<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 31, 1996
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
AMERICAN RADIO SYSTEMS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 4832 04-3196245
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NO.)
INCORPORATION OR CODE NUMBER)
ORGANIZATION)
116 HUNTINGTON AVENUE, BOSTON, MASSACHUSETTS 02116
(617)375-7500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
STEVEN B. DODGE
AMERICAN RADIO SYSTEMS CORPORATION
116 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02116
(617) 375-7500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
NORMAN A. BIKALES, ESQ. JOSEPH CONROY, ESQ.
SULLIVAN & WORCESTER LLP HUNTON & WILLIAMS
ONE POST OFFICE SQUARE 1751 PINNACLE DRIVE, SUITE 700
BOSTON, MA 02109 MCLEAN, VIRGINIA 22102
(617) 338-2800 (703) 714-7400
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the merger of EZ Communications, Inc. with and into American
Radio Systems Corporation or American Merger Corporation pursuant to the
Agreement and Plan of Merger, as amended and restated, described in the
accompanying Proxy Statement/Prospectus have been satisfied or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reimbursement plans, check the following box. [_]
CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED AGGREGATE
TITLE OF EACH CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER SECURITY OFFERING PRICE FEE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock,
$.01 par value........ 8,190,649 (1) (2) $70,324(2)
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) The Securities to be offered hereby will be offered pursuant to a fixed
exchange ratio of shares of Class A Common Stock, $.01 par value, of
American Radio Systems Corporation for shares of Class A Common Stock,
$.01 par value, of EZ Communications, Inc.
(2) Pursuant to Rule 457(f), the maximum aggregate offering price has been
determined by the value of the shares of EZ Communications, Inc. (based on
the average of the bid and asked price on the Nasdaq National Market on
October 29, 1996) to be acquired by American Radio Systems Corporation in
the merger, less the portion of the purchase price to be paid in cash.
American paid $76,674 to the Commission on October 16, 1996 in connection
with the confidential filing of the Proxy Statement/Prospectus that forms
a part of this Registration Statement. No additional registration fee is
due hereunder.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
WILL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT WILL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
[AMERICAN RADIO LOGO]
November 8, 1996
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders (the
"American Special Meeting") of American Radio Systems Corporation ("American")
to be held on December 17, 1996 at 10:00 a.m., local time, at The Four Seasons
Hotel, 200 Boylston Street, Boston, Massachusetts.
At the American Special Meeting, stockholders will be asked to approve and
adopt (i) an Agreement and Plan of Merger (the "Original Agreement"), dated as
of August 5, 1996, and as amended and restated as of September 27, 1996 (the
"Merger Agreement"), among American, American Merger Corporation, a Delaware
corporation and a wholly-owned subsidiary of American ("American Subsidiary"),
and EZ Communications, Inc. ("EZ"), pursuant to which either (a) EZ will be
merged with and into American Subsidiary (the "Subsidiary Merger" or the
"Merger") or (b) EZ will be merged with and into American (the "Direct Merger"
or the "Merger"); and (ii) an amendment (the "Charter Amendment") to the
Restated Certificate of Incorporation, as amended, of American (the "American
Restated Certificate") to increase the authorized number of shares of
Preferred Stock and Common Stock to permit, among other things, the
consummation of the Merger.
As a result of the Merger, each outstanding share of common stock of EZ will
be converted into (i) $11.75 and (ii) 0.9 shares of American Class A Common
Stock. Assuming that no appraisal rights are asserted by the EZ stockholders
in the Merger, based on the number of shares of EZ common stock outstanding on
October 1, 1996, American will pay an aggregate of approximately $106,933,000
and issue an aggregate of approximately 8,190,649 shares of American Class A
Common Stock to the EZ stockholders. In addition, options to purchase an
aggregate of 532,200 shares of American Class A Common Stock will be assumed
pursuant to the Merger.
The Merger is subject to various conditions described in this Proxy
Statement/Prospectus. It is expected that the Merger will be completed during
the first quarter of 1997. Once the Merger is completed, American will have
solid positions in four or five attractive new markets with good potential for
growth in each. This is very much in line with American's strategy.
Your Board of Directors has carefully considered the terms of the Merger and
believes that it is advisable and in the best interests of American and its
stockholders. The Board has unanimously approved the Merger and the related
transactions and recommends that stockholders vote FOR the Merger.
In order to permit American to issue shares of American Class A Common Stock
to the EZ stockholders as provided in the Merger Agreement, to provide for
future equity financings or mergers and acquisitions and to permit stock
splits and stock dividends, American stockholders will also be asked to
approve and adopt an amendment to the American Restated Certificate which will
increase the total number of authorized shares of American Preferred Stock
from 1,000,000 to 10,000,000 and the authorized number of shares of Class A
Common Stock and Class B Common Stock from 25,000,000 and 10,000,000 to
100,000,000 and 15,000,000, respectively. The Board has unanimously approved
the Charter Amendment and recommends that stockholders vote FOR that proposal.
We hope you will be able to attend the meeting. However, even if you
anticipate attending in person, we urge you to complete, sign, date and return
the enclosed proxy card promptly to ensure that your shares will be
represented at the American Special Meeting. If you do attend, you will, of
course, be entitled to vote in person.
Thank you and I look forward to seeing you at the meeting.
Sincerely,
/s/ Steven B. Dodge
Steven B. Dodge
Chairman of the Board, President and
Chief Executive Officer
<PAGE>
AMERICAN RADIO SYSTEMS CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 17, 1996
TO THE STOCKHOLDERS OF AMERICAN RADIO SYSTEMS CORPORATION:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the "American
Special Meeting") of American Radio Systems Corporation ("American") will be
held on December 17, 1996 at 10:00 a.m., local time, at The Four Seasons
Hotel, 200 Boylston Street, Boston, Massachusetts, for the purpose of
considering and voting upon the following proposals (collectively, the
"Proposals"):
(1) A proposal to approve and adopt an Agreement and Plan of Merger,
dated as of August 5, 1996 (the "Original Agreement"), and as amended and
restated as of September 27, 1996 (the "Merger Agreement"), by and among
American, American Merger Corporation, a Delaware corporation and a wholly-
owned subsidiary of American ("American Subsidiary"), and EZ
Communications, Inc. ("EZ"), pursuant to which either (a) EZ will be merged
with and into American Subsidiary (the "Subsidiary Merger") or (b) EZ will
be merged with and into American (the "Direct Merger"). As used herein, the
"Merger" refers to the Subsidiary Merger or the Direct Merger, as
applicable;
(2) A proposal to approve and adopt an amendment (the "Charter
Amendment") to American's Restated Certificate of Incorporation that will
increase the authorized number of shares of capital stock, including the
authorized number of shares of Preferred Stock, par value $.01 per share,
and the authorized number of shares of Common Stock, par value $.01 per
share; and
(3) Such other business as may properly come before the American Special
Meeting or any adjournments or postponements thereof.
The American Board of Directors has fixed the close of business on November
4, 1996 as the record date for the determination of stockholders entitled to
notice of and to vote at the American Special Meeting and any adjournments or
postponements thereof. Only stockholders of record at the close of business on
such date are entitled to notice of and to vote at the American Special
Meeting. A list of American stockholders entitled to vote at the American
Special Meeting or any adjournments or postponements thereof will be available
for examination for any purpose germane to the American Special Meeting,
during ordinary business hours, at the principal executive offices of American
located at 116 Huntington Avenue, Boston, Massachusetts 02116, for ten days
prior to the American Special Meeting.
Shares of the Class A Common Stock, par value $.01 per share, and the Class
B Common Stock, par value $.01 per share, are the only securities of American
whose holders are entitled to vote upon the Proposals and any other proposals
to be presented at the American Special Meeting.
Each Proposal shall be voted upon separately by the American stockholders
entitled to vote at the American Special Meeting; however, failure of the
stockholders to approve either the Merger Agreement or the Charter Amendment
will result in the abandonment by American of the Merger.
American stockholders entitled to vote at the American Special Meeting do
not have a right to dissent to the Merger or, if the Merger is consummated, to
obtain payment for their shares of American Common Stock.
Approval and adoption of the Merger Agreement requires the affirmative vote
of a majority of the outstanding Class A Common Stock and Class B Common
Stock, voting as a single class. Approval of the Charter Amendment requires
the affirmative vote of not less than 66 2/3% of the outstanding Class A
Common Stock and the Class B Common Stock, voting as a single class.
<PAGE>
Your vote is important regardless of the number of shares you own. Each
stockholder, even though he or she now plans to attend the American Special
Meeting, is requested to sign, date and return the enclosed proxy card without
delay in the enclosed postage-paid return envelope. You may revoke your proxy
at any time prior to its exercise. Any stockholder present at the American
Special Meeting or at any adjournments or postponements thereof may revoke his
or her proxy and vote personally on each matter brought before the American
Special Meeting.
By Order of the Board of Directors,
/s/ Michael B. Milsom
Michael B. Milsom, Secretary
November 8, 1996
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL
TO APPROVE AND ADOPT THE MERGER AGREEMENT AND FOR THE CHARTER AMENDMENT.
PLEASE DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
ENCLOSED POSTAGE-PAID RETURN ENVELOPE. NO POSTAGE IS NEEDED IF PROXY CARD IS
MAILED WITHIN THE UNITED STATES.
<PAGE>
EZ COMMUNICATIONS, INC.
November 8, 1996
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders (the
"EZ Special Meeting") of EZ Communications, Inc. ("EZ") to be held on December
17, 1996 at 10:00 a.m., local time, at The Country Club of Fairfax, 5110 Ox
Road, Fairfax, Virginia.
At the EZ Special Meeting, stockholders will be asked to approve and adopt
an Agreement and Plan of Merger (the "Original Agreement"), dated as of August
5, 1996, and as amended and restated as of September 27, 1996 (the "Merger
Agreement"), by and among EZ, American Radio Systems Corporation ("American"),
and American Merger Corporation, a wholly-owned subsidiary of American
("American Subsidiary"), pursuant to which either (a) EZ will be merged with
and into American Subsidiary (the "Subsidiary Merger" or the "Merger") or (b)
EZ will be merged with and into American (the "Direct Merger" or the
"Merger").
As a result of the Merger, each outstanding share of common stock of EZ will
be converted into (i) $11.75 and (ii) 0.9 shares of American Class A Common
Stock. Assuming that no appraisal rights are asserted by the EZ stockholders
in the Merger, based on the number of shares of EZ common stock outstanding on
October 1, 1996, American will pay an aggregate of approximately $106,933,000
and issue an aggregate of approximately 8,190,649 shares of American Class A
Common Stock to the EZ stockholders. In addition, options to purchase an
aggregate of 532,200 shares of American Class A Common Stock will be assumed
pursuant to the Merger.
The Merger is subject to various conditions, described in this Proxy
Statement/Prospectus. It is expected that the Merger will be completed during
the first quarter of 1997.
Your Board of Directors has carefully considered the terms of the Merger and
believes that it is advisable and in the best interests of EZ and its
stockholders. The Board has unanimously approved the Merger and recommends
that stockholders vote FOR the Merger.
We hope you will be able to attend the meeting. However, even if you
anticipate attending in person, we urge you to complete, sign, date and return
the enclosed proxy card promptly to ensure that your shares will be presented
at the EZ Special meeting. If you do attend, you will, of course, be entitled
to vote in person.
Thank you and I look forward to seeing you at the meeting.
Sincerely,
/s/ Alan Box
Alan Box
President and Chief Executive
Officer
<PAGE>
EZ COMMUNICATIONS, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 17, 1996
TO THE STOCKHOLDERS OF EZ COMMUNICATIONS, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the "EZ
Special Meeting") of EZ Communications, Inc. ("EZ"), will be held on December
17, 1996 at 10:00 a.m., local time, at The Country Club of Fairfax, 5110 Ox
Road, Fairfax, Virginia, for the purpose of considering and voting upon the
following proposals.
(1) A proposal to approve and adopt an Agreement and Plan of Merger,
dated as of August 5, 1996, and as amended and restated as of September 27,
1996 (the "Merger Agreement"), by and among EZ, American Radio Systems
Corporation ("American"), and American Merger Corporation, a wholly-owned
subsidiary of American ("American Subsidiary"), pursuant to which either
(a) EZ will be merged with and into American Subsidiary (the "Subsidiary
Merger") or (b) EZ will be merged with and into American (the "Direct
Merger"). As used herein, the "Merger" refers to the Subsidiary Merger or
the Direct Merger, as applicable; and
(2) Such other business as may properly come before the EZ Special
Meeting or any adjournments or postponements thereof.
The EZ Board of Directors has fixed the close of business on November 4,
1996 as the record date for the determination of stockholders entitled to
notice of and to vote at the EZ Special Meeting and any adjournments or
postponements thereof. Only stockholders of record at the close of business on
such date are entitled to notice of and to vote at the EZ Special Meeting. A
list of EZ stockholders entitled to vote at the EZ Special Meeting or any
adjournments or postponements thereof will be available for examination for
any purpose germane to the EZ Special Meeting, during the ordinary business
hours, at the principal executive offices of EZ located at 10800 Main Street,
Fairfax, Virginia 22030, for ten days prior to the EZ Special Meeting.
Shares of the Class A Common Stock, par value $.01 per share, and the Class
B Common Stock, par value $.01 per share, are the only securities of EZ whose
holders are entitled to vote upon the proposals and any other proposals to be
presented at the EZ Special Meeting.
EZ stockholders entitled to vote at the EZ Special Meeting have a right to
dissent from the Merger and, if the Merger is consummated, to obtain payment
for their shares of EZ stock by complying with the provisions of Article 15
((S) 13.1-729 et seq.) of the Virginia Stock Corporation Act.
Approval and adoption of the Merger Agreement requires the affirmative vote
of a majority of the outstanding Class A Common Stock and Class B Common
Stock, each voting separately as a class.
Your vote is important regardless of the number of shares you own. Each
stockholder, even though he or she now plans to attend the EZ Special Meeting,
is requested to sign, date and return the enclosed proxy card without delay in
the enclosed postage-paid return envelope. You may revoke your proxy at any
time prior to its exercise. Any stockholder present at the EZ Special Meeting
or at any adjournments or postponements thereof may revoke his or her proxy
and vote personally on each matter brought before the EZ Special Meeting.
By Order of the Board of Directors,
/s/ Ronald H. Peele, Jr.
Ronald H. Peele, Jr., Secretary
November 8, 1996
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL
TO APPROVE AND ADOPT THE MERGER AGREEMENT.
PLEASE DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
ENCLOSED POSTAGE-PAID RETURN ENVELOPE. NO POSTAGE IS NEEDED IF PROXY CARD IS
MAILED WITHIN THE UNITED STATES.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED OCCTOBER 31, 1996
AMERICAN RADIO SYSTEMS CORPORATION
EZ COMMUNICATIONS, INC.
PROXY STATEMENT
FOR SPECIAL MEETINGS OF STOCKHOLDERS
TO BE HELD DECEMBER 17, 1996
-----------
AMERICAN RADIO SYSTEMS CORPORATION
PROSPECTUS
-----------
This Proxy Statement and Prospectus (this "Proxy Statement" or the
"Prospectus") is being furnished to the stockholders of
(a) American Radio Systems Corporation, a Delaware corporation
("American", which term includes its consolidated subsidiaries unless the
context indicates otherwise), in connection with the solicitation of proxies
by the Board of Directors of American (the "American Board") from holders of
outstanding shares of Class A Common Stock, par value $.01 per share, of
American (the "American Class A Common Stock"), and Class B Common Stock,
par value $.01 per share, of American (the "American Class B Common Stock"
and, together with the American Class A Common Stock and the Class C Common
Stock, par value $.01 per share, of American (the "American Class C Common
Stock"), the "American Common Stock") for use at the Special Meeting of
Stockholders of American to be held at 10:00 a.m., local time, on December
17, 1996, and at any adjournment or postponement thereof (the "American
Special Meeting"); and
(b) EZ Communications, Inc., a Virginia corporation ("EZ", which term
includes its consolidated subsidiaries unless the context indicates
otherwise) in connection with the solicitation of proxies by the Board of
Directors of EZ (the "EZ Board") from holders of outstanding shares of Class
A Common Stock, par value $.01 per share, of EZ (the "EZ Class A Common
Stock" and, together with the Class B Common Stock, par value $.01 per
share, of EZ (the "EZ Class B Common Stock"), the "EZ Common Stock") for use
at the Special Meeting of Stockholders of EZ to be held at 10:00 a.m., local
time, on December 17, 1996, and at any adjournment or postponement thereof
(the "EZ Special Meeting").
This Proxy Statement and the accompanying forms of proxy are first being
mailed to stockholders of American and EZ on or about November 8, 1996.
American stockholders (the "American Stockholders") will be asked at the
American Special Meeting to consider and vote upon the following proposals
(collectively, the "American Proposals"):
1. A proposal (the "Merger Proposal") to approve and adopt an Agreement
and Plan of Merger, dated as of August 5, 1996 (the "Original Agreement"),
and as amended and restated as of September 27, 1996 (the "Merger
Agreement"), by and among American, American Merger Corporation, a Delaware
corporation and a wholly-owned subsidiary of American ("American
Subsidiary"), and EZ, pursuant to which either (a) EZ will be merged with
and into American Subsidiary (the "Subsidiary Merger") or (b) EZ will be
merged with and into American (the "Direct Merger"). As used herein, the
"Merger" refers to the Subsidiary Merger or the Direct Merger, as
applicable; and
2. A proposal (the "Charter Amendment Proposal") to approve and adopt an
amendment (the "Charter Amendment") to the Restated Certificate of
Incorporation, as amended, of American (the "American Restated Certificate")
required pursuant to the Merger Agreement to increase the authorized number
of shares of capital stock of American, including the authorized number of
shares of American Common Stock.
<PAGE>
EZ stockholders (the "EZ Stockholders") will be asked at the EZ Special
Meeting to consider and vote upon the Merger Proposal.
EACH OF THE AMERICAN BOARD AND THE EZ BOARD HAS UNANIMOUSLY ADOPTED AND
APPROVED THE MERGER AGREEMENT AND EACH BELIEVES THAT THE APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT IS ADVISABLE AND IN THE BEST INTERESTS OF AMERICAN AND
ITS STOCKHOLDERS AND EZ AND ITS STOCKHOLDERS, RESPECTIVELY, AND EACH
UNANIMOUSLY RECOMMENDS THAT THE AMERICAN STOCKHOLDERS AND EZ STOCKHOLDERS,
RESPECTIVELY, VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. THE
AMERICAN BOARD HAS ALSO UNANIMOUSLY ADOPTED AND APPROVED THE CHARTER
AMENDMENT, BELIEVES IT IS ADVISABLE AND IN THE BEST INTERESTS OF THE
STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE AMERICAN STOCKHOLDERS VOTE
FOR THE APPROVAL AND ADOPTION OF THE CHARTER AMENDMENT.
Consummation of the Merger is conditioned upon approval and adoption of both
the Merger Agreement and the Charter Amendment by the American Stockholders
and the Merger Agreement by the EZ Stockholders. Accordingly, if the Merger
Agreement is approved and adopted but the Charter Amendment is not approved,
the Merger will not be consummated. The Subsidiary Merger will only be
effected in lieu of the Direct Merger if the American Board determines that
the consent of the holders of certain debt of EZ cannot be obtained on terms
satisfactory to American. See "The Merger Agreement--Other Consents".
This Proxy Statement also constitutes a prospectus of American with respect
to the shares of American Class A Common Stock that will be issued to holders
of EZ Class A Common Stock and EZ Class B Common Stock at the effective time
of the Merger (the "Effective Time"). At the Effective Time, each share of EZ
Class A Common Stock and each share of EZ Class B Common Stock will be
converted into the right to receive (a) $11.75 in cash (the "Cash
Consideration") and (b) 0.9 shares (the "Exchange Ratio") of American Class A
Common Stock (the "Common Stock Consideration" and, collectively with the Cash
Consideration, the "Merger Consideration").
SEE "RISK FACTORS" BEGINNING ON PAGE 18 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY THE EZ STOCKHOLDERS IN EVALUATING AN INVESTMENT IN THE AMERICAN
CLASS A COMMON STOCK.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
November 8, 1996
ii
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT IN CONNECTION WITH THE
OFFERING AND SOLICITATION MADE HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS PROXY STATEMENT, OR THE
SOLICITATION OF A PROXY, IN ANY JURISDICTION OR FROM ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROXY STATEMENT NOR ANY DISTRIBUTION OF THE SECURITIES OFFERED PURSUANT TO
THIS PROXY STATEMENT SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION CONTAINED HEREIN OR IN THE
AFFAIRS OF AMERICAN OR EZ SINCE THE DATE HEREOF.
The information set forth or incorporated by reference herein concerning EZ
has been furnished by EZ. The information set forth or incorporated by
reference herein concerning American has been furnished by American. The pro
forma information contained herein relating to American has been prepared by
American and includes historical financial information regarding EZ that was
furnished to American by EZ. EZ does not have independent knowledge of the
matters set forth or incorporated by reference herein concerning American.
American does not have independent knowledge of the matters set forth or
incorporated by reference herein concerning EZ.
iii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION..................................................... x
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... x
SUMMARY
The Companies........................................................... 1
The Special Meetings.................................................... 4
The Merger.............................................................. 5
The Charter Amendment................................................... 6
Security Ownership and Voting Agreements................................ 6
Recommendations of the Boards of Directors.............................. 7
Opinions of Financial Advisors.......................................... 8
Conditions to the Merger................................................ 8
Regulatory Matters...................................................... 9
Nasdaq Listing.......................................................... 9
Termination; Certain Fees and Purchase Option........................... 9
Corporate Governance.................................................... 9
Interests of Certain Persons............................................ 10
Certain Federal Income Tax Consequences................................. 10
Accounting Treatment.................................................... 10
Rights of Dissenting Stockholders....................................... 10
Comparative Per Share Market Price Information.......................... 11
American Summary Combined Financial Information......................... 11
EZ Summary Combined Financial Information............................... 15
Comparative Historical and Pro Forma Equivalent Common Share Data....... 17
RISK FACTORS
Financial Leverage; Debt Service Requirements........................... 18
Restrictions Imposed by Terms of Indebtedness........................... 19
Competition............................................................. 19
Control by Principal Stockholders; Restrictions on Change of Control.... 20
Dependence on Key Personnel............................................. 21
Acquisition Strategy.................................................... 21
Antitrust Matters....................................................... 22
Regulatory Matters...................................................... 23
No Dividends............................................................ 23
Shares Eligible for Future Sale; Possible Adverse Effect on Future
Market Sales........................................................... 23
Possible Volatility of Stock Price...................................... 24
Interests of Certain EZ Persons in the Merger........................... 24
THE SPECIAL MEETINGS
Matters to be Discussed at the Special Meetings......................... 25
Record Dates; Stock Entitled to Vote; Quorum............................ 25
Required Votes.......................................................... 26
Solicitation and Voting of Proxies...................................... 26
Ownership of Securities................................................. 28
BACKGROUND OF THE MERGER
General Background...................................................... 33
Recommendation of the American Board; American's Reasons for the
Merger................................................................. 34
Opinion of Financial Advisor to American................................ 37
Recommendation of the EZ Board; EZ's Reasons for the Merger............. 40
Opinion of Financial Advisor to EZ...................................... 42
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
THE MERGER AGREEMENT
The Merger........................................................... 49
Conversion of Securities............................................. 49
Exchange Procedures.................................................. 49
Representations and Warranties....................................... 50
Certain Covenants.................................................... 50
Interest of Certain Persons in the Merger............................ 55
Regulatory Matters................................................... 56
Other Consents....................................................... 59
Accounting Treatment................................................. 59
Federal Securities Law Consequences.................................. 59
Conditions to the Merger............................................. 60
Termination.......................................................... 63
Fees and Expenses.................................................... 65
Amendment; Waiver.................................................... 65
ANCILLARY AGREEMENTS
Voting Agreements.................................................... 65
Registration Rights Agreement........................................ 66
Stockholder Agreement................................................ 66
Affiliate Letters.................................................... 67
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Tax Consequences to Holders of EZ Common Stock....................... 67
Tax Consequences to Holders of American Common Stock................. 68
Backup Withholding................................................... 69
PROPOSAL TO APPROVE AND ADOPT THE CHARTER AMENDMENT.................... 69
CAPITALIZATION......................................................... 71
UNAUDITED PRO FORMA FINANCIAL STATEMENTS OF AMERICAN AND EZ............ 73
MARKET PRICES AND DIVIDEND DATA
American............................................................. 89
EZ................................................................... 89
DESCRIPTION OF AMERICAN CAPITAL STOCK
General.............................................................. 90
Common Stock......................................................... 90
Preferred Stock...................................................... 91
Ownership Restrictions............................................... 92
Delaware Business Combination Provisions............................. 92
Transfer Agent and Registrar......................................... 93
Listing.............................................................. 93
COMPARISON OF RIGHTS OF STOCKHOLDERS OF AMERICAN AND EZ................ 94
RIGHTS OF DISSENTING STOCKHOLDERS...................................... 97
LEGAL MATTERS.......................................................... 98
EXPERTS................................................................ 98
APPENDICES:
Appendix I--Agreement and Plan of Merger, as Amended and Restated.... A-I-1
Appendix II--Opinion of Morgan Stanley & Co. Incorporated............ A-II-1
Appendix III--Opinion of CS First Boston Corporation................. A-III-1
Appendix IV--Article 15 ((S)13.1-729 et seq.) of the Virginia Stock
Corporation Act..................................................... A-IV-1
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Appendix V--Business and Management of American...................... A-V-1
Business............................................................ A-V-1
General............................................................ A-V-1
Operating Philosophy............................................... A-V-2
Acquisition Strategy............................................... A-V-4
History............................................................ A-V-5
Recent Transactions................................................ A-V-5
Operations......................................................... A-V-12
Advertising Sales.................................................. A-V-14
Competition........................................................ A-V-15
Employees.......................................................... A-V-16
Community Involvement.............................................. A-V-16
Federal Regulation of Radio Broadcasting........................... A-V-16
Management.......................................................... A-V-24
Executive Officers and Directors................................... A-V-24
Executive Compensation............................................. A-V-27
Compensation Committee Interlocks and Insider Participation........ A-V-27
Director Compensation.............................................. A-V-27
Stock Option Information........................................... A-V-28
Certain Transactions................................................ A-V-30
Formation Transaction.............................................. A-V-30
Back Bay Transaction............................................... A-V-31
1994 Equity Financing.............................................. A-V-32
Dayton Transaction................................................. A-V-33
American Recapitalization.......................................... A-V-33
Other Transactions................................................. A-V-34
Indebtedness of American............................................ A-V-34
American Credit Agreement.......................................... A-V-34
American Senior Notes.............................................. A-V-35
Index to Financial Statements...................................... A-V-F-1
Appendix VI--Business and Management of EZ........................... A-VI-1
Business............................................................ A-VI-1
General............................................................ A-VI-1
Operating Philosophy............................................... A-VI-2
Acquisition Strategy............................................... A-VI-3
Recent Transactions................................................ A-VI-3
Operations......................................................... A-VI-6
Advertising Sales.................................................. A-VI-7
Competition........................................................ A-VI-7
Employees.......................................................... A-VI-8
Community Involvement.............................................. A-VI-8
Subsidiaries....................................................... A-VI-8
Federal Regulation of Radio Broadcasting........................... A-VI-9
Properties......................................................... A-VI-9
Litigation......................................................... A-VI-10
Management.......................................................... A-VI-11
Executive Officers and Directors................................... A-VI-11
Employment Agreements.............................................. A-VI-12
Executive Compensation............................................. A-VI-13
Director Compensation.............................................. A-VI-13
Stock Option Information........................................... A-VI-13
Certain Transactions................................................ A-VI-14
Indebtedness of EZ.................................................. A-VI-14
EZ Senior Subordinated Notes....................................... A-VI-15
EZ Credit Facility................................................. A-VI-15
Index to Financial Statements...................................... A-VI-F-1
</TABLE>
vi
<PAGE>
DEFINITION CROSS REFERENCE SHEET
Set forth below is a list of certain defined terms used in this Proxy
Statement and the page on which such terms are defined. Terms designated with
A-V or A-VI are found on the pages indicated in Appendix V and Appendix VI,
respectively.
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------------ -------
<S> <C>
1994 Equity Financing................................................... A-V-32
30 Day Date............................................................. 53
ABS..................................................................... A-V-32
ABS Capital............................................................. 30
ABS Partners............................................................ 30
Affiliate Agreement..................................................... A-I-27
After-tax Cash Flow..................................................... 13
AFTRA................................................................... A-V-16
Allegheny............................................................... A-VI-10
Alliance................................................................ 38
American................................................................ i
American Acquisitions................................................... 1
American Base Case...................................................... 46
American Board.......................................................... i
American Bylaws......................................................... 46
American Class A Common Stock........................................... i
American Class B Common Stock........................................... i
American Class C Common Stock........................................... i
American Common Stock................................................... i
American Comparable Companies........................................... 39
American (EZ) Comparable Companies...................................... 45
American Corporate Adjustments.......................................... 46
American Credit Agreement............................................... 8
American Dispositions................................................... 1
American Exchange Debentures............................................ 92
American Financial Statements........................................... A-I-17
American Management Case................................................ 46
American Plan........................................................... A-V-27
American Predecessor Entities........................................... 11
American Preferred Stock................................................ 6
American Principal Stockholders......................................... 20
American Probable Transactions.......................................... 1
American Pro Forma Transactions......................................... 13
American Proposals...................................................... i
American Proxy Statement................................................ x
American Recapitalization............................................... 13
American Record Date.................................................... 4
American Reorganization................................................. 11
American Restated Certificate........................................... i
American SEC Documents.................................................. A-I-17
American Senior Note Indenture.......................................... 9
American Senior Notes................................................... 8
American Special Meeting................................................ i
American Stockholder Approval........................................... A-I-26
</TABLE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------------ -------
<S> <C>
American Stockholders................................................... i
American Subsidiary..................................................... i
American 10-K........................................................... x
American 10-Q........................................................... x
American Voting Agreement............................................... 7
American Voting Stock................................................... 5
Antitrust Division...................................................... 22
Application for Review.................................................. 57
Arbitron................................................................ 2
Asset Swaps............................................................. A-V-36
Atlantic................................................................ A-V-5
Audience Share.......................................................... 2
Back Bay................................................................ A-V-31
Back Bay New Appreciation Right......................................... A-V-32
Back Bay New Note....................................................... A-V-32
Back Bay Original Appreciation Right.................................... A-V-31
Back Bay Original Note.................................................. A-V-31
Back Bay Put/Call Agreement............................................. A-V-32
Back Bay Transaction.................................................... A-V-31
Baltimore Transaction................................................... A-V-7
BayCom Transaction...................................................... A-V-6
BCF..................................................................... 38
Boston AM............................................................... A-V-5
Boston AM Notes......................................................... A-V-30
Broadcast Cash Flow..................................................... 13
Capitol................................................................. A-V-F-2
Cash Consideration...................................................... ii
CCP..................................................................... 30
CEA..................................................................... 30
Chancellor.............................................................. 38
Charter Amendment....................................................... i
Charter Amendment Proposal.............................................. i
Chase................................................................... A-V-25
Chemical................................................................ A-V-25
Citicasters............................................................. 38
Clear Channel........................................................... 39
Closing................................................................. 5
Closing Date............................................................ 5
Commission.............................................................. x
Common Stock Consideration.............................................. ii
Communications Act...................................................... 20
Convertible Preferred Stock............................................. 6
Credit Agreements....................................................... 8
CS First Boston......................................................... 7
</TABLE>
vii
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------------ -------
<S> <C>
CVP..................................................................... A-V-25
DAB..................................................................... 20
Dayton Station.......................................................... A-V-33
DGCL.................................................................... 10
Direct Merger........................................................... i
Dodge Trusts............................................................ A-V-30
Duncan Guide............................................................ 1
EBITDA.................................................................. 13
Effective Time.......................................................... ii
Emmis................................................................... 39
Evergreen............................................................... 38
Exchange Act............................................................ x
Exchange Agent.......................................................... 49
Exchange Agent Agreement................................................ A-I-4
Exchanged Options....................................................... 6
Exchange Ratio.......................................................... ii
EZ...................................................................... i
EZ Articles............................................................. 94
EZ Acquisitions......................................................... 1
EZ Base Case............................................................ 45
EZ Board................................................................ i
EZ Bylaws............................................................... 94
EZ Certificates......................................................... 50
EZ Class A Common Stock................................................. i
EZ Class B Common Stock................................................. i
EZ Common Stock......................................................... i
EZ Communications, Inc. ................................................ 5
EZ Comparable Companies................................................. 44
EZ Comparable Transactions.............................................. 44
EZ Corporate Adjustments................................................ 44
EZ Credit Facility...................................................... 8
EZ Dispositions......................................................... 1
EZ Financial Statements................................................. A-I-9
EZ Incentive Plan....................................................... A-VI-13
EZ Management Case...................................................... 45
EZ Options.............................................................. 6
EZ Probable Transactions................................................ 1
EZ Proxy Statement...................................................... x
EZ Record Date.......................................................... 5
EZ SEC Documents........................................................ A-I-9
EZ Senior Note Indenture................................................ 9
EZ Senior Notes......................................................... 8
EZ Special Meeting...................................................... i
EZ Stockholder Approval................................................. A-I-25
EZ Stockholders......................................................... ii
EZ 10-K................................................................. x
EZ 10-Q................................................................. x
EZ Transfer Application................................................. 56
EZ Voting Agreement..................................................... 7
Exchanged Options....................................................... 6
FCC..................................................................... 9
</TABLE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------------ -------
<S> <C>
Fiduciary Determination................................................. 53
Fidelity................................................................ 32
FMTC.................................................................... 32
FTC..................................................................... 22
GAAP.................................................................... A-I-46
Granum.................................................................. 38
Hartford Transaction.................................................... A-V-6
HBC..................................................................... A-V-6
HBC Merger.............................................................. 11
Heftel.................................................................. 44
HSR Act................................................................. 9
Hunton & Williams....................................................... 34
IBEW.................................................................... A-V-16
IBOC.................................................................... 20
Indemnified Parties..................................................... 54
Independent Market Reports.............................................. 2
Infinity................................................................ 38
Interested Stockholder.................................................. 93
IRS..................................................................... 67
ISOs.................................................................... A-V-28
Jacor................................................................... 38
JSA..................................................................... 22
LMA..................................................................... 22
Market Capitalization................................................... 44
Market Ranking by Revenue............................................... 3
Market Revenue Percent.................................................. 2
Market Revenue Rank..................................................... 2
Marlin.................................................................. A-V-5
Marlin Transaction...................................................... A-V-5
Merger.................................................................. i
Merger Agreement........................................................ i
Merger Consideration.................................................... ii
Merger Proposal......................................................... i
Morgan Stanley.......................................................... 7
Morgan Stanley Opinion.................................................. 37
Multi Market............................................................ A-V-5
NAB..................................................................... A-VI-11
Nasdaq.................................................................. 9
NQOs.................................................................... A-V-28
Original Agreement...................................................... i
Original Preferred Stock................................................ A-V-30
Palm Beach Broadcasting................................................. A-V-7
Permitted Investors..................................................... A-I-5
PBI..................................................................... 52
Pro Forma Transactions.................................................. 73
Prospectus.............................................................. i
Proxy Statement......................................................... i
Purchase Proposal....................................................... 53
Pyramid................................................................. 38
RDG..................................................................... A-VI-8
Registration Rights Agreement........................................... 56
</TABLE>
viii
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------------ -------
<S> <C>
Registration Statement.................................................. x
Restricted Subsidiaries................................................. 20
Rochester Acquisition................................................... A-V-9
Rochester Consent Decree................................................ 22
Rochester Loan.......................................................... A-V-10
Saga.................................................................... 39
Second Request.......................................................... 58
Secret Transaction...................................................... A-V-8
Section 13.1-729........................................................ 10
S.E.C. ................................................................. 59
Securities Act.......................................................... x
Senior Note Indentures.................................................. 9
Senior Notes............................................................ 9
SFAS 121................................................................ A-V-F-9
SFX..................................................................... 39
Shamrock................................................................ 38
Special Conversion Price................................................ 92
Spring 1996 Arbitron reports............................................ 2
Station Fair Market Value............................................... 53
Stations................................................................ A-V-F-2
</TABLE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------------ ------
<S> <C>
Stockholder Agreement.................................................... 55
Stoner................................................................... A-V-5
Subsidiaries............................................................. 20
Subsidiary Merger........................................................ i
Sullivan & Worcester..................................................... 34
Surviving Corporation.................................................... A-I-2
TBA...................................................................... A-V-23
Telecommunications Act................................................... 1
Termination Date......................................................... 64
Tower Subsidiary......................................................... A-V-11
Tri-City................................................................. A-V-33
Unregistered Shares...................................................... 24
Unrestricted Subsidiaries................................................ 20
VSCA..................................................................... 10
WBZZ Renewal Proceedings................................................. 58
Westinghouse............................................................. 38
Wind Point............................................................... A-V-30
WMC...................................................................... 32
WTC...................................................................... 32
</TABLE>
ix
<PAGE>
AVAILABLE INFORMATION
American and EZ are each subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file reports, proxy statements, and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements, and other information concerning American and EZ can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
at the Commission's Regional Offices at Seven World Trade Center, 13th Floor,
New York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, at prescribed rates. The Commission maintains a
Web site that contains reports, proxy information statements and other
information regarding American and EZ; the address of such site is
http://www.sec.gov. In addition, reports, proxy statements and other
information concerning American and EZ may also be inspected at the offices of
the Nasdaq Stock Market at 1735 K Street, N.W., Washington, D.C. 20006-1506.
American has filed with the Commission a registration statement on Form S-4
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act") covering the shares of American Class A Common Stock
issuable in connection with the Merger. This Proxy Statement, which also
constitutes the Prospectus of American filed as part of the Registration
Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits thereto, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information, reference is hereby made to the Registration Statement,
which is available for inspection and copying as set forth above. Statements
contained in this Proxy Statement or in any document incorporated by reference
in this Proxy Statement as to the contents of any contract or other document
referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement or such other document, each
such statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by American with the
Commission (File No. 0-26102), are incorporated herein by reference: (i)
Annual Report on Form 10-K for the year ended December 31, 1995 (the "American
10-K") and the portions of American's definitive proxy statement dated April
24, 1996 incorporated by reference in Part III of the American 10-K (the
"American Proxy Statement"), (ii) Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1996 (as amended by Form 10-Q/A filed on June 7,
1996) and June 30, 1996 (the "American 10-Q"), (iii) Current Reports on Form
8-K dated February 22, 1996, February 23, 1996, March 19, 1996, March 26,
1996, April 23, 1996, May 2, 1996, May 21, 1996, June 11, 1996 (as amended by
Form 8-K/A filed on August 12, 1996 and Form 8-K/A filed on October 2, 1996),
and July 16, 1996 (as amended by Form 8-K/A filed on September 16, 1996), and
(iv) Form 8-A Registration Statement dated May 22, 1995. All documents filed
by American pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Proxy Statement and prior to the date of the
American Special Meeting shall be deemed to be incorporated by reference into
this Proxy Statement and to be a part hereof from the date any such document
is filed.
The following documents, which have been filed by EZ with the Commission
(File No. 0-16265), are incorporated herein by reference: (i) Annual Report on
Form 10-K for the year ended December 31, 1995 (the "EZ 10-K") and the
portions of the EZ's definitive proxy statement dated April 23, 1996
incorporated by reference in Part III of the EZ 10-K (the "EZ Proxy
Statement"), (ii) Quarterly Reports on Form 10-Q for the quarters ended March
31, 1996 (as amended by Form 10-Q/A filed on June 11, 1996) and June 30, 1996
(the "EZ 10-Q"), and (iii) Current Reports on Form 8-K dated January 2, 1996,
May 22, 1996, and August 8, 1996. All documents filed by EZ pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of this Proxy Statement and prior to the date of the EZ Special Meeting shall
be deemed to be incorporated by reference into this Proxy Statement and to be
a part hereof from the date any such document is filed.
x
<PAGE>
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein (or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein) modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement.
AMERICAN AND EZ WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A COPY OF
THIS PROXY STATEMENT IS DELIVERED, UPON WRITTEN OR ORAL REQUEST OF SUCH
PERSON, BY FIRST CLASS MAIL OR OTHER EQUALLY PROMPT MEANS WITHIN ONE BUSINESS
DAY OF RECEIPT OF SUCH REQUEST, A COPY OF ANY OR ALL OF THE DOCUMENTS THAT ARE
INCORPORATED BY REFERENCE HEREIN, OTHER THAN EXHIBITS TO SUCH DOCUMENTS
(UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH
DOCUMENTS). REQUESTS SHOULD BE DIRECTED TO AMERICAN RADIO SYSTEMS CORPORATION,
116 HUNTINGTON AVENUE, BOSTON, MASSACHUSETTS, 02116, ATTENTION: BRUCE G.
DANZIGER, DIRECTOR OF INVESTOR RELATIONS, OR EZ COMMUNICATIONS, INC., 10800
MAIN STREET, FAIRFAX, VIRGINIA, 22030, ATTENTION: RONALD H. PEELE, JR., VICE
PRESIDENT, TREASURER AND SECRETARY. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BEFORE DECEMBER 10, 1996.
INFORMATION SET FORTH OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995, WHICH CAN BE IDENTIFIED BY THE USE
OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "WILL," "SHOULD," "EXPECT,"
"ANTICIPATE," "ESTIMATE" OR "CONTINUE" OR THE NEGATIVE THEREOF OR OTHER
VARIATIONS THEREON OR COMPARABLE TERMINOLOGY. THE MATTERS SET FORTH UNDER THE
CAPTION "RISK FACTORS" IN THE PROSPECTUS, INCLUDING, WITHOUT LIMITATION,
COMPETITIVE FACTORS APPLICABLE TO THE RADIO BROADCASTING INDUSTRY AND
REGULATORY DEVELOPMENTS AFFECTING OPERATIONS AND THE ACQUISITION AND
DISPOSITION OF RADIO BROADCASTING PROPERTIES, CONSTITUTE CAUTIONARY STATEMENTS
IDENTIFYING IMPORTANT FACTORS WITH RESPECT TO SUCH FORWARD-LOOKING STATEMENTS,
INCLUDING CERTAIN RISKS AND UNCERTAINTIES, THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE IN SUCH FORWARD-LOOKING STATEMENTS.
xi
<PAGE>
SUMMARY
The following is a summary of certain information contained in this Proxy
Statement. This summary is not intended to be complete and is qualified in its
entirety by reference to the more detailed information set forth elsewhere in
this Proxy Statement including the Appendices, all of which should be reviewed
carefully.
THE COMPANIES
American. American will, upon consummation of the American Probable
Transactions* and prior to the Merger, be among the ten largest radio groups in
the nation owning and/or operating 70 radio stations in 13 markets across the
United States. American is a national radio broadcasting company committed to
acquiring, developing and operating radio stations in markets where it can be a
leading radio operator (i.e., one of the top two radio operators in terms of
local market revenues). Consistent with this objective and the opportunities
created by the enactment of the Telecommunications Act of 1996 (the
"Telecommunications Act"), since January 1, 1996, American has, exclusive of
the Merger and certain station asset swaps, acquired or entered into agreements
to acquire 49 radio stations for approximately $673.6 million. Giving effect to
the American Probable Transactions, immediately prior to the Merger, American
will have multiple station groups (including at least two FM stations in each
group) in each of its markets: Boston, Baltimore, Portland, Sacramento,
Hartford, Austin, Buffalo, Las Vegas, San Jose, West Palm Beach, Rochester,
Dayton and Fresno. Based on the 1996 edition of Duncan's Radio Market Guide
(the "Duncan Guide")+ and giving effect to the American Probable Transactions
but not the Merger, American station groups ranked first or second among
station operators in radio advertising revenues in 12 of its 13 markets. Giving
effect to the American Probable Transactions and the Merger, American will be
among the five largest radio groups in the nation owning and/or operating 93
radio stations in 18 markets across the United States.
American's stations have demonstrated significant same station growth in net
revenues and broadcast cash flow. Net revenues from American's then currently
owned and/or operated stations (including periods prior to their acquisition by
American) increased by approximately 18.1% from $82.2 million in 1994 to $97.1
million in 1995 and 10.8% from $49.9 million in the first six months of 1995 to
$55.3 million in the first six months of 1996. Broadcast cash flow of such
stations increased by approximately 33.6% from $23.5 million in 1994 to $31.4
million in 1995 and 24.4% from $11.9 million in the first six months of 1995 to
$14.8 million in the first six months of 1996. Net revenues for currently owned
and/or operated stations (including periods prior to their acquisition by
American) increased by approximately 11.9% from $40.5 million in the third
quarter of 1995 to $45.3 million in the third quarter of 1996, while broadcast
cash flow of those stations increased approximately 17.9% from $11.2 million in
the third quarter of 1995 to $13.2 million in the third quarter of 1996. Net
revenues and broadcast cash flow in 1995, giving pro forma effect to the
American Probable Transactions only (and to the American Probable Transactions
and the Merger including the EZ Probable Transactions) as though all of them
had been consummated as of January 1, 1995, would have been $220.6 million
($317.4 million) and $64.5 million ($98.7 million), respectively. See "American
Summary Combined Financial Information" and "Unaudited Pro Forma Financial
Information of American and EZ".
- --------
* The term "American Probable Transactions" means the American Acquisitions and
the American Dispositions. The terms "American Acquisitions" and "American
Dispositions" mean the acquisitions and dispositions, respectively, of radio
stations described in Appendix V under "Business--Recent Transactions--
Consummated Acquisitions" and "--Pending Acquisitions and Dispositions"; it
does not, however, include those referred to under "--Other Transactions" nor
to the stations owned by EZ. The term "EZ Probable Transactions" means the EZ
Acquisitions and the EZ Dispositions. The terms "EZ Acquisitions," and "EZ
Dispositions" means the acquisitions and dispositions, respectively, of radio
stations described under Appendix VI under "Business--Recent Transactions--
Consummated Acquisitions" and "--Pending Acquisitions and Dispositions".
+ The Duncan Guide is published by a company owned by James H. Duncan, Jr., a
director of American.
1
<PAGE>
The following table sets forth certain information regarding American and its
markets, assuming all of the American Probable Transactions (but not the
Merger) had been consummated as of January 1, 1995. It does not include the
possible acquisition of stations described under "Business--Recent
Transactions--Other Transactions" in Appendix V as to which letters of intent
have been entered into, but which are not included among the American Probable
Transactions.
<TABLE>
<CAPTION>
MARKET DATA AMERICAN DATA
----------- ---------------------------------------
MARKET MARKET MARKET
RANKING BY REVENUE REVENUE AUDIENCE NUMBER
REVENUE(1) RANK(2) PERCENT(3) SHARE(4) OF STATIONS
----------- ------- ---------- -------- -----------
FM AM
----- -----
<S> <C> <C> <C> <C> <C> <C>
Boston..................... 9 2 29.9 20.0 3 3
Baltimore.................. 19 1 33.3 16.7 3 2
Portland................... 23 2 21.2 17.2 4 1
Sacramento................. 25 2 22.6 23.2 4 3
Hartford................... 34 1 52.0 33.2 3 1
Austin(5).................. 37 4 15.1 13.2 2 1
Buffalo.................... 41 2 31.1 32.6 4 1
Las Vegas.................. 42 1 30.3 21.8 4 2
San Jose................... 43 1 37.6 13.9 3 1
West Palm Beach(6)......... 48 1 54.5 30.0 6 2
Rochester.................. 54 1 42.3 25.9 3 1
Dayton..................... 55 1 50.8 33.0 5 1
Fresno..................... 62 1 47.6 22.4 5 2
</TABLE>
- --------
(1) Ranking of the principal radio market served by the station among all radio
markets in the United States, by 1995 market revenue, according to the
Duncan Guide.
(2) "Market Revenue Rank" is the ranking of American's station group (currently
owned or operated and giving effect to the American Probable Transactions)
among all radio stations in its market by gross radio revenue (excluding
trade items) for 1995, according to the Duncan Guide. American has
attempted to recompute Market Revenue Rank and Market Revenue Percent of
its competitors based on consummated or announced acquisitions of such
competitors. However, there can be no assurance that American is aware of
all such acquisitions. Accordingly, the Market Revenue Rank of American's
stations shown may not necessarily be the same were all such competitors'
acquisitions taken into account.
(3) "Market Revenue Percent" is American's calculation based on gross radio
revenue (excluding trade items) as reported by the independent local market
reports for the year ended December 31, 1995 (the "Independent Market
Reports") as provided by Hungerford, Aldrin, Nichols & Carter, Certified
Public Accountants, or Miller, Kaplan, Arase & Co., Certified Public
Accountants, except in the case of Austin and San Jose which is based on
the Duncan Guide. In the case of WBGR-AM in Baltimore and KMXB-FM in Las
Vegas, the actual 1995 revenue figure was utilized in the calculation, as
the revenues for such stations were not reported in the Independent Market
Reports. In the case of Rochester, the percentage of revenues was obtained
by multiplying the aggregate percentage of revenues for WCMF (FM) and WCMF
(AM) combined, as reported by an Independent Market Report, by a fraction,
the denominator of which is gross revenues for WCMF (FM) and WCMF (AM)
combined and the numerator of which is the gross revenues of WCMF (FM) as
reported in the financial statements of WCMF (FM) for 1995, and adding the
result to the aggregate percentage of revenues for WRMM (FM), WPXY (FM) and
WHTK (AM) as reported by an Independent Market Report.
(4) "Audience Share" is the audience share (Persons 12+) of American's station
groups (currently owned or operated and giving effect to the American
Probable Transactions) among all radio stations in the markets, according
to the Spring 1996 Radio Market Reports (the "Spring 1996 Arbitron
reports") prepared by The Arbitron Company ("Arbitron").*
(5) Operated by American under a local marketing agreement; American also has
an option to acquire these stations. See Notes to Consolidated Financial
Statements of American in the American 10-K.
(6) Consummation of the American Probable Transactions will require American to
dispose of one FM station in West Palm Beach.
- --------
* Copyright 1996. The Arbitron Company. All Rights Reserved.
2
<PAGE>
American was incorporated under the laws of the State of Delaware in 1993.
American's principal offices are located at 116 Huntington Avenue, Boston,
Massachusetts 02116, and its telephone number is (617) 375-7500.
EZ. EZ is a radio broadcasting company that will, upon consummation of the EZ
Probable Transactions and prior to the Merger, own and/or operate seventeen FM
and six AM radio stations serving six of the nation's top 40 radio revenue
markets (Seattle, St. Louis, Pittsburgh, Sacramento, Charlotte and Kansas
City). EZ owns at least two FM stations in each of its markets. EZ's portfolio
of stations is diversified in terms of format, target demographics, geographic
location and phase of development.
EZ's strategy is to acquire and operate radio stations in large markets with
an emphasis on the nation's 30 largest markets. As part of this strategy, EZ
seeks to maximize its presence in each of its markets through, among other
things, the ownership of multiple station combinations. EZ seeks to own and
operate multiple station combinations as a way to establish a leading position
in each of its markets as measured by audience ratings and revenue share.
Operating multiple station combinations has enabled EZ to program a greater
number of stations, strategically position those stations in a variety of
formats, attract top talent, and improve the range of products and services
available to advertisers, thereby making EZ's stations a more attractive
alternative to advertisers and better positioning EZ to compete effectively for
available dollars against other media, including newspapers and television.
Additionally, multiple station combinations allow station consolidation and
centralization, creating certain cost and operational efficiencies and
enhancing consistency of management and talent excellence.
EZ regularly evaluates potential acquisitions both in markets that it does
not currently serve and in markets in which it would like to achieve a larger
presence. Acquisition candidates may include individual stations, pairs of
stations in a single market or groups of stations that may operate in a number
of major markets. After acquiring a station, EZ seeks to improve net revenue
and broadcast cash flow by a variety of means such as changing the station's
programming format, reducing its operating expenses, or combining its
operations with an existing station operated by EZ in the same market. EZ
intends to continue to pursue opportunities for expansion, including
opportunities to acquire multiple radio stations in the same local market as
allowed under the Telecommunications Act.
The following table sets forth certain information regarding EZ and its
markets, assuming all of the EZ Probable Transactions (but not the Merger) had
been consummated as of January 1, 1995.
<TABLE>
<CAPTION>
MARKET DATA(1) EZ DATA
-------------- ------------------------------------
MARKET MARKET MARKET
RANKING BY REVENUE REVENUE AUDIENCE NUMBER
REVENUE RANK PERCENT SHARE OF STATIONS
-------------- ------- ------- -------- -----------
FM AM
----- -----
<S> <C> <C> <C> <C> <C> <C>
Seattle.................... 13 1 22.6 15.8 4 1
St. Louis.................. 18 1 30.5 17.9 3 1
Pittsburgh................. 24 4 11.9 10.3 2 --
Sacramento................. 25 3 16.7 11.0 2 1
Charlotte.................. 30 1 38.8 30.9 4 2
Kansas City................ 32 2 17.5 14.0 2 1
</TABLE>
- --------
(1) For information concerning source and calculation of "Market Ranking by
Revenue", "Market Revenue Rank", "Market Revenue Percent" and "Audience
Share", see the notes under the table on page 2 above, except that EZ
rather than American has made the computations and calculations referred to
in notes (2) and (3) thereunder.
EZ was incorporated under the laws of the Commonwealth of Virginia in 1967.
EZ's principal offices are located at 10800 Main Street, Fairfax, Virginia
22030, and its telephone number is (703) 591-1000.
3
<PAGE>
Pro Forma American
The following table sets forth certain information regarding American and its
markets, assuming that the Merger and all of the American Probable Transactions
and EZ Probable Transactions had been consummated as of January 1, 1995. It
does not include the possible acquisition of stations by American described
under "Business--Recent Transactions--Other Transactions" in Appendix V as to
which letters of intent have been entered into, but which are not included
among the American Probable Transactions.
<TABLE>
<CAPTION>
MARKET DATA PRO FORMA AMERICAN DATA
----------- ---------------------------------------
MARKET MARKET MARKET
RANKING BY REVENUE REVENUE AUDIENCE NUMBER
REVENUE(1) RANK(2) PERCENT(1) SHARE(1) OF STATIONS
----------- ------- ---------- -------- -----------
FM AM
----- -----
<S> <C> <C> <C> <C> <C> <C>
Boston..................... 9 2 29.9 20.0 3 3
Seattle*................... 13 1 22.6 15.8 4 1
St. Louis*................. 18 1 30.5 17.9 3 1
Baltimore.................. 19 1 33.3 16.7 3 2
Portland................... 23 2 21.2 17.2 4 1
Pittsburgh*................ 24 4 11.9 10.3 2 --
Sacramento(2)*............. 25 1 39.3 34.2 6 4
Charlotte*................. 30 1 38.8 30.9 4 2
Kansas City*............... 32 2 17.5 14.0 2 1
Hartford................... 34 1 52.0 33.2 3 1
Austin(3).................. 37 4 15.1 13.2 2 1
Buffalo.................... 41 2 31.1 32.6 4 1
Las Vegas.................. 42 1 30.3 21.8 4 2
San Jose................... 43 1 37.6 13.9 3 1
West Palm Beach(4)......... 48 1 54.5 30.0 6 2
Rochester.................. 54 1 42.3 25.9 3 1
Dayton..................... 55 1 50.8 33.0 5 1
Fresno..................... 62 1 47.6 22.4 5 2
</TABLE>
- --------
* Indicates stations owned and/or operated by EZ under a local marketing
agreement and, in the case of Sacramento, includes two FM stations and one
AM station owned by EZ.
(1) For information concerning source and calculation of "Market Ranking by
Revenue", "Market Revenue Rank", "Market Revenue Percent" and "Audience
Share", see the notes under the table on page 2 above.
(2) Upon consummation of the Merger, American will be required to dispose of
one station in Sacramento, in addition to the disposition of one FM and one
AM station included in the American Probable Transactions.
(3) Operated by American under a local marketing agreement; American also has
an option to acquire these stations. See Notes to Consolidated Financial
Statements of American in the American 10-K.
(4) Consummation of the American Probable Transactions will require American to
dispose of one FM station in West Palm Beach.
THE SPECIAL MEETINGS
American. The American Special Meeting will be held at The Four Seasons
Hotel, 200 Bolyston Street, Boston, Massachusetts 02116 on December 17, 1996,
beginning at 10:00 a.m. local time. The purpose of the American Special Meeting
is to consider and vote upon the American Proposals. See "The Special
Meetings--Matters to Be Discussed at the Special Meetings--American."
The record date for the American Special Meeting is November 4, 1996 (the
"American Record Date"). Accordingly, holders of record of American Class A
Common Stock and American Class B Common Stock
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<PAGE>
(collectively, the "American Voting Stock") as of the American Record Date will
be entitled to notice of, and to vote at, the American Special Meeting.
The presence in person or by proxy of shares representing a majority of votes
entitled to be cast by holders of the American Voting Stock as of the American
Record Date is required to constitute a quorum for the transaction of business
at the American Special Meeting.
The Merger Agreement must be approved and adopted by a majority of the votes
entitled to be cast by the holders of the American Voting Stock, voting as a
single class. The Charter Amendment must be approved and adopted by 66 2/3% of
the votes entitled to be cast by the holders of American Voting Stock, voting
as a single class.
EZ. The EZ Special Meeting will be held at The Country Club of Fairfax, 5110
Ox Road, Fairfax, Virginia on December 17, 1996, beginning at 10:00 a.m. local
time. The purpose of the EZ Special Meeting is to consider and vote upon the
Merger Proposal. See "The Special Meetings--Matters to Be Discussed at the
Special Meetings--EZ."
The record date for the EZ Special Meeting is November 4, 1996 (the "EZ
Record Date"). Accordingly, holders of record of EZ Class A Common Stock and EZ
Class B Common Stock as of the EZ Record Date will be entitled to notice of,
and to vote at, the EZ Special Meeting.
The presence in person or by proxy of shares representing a majority of votes
of the EZ Class A Common Stock and a majority of votes of the EZ Class B Common
Stock entitled to be cast by holders of each class as of the EZ Record Date is
required to constitute a quorum for the transaction of business at the EZ
Special Meeting.
The Merger Agreement must be approved and adopted by a majority of the votes
cast at the EZ Special Meeting by the holders of each class of EZ Common Stock,
each voting separately as a class.
THE MERGER
General. If the Direct Merger is effected, at the Effective Time, EZ will be
merged with and into American, with American continuing as the surviving
corporation. If the Subsidiary Merger is effected, at the Effective Time, EZ
will be merged with and into American Subsidiary, with American Subsidiary
continuing as the surviving corporation and a wholly-owned subsidiary of
American. Upon consummation of the Subsidiary Merger, the name of American
Subsidiary will be changed to "EZ Communications, Inc." As a result of the
Merger, the separate corporate existence of EZ will cease. Subject to the terms
and conditions of the Merger Agreement, the closing (the "Closing") of the
transactions contemplated thereby will take place on the later of (i) the tenth
business day after the date on which the last of the conditions set forth in
the Merger Agreement, other than conditions requiring deliveries at the
Closing, is fulfilled or waived, and (ii) January 8, 1997, unless another date
is agreed to by EZ and American (the "Closing Date"). The Merger will become
effective at the time at which a Certificate of Merger is filed with the
Secretary of State of the State of Delaware and Articles of Merger are filed
with the State Corporation Commission of the Commonwealth of Virginia and such
Commission shall have issued a Certificate of Merger, or such later time as is
specified in such documents. The Subsidiary Merger will only be effected in
lieu of the Direct Merger if the American Board determines that the consent of
the holders of certain debt of EZ cannot be obtained on terms satisfactory to
American.
Conversion of EZ Common Stock. Upon consummation of the Merger, each share of
EZ Common Stock issued and outstanding immediately prior to the Effective Time
(other than Dissenting Shares) will be converted into the right to receive the
Merger Consideration.
5
<PAGE>
Conversion of EZ Options. Upon consummation of the Merger, each option
(collectively, the "EZ Options") to purchase shares of EZ Common Stock
outstanding immediately prior to the Effective Time, will be exchanged for an
option (the "Exchanged Options") to purchase a number of shares of American
Class A Common Stock equal to the product of the number of shares of EZ Common
Stock which the holder is entitled to purchase under the EZ Option multiplied
by the Exchange Ratio, at a price per share equal to the quotient obtained by
dividing (a) the per share option exercise price determined pursuant to the EZ
Option less $11.75, by (b) the Exchange Ratio.
American or American Subsidiary Capital Stock. If the Direct Merger is
effected, upon consummation of the Merger, each share of American capital stock
(including each share of 7% Convertible Exchangeable Preferred Stock, par value
$.01 per share (the "Convertible Preferred Stock"), and each share of American
Common Stock) issued and outstanding immediately prior to the Effective Time
will remain issued and outstanding and will not be changed in any respect by
the Merger. If the Subsidiary Merger is effected, upon the consummation of the
Merger, each share of American Subsidiary capital stock issued and outstanding
immediately prior to the Effective Time will remain issued and outstanding and
will not be changed in any respect by the Merger.
THE CHARTER AMENDMENT
The American Restated Certificate is required to be amended to increase the
authorized number of shares of American Class A Common Stock in order to have
sufficient shares available to be issued upon consummation of the Merger. In
addition, the American Board has determined it is advisable and in the best
interests of the stockholders to increase the number of authorized shares of
Preferred Stock, par value $.01 per share, of American (the "American Preferred
Stock"), American Class A Common Stock and American Class B Common Stock to
accommodate future corporate transactions, including future equity financings
and possible stock splits or stock dividends. There are 1,000,000 shares of
American Preferred Stock authorized, of which 137,500 are issued as shares of
Convertible Preferred Stock; there are also 25,000,000 million shares of
American Class A Common Stock authorized, of which as of the American Record
Date an aggregate of . were issued or reserved for issue, and 10,000,000
million shares of American Class B Common Stock authorized, of which as of the
American Record Date an aggregate of . were issued or reserved for issue. The
Charter Amendment provides for an aggregate of 10,000,000 shares of American
Preferred Stock, 100,000,000 shares of American Class A Common Stock and
15,000,000 shares of American Class B Common Stock. The Charter Amendment does
not change the number of authorized shares of American Class C Common Stock, of
which there are 6,000,000 authorized, 1,295,518 of which are outstanding. The
Charter Amendment requires the affirmative vote of the holders of the American
Voting Stock entitled to cast not less than 66 2/3% of the aggregate votes of
such stock, voting as a single class. If approved by the American Stockholders,
American intends to effect the Charter Amendment even if the Merger is not
consummated. See "Background of the Merger--Recommendation of the American
Board; American's Reasons for the Merger" and "Proposal to Approve and Adopt
the Charter Amendment".
SECURITY OWNERSHIP AND VOTING AGREEMENTS
American. As of October 1, 1996, directors and executive officers of American
and their respective affiliates may be deemed to be the beneficial owners of
28.2% shares of the outstanding American Voting Stock, which constitute in the
aggregate approximately 54.7% of the total votes entitled to be cast by the
holders of American Voting Stock. It is anticipated that each of such
directors, executive officers and their respective affiliates will vote their
shares in favor of each of the Proposals. See "The Special Meetings--Ownership
of Securities--American" and "Ancillary Agreements--Voting Agreements--American
".
In connection with the execution of the Merger Agreement, certain
stockholders of American entitled to exercise voting power with respect to an
aggregate of 68,500 shares of American Class A Common Stock and
6
<PAGE>
2,673,662 shares of American Class B Common Stock, which as of October 1, 1996
in the aggregate represented approximately 43.0% of the voting power of the
American Voting Stock, and EZ entered into an agreement (the "American Voting
Agreement"), pursuant to which such American stockholders agreed, among other
things, to vote all of their shares of American Voting Stock (and granted to EZ
their proxies to vote all such shares): (i) in favor of the adoption of the
Merger Agreement, (ii) against any action or agreement that would result in a
breach in any material respect of any covenant, representation or warranty or
any other obligation of American under the Merger Agreement, and (iii) against
any proposal for any merger, consolidation, recapitalization, sale of assets,
business combination or other material change in American's corporate structure
or business that is inconsistent with or that would, or is reasonably likely
to, directly or indirectly, impede, interfere with or attempt to discourage the
Merger or any other transaction contemplated by the Merger Agreement. See
"Ancillary Agreements--Voting Agreements--American".
EZ. As of October 1, 1996, directors and executive officers of EZ and their
respective affiliates may be deemed to be the beneficial owners of 3,549,712
shares of the outstanding EZ Common Stock, which constitute in the aggregate
approximately 13.3% of the total votes entitled to be cast by the holders of EZ
Class A Common Stock and 100% of the total votes entitled to be cast by the
holders of EZ Class B Common Stock. It is anticipated that each of such
directors, executive officers and their respective affiliates will vote their
shares in favor of the Merger. See "The Special Meetings--Ownership of
Securities--EZ" and "Ancillary Agreements--Voting Agreements--EZ ".
In connection with the execution of the Merger Agreement, certain
stockholders of EZ entitled to exercise voting power with respect to an
aggregate of 2,697,897 shares of the EZ Class B Common Stock, which as of
October 1, 1996 in the aggregate represented 100% of the voting power of the EZ
Class B Common Stock, and American entered into an agreement (the "EZ Voting
Agreement"), pursuant to which such EZ Stockholders agreed, among other things,
to vote all of their shares of EZ Common Stock (and granted to American their
proxies to vote all such shares): (i) in favor of the adoption of the Merger
Agreement, (ii) against any action or agreement that would result in a breach
in any material respect of any covenant, representation or warranty or any
other obligation of EZ under the Merger Agreement, and (iii) against any
proposal for any merger, consolidation, recapitalization, sale of assets,
business combination or other material change in EZ's corporate structure or
business that is inconsistent with or that would, or is reasonably likely to,
directly or indirectly, impede, interfere with or attempt to discourage the
Merger or any other transaction contemplated by the Merger Agreement. See
"Ancillary Agreements--Voting Agreements--EZ", "The Special Meetings--Required
Votes--EZ" and "--Ownership of Securities".
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
American. The American Board, by unanimous vote, has determined that the
Merger is advisable and in the best interests of the American Stockholders and
has recommended that holders of American Voting Stock vote in favor of the
Merger Agreement and the Charter Amendment. The decision of the American Board
to approve and adopt the Merger Agreement and to recommend that the American
Stockholders vote in favor of the Merger was based upon its evaluation of a
number of factors, including, among others, the oral opinion (subsequently
confirmed in writing as of August 5, 1996) of Morgan Stanley & Co. Incorporated
("Morgan Stanley"), American's financial advisor in connection with the Merger,
that, as of such date, the consideration to be paid to the holders of EZ Common
Stock in the Merger was fair from a financial point of view to American. See
"Background of the Merger--Recommendation of the American Board; American's
Reasons for the Merger" and "--Opinion of Financial Advisor to American".
EZ. The EZ Board, by unanimous vote, has determined that the Merger is
advisable and in the best interests of the EZ Stockholders and has recommended
that holders of EZ Common Stock vote in favor of the Merger Agreement. The
decision of the EZ Board to adopt and approve the Merger Agreement and to
recommend that the EZ Stockholders vote in favor of the Merger was based upon
its evaluation of a number of factors, including, among others, the oral
opinion (subsequently confirmed in writing as of August 5, 1996) of CS First
Boston Corporation ("CS First Boston"), EZ's financial advisor in connection
with the Merger, that, as
7
<PAGE>
of such date, the consideration to be paid to the holders of EZ Common Stock in
the Merger was fair to such holders from a financial point of view to the EZ
Stockholders. See "Background of the Merger--Recommendation of the EZ Board;
EZ's Reasons for the Merger" and "--Opinion of Financial Advisor to EZ".
OPINIONS OF FINANCIAL ADVISORS
American. American has retained Morgan Stanley to act as its exclusive
financial advisor in connection with the Merger. At the meeting of the American
Board held on August 4, 1996, Morgan Stanley delivered its oral opinion to the
American Board, subsequently confirmed in a written opinion to the American
Board, that, as of that date, the consideration to be received by the EZ
Stockholders pursuant to the Merger was fair to American from a financial point
of view.
A copy of the full text of the Morgan Stanley opinion, dated as of August 5,
1996, which sets forth the assumptions made, matters considered and limitations
of the review undertaken, is attached as Appendix II hereto. The American
Stockholders are urged to read the text of the Morgan Stanley opinion in its
entirety. The summary discussion of the opinion of Morgan Stanley set forth in
this Proxy Statement is qualified in its entirety by reference to the full text
of such opinion. The opinion of Morgan Stanley is directed only to the fairness
of the Merger from a financial point of view to American, does not address any
other aspects of the Merger or any related transactions and does not constitute
a recommendation to any American Stockholder as to how such stockholder should
vote at the American Special Meeting. See "Background of the Merger--Opinion of
Financial Advisor to American".
EZ. EZ has retained CS First Boston to act as its exclusive financial advisor
in connection with the Merger. At the meeting of the EZ Board held on August 3,
1996, CS First Boston delivered its oral opinion to the EZ Board (subsequently
confirmed in writing as of August 5, 1996) that, as of such date and based upon
and subject to certain matters stated in such opinion, the consideration to be
received by the EZ Stockholders pursuant to the Merger was fair to the EZ
Stockholders from a financial point of view.
A copy of the full text of the CS First Boston written opinion, dated as of
August 5, 1996, which sets forth the assumptions made, matters considered and
limitations of the review undertaken in connection therewith, is attached as
Appendix III hereto. The EZ Stockholders are urged to read the text of the CS
First Boston opinion in its entirety. The summary discussion of the opinion of
CS First Boston set forth in this Proxy Statement is qualified in its entirety
by reference to the full text of such opinion. The opinion of CS First Boston
is directed only to the fairness of the Merger Consideration from a financial
point of view to the EZ Stockholders, does not address any other aspects of the
Merger or any related transaction and does not constitute a recommendation to
any EZ Stockholder as to how such stockholder should vote at the EZ Special
Meeting. See "Background of the Merger--Opinion of Financial Advisor to EZ".
CONDITIONS TO THE MERGER
The obligations of EZ and American to consummate the Merger are subject to
various conditions, including, among others, the adoption and approval of the
Merger Agreement and the Charter Amendment by the American Stockholders, the
adoption and approval of the Merger Agreement by the EZ Stockholders, the
receipt of certain required regulatory approvals and the receipt of opinions
from tax counsel for EZ and American. See "The Merger Agreement--Conditions to
the Merger".
Consummation of the Merger will require the consent of the lenders under the
senior secured credit agreement between American and the lenders named therein
(the "American Credit Agreement"). American believes that such consent will be
obtained. The consent of the holders of the 9% Senior Subordinated Notes due
2006 of American (the "American Senior Notes") is not required for consummation
of the Merger. If the Direct Merger is effected, the senior secured credit
agreement between EZ and the lenders named therein (the "EZ Credit Facility"
and, collectively with the American Credit Agreement, the "Credit Agreements")
will be refinanced as part of an amended American Credit Agreement.
Consummation of the Direct Merger will require the consent of the holders of
the 9 3/4% Senior Subordinated Notes due 2005 of EZ (the "EZ Senior Notes" and,
8
<PAGE>
collectively with the American Senior Notes, the "Senior Notes") to amend the
Indenture under which the EZ Senior Notes are outstanding (the "EZ Senior Note
Indenture") to conform certain covenants to those of the Indenture under which
the American Senior Notes are outstanding (the "American Senior Note Indenture"
and, collectively with the EZ Senior Note Indenture, the "Senior Note
Indentures"). If the Subsidiary Merger is effected, (a) it is anticipated that
the EZ Credit Facility will be amended and restated and the lenders thereunder
may be aligned with those under the American Credit Agreement and (b) the
consent of the holders of the EZ Senior Notes will not be required. See "The
Merger Agreement--Other Consents".
REGULATORY MATTERS
The receipt of certain federal and state governmental or regulatory approvals
are required in order to consummate the Merger, including approvals or waivers
from the Federal Communications Commission ("FCC"), and the expiration or
earlier termination of the applicable waiting period under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). American
and EZ have agreed in the Merger Agreement to use their reasonable best efforts
to obtain such approvals, but there can be no assurance as to if or when such
approvals will be obtained such that the Merger may be consummated. See "The
Merger Agreement--Regulatory Matters".
NASDAQ LISTING
Application will be made to list the shares of American Class A Common Stock
to be issued in connection with the Merger on the Nasdaq National Market
("Nasdaq"). The American Class A Common Stock is currently traded on the Nasdaq
under the symbol "AMRD". It is a condition to consummation of the Merger that
the shares of American Class A Common Stock to be issued in connection with the
Merger shall have been approved for listing on Nasdaq, subject only to official
notice of issuance. See "The Merger Agreement--Certain Covenants--Certain Other
Covenants" and "--Conditions to the Merger".
TERMINATION; CERTAIN FEES AND PURCHASE OPTION
The Merger Agreement will be subject to termination by either EZ or American
if the Merger is not consummated on or before September 30, 1997 (which date
may be extended by mutual consent of EZ and American) and prior to such time by
the mutual consent of EZ and American. The Merger Agreement will also be
subject to termination by either EZ or American under certain circumstances
described herein. If the Merger Agreement is terminated by EZ or American under
certain circumstances described therein relating to breach or default, the
breaching or defaulting party will be required to pay to the other an amount
equal to $15.0 million together with reasonable fees and expenses. In addition,
if the Merger Agreement is terminated by EZ under certain circumstances
described therein relating to the EZ Board exercising its fiduciary duties,
American will have the right, at its option, to (a) receive $15.0 million or
(b) purchase the radio stations of EZ in one of its markets at a purchase price
equal to Station Fair Market Value (as defined in the Merger Agreement) less
$10.0 million. See "The Merger Agreement--Certain Covenants--No Solicitation"
and "--Fees and Expenses".
CORPORATE GOVERNANCE
If either the Direct Merger or the Subsidiary Merger is effected, the
directors of American immediately prior to the Effective Time will be the
directors of the surviving corporation following the Effective Time and the
officers of American immediately prior to the Effective Time will be the
officers of the surviving corporation following the Effective Time. In
addition, Arthur Kellar, Chairman of the Board of EZ, and Alan Box, President
and Chief Executive Officer of EZ, will become directors of American and Mr.
Box will become an Executive Vice President of American.
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<PAGE>
INTERESTS OF CERTAIN PERSONS
In considering the recommendation of the EZ Board with respect to the Merger,
the EZ Stockholders should be aware that certain members of EZ's management and
the EZ Board have certain interests in the Merger that may present them with
actual or potential conflicts of interest. As noted above, Messrs. Kellar and
Box will become directors of American and Mr. Box will become an Executive Vice
President of American. It is also anticipated that Mr. Kellar will be elected
to the Executive Committee and the Compensation Committee of the American
Board. The existing employment agreements of each of Messrs. Kellar and Box
with EZ will be terminated and Mr. Kellar will receive a payment of $250,000 in
lieu of the severance payments to which he is entitled under his employment
agreement. The Merger Agreement requires American (if the Direct Merger is
effected) or American Subsidiary (if the Subsidiary Merger is effected) to
indemnify the directors, officers and employees of EZ with respect to matters
arising prior to the Effective Time (including in connection with the Merger
and the Merger Agreement) to the fullest extent permitted by the Delaware
General Corporation Law (the "DGCL") and, in either event, requires American,
so long as it otherwise maintains directors' and officers' insurance for its
then current directors and officers, to maintain for a period of six years the
policies of directors' and officers' liability insurance currently maintained
by EZ (or substantially equivalent ones). The Merger Agreement also requires
American to grant registration rights to each "affiliate" of EZ on the terms
set forth in American's present registration rights agreement with many of its
stockholders. See "Risk Factors--Interests of Certain EZ Persons in the
Merger".
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
No gain or loss will be recognized by the American Stockholders in the
Merger. The EZ Stockholders will recognize gain realized, if any, to the extent
of the $11.75 per share received as part of the Merger Consideration and will
recognize gain or loss with respect to cash received in lieu of fractional
shares. The tax basis of an EZ Stockholder in American Class A Common Stock
received will generally be the same as the tax basis of the EZ Common Stock
surrendered by such EZ Stockholder in the Merger, decreased by cash received
(excluding cash received in lieu of a fractional share) and increased by any
gain recognized (whether capital gain or dividend income), and the holding
period of the American Class A Common Stock received will include the holding
period of the EZ Common Stock surrendered if the EZ Common Stock was held as a
capital asset. An EZ Stockholder who receives cash in lieu of a fractional
share of American Class A Common Stock will recognize gain or loss as if the
fractional share had been received and sold for cash. Neither American nor EZ
nor any subsidiary of either will recognize any gain as a result of the Merger.
See "Certain Federal Income Tax Considerations."
ACCOUNTING TREATMENT
The Merger will be accounted for by American under the "purchase" method of
accounting in accordance with generally accepted accounting principles.
Therefore, the aggregate consideration paid by American in connection with the
Merger will be allocated to EZ's assets and liabilities based upon their fair
values, with any excess being treated as goodwill. The assets and liabilities
and results of operations of EZ will be consolidated into the assets and
liabilities and results of operations of American subsequent to the Effective
Time.
RIGHTS OF DISSENTING STOCKHOLDERS
Pursuant to the DGCL, holders of American Common Stock do not have appraisal
rights. Pursuant to the Virginia Stock Corporation Act (the "VSCA"), any holder
of EZ Common Stock (i) who delivers to EZ written notice prior to the vote
taken at the EZ Special Meeting of his intent to demand payment for his shares
if the Merger is effectuated, (ii) whose shares are not voted in favor of the
Merger, and (iii) who follows certain other procedural requirements set forth
in the VSCA, shall be entitled to dissenters' rights under Section 13.1-730 of
the VSCA ("Section 13.1-730"). See "Rights of Dissenting Stockholders--EZ". The
receipt of cash in exchange for EZ Common Stock pursuant to the exercise of
dissenters' rights will be a taxable transaction. All of the holders of EZ
Common Stock subject to the EZ Voting Agreement have waived their dissenters'
rights with respect to their shares of EZ Common Stock. See "Certain Federal
Tax Considerations" and "Rights of Dissenting Stockholders".
10
<PAGE>
COMPARATIVE PER SHARE MARKET PRICE INFORMATION
On August 2, 1996, the trading day prior to the announcement of the Merger,
the closing sales prices of the American Class A Common Stock and the EZ Class
A Common Stock, as reported on Nasdaq, were $39.50 and $32.50, respectively. On
October 29, 1996, the most recent date for which it was practicable to obtain
market data prior to printing of this Proxy Statement, the closing sales prices
of the American Class A Common Stock and the EZ Class A Common Stock, as
reported on Nasdaq, were $28.25 and $36.50, respectively. No established public
trading market exists for the American Class B Common Stock or the EZ Class B
Common Stock and, accordingly, no price information is available with respect
thereto. See "Market Prices and Dividend Data".
Holders of American Voting Stock and EZ Common Stock are urged to obtain
current market quotations prior to making any decision with respect to the
Merger.
AMERICAN SUMMARY COMBINED FINANCIAL INFORMATION
The following Summary Combined Financial Information has been derived from
the consolidated financial statements of American and the financial statements
and the Selected Financial Data of the predecessor entities of American
(Stoner, Atlantic, Multi Market and Boston AM (the "American Predecessor
Entities")), which are contained in the American 10-K and the American 10-Q.
The Summary Combined Financial Information should be read in conjunction with
American's and each of the American Predecessor Entities' financial statements
and the notes thereto and with "Management's Discussion and Analysis of
Financial Condition and Results of Operations", which are contained in the
American 10-K and the American 10-Q. The following financial information
presents the combined operating results of the American Predecessor Entities
for periods prior to the date of the combination of American and the American
Predecessor Entities (the "American Reorganization") (November 1, 1993) for
1991, 1992 and the ten months ended October 31, 1993 as if such entities had
combined effective January 1, 1991 or, if later, the date of commencement of
operations of certain American Predecessor Entities. The information for the
two months ended December 31, 1993, the years ended December 31, 1994 and 1995,
as of June 30, 1996 and for the six months ended June 30, 1995 and 1996, is
based on the historical American consolidated financial statements. The Summary
Combined Financial Information presented below as of June 30, 1996 and for each
of the six months ended June 30, 1995 and 1996 is derived from the unaudited
historical American consolidated financial statements which, in the opinion of
American management, have been prepared on the same basis as the audited
historical American consolidated financial statements and include all
adjustments (consisting only of normal recurring adjustments and accruals)
necessary for a fair presentation thereof. Because generally accepted
accounting principles require the American Reorganization to be accounted for
on a purchase basis, the historical consolidated financial statements of
American incorporated by reference in this Proxy Statement cover the period
commencing with the effectiveness of the American Reorganization. The pro forma
financial information with respect to the year ended December 31, 1995, as of
June 30, 1996 and for the six months then ended included below reflects certain
adjustments, as explained elsewhere in this Proxy Statement, and therefore any
comparison of the pro forma 1995 and 1996 financial information with the
Summary Combined Financial Information appearing below and elsewhere in this
Proxy Statement for periods prior to 1995 is inappropriate. Such pro forma
financial information gives effect, among other things, to the American Pro
Forma Transactions (which term means the Hartford Transaction, the HBC Merger,
the BayCom Transaction and the Baltimore Transaction) because American has or
intends to consummate the American Pro Forma Transactions, subject to FCC
approval and expiration or earlier termination of the HSR Act waiting period.
The American Pro Forma Transactions do not include all of the American Probable
Transactions. Because it is uncertain whether the circumstances will in fact
occur under which the Austin stations option would be exercised, the pro forma
financial information does not give effect to the exercise of such option. In
addition, the pro forma financial information does not give effect to the
transactions referred to under "Business--Recent Transactions--Other
Transactions" in Appendix V because of, among other things, the absence of a
definitive purchase and sale agreement. The historical operating results for
the six months ended June 30, 1996 are not necessarily indicative of results to
be expected for the year ending December 31, 1996. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--General" in the
American 10-K and the American 10-Q.
11
<PAGE>
AMERICAN RADIO SYSTEMS CORPORATION
<TABLE>
<CAPTION>
COMBINED AMERICAN
PREDECESSOR ENTITIES(1) AMERICAN(1) AMERICAN
-------------------------- -------------------- ----------------------------------------------------------
YEAR ENDED
TEN TWO COMBINED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
YEAR ENDED MONTHS MONTHS YEAR ---------------------------- ----------------------------
DECEMBER 31, ENDED ENDED ENDED HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------------- OCTOBER DECEMBER DECEMBER ----------------- --------- ----------------- ---------
1991(2) 1992(2) 31, 1993 31, 1993 31, 1993(2) 1994(2) 1995(2) 1995(3) 1995(2) 1996(2) 1996(4)
------- ------- -------- -------- ----------- ------- -------- --------- ------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS
DATA:
Net revenues.... $42,224 $46,306 $45,010 $8,943 $53,953 $68,034 $ 97,772 $257,205 $44,514 $ 61,426 $138,242
Operating
expenses....... 37,473 36,698 37,058 6,493 43,551 50,129 67,048 167,510 32,618 45,696 94,998
Depreciation and
amortization... 6,294 4,465 5,900 1,415 7,315 9,920 12,364 58,641 6,042 4,839 25,592
Corporate
general and
administrative
expenses....... 2,581 3,657 2,897 944 3,841 2,229 3,908 4,908 1,484 2,341 2,840
------- ------- ------- ------ ------- ------- -------- -------- ------- -------- --------
Operating income
(loss)......... (4,124) 1,486 (845) 91 (754) 5,756 14,452 26,146 4,370 8,550 14,812
Net interest
expense........ (4,702) (4,370) (5,517) (801) (6,318) (7,051) (10,062) 55,122 (5,628) (5,323) 27,429
Gains (losses)
on sale of
assets, net.... (67) (964) 3,133 -- 3,133 2,345 11,544 11,544 11,559 (36) (36)
Other non-
operating
income
(expense),
net(5)......... (60) (3) 42 -- 42 (568) -- -- -- -- --
------- ------- ------- ------ ------- ------- -------- -------- ------- -------- --------
Income (loss)
before income
taxes and other
items.......... (8,953) (3,851) (3,187) (710) (3,897) 482 15,934 (17,432) 10,301 3,191 (12,653)
Provision
(benefit) for
income
taxes(6)....... 716 382 1,690 (263) 1,427 556 6,829 (2,771) 4,419 1,436 (2,935)
------- ------- ------- ------ ------- ------- -------- -------- ------- -------- --------
Income (loss)
before
extraordinary
item........... $(9,669) $(4,233) $(4,877) $ (447) $(5,324) (74) 9,105 (14,661) 5,882 1,755 (9,718)
======= ======= ======= ====== =======
Extraordinary
loss........... (1,159) (817) -- -- -- --
------- -------- -------- ------- -------- --------
Net income
(loss)......... (1,233) 8,288 (14,661) 5,882 1,755 (9,718)
Preferred Stock
and Series C
Common Stock
dividends...... (1,887) (815) (815) (815) (134) (134)
------- -------- -------- ------- -------- --------
Net income
(loss)
applicable to
common
stockholders... (3,120) 7,473 (15,476) 5,067 1,621 (9,852)
======= ======== ======== ======= ======== ========
Net income
(loss) before
extraordinary
item per common
share(7)....... $ (0.21) $ 0.65 $ (0.71) $ 0.50 $ .09 $ (.35)
======= ======== ======== ======= ======== ========
Weighted average
common shares
outstanding(8).. 9,338 12,646 21,922 10,081 19,026 28,145
======= ======== ======== ======= ======== ========
OTHER FINANCIAL
DATA:
Broadcast cash
flow(9)........ $ 4,751 $ 9,608 $ 7,952 $2,450 $10,402 $17,905 $ 30,724 $ 89,695 $11,896 $ 15,730 $ 43,244
EBITDA(9)....... 2,170 5,951 5,055 1,506 6,561 15,676 26,816 84,787 10,412 13,389 40,404
After-tax cash
flow(9)........ -- -- -- -- -- 7,959 20,654 43,165 11,109 6,460 15,740
Cash (used for)
provided by
operating
activities..... (2,008) 2,312 (531) (404) (935) 424 5,828 -- 1,527 (5,523) --
Cash (used for)
provided by
investing
activities..... (2,869) (1,632) (6,573) (197) (6,770) (92,909) (81,183) -- (25,658) (113,643) --
Cash (used for)
provided by
financing
activities..... 404 22 6,197 1,977 8,174 91,261 76,076 -- 25,901 264,452 --
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
JUNE 30, 1996
-----------------------
HISTORICAL PRO FORMA(4)
---------- ------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $149,175 $ 107,993
Notes receivable(10).................................... 1,136 1,136
Working capital......................................... 165,073 142,491
Station investment notes(5)(11)......................... 41,377 41,377
Intangible assets--net.................................. 177,885 1,091,814
Total assets............................................ 542,044 1,507,812
Long-term debt, including current portion............... 175,086 632,554
Stockholders' equity.................................... 333,464 702,565
</TABLE>
- --------
(1) The information for the Combined American Predecessor Entities includes the
results of operations of the following entities for the following periods:
Stoner and Atlantic--the two years ended December 31, 1992 and ten months
ended October 31, 1993; Multi Market--the two fiscal years ended August 31,
1992 (included in calendar years 1991 and 1992) and the sum of (a) eight-
twelfths of the fiscal year ended August 31, 1993 and (b) the historical
results for the two months ended October 31, 1993 (included in the ten
months ended October 31, 1993); and Boston AM--the one-month period ended
December 31, 1992 (in calendar year 1992) and the ten months ended October
31, 1993 (in that period). In addition, the 1993 financial information
combines the American Predecessor Entities for the ten months ended October
31, 1993 and historical American financial statements for the two month
period ended December 31, 1993.
(2) Year-to-year comparisons are significantly affected by the timing of
acquisitions and dispositions of radio stations, which have been numerous
during the periods shown. See the American 10-K and Appendix V for a
description of the acquisitions and dispositions made in 1994, 1995 and
1996, and for those made in certain earlier years.
(3) The unaudited pro forma Statement of Operations Data and Other Financial
Data for the year ended December 31, 1995 give effect to (i) the West Palm
Beach acquisition which was consummated in July 1995, (ii) the American Pro
Forma Transactions, and (iii) the Merger including the EZ Probable
Transactions as if each of the foregoing had occurred on January 1, 1995.
The term "American Pro Forma Transactions" means the BayCom Transaction,
the Hartford Transaction, the HBC Merger and the Baltimore Transaction and
does not include all of the American Probable Transactions. See "Business--
Recent Transactions" in Appendices V and VI and "Unaudited Pro Forma
Financial Statements of American and EZ".
(4) The unaudited pro forma Statement of Operations Data and Other Financial
Data for the six months ended June 30, 1996 give effect to (i) the American
Pro Forma Transactions, and (ii) the Merger including the EZ Probable
Transactions as if each of the foregoing had occurred on January 1, 1996.
The unaudited pro forma Balance Sheet Data as of June 30, 1996 gives effect
to the above, as if each of the transactions had occurred on June 30, 1996.
See "Business--Recent Transactions" in Appendices V and VI and "Unaudited
Pro Forma Financial Statements of American and EZ".
(5) Includes a provision for loss in 1994 of $0.5 million on a station
investment note receivable from an entity owning an AM radio station in
Boston, Massachusetts (together with two other stations in the Providence,
Rhode Island area). See the Consolidated Financial Statements of American
in the American 10-K.
(6) The American Predecessor Entities' provision (benefit) for income taxes for
the periods prior to 1994 represents the historical provision (benefit) for
Stoner. Atlantic was a partnership and Boston AM was an S corporation and,
accordingly, taxable income or loss flowed through to the partners and
stockholder, respectively, of those entities. Multi Market has net
operating loss carryforwards available to reduce future taxable income. As
the realization of the benefit of those losses was not assured, no income
tax benefit was recorded. Based on these circumstances, a combined tax
provision for periods prior to 1994 has not been presented.
(7) Represents net income (loss) per common share before extraordinary loss
after Preferred Stock and Series C Common Stock dividends. Net income
(loss) per common share reflects the two-for-one exchange of shares of
American Common Stock effected in June 1995 by the recapitalization of the
American capital stock described in the Notes to the Consolidated Financial
Statements in the American 10-K and under "Certain Transactions--American
Recapitalization" in Appendix V (the "American Recapitalization").
(8) For the periods prior to 1994, weighted average common shares outstanding
and per share data were not computed because the American Predecessor
Entities included a partnership. Number of shares reflects the two-for-one
exchange of shares of American Common Stock effected by the American
Recapitalization.
(9) "Broadcast cash flow" means operating income (loss) before depreciation and
amortization and corporate general and administrative expenses. "EBITDA"
means operating income (loss) before depreciation and amortization. "After-
tax cash flow" means income (loss) before extraordinary items, plus
depreciation and amortization, less stock dividends. Broadcast cash flow,
EBITDA and after-tax cash flow should not be considered in isolation from,
or as a substitute for, operating income, net income or cash flow and other
consolidated income or cash flow statement data computed in accordance with
generally accepted accounting principles or as a measure of American's
profitability or liquidity. Although these measures of performance are not
calculated in accordance with generally accepted accounting principles,
they are widely used in the broadcasting industry as a measure of a radio
company's operating performance because they assist in comparing radio
station performance on a consistent basis across radio companies without
regard to depreciation and amortization, which can vary significantly
depending on accounting methods (particularly where acquisitions are
13
<PAGE>
involved) or non-operating factors such as historical cost bases. Broadcast
cash flow also excludes the effect of corporate general and administrative
expenses, which generally do not relate directly to station performance.
(10) Represents a note receivable relating to the sale of a radio station in
Syracuse, New York in 1990. The note has a face amount of $1.0 million
and was paid in full in October 1996.
(11) Station investment notes represent American's loans to entities (or their
affiliates) owning stations as follows: Boston--$.5 million; West Palm
Beach--$9.9 million; Buffalo--$8.0 million; Dayton--$15.6 million; and
Jensen Beach--$7.4 million. Such loans have stated annual interest rates
ranging from 10%-12% or, in certain cases, American's borrowing rate
under the American Credit Agreement. Substantially all of the station
investment notes were issued in connection with the prospective
acquisitions of the related stations. Accordingly, after giving effect to
the American Probable Transactions, the only such note which would remain
outstanding would be Boston--$.5 million.
14
<PAGE>
EZ SUMMARY COMBINED FINANCIAL INFORMATION
The following Summary Combined Financial Information has been derived from
the consolidated financial statements of EZ which are contained in the EZ 10-K
and the EZ 10-Q. The Summary Combined Financial Information should be read in
conjunction with EZ's financial statements and the notes thereto and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", which are contained in the EZ 10-K and the EZ 10-Q. The
information for the years ended March 31, 1992 and 1993, the nine months ended
December 31, 1993, and the years ended December 31, 1994 and 1995, is based on
the historical EZ consolidated financial statements. The Summary Combined
Financial Information presented below as of June 30, 1996 and for each of the
six months ended June 30, 1995 and 1996, is derived from the unaudited
historical EZ consolidated financial statements which, in the opinion of EZ
management, have been prepared on the same basis as the audited historical EZ
consolidated financial statements and include all adjustments (consisting only
of normal and recurring adjustments and accruals) necessary for a fair
presentation thereof. The pro forma financial information with respect to the
year ended December 31, 1995, as of June 30, 1996 and for the six months then
ended included below reflects certain adjustments, as explained elsewhere in
this Proxy Statement, and therefore any comparison of the pro forma 1995 and
1996 financial information with the Summary Combined Financial Information
appearing below and elsewhere in this Proxy Statement for the periods prior to
1995 is inappropriate. The historical operating results for the six months
ended June 30, 1996 are not necessarily indicative of results to be expected
for the year ending December 31, 1996. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the EZ 10-K and
the EZ 10-Q.
EZ COMMUNICATIONS, INC.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------- -----------------------------
NINE
MONTHS
ENDED
YEAR ENDED DECEMBER PRO PRO
MARCH 31, 31, HISTORICAL FORMA HISTORICAL FORMA
---------------- -------- ---------------- ------- ------------------ ---------
1992 1993 1993 1994 1995 1995 1995 1996 1996
------- ------- -------- ------- ------- ------- -------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA(1):
Net revenues............ $52,894 $47,482 $40,695 $66,013 $83,668 $96,811 $ 38,364 $ 47,351 $ 46,010
Operating expenses...... 40,731 34,779 27,262 42,951 55,652 62,564 26,158 32,201 30,456
Depreciation and
amortization........... 5,059 3,652 2,726 5,388 6,757 9,781 3,277 4,292 5,240
Corporate general and
administrative
expenses............... 2,663 2,559 1,963 3,325 3,556 3,556 1,820 1,826 1,826
------- ------- ------- ------- ------- ------- -------- -------- --------
Operating income
(loss)................. 4,441 6,492 8,744 14,349 17,703 20,910 7,109 9,032 8,488
Net interest expense.... 7,947 5,526 2,754 5,313 10,799 17,953 5,343 9,634 8,748
Gains (losses) on sale
of assets, net (3,380) 547 (1,038) (860) -- -- -- -- --
Other non-operating
income (expense), net.. (1,049) (553) (251) 316 (685) (685) (278) (41) (41)
------- ------- ------- ------- ------- ------- -------- -------- --------
Income (loss) before
income taxes and other
items.................. (7,935) 960 4,701 8,492 6,219 2,272 1,488 (643) (301)
Provision (benefit) for
income taxes........... (2,650) 997 1,983 3,670 2,975 1,396 654 (804) (667)
------- ------- ------- ------- ------- ------- -------- -------- --------
Income (loss) before
extraordinary item..... (5,285) (37) 2,718 4,822 3,244 876 834 161 366
Extraordinary gain
(loss)................. -- (550) -- (1,343) (1,001) (1,001) -- -- --
------- ------- ------- ------- ------- ------- -------- -------- --------
Net income (loss)....... $(5,285) $ (587) $ 2,718 $ 3,479 $ 2,243 $ (125) $ 834 $ 161 $ 366
------- ------- ------- ------- ------- ------- -------- -------- --------
Net income (loss) before
extraordinary item per
common share........... $ (0.89) $ (0.01) $ 0.37 $ 0.54 $ 0.36 $ 0.10 $ 0.09 $ 0.02 $ 0.04
======= ======= ======= ======= ======= ======= ======== ======== ========
Weighted average common
shares outstanding..... 5,931 5,931 7,400 8,969 9,029 9,029 9,004 9,074 9,074
======= ======= ======= ======= ======= ======= ======== ======== ========
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------ -----------------------------
NINE
MONTHS
ENDED
YEAR ENDED DECEMBER PRO PRO
MARCH 31, 31, HISTORICAL FORMA HISTORICAL FORMA
---------------- -------- ---------------- ------- ------------------ ---------
1992 1993 1993 1994 1995 1995 1995 1996 1996
------- ------- -------- ------- ------- ------- -------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
Broadcast cash flow(2).. $12,163 $12,703 $13,433 $23,062 $28,016 $34,247 $ 12,206 $ 15,150 $ 15,554
EBITDA(2)............... 9,500 10,144 11,470 19,737 24,460 30,691 10,386 13,324 13,728
After-tax cash flow(2).. 3,154 3,068 6,482 11,070 10,001 10,657 4,111 4,453 5,606
Cash (used for) provided
by operating
activities............. 199 1,979 3,818 9,959 7,139 -- 357 (1,817) --
Cash (used for) provided
by investing
activities............. 1,034 6,488 (19,295) (88,305) 4,248 -- 6,625 (57,354) --
Cash (used for) provided
by financing
activities............. (3,188) (9,899) 16,680 79,070 19,165 -- (8,172) 28,572 --
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
------------------
PRO
HISTORICAL FORMA
---------- -------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 2,676 $ 2,426
Notes receivable............................................ 648 648
Working Capital............................................. 23,640 20,640
Intangible assets--net...................................... 172,068 225,399
Total assets................................................ 236,838 289,338
Long-term debt, including current portion................... 177,387 175,087
Stockholders' equity........................................ 42,015 74,895
</TABLE>
- --------
(1) Year to year comparisons are significantly affected by the timing of
acquisitions and dispositions of radio stations, which have been numerous
during the periods shown. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the EZ 10-K.
(2) "Broadcast cash flow" means operating income (loss) before depreciation and
amortization and corporate general and administrative expenses. "EBITDA"
means operating income (loss) before depreciation and amortization. "After-
tax cash flow" means income (loss) before extraordinary items, plus
depreciation and amortization, less stock dividends. Broadcast cash flow,
EBITDA and after-tax cash flow should not be considered in isolation from,
or as a substitute for operating income, net income or cash flow and other
consolidated income or cash flow statement data prepared in accordance with
generally accepted accounting principles or as a measure of EZ's
profitability or liquidity. Although these measures of performance are not
calculated in accordance with generally accepted accounting principles,
they are widely used in the broadcasting industry as a measure of a radio
company's operating performance because they assist in comparing radio
station performance on a consistent basis across radio companies without
regard to depreciation and amortization, which can vary significantly
depending on accounting methods (particularly where acquisitions are
involved) or non-operating factors such as historical cost bases. Broadcast
cash flow also excludes the effect of corporate general and administrative
expenses, which generally do not relate directly to station performance.
16
<PAGE>
COMPARATIVE HISTORICAL AND PRO FORMA EQUIVALENT COMMON SHARE DATA
The following table sets forth as of the date and for the periods indicated
selected historical per share data of American and EZ, pro forma per share data
from continuing operations of American and EZ (giving effect to the American
Probable Transactions and the Merger in the case of American, and the EZ
Probable Transactions in the case of EZ), and pro forma equivalent per share
amounts giving effect to the American Probable Transactions, the EZ Probable
Transactions and the Merger. The pro forma equivalent information of EZ
represents American's pro forma per share information multiplied by 0.9, the
exchange ratio called for in the Merger Agreement. Neither American nor EZ has
ever paid cash dividends on its Class A or Class B Common Stock. The data set
forth below should be read in conjunction with the audited and unaudited
consolidated financial statements of American and EZ, including the notes
thereto, which are incorporated by reference in this Proxy Statement. The data
should also be read in conjunction with the unaudited pro forma condensed
financial statements, including the notes thereto, included in this Proxy
Statement.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
------------------- -------------------
AMERICAN EZ AMERICAN EZ
------------------- -------------------
<S> <C> <C> <C> <C>
Historical:
Income per share................... $ 0.59 $ 0.36 $ 0.10 $ 0.02
Book value per share............... $ 5.29 $ 4.56 $ 17.39 $ 4.62
Pro Forma:
Income (loss) per share............ $ (0.71) $ 0.10 $ (0.35) $ 0.04
Book value per share............... -- -- $ 24.02 $ 8.23
Pro Forma Equivalent:
Loss per share..................... $ (0.64) $ (0.32)
Book value per share............... -- $ 21.62
</TABLE>
17
<PAGE>
RISK FACTORS
The following risk factors may affect the value of the American Class A
Common Stock and therefore should be considered by the American Stockholders
and the EZ Stockholders in evaluating whether to approve the Merger and, in
the case of the American Stockholders, to approve the Charter Amendment, and
in the case of the EZ Stockholders, to become holders of American Class A
Common Stock. These factors should be considered in conjunction with the other
information included and incorporated by reference in this Proxy Statement.
FINANCIAL LEVERAGE; DEBT SERVICE REQUIREMENTS
At June 30, 1996, American had approximately $176.5 million in long-term
debt outstanding. After giving effect to the American Probable Transactions
but not the Merger (and the Merger), as if each of them had occurred on June
30, 1996, American's long-term debt outstanding would have been approximately
$414.4 million ($701.9 million), which would have comprised approximately
51.0% (50.0%) of American's total capitalization, and its combined long-term
debt and obligations relating to the Convertible Preferred Stock would have
been $551.9 million ($839.4 million), which would have comprised approximately
68.0% (59.8%) of American's total capitalization. Had the American Probable
Transactions but not the Merger (and the Merger), as well as the acquisitions
and dispositions consummated during 1995 or thereafter, occurred on January 1,
1995, pro forma net interest expense and net distribution requirements on the
Convertible Preferred Stock for the year ended December 31, 1995 would have
been approximately $46.3 million ($73.1 million).
In order to finance acquisitions of radio stations and for general corporate
purposes, American has borrowed and expects to continue to borrow under the
American Credit Agreement and has issued an aggregate of $175.0 million
principal amount of the American Senior Notes. As part of the Merger, American
will, in the case of the Direct Merger, assume EZ's obligations with respect
to $150.0 million principal amount of the EZ Senior Notes and refinance the EZ
Credit Facility as part of the American Credit Agreement. In the case of the
Subsidiary Merger, the EZ Credit Facility and the EZ Senior Notes will become
the obligations of American Subsidiary. To the extent the holders of the EZ
Senior Notes elect to exercise their right to require American (or American
Subsidiary) to purchase such notes as a result of the Change of Control (as
defined in the EZ Senior Note Indenture) of EZ, American (or American
Subsidiary) will be required to borrow the necessary funds under the American
Credit Agreement (or the EZ Credit Facility). In connection with the
consummation of the Merger, American expects to increase the maximum amount
which may be borrowed under the American Credit Agreement (or, in the event of
the Subsidiary Merger, the Credit Agreements) to $1.0 billion. A substantial
portion of American's cash flow from operations is required for debt service.
American believes that cash flow from operations will be sufficient to meet
debt service requirements for interest and scheduled payments of principal
under the Credit Agreements and the Senior Notes. However, American's leverage
could make it vulnerable to a downturn in the operating performance of its
radio stations or a downturn in economic conditions. If such cash flow were
not sufficient to meet such debt service requirements or payments of
principal, American could be required to sell equity securities, refinance its
obligations or dispose of one or more of its stations in order to make
scheduled payments. There can be no assurance that American would be able to
effect any such transactions on favorable terms. See "Management's Discussion
and Analysis of Financial Conditions and Results of Operations--Liquidity and
Capital Resources" in the American 10-K.
Borrowings under the Credit Agreements bear interest at variable rates.
Therefore, increases in interest rates on borrowings under the Credit
Agreements would adversely affect American's income and cash flow otherwise
available for principal and interest requirements and the ability of American
to implement fully its strategic plan. Although American intends to manage its
exposure to fluctuating interest rates by entering into interest rate
protection and similar agreements, including interest rate swaps, collars and
caps (all of the foregoing agreements being forms of derivatives) with respect
to a portion of the borrowings thereunder, there can be no assurance that
American will continue to be able to enter into such agreements.
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RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The American Senior Note Indenture and the EZ Senior Note Indenture contain
certain restrictive covenants, including limitations on (i) the incurrence of
indebtedness and the issuance of preferred stock by American (and American
Subsidiary in the case of the Subsidiary Merger) and the Restricted
Subsidiaries (as defined in the Senior Note Indentures); (ii) the payment of
dividends and the making of restricted payments; (iii) transactions with
affiliates; (iv) the existence of liens; (v) the disposition of proceeds of
asset sales; (vi) Asset Swaps (as defined in the Senior Note Indentures);
(vii) the making of guarantees by American and the Restricted Subsidiaries (or
Subsidiaries, in the case of the EZ Senior Note Indenture); (viii) transfers
and issuances of stock of the Restricted Subsidiaries (or Subsidiaries, in the
case of the EZ Senior Note Indenture); (ix) the imposition of restrictions on
certain payments by the Restricted Subsidiaries (or Subsidiaries, in the case
of the EZ Senior Note Indenture); (x) investment in Unrestricted Subsidiaries
(in the case of and as defined in the American Senior Note Indenture); and
(xi) certain mergers and sales of assets. As noted above, the EZ Senior Note
Indenture will also require American (or American Subsidiary in the event of
the Subsidiary Merger) to offer to purchase all of the EZ Senior Notes at 101%
of their principal amount, upon consummation of the Merger. In addition, the
Credit Agreements contain certain other and more restrictive covenants than
those contained in the Senior Note Indentures, including limitations on the
aggregate size of future acquisitions undertaken without lender consent,
requirements that certain conditions be satisfied prior to consummation of any
future acquisitions and limitations on the amount of capital expenditures
permitted in future years without lender consent. These covenants may
adversely affect American's ability to pursue its acquisition strategy. The
Credit Agreements also require American (and American Subsidiary in the case
of the Subsidiary Merger) to maintain specific financial ratios and to satisfy
certain financial condition tests. The ability of American (or the American
Subsidiary) to meet these financial ratios and financial condition tests can
be affected by events beyond its control, and there can be no assurance that
American (or the American Subsidiary) will meet those tests. The breach of any
of these covenants could result in a default under either Credit Agreement,
either Senior Note Indenture, or all of them. In the event of a default under
either Credit Agreement or either Senior Note Indenture, the lenders or the
noteholders, as the case may be, could seek to declare all amounts outstanding
under the applicable Credit Agreement or Senior Note Indenture, as the case
may be, together with accrued and unpaid interest, if any, to be immediately
due and payable. Under such circumstances, cross default provisions would
probably result in the amounts outstanding under all such instruments becoming
due and payable. If American (or the American Subsidiary) were unable to repay
those amounts, the lenders under the applicable Credit Agreement could proceed
against the collateral granted to them to secure that indebtedness.
Substantially all of the assets of American and EZ are pledged as collateral
under the applicable Credit Agreement. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and the Notes to the Consolidated Financial Statements of
American and of EZ in the American 10-K and the EZ 10-K, respectively.
COMPETITION
Radio broadcasting is a highly competitive business. Each of American's and
EZ's radio stations competes for audience share and advertising revenue
directly with other radio stations, as well as with other media such as
billboards, newspapers, television, compact discs, music videos and mobile
telephones within their respective markets. There are typically other well-
capitalized firms competing in the same geographic markets as American and EZ,
many of which have substantial financial resources. With the elimination of
any restrictions on the number of radio stations which may be owned nationally
by a single operator and the liberalization of local ownership restrictions
effected by the Telecommunications Act, the radio industry is experiencing a
consolidation of ownership, as a result of which competition may intensify as
companies with substantial resources emerge.
The financial success of each of American's and EZ's radio stations is
dependent principally upon each such station's share of the overall
advertising revenue within its geographic market, its promotion and other
expenses incurred to obtain that revenue and the economic health of the
geographic market. Radio advertising revenues are, in turn, highly dependent
upon audience share. Radio station operators are subject to the possibility of
another station changing programming formats to compete directly for listeners
and advertisers or launching an aggressive promotional campaign in support of
an already existing competitive format. If a competitor were
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to attempt to compete in either of these fashions, the broadcast cash flow of
American's or EZ's affected station could decrease due to increased promotion
and other expenses and/or lower advertising revenues resulting from lower
ratings. There can be no assurance that any of American's or EZ's radio
stations will be able to maintain or increase its current audience ratings and
revenue market share. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the American 10-K and the EZ 10-K and
"Business--Operating Philosophy" and "--Advertising Sales" in each of Appendix
V and VI.
In addition to management experience, factors which may materially influence
a station's competitiveness include the station's rank in its market, its
signal strength, audience characteristics, local program acceptance and the
characteristics of other stations in the market area.
Radio broadcasting is also subject to competition from new media
technologies that are being developed or introduced, such as the delivery of
audio programming by cable television systems or the introduction of digital
audio broadcasting ("DAB"). DAB may deliver by satellite to nationwide and
regional audiences, multi-channel, multi-format digital radio services with
sound quality equivalent to compact discs. Another possible competitor to
traditional radio is In Band On Channel ("IBOC") digital radio. IBOC could
provide multi-channel, multi-format digital radio services in the same
bandwidth currently occupied by traditional AM and FM radio services. American
cannot predict the effect, if any, that new technologies may have on the radio
broadcasting industry. See "Business--Federal Regulation of Radio
Broadcasting" in Appendix V.
For information concerning additional potential competition from other
media, entertainment and telecommunications companies which might be able to
enter the radio broadcasting industry in the event of legislative or
regulatory change, see "--Regulatory Matters" below.
CONTROL BY THE PRINCIPAL STOCKHOLDERS; RESTRICTIONS ON CHANGE OF CONTROL
As of October 1, 1996, Steven B. Dodge, Chairman of the Board, President and
Chief Executive Officer, and Thomas H. Stoner, Chairman of the Executive
Committee of the Board, together with their affiliates (the "American
Principal Stockholders"), owned approximately 49.0% of the combined votes of
the American Voting Stock. After giving effect to the consummation of the
Merger, as of such date, the American Principal Stockholders would have owned
approximately 43.4% of such combined votes. Accordingly, the American
Principal Stockholders may, in effect, be able to control the vote on all
matters submitted to a vote of the holders of the American Common Stock,
except with respect to (i) the election of two independent directors, (ii)
those matters which the American Restated Certificate or applicable law
requires a 66 2/3% vote, and (iii) those matters requiring a class vote by
law. See "The Special Meetings--Ownership of Securities--American." Control by
the American Principal Stockholders may have the effect of discouraging
certain types of transactions involving an actual or potential change of
control of American, including transactions in which the holders of American
Class A Common Stock might otherwise receive a premium for their shares over
the then-current market prices. See "Description of American Capital Stock".
The American Credit Agreement, the American Senior Note Indenture and the
Convertible Preferred Stock, as well as the agreement relating to the
broadcast of Boston Red Sox games, restrict, and the EZ Senior Note Indenture
will restrict, certain changes in control of American. In addition, the
Communications Act of 1934, as amended, including by the Telecommunications
Act (the "Communications Act"), and the rules of the FCC require the prior
consent of the FCC to any change of control of American. See "Business--
Federal Regulation of Radio Broadcasting" in Appendix V.
In addition to the stock ownership by the American Principal Stockholders
and the FCC restrictions referred to above, certain provisions of the American
Restated Certificate and Delaware law may have the effect of discouraging a
third party from making an acquisition proposal for American and may thereby
inhibit a change of control of American. See "Description of American Capital
Stock--Preferred Stock" and "--Delaware Business Combination Provisions".
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DEPENDENCE ON KEY PERSONNEL
American's and EZ's business is partially dependent upon the performance of
certain key individuals, including its executive officers, station general
managers and on-air announcers who are well recognized and established in the
markets in which American and EZ conduct business. Neither American nor EZ has
entered into employment agreements with any of its executive officers (other
than, in the case of EZ, Messrs. Kellar and Box whose agreements are intended
to be terminated), but each has entered into employment agreements, which
contain non-compete provisions, with certain of its station general managers
and high-profile on-air announcers. As additional incentive, certain of
American's general managers and executive officers have been granted options
to purchase shares of American Common Stock which are subject to vesting
provisions over a five year period and EZ has granted stock options to its
personnel of a similar type. However, there can be no assurance that American
(or EZ prior to the Merger) will be able to retain such officers, managers or
announcers, the loss of whom could have a material adverse effect upon
American (or EZ prior to the Merger), or that American (or EZ prior to the
Merger) will be able to prevent them from competing with American (or EZ prior
to the Merger) in the event of their departure. American and EZ do not
maintain key man life insurance of any significance on the lives of any of
such officers, managers or announcers.
ACQUISITION STRATEGY
Since January 1, 1996, American has entered into or consummated acquisition
agreements, exclusive of the Merger Agreement and station asset swaps, for 49
stations for an aggregate consideration of approximately $673.6 million.
American intends to continue its active acquisition strategy as described
elsewhere in this Proxy Statement. Inherent in such a strategy are certain
risks, such as increasing leverage and debt service requirements, combining
disparate company cultures and facilities, and operating stations in many
geographically diverse markets, which could adversely affect ratings and
revenues in a given market. Certain of these risks may be increased to the
extent that American's future acquisitions are in larger markets and/or
involve multiple stations in several markets, as does the EZ Merger.
Accordingly, there can be no assurance that one or more of American's past or
future acquisitions may not have an adverse effect on its business.
The Credit Agreements require the approval of the lenders to acquisitions
above a certain size and, in addition, each of them and each Senior Note
Indenture contain borrowing limits. Although all of the acquisitions
constituting a part of the American Probable Transactions which require such
approval have received the required lender approvals, there can be no
assurance that the lenders will consent to any particular future acquisition
that American desires to make or, since American may, from time to time, be at
or near its borrowing limits, to increased borrowing levels, and this may
inhibit the ability of American to implement its acquisition strategy. The
Senior Note Indentures also contain restrictions which, under certain
circumstances, could impair the ability of American (or, in the case of the
Subsidiary Merger, of American Subsidiary) to make acquisitions. Moreover, to
the extent that acquisitions in the future are financed, either in whole or in
part, through the issuance of American Common Stock or securities convertible
into or entitling their holders to purchase American Common Stock, existing
stockholders may suffer a dilution in their holdings.
American competes and will continue to compete with many other buyers, both
radio operators and financial institutions, for the acquisition of radio
stations. Certain of those competitors have greater financial and other
resources than those of American. In addition, if the prices sought by sellers
of radio stations continue to rise, American may find fewer acceptable
acquisition opportunities. For information concerning additional potential
competition from other media, entertainment and telecommunication companies
for acquisitions, see "Business--Federal Regulation of Radio Broadcasting" in
Appendix V.
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American may not be able to implement its acquisition strategy because of
the application of FCC cross ownership rules, cross-interest policy or other
rules and policies. These rules and policies could prevent American from
making future acquisitions if the American Principal Stockholders or certain
other stockholders or officers and directors also have or acquire attributable
interests in broadcast or other media properties. It is not possible to know,
however, whether future legislative or regulatory action may change applicable
ownership rules or policies or, if it does, whether such changes would make
those limitations more or less restrictive. See "Business--Acquisition
Strategy" and "--Federal Regulation of Radio Broadcasting" in Appendices V and
VI.
ANTITRUST MATTERS
As a result of the recent consolidation of ownership in the radio broadcast
industry, the Antitrust Division has been giving closer scrutiny to
acquisitions in the industry, including some of those of EZ and American. The
consummation of certain acquisitions, including the Merger and some of the
American Probable Transactions and some of the EZ Probable Transactions, are
subject to notification filing requirements, applicable waiting periods and
possible review by the Antitrust Division of the Justice Department (the
"Antitrust Division") or the Federal Trade Commission ("FTC") under the HSR
Act. See "The Merger Agreement--Regulatory Matters--Antitrust." The Antitrust
Division has issued Second Requests for additional information in connection
with American Probable Transactions in Rochester and Sacramento. See
"Business--Recent Transactions--Pending Acquisitions and Dispositions--
Rochester" and "--Sacramento" in Appendix V. The Antitrust Division has also
issued a Civil Investigative Demand to both EZ and American in connection with
the EZ Probable Transactions in Charlotte. See "Business--Recent
Transactions--Pending Acquisitions and Dispositions--Philadelphia-Charlotte
Station Asset Exchange and Purchase" in Appendix VI. American and EZ have been
engaged in ongoing negotiations with the Antitrust Division to attempt to
reach satisfactory resolutions and to address the Antitrust Division's
concerns regarding the effect of the proposed transactions in the respective
markets. In October 1996, American entered into a consent decree (the
"Rochester Consent Decree") with the Antitrust Division with respect to the
American Probable Transactions in Rochester resulting in a negotiated
settlement with the Antitrust Division which modified the Rochester
transaction. See "Business--Recent Transactions--Pending Acquisitions and
Dispositions--Rochester." in Appendix V. Antitrust Division review of certain
transactions has caused, and may continue to cause, delays in anticipated
consummations of certain transactions and, in some cases, may result in
negotiated modifications of the proposed transactions. Such delays and
modifications could have an adverse effect on American or EZ and, although
unlikely, may result in the abandonment of some of these otherwise attractive
transactions.
Further, as part of its increased scrutiny of radio industry transactions,
the Antitrust Division is currently reviewing its internal guidelines for
antitrust review of other widespread radio broadcasting agreements, including
local marketing agreements ("LMAs"), time brokerage agreements ("TBAs") and
certain joint sales agreements. The Antitrust Division has informally
contacted industry representatives to express certain concerns regarding LMAs
and TBAs and has suggested that radio broadcasting companies file notification
and obtain clearance under the HSR Act prior to commencing certain LMAs or
TBAs. As a result of these informally expressed concerns, American and EZ,
respectively, have instituted internal policies to obtain any required HSR
clearance prior to commencing any future LMAs or TBAs. See "Business--Federal
Regulation of Radio Broadcasting--Local Marketing Agreements" in Appendix V
for a description of local marketing agreements and time brokerage agreements.
The Antitrust Division has also informally expressed to American that it is
investigating whether the terms of certain joint sales agreements ("JSA") in
certain markets may violate antitrust laws. A JSA involves the purchase by a
third party of all the commercial advertising time of a particular radio
station for resale by the third party directly to advertisers. As part of the
proposed Rochester Consent Decree involving Rochester stations, American has
agreed to terminate a JSA in that market. American and EZ have LMAs, TBAs and
JSAs currently in effect. Although American and EZ believe that each of their
respective LMAs, TBAs and JSAs are in compliance with the antitrust laws, the
Antitrust Division or others could take action under the antitrust laws to
enjoin or otherwise challenge such arrangements. There can be no assurance
that such a challenge will not be made or, if made, will not be successful.
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REGULATORY MATTERS
The radio broadcasting industry is subject to extensive and changing
regulation governing, among other things, technical operations, ownership,
business and employment practices, and certain types of program content
(including indecent and obscene program material). The FCC regulates radio
broadcast stations pursuant to the Communications Act. The Communications Act
permits the operation of radio broadcast stations only in accordance with a
license issued by the FCC upon a finding that the grant of a license would
serve the public interest, convenience and necessity. The Communications Act
provides for the FCC to exercise its licensing authority to provide a fair,
efficient and equitable distribution of broadcast service through out the
United States. Among other things, the FCC assigns frequency bands for radio
broadcasting; determines the particular frequencies, locations and operating
power of radio broadcast stations; issues, renews, revokes and modifies radio
broadcast station licenses; regulates transmitting equipment used by radio
broadcast stations; adopts and implements regulations and policies that
directly or indirectly affect the ownership, operation, program content and
employment and business practices of radio broadcast stations, and has the
power to impose penalties for violations of its rules and the Communications
Act.
The FCC also regulates the ownership, operation and sale of radio broadcast
stations, including those licensed to American and EZ. The Communications Act
prohibits the assignment of an FCC license, or the transfer of control of an
FCC licensee, without the prior approval of the FCC. In determining whether to
grant requests for consents to assignments or transfers, and in determining
whether to grant or renew a radio broadcast license, the FCC considers a
number of factors pertaining to the legal and other qualifications of the
licensee (and any proposed licensee), including restrictions on foreign
ownership, compliance with FCC media ownership rules, licensee "character" and
compliance with the Anti-Drug Abuse Act of 1988, which allows courts to
disqualify individuals from the benefits of federal licenses as a penalty for
certain drug-related offenses.
The Congress and the FCC have had under consideration, and may in the future
consider and adopt, new laws, regulations and policies regarding a wide
variety of matters that could, directly or indirectly, affect the operation,
ownership and profitability of American's radio broadcast stations, result in
the loss of audience share and advertising revenues for American's radio
broadcast stations or affect its ability to acquire additional radio broadcast
stations or other such acquisitions. American cannot predict whether or when
any proposed changes will be adopted nor can it predict what other matters
might be considered in the future, nor can it judge in advance the impact, if
any, the implementation of any of these proposals or changes might have on its
business.
See "Business--Federal Regulation of Radio Broadcasting" in Appendix V.
NO DIVIDENDS
American intends to retain future earnings, if any, for use in its business
and does not anticipate paying any cash dividends on shares of American Common
Stock in the foreseeable future. In addition, American is currently restricted
under the terms of the American Credit Agreement and the American Senior Note
Indenture and will, in the case of the Direct Merger, be restricted under the
terms of the EZ Senior Note Indenture from paying cash dividends on its Common
Stock unless certain financial tests are met and then only in accordance with
a formula based on cash flow. In the event of the Subsidiary Merger, American
Subsidiary will be restricted in its ability to pay cash dividends to American
by the terms of the EZ Credit Facility and the EZ Senior Note Indenture. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" in the American 10-K and the EZ
10-K and "Description of American Capital Stock--Common Stock--Dividends".
SHARES ELIGIBLE FOR FUTURE SALE; POSSIBLE ADVERSE EFFECT ON FUTURE MARKET
PRICES
Sales in the public market of substantial amounts of shares of American
Class A Common Stock (including shares issued upon the exercise of outstanding
options or upon conversion of the Convertible Preferred Stock), or the
perception that such sales could occur, could depress prevailing market prices
for the American Class A Common Stock. Approximately 10,030,000 shares of
American Common Stock have been issued or sold in
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transactions which were not registered under the Securities Act ("Unregistered
Shares"). Substantially all of the Unregistered Shares are eligible for sale
in the open market under Rule 144. Moreover, the holders of substantially all
of the Unregistered Shares are parties to a registration rights agreement with
American pursuant to which they are entitled to require American to register
their shares under the Securities Act for sale publicly at any time, if
holders of not less than $10 million ($5 million in the case of a registration
on Form S-3 which American is eligible to file) in market value of American
Common Stock request such registration. Those holders also have so-called
"piggy-back" registration rights which permit such holders to require American
to register their shares under certain circumstances. Approximately 3,235,000
additional shares of American Class A Common Stock are issuable upon
conversion of the Convertible Preferred Stock; holders of such stock do not
have any registration rights. Sales of significant numbers of shares of
American Class A Common Stock received by the EZ Stockholders upon
consummation of the Merger could also adversely affect the market price of the
American Class A Common Stock.
American can make no prediction as to the effect, if any, that sales of
additional shares of American Class A Common Stock or the availability of
shares for future sale will have on the market price of the American Class A
Common Stock. Such sales also may make it more difficult for American to sell
equity securities or equity-related securities in the future at a time and
price that American deems appropriate.
POSSIBLE VOLATILITY OF STOCK PRICE
Factors such as market conditions in the radio industry may have a
significant impact on the market price of the American Class A Common Stock.
Further, the stock market has experienced volatility that affects the market
prices of companies in ways often unrelated to the operating performance of
such companies. These market fluctuations may adversely affect the market
price of the American Class A Common Stock.
INTERESTS OF CERTAIN EZ PERSONS IN THE MERGER
In considering the recommendation of the EZ Board with respect to the
Merger, EZ Stockholders should be aware that certain members of EZ's
management and the EZ Board may have certain interests in the Merger that may
present them with actual or potential conflicts of interest. See "The Merger
Agreement--Interest of Certain Persons in the Merger".
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THE SPECIAL MEETINGS
MATTERS TO BE DISCUSSED AT THE SPECIAL MEETINGS
American. At the American Special Meeting or any adjournments or
postponements thereof, holders of shares of American Voting Stock will be
asked to approve and adopt the following proposals: (i) the approval and
adoption of the Merger Agreement; and (ii) the approval and adoption of the
Charter Amendment.
THE AMERICAN BOARD HAS UNANIMOUSLY APPROVED AND ADOPTED THE MERGER AGREEMENT
AND THE CHARTER AMENDMENT, BELIEVES THAT APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AND THE CHARTER AMENDMENT ARE ADVISABLE AND IN THE BEST INTERESTS OF
AMERICAN AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE AMERICAN
STOCKHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND
THE CHARTER AMENDMENT.
EZ. At the EZ Special Meeting or any adjournments or postponements thereof,
holders of shares of EZ Common Stock will be asked to approve and adopt the
Merger Agreement.
THE EZ BOARD HAS UNANIMOUSLY APPROVED AND ADOPTED THE MERGER AGREEMENT,
BELIEVES THAT APPROVAL AND ADOPTION OF THE MERGER AGREEMENT IS IN THE BEST
INTERESTS OF EZ AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT EZ
STOCKHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
RECORD DATES; STOCK ENTITLED TO VOTE; QUORUM
American. The American Record Date for the determination of shares of those
holders of American Voting Stock entitled to notice of, and to vote at, the
American Special Meeting is November 4, 1996. Only holders of record of shares
of American Voting Stock at the close of business on the American Record Date
will be entitled to notice of, and to vote at, the American Special Meeting or
any adjournments or postponements thereof. As of the American Record Date,
there were outstanding . shares of American Class A Common Stock held by .
holders of record, and . shares of American Class B Common Stock held by .
holders of record. The holders of American Class A Common Stock are entitled
to one vote per share, and the holders of American Class B Common Stock are
entitled to ten votes per share.
The presence in person or by proxy of shares representing a majority of
votes ( . votes) entitled to be cast by holders of American Voting Stock
issued and outstanding and entitled to vote as of the American Record Date is
required to constitute a quorum for the transaction of business at any meeting
of stockholders. Abstentions and broker non-votes are included in the
determination of the number of shares of American Voting Stock present and
voting.
EZ. The EZ Record Date for the determination of shares of those holders of
EZ Common Stock entitled to notice of, and to vote at, the EZ Special Meeting
is November 4, 1996. Only holders of record of shares of EZ Common Stock at
the close of business on the EZ Record Date will be entitled to notice of, and
to vote at, the EZ Special Meeting or any adjournments or postponements
thereof. As of the EZ Record Date, there were outstanding 6,402,824 shares of
EZ Class A Common Stock held by 146 holders of record and 2,697,897 shares of
EZ Class B Common Stock held by two holders of record. The holders of EZ Class
A Common Stock are entitled to one vote per share, and the holders of EZ Class
B Common Stock are entitled to ten votes per share.
The presence in person or by proxy of shares representing a majority of
votes of the EZ Class A Common Stock (3,201,413 votes) and of the EZ Class B
Common Stock (13,489,486 votes) entitled to be cast by holders of EZ Common
Stock issued and outstanding and entitled to vote as of the EZ Record Date is
required to constitute a quorum for the transaction of business at any meeting
of stockholders. Abstentions and broker non-votes are included in the
determination of the number of shares of EZ Common Stock present and voting.
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REQUIRED VOTES
American. The affirmative vote of a majority of the votes ( . votes) of
holders of the outstanding shares of the American Voting Stock, voting
together as a class, is required for approval and adoption of the Merger
Agreement. The affirmative vote of (i) 66 2/3% of the votes ( . votes) of
holders of the outstanding shares of the American Voting Stock, voting
together as a class, is required for approval and adoption of the Charter
Amendment. Abstentions and broker non-votes are considered present for
purposes of determining a quorum. Abstentions and broker non-votes will have
the same effect as a vote against the Merger Agreement and the Charter
Amendment.
In connection with the execution of the Merger Agreement, the American
Principal Stockholders who are entitled to exercise voting power with respect
to an aggregate of 68,500 shares of American Class A Common Stock and
2,673,662 shares of American Class B Common Stock, which in the aggregate
represent approximately 43.0% of the voting power of the American Voting
Stock, and EZ entered into the American Voting Agreement, pursuant to which
such American stockholders agreed, among other things, to vote all of their
shares of American Voting Stock (and granted to EZ their proxies to vote all
such shares): (i) in favor of the adoption of the Merger Agreement, (ii)
against any action or agreement that would result in a breach in any material
respect of any covenant, representation or warranty or any other obligation of
American under the Merger Agreement, and (iii) against any proposal for any
merger, consolidation, recapitalization, sale of assets, business combination,
or other material change in American's corporate structure or business that is
inconsistent with or that would, or is reasonably likely to, directly or
indirectly, impede, interfere with or attempt to discourage the Merger or any
other transaction contemplated by the Merger Agreement.
Each American Proposal shall be voted upon separately by the American
Stockholders entitled to vote at the American Special Meeting. Consummation of
the Merger is conditioned upon adoption of both the Merger Agreement and the
Charter Amendment by the American Stockholders. American intends to file the
Charter Amendment under the DGCL, if approved by the American Stockholders,
even if the Merger is not consummated.
EZ. The affirmative vote of a majority of the votes cast at the EZ Special
Meeting by holders of each class of the outstanding shares of EZ Class A
Common Stock and EZ Class B Common Stock, each voting separately as a class,
is required for approval and adoption of the Merger Agreement. Abstentions and
broker non-votes are considered present for purposes of determining a quorum.
Abstentions and broker non-votes will have the same effect as a vote against
the Merger Agreement.
In connection with the execution of the Merger Agreement, Messrs. Kellar and
Box who are entitled to exercise voting power with respect to an aggregate of
2,697,897 shares of EZ Class B Common Stock, which in the aggregate represent
100% of the voting power of the EZ Class B Common Stock, and American entered
into the EZ Voting Agreement, pursuant to which such EZ stockholders agreed,
among other things, to vote all of their shares of EZ Common Stock (and
granted to American their proxies to vote all such shares): (i) in favor of
the adoption of the Merger Agreement, (ii) against any action or agreement
that would result in a breach in any material respect of any covenant,
representation or warranty or any other obligation of EZ under the Merger
Agreement, and (iii) against any proposal for any merger, consolidation,
recapitalization, sale of assets, business combination, or other material
change in EZ's corporate structure or business that is inconsistent with or
that would, or is reasonably likely to, directly or indirectly, impede,
interfere with or attempt to discourage the Merger or any other transaction
contemplated by the Merger Agreement. With respect to the Merger, the
affirmative vote of a majority of the EZ Class B Common Stock is controlled by
Messrs. Kellar and Box because they collectively own 100% of the voting power
of the EZ Class B Common Stock and each has entered into the EZ Voting
Agreement. See "--Ownership of Securities--EZ" and "Ancillary Agreements--
Voting Agreements." The affirmative vote of a majority of the EZ Class A
Common Stock is not affected by the EZ Class B Common Stock held by Messrs.
Kellar and Box and the EZ Voting Agreement.
Consummation of the Merger is conditioned upon adoption of the Merger
Agreement by the EZ Stockholders.
26
<PAGE>
SOLICITATION AND VOTING OF PROXIES
American. American Stockholders of record on the American Record Date are
entitled to cast their votes, in person or by properly executed proxy, at the
American Special Meeting. All shares represented at the American Special
Meeting by properly executed proxies received prior to or at the American
Special Meeting and not properly revoked will be voted at the American Special
Meeting in accordance with the instructions indicated in such proxies. If no
instructions are indicated, such proxies will be voted FOR approval of the
American Proposals. The American Board does not know of any matters, other
than the matters described in the Notice of American Special Meeting, that
will come before the American Special Meeting.
If a quorum is not present at the time the American Special Meeting is
convened, or if for any other reason American believes that additional time
should be allowed for the solicitation of proxies or for the satisfaction of
conditions to the Merger or the transactions contemplated thereby, American
may adjourn the American Special Meeting with a vote of the holders of a
majority of the voting power represented by the American Voting Stock present
at such meeting. If American proposes to adjourn the American Special Meeting,
the persons named in the enclosed proxy card will vote all shares for which
they have voting authority in favor of such adjournment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted in the following manner. Proxies may
be revoked by (i) filing with the Secretary of American, at or before the
American Special Meeting, a written notice of revocation bearing a date later
than the date of the proxy, (ii) duly executing a subsequent proxy relating to
the same shares and delivering it to the Secretary of American at or before
the American Special Meeting, or (iii) attending the American Special Meeting
and voting in person (although attendance at the American Special Meeting will
not in and of itself constitute revocation of a proxy). Any written notice
revoking a proxy should be sent to American Radio Systems Corporation, 116
Huntington Avenue, Boston, Massachusetts 02116, Attention: Michael B. Milsom,
Vice President and General Counsel.
Proxies are being solicited by and on behalf of the American Board. All
expenses of this solicitation, including the cost of preparing and mailing
this Proxy Statement (except for printing costs, which will be shared with
EZ), will be borne by American. In addition to solicitation by use of the
mails, proxies may be solicited by directors, officers and employees of
American in person or by telephone, telegram or other means of communications.
Such directors, officers and employees will not be additionally compensated,
but may be reimbursed for out-of-pocket expenses in connection with such
solicitation. Arrangements will be made with custodians, nominees and
fiduciaries for forwarding of proxy solicitation materials to beneficial
owners of American Voting Stock held of record by such persons, and American
may reimburse such custodians, nominees and fiduciaries for reasonable
expenses incurred in connection therewith.
EZ. EZ Stockholders of record on the EZ Record Date are entitled to cast
their votes, in person or by properly executed proxy, at the EZ Special
Meeting. All shares represented at the EZ Special Meeting by properly executed
proxies received prior to or at the EZ Special Meeting and not properly
revoked will be voted at the EZ Special Meeting in accordance with the
instructions indicated in such proxies. If no instructions are indicated, such
proxies will be voted FOR approval and adoption of the Merger Agreement. The
EZ Board does not know of any matters, other than the matters described in the
Notice of EZ Special Meeting, that will come before the EZ Special Meeting.
If a quorum is not present at the time the EZ Special Meeting is convened,
or if for any other reason EZ believes that additional time should be allowed
for the solicitation of proxies or for the satisfaction of conditions to the
Merger or the transactions contemplated thereby, EZ may adjourn the EZ Special
Meeting with a vote of the holders of a majority of the voting power
represented by the EZ Common Stock present at such meeting. If EZ proposes to
adjourn the EZ Special Meeting, the persons named in the enclosed proxy card
will vote all shares for which they have voting authority in favor of such
adjournment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted in the following manner. Proxies may
be revoked by (i) filing with the Secretary of EZ, at or before the EZ Special
Meeting, a written notice of revocation bearing a date later than the date of
the proxy, (ii) duly executing a subsequent proxy relating to the same shares
and delivering it to the Secretary of EZ at or before the
27
<PAGE>
EZ Special Meeting, or (iii) attending the EZ Special Meeting and voting in
person (although attendance at the EZ Special Meeting will not in and of
itself constitute revocation of a proxy). Any written notice revoking a proxy
should be sent to EZ Communications, Inc., 10800 Main Street, Fairfax,
Virginia 22030, Attention: Ronald H. Peele, Jr., Vice President, Secretary and
Treasurer.
Proxies are being solicited by and on behalf of the EZ Board. All expenses
of this solicitation, including the cost of preparing and mailing this Proxy
Statement (except for printing costs, which will be shared with American),
will be borne by EZ. In addition to solicitation by use of the mails, proxies
may be solicited by directors, officers and employees of EZ in person or by
telephone, telegram or other means of communications. Such directors, officers
and employees will not be additionally compensated, but may be reimbursed for
out-of-pocket expenses in connection with such solicitation. Arrangements will
be made with custodians, nominees and fiduciaries for forwarding of proxy
solicitation materials to beneficial owners of EZ Class A Common Stock held of
record by such persons, and EZ may reimburse such custodians, nominees and
fiduciaries for reasonable expenses incurred in connection therewith.
OWNERSHIP OF SECURITIES
American. The following table provides information as of October 1, 1996,
with respect to the shares of American Common Stock beneficially owned by (i)
each person known by American to own more than 5% of the outstanding American
Common Stock, (ii) each director of American, (iii) each executive officer
required to be identified in the Summary Compensation Table of American, and
(iv) by all directors and executive officers of American as a group. The
number of shares beneficially owned by each director or executive officer is
determined according to the rules of the Commission, and the information is
not necessarily indicative of beneficial ownership for any other purpose.
Under such rules, beneficial ownership includes any shares as to which the
individual or entity has sole or shared voting power or investment power and
also any shares which the individual or entity has the right to acquire within
sixty days of October 1, 1996 through the exercise of an option, conversion
feature or similar right. Except as noted below, each holder has sole voting
and investment power with respect to all shares of American Common Stock
listed as owned by such person or entity.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK BENEFICIALLY OWNED(1)
-----------------------------------------------
PERCENT OF
PERCENT PERCENT PERCENT OF TOTAL
OF OF COMMON VOTING
NUMBER CLASS A CLASS B STOCK POWER
--------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE
OFFICERS
Steven B. Dodge(2)............ 2,199,496 * 44.25 10.41 33.79
Thomas H. Stoner(3)........... 949,927 20.09 4.51 15.24
Don P. Bouloukas(4)........... -- -- -- -- --
John R. Gehron(5)............. 78,000 * 1.50 * 1.15
David Pearlman(6)............. 108,520 * 2.17 * 1.66
Joseph L. Winn(7)............. 119,048 * 2.41 * 1.85
Charlton H. Buckley(8)........ 1,851,267 12.30 8.79 2.97
Arnold Chavkin/CEA(9)......... 1,295,518 -- -- 6.14 --
James H. Duncan, Jr.(10)...... 15,578 * * * *
Donald B. Hebb, Jr.(11)....... 356,944 2.37 1.69 *
Charles Peebler(12)........... 4,000 * * * *
All executive officers and
directors as a group
(11 persons)(13)............. 6,978,298 15.35 66.43 32.57 54.75
DIRECTOR NOMINEES OF EZ
Alan Box(14).................. 398,859 + + + +
Arthur Kellar(15)............. 2,218,248 + + + +
FIVE PERCENT STOCKHOLDERS
Windpoint Partners II,
L.P.(16)..................... 601,072 -- 11.56 2.86 9.03
Stoner Broadcasting System
ESOP(17)..................... 363,299 -- 6.99 1.73 5.45
</TABLE>
28
<PAGE>
- --------
* Less than 1%
+ For information regarding the pro forma beneficial ownership of Messrs.
Box and Kellar, see Notes 14 and 15.
(1) Unless otherwise indicated, all ownership is of American Class B Common
Stock.
(2) Mr. Dodge is Chairman of the American Board, President and Chief
Executive Officer. His address is 116 Huntington Avenue, Boston,
Massachusetts 02116. Includes 68,500 shares of American Class A Common
Stock owned by Mr. Dodge. Does not include 90,000 shares of American
Class B Common Stock purchasable under an option granted on September 30,
1994 and 40,000 shares purchasable under an option granted on January 18,
1996 under the Plan; includes 60,000 shares purchasable under the
September 30, 1996 option. Includes an aggregate of 10,050 shares of
American Class A Common Stock and 20,832 shares of American Class B
Common Stock owned by three trusts for the benefit of Mr. Dodge's
children and 3,000 shares of American Class A Common Stock owned by Mr.
Dodge's wife. Mr. Dodge disclaims beneficial ownership in all shares
owned by such trusts and his wife. See "Management--Stock Option
Information" in Appendix V.
(3) Mr. Stoner is Chairman of the Executive Committee of the American Board.
His address is 116 Huntington Avenue, Boston, Massachusetts 02116.
Includes 23,811 shares owned by his wife, an aggregate of 260,410 shares
owned by trusts of which he and/or certain other persons are trustees and
29,158 shares owned by the Stoner Broadcasting System ESOP. Mr. Stoner
disclaims beneficial ownership of 160,540 shares owned by such trusts.
Does not include 112,308 shares owned by Mr. Stoner's adult children.
(4) Mr. Bouloukas is Co-Chief Operating Officer. Does not include 122,000
shares of American Class B Common Stock and 78,000 shares of American
Class A Common Stock purchasable under an option granted on August 15,
1996. See "Management--Stock Option Information" in Appendix V.
(5) Mr. Gehron is Co-Chief Operating Officer. Includes 6,000 shares of
American Class A Common Stock owned by Mr. Gehron. Does not include
96,000 shares of American Class B Common Stock purchasable under an
option granted on May 23, 1994, 32,000 purchasable under an option
granted on February 15, 1995 and 10,000 shares purchasable under an
option granted on January 18, 1996; includes 64,000 shares as to which
the May option and 8,000 shares as to which the February option are
exercisable. See "Management--Stock Option Information" in Appendix V.
(6) Mr. Pearlman is Co-Chief Operating Officer. Includes 3,000 shares of
American Class A Common Stock owned individually by Mr. Pearlman and 520
shares of American Class A Common Stock held for the benefit of his
children. Does not include 68,000 shares of American Class B Common Stock
purchasable under an option granted on December 16, 1993, 40,000 shares
purchasable under an option granted on February 15, 1995, 4,000 shares
purchasable under an option granted on May 18, 1995, 24,000 shares
purchasable under an option granted on June 15, 1995 and 20,000 shares
purchasable under an option granted on January 18, 1996; includes 88,000
shares as to which the December option, 10,000 shares as to which the
February option and 1,000 as to which the May option and 6,000 shares as
to the June option are exercisable. See "Management--Stock Option
Information" in Appendix V.
(7) Mr. Winn is a director, Treasurer and Chief Financial Officer. Includes
2,000 shares of American Class A Common Stock and 7,948 shares of
American Class B Common Stock owned individually by Mr. Winn and 100
shares of American Class A Common Stock held for the benefit of his
children. Does not include 64,000 shares of American Class B Common Stock
purchasable under an option granted on December 16, 1993, 48,000 shares
purchasable under an option granted on February 15, 1995, 4,000 shares
purchasable under an option granted on May 18, 1995 and 20,000 shares
purchasable under an option granted on January 18, 1996; includes 64,000
shares as to which the December option, 12,000 shares as to which the
February option and 1,000 at to which the May option are exercisable. See
"Management--Stock Option Information" in Appendix V.
(8) Mr. Buckley is a director of American. Does not include 5,553 shares of
American Class A Common Stock which are held by an adult child of Mr.
Buckley and in which Mr. Buckley disclaims beneficial ownership.
29
<PAGE>
(9) Mr. Chavkin is a director of American. Mr. Chavkin, as a general partner
of Chase Capital Partners ("CCP"), which is the general partner of Chase
Equity Associates ("CEA"), is deemed to own beneficially shares held by
CEA. CEA is the sole holder of American Class C Common Stock. The address
of CCP and CEA is 380 Madison Avenue, 12th Floor, New York, New York
10017.
(10) Mr. Duncan is a director of American. Does not include 2,000 shares of
American Class B Common Stock purchasable under an option granted on
December 16, 1993, 3,200 shares purchasable under an option granted on
February 15, 1995 and 3,000 shares purchasable under an option granted on
January 18, 1996. Includes (a) 6,500 shares of American Class A Common
Stock and 6,578 shares of American Class B Common Stock owned directly
and (b) 500 shares of American Class A Common Stock owned as follows: (i)
200 shares held by Mr. Duncan's spouse, (ii) 100 shares held by each of
his two daughters and (iii) 100 shares held by his spouse for his
stepson. Mr. Duncan has disclaimed beneficial ownership of these shares.
See "Management--Stock Option Information" in Appendix V.
(11) Mr. Hebb is a director of American. Mr. Hebb, as the Managing General
Partner of ABS Partners, L.P. ("ABS Partners"), is deemed to own
beneficially 356,944 shares of American Class A Common Stock held by ABS
Capital Partners, L.P. ("ABS Capital"). ABS Partners is the general
partner of ABS Capital. The address of ABS Capital and ABS Partners is
One Thirty-Five East Baltimore Street, Baltimore, Maryland 21202.
(12) Mr. Peebler is a director of American. Includes 2,000 shares of American
Class A Common Stock owned by Mr. Peebler. Does not include 8,000 shares
of American Class B Common Stock purchasable under an option granted
February 15, 1995 and 3,000 shares purchasable under an option granted on
January 18, 1996; includes 2,000 shares as to which the February option
is exercisable. See "Management--Stock Option Information" in Appendix V.
(13) Includes all shares stated to be owned in the preceding notes.
(14) Mr. Box is a director, President and Chief Executive Officer of EZ. His
address is 10800 Main Street, Fairfax, Virginia 22030. Mr. Box owns
443,177 shares of EZ Class B Common Stock. See Note (2) to the table
under "--EZ" immediately following this section. Giving effect to the
Merger, Mr. Box would own 398,859 shares of American Class A Common Stock
representing 1.7%, 1.4% and .57% of the pro forma American Class A Common
Stock, American Common Stock and Voting Power, respectively. Includes
105,000 shares of EZ Class B Common Stock purchasable under options. See
"Management--Stock Option Information" in Appendix VI. Mr. Box is the
son-in-law of Mr. Kellar.
(15) Mr. Kellar is Chairman of the EZ Board. His address is 10800 Main Street,
Fairfax, Virginia 22030. Mr. Kellar owns 2,464,720 shares of EZ Class B
Common Stock. See Note (1) to the table under "--EZ" immediately
following this section. Giving effect to the Merger, Mr. Kellar would own
2,218,248 shares of American Class A Common Stock representing 9.5%, 7.7%
and 3.1% of the pro forma American Class A Common Stock, American Common
Stock and Voting Power, respectively. Includes 105,000 shares of EZ Class
B Common Stock purchasable under options. See "Management--Stock Option
Information" in Appendix VI.
(16) The address of Windpoint Partners II, L.P. is 676 North Michigan Avenue,
Suite 300, Chicago, IL 60611.
(17) The Trustees of the Stoner Broadcasting System ESOP are Michael B.
Milsom, Vice President and General Counsel of American, and Suzanne
McDonald, Vice President and General Manager--Hartford Stations of
American. The Trustees have full discretion to vote all of the shares
held by the ESOP. The ESOP's address is 116 Huntington Avenue, Boston, MA
02116.
30
<PAGE>
EZ. The following table provides information as of October 1, 1996, with
respect to the shares of EZ Common Stock beneficially owned by (i) each person
known by EZ to own more than 5% of the outstanding EZ Common Stock, (ii) each
director of EZ, (iii) each executive officer required to be identified in the
Summary Compensation Table of EZ and (iv) all directors and executive officers
of EZ as a group. The number of shares beneficially owned by each director or
executive officer is determined according to the rules of the Commission, and
the information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares as
to which the individual or entity has the right to acquire within sixty days
of October 1, 1996 through the exercise of an option, conversion feature or
similar right. Except as noted below, each holder has sole voting and
investment power with respect to all shares of EZ Common Stock listed as owned
by such person or entity.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK BENEFICIALLY OWNED
-----------------------------------------------
PERCENT OF
PERCENT PERCENT PERCENT OF TOTAL
OF OF COMMON VOTING
NUMBER CLASS A CLASS B STOCK POWER +
--------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE
OFFICERS
Arthur Kellar(1).............. 2,464,720 -- 84.8 25.4 68.7
Alan Box(2)................... 443,177 -- 15.2 4.6 12.4
Ronald H. Peele, Jr.(3)....... 52,571 * -- * *
Woodley A. Allen(4)........... 35,000 * -- * *
C. Barrie Cook(5)............. 99,173 * -- * *
George Johnson(6)............. 5,667 * -- * *
John W. King(7)............... 112,572 1.7 -- 1.2 *
James R. McKay(8)............. 279,948 4.1 -- 2.9 *
Glenn W. Saunders, Jr.(9)..... 56,884 * -- * *
All executive officers and
directors as a group
(9 persons)(10).............. 3,549,712 9.5 100.0 36.6 82.9
FIVE PERCENT STOCKHOLDERS
James L. Draper, Jr.(11)...... 517,328 7.6 -- 5.3 1.4
FMR Corp.(12)................. 618,900 9.1 -- 6.4 1.7
Wellington Management
Company(13).................. 397,800 5.9 -- 4.1 1.1
</TABLE>
- --------
* Less than 1%.
+ With respect to the Merger, the holders of EZ Class A Common Stock and the
holders of EZ Class B Common Stock each vote as a separate class. See "The
Special Meetings--Required Votes--EZ."
(1) Includes 116,000 shares of EZ Class B Common Stock owned jointly with his
wife and 105,000 shares of EZ Class B Common Stock subject to immediately
exercisable options. Mr. Kellar is the Chairman of the EZ Board. His
address is 10800 Main Street, Fairfax, Virginia 22030. See "Management--
Stock Option Information" in Appendix VI.
(2) Represents 338,177 shares of EZ Class B Common Stock owned jointly with
his wife and 105,000 shares of EZ Class B Common Stock subject to
immediately exercisable options. Mr. Box is the President and a director
of EZ. His address is 10800 Main Street, Fairfax, Virginia 22030. See
"Management--Stock Option Information" in Appendix VI.
(3) Includes 47,500 shares of EZ Class A Common Stock subject to immediately
exercisable options. Mr. Peele is Vice President, Secretary and Treasurer
of EZ. See "Management--Stock Option Information" in Appendix VI.
(4) Mr. Allen is a director of EZ. He was also Vice President, Secretary and
Treasurer of EZ until April 1992, and continues to act as a consultant to
EZ. Includes 5,000 shares of EZ Class A Common Stock purchasable under an
option granted in May 1996. See "Management--Stock Option Information" in
Appendix VI.
(5) Represents 80,874 shares owned individually by Dr. Cook and 13,299 shares
owned with his wife as joint tenants. Dr. Cook is a director of EZ.
Includes 5,000 shares of EZ Class A Common Stock purchasable under an
option granted in May 1996. See "Management--Stock Option Information" in
Appendix VI.
(6) Dr. Johnson is a director of EZ. Includes 5,000 shares of EZ Class A
Common Stock purchasable under an option granted in May 1996. See
"Management--Stock Option Information" in Appendix VI.
31
<PAGE>
(7) Mr. King is a director of EZ. Includes 5,000 shares of EZ Class A Common
Stock purchasable under an option granted in May 1996. See "Management--
Stock Option Information" in Appendix VI.
(8) Mr. McKay is a director of EZ. Includes 5,000 shares of EZ Class A Common
Stock purchasable under an option granted in May 1996. See "Management--
Stock Option Information" in Appendix VI.
(9) Mr. Saunders is a director of EZ. Includes 5,000 shares of EZ Class A
Common Stock purchasable under an option granted in May 1996. See
"Management--Stock Option Information" in Appendix VI.
(10) Includes all shares stated to be included in the preceding notes.
(11) Represents 258,578 shares owned jointly with his wife and 258,750 shares
owned individually by his wife. Mr. Draper served as a director of EZ
until June 1993. Mr. Draper also served as EZ's Secretary and Treasurer
from its formation until he retired in 1979. His address is 561 Colebrook
Road, P.O. Box 2, Colebrook, Connecticut 06021-1017.
(12) Includes shares of EZ Class A Common Stock beneficially owned by Fidelity
Management & Research Company ("Fidelity") and Fidelity Management Trust
Company ("FMTC") as reported to EZ on February 14, 1996. Fidelity and
FMTC are both wholly-owned subsidiaries of FMR Corp. Of the 612,300
shares of EZ Class A Common Stock beneficially owned by Fidelity, all are
owned with sole dispositive power. Of the 6,600 shares of EZ Class A
Common Stock beneficially owned by FMTC, all are owned with sole voting
and dispositive power. The address of FMR Corp., Fidelity and FMTC is 82
Devonshire Street, Boston, Massachusetts 02109.
(13) Includes shares of EZ Class A Common Stock beneficially owned by
Wellington Trust Co., N.A. (BK) ("WTC") as reported to EZ on February 13,
1996. WTC is a wholly-owned subsidiary of Wellington Management Company
("WMC"). Of the 397,800 shares of EZ Class A Common Stock beneficially
owned by WTC, 203,700 are owned with shared voting power and all are
owned with shared dispositive power. The address of WMC and WTC is 75
State Street, Boston, Massachusetts 02109.
32
<PAGE>
BACKGROUND OF THE MERGER
GENERAL BACKGROUND
The radio broadcasting industry has undergone significant changes in the
last several years in anticipation of and, in 1996, as a consequence of a new
regulatory structure. The passage in February 1996 of the Telecommunications
Act fundamentally altered the landscape in the radio broadcasting industry by
dramatically expanding the number of radio stations that could be owned in a
local market and eliminating all FCC restrictions on the number of stations
that could be owned nationwide. In light of those changes, American began to
pursue, in anticipation of such legislation, and has continued to pursue even
more aggressively after its passage, the acquisition of additional radio
stations in new and existing markets, in order to achieve, among other things,
increased size and greater geographic diversification. American's intention
has been to increase its presence in these markets through further
acquisitions, as well as to expand into new markets. American has concentrated
these efforts in markets ranked in the top 50 (with an emphasis on markets
ranked 10 through 50) in terms of radio advertising revenues where management
believes it can ultimately achieve a substantial market position. When
evaluating acquisition opportunities in new markets, American assesses the
potential to achieve a strong position in audience share and to generate
significant cash flow growth through owning multiple stations and through
improved programming, marketing, sales and operating efficiencies.
In connection with the passage of the Telecommunications Act, EZ considered
the general consolidation taking place in the radio broadcasting industry and
evaluated possible strategic alternatives for EZ, including potential
transactions with third parties. In July 1996, EZ engaged CS First Boston to
act as its financial advisor in connection with a possible sale or merger of
EZ.
Negotiations of the Merger. On June 23, 1996, Alan Box, Chief Executive
Officer of EZ, advised Steven B. Dodge, Chief Executive Officer of American,
that EZ might consider a sale or merger with American Common Stock being a
component of the consideration. On July 10, 1996, a meeting was held at which
Joseph L. Winn, Chief Financial Officer of American, and Ronald H. Peele, Jr.,
Vice President and Chief Financial Officer of EZ, together with Messrs. Box
and Dodge were present, and at which financial information concerning the two
companies was exchanged and discussed. Messrs. Dodge and Box continued their
discussions that evening concerning the two companies and Mr. Box's intentions
and desires with respect to his future. Thereafter, American furnished EZ with
additional financial information concerning American and obtained additional
financial information concerning EZ. American also conferred during this
period with Morgan Stanley and CS First Boston. Mr. Dodge met with Arthur
Kellar, Chairman of the Board and principal stockholder of EZ, on July 17,
1996 to discuss possible merger terms. Following such meeting, American
advised CS First Boston of American's continued interest in EZ and discussed
certain issues regarding the stock component of the merger consideration. On
July 22, 1996, Mr. Dodge conferred with Mr. Kellar by telephone and advised
him in writing of certain terms of American's proposal. On July 25, 1996,
American sent a written expression of interest to EZ. The following day,
American retained Morgan Stanley as its financial adviser in connection with
any merger with EZ. During these conversations and meetings between American
and EZ, the discussions focused principally on four issues: (i) the valuation
of EZ, (ii) the valuation of the American Class A Common Stock, (iii) the type
of consideration that American would propose to issue in exchange for EZ
Common Stock, and (iv) the type of exchange ratio that would be proposed to be
used, including whether it would be a fixed or floating exchange ratio.
During the week commencing July 29, 1996, meetings were held among the
principal officers of American and EZ almost continuously with respect to the
proposed merger. In addition to the principal issues involving the form of
consideration and the exchange ratios, attention focused on what remedies
would be available to American in the event the EZ Board, pursuant to its
fiduciary duties, approved another merger or acquisition proposal after a
merger agreement with American had been executed. Other issues regarding the
integration of the two companies and their management teams were also
discussed. The parties determined that discussions relating to the proposed
business combination had advanced to a point where they should proceed to
negotiate definitive pricing terms and documentation. Simultaneously with the
negotiations between the principal officers
33
<PAGE>
of American and EZ and their respective financial advisors, counsel for the
parties commenced negotiations with respect the terms and conditions of the
Merger Agreement. Sullivan & Worcester LLP, counsel for American ("Sullivan &
Worcester"), prepared a draft of the merger agreement together with a proposed
form of voting agreement to be executed by certain of the EZ stockholders.
Sullivan & Worcester and Hunton & Williams, counsel for EZ ("Hunton &
Williams"), then negotiated the terms and provisions of such agreements and of
a comparable voting agreement for the American stockholders.
Agreement between American and EZ was reached with respect to the form and
terms of the merger consideration on July 31, 1996, but it was not until
August 2, 1996 that agreement was reached by the parties with respect to
American's remedies in the event of a subsequent competing proposal and all of
the other terms and conditions of the Merger.
August 3, 1996 EZ Board Meeting. On August 3, 1996, the EZ Board met to
consider the proposed merger agreement and other ancillary agreements and the
transactions contemplated thereby, including the proposed consideration to be
paid to the EZ Stockholders. Mr. Box and other members of EZ management,
representatives of Hunton & Williams and CS First Boston, EZ's financial
advisor, made presentations to the EZ Board and discussed with the EZ Board
their views and analyses of various aspects of the proposed transaction. The
EZ Board reviewed and discussed, among other things, (i) the background of the
proposed transaction; (ii) EZ's strategic alternatives; (iii) financial and
valuation analyses of the transactions, (iv) the terms of the proposed merger
agreement; (v) regulatory and tax aspects of the Merger; and (vi) other
matters described below under "--Recommendation of the EZ Board; EZ's Reasons
for the Merger". CS First Boston rendered its oral opinion (subsequently
confirmed in a written opinion to the EZ Board dated as of August 5, 1996, a
copy of which is attached hereto as Appendix III) that, based upon and subject
to the matters set forth in its opinion, as of such date, the consideration to
be received by the EZ Stockholders pursuant to the Merger was fair to the EZ
Stockholders from a financial point of view. After deliberation, the EZ Board
unanimously approved and adopted the terms of the Merger Agreement and the
ancillary documents presented to them and the transactions contemplated
thereby and authorized the execution of the Merger Agreement and such
ancillary documents.
August 4, 1996 American Board Meeting. On August 4, 1996, the American Board
convened by telephone to consider the proposed merger agreement and other
ancillary agreements and the transactions contemplated thereby, including the
proposed consideration to be paid to the EZ Stockholders. Messrs. Dodge and
Winn, representatives of Sullivan & Worcester and Morgan Stanley, American's
financial advisor, made presentations to the American Board and discussed with
the American Board their views and analyses of various aspects of the proposed
transaction. The American Board reviewed and discussed, among other things,
(i) the background of the proposed transactions; (ii) financial and valuation
analyses of the transactions; (iii) the terms of the proposed merger
agreement, including those with respect to registration rights, the rights of
the principal EZ Stockholders to nominate directors and the Voting Agreements;
(iv) regulatory and tax aspects of the Merger; and (vi) other matters
described below under "--Recommendation of the American Board; American's
Reasons for the Merger". Morgan Stanley rendered its oral opinion
(subsequently confirmed in a written opinion to the American Board dated as of
August 5, 1996, a copy of which is attached hereto as Appendix II) that, based
upon the matters presented to the American Board and as set forth in its
opinion, as of such date, the consideration to be received by the EZ
Stockholders pursuant to the Merger was fair to American from a financial
point of view. After deliberation, the American Board unanimously approved and
adopted the terms of the Merger Agreement and the ancillary documents
presented to them and the transactions contemplated thereby and authorized the
execution of the Merger Agreement and such ancillary documents.
RECOMMENDATION OF THE AMERICAN BOARD; AMERICAN'S REASONS FOR THE MERGER
The American Board believes that the Merger Agreement and the transactions
contemplated thereby are fair to, and in the best interests of, its
stockholders. Accordingly, the American Board unanimously recommends that the
American Stockholders vote FOR the approval of the Merger Agreement and the
transactions contemplated thereby, including the Charter Amendment. The
American Board, in reaching its conclusions, considered the factors discussed
below. In view of the wide variety of factors considered in connection with
the evaluation of
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the Merger, the American Board did not find it practicable, nor did it
attempt, to quantify or otherwise to assign relative weights to the specific
factors it considered in reaching its determinations.
Market Diversification. In light of the changes effected by the
Telecommunications Act, American has aggressively pursued the acquisition of
additional radio stations in new and existing markets, in order to achieve,
among other things, increased size and greater geographic diversification.
American's intention has been to increase its presence in these markets
through further acquisitions, as well as to expand into new markets. American
has concentrated these efforts in markets ranked in the top 50 (with an
emphasis on markets ranked 10 through 50) in terms of advertising revenues
where management believes it can ultimately achieve a substantial market
position. When evaluating acquisition opportunities in new markets, American
assesses the potential to achieve such a position in audience share and to
generate significant cash flow growth through owning multiple stations and
through improved programming, marketing, sales and operating efficiencies.
Consistent with American's acquisition strategy, since January 1, 1996,
American has consummated or entered into agreements, exclusive of the Merger
and station asset swaps, to acquire 49 stations for an aggregate consideration
of approximately $673.6 million.
With the increasing competitive nature of acquisitions in the radio
broadcasting industry, American management began to consider alternative means
of implementing its acquisition strategy and achieving greater diversification
of markets. To that end, it evaluated several large publicly traded and
private radio broadcasting companies, including EZ, and concluded that EZ was
the most appropriate merger partner. Among the factors which attracted
American to EZ were the nature of the markets in which EZ operates, primarily
the 10 to 30 largest markets in terms of radio advertising revenues. These
markets dovetailed with the markets which are American's primary focus.
Moreover, American's management believed that many of both EZ's markets and
EZ's stations represent significant growth opportunities. Moreover, consistent
with its acquisition strategy, management viewed as favorable the fact that EZ
had not, in any of its markets, achieved the maximum potential ownership of
stations and that there was, therefore, attractive acquisition potential in
many of those markets. Finally, the fact that there was a market overlap
between American stations and EZ stations only in Sacramento, where a limited
number of stations will be required to be disposed of, was also a favorable
factor considered by American management and the American Board.
Increased Financial Strength. The American Board considered American's need
for future capital to fund American's aggressive program of radio station
acquisitions, the financial needs to its subsidiary which owns and manages
communications towers, and other possible equity investments and capital
requirements. The American Board concurred in the view expressed by American's
management that large, well-capitalized enterprises will be at a competitive
advantage in the new radio broadcasting industry. The American Board concluded
that, through the Merger, the combined organization's ability to finance the
acquisition of additional stations and communications towers should be
strengthened.
American's Business, Condition and Prospects. In evaluating the terms of the
Merger, the American Board reviewed, among other things, information with
respect to the financial condition, results of operations and businesses of
American, on both an historical and prospective basis, and current industry,
economic and market conditions. The members of the American Board were
generally familiar with and knowledgeable about American's business and
further reviewed these matters in the course of their deliberations. In
evaluating American's prospects, the American Board considered, among other
things, the strengths of American's radio broadcasting business, including the
markets in which it was operating, the acquisitions which were pending or in
the process of negotiation, its management team, marketing expertise,
commitment to customer service and community relations, leadership in
regulatory and other industry matters, as well as the challenges facing the
business, including increased capital commitments, greater consolidation of
ownership and competition from other larger radio broadcasting companies,
potential competition from new entrants into the radio broadcasting industry,
new technologies and the difficulty of maintaining historical cash flow growth
rates in an increasingly competitive media environment.
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EZ's Business, Condition and Prospects. The American Board also reviewed
information presented by management with respect to the financial condition,
results of operations and business of EZ on both an historical and prospective
basis, and current industry, economic and market conditions. In evaluating
EZ's prospects, the American Board considered, among other things, the
strengths of EZ's radio broadcasting business, including the markets in which
it was operating, various station swap potentials, its management team and
other industry matters.
Terms of the Merger Agreement. The American Board considered, with the
assistance of Messrs. Dodge and Winn and representatives from Sullivan &
Worcester and Morgan Stanley, the terms of the Original Agreement, including
but not limited to the amount and form of consideration, the fact that two
representatives of EZ would be joining the American Board, and the termination
provisions. The American Board considered the provisions of the Original
Agreement that (i) prohibit EZ and its subsidiaries, and their respective
directors, officers, employees, and representatives from soliciting or
encouraging any Purchase Proposals (as defined in the Original Agreement) by
third parties, or, subject to the fiduciary duties of the EZ Board, from
negotiating with any other parties with respect to a Purchase Proposal, and
(ii) permit the EZ Board, in the exercise of its fiduciary duties, to
terminate the Original Agreement upon payment of a fee of $15.0 million if
such termination were to occur prior to September 4, 1996 or, if thereafter,
at American's option, $15.0 million or the right to purchase EZ's stations in
any market selected by American at Station Fair Market Value (as defined in
the Original Agreement) less $10.0 million. The American Board reviewed the
terms of the American Voting Agreement pursuant to which, among other things,
Messrs. Dodge and Stoner, who together controlled slightly more than 40.0% of
the voting power of the American Voting Stock, would agree to grant EZ a proxy
to vote their shares in favor of the Merger. The American Board also
considered the terms of the EZ Voting Agreement pursuant to which, among other
things, Messrs. Kellar and Box, who together controlled 100% of the voting
power of the EZ Class B Common Stock, would agree to grant American a proxy to
vote their shares in favor of the transactions contemplated by the Original
Agreement. See "The Special Meetings--Required Votes--EZ".
Charter Amendment. In order to consummate the Merger, the American Restated
Certificate will be required to be amended to increase the authorized number
of shares of Class A Common Stock. The American Board also deemed it advisable
and in the best interests of the American Stockholders, for the reasons
discussed elsewhere in this Proxy Statement, to increase the authorized number
of shares of Preferred Stock and Class B Common Stock. See "Proposal to
Approve and Adopt the Charter Amendment".
Opinion of Morgan Stanley. The American Board considered as favorable to its
determination the oral opinion delivered by Morgan Stanley on August 4, 1996,
subsequently confirmed in a written opinion to the American Board, dated
August 5, 1996, that, as of such date, the consideration to be received by the
EZ Stockholders pursuant to the Merger was fair to American from a financial
point of view. The American Board also considered the oral and written
presentation made to it by Morgan Stanley. See "--Opinion of Financial Advisor
to American." A copy of the opinion of Morgan Stanley is attached as Appendix
II and is incorporated herein by reference.
Amended and Restated Merger Agreement. Subsequent to the execution and
delivery of the Original Agreement, American and EZ agreed that it would be in
the best interests of their respective stockholders to amend the Original
Agreement to deal with the possibility that the holders of the EZ Senior Notes
would not agree to amendments to the EZ Senior Note Indenture on satisfactory
terms. Accordingly, the American Board by written consent dated September 26,
1996 unanimously approved the Merger Agreement which provided for, among other
things, either the Direct Merger or the Subsidiary Merger and, thereafter, it
was executed and delivered by American and EZ.
THE AMERICAN BOARD UNANIMOUSLY RECOMMENDS THAT HOLDERS OF AMERICAN VOTING
STOCK VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT, AND FOR
THE PROPOSAL TO APPROVE AND ADOPT THE CHARTER AMENDMENT.
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OPINION OF FINANCIAL ADVISOR TO AMERICAN
Morgan Stanley was engaged by American to act as a financial advisor and
render a fairness opinion letter to the American Board in connection with the
Merger. At the August 4, 1996 meeting of the American Board, Morgan Stanley
delivered its oral opinion to the American Board that, as of such date, the
Merger Consideration to be paid by American to holders of shares of EZ Common
Stock pursuant to the Merger Agreement was fair from a financial point of view
to American. Morgan Stanley confirmed its oral opinion in a written opinion
dated August 5, 1996 (the "Morgan Stanley Opinion").
A copy of the Morgan Stanley Opinion is attached hereto as Appendix II.
American Stockholders are urged to read the Morgan Stanley Opinion in its
entirety for information with respect to the procedures followed, assumptions
made, matters considered and limits of the review by Morgan Stanley in
rendering the Morgan Stanley Opinion. References to the Morgan Stanley Opinion
herein and the summary of the Morgan Stanley Opinion set forth below are
qualified by Appendix II, which is incorporated herein by reference. The
Morgan Stanley Opinion is directed to the American Board and the fairness of
the consideration to be paid by American from a financial point of view to
American, and it does not address any other aspect of the Merger nor does it
constitute a recommendation to any American Stockholder as to how to vote at
the American Special Meeting.
In arriving at its opinion, Morgan Stanley, among other things: (i) reviewed
certain publicly available financial statements and other information of
American and EZ, respectively; (ii) reviewed certain internal financial
statements and other financial and operating data concerning American and EZ
prepared by managements of American and EZ, respectively; (iii) analyzed
certain financial projections concerning American and EZ prepared by
managements of American and EZ, respectively; (iv) discussed the past and
current operations and financial condition and the prospects of American and
EZ with senior executives of American and EZ, respectively; (v) discussed with
American senior management their views regarding future business, financial
and operating benefits arising from the Merger; (vi) analyzed the pro forma
financial impact of the Merger, including the impact on American's
consolidated capitalization and financial ratios; (vii) reviewed the reported
prices and trading activity of American Class A Common Stock and EZ Class A
Common Stock; (viii) compared the financial performance of American and EZ and
the prices and trading activity of American Class A Common Stock and EZ Class
A Common Stock with that of certain other comparable publicly-traded
companies; (ix) reviewed the financial terms, to the extent publicly
available, of certain comparable acquisition transactions; (x) reviewed the
Merger Agreement and certain related documents; and (xi) performed such other
analyses and examinations as Morgan Stanley deemed appropriate.
In connection with its review, Morgan Stanley did not assume any
responsibility for independent verification of any of the foregoing
information and relied on its being complete and accurate in all material
respects. With respect to the financial projections supplied to Morgan Stanley
by American, including estimates of the business, financial and operating
benefits expected to result from the Merger, Morgan Stanley assumed that they
had been reasonably prepared on bases reflecting the best currently available
estimates and good faith judgments of the future competitive, operating and
regulatory environments and related financial performance of American and EZ,
respectively. Furthermore, Morgan Stanley assumed no responsibility for
conducting a physical inspection of the properties or facilities of American
or EZ or for making or obtaining any independent valuation or appraisal of the
assets or liabilities of American or EZ, nor was Morgan Stanley furnished with
any such valuations or appraisals. Morgan Stanley assumed, with the consent of
the American Board, that the transaction described in the Merger Agreement
would be consummated on the terms set forth therein. In addition, Morgan
Stanley relied as to certain matters relating to the FCC upon the advice of
FCC counsel to American. Morgan Stanley's opinion is necessary based on
economic, market and other conditions as in effect on, and any information and
agreements made available to it as of, the date thereof. Interested
stockholders are encouraged to review the Morgan Stanley Opinion in its
entirety.
At the August 4, 1996 meeting of the American Board, Morgan Stanley reviewed
with the members of the American Board certain financial, industry and market
information with respect to EZ and the procedures used and the analyses
underlying the Morgan Stanley Opinion. The summary set forth below does not
purport to be a complete description of the Morgan Stanley Opinion or Morgan
Stanley's analysis related thereto.
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Implied Transaction Valuation. Morgan Stanley reviewed the implied
transaction valuation. The total amount of American shares issued, based on EZ
fully diluted shares outstanding of approximately 9.622 million, was
approximately 8.7 million. The value of the shares issued, based on Morgan
Stanley's estimate of American's unaffected trading price of $39.43 and the
Exchange Ratio of 0.9x, was approximately $342 million. The pro forma EZ
Stockholders' ownership of American, based on American's fully diluted shares
outstanding of approximately 22.518 million, was 27.8%. Morgan Stanley noted
that the implied EZ valuation was as follows: equity value, $455 million;
asset value, $683 million; and operating broadcast asset value, $655 million.
Precedent Transaction Analysis. Using publicly available information, Morgan
Stanley reviewed and analyzed selected acquisition transactions involving
other companies in the radio industry that it deemed relevant.
Acquisition Multiples.
In analyzing the multiple of forward year broadcast cash flow ("BCF")
represented by the aggregate acquisition price, Morgan Stanley reviewed the
following transactions, each involving a purchase price for the operating
assets of the target company in excess of $250 million: (i) Westinghouse
Electric Corporation ("Westinghouse")/Infinity Broadcasting Corporation
("Infinity"), (ii) American Radio/EZ, (iii) Infinity/Alliance Broadcasting,
L.P. ("Alliance"), (iv) Infinity/Granum Holdings LP ("Granum"), (v) Chancellor
Broadcasting Company ("Chancellor")/Shamrock Broadcasting, Inc. ("Shamrock"),
(vi) Jacor Communications, Inc. ("Jacor")/Citicasters Inc. ("Citicasters"),
and (vii) Evergreen Media Corporation ("Evergreen")/Pyramid Communications
Inc. ("Pyramid"). The Morgan Stanley analysis yielded the following
acquisition multiples paid for each of the above referenced transactions:
Westinghouse/Infinity, 17.0x; American/EZ, 13.6x; Infinity/Alliance, 13.3x;
Infinity/Granum, 13.0x; Chancellor/Shamrock, 12.6x; Jacor/Citicasters, 11.8x;
and Evergreen/Pyramid, 9.9x. The average purchase price as a multiple of
forward BCF was 12.9x, excluding the American/EZ transaction. Morgan Stanley
noted that the multiples for transactions announced after the passage of the
Telecommunications Act were generally higher than those announced before such
passage and that the transactions which involve principally or exclusively
capital stock tended to be higher than those which involve principally or
exclusively cash. No transaction utilized in the comparable transaction
analysis is identical to the Merger. In evaluating the precedent transactions,
Morgan Stanley made judgments and assumptions with regard to industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of EZ or American such as
the impact of competition on the business of EZ and the industry generally,
industry growth and the absence of any material adverse change in the
financial condition and prospects of EZ or the industry or in the financial
markets in general.
Premium to Unaffected Market Price.
Morgan Stanley presented an analysis of the acquisition premium paid in
selected radio transactions in relation to the unaffected market price of
certain acquired companies. The transactions reviewed by Morgan Stanley
included the following, which are listed by acquiror/target: (i) American/EZ;
(ii) Jacor/Citicasters; (iii) Evergreen/Broadcasting Partners L.P.; and (iv)
Westinghouse/Infinity. In addition, Morgan Stanley presented the average
acquisition premium paid in all media stock and all public stock transactions
with aggregate consideration between $100 million and $1 billion since January
1989. The Morgan Stanley analysis yielded the following premiums to unaffected
market price for each of the above referenced transactions: American/EZ, 89%
(based on the unaffected price of EZ Class A Common Stock of $24.95) and 45%
(based on the closing price of EZ Class A Common Stock on August 2, 1996), in
each case based on the implied nominal acquisition price of $47.24 per share;
Jacor/Citicasters, 30%; Evergreen/Broadcasting Partners, L.P., 24%; and
Westinghouse/Infinity, 15%. The acquisition premium paid in all media stock
transactions was 70% and the acquisition premium paid in all public stock
transactions was 44%.
EZ Discounted Cash Flow Analysis. Morgan Stanley performed a five-year
discounted cash flow analysis of EZ based upon the internal projections of the
management of EZ, as well as discussions with American and
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EZ management regarding the business of EZ. However, Morgan Stanley's
discounted cash flow analysis did not give effect to potential cost saving or
revenue enhancement opportunities from the Merger.
In conducting the discounted cash flow analysis, Morgan Stanley assumed
discount rates of between 11% and 13%, year 2000 BCF multiples of 11x to 13x.
The assumed discount rates were chosen based upon an analysis of the weighted
average cost of capital of EZ and certain comparable companies. The range of
exit multiples used reflected different assumptions regarding the growth and
profitability prospects of EZ beyond the year 2000. Based on the
aforementioned projections and assumptions, the discounted cash flow analysis
yielded a mid-point per share value of approximately $42.00 per share of EZ
Common Stock.
EZ Stock Trading Comparison. Morgan Stanley compared the historical trading
prices of the EZ Class A Common Stock to a composite of radio stocks
(consisting of Chancellor, Clear Channel Communications, Inc. ("Clear
Channel"), Emmis Broadcasting Corp. ("Emmis"), Evergreen, Jacor, Saga
Communications, Inc. ("Saga") and SFX Broadcasting Inc. ("SFX")) and the study
showed that for much of the period the EZ Class A Common Stock traded at a
discount from such composite. Another study showed that the EZ Class A Common
Stock had, for the most part, and until very recently, increased in value less
than that of the American Class A Common Stock since American's initial public
offering in June 1995.
Comparable Radio Company Trading Analysis. Comparable company analysis
examines a company's trading performance relative to a group of publicly
traded peers. Morgan Stanley analyzed the trading performance of EZ, American
and companies in the radio broadcasting sector (the "American Comparable
Companies"). The companies analyzed were: Chancellor, Clear Channel, Emmis,
Evergreen, Infinity, Jacor, Saga and SFX. The American Comparable Companies
were selected based on general business, operating and financial
characteristics representative of companies in the radio broadcasting
industry. Historical financial information used in connection with the ratios
provided below with respect to the American Comparable Companies is as of the
most recent financial statements publicly available for each company. Market
information used in calculating the financial ratios below is as of August 2,
1996.
Morgan Stanley analyzed the relative performance and value for EZ by
comparing certain market trading statistics for EZ with the American
Comparable Companies. Among the market trading information considered in the
analysis was aggregate value to BCF for calendar years 1996 and 1997,
respectively. The ratio of aggregate value to BCF for calendar years 1996 and
1997 for the American Comparable Companies was 9.6x to 19.8x and 8.4x to
17.5x, respectively.
Using the financial information and forecasts provided by management of EZ
and American, Morgan Stanley derived an implied aggregate value of American's
proposed acquisition of EZ of 16.8x 1996 BCF and 13.6x and 1997 BCF. In
addition, Morgan Stanley noted that American traded at 18.4x 1996 BCF and
14.4x 1997 BCF, respectively.
No company utilized in the American Comparable Companies analysis as a
comparison is identical to EZ or American. In evaluating the American
Comparable Companies, Morgan Stanley made judgments and assumptions with
regard to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control
of EZ or American, such as the impact of competition on the business of EZ or
American and the industry generally, industry growth and the absence of any
material adverse change in the financial condition and prospects of EZ,
American, the industry or the financial markets in general. Mathematical
analysis (such as determining the average or median) is not, in the opinion of
Morgan Stanley and American, in itself a meaningful method of using comparable
company data.
Pro Forma Merger Analysis. Morgan Stanley prepared a pro forma merger
analysis of the financial impact of the Merger on American. The analysis
assumed no synergies or cost savings as a result of the Merger. Based on
American's 1997 estimated BCF trading multiple and the closing price of
American Class A Common Stock on August 2, 1996, Morgan Stanley estimated that
American would need to obtain approximately $0.4 million of synergies or cost
savings in order for the transaction to be non-dilutive to the American
Stockholders.
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The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, Morgan Stanley considered the results of all of its
analyses as a whole and did not attribute any particular weight to any
particular analysis or factor considered by it. Furthermore, selecting any
portions of Morgan Stanley's analyses, without considering all analyses, would
create an incomplete view of the process of underlying its opinion. In
addition, Morgan Stanley may have deemed various assumptions more or less
probable than other assumptions, so that the range of valuations resulting for
any particular analysis described above should not be taken to be Morgan
Stanley's view of the actual value of EZ or American.
In performing its analysis, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of EZ or American. The
analyses performed by Morgan Stanley are not necessarily indicative of actual
values, which may be significantly more or less favorable than suggested by
such analyses. Such analyses were prepared solely as a part of Morgan
Stanley's analysis of the fairness of the consideration to be paid by American
from a financial point of view to American and was provided to the American
Board in connection with the delivery of Morgan Stanley's written opinion
dated August 5, 1996. The analyses do not purport to be appraisals or to
reflect the prices at which EZ or American might actually be sold. Because
such estimates are inherently subject to uncertainty, none of EZ, American,
Morgan Stanley or any other person assumes any responsibility for their
accuracy. In addition, as described above, Morgan Stanley's opinion and
presentation to the American Board was one of many factors taken into
consideration by the American Board in making its determination to approve the
Merger. Consequently, the Morgan Stanley analysis described above should not
be viewed as determinative of the opinions of the EZ Board or the American
Board with respect to the value of EZ and American or whether such Boards
would have been willing to agree to a different consideration.
The American Board retained Morgan Stanley based upon its experience and
expertise. Morgan Stanley is an internationally recognized investment banking
and advisory firm. Morgan Stanley, as part of its investment banking business,
is continuously engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and other
purposes. Morgan Stanley is a full-service securities firm engaged in
securities trading and brokerage activities, as well as providing investment
banking financing and financial advisory services. In the ordinary course of
its trading and brokerage activities, Morgan Stanley or its affiliates may at
any time hold long or short positions, and may trade or otherwise effect
transactions, for its own account or the accounts of customers, in securities
or senior loans of EZ or American. In the past, Morgan Stanley and its
affiliates have provided financing services to American and have received
customary fees for the rendering of these services.
Pursuant to a letter agreement dated as of August 2, 1996, American has
agreed to pay Morgan Stanley a fee of $1.5 million in consideration for its
services. In addition to the foregoing compensation, American has agreed to
reimburse Morgan Stanley for its expenses, including reasonable fees and
expenses of its counsel, and to indemnify Morgan Stanley for liabilities and
expenses arising out of the engagement and the transactions in connection
therewith, including liabilities under federal securities laws.
A COPY OF THE WRITTEN OPINION OF MORGAN STANLEY, DATED AS OF AUGUST 5, 1996,
IS ATTACHED HERETO AS APPENDIX II. THE AMERICAN STOCKHOLDERS ARE URGED TO READ
THE MORGAN STANLEY OPINION CAREFULLY IN ITS ENTIRETY FOR THE ASSUMPTIONS MADE,
MATTERS CONSIDERED, SCOPE AND LIMITS OF THE REVIEW UNDERTAKEN AND PROCEDURES
FOLLOWED BY MORGAN STANLEY IN CONNECTION WITH SUCH OPINION.
RECOMMENDATION OF THE EZ BOARD; EZ'S REASONS FOR THE MERGER
The EZ Board believes that the Merger Agreement and the transactions
contemplated thereby are fair to, and in the best interests of, its
stockholders. Accordingly, the EZ Board unanimously recommends that the EZ
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Stockholders vote FOR the approval and adoption of the Merger Agreement and
the transactions contemplated thereby. The EZ Board, in reaching its
determinations, considered the factors discussed below. In view of the wide
variety of factors considered in connection with the evaluation of the Merger,
the EZ Board did not find it practicable to, nor did it attempt to, quantify
or otherwise assign relative weights to the specific factors it considered in
reaching its determination.
Terms of the Merger Agreement. The EZ Board considered, with the assistance
of Messrs. Kellar and Box and representatives from Hunton & Williams and CS
First Boston, the terms of the Merger Agreement and related documents. The EZ
Board gave consideration to, among other things, the structure of the proposed
Merger and the amount and form of consideration offered to the EZ Stockholders
(i.e., $11.75 cash and 0.9 shares of American Class A Common Stock per share
of EZ Common Stock), which represented a significant premium to the trading
prices of EZ Common Stock during the period prior to the announcement of the
execution of the Merger Agreement. The EZ Board further considered the
provisions of the Merger Agreement that (i) permit EZ and its subsidiaries and
their respective directors, officers, employees and representatives to
participate in discussions and negotiations with, and furnish information to,
third parties regarding Purchase Proposals if the EZ Board determined in good
faith that such action is required for the discharge of its fiduciary
obligations, and (ii) permit the EZ Board, in the exercise of its fiduciary
duties, to terminate the Merger Agreement upon payment of a fee of $15.0
million if such termination were to occur prior to September 4, 1996 or, if
thereafter, at American's option, $15.0 million or the right to purchase EZ's
stations in any market selected by American at Station Fair Market Value (as
defined in the Original Agreement) less $10.0 million. Finally, the EZ Board
considered the absence of any term or condition in the Merger Agreement which
was unduly onerous or could materially impede or impair the consummation of
the Merger.
Trading History of EZ and American Common Stock. The EZ Board also
considered historical market prices and trading volume of the EZ Class A
Common Stock and historical and projected earnings, the historical market
prices and trading volume of the American Class A Common Stock and historical
and projected earnings, the premium American's offer represented over the
historical trading prices of the EZ Class A Common Stock during the period
prior to the announcement of the execution of the Merger Agreement, the market
prices and financial data relating to companies engaged in similar businesses
to EZ, and prices and premiums paid in recent acquisitions of similar
companies.
Market Diversification. In light of changes effected by the
Telecommunications Act, EZ has aggressively pursued the acquisition of
additional radio stations, particularly in markets where it has an existing
ownership interest, in order to achieve, among other things, the potential
cost savings of operating multiple stations in the same geographic market.
EZ's intention has been to increase its presence in these markets through
further acquisitions, as well as to expand into new markets where it
anticipates that it can ultimately operate multiple stations.
With the increasing competitive nature of acquisitions in the radio
broadcasting industry, EZ's management began to consider alternative means of
implementing its acquisition strategy. The EZ Board considered, among other
options, strategic mergers with several radio broadcasting companies,
including American, and concluded that American was the most appropriate
merger partner. Among the factors which attracted EZ to American was the
nature of the markets in which American operates. These markets dovetailed
well with the markets in which EZ operates. Moreover, EZ's management believes
that many of American's markets and many of its stations represent significant
growth opportunities. Finally, the fact that there was market overlap between
American-owned and EZ-owned stations only in Sacramento, where a limited
number of stations will be required to be disposed of, was also a favorable
factor considered by the EZ Board.
EZ's Business, Conditions and Prospects. In evaluating the terms of the
Merger, the EZ Board reviewed, among other things, information with respect to
the financial condition, results of operations and businesses of EZ, on both
an historical and prospective basis, and current industry, economic and market
conditions. In evaluating EZ's prospects and the terms of the Merger, the EZ
Board considered, among other things, the strengths of EZ's radio broadcasting
business, including the markets in which it operates, its management team,
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sales/marketing expertise, commitment to community relations and customer
service, and its leadership role in broadcast industry affairs. The EZ Board
also considered the current industry-specific challenges facing the business
including, among other things, increased capital requirements, competition
from new entrants into the radio broadcasting industry, competition from new
broadcast technologies and competition from larger and rapidly growing
competitors established pursuant to the changes effected by the
Telecommunications Act.
Terms of the Voting Agreement. The EZ Board reviewed the terms of the EZ
Voting Agreement pursuant to which, among other things, Messrs. Kellar and
Box, who together controlled 100% of the voting power of the EZ Class B Common
Stock, would agree to grant American a proxy (effective on the 31st day
following the date of that agreement) to vote their shares in favor of the
transactions contemplated by the Merger Agreement. The EZ Board also
considered the terms of the American Voting Agreement pursuant to which, among
other things, Messrs. Dodge and Stoner, who together controlled more than
40.0% of the voting power of the American Voting Stock, would agree to grant
EZ a proxy to vote their shares in favor of the transactions contemplated in
the Merger Agreement. See "The Special Meetings--Required Votes" and "--
Ownership of Securities".
American's Business, Condition and Prospects. The EZ Board also reviewed
information presented by CS First Boston with respect to the financial
condition, results of operations and businesses of American on both an
historical and prospective basis, and current industry, economic and market
conditions. In evaluating a possible merger with American, the EZ Board
considered, among other things, the strengths of American's radio broadcasting
business, including the markets in which it operates, its management team, and
other industry matters.
Opinion of CS First Boston. The EZ Board considered as favorable to its
determination the oral opinion delivered by CS First Boston on August 3, 1996,
subsequently confirmed in a written opinion to the EZ Board dated as of August
5, 1996, that, as of such date, the consideration to be received by the EZ
Stockholders pursuant to the Merger was fair to such stockholders from a
financial point of view. The EZ Board also considered the presentations made
to it by CS First Boston. See "Opinion of Financial Advisor to EZ". A copy of
the written opinion of CS First Boston is attached as Appendix III and is
incorporated herein by reference.
Amended and Restated Merger Agreement. Subsequent to the execution and
delivery of the Original Agreement, American and EZ agreed that it would be in
the best interests of their respective stockholders to amend the Original
Agreement to deal with the possibility that the holders of the EZ Senior Notes
would not agree to amendments to the EZ Senior Note Indenture on satisfactory
terms. Accordingly, on September 24, 1996, the EZ Board unanimously approved
the Merger Agreement which provided for, among other things, either the Direct
Merger or the Subsidiary Merger and, thereafter, it was executed and delivered
by American and EZ.
THE EZ BOARD UNANIMOUSLY RECOMMENDS THAT HOLDERS OF EZ COMMON STOCK VOTE FOR
THE PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT.
OPINION OF FINANCIAL ADVISOR TO EZ
CS First Boston acted as exclusive financial adviser to EZ in connection
with the Merger and has assisted the EZ Board in its examination of the
fairness, from a financial point of view, of the Merger Consideration to be
received by the holders of EZ Common Stock.
On August 3, 1996, CS First Boston delivered its oral opinion to the EZ
Board (subsequently confirmed in writing as of August 5, 1996) to the effect
that as of such date and based upon and subject to certain matters stated
therein, the consideration to be received by the EZ Stockholders in the Merger
was fair to such stockholders from a financial point of view. The full text of
CS First Boston's written opinion dated as of August 5, 1996, which sets forth
the assumptions made, matters considered and limitation on review undertaken,
is attached as Appendix III to this Proxy Statement and is incorporated herein
by reference. CS First Boston's opinion is directed to the EZ Board and the
fairness of the consideration to be received by the EZ Stockholders in the
Merger from a financial point of view and does not address any other aspect of
the Merger or any related transaction and does not constitute a recommendation
to any EZ Stockholder as to how such stockholder should
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vote at the EZ Special Meeting. The summary of the opinion of CS First Boston
set forth in this Proxy Statement is qualified in its entirety by reference to
the full text of such opinion.
In connection with its opinion, CS First Boston reviewed the Merger
Agreement and certain publicly available business and financial information
relating to EZ and American. CS First Boston also has reviewed certain other
information, including financial forecasts, provided to CS First Boston by EZ
and American, and met with the respective managements of EZ and American to
discuss the businesses and prospects of EZ and American. CS First Boston also
considered certain financial and stock market data of EZ and American, and
compared that data with similar data for other publicly held companies in
businesses similar to those of EZ and American and considered, to the extent
publicly available, the financial terms of certain other business combinations
that have recently been effected. CS First Boston also considered such other
information, financial studies, analyses and investigations and financial,
economic and market criteria which it deemed relevant. For purposes of its
opinion, CS First Boston assumed the consummation of (i) the EZ Probable
Transactions with respect to which agreements were executed and publicly
announced prior to August 3, 1996 and (ii) the American Probable Transactions
with respect to which agreements were executed and publicly announced prior to
July 25, 1996.
In connection with its review, CS First Boston did not assume any
responsibility for independent verification of any of the information provided
to or otherwise reviewed by CS First Boston and relied upon its being complete
and accurate in all material respects. With respect to the financial
forecasts, CS First Boston assumed that such forecasts were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the managements of EZ and American as to the future financial
performance of EZ and American. In addition, CS First Boston did not make an
independent evaluation or appraisal of the assets or liabilities (contingent
or otherwise) of EZ or American, nor was CS First Boston furnished with any
such evaluations or appraisals. CS First Boston's opinion is necessarily based
upon information available to it and financial, stock market and other
conditions as they existed and could be evaluated on the date of its opinion.
CS First Boston expressed no opinion as to what the value of the American
Class A Common Stock actually would be when issued to the EZ Stockholders
pursuant to the Merger or the prices at which such American Class A Common
Stock will trade subsequent to the Merger. In connection with its engagement,
CS First Boston was requested to approach third parties to solicit indications
of interest in a possible acquisition of EZ and held discussions with certain
of these parties prior to the date on which its opinion was rendered. Although
CS First Boston evaluated the Merger Consideration from a financial point of
view, CS First Boston was not requested to, and did not, recommend the
specific consideration payable in the Merger. No other limitations were
imposed by the EZ Board on CS First Boston with respect to the investigations
made or procedures followed by CS First Boston in rendering its opinion.
In preparing its opinion for the EZ Board, CS First Boston performed a
variety of financial and comparative analyses, including those described
below. The summary of CS First Boston's analyses set forth below does not
purport to be a complete description of the analyses underlying CS First
Boston's opinion. The preparation of a fairness opinion is a complex analytic
process involving various determinations as to the most appropriate and
relevant methods of financial analyses and the application of those methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description.
In arriving at its opinion, CS First Boston made qualitative judgments as to
the significance and relevance of each analysis and factor considered by it.
Accordingly, CS First Boston believes that its analyses must be considered as
a whole and that selecting portions of its analyses and factors, without
considering all analyses and factors, could create an incomplete view of the
processes underlying such analyses and its opinion. In its analyses, CS First
Boston made numerous assumptions with respect to EZ, American, industry
performance, regulatory, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of EZ and
American. No company, transaction or business used in such analyses as a
comparison is identical to EZ, American or the Merger, nor is an evaluation of
the results of such analyses entirely mathematical; rather, it involves
complex considerations and judgments concerning financial and operating
characteristics and other factors that could affect the acquisition, public
trading or other values of the
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companies, business segments or transactions being analyzed. The estimates
contained in such analyses and the ranges of valuations resulting from any
particular analyses are not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or
less favorable than those suggested by such analyses. In addition, analyses
relating to the value of businesses or securities do not purport to be
appraisals or to reflect the prices at which businesses or securities actually
may be sold. Accordingly, such analyses and estimates are inherently subject
to substantial uncertainty.
The following is a summary of the material analyses performed by CS First
Boston.
EZ Comparable Company Analysis. CS First Boston reviewed and compared
certain actual and forecasted financial, operating and stock market
information of EZ to selected publicly traded radio broadcasting companies
considered by CS First Boston to be reasonably comparable to EZ. These
companies included American, Chancellor, Clear Channel, Emmis, Evergreen,
Infinity, Jacor, Saga and SFX (the "EZ Comparable Companies"). CS First Boston
calculated a range of market multiples for the EZ Comparable Companies by
dividing the market capitalization (total common shares outstanding plus "in
the money" exercisable options multiplied by the closing market price per
share on August 2, 1996 plus latest reported total debt, preferred stock and
minority interest, minus cash and cash equivalents and option proceeds, the
"Market Capitalization") of each of the EZ Comparable Companies by net
revenues, earnings before interest, taxes, depreciation and amortization
("EBITDA") plus corporate expenses ("BCF") and EBITDA estimates of selected
investment banking firms for each of the EZ Comparable Companies for fiscal
1997. This analysis indicated that the average multiples of 1997 estimated net
revenues, BCF and EBITDA were 5.3x, 12.7x and 13.5x, respectively. CS First
Boston derived the appropriate valuation range for EZ by comparing EZ's
business and performance to those of the EZ Comparable Companies (specifically
considering market presence, same station growth and BCF as a percentage of
net revenues). CS First Boston determined that the relevant ranges of
multiples derived from the EZ Comparable Companies were: (i) net revenues:
5.0x--5.5x; (ii) BCF: 11.5x--12.5x; and (iii) EBITDA: 13.0x--13.5x. CS First
Boston then calculated imputed valuation ranges for EZ by applying EZ
management's forecasted results for EZ for fiscal year 1997 to the multiples
derived from its analysis of the EZ Comparable Companies. This analysis
resulted in a reference range of values for EZ of $585 million to $660
million. This reference range of values was then adjusted for non-operating
assets and liabilities including (i) net debt (total debt less cash and cash
equivalents) of $220.1 million and (ii) option proceeds of $7.0 million
(collectively, the "EZ Corporate Adjustments") to yield an equity reference
range of values which was then divided by 9,622,054 fully diluted shares
outstanding of EZ Common Stock (including 521,333 shares issuable upon
exercise of options) to yield a valuation reference range for EZ of $38.65 to
$46.45 per share.
EZ Comparable Acquisition Analysis. CS First Boston analyzed the purchase
prices and multiples paid or proposed to be paid in selected merger or
acquisition transactions using publicly available information in the radio
broadcasting industry which occurred since August 1995 including: Heftel
Broadcasting Corp. ("Heftel") and Clear Channel/Tichenor Media Systems, Inc.;
Westinghouse/Infinity; Clear Channel/Heftel; Cox Radio, Inc./NewCity
Communications, Inc.; Chancellor/OmniAmerica Communications, Inc.; Clear
Channel/Radio Equity Partners L.P.; SFX/Multi-Market Radio; American/Henry
Broadcasting Company; Infinity/Granum Holdings L.P.; Jacor/Citicasters Inc.;
SFX/Prism Radio Partners L.P.; Jacor/Noble Broadcast Group; SFX/Liberty
Broadcasting; Infinity/Alliance Broadcasting; Chancellor/Shamrock
Broadcasting; and Evergreen/Pyramid Communications, Inc. (the "EZ Comparable
Transactions"). CS First Boston selected these acquisitions based on the
comparability of businesses conducted by the acquired company to that of EZ.
CS First Boston calculated the adjusted purchase price (purchase price plus
total assumed debt less assumed cash) as a multiple of BCF for fiscal year
1996 (and 1995 and 1997, where appropriate). CS First Boston determined that
the relevant ranges of multiples derived from the EZ Comparable Transactions
were 15.5x to 16.5x 1996 BCF and 12.5x to 13.0x 1997 BCF. CS First Boston then
calculated imputed valuation ranges for EZ by applying EZ management's
forecasted results for EZ for fiscal years 1996 and 1997 to the multiples
derived from its analysis of the EZ Comparable Transactions. Using such
information, CS First Boston derived a reference range for values for EZ of
$625 million to $660 million. This reference range of values was then adjusted
for the EZ Corporate Adjustments to yield an equity reference range of values
which was then divided by 9,622,054 fully diluted shares outstanding of EZ
Common Stock (including 521,333 shares issuable upon exercise of options) to
yield a valuation reference
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range for EZ of $42.81 to $46.45 per share. CS First Boston also determined a
range of multiples derived from the EZ Comparable Transactions which was
relevant for valuing EZ's cash flowing stations only, rather than the entire
company. These ranges were 13.0x to 14.0x 1996 BCF and 10.5x to 11.5x 1997
BCF. CS First Boston then calculated imputed valuation ranges for EZ by
applying EZ management's forecasted results for EZ's cash flowing stations for
fiscal years 1996 and 1997 to the multiples derived from its analysis of the
EZ Comparable Transactions and adding EZ management's estimates regarding the
value of EZ's non-cash flowing or underperforming stations. Using such
information, CS First Boston derived a reference range of values for EZ of
$620 million to $675 million. This reference range of values was then adjusted
for the EZ Corporate Adjustments to yield an equity reference range of values
which was then divided by 9,622,054 fully diluted shares outstanding of EZ
Common Stock (including 521,333 shares issuable upon exercise of options) to
yield a valuation reference range for EZ of $42.29 to $48.00 per share.
EZ Discounted Cash Flow Analysis. CS First Boston performed a discounted
cash flow analysis of the projected cash flow of EZ for the period 1996
through 2005 based in part upon certain operating and financial assumptions,
forecasts and other information provided by the management of EZ. Using the
financial information set forth by management, CS First Boston calculated the
estimated free cash flow based on forecasted unleveraged net income (earnings
before interest and after taxes) adjusted for (i) certain non-cash items
(i.e., depreciation and amortization); (ii) forecasted capital expenditures;
and (iii) forecasted non-cash working capital investments. CS First Boston
analyzed the financial information provided by management and discounted the
stream of free cash flows provided in such forecast back to December 31, 1996
using discount rates ranging from 11.0% to 12.0%. To estimate the residual
value of EZ at the end of the forecast, CS First Boston applied a range of
terminal multiples of 9.0x to 12.0x to the forecasted fiscal year 2006 BCF and
discounted such value estimates back to December 31, 1996 using discount rates
ranging from 11.0% to 12.0%. The range of discount rates was selected based on
a variety of factors including analysis of the estimated cost of capital and
capital structure for companies operating in businesses similar to that in
which EZ operates, and the range of terminal year multiples was selected based
on the trading multiples for such companies. CS First Boston then summed the
present values of the free cash flows and the present value of the residual
values to derive a reference range of values for EZ. CS First Boston performed
this analysis based on two sets of assumptions: (i) EZ management's
projections (the "EZ Management Case") and (ii) a more conservative base case
of projections (the "EZ Base Case"). These analyses resulted in reference
ranges of values for EZ of $575 million to $730 million based on the EZ
Management Case and $555 million to $685 million based on the EZ Base Case.
These reference ranges of values were then adjusted for the EZ Corporate
Adjustments to yield equity reference ranges of values which were then divided
by 9,622,054 fully diluted shares outstanding of EZ Common Stock (including
521,333 shares issuable upon exercise of options) to yield valuation reference
ranges for EZ of $37.61 to $53.72 per share based on the EZ Management Case
and $35.53 to $49.04 per share based on the EZ Base Case.
American Comparable Company Analysis. CS First Boston reviewed and compared
certain actual and forecasted financial, operating and stock market
information of American to selected publicly traded radio broadcasting
companies considered by CS First Boston to be reasonably comparable to
American. These companies included EZ, Chancellor, Clear Channel, Emmis,
Evergreen, Infinity, Jacor, Saga and SFX (the "American (EZ) Comparable
Companies"). CS First Boston calculated a range of market multiples for the
American (EZ) Comparable Companies by dividing the Market Capitalization of
each of the American (EZ) Comparable Companies by net revenues, BCF and EBITDA
estimates of selected investment banking firms for each of the American
Comparable Companies for fiscal 1997. This analysis indicated that the average
multiples of 1997 estimated net revenues, BCF and EBITDA were 5.3x, 12.5x and
13.3x, respectively. CS First Boston derived the appropriate valuation range
for American by comparing American's business and performance to those of the
American (EZ) Comparable Companies (specifically considering market presence,
same station growth and BCF as a percentage of net revenues). CS First Boston
determined that the relevant ranges of multiples derived from the American
Comparable Companies were: (i) net revenues: 5.0x--5.5x; (ii) BCF: 13.5x--
15.5x; and (iii) EBITDA: 14.5x--15.5x. CS First Boston then calculated imputed
valuation ranges for American by applying American management's forecasted
results for American for fiscal year 1997 to the multiples derived from its
analysis of the American (EZ) Comparable Companies. This analysis resulted in
a reference range of values for American of $1.2 billion to $1.3 billion. This
reference range of values was then
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adjusted for non-operating assets and liabilities including (i) net debt
(total debt less cash and cash equivalents) of $301.2 million; (ii) $137.5
million of convertible exchangeable preferred stock; and (iii) option proceeds
of $4.1 million (collectively, the "American Corporate Adjustments") to yield
an equity reference range of values which was then divided by 21,506,412 fully
diluted shares outstanding of American Common Stock (including 271,200 shares
issuable upon exercise of options) to yield a valuation reference range for
American of $35.59 to $40.24 per share.
American Comparable Acquisition Analysis. CS First Boston analyzed the
purchase prices and multiples paid or proposed to be paid in the EZ Comparable
Transactions. CS First Boston selected these acquisitions based on the
comparability of businesses conducted by the acquired company to that of
American. CS First Boston calculated the adjusted purchase price (purchase
price plus total assumed debt less assumed cash) as a multiple of BCF for
fiscal year 1996 (and 1995 and 1997, where appropriate). CS First Boston
determined that the relevant range of multiples derived from the EZ Comparable
Transactions were 19.0x to 20.0x 1996 BCF and 14.0x to 15.0x 1997 BCF. CS
First Boston then calculated imputed valuation ranges for American by applying
American management's forecasted results for American for fiscal years 1996
and 1997 to the multiples derived from its analysis of the EZ Comparable
Transactions. Using such information, CS First Boston derived a reference
range for values for American of $1.25 billion to $1.34 billion. This
reference range of values was then adjusted for the American Corporate
Adjustments to yield an equity reference range of values which was then
divided by 21,506,412 fully diluted shares outstanding of American Common
Stock (including 271,200 shares issuable upon exercise of options) to yield a
valuation reference range for American of $37.91 to $42.10 per share. CS First
Boston also determined a range of multiples derived from the EZ Comparable
Transactions which was relevant for valuing American's cash flowing stations
only, rather than the entire company. These ranges were 16.5x to 17.5x 1996
BCF and 13.0x to 14.0x 1997 BCF. CS First Boston then calculated imputed
valuation ranges for American by applying American management's forecasted
results for American's cash flowing stations for fiscal years 1996 and 1997 to
the multiples derived from its analysis of the EZ Comparable Transactions and
adding American management's estimates regarding the value of American's
underperforming stations. Using such information, CS First Boston derived a
reference range of values for American of $1.3 billion to $1.37 billion. This
reference range of values was then adjusted for the American Corporate
Adjustments to yield an equity reference range of values which was then
divided by 21,506,412 fully diluted shares outstanding of American Common
Stock (including 271,200 shares issuable upon exercise of options) to yield a
valuation reference range for American of $40.24 to $43.49 per share.
American Discounted Cash Flow Analysis. CS First Boston performed a
discounted cash flow analysis of the projected cash flow of American for the
period 1996 through 2005 based in part upon certain operating and financial
assumptions, forecasts and other information provided by the management of
American. Using the financial information set forth by management, CS First
Boston calculated the estimated free cash flow based on forecasted unleveraged
net income (earnings before interest and after taxes) adjusted for (i) certain
non-cash items (i.e., depreciation and amortization); (ii) forecasted capital
expenditures; and (iii) forecasted non-cash working capital investments. CS
First Boston analyzed the financial information provided by management and
discounted the stream of free cash flows provided in such forecast back to
December 31, 1996 using discount rates ranging from 11.0% to 12.0%. To
estimate the residual value of American at the end of the forecast, CS First
Boston applied a range of terminal multiples of 10.0x to 13.0x to the
forecasted fiscal year 2006 BCF and discounted such value estimates back to
December 31, 1996 using discount rates ranging from 11.0x to 12.0x. The range
of discount rates was selected based on a variety of factors including
analysis of the estimated cost of capital and capital structure for companies
operating in businesses similar to that in which American operates, and the
range of terminal year multiples was selected based on the trading multiples
for such companies. CS First Boston then summed the present values of the free
cash flows and the present value of the residual values to derive a reference
range of values for American. CS First Boston performed this analysis based on
two sets of assumptions: (i) American management's projections (the "American
Management Case") and (ii) a more conservative base case of projections (the
"American Base Case"). These analyses resulted in reference ranges of values
for American of $1.4 billion to $1.8 billion based on the American Management
Case and $1.2 billion to $1.6 billion based on the American Base Case. These
reference ranges of values were then adjusted for the
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American Corporate Adjustments to yield equity reference ranges of values
which were then divided by 21,506,412 fully diluted shares outstanding of
American Common Stock (including 271,200 shares issuable upon exercise of
options) to yield valuation reference ranges for American of $44.89 to $63.49
per share based on the American Management Case and $35.59 to $54.19 per share
based on the American Base Case.
Other Factors and Analyses
In the course of preparing its opinion, CS First Boston performed certain
other analyses and reviewed certain other matters including, among other
things, (i) implied exchange ratios; (ii) pro forma capitalization of the
combined company; and (iii) EZ's and American's contributions to the combined
company.
Implied Exchange Ratios. CS First Boston reviewed the at-market exchange
ratios of EZ Class A Common Stock to American Class A Common Stock at
intervals of one day, one month, three months and one year preceding the
announcement of the Merger and compared these ratios to a conversion ratio of
1.201, which is the exchange ratio implied if the Merger Consideration were
100% stock, based upon a trading price of $39 1/8 per share of American Class
A Common Stock. This analysis demonstrated that the at-market exchange ratios
of EZ Class A Common Stock to American Class A Common Stock at intervals of
one day, one month, three months and one year preceding the announcement of
the Merger were 0.823, 0.687, 0.601 and 0.652, respectively. The implied
exchange ratio of 1.201 was also compared to the exchange ratio ranges implied
by the discounted cash flow analyses described above and the contribution
analysis described below. The exchange ratio ranges implied by the discounted
cash flow analyses and the contribution analysis were 0.552 to 1.487 and 1.023
to 1.382, respectively.
Contribution Analysis. CS First Boston reviewed certain financial
information (including net revenues, BCF and EBITDA) for EZ, American and the
pro forma combined entity resulting from the Merger based on estimated future
results of EZ and American forecasted by their respective managements. Based
on such review, CS First Boston analyzed the contribution of each of EZ and
American to the pro forma combined entity resulting from the Merger and
compared the results of such analysis to the approximately 28.7% ownership
interest of holders of shares of EZ Common Stock in the combined entity (EZ
Stockholders will also receive $11.75 per share in cash, which was not taken
into consideration for the purposes of this analysis). Such analysis indicated
that EZ would contribute to the pro forma combined entity resulting from the
Merger (i) based on projected results for fiscal 1996, 38.2% of net revenues,
38.2% of BCF and 37.7% of EBITDA; and (ii) based on projected results for
fiscal 1997, 31.4% of net revenues, 36.1% of BCF and 35.9% of EBITDA.
Merger Analysis. CS First Boston also analyzed certain pro forma effects
resulting from the Merger on the forecasted BCF per share of American for its
1997 fiscal year based on financial forecasts provided by EZ's and American's
managements for fiscal 1997. This analysis indicated that the Merger would be
accretive to BCF per share of American for its 1997 fiscal year.
General
CS First Boston is an internationally recognized investment banking firm
and, as part of its investment banking business, CS First Boston is regularly
engaged in the valuation of businesses and securities in connection with
mergers and acquisitions, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes. The EZ Board selected CS First Boston as its
financial adviser because of CS First Boston's experience and expertise.
Pursuant to the terms of CS First Boston's engagement, EZ has agreed to pay
CS First Boston for its services in connection with the Merger fees payable as
follows: (i) a financial advisory fee of $100,000, payable upon execution of
CS First Boston's engagement letter; and (ii) a transaction fee of 0.60% of
the aggregate consideration payable to the EZ Stockholders in connection with
the Merger, payable upon the closing of the Merger. The financial advisory fee
will be credited, to the extent paid, against the transaction fee. EZ also has
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agreed to reimburse CS First Boston for its out-of-pocket expenses, including
the fees and expenses of legal counsel and any other adviser retained by CS
First Boston, and to indemnify CS First Boston and certain related entities
against certain liabilities, including liabilities under the federal
securities laws.
In the ordinary course of business, CS First Boston and its affiliates may
actively trade the equity and debt securities of EZ and American for their own
accounts and for accounts of customers and, accordingly, may at any time hold
a long or short position in such securities. CS First Boston has in the past
performed certain financial advisory services for both EZ and American and has
received customary fees for such services.
A COPY OF THE WRITTEN OPINION OF CS FIRST BOSTON, DATED AS OF AUGUST 5,
1996, IS ATTACHED HERETO AS APPENDIX III. THE EZ STOCKHOLDERS ARE URGED TO
READ THE CS FIRST BOSTON OPINION CAREFULLY IN ITS ENTIRETY FOR THE ASSUMPTIONS
MADE, MATTERS CONSIDERED, SCOPE AND LIMITS OF THE REVIEW UNDERTAKEN AND
PROCEDURES FOLLOWED BY CS FIRST BOSTON IN CONNECTION WITH SUCH OPINION.
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THE MERGER AGREEMENT
The following is a brief summary of the material provisions of the Merger
Agreement, a copy of which is attached as Appendix I to this Proxy Statement
and is incorporated by reference herein. This summary is qualified in its
entirety by reference to the full and complete text of the Merger Agreement.
Capitalized terms used in this Section describing the provisions of the Merger
Agreement which are not otherwise defined in this Proxy Statement shall have
the meaning prescribed therefor in the Merger Agreement.
THE MERGER
If the Direct Merger is effected, pursuant to the Merger Agreement and
subject to the terms and conditions thereof, EZ will be merged with and into
American, with American continuing as the surviving corporation. If the
Subsidiary Merger is effected, pursuant to the Merger Agreement and subject to
the terms and conditions thereof, EZ will be merged with and into American
Subsidiary, with American Subsidiary continuing as the surviving corporation
and a wholly-owned subsidiary of American. As a result of the Merger, the
separate corporate existence of EZ will cease.
Subject to the terms and conditions of the Merger Agreement, the Closing of
the transactions contemplated thereby will take place on the Closing Date
which is the later of (i) the tenth business day after the date on which the
last of the conditions set forth in the Merger Agreement, other than those to
be satisfied on the Closing Date, is fulfilled or waived, and (ii) January 8,
1997, unless another date is agreed to by EZ and American. The Merger will
become effective at the Effective Time, which will be the time at which a
Certificate of Merger is filed with the Secretary of State of the State of
Delaware and Articles of Merger are filed with the State Corporation
Commission of the Commonwealth of Virginia and such Commission shall have
issued a Certificate of Merger, or such later time as is specified in such
documents.
CONVERSION OF SECURITIES
Conversion of EZ Common Stock. Upon consummation of the Merger, each share
of EZ Common Stock, including each share of EZ Class A Common Stock and each
share of EZ Class B Common Stock, issued and outstanding immediately prior to
the Effective Time (other than Dissenting Shares) will be converted into the
right to receive a (a) $11.75 and (b) 0.9 shares of American Class A Common
Stock.
Conversion of EZ Options. Upon consummation of the Merger, each EZ Option to
purchase shares of EZ Common Stock outstanding immediately prior to the
Effective Time will be exchanged for an Exchanged Option to purchase a number
of shares of American Class A Common Stock equal to the product of the number
of shares of EZ Common Stock which the holder is entitled to purchase under
the EZ Option multiplied by the Exchange Ratio (0.9), at a price per share
equal to the quotient obtained by dividing (a) the per share option exercise
price determined pursuant to the EZ Option less $11.75, by (b) the Exchange
Ratio.
American or American Subsidiary Capital Stock. If the Direct Merger is
effected, upon consummation of the Merger, each share of American capital
stock (including each share of Convertible Preferred Stock and each share of
American Common Stock) issued and outstanding immediately prior to the
Effective Time will remain issued and outstanding and will not be changed in
any respect by the Merger. If the Subsidiary Merger is effected, upon
consummation of the Merger, each share of American Subsidiary capital stock
issued and outstanding immediately prior to the Effective Time will remain
issued and outstanding and will not be changed in any respect by the Merger.
EXCHANGE PROCEDURES
As soon as reasonably practicable after the Effective Time, Harris Trust and
Savings Bank, in its capacity as Exchange Agent (the "Exchange Agent"), will
mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time evidenced outstanding shares of EZ
Common Stock (other than
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Dissenting Shares and other than shares owned by EZ as treasury stock and
shares owned by American or by any wholly owned subsidiary of American or EZ)
("EZ Certificates") (i) a letter of transmittal and (ii) instructions for use
in effecting the surrender of the EZ Certificates in exchange for the Merger
Consideration.
Upon surrender of an EZ Certificate for cancellation to the Exchange Agent,
together with the letter of transmittal, duly executed, and such other
documents as American or the Exchange Agent may reasonably request, the holder
of such EZ Certificate will be entitled to receive promptly in exchange
therefor (i) the Cash Consideration that such holder has the right to receive
pursuant to the Merger Agreement (together with any cash in lieu of fractional
shares) and (ii) certificates representing that number of shares of American
Class A Common Stock that such holder has the right to receive (in each case
less the amount of any required withholding taxes, if any), and the EZ
Certificate so surrendered shall forthwith be canceled. Until surrendered,
each EZ Certificate will, at any time after the Effective Time, represent only
the right to receive the Merger Consideration with respect to the shares of EZ
Common Stock formerly represented thereby.
HOLDERS OF EZ COMMON STOCK SHOULD NOT SEND EZ CERTIFICATES WITH THE ENCLOSED
PROXY CARD. EZ STOCKHOLDERS SHOULD SEND EZ CERTIFICATES TO THE EXCHANGE AGENT
ONLY AFTER THEY RECEIVE, AND IN ACCORDANCE WITH THE INSTRUCTIONS ACCOMPANYING,
THE LETTER OF TRANSMITTAL.
No fractional shares of American Class A Common Stock will be issued upon
the surrender for exchange of EZ Certificates. In lieu of any such fractional
shares, the holders thereof will be entitled to receive from the Exchange
Agent a cash payment equal to such fraction multiplied by the closing price
per share of American Class A Common Stock on Nasdaq, as reported by the Wall
Street Journal, on the last trading day immediately preceding the Effective
Date.
No dividends or other distributions declared after the Effective Time on
American Class A Common Stock will be paid with respect to any shares of
American Class A Common Stock represented by an EZ Certificate until such EZ
Certificate is surrendered for exchange in accordance with the procedures
described above. EZ Stockholders will not be entitled to interest or other
income on the Cash Consideration.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains certain customary representations and
warranties relating to, among other things: (a) each of EZ's and American's
organization and similar corporate matters; (b) each of EZ's and American's
capital structure; (c) the authorization, execution, delivery, performance and
enforceability of the Merger Agreement with respect to EZ and American; (d)
the financial statements and certain other documents filed by EZ and American
with the Commission and the accuracy of the information contained therein; (e)
the absence of undisclosed material litigation relating to EZ and American;
(f) the absence of material adverse changes with respect to the business of EZ
and American; (g) certain tax and employee benefit matters with respect to EZ
and American; (h) the holding of all FCC licenses and other governmental and
private authorizations by EZ and American; and (i) certain environmental and
tax matters with respect to EZ and American. The Merger Agreement provides
that the representations and warranties of the parties do not survive
consummation of the Merger.
CERTAIN COVENANTS
The Merger Agreement contains certain customary covenants and agreements,
including, without limitation, the following:
Conduct of Business. American has agreed that, during the period from August
5, 1996 until the Effective Time, except as otherwise contemplated by the
Merger Agreement or as otherwise consented to in writing by EZ, American will,
and will cause its Subsidiaries to:
(a) conduct their respective businesses in the ordinary and usual course
of business and consistent with past practice, which includes the
acquisition of other radio broadcasting stations and communications towers;
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(b) not (i) amend or propose to amend their respective Organic Documents
in any manner Materially Adverse to the EZ stockholders or (ii) declare,
set aside or pay any dividend or distribution payable in cash, stock,
property or otherwise, on the American Common Stock;
(c) not (i) redeem, purchase, acquire or offer to purchase or acquire any
shares of its capital stock, Convertible Securities or Option Securities,
except to the extent required by the terms thereof, (ii) take or fail to
take any action which action or failure, to the knowledge of American,
would cause American, EZ or any of their respective stockholders (except to
the extent of the Cash Consideration or the receipt of cash in lieu of
fractional shares) to recognize gain or loss for federal income tax
purposes as a result of the consummation of the Merger, (iii) sell or
otherwise dispose of any assets or businesses other than sales in the
ordinary course of business and other than sales of one or more of the
American Stations (x) pursuant to agreements in effect on August 5, 1996,
(y) pursuant to agreements thereafter entered into and accounting for less
than twenty percent (20%) of Broadcast Cash Flow of American, or (iv) enter
into any contract, agreement, commitment or arrangement with respect to any
of the foregoing;
(d) use all reasonable business efforts to preserve intact their
respective business organizations and goodwill, keep available the services
of their respective present officers and key employees, and preserve the
goodwill and business relationships with customers and others having
business relationships with them and not engage in any action, directly or
indirectly, with the intent to adversely affect the transactions
contemplated by the Merger Agreement;
(e) confer on a regular and frequent basis with one or more
representatives of EZ to report Material operational matters and the
general status of ongoing operations; and
(f) maintain with financially responsible insurance companies insurance
on their respective tangible assets and their respective businesses in such
amounts and against such risks and losses as are consistent with past
practice.
EZ has agreed that, during the period from August 5, 1996 until the
Effective Time, except as otherwise contemplated by the Merger Agreement or as
otherwise consented to in writing by American, EZ will, and will cause its
Subsidiaries to:
(a) conduct their respective businesses in the ordinary and usual course
of business and consistent with past practice;
(b) not (i) amend or propose to amend their respective Organic Documents,
(ii) split, combine or reclassify (whether by stock dividend or otherwise)
their outstanding capital stock, or (iii) declare, set aside or pay any
dividend or distribution payable in cash, stock, property or otherwise on
the EZ Common Stock, except for the payment of dividends or distributions
by a direct or indirect wholly-owned Subsidiary of EZ;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any shares of EZ Common Stock, Convertible Securities
or Option Securities, except that EZ may issue shares upon (i) conversion
of Convertible Securities and (ii) exercise of Option Securities
outstanding on August 5, 1996;
(d) not (i) incur or become contingently liable with respect to any
indebtedness for borrowed money other than (A) borrowings in the ordinary
course of business or (B) borrowings to refinance existing indebtedness,
(ii) redeem, purchase, acquire or offer to purchase or acquire any shares
of its capital stock, Convertible Securities or Option Securities, (iii)
take or fail to take any action which action or failure, to the knowledge
of EZ, would cause American, EZ or any of their respective stockholders
(except to the extent of the Cash Consideration or the receipt of cash in
lieu of fractional shares) to recognize gain or loss for federal income tax
purposes as a result of the consummation of the Merger, (iv) sell, pledge,
dispose of or encumber any assets or businesses other than sales in the
ordinary course of business, or (v) enter into any contract, agreement,
commitment or arrangement with respect to any of the foregoing;
(e) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill
and business relationships with customers and others having business
relationships with them and not engage in any action, directly or
indirectly, with the intent to adversely impact the transactions
contemplated by the Merger Agreement;
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(f) confer on a regular and frequent basis with one or more
representatives of American to report Material operational matters and the
general status of ongoing operations;
(g) not enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key employees,
except in the ordinary course and consistent with past practice or
reasonable performance or severance bonuses related to the transactions
contemplated by the Merger Agreement; provided, however, that EZ and its
Subsidiaries shall in no event enter into any written employment agreement
which provides for an annual base salary in excess of $100,000 and has a
term in excess of one year or enter into or amend any severance or
termination arrangement;
(h) not adopt, enter into or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
health care, employment or other employee benefit plan, agreement, trust,
fund or arrangement for the benefit or welfare of any employee or retiree,
except as required to comply with changes in Applicable Law; and
(i) maintain with financially responsible insurance companies insurance
on their respective tangible assets and their respective businesses in such
amounts and against such risks and losses as are consistent with past
practice.
Notwithstanding the foregoing covenants, the Merger Agreement provides that
nothing contained therein shall give to (a) American, directly or indirectly,
rights to control or direct EZ's operations prior to the Effective Time, or
(b) EZ, directly or indirectly, rights to control or direct American's
operations prior to the Effective Time. The Merger Agreement further provides
that prior to the Effective Time, consistent with the terms and conditions of
the Merger Agreement, (a) EZ shall exercise, complete control and supervision
of its operations, and (b) American shall exercise complete control and
supervision of its operations.
Meetings of Stockholders. American and EZ have agreed, as promptly as
practicable after the execution of the Original Agreement, to duly call, give
notice of, convene and hold the American Special Meeting and the EZ Special
Meeting, respectively. As discussed under "--Conditions to the Merger",
consummation of the Merger is conditioned upon adoption of the Charter
Amendment by the American Stockholders. Certain holders of American Voting
Stock and EZ Class B Common Stock have agreed to vote such shares in favor of
adoption of the Merger. See "Ancillary Agreements--Voting Agreements".
Subject to the fiduciary duties of the American Board and the EZ Board,
respectively, under applicable law and to the right of the EZ Board to
terminate the Merger Agreement as described in clause (b) of the third
paragraph under "--Termination--Termination Events", American and EZ have
agreed, through the American Board and the EZ Board, respectively, to
recommend, and to use their reasonable business efforts to solicit from their
respective stockholders proxies in favor of, approval and adoption of the
Merger Agreement and, in the case of American, the Charter Amendment, and to
take all other action necessary to secure such approvals at the American
Special Meeting and the EZ Special Meeting, as the case may be.
No Solicitation. From the date of the Merger Agreement until the Effective
Time, EZ has agreed that it will not, nor will it permit any of its
Subsidiaries, nor will it authorize or permit any of its officers, directors,
employees, agents, investment bankers, attorneys, financial advisors or other
representatives or those of any of its Subsidiaries to, directly or
indirectly, solicit or initiate (including by way of furnishing any non-public
information concerning EZ's business, properties or assets), discussions,
inquiries or proposals or participate in any negotiation for the purpose or
with the intention of leading to any proposal concerning any Purchase Proposal
for the sale of all or substantially all of EZ's assets (including without
limitation the purchase of all or substantially all of the common stock of
Professional Broadcasting, Incorporated, a wholly-owned Subsidiary of EZ
("PBI")) or for the purchase of all or substantially all of EZ's equity
securities, except for the transactions with American contemplated by the
Merger Agreement. Notwithstanding the foregoing restriction, EZ is permitted
to furnish information concerning its business, properties or assets, and may
engage in negotiations, in connection with a possible Purchase Proposal if the
Board of Directors of EZ makes a Fiduciary Determination.
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The term "Purchase Proposal" means any proposal or offer to acquire all or
substantially all of the assets of EZ and its Subsidiaries (including without
limitation all or substantially all of the common stock of PBI) or all or
substantially all of EZ's equity securities, whether by merger, purchase of
assets, tender offer or otherwise, whether for cash, securities or any other
consideration or combination thereof.
In the event that EZ shall determine to provide any information or negotiate
as described in the preceding paragraph, or shall receive any offer of the
type referred to in the preceding paragraph, unless the EZ Board concludes
that such disclosure is inconsistent with its fiduciary duties under
Applicable Law, it shall (i) immediately provide American a copy of all
information provided to the third party, (ii) inform American that information
is to be provided, that negotiations are to take place or that an offer has
been received, as the case may be, and (iii) furnish to American the identity
of the Person receiving such information or the proponent of such offer, if
applicable, and, if any offer has been received, a copy of such offer or, if
oral, a description of the Material terms thereof.
If, prior to the approval of the Merger by the EZ Stockholders, EZ shall
receive a firm, bona fide written proposal or proposals from any Person
relating to any Purchase Proposal, and the EZ Board shall determine in good
faith, based upon the advice of independent counsel, and after receiving
advice from EZ's financial advisor, that fiduciary obligations under
Applicable Law require the EZ Board to terminate the Merger Agreement and
accept the Purchase Proposal (a "Fiduciary Determination"), then EZ may,
subject to the following provisions, terminate the Merger Agreement; provided,
however, that (i) EZ is required to give its termination notice on or before
the later of (A) the 30 Day Date (as defined below) and (B) the day that is
five (5) business days after EZ's receipt of the Purchase Proposal, and (ii)
upon EZ's notification to American of such termination, EZ is required to
comply with the following provisions. If EZ receives a Purchase Proposal in
accordance with the provisions of the Merger Agreement which the EZ Board
wishes to accept: (i) EZ shall promptly notify American in writing of such
Purchase Proposal and of the material terms and conditions thereof; (ii)
American shall be entitled, within five (5) days after such notification, to
revise its offer to consummate the Merger and to communicate such revised
offer in writing to EZ; and (iii) EZ shall consider any such revised offer in
connection with its Fiduciary Determination. The rights of American described
above terminate upon any proper termination of the Merger Agreement other than
pursuant to the provisions dealing with a Fiduciary Determination. If EZ
terminates the Merger Agreement pursuant to the foregoing provisions or
paragraph (g) under "--Termination--Termination Events":
(a) on or before the day thirty (30) days after the date of the Original
Agreement (the "30 Day Date"), or in the event American does not elect to
exercise its rights to purchase assets of EZ pursuant to the provisions of
paragraph (b) below, then EZ shall promptly pay American the cash sum of
$15.0 million; and
(b) after the 30 Day Date, then American shall have the right to purchase
the assets of all of the EZ Stations in any one of EZ's geographic markets
(i.e., one of the markets in which EZ owns (and not subject to a contract
for sale) stations at the time of such termination) at a purchase price
payable in cash equal to the Station Fair Market Value of such stations as
of the date EZ so terminates the Merger Agreement less $10.0 million.
The term "Station Fair Market Value" shall mean the fair market value of the
EZ Stations which American has elected to purchase pursuant to the provisions
of paragraph (b) above as determined by mutual agreement of American and EZ
or, in the event they are unable to so agree within thirty (30) days, by
arbitration determined by the agreement of two investment bankers
knowledgeable in radio station valuations selected one by American and one by
EZ. In the event such investment bankers are unable to agree on the Station
Fair Market Value within thirty (30) days, they shall appoint a third
investment banker, so knowledgeable, or failing agreement on such third
investment banker, it shall be appointed by the President of the New York City
Chapter of the American Arbitration Association. The decision of the third
investment banker however so appointed shall be binding on American and EZ. In
the event American shall elect to exercise its rights to so purchase the EZ
Stations, it shall, within ten (10) days after EZ's termination of the Merger
Agreement, notify EZ in writing of such election and identify the EZ Stations
it has elected to purchase. Thereafter, American and EZ shall negotiate in
good faith an asset purchase agreement with respect to such transaction
containing terms and conditions customary in the radio
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industry for the purchase and sale of radio stations, including, without
limitation, representations and warranties, covenants, closing conditions and
survival of the representations and warranties for a reasonable period of
time.
Indemnification. From and after the Effective Time, American (if the Direct
Merger is effected) or American Subsidiary (if the Subsidiary Merger is
effected), as the case may be, has agreed to indemnify, defend and hold
harmless the present and former officers, directors and employees of EZ
(collectively, the "Indemnified Parties") against all losses, expenses,
claims, damages, liabilities or amounts that are paid in settlement of, or
otherwise in connection with any claim, action, suit, proceeding or
investigation (a "claim"), based in whole or in part on the fact that such
person is or was a director, officer or employee of EZ and arising out of
actions or omissions occurring at or prior to the Effective Time (including,
without limitation, in connection with the Merger Agreement, the Merger and
the transactions contemplated hereby), in each case to the fullest extent
permitted under the DGCL (and has agreed to pay any expenses in advance of the
final disposition of any such action or proceeding to each Indemnified Party
to the fullest extent permitted under the DGCL, upon receipt from the
Indemnified Party to whom expenses are advanced of any undertaking to repay
such advances required under the DGCL). So long as American shall maintain
directors' and officers' liability insurance for its then current directors
and officers, American has agreed to maintain in effect for a period of six
(6) years after the Effective Time the current policies of directors' and
officers' liability insurance maintained by EZ (provided that American may
substitute therefor policies which it is then maintaining for its directors
and officers so long as such policies are not materially less advantageous to
such directors and officers) with respect to claims arising from facts or
events which occurred at or before the Effective Time.
Employee Benefits. Prior to Closing, all officers of EZ who are parties to
agreements that would provide to them cash compensation upon a change of
control (as defined therein) of EZ are required to execute amendments and/or
waivers of the cash compensation provisions applicable upon such a change of
control or upon a voluntary termination of employment by any such employee.
Certain Efforts. Pursuant to the Merger Agreement, each of American and EZ
have agreed to use reasonable business efforts (x) to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable under Applicable Law to consummate the Merger, and (y) to
refrain from taking, or cause to be taken, any action and to refrain from
doing or causing to be done, anything which could impede or impair the
consummation of the Merger, subject to any fiduciary obligations of the EZ
Board or the American Board, including, in all cases, without limitation,
using its reasonable business efforts (a) to prepare and file with the
applicable Authorities as promptly as practicable after the execution of the
Original Agreement all requisite applications and amendments thereto, together
with related information, data and exhibits, necessary to request issuance of
orders approving the Merger by all such applicable Authorities, each of which
is required to be obtained or become final in order to satisfy the condition
applicable to it set forth in the Merger Agreement, (b) to obtain all
necessary or appropriate waivers, consents and approvals, (iii) to effect all
necessary registrations, filings and submissions (including without limitation
filings under the HSR Act, and all filings necessary for American to own and
operate the EZ Stations), (iv) to lift any injunction or other legal bar to
the Merger (and, in such case, to proceed with the Merger as expeditiously as
possible), and (v) to obtain the satisfaction of the conditions specified in
the Merger Agreement, including without limitation the truth and correctness
as of the Closing Date as if made on and as of the Closing Date of the
representations and warranties of such party and the performance and
satisfaction as of the Closing Date of all agreements and conditions to be
performed or satisfied by such party. Within thirty (30) business days
following the date of the Merger Agreement, EZ and American are required to
file with the FCC appropriate applications for FCC Consents, which
applications shall include a request for a temporary waiver of Section
73.3555(a) of the FCC's rules and regulations with respect to American's
proposed ownership of radio stations in the Sacramento, California market. The
grant of a temporary waiver by the FCC requiring American to file with the
FCC, within no less than six (6) months following the Closing Date, one or
more assignment or transfer applications proposing divestiture of one or more
radio stations in the Sacramento radio market, is not to be deemed a Material
Adverse Effect and American has agreed to accept an FCC grant of the FCC
Consents including such a condition. American and EZ filed their respective
FCC applications on October 1, 1996. American and EZ have agreed to prosecute
such
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applications with all reasonable diligence and otherwise use reasonable
business efforts to obtain the grant of FCC Consents to such applications as
expeditiously as practicable. If the FCC Consents, or any of them, imposes any
condition on either American or EZ, it is required to use reasonable business
efforts to comply with such condition unless compliance would be unduly
burdensome or would have a Material Adverse Effect upon it. If reconsideration
or judicial review is sought with respect to any FCC Consent, EZ and American
have agreed to oppose such efforts to obtain reconsideration or judicial
review, although such agreements do not, and are not intended to, limit the
right to terminate the Merger Agreement pursuant to the provisions thereof
dealing with termination. The Merger is expressly conditioned upon the grant
of the Final Order as to the FCC Consents for the transfer of the FCC Licenses
for the EZ Stations without any condition Materially Adverse to American.
American and EZ have also undertaken and agreed to file as soon as
practicable after the execution of the Original Agreement a Notification and
Report Form under the HSR Act with the FTC and the Antitrust Division.
American and EZ made such filings on October 24, 1996. Each of the parties
have agreed to (a) use its reasonable business efforts to comply as
expeditiously as possible with all lawful requests of the FTC or the Antitrust
Division for additional information and documents and (b) not extend any
waiting period under the HSR Act or enter into any agreement with the FTC or
the Antitrust Division not to consummate the transactions contemplated by this
Agreement, except with the prior written consent of the other parties to the
Merger Agreement. See "--Regulatory Matters" below.
Certain Other Covenants. Both EZ and American have also agreed, among other
things: (a) to consult with each other prior to issuing any press release or
public statement; (b) that each party and its representatives be granted
access to the management, accounts, books, records, contracts, and other
materials, as well as to the directors, officers, employees and independent
accountants, of the other party; (c) that American will use its reasonable
business efforts to cause the shares of American Class A Common Stock to be
issued in the Merger to be listed on Nasdaq; (d) that EZ will use its
reasonable business efforts to cause to be delivered to American, prior to the
Closing, a letter from each "affiliate" of EZ agreeing not to dispose of
shares of American Class A Common Stock to be received pursuant to the Merger
in violation of the Securities Act; and (e) to use reasonable business efforts
to cause the Merger to be treated as a tax-free reorganization for federal
income tax purposes.
INTEREST OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the EZ Board with respect to the
Merger, the EZ Stockholders should be aware that certain members of EZ's
management and the EZ Board have certain interests in the Merger that may
present them with actual or potential conflicts of interest.
Director and Officer Positions. At the Closing, Messrs. Kellar and Box will
enter into a stockholder agreement with American (the "Stockholder Agreement")
pursuant to which such persons jointly shall have the right to nominate two
(2) persons to the Board of Directors of American so long as they collectively
continue to hold (i) more than fifty percent (50%) of the American Class A
Common Stock received by them pursuant to consummation of the Merger and (ii)
shares of American Class A Common Stock representing not less than 4.5% of the
number of shares of American Common Stock outstanding on a pro forma fully
diluted basis (i.e., giving effect to the conversion of all Convertible
Securities and the exercise of all Option Securities at the time outstanding).
The Stockholder Agreement will also provide that so long as Messrs. Kellar and
Box continue to own collectively shares of American Class A Common Stock
satisfying one but not both of the requirements of clauses (i) and (ii) of the
preceding sentence, they shall jointly be entitled to nominate one (1) person
to the Board of Directors of American, and if they cease to own collectively a
sufficient number of shares of American Class A Common Stock to satisfy either
of such requirements they shall no longer have any right to nominate a
director. The Stockholder Agreement will permit Messrs. Kellar and Box to
transfer the stock subject to such Agreement to their immediate family members
or a trust for the benefit of such persons, and the holdings of such persons
(of such transferred stock) shall be included in the determination of whether
the requirements of clauses (i) and (ii) of the first sentence of this
paragraph are satisfied. The Stockholder Agreement will also provide that any
nominee other than Mr. Kellar or Mr. Box must be reasonably acceptable to the
American Board. It is anticipated that Messrs. Kellar and Box will, pursuant
to the Stockholder Agreement, become
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directors of American. It is also anticipated that Mr. Kellar will be elected
to the Executive Committee and the Compensation Committee of the American
Board and Mr. Box will become an Executive Vice President of American. The
existing employment agreements of each of Messrs. Kellar and Box will be
terminated and Mr. Kellar will receive a payment of $250,000 in lieu of the
severance payments to which he is entitled under his employment agreement.
Indemnification. The directors and officers of EZ will be indemnified by
American and American is obligated, subject to certain conditions, to provide
insurance for such directors and officers as described under "--Certain
Covenants--Indemnification" above.
Registration Rights. American will enter into a registration rights
agreement with Messrs. Kellar, Box and each other Person executing an
Affiliate Agreement (the "Registration Rights Agreement"), in the form of the
presently existing registration rights agreement of American. The Registration
Rights Agreement provides that, subject to certain limitations and conditions,
all stockholders that are a party thereto, including existing stockholders who
are parties thereto, will be entitled to three "demand" registration rights
and unlimited "piggyback" registration rights to register American Class A
Common Stock held by such persons under the Securities Act.
REGULATORY MATTERS
The receipt of certain federal and state governmental or regulatory
approvals are required in order to consummate the Merger, including the
approval of the FCC, and the expiration or termination of the applicable
waiting period under the HSR Act. American and EZ have agreed in the Merger
Agreement to use all reasonable efforts to obtain such approvals or waivers,
but there can be no assurance as to when or if such approvals or waivers will
be obtained.
FCC Approvals. On October 1, 1996, American and EZ filed an application (the
"EZ Transfer Application") with the FCC requesting the FCC's consent to
transfer control of the subsidiaries of EZ holding the FCC licenses for each
of EZ's radio stations, from the holders of EZ Common Stock to American. As a
result of the transfer and giving effect to the American Probable
Transactions, American and its subsidiaries would have an attributable
interest in seven FM stations and four AM stations in two separate contour-
based markets in the vicinity of Sacramento. In the first market, American
would have an attributable interest in nine radio stations (4 AM and 5 FM),
one above the limit allowed by the FCC's rules. Similarly, in the second
market, American would have an attributable interest in ten radio stations (6
FM and 4 AM), two above the limit allowed by the FCC's rules. American has
requested a temporary twelve-month waiver to divest itself of one AM station
and one FM station that are a part of both contour-defined markets so as to
bring itself into compliance with the FCC's radio multiple ownership rules. If
the FCC does not grant a temporary waiver, but otherwise consents to the
Merger, American could not consummate the Merger unless the excess Sacramento
stations were assigned to third parties. There can be no assurance that
American will be able to obtain full value for such stations nor that such
sales would not have a material adverse impact upon American's business,
financial condition and results of operations, particularly if a temporary
waiver were not obtained. In such event, American's intention would be to seek
reconsideration and/or appellate court review of the FCC's decision. See
"Business--Recent Transactions--Pending Acquisitions and Dispositions--
Sacramento" in Appendix V for information with respect to agreements relating
to the disposition of one AM and one FM station in Sacramento.
On October 11, 1996, the EZ Transfer Application was accepted by the FCC.
Pursuant to the Communications Act and the FCC's rules, interested third
parties will have until November 12, 1996 to file petitions to deny the EZ
Transfer Application, and thereafter may file informal objections until the EZ
Transfer Application is granted. As of October 28, 1996, no party, to
American's or EZ's knowledge, had filed a petition to deny or other objection
to the EZ Transfer Application. To date, the FCC has not acted on the EZ
Transfer Application.
In the event that an opposition against the EZ Transfer Application is filed
that raises substantial issues, the FCC will determine on the basis of the
opposition, responses to the opposition that may be filed by American and/or
EZ, and such other facts as it may officially notice, whether there are
substantial and material issues of fact that will require an evidentiary
hearing to resolve. In the absence of issues requiring an evidentiary hearing,
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and upon a finding that a grant of the EZ Transfer Application (and the
associated waivers noted above) would serve the public interest, convenience
and necessity, the FCC, or the FCC's staff acting by delegated authority, will
grant the EZ Transfer Application. In the unlikely event that there are any
issues of fact which cannot be resolved without an evidentiary hearing, the
FCC must designate the EZ Transfer Application for such a hearing, and the
consummation of the Merger could be jeopardized due to the length of time
ordinarily required to complete such proceedings.
Within thirty days following FCC public notice of such a grant, parties in
interest may file a petition for reconsideration requesting that the FCC (or
the FCC's staff in the case of a staff grant which is unlikely in the case of
a transfer of control or assignment involving an unusual waiver request),
reconsider its action. Alternatively, in the case of a staff grant, parties in
interest may within the same thirty-day period file an "Application for
Review" requesting that the FCC review and set aside the staff grant. In the
event of a staff grant, a party in interest could take both actions, by first
filing a petition for reconsideration with the staff and later, within thirty
days following public notice of denial of that petition, filing an Application
for Review. In the case of a staff grant, the FCC may also review the staff
action on its own motion within forty days following public notice of the
staff's action. The FCC may review any of its own actions on its own motion
within thirty days following public notice of the action.
Within thirty days of public notice of an action by the FCC (i) granting the
EZ Transfer Application, (ii) denying a petition for reconsideration of such a
grant or (iii) denying an Application for Review of a staff grant, parties in
interest may appeal the FCC's action to the U.S. Court of Appeals for the
District of Columbia Circuit.
In the event that the EZ Transfer Application should be denied or the
requested waivers not granted by the FCC or its staff, American and EZ would
have the same rights to seek reconsideration or review to an appeal as set
forth above with respect to adverse parties.
If the FCC does not, on its own motion, or upon a request by an interested
party for reconsideration or review, review a staff grant or its own action
within the time periods set forth above, an action by the FCC or its staff
granting the EZ Transfer Application would become final. The Merger Agreement
provides that the parties are not obligated to consummate the Merger upon the
issuance of an FCC grant of the EZ Transfer Application, until such grant has
become final.
FCC License Renewals. On August 1, 1996, an application for regular renewal
of the license of KFNS- AM in the St. Louis market was filed, and, on October
1, 1996, applications for the regular renewal of the licenses of KSD-AM, KSD-
FM, KYKY-FM, and KEZK-FM in the St. Louis market and KOWW-AM and KBEQ-FM in
the Kansas City market were filed. In normal course, the KFNS-AM application
would be granted by December 1, 1996, and the applications filed on October 1,
1996 would be granted by February 1, 1997. A similar renewal applications is
due to be filed by February 1, 1997 for KFKF-FM, EZ's remaining Kansas City
station. Such application would normally be granted by June 1, 1997. For
information with respect to other FCC license renewals, see "Business--Federal
Regulations of Radio Broadcasting--FCC Station License Renewal Dates" in
Appendices V and VI.
Neither American nor EZ anticipates any material difficulty in obtaining
license renewals for full terms in the future, except as described below with
respect to EZ's Pittsburgh station.
When the FCC considers a proposed transfer of control of an FCC licensee
that holds multiple FCC licenses, some of which licenses are subject to
pending renewal applications, the FCC's past policy has been either to defer
action on the transfer application until the pending renewals have been
granted or to grant the transfer application conditioned on the transfer not
being consummated until the renewals have been granted. The FCC has recently
modified that policy to provide that so long as there are no unresolved issues
pertaining to the qualifications of the transferor or the transferee and so
long as the transferee is willing to substitute itself as the renewal
applicant, the FCC will grant a transfer application for a licensee holding
applications for one or several of the licensee's stations. This new policy
should permit the parties to consummate the Merger (assuming
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satisfaction or waiver of all other conditions and the FCC's grant of the EZ
Transfer Application) during those periods when renewal applications are
pending for one or more EZ's stations. However, because the policy is so new,
there can be no assurance that further clarifications of the policy will not
make it impossible or inadvisable to consummate the Merger during such
periods.
In June 1991, Allegheny Communications Group, Inc. filed a competing
application and a Petition to Deny against the license renewal application of
EZ for station WBZZ-FM serving Pittsburgh which is presently pending in M M
Docket No. 93-88 (the "WBZZ Renewal Proceedings"). Under FCC precedent, an
incumbent is entitled to renewal expectancy if it has provided meritorious
service to its listeners during the license term. EZ believes that WBZZ-FM has
provided such service. After the FCC denied the petition of such company, a
hearing was conducted on the license renewal application and the competing
application before an administrative judge who has yet to render a decision.
Given American's belief that EZ is entitled to a renewal expectancy, American
believes the station's license will be renewed. However, if the FCC grants
approval of the transfer of the FCC license of WBZZ--FM to American without
granting the renewal application, American would not, if the Merger is
consummated, be entitled to such renewal expectancy. Therefore, the Merger
Agreement provides that, as a condition of American's obligation to consummate
the Merger, the FCC shall not have released on or before the Closing Date any
ruling, order or other pronouncement Materially Adverse to the interests of EZ
or American in the WBZZ Renewal Proceedings or, if the WBZZ Renewal
Proceedings are still pending, arrangements shall have been made, reasonably
satisfactory to American, pursuant to which (i) EZ's renewal expectations with
respect to WBZZ-FM shall be preserved, (ii) during the period when such
renewal is pending the Entity holding the FCC license with respect to WBZZ-FM
shall enter into a local marketing agreement with American with respect to
WBZZ-FM, and (iii) American shall have the right to acquire such FCC license
and related assets with respect to WBZZ-FM upon such license renewal. American
has agreed that any such arrangements must be reasonably satisfactory to the
Entity holding such FCC license. American and EZ believe that, if it becomes
necessary to so transfer the FCC license to such an Entity, arrangements
reasonably satisfactory to American and such Entity can be agreed upon.
Antitrust. Under the HSR Act and the rules promulgated thereunder, the
Merger may not be consummated until notifications have been given and certain
information has been furnished to the Antitrust Division and the FTC and
specified waiting period requirements have been satisfied. American and EZ
each filed with the Antitrust Division and the FTC a Notification and Report
Form with respect to the Merger on October 24, 1996.
The Antitrust Division and the FTC determine between themselves which agency
is to review a proposed transaction. The Antitrust Division or the FTC, as the
case may be, may then issue a formal request for additional information (the
"Second Request"). Under the HSR Act, if a Second Request is issued, the
waiting period then would be extended and would expire at 11:59 p.m., on the
twentieth calendar day after the date of substantial compliance by both
parties with such Second Request. Only one extension of the waiting period
pursuant to a request for additional information is authorized by the HSR Act.
Thereafter, such waiting period may be extended only by court order or with
the consent of the parties. In practice, complying with a request for
additional information or material can take a significant amount of time. In
addition, if the Antitrust Division or the FTC raises substantive issues in
connection with a proposed transaction, the parties frequently engage in
negotiations with the relevant governmental agency concerning possible means
of addressing those issues and may agree to delay consummation of the
transaction while such negotiations continue.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Merger. In light of the
continuing consolidation occurring in the radio broadcasting industry, the
Antitrust Division and the FTC may be expected to give increased attention to
the Merger. At any time before or after the Special Meetings, the Antitrust
Division or the FTC could take such action under the antitrust laws as it
deems necessary or desirable in the public interest, including seeking to
enjoin the proposed Charlotte transactions or the Merger or seeking the
divesture of substantial assets of American or EZ.
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In addition, state antitrust authorities may also bring legal action under
the antitrust laws. Such action could include seeking to enjoin the
consummation of the Merger or seeking divestiture of certain assets of
American or EZ. No state authorities have indicated that they will undertake
an investigation of the Merger. Private parties may also seek to take legal
action under the antitrust laws under certain circumstances. There can be no
assurance that a challenge to the Merger on antitrust grounds will not be made
or, if such a challenge is made, what the result of such challenge may be.
Certain of the American Probable Transactions and the EZ Probable
Transactions will be subject to review by the Antitrust Division and the FTC
pursuant to the provisions of the HSR Act. Generally, acquisitions involving
assets valued at $15.0 million or more, and certain acquisitions of voting
securities, come within the purview of the HSR Act. As noted above, because of
the continuing consolidation occurring in the radio broadcasting industry, the
antitrust agencies may choose to investigate one or more of the proposed
acquisitions, particularly if it appears that such acquisition will result in
substantial consolidation within a specific market. Any decision by an
antitrust agency to challenge a proposed acquisition could affect the ability
of American or EZ to consummate the proposed acquisition, or to consummate the
acquisition on the proposed terms. See "Business--Recent Transactions--Pending
Acquisitions--Rochester" and "--Sacramento" in Appendix V and "Business--
Recent Transactions--Pending Acquisitoins--Philadelphia-Charlotte Station
Asset Exchange and Purchase" in Appendix VI for information with respect to
questions raised by the Antitrust Division with respect to pending
acquisitions by American and EZ, respectively.
S.E.C. Matters. On August 6, 1996 each of EZ and American received an
informal inquiry from the Division of Enforcement of the Securities and
Exchange Commission ("S.E.C.") regarding trading activity in the stock of EZ
prior to the announcement of the Merger. On September 11, 1996, the Division
of Enforcement informally requested that each of EZ and American voluntarily
provide certain documents in connection with the Division's inquiry. Such
documents were provided to the Division by EZ on September 26, 1996 and by
American on September 27, 1996.
OTHER CONSENTS
Consummation of the Merger will require the consent of the lenders under
American Credit Agreement. American believes that such consent will be
obtained. The consent of the holders of the American Senior Notes is not
required for consummation of the Merger. If the Direct Merger is effected, the
EZ Credit Facility will be refinanced as part of an amended American Credit
Agreement. Consummation of the Direct Merger will require the consent of the
holders of the EZ Senior Notes to amend the EZ Senior Note Indenture to
conform certain covenants to those of the American Senior Note Indenture. If
the Subsidiary Merger is effected, (a) it is anticipated that the EZ Credit
Facility will be amended and restated and the lenders thereunder may be
aligned with those under the American Credit Agreement and (b) the consent of
the holders of the EZ Senior Notes will not be required. American has the
right to effect the Merger in the form of the Subsidiary Merger if the consent
of the holders of the EZ Senior Notes cannot be obtained on terms satisfactory
to American.
ACCOUNTING TREATMENT
The Merger will be accounted for as a "purchase", as such term is used under
generally accepted accounting principles. Accordingly, from and after the
Effective Date, EZ's consolidated results of operations will be included in
American's consolidated results of operations. For purposes of preparing
American's consolidated financial statements, American will establish a new
accounting basis for EZ's assets and liabilities based upon the fair market
values thereof and American's purchase price, including the fees and other
costs associated with the Merger. Accordingly, the purchase accounting
adjustments made in connection with the development of the pro forma condensed
financial information appearing elsewhere in this Proxy Statement are
preliminary and have been made solely for purposes of developing such pro
forma consolidated financial information to comply with disclosure
requirements of the Commission. Although the final allocation will differ, the
pro forma consolidated financial information reflects management's best
estimate based upon currently available information. See "Unaudited Pro Forma
Financial Statements of American".
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FEDERAL SECURITIES LAW CONSEQUENCES
All American Class A Common Stock received by the EZ Stockholders in the
Merger will be freely transferable, except that shares received by persons who
are deemed to be "affiliates" (as such term is defined under the Securities
Act) of EZ prior to the Merger may be resold by them only in transactions
permitted by the resale provisions of Rule 145 promulgated under the
Securities Act (or Rule 144 in the case of such persons who become affiliates
of American) or as otherwise permitted under the Securities Act. Persons who
may be deemed to be affiliates of American or EZ generally include individuals
or entities that control, are controlled by, or are under common control with,
such party and may include certain officers and directors of such party as
well as principal stockholders of such party. The Merger Agreement requires EZ
to use its reasonable business efforts to cause each of its affiliates to
execute a written agreement to the effect that such affiliate will not offer
or sell or otherwise dispose of any of the American Common Stock issued to
such affiliate pursuant to the Merger in violation of the Securities Act or
the rules and regulations promulgated by the Commission thereunder.
CONDITIONS TO THE MERGER
The obligations of EZ and American to consummate the Merger are subject to
the satisfaction of the following conditions:
(a) The Merger Agreement and the transactions contemplated thereby shall
have been approved and adopted by the requisite vote of the stockholders of
American and EZ under Applicable Law and applicable Nasdaq requirements;
(b) No preliminary or permanent injunction or other order or decree by
any federal or state court which prevents the consummation of the Merger
shall have been issued and remain in effect; American and EZ have agreed to
use their respective reasonable business efforts to have any such
injunction, order or decree lifted;
(c) All authorizations, consents, waivers, orders or approvals required
to be obtained from all Authorities, and all filings, submissions,
registrations, notices or declarations required to be made by American and
EZ with any Authority, prior to the consummation of the Merger, shall have
been obtained from, and made with, the FCC and all other required
Authorities, except for such authorizations, consents, waivers, orders,
approvals, filings, registrations, notices or declarations the failure of
which to obtain or make would not, in the reasonable business judgment of
each of American and EZ, have a Material Adverse Effect on American.
Without limiting the generality of the foregoing, the Merger Agreement
provides that the FCC shall have issued all necessary consents and
approvals in connection with the transactions contemplated by the Merger
Agreement, the same shall have become Final Orders, and any conditions
precedent to the effectiveness of such Final Orders which are specified
therein shall have been satisfied as provided in the Merger Agreement;
(d) The shares of American Class A Common Stock to be issued in the
Merger shall have been approved for listing on Nasdaq, upon official notice
of issuance;
(e) The waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated;
(f) The Registration Statement (of which the Prospectus is a part) shall
have become effective in accordance with the provisions of the Securities
Act, and no stop order suspending such effectiveness shall have been issued
and remain in effect and no proceeding for that purpose shall have been
instituted by the Commission or any state regulatory authorities; and
(g) No action shall have been taken, and no statute, rule or regulation
shall have been enacted, by any Authority in the United States which would
prevent the consummation of the Merger or make the consummation of the
Merger illegal.
The obligations of EZ to consummate the Merger are also subject to the
satisfaction of the following additional conditions:
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(a) All agreements, certificates, opinions and other documents delivered
by American shall be reasonably satisfactory in form, scope and substance
to EZ and its counsel, and EZ and its counsel shall have received all
information and copies of all documents, including records of corporate
proceedings, which they may reasonably request in connection therewith,
such documents where reasonably appropriate to be certified by proper
corporate officers;
(b) American shall have furnished EZ and, at EZ's request, any bank or
other financial institution providing credit to EZ or any Subsidiary, with
favorable opinions, dated the Closing Date, of Sullivan & Worcester LLP,
counsel for American, and of Dow, Lohnes & Albertson, FCC counsel for
American, in each case, with respect to such matters incident to the
Merger, as EZ or its counsel may reasonably request or which may be
reasonably requested by any such bank or financial institution or their
respective counsel;
(c) The representations, warranties, covenants and agreements of American
contained in the Merger Agreement or otherwise made in writing by it or on
its behalf pursuant thereto or otherwise made in connection with the Merger
shall be true and correct in all Material respects at and as of the Closing
Date with the same force and effect as though made on and as of such date
except those which speak as of a certain date which shall continue to be
true and correct in all Material respects as of the Closing Date (including
without limitation, giving effect to any later obtained knowledge,
information or belief of American or EZ); each and all of the agreements
and conditions to be performed or satisfied by American under the Merger
Agreement at or prior to the Closing Date shall have been duly performed or
satisfied in all Material respects; and American shall have furnished EZ
with such certificates and other documents evidencing the truth of such
representations, warranties, covenants and agreements and the performance
of such agreements or conditions as EZ or its counsel shall have reasonably
requested;
(d) All authorizations, consents, waivers, modifications, orders or
approvals required to be obtained from all Persons (other than Authorities)
prior to the consummation of the Merger, including without limitation all
Private Authorizations and consents related to Material Agreements of
American and its Subsidiaries and all modifications of Contractual
Obligations reasonably requested by EZ within ten (10) business days of the
date of the Original Agreement, shall have been obtained, other than such
authorizations, consents, waivers, modifications, orders or approvals, the
failure of which to obtain would not, individually or in the aggregate,
Materially Adversely Affect American, without the imposition, individually
or in the aggregate, of any condition or requirement which would Materially
Adversely Affect American;
(e) Between the date of the Original Agreement and the Closing Date,
there shall not have occurred and be continuing any Material Adverse Change
in American from that reflected in the most recent American Financial
Statements, and, as of the Closing Date, the FCC Licenses with respect to
each of the American Stations shall not have been Materially Adversely
Affected;
(f) EZ shall have received "comfort" letters in customary form from
Deloitte & Touche LLP, certified public accountants for American and its
Subsidiaries, dated the date of the Prospectus, the effective date of the
Registration Statement and the Closing Date (or such other date reasonably
acceptable to EZ) with respect to certain financial statements and other
financial information included in the Registration Statement and any
subsequent changes in specified balance sheet and income statement items,
including total assets, working capital, stockholders' equity, net
revenues, Broadcast Cash Flow, net income and net income per share;
(g) American shall have executed and delivered to each of the Persons
executing an Affiliate Agreement the Registration Rights Agreement (in the
form heretofore executed and delivered by American and certain of its
stockholders) and permitting each of such Persons to become a party
thereto;
(h) EZ shall have received from its counsel, Hunton & Williams, a
favorable opinion (dated as of the Closing Date) to the effect that the
Merger constitutes a reorganization within the meaning of Section 368 of
the Code and that, as a consequence, EZ and its stockholders will not
recognize any gain or loss for federal income tax purposes as a result of
consummation of the Merger, except that gain will be recognized to the
extent of the Cash Consideration and gain or loss will be recognized with
respect to cash received in lieu of fractional shares or with respect to
Dissenting Shares, and in connection with such opinion, American and each
of its stockholders owning five percent (5%) or more of the American Common
Stock shall have
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furnished to EZ and such counsel such representations, warranties,
covenants and agreements as such counsel shall have reasonably requested in
order to enable them to render such opinion;
(i) American shall have executed and delivered to EZ the Stockholder
Agreement, in form, scope and substance reasonably satisfactory to EZ, and
any individuals nominated as directors of American pursuant to the
provisions thereof shall have been elected, subject to consummation of the
Merger, directors of American;
(j) Each of the individuals listed in Section 7.3(j) of the EZ Disclosure
Schedule shall have been elected, subject to consummation of the Merger, to
the positions as officers of American set forth opposite his or her name in
such Section; and
(k) The employment agreements between EZ and each of Arthur Kellar and
Alan Box shall have been amended on terms reasonably satisfactory to each
of them.
The parties have subsequently agreed that those employment agreements will
be terminated and Mr. Kellar will be paid $250,000 in lieu of the severance
payments to which he is entitled under his employment agreement.
The obligation of American to consummate the Merger is also subject to the
satisfaction of the following additional conditions:
(a) All agreements, certificates, opinions and other documents shall be
reasonably satisfactory in form, scope and substance to American and its
counsel, and American and its counsel shall have received all information
and copies of all documents, including records of corporate proceedings,
which they may reasonably request in connection therewith, such documents
where reasonably appropriate to be certified by proper corporate officers;
(b) EZ shall have furnished American and, at American's request, any bank
or other financial institution providing credit to American or any
Subsidiary, with favorable opinions, dated the Closing Date, of Hunton &
Williams, counsel for EZ, and of Koteen & Naftalin, LLP, FCC counsel for
EZ, in each case, with respect to such matters incident to the Merger, as
American or its counsel may reasonably request or which may be reasonably
requested by any such bank or financial institution or their respective
counsel;
(c) The representations, warranties, covenants and agreements of EZ
contained in the Merger Agreement or otherwise made in writing by it or on
its behalf pursuant thereto or otherwise made in connection with the Merger
shall be true and correct in all Material respects at and as of the Closing
Date with the same force and effect as though made on and as of such date
except those which speak as of a certain date which shall continue to be
true and correct in all Material respects as of such date on the Closing
Date (including without limitation giving effect to any later obtained
knowledge, information or belief of EZ or American); each and all of the
agreements and conditions to be performed or satisfied by EZ under the
Merger Agreement at or prior to the Closing Date shall have been duly
performed or satisfied in all Material respects; and EZ shall have
furnished American with such certificates and other documents evidencing
the truth of such representations, warranties, covenants and agreements and
the performance of such agreements or conditions as American or its counsel
shall have reasonably requested;
(d) All authorizations, consents, waivers, modifications, orders or
approvals required to be obtained from all Persons (other than Authorities)
prior to the consummation of the Merger, including without limitation all
Private Authorizations and consents related to Material Agreements of EZ
and its Subsidiaries and all modifications of Contractual Obligations
reasonably requested by American within ten (10) business days of the date
of the Original Agreement, shall have been obtained, other than such
authorizations, consents, waivers, modifications, orders or approvals, the
failure of which to obtain would not, individually or in the aggregate,
Materially Adversely Affect EZ, without the imposition, individually or in
the aggregate, of any condition or requirement which would Materially
Adversely Affect EZ;
(e) Between the date of the Original Agreement and the Closing Date,
there shall not have occurred and be continuing any Material Adverse Change
in EZ from that reflected in the most recent EZ Financial Statements, and,
as of the Closing Date, the FCC Licenses with respect to each of the EZ
Stations shall not have been Materially Adversely Affected;
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(f) American shall have received "comfort" letters in customary form from
Ernst & Young LLP, certified public accountants for EZ and its
Subsidiaries, dated the date of the Prospectus, the effective date of the
Registration Statement and the Closing Date (or such other date reasonably
acceptable to American) with respect to certain financial statements and
other financial information included in the Registration Statement and any
subsequent changes in specified balance sheet and income statement items,
including total assets, working capital, stockholders' equity, net
revenues, Broadcast Cash Flow, net income and net income per share;
(g) American shall have received from its counsel, Sullivan & Worcester
LLP, a favorable opinion (dated as of the Closing Date) to the effect that
the Merger constitutes a reorganization within the meaning of Section 368
of the Code and that, as a consequence, American and its stockholders will
not recognize any gain or loss for federal income tax purposes as a result
of consummation of the Merger, and in connection with such opinion, EZ and
each of its stockholders owning five percent (5%) or more of the EZ Common
Stock shall have furnished to American and such counsel such
representations, warranties, covenants and agreements as such counsel shall
have reasonably requested in order to enable them to render such opinion;
(h) The employment agreements between EZ and each of Arthur Kellar and
Alan Box shall have been amended on terms reasonably satisfactory to
American;
(i) Arthur Kellar and Alan Box shall have executed and delivered to
American the Stockholder Agreement, in form, scope and substance reasonably
satisfactory to American;
(j) Each of the persons who is an "affiliate," as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act, of EZ shall
have executed and delivered to American an Affiliate Agreement; and
(k) The FCC shall not have released on or before the Closing Date any
ruling, order or other pronouncement Materially Adverse to the interests of
EZ or American in the WBZZ Renewal Proceedings or, if the WBZZ Renewal
Proceedings are still pending, arrangements shall have been made,
reasonably satisfactory to American, pursuant to which (i) EZ's renewal
expectations with respect to WBZZ(FM) shall be preserved, (ii) during the
period when such renewal is pending the Entity holding the FCC License with
respect to WBZZ(FM) shall enter into a local marketing agreement with
American with respect to WBZZ(FM), and (iii) American shall have the right
to acquire such FCC License and related assets with respect to WBZZ(FM)
upon such license renewal. American has agreed that any such arrangements
must be reasonably satisfactory to the Entity holding such FCC License.
Any or all of the foregoing conditions to American's and EZ's obligations to
effect the Merger may be waived, in whole or in part, to the extent permitted
by Applicable Law.
TERMINATION
Termination Events. The Merger Agreement may be terminated at any time prior
to the Closing Date, whether before or after approval by the stockholders of
American and EZ:
(a) by mutual consent of EZ and American; or
(b) by either American or EZ if any permanent injunction, decree or
judgment by any Authority preventing the consummation of the Merger shall
have become final and nonappealable, unless the party seeking such
injunction, decree or judgment was the terminating party or any Affiliate
thereof; or
(c) by either American or EZ if the American Stockholder Approval or the
EZ Stockholder Approval is not obtained, so long as the terminating party
is not in Material breach of the Merger Agreement and none of its
representations and warranties shall have been or become and continue to be
untrue in any Material respect; or
(d) by EZ in the event (i) EZ is not in Material breach of the Merger
Agreement and none of its representations or warranties shall have been or
become and continue to be untrue in any Material respect, and (ii) either
(A) the Merger has not been consummated prior to the Termination Date and
American is in Material breach of the Merger Agreement or any of its
representations or warranties shall have become and
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continue to be untrue in any Material respect, or (B) such a breach or
untruth exists and is not capable of being cured by and will prevent or
delay consummation of the Merger by or beyond the Termination Date; or
(e) by American in the event (i) American is not in Material breach of
the Merger Agreement and none of its representations or warranties shall
have been or become and continue to be untrue in any Material respect, and
(ii) either (A) the Merger has not been consummated prior to the
Termination Date and EZ is in Material breach of the Merger Agreement or
any of its representations or warranties shall have become and continue to
be untrue in any Material respect, or (B) such a breach or untruth exists
and is not capable of being cured by and will prevent or delay consummation
of the Merger by or beyond the Termination Date; or
(f) by EZ pursuant to and in compliance with the provisions of described
above under "--No Solicitation"; or
(g) by EZ, if the opinion letter that EZ received from CS First Boston,
to the effect that the Merger is fair, from a financial point of view, to
EZ's stockholders, shall have been withdrawn prior to the receipt of the EZ
Stockholder Approval; or
(h) by American, if the opinion letter that American received from Morgan
Stanley, to the effect that the Merger is fair, from a financial point of
view, to American, shall have been withdrawn prior to the receipt of the
American Stockholder Approval.
"Termination Date" means September 30, 1997 or such other date as the parties
may, from time to time, mutually agree. The right of American or EZ to
terminate the Merger Agreement as described above shall remain operative and
in full force and effect regardless of any investigation made by or on behalf
of either party, any Person controlling any such party or any of their
respective Representatives, whether prior to or after the execution of the
Merger Agreement.
Effect of Termination. Except as specifically provided in the Merger
Agreement, in the event of the termination of the Merger Agreement as
described above, or in the event the Merger shall not have become effective
prior to the end of business on the day prior to the Termination Date, the
Merger Agreement shall forthwith become void, there shall be no liability on
the part of either party, or any of their respective stockholders, officers or
directors, to the other and all rights and obligations of each party shall
cease; provided, however, that such termination shall not relieve either party
from liability for any misrepresentation or breach of any of its warranties,
covenants or agreements set forth in the Merger Agreement. The Merger
Agreement provides that in the event the Merger Agreement is terminated (i) by
the parties pursuant to the provisions of paragraph (a) under "--Termination
Events", or (ii) by EZ or American pursuant to the provision of paragraph (b)
or (c) under "--Termination Events" (other than a termination under the
provisions of paragraph (c) resulting from a failure of EZ to obtain the EZ
Stockholder Approval, which failure was caused by a withdrawal by CS First
Boston of its opinion letter to EZ described elsewhere herein), except as
described below, neither of the parties shall have any further rights or
remedies. The Merger Agreement also provides that in the event it is
terminated by (i) EZ pursuant to the provisions of paragraph (d) under "--
Termination Events", or (ii) American pursuant to the provisions of paragraph
(e) under "--Termination Events", then the terminating party shall be entitled
to liquidated damages in the amount of $15.0 million, together with the
reasonable fees and expenses of the terminating party incurred in connection
with the Merger Agreement and the transactions contemplated hereby, including
without limitation, fees and expenses of its investment bankers, counsel,
accountants, banks and other lenders and other consultants and agents, it
being agreed that such amount shall constitute full payment for any and all
damages suffered by the terminating party by reason of other party's failure
to consummate the Merger. The Merger Agreement also provided that in the event
it is terminated by EZ pursuant to the provisions of paragraph (g) under "--
Termination Events", then American shall be entitled to its rights described
under "--No Solicitation" above. Finally, the Merger Agreement provides that
in the event it is terminated by American pursuant to the provisions of
paragraph (h) under "--Termination Events", then EZ shall be entitled to
liquidated damages in the amount of $15.0 million. American and EZ have agreed
that actual damages would be difficult to ascertain and that $15.0 million
and, to the extent applicable, such reasonable fees and expenses of the
terminating party, and rights of American described under "--No Solicitation"
above are a fair and equitable
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amount to reimburse EZ or American, as the case may be, for damages sustained
due to American's or EZ's failure to consummate the Merger for the reasons
specified above. Notwithstanding the foregoing, the Merger Agreement provides
that each party shall have the right to seek specific performance of the
Merger Agreement pursuant to the provisions of the Merger Agreement, and, if
such breach relates to the provisions described under "--No Solicitation"
above, to the extent applicable, American shall have the rights described
thereunder.
FEES AND EXPENSES
Except as described above under "--Effect of Termination", each of EZ and
American has agreed to pay the fees and expenses of its respective counsel,
accountants and other experts and to pay all other costs and expenses incurred
by it in connection with the negotiation, preparation and execution of the
Merger Agreement and the consummation of the transactions contemplated
thereby. All filing fees (including HSR Act and FCC filing fees) and all
transfer and other taxes will be shared equally by American and EZ.
AMENDMENT; WAIVER
The Merger Agreement may be amended, modified or supplemented only by
written agreement of EZ and American at any time prior to the Effective Time,
and, after the Merger Agreement is adopted by the American Stockholders or the
EZ Stockholders, subject to Applicable Law.
At any time prior to the Effective Time, EZ or American may, to the extent
permitted by Applicable Law: (a) extend the time for the performance of any of
the obligations or other acts of the other party; (b) waive any inaccuracies
in the representations and warranties contained in the Merger Agreement or in
any document delivered pursuant to the Merger Agreement; and (c) waive
compliance with any of the agreements or conditions contained in the Merger
Agreement.
ANCILLARY AGREEMENTS
VOTING AGREEMENTS
American. In connection with the execution of the Merger Agreement, Messrs.
Dodge and Stoner, who collectively are entitled to exercise voting power with
respect to an aggregate of 68,500 shares of American Class A Common Stock and
2,673,662 shares of American Class B Common Stock, which as of October 1, 1996
in the aggregate represented approximately 43.0% of the voting power of the
American Voting Stock, and EZ entered into the American Voting Agreement,
pursuant to which such American stockholders agreed, among other things, to
vote all of their shares of American Voting Stock (and granted to EZ their
proxies to vote all such shares) (i) in favor of the adoption of the Merger
Agreement, (ii) against any action or agreement that would result in a breach
in any material respect of any covenant, representation or warranty or any
other obligation of American under the Merger Agreement, and (iii) against any
proposal for any merger, consolidation, recapitalization, sale of assets,
business combination, or other material charge in American's corporate
structure or business that is inconsistent with or that would, or is
reasonably likely to, directly or indirectly, impede, interfere with or
attempt to discourage the Merger or any other transaction contemplated by the
Merger Agreement. Such stockholders have also agreed not to convert any shares
of American Class B Common Stock into shares of American Class A Common Stock
and not to sell, transfer, pledge, hypothecate, encumber or otherwise dispose
of shares of American Common Stock owned by them. Such stockholders have also
agreed not to assert any claims or rights he may have against any director of
American in respect of approval or adoption of the Merger or the consummation
of the Merger or the other transactions contemplated thereby. The American
Voting Agreement provides that the obligations of each such stockholder are
subject to his fiduciary duties as a director of American. The American Voting
Agreement terminates upon the earliest to occur of (a) the mutual consent of
EZ and all of the stockholders party thereto, (b) the termination of the
Merger Agreement prior to the consummation of the Merger (including without
limitation a termination by EZ pursuant to the provisions described above
under "--No Solicitation"), and (c) the consummation of the Merger.
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EZ. In connection with the execution of the Merger Agreement, Messrs. Kellar
and Box, who collectively are entitled to exercise voting power with respect
to an aggregate of 2,697,897 shares of EZ Class B Common Stock, which in the
aggregate represents 100% of the voting power of the EZ Class B Common Stock,
and American entered into the EZ Voting Agreement, pursuant to which such EZ
stockholders agreed, among other things, to vote all of their shares of EZ
Common Stock (and granted to American their proxies to vote all such shares)
(i) in favor of the adoption of the Merger Agreement, (ii) against any action
or agreement that would result in a breach in any material respect of any
covenant, representation or warranty or any other obligation of EZ under the
Merger Agreement, and (iii) against any proposal for any merger,
consolidation, recapitalization, sale of assets, business combination, or
other material charge in EZ's corporate structure or business that is
inconsistent with or that would, or is reasonably likely to, directly or
indirectly, impede, interfere with or attempt to discourage the Merger or any
other transaction contemplated by the Merger Agreement. Such stockholders have
also agreed not to convert any shares of EZ Class B Common Stock into shares
of EZ Class A Common Stock and not to sell, transfer, pledge, hypothecate,
encumber or otherwise dispose of shares of EZ Common Stock owned by them. Such
stockholders have also agreed to waiver their appraisal rights and not to
assert any claims or rights he may have against any director of EZ in respect
of approval or adoption of the Merger or the consummation of the Merger or the
other transactions contemplated thereby. The EZ Voting Agreement provides that
the obligations of each such stockholder are subject to his fiduciary duties
as a director of EZ. The EZ Voting Agreement terminates upon the earliest to
occur of (a) the mutual consent of American and all of the stockholders party
thereto, (b) the termination of the Merger Agreement prior to the consummation
of the Merger (including without limitation a termination by EZ pursuant to
the provisions described above under "--No Solicitation"), and (c) the
consummation of the Merger.
REGISTRATION RIGHTS AGREEMENT
It is a condition of EZ's obligation to consummate to the Merger Agreement
that American shall have entered into the Registration Rights Agreement with
Messrs. Kellar, Box and each other Person executing an Affiliate Agreement, in
the form of the presently existing registration rights agreement of American.
The Registration Rights Agreement provides that, subject to certain
limitations and conditions, all stockholder party thereto, including existing
stockholders who are parties thereto, will be entitled to three "demand"
registration rights and unlimited "piggy back" registration rights to register
under the Securities Act.
STOCKHOLDER AGREEMENT
Messrs. Kellar and Box will enter into the Stockholder Agreement with
American pursuant to which such persons jointly shall have the right to
nominate two persons to the Board of Directors of American so long as they
collectively continue to hold (i) more than fifty percent (50%) of the
American Class A Common Stock received by them pursuant to consummation of the
Merger and (ii) shares of American Class A Common Stock representing not less
than 4.5% of the number of shares of American Common Stock outstanding on a
pro forma fully diluted basis (i.e., giving effect to the conversion of all
Convertible Securities and the exercise of all Option Securities at the time
outstanding). The Stockholder Agreement will also provide that so long as
Messrs. Kellar and Box continue to own collectively shares of American Class A
Common Stock satisfying one but not both of the requirements of clauses (i)
and (ii) of the preceding sentence, they shall jointly be entitled to nominate
one (1) person to the Board of Directors of American, and if they cease to own
collectively a sufficient number of shares of American Class A Common Stock to
satisfy either of such requirements they shall no longer have any right to
nominate a director. The Stockholder Agreement will permit Messrs. Kellar and
Box to transfer the stock subject to such Agreement to their immediate family
members or a trust for the benefit of such Persons, and the holdings of such
Persons (of such transferred stock) will be included in the determination of
whether the requirements of clauses (i) and (ii) of the first sentence of this
paragraph are satisfied. The Stockholder Agreement will also provide that any
nominee other than Mr. Kellar or Mr. Box must be reasonably acceptable to the
American Board.
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AFFILIATE LETTERS
All shares of American Class A Common Stock received by the EZ Stockholders
in the Merger will be freely transferable, except that shares of American
Class A Common Stock received by persons who are deemed to be "affiliates" (as
such term is defined under the Securities Act) of EZ prior to the Merger may
be resold by them only in transactions permitted by the resale provisions of
Rule 145 promulgated under the Securities Act (or Rule 144 in the case of such
persons who become affiliates of American) or as otherwise permitted under the
Securities Act. Persons who may be deemed to be affiliates of EZ are generally
defined as individuals or entities that control, are controlled by, or are
under common control with, EZ and include certain executive officers and
directors, as well as principal stockholders, of EZ. The Merger Agreement
requires EZ to use reasonable business efforts to cause to be delivered to
American, prior to the Closing, from each EZ affiliate a letter agreement to
the effect that such person will not offer or sell or otherwise dispose of any
of the shares of American Class A Common Stock issued to such persons in or
pursuant to the Merger in violation of the Securities Act or the rules and
regulations promulgated by the Commission thereunder.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
It is the policy of the Internal Revenue Services (the "IRS") not to rule
directly on the tax status of the transactions such as the Merger, so no such
ruling will be sought. It is a condition to the obligation of each of American
and EZ to consummate the Merger that its tax counsel render an opinion (dated
the Closing Date) to it to the effect that the Merger will be a tax-free
reorganization under section 368(a) of the Code and that, as a consequence, no
gain of loss will be recognized by it upon consummation of the Merger and, in
the case of EZ, that the Merger will result in the federal income tax
consequences summarized below for the EZ Stockholders upon the exchange of EZ
Common Stock for the Merger Consideration. Such opinions are not binding on
the IRS and would not, in any event, prevent the IRS from challenging the tax-
free nature of the Merger under the Code.
Set forth below is a description of material federal income tax consequences
of the Merger applicable to holders of American Common Stock and EZ Common
Stock. Except as otherwise expressly indicated, the following only describes
certain tax consequences to United States persons (e.g., citizens or residents
of the United States and domestic corporations) who hold shares of American
Common Stock and EZ Common Stock as capital assets and will hold the American
Class A Common Stock received in the Merger as capital assets. It does not
discuss the tax consequences that might be relevant to holders of such stock
who may be subject to special rules under the federal income tax law, such as
persons who acquired American Common Stock, EZ Common Stock or options to
acquire such stock in connection with their employment, life insurance
companies, regulated investment companies, tax-exempt organizations, financial
institutions, securities broker-dealers and persons subject to alternative
minimum tax and persons who hold American Common Stock or EZ Common Stock as
part of a hedging or conversion transaction.
TAX CONSEQUENCES TO HOLDERS OF EZ COMMON STOCK
EZ has received the opinion of Hunton & Williams, counsel to EZ, to the
effect that (among other things) for federal income tax purposes: (i) an EZ
Stockholder will recognize any gain realized up to the amount of Cash
Consideration received (excluding cash paid in lieu of a fractional share of
American Class A Common Stock), but will not recognize any loss realized, on
the exchange of EZ Common Stock for the Merger Consideration; (ii) if an EZ
Stockholder receives cash in lieu of a fractional share of American Class A
Common Stock, the stockholder will recognize gain or loss as if the fractional
share had been received and then sold for the cash; (iii) an EZ Stockholder's
aggregate tax basis in the shares of American Class A Common Stock (including
any fractional share interest) received in the Merger will equal such
stockholder's aggregate tax basis in the shares of EZ Common Stock exchanged
therefor, reduced by the amount of Cash Consideration received (excluding cash
paid in lieu of a fractional share) and increased by the amount of gain
recognized by such stockholder on the exchange (excluding gain recognized with
respect to the receipt of cash in lieu of a fractional
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share); and (iv) an EZ Stockholder's holding period for shares of American
Class A Common Stock (including any fractional share interest) received in the
Merger will include such stockholder's holding period for the shares of EZ
Common Stock exchanged therefor if they are held as a capital asset at the
Effective Time. EZ's receipt of substantially the same opinion of Hunton &
Williams as of the Closing Date is a condition to consummation of the Merger.
The opinion of Hunton & Williams is based on, and the opinion to be given as
of the Closing Date will be based on, certain customary assumptions and
representations regarding, among other things, the existing and future
ownership of EZ Common Stock and American Class A Common Stock and the future
plans for American. See "The Merger Agreement--Conditions to the Merger".
The gain recognized by an EZ Stockholder on the exchange of shares of EZ
Common Stock for the Merger Consideration generally will be capital gain
unless, as is highly unlikely, the receipt of Cash Consideration is treated as
having the effect of a dividend. The determination of whether the receipt of
Cash Consideration has the effect of a dividend is to be made separately for
each EZ Stockholder by treating the EZ Stockholder as first receiving solely
shares of American Class A Common Stock in the Merger and then receiving Cash
Consideration from American in a hypothetical redemption of part of those
shares. The recognized gain will not be treated as having the effect of a
dividend if the hypothetical redemption satisfies the requirements for a stock
redemption to be treated as a sale of stock under Section 302 of the Code. The
hypothetical redemption will satisfy those requirements if it results in a
"meaningful reduction" in the percentage of American Common Stock actually
owned and, under Section 318 of the Code, constructively owned by the
stockholder (including all American Class A Common Stock deemed received in
the Merger). The hypothetical redemption should result in a meaningful
reduction in an EZ Stockholder's ownership of American Common Stock unless the
stockholder (or another person whose stock the stockholder is treated as
owning under Section 318 of the Code) acquires shares of American Common Stock
or a right to acquire such shares, other than pursuant to the Merger, as part
of a plan that includes the hypothetical redemption. Any EZ Stockholder
planning to acquire (or obtain any right to acquire) any American Common Stock
other than as part of the Merger Consideration should consult a tax advisor to
determine whether any such acquisition could cause the receipt of Cash
Consideration to have the effect of a dividend.
The receipt of cash for shares of EZ Common Stock pursuant to the exercise
of dissenter's rights will be a taxable transaction. Although a dissenting
stockholder arguably should be treated for income tax purposes simply as
having sold stock, the Internal Revenue Service's rulings in similar cases
indicate that it likely would view an EZ Stockholder who receives cash for
shares of EZ Common Stock pursuant to the exercise of dissenter's rights as
receiving the cash in redemption of such shares. In that case, a dissenting
stockholder ordinarily would recognize gain or loss equal to the difference
between the amount of cash received and the stockholder's tax basis in such
shares of EZ Common Stock, and such gain or loss generally would be capital
gain or loss. However, if a dissenting stockholder is treated under Section
318 of the Code as constructively owning shares of EZ Common Stock owned by
one or more non-dissenting EZ Stockholders, and if the redemption of shares
actually owned by the EZ Stockholder would not result in at least a meaningful
reduction in the EZ Stockholder's total interest in EZ Common Stock
represented by all shares actually or constructively owned by such stockholder
(determined by disregarding the Merger), the entire amount of cash received
could be taxable as a dividend. Any EZ Stockholder considering the exercise of
dissenter's rights should consult a tax advisor about the tax consequences of
receiving cash for shares of EZ Common Stock pursuant to the exercise of such
rights.
TAX CONSEQUENCES TO HOLDERS OF AMERICAN COMMON STOCK
American has been advised by its counsel, Sullivan & Worcester, that the
American Stockholders, as such, will not recognize gain or loss as a result of
the Merger. Such advice is based, in part, on the anticipated receipt by such
counsel of certain representations, warranties, covenants and agreements which
are a condition of the consummation of the Merger from certain stockholders of
American and EZ. See "The Merger Agreement--Conditions to the Merger".
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BACKUP WITHHOLDING
Under the federal income tax backup withholding rules, unless an exemption
applies, the Exchange Agent will be required to withhold, and will withhold,
31% of all payments to which a holder of EZ Common Stock or other payee is
entitled pursuant to the Merger, unless the holder or other payee provides a
tax identification number (social security number in the case of any
individual, or employer identification number in the case of other EZ
stockholders) and certifies under penalties of perjury that such number is
correct. Each holder of EZ Common Stock, and, if applicable, each other payee,
should complete and sign the substitute Form W-9 which will be included as
part of the letter of transmittal to be returned to the Exchange Agent in
order to provide the information and certification necessary to avoid backup
withholding, unless an applicable exemption exists and is proved in a manner
satisfactory to the Exchange Agent. Certain holders (including, among others,
corporations) are not subject to these backup withholding requirements. Any
amounts withheld will be allowed as a credit against the holder's federal
income tax liability for such year.
THE FOREGOING IS A SUMMARY DESCRIPTION OF MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER AND RELATED TRANSACTIONS, WITHOUT CONSIDERATION OF
THE PARTICULAR FACTS AND CIRCUMSTANCES OF ANY HOLDER OF AMERICAN COMMON STOCK
OR EZ COMMON STOCK. IN ADDITION, IT DOES NOT ADDRESS THE STATE, LOCAL OR
FOREIGN TAX ASPECTS OF THE MERGER. THE DISCUSSION IS BASED ON CURRENTLY
EXISTING PROVISIONS OF THE CODE, EXISTING AND PROPOSED TREASURY REGULATIONS
THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS AND COURT DECISIONS. ALL OF THE
FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD AFFECT THE
CONTINUING VALIDITY OF THE DISCUSSION. EACH AMERICAN STOCKHOLDER AND EZ
STOCKHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER TO THE HOLDER, INCLUDING THE APPLICATION AND EFFECT
OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.
PROPOSAL TO APPROVE AND ADOPT THE CHARTER AMENDMENT
One of the purposes of the American Special Meeting is to obtain the
approval and adoption of the Charter Amendment by the American Stockholders.
The American Board unanimously approved the Charter Amendment at a meeting
held on August 4, 1996 and found that it was advisable and in the best
interests of the American Stockholders. The American Restated Certificate is
required to be amended to increase the authorized number of shares of American
Class A Common Stock in order to have sufficient shares available to be issued
upon consummation of the Merger. In addition, the American Board has
determined it is advisable and in the best interests of the American
Stockholders to increase the number of authorized shares of Preferred Stock,
American Class A Common Stock and American Class B Common Stock to accommodate
future corporate transactions. At the present time, there are 1,000,000 shares
of Preferred Stock authorized, of which 137,500 are issued as the Convertible
Preferred Stock; 25,000,000 million shares of American Class A Common Stock,
of which as of October 1, 1996, an aggregate of 24,868,280 had been issued or
reserved for issue; and 10,000,000 million shares of American Class B Common
Stock, of which as of October 1, 1996, an aggregate of 6,326,827 had been
issued or reserved for issue. The Charter Amendment provides for an aggregate
of 10,000,000 shares of Preferred Stock, 100,000,000 shares of American Class
A Common Stock and 15,000,000 shares of American Class B Common Stock. The
Charter Amendment does not change the number of authorized shares of American
Class C Common Stock (6,000,000), of which 1,295,518 are outstanding. The
Charter Amendment requires the affirmative vote of the holders of the American
Voting Stock entitled to cast not less than 66 2/3% of the aggregate votes of
such stock, voting as a single class.
After giving effect to the consummation of the Merger (and the reservation
of shares of American Class A Common Stock for issue upon conversion of the
Convertible Preferred Stock (3,235,295) exercise of all options
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outstanding or available for granted under the American Amended and Restated
Stock Option Plan (2,000,000), and the Exchanged Options (532,200), assuming
approval of the Charter Amendment, American would have an aggregate of
9,862,500 Preferred Stock, 66,408,872 shares of American Class A Common Stock,
8,673,173 shares of American Class B Common Stock and 4,704,482 shares of
Class C Common Stock authorized and unissued and not reserved for issue. The
Board of Directors believes that it is in the best interests of American and
its stockholders to have available a significant number of shares of American
Preferred Stock and American Class A Common Stock, which would be available to
be issued in connection with public and private equity financings, mergers and
acquisitions or other corporate transactions, including benefit programs, or
stock splits or stock dividends. All such shares, including any such Preferred
Stock, could be issued by the Board of Directors, without the necessity of any
stockholder action, except to the extent otherwise required by the DGCL or the
rules of Nasdaq. The DGCL, in the case of a merger, and those rules generally
require stockholder approval if more than 20% of the outstanding common stock
of a company is to be issued in a single transaction or group of related
transactions.
If approved by the American Stockholders, American intends to effect the
Charter Amendment even if the Merger is not consummated.
THE AMERICAN BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL AND
ADOPTION OF THE CHARTER AMENDMENT.
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CAPITALIZATION
The following table sets forth at June 30, 1996 the actual and the pro forma
capitalization of American after giving effect to the American Pro Forma
Transactions and the Merger (including the EZ Probable Transactions), as if
each had occurred on June 30, 1996.
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------------------
PRO FORMA
----------------------------------------
AMERICAN PRO FORMA AFTER
HISTORICAL TRANSACTIONS MERGER
---------- ------------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents............ $149,175 $105,567 $ 107,993
======== ======== ==========
Long-term debt, including current
portion(1):
Borrowings under the American
Credit Agreement.................. $170,000 $ 308,581
American Senior Notes(2)........... $173,618 173,618 173,618
EZ Senior Notes(3)................. 148,887
Other long-term debt............... 1,468 1,468 1,468
-------- -------- ----------
Total long-term debt........... 175,086 345,086 632,554
-------- -------- ----------
Stockholders' equity(4)(5):
Preferred Stock:
Convertible Preferred Stock...... 1 1 1
American Common Stock:
American Class A Common Stock.... 126 145 227
American Class B Common Stock.... 53 53 53
American Class C Common Stock.... 13 13 13
Additional paid-in capital......... 326,505 390,486 695,505
Retained earnings.................. 7,414 7,414 7,414
Other (net)(6)..................... (648) (648) (648)
-------- -------- ----------
Total stockholders' equity..... 333,464 397,464 702,565
-------- -------- ----------
Total capitalization........... $508,550 $742,550 $1,327,619
======== ======== ==========
</TABLE>
- --------
(1) See Notes to Consolidated Financial Statements of American in the American
10-K and of EZ in the EZ 10-K for additional information regarding the
components and terms of American's and EZ's, respectively, long-term debt.
The pro forma information includes approximately $170.0 million of long-
term debt expected to be incurred to finance the American Pro Forma
Transactions, including debt to be assumed or repaid in connection
therewith. The pro forma information after the Merger assumes the Direct
Merger; if the Subsidiary Merger is effected, borrowings under the
American Credit Agreement and the EZ Credit Facility will be $170.0
million and $138.6 million, respectively. See Note (3) below.
Approximately $155.8 million of additional long-term debt will be required
(on a net basis) to finance the American Probable Transactions which are
not included in the American Pro Forma Transactions.
(2) Net of unamortized discount of ($1,381.8).
(3) Net of unamortized discount of ($1,113.0). The holders of the EZ Senior
Notes have the right to require repurchase of their Notes at 101% of the
principal amount of the Notes upon consummation of the Merger. American
intends to borrow any funds required for such purpose under the American
Credit Agreement (or, in the event of the Subsidiary Merger, under a
credit facility of American Merger Corporation).
(4) Consists of (a) Preferred Stock, par value $.01 per share, authorized
1,000,000 shares (historical); 10,000,000 shares (pro forma for the
Merger); 137,500 shares issued and outstanding (historical and pro forma
for the Merger); (b) American Class A Common Stock, par value $.01 per
share, authorized 25,000,000 shares (historical and pro forma);
100,000,000 shares (pro forma for the Merger); 12,548,130 shares issued
and outstanding (historical and pro forma); 14,427,164 shares issued and
outstanding (pro forma for the Pro Forma Transactions); and 22,617,813
shares issued and outstanding (pro forma for the Merger); (c) American
Class B Common Stock, par value $.01 per share, authorized 10,000,000
shares
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(historical and pro forma); 15,000,000 shares (pro forma for the Merger);
5,350,403 shares issued and outstanding (historical, pro forma and pro
forma for the Merger); and (d) American Class C Common Stock, par value
$.01 per share, authorized 6,000,000 shares (historical, pro forma and pro
forma for the Merger); 1,295,518 shares issued and outstanding (historical,
pro forma and pro forma for the Merger).
(5) Outstanding share figures do not include, except as otherwise indicated:
(a) shares of American Class A Common Stock issuable upon conversion of
American Class B Common Stock or American Class C Common Stock; (b) shares
issuable upon exercise of options currently outstanding to purchase an
aggregate of 1,678,100 shares of American Class B Common Stock, at prices
ranging from $6.375 to $39.125 per share, all of which become exercisable,
on a cumulative basis, at the rate of 20% per year, commencing one year
from the date of grant; (c) 18,449 shares held in the treasury of the
Company; (d) pro forma for the Merger, shares of American Class A Common
Stock issuable upon exercise of options currently outstanding to purchase
an aggregate of 591,333 shares of EZ Class A Common Stock which will
become options to purchase an aggregate of 532,200 shares of American
Class A Common Stock upon consummation of the Merger; and (e) 3,235,295
shares of American Class A Common Stock issuable upon the conversion of
the Convertible Preferred Stock. See Notes to Consolidated Financial
Statements of American in the American 10-K.
(6) Consists of unearned compensation of $(343.9), dividends payable of $133.7
and treasury stock of 18,449 shares at a cost of $(438.2). See Notes to
Consolidated Financial Statements of American in the American 10-K for
information with respect to unearned compensation.
72
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS OF AMERICAN AND EZ
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements of EZ consist of an unaudited pro forma condensed consolidated
balance sheet as of June 30, 1996 and an unaudited pro forma condensed
consolidated statement of operations for the year ended December 31,1995 and
for the six months ended June 30, 1996. The pro forma financial information
gives effect to the EZ Probable Transactions with the exception of the sale of
KMPS-AM, Seattle and KSD-AM, St. Louis. See "Summary--EZ Summary Combined
Financial Information" and "Business--Recent Transactions--Pending
Acquisitions and Dispositions" in Appendix VI.
The following unaudited pro forma condensed consolidated financial
statements of American consist of an unaudited pro forma condensed
consolidated balance sheet as of June 30, 1996 and an unaudited pro forma
condensed consolidated statement of operations for the year ended December 31,
1995 and for the six months ended June 30, 1996. With respect to acquisitions
other than the Merger, the pro forma financial information gives effect only
to the Pro Forma Transactions (which means the Hartford Transaction, the HBC
Merger, the BayCom Transaction, the Baltimore Transaction and the acquisition
of WKGR-FM, West Palm Beach). See "Business--Recent Transactions--Consummated
Acquisitions" and "--Pending Acquisitions and Dispositions" in Appendix V and
"Business--Post-Combination Transactions" in the American 10-K.
The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with American's consolidated financial statements and
notes thereto, as well as the consolidated financial statements and notes
thereto of EZ and certain businesses that have been or may be acquired, which
appear or are incorporated by reference in this Proxy Statement.
The unaudited pro forma condensed consolidated financial statements are not
necessarily indicative of the results that would have been reported had such
events actually occurred on the date specified, nor are they indicative of
American's or EZ's future results of operations.
73
<PAGE>
EZ COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR EZ DISPOSITIONS
HISTORICAL AND ACQUISITIONS PRO FORMA
---------- ------------------- ---------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents..... $ 2,676 $ (250)(a) $ 2,426
Accounts receivable, net...... 21,103 21,103
Other current assets.......... 9,401 (2,750)(a) 6,651
Property and equipment, net... 24,895 2,169 (a) 27,064
Intangible assets, net........ 172,068 53,331 (a)(b)(c)(d) 225,399
Deposits and other assets..... 6,695 6,695
-------- ------- --------
Total....................... $236,838 $52,500 $289,338
======== ======= ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities, excluding
current portion of long-term
debt......................... $ 9,540 $ 9,540
Deferred income taxes......... 7,896 $21,920 (d) 29,816
Long-term debt, including
current portion.............. 28,500 (2,300)(a)(b)(c)(d) 26,200
Senior subordinated notes..... 148,887 148,887
Common stockholders' equity... 42,015 32,880 (d) 74,895
-------- ------- --------
Total....................... $236,838 $52,500 $289,338
======== ======= ========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet.
74
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(a) Adjusted to reflect the acquisition of stations KEZK-FM and KFNS-AM, St.
Louis as if it had occurred on June 30, 1996. The acquisition will be
accounted for using the purchase method of accounting. EZ estimates that the
purchase price of approximately $48.0 million will be allocated as follows (in
thousands):
<TABLE>
<S> <C>
Broadcast equipment............................................. $ 2,169
Goodwill and broadcast license.................................. 45,831
-------
$48,000
=======
</TABLE>
The adjustments reflect the funding of the purchase price with approximately
$45.0 million from borrowings under the EZ Credit Facility, $2.8 million being
funded from a previously established escrow deposit and the remainder being
provided from cash from operations.
(b) Adjusted to reflect the asset exchange of EZ's stations WEZB-FM, WRNO-FM
and WBYU-AM, New Orleans and $7.5 million for stations KBKS-FM and KRPM-AM,
Seattle through a Section 1031 like-kind exchange as if the transaction had
occurred on June 30, 1996. The transaction will be accounted for as a non-
monetary exchange of similar productive assets. The $7.5 million paid by EZ,
which will be funded from proceeds from the EZ Credit Facility, will be added
to the basis of the assets acquired.
(c) Adjusted to reflect the asset exchange of EZ's stations WIOQ-FM and
WUSL-FM, Philadelphia for stations WRFX-FM, WPEG-FM, WBAV-AM/FM and WFNZ-AM,
Charlotte through a Section 1031 like-kind exchange and the purchase of WNKS-
FM, Charlotte for $10.0 million in cash, as if the transactions had occurred
on June 30, 1996. The asset exchange transaction will be accounted for as a
non-monetary exchange of similar productive assets. The $10.0 million to be
paid by EZ, which will be funded from proceeds from the EZ Credit Facility,
will be allocated to the assets acquired.
(d) Adjusted to reflect the asset exchange of EZ's station WSSS-FM,
Charlotte for station WTDR-FM, Charlotte through a Section 1031 like-kind
exchange and the sale of stations WRFX-FM and WNKS-FM, Charlotte for $64.8
million in cash, as if the transactions had occurred on June 30, 1996. The
asset exchange transaction will be accounted for as a non-monetary exchange of
similar productive assets. The $64.8 million to be received by EZ, will be
used to reduce amounts outstanding under the EZ Credit Facility. A gain of
$32.9 million, net of deferred taxes of $21.9 million, has been recorded on
the transactions to reflect the cash to be received on the sale of the two
stations and the temporary differences associated with the difference between
the book and tax basis of the assets exchanged.
75
<PAGE>
EZ COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENTS FOR ADJUSTMENTS FOR
HISTORICAL EZ DISPOSITIONS(A) EZ ACQUISITIONS(A) PRO FORMA
---------- ------------------ ------------------ ---------
<S> <C> <C> <C> <C>
Net revenues............ $ 47,351 $(10,842) $9,501 $ 46,010
Operating expenses...... 32,201 (7,574) 5,829 (b) 30,456
Depreciation and amorti-
zation................. 4,292 948 5,240
Corporate general and
administrative
expenses............... 1,826 1,826
--------- -------- ------ ---------
Operating income
(loss)................. 9,032 (3,268) 2,724 8,488
Other (income) expense:
Interest expense--net.. 9,634 (886)(c) 8,748
Other non-operating ex-
penses................ 41 41
--------- -------- ------ ---------
Total other (income)
expense.............. 9,675 (886) 8,789
--------- -------- ------ ---------
Income (loss) before in-
come taxes............. (643) (3,268) 3,610 (301)
Provision (benefit) for
income taxes........... (804) (1,307)(d) 1,444 (d) (667)
--------- -------- ------ ---------
Net income (loss)....... $ 161 $ (1,961) $2,166 $ 366
========= ======== ====== =========
Net income (loss) per
common share........... $ 0.02 $ 0.04
========= =========
Weighted average common
shares outstanding..... 9,073,996 9,073,996
========= =========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of
Operations.
76
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
The unaudited pro forma condensed consolidated statement of operations for
the six months ended June 30, 1996 gives effect to the EZ Dispositions and EZ
Acquisitions, as if each of the foregoing had occurred on January 1, 1996.
(a) Adjusted for the following transactions as if each of the foregoing has
occurred at the beginning of the period presented:
(1) the May 1996 acquisition of station KYCW-FM, Seattle (EZ began
programming and marketing the station effective March 1996
pursuant to the terms of an LMA);
(2) the July 1996 acquisition of stations KEZK-FM and KFNS-AM, St.
Louis (EZ began programming and marketing the stations effective
April 1996 pursuant to the terms of an LMA);
(3) the pending acquisition of stations KBKS-FM and KRPM-AM, Seattle
(EZ began programming and marketing the stations effective March
1996 pursuant to the terms of an LMA);
(4) the pending exchange of stations WEZB-FM, WRNO-FM and WBYU-AM, New
Orleans (an unrelated party began programming and marketing the
stations effective March 1996 pursuant to the terms of an LMA);
(5) the pending acquisition of stations, WPEG-FM, WBAV-AM/FM, WFNZ-AM,
WRFX-FM and WNKS-FM, Charlotte;
(6) the pending exchange of stations WIOQ-FM and WUSL-FM,
Philadelphia;
(7) the pending acquisition of station WTDR-FM, Charlotte; and
(8) the pending exchange of stations WSSS-FM, Charlotte and
disposition of stations WRFX-FM and WNKS-FM, Charlotte.
This adjustment reflects revenue and broadcasting expenses of the acquired
stations from the beginning of the period presented to the date of the
commencement of the LMA or TBA and pro forma depreciation and amortization
(assuming useful lives of ten years for broadcast equipment and 40 years for
goodwill and broadcast licenses), based on the allocated purchase prices of
these stations, from the beginning of the period presented to the date of the
acquisition. The preliminary allocation of the purchase price to property,
plant and equipment, FCC licenses and goodwill may change upon final
appraisal.
Corporate general and administrative expenses of the prior owners have not
been carried forward into the unaudited pro forma condensed financial
statements as these costs represent duplicative facilities and compensation to
owners and/or executives not retained by EZ. Because EZ maintains a separate
corporate headquarters which provides to all stations services substantially
similar to those represented by these costs, they are not expected to recur
following acquisition. EZ believes that it has existing management capacity
sufficient to provide such services without incurring incremental costs.
(b) Reflects the elimination of $0.2 million of salary expenses relating to
employees who have been terminated and not replaced, and certain other
expenses which would have been eliminated had EZ's operating strategy been in
effect as of the beginning of the period.
(c) Represents additional adjustment to increase or decrease interest
expense under the EZ Credit Facility associated with the additional
indebtedness related to the transactions previously described in (a) above, as
if the foregoing, had occurred at the beginning of the periods presented. Each
1/4% change in the interest rate applicable to the change in debt would
increase or decrease, as appropriate, the net adjustment to interest expense
by approximately $0.03 million.
(d) Assumes an effective tax rate of 40%.
77
<PAGE>
EZ COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENTS
ADJUSTMENT FOR ADJUSTMENTS FOR FOR THE
HISTORICAL EZ DISPOSITIONS(A) EZ ACQUISITIONS(A) NOTES PRO FORMA
---------- ------------------ ------------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
Net revenues............ $ 83,668 $(23,614) $36,757 $ 96,811
Operating expenses...... 55,652 (16,444) 23,356(b) 62,564
Depreciation and amorti-
zation................. 6,757 3,024 9,781
Corporate general and
administrative
expenses............... 3,556 3,556
--------- -------- ------- ---------
Operating income
(loss)................. 17,703 (7,170) 10,377 20,910
Other (income) expense:
Interest expense--net.. 10,799 1,766(e) $ 5,388 (c)(d) 17,953
Other non-operating ex-
penses................ 685 685
--------- -------- ------- ------- ---------
Total other (income)
expense.............. 11,484 1,766 5,388 18,638
--------- -------- ------- ------- ---------
Income (loss) before in-
come taxes............. 6,219 (7,170) 8,611 (5,388) 2,272
Provision (benefit) for
income taxes........... 2,975 (2,868)(f) 3,444(f) (2,155)(f) 1,396
--------- -------- ------- ------- ---------
Net income (loss) before
extraordinary item..... $ 3,244 $ (4,302) $ 5,167 $(3,233) $ 876
========= ======== ======= ======= =========
Net income (loss) per
common share before ex-
traordinary item....... $ 0.36 $ 0.10
========= =========
Weighted average common
shares outstanding..... 9,029,230 9,029,230
========= =========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of
Operations.
78
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
The unaudited pro forma condensed consolidated statement of operations for
the year ended December 31, 1995 gives effect to the EZ Dispositions, EZ
Acquisitions and the EZ Senior Notes offering, as if each of the foregoing had
occurred on January 1, 1995.
(a) Adjusted for the following transactions as if each of the foregoing had
occurred at the beginning of the period presented:
(1) the March 1995 acquisition of stations KBEQ AM/FM, Kansas City (an
unrelated party began immediately programming and marketing the
stations pursuant to the terms of an LMA effective upon closing);
(2) the January 1996 acquisition of KFKF-FM, Kansas City;
(3) the May 1996 acquisition of station KYCW-FM, Seattle (EZ began
programming and marketing the station effective March 1996
pursuant to the terms of an LMA);
(4) the July 1996 acquisition of stations KEZK-FM and KFNS-AM St.
Louis (EZ began programming and marketing the stations effective
April 1996 pursuant to the terms of an LMA);
(5) the pending acquisition of stations KBKS-FM and KRPM-AM, Seattle
(EZ began programming and marketing the stations effective March
1996 pursuant to the terms of an LMA);
(6) the pending exchange of stations WEZB-FM, WRNO-FM and WBYU-AM, New
Orleans (an unrelated party began programming and marketing the
stations effective March 1996 pursuant to the terms of an LMA);
(7) the pending acquisition of stations, WPEG-FM, WBAV AM/FM, WFNZ-AM,
WRFX-FM and WNKS-FM, Charlotte;
(8) the pending exchange of stations WIOQ-FM and WUSL-FM,
Philadelphia;
(9) the pending acquisition of station WTDR-FM, Charlotte; and
(10) the pending exchange of station WSSS-FM, Charlotte and
dispositions of stations WRFX-FM and WNKS-FM, Charlotte.
This adjustment reflects revenue and broadcasting expenses of the acquired
stations from the beginning of the period presented to the date of the
commencement of the LMA or TBA and pro forma depreciation and amortization
(assuming useful lives of ten years for broadcast equipment and 40 years for
goodwill and broadcast licenses), based on the allocated purchase prices of
these stations, from the beginning of the period presented to the date of the
acquisition. The preliminary allocation of the purchase price to property,
plant and equipment, FCC licenses and goodwill may change upon final
appraisal.
Corporate general and administrative expenses of the prior owners have not
been carried forward into the unaudited pro forma condensed financial
statements as these costs represent duplicative facilities and compensations
to owners and/or executives not retained by EZ. Because EZ maintains a
separate corporate headquarters which provides to all stations services
substantially similar to those represented by these costs, they are not
expected to recur following acquisition. EZ believes that it has existing
management capacity sufficient to provide services without incurring
incremental costs.
(b) Reflects the elimination of $0.8 million of salary expenses relating to
employees who have been terminated and not replaced and certain other expenses
which would have been eliminated had EZ's operating strategy been in effect as
of the beginning of the period.
(c) Adjusted to reflect the amortization of offering costs of $5.0 million
over the term of the Notes.
79
<PAGE>
(d) Represents adjustment to increase interest expense associated with the
Notes and the Kansas City Notes as if they were issued at the beginning of the
period presented. The following table presents a detail of the pro forma
interest expense (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
------------
<S> <C>
Pro forma interest expense
For the Notes.............................................. $ 14,625
For the Kansas City Notes at 8.49%......................... 1,104
--------
Pro forma interest expense.................................. 15,729
Less: aggregate historical interest expense................. (10,799)
--------
Pro forma adjustment........................................ $ 4,930
========
</TABLE>
(e) Represents additional adjustment to increase or decrease interest
expense under the EZ Credit Facility associated with the additional
indebtedness related to the transactions previously described in (a) above, as
if the foregoing had occurred at the beginning of the periods presented. Each
1/4% change in the interest rate applicable to the change in debt would
increase or decrease, as appropriate, the net adjustment to interest expense
by approximately $0.05 million.
(f) Assumes an effective tax rate of 40%.
80
<PAGE>
AMERICAN RADIO SYSTEMS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR ADJUSTMENTS
PRO FORMA AMERICAN FOR EZ
HISTORICAL TRANSACTIONS(A) PRO FORMA MERGER(B) PRO FORMA
---------- --------------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents............ $149,175 $(43,608) $105,567 $ 2,426 $ 107,993
Accounts receivable,
net.................... 32,028 32,028 21,103 53,131
Other current assets.... 5,577 149 5,726 6,651 12,377
Property and equipment,
net.................... 45,739 42,000 87,739 51,000 138,739
Station investment
notes.................. 41,377 41,377 41,377
Intangible assets, net.. 177,885 298,050 475,935 615,879 1,091,814
Deposits and other
assets................. 25,438 (9,882) 15,556 15,556
Restricted cash......... 18,000 (18,000)
Net assets held under
exchange agreement..... 46,825 46,825 46,825
-------- -------- -------- -------- ----------
Total................. $542,044 $268,709 $810,753 $697,059 $1,507,812
======== ======== ======== ======== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities,
excluding current
portion of long-term
debt................... $ 21,411 $ 59 $ 21,470 $ 9,540 $ 31,010
Deferred income taxes... 10,240 34,650 44,890 94,950 139,840
Other long-term
liabilities............ 1,843 1,843 1,843
Long-term debt,
including current
portion................ 175,086 170,000 345,086 287,468 632,554
Stockholders' equity.... 333,464 64,000 397,464 305,101 702,565
-------- -------- -------- -------- ----------
Total................. $542,044 $268,709 $810,753 $697,059 $1,507,812
======== ======== ======== ======== ==========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet.
81
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(a) The Pro Forma Transactions will be accounted for under the purchase
method of accounting. The following adjustments have been recorded as of June
30, 1996: (i) American will borrow approximately $170.0 million, issue $64.0
million of Class A Common Stock, and use currently outstanding escrow deposits
and restricted cash to finance the Pro Forma Transactions; (ii) the excess of
purchase price over property, plant and equipment and FCC licenses has been
recorded in intangible assets; and (iii) a deferred tax liability has been
recorded to reflect temporary differences associated with the book and tax
basis of assets acquired. The preliminary estimates of fair value of property,
plant and equipment and FCC licenses may change upon final appraisal.
(b) The Merger will be accounted for under the purchase method of
accounting. The following adjustments have been recorded as of June 30, 1996:
(i) American will borrow approximately $138.6 million, which includes $112.4
of additional debt and the refunding of approximately $26.2 million of
existing EZ debt, $150.0 million principal amount of EZ Senior Notes will
either be assumed or continue to exist, and American will issue approximately
8,190,600 shares of Class A Common Stock valued at $305.1 million, (based on
the closing price of the American Class A Common Stock during a reasonable
period before and after August 5, 1996); (ii) the excess of purchase price
over property, plant and equipment and FCC licenses has been recorded in
intangible assets; and (iii) a deferred tax liability has been recorded to
reflect the temporary differences associated with the book and tax basis of
assets acquired. Transaction costs estimated at approximately $5.4 million
have been included in the estimated purchase price allocation. The preliminary
estimates of fair value of property, plant and equipment and FCC licenses may
change upon final appraisal.
82
<PAGE>
AMERICAN RADIO SYSTEMS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR PRO FORMA AMERICAN ADJUSTMENTS FOR
HISTORICAL TRANSACTIONS(A) PRO FORMA EZ MERGER(B) PRO FORMA
---------- --------------- --------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Net revenues.............. $ 61,426 $ 30,806 $92,232 $ 46,010 $ 138,242
Operating expenses........ 45,696 18,846 64,542 30,456 94,998
Depreciation and
amortization............. 4,839 7,590 12,429 13,163 25,592
Corporate general and
administrative expenses.. 2,340 2,340 500 2,840
---------- --------- ------- --------- ----------
Operating income (loss)... 8,551 4,370 12,921 1,891 14,812
Other (income) expense:
Interest expense--net.... 5,324 8,766 14,090 13,339 27,429
Loss on sale of assets,
net..................... 36 36 36
---------- --------- ------- --------- ----------
Total other (income)
expense................. 5,360 8,766 14,126 13,339 27,465
---------- --------- ------- --------- ----------
Income (loss) before
income taxes............. 3,191 (4,396) (1,205) (11,448) (12,653)
Provision (benefit) for
income taxes............. 1,436 (1,612)(c) (176) (2,759)(c) (2,935)
---------- --------- ------- --------- ----------
Net income (loss)......... 1,755 (2,784) (1,029) (8,689) (9,718)
Redeemable common and
preferred stock
dividends................ 134 134 134
---------- --------- ------- --------- ----------
Net income (loss)
applicable to
common stockholders...... $ 1,621 $ (2,784) $(1,163) $ (8,689) $ (9,852)
========== ========= ======= ========= ==========
Net income (loss) per
common share............. $ 0.09 $ (0.35)
========== ==========
(950,386)(d)
Weighted average common
shares outstanding....... 19,025,668 1,879,034 (d) 8,190,649 (e) 28,144,965
========== ========= ========= ==========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of
Operations.
83
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
The unaudited pro forma condensed consolidated statement of operations for
the six months ended June 30, 1996 gives effect to the Hartford Transaction,
the HBC Merger, the BayCom Transaction and the Baltimore Transaction
(collectively, the Pro Forma Transactions) and the Merger, as if each of the
foregoing had occurred on January 1, 1996.
(a) To record the results of operations for the Pro Forma Transactions. The
results of operations have been adjusted to reverse historical interest
expense of $7.1 million and $1.3 million of interest income recorded on the
Hartford Transaction station investment notes and record interest expense of
$7.4 million for the six months ended June 30, 1996, as a result of
approximately $170.0 million of additional debt, bearing interest at an
assumed rate of 8.75%, to be incurred to finance the Pro Forma Transactions.
Each 1/4% change in the interest rate applicable to the change in debt would
increase or decrease, as appropriate, the net adjustment to interest expense
by approximately $0.2 million.
The results of operation have also been adjusted to reverse historical
depreciation and amortization expense of $3.6 million for the six months ended
June 30, 1996 and record depreciation and amortization expense of $7.6 million
for the six months ended June 30, 1996 based on estimated allocations of
purchase prices. Depreciation expense for property, plant and equipment
acquired has been determined based on an average life of ten years. Costs of
acquired FCC licenses and goodwill for the transactions are amortized over 25
and 40 years, respectively. The preliminary estimates of the fair value of
property, plant and equipment, FCC licenses and goodwill may change upon final
appraisal.
Corporate general and administrative expenses of the prior owners have not
been carried forward into the pro forma condensed financial statements as
these costs represent duplicative facilities and compensation to owners and/or
executives not retained by American. Because American maintains a separate
corporate headquarters which provides to all stations services substantially
similar to those represented by these costs, they are not expected to recur
following acquisition. American believes that it has existing management
capacity sufficient to provide such services without incurring incremental
costs.
The following table sets forth the historical results of operations for the
Pro Forma Transactions for the periods in which they were not owned by
American for the six months ended June 30, 1996.
<TABLE>
<CAPTION>
HARTFORD HBC BAYCOM BALTIMORE PRO FORMA
TRANSACTION MERGER TRANSACTION TRANSACTION ADJUSTMENTS TOTAL
----------- ------- ----------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Net revenues............ $4,117 $12,409 $ 8,241 $6,039 $30,806
Operating expenses...... 2,594 5,448 6,303 4,501 18,846
Depreciation and amorti-
zation................. 129 629 2,012 865 $ 3,955 7,590
Corporate general and
administrative......... 4,391 441 1,074 (5,906)
------ ------- ------- ------ ------- -------
Operating income
(loss)................. 1,394 1,941 (515) (401) 1,951 4,370
Other (income) expense
Interest expense
(net)................. 3,044 4,105 1,617 8,766
Other expense (in-
come)................. 7 (22) (12) 27
------ ------- ------- ------ ------- -------
Income (loss) from
operations before
income taxes........... $1,387 $(1,103) $(4,598) $ (389) $ 307 $(4,396)
====== ======= ======= ====== ======= =======
</TABLE>
(b) To record the results of operations for the Merger. The results of
operations have been adjusted to reverse historical interest expense of $8.7
million and record interest expense of $13.3 million for the six months ended
June 30, 1996, as a result of approximately $112.4 million of additional debt,
the refunding of approximately $26.2 million of existing EZ debt, both bearing
interest at an assumed rate of 8.75%, and $150.0 million principal amount of
EZ Senior Notes bearing interest at 9.75%. Each 1/4% change in the interest
rate applicable to the additional and refunded debt would increase or
decrease, as appropriate, the net adjustment to interest expense by
approximately $0.3 million.
84
<PAGE>
The results of operations have also been adjusted to reverse historical
depreciation and amortization expense of $5.2 million for the six months ended
June 30, 1996 and record depreciation and amortization expense of $13.2
million for the six months ended June 30, 1996, based on an estimated
allocation of the purchase price. Depreciation expense for property, plant and
equipment acquired has been determined based on an average life of ten years.
Costs of acquired FCC licenses and goodwill for the transactions are amortized
over 25 and 40 years, respectively. The preliminary estimates of the fair
value of property, plant and equipment, FCC licenses and goodwill may change
upon final appraisal.
Corporate general and administrative expenses of EZ have been adjusted to
eliminate duplicative facilities and compensation to executives and other
officers who will not be retained by American.
(c) To record the tax effect of the pro forma adjustments and impact on
American's effective tax rate. The actual effective tax rate may be different
once the final allocation of purchase price is determined.
(d) Consists of 1,879,034 shares of American Class A Common Stock issued to
consummate the HBC Merger and the reversal of common stock equivalents
included in earnings per share due to a pro forma net loss for the six months
ended June 30, 1996. Such equivalent shares would become anti-dilutive due to
such loss.
(e) Consists of shares which would have been outstanding had the Merger
taken place on January 1, 1995.
85
<PAGE>
AMERICAN RADIO SYSTEMS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENTS FOR
PRO FORMA AMERICAN ADJUSTMENTS FOR
HISTORICAL TRANSACTIONS(A) PRO FORMA EZ MERGER(B) PRO FORMA
---------- --------------- --------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Net revenues............ $ 97,772 $ 62,622 $160,394 $ 96,811 $ 257,205
Operating expenses...... 67,048 37,898 104,946 62,564 167,510
Depreciation and
amortization........... 12,364 15,594 27,958 30,683 58,641
Corporate general and
administrative
expenses............... 3,908 3,908 1,000 4,908
---------- --------- -------- ---------- -----------
Operating (loss)
income................. 14,452 9,130 23,582 2,564 26,146
---------- --------- -------- ---------- -----------
Other (income) expense:
Interest expense--net.. 10,062 17,390 27,452 27,690 55,122
Gain on disposal of
assets, net........... (11,544) (11,544) (11,544)
---------- --------- -------- ---------- -----------
Total other (income)
expense............... (1,482) 17,390 15,908 27,690 43,578
---------- --------- -------- ---------- -----------
Income (loss) before
income taxes........... 15,934 (8,260) 7,674 (25,106) (17,432)
Provision (benefit) for
income taxes........... 6,829 (3,045)(c) 3,784 (6,555)(c) (2,771)
---------- --------- -------- ---------- -----------
Income (loss) before
extraordinary item..... 9,105 (5,215) 3,890 (18,551) (14,661)
Preferred Stock and
Series C Common Stock
dividends.............. 815 815 815
---------- --------- -------- ---------- -----------
Net income (loss) before
extraordinary item
applicable to common
stockholders........... $ 8,290 $ (5,215) $ 3,075 $ (18,551) $ (15,476)
========== ========= ======== ========== ===========
Net loss per common
share.................. $ 0.66 $ (0.71)
========== ===========
(792,747)(d)
Weighted average common
shares outstanding..... 12,645,556 1,879,034(d) 8,190,649(e) 21,922,492
========== ========= ========== ===========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of
Operations.
86
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
The unaudited pro forma condensed consolidated statement of operations for
the year ended December 31, 1995 gives effect to the Hartford Transaction, the
HBC Merger, the BayCom Transaction and the Baltimore Transaction
(collectively, the Pro Forma Transactions), the West Palm Beach (WKGR-FM)
acquisition which was consummated in the third quarter of 1995 and the Merger
as if each of the foregoing had occurred on January 1, 1995.
(a) To record the results of operations for the Pro Forma Transactions. The
results of operations have been adjusted to reverse historical interest
expense of $14.3 million and $1.3 million of interest income recorded on the
Hartford Transaction station investment notes and record interest expense of
$16.1 million for the year ended December 31, 1995, as a result of
approximately $170.0 million of additional debt, bearing interest at an
assumed rate of 8.75%, to be incurred to finance the Pro Forma Transactions,
and $28.8 million bearing interest at an assumed rate of 8.75% to finance the
WKGR-FM acquisition. Each 1/4% change in the interest rate applicable to the
additional debt would increase or decrease, as appropriate, the net adjustment
to interest expense by approximately $0.5 million.
The results of operation have also been adjusted to reverse historical
depreciation and amortization expense of $7.7 million for the year ended
December 31, 1995 and record depreciation and amortization expense of
$15.6 million for the year ended December 31, 1995, based on estimated
allocations of purchase prices. Depreciation expense for property, plant and
equipment acquired has been determined based on an average life of ten years.
Costs of acquired FCC licenses and goodwill for the transactions are amortized
over 25 and 40 years, respectively. The preliminary estimates of the fair
value of property, plant and equipment, FCC licenses and goodwill may change
upon final appraisal.
Corporate general and administrative expenses of the prior owners have not
been carried forward into the pro forma condensed financial statements as
these costs represent duplicative facilities and compensation to owners and/or
executives not retained by the American. Because American maintains a separate
corporate headquarters which provides to all stations services substantially
similar to those represented by these costs, they are not expected to recur
following acquisition. American believes that it has existing management
capacity sufficient to provide such services without incurring incremental
costs.
The following table sets forth the historical results of operations for the
Pro Forma Transactions and WKGR-FM for the periods in which they were not
owned by American for the year ended December 31, 1995.
<TABLE>
<CAPTION>
WKGR- HARTFORD HBC BAYCOM BALTIMORE PRO FORMA
FM TRANSACTION MERGER TRANSACTION TRANSACTION ADJUSTMENTS TOTAL
------ ----------- ------- ----------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues............ $2,091 $10,463 $20,604 $16,485 $12,979 $62,622
Operating expenses...... 1,500 7,294 9,776 11,217 8,111 37,898
Depreciation and amorti-
zation................. 503 304 871 4,182 1,843 $ 7,891 15,594
Corporate general and
administrative......... 260 4,401 1,056 1,310 (7,027)
------ ------- ------- ------- ------- ------- -------
Operating income
(loss)................. 88 2,605 5,556 30 1,715 (864) 9,130
Other (income) expense
Interest expense
(net)................. 3,442 10,888 3,060 17,390
Other expense (in-
come)................. 3 (10) 335 (1,341) 1,013
------ ------- ------- ------- ------- ------- -------
Income (loss) from
operations before
income taxes........... $ 85 $ 2,615 $ 1,779 $(9,517) $ 1,715 $(4,937) $(8,260)
====== ======= ======= ======= ======= ======= =======
</TABLE>
(b) To record the results of operations for the Merger. The results of
operations have been adjusted to reverse historical interest expense of $17.5
million and record interest expense of $27.7 million for the year December 31,
1995 as a result of approximately $112.4 million of additional debt, the
refunding of approximately $36.7 million of existing EZ debt, both bearing
interest at an assumed rate of 8.75%, and
87
<PAGE>
$150.0 million principal amount of EZ Senior Notes bearing interest at 9.75%.
Each 1/4% change in the interest rate applicable to the additional and
refunded debt would increase or decrease, as appropriate, the net adjustment
to interest expense by approximately $0.4 million.
The results of operations have also been adjusted to reverse historical
depreciation and amortization expense of $10.2 million for the year ended
December 31, 1995 and record depreciation and amortization expense of $30.6
million for the year ended December 31, 1995, based on an estimated allocation
of the purchase price. Depreciation expense for property, plant and equipment
acquired has been determined based on an average life of ten years. Costs of
acquired FCC licenses and goodwill for the transactions are amortized over 25
and 40 years, respectively. The preliminary estimates of the fair value of
property, plant and equipment, FCC licenses and goodwill may change upon final
appraisal.
Corporate general and administrative expenses of EZ have been adjusted to
eliminate duplicative facilities and compensation to executives and other
officers who will not be retained by American.
(c) To record the tax effect of the pro forma adjustments and impact on
American's effective tax rate. The actual effective tax rate may be different
once the final allocation of purchase price is determined.
(d) Consists of 1,879,034 shares of American Class A Common Stock issued to
consummate the HBC Merger and the reversal of common stock equivalents
included in earnings per share due to a pro forma net loss for the year ended
December 31, 1995. Such equivalent shares would become anti-dilutive due to
such loss.
(e) Consists of shares which would have been outstanding had the merger
taken place on January 1, 1995.
88
<PAGE>
MARKET PRICES AND DIVIDEND DATA
The following table sets forth the high and low sales prices on Nasdaq of
the American Class A Common Stock and the EZ Class A Common Stock for the
periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
AMERICAN CLASS A COMMON STOCK
1995
Second Quarter (from June 8, 1995)......................... $26 $18 3/4
Third Quarter.............................................. 29 3/4 23
Fourth Quarter............................................. 28 1/2 19 1/2
1996
First Quarter.............................................. 34 1/4 25
Second Quarter............................................. 43 30 3/4
Third Quarter.............................................. 43 33 1/4
Fourth Quarter (through October 29, 1996).................. 37 3/4 28 1/4
EZ CLASS A COMMON STOCK
1994
First Quarter.............................................. 16 3/4 12 3/8
Second Quarter............................................. 13 9 1/8
Third Quarter.............................................. 14 10 1/2
Fourth Quarter............................................. 14 1/4 11 5/8
1995
First Quarter.............................................. 17 12 1/4
Second Quarter............................................. 19 15
Third Quarter.............................................. 20 3/4 17 3/4
Fourth Quarter............................................. 19 1/4 15 1/4
1996
First Quarter.............................................. 21 3/4 16 1/4
Second Quarter............................................. 24 3/4 18 1/2
Third Quarter.............................................. 45 1/2 23 3/4
Fourth Quarter (through October 29, 1996).................. 44 1/4 36 1/2
</TABLE>
On August 2, 1996, the trading day prior to the announcement of the Merger,
the closing sales prices of the American Class A Common Stock and the EZ Class
A Common Stock, as reported on Nasdaq, were $39.50 and $32.50, respectively.
On October 29, 1996, the closing sales prices of the American Class A Common
Stock and the EZ Class A Common Stock, as reported on Nasdaq, were $28 1/4 and
$36 1/2, respectively. As of November 4, 1996, there were . shares of
American Class A Common Stock and 6,402,824 shares of EZ Class A Common Stock
outstanding and . holders of record of American Class A Common Stock and 146
holders of record of EZ Class A Common Stock. There is no public trading
market for the American Class B or Class C Common Stock or the EZ Class B
Common Stock and, therefore, no market price information is included.
Dividends have never been paid on the American Class A Common Stock or the
EZ Class A Common Stock. The American Board does not currently pay dividends
on the American Class A Common Stock. The American Board currently intends to
retain future earnings, if any, for the development of the its businesses and
does not anticipate paying cash dividends on the American Class A Common Stock
in the foreseeable future. Future determinations by the American Board to pay
dividends on the American Class A Common Stock would be based primarily upon
the respective financial condition, results of operations and business
requirements of American. The American Credit Agreement and the American
Senior Note Indenture restrict, and the EZ Senior Note Indenture (and, in the
event of the Subsidiary Merger, the EZ Credit Facility) will restrict, the
payment of cash dividends on the American Class A Common Stock. In the event
of the Subsidiary Merger, the EZ Credit Facility and the EZ Senior Note
Indenture will restrict the ability of EZ to pay cash dividends or make other
distributions to American and, as a consequence, will restrict American's
ability to pay cash dividends on the American Class A Common Stock. See
"Description of American Capital Stock--Common Stock--Dividends."
89
<PAGE>
DESCRIPTION OF AMERICAN CAPITAL STOCK
GENERAL
The authorized capital stock of American consists of 25,000,000 shares of
American Class A Common Stock, $.01 par value per share, 10,000,000 shares of
American Class B Common Stock, $.01 par value per share, 6,000,000 shares of
American Class C Common Stock, $.01 par value per share, and 1,000,000 shares
of American Preferred Stock, $.01 par value per share. The outstanding shares
of American Common Stock as of October 1, 1996 were as follows: American
Preferred Stock--137,500; American Class A Common Stock--15,050,740; American
Class B Common Stock--4,726,827; and American Class C Common Stock--1,295,518.
See "Proposal to Approve and Adopt the Charter Amendment" for information with
respect to the proposed increase in the number of authorized shares of
American Preferred Stock and American Common Stock.
COMMON STOCK
Dividends. Holders of record of shares of American Common Stock on the
record date fixed by the American Board are entitled to receive such dividends
as may be declared by the American Board out of funds legally available for
such purpose. No dividends may be declared or paid in cash or property on any
share of any class of American Common Stock, however, unless simultaneously
the same dividend is declared or paid on each share of the other classes of
American Common Stock. In the case of any stock dividend, holders of each
class of American Common Stock are entitled to receive the same percentage
dividend (payable in shares of that class) as the holders of each other class.
American is currently prohibited under the terms of the American Credit
Agreement from paying cash dividends on its Common Stock except that,
beginning on January 1, 1998, American may pay cash dividends if (a)(i) the
ratio of Total Debt to Consolidated Annual Operating Cash Flow is less than
4.5 to one or (ii) the ratio of Total Debt to Consolidated Annual Operating
Cash Flow is less than 5.0 to one and the ratio of Senior Debt to Consolidated
Annual Operating Cash Flow is less than 3.0 to one, and (b) then only to the
extent that Restricted Payments do not exceed 50% of Cumulative Excess Cash
Flow for the period commencing January 1, 1997 minus aggregate Restricted
Payments, (as each such term is defined in the American Credit Agreement).
Accordingly, American's ability to pay dividends to its stockholders is, and
under the new $1.0 billion credit agreement currently being negotiated will
be, restricted. Even if funds were to be available, American does not intend
to pay dividends in the foreseeable future. The American Senior Note Indenture
also restricts, and the EZ Senior Note Indenture (and, in the event of the
Subsidiary Merger, the EZ Credit Facility) will restrict, the ability of
American to pay dividends. See the Notes to Consolidated Financial Statements
of American in the American 10-K and "Market Prices and Dividend Data".
Voting Rights. Except as otherwise required by law and in the election of
directors, holders of shares of American Class A Common Stock and American
Class B Common Stock have the exclusive voting rights and will vote as a
single class on all matters submitted to a vote of the stockholders, with each
share of American Class A Common Stock entitled to one vote and each share of
American Class B Common Stock entitled to ten votes. The holders of the
American Class A Common Stock, voting as a separate class, have the right to
elect two independent directors.
Under Delaware law, the affirmative vote of the holders of a majority of the
outstanding shares of any class of common stock is required to approve, among
other things, a change in the designations, preferences and limitations of the
shares of such class of common stock. Under the Restated Certificate, the
affirmative vote of the holders of not less than 66 2/3% of the American
Voting Stock is required in order to amend most of the provisions of the
American Restated Certificate, including those relating to the provisions of
the various classes of Common Stock, indemnification of directors, exoneration
of directors for certain acts, and such super-majority provision.
Conversion Provisions. Shares of American Class B Common Stock and, except
as hereinafter noted, American Class C Common Stock, are convertible, at any
time at the option of the holder, on a share for share basis into shares of
American Class A Common Stock. American Class C Common Stock may not be
converted into American Class A Common Stock if, as a result thereof, the
holder would be a Disqualified Person (as
90
<PAGE>
defined in the American Restated Certificate) or would cause a violation of
the alien ownership restrictions set forth in the American Restated
Certificate. In addition, the owner of American Class C Common Stock can
convert such stock only in the event of a Conversion Event (as defined in the
American Restated Certificate). Shares of American Class B Common Stock
automatically convert into shares of American Class A Common Stock upon any
sale, transfer, assignment or other disposition other than to Permitted
Transferees (as defined in the American Restated Certificate), which term
includes certain family members, trusts and other family entities and
charitable organizations and upon pledges but not to the pledgee upon
foreclosure.
Liquidation Rights. Upon liquidation, dissolution or winding-up of American,
the holders of each class of American Common Stock are entitled to share
ratably (based on the number of shares held) in all assets available for
distribution after payment in full of creditors and payment in full to any
holders of the American Preferred Stock then outstanding of any amount
required to be paid under the terms of the American Preferred Stock.
Other Provisions. The holders of American Common Stock are not entitled to
preemptive or subscription rights. The shares of American Common Stock
presently outstanding are, and the shares of American Class A Common Stock to
be issued upon consummation of the Merger will be, upon issuance, validly
issued, fully paid and nonassessable. In any merger, consolidation or business
combination, the consideration to be received per share by holders of each
class of American Common Stock must be identical to that received by holders
of the other class of American Common Stock, except that in any such
transaction in which shares of American Common Stock are distributed, such
shares may differ as to voting rights to the extent that voting rights now
differ between the different classes of American Common Stock. No class of
American Common Stock may be subdivided, consolidated, reclassified or
otherwise changed unless, concurrently, the other classes of American Common
Stock are subdivided, consolidated, reclassified or otherwise changed in the
same proportion and in the same manner.
Each new issuance of American Common Stock shall be an issuance of American
Class A Common Stock or American Class C Common Stock, except for up to an
aggregate of 1,600,000 shares of American Class B Common Stock issuable
pursuant to the American Plan or except in connection with stock splits,
dividends or combinations.
PREFERRED STOCK
All authorized and unissued shares of American Preferred Stock may be issued
with such designations, preferences, limitations and relative rights as the
American Board may authorize, including, but not limited to: (i) the
distinctive designation of each series and the number of shares that will
constitute such series; (ii) the voting rights, if any, of shares of such
series; (iii) the dividend rate on the shares of such series, any restriction,
limitation or condition upon the payment of such dividends, whether dividends
shall be cumulative, and the dates on which dividends are payable; (iv) the
prices at which, and the terms and conditions on which, the shares of such
series may be redeemed, if such shares are redeemable; (v) the purchase or
sinking fund provisions, if any, for the purchase or redemption of shares of
such series; (vi) any preferential amount payable upon shares of such series
in the event of the liquidation, dissolution or winding-up of American or the
distribution of its assets; and (vii) the price or rates of conversion at
which, and the terms and conditions on which the shares of such series may be
converted into other securities, if such shares are convertible. Although
American has no present intention to issue any additional shares of American
Preferred Stock, the issuance of American Preferred Stock, or the issuance of
rights to purchase such shares, could discourage an unsolicited acquisition
proposal.
Convertible Preferred Stock. American has issued an aggregate of 137,500
shares of Convertible Preferred Stock, liquidation value $1,000 per share. The
Convertible Preferred Stock ranks, with respect to dividend rights and rights
on liquidation, winding upon and dissolution, senior to all classes of
American Common Stock. Holders of the Convertible Preferred Stock are entitled
to receive, when, as and if declared by the American Board out of funds
legally available for payment, cash dividends at an annual rate of 7% ($70 per
share). In the event of any liquidation, winding up or dissolution of
American, before any distribution of assets is made on any American Common
Stock, the holders of the Convertible Preferred Stock are entitled to receive
a liquidation
91
<PAGE>
preference of $1,000 per share, together with all accrued and unpaid dividends
through the date of distribution. The Convertible Preferred Stock is
convertible at any time (except in the case of Convertible Preferred Stock
called for redemption which shall be convertible at any time prior to the
close of business on the Business Day prior to the redemption date), at the
option of the holder thereof, into shares of American Class A Common Stock at
an initial conversion price of $42.50 per share, subject to adjust in certain
events. The Convertible Preferred Stock is redeemable for cash at any time
after July 15, 1999 at the option of American, in whole or in part, at a
redemption price initially of $1,049, declining ratably immediately after July
15 of each year thereafter to a redemption price of $1,000 per share after
July 15, 2006, together in each case with accrued and unpaid dividends. Except
as provided by the DGCL or with respect to an amendment of the American
Restated Certificate adversely affecting the rights of the Convertible
Preferred Stock, the holders of the Convertible Preferred Stock will not be
entitled to any voting rights except as follows: (i) in the event the
equivalent of six quarterly dividends payable on the Convertible Preferred
Stock are in arrears, the number of directors of American will be increased by
two and the holders of the Convertible Preferred Stock, voting separately as a
class with the holders of shares of any other series of parity preferred stock
upon which like voting rights have been conferred and are exercisable, will be
entitled to elect two directors, who shall serve until all dividends in
arrears have been paid or declared and set apart for payment or (ii) with
respect to the creation, authorization or issuance of capital stock ranking
senior (in certain respects) to the Convertible Preferred Stock. In the event
of a Change in Control of American (as defined in the American Restated
Certificate), each share of Convertible Preferred Stock may, at the option of
the holder, be convertible for a limited period into the number of shares of
American Class A Common Stock determined by dividing the $1,000 liquidation
preference of the Convertible Preferred Stock, plus accrued and unpaid
dividends, if any, by the Special Conversion Price. The term Special
Conversion Price means, in effect, the greater of (i) the average of the Last
Sale Price (as defined in the American Restated Certificate) of a share of
Class A Common Stock prior to the Change in Control or (ii) $23.00. Upon a
Change in Control, American may elect to pay holders of the Convertible
Preferred Stock exercising their special conversion rights an amount in cash
equal to the $1,000 liquidation preference thereof, plus accrued and unpaid
dividends, if any. The Convertible Preferred Stock will be exchangeable,
subject to certain conditions, at the option of American, in whole but not in
part, on any dividend payment date commencing June 30, 1997, for American's 7%
Convertible Subordinated Debentures due 2011 (the "American Exchange
Debentures") at a rate of $1,000 principal amount of American Exchange
Debentures for each share of Convertible Preferred Stock. The American
Exchange Debentures will have substantially the same economic terms as the
Convertible Preferred Stock except that upon a Change of Control the holders
thereof will have the right to require American to purchase their American
Exchange Debentures at a price equal to the principal amount thereof, plus
accrued and unpaid interest, if any.
OWNERSHIP RESTRICTIONS
The American Restated Certificate restricts the ownership, voting and
transfer of American's capital stock, including the American Class A Common
Stock, in accordance with the Communications Act and the rules of the FCC, to
prohibit ownership of American's outstanding capital stock (or the voting
rights it represents) by or for the account of aliens or corporations
otherwise subject to domination or control by aliens. The American Restated
Certificate also has provisions designed to restrict the ownership of the
American Common Stock to ameliorate a breach or violation of or default under
the FCC's "cross-ownership" or multiple ownership rules, "cross-interest"
policy and other rules and policies. The American Restated Certificate
provides that, in the event of a violation of any of these prohibitions,
American has the right, in its sole and absolute discretion, to require a
conversion of American Class B Common Stock into American Class C Common
Stock. In addition, the American Restated Certificate authorizes the American
Board to adopt such provisions as it deems necessary to enforce these
prohibitions. See "Business--Federal Regulation of Radio Broadcasting--
Ownership Matters" in Appendix V.
DELAWARE BUSINESS COMBINATION PROVISIONS
Under the Delaware General Corporation Law, certain "business combinations"
(including the issuance of equity securities) between a Delaware corporation
and any person who owns, directly or indirectly, 15% or more
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<PAGE>
of the voting power of the corporation's shares of capital stock (an
"Interested Stockholder") must be approved by the holders of at least 66 2/3%
of the voting stock not owned by the Interested Stockholder if it occurs
within three years of the date such person became an Interested Stockholder
unless prior to such date the Board of Directors approved either the business
combination or the transaction which resulted in the stockholder becoming an
Interested Stockholder. The transactions pursuant to which each of Messrs.
Dodge and Stoner became an Interested Stockholder were approved by the
American Board.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the American Class A Common Stock is
Harris Trust and Savings Bank, 311 West Monroe Street, Chicago, Illinois 60606
(telephone number is (312) 461-3309).
LISTING
The American Class A Common Stock is quoted on Nasdaq under the symbol
"AMRD".
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<PAGE>
COMPARISON OF RIGHTS OF STOCKHOLDERS OF AMERICAN AND EZ
At the Effective Time, the EZ Stockholders will become stockholders of
American. Set forth below is a comparison of the terms of the American Class A
Common Stock and the terms of the EZ Common Stock, as well as a summary of
other material differences between the rights of holders of American Class A
Common Stock and the rights of holders of EZ Common Stock. This summary does
not purport to be complete and is qualified in its entirety by reference to
the American Restated Certificate, American's Bylaws (the "American Bylaws"),
the EZ Articles of Incorporation, as amended (the "EZ Articles"), the EZ
Bylaws (the "EZ Bylaws") and the more detailed description of the American
Common Stock contained herein. See "Description of American Capital Stock--
Common Stock."
TERMS OF COMMON STOCK
<TABLE>
<CAPTION>
AMERICAN COMMON STOCK EZ COMMON STOCK
--------------------- ---------------
<S> <C> <C>
BUSINESS: All businesses of American. All business of EZ.
LISTING: Nasdaq under the symbol "AMRD" Nasdaq under the symbol "EZCIA"
DIVIDENDS: American currently does not pay EZ currently does not pay divi-
dividends on the American Common dends on the EZ Common Stock.
Stock. Dividends on the Common Dividends on the EZ Common Stock
Stock may be paid in the discre- may be paid in the discretion of
tion of the American Board based the EZ Board based primarily upon
primarily upon the financial con- the financial condition, results
dition, results of operations and of operations and business re-
business requirements of Ameri- quirements of EZ. Dividends, if
can. Dividends, if any, are pay- any, are payable out of the funds
able out of the funds of American of EZ legally available for the
legally available for the payment payment of dividends, subject to
of dividends, subject to restric- restrictions contained in financ-
tions contained in financing ing agreements. The EZ Board is
agreements and to the preference required to pay dividends, if
rights of the Convertible Pre- any, on each class in equal
ferred Stock. The American Board amounts.
is required to pay dividends, if
any, on each class in equal
amounts.
VOTING RIGHTS: Except as otherwise required by Except as otherwise required by
the DGCL, holders of the American the VSCA, holders of the EZ Class
Class A Common Stock and American A Common Stock and EZ Class B
Class B Common Stock vote to- Common Stock vote together as a
gether as a single class. The single class. The EZ Class A Com-
American Class A Common Stock has mon Stock has one vote per share
one vote per share and the Ameri- and the EZ Class B Common Stock
can Class B Common Stock has ten has ten votes per share. The
votes per share. The American holders of EZ Class A Common
Class C Common Stock does not Stock have the right to elect two
have any voting rights except as independent directors.
otherwise required by the DGCL.
The holders of American Class A
Common Stock have the right to
elect two independent directors.
PREEMPTIVE RIGHTS: The holders of American Common The holders of EZ Common Stock do
Stock do not have any preemptive not have any preemptive rights.
rights.
</TABLE>
94
<PAGE>
<TABLE>
<CAPTION>
AMERICAN COMMON STOCK EZ COMMON STOCK
--------------------- ---------------
<S> <C> <C>
CONVERSION: Shares of American Class B Common Shares of EZ Class B Common Stock
Stock will automatically convert will automatically convert into
into shares of American Class A shares of EZ Class A Common Stock
Common Stock upon any transfer of upon any transfer of such shares
such shares of American Class B of EZ Class B Common Stock, un-
Common Stock, unless the trans- less the transferee is an affili-
feree is an affiliate of the ate of the holder, such as a fam-
holder, such as a family member, ily member, a family trust or
a family trust or other entity other trust controlled by the
controlled by the holder of Amer- holder of EZ Class B Common Stock
ican Class B Common Stock, or is or other entity controlled or
a holder of American Class B Com- owned by the holder of EZ Class B
mon Stock. Common Stock.
A holder of shares of American A holder of shares of EZ Class B
Class B Common Stock or of Ameri- Common Stock may at any time, at
can Class C Common Stock (subject such holder's election, convert
to certain restrictions in the such shares into shares of EZ
case of the present holder) may Class A Common Stock.
at any time, at such holder's
election, convert such shares
into shares of American Class A
Common Stock.
LIQUIDATION: In the event of a liquidation of In the event of a liquidation of
American, holders of American EZ, holders of EZ Common Stock
Common Stock will be entitled to will be entitled to receive the
receive the net assets of Ameri- net assets of EZ, if any, remain-
can, if any, remaining for dis- ing for distribution to holders
tribution to holders of Common of EZ Common Stock.
Stock.
</TABLE>
OTHER STOCKHOLDER RIGHTS
Amendments to the Certificate of Incorporation
Under the American Restated Certificate, amendments to the American Restated
Certificate must be adopted by the holders of a majority of the voting power
of the American Voting Stock, except that amendments to the provisions
relating to (i) the number, rights and powers of any class of stock; (ii) the
composition and powers of the American Board; (iii) release of directors'
liability; (iv) indemnification of directors as a result of a breach of
fiduciary duties, officers, employees and agents; (v) amendments to the
American By-laws; and (vi) amendments to foregoing provisions, require
adoption by the holders of 66 2/3% of the total number of the voting power of
the outstanding shares of American Voting Stock.
Under the EZ Articles, amendments to the EZ Articles must be approved by the
EZ Board and must then be adopted by a majority of the votes cast on such
amendment by the holders of EZ Common Stock entitled to vote on such amendment
at a meeting at which a quorum of such votes exists, except that amendments of
the provisions relating to (i) the number, rights and powers of any class of
stock; (ii) the composition and powers of the EZ Board; and (iii) amendments
to the foregoing provisions, require adoption by the holders of a majority of
the votes cast by the holders of EZ Class A Common Stock and a majority of the
votes cast by the holders of EZ Class B Common Stock, voting as separate
groups, at a meeting at which a quorum of such votes exists.
Amendments to Bylaws
The American Restated Certificate and the American Bylaws provide that
bylaws may be adopted, amended, altered, changed or repealed by either the
affirmative vote of the holders of 66 2/3% of the outstanding shares of
American Voting Stock or by the affirmative vote of a majority of the entire
American Board.
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The VSCA provides that the EZ Bylaws may be amended or repealed by the
affirmative vote of a majority of the members of the EZ Board present at any
meeting at which a quorum is present, or by the EZ stockholders.
Directors
Under the American Bylaws, the number of directors is determined by the
American Board from time to time, but can not be less than three. The American
Bylaws do not provide for a classified board. The American Restated
Certificate provides that the holders of the American Class A Common Stock
shall be entitled to vote as a class to elect two directors, all other
directors are elected by the holders of the American Class A Common Stock and
the American Class B Common Stock, voting together as a single class, with
each share of American Class A Common Stock entitled to one vote and each
share of the American Class B Common Stock entitled to ten votes.
The EZ Articles and EZ Bylaws provide that the number of directors shall be
nine. The EZ Bylaws do not provide for a classified board. The EZ Articles
provide that the holders of the EZ Class A Common Stock shall be entitled to
vote as a class to elect two directors; all other directors are elected by the
holders of the EZ Class A Common Stock and the EZ Class B Common Stock, voting
together as a single class, with each share of the EZ Class A Common Stock
entitled to one vote and each share of the EZ Class B Common Stock entitled to
ten votes.
Removal of Directors
Under the American Restated Certificate and Bylaws, (a) directors elected by
the American Stockholders may be removed, with or without cause, by vote of
the holders of a majority of the American Voting Stock; and (b) any directors
elected by the holders of American Class A Common Stock may be removed, with
or without cause, by a vote of the holders of the American Class A Common
Stock holding not less than a majority of the issued and outstanding shares of
American Class A Common Stock. Under the EZ Articles, (a) directors who were
elected by all of the EZ Stockholders may be removed with or without cause, by
a vote of the holders of not less than 66 2/3% of the votes entitled to be
cast for the election of such directors; and (b) any director elected by the
holders of EZ Class A Common Stock may be removed, with or without cause, by a
vote of the holders of EZ Class A Common Stock holding not less than 66 2/3%
of the issued and outstanding shares of EZ Class A Common Stock.
Newly Created Directorships and Vacancies
Under the American Restated Certificate and the American Bylaws, vacancies
in the American Board and newly created directorships may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If there are no directors in office, the DGCL
provides that any officer or stockholder may call a special meeting of
stockholders in accordance with the American Restated Certificate and American
Bylaws, at which meeting such vacancies shall be filled.
Under the EZ Articles and the EZ Bylaws, vacancies and newly created
directorships may be filled by a majority of the directors then in office,
even if less than a quorum, or by the sole remaining director. If there are no
directors in office, any officer or stockholder may call a special meeting of
stockholders in accordance with the EZ Articles and EZ Bylaws, at which
meeting such vacancies shall be filled.
Special Meetings of Stockholders; Action by Written Consent
Under the American Bylaws, special meetings of the stockholders may be
called for any purpose or purposes by the Chairman of the American Board or,
if there be none, the President, or by the American Board, and shall be called
by the President or Secretary of American at the request in writing of the
stockholders holding of record a majority in interest of the voting power of
the shares of stock of American issued and outstanding and entitled to vote.
Under the DGCL, any action required or permitted by law or the American
Restated
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Certificate to be taken at any meeting of stockholders may be taken without a
meeting, without prior notice, and without a vote, if a written consent,
setting forth the action so taken, is signed by the number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present or present by proxy and voted.
Under the EZ Bylaws, special meetings of stockholders may be called for any
purpose or purposes any time by the Chairman of the Board, the President or a
majority of the EZ Board. Under the VSCA, any action required or permitted by
law to be taken at any meeting of the stockholders may be taken without a
meeting and without action by the EZ Board if the action is taken by all the
stockholders entitled to vote on the action and is evidenced by a written
consent signed by all the stockholders entitled to vote on the action.
Stockholder Proposals and Nominations
The American Bylaws do not contain specific requirements which must be met
in order for a stockholder to present a proposal for action at an annual
meeting of stockholders or to nominate an individual for election to the
American Board.
The EZ Bylaws do not contain specific requirements which must be met in
order for a stockholder to present a proposal for action at an annual meeting
of stockholders or to nominate an individual for election to the EZ Board.
Business Combinations Following a Change in Control
American, as a Delaware corporation, is subject to Section 203 of the DGCL,
which governs business combinations with interested stockholders. See
"Description of American Capital Stock--Delaware Business Combination
Provisions."
EZ, as a Virginia corporation, is subject to Section 13.1-728.1 through .9
of the VSCA, which governs combinations with interested stockholders.
RIGHTS OF DISSENTING STOCKHOLDERS
American.
Holders of American Common Stock will not have the right to dissent from the
Merger and demand and perfect dissenters rights in accordance with the
provisions of Section 262 of the DGCL.
EZ.
Each holder of EZ Common Stock has the right to dissent from the Merger and
demand and perfect dissenters' rights in accordance with the conditions
established by Section 13.1-730 of the VSCA. All of the stockholders whose
shares of EZ Common Stock are subject to the EZ Voting Agreement have waived
their dissenters rights with respect to such shares of EZ Common Stock.
SECTION 13.1-730 OF THE VSCA IS REPRINTED IN ITS ENTIRETY AS APPENDIX IV TO
THIS PROXY STATEMENT. THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF
THE LAW RELATING TO DISSENTERS' RIGHTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO APPENDIX IV. THIS DISCUSSION AND APPENDIX IV SHOULD BE REVIEWED
CAREFULLY BY ANY HOLDER WHO WISHES TO EXERCISE STATUTORY DISSENTERS' RIGHTS OR
WHO WISHES TO PRESERVE THE RIGHT TO DO SO, AS FAILURE TO COMPLY WITH THE
PROCEDURES SET FORTH HEREIN OR THEREIN WILL RESULT IN THE LOSS OF DISSENTERS'
RIGHTS.
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Any holder of EZ Common Stock who exercises his right to dissent is entitled
to receive the "fair value" of his shares from EZ. The notice of the EZ
Special Meeting accompanying this Proxy contains a statement that any holder
of EZ Common Stock is entitled to assert dissenter's rights pursuant to
Article 15 of the VSCA and a copy of that article is attached hereto. Any
holder of EZ Common Stock who wishes to assert dissenters' rights must deliver
to EZ, before the vote on adoption of the Merger Agreement is taken, written
notice of his intent to exercise his dissenters' rights, and must not vote in
favor of adoption of the Merger Agreement. If the Merger Agreement is
subsequently adopted at the EZ Special Meeting, EZ shall deliver a dissenters'
notice in writing to each such dissenting stockholder (i) stating where the
payment demand shall be sent and where and when certificated shares shall be
deposited; (ii) informing holders of uncertificated shares to what extent
transfer of such shares may be restricted after the payment demand is
received; (iii) supplying a form for demanding payment; (iv) setting a date
between 30 and 60 days after the date of the dissenters' notice by which EZ
must receive the payment demand; and (v) containing a copy of Article 15 of
the VSCA. The dissenting stockholder must then demand payment, certify that he
acquired the shares of EZ Common Stock before or after the date set forth in
the dissenters' notice, and deposit his share certificates in accordance with
the dissenters' notice. EZ will then pay such dissenting stockholder the
amount EZ estimates to be the fair market value of such shares of EZ Common
Stock, plus accrued interest, within 30 days after receipt of the payment
demand, accompanied by certain financial statements, an explanation of how the
fair market value and the interest was calculated, and a statement of the
dissenters' right to demand payment under (S) 13.1-735 of the VSCA. Section
13.1-739 of the VSCA permits a dissenting stockholder to notify the
corporation in writing of his own estimate of the fair value of his shares and
interest due and to demand payment of his estimate, or reject the
corporation's offer and demand payment of the fair value of his shares and
interest due, if the dissenter believes that the amount offered by the
corporation is less than the fair value of his shares. Any dispute between the
corporation and a dissenting stockholder as to the fair value of shares or
interest due will be resolved by court action in accordance with (S) 13.1-740
of the VSCA.
LEGAL MATTERS
The validity of the American Class A Common Stock to be issued in the Merger
will be passed upon by Sullivan & Worcester LLP, Boston, Massachusetts.
Certain legal matters, including the tax-free nature of the Merger, relating
to the Merger will be passed upon, on behalf of American, by Sullivan &
Worcester LLP, Boston, Massachusetts, and for EZ by Hunton & Williams, McLean,
Virginia. Norman A. Bikales, a member of the firm of Sullivan & Worcester LLP,
is the owner of 6,000 shares of American Class A Common Stock and 41,900
shares of American Class B Common Stock and certain partners and/or associates
of that firm serve as secretary or assistant secretaries of American and
certain of its subsidiaries.
EXPERTS
The following financial statements and related financial statement schedules
incorporated by reference in this Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports which are
incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing:
(1) The consolidated financial statements as of December 31, 1994 and
1995 and for the period November 1, 1993 to December 31, 1993 and for the
years ended December 31, 1994 and 1995 of American Radio Systems
Corporation and subsidiaries and the related financial statement schedules;
(2) The consolidated statement of operations, stockholders' deficit, and
cash flows for the ten months ended October 31, 1993 of SBS Holding, Inc.
and subsidiary and the related financial statement schedule;
(3) The consolidated statement of operations, partners' deficiency, and
cash flows for the ten month period ended October 31, 1993 of Atlantic
Radio, L.P. and subsidiaries (a Partnership) and the related financial
statement schedule;
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(4) The statements of operations, stockholders' equity (deficiency) and
cash flows for the year ended August 31, 1993 and the two month period
ended October 31, 1993 of Multi Market Communications Inc. and the related
financial statement schedule; and
(5) The statement of operations and accumulated deficit, and cash flows
for the ten month period ended October 31, 1993 of Boston AM Radio
Corporation and the related financial statement schedule.
The following financial statements incorporated by reference in this
Prospectus have been audited by Deloitte & Touche LLP, independent auditors,
as stated in their reports which are incorporated herein by reference, and
have been so incorporated in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing:
(1) The consolidated financial statements as of December 31, 1994 and
1995 and for the three years ended December 31, 1995 of BayCom Partners,
L.P. (a Limited Partnership); and
(2) The statement of net assets to be sold as of December 31, 1995 and of
income and cash flows derived from net assets to be sold for the year then
ended of The Ten Eighty Corporation.
The financial statements of Henry Broadcasting Company Special Financial
Statement Presentation as of December 31, 1994 and 1995 and for each of the
three years in the period ended December 31, 1995 incorporated by reference in
this Prospectus have been audited by Miller, Kaplan, Arase & Co., independent
auditors, as stated in their report incorporated by reference in this
Prospectus and have been so included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
The financial statements of CBC of Baltimore, Inc. (d/b/a WOCT-FM) and WWMX-
FM, Inc. (wholly-owned subsidiaries of Capitol Broadcasting Company, Inc.) as
of December 31, 1995 and for the year then ended included in this Prospectus
have been so included in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The combined financial statements of WBAV-AM/FM and WPEG-FM as of December
31, 1995 and September 30, 1996 and for the periods from January 1, 1995 to
May 12, 1995 and from May 13, 1995 to December 31, 1995 and the nine months
ended September 30, 1996 are included herein in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, included
herein, and upon authority of said firm as experts in accounting and auditing.
The report of KMPG Peat Marwick LLP contains an explanatory paragraph that
refers to a different cost basis in the financial information of WBAV-AM/FM
and WPEG-FM for periods before and after their acquisition by Evergreen Media
Corporation. As a result of such different cost basis, the financial
information for periods before and after the acquisition is not comparable.
The following financial statements incorporated by reference in the Proxy
Statement of American Radio Systems Corporation which is referred to and made
part of this Prospectus and Registration Statement, have been audited by Ernst
& Young, independent auditors, as set forth in their reports thereon and
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing:
(1) The consolidated financial statements of EZ Communications, Inc. as
of December 31, 1995 and 1994 and for the years ended December 31, 1995 and
1994, and the nine months ended December 31, 1993;
(2) The financial statements of Alliance Broadcasting Rainier I.P. (A
Partnership) as of December 31, 1995 and for the year then ended;
(3) The financial statements of Compass Radio of St. Louis, Inc. as of
December 31, 1994 and 1995 and for the two years then ended; and
(4) The financial statements of KFKF Broadcasting, Inc as of December 31,
1994 and for the year then ended.
The portion of this Proxy Statement under the caption "Certain Federal
Income Tax Considerations" has been reviewed by Sullivan & Worcester and
Hunton & Williams.
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APPENDIX I
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AMERICAN RADIO SYSTEMS CORPORATION
AMERICAN MERGER CORPORATION
AND
EZ COMMUNICATIONS, INC.
DATED AS OF
AUGUST 5, 1996
AND AS AMENDED AND RESTATED
AS OF SEPTEMBER 27, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
ARTICLE 1 DEFINED TERMS................................................. 1
ARTICLE 2 THE MERGER.................................................... 2
2.1 The Merger.................................................... 2
2.2 Closing....................................................... 2
2.3 Effective Time................................................ 2
2.4 Effect of the Merger.......................................... 2
2.5 Certificate of Incorporation.................................. 2
2.6 Bylaws........................................................ 3
2.7 Directors and Officers........................................ 3
ARTICLE 3 CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES................ 3
3.1 Conversion of Capital Stock................................... 3
3.2 Exchange of Certificates...................................... 4
3.3 Closing of EZ's Transfer Books................................ 6
3.4 Dissenting Shares............................................. 7
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF EZ.......................... 7
4.1 Organization and Business; Power and Authority; Effect of
Transaction................................................... 7
4.2 Financial and Other Information............................... 9
4.3 Changes in Condition.......................................... 9
4.4 Materiality................................................... 9
4.5 Title to Properties; Leases................................... 9
4.6 Compliance with Private Authorizations........................ 10
4.7 Compliance with Governmental Authorizations and Applicable
Law........................................................... 10
4.8 Related Transactions.......................................... 11
4.9 Tax Matters................................................... 11
4.10 Employee Retirement Income Security Act of 1974............... 12
4.11 Inapplicability of Specified Statutes......................... 13
4.12 Authorized Capital Stock...................................... 13
4.13 Employment Arrangements....................................... 14
4.14 Material Agreements........................................... 14
4.15 Ordinary Course of Business................................... 14
4.16 Broker or Finder.............................................. 15
4.17 Environmental Matters......................................... 15
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF AMERICAN.................... 16
5.1 Organization and Business; Power and Authority; Effect of
Transaction................................................... 16
5.2 Financial and Other Information............................... 17
5.3 Changes in Condition.......................................... 18
5.4 Materiality................................................... 18
5.5 Title to Properties; Leases................................... 18
5.6 Compliance with Private Authorizations........................ 18
5.7 Compliance with Governmental Authorizations and Applicable
Law........................................................... 18
5.8 Related Transactions.......................................... 20
5.9 Tax Matters................................................... 20
5.10 Employee Retirement Income Security Act of 1974............... 20
5.11 Inapplicability of Specified Statutes......................... 22
5.12 Authorized Capital Stock...................................... 22
5.13 Employment Arrangements....................................... 22
5.14 Material Agreements........................................... 22
5.15 Ordinary Course of Business................................... 23
5.16 Broker or Finder.............................................. 23
</TABLE>
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<TABLE>
<C> <S> <C>
5.17 Environmental Matters......................................... 23
5.18 American Financing............................................ 23
ARTICLE 6 COVENANTS..................................................... 23
6.1 Access to Information; Confidentiality........................ 23
6.2 Agreement to Cooperate........................................ 24
6.3 Public Announcements.......................................... 25
6.4 Notification of Certain Matters............................... 25
6.5 Stockholder Approval.......................................... 25
6.6 Registration Statement and Proxy Statement.................... 26
6.7 Affiliates of EZ.............................................. 27
6.8 Nasdaq Listing................................................ 27
6.9 Other Offers; No Solicitation................................. 27
6.10 Option Plans.................................................. 28
6.11 Conduct of Business by American Pending the Merger............ 29
6.12 Conduct of Business by EZ Pending the Merger.................. 29
6.13 Control of EZ's Operations.................................... 30
6.14 Control of American's Operations.............................. 30
6.15 Directors', Officers' and Employees' Indemnification and
Insurance..................................................... 30
6.16 Employment Agreements......................................... 31
6.17 Irrevocable Proxies........................................... 31
6.18 Tax-Free Treatment of Merger.................................. 31
ARTICLE 7 CLOSING CONDITIONS............................................ 31
7.1 Conditions to Obligations of Each Party to Effect the Merger.. 31
7.2 Conditions to Obligations of American......................... 32
7.3 Conditions to Obligations of EZ............................... 34
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER............................. 35
8.1 Termination................................................... 35
8.2 Effect of Termination......................................... 36
ARTICLE 9 GENERAL PROVISIONS............................................ 37
9.1 Amendment..................................................... 37
9.2 Waiver........................................................ 37
9.3 Fees, Expenses and Other Payments............................. 37
9.4 Notices....................................................... 37
9.5 Specific Performance; Other Rights and Remedies............... 38
9.6 Non-Survival of Representations and Warranties................ 38
9.7 Severability.................................................. 38
9.8 Counterparts.................................................. 38
9.9 Section Headings.............................................. 39
9.10 Governing Law................................................. 39
9.11 Further Acts.................................................. 39
9.12 Entire Agreement.............................................. 39
9.13 Assignment.................................................... 39
9.14 Parties in Interest........................................... 39
9.15 Mutual Drafting............................................... 39
9.16 American Agent for American Subsidiary........................ 39
</TABLE>
<TABLE>
<C> <S>
APPENDIX A: Definitions
EXHIBITS:
EXHIBIT A: EZ Voting Agreement (Section 6.17)
EXHIBIT B: American Voting Agreement (Section 6.17)
</TABLE>
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated as of August 5, 1996, and as
amended and restated as of September 27, 1996 by and among American Radio
Systems Corporation, a Delaware corporation ("American"), American Merger
Corporation, a Delaware and direct wholly owned subsidiary of American
("American Subsidiary"), and EZ Communications, Inc., a Virginia corporation
("EZ").
WITNESSETH:
WHEREAS, American and EZ have entered into an Agreement and Plan of Merger,
dated as of August 5, 1996 (the "Original Agreement"), providing for the
merger of EZ with and into American (the "Direct Merger");
WHEREAS, American and EZ desire to amend and restate the Original Agreement
in its entirety to permit an alternate merger structure providing for the
merger of EZ into American Subsidiary (the "Subsidiary Merger") and to make
certain other amendments to the Original Agreement, and American Subsidiary
desires to become a party thereto; and
WHEREAS, the Boards of Director of EZ and American have determined that the
Direct Merger and the Subsidiary Merger on the terms and conditions set forth
in the Original Agreement, as amended and restated by this Agreement and Plan
of Merger (this "Agreement") is consistent with and in furtherance of the
long-term business strategy of each, is desirable, generally to the welfare
and advantage of each, and is fair to, and in the best interests of, American,
EZ and the stockholders of each; and
WHEREAS, the Board of Directors of American Subsidiary has determined that
the Subsidiary Merger on the terms and conditions set forth in this Agreement
is fair to, and in the best interests of, American Subsidiary and its
stockholders; and
WHEREAS, American, American Subsidiary and EZ intend that the Direct Merger
and the Subsidiary Merger shall each qualify as a tax-free reorganization
under the provisions of Section 368 of the Code; and
WHEREAS, the Boards of Directors of EZ, American and American Subsidiary
have approved and adopted this Agreement and have directed that this Agreement
be submitted to the respective stockholders of EZ, American and American
Subsidiary for their approval;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and other valuable consideration, the receipt and adequacy
whereof are hereby acknowledged, the parties hereto hereby, intending to be
legally bound, represent, warrant, covenant and agree as follows:
ARTICLE 1
DEFINED TERMS
As used herein, unless the context otherwise requires, the terms defined in
Appendix A shall have the respective meanings set forth therein. Terms defined
in the singular shall have a comparable meaning when used in the plural, and
vice versa, and the reference to any gender shall be deemed to include all
genders. Unless otherwise defined or the context otherwise clearly requires,
terms for which meanings are provided in this Agreement shall have such
meanings when used in either Disclosure Schedule and each Collateral Document
executed or required to be executed pursuant hereto or thereto or otherwise
delivered, from time to time, pursuant hereto or thereto.
A-I-1
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ARTICLE 2
THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Delaware General Corporation Law
(the "DCL") and the Virginia Stock Corporation Act (the "VCA"), at the
Effective Time, EZ shall be merged with and into American; provided, however,
in the event that the Board of Directors of American determines that the
consent (the "EZ Senior Note Consent") of the holders of the 9 3/4% Senior
Subordinated Notes due 2005 of EZ (the "EZ Senior Notes") issued and
outstanding under the indenture dated as of November 21, 1995 by and among EZ,
the Guarantors (as defined therein) and State Street Bank and Trust Company,
as Trustee (the "EZ Senior Note Indenture") cannot be obtained on terms
satisfactory to American, EZ shall be merged with and into American
Subsidiary. As used herein, the "Merger" shall refer to the Subsidiary Merger
or the Direct Merger, as applicable. At the Effective Time, the separate
corporate existence of EZ shall cease, and American Subsidiary or American, as
applicable, shall continue as the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all of the rights, properties,
liabilities and obligations of EZ in accordance with the DCL and the VCA.
2.2 Closing. Unless this Agreement shall have been terminated pursuant to
Section 8.1 and the Merger shall have been abandoned, and subject to the
satisfaction or, if permissible, waiver of the conditions set forth in Article
7, the closing of the Merger (the "Closing") will take place, on the Closing
Date, at the offices of Sullivan & Worcester LLP, One Post Office Square,
Boston, Massachusetts, on the later of (a) January 8, 1997 and (b) the date
that is the tenth (10th) day after the date on which the last of the
conditions set forth in Article 7 (other than conditions requiring delivery at
the Closing) is fulfilled or waived, unless another date, time or place is
agreed to in writing by the parties or provided for herein. The date on which
the Closing occurs is herein referred to as the "Closing Date."
2.3 Effective Time. Subject to the provisions of this Agreement, as promptly
as practicable after the satisfaction or, if permissible, waiver of the
conditions set forth in Article 7, the parties hereto shall cause the Merger
to be consummated by filing a Certificate of Merger and any related filings
required under the DCL with the Secretary of State of the State of Delaware
and Articles of Merger and any related filings required under the VCA with the
State Corporation Commission of the Commonwealth of Virginia. The Merger shall
become effective at such time (but not prior to the Closing Date) as such
documents are duly filed with the Secretary of State of the State of Delaware
and the State Corporation Commission of the Commonwealth of Virginia shall
have issued a Certificate of Merger, or at such later time as is specified in
such documents (the "Effective Time").
2.4 Effect of the Merger. From and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises
and be subject to all of the restrictions, disabilities and duties of American
and EZ, and the Merger shall otherwise have the effects provided for under the
DCL and the VCA.
2.5 Certificate of Incorporation. If the Direct Merger is effected, the
Restated Certificate of Incorporation of American in effect at the Effective
Time shall be the Certificate of Incorporation of the Surviving Corporation
unless amended in accordance with Applicable Law, except that the first
paragraph of Article Fourth of such Restated Certificate of Incorporation
shall be amended and restated to read in its entirety as follows:
"The aggregate number of shares of all classes of stock which the
Corporation is authorized to issue is 131,000,000 shares of which
10,000,000 shall be shares of Preferred Stock, $.01 par value per share
(the "Preferred Stock"), and 121,000,000 shall be shares of Common Stock,
$.01 par value per share (the "Common Stock"), of which 100,000,000 shall
be shares of Class A Common Stock, $.01 par value per share, 15,000,000
shall be shares of Class B Common Stock, $.01 par value per share (the
"Class B Common Stock"), and 6,000,000 shall be shares of Class C Common
Stock, $.01 par value per share (the "Class C Common Stock")."
The name of the Surviving Corporation shall be "American Radio Systems
Corporation."
A-I-2
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If the Subsidiary Merger is effected, the Certificate of Incorporation of
American Subsidiary as in effect immediately prior to the Effective Time shall
be amended at the Effective Time so that Article I thereof reads in its
entirety as follows: "The name of the corporation is EZ Communications, Inc."
and, as so amended, such Certificate of Incorporation shall be the Certificate
of Incorporation of the Surviving Corporation until thereafter duly amended in
accordance with the terms thereof and the DCL. If the Subsidiary Merger is
effected, the Restated Certificate of Incorporation of American shall be
amended so that Article Fourth thereof is amended and restated in its entirety
as provided in the preceding paragraph of this Section (the "Charter
Amendment").
2.6 Bylaws. If the Direct Merger is effected, the bylaws of American in
effect at the Effective Time shall be the bylaws of the Surviving Corporation
unless amended in accordance with Applicable Law.
If the Subsidiary Merger is effected, the bylaws of American Subsidiary in
effect at the Effective Time shall be the bylaws of the Surviving Corporation
unless amended in accordance with Applicable Law.
2.7 Directors and Officers. If the Direct Merger, is effected, from and
after the Effective Time, until successors are duly elected or appointed and
qualified (or upon their earlier resignation or removal) in accordance with
Applicable Law (a) the directors of American at the Effective Time shall be
the directors of the Surviving Corporation, together with such persons, if
any, as shall have been nominated pursuant to the provisions of the
Stockholder Agreement, and (b) the officers of American at the Effective Time
shall be the officers of the Surviving Corporation, together with the persons
referred to in Section 7.3(k) of the EZ Disclosure Schedule, who shall be
elected to the respective positions set forth therein.
If the Subsidiary Merger, is effected, from and after the Effective Time,
until successors are duly elected or appointed and qualified (or upon their
earlier resignation or removal) in accordance with Applicable Law (a) the
directors of American at the Effective Time shall be the directors of the
Surviving Corporation, together with such persons, if any, as shall have been
nominated pursuant to the provisions of the Stockholder Agreement, and (b) the
officers of American at the Effective Time shall be the officers of the
Surviving Corporation, together with the persons referred to in Section 7.3(k)
of the EZ Disclosure Schedule, who shall be elected to the respective
positions set forth therein.
ARTICLE 3
CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES
3.1 Conversion of Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of American, American Subsidiary or
EZ or their respective stockholders:
(a) Each share of 7% Convertible Exchangeable Preferred Stock, par value
$.01 per share, of American issued and outstanding immediately prior to the
Effective Time shall remain outstanding;
(b) Each share of Common Stock, par value $.01 per share, of American
(the "American Common Stock") issued and outstanding immediately prior to
the Effective Time shall remain outstanding;
(c) Each share of Class A Common Stock, par value $.01 per share, and
each share of Class B Common Stock, par value $.01 per share, of EZ
(collectively, the "EZ Common Stock") issued and outstanding immediately
prior to the Effective Time (other than Dissenting Shares) shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into the right to receive $11.75 (the "Cash Consideration") and
nine-tenths (0.9) of a share (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of American (the "American Class A Common
Stock") (the "Common Stock Consideration" and collectively with the Cash
Consideration, the "Merger Consideration");
(d) Each share of EZ Common Stock owned by American or any of its
Subsidiaries immediately prior to the Effective Time shall automatically be
canceled and extinguished without any conversion thereof and no payment
shall be made with respect thereto;
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(e) If the Subsidiary Merger is effected, each share of common stock, par
value $.01 per share, of American Subsidiary issued and outstanding
immediately prior to the Effective Time shall remain outstanding as one
share of common stock, par value $.01 per share, of the Surviving
Corporation.
(f) Subject to and as more fully provided in Section 6.10, each unexpired
option to purchase EZ Common Stock ("EZ Options") that is outstanding at
the Effective Time shall automatically be converted into an option (the
"Exchanged Options") to purchase a number of shares of American Class A
Common Stock equal to the product of the number of shares of EZ Common
Stock which the holder is entitled to purchase under such EZ Options
multiplied by the Exchange Ratio; and
(g) Each option to purchase shares of American Common Stock issued and
outstanding immediately prior to the Effective Time shall remain
outstanding.
If, prior to Closing, American
(i) pays a dividend or makes a distribution on any class of American
Class A Common Stock in shares of any class of American Common Stock;
(ii) subdivides its outstanding shares of American Class A Common
Stock into a greater number of shares;
(iii) combines its outstanding shares of American Class A Common
Stock into a smaller number of shares;
(iv) pays a dividend or makes a distribution on American Class A
Common Stock in shares of its capital stock other than American Common
Stock; or
(v) issues by reclassification of any American Class A Common Stock
any shares of its capital stock;
then the Common Stock Consideration in effect immediately prior to such action
shall be proportionately adjusted so that the holder of any shares of EZ
Common Stock or any EZ Options thereafter shall receive the aggregate number
and kind of shares of American capital stock which it would have owned
immediately following such action if such shares of EZ Common Stock or such EZ
Option had been converted to American Class A Common Stock or Exchanged
Options, as the case may be, immediately prior to such action. The adjustment
provided for in this Section shall become effective immediately after the
record date in the case of a dividend or distribution and immediately after
the effective date in the case of a subdivision, combination or
reclassification.
As a result of the Merger and without any action on the part of the holder
thereof, at the Effective Time all shares of EZ Common Stock shall cease to be
outstanding and shall be canceled and retired and shall cease to exist, and
each holder of shares of EZ Common Stock shall thereafter cease to have any
rights with respect to such shares of EZ Common Stock, except the right to
receive, without interest, the Merger Consideration and cash for fractional
shares of American Class A Common Stock in accordance with the provisions of
Section 3.2(d) upon the surrender of a certificate representing such shares of
EZ Common Stock or, in the case of a holder of Dissenting Shares, the right to
perfect the right to receive payment for Dissenting Shares pursuant to Section
13.1-733 of the VCA. The American Class A Common Stock comprising part of the
Merger Consideration, when issued to the holders of EZ Common Stock, will be
duly authorized, validly issued, fully paid, non-assessable and not subject to
preemptive rights created by statute, American's Restated Certificate of
Incorporation or Bylaws or any agreement to which American is a party or by
which American is bound.
3.2 Exchange of Certificates.
(a) Pursuant to an agreement reasonably satisfactory to American and EZ (the
"Exchange Agent Agreement") to be entered into at or prior to the Closing Date
between American, EZ and the transfer agent for the American Class A Common
Stock (the "Exchange Agent"), at or immediately following the Effective Time,
American shall deposit or cause to be deposited in trust for the benefit of
the EZ stockholders an amount of cash equal to the aggregate Cash
Consideration and shares of American Class A Common Stock representing the
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aggregate Common Stock Consideration to which holders of EZ Common Stock shall
be entitled at the Effective Time pursuant to the provisions of this Section.
The Exchange Agent shall invest the cash deposited with it in such manner as
American directs; provided, however, that substantially all of such
investments shall be in obligations of or guaranteed by the United States of
America, in commercial paper obligations receiving the highest rating from
either Moody's Investors Service, Inc. or Standard & Poor's Ratings Group, or
in certificates of deposit, bank repurchase agreements or bankers' acceptances
of commercial banks with capital exceeding One Billion Dollars
($1,000,000,000) (collectively, "Permitted Investments") or in money market
funds which are invested solely in Permitted Investments; provided further,
however, that the maturities of Permitted Investments shall be such as to
permit the Exchange Agent to make prompt payment of the Cash Consideration at
and after the Effective Time. Any net profit from, or interest or income
produced by, Permitted Investments shall be payable to the Surviving
Corporation as and when requested by the Surviving Corporation. The Surviving
Corporation shall be required to replace any Cash Consideration lost as a
result of any Permitted Investment.
(b) Not less than five (5) business days subsequent to the Effective Time,
the Exchange Agent shall mail to each holder of record of a certificate or
certificates that immediately prior to the Effective Time represented
outstanding shares of EZ Common Stock (the "Certificates") (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon actual delivery of
the Certificates to the Exchange Agent) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for cash and
certificates representing shares of American Class A Common Stock. Upon
surrender of Certificates for cancellation to the Exchange Agent, together
with a duly executed letter of transmittal and such other documents as the
Exchange Agent shall reasonably require, the holder of such Certificates shall
be entitled to receive in exchange therefor cash and a certificate
representing that number of whole shares of American Class A Common Stock into
which the shares of EZ Common Stock, theretofore represented by the
Certificates so surrendered, shall have been converted pursuant to the
provisions of Section 3.1(c), and the Certificates so surrendered shall be
canceled. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to a holder of shares of EZ Common Stock for any
shares of American Class A Common Stock or dividends or distributions thereon
delivered to a public official pursuant to applicable abandoned property,
escheat or similar Laws. Certificates surrendred for exchange by any Person
constituting an "affiliate", as that term is used in paragraphs (c) and (d) of
Rule 145 under the Securities Act, of EZ shall not be exchanged until American
has received a written agreement from such Person as provided in Section 6.7.
(c) Promptly following the date which is six (6) months after the Closing
Date, the Exchange Agent shall deliver to American all cash, certificates
(including any American Class A Common Stock) and other documents in its
possession relating to the transactions described in this Agreement, and the
Exchange Agent's duties shall terminate. Thereafter, each holder of a
Certificate may surrender such Certificate to the Surviving Corporation and
(subject to applicable abandoned property, escheat and similar Laws) receive
in exchange therefor the Merger Consideration to which such holder is
entitled, without any interest thereon. Notwithstanding the foregoing, neither
the Exchange Agent nor any party hereto shall be liable to a holder of EZ
Common Stock for any American Class A Common Stock delivered to a public
official pursuant to applicable abandoned property, escheat or similar Laws.
(d) Notwithstanding any other provision of this Agreement, no certificates
or scrip for fractional shares of American Class A Common Stock shall be
issued in the Merger or pursuant to the exercise of any Exchanged Options and
no American Class A Common Stock dividend, stock split or interest shall
relate to any fractional interest, and such fractional interests shall not
entitle the owner thereof to vote or to any other rights of a security holder.
In lieu of any such fractional shares, each holder of EZ Common Stock who
would otherwise have been entitled to receive a fraction of a share of
American Class A Common Stock upon surrender of Certificates for exchange
pursuant to this Article, or upon the exercise of any Exchanged Option shall
be entitled to receive from the Exchange Agent a cash payment equal to such
fraction multiplied by the closing price per share of American Class A Common
Stock on the Nasdaq National Market ("Nasdaq"), as reported by the Wall Street
Journal, on the last trading day immediately preceding the Effective Time with
respect to shares issued in the Merger and on the last trading day immediately
preceding the date of exercise of any Exchanged Option.
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(e) If the Merger Consideration (or any portion thereof) is to be paid to a
Person other than the Person in whose name the Certificate surrendered in
exchange therefor is registered, it shall be a condition to the payment of the
Merger Consideration that the Certificate so surrendered shall be properly
endorsed or accompanied by appropriate stock powers (with signatures
guaranteed in accordance with the transmittal form) and otherwise in proper
form for transfer, that such transfer otherwise be proper and that the Person
requesting such transfer pay to the Exchange Agent any transfer or other Taxes
payable by reason of the foregoing or establish to the satisfaction of the
Exchange Agent that such Taxes have been paid or are not required to be paid.
(f) In the event any Certificate 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 and subject to such other
reasonable conditions as the Board of Directors of the Surviving Corporation
may impose, the Surviving Corporation shall issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration deliverable in
respect thereof as determined in accordance with this Article. When
authorizing such issue of the Merger Consideration in exchange therefor, the
Board of Directors of the Surviving Corporation may, in its discretion and as
a condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Certificate to give the Surviving Corporation a bond or
other surety in such sum as it may reasonably direct as indemnity against any
Claim that may be made against the Surviving Corporation with respect to the
Certificate alleged to have been lost, stolen or destroyed.
(g) Notwithstanding any other provisions of this Agreement, no dividends or
other distributions declared after the Effective Time on American Class A
Common Stock shall be paid with respect to any whole shares of American Class
A Common Stock represented by a Certificate until such Certificate is
surrendered for exchange as provided herein. Subject to the effect of
Applicable Laws, following surrender of any such Certificate, there shall be
paid to the holder of the shares of American Class A Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to such whole shares of
American Class A Common Stock and not paid, less the amount of any withholding
taxes which may be required thereon, and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of American Class A Common
Stock, less the amount of any withholding taxes which may be required thereon.
(h) At and after the Effective Time, the holder of a Certificate or of
Dissenting Shares shall cease to have any rights as a EZ stockholder, except
for, in the case of a holder of a Certificate or a holder of Dissenting Shares
to whom the proviso in Section 3.4(a) applies, the right to surrender
Certificates in the manner prescribed by Section 3.2(b) or (c) in exchange for
payment of the Merger Consideration, or, in the case of a holder of Dissenting
Shares, the right to perfect the right to receive payment for Dissenting
Shares pursuant to Section 13.1-733 of the VCA.
(i) American shall be entitled to, or shall be entitled to cause the
Exchange Agent to, deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of EZ Common Stock
such amounts as are required to be deducted and withheld 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 by American or the
Exchange Agent, as the case may be, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder of the shares
of EZ Common Stock in respect of which such deduction and withholding was made
by American or the Exchange Agent.
3.3 Closing of EZ's Transfer Books. At and after the Effective Time, holders
of Certificates shall cease to have any rights as stockholders of EZ, except
for, in addition to the rights specified in Section 3.2(h), the right to
receive cash and shares of American Class A Common Stock pursuant to Section
3.2 and the right to receive cash for payment of fractional shares pursuant to
Section 3.2(d). At the Effective Time, the stock transfer books of EZ shall be
closed and no transfer of shares of EZ Common Stock which were outstanding
immediately prior to the Effective Time shall thereafter be made. If, after
the Effective Time, subject to the terms and conditions of
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this Agreement, Certificates formerly representing EZ Common Stock are
presented to the Surviving Corporation, they shall be canceled and exchanged
for cash and American Class A Common Stock in accordance with this Article.
3.4 Dissenting Shares.
(a) Notwithstanding any other provision of this Agreement to the contrary,
shares of EZ Common Stock that are outstanding immediately prior to the
Effective Time and which are held by EZ stockholders who shall have not voted
in favor of the Merger or consented thereto in writing and who shall be
entitled to and shall have demanded properly in writing appraisal rights for
such shares of EZ Common Stock in accordance with Section 13.1-733 of the VCA
and who shall not have withdrawn such demand or otherwise have forfeited
appraisal rights (collectively, the "Dissenting Shares"), shall not be
converted into or represent the right to receive the Merger Consideration
payable in respect of each share of EZ Common Stock represented thereby. Such
EZ stockholders shall be entitled to receive payment of the appraised value of
such shares of EZ Common Stock held by them in accordance with the provisions
of the VCA; provided, however, that all Dissenting Shares held by EZ
stockholders who shall have failed to perfect or who effectively shall have
withdrawn, forfeited or lost their appraisal rights with respect to such
shares of EZ Common Stock under the VCA shall thereupon be deemed to have been
converted into and to have become exchangeable for, as of the Effective Time,
the right to receive, without any interest thereon, the appropriate Merger
Consideration upon surrender, in the manner provided in Section 3.2, of the
Certificate or Certificates that formerly evidenced such shares of EZ Common
Stock. American shall contribute to American Merger funds sufficient from time
to time to make all payments with respect to Dissenting Shares.
(b) EZ shall give American prompt notice of any demands for appraisal rights
received by it, withdrawals of such demands, and any other instruments served
pursuant to the VCA and received by EZ and relating thereto. EZ and American
shall jointly direct all negotiations and proceedings with respect to demands
for appraisal rights under the provisions of the VCA. EZ shall not, except
with the prior written consent of American, make any payment with respect to
any demands for appraisal rights, or offer to settle, or settle, any such
demands.
ARTICLE
REPRESENTATIONS AND WARRANTIES OF EZ
Except as set forth in the EZ Disclosure Schedule, EZ hereby represents,
warrants and covenants to, and agrees with, American as follows:
4.1 Organization and Business; Power and Authority; Effect of Transaction.
(a) EZ is a corporation duly incorporated, validly existing and in good
standing under the laws of the Commonwealth of Virginia, has all requisite
power and authority (corporate and other) to own or hold under lease its
properties and to conduct its business as now conducted and as presently
proposed to be conducted, and has in full force and effect all Governmental
Authorizations pertaining to EZ or any of the EZ Stations and Private
Authorizations and has made all Governmental Filings, to the extent required
for such ownership and lease of its property and conduct of its business as
currently conducted; EZ is not required to be qualified or authorized to do
business in any jurisdiction because of the character of the property owned or
leased by it or the nature of its business or operations.
(b) EZ has all requisite power and authority (corporate and other) and has
in full force and effect all Governmental Authorizations pertaining to EZ or
any of the EZ Stations and Private Authorizations, except for (i) those
contemplated by this Agreement that must be obtained prior to the Closing
Date, including without limitation the consents of its lenders under its bank
credit agreement and other debt instruments, and (ii) such, the failure of
which to obtain, would not, individually or in the aggregate, (A) have a
Material Adverse Effect on EZ, or (B) prohibit it from executing and
delivering, and performing its obligations under, this Agreement and
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each Collateral Document executed or required to be executed by EZ pursuant
hereto or thereto or consummating the Merger; and the execution, delivery and
performance of this Agreement and each Collateral Document executed or
required to be executed pursuant hereto or thereto have been duly authorized
by all requisite corporate or other action on the part of EZ, other than the
approval of the EZ stockholders contemplated by this Agreement. This Agreement
has been duly executed and delivered by EZ and constitutes, and each
Collateral Document executed or required to be executed pursuant hereto or
thereto or to consummate the Merger when executed and delivered by EZ, will
constitute, legal, valid and binding obligations of EZ, enforceable in
accordance with their respective terms. The provisions of Section 13.1-728.1
through .9 of the VCA will not apply to this Agreement or the Merger.
(c) Except for (x) consents as set forth in Section 4.1(c) of the EZ
Disclosure Schedule and (y) such consents, the failure of which to obtain,
would not, individually or in the aggregate, have a Material Adverse Effect on
EZ, neither the execution and delivery by EZ of this Agreement or any
Collateral Document executed or required to be executed by it pursuant hereto
or thereto, nor the consummation by EZ of the Merger, nor compliance with the
terms, conditions and provisions hereof or thereof by EZ:
(i) will conflict with, or result in a breach or violation of, or
constitute a default under, any Organic Document of EZ or any Applicable
Law, or will conflict with, or result in a breach or violation of, or
constitute a default under, or permit the acceleration of any obligation or
liability in, or but for any requirement of the giving of notice or passage
of time or both would constitute such a conflict with, breach or violation
of, or default under, or permit any such acceleration in, any Contractual
Obligation of EZ, except for such conflicts, breaches, violations or
accelerations that would not, individually or in the aggregate, have a
Material Adverse Effect on EZ; or
(ii) will result in or permit the creation or imposition of any Lien upon
any property now owned or leased by EZ; or
(iii) will require any Governmental Authorization or Governmental Filing
or Private Authorization, except for the FCC Consents, filings under the
Hart-Scott-Rodino Act, and other filing requirements under Applicable Law
in connection with the consummation of the Merger.
(d) EZ does not have any direct or indirect Subsidiaries other than those
set forth on Section 4.1(d) of the EZ Disclosure Schedule, each of which is
(i) wholly-owned unless noted otherwise in Section 4.1(d) of the EZ Disclosure
Schedule, (ii) a corporation which is duly organized, validly existing and in
good standing under the laws of the respective state of incorporation set
forth opposite its name on Section 4.1(d) of the EZ Disclosure Schedule, and
(iii) duly qualified and in good standing as a foreign corporation in each
other jurisdiction (as shown on Section 4.1(d) of the EZ Disclosure Schedule)
in which the character of the property owned or leased by it or the nature of
its business or operations requires such qualification, with full power and
authority (corporate and other) to carry on the business in which it is
engaged, except for such qualifications the failure of which to obtain,
individually or in the aggregate, would not have a Material Adverse Effect on
EZ. Each Subsidiary has in full force and effect all Governmental
Authorizations pertaining to EZ or any of the EZ Stations and Private
Authorizations and has made all Governmental Filings, to the extent required
for such ownership and lease of its property and conduct of its business,
except for such Governmental Authorizations, Private Authorizations, and
Governmental Filings which, if not obtained or made, as the case may be, would
not, individually or in the aggregate, have a Material Adverse Effect on EZ.
EZ owns, directly or indirectly, all of the outstanding capital stock and
equity interests (as shown in Section 4.1(d) of the EZ Disclosure Schedule) of
each Subsidiary, free and clear of all Liens (except for Permitted Liens or
except as set forth in Section 4.1(d) of the EZ Disclosure Schedule), and all
such stock has been duly authorized and validly issued and is fully paid and
nonassessable. There are no outstanding Option Securities or Convertible
Securities, or agreements or understandings of any nature whatsoever, relating
to the authorized and unissued or outstanding capital stock of any Subsidiary
of EZ. Except as the context otherwise requires, the representations and
warranties of EZ set forth in this Article shall apply to each of such
Subsidiaries with the same force and effect as though each of them were named
in each Section hereof.
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4.2 Financial and Other Information. EZ has heretofore furnished to American
copies of the audited consolidated financial statements of EZ and its
Subsidiaries set forth in its Report on Form 10-K (the "EZ 10-K") for the
fiscal year ended December 31, 1995 and the unaudited consolidated financial
statements of EZ and its Subsidiaries set forth in its Report on Form 10-Q for
the fiscal quarter ended March 31, 1996 (collectively, the "EZ Financial
Statements"). The EZ Financial Statements, including in each case the notes
thereto, have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby, except as otherwise noted
therein, are true, accurate and complete, do not contain any untrue statement
of a Material fact or omit to state a Material fact required by GAAP to be
stated therein or necessary in order to make the statements contained therein
not misleading, and fairly present the results of operations of EZ and its
Subsidiaries on the bases therein stated, as of the respective dates thereof,
and for the respective periods covered thereby subject, in the case of
unaudited financial statements, to normal year-end audit adjustments and
accruals. EZ has also furnished to American its Proxy Statement with respect
to the Annual Meeting of Shareholders of EZ held April 23, 1996, the EZ 1995
Annual Report to Stockholders and the Prospectus, dated November 25, 1995,
with respect to its 9.75% Senior Subordinated Notes due 2005 and Reports on
Form 8-K for the period between March 31, 1996 and July 31, 1996
(collectively, with the EZ 10-K, the "EZ SEC Documents"). EZ has filed all
reports and other documents required to be filed by it with the SEC under the
Exchange Act. Neither the EZ Disclosure Schedule, the EZ Financial Statements,
the EZ SEC Documents or this Agreement, nor any Collateral Document, data,
information or statement furnished or to be furnished by or on behalf of EZ
pursuant to this Agreement (including without limitation the information to be
furnished pursuant to the provisions of Section 6.6), nor any Collateral
Document executed or required to be executed by or on behalf of EZ pursuant
hereto or thereto or to consummate the Merger, contains or will contain any
untrue statement of a Material fact or omits or will omit to state a Material
fact required to be stated herein or therein or necessary in order to make the
statements contained herein or therein not misleading, and all such Collateral
Documents, data, information or statements are and will be true, accurate and
complete in all Material respects.
4.3 Changes in Condition. Except as set forth in Section 4.3 of the EZ
Disclosure Schedule, since March 31, 1996, there has been no Material Adverse
Change in EZ. Except as disclosed in the EZ SEC Documents or otherwise
disclosed herein, there is no Event known to EZ which Materially Adversely
Affects EZ.
4.4 Materiality. The representations and warranties set forth in this
Article would in the aggregate be true and correct even without the
materiality exceptions or qualifications contained therein or set forth in the
EZ Disclosure Schedule, except for such exceptions and qualifications,
including without limitation those set forth in the EZ Disclosure Schedule
which, in the aggregate for all such representations and warranties, are not
and could not reasonably be expected to be Materially Adverse to EZ.
4.5 Title to Properties; Leases.
(a) EZ has good indefeasible and marketable title to all real property and
good indefeasible and merchantable title to all other property and assets,
tangible and intangible, owned by it, in each case free and clear of all
Liens, except (i) Permitted Liens and (ii) Liens set forth in the EZ Financial
Statements. Each Material Lease or other occupancy or other agreement under
which EZ holds real property has been duly authorized, executed and delivered
by EZ and, to EZ's knowledge, information and belief, each of the other
parties thereto, and is a legal, valid and binding obligation of EZ, and, to
EZ's knowledge, information and belief, each of the other parties thereto,
enforceable in accordance with its terms. EZ has a valid leasehold interest in
and enjoys peaceful and undisturbed possession under all Material Leases
pursuant to which it holds any such real property. All of such Leases are
valid and subsisting and in full force and effect; neither EZ nor, to EZ's
knowledge, information and belief, any other party thereto, is in default in
any Material respect in the performance, observance or fulfillment of any
obligation, covenant or condition contained in any such Lease.
(b) Section 4.5(b) of the EZ Disclosure Schedule contains a true, accurate
and complete description of all real property (including communication towers)
owned or leased by EZ and all Leases under which real property is leased by
it.
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4.6 Compliance with Private Authorizations. EZ has obtained all Private
Authorizations which are necessary for the ownership and operation by EZ of
each of the EZ Stations and the conduct of business thereof as now conducted
or as presently proposed to be conducted or which, if not obtained and
maintained, could, individually or in the aggregate, Materially Adversely
Effect EZ. All such Private Authorizations are in full force and effect and EZ
is not in breach or violation of, or in default in the performance, observance
or fulfillment of, any such Private Authorization, and no Event exists or has
occurred, which constitutes, or but for any requirement of the giving of
notice or passage of time or both would constitute, such a breach, violation
or default, under any such Private Authorization, except for such defaults,
breaches or violations as do not and will not, individually or in the
aggregate, have any Material Adverse Effect on EZ. No such Private
Authorization is the subject of any pending or, to EZ's knowledge, information
or belief, threatened attack, revocation or termination.
4.7 Compliance with Governmental Authorizations and Applicable Law.
(a) The EZ SEC Documents or Section 4.7 of the EZ Disclosure Schedule
contain a description of:
(i) all Legal Actions pending or, to EZ's knowledge, information and
belief, threatened against EZ with respect to the business, operation or
ownership of any of the EZ Stations (to its knowledge, information and
belief with respect to the EZ Brokered Stations);
(ii) all Claims and Legal Actions pending or, to EZ's knowledge,
information and belief, threatened against EZ with respect to the business,
operation or ownership of any of the EZ Stations (to its knowledge,
information and belief with respect to the EZ Brokered Stations) which,
individually or in the aggregate, could, under sanctions available at the
FCC, be reasonably likely to result in the revocation or termination of any
of the FCC Licenses or the imposition of any restriction of such a nature
as would Adversely Affect the ownership or operations of any of the EZ
Stations (to its knowledge, information and belief with respect to the EZ
Brokered Stations); in particular, but without limiting the generality of
the foregoing, there are no applications, complaints or Legal Actions
pending or, to EZ's knowledge, information and belief, threatened before
any Authority involving charges of illegal discrimination by any of the EZ
Stations (to its knowledge, information and belief with respect to the EZ
Brokered Stations) under any federal or state employment Laws; and
(iii) each Governmental Authorization (including without limitation all
FCC Licenses) required under Applicable Laws to own and operate each of the
EZ Stations (to its knowledge, information and belief with respect to the
EZ Brokered Stations), as currently operated or proposed to be operated on
or prior to the Closing Date, all of which are in full force and effect.
(b) EZ is the authorized legal holder of the FCC Licenses listed in Section
4.7(b) of the EZ Disclosure Schedule, none of which is subject to any
restriction or condition which would limit in any Material respect the
operations of any of the EZ Stations (except with respect to the EZ Brokered
Stations) as currently conducted or proposed to be conducted on or prior to
the Closing Date. The FCC Licenses listed in Section 4.7(b) of the EZ
Disclosure Schedule are valid and in good standing, are in full force and
effect and are not impaired in any Material respect by any act or omission of
EZ or its officers, directors, employees or agents, and the operation of each
of the EZ Stations (except with respect to the EZ Brokered Stations) is in
accordance in all Material respects with such FCC Licenses. All Material
reports, forms and statements required to be filed by EZ with the FCC with
respect to each of the EZ Stations have been filed and are true, complete and
accurate in all Material respects. EZ has obtained all Governmental
Authorizations in addition to the FCC Licenses listed in Section 4.7(b) of the
EZ Disclosure Schedule which are necessary for the ownership or operations or
the conduct of the business of each of the EZ Stations (except with respect to
the EZ Brokered Stations) as now conducted or as presently proposed to be
conducted and which, if not obtained and maintained, would, individually or in
the aggregate, have any Material Adverse Effect on EZ. Except as set forth in
Section 4.7(b) of the EZ Disclosure Schedule, no such Governmental
Authorization is the subject of any pending or, to EZ's knowledge, information
and belief, threatened challenge or proceeding to revoke or terminate any such
Governmental Authorization, except as set forth in Section 4.7(b) of the EZ
Disclosure Schedule. EZ has no reason to believe that any such
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Governmental Authorization would not be renewed in the name of EZ by the
granting Authority in the ordinary course.
Except as otherwise specifically described in Section 4.7(b) of the EZ
Disclosure Schedule, neither EZ nor any officer or director (in connection
with the ownership, operation or the conduct of the business of any of the EZ
Stations, to its knowledge, information and belief with respect to the EZ
Brokered Stations) is in or is charged by any Authority with or, to EZ's
knowledge, information and belief, at any time since January 1, 1993 has been
in or has been charged by any Authority with, or is threatened or under
investigation by any Authority with respect to, any breach or violation of, or
default in the performance, observance or fulfillment of, any Governmental
Authorization listed in Section 4.7(b) of the EZ Disclosure Schedule or any
Applicable Law relating to the ownership, operation and conduct of the
business of any of the EZ Stations (to its knowledge, information and belief
with respect to the EZ Brokered Stations), and no Event exists or has
occurred, which constitutes, or but for any requirement of the giving of
notice or passage of time or both would constitute, such a breach, violation
or default, under
(x) any Governmental Authorization pertaining to EZ or any of the EZ
Stations (to its knowledge, information and belief with respect to the EZ
Brokered Stations) or any Applicable Law, except for such breaches,
violations or defaults as do not and will not, individually or in the
aggregate, have any Material Adverse Effect on EZ, or
(y) any Material requirement of any insurance carrier, applicable to the
business or operations of any of the EZ Stations.
(c) With respect to matters, if any, of a nature referred to in Section 4.7
of the EZ Disclosure Schedule, all such information and matters, with the
exception of the noted challenges to the pending WEZB(FM) and WBZZ(FM) renewal
applications, set forth in the EZ Disclosure Schedule, if Adversely determined
against EZ, will not, individually or in the aggregate, Materially Adversely
Affect EZ.
4.8 Related Transactions. Except as set forth in Section 4.8 to the EZ
Disclosure Schedule, EZ is not a party or subject to any Contractual
Obligation or other transactions (including without limitation any providing
for the furnishing of services to or by, providing for the rental of property,
real, personal or mixed, to or from, or providing for the lending or borrowing
of money to or from or otherwise requiring payments to or from, any officer or
director) between EZ and any of its officer or directors or, to the knowledge,
information and belief of EZ, any Affiliate of any thereof (other than
reasonable compensation for services as officers or directors), now existing
or which, to EZ's knowledge, information and belief, at any time during the
past three (3) years, existed or occurred, including without limitation, any
providing for the furnishing of services to or by, providing for the rental of
property, real, personal or mixed, to or from, or providing for the lending or
borrowing of money to or from or otherwise requiring payments to or from, any
officer or director, or any Affiliate of any thereof. All such Contractual
Obligations and transactions which are to continue after the Effective Time
will be on terms and conditions no less favorable to American, as the
Surviving Corporation, or any of its Subsidiaries than would be customary for
similar Contractual Obligations and transactions between Persons who are not
Affiliates or upon terms and conditions on which similar Contractual
Obligations and transactions with Persons who are not Affiliates could fairly
and reasonably be expected to be entered into, except as otherwise
specifically described in Section 4.8 of the EZ Disclosure Schedule.
4.9 Tax Matters.
(a) EZ has in accordance with all Applicable Laws filed all Tax Returns
which are required to be filed by it, except with respect to failures to file
which in the aggregate would not have a Material and Adverse Effect on EZ, and
has paid, or made adequate provision for the payment of, all Material Taxes
which have or may become due and payable pursuant to said Tax Returns and all
other governmental charges and assessments received to date other than those
Taxes being contested in good faith for which adequate provision has been made
on the most recent balance sheet forming part of the EZ Financial Statements.
The Tax Returns of EZ have been prepared, in all Material respects, in
accordance with all Applicable Laws and generally accepted principles
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applicable to taxation consistently applied. All Material Taxes which EZ is
required by law to withhold and collect have been duly withheld and collected,
and have been paid over, in a timely manner, to the proper Taxing Authorities
to the extent due and payable. EZ has not executed any waiver to extend, or
otherwise taken or failed to take any action that would have the effect of
extending, the applicable statute of limitations in respect of any Tax
liabilities of EZ for the fiscal years prior to and including the most recent
fiscal year. To the extent required by GAAP, adequate provision has been made
on the most recent balance sheet forming part of the EZ Financial Statements
for all Taxes of any kind accrued through the date of such balance sheet,
including interest and penalties in respect thereof, whether disputed or not,
and whether past, current or deferred, accrued or unaccrued, fixed,
contingent, absolute or other, and there are no past transactions or matters
which could result in additional Taxes of a Material nature to EZ for which an
adequate reserve has not been provided on such balance sheet. EZ is not a
"consenting corporation" within the meaning of Section 341(f) of the Code. EZ
has at all times been taxable as a Subchapter C corporation under the Code. EZ
has never been a member of any consolidated group (other than with EZ and its
Subsidiaries) for Tax purposes.
(b) From the end of its most recent fiscal year to the date of the Original
Agreement EZ has not made any payment on account of any Taxes except regular
payments required in the ordinary course of business with respect to current
operations or property presently owned.
(c) EZ is not a party to any tax sharing agreement or arrangement.
(d) EZ is not, and within five (5) years of the date of the Original
Agreement has not been, a "United States real property holding corporation" as
defined in Section 897 of the Code.
4.10 Employee Retirement Income Security Act of 1974.
(a) EZ (which for purposes of this Section shall include any ERISA
Affiliate) currently sponsors, maintains and contributes to the Plans and
Benefit Arrangements set forth in Section 4.10(a) of the EZ Disclosure
Schedule. Except as set forth in Section 4.10(a) of the EZ Disclosure
Schedule, as to all Plans and Benefit Arrangements listed in Section 4.10(a)
of the EZ Disclosure Schedule:
(i) all such Plans and Benefit Arrangements comply and have been
administered in form and in operation with all Applicable Laws in all
Material respects, and EZ has not received any notice from any Authority
questioning or challenging such compliance;
(ii) all such Plans maintained by EZ that are intended to comply with
Sections 401 and 501 of the Code comply in all Material respects in form
and in operation with all applicable requirements of such sections, and no
event has occurred which will or could give rise to disqualification of any
such Plan under such sections or to a tax under Section 511 of the Code;
(iii) none of the assets of any such Plan are invested in employer
securities or employer real property;
(iv) there have been no "prohibited transactions" (as defined in Section
406 of ERISA or Section 4975 of the Code) with respect to any such Plan and
EZ has not otherwise engaged in any prohibited transaction that would
result in any Material liability or Tax;
(v) there have been no acts or omissions by EZ which have given rise to
or may give rise to any Material fines, penalties, taxes or related charges
under Sections 502(c), 502(i) or 4071 of ERISA or Chapter 43 of the Code
for which EZ may be liable;
(vi) there are no Claims (other than routine Claims for benefits or
actions seeking qualified domestic relations orders) pending or, to EZ's
knowledge, information and belief, threatened involving such Plans or the
assets of such Plans, and, to EZ's knowledge, information and belief, no
facts exist which could give rise to any such Claims (other than routine
Claims for benefits or actions seeking qualified domestic relations
orders);
(vii) no such Plan is subject to Title IV of ERISA, or, if subject, there
have been no "reportable events" (as described in Section 4043 of ERISA),
and no steps have been taken to terminate any such Plan;
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(viii) all group health Plans of EZ have been operated in compliance in
all Material respects with the group health plan continuation coverage
requirements of COBRA;
(ix) actuarially adequate accruals for all obligations under the Plans
are reflected in the most recent balance sheet forming part of the EZ
Financial Statements and such obligations include a pro rata amount of the
contributions which would otherwise have been made in accordance with past
practices for the Plan years which include the Closing Date;
(x) neither EZ nor any of its directors, officers, employees or any other
fiduciary has committed any breach of fiduciary responsibility imposed by
ERISA or any similar Applicable Law that would subject EZ or any of its
respective directors, officers or employees to Material liability under
ERISA or any similar Applicable Law;
(xi) no such Plan which is subject to Part 3 of Subtitle B of Title I of
ERISA or Section 412 of the Code had an accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or
not waived, as of the last day of the most recent fiscal year of such Plan
to which Part 3 of Subtitle B of Title I of ERISA or Section 412 of the
Code applied, nor would have had an accumulated funding deficiency on such
date if such year were the first year of such Plan to which Part 3 of
Subtitle B of Title I of ERISA or Section 412 of the Code applied;
(xii) no Material liability to the PBGC has been or is expected by EZ to
be incurred by EZ with respect to any Plan, and there has been no event or
condition which presents a material risk of termination of any Plan by the
PBGC;
(xiii) EZ is not and, to EZ's knowledge, information and belief, never
has been a party to any Multiemployer Plan or made contributions to any
such Plan; and
(xiv) except as set forth in the EZ Financial Statements (which entry, if
applicable, shall indicate the present value of accumulated plan
liabilities calculated in a manner consistent with FAS 106 and actual
annual expense for such benefits for each of the last two (2) years) and
pursuant to the provisions of COBRA, EZ does not maintain any Plan that
provides benefits described in Section 3(1) of ERISA, except as the
provisions of COBRA may apply to any former employees or retirees of EZ.
(b) The execution, delivery and performance by EZ of this Agreement and the
Collateral Documents executed or required to be executed by EZ pursuant hereto
and thereto will not involve any prohibited transaction within the meaning of
ERISA or Section 4975 of the Code.
4.11 Inapplicability of Specified Statutes. EZ is not a "holding company,"
or a "subsidiary company" or an "affiliate" of a "holding company," as such
terms are defined in the Public Utility Holding Company Act of 1935, as
amended, or an "investment company" or a company "controlled" by or acting on
behalf of an "investment company," as defined in the Investment Company Act of
1940, as amended, or a "carrier" or a Person which is in control of a
"carrier," as defined in section 11301 of Title 49, U.S.C.
4.12 Authorized Capital Stock. The authorized and outstanding capital stock,
Option Securities and Convertible Securities of EZ, as of March 31, 1996, are
set forth in the EZ SEC Documents. Except as set forth in Section 4.12 of the
EZ Disclosure Schedule, since March 31, 1996, EZ has not issued any shares of
capital stock of any class, any Option Securities or any Convertible
Securities, except for the issue of EZ Common Stock pursuant to the exercise
of Option Securities outstanding on March 31, 1996 or as otherwise described
or contemplated by the EZ SEC Documents. All of such outstanding capital stock
has been duly authorized and validly issued, is fully paid and nonassessable
and is not subject to any preemptive or similar rights. EZ is not a party to
or bound by any agreement, put or commitment pursuant to which it is obligated
to purchase, redeem or otherwise acquire any shares of capital stock or any
Option Security or Convertible Security of EZ, except as described in Section
4.12 of the EZ Disclosure Schedule. To EZ's knowledge, information and belief,
no Person, and no group of Persons acting in concert, owns as much as five
percent (5%) of the EZ Common Stock, and EZ is not controlled by any other
Person, except as set forth in the EZ SEC Documents.
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4.13 Employment Arrangements.
(a) Except as described in the EZ SEC Documents, (i) none of the employees
of EZ is now, or, to EZ's knowledge, information and belief, during the past
five (5) years has been, represented by any labor union or other employee
collective bargaining organization, or are now, or, to EZ's knowledge,
information and belief during the past five (5) years have been, parties to
any labor or other collective bargaining agreement, (ii) there are no pending
grievances, disputes or controversies with any union or any other employee or
collective bargaining organization of such employees, or threats of strikes,
work stoppages or slowdowns or any pending demands for collective bargaining
by any union or other such organization, and (iii) neither EZ nor any of its
employees is now, or, to EZ's knowledge, information and belief, during the
past five (5) years has been, subject to or involved in or, to EZ's knowledge,
information and belief, threatened with, any union elections, petitions
therefor or other organizational or recruiting activities. EZ has performed
all obligations required to be performed under all Employment Arrangements and
is not in breach or violation of or in default or arrears under any of the
Material terms, provisions or conditions thereof.
(b) Except as set forth on Section 4.13(b) of the EZ Disclosure Schedule, no
employee shall accrue or receive additional benefits, service or accelerated
rights to payments of benefits under any Employment Arrangement, including the
right to receive any parachute payment, as defined in Section 280G of the
Code, or become entitled to severance, termination allowance or similar
payments as a result, directly or indirectly, of the transactions contemplated
by this Agreement.
4.14 Material Agreements. Listed on Section 4.14 of the EZ Disclosure
Schedule are all Material Agreements relating to the ownership, operation or
conduct of the business of any of the EZ Stations presently held or used by EZ
or to which EZ is a party or to which it or any of its property is subject or
bound. All of the Material Agreements are valid, binding and legally
enforceable obligations of EZ and, to EZ's knowledge, information and belief,
all other parties thereto, and EZ is validly and lawfully operating its
business in all Material respects and owning its property under each of the
Material Agreements. EZ has duly complied with all of the Material terms and
conditions of each Material Agreement and has not done or performed, or failed
to do or perform (and there is no pending or, to the knowledge, information
and belief of EZ, threatened Claim that EZ has not so complied, done and
performed or failed to do and perform) any act which would invalidate or
provide grounds for the other party thereto to terminate (with or without
notice, passage of time or both) such Material Agreement or impair the rights
or benefits, or increase the costs, of EZ, under any of the Material
Agreements. The time brokerage, local marketing and other similar agreements
to which EZ is a party comply in all Material respects with the FCA. The joint
sales and other similar agreements to which EZ is a party do not create
attributable interests under the FCA.
4.15 Ordinary Course of Business. EZ, from the end of its most recent fiscal
quarter to the date of the Original Agreement, except as may be described in
the EZ SEC Documents or on Section 4.15 of the EZ Disclosure Schedule:
(a) has operated its business in the normal, usual and customary manner
in the ordinary and regular course of business, consistent with prior
practice;
(b) has not sold or otherwise disposed of or contracted to sell or
otherwise dispose of any of its properties or assets having a value in
excess of $500,000, other than in the ordinary course of business;
(c) except in each case in the ordinary course of business, consistent
with prior practice:
(i) has not incurred any obligations or liabilities (fixed,
contingent or other) having a value in excess of $500,000;
(ii) has not entered into any commitments having a value in excess of
$500,000;
(iii) has not canceled any debts or Claims having a value in excess
of $500,000; and
(iv) has not made or committed to make any additions to its property
or any purchases of equipment, except for normal maintenance and
replacements;
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(d) has not increased the compensation payable or to become payable to
any of its employees other than in the ordinary course of business or
otherwise altered, modified or changed the terms of their employment;
(e) has not suffered any Material damage, destruction or loss (whether or
not covered by insurance) or any acquisition or taking of property by any
Authority;
(f) has not waived any rights of Material value without fair and adequate
consideration;
(g) has not experienced any work stoppage;
(h) except in the ordinary course of business, has not entered into,
amended or terminated any Lease, Governmental Authorization applicable to
EZ or any of the EZ Stations, Private Authorization, Material Agreement,
Employment Arrangement or Contractual Obligation, or any transaction,
agreement or arrangement with any Affiliate of EZ; and
(i) has not entered into any trade or barter arrangements with respect to
any of the EZ Stations (i) which are outside the ordinary course of
business, or (ii) otherwise than in accordance with EZ's prior policies and
practices.
4.16 Broker or Finder. No Person assisted in or brought about the
negotiation of this Agreement or the Merger or the subject matter of either
thereof in the capacity of broker, agent or finder or in any similar capacity
on behalf of EZ, other than CS First Boston Corporation.
4.17 Environmental Matters. Except as set forth in the EZ SEC Documents, EZ:
(a) to the knowledge, information and belief of EZ, has not been notified
that it is potentially liable under, has not received any request for
information or other correspondence concerning its potential liability with
respect to any site or facility under, and is not a "potentially
responsible party" under, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Resource
Conservation and Recovery Act, as amended, or any similar state Law;
(b) has not entered into or received any consent decree, compliance order
or administrative order issued pursuant to any Environmental Law;
(c) is not a party in interest or in default under any judgment, order,
writ, injunction or decree of any final order issued pursuant to any
Environmental Law;
(d) is, to the knowledge, information and belief of EZ, in substantial
compliance in all Material respects with all Environmental Laws, has, to
EZ's knowledge, information and belief, obtained all Environmental Permits
required under Environmental Laws, and is not the subject of or, to EZ's
knowledge, information and belief, threatened with any Legal Action
involving a demand for damages or other potential liability, including any
Lien, with respect to Material violations or Material breaches of any
Environmental Law; and
(e) has no knowledge of any past or present Event related to any of the
property and assets of EZ which Events, individually or in the aggregate,
will interfere with or prevent continued Material compliance with all
Environmental Laws, or which, individually or in the aggregate, will form
the basis of any Material Claim for the release or threatened release into
the environment, of any Hazardous Material.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF AMERICAN
American represents, warrants and covenants to, and agrees with, EZ as
follows (provided that the representations and warranties set forth herein
with respect to American Subsidiary shall be made as of September , 1996):
5.1 Organization and Business; Power and Authority; Effect of Transaction.
(a) American is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, has all requisite power
and authority (corporate and other) to own or hold under lease its properties
and to conduct its business as now conducted and as presently proposed to be
conducted, and has in full force and effect all Governmental Authorizations
pertaining to American or any of the American Stations and Private
Authorizations and has made all Governmental Filings, to the extent required
for such ownership and lease of its property and conduct of its business, as
currently conducted; each of American and American Subsidiary is duly
qualified and authorized to do business and in good standing as a foreign
corporation in each jurisdiction in which the character of the property owned
or leased by it or the nature of its business or operations require such
qualification or authorization.
(b) Each of American and American Subsidiary has all requisite power and
authority (corporate and other) and has in full force and effect all
Governmental Authorizations pertaining to American or American Subsidiary or
any of the American Stations and Private Authorizations, except for (i) those
contemplated by this Agreement which must be obtained prior to the Closing
Date, including without limitation the consents of its lenders under its bank
credit agreement and other debt instruments, and (ii) such, the failure of
which to obtain would not, individually or in the aggregate, (A) have a
Material Adverse Effect on American, or (B) prohibit it from executing and
delivering, and performing its obligations under, this Agreement and each
Collateral Document executed or required to be executed by American pursuant
hereto or thereto or to consummating the Merger; and the execution, delivery
and performance of this Agreement and each Collateral Document executed or
required to be executed by American or American Subsidiary pursuant hereto or
thereto have been duly authorized by all requisite corporate or other action
on the part of American and American Subsidiary, other than the approvals of
the American stockholders contemplated by this Agreement, including without
limitation approval of the Charter Amendment. This Agreement has been duly
executed and delivered by each of American and American Subsidiary and
constitutes, and each Collateral Document executed or required to be executed
pursuant hereto or thereto or to consummate the Merger when executed and
delivered by American or American Subsidiary will constitute legal, valid and
binding obligations of American and/or American Subsidiary, as the case may
be, enforceable in accordance with their respective terms. The provisions of
Section 203 of the DCL will not apply to this Agreement or the Merger.
(c) Except for (x) consents of lenders under its bank credit agreement and
other debt instruments or as otherwise contemplated by this Agreement, and (y)
such consents, the failure of which to obtain would not, individually or in
the aggregate, have a Material Adverse Effect on American, neither the
execution and delivery by American of this Agreement or any Collateral
Document executed or required to be executed by it pursuant hereto or thereto,
nor the consummation by American of the Merger, nor compliance with the terms,
conditions and provisions hereof or thereof by American or American
Subsidiary:
(i) will conflict with, or result in a breach or violation of, or
constitute a default under, any Organic Document of American or American
Subsidiary or any Applicable Law applicable to American or American
Subsidiary, or will conflict with, or result in a breach or violation of,
or constitute a default under, or permit the acceleration of any obligation
or liability in, or but for any requirement of the giving of notice or
passage of time or both would constitute such a conflict with, breach or
violation of, or default under, or permit any such acceleration in, any
Contractual Obligation of American or American Subsidiary, except for such
conflicts, breaches, violations or accelerations that would not,
individually or in the aggregate, have a Material Adverse Effect on
American; or
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(ii) will result in or permit the creation or imposition of any Lien upon
any property now owned or leased by American or American Subsidiary; or
(iii) will require any Governmental Authorization or Governmental Filing
or Private Authorization, except for the FCC Consents, filings under the
Hart-Scott-Rodino Act, and other filing requirements under Applicable Law
in connection with the consummation of the Merger.
(d) Each of American's direct or indirect Subsidiaries (including without
limitation American Subsidiary) is (i) wholly-owned, (ii) a corporation which
is duly organized, validly existing and in good standing under the laws of the
respective state of incorporation, and (iii) duly qualified and in good
standing as a foreign corporation in each other jurisdiction in which the
character of the property owned or leased by it or the nature of its business
or operations requires such qualification, with full power and authority
(corporate and other) to carry on the business in which it is engaged, except
for (i) a non-Material, non-wholly-owned joint venture partnership which owns
a communications tower, and (ii) such qualifications, the failure of which to
obtain, individually or in the aggregate, would not have a Material Adverse
Effect on American. Each Subsidiary (including without limitation American
Subsidiary) has in full force and effect all Governmental Authorizations
pertaining to American or any of the American Stations and Private
Authorizations and has made all Governmental Filings, to the extent required
for such ownership and lease of its property and conduct and operations of its
business, except for such Governmental Authorizations, Private Authorizations,
and Governmental Filings which, if not obtained or made, as the case may be,
would not, individually or in the aggregate, have a Material Adverse Effect on
American. Except to the extent set forth in the American Financial Statements
and except for such non-Material, non-wholly-owned joint venture partnership,
American owns, directly or indirectly, all of the outstanding capital stock or
equity interests of each Subsidiary (including without limitation American
Subsidiary), free and clear of all Liens (except for Permitted Liens or except
as set forth in the American Financial Statements), and all such stock has
been duly authorized and validly issued and is fully paid and nonassessable.
There are no outstanding Option Securities or Convertible Securities, or
agreements or understandings of any nature whatsoever, relating to the
authorized and unissued or outstanding capital stock of any Subsidiary
(including without limitation American Subsidiary) of American. Except as the
context otherwise requires, the representations and warranties of American set
forth in this Article shall apply to each of such Subsidiaries (including
without limitation American Subsidiary) with the same force and effect as
though each of them were named in each Section hereof.
(e) American Subsidiary was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement and has not engaged in any
business activities or conducted any operations other than in connection with
the transactions contemplated by this Agreement.
5.2 Financial and Other Information. American has heretofore furnished to EZ
copies of the audited consolidated financial statements of American and its
Subsidiaries set forth in its Report on Form 10-K (the "American 10-K") for
the fiscal year ended December 31, 1995 and the unaudited consolidated
financial statements of American and its Subsidiaries set forth in its Report
on Form 10-Q for the fiscal quarter ended March 31, 1996 (collectively, the
"American Financial Statements"). The American Financial Statements, including
in each case the notes thereto, have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby, except
as otherwise noted therein, are true, accurate and complete, do not contain
any untrue statement of a Material fact or omit to state a Material fact
required by GAAP to be stated therein or necessary in order to make the
statements contained therein not misleading, and fairly present the results of
operations of American and its Subsidiaries on the bases therein stated, as of
the respective dates thereof, and for the respective periods covered thereby
subject, in the case of unaudited financial statements, to normal year-end
audit adjustments and accruals. American has also furnished to EZ its Proxy
Statement with respect to the Annual Meeting of Stockholders of American held
May 22, 1996, the American 1995 Annual Report to Stockholders and the Offering
Circular, dated June 19, 1996, with respect to its 7% Convertible Exchangeable
Preferred Stock and Reports on Form 8-K for the period between March 31, 1996
and July 31, 1996, (collectively, with the American 10-K, the "American SEC
Documents"). American has filed all reports and other documents required to be
filed by it with the SEC under the Exchange Act. Neither the American
Financial Statements, the American SEC Documents or this Agreement, nor any
Collateral Document, data,
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information or statement furnished or to be furnished by or on behalf of
American pursuant to this Agreement (including without limitation the
information to be furnished pursuant to the provisions of Section 6.6), nor
any Collateral Document executed or required to be executed by or on behalf of
American pursuant hereto or thereto or to consummate the Merger, contains or
will contain any untrue statement of a Material fact or omits or will omit to
state a Material fact required to be stated herein or therein or necessary in
order to make the statements contained herein or therein not misleading, and
all such Collateral Documents, data, information or statements are and will be
true, accurate and complete in all Material respects.
5.3 Changes in Condition. Since March 31, 1996, there has been no Material
Adverse Change in American. Except as disclosed in the American SEC Documents
or otherwise disclosed herein, there is no Event known to American which
Materially Adversely Affects American.
5.4 Materiality. The representations and warranties set forth in this
Article would in the aggregate be true and correct even without the
materiality exceptions or qualifications contained therein, except for such
exceptions and qualifications which, in the aggregate for all such
representations and warranties, are not and could not reasonably be expected
to be Materially Adverse to American.
5.5 Title to Properties; Leases. American has good indefeasible and
marketable title to all real property and good indefeasible and merchantable
to all other property and assets, tangible and intangible, owned by it in each
case free and clear of all Liens, except (i) Permitted Liens and (ii) Liens
set forth or described in the American Financial Statements. Each Material
Lease or other occupancy or other agreement under which American holds real
property has been duly authorized, executed and delivered by American and, to
American's knowledge, information and belief, each of the other parties
thereto, and is a legal, valid and binding obligation of American, and, to
American's knowledge, information and belief, each of the other parties
thereto, enforceable in accordance with its terms. American has a valid
leasehold interest in and enjoys peaceful and undisturbed possession under all
Material Leases pursuant to which it holds any such real property. All of such
Leases are valid and subsisting and in full force and effect; neither American
nor, to American's knowledge, information and belief, any other party thereto,
is in default in any Material respect in the performance, observance or
fulfillment of any obligation, covenant or condition contained in any such
Lease.
5.6 Compliance with Private Authorizations. American has obtained all
Private Authorizations which are necessary for the ownership and operation by
American of each of the American Stations and the conduct of business thereof
as now conducted or as presently proposed to be conducted or which, if not
obtained and maintained, could, individually or in the aggregate, Materially
Adversely Affect American. All such Private Authorizations are in full force
and effect and American is not in breach or violation of, or in default in the
performance, observance or fulfillment of, any such Private Authorization, and
no Event exists or has occurred, which constitutes, or but for any requirement
of the giving of notice or passage of time or both would constitute, such a
breach, violation or default, under any such Private Authorization, except for
such defaults, breaches or violations as do not and will not, individually or
in the aggregate, have any Material Adverse Effect on American. No such
Private Authorization is the subject of any pending or, to American's
knowledge, information or belief, threatened attack, revocation or
termination.
5.7 Compliance with Governmental Authorizations and Applicable Law.
(a) The American SEC Documents contain a description of:
(i) all Material Legal Actions pending or, to American's knowledge,
information and belief, threatened against American with respect to the
business, operation or ownership of any of the American Stations (except
with respect to the American Brokered Stations, as to which, to American's
knowledge, information and belief, there are no such Legal Actions); and
(ii) all Claims and Legal Actions pending or, to American's knowledge,
information and belief, threatened against American with respect to the
business, operation or ownership of any of the American Stations (except
with respect to the American Brokered Stations, as to which, to American's
knowledge,
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information and belief, there are no such Claims or Legal Actions) which,
individually or in the aggregate, could, under sanctions available at the
FCC, be reasonably likely to result in the revocation or termination of any
of the FCC Licenses or the imposition of any restriction of such a nature
as would Adversely Affect the ownership or operations of the American
Stations (to its knowledge, information and belief with respect to the
American Brokered Stations) taken as a whole; in particular, but without
limiting the generality of the foregoing, there are no applications,
complaints or Legal Actions pending or, to American's knowledge,
information and belief, threatened before any Authority involving charges
of illegal discrimination by any of the American Stations (except with
respect to the American Brokered Stations, as to which, to American's
knowledge, information and belief, there are no such Claims or Legal
Actions) under any federal or state employment Laws.
Each Governmental Authorization (including without limitation all FCC
Licenses) required under Applicable Laws to own and operate each of the
American Stations (to the knowledge, information and belief of American with
respect to the American Brokered Stations) as currently operated or proposed
to be operated on or prior to the Closing Date is in full force and effect.
(b) American is the authorized legal holder of its FCC Licenses, none of
which is subject to any restriction or condition which would limit in any
Material respect the operations of any of the American Stations (except with
respect to the American Brokered Stations) as currently conducted or proposed
to be conducted on or prior to the Closing Date. The FCC Licenses of American
are valid and in good standing, are in full force and effect and are not
impaired in any Material respect by any act or omission of American or its
officers, directors, employees or agents, and the operation of each of the
American Stations (except with respect to the American Brokered Stations) is
in accordance in all Material respects with such FCC Licenses. All Material
reports, forms and statements required to be filed by American with the FCC
with respect to each of the American Stations have been filed and are true,
complete and accurate in all Material respects. American has obtained all
Governmental Authorizations in addition to the FCC Licenses which are
necessary for the ownership or operations or the conduct of the business of
each of the American Stations (except with respect to the American Brokered
Stations) as now conducted or as presently proposed to be conducted and which,
if not obtained and maintained, would, individually or in the aggregate, have
any Material Adverse Effect on American. No such Governmental Authorization is
the subject of any pending or, to American's knowledge, information and
belief, threatened challenge or proceeding to revoke or terminate any such
Governmental Authorization. American has no reason to believe that any such
Governmental Authorization would not be renewed in the name of American by the
granting Authority in the ordinary course.
Except as otherwise specifically described in the American SEC Documents,
neither American nor any officer or director (in connection with the
ownership, operation or the conduct of the business of any of the American
Stations, to its knowledge, information and belief with respect to the
American Brokered Stations) is in or is charged by any Authority with or, to
American's knowledge, information and belief, at any time since November 1,
1993 has been in or has been charged by any Authority with, or is threatened
or under investigation by any Authority with respect to, any breach or
violation of, or default in the performance, observance or fulfillment of, any
Governmental Authorization or any Applicable Law relating to the ownership,
operation and conduct of the business of any of the American Stations (to its
knowledge, information and belief with respect to the American Brokered
Stations), and no Event exists or has occurred, which constitutes, or but for
any requirement of the giving of notice or passage of time or both would
constitute, such a breach, violation or default, under
(x) any Governmental Authorization pertaining to American or any of the
American Stations (to its knowledge, information and belief with respect to
the American Brokered Stations) or any Applicable Law, except for such
breaches, violations or defaults as do not and will not, individually or in
the aggregate, have any Material Adverse Effect on American, or
(y) any Material requirement of any insurance carrier, applicable to the
business or operations of any of the American Stations;
except as otherwise specifically described in the American SEC Documents.
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5.8 Related Transactions. Except as set forth in the American SEC Documents
or the Prospectus dated February 1, 1996 relating to a public offering of
American Class A Common Stock, American is not a party or subject to any
Contractual Obligation or other transactions (including without limitation any
providing for the furnishing of services to or by, providing for the rental of
property, real, personal or mixed, to or from, or providing for the lending or
borrowing of money to or from or otherwise requiring payments to or from, any
officer or director) between American and any of its officers or directors or,
to the knowledge, information and belief of American, any Affiliate of any
thereof (other than reasonable compensation for services as officers or
directors), now existing or which, to American's knowledge, information and
belief, at any time since November 1, 1993, existed or occurred, including
without limitation any providing for the furnishing of services to or by,
providing for the rental of property, real, personal or mixed, to or from, or
providing for the lending or borrowing of money to or from or otherwise
requiring payments to or from, any officer or director, or any Affiliate of
any thereof. All such Contractual Obligations and transactions which are to
continue after the Effective Time will be on terms and conditions no less
favorable to American than would be customary for similar Contractual
Obligations and transactions between Persons who are not Affiliates or upon
terms and conditions on which similar Contractual Obligations and transactions
with Persons who are not Affiliates could fairly and reasonably be expected to
be entered into, except as otherwise set forth in the American SEC Documents
or such Prospectus.
5.9 Tax Matters.
(a) American has in accordance with all Applicable Laws filed all Tax
Returns which are required to be filed by it, except with respect to failures
to file which in the aggregate would not have a Material Adverse Effect on
American, and has paid, or made adequate provision for the payment of, all
Material Taxes which have or may become due and payable pursuant to said Tax
Returns and all other governmental charges and assessments received to date
other than those Taxes being contested in good faith for which adequate
provision has been made on the most recent balance sheet forming part of the
American Financial Statements. The Tax Returns of American have been prepared,
in all Material respects, in accordance with all Applicable Laws and generally
accepted principles applicable to taxation consistently applied. All Material
Taxes which American is required by law to withhold and collect have been duly
withheld and collected, and have been paid over, in a timely manner, to the
proper Taxing Authorities to the extent due and payable. American has not
executed any waiver to extend, or otherwise taken or failed to take any action
that would have the effect of extending, the applicable statute of limitations
in respect of any Tax liabilities of American for the fiscal years prior to
and including the most recent fiscal year. To the extent required by GAAP,
adequate provision has been made on the most recent balance sheet forming part
of the American Financial Statements for all Taxes of any kind accrued through
the date of such balance sheet, including interest and penalties in respect
thereof, whether disputed or not, and whether past, current or deferred,
accrued or unaccrued, fixed, contingent, absolute or other, and there are no
past transactions or matters which could result in additional Taxes of a
Material nature to American for which an adequate reserve has not been
provided on such balance sheet. American is not a "consenting corporation"
within the meaning of Section 341(f) of the Code. American has at all times
been taxable as a Subchapter C corporation under the Code. American has never
been a member of any consolidated group (other than with American and its
Subsidiaries) for Tax purposes.
(b) From the end of its most recent fiscal year to the date of the Original
Agreement, American has not made any payment on account of any Taxes except
regular payments required in the ordinary course of business with respect to
current operations or property presently owned.
(c) American is not a party to any tax sharing agreement or arrangement.
(d) American is not, and since its organization has not been, a "United
States real property holding corporation" as defined in Section 897 of the
Code.
5.10 Employee Retirement Income Security Act of 1974.
(a) With respect to all Plans and Benefit Arrangements which American (which
for purposes of this Section shall include any ERISA Affiliate) currently
contributes to, sponsors or maintains:
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(i) all such Plans and Benefit Arrangements comply and have been
administered in form and in operation with all Applicable Laws in all
Material respects, and American has not received any notice from any
Authority questioning or challenging such compliance;
(ii) all such Plans maintained by American that are intended to comply
with Sections 401 and 501 of the Code comply in all Material respects in
form and in operation with all applicable requirements of such sections,
and no event has occurred which will or could give rise to disqualification
of any such Plan under such sections or to a Tax under Section 511 of the
Code;
(iii) one of the assets of any such Plan are invested in employer
securities or employer real property;
(iv) there have been no "prohibited transactions" (as defined in Section
506 of ERISA or Section 5975 of the Code) with respect to any such Plan and
American has not otherwise engaged in any prohibited transaction that would
result in any Material liability or Tax;
(v) there have been no acts or omissions by American which have given
rise to or may give rise to any Material fines, penalties, taxes or related
charges under Sections 502(c), 502(i) or 4071 or ERISA or Chapter 43 of the
Code for which American may be liable;
(vi) there are no Claims (other than routine Claims for benefits or
actions seeking qualified domestic relations orders) pending or, to
American's knowledge, information and belief, threatened involving such
Plans or the assets of such Plans, and, to American's knowledge,
information and belief, no facts exist which could give rise to any such
Claims (other than routine Claims for benefits or actions seeking qualified
domestic relations orders);
(vii) no such Plan is subject to Title IV of ERISA, or, if subject, there
have been no "reportable events" (as described in Section 5043 of ERISA),
and no steps have been taken to terminate any such Plan;
(viii) all group health Plans of American have been operated in
compliance in all Material respects with the group health plan continuation
coverage requirements of COBRA;
(ix) actuarially adequate accruals for all obligations under the Plans
are reflected in the most recent balance sheet forming part of the American
Financial Statements and such obligations include a pro rata amount of the
contributions which would otherwise have been made in accordance with past
practices for the Plan years which include the Closing Date;
(x) neither American nor any of its directors, officers, employees or any
other fiduciary has committed any breach of fiduciary responsibility
imposed by ERISA or any similar Applicable Law that would subject American
or any of its respective directors, officers or employees to Material
liability under ERISA or any similar Applicable Law;
(xi) no such Plan which is subject to Part 3 of Subtitle B of Title I of
ERISA or Section 512 of the Code had an accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 512 of the Code), whether or
not waived, as of the last day of the most recent fiscal year of such Plan
to which Part 3 of Subtitle B of Title I of ERISA or Section 512 of the
Code applied, nor would have had an accumulated funding deficiency on such
date if such year were the first year of such Plan to which Part 3 of
Subtitle B of Title I of ERISA or Section 512 of the Code applied;
(xii) no Material liability to the PBGC has been or is expected by
American to be incurred by American with respect to any Plan, and there has
been no event or condition which presents a material risk of termination of
any Plan by the PBGC;
(xiii) American is not and, to American's knowledge, information and
belief, never has been a party to any Multiemployer Plan or made
contributions to any such Plan; and
(xiv) except as set forth in the American Financial Statements (which
entry, if applicable, shall indicate the present value of accumulated plan
liabilities calculated in a manner consistent with FAS 106 and actual
annual expense for such benefits for each of the last two (2) years) and
pursuant to the provisions of COBRA, American does not maintain any Plan
that provides benefits described in Section 3(1) of ERISA, except as the
provisions of COBRA may apply to any former employees or retirees of
American.
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(b) The execution, delivery and performance by American of this Agreement
and the Collateral Documents executed or required to be executed by American
pursuant hereto and thereto will not involve any prohibited transaction within
the meaning of ERISA or Section 5975 of the Code.
5.11 Inapplicability of Specified Statutes. American is not a "holding
company", or a "subsidiary company" or an "affiliate" of a "holding company",
as such terms are defined in the Public Utility Holding Company Act of 1935,
as amended, or an "investment company" or a company "controlled" by or acting
on behalf of an "investment company", as defined in the Investment Company Act
of 1940, as amended, or a "carrier" or a person which is in control of a
"carrier", as defined in section 11301 of Title 49, U.S.C.
5.12 Authorized Capital Stock. The authorized and outstanding capital stock,
Option Securities and Convertible Securities of American, as of March 31,
1996, is as set forth in the American SEC Documents. Since March 31, 1996,
American has not issued any shares of capital stock of any class, any Option
Securities or any Convertible Securities, except for the issue of American
Common Stock pursuant to the exercise of Option Securities outstanding on
March 31, 1996 or as otherwise described or contemplated by the American SEC
Documents. All of such outstanding capital stock has been duly authorized and
validly issued, is fully paid and nonassessable and is not subject to any
preemptive or similar rights. American is not a party to or bound by any
agreement, put or commitment pursuant to which it is obligated to purchase,
redeem or otherwise acquire any shares of capital stock or any Option Security
or Convertible Security of American, except as described in the American SEC
Documents. To American's knowledge, information and belief, no Person, and no
group of Persons acting in concert, owns as much as five percent (5%) of the
American Common Stock, and American is not controlled by any other Person,
except as set forth in the American SEC Documents. The shares of American
Class A Common Stock to be issued pursuant to the Merger will have been, when
issued, duly authorized and validly issued, fully paid and nonassessable and
will not be subject to any preemptive or similar rights.
5.13 Employment Arrangements.
(a) Except as described in the American SEC Documents, (i) none of the
employees of American is now, or, to American's knowledge, information and
belief, since November 1, 1993 has been, represented by any labor union or
other employee collective bargaining organization, or are now, or, to
American's knowledge, information and belief since November 1, 1993 have been,
parties to any labor or other collective bargaining agreement, (ii) there are
no pending grievances, disputes or controversies with any union or any other
employee or collective bargaining organization of such employees, or threats
of strikes, work stoppages or slowdowns or any pending demands for collective
bargaining by any union or other such organization, and (iii) neither American
nor any of its employees is now, or, to American's knowledge, information and
belief, since November 1, 1993 has been, subject to or involved in or, to
American's knowledge, information and belief, threatened with, any union
elections, petitions therefor or other organizational or recruiting
activities. American has performed all obligations required to be performed
under all Employment Arrangements and is not in breach or violation of or in
default or arrears under any of the Material terms, provisions or conditions
thereof.
5.14 Material Agreements. All Material Agreements relating to the ownership,
operation or the conduct of the business of any of the American Stations
presently held or used by American or to which American is a party or to which
it or any of its property is subject or bound are valid, binding and legally
enforceable obligations of American and, to American's knowledge, information
and belief, all other parties thereto, and American is validly and lawfully
operating its business in all Material respects and owning its property under
each of the Material Agreements. American has duly complied with all of the
Material terms and conditions of each Material Agreement and has not done or
performed, or failed to do or perform (and there is no pending or, to the
knowledge, information and belief of American, threatened Claim that American
has not so complied, done and performed or failed to do and perform) any act
which would invalidate or provide grounds for the other party thereto to
terminate (with or without notice, passage of time or both) such Material
Agreement or impair the rights or benefits, or increase the costs, of
American, under any of the Material Agreements. The time brokerage, local
marketing and other similar agreements to which American is a party comply in
all Material respects with the FCA. The joint sales and other similar
agreements to which American is a party do not create attributable interests
under the FCA.
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5.15 Ordinary Course of Business. American, from the end of its most recent
fiscal quarter to the date of the Original Agreement, except as may be
described in or contemplated by the American SEC Documents, has operated its
business in the normal, usual and customary manner in the ordinary and regular
course of business, consistent with prior practice.
5.16 Broker or Finder. No Person assisted in or brought about the
negotiation of this Agreement or the Merger or the subject matter of either
thereof in the capacity of broker, agent or finder or in any similar capacity
on behalf of American, other than Morgan Stanley & Co. Incorporated.
5.17 Environmental Matters. Except as set forth in the American SEC
Documents, American:
(a) to the knowledge, information and belief of American, has not been
notified that it is potentially liable under, has not received any request
for information or other correspondence concerning its potential liability
with respect to any site or facility under, and is not a "potentially
responsible party" under, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Resource
Conservation and Recovery Act, as amended, or any similar state Law;
(b) has not entered into or received any consent decree, compliance order
or administrative order issued pursuant to any Environmental Law;
(c) is not a party in interest or in default under any judgment, order,
writ, injunction or decree of any final order issued pursuant to any
Environmental Law;
(d) is, to the knowledge, information and belief of American, in
substantial compliance in all Material respects with all Environmental
Laws, has, to American's knowledge, information and belief, obtained all
Environmental Permits required under Environmental Laws, and is not the
subject of or, to American's knowledge, information and belief, threatened
with any Legal Action involving a demand for damages or other potential
liability, including any Lien, with respect to Material violations or
Material breaches of any Environmental Law; and
(e) has no knowledge of any past or present Event related to any of the
property and assets of American which Events, individually or in the
aggregate, will interfere with or prevent continued Material compliance
with all Environmental Laws, or which, individually or in the aggregate,
will form the basis of any Material Claim for the release or threatened
release into the environment, of any Hazardous Material.
5.18 American Financing. American has, or on the Closing Date will have,
sufficient funds to consummate the transactions contemplated by this Agreement
and to pay all transaction related fees and expenses.
ARTICLE 6
COVENANTS
6.1 Access to Information; Confidentiality.
(a) Each party shall afford to the other party and its accountants, counsel,
investment bankers, financial advisors and other agents and representatives
(the "Representatives") full access during normal business hours throughout
the period prior to the Closing Date to all of its (and its Subsidiaries')
properties, books, contracts, commitments and records (including without
limitation Tax Returns) and, during such period, shall furnish promptly upon
request (i) a copy of each report, schedule and other document filed or
received by any of them pursuant to the requirements of any Applicable Law
(including without limitation the FCA) or filed by it or any of its
Subsidiaries with any Authority in connection with the Merger or which may
have a Material effect on it or its businesses, operations, properties,
prospects, personnel, condition, (financial or other), or results of
operations, and (ii) such other information concerning any of the foregoing as
American or EZ shall reasonably request. All non-public information furnished
pursuant to the provisions of this Agreement, including without limitation
this Section, will be kept confidential and shall not, without the prior
written consent of the party
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disclosing such information, be disclosed by the other party in any manner
whatsoever, in whole or in part, and shall not be used for any purposes, other
than in connection with the Merger. In no event shall any party or any of its
Representatives use such information to the detriment of the other party. Each
party agrees to reveal such information only to those of its Representatives
or other Persons who need to know such information for the purpose of
evaluating the Merger, who are informed of the confidential nature of such
information and who shall undertake in writing (a copy of which, if requested,
will be furnished to the disclosing party) to act in accordance with the terms
and conditions of this Agreement.
(b) Subject to the terms and conditions of Section 6.1(a), each party may
disclose such information as may be necessary in connection with seeking all
Governmental and Private Authorizations or that is required by Applicable Law
to be disclosed. In the event that this Agreement is terminated in accordance
with its terms, each party shall promptly redeliver all non-public written
material provided pursuant to this Section or any other provision of this
Agreement or otherwise in connection with the Merger and shall not retain any
copies, extracts or other reproductions in whole or in part of such written
material other than one copy thereof which shall be delivered to independent
counsel for such party.
(c) No investigation pursuant to this Section or otherwise shall affect any
representation or warranty in this Agreement of any party or any condition to
the obligations of the parties hereto.
6.2 Agreement to Cooperate.
(a) Each of the parties hereto shall use reasonable business efforts (x) to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under Applicable Law to consummate the
Merger, and (y) to refrain from taking, or cause to be taken, any action and
to refrain from doing or causing to be done, any thing which could impede or
impair the consummation of the Merger, subject to any fiduciary obligations of
EZ's or American's Board of Directors, including, in all cases, without
limitation using its reasonable business efforts (i) to prepare and file with
the applicable Authorities as promptly as practicable after the execution of
the Original Agreement all requisite applications and amendments thereto,
together with related information, data and exhibits, necessary to request
issuance of orders approving the Merger by all such applicable Authorities,
each of which must be obtained or become final in order to satisfy the
condition applicable to it set forth in Section 7.1(c), (ii) to obtain all
necessary or appropriate waivers, consents and approvals, including without
limitation the EZ Senior Note Consent, (iii) to effect all necessary
registrations, filings and submissions (including without limitation filings
under the Hart-Scott-Rodino Act and all filings necessary for American to own
and operate the EZ Stations), (iv) to lift any injunction or other legal bar
to the Merger (and, in such case, to proceed with the Merger as expeditiously
as possible), and (v) to obtain the satisfaction of the conditions specified
in Article 7, including without limitation the truth and correctness as of the
Closing Date as if made on and as of the Closing Date of the representations
and warranties of such party and the performance and satisfaction as of the
Closing Date of all agreements and conditions to be performed or satisfied by
such party.
(b) Without limiting the generality of the foregoing, the parties
acknowledge and agree that the assignment of the FCC Licenses as contemplated
by this Agreement is subject to the prior consent and approval of the FCC.
Within thirty (30) business days following the date of this Agreement, EZ and
American shall file with the FCC appropriate applications for FCC Consents,
which applications shall include a request for a temporary waiver of Section
73,3555(a) of the FCC's rules and regulations with respect to American's
proposed ownership of radio stations in the Sacramento, California market. The
grant of a temporary waiver by the FCC requiring American to file with the
FCC, within no less than six (6) months following the Closing Date, one or
more assignment or transfer applications proposing divestiture of one or more
radio stations in the Sacramento radio market, shall not be deemed a Material
Adverse Effect and American agrees to accept an FCC grant of the FCC Consents
including such a condition. The parties shall prosecute said applications with
all reasonable diligence and otherwise use reasonable business efforts to
obtain the grant of FCC Consents to such applications as expeditiously as
practicable. If the FCC Consents, or any of them, imposes any condition on any
party hereto, such party shall use reasonable business efforts to comply with
such condition unless compliance would be
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unduly burdensome or would have a Material Adverse Effect upon it. If
reconsideration or judicial review is sought with respect to any FCC Consent,
EZ and American shall oppose such efforts to obtain reconsideration or
judicial review (but nothing herein shall be construed to limit any party's
right to terminate this Agreement pursuant to the provisions of Section 8.1).
The Merger is expressly conditioned upon the grant of the Final Order as to
the FCC Consents for the transfer of the FCC Licenses for the EZ Stations
without any condition Materially Adverse to American.
(c) The parties also undertake and agree to file as soon as practicable
after the date of the Original Agreement a Notification and Report Form under
the Hart-Scott-Rodino Act with the Federal Trade Commission (the "FTC") and
the Antitrust Division of the Department of Justice (the "Antitrust
Division"). Each of the parties shall (i) use its reasonable business efforts
to comply as expeditiously as possible with all lawful requests of the FTC or
the Antitrust Division for additional information and documents and (ii) not
extend any waiting period under the Hart-Scott-Rodino Act or enter into any
agreement with the FTC or the Antitrust Division not to consummate the
transactions contemplated by this Agreement, except with the prior written
consent of the other party hereto.
(d) The parties shall cooperate with one another in the preparation,
execution and filing of all Tax Returns, questionnaires, applications, or
other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp Taxes, any transfer,
recording, registration and other fees, and any similar Taxes which become
payable in connection with the Merger that are required or permitted to be
filed on or before the Closing Date.
6.3 Public Announcements. Until the Closing, or in the event of termination
of this Agreement, each party shall consult with the other before issuing any
press release or otherwise making any public statements with respect to this
Agreement or the Merger and shall not issue any such press release or make any
such public statement without the prior consent of the other. Notwithstanding
the foregoing, the parties acknowledge and agree that they may, without each
other's prior consent, issue such press releases or make such public
statements as may be required by Applicable Law, in which case, to the extent
practicable, they will consult with the other regarding the nature, content
and form of such press release or public statement.
6.4 Notification of Certain Matters. Each party shall give prompt notice to
the other, of the occurrence or non-occurrence of any Event the occurrence or
non-occurrence of which would be likely to cause (i) any representation or
warranty made by it contained in this Agreement to be untrue or inaccurate in
any respect such that one or more of the conditions of Closing might not be
satisfied, or (ii) any covenant, condition or agreement made by it contained
in this Agreement not to be complied with or satisfied, or (iii) any change to
be made in the EZ Disclosure Schedule or the American Disclosure Schedule, as
the case may be, in any respect such that one or more of the conditions of
Closing might not be satisfied, and any failure made by it to comply with or
satisfy, or be able to comply with or satisfy, any covenant, condition or
agreement to be complied with or satisfied by it hereunder (or thereunder) in
any respect such that one or more of the conditions of Closing might not be
satisfied; provided, however, that the delivery of any notice pursuant to this
Section shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
6.5 Stockholder Approval.
(a) EZ shall promptly submit this Agreement and the Merger for the approval
of its stockholders at a special meeting of stockholders and, subject to the
fiduciary duties of the Board of Directors of EZ under Applicable Law, and to
the receipt of a written opinion from CS First Boston Corporation to the
effect that the terms of the Merger are fair to the stockholders of EZ from a
financial point of view (which opinion EZ represents and warrants it has
received as of the date of the Original Agreement), shall use its reasonable
business efforts to obtain stockholder approval and adoption (the "EZ
Stockholder Approval") of this Agreement and the Merger. Such meeting shall be
held as soon as practicable following the date upon which the Registration
Statement becomes effective. Subject to the fiduciary duties of the Board of
Directors of EZ under Applicable Law and the receipt of the written opinion
set forth in the preceding sentence, EZ shall, through its Board of Directors,
recommend to its stockholders approval of this Agreement and the Merger.
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(b) American shall promptly submit this Agreement and the Merger for the
approval of its stockholders at a special meeting of stockholders and, subject
to the fiduciary duties of the Board of Directors of American under Applicable
Law, and to the receipt of a written opinion from Morgan Stanley & Co.
Incorporated to the effect that the terms of the Merger are fair to the
stockholders of American from a financial point of view (which opinion
American represents and warrants it has received as of the date of the
Original Agreement), shall use its reasonable business efforts to obtain
stockholder approval and adoption (the "American Stockholder Approval") of
this Agreement and the Merger. Such meeting shall be held as soon as
practicable following the date upon which the Registration Statement becomes
effective. Subject to the fiduciary duties of the Board of Directors of
American under Applicable Law and the receipt of the written opinion set forth
in the preceding sentence, American shall, through its Board of Directors,
recommend to its stockholders approval of this Agreement and the Merger.
American shall also submit the Charter Amendment for the approval of its
stockholders at the special meeting of stockholders referred to in this
Section, shall use its reasonable business efforts to obtain stockholder
approval and adoption of the Charter Amendment and shall, through its Board of
Directors, recommend to its stockholders approval of the Charter Amendment.
(c) American shall, as the sole stockholder of American Subsidiary, and,
subject to the fiduciary duties of the Board of Directors of American under
Applicable Law, and to the receipt of a written opinion from Morgan Stanley &
Co. Incorporated to the effect that the terms of the Merger are fair to the
stockholders of American from a financial point of view (which opinion
American represents and warrants it has received as of the date of the
Original Agreement) approve and adopt this Agreement and the Merger.
6.6 Registration Statement and Proxy Statement.
(a) American and EZ shall prepare and file with the Commission as soon as is
reasonably practicable after the date of the Original Agreement a joint proxy
statement prospectus (the "Joint Proxy Statement/Prospectus") for use in
connection with the special meetings of stockholders of American and of EZ and
shall use all reasonable business efforts to file a Registration Statement on
Form S-4 (the "Registration Statement") under the Securities Act with the
Commission in connection with the Merger for the purpose of registering the
shares of American Class A Common Stock to be issued in the Merger and to have
the Registration Statement declared effective by the Commission as promptly as
practicable. American and EZ shall also take any action required to be taken
under Applicable Law in connection with the consummation of the transactions
contemplated by this Agreement, including without limitation in the case of
American all filings under applicable state blue sky or securities laws in
connection with the issuance of American Class A Common Stock. American and EZ
shall promptly furnish to each other all information, and take such other
actions, as may reasonably be requested in connection with any action by
either of them in connection with the provisions of this Section.
(b) Prior to the date of approval of the Merger by their respective
stockholders, each of EZ and American shall correct promptly any information
provided by it to be used specifically in the Joint Proxy Statement/Prospectus
and Registration Statement that shall have become false or misleading in any
material respect and shall take all steps necessary to file with the
Commission and have declared effective or cleared by the Commission any
amendment or supplement to the Joint Proxy Statement/Prospectus or the
Registration Statement so as to correct such Joint Proxy Statement/Prospectus
or Registration Statement and cause it to be disseminated to the stockholders
of EZ and American, in each case to the extent required by Applicable Law.
Without limiting the generality of the foregoing, EZ and American shall notify
each other promptly of the receipt of the comments of the Commission and of
any request by the Commission for amendments or supplements to the Joint Proxy
Statement/Prospectus and Registration Statement, or for additional
information, and shall supply each other with copies of all correspondence
between them or their respective representatives, on the one hand, and the
Commission or members of its staff, on the other hand, with respect to the
Joint Proxy Statement/Prospectus and Registration Statement. If at any time
prior to the stockholder meetings of EZ and American any event should occur
relating to EZ or American or their respective officers or directors which
should be described in an amendment or supplement to the Joint Proxy
Statement/Prospectus and Registration Statement, the parties shall promptly
inform each other. Whenever any event occurs which should be described in an
amendment or a supplement to the Joint Proxy Statement/Prospectus and
Registration Statement, EZ and
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American shall, upon learning of such event, cooperate in promptly preparing,
filing and clearing with the Commission and mailing to the stockholders of EZ
and American such amendment or supplement; provided, however, that, prior to
such mailing, (i) EZ and American shall consult with each other with respect
to such amendment or supplement, (ii) shall afford each other reasonable
opportunity to comment thereon, and (iii) each such amendment or supplement
shall be reasonably satisfactory to the other.
6.7 Affiliates of EZ. EZ shall, within thirty (30) days after the date of
the Original Agreement, use its reasonable business efforts to cause each
principal executive officer, each director and each other person who is an
"affiliate," as that term is used in paragraphs (c) and (d) of Rule 145 under
the Securities Act, of EZ, to deliver to American on or prior to the Effective
Time a written agreement (an "Affiliate Agreement"), reasonably satisfactory
in form, scope and substance to American, to the effect that such Person will
not offer to sell, sell or otherwise dispose of any shares of American Class A
Common Stock issued in the Merger, except, in each case, pursuant to an
effective registration statement or in compliance with Rule 145, or in a
transaction which, in the opinion of legal counsel reasonably satisfactory to
American, is exempt from the registration requirements of the Securities Act.
6.8 Nasdaq Listing. American shall use its reasonable business efforts to
effect, at or before the Effective Time, authorization for listing on Nasdaq
upon official notice of issuance, of the additional shares of the American
Class A Common Stock to be issued pursuant to the Merger.
6.9 Other Offers; No Solicitation.
(a) If, prior to the approval of the Merger by EZ's stockholders, EZ shall
receive a firm, bona fide written proposal or proposals from any Person
relating to any Purchase Proposal (as defined in subsection (e) below), and
EZ's Board of Directors shall determine in good faith, based upon the advice
of independent counsel, and after receiving advice from EZ's financial
advisor, that fiduciary obligations under Applicable Law require EZ's Board of
Directors to terminate this Agreement and accept the Purchase Proposal (a
"Fiduciary Determination"), then EZ may, subject to the provisions of
subsection (b) below, terminate this Agreement; provided, however, that (i) EZ
shall give its termination notice on or before the later of (A) the 30 Day
Date and (B) the day that is five (5) of the business days after EZ's receipt
of the Purchase Proposal, and (ii) upon EZ's notification to American of such
termination, EZ shall comply with the provisions of subsection (c) below.
(b) If EZ receives a Purchase Proposal in accordance with subsection (a)
above which EZ's Board of Directors wishes to accept: (i) EZ shall promptly
notify American in writing of such Purchase Proposal and of the material terms
and conditions thereof; (ii) American shall be entitled, within five (5) days
after such notification, to revise its offer to consummate the Merger and to
communicate such revised offer in writing to EZ; and (iii) EZ shall consider
any such revised offer in connection with its Fiduciary Determination. The
rights of American under this subsection (b) shall terminate upon any proper
termination of this Agreement under Section 8.1 other than paragraph (f)
thereof.
(c) If EZ terminates this Agreement pursuant to Section 6.9(a) or Section
8.1(g):
(i) on or before the day thirty (30) days after the date of the Original
Agreement (the "30 Day Date"), or in the event American does not elect to
exercise its rights to purchase assets of EZ pursuant to the provisions of
paragraph (ii) below, then EZ shall promptly pay American the cash sum of
$15,000,000;
(ii) after the 30 Day Date, then American shall have the right to
purchase the assets of all of the EZ Stations in any one of EZ's geographic
markets (i.e., one of the markets in which EZ owns (and not subject to a
contract for sale ) Stations at the time of such termination) at a purchase
price payable in cash equal to the Station Fair Market Value (as defined
below) of such Stations as of the date EZ so terminates this Agreement less
$10,000,000. The term "Station Fair Market Value" shall mean the fair
market value of the EZ Stations which American has elected to purchase as
determined by mutual agreement of American and EZ or, in the event they are
unable to so agree within thirty (30) days, by arbitration determined by
the agreement of two investment bankers knowledgeable in radio station
valuations selected one by American
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and one by EZ. In the event such investment bankers are unable to agree on
the Station Fair Market Value within thirty (30) days, they shall appoint a
third investment banker, so knowledgeable, or failing agreement on such
third investment banker, it shall be appointed by the President of the New
York City Chapter of the American Arbitration Association. The decision of
the third investment banker however so appointed shall be binding on
American and EZ. In the event American shall elect to exercise its rights
to so purchase EZ Stations, it shall, within ten (10) days after EZ's
termination of this Agreement, notify EZ in writing of such election and
identify the EZ Stations it has elected to purchase. Thereafter, American
and EZ shall negotiate in good faith an asset purchase agreement with
respect to such transaction containing terms and conditions customary in
the radio industry for the purchase and sale of radio stations, including
without limitation, representations and warranties, covenants, closing
conditions and survival of the representations and warranties for a
reasonable period of time.
(d) During the term hereof, EZ shall not, and shall not permit any of its
Subsidiaries, any officer or director of EZ or any of its Subsidiaries, or any
of its Representatives, directly or indirectly, to solicit or initiate
(including by way of furnishing any non-public information concerning EZ's
business, properties or assets) discussions, inquiries or proposals or
participate in any negotiation for the purpose or with the intention of
leading to any proposal concerning any Purchase Proposal for the sale of all
or substantially all of EZ's assets (including without limitation the purchase
of all or substantially all of the common stock of Professional Broadcasting,
Incorporated, a wholly-owned Subsidiary of EZ ("PBI")) or for the purchase of
all or substantially all of EZ's equity securities, except for the
transactions with American contemplated by this Agreement. Notwithstanding the
foregoing restriction on participation (i.e., EZ may not solicit or initiate,
as above provided), EZ may furnish information concerning its business,
properties or assets, and may engage in negotiations, in connection with a
possible Purchase Proposal if the Board of Directors of EZ makes a Fiduciary
Determination. In the event that EZ shall determine to provide any information
or negotiate as described in this subsection, or shall receive any offer of
the type referred to in this subsection, unless the Board of Directors of EZ
concludes that such disclosure is inconsistent with its fiduciary duties under
Applicable Law, it shall (i) immediately provide American a copy of all
information provided to the third party, (ii) inform American that information
is to be provided, that negotiations are to take place or that an offer has
been received, as the case may be, and (iii) furnish to American the identity
of the Person receiving such information or the proponent of such offer, if
applicable, and, if any offer has been received, a copy of such offer or, if
oral, a description of the material terms thereof.
(3) The term "Purchase Proposal" shall mean any proposal or offer to acquire
all or substantially all of the assets of EZ and its Subsidiaries (including
without limitation all or substantially all of the common stock of PBI) or all
or substantially all of EZ's equity securities, whether by merger, purchase of
assets, tender offer or otherwise, whether for cash, securities or any other
consideration or combination thereof.
6.10 Option Plans. Prior to the Effective Time, American and EZ shall take
such action as may be necessary to cause each unexpired and unexercised EZ
Option to be automatically converted at the Effective Time into an Exchanged
Option to purchase a number of shares of American Class A Common Stock equal
to the product of the number of shares of EZ Common Stock which the holder is
entitled to purchase under the EZ Option multiplied by the Exchange Ratio, at
a price per share equal to the quotient obtained by dividing (a) the per share
option exercise price determined pursuant to the EZ Option less $11.75, by (b)
the Exchange Ratio. The Exchanged Options will otherwise have the same terms
and conditions as the EZ Option, including acceleration and period of
exercise. At the Effective Time, American will execute and deliver to each
holder of an Exchanged Option a document evidencing American's assumptions of
EZ's obligations under the EZ Option and all references in the stock option
agreements to EZ shall be deemed to refer to American. As of the Effective
Time, American shall assume all of EZ's obligations with respect to EZ Options
as so amended and shall, from and after the Effective Time, have reserved for
issuance upon exercise of the EZ Options all shares of American Class A Common
Stock covered thereby and, as of the Effective Time, shall, if required, have
filed an amendment to its or EZ's Registration Statement on Form S-8 to
register the additional shares of American Class A Common Stock subject to
Exchanged Options granted in replacement of EZ Options. No fractional shares
of American Class A Common Stock will be issued upon the exercise of any
Exchanged Option, and instead the
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exercising holder of such Exchanged Option shall receive cash for any
fractional share amounts, in accordance with the provisions of Section 3.2(d).
6.11 Conduct of Business by American Pending the Merger. Except as otherwise
contemplated by this Agreement, after the date of the Original Agreement and
prior to the Closing Date or earlier termination of this Agreement, unless EZ
shall otherwise agree in writing, American shall, and shall cause its
Subsidiaries, to:
(a) conduct their respective businesses in the ordinary and usual course
of business and consistent with past practice, which includes the
acquisition of other radio broadcasting stations and communications towers;
(b) not (i) amend or propose to amend its Organic Documents in any manner
Materially Adverse to the EZ stockholders or (ii) declare, set aside or pay
any dividend or distribution payable in cash, stock, property or otherwise,
on the American Common Stock;
(c) not (i) redeem, purchase, acquire or offer to purchase or acquire any
shares of its capital stock, Convertible Securities or Option Securities of
American, except to the extent required by the terms thereof, (ii) take or
fail to take any action which action or failure to the knowledge of
American would cause American, EZ or any of their respective stockholders
(except to the extent of the Cash Consideration or the receipt of cash in
lieu of fractional shares) to recognize gain or loss for federal income tax
purposes as a result of the consummation of the Merger, (iii) sell or
otherwise dispose of any assets or businesses other than sales in the
ordinary course of business and other than sales of one or more of the
American Stations (x) pursuant to agreements in effect on the date of the
Original Agreement, (y) pursuant to agreements hereafter entered into and
accounting for less than twenty percent (20%) of Broadcast Cash Flow of
American, or (iv) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing;
(d) use all reasonable business efforts to preserve intact their
respective business organizations and goodwill, keep available the services
of their respective present officers and key employees, and preserve the
goodwill and business relationships with customers and others having
business relationships with them and not engage in any action, directly or
indirectly, with the intent to adversely affect the transactions
contemplated by this Agreement;
(e) confer on a regular and frequent basis with one or more
representatives of EZ to report Material operational matters and the
general status of ongoing operations;
(f) maintain with financially responsible insurance companies insurance
on their respective tangible assets and their respective businesses in such
amounts and against such risks and losses as are consistent with past
practice; and
(g) not permit American Subsidiary to engage in any business activities
or conduct any operations, other than in connection with the transactions
contemplated by this Agreement.
6.12 Conduct of Business by EZ Pending the Merger. Except as set forth in
Section 6.12 of the EZ Disclosure Schedule or as otherwise contemplated by
this Agreement, after the date of the Original Agreement and prior to the
Closing Date or earlier termination of this Agreement, unless American shall
otherwise agree in writing, EZ shall, and shall cause its Subsidiaries, to:
(a) conduct their respective businesses in the ordinary and usual course
of business and consistent with past practice;
(b) not (i) amend or propose to amend their respective Organic Documents,
(ii) split, combine or reclassify (whether by stock dividend or otherwise)
their outstanding capital stock, or (iii) declare, set aside or pay any
dividend or distribution payable in cash, stock, property or otherwise,
except for the payment of dividends or distributions by a direct or
indirect wholly-owned Subsidiary of EZ;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any shares of EZ Common Stock, Convertible Securities
or Option Securities, except that EZ may issue shares upon (i) conversion
of Convertible Securities and (ii) exercise of Option Securities
outstanding on the date of the Original Agreement;
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(d) not (i) incur or become contingently liable with respect to any
indebtedness for borrowed money other than (A) borrowings in the ordinary
course of business or (B) borrowings to refinance existing indebtedness,
(ii) redeem, purchase, acquire or offer to purchase or acquire any shares
of its capital stock, Convertible Securities or Option Securities, (iii)
take or fail to take any action which action or failure to the knowledge of
EZ would cause American, EZ or any of their respective stockholders (except
to the extent of the Cash Consideration or the receipt of cash in lieu of
fractional shares) to recognize gain or loss for federal income tax
purposes as a result of the consummation of the Merger, (iv) sell, pledge,
dispose of or encumber any assets or businesses other than sales in the
ordinary course of business or (v) enter into any contract, agreement,
commitment or arrangement with respect to any of the foregoing;
(e) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill
and business relationships with customers and others having business
relationships with them and not engage in any action, directly or
indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement;
(f) confer on a regular and frequent basis with one or more
representatives of American to report Material operational matters and the
general status of ongoing operations;
(g) not enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key employees,
except in the ordinary course and consistent with past practice or
reasonable performance or severance bonuses related to the transactions
contemplated by this Agreement; provided, however, that EZ and its
Subsidiaries shall in no event enter into any written employment agreement
which provides for an annual base salary in excess of $100,000 and has a
term in excess of one year or enter into or amend any severance or
termination arrangement;
(h) not adopt, enter into or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
health care, employment or other employee benefit plan, agreement, trust,
fund or arrangement for the benefit or welfare of any employee or retiree,
except as required to comply with changes in Applicable Law; and
(i) maintain with financially responsible insurance companies insurance
on their respective tangible assets and their respective businesses in such
amounts and against such risks and losses as are consistent with past
practice.
6.13 Control of EZ's Operations. Nothing contained in this Agreement shall
give to American, directly or indirectly, rights to control or direct EZ's
operations prior to the Effective Time. Prior to the Effective Time, EZ shall
exercise, consistent with the terms and conditions of this Agreement, complete
control and supervision of its operations.
6.14 Control of American's Operations. Nothing contained in this Agreement
shall give to EZ, directly or indirectly, rights to control or direct
American's operations prior to the Effective Time. Prior to the Effective
Time, American shall exercise, consistent with the terms and conditions of
this Agreement, complete control and supervision of its operations.
6.15 Directors', Officers' and Employees' Indemnification and Insurance.
(a) From and after the Effective Time, American (in the event of the Direct
Merger) or American Subsidiary (in the event of the Subsidiary Merger) shall
indemnify, defend and hold harmless the present and former officers, directors
and employees of EZ (collectively, the "Indemnified Parties") against all
losses, expenses, claims, damages, liabilities or amounts that are paid in
settlement of, or otherwise in connection with any claim, action, suit,
proceeding or investigation (as used in this Section, a "claim"), based in
whole or in part on the fact that such person is or was a director, officer or
employee of EZ and arising out of actions or omissions occurring at or prior
to the Effective Time (including, without limitation, in connection with this
Agreement, the Merger and the transactions contemplated hereby), in each case
to the fullest extent permitted
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under the DCL (and shall pay any expenses in advance of the final disposition
of any such action or proceeding to each Indemnified Party to the fullest
extent permitted under the DCL, upon receipt from the Indemnified Party to
whom expenses are advanced of any undertaking to repay such advances required
under the DCL).
(b) So long as American shall maintain directors' and officers' liability
insurance for its then current directors and officers, American shall cause
the Surviving Corporation to cause to be maintained in effect for a period of
six (6) years after the Effective Time the current policies of directors' and
officers' liability insurance maintained by EZ (provided that American may
substitute therefor policies which it is then maintaining for its directors
and officers so long as such policies are not materially less advantageous to
such directors and officers) with respect to claims arising from facts or
events which occurred at or before the Effective Time.
(c) In the event American or American Subsidiary or any of their successors
or assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then and in each such case, proper provisions shall be made so
that the successors and assigns of American or American Subsidiary, as the
case may be, shall assume the obligations set forth in this Section.
(d) This Section is intended to be for the benefit of, and shall be
enforceable by, the Indemnified Parties, their heirs and personal
representatives and shall be binding on American and American Subsidiary and
its successors and assigns.
6.16 Employment Agreements. Prior to Closing, any and all officers of EZ who
are parties to agreements that would provide to them cash compensation upon a
change of control (as defined therein) of EZ shall execute amendments and/or
waivers of the cash compensation provisions applicable upon such a change of
control or upon a voluntary termination of employment by any such employee.
6.17 Irrevocable Proxies. Simultaneous with the execution of the Original
Agreement, each of the Persons named therein has executed and delivered to
American an agreement substantially in the form of Exhibit A attached hereto
and made a part hereof (the "EZ Voting Agreement"), and each of the Persons
named therein has executed and delivered to EZ an agreement substantially in
the form of Exhibit B attached hereto and made a part hereof (the "American
Voting Agreement").
6.18 Tax-Free Treatment of Merger. Each of the parties shall use its
reasonable business efforts to cause each of the Direct Merger and the
Subsidiary Merger to be treated as a tax-free reorganization for federal
income tax purposes.
ARTICLE 7
CLOSING CONDITIONS
7.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger shall, except as
hereinafter provided in this Section, be subject to the satisfaction at or
prior to the Closing Date of the following conditions, any or all of which may
be waived, in whole or in part, to the extent permitted by Applicable Law:
(a) This Agreement and the transactions contemplated hereby (including
without limitation, in the case of American, the Charter Amendment) shall
have been approved and adopted by the requisite vote of the stockholders of
American and EZ under Applicable Law and applicable Nasdaq requirements;
(b) No preliminary or permanent injunction or other order or decree by
any federal or state court which prevents the consummation of the Merger
shall have been issued and remain in effect (each party agreeing to use its
reasonable business efforts to have any such injunction, order or decree
lifted);
(c) All authorizations, consents, waivers, orders or approvals required
to be obtained from all Authorities, and all filings, submissions,
registrations, notices or declarations required to be made by
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American and EZ with any Authority, prior to the consummation of the
Merger, shall have been obtained from, and made with, the FCC and all other
required Authorities, except for such authorizations, consents, waivers,
orders, approvals, filings, registrations, notices or declarations the
failure to obtain or make would not, in the reasonable business judgment of
each of the parties, have a Material Adverse Effect on American. Without
limiting the generality of the foregoing, the FCC shall have issued all
necessary consents and approvals in connection with the transactions
contemplated by this Agreement, the same shall have become Final Orders,
and any conditions precedent to the effectiveness of such Final Orders
which are specified therein shall have been satisfied as provided in
Section 6.2(b);
(d) The shares of American Class A Common Stock to be issued in the
Merger shall have been approved for listing on Nasdaq, upon official notice
of issuance;
(e) The waiting period applicable to the consummation of the Merger under
the Hart-Scott-Rodino Act shall have expired or been terminated;
(f) The Registration Statement shall have become effective in accordance
with the provisions of the Securities Act, and no stop order suspending
such effectiveness shall have been issued and remain in effect and no
proceeding for that purpose shall have been instituted by the Commission or
any state regulatory authorities; and
(g) No action shall have been taken, and no statute, rule or regulation
shall have been enacted, by any Authority in the United States which would
prevent the consummation of the Merger or make the consummation of the
Merger illegal.
7.2 Conditions to Obligations of American. The obligation of American and
American Subsidiary to effect the Merger shall be subject to the satisfaction
of the following conditions, any or all of which may be waived, in whole or in
part, to the extent permitted by Applicable Law:
(a) All agreements, certificates, opinions and other documents shall be
reasonably satisfactory in form, scope and substance to American and its
counsel, and American and its counsel shall have received all information
and copies of all documents, including records of corporate proceedings,
which they may reasonably request in connection therewith, such documents
where reasonably appropriate to be certified by proper corporate officers;
(b) EZ shall have furnished American and, at American's request, any bank
or other financial institution providing credit to American or any
Subsidiary, with favorable opinions, dated the Closing Date of Hunton &
Williams, counsel for EZ, and of Koteen & Naftalin, LLP, FCC counsel for
EZ, in each case, with respect to such matters incident to the Merger, as
American or its counsel may reasonably request or which may be reasonably
requested by any such bank or financial institution or their respective
counsel;
(c) The representations, warranties, covenants and agreements of EZ
contained in this Agreement or otherwise made in writing by it or on its
behalf pursuant hereto or otherwise made in connection with the Merger
shall be true and correct in all Material respects at and as of the Closing
Date with the same force and effect as though made on and as of such date
except those which speak as of a certain date which shall continue to be
true and correct in all Material respects as of such date on the Closing
Date (including without limitation giving effect to any later obtained
knowledge, information or belief of EZ or American); each and all of the
agreements and conditions to be performed or satisfied by EZ hereunder at
or prior to the Closing Date shall have been duly performed or satisfied in
all Material respects; and EZ shall have furnished American with such
certificates and other documents evidencing the truth of such
representations, warranties, covenants and agreements and the performance
of such agreements or conditions as American or its counsel shall have
reasonably requested;
(d) All authorizations, consents, waivers, modifications, orders or
approvals required to be obtained from all Persons (other than Authorities)
prior to the consummation of the Merger, including without limitation all
Private Authorizations and consents related to Material Agreements of EZ
and its Subsidiaries and all modifications of Contractual Obligations
reasonably requested by American within ten (10) business days of the date
of the Original Agreement, shall have been obtained, other than such
authorizations,
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consents, waivers, modifications, orders or approvals, the failure of which
to obtain would not, individually or in the aggregate, Materially Adversely
Affect EZ, without the imposition, individually or in the aggregate, of any
condition or requirement which would Materially Adversely Affect EZ;
(e) Between the date of the Original Agreement and the Closing Date,
there shall not have occurred and be continuing any Material Adverse Change
in EZ from that reflected in the most recent EZ Financial Statements, and
as of the Closing Date, the FCC Licenses with respect to each of the EZ
Stations shall not have been Materially Adversely Affected;
(f) American shall have received "comfort" letters in customary form from
Ernst & Young LLP, certified public accountants for EZ and its
Subsidiaries, dated the date of the Joint Proxy Statement/Prospectus, the
effective date of the Registration Statement and the Closing Date (or such
other date reasonably acceptable to American) with respect to certain
financial statements and other financial information included in the
Registration Statement and any subsequent changes in specified balance
sheet and income statement items, including total assets, working capital,
stockholders' equity, net revenues, Broadcast Cash Flow, net income and net
income per share;
(g) American shall have received from its counsel, Sullivan & Worcester
LLP, a favorable opinion (dated as of the Closing Date) to the effect that
the Merger constitutes a reorganization within the meaning of Section 368
of the Code and that, as a consequence, American and its stockholders will
not recognize any gain or loss for federal income tax purposes as a result
of consummation of the Merger, and in connection with such opinion, EZ and
each of its stockholders owning five percent (5%) or more of the EZ Common
Stock shall have furnished to American and such counsel such
representations, warranties, covenants and agreements as such counsel shall
have reasonably requested in order to enable them to render such opinion;
(h) The employment agreements between EZ and each of Arthur Kellar and
Alan Box shall have been terminated in their entirety and each of them
shall have delivered to American a general release on terms reasonably
satisfactory to American, against delivery, in the case of Arthur Kellar,
of a payment in the amount of $250,000 in lieu of the severance payments
provided for in his employment agreement;
(i) Arthur Kellar and Alan Box shall have executed and delivered to
American a stockholder agreement (the "Stockholder Agreement"), in form,
scope and substance reasonably satisfactory to American, pursuant to which
such persons jointly shall have the right to nominate two (2) persons to
the Board of Directors of American so long as they collectively continue to
hold (i) more than fifty percent (50%) of the American Class A Common Stock
received by them pursuant to consummation of the Merger and (ii) shares of
American Class A Common Stock representing not less than 4.5% of the number
of shares of American Common Stock outstanding on a pro forma fully diluted
basis (i.e., giving effect to the conversion of all Convertible Securities
and the exercise of all Option Securities at the time outstanding). The
Stockholder Agreement shall also provide that so long as Arthur Kellar and
Alan Box continue to own collectively shares of American Class A Common
Stock satisfying one but not both of the requirements of clauses (i) and
(ii) of the preceding sentence they shall jointly be entitled to nominate
one (1) person to the Board of Directors of American, and if they cease to
own collectively a sufficient number of shares of American Class A common
Stock to satisfy either of such requirements they shall no longer have any
right to nominate a director. The Stockholder Agreement shall permit Arthur
Kellar and Alan Box to transfer the stock subject to such Agreement to
their immediate family members or a trust for the benefit of such Persons,
and the holdings of such Persons (of such transferred stock) shall be
included in the determination of whether the requirements of clauses (i)
and (ii) of the first sentence of this paragraph are satisfied. The
Stockholder Agreement shall also provide that any nominee other than Arthur
Kellar or Alan Box shall be reasonably acceptable to the Board of Directors
of American;
(j) Each of the persons referred to in Section 6.7 shall have executed
and delivered to American an Affiliate Agreement; and
(k) The FCC shall not have released on or before the Closing Date any
ruling, order or other pronouncement Materially Adverse to the interests of
EZ or American in the comparative renewal
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proceedings pending before the FCC in M M Docket No. 93-18 (the "WBZZ
Renewal Proceedings") or, if the WBZZ Renewal Proceedings are still
pending, arrangements shall have been made, reasonably satisfactory to
American, pursuant to which (i) EZ's renewal expectations with respect to
WBZZ(FM) shall be preserved, (ii) during the period when such renewal is
pending the Entity holding the FCC License with respect to WBZZ(FM) shall
enter into a local marketing agreement with American with respect to
WBZZ(FM), and (iii) American shall have the right to acquire such FCC
License and related assets with respect to WBZZ(FM) upon such license
renewal. American agrees that any such arrangements must be reasonably
satisfactory to the Entity holding such FCC License.
7.3 Conditions to Obligations of EZ. The obligation of EZ to effect the
Merger shall be subject to the satisfaction of the following conditions, any
or all of which may be waived, in whole or in part, to the extent permitted by
Applicable Law:
(a) All agreements, certificates, opinions and other documents delivered
by American and American Subsidiary shall be reasonably satisfactory in
form, scope and substance to EZ and its counsel, and EZ and its counsel
shall have received all information and copies of all documents, including
records of corporate proceedings, which they may reasonably request in
connection therewith, such documents where reasonably appropriate to be
certified by proper corporate officers;
(b) American shall have furnished EZ and, at EZ's request, any bank or
other financial institution providing credit to EZ or any Subsidiary, with
favorable opinions, dated the Closing Date of Sullivan & Worcester LLP,
counsel for American and American Subsidiary, and of Dow, Lohnes &
Albertson, FCC counsel for American and American Subsidiary, in each case,
with respect to such matters incident to the Merger, as EZ or its counsel
may reasonably request or which may be reasonably requested by any such
bank or financial institution or their respective counsel;
(c) The representations, warranties, covenants and agreements of American
contained in this Agreement or otherwise made in writing by it or on its
behalf pursuant hereto or otherwise made in connection with the Merger
shall be true and correct in all Material respects at and as of the Closing
Date with the same force and effect as though made on and as of such date
except those which speak as of a certain date which shall continue to be
true and correct in all Material respects as of such date on the Closing
Date (including without limitation, giving effect to any later obtained
knowledge, information or belief of American or EZ); each and all of the
agreements and conditions to be performed or satisfied by American and
American Subsidiary hereunder at or prior to the Closing Date shall have
been duly performed or satisfied in all Material respects; and American and
American Subsidiary shall have furnished EZ with such certificates and
other documents evidencing the truth of such representations, warranties,
covenants and agreements and the performance of such agreements or
conditions as EZ or its counsel shall have reasonably requested;
(d) All authorizations, consents, waivers, modifications orders or
approvals required to be obtained from all Persons (other than Authorities)
prior to the consummation of the Merger, including without limitation all
Private Authorizations and consents related to Material Agreements of
American and its Subsidiaries and all modifications of Contractual
Obligations reasonably requested by EZ within ten (10) business days of the
date of the Original Agreement, shall have been obtained, other than such
authorizations, consents, waivers, modifications, orders or approvals, the
failure of which to obtain would not, individually or in the aggregate,
Materially Adversely Affect American, without the imposition, individually
or in the aggregate, of any condition or requirement which would Materially
Adversely Affect American;
(e) Between the date of the Original Agreement and the Closing Date,
there shall not have occurred and be continuing any Material Adverse Change
in American from that reflected in the most recent American Financial
Statements, and as of the Closing Date, the FCC Licenses with respect to
each of the American Stations shall not have been Materially Adversely
Affected;
(f) EZ shall have received "comfort" letters in customary form from
Deloitte & Touche LLP, certified public accountants for American and its
Subsidiaries, dated the date of the Joint Proxy
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Statement/Prospectus, the effective date of the Registration Statement and
the Closing Date (or such other date reasonably acceptable to EZ) with
respect to certain financial statements and other financial information
included in the Registration Statement and any subsequent changes in
specified balance sheet and income statement items, including total assets,
working capital, stockholders' equity, net revenues, Broadcast Cash Flow,
net income and net income per share;
(g) American shall have executed and delivered to each of the Persons
executing an Affiliate Agreement, a registration rights agreement in the
form heretofore executed and delivered by American and certain of its
stockholders and permitting each of such Persons to become a party thereto;
(h) EZ shall have received from its counsel, Hunton & Williams, a
favorable opinion (dated as of the Closing Date) to the effect that the
Merger constitutes a reorganization within the meaning of Section 368 of
the Code and that, as a consequence, EZ and its stockholders will not
recognize any gain or loss for federal income tax purposes as a result of
consummation of the Merger, except that gain will be recognized to the
extent of the Cash Consideration and gain or loss will be recognized with
respect to cash received in lieu of fractional shares or with respect to
Dissenting Shares, and in connection with such opinion, American and each
of its stockholders owning five percent (5%) or more of the American Common
Stock shall have furnished to EZ and such counsel such representations,
warranties, covenants and agreements as such counsel shall have reasonably
requested in order to enable them to render such opinion;
(i) American shall have executed and delivered to EZ the Stockholder
Agreement, in form, scope and substance reasonably satisfactory to EZ, and
any individuals nominated as directors of American pursuant to the
provisions thereof shall have been elected, subject to consummation of the
Merger, directors of American;
(j) Each of the individuals listed in Section 7.3(j) of the EZ Disclosure
Schedule shall have been elected, subject to consummation of the Merger, to
the positions as officers of American set forth opposite his or her name in
such Section; and
(k) The employment agreements between EZ and each of Arthur Kellar and
Alan Box shall have been terminated and Arthur Kellar shall have received a
payment in the amount of $250,000 in lieu of the severance payments
provided for in his employment agreement.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date, whether before or after approval by the stockholders of American
and EZ:
(a) by mutual consent of EZ and American; or
(b) by either American or EZ if any permanent injunction, decree or
judgment by any Authority preventing the consummation of the Merger shall
have become final and nonappealable, unless the party seeking such
injunction, decree or judgment was the terminating party or any Affiliate
thereof; or
(c) by either American or EZ if the American Stockholder Approval or the
EZ Stockholder Approval is not obtained, so long as the terminating party
is not in Material breach of this Agreement and none of its representations
and warranties shall have been or become and continue to be untrue in any
Material respect; or
(d) by EZ in the event (i) EZ is not in Material breach of this Agreement
and none of its representations or warranties shall have been or become and
continue to be untrue in any Material respect, and (ii) either (A) the
Merger has not been consummated prior to the Termination Date and American
is in Material breach of this Agreement or any of its representations or
warranties shall have become and continue to be untrue in any Material
respect, or (B) such a breach or untruth exists and is not capable of being
cured by and will prevent or delay consummation of the Merger by or beyond
the Termination Date; or
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(e) by American in the event (i) American is not in Material breach of
this Agreement and none of its representations or warranties shall have
been or become and continue to be untrue in any Material respect, and (ii)
either (A) the Merger has not been consummated prior to the Termination
Date and EZ is in Material breach of this Agreement or any of its
representations or warranties shall have become and continue to be untrue
in any Material respect, or (B) such a breach or untruth exists and is not
capable of being cured by and will prevent or delay consummation of the
Merger by or beyond the Termination Date; or
(f) by EZ pursuant to and in compliance with the provisions of Section
6.9; or
(g) by EZ, if the opinion letter that EZ received from CS First Boston
Corporation, to the effect that the Merger is fair, from a financial point
of view, to EZ's stockholders, shall have been withdrawn prior to the
receipt of the EZ Stockholder Approval; or
(h) by American, if the opinion letter that American received from Morgan
Stanley & Co. Incorporated, to the effect that the Merger is fair, from a
financial point of view, to American, shall have been withdrawn prior to
the receipt of the American Stockholder Approval.
The term "Termination Date" shall mean September 30, 1997 or such other date
as the parties may, from time to time, mutually agree.
The right of American or EZ to terminate this Agreement pursuant to this
Section shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any party, any Person controlling any
such party or any of their respective Representatives, whether prior to or
after the execution of this Agreement.
8.2 Effect of Termination.
(a) Except as provided in Sections 6.1, 6.3, 6.9 and 9.3 and this Section,
in the event of the termination of this Agreement pursuant to Section 8.1, or
in the event the Merger shall not have become effective prior to the end of
business on the day prior to the Termination Date, this Agreement shall
forthwith become void, there shall be no liability on the part of any party,
or any of its respective stockholders, officers or directors, to the other and
all rights and obligations of each party shall cease; provided, however, that
such termination shall not relieve any party from liability for any
misrepresentation or breach of any of its warranties, covenants or agreements
set forth in this Agreement.
(b) In the event this Agreement is terminated by (i) EZ pursuant to the
provisions of Section 8.1(d), or (ii) American pursuant to the provisions of
Section 8.1(e), then the terminating party shall be entitled to liquidated
damages in the amount of $15,000,000, together with the reasonable fees and
expenses of the terminating party incurred in connection with this Agreement
and the transactions contemplated hereby, including without limitation, fees
and expenses of its investment bankers, counsel, accountants, banks and other
lenders and other consultants and agents, it being agreed that such amount
shall constitute full payment for any and all damages suffered by the
terminating party by reason of other party's failure to consummate the Merger.
In the event this Agreement is terminated by American pursuant to Section
8.1(h), then EZ shall be entitled to the liquidated damages in the amount of
$15,000,000. American and EZ agree in advance that actual damages would be
difficult to ascertain and that $15,000,000, to the extent applicable,
together with such reasonable fees and expenses of the terminating party or
EZ, as the case may be, and rights of American set forth in Section 6.9(c) are
a fair and equitable amount to reimburse EZ or American, as the case may be,
for damages sustained due to American's or EZ's failure to consummate the
Merger for the reasons specified in this Section 8.2(b). In the event this
Agreement is terminated by EZ pursuant to Section 8.1(g), then American shall
be entitled to its rights set forth in Section 6.9(c). Notwithstanding the
foregoing, each party shall have the right to seek specific performance of
this Agreement pursuant to the provisions of Section 9.5, and, if such breach
relates to the provisions of Section 6.9, to the extent applicable, American
shall have the rights set forth in that Section.
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(c) In the event this Agreement is terminated (i) by the parties pursuant to
the provisions of Section 8.1(a) or (ii) by EZ or American pursuant to the
provision of Section 8.1 (b) or Section 8.1(c) (other than a termination under
Section 8.1(c) resulting from a failure of EZ to obtain the EZ Stockholder
Approval, which failure was caused by a withdrawal by CS First Boston of its
opinion letter to EZ referenced in Sections 6.5(a) and 8.1(g)), except as
provided in Sections 8.2(a) and 8.2(b), neither of the parties shall have any
further rights or remedies.
ARTICLE 9
GENERAL PROVISIONS
9.1 Amendment. This Agreement may be amended from time to time by the
parties hereto at any time prior to the Closing Date but only by an instrument
in writing signed by the parties hereto and, after stockholder approval,
subject to Applicable Law
9.2 Waiver. At any time prior to the Closing Date, except to the extent not
permitted by Applicable Law, American or EZ may extend the time for the
performance of any of the obligations or other acts of the other, subject,
however, to the provisions of Section 8.1, waive any inaccuracies in the
representations and warranties of the other contained herein or in any
document delivered pursuant hereto, and waive compliance by the other with any
of the agreements, covenants or conditions contained herein. Any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
9.3 Fees, Expenses and Other Payments. All costs and expenses incurred in
connection with any filing fees (including without limitation Hart-Scott-
Rodino Act filings and FCC filing fees), transfer Taxes, sales Taxes, document
stamps or other charges levied by any Authority in connection with this
Agreement and the Merger shall be borne equally by American and EZ. All other
costs and expenses incurred in connection with this Agreement, the Merger, and
in compliance with Applicable Law and Contractual Obligations as a consequence
hereof and thereof, including without limitation, fees and disbursements of
counsel, financial advisors and accountants incurred by the parties hereto,
shall be borne solely and entirely by the party which has incurred such costs
and expenses (with respect to such party, its "Expenses").
9.4 Notices. All notices and other communications which by any provision of
this Agreement are required or permitted to be given shall be given in writing
and shall be (a) mailed by first-class or express mail, postage prepaid, or by
recognized courier service, (b) sent by telex, telegram, telecopy or other
form of rapid transmission, confirmed by mailing (by first class or express
mail, postage prepaid, or by recognized courier service) written confirmation
at substantially the same time as such rapid transmission, or (c) personally
delivered to the receiving party (which if, other than an individual, shall be
an officer or other responsible party of the receiving party). All such
notices and communications shall be mailed, sent or delivered as follows:
(a)If to American:
116 Huntington Avenue
Boston, Massachusetts 02116
Attention: Steven B. Dodge, President and Chief Executive Officer
Telecopier No.: (617) 375-7575
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Norman A. Bikales, Esq.
Telecopier No.: (617) 338-2880
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<PAGE>
(b)If to EZ:
10800 Main Street
Fairfax, Virginia 22030
Attention: Alan Box, Chief Executive Officer
Telecopier No.: (703) 934-1200
with a copy to:
Hunton & Williams
1751 Pinnacle Drive
Suite 1700
McLean, Virginia 22102
Attention: Joseph W. Conroy, Esq.
Telecopier No.: (703) 714-7410
or to such other person(s), telex or facsimile number(s) or address(es) as the
party to receive any such communication or notice may have designated by
written notice to the other party.
9.5 Specific Performance; Other Rights and Remedies. Each party recognizes
and agrees that in the event the other party should refuse to perform any of
its obligations under this Agreement or any Collateral Document, including
without limitation, Section 6.9, the remedy at law would be inadequate and
agrees that for breach of such provisions, each party shall, in addition to
such other remedies as may be available to it at law or in equity or as
provided in Article 8, be entitled to injunctive relief and to enforce its
rights by an action for specific performance to the extent permitted by
Applicable Law. Each party hereby waives any requirement for security or the
posting of any bond or other surety in connection with any temporary or
permanent award of injunctive, mandatory or other equitable relief. Nothing
herein contained shall be construed as prohibiting each party from pursuing
any other remedies available to it under Applicable Law or pursuant to the
provisions of, and subject to the limitations contained in, this Agreement for
such breach or threatened breach.
9.6 Non-Survival of Representations and Warranties. None of the
representations and warranties in this Agreement shall survive the Merger, and
after effectiveness of the Merger neither American, EZ or their respective
officers or directors shall have any further obligation with respect thereto.
9.7 Severability. If any term or provision of this Agreement shall be held
or deemed to be, or shall in fact be, invalid, inoperative, illegal or
unenforceable as applied to any particular case in any jurisdiction or
jurisdictions, or in all jurisdictions or in all cases, because of the
conflicting of any provision with any constitution or statute or rule of
public policy or for any other reason, such circumstance shall not have the
effect of rendering the provision or provisions in question invalid,
inoperative, illegal or unenforceable in any other jurisdiction or in any
other case or circumstance or of rendering any other provision or provisions
herein contained invalid, inoperative, illegal or unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid,
inoperative, illegal or unenforceable provision had never been contained
herein and such provision reformed so that it would be valid, operative and
enforceable to the maximum extent permitted in such jurisdiction or in such
case. Notwithstanding the foregoing, in the event of any such determination
the effect of which is to Affect Materially and Adversely any party, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible to the fullest
extent permitted by Applicable Law in an acceptable manner to the end that the
Merger is fulfilled and consummated to the maximum extent possible.
9.8 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument, binding upon all of the parties. In
pleading or proving any provision of this Agreement, it shall not be necessary
to produce more than one of such counterparts.
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<PAGE>
9.9 Section Headings. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
9.10 Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by, and construed in
accordance with, the Applicable Laws of the United States of America and the
laws of the State of New York applicable to contracts made and performed in
such State and, in any event, without giving effect to any choice or conflict
of laws provision or rule that would cause the application of domestic
substantive laws of any other jurisdiction, except to the extent the corporate
laws of the State of Delaware or the Commonwealth of Virginia are applicable.
Anything in this Agreement to the contrary notwithstanding, in the event of
any dispute between the parties which results in a Legal Action, the
prevailing party shall be entitled to receive from the non-prevailing party
reimbursement for reasonable legal fees and expenses incurred by such
prevailing party in such Legal Action.
9.11 Further Acts. Each party agrees that at any time, and from time to
time, before and after the consummation of the transactions contemplated by
this Agreement, it will do all such things and execute and deliver all such
Collateral Documents and other assurances, as the other party or its counsel
reasonably deems necessary or desirable in order to carry out the terms and
conditions of this Agreement and the transactions contemplated hereby or to
facilitate the enjoyment of any of the rights created hereby or to be created
hereunder.
9.12 Entire Agreement. This Agreement (together with the Disclosure
Schedules and the other Collateral Documents delivered in connection herewith)
constitutes the entire agreement of the parties and supersedes all prior
agreements and undertakings, both written and oral, between the parties, with
respect to the subject matter hereof.
9.13 Assignment. This Agreement shall not be assignable by any party and any
such assignment shall be null and void, except that it shall inure to the
benefit of and be binding upon any successor to each party by operation of
Law, including by way of merger, consolidation or sale of all or substantially
all of its assets, and each party may assign its rights and remedies hereunder
to any bank or other financial institution which has loaned funds or otherwise
extended credit to it.
9.14 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any Person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement, except
as otherwise provided in Sections 6.15 and 9.13.
9.15 Mutual Drafting. This Agreement is the result of the joint efforts of
American and EZ, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of the parties and there shall be no
construction against any party based on any presumption of that party's
involvement in the drafting thereof.
9.16 American Agent for American Subsidiary. Anything in this Agreement to
the contrary notwithstanding, American Subsidiary hereby grants American an
irrevocably power of attorney and hereby irrevocably appoints American its
agent for all purposes of this Agreement, including without limitation for the
purpose of executing and delivering extensions of the time for the performance
of any of the obligations or other acts of EZ, waivers, terminations or
amendments, and any action taken by American pursuant to such power of
attorney and agency, and any such extension, waiver, termination or amendment
executed and delivered by American, shall be binding upon American Subsidiary
whether or not it has specifically approved such action or executed such
extension, waiver, termination or amendment.
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IN WITNESS WHEREOF, American, American Subsidiary and EZ have caused this
Agreement and Plan of Merger to be executed, pursuant to the authority and
approval of each of their respective Boards of Directors, as of the date first
written above by their respective officers thereunto duly authorized.
American Radio Systems Corporation
/s/ Steven B. Dodge
By: _________________________________
Name: Steven B. Dodge
Title: Chairman of the Board,
President and Chief Executive
Officer
American Merger Corporation
/s/ Steven B. Dodge
By: _________________________________
Name: Steven B. Dodge
Title: Chairman of the Board,
President and Chief Executive
Officer
EZ Communications, Inc.
/s/ Arthur Kellar
By: _________________________________
Name: Arthur Kellar
Title: Chairman of the Board
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APPENDIX A
DEFINITIONS
As used in this Agreement, unless the context otherwise requires, the
following terms (or any variant in the form thereof) have the following
respective meanings. Terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa, and the reference to any
gender shall be deemed to include all genders. Unless otherwise defined or the
context otherwise clearly requires, terms for which meanings are provided
herein shall have such meanings when used in either Disclosure Schedule, and
each Collateral Document executed or required to be executed pursuant hereto
or thereto or otherwise delivered, from time to time, pursuant hereto or
thereto. References to "hereof," "herein" or similar terms are intended to
refer to the Agreement as a whole and not a particular section, and references
to "this Section" of "this Article" are intended to refer to the entire
section or article and not a particular subsection thereof.
Adverse, Adversely, when used alone or in conjunction with other terms
(including without limitation "Affect," "Change" and "Effect") shall mean any
Event that is reasonably likely, in the reasonable business judgment of
American or EZ, as the case may be, to be expected to (a) adversely affect the
validity or enforceability of this Agreement or the likelihood of consummation
of the Merger, or (b) adversely affect the business, operations, management,
properties or prospects, or the condition, financial or other, or results of
operation of the EZ Stations or the American Stations (or, in the event that
the acquisition of any radio station is consummated prior to the Effective
Time in accordance with the terms of this Agreement, the Station so acquired
pursuant to such transaction), as the case may be, or (c) impair EZ's or
American's, as the case may be, ability to fulfill its obligations under the
terms of this Agreement, or (d) adversely affect the aggregate rights and
remedies of American or EZ, as the case may be, under this Agreement.
Notwithstanding the foregoing, and anything in this Agreement to the contrary
notwithstanding, any Event affecting the radio broadcasting industry generally
shall not be deemed to constitute an Adverse Change, have an Adverse Effect or
to Adversely Affect the Stations, American or EZ, as applicable.
Affiliate, Affiliated shall mean, with respect to any Person, (a) any other
Person at the time directly or indirectly controlling, controlled by or under
direct or indirect common control with such Person, (b) any other Person of
which such Person at the time owns, or has the right to acquire, directly or
indirectly, twenty percent (20%) or more of any class of the capital stock or
beneficial interest, (c) any other Person which at the time owns, or has the
right to acquire, directly or indirectly, twenty percent (20%) or more of any
class of the capital stock or beneficial interest of such Person, (d) any
executive officer or director of such Person, (e) with respect to any
partnership, joint venture or similar Entity, any general partner thereof, and
(f) when used with respect to an individual, shall include any member of such
individual's immediate family or a family trust.
Affiliate Agreement shall have the meaning given to it in Section 6.7.
Agreement shall have the meaning given to it in the first "Whereas"
paragraph and shall include any amendments executed and delivered by the
parties pursuant to the provisions of Section 9.1.
American shall have the meaning given to it in the Preamble.
American Brokered Stations shall mean the radio broadcast stations which
American has the right to acquire but which as of the date of the Original
Agreement it is operating pursuant to time brokerage, local marketing or other
similar Agreements.
American Class A Common Stock shall have the meaning given to it in Section
3.1(c).
American Common Stock shall have the meaning given to it in Section 3.1(b).
American Disclosure Schedule shall mean the American Disclosure Schedule, if
any, delivered by American to EZ.
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American Financial Statements shall have the meaning given to it in Section
5.2.
American SEC Documents shall have the meaning given to it in Section 5.2.
American Stations means the radio broadcast stations owned by American, or
which it has the right to acquire (and acquires prior to the Closing Date but
only from and after such acquisition) as of the date of the Original
Agreement; provided, however, that American Stations shall not include any
American Station disposed of by American subsequent to the date of the
Original Agreement not in violation of the provisions of this Agreement;
further, provided, that the term American Stations shall include American
Brokered Stations if the context so requires.
American Stockholder Approval shall have the meaning given to it in Section
6.5(b).
American Subsidiary shall have the meaning given to it in the Preamble.
American 10-K shall have the meaning given to it in Section 5.2.
American Voting Agreement shall have the meaning given to it in Section
6.17.
American's knowledge (including the term "to the knowledge, information and
belief of American") means the knowledge of any American director or executive
officer, and that such director or executive officer, after reasonable inquiry
of appropriate American executives and reasonable review of appropriate
American records, to the extent customary in connection with transactions such
as the Merger, shall have reason to believe and shall believe that the subject
representation or warranty is true and accurate as stated.
Antitrust Division shall have the meaning given to it in Section 6.2(c).
Applicable Law shall mean, with respect to any Person, any Law of any
Authority, whether domestic or foreign, including without limitation all
federal and state securities and Environmental Laws, to which such Person is
subject or by which it or any of its business or operations is subject or any
of its property or assets is bound.
Authority shall mean any governmental or quasi-governmental authority,
whether administrative, executive, judicial, legislative or other, or any
combination thereof, including without limitation any federal, state,
territorial, county, municipal or other government or governmental or quasi-
governmental agency, arbitrator, authority, board, body, branch, bureau,
central bank or comparable agency or Entity, commission, corporation, court,
department, instrumentality, master, mediator, panel, referee, system or other
political unit or subdivision or other Entity of any of the foregoing, whether
domestic or foreign.
Benefit Arrangement shall mean, with respect to any Person, any material
benefit arrangement that is not a Plan, including (a) any employment or
consulting agreement, (b) any arrangement providing for insurance coverage or
workers' compensation benefits, (c) any incentive bonus or deferred bonus
arrangement, (d) any arrangement providing termination allowance, severance or
similar benefits, (e) any equity compensation plan, and (f) any deferred
compensation plan, but only to the extent that it covers or relates to any
officer, employee or other Person involved in the ownership, operation or
conduct of the business of any of the Stations of such Person.
Broadcast Cash Flow shall mean, with respect to any Person, the excess, if
any, of the net revenues (exclusive of trade or barter items) over operating
expenses (exclusive of trade or barter items and corporate overhead) of such
Person and its Subsidiaries taken as a whole.
Cash Consideration shall have the meaning given to it in Section 3.1(c).
Certificates shall have the meaning given to it in Section 3.2(b).
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<PAGE>
Charter Amendment shall have the meaning given to it in Section 2.5.
Claims shall mean any and all debts, liabilities, obligations, losses,
damages, deficiencies, assessments and penalties, together with all Legal
Actions, pending or threatened, claims and judgments of whatever kind and
nature relating thereto, and all fees, costs, expenses and disbursements
(including without limitation reasonable attorneys' and other legal fees,
costs and expenses) relating to any of the foregoing.
Closing shall have the meaning given to it in Section 2.2.
Closing Date shall have the meaning given to it in Section 2.2.
COBRA shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended, as set forth in Section 4980B of the Code and Part 6 of Subtitle B
of Title I of ERISA.
Code shall mean the Internal Revenue Code of 1986, and the rules and
regulations thereunder, all as from time to time in effect, or any successor
law, rules or regulations, and any reference to any statutory or regulatory
provision shall be deemed to be a reference to any successor statutory or
regulatory provision.
Collateral Document shall mean any agreement, certificate, contract,
instrument, notice, opinion or other document delivered pursuant to the
provisions of this Agreement, including without limitation, the registration
rights agreement required to be delivered by American pursuant to the
provisions of Section 7.3(h), the Stockholder Agreement, the EZ Voting
Agreement, the American Voting Agreement and the Affiliate Agreement.
Commission or SEC shall mean the Securities and Exchange Commission and
shall include any successor Authority.
Common Stock Consideration shall have the meaning given to it in Section
3.1(c).
Contract, Contractual Obligation shall mean, with respect to any Person, any
agreement, arrangement, commitment, contract, covenant, indemnity, undertaking
or other obligation or liability which involves the ownership, operation or
conduct of the business of any of the Stations of such Person.
Control (including the terms "controlled," "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a Person, or the disposition of such Person's assets or
properties, whether through the ownership of stock, equity or other ownership,
by contract, arrangement or understanding, or as trustee or executor, by
contract or credit arrangement or otherwise.
Convertible Securities shall mean any evidences of indebtedness, shares of
capital stock (other than common stock) or other securities directly or
indirectly convertible into or exchangeable for shares of common stock,
whether or not the right to convert or exchange thereunder is immediately
exercisable or is conditioned upon the passage of time, the occurrence or non-
occurrence or existence or non-existence of some other Event, or both.
DCL shall have the meaning given to it in Section 2.1.
Direct Merger shall have the meaning given to it in the first "Whereas"
paragraph.
Disclosure Schedule shall mean the American Disclosure Schedule, if any, or
the EZ Disclosure Schedule, as the case may be.
Dissenting Shares shall have the meaning given to it in Section 3.4(a).
Effective Time shall have the meaning given to it in Section 2.3.
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<PAGE>
Employment Arrangement shall mean, with respect to any Person, any
employment, consulting, retainer, severance or similar contract, agreement,
plan, arrangement or policy (exclusive of any which is terminable within
thirty (30) days without liability, penalty or payment of any kind by such
Person or any Affiliate), providing for severance, termination payments,
insurance coverage (including any self-insured arrangements), workers
compensation, disability benefits, life, health, medical, dental or
hospitalization benefits, supplemental unemployment benefits, vacation or sick
leave benefits, pension or retirement benefits or for deferred compensation,
profit-sharing, bonuses, stock options, stock purchase or appreciation rights
or other forms of incentive compensation or post-retirement insurance,
compensation or post-retirement insurance, compensation or benefits, or any
collective bargaining or other labor agreement, whether or not any of the
foregoing is subject to the provisions of ERISA, but only to the extent that
it covers or relates to any officer, employee or other Person involved in the
ownership, operation or conduct of the business of any of the Stations of such
Person; provided, however, that none of the foregoing shall be deemed to
include any Plan, Benefit Arrangement, or Option Security.
Encumber shall mean to suffer, accept, agree to or permit the imposition of
a Lien.
Entity shall mean any corporation, firm, unincorporated organization,
association, partnership, limited liability company, trust (inter vivos or
testamentary), estate of a deceased, insane or incompetent individual,
business trust, joint stock company, joint venture or other organization,
entity or business, whether acting in an individual, fiduciary or other
capacity, or any Authority.
Environmental Law shall mean any Law relating to or otherwise imposing
liability or standards of conduct concerning pollution or protection of the
environment, including without limitation, Laws relating to emissions,
discharges, releases or threatened releases of Hazardous Materials or other
chemicals or industrial pollutants, substances, materials or wastes into the
environment (including, without limitation, ambient air, surface water, ground
water, mining or reclamation of mined land, land surface or subsurface strata)
or otherwise relating to the manufacture, processing, generation,
distribution, use, treatment, storage, disposal, cleanup, transport or
handling of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances, materials or wastes. Environmental Laws shall include
without limitation the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 6901 et seq.), the Hazardous Material
Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation
and Recovery Act (42 U.S.C. Section 6901 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section
2601 et seq.), the Occupational Safety and Health Act (29 U.S.C. Section 651
et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C.
Section 136 et seq.), and the Surface Mining Control and Reclamation Act of
1977 (30 U.S.C. Section 1201 et seq.), and any analogous federal, state, local
or foreign Laws, and the rules and regulations promulgated thereunder, all as
from time to time in effect, and any reference to any such statutory or
regulatory provision shall be deemed to be a reference to any successor
statutory or regulatory provision.
Environmental Permit shall mean, with respect to any Person, any
Governmental Authorization required by or pursuant to any Environmental Law.
ERISA shall mean the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, all as from time to time in effect, or
any successor law, rules or regulations, and any reference to any such
statutory or regulatory provision shall be deemed to be a reference to any
successor statutory or regulatory provision.
ERISA Affiliate shall mean any Person that is treated as a single employer
with EZ or American, as the case may be, under Sections 414(b), (c), (m) or
(o) of the Code or Section 4001(b)(1) of ERISA.
Event shall mean the existence or occurrence of any act, action, activity,
circumstance, condition, event, fact, failure to act, omission, incident or
practice, or any set or combination of any of the foregoing.
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Exchange Act shall mean the Securities Exchange Act of 1934, and the rules
and regulations thereunder, all as from time to time in effect, or any
successor law, rules or regulations, and any reference to any such statutory
or regulatory provision shall be deemed to be a reference to any successor
statutory or regulatory provision.
Exchange Agent shall have the meaning given to it in Section 3.2(a).
Exchange Agent Agreement shall have the meaning given to it in Section
3.2(a).
Exchange Ratio shall have the meaning given to it in Section 3.1(c).
Exchanged Options shall have the meaning given to it in Section 3.1(e).
EZ shall have the meaning given to it in the Preamble.
EZ Brokered Stations shall mean the radio broadcast stations which EZ has
the right to acquire, but which as of the date of the Original Agreement it is
operating pursuant to time brokerage, local marketing or other similar
Agreements.
EZ Common Stock shall have the meaning given to it in Section 3.1(c).
EZ Disclosure Schedule shall mean the EZ Disclosure Schedule dated as of the
date of the Original Agreement delivered by EZ to American simultaneously with
the execution and delivery of the Original Agreement, it being understood that
disclosure of information in any part thereof shall be deemed to apply to each
reference to the EZ Disclosure Schedule, whether or not the particular or
applicable section herein is actually referenced.
EZ Financial Statements shall have the meaning given to it in Section 4.2.
EZ Options shall have the meaning given to it in Section 3.1(e).
EZ SEC Documents shall have the meaning given to it in Section 4.2.
EZ Senior Note Consent shall have the meaning given to it in Section 2.1.
EZ Senior Note Indenture shall have the meaning given to it in Section 2.1.
EZ Senior Notes shall have the meaning given to it in Section 2.1.
EZ Stations means the radio broadcast stations owned by EZ, or which it has
the right to acquire (and acquires prior to the Closing Date but only from and
after such acquisition) as of the date of the Original Agreement; provided,
however, that EZ Stations shall not include any EZ Station disposed of by EZ
subsequent to the date of the Original Agreement not in violation of the
provisions of this Agreement; further, provided, that EZ Stations shall
include EZ Brokered Stations if the context so requires.
EZ Stockholder Approval shall have the meaning given to it in Section
6.5(a).
EZ 10-K shall have the meaning given to it in Section 4.2.
EZ Voting Agreement shall have the meaning given to it in Section 6.17.
EZ's knowledge (including the term "to the knowledge, information and belief
of EZ") means the knowledge of any EZ officer or director, and that such
Person, after reasonable inquiry of appropriate executives of EZ and
reasonable review of appropriate EZ records, to the extent customary in
transactions such as the Merger, shall have reason to believe and shall
believe that the subject representation or warranty is true and accurate as
stated.
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<PAGE>
FCA shall mean the Communication Act of 1934, and the rules and regulations
thereunder, all as from time to time in effect, or any successor law, rules or
regulations, and any reference to any such statutory or regulatory provision
shall be deemed to be a reference to any successor statutory or regulatory
provision.
FCC shall mean the Federal Communications Commission and shall include any
successor Authority.
FCC Consents shall mean the actions of the FCC granting its consents to the
transfer of the FCC Licenses relating to the EZ Stations to American and to
any possible change in control of American or EZ.
FCC Licenses shall mean all Governmental Authorizations issued by the FCC to
American or its Subsidiaries in connection with the ownership, operation and
conduct of the business of the EZ Stations.
Fiduciary Determinations shall have the meaning given to it in Section
6.9(a).
Final Order shall mean, with respect to any Authority, including without
limitation the FCC, a consent or approval with respect to which no appeal, no
stay, no petition or application for rehearing, reconsideration, review or
stay, whether on motion of the applicable Authority or other Person or
otherwise, and no other Legal Action contesting such consent or approval, is
in effect or pending and as to which the time or deadline for filing any such
appeal, petition or application or other Legal Action has expired or, if
filed, has been denied, dismissed or withdrawn, and the time or deadline for
instituting any further Legal Action has expired.
FTC shall have the meaning given to it in Section 6.2(c).
GAAP shall mean generally accepted accounting principles as in effect from
time to time in the United States of America.
Governmental Authorizations shall mean all approvals, concessions, consents,
franchises, licenses, permits, plans, registrations and other authorizations
of all Authorities, including the FCC Licenses, issued by the FCC, the Federal
Aviation Administration and any other Authority in connection with the conduct
of business or operations of any of the Stations.
Governmental Filings shall mean all filings, including franchise and similar
Tax filings, and the payment of all fees, assessments, interest and penalties
associated with such filings, with all Authorities.
Hart-Scott-Rodino Act shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, and the rules and regulations thereunder, all as
from time to time in effect, or any successor law, rules or regulations, and
any reference to any such statutory or regulatory provision shall be deemed to
be a reference to any successor statutory or regulatory provision.
Hazardous Materials shall mean and include any substance, material, waste,
constituent, compound, chemical, natural or man-made element or force (in
whatever state of matter): (a) the presence of which requires investigation or
remediation under any Environmental Law; or (b) that is defined as a
"hazardous waste" or "hazardous substance" under any Environmental Law; or (c)
that is toxic, explosive, corrosive, etiologic, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is regulated
by any applicable Authority or subject to any Environmental Law; or (d) the
presence of which on the real property owned or leased by a Person causes or
threatens to cause a nuisance upon any such real property or to adjacent
properties or poses or threatens to pose a hazard to the health or safety of
persons on or about any such real property; or (e) the presence of which on
adjacent properties could constitute a trespass by such Person; or (f) that
contains gasoline, diesel fuel or other petroleum hydrocarbons, or any by-
products or fractions thereof, natural gas, polychlorinated biphenyls ("PCBs")
and PCB-containing equipment, radon or other radioactive elements, ionizing
radiation, electromagnetic field radiation and other non-ionizing radiation,
sonic forces and other natural forces, lead, asbestos or asbestos-containing
materials ("ACM"), or urea formaldehyde foam insulation.
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<PAGE>
Joint Proxy Statement/Prospectus shall have the meaning given to it in
Section 6.6(a).
Law shall mean any (a) administrative, judicial, legislative or other
action, code, consent decree, constitution, decree, directive, enactment,
finding, guideline, law, injunction, interpretation, judgment, order,
ordinance, policy statement, proclamation, promulgation, regulation,
requirement, rule, rule of law, rule of public policy, settlement agreement,
statute, or writ of any Authority, domestic or foreign; (b) the common law, or
other legal or quasi-legal precedent; or (c) arbitrator's, mediator's or
referee's award, decision, finding or recommendation; including, in each such
case or instance, any interpretation, directive, guideline or request, whether
or not having the force of law, including, in all cases, without limitation
any particular section, part or provision thereof.
Leases shall mean any lease of property, whether real, personal or mixed and
all amendments thereto.
Legal Action shall mean, with respect to any Person, any and all litigation
or legal or other actions, arbitrations, counterclaims, investigations,
proceedings, requests for material information by or pursuant to the order of
any Authority or suits, at law or in arbitration, equity or admiralty, whether
or not purported to be brought on behalf of such Person, affecting such Person
or any of such Person's business, property or assets.
Lien shall mean any of the following: mortgage; lien (statutory or other),
or other security agreement, arrangement or interest; hypothecation, pledge or
other deposit arrangement; assignment; charge; levy; executory seizure;
attachment; garnishment; encumbrance (including any easement, exception,
reservation or limitation, right of way, and the like); conditional sale,
title retention or other similar agreement, arrangement, device or
restriction; preemptive or similar rights; any financing lease involving
substantially the same economic effect as any of the foregoing; the filing of
any financing statement under the Uniform Commercial Code or comparable law of
any jurisdiction; restriction on sale, transfer, assignment, disposition or
other alienation; or any option, equity, claim or right of or obligation to,
any other Person, of whatever kind and character.
Material, Materially or materiality for the purposes of this Agreement,
shall, unless specifically stated to the contrary, be determined without
regard to the fact that various provisions of this Agreement set forth
specific dollar amounts.
Material Agreement shall mean, with respect to any Person, any Contractual
Obligation which (a) was not entered into in the ordinary course of business,
(b) was entered into in the ordinary course of business which (i) involved the
purchase, sale or lease of goods or materials, or purchase of services,
aggregating more than $500,000 during any of the last three fiscal years of
such Person, (ii) extends for more than three (3) months, or (iii) is not
terminable on thirty (30) days or less notice without penalty or other
payment, (c) involves indebtedness for money borrowed, (d) is or otherwise
constitutes a written agency, broker, dealer, license, distributorship, sales
representative or similar written agreement, or (e) accounted for more than
three percent (3%) of the revenues of the American Stations or the EZ
Stations, as the case may be, in any of the last three fiscal years of such
Person or is likely to account for more than three percent (3%) of revenues of
the American Stations or the EZ Stations, as the case may be, during the
current fiscal year of such Person.
Merger shall have the meaning given to it in Section 2.1.
Merger Consideration shall have the meaning given to it in Section 3.1(c).
Multiemployer Plan shall mean a Plan which is a "multiemployer plan" within
the meaning of Section 4001(a)(3) of ERISA.
Nasdaq shall have the meaning given to it in Section 3.2(d).
Option Securities shall mean all rights, options, calls, contracts,
agreements, warrants, understandings, restrictions, arrangements or
commitments, including without limitation, any rights plan or other anti-
takeover agreement or arrangement, evidencing the right to subscribe for,
purchase or otherwise acquire shares of capital
A-I-47
<PAGE>
stock or Convertible Securities, whether or not the right to subscribe for,
purchase or otherwise acquire is immediately exercisable or is conditioned
upon the passage of time, the occurrence or non-occurrence or the existence or
non-existence of some other Event.
Organic Document shall mean, with respect to a Person which is a
corporation, its charter, its by-laws and all stockholder agreements, voting
trusts and similar arrangements applicable to any of its capital stock and,
with respect to a Person which is a partnership, its agreement and certificate
of partnership, any agreements among partners, and any management and similar
agreements between the partnership and any general partners (or any Affiliate
thereof).
PBGC shall mean the Pension Benefit Guaranty Corporation and any Entity
succeeding to any or all of its functions under ERISA.
Permitted Investments shall have the meaning given to it in Section 3.2(a).
Permitted Liens shall mean (a) Liens for current Taxes not yet due and
payable, and (b) such imperfections of title, easements, encumbrances and
mortgages or other Liens, if any, as are not, individually or in the
aggregate, substantial in character, amount or extent and do not Materially
detract from the value, or Materially interfere with the present use, of the
property subject thereto or affected thereby, or otherwise Materially impair
the business or operations of the EZ Stations or the American Stations, as the
case may be.
Person shall mean any natural individual or any Entity.
Plan shall mean, with respect to any Person and at a particular time, any
employee benefit plan which is covered by ERISA and in respect of which such
Person or an ERISA Affiliate is (or, if such plan were terminated at such
time, would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA, but only to the extent that it covers or
relates to any officer, employee or other Person involved in the ownership and
operation of the assets or the conduct of the business of any of the Stations
of such Person.
Private Authorizations shall mean all approvals, concessions, consents,
franchises, licenses, permits, and other authorizations of all Persons (other
than Authorities) including without limitation those with respect to
copyrights, computer software programs, patents, service marks, trademarks,
trade names, technology and know-how.
Purchase Proposal shall have the meaning given to it in Section 6.9(e).
Registration Statement shall have the meaning given to it in Section 6.6(a).
Regulations shall mean the federal income tax regulations promulgated under
the Code, as such Regulations may be amended from time to time. All references
herein to specific sections of the Regulations shall be deemed also to refer
to any corresponding provisions of succeeding Regulations, and all references
to temporary Regulations shall be deemed also to refer to any corresponding
provisions of final Regulations.
Representatives shall have the meaning given to it in Section 6.1(a).
Securities Act shall mean the Securities Act of 1933, and the rules and
regulations of the Commission thereunder, all as from time to time in effect,
or any successor law, rules or regulations, and any reference to any such
statutory or regulatory provision shall be deemed to be a reference to any
successor statutory or regulatory provision.
Station Fair Market Value shall have the meaning given it in Section
6.9(c)(ii).
Stations shall mean, collectively, the EZ Stations and the American
Stations.
Stockholder Agreement shall have the meaning given to it in Section 7.2(i).
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<PAGE>
Subsidiary shall mean, with respect to a Person, any Entity a majority of
the capital stock ordinarily entitled to vote for the election of directors of
which, or if no such voting stock is outstanding, a majority of the equity
interests of which, is owned directly or indirectly, legally or beneficially,
by such Person or any other Person controlled by such Person.
Subsidiary Merger shall have the meaning given to it in the first "Whereas"
paragraph.
Surviving Corporation shall have the meaning given to it in Section 2.1.
Tax (and "Taxable," which shall mean subject to Tax), shall mean, with
respect to any Person, (a) all taxes (domestic or foreign), including without
limitation any income (net, gross or other, including recapture of any tax
items such as investment tax credits), alternative or add-on minimum tax,
gross income, gross receipts, gains, sales, use, leasing, lease, user, ad
valorem, transfer, recording, franchise, profits, property (real or personal,
tangible or intangible), fuel, license, withholding on amounts paid to or by
such Person, payroll, employment, unemployment, social security, excise,
severance, stamp, occupation, premium, environmental or windfall profit tax,
custom, duty or other tax, or other like assessment or charge of any kind
whatsoever, together with any interest, levies, assessments, charges,
penalties, additions to tax or additional amounts imposed by any Taxing
Authority, (b) any joint or several liability of such Person with any other
Person for the payment of any amounts of the type described in (a) of this
definition, and (c) any liability of such Person for the payment of any
amounts of the type described in (a) as a result of any express or implied
obligation to indemnify any other Person.
Tax Claim shall mean any Claim which relates to Taxes.
Tax Return or Returns shall mean all returns, consolidated or otherwise
(including without limitation information returns), required to be filed with
any Authority with respect to Taxes.
Taxing Authority shall mean any Authority responsible for the imposition of
any Tax.
Termination Date shall have the meaning given to it in Section 8.1.
30 Day Date shall have the meaning given to it in Section 6.9(c)(i).
VCA shall have the meaning given to it in Section 2.1.
WBZZ Renewal Proceedings shall have the meaning given to it in Section
7.2(k).
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<PAGE>
APPENDIX II
August 5, 1996
Board of Directors
American Radio Systems Corporation
116 Huntington Avenue
Boston, MA 02116
Members of the Board:
We understand that American Radio Systems Corporation ("American Radio") and
EZ Communications, Inc. ("EZ Communications") have entered into an Agreement
and Plan of Merger, dated as of August 5, 1996 (the "Merger Agreement"), which
provides, among other things, for the merger of EZ Communications with and
into American Radio (the "Merger"), with American Radio as the surviving
corporation in the Merger. Pursuant to the Merger, the separate existence of
EZ Communications will cease and each issued and outstanding share of Class A
Common Stock, par value $0.01 per share, of EZ Communications (the "EZ Class A
Common Stock") and each issued and outstanding share of Class B Common Stock,
par value $0.01 per share, of EZ Communications (the "EZ Class B Common Stock"
and, together with the EZ Class A Common Stock, the "EZ Common Stock"), other
than shares of EZ Common Stock held in treasury or as to which appraisal
rights have been perfected, will be converted into the right to receive (i)
0.9 shares of Class A Common Stock, par value $0.01 per share, of American
Radio (the "American Class A Common Stock") and (ii) $11.75 in cash
(collectively, the "Merger Consideration"). The terms and conditions of the
Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Merger Consideration to be
paid to holders of shares of EZ Common Stock pursuant to the Merger Agreement
is fair from a financial point of view to American Radio.
In connection with our opinion set forth herein, we have, among other
things:
(i) reviewed certain publicly available financial statements and other
information of American Radio and EZ Communications, respectively;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning American Radio and EZ Communications prepared
by managements of American Radio and EZ Communications, respectively;
(iii) analyzed certain financial projections concerning American Radio
and EZ Communications prepared by the managements of American Radio and EZ
Communications, respectively;
(iv) discussed the past and current operations and financial condition
and the prospects of American Radio and EZ Communications with senior
executives of American Radio and EZ Communications, respectively;
(v) discussed with American Radio senior management their views regarding
future business, financial and operating benefits arising from the Merger;
(vi) analyzed the pro forma financial impact of the Merger, including the
impact on American Radio's consolidated capitalization and financial
ratios;
(vii) reviewed the reported prices and trading activity of American Class
A Common Stock and EZ Class A Common Stock;
(viii) compared the financial performance of American Radio and EZ
Communications and the prices and trading activity of American Class A
Common Stock and EZ Class A Common Stock with that of certain other
comparable publicly-traded companies;
(ix) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
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<PAGE>
(x) reviewed the Merger Agreement and certain related documents; and
(xi) considered such other factors as we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes
of this opinion. With respect to the financial projections, including
estimates of the business, financial and operating benefits expected to result
from the Merger, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
future competitive, operating and regulatory environments and related
financial performance of American Radio and EZ Communications, respectively.
Furthermore, we have not assumed responsibility for conducting a physical
inspection of the properties or facilities of American Radio or EZ
Communications or for making or obtaining any independent valuation or
appraisal of the assets or liabilities of American Radio or EZ Communications,
nor have we been furnished with any such valuations or appraisals. We have
assumed, with your consent, that the transactions described in the Merger
Agreement will be consummated on the terms set forth therein. In addition, we
have relied as to certain matters relating to the Federal Communications
Commission upon the advice of counsel to American Radio. Our opinion is
necessarily based on economic, market and other conditions as in effect on,
and the information made available to us as of, the date hereof.
As you are aware, we have been engaged by American Radio to render an
opinion to the Board of Directors of American Radio in connection with the
transaction described in this letter and we will receive a fee for our
services. Morgan Stanley & Co. Incorporated and its affiliates in the past
have provided financing services to American Radio for which we have received
fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of American Radio and, except for inclusion of this letter in its
entirety in a proxy statement-prospectus of American Radio relating to the
issuance of American Class A Common Stock in the Merger, may not be used or
quoted for any other purpose without our prior written consent. In addition,
we express no opinion or recommendation to any shareholder as to how such
shareholder should vote at the shareholders' meetings to be held in connection
with the Merger.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Merger Consideration to be paid to the holders of shares
of EZ Common Stock pursuant to the Merger Agreement is fair from a financial
point of view to American Radio.
Very truly yours,
Morgan Stanley & Co. Incorporated
/s/ Paul J. Taubman
_____________________________________
Paul J. Taubman
Managing Director
A-II-2
<PAGE>
APPENDIX III
August 5, 1996
Board of Directors
EZ Communications, Inc.
10800 Main Street
Fairfax, Virginia 22030
Members of the Board:
You have asked us to advise you with respect to the fairness to the holders
of the common stock of EZ Communications, Inc. ("EZ") from a financial point
of view of the consideration to be received by such holders pursuant to the
terms of the Agreement and Plan of Merger, dated as of August 5, 1996 (the
"Merger Agreement"), by and between American Radio Systems Corporation
("American Radio") and EZ. The Merger Agreement provides for, among other
things, the merger of EZ with and into American Radio pursuant to which
American Radio will be the surviving corporation (the "Merger") and each
outstanding share of the Class A Common Stock, par value $.01 per share, of EZ
("EZ Class A Common Stock") and each outstanding share of the Class B Common
Stock, par value $.01 per share, of EZ ("EZ Class B Common Stock" and,
together with the EZ Class A Common Stock, the "EZ Common Stock") will be
converted into the right to receive (i) nine-tenths (0.9) of a share of Class
A Common Stock, par value $.01 per share, of American Radio ("American Radio
Class A Common Stock") and (ii) cash in the amount of $11.75, all as more
fully described in the Merger Agreement (the "Merger Consideration").
In arriving at our opinion, we have reviewed the Merger Agreement and
certain publicly available business and financial information relating to EZ
and American Radio. We also have reviewed certain other information, including
financial forecasts, provided to us by EZ and American Radio, and have met
with the respective managements of EZ and American Radio to discuss the
businesses and prospects of EZ and American Radio.
We also have considered certain financial and stock market data of EZ and
American Radio, and we have compared that data with similar data for other
publicly held companies in businesses similar to those of EZ and American
Radio and we have considered, to the extent publicly available, the financial
terms of certain other business combinations and other transactions which have
recently been effected. We also considered such other information, financial
studies, analyses and investigations and financial, economic and market
criteria which we deemed relevant. For purposes of this opinion, we have
assumed the consummation of pending acquisitions and dispositions of radio
stations (i) by EZ with respect to which agreements were executed and publicly
announced prior to August 3, 1996 and (ii) by American Radio with respect to
which agreements were executed and publicly announced prior to July 25, 1996.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied
upon its being complete and accurate in all material respects. With respect to
the financial forecasts, we have assumed that such forecasts have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the managements of EZ and American Radio as to the future
financial performance of EZ and American Radio. In addition, we have not made
an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of EZ or American Radio, nor have we been furnished
with any such evaluations or appraisals. Our opinion is necessarily based upon
information available to us and financial, stock market and other conditions
as they exist and can be evaluated on the date hereof. We are not expressing
any opinion as to what the value of the American Radio Class A Common Stock
actually will be when issued to the holders of EZ Common Stock pursuant to the
Merger or the prices at which such American Radio Class A Common Stock will
trade subsequent to the Merger. In connection with our engagement, we were
requested to approach third parties to solicit indications of interest in a
possible acquisition of EZ and held discussions with certain of these parties
prior to the date hereof.
A-III-1
<PAGE>
We have acted as financial advisor to the Board of Directors of EZ in
connection with the Merger and will receive a fee for our services, a
significant portion of which is contingent upon the consummation of the
Merger. In the past we have performed certain financial advisory services for
both EZ and American Radio and have received customary fees for such services.
In the ordinary course of our business, CS First Boston and its affiliates may
actively trade the equity and debt securities of both EZ and American Radio
for their own accounts and for the accounts of customers and, accordingly, may
at any time hold a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors of EZ in connection with its evaluation of the Merger and is not
intended to be and shall not be deemed to constitute a recommendation to any
stockholder as to how such stockholder should vote on the Merger. This letter
is not to be quoted or referred to, in whole or in part, in any registration
statement, prospectus or proxy statement, or in any other document used in
connection with the offering or sale of securities, nor shall this letter be
used for any other purposes, without CS First Boston's prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Merger Consideration to be received by the holders of EZ
Common Stock in the Merger is fair to such holders from a financial point of
view.
Very truly yours,
/s/ CS First Boston Corporation
CS FIRST BOSTON CORPORATION
A-III-2
<PAGE>
APPENDIX IV
VIRGINIA STOCK CORPORATION ACT
ARTICLE 15
DISSENTER'S RIGHTS
(S) 13.1-729. DEFINITIONS.
In this article:
"Corporation" means the issuer of the shares held by a dissenter before the
corporate action, except that (i) with respect to a merger, "corporation"
means the surviving domestic or foreign corporation or limited liability
company by merger of that issuer, and (ii) with respect to a share exchange,
"corporation" means the acquiring corporation by share exchange, rather than
the issuer, if the plan of share exchange places the responsibility for
dissenters' rights on the acquiring corporations.
"Dissenter" means a shareholder who is entitled to dissent from corporate
action under (S) 13.1-730 and who exercises that right when and in the manner
required by (S)(S) 13.1-732 through 13.1-739.
"Fair value," with respect to a dissenter's shares, means the value of the
shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
"Interest" means interest from the effective date of the corporate action
until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair
and equitable under all the circumstances.
"Record shareholder" means the person in whose name shares are registered in
the records of a corporation or the beneficial owner of shares to the extent
of the rights granted by a nominee certificate on file with a corporation.
"Beneficial shareholder" means the person who is a beneficial owner of
shares held by a nominee as the record shareholder.
"Shareholder" means the record shareholder or the beneficial shareholder.
(S) 13.1-730. RIGHT TO DISSENT.
A. A Shareholder is entitled to dissent from, and obtain payment of the fair
value of his shares in the event of, any of the following corporate actions:
I. Consummation of a plan of merger to which the corporation is a party
(i) if shareholder approval is required for the merger by (S) 13.1-718 or
the articles of incorporation and the shareholder is entitled to vote on
the merger or (ii) if the corporation is a subsidiary that is merged with
its parent under (S) 13.1-719;
2. Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the shareholder
is entitled to vote on the plan;
3. Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation if the shareholder was entitled to vote on
the sale or exchange or if the sale or exchange was in furtherance of a
dissolution on which the shareholder was entitled to vote, provided that
such dissenter's rights shall not apply in the case of (i) a sale or
exchange pursuant to court order, or (ii) a sale for cash pursuant to a
plan by which all or substantially all of the net proceeds of the sale will
be distributed to the shareholders within one year after the date of sale;
4. Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
A-IV-1
<PAGE>
B. A shareholder entitled to dissent and obtain payment for his shares under
this article may not challenge the corporate action creating his entitlement
unless the action is unlawful or fraudulent with respect to the shareholder or
the corporation;
C. Notwithstanding any other provision of this article, with respect to a
plan of merger or share exchange or a sale or exchange of property there shall
be no right of dissent in favor of holders of shares of any class or series
which, at the record date fixed to determine the shareholders entitled to
receive notice of and to vote at the meeting at which the plan of merger or
share exchange or the sale or exchange of property is to be acted on, were (i)
listed on a national securities exchange or on the National Association of
Securities Dealers Automated Quotation System (NASDAQ) or (ii) held by at
least 2,000 record shareholders, unless in either case:
1. The articles of incorporation of the corporation issuing such shares
provide otherwise;
2. In the case of a plan of merger or share exchange, the holders of the
class or series are required under the plan of merger or share exchange to
accept for such shares anything except:
a. Cash;
b. Shares or membership interests, or shares or membership interests
and cash in lieu of fractional shares (i) of the surviving or acquiring
corporation or limited liability company or (ii) of any other
corporation or limited liability company which, at the record date
fixed to determine the shareholders entitled to receive notice of and
to vote at the meeting at which the plan of merger or share exchange is
to be acted on, were either listed subject to notice of issuance on a
national securities exchange or held of record by at least 2,000 record
shareholders or members; or
c. A combination of cash and shares or membership interests as set
forth in subdivisions 2a and 2b of this subsection; or
3. The transaction to be voted on is an "affiliated transaction" and is
not approved by a majority of "disinterested directors" as such terms are
defined in (S) 13.1-725.
D. The right of a dissenting shareholder to obtain payment of the fair value
of his shares shall terminate upon the occurrence of any one of the following
events:
1. The proposed corporate action is abandoned or rescinded;
2. A court having jurisdiction permanently enjoins or sets aside the
corporate action; or
3. His demand for payment is withdrawn with the written consent of the
corporation.
(S) 13.1-731. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A. A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all
shares beneficially owned by any one person and notifies the corporation in
writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter under this subsection
are determined as if the shares as to which he dissents and his other shares
were registered in the names of different shareholders.
B. A beneficial shareholder may assert dissenters' rights as to shares held
on his behalf only if:
1. He submits to the corporation the record shareholder's written consent
to the dissent not later than the time the beneficial shareholder asserts
dissenters' rights; and
2. He does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote.
(S) 13.1-732. NOTICE OF DISSENTERS' RIGHTS.
A. If proposed corporate action creating dissenters' rights under (S) 13.1-
730 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
A-IV-2
<PAGE>
B. If corporate action creating dissenters' rights under (S) 13.1-730 is
taken without a vote of shareholders, the corporation, during the ten-day
period after the effectuation of such corporate action, shall notify in
writing all record shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in (S) 13.1-
734.
(S) 13.1-733. NOTICE OF INTENT TO DEMAND PAYMENT.
A. If proposed corporate action creating dissenters' rights under (S) 13.1-
730 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights (i) shall deliver to the corporation
before the vote is taken written notice of his intent to demand payment for
his shares if the proposed action is effectuated and (ii) shall not vote such
shares in favor of the proposed action.
B. A shareholder who does not satisfy the requirements of subsection A of
this section is not entitled to payment for his shares under this article.
(S) 13.1-734. DISSENTERS' NOTICE.
A. If proposed corporate action creating dissenters' rights under (S) 13.1-
730 is authorized at a shareholders' meeting, the corporation, during the ten-
day period after the effectuation of such corporate action, shall deliver a
dissenters' notice in writing to all shareholders who satisfied the
requirements of (S) 13.1-733.
B. The dissenters' notice shall:
1. State where the payment demand shall be sent and where and when
certificates for certificated shares shall be deposited;
2. Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
3. Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not he acquired beneficial ownership
of the shares before or after that date;
4. Set a date by which the corporation must receive the payment demand,
which date may not be fewer than thirty nor more than sixty days after the
date of delivery of the dissenters' notice; and
5. Be accompanied by a copy of this article.
(S) 13.1-735. DUTY TO DEMAND PAYMENT.
A. A shareholder sent a dissenters' notice described in (S) 13.1-734 shall
demand payment, certify that he acquired beneficial ownership of the shares
before or after the date required to be set forth in the dissenters' notice
pursuant to subdivision 3 of subsection B of (S) 13.1-734, and, in the case of
certificated shares, deposit his certificates in accordance with the terms of
the notice.
B. The shareholder who deposits his shares pursuant to subsection A of this
section retains all other rights of a shareholder except to the extent that
these rights are canceled or modified by the taking of the proposed corporate
action.
C. A shareholder who does not demand payment and deposits his share
certificates where required, each by the date set in the dissenters' notice,
is not entitled to payment for his shares under this article.
(S) 13.1-736. SHARE RESTRICTIONS.
A. The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received.
A-IV-3
<PAGE>
B. The person for whom dissenters, rights are asserted as to uncertificated
shares retains all other rights of a shareholder except to the extent that
these rights are canceled or modified by the taking of the proposed corporated
action.
(S) 13.1-737. PAYMENT.
A. Except as provided in (S) 13.1-738, within thirty days after receipt of a
payment demand made pursuant to (S) 13.1-735, the corporation shall pay the
dissenter the amount the corporation estimates to be the fair value of his
shares, plus accrued interest. The obligation of the corporation under this
paragraph may be enforced (i) by the circuit court in the city or county where
the corporation's principal office is located, or, if none in this
Commonwealth, where its registered office is located or (ii) at the election
of any dissenter residing or having its principal office in the Commonwealth,
by the circuit court in the city or county where the dissenter resides or has
its principal office. The court shall dispose of the complaint on an expedited
basis.
B. The payment shall be accompanied by:
1. The corporation's balance sheet as of the end of a fiscal year ending
not more than sixteen months before the effective date of the corporate
action creating dissenters' rights, an income statement for that year, a
statement of changes in shareholders' equity for that year, and the latest
available interim financial statements, if any;
2. An explanation of how the corporation estimated the fair value of the
shares and of how the interest was calculated;
3. A statement of the dissenters' right to demand payment under (S) 13.1-
739; and
4. A copy of this article.
(S) 13.1-738. AFTER-ACQUIRED SHARES.
A. A corporation may elect to withhold payment required by (S) 13.1-737 from
a dissenter unless he was the beneficial owner of the shares on the date of
the first publication by news media or the first announcement to shareholders
generally, whichever is earlier, of the terms of the proposed corporate
action, as set forth in the dissenters' notice.
B. to the extent the corporation elects to withhold payment under subsection
A of this section, after taking the proposed corporate action, it shall
estimate the fair value of the shares, plus accrued interest, and shall offer
to pay this amount to each dissenter who agrees to accept it in full
satisfaction of his demand. The corporation shall send with its offer an
explanation of how it estimated the fair value of the shares and of how the
interest was calculated, and a statement of the dissenter's right to demand
payment under (S) 13.1-739.
(S) 13.1-739. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
A. A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due, and demand payment of
his estimate (less any payment under (S) 13.1-737), or reject the
corporation's offer under (S) 13.1-738 and demand payment of the fair value of
his shares and interest due, if the dissenter believes that the amount paid
under (S) 13.1-737 or offered under (S) 13.1-738 is less than the fair value
of his shares or that the interest due is incorrectly calculated.
B. A dissenter waives his right to demand payment under this section unless
he notifies the corporation of his demand in writing under subsection A of
this section within thirty days after the corporation made or offered payment
for his shares.
(S) 13.1-740. COURT ACTION.
A. If a demand for payment under (S) 13.1-739 remains unsettled, the
corporation shall commence a proceeding within sixty days after receiving the
payment demand and petition the circuit court in the city or
A-IV-4
<PAGE>
county described in subsection B of this section to determine the fair value
of the shares and accrued interest. If the corporation does not commence the
proceeding within the sixty-day period, it shall pay each dissenter whose
demand remains unsettled the amount demanded.
B. The corporation shall commence the proceeding in the city or county where
its principal office is located, or, if none in this Commonwealth, where its
registered office is located. If the corporation is a foreign corporation
without a registered office in this Commonwealth, it shall commence the
proceeding in the city or county in this Commonwealth where the registered
office of the domestic corporation merged with or whose shares were acquired
by the foreign corporation was located.
C. The corporation shall make all dissenters, whether or not residents of
this Commonwealth, whose demands remain unsettled parties to the proceeding as
in an action against their shares and all parties shall be served with a copy
of the petition. Nonresidents may be served by registered or certified mail or
by publication as provided by law.
D. The corporation may join as a party to the proceeding any shareholder who
claims to be a dissenter but who has not, in the opinion of the corporation,
complied with the provisions of this article. If the court determines that
such shareholder has not complied with the provisions of this article, he
shall be dismissed as a party.
E. The jurisdiction of the court in which the proceeding is commenced under
subsection B of this section is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend a decision
on the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The dissenters are entitled
to the same discovery rights as parties in other civil proceedings.
F. Each dissenter made a party to the proceeding is entitled to judgment (i)
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation or (ii) for the fair
value, plus accrued interest, of his after-acquired shares for which the
corporation elected to withhold payment under (S) 13.1-738.
(S) 13.1-741. COURT COSTS AND COUNSEL FEES.
A. The court in an appraisal proceeding commenced under (S) 13.1-740 shall
determine all costs of the proceeding, including the reasonable compensation
and expenses of appraisers appointed by the court. The court shall assess the
costs against the corporation, except that the court may assess costs against
all or some of the dissenters, in amounts the court finds equitable, to the
extent the court finds the dissenters did not act in good faith in demanding
payment under (S) 13.1-739.
B. The court may also assess the reasonable fees and expenses of experts,
excluding those of counsel, for the respective parties, in amounts the court
finds equitable:
1. Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of (S)(S) 13.1-732 through 13.1-739; or
2. Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses
are assessed did not act in good faith with respect to the rights provided
by this article.
C. If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded
the dissenters who were benefited.
D. In a proceeding commenced under subsection A of (S) 13.1-737 the court
shall assess the costs against the corporation, except that the court may
assess costs against all or some of the dissenters who are parties to the
proceeding, in amounts the court finds equitable, to the extent the court
finds that such parties did not act in good faith in instituting the
proceeding.
A-IV-5
<PAGE>
APPENDIX V
BUSINESS AND MANAGEMENT OF AMERICAN+
BUSINESS
GENERAL
American will, upon consummation of the American Probable Transactions* and
prior to the Merger, be among the ten largest radio groups in the nation
owning and/or operating 70 radio stations in 13 markets across the United
States. American is a national radio broadcasting company committed to
acquiring, developing and operating radio stations in markets where it can be
a leading radio operator (i.e., one of the top two radio operators in terms of
local market revenues). Consistent with this objective and the opportunities
created by the enactment of the Telecommunications Act, since January 1, 1996,
American has, exclusive of the Merger and certain station asset swaps,
acquired or entered into agreements to acquire 49 radio stations for
approximately $673.6 million. Giving effect to the American Probable
Transactions, immediately prior to the Merger, American will have multiple
station groups (including at least two FM stations in each group) in each of
its markets: Boston, Baltimore, Portland, Sacramento, Hartford, Austin,
Buffalo, Las Vegas, San Jose, West Palm Beach, Rochester, Dayton and Fresno.
Based on the 1996 edition of the Duncan Guide and giving effect to the
American Probable Transactions but not the Merger, American station groups
ranked first or second among station operators in radio advertising revenues
in 12 of its 13 markets. Giving effect to the American Probable Transactions
and the Merger (including the EZ Probable Transactions), American will be
among the five largest radio groups in the nation owning and/or operating 93
radio stations in 18 markets across the United States.
American's stations have demonstrated significant same station growth in net
revenues and broadcast cash flow. Net revenues from American's then currently
owned and/or operated stations (including periods prior to their acquisition
by American) increased by approximately 18.1% from $82.2 million in 1994 to
$97.1 million in 1995 and 10.8% from $49.9 million in the first six months of
1995 to $55.3 million in the first six months of 1996. Broadcast cash flow of
such stations increased by approximately 33.6% from $23.5 million in 1994 to
$31.4 million in 1995 and 24.4% from $11.9 million in the first six months of
1995 to $14.8 million in the first six months of 1996. Net revenues for
currently owned and/or operated stations (including periods prior to their
acquisition by American) increased by approximately 11.9% from $40.5 million
in the third quarter of 1995 to $45.3 million in the third quarter of 1996,
while broadcast cash flow of those stations increased approximately 17.9% from
$11.2 million in the third quarter of 1995 to $13.2 million in the third
quarter of 1996. Net revenues and broadcast cash flow in 1995, giving pro
forma effect to the American Probable Transactions only (and to the American
Probable Transactions and the Merger including the EZ Probable Transactions)
as though all of them had been consummated as of January 1, 1995, would have
been $220.6 million ($317.4 million) and $64.5 million ($98.7 million),
respectively. See "American Summary Combined Financial Information" and
"Unaudited Pro Forma Financial Statements of American and EZ" in this Proxy
Statement.
- --------
+ Terms used in this Appendix V without definition have the meaning given to
them elsewhere in this Proxy Statement.
* The term "American Probable Transactions" consists of the American
Acquisitions and the American Dispositions. The terms "American
Acquisitions" and "American Dispositions" mean the acquisitions and
dispositions, respectively, of radio stations described under "--Recent
Transactions--Consummated Acquisitions" and "--Pending Acquisitions and
Dispositions"; it does not, however, include those referred to under "--
Other Transactions" nor to the stations owned by EZ.
A-V-1
<PAGE>
The following table sets forth certain information regarding American and
its markets, assuming all of the American Probable Transactions (but not the
Merger) had been consummated as of January 1, 1995. It does not include the
possible acquisition of stations described under "--Recent Transactions--Other
Transactions" as to which letters of intent have been entered into, but which
are not included among the American Probable Transactions.
<TABLE>
<CAPTION>
MARKET DATA AMERICAN DATA
----------- --------------------------------------
MARKET MARKET MARKET
RANKING BY REVENUE REVENUE AUDIENCE NUMBER OF
REVENUE(1) RANK(1) PERCENT((1) SHARE(1) STATIONS
----------- ------- ----------- -------- ---------
FM AM
---- ----
<S> <C> <C> <C> <C> <C> <C>
Boston...................... 9 2 29.9 20.0 3 3
Baltimore................... 19 1 33.3 16.7 3 2
Portland.................... 23 2 21.2 17.2 4 1
Sacramento.................. 25 2 22.6 23.2 4 3
Hartford.................... 34 1 52.0 33.2 3 1
Austin(2)................... 37 4 15.1 13.2 2 1
Buffalo..................... 41 2 31.1 32.6 4 1
Las Vegas................... 42 1 30.3 21.8 4 2
San Jose.................... 43 1 37.6 13.9 3 1
West Palm Beach(3).......... 48 1 54.5 30.0 6 2
Rochester................... 54 1 42.3 25.9 3 1
Dayton...................... 55 1 50.8 33.0 5 1
Fresno...................... 62 1 47.6 22.4 5 2
</TABLE>
- --------
(1) For information concerning the source and calculation of "Market Ranking
by Revenue", "Market Revenue Rank", "Market Revenue Percent" and "Audience
Share" see the first table under "Summary--The Companies--American" in
this Proxy Statement.
(2) Operated by American under a local marketing agreement; American also has
an option to acquire these stations. See Notes to Consolidated Financial
Statements of American in the American 10-K.
(3) Consummation of the American Probable Transactions will require American
to dispose of one FM station in West Palm Beach.
OPERATING PHILOSOPHY
American's objective is to operate leading radio station groups in each of
its markets as measured by audience ratings and revenue share. Management
believes that station groups create the opportunity to develop leadership
positions within American's markets, which significantly improve its stations'
appeal to advertisers and their revenue and profit potential. American
believes that group, rather than individual station, results present a more
meaningful measure of performance because a significant percentage of revenues
in most of its markets is earned by companies owning multiple stations.
Consistent with such belief, American seeks to enhance the overall performance
of its groups through means such as complementary programming and joint
marketing of its individual stations.
In order to maintain or improve its position in each market, American
combines extensive research with an assessment of its competitors'
vulnerabilities in order to identify specific audience opportunities within
each market. American then tailors the programming, marketing and promotion of
each station to maximize its appeal to its target audience. Management seeks
to create a distinct and marketable personality for each of its stations in
order to enhance audience share and listener loyalty, and to protect against
vulnerability to other format competition. To help achieve this objective,
American employs and promotes distinct, high-profile on-air personalities in
many of its stations.
American's radio stations employ a number of programming formats, each of
which is designed to appeal to a specific target audience in each local
market. American's portfolio of stations is diversified in terms of format,
target audience and geographic location. Management believes this
diversification helps to insulate its
A-V-2
<PAGE>
performance from potential local economic downturns, competitive attacks and
changes in listening preferences. American's station groups are, in many
instances, composed of stations in different phases of development. Management
believes this configuration enables it to maximize the growth potential of
those station groups, while reducing the risks associated with launching new
formats and undertaking other means of improving underperforming properties.
Management employs an operating philosophy designed to achieve market
leadership which includes: (i) owning multiple stations and establishing
program formats within its individual markets that target specific diverse
demographics, (ii) developing and maintaining popular programming to attract a
large share of the target audience, (iii) promoting its radio stations
frequently to develop high awareness among its target listeners, (iv)
leveraging the skills of experienced general managers with strong local market
knowledge, and (v) developing well trained client-oriented local sales
professionals.
Strategic Programming of Station Groups. Giving effect to the American
Probable Transactions, American will own and/or operate at least two FM
stations in each of its markets and at least three FM stations in each of its
markets other than Austin. American customizes the programming of its groups
to maximize their combined audience share and revenue potential. American does
not utilize a predetermined formula to target demographic niches; instead,
American believes that each market has individual characteristics and should
be evaluated independently.
In certain cases, American utilizes stations to superserve a demographic
group by operating stations with formats that target similar or complementary
audiences. For example, in Boston, American owns two AM stations with
complementary formats (Talk and Sports/Talk) and overlapping demographics (Men
35-54). Management believes that if two of its stations which target similar
audiences can achieve a large enough percentage of that audience, it will be
able to secure a higher percentage of the advertising directed to that
audience than its comparative market share of that audience.
In markets where one American station is a leader in a demographic group,
American may use its second station to expand audience reach. In Dayton, where
WMMX-FM with a Hot Adult Contemporary format ranks first in the Women 25-44
demographic, American purchased WTUE-FM, with an Album Oriented Rock format
that targets Men 18-34. American sought to create a station group in Dayton
that would expand its listenership without competing for the audience base of
its original station. As a result, American's station group ranks first among
Persons 12+ and Adults 25-54 in Dayton, according to the Spring 1996 Arbitron
report, and has strong performance among men and women aged 25-54. Finally,
American may utilize a strongly performing group to enhance the relative
position of one of its leading stations by initiating a format competition
between American's second station and another leading station in the market.
An example of this strategy was American's launch in the fall of 1994 of WEGQ-
FM in Boston which has been programmed as a 70's Rock-oriented Oldies station.
This format is intended to allow the station to seek additional shares from
market leaders in Rock, Classic Rock and Adult Top 40 formats, among others.
Popular Programming. American tailors the programming, marketing and
promotion of each station to maximize its appeal to that station's target
audience and to create a distinct and marketable personality for each station.
An important element of this approach is American's strong preference for
employing and promoting high profile and marketable on-air personalities,
especially in the morning drive day part, which is 6-10 a.m. In order to
adjust to developing trends and identify new opportunities, American conducts
frequent market research to provide its stations with the information
necessary to refine and improve their programming and assess the
vulnerabilities of competitors. The success of American's programming
approaches is exemplified in Boston, where its station, WBMX-FM, rose from a
station ranked twelfth in Adults 25-54 when it was launched in 1991, to a
generally consistent top five station in Adults 25-54 (although it ranked
seventh in the Spring 1996 Arbitron report) and ranked third in its target
demographic of Women 25-44 in the Spring 1996 Arbitron report. In addition,
WMMX-FM in Dayton has emerged as a top two station in Adults 25-54 and number
one in its target demographic of Women 25-44, according to the Spring 1996
Arbitron report. WZMX-FM in Hartford, which American launched as a 70's Oldies
station in the Fall of 1994, has achieved a number four rank among Adults
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25-54 and number one in its target demographic Adults 25-44 in the Spring 1996
Arbitron report, and WQSR-FM in Baltimore achieved a number one ranking among
Adults 25-54 according to the Spring 1996 Arbitron Report. Finally, three of
American's FM stations in Las Vegas, KLUC-FM, KMZQ-FM and KMXB-FM, which
target a female audience, each ranked in the top five among Women 25-44 in the
Spring 1996 Arbitron report.
Aggressive Station Promotion. American's stations typically engage in
significant local promotional activities, including extensive community
involvement. American's stations also typically advertise on local television,
utilize billboards and print media, participate in telemarketing and direct
mailings and sponsor local contests, concerts and events. In Boston, WBMX-FM
sponsors events such as "MIX Fest", WRKO-AM sponsors "Taste of Boston" and
WEEI-AM sponsors "The Hot Dog Safari". In Hartford, WZMX-FM sponsors an annual
"penny pitch" charity event designed to raise funds for the Hartford
Children's Hospital. See "--Community Involvement". American has also invested
in database marketing programs with the objective of developing more personal
contact with listeners.
Strong Local Management and Sales Effort. In each of its markets, American
employs a highly experienced general manager who is responsible for the
performance of the stations in his or her market. The general managers of
American's stations have an average of six years experience as general
managers and an average of more than twenty years experience in the radio
industry. A portion of each general manager's compensation is dependent on the
financial results of the stations in his or her markets, aligning the
manager's goals with those of American. As incentive compensation, American's
general managers and executive officers have been granted options to purchase
shares of American Common Stock which are subject to vesting provisions over a
five-year period. Since a significant portion of American's revenues are
generated from local advertising, American also focuses on developing a high
quality, client-oriented local sales force at each radio station. Such a sales
force allows American to establish and maintain direct relationships with
advertisers and capture significant advertising dollars.
ACQUISITION STRATEGY
American intends to continue to pursue the acquisition of additional radio
stations in new and existing markets in order to achieve, among other things,
increased size and greater geographic diversification. American expects to
concentrate these efforts in markets ranked in the top 60 (with an emphasis on
markets ranked 10 through 50) in terms of radio advertising revenues where
management believes it can achieve a substantial market position. When
evaluating acquisition opportunities in new markets, American also assesses
the potential to achieve a leading position in audience share and to generate
strong cash flow growth through improved programming, marketing, sales and
operating efficiencies. While American intends to continue to focus its
principal acquisition efforts on radio stations, it also intends to expand its
ownership and operation of communications towers and to explore the
syndication of radio programming.
American intends to pursue acquisitions opportunistically and to evaluate
both market and station characteristics.
Market Selection Considerations. American intends to make acquisitions in
markets that provide the opportunity to obtain a leadership position in both
audience share and revenue share. In assessing its potential to achieve this
leadership, American evaluates the existence of underserved audience segments
and competitors with perceived vulnerabilities. In addition, American
considers the potential to acquire two or more FM stations in the market.
American believes the potential to acquire two or more FM stations is
essential to its ability to achieve leading audience shares, broad acceptance
with advertisers, and sustainable growth in profitability. American will also
consider the acquisition of AM stations which it believes have profit
potential and whose ownership will enhance American's overall appeal to
advertisers.
American seeks to acquire stations in markets that have already witnessed or
are poised for significant group activity. American also closely examines the
state of the economy in its potential markets, specifically the size,
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historical growth rates and projected future growth rates of the market's
radio advertising revenue, population and retail sales.
Station Factors. Within markets meeting the above criteria, American intends
to acquire stations in varying stages of development, based primarily on
management's evaluation of the target station's facilities, including the
relative strength and market coverage of its signal, and its past and current
operating performance. When entering a new market, American generally plans to
employ a "core station" strategy, acquiring a well-established and profitable
station, thereby reducing the risk of entering a new market. Having
established its presence in a new market, American may then continue its
selective acquisition of underperforming stations which generally represent
greater growth potential than well-established and profitable stations. By
applying its turnaround expertise, and leveraging the core station's
management and market presence, American believes that it will be able to
promote the development of underperforming stations and thereby enhance asset
value.
Purchase Price Considerations. American has never applied a fixed formula to
determine the purchase price of radio stations. In determining the purchase
price for an acquisition, management places emphasis on multiples of projected
broadcast cash flow rather than historical measures. This is because American
frequently considers acquisitions of radio stations requiring significant
reconfiguration which have nominal or negative historical station broadcast
cash flow.
American believes that its acquisition strategy, if properly implemented,
could have a number of benefits, including the following: (i) diversification
of revenues and broadcast cash flow across a greater number of stations and
markets, (ii) more efficient utilization of its senior management team, (iii)
enhanced appeal to top industry management talent, and (iv) increased overall
scale which should broaden the range of and facilitate American's capital
raising activities. See "Risk Factors--Acquisition Strategy" in this Proxy
Statement.
Although American has had discussions with a number of other radio operators
concerning potential acquisitions, it is not currently a party to any binding
agreement or letter of intent relating to any such acquisition, except as
described elsewhere in this Proxy Statement.
HISTORY
On November 1, 1993 the American Reorganization became effective with the
merger of four radio broadcasting entities: Stoner Broadcasting Systems, Inc.
("Stoner"), Atlantic Radio, L.P. ("Atlantic"), Multi Market Communications,
Inc. ("Multi Market") and Boston AM Radio Corporation ("Boston AM")
(collectively, the "American Predecessor Entities"). As a result, American
owned and operated 11 FM and seven AM stations in eight markets consisting of
Boston, Hartford, Buffalo, Rochester, Dayton, Des Moines, Binghamton and
Louisville. Between November 1, 1993 and January 1, 1996, American entered
three new markets, Baltimore, Austin and West Palm Beach, and disposed of all
of its stations in Des Moines, Binghamton and Louisville. During such period,
American also agreed to purchase or acquired options to purchase additional
stations in several existing and new markets. See "Business--Post-Combination
Transactions" in the American 10-K. See "--Recent Transactions" below.
RECENT TRANSACTIONS
Consistent with American's acquisition strategy, in 1996 American has,
exclusive of the Merger and station asset swaps, acquired or entered into
agreements to acquire 49 stations for an aggregate consideration of
approximately $673.6 million.
Consummated Acquisitions
Marlin Transaction: In May 1996, American consummated the transactions
contemplated by a merger agreement (the "Marlin Transaction") with Marlin
Broadcasting, Inc. ("Marlin"). American acquired WFLN-FM in Philadelphia,
WQRS-FM in Detroit and WTMI-FM in Miami for an aggregate purchase price of
approximately $58.5 million, together with the assumption of approximately
$9.0 million of long-term debt
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which was paid in full at closing. The principal stockholder of Marlin
immediately thereafter acquired WTMI-FM from American for approximately $18.7
million. In June 1996, American entered into an agreement pursuant to which it
will exchange the Philadelphia and Detroit stations, respectively, for two
stations in Sacramento and approximately $20.0 million in cash, with an
unaffiliated party which is currently programming and marketing the
Philadelphia and Detroit stations under LMAs. See "--Pending Acquisitions--
Sacramento". American retained certain Philadelphia real estate and tower
assets valued at approximately $4.0 million.
Baltimore: In October 1996, American acquired WBGR-AM serving the Baltimore
area for a purchase price of approximately $2.8 million.
Portland, Oregon: In July 1996, American consummated a merger (the "HBC
Merger") pursuant to which Henry Broadcasting Company ("HBC") merged into
American. Pursuant to the HBC Merger, American issued an aggregate of
1,879,034 shares of American Class A Common Stock with an agreement determined
current market value of $64.0 million, paid approximately $10.4 million in
cash, and assumed long-term debt of approximately $36.0 million which was paid
in full at closing. As part of a related transaction, American acquired
certain real estate used in the business of HBC for approximately $2.0 million
and obtained a five-year option to acquire certain other real estate for
approximately $1.0 million. HBC owned an aggregate of twelve stations, of
which nine were included as part of the HBC Merger as follows: KUFO-FM and
KBBT-AM in Portland, Oregon, KYMX-FM and KCTC-AM in Sacramento, KGOR-FM and
KFAB-AM in Omaha and KSKS-FM, KKDJ-FM and KMJ-AM in Fresno.
In July 1996, American acquired KDBX-FM serving Portland for a purchase
price of approximately $14.0 million. As part of such arrangement, American
granted the seller the right, effective at any time after August 31, 1998, to
cause American to exercise its option to acquire WBNW-AM in Boston for $6.0
million and to sell such station to the seller of KDBX-FM. See Notes to
Consolidated Financial Statements of American in the American 10-K for
information concerning that option.
In August 1996, American acquired KUPL-FM and KKJZ-FM serving Portland,
together with two FM stations in San Jose (the "BayCom Transaction"), for an
aggregate purchase price of approximately $103.0 million.
Sacramento: As part of the HBC Merger, American acquired KYMX-FM and KCTC-AM
in Sacramento in July 1996. See "--Portland, Oregon" above.
In July 1996, American acquired KSTE-AM serving Sacramento for a purchase
price of approximately $7.25 million. American had been programming and
marketing this station pursuant to an LMA since July 1996. See "--Pending
Acquisitions and Dispositions--West Palm Beach" for information with respect
to the disposition of this station pursuant to a station asset swap agreement.
In September 1996, American acquired KSSJ-FM serving Sacramento for a
purchase price of approximately $14.0 million. American had been programming
and marketing the station pursuant to an LMA since July 1996.
Hartford: In May 1996, American consummated the acquisitions of WTIC-FM and
WTIC-AM in Hartford. In August 1995, American had entered into a series of
transactions (the "Hartford Transaction") with the owner of those stations and
certain affiliates, pursuant to which, among other things, American agreed to
purchase those stations for approximately $29.0 million (plus working
capital), to make payments aggregating $8.5 million pursuant to a consulting
and non-competition agreement with an affiliate of the owner and to purchase
the tower of one of those stations for $3.5 million. Also as part of the
Hartford Transaction, American paid $1.0 million for a two-year option to
purchase for $1.00 the New England Weather Service (which provides weather
information to subscribers). Because American was prevented under the then
current FCC regulations from acquiring these stations, it loaned an aggregate
of $35.5 million to the owner of such stations and an affiliate thereof and
made a $2.0 million escrow deposit. The tower site was acquired in October
1995. A portion of the
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loans was used to finance the acquisition of the stations and the balance may
be used to satisfy American's obligations under the consulting and non-
competition agreement.
Buffalo: In August 1996, American acquired WSJZ-FM in Buffalo for a purchase
price of approximately $12.5 million. This station had been programmed and
marketed by American pursuant to an LMA since April 1996.
Las Vegas: In July 1996, American acquired KMXB-FM (formerly KJMZ-FM)
serving Las Vegas for approximately $8.0 million. American had been
programming and marketing the station pursuant to an LMA since April 1996.
In July 1996, American also acquired KLUC-FM and KXNO-AM serving Las Vegas
for approximately $11.0 million.
In September 1996, American also acquired KVEG-AM for approximately $1.8
million. American had been programming and marketing this station pursuant to
an LMA since May 1996.
In October 1996, American acquired KMZQ-FM and KXTE-FM (formerly KFBI-FM)
for a purchase price of approximately $28.0 million. American began
programming and marketing the stations pursuant to an LMA in May 1996. As part
of such transaction, American paid an additional $0.2 million to acquire the
seller's right (and obligation) to purchase KVEG-AM for approximately $1.8
million which, as noted above, it did in September 1996.
San Jose: As part of the BayCom Transaction, American acquired KSJO-FM and
KUFX-FM serving San Jose in August 1996. See "--Portland, Oregon" above.
Omaha: As part of the HBC Merger, American acquired KGOR-FM and KFAB-AM in
Omaha in July 1996. See "--Portland, Oregon" above.
Fresno: As part of the HBC Merger, American acquired KSKS-FM, KKDJ-FM and
KMJ-AM serving Fresno in July 1996. See "--Portland, Oregon" above.
Pending Acquisitions and Dispositions
Boston, Worcester: In July 1996, American entered into an agreement to
purchase WAAF-FM and WWTM-AM in Worcester, Massachusetts for approximately
$24.8 million in cash. American began programming and marketing the stations
pursuant to an LMA in August 1996. Subject to the receipt of FCC approval, and
expiration or earlier termination of the HSR Act waiting period, American
expects to consummate the acquisition in the first quarter of 1997.
Baltimore: In September 1996, American entered into an agreement (the
"Baltimore Transaction") to acquire WWMX-FM and WOCT-FM in Baltimore for
approximately $90.0 million. American will begin programming and marketing the
stations pursuant to an LMA in November 1996. Subject to the receipt of FCC
approval (the HSR Act waiting period having expired), American expects to
consummate the acquisition in the first quarter of 1997.
Hartford: In August 1996, American entered into an agreement to sell WNEZ-AM
serving New Britain, Connecticut for approximately $0.75 million. FCC approval
has been received and the sale is expected to be consummated in the first
quarter of 1997.
Buffalo: In August 1995, American entered into an agreement to purchase
WBLK-FM serving Buffalo for approximately $8.0 million. Because of the then
current FCC regulations, American was not permitted to consummate this
acquisition and assigned its rights to purchase the station, and agreed to
make loans to finance the purchase, to Palm Beach Radio Broadcasting, Inc.
("Palm Beach Broadcasting") which owns WPBZ-FM
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serving West Palm Beach, as a consequence of an earlier assignment to it by
American. The acquisition was consummated by Palm Beach Broadcasting in March
1996, using the proceeds of loans of approximately $8.0 million from American
to do so. This station is currently being programmed and marketed by American
pursuant to an LMA. In November 1996, American intends to enter into an
agreement to purchase WBLK-FM for approximately $8.0 million. Subject to the
receipt of FCC approval, American expects the acquisition to be consummated in
the first quarter of 1997 and will use the loan to finance such acquisition.
See "--West Palm Beach" below.
Sacramento: In June 1996, American entered into an agreement to exchange the
Philadelphia station which it acquired as part of the Marlin Transaction for
KSFM-FM and KMJI-AM serving Sacramento. As part of such transaction (the
"Secret Transaction"), American will sell the Detroit station acquired as part
of the Marlin Transaction to the owner of the Sacramento stations for
approximately $20.0 million. American is currently programming and marketing
the Sacramento stations under an LMA and the prospective acquiror of the
Philadelphia and Detroit stations is programming and marketing those stations
under LMAs. American has received the required FCC approval and, subject to
the satisfactory resolution of the matters described in the subsequent
sentence, the Secret Transaction is expected to be consummated in the fourth
quarter of 1996. On October 11, 1996, American and the seller received Second
Requests for additional information about the acquisition from the Antitrust
Division. Under the HSR Act, the Secret Transaction may not be consummated
until twenty (20) days after American and the seller have substantially
complied with such Second Requests. Although American believes the acquisition
complies with the antitrust laws, the Antitrust Division has expressed
concerns regarding its effect on the Sacramento market. The parties to the
Secret Transaction intend to engage in discussions with the Antitrust Division
to address those concerns. The Antitrust Division or others could take action
under the antitrust laws to enjoin or otherwise challenge the Secret
Transaction. There can be no assurance that such a challenge will not be made
or, if made, will not be successful.
In an unrelated transaction, in July 1996, American entered into an
agreement to acquire KXOA-AM/FM and KQPT-FM serving Sacramento for
approximately $49.8 million in cash. American began programming and marketing
the stations pursuant to an LMA in August 1996. Subject to the receipt of FCC
approvals and the expiration or earlier termination of the HSR Act waiting
period, American expects to consummate the acquisition in the first quarter of
1997.
In October 1996, American entered into an agreement to sell KXOA-FM for
approximately $27.5 million in cash. Subject to the receipt of FCC approvals
and the expiration or earlier termination of the HSR waiting period, American
expects to consummate the sale in the first half of 1997.
As a result of Sacramento stations owned and those under agreement to
purchase or sell, upon consummation of the Merger, American will be required
to sell one radio station in Sacramento (in addition to KXOA-FM and KSTE-AM).
See "--West Palm Beach" below for information with respect to a station
agreement pursuant to which American would dispose of KSTE-AM in Sacramento.
San Jose: In August 1996, American entered into an agreement to acquire
KBAY-FM and KKSJ-AM serving San Jose for approximately $30.0 million in cash.
American began programming and marketing the stations pursuant to an LMA in
August 1996. FCC approval has been received and subject to the expiration or
earlier termination of the HSR Act waiting period, American expects to
consummate the acquisition in the first quarter of 1997.
West Palm Beach: In August 1995, American purchased options to acquire WSTU-
AM in Stuart and WHLG-FM (which is in the process of constructing a signal
upgrade) in Jensen Beach, the latter of which is in the same radio market as
West Palm Beach, for an aggregate purchase price of approximately $7.2
million. Because American was prevented under then current FCC regulations
from acquiring these stations, it assigned its acquisition rights to Palm
Beach Broadcasting. American loaned Palm Beach Broadcasting approximately $7.2
million to finance the acquisitions. Palm Beach Broadcasting also owns WPBZ-
FM, as a result of an earlier assignment of the right to acquire such station
by American. Palm Beach Broadcasting has entered into an
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agreement to sell WSTU-AM to a third party and the sale is, subject to the
receipt of FCC approval, expected to be consummated in the fourth quarter of
1996. American intends to exercise its option to acquire WHLG-FM and WPBZ-FM
(which acquisitions may take the form of a merger of Palm Beach Broadcasting
into American) and, in addition to the cancellation of loans in the aggregate
principal amount of $17.0 million, will pay approximately $2.75 million for
such stations. Subject to the receipt of FCC approval and the expiration or
earlier termination of the HSR Act waiting period, American expects to
consummate the acquisition in the first half of 1997.
In July 1996, American entered into a station asset swap agreement to
exchange KSTE-AM serving Sacramento plus $33.0 million in cash for WEAT-FM,
WEAT-AM and WOLL-FM serving West Palm Beach. The other party to the agreement
began programming and marketing KSTE-AM pursuant to an LMA and American began
programming and marketing the West Palm stations pursuant to an LMA, in August
1996. Subject to the receipt of FCC approval, and the expiration or earlier
termination of the HSR waiting period, American expects to consummate the
exchange in the first quarter of 1997. Under the Telecommunications Act,
American is permitted to own five FM stations in West Palm Beach; accordingly,
it will be required to dispose of one FM station in West Palm Beach.
Rochester: In February 1996, American entered into an agreement to acquire
two FM (WVOR-FM and WPXY-FM) and two AM (WHAM-AM and WHTK-AM) stations serving
the Rochester market for a purchase price of approximately $30.5 million (the
"Rochester Acquisition"). The FCC has approved the transfer of the FCC
licenses and, subject to the terms of a consent decree with the Antitrust
Division (the "Rochester Consent Decree") described in the subsequent
sentences, American expects to consummate the Rochester Acquisition in the
first quarter of 1997. On May 17, 1996, American and the seller received
Second Requests for additional information from the Antitrust Division.
Although American continues to believe that the acquisition complies with the
antitrust laws, the Antitrust Division has expressed concerns regarding its
effect on the Rochester market. Under the HSR Act, the Rochester Acquisition
could not be consummated until twenty (20) days after American and the seller
substantially complied with such Second Requests. American and the seller
furnished extensive material to the Antitrust Division in July 1996 and thus
substantially complied with the Second Request and subsequently entered into
an agreement with the Antitrust Division whereby American agreed not to
consummate the Rochester Acquisition unless first providing the Antitrust
Division with fifteen (15) days prior notice. American engaged in ongoing
negotiations with the Antitrust Division in an effort to reach a settlement of
the matter and as a result of those negotiations, on October 24, 1996,
American and the seller entered into the Rochester Consent Decree with the
Antitrust Division and the Attorney General of the State of New York, pursuant
to which, among other things, American may consummate the Rochester
Acquisition. However, it must then divest, within a certain specified period
of time, WHAM(AM) and WVOR(FM). As part of the Rochester Consent Decree,
American agreed not to acquire any additional stations in the Rochester
market, other than, with certain specified exceptions, one Class A FM station.
Giving effect to the Rochester Consent Decree, American will own three FM
stations (WCMF-FM, WRMM-FM, and WPXY-FM), one AM station (WHTK-AM) and may
purchase one additional Class A FM station in Rochester. In October 1996,
American also entered into a preliminary agreement to purchase WAQB(FM), a
newly licensed Class A FM radio station in Rochester which is not yet on-the-
air. See "--Other Transactions" below.
The Rochester Consent Decree also provides that American will terminate the
joint sales agreement and assign to a third party its option to purchase
another FM station in Rochester (which station has not been included in the
American Probable Transactions, or reflected in any of the station information
concerning American in this Proxy Statement). The Rochester Consent Decree is
subject to approval by the United States District Court for the District of
Columbia and a sixty-day public comment period. In the unlikely event that the
District Court does not approve the Rochester Consent Decree, the Antitrust
Division or others could take action under the antitrust laws to enjoin or
otherwise challenge the Rochester Acquisition. In such event, there can be no
assurance that such a challenge will not be made or, if made, will not be
successful.
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In July 1996, American loaned the owner of the stations to be acquired
approximately $28.5 million (the "Rochester Loan"). The Rochester Loan is a
nonrecourse loan, collateralized by the assets of the stations, bears interest
at a rate equal to American's borrowing rate under the American Credit
Agreement and matures in June 2001. Under the terms of the Rochester
Acquisition, American has the right to assign its right to acquire those
stations which are part of the Rochester Acquisition which it does not
acquire. American will use the Rochester Loan (together with an escrow
deposit) to acquire the radio stations.
In an unrelated transaction, American has agreed to contribute the assets of
WCMF-AM to an educational institution in the Rochester area.
Dayton: In December 1995, American loaned approximately $1.1 million to the
buyer to finance the acquisition of WXEG-FM serving Dayton and purchased from
Mr. Steven B. Dodge, Chairman of the Board, President and Chief Executive
Officer of American, interim loans of approximately $2.2 million (including
accrued interest) which he had made to the seller of the station and which had
been assumed by the new owner of the station. American intends to exercise its
option to acquire the station, subject to receipt of FCC approval, in a
transaction which is expected to be consummated in the fourth quarter of 1996.
In January 1996, American entered into a nonbinding letter of intent to
acquire for approximately $12.0 million two FM stations (WLQT-FM and WBTT-FM)
serving Dayton. Because of then existing FCC regulations, American assigned
its rights under the letter of intent to Palm Beach Broadcasting, which
entered into the definitive purchase and sale agreement. American loaned Palm
Beach Broadcasting approximately $12.0 million to finance the acquisition
(which occurred in March 1996) and has an option to purchase the stations.
American has exercised its option to acquire both stations; subject to the
receipt of FCC approval, such acquisition is expected to occur in the first
quarter of 1997 and American will use such loan to finance the acquisition.
All of the Dayton stations are currently being programmed and marketed by
American pursuant to LMAs.
Omaha: In October 1996, American entered into an agreement to sell KGOR-FM
and KFAB-AM and Business Music Service in Omaha for approximately $39.0
million in cash. Subject to the receipt of FCC approval, and the expiration or
earlier termination of the HSR waiting period, American expects to consummate
the sale in the first quarter of 1997.
Fresno: In July 1996, American entered into an agreement to acquire KNAX-FM
and KRBT-FM in Fresno for approximately $11.0 million in cash. American began
programming and marketing the stations pursuant to an LMA in August 1996. The
FCC has approved the assignment of the FCC licenses and American expects to
consummate the acquisition in the first quarter of 1997.
In July 1996, American entered into an agreement to acquire KOQO-AM/FM in
Fresno for approximately $6.0 million in cash. American began programming and
marketing the stations pursuant to an LMA in August 1996. A petition to deny
the assignment of the FCC licenses of KOQO-AM and KOQO-FM to American was
filed with the FCC on September 16, 1996. American and the seller have filed
oppositions to the petition to deny and believe that it is without merit and
will not affect or substantially delay FCC approval of the transaction.
Subject to the receipt of FCC approval, American expects to consummate the
acquisition in the first quarter of 1997.
Other Transactions
American has entered into or is negotiating letters of intent (a) to acquire
two FM stations in one of its existing markets for a purchase price of
approximately $24.0 million of which between approximately $20.0-21.0 million
will be in the form of American Class A Common Stock, and the balance in cash
or the assumption of long-term debt, and (b) to acquire WAQB-FM, a Class A FM
station in Rochester, for approximately $3.5 million. For information with
respect to letters of intent relating to the acquisition of affiliated
companies owning and managing tower communication sites, see "--Tower
Subsidiary" below. The transactions contemplated by such
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letters of intent have not been included in the American Probable Transactions
or reflected in the Pro Forma Financial Information included in this Proxy
Statement because of, among other things, the absence of definitive purchase
and sale agreements.
Tower Subsidiary
In July 1995, American organized a wholly-owned subsidiary, American Tower
Systems, Inc. (the "Tower Subsidiary"), to acquire, own and operate
telecommunications antenna sites and towers, principally for other radio and
telecommunications operators. In February 1996, the Tower Subsidiary acquired
Skyline Communications Limited Partnership and Skyline Antenna Management,
Inc. in exchange for an aggregate of 26,989 shares of American Class A Common
Stock, then valued at approximately $0.8 million, $2.1 million in cash and the
assumption of approximately $0.3 million of long-term debt which was paid in
full at closing. Skyline Communications Limited Partnership owns eight towers,
six of which are in West Virginia and the remaining two in Northern Virginia.
Skyline Antenna Management, Inc. manages more than 200 antenna sites,
primarily in the northeast region of the United States.
In April 1996, the Tower Subsidiary acquired BDS Communications, Inc. and
BRIDAN Communications Corporation for 257,495 shares of American Class A
Common Stock, then valued at approximately $7.0 million, and the assumption of
$1.7 million of long-term debt of which $1.5 million was paid at closing. BDS
Communications, Inc. owns three towers in Pennsylvania and BRIDAN
Communications Corporation manages or has sublease agreements on approximately
40 tower sites located throughout the mid-Atlantic Region.
In July 1996, the Tower Subsidiary entered into letters of intent with three
entities which are affiliated to one another to acquire tower sites and a
tower site management business in California for an aggregate purchase price
of approximately $32.1 million. Consummation of the transaction is conditioned
on, among other things, negotiation and execution of definitive purchase and
sale agreements and the expiration or earlier termination of the HSR Act
waiting period. Subject to such expiration or termination, the acquisitions
are expected to be consummated in the first quarter of 1997.
In July 1996, the Tower Subsidiary entered into a partnership agreement with
an unaffiliated party relating to the ownership and operation of a tower site
in Needham, Massachusetts and has a 50.1% interest in the partnership.
American intends to transfer its towers and tower sites in Philadelphia
(acquired as part of the Marlin Transaction and not included in the Secret
Transaction) and in Peabody, Massachusetts to the Tower Subsidiary.
In August, 1996, the Tower Subsidiary executed a commitment letter with The
Toronto-Dominion Bank relating to a $90.0 million eight-year secured revolving
credit facility. Consummation of the revolving credit facility is conditioned,
among other things, on syndication of the $90.0 million facility (The Toronto-
Dominion Bank having agreed to fund $30.0 million) and negotiation and
execution of a definitive credit agreement.
Equity and Debt Financings
February Public Offerings. In February 1996, American consummated an
offering of 5,514,707 shares of American Class A Common Stock at an offering
price of $27 per share, including 4,501,337 shares sold by American and
1,013,370 shares sold by the selling stockholders. Proceeds to American, net
of underwriters' discount and associated costs, were approximately $114.5
million. Concurrent with the stock offering, American sold $175,000,000
principal amount of the American Senior Notes at a discount of $1,419,250 to
yield 9.125%. Proceeds of the debt offering to American, net of the
underwriters' discount and associated costs, were approximately $167.3
million.
June Private Offering. In June 1996, American consummated an offering exempt
from registration under the Securities Act of 137,500 shares of Convertible
Preferred Stock. Net proceeds to American from the offering were approximately
$132.8 million. The Convertible Preferred Stock is convertible into shares of
American Class A Common Stock at a conversion price of $42.50, subject to
adjustment for certain dilutive stock issuances, and exchangeable at
American's option after June 30, 1997 for the American Exchange Debentures
which are convertible into American Class A Common Stock on the same terms as
the Convertible Preferred Stock.
A-V-11
<PAGE>
OPERATIONS
The following table sets forth information about each of American's stations
and each of the stations which will be owned by American upon consummation of
the American Probable Transactions, together with the Austin stations which
are the subject of an LMA with American.
<TABLE>
<CAPTION>
STATION RANK STATION
MARKET MARKET MARKET STATION PRIMARY IN PRIMARY RANK IN
RANKING BY REVENUE REVENUE BROADCASTING DEMOGRAPHIC DEMOGRAPHIC ADULTS
MARKET/STATION(1) REVENUE(2) RANK(2) PERCENT(2) FORMAT TARGET(3) TARGET(4) 25-54(4)
- ----------------- ---------- ------- ---------- ------------ ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Boston, MA.............. 9 2 29.9
WBMX-FM................ Adult Contemporary Women 25-44 3 7
WEGQ-FM................ 70's Oldies Adults 25-44 5 8
WEEI-AM................ Sports/Talk Men 35-54 3 9
WRKO-AM................ Talk Adults 35+ 2 11
WAAF-FM*............... Album Oriented Rock Men 18-34 5 19
WWTM-AM*............... Sports/Talk Men 35-54 -- --
Baltimore, MD........... 19 1 33.3
WQSR-FM................ 60's Oldies Adults 35-54 1 1
WWMX-FM*............... Hot Adult Contemporary Women 25-44 1 3
WOCT-FM*............... 70's Oldies Adults 25-44 4 6
WBGR-AM................ Religious Adults 18+ -- 33+
WBMD-AM................ Religious Adults 18+ -- --
Portland, OR............ 23 2 21.2
KUPL-FM................ Country Adults 25-54 4+ 4+
KUFO-FM................ Album Oriented Rock Men 18-34 1 8
KKJZ-FM................ Smooth Jazz Adults 35-54 6+ 11
KBBT-AM................ Alternative Rock Adults 18-34 15 24+
KDBX-FM................ N/A N/A -- --
Sacramento, CA.......... 25 2 22.6
KSFM-FM*............... Contemporary Hit Radio Adults 18-34 2 6+
KYMX-FM................ Soft Adult Contemporary Women 35-54 5 9
KSSJ-FM................ Smooth Jazz Adults 35-54 9 11
KQPT-FM*............... Alternative Rock Adults 18-34 8 13
KCTC-AM................ Nostalgia Adults 45+ 2 16+
KXOA-AM*............... Oldies Adults 35-54 3 19+
KMJI-AM*............... Sports Men 35-54 25+ 27+
Hartford, CT............ 34 1 52.0
WRCH-FM................ Soft Adult Contemporary Women 35-54 1 1
WTIC-AM................ News/Talk Adults 35+ 1 3
WZMX-FM................ 70's Oldies Adults 25-44 1 4
WTIC-FM................ Contemporary Hit Radio Adults 18-34 3+ 7
Austin, TX.............. 37 4 15.1
KKMJ-FM(5)............. Soft Adult Contemporary Women 35-54 1+ 2
KAMX-FM(5)............. Hot Adult Contemporary Women 25-44 4 9+
KJCE-AM(5)............. Urban Adult Contemporary Adults 35-54 12 13
Buffalo, NY............. 41 2 31.1
WJYE-FM................ Soft Adult Contemporary Women 35-54 1 2
WYRK-FM................ Country Adults 25-54 3 3
WSJZ-FM................ Smooth Jazz Adults 35-54 6 8
WBLK-FM*............... Urban Adults 18-34 6 10
WECK-AM................ Big Band Adults 45+ 2 15+
Las Vegas, NV........... 42 1 30.3
KMZQ-FM................ Soft Adult Contemporary Women 35-54 4 2+
KLUC-FM................ Contemporary Hit Radio Adults 18-34 3 8
KMXB-FM................ Hot Adult Contemporary Women 25-44 5 10
KXTE-FM................ Alternative Rock Adults 18-34 9 12
KVEG-AM................ Sports Men 35-54 16+ 19+
KXNO-AM................ Casino Adults 18+ -- --
</TABLE>
A-V-12
<PAGE>
<TABLE>
<CAPTION>
STATION RANK STATION
MARKET MARKET MARKET STATION PRIMARY IN PRIMARY RANK IN
RANKING BY REVENUE REVENUE BROADCASTING DEMOGRAPHIC DEMOGRAPHIC ADULTS
MARKET/STATION(1) REVENUE(2) RANK(2) PERCENT(2) FORMAT TARGET(3) TARGET(4) 25-54(4)
- ----------------- ---------- ------- ---------- ------------ ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
San Jose, CA............ 43 1 37.6
KBAY-FM*............... Soft Adult Contemporary Women 35-54 3 2
KSJO-FM................ Album Oriented Rock Men 18-34 1 5
KUFX-FM................ Classic Rock Men 25-49 9+ 13+
KKSJ-AM*............... Nostalgia Adults 45+ 4 26+
West Palm Beach, FL(6).. 48 1 54.5
WEAT-FM*............... Soft Adult Contemporary Women 35-54 1 2
WIRK-FM................ Country Adults 25-54 3 3
WKGR-FM................ Classic Rock Men 25-49 1 4
WPBZ-FM*............... Alternative Rock Adults 18-34 1 5
WOLL-FM*............... Oldies Adults 35-54 5 7
WBZT-AM................ News/Talk Adults 35+ 7 18+
WEAT-AM*............... News/Talk Adults 35+ 12 29+
WHLG-FM*............... N/A N/A -- --
Rochester, NY........... 54 1 42.3
WCMF-FM................ Album Oriented Rock Men 18-34 1 1
WPXY-FM*............... Contemporary Hit Radio Adults 18-34 1 2+
WRMM-FM................ Soft Adult Contemporary Women 35-54 1 4
WHTK-AM*............... Sports/Talk Men 35-54 13+ 16
Dayton, OH.............. 55 1 50.8
WMMX-FM................ Hot Adult Contemporary Women 25-44 1 2
WLQT-FM*............... Soft Adult Contemporary Women 35-54 3 3
WTUE-FM................ Album Oriented Rock Men 18-34 1 4
WXEG-FM*............... Alternative Rock Adults 18-34 3+ 8
WONE-AM................ Nostalgia Adults 45+ 5 17+
WBTT-FM*(7)............ Contemporary Hit Radio Adults 18-34 N/A N/A
Fresno, CA.............. 62 1 47.6
KMJ-AM................. News/Talk Adults 35+ 1 1
KSKS-FM................ Country Adults 25-54 10+ 10+
KOQO-FM*............... Spanish Adults 18-54 12 12
KKDJ-FM(8)............. Spanish Romance Adults 18-54 N/A N/A
KNAX-FM*............... Country Adults 25-54 14 14
KRBT-FM*(8)............ Hot Adult Contemporary Women 25-44 N/A N/A
KOQO-AM*............... Spanish Adults 18-54 N/A N/A
</TABLE>
A-V-13
<PAGE>
- --------
N/A Not applicable.
* Included in American Probable Transactions. Several of these stations are
being programmed and marketed by American pursuant to LMAs.
+ Tied.
(1) Actual community of license may differ from the metropolitan market
served. This listing and the accompanying notes do not correspond to the
formal call signatures recognized by the FCC, which do not include the "-
AM" suffix or, in most instances, the "-FM" suffix.
(2) For information concerning source and calculation of "Market Ranking by
Revenue", "Market Revenue Rank" and "Market Revenue Percent", see the
first table under "Summary--The Companies--American" in this Proxy
Statement.
(3) Due to variations that may exist within the same station programming
format (such as variations in the tempo of the music or the age of the
songs broadcast), the primary demographic target may be different even
though the station programming format is the same.
(4) "Station Rank in Primary Demographic Target" is the ranking of the station
among all radio stations in its market that are ranked in its target
demographic group and is based on the station's average persons share in
the primary demographic target in the applicable Metro Survey Area,
Average Quarter Hour Share, Monday through Sunday, 6:00 A.M. to Midnight,
according to the Spring 1996 Arbitron reports. Arbitron is the generally
accepted industry source for statistical information concerning audience
ratings. The table includes stations having at least a 0.1% market share.
Due to the nature of listener surveys, other radio rating services may
report different rankings; however, American does not believe that any
radio rating service other than Arbitron is accorded significant weight in
the radio broadcast industry. "Station Rank in Adults 25-54" is also based
on the Spring 1996 Arbitron reports. The information provided herein
regarding Arbitron's audience listening estimates is based on Arbitron's
copyrighted and proprietary data and estimates concerning the applicable
station's average quarter hour persons share, Monday-Sunday, 6:00 A.M.-
Midnight, from the applicable Spring 1996 Arbitron reports for the
demographic, daypart and metro areas listed. Stations referenced herein
are ranked according to calculations made by Arbitron based on Arbitron's
data and estimates for stations that have met Arbitron's minimum reporting
standards for the applicable market and survey.
(5) These stations are subject to an LMA with American, which also has an
option to acquire them. See Notes to Consolidated Financial Statements of
American in the American 10-K.
(6) Consummation of the American Probable Transactions will require American
to dispose of one FM station in West Palm Beach.
(7) The format and target demographic of WBTT-FM were changed in August 1996.
(8) The format and target demographic of KKDJ-FM and KRBT-FM were changed in
August 1996.
ADVERTISING SALES
Virtually all of American's revenues are generated from the sale of local
and national advertising for broadcast on its radio stations. During each of
1994 and 1995, approximately 77% and 23% of American's net revenues were
generated from local and national advertising, respectively. American believes
that radio is an efficient and cost-effective means for advertisers to reach
specific demographic groups. Advertising rates charged by radio stations are
based primarily on (i) a station's share of the audience in the demographic
groups targeted by advertisers, (ii) the number of stations in the market
competing for the same demographic groups, and (iii) the supply of and demand
for radio advertising time. Rates are generally highest during morning and
afternoon commuting hours.
Depending on the format of a particular station, there are predetermined
numbers of advertisements that are broadcast each hour. American determines
the number of advertisements broadcast hourly that can maximize available
revenue dollars without jeopardizing listening levels. Although the number of
advertisements broadcast during a given time period may vary, the total number
of advertisements broadcast on a particular station generally does not vary
significantly from year to year. As is typical of the broadcasting industry,
American's stations respond to changing demand for advertising inventory by
varying prices based on supply and demand rather than by varying the target
inventory level for a particular station. Most changes in revenues are
therefore the result of pricing changes rather than changes in the available
inventory.
A-V-14
<PAGE>
Local and most regional advertising sales are made by a station's sales
staff. To achieve greater access to potential advertising dollars, American's
sales force focuses on establishing direct relationships with local
advertisers. National sales are made by firms specializing in such sales which
are compensated on a commission-only basis. The majority of advertising
contracts run for only a few weeks.
Advertising sales in connection with its sports network generated
approximately 7.6% of American's revenues during 1995. American believes that
sports broadcasting, absent unusual circumstances, is a stable source of
advertising revenues. There is less competition for the sports listener, since
only one radio station can offer a particular game. In addition, due to the
higher degree of audience predictability, sports advertisers tend to sign
contracts which are generally longer term and more stable than those with
American's other advertisers. American's sports network also benefits from a
dedicated and experienced sales force that has specialized expertise in sports
advertising.
American believes its multi-station combinations give it significant
advantages in the competition for advertising dollars. A leading group in a
market better positions American to access a significant share of various
demographic segments, making its stations more attractive to advertisers
seeking to reach a given segment. In addition, management believes the larger
size of the American organization attracts a higher quality sales force, a key
asset for the profitability of a radio station.
COMPETITION
Radio broadcasting is a highly competitive business. Each of American's
radio stations competes for audience share and advertising revenue directly
with other radio stations, as well as with other media such as billboards,
newspapers, television, compact discs, music videos and mobile telephones
within their respective markets. There are typically other well-capitalized
firms competing in the same geographic markets as American, many of which have
substantial financial resources. With the elimination of restrictions on the
number of radio stations which may be owned nationally by a single entity and
the liberalization of local ownership restrictions affected by the
Telecommunications Act, the radio industry is experiencing a consolidation of
ownership, as a result of which competition may intensify as companies with
substantial resources emerge.
The financial success of each of American's radio stations is dependent
principally upon its share of the overall advertising revenue within its
geographic market, its promotion and other expenses incurred to obtain that
revenue and the economic health of the geographic market. A radio station's
advertising revenues are, in turn, highly dependent upon audience share. Radio
station operators are subject to the possibility of another station changing
programming formats to compete directly for listeners and advertisers or
launching an aggressive promotional campaign in support of an already existing
competitive format. If a competitor were to attempt to compete in either of
these fashions, the broadcast cash flow of American's affected station could
decrease due to increased promotional and other expenses and/or lower
advertising revenues resulting from lower ratings. There can be no assurance
that any one of American's radio stations will be able to maintain or increase
its current audience ratings and advertising revenue market share.
In addition to management experience, factors that may materially influence
a station's competitiveness include the station's rank in its market, its
signal strength, audience characteristics, local program acceptance and the
characteristics of other stations in the market area. American attempts to
improve its competitive position in each market by devoting extensive research
to its stations' programming, implementing advertising campaigns aimed at the
demographic groups for which its stations program and managing its sales
efforts to attract a larger share of advertising dollars.
Radio broadcasting is also subject to competition from new media
technologies that are being developed or introduced, such as the delivery of
audio programming by cable television systems or the introduction of DAB. DAB
may deliver to nationwide and regional audiences by satellite multi-channel,
multi-format digital radio services with sound quality equivalent to compact
discs. American cannot predict the effect, if any, that any such new
technologies may have on the radio broadcasting industry. Another possible
competitor to traditional radio
A-V-15
<PAGE>
is IBOC digital radio. IBOC could provide multi-channel, multi-format digital
radio services in the same bandwidth currently occupied by traditional AM and
FM radio services. See "--Federal Regulation of Radio Broadcasting". The radio
broadcasting industry historically has grown in terms of total revenues
despite the introduction of new technologies for the delivery of entertainment
and information, such as television broadcasting, cable television, audio
tapes and compact disks.
EMPLOYEES
At October 1, 1996, American employed 1,178 full time and 575 part time
persons. American has three agreements with the American Federation of
Television and Radio Artists ("AFTRA") covering various on-air personnel at
its Boston stations and at two of its Hartford stations. American also has
agreements with the International Brotherhood of Electrical Workers, AFL-CIO
("IBEW") in Boston expiring on April 30, 1997 and in Fresno, expiring on March
1, 1997. American considers its relations with its employees, AFTRA and IBEW
to be satisfactory. See "Risk Factors--Dependence on Key Personnel" for
information with respect, among other things, to the dependence of American
upon the performance of certain key individuals, particularly the executive
officers and general managers and high-profile on-air announcers of its
stations.
COMMUNITY INVOLVEMENT
American considers its community involvement to be of considerable
importance, and, to that end, each of its stations participates in many
community programs, fund raisers and activities that benefit a wide variety of
organizations. Charitable organizations that have been the beneficiaries of
American's telethons, marathons, walkathons, swimathons, parades, food banks,
fairs and festivals include, among others, the American Cancer Society,
American Heart Association, Big Brothers, Big Sisters, Red Cross, United Way,
Salvation Army, Jimmy Fund (Dana Farber Cancer Institute), St. Jude's Hospital
and many other organizations.
FEDERAL REGULATION OF RADIO BROADCASTING
The radio broadcasting industry is subject to extensive and changing
regulation over, governing among other things, technical operations, ownership
and business and employment practices, and certain types of program content
(including indecent and obscene program material).
The ownership, operation and sale of radio broadcast stations (including
those licensed to American) are subject to the jurisdiction of the FCC, which
acts are under authority granted by the Communications Act. The Communications
Act prohibits the assignment of an FCC license or any transfer of control of
an FCC licensee without the prior written approval of the FCC. In determining
whether to grant requests for consents to such assignments or transfers, and
in determining whether to grant or renew a radio broadcast license, the FCC
considers a number of factors pertaining to the licensee (and proposed
licensee) including compliance with alien ownership restrictions and rules
governing the multiple ownership and cross-ownership of broadcast and other
media properties, the "character" of the applicant and those persons or
entities holding "attributable" interests in the applicant and compliance with
the Anti-Drug Abuse Act of 1988. Among other things, the FCC assigns frequency
bands for radio broadcast stations; issues, renews, revokes and modifies radio
broadcast station licenses; regulates transmitting equipment used by radio
broadcast stations; adopts and implements regulations and policies that
directly or indirectly affect the ownership, operation, program content and
employment and business practices of radio broadcast stations. The FCC also
has the power to impose penalties for violations of its rules and the
Communications Act.
On February 8, 1996, the President signed the Telecommunications Act which
substantially amended the Communications Act. The Telecommunications Act,
among other things, eliminated the national radio broadcast ownership
restrictions in the FCC's broadcast ownership regulations and raised the
ceiling on the number of radio broadcast stations that a single entity may own
in a local radio market. The precise number of stations that may be commonly
owned in a particular local market depends upon the number of commercial radio
stations serving the local market.
A-V-16
<PAGE>
The following is a brief summary of certain provisions of the Communications
Act and specific FCC rules and policies. Reference should be made to the
Communications Act, the FCC's rules and the public notices and rulings of the
FCC for further information concerning the nature and extent of federal
regulation of radio broadcast stations.
License Renewal. Under present FCC rules, radio broadcast licenses are
granted for maximum terms of seven years and upon application may be renewed
for additional terms. The Telecommunications Act now permits the FCC to grant
radio broadcast licenses for terms up to eight years. The FCC has begun a rule
making proceeding in which it has proposed to extend the license term for
radio broadcast stations to the full eight year term permitted by the
Telecommunications Act. Broadcast licenses may be renewed through an
application to the FCC and licensees are entitled to renewal expectancies. The
Communications Act authorizes the filing of petitions to deny against a
license renewal application during specified periods after the renewal
application has been filed. Interested parties, including members of the
public, may file petitions to deny as a means to raise issues concerning the
renewal applicant's qualifications. The Telecommunications Act removed the
opportunity for the filing of competing applications against an incumbent
licensee at renewal time. Instead, the FCC will renew broadcast licenses if
the incumbent meets three requirements: (1) the station has served the public
interest, convenience and necessity; (2) the licensee has not seriously
violated the Communications Act or the FCC rules; and (3) there have been no
other violations, which, taken together, would constitute a pattern of abuse
of the Communications Act or the FCC rules. If an applicant for renewal fails
to satisfy this tripartite standard, the FCC nevertheless may renew the
license on appropriate terms and conditions, including renewal for less than a
full license term. The FCC may not consider applications for the channel by
other parties until it first has decided to deny renewal to the incumbent.
Before denying renewal to an incumbent, the FCC must allow the licensee a
hearing on the licensee's alleged failure to satisfy the statutory standard.
The Communications Act now prohibits the FCC from considering whether another
licensee would be preferable until it first has determined that the incumbent
does not qualify for renewal. In recent years, there have been a number of
petitions to deny filed with respect to broadcast license renewal
applications, but in the vast majority of cases the FCC has renewed incumbent
operators' station licenses. Also, during certain periods when a renewal
application is pending, the transferability of the applicant's license may be
restricted. American is not aware of any facts or circumstances that would
prevent it from obtaining renewal of the radio broadcast licenses that it
holds. There can be no assurance, however, that each of American's licenses
will necessarily be renewed.
A-V-17
<PAGE>
The following table sets forth the expiration date of each station's main
FCC broadcast license and certain other information with respect to those
stations (a [*] indicates stations for which American (or the Seller) has
already filed a renewal application with the FCC and those marked with a [+]
indicates American Probable Transactions, except that stations to be disposed
of pursuant to American Probable Transactions are not listed):
FCC STATION LICENSE RENEWAL DATES
<TABLE>
<CAPTION>
STATION GEOGRAPHIC CURRENT LICENSE HAAT STATION POWER
CALL LETTERS MARKET SERVED(A) EXPIRATION DATE IN METERS(B) IN WATTS
- ------------ ---------------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
WBMX-FM Boston, MA April 1998 349 9,000
WRKO-AM Boston, MA April 1998 -- 50,000(dir)
WEEI-AM Boston, MA April 1998 -- 50,000(dir)
WEGQ-FM Boston, MA April 1998 131 50,000
+WAAF-FM Boston, MA April 1998 250 18,600
+WWTM-AM Boston, MA April 1998 -- 5,000
WQSR-FM Baltimore, MD October 2002 150 50,000
WBMD-AM Baltimore, MD October 2002 -- 710(non-d)(c)
+WWMX-FM Baltimore, MD October 2002 128 50,000
+WOCT-FM Baltimore, MD October 2002 371 7,400
WBGR-AM Baltimore, MD October 2002 -- 2,500/66
KUFO-FM Portland, OR February 1998 500 100,000
KDBX-FM Portland, OR February 1998 406 2,000
KUPL-FM Portland, OR February 1998 337 100,000
KKJZ-FM Portland, OR February 1998 304 94,000
KBBT-AM Portland, OR February 1998 -- 5,000
KYMX-FM Sacramento, CA December 1997 145 50,000
+KSFM-FM Sacramento, CA December 1997 152 50,000
KSSJ-FM Sacramento, CA December 1997 252 41
+KMJI-AM Sacramento, CA December 1997 -- 5,000
KCTC-AM Sacramento, CA December 1997 -- 5,000
+KQPT-FM Sacramento, CA December 1997 100 115(h)/105(v)
+KXOA-AM Sacramento, CA December 1997 -- 5,000/1,000
WZMX-FM Hartford, CT April 1998 259 17,000
WRCH-FM Hartford, CT April 1998 381 7,500
WTIC-AM Hartford, CT April 1998 -- 50,000(dir)
WTIC-FM Hartford, CT April 1998 247 20,000
WYRK-FM Buffalo, NY June 1998 119 50,000
WJYE-FM Buffalo, NY June 1998 146 50,000
WECK-AM Buffalo, NY June 1998 -- 1,000(non-d)
+WBLK-FM Buffalo, NY June 1998 122 50,000
WSJZ-FM Buffalo, NY June 1998 177 93,000
KMZQ-FM Las Vegas, NV October 1997 337 100,000
KMBX-FM Las Vegas, NV October 1997 369 100,000
KLUC-FM Las Vegas, NV October 1997 360 100,000
KXTE-FM Las Vegas, NV October 1997 1,138 24,500
KXNO-AM Las Vegas, NV October 1997 -- 10,000/2,500
KVEG-AM Las Vegas, NV October 1997 -- 50,000/25,000
KSJO-FM San Jose, CA December 1997 142 50,000
KUFX-FM San Jose, CA December 1997 773 1,230
+KBAY-FM San Jose, CA December 1997 786 14,500
+KKSJ-AM San Jose, CA December 1997 -- 5,000
</TABLE>
A-V-18
<PAGE>
<TABLE>
<CAPTION>
STATION GEOGRAPHIC CURRENT LICENSE HAAT STATION POWER
CALL LETTERS MARKET SERVED(A) EXPIRATION DATE IN METERS(B) IN WATTS
- ------------ ------------------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
WIRK-FM West Palm Beach, FL February 2003 106 100,000
WBZT-AM West Palm Beach, FL February 2003 -- 5,000(dir-n)
WKGR-FM West Palm Beach, FL February 2003 421 100,000
+WPBZ-FM West Palm Beach, FL February 2003 297 50,000
+WHLG-FM West Palm Beach, FL February 2003 88 22,000
+WEAT-FM West Palm Beach, FL February 2003 388 100,000
+WEAT-AM West Palm Beach, FL February 2003 -- 3,000/1,000
+WOLL-FM West Palm Beach, FL February 2003 138 1,260/
WCMF-FM Rochester, NY June 1998 137 50,000
WRMM-FM Rochester, NY June 1998 195 27,000
+WPXY-FM Rochester, NY June 1998 122 50,000
+WHTK-AM Rochester, NY June 1998 -- 5,000
WMMX-FM Dayton, OH October 2003 128 50,000
WTUE-FM Dayton, OH October 2003 152 50,000
WONE-AM Dayton, OH October 2003 -- 5,000(dir-n)
+WXEG-FM Dayton, OH October 2003 100 3,000
+WLQT-FM Dayton, OH October 2003 152 50,000
+WBTT-FM Dayton, OH October 2003 100 6,000
KSKS-FM Fresno, CA December 1997 583 68,000
KKDJ-FM Fresno, CA December 1997 597 2,400
KMJ-AM Fresno, CA December 1997 -- 5,000
+KNAX-FM Fresno, CA December 1997 606 2,070
+KRBT-FM Fresno, CA December 1997 328 50,000
+KOQO-FM Fresno, CA December 1997 594 225
+KOQO-AM Fresno, CA December 1997 -- 5,000/2,500
</TABLE>
- --------
(a) A broadcast station's market may be different from its community of
license. This listing and the accompanying notes do not correspond to the
formal call signs issued by the FCC which do not include the "-AM" suffix
or, in most instances, the "-FM" suffix.
(b) The signal coverage area of radio stations is determined, in part, by the
station's operating power. The nominal power of an AM station (in watts)
is chiefly a function of the station's transmitter power output, less
dissipative power losses and any directional antenna adjustments. AM
directional ("dir"), AM directional at nighttime only (dir- n), and AM
nondirectional ("non-d") antennas are noted in the margin. For FM
stations, coverage is chiefly a function of the antenna height above
average terrain (HAAT) and the effective radiated power of the station.
(c) Station authorized to operate in the daytime only.
(d) Many AM stations are licensed to operate with reduced power during
nighttime broadcasting hours. Both power ratings are shown, where
applicable.
Ownership Matters. The FCC's broadcast multiple ownership rules restrict the
number of radio broadcast stations one person or entity may own, operate or
control in a local market. The Telecommunications Act eliminated all of the
FCC's restrictions on the number of FM and AM radio stations that an entity
may own nationwide. The Telecommunications Act raised the limitation on the
number of radio broadcast stations that a single entity may own in a given
local market, as follows:
(i) In radio markets with 14 or fewer commercial radio stations, one
person or entity may hold attributable interests in up to five radio
stations, no more than three of which are in any one service (i.e., AM or
FM), as long as the commonly owned stations amount to no more than 50% of
the commercial radio stations in that market;
A-V-19
<PAGE>
(ii) In radio markets with between 15 and 29 commercial radio stations,
one person or entity may hold attributable interests in up to six radio
stations, no more than four of which are in any one service;
(iii) In radio markets with between 30 and 44 commercial radio stations,
one person or entity may hold attributable interest in up to seven radio
stations, no more than four of which are in any one service; and
(iv) In radio markets with 45 or more commercial radio stations, one
person or entity may hold attributable interests in up to eight radio
stations, no more than five of which are in any one service.
The FCC rules also generally restrict the common ownership, operation or
control of (i) a radio broadcast station and a television broadcast station
serving the same local market, and (ii) a radio broadcast station and a daily
newspaper serving the same local market. Under these "cross-ownership" rules,
American, absent waivers, would not be permitted to acquire an attributable
interest in any daily newspaper or television broadcast station (other than a
low-power television station) in a local market where it then owned any radio
broadcast station. However, on October 1, 1996, the FCC began a proceeding in
which it is considering altering or eliminating its newspaper-radio cross-
ownership prohibition and its newspaper-radio cross-ownership waiver
standards. If certain conditions are satisfied, the FCC's rules provide for
the liberal grant of a waiver of the rule prohibiting common ownership of
radio and television stations in the same geographic market in the top 25
television markets. The Telecommunications Act now requires that the FCC apply
this policy to the top 50 television markets. American is not aware of any
reason why these cross-ownership rules would require any change in American's
current ownership of radio broadcast stations.
The FCC generally applies its television/radio/newspaper cross-ownership
rules and its broadcast multiple ownership rules by considering the
"attributable" or "cognizable" interests held by a person or entity. A person
or entity may have an attributable interest in a radio station, television
station or daily newspaper by being an officer, director, partner or 5% or
greater voting shareholder of a company that owns that station or newspaper.
The FCC's attribution rules include a number of exceptions to the general
definition of "attributable" interests. If an interest is attributable, the
FCC treats the person or entity that holds that interest as an "owner" of the
radio station, television station or daily newspaper in question for purposes
of ownership rules.
With respect to a corporation, officers and directors and person or entities
that directly or indirectly can vote five percent or more of the corporation's
stock (10% or more of such stock in the case of insurance companies,
investment companies, bank trust departments and certain other "passive
investors" that hold such stock for investment purposes only) generally are
attributed with ownership of whatever radio stations, television stations and
daily newspapers the corporation owns.
With respect to a partnership, the interest of a general partner is
attributable, as is the interest of any limited partner who is not "insulated"
from "material involvement" in the media-related activities of the partnership
within the meaning of applicable FCC rules and policies. Debt instruments,
non-voting stock, options and warrants for voting stock that have not yet been
exercised, limited partnership interests where the limited partner is
"insulated" from "material involvement" in the media-related activities of the
partnership, and minority voting stock interests in corporations where there
is a single holder of more than 50% of the outstanding voting stock, generally
do not subject their holders to attribution.
Because of these multiple and cross-ownership rules, if a stockholder,
officer or director of American acquires an "attributable" interest in
American, such stockholder, officer or director may violate the FCC's rules if
that person or entity also has an attributable interest in television
stations, daily newspapers, or other radio broadcast stations that serve the
same markets as American's radio broadcast stations. If an attributable
stockholder, officer or director of American should be in violation of any of
these ownership rules, American might be unable to obtain from the FCC one or
more authorizations needed to conduct its radio broadcast business and might
be unable to obtain FCC consents for certain future acquisitions. The American
Restated Certificate has provisions designed to restrict the ownership of the
American Class B Common Stock to prevent a breach or violation of or a default
under the "cross-ownership" and multiple ownership rules of the FCC. The
A-V-20
<PAGE>
American Restated Certificate provides that, in the event of a violation of
any of these prohibitions, American has the right, in its sole and absolute
discretion, to require a conversion of American Class B Common Stock into
American Class C Common Stock. In addition, the American Restated Certificate
authorizes the Board of Directors of American to adopt such provisions as it
deems necessary to enforce these prohibitions.
The FCC also has a "cross-interest" policy that under certain circumstances
could prohibit a person or entity with an attributable interest in a broadcast
station, daily newspaper or cable system from having a "meaningful"
nonattributable interest in another broadcast station or daily newspaper in
the same local market. Among other things "meaningful" interests could include
significant equity interests (including non-voting stock, voting stock and
limited partnership interests) and significant employment positions. The FCC
has issued a further notice of proposed rule making in a long-pending
proceeding under which the FCC is considering whether to modify this policy.
Under the Communications Act, a broadcast license may not be granted to or
held by any corporation that has more than one-fifth of its capital stock
owned or voted by aliens or their representatives, by foreign government or
their representatives, or by non-U.S. corporations. Under the Communications
Act, a broadcast license also may not be granted to or held by any corporation
that is controlled, directly or indirectly, by any other corporation more than
one-fourth of whose capital stock is owned or voted by aliens or their
representatives, by foreign governments or their representatives, or by non-
U.S. corporations, unless the FCC determines that a higher level of non-U.S.
ownership or control would not be contrary to the public interest. These
restrictions apply in modified form to other forms of business organizations,
including partnerships. American, all of whose FCC licenses are owned by one
or more subsidiaries, may, therefore, be restricted from having more than one-
fourth of its stock owned or voted by aliens, foreign governments or non-U.S.
corporations. The American Restated Certificate restricts the voting and
transfer of American capital stock, including American Class A Common Stock,
in accordance with the Communications Act and the rules of the FCC, to
prohibit ownership of American's outstanding capital stock (or the voting
rights it represents) by or for the account of aliens or corporations
otherwise subject to domination or control by aliens.
Programming and Operation. The Communications Act requires broadcasters to
serve the "public interest". Since the late 1980's, the FCC gradually has
relaxed or eliminated many of the more formalized procedures it developed to
promote the broadcast of certain types of programming responsive to the needs
of a station's community. Nevertheless, a broadcast licensee continues to be
required to present programming in response to community problems, needs and
interest and to maintain certain records demonstrating its responsiveness. The
FCC will generally consider complaints from listeners concerning a broadcast
station's programming when it evaluates the licensee's renewal application,
but such complaints may be filed and considered at any time. Stations also
must follow various FCC rules that regulate, among other things, political
advertising, the broadcast of obscene or indecent programming, sponsorship
identification, the broadcast of contests and lotteries and technical
operation (including limits on human exposure to radio frequency energy). From
time to time, complaints may be filed against American's stations alleging
violations of these or other rules. In addition, a complaint is pending
against a station licensed to American alleging violation of the political
broadcasting rules by discriminatory political sales practices. American
believes that these complaints will not, either separately or in the
aggregate, result in either monetary forfeitures of a material nature or any
other regulatory action which might have a materially adverse effect on
American's stations or FCC licenses.
In addition, licensees must develop and implement programs designed to
promote equal employment opportunities and must submit reports to the FCC on
these matters annually and in connection with the licensee's renewal
application. The FCC has begun a rule making proceeding to revise its equal
employment opportunity rules. At this time, however, American cannot predict
what changes, if any, the FCC will implement, or the effect of those changes
on American's current equal employment opportunity programs. The FCC rules
also prohibit a broadcast licensee from simulcasting more than 25% of its
programming on another station in the same broadcast service (that is, AM-AM
or FM-FM). The simulcasting restriction applies if the licensee owns both
radio broadcast stations or owns one and programs the other through a local
marketing agreement.
A-V-21
<PAGE>
Local Marketing Agreements. In recent years, a number of radio stations,
including certain of American's stations, have entered into what are referred
to as "local marketing agreements" ("LMAs"), "time brokerage agreements"
("TBAs") or joint sales and service agreements. These agreements take various
forms. Separately owned and licensed stations may agree to function
cooperatively with respects to certain other matters, subject to compliance
with the antitrust laws and the FCC's rules and policies, including the
requirement that the licensee of each station maintain independent control
over the programming and other operations of its own station. The FCC has held
that such agreements do not violate the Communications Act as long as the
licensee of the radio broadcast station that is being substantially programmed
by another entity maintains complete responsibility for, and control over,
operations of its station and otherwise ensures compliance with applicable FCC
rules and policies.
A radio broadcast station that brokers time on another radio broadcast
station or engages in a TBA or LMA with a radio broadcast station in the same
market will be considered to have an attributable ownership interest in the
brokered radio station for purposes of the FCC's local ownership rules, if the
arrangement covers more that 15% of the brokered station's weekly broadcast
hours. As a result, a radio broadcast station may not enter into a TBA or LMA
that allows it to program more than 15% of the broadcast time, on a weekly
basis, of another local radio broadcast station that it could not own under
the FCC's local multiple ownership rules. Also, as described above, FCC rules
prohibit a radio broadcast licensee from simulcasting more than 25% of its
programming on another radio broadcast station in the same broadcast service
(that is, AM-AM or FM-FM) where the two stations serve substantially the same
geographic area, whether the licensee owns both stations or owns one station
and programs the other through a TBA or LMA. Thus far, the FCC has not
considered what relevance, if any, a TBA or LMA may have upon its evaluation
of a licensee's performance at renewal time.
Failure to observe these or other FCC rules and policies may result in the
imposition of various sanctions, including admonishment, fines, the grant of
"short" (less than the full) renewal terms or, for particularly egregious
violations, the denial of a license renewal application, the revocation of FCC
licenses or the denial of FCC consent to acquire additional broadcast
properties.
Digital Audio Broadcasting. The FCC recently has allocated spectrum to a new
technology, digital audio broadcasting ("DAB"), to deliver satellite-based
audio programming to a national or regional audience and is considering
regulations for a DAB service. DAB may provide a medium for the delivery by
satellite or terrestrial means of multiple new audio programming formats with
compact disc quality sound to local and national audiences. It is not known at
this time whether this technology also may be used in the future by existing
radio broadcast stations either on existing or alternate broadcasting
frequencies. In addition, applications by several entities currently are
pending at the FCC for authority to offer multiple channels of digital,
satellite-delivered S-Band aural services that could compete with conventional
terrestrial radio broadcasting. These satellite radio services use technology
that may permit higher sound quality than is possible with conventional AM and
FM terrestrial radio broadcasting. Thus far, the FCC has not granted the
pending requests for authorizations to offer satellite radio, nor has it
adopted regulations for the proposed satellite radio service. A rule making
proceeding is pending before the FCC to adopt DAB regulations, however. There
are currently several pending satellite DAB, and the FCC has begun rulemaking
to establish services and operational standards for satellite DAB. The FCC has
granted at least one applicant a waiver to begin satellite construction.
Implementation of DAB would provide an additional audio programming service
that could compete with American's radio stations for listeners, but the
effect upon American cannot be predicted.
Future Changes. In January 1995, the FCC issued a further notice of proposed
rule making that combined several long-pending proceedings to consider changes
in its ownership rules and policies. In the new proceeding, the FCC is
considering, among other things, (i) whether to make non-voting stock
interests attributable; (ii) whether to change attribution thresholds; (iii)
how to treat limited liability companies for purposes of attribution; (iv)
whether to extend the cross-interest policy to require review of multi-layered
business relationships, including debt relationships, that now are not subject
to scrutiny; (v) modification of the single majority stockholder exemption
from attribution; and (vi) whether to change the insulation standards for non-
attribution
A-V-22
<PAGE>
of limited partnership interests. In the event the legislative or regulatory
changes discussed in the previous paragraph do not occur and the FCC instead
adopts the most restrictive alternatives available to it, American could be
required to restructure some business relationships and interests in
particular markets and could be required, in assessing acquisition and
compliance strategies, to take into account additional interests held by
itself and its principals that are now exempt from FCC ownership regulation.
Also in January 1995, the FCC issued a further notice of proposed rule
making to combine pending proceedings on television ownership rules. In the
proceeding, the FCC will consider, among other things, revisions to its radio-
television cross-ownership rules and policies. At present, one entity may not
acquire both a radio and a television station in the same market except with a
waiver granted by the FCC. The FCC is considering whether to retain this rule,
eliminate it entirely, or develop a standard for same-market radio-television
ownership based upon the existence of a sufficient number of other separately
owned, operated or controlled broadcast licensees.
* * *
The foregoing is only a brief summary of certain provisions of the
Communications Act, the Telecommunications Act and of specific FCC and other
regulations. Reference should be made to the Communications Act, the
Telecommunications Act, FCC regulations, and the public notices and rulings of
the FCC for further information concerning the nature and extent of federal
regulation of broadcast stations. In addition to the Telecommunications Act,
the Congress and the FCC have had under consideration, and may in the future
consider and adopt, new laws, regulations and policies regarding a wide
variety of matters that could, directly or indirectly, affect the operation,
ownership and profitability of American's radio broadcast stations, result in
the loss of audience share and advertising revenues for American's radio
broadcast stations or affect its ability to acquire additional radio broadcast
stations or finance such acquisitions. Such matters may include changes to the
comparative licensing and hearing process; proposals to impose spectrum use or
other fees on FCC licensees; changes to the FCC's equal employment opportunity
regulations and other matters relating to involvement of minorities and women
in the broadcasting industry; proposals to change rules relating to political
broadcasting; technical and frequency allocation matters; changes in broadcast
cross-interest, multiple ownership and cross-ownership policies; changes to
technical broadcast requirements; proposals to allow telephone companies to
deliver audio and video programming to homes in their service areas; and
proposals to alter provisions of the tax laws affecting broadcast operations
and acquisitions.
American cannot predict whether or when any proposed changes will be adopted
nor can it predict what other matters might be considered in the future, nor
can it judge in advance what impact, if any, the implementation of any of
these proposals or changes might have on its business.
A-V-23
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of American are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---- --- ---------
<S> <C> <C>
Steven B. Dodge(1)...... 51 Chairman of the Board, President and Chief Executive Officer
Thomas H.
Stoner(1)(2)(3)........ 61 Chairman of the Executive Committee of the Board
Joseph L. Winn.......... 45 Treasurer, Chief Financial Officer and Director
Don P. Bouloukos........ 48 Co-Chief Operating Officer
John R. Gehron.......... 50 Co-Chief Operating Officer
David Pearlman.......... 46 Co-Chief Operating Officer
Charlton Buckley(1)..... 59 Director
Arnold L.
Chavkin(1)(2)(3)....... 45 Director
James H. Duncan,
Jr.(2)(4).............. 49 Director
Donald B. Hebb, Jr...... 54 Director
Charles Peebler(2)(4)... 60 Director
</TABLE>
- --------
(1) Member of the Executive Committee; Mr. Stoner is the Chairman of the
Executive Committee.
(2) Member of the Audit Committee; Mr. Chavkin is the Chairman of the Audit
Committee.
(3) Member of the Compensation Committee; Mr. Stoner is the Chairman of the
Compensation Committee.
(4) Independent director to be elected by holders of the American Class A
Common Stock. See "Certain Transactions--Other Transactions".
The Board of Directors of American currently consists of eight members. All
directors hold office until the annual meeting of the stockholders of American
next following their election or until their successors are elected and
qualified. The holders of the shares of American Class A Common Stock, voting
separately as a class, will be entitled to elect two independent directors.
Each executive officer is appointed annually by the Board of Directors and
serves at the discretion of the Board. It is a condition of the obligations of
American and EZ to consummate the Merger, that American and Arthur Kellar and
Alan Box, the principal stockholders of EZ, enter into the Stockholder
Agreement, pursuant to which, subject to certain conditions relating to the
continued ownership of American Class A Common Stock by such persons, that
they will have the right to nominate two persons to serve as directors of
American. It is anticipated that Messrs. Kellar and Box will be so nominated
and that Mr. Kellar will also be elected to the Executive Committee and the
Compensation Committee.
Steven B. Dodge has been Chairman of the Board, President and Chief
Executive Officer since the founding of American. Mr. Dodge was the founder in
1988 of Atlantic. Prior to forming Atlantic, Mr. Dodge served as Chairman and
Chief Executive Officer of American Cablesystems Corporation, a cable
television company he founded in 1978 and operated as a privately-held company
until 1986 when it completed a public offering in which its stock was priced
at $14.50 per share. American Cablesystems was merged into Continental
Cablevision, Inc. in 1988 in a transaction valued at more than $750 million,
or $46.50 per share. Mr. Dodge serves as a director of American Media, Inc.
and is a director of the National Association of Broadcasters (the "NAB").
Thomas H. Stoner has been Chairman of the Executive Committee and the
Compensation Committee of the Board since the founding of American. Mr. Stoner
founded Stoner in 1965. Stoner operated radio stations for over 25 years in
large, medium and small markets; at the time of the American Reorganization,
Stoner owned its original station (KGGO-AM in Des Moines) and thirteen other
stations in six markets and programmed and marketed another station pursuant
to a local marketing agreement. Mr. Stoner is a director of Gaylord Container
Corporation, a Trustee of Chesapeake Bay Foundation, and serves on the
Advisory Board of St. John's College.
Joseph L. Winn has been the Treasurer, Chief Financial Officer and a
director since the founding of American. In addition to serving as Chief
Financial Officer of American, Mr. Winn was Co-Chief Operating
A-V-24
<PAGE>
Officer responsible for Boston operations until May 1994 when Mr. Gehron
joined American. Mr. Winn served as Chief Financial Officer and a director of
the general partner of Atlantic since its organization. He also served as
Executive Vice President of the general partner of Atlantic from its
organization until June 1992, and as its President from June 1992 until the
organization of American. Prior to joining Atlantic, Mr. Winn served as Senior
Vice President and Corporate Controller of American Cablesystems since joining
that company in 1983.
Don P. Bouloukos joined American in August 1996 and became a Co-Chief
Operating Officer in September 1996. Prior to joining American, Mr. Bouloukos
served as President of Capital Cities/ABC owned radio stations for more than
ten years, having previously been Vice-President--Operations for ABC owned
radio stations. Mr. Bouloukos, as Vice President--Operations for ABC, had been
responsible for the daily operations of the station group which consisted of
twelve stations. In 1980, Mr. Bouloukos served as Vice President and General
Manager of WLS-AM/FM, the ABC owned station in Chicago and headed the AM
station there since May 1979. With 25 years of radio experience, Mr. Bouloukos
began his career at WFYR in Chicago before joining WLS-AM/FM.
John R. Gehron joined American in May 1994 as a director and Co-Chief
Operating Officer and served as a director from then until February 16, 1995.
With more than twenty years of radio experience, Mr. Gehron began his career
as a program director in Philadelphia, New York and Chicago before he joined
Capital Cities/ABC in 1983 as Vice President--General Manager of WLS-AM/FM in
Chicago. In 1987, Mr. Gehron joined CBS and launched WODS-FM in Boston,
bringing the station rank from fifteen to first within three years. Mr. Gehron
joined Pyramid Broadcasting in 1989 as Vice President--General Manager for
WNUA-FM in Chicago which, under his aegis, established a national standard for
the "smooth jazz" format and became a major factor in the Chicago market.
David Pearlman has been Co-Chief Operating Officer since the founding of
American, and served as a director from then until February 16, 1995. Mr.
Pearlman organized Multi Market in 1990. Mr. Pearlman has over 24 years of
radio experience that includes 14 years at Westinghouse where, in a capacity
of vice president/general manager, he launched an all news format on WMAQ-AM
in Chicago and negotiated the country's first FM sports rights agreement in
Houston at KODA-FM, which station became one of Westinghouse's top performing
radio stations under his management. Mr. Pearlman was the first three time
winner of Westinghouse's Winner's Circle Award, signifying management
excellence. In addition, Mr. Pearlman was the president and chief executive
officer of First City Broadcasting, a privately owned radio operating group
that experienced significant performance gains in key markets under his
leadership.
Mr. Buckley was elected a director in August 1996. In connection with
American's merger with Henry Broadcasting Company ("HBC"), American entered
into an agreement with certain stockholders of HBC pursuant to which such
stockholders are entitled to nominate a member of the Board of Directors. Mr.
Buckley, the President, Chairman and Chief Executive Officer of HBC, was
nominated for such directorship. Mr. Buckley is the founder, President and
Chief Executive Officer of HBC. Mr. Buckley is also President and 100% owner
of Steele Park Resort, Inc., which owns and operates a resort on Lake
Berryessa in California's Napa Valley, and is a co-founder of World Asphalt
Company, a manufacturer of roofing products located in Sacramento, CA. Mr.
Buckley has been involved in the radio broadcast industry since 1983 when the
company acquired its first stations in Portland, Oregon. Prior to that time,
Mr. Buckley was involved in the construction business.
Arnold L. Chavkin has been a director since the founding of American. Mr.
Chavkin is a general partner of Chase Capital Partners ("CCP"), previously
known as Chemical Venture Partners ("CVP"), which is a general partner of
Chase Equity Associates ("CEA"), one of American's stockholders, and
previously a principal stockholder of Multi Market. CEA also provided
financing to Back Bay as a part of the Back Bay Transaction and participated
in the 1994 Equity Financing. See "Certain Transactions--Back Bay Transaction"
and "--1994 Equity Financing." Mr. Chavkin has been a General Partner of CCP
and CVP since January 1992 and has served as the President of Chase
Investments, Inc. (previously known as Chemical Investments, Inc.) since March
1991. CCP, CEA and Chase Investments, Inc. are affiliates of The Chase
Manhattan Bank (National Association) ("Chase"), which, as successor to
Chemical Bank "Chemical"), is a co-agent and a lender, with
A-V-25
<PAGE>
an approximately 9.2% participation, under the American Credit Agreement.
Chase Securities Inc. (previously known as Chemical Securities, Inc.), an
affiliate of Chase, was one of the Underwriters in the public offering of the
American Senior Notes in February 1996. Mr. Chavkin is also a director of
Reading & Bates Corporation, Bell Sports Corporation, Forcenergy Gas
Exploration, Inc., CruisePhone, Inc., Truvision Cable, Inc., SMG, Inc.,
Centennial Security, Inc. and Envirotest Systems, Inc. Prior to joining
Chemical Investments, Inc., Mr. Chavkin was a specialist in investment and
merchant banking at Chemical for six years.
James H. Duncan, Jr. has been a director since the founding of American. Mr.
Duncan is the founder, chief executive officer and a 50% stockholder of
Duncan's American Radio, Inc., which publishes the Duncan Guide and other
reports and publications about the radio broadcasting industry. Mr. Duncan had
served as a director of Stoner from 1983 until the merger with American in
1993. Mr. Duncan had also served as a director of Price Communications
Corporation (from whom American purchased WIRK-FM and WBZT-AM in West Palm
Beach) from 1992 to 1994, and as a director of Emmis Broadcasting Corporation
from 1985 to 1992.
Mr. Hebb has served a director of American since February 1996. Since
December 1993, he has been principally employed as Managing General Partner of
ABS Partners, the general partner of ABS Capital Partners, a private equity
fund and stockholder of American. See "Certain Transactions--1994 Equity
Financing." Prior to that date, he was principally employed as a Managing
Director of Alex. Brown & Sons Incorporated, investing private equity funds,
and prior thereto served as President and Chief Executive Officer of Alex.
Brown Incorporated, the parent of Alex. Brown & Sons Incorporated. Alex. Brown
& Sons Incorporated has served as one of the managing underwriters in each of
American's public equity offerings and was one of the purchasers in the June
equity private placement of the Convertible Preferred Stock. Mr. Hebb is
currently a director of AMISYS Managed Care Systems, Inc., PowerCerv
Corporation and several private companies.
Charles Peebler was elected a director in May 1994. He is president and
chief executive officer of Bozell, Jacobs, Kenyon and Eckhardt, Inc., a major
advertising organization. Mr. Peebler served as a director of Stoner for more
than 12 years, from 1976 to 1988. Mr. Peebler also serves as a director or
trustee of Ultrafem Inc., Drake University and several other non-profit
organizations.
For information with respect to ownership of American Common Stock by
directors and officers of American, see "The Special Meetings--Ownership of
Securities--American".
A-V-26
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the annual and long-term compensation for the
years ended December 31, 1994 and 1995 of American's Chief Executive Officer
and each of the other executive officers whose salary and bonus exceeded
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------ ------------------------------
NAME AND OTHER ANNUAL SHARES UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION OPTIONS(3) COMPENSATION
------------------ ---- --------- ------- ------------ ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Steven B. Dodge......... 1994 $252,250 -- -- 150,000 --
Chairman of the Board, 1995 $252,625 -- -- -- --
President and Chief
Executive Officer
Joseph L. Winn(2)....... 1994 $184,247 -- -- 160,000 --
Treasurer and Chief 1995 $227,859 -- -- 65,000 --
Financial Officer
John R. Gehron.......... 1994 $136,509(4) $50,000(5) $25,000(6) 160,000 --
Co-Chief Operating 1995 $227,544 -- -- 40,000 --
Officer
David Pearlman.......... 1994 $217,760 -- -- 170,000 --
Co-Chief Operating 1995 $222,745 -- -- 85,000 --
Officer
</TABLE>
- --------
(1) Includes Company's matching 401(k) plan contributions.
(2) Mr. Winn also served as Co-Chief Operating Officer until Mr. Gehron joined
American in May 1994.
(3) See "--Stock Option Information" below.
(4) For period from May 16, 1994 through December 31, 1994. Mr. Gehron also
received a $75,000 demand loan at a variable interest rate (prime) at the
time he joined American, $37,500 of which is currently outstanding.
(5) Bonus paid in January 1995 for services rendered in 1994.
(6) One time allowance for relocation expenses.
Don P. Bouloukas joined American in August 1996 and became a Co-Chief
Operating Officer in September 1996 at an annual salary of $200,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For the year ended December 31, 1995, the Compensation Committee of the
Board of Directors consisted of Messrs. Stoner (Chairman) and Chavkin. See
"Certain Transactions".
DIRECTOR COMPENSATION
As chairman of the Executive Committee, Mr. Stoner is party to an agreement
with American pursuant to which he is entitled to annual compensation at the
rate of $50,000 and to a nonaccountable expense allowance of $50,000 until the
earlier of (a) October 31, 1998 or (b) his death. The only current outside
directors who receive compensation are Messrs. Buckley, Duncan and Peebler,
who are paid a fee of $3,000 for each Board of Directors' meeting attended and
$1,000 for each committee meeting attended held apart from a board meeting and
are reimbursed for expenses. American paid a total of $30,000 in directors
fees during 1995. Mr. Duncan was granted an option on December 16, 1993 under
American's Amended and Restated Stock Option Plan (the "American Plan") to
purchase 10,000 shares of American Class B Common Stock at $6.375 per share.
Mr. Duncan exercised the option for 2,000 shares in December 1994. Messrs.
Duncan and Peebler were granted options on February 15, 1995 under the
American Plan to purchase 4,000 and 10,000 shares, respectively, of American
Class B Common Stock at $9.875 per share. Each of the foregoing options is
exercisable in 20%
A-V-27
<PAGE>
cumulative annual increments commencing one year from the date of the grant
and expires at the end of ten years.
STOCK OPTION INFORMATION
Effective December 16, 1993, American instituted the American Plan, which is
administered by the Compensation Committee of American's Board of Directors.
The American Plan was designed to encourage directors, consultants and key
employees of American and its subsidiaries to continue their association with
American and its subsidiaries by providing opportunities for such persons to
participate in the ownership of American and in its future growth through the
granting of stock options, which may be options designed to qualify as
incentive stock options ("ISOs") within the meaning of Section 422 of the
Code, or options not intended to qualify for any special tax treatment under
the Code ("NQOs"). The term "subsidiary" as used in the American Plan means a
corporation or other business organization of which American owns, directly or
indirectly, fifty percent or more of the total combined voting power of all
classes of stock.
The duration of the ISOs and NQOs granted under the American Plan may be
specified by the Compensation Committee pursuant to each respective option
agreement, but in no event can any such option be exercisable after the
expiration of ten (10) years after the date of grant. In the case of any
employee who owns (or is considered under Section 424(d) of the Code as
owning) stock possessing more than ten percent of the total combined voting
power of all classes of stock of American or any of its subsidiaries, no ISO
shall be exercisable after the expiration of five (5) years from the date such
option is granted. The option pool under the American Plan consists of
2,000,000 shares of American Class A and Class B Common Stock. The American
Plan provides that any options granted with respect to more than an aggregate
of 1,600,000 shares will be for American Class A Common Stock.
The following table sets forth certain information relating to option grants
pursuant to the American Plan in the year ended December 31, 1995 to the
individuals named in the Summary Compensation Table above.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF % OF
SHARES OF TOTAL POTENTIAL REALIZABLE VALUE
UNDERLYING OPTIONS EXERCISE AT ASSUMED ANNUAL RATES
OPTIONS GRANTED PRICE EXPIRATION OF STOCK PRICE APPRECIATION
NAME GRANTED(A) IN YEAR PER SHARE DATE FOR OPTION TERMS(B)
- ---- ---------- ------- --------- ---------- ----------------------------
5% 10%
<S> <C> <C> <C> <C> <C> <C>
Joseph L. Winn.......... 60,000 16.6 $ 9.875 2/14/2005 $ 2,144,043 $ 3,764,987
5,000 1.4 $15.00 5/18/2005 $ 153,045 $ 288,124
John R. Gehron.......... 40,000 11.1 $ 9.875 2/14/2005 $ 1,429,362 $ 2,509,992
David Pearlman.......... 50,000 13.8 $ 9.875 2/14/2005 $ 1,786,702 $ 3,137,489
5,000 1.4 $15.00 5/18/2005 $ 153,045 $ 288,124
30,000 8.3 $22.25 6/14/2005 $ 700,771 $ 1,511,244
</TABLE>
- --------
(a) All options granted to the named executive officers were granted pursuant
to the American Plan. The options become exercisable in 20% cumulative
annual increments commencing one year from the grant dates (options at
$9.875 become exercisable on February 15, 1996; $15.00 on May 19, 1996;
and $22.25 on June 15, 1996).
(b) Potential Realizable Value is based on the assumed growth rates for the
ten-year option term, as applicable, based on the last sale price of the
Class A Common Stock on Nasdaq on December 29, 1995 of $28.00. 5% annual
growth results in a stock price per share of $45.61, and 10% results in a
stock price per share of $72.62. The actual value, if any, an executive
may realize will depend on the excess of the stock price over the exercise
price on the date the option is exercised, so that there is no assurance
the value realized by an executive will be at or near the amounts
reflected in this table.
A-V-28
<PAGE>
The following table sets forth certain information with respect to the
unexercised options to purchase Class B Common Stock granted under the
American Plan to the individuals named in the Summary Compensation Table
above. None of such individuals exercised any stock options during the year
ended December 31, 1995.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-THE-
NUMBER OF UNEXERCISED MONEY
OPTIONS AT DECEMBER 31, 1995 OPTIONS AT DECEMBER 31, 1995(A)
-------------------------------- -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------- --------------- -------------------------------
<S> <C> <C> <C> <C>
Steven B. Dodge......... 30,000 120,000 $ 561,000$ 2,244,000
Joseph L. Winn.......... 64,000 161,000 $ 1,384,000$ 3,228,500
John R. Gehron.......... 32,000 168,000 $ 692,000$ 3,493,000
David Pearlman.......... 68,000 187,000 $ 1,470,500$ 3,349,500
</TABLE>
- --------
(a) Based on the last sale price of the Class A Common Stock on the Nasdaq
Market on December 29, 1995 of $28.00.
Additional ten-year options were granted on January 18, 1996 to purchase
shares of American Class B Common Stock at $25.00 per share as follows:
Dodge--40,000 shares; Winn--20,000 shares; Pearlman--20,000 shares; Gehron--
10,000 shares; and each of Duncan and Peebler--3,000 shares. Mr. Bouloukas was
granted a ten-year option on August 15, 1996 to purchase 122,000 shares of
American Class B Common Stock and 78,000 shares of American Class A Common
Stock at $33.33 per share.
A-V-29
<PAGE>
CERTAIN TRANSACTIONS*
FORMATION TRANSACTION
American was formed on November 1, 1993 in the American Reorganization, a
tax free transaction involving four radio broadcasting companies: Atlantic,
Boston AM, Stoner and Multi Market.
Atlantic was organized by Mr. Dodge in 1988 and, immediately prior to the
American Reorganization, he owned approximately 80% of its equity. Upon the
contribution to American of all of the assets of Atlantic, Mr. Dodge received
1,767,516 shares of Series A Common Stock and cash in the amount of $0.5
million. In addition, a loan by him to Atlantic in the principal amount of
$350,000 was repaid. Mr. Winn and Arthur DelVesco (a director of American from
its foundation until February 15, 1995) were also limited partners of Atlantic
and received 6,282 and 19,356 shares, respectively, of Series A Common Stock
pursuant to the American Reorganization.
In November 1992, in connection with its acquisition of then WHDH-AM
(presently WEEI-AM), Boston AM issued (a) all of its common stock to Mr. Dodge
in exchange for a capital contribution of $1.0 million and (b) $4.0 million
principal amount of 12% Secured Notes due 1995 (the "Boston AM Notes"). Among
the purchasers of the Boston AM Notes were (i) three trusts for the benefit of
Mr. Dodge's children (the "Dodge Trusts") that purchased an aggregate of $0.45
million principal amount of the Boston AM Notes, (ii) a corporation controlled
by Mr. Dodge's brother-in-law which purchased $1.0 million principal amount of
the Boston AM Notes, and (iii) Messrs. Winn and DelVesco who purchased $50,000
and $100,000, respectively, of the Boston AM Notes. The Boston AM Notes were
originally secured by all of the assets of Boston AM and certain limited
partnership interests in Atlantic owned by Mr. Dodge. As part of the American
Reorganization, (a) Mr. Dodge received 71,429 shares of a prior series of
preferred stock of American (the "Original Preferred Stock") with a
liquidation and redemption price of $1,000,000 in exchange for all of the
capital stock of Boston AM, (b) such Original Preferred Stock was substituted
for his limited partnership interest as collateral, and (c) Boston AM
Noteholders were offered the opportunity to redeem a portion of their notes
(which offer was accepted by the Dodge Trusts, Mr. Dodge's brother-in-law's
corporation and Mr. Winn to the extent of $75,000, $100,000 and $20,000,
respectively). See "--1994 Equity Financing" below for information concerning
the exchange of such Preferred Stock for Common Stock.
Thomas H. Stoner was the founder of Stoner and at the time of the American
Reorganization, together with members of his immediate family (or trusts for
their benefit or otherwise controlled by them), owned approximately 65% of the
holding company of which Stoner was a wholly-owned subsidiary. As a
consequence of the merger of the holding company into American, Mr. Stoner and
members of his immediate family (and trusts for their benefit or otherwise
controlled by them) received an aggregate of 2,079,686 shares of Series A
Common Stock. Mr. Stoner and members of his immediate family (and trusts for
their benefit or otherwise controlled by them) also received (i) a 10%
Subordinated Note due 2000 of American in the principal amount of $1,000,000
as part of the transaction (which note was redeemed out of the proceeds of the
initial public offering of American Class A Common Stock in June 1995), (ii)
cash in the aggregate amount of approximately $6.4 million and (iii) notes of
an unaffiliated person in the aggregate principal amount of $2.25 million.
Multi Market was organized in 1990 and immediately prior to the American
Reorganization was owned as follows: 49.5% by CEA, 49.5% by Wind Point
Partners II, L.P. ("Wind Point") and 1% by David Pearlman. Mr. Chavkin, a
director of American, is a general partner of CCP, which is a general partner
of CEA. Wind Point is a private venture capital partnership which is a
stockholder of American. Mr. DelVesco is a general partner of Wind Point
Management Partners II, which is the general partner of Wind Point. Mr.
DelVesco was also a limited partner of Atlantic and a director of American
Cablesystems Corporation and owned Boston AM Notes and, as such, participated
in the 1994 Equity Financing as described below. Pursuant to the American
- --------
* All share figures (including purchase prices per share) shown under "Certain
Transactions" have (except in the case of Original Preferred Stock and
Series C Common Stock) been adjusted for the two-for-one share exchange
effected by the American Recapitalization.
A-V-30
<PAGE>
Reorganization, CEA received 298,092 shares of Series A Common Stock and
302,978 shares of Series B Common Stock, Wind Point received 601,072 shares of
Series A Common Stock, and Mr. Pearlman received 6,071 shares of Series A
Common Stock.
As part of the financing of the American Reorganization, CEA invested $8.6
million and received an aggregate of 612,500 shares of Series C Common Stock,
which were redeemed out of the proceeds of the initial public offering of the
American Class A Common Stock in June 1995 and, as a consequence, CEA received
an amount equal to its investment (together with accrued and unpaid dividends)
and 671,166 shares of American Class C Common Stock. CEA is an affiliate of
Chase, which is a co-agent and a lender under the American Credit Agreement
with an approximately 9.2% participation under the American Credit Agreement
in the loans outstanding thereunder. Chase Securities Inc., an affiliate of
Chase, was one of the Underwriters in the public offering of the American
Senior Notes in February 1996.
BACK BAY TRANSACTION
During 1994 and the first quarter of 1995, American entered into a series of
agreements (the "Back Bay Transaction") with Back Bay Broadcasters, Inc.
("Back Bay") and CEA, as a result of which, among other things, (a) American
acquired the rights to broadcast all of the Boston Celtics basketball games
through the 1998-99 season, (b) Back Bay acquired the radio station then
operating under the call letters WEEI-AM from Boston Celtics Communications
Limited Partnership, and (c) Back Bay assigned all of its sports and other
programming agreements, including those relating to syndicated personalities,
to American's WHDH-AM station, which assumed the obligations under those
agreements and changed its call letters to WEEI-AM.
On March 15, 1994, Back Bay agreed to acquire WEEI-AM, and commenced
programming and marketing that station under an LMA. Pursuant to the initial
arrangements between Back Bay and American, American was obligated to provide
office and studio space and utilities and furnish engineering and some
administrative support services. American also sold advertising to national
accounts for Back Bay. In return for these facilities and services, American
was entitled to a percentage (increasing over time) of WEEI-AM's advertising
sales revenues from national accounts. In addition, American was entitled to
sell, for its own account, certain time on WEEI-AM to American's local sports
accounts. All of these arrangements have been either terminated or
substantially amended as described below. In connection with these
transactions, American also acquired the right to broadcast all of the Boston
Celtics basketball games through the 1998-99 season.
Back Bay purchased WEEI-AM on June 30, 1994, financing for which was
provided by CEA in the form of a $5,000,000 loan. CEA received a 16% Secured
Note due 2001 (the "Back Bay Original Note") together with rights representing
a 75% share in the appreciation in the value of Back Bay (the "Back Bay
Original Appreciation Right"). The Back Bay Original Appreciation Right was
exercisable upon the earliest of February 28, 1999, or a Change of Control, an
Act of Bankruptcy or an Event of Default relating to Back Bay (as each of such
terms is defined in the Back Bay Original Appreciation Right). Upon exercise,
the holder was entitled to an amount calculated based upon a multiple of Back
Bay's trailing cash flow less its aggregate indebtedness, adjusted upward or
downward based upon whether Back Bay's working capital was positive or
negative at the time of the calculation.
As part of those arrangements, American had the right, but not the
obligation, to purchase from CEA the Back Bay Original Note and the Back Bay
Original Appreciation Right for a purchase price equal to the sum of (i)
principal of and accrued and unpaid interest on the Back Bay Original Note,
and (ii) the value of the Back Bay Original Appreciation Right, except that
during the first year of its existence, the Back Bay Original Appreciation
Right was deemed to have no value. American also issued to CEA a ten year
warrant to purchase an aggregate of 78,838 shares of Series B Common Stock at
a purchase price of $0.05 per share, representing 1% of the outstanding Common
Stock (on a pro forma basis at that time). American also agreed to issue
warrants to purchase Series B Common Stock representing an additional 1/2% of
such pro forma outstanding Common Stock at the end of each of the five three-
month periods commencing September 15, 1994, unless prior thereto American had
purchased (or arranged for the purchase of) the Back Bay Original Note and the
Back Bay Original
A-V-31
<PAGE>
Appreciation Right. In light of the transactions described below, American was
not required to issue any further warrants. CEA exercised the warrant in
connection with the initial public offering of the American Class A Common
Stock in June 1995.
American and the stockholders of Back Bay entered into a put/call agreement
(the "Back Bay Put/Call Agreement") pursuant to which American has the
assignable right to purchase at any time prior to January 1, 2005, and the
Back Bay stockholders have the right at any time after March 15, 1997 and
prior to January 1, 2005 to require American to purchase, all but not less
than all of the capital stock of Back Bay. The purchase price for the stock of
Back Bay under the Back Bay Put/Call Agreement is based on a formula similar
to that relating to the Back Bay Original Appreciation Right.
Effective on August 29, 1994, Back Bay assigned to American all of its
sports and other programming agreements, including those relating to
syndicated personalities. As part of that arrangement, WHDH-AM assumed the
obligations under those agreements and changed its call letters to WEEI-AM.
In September 1994, as part of the 1994 Equity Financing described below: (a)
American exercised its right to purchase from CEA the Back Bay Original Note
and the Back Bay Original Appreciation Right for an aggregate of $5.0 million
in cash; (b) the interest rate on the Back Bay Original Note became 10% per
annum; (c) American and Back Bay entered into certain collateral arrangements
including a sublease of American's office space, a service agreement and
certain arrangements with respect to broadcasts of certain sporting events;
(d) the existing marketing, programming, space and service arrangements
between American and Back Bay were terminated; and (e) Back Bay purchased
55,556 shares of American's Common Stock in exchange for a 10% Secured Note
due 2001 in the principal amount of $0.5 million (the "Back Bay New Note") and
rights representing an additional 10% participation in any increase in the
value of Back Bay (the "Back Bay New Appreciation Right").
In May 1995, American sold the Back Bay Original Note, the Back Bay New
Note, the Back Bay Original Appreciation Right and the New Appreciation Right
to Back Bay in exchange for (a) $3.0 million in cash, (b) 4.99% of the common
stock of Back Bay, and (c) a 10% Convertible Subordinated Debenture of Back
Bay in the principal amount of $1.0 million which, at the option of the
holder, is convertible into 20% of the common stock of Back Bay. As part of
the arrangements, American obtained an assignable right of first refusal with
respect to the sale of assets or stock (or other equity securities) by Back
Bay and an assignable option, exercisable at any time after August 31, 1998,
to purchase all of the assets of Back Bay at a purchase price equal to the
greater of (a) "fair saleable value" or (b) seven and one-half times cash flow
(with certain adjustments for working capital). Back Bay currently owns three
radio stations: WBNW-AM, Boston, WWKX-FM, Woonsocket, Rhode Island, and WPNW-
AM (formerly WICE-AM), Pawtucket, Rhode Island. See "Business-- Recent
Transactions--Consummated Acquisitions--Portland, Oregon" for information
concerning American's grant to a third party of a right to require it to
purchase WBNW-AM.
In August 1996, American advanced an additional $243,000 to Back Bay in
exchange for a promissory note, bearing interest at 10% per annum and maturing
2002.
1994 EQUITY FINANCING
In September 1994, American consummated an approximately $21.2 million
private placement (the "1994 Equity Financing") with a group of institutional
and other sophisticated investors pursuant to which American issued and sold
an aggregate of 2,354,240 shares of its Common Stock at $9.00 per share as
follows: (a) an aggregate of 1,999,998 shares (including 888,888 shares to ABS
Capital Partners, L.P. ("ABS") and 444,444 shares to CEA) were sold for cash;
(b) 55,556 shares were purchased by Back Bay in exchange for the Back Bay New
Note and the Back Bay New Appreciation Right; (c) 22,222 shares were agreed to
be purchased (and subsequently were purchased) by two of the stockholders of
Back Bay for an aggregate of $0.2 million in cash; (d) 126,464 shares were
issued to Mr. Dodge in exchange for his 71,429 shares of Original Preferred
Stock that had a liquidation preference of $1,138,176, including accrued and
unpaid dividends; and (e) an aggregate of
A-V-32
<PAGE>
150,000 shares were issued in exchange for an aggregate of $1.35 million
principal amount of the Boston AM Notes. The balance of the Boston AM Notes,
together with accrued and unpaid interest on all of the Boston AM Notes was
paid in cash. As part of the 1994 Equity Financing, in exchange for their
Boston AM Notes, (a) the Dodge Trusts received an aggregate of 20,832 shares,
$187,500 in repayment of the principal amount of their unexchanged Boston AM
Notes and interest of approximately $75,500, (b) the corporation controlled by
Mr. Dodge's brother-in-law received approximately $0.9 million in repayment of
its Boston AM Note and interest of approximately $182,100, (c) Mr. Winn
received 1,666 shares, $15,000 in repayment of his unexchanged Boston AM Note
and interest of approximately $6,000, and (d) Mr. DelVesco received 5,556
shares, approximately $50,000 in repayment of his unexchanged Boston AM Note
and interest of approximately $20,200.
In addition to the transactions described above with respect to Back Bay and
WEEI-AM, as part of the 1994 Equity Financing: (a) Boston AM was merged into
American Radio Systems, Inc., a wholly-owned subsidiary of American which at
the time owned all of American's radio stations (other than Boston AM), and
(b) American entered into a new credit agreement which, among other things,
increased the total availability thereunder from $85 million to $150 million,
subject to satisfaction at the time of drawing of certain financial covenants.
DAYTON TRANSACTION
Mr. Dodge entered into an agreement in principle in March 1995 with Tri-City
Radio Ltd. Partnership ("Tri-City"), the owner of radio station WXEG-FM (the
"Dayton Station") in the Dayton, Ohio market. Under the terms of the
agreement, Mr. Dodge purchased the total current debt outstanding of Tri-City
(approximately $1.8 million) and agreed to fund the Dayton Station's working
capital requirements up to a monetary limit and for a period of time to be
negotiated. Further, Mr. Dodge agreed in principle to fund the purchase of the
Dayton Station by a corporation to be formed and owned by its current general
manager, who held a 23% interest in Tri-City. As part of that financing, Mr.
Dodge would have had an option to purchase the station. Tri-City agreed in
principle to the sale of the Dayton Station materially in accordance with the
terms of such agreement. Mr. Dodge's rights and obligations under each of
these agreements would have been assignable at his discretion to American or
any affiliate of American subject to the American Board approval. At the time
of the initial agreements, the Dayton Station and American's Dayton stations
entered into a joint sales agreement.
Under then current FCC rules, neither American nor Mr. Dodge could own the
Dayton Station because American owned two FM stations in Dayton. While
American could have entered into the same arrangements as Mr. Dodge, the
American Board determined not to do so at that time. In December 1995,
American acquired Mr. Dodge's position with respect to this transaction and,
as a result, loaned approximately $1.1 million to the buyer to finance the
acquisition of the station, and purchased the debt acquired by Mr. Dodge and
his subsequent working capital loans (including accrued interest) of
approximately $2.2 million which had been assumed by the new owner as part of
the acquisition of WXEG- FM. American used borrowings under its credit
agreement to finance these transactions. Accordingly, American has an option
to acquire the station which has been exercised. Subject to receipt of FCC
approval, American expects to consummate the acquisition in the fourth quarter
of 1996. American will use its loans to the owner to finance the acquisition.
American's loans are in the form of secured debt of approximately $2.2 million
and convertible subordinated debentures of approximately $1.1 million which
are convertible, at American's option, into 99% of the non-voting or (in the
event FCC regulations permit such ownership) voting stock of the owner of the
Dayton Station.
AMERICAN RECAPITALIZATION
As part of the initial public offering of the American Class A Common Stock
in June 1995, American effected the American Recapitalization, pursuant to
which all of the American Stockholders (including each of the directors,
officers and beneficial holders of more than 5% of any class of American
Common Stock) had their respective shares of Series A, Series B and Series D
Common Stock converted into shares of American Class A, Class B and Class C
Common Stock on a basis of two new shares for each old share. All of the
American Stockholders received American Class B Common Stock, except for (a)
CEA which received solely American Class C Common Stock (1,795,518 shares);
(b) Greylock Equity Limited Partnership which received
A-V-33
<PAGE>
American Class A Common Stock (194,444 shares) and American Class B Common
Stock (240,000 shares); and (c) ABS Capital Partners, L.P. which received
solely American Class A Common Stock (888,888 shares). In addition, as part of
the American Recapitalization, all of the Series C Common Stock owned by the
stockholders (including CEA) were redeemed out of the proceeds of the initial
public offering as a consequence of which they received their original
investment (together with accrued and unpaid dividends) and shares of American
Class C Common Stock (which, in the case of CEA, aggregate 671,166 shares and
which number is included in the aggregate ownership of CEA shown in the
preceding sentence).
OTHER TRANSACTIONS
Prior to February 18, 1994, Mr. Dodge had leased space to American at which
its (and, prior to the American Reorganization, Atlantic's) principal
executive offices were located; in 1993 the annual base rent under such lease
was approximately $60,000; in addition, American paid third parties for real
estate taxes, operating and maintenance expenses and utilities. Management
believes that the rent paid was equivalent to prevailing market rates at that
time for that location.
Chase is a co-agent and a lender with an approximately 9.2% participation
under the American Credit Agreement. Chase is an affiliate of CCP, the general
partner of CEA; Mr. Chavkin, a director, is a general partner of CCP. At June
30, 1996, there were no borrowings outstanding under the American Credit
Agreement. Chase's share of interest and fees paid by American pursuant to the
provisions of the American Credit Agreement were $0.3 million, $1.2 million,
$1.7 million and insignificant during 1993, 1994, 1995 and the first six
months of 1996, respectively. Chase Securities Inc. is an affiliate of Chase,
and was an Underwriter in the public offering of the American Senior Notes in
February 1996.
Mr. Gehron and American are parties to a demand loan agreement pursuant to
which American loaned to Mr. Gehron $75,000 at a variable interest rate
(prime) at the time he joined American in May 1994. Such loan remains
outstanding in the principal amount of $37,500.
Management believes that the above transactions, to the extent they were
with affiliated parties, were on terms, and American intends to continue its
policy that all future transactions between it and its officers, directors,
principal stockholders and affiliates will be on terms not less favorable to
American than those which could be obtained from unaffiliated third parties.
INDEBTEDNESS OF AMERICAN
The summaries contained herein of the material provisions of certain
indebtedness of American do not purport to be complete and are qualified in
their entirety by reference to the provisions of the American Credit Agreement
and the American Senior Note Indenture, which are filed as exhibits to the
Registration Statement to which exhibits reference is made hereby. Capitalized
terms used in this Section which are not otherwise defined in this Proxy
Statement have the respective meanings assigned thereto in the American Credit
Agreement or the American Senior Note Indenture, as the case may be.
AMERICAN CREDIT AGREEMENT
In order to finance acquisitions of radio stations and for general corporate
purposes, American has borrowed and expects to continue to borrow under the
American Credit Agreement. The American Credit Agreement provides American
with a revolving loan commitment based on the lesser of (a) $300.0 million or
(b) an amount based on a financial test based upon which American's total
debt, including the American Senior Notes, could not have exceeded $237.0
million at June 30, 1996. In connection with the Merger, American proposes to
increase the maximum amount which could be borrowed under the American Credit
Agreement (or, in the event of the Subsidiary Merger, the Credit Agreements)
to $1.0 billion. The facility may be borrowed, repaid and reborrowed until
December 31, 1997; thereafter availability decreases in semi-annual
installments of varying
A-V-34
<PAGE>
amounts until maturity on September 30, 2003. Until interest rates are fixed
or capped at American's request, all outstanding amounts under the American
Credit Agreement bear interest at a variable base rate plus a variable margin
based on certain of American's financial ratios. Interest rates under the
American Credit Agreement are determined, at the option of American, at either
the Eurodollar Rate plus 1.25% to 2.50% or the Alternate Base Rate plus 0.00%
to 1.25%. The spread over the Eurodollar Rate and the Alternate Base Rate
varies from time to time, depending upon American's financial leverage.
American pays quarterly commitment fees equal to 0.5% or 0.375% per annum,
depending on American's financial leverage, on the aggregate unused portion of
the aggregate commitment. American may make borrowings under the American
Credit Agreement only so long as it remains in compliance with certain
financial covenants and meets certain other conditions.
American may incur Indebtedness under the American Credit Agreement for
acquisitions, capital expenditures, investments in the Tower Subsidiary,
working capital and general corporate purposes. All such Indebtedness will be
subject to satisfaction of certain conditions with respect to the maintenance
of debt levels, including the maintenance of the following ratios: (i) maximum
Total Debt to Consolidated Annual Operating Cash Flow ratio of 6.50:1
declining in stages to 5.50:1 by January 1, 1998 and thereafter, (ii) maximum
Senior Debt to Consolidated Annual Operating Cash Flow ratio of 4.50:1
declining in stages to 3.00:1 by January 1, 1999 and thereafter, (iii) minimum
Consolidated Annual Operating Cash Flow to Interest Expense ratio of 1.75:1
increasing in stages to 2.25:1 at December 31, 1999 and thereafter, (iv)
minimum Consolidated Annual Operating Cash Flow to Fixed Charges ratio of
1.05:1 at all times, and (v) minimum Consolidated Annual Operating Cash Flow
to Pro Forma Debt Service ratio of 1.20:1 at all times.
The obligations of American under the American Credit Agreement are secured
by a first priority security interest in substantially all of the assets of
American (other than the FCC broadcast licenses) including the stock of its
subsidiaries holding the FCC broadcasting licenses. These subsidiaries have
has also guaranteed the obligations of American under the American Credit
Agreement. If American becomes insolvent or is liquidated or if the
indebtedness under the American Credit Agreement is accelerated, the lenders
under the American Credit Agreement would be entitled to exercise the remedies
available to a secured lender. Accordingly, such lenders will have a prior
claim on such assets of American and its subsidiaries.
AMERICAN SENIOR NOTES
The American Senior Note Indenture provides for the issuance of $175.0
million aggregate principal amount of the American Senior Notes, all of which
are outstanding, are unsecured obligations of American and mature in 2006. The
American Senior Notes are, in the case of each existing Restricted Subsidiary,
and will be, in the case of each future direct or indirect Restricted
Subsidiary, unconditionally guaranteed, jointly and severally. The Tower
Subsidiary is an Unrestricted Subsidiary and, accordingly, has not guaranteed
the American Senior Notes. If the Subsidiary Merger is effected, American
Subsidiary will be an Unrestricted Subsidiary. The American Senior Notes are
subordinated to all Senior Debt (which includes indebtedness under the
American Credit Agreement) of American, and the Subsidiary Guarantees are
subordinated to all Senior Debt of the respective Subsidiary Guarantors.
The American Senior Notes are redeemable at the option of American, in whole
or in part, at any time on or after February 1, 2001 at the redemption prices
set forth in the American Senior Note Indenture (beginning at 104.5% of the
principal amount and decreasing annually to 100.0% in 2004 and thereafter)
plus accrued and unpaid interest, if any, to but excluding the date of
redemption. Also, on or prior to February 1, 1999, American may redeem up to
$58.3 million principal amount of the American Senior Notes, in cash, at 109%
of the principal amount thereof, together with accrued and unpaid interest, if
any, to the date of redemption, as long as American Senior Notes having an
aggregate principal amount of at least $116.7 million remain outstanding
immediately after any such redemption. Within 15 days after the occurrence of
a Change of Control, American will be required to make an offer to purchase
all American Senior Notes then outstanding at a purchase price, in cash, equal
to 101% of the principal amount thereof, together with accrued and unpaid
interest, if any, to the date of purchase.
A-V-35
<PAGE>
The American Senior Note Indenture contains certain restrictive covenants,
including limitations on (i) the incurrence of indebtedness and the issuance
of preferred stock by American and the Restricted Subsidiaries; (ii) the
payment of dividends and the making of restricted payments; (iii) transactions
with affiliates; (iv) the existence of liens; (v) the disposition of proceeds
of asset sales; (vi) Asset Swaps; (vii) the making of guarantees by American
and the Restricted Subsidiaries; (viii) transfers and issuances of stock of
the Restricted Subsidiaries; (ix) the imposition of restrictions on certain
payments by the Restricted Subsidiaries; (x) investment in Unrestricted
Subsidiaries; and (xi) certain mergers and sales of assets.
A-V-36
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
CBC of Baltimore, Inc. (d/b/a WOCT-FM) and WWMX-FM, Inc. (Wholly-owned
subsidiaries of Capitol Broadcasting Company, Inc.)
Report of Independent Accountants.................................... A-V-F-2
Combined Balance Sheets as of December 31, 1995 and June 30, 1996
(unaudited)......................................................... A-V-F-3
Combined Statements of Income for the year ended December 31, 1995
and the six months ended June 30, 1995 and 1996 (unaudited)......... A-V-F-4
Combined Statements of Shareholder's Equity for the year ended
December 31, 1995 and the six months ended June 30, 1996
(unaudited)......................................................... A-V-F-5
Combined Statements of Cash Flows for the year ended December 31,
1995 and the six months ended June 30, 1995 and 1996 (unaudited).... A-V-F-6
Notes to Combined Financial Statements............................... A-V-F-7
</TABLE>
A-V-F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Capitol Broadcasting Company, Inc.
In our opinion, the accompanying combined balance sheet and the related
combined statements of income, of shareholder's equity and of cash flows
present fairly, in all material respects, the financial position of CBC of
Baltimore, Inc. (d/b/a WOCT-FM) and WWMX-FM, Inc. (collectively referred to as
the "Stations"), wholly-owned subsidiaries of Capitol Broadcasting Company,
Inc. ("Capitol"), at December 31, 1995 and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Stations' management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
As described in Note 8, during August of 1996, Capitol entered into an
agreement to sell the assets of the Stations to an outside party.
Price Waterhouse LLP
Raleigh, North Carolina
September 11, 1996
A-V-F-2
<PAGE>
CBC OF BALTIMORE, INC.
(D/B/A WOCT-FM) AND WWMX-FM, INC.
(WHOLLY-OWNED SUBSIDIARIES OF CAPITOL BROADCASTING COMPANY, INC.)
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash................................................ $ 217,357 $ 332,831
Accounts receivable, less allowance for doubtful
accounts of $55,717 ($61,698 as of June 30, 1996).. 3,588,018 2,982,840
Prepaid expenses and other assets................... 69,284 92,401
Barter receivables, net............................. -- 59,858
----------- -----------
Total current assets.............................. 3,874,659 3,467,930
----------- -----------
Property and equipment, net........................... 1,360,890 1,288,223
Intangible assets, net................................ 12,028,389 11,262,807
Affiliate receivables, net............................ 2,274,530 2,886,247
Other assets.......................................... 8,830 11,840
----------- -----------
Total assets...................................... $19,547,298 $18,917,047
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable.................................... $ 59,711 $ 14,302
Barter payables, net................................ 97,055 --
Accrued compensation expenses....................... 148,786 172,379
Accrued commission expenses......................... 113,097 152,325
Accrued sales and use taxes......................... 56,114 1,481
Accrued profit sharing.............................. 156,145 116,337
Other accrued expenses.............................. 122,613 53,894
----------- -----------
Total current liabilities......................... 753,521 510,718
----------- -----------
Total liabilities................................. 753,521 510,718
=========== ===========
Shareholder's equity:-
Common stock:
WWMX-FM, Inc.--$10 par value; 1,000 shares
authorized, issued and outstanding................ 10,000 10,000
CBC of Baltimore, Inc.--$10 par value; 1,000 shares
authorized, issued and outstanding................ 10,000 10,000
Additional paid-in capital.......................... 11,537,698 11,537,698
Retained earnings................................... 7,236,079 6,848,631
----------- -----------
Total shareholder's equity........................ 18,793,777 18,406,329
----------- -----------
Total liabilities and shareholder's equity........ $19,547,298 $18,917,047
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-V-F-3
<PAGE>
CBC OF BALTIMORE, INC.
(D/B/A WOCT-FM) AND WWMX-FM, INC.
(WHOLLY-OWNED SUBSIDIARIES OF CAPITOL BROADCASTING COMPANY, INC.)
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED 30,
DECEMBER 31, ------------------------
1995 1995 1996
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Net revenues.............................. $12,979,117 $5,687,463 $6,039,230
----------- ---------- ----------
Operating expenses excluding loss on sale
of operating properties, depreciation and
amortization, corporate general and
administrative expenses, and profit
sharing expenses......................... 8,110,739 4,003,105 4,500,917
Loss on sale of operating properties...... 756,116 756,116 --
Depreciation and amortization............. 1,843,270 914,169 864,956
Corporate general and administrative
expenses................................. 1,310,040 647,858 888,248
Profit sharing expenses................... 277,520 148,908 185,355
----------- ---------- ----------
Total operating expenses.............. 12,297,685 6,470,156 6,439,476
----------- ---------- ----------
Operating income (loss)................... 681,432 (782,693) (400,246)
Other nonoperating income, net............ 51,085 23,815 12,798
----------- ---------- ----------
Net income (loss)......................... $ 732,517 $ (758,878) $ (387,448)
=========== ========== ==========
Unaudited pro forma data:
Historical income (loss) before income
taxes.................................. $ 732,517 $ (387,448)
Pro forma provision (benefit) for income
taxes.................................. 451,569 (102,568)
----------- ----------
Pro forma net income (loss)............... $ 280,948 $ (284,880)
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-V-F-4
<PAGE>
CBC OF BALTIMORE, INC.
(D/B/A WOCT-FM) AND WWMX-FM, INC.
(WHOLLY-OWNED SUBSIDIARIES OF CAPITOL BROADCASTING COMPANY, INC.)
COMBINED STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1994....... $20,000 $11,537,698 $6,503,562 $18,061,260
Net income..................... -- -- 732,517 732,517
------- ----------- ---------- -----------
Balance, December 31, 1995....... 20,000 11,537,698 7,236,079 18,793,777
Net loss (Unaudited)........... -- -- (387,448) (387,448)
------- ----------- ---------- -----------
Balance, June 30, 1996
(Unaudited)..................... $20,000 $11,537,698 $6,848,631 $18,406,329
======= =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-V-F-5
<PAGE>
CBC OF BALTIMORE, INC.
(D/B/A WOCT-FM) AND WWMX-FM, INC.
(WHOLLY-OWNED SUBSIDIARIES OF CAPITOL BROADCASTING COMPANY, INC.)
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, -----------------------
1995 1995 1996
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:--
Net income (loss)....................... $ 732,517 $(758,878) $(387,448)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Loss on sale of operating properties... 756,116 756,116 --
Depreciation and amortization.......... 1,843,270 914,169 864,956
Barter expense (revenue)............... 114,455 (44,526) (156,913)
Change in assets and liabilities:
Accounts receivable................... (1,231,061) (562,705) 605,178
Prepaid expenses and other current
assets............................... 31,086 (16,802) (23,117)
Other assets.......................... 3,903 1,733 (3,010)
Accounts payable...................... (190,144) (197,657) (45,409)
Accrued compensation expenses......... 65,026 34,238 23,593
Accrued commission expenses........... 20,116 41,271 39,228
Accrued sales and use taxes........... 56,114 -- (54,633)
Accrued profit sharing................ 65,095 58,566 (39,808)
Other accrued expenses................ 83,226 1,174 (68,719)
----------- --------- ---------
Cash provided by operating activities..... 2,349,719 226,699 753,898
----------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of property.......... 406,942 406,942 --
Purchase of property and equipment, net
of normal retirements.................. (457,490) (271,382) (26,707)
----------- --------- ---------
Cash (used) provided by investing
activities............................... (50,548) 135,560 (26,707)
----------- --------- ---------
Cash flows from financing activities:
Change in amount due from affiliates.... (2,109,533) 109,095 (611,717)
----------- --------- ---------
Cash (used) provided by financing
activities............................... (2,109,533) 109,095 (611,717)
----------- --------- ---------
Increase in cash.......................... 189,638 471,354 115,474
Cash, beginning of period................. 27,719 27,719 217,357
----------- --------- ---------
Cash, end of period....................... $ 217,357 $ 499,073 $ 332,831
=========== ========= =========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
A-V-F-6
<PAGE>
CBC OF BALTIMORE, INC.
(D/B/A WOCT-FM) AND WWMX-FM, INC.
(WHOLLY-OWNED SUBSIDIARIES OF CAPITOL BROADCASTING COMPANY, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying combined financial statements include the operations of two
radio stations, CBC of Baltimore, Inc. (d/b/a WOCT-FM) and WWMX-FM, Inc.
(collectively referred to as the "Stations"). The Stations are wholly-owned by
Capitol Broadcasting Company, Inc. ("Capitol").
The combined financial statements have been prepared as if the Stations had
been independent stand-alone entities for the periods presented. Such combined
financial statements include the combined revenues and expenses of the
Stations. All transactions between the Stations included in the combined
financial statements have been eliminated.
Related party transactions
Corporate general and administrative expense consists of corporate overhead
costs not specifically allocable to any of Capitol's individual broadcast
properties or other subsidiaries. Such expenses, including corporate level
salaries, legal, accounting and other expenses, have been allocated based on
management's estimate of the portion of time devoted to the Stations'
operations.
The assets of the Stations are security for certain debt of Capitol;
however, no interest expense is charged to the Stations. Due to advances of
excess funds, the Stations have a net intercompany receivable balance with
Capitol which is included within "affiliate receivables, net" on the combined
balance sheets; however, interest is not charged/credited on intercompany
balances. Minimal balances due from certain subsidiaries of Capitol are also
included within "affiliate receivables, net".
Substantially all of the Stations' employees are covered by a profit sharing
plan. The Stations fund and charge to operations the current profit sharing
costs which are based on a percentage, as determined annually by Capitol's
Board of Directors, of participant compensation.
Management believes that the methods used to allocate related party charges
are reasonable.
Unaudited pro forma information
The Stations do not have a tax sharing agreement with Capitol and do not
reflect income tax expense in their accounts. The pro forma income tax
provision for the year ended December 31, 1995 was calculated by applying the
applicable federal and state tax rates to taxable income derived from the
Stations' effect on the Capitol federal return and from the Stations' state
tax returns, respectively. Interim pro forma income tax provisions are based
on pre-tax book income or loss adjusted for estimated permanent and temporary
differences.
The pro forma effective tax rates significantly differ from the statutory
rates. The pro forma effective tax rate for the year ended December 31, 1995
is higher than the statutory rate due primarily to certain intangible assets
being amortized faster for book purposes than tax purposes. The pro forma
effective tax rate for the six months ended June 30, 1996 is lower than the
statutory rate due primarily to the seasonality of the Stations' operations
which traditionally are stronger during the second half of the year. This,
coupled with the fact that permanent and temporary differences occur evenly
throughout the year, resulted in an effective benefit rate of 26.5%.
A-V-F-7
<PAGE>
CBC OF BALTIMORE, INC.
(D/B/A WOCT-FM) AND WWMX-FM, INC.
(WHOLLY-OWNED SUBSIDIARIES OF CAPITOL BROADCASTING COMPANY, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Unaudited interim information
Interim financial information for the six months ended June 30, 1995 and
1996 included herein is unaudited; however, in the opinion of management, the
interim financial information includes all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation of the results
of operations for the interim periods. The results of operations for the six
months ended June 30, 1995 and 1996 are not necessarily indicative of the
results which would be expected for a full year.
2. SIGNIFICANT ACCOUNTING POLICIES
Revenue recognition
Advertising revenues are recognized in the period during which
advertisements are broadcast.
Concentration of credit risk
A significant portion of the Stations' accounts receivable is due from local
and national advertising agencies. Such accounts are generally unsecured.
Barter transactions
The Stations barter certain advertising time for various goods and services
which are recorded at the estimated fair value of the goods or services
received. The related revenue is recognized when the advertisements are
broadcast while expenses are recognized as the goods or services are received.
Barter receivables (payables), net consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Barter payable......................................... $(99,593) $(163,775)
Barter receivable...................................... 2,538 223,633
-------- ---------
Net.................................................. $(97,055) $ 59,858
======== =========
</TABLE>
Barter transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, -----------------------
1995 1995 1996
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Barter revenues............................ $323,410 $202,967 $297,417
Barter expenses............................ $437,865 $158,441 $140,504
</TABLE>
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
A-V-F-8
<PAGE>
CBC OF BALTIMORE, INC.
(D/B/A WOCT-FM) AND WWMX-FM, INC.
(WHOLLY-OWNED SUBSIDIARIES OF CAPITOL BROADCASTING COMPANY, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Property and equipment and intangible assets
Property and equipment is recorded at cost. Depreciation is computed using
the straight-line method over estimated useful lives of the assets which range
from five to 25 years.
Intangible assets consist primarily of goodwill, FCC licenses and non-
compete agreements. Such assets are being amortized on a straight-line basis
over their estimated useful lives.
On an ongoing basis, management evaluates the recoverability of the net
carrying value of property and equipment and intangible assets to determine
whether there has been a permanent impairment in the value of such assets.
Factors considered in the evaluation include cash flows from operation of the
Stations.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121").
SFAS 121 establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles and goodwill related to those assets.
Effective January 1, 1996, the Stations adopted SFAS 121; this adoption did
not have a material impact on the financial position or results of operations
of the Stations.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Broadcasting equipment............................... $ 1,845,362 $ 1,872,069
Land, buildings, and improvements.................... 219,568 219,568
Furniture and other equipment........................ 543,610 543,610
Construction in progress............................. 46,145 46,145
----------- -----------
2,654,685 2,681,392
Less--accumulated depreciation....................... (1,293,795) (1,393,169)
----------- -----------
$ 1,360,890 $ 1,288,223
=========== ===========
</TABLE>
4. LOSS ON SALE OF OPERATING PROPERTIES
In April 1995, land, building and other property and equipment used in the
operation of WOCT-FM were sold to a third party, resulting in a loss of
$756,116. This property was sold as a result of a decision to operate WOCT-FM
in the same building as WWMX-FM.
A-V-F-9
<PAGE>
CBC OF BALTIMORE, INC.
(D/B/A WOCT-FM) AND WWMX-FM, INC.
(WHOLLY-OWNED SUBSIDIARIES OF CAPITOL BROADCASTING COMPANY, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
5. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
AMORTIZATION DECEMBER 31, JUNE 30,
PERIOD 1995 1996
------------ ------------ -----------
(YEARS) (UNAUDITED)
<S> <C> <C> <C>
Goodwill................................ 40 $ 9,710,735 $ 9,710,735
FCC license............................. 15 4,480,075 4,480,075
Non compete agreement................... 3 3,000,000 3,000,000
Other................................... 20 23,000 23,000
----------- -----------
17,213,810 17,213,810
Less--accumulated amortization.......... (5,185,421) (5,951,003)
----------- -----------
$12,028,389 $11,262,807
=========== ===========
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
Operating leases
The Stations lease broadcast studios, office space and tower sites. Rent
expense for the year ended December 31, 1995 was $215,000 and totaled $103,000
and $112,000 for the six months ended June 30, 1995 and 1996, respectively. At
December 31, 1995, minimum annual payments under noncancelable operating
leases were as follows:
<TABLE>
<S> <C>
1996................................................................. $22,000
1997................................................................. 20,000
1998................................................................. 12,000
-------
$54,000
=======
</TABLE>
Litigation
CBC of Baltimore, Inc. has been named the defendant in an employment related
claim. However, legal counsel and management believe that the likelihood of a
judgment in an amount that would have a material impact on the Stations'
financial position and results of operations is remote. Accordingly, no
provision has been made in the accompanying financial statements related to
this claim.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable, accounts payable and
accrued expenses approximate fair value due to the short maturity of those
instruments.
8. SUBSEQUENT EVENT
In August 1996, Capitol agreed to sell substantially all of the assets,
including FCC licenses, of CBC of Baltimore, Inc. (d/b/a WOCT-FM) and WWMX-FM,
Inc. for approximately $90 million to American Radio Systems Corporation.
A-V-F-10
<PAGE>
APPENDIX VI
BUSINESS AND MANAGEMENT OF
EZ COMMUNICATIONS, INC.+
BUSINESS
GENERAL
EZ is a radio broadcasting company that will, upon consummation of the EZ
Probable Transactions* and prior to the Merger, own and/or operate seventeen
FM and six AM radio stations serving six of the nation's top 40 radio revenue
markets (Seattle, St. Louis, Pittsburgh, Sacramento, Charlotte and Kansas
City). EZ owns at least two FM stations in all its markets. EZ's portfolio of
stations is diversified in terms of format, target demographics, geographic
location and phase of development.
EZ's strategy is to acquire and operate radio stations in large markets with
an emphasis on the nation's 30 largest markets. As part of this strategy, EZ
seeks to maximize its presence in each of its markets through, among other
things, the ownership of multiple station combinations. EZ seeks to own and
operate multiple station combinations as a way to establish a leading position
in each of its markets as measured by audience ratings and revenue share.
Operating multiple station combinations has enabled EZ to program a greater
number of stations, strategically position those stations in a variety of
formats, attract top talent, and improve the range of products and services
available to advertisers, thereby making EZ's stations a more attractive
alternative to advertisers and better positioning EZ to compete effectively
for available dollars against other media, including newspapers and
television. Additionally, multiple station combinations allow station
consolidation and centralization, creating certain cost and operational
efficiencies and enhancing consistency of management and talent excellence.
EZ regularly evaluates potential acquisitions both in markets that it does
not currently serve and in markets in which it would like to achieve a larger
presence. Acquisition candidates may include individual stations, pairs of
stations in a single market or groups of stations that may operate in a number
of major markets. After acquiring a station, EZ seeks to improve net revenue
and broadcast cash flow by a variety of means such as changing the station's
programming format, reducing its operating expenses, or combining its
operations with an existing station operated by EZ in the same market. EZ
intends to continue to pursue opportunities for expansion, including
opportunities to acquire multiple radio stations in the same local market as
allowed under the recently enacted Telecommunications Act.
- --------
+ Terms used in this Appendix VI without definitions have the meanings given
to them elsewhere in this Proxy Statement.
* The term "EZ Probable Transactions" means the EZ Acquisitions and the EZ
Dispositions. The terms "EZ Acquisitions," and "EZ Dispositions" means the
acquisitions and dispositions, respectively, of radio stations described
under "--Recent Transactions--Consummated Acquisitions" and "--Pending
Acquisitions and Dispositions"; it does not, however, include the stations
owned by American.
A-VI-1
<PAGE>
The following table sets forth certain information regarding EZ and its
markets, assuming all of the EZ Probable Transactions (but not the Merger) had
been consummated as of January 1, 1995.
<TABLE>
<CAPTION>
MARKET
DATA EZ DATA
---------- -------------------------------------
NO. OF
MARKET MARKET MARKET STATIONS
RANKING BY REVENUE REVENUE AUDIENCE ---------
REVENUE(1) RANK(1) PERCENT(1) SHARE(1) FM AM
---------- ------- ---------- -------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Seattle........................ 13 1 22.6 15.8 4 1
St. Louis...................... 18 1 30.5 17.9 3 1
Pittsburgh..................... 24 3 11.9 10.3 2 --
Sacramento..................... 25 3 16.7 11.0 2 1
Charlotte...................... 30 1 38.8 30.9 4 2
Kansas City.................... 32 2 17.5 14.0 2 1
</TABLE>
- --------
(1) For information concerning source and calculation of "Market Ranking by
Revenue", "Market Revenue Rank", "Market Revenue Percent" and "Audience
Share", see the first table under "Summary--The Companies--American",
except that EZ rather than American has made the computations and
calculations referred to in notes (2) and (3) thereunder.
OPERATING PHILOSOPHY
EZ seeks to maximize its audience ratings for each of its stations and to
generally achieve the largest possible share of radio advertising revenue in
its markets. By operating multiple station combinations in its markets, EZ has
the opportunity to position its stations in complementary formats that may
enable EZ to achieve a high concentration of listeners in a variety of
formats, attract top talent, and improve the range of products and services
available to advertisers, thereby making EZ's stations a more attractive
alternative to advertisers and better positioning EZ to compete effectively
for available dollars against other media, including newspapers and
television. Additionally, multiple station combinations allow station
consolidation and centralization, creating certain cost and operational
efficiencies and enhancing consistency of management and talent excellence.
EZ employs a variety of innovative techniques to increase its audience
ratings and to generate revenue in its markets. As an example of that effort,
EZ's Seattle station, KMPS-FM, became during 1994, the first commercial
country station to have an interactive world-wide web site on the Internet.
During 1995, that station continued to evolve its Internet applications, by
forming collaborations offering Internet access to listeners and broadcasting
the station's programming in real time on the Internet. While in its early
stages, management believes that these Internet applications have the
potential to create supplemental revenue sources for EZ.
EZ believes that effective sales training is essential to strong operating
performance and believes that its training is superior to the industry as a
whole. EZ has a comprehensive sales training program, called "A Promise For
Excellence", which emphasizes the staged, on-going development of EZ's sales
professionals. The program includes, among other things, sales managers'
training meetings, regular company-wide sales staff conference calls and
testing, auditing and oversight by the training committee. As an adjunct to
the training and management of its sales staff, EZ's stations have, for over
18 years, participated in a sales incentive travel program developed by EZ and
known as the "EZ Marketing Seminar". This incentive travel program involves
owners and managers of some of the largest advertisers in EZ's various
markets, and enables EZ's general managers and senior executives to establish
ongoing relationships with these key advertisers.
EZ concentrates on developing its general managers, who are responsible for
the day-to-day operations of the stations in their respective geographic
markets and are compensated, in part, based on their station's financial
performance. To enhance internal coordination and to effect broader usage of
successful sales and programming techniques, EZ holds quarterly meetings and
monthly conference calls among its senior managers. While day-to-day
operations of the stations are run by the general managers, EZ minimizes costs
by centralizing common
A-VI-2
<PAGE>
functions such as long-range planning, the establishment of policies and
procedures, general accounting and auditing, resource allocation, regulatory
compliance and license renewals.
In an effort to add and retain new listeners, EZ's stations typically will
engage in significant local promotional activities which include extensive
community involvement. EZ's Seattle stations were presented with the national
Humanitarian Award by the Country Music Association, and one of EZ's
Pittsburgh stations received the Media Awareness Award (Radio) by the National
Commission Against Drunk Driving in recognition of its Designated Driver
Program. In addition, in St. Louis, EZ has created an extensive program known
as "Outreach St. Louis, Inc.", which features a daily, informational radio
segment on St. Louis area non-profit organizations designed to educate the
public on how to access or support the valuable services provided by such
organizations. It also acts as a broker to match requests for goods or
services with donors and serves as the vehicle for a grant-funding program to
place charitable contributions with qualifying recipients.
ACQUISITION STRATEGY
EZ endeavors to make acquisitions of stations that have positive broadcast
cash flow, that have the potential for greater revenue and significant
operating efficiencies and that can create opportunities for multiple station
ownership in a market. In analyzing potential acquisitions, EZ generally
considers (i) the size, rate of growth and projected future rate of growth of
the market's revenue, population and retail sales, (ii) whether the proposed
station has a competitive signal with a broad market coverage area, (iii)
whether there is a niche in the local spectrum of radio formats or whether one
of the station's competitors has an obvious vulnerability, (iv) the operating
history and financial performance of the station, (v) the terms of the
purchase and (vi) the minimum level of performance that can be expected from
the station under EZ's management.
EZ believes that there are several potential benefits that result from
operating multiple stations within the same market. First, each additional
station in a market provides EZ with a greater amount of the prime advertising
time to make available for sale to potential advertisers. Second, the more
signals programmed by EZ, the greater the audience share EZ can achieve in a
particular target demographic group. Third, EZ is able to consolidate
administrative, engineering and management expenses to produce substantial
cost savings. Finally, the purchase of additional stations in an existing
market allows EZ to take advantage of its market expertise and existing
relationships with advertisers.
EZ does not apply a fixed formula to determine the purchase price of radio
stations. EZ does not focus solely on multiples of broadcast cash flow because
it generally seeks to acquire untapped potential in addition to existing
broadcast cash flow. Assessing a station's potential is more difficult in
markets in which EZ does not have an existing station group. With multiple
station ownership, EZ can use its current operating experience and existing
relationships with advertisers in a particular market in assessing the degree
of improvement in programming service and broadcast cash flow that is possible
from a potential acquisition in that market. EZ frequently evaluates potential
acquisitions of radio stations. However, EZ has no present understanding,
commitment or agreement with respect to any such acquisition other than as
described in "Recent Transactions-- Pending Acquisitions and Dispositions".
RECENT TRANSACTIONS
Consistent with EZ's acquisition strategy, in 1996 EZ has consummated or
entered into agreements, exclusive of the Merger, but inclusive of station
asset swaps, to acquire 11 stations for an aggregate consideration consisting
of (i) approximately $120.0 million, (ii) its two stations in Philadelphia and
(iii) its three stations in New Orleans. In addition, subject to consummation
of one of the station asset swaps and in order to comply with FCC regulations,
EZ has agreed to sell two FM stations in Charlotte for approximately $64.8
million. EZ has also agreed to sell one AM station in each of Seattle and St.
Louis for an aggregate of approximately $15.0 million.
A-VI-3
<PAGE>
Consummated Acquisitions
Seattle: In May 1996, EZ acquired the assets of station KYCW-FM in Seattle
for approximately $26.0 million. EZ had been programming and marketing the
station pursuant to an LMA since March 1996.
St. Louis: In July 1996, EZ acquired the assets of stations KEZK-FM and
KFNS-AM in St. Louis for approximately $48.0 million. EZ had been programming
and marketing those stations pursuant to an LMA since April 1996.
Pending Acquisitions and Dispositions
Seattle Station Asset Exchange: In March 1996, EZ entered into an asset
exchange agreement with Heritage Media Inc., pursuant to which EZ agreed to
exchange stations WEZB-FM, WRNO-FM and WBYU-AM, serving New Orleans, for
stations KBKS-FM (formerly KCIN-FM) and KRPM-AM, serving Seattle. At the same
time, both parties began programming and marketing the stations to be acquired
by each pursuant to separate LMAs. The consummation of the exchange, which is
expected to occur in late 1996, is subject to the consent of the FCC and the
expiration or earlier termination of the HSR waiting period. See "--
Litigation" for information concerning a challenge to the renewal of the
license for WEZB-FM; consummation of the station asset exchange is conditioned
on such license being renewed.
Philadelphia-Charlotte Station Asset Exchange and Purchase: In November
1996, EZ expects to enter into an asset exchange agreement with Evergreen,
whereby EZ agreed to exchange stations WIOQ-FM and WUSL-FM in Philadelphia for
stations WRFX-FM, WPEG-FM, WBAV-FM, WBAV-AM and WFNZ-AM in Charlotte, and an
asset purchase agreement to purchase station WNKS-FM in Charlotte for
approximately $10.0 million. Consummation of the asset exchange agreement is
not conditioned on consummation of the asset purchase agreement, although
consummation of the asset purchase agreement is conditioned on consummation of
the asset exchange agreement. Simultaneously, the parties and, as applicable,
SFX entered into separate LMAs, pursuant to which they will, after expiration
of the applicable waiting period under the HSR Act, begin programming and
marketing the stations to be acquired by each. On September 16, 1996, EZ and
American each received a Civil Investigative Demand from the Antitrust
Division requesting certain documentary materials regarding the purchase,
sale, trade or other transfer of radio stations in Charlotte, North Carolina.
Consummation of the exchange and the acquisition, which is expected in first
quarter of 1997, is subject to the consent of the FCC and the expiration or
earlier termination of the HSR waiting period. Upon such consummation, EZ will
own six FM stations in Charlotte and will, therefore, be required to dispose
of one of those stations. See "--Charlotte Station Asset Exchange and Sale"
below.
Charlotte Station Asset Exchange and Sale: In November 1996, in order, among
other things, to meet applicable FCC requirements, EZ expects to enter into an
asset agreement with SFX pursuant to which EZ agreed to exchange the assets of
WSSS-FM for WTDR-FM in Charlotte, and an asset purchase agreement pursuant to
which EZ agreed to sell WRFX-FM and WNKS-FM in Charlotte for approximately
$64.8 million. Consummation of the asset exchange agreement is not conditioned
on consummation of the asset purchase agreement, although consummation of the
asset purchase agreement is conditioned on consummation of the asset exchange
agreement and SFX has the right to terminate both agreements if EZ is unable
to close under either agreement. Simultaneously, the parties entered into
separate LMAs, pursuant to which they will, upon expiration of the applicable
waiting period under the HSR Act, begin programming and marketing the stations
to be acquired by each pursuant to separate LMAs. On September 16, 1996, EZ
and American each received a Civil Investigative Demand from the Antitrust
Division requesting certain documentary materials regarding the purchase,
sale, trade or other transfer of radio stations in Charlotte, North Carolina.
Consummation of the transactions, which is expected to close in the first
quarter of 1997, is subject to consummation of the stations asset exchange
with Evergreen described above, the consent of the FCC and the expiration or
earlier determination of the HSR waiting period.
Seattle: In November 1996, EZ expects to enter into an agreement to sell the
assets of KMPS-AM in Seattle for approximately $2.0 million. Consummation of
the transaction, which is expected to close in late 1996, is subject to the
consent of the FCC.
A-VI-4
<PAGE>
St. Louis: In November 1996, EZ expects to enter into an agreement to sell
the assets of KSD-AM in St. Louis for approximately $13.0 million.
Consummation of the transaction, which is expected to close in late 1996, is
subject to the consent of the FCC.
Debt Financings
Senior Subordinated Notes. In November 1995, EZ sold $150.0 million of the
EZ Senior Notes to the public. The EZ Senior Notes bear interest at a rate of
9.75% per annum, payable semi-annually on June 1 and December 1 of each year,
commencing June 1, 1996. The EZ Senior Notes are general unsecured obligations
of EZ and are subordinated in right of payment to all existing and future
senior debt of EZ. The EZ Senior Notes are guaranteed on a senior subordinated
basis by EZ's subsidiaries. Net proceeds from the sale of the EZ Senior Notes
were used to repay in full all amounts outstanding under EZ's former Credit
Facility. See "Indebtedness of EZ--Senior Subordinated Notes." The Indenture
governing the EZ Senior Notes provides that in the event of a change of
control, such as the Merger, EZ must offer to redeem the EZ Senior Notes at a
price equal to 101% of the outstanding principal amount of such notes. See
"Risk Factors--Restrictions Imposed by Terms of Indebtedness".
New Credit Facility. Concurrent with the sale of the EZ Senior Notes, EZ
entered into a new credit facility (the "EZ Credit Facility") providing for
aggregate borrowings of up to $125 million, of which $58.5 million was
outstanding as of October 1, 1996. See "Indebtedness of EZ--New Credit
Facility".
A-VI-5
<PAGE>
OPERATIONS
The following table sets forth information about each of EZ's stations and
each of the stations which will be owned by EZ upon consummation of the EZ
Probable Transactions.
<TABLE>
<CAPTION>
STATION RANK STATION
MARKET MARKET MARKET STATION PRIMARY IN PRIMARY RANK IN
RANKING BY REVENUE REVENUE BROADCASTING DEMOGRAPHIC DEMOGRAPHIC ADULTS
MARKET/STATION(1) REVENUE(2) RANK(2) PERCENT(2) FORMAT TARGET(3) TARGET(4) 25-54(4)
----------------- ---------- ------- ---------- ---------------------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
SEATTLE, WA............. 13 1 22.6
KZOK-FM................ Classic Rock Adults 25-54 2+ 2+
KMPS-FM................ Country Adults 25-54 4 4
KYCW-FM................ Country Adults 18-34 5+ 6
KBKS-FM*............... Adult Contemporary Women 25-54 14 21
KRPM-AM*(5)............ Adult Contemporary Women 25-54
ST. LOUIS, MO........... 18 1 30.5
KEZK-FM................ Adult Contemporary Women 25-54 1 2
KYKY-FM................ Adult Contemporary Women 25-54 2 5
KSD-FM................. Classic Rock Men 25-54 6 9
KFNS-AM................ Sports Talk Men 25-54 14 18
PITTSBURGH, PA.......... 24 4 11.9
WBZZ-FM................ Contemporary Hit Radio Adults 18-34 2 5
WZPT-FM................ Seventies Adults 25-54 7 7
SACRAMENTO, CA.......... 25 3 16.7
KNCI-FM................ Country Adults 25-54 2+ 2+
KRAK-FM................ Country Adults 25-54 12 12
KHTK-AM................ Talk/Sports Adults 25-54 14 14
CHARLOTTE, NC........... 30 1 38.8
WSOC-FM................ Country Adults 25-54 2 2
WPEG-FM*............... Urban Adults 18-34 1 3
WTDR-FM*............... Country Adults 25-54 4 4
WBAV-FM*............... Urban Adults 25-54 5 5
WFNZ-AM*............... Sports Adults 25-54 16+ 16+
WBAV-AM*............... Urban Adults 25-54 20 20
KANSAS CITY, MO......... 32 2 17.5
KFKF-FM................ Country Adults 25-54 2 2
KBEQ-FM................ Country Adults 18-34 4 4
KOWW-AM(6)............. Talk Adults 25-54 21 21
</TABLE>
- --------
* Included in EZ Probable Transactions. Several of these stations are being
programmed by EZ pursuant to LMAs.
+ Tied.
(1) Actual community of license may differ from the metropolitan market
served. This listing and the accompanying notes do not correspond to the
formal call signatures recognized by the FCC, which do not include the "-
AM" suffix or, in most instances, the "-FM" suffix.
(2) For information concerning source and calculation of "Market Ranking by
Revenue", "Market Revenue Rank" and "Market Revenue Percent", see
"Summary--The Companies--American" in this Proxy Statement, except that EZ
rather than American has made the computations and calculations referred
to in notes (2) and (3) thereunder.
(3) Due to variations that may exist within the same station programming
format (such as variations in the tempo of the music or the age of the
songs broadcast), the primary demographic target may be different even
though the station programming format is the same.
(4) "Station Rank in Primary Demographic Target" is the ranking of the station
among all radio stations in its market that are ranked in its target
demographic group and is based on the station's average persons share in
the primary demographic target in the applicable Metro Survey Area,
Average Quarter Hour Share, Monday through Sunday, 6:00 A.M. to Midnight,
according to the Spring 1996 Arbitron reports. Arbitron is the generally
accepted industry source for statistical information concerning audience
ratings. The table includes stations having at least a 0.1% market share.
Due to the nature of listener surveys, other radio rating services may
report different rankings; however, EZ does not believe that any radio
rating service other than Arbitron is accorded significant weight in the
radio broadcast industry. "Station Rank in Adults 25-54" is also based on
the Spring 1996 Arbitron reports. The information provided herein
regarding Arbitron's audience listening estimates is based on Arbitron's
copyrighted and proprietary data estimates concerning the applicable
station's average quarter hour persons share, Monday-Sunday, 6:00 A.M. to
Midnight, from the applicable Spring 1996 Arbitron reports for the
demographic, daypart and metro areas listed. Stations referenced herein
are ranked according to calculation made by Arbitron based on Arbitron's
data and estimates for stations that have met Arbitron's minimum reporting
standards for the applicable market and survey.
(5) KRPM-AM is simulcast with KBKS-FM.
(6) Formerly KBEQ-AM.
A-VI-6
<PAGE>
ADVERTISING SALES
Virtually all of EZ's revenues are generated from the sale of local and
national advertising for broadcast on its radio stations. Additional
broadcasting revenue is generated from network compensation payments and other
miscellaneous transactions. Local sales are made by a station's sales staff.
National sales are made by firms specializing in radio advertising sales on
the national level, in exchange for a commission from EZ that is based on EZ's
gross revenue from the advertising obtained. Approximately 80% of EZ's
broadcasting revenue for the year ended December 31, 1995, was generated from
the sale of local advertising.
EZ believes that radio is an efficient and cost-effective means for
advertisers to reach specific demographic groups. Advertising rates charged by
radio stations are based primarily on (i) a station's audience share within
the demographic groups targeted by advertisers, (ii) the number of stations in
the market competing for the same demographic groups, (iii) the supply of and
demand for radio advertising time and (iv) certain qualitative factors. Rates
are generally highest during morning and afternoon commuting hours.
A station's listenership is reflected in ratings surveys that estimate the
number of listeners tuned to a station and the time they spend listening to
that station. Each station's ratings are used by its advertisers and
advertising representatives to consider advertising with the station, and are
used by EZ to chart audience growth, set advertising rates and adjust
programming. The radio broadcast industry's principal ratings service is
Arbitron, which publishes monthly and quarterly ratings surveys for
significant domestic radio markets. These surveys are EZ's primary source of
ratings data with respect to its stations.
COMPETITION
The success of each of EZ's radio stations is dependent, to a significant
degree, upon its audience ratings and its share of the overall advertising
revenue within its market. The radio broadcasting industry is a highly
competitive business. EZ's radio stations compete for listeners and
advertising revenue directly with other radio stations, as well as other media
within their markets. EZ's audience ratings and market share are subject to
change and any adverse change in a particular market could have a material and
adverse effect on the revenue of EZ's stations located in that market. There
can be no assurance that any one of EZ's stations will be able to maintain and
increase its current audience ratings and advertising revenue market share.
The radio broadcasting industry is also subject to competition from new
media technologies that may be developed or introduced, such as the delivery
of audio programming by cable television systems and by digital audio
broadcasting formats to local and national audiences. In June 1995, the FCC
issued a Notice of Proposed Rulemaking that contemplates the introduction of
satellite delivered digital audio radio services. This Rulemaking may result
in the initiation of satellite-delivered radio programming. EZ cannot predict
at this time the effect, if any, that any such new technologies may have on
the radio broadcasting industry. The radio broadcasting industry historically
has grown in terms of total revenues despite the introduction of new
technologies for the delivery of entertainment and information, such as
television broadcasting, cable television, audio tapes, compact disks and
cellular telephones.
Companies that operate radio stations must always be alert to the
possibility of another station changing its programming format to compete
directly for listeners and advertisers. There are typically other well-
capitalized firms competing in the same geographic markets as EZ. If these
firms decide to convert one of their stations to a format similar to that of
one of EZ's radio stations in the same geographic area, the result could be
lower ratings and advertising revenue, increased promotion and other expenses
and consequently lower station operating income.
As a result of abolition of the national limit on the number of stations
that may be owned by one entity and liberalization of the local ownership
rules by the Telecommunications Act, the radio industry has shown a trend
toward consolidation which is likely to continue. The trend towards
consolidation will increase competition among purchasers for radio stations,
including stations which EZ may find attractive, which may, in turn, increase
the price of such stations to EZ. Market pressure to consolidate may also
cause EZ to increase the speed at which and the number of stations it
purchases.
A-VI-7
<PAGE>
EMPLOYEES
At October 1, 1996, EZ employed 508 full time and 257 part time persons.
With the exception of the on-air announcers of stations WBZZ-FM and WZPT-FM in
Pittsburgh and WIOQ-FM in Philadelphia, who are members of AFTRA, giving
effect to the EZ Probable Transactions, none of EZ's employees are covered by
collective bargaining agreements. The AFTRA agreement for Pittsburgh expires
in May 1997 and in July 1998 for Philadelphia. EZ considers its relations with
its employees and AFTRA to be good.
COMMUNITY INVOLVEMENT
EZ considers its community involvement to be of considerable importance, and
to that end each of EZ's stations participates in many community programs,
fund raisers and activities that benefit a wide variety of organizations.
Charitable organizations that have been the beneficiaries of EZ's marathons,
walkathons, swimathons, parades, food banks, fairs and festivals include,
among others, the United Negro College Fund, Ronald McDonald house, Big
Brothers, Big Sisters, Red Cross, United Way, Salvation Army and research
foundations seeking cures for multiple sclerosis, cystic fibrosis, leukemia,
sickle cell anemia and AIDS and helping to fight drug abuse.
SUBSIDIARIES
EZ conducts all of its operations through direct and indirect subsidiaries.
In addition, in 1995, EZ formed a wholly-owned subsidiary, Radio Data Group,
Inc. ("RDG"), to explore new technologies with potential applications to radio
broadcasting. RDG does not contribute materially to EZ's revenue. In June
1996, three unrelated third parties, including American, each bought a 25%
equity interest in RDG.
A-VI-8
<PAGE>
FEDERAL REGULATION OF RADIO BROADCASTING
For a description of federal regulation of the radio broadcasting industry,
see "Business--Federal Regulation of Radio Broadcasting" in Appendix V.
The following table sets forth the expiration date of each station's main
FCC broadcast license (a [*] indicates stations for which EZ (or the seller)
has already filed a renewal application with the FCC and those marked with a
[+] indicate EZ Probable Transactions, except that the stations to be disposed
of pursuant to EZ Probable Transactions are not listed):
FCC STATION LICENSE RENEWAL DATES
<TABLE>
<CAPTION>
GEOGRAPHIC CURRENT LICENSE
STATION CALL LETTERS MARKET SERVED EXPIRATION DATE
- -------------------- ------------------ -----------------
<S> <C> <C>
KMPS-FM Seattle-Tacoma, WA February 1998
KZOK-FM Seattle-Tacoma, WA February 1998
KYCW-FM Seattle-Tacoma, WA February 1998
*+KBKS-FM(1) Seattle-Tacoma, WA February 1998
*+KRPM-AM(1) Seattle-Tacoma, WA February 1998
KYKY-FM St. Louis, MO February 1997
KSD-FM St. Louis, MO February 1997
KEZK-FM St. Louis, MO February 1997
KFNS-AM St. Louis, MO December 1996
WBZZ-FM Pittsburgh, PA Renewal Pending(1)
WZPT-FM Pittsburgh, PA August 1998
KNCI-FM Sacramento, CA December 1997
KRAK-FM Sacramento, CA December 1997
KHTK-AM Sacramento, CA December 1997
KFKF-FM Kansas City, MO June 1997
KBEQ-FM Kansas City, MO February 1997
KOWW-AM Kansas City, MO February 1997
WSOC-FM Charlotte, NC December 2002
+WTDR-FM Charlotte, NC December 2002
+WPEG-FM Charlotte, NC December 2002
+WBAV-FM Charlotte, NC December 2002
+WBAV-AM Charlotte, NC December 2002
+WFNZ-AM Charlotte, NC December 2002
</TABLE>
- --------
(1) See "Legal Proceedings" below for a discussion of the competing
application filed for the WBZZ-FM license and the petition to deny filed
with respect to the WEZB-FM in New Orleans (one of the stations involved
in the station asset exchange for the Seattle stations) license renewal
application.
PROPERTIES
EZ's corporate headquarters are located at 10800 Main Street in Fairfax,
Virginia. The headquarters building is owned by EZ Limited Partnership, an
affiliated entity, and is leased in part to EZ. See "--Certain Transactions"
below.
A-VI-9
<PAGE>
The properties used by EZ's radio stations consist of office and studio
facilities, towers and tower and transmitter sites. FM antennas are located on
either EZ-owned or leased towers, and AM towers are either owned or leased.
Stations' studio and sales offices are generally located in downtown or
business districts. Transmitter and tower sites are generally located at sites
which provide maximum market coverage.
Giving effect to the EZ Probable Transactions, EZ presently owns: its office
and studio facility and a tower and transmitter site in Pittsburgh; an office
and studio facility and AM tower and transmitter site in St. Louis; an office,
studio facility and a tower for its Charlotte stations; its AM tower,
transmitter site and office and studio facility in Sacramento; a tower and
transmitter site, its AM tower and transmitter site in Seattle; its AM tower
and transmitter site in Kansas City; and a parcel of land improved by a tower
and transmitter site in Fairfax County, Virginia.
EZ owns substantially all of the equipment it uses, including its
transmitting antennas, transmitters, studio equipment and general office
equipment. EZ believes that its properties are in good condition and suitable
for its operations; however, EZ continually reviews opportunities to upgrade
its equipment.
LITIGATION
From time to time, EZ becomes involved in various claims and lawsuits that
are incidental to its business. In the opinion of EZ's management, there are
no material legal proceedings pending against EZ, except as discussed below.
Currently, commercial radio stations are required to file license renewal
applications with the FCC every seven years and, upon implementation of the
Telecommunications Act, the license term will be expanded to eight years.
Following the filing of renewal applications, "parties in interest," a term
which includes competitors and community groups, have a specified period of
time in which they may file petitions requesting that the FCC deny the renewal
application or designate it for hearing. In addition, prior to adoption of the
Telecommunications Act, if any party wished to file an application seeking
that station's license, the challenger could do so by filing an application
shortly before the expiration of the license.
In June 1991, Allegheny Communications Group, Inc. ("Allegheny") filed a
competing application and a Petition to Deny against the license renewal
application for station WBZZ-FM in Pittsburgh. Under FCC precedent, an
incumbent is entitled to a renewal expectancy if it has provided meritorious
service to its listeners during the license term. EZ believes that WBZZ has
provided such service. After the FCC denied the Allegheny petition, a hearing
was conducted on the WBZZ license renewal application and Allegheny's
competing application before an administrative law judge who has yet to render
a decision. Given WBZZ's entitlement to a renewal expectancy, EZ believes that
the station's license will be renewed. See "The Merger Agreement--Regulatory
Matters--FCC License Renewals" and "--Conditions of the Merger" in the Proxy
Statement for information with respect to the effect of this proceeding on
consummation of the Merger.
On January 31, 1996, EZ New Orleans, Inc. filed an application for the
renewal of the license of WEZB-FM in New Orleans with the FCC. A petition to
deny the application, dated April 25, 1996, has been filed. The petition
alleges, among other things, that the licensee has presented indecent and
obscene programming and improperly maintained the station's public inspection
file; it also contends that the licensee is not qualified to do business in
Louisiana. The licensee filed its opposition to the petition to deny on June
17, 1996. The petitioners filed a reply dated July 11, 1996. Informal
objections have also been filed against the WEZB-FM renewal application,
raising allegations similar to those in the petition. The licensee is
preparing its response to the informal objections as well as to an inquiry
from the FCC staff concerning public inspection file compliance. While EZ
cannot predict the outcome of these matters involving WEZB-FM at this time, EZ
believes that the challenges will not have a material adverse effect on EZ.
There can be no assurance, however, that the renewal application will be
granted. See "Recent Transactions--Pending Acquisitions and Dispositions--
Seattle Station Asset Exchange" for information with respect to the EZ
Probable Transaction involving, among other stations, WEZB-FM.
A-VI-10
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of EZ are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
---- --- ---------
<S> <C> <C>
Arthur Kellar(1)........ 74 Chairman of the Board
Alan Box(1)............. 45 President, Chief Executive Officer and Director
Ronald H. Peele, Jr..... 37 Vice President, Secretary and Treasurer
Woodley A. Allen(2)..... 49 Director
C. Barrie Cook(2)....... 72 Director
George W. Johnson(3).... 68 Director
John W. King(3)......... 67 Director
James R. McKay(3)....... 72 Director
Glenn W. Saunders,
Jr.(1)(2).............. 69 Director
</TABLE>
- --------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
The Board of Directors of EZ currently consists of eight members. All
directors hold office until the annual meeting of the EZ Stockholders next
following their election or until their successors are elected and qualified.
The holders of the shares of Class A Common Stock, voting separately as a
class, are entitled to elect two independent directors. Each executive officer
is appointed annually by the EZ Board and serves at the discretion of the EZ
Board. It is a condition of the obligations of American and EZ to consummate
the Merger, that American and Messrs. Kellar and Box enter into the
Stockholder Agreement, pursuant to which, subject to certain conditions
relating to the continued ownership of American Class A Common Stock by such
persons, that they will have the right to nominate two persons to serve as
directors of American. It is anticipated that Messrs. Kellar and Box will be
so nominated and that Mr. Kellar will also be elected to the Executive
Committee of American and the Compensation Committee of American. See "The
Merger Agreement--Interests of Certain Persons in the Merger".
Mr. Kellar is the founder of EZ and has served as a director since 1967. He
has served as Chairman of the Board since 1968 and was President of EZ from
1967 until 1985. From the period 1956 through 1978, Mr. Kellar was the
President and principal stockholder of O.K. Broadcasting, Inc., which owned
and operated WEEL-AM, a radio station located in Fairfax, Virginia. He is the
father-in-law of Mr. Box. Mr. Kellar currently serves as a director of George
Mason Bankshares, Inc., Precision Tune, Inc. and American Medical
Laboratories, Inc., and as a trustee of George Mason University.
Mr. Box joined EZ in 1974 as the General Manager of EZ's Washington, D.C.
area radio station. He became Executive Vice President and General Manager and
a director of EZ in 1979, President of EZ in 1985 and Chief Executive Officer
of EZ in 1995. Mr. Box is the son-in-law of Mr. Kellar. He serves as a
director of the George Mason Bankshares and the George Mason Bank. Previously,
Mr. Box served as the Chairman of the National Association of Broadcasters'
("NAB") Digital Audio Broadcast Task Force and as a director of the NAB.
Currently, Mr. Box is the Chairman of the NAB's Futures Committee.
Mr. Peele joined EZ in March 1987 as its Controller, and was named Vice
President and Controller in 1991, and Vice President, Secretary and Treasurer
in 1992. Prior to joining EZ, he was with Ernst & Young LLP. Mr. Peele is a
certified public accountant.
Mr. Allen has served as a director of EZ since 1979. He has been the
principal of Allen Management Services, Inc., a consulting firm, since 1992.
He was Vice President, Secretary and Treasurer of EZ from 1979 to 1992, and
its Controller from 1973 to 1979. Mr. Allen is Vice Chairman of the Board of
Precision Tune Inc.
A-VI-11
<PAGE>
Dr. Cook has served as a director of EZ since 1988. He has been a medical
doctor for more than 30 years, and is currently Chairman of the Pathology
Department of Fairfax Hospital in Fairfax, Virginia. He is also the founder
and Chairman of American Medical Laboratories, Inc. Dr. Cook is a director of
the George Mason Bank and former President of the American Society of Clinical
Pathology.
Dr. Johnson has served as a director of EZ since 1988. He was the President
of George Mason University, located in Fairfax, Virginia, from 1978 until his
retirement in June 1996.
Mr. King has served as a director of EZ since 1967. He was the founder and
President of King Wholesale, Inc., a distributor for Anheuser Busch, from 1964
until his retirement in 1993.
Mr. McKay has served as a director of EZ since 1967. He has been the
President of Jim McKay Chevrolet, Inc., which he founded in 1956.
Mr. Saunders has served as a director of EZ since 1967. He has been the
Chairman of International Real Estate Associates, Ltd., since 1978.
EMPLOYMENT AGREEMENTS
In June 1995, Messrs. Kellar and Box each entered into a five-year
employment agreement with EZ that provide for a base salary, bonuses and such
other specific benefits as are determined annually by the EZ Board. Messrs.
Kellar and Box and the EZ Board each have the right to terminate the
employment agreements with or without cause at any time. Termination by the EZ
Board without cause or termination by Messrs. Box or Kellar with cause would
obligate EZ to pay the compensation due under the applicable employment
agreement for the greater of 12 months or the remainder of its term. The
present annual base salaries of Messrs. Kellar and Box are $250,000. Pursuant
to the terms of the employment agreements, Messrs. Kellar and Box have agreed
that they will not compete with EZ during the period of their employment and
for a two-year period after termination of the applicable employment
agreement. In connection with the consummation of the Merger, it is
anticipated that the existing employment agreement of Messrs. Kellar and Box
will be terminated and Mr. Kellar will receive a payment of $250,000 in lieu
of the severance payments to which he is entitled under his Employment
Agreement. In addition, Mr. Box will become an Executive Vice President of
American. See "The Merger Agreement--Interests of Certain Persons in the
Merger".
A-VI-12
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid to certain EZ executives for services rendered to EZ by such executives
in all capacities during the nine months ended December 31, 1993 and the years
ended December 31, 1994 and 1995, for EZ's Chief Executive Officer and each of
the other executive officers of EZ whose salary and bonus exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------- ------------------------------
NAME AND OTHER ANNUAL SHARES UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR(A) SALARY BONUS COMPENSATION OPTIONS COMPENSATION
------------------ ------- -------- ------- ------------ ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Arthur Kellar........... 1993 $187,500 $80,000 $10,000 100,000 --
Chairman of the Board 1994 250,000 170,000 12,000 -- --
1995 250,000 106,000 12,000 -- --
Alan Box................ 1993 $187,500 $80,000 $10,000 100,000 --
President and Chief 1994 250,000 170,000 2,000 -- --
Executive Officer 1995 250,000 106,000 3,000 -- --
Ronald H. Peele, Jr..... 1993 $ 76,000 $46,000 $ 3,000 40,000 --
Vice President, Secre-
tary 1994 104,000 97,000 8,400 -- --
and Treasurer Officer 1995 110,000 50,000 8,400 -- --
</TABLE>
- --------
(a) Nine months in the case of 1993.
DIRECTOR COMPENSATION
Directors who are not officers of EZ each receive an annual retainer of
$5,000, and $600 for each full board meeting and $100 for each executive,
audit and compensation committee meeting attended. Officers of EZ do not
receive additional compensation for attendance at EZ Board meetings or
committee meetings.
STOCK OPTION INFORMATION
EZ believes that the use of a stock option plan is beneficial to
stockholders. Stock ownership by management and stock-based performance
compensation further align management and stockholder interests towards
increasing the price of EZ's stock and thus increasing stockholder value. EZ's
only long-term incentive opportunity is the 1993 Equity Incentive Plan (the
"EZ Incentive Plan"), adopted in June 1993. Pursuant to the EZ Incentive Plan,
individual stock option grants were determined considering observed market
practices for the radio industry.
At December 31, 1995, the executive officers, other than the Chief Executive
Officer, held options to purchase an additional 138,500 shares of the EZ Class
A Common Stock. The projected annualized value of stock options based on the
difference between the exercise price and the fair market value as of December
31, 1995, awarded to the executive officers, other than the Chief Executive
Officer, averaged 196% of base salary during the year ended December 31, 1995.
The ultimate value of these long-term compensation awards will be determined
by the actual performance of EZ's (and, upon consummation of the Merger,
American's) stock price and returns on investment capital over time.
During the year ended December 31, 1995, there were no stock options with
respect to the EZ Common Stock granted to the individuals named in the Summary
Compensation table above.
In May 1996, the Compensation Committee of the EZ Board granted options to
acquire 5,000 shares of Class B Common Stock to Messrs. Box and Kellar at an
exercise price of $19.50 per share and options to acquire 10,000 shares of
Class A Common Stock to Mr. Peele at an exercise price of $19.50 per share.
A-VI-13
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL PERIOD AND
FISCAL PERIOD END OPTION VALUES
The following table summarizes options exercised during the year ended
December 31, 1995 and presents the value of unexercised options held by the
individuals named in the Summary Compensation table above as of the year ended
December 31, 1995:
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
SHARES NUMBER OF IN-THE-MONEY
ACQUIRED VALUE UNEXERCISED OPTIONS OPTIONS AT
NAME ON EXERCISE REALIZED AT DECEMBER 31, 1995 DECEMBER 31, 1995
---- ----------- -------- -------------------- -----------------
<S> <C> <C> <C> <C>
Arthur Kellar........... -- -- 100,000 $500,000
Alan Box................ -- -- 100,000 $500,000
Ronald H. Peele, Jr..... 1,500 7,500 38,500 $192,500
</TABLE>
All options are immediately exercisable at $13 per share. The closing share
price of EZ's Class A Common Stock at December 31, 1995 was $18.00. The value
of unexercised stock options was based on the difference between the exercise
price and the fair market value as of December 31, 1995.
CERTAIN TRANSACTIONS
Since 1985, EZ has leased a portion of the building in which its
headquarters are located from EZ Limited Partnership pursuant to a lease that
expires in November 1997. The aggregate monthly lease payments to EZ Limited
Partnership under EZ's lease are, in EZ's opinion, no less favorable than
rates that could be negotiated with unrelated parties in the area. EZ Limited
Partnership, of which EZ owns a 10% partnership interest, was formed in April
1984 to construct and own EZ's headquarters building. The other limited
partners are Messrs. Kellar, Kelly, King, McKay, Saunders and John M.
Sherwood, all of whom are directors or former directors of EZ, and Thomas
Blackwell, a stockholder of EZ.
Prior to consummation of the Merger, EZ will purchase the limited
partnership interests of the limited partners for an aggregate of
approximately $270,000 in cash and dissolve EZ Limited Partnership, with the
result that EZ will be the sole owner of the building at the Effective Time.
As part of the purchase of the limited partnership interests, EZ will assume a
loan with an outstanding principal balance of approximately $1,400,000 due on
December 31, 1996, but will be extended if the acquisition of such limited
partnership interests is not then consummated.
EZ in the ordinary course of business conducts banking business with and
borrows from the George Mason Bank. EZ currently maintains savings and
operating accounts with the George Mason Bank. Messrs. Kellar, Box and Dr.
Cook are directors of the George Mason Bank and Messrs. Box and Kellar are
directors of its parent company, George Mason Bankshares, Inc. EZ believes all
transactions between EZ and its directors and officers or companies with which
they are associated were conducted in an arms'-length fashion.
INDEBTEDNESS OF EZ
The summaries contained herein of the material provisions of certain
indebtedness of EZ do not purport to be complete and are qualified in their
entirety by reference to the provisions of the EZ Credit Facility and the EZ
Senior Note Indenture, which are filed as exhibits to the Registration
Statement to which exhibits reference is made hereby. Capitalized terms used
in this Section which are not otherwise defined in this Proxy Statement have
the respective meanings assigned thereto in the EZ Credit Facility or the EZ
Senior Note Indenture, as the case may be.
A-VI-14
<PAGE>
EZ SENIOR SUBORDINATED NOTES
In November 1995, EZ sold $150.0 million of the EZ Senior Notes to the
public. The EZ Senior Notes bear interest at a rate of 9.75% per annum,
payable semi-annually on June 1 and December 1 of each year, commencing June
1, 1996. The EZ Senior Notes are redeemable, in whole or in part, at the
option of EZ at any time on or after December 1, 2000, at a redemption price
of 104.875% of the principal amount, plus accrued and unpaid interest to the
date of the redemption. The redemption price reduces over three years to a
redemption price of 100% of the principal amount in 2003 and thereafter. At
any time prior to December 1, 1998, EZ may redeem up to $50.0 million of the
original aggregate principal amount of the EZ Senior Notes with the net
proceeds of one public offering of common stock at 109.75% of the principal
amount thereof, together with accrued and unpaid interest, if any, to the date
of redemption, as long as at least $100.0 million of the original aggregate
amount of the EZ Senior Notes remain outstanding. Upon a Change of Control,
holders of the EZ Senior Notes will have the right to require EZ to repurchase
their EZ Senior Notes at 101% of the principal amount, thereof, plus accrued
and unpaid interest, if any, to the date of the purchase. The Merger will
represent a Change of Control. See "Risk Factors--Financial Leverage; Debt
Service Requirements" and "--Restrictions Imposed by Terms of Indebtedness" in
this Proxy Statement. The EZ Senior Notes are general unsecured obligations of
EZ and are subordinated in right of payment to all existing and future senior
debt of EZ. The EZ Senior Notes are guaranteed on a senior subordinated basis
by EZ's subsidiaries.
EZ CREDIT FACILITY
Concurrent with the sale of the EZ Senior Notes, EZ entered into the EZ
Credit Facility which provides for aggregate outstanding borrowings of $125.0
million, subject to compliance with certain financial tests. The amount
available under the EZ Credit Facility reduces on a scheduled quarterly basis
from March 1998 through the expiration date of December 2002. Additional
reductions are required based on EZ's excess cash flow and upon the occurrence
of certain events (described in the EZ Credit Facility), including sales of
assets. If drawn upon, mandatory principal payments will begin in 1998. The
commitment fee is 1/2 of 1% of the unused portion. Substantially all of EZ's
assets are pledged to secure the performance of EZ under the EZ Credit
Facility. At October 1, 1996, total debt outstanding under the EZ Credit
Facility was $58.5 million and the maximum amount available under the EZ
Credit Facility was $66.5 million. The EZ Credit Facility is a direct
obligation of EZ, ranks senior to the EZ Senior Notes and is secured by first
priority pledges of all of the stock of EZ and its subsidiaries and security
interests in and liens on substantially all of the assets of EZ and its
subsidiaries (other than the FCC broadcasting licenses).
Both the EZ Senior Note Indenture governing the EZ Senior Notes and the EZ
Credit Facility contain certain financial and operational covenants and other
restrictions with which EZ must comply, including among others, prohibiting
the payment of dividends, limitations on making capital expenditures,
incurring additional indebtedness, redeeming or repurchasing capital stock of
EZ, restrictions on the use of borrowings, requirements to maintain certain
financial ratios and limitations on acquisitions and dispositions of stations
in certain circumstances.
A-VI-15
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
WBAV-AM/FM and WPEG-FM
Report of Independent Auditors...................................... A-VI-F-2
Combined Balance Sheets as of December 31, 1995 and September 30,
1996............................................................... A-VI-F-3
Combined Statements of Earnings and Division Equity as of December
31, 1995 and September 30, 1996.................................... A-VI-F-4
Combined Statements of Cash Flows as of December 31, 1995 and
September 30, 1996................................................. A-VI-F-5
Notes to Combined Financial Statements.............................. A-VI-F-6
</TABLE>
A-VI-F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Evergreen Media Corporation:
We have audited the accompanying combined balance sheets of WBAV-AM/FM and
WPEG-FM as of December 31, 1995 and September 30, 1996, and the related
combined statements of earnings and division equity and cash flows for the
periods from January 1, 1995 to May 12, 1995 and from May 13, 1995 to December
31, 1995 and the nine months ended September 30, 1996. These combined
financial statements are the responsibility of the management of WBAV-AM/FM
and WPEG-FM. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of WBAV-AM/FM and
WPEG-FM as of December 31, 1995 and September 30, 1996, and the results of
their operations and their cash flows for the periods from January 1, 1995 to
May 12, 1995 and from May 13, 1995 to December 31, 1995 and the nine months
ended September 30, 1996, in conformity with generally accepted accounting
principles.
As discussed in note 1 to the combined financial statements, on May 12,
1995, Evergreen Media Corporation purchased substantially all of the assets of
WBAV-AM/FM and WPEG-FM from Broadcasting Partners, Inc. in a business
combination accounted for as a purchase. As a result of the acquisition,
financial information for periods after May 12, 1995 is presented on a
different basis than that for periods before May 12, 1995 and, therefore, such
information is not comparable.
KPMG Peat Marwick LLP
Dallas, Texas
October 16, 1996
A-VI-F-2
<PAGE>
WBAV-AM/FM AND WPEG-FM
COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash.............................................. $ 72 $ 248
Accounts receivable, less allowance for doubtful
accounts of $61 in 1995 and $96 in 1996.......... 1,915 2,223
Prepaid expenses and other........................ 19 40
------- -------
Total current assets............................ 2,006 2,511
Property and equipment, net (note 2)................ 1,907 1,758
Intangible assets, net (note 3)..................... 25,024 22,587
------- -------
$28,937 $26,856
======= =======
LIABILITIES AND DIVISION EQUITY
Current liabilities--accounts payable and accrued
expenses........................................... $ 379 $ 290
Division equity (note 1)............................ 28,558 26,566
Commitments (note 4)................................
------- -------
$28,937 $26,856
======= =======
</TABLE>
See accompanying notes to combined financial statements.
A-VI-F-3
<PAGE>
WBAV-AM/FM AND WPEG-FM
COMBINED STATEMENTS OF EARNINGS AND DIVISION EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 1, MAY 13, NINE MONTHS
1995 TO 1995 TO ENDED
MAY 12, DECEMBER 31, SEPTEMBER 30,
1995 1995 1996
---------- ------------ -------------
<S> <C> <C> <C>
Gross revenues.......................................................................... $2,628 $ 5,984 $ 7,480
Less agency commissions............................................................... 330 708 978
------ ------- -------
Net revenues........................................................................ 2,298 5,276 6,502
------ ------- -------
Operating expenses:
Station operating expenses excluding depreciation and amortization.................... 1,520 2,558 3,529
Depreciation and amortization......................................................... 128 2,545 2,603
------ ------- -------
Total operating expenses............................................................ 1,648 5,103 6,132
------ ------- -------
Earnings before income taxes........................................................ 650 173 370
Income tax expense (note 1)............................................................. 240 64 136
------ ------- -------
Net earnings........................................................................ 410 109 234
Division equity at beginning of period.................................................. 6,108 5,805 28,558
Elimination of BPI equity (note 1)...................................................... -- (5,805) --
Acquisition by parent (note 1).......................................................... -- 30,417 --
Net advances to parent.................................................................. (953) (2,032) (2,362)
Allocation of income taxes (note 1)..................................................... 240 64 136
------ ------- -------
Division equity at end of period........................................................ $5,805 $28,558 $26,566
- --------------------------------------------------
====== ======= =======
</TABLE>
See accompanying notes to combined financial statements.
A-VI-F-4
<PAGE>
WBAV-AM/FM AND WPEG-FM
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 1, MAY 13, NINE MONTHS
1995 TO 1995 TO ENDED
MAY 12, DECEMBER 31, SEPTEMBER 30,
1995 1995 1996
---------- ------------ -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings............................ $ 410 $ 109 $ 234
Adjustments to reconcile net earnings to
net cash provided by operating
activities:
Depreciation and amortization.......... 128 2,545 2,603
Allocation of income tax............... 240 64 136
Changes in certain assets and
liabilities:
Accounts receivable................... 46 (515) (308)
Prepaid expenses and other............ 10 62 (21)
Accounts payable and accrued
expenses............................. 447 (472) (89)
------- ------- -------
Net cash provided by operating
activities.......................... 1,281 1,793 2,555
------- ------- -------
Cash flows used in investing activities--
capital expenditures.................... (50) (22) (17)
------- ------- -------
Cash flows from financing activities:
Changes in bank overdrafts.............. (278) 333 --
Net change in Division equity........... (953) (2,032) (2,362)
------- ------- -------
Net cash used by financing
activities.......................... (1,231) (1,699) (2,362)
------- ------- -------
Increase in cash......................... -- 72 176
Cash at beginning of period.............. -- -- 72
------- ------- -------
Cash at end of period.................... $ -- $ 72 $ 248
======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
A-VI-F-5
<PAGE>
WBAV-AM/FM AND WPEG-FM
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND SEPTEMBER 30, 1996
(TABLES IN THOUSANDS OF DOLLARS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) General and Basis of Presentation
WBAV-AM/FM and WPEG-FM (collectively, the "Division" or the "Stations") are
commercial radio stations located in Charlotte, North Carolina. Until May 12,
1995 the Stations were owned by Broadcasting Partners, Inc. ("BPI"). On May
12, 1995, Evergreen Media Corporation (the "Company") acquired BPI, including
the assets of the Division. In connection with the BPI acquisition, the
Company allocated $30,417,000 of the purchase price to the assets of the
Division based on management's estimates of the fair value of net assets
acquired as follows: working capital--$962,000; property and equipment--
$2,033,000 and intangible assets--$27,422,000.
As a result of the acquisition and the different cost basis with respect to
the assets and liabilities of the Division, financial information for periods
before and after May 12, 1995 is not comparable.
The accompanying financial statements include the assets, liabilities,
revenues and expenses that are directly related to the Division. The financial
statements do not include general unallocated corporate assets, liabilities,
revenues and expenses of BPI or Evergreen which are not directly related to
the Division or debt financing and associated interest expense and, therefore,
may not necessarily reflect what the financial position and results of
operations of the Division would have been had it been a separate stand-alone
entity during the periods covered by the financial statements.
(b) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is recorded on a straight-line basis over the estimated useful lives
of the assets. Leasehold improvements are amortized over the shorter of the
estimated useful life or the lease term. Repair and maintenance costs are
charged to expense when incurred.
(c) Intangible Assets
Intangible assets consist primarily of broadcast licenses and other
identifiable intangible assets. Prior to May 12, 1995, BPI amortized such
intangible assets using the straight-line method over estimated useful lives
ranging from 2 to 40 years. Subsequent to May 12, 1995, the Division amortizes
such intangible assets using the straight-line method over estimated useful
lives ranging from 1 to 15 years. The Division continually evaluates the
propriety of the carrying amount of intangible assets as well as the
amortization period to determine whether current events or circumstances
warrant adjustments to the carrying value and/or revised estimates of useful
lives. This evaluation consists of the projection of undiscounted operating
income before depreciation, amortization, nonrecurring charges and interest
for each of the Division's radio stations over the remaining amortization
periods of the related intangible assets. The projections are based on a
historical trend line of actual results since the acquisition of the Stations,
adjusted for expected changes in operating results. To the extent such
projections indicate that undiscounted operating income is not expected to be
adequate to recover the carrying amounts of the related intangible assets,
such carrying amounts are written down by charges to expense. At this time,
the Division believes that no significant impairment of intangible assets has
occurred and that no reduction of the estimated useful lives is warranted.
(d) Barter Transactions
The Division trades commercial air time for goods and services used
principally for promotional, sales and other business activities. An asset and
liability is recorded at the fair market value of the goods or services
A-VI-F-6
<PAGE>
WBAV-AM/FM AND WPEG-FM
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(TABLES IN THOUSANDS OF DOLLARS)
received. Barter revenue is recorded and the liability relieved when
commercials are broadcast and barter expense is recorded and the asset is
relieved when goods or services are received or used. Barter revenue and
expense was approximately $60,000 from January 1, 1995 to May 12, 1995,
$63,000 from May 13, 1995 to December 31, 1995 and $81,000 for the nine months
ended September 30, 1996.
(e) Income Taxes
The Division is included in the consolidated federal income tax return of
the Company (BPI prior to May 13, 1995). Income taxes are allocated to the
Division as if such taxes were calculated on a separate return basis using the
accounting principles in Statement of Financial Accounting Standards No. 109.
Actual income tax expense for the periods from January 1, 1995 to May 12,
1995 and from May 13, 1995 to December 31, 1995 and the nine months ended
September 30, 1996 differs from the "expected" income tax expense (computed by
applying the U.S. Federal corporate tax rate of 34% to earnings before income
taxes) principally due to state income taxes.
(f) Revenue Recognition
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
(g) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(h) Fair Value of Financial Instruments
The carrying amounts of cash, accounts receivable and accounts payable
approximate fair value because of the short maturities of these instruments.
(i) Division Equity
Excess cash funds are transferred to the Company (BPI prior to May 13, 1995)
using the Division equity account. In addition, the Company makes
disbursements on behalf of the Division for items such as payroll, payroll
taxes, employee benefits and other costs. To the extent that the disbursements
represent expenses applicable to the business of the Division, such amounts
are transferred to the Division through the equity account and recognized in
the accompanying combined statements of earnings. The average investment by
the Company in the Division, consisting of the Company's initial investment
upon acquisition of the Division and subsequent net distributions to the
Company by the Division, was $5,957,000, $29,318,000 and $26,826,000 for the
periods from January 1, 1995 to May 12, 1995 and from May 13, 1995 to December
31, 1995 and the nine months ended September 30, 1996, respectively.
A-VI-F-7
<PAGE>
WBAV-AM/FM AND WPEG-FM
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(TABLES IN THOUSANDS OF DOLLARS)
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1995 and
September 30, 1996:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL
LIFE 1995 1996
--------- ------ ------
<S> <C> <C> <C>
Broadcast and other equipment....................... 5-15 $1,246 1,259
Buildings and improvements.......................... 5-15 435 435
Furniture and fixtures.............................. 5 175 179
Land................................................ -- 199 199
------ ------
2,055 2,072
Less accumulated depreciation....................... 148 314
------ ------
$1,907 $1,758
====== ======
</TABLE>
(3) INTANGIBLE ASSETS
Intangible assets consist of the following at December 31, 1995 and
September 30, 1996:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL
LIFE 1995 1996
--------- ------- -------
<S> <C> <C> <C>
Broadcast licenses................................ 15 $11,476 $11,476
Other............................................. 1-10 15,946 15,946
------- -------
27,422 27,422
Less accumulated amortization..................... 2,398 4,835
------- -------
$25,024 $22,587
======= =======
</TABLE>
In addition to broadcast licenses, categories of other intangible assets
include: (i) premium advertising revenue base (the value of the higher radio
advertising revenues in the Division's market as compared to other markets of
similar population); (ii) advertising client base (the value of the well-
established advertising base in place at the time of acquisition of the
Stations); (iii) fixed asset delivery premium (the benefit expected from the
Division's ability to operate fully constructed and operational stations from
the date of acquisition), and (iv) premium audience growth pattern (the value
of expected above-average population growth in a given market).
(4) COMMITMENTS
The Division has noncancelable operating leases for office space and
transmitters. Rental expense for the operating leases was approximately
$31,000 from January 1, 1995 to May 12, 1995, $73,000 from May 13, 1995 to
December 31, 1995 and $88,000 for the nine months ended September 30, 1996.
Future minimum lease payments under noncancelable operating leases (with
remaining terms in excess of one year) as of September 30, 1996 are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30:
-------------------------
<S> <C>
1997............................................................... $74
1998............................................................... 76
1999............................................................... 77
2000............................................................... 81
2001............................................................... 82
</TABLE>
A-VI-F-8
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides,
in effect, that any person made a party to any action by reason of the fact
that he is or was a director, officer, employee or agent of American may and,
in certain cases, must be indemnified by American against, in the case of a
non-derivative action, judgments, fines, amounts paid in settlement and
reasonable expenses (including attorney's fees) incurred by him as a result of
such action, and in the case of a derivative action, against expenses
(including attorney's fees), if in either type of action he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of American. This indemnification does not apply, in a
derivative action, to matters as to which it is adjudged that the director,
officer, employee or agent is liable to American, unless upon court order it
is determined that, despite such adjudication of liability, but in view of all
the circumstances of the case, he is fairly and reasonably entitled to
indemnity for expenses and, in a non-derivative action, to any criminal
proceeding in which such person had reasonable cause to believe his conduct
was unlawful.
Article XII of American's By-Laws provides that American shall indemnify
each person who is or was an officer or director of American to the fullest
extent permitted by Section 145 of the DGCL.
Article Sixth of the American Restated Certificate, states that no director
of American shall be personally liable to American or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for (i)
breach of the director's duty of loyalty to American or its stockholders, (ii)
acts or omissions not in good faith or which involve intentional misconduct or
knowing violation of law, (iii) liability under Section 174 of the DGCL
relating to certain unlawful dividends and stock repurchases, or (iv) any
transaction from which the director derived an improper personal benefit.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Listed below are the exhibits which are filed as part of this registration
statement (according to the number assigned to them in Item 601 of Regulation
S-K). Each exhibit marked by a (+) is incorporated by reference to American's
Report on Form 10-Q for the quarterly period ended June 30, 1996. Exhibit
numbers in parenthesis refer to the exhibit number in the applicable filing.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT EXHIBIT FILE NO.
----------- ----------------------- ----------------
<C> <S> <C>
2.1 Agreement and Plan of Merger by and
among American, American Merger Incorporated herein by
Corporation and EZ Communications, reference to Appendix I of
Inc., dated as of August 5, 1996 the Prospectus which is a
and as amended and restated, as of part of this Registration
September 27, 1996................. Statement
2.2 EZ Voting Agreement, dated as of
August 5, 1996 by and among certain
stockholders of EZ Communications,
Inc. and the Company .............. +(2.2)
2.3 American Voting Agreement, dated as
of August 5, 1996 by and among
certain stockholders of the Company
and EZ Communications, Inc. ....... +(2.3)
5. Opinion of Sullivan & Worcester
LLP................................ Filed herewith as Exhibit 5
8.1 Opinion of Sullivan & Worcester LLP
as to tax matters.................. Filed herewith as Exhibit 8.1
8.2 Opinion of Hunton & Williams as to
tax matters........................ Filed herewith as Exhibit 8.2
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT EXHIBIT FILE NO.
----------- ----------------------- ----------------
<C> <S> <C>
11 Schedule of Computation
of Earnings per Share... + (11)
23.1 Consents of Sullivan & Contained in the opinions of Sullivan
Worcester LLP........... & Worcester LLP filed as Exhibits 5 and 8.1
23.2 Consent of Hunton & Contained in the opinion of Hunton &
Williams................ Williams filed as Exhibit 8.2
23.3 Consents of Deloitte &
Touche LLP.............. Filed herewith as Exhibit 23.3
23.4 Consent of KPMG Peat
Marwick LLP............. Filed herewith as Exhibit 23.4
23.5 Consent of Price
Waterhouse LLP.......... Filed herewith as Exhibit 23.5
23.6 Consent of Miller,
Kaplan, Arase & Co...... Filed herewith as Exhibit 23.6
23.7 Consent of Morgan
Stanley & Co.
Incorporated............ Filed herewith as Exhibit 23.7
23.8 Consent of CS First
Boston Corporation...... Filed herewith as Exhibit 23.8
23.9 Consent of Ernst & Young
LLP..................... Filed herewith as Exhibit 23.9
23.10 Consent of Duncan's
American Radio (Duncan
Radio Market Guide)..... Filed herewith as Exhibit 23.10
23.11 Consent of The Arbitron
Company................. Filed herewith as Exhibit 23.11
24 Powers of Attorney...... Filed as page II-3 of the Registration
Statement
99.1 American Radio Systems
Corporation Proxy Card
(Class A Common Stock)
for Special Meeting of
Stockholders to be held
on December 17, 1996.... Filed herewith as Exhibit 99.1
99.2 American Radio Systems
Corporation Proxy Card
(Class B Common Stock)
for Special Meeting of
Stockholders to be held
on December 17, 1996.... Filed herewith as Exhibit 99.2
99.3 EZ Communications, Inc.
Proxy Card (Class A
Common Stock) for
Special Meeting of
Stockholders to be held
on December 17, 1996.... Filed herewith as Exhibit 99.3
</TABLE>
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
AMERICAN RADIO SYSTEMS CORPORATION HAS DULY CAUSED THIS AMENDMENT TO ITS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF BOSTON, COMMONWEALTH OF
MASSACHUSETTS, ON OCTOBER 31, 1996.
American Radio Systems Corporation
/s/ Steven B. Dodge
By: _________________________________
STEVEN B. DODGE CHAIRMAN OF THE
BOARD
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT TO THE REGISTRATION STATEMENT ON FORM S-4 RELATING TO CLASS A COMMON
STOCK ("THIS REGISTRATION STATEMENT") HAS BEEN SIGNED BELOW ON OCTOBER 31,
1996 BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED,
AND EACH OF THE UNDERSIGNED OFFICERS AND DIRECTORS OF AMERICAN RADIO SYSTEMS
CORPORATION, HEREBY SEVERALLY CONSTITUTE AND APPOINT STEVEN B. DODGE, JOSEPH
L. WINN, MICHAEL B. MILSOM, JUSTIN BENINCASA AND NORMAN A. BIKALES, AND EACH
OF THEM, TO SIGN FOR HIM, AND IN HIS NAME IN THE CAPACITY INDICATED BELOW,
THIS REGISTRATION STATEMENT FOR THE PURPOSE OF REGISTERING SUCH SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY AND ALL AMENDMENTS
THERETO, HEREBY RATIFYING AND CONFIRMING OUR SIGNATURES AS THEY MAY BE SIGNED
BY OUR ATTORNEYS TO THIS REGISTRATION STATEMENT AND ANY AND ALL AMENDMENTS
THEREOF.
SIGNATURE TITLE
/s/ Steven B. Dodge Chairman of the Board, Chief Executive
- ------------------------------------- Officer, President and Director
STEVEN B. DODGE
/s/ Joseph L. Winn Chief Financial Officer and Director
- -------------------------------------
JOSEPH L. WINN
/s/ Justin D. Benincasa Corporate Controller and Chief
- ------------------------------------- Accounting Officer
JUSTIN D. BENINCASA
/s/ Charlton Buckley Director
- -------------------------------------
CHARLTON BUCKLEY
/s/ Arnold L. Chavkin Director
- -------------------------------------
ARNOLD L. CHAVKIN
/s/ James H. Duncan, Jr. Director
- -------------------------------------
JAMES H. DUNCAN, JR.
/s/ Donald B. Hebb, Jr. Director
- -------------------------------------
DONALD B. HEBB, JR.
/s/ Charles Peebler Director
- -------------------------------------
CHARLES PEEBLER
/s/ Thomas H. Stoner Director
- -------------------------------------
THOMAS H. STONER
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT EXHIBIT FILE NO. PAGE
----------- ----------------------- ---------------- ----
<C> <S> <C> <C>
2.1 Agreement and Plan of Merger by
and among American, American
Merger Corporation and EZ
Communications, Inc., dated as
of August 5, 1996 and as amended
and restated, as of September
27, 1996.............................. Incorporated herein by
reference to Appendix I of
the Prospectus which is a
part of this Registration
Statement
2.2 EZ Voting Agreement, dated as of
August 5, 1996 by and among
certain stockholders of EZ
Communications, Inc. and the
Company .............................. +(2.2)
2.3 American Voting Agreement, date
as of August 5, 1996 by and
among certain stockholders of
the Company and EZ
Communications, Inc. ................. +(2.3)
5. Opinion of Sullivan & Worcester LLP... Filed herewith as Exhibit 5
8.1 Opinion of Sullivan & Worcester LLP
as to tax matters..................... Filed herewith as Exhibit 8.1
8.2 Opinion of Hunton & Williams as to
tax matters........................... Filed herewith as Exhibit 8.2
11 Schedule of Computation of Earnings
per Share............................. + (11)
23.1 Consent of Sullivan & Worcester LLP... Contained in the opinions
of Sullivan & Worcester
LLP filed as Exhibits 5 and 8.1
23.2 Consent of Hunton & Williams.......... Contained in the opinion
of Hunton & Williams filed
as Exhibit 8.2
23.3 Consents of Deloitte & Touche LLP..... Filed herewith as Exhibit 23.3
23.4 Consent of KPMG Peat Marwick LLP...... Filed herewith as Exhibit 23.4
23.5 Consent of Price Waterhouse LLP....... Filed herewith as Exhibit 23.5
23.6 Consent of Miller, Kaplan, Arase & Co. Filed herewith as Exhibit 23.6
23.7 Consent of Morgan Stanley & Co.
Incorporated.......................... Filed herewith as Exhibit 23.7
23.8 Consent of CS First Boston
Corporation........................... Filed herewith as Exhibit 23.8
23.9 Consent of Ernst & Young LLP.......... Filed herewith as Exhibit 23.9
23.10 Consent of Duncan's American Radio
(Duncan Radio Market Guide)........... Filed herewith as Exhibit 23.10
23.11 Consent of The Arbitron Company....... Filed herewith as Exhibit 23.11
24 Powers of Attorney.................... Filed as page II-3 of the
Registration Statement
99.1 American Radio Systems Corporation
Proxy Card (Class A Common Stock)
for Special Meeting of Stockholders
to be held on December 17, 1996....... Filed herewith as Exhibit 99.1
99.2 American Radio Systems Corporation
Proxy Card (Class B Common Stock)
for Special Meeting of Stockholders
to be held on December 17, 1996....... Filed herewith as Exhibit 99.2
99.3 EZ Communications, Inc. Proxy
Card (Class A Common Stock) for
Special Meeting of Stockholders
to be held on December 17, 1996....... Filed herewith as Exhibit 99.3
</TABLE>
<PAGE>
Exhibit 5
October 30, 1996
American Radio Systems Corporation
116 Huntington Avenue
Boston, MA 02116
Re: Registration Statement on Form S-4
8,190,649 shares of Class A Common Stock, par value $.01 per share
------------------------------------------------------------------
Dear Sir or Madam:
In connection with the registration under the Securities Act of 1933, as
amended (the "Securities Act"), by American Radio Systems Corporation, a
Delaware corporation ("American"), of 8,190,649 shares (the "Shares") of its
Class A Common Stock, par value $.01 per share (the "Class A Common Stock"), the
following opinion is furnished to you to be filed with the Securities and
Exchange Commission (the "Commission") as Exhibit 5 to American's registration
statement on Form S-4 (the "Registration Statement"). The Shares will be issued
as consideration under the Agreement and Plan of Merger, dated August 5, 1996,
and as amended and restated as of September 27, 1996 (the "Merger Agreement"),
by and among American, American Merger Corporation, a Delaware corporation and a
wholly-owned subsidiary of American (the "American Subsidiary"), and EZ
Communications, Inc. ("EZ"), pursuant to which either (a) EZ will be merged with
and into American Subsidiary (the "Subsidiary Merger") or (b) EZ will be merged
with and into American (the "Direct Merger").
We have acted as counsel to American in connection with the preparation of
the Registration Statement, and we have examined originals or copies, certified
or otherwise identified to our satisfaction, of the Registration Statement, the
Certificate of Incorporation of American, corporate records, certificates and
statements of officers and accountants of American, and of public officials, and
such other documents as we have considered necessary in order to furnish the
opinion hereinafter set forth. We express no opinion herein as to any laws
other than the General Corporation Law of the State of Delaware.
The authorized capital stock of American consists of 1,000,000 shares of
preferred stock, par value $.01 per share (the "Preferred Stock"), the relative
designations, preferences, rights and restrictions of which are to be designated
from time to time by the Board of Directors of American, 25,000,000 shares of
Class A Common Stock, par value $.01 per share (the "Class A
<PAGE>
American Radio Systems Corporation
October 30, 1996
Page 2
Common Stock"), 10,000,000 shares of Class B Common Stock, par value $.01 per
share (the "Class B Common Stock"), and 6,000,000 shares of Class C Common
Stock, par value $.01 per share (the "Class C Common Stock" and, collectively
with the Class A Common Stock and the Class B Common Stock, the "Common Stock").
Pursuant to a proposal contained in the Joint Proxy-Prospectus of American
to be mailed to its shareholders on or about November 8, 1996, the shareholders
of American will be asked at a Special Meeting of Shareholders to be held on
December 17, 1996 (the "American Special Meeting") to adopt and approve an
amendment (the "Charter Amendment") to the Restated Certificate of
Incorporation, as amended, of American (the "American Restated Certificate") to
increase the total number of authorized shares of Preferred Stock to 10,000,000
and to increase the total number of authorized shares of Class A Common Stock
and Class B Common Stock to 100,000,000 and 15,000,000, respectively.
Based on and subject to the foregoing and assuming that the Charter
Amendment is duly adopted and approved by the shareholders at the American
Special Meeting and that such amendment is duly filed with the Secretary of
State of the State of Delaware, we are of the opinion that the Shares have been
duly and validly authorized by American and the Shares, when issued as
authorized in accordance with the terms of the Merger Agreement and upon
acceptance for filing of the Certificate of Merger by the Secretary of State of
the State of Delaware and Articles of Merger are filed with the State
Corporation Commission of the Commonwealth of Virginia and such Commission shall
have issue a Certificate of Merger, will be validly issued, fully paid and non-
assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm made therein under the
caption "Experts." In giving such consent, we do not thereby admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act or the Rules and Regulations of the Commission promulgated
thereunder.
Very truly yours,
/s/ Sullivan & Worcester LLP
SULLIVAN & WORCESTER LLP
<PAGE>
EXHIBIT 8.1
October 30, 1996
American Radio Systems Corporation
116 Huntington Avenue
Boston, Massachusetts 02116
Ladies and Gentlemen:
You have requested our opinion as to certain federal income tax
consequences of the transactions referred to below. This opinion is delivered
in connection with (i) the Agreement and Plan of Merger, dated as of August 5,
1996, as amended, by and among American Radio Systems Corporation, a Delaware
corporation ("American"), American Merger Corporation, a Delaware corporation
and direct wholly-owned subsidiary of American ("American Subsidiary") and EZ
Communications, Inc., a Virginia Corporation ("EZ"), which agreement, as
amended, and all other agreements contemplated thereby, are collectively
referred to herein as the "Merger Agreement." Capitalized terms used herein
shall have the same meanings they have in the Merger Agreement, except as
otherwise defined herein, and "Code" shall mean the Internal Revenue Code of
1986, as amended.
Facts. The Merger Agreement provides that at the Effective Time EZ will be
merged with and into American; provided, however, that if the Board of Directors
of American determines that the consent of the holders of the 9 3/4% Senior
Subordinated Notes due 2005 of EZ the "EZ Notes" cannot be obtained on terms
satisfactory to American, EZ shall be merged with and into American Subsidiary
(such merger, whether into American or American Subsidiary, the "Merger"). At
the Effective Time, the separate corporate existence of EZ shall cease, and
American or American Subsidiary, as applicable, shall continue as the surviving
corporation (the "Surviving Corporation"), and shall succeed to and assume all
of the rights, properties, liabilities and obligations of EZ. Pursuant to the
Merger Agreement, at the Effective Time:
(a) Each share of 7% Convertible Exchangeable Preferred Stock, par
value $.01 per share, of American issued and outstanding immediately prior
to the Effective Time shall remain outstanding.
<PAGE>
American Radio Systems Corporation
October 30, 1996
Page 2
(b) Each share of Common Stock, par value $.01 per share, of American
issued and outstanding immediately prior to the Effective Time shall remain
outstanding.
(c) Each share of Class A Common Stock, par value $.01 per share, and
each share of Class B Common Stock, par value $.01 per share, of EZ issued
and outstanding immediately prior to the Effective Time (other than
Dissenting Shares) shall be converted into the right to receive $11.75 in
cash and nine-tenths (0.9) of a share of Class A Common Stock, par value
$.01 per share, of American.
(d) Each share of EZ Common Stock owned by American or any of its
Subsidiaries immediately prior to the Effective Time shall be canceled.
(e) If the Merger is into American Subsidiary, each share of common
stock, par value $.01 per share, of American Subsidiary issued and
outstanding immediately prior to the Effective Time shall remain
outstanding as one share of common stock, par value $.01 per share, of the
Surviving Corporation.
For federal income tax purposes, the Merger is intended to qualify as a
tax-free reorganization within the meaning of Section 368(a)(1)(A) and, if the
Merger is into American Subsidiary, Section 368(a)(2)(D) of the Code.
Assumptions. In rendering our opinions, we have with your permission made
the following assumptions, and we have further assumed that the Merger will be
consummated pursuant to the terms of and in accordance with the Merger
Agreement.
A. The fair market value of the American stock and other consideration
received by each EZ shareholder in the Merger will be approximately equal to the
fair market value of the EZ stock surrendered in exchange therefor.
B. There is no plan or intention by the stockholders of EZ who own,
directly or indirectly, a five percent (5%) or greater interest (by value) in
EZ, and to the best of the knowledge of the management of EZ there is no plan or
intention on the part of the remaining EZ shareholders, to sell, exchange or
otherwise dispose of a number of shares of American stock received in the Merger
that would reduce the EZ shareholders' ownership of American stock to a number
of shares having a value, as of the date of the Merger, which is less than fifty
percent (50%) of the value of all of the formerly outstanding stock of EZ as of
the same date. For purposes of this assumption, shares of EZ stock exchanged
for cash or other property, surrendered by dissenters, or exchanged for cash in
lieu of fractional shares of American stock will be treated as outstanding EZ
stock on the date of the Merger. Moreover, shares of EZ stock and shares of
American stock held by EZ shareholders and otherwise sold, redeemed, or disposed
of prior or subsequent to the Merger have been considered in making this
assumption.
<PAGE>
American Radio Systems Corporation
October 30, 1996
Page 3
C. If EZ merges into American Subsidiary, following the Merger American
Subsidiary will hold at least ninety percent (90%) of the fair market value of
the net assets of EZ and at least seventy percent (70%) of the fair market value
of the gross assets of EZ held immediately prior to the Effective Time. For
purposes of this representation, amounts paid by EZ to dissenters, amounts paid
by EZ to stockholders who receive cash or other property, amounts used by EZ to
pay reorganization expenses, and all redemptions and distributions made by EZ
immediately preceding the Merger (except for regular, normal dividends) are
included as assets of EZ immediately prior to the Effective Time. Moreover,
liabilities of EZ to pay reorganization expenses are excluded from the
computation of the fair market value of its net assets immediately prior to the
Effective Time.
D. American is in control of American Subsidiary and will be in control
of American Subsidiary at the Effective Time.
E. American Subsidiary has no plan or intention to issue additional
shares of stock that would result in American losing control of American
Subsidiary.
F. American Subsidiary has no plan or intention to issue any warrants,
options, convertible securities, or any other type of right pursuant to which
any person could acquire stock in American Subsidiary that, if exercised or
converted, would result in American losing control of American Subsidiary.
G. If EZ merges into American Subsidiary, American has no plan or
intention to liquidate American Subsidiary, to merge American Subsidiary with or
into another corporation, or to sell or otherwise dispose of any of the stock of
American Subsidiary, unless tax counsel to American, and Hunton & Williams, have
advised that any such merger, liquidation, sale or other disposition would not
adversely affect the qualification of the Subsidiary Merger as a tax-free
reorganization under the Code.
J. No stock of American Subsidiary will be issued in the Merger.
K. American has no plan or intention to reacquire any of its stock issued
in the Merger or to make any extraordinary distribution with respect to such
stock.
L. No share of EZ common stock has been or will be redeemed in
anticipation of the Merger, and EZ has not made and will not make any
extraordinary distribution with respect to its stock in anticipation of the
Merger.
M. American and American Subsidiary have no plan or intention to sell or
otherwise dispose of any of the assets of EZ acquired in the Merger, except for
dispositions made in the ordinary course of business or transfers described in
Section 368(a)(2)(C) of the Code.
<PAGE>
American Radio Systems Corporation
October 30, 1996
Page 4
N. The liabilities of EZ assumed by American or American Subsidiary, as
the case may be, in the Merger, and the liabilities to which the assets of EZ
transferred in the Merger are subject, were incurred by EZ in the ordinary
course of its business.
O. Following the Merger, American or American Subsidiary, as the case may
be, will continue the historic business of EZ or use a significant portion of
EZ's historic business assets in a business.
P. American, American Subsidiary, EZ and the shareholders of EZ will pay
their respective expenses, if any, incurred in connection with the Merger,
except that all filing fees and all transfer and other taxes incurred by
American and EZ will be shared equally by American and EZ.
Q. There is no intercorporate indebtedness existing between or among any
of American, American Subsidiary or EZ that was issued, acquired, or will be
settled at a discount, provided, however, that prior to the Effective Time
American may acquire, in market transactions or otherwise, some or all of the EZ
Notes.
R. None of American, American Subsidiary or EZ is an "investment company"
as defined in Sections 368(a)(2)(F)(iii) and (iv) of the Code.
S. None of American, American Subsidiary or EZ is under the jurisdiction
of a court in a Title 11 or similar case within the meaning of Section
368(a)(3)(A) of the Code.
T. The fair market value of the assets of EZ transferred to American or
American Subsidiary, as the case may be, in the Merger will equal or exceed the
sum of the liabilities assumed by American plus the amount of liabilities, if
any, to which the transferred assets are subject.
V. The payment of cash in lieu of fractional shares of American stock is
solely for the purpose of avoiding the expense and inconvenience to American of
issuing fractional shares and does not represent separately bargained for
consideration. The total cash consideration that will be paid in the Merger to
the EZ shareholders, instead of issuing fractional shares of American stock,
will not exceed one percent (1%) of the total consideration that will be issued
in the Merger to the EZ shareholders in exchange for their shares of EZ stock.
The fractional share interests of each EZ shareholder will be aggregated, and no
EZ shareholder will receive cash in an amount equal to or greater than the value
of one full share of American stock.
<PAGE>
American Radio Systems Corporation
October 30, 1996
Page 5
W. No consideration for the Merger has been or will be provided by
American to EZ or to the shareholders of EZ other than as expressly provided for
in the Merger Agreement.
X. None of the compensation received by any shareholder-employees of EZ
will be separate consideration for, or allocable to, any of their shares of EZ
stock; none of the shares of American stock received by any shareholder-
employees of EZ will be separate consideration for, or allocable to, any
employment agreement; and the compensation paid to any shareholder-employees of
EZ will be for services actually rendered and will be commensurate with amounts
paid to third parties bargaining at arm's length for similar services.
Opinions. Based on the foregoing facts and assumptions and assuming the
accuracy thereof, we are of the opinion that for federal income tax purposes:
1. The Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code. American and EZ will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code.
2. EZ will recognize no gain or loss on the transfer of its assets to
American or American Subsidiary, as the case may be, in the Merger. Sections
357 and 361 of the Code.
3. American or American Subsidiary, as the case may be, will recognize no
gain or loss on the receipt of EZ's assets in the Merger. Section 1032 of the
Code.
4. The basis of EZ's assets in the hands of American or American
Subsidiary, as the case may be, immediately after the Merger will be the same as
the basis of such assets in the hands of EZ immediately prior to the Merger.
Section 362 of the Code.
5. No gain or loss will be recognized by an American shareholder on his
American stock as a result of the Merger, and such shareholder's tax basis and
holding period in his American stock will be the same following the Merger as
they were preceding.
No opinion is expressed concerning the consequences to any party of any
matter other than those specifically addressed above. In particular, we express
no opinion as to the tax consequences of any acquisition by American of all or
any of the EZ Notes or the ownership by American of all or any of the EZ Notes
of the Effective Time, or with respect to the state or local tax treatment of
the Merger.
Miscellaneous. The foregoing opinions are based on the Code as in effect
on the date hereof and administrative and judicial interpretations of it. No
assurance can be given that the Code will not change or that such
interpretations will not be revised or amended adversely, possibly with
retroactive effect.
This opinion is not intended to constitute the opinion required by Section
7.2(g) of the Merger Agreement, which opinion will be delivered at the Effective
Time and be based upon
<PAGE>
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 or the rules and regulations
promulgated thereunder.
Very truly yours,
/s/ Sullivan & Worcester LLP
SULLIVAN & WORCESTER LLP
<PAGE>
EXHIBIT 8.2
October 30, 1996
EZ Communications, Inc.
10800 Main Street
Fairfax, Virginia 22030
Merger of EZ Communications, Inc.
Into American Radio Systems Corporation
Certain Federal Income Tax Matters
----------------------------------------
Ladies and Gentlemen:
We have acted as counsel to EZ Communications, Inc. ("EZ"), a Virginia
corporation, in connection with the proposed merger of EZ with and into American
Radio Systems Corporation ("American"), a Delaware corporation, (the "Direct
Merger") or, in the alternative if American so elects, the proposed merger of EZ
with and into American Merger Corporation ("American Subsidiary"), a Delaware
corporation and wholly-owned subsidiary of American formed for purposes of
effecting such merger (the "Subsidiary Merger"). The Subsidiary Merger will be
effected in lieu of the Direct Merger only if American's Board of Directors
determines that the consent of the holders of certain debt of EZ cannot be
obtained on terms satisfactory to American. In either event, the separate
corporate existence of EZ will cease, and either American or American
Subsidiary, as applicable, will continue as the surviving corporation. The term
"Merger" is used herein to refer to either the Direct Merger or the Subsidiary
Merger, as applicable.
EZ has outstanding two classes of stock, Class A Common Stock and Class B
Common Stock (collectively, "EZ Common Stock"). The two classes are identical
except for differences in voting rights. In the Merger, each outstanding share
of EZ Common Stock, except any shares for which the holder exercises and
perfects the statutory right to an appraisal ("Dissenting Shares"), will be
converted into the right to receive (i) $11.75 in cash and (ii) 0.9 of a share
of American Class A Common Stock (the "Merger Consideration"). Any EZ
shareholder
<PAGE>
EZ Communications, Inc.
October 30, 1996
Page 2
who otherwise would become entitled to a fractional share of American Class A
Common Stock as a result of the Merger will receive cash from American in lieu
of the fractional share. If the Subsidiary Merger is effected, American will
provide the funds to pay the cash portion of the Merger Consideration and the
cash paid for any Dissenting Shares. Each outstanding option issued by EZ to
purchase EZ Common Stock will be converted into an option to purchase a number
of shares of American Class A Common Stock equal to the product of 0.9
multiplied by the number of shares of EZ Common Stock that the option holder is
entitled to purchase under the option.
You have requested our opinion concerning certain federal income tax
consequences of the Merger. In giving this opinion, we have reviewed the
Agreement and Plan of Merger dated as of August 5, 1996, as amended and restated
as of September 27, 1996, among EZ, American, and American Subsidiary; the Form
S-4 Registration Statement under the Securities Act of 1933 relating to the
Merger (the "S-4"); and such other documents as we have considered necessary. In
addition, officers of EZ and American, as appropriate, have advised us as
follows:
1. The fair market value of the Merger Consideration received by an EZ
shareholder in exchange for EZ Common Stock will be approximately equal to the
fair market value of EZ Common Stock surrendered in exchange.
2. None of the compensation received by any shareholder-employee of EZ
will be separate consideration for, or allocable to, any shares of EZ Common
Stock; none of the Merger Consideration received by any shareholder-employee
will be separate consideration for, or allocable to, any employment agreement;
and the compensation paid to any shareholder-employee will be for services
actually rendered and will be commensurate with amounts paid to third parties
bargaining at arm's length for similar services.
3. The payment of cash in lieu of fractional shares of American Class A
Common Stock is solely for the purpose of avoiding the expense and inconvenience
to American of issuing fractional shares and does not represent separately
bargained-for consideration. The total cash that will be paid in the Merger in
lieu of fractional shares of American Class A Common Stock will not exceed one
percent of the total consideration that will be issued in the Merger to EZ
shareholders in exchange for their EZ Common Stock.
<PAGE>
EZ Communications, Inc.
October 30, 1996
Page 3
4. No share of EZ Common Stock has been or will be redeemed in
anticipation of the Merger, and EZ has not made and will not make any
extraordinary distribution with respect to its stock in anticipation of the
Merger.
5. American has no plan or intention to reacquire any of the American
Class A Common Stock issued in the Merger or to make any extraordinary
distribution with respect to such stock.
6. There is, and on the effective date of the Merger (the "Effective
Date") there will be, no plan or intention by the EZ shareholders to sell,
exchange, or otherwise dispose of a number of shares of American Class A Common
Stock received in the Merger that would reduce the EZ shareholders' ownership of
American Class A Common Stock to a number of shares having a fair market value,
as of the Effective Date, of less than 50 percent of the formerly outstanding EZ
Common Stock as of the Effective Date. Dissenting Shares and shares of EZ
Common Stock and American Class A Common Stock held by EZ shareholders and sold,
redeemed, or otherwise disposed of are considered in making the preceding
determination.
7. Following the Merger, American, or if the Subsidiary Merger is
effected, American Subsidiary, will continue the historic business of EZ or use
a significant portion of EZ's historic business assets in a business.
8. The liabilities of EZ that will be assumed by American, or if the
Subsidiary Merger is effected, by American Subsidiary, and the liabilities, if
any, to which assets of EZ are subject were incurred and, as of the Effective
Date, will have been incurred by EZ in the ordinary course of business.
9. There is, and on the Effective Date there will be, no
intercorporate indebtedness existing between (a) EZ or any subsidiary of EZ and
(b) American or any subsidiary of American, provided, however, that prior to the
Effective Date American may acquire, in market transactions or otherwise, some
or all of certain publicly held indebtedness of EZ (the "EZ Public Debt").
10. Neither American nor any subsidiary of American (a) owns
beneficially any EZ Common Stock or will acquire any EZ Common Stock in
anticipation of the Merger, (b) has transferred or will transfer cash or other
property to EZ or any subsidiary of EZ in anticipation of the Merger, or (c) has
made or will make any loan to EZ or any subsidiary of EZ in anticipation of the
Merger.
<PAGE>
EZ Communications, Inc.
October 30, 1996
Page 4
11. On the Effective Date, the fair market value of the assets of EZ
transferred to American, or if the Subsidiary Merger is effected, to American
Subsidiary, will exceed the sum of EZ's liabilities assumed by American plus the
amount of liabilities, if any, to which the assets are subject.
12. There is, and on the Effective Date there will be, no plan or
intention for American or American Subsidiary to sell or otherwise dispose of
any of the assets of EZ acquired in the Merger, except for dispositions made in
the ordinary course of business.
13. American, EZ, and the EZ shareholders will pay their respective
expenses, if any, incurred in connection with the Merger, except that all filing
fees and all transfer and other taxes incurred by American and EZ will be shared
equally by American and EZ.
14. For each of EZ, American, and if the Subsidiary Merger is effected,
American Subsidiary, less than 50 percent of the fair market value of its total
assets consists of stock and securities, or less than 80 percent of the fair
market value of its total assets consists of assets held for investment. For
purposes of the preceding sentence, (a) total assets exclude cash, cash items
(including accounts receivable and cash equivalents), and United States
government securities; (b) a corporation's total assets exclude stock and
securities issued by any subsidiary at least 50 percent of the voting power or
50 percent of the total fair market value of the stock of which is owned by the
corporation, but the corporation is treated as owning directly a ratable share
(based on the percentage of the fair market of the subsidiary's stock owned by
the corporation) of the assets owned by any such subsidiary; (c) the term
"securities" includes, among other things, partnership interests other than
interests held as a managing general partner; and (d) an asset is held for
investment if it is held primarily for gain from appreciation in value and/or
for the production of passive income (including royalties, rents, dividends, and
interest).
15. At all times during the five-year period ending on the Effective
Date, the fair market value of all of EZ's United States real property interests
has been less than 50 percent of the total fair market value of (a) its United
States real property interests, (b) its interests in real property located
outside the United States, and (c) its other assets used or held for use in a
trade or business. For purposes of the preceding sentence, (x) United States
real property inter-
<PAGE>
EZ Communications, Inc.
October 30, 1996
Page 5
ests include all interests (other than an interest solely as a creditor) in real
property and associated personal property (such as movable walls and
furnishings) located in the United States or the Virgin Islands and interests in
any corporation (other than a controlled corporation) owning any United States
real property interest; (y) EZ is treated as owning its proportionate share
(based on the relative fair market value of its ownership interest to all
ownership interests) of the assets owned by any controlled corporation or any
partnership, trust, or estate in which EZ is a partner or beneficiary; and (z)
any such entity in turn is treated as owning its proportionate share of the
assets owned by any controlled corporation or any partnership, trust, or estate
in which the entity is a partner or beneficiary. As used in this paragraph,
"controlled corporation" means any corporation at least 50 percent of the fair
market value of the stock of which is owned by EZ, in the case of a first-tier
subsidiary of EZ, or by a controlled corporation, in the case of a lower-tier
subsidiary.
16. Any shares of American Class A Common Stock received in exchange
for shares of EZ Common Stock that (a) were acquired in connection with the
performance of services, including stock acquired through the exercise of an
option or warrant acquired in connection with the performance of services, and
(b) are subject to a substantial risk of forfeiture within the meaning of
section 83(a) of the Internal Revenue Code (the "Code") will be subject to
substantially the same risk of forfeiture after the Merger.
17. No outstanding EZ Common Stock acquired in connection with the
performance of services was or will have been acquired within six months before
the Effective Date by any person subject to section 16(b) of the Securities
Exchange Act of 1934 other than pursuant to an option granted more than six
months before the effective date of the Merger.
18. EZ has not filed, and holds no asset subject to, a consent
pursuant to section 341(f) of the Code and regulations thereunder.
19. EZ is not a party to, and holds no asset subject to, a "safe
harbor lease" under former section 168(f)(8) of the Code and regulations
thereunder.
Also, specificially with respect to the Subsidiary Merger, such
officers of EZ and American have advised that:
<PAGE>
EZ Communications, Inc.
October 30, 1996
Page 6
20. American Subsidiary will acquire at least 90 percent of the fair
market value of the net assets and at least 70 percent of the fair market
value of the gross assets held by EZ immediately before the Merger. For this
purpose, any amounts paid by EZ or American Subsidiary (to the extent not
paid with funds contributed by American) for (a) expenses related to the
Merger, (b) the cash portion of the Merger Consideration, and (c) Dissenting
Shares, and any redemptions and distributions (except for regular, normal
dividends) made by EZ in connection with the Merger, will be included as assets
of EZ held immediately before the Merger.
21. American Subsidiary has outstanding only one class of stock, and
American owns all the outstanding shares of such class. Following the Merger,
American Subsidiary will not issue additional shares of its stock that would
result in American's owning directly less than 80 percent of the total combined
voting power of all classes of American Subsidiary's voting stock or less than
80 percent of each class of American Subsidiary's nonvoting stock.
22. There is, and on the Effective Date there will be, no plan or
intention to liquidate American Subsidiary, to merge American Subsidiary into
another corporation, or to sell or otherwise dispose of any stock of American
Subsidiary, unless tax counsel to American, and Hunton & Williams, have
advised that any such merger, liquidation, sale or other disposition would not
adversely affect the qualification of the Subsidiary Merger as a tax-free
reorganization under the Code.
On the basis of the foregoing, and assuming that (a) with respect to
any nonresident alien or foreign entity that is a shareholder of EZ, EZ will
comply with all applicable statement and notification requirements (if any) of
Treasury Regulation (S) 1.897-2(g) & (h), and (b) the Merger will be
consummated in accordance with the Agreement and Plan of Merger, we are of the
opinion that (under existing law) for federal income tax purposes:
1. The Direct Merger, if effected, will be a reorganization within the
meaning of section 368(a) (1) (A) of the Code, and the Subsidiary Merger, if
effected, will be a reorganization within the meaning of section 368(a) (1)
(A) by reason of section 368(a) (2) (D) of the Code.
2. EZ will not recognize gain or loss (a) on the transfer of its assets
to American, or if the Subsidiary Merger is effected, to American Subsidiary, in
exchange for the Merger Consideration and the assumption of EZ's liabilities, or
(b) on the constructive distribution of the Merger Consideration to the EZ
shareholders. We express no opinion, however, whether EZ will recognize any
income, gain or loss as a result of American's acquisition of some or all of the
EZ Public Debt or the ownership by American of some or all of the EZ Public Debt
as of the Effective Date.
<PAGE>
EZ Communications, Inc.
October 30, 1996
Page 7
3. An EZ shareholder will recognize gain realized on the exchange of his
shares of EZ Common Stock for the Merger Consideration (including any fractional
share interest) to the extent of the amount of cash received (excluding cash
paid in lieu of a fractional share of American Class A Common Stock). Whether
any part of the gain recognized will be taxable as a dividend will be determined
pursuant to section 356(a)(2) of the Code, and we express no opinion whether any
gain will be taxable as a dividend. No loss will be recognized on the exchange.
4. Cash received by an EZ shareholder in lieu of a fractional share of
American Class A Common Stock will be treated as having been received as full
payment in exchange for such fractional share pursuant to section 302(a) of the
Code. Accordingly, an EZ shareholder who receives cash in lieu of a fractional
share will recognize gain or loss equal to the difference between the amount of
cash received and the shareholder's basis in the fractional share interest.
5. The aggregate basis of the shares of American Class A Common Stock
(including any fractional share interest) received in the Merger by an EZ
shareholder will be the same as the aggregate basis of the shares of EZ Common
Stock exchanged therefor, decreased by the amount of cash received (excluding
cash received in lieu of a fractional share) and increased by the amount of gain
recognized by such shareholder (excluding gain recognized with respect to the
receipt of cash in lieu of a fractional share).
6. The holding period for shares of American Class A Common Stock
(including any fractional share interest) received by an EZ shareholder in the
Merger will include the holding period for the shares of EZ Common Stock
exchanged therefor, if such shares of EZ Common Stock are held as a capital
asset on the Effective Date.
We are also of the opinion that the material federal income tax
consequences of the Merger to EZ shareholders are fairly summarized in the S-4
under the headings "Summary--Certain Federal Income Tax Consequences" and
"Certain Federal Income Tax Considerations--Tax Consequences to Holders of EZ
Common Stock." We consent to the use of this opinion as an exhibit to the S-4
and to the reference to this firm under the latter heading. In giving this
consent, we do not admit that we are within the category of persons whose
consent is required by section 7 of the Securities Act of 1933 or the rules and
<PAGE>
EZ Communications, Inc.
October 30, 1996
Page 8
regulations promulgated thereunder by the Securities and Exchange Commission.
Very truly yours,
/S/ Hunton & Williams
HUNTON & WILLIAMS
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of American Radio Systems Corporation and subsidiaries on Form S-4 of our
report dated March 8, 1996 (August 1, 1996 as to Note 8) related to the
consolidated financial statements of BayCom Partners, L.P. (a Limited
Partnership) for the years ended December 31, 1994 and 1995, appearing in the
Current Report on Form 8-K/A (Amendment No. 1) of American Radio Systems
Corporation and subsidiaries dated September 16, 1996 and to the reference to
us under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Birmingham, Alabama
October 31, 1996
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of American Radio Systems Corporation and subsidiaries on Form S-4 of:
(1) our reports dated February 20, 1996, related to the consolidated
financial statements and related financial statement schedule of American
Radio Systems Corporation and subsidiaries as of December 31, 1994 and 1995
and for the period November 1, 1993 to December 31, 1993 and for the years
ended December 31, 1994 and 1995,
(2) our reports dated March 24, 1995, related to the consolidated statement
of operations, stockholders' deficit, and cash flows and related financial
statement schedule of SBS Holding, Inc. and subsidiary for the ten months
ended October 31, 1993,
(3) our reports dated April 8, 1994, related to the consolidated statement
of operations, partners' deficiency, and cash flows and related financial
statement schedule of Atlantic Radio, L.P. and subsidiaries (a Partnership)
for the ten-month period ended October 31, 1993,
(4) our reports dated April 8, 1994, related to the statements of
operations, stockholders' equity (deficiency), and cash flows and related
financial statement schedule of Multi Market Communications, Inc. for the
year ended August 31, 1993 and the two-month period ended October 31, 1993,
and
(5) our report dated October 28, 1994, related to the statement of
operations and accumulated deficit, and cash flows and related financial
statement schedule of Boston AM Radio Corporation for the ten-month period
ended October 31, 1993.
all of the foregoing appearing in the Annual Report on Form 10-K of American
Radio Systems Corporation and subsidiaries for the year ended December 31,
1995.
We consent to the incorporation by reference in this Registration Statement
of American Radio Systems Corporation and subsidiaries of our report dated
March 13, 1996 related to the statement of net assets to be sold and of income
and cash flows derived from net assets to be sold of The 1080 Corporation for
the year ended December 31, 1995, appearing in the Current Report on Form 8-
K/A (Amendment No. 2) of American Radio Systems Corporation and subsidiaries
dated October 2, 1996.
We also consent to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 31, 1996
<PAGE>
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
American Radio Systems Corporation:
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the Joint Proxy/Prospectus. Our report
contains an explanatory paragraph that refers to a different cost basis in the
financial information of WBAV-AM/FM and WPEG-FM for periods before and after
their acquisition by Evergreen Media Corporation. As a result of such
different cost basis, the financial information for periods before and after
the acquisition is not comparable.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Dallas, Texas
October 30, 1996
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Joint Prospectus constituting part of
this Registration Statement on Form S-4 of American Radio Systems Corporation
and EZ Communications, Inc. of our report dated September 11, 1996 relating to
the combined financial statements of CBC of Baltimore, Inc. (d/b/a WOCT-FM)
and WWMX-FM, Inc. (wholly-owned subsidiaries of Capitol Broadcasting Company,
Inc.), which appears in such Prospectus. We also consent to the references to
us under the headings "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
Raleigh, North Carolina
October 30, 1996
<PAGE>
EXHIBIT 23.6
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of American Radio Systems, Corporation on Form S-4 of our report, dated April
16, 1996 (except for Note 18 as to which the date is July 3, 1996), on the
financial statements of Henry Broadcasting Company--Special Financial
Statement Presentation, as of December 31, 1994 and 1995 and for each of the
three years in the period ended December 31, 1995, appearing in the Current
Report on Form 8-K/A of American Radio Systems Corporation dated September 16,
1996 and to the reference to us under the heading "Experts" in this
Prospectus, which is part of this Registration Statement.
/s/ Miller, Kaplan, Arase & Co.
Miller, Kaplan, Arase & Co.
North Hollywood, California
October 29, 1996
<PAGE>
EXHIBIT 23.7
MORGAN STANLEY
MORGAN STANLEY & CO.
INCORPORATED
1585 BROADWAY
NEW YORK, NEW YORK
10036
(212) 761-4000
We hereby consent to the use in the Registration Statement, and in the
related Prospectus, of American Radio Systems Corporation ("American") on Form
S-4, covering the securities of American to be issued in connection with the
merger of EZ Communications, Inc. ("EZ") with and into American Merger
Corporation, and in the related Joint Proxy Statement of American and EZ, of
our opinion dated August 5, 1996 appearing as Appendix II to such Joint Proxy
Statement/Prospectus, to the description therein of such opinion and of our
presentation to the Board of Directors of American on August 4, 1996, and to
the references therein to us under the headings "Summary--Opinions of
Financial Advisors--American," "Background of the Merger--General Background,"
"Background of the Merger--Recommendation of the American Board; American's
Reasons for the Merger," and "Background of the Merger--Opinion of Financial
Advisor to American." In giving the foregoing consent, we do not admit that we
come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, and rules and regulations
promulgated thereunder, nor do we admit that we are experts with respect to
any part of such Registration Statement within the meaning of the term
"experts" as used in the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Morgan Stanley & Co. Incorporated
/s/ Paul J. Taubman
By:__________________________________
<PAGE>
EXHIBIT 23.8
CONSENT
OF
CS FIRST BOSTON CORPORATION
The Board of Directors
EZ Communications, Inc.
10800 Main Street
Fairfax, Virginia 22030
The Board of Directors
American Radio Systems Corporation
116 Huntington Avenue
Boston, Massachusetts 02116
Members of the Board:
We hereby consent to the inclusion of (1) our opinion letter to the Board of
Directors of EZ Communications, Inc. ("EZ') as Appendix III to the
Registration Statement on Form S-4 of American Radio Systems Corporation
("American") relating to the proposed merger transaction involving EZ and
American, and (ii) references made to our firm and such opinion in such
Registration Statement under the captions entitled "SUMMARY--Opinions of
Financial Advisors" and "BACKGROUND OF THE MERGER--General Background;" "--
Recommendation of the EZ Board; EZ's Reasons for the Merger;" and "--Opinion
of Financial Advisor to EZ." In giving such consent, we do not admit that we
come within the category of persons whose consent is required under, and we do
not admit that we are "experts" for purposes of, the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder.
CS First Boston Corporation
/s/ Matthew L. Harris
By: _________________________________
Name: Matthew L. Harris
Title: Director
New York, New York
October 30, 1996
<PAGE>
EXHIBIT 23.9
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference of our firm under the caption "Experts" in the
Proxy Statement of American Radio Systems Corporation which is made part of
the Registration Statement (Form S-4 filed on or about October 31, 1996) and
related Prospectus of American Radio Systems Corporation for the registration
of 8,190,649 shares of its common stock and to the incorporation by reference
therein of our report dated February 12, 1996, with respect to the
consolidated financial statements of EZ Communications, Inc. incorporated by
reference in its Annual Report (Form 10-K) for the year ended December 31,
1995, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Ernst & Young LLP
Washington, DC
October 31, 1996
<PAGE>
EXHIBIT 23.10
October 28, 1996
James H. Duncan, Jr.
Duncan's American Radio
10905 Rooked Stick Lane
Carmel, IN 46032
Dear Jim:
American Radio Systems Corporation plans to file a Registration Statement in
compliance with the Securities Act of 1933, as amended. As part of that filing
we are seeking approval from you to include certain statistics about our radio
stations and their markets that are available in your publications for which
we subscribed. Please sign in the area provided below providing us with
permission to use this information.
Thank you for your cooperation in this matter.
Sincerely
/s/ Justin D. Benincasa
Justin D. Benincasa
Vice President and Corporate Controller
Signed: /s/ James H. Duncan Jr.
Date: /s/ 28 October 1996
Name: James H. Duncan Jr.
Title: President
<PAGE>
EXHIBIT 23.11
Patricia O'Donnell
Associate General Counsel
VIA: FEDERAL EXPRESS
October 30, 1996
Joseph L. Winn
Chief Financial Officer
American Radio systems
116 Huntingdon Avenue
Boston, Massachusetts 01226
Dear Mr. Winn:
We have received your request in connection with the Intention of American
Radio Systems to file a Registration Statement with the Securities and
Exchange Commission.
We hereby consent to the use of Arbitron's copyrighted and proprietary data
and estimates from the Arbitron Radio Market Reports in the Registration
Statement and the prospectus contained therein provided sourcing information
is clearly disclosed in such documents pursuant to the guidelines on the
attached sheet.
Please sign this letter and return to me to indicate your agreement with
these terms.
Very truly yours,
THE ARBITRON COMPANY
/S/ PATRICIA O'DONNELL
Patricia O'Donnell
Agreed to:
/s/ Joseph L. Winn
By: _________________________________
JOSEPH L. WINN
October 31, 1996
Date: _______________________________
POD
Enclosure
cc: M. Gardella
9705 Patuxent Woods Drive . Columbia, Maryland 21046-1572
(410) 312-8275 . Fax (410) 912-8613
A division of Caridian Corporation
<PAGE>
EXHIBIT 99.1
PRELIMINARY COPY
PROXY CLASS A PROXY CLASS A
AMERICAN RADIO SYSTEMS CORPORATION
116 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02116
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints STEVEN B. DODGE, JOSEPH L. WINN and MICHAEL
B. MILSOM, and each of them, as Proxies of the undersigned, each with the
power to appoint his or her substitute, and hereby authorizes a majority of
them, or any one if only one be present, to represent and to vote, as
designated below and on the reverse hereof, all the Class A Common Stock, $.01
par value per share, of American Radio Systems Corporation held of record by
the undersigned or with respect to which the undersigned is entitled to vote
or act at the Special Meeting of Stockholders to be held on December 17, 1996
or any adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S), IF NO DIRECTIONS ARE MADE, THE
PROXIES WILL VOTE FOR EACH OF THE MATTERS LISTED ON THE REVERSE SIDE OF THIS
CARD AND, AT THEIR DISCRETION, ON ANY OTHER MATTER THAT MAY PROPERLY COME
BEFORE THE MEETING.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE>
PRELIMINARY COPY
AMERICAN RADIO SYSTEMS CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. LOGO
1. Approval of the Amended and Restated Agreement and Plan of Merger, pursuant
to which EZ Communications, Inc. will merge with and into American or
American Merger Corporation, a Delaware corporation and a wholly-owned
subsidiary of American.
For Against Abstain
LOGO
2. Approval of an amendment to American's Restated Certificate of
Incorporation to increase the authorized number of shares of capital stock
of American.
For Against Abstain
LOGO
Dated: ________________________________________________ , 1996
-------------------------------------------------------------------------
Signature(s)
- -------------------------------------------------------------------------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in full company
name by an authorized officer or if a partnership please sign in partnership
name by an authorized person.
<PAGE>
EXHIBIT 99.2
PRELIMINARY COPY
PROXY CLASS B PROXY CLASS B
AMERICAN RADIO SYSTEMS CORPORATION
116 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02116
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints STEVEN B. DODGE, JOSEPH L. WINN and MICHAEL
B. MILSOM, and each of them, as Proxies of the undersigned, each with the power
to appoint his or her substitute, and hereby authorizes a majority of them, or
any one if only one be present, to represent and to vote, as designated below
and on the reverse hereof, all the Class B Common Stock, $.01 par value per
share, of American Radio Systems Corporation held of record by the undersigned
or with respect to which the undersigned is entitled to vote or act at the
Special Meeting of Stockholders to be held on December 17, 1996 or any
adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER(S), IF NO DIRECTIONS ARE MADE, THE PROXIES WILL
VOTE FOR EACH OF THE MATTERS LISTED ON THE REVERSE SIDE OF THIS CARD AND, AT
THEIR DISCRETION, ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE
MEETING.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE>
PRELIMINARY COPY
AMERICAN RADIO SYSTEMS CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. LOGO
1. Approval of the Amended and Restated Agreement and Plan of Merger, pursuant
to which EZ Communications, Inc. will merge with and into American or
American Merger Corporation, a Delaware corporation and a wholly-owned
subsidiary of American.
For Against Abstain
LOGO
2. Approval of an amendment to American's Restated Certificate of
Incorporation to increase the authorized number of shares of capital stock
of American.
For Against Abstain
LOGO
Dated: ________________________________________________ , 1996
-------------------------------------------------------------------------
Signature(s)
- -------------------------------------------------------------------------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in full company
name by an authorized officer or if a partnership please sign in partnership
name by an authorized person.
<PAGE>
EZ COMMUNICATIONS, INC. PRELIMINARY COPY
10800 MAIN STREET
FAIRFAX, VIRGINIA 22030
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby constitutes and appoints
JAMES R. McKAY, JOHN W. KING and GLENN W. SAUNDERS, Jr., and each of them, as
the true and lawful attorneys and proxies for the undersigned, each with full
power of substitution, and hereby authorizes a majority of them, or any one if
only one be present, to vote, to vote, as designated below and or the reverse
hereof, all the shares of Class A Common Stock of EZ Communications, Inc.
("EZ") held of record by the undersigned or with respect to which the
undersigned is entitled to vote at the Special Meeting of Shareholders of EZ to
be held at The Country Club of Fairfax, 5110 Ox Road, Fairfax, Virginia 22030
on December 17, 1996 at 10:00 a.m. local time, or at any adjournment or
postponement thereof.
(change of address)
---------------------------
---------------------------
---------------------------
(if you have written in
the above space, please
mark the corresponding
reverse side of this
card.)
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder(s). If no directions are made, the Proxies will
vote FOR each of the matters listed on the reverse side of this card and, at
their discretion, or any other matter that may properly come before this
meeting.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
SEE
USING THE ENCLOSED ENVELOPE. REVERSE
SIDE
P R O X Y
C L A S S
A
<PAGE>
Please
mark
your
votes as
in this
example
FOR AGAINST ABSTAIN
SIGNATURE(S) DATED:
------------------------------ ----------------------, 1996
SIGNATURE(S)
------------------------------ DATE:
----------------------, 1996
PRINT NAME
------------------------------
NOTE: This Proxy should be dated and signed
by the shareholder exactly as printed at
the left and returned promptly in the
enclosed envelope. Persons signing in a
fiduciary capacity should so indicate.
X
SHARES IN YOUR NAME
- --------------------------------------------------------------------------------
1. Approval of the Amended
and Restated Agreement
and Plan of Merger,
pursuant to which EZ
Communications, Inc.
will merge with and into
American Radio Systems
Corporation or American
Merger Corporation, a
Delaware corporation and
a wholly-owned
subsidiary of American.
Address Change
