No. (if any)__________________________________________________
Date of Execution of Notice of Guaranteed Delivery__________________________
Name of Institution which Guaranteed Delivery_______________________________
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Morris Acquisition Corporation, a
Delaware corporation ("Purchaser") and a jointly owned subsidiary of Chancellor
Broadcasting Corporation, a Delaware corporation ("Chancellor"), and Evergreen
Media Corporation, a Delaware corporation ("Evergreen" and together with
Chancellor, the "Parents"), the above-described shares of Common Stock, par
value $.01 per share (the "Shares"), of Katz Media Group, Inc., a Delaware
corporation (the "Company"), pursuant to Purchaser's offer to purchase any and
all outstanding Shares at a purchase price of $11.00 per Share (the "Offer
Price"), net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated July 18,
1997 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in
this Letter of Transmittal (which, together with the Offer to Purchase, as each
may be amended and supplemented from time to time, constitute the "Offer").
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, the undersigned hereby sells, assigns and transfers to or
upon the order of Purchaser all right, title and interest in and to all the
Shares that are being tendered hereby and any and all other Shares or other
securities issued or issuable in respect thereof on or after July 18, 1997 (a
"Distribution") and appoints the Depositary the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Shares (and any
Distributions), with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (a) deliver
Share Certificates (and any Distributions), or transfer ownership of such Shares
(and any Distributions) on the account books maintained by any of the Book-Entry
Transfer Facilities, together, in any such case, with all accompanying evidences
of transfer and authenticity, to or upon the order of Purchaser, (b) present
such Shares (and any Distributions) for transfer on the books of the Company,
and (c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares (and any Distributions), all in accordance with the
terms and subject to the conditions of the Offer.
The undersigned hereby irrevocably appoints designees of Purchaser as the
attorneys and proxies of the undersigned, each with full power of substitution,
to exercise all voting and other rights of the undersigned in such manner as
each such attorney and proxy or his substitute shall in his sole judgment deem
proper, with respect to all of the Shares tendered hereby which have been
accepted for payment by Purchaser prior to the time of any vote or other action
(and any Distributions), at any meeting of stockholders of the Company (whether
annual or special and whether or not an adjourned meeting) or otherwise. This
power of attorney and proxy are irrevocable, are coupled with an interest in the
Shares tendered hereby, and are granted in consideration of, and effective upon,
the acceptance for payment of such Shares by Purchaser in accordance with the
terms of the Offer. Such acceptance for payment shall revoke any other proxy or
written consent granted by the undersigned at any time with respect to such
Shares (and any Distributions), and no subsequent proxies will be given or
written consents executed by the undersigned (and if given or executed, will not
be deemed effective).
<PAGE> 3
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any Distributions) and that when the same are accepted for
payment by Purchaser, Purchaser will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claims. The undersigned will, upon request, execute
and deliver any additional documents deemed by the Depositary or Purchaser to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby (and any Distributions). All authority herein conferred
or agreed to be conferred shall survive the death or incapacity of the
undersigned, and any obligation of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned. Except as stated in the Offer, this tender is irrevocable.
The undersigned understands that the tender of Shares pursuant to any one
of the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute an agreement between the undersigned and
Purchaser upon the terms and subject to the conditions of the Offer. The
undersigned acknowledges that no interest will be paid on the Offer Price for
tendered Shares regardless of any extension of the Offer or any delay in making
such payment.
Unless otherwise indicated in the box entitled "Special Payment
Instructions," please issue the check for the purchase price of any Shares
purchased, and return any Share Certificates evidencing any Shares not tendered
or not purchased, in the name(s) of the undersigned (and, in the case of Shares
tendered by book-entry transfer, by credit to the account at the Book-Entry
Transfer Facility designated above). Similarly, unless otherwise indicated in
the box entitled "Special Delivery Instructions," please mail the check for the
purchase price of any Shares purchased and return any Share Certificates
evidencing any Shares not tendered or not purchased (and accompanying documents,
as appropriate) to the undersigned at the address shown below the undersigned's
signature(s). In the event that the boxes entitled "Special Payment
Instructions" and "Special Delivery Instructions" are both completed, please
issue the check for the purchase price of any Shares purchased and return any
Share Certificates evidencing any Shares not tendered or not purchased in the
name(s) of, and mail said check and Share Certificates to, the person(s) so
indicated. The undersigned acknowledges that Purchaser has no obligation,
pursuant to the "Special Payment Instructions," to transfer any Shares from the
name of the registered holder(s) thereof if Purchaser does not accept for
payment any of the Shares so tendered.
============================================================
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase To be completed ONLY if the check for the purchase
price of Shares purchased or Share Certificates price of Shares purchased or Share Certificates
evidencing Shares not tendered or not purchased are evidencing Shares not tendered or not purchased are
to be issued in the name of someone other than the to be mailed to someone other than the undersigned,
undersigned, or if Shares tendered hereby and or to the undersigned at an address other than that
delivered by book-entry transfer which are not shown under the undersigned's signature.
purchased are to be returned by credit to an account
at one of the Book-Entry Transfer Facilities other Mail: [ ] check [ ] Share Certificate(s) to:
than that designated above. Name(s): __________________________________________
Issue: [ ] check [ ] Share Certificate(s) to: (Please Print)
Name: ______________________________________________ Address: ____________________________________________
(Please Print) _____________________________________________________
Address: ____________________________________________ (Zip Code)
_____________________________________________________
_____________________________________________________ (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(Zip Code) (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
_____________________________________________________
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
Credit Shares delivered by book-entry transfer and
not purchased to the account set forth below:
Check appropriate box:
[ ] DTC [ ] PDTC
Account Number __________________________________
</TABLE>
============================================================
<PAGE> 4
IMPORTANT
STOCKHOLDERS: SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
________________________________________________________________________________
________________________________________________________________________________
(SIGNATURE(S) OF HOLDER(S))
DATED:______________________________, 1997
(Must be signed by the registered holder(s) exactly as such holder(s)
name(s) appear(s) on the Share Certificate(s) or on a security position listing
or by a person(s) authorized to become the registered holder(s) of such Share
Certificate(s) by certificates and documents transmitted herewith. If signature
is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of
a corporation or other person acting in a fiduciary or representative capacity,
please provide the following information and see Instruction 5.)
NAME(S):________________________________________________________________________
(PLEASE PRINT)
CAPACITY (FULL TITLE):__________________________________________________________
ADDRESS:________________________________________________________________________
(INCLUDE ZIP CODE)
AREA CODE AND TELEPHONE NO.:____________________________________________________
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.:_________________________________
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
AUTHORIZED SIGNATURE:___________________________________________________________
NAME:___________________________________________________________________________
(PLEASE TYPE OR PRINT)
TITLE:__________________________________________________________________________
NAME OF FIRM:___________________________________________________________________
ADDRESS:________________________________________________________________________
(INCLUDE ZIP CODE)
AREA CODE AND TELEPHONE NO.:____________________________________________________
DATED:______________________________, 1997
<PAGE> 5
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, signatures
on all Letters of Transmittal must be guaranteed by a firm that is a bank,
broker, dealer, credit union, savings association or other entity which is a
member in good standing of the Securities Transfer Agents Medallion Program or
by any other bank, broker, dealer, credit union, savings association or other
entity which is an "eligible guarantor institution," as such term is defined in
Rule 17Ad15 under the Securities Exchange Act of 1934, as amended (each of the
foregoing constituting an "Eligible Institution"), unless the Shares tendered
thereby are tendered (i) by a registered holder of Shares who has not completed
either the box labeled "Special Payment Instructions" or the box labeled
"Special Delivery Instructions" on this Letter of Transmittal or (ii) for the
account of an Eligible Institution. See Instruction 5. If Share Certificates are
registered in the name of a person or persons other than the signer of this
Letter of Transmittal, or if payment is to be made or delivered to, or
certificates evidencing unpurchased Shares are to be issued or returned to, a
person other than the registered owner or owners, then the tendered Share
Certificates must be endorsed or accompanied by duly executed stock powers, in
either case signed exactly as the name or names of the registered owner or
owners appear on the Share Certificates, with the signatures on the Share
Certificates or stock powers guaranteed by an Eligible Institution as provided
herein. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter of
Transmittal is to be used if Share Certificates are to be forwarded herewith or,
unless an Agent's Message (as defined in the Offer to Purchase) is utilized, if
the delivery of Shares is to be made by book-entry transfer pursuant to the
procedures set forth in Section 3 of the Offer to Purchase. Certificates for all
physically delivered Shares, or a confirmation of a book-entry transfer into the
Depositary's account at one of the Book-Entry Transfer Facilities of all Shares
delivered electronically, as well as a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof) and any other
documents required by this Letter of Transmittal, or an Agent's Message in the
case of a book-entry transfer, must be received by the Depositary at one of its
addresses set forth on the front page of this Letter of Transmittal by the
Expiration Date (as defined in the Offer to Purchase). Stockholders who cannot
deliver their Share Certificates and all other required documents to the
Depositary by the Expiration Date must tender their Shares pursuant to the
guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
Pursuant to such procedure: (a) such tender must be made by or through an
Eligible Institution; (b) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form provided by Purchaser, must be
received by the Depositary prior to the Expiration Date; and (c) Share
Certificates for all tendered Shares, in proper form for tender, or a
confirmation of a book-entry transfer into the Depositary's account at one of
the Book-Entry Transfer Facilities of all Shares delivered electronically, as
well as a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof), and any other documents required by this
Letter of Transmittal, must be received by the Depositary within three New York
Stock Exchange trading days after the date of execution of such Notice of
Guaranteed Delivery, all as provided in Section 3 of the Offer to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted. By
execution of this Letter of Transmittal (or a manually signed facsimile
thereof), all tendering stockholders waive any right to receive any notice of
the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the Share
Certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all of the Shares represented by any Share Certificate
delivered to the Depositary are to be tendered, fill in the number of Shares
which are to be tendered in the box entitled "Number of Shares Tendered." In
such case, a new Share Certificate for the remainder of the Shares represented
by the old Share Certificate will be sent to the person(s) signing this Letter
of Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions," as promptly as practicable following the expiration or
termination of the Offer. All Shares represented by Share Certificates delivered
to the Depositary will be deemed to have been tendered unless otherwise
indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificate(s) without alteration, enlargement or any
other change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
persons, all such persons must sign this Letter of Transmittal.
<PAGE> 6
If any of the Shares tendered hereby are registered in different names on
different Share Certificates, it will be necessary to complete, sign and submit
as many separate Letters of Transmittal as there are different registrations of
Share Certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificate(s) or separate
stock powers are required, unless payment of the purchase price is to be made,
or Share Certificate(s) evidencing Shares not tendered or not purchased are to
be returned, in the name of any person other than the registered holder(s).
Signatures on any such Share Certificate(s) or stock powers must be guaranteed
by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signature(s) on any
such Share Certificate(s) or stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing and proper evidence
satisfactory to Purchaser of the authority of such person so to act must be
submitted.
6. STOCK TRANSFER TAXES. Purchaser will pay any stock transfer taxes with
respect to the sale and transfer of any Shares to it or its order pursuant to
the Offer. If, however, payment of the purchase price is to be made to, or Share
Certificates evidencing Shares not tendered or not purchased are to be returned
in the name of, any person other than the registered holder(s) of such Shares,
then the amount of any stock transfer taxes (whether imposed on the registered
holder(s), such other person or otherwise) payable on account of the transfer to
such person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes, or exemption therefrom, is submitted.
Except as provided in this Instruction 6, it will not be necessary for transfer
tax stamps to be affixed to the Share Certificate(s) listed in this Letter of
Transmittal.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the purchase
price of any Shares purchased is to be issued, or any Share Certificate(s)
evidencing Shares not tendered or not purchased are to be returned, in the name
of a person other than the person(s) signing this Letter of Transmittal or if
the check or any Share Certificate(s) evidencing Shares not tendered or not
purchased are to be mailed to someone other than the person(s) signing this
Letter of Transmittal or to the person(s) signing this Letter of Transmittal at
an address other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed. Shareholders tendering Shares by book-entry
transfer may request that Shares not purchased be credited to such account at
any of the Book-Entry Transfer Facilities as such stockholder may designate in
the box entitled "Special Payment Instructions." If no such instructions are
given, any such Shares not purchased will be returned by crediting the account
at the Book-Entry Transfer Facilities designated above.
8. SUBSTITUTE FORM W-9. The tendering holder of Shares is required to
provide the Depositary with such holder's correct taxpayer identification number
("TIN") on Substitute Form W-9, which is provided below, unless an exemption
applies. In the case of any holder who has completed the box entitled "Special
Payment Instructions," however, the correct TIN on Substitute Form W-9 should be
provided for the recipient of the payment pursuant to such instructions. Failure
to provide the information on the Substitute Form W-9 may subject the tendering
holder of Shares to a $50 penalty and to 31% federal income tax backup
withholding on the payment of the purchase price for the Shares.
9. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Information Agent or the
Dealer Manager at their respective addresses and telephone numbers set forth on
the back cover of the Offer to Purchase. Additional copies of the Offer to
Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other
related materials may be obtained from the Information Agent or from brokers,
dealers, commercial banks and trust companies.
THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE COPY HEREOF
(TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL
OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY
THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO
PURCHASE).
<PAGE> 7
IMPORTANT TAX INFORMATION
Under the federal income tax law, a holder of Shares whose tendered Shares
are accepted for payment is required by law to provide the Depositary (as payer)
with such holder's correct TIN on Substitute Form W-9 below. The holder of
Shares must also state that (i) such holder has not been notified by the
Internal Revenue Service that such holder is subject to backup withholding as a
result of a failure to report all interest or dividends or (ii) the Internal
Revenue Service has notified such holder that such holder is no longer subject
to backup withholding. If the Depositary is not provided with the correct TIN,
the holder of Shares may be subject to a $50 penalty imposed by the Internal
Revenue Service and payments made to such holder may be subject to backup
withholding.
Certain holders of Shares (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, such individual must submit a statement, signed under
penalties of perjury, attesting to such individual's exempt status. Forms of
such statements can be obtained from the Depositary. See the enclosed Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the holder of Shares. Backup withholding is not an
additional tax. Rather, the tax withheld pursuant to backup withholding rules
will be available as a credit against such holder's tax liabilities. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
WHAT NUMBER TO GIVE THE DEPOSITARY
If the holder of Shares is an individual, the correct TIN is his or her
social security number. In other cases, the correct TIN may be the employer
identification number of the record holder of the Shares tendered hereby. If the
Shares are in more than one name or are not in the name of the actual owner,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidance on which number to report.
If the tendering holder of Shares has not been issued a TIN and has applied for
a number or intends to apply for a number in the near future, the holder should
write "Applied For" in the space provided for the TIN in Part III of the
Substitute Form W-9, and sign and date the Substitute Form W-9. If "Applied For"
is written in Part III of the Substitute Form W-9 and the Depositary is not
provided with a TIN within thirty (30) days, the Depositary may withhold 31% of
all payments of the purchase price to such holder until a TIN is provided to the
Depositary.
<PAGE> 8
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
PAYER'S NAME: THE BANK OF NEW YORK
- --------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- Taxpayer Identification PART III -- Social Security Number
Number -- For all accounts, enter OR Employer Identification Number
FORM W-9 taxpayer identification number in
the box at right. (For most
DEPARTMENT OF THE TREASURY individuals this is your social
INTERNAL REVENUE SERVICE security number. If you do not
have a number, see OBTAINING A
PAYOR'S REQUEST FOR TAXPAYER NUMBER in the enclosed ---------------------------------
IDENTIFICATION NO. (TIN) Guidelines.). Certify by signing
and dating below. (If awaiting TIN write "Applied
For")
NOTE: If the account is in more
than one name, see chart in the
enclosed Guidelines to determine
which number to give the payer.
- --------------------------------------------------------------------------------------------------------
PART II -- For Payees exempt from backup withholding, see the enclosed Guidelines and complete as
instructed therein.
- --------------------------------------------------------------------------------------------------------
</TABLE>
CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me); and
(2) I am not subject to backup withholding either because (a) I have not been
notified by the Internal Revenue Service (IRS) that I am subject to backup
withholding as a result of a failure to report all interest or dividends,
or (b) the IRS has notified me that I am no longer subject to backup
withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if, after
being notified by the IRS that you were subject to backup withholding, you
received another notification from the IRS that you were no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
<TABLE>
<S> <C> <C>
SIGNATURE DATE _______________________________________________________________________
NAME ___________________________________________________________________________________
ADDRESS ________________________________________________________________________________
CITY __________________________________ STATE ______________________ ZIP __________
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER AND THE MERGER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING (OR WILL SOON
APPLY FOR) A TAXPAYER IDENTIFICATION NUMBER
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand
that, notwithstanding the information I provided in Part III of the Substitute
Form W-9 (and the fact that I have completed this Certificate of Awaiting
Taxpayer Identification Number), if I do not provide a correct taxpayer
identification number to the Depositary within thirty (30) days, 31% of all
reportable payments made to me pursuant to the Offer and Merger may be withheld.
<TABLE>
<S> <C>
______________________________________________ ______________________________________________
Signature Date
</TABLE>
The Information Agent for the Offer is:
[MACKENZIE PARTNERS INC. LOGO]
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(800) 322-2885 (TOLL FREE)
(212) 929-5500 (CALL COLLECT)
<PAGE> 9
The Dealer Manager for the Offer is:
SMITH BARNEY INC.
388 GREENWICH STREET
NEW YORK, NEW YORK 10013
(212) 816-8820 OR (212) 816-8781
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY FOR
TENDER OF SHARES OF COMMON STOCK
OF
KATZ MEDIA GROUP, INC.
TO
MORRIS ACQUISITION CORPORATION
A JOINTLY OWNED SUBSIDIARY
OF
CHANCELLOR BROADCASTING COMPANY
AND
EVERGREEN MEDIA CORPORATION
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Offer (as defined below) if certificates
evidencing shares of Common Stock, par value $.01 per share (the "Shares"), of
Katz Media Group, Inc., a Delaware corporation (the "Company"), are not
immediately available, or if the procedure for book-entry transfer cannot be
completed on a timely basis or time will not permit all required documents to
reach the Depositary on or prior to the Expiration Date (as defined in the Offer
to Purchase, dated July 18, 1997 (the "Offer to Purchase")). Such form may be
delivered by hand or facsimile transmission or mail to the Depositary. See
Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<C> <C> <C>
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
(for Eligible Institutions Only)
Tender & Exchange Department (212) 815-6213 Tender & Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
FOR CONFIRMATION TELEPHONE:
(800) 507-9357
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to Morris Acquisition Corporation, a
Delaware corporation and a jointly owned subsidiary of Chancellor Broadcasting
Company, a Delaware corporation, and Evergreen Media Corporation, a Delaware
corporation, upon the terms and subject to the conditions set forth in the Offer
to Purchase and the related Letter of Transmittal (which, as amended and
supplemented from time to time, together constitute the "Offer"), receipt of
which is hereby acknowledged, the number of Shares specified below pursuant to
the guaranteed delivery procedures described in Section 3 of the Offer to
Purchase.
Number of Shares:_______________________________________________________________
Certificate Nos. (If Available):________________________________________________
Check ONE box if Shares will be delivered by book-entry transfer:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number:_________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
SIGNATURE(S) OF HOLDER(S)
Dated:______________________________, 1997
Name(s) of Holder(s):
________________________________________________________________________________
________________________________________________________________________________
PLEASE TYPE OR PRINT
________________________________________________________________________________
ADDRESS
________________________________________________________________________________
ZIP CODE
________________________________________________________________________________
AREA CODE AND TELEPHONE NO.
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings association
or other equity which is a member in good standing of the Securities Transfer
Agents Medallion Program or a bank, broker, dealer, credit union, savings
association or other entity which is an "eligible guarantor institution," as
such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934,
as amended (each of the foregoing constituting an "Eligible Institution"),
guarantees the delivery to the Depositary of the Shares tendered hereby,
together with a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof) and any other required documents, or an
Agent's Message (as defined in the Offer to Purchase) in the case of a
book-entry transfer of Shares, all within three New York Stock Exchange trading
days of the date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates representing Shares to the Depositary within the time period set
forth herein. Failure to do so could result in a financial loss to such Eligible
Institution.
________________________________________________________________________________
NAME OF FIRM
________________________________________________________________________________
ADDRESS
________________________________________________________________________________
ZIP CODE
________________________________________________________________________________
AREA CODE AND TELEPHONE NO.
________________________________________________________________________________
AUTHORIZED SIGNATURE
________________________________________________________________________________
TITLE
NAME:___________________________________________________________________________
PLEASE TYPE OR PRINT
DATED:________________________ , 1997
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE.
SHARE CERTIFICATES SHOULD BE SENT WITH YOUR
LETTER OF TRANSMITTAL.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ANY AND ALL OUTSTANDING SHARES OF COMMON STOCK
OF
KATZ MEDIA GROUP, INC.
AT
$11.00 NET PER SHARE
BY
MORRIS ACQUISITION CORPORATION
A JOINTLY OWNED SUBSIDIARY OF
CHANCELLOR BROADCASTING COMPANY
AND
EVERGREEN MEDIA CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, AUGUST 14, 1997, UNLESS THE OFFER IS EXTENDED.
July 18, 1997
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Smith Barney Inc. is acting as Dealer Manager to Morris Acquisition
Corporation, a Delaware corporation ("Purchaser") and a jointly owned subsidiary
of Chancellor Broadcasting Company, a Delaware corporation ("Chancellor"), and
Evergreen Media Corporation, a Delaware corporation ("Evergreen" and, together
with "Chancellor," the "Parents"), in connection with Purchaser's offer to
purchase any and all outstanding shares of Common Stock, par value $.01 per
share (the "Shares"), of Katz Media Group, Inc., a Delaware corporation (the
"Company"), at a purchase price of $11.00 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
in the Offer to Purchase, dated July 18, 1997 (the "Offer to Purchase"), and in
the related Letter of Transmittal (which, as amended and supplemented from time
to time, together constitute the "Offer") enclosed herewith. All capitalized
terms used but not defined herein shall have the meaning ascribed to them in the
Offer to Purchase.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares in your name or in the name of your nominee.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated July 18, 1997.
2. The Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of Transmittal
(with manual signatures) may be used to tender Shares.
3. A letter to stockholders of the Company from Thomas F. Olson,
President, Chief Executive Officer and Director of the Company, together
with a Solicitation/Recommendation Statement on Schedule 14D-9 filed with
the Securities and Exchange Commission by the Company and mailed to the
stockholders of the Company, each recommending that the Company's
stockholders accept the Offer and tender their Shares.
4. The Notice of Guaranteed Delivery to be used to tender Shares
pursuant to the Offer if none of the procedures for tendering Shares set
forth in the Offer to Purchase can be completed on a timely basis.
5. A printed form of letter which may be sent to your clients for
whose accounts you hold Shares registered in your name or in the name of
your nominee, with space provided for obtaining such clients' instructions
with regard to the Offer.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
7. A return envelope addressed to The Bank of New York, as Depositary
(the "Depositary").
<PAGE> 2
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, AUGUST 14, 1997, UNLESS THE
OFFER IS EXTENDED.
---------------------
Please note the following:
1. The tender price is $11.00 per Share, net to the seller in cash,
without interest thereon.
2. The Offer is being made for any and all of the outstanding Shares.
3. The Offer is being made pursuant to the Merger Agreement, dated as
of July 14, 1997, by and among the Parents, Purchaser and the Company. The
Board of Directors of the Company and its disinterested directors have
unanimously approved the Offer, the Merger, the Merger Agreement and the
Stockholder Agreement (as defined in the Offer to Purchase) and have
determined that the Offer and the Merger are fair to and in the best
interests of the Company's stockholders and recommend that the Company's
stockholders accept the Offer and tender their Shares pursuant to the
Offer.
4. The Offer is conditioned upon, among other things, (i) there having
been validly tendered, and not properly withdrawn, that number of Shares
representing at least a majority of all outstanding Shares on a fully
diluted basis, (ii) the expiration or termination of any applicable waiting
periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and (iii) the satisfaction of certain other terms and conditions
set forth in the Offer to Purchase.
5. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in the Letter of Transmittal, stock
transfer taxes on the transfer of Shares pursuant to the Offer.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and pay for all Shares which
are validly tendered and not properly withdrawn on or prior to the Expiration
Date (as defined in the Offer to Purchase). In order to take advantage of the
Offer, (i) a duly executed and properly completed Letter of Transmittal (or a
manually signed facsimile thereof) and any required signature guarantees or, in
the case of a book-entry transfer, an Agent's Message, and any other required
documents should be sent to the Depositary and (ii) certificates representing
the tendered Shares (the "Share Certificates") or a timely Book-Entry
Confirmation should be delivered to the Depositary in accordance with the
instructions set forth in the Offer to Purchase and the Letter of Transmittal.
Holders of Shares whose Share Certificates' are not immediately available
or who cannot deliver their Share Certificates and all other required documents
to the Depositary or complete the procedures for book-entry transfer prior to
the Expiration Date must tender their Shares according to the guaranteed
delivery procedures set forth in Section 3 of the Offer to Purchase.
None of Purchaser, the Parents nor any officer, director, stockholder,
agent or other representative of Purchaser will pay any fees or commissions to
any broker, dealer or other person (other than the Dealer Manager, the
Depositary and the Information Agent as described in the Offer to Purchase) for
soliciting tenders of Shares pursuant to the Offer. Purchaser will, however,
upon request, reimburse you for customary mailing and handling expenses incurred
by you in forwarding any of the enclosed materials to your clients. Purchaser
will pay or cause to be paid any stock transfer taxes payable on the transfer of
Shares to it, except as otherwise provided in Instruction 6 to the Letter of
Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
MacKenzie Partners, Inc. (the "Information Agent"), 156 Fifth Avenue, New York,
New York, (212) 929-5500 or (800) 322-2885.
Requests for copies of the enclosed materials may be directed to the
Information Agent at the above address and telephone number.
Very truly yours,
SMITH BARNEY INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE PARENTS, PURCHASER, THE DEPOSITARY, THE
INFORMATION AGENT, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF THE FOREGOING,
OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT
ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ANY AND ALL OUTSTANDING SHARES OF COMMON STOCK
OF
KATZ MEDIA GROUP, INC.
AT
$11.00 NET PER SHARE
BY
MORRIS ACQUISITION CORPORATION
A JOINTLY OWNED SUBSIDIARY OF
CHANCELLOR BROADCASTING COMPANY
AND
EVERGREEN MEDIA CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, AUGUST 14, 1997, UNLESS THE OFFER IS EXTENDED.
July 18, 1997
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated July 18,
1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as
amended or supplemented from time to time, together constitute the "Offer")
relating to an offer by Morris Acquisition Corporation, a Delaware corporation
("Purchaser") and a jointly owned subsidiary of Chancellor Broadcasting Company,
a Delaware corporation ("Chancellor"), and Evergreen Media Corporation, a
Delaware corporation ("Evergreen" and together with Chancellor, the "Parents"),
to purchase any and all outstanding shares of Common Stock, par value $.01 per
share (the "Shares"), of Katz Media Group, Inc., a Delaware corporation (the
"Company"), at a purchase price of $11.00 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
in the Offer.
This material is being forwarded to you as the beneficial owner of Shares
carried by us in your account but not registered in your name.
A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND
PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR
YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR
YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish to tender any
or all of the Shares held by us for your account, upon the terms and subject to
the conditions set forth in the Offer to Purchase.
Please note the following:
1. The tender price is $11.00 per Share, net to the seller in cash,
without interest thereon.
2. The Offer is being made for any and all of the outstanding Shares.
3. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Thursday, August 14, 1997, unless the Offer is extended.
4. The Offer is conditioned upon (i) there having been validly
tendered, and not properly withdrawn, pursuant to the Offer that number of
Shares representing at least a majority of all outstanding Shares on a
fully diluted basis,
<PAGE> 2
(ii) the expiration or termination of any applicable waiting periods under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
(iii) the satisfaction of certain other terms and conditions set forth in
the Offer to Purchase.
5. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in the Letter of Transmittal, stock
transfer taxes on the transfer of Shares pursuant to the Offer.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction form
contained in this letter. An envelope to return your instruction to us is
enclosed. If you authorize tender of your Shares, all such Shares will be
tendered unless otherwise indicated in such instruction form. PLEASE FORWARD
YOUR INSTRUCTIONS TO US AS SOON AS POSSIBLE TO ALLOW US AMPLE TIME TO TENDER
YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
The Offer is made solely pursuant to the Offer to Purchase and the related
Letter of Transmittal and any supplements or amendments thereto. The Offer is
not being made to, nor will tenders be accepted from or on behalf of, holders of
Shares residing in any jurisdiction in which the making of the Offer or
acceptance thereof would not be in compliance with the securities laws of such
jurisdiction.
_____________________
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH
ANY AND ALL OUTSTANDING SHARES OF COMMON STOCK
OF
KATZ MEDIA GROUP, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated July 18, 1997 (the "Offer to Purchase"), and the related
Letter of Transmittal (which together constitute the "Offer") in connection with
the offer by Morris Acquisition Corporation, a Delaware corporation
("Purchaser"), and a jointly owned subsidiary of Chancellor Broadcasting
Company, a Delaware corporation, and Evergreen Media Corporation, a Delaware
corporation, to purchase any and all outstanding shares of Common Stock, par
value $.01 per share (the "Shares"), of Katz Media Group, Inc., a Delaware
corporation.
This will instruct you to tender to Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) which are held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer to Purchase.
Date: ________________, 1997
NUMBER OF SHARES OF COMMON STOCK TO BE TENDERED:*_______________________________
Account Number:_________________________________________________________________
SIGN HERE
________________________________________________________________________________
(Signature(s))
________________________________________________________________________________
(Print Name(s))
________________________________________________________________________________
(Print Address(es))
________________________________________________________________________________
(Area Code and Telephone Number(s))
________________________________________________________________________________
(Taxpayer Identification or Social Security Number(s))
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<CAPTION>
==============================================================
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- --------------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- --------------------------------------------------------------
<C> <S> <C>
1. Individual The individual
2. Two or more individuals (joint The actual owner of the
account) account or, if combined
funds, the first
individual on the
account(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, either person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the
minor is the only
contributor, the
minor(1)
6. Account in the name of guardian The ward, minor or
or committee for a designated incompetent person(3)
ward, minor or incompetent
person
7. a. The usual revocable savings The grantor- trustee(1)
trust account (grantor is
also trustee) The actual owner(1)
b. So-called trust account that
is not a legal or valid
trust under State law
8. Sole proprietorship The owner(4)
9. A valid trust, estate or The legal entity(5)
pension trust
10. Corporate The corporation
11. Religious, charitable, or The organization
educational organization
12. Partnership account held in the The partnership
name of the business
13. Association, club or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district or prison) that
receives agricultural program
payments
==============================================================
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) The name of the owner must be shown.
(5) List first and circle the name of the legal trust, estate or pension trust.
Do not furnish the identification number of the personal representative or
trustee unless the legal entity itself is not designated in the account
title.
NOTE:If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees generally exempted from backup withholding on payments include the
following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under Section 501(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), or an individual retirement plan.
- - The United States or any agency or instrumentality thereof.
- - A State, the District of Columbia, a possession of the United States or any
political subdivision or instrumentality thereof.
- - A foreign government, a political subdivision of a foreign government or any
agency or instrumentality thereof.
- - An international organization or any agency or instrumentality thereof.
- - A dealer in securities or commodities required to register in the United
States or a possession thereof.
- - A real estate investment trust.
- - A common trust fund operated by a bank under Section 584(a) of the Code.
- - An entity registered at all times during the tax year under the Investment
Company Act of 1940.
- - A foreign central bank of issue.
Payments of dividends and patronage dividends generally not subject to backup
withholding include the following:
- - Payments to nonresident aliens subject to withholding under Section 1441 of
the Code.
- - Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
- - Payments of patronage dividends where the amount received is not paid in
money.
- - Payments made by certain foreign organizations.
Payments of interest generally not subject to backup withholding include the
following:
- - Payments of interest on obligations issued by individuals. Note: Payees may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and the payee has not provided his
or her correct taxpayer identification number to the payer.
- - Payments of tax-exempt interest (including exempt-interest dividends under
Section 852 of the Code).
- - Payments described in Section 6049(b)(5) of the Code to nonresident aliens.
- - Payments on tax-free covenant bonds under Section 1451 of the Code.
- - Payments made by certain foreign organizations.
Exempt payees described above must still complete the Substitute Form W-9
enclosed herewith to avoid possible erroneous backup withholding. FILE
SUBSTITUTE FORM W-9 WITH THE PAYER, REMEMBERING TO CERTIFY YOUR TAXPAYER
IDENTIFICATION NUMBER ON THE FORM AND WRITE "EXEMPT" ON THE FACE OF THE FORM.
Payments that are not subject to information reporting are also not subject to
backup withholding. For details, see the regulations under sections 6041,
6041A(a), 6042, 6044, 6045, 6049, 6050A and 6050N of the Code.
PRIVACY ACT NOTICE. -- Section 6109 of the Code requires most recipients of
dividend, interest or other payments to give taxpayer identification numbers to
payers who must report the payments to the IRS. The IRS uses the numbers for
identification purposes and to help verify the accuracy of the recipient's tax
return. Payers must be given the numbers whether or not recipients are required
to file tax returns. Payers must generally withhold 31% of taxable interest,
dividend and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your correct taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup imposition of withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE> 1
EXHIBIT (a)(7)
News Announcement
FOR IMMEDIATE RELEASE
EVERGREEN MEDIA AND CHANCELLOR BROADCASTING
TO ACQUIRE KATZ MEDIA GROUP, NATION'S PREMIER FULL-SERVICE MEDIA
REPRESENTATION FIRM, FOR $11.00 IN CASH PER SHARE
IRVING and DALLAS, TEX. and NEW YORK, N.Y. - July 14, 1997 - Evergreen Media
Corporation (Nasdaq: EVGM), Chancellor Broadcasting Company (Nasdaq: CBCA), Katz
Media Group, Inc. (AMEX: KTZ) and Hicks, Muse, Tate & Furst Incorporated today
announced that Evergreen Media, Chancellor Broadcasting and Katz Media have
entered into a definitive agreement pursuant to which a jointly owned affiliate
of Evergreen Media and Chancellor Broadcasting will acquire Katz Media in a
transaction valued at approximately $373 million. Katz Media will ultimately be
owned by Chancellor Media Corporation upon consummation of the pending merger of
Evergreen Media and Chancellor Broadcasting. Katz Media will retain its name,
organizational identity, management team, personnel, New York headquarters and
65 regional sales offices.
Under the terms of the agreement, which was unanimously approved by the boards
of directors of each of the three public companies, Evergreen Media and
Chancellor Broadcasting will acquire Katz Media through a tender offer in which
Katz Media shareholders will receive $11.00 in cash for each share they hold.
The transaction value is based on the approximately 14.1 million Katz Media
shares and the assumption of approximately $218 million of Katz Media debt.
Shareholders representing approximately 51.6% of Katz Media's outstanding common
stock, including the company's largest shareholder, DLJ Merchant Banking
Partners, L.P., and certain of Katz Media's executive officers, have agreed to
tender their shares in the offer and vote in favor of the transaction. Under the
terms of the agreement, shares not purchased in the tender offer will be
converted in a second-step merger into The right to receive $11.00 per share in
cash subject to statutory dissenters' rights.
(more)
<PAGE> 2
page 2
EVERGREEN MEDIA AND CHANCELLOR BROADCASTING TO ACQUIRE KATZ MEDIA, 7/14/97
Katz Media, with a sales organization of approximately 1,500 people, is the only
full-service media representation firm in the United States serving multiple
types of electronic media, with leading market shares in the representation of
radio and television stations, cable television systems and Internet media
outlets. The company is exclusively retained by over 2,000 radio stations, 340
television stations and 1,390 cable systems and a growing number of Internet Web
sites and other interactive media providers to sell national spot advertising
time throughout the United States and through its Katz International Limited
subsidiary in the United Kingdom. In 1996, Katz Media generated $183 million in
revenues and EBITDA of $44.1 million.
Thomas O. Hicks, Chairman of Chancellor Broadcasting, Chairman and C.E.O. of
Hicks, Muse, Tate & Furst Incorporated and Chairman designate of the new
Chancellor Media Corporation, said, "Hicks Muse, which is one of the most
significant investors in broadcasting and cable properties in the nation and
which will be Chancellor Media's largest shareholder, recognizes that the Katz
Media organization, over its 109-year history, has built a strong franchise and
a quality brand name as the nation's premier media representation company, This
transaction will provide Katz Media with the financial resources and operating
autonomy necessary to retain and attract the most talented personnel and invest
in the most advanced technology and thereby continue to best serve its thousands
of radio, television, cable, new media and Internet clients."
Commenting on the transaction, Scott K. Ginsburg, Chairman and Chief Executive
Officer of Evergreen Media and Chief Executive Officer designate of the new
Chancellor Media Corporation, said, "As the largest client of Katz Media, we
view the opportunity to acquire the company as an excellent strategic and
financial transaction, and we are delighted that the Katz Media team has chosen
to become a key part of the new Chancellor Media Corporation.
"Through this attractively valued transaction, Evergreen Media and Chancellor
Broadcasting are adding a new independent operating unit on a basis that we
expect will be accretive for the new Chancellor Media. As clients, we are
intimately aware of the highly talented, effective sales team which Katz Media's
CEO Tom Olson, radio chief Stu Olds and television head Jim Beloyianis direct.
The organization is a recognized leader in its industry.
(more)
<PAGE> 3
PAGE 3
EVERGREEN MEDIA AND CHANCELLOR BROADCASTING TO ACQUIRE KATZ MEDIA, 7/14/97
"With ongoing, significant listener growth, radio has emerged as a hot
advertising medium, attracting a greater number of national advertisers. This
business combination is intended to allow Evergreen Media, Chancellor
Broadcasting and the many other radio companies served by Katz Media to
continue to capture a growing base of national advertisers. We also expect to
further broaden the Katz Media organization's resources and capabilities to
serve existing clients and new, exciting advertising media such as the
Internet, where Katz Media has already emerged as a leader."
Tom Olson, President and Chief Executive Officer of Katz Media, who will
continue to head the Katz Media management team and organization following
completion of the transaction, commented, "Having known Scott Ginsburg and Jim
de Castro of Evergreen, Steve Dinetz of Chancellor Broadcasting and the
partners of Hicks Muse for many years, we have tracked their rapid growth and
creation of value for their investors. All of us at Katz Media are extremely
pleased to join the Evergreen and Chancellor teams, whose senior executives
have a proven track record and an intimate knowledge of our business and who
share our commitment to the industry. We believe our alliance will further
strengthen Katz Media, creating synergies and efficiencies that will enhance our
ability to serve the needs of our clients, the advertising community and our
employees."
Smith Barney Inc. served as advisor to Evergreen Media and Chancellor
Broadcasting and Donaldson, Lufkin & Jenrette Securities Corporation advised
Katz Media with regard to the transaction. Smith Barney has rendered fairness
opinions to the Boards of Directors of Evergreen Media and Chancellor
Broadcasting. Credit Suisse First Boston has rendered its opinion to the Board
of Directors of Katz Media that the transaction is fair to Katz Media's
stockholders from a financial point of view.
Completion of the transaction is subject to the tender of a majority of Katz
Media shares on a fully diluted basis in the tender offer, shareholder and
regulatory approval, including expiration of the applicable Hart-Scott-Rodino
waiting period, and other customary closing conditions. The offer will be made
only pursuant to definitive offering documents under the Securities Exchange
Act of 1934. The transaction is expected to be consummated in the third quarter
of 1997 and is not subject to financing.
(more)
<PAGE> 4
page 4
EVERGREEN MEDIA AND CHANCELLOR BROADCASTING TO ACQUIRE KATZ MEDIA, 7/14/97
Chancellor Media Corporation will be formed by the currently pending merger of
Evergreen Media Corporation and Chancellor Broadcasting Company, as well as
radio properties acquired from Viacom Inc. and the acquisition of five radio
stations from Pacific and Southern Company, Inc., a wholly-owned subsidiary of
Gannett Company, Inc. Upon consummation of all announced transactions,
Chancellor Media will own and operate 98 radio stations in 21 of the nation's
largest markets.
The above statements contain forward-looking statements. Such forward-looking
statements are subject to inherent uncertainties and to a wide variety of
significant business, economic and competitive risks. Such uncertainties and
risks include, among others: certain risks associated with the closing and
integration of acquisitions; competition; government regulation; general
economic and business conditions; and dependence on key personnel. Actual
events, circumstances, effects and results may vary significantly from those
included in or contemplated or implied by such forward-looking statements.
Consequently, the forward-looking statements contained herein should not be
regarded as representations by Evergreen, Chancellor or any other person that
the projected outcomes can or will be achieved.
CONTACTS:
Evergreen Media Corporation Jaffoni & Collins Incorporated
Matthew E. Devine David C. Collins
Chief Financial Officer Joseph N. Jaffoni
972-869-9020 212/505-3015
Katz Media Group, Inc. Chancellor Broadcasting Company and
Ellen Strahs Fader Hicks, Muse, Tate & Furst Incorporated
212/424-6863 Roy Winnick
Kekst and Company
212/521-4842
# # #
<PAGE> 1
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated July 18,
1997 and the related Letter of Transmittal, and any amendments or supplements
thereto, and is being made to all holders of Shares. Purchaser is not aware of
any state where the making of the Offer is prohibited by administrative or
judicial action pursuant to any valid state statute. If Purchaser becomes aware
of any valid state statute prohibiting the making of the Offer or the acceptance
of Shares pursuant thereto, Purchaser will make a good faith effort to comply
with such state statute. If, after such good faith effort, Purchaser cannot
comply with such state statute, the Offer will not be made to (nor will tenders
be accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of Purchaser by Smith Barney Inc. ("Smith Barney") or one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ANY AND ALL OUTSTANDING SHARES OF COMMON STOCK
OF
KATZ MEDIA GROUP, INC.
AT
$11.00 NET PER SHARE
BY
MORRIS ACQUISITION CORPORATION
A JOINTLY OWNED SUBSIDIARY OF
CHANCELLOR BROADCASTING COMPANY
AND
EVERGREEN MEDIA CORPORATION
Morris Acquisition Corporation, a Delaware corporation ("Purchaser") and a
jointly owned subsidiary of Chancellor Broadcasting Company, a Delaware
corporation ("Chancellor"), and Evergreen Media Corporation, a Delaware
corporation ("Evergreen" and together with Chancellor, the "Parents"), is
offering to purchase any and all outstanding shares of Common Stock, par value
$.01 per share (the "Shares"), of Katz Media Group, Inc., a Delaware corporation
(the "Company"), at a price of $11.00 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
in the Offer to Purchase, dated July 18, 1997 (the "Offer to Purchase"), and in
the related Letter of Transmittal (which, as amended and supplemented from time
to time, together constitute the "Offer"). Following the Offer, Purchaser
intends to effect the merger described below. All capitalized terms used but not
otherwise defined herein shall have the meaning ascribed to them in the Offer to
Purchase.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, AUGUST 14, 1997,
UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE HAVING BEEN
VALIDLY TENDERED PURSUANT TO THE OFFER, AND NOT PROPERLY WITHDRAWN, THAT NUMBER
OF SHARES REPRESENTING AT LEAST A MAJORITY OF THE OUTSTANDING SHARES ON A FULLY
DILUTED BASIS (THE "MINIMUM CONDITION"), (II) THE EXPIRATION OR TERMINATION OF
ANY APPLICABLE WAITING PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST
IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"), AND (III) THE SATISFACTION
OF CERTAIN OTHER CONDITIONS SET FORTH IN THE OFFER TO PURCHASE.
THE BOARD OF DIRECTORS OF THE COMPANY AND THE DIRECTORS OF THE COMPANY WHO
ARE NEITHER EMPLOYEES OF THE COMPANY NOR EMPLOYEES OF AFFILIATES OF THE SELLING
STOCKHOLDERS (AS DEFINED BELOW) HAVE SEPARATELY AND UNANIMOUSLY APPROVED THE
OFFER, THE MERGER, THE MERGER AGREEMENT, THE STOCKHOLDER TENDER AGREEMENT (AS
DEFINED IN THE OFFER TO PURCHASE) AND THE MANAGEMENT TENDER AGREEMENT (AS
DEFINED IN THE OFFER TO PURCHASE), HAVE DETERMINED THAT THE
<PAGE> 2
OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S
STOCKHOLDERS AND RECOMMEND THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES PURSUANT TO THE OFFER.
CERTAIN STOCKHOLDERS OF THE COMPANY (THE "SELLING STOCKHOLDERS"), OWNING IN
THE AGGREGATE APPROXIMATELY 51.6% OF THE ISSUED AND OUTSTANDING SHARES, HAVE
ENTERED INTO AGREEMENTS WITH CHANCELLOR, EVERGREEN AND PURCHASER PURSUANT TO
WHICH THE SELLING STOCKHOLDERS AGREE TO TENDER AND SELL ALL OF THEIR SHARES TO
PURCHASER PURSUANT TO THE OFFER.
The Offer is being made pursuant to a Merger Agreement, dated as of July
14, 1997 (the "Merger Agreement"), by and among the Parents, Purchaser and the
Company. The Merger Agreement provides, among other things, that as soon as
practicable after the purchase of the Shares pursuant to the Offer and the
satisfaction or waiver of the Minimum Condition and certain other conditions set
forth in the Merger Agreement and in accordance with relevant provisions of the
General Corporation Law of the State of Delaware, Purchaser will be merged with
and into the Company (the "Merger"). Following consummation of the Merger, the
Company will continue as the surviving corporation (the "Surviving Corporation")
and will be a jointly owned subsidiary of the Parents. At the effective time of
the Merger (the "Effective Time"), each issued and outstanding Share (other than
Shares owned by the Company as treasury stock, Shares owned by the Parents or
Purchaser or any subsidiary of Chancellor or Evergreen, or Shares with respect
to which appraisal rights are properly exercised under Delaware law) will be
canceled and converted automatically into the right to receive $11.00 in cash,
or any higher price that may be paid per Share in the Offer, without interest
thereon (the "Offer Price").
Purchaser is at present a wholly owned subsidiary of Evergreen. Pursuant to
a Joint Bidding Agreement, dated as of July 14, 1997, Chancellor has agreed to
acquire 20% of the common stock of Purchaser prior to the consummation of the
Offer, and Chancellor and its affiliates have the right to acquire an additional
30% of the common stock of Purchaser at a later date, in each case subject to
certain conditions, including without limitation, the expiration or termination
of any applicable waiting period under the HSR Act.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn if and when Purchaser gives oral or written notice to The Bank of New
York (the "Depositary") of Purchaser's acceptance for payment of such Shares
pursuant to the Offer. Upon the terms and subject to the conditions of the
Offer, payment for Shares accepted for payment pursuant to the Offer will be
made by deposit of the purchase price therefor with the Depositary, which will
act as agent for all tendering stockholders for the purpose of receiving
payments from Purchaser and transmitting such payments to tendering stockholders
whose Shares have been accepted for payment. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE FOR THE SHARES, REGARDLESS OF ANY DELAY
IN MAKING SUCH PAYMENT. In all cases, payment for Shares tendered and accepted
for payment pursuant to the Offer will be made only after timely receipt by the
Depositary of (i) the certificates evidencing such Shares (the "Share
Certificates") or timely confirmation (a "Book-Entry Confirmation") of a
book-entry transfer of such Shares into the Depositary's account at one of the
Book-Entry Transfer Facilities (as defined in the Offer to Purchase) pursuant to
the procedures set forth in Section 3 of the Offer to Purchase, (ii) the Letter
of Transmittal (or a manually signed facsimile thereof), properly completed and
duly executed, with any required signature guarantees or an Agent's Message (as
defined below) in connection with a book-entry transfer, and (iii) any other
documents required under the Letter of Transmittal. The term "Agent's Message"
means a message transmitted by a Book-Entry Transfer Facility to, and received
by, the Depositary and forming a part of a Book-Entry Confirmation, which states
that such Book-Entry Transfer Facility has received an express acknowledgement
from the participant in such Book-Entry Transfer Facility tendering the Shares
that 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 and
that Purchaser may enforce such agreement against such participant.
Subject to the terms and conditions of the Merger Agreement and the
applicable rules of the Commission, Purchaser expressly reserves the right, at
any time and from time to time, to increase the Offer Price and extend the
period of time during which the Offer is open, and thereby delay acceptance for
payment and payment for tendered Shares, (i) upon the occurrence of certain
conditions specified in Section 15 of the Offer to Purchase and (ii) to the
extent required by law, by giving oral or written notice of such extension to
the Depositary. Any such extension will be followed as promptly as practicable
by public announcement thereof, such announcement to be made not later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled expiration date of the Offer. During any such extension, all Shares
previously tendered and not withdrawn will remain subject to the Offer and to
the rights of a tendering stockholder to withdraw such stockholder's Shares.
Under no circumstances will any interest be paid on the purchase price for
tendered Shares, regardless of any extension of the Offer or any delay in
acceptance for payment and payment for tendered Shares.
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to 12:00 Midnight, New York City
time, on Thursday, August 14, 1997 (or the latest time and date at which the
<PAGE> 3
Offer, if extended by Purchaser, shall expire) and, unless theretofore accepted
for payment by Purchaser pursuant to the Offer, may also be withdrawn at any
time after Monday, September 15, 1997. For the withdrawal to be effective, a
written, telegraphic, telex or facsimile transmission notice of withdrawal must
be timely received by the Depositary at its address set forth on the back cover
page of the Offer to Purchase. Any such notice of withdrawal must specify the
name of the person who tendered the Shares to be withdrawn, the number of Shares
to be withdrawn and the name of the registered holder of such Shares, if
different from that of the person who tendered such Shares. If Share
Certificates evidencing Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such Share
Certificates, the serial numbers shown on such Share Certificates must be
submitted to the Depositary and the signature(s) on the notice of withdrawal
must be guaranteed by an Eligible Institution (as defined in the Offer to
Purchase), unless such Shares have been tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedures for
book-entry transfer as set forth in Section 3 of the Offer to Purchase, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares and must
otherwise comply with such Book-Entry Transfer Facility's procedures. All
questions as to the form and validity (including the time of receipt) of any
notice of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. The Offer to Purchase and the related Letter of Transmittal will be
mailed to record holders of Shares whose names appear on the Company's
stockholder list and will be furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
Questions and requests for assistance or for copies of the Offer to
Purchase and the related Letter of Transmittal, and other tender offer
materials, may be directed to the Dealer Manager or the Information Agent as set
forth below, and copies will be furnished promptly at Purchaser's expense. No
fees or commissions will be paid to brokers, dealers or other persons (other
than the Dealer Manager) for soliciting tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
[MACKENZIE PARTNERS INC. LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL FREE (800) 322-2885
The Dealer Manager for the Offer is:
SMITH BARNEY INC.
388 GREENWICH STREET
NEW YORK, NEW YORK 10013
(212) 816-8820 OR (212) 816-8781
July 18,1997
<PAGE> 1
MERGER AGREEMENT
CHANCELLOR BROADCASTING COMPANY
EVERGREEN MEDIA CORPORATION
MORRIS ACQUISITION CORPORATION
AND
KATZ MEDIA GROUP, INC.
JULY 14, 1997
<PAGE> 2
MERGER AGREEMENT
THIS MERGER AGREEMENT (this "Agreement") is entered into as of July 14,
1997 by and among: Chancellor Broadcasting Company, a Delaware corporation
("Chancellor"); Evergreen Media Corporation, a Delaware corporation
("Evergreen") (each of Chancellor and Evergreen, a "Parent" and collectively
"Parents"); Morris Acquisition Corporation, a Delaware corporation jointly
owned by Chancellor and Evergreen ("Merger Sub"); and Katz Media Group, Inc., a
Delaware corporation (the "Company").
RECITALS
Acquisition and Merger. The Boards of Directors of each Parent, Merger Sub
and the Company have determined that it is in the best interest of their
respective companies and their stockholders to consummate the business
transactions contemplated herein. In order to effectuate such transaction, (i)
Parents have organized Merger Sub as a jointly owned subsidiary to make a
tender offer to purchase the Common Stock of the Company and (ii) the parties
have agreed, subject to the terms and conditions set forth in this Agreement,
to merge Merger Sub with and into the Company so that the Company continues as
the surviving corporation and becomes a jointly owned subsidiary of each of
Parents.
Definitions. Capitalized terms not defined in text are used as defined in
Section 8.1 hereof.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
<PAGE> 3
ARTICLE I
THE OFFER; THE MERGER; CLOSING
1.1. THE OFFER.
(a) Provided that this Agreement shall not have been terminated
in accordance with Section 9.1 hereof and that none of the
events set forth in Annex 1 hereto shall have occurred or be
existing, as promptly as practicable, but in any event within
five business days of the date of this Agreement, Merger Sub
shall, and Parents shall cause Merger Sub to, commence an
offer (the "Offer") to purchase for cash all shares of the
issued and outstanding shares of Common Stock, par value $.01
per share (the "Common Stock") of the Company at a price of
$11.00 per share in cash (the "Offer Price"). The obligations
of Merger Sub to accept for payment and to pay for any shares
of Common Stock validly tendered and not withdrawn shall be
subject only to the conditions set forth on Annex 1 hereto
(the "Tender Offer Conditions").
Without the written consent of the Company, prior to
termination of this Agreement, Merger Sub shall not terminate
the Offer, decrease the Offer Price, decrease the number of
shares of Common Stock being sought in the Offer, change the
form of consideration payable in the Offer (other than by
adding consideration), add additional conditions to the
Offer, or make any other change in the terms or conditions of
the Offer which is adverse to the holders of shares of Common
Stock, it being agreed that neither a waiver by Merger Sub of
any Tender Offer Condition (other than the Minimum Condition
(as defined in Annex 1 hereto)) in whole or in part at any
time and from time to time in its discretion, nor the
extension of the Offer as permitted in subsection (b) below,
shall be deemed to be adverse to any holder of shares of
Common Stock. It is agreed that the conditions set forth on
Annex I are for the sole benefit of Parents and Merger Sub
and may be asserted by Parents or Merger Sub regardless of
the circumstances giving rise to any such condition or may be
waived by Parents or Merger Sub, in whole or in part at any
time and from time to time, in its sole discretion. The
failure by Parents or Merger Sub at any time to exercise any
of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to
time. Any determination by Parents or Merger Sub with
respect to any of the foregoing conditions (including,
without limitation, the satisfaction of such conditions)
shall be final and binding on the parties. The Company
agrees that no shares of Common Stock held by the Company
will be tendered in the Offer.
2
<PAGE> 4
(b) The Offer shall be made by means of an offer to purchase and
related letter of transmittal (the "Letter of Transmittal")
(collectively, the "Offer to Purchase"). Notwithstanding the
foregoing, Merger Sub expressly reserves the right to
increase the Offer Price and extend the Offer: (i) if any of
the Tender Offer Conditions have not been satisfied, for the
period of time Merger Sub deems reasonably necessary to satisfy
such condition; and (ii) to the extent required by law. Upon
the terms and subject to the conditions of the Offer, Merger
Sub shall purchase the shares of Common Stock which are
validly tendered and not withdrawn on or prior to the
expiration of the Offer. The Offer initially shall expire at
12:00 midnight eastern standard time on the 20th business day
following the date of commencement of the Offer (such date and
time, as extended in accordance with the terms hereof, the
"Expiration Date").
(c) On the date the Offer is commenced, Merger Sub shall file with
the SEC a tender offer statement on Schedule 14D-1 (together
with all amendments and supplements thereto, the "Schedule
14D-1") with respect to the Offer. The Schedule 14D-1 shall
contain or shall incorporate by reference the Offer to Purchase
(or portions thereof) and forms of the related Letter of
Transmittal and summary advertisement, as well as all other
information and exhibits required by law. Each of Parents,
Company (solely with respect to information it has supplied)
and Merger Sub agrees promptly to correct any information in
the documents pursuant to which the Offer will be made (the
"Offer Documents") that shall be or have become false or
misleading in any material respect and each of Parents and
Merger Sub further agrees to take all steps necessary to cause
the Schedule 14D-1 as so corrected to be filed with the SEC and
the other Offer Documents as so corrected to be disseminated to
holders of the Common Stock, in each case if, as and to the
extent required by applicable federal securities laws. The
Company and its counsel shall be given an opportunity to review
the Schedule 14D-1 prior to its being filed with the SEC.
Parents and Merger Sub agree to provide the Company and its
counsel with any written comments Parents, Merger Sub or their
counsel may receive from the SEC with respect to the Offer
Documents, promptly after the receipt of such comments.
(d) The Company hereby represents and warrants that the Board of
Directors of the Company (the "Board of Directors") (at a
meeting duly called and held) has by the requisite vote of
such Board of Directors and a separate unanimous approval of
the directors of the Company who are neither employees of the
Company nor employees of any Affiliate of DLJ Merchant Banking
Partners, L.P.: (i) determined that the Offer and the Merger,
taken together, are fair to, and in the best interests of, the
holders of Common Stock; (ii) approved the Offer and the
Merger subject to the
3
<PAGE> 5
terms and conditions set forth herein; (iii) resolved to
recommend that the stockholders of the Company accept the
Offer and tender their shares of Common Stock thereunder to
Merger Sub and approve the Merger; (iv) approved and adopted
the Merger, this Agreement, the Stockholder Tender Agreement
(the "Stockholder Tender Agreement") and the Management Tender
Agreement (the "Management Tender Agreement"). The Company
further represents and warrants that the transactions
contemplated by this Agreement, the Stockholder Tender
Agreement and the Management Tender Agreement have been
approved for purposes of Section 203 of the General
Corporation Law of the State of Delaware (the "DGCL") and
similar provisions of any other similar state statutes that
might be deemed applicable to the transactions contemplated
hereby by the unanimous vote of all of the directors of the
Company and a separate unanimous approval of the directors of
the Company who are neither employees of the Company nor
employees of any Affiliate of DLJ Merchant Banking Partners,
L.P. The Company shall file with the SEC as soon as
practicable on the date of the commencement of the Offer, a
Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") containing the recommendations referred to
in the preceding sentence subject to the Board of Directors of
the Company concluding in good faith, based on advice of its
counsel and investment bankers, that not making such
recommendation is an action necessary in order for such Board
of Directors to comply with its fiduciary obligations under
applicable law. Parents, Merger Sub and their counsel shall
be given the opportunity to review the Schedule 14D-9 and any
amendment or supplement thereto prior to its filing with the
SEC. If at any time prior to the expiration or termination of
the Offer any event occurs which is required by applicable law
to be described in an amendment to the Schedule 14D-9 or any
supplement thereto, the Company will file and disseminate, as
required, an amendment or supplement which complies in all
material respects with the Exchange Act and the rules and
regulations thereunder and any other applicable laws. In
connection with the Offer, the Company will promptly furnish
Merger Sub with mailing labels, security position listings,
and any available listing or computer list containing the
names and addresses of the record holders of Common Stock as
of the most recent practicable date, the Company shall also
furnish Merger Sub with such additional information
(including, but not limited to, updated lists of holders of
Common Stock and their addresses, mailing labels and lists of
security positions) and such other assistance as Merger Sub or
its agents may reasonably request in communicating the Offer
to the Company's stockholders.
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<PAGE> 6
1.2. COMPOSITION OF THE BOARD OF DIRECTORS.
(a) Promptly upon the acceptance for payment of, and payment by
Merger Sub, in accordance with the Offer, for shares of Common
Stock pursuant to the Offer, and from time to time thereafter
as shares of Common Stock are acquired by Merger Sub, Merger
Sub shall be entitled to designate such number of directors,
rounded up to the next whole number, but at no time prior to
the Effective Time (as hereinafter defined) more than three
fewer than the total number of directors on the Board of
Directors of the Company, equal to that number of directors
which equals the product of the total number of directors on
the Board of Directors (giving effect to the directors elected
pursuant to this sentence) multiplied by the percentage that
such number of shares of Common Stock so accepted for payment
and paid for or otherwise acquired or owned by Merger Sub or
Parents bears to the number of shares of Common Stock
outstanding. The Company shall, at such time, cause Merger
Sub's designees to be so elected.
(b) The Company's obligations to cause designees of Merger Sub to
be elected or appointed to the Board of Directors of the
Company shall be subject to Section 14(f) of the Exchange Act,
and Rule 14f-1 promulgated thereunder. The Company shall
promptly take all actions required pursuant to Section 14(f)
and Rule 14f-1 in order to fulfill its obligations under this
Section 1.2(b), and shall include in the Schedule 14D-9 such
information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1.
Parents and Merger Sub will supply to the Company any
information with respect to any of them and their nominees,
officers, directors and affiliates required by Section 14(f)
and Rule 14f-1.
(c) After the time that Merger Sub's designees constitute at least
a majority of the Board of Directors of the Company (the
"Change in Majority Directors") and until the Effective Time,
any amendment or termination of this Agreement, extension for
the performance or waiver of the obligations or other acts of
Parents or Merger Sub or waiver of the Company's rights
hereunder shall also require the approval of a majority (or
such higher percentage as is required under the bylaws of the
Company) of the then serving directors, if any, who are
directors as of the date hereof (the "Continuing Directors").
If the number of Continuing Directors prior to the Effective
Time is reduced below three for any reason, the remaining
Continuing Directors or Director shall be entitled to designate
persons to fill such vacancies who shall be deemed Continuing
Directors for all purposes of this Agreement.
(d) Notwithstanding the forgoing, the last three directors to be
removed pursuant to this Section 1.2 shall be Messrs. Olds,
Olson and Beloyianis.
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1.3. THE MERGER. Subject to the terms and conditions of this Agreement,
and in accordance with the DGCL, at the Effective Time, Merger Sub
will be merged with and into the Company (the "Merger"), with the
Company being the surviving corporation (the "Surviving
Corporation") in the Merger and the separate corporate existence of
Merger Sub shall cease.
1.4. CONVERSION OF SECURITIES; PAYMENT TO STOCKHOLDERS. At the
Effective Time, by virtue of the Merger and without any action on
the part of the Company, Parents or Merger Sub:
(a) Each outstanding share of Common Stock of the Company other
than Excluded Shares (as defined below) and Dissenting Shares
(as defined in Section 1.7) shall be converted into and become
the right to receive the Offer Price in cash without interest
(the "Merger Consideration"). Each share of common stock of
Merger Sub issued and outstanding at the Effective Time shall
be converted into ten (10) shares of the Surviving Corporation.
All shares of Common Stock that are owned directly or
indirectly by the Company, Parents, Merger Sub or any of the
Parents' Subsidiaries at the Effective Time (the "Excluded
Shares") shall be canceled, and no consideration shall be
delivered in exchange therefor.
(b) (i) Parents shall authorize one or more persons to act as
Paying Agent hereunder (the "Agent") to receive the funds to
which holders of shares of the Common Stock shall become
entitled hereunder.
(ii) As soon as practicable after the Effective Time, upon
surrender to the Paying Agent for cancellation of one or more
certificates representing shares of Common Stock to be
converted into the right to receive the Merger Consideration,
the Merger Consideration shall be paid with respect to such
shares in accordance with Section 1.9.
(iii) As of the Effective Time, all shares of Common Stock
issued and outstanding immediately prior to the Effective
Time, shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such shares of
Common Stock shall, to the extent such certificate represents
such shares, cease to have any rights with respect thereto,
except the right to receive the Merger Consideration in cash
in consideration therefor upon surrender of such certificate.
(iv) The Paying Agent and Parents shall be entitled to deduct
and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of Common Stock such
amounts as the Paying
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<PAGE> 8
Agent, Merger Sub or Parents, as the case may be, is required
to deduct and withhold with respect to the making of such
payment under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld,
such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of Common
Stock in respect of which such deduction and withholding was
made.
(v) In the event that a certificate representing Common Stock
shall have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming such
certificate to be lost, stolen or destroyed, the Paying Agent
shall issue in exchange for such lost, stolen or destroyed
certificate the cash in respect thereof. The owner of such
lost, stolen or destroyed certificate shall deliver to
Parents such indemnity as it may reasonably direct as
protection against any claim that may be made against Parents
with respect to the certificate alleged to have been lost,
stolen or destroyed.
(c) From and after the Effective Time, the stock transfer books of
the Company shall be closed and no transfer of shares of
Common Stock shall thereafter be made.
(d) Promptly following the first anniversary of the Effective
Date, the Paying Agent shall deliver to Parents the Merger
Consideration, all cash held for payment of fractional shares
and all other documents in its possession relating to the
transactions described in this Agreement, and the Paying
Agent's duties shall terminate. Notwithstanding the
foregoing, neither the Paying Agent nor any party hereto shall
be liable to a holder of Common Stock for any amount paid to a
public official pursuant to applicable abandoned property,
escheat and similar laws.
1.5. FILING OF CERTIFICATE OF MERGER. At the Closing, the parties
shall cause the Merger to be consummated by filing a duly executed
Certificate of Merger with the Secretary of State of the State of
Delaware, in such form as the Company determines is required by and
in accordance with the relevant provisions of the DGCL (the date and
time of such filing is referred to herein as the "Effective Date"
and "Effective Time" respectively).
1.6. EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided under the DGCL. Without limiting
the generality of the foregoing, at the Effective Time:
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time, the Parents shall cause Merger Sub to merge
with and into the Company and the separate corporate existence
of Merger Sub shall thereupon cease. The Company shall be the
Surviving Corporation and
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<PAGE> 9
shall, following the Merger, be governed by the laws of the
State of Delaware, and the separate corporate existence of
the Company, with all its rights, privileges, immunities,
powers and franchises, of a public as well as of a private
nature, shall continue unaffected by the Merger. From and
after the Effective Time, the Merger shall have the effects
specified in the DGCL.
(b) The Certificate of Incorporation of the Company shall be
amended at the Effective Time to read as set forth in
Exhibit A hereto, and as so amended shall be the Certificate
of Incorporation of the Surviving Company until duly amended
in accordance with the terms thereof and the DGCL.
(c) The By-Laws of Merger Sub as in effect immediately prior to
the Effective Time shall be the By-Laws of the Surviving
Corporation, until duly amended in accordance with the terms
thereof and the DGCL.
(d) At the Effective Time, the Continuing Directors shall resign
(unless requested not to do so in the case of Messrs. Olds,
Olson and Beloyianis) and the other directors of the Company
immediately prior to the Effective Time shall remain in office
and be the directors of the Surviving Corporation, each of
such directors to hold office, subject to the applicable
provisions of the Certificate of Incorporation and By-Laws of
the Surviving Corporation, until their respective successors
shall be duly elected or appointed and qualified. The
officers of the Company immediately prior to the Effective
Time shall be the initial officers of the Surviving
Corporation, in each case until their respective successors
are duly elected or appointed and qualified.
1.7. DISSENTING SHAREHOLDERS. Notwithstanding the provisions of
this Section or any other provisions of this Agreement to the
contrary, shares of Common Stock that are issued and outstanding
immediately prior to the Effective Time and that are held by persons
(collectively, the "Dissenting Stockholders") who have properly
demanded appraisal of their shares of Common Stock in accordance
with Section 262 of the DGCL (the "Dissenting Shares") shall not be
converted into the rights to receive any of the pro rata Merger
Consideration applicable to such shares at or after the Effective
Time but shall become the rights to receive such consideration as
may be determined to be due to such Dissenting Stockholder pursuant
to the laws of the State of Delaware unless and until the holder of
such Dissenting Shares shall have failed to perfect or shall have
effectively withdrawn or lost such rights to appraisals and payments
under the DGCL. If a holder of such Dissenting Shares shall have so
failed to perfect or shall have effectively withdrawn or lost such
right to appraisal and payment, then, as of the Effective Time or
the occurrence of such event, whichever last occurs, such holder's
Dissenting Shares shall be converted into and shall represent solely
the right to receive the pro rata Merger Consideration applicable to
such shares, without any interest therein, as
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<PAGE> 10
provided in Section 1.4. The Company shall give Parents: (i)
prompt notice of any written demands for appraisal, withdrawals of
demands for any appraisal and any other similar demands or
instruments served pursuant to the DGCL, received by the Company;
and (ii) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal under the DGCL. The Company
will not voluntarily make any payment with respect to any demands
for appraisal and will not, except with the prior written consent
of Parents, settle or offer to settle any such demands.
1.8. THE CLOSING. Subject to the terms and conditions of this
Agreement, the consummation of the Merger, the closing of the
transactions hereunder (the "Closing") shall take place on or
before five days following the satisfaction of the conditions in
Articles VI and VII, at the offices of Akin, Gump, Strauss, Hauer &
Feld, L.L.P. in New York, New York, or such other place and time as
Parents and the Company may otherwise agree. The date on which such
Closing occurs is herein referred to as the "Closing Date".
1.9. PROCEDURE AT THE CLOSING. At the Closing, the parties agree
that the following shall occur:
(a) The Company shall have satisfied each of the
conditions set forth in Article VI and shall deliver to
Parents the documents, certificates, opinions, consents and
letters required by Article VI.
(b) Parents and Merger Sub shall have satisfied each
of the conditions set forth in Article VII and shall deliver
to the Company the documents, certificates, consents and
letters required by Article VII.
(c) The Merger Consideration shall be paid.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
As a material inducement to Parents and Merger Sub to enter into this
Agreement and to consummate the transactions contemplated hereby, the Company
makes the following representations and warranties to Parents and Merger Sub:
2.1. CORPORATE STATUS; SUBSIDIARIES.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware,
and has the
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<PAGE> 11
requisite power and authority to own or lease its properties
and to carry on its business as presently conducted. The
Company is legally qualified to do business as a foreign
corporation in each of the jurisdictions where the nature of
the properties and the conduct of its business require such
qualification and is in good standing in each of the
jurisdictions in which it is so qualified, except where the
failure to so qualify would not cause a Material Adverse
Effect to the Company. There is no pending or, to the
knowledge of the Company, threatened proceeding for the
dissolution, liquidation or insolvency of the Company.
(b) Each of the Company's Subsidiaries is a
corporation, duly organized, validly existing and in good
standing under the laws of the state of its incorporation and
has the requisite power and authority to own or lease its
properties and to carry on its business as now being
conducted, except where to the failure to so qualify would not
cause a Material Adverse Effect on the Company. Each of the
Company's Subsidiaries is legally qualified to do business as
a foreign corporation in each of the jurisdictions where the
nature of its properties and the conduct of its business
require such qualification, and is in good standing in each of
the jurisdictions in which it is so qualified, except where
the failure to so qualify would not cause a Material Adverse
Effect on the Company. There is no pending or threatened
proceeding for the dissolution, liquidation or insolvency of
any of the Company's Subsidiaries.
2.2. POWER AND AUTHORITY. The Company has the corporate power and
authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions
contemplated hereby. The Company has taken all action on the part
of its Board of Directors necessary to authorize its execution and
delivery of this Agreement.
2.3. ENFORCEABILITY. This Agreement has been duly executed and
delivered by the Company and constitutes its legal, valid and
binding obligation enforceable against the Company in accordance
with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and general
equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity.
2.4. CAPITALIZATION.
(a) As of the date hereof, the authorized capital
stock of the Company consists of 26,000,000 shares of Common
Stock and 4,000,000 shares of preferred stock. As of July 11,
1997 (i) 13,682,079 shares of Common Stock were validly issued
and outstanding, fully paid and non-assessable, of which
207,751 shares were held in treasury; (ii) there were 1,475,768
shares of
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<PAGE> 12
Common Stock reserved for issuance upon exercise of outstanding
options; (iii) there were 45,673 shares of Common Stock
reserved for issuance in connection with Restricted Stock
grants; and (iv) no shares of preferred stock were issued or
outstanding. Except as set forth on Schedule 2.4(a) of the
Disclosure Statement previously delivered by the Company to
representatives of Parents (the "Company Disclosure
Statement"), (1) no preemptive rights, rights of first refusal
or similar rights exist with respect to the shares of capital
stock of the Company, and no such rights arise or become
exercisable by virtue of or in connection with the
transactions contemplated hereby; (2) there are no outstanding
or authorized rights, options, warrants, convertible
securities, subscription rights, conversion rights, exchange
rights or other agreements or commitments of any kind that
could require the Company to issue or sell any shares of its
capital stock (or securities convertible into or exchangeable
for shares of its capital stock) (the matters in clauses (1)
and (2) with respect to any entity being referred to as
"Equity Rights"); (3) there are no outstanding stock
appreciation, phantom stock, profit participation or other
similar rights with respect to the Company (being referred to
with respect to any entity as "Equity Programs"); (4) there
are no proxies, voting rights or other agreements or
understandings with respect to the voting or transfer of the
capital stock of the Company (being referred to with respect
to any entity as "Voting Agreements"); (5) and there are no
outstanding agreements, arrangements or understandings
pursuant to which the Company is obligated to redeem or
otherwise acquire any of its outstanding shares of capital
stock (being referred to with respect to any entity as
"Redemption Rights").
(b) Set forth on Schedule 2.4(b) of the Company Disclosure
Statement is a complete and accurate list showing, as of the
date hereof, all Subsidiaries of the Company (other than NCC)
and, as to each such Subsidiary, the jurisdiction of its
incorporation, the number of shares of each class of capital
stock authorized, and the number outstanding and the
percentage of the outstanding shares of each such class owned
(directly or indirectly) by the Company. Except as set forth
on Schedule 2.4(b), no class of capital stock of any
Subsidiary of the Company is subject to any Equity Rights,
Voting Agreements, Equity Programs or Redemption Rights. All
of the outstanding capital stock of each such Subsidiary has
been validly issued, is fully paid and non-assessable and is
owned by the Company or by a Subsidiary of the Company as set
forth on Schedule 2.4(b), free and clear of all Liens other
than the Liens securing the KMC Credit Agreement. Neither the
Company nor any such Subsidiary is a party to any agreement
restricting the transfer or hypothecation of any shares of any
such Subsidiary's capital stock (generally being referred to
as "Transfer Restrictions"), other than as provided in the
KMC Credit Agreement and the Indenture governing the 10 1/2%
Notes. Except as set forth on Schedule 2.4,
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<PAGE> 13
the Company does not own or hold, directly or indirectly, any
capital stock or equity security of, or any equity interest
in, any Person other than such Subsidiaries.
(c) All of the partnership interests of each
partnership Affiliate beneficially owned directly or
indirectly by the Company or any Subsidiary are set forth on
Schedule 2.4(c) of the Company Disclosure Statement and have
been validly created pursuant to the partnership agreement of
such Partnership Affiliate and all of the partnership
interests of each partnership Affiliate owned by the Company
or any Subsidiary, as applicable, are free and clear of any
Liens, Equity Rights, Voting Agreements, Redemption Rights or
Transfer Restrictions, except as set forth in the partnership
agreements relating to such partnership interests or on
Schedule 2.4(c) of the Company Disclosure Statement.
2.5. NO VIOLATION. Except as set forth on Schedule 2.5 of the
Company Disclosure Statement, the execution and delivery of this
Agreement by the Company, the performance by the Company of its
obligations hereunder and the consummation by the Company of the
transactions contemplated by this Agreement will not: (i) contravene
any provision of the certificate of incorporation, bylaws or other
organizational documents, (as to any entity, "Organizational
Documents") of the Company or any Subsidiary; (ii) violate or
conflict with any law, statute, ordinance, rule, regulation, decree,
writ, injunction, judgment, ruling or order of any Governmental
Authority or of any arbitration award which is either applicable to,
binding upon, or enforceable against the Company or any Subsidiary;
(iii) conflict with, result in any breach of, or constitute a
default (or an event which would, with the passage of time or the
giving of notice or both, constitute a default) under, or give rise
to a right to terminate, amend, modify, abandon or accelerate, or
adversely affect the rights and privileges of the Company or any
Subsidiary under, any Contract which is applicable to, binding upon
or enforceable against the Company or its Subsidiaries; (iv) result
in or require the creation or imposition of any Lien upon or with
respect to any of the property or assets of the Company or any
Subsidiary; (v) give to any individual or entity a right or claim
against the Company, which would have a Material Adverse Effect on
the Company; or (vi) require the consent, approval, authorization or
permit of, or filing with or notification to, any Governmental
Authority, any court or tribunal or any other Person, except (A)
pursuant to the Exchange Act and applicable inclusion requirements
of AMEX, (B) filings required under the HSR Act, (C) any filings
required to be made by Parents or Merger Sub, or (D) any
governmental permits or licenses required to operate the business of
Parents or Merger Sub.
2.6. REPORTS AND FINANCIAL STATEMENTS. From January 1, 1997 until
the date hereof, the Company has filed all reports, registrations
and statements, together with any required amendments thereto, that
it was required to file with the SEC, including,
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but not limited to, any Forms 10-K, Forms 10-Q, Forms 8-K and
proxy statements (collectively, the "Company Reports"). As of
their respective dates (but taking into account any amendments
filed prior to the date of this Agreement), the Company Reports
complied in all material respects with all the rules and
regulations promulgated by the SEC and did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company
included in the Company Reports comply as to form in all material
respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with GAAP consistently applied
during the periods presented (except, as noted therein, or, in
the case of the unaudited statements, as permitted by Form 10-Q of
the SEC) and fairly present (subject, in the case of the unaudited
statements, to normal audit adjustments) the financial position of
the Company and its consolidated subsidiaries as of the date
thereof and the results of their operations and their cash flows
for the periods then ended.
2.7. REPRESENTATION AGREEMENTS.
(a) Except as set forth on Schedule 2.7(a) of the Company
Disclosure Statement, each Representation Agreement is
in full force and effect and is a legal, valid and binding
obligation of the Company or a Subsidiary of the Company, and
there is not (i) any breach by the Company or any Subsidiary of
the Company, or to the knowledge of the Company, any other
party, in the performance of any obligation to be performed
under any such Representation Agreement; (ii) to the Company's
or any Subsidiary's knowledge, any written notice of
cancellation or termination of any such Representation
Agreement; or (iii) any Representation Agreement that has been
canceled or terminated since July 1, 1996 in respect of a
terminated station or terminated group of affiliated stations
that represented in excess of $20 million in annualized
billings, except in each case for such as would have no
reasonable likelihood of having a Material Adverse Effect on
the Company.
(b) Except in each case where the failure would have no reasonable
likelihood of having a Material Adverse Effect (i) the
information on Schedule 2.7(b)(i) of the Company Disclosure
Statement is true and correct in all material respects; (ii)
true and correct copies of all Master Agreements pertaining to
the radio broadcast companies listed on Schedule 2.7(b)(ii) of
the Company Disclosure Statement that are covered by a Master
Agreement have been made available to representatives of the
Parents; (iii) each Station Agreement for a radio station
covered by such a Master Agreement is in substantially the form
or otherwise contains provisions for termination contemplated
by the related Master Agreement; and (iv) the
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<PAGE> 15
Station Agreements relating to the stations referred to on
Schedule 2.7(b)(i) that are not covered by a Master Agreement
have termination provisions that require the related stations
to give not less than one year's advance written notice prior
to termination and provide that a termination by a client
without such prior written notice entitles the Company or its
Subsidiary to at least its standard commission under the
Station Agreement for not less than a 12 month period from the
date of such client's termination.
(c) Except in each case where the failure would have no
reasonable likelihood of having a Material Adverse Effect,
(i) the information on Schedule 2.7(c)(i) of the Company
Disclosure Statement is true and correct in all material
respects; (ii) true and correct copies of all Master
Agreements pertaining to the television broadcast companies
listed on Schedule 2.7(c)(ii) of the Company Disclosure
Statement that are covered by a Master Agreement have been
made available to representatives of the Parents; (iii) each
Station Agreement for a television station covered by a Master
Agreement is in substantially the form or otherwise contains
provisions for termination contemplated by the Master
Agreement; and (iv) the Station Agreements relating to the
stations referred to on Schedule 2.7(c)(i) that are not
covered by a Master Agreement have termination provisions that
require the related stations to give not less than six month's
advance written notice prior to termination and provide that a
by a client without such prior written notice entitles the
Company or its Subsidiary to at least its standard commission
under the Station Agreement for not less than a six month
period from the date of such client's termination.
(d) The Company makes no representation in this Section 2.7
regarding Representation Agreements with Parents, Capstar
Radio or any of their respective Affiliates.
2.8. NO COMMISSIONS. Except as disclosed on Schedule 2.8 of the
Company Disclosure Statement, the Company has not incurred any
obligation for any finder's, broker's, or agent's fees or
commissions or similar compensation in connection with the
transactions contemplated hereby.
2.9. MATERIAL DEVELOPMENTS; ABSENCE OF UNDISCLOSED LIABILITIES.
Except as disclosed in or contemplated by the Company Reports filed
prior to the date hereof or as disclosed on Schedule 2.9 of the
Company Disclosure Statement, there has been no Material Adverse
Change with respect to the Company since December 31, 1996. Except
as disclosed in or contemplated by the Company Reports filed prior
to the date hereof or as set forth on Schedule 2.9 of the Company
Disclosure Statement, the Company does not have any liabilities or
obligations, whether accrued, absolute, contingent or otherwise,
except liabilities incurred in the ordinary course of business
consistent with past practice, or other liabilities which would not
have a reasonable likelihood of having a Material Adverse Effect
on the Company.
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2.10. TAXES. All Tax Returns required to be filed by the Company
or any of its Tax Affiliates have been filed with the appropriate
Governmental Authorities in all jurisdictions in which such Tax
Returns are required to be filed, except where the failure to file
such returns, reports and statements would have no reasonable
likelihood of having a Material Adverse Effect on the Company, all
such Tax Returns are true and correct in all material respects, and,
except as disclosed on Schedule 2.13 of the Company Disclosure
Statement, there is no liability for Taxes for any taxable year or
other period ending on or before the date hereof (as if the date
hereof were the end of a taxable year or period) in excess of
reserves therefore that have been established on the books of the
Company or such a Tax Affiliate, as the case may be, in conformity
with GAAP except as has arisen in the ordinary course of business
since March 31, 1997 or except as would have no reasonable
likelihood of having a Material Adverse Effect on the Company. The
Company and each of the Tax Affiliates have complied with all
applicable laws, rules, and regulations relating to the withholding
and payment of Taxes and have timely withheld from employee wages
and paid over to the proper Governmental Authorities all amounts
required to be so withheld and paid over for all periods in full and
complete compliance with the tax, social security and unemployment
withholding provisions of applicable Federal state, local and
foreign law, except where such nonpayment would have no reasonable
likelihood of having a Material Adverse Effect on the Company.
Neither the Company nor any Tax Affiliate is or has been a party to
any tax sharing agreement, and neither has assumed the liability of
any other Person for Taxes. There are no Liens on any of the assets
of the Company or the Tax Affiliates with respect to Taxes, other
than for Taxes not yet due and payable.
2.11. EMPLOYEE BENEFITS.
(a) Set forth on Schedule 2.11 of the Company Disclosure Schedule
is a list setting forth each employee benefit plan or
arrangement maintained, contributed to or sponsored by the
Company or any ERISA Affiliate or under which the Company or
any Affiliate may incur any liability, including, but not
limited to, employee pension benefit plans, as defined in
Section 3(2) ERISA, multiemployer plans, as defined in Section
3(37) or 4001(a)(3) of ERISA, employee welfare benefit plans,
as in Section 3(1) of ERISA, deferred compensation plans,
stock option plans, bonus plans, stock purchase plans,
hospitalization, disability and other insurance plans,
employment or consulting or termination agreements, severance
or termination pay plans and policies, whether or not
described in Section 3(3) of ERISA, ("Employee Benefit Plans")
(true and accurate copies of which, together with the most
recent annual reports on Form 5500 and summary plan
descriptions with respect thereto, were furnished to Parent).
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(b) Compliance with Law. With respect to each Employee Benefit
Plan (i) each has been administered in all material respects
in compliance with its terms and with all applicable laws,
including, but not limited to, ERISA and the Code; (ii) no
actions, suits, claims or disputes are pending, or
threatened; (iii) no audits, inquiries, reviews, proceedings,
claims, or demands are pending with any governmental or
regulatory agency; (iv) there are no facts which could give
rise to any material liability in the event of any such
investigation, claim, action, suit, audit, review, or other
proceeding; (v) all material reports, returns and similar
documents required to be filed with any governmental agency or
distributed to any plan participant have been duly or timely
filed or distributed; and (vi) no "prohibited transaction" has
occurred within the meaning of the applicable provisions of
ERISA or the Code; (vi) none of the Company or any of its
Subsidiaries nor any plan fiduciary of any Employee Benefit
Plan has otherwise violated the provisions of Part 4 of Title
I, Subtitle B of ERISA or knowingly participated in a
violation of Part 4 of Title I, Subtitle B of ERISA by any
plan fiduciary of any Employee Benefit Plan or has been
assessed any civil penalty under Section 502 (l) of ERISA.
(c) Qualified Plans. With respect to each Employee Benefit Plan
intended to qualify under Code Section 401(a) or 403(a), (i)
the Internal Revenue Service has issued a favorable
determination letter, true and correct copies of which have
been furnished to representatives of Parents, that such plans
are qualified and exempt from federal income taxes; (ii) no
such determination letter has been revoked nor has revocation
been threatened, nor has any amendment or other action or
omission occurred with respect to any such plan since the date
of its most recent determination letter or application
therefor in any respect which would adversely affect its
qualifications or materially increase its costs; (iii) no such
plan is a defined benefit plan within the meaning of Section
3(35) of ERISA; (iv) all contributions to, and payments from
and with respect to such plans which may have been required to
be made in accordance with such plans and when applicable,
have been timely made; and (v) all contributions to the plans
and all payments under the plans (except those to be made from
a trust qualified under Section 401(a) of the Code) and all
payments with respect to the plans (except those to be made
from a trust qualified under Section 401(a) of the Code) and
all payments of benefits with respect to the plans and all
insurance premiums for any period ending before the Effective
Date that are not yet but will be required to be made, are
properly accrued and reflected on the Company Reports.
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(d) Multiemployer Plans. None of the Company nor any ERISA
Affiliate has at any time contributed to or been obligated to
contribute to any "multiemployer plan" (within the meaning of
Section 3(37) or 4001(a)(3) of ERISA) and neither the Company
nor any ERISA Affiliate has incurred any withdrawal liability
which remains unsatisfied.
(e) Welfare Plans. Except as set forth on Schedule 2.11 of the
Company Disclosure Statement, neither the Company nor any ERISA
Affiliate is obligated under any employee welfare benefit plan
as described in Section 3(1) of ERISA ("Welfare Plan") to
provide medical or death or other benefits with respect to any
employee or former employee of the Company, any ERISA Affiliate
or any of their predecessors after termination of employment
(other than as may be required under Section 4980 of the Code)
and no condition exists which would prevent the Company or one
of its ERISA Affiliates from amending or terminating any such
Welfare Plan; (ii) the Company and each ERISA Affiliate has
complied with the notice and continuation coverage requirements
of Section 4980B of the Code and the regulations thereunder
with respect to each Welfare Plan that is a group health plan
within the meaning of Section 5000(b)(1) of the Code; and (iii)
there are no reserves, assets, surplus or prepaid premiums
under any Welfare Plan which is an Employee Benefit Plan.
(f) Employment Arrangements. Except as set forth on Schedule 2.4
or Schedule 2.11 of the Company Disclosure Statement, and
except as provided by law, the employment of all persons
presently employed or retained by the Company or any of its
Subsidiary is terminable at will. Except as set forth on
Schedule 2.11 of the Company Disclosure Statement, there is no
contract, agreement, plan or arrangement covering any employee
or former employee of the Company or any of its Subsidiaries
that, individually or collectively, provides for the payment of
any amount (i) that is not deductible under Section 162(a) (1)
or 404 of the Code or (ii) that is an "excess parachute
payment" pursuant to Section 280G of the Code.
(g) No Acceleration. Except as contemplated hereby or as set
forth on Schedule 2.4(a) or Schedule 2.11 of the Company
Disclosure Statement, neither the execution and delivery of
this Agreement or other related agreements by the Company nor
the consummation of the transactions contemplated hereby will
result in the acceleration or creation of any rights of any
person to benefits under any employee benefit plan or
arrangement (including, without limitation, the acceleration of
the vesting or exercisability of any stock options, the
acceleration of the vesting of any restricted stock, the
acceleration of the accrual or vesting of any
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benefits under any Pension Plan or the acceleration or
creation of any rights under any severance, parachute or
change in control agreement).
(h) No Other Material Liability. No event has occurred in
connection with which the Company or any of its Subsidiaries,
directly or indirectly, could be subject to any material
liability (A) under any statute, regulation or governmental
order relating to any Employee Benefit Plan or (B) pursuant to
any obligation of the Company or any of its Subsidiaries to
indemnify any person against liability incurred under any such
statute, regulation or order as they relate to such plans.
Except as set forth on Schedule 2.11 or Schedule 4.1 of the
Company Disclosure Statement, none of the Company or any ERISA
Affiliate has any announced plan or legally binding commitment
to create any additional Employee Benefit Plan or other
benefit arrangement which is intended to cover employees or
former employees of the Company or any Subsidiary or to amend
or modify any existing such plan or arrangement.
(i) No representation is made in this Section 2.11 regarding NCC.
2.12. ENVIRONMENTAL
(a) The Company is currently and has in the past been
in compliance with all Environmental Laws, except where the
failure to be or have been in compliance would not be
reasonably likely to have a Material Adverse Effect on the
Company. There are no existing, and the Company is not aware
of any potential or threatened, Environmental Claims against
the Company or its Subsidiaries which are reasonably likely to
have a Material Adverse Effect on the Company. There are no
consent decrees, consent orders, judgments, judicial or
administrative orders, agreements with (other than permits) or
liens by, any Governmental Authority or quasi-governmental
authority relating to any Environmental Laws which regulate,
obligate or bind the Company or its Subsidiaries.
(b) True and correct copies of any environmental
reports, audits or assessments which have been conducted,
either by or on behalf of the Company or its Subsidiaries,
regarding any of the Company's or its Subsidiaries current or
former properties have been made available to the Parent.
2.13. LITIGATION. Except as set forth on Schedule 2.13 of the Company
Disclosure Statement, there is no action, suit or other legal or
administrative proceeding or governmental investigation pending,
or, to their knowledge, threatened, anticipated or contemplated
against, by or affecting the Company or its Subsidiaries, or any
of the Company's or any of its Subsidiaries' properties or assets,
which, individually or in the aggregate, would be reasonably
likely to have a Material Adverse Effect on the Company, or which
question the validity or
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<PAGE> 20
enforceability of this Agreement or the transactions contemplated
hereby. There are no outstanding orders, decrees or stipulations
issued by any Governmental Authority in any proceeding to which the
Company or any of its Subsidiaries is or was a party which have not
been complied with in full or which continue to impose any
obligations on the Company or any its Subsidiaries (other than
those that would not be reasonably likely to have a Material
Adverse Effect).
2.14. DISCLOSURE IN PROXY STATEMENT, SCHEDULE 14D-9 AND SCHEDULE 14D-1.
None of the information which has been or will be supplied by the
Company for inclusion or incorporation by reference in the Proxy
Statement in connection with the meeting of the stockholders of the
Company held to approve the Merger (the "Proxy Statement") will, at
the time such Proxy Statement is mailed to the stockholders of the
Company, include an untrue statement of a material fact, or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading. None of the
information which has been or will be supplied by the Company for
inclusion or incorporation by reference in the Offer Documents or
any amendments or supplements thereto including the Schedule 14D-1
and the Offer to Purchase, will, at the time the Offer Documents
(or such amendments or supplements) are filed with the SEC, contain
any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made
therein, in light of the circumstances in which they are made, not
misleading. The Schedule 14D-9 or any amendments or supplements
thereto will not, at the time it or any such amendments or
supplements are filed with the SEC, sent or given to stockholders
of the Company, or at the time the Offer is consummated is filed
with the Commission, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstance in which they were made, not misleading.
Notwithstanding the foregoing, no representation or warranty is
made with respect to any information with respect to Parents,
Merger Sub or their respective officers, directors or affiliates
provided to the Company by Parents or Merger Sub in writing for
inclusion in the Proxy Statement, the Schedule 14D-9 or the
supplements or amendments thereto. The Schedule 14D-9 will comply
in all material respects with the Exchange Act and the rules and
regulations thereunder and any other applicable laws.
2.15. OPINION OF FINANCIAL ADVISORS. The Company has received (and
delivered to representatives of Parents a true copy thereof) the
opinion from Credit Suisse First Boston to the effect that the
consideration to be received by the Company's stockholders in the
Offer and the Merger is fair to the Company's stockholders from a
financial point of view and such opinion has not been modified or
withdrawn.
2.16. VOTE REQUIRED. The affirmative vote of the holders of a majority
of the outstanding shares of Common Stock is the only vote of the
holders of any class
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or series of the Company's capital stock necessary to approve this
Agreement and the transactions contemplated hereby.
2.17. TAKEOVER RESTRICTIONS. To the best knowledge of the Company, other
than Section 203 of the DGCL, no state takeover statute or similar
statute or regulation of any state or other jurisdiction applies or
purports to apply to the Agreement or any of the transactions
contemplated herein, including the Merger. No provision of the
certificate of incorporation or bylaws of the Company or any
Subsidiary would, directly or indirectly, restrict or impair the
ability of Merger Sub or its affiliates to vote, or otherwise to
exercise the rights of a shareholder with respect to, securities of
the Company or any Subsidiary that may be acquired or controlled by
Merger Sub or its affiliates pursuant to this Agreement or permit
any shareholder to acquire securities of the Company on a basis not
available to Merger Sub in the event that Merger Sub were to
acquire securities of the Company.
2.18. PATENTS, TRADEMARKS, ETC. To the Company's best knowledge, the
Company or its Subsidiaries own, or are licensed or otherwise have
adequate right to use, all patents, patent rights, trademarks,
trademark rights, service marks, service mark rights, trade names,
trade name rights, copyrights, know-how, technology, trade secrets
and other proprietary information (collectively, the "Intellectual
Property") which are material to the conduct of the business of the
Company and its Subsidiaries. To the Company's best knowledge, no
claims have been asserted by any person, and neither the Company
nor any of its Subsidiaries has asserted a claim against any
person, with respect to any of the Intellectual Property owned or
used by the Company or its Subsidiaries, challenging or questioning
the validity or effectiveness of any license or agreement relating
thereto to which the Company or any Subsidiary is a party, in any
case that would be reasonably likely to have a Material Adverse
Effect on the Company.
2.19. COMPLIANCE WITH LAW. The business of the Company and its
Subsidiaries is not being conducted and the properties and assets of
the Company and its Subsidiaries are not currently owned or operated
in violation of any law, ordinance, regulation, order, judgment,
injunction, award or decree of any governmental or regulatory entity
or court or arbitrator, except for possible violations which either
individually or in the aggregate do not, and so far as can be
reasonably foreseen will not, have a Material Adverse Effect.
2.20. ABSENCE OF LIENS. Except for Liens granted pursuant to the KMC
Credit Agreement and such as to not interfere in any material
respect with the use and operation thereof or would have no
reasonable likelihood of having a Material Adverse Effect, there are
no Liens on any of the assets of the Company or its Subsidiaries
(other than NCC) to secure indebtedness for borrowed money.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PARENTS AND MERGER SUB
As a material inducement to the Company to enter into this Agreement and
to consummate the transactions contemplated hereby, each Parent and Merger Sub,
jointly and severally, make the following representations and warranties to the
Company:
3.1. CORPORATE STATUS. Each Parent and Merger Sub is a corporation,
duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite power and
authority to own or lease its properties and to carry on its
business as now being conducted. There is no pending or
threatened proceeding for the dissolution, liquidation or
insolvency of either Parent or Merger Sub.
3.2. POWER AND AUTHORITY. Each Parent and Merger Sub has the
corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder, and to consummate the
transactions contemplated hereby. Each Parent, and Merger Sub and
the stockholders of each have taken all corporate action necessary
to authorize the execution and delivery of this Agreement, the
performance of its obligations hereunder, and the consummation of
the transactions contemplated hereby.
3.3. ENFORCEABILITY. This Agreement has been duly executed and
delivered by each Parent and Merger Sub, and constitutes the legal,
valid and binding obligation of each of them, enforceable against
each of them in accordance with its terms, except as the same may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or similar laws affecting the
enforcement of creditors' rights generally and general equitable
principles regardless of whether such enforceability is considered
in a proceeding at law or in equity.
3.4. NO VIOLATION. The execution and delivery of this Agreement by each
Parent and Merger Sub, the performance by each Parent and Merger
Sub of their obligations hereunder and the consummation by them of
the transactions contemplated by this Agreement will not: (i)
contravene any provision of their Organizational Documents; (ii)
violate or conflict with any law, statute, ordinance, rule,
regulation, decree, writ, injunction, judgment or order of any
Governmental Authority or of any arbitration award which is either
applicable to, binding upon or enforceable against either of them;
(iii) conflict with, result in any breach of, constitute a default
(or an event which would, with the passage of time or the giving
of notice or both, constitute a default) under, require any
consent under, or give rise to a right of payment under or the
right to terminate or amend any
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<PAGE> 23
Contract which is applicable to, binding upon or enforceable
against any of Parents or Merger Sub or any Subsidiary of any of
them; (iv) result in or require the creation or imposition of any
Lien upon or with respect to any of the properties or assets of
any of the Parents or Merger Sub or any subsidiary of any of them;
(v) give to any individual or entity a right or claim against any
of the Parents or Merger Sub or any subsidiary of any of them; or
(vi) require the consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Authority, any
court or tribunal or any other Person, except any applicable
filings required under the HSR Act and the Exchange Act.
3.5. REPORTS AND FINANCIAL STATEMENTS. From January 1, 1997 until
the date hereof, each Parent has filed all reports, registrations
and statements, together with any required amendments thereto, that
it was required to file with the SEC, including, but not limited, to
any Forms 10-K, Forms 10-Q, Forms 8-K and proxy statements
(collectively, the "Parent Reports"). As of their respective dates
(but taking into account any amendments filed prior to the date of
this Agreement), the Parent Reports complied in all material
respects with all the rules and regulations promulgated by the SEC
and did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated herein or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading.
3.6. NO COMMISSIONS. Except as disclosed to the Company, neither
of the Parents, nor Merger Sub nor any of Parents' Subsidiaries have
incurred any obligation for any finder's, broker's or agent's fees
or commissions or similar compensation in connection with the
transactions contemplated hereby.
3.7. DISCLOSURE IN PROXY STATEMENT. None of the information which has
been or will be supplied by either Parent for inclusion or
incorporation by reference in the Proxy Statement will, at the
time such Proxy Statement is mailed to the stockholders of Parents
and the Company, include an untrue statement of a material fact,
or omit to state a material fact, or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading. None of the information which has been or
will be supplied by Parents and Merger Sub specifically for
inclusion in the Proxy Statement and the Schedule 14D-9 or any
amendment or supplement thereto of the Company will, at the time
the Schedule 14D-9 is filed with the SEC, contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made, in light of the
circumstance under which they are made, not misleading. The Offer
Documents or any amendment or supplement thereto will not, at the
time of filing with the SEC, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made,
not misleading. Notwithstanding the foregoing, no representation
or warranty is made with respect to any information with respect
to the Company or
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<PAGE> 24
its officers, directors and affiliates provided to Parents or
Merger Sub by the Company in writing for inclusion in the Offer
Documents, the Proxy Statement, the Schedule 14D-1 or amendments
or supplements thereto. The Schedule 14D-1 will comply in all
material respects with the Exchange Act and the rules and
regulations thereunder and any other applicable laws.
3.8. FINANCING. Parents will have or will obtain available funds
necessary to consummate the Offer and the Merger and the
transactions contemplated hereby and thereby, to pay related fees
and expenses and to refinance indebtedness under the KMC Credit
Agreement and the 10 1/2% Notes, as required by this Agreement.
ARTICLE IV
CONDUCT OF BUSINESS AND PROPERTIES PRIOR TO THE CHANGE IN
MAJORITY DIRECTORS
4.1. CONDUCT OF BUSINESS BY THE COMPANY PRIOR TO THE CHANGE IN MAJORITY
DIRECTORS. The Company covenants and agrees that, between the date
of this Agreement and the Change in Majority Directors, the
business of the Company and the Subsidiaries shall be conducted
only in, and the Company and the Subsidiaries shall not take any
action except in, the ordinary course of business consistent with
past practice. The Company shall use its reasonable best efforts
to preserve intact the Company's and the Subsidiaries' present
lines of business, maintain their respective rights and preserve
their respective present relationships with customers, suppliers,
and other persons with which it has significant business relations.
By way of amplification and not limitation, except as contemplated
by this Agreement or as set forth on Schedule 4.1, the Company
shall not, nor shall it permit any Subsidiary or other entity it
controls, between the date of this Agreement and the Change in
Majority Directors, directly or indirectly, do any of the following
without the prior consent of Parents:
(a) Amend or otherwise change its certificate of incorporation or
bylaws, or equivalent Organizational Documents, or amend any
material term of any outstanding security;
(b) (i) Declare or pay any dividends on or make or become
obligated to make other distributions in respect of any of its
capital stock, except dividends by the wholly-owned
Subsidiaries in the ordinary course of business consistent
with past practice, (ii) split, combine or reclassify any of
its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or
in substitution for, shares of its capital stock, except for
any such transaction by a wholly owned Subsidiary of the
Company which remains a wholly owned Subsidiary after
consummation of such transaction, or (iii) repurchase,
redeem or otherwise acquire any
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shares of its capital stock or any securities convertible into
or exercisable for any shares of its capital stock;
(c) Issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock of any
class or any securities convertible into or exercisable for,
or any rights, warrants or options to acquire, any such shares
or enter into any agreement with respect to any of the
foregoing and shall not amend any equity-related awards issued
pursuant to the Employee Benefit Plans, other than the
issuance of capital stock or other equity interests upon the
exercise of stock options issued prior to the date of this
Agreement;
(d) (i) Incur or suffer to exist any indebtedness for borrowed
money other than under the KMC Credit Agreement in the
ordinary course of business or guarantee any such indebtedness
or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or any of the
Subsidiaries, or guarantee any debt securities of other
Persons other than indebtedness of the Company or any
Subsidiary of the Company to the Company or any wholly-owned
Subsidiary of the Company and other than in the ordinary
course of business; or (ii) make any loans, advances or
capital contributions to any other Person, other than loans or
advances to employees not in excess of $250,000 in the
aggregate in the ordinary course of business consistent with
past practices, and other than by the Company or a wholly-
owned Subsidiary of the Company to or in the Company or any
wholly-owned Subsidiary of the Company;
(e) (i) Increase the compensation payable or to become payable to
any of its executive officers or employees; (ii) adopt or
amend (except as may be required by law) any bonus, profit
sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit
plan, agreement, trust, fund or other arrangement (including
any Employee Benefit Plan) for the benefit or welfare of any
director, executive officer or other employees or former
director or employees; (iii) grant any new or modified
severance or termination arrangement or increase or accelerate
any benefits payable under its severance or termination pay
policies in effect on the date hereof, except to employees
other than to any executive officer and not to exceed $250,000
in the aggregate; (iv) effectuate a "plant closing" or "mass
layoff", as those terms are defined in the Worker Adjustment
and Retraining Notification Act of 1988 WARN, affecting in
whole or in part any site of employment, facility, operating
unit or employee of the Company or any of the Company's
Subsidiaries; or (v) take any action with respect to the grant
of any severance or termination pay, or stay, bonus or other
incentive arrangement (other than pursuant to benefit plans
and policies in effect on the date of this Agreement), except
in each case (A) any such increases or
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grants made in the ordinary course of business and in
accordance with past practice, or (B) as provided in Section
5.11;
(f) Except in the ordinary course of business, consistent with
past practice, acquire (including, without limitation, for
cash or shares of stock or partnership interests, by merger,
consolidation or acquisition of stock or assets) any interest
in any Person or other business organization or division
thereof or any assets, or make any investment either by
purchase of stock or securities, contributions of capital or
property transfer, or purchase any property or assets of any
other Person, other than such acquisitions or investments
which in the aggregate do not exceed $100,000;
(g) Make any commitments for capital or other expenditures in
excess of $2 million;
(h) Acquire by purchase Representation Agreements for amounts,
individually or in the aggregate, exceeding $2 million;
(i) Modify, terminate, or enter into any material Contract other
than as provided herein or in the ordinary course of business,
consistent with past practice;
(j) Take any action with respect to accounting policies or
procedures, or with respect to Tax elections, audits or
controversies, other than in the ordinary course of business
and in a manner consistent with past practices;
(k) Pay, discharge or satisfy any existing claims, liabilities or
obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business and consistent
with past practice of due and payable liabilities reflected or
reserved against in its financial statements, as appropriate,
or liabilities incurred after the date thereof in the ordinary
course of business and consistent with past practice and other
than other claims, liabilities or obligations not exceeding $3
million in the aggregate;
(l) (i) Enter into any material transaction with any executive
officer, director or Affiliate thereof; (ii) pay or become
obligated to pay any material liability or obligation to any
executive officer, director or Affiliate, other than as
disclosed on Schedule 2.11 and 4.1 of the Company Disclosure
Statement; (iii) or waive any rights of material value or
cancel any material debts or claims or any debts or claims
with respect to an officer, director or Affiliate;
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(m) Except as otherwise permitted hereby, take any action that
could reasonably be expected to result in any of the
representations and warranties of the Company set forth in
Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.6, 2.8, 2.10, 2.11, 2.12,
2.14, 2.15, 2.16, 2.17, 2.18, 2.19 and 2.20 of this Agreement
(other than any representation or warranty which is expressly
made as of a specified date) (the "Surviving Representations"),
becoming untrue in any material respect or any of the
conditions to the Merger set forth in Article VI not being
satisfied; or
(n) Agree, in writing or otherwise, to take or authorize any of
the foregoing actions.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1. FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such
further actions as may be necessary or appropriate to effectuate,
carry out and comply with all of the terms of this Agreement and
the transactions contemplated hereby.
5.2. COOPERATION. Each of the parties agrees to cooperate with the
other in the preparation and filing of all forms, notifications,
reports and information, if any, required or reasonably deemed
advisable pursuant to any law, rule or regulation in connection with
the transactions contemplated by this Agreement and to use their
respective reasonable best efforts to agree jointly on a method to
overcome any objections by any Governmental Authority to any such
transactions.
5.3. OTHER ACTIONS. Each of the parties hereto shall use its reasonable
best efforts to take, or cause to be taken, all appropriate
actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated herein
as soon as possible, including, without limitation, using its
reasonable best efforts to effect the Offer and Merger pursuant to
Section 253 of the DGCL, if greater than 90% of the outstanding
Common Stock is accepted for payment in the Offer, and to obtain
all licenses, permits, consents, approvals, authorizations,
qualifications and orders of any Governmental Authority and parties
to Contracts with the Company as are necessary for the consummation
of the transactions contemplated hereby; provided, however, in no
event shall either party be required to divest or forfeit material
incidents of control of any material assets in order to obtain
approval of a governmental authority (including, without
limitation, under the HSR Act). Each of the parties shall make on
a prompt and timely basis all governmental or regulatory
notifications and filings required to be made by it for the
consummation of the transactions contemplated hereby.
5.4. HSR ACT. Parents and the Company shall make promptly their
respective filings, if any, and thereafter make any other required
submissions, under the HSR Act,
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with respect to the transactions contemplated hereby. The parties
hereto shall cooperate on any exchange of information subject to
joint attorney/client privilege.
5.5. ACCESS TO INFORMATION. From the date hereof to the Effective
Time, the Company shall (and shall cause its Subsidiaries and their
respective officers, directors, employees, auditors, counsel,
representatives, and agents to) afford the officers, employees,
auditors, counsel, representatives, and agents (the
"Representatives") of Parents reasonable access at all reasonable
times to its officers, employees, agents, properties, offices and
other facilities, books, records and tax returns, and shall furnish
such Representatives with all financial, operating and other data
and information as may be reasonably requested.
5.6. NOTIFICATION OF CERTAIN MATTERS. Each of the parties to this
Agreement shall give prompt notice to the other parties of the
occurrence or non-occurrence of any event which would likely cause
any covenant, condition or agreement contained herein not to be
complied with or satisfied; provided, however, that, any such
disclosure shall not in any way be deemed to amend, modify or in any
way affect the representations, warranties and covenants made by any
party in or pursuant to this Agreement.
5.7. CONFIDENTIALITY; PUBLICITY. Each party to this Agreement shall
comply with the provisions of any confidentiality agreement between
Parents or any Affiliate and the Company (the "Confidentiality
Agreement"), which shall remain in full force and effect in
accordance with its terms. Parents, Merger Sub and the Company
will consult with each other before issuing, and provide each other
the opportunity to review, comment upon and concur with, any press
release or other public statements with respect to the transactions
completed by this Agreement, and shall not issue any such press
release or make any such public statement prior to such
consultation, except as either party may determine is required by
applicable law, court process or by obligations pursuant to any
listing agreement with any national securities exchange. The
parties agree that the initial press release to be issued with
respect to the transactions contemplated by this Agreement shall be
in the form agreed upon by the parties.
5.8. SOLICITATION
(a) The Company agrees that it shall not, nor shall it permit any
of its Subsidiaries to (and the Company shall use its best
efforts to cause any officer, director, employee,
representative or agent of the Company or any of the Company's
Subsidiaries not to): (i) solicit, initiate, or encourage the
submission of (including by way of furnishing information),
any Takeover Proposal (as hereinafter defined); (ii) enter
into any agreement with respect to any Takeover Proposal; or
(iii) participate in any discussions or negotiations
regarding, or furnish to any person any
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information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any
Takeover Proposal; provided, however, that prior to the
acceptance for payment of shares of Common Stock pursuant to
the Offer, to the extent required by the fiduciary
obligations of the Board of Directors of the Company under
applicable law (after consultation with counsel), the Company
may, in response to a Takeover Proposal which was unsolicited
or which did not otherwise result from a breach of this
Section 5.8(a), and subject to providing one full day's prior
written notice of its decision to Parents, (x) furnish
information with respect to the Company to any person making
such Takeover Proposal pursuant to a customary
confidentiality agreement (as determined by the Company's
outside counsel), and (y) participate in discussions and
negotiations regarding such Takeover Proposal; provided,
however, that the Company shall not enter into any definitive
agreement with any Person regarding such Takeover Proposal
for the lesser of (a) three days and (b) the time remaining
until one full business day prior to the expiration of the
Offer; and provided, further, that nothing contained in this
Section 5.8(a) shall prohibit the Company or its Board of
Directors from disclosing to the Company's stockholders a
position with respect to a tender offer by a Third Party
pursuant to Rules 14d-9 and 14e-2 of the Exchange Act. For
purposes of this Agreement, "Takeover Proposal" means any
bona fide proposal or offer or public announcement of a
proposal, plan or intention to do (whether or not in writing
and whether or not delivered to the stockholders of the
Company generally) a merger or other business combination
involving the Company or to acquire in any manner, directly
or indirectly, a material equity interest in, any voting
securities of, or a substantial portion of the assets of the
Company and its Subsidiaries, other than the transactions
contemplated by this Agreement. "Superior Proposal" means a
Takeover Proposal made by a Third Party and its Subsidiaries,
on terms that the Board of Directors determines in good faith
(based on the advice of its counsel and financial advisors)
to be more favorable to its stockholders than the Offer,
taking into account all legal, financial, regulatory and
other aspects of the proposal, including the financing for
the proposal (or contingencies therefor), the Person making
the proposal, and the certainty of consummation, and which
the Board of Directors determines in good faith (after
consultation with counsel) should be considered by the Board
of Directors in order to prevent the Board of Directors from
breaching its fiduciary duties to stockholders under
applicable law.
(b) In addition to the obligations of the Company set forth in
paragraph (a) of this Section 5.8, the Company shall
immediately advise Parents orally and in writing of any
request for information or of any Takeover Proposal, the
material terms and conditions of such request or Takeover
Proposal and
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the identity of the Person and its Affiliates (if known to the
Company) making such request or Takeover Proposal. The
Company will keep Parents reasonably informed of the status
and details (including amendments or proposed amendments) of
any such request or Takeover Proposal.
5.9. PROXY STATEMENT.
(a) If necessary and as soon as practicable, the Company will take
all steps necessary duly to call, give notice of, convene and
hold a meeting of its stockholders as soon as practicable for
the purpose of approving the Merger and for such other
purposes as may be necessary or desirable. The Company will
(i) subject to the terms of Section 5.8, endorse the Offer and
Merger and recommend to its stockholders the approval of this
Agreement, the Merger and the transactions to be consummated
hereunder; and (ii) use its best efforts to obtain the
necessary approvals by its stockholders of this Agreement and
the Merger.
(b) As soon as practicable, the Company will prepare and file with
the SEC a proxy statement (together with any amendments or
supplements thereto, the "Proxy Statement"), which shall
(subject to Section 5.8) include the recommendations and
findings of the Board of Directors set forth in Section 2.16,
and will use its reasonable best efforts to respond to any
comments of the SEC or its staff and to cause the Proxy
Statement to be mailed to the Company stockholders. Parents
shall furnish all information concerning Parents and their
Affiliates as the Company may reasonably request in connection
with the preparation of the Proxy Statement.
(c) Notwithstanding the foregoing, in the event that Merger Sub
shall acquire at least 90 percent of the outstanding shares of
Common Stock (assuming the exercise of all outstanding
Options), the Company agrees, at the request of Parents, to
take all necessary and appropriate action to cause the Merger
to become effective, in accordance with Section 253 of the
DGCL, as soon as reasonably practicable after such acquisition
and satisfaction or waiver of the conditions of Article VI,
without a meeting of the stockholders of the Company.
5.10. EMPLOYMENT MATTERS. From and after the date of purchase of shares
of Common Stock pursuant to the Offer, Parents will cause the
Surviving Corporation to honor, in accordance with their terms, all
existing employment and severance agreements between the Company or
any of its Subsidiaries and any officer, director, or employee of
the Company or any of its Subsidiaries. From and after the date of
purchase of shares of Common Stock pursuant to the Offer, Evergreen
shall, or shall cause the Surviving Corporation or its Subsidiaries
to, provide employees of the Surviving Corporation and the
Subsidiaries employee benefits
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<PAGE> 31
that are substantially comparable to benefits provided to such
employees prior to such time (other than with respect to stock and
stock-based plans or programs, including stock grants, restricted
stock, options to purchase stock, dividend rights, or other stock
based awards) with credit for time of service with the Company and
its Subsidiaries. From and after any termination of a Company
Employee Benefit Plan, Evergreen shall, or shall cause the
Surviving Corporation to, provide U.S. employees of the Surviving
Corporation and its Subsidiaries (other than NCC) with a similar
employee benefit plan (if then in existence at Evergreen) that, in
the aggregate, provides benefits that are substantially comparable
to those provided generally to employees of Evergreen and its
Subsidiaries; provided, however, that from and after the Effective
Time, except as expressly set forth in this Section 5.10, no
provision of this Agreement shall prevent Parents or the Surviving
Corporation from amending or terminating any such plan, program or
policy or any benefit plan established or maintained for the
benefit of current or former employees of the Company or any of its
Subsidiaries. In addition, promptly after the date of purchase of
shares of Common Stock pursuant to the Offer, Parents shall make
arrangements for provision to employees of the Company and its
Subsidiaries an equity incentive program at the Surviving
Corporation funded with options to acquire shares of or shares of
the survivor of the contemplated merger of the Parents in size and
scope comparable to the Company's current stock option and other
stock-based plans, on terms satisfactory to the Continuing
Directors.
5.11. STOCK OPTIONS. The Compensation Committee of the Board of
Directors of the Company shall adopt resolutions which provide for
the cancellation of all Options as of the Effective Time in exchange
for the payment of the excess, if any, of the Offer Price over the
exercise price therefor, net of applicable income and employment
taxes, if any.
5.12. DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION. For six
years after the Effective Time, Parents shall cause the Surviving
Corporation to, indemnify, defend and hold harmless the present and
former officers, directors, employees and agents of the Company and
its Subsidiaries (each an "Indemnified Party") the full extent
permitted by the Company's certificate of incorporation, bylaws or
indemnification agreements in effect at the date hereof, including
provisions relating to advancement of expenses incurred in the
defense of any action or suit; provided, that in the event any
claim or claims are asserted or made within such six year period,
all rights to indemnification in respect of any such claim or
claims shall continue until disposition of any and all such claims;
provided, further, that any determination required to be made with
respect to whether an Indemnified Party's conduct complies with the
standards set forth under Delaware law, the Company's certificate
of incorporation or bylaws or such agreements, as the case may be,
shall be made by independent counsel mutually acceptable to Parents
and the Indemnified Party; and provided, further, that nothing
herein shall impair any rights or obligations of any present or
former directors or officers of the
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<PAGE> 32
Company. Parents or the Surviving Corporation shall maintain
the Company's existing officers' and directors' liability insurance
policy ("D&O Insurance") for a period of six years after the
Effective Time; provided, that the Parents may substitute therefor
policies of substantially similar coverage and amounts containing
terms no less advantageous to such former directors or officers;
provided, further that if the existing D&O Insurance expires, is
terminated or canceled during such period, Parents or the Surviving
Corporation will use all reasonable efforts to obtain substantially
similar D&O Insurance; provided, further, however, that in no event
shall either Parents or the Surviving Corporation be required to
pay aggregate premiums for insurance under this Section in excess
of 200% of the aggregate premiums paid by the Company in 1996.
5.13. CERTAIN AGREEMENTS. Except with respect to a Superior Proposal,
neither the Company nor any Subsidiary of the Company will waive or
fail to enforce any provision of any confidentiality or standstill
or similar agreement to which it is a party without the prior
written consent of Merger Sub.
5.14. FINANCING. From and after the date of purchase of shares of
Common Stock pursuant to the Offer, Parents agree to timely make
available or cause to be made available to the Company funds
sufficient to provide for working capital of the Company and to
refinance indebtedness under the KMC Credit Agreement and the 10
1/2% Notes, as required. The Company agrees to cooperate with
Parents and their Affiliates to enable Parents and their Affiliates
to obtain such funds including through the incurrence or refinancing
of indebtedness by the Company and their Subsidiaries, to the extent
the same would not conflict with the obligations of the Company or
its Subsidiaries under any agreement to which any of them is subject
and seek to obtain such waivers as may be necessary or appropriate.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF PARENTS AND MERGER SUB
The obligations of Parents and Merger Sub to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions, any or all of which may be waived in whole or in part by Parents
and Merger Sub:
6.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of the Company
contained in this Agreement shall be true and correct when made as
of the date of this Agreement, except for failures that would not,
individually or in the aggregate, have a Material Adverse Effect on
the Company. The Surviving Representations shall be true and
correct on and as of the Closing Date, except for failures that
would not, individually or in the aggregate, have a Material Adverse
Effect on the
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<PAGE> 33
Company. The Company shall have performed or complied in all
material respects with all of its obligations required by Articles
I, IV and V of this Agreement to be performed or complied with at
or prior to the Closing Date. The Company shall have delivered to
Parents a certificate, dated as of the Closing Date, and signed by
an executive officer of the Company, certifying to the effect of
the above.
6.2. ORGANIZATIONAL DOCUMENTS. The Company shall have delivered to
Parents (i) copies of the Organizational Documents of the Company
as in effect immediately prior to the Effective Time; (ii) copies
of resolutions adopted by the Board of Directors and the
stockholders of the Company authorizing the transactions
contemplated by this Agreement; (iii) a certificate of good
standing of the Company issued by the Secretary of State of
Delaware as of a date not more than five business days prior to the
Effective Time, certified in each case as of the Effective Time by
the Secretary of the Company as being true, correct and complete,
and (iv) the written resignations of each of the Continuing
Directors.
6.3. GOVERNMENTAL CONSENTS. The Company and Parents shall have received
consents to the Merger contemplated hereby with respect to any
Governmental Authority on or prior to the Closing and effective
through and including the Closing Date.
6.4. NO ORDER OR INJUNCTION. There shall not be issued and in effect by
or before any court or other governmental body an order or
injunction restraining or prohibiting the transactions contemplated
hereby.
6.5. OTHER DOCUMENTS. Parents shall have received such other documents,
instruments and certificates incidental to the transactions
contemplated by this Agreement as are reasonably requested by
Parents.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF
THE COMPANY
The obligations of the Company to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions,
any or all of which may be waived in whole or in part by the Company.
7.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of Parents and
Merger Sub contained in this Agreement shall be true and correct in
all material respects when made as of the date of this Agreement.
Parents and Merger Sub shall have performed and complied in all
material respects with all of its obligations required
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<PAGE> 34
by this Agreement to be performed or complied with at or prior to
the Effective Time, except in the event failure to comply would not
prevent the consummation of the transactions contemplated hereby.
Each of the Parents and the Merger Sub shall have delivered to the
Company a certificate, dated as of the Effective Date, and signed by
an executive officer of each of the Parents and the Merger Sub,
certifying to the effect of the above.
7.2. STOCKHOLDER APPROVAL. This Agreement and the Merger shall have been
approved by the affirmative vote, in person or by proxy, of the
holders of a majority of the outstanding shares of the Common Stock
entitled to vote at regular or special meeting.
7.3. NO ORDER OR INJUNCTION. There shall not be issued and in effect by
or before any court or other governmental body an order or
injunction restraining or prohibiting the transactions contemplated
hereby.
7.4. CORPORATE CERTIFICATE. Parents and Merger Sub shall have delivered
the Company (i) copies of the Organizational Documents of each
Parent and Merger Sub as in effect immediately prior to the
Effective Time; (ii) copies of resolutions adopted by the Board of
Directors of each Parent and Merger Sub and the stockholders of
Merger Sub authorizing the transactions contemplated by this
Agreement; and (iii) a certificate of good standing of each Parent
and Merger Sub issued by the Secretary of State of Delaware as of a
date not more than five business days prior to the Effective Time,
certified in each case as of the Effective Time by the respective
Secretary of each Parent and Merger Sub as being true, correct and
complete.
7.5. OTHER DOCUMENTS. The Company shall have received such other
documents, instruments and certificates incidental to the
transactions contemplated by this Agreement as are reasonably
requested by it.
ARTICLE VIII
DEFINITIONS
8.1. DEFINED TERMS. As used herein, the following terms shall have the
following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of
the Exchange Act, as in effect on the date hereof.
"AMEX" means the American Stock Exchange.
"Code" means the Internal Revenue Code of 1986, as amended.
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<PAGE> 35
"Contract" means any agreement, contract, lease, note, mortgage,
indenture, loan agreement, franchise agreement, covenant, employment
agreement, license, instrument, purchase and sales order, commitment,
undertaking, obligation, whether written or oral, express or implied.
"Environmental Claims" means all accusations, allegations, notices
of violation, liens, claims, demands, suits, or causes of action for any
damage, including, without limitation, personal injury, property damage
(including, without limitation, any depreciation or diminution of
property values), lost use of property or consequential damages, arising
directly or indirectly out of (i) Environmental Laws; or (ii) the
presence, use, handling, storage, treatment, recycling, generation,
transportation, release, spilling, leaking, pumping, pouring, emptying,
discharging, injecting, escaping, leaching, disposal, dumping or
threatened release of Hazardous Substances at any location, whether or
not owned, leased or operated by the Company or its Subsidiaries.
"Environmental Laws" means all applicable federal, state, district,
local and foreign laws, all rules or regulations promulgated thereunder,
and all orders, consent orders, judgments, notices, permits or demand
letters issued, promulgated or entered pursuant thereto, relating to
pollution or protection of the environment (including, without
limitation, ambient air, surface water, ground water, land surface, or
subsurface strata), including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), the
Toxic Substances Control Act ("TSCA"), the Hazardous Materials
Transportation Act, the Resource Conservation and Recovery Act ("RCRA"),
the Clean Water Act, the Safe Drinking Water Act, the Clean Air Act, the
Atomic Energy Act of 1954, the Occupational Safety and Health Act
("OSHA") and the Emergency Planning and Community-Right-to-Know Act, each
as amended, and all analogous laws promulgated or issued by any
Governmental Authority.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" means any entity which is (or at any relevant time
was) (i) a Subsidiary of the Company, or (ii) a member of a "controlled
group of corporations" with, under "common control" with, or a member of
an "affiliated service group" with, the Company or any of its
Subsidiaries, as set forth in Section 414 (b), (c), (m) or (o) of the
Code.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles in effect in
the United States of America from time to time.
"Governmental Authority" means any nation or government, any state,
regional, local or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
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"Hazardous Substances" means all pollutants, contaminants,
chemicals, wastes, any other carcinogenic, ignitable, corrosive,
reactive, toxic or otherwise hazardous substances or materials (whether
solids, liquids or gases) and any other materials or substances subject
to regulation, control or remediation under Environmental Laws.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"KMC Credit Agreement" means the Credit Agreement, dated as of
December 19, 1996, among Katz Media Corporation, the Lenders as defined
therein, the DLJ Capital Funding, Inc., as Syndication Agent and the
First National Bank of Boston, as Administration Agent, as amended.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, but not limited to, any
conditional sale or other title retention agreement, any lease in the
nature thereof, and the filing of or agreement to give any financing
statement under the Uniform Commercial Code or comparable law or any
jurisdiction in connection with such mortgage, pledge, security interest,
encumbrance, lien or charge)
"Material Adverse Change (or Effect)" means a change (or effect), in
the condition (financial or otherwise), properties, assets, liabilities,
rights, obligations, operations, business or prospects which change (or
effect) individually or in the aggregate, is materially adverse to such
condition, properties, assets, liabilities, rights, obligations,
operations, business or prospects. With respect to any Person, a Material
Adverse Change (or Effect) refers to such Person and its Subsidiaries.
"NCC" means National Cable Communications, L.P.
"Register", "registered" and "registration" refer to a registration
of the offering and sale of securities effected by preparing and filing a
registration statement in compliance with the Securities Act and the
declaration or ordering of the effective of such registration statement.
"Representation Agreement" means any agreement (including, without
limitation, any agreement applicable to a specific radio or television
broadcast station (each, a "Station Agreement") or any master agreement,
mutual agreement or letter agreement (each, a "Master Agreement")
applicable to one or more radio or television broadcast stations or
Station Agreements) now in effect or hereafter entered into between the
Company or any of its Subsidiaries and owners and operators of electronic
media (including, without limitation, radio and television stations,
cable systems, interactive television projects, Internet and other
on-line services) pursuant to which the Company or such Subsidiary sells
advertising on such media, as such agreements may be amended,
supplemented or otherwise modified from time to time.
"SEC" means the Securities and Exchange Commission.
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"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" shall mean, as to any Person, any corporation, joint
venture, limited liability company, partnership, other business entity or
Person of which at least a majority of voting securities or other
ownership interests are, at the time as of which any determination is
being made, owned directly or indirectly by such Person, and as to the
Company, shall also include NCC.
"Tax Affiliate" means, as to any Person, (i) any Subsidiary of such
Person, and (ii) any Affiliate of such Person with which such Person
files or is eligible to file consolidate, combined or unitary tax
returns.
"Tax Authority" includes the Internal Revenue Service and any state,
local, foreign or other governmental authority responsible for the
administration of any Taxes.
"Tax Return" means any declaration, estimate, return, report,
information statement, schedule or other document (including any related
or supporting information) with respect to Taxes that is required to be
filed with any Tax Authority.
"Taxes" includes all federal, provincial, territorial, state,
municipal, local, domestic, foreign or other taxes, imposts, rates,
levies, assessments and other charges including, without limitation, ad
valorem, capital, capital stock, customs and import duties, disability
documentary stamp, employment, estimated, excise, fees, franchise,
gains, goods and services, gross income, gross receipts, income,
intangible, inventory, license, mortgage recording, net income,
occupation, payroll, personal property, production, profits, property,
real property, recording, rent, sales, severance, sewer, social security,
stamp, transfer, transfer gains, unemployment, use, value added, water,
windfall profits, and withholding, together with any interest, additions,
fines or penalties with respect thereto or in respect of any failure to
comply with any requirement regarding Tax Returns and any interest in
respect of such additions, fines or penalties and shall include any
transferee liability in respect of any and all of the above.
"10 1/2% Notes" means the 10 1/2% Senior Subordinated Notes due 2007
of Katz Media Corporation.
"Third Party" means any Person other than Parents, Merger Sub or any
of their respective Affiliates.
8.2. OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have
the defined meanings when used in any certificates, reports or
other documents made or delivered pursuant hereto or thereto,
unless the context otherwise requires.
(b) Terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
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(c) As used herein, the neuter gender shall also denote the
masculine and feminine, and the feminine gender shall also
denote the neuter and feminine where the context so permits.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1. TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time:
(a) By mutual written consent of all of the parties hereto at any
time prior to the Closing;
(b) By Parents and Merger Sub upon delivery of written notice to
the Company in accordance with Section 10.1 of this Agreement
in the event of a material breach by the Company of any
provisions of this Agreement, which breach shall not be
remedied within ten business days of written notice specifying
such breach in reasonable detail and demanding that the same
be remedied;
(c) By the Company upon delivery of written notice to Parents in
accordance with Section 10.1 of this Agreement in the event of
a material breach by Parents or Merger Sub of any provision of
this Agreement, which breach shall not be remedied within ten
business days of written notice specifying such breach in
reasonable detail and demanding that the same be remedied;
(d) By Parents, Merger Sub, or the Company upon delivery of
written notice to the others in accordance with Section 10.1
of this Agreement, if the Closing shall not have occurred by
December 31, 1997, unless the failure of the Closing to occur
is the result of a breach by the terminating party that caused
the Closing to be delayed;
(e) By Parents, Merger Sub or the Company if a court of competent
jurisdiction or governmental, regulatory or administrative
agency or commission shall have issued an order, decree or
ruling or taken any other action (which order, decree or
ruling each of the parties hereto shall use all reasonable
efforts to lift), in each case permanently restraining,
enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling
or other action shall have become final and nonappealable;
(f) By Parents and Merger Sub if, due to any event, occurrence or
non-occurrence, as the case may be, which results in or
constitutes a failure to
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<PAGE> 39
satisfy a Tender Offer Condition, the Offer is terminated or
expires in accordance with its terms without Merger Sub having
purchased any Common Stock thereunder provided, that Parents
or Merger Sub may not terminate if any of them is in material
breach of this Agreement;
(g) By Parents and Merger Sub or the Company if th stockholders of
the Company shall have failed to approve this Agreement, the
Merger and the transactions contemplated herein at the meeting
called pursuant to Section 5.9, provided that prior to or
contemporaneous with such termination the payments set forth
in Section 10.3 of this Agreement shall have been paid to
Merger Sub;
(h) By Parents and Merger Sub if (i) the Board of Directors (A)
shall withdraw or modify in any manner adverse to Parents or
Merger Sub its approval or recommendation of this Agreement or
the Merger or the Stockholder Agreement, (B) in response to
the commencement of any tender offer or exchange offer by
Persons other than Parents and their Affiliates for more than
25% of the outstanding shares of the Company's Common Stock,
shall have not recommended rejection of such tender offer or
exchange offer within the time prescribed therefor by
applicable law, (C) shall approve or recommend any Takeover
Proposal other than the Offer, or (D) shall resolve to take
any of the actions specified in clauses (A) or (C) above or
(ii) the stockholders party to the Stockholder Tender
Agreement fail to tender their shares of Common Stock in the
Offer unless permitted under the terms of the Stockholder
Tender Agreement;
(i) By the Company, if Parents or Merger Sub terminate the Offer
in accordance with this Agreement, or the Offer shall have
expired without Parents or Merger Sub purchasing any Shares of
Common Stock pursuant hereto; provided, that, the Company may
not terminate if it is in material breach of this Agreement;
or
(j) By the Company, if the Board of Directors of the Company shall
have determined to accept a Superior Proposal, provided that
prior to or contemporaneous with such termination the payments
set forth in Section 10.3 of this Agreement shall have been
paid to Merger Sub.
9.2. EFFECT OF TERMINATION. Except for the provisions of Section 5.7
and Section 10.3 hereof, which shall survive any termination of
this Agreement, in the event of termination of this Agreement
pursuant to Section 9.1, this Agreement shall forthwith become void
and of no further force and effect, and the parties shall be
released from any and all obligations hereunder; provided, however,
that nothing herein shall relieve any party from liability for the
willful breach of any of its representations, warranties, covenants
or agreements set forth in this Agreement.
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ARTICLE X
GENERAL PROVISIONS
10.1. NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be deemed
given if delivered by certified or registered mail (first class
postage pre-paid), guaranteed overnight delivery or facsimile
transmission if such transmission is confirmed by delivery by
certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and
telecopy numbers (or to such other addresses or telecopy numbers
which such party shall designate in writing to the other party):
(a) if to the Company to:
Katz Media Group, Inc.
125 West 55th Street
New York, New York 10019
Attn: Thomas F. Olson
Telecopy: (212) 424-6489
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attn: Edward D. Sopher
Telecopy: (212) 872-1002
(b) if to Parents or Merger Sub to:
Evergreen Media Corporation
433 East Las Colinas Blvd.
Irving, Texas 75039
Attn: Scott K. Ginsburg
Telecopy: (972) 869-3671
and to
Chancellor Broadcasting Company
12655 North Central Expressway
Suite 405
Dallas, Texas 75243
Attn: Steven Dinetz
Telecopy: (972) 239-0220
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with a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004-2505
Attn: Eric L. Bernthal
Telecopy: (202) 637-2201
10.2. ENTIRE AGREEMENT. This Agreement, the Stockholder Tender Agreement,
the Management Tender Agreement, and the Confidentiality Agreement
and other documents delivered at the Closing pursuant hereto,
contain the entire understanding of the parties in respect of its
subject matters and supersedes all prior agreements and
understanding (oral or written) between or among the parties with
respect to such subject matter. The Company Disclosure Statement
constitutes a part hereof as though set forth in full above.
10.3. EXPENSES.
(a) (i) In addition to any other amounts which may be payable or
become payable pursuant to any other paragraph of this Section
10.3, the Company shall (provided that neither of Parents nor
Merger Sub is then in material breach of its obligations under
this Agreement), promptly, but in no event later than the
earlier of (A) the time specified in Section 9.1 hereof, if
any, or (B) one business day after the termination of this
Agreement reimburse Parents and Merger Sub (to be paid as
Parents jointly direct in writing) for all documented Expenses
up to $2 million.
(ii) As used in this Agreement, "Expenses" includes all
out-of-pocket expenses (including, without limitation, all
fees and expenses of all banks (including commitment fees),
investment banking firms and other financial institutions,
and their respective agents and counsel, and counsel,
accountants, experts and consultants to a party hereto and
its affiliates) incurred by a party or its affiliate on its
or their behalf, whether incurred prior to, on or after the
date of this Agreement, in connection with or related to the
authorization, preparation, negotiation, execution and
performance of this Agreement and the transactions
contemplated hereby and the financing thereof, including the
preparation, printing, filing and mailing of the Offer
Documents and all other matters related to the transactions
contemplated hereby.
(b) If (i) this Agreement shall have been terminated pursuant to
Section 9.1(b) or pursuant to condition (a) of Annex 1 and
either of the following shall have occurred prior to such
termination: (A)(x) any corporation, partnership, person,
other entity or "group" (as referred to in Section
40
<PAGE> 42
13(d)(3) of the Exchange Act) other than Merger Sub, Parents,
or any of their respective Affiliates, but excluding the
entities' signatory to the Stockholder Tender Agreement and
their Affiliates or any "group" of which any such Persons is a
member, shall have become the beneficial owner of more than
25% of the outstanding shares of the Company's Common Stock,
or (y) any Person (other than Merger Sub, Parents, or any of
their respective Affiliates or any "group" of which any such
Persons is a member) shall have made, or proposed,
communicated or disclosed in a manner which is or otherwise
becomes public, a Takeover Proposal (including by making such
Takeover Proposal) and (B) on or prior to the eighteen-month
anniversary of the date of this Agreement, the Company either
consummates with a Person referred to in (A)(x) or (y) a
transaction the proposal of which would otherwise qualify as
an Takeover Proposal under Section 5.8 or enters into a
definitive agreement with respect to and subsequently
consummates a transaction with a Person referred to in (A)(x)
or (y) the proposal of which would otherwise qualify as an
Takeover Proposal under Section 5.8; or (ii) this Agreement is
terminated pursuant to Section 9.1(h) or (j), then in the case
of clauses (i) or (ii) of this Section 10.3(b) the Company
shall (1) in the case of clauses (b)(i)(A) and (b)(ii) above,
promptly, but in no event later than the earlier of (a) the
time, if any, specified in Section 9.1, or (b) one business
day after the termination of this Agreement and (2) in the
case of clause (b)(i)(B) above, promptly, but in no event
later than the date of the event specified therein shall have
occurred, pay Parents (as they jointly direct in writing)
Merger Sub a fee of $8 million in cash, which amount shall be
payable in same day funds.
(c) In addition to the other provisions of this Section 10.3, in
the event a fee is or becomes payable pursuant to Section 10.3
hereof, the Company agrees promptly, but in no event later
than two business days following written notice thereof, to
reimburse Merger Sub or its designee for all reasonable
out-of-pocket costs, fees and expenses, including, without
limitation, the reasonable fees and disbursements of counsel
and the expenses of litigation, incurred in connection with
collecting the Expenses pursuant to paragraph (a) of this
Section and the fee pursuant to paragraph (b) of this Section,
as a result of any breach by the Company of its obligations
under this Section 10.3.
(d) Except as set forth in Section 10.3(a), each of the parties
hereto shall pay all the fees and expenses incurred by it
incident to preparing for, entering into and carrying into
effect this Agreement and the transactions contemplated
herein; provided that the Company covenants and represents and
warrants that such fees and expenses incurred by the Company
for services of attorneys, accountants, investment bankers
(including for the
41
<PAGE> 43
fairness opinion) and all other advisors to the Company
associated with the transactions contemplated herein, will not
exceed $5 million.
10.4. AMENDMENT; WAIVER. This Agreement may not be modified, amended,
supplemented, canceled, or discharged, except by written
instrument executed by all parties. No failure to exercise and no
delay in exercising, any right, power or privilege under this
Agreement shall operate as a waiver, nor shall any single or
partial exercise of any right, power or privilege hereunder
preclude the exercise of any other right, power or privilege. No
waiver of any breach of any provision shall be deemed to be a
waiver of any preceding or succeeding breach of the same or any
other provision, nor shall any waiver be implied from any course
of dealing between the parties. No extension of time for
performance of any obligations or other acts hereunder or under
any other agreement shall be deemed to be an extension of the time
for performance of any other obligations or any other acts.
10.5. BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and
their respective successors and assigns. Nothing expressed or
implied herein shall be construed to give any other person any
legal or equitable rights hereunder. Except as expressly provided
herein, the rights and obligations of this Agreement may not be
assigned by the without the prior written consent of Parents and
Merger Sub within the prior written consent of the Company.
10.6. REPRESENTATIONS AND WARRANTIES. None of the representation and
warranties contained in this Agreement or any instrument or other
document deliver pursuant to this Agreement shall survive the
Effective Time.
10.7. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which
together shall constitute one and the same instrument.
10.8. INTERPRETATION. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such
reference shall be deemed to be to this Agreement unless otherwise
indicated. The headings contained herein and on the schedules are
for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement or the schedules.
Whenever, the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words
"without limitation." Time shall be of the essence in this
Agreement.
10.9. GOVERNING LAW; INTERPRETATION. This Agreement shall be construed
in accordance with and governed for all purposes by the laws of the
State of Delaware without giving effect to the principles of
conflicts of laws thereunder which would specify the application of
the law of another jurisdiction.
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<PAGE> 44
10.10. JURISDICTION; CONSENT TO SERVICE OF PROCESS.
(a) Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of any federal or state court located within the
State of Delaware over any dispute arising out of or relating
to this Agreement and waives any objections which it may now
or hereafter have to the laying of the venue of any suit,
action or proceeding arising out of or relating to this
Agreement brought in any state or federal court of competent
jurisdiction in the State of Delaware, and hereby further
irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in any
inconvenient forum. No suit, action or proceeding against a
party hereto with respect to this Agreement may be brought in
any court, domestic or foreign, or before any similar domestic
or foreign authority other than in a court of competent
jurisdiction in the State of Delaware, and each party hereto
hereby irrevocably waives any right which it may otherwise
have had to bring such an action in any other court, domestic
or foreign, or before any similar domestic or foreign
authority.
(b) Each of the parties hereto consents to process being served by
any party to this Agreement in any suit, action or proceeding
by the mailing of a copy thereof in accordance with the
provisions of Section 10.1.
10.11. ARM'S LENGTH NEGOTIATIONS. Each party hereto expressly represents
and warrants to all other parties hereto that (i) before executing
this Agreement, said party has fully informed himself or itself of
the terms, contents, conditions, and effects of this Agreement;
(ii) said party has relied solely and completely upon his or its
own judgment in executing this Agreement; (iii) said party has had
the opportunity to seek and has obtained the advice of counsel
before executing this Agreement; (iv) said party has acted
voluntarily and of his or its own free will in executing this
Agreement; (v) said party is not acting under duress, whether
economic or physical, in executing this Agreement; and (vi) this
Agreement is the result of arm's length negotiations conducted by
and among the parties and their respective counsel.
10.12. MATTERS AFFECTING PARENTS. It is understood and agreed that,
except as expressly provided in this Agreement, no condition in
or matter affecting the pending transactions between the Parents
shall act as a condition to the obligations of Parents or Merger
Sub hereunder or give rise to any right on the part of Parents or
Merger Sub to terminate this Agreement. The obligations of Parents
hereunder are joint and several. Any amendment, consent or waiver
on part of Parents or Merger Sub may be given by Evergreen on part
of Parents and Merger Sub.
43
<PAGE> 45
THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK.
44
<PAGE> 46
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
CHANCELLOR BROADCASTING COMPANY
By: /s/ ERIC C. NEUMAN
--------------------------------------------
Name: Eric C. Neuman
Title: Vice President
EVERGREEN MEDIA CORPORATION
By: /s/ SCOTT K. GINSBURG
--------------------------------------------
Name: Scott K. Ginsburg
Title: Chairman of the Board
and Chief Executive Officer
MORRIS ACQUISITION CORPORATION
By: /s/ SCOTT K. GINSBURG
--------------------------------------------
Name: Scott K. Ginsburg
Title: President and Chief Executive Officer
KATZ MEDIA GROUP, INC.
By: /s/ THOMAS F. OLSON
--------------------------------------------
Name: Thomas F. Olson
Title: President and Chief Executive Officer
<PAGE> 47
ANNEX 1
The capitalized terms used herein have the meanings set forth in the
Merger Agreement dated as of July 14, 1997 (the "Merger Agreement") to which
this Annex 1 is attached.
CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Merger Agreement or the Offer,
Merger Sub shall not be required to accept for payment, purchase or pay for any
shares of Common Stock tendered and may terminate or (subject to the terms of
the Merger Agreement) amend the Offer and may postpone the acceptance for
payment of and payment for any shares of Common Stock, if prior to the time of
acceptance for payment of shares of Common Stock tendered and if pursuant to
the Offer (whether or not any shares of Common Stock have theretofore been
accepted for payment or paid for pursuant to the Offer) (i) there shall not
have been validly tendered and not properly withdrawn pursuant to the Offer at
least a majority of the shares of Common Stock, on a fully diluted basis (the
"Minimum Condition"), (ii) any waiting period under the HSR Act applicable to
the purchase of shares of Common Stock pursuant to the Offer shall not have
expired or been terminated, or (iii) any of the following shall occur:
(a) Any representation or warranty of the Company in the Merger
Agreement shall have been untrue or incorrect as of the date of the
Merger Agreement, or any Surviving Representation shall become
untrue or incorrect, except in each case for any failure that would
not have a Material Adverse Effect on the Company; or the Company
shall have failed to perform or comply in all material respects with
its obligations required by Articles I, IV and V of the Merger
Agreement to be performed or complied with prior to payment for any
shares of Common Stock tendered in the Offer.
(b) There shall have been instituted or be pending any action,
proceeding, application, claim or counterclaim by any government or
governmental authority or agency, domestic or foreign, before any
court or governmental regulatory or administrative agency,
authority, or tribunal, domestic or foreign, (i) challenging the
acquisition by Parents or Merger Sub of the shares of Common Stock,
seeking to restrain or prohibit the making or consummation of the
Offer; (ii) seeking to obtain from Parents or Merger Sub any
material damages, fines or legal sanctions related to the Offer or
the Merger or the subsequent ownership or operation of the Company;
(iii) seeking to prohibit or limit the ownership or operation by
Parents or Merger Sub or any of their affiliates of any material
portion of the business or assets of the Company or to compel
Parents or Merger Sub or any of their affiliates to dispose of or
forfeit material incidents of control all or any material portion of
the business or assets of the Company or of Merger Sub; (iv) seeking
to impose limitations on the ability of Parents or Merger Sub or any
of their affiliates effectively to exercise full rights of ownership
of the shares of Common Stock, including, without limitation, the
right to vote any shares of Common Stock
<PAGE> 48
acquired or owned by Parents or Merger Sub or any of their
affiliates on all matters properly presented to the Company's
stockholders; or (v) seeking to require divestiture by Parents or
Merger Sub or any of their affiliates of any shares of Common
Stock; or
(c) There shall be any statute, rule, regulation, legislation,
interpretation, judgment, order or injunction proposed, enacted,
promulgated, entered, enforced, issued or deemed applicable to the
Offer, the Merger or other similar business combination by Merger
Sub or any affiliate of Parents with the Company, or any other
action shall have been taken by any government, governmental
authority or agency or court with respect to a proceeding described
in paragraph (b) above, domestic or foreign, that has, or, in
Parents' sole discretion, could be expected to result in, any of the
consequences referred to in paragraph (b) above; or
(d) There shall have been instituted or be pending any action,
proceeding, application, claim or counterclaim by any Person (other
than a governmental authority or agency), before any court or
governmental regulatory or administrative agency, authority, or
tribunal, domestic or foreign, that (i) relates solely to the
business of the Company or its Subsidiaries (including employee
related matters) prior to the date of the Merger Agreement (and not
in connection with or in contemplation of the transactions
contemplated by the Merger Agreements and (ii) would if adversely
determined have a Material Adverse Effect; or
(e) There shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on the New York Stock
Exchange, Inc., the American Stock Exchange, or the Nasdaq Stock
Market; (ii) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States
(whether or not mandatory); (iii) a decline of at least 25% in
either the Dow Jones Average of Industrial Stocks or the Standard &
Poor's 500 Index from that existing at the close of business on July
11, 1997; or (iv) in the case of any of the foregoing existing at
July 11, 1997, a material acceleration or worsening thereof;
The foregoing conditions are for the sole benefit of Parents and
Merger Sub and may be asserted by Parents or Merger Sub regardless of the
circumstances giving rise to any such conditions and may be waived by Parents
or Merger Sub, in whole or in part, at any time and from time to time, in its
sole discretion. The failure by Parents or Merger Sub at any time to exercise
any of the foregoing rights will not be deemed a waiver of any such right and
the waiver of such right with respect to any particular facts or circumstances
shall not be deemed a wavier with respect to any other facts or circumstances,
and each such right will be deemed an ongoing right which may be asserted at
any time and from time to time. Any determination by Parents or Merger Sub
concerning the event descried above will be fined and binding upon all parties.
<PAGE> 1
STOCKHOLDER TENDER AGREEMENT
STOCKHOLDER TENDER AGREEMENT, dated as of July 14, 1997 (this
"Agreement"), by and among the persons or entities designated as Stockholders
on the signature pages hereto (the "Stockholders" and each a "Stockholder"),
Chancellor Broadcasting Company, a Delaware corporation ("Chancellor"),
Evergreen Media Corporation, a Delaware corporation (Evergreen, and together
with Chancellor, "Parents"), and Morris Acquisition Corporation, a Delaware
corporation ("Merger Sub"). Capitalized terms used and not otherwise defined
herein shall have the respective meanings assigned to them in the Merger
Agreement referred to below.
WHEREAS, the Stockholders collectively own of record and
beneficially certain shares of common stock, par value $.01 per share (the
"Company Common Stock"), of Katz Media Group, Inc., a Delaware corporation (the
"Company"), each Stockholder, respectively, owning of record and/or
beneficially the number of shares of Company Common Stock set forth next to its
name on Annex A attached hereto and incorporated by reference herein (such
Stockholder's shares, together with any other voting or equity securities of
the Company hereafter acquired by such Stockholder prior to the termination of
this Agreement, being referred to collectively as the "Shares"); and
WHEREAS, concurrently with the execution of this Agreement,
Parents, Merger Sub and the Company, are entering into a Merger Agreement,
dated as of the date hereof (as amended from time to time, the "Merger
Agreement"), which provides, among other things, that, upon the terms and
subject to the conditions therein, Merger Sub will make a cash tender offer
(the "Offer") for all outstanding shares of Company Common Stock and will merge
with and into the Company (the "Merger"); and
WHEREAS, as a condition to the willingness of Parents and
Merger Sub to enter into the Merger Agreement, Parent and Merger Sub have
requested that the Stockholders agree, and in order to induce Parent and Merger
Sub to enter into the Merger Agreement, the Stockholders have agreed, to enter
into this Agreement; and
WHEREAS, prior to the execution and delivery of this Agreement
by the parties hereto, the disinterested directors of and the entire Board of
Directors of the Company have approved the execution and delivery of this
Agreement and the terms hereof pursuant to Section 203 of the DGCL.
NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and subject to the terms and conditions set forth herein,
the parties hereto hereby agree as follows:
<PAGE> 2
Section 1. Representations and Warranties of the
Stockholders. Each Stockholder represents and warrants to Parents and Merger
Sub, severally as to itself and with respect to its Shares, as follows:
(a) Such Stockholder is the beneficial owner (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), which definition will apply for all purposes of this
Agreement) of, and has good title to, all of its Shares, and there exist no
liens, claims, security interests, options, proxies, voting agreements, charges
or encumbrances of whatever nature ("Liens") affecting its Shares, except for
Liens created pursuant to the Shareholder Agreement, dated as of August 1,
1994, among the Stockholders and certain other parties thereto (as amended, the
"Stockholders Agreement").
(b) Assuming that Merger Sub acquired its
interest in the Shares in good faith and without notice of any adverse claim
(within the meaning of Section 8-302 of the Uniform Commercial Code as in
effect in the State of New York), upon the transfer to Merger Sub by such
Stockholder of its Shares upon consummation of the Offer or the Merger
(whichever is earlier), Merger Sub will acquire all of such Stockholder's
rights in such Stockholder's Shares, free of any adverse claim.
(c) Such Stockholder's Shares constitute all of
the shares of Common Stock beneficially owned, directly or indirectly, by such
Stockholder.
(d) The execution and delivery of this Agreement
by such Stockholder does not, and the performance by such Stockholder of its
obligations hereunder will not, constitute a violation of, conflict with,
result in a default (or an event which, with notice or lapse of time or both,
would result in a default) under, or result in the creation of any Lien on any
of such Stockholder's Shares under (i) any contract, commitment, agreement,
understanding, arrangement or restriction of any kind to which such Stockholder
is a party or by which such Stockholder is bound, (ii) any judgment, writ,
decree, order or ruling applicable to such Stockholder, or (iii) the
organizational documents of such Stockholder.
(e) Such Stockholder has full power and authority
to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized and no other actions on the part of such
Stockholder. This Agreement has been duly and validly executed and delivered
by such Stockholder and, assuming due authorization, execution and delivery by
Parent and Merger Sub, constitutes a valid and binding agreement of such
Stockholder, enforceable against such Stockholder in accordance with its terms,
except to the extent that enforceability may be limited by applicable law.
(g) Neither the execution and delivery of this
Agreement nor the performance by such Stockholder of its obligations hereunder
will (i) violate any order, writ, injunction or judgment applicable to such
Stockholder or (ii) violate any law, decree, statute, rule or regulation
applicable to such Stockholder or require any consent, authorization or
approval of,
2
<PAGE> 3
filing with or notice to, any court, administrative agency or other
governmental body or authority, other than any required notices or filings
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act")
or the federal securities laws.
Section 2. Representations and Warranties of Parent.
Parents severally represent and warrant to the Stockholders as follows:
(a) Each Parent is (i) duly organized and validly
existing and in good standing under the laws of the State of Delaware, (ii) has
the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby, and (iii) has
taken all necessary corporate action to authorize the execution, delivery and
performance of this Agreement. This Agreement has been duly and validly
executed and delivered by each Parent and constitutes the legal, valid and
binding several obligation of each Parent, enforceable against each Parent in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, organization, insolvency, moratorium or other
laws affecting the enforcement of creditors' rights generally and by general
principles of equity, regardless of whether such enforceability is considered
in a proceeding in equity or at law.
(b) The execution and delivery of this Agreement
by each Parent does not, and the performance by each Parent of its obligations
hereunder will not, constitute a violation of, conflict with, or result in a
default (or an event which, with notice or lapse of time or both, would result
in a default) under, its certificate of incorporation or bylaws or any
contract, commitment, agreement, understanding, arrangement or restriction of
any kind to which each Parent is a party or by which each Parent is bound or
any judgment, writ, decree, order or ruling applicable to each Parent.
(c) Neither the execution and delivery of this
Agreement nor the performance by each Parent of its obligations hereunder will
violate any order, writ, injunction, judgment, law, decree, statute, rule or
regulation applicable to each Parent or require any consent, authorization or
approval of, filing with, or notice to, any court, administrative agency or
other governmental body or authority, other than any required notices or
filings pursuant to the HSR Act or the federal securities laws.
Section 3. Representations and Warranties of Merger Sub.
Merger Sub represents and warrants to the Stockholders as follows:
(a) Merger Sub is (i) duly organized and validly
existing and in good standing under the laws of the State of Delaware, (ii) has
the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby, and (iii) has
taken all necessary corporate action to authorize the execution, delivery and
performance of this Agreement. This Agreement has been duly and validly
executed and delivered by Merger Sub and constitutes the legal, valid and
binding obligation of Merger Sub, enforceable against Merger Sub in accordance
with its terms, except to the extent
3
<PAGE> 4
that enforceability may be limited by applicable bankruptcy, organization,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether
such enforceability is considered in a proceeding in equity or at law.
(b) The execution and delivery of this Agreement
by Merger Sub does not, and the performance by Merger Sub of its obligations
hereunder will not, constitute a violation of, conflict with, or result in a
default (or an event which, with notice or lapse of time or both, would result
in a default) under, its certificate of incorporation or bylaws or any
contract, commitment, agreement, understanding, arrangement or restriction of
any kind to which Merger Sub is a party or by which Merger Sub is bound or any
judgment, writ, decree, order or ruling applicable to Merger Sub.
(c) Neither the execution and delivery of this
Agreement nor the performance by Merger Sub of its obligations hereunder will
violate any order, writ, injunction, judgment, law, decree, statute, rule or
regulation applicable to Merger Sub or require any consent, authorization or
approval of, filing with, or notice to, any court, administrative agency or
other governmental body or authority, other than any required notices or
filings pursuant to the HSR Act or the federal securities laws.
Section 4. Tender of Shares.
(a) During the term of this Agreement, each
Stockholder hereby agrees to tender and sell (and not withdraw) pursuant to and
in accordance with the terms of the Offer all of such Stockholder's Shares.
Upon the purchase of all Shares owned by a Stockholder pursuant to the Offer in
accordance with this Section 4(a), this Agreement shall terminate solely with
respect to such Stockholder. Notwithstanding the provisions of this Section
4(a), in the event any Stockholder withdraws such Stockholder's Shares from the
Offer for any reason or any such Shares are not purchased pursuant to the
Offer, such Shares shall remain subject to the terms of this Agreement. Each
Stockholder acknowledges that Merger Sub's obligation to accept for payment and
pay for the Shares in the Offer is subject to all the terms and conditions of
the Offer.
(b) Each Stockholder hereby agrees to permit
Parents and Merger Sub to publish and disclose in the Offer Documents and, if
approval of the stockholders of the Company is required under applicable law,
in the Proxy Statement, including all documents and schedules filed with the
SEC, its identity and ownership of Company Common Stock and the nature of its
commitments, arrangements and understandings under this Agreement.
Section 5. Transfer of the Shares. During the term of
this Agreement, except as otherwise provided herein, no Stockholder shall (a)
offer to sell, sell, pledge or otherwise dispose of or transfer any interest in
or encumber with any Lien any of such Stockholder's Shares, except for transfer
or sale to any affiliate of such Stockholder who agrees to be bound by this
Agreement, (b) deposit such Stockholder's Shares into a voting trust, enter
into a voting agreement or arrangement with respect to such Shares or grant any
proxy or power of attorney
4
<PAGE> 5
with respect to such Shares, or (c) enter into any contract, option or other
arrangement or undertaking with respect to the direct or indirect acquisition
or sale, assignment or other disposition of or transfer of any interest in or
the voting of any shares of Company Common Stock or any other securities of the
Company.
Section 6. No Solicitation. During the term of this
Agreement, each Stockholder agrees, in its capacity as such, not to directly or
indirectly, initiate, solicit (including by way of furnishing information),
encourage or respond to or take any other action knowingly to facilitate, any
inquiries or the making of any proposal by any person or entity (other than
Parent or any affiliate of Parent) with respect to the Company that reasonably
may be expected to lead to a Takeover Proposal, or enter into or maintain or
continue discussions or negotiate with any person or entity in furtherance of
such inquiries or to obtain any Takeover Proposal, or agree to or endorse any
Takeover Proposal, or authorize or permit any person or entity acting on behalf
of such Stockholder to do any of the foregoing. If any Stockholder receives
any Takeover Proposal, such Stockholder agrees to promptly notify Parent of
that inquiry or proposal and the details thereof.
Section 7. Waiver of Appraisal Rights. Each Stockholder
hereby irrevocably waives any rights of appraisal or rights to dissent from the
Merger that such Stockholder may have.
Section 8. Voting of Shares. During the term of this
Agreement, each Stockholder in its capacity as such hereby agrees to vote each
of its Shares at any annual, special or adjourned meeting of the stockholders
of the Company (a) in favor of the Merger, the execution and delivery by the
Company of the Merger Agreement and the approval and adoption of the terms
thereof and hereof; (b) against any action or agreement that would result in a
breach in any respect of any covenant, agreement, representation or warranty of
the Company under the Merger Agreement; and (c) against the following actions
(other than the Merger and the other transactions contemplated by the Merger
Agreement): (i) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company or its
Subsidiaries; (ii) a sale, lease or transfer of a material amount of assets of
the Company or one of its Subsidiaries, or a reorganization, recapitalization,
dissolution or liquidation of the Company or its Subsidiaries; (iii) (A) any
change in a majority of the persons who constitute the board of directors of
the Company as of the date hereof; (B) any change in the present capitalization
of the Company or any amendment of the Company's certificate of incorporation
or bylaws, as amended to date; (C) any other material change in the Company's
corporate structure or business; or (D) any action that is intended, or could
reasonably be expected, to impede, interfere with, delay, postpone, or
adversely affect the Merger and the other transactions contemplated by this
Agreement and the Merger Agreement.
Section 9. Enforcement of the Agreement. Each
Stockholder acknowledges that irreparable damage would occur in the event that
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
Merger Sub will be entitled (i) to an injunction or injunctions to prevent
breaches of this Agreement and (ii) to specifically enforce the terms and
provisions hereof in any
5
<PAGE> 6
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which it is entitled at law or in equity.
Section 10. Adjustments. The number and type of
securities subject to this Agreement will be appropriately adjusted in the
event of any stock dividends, stock splits, recapitalizations, combinations,
exchanges of shares or the like or any other action that would have the effect
of changing any Stockholder's ownership of the Company's capital stock or other
securities.
Section 11. Termination. This Agreement will terminate
on the earlier of (a) the purchase of all the Shares pursuant to the Offer in
accordance with Section 4 and (b) the date on which the Merger Agreement is
terminated in accordance with its terms. Notwithstanding the foregoing and any
such termination, in the event (A) the Stockholder disposes of its Shares in
breach of this Agreement or (B) the Merger Agreement is terminated (i) pursuant
to the provisions of Section 9(h) or (j) of the Merger Agreement and at any
time within twelve months of the date hereof a Stockholder or any of its
Affiliates disposes of any interest in the Shares to a party other than any
Affiliate of Stockholder, Parents or any of their Affiliates, or (ii) in any
other circumstance in which a fee is payable to Parents or Merger Sub under
Section 10.3(b)(i) of the Merger Agreement and at any time within twelve months
of the date hereof a Stockholder or any of its Affiliates disposes of any
interest in the Shares to a party other than any Affiliate of Stockholder,
Parents or any their Affiliates but while the circumstances described in
Section 10.3(b)(i)(A) are pending, then in each case of (A) or (B) such
Stockholder shall pay promptly following receipt by such Stockholder or any of
its Affiliates, to Parents as they jointly direct, (x) 100% of any
consideration received by it for such interest in such Shares so disposed that
exceeds $11.00 per share up to $13.00 per share and (y) 75% of any
consideration received by it for such interest in such Shares so disposed that
exceeds $13.00 per share. All terms hereof pertinent to this obligation shall
survive such termination.
Section 12. Expenses. All fees and expenses incurred by
any of the parties hereto shall be borne by the party incurring such fees and
expenses.
Section 13. Brokerage. Except as disclosed in the Merger
Agreement (including the Schedules thereto), each party represents and warrants
to the others that there are no claims for finder's fees or brokerage
commissions or other like payments in connection with this Agreement or the
transactions contemplated hereby, and each party agrees to indemnify and hold
harmless the other parties from and against any and all claims or liabilities
for finder's fees or brokerage commissions or other like payments incurred in
connection with the transactions contemplated hereby.
Section 14. Miscellaneous.
(a) All representations and warranties contained
herein shall survive for one (1) year after the termination hereof.
6
<PAGE> 7
(b) Any provision of this Agreement may be waived
at any time by the party that is entitled to the benefits thereof. No such
waiver, amendment or supplement shall be effective unless in writing signed by
the party or parties sought to be bound thereby. Any waiver by any party of a
breach of any provision of this Agreement shall not operate as or be construed
to be a waiver of any other breach of such provision or of any breach of any
other provision of this Agreement. The failure of a party to insist upon strict
adherence to any term of this Agreement or one or more sections hereof shall
not be considered a waiver or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this Agreement.
(c) This Agreement contains the entire agreement
among Parent, Merger Sub and the Stockholders with respect to the subject
matter hereof, and supersedes all prior agreements among Parent, Merger Sub and
the Stockholders with respect to such matters. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified, except upon the
delivery of a written agreement executed by the parties hereto.
(d) This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and performed in that state.
(e) Each party hereto hereby irrevocably submits
to the exclusive jurisdiction of any federal or state court located within the
State of Delaware over any dispute arising out of or relating to this Agreement
and waives any objections which it may now or hereafter have to the laying of
the venue of any suit, action or proceeding arising out of or relating to this
Agreement brought in any state or federal court of competent jurisdiction in
the State of Delaware, and hereby further irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in
any inconvenient forum. No suit, action or proceeding against a party hereto
with respect to this Agreement may be brought in any court, domestic or
foreign, or before any similar domestic or foreign authority other than in a
court of competent jurisdiction in the State of Delaware, and each party hereto
hereby irrevocably waives any right which it may otherwise have had to bring
such an action in any other court, domestic or foreign, or before any similar
domestic or foreign authority. Each of the parties hereto consents to process
being served by any party to this Agreement in any suit, action or proceeding
by the mailing of a copy thereof in accordance with the provisions of Section
14(g) hereof.
(f) The descriptive headings contained herein are
for convenience and reference only and shall not affect in any way the meaning
or interpretation of this Agreement.
(g) All notices and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by telecopy, or by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to a Stockholder to such Stockholder at the address listed
below such Stockholder's name on Annex A hereto.
7
<PAGE> 8
If to Parents or Merger Sub to:
Evergreen Media Corporation
433 East Las Colinas Boulevard
Suite 1130
Irving, Texas 75039
Attention: Scott K. Ginsburg
Chairman, President and Chief Executive Officer
Telecopier: (972) 432-0754
and to
Chancellor Broadcasting Company
12655 North Central Expressway
Suite 405
Dallas, Texas 75243
Attn: Steven Dinetz
Telecopy: (972) 239-0220
with a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004-2505
Attention: Eric L. Bernthal, Esq.
Telecopier: (202) 637-2201
or to such other address as any party may have furnished to the other parties
in writing in accordance herewith.
(h) This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one agreement.
(i) This Agreement is binding upon and is solely
for the benefit of the parties hereto and their respective successors, legal
representatives and assigns. Except as provided herein, neither this Agreement
nor any of the rights, interests or obligations under this Agreement may be
assigned by any of the parties hereto without the prior written consent of the
other parties, except that Merger Sub shall have the right to assign to either
Parent or any other direct or indirect wholly owned Subsidiary of either Parent
any and all rights and obligations of Merger Sub under this Agreement,
including the right to purchase Shares tendered by any
8
<PAGE> 9
Stockholder pursuant to the terms hereof and the Offer, provided that any such
assignment shall not relieve Merger Sub from any of its obligations hereunder.
(k) All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any thereof
by either party shall not preclude the simultaneous or later exercise of any
other such right, power or remedy by such party.
9
<PAGE> 10
IN WITNESS WHEREOF, each of the parties hereto as caused this
Agreement to be duly executed as of the date first written above.
STOCKHOLDERS: DLJ MERCHANT BANKING PARTNERS, L.P.,
By: DLJ MERCHANT BANKING, INC.,
Managing General Partner
By:/s/ THOMPSON DEAN
--------------------------------
Name: Thompson Dean
Title: Managing Director
By: DLJ INTERNATIONAL PARTNERS, C.V.
By: DLJ MERCHANT BANKING, INC.,
Advisory General Partner
By:/s/ THOMPSON DEAN
------------------------
Name: Thompson Dean
Title: Managing Director
By: DLJ OFFSHORE PARTNERS, C.V.
By: DLJ MERCHANT BANKING, INC.,
Advisory General Partner
By:/s/ THOMPSON DEAN
------------------------
Name: Thompson Dean
Title: Managing Director
By: DLJ MERCHANT BANKING FUNDING, INC.
By:/s/ IVY DODES
--------------------------------
Name: Ivy Dodes
Title: Vice President
By: DLJ FIRST ESC, L.L.C.
By: DLJ LBO PLANS MANAGEMENT
CORPORATION
By:/s/ IVY DODES
------------------------
Name: Ivy Dodes
Title: Vice President
10
<PAGE> 11
PARENTS: EVERGREEN MEDIA CORPORATION
By:/s/ SCOTT K. GINSBURG
---------------------------------
Name: Scott K. Ginsburg
Title: Chairman of the Board
and Chief Executive Officer
CHANCELLOR BROADCASTING COMPANY
By:/s/ ERIC C. NEUMAN
---------------------------------
Name: Eric C. Neuman
Title: Vice President
MERGER SUB: MORRIS ACQUISITION CORPORATION
By:/s/ SCOTT K. GINSBURG
---------------------------------
Name: Scott K. Ginsburg
Title: President and Chief Executive
Officer
11
<PAGE> 12
ANNEX A
<TABLE>
<CAPTION>
Stockholder Number of
- ----------- ---------
Shares
- ------
<S> <C>
DLJ Merchant Banking Partners, L.P. 3,133,989
277 Park Avenue
New York, New York 10172
DLJ International Partners, C.V. 1,406,735
John B. Gorsiraweg 6
Willemstad, Curacao
Netherlands Antilles
DLJ Offshore Partners, C.V. 81,562
John B. Gorsiraweg 6
Willemstad, Curacao
Netherlands Antilles
DLJ Merchant Banking Funding, Inc. 1,291,147
277 Park Avenue
New York, New York 10172
DLJ First ESC, L.L.C. 753,235
277 Park Avenue
New York, New York 10172
</TABLE>
12
<PAGE> 1
MANAGEMENT TENDER AGREEMENT
MANAGEMENT TENDER AGREEMENT, dated as of July 14, 1997 (this
"Agreement"), by and among the persons designated as Management Stockholders on
the signature pages hereto (each a "Management Stockholder" and collectively,
the "Management Stockholders"), Evergreen Media Corporation, a Delaware
corporation ("Evergreen Media"), Chancellor Broadcasting Company, a Delaware
corporation ("Chancellor"), (Evergreen Media and Chancellor, each a "Parent"
and collectively, the "Parents"), and Morris Acquisition Corporation, a
Delaware corporation ("Merger Sub"). Capitalized terms used and not otherwise
defined herein shall have the respective meanings assigned to them in the
Merger Agreement referred to below.
WHEREAS, the Management Stockholders collectively own of
record and beneficially certain shares of common stock, par value $.01 per
share (the "Company Common Stock"), of Katz Media Group, Inc., a Delaware
corporation (the "Company"), each Management Stockholder, respectively, owning
of record and/or beneficially the number of shares of Company Common Stock set
forth next to his name on Annex A attached hereto and incorporated by reference
herein (such Management Stockholder's shares, together with any other voting or
equity securities of the Company hereafter acquired by such Management
Stockholder prior to the termination of this Agreement, being referred to
collectively as the "Shares"); and
WHEREAS, concurrently with the execution of this Agreement,
each Parent, Merger Sub and the Company, are entering into a Merger Agreement,
dated as of the date hereof (as amended from time to time, the "Merger
Agreement"), which provides, among other things, that, upon the terms and
subject to the conditions therein, Merger Sub will make a cash tender offer
(the "Offer") for all outstanding shares of Company Common Stock and will merge
with and into the Company (the "Merger"); and
WHEREAS, as a condition to the willingness of the Parents and
Merger Sub to enter into the Merger Agreement, the Parents and Merger Sub have
requested that the Management Stockholders agree, and in order to induce the
Parents and Merger Sub to enter into the Merger Agreement, the Management
Stockholders have agreed, to enter into this Agreement; and
WHEREAS, prior to the execution and delivery of this Agreement
by the parties hereto, the disinterested directors of and the entire Board of
Directors of the Company have approved the execution and delivery of this
Agreement and the terms hereof pursuant to Section 203 of the DGCL.
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and subject to the terms and conditions set forth herein,
the parties hereto hereby agree as follows:
Section 1. Representations and Warranties of the
Management Stockholders. Each Management Stockholder represents and warrants
to the Parents and Merger Sub, severally as to himself and with respect to his
Shares, as follows:
(a) Such Management Stockholder is the sole
record and beneficial owner (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which definition will
apply for all purposes of this Agreement) of, and has good title to, all of his
Shares, and there exist no liens, claims, security interests, options, proxies,
voting agreements, charges or encumbrances of whatever nature ("Liens")
affecting his Shares, except for Liens created pursuant to the Shareholders
Agreement, dated as of August 1, 1994, among the Management Stockholders and
certain other parties thereto (as amended, the "Management Stockholders
Agreement").
(b) Assuming that Merger Sub acquired its
interest in the Shares in good faith and without notice of any adverse claim
(within the meaning of Section 8-302 of the Uniform Commercial Code as in
effect in the State of New York), upon the transfer to Merger Sub by such
Management Stockholder of his Shares upon consummation of the Offer or the
Merger (whichever is earlier), Merger Sub will acquire all of such Management
Stockholder's rights in such Management Stockholder's Shares, free of any
adverse claim.
(c) The execution and delivery of this Agreement
by such Management Stockholder does not, and the performance by such Management
Stockholder of its obligations hereunder will not, constitute a violation of,
conflict with, result in a default (or an event which, with notice or lapse of
time or both, would result in a default) under, or result in the creation of
any Lien on any of such Management Stockholder's Shares under (i) any contract,
commitment, agreement, understanding, arrangement or restriction of any kind to
which such Management Stockholder is a party or by which such Management
Stockholder is bound, (ii) any judgment, writ, decree, order or ruling
applicable to such Management Stockholder, or (iii) the organizational
documents of such Management Stockholder.
(d) Such Management Stockholder has the requisite
capacity to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by such Management Stockholder and, assuming due
authorization, execution and delivery by the Parents and Merger Sub,
constitutes a valid and binding agreement of such Management Stockholder,
enforceable against such Management Stockholder in accordance with its terms,
except to the extent that enforceability may be limited by applicable law.
(e) Neither the execution and delivery of this
Agreement nor the performance by such Management Stockholder of its obligations
hereunder will (i) violate any
2
<PAGE> 3
order, writ, injunction or judgment applicable to such Management Stockholder,
or (ii) violate any law, decree, statute, rule or regulation applicable to such
Management Stockholder or require any consent, authorization or approval of,
filing with or notice to, any court, administrative agency or other
governmental body or authority, other than any required notices or filings
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act")
or the federal securities laws.
Section 2. Representations and Warranties of the Parents.
Parents severally represent and warrant to the Management Stockholders as
follows:
(a) Each Parent is (i) duly organized and validly
existing and in good standing under the laws of the State of Delaware, (ii) has
the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby, and (iii) has
taken all necessary corporate action to authorize the execution, delivery and
performance of this Agreement. This Agreement has been duly and validly
executed and delivered by each Parent and constitutes the legal, valid and
binding obligation of each Parent, enforceable against each Parent in
accordance with its terms, except to the extent that enforceability may be
limited by applicable law.
(b) The execution and delivery of this Agreement
by each Parent does not, and the performance by each Parent of its obligations
hereunder will not, constitute a violation of, conflict with, or result in a
default (or an event which, with notice or lapse of time or both, would result
in a default) under, its certificate of incorporation or bylaws or any
contract, commitment, agreement, understanding, arrangement or restriction of
any kind to which each Parent is a party or by which each Parent is bound or
any judgment, writ, decree, order or ruling applicable to each Parent.
(c) Neither the execution and delivery of this
Agreement nor the performance by each Parent of its obligations hereunder will
violate any order, writ, injunction, judgment, law, decree, statute, rule or
regulation applicable to each Parent or require any consent, authorization or
approval of, filing with, or notice to, any court, administrative agency or
other governmental body or authority, other than any required notices or
filings pursuant to the HSR Act or the federal securities laws.
Section 3. Representations and Warranties of Merger Sub.
Merger Sub represents and warrants to the Management Stockholders as follows:
(a) Merger Sub is (i) duly organized and validly
existing and in good standing under the laws of the State of Delaware, (ii) has
the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby, and (iii) has
taken all necessary corporate action to authorize the execution, delivery and
performance of this Agreement. This Agreement has been duly and validly
executed and delivered by Merger Sub and constitutes the legal, valid and
binding obligation of Merger Sub, enforceable against Merger Sub in accordance
with its terms, except to the extent that enforceability may be limited by
bankruptcy, organization, insolvency, moratorium or other
3
<PAGE> 4
laws affecting the enforcement of creditors' rights generally and by general
principles of equity, regardless of whether such enforceability is considered
in a proceeding in equity or at law.
(b) The execution and delivery of this Agreement
by Merger Sub does not, and the performance by Merger Sub of its obligations
hereunder will not, constitute a violation of, conflict with, or result in a
default (or an event which, with notice or lapse of time or both, would result
in a default) under, its certificate of incorporation or bylaws or any
contract, commitment, agreement, understanding, arrangement or restriction of
any kind to which Merger Sub is a party or by which Merger Sub is bound or any
judgment, writ, decree, order or ruling applicable to Merger Sub.
(c) Neither the execution and delivery of this
Agreement nor the performance by Merger Sub of its obligations hereunder will
violate any order, writ, injunction, judgment, law, decree, statute, rule or
regulation applicable to Merger Sub or require any consent, authorization or
approval of, filing with, or notice to, any court, administrative agency or
other governmental body or authority, other than any required notices or
filings pursuant to the HSR Act or the federal securities laws.
Section 4. Tender of Shares.
(a) During the term of this Agreement, each
Management Stockholder hereby agrees to tender and sell (and not withdraw)
pursuant to and in accordance with the terms of the Offer all of such
Management Stockholder's Shares. Upon the purchase of all Shares owned by a
Management Stockholder pursuant to the Offer in accordance with this Section
4(a), this Agreement shall terminate solely with respect to such Management
Stockholder. Notwithstanding the provisions of this Section 4(a), in the event
any Management Stockholder withdraws such Management Stockholder's Shares from
the Offer for any reason or any such Shares are not purchased pursuant to the
Offer, such Shares shall remain subject to the terms of this Agreement. Each
Management Stockholder acknowledges that Merger Sub's obligation to accept for
payment and pay for the Shares in the Offer is subject to all the terms and
conditions of the Offer.
(b) Each Management Stockholder hereby agrees to
permit the Parents and Merger Sub to publish and disclose in the Offer
Documents and, if approval of the stockholders of the Company is required under
applicable law, in the Proxy Statement, including all documents and schedules
filed with the SEC, its identity and ownership of Company Common Stock and the
nature of its commitments, arrangements and understandings under this
Agreement.
Section 5. Transfer of the Shares. During the term of
this Agreement, except as otherwise provided herein, no Management Stockholder
shall (a) offer to sell, sell, pledge or otherwise dispose of or transfer any
interest in or encumber with any Lien any of such Management Stockholder's
Shares, except for transfer or sale to any affiliate of such Management
Stockholder who agrees to be bound by this Agreement, (b) deposit such
Management Stockholder's Shares into a voting trust, enter into a voting
agreement or arrangement with respect to such Shares or grant any proxy or
power of attorney with respect to
4
<PAGE> 5
such Shares, or (c) enter into any contract, option or other arrangement or
undertaking with respect to the direct or indirect acquisition or sale,
assignment or other disposition of or transfer of any interest in or the voting
of any shares of Company Common Stock or any other securities of the Company.
Section 6. No Solicitation. During the term of this
Agreement, each Management Stockholder agrees, in his capacity as such, not to
directly or indirectly, initiate, solicit (including by way of furnishing
information), encourage or respond to or take any other action knowingly to
facilitate, any inquiries or the making of any proposal by any person or entity
(other than either Parent or any affiliate of either Parent) with respect to
the Company that reasonably may be expected to lead to a Takeover Proposal, or
enter into or maintain or continue discussions or negotiate with any person or
entity in furtherance of such inquiries or to obtain any Takeover Proposal, or
agree to or endorse any Takeover Proposal, or authorize or permit any person or
entity acting on behalf of such Management Stockholder to do any of the
foregoing. If any Management Stockholder receives any Takeover Proposal, such
Management Stockholder agrees to promptly notify the Parents of that inquiry or
proposal and the details thereof.
Section 7. Waiver of Appraisal Rights. Each Management
Stockholder hereby irrevocably waives any rights of appraisal or rights to
dissent from the Merger that such Management Stockholder may have.
Section 8. Voting of Shares. During the term of this
Agreement, each Management Stockholder in his capacity as such hereby agrees to
vote each of his Shares at any annual, special or adjourned meeting of the
stockholders of the Company (a) in favor of the Merger, the execution and
delivery by the Company of the Merger Agreement and the approval and adoption
of the terms thereof and hereof; and (b) against any action or agreement that
would result in a breach in any respect of any covenant, agreement,
representation or warranty of the Company under the Merger Agreement; and (c)
against the following actions (other than the Merger and the other transactions
contemplated by the Merger Agreement): (i) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving the company or its Subsidiaries; (ii) a sale, lease or transfer of a
material amount of assets of the Company or one of its Subsidiaries, or a
reorganization, recapitalization, dissolution or liquidation of the Company or
its Subsidiaries; (iii) (A) any change in a majority of the persons who
constitute the board of directors of the Company as of the date hereof; (B) any
change in the present capitalization of the Company or any amendment of the
Company's certificate of incorporation or bylaws, as amended to date; (C) any
other material change in the Company's corporate structure or business; or (D),
is intended, or could reasonably be expected, to impede, interfere with, delay,
postpone, or adversely affect the Merger and the other transactions
contemplated by this Agreement and the Merger Agreement.
Section 9. Enforcement of the Agreement. Each Management
Stockholder acknowledges that irreparable damage would occur in the event that
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
Merger Sub will be entitled (i) to an injunction or injunctions to prevent
breaches of this Agreement, and (ii) to specifically enforce the terms and
5
<PAGE> 6
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which it is
entitled at law or in equity.
Section 10. Adjustments. The number and type of
securities subject to this Agreement will be appropriately adjusted in the
event of any stock dividends, stock splits, recapitalizations, combinations,
exchanges of shares or the like or any other action that would have the effect
of changing any Management Stockholder's ownership of the Company's capital
stock or other securities.
Section 11. Termination. This Agreement will terminate on
the earlier of (a) the purchase of all the Shares pursuant to the Offer in
accordance with Section 4, and (b) the date on which the Merger Agreement is
terminated in accordance with its terms.
Section 12. Expenses. All fees and expenses incurred by
any of the parties hereto shall be borne by the party incurring such fees and
expenses.
Section 13. Brokerage. Except as disclosed in the Merger
Agreement (including the Schedules thereto), each party represents and warrants
to the others that there are no claims for finder's fees or brokerage
commissions or other like payments in connection with this Agreement or the
transactions contemplated hereby, and each party agrees to indemnify and hold
harmless the other parties from and against any and all claims or liabilities
for finder's fees or brokerage commissions or other like payments incurred in
connection with the transactions contemplated hereby.
Section 14. Miscellaneous.
(a) All representations and warranties contained
herein shall survive for one (1) year after the termination hereof.
(b) Any provision of this Agreement may be waived
at any time by the party that is entitled to the benefits thereof. No such
waiver, amendment or supplement shall be effective unless in writing signed by
the party or parties sought to be bound thereby. Any waiver by any party of a
breach of any provision of this Agreement shall not operate as or be construed
to be a waiver of any other breach of such provision or of any breach of any
other provision of this Agreement. The failure of a party to insist upon
strict adherence to any term of this Agreement or one or more sections hereof
shall not be considered a waiver or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Agreement.
(c) This Agreement contains the entire agreement
among the Parents, Merger Sub and the Management Stockholders with respect to
the subject matter hereof, and supersedes all prior agreements among the
Parents, Merger Sub and the Management Stockholders with respect to such
matters. This Agreement may not be amended, changed, supplemented, waived or
otherwise modified, except upon the delivery of a written agreement executed by
the parties hereto.
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<PAGE> 7
(d) This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and performed in that state.
(e) Each party hereto hereby irrevocably submits
to the exclusive jurisdiction of any federal or state court located within the
State of Delaware over any dispute arising out of or relating to this Agreement
and waives any objections which it may now or hereafter have to the laying of
the venue of any suit, action or proceeding arising out of or relating to this
Agreement brought in any state or federal court of competent jurisdiction in
the State of Delaware, and hereby further irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in
any inconvenient forum. No suit, action or proceeding against a party hereto
with respect to this Agreement may be brought in any court, domestic or
foreign, or before any similar domestic or foreign authority other than in a
court of competent jurisdiction in the State of Delaware, and each party hereto
hereby irrevocably waives any right which it may otherwise have had to bring
such an action in any other court, domestic or foreign, or before any similar
domestic or foreign authority. Each of the parties hereto consents to process
being served by any party to this Agreement in any suit, action or proceeding
by the mailing of a copy thereof in accordance with the provisions of Section
14(g) hereof.
(f) The descriptive headings contained herein are
for convenience and reference only and shall not affect in any way the meaning
or interpretation of this Agreement.
(g) All notices and other communications hereunder
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in person, by telecopy, or by registered or
certified mail, postage prepaid, return receipt requested, addressed as
follows:
If to a Management Stockholder to such Management Stockholder
at the address listed below such Management Stockholder's name on Annex A
hereto.
If to the Parents or Merger Sub, to:
Evergreen Media Corporation
433 East Las Colinas Boulevard
Suite 1130
Irving, Texas 75039
Attention: Scott K. Ginsburg
Telecopier: (972) 432-0754
7
<PAGE> 8
and to
Chancellor Broadcasting Company
12655 North Central Expressway
Suite 405
Dallas, Texas 75243
Attention: Steven Dinetz
Telecopier: (972) 239-0220
with a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004-2505
Attention: Eric L. Bernthal, Esq.
Telecopier: (202) 637-2201
or to such other address as any party may have furnished to the other parties
in writing in accordance herewith.
(h) Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one agreement.
(i) Agreement is binding upon and is solely for
the benefit of the parties hereto and their respective successors, legal
representatives and assigns. Except as provided herein, neither this Agreement
nor any of the rights, interests or obligations under this Agreement may be
assigned by any of the parties hereto without the prior written consent of the
other parties, except that Merger Sub shall have the right to assign to the
Parents [or any other direct or indirect wholly owned Subsidiary of either
Parent] any and all rights and obligations of Merger Sub under this Agreement,
including the right to purchase Shares tendered by any Management Stockholder
pursuant to the terms hereof and the Offer, provided that any such assignment
shall not relieve Merger Sub from any of its obligations hereunder.
(j) All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any thereof
by either party shall not preclude the simultaneous or later exercise of any
other such right, power or remedy by such party.
8
<PAGE> 9
IN WITNESS WHEREOF, each of the parties hereto as caused this
Agreement to be duly executed as of the date first written above.
STOCKHOLDERS:
By:/s/ THOMAS F. OLSON
---------------------------------
Name: Thomas F. Olson
By:/s/ JAMES E. BELOYIANIS
---------------------------------
Name: James E. Beloyianis
By:/s/ STUART O. OLDS
---------------------------------
Name: Stuart O. Olds
PARENTS: CHANCELLOR BROADCASTING COMPANY
By:/s/ ERIC C. NEUMAN
---------------------------------
Name: Eric C. Neuman
Title: Vice President
EVERGREEN MEDIA CORPORATION
By:/s/ SCOTT K. GINSBURG
---------------------------------
Name: Scott K. Ginsburg
Title: Chairman of the Board
and Chief Executive Officer
MERGER SUB: MORRIS ACQUISITION CORPORATION
By:/s/ SCOTT K. GINSBURG
---------------------------------
Name: Scott K. Ginsburg
Title: President and Chief Executive
Officer
9
<PAGE> 10
ANNEX A
<TABLE>
<CAPTION>
Management Stockholder Number of Shares
- ---------------------- ----------------
<S> <C>
Thomas F. Olson 140,569
Katz Media Group., Inc.
125 West 55th Street
New York, New York 10019
James E. Beloyianis 124,334
Katz Media Group., Inc.
125 West 55th Street
New York, New York 10019
Stuart O. Olds 123,834
Katz Media Group., Inc.
125 West 55th Street
New York, New York 10019
</TABLE>
10
<PAGE> 1
JOINT BIDDING AGREEMENT
This Joint Bidding Agreement ("Agreement") is made as of this 14th day
of July 1997, by and among Chancellor Broadcasting Company, a Delaware
corporation ("Chancellor"), Evergreen Media Corporation, a Delaware corporation
("Evergreen"), HM2/Chancellor, L.P., a Delaware limited partnership ("Hicks
Muse"), and Morris Acquisition Corporation, a Delaware corporation ("Merger
Sub").
RECITALS:
A. Chancellor, Chancellor Radio Broadcasting Company, a
Delaware corporation and a subsidiary of Chancellor ("CRBC"), and Evergreen
have entered into an Agreement and Plan of Merger dated as of February 19, 1997
(as amended from time to time, the "Chancellor Merger Agreement"), pursuant to
which, as presently contemplated to be amended, Chancellor and CRBC will each
be merged with and into a direct and indirect subsidiary, respectively, of
Evergreen (collectively, the "Chancellor Merger").
B. Evergreen and Chancellor have entered into an Agreement
and Plan of Merger dated as of July 14, 1997 (the "Merger Agreement") by and
among Evergreen, Chancellor, Merger Sub, which is owned 100% by Evergreen, and
Katz Media Group, Inc., a Delaware corporation ("Target"), pursuant to which
Merger Sub will commence an offer to purchase for cash all of the issued and
outstanding shares of common stock, par value $.01 per share ("Target Common
Stock"), of Target at a price of $11.00 per share in cash, subject to the terms
and conditions contained in the Merger Agreement (the "Offer"), to be followed
by a merger of Merger Sub with and into Target, with Target surviving the
merger (the "Merger").
C. The parties have reached certain understandings and
agreements regarding the Offer and the Merger, including without limitation the
sharing of certain of the risks and benefits related thereto and the ownership
and operation of Merger Sub, in the event the Offer is consummated prior to the
consummation of the Chancellor Merger.
NOW, THEREFORE, in consideration of the foregoing premises, and
in further consideration of the mutual agreements herein contained, the parties
agree as follows:
<PAGE> 2
1. DEFINED TERMS. Capitalized terms used herein and not otherwise
defined shall have the meanings given such terms in the Merger Agreement. For
the purposes of this Agreement, the following terms shall have the meanings set
forth below:
(a) "Base Amount" shall mean an amount equal to the sum of the
Evergreen Funded Amount plus the Bridge Fee, plus an additional amount equal to
the Equity Funding Rate on the sum of the foregoing amounts and accruing from
the Equity Contribution Date (as defined in Section 3(a) hereof) to, but not
including, the date of exercise of the Options pursuant to Section 3(b)
hereof.
(b) "Bridge Fee" shall mean an amount equal to 1% of the Evergreen
Funded Amount.
(c) "Common Equity" shall mean the Voting Common Stock and the Non-
Voting Common Stock.
(d) "Common Stock" shall mean the common stock, par value $0.01 per
share, of Merger Sub, and any voting common equity securities of Intermediate
Sub (as defined in Exhibit A) should it be formed.
(e) "Evergreen Funded Amount" shall mean an amount equal to 30% of
the Equity Contribution Amount (as defined in Section 3(a) hereof).
(f) "Equity Funding Rate" shall mean the weighted average cost of
funds under the revolving credit component of the Senior Credit Facility of
Evergreen Media Corporation of Los Angeles during the period(s) as to which
such rate is calculated.
(g) "Non-Voting Common Stock" shall mean non-voting common stock, par
value $.01 per share, of Merger Sub, and any non-voting common equity
securities of Intermediate Sub should it be formed.
2. TERM. This Agreement shall automatically terminate, without
further action by the parties hereto, upon consummation of the Chancellor
Merger.
3. INITIAL EQUITY CONTRIBUTION; OPTION
(a) Immediately prior to Merger Sub's acceptance for payment of the
shares of Target Common Stock pursuant to the Offer, Evergreen and Chancellor
shall contribute to Merger Sub (the "Equity Contribution") an aggregate amount
which, together with any
2
<PAGE> 3
indebtedness to be incurred by Merger Sub to finance the Offer and the Merger,
is sufficient to fund the aggregate amount required to be paid by Merger Sub to
pursuant to the Offer and the Merger plus an additional $20 million (the
"Equity Contribution Amount"), excluding the payment of any Transaction Fees
and Expenses (as defined in Section 3(b) below). The Equity Contribution Amount
shall be paid in cash and shall be made 80% by Evergreen and 20% by Chancellor.
In exchange for Chancellor's equity contribution, Chancellor shall issue such
number of shares of Non-Voting Common Stock which represents 20% of the issued
and outstanding Common Equity.
(b) Chancellor and Evergreen shall each pay (or reimburse to the
other) one-half of all fees and expenses paid or payable by Evergreen,
Chancellor and Merger Sub in connection with the transactions contemplated by
the Merger Agreement, including, without limitation, fees and expenses incurred
by any of them in connection with the HSR Act and reasonable fees and expenses
of attorneys, accountants, investment banking firms and other advisors and
representatives; provided that the financial advisory fee payable by Chancellor
as provided in Section 9(d) hereof shall be borne by Chancellor ("Transaction
Fees and Expenses") and shall be the only fee payable to HM2 (as hereinafter
defined) or its affiliates in connection with the Offer and the Merger.
(c) Evergreen, Chancellor and Merger Sub agree that (i) any amounts
to be received by them or Merger Sub pursuant to Section 10.3 of the Merger
Agreement shall be shared one-half by Evergreen and one-half by Chancellor
(after deducting the portion of any such amounts required to be shared with
Smith Barney Inc. pursuant to the engagement letters between Evergreen and
Chancellor, and Smith Barney Inc., respectively, each dated July 7, 1997);
provided that any such amounts which represent the reimbursement of any
Transaction Fees and Expenses incurred by either Chancellor or Evergreen shall
be allocated to the party that actually incurred such expenses (to the extent
such party had not previously been reimbursed for such expenses pursuant to
Section 3(b) hereof or otherwise).
(d) Evergreen hereby agrees (i) to sell, at Chancellor's election,
such number of shares of Common Stock which would give Chancellor, together
with such other shares of Common Stock owned by Chancellor, 49.9% of the issued
and outstanding Common Equity (the "Chancellor Purchase Right") and (ii) to
sell, at Hicks Muse's election, such number of shares of Common Stock which
would give Hicks Muse 0.1% of the issued and outstanding Common Equity (the
"Hicks Muse Purchase Right" and, together with the Chancellor Purchase Right,
the "Purchase Rights"). The exercise price payable upon exercise of the
Purchase Rights shall be the product of (A) 99.67% multiplied by the Base
Amount, in the case of the Chancellor Purchase Right, and (B) 0.33% multiplied
by the Base Amount, in the case of the Hicks Muse Purchase Right (the "Purchase
Price"). The Chancellor Purchase
3
<PAGE> 4
Right and the Hicks Muse Purchase Right may not be exercised separately.
Subject to any requisite filing and related early termination or expiration of
the waiting period under the HSR Act, the Purchase Rights are exercisable in
full by Chancellor and Hicks Muse at any time within 120 days after the date
the Chancellor Merger Agreement is terminated (the "Expiration Date") upon not
less than three business days prior written notice to Evergreen, which notice
shall be a joint notice from Chancellor and Hicks Muse and shall specify the
effective date of the proposed purchase. The Purchase Price payable upon
exercise of the Purchase Rights shall be made by wire transfer of immediately
available funds on the purchase date to such account as Evergreen shall
designate at least one business day prior to the purchase date. Upon the
payment of the Purchase Prices, all Non-Voting Common Stock held by Chancellor
shall automatically convert to Common Stock.
(e) In the event the Options are not exercised on or prior to the
Expiration Date, Evergreen shall have the option, within 90 days following the
Expiration Date, to purchase from Chancellor, for an aggregate amount equal to
the amount of the Equity Contribution made by Chancellor, the shares of Common
Stock issued to Chancellor in connection with such Equity Contribution.
4. TAKING OF CERTAIN ACTIONS.
(a) Pursuant to their respective rights under the Merger Agreement,
Evergreen and Chancellor shall jointly control the defense of any action, suit,
or proceeding initiated by Target in connection with the Merger Agreement, and
neither party shall consent to the settlement or compromise of such action
without the prior written consent of the other (not to be unreasonably withheld
or delayed). All losses, costs, expenses and damages (collectively, "Losses"),
if any, required to be paid by Evergreen, Chancellor or Merger Sub shall be
shared equally by Chancellor and Evergreen and reimbursed to the other, as
appropriate. In furtherance of the foregoing, Chancellor and Evergreen shall
each indemnify and hold harmless the other from and against any and all Losses
related to or arising in any manner out of the Merger or the Offer to the
extent necessary to cause each of Chancellor and Evergreen to share such Losses
equally. Notwithstanding the foregoing, neither Evergreen nor Chancellor shall
be liable to the other party in respect of any Losses that resulted solely from
the gross negligence or wilful misconduct of such other party.
(b) Pursuant to their respective rights under the Merger Agreement,
Evergreen and Chancellor shall jointly control any action, suit, or proceeding
initiated by or on behalf of Chancellor, Evergreen or Merger Sub against Target
in connection with the Merger Agreement to recover any Losses incurred by
Chancellor, Evergreen or Merger Sub as a result of the termination or breach of
the Merger Agreement. Any amounts recovered by
4
<PAGE> 5
Merger Sub in any such action shall be shared one-half by Chancellor and one-
half by Evergreen; provided that any such amounts which represent the
reimbursement of any Transaction Fees and Expenses incurred by either
Chancellor or Evergreen shall be allocated to the party that actually incurred
such expenses (to the extent such party had not previously been reimbursed for
such expenses pursuant to Section 3(b) hereof or otherwise). All costs of
prosecuting any such action, suit or proceeding shall be borne equally by
Chancellor and Evergreen.
(c) Without the prior written consent of Chancellor (not to be
unreasonably withheld or delayed), Evergreen agrees that it will not, and that
it will cause Merger Sub not to, enter into any amendments, modifications or
supplements to the Merger Agreement.
(d) The parties shall cooperate in the prompt preparation, filing and
prosecution of applications for HSR Act clearance for the consummation of the
Offer and the Merger and the other transactions contemplated hereby and the
Merger Agreement, and any other consents that are necessary to effect the
transactions contemplated by the Merger Agreement and this Agreement
(collectively, the "Applicable Consents").
5. REPRESENTATIONS AND WARRANTIES.
(a) Chancellor represents and warrants to Evergreen as follows:
(i) Chancellor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite corporate power and authority to enter into this Agreement and
consummate the transactions contemplated hereby to be consummated by it. The
execution and delivery by Chancellor of this Agreement and the consummation by
it of the transactions contemplated hereby to be consummated by it have been
duly authorized by all necessary corporate action on the part of Chancellor.
This Agreement has been duly executed and delivered by Chancellor and, assuming
the due execution and delivery of this Agreement by Evergreen, constitutes a
valid and binding obligation, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights in general and subject to general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(ii) The execution and delivery of this Agreement by Chancellor
does not, and the performance by Chancellor of the transactions contemplated
hereby to be performed by it will not (A) conflict with the certificate of
incorporation or bylaws of Chancellor, (B) subject to obtaining the requisite
consent, if any, of the lenders party to Chancellor's and
5
<PAGE> 6
CRBC's credit facilities, conflict with, or result in any violation of, or
constitute a default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a benefit under, any material contract or permit,
order, judgment or decree to which Chancellor is a party or by which it is
bound, or (C) subject to obtaining the Applicable Consents, constitute a
violation of any law or regulation applicable to Chancellor.
(iii) The shares of Common Stock to be acquired by Chancellor
pursuant to this Agreement are being acquired for its own account for
investment purposes and without a view to distribution of such shares in
violation of the Securities Act of 1933.
(b) Evergreen represents and warrants to Chancellor as follows:
(i) Evergreen is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite corporate power and authority to enter into this Agreement and
consummate the transactions contemplated hereby to be consummated by it. The
execution and delivery by Evergreen of this Agreement and the consummation by
it of the transactions contemplated hereby to be consummated by it have been
duly authorized by all necessary corporate action on the part of Evergreen.
This Agreement has been duly executed and delivered by Evergreen and, assuming
the due execution and delivery of this Agreement by Chancellor, constitutes a
valid and binding obligation, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights in general and subject to general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(ii) The execution and delivery of this Agreement by Evergreen
does not, and the performance by Evergreen of the transactions contemplated
hereby to be performed by it will not (A) conflict with the certificate of
incorporation or bylaws of Evergreen, (B) conflict with, or result in any
violation of, or constitute a default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a benefit under, any material
contract or permit, order, judgment or decree to which Evergreen is a party or
by which it is bound, or (C) subject to obtaining the Applicable Consents,
constitute a violation of any law or regulation applicable to Evergreen.
(iii) The authorized capital stock of Merger Sub consists of
1,000 shares of common stock, par value $.01 per share, of which 800 shares
were issued and outstanding and held beneficially and of record by Evergreen,
free and clear of all pledges, claims, liens,
6
<PAGE> 7
charges, encumbrances and security interests of any kind or nature whatsoever.
Except as provided in the previous sentence, no shares of capital stock or
securities of Merger Sub are authorized, issued, reserved for issuance or
outstanding. Except for this Agreement, no person or entity has any outstanding
options, warrants, subscription or other rights, agreements or commitments that
either obligates Evergreen or Merger Sub to issue, sell, or transfer or
otherwise acquire or vote any shares of capital stock of Merger Sub.
6. EXECUTION OF STOCKHOLDERS AGREEMENT. On the Equity Contribution
Date, Chancellor, Hicks Muse and Evergreen shall enter into a stockholders
agreement containing terms consistent with those set forth on the term sheet
attached hereto as Exhibit A. The parties hereto shall promptly commence to
negotiate in good faith the definitive form of such stockholders agreement,
with a final form to be agreed upon prior to the Equity Contribution Date (the
"Stockholders Agreement").
7. TAX SHARING AGREEMENT/TAX INDEMNITY. The parties hereto
acknowledge that Merger Sub, Target, and their respective subsidiaries will
become members of the affiliated group (as defined in Section 1504(a) of the
Internal Revenue Code of 1986, as amended) of which Evergreen is the common
parent, and such affiliated group will file a consolidated federal income tax
return. Accordingly, the parties hereto agree to negotiate in good faith tax
sharing and other equitable agreements concerning such relationship prior to
the Equity Contribution Date.
8. MISCELLANEOUS.
(a) Any general notices, releases, statements or communications to
the general public or the press relating to this Agreement or the Merger
Agreement and the transactions contemplated hereby and thereby shall be made
only at such times and in such manner as may be mutually agreed upon by
Evergreen and Chancellor; provided that the parties hereto shall be entitled to
issue such press releases and to make such public statements as are required by
applicable law, in which case the other party shall be advised thereof and the
parties shall use their reasonable efforts to cause a mutually agreeable
release or announcement to be issued. Once information has been made available
to the general public in accordance with this Agreement, this Section 8(a)
shall no longer apply to such information.
(b) Any notices or other correspondence delivered pursuant to this
Agreement shall be delivered in accordance with the terms of the Merger
Agreement and to the respective addresses of the parties hereto set forth in
the Merger Agreement.
7
<PAGE> 8
(c) No party hereto shall take any action which is materially
inconsistent with its obligations under this Agreement without the prior
written consent of the other parties hereto.
(d) Prior to the Equity Contribution Date, Chancellor, Evergreen, and
Merger Sub will take such action as is necessary to authorize for issuance the
shares of Non-Voting Common Stock to be issued pursuant to Section 3(a) hereof.
Such Non-Voting Common Stock shall be identical in all respects to the Common
Stock, except that it will not have the right to vote. The shares of Non-
Voting Common Stock to be issued to Chancellor the Chancellor Acquiring Entity
pursuant hereto will be, when issued, duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights.
(e) In lieu of the fees that might be payable pursuant to the
Financial Advisory Agreement among Chancellor, CRBC and HM2/Management
Partners, L.P. ("HM2"), Evergreen acknowledges that HM2 shall be entitled to
financial advisory fees equal to $1,500,000, payable upon consummation of the
Offer (which amount is in addition to any amounts payable under the Financial
Advisory Agreement as a result of the consummation of the Chancellor Merger).
In the event that the Chancellor Merger is consummated prior to the
consummation of the Offer, Evergreen hereby consents to and agrees that the
termination of the Financial Advisory Agreement upon the consummation of the
Chancellor Merger shall be expressly contingent upon the receipt by HM2, if and
at the time of consummation of the Offer, of all fees under such Financial
Advisory Agreement for which HM2 is entitled upon the consummation of the Offer
as if the Offer had been consummated prior to the Chancellor Merger.
(f) This Agreement will be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns, but,
except as provided in the next sentence hereof, will not be assignable or
delegable by any party hereto without the prior written consent of the other
parties (which consent shall not be unreasonably withheld). The Hicks Muse
Purchase Right shall be assignable to Chancellor or any direct or indirect
subsidiary of Chancellor or any other Affiliate of Hicks Muse without the prior
written consent of Evergreen. In addition, notwithstanding anything to the
contrary contained herein, Evergreen shall have the right to transfer up to
0.1% of the Common Stock and, in connection therewith, to assign to such
transferee, on a pro rata basis (0.1%), Evergreen's rights and obligations
under this Agreement. Nothing expressed or implied in this Agreement is
intended or will be construed to confer upon or give any person or entity other
8
<PAGE> 9
than the parties hereto any rights or remedies under or by reason of this
Agreement or any transaction contemplated hereby.
(g) This Agreement, including without limitation, the interpretation,
construction and validity hereof, shall be governed by the Laws of the State of
New York without regard to principles of conflicts of laws.
(h) This Agreement may be executed in two or more counterparts, each
of which will be deemed an original, but all of which together with constitute
one and the same agreement.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto executed this Agreement as of the
day and year first above written.
CHANCELLOR BROADCASTING COMPANY
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
EVERGREEN MEDIA CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
HM2/CHANCELLOR, L.P.
By: HM2 GP/CHANCELLOR, L.P.,
its general partner
By: HICKS, MUSE GP PARTNERS,
L.P., its general partner
By: HICKS, MUSE & CO.
INCORPORATED, its general
partner
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
MORRIS ACQUISITION CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
10
<PAGE> 11
Exhibit A
Stockholders Agreement Term Sheet
1. Parties. Chancellor, Evergreen, and Merger Sub (which will be replaced
by an intermediate holding company ("Intermediate Sub") to which the
parties will contribute their interests in Target following the later of
(i) the Merger and (ii) termination of the Chancellor Merger Agreement).
2. CEO. The Chief Executive Officer of Intermediate Sub and Merger Sub
shall be Scott K. Ginsburg, who shall not be removed prior to the
exercise of the Purchase Rights except by the vote of 3/4 of the entire
board of directors. Upon exercise of the Purchase Rights, Scott K.
Ginsburg will resign as Chief Executive Officer and Chancellor and
Evergreen shall take such action within their power to remove Scott K.
Ginsburg as Chief Executive Officer).
3. Election of Directors. Subsequent to the Merger and prior to the date
the Purchase Rights are exercised, Chancellor have the right to have 1
designee present at all meetings of the Board of Directors of
Intermediate Sub (the "Board of Directors"). Following exercise of the
Purchase Rights, the Board of Directors shall consist of an even number
of directors (not less than four and not more than eight), with
Chancellor entitled to elect one-half of such directors and Evergreen
entitled to elect one-half of such directors. Any vacancy created by the
removal or resignation of any director will be filled by the stockholder
that elected such director.
4. Required Board Approvals. Except as required by paragraph 2, all matters
requiring Board of Director approval shall be decided by the affirmative
vote of a majority of the total number of directors then serving.
5. Super-Majority Provisions. Prior to the exercise of the Purchase Rights,
the consent or vote of 100% (reduced by any shares transferred by
Chancellor) of the outstanding Common Equity shall be required for
Merger Sub to do any of the following: (i) directly or indirectly
through any subsidiaries acquire, by way of merger, purchase of stock or
assets, or otherwise, any business other than the business conducted by
Target and its subsidiaries on the Equity Contribution Date; (ii) except
for the transactions contemplated hereunder, directly or indirectly
through any subsidiaries engage in transaction or series of transactions
with any Affiliates (other than pursuant to representation agreements
existing at or prior to the date of the Merger or entered into
consistent with the terms of such pre-existing representation
<PAGE> 12
agreements); (iii) amend its certificate of incorporation or bylaws;
(iv) directly or indirectly through any subsidiaries sell all or
substantially all of its assets; or (iv) dissolve or liquidate.
6. Deadlock. After exercise of the Purchase Rights, if the Board of
Directors are deadlocked on any matter that comes before the Board of
Directors for a vote, Chancellor and Evergreen agree to use good faith
efforts to resolve such deadlocks within thirty days after such deadlock
occurs. If such deadlock is not resolved within such thirty day period,
then on the first day after such thirty day period and for a period of
ten business days thereafter, either party ("Offeror") may deliver a
notice to the other party ("Offeree") setting forth a price per share at
which Offeror proposes to purchase all of the shares of common stock of
Merger Sub (or the Intermediate Sub) owned by Offeree. Within twenty
business days after Offeree's receipt of such notice, Offeree shall
respond to Offeror, which response either (i) accepts the offer
contained in Offeror's notice or (ii) offers to purchase all of the
shares of common stock of Merger Sub owned by the Offeror at the price
per share specified in Offeror's notice. If Offeree fails to respond to
Offeror's notice during such twenty business day period, Offeree shall
be deemed to have accepted the offer contained in Offeror's notice.
7. Right of First Refusal/Tag Along Rights. If Chancellor or Evergreen or
Hicks Muse desires to sell any of its shares of Common Stock pursuant to
a bona fide offer, such selling stockholder will first be required to
offer to sell such shares to the other stockholder on the same terms and
conditions as those contained in the offer. If the other stockholder
declines to exercise its right of first refusal, such stockholder will
have the right to tag-along, on a pro rata basis, in such sales of
Common Stock, and the number of shares to be sold by the selling
stockholder shall be reduced accordingly.
8. Transfers Subject to Agreement. No sale, transfer or other disposition
of shares of Common Stock of Merger Sub shall be effective unless the
transferee shall agree to be bound by the provisions of the Stockholders
Agreement and the Joint Bidding Agreement applicable to the transferor
of such shares.
9. Termination. The Stockholders Agreement will terminate upon the earlier
to occur of (a) the consummation of the transactions contemplated by the
Agreement and Plan of Merger dated as of February 19, 1997, as amended,
among Chancellor, Evergreen, and Chancellor Radio Broadcasting Company
or (b) the tenth anniversary of the Stockholders Agreement.
