-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RhHATEMTFvqYBavlpuRSWnIQJswFuUc4loSY+smWKQOySMWENROefpscIM5YLAvx /ajW7+nWPKiF4c5DOIE7mQ== 0000930661-97-000731.txt : 19970329 0000930661-97-000731.hdr.sgml : 19970329 ACCESSION NUMBER: 0000930661-97-000731 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970328 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: EVERGREEN MEDIA CORP CENTRAL INDEX KEY: 0000894972 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 752247099 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-21570 FILM NUMBER: 97567397 BUSINESS ADDRESS: STREET 1: 433 EAST LAS COLINAS BLVD STREET 2: STE 2230 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 2148699020 10-K 1 FORM 10-K - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 COMMISSION FILE NUMBER 0-215-70 ---------------- EVERGREEN MEDIA CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 75-2247099 (I.R.S. EMPLOYER IDENTIFICATION NO.) (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) 433 EAST LAS COLINAS BOULEVARD, SUITE 1130, IRVING, TEXAS 75039 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE, INCLUDING ZIP CODE) (972) 869-9020 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Class A Common Stock, $.01 par value ---------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. Yes X No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. The aggregate market value of the voting stock held by non-affiliates of the registrant as of March 1, 1997, was approximately $1,168,715,160. Solely for purposes of the preceding calculation, outstanding shares of Class A Common Stock held by executive officers and directors of the Company have been treated as held by affiliates of the Company. As of March 1, 1997, 39,102,735 shares of Class A Common Stock, and 3,114,066 shares of Class B Common Stock were issued and outstanding. DOCUMENTS INCORPORATED BY REFERENCE None. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS GENERAL Evergreen Media Corporation (the "Company") owns and operates radio stations across the United States, including stations in 11 of the nation's 12 largest radio markets (Los Angeles, New York, Chicago, San Francisco, Dallas, Philadelphia, Houston, Washington, D.C., Boston, Detroit and Miami). At March 1, 1997, after giving effect to announced transactions in the industry and as measured by gross revenues, the Company is the largest pure play radio broadcasting company and the operator of the nation's second largest radio broadcasting group. At March 1, 1997, without giving effect to any of the pending acquisitions or dispositions discussed below, the Company's portfolio of stations consisted of 39 radio stations (27 FM and 12 AM) in 12 markets. The portfolio is diversified in terms of format, target demographics, geographic location and phase of development. Because of the size and geographic breadth of its portfolio, the Company believes that it is not unduly reliant on the performance of any one station or market. The Company also believes that the diversity of its portfolio of radio stations helps to insulate the Company from downturns in specific markets and changes in musical tastes. The Company has recently announced two significant transactions, each of which is currently pending. On February 16, 1997, the Company entered into an agreement (the "Viacom Stock Purchase Agreement") to acquire from Viacom International, Inc. ("Viacom") all of the issued and outstanding capital stock of certain subsidiaries of Viacom for an aggregate purchase price of approximately $1.075 billion in cash (the "Viacom Acquisition"). The subsidiaries of Viacom that will be purchased will own and operate at the consummation of the Viacom Stock Purchase Agreement the assets used in the operation of ten radio stations (8 FM and 2 AM) in five major markets (the "Viacom Stations"). On February 19, 1997, the Company entered into an agreement (the "Chancellor Merger Agreement") pursuant to which Chancellor Broadcasting Company ("Chancellor") and Chancellor Radio Broadcasting Company ("CRBC"), a subsidiary of Chancellor, each will be merged in a stock-for-stock merger with and into the Company, with the Company remaining as the surviving corporation (the "Chancellor Merger"). After giving effect to Chancellor's pending transactions to acquire or dispose of stations, at March 1, 1997 Chancellor would have owned and operated the assets used in the operation of 51 radio stations (34 FM and 17 AM) in fourteen markets (the "Chancellor Stations"). In addition to the Viacom Stock Purchase Agreement and the Chancellor Merger Agreement, the Company has entered into binding contracts to purchase an additional seven radio stations for $414.5 million in cash and has agreed in three separate transactions to swap or sell a total of nine stations (including one of the stations that the Company has agreed to acquire) in exchange for three other stations and $41.75 million in cash (collectively, the "Other Pending Transactions"). Under currently applicable rules of the Federal Communications Commission (the "FCC"), the Company, like other radio broadcasters, may not own or control more than eight stations, of which no more than five may be AM or FM, in a single large market. In total, the Company will be required to dispose of nine stations in six markets in order to comply with the FCC's multiple ownership rules (the "Required Additional Dispositions") in connection with the consummation of the Viacom Stock Purchase Agreement, the Chancellor Merger Agreement and the Other Pending Transactions. See "--Developments Since January 1, 1996 --Required Additional Dispositions." There can be no assurance that the Viacom Stock Purchase Agreement, the Chancellor Merger Agreement or any of the Other Pending Transactions will be consummated. COMPANY STRATEGY The Company's strategy historically has been to acquire and operate radio stations in the nation's largest radio markets, focusing particularly on markets where the Company has the opportunity to develop superduopolies, or clusters of as many as five FM radio stations. The Company believes that its presence in major markets provides significant advantages, including strengthening the Company's reputation among advertisers and advertising agencies as well as increasing the Company's ability to attract highly skilled management employees and popular on-air talent. Assuming consummation of the Viacom Acquisition, the Chancellor Merger, the Other Pending Transactions and the Required Additional Dispositions, the Company will have assembled superduopolies of at least three FM stations in six of the nation's top ten markets, including superduopolies of five FM radio stations in four of the nation's top ten radio markets. The Company expects to continue to pursue acquisition opportunities that would create additional superduopolies in top ten markets, and the Company may also pursue opportunities to expand the Company's presence in major markets not included within the top ten. In this regard, consummation of the Chancellor Merger will establish a Company presence in eight major markets in which the Company has not operated prior to the Chancellor Merger that fall within the nation's top thirty radio markets. Operations. The Company uses a variety of techniques to maximize the performance of its radio stations. These techniques are typically tailored to fit the requirements of a particular market, but the Company's general operational objective is to heighten a station's recognition in its market. Depending on the market, the Company may employ one or more of a variety of methods, including: developing new programming that responds to the needs of the local market, hiring dynamic on-air personalities for key morning and afternoon "drive" times, and engaging in creative promotional efforts designed to create listener loyalty. The Company generally seeks to "institutionalize" its stations by hiring popular on-air talent and by using promotional tie-ins with local community events. In implementing its operating strategy, the Company emphasizes the use of an aggressive sales force, prudent promotional spending and strict cost controls at each of its stations. Each of the Company's stations is managed by a team of experienced broadcasters who understand the musical tastes, demographics and competitive opportunities of the particular market. The Company decentralizes station operations and holds local management accountable for performance. Consistent with this approach, local management develops an annual operating budget in conjunction with corporate management. A general manager of a station receives additional compensation if his or her station meets or exceeds the operating targets established through the budget process. Likewise, a station's general sales manager receives a bonus for surpassing revenue targets, and its program director is rewarded for improving ratings in the targeted listening audience. Corporate management oversees and controls station spending and is responsible for long-range planning, establishing company policies, and allocating resources. The Company has implemented local sales reporting systems at each of its stations to provide local and corporate management with timely information about station operations. Corporate management imposes strict financial reporting requirements and budget limitations. The Company believes that retaining managers and key employees is important and prides itself on its low employee turnover. This low turnover results in part from the Company's emphasis on finding experienced, self-motivated managers who are rewarded for performance and on maintaining a comfortable, creative work environment. The Company believes that this entrepreneurial approach has made it a highly desirable employer in the radio broadcasting industry and has significantly enhanced the Company's ability to attract skilled employees, management and on-air talent. Acquisitions. The Company's strategy is to acquire and operate radio stations in the nation's largest radio markets, focusing particularly on markets where the Company has the opportunity to assemble superduopolies of as many as five FM radio stations. In evaluating potential acquisition candidates in its target markets, the Company seeks to identify underperforming radio stations or groups of stations that have strong broadcast signals. The Company typically analyzes whether the broadcasting signal of a target station is strong enough to ensure satisfactory market penetration, and uses programming and demographic research to determine whether the target station appeals, or can be made to appeal, to market segments that are both sought by advertisers and not well-served by other stations in the market. After acquiring a station, the Company seeks to improve broadcast cash flow (station operating income excluding depreciation and amortization) by such means as adjusting the station's programming, improving marketing, increasing its net revenues, reducing its operating expenses or combining its operations with an existing station operated by the Company in the same market. 2 The Company intends to continue to actively pursue opportunities for expansion, including opportunities that have been created by the Telecommunications Act of 1996 (the "1996 Act"), which, among other things (i) has increased significantly the number of radio stations that a single entity may own and operate in a single market and, (ii) has eliminated the ceiling on the number of stations that a single entity may own and operate on a national basis. See "--Regulation of Radio Broadcast Stations--Ownership Matters." The passage of the 1996 Act has significantly facilitated the acquisition of groups of radio stations in single transactions such as the Viacom Acquisition and the Chancellor Merger, and the Company typically analyzes such transactions in terms of the number and attractiveness of the major markets that they may allow the Company to penetrate. The new opportunity to own as many as eight stations in a market (depending on the market's size) created by the 1996 Act may allow certain synergies to be achieved. For example, owners of multiple stations may be able to increase their revenues by delivering larger, combined audiences to advertisers and by engaging in joint promotional efforts. In addition, owners of multiple stations may be able to reduce operating expenses by combining studios and offices. Any future acquisitions are subject to the Communications Act of 1934 (as amended by the 1996 Act and otherwise, the "Communications Act"), the rules of the FCC and, under certain circumstances, the consent of the Company's lenders. See "--Regulation of Radio Broadcast Stations--Ownership Matters" and "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources" set forth in Part II--Item 7 herein. The Company anticipates that it would fund any such future acquisitions through funds generated from operations, additional borrowings under the Senior Credit Facility (as defined below), possible dispositions of certain stations, additional debt or equity financing, or a combination of those methods. There can be no assurance, however, that any such funds or financing will be available. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources" set forth in Part II--Item 7 elsewhere herein. DEVELOPMENTS SINCE JANUARY 1, 1996 Since January 1, 1996, the Company has completed the acquisition of 21 radio stations for $604.3 million, completed the disposition of three radio stations for $32.0 million, and completed the exchange of WKLB-FM in Boston for WGAY-FM in Washington, D.C. The Company has entered into the Viacom Stock Purchase Agreement, under which the Company will acquire ten radio stations for approximately $1.075 billion. The Company has entered into the Chancellor Merger Agreement, under which the Company will acquire 51 radio stations (after giving effect to Chancellor's pending transactions at March 1, 1997 to acquire or dispose of stations. In addition, the Company has entered into binding contracts to purchase an additional seven radio stations for $414.5 million and has agreed in three separate transactions to swap or sell a total of nine stations (including one of the stations that the Company has agreed to acquire) in exchange for three other stations and $41.75 million. There can be no assurance that the Viacom Stock Purchase Agreement, the Chancellor Merger Agreement or the Other Pending Transactions will be consummated. Completion of the Viacom Stock Purchase Agreement, Chancellor Merger and the Other Pending Transactions require the Company to effect the Required Additional Dispositions in order to comply with the FCC's multiple ownership rules. The Required Additional Dispositions consist of the sale of nine stations in six markets, as discussed below. Transactions Completed Since January 1, 1996 On January 17, 1996, the Company acquired Pyramid Communications, Inc. ("Pyramid"), a radio broadcasting company with nine FM and three AM radio stations in five radio markets (Chicago, Philadelphia, Boston, Charlotte and Buffalo) (the "Pyramid Acquisition"). The Pyramid Acquisition was effected through the merger of a wholly-owned subsidiary of the Company with and into Pyramid, with Pyramid surviving the merger as a wholly-owned subsidiary of the Company. The total purchase price, including closing costs, allocated to net assets acquired was approximately $316.3 million in cash. On May 3, 1996, the Company acquired WKLB-FM in Boston for $34.0 million in cash plus various other direct acquisition costs. On November 26, 1996, the Company exchanged WKLB-FM in Boston (now known as WROR-FM) for WGAY-FM in Washington, D.C. The Company had previously been operating WGAY-FM under a time brokerage agreement and selling substantially all of the broadcast time of WKLB-FM under a time brokerage agreement, in each case since June 17, 1996, pending completion of the exchange. 3 On July 19, 1996, the Company sold WHTT-FM and WHTT-AM in Buffalo for $19.5 million in cash, and on August 1, 1996, the Company sold WSJZ-FM in Buffalo for $12.5 million in cash (collectively, the "Buffalo Stations"). The assets of the Buffalo Stations were classified as assets held for sale in the Pyramid Acquisition and no gain or loss was recognized by the Company upon consummation of the sales. The Company had previously entered into time brokerage agreements (effective April 15, 1996 for WSJZ-FM and April 25, 1996 for WHTT-FM and WHTT-AM) to sell substantially all of the broadcast time of these stations pending completion of the sales. On August 14, 1996, the Company acquired KYLD-FM in San Francisco for $44.0 million in cash plus various other direct acquisition costs. The Company had previously been operating KYLD-FM under a time brokerage agreement since May 1, 1996. The KYLD-FM acquisition created an FM superduopoly consisting of three FM stations for the Company in the San Francisco market. On October 18, 1996, the Company acquired WEDR-FM in Miami for $65.0 million in cash plus various other direct acquisition costs. On January 31, 1997, the Company acquired WWWW-FM and WDFN-AM in Detroit for $30.0 million in cash plus various other direct acquisition costs. The Company had previously provided certain sales and promotional functions to WWWW-FM and WDFN-AM under a joint sales agreement since February 14, 1996 and subsequently operated the stations under a time brokerage agreement since April 1, 1996. The acquisition of WWWW-FM created an FM superduopoly of three FM stations for the Company in the Detroit market. On January 31, 1997, the Company acquired KKSF-FM, KDFC-FM and KDFC-AM in San Francisco for $115.0 million in cash plus various other direct acquisition costs. The Company had previously been operating KKSF-FM and KDFC-FM under a time brokerage agreement since November 1, 1996. The following table sets forth certain information regarding the Company's actual portfolio and markets at March 1, 1997, without giving effect to any of the pending acquisitions or dispositions discussed below:
NO. OF STATIONS RANKING OF STATION'S ------------------ MARKET MARKET BY REVENUE(1) AM FM - ------ -------------------- ------- ------- Los Angeles.......................... 1 -- 1 New York............................. 2 -- 1 Chicago.............................. 3 2(2) 5(2) San Francisco........................ 4 1 5 Dallas/Ft. Worth..................... 5 1 -- Philadelphia......................... 6 -- 2 Houston.............................. 7 1 1 Washington, D.C...................... 8 1 2 Boston............................... 9 1 2 Detroit.............................. 11 2 3 Miami/Fort Lauderdale................ 12 1 1 Charlotte............................ 27 2(3) 4(3) ------- ------- Total.............................. 12 27
- -------- (1) Ranking of the principal radio market served by the Company's station(s) among all U.S. radio markets by 1996 gross radio broadcasting revenue as reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.). (2) Includes WEJM-FM, a station which, on March 13, 1997, the Company transferred to a trust through which the Company retains the economic interest in the station, but no control, pending sale of the station by the trust to a third party. Also includes WEJM-AM, a station which, on March 19, 1997, the Company agreed to sell for $7.5 million. See "-- Developments Since January 1, 1996--Other Pending Transactions." (3) The Company has agreed to dispose of all six Charlotte stations pursuant to existing contracts. See""--Developments Since January 1, 1996--Other Pending Transactions." 4 Viacom Acquisition On February 16, 1997, Evergreen Media Corporation of Los Angeles ("EMCLA"), a direct wholly-owned subsidiary of the Company, entered into the Viacom Stock Purchase Agreement. Under the Viacom Stock Purchase Agreement, EMCLA agreed to acquire from Viacom all of the issued and outstanding capital stock of the Viacom Subsidiaries for an aggregate purchase price of $1.075 billion in cash, subject to certain adjustments as set forth in the Viacom Stock Purchase Agreement. The Viacom Subsidiaries will own and operate at the consummation of the Viacom Stock Purchase Agreement the assets used in the operation of the following radio broadcast stations: (i) WAXQ(FM), New York, New York; (ii) WLTW(FM), New York, New York; (iii) KYSR(FM), Los Angeles, California; (iv) KIBB(FM), Los Angeles, California; (v) WMZQ-FM, Washington, D.C.; (vi) WZHF(AM), Arlington, Virginia; (vii) WJZW(FM), Woodbridge, Virginia; (viii) WBZS(AM), Alexandria, Virginia; (ix) WLIT(FM), Chicago, Illinois; and (x) WDRQ(FM), Detroit, Michigan. Consummation of the Viacom Stock Purchase Agreement is subject to (i) consent of the FCC; (ii) expiration or early termination of the waiting period required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and (iii) satisfaction of certain other closing conditions, each as more fully described in the Viacom Stock Purchase Agreement. No assurance can be given that the Viacom Stock Purchase Agreement will be consummated. Subject to the satisfaction of such conditions, the Company anticipates that the Viacom Stock Purchase Agreement will be consummated in the second quarter of 1997. If the Viacom Acquisition is consummated prior to the consummation of the Chancellor Merger, certain aspects of the Viacom Acquisition will be governed by the Joint Purchase Agreement (the "Joint Purchase Agreement"), dated February 19, 1997, among the Company, EMCLA, Chancellor and CRBC, as described below. The following table sets forth certain information regarding the Viacom Stations:
NO. OF STATIONS RANKING OF STATION'S --------- MARKET MARKET BY REVENUE(1) AM FM ------ -------------------- ---- ---- Los Angeles.................................. 1 -- 2 New York..................................... 2 -- 2 Chicago...................................... 3 -- 1 Washington, D. C............................. 8 2 2 Detroit...................................... 11 -- 1 ---- ---- Total...................................... 2 8
- -------- (1) Ranking of the principal radio market served by the Viacom's Stations among all U.S. radio markets by 1996 gross radio broadcasting revenue as reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.). Chancellor Merger On February 19, 1997, the Company entered into the Chancellor Merger Agreement with Chancellor and CRBC. Pursuant to the terms of the Chancellor Merger Agreement, Chancellor and CRBC will be merged with and into the Company in a stock-for-stock merger, with the Company remaining as the surviving corporation. Upon the consummation of the Chancellor Merger Agreement (the "Effective Time"), the surviving corporation will be re-named Chancellor Media Corporation (as such, the "Surviving Corporation"). At the Effective Time, (i) each share of Chancellor's Class A Common Stock, par value $.01 per share, and Class B Common Stock, par value $.01 per share, will be converted into 0.9091 shares of Common Stock of the Surviving Corporation, (ii) each share of the Company's Class A Common Stock, par value $.0l per share, and Class B Common Stock, par value $.0l per share, will be converted into one share of Common Stock of the Surviving Corporation, (iii) each share of Chancellor's 7% Convertible Preferred Stock, par value $.0l per share, will be converted into one share of Preferred Stock of the Surviving Corporation with substantially identical powers, preferences and relative rights, (iv) each share of CRBC's 12.25% Series A Senior Cumulative Exchangeable Preferred Stock, par value $.0l per share, will be converted into one share of preferred stock of the Surviving Corporation with 5 substantially identical powers, preferences and relative rights, and (v) each share of CRBC's 12% Exchangeable Preferred Stock, par value $.0l per share, will be converted into one share of Preferred Stock of the Surviving Corporation with substantially identical powers, preferences and relative rights. All shares of Common Stock of the Surviving Corporation will be entitled to one vote per share on all matters that holders of such stock are entitled to vote. Additionally, at the Effective Time, all indebtedness of Chancellor, CRBC and the Company will either be assumed or refinanced by the Surviving Corporation. On February 19, 1997, CRBC, Chancellor, EMCLA and the Company entered into a Joint Purchase Agreement (the "Joint Purchase Agreement"). The Joint Purchase Agreement governs certain aspects of the acquisition of the Viacom Subsidiaries as between CRBC, Chancellor, EMCLA and the Company. Pursuant to the Joint Purchase Agreement, each of the Company and Chancellor are required to pay one-half of certain costs due under the Viacom Stock Purchase Agreement, including those amounts owed as deposits. On February 19, 1997, each of the Company and Chancellor paid $53.75 million to Viacom to satisfy the obligation of the Company under the Viacom Stock Purchase Agreement to pay a deposit of 10% of the purchase price, which deposit is non-refundable except under certain limited circumstances. If the consummation of the Viacom Stock Purchase Agreement occurs prior to the consummation of the Chancellor Merger Agreement, (i) EMCLA will be required to purchase the Viacom Subsidiaries that own and operate radio stations WAXQ(FM), New York, New York, WLTW(FM), New York, New York, WMZQ(FM), Washington, D.C., WZHF(AM), Arlington, Virginia, WJZW(FM), Woodbridge, Virginia and WBZS(AM) Alexandria, Virginia, for an aggregate purchase price of approximately $595.0 million and (ii) CRBC will be required to purchase the Viacom Subsidiaries that own and operate radio stations KYSR(FM), Los Angeles, California, KIBB(FM), Los Angeles, California, WLIT(FM), Chicago, Illinois and WDRQ(FM), Detroit, Michigan, for an aggregate purchase price of approximately $480.0 million. If the Viacom Stock Purchase Agreement is consummated after the consummation of the Chancellor Merger Agreement, the Surviving Corporation will be required to purchase all of the Viacom Subsidiaries. The Company anticipates that the Viacom Stock Purchase Agreement and the refinancing of the indebtedness of the Company and Chancellor required in connection with the transactions contemplated by the Chancellor Merger Agreement will be financed through additional bank borrowings or additional public or private debt or equity financing. In connection with these transactions, the Company is actively engaged in negotiations with certain of the lenders party to the Company's senior credit facility (the "Senior Credit Facility") regarding the establishment of a new, expanded credit facility. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources" set forth in Part II--Item 7 herein. Toronto Dominion (Texas), Inc. acts as administrative agent for the lenders that are parties to the Senior Credit Facility. 6 The following table sets forth certain information regarding the Chancellor Stations (after giving effect to transactions of Chancellor to acquire or dispose of stations pending at March 1, 1997):
NO. OF STATIONS RANKING OF STATION'S --------------- MARKET MARKET BY REVENUE(1) AM FM ------ -------------------- ------- ------- Los Angeles........................ 1 1 1 New York........................... 2 -- 1 San Francisco...................... 4 2 2 Washington, D.C.................... 8 1 2 Atlanta............................ 10 -- 1 Denver............................. 15 1 4 Minneapolis-St. Paul............... 16 2 5 Phoenix............................ 17 2 4 Cincinnati......................... 20 2 2 Pittsburgh......................... 24 1 1 Sacramento......................... 25 2 2 Orlando............................ 26 -- 4 Long Island........................ 44 2 4 Riverside-San Bernardino........... 64 1 1 ------- ------- Total............................ 17 34
- -------- (1) Ranking of the principal radio market served by the Chancellor Stations among all U.S. radio markets by 1996 gross radio broadcasting revenue as reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.). Other Pending Transactions On June 13, 1996, the Company entered into an agreement to acquire WWRC-AM in Washington, D.C. for $22.5 million in cash. The Company has subsequently agreed with the owner of WWRC-AM to exchange WQRS-FM in Detroit (which, as discussed below, the Company has agreed to acquire in a separate purchase for $32.0 million in cash) in return for WWRC-AM and $9.5 million in cash. The Company has been operating WWRC-AM under a time brokerage agreement since June 17, 1996. On July 15, 1996, the Company entered into an agreement to acquire WPNT-FM in Chicago for $73.75 million in cash. On August 12, 1996, the Company entered into an agreement to acquire WMXD-FM and WJLB-FM in Detroit for $168.0 million in cash and WFLN-FM in Philadelphia for $37.75 million in cash. The Company also entered into an agreement to operate WMXD-FM, WJLB-FM and WFLN-FM under time brokerage agreements effective September 1, 1996. The Company also entered into a separate agreement on August 12, 1996 to acquire WQRS-FM in Detroit for $32.0 million in cash. As discussed above, the Company will immediately swap WQRS-FM at closing in return for WWRC-AM in Washington, D.C. and $9.5 million in cash. On September 4, 1996, the Company entered into a binding letter of intent to swap five of its six stations in the Charlotte, N.C. market (WPEG-FM, WBAV-FM, WBAV-AM, WRFX-FM and WFNZ-AM), which were acquired as part of the BPI Acquisition (as defined below) and the Pyramid Acquisition, for WIOQ-FM and WUSL-FM in Philadelphia. As part of this transaction, the Company has also agreed to sell its sixth radio station in Charlotte, WNKS-FM, for $10.0 million in cash. On December 5, 1996, the Company entered into definitive agreements regarding these stations. On September 19, 1996, the Company entered into an agreement to acquire WDAS-FM and WDAS-AM in Philadelphia for $103.0 million in cash. 7 On February 18, 1997, the Company entered into an agreement to sell WEJM-FM in Chicago for $14.75 million in cash. On March 13, 1997, the Company transferred WEJM-FM to an independent operating trust (the "WEJM Trust") pending consummation of this sale. The WEJM Trust permits the Company to retain its economic interest in WEJM-FM, but no control. The transfer of WEJM- FM to the WEJM Trust will allow the Company to maintain compliance with the FCC's multiple ownership limits in Chicago upon consummation of the acquisition of WPNT-FM in Chicago. On March 19, 1997, the Company entered into an agreement to sell WEJM-AM in Chicago for $7.5 million in cash. Consummation of each Other Pending Transaction is subject to various conditions, including approval from the FCC and the expiration or early termination of any waiting period required under the HSR Act. The Company believes that such conditions will be satisfied in the ordinary course, but there can be no assurance that this will be the case. The following table sets forth certain information regarding stations that the Company would acquire assuming consummation of all Other Pending Transactions of the Company pending at March 1, 1997:
NO. OF STATIONS RANKING OF STATION'S --------- MARKET MARKET BY REVENUE(1) AM FM ------ -------------------- ---- ---- Chicago.................................... 3 -- 1 Philadelphia............................... 6 1 4 Washington, D. C........................... 8 1 -- Detroit.................................... 11 -- 2(2) ---- ---- Total.................................... 2 7 ==== ====
- -------- (1) Ranking of the principal radio market served by the station(s) among all U.S. radio markets by 1996 gross radio broadcasting revenue as reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.). (2) Does not include one station in Detroit that the Company has agreed to acquire and then immediately exchange for another station in Washington, D.C. Required Additional Dispositions Completion of the Other Pending Transactions would result in the Company's ownership of six FM stations in the Philadelphia market, or one station in excess of the maximum number of FM stations under common ownership permitted by the FCC's multiple ownership rules. Therefore, the Company will be required to divest one FM station in Philadelphia in order to comply with such rules. Accordingly, the Company filed on October 10, 1996 an application with the FCC to transfer WFLN-FM to an independent operating trust (the "WFLN Trust") through which the Company would retain its economic interest in WFLN-FM, but no control, pending sale of the station by the trust. The Company reserves the right to sell WFLN-FM or any of its other Philadelphia FM stations to an unrelated third party prior to (and instead of) transferring WFLN-FM to the WFLN Trust. Furthermore, the Company will also be required to divest certain of its stations that it will acquire pursuant to the Viacom Acquisition and the Chancellor Merger, or other stations, in the Chicago, Detroit, Washington, D.C., San Francisco and Sacramento markets, in order to comply with the FCC's multiple ownership limits. As a result of the Viacom Acquisition, the Company will be required to dispose of one FM station in each of the Chicago and Detroit markets. As a result of the Chancellor Merger, the Company will be required to dispose of one FM and two AM stations in the Washington, D.C. market, two FM stations in the San Francisco market and one AM station in the Sacramento market. The stations in the Chicago, Detroit, Washington, D.C., San Francisco and Sacramento markets that the Company will be required to dispose of have not yet been identified, and could include one or more stations 8 currently in the Company's portfolio or one or more of the stations to be acquired in the Chancellor Merger, the Viacom Acquisition or any of the Other Pending Transactions in the relevant markets. Although discussions with third parties with respect to certain dispositions are underway, there has been no binding agreement reached with respect to any such dispositions. The inability of the Company to effect one or more of the Required Additional Dispositions could have a material adverse effect on the Company's ability to consummate the Chancellor Merger, the Viacom Acquisition or one or more of the Other Pending Transactions. Furthermore, it is not clear if the FCC would permit the Company to complete any acquisition that would cause the Company to exceed the FCC's multiple ownership limits in a market unless an executed purchase agreement were in effect or a transfer of one or more stations to a qualified trust were permitted. The Required Additional Dispositions reflect the number of stations that must be disposed by the Company in order to comply with the FCC's multiple ownership limits upon consummation of the Chancellor Merger, the Viacom Acquisition and the Other Pending Transactions. The Company may also be required to dispose of one or more of its stations as a result of federal or state antitrust laws. See "--Regulation of Radio Broadcasting Industry-- Federal Antitrust Laws." The following table summarizes the markets and number of stations where the Company will be required to effect the Required Additional Dispositions in order to comply with the FCC's multiple ownership limits, assuming consummation of all Other Pending Transactions, the Viacom Acquisition and the Chancellor Merger:
NO. OF STATIONS RANKING OF STATION'S --------------- MARKET MARKET BY REVENUE(1) AM FM ------ -------------------- ------- ------- Chicago................................. 3 -- 1 San Francisco........................... 4 -- 2 Philadelphia............................ 6 -- 1 Washington, D. C........................ 8 2 1 Detroit................................. 11 -- 1 Sacramento.............................. 25 1 -- ------- ------- Total................................. 3 6 ======= =======
- -------- (1) Ranking of the principal radio market served by the station(s) among all U.S. radio markets by 1996 gross radio broadcasting revenue as reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.). BROADCAST PROPERTIES The following table sets forth selected information with respect to the portfolio of radio stations owned by the Company at March 1, 1997, without giving effect to announced acquisitions and dispositions.
TOTAL NUMBER OF STATIONS RANKING OF RANKED STATION'S STATION RANKING IN TARGET MARKET TARGET IN TARGET DEMOGRAPHICS IN MARKET(1) STATION BY REVENUE(4) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(6) MARKET(6) - --------- ------- ------------- -------------- ------------- --------------- --------------- Los Angeles, CA KKBT-FM 1 Urban Contemporary Women 18-34 2 48 New York, NY WKTU-FM 2 Rhythmic Contemporary Hits Persons 25-54 2 44 Chicago, IL WLUP-FM 3 Adult Rock Persons 25-44 9 42 Chicago, IL WMVP-AM 3 Personality / Sports Men 25-54 21 42 Chicago, IL WRCX-FM 3 Mainstream Rock Men 18-34 1 42 Chicago, IL WVAZ-FM 3 Black Adult Women 25-54 2 42 Chicago, IL WEJM-FM+ 3 Hip Hop Persons 18-34 7 42 Chicago, IL WEJM-AM+ 3 Hip Hop Persons 18-34 37 42 Chicago, IL WNUA-FM 3 Contemporary Jazz Persons 25-54 6 42
9
TOTAL NUMBER OF STATIONS RANKING OF RANKED STATION'S STATION RANKING IN TARGET MARKET TARGET IN TARGET DEMOGRAPHICS IN MARKET STATION BY REVENUE(4) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(6) MARKET(6) - ------ ------- ------------- -------------- ------------- --------------- --------------- San Francisco, CA KIOI-FM 4 Adult Contemporary Women 25-54 2 52 San Francisco, CA KMEL-FM 4 Contemporary Hits Persons 18-34 2 51 San Francisco, CA KYLD-FM 4 Contemporary Hits Persons 18-34 1 51 San Francisco, CA KKSF-FM 4 Contemporary Jazz Persons 25-54 6 52 San Francisco, CA KDFC-FM 4 Classical Persons 35-64 9 52 San Francisco, CA KDFC-AM(2) 4 Classical Persons 35-64 N/M 52 Dallas, TX KSKY-AM 5 Inspirational N/M N/M N/M Philadelphia, PA WYXR-FM 6 Adult Contemporary Women 18-49 4 33 Philadelphia, PA WJJZ-FM 6 Contemporary Jazz Persons 35-54 4 33 Houston, TX KTRH-AM 7 News/Sports Men 25-54 4 33 Houston, TX KLOL-FM 7 Album Rock Men 18-34 2 32 Washington, D.C. WTOP-AM 8 News/Sports Men 25-54 10 35 Washington, D.C. WASH-FM 8 Adult Contemporary Women 25-54 3 34 Washington, D.C. WGAY-FM 8 Adult Contemporary Persons 35-64 9 35 Boston, MA WJMN-FM 9 Contemporary Hits Women 18-24 1 25 Boston, MA WXKS-FM 9 Contemporary Hits Women 25-34 1 29 Boston, MA WXKS-AM 9 Nostalgia Women 45-54 12 32 Detroit, MI WKQI-FM 11 Adult Contemporary Women 25-54 4 29 Detroit, MI WNIC-FM 11 Adult Contemporary Women 25-54 1 29 Detroit, MI WDOZ-AM(3) 11 Adult Contemporary Women 25-54 N/M 29 Detroit, MI WWWW-FM 11 Country Women 25-54 8 29 Detroit, MI WDFN-AM 11 Sports/Talk Men 25-49 9 29 Miami-Ft Lauderdale, FL WVCG-AM 12 Brokered(5) N/M N/M N/M Miami-Ft Lauderdale, FL WEDR-FM 12 Urban Contemporary Persons 25-54 2 37 Charlotte, NC WPEG-FM+ 27 Urban Contemporary Persons 18-34 1 21 Charlotte, NC WBAV-AM+ 27 Urban Adult Persons 25-54 16 27 Charlotte, NC WBAV-FM+ 27 Black Contemporary Hits Persons 25-54 9 27 Charlotte, NC WNKS-FM+ 27 Contemporary Hits Persons 18-34 3 21 Charlotte, NC WRFX-FM+ 27 Classic Rock Men 18-49 1 24 Charlotte, NC WFNZ-AM+ 27 Sports Men 18-49 17 24
- -------- + Indicates station to be disposed in an Other Pending Transaction. (1) Actual city of license may differ from metropolitan market served in certain cases. (2) The Company has historically brokered KDFC-AM to third parties. (3) The Company has historically brokered WDOZ-AM to third parties. (4) Ranking of principal radio market served by the station among all U.S. radio broadcast markets by aggregate 1996 gross radio broadcasting revenue as reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.). (5) The Company sells airtime on this station to third parties for broadcast of specialty programming on a variety of topics. (6) Information derived from The Arbitron Company, Fall 1996, Los Angeles, New York, Chicago, San Francisco, Philadelphia, Houston, Washington, D.C., Boston, Detroit, Miami and Charlotte Local Market Reports for the Target Demographics specified for listening Monday to Sunday, 6:00 a.m. to Midnight. Copyright, The Arbitron Company. N/M: Not meaningful 10 The following table sets forth selected information with respect to the Viacom Stations at March 1, 1997.
TOTAL NUMBER OF STATIONS RANKED RANKING OF STATION RANKING IN TARGET STATION'S MARKET TARTET IN TARGET DEMOGRAPHICS MARKET(1) STATION BY REVENUE(2) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS (3) MARKET(3) - --------- ------- ---------------- -------------- ------------- ---------------- ------------ Los Angeles, CA KYSR-FM 1 Hot Adult Contemporary Persons 25-54 13 49 Los Angeles, CA KIBB-FM 1 Rhythmic Adult Contemporary Persons 25-54 25 49 New York, NY WLTW-FM 2 Soft Adult Contemporary Persons 25-54 1 44 New York, NY WAXQ-FM 2 Classic Rock Persons 25-54 11 44 Chicago, IL WLIT-FM 3 Soft Adult Contemporary Persons 25-54 5 42 Washington, D.C. WMZQ-FM 8 Country Persons 25-54 2 35 Washington, D.C. WJZW-FM 8 Smooth Jazz Persons 25-54 9 35 Washington, D.C. WBZS-AM 8 Business News N/M N/M N/M Washington, D.C. WZHF-AM 8 Health and Fitness N/M N/M N/M Detroit, MI WDRQ-FM 11 Rhythmic Hit Radio Persons 18-34 6 28
- -------- (1) Actual city of license may differ from metropolitan market served in certain cases. (2) Ranking of principal radio market served by the station among all U.S. radio broadcast markets by aggregate 1996 gross radio broadcasting revenue as reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.). (3) Information derived from The Arbitron Company, Fall 1996, Los Angeles, New York, Chicago, Washington, D.C., and Detroit Local Market Reports for the Target Demographics specified for listening Monday to Sunday, 6:00 a.m. to Midnight. Copyright, The Arbitron Company. N/M: Not meaningful The following table sets forth selected information with respect to the Chancellor Stations at March 1, 1997, assuming the consummation of Chancellor's pending transactions to acquire or dispose of stations as of such date.
TOTAL NUMBER OF STATIONS RANKING OF STATION RANKING IN TARGET STATION'S MARKET TARGET IN TARGET DEMOGRAPHICS MARKET(1) STATION BY REVENUE(8) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS (9) MARKET(9) - --------- ------- ---------------- -------------- ------------- ---------------- ------------ Los Angeles, CA KLAC-AM 1 Adult Standards/Sports Persons 35-64 17 49 Los Angeles, CA KZLA-FM 1 Country Persons 25-54 12 49 New York, NY WHTZ-FM 2 Contemporary Hit Radio Persons 18-34 7 43 San Francisco, CA KNEW-AM 4 Country/Sports Persons 25-54 32 52 San Francisco, CA KSAN-FM 4 Country Persons 25-54 19 52 San Francisco, CA KABL-AM 4 Adult Standards Persons 35-64 16 52 San Francisco, CA KBGG-FM 4 70's Oldies Persons 25-54 10 52 Washington, D.C. WBIG-FM 8 Oldies Persons 25-54 8 35 Washington, D.C. WGMS-FM 8 Classical Persons 35-64 8 35 Washington, D.C. WTEM-AM 8 Sports/Talk Men 18-49 19 35 Atlanta, GA WFOX-FM 10 Oldies Persons 25-54 9 25 Denver, CO KRRF-AM 15 Talk Men 25-54 25 31 Denver, CO KXKL-FM 15 Oldies Persons 25-54 8 31 Denver, CO KVOD-FM 15 Classical Persons 25-54 17 31 Denver, CO KIMN-FM 15 70's Oldies Persons 25-54 11 31 Denver, CO KALC-FM 15 Hot Adult Contemporary Persons 18-34 2 31 Minneapolis- St. Paul, MN KTCZ-FM 16 Progressive Album Rock Men 25-49 6 23 Minneapolis- St. Paul, MN KTCJ-AM(3) 16 Progressive Album Rock Men 25-49 19 23 Minneapolis- St. Paul, MN KDWB-FM 16 Contemporary Hit Radio Persons 18-34 2 23 Minneapolis- St. Paul, MN KFAN-AM 16 Sports Men 18-49 7 23 Minneapolis- St. Paul, MN KEEY-FM 16 Country Persons 25-54 6 23
11
TOTAL NUMBER OF STATIONS RANKING OF STATION RANKING IN TARGET STATION'S MARKET TARGET IN TARGET DEMOGRAPHICS MARKET(1) STATION BY REVENUE(8) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS (9) MARKET(9) - --------- ------- ---------------- -------------- ------------- ---------------- ------------ Minneapolis- St. Paul, MN KQQL-FM 16 Oldies Persons 25-54 4 23 Minneapolis- St. Paul, MN WBOB-FM 16 Young Country Persons 18-49 9 23 Phoenix, AZ KMLE-FM 17 Country Persons 25-54 2 36 Phoenix, AZ KISO-AM 17 Urban Adult Contemporary Persons 25-54 27 36 Phoenix, AZ KOOL-FM 17 Oldies Persons 25-54 1 36 Phoenix, AZ KOY-AM 17 Adult Standards Persons 35-64 9 36 Phoenix, AZ KYOT-FM 17 Contemporary Jazz Persons 25-54 11 36 Phoenix, AZ KZON-FM 17 Alternative Rock Persons 18-34 6 36 Cincinnati, OH WUBE-FM(4) 20 Country Persons 25-54 1 26 Cincinnati, OH WUBE-AM 20 Nostalgia Persons 35-64 N/M N/M Cincinnati, OH WYGY-FM(4) 20 Young Country Men 18-34 6 26 Cincinnati, OH WKYN-AM 20 Sports/Talk Men 18-49 16 26 Pittsburgh, PA WWSW-AM(5) 24 Oldies Persons 25-54 24 29 Pittsburgh, PA WWSW-FM 24 Oldies Persons 25-54 3 29 Sacramento, CA KGBY-FM 25 Adult Contemporary Women 25-54 1 32 Sacramento, CA KHYL-FM 25 Oldies Persons 25-54 9 32 Sacramento, CA KFBK-AM 25 News/Talk Persons 25-54 1 32 Sacramento, CA KSTE-AM(6) 25 Talk Persons 25-54 14 32 Orlando, FL WOCL-FM 26 Oldies Persons 25-54 5 25 Orlando, FL WOMX-FM 26 Adult Contemporary Persons 25-54 6 25 Orlando, FL WJHM-FM 26 Urban Contemporary Persons 18-34 4 25 Orlando, FL WXXL-FM 26 Contemporary Hit Radio Persons 18-34 1 25 Long Island, NY(2) WALK-FM 44 Adult Contemporary Persons 25-54 1 40 Long Island, NY(2) WALK-AM 44 Adult Contemporary Persons 35-64 N/M N/M Long Island, NY(2) WBAB-FM(7)+ 44 Album Rock Men 25-49 3 40 Long Island, NY(2) WBLI-FM(7)+ 44 Adult Contemporary Women 25-54 5 40 Long Island, NY(2) WHFM-FM(7)+ 44 Album Rock Men 25-49 38 40 Long Island, NY(2) WGBB-AM(7)+ 44 News/Talk Persons 25-54 N/M N/M Riverside- San Bernardino, CA KGGI-FM 64 Contemporary Hit Radio Persons 18-34 2 51 Riverside- San Bernardino, CA KMEN-AM 64 Oldies Men 25-54 34 51
- -------- + Includes station to be acquired by Chancellor pursuant to a transaction pending as of March 1, 1997. (1) Actual city of license may differ from metropolitan market served in certain cases. (2) Long Island may also be considered part of the greater New York market, although it is reported separately as a matter of convention. (3) Programming provided to KTCJ-AM via simulcast of programming broadcast on KTCZ-FM. (4) WUBE-FM and WYGY-FM are sold in combination. (5) Programming provided to WWSW-AM via simulcast of programming broadcast on WWSW-FM. (6) Chancellor currently manages certain limited functions of station KSTE-AM in Sacramento, California pursuant to a time brokerage agreement. On July 31, 1996, Chancellor entered into an agreement with American Radio Systems Corporation ("ARS") under which Chancellor has agreed to exchange its West Palm Beach, Florida stations for ARS' station KSTE-AM in Sacramento, California, plus $33.0 million in cash. (7) Chancellor currently manages certain limited functions of stations, WBAB- FM, WBLI-FM, WHFM-FM and WGBB-AM in Long Island, New York, pursuant to a time brokerage agreement. On July 1, 1996, Chancellor entered into an agreement with SFX Broadcasting ("SFX") under which Chancellor would exchange WAPE-FM and WFYV-FM, two Jacksonville, Florida stations, and $11.0 million in cash for SFX's three FM stations and one AM station in Long Island, New York. (8) Ranking of principal radio market served by the station among all U.S. radio broadcast markets by aggregate 1996 gross radio broadcasting revenue as reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.). 12 (9) Information derived from The Arbitron Company, Fall 1996, Los Angeles, New York, San Francisco, Washington, D.C., Atlanta, Denver, Minneapolis-St. Paul, Phoenix, Cincinnati, Pittsburgh, Sacramento, Orlando, Long Island and Riverside-San Bernardino Local Market Reports for the Target Demographics specified for listening Monday to Sunday, 6:00 a.m. to Midnight. Copyright, The Arbitron Company. N/M: Not meaningful. The following table sets forth selected information with respect to the stations to be acquired by the Company assuming consummation of the Other Pending Transactions.
TOTAL NUMBER OF STATIONS RANKING OF STATION RANKING RANKED STATION'S MARKET TARGET IN TARGET IN TARGET MARKET(1) STATION(2) BY REVENUE(3) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS (4) MARKET(4) - --------- ---------- ---------------- -------------- ------------- ---------------- ------------ Chicago, IL WPNT-FM 3 Adult Contemporary Women 25-54 8 42 Philadelphia, PA WUSL-FM 6 Urban Contemporary Women 18-34 1 31 Philadelphia, PA WIOQ-FM 6 Contemporary Hit Radio/Dance Women 18-34 2 31 Philadelphia, PA WFLN-FM 6 Classical Persons 35-64 11 33 Philadelphia, PA WDAS-FM 6 Urban Contemporary Persons 25-54 1 33 Philadelphia, PA WDAS-AM 6 Gospel N/M N/M N/M Washington, D.C. WWRC-AM 8 News/Talk Persons 35-64 21 35 Detroit, MI WJLB-FM 11 Urban Contemporary Persons 18-34 1 28 Detroit, MI WMXD-FM 11 Black Adult Persons 25-54 7 29
- -------- (1) Actual city of license may differ from metropolitan market served in certain cases. (2) Does not include information for WQRS-FM in Detroit, which the Company has agreed to acquire and then immediately exchange for WWRC-AM. See "-- Developments Since January 1, 1996--Other Pending Transactions." (3) Ranking of principal radio market served by the station among all U.S. radio broadcast markets by aggregate 1996 gross radio broadcasting revenue as reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.). (4) Information derived from The Arbitron Company, Fall 1996, Chicago, Philadelphia, Washington, D.C. and Detroit Local Market Reporting for the Target Demographics specified for listening Monday to Sunday, 6:00 a.m. to Midnight. Copyright, The Arbitron Company. N/M: Not meaningful ADVERTISING The primary source of the Company's revenues is the sale of broadcasting time for local, regional and national advertising. Approximately 69% of the Company's gross revenues was generated from the sale of local advertising in 1995 and 1996. The Company believes that radio is one of the most efficient, cost-effective means for advertisers to reach specific demographic groups. The advertising rates charged by the Company's radio stations are based primarily on (i) a station's ability to attract audiences in the demographic groups targeted by its advertisers (as measured principally by quarterly Arbitron rating surveys that quantify the number of listeners tuned to the station at various times) and (ii) the supply of and demand for radio advertising time. Advertising rates generally are the highest during morning and evening drive- time hours. Depending on the format of a particular station, there are predetermined numbers of advertisements that are broadcast each hour. The Company determines the number of advertisements broadcast hourly that can maximize available revenue dollars without jeopardizing listening levels. Although the number of advertisements broadcast during a given time period may vary, the total number of advertisements broadcast on a particular station generally does not vary significantly from year to year. A station's sales staff generates most of its local and regional advertising sales. To generate national advertising sales, the Company engages an advertising representative for each of its stations that specializes in 13 national sales and is compensated on a commission-only basis. Most advertising contracts are short-term and generally run only for a few weeks. COMPETITION The radio broadcasting industry is a highly competitive business. The success of each of the Company's stations is dependent, to a significant degree, upon its audience ratings and share of the overall advertising revenue within its market. The Company's radio stations compete for listeners and advertising revenues directly with other radio stations, as well as with other media, within their respective markets. Radio stations compete for listeners primarily on the basis of program content and by hiring on-air talent that appeals to a particular demographic group. By building a strong listener base comprised of a specific demographic group in each of its markets, the Company is able to attract advertisers who seek to reach those listeners. Other media, including broadcast television, cable television, newspapers, magazines, direct mail coupons and billboard advertising also compete with the Company's stations for advertising revenues. The Company also competes with other broadcasting operators for acquisition opportunities, and prices have increased significantly in recent periods. As the pace of consolidation in the radio broadcasting industry accelerates, certain competitors are emerging which may have larger portfolios of major market radio stations, greater ability to deliver large audiences to advertisers and more access to capital resources than does the Company. The radio broadcasting industry is also subject to competition from new media technologies that are being developed or introduced, such as the delivery of audio programming by cable television systems, direct broadcast satellite ("DBS") systems and other digital audio broadcasting formats to local and national audiences. In addition, the FCC has allocated spectrum to and currently is preparing the service rules for a new satellite-delivered Digital Audio Radio Service ("DARS"). These actions may result in the introduction of several new national or regional satellite radio services. The Company cannot predict at this time the effect, if any, that any such new technologies may have on the radio broadcasting industry. EMPLOYEES As of December 31, 1996, the Company had approximately 1,382 full-time employees and 396 part-time employees. Certain employees at the Company's stations in Los Angeles, Chicago, and Washington, D.C. (approximately 180 employees), are represented by unions. The Company believes that it has good relations with its employees and these unions. The Company employs several high-profile on-air personalities who have large, loyal audiences in their respective markets. The Company believes that its relationships with its on-air talent are valuable, and it generally enters into employment agreements with these individuals. During 1996, the Company executed employment agreements with Scott K. Ginsburg (the Company's Chairman and Chief Executive Officer) and Kenneth J. O'Keefe (the Company's Executive Vice President--Operations). To date in 1997, the Company has entered into a Memorandum of Agreement with Scott K. Ginsburg regarding his employment by the Surviving Corporation following consummation of the Chancellor Merger. See "Executive Compensation--Employment Agreements" set forth in Part III--Item 11 herein. REGULATION OF RADIO BROADCASTING INDUSTRY Introduction. The radio broadcasting industry is subject to extensive and changing regulation over, among other things, program content, technical operations and business and employment practices. The ownership, operation and sale of radio broadcast stations (including those licensed to the Company) are subject to the jurisdiction of the FCC, which acts under authority granted by the Communications Act. The Communications Act prohibits the assignment of an FCC license, and the transfer of control of an FCC licensee, without the prior consent of the FCC. In determining whether to grant requests for consent to such assignments or transfers, and in determining whether to grant or renew a radio broadcast license, the FCC considers a number 14 of factors pertaining to the licensee (and proposed licensee), including: limitations on alien ownership and the common ownership of television broadcast, radio broadcast and daily newspaper properties, the "character" of the licensee (and proposed licensee) and those persons or entities that have "attributable" interests, and compliance with the Anti-Drug Abuse Act of 1988. Among other things, the FCC assigns frequency bands for radio broadcasting; determines the particular frequencies, locations and operating power of radio broadcast stations; issues, renews, revokes and modifies radio broadcast station licenses; regulates equipment used by radio broadcast stations; adopts and implements regulations and policies that directly or indirectly affect the ownership, operation, program content and employment and business practices of radio broadcast stations; and has the power to impose penalties for violations of its rules and the Communications Act. The following is a brief summary of certain provisions of the Communications Act and specific FCC rules and policies. Reference should be made to the Communications Act, FCC rules, and the public notices and rulings of the FCC for further information concerning the nature and extent of federal regulation of radio broadcast stations. Failure to observe these or other FCC rules and policies may result in the imposition of various sanctions, including admonishment, monetary forfeitures, the grant of "short" (less than the maximum eight-year term) renewal terms or, for particularly egregious violations, the denial of a license renewal application, the revocation of FCC licenses, or the denial of FCC consent to acquire additional broadcast properties. License Renewal. Radio broadcast licenses are granted for maximum terms of up to eight years. They may be renewed through an application to the FCC, and, in certain instances, licensees are entitled to renewal expectancies. During certain periods when a renewal application is pending, competing applicants may file for the radio frequency being used by the renewal applicant, although the FCC is prohibited from considering such competing applications if the existing license has satisfied certain obligations. Petitions to deny license renewals can be filed by interested parties, including members of the public. The FCC is required to hold hearings on a renewal application in certain circumstances. The following table sets forth the date of acquisition by the Company (or one of its predecessor entities) of the radio stations actually owned by the Company as of March 1, 1997, without giving effect to any pending acquisitions or dispositions, the frequency of each such station, and the date of expiration of such station's main FCC broadcast license:
DATE OF EXPIRATION DATE STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE ------- --------- ----------- --------- --------------- KKBT-FM Los Angeles, CA 5/89 92.3 MHz 12/97 WKTU-FM New York, NY 5/95 103.5 MHz 6/98 WLUP-FM Chicago, IL 6/88 97.9 MHz 12/03 WMVP-AM Chicago, IL 5/84 1000 kHz 12/03 WRCX-FM Chicago, IL 12/93 103.5 MHz 12/96* WVAZ-FM Chicago, IL 5/95 102.7 MHz 12/03 WEJM-FM+ Chicago, IL 5/95 106.3 MHz 12/03 WEJM-AM+ Chicago, IL 5/95 950 kHz 12/03 WNUA-FM Chicago, IL 1/96 95.5 MHz 12/03 KIOI-FM San Francisco, CA 4/94 101.3 MHz 12/97 KMEL-FM San Francisco, CA 11/92 106.1 MHz 12/97 KYLD-FM San Francisco, CA 8/96 107.7 MHz 12/97 KKSF-FM San Francisco, CA 1/97 103.7 MHz 12/97 KDFC-FM San Francisco, CA 1/97 102.1 MHz 12/97 KDFC-AM San Francisco, CA 1/97 1220 kHz 12/97 KSKY-AM Dallas, TX 5/95 660 kHz 8/97 WYXR-FM Philadelphia, PA 1/96 104.5 MHz 8/98 WJJZ-FM Philadelphia, PA 1/96 106.1 MHz 8/98
15
DATE OF EXPIRATION DATE STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE - ------- --------- ----------- --------- --------------- KTRH-AM Houston, TX 6/93 740 kHz 8/97 KLOL-FM Houston, TX 6/93 101.1 MHz 8/97 WTOP-AM Washington, DC 11/92 1500 kHz 10/02 WASH-FM Washington, DC 11/92 97.1 MHz 10/02 WGAY-FM Washington, DC 11/96 99.5 MHz 10/02 WJMN-FM Boston, MA 1/96 94.5 MHz 4/98 WXKS-FM Boston, MA 1/96 107.9 MHz 4/98 WXKS-AM Boston, MA 1/96 1430 kHz 4/98 WKQI-FM Detroit, MI 5/95 95.5 MHz 10/03 WNIC-FM Detroit, MI 5/95 100.3 MHz 10/03 WDOZ-AM Detroit, MI 5/95 1310 kHz 10/03 WWWW-FM Detroit, MI 1/97 106.7 MHz 10/03 WDFN-AM Detroit, MI 1/97 1130 kHz 10/03 WVCG-AM Miami-FT. Lauderdale, FL 7/83 1080 kHz 2/03 WEDR-FM Miami-FT. Lauderdale, FL 10/96 99.1 MHz 2/03 WPEG-FM+ Charlotte, NC 5/95 97.9 MHz 12/02 WBAV-AM+ Charlotte, NC 5/95 1600 kHz 12/02 WBAV-FM+ Charlotte, NC 5/95 101.9 MHz 12/02 WNKS-FM+ Charlotte, NC 1/96 95.1 MHz 12/02 WRFX-FM+ Charlotte, NC 1/96 99.7 MHz 12/02 WFNZ-AM+ Charlotte, NC 1/96 610 kHz 12/02
- -------- + Indicates station to be disposed in an Other Pending Transaction. * Indicates pending renewal application. (1) Actual city of license may differ from metropolitan market served in certain cases. The following table sets forth the frequency of each Viacom Station, and the date of expiration of such station's main FCC broadcast license:
EXPIRATION DATE STATION MARKET(1) FREQUENCY OF FCC LICENSE ------- --------- --------- --------------- KYSR-FM Los Angeles, CA 98.7 MHz 12/97 KIBB-FM Los Angeles, CA 100.3 MHz 12/97 WLTW-FM New York, NY 106.7 MHz 6/98 WAXQ-FM New York, NY 104.3 MHz 6/98 WLIT-FM Chicago, IL 93.9 MHz 12/03 WMZQ-FM Washington, D.C. 98.7 MHz 10/02 WJZW-FM Washington, D.C. 105.9 MHz 10/02 WBZS-AM Washington, D.C. 730 kHz 10/02 WZHF-AM Washington, D.C. 1390 kHz 10/02 WDRQ-FM Detroit, MI 93.1 MHz 10/03
- -------- (1)Actual city of license may differ from metropolitan market served in certain cases. 16 The following table sets forth the frequency of each Chancellor Station (after giving effect to Chancellor's pending transactions to acquire or dispose of stations at March 1, 1997), and the date of expiration of such station's main FCC broadcast license:
EXPIRATION DATE STATION MARKET(1) FREQUENCY OF FCC LICENSE ------- --------- --------- --------------- KLAC-AM Los Angeles, CA 570 kHz 12/97 KZLA-FM Los Angeles, CA 93.9 MHz 12/97 WHTZ-FM New York, NY 100.3 MHz 06/98 KNEW-AM San Francisco, CA 910 kHz 12/97 KSAN-FM San Francisco, CA 94.9 MHz 12/97 KABL-AM San Francisco, CA 960 kHz 12/97 KBGG-FM San Francisco, CA 98.1 MHz 12/97 WBIG-FM Washington, D.C. 100.3 MHz 10/03 WGMS-FM Washington, D.C. 103.5 MHz 10/03 WTEM-AM Washington, D.C. 570 kHz 10/03 WFOX-FM Atlanta, GA 97.1 MHz 04/03 KRRF-AM Denver, CO 1280 kHz 04/97 KXKL-FM Denver, CO 105.1 MHz 04/97 KVOD-FM Denver, CO 92.5 MHz 04/97 KIMN-FM Denver, CO 100.3 MHz 04/97 KALC-FM Denver, CO 105.9 MHz 04/97 KTCZ-FM Minneapolis-St. Paul, MN 97.1 MHz 04/97 KTCJ-AM Minneapolis-St. Paul, MN 690 kHz 04/97 KDWB-FM Minneapolis-St. Paul, MN 101.3 MHz 04/97 KFAN-AM Minneapolis-St. Paul, MN 1130 kHz 04/97 KEEY-FM Minneapolis-St. Paul, MN 102.1 MHz 04/97 KQQL-FM Minneapolis-St. Paul, MN 107.9 MHz 04/97 WBOB-FM Minneapolis-St. Paul, MN 100.3 MHz 04/97 KMLE-FM Phoenix, AZ 107.9 MHz 10/97 KISO-AM Phoenix, AZ 1230 kHz 10/97 KOOL-FM Phoenix, AZ 94.5 MHz 10/97 KOY-AM Phoenix, AZ 550 kHz 10/97 KYOT-FM Phoenix, AZ 95.5 MHz 10/97 KZON-FM Phoenix, AZ 101.5 MHz 10/97 WUBE-FM Cincinnati, OH 105.1 MHz 10/03 WUBE-AM Cincinnati, OH 1230 kHz 10/03 WYGY-FM Cincinnati, OH 96.5 MHz 10/03 WKYN-AM Cincinnati, OH 1160 kHz 10/03 WWSW-AM Pittsburgh, PA 970 kHz 08/98 WWSW-FM Pittsburgh, PA 94.5 MHz 08/98 KGBY-FM Sacramento, CA 92.5 MHz 12/97 KHYL-FM Sacramento, CA 101.1 MHz 12/97 KFBK-AM Sacramento, CA 1530 kHz 12/97 KSTE-AM Sacramento, CA 650 kHz 12/97 WOCL-FM Orlando, FL 105.9 MHz 02/03 WOMX-FM Orlando, FL 105.1 MHz 02/03 WJHM-FM Orlando, FL 101.9 MHz 02/03 WXXL-FM Orlando, FL 106.7 MHz 02/03 WALK-FM Long Island, NY 97.5 MHz 06/98 WALK-AM Long Island, NY 1370 kHz 06/98 WBAB-FM+ Long Island, NY 102.3 MHz 06/98 WBLI-FM+ Long Island, NY 106.1 MHz 06/98 WHFM-FM+ Long Island, NY 95.3 MHz 06/98 WGBB-AM+ Long Island, NY 1240 kHz 06/98 KGGI-FM Riverside-San Bernardino, CA 99.1 MHz 12/97 KMEN-AM Riverside-San-Bernardino, CA 1290 kHz 12/97
- -------- + Includes station to be acquired by Chancellor pursuant to a contract pending as of March 1, 1997. (1) Actual city of license may differ from metropolitan market served in certain cases. 17 The following table sets forth the frequency of each station to be acquired by the Company pursuant to an Other Pending Transaction, and the date of expiration of such station's main FCC broadcast license:
EXPIRATION DATE STATION(1) MARKET(2) FREQUENCY OF FCC LICENSE ---------- --------- --------- --------------- WPNT-FM Chicago, IL 100.3 MHz 12/03 WUSL-FM Philadelphia, PA 98.9 MHz 08/98 WIOQ-FM Philadelphia, PA 102.1 MHz 08/98 WFLN-FM Philadelphia, PA 95.7 MHz 08/98 WDAS-FM Philadelphia, PA 105.3 MHz 08/98 WDAS-AM Philadelphia, PA 1480 kHz 08/98 WWRC-AM Washington, D.C. 980 kHz 10/02 WJLB-FM Detroit, MI 97.9 MHz 10/03 WMXD-FM Detroit, MI 92.3 MHz 10/03
- -------- (1) Does not include information for WQRS-FM in Detroit, which the Company has agreed to acquire and then immediately exchange for WWRC-AM. See "-- Developments Since January 1, 1996--Other Pending Transactions." (2) Actual city of license may differ from metropolitan market served in certain cases. Ownership Matters. Under the Communications Act, a broadcast license may not be granted to or held by any corporation that has more than one-fifth of its capital stock owned or voted by aliens or their representatives, by foreign governments or their representatives, or by non-U.S. corporations. Under the Communications Act, a broadcast license also may not be granted to or held by any corporation that is controlled, directly or indirectly, by any other corporation more than one-fourth of whose capital stock is owned or voted by aliens or their representatives, by foreign governments or their representatives, or by non-U.S. corporations, if the FCC finds that the public interest will be served by the refusal or revocation of such license. The Company has been advised that the FCC staff has interpreted this provision of the Communications Act to require an affirmative public interest finding before a broadcast license may be granted to or held by any such corporation and that the FCC has made such an affirmative finding only in limited circumstances. These restrictions apply in modified form to other forms of business organizations, including partnerships. The Company, which serves as a holding company for its direct and indirect radio station subsidiaries, therefore may be restricted from having more than one-fourth of its stock owned or voted by aliens, foreign governments or non-U.S. corporations. The Certificate of Incorporation of the Company contains prohibitions on alien ownership and control that are intended to facilitate compliance with the provisions of the Communications Act applicable to alien ownership. The Company believes that in light of current levels of alien ownership of the Company's capital stock, the foregoing restrictions are not likely to have a material impact on the Company. The Communications Act and FCC rules also generally prohibit the common ownership, operation or control of a radio broadcast station and a television broadcast station serving the same local market, and of a radio broadcast station and a daily newspaper serving the same local market. Under these "cross-ownership" rules, absent waivers, the Company would not be permitted to acquire any daily newspaper or television broadcast station (other than low- power television) in a local market where it then owned any radio broadcast station. In October 1996, the Commission issued a Notice of Inquiry to explore possible changes in the newspaper/broadcast cross-ownership waiver policy with respect to newspaper/radio combinations, including the possibility of adopting a waiver policy based on market size or on the number of independently owned media in a market. The 1996 Act eliminated national ownership caps on ownership of AM and FM radio stations. Prior to the 1996 Act, radio groups were limited to ownership of 20 FM stations and 20 AM stations on a national basis. Additionally, the 1996 Act increased local ownership limits. Prior to the 1996 Act, a single owner was limited to owning two FMs and two AMs in a single large radio market with common ownership of three stations, including two in the same service, permitted in smaller markets. After the 1996 Act, local ownership limits were increased as follows: in markets with 45 or more stations, ownership is limited to eight stations, no more than five of which 18 can be FMs or AMs; in markets with 30-44 stations, ownership is limited to seven stations, no more than four of which can be FMs or AMs; in markets with 15-29 stations, ownership is limited to six stations, no more than four of which can be FMs or AMs; and in markets with 14 or fewer stations, ownership is limited to no more than 50% of the market's total and no more than three AMs or FMs. Because of these multiple ownership rules and the cross-interest policy described below, a purchaser of the Company's Class A Common Stock who acquires an attributable interest in the Company may violate the FCC's rules if it also has an "attributable" interest in other television or radio stations, or in daily newspapers, depending on the number and location of those radio or television stations or daily newspapers. Such a purchaser also may be restricted in the companies in which it may invest, to the extent that those investments give rise to an attributable interest. If an attributable stockholder of the Company violates any of these ownership rules, the Company may be unable to obtain from the FCC one or more authorizations needed to conduct its radio station business and may be unable to obtain FCC consents for certain future acquisitions. The FCC generally applies its television/radio/newspaper cross-ownership rules, and its broadcast multiple ownership rules, by considering the "attributable," or cognizable, interests held by a person or entity. A person or entity can have an interest in a radio station, television station or daily newspaper by being an officer, director, partner or stockholder of a company that owns that station or newspaper. Whether that interest is cognizable under the FCC's ownership rules is determined by the FCC's attribution rules. If an interest is attributable, the FCC treats the person or entity who holds that interest as the "owner" of the radio station, television station or daily newspaper in question, and therefore subject to the FCC's ownership rules. In the case of corporations, the interest of officers, directors and persons or entities that directly or indirectly have the right to vote 5% or more of the corporation's voting stock (or 10% or more of such stock in the case of insurance companies, investment companies, bank trust departments and certain other "passive investors" that hold such stock for investment purposes only) are generally attributed with ownership of whatever radio stations, television stations, and daily newspapers the corporation owns. Likewise, the interest of an officer or a director of a corporate parent (as well as the corporate parent) is generally attributed with ownership of whatever the subsidiary owns. In the case of a partnership, the interest of a general partner is attributable, as is the interest of any limited partner who is "materially involved" in the media-related activities of the partnership. Debt instruments, non-voting stock, options and warrants for voting stock that have not yet been exercised, limited partnership interests where the limited partner is not "materially involved" in the media-related activities of the partnership, and minority voting stock interests in corporations where there is a single holder of more than 50% of the outstanding voting stock, generally do not subject their holders to attribution. The FCC has issued a Notice of Proposed Rulemaking (the "NPRM") that contemplates tightening attribution standards where parties have multiple nonattributable interests in and relationships with stations that would be prohibited by the FCC's cross-interest rules, if the interests/relationships were attributable. The NPRM contemplates that this change in attribution will apply only to persons holding debt or equity interests that exceed certain benchmarks. In addition, the FCC has a "cross-interest" policy that under certain circumstances could prohibit a person or entity with an attributable interest in a broadcast station or daily newspaper from having a "meaningful" non- attributable interest in another broadcast station or daily newspaper in the same local market. Among other things, "meaningful" interests could include significant equity interests (including non-voting stock, voting stock, and limited partnership interests) and significant employment positions. This policy may limit the permissible investments that an equity investor in the Company may make or hold. If the FCC determines that a stockholder of the Company has violated this cross-interest policy, the Company may be unable to obtain from the FCC one or more authorizations needed to conduct its radio station business and may be unable to obtain FCC consents for certain future acquisitions. Programming and Operation. The Communications Act requires broadcasters to serve the "public interest." The FCC has gradually relaxed or eliminated many of the more formalized procedures it had developed 19 in the past to promote the broadcast of certain types of programming responsive to the needs of a station's community of license. A licensee continues to be required, however, to present programming that is responsive to community problems, needs and interests and to maintain certain records demonstrating such responsiveness. Complaints from listeners concerning a station's programming often will be considered by the FCC when it evaluates the licensee's renewal application, but such complaints may be filed and considered at any time. Stations also must follow various FCC rules that regulate, among other things, political advertising, sponsorship identification, and technical operations (including limits on radio frequency radiation). In addition, licensees must develop and implement programs designed to promote equal employment opportunities. The broadcast of obscene and indecent material and the advertisement of contests and lotteries are regulated by FCC rules, as well as by state and other federal laws. Time Brokerage Agreements. Over the past three years, a number of radio stations, including certain of the Company's stations, have entered into what commonly are referred to as "Time Brokerage Agreements," or "TBAs" (certain types of these agreements also are known as "Local Marketing Agreements," or "LMAs"). These agreements may take various forms. Separately-owned and licensed stations may agree to function cooperatively in terms of programming, advertising sales, and other matters, subject to the licensee of each station maintaining independent control over the programming and other operations of its own station and compliance with the requirements of antitrust laws. One typical type of TBA is a programming agreement between two separately-owned radio stations that serve a common service area, whereby the licensee of one station programs substantial portions of the broadcast day on the other licensee's station (subject to ultimate editorial and other controls being exercised by the latter licensee), and sells advertising time during those program segments. The FCC staff has held that such agreements do not violate the Communications Act as long as the licensee of the station that is being substantially programmed by another entity maintains complete responsibility for, and control over, operations of its broadcast station and otherwise ensures compliance with applicable FCC rules and policies. As of March 1, 1997, four of the stations to be acquired in the Other Pending Transactions are being operated by the Company under TBAs. A station that brokers more than 15% of the broadcast time, on a weekly basis, on another station in the same market will be considered to have an attributable ownership interest in the brokered station for purposes of the FCC's ownership rules, discussed above. As a result, a broadcast station may not enter into a TBA that allows it to program more than 15% of the broadcast time, on a weekly basis, of another local station that it could not own under the FCC's local multiple ownership rules. FCC rules also prohibit a broadcast licensee from simulcasting more than 25% of its programming on another station in the same broadcast service (i.e., AM-AM or FM-FM) where the two stations serve substantially the same geographic area, whether the licensee owns the stations or owns and programs the other through a TBA arrangement. Proposed Changes. The FCC is considering various proposals to modify its broadcast "attribution" rules. Among the proposals are (i) raising the basic benchmark for attributing ownership from 5% to 10% of the licensee's voting stock, (ii) raising the attribution benchmark for certain institutional investors from 10% to 20%, (iii) limiting the applicability of the single majority shareholder rule (discussed above) to treat as attributable large stock interests coupled with other debt or securities and (iv) treating non- voting stock as attributable in certain circumstances. The FCC is also considering changes to its multiple ownership rules to encourage minority ownership of radio and television broadcast stations. The FCC has under consideration, and may in the future consider and adopt, new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect the operation, ownership and financial performance of the Company's radio broadcast stations, result in the loss of audience share and advertising revenues for the Company's radio broadcast stations, and affect the ability of the Company to acquire additional radio broadcast stations or finance such acquisitions. Such matters include: changes to the license renewal process; the FCC's equal employment opportunity rules and other matters relating to minority and female involvement in the broadcasting industry; proposals to change rules relating to political broadcasting; technical and frequency allocation matters; AM stereo broadcasting; proposals to permit expanded use of FM translator stations; proposals to restrict or prohibit the advertising of beer, wine and other alcoholic beverages on radio; changes in the FCC's cross-interest, multiple ownership and cross-ownership policies; changes to 20 broadcast technical requirements; proposals to allow telephone companies to deliver audio and video programming to the home through existing phone lines; proposals to limit the tax deductibility of advertising expenses by advertisers; proposals to auction to the highest bidder the right to use the radio broadcast spectrum, instead of granting FCC licenses and subsequent license renewals; and proposals to reinstate the "Fairness Doctrine" which requires a station to present coverage of opposing views in certain circumstances. It is also possible that Congress may enact additional legislation that could have a material impact on the operation, ownership and financial performance of the Company's radio stations over and above the already substantial impact of the 1996 Act. The FCC has taken initial steps to authorize the use of a new technology, DARS, to deliver audio programming by satellite. The FCC is also considering various proposals for terrestrial DARS. DARS may provide a medium for the delivery of multiple new audio programming formats to local and national audiences. It is not known at this time whether this technology also may be used in the future by existing radio broadcast stations either on existing or alternate broadcasting frequencies. The Company cannot predict what other matters might be considered in the future, nor can it judge in advance what impact, if any, the implementation of any of these proposals or changes might have on its business. Federal Antitrust Laws. The United States Federal Trade Commission and the Antitrust Division of the United States Department of Justice (the "DOJ"), evaluate transactions requiring a pre-acquisition filing under the Hart-Scott- Rodino Antitrust Improvement Act of 1976, as amended (the "HSR Act") to determine whether those transactions should be challenged under the federal antitrust laws. These agencies (particularly the DOJ) recently have been increasingly active in their review of radio station acquisitions where an operator proposes to acquire new stations in its existing markets. In connection with the Company's acquisitions of WWWW-FM and WDFN-AM (which have been completed), and the Company's proposed acquisition of WJLB-FM and WMXD-FM in Detroit, the DOJ issued second requests to the Company seeking the production of documents and other information. The Company complied with the second requests, and the DOJ ultimately cleared the transactions. The DOJ also issued second requests to the Company for documents and information with regard to the transfer of the Company's Charlotte, North Carolina stations in exchange for WIOQ-FM and WUSL-FM in Philadelphia. On March 5, 1997, the DOJ terminated the waiting period and cleared the acquisition by the Company of WIOQ-FM and WUSL-FM. On March 14, 1997, the DOJ terminated the waiting period and cleared the disposition by the Company of its North Carolina stations. As part of its increased scrutiny of radio station acquisitions, the DOJ has stated publicly that it believes that TBAs and other similar agreements customarily entered into in connection with radio station transfers prior to the expiration of the waiting period under the HSR Act could violate the HSR Act. Since then, the DOJ has stated publicly that it will apply its new policy prohibiting TBAs in connection with purchase agreements until the expiration or termination of the HSR waiting period on a prospective basis. The DOJ has stated publicly that it has established certain revenue and audience share concentration benchmarks with respect to radio station acquisitions, above which a transaction may receive additional antitrust scrutiny. However, to date, the DOJ has also investigated transactions that do not meet or exceed these benchmarks, and has cleared transactions that do exceed these benchmarks. Given this uncertainty, the Company cannot predict whether it will be required by the DOJ or the FTC to dispose of certain stations to be acquired as a result of the Chancellor Merger, the Viacom Acquisition and the Other Pending Transactions in addition to the Required Additional Dispositions that the Company will effect in order to comply with the FCC's multiple ownership limits. Although the Company does not believe that its acquisition strategy as a whole will be adversely affected in any material respect by review under the HSR Act or by additional divestitures that the Company may have to make as a result of the HSR Act, there can be no assurance that this will be the case. ITEM 2. PROPERTIES The Company's corporate headquarters is in Irving, Texas. The types of properties required to support each of the Company's radio stations include offices, studios, transmitter sites and antenna sites. A station's studio is 21 generally housed with its office in a downtown or business district. A station's transmitter sites and antenna sites generally are located in a manner that provides maximum market coverage. The studios and offices of the Company's stations and its corporate headquarters are located in leased or owned facilities. The terms of these leases expire in one to ten years. The Company either owns or leases its transmitter and antenna sites. These leases have expiration dates that range from one to eight years. The Company does not anticipate any difficulties in renewing those leases that expire within the next several years or in leasing other space, if required. No one property is material to the Company's overall operations. The Company believes that its properties are in good condition and suitable for its operations. The Company owns substantially all of the equipment used in its radio broadcasting business. ITEM 3. LEGAL PROCEEDINGS In August 1993, the Company terminated an agreement with Sagittarius Broadcasting Company (an affiliate of Infinity Broadcasting Corporation) and One Twelve, Inc. (collectively, the "Claimants" or the "Plaintiffs") pursuant to which programming featuring radio personality Howard Stern was broadcast on radio station WLUP- AM (now WMVP-AM) in Chicago. The Claimants allege that termination of the agreement was wrongful and have sued the Company in the Supreme Court of the State of New York, County of New York (the "Court"). The agreement required payments to the Claimants in the amount of $2.6 million plus five percent of advertising revenues generated by the programming over the three-year term of the agreement. A total of approximately $680,000 was paid to the Claimants pursuant to the agreement prior to termination. Claimants' complaint alleged claims for breach of contract, indemnification, breach of fiduciary duty and fraud. Plaintiffs' aggregate prayer for relief totaled $45.0 million. On July 12, 1994, the Court granted the Company's motion to dismiss Plaintiffs' claims for fraud and breach of fiduciary duty. On June 6, 1995, the Court denied the Plaintiff's motion for summary judgment on their contract and indemnification claims and this order has been affirmed on appeal. On May 17, 1996, after the close of discovery, the Company filed a motion for summary judgment, seeking the dismissal of the remaining claims in the original complaint. On July 1, 1996, Plaintiffs moved for leave to amend their complaint in order to add claims for breach of the covenant of good faith and fair dealing, tortious interference with business advantage and prima facia tort. In the proposed amended complaint, Plaintiffs seek compensatory and punitive damages in excess of $25.0 million. On March 13, 1997, the Court denied the Company's motion for summary judgment, allowed Plaintiffs' request to amend the complaint to add a claim for breach of the covenant of good faith and fair dealing and denied Plaintiffs' request to amend the complaint to add claims for tortious interference with business advantage and prima facia tort. The Company believes that it acted within its rights in terminating the agreement. The Company is also involved in various other claims and lawsuits which are generally incidental to its business. The Company is vigorously contesting all such matters and believes that their ultimate resolution will not have a material adverse effect on its consolidated financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of 1996. 22 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company did not sell equity securities during 1996 other than pursuant to transactions that were registered under the Securities Act of 1933, as amended. Shares of the Company's Class A Common Stock, par value $.01 per share, have been quoted on The Nasdaq Stock Market under the symbol EVGM since the consummation of the initial public offering of the Company's Class A Common Stock in May 1993. The following table sets forth, for the calendar quarters indicated, the high and low closing sales prices of the Class A Common Stock on The Nasdaq Stock Market, as reported in published financial sources.
YEAR HIGH(1) LOW(1) ---- ------ ------ 1995: First Quarter.............................................. 12.00 9.33 Second Quarter............................................. 18.00 10.67 Third Quarter.............................................. 23.75 17.17 Fourth Quarter............................................. 21.33 15.92 1996: First Quarter.............................................. 24.50 16.83 Second Quarter............................................. 29.50 21.83 Third Quarter.............................................. 33.25 25.74 Fourth Quarter............................................. 32.25 23.50
- -------- (1) All information set forth herein has been adjusted to reflect a three-for- two split of the Company's Common Stock, effected in the form of a stock dividend, paid on August 26, 1996 to stockholders of record at the close of business on August 19,1996 (the "Stock Split"). There is no public trading market for the Company's Class B Common Stock, $.01 per share. As of March 1, 1997, there were 127 holders of record of the Class A Common Stock (which number does not include the number of stockholders whose shares are held of record by a broker or clearing agency but does include each such brokerage house or clearing agency as one record holder). The Company was informed by the underwriters in its initial public offering that such underwriters expected that subsequent to such offering there would be a sufficient number of beneficial owners of the Company's Class A Common Stock to comply with the minimum shareholder maintenance standards set by The Nasdaq Stock Market. The Company knows of no reason why this would not continue to be true as of the date hereof. As of March 1, 1997, there was one holder of the Class B Common Stock. The Company has not declared or paid any cash dividends on its Common Stock since its inception and does not currently anticipate paying any cash dividends on its Common Stock in the foreseeable future. The Company intends to retain future earnings for use in its business. The Company is currently subject to restrictions under terms of the Senior Credit Facility that limit the amount of cash dividends that may be paid on its Common Stock. The Company may pay cash dividends on its Common Stock in the future only if certain financial tests set forth in the Senior Credit Facility are met. 23 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA The selected consolidated historical financial data presented below have been derived from the annual audited consolidated financial statements of the Company for, and as of the end of, each of the years in the five-year period ended December 31, 1996. The consolidated historical financial results of the Company are not comparable from year to year because of the acquisition and disposition of various radio stations by the Company during the periods covered. This data should be read in conjunction with the consolidated financial statements of the Company and with the related notes thereto and with "Management's Discussion and Analysis of Financial Conditions and Results of Operations" set forth in Part II--Item 7 herein. EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, ------------------------------------------------------- 1992 1993 1994 1995 1996 -------- -------- -------- -------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) CONSOLIDATED STATEMENT OF OPERATIONS DATA: Gross revenues.......... $ 61,935 $106,813 $125,478 $186,365 $ 337,405 Net revenues ........... 53,969 93,504 109,516 162,931 293,850 Station operating expenses excluding depreciation and amortization........... 34,968 60,656 68,852 97,674 174,344 Depreciation and amortization........... 11,596 33,524 30,596 47,005 93,749 Corporate general and administrative expense................ 1,717 2,378 2,672 4,475 7,797 Other nonrecurring costs(1)............... -- 7,002 -- -- -- -------- -------- -------- -------- ---------- Operating income (loss)................. 5,688 (10,056) 7,396 13,777 17,960 Interest expense........ 10,112 13,878 13,809 19,199 37,527 Other (income) expense, net.................... 565 (3,185) (6,452) 236 (477) -------- -------- -------- -------- ---------- Income (loss) before income taxes and extraordinary item..... (4,989) (20,749) 39 (5,658) (19,090) Income tax expense (benefit) ............. -- -- -- 192 (2,896) -------- -------- -------- -------- ---------- Income (loss) before extraordinary item..... (4,989) (20,749) 39 (5,850) (16,194) Extraordinary loss on early extinguishment of debt(2)................ 1,798 -- 3,585 -- -- -------- -------- -------- -------- ---------- Net loss................ (6,787) (20,749) (3,546) (5,850) (16,194) Preferred stock dividends.............. 741 4,756 4,830 4,830 3,820 Accretion of redeemable preferred stock to mandatory redemption value, including $17,506 in 1993 relating to early redemption............. 276 18,823(3) -- -- -- -------- -------- -------- -------- ---------- Net loss attributable to common stockholders.... $ (7,804) $(44,328) $ (8,376) $(10,680) $ (20,014) ======== ======== ======== ======== ========== Loss per common share before extraordinary item................... $ (.74) (4.48)(3) (.37) (.52) (.66) ======== ======== ======== ======== ========== Net loss per common share.................. (.96) (4.48)(3) (.64) (.52) (.66) ======== ======== ======== ======== ========== Weighted average common shares outstanding..... 8,153 9,890 (4) 13,002 20,721 30,207 FOR THE YEAR ENDED DECEMBER 31, ------------------------------------------------------- 1992 1993 1994 1995 1996 -------- -------- -------- -------- ---------- CONSOLIDATED BALANCE SHEET DATA AT YEAR-END: Working capital......... $ 13,456 $ 7,873 $ 15,952 $ 30,556 $ 41,421 Intangible assets (net of accumulated amortization).......... 181,022 212,517 233,494 458,787 853,643 Total assets............ 234,852 283,505 297,990 552,347 1,020,959 Long-term debt (including current portion)............... 165,000 152,000 174,000 201,000(5) 358,000(5) Redeemable preferred stock, including accreted dividends..... 40,106 -- -- -- -- Common stock, subject to repurchase(6).......... 17,000 -- -- -- -- Stockholders' equity ... 2,905 120,968 112,353 304,577 549,411 Other Financial Data: Broadcast cash flow(7).. 19,001 32,848 40,664 65,257 119,506
See accompanying notes to Selected Consolidated Financial Data 24 NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA (1) Consists of a non-cash charge resulting from the grant of employee stock options prior to the Company's initial public offering. (2) In connection with its debt refinancings in 1992 and 1994, the Company wrote off the unamortized balance of deferred debt issuance costs of $1,798 and $3,585, respectively, as an extraordinary charge. (3) Due to the early redemption of the Company's Series A and Junior Exchangeable Redeemable Preferred Stock in October 1993, a one-time accretion charge of approximately $17,506 was incurred which increased loss per common share for 1993 by $2.66. (4) Subsequent to the Company's initial public offering, the calculation of weighted average common shares outstanding excludes common stock issuable upon the exercise of outstanding warrants and options due to their anti- dilutive effect on loss per common share. (5) The current portion of the Company's long-term debt was $4,000 and $26,500 at December 31, 1995 and 1996, respectively. (6) Represents shares of common stock which included a repurchase right. This repurchase right terminated in connection with the Company's initial public offering. (7) Data on station operating income excluding depreciation and amortization, corporate general and administrative expenses, and other non-recurring costs (commonly referred to as broadcast cash flow), although not calculated in accordance with generally accepted accounting principles, is widely used in the broadcast industry as a measure of a company's operating performance. Nevertheless, this measure should not be considered in isolation or as a substitute for operating income, cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with generally accepted accounting principles. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Since the Company's acquisition in May of 1995 of Broadcasting Partners, Inc. ("BPI"), an eleven-station radio broadcasting group holding eight stations in the nation's ten largest radio markets (the "BPI Acquisition"), the Company has engaged in an acquisition strategy concentrating on expanding the Company's presence in the nation's largest radio markets. Implementation of this acquisition strategy has been significantly accelerated in 1996 and to date in 1997 due to passage of the 1996 Act and the associated relaxation of national and local ownership limits. See "Business--Regulation of Radio Broadcasting--Ownership Matters" set forth in Part I--Item 1 herein. For a discussion of the various transactions completed and agreements entered since January 1, 1996 as part of the Company's acquisition strategy, see "Business-- Developments Since January 1, 1996" set forth in Part I--Item 1 herein. Upon consummation of the Viacom Acquisition, the Chancellor Merger (assuming the completion of Chancellor's pending transactions at March 1, 1997) and the Other Pending Transactions, the Company will have assembled superduopolies of at least three FM stations in six of the nation's top ten radio markets including superduopolies of five FM stations in four of the nation's top ten radio markets. The Company expects to continue to pursue acquisition opportunities that would create additional superduopolies in top ten radio markets and the Company may also pursue opportunities to expand the Company's presence in major markets not included within the top ten. In this regard, consummation of the Chancellor Merger will establish a Company presence in eight major markets in which the Company has not operated prior to the Chancellor Merger within the nation's top thirty radio markets. In the following analysis, management discusses the broadcast cash flow of its radio station group. The performance of a radio station group is customarily measured by its ability to generate broadcast cash flow. The two components of broadcast cash flow are gross revenues (net of agency commissions) and operating expenses (excluding depreciation and amortization and corporate general and administrative expense). The primary source of revenues is the sale of broadcasting time for advertising. The Company's most significant operating expenses 25 for purposes of the computation of broadcast cash flow are employee salaries and commissions, programming expenses, and advertising and promotion expenses. The Company strives to control these expenses by working closely with local station management. The Company's revenues vary throughout the year. As is typical in the radio broadcasting industry, the Company's first calendar quarter generally produces the lowest revenues, and the fourth quarter generally produces the highest revenues. Data on broadcast cash flow, although not calculated in accordance with generally accepted accounting principles, is widely used in the broadcast industry as a measure of a company's operating performance. Nevertheless, this measure should not be considered in isolation or as a substitute for operating income, cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with generally accepted accounting principles. Broadcast cash flow does not take into account the Company's debt service requirements and other commitments and, accordingly, broadcast cash flow is not necessarily indicative of amounts that may be available for dividends, reinvestment in the Company's business or other discretionary uses. YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995 The Company's results of operations for the year ended December 31, 1996 are not comparable to the results of operations for the year ended December 31, 1995 due to the impact of the various station acquisitions, dispositions and time brokerage agreements discussed in "Business--Developments Since January 1, 1996" set forth in Part I--Item 1 herein and in Note 2 to the Consolidated Financial Statements included elsewhere in this Form 10-K. Net revenues for the year ended December 31, 1996 increased 80.4% to $293.9 million compared to $162.9 million for the year ended December 31, 1995. Station operating expenses excluding depreciation and amortization for 1996 increased 78.5% to $174.3 million compared to $97.7 million in 1995. Station operating income excluding depreciation and amortization and corporate general and administrative expense (broadcast cash flow) for 1996 increased 83.1% or $54.2 million to $119.5 million compared to $65.3 million in 1995. The increase in net revenues, station operating expenses, and broadcast cash flow was primarily attributable to the impact of the various station acquisitions and dispositions discussed elsewhere herein, in addition to the overall net operational improvements realized by the Company's radio stations. Depreciation and amortization for 1996 increased 99.4% to $93.7 million compared to $47.0 million in 1995. The increase represents additional depreciation and amortization expenses due to the impact of recent acquisitions, offset by decreases due to certain intangibles which became fully amortized in 1995 and 1996. Corporate general and administrative expenses for 1996 increased 74.2% to $7.8 million compared to $4.5 million in 1995. The increase is due to the growth of the Company, and related increase in properties and staff, primarily due to recent acquisitions. As a result of the above factors, operating income for 1996 increased 30.4% to $18.0 million compared to $13.8 million in 1995. Interest expense for 1996 increased 95.4% to $37.5 million compared to $19.2 million in 1995. The net increase in interest expense was primarily due to additional bank borrowings required to finance the Pyramid acquisition as well as the other station acquisitions discussed above, offset by repayment of borrowings under the revolving credit portion of the Senior Credit Facility from the net proceeds of approximately $264.2 million from the Company's public offering of Class A Common Stock in October 1996, and an overall decrease in the Company's borrowing rates. The provision for income tax expense for the year ended December 31, 1996 is comprised of current federal and state taxes of $.5 million and $1.0 million, respectively, and a deferred federal income tax benefit of $4.4 million. The Company from time to time seeks to defer recognition of taxable gains upon the disposition of radio 26 properties by structuring dispositions as like-kind exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended, under appropriate circumstances. Dividends on preferred stock decreased $1.0 million to $3.8 million in 1996 compared to $4.8 million in 1995. The decrease in preferred stock dividends is due to the conversion of a total of 1,608,297 shares of the Company's Convertible Exchangeable Preferred Stock into a total of 5,025,916 shares of the Company's Class A Common Stock and the redemption of the remaining 1,703 shares of Convertible Exchangeable Preferred Stock during 1996. As a result of the above factors, the Company incurred a $20.0 million net loss attributable to common stockholders in 1996 compared to a $10.7 million net loss in 1995. YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994 The Company's results of operations for the year ended December 31, 1995 are not comparable to the results of operations for the year ended December 31, 1994 due to the impact of the BPI Acquisition. The BPI Acquisition resulted in the addition of seven FM and four AM radio stations, eight of which are in the nation's ten largest radio markets. Net revenues for the year ended December 31, 1995 increased 48.8% to $162.9 million compared to $109.5 million for the year ended December 31, 1994. Station operating expenses excluding depreciation and amortization for 1995 increased 41.9% to $97.7 million compared to $68.9 million in 1994. Station operating income excluding depreciation and amortization (broadcast cash flow) for 1995 increased 60.5% or $24.6 million to $65.3 million compared to $40.7 million in 1994. The increase in net revenues, station operating expenses, and broadcast cash flow was attributable to the overall net operational improvements realized by the Company's radio stations, in addition to the impact of the consolidation of the results of operations of BPI since the consummation of the BPI Acquisition on May 12, 1995. Depreciation and amortization for 1995 increased 53.6% to $47.0 million compared to $30.6 million in 1994. The net increase represents additional depreciation and amortization expenses due to the impact of the BPI Acquisition on May 12, 1995, offset by decreases due to certain intangible assets which became fully amortized in 1995 and 1994. Corporate general and administrative expenses for 1995 increased 67.5% to $4.5 million compared to $2.7 million in 1994. The increase is due to the growth of the Company primarily related to the BPI Acquisition. As a result of the above factors, operating income for 1995 increased 86.3% to $13.8 million compared to $7.4 million in 1994. Interest expense for 1995 increased 39.0% to $19.2 million compared to $13.8 million in 1994. The net increase in interest expense was due to additional bank borrowings of approximately $186.0 million required to finance the BPI Acquisition in May 1995, offset by the application of net proceeds of approximately $132.7 million from the Company's public offering of Class A Common Stock in July 1995 and overall decline in the Company's borrowing rates. The net proceeds from the public offering were used to repay borrowings under the revolving credit portion of the Senior Credit Facility, which borrowings had been incurred to finance the BPI Acquisition. Other income (expense) comprised of interest income, gain on disposition of assets and other expense, net was a $.2 million charge in 1995 compared to $6.5 million in income in 1994. Other income (expense) for the year ended December 31, 1994 includes a gain of approximately $7.3 million on the disposition of WAPE-FM and WFYV-FM in Jacksonville, Florida, which closed in April 1994. The provision for income tax expense for the year ended December 31, 1995 is comprised of current federal and state taxes of $.3 million and $.4 million, respectively, and a deferred federal income tax benefit of $.5 million. 27 In connection with the Senior Credit Facility debt restructuring on November 29, 1994, the Company recorded an extraordinary charge of $3.6 million, consisting of a write-off of the unamortized balance of deferred debt issuance costs related to the debt retirement. Dividends on preferred stock were $4.8 million in 1995 and 1994. As a result of the above factors, the Company incurred a $10.7 million net loss attributable to common stockholders in 1995 compared to an $8.4 million net loss in 1994. LIQUIDITY AND CAPITAL RESOURCES Overview. The Company historically has generated sufficient cash flow from operations to finance its existing operational requirements and debt service requirements, and the Company anticipates that this will continue to be the case. The Company historically has used the proceeds of bank debt and public equity offerings, supplemented by cash flow from operations not required to fund operational requirements and debt service, to fund implementation of its acquisition strategy. On October 17, 1996, the Company completed a secondary public offering of 9,000,000 shares of its Class A Common Stock at a public offering price of $30.625 per share. The net proceeds of approximately $265.0 million received by the Company were used to reduce borrowings under the New Revolving Loan (as defined below) portion of the Senior Credit Facility. The total cash financing required to consummate the Other Pending Transactions is expected to be $414.5 million. Of this amount, approximately $5.5 million has already been advanced by the Company in the form of escrow deposits or other upfront payments. In addition, the Company expects to receive $41.75 million in cash from the sale of WNKS-FM, WEJM-FM and WEJM-AM and the exchange of WQRS-FM for WWRC-AM. Accordingly, the Company will require approximately $367.25 million in additional financing to consummate the Other Pending Transactions. Additionally, the Company will require significant capital resources to consummate the Viacom Acquisition and the Chancellor Merger and to assume or refinance existing debt and preferred stock of Chancellor and its subsidiaries. It is likely that some portion of the Company's capital requirements will be funded from the proceeds of one or more of the Required Additional Dispositions that will be required to be made in order to effect the various pending transactions while remaining in compliance with the FCC's multiple ownership rules. However, the Company is unable to predict what level of proceeds may be received, given that certain required dispositions may be effected through exchanges for other assets and that the Company has not yet reached binding contracts regarding any of the Required Additional Dispositions. The Company is actively engaged in negotiations with certain of the lenders party to the Senior Credit Facility regarding the establishment of a new, expanded credit facility (the "Financing Transaction") that would (i) replace the Senior Credit Facility, (ii) provide the Company with additional borrowing capacity and (iii) partially fund the financing requirements of the Viacom Acquisition, the Chancellor Merger, and the Other Pending Transactions as well as other potential acquisitions. The Company is also exploring the possibility of supplementing the Financing Transaction through various other public or private sources of debt or equity capital. There can be no assurance that the Company will be successful in consummating the Financing Transaction, or that alternative sources of funding will be available on acceptable terms. The Senior Credit Facility. In connection with the Pyramid Acquisition, the Company amended and restated its Senior Credit Facility. Under the amended agreement, dated January 17, 1996, a $150.0 million Term Loan and a $200.0 million Revolving Loan remained in place, and the Company also established an additional revolving facility of up to $275.0 million (the "New Revolving Loan"). At December 31, 1996, the Company had drawn $150.0 million of the Term Loan, $190.0 million of the Revolving Loan, and $8.0 million of the New Revolving Loan. At March 1, 1997, after the consummation of the acquisitions of WWWW-FM and WDFN-AM in Detroit and KKSF-FM and KDFC-FM/AM in San Francisco on January 31, 1997, the Company had drawn $150.0 million of the Term Loan, $185.0 million of the Revolving Loan, and $196.0 million of the New Revolving Loan. The Company's ability to make additional borrowings under the New Revolving Loan is subject to compliance with certain financial ratios and other conditions set forth in the Senior Credit Facility. 28 Substantially all of the assets of the Company and its subsidiaries are pledged to secure performance of the Company's obligations under the Senior Credit Facility. For additional information regarding the Senior Credit Facility, see Note 6 to the Consolidated Financial Statements included elsewhere in this Form 10-K. FORWARD LOOKING STATEMENTS When used in the preceding and following discussion, the words "expects," "anticipates" and similar expressions are intended to identify forward looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in any of the forward looking statements. Such risks and uncertainties include, but are not limited to, industry-wide market factors and regulatory developments affecting the Company's operations and the acquisitions and dispositions of broadcast properties described elsewhere herein. RECENTLY--ISSUED ACCOUNTING PRINCIPLES In June 1996, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 125, "Transfers of Financial Assets and Extinguishments of Liabilities" ("SFAS No. 125"). SFAS No. 125 provides accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities. The provisions of SFAS No. 125 are generally effective for transactions occurring after December 31, 1996. The adoption of SFAS No. 125 is not expected to have a material impact on the Company's financial statements. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information called for by this Item is included on Pages F-1 through F- 26 of this Report on Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 29 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The directors and executive officers of the Company are listed below: Scott K. Ginsburg Chairman of the Mr. Ginsburg has been Chairman of the Board and Chief Executive Officer Board of the Company since 1990. He Director since 1988 Member of the has been Chief Executive Officer and a Executive and Nominating Committees director of the Company since 1988. of the Board of Directors Age: 44 Mr. Ginsburg was President of the Company from 1988 to 1993 and held various positions with H&G Communications, Inc. from 1987 to 1988. Mr. Ginsburg entered the radio broadcasting business in 1983. James E. de Castro President and Mr. de Castro has been President of Chief Operating Officer Director the Company since 1993 and Chief since 1989 Member of the Executive Operating Officer and a director since Committee of the Board of Directors 1989. From 1987 to 1988, Mr. de Castro Age: 44 held various positions with H&G Communications, Inc. and predecessor entities. From 1981 to 1989 Mr. de Castro was general manager of radio stations WLUP-FM and WLUP-AM (now known as WMVP-AM) in Chicago, and from 1989 to 1992 Mr. de Castro was general manager of radio station KKBT-FM in Los Angeles. Matthew E. Devine Executive Vice Mr. Devine has been an Executive Vice President, Chief Financial Officer President of the Company since 1993, and Treasurer Director since 1989 Chief Financial Officer and Treasurer Member of the Executive Committee of of the Company since 1988 and a the Board of Directors Age: 48 director since 1989. Kenneth J. O'Keefe Executive Vice Mr. O'Keefe has been an Executive Vice President--Operations Director since President of the Company since 1996 Age: 42 February of 1996 and a director since May of 1996. Prior to joining the Company in 1996, Mr. O'Keefe was a director, Chief Financial Officer and Executive Vice President of Pyramid Communications, Inc. from March 1994 until the Company's acquisition of Pyramid Communications, Inc. on January 17, 1996. Mr. O'Keefe served in various capacities with Pyramid Communications, Inc. or predecessor entities during the five-year period prior to his joining the Company in 1996. Joseph M. Sitrick Director since Mr. Sitrick has been a director of the 1988 Member of the Audit and Company since 1988. Mr. Sitrick is a CompensationCommittees of the Board Vice President with Blackburn & of Directors Age: 75 Company, Incorporated, a media brokerage firm, which he joined in 1958. 30 Thomas J. Hodson Director since 1992 In 1994, Mr. Hodson became President Member of the Audit, Nominating and of Columbia Falls Aluminum Company. He Compensation Committees of the Board had been a Vice President of Stephens, of Directors Age: 53 Inc. from 1986 through 1993. Mr. Hodson has been a director of the Company since 1992. Perry Lewis Director since 1995 Mr. Lewis was the Chairman of Member of the Nominating and Broadcasting Partners, Inc. ("BPI") Compensation Committees of the Board from its inception in 1988 until its of Directors Age: 59 merger with the Company in 1995 and was Chief Executive Officer of BPI from 1993 to 1995. Mr. Lewis has been a director of the Company since the Company acquired BPI in 1995. Mr. Lewis is a founder of Morgan, Lewis, Githens & Ahn ("MLG&A"), an investment banking and leveraged buyout firm which was established in 1982. Mr. Lewis serves as a director of Aon Corporation, Quaker Fabric Corporation, ITI Technologies, Inc. and Stuart Entertainment, Inc. Eric L. Bernthal Director since 1996 Mr. Bernthal has been a director of Age: 50 the Company since 1996. Mr. Bernthal has been a partner with the law firm of Latham & Watkins, Washington, D.C., regular legal counsel to the Company, since 1986. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires the Company's directors, executive officers and holders of more than 10% of the Class A Common Stock or the Company's $3.00 Convertible Exchangeable Preferred Stock to file with the Securities and Exchange Commission (the "S.E.C.") initial reports of ownership and reports of changes in ownership of any equity securities of the Company. As discussed elsewhere herein, all of the Company's issued and outstanding $3.00 Convertible Exchangeable Preferred Stock was redeemed or converted during 1996. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II - Item 7 contained elsewhere herein. To the Company's knowledge, for the period from January 1, 1996 through March 1, 1997, all Section 16(a) filing requirements applicable to its executive officers, directors and holders of more than 10% of the Class A Common Stock or the $3.00 Convertible Exchangeable Preferred Stock were satisfied, except that (i) directors Joseph M. Sitrick, Thomas J. Hodson and Perry J. Lewis each filed late a Form 5 for the year ended December 31, 1995 in connection with the grant of stock options under the Company's Non-Employee Director Stock Option Plan and (ii) Putnam Investments, Inc. has not filed a Form 3 in connection with its acquisition of the Company's Class A Common Stock. ITEM 11. EXECUTIVE COMPENSATION COMPENSATION OF DIRECTORS Directors who are also officers of the Company receive no additional compensation for their services as directors. Effective for the 1997 fiscal year, directors who are not officers will receive (i) a fee of $12,000 per annum, (ii) a $1,000 fee for attendance at meetings or, if applicable, a $500 fee for attendance at meetings by telephone, (iii) a $500 fee for attendance at a committee meeting held on the same day as a regularly scheduled meeting and (iv) a $750 fee for attendance at a committee meeting held on a day other than a regularly scheduled meeting day. Directors are also reimbursed for travel expenses and other out-of-pocket costs incurred in connection with such meetings. Additionally, all non-employee directors in office on the day of the Company's Annual Meeting are entitled to an award of options to purchase 7,500 shares of Class A Common Stock at an exercise price equal to the fair market value of such shares on the date of grant. 31 COMPENSATION OF EXECUTIVE OFFICERS Summary Compensation. The following table sets forth all compensation, including bonuses, stock option awards and other payments, paid or accrued by the Company for the three fiscal years ending December 31, 1996, to the Company's Chief Executive Officer and each of the Company's other executive officers serving in such capacity at the end of the last completed fiscal year whose total annual salary and bonus exceeded $100,000 during the fiscal year ended December 31, 1996. SUMMARY COMPENSATION TABLE
LONG TERM ANNUAL COMPENSATION COMPENSATION ------------------------------------ ------------ OTHER SECURITIES NAME AND ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) STOCK AWARDS OPTIONS (2) PAYOUTS COMPENSATION ------------------ ---- -------- -------- --------------- ------------ ----------- ------- ------------ Scott K. Ginsburg....... 1996 $750,000 $956,000 -- -- 187,500 -- $ 9,776(3) Chairman of the Board 1995 650,000 -- -- -- -- -- 7,663(3) and Chief Executive 1994 574,000 50,000 -- -- -- 11,020(3) Officer James E. de Castro...... 1996 $750,000 $704,000 -- -- 37,500 -- 2,455(3) President and Chief 1995 650,000 125,000 -- -- 150,000 -- 2,455(3) Operating Officer 1994 500,000 50,000 -- -- 75,000 -- 27,455(4) Matthew E. Devine....... 1996 $300,000 $352,000 -- -- 18,750 -- -- Executive Vice 1995 275,000 63,000 -- -- 75,000 -- -- President, Chief 1994 194,000 25,000 -- -- 75,000 -- -- Financial Officer and Treasurer Kenneth J. O'Keefe...... 1996 $250,000(5) $210,000 -- -- 150,000 -- -- Executive Vice 1995 -- -- -- -- -- -- -- President Operations 1994 -- -- -- -- -- -- --
- -------- (1) The aggregate annual amount of perequisites and other personal benefits, securities or property does not exceed $50,000 or 10% of the total of the annual salary and bonus for the named officer. (2) Gives effect to the Stock Split. (3) Payment of term life insurance policy. (4) Includes payment of a term life insurance policy and payments to Mr. de Castro as compensation to offset increased costs and other expenses associated with Mr. de Castro's temporary relocation to Los Angeles, California, undertaken at the request of the Company. These amounts were $2,455 and $25,000, respectively. (5) Represents compensation for the period beginning March 1, 1996, when Mr. O'Keefe joined the Company. Option Grants in Last Fiscal Year. The following table sets forth information regarding options to purchase Class A Common Stock granted by the Company to its Chief Executive Officer and the other executive officers named in the Summary Compensation Table during the 1996 fiscal year. OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS GRANT DATE VALUE ------------------------------------ ------------------------ NUMBER OF SECURITIES % OF TOTAL UNDERLYING OPTIONS OPTIONS GRANTED TO EXERCISE OR GRANT DATE GRANTED EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE NAME (#)(1)(2) FISCAL YEAR ($/SHARE)(2) DATE $(5) - ---- ---------- ------------ ------------ ---------- ------------- Scott K. Ginsburg....... 150,000 25.5% $21.33(3) 12/31/05 1,792,500 37,500 6.4% 24.50(4) 12/31/05 478,125 James E. de Castro...... 37,500 6.4% 24.50(4) 12/31/04 436,875 Matthew E. Devine....... 18,750 3.2% 24.50(4) 12/31/04 218,438 Kenneth J. O'Keefe...... 150,000 25.5% 21.33(3) 03/01/06 1,545,000
32 - -------- (1) Represents options to purchase shares of Class A Common Stock granted under the Company's 1995 Stock Option Plan for Executive Officers and Key Employees (the "1995 Stock Option Plan"). The options awarded to Mr. Ginsburg are exercisable in whole or part beginning on January 1, 2001, and expire on December 31, 2005. The options awarded to Mr. de Castro and Mr. Devine are exercisable in whole or part beginning January 1, 2000, and expire on December 31, 2004. The options awarded to Mr. O'Keefe are exercisable in whole or part beginning February 28, 1999, and expire on March 1, 2006. The Compensation Committee under certain circumstances has the discretion to accelerate the exercisability of the options in connection with the occurrence of a change in control of the Company. The options may expire earlier upon the occurrence of certain merger or consolidation transactions involving the Company. The Company is not required to issue and deliver any certificate for shares of Class A Common Stock purchased upon exercise of the option or any portion thereof prior to fulfillment of certain conditions, including the completion of registration or qualification of such shares of Class A Common Stock under federal or state securities laws and the payment to the Company of all amounts required to be withheld upon exercise of the options under any federal, state or local tax law. The holder of an option has no rights or privileges of a stockholder in respect of any shares of Class A Common Stock purchasable upon exercise of the options unless and until certificates representing such shares shall have been issued by the Company to such holder. Once exercisable, the options are exercisable by the holder or, upon the death of such holder, by his personal representatives or by any person empowered to do so under such holder's will or under the applicable laws of descent and distribution. The options are not transferable except by will or by the applicable laws of descent and distribution. (2) Gives effect to the Stock Split. (3) Represents the estimated fair value of Class A Common Stock on December 29, 1995, the last trading day before December 31, 1995, the date of grant. (4) Represents the estimated fair value of Class A Common Stock on December 30, 1996, the last trading day before December 31, 1996, the date of the grant. (5) The present value of each grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: dividend yield of 0% for all years; expected volatility of 44.5%; risk-free interest rate of 6.0% and expected life of seven years. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END VALUES The following table sets forth information concerning option exercises in the year ended December 31, 1996 by the Company's Chief Executive Officer and the other executive officers named in the Summary Compensation Table, and the value of each such executive officer's unexercised options at December 31, 1996.
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS ACQUIRED ON VALUE AT FISCAL YEAR-END (#)(1) AT FISCAL YEAR-END ($)(2) EXERCISE REALIZED ------------------------- ------------------------- (#)(1) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ----------- -------- ----------- ------------- ----------- ------------- Scott K. Ginsburg....... -- -- -- 187,500 -- 475,500 James E. de Castro...... 15,000 418,050 547,500 187,500 12,608,775 475,500 Matthew E. Devine....... -- -- 150,000 93,750 2,874,000 237,750 Kenneth J. O'Keefe...... -- -- -- 150,000 -- 475,500
- -------- (1) Gives effect to the Stock Split. (2) Based upon a per share price for Class A Common Stock of $24.50. This price represents the closing price for the Class A Common Stock on the NASDAQ National Market System on December 30, 1996. EMPLOYMENT AGREEMENTS On November 27, 1995, the Company entered into a new employment agreement with Mr. de Castro that has a term through December 31, 1999 and provides for an annual base salary beginning at $650,000 in 1995 and increasing incrementally to $900,000 in 1999. In addition, the agreement provides for Mr. de Castro to receive an annual incentive bonus based upon a percentage of the amount by which the Company exceeds certain annual performance targets as defined in the agreement. The agreement also provides that Mr. de Castro is eligible for certain options to purchase Class A Common Stock. Upon execution of the agreement, Mr. de Castro 33 was awarded options to purchase 150,000 shares of Class A Common Stock (after giving effect to the Stock Split). Mr. de Castro is eligible to receive over the term of the agreement options to purchase up to an additional 150,000 shares of Class A Common Stock (after giving effect to the Stock Split), subject to continued employment and satisfaction of other conditions. The agreement terminates upon the death of Mr. de Castro and may be terminated by the Company upon the disability of Mr. de Castro, for or without "cause" or upon a "change in control" of the Company (as defined in the agreement). The agreement may be terminated by Mr. de Castro in the event of a change in control of the Company, in which event Mr. de Castro is entitled to receive (i) an accelerated grant of all options to which he otherwise would have been entitled over the term of the agreement, (ii) immediate payment of the base salary which he otherwise would have earned over the term of the agreement, (iii) a pro-rated annual incentive bonus and (iv) $1,250,000. During the term of the agreement, Mr. de Castro is prohibited from engaging in certain activities competitive with the business of the Company. However, with the approval of the Company, Mr. de Castro may engage in activities not directly competitive with the business of the Company as long as such activities do not unreasonably interfere with Mr. de Castro's employment obligations. On November 28, 1995, the Company entered into a new employment agreement with Mr. Devine that has a term through December 31, 1999 and provides for an annual base salary beginning at $275,000 in 1995 and increasing incrementally to $375,000 in 1999. In addition, the agreement provides for Mr. Devine to receive an annual incentive bonus based upon a percentage of the amount by which the Company exceeds certain annual performance targets as defined in the agreement. The agreement also provides that Mr. Devine is eligible for certain options to purchase Class A Common Stock. Upon execution of the agreement, Mr. Devine was awarded options to purchase 75,000 shares of Class A Common Stock (after giving effect to the Stock Split). Mr. Devine is eligible to receive over the term of the agreement options to purchase up to an additional 75,000 shares of Class A Common Stock (after giving effect to the Stock Split), subject to continued employment and satisfaction of other conditions. The agreement terminates upon the death of Mr. Devine and may be terminated by the Company upon the disability of Mr. Devine, for or without "cause" or upon a "change in control" of the Company (as defined in the agreement). The agreement may be terminated by Mr. Devine in the event of a change in control of the Company, in which event Mr. Devine is entitled to receive (i) an accelerated grant of all options to which he otherwise would have been entitled over the term of the agreement, (ii) immediate payment of the base salary which he otherwise would have earned over the term of the agreement, (iii) a pro-rated annual incentive bonus and (iv) $750,000. During the term of the agreement, Mr. Devine is prohibited from engaging in certain activities competitive with the business of the Company. However, with the approval of the Company, Mr. Devine may engage in activities not directly competitive with the business of the Company as long as such activities do not unreasonably interfere with Mr. Devine's employment obligations. In February of 1996, the Company entered into an employment agreement with Mr. O'Keefe that has a term through February 28, 1999 and provides for an annual base salary beginning at $300,000 in 1996 and increasing incrementally to $350,000 in 1998. Mr. O'Keefe was nominated for election to the Board of Directors pursuant to the terms of his employment agreement. In addition, the agreement provides for Mr. O'Keefe to receive an annual incentive bonus based upon a percentage of the amount by which the Company exceeds certain annual performance targets as defined in the agreement. The agreement also provides that Mr. O'Keefe is eligible for certain options to purchase Class A Common Stock. Pursuant to the agreement, Mr. O'Keefe was awarded options to purchase 150,000 shares of Class A Common Stock (after giving effect to the Stock Split). The stock options vest and become exercisable subject to Mr. O'Keefe's continued employment by the Company through February 28, 1999. However, Mr. O'Keefe may be eligible to exercise the options on a pro rata basis in the event he is terminated prior to February 28, 1999 upon certain events specified in his employment agreement, including Mr. O'Keefe's death or disability, a change in control of the Company, termination without cause and a material breach of the employment agreement by the Company leading to the resignation of Mr. O'Keefe. The agreement terminates upon the death of Mr. O'Keefe and may be terminated by the Company upon the disability of Mr. O'Keefe or for or without "cause" (as defined in the agreement). During the term of the agreement, Mr. O'Keefe is prohibited from engaging in certain activities competitive with the business of the Company. However, with the approval of the Company, Mr. O'Keefe may engage in activities not directly competitive with the business of the Company as long as such activities do not materially interfere with Mr. O'Keefe's 34 employment obligations. On January 29, 1997, the Compensation Committee of the Board of Directors of the Company authorized the negotiation, execution and delivery of an amended employment agreement for Mr. O'Keefe in order to make certain provisions of Mr. O'Keefe's employment agreement comparable to those of Mr. de Castro and Mr. Devine. As of March 1, 1997, no such amended employment agreement has been entered into. On April 15, 1996, the Company entered into a new employment agreement with Mr. Ginsburg, Chairman of the Board and Chief Executive Officer of the Company that has a term that extends through December 31, 2000 and provides for an initial annual base salary of $750,000 in 1996 which increases incrementally each year to $950,000 in 2000. In addition, the agreement provides for Mr. Ginsburg to receive an annual incentive bonus based upon a percentage of the amount by which the Company exceeds certain annual performance targets which are defined in the agreement. The agreement also provides that Mr. Ginsburg is eligible to receive options to purchase Class A Common Stock. Upon execution of the Agreement, Mr. Ginsburg was awarded an option to purchase 150,000 shares of Class A Common Stock at an exercise price of $21.33 per share (representing the last sale price of the Class A Common Stock on the Nasdaq National Market on December 29, 1995) (after giving effect to the Stock Split). Mr. Ginsburg is eligible to receive, over the term of the agreement, options to purchase up to an additional 187,500 shares of Class A Common Stock (after giving effect to the Stock Split), subject to continued employment and satisfaction of other conditions specified in the agreement. Upon execution of the agreement, Mr. Ginsburg also received a one time bonus in the amount of $1,000,000 in consideration of his extraordinary services to the Company including the Company's strong operating performance, broadcast properties acquisition program and Mr. Ginsburg's other activities on behalf of the Company. Under the agreement, the Company also agreed to make to Mr. Ginsburg a ten-year unsecured loan in the amount of $3,500,000 bearing interest at a fixed rate equal to the applicable Federal long-term rate in effect on the date on which the loan is made. The terms of the loan will require Mr. Ginsburg to repay principal of the loan in five equal annual installments, commencing on the sixth anniversary of the date on which the loan is made. As of March 1, 1997, Mr. Ginsburg has borrowed approximately $824,000 under the loan. The agreement may be terminated by Mr. Ginsburg in the event of a "change in control" of the Company, in which event Mr. Ginsburg is entitled to receive (i) an accelerated grant of all options to which he otherwise would have been entitled over the term of the agreement, (ii) immediate payment of the base salary which he otherwise would have earned over the term of the agreement and (iii) a pro-rated annual incentive bonus. The agreement may be terminated by the Company upon the permanent disability of Mr. Ginsburg, in which event, Mr. Ginsburg shall receive (i) base salary for one year (payable in installments) from the date of termination at the level in effect on the date of termination and (ii) a pro-rated annual incentive bonus. The agreement may also be terminated by the Company for or without cause, provided that, in the event such termination is without cause, Mr. Ginsburg shall receive (i) grants of options on the same schedule and under the same terms as if such termination had occurred on December 31, 2000, (ii) base salary, payable in installments through December 31, 2000, in the amounts to which Mr. Ginsburg would have been entitled if such termination had occurred on December 31, 2000, and (iii) a pro-rated annual incentive bonus. The agreement terminates upon the death of Mr. Ginsburg, in which event, Mr. Ginsburg's estate or legal representative shall receive the amounts that would have been payable to Mr. Ginsburg in the event of termination for reason of his permanent disability (set forth above). During the term of this agreement, Mr. Ginsburg is prohibited from engaging in certain activities competitive with the business of the Company. On February 19, 1997, the Company entered into a memorandum of agreement (the "Memorandum") with Mr. Ginsburg in connection with the Company's entering into the Chancellor Merger Agreement. The Memorandum was entered in connection with the execution of the Merger Agreement, because the Company and Chancellor concluded that it was desirable to extend Mr. Ginsburg's term of employment with the Company in order to provide for continuity and stability of management of the Company following consummation of the Chancellor Merger. The Memorandum is intended to be replaced by a definitive employment contract prior to consummation of the Chancellor Merger; should the Chancellor Merger not be consummated, the employment agreement contemplated by the Memorandum will not be entered into. The Memorandum provides that the term of Mr. Ginsburg's employment with the Company will be extended through the fifth annual anniversary of the 35 consummation of the Chancellor Merger, which Mr. Ginsburg may extend for an additional five years, and provides for an initial base salary of $1,000,000 in the first year following the consummation of the Chancellor Merger, to be increased each year by a percentage equal to the percentage change in the consumer price index during the preceding year. In addition, the Memorandum provides for an annual bonus of up to $3,000,000 based upon a percentage of the amount by which the Company exceeds certain annual performance targets which are defined in the Memorandum. The Memorandum also provides that Mr. Ginsburg is eligible to receive options to purchase 100,000 shares per year of the Company's common stock. The Memorandum provides that if Mr. Ginsburg's employment is terminated prior to the fifth annual anniversary of the consummation of the Chancellor Merger, except termination for "cause" or termination by Mr. Ginsburg for other than "good reason," Mr. Ginsburg will receive on such termination date options to purchase the number of shares of Common Stock that is equal to 500,000 minus the number of shares of Common Stock subject to options received by Mr. Ginsburg pursuant to the Memorandum (or any definitive agreement executed by Mr. Ginsburg and Evergreen) prior to such date. The Memorandum provides that all options granted to Mr. Ginsburg will be exercisable for ten years from the date of grant of the option, at a price equal to the market price for the Company's Common Stock on the date of grant of the option. The Memorandum provides that, in the event of termination of Mr. Ginsburg's employment following the Chancellor Merger, except termination for "cause" or termination by Mr. Ginsburg for other than "good reason," Mr. Ginsburg will be entitled to a one-time cash payment in an amount (after payment by the Company of any excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended) equal to $20,000,000. The Memorandum provides that Mr. Ginsburg will have registration rights with respect to all Common Stock owned by Mr. Ginsburg upon the consummation of the Chancellor Merger and any such stock acquired thereafter. The Memorandum provides that the Company, Chancellor and Mr. Ginsburg will work together in good faith to prepare and execute a definitive employment agreement containing the terms of the Memorandum, including definitions of "cause" and "good reason," at or prior to consummation of the Chancellor Merger. As of March 1, 1997, a definitive employment agreement had not been executed. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS From January 1, 1996 through December 31, 1996, the Compensation Committee of the Board consisted of Messrs. Sitrick, Lewis and Hodson. 36 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table lists information concerning the beneficial ownership of the Company's Common Stock on March 1, 1997 by (i) each person known to the Company to own beneficially more than 5% of any class of the Common Stock, (ii) each director and executive officer of the Company and (iii) all directors and executive officers as a group.
CLASS A COMMON STOCK CLASS B COMMON STOCK PERCENT OF -------------------------- ----------------------- TOTAL VOTING PERCENT PERCENT POWER AS NAME OF STOCKHOLDER SHARES (1) OF CLASS (1) SHARES (1) OF CLASS (1) ADJUSTED (1) - ------------------- ---------- ------------ ---------- ------------ ------------ Scott K. Ginsburg (2)(3)........ -- -- 3,114,066 100.0% 44.3% James E de Castro (2)... 497,500(4) 1.3% -- -- * Matthew E. Devine (2)... 150,000(4) * -- -- * Joseph M. Sitrick (5)... 99,289(6) * -- -- * Perry J. Lewis (7)...... 59,274(8) * -- -- * Thomas J. Hodson (9).... 7,500(4) * -- -- -- Kenneth J. O'Keefe (10)........... 2,000 * -- -- -- Eric L. Bernthal (11)... 2,500(4) * -- -- -- J. & W. Seligman & Co., Incorporated (12)...... 2,655,449 6.8% -- -- 3.8% FMR Corp. (13).......... 2,581,012 6.6% -- -- 3.7% American Century Companies (14)......... 2,102,500 5.4% -- -- 3.0% Putnam Investments, Inc. (15).............. 5,159,251 13.2% -- -- 7.3% The Equitable Companies, Incorporated (16)...... 3,769,800 9.6% -- -- 5.4% All directors and executive officers as a group (8 persons)............ 818,063 2.1% 3,114,066 100.0% 45.5%
- -------- * Less than one percent (1%). (1) The information as to beneficial ownership is based on statements furnished to the Company by the beneficial owners. As used in this table, "beneficial ownership" means the sole or shared power to vote, or direct the voting of a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or direct the disposition of). A person is deemed as of any date to have "beneficial ownership" of any security that such person has the right to acquire within 60 days after such date. "Beneficial ownership" does not include the number of shares of Class A Common Stock issuable upon conversion of shares of Class B Common Stock, although shares of Class B Common Stock are freely convertible into shares of Class A Common Stock. For purposes of computing the percentage of outstanding shares held by each person named above, any security that such person has the right to acquire within 60 days of the date of calculation is deemed to be outstanding, but is not deemed to be outstanding for purposes of computing the percentage ownership of any other person. (2) The address of Mr. Ginsburg, Mr. Devine and Mr. de Castro is Evergreen Media Corporation, 433 E. Las Colinas Boulevard, Irving, Texas 75039. (3) The 3,114,066 shares of Class B Common Stock held by Mr. Ginsburg includes 5,800 shares of Class B Common Stock held by Mr. Ginsburg as custodian for his children. (4) Consists of outstanding options to purchase Class A Common Stock awarded pursuant to the Company's various stock option plans. (5) The address of Mr. Sitrick is Blackburn & Company, Incorporated, 201 N. Union Street, Suite 340, Alexandria, Virginia, 22314. (6) Includes 91,789 shares of Class A Common Stock owned by Mr. Sitrick and 7,500 options to purchase Class A Common Stock awarded pursuant to the Company's Non-Employee Director Stock Option Plan. (7) The address of Mr. Lewis is MLGAL Partners, L.P., Two Greenwich Plaza, Greenwich, Connecticut, 06830. 37 (8) Includes 51,774 shares of Class A Common Stock owned by Mr. Lewis and 7,500 options to purchase Class A Common Stock awarded pursuant to the Company's Non-Employee Director Stock Option Plan. (9) The address of Mr. Hodson is Columbia Falls Aluminum Company, 12115 Hinson Road, Little Rock, Arkansas, 72212. (10) The address of Mr. O'Keefe is Evergreen Media Corporation, 99 Revere Beach Parkway, Medford, Massachusetts, 02155. (11) The address of Mr. Bernthal is Latham & Watkins, 1001 Pennsylvania Avenue, N.W., Washington, D.C., 20004. (12) The address of J. & W. Seligman & Co., Incorporated is 100 Park Avenue, New York, New York, 10017. Share ownership for J. &W. Seligman & Co., Incorporated is based on the Schedule 13D filed by such person with the Securities and Exchange Commission on February 12, 1997. (13) The address of FMR Corp. is 82 Devonshire Street, Boston, Massachusetts, 02109. Share ownership for FMR Corp. is based on the Schedule 13G filed by such person with the Securities and Exchange Commission on February 11, 1997. (14) The address of American Century Companies is 4500 Main Street, P.O. Box 418210, Kansas City, Missouri, 64141-9210. Share ownership for American Century Companies, Inc. is based on the Schedule 13G filed by such person with the Securities and Exchange Commission on February 5, 1997. (15) The address of Putnam Investments, Inc. is One Post Office Square, Boston, Massachusetts, 02109. Share ownership for Putnam Investments, Inc. is based on the Schedule 13G, Amendment No. 1, filed by such person with the Securities and Exchange Commission on January 29, 1997. (16) The address of The Equitable Companies, Incorporated is 787 Seventh Avenue, New York, New York 10019. Share ownership for The Equitable Companies, Incorporated is based on the Schedule 13G, Amendment No. 1, filed by such person with the Securities and Exchange Commission on January 10, 1997. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS CERTAIN RELATIONSHIPS AND TRANSACTIONS Mr. Sitrick, who serves on the Board of Directors, is a Vice President with Blackburn & Company, Incorporated. Blackburn & Company, Incorporated has from time to time rendered brokerage services to the Company in connection with the purchase and sale of radio stations for which it has been paid customary compensation, and Blackburn & Company, Incorporated expects to continue to render such services for the future. Mr. Bernthal, who serves on the Board of Directors, is a partner in the law firm of Latham & Watkins, regular legal counsel to the Company. Under the terms of the Company's employment agreement with Mr. Ginsburg, dated April 15, 1996, the Company has agreed to make to Mr. Ginsburg, a ten- year unsecured loan. For a discussion of the terms of the loan, see "Executive Compensation--Employment Agreements" set forth in Part III--Item 11 herein. As of the date hereof, the loan has not been made. 38 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)1.Financial Statements. 2.Financial Statement Schedules. The financial statements and financial statement schedules listed in the index to the Consolidated Financial Statements of the Company that appear on Page F-1 of this Report on Form 10-K are filed as part of this Report. 3.Exhibits. The exhibits to this Report on Form 10-K are listed under item 14(c) below. (b)Reports on Form 8-K. 1. Form 8-K/A dated October 18, 1996, reporting consummation of acquisition of assets from WEDR, Inc. 2. Form 8-K, dated February 16, 1997, reporting certain events related to the execution of the Viacom Stock Purchase Agreement (attached as Exhibit 2.28 hereto) and the execution of the Chancellor Merger Agreement (attached as Exhibit 2.29 hereto).
EXHIBIT NO. DESCRIPTION OF EXHIBIT (c) ----------- ---------------------- (f) 2.9 Plan of Reorganization and Merger by and between Evergreen Media Corporation and Broadcasting Partners, Inc., dated as of January 31, 1995, as amended, including the Form of Registration Rights Agreement among MLGA Fund I, L.P., MLGA Fund II, L.P., MLGA/BPI Partners I, L.P., MLGAL Partners, Limited Partnership and Evergreen Media Corporation (see table of contents for a list of omitted schedules). (g) 2.9A Agreement dated as of January 31, 1995 among Evergreen Media Corporation, Broadcasting Partners, Inc., the holders of the shares of capital stock of Broadcasting Partners, Inc. and Scott K. Ginsburg, holder of shares of capital stock of Evergreen Media Corporation. (f) 2.10 Plan and Agreement of Merger among Evergreen Media Partners Corporation, Evergreen Media Corporation and Broadcasting Partners, Inc., dated as of April 12, 1995. (h) 2.11 Agreement and Plan of Merger by and among Pyramid Communications, Inc., Evergreen Media Corporation and Evergreen Media/Pyramid Corporation dated as of July 14, 1995 (see table of contents for list of omitted exhibits and schedules). (i) 2.11A Amendment to Plan and Agreement of Merger by and among Pyramid Communications, Inc., Evergreen Media Corporation and Evergreen Media/Pyramid Corporation dated September 7, 1995. (i) 2.11B Amendment to Plan and Agreement of Merger by and among Pyramid Communications, Inc., Evergreen Media Corporation and Evergreen Media/Pyramid Corporation dated January 11, 1996. (j) 2.12 Purchase Agreement between Fairbanks Communications, Inc. and Evergreen Media Corporation dated October 12, 1995 (see table of contents for list of omitted exhibits and schedules). (n) 2.13 Option Agreement dated as of January 9, 1996 between Chancellor Broadcasting Company and Evergreen Media Corporation (including Form of Advertising Brokerage Agreement and Form of Asset Purchase Agreement). (o) 2.14 Asset Purchase Agreement dated April 4, 1996 between American Radio Systems Corporation and Evergreen Media Corporation of Buffalo (see table of contents for list of omitted exhibits and schedules).
39
EXHIBIT NO. DESCRIPTION OF EXHIBIT ----------- ---------------------- (o) 2.15 Asset Purchase Agreement dated April 11, 1996 between Mercury Radio Communications, L.P. and Evergreen Media Corporation of Los Angeles, Evergreen Media/Pyramid Holdings Corporation, WHTT (AM) License Corp. and WHTT (FM) License Corp. (see table of contents for list of omitted exhibits and schedules). (o) 2.16 Asset Purchase Agreement dated April 19, 1996 between Crescent Communications L.P. and Evergreen Media Corporation of Los Angeles (see table of contents for list of omitted exhibits and schedules). (p) 2.17 Asset Purchase Agreement dated June 13, 1996 between Evergreen Media Corporation of Los Angeles and Greater Washington Radio, Inc. (see table of contents for list of omitted exhibits and schedules). (p) 2.18 Asset Exchange Agreement dated June 13, 1996 among Evergreen Media Corporation of Los Angeles, Evergreen Media Corporation of the Bay State, WKLB License Corp., Greater Media Radio, Inc. and Greater Washington Radio, Inc. (see table of contents for list of omitted exhibits and schedules). (p) 2.19 Purchase Agreement dated June 27, 1996 between WEDR, Inc., Seller and Evergreen Media Corporation of Los Angeles, Buyer. (See table of contents for list of omitted schedules) (p) 2.20 Time Brokerage Agreement dated July 10, 1996 by and between Evergreen Media Corporation of Detroit, as Licensee, and Kidstar Interactive Media Incorporated, as Time Broker. (p) 2.21 Asset Purchase Agreement dated July 15, 1996 by and among Century Chicago Broadcasting L.P., an Illinois limited partnership, ("Seller"), Century Broadcasting Corporation, a Delaware Corporation ("Century"), Evergreen Media Corporation of Los Angeles, a Delaware Corporation ("Parent"), and Evergreen Media Corporation of Chicago, a Delaware Corporation ("Buyer"). (p) 2.22 Asset Purchase Agreement dated August 12, 1996 by and among Chancellor Broadcasting Company, Shamrock Broadcasting, Inc. and Evergreen Media Corporation of the Great Lakes. (p) 2.23 Asset Purchase Agreement dated as of August 12, 1996 between Secret Communications Limited Partnership and Evergreen Media Corporation of Los Angeles (WQRS-FM). (See table of contents for list of omitted exhibits and schedules) (p) 2.24 Asset Purchase Agreement dated as of August 12, 1996 between Secret Communications Limited Partnership and Evergreen Media Corporation of Los Angeles. (See table of contents for list of omitted schedules) (q) 2.25 Letter of intent dated August 27, 1996 between EZ Communications, Inc. and Evergreen Media Corporation. (q) 2.26 Asset Purchase Agreement dated September 19, 1996 between Beasley-FM Acquisition Corp., WDAS License Limited Partnership and Evergreen Media Corporation of Los Angeles. (q) 2.27 Asset Purchase Agreement dated September 19, 1996 between The Brown Organization and Evergreen Media Corporation of Los Angeles. (r) 2.28 Stock Purchase Agreement by and between Viacom International, Inc. and Evergreen Media Corporation of Los Angeles, dated February 16, 1997 (See table of contents for omitted schedules and exhibits). (r) 2.29 Agreement and Plan of Merger, by and among Evergreen Media Corporation, Chancellor Broadcasting Company and Chancellor Radio Broadcasting Company, dated as of February 19, 1997.
40
EXHIBIT NO. DESCRIPTION OF EXHIBIT ----------- ---------------------- (r) 2.30 Stockholders Agreement, by and among Chancellor Broadcasting Company, Evergreen Media Corporation, Scott K. Ginsburg (individually and as custodian for certain shares held by his children), HM2/Chancellor, L.P., Hicks, Muse, Tate & First Equity Fund II, L.P., HM2/HMW, L.P., The Chancellor Business Trust, HM2/HMD Sacramento GP, L.P., Thomas O. Hicks, as Trustee of the William Cree Hicks 1992 Irrevocable Trust, Thomas O. Hicks, as Trustee of the Catherine Forgave Hicks 1993 Irrevocable Trust, Thomas O. Hicks, as Trustee of the John Alexander Hicks 1984 Trust, Thomas O. Hicks, as Trustee of the Mack Hardin Hicks 1984 Trust, Thomas O. Hicks, as Trustee of Robert Bradley Hicks 1984 Trust, Thomas O. Hicks, as Trustee of the Thomas O. Hicks, Jr. 1984 Trust, Thomas O. Hicks and H. Rand Reynolds, as Trustees for the Muse Children's GS Trust, and Thomas O. Hicks, dated as of February 19, 1997. (r) 2.31 Joint Purchase Agreement, by and among Chancellor Radio Broadcasting Company, Chancellor Broadcasting Company, Evergreen Media Corporation of Los Angeles, and Evergreen Media Corporation, dated as of February 19, 1997. *2.32 Asset Exchange Agreement, by and among EZ Communications, Inc., Professional Broadcasting Incorporated, EZ Philadelphia, Inc., Evergreen Media Corporation of Los Angeles, Evergreen Media Corporation of Charlotte, Evergreen Media Corporation of the East, Evergreen Media Corporation of Carolinaland, WBAV/WBAV-FM/WPEG License Corp. and WRFX License Corp., dated as of December 5, 1996 (See table of contents for list of omitted schedules). *2.33 Asset Purchase Agreement, by and among EZ Communications, Inc., Professional Broadcasting Incorporated, EZ Charlotte, Inc., Evergreen Media Corporation of Los Angeles, Evergreen Media Corporation of the East and Evergreen Media Corporation of Carolinaland, dated as of December 5, 1996 (See table of contents for list of omitted schedules). (a) 3.1A Restated Certificate of Incorporation of Evergreen Media Corporation, dated November 6, 1992. (k) 3.1B Certificate of Amendment of Restated Certificate of Incorporation of Evergreen Media Corporation. (a) 3.2 Restated Bylaws of Evergreen Media Corporation. (a) 4.1 Specimen Class A Common Stock certificate. (i) 4.8 Amended and Restated Loan Agreement dated as of January 17, 1996 among Evergreen Media Corporation of Los Angeles, the financial institutions whose names appear as Lenders on the signature pages thereof (the "Lenders"), The Toronto Dominion Bank, The Bank of New York and NationsBank of Texas, N.A., as Arranging Agents, The Bank of New York, as Syndication Agent, NationsBank of Texas, N.A., as Documentation Agent, and Toronto Dominion (Texas), Inc. as Administrative Agent for the Lenders together with certain collateral documents attached thereto as exhibits, including Assignment of Partnership Interests, Borrower's Pledge Agreement, Parent Company Guarantee, Security Agreement, Stock Pledge Agreement, Subsidiary Guarantee, Subsidiary Pledge Agreement and Subsidiary Security Agreement. (o) 4.8A First Amendment to Loan Agreement, dated May 8, 1996, between the Company, the Banks, the Co-Agents and the Agent. (i) 4.9 Amended and Restated Note Purchase Agreement dated as of January 17, 1996 among Evergreen Media Corporation of Los Angeles and Teachers Insurance and Annuity Association of America.
41
EXHIBIT NO. DESCRIPTION OF EXHIBIT ----------- ---------------------- (f)10.23 Evergreen Media Corporation Stock Option Plan for Non- employee Directors. +(n)10.24 Employment Agreement dated November 28, 1995 by and between Evergreen Media Corporation and Matthew E. Devine. +(n)10.25 Employment Agreement dated November 28, 1995 by and between Evergreen Media Corporation and James de Castro. +(n)10.26 Employment Agreement dated February 9, 1996 by and between Evergreen Media Corporation and Kenneth J. O'Keefe. +(o)10.27 Employment Agreement dated April 15, 1996 by and between Evergreen Media Corporation and Scott K. Ginsburg, as amended. +(o)10.28 1995 Stock Option Plan for executive officers and key employees of Evergreen Media Corporation. +*10.29 Memorandum of Agreement, dated February 19, 1997, between Evergreen Media Corporation and Scott K. Ginsburg, as agreed and acknowledged by Chancellor Broadcasting Company and Chancellor Radio Broadcasting Company. *21.1 Subsidiaries of Evergreen Media Corporation. *23.1 Consent of KPMG Peat Marwick LLP. *27 Financial Data Schedule
- -------- * Filed herewith. +Management contract or compensatory arrangement. (a) Incorporated by reference to the identically numbered exhibit to the Company's Registration Statement on Form S-1, as amended (Reg. No. 33- 60036). (f) Incorporated by reference to the identically numbered exhibit to the Company's Registration Statement on Form S-4, as amended (Reg. No. 33- 89838). (g) Incorporated by reference to Exhibit No. 4.8 to the Company's Registration Statement on Form S-4, as amended (Reg. No. 33-89838). (h) Incorporated by reference to the identically numbered exhibit to the Company's Report on Form 8-K dated July 14, 1995. (i) Incorporated by reference to the identically numbered exhibit to the Company's Report on Form 8-K dated January 17, 1996. (j) Incorporated by reference to the identically numbered exhibit to the Company's Report on Form 10-Q for the quarterly period ending September 30, 1995. (k) Incorporated by reference to the identically numbered exhibit to the Company's Registration Statement on Form S-1, as amended (Reg. No. 33- 69752). (n) Incorporated by reference to the identically numbered exhibit to the Company's Report on Form 10-K for the fiscal year ended December 31, 1995. (o) Incorporated by reference to the identically numbered exhibit to the Company's report on Form 10-Q for the quarterly period ending March 31, 1996. (p) Incorporated by reference to the identically numbered exhibit to the Company's report on Form 10-Q for the quarterly period ended June 30, 1996. (q) Incorporated by reference to the identically numbered exhibit to the Company's Registration Statement on Form S-3, as amended (Reg. No. 333- 12453). (r) Incorporated by reference to the identically numbered exhibit to the Company's Report on Form 8-K dated February 16, 1997. 42 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON THE 28TH DAY OF MARCH, 1997. Evergreen Media Corporation /s/ Scott K. Ginsburg By __________________________________ SCOTT K. GINSBURG CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED. SIGNATURE TITLE DATE /s/ Scott K. Ginsburg Chairman of the Board March 28, 1997 _____________________________________ and Chief Executive SCOTT K. GINSBURG Officer /s/ James de Castro Director, President and March 28, 1997 _____________________________________ Chief Operating Officer JAMES DE CASTRO /s/ Matthew E. Devine Director, Executive Vice March 28, 1997 _____________________________________ President, Chief MATTHEW E. DEVINE Financial Officer and Treasurer /s/ Kenneth J. O'Keefe Director, Executive Vice March 28, 1997 _____________________________________ President KENNETH J. O'KEEFE /s/ Perry Lewis Director March 28, 1997 _____________________________________ PERRY LEWIS /s/ Thomas J. Hodson Director March 28, 1997 _____________________________________ THOMAS J. HODSON /s/ Joseph M. Sitrick Director March 28, 1997 _____________________________________ JOSEPH M. SITRICK /s/ Eric L. Bernthal Director March 28, 1997 _____________________________________ ERIC L. BERNTHAL 43 INDEPENDENT AUDITORS' REPORT The Board of Directors Evergreen Media Corporation: We have audited the accompanying consolidated balance sheets of Evergreen Media Corporation and subsidiaries as of December 31, 1995 and 1996, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Evergreen Media Corporation and subsidiaries as of December 31, 1995 and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996 in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. KPMG Peat Marwick LLP Dallas, Texas January 31, 1997, except for note 2(c), which is as of February 19, 1997 F-1 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND 1996 (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
1995 1996 -------- ---------- ASSETS Current assets: Cash and cash equivalents.............................. $ 3,430 $ 3,060 Accounts receivable, less allowance for doubtful accounts of $2,000 in 1995 and $2,292 in 1996......... 45,413 85,159 Prepaid expenses and other............................. 2,146 6,352 -------- ---------- Total current assets................................. 50,989 94,571 Property and equipment, net (note 3)..................... 37,839 48,193 Intangible assets, net (note 4).......................... 458,787 853,643 Other assets, net........................................ 4,732 24,552 -------- ---------- $552,347 $1,020,959 ======== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses (note 5)......... $ 15,892 $ 26,366 Current portion of long-term debt (note 6)............. 4,000 26,500 Other current liabilities.............................. 541 284 -------- ---------- Total current liabilities............................ 20,433 53,150 Long-term debt, excluding current portion (note 6)....... 197,000 331,500 Deferred tax liabilities (note 8)........................ 29,233 86,098 Other liabilities........................................ 1,104 800 -------- ---------- Total liabilities.................................... 247,770 471,548 -------- ---------- Stockholders' equity (notes 2 and 7): Preferred stock. Authorized 6,000,000 shares in 1995; issued 1,610,000 shares of $3 Convertible Exchangeable Preferred Stock in 1995............................... 80,500 -- Class A common stock, $.01 par value. Authorized 75,000,000 shares; issued 24,929,529 shares in 1995 and 39,038,848 shares in 1996......................... 249 390 Class B common stock, $.01 par value. Authorized 4,500,000 shares; issued 3,116,066 shares in 1995 and 1996.................................................. 31 31 Paid-in capital........................................ 317,295 662,502 Accumulated deficit.................................... (93,498) (113,512) -------- ---------- Total stockholders' equity........................... 304,577 549,411 -------- ---------- Commitments and contingencies (notes 2, 6 and 10)........ $552,347 $1,020,959 ======== ==========
See accompanying notes to consolidated financial statements F-2 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 (IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
1994 1995 1996 -------- --------- --------- Gross revenues................................. $125,478 $186,365 $337,405 Less agency commissions...................... 15,962 23,434 43,555 -------- --------- --------- Net revenues............................... 109,516 162,931 293,850 -------- --------- --------- Operating expenses: Station operating expenses excluding depreciation and amortization............... 68,852 97,674 174,344 Depreciation and amortization................ 30,596 47,005 93,749 Corporate general and administrative......... 2,672 4,475 7,797 -------- --------- --------- Operating expenses......................... 102,120 149,154 275,890 -------- --------- --------- Operating income........................... 7,396 13,777 17,960 -------- --------- --------- Nonoperating income (expenses): Interest expense............................. (13,809) (19,199) (37,527) Interest income.............................. 91 55 477 Gain on disposition of assets (note 2)....... 6,991 -- -- Other expense, net........................... (630) (291) -- -------- --------- --------- Nonoperating expenses, net................. (7,357) (19,435) (37,050) -------- --------- --------- Income (loss) before income taxes and extraordinary item........................ 39 (5,658) (19,090) Income tax expense (benefit) (note 8).......... -- 192 (2,896) -------- --------- --------- Income (loss) before extraordinary item.... 39 (5,850) (16,194) Extraordinary item--loss on extinguishment of debt (note 6)................................. (3,585) -- -- -------- --------- --------- Net loss................................... (3,546) (5,850) (16,194) Preferred stock dividends (note 7(a)).......... (4,830) (4,830) (3,820) -------- --------- --------- Net loss attributable to common stockhold- ers....................................... $ (8,376) $ (10,680) $ (20,014) ======== ========= ========= Loss per common share (notes 1(k), 6 and 7(a)): Before extraordinary item.................... $ (.37) $ (.52) $ (.66) Extraordinary item........................... (.27) -- -- -------- --------- --------- Net loss................................... $ (.64) $ (.52) $ (.66) ======== ========= ========= Weighted average common shares outstanding..... 13,002 20,721 30,207 ======== ========= =========
See accompanying notes to consolidated financial statements. F-3 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 (DOLLARS IN THOUSANDS)
CONVERTIBLE CLASS A CLASS B PREFERRED STOCK COMMON STOCK COMMON STOCK TOTAL -------------------- ----------------- ----------------- WARRANTS PAID-IN ACCUMULATED STOCKHOLDERS' SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT (NOTE 8(C)) CAPITAL DEFICIT EQUITY ---------- -------- ---------- ------ --------- ------ ----------- ------- ----------- ------------- Balances at December 31, 1993............ 1,610,000 $ 80,500 9,758,759 $ 98 3,168,941 $ 31 12,488 102,293 (74,442) 120,968 Conversion of common stock (note 7(b))..... -- -- 20,625 -- (20,625) -- -- -- -- -- Issuance costs for convertible preferred stock (note 7(a))..... -- -- -- -- -- -- -- (240) -- (240) Exercise of common stock options (note 7(d))........... -- -- 180,000 2 -- -- -- (1) -- 1 Convertible preferred stock dividends (note 7(a))........... -- -- -- -- -- -- -- (4,830) (4,830) Net loss........ -- -- -- -- -- -- -- -- (3,546) (3,546) ---------- -------- ---------- ----- --------- ---- ------- ------- -------- ------- Balances at December 31, 1994............ 1,610,000 80,500 9,959,384 100 3,148,316 31 12,488 102,052 (82,818) 112,353 Issuance of Class A common stock in acquisition (note 2(b))..... -- -- 5,611,009 56 -- -- -- 70,082 -- 70,138 Issuance of Class A common stock in public offering (note 7(b))........... -- -- 7,350,000 73 -- -- -- 132,648 -- 132,721 Exercise of common stock warrants (note 7(c))........... -- -- 1,951,386 20 -- -- (12,488) 12,481 -- 13 Conversion of Class B common stock to Class A common stock (note 7(b))..... -- -- 32,250 -- (32,250) -- -- -- -- -- Exercise of common stock options (note 7(d))........... -- -- 25,500 -- -- -- -- 32 -- 32 Convertible preferred stock dividends (note 7(a))........... -- -- -- -- -- -- -- -- (4,830) (4,830) Net loss........ -- -- -- -- -- -- -- -- (5,850) (5,850) ---------- -------- ---------- ----- --------- ---- ------- ------- -------- ------- Balances at December 31, 1995............ 1,610,000 80,500 24,929,529 249 3,116,066 31 -- 317,295 (93,498) 304,577 Issuance of Class A common stock in public offering (note 7(b))........... -- -- 9,000,000 90 -- -- -- 264,146 -- 264,236 Conversion of preferred stock (note 7(a))..... (1,608,297) (80,415) 5,025,916 50 -- -- -- 80,365 -- -- Redemption of preferred stock (note 7(a))..... (1,703) (85) -- -- -- -- -- (5) -- (90) Exercise of common stock options (note 7(d))........... -- -- 83,403 1 -- -- -- 701 -- 702 Convertible preferred stock dividends (note 7(a))........... -- -- -- -- -- -- -- -- (3,820) (3,820) Net loss........ -- -- -- -- -- -- -- -- (16,194) (16,194) ---------- -------- ---------- ----- --------- ---- ------- ------- -------- ------- Balances at December 31, 1996............ -- -- 39,038,848 $ 390 3,116,066 $ 31 -- 662,502 (113,512) 549,411 ========== ======== ========== ===== ========= ==== ======= ======= ======== =======
See accompanying notes to consolidated financial statements. F-4 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
1994 1995 1996 -------- --------- --------- (IN THOUSANDS) Cash flows from operating activities: Net loss...................................... $ (3,546) $ (5,850) $ (16,194) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation................................. 4,528 5,508 7,707 Amortization of goodwill, intangible assets and other assets............................ 26,068 41,497 86,042 Provision for doubtful accounts.............. 754 904 2,179 Deferred income tax benefit.................. -- (479) (4,353) Gain on disposition of assets................ (6,991) -- -- Loss on extinguishment of debt............... 3,585 -- -- Changes in certain assets and liabilities, net of effects of acquisitions: Accounts receivable......................... (5,051) (6,628) (28,146) Prepaid expenses and other current assets... 84 724 (2,804) Accounts payable and accrued expenses....... 1,194 4,405 4,560 Other assets................................ (724) (184) (354) Other liabilities........................... (21) 490 (587) -------- --------- --------- Net cash provided by operating activities.. 19,880 40,387 48,050 -------- --------- --------- Cash flows from investing activities: Acquisitions, net of cash acquired........... (44,921) (188,004) (457,764) Escrow deposits on pending acquisitions...... -- -- (17,000) Proceeds from sale of assets................. 19,101 -- 32,000 Capital expenditures......................... (5,227) (2,642) (6,543) Other........................................ (1,881) (1,466) (12,631) -------- --------- --------- Net cash used by investing activities...... (32,928) (192,112) (461,938) -------- --------- --------- Cash flows from financing activities: Proceeds from issuance of long-term debt..... 36,000 186,000 447,750 Principal payments on long-term debt......... (14,000) (159,000) (290,750) Payments on other long-term liabilities...... (645) (694) (569) Proceeds (costs) from issuance of common stock, preferred stock and warrants......... (240) 132,766 264,938 Dividends on preferred stock................. (4,830) (4,830) (3,820) Payments for debt issuance costs............. (4,602) (303) (3,941) Redemption of preferred stock................ -- -- (90) -------- --------- --------- Net cash provided by financing activities.. 11,683 153,939 413,518 -------- --------- --------- Increase (decrease) in cash and cash equivalents................................... (1,365) 2,214 (370) Cash and cash equivalents at beginning of year.......................................... 2,581 1,216 3,430 -------- --------- --------- Cash and cash equivalents at end of year....... $ 1,216 $ 3,430 $ 3,060 ======== ========= =========
See accompanying notes to consolidated financial statements. F-5 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA) (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Description of Business Evergreen Media Corporation ("Evergreen") and its subsidiaries own and operate commercial radio stations in various geographical regions across the United States, primarily in the top ten radio revenue markets. (b) Principles of Consolidation The consolidated financial statements include the accounts of Evergreen Media Corporation and its subsidiaries (collectively, the "Company") all of which are wholly owned. Significant intercompany balances and transactions have been eliminated in consolidation. (c) Property and Equipment Property and equipment are stated at cost. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the assets. Repair and maintenance costs are charged to expense when incurred. (d) Intangible Assets Intangible assets consist primarily of broadcast licenses, goodwill and other identifiable intangible assets. The Company amortizes such intangible assets using the straight-line method over estimated useful lives ranging from 1 to 40 years. The Company continually evaluates the propriety of the carrying amount of goodwill and other intangible assets as well as the amortization period to determine whether current events or circumstances warrant adjustments to the carrying value and/or revised estimates of useful lives. This evaluation consists of the projection of undiscounted operating income before depreciation, amortization, nonrecurring charges and interest for each of the Company's radio stations over the remaining amortization periods of the related intangible assets. The projections are based on a historical trend line of actual results since the acquisitions of the respective stations adjusted for expected changes in operating results. To the extent such projections indicate that undiscounted operating income is not expected to be adequate to recover the carrying amounts of the related intangible assets, such carrying amounts are written down by charges to expense. At this time, the Company believes that no significant impairment of goodwill and other intangible assets has occurred and that no reduction of the estimated useful lives is warranted. (e) Debt Issuance Costs The costs related to the issuance of debt are capitalized and amortized to expense over the lives of the related debt. During the years ended December 31, 1994, 1995 and 1996, the Company recognized amortization of debt issuance costs of $712,000, $631,000 and $1,113,000, respectively, which amounts are included in amortization expense in the accompanying consolidated statements of operations. (f) Barter Transactions The Company trades commercial air time for goods and services used principally for promotional, sales and other business activities. An asset and liability is recorded at the fair market value of the goods or services received. Barter revenue is recorded and the liability relieved when commercials are broadcast and barter expense is recorded and the asset relieved when goods or services are received or used. Barter amounts are not significant to the Company's consolidated financial statements. F-6 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA) (g) Income Taxes Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable earnings. Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not to be realized. Income tax expense is the total of tax payable for the period and the change during the period in deferred tax assets and liabilities. (h) Revenue Recognition Revenue is derived primarily from the sale of commercial announcements to local and national advertisers. Revenue is recognized as commercials are broadcast. Fees received or paid pursuant to various time brokerage agreements are recognized as gross revenues or amortized to expense, respectively, over the term of the agreement using the straight-line method. (i) Statements of Cash Flows For purposes of the statements of cash flows, the Company considers temporary cash investments purchased with original maturities of three months or less to be cash equivalents. The Company paid approximately $12,852,000, $19,134,000 and $37,042,000 for interest in 1994, 1995 and 1996, respectively. The Company paid approximately $733,000 for income taxes in 1996. (j) Derivative Financial Instruments The Company has only limited involvement with derivative financial instruments and does not use them for trading purposes. They are used to manage well-defined interest rate risks related to interest on the Company's outstanding debt. As interest rates change under interest rate swap and cap agreements, the differential to be paid or received is recognized as an adjustment to interest expense. The Company is not exposed to credit loss as its interest rate swap agreements are with the participating banks under the Company's senior credit facility. (k) Loss Per Common Share Loss per common share for 1994, 1995 and 1996 is calculated based on the weighted average shares of common stock outstanding during each year. Options and warrants are not included in the calculation as their effect would be antidilutive. On August 8, 1996, the Company declared a three-for-two stock split effected in the form of a stock dividend payable on August 26, 1996 to shareholders of record at the close of business on August 19, 1996. All share and per share data (other than authorized share data) contained in the accompanying consolidated financial statements have been retroactively adjusted to give effect to the stock dividend. (l) Disclosure of Certain Significant Risks and Uncertainties The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and F-7 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA) disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the opinion of management, credit risk with respect to trade receivables is limited due to the large number of diversified customers and the geographic diversification of the Company's customer base. The Company performs ongoing credit evaluations of its customers and believes that adequate allowances for any uncollectible trade receivables are maintained. At December 31, 1995 and 1996, no receivable from any customer exceeded 5% of stockholders' equity and no customer accounted for more than 10% of net revenues in 1994, 1995 or 1996. (m) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of The Company adopted the provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on January 1, 1996. This Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. The adoption of this Statement did not have a material impact on the Company's financial position, results of operations, or liquidity. (n) Stock Option Plan Prior to January 1, 1996, the Company accounted for its stock option plans in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. On January 1, 1996, the Company adopted SFAS No. 123, Accounting for Stock-Based Compensation, which permits entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the provisions of APB Opinion No. 25 and provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants made in 1995 and future years as if the fair-value-based method defined in SFAS No. 123 had been applied. The Company has elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosures of SFAS No. 123. (o) Reclassifications Certain reclassifications have been made to prior years' consolidated financial statements to conform to the current year presentation. (2) ACQUISITIONS AND DISPOSITIONS (a) Completed Transactions In April 1994, the Company acquired radio station KIOI-FM in San Francisco, California for cash consideration of approximately $44,921,000. This acquisition was funded with proceeds received from the sale of stations WAPE- FM and WFYV-FM in Jacksonville (which sale closed in April 1994) and additional F-8 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA) borrowings under the Company's senior credit facility. The Company received proceeds of $19,500,000 less closing costs from the sale of WAPE- FM and WFYV- FM and recognized a gain of $7,328,000 on such sale. In May 1995, the Company acquired Broadcasting Partners, Inc. ("BPI"), a publicly traded radio broadcasting company with seven FM and four AM radio stations, eight of which are in the nation's ten largest radio markets (the "BPI Acquisition"). The BPI Acquisition was effected through the merger of a wholly-owned subsidiary of the Company with and into BPI, with BPI surviving the merger as a wholly-owned subsidiary of the Company. The BPI Acquisition included the conversion of each outstanding share of BPI common stock into the right to receive $12.00 in cash and .69 shares of the Company's Class A Common Stock, resulting in total cash payments of $94,813,000 and the issuance of 5,611,009 shares of the Company's Class A Common Stock valued at $12.50 per share. In addition, the Company retired existing BPI debt of $81,926,000 and incurred various other direct acquisition costs. The total purchase price, including closing costs, allocated to net assets acquired was approximately $258,634,000. On January 17, 1996, the Company acquired Pyramid Communications, Inc. ("Pyramid"), a radio broadcasting company with nine FM and three AM radio stations in five radio markets (Chicago, Philadelphia, Boston, Charlotte and Buffalo) (the "Pyramid Acquisition"). The Pyramid Acquisition was effected through the merger of a wholly-owned subsidiary of the Company with and into Pyramid with Pyramid surviving the merger as a wholly-owned subsidiary of the Company. The total purchase price, including closing costs, allocated to net assets acquired was approximately $316,343,000 in cash. On May 3, 1996, the Company acquired WKLB-FM in Boston for $34,000,000 in cash plus various other direct acquisition costs. On November 26, 1996, the Company exchanged WKLB-FM in Boston (now known as WROR-FM) for WGAY-FM in Washington, D.C. The Company had previously been operating WGAY-FM under a time brokerage agreement and selling substantially all of the broadcast time of WKLB-FM under a time brokerage agreement, in each case since June 17, 1996, pending completion of the exchange. On July 19, 1996, the Company sold WHTT-FM and WHTT-AM in Buffalo for $19,500,000 in cash and on August 1, 1996, the Company sold WSJZ-FM in Buffalo for $12,500,000 in cash (collectively, the "Buffalo Stations"). The assets of the Buffalo Stations were classified as assets held for sale in the Pyramid Acquisition and no gain or loss was recognized by the Company upon consummation of the sales. The combined net income of the Buffalo stations of approximately $733,000 has been excluded from the consolidated statement of operations for the year ended December 31, 1996. The excess of the proceeds over the carrying amounts at the dates of sale approximated $2,561,000 (including interest costs during the holding period of approximately $1,169,000) and has been accounted for as an adjustment to the original purchase price of the Pyramid Acquisition. The Company had previously entered into time brokerage agreements (effective April 15, 1996 for WSJZ-FM and April 25, 1996 for WHTT-FM and WHTT-AM) to sell substantially all of the broadcast time of these stations pending completion of the sales. On August 14, 1996, the Company acquired KYLD-FM in San Francisco for $44,000,000 in cash plus various other direct acquisition costs. The Company had previously been operating KYLD-FM under a time brokerage agreement since May 1, 1996. On October 18, 1996, the Company acquired WEDR-FM in Miami for $65,000,000 in cash plus various other direct acquisition costs. On January 31, 1997, the Company acquired WWWW-FM and WDFN-AM in Detroit for $30,000,000 in cash plus various other direct acquisition costs. The Company had previously provided certain sales and F-9 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA) promotional functions to WWWW-FM and WDFN-AM under a joint sales agreement since February 14, 1996 and subsequently operated the stations under a time brokerage agreement since April 1, 1996. On January 31, 1997, the Company acquired KKSF-FM, KDFC-FM and KDFC-AM in San Francisco for $115,000,000 in cash plus various other direct acquisitions costs. The Company had previously been operating KKSF-FM and KDFC-FM under a time brokerage agreement since November 1, 1996. The acquisitions discussed above were accounted for as purchases. Accordingly, the accompanying consolidated financial statements include the results of operations of the acquired entities from the dates of acquisition. A summary of the net assets acquired follows:
1994 1995 1996 ------- -------- -------- Working capital, including cash of $492 in 1995 and $1,011 in 1996..................... $ (79) $ 12,012 $ 11,218 Property and equipment....................... 1,762 11,684 11,519 Assets held for sale (note 2)................ -- -- 32,000 Intangible assets............................ 43,238 264,650 465,824 Deferred tax liability....................... -- (29,712) (61,218) ------- -------- -------- $44,921 $258,634 $459,343 ======= ======== ========
The consolidated condensed pro forma results of operations data for 1995 and 1996, as if the 1995 and 1996 acquisitions and dispositions and the 1995 Offering, 1996 Offering and preferred stock conversion and redemption described in note 7 occurred at January 1, 1995, follow:
UNAUDITED ------------------ 1995 1996 -------- -------- Net revenues................................................ $263,569 $306,388 Operating income (loss)..................................... (1,540) 15,531 Net loss.................................................... (21,471) (8,030) Net loss per common share................................... (0.51) (0.19)
(b) Pending transactions On June 13, 1996, the Company entered into an agreement to acquire WWRC-AM in Washington, D.C. for $22,500,000 in cash. The Company has subsequently agreed with the owner of WWRC-AM to exchange WQRS-FM in Detroit (which, as discussed below, the Company has agreed to acquire in a separate purchase for $32,000,000 in cash) in return for WWRC-AM and $9,500,000 in cash. The Company has been operating WWRC-AM under a time brokerage agreement since June 17, 1996. On July 15, 1996, the Company entered into an agreement to acquire WPNT-FM in Chicago for $73,750,000 in cash. On August 12, 1996, the Company entered into an agreement to acquire WMXD-FM and WJLB-FM in Detroit for $168,000,000 in cash and WFLN-FM in Philadelphia for $37,750,000 in cash. The Company also entered into an agreement to operate WMXD-FM, WJLB-FM and WFLN-FM under time brokerage agreements F-10 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA) effective September 1, 1996. The Company also entered into a separate agreement on August 12, 1996 to acquire WQRS-FM in Detroit for $32,000,000 in cash. As discussed above, the Company will immediately swap WQRS-FM at closing in return for WWRC-AM in Washington and $9,500,000 in cash. On September 4, 1996, the Company entered into a binding letter of intent to swap five of its six stations in the Charlotte, N.C. market (WPEG-FM, WBAV-FM, WBAV-AM, WRFX-FM and WFNZ-AM), which were acquired as part of the BPI Acquisition and the Pyramid Acquisition, for WIOQ-FM and WUSL-FM in Philadelphia. As part of this transaction, the Company has also agreed to sell its sixth radio station in Charlotte, WNKS-FM, for $10,000,000 in cash. On December 5, 1996, the Company entered into definitive agreements regarding these stations. On September 19, 1996, the Company entered into an agreement to acquire WDAS-FM and WDAS-AM in Philadelphia for $103,000,000 in cash. Consummation of each Pending Transaction is subject to various conditions, including approval from the FCC and the expiration or early termination under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). The Company believes that such conditions will be satisfied in the ordinary course, but there can be no assurance that this will be the case. Completion of the above pending transactions would result in the Company's ownership of six FM stations in the Chicago and Philadelphia markets, or one station in each market in excess of the maximum number of FM stations under common ownership permitted by the Telecommunications Act of 1996 (the "1996 Act"). Therefore, the Company will be required to divest one FM station in each market in order to comply with the 1996 Act. Escrow funds of $17,000,000 paid by the Company in connection with the completed transactions subsequent to year end and the pending transactions have been classified as other assets at December 31, 1996 in the accompanying consolidated balance sheet. (c) Chancellor Broadcasting Merger and Viacom Acquisition On February 16, 1997, the Company entered into a stock purchase agreement with Viacom International, Inc. ("Viacom") whereby the Company agreed to acquire all of the issued and outstanding capital stock of certain subsidiaries of Viacom ("Viacom Subsidiaries") for an aggregate purchase price of $1,075,000,000 in cash. The Viacom Subsidiaries own and operate ten radio stations in five major markets. On February 19, 1997, the Company entered into an agreement to merge with Chancellor Broadcasting Company ("Chancellor") and Chancellor Radio Broadcasting Company, in a stock-for-stock transaction with the Company remaining as the surviving corporation. On February 19, 1997, the Company and Chancellor entered into a joint purchase agreement whereby in the event that consummation of the Company's stock purchase agreement with Viacom occurs prior to consummation of the transaction with Chancellor, Chancellor will be required to purchase the Viacom Subsidiaries that own and operate four of the ten stations for $480,000,000 and the Company will purchase the Viacom Subsidiaries that own and operate the remaining six stations for $595,000,000. In the event consummation of the stock purchase agreement with Viacom occurs after the consummation of the transaction with Chancellor, the surviving corporation will acquire the stock of the Viacom Subsidiaries. Completion of the Chancellor Merger and the Viacom Acquisition would result in the Company's ownership of a number of stations in the Chicago, San Francisco, Washington, D.C., Detroit and Sacramento F-11 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA) markets in excess of the maximum number of stations under common ownership permitted by the 1996 Act. Therefore, the Company will be required to divest the following stations in order to comply with the 1996 Act: (i) one FM station in the Chicago market; (ii) two FM stations in the San Francisco market; (iii) one FM station and two AM stations in the Washington, D.C. market; (iv) one FM station in the Detroit market; and (v) one AM station in the Sacramento market. (3) PROPERTY AND EQUIPMENT Property and equipment consists of the following at December 31, 1995 and 1996:
ESTIMATED USEFUL LIFE 1995 1996 --------------------- -------- ---------- Broadcast and other equipment.... 3-15 years $ 36,428 $ 47,937 Buildings and improvements....... 3-20 years 8,570 11,735 Furniture and fixtures........... 5- 7 years 6,429 8,392 Land............................. -- 6,524 7,379 -------- ---------- 57,951 75,443 Less accumulated depreciation.... 20,112 27,250 -------- ---------- $ 37,839 $ 48,193 ======== ========== (4) INTANGIBLE ASSETS Intangible assets consist of the following at December 31, 1995 and 1996: ESTIMATED USEFUL LIFE 1995 1996 --------------------- -------- ---------- Broadcast licenses............... 15-40 $187,024 $ 498,766 Goodwill......................... 15-40 70,317 131,775 Other intangibles................ 1-40 291,203 397,062 -------- ---------- 548,544 1,027,603 Less accumulated amortization.... 89,757 173,960 -------- ---------- $458,787 $ 853,643 ======== ==========
In addition to broadcast licenses and goodwill, categories of other intangible assets include: (i) premium advertising revenue base (the value of the higher radio advertising revenues in certain of the Company's markets as compared to other markets of similar population); (ii) advertising client base (the value of the well-established advertising base in place at the time of acquisition of certain stations); (iii) talent contracts (the value of employment contracts between certain stations and their key employees); (iv) fixed asset delivery premium (the benefit expected from the Company's ability to operate fully constructed and operational stations from the date of acquisition), and (v) premium audience growth pattern (the value of expected above-average population growth in a given market). F-12 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA) (5) ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consist of the following at December 31, 1995 and 1996:
1995 1996 -------- -------- Accounts payable........................................... $ 11,081 $ 20,311 Accrued payroll............................................ 1,816 4,413 Accrued interest........................................... 1,304 1,642 Accrued dividends.......................................... 1,020 -- Accrued income taxes....................................... 671 -- -------- -------- $ 15,892 $ 26,366 ======== ========
(6) LONG-TERM DEBT Long-term debt consists of the following at December 31, 1995 and 1996:
1995 1996 -------- -------- Senior Credit Facility (a)................................. $187,000 $348,000 Senior Notes (b)........................................... 14,000 10,000 -------- -------- Total long-term debt..................................... 201,000 358,000 Less current portion....................................... 4,000 26,500 -------- -------- $197,000 $331,500 ======== ========
(a) Senior Credit Facility On November 6, 1992, the Company entered into a variable rate loan agreement with a group of banks providing for a $115,000,000 term loan and a revolving loan of up to $55,000,000. On November 28, 1994, amounts outstanding under this agreement were retired with borrowings under a new senior credit facility (the "Senior Credit Facility") which provided for a $150,000,000 term loan ("Term Loan") and a revolving loan of up to $200,000,000 ("Revolving Loan"). In connection with this debt restructuring, the Company wrote off the unamortized balance of deferred debt issuance costs of $3,585,000 as an extraordinary charge. In connection with the Pyramid Acquisition, the Company amended and restated the Senior Credit Facility. Under the amended agreement, dated January 17, 1996, the $150,000,000 Term Loan and $200,000,000 Revolving Loan remained in place, and the Company also established an additional revolving facility of up to $275,000,000 (the "New Revolving Loan"). Borrowings under the Senior Credit Facility bear interest at a rate based, at the option of the Company, on the participating banks' prime rate or Eurodollar rate, plus an incremental rate. Without giving effect to the interest rate swap and cap agreements described in the following paragraph, the interest rate on the $150,000,000 outstanding under the Term Loan at December 31, 1996 was 7.03% on a blended basis, based on Eurodollar rates, and the interest rates on $185,000,000 and $5,000,000 of advances outstanding under the Revolving Loan were 7.17% and 8.625% at December 31, 1996, based on the Eurodollar and prime rates, respectively. The interest rate on the $8,000,000 outstanding under the New Revolving Loan at December 31, 1996 was 7.13% on a blended basis, based on Eurodollar rates. The Company pays fees of 1/2% per annum on the aggregate unused portion of the loan commitment, in addition to an annual agent's fee. As required by the terms of the Senior Credit Facility, the Company has entered into interest rate swap agreements with certain of the participating banks under the Senior Credit Facility. These swap agreements have F-13 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA) the effect of reducing the impact of changes in interest rates on the Company's floating rate debt under the Senior Credit Facility. At December 31, 1996, interest rate swap agreements covering a notional balance of $425,000,000 were outstanding. These outstanding swap agreements mature from 1997 through 1999 and require the Company to pay fixed rates of 4.96%-6.38% plus an incremental rate while the counterparty pays a floating rate based on the six-month London Interbank Borrowing Offered Rate ("LIBOR"). In addition to these swap agreements, in connection with the BPI Acquisition the Company assumed interest rate cap agreements. The outstanding interest rate cap agreement at December 31, 1996 covers a notional balance of $10,000,000 and provides for a fixed rate of 8.0% and matures during 1997. During the years ended December 31, 1995 and 1996, the Company recognized charges (income) under its interest rate swap and cap agreements of $(275,000) and $110,584, respectively. Because the interest rate swap and cap agreements are with banks that are lenders under the Senior Credit Facility, the Company is not exposed to credit loss. The Term Loan is payable in quarterly installments beginning March 31, 1997 and ending June 30, 2002, while availability under the Revolving Loan reduces quarterly commencing March 31, 1997 and ending June 30, 2002. Availability under the New Revolving Loan reduces quarterly beginning March 31, 1998 and ending December 31, 2002. (b) Senior Notes The Company issued $20,000,000 of senior notes (the "Senior Notes") in 1989. The Senior Notes bear interest at 11.59% per annum payable quarterly and principal is payable in equal quarterly installments of $1,000,000 through May 1999. (c) Other The Senior Credit Facility and the Senior Notes each contain certain financial and operational covenants and other restrictions with which the Company must comply, including, among others, limitations on capital expenditures, corporate overhead and the incurrence of additional indebtedness, restrictions on the use of borrowings, paying cash dividends and redeeming or repurchasing the Company's capital stock, and requirements to maintain certain financial ratios, including cash flow and debt service coverage (as defined). The Senior Credit Facility also separately restricts the Company from making certain acquisitions without the prior consent of the lenders. If the Company increases its leverage beyond certain specified levels in order to effect an acquisition, the Senior Notes require that the Company prepay all principal and accrued interest thereunder, together with a "make whole" premium equal to the amount of unearned interest, based on current market rates, through the original maturity date. Substantially all of the Company's assets are pledged as security for the Senior Credit Facility and Senior Notes under the loan agreements. The obligations of the Company under the Senior Credit Facility and Senior Notes rank pari passu. A summary of the future maturities of long-term debt follows: 1997............................................................... $26,500 1998............................................................... 76,500 1999............................................................... 63,250 2000............................................................... 70,000 2001............................................................... 72,500 Thereafter......................................................... 49,250
F-14 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA) (7) STOCKHOLDERS' EQUITY (a) Redeemable and Convertible Preferred Stocks In October 1993, the Company issued 1,610,000 shares of $3 Convertible Exchangeable Preferred Stock (the "Convertible Preferred Stock") for net proceeds of approximately $76,645,000. The liquidation preference of each share of Convertible Preferred Stock is $50 plus accrued and unpaid dividends. Annual dividends of $3 per share are cumulative and payable quarterly when, as and if declared by the Board of Directors of the Company. The Company converted 1,608,297 shares of the Convertible Preferred Stock into 5,025,916 shares of the Company's Class A Common Stock and redeemed the remaining 1,703 shares of Convertible Preferred Stock at $52.70 per share in 1996. (b) Common Stock The rights of holders of Class A Common Stock and Class B Common Stock are identical except for voting and conversion rights. Holders of shares of common stock vote as a single class on all matters submitted to a vote of the stockholders, with each share of Class A Common Stock entitled to one vote and each share of Class B Common Stock entitled to ten votes, except for (i) certain amendments to the Certificate of Incorporation of the Company, (ii) proposed "going private" transactions between the Company and the controlling shareholder and (iii) as otherwise provided by law. Each share of Class B Common Stock is convertible at the option of the holder into one share of Class A Common Stock at any time. The Class B Common Stock will convert automatically into Class A Common Stock, and thereby lose its special voting rights, if such Class B Common Stock is sold or otherwise transferred to any person or entity other than certain specified affiliates of the current holder. During 1995, the holder of the outstanding shares of Class B Common Stock disposed of 32,250 shares of such stock, thereby causing the shares sold to be converted to Class A Common Stock. In May 1995, the Company issued 5,611,009 shares of Class A Common Stock in connection with the BPI Acquisition. In July 1995, the Company completed a secondary public offering of 8,287,500 shares of its Class A Common Stock (the "1995 Offering"). The Company issued and sold 7,350,000 shares in the offering, while 937,500 shares were issued and sold in connection with the exercise of certain warrants. Furthermore, 1,013,886 shares were issued in the offering in connection with the exercise of the remaining warrants outstanding pursuant to the over-allotment option. The net proceeds to the Company in connection with the offering of approximately $132,721,000 were used to reduce borrowings under the revolving credit portion of the Senior Credit Facility. On August 8, 1996, the Company declared a three-for-two stock split effected in the form of a stock dividend payable on August 26, 1996 to shareholders of record at the close of business on August 19, 1996. All share and per share data (other than authorized share data) contained in the accompanying consolidated financial statements have been retroactively adjusted to give effect to the stock dividend. On October 17, 1996, the Company completed a secondary public offering of 9,000,000 shares of its Class A Common Stock (the "1996 Offering"). The net proceeds of approximately $264,236,000 were used to reduce borrowings under the New Revolving Loan portion of the Senior Credit Facility. F-15 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA) (c) Common Stock Purchase Warrants In November 1992, the Company issued certain warrants which, immediately prior to the consummation of the common stock offering in July 1995, entitled holders to purchase an aggregate of 1,300,924 shares of Class A Common Stock at $.01 per share. These warrants were assigned a value at date of issuance of $12,488,000. Such warrants were exercised in connection with the common stock offering in July 1995. (d) Stock Options The Company has established the 1992, 1993 and 1995 Key Employee Stock Option Plans (the "Employee Option Plans") which provide for the issuance of stock options to officers and other key employees of the Company and its subsidiaries. The Employee Option Plans make available for issuance an aggregate of 1,957,500 shares of Class A Common Stock. Options issued under the Employee Option Plans have varying vesting periods as provided in separate stock option agreements and generally carry an expiration date of ten years subsequent to the date of issuance. Options issued under the 1993 and 1995 Employee Option Plans are required to have exercise prices equal to or in excess of the fair market value of the Company's Class A Common Stock on the date of issuance. In May 1995, the Company also established the Stock Option Plan for Non- Employee Directors (the "Director Plan") which provides for the issuance of stock options to non-employee directors of the Company. The Director Plan makes available for issuance an aggregate of 225,000 shares of Class A Common Stock. Options issued under the Director Plan have exercise prices equal to the fair market value of the Company's Class A Common Stock on the date of issuance, vest over a three year period and have an expiration date of ten years subsequent to the date of issuance. In connection with the BPI Acquisition, the Company assumed outstanding options to purchase 94,000 shares of BPI common stock held by BPI employees. Options to purchase approximately 87,000 shares of the Company's Class A Common Stock vested and became exercisable on May 12, 1996. The Company applies APB Opinion No. 25 in accounting for its Employee Option Plans and, accordingly, no compensation cost has been recognized for its stock options in the consolidated financial statements. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company's net loss would have been increased to the pro forma amounts indicated below:
1995 1996 ------- -------- Net loss: As reported............................................. $(5,850) $(16,194) Pro forma............................................... (8,787) (20,969) Loss per common share: As reported............................................. (.52) (.66) Pro forma............................................... (.66) (.82)
Pro forma net loss reflects only options granted in 1995 and 1996. Therefore, the full impact of calculating compensation cost for stock options under SFAS No. 123 is not reflected in the pro forma net loss amounts presented above because compensation cost is reflected over the options' vesting period of one year and compensation cost for options granted during 1994 is not considered. F-16 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA) The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 1995 and 1996: dividend yield of 0% for all years; expected volatility of 44.5%; risk-free interest rate of 6.0% and expected lives ranging from three to seven years. Following is a summary of activity in the employee option plans and agreements discussed above for the years ended December 31, 1994, 1995 and 1996:
1994 1995 1996 ------------------ ------------------- ------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE -------- -------- --------- -------- --------- -------- Outstanding at beginning of year................ 877,500 $ 0.01 978,000 $ 3.10 1,289,874 $ 6.91 Granted................. 280,500 10.67 413,138 16.17 587,250 23.12 Exercised............... (180,000) 0.01 (25,500) 1.29 (83,403) 8.54 Canceled................ -- -- (75,764) 8.59 (13,729) 9.91 -------- ------ --------- ------ --------- ------ Outstanding at end of year................... 978,000 $ 3.10 1,289,874 $ 6.91 1,779,992 $11.93 ======== ====== ========= ====== ========= ====== Options exercisable at year end............... 697,500 945,000 967,742 ======== ========= ========= Weighted average fair value of options granted during the year................... $ 8.54 $ 9.76 ====== ======
The following table summarizes information about stock options outstanding at December 31, 1996:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ---------------------------------- ---------------------- NUMBER WEIGHTED NUMBER OUTSTANDING AVERAGE WEIGHTED EXERCISABLE WEIGHTED RANGE OF AT REMAINING AVERAGE AT AVERAGE EXERCISE DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE PRICES 1996 LIFE PRICE 1996 PRICE - -------- ------------- ----------- -------- ------------- -------- $ 0.01 660,000 6.3 years $ 0.01 660,000 $ 0.01 $ 9.69 to 12.33 307,742 7.9 years 10.49 307,742 10.49 $ 21.33 to 26.75 812,250 8.8 years 22.49 -- -- --------- ------ ------- ------ 1,779,992 $11.93 967,742 $ 3.29 ========= ====== ======= ======
F-17 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA) (8) INCOME TAXES Income tax expense attributed to loss from continuing operations consists of:
1995 1996 ----- ------- Current tax expense: Federal................................................... $ 246 $ 485 State..................................................... 425 972 ----- ------- Total current tax expense................................... 671 1,457 Deferred federal benefit.................................... (479) (4,353) ----- ------- Total income tax expense (benefit).......................... $ 192 $(2,896) ===== =======
The Company did not incur significant tax expense during the years ended December 31, 1994 as its operations did not generate taxable income. Total income tax expense (benefit) differed from the amount computed by applying the U.S. federal statutory income tax rate of 35% to loss from continuing operations for the years ended December 31, 1994, 1995 and 1996 as a result of the following:
1994 1995 1996 ------- ------- ------- Computed "expected" tax benefit.................... $(1,172) $(1,980) $(6,682) Amortization of goodwill........................... 355 788 2,477 Net operating loss carryforwards for which no tax benefit was recognized............................ 760 923 -- State income taxes, net of federal benefit......... -- 276 632 Other, net......................................... 57 185 677 ------- ------- ------- $ -- $ 192 (2,896) ======= ======= =======
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 1995 and 1996 are presented below:
1995 1996 -------- --------- Deferred tax assets: Net operating loss carryforwards........................ $ 18,748 $ 13,519 Accrued compensation primarily relating to stock options................................................ 1,787 1,687 Other................................................... 649 1,215 -------- --------- Total deferred tax assets............................. 21,184 16,421 -------- --------- Deferred tax liabilities: Property and equipment and intangibles, primarily re- sulting from difference in bases from BPI and Pyramid Acquisitions........................................... (49,884) (101,761) Other................................................... (533) (758) -------- --------- Total deferred tax liabilities........................ (50,417) (102,519) -------- --------- Net deferred tax liability............................ $(29,233) $ (86,098) ======== =========
F-18 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA) Deferred tax assets and liabilities are computed by applying the U.S. federal income tax rate in effect to the gross amounts of temporary differences and other tax attributes, such as net operating loss carryforwards. As a result of the application of purchase accounting to the BPI Acquisition in May 1995, the Company recognized deferred tax assets of $15,380,000, which had not been recognized by the Company in previous periods. Recognition of these assets effectively reduced goodwill resulting from the acquisitions by a corresponding amount. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The Company expects the deferred tax assets at December 31, 1996 to be realized as a result of the reversal during the carryforward period of existing taxable temporary differences giving rise to deferred tax liabilities, the generation of taxable income in the carryforward period and the disposition of one or more of its stations. At December 31, 1996, the Company has net operating loss carryforwards available to offset future taxable income of approximately $38,600,000 which begin to expire in 2004. Approximately $29,700,000 of such net operating loss carryforwards are subject to annual use limitations of up to $2,800,000 per year. (9) OPERATING LEASES The Company has noncancelable operating leases, primarily for office space. These leases generally contain renewal options for periods ranging from one to ten years and require the Company to pay all executory costs such as maintenance and insurance. Rental expense for operating leases (excluding those with lease terms of one month or less that were not renewed) was approximately $2,193,000, $3,073,000 and $5,462,000 during 1994, 1995 and 1996, respectively. Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 1996 are as follows: Year ending December 31: 1997.............................................................. $4,658 1998.............................................................. 4,001 1999.............................................................. 4,015 2000.............................................................. 3,625 2001.............................................................. 3,559
(10) COMMITMENTS AND CONTINGENCIES In August 1993, the Company terminated an agreement with Sagittarius Broadcasting Company (an affiliate of Infinity Broadcasting Corporation) and One Twelve, Inc. (collectively, the "Claimants" or the "Plaintiffs") pursuant to which programming featuring radio personality Howard Stern was broadcast on radio station WLUP-AM (now WMVP-AM) in Chicago. The Claimants allege that termination of the agreement was wrongful and have sued the Company in the Supreme Court of the State of New York, County of New York (the "Court"). The agreement required payments to the Claimants in the amount of $2,600,000 plus five percent of advertising revenues generated by the programming over the three-year term of the agreement. A total of approximately F-19 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA) $680,000 was paid to the Claimants pursuant to the agreement prior to termination. Claimants' original complaint alleged claims for breach of contract, indemnification, breach of fiduciary duty and fraud. Plaintiffs' aggregate prayer for relief in the original complaint totaled $45,000,000. On July 12, 1994, the Court granted the Company's motion to dismiss Plaintiffs' claims for fraud and breach of fiduciary duty. On June 6, 1995, the Court denied the Plaintiff's motion for summary judgment on their contract and indemnification claims and this order has been affirmed on appeal. On May 17, 1996, after the close of discovery, the Company filed a motion for summary judgment, seeking the dismissal of the remaining claims in the original complaint. On July 1, 1996, Plaintiffs moved for leave to amend their complaint in order to add claims for breach of the covenant of good faith and fair dealing, tortious interference with business advantage and prima facia punitive damages in excess of $25,000,000. On March 13, 1997, the Court denied the Company's motion for summary judgment, allowed Plaintiffs' request to amend the complaint to add a claim for breach of the covenant of good faith and fair dealing, and denied Plaintiffs' request to amend the complaint to add claims for tortious interference with business advantage and prima facia tort. The Company believes that it acted within its rights in terminating the agreement. The Company is also involved in various other claims and lawsuits which are generally incidental to its business. The Company is vigorously contesting all such matters and believes that their ultimate resolution will not have a material adverse effect on its consolidated financial position, results of operations or cash flows. The Company offers substantially all of its employees voluntary participation in a 401(k) Plan. The Company may make discretionary contributions to the plan; however, no such contributions were made by the Company during 1994, 1995 or 1996. (11) FAIR VALUE OF FINANCIAL INSTRUMENTS The following table presents the carrying amounts and estimated fair values of the Company's financial instruments for which the estimated fair value of the instrument differs significantly from its carrying amounts at December 31, 1995 and 1996. The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties.
1995 1996 ------------------ ------------------ CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE -------- -------- -------- -------- Interest rate swaps................. $ -- $ 272 $ -- $ (199) Long-term debt--Senior Notes........ (14,000) (15,443) (10,000) (10,572)
The following methods and assumptions were used to estimate the fair value of each class of financial instrument: Cash and cash equivalents, accounts receivable and accounts payable: The carrying amount of these assets and liabilities approximates fair value because of the short maturity of these instruments. Interest rate swaps: The fair value of the interest rate swap and cap contracts is estimated by obtaining quotations from brokers. The fair value is an estimate of the amounts that the Company would receive (pay) at the reporting date if the contracts were transferred to other parties or canceled by the broker. The carrying amounts of receivables (payables) under interest rate swaps and caps are included in accrued expenses in the accompanying consolidated balance sheets. Long-term debt: The fair values of the Company's Senior Notes are based on discounted cash flows under the Senior Notes using interest rates currently available to the Company for similar debt issues. As amounts outstanding under the Company's Senior Credit Facility agreements bear interest at current market rates, their carrying amounts approximate fair market value. F-20 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA) (12) QUARTERLY FINANCIAL DATA (UNAUDITED)
QUARTER ENDED ------------------------------------------- MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 -------- ------- ------------ ----------- 1995: Net revenues...................... $ 25,413 $41,992 $47,772 $47,754 Operating income.................. 919 6,613 1,812 4,433 Net loss.......................... (4,118) (759) (3,559) (2,244) Net loss per share................ (.31) (.05) (.14) (.08) 1996: Net revenues...................... $ 53,371 $72,991 $78,768 $88,720 Operating income (loss)........... (8,223) 7,062 9,351 9,770 Net income (loss)................. (15,481) (3,429) (1,997) 893 Net income (loss) per share....... (0.55) (0.12) (0.07) 0.02
Operating income (loss) is defined as net revenues less station operating expenses, corporate general and administrative expenses, depreciation and amortization and other nonrecurring costs. Net loss per share for the years ended December 31, 1995 and 1996 differs from the sum of net loss per share for the quarters during the respective year due to the different periods used to calculate weighted average shares outstanding. F-21 SCHEDULE I EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES CONDENSED BALANCE SHEETS--PARENT COMPANY DECEMBER 31, 1995 AND 1996 (IN THOUSANDS)
1995 1996 -------- -------- ASSETS Investment in subsidiaries, at equity....................... $305,597 $549,411 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable............................................ $ 1,020 $ -- Stockholders' equity: Preferred stock........................................... 80,500 -- Common stocks............................................. 280 421 Paid-in capital........................................... 317,295 662,502 Accumulated deficit....................................... (93,498) (113,512) -------- -------- Total stockholders' equity.............................. 304,577 549,411 -------- -------- Total liabilities and stockholders' equity.............. $305,597 $549,411 ======== ========
See accompanying notes to condensed financial statements. F-22 SCHEDULE I, CONT. EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES CONDENSED STATEMENTS OF OPERATIONS--PARENT COMPANY YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 (IN THOUSANDS)
1994 1995 1996 ------- ------- -------- Net loss--equity in losses of unconsolidated subsidiaries..................................... $(3,546) $(5,850) $(16,194) ======= ======= ========
See accompanying notes to condensed financial statements. F-23 SCHEDULE I, CONT. EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES CONDENSED STATEMENTS OF CASH FLOWS--PARENT COMPANY YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 (IN THOUSANDS)
1994 1995 1996 ------- --------- --------- Cash flows from operating activities: Net loss...................................... $(3,546) $ (5,850) $ (16,194) Equity in undistributed losses of unconsolidated subsidiaries.................. 3,546 5,850 16,194 ------- --------- --------- Net cash provided by operating activities... -- -- -- ------- --------- --------- Cash flows from investing activities--investment in subsidiaries................................ -- (127,936) (261,028) ------- --------- --------- Cash flows from financing activities: Proceeds from issuance of common stock, preferred stock and warrants................. (240) 132,766 264,938 Redemption of redeemable preferred stock...... -- -- (90) Dividends on preferred stock.................. (4,830) (4,830) (3,820) Distributions from subsidiaries............... 5,070 -- -- ------- --------- --------- Net cash provided by financing activities... -- 127,936 261,028 ------- --------- --------- Net change in cash and cash equivalents......... -- -- -- Cash and cash equivalents at beginning of year.. -- -- -- ------- --------- --------- Cash and cash equivalents at end of year........ $ -- $ -- $ -- ======= ========= =========
See accompanying notes to condensed financial statements. F-24 SCHEDULE I, CONT. EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES NOTES TO PARENT COMPANY CONDENSED FINANCIAL STATEMENTS (1) GENERAL The accompanying condensed financial statements of Evergreen Media Corporation (the "Company") should be read in conjunction with the consolidated financial statements of the Company and its subsidiaries included in the Company's Annual Report on Form 10-K. (2) OBLIGATIONS, GUARANTEES AND COMMITMENTS On November 6, 1992, the Company organized a new wholly-owned subsidiary to which the Company transferred and assigned substantially all of its assets and liabilities. The Company has guaranteed the obligations under a senior credit facility and senior note agreement of this subsidiary. Such obligations prohibit the subsidiary from making loans or transfers or paying dividends to the Company without the consent of the lenders subject to certain provisions in the Senior Credit Facility. Prior to such time the Company was the debtor on such obligations. See note 7 to consolidated financial statements regarding these obligations. (3) OTHER See note 7 to consolidated financial statements for a description of the preferred stock, common stock and other equity securities of the Company. F-25 SCHEDULE II EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 (DOLLARS IN THOUSANDS)
ADDITIONS ADDITIONS BALANCE AT CHARGED TO CHARGED BALANCE BEGINNING COSTS AND TO OTHER AT END DESCRIPTION OF PERIOD EXPENSES ACCOUNTS WRITEOFFS OF PERIOD ----------- ---------- ---------- --------- --------- --------- Allowance for doubtful accounts: Year ended December 31, 1996............. $ 2,000 2,179 156(1) 2,043 2,292 ======= ===== ======= ===== ====== Year ended December 31, 1995............. $ 835 904 1,644(1) 1,383 2,000 ======= ===== ======= ===== ====== Year ended December 31, 1994............. $ 734 754 -- 653 835 ======= ===== ======= ===== ====== Deferred tax asset valuation allowance: Year ended December 31, 1996............. $ -- -- -- -- -- ======= ===== ======= ===== ====== Year ended December 31, 1995............. $14,458 -- (14,458)(1) -- -- ======= ===== ======= ===== ====== Year ended December 31, 1994............. $13,979 -- 479 -- 14,458 ======= ===== ======= ===== ======
- -------- (1) Additions (deductions) result from the application of purchase accounting relating to the BPI Acquisition in 1995 and the Pyramid Acquisition in 1996. F-26 EX-2.32 2 ASSET PURCHASE AGREEMENT Exhibit 2.32 ASSET EXCHANGE AGREEMENT By and Among EZ COMMUNICATIONS, INC. PROFESSIONAL BROADCASTING INCORPORATED EZ PHILADELPHIA, INC. EVERGREEN MEDIA CORPORATION OF LOS ANGELES EVERGREEN MEDIA CORPORATION OF CHARLOTTE EVERGREEN MEDIA CORPORATION OF THE EAST EVERGREEN MEDIA CORPORATION OF CAROLINALAND WBAV/WBAV-FM/WPEG LICENSE CORP. and WRFX LICENSE CORP. Dated as of December 5, 1996 TABLE OF CONTENTS ARTICLE 1 DEFINED TERMS................................................ 2 ARTICLE 2 EXCHANGE OF LICENSES AND STATIONS............................ 2 2.1 Agreement to Exchange Licenses and Stations.................. 2 2.2 Appraisals; Tax Reporting.................................... 2 2.3 Assumption of Liabilities and Obligations.................... 3 2.4 Closing Date................................................. 6 2.5 Accounts Receivable.......................................... 7 2.6 Like-Kind Exchange........................................... 8 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE EVERGREEN PARTIES........ 8 3.1 Organization and Business; Power and Authority; Effect of Transaction................................................. 8 3.2 Financial and Other Information.............................. 9 3.3 Changes in Condition......................................... 9 3.4 Materiality.................................................. 9 3.5 Title to Properties; Leases.................................. 10 3.6 Compliance with Private Authorizations....................... 11 3.7 Compliance with Governmental Authorizations and Applicable Law......................................................... 11 3.8 Intangible Assets............................................ 13 3.9 Related Transactions......................................... 13 3.10 Insurance.................................................... 13 3.11 Tax Matters.................................................. 14 3.12 Employee Retirement Income Security Act of 1974.............. 14 3.13 Absence of Sensitive Payments................................ 15 3.14 Inapplicability of Specified Statutes........................ 15 3.15 Employment Arrangements...................................... 16 3.16 Material Agreements.......................................... 16 3.17 Ordinary Course of Business.................................. 17 3.18 Broker or Finder............................................. 18 3.19 Solvency..................................................... 18 3.20 Environmental Matters........................................ 18 3.21 Trade or Barter.............................................. 18 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE EZ PARTIES............. 19 4.1 Organization and Business; Power and Authority; Effect of Transaction................................................. 19 4.2 Financial and Other Information.............................. 20 4.3 Changes in Condition......................................... 20 4.4 Materiality.................................................. 20 4.5 Title to Properties; Leases.................................. 20 4.6 Compliance with Private Authorizations....................... 21 4.7 Compliance with Governmental Authorizations and Applicable Law......................................................... 21 4.8 Intangible Assets............................................ 23 4.9 Related Transactions......................................... 23 4.10 Insurance.................................................... 24
4.11 Tax Matters.................................................. 24 4.12 Employee Retirement Income Security Act of 1974.............. 24 4.13 Absence of Sensitive Payments................................ 25 4.14 Inapplicability of Specified Statutes........................ 25 4.15 Employment Arrangements...................................... 26 4.16 Material Agreements.......................................... 26 4.17 Ordinary Course of Business.................................. 27 4.18 Broker or Finder............................................. 28 4.19 Solvency..................................................... 28 4.20 Environmental Matters........................................ 28 4.21 Trade or Barter.............................................. 28 ARTICLE 5 COVENANTS.................................................... 29 5.1 Access to Information; Confidentiality....................... 29 5.2 Agreement to Cooperate....................................... 30 5.3 Public Announcements......................................... 32 5.4 Notification of Certain Matters.............................. 33 5.5 No Solicitation.............................................. 33 5.6 Conduct of Business by Evergreen Pending the Closing......... 33 5.7 Conduct of Business by EZ Pending the Closing................ 35 5.8 Building of EZ Stations...................................... 36 5.9 FCC Application; Divesture Commitment........................ 36 ARTICLE 6 CLOSING CONDITIONS........................................... 38 6.1 Conditions to Obligations of Each Party to Effect the Exchange..................................................... 38 6.2 Conditions to Obligations of EZ.............................. 38 6.3 Conditions to Obligations of Evergreen....................... 40 ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER............................ 41 7.1 Termination.................................................. 41 7.2 Effect of Termination........................................ 42 ARTICLE 8 INDEMNIFICATION.............................................. 42 8.1 Survival..................................................... 43 8.2 Indemnification.............................................. 43 8.3 Limitation of Liability...................................... 43 8.4 Notice of Claims............................................. 44 8.5 Defense of Third Party Claims................................ 44 8.6 Exclusive Remedy............................................. 44 ARTICLE 9 GENERAL PROVISIONS........................................... 45 9.1 Amendment.................................................... 45 9.2 Waiver....................................................... 45 9.3 Fees, Expenses and Other Payments............................ 45 9.4 Notices...................................................... 45 9.5 Specific Performance; Other Rights and Remedies.............. 46
ii 9.6 Severability................................................. 47 9.7 Counterparts................................................. 47 9.8 Section Headings............................................. 47 9.9 Governing Law................................................ 47 9.10 Further Acts................................................. 47 9.11 Entire Agreement............................................. 48 9.12 Assignment................................................... 48 9.13 Parties in Interest.......................................... 48 9.14 Mutual Drafting.............................................. 48 9.15 EZ Agent for Other EZ Parties................................ 48 9.16 Evergreen Parent Agent for Other Evergreen Parties........... 48
APPENDIX A: Definitions iii ASSET EXCHANGE AGREEMENT This Asset Exchange Agreement (this "Agreement") is dated as of December 5, 1996, by and among EZ Communications, Inc., a Virginia corporation ("EZ"), Professional Broadcasting Incorporated, a Virginia corporation ("PBI") and EZ Philadelphia, Inc., a Virginia corporation ("EZP" and, collectively with EZ and PBI, sometimes collectively referred to individually as an "EZ Party" and collectively as the "EZ Parties"), on the one hand, and Evergreen Media Corporation of Los Angeles, a Delaware corporation ("Evergreen"or "Evergreen Parent"), Evergreen Media Corporation of Charlotte ("EMC Charlotte"), Evergreen Media Corporation of the East ("EMC East"), Evergreen Media Corporation of Carolinaland ("EMC Carolinaland), WBAV/WBAV-FM/WPEG License Corp. ("EMC-BAV") and WRFX(FM) License Corp. ("EMC-RFX"), each a Delaware corporation and an indirect wholly owned subsidiary of Evergreen Parent (including Evergreen Parent, individually an "Evergreen Party" and collectively the "Evergreen Parties"), on the other hand. WHEREAS, an Evergreen Party is the owner, operator and licensee of radio stations WRFX(FM), Kannapolis, North Carolina, WPEG(FM), Concord, North Carolina, WBAV(AM) and WFNZ(AM), Charlotte, North Carolina and WBAV-FM, Gastonia, North Carolina (individually, an "Evergreen Station" and collectively, the "Evergreen Stations") pursuant to licenses issued by the FCC (the "Evergreen FCC Licenses"); WHEREAS, PBI, a wholly-owned subsidiary of EZ, operates, and EZP, a wholly- owned subsidiary of PBI, is the licensee of, radio stations WIOQ(FM) and WUSL(FM) (individually, an "EZ Station" and collectively, the "EZ Stations") pursuant to licenses issued to EZP by the FCC (the "EZ FCC Licenses"); WHEREAS, the EZ Parties and the Evergreen Parties desire to exchange certain property and assets used in, held for use in connection with or necessary for the conduct of the business or operations of the Evergreen Stations and the EZ Stations on the terms and conditions hereinafter set forth (the "Exchange"); WHEREAS, the parties hereto intend the Exchange to qualify as a Like-Kind Exchange; and WHEREAS, EZ is party to an agreement and plan of merger (the "EZ Merger Agreement"), dated as of August 5, 1996, as amended and restated as of September 27, 1996, with American Radio Systems Corporation, a Delaware corporation ("American"), pursuant to which EZ will be merged into American or a wholly- owned subsidiary of American (the "American-EZ Merger"), and American desires to consent to the Exchange and the other transactions contemplated by this Agreement; NOW, THEREFORE, in consideration of the above premises and the covenants and agreements contained herein, the EZ Parties and the Evergreen Parties, intending to be legally bound, do hereby 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. References to "hereof", "herein" or similar terms are intended to refer to this Agreement as a whole and not a particular section, and references to "this Section" are intended to refer to the entire section and not a particular subsection thereof. The term "either party" shall, unless the context otherwise requires, refer to Evergreen Parent and EZ, and shall include, any Subsidiary of either thereof which is a party to this Agreement. ARTICLE 2 EXCHANGE OF LICENSES AND STATIONS --------------------------------- 2.1 Agreement to Exchange Licenses and Stations. Subject to the terms and ------------------------------------------- conditions set forth in this Agreement, the Evergreen Parties and the EZ Parties hereby agree to exchange, transfer and deliver at the Closing, the Evergreen Assets and the EZ Assets, not previously transferred by the parties pursuant to the applicable TBA, free and clear of any Liens of any nature whatsoever except Permitted Liens, on the terms and conditions of this Agreement. 2.2 Appraisals; Tax Reporting. ------------------------- (a) The Evergreen Parties and the EZ Parties agree that the fair market value of each asset included in the Evergreen Assets and the EZ Assets will be determined on the basis of the appraisals (the "Appraisals"), prepared by the firm of Bond & Pecaro, whose fee and expenses shall be equally borne by Evergreen and EZ. The parties shall direct Bond & Pecaro to deliver Appraisals within thirty (30) days from the Closing and to set forth in the Appraisals the fair market value of each asset included in the Evergreen Assets and the EZ Assets. (b) Within thirty (30) days of the receipt of the Appraisals, each party shall prepare a draft schedule that sets forth the "exchange groups" and "residual group" (each within the meaning of Treas. Reg. section 1.1031(j)-1) together with each asset included in the Evergreen Assets and the EZ Assets that belongs to the relevant exchange group or residual group, and send the schedule to the other for approval, which approval shall not be unreasonably conditioned, withheld or delayed. If the draft schedules do not contain any differences, they shall form the basis for the final schedule (the "Section 1031 Schedule"). If the draft schedules contain any differences, the parties shall negotiate in good faith to reconcile the draft and produce a uniform schedule which shall constitute the Section 1031 Schedule. -2- (c) Each of Evergreen and EZ shall cause to be prepared in a timely fashion a draft of IRS Forms 8824 for itself on the basis of the Appraisals and the Section 1031 Schedule. Each of Evergreen and EZ shall deliver drafts of their respective IRS Forms 8824 to the other for approval, which approval shall not be unreasonably conditioned, withheld or delayed. (d) Each of Evergreen and EZ shall cause to be prepared in a timely fashion a draft of IRS Form 8594 for itself in a manner consistent with the Section 1031 Schedule and IRS Forms 8824 prepared in accordance with paragraphs (b) and (c) above, reflecting (i) the allocation of consideration exchanged by it among the assets acquired based on the respective fair market values of the relevant assets as set forth in the Appraisals and in accordance with section 1060 of the Code and (ii) such other information as required by Section 1060 of the Code and IRS Form 8594. Each of Evergreen and EZ shall deliver drafts of their respective IRS Forms 8594 to the other for approval, which approval shall not be unreasonably conditioned, withheld or delayed. (e) Each of Evergreen and EZ shall report the transactions contemplated hereby as a "like-kind exchange" to the maximum extent permissible under Section 1031 of the Code, consistent with the Appraisals, the Section 1031 Schedule, and IRS Forms 8594 and 8824 prepared in accordance with paragraphs (c) and (d) above, and shall not take, and shall cause their respective Affiliates, representatives, successors and assigns not to take, any position on any federal, state or local Tax Return or report, inconsistent with such reporting position, the Appraisals, the Section 1031 Schedule or such IRS Form 8594 or 8824. Each of Evergreen and EZ shall promptly give the other notice of any disallowance of or challenge to such reporting by any Taxing Authority. (f) Each of Evergreen and EZ shall cooperate with the other, including without limitation in preparing the Section 1031 Schedule, the IRS Forms 8594 and 8824 and executing all necessary agreements and documents, to the extent necessary for each of Evergreen and EZ to treat the exchange of the Evergreen Assets for the EZ Assets as a Like-Kind Exchange pursuant to Section 1031 of the Code. (g) Notwithstanding the provisions of this Section 2.2, the parties to this Agreement will rely solely on their own advisors in determining the tax consequences of the transactions contemplated by this Agreement and each party is not relying, and will not rely, on any representations or assurances of any other party regarding such consequences other than the representations, warranties, covenants and agreements set forth in writing in this Agreement or furnished pursuant to the provisions hereof. Notwithstanding anything in this Agreement to the contrary, the obligations of the parties set forth in this Section 2.2 shall survive the Closing. 2.3 Assumption of Liabilities and Obligations. ----------------------------------------- (a) Except as expressly provided in this Agreement, the Evergreen Parties shall not assume or become obligated to perform any debt, liability or obligation of any EZ Party or relating to any EZ Station whatsoever, including without limitation (i) any obligations or liabilities arising under any contract, lease or agreement, other than those arising under the EZ Assumable Agreements; (ii) any obligations or liabilities under the EZ Assumable Agreements relating to the period prior to the Cut-off Date; (iii) any Claims or pending or threatened Legal Actions to which -3- any EZ Party is a party or to which any of the EZ Assets or either of the EZ Stations is subject relating to the ownership or operation of the EZ Assets or the conduct of the business of the EZ Stations prior to the Closing (other than as provided in the EZ Stations TBA); (iv) any insurance policies of the EZ Parties; (v) any obligations or liabilities arising under any financing arrangement, capitalized lease or other agreement relating to Indebtedness for Borrowed Money; (vi) any obligations or liabilities of any EZ Party under any EZ Employment Arrangement (including under any EZ Employee Plan), including any obligation to any EZ Station Employee for severance benefits, vacation time or sick leave; (vii) any liability for any Taxes attributable to the ownership or operation of the EZ Assets or the EZ Stations on or prior to the Cut-off Date; or (viii) any obligations or liabilities caused by, arising out of, or resulting from any action or omission of any EZ Party prior to the Closing. All such obligations and liabilities (the "EZ Nonassumed Liabilities") shall remain and be the obligations and liabilities solely of the EZ Parties. (b) Except as expressly provided in this Agreement, the EZ Parties shall not assume or become obligated to perform any debt, liability or obligation of any Evergreen Party whatsoever, including without limitation (i) any obligations or liabilities arising under any contract, lease or agreement, other than those arising under the Evergreen Assumable Agreements, (ii) any obligations or liabilities under the Evergreen Assumable Agreements relating to the period prior to the Cut-off Date; (iii) any Claims or pending or threatened Legal Action to which any Evergreen Party is a party or to which any of the Evergreen Assets or any of the Evergreen Stations is subject relating to the ownership or operation of the Evergreen Assets or the conduct of the business of the Evergreen Stations prior to the Closing (other than as provided in the Evergreen Stations TBA); (iv) any insurance policies of the Evergreen Parties; (v) any obligations or liabilities arising under any financing arrangement, capitalized lease or other agreement relating to Indebtedness for Borrowed Money; (vi) any obligations or liabilities of any Evergreen Party under any Evergreen Employment Arrangement (including under any Evergreen Employee Plan), including any obligation to any Evergreen Stations Employee for severance benefits, vacation time, or sick leave; (vii) any liability for any Taxes attributable to the ownership or operation of the Evergreen Assets or the Evergreen Stations on or prior to the Cut-off Date; or (viii) any obligations or liabilities caused by, arising out of, or resulting from any action or omission of any Evergreen Party prior to the Closing. All such obligations and liabilities (the "Evergreen Nonassumed Liabilities") shall remain and be the obligations and liabilities solely of the Evergreen Parties. (c) Notwithstanding anything contained in this Agreement to the contrary and except as otherwise provided in the Evergreen Stations TBA or the EZ Stations TBA, as the case may be, (i) all items of income and expense (including without limitation with respect to rent, utilities, Pro Ratable Taxes and wages, salaries and accrued but unused vacation for employees) arising from the conduct of the business of the Evergreen Stations and EZ Stations (the conduct of such business, in each case, to be in the ordinary course consistent with past practice) shall be prorated between the Evergreen Parties and EZ Parties in accordance with GAAP applied consistently with past practice as of 12:01 a.m., Eastern time, on the Cut-off Date, with the transferring party responsible for any such items prior to the Cut-off Date and the transferee party responsible for any such items relating to any subsequent period, and (ii) obligations and liabilities under the Evergreen Trade Agreements shall be prorated to the extent and in the manner set forth in Section 2.3(g). For these purposes, Pro Ratable Taxes attributable to a period that begins before and ends after the Cut-off Date shall be treated on a "closing of the books" basis as two partial periods, one ending at the close of the day -4- immediately preceding the Cut-off Date and the other beginning on the Cut-off Date, except that Pro Ratable Taxes (such as property Taxes) imposed on a periodic basis shall be allocated on a daily basis. (d) Within sixty (60) days of the Closing Date, EZ shall deliver to Evergreen Parent a schedule of its proposed prorations, including without limitation any with respect to the Evergreen Trade Agreements pursuant to the provisions of Section 2.3(g), which shall set forth in reasonable detail the basis for those determinations (the "Charlotte Proration Schedule"). The Charlotte Proration Schedule shall be conclusive and binding upon the Evergreen Parties unless Evergreen Parent provides EZ with written notice of objection (the "Notice of Disagreement") within thirty (30) days after Evergreen's receipt of the Charlotte Proration Schedule, which notice shall state the prorations proposed by Evergreen Parent (the "Evergreen Proration Schedule"). EZ shall have fifteen (15) days from receipt of a Notice of Disagreement to accept or reject the Evergreen Proration Schedule. If EZ rejects the Evergreen Proration Schedule, and the amount in dispute exceeds Five Thousand Dollars ($5,000), the dispute shall be submitted within ten (10) days of such rejection to the Chicago, Illinois office of Arthur Andersen & Co., LLP (the "Referee") for resolution, such resolution to be made within thirty (30) days after submission to the Referee and to be final, conclusive and binding on the EZ Parties and the Evergreen Parties. Evergreen Parent and EZ agree to share equally the cost and expenses of the Referee, but each party shall bear its own legal and other expenses, if any. If the amount in dispute is equal to or less than Five Thousand Dollars ($5,000), such amount shall be divided equally between Evergreen Parent and EZ. Payment by Evergreen Parent or EZ, as the case may be, of the proration amounts determined pursuant to this Section 2.3(d) shall be due fifteen (15) days after the last to occur of (i) Evergreen Parent's acceptance of the Charlotte Proration Schedule or failure to give EZ a timely Notice of Disagreement; (ii) EZ's acceptance of the Evergreen Proration Schedule or failure to reject the Evergreen Proration Schedule within fifteen (15) days of receipt of a timely Notice of Disagreement; (iii) EZ's rejection of the Evergreen Proration Schedule in the event the amount in dispute equals or is less than Five Thousand Dollars ($5,000); and (iv) notice to EZ and Evergreen Parent of the resolution of the disputed amount by the Referee in the event that the amount in dispute exceeds Five Thousand Dollars ($5,000). (e) Within sixty (60) days of the Closing Date, Evergreen Parent shall deliver to EZ a schedule of its proposed prorations, including without limitation any with respect to the EZ Trade Agreements pursuant to the provisions of Section 2.3(g), which shall set forth in reasonable detail the basis for those determinations (the "Philadelphia Proration Schedule"). The Philadelphia Proration Schedule shall be conclusive and binding upon the EZ Parties unless EZ provides Evergreen Parent with a Notice of Disagreement within thirty (30) days after EZ's receipt of the Philadelphia Proration Schedule, which notice shall state the prorations proposed by EZ (the "EZ Proration Schedule"). Evergreen Parent shall have fifteen (15) days from receipt of a Notice of Disagreement to accept or reject the EZ Proration Schedule. If Evergreen Parent rejects the EZ Proration Schedule and the amount in dispute exceed Five Thousand Dollars ($5,000), the dispute shall be submitted within ten (10) days of such rejection to the Referee for resolution, such resolution to be made within thirty (30) days after submission to the Referee and to be final, conclusive and binding on the Evergreen Parties and the EZ Parties. EZ and Evergreen Parent agree to share equally the cost and expenses of the Referee, but each party shall bear its own legal and other expenses, if any. If the amount in dispute is equal to or less than Five Thousand Dollars -5- ($5,000), such amount shall be divided equally between EZ and Evergreen Parent. Payment by EZ or Evergreen Parent, as the case may be, of the proration amounts determined pursuant to this Section 2.3(e) shall be due fifteen (15) days after the last to occur of (i) EZ's acceptance of the Philadelphia Proration Schedule or failure to give Evergreen Parent a timely Notice of Disagreement; (ii) Evergreen Parent's acceptance of the EZ Proration Schedule or failure to reject the EZ Proration Schedule within fifteen (15) days of receipt of a timely Notice of Disagreement; (iii) Evergreen Parent's rejection of the EZ Proration Schedule in the event the amount in dispute equal or is less than Five Thousand Dollars ($5,000); and (iv) notice to Evergreen Parent and EZ of the resolution of the disputed amount by the Referee in the event that the amount in dispute exceeds Five Thousand Dollars ($5,000). (f) Any payment required by EZ to Evergreen Parent or by Evergreen Parent to EZ, as the case may be, under Section 2.3(d), 2.3(e) or 2.3(g) shall be paid by wire transfer of immediately available funds to the account of the payee with a financial institution in the United States as designated by such party in the Philadelphia Proration Schedule or the Charlotte Proration Schedule, as the case may be, or the Notice of Disagreement (or by separate notice in the event a Notice of Disagreement is not sent). If either EZ or Evergreen Parent fails to pay when due any amount under Section 2.3(d), 2.3(e) or 2.3(g), interest on such amount will accrue from the date payment was due to the date such payment is made at a per annum rate equal to the "prime rate" as published daily in the Money Rates column of the Wall Street Journal (or the average of such rates if ------------------- more than one rate indicated) plus two percent (2%), and such interest shall be ---- payable upon demand. (g) Obligations and liabilities under Trade Agreements shall be prorated in favor of the party assuming the same only to the extent that the aggregate obligations and liabilities (determined in accordance with GAAP) for unperformed air time under all such agreement as of 12:01 a.m. on the applicable Cut-off Date exceed by One Hundred Twenty-Five Thousand Dollars ($125,000) in the case of the EZ Stations, and by One Hundred Fifteen Thousand ($115,000) in the case of the Evergreen Stations, the fair market value of the property (determined in accordance with GAAP) to be received by the Assuming Party under such Trade Agreements after 12:01 a.m. on the applicable Cut-off Date under all such Trade Agreements. Additionally, the aggregate obligations and liabilities for unperformed air time under all Evergreen Trade Agreements and under all EZ Trade Agreements on the applicable Cut-off Date which are required to be prorated (any excess being part of the applicable Nonassumed Liabilities) shall not exceed Five Hundred Thousand Dollars ($500,000) and Six Hundred Thousand Dollars ($600,000), respectively. There shall be no proration in favor of the assigning party with respect to the Trade Agreements, notwithstanding the fact that the excess, if any, of the obligations and liabilities under the Trade Agreements over the fair market value of the property to be received under such Trade Agreements after 12:01 a.m. on the applicable Cut-off Date is less than the amounts specified in the first sentence of this paragraph. (h) Nothing contained in this Section 2.3 is intended or shall be deemed to amend or modify the indemnification provisions of Article 8 nor to reallocate responsibility for the matters set forth therein. 2.4 Closing Date. The closing of the Exchange (the "Closing") shall take ------------ place at Hunton & Williams, 1751 Pinnacle Drive, Suite 1700, McLean, Virginia 22102, at 10:00 a.m., local time, on the later of (a) the earlier of (i) the second (2nd) business day following the effectiveness of the -6- American-EZ Merger, and (ii) June 30, 1997, and (b) the tenth (10th) business day after the satisfaction or waiver by Evergreen Parent and EZ of the conditions set forth in Section 6.1, or such other place or on such other date, prior to the Termination Date, as the parties may agree (the "Closing Date"). At the Closing, each of the parties shall deliver such bills of sale, assignments, assumptions of liabilities, opinions and other instruments and documents as are described in this Agreement or as may be otherwise reasonably requested by the parties and their respective counsel. Prior to Closing, Evergreen Parent shall identify for EZ the appropriate Evergreen Party to which the EZ Assets (or any portion of them) shall be assigned. 2.5 Accounts Receivable. Upon the earlier to occur of Closing or the ------------------- commencement of the effectiveness of the applicable TBA, the Evergreen Parties shall appoint PBI their agent and the EZ Parties shall appoint Evergreen Parent their agent for the purpose of collecting all Accounts Receivable relating to the Evergreen Stations and the EZ Stations, respectively. Each party shall deliver to the other on or as soon as practicable after the applicable TBA Date (but, in any event, within ten (10) days after such TBA Date) a complete and detailed statement showing the name, amount and age of each Account Receivable of its Stations. Subject to and limited by the following, revenues relating to the Evergreen Accounts Receivable and the EZ Accounts Receivable will be for the account of Evergreen and the EZ Parties, respectively. Each agent shall use its best efforts to collect the Accounts Receivable with respect to which it is acting as agent for a period of ninety (90) days after the applicable Cut-off Date (the "Collection Period"). Any payment received by either party during the Collection Period from any customer with an account which is an Account Receivable with respect to which it is acting as agent shall first be applied in reduction of such Account Receivable, unless the customer indicates otherwise in writing. During the Collection Period, each agent shall furnish the other with a list of, and pay over to the other, the amounts collected with respect to the Accounts Receivable with respect to which it is acting as agent on a bi-weekly basis. Each agent shall provide the other with a final accounting on or before the fifteenth (15th) day following the end of the Collection Period. Upon the request of either agent at and after such time, the parties shall meet to mutually and in good faith analyze any uncollected Accounts Receivable to determine if the same, in their reasonable business judgment, are deemed to be collectable and if the party which acted as agent with respect thereto desires to retain such Accounts Receivable in the interest of maintaining an advertising relationship. As to each such Accounts Receivable, the parties shall negotiate a good faith value of such Accounts Receivable, which the purchasing party shall pay to the other if the purchasing party, in its sole discretion, chooses to retain such Accounts Receivable. Each party shall retain the right to collect any of its Accounts Receivable as to which the parties are unable to reach agreement as to a good faith value, and each party agrees to turn over to the other any payments received against any such Accounts Receivable. Neither agent shall be obligated to use any extraordinary efforts to collect any of the Accounts Receivable assigned to it for collection hereunder or to refer any of such Accounts Receivable to a collection agency or to any attorney for collection, and neither party shall make any such referral or compromise, nor settle or adjust the amount of any such Accounts Receivable, except with the approval of the other agent. Neither agent shall incur any liability to any other party for any uncollected account unless such agent shall have engaged in willful misconduct or gross negligence in the performance of its obligations set forth in this Section. During and after the Collection Period, without specific agreement with the agent with respect thereto to the contrary, none of the assigning parties nor its agents shall make any direct solicitation of the Accounts Receivable for collection purposes, except for Accounts Receivable retained by the assigning party after the Collection Period. -7- 2.6 Like-Kind Exchange. The EZ Parties may elect to effect the transfer ------------------ and conveyance of the Evergreen Assets relating to WRFX(FM) as part of an exchange under Section 1031 of the Code, in lieu of selling such assets hereafter. If the EZ Parties so elect, they shall provide notice to Evergreen of their election, and thereafter (i) may at any time at or prior to Closing assign their rights (but such assignment shall not relieve them of their obligations) under this Agreement with respect to such Evergreen Assets to a "qualified intermediary" as defined in Treas. Reg. (S)1.1031(k)-1(g)(4), subject to all rights and obligations hereunder of the Evergreen Parties and (ii) shall promptly provide written notice of such assignment to all Evergreen Parties. The Evergreen Parties shall cooperate with all reasonable requests of the EZ Parties and the "qualified intermediary" in arranging and effecting the transfer of such Evergreen Assets to the "qualified intermediary". Without limiting the generality of the foregoing, if the EZ Parties have given notice of their intention to effect the acquisition of such Evergreen Assets as part of a tax- deferred exchange, the Evergreen Parties shall (i) promptly provide the EZ Parties with written acknowledgment of such notice and (ii) at Closing, deliver such Evergreen Assets to the "qualified intermediary" rather than to the EZ Parties (which deliver shall discharge the obligation of the Evergreen Parties to make delivery of such Evergreen Assets hereunder). ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE EVERGREEN PARTIES Each Evergreen Party hereby, jointly and severally, represents, warrants and covenants to, and agrees with, the EZ Parties as follows: 3.1 Organization and Business; Power and Authority; Effect of Transaction. --------------------------------------------------------------------- (a) Each Evergreen Party is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, has all requisite corporate power and authority to own or hold under lease its properties and to conduct its business as now conducted. (b) Each Evergreen Party has all requisite corporate power and authority necessary to enable it to execute and deliver, and to perform its obligations under, this Agreement and each Collateral Document executed or required to be executed by it pursuant hereto or thereto or to consummate the Exchange and the other Transactions; and the execution, delivery and performance of this Agreement and each Collateral Document executed or required to be executed by it pursuant hereto or thereto have been duly authorized by all requisite corporate action on the part of each Evergreen Party. This Agreement has been duly executed and delivered by each Evergreen Party and constitutes, and each Collateral Document to which any Evergreen Party becomes a party will, when executed and delivered by such Evergreen Party, constitute, the legally valid and binding obligation of such Evergreen Party, enforceable against such Evergreen Party in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, moratorium, insolvency and similar laws affecting the rights and remedies of creditors and obligations of debtors generally and by general principles of equity. -8- (c) Except as set forth in Section 3.1(c) of the Evergreen Disclosure Schedule, neither the execution and delivery by each Evergreen Party of this Agreement or any Collateral Document executed or required to be executed by it pursuant hereto or thereto, nor the consummation by each Evergreen Party of the Exchange and the other Transactions, nor compliance with the terms, conditions and provisions hereof or thereof by each Evergreen Party: (i) will conflict with, or result in a breach or violation of, or constitute a default under, any Organic Document of any Evergreen Party or any Applicable Law on the part of any Evergreen Party, 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 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 Evergreen Material Agreement; or (ii) will require any Evergreen Party to make or obtain any Governmental Authorization, Governmental Filing or Private Authorization, except for the FCC Consents, filings under the Hart-Scott-Rodino Act and Private Authorizations the failure of which to be obtained or maintained would not, individually or in the aggregate, have a Material Adverse Effect on Evergreen. (d) Evergreen Parent does not have any direct or indirect Subsidiaries or other Affiliates which own or have any interest in any of the Evergreen Stations or any of the Evergreen Assets other than the other Evergreen Parties. 3.2 Financial and Other Information. Evergreen has heretofore furnished ------------------------------- to EZ copies of the unaudited financial data of the Evergreen Stations listed in Section 3.2 of the Evergreen Disclosure Schedule (the "Evergreen Financial Data"). Except as set forth in Section 3.2 of the Evergreen Disclosure Schedule (which schedule reflects the inclusion of "barter" transactions and the effects thereof), and except for normal year-end audit adjustments and accruals, if any, the Evergreen Financial Data have been prepared in accordance with GAAP applied on a basis consistent with past practices and are a true, accurate and fair presentation of the operating revenues and operating expenses of the Evergreen Stations for the periods indicated. 3.3 Changes in Condition. Since June 30, 1996, except to the extent -------------------- specifically described in Section 3.3 of the Evergreen Disclosure Schedule, there has been no Material Adverse Change in Evergreen. There is no Event known to Evergreen which Materially Adversely Affects, or (so far as any Evergreen Party can now reasonably foresee) is likely to Materially Adversely Affect, Evergreen, except to the extent specifically described in Section 3.3 of the Evergreen Disclosure Schedule. 3.4 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 Evergreen Disclosure Schedule, except for such exceptions and qualifications including without limitation those set forth in the Evergreen Disclosure Schedule -9- which, in the aggregate for all such representations and warranties, are not and could not reasonably be expected to be Materially Adverse to Evergreen. 3.5 Title to Properties; Leases. --------------------------- (a) Section 3.5(a) of the Evergreen Disclosure Schedule lists all Real Property and describes all Leases of Real Property (the "Evergreen Leases") used or held for use in the operation of the Evergreen Stations (the "Evergreen Real Property"). One of the Evergreen Parties has good and marketable title, or valid and subsisting leasehold interests (as shown on Section 3.5(a) of the Evergreen Disclosure Schedule), to all Evergreen Real Property, in each case free and clear of all Liens, except (i) Permitted Liens and (ii) Liens set forth on Section 3.5(a) of the Evergreen Disclosure Schedule (which Liens shall be released prior to Closing). Except as otherwise set forth in Schedule 3.5(a) of the Evergreen Disclosure Schedule, each Evergreen Lease included in the Evergreen Real Property has been duly authorized, executed and delivered by the appropriate Evergreen Party and, to Evergreen's knowledge, information and belief, each of the other parties thereto, and is a legally valid and binding obligation of the appropriate Evergreen Party, and, to Evergreen's knowledge, information and belief, each of the other parties thereto, enforceable in accordance with its terms. The appropriate Evergreen Party has a valid leasehold interest in and enjoys peaceful and undisturbed possession under all Evergreen Leases pursuant to which it holds any Evergreen Real Property. All Evergreen Leases are valid and subsisting and in full force and effect; neither any Evergreen Party nor, to Evergreen's knowledge, information and belief, any other party thereto, is in default in the performance, observance or fulfillment of any obligation, covenant or condition contained in any Evergreen Lease. Except as disclosed in Section 3.5(a) of the Evergreen Disclosure Schedule, all improvements on the Evergreen Real Property are in compliance with applicable zoning and land use laws, ordinances and regulations in all respects necessary to conduct the operation of the Evergreen Stations operating thereon as presently conducted, except for any instances of non-compliance which do not and will not individually or in the aggregate have a Material Adverse Effect on the owner or lessee, as the case may be, of such Evergreen Real Property. Except as disclosed in Section 3.5(a) of the Evergreen Disclosure Statement, and except for the Evergreen AM Stations (as to which no representation or warranty is made hereby), all such improvements are in good working condition and repair (ordinary wear and tear excepted), are insurable at standard rates, and comply in all Material aspects with FCC rules and regulations. Except as disclosed in Section 3.5(a) of the Evergreen Disclosure Statement, and except for the Evergreen AM Stations (as to which no representation or warranty is made hereby), all of the transmitting towers, ground radials, guy anchors, transmitting buildings and related improvements located on the Evergreen Real Property are located entirely on the Evergreen Real Property. Evergreen has no knowledge of any pending, threatened or contemplated action to take by eminent domain or otherwise to condemn any part of the Evergreen Real Property. (b) Section 3.5(b) of the Evergreen Disclosure Schedule contains a true, accurate and complete description of all Material items of Evergreen Personal Property. None of the Evergreen Personal Property is subject to any Lien, except (i) Permitted Liens, and (ii) Liens set forth on Section 3.5(b) of the Evergreen Disclosure Schedule (which Liens shall be released prior to Closing). Except as set forth in Section 3.5(b) of the Evergreen Disclosure Schedule, including without limitation the fact that the office and studio facilities of the Evergreen Stations (the "Evergreen Studio Facilities") require significant improvement (including without limitation the -10- necessity of repair, renovation or relocation), all Material items of Evergreen Personal Property (other than the Evergreen Studio Facilities and the Evergreen Personal Property used solely in connection with the Evergreen AM Stations, as to which no representation or warranty is made hereby) are in a state of good repair and maintenance and are in good operating condition, normal wear and tear excepted, have been maintained in a manner consistent with generally accepted standards of good engineering practice and currently permit the Evergreen Stations to be operated in accordance with the terms and conditions of the Evergreen FCC Licenses and all Applicable Laws. EZ acknowledges and agrees that Evergreen shall not be required to perform any facility improvements to the Evergreen Studio Facilities. 3.6 Compliance with Private Authorizations. Section 3.6 of the Evergreen -------------------------------------- Disclosure Schedule sets forth a true, accurate and complete list and description of each Evergreen Private Authorization which individually or when taken together with other substantially similar Evergreen Private Authorizations is Material to the Evergreen Assets or any of the Evergreen Stations, all of which are in full force and effect. The Evergreen Private Authorizations are all Private Authorizations that are necessary for the ownership and operation by Evergreen of the Evergreen Assets and the Evergreen 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 Evergreen. No Evergreen Party is in breach or violation of, or in default in the performance, observance or fulfillment of, any Evergreen Private Authorization, and no Event exists or has occurred, which constitutes, or but for any requirement of giving of notice or passage of time or both would constitute, such a breach, violation or default, under any Evergreen Private Authorization, except for such defaults, breaches or violations as do not and will not have in the aggregate any Material Adverse Effect on Evergreen. No Evergreen Private Authorization is the subject of any pending or, to Evergreen's knowledge, information or belief, threatened attack, revocation or termination. 3.7 Compliance with Governmental Authorizations and Applicable Law. -------------------------------------------------------------- (a) Section 3.7(a) of the Evergreen Disclosure Schedule contains a description of: (i) all Legal Actions pending or, to Evergreen's knowledge, information and belief, is threatened against any Evergreen Party with respect to the operation or ownership of any of the Evergreen Assets or the conduct of the business of any of the Evergreen Stations; (ii) all Claims and Legal Actions pending or, to Evergreen's knowledge, information and belief, threatened against any Evergreen Party with respect to the operation or ownership of any of the Evergreen Assets or the conduct of the business of any of the Evergreen Stations which, individually or in the aggregate, are reasonably likely to result in the revocation or termination of any of the Evergreen FCC Licenses or the imposition of any restriction of such a nature as would Adversely affect the ownership or operations of any of the Evergreen Stations; in particular, but without limiting the generality of the foregoing, there are no applications, complaints or Legal Actions pending or, to Evergreen's knowledge, information and belief, threatened (x) before the FCC relating to the ownership or operations of any of the Evergreen Assets or the conduct of the business of any of the -11- Evergreen Stations other than applications, complaints or Legal Actions which affect the radio broadcasting industry generally, or (y) before any Authority involving charges of illegal discrimination by any of the Evergreen Stations under any federal or state employment Laws; and (iii) each Governmental Authorization (including without limitation all FCC Licenses) required under Applicable Laws (x) to own and operate each of the Evergreen Stations, as currently conducted or proposed to be conducted on or prior to the Closing Date, all of which are in full force and effect or (y) that are necessary to permit each Evergreen Party to execute and deliver this Agreement and to perform its obligations hereunder (the "Evergreen Governmental Authorizations"). The Evergreen Parties have delivered to the EZ Parties true and complete copies of the Evergreen Governmental Authorizations (including any and all amendments and other modifications thereto.) (b) The appropriate Evergreen Party is the authorized legal holder of the Evergreen FCC Licenses listed in Section 3.7(a) of the Evergreen Disclosure Schedule, none of which is subject to any restriction or condition which would limit in any respect the operations of any of the Evergreen Stations as currently conducted or proposed to be conducted on or prior to the Closing Date. The Evergreen FCC Licenses 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 any Evergreen Party or its officers, directors, employees or agents, and the operation of each of the Evergreen Stations is in accordance in all Material respects with the Evergreen FCC Licenses. The Evergreen Stations are operating in accordance with the Evergreen FCC Licenses, all underlying construction permits and the FCA. Except as disclosed in Section 3.7 of the Evergreen Disclosure Schedule, no application, action or proceeding is pending for the renewal or modification of any Evergreen FCC Licenses and, to Evergreen's knowledge, information and belief, there is not as of the date of this Agreement issued or outstanding any investigation or material complaint against any Evergreen Party at the FCC relating to any Evergreen Station. Except as disclosed in Section 3.7 of the Evergreen Disclosure Schedule, as of the date of this Agreement, there is no proceeding pending at or outstanding notice of violation from the FCC relating to any Evergreen Station. All fees payable to Authorities pursuant to the FCC Licenses, including FCC annual regulatory fees have been paid and no event has occurred which, individually or in the aggregate, and without the giving of notice or the lapse of time or both, would constitute grounds for revocation thereof or would have a Material Adverse Effect on Evergreen. All Material reports, forms and statements required to be filed by each Evergreen Party with the FCC with respect to each of the Evergreen Stations have been filed and are true, complete and accurate in all Material respects. To the knowledge, information and belief of Evergreen, under the FCA, there are no facts that would disqualify it as the transferee of the control of the EZ Stations. No renewal of any Evergreen FCC License would constitute a major environmental action (as defined in the FCC rules and regulations). The Evergreen Governmental Authorizations comprise all Governmental Authorizations which are necessary for the lawful ownership or operation of the Evergreen Assets or the lawful conduct of the business of each of the Evergreen Stations as now conducted or as presently proposed to be conducted, except for Governmental Authorizations, the failure of which to obtain and maintain, would not individually or in the aggregate, have any Material Adverse Effect on -12- Evergreen. No Evergreen Governmental Authorization is the subject of any pending or, to Evergreen's knowledge, information and belief, threatened challenge or proceeding to revoke or terminate any Evergreen Governmental Authorization. Evergreen has no reason to believe that any Evergreen Governmental Authorization would not be renewed in the name of Evergreen by the granting Authority in the ordinary course. (c) With respect to matters, if any, of a nature referred to in Section 3.7(a) or 3.7(b) of the Evergreen Disclosure Schedule, except as otherwise specifically described in Section 3.7(c) of the Evergreen Disclosure Schedule, all such information and matters set forth in the Evergreen Disclosure Schedule, if adversely determined against Evergreen, will not, in the aggregate, Materially Adversely Affect Evergreen. 3.8 Intangible Assets. Section 3.8 of the Evergreen Disclosure Schedule ----------------- sets forth a true, accurate and complete description of all Intangible Assets held or used by Evergreen (other than the Evergreen Governmental Authorizations and the Evergreen Private Authorizations) relating to the ownership and operation of the Evergreen Assets or the conduct of the business of any of the Evergreen Stations (the "Evergreen Intangible Assets"), including without limitation the nature of Evergreen's interest in each and the extent to which the same have been duly registered in the offices as indicated therein. One of the Evergreen Parties owns or possesses or otherwise has the right to use all Evergreen Intangible Assets necessary in order to operate the Evergreen Assets in the manner currently being operated by the Evergreen Parties. Except as set forth in Section 3.8 of the Evergreen Disclosure Schedule, no Intangible Assets (except for the Evergreen Governmental Authorizations and the Evergreen Private Authorizations and the Evergreen Intangible Assets so set forth) are required for the ownership or operation of the Evergreen Assets or the conduct of the business of any of the Evergreen Stations as currently owned, operated and conducted or proposed to be owned, operated and conducted on or prior to the Closing Date. 3.9 Related Transactions. No Evergreen Party is a party or subject to any -------------------- Contract relating to the ownership and operation of the Evergreen Assets or the conduct of the business of any of the Evergreen Stations between any Evergreen Party and any of its officers, directors, stockholders, employees or, to the knowledge, information and belief of Evergreen, any Affiliate of any thereof (other than another Evergreen Party), including without limitation any Contract providing for the furnishing of services to or by, providing for 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 such Person, other than (i) Evergreen Employment Arrangements listed or described in Section 3.12 of the Evergreen Disclosure Schedule and (ii) Contracts between Evergreen and officers which constitute Evergreen Excluded Assets and obligations of Evergreen not being assumed by EZ. 3.10 Insurance. One of the Evergreen Parties maintains, with respect to --------- the Evergreen Assets and the Evergreen Stations, policies of fire and extended coverage and casualty, liability and other forms of insurance in such amounts and against such risks and losses as are in Evergreen Parent's reasonable business judgment prudent (a true, complete and accurate description of which is set forth in Section 3.10 of the Evergreen Disclosure Schedule) and shall use reasonable business efforts to keep such insurance or comparable insurance in full force and effect through the Closing Date, except to the extent otherwise provided in the Evergreen Stations TBA. -13- 3.11 Tax Matters. Each Evergreen Party has in respect of the Evergreen ----------- Assets and the Evergreen Stations filed all Material Tax Returns which are required to be filed, and has paid, or made adequate provision for the payment of, all 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. There are no unpaid Taxes which are due and payable, or alleged to be due and payable by any Taxing Authority, the non-payment of which is or could become a Lien on any of the Evergreen Assets or any of the Evergreen Stations. All Taxes in respect of the Evergreen Assets and the Evergreen Stations which Evergreen 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 Authorities to the extent due and payable. Except as set forth in Section 3.11 of the Evergreen Disclosure Schedule, no Evergreen Party has 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 associated with the Evergreen Assets or the Evergreen Stations for the fiscal years prior to and including the most recent fiscal year. 3.12 Employee Retirement Income Security Act of 1974. ----------------------------------------------- (a) Section 3.12(a) of the Evergreen Disclosure Schedule contains a true, accurate and complete list of all Evergreen employees employed in the ownership or operation of any of the Evergreen Assets or the conduct of the business of any of the Evergreen Stations (the "Evergreen Station Employees"), together with each such employee's title or the capacity in which he or she is employed and all Employment Arrangements with respect to such employee (each, an "Evergreen Employment Arrangement"). All of the Evergreen Employee Plans and all other Evergreen Employment Arrangements are listed in Section 3.12(a) of the Evergreen Disclosure Schedule and true, complete and accurate copies of all such written Evergreen Employee Plans and Evergreen Employment Arrangements (or related insurance policies) have been furnished to EZ, along with copies of any employee handbooks or similar documents describing such Evergreen Employee Plans or any other Evergreen Employment Arrangements. Section 3.12(a) of the Evergreen Disclosure Schedule also contains a true, complete and accurate description of any unwritten Evergreen Employee Plan or other unwritten Evergreen Employment Arrangement. (b) Each Evergreen Employment Arrangement has been administered in compliance with its own terms and in Material compliance with the provisions of ERISA, the Code, the Age Discrimination in Employment Act and any other applicable federal or state Laws. Evergreen is not aware of any pending audit or examination of any Evergreen Employee Plan or any other Evergreen Employment Arrangement by any Authority or of any facts which would lead it to believe that any such audit or examination is threatened. There exists no Claim or Legal Action (other than routine claims for benefits) with respect to any Evergreen Employee Plan or any other Evergreen Employment Arrangement pending or, to Evergreen's knowledge, information and belief, threatened against any Evergreen Employee Plan or any other Evergreen Employment Arrangement, and no Evergreen Party possesses any knowledge of any facts which could give rise to any such Legal Action or Claim. (c) No Evergreen Party contributes to or is required to contribute to any Multiemployer Plan with respect to any of the Evergreen Station Employees and neither any Evergreen Party nor -14- any other trade or business under common control with any Evergreen Party (within the meaning of Section 414(b), (c), (m) or (o) of the Code) has incurred or reasonably expects to incur any "withdrawal liability," as defined under Section 4201 et seq. of ERISA. -- --- (d) Except as described in Section 3.12(d) of the Evergreen Disclosure Statement, neither any Evergreen Party nor any other trade or business under common control with any Evergreen Party (within the meaning of Sections 414(b), (c), (m) or (o) of the Code) sponsors, maintains or contributes to any Evergreen Employee Plan or any other Evergreen Employment Arrangement that provides retiree medical or retiree life insurance coverage to any Evergreen Station Employee upon his/her retirement. (e) Except as described in Section 3.12(e) of the Evergreen Disclosure Statement with respect to each Evergreen Employee Plan and, to the extent applicable, any other compensation comprising an Evergreen Employment Arrangement: (i) each such Evergreen Employee Plan that is intended to be tax- qualified, and each amendment thereto, is the subject of a favorable determination letter, and no plan amendment that is not the subject of a favorable determination letter would affect the validity of an Evergreen Employee Plan's letter; (ii) no prohibited transaction, within the definition of Section 4975 of the Code or Title 1, Part 4 of ERISA, has occurred which would subject any Evergreen Party to any liability that could become a liability of EZ; and (iii) all contributions premiums or payments accrued, in whole or in part, under each such Evergreen Employee Plan or other Evergreen Employment Arrangement or with respect thereto as of the Closing will be paid by the appropriate Evergreen Party prior to the Closing. (f) For purposes of this Section, the term "Evergreen Employee Plan" shall mean any pension, profit-sharing, deferred compensation, vacation, bonus, incentive, medical, vision, dental, disability, life insurance or any other employee benefit plan as defined in Section 3(3) of ERISA to which any Evergreen Party (under the terms of Section 414(b), (c), (m) or (o) of the Code) sponsors, maintains or otherwise is bound which provides benefits to any person employed or previously employed at any of the Evergreen Stations. 3.13 Absence of Sensitive Payments. Neither any Evergreen Party nor, to ----------------------------- Evergreen's knowledge, information and belief, any of its officers, directors, employees, agents or other representatives, has with respect to the Evergreen Assets or the Evergreen Stations (a) made any contributions, payments or gifts to or for the private use of any governmental official, employee or agent where either the payment or the purpose of such contribution, payment or gift is illegal under the laws of the United States or the jurisdiction in which made or (b) established or maintained any unrecorded fund or asset for any purpose or made any false or artificial entries on its books. 3.14 Inapplicability of Specified Statutes. Evergreen Parent 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. -15- 3.15 Employment Arrangements. Except as described in Section 3.15 of the ----------------------- Evergreen Disclosure Schedule, with respect to any Evergreen Station, (i) none of the Evergreen Station Employees is now, or, to Evergreen's knowledge, information and belief, since the date on which the appropriate Evergreen Party acquired such Evergreen Station, has been, represented by any labor union or other employee collective bargaining organization, and no Evergreen Party is, or has ever been, a party to any labor or other collective bargaining agreement with respect to the Evergreen Station Employees, (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 such union or other organization, and (iii) neither any Evergreen Party nor any of such employees is now, or, to Evergreen's knowledge, information and belief, since the date on which the appropriate Evergreen Party acquired such Evergreen Station, has been, subject to or involved in or, to Evergreen's knowledge, information and belief, threatened with, any union elections, petitions therefore or other organizational or recruiting activities, in each case with respect to any Evergreen Station Employees. Each Evergreen Party has performed in all Material respects all obligations required to be performed under each Evergreen Employee Plan and each other Evergreen Employment Arrangement and is not in Material breach or violation of or in Material default or arrears under any of the terms, provisions or conditions thereof. 3.16 Material Agreements. Listed on Section 3.16 of the Evergreen ------------------- Disclosure Schedule are all Material Agreements relating to the ownership or operation of the Evergreen Assets or the conduct of the business of any of the Evergreen Stations or to which any of the Evergreen Assets is subject (the "Evergreen Material Agreements"). True, accurate and complete copies of each Evergreen Material Agreement have been made available by Evergreen to EZ and Evergreen has provided EZ with photocopies of all Evergreen Material Agreements requested by EZ (or true, accurate and complete descriptions thereof have been set forth in Section 3.16 of the Evergreen Disclosure Schedule, if any such Material Agreements are oral). All of the Evergreen Material Agreements are valid, binding and legally enforceable obligations of an Evergreen Party and, to Evergreen's knowledge, information and belief, all other parties thereto (except to the extent that the invalidity or non-binding nature of any Evergreen Material Agreements, individually or in the aggregate would not have a Material Adverse Effect on Evergreen). Each Evergreen Party has duly complied with all of the Material terms and conditions of each Evergreen Material Agreement to which it is a party 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 Evergreen, threatened Claim that any Evergreen Party 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) any Evergreen Material Agreement or impair the rights or benefits, or increase the costs, of any Evergreen Party under any Evergreen Material Agreement. No Evergreen Party has granted any Material waivers or forbearance under any Evergreen Material Agreement and, to Evergreen's knowledge, information and belief, no third party is in material default in the performance of any of its obligations under any Evergreen Material Agreement. Except for those consents or approvals listed in Section 3.16 of the Evergreen Disclosure Schedule, no consents or approvals of any third party are necessary to permit the assignment by the Evergreen Parties of the Evergreen Material Agreements to the EZ Parties and such assignment will not affect the validity or enforceability of any Evergreen Material Agreement or cause any Material change in the substantive terms of any of them. -16- 3.17 Ordinary Course of Business. Each Evergreen Party, from the end of --------------------------- its most recent fiscal quarter to the date hereof, except (i) as may be described on Section 3.17 of the Evergreen Disclosure Schedule, or (ii) as may be required or expressly contemplated by the terms of this Agreement, with respect to the Evergreen Assets and each of the Evergreen Stations: (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 Evergreen Asset having a value in excess of $50,000, 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 $50,000; (ii) has not entered into any commitments having a value in excess of $50,000; and (iii) has not canceled any debts or claims; (d) has not made or committed to make any additions to its property or any purchases of equipment, except for normal maintenance and replacements; (e) except as described in Section 3.17(e) of the Evergreen Disclosure Schedule, has not increased the compensation payable or to become payable to any of the Evergreen Station Employees other than in the ordinary course of business or otherwise altered, modified or changed the terms of their employment; (f) 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; (g) has not waived any rights of Material value without fair and adequate consideration; (h) has not experienced any work stoppage; and (i) except in the ordinary course of business, has not entered into, amended or terminated any Evergreen Lease, Evergreen Governmental Authorization, Evergreen Private Authorization, Evergreen Material Agreement, Evergreen Employment Arrangement or Contract, or any transaction, agreement or arrangement with any Affiliate of Evergreen. -17- 3.18 Broker or Finder. No Person assisted in or brought about the ---------------- negotiation of this Agreement or the Exchange in the capacity of broker, agent or finder or in any similar capacity on behalf of any Evergreen Party other than Star Media Group whose fee will be paid by Evergreen. 3.19 Solvency. As of the execution and delivery of this Agreement, each -------- Evergreen Party is, and immediately prior to giving effect to the consummation of the Exchange and the other Transactions will be, solvent. 3.20 Environmental Matters. Except as set forth in Section 3.20 of the --------------------- Evergreen Disclosure Schedule, with respect to the Evergreen Assets, each Evergreen Party: (a) to the knowledge, information and belief of Evergreen, 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 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 Evergreen, in substantial compliance in all Material respects with all Environmental Laws, has, to Evergreen's knowledge, information and belief, obtained all Environmental Permits required under Environmental Laws, and is not the subject of or, to Evergreen'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 Evergreen Stations or any of the Evergreen Assets which Event, 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. 3.21 Trade or Barter. Section 3.21 of the Evergreen Disclosure Schedule --------------- sets forth a true, complete and accurate description (including obligations and liabilities remaining thereunder) of all Evergreen Trade Agreements that individually involve or may involve, valued in accordance with GAAP, more than $500 in obligations remaining thereunder as of the date of this Agreement in money, property or services or a remaining term in excess of two months. -18- ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE EZ PARTIES Each EZ Party hereby, jointly and severally, represents, warrants and covenants to, and agrees with, the Evergreen Parties as follows: 4.1 Organization and Business; Power and Authority; Effect of Transaction. --------------------------------------------------------------------- (a) Each EZ Party is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, has all requisite corporate power and authority to own or hold under lease its properties and to conduct its business as now conducted. (b) Each EZ Party has all requisite corporate power and authority necessary to enable it to execute and deliver, and to perform its obligations under, this Agreement and each Collateral Document executed or required to be executed by it pursuant hereto or thereto or to consummate the Exchange and the other Transactions; and the execution, delivery and performance of this Agreement and each Collateral Document executed or required to be executed by it pursuant hereto or thereto have been duly authorized by all requisite corporate action on the part of each EZ Party. This Agreement has been duly executed and delivered by each EZ Party and constitutes, and each Collateral Document to which any EZ Party becomes a party will, when executed and delivered by such EZ Party, constitute, the legally valid and binding obligation of such EZ Party, enforceable against such EZ Party in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, moratorium, insolvency and similar laws affecting the rights and remedies of creditors and obligations of debtors generally and by general principles of equity. (c) Except as set forth in Section 4.1(c) of the EZ Disclosure Schedule, neither the execution and delivery by any EZ Party of this Agreement or any Collateral Document executed or required to be executed by it pursuant hereto or thereto, nor the consummation by each EZ Party of the Exchange and the other Transactions, nor compliance with the terms, conditions and provisions hereof or thereof by each EZ Party: (i) will conflict with, or result in a breach or violation of, or constitute a default under, any Organic Document of any EZ Party or any Applicable Law on the part of any EZ Party, 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 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 EZ Material Agreement; or (ii) will require any EZ Party to make or obtain any Governmental Authorization, Governmental Filing or Private Authorization, except for the FCC Consents, filings under the Hart-Scott-Rodino Act and Private Authorizations the failure of which to be obtained or maintained would not, individually or in the aggregate, have a Material Adverse Effect on EZ. -19- (d) EZ Parent does not have any direct or indirect Subsidiaries or other Affiliates which own or have any interest in any of the EZ Stations or any of the EZ Assets other than the other EZ Parties. 4.2 Financial and Other Information. EZ has heretofore furnished to ------------------------------- Evergreen copies of the unaudited financial data of the EZ Stations listed in Section 4.2 of the EZ Disclosure Schedule (the "EZ Financial Data"). Except as set forth in Section 4.2 of the EZ Disclosure Schedule (which schedule reflects the inclusion of "barter" transactions and the effects thereof), and except for normal year-end audit adjustments and accruals, if any, the EZ Financial Data have been prepared in accordance with GAAP applied on a basis consistent with past practices and are a true, accurate and fair presentation of the operating revenues and operating expenses of the EZ Stations for the periods indicated. 4.3 Changes in Condition. Since June 30, 1996, except to the extent -------------------- specifically described in Section 4.3 of the EZ Disclosure Schedule, there has been no Material Adverse Change in EZ. There is no Event known to EZ which Materially Adversely Affects, or (so far as any EZ Party can now reasonably foresee) is likely to Materially Adversely Affect, EZ, except to the extent specifically described in Section 4.3 of the EZ Disclosure Schedule. 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) Section 4.5(a) of the EZ Disclosure Schedule lists all Real Property and describes all Leases of Real Property (the "EZ Leases") used or held for use in the operation of the EZ Stations (the "EZ Real Property"). One of the EZ Parties has good and marketable title, or valid and subsisting leasehold interests (as shown on Section 4.5(a) of the EZ Disclosure Schedule), to all EZ Real Property, in each case free and clear of all Liens, except (i) Permitted Liens and (ii) Liens set forth on Section 4.5(a) of the EZ Disclosure Schedule (which Liens shall be released prior to Closing). Except as otherwise set forth in Schedule 3.5(a) of the EZ Disclosure Schedule, each EZ Lease included in the EZ Real Property has been duly authorized, executed and delivered by the appropriate EZ Party and, to EZ's knowledge, information and belief, each of the other parties thereto, and is a legally valid and binding obligation of the appropriate EZ Party, and, to EZ's knowledge, information and belief, each of the other parties thereto, enforceable in accordance with its terms. The appropriate EZ Party has a valid leasehold interest in and enjoys peaceful and undisturbed possession under all EZ Leases pursuant to which it holds any EZ Real Property. All EZ Leases are valid and subsisting and in full force and effect; neither any EZ Party nor, to EZ's knowledge, information and belief, any other party thereto, is in default in the performance, observance or fulfillment of any obligation, covenant or condition contained in any EZ Lease. Except as disclosed in Section 4.5(a) of the EZ Disclosure Schedule, all improvements on the EZ Real Property are in compliance with applicable zoning and land use laws, ordinances and -20- regulations in all respects necessary to conduct the operation of the EZ Stations operating thereon as presently conducted, except for any instances of non-compliance which do not and will not individually or in the aggregate have a Material Adverse Effect on the owner or lessee, as the case may be, of such EZ Real Property. Except as disclosed in Section 4.5(a) of the EZ Disclosure Statement, all such improvements are in good working condition and repair (ordinary wear and tear excepted), are insurable at standard rates, and comply in all Material aspects with FCC rules and regulations. Except as disclosed in Section 4.5(a) of the EZ Disclosure Statement, all of the transmitting towers, ground radials, guy anchors, transmitting buildings and related improvements located on the EZ Real Property are located entirely on the EZ Real Property. EZ has no knowledge of any pending, threatened or contemplated action to take by eminent domain or otherwise to condemn any part of the EZ Real Property. (b) Section 4.5(b) of the EZ Disclosure Schedule contains a true, accurate and complete description of all Material items of EZ Personal Property. None of the EZ Personal Property is subject to any Lien, except (i) Permitted Liens and (ii) Liens set forth on Section 4.5(b) of the EZ Disclosure Schedule (which Liens shall be released prior to Closing). Except as set forth in Section 4.5(b) of the EZ Disclosure Schedule, all Material items of EZ Personal Property are in a state of good repair and maintenance and are in good operating condition, normal wear and tear excepted, have been maintained in a manner consistent with generally accepted standards of good engineering practice and currently permit the EZ Stations to be operated in accordance with the terms and conditions of their respective EZ FCC Licenses and all Applicable Laws. Without limiting the generality of the foregoing, EZ acknowledges and agrees that it shall be responsible for the substantial completion of construction of the tenant improvements currently underway at the studio building for the EZ Stations as more fully described in Section 4.5(b) of the EZ Disclosure Schedule and Section 5.8 of this Agreement. 4.6 Compliance with Private Authorizations. Section 4.6 of the EZ -------------------------------------- Disclosure Schedule sets forth a true, accurate and complete list and description of each EZ Private Authorization which individually or when taken together with other substantially similar EZ Private Authorizations is Material to the EZ Assets or either of the EZ Stations, all of which are in full force and effect. The EZ Private Authorizations are all Private Authorizations that are necessary for the ownership and operation by EZ of the EZ Assets and 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 Affect EZ. No EZ Party is in breach or violation of, or in default in the performance, observance or fulfillment of, any EZ Private Authorization, and no Event exists or has occurred, which constitutes, or but for any requirement of giving of notice or passage of time or both would constitute, such a breach, violation or default, under any EZ Private Authorization, except for such defaults, breaches or violations as do not and will not have in the aggregate any Material Adverse Effect on EZ. No EZ 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) Section 4.7(a) of the EZ Disclosure Schedule contains a description of: -21- (i) all Legal Actions pending or, to EZ's knowledge, information and belief, is threatened against any EZ Party with respect to the operation or ownership of any of the EZ Assets or the conduct of the business of either of the EZ Stations; (ii) all Claims and Legal Actions pending or, to EZ's knowledge, information and belief, threatened against any EZ Party with respect to the operation or ownership of any of the EZ Assets or the conduct of the business of either of the EZ Stations which, individually or in the aggregate, are reasonably likely to result in the revocation or termination of any of the EZ FCC Licenses or the imposition of any restriction of such a nature as would Adversely affect the ownership or operations of either of the EZ 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 (x) before the FCC relating to the ownership or operations of any of the EZ Assets or the conduct of business of either of the EZ Stations other than applications, complaints or Legal Actions which affect the radio broadcasting industry generally, or (y) before any Authority involving charges of illegal discrimination by any of the EZ Stations under any federal or state employment Laws; and (ii) each Governmental Authorization (including without limitation all FCC Licenses) required under Applicable Laws (x) to own and operate each of the EZ Stations, as currently conducted or proposed to be conducted on or prior to the Closing Date, all of which are in full force and effect or (y) that are necessary to permit each EZ Party to execute and deliver this Agreement and to perform its obligations hereunder (the "EZ Governmental Authorizations"). The EZ Parties have delivered to the EZ Parties true and complete copies of the EZ Governmental Authorizations (including any and all amendments and other modifications thereto.) (b) The appropriate EZ Party is the authorized legal holder of the EZ FCC Licenses listed in Section 4.7(a) of the EZ Disclosure Schedule, none of which is subject to any restriction or condition which would limit in any respect the operations of any of the EZ Stations as currently conducted or proposed to be conducted on or prior to the Closing Date. The EZ FCC Licenses 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 any EZ Party or its officers, directors, employees or agents, and the operation of each of the EZ Stations is in accordance in all Material respects with the EZ FCC Licenses. The EZ Stations are operating in accordance with the EZ FCC Licenses, all underlying construction permits and the FCA. Except as disclosed in Section 4.7 of the EZ Disclosure Schedule, no application, action or proceeding is pending for the renewal or modification of any EZ FCC Licenses and, to EZ's knowledge, information and belief, there is not as of the date of this Agreement issued or outstanding any investigation or material complaint against any EZ Party at the FCC relating to either EZ Station. Except as disclosed in Section 4.7 of the EZ Disclosure Schedule, as of the date of this Agreement, there is no proceeding pending at or outstanding notice of violation from the FCC relating to either EZ Station. All fees payable to Authorities pursuant to the FCC Licenses, including FCC annual regulatory fees, have been paid and no event has occurred which, individually or in the aggregate, and without the giving of notice or the lapse of time or both, would constitute grounds for revocation thereof or would have a Material Adverse Effect on EZ. -22- All Material reports, forms and statements required to be filed by any EZ Party with the FCC with respect to each of the EZ Stations have been filed and are true, complete and accurate in all Material respects. To the knowledge, information and belief of EZ, under the FCA, there are no facts that would disqualify it as the transferee of the control of the Evergreen Stations. No renewal of any EZ FCC License would constitute a major environmental action (as defined in the FCC rules and regulations). The EZ Governmental Authorizations comprise all Governmental Authorizations which are necessary for the lawful ownership or operations of the EZ Assets or the lawful conduct of the business of each of the EZ Stations as now conducted or as presently proposed to be conducted, except for Governmental Authorizations, the failure of which to obtain and maintain, would not individually or in the aggregate, have any Material Adverse Effect on EZ. No EZ 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 EZ Governmental Authorization. EZ has no reason to believe that any EZ Governmental Authorization would not be renewed in the name of EZ by the granting Authority in the ordinary course. (c) With respect to matters, if any, of a nature referred to in Section 4.7(a) or 4.7(b) of the EZ Disclosure Schedule, except as otherwise specifically described in Section 4.7(c) of the EZ Disclosure Schedule, all such information and matters set forth in the EZ Disclosure Schedule, if adversely determined against EZ, will not, in the aggregate, Materially Adversely Affect EZ. 4.8 Intangible Assets. Section 4.8 of the EZ Disclosure Schedule sets ----------------- forth a true, accurate and complete description of all Intangible Assets held or used by EZ (other than the EZ Governmental Authorizations and the EZ Private Authorizations) relating to the ownership and operation of the EZ Assets or the conduct of the business of any of the EZ Stations (the "EZ Intangible Assets"), including without limitation the nature of EZ's interest in each and the extent to which the same have been duly registered in the offices as indicated therein. One of the EZ Parties owns or possesses or otherwise has the right to use all EZ Intangible Assets necessary in order to operate the EZ Assets in the manner currently being operated by the EZ Parties. Except as set forth in Section 4.8 of the EZ Disclosure Schedule, no Intangible Assets (except for the EZ Governmental Authorizations and the EZ Private Authorizations and the EZ Intangible Assets so set forth) are required for the ownership or operation of the EZ Assets or the conduct of the business of any of the EZ Stations as currently owned, operated and conducted or proposed to be owned, operated and conducted on or prior to the Closing Date. 4.9 Related Transactions. No EZ Party is a party or subject to any -------------------- Contract relating to the ownership and operation of the EZ Assets or the conduct of the business of any of the EZ Stations between any EZ Party and any of its officers, directors, stockholders, employees or, to the knowledge, information and belief of EZ, any Affiliate of any thereof (other than another EZ Party), including without limitation any Contract providing for the furnishing of services to or by, providing for 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 such Person, other than (i) EZ Employment Arrangements listed or described in Section 4.12 of the EZ Disclosure Schedule and (ii) Contracts between EZ and officers which constitute EZ Excluded Assets and obligations of EZ not being assumed by Evergreen. -23- 4.10 Insurance. One of the EZ Parties maintains, with respect to the EZ --------- Assets and the EZ Stations, policies of fire and extended coverage and casualty, liability and other forms of insurance in such amounts and against such risks and losses as are in EZ's reasonable business judgment prudent (a true, complete and accurate description of which is set forth in Section 4.10 of the EZ Disclosure Schedule) and shall use reasonable business efforts to keep such insurance or comparable insurance in full force and effect through the Closing Date, except to the extent otherwise provided in the EZ Stations TBA. 4.11 Tax Matters. Each EZ Party has in respect of the EZ Assets and the EZ ----------- Stations filed all Material Tax Returns which are required to be filed, and has paid, or made adequate provision for the payment of, all 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. There are no unpaid Taxes which are due and payable, or alleged to be due and payable by any Taxing Authority, the non-payment of which is or could become a Lien on any of the EZ Assets or any of the EZ Stations. All Taxes in respect of the EZ Assets and the EZ Stations 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 Authorities to the extent due and payable. Except as set forth in Section 4.11 of the EZ Disclosure Schedule, no EZ Party has 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 associated with the EZ Assets or the EZ Stations for the fiscal years prior to and including the most recent fiscal year. 4.12 Employee Retirement Income Security Act of 1974. ----------------------------------------------- (a) Section 4.12(a) of the EZ Disclosure Schedule contains a true, accurate and complete list of all EZ employees employed in the ownership or operation of any of the EZ Assets or the conduct of the business of either of the EZ Stations (the "EZ Station Employees"), together with each such employee's title or the capacity in which he or she is employed and all Employment Arrangements with respect to such employee (each, an "EZ Employment Arrangement"). All of the EZ Employee Plans and all other EZ Employment Arrangements are listed in Section 4.12(a) of the Evergreen Disclosure Schedule and true, complete and accurate copies of all such written EZ Employee Plans and EZ Employment Arrangements (or related insurance policies) have been furnished to EZ, along with copies of any employee handbooks or similar documents describing such EZ Employee Plans or any other EZ Employment Arrangements. Section 4.12(a) of the Evergreen Disclosure Schedule also contains a true, complete and accurate description of any unwritten EZ Employee Plan or other unwritten EZ Employment Arrangement. (b) Each EZ Employment Arrangement has been administered in compliance with its own terms and in Material compliance with the provisions of ERISA, the Code, the Age Discrimination in Employment Act and any other applicable federal or state Laws. EZ is not aware of any pending audit or examination of any EZ Employee Plan or any other EZ Employment Arrangement by any Authority or of any facts which would lead it to believe that any such audit or examination is threatened. There exists no Claim or Legal Action (other than routine claims for benefits) with respect to any EZ Employee Plan or any other EZ Employment Arrangement pending or, to EZ's knowledge, information and belief, threatened against any EZ Employee Plan or any -24- other EZ Employment Arrangement, and no EZ Party possesses any knowledge of any facts which could give rise to any such Legal Action or Claim. (c) No EZ Party contributes to or is required to contribute to any Multiemployer Plan with respect to any of the EZ Station Employees and neither any EZ Party nor any other trade or business under common control with any EZ Party (within the meaning of Sections 414(b), (c), (m) or (o) of the Code) has incurred or reasonably expects to incur any "withdrawal liability," as defined under Section 4201 et seq. of ERISA. -- --- (d) Except as described in Section 4.12(d) of the EZ Disclosure Statement, neither any EZ Party nor any other trade or business under common control with any EZ Party (within the meaning of Sections 414(b), (c), (m) or (o) of the Code) sponsors, maintains or contributes to any EZ Employee Plan or any other EZ Employment Arrangement that provides retiree medical or retiree life insurance coverage to any EZ Station Employee upon his/her retirement. (e) Except as described in Section 4.12(e) of the EZ Disclosure Statement with respect to each Employee Plan and, to the extent applicable, any other compensation arrangement comprising an EZ Employment Arrangement: (i) each such EZ Employee Plan that is intended to be tax-qualified, and each amendment thereto, is the subject of a favorable determination letter, and no plan amendment that is not the subject of a favorable determination letter would affect the validity of an EZ Employee Plan's letter; (ii) no prohibited transaction, within the definition of Section 4975 of the Code or Title 1, Part 4 of ERISA, has occurred which would subject any EZ Party to any liability that could become a liability of Evergreen; and (iii) all contributions premiums or payments accrued, in whole or in part, under each such EZ Employee Plan or other EZ Employment Arrangement or with respect thereto as of the Closing will be paid by the appropriate EZ Party prior to the Closing. (f) For purposes of this Section, the term "EZ Employee Plan" shall mean any pension, profit-sharing, deferred compensation, vacation, bonus, incentive, medical, vision, dental, disability, life insurance or any other employee benefit plan as defined in Section 3(3) of ERISA to which any Evergreen Party (under the terms of Section 414(b), (c), (m) or (o) of the Code) sponsors, maintains or otherwise is bound which provides benefits to any person employed or previously employed at either of the EZ Stations. 4.13 Absence of Sensitive Payments. Neither any EZ Party nor, to EZ's ----------------------------- knowledge, information and belief, any of its officers, directors, employees, agents or other representatives, has with respect to the EZ Assets or the EZ Stations (a) made any contributions, payments or gifts to or for the private use of any governmental official, employee or agent where either the payment or the purpose of such contribution, payment or gift is illegal under the laws of the United States or the jurisdiction in which made or (b) established or maintained any unrecorded fund or asset for any purpose or made any false or artificial entries on its books. 4.14 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 -25- 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. 4.15 Employment Arrangements. Except as described in Section 4.15 of the ----------------------- EZ Disclosure Schedule, with respect to either EZ Station, (i) none of the EZ Station Employees is now, or, to EZ's knowledge, information and belief, since the later of the date on which an EZ Party acquired such EZ Station or January 1, 1993, has been, represented by any labor union or other employee collective bargaining organization, and no EZ Party is, or has ever been, a party to any labor or other collective bargaining agreement with respect to the EZ Station Employees, (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 such union or other organization, and (iii) neither any EZ Party nor any of such employees is now, or, to EZ's knowledge, information and belief, since the later of the date on which an EZ Party acquired such EZ Station or January 1, 1993 has been, subject to or involved in or, to EZ's knowledge, information and belief, threatened with, any union elections, petitions therefore or other organizational or recruiting activities, in each case with respect to any EZ Station Employees. Each EZ Party has performed in all Material respects all obligations required to be performed under each EZ Employment Plan and each other EZ Employment Arrangements and is not in Material breach or violation of or in Material default or arrears under any of the terms, provisions or conditions thereof. 4.16 Material Agreements. Listed on Section 4.16 of the EZ Disclosure ------------------- Schedule are all Material Agreements relating to the ownership or operation of the EZ Assets or the conduct of the business of any of the EZ Stations or to which any of the EZ Assets is subject (the "EZ Material Agreements"). True, accurate and complete copies of each EZ Material Agreement have been made available by EZ to Evergreen and EZ has provided Evergreen with photocopies of all EZ Material Agreements requested by Evergreen (or true, accurate and complete descriptions thereof have been set forth in Section 4.16 of the EZ Disclosure Schedule, if any such Material Agreements are oral). All of the EZ Material Agreements are valid, binding and legally enforceable obligations of an EZ Party and, to EZ's knowledge, information and belief, all other parties thereto (except to the extent that the invalidity or non-binding nature of any EZ Material Contract would not have a Material Adverse Effect on EZ). Each EZ Party has duly complied with all of the Material terms and conditions of each EZ Material Agreement to which it is a party 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 any EZ Party 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) any EZ Material Agreement or impair the rights or benefits, or increase the costs, of any EZ Party under any EZ Material Agreement. No EZ Party has granted any Material waivers or forbearance under any EZ Material Agreement and, to EZ's knowledge, information and belief, no third party is in material default in the performance of any of its obligations under any EZ Material Agreement. Except for those consents or approvals listed in Section 4.16 of the EZ Disclosure Schedule, no consents or approvals of any third party are necessary to permit the assignment by the EZ Parties of the EZ Material Agreements to the Evergreen Parties and such assignment will not affect the validity or enforceability of any EZ Material Agreement or cause any Material change in the substantive terms of any of them. -26- 4.17 Ordinary Course of Business. Each EZ Party, from the end of its most --------------------------- recent fiscal quarter to the date hereof, except (i) as may be described on Section 4.17 of the EZ Disclosure Schedule, or (ii) as may be required or expressly contemplated by the terms of this Agreement, with respect to the EZ Assets and each of the EZ Stations: (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 EZ Asset having a value in excess of $50,000, 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 $50,000; (ii) has not entered into any commitments having a value in excess of $50,000; and (iii) has not canceled any debts or claims; (d) has not made or committed to make any additions to its property or any purchases of equipment, except for normal maintenance and replacements; (e) except as described in Section 4.17(e) of the EZ Disclosure Schedule, has not increased the compensation payable or to become payable to any of the EZ Station Employees other than in the ordinary course of business or otherwise altered, modified or changed the terms of their employment; (f) 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; (g) has not waived any rights of Material value without fair and adequate consideration; (h) has not experienced any work stoppage; and (i) except in the ordinary course of business, has not entered into, amended or terminated any EZ Lease, EZ Governmental Authorization, EZ Private Authorization, EZ Material Agreement, EZ Employment Arrangement or Contract, or any transaction, agreement or arrangement with any Affiliate of EZ. -27- 4.18 Broker or Finder. No Person assisted in or brought about the ---------------- negotiation of this Agreement or the Exchange in the capacity of broker, agent or finder or in any similar capacity on behalf of any EZ Party other than Star Media Group which EZ understands was retained by, and whose fee will be paid by, Evergreen. 4.19 Solvency. As of the execution and delivery of this Agreement, each EZ -------- Party is, and immediately prior to giving effect to the consummation of the Exchange and the other Transactions will be, solvent. 4.20 Environmental Matters. Except as set forth in Section 4.20 of the EZ --------------------- Disclosure Schedule, with respect to the EZ Assets, each EZ Party: (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 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 either of the EZ Stations or any of the EZ Assets which Event, 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. 4.21 Trade or Barter. Section 4.21 of the EZ Disclosure Schedule sets --------------- forth a true, complete and accurate description (including obligations and liabilities remaining thereunder) of all of the Trade Agreements currently in effect that relate to the business or operation of the EZ Stations that individually involve or may involve, valued in accordance with GAAP, more than $500 in obligations remaining thereunder as of the date of this Agreement in money, property or services or a remaining term in excess of two months. -28- ARTICLE 5 COVENANTS 5.1 Access to Information; Confidentiality. -------------------------------------- (a) Each party shall afford to the other party (including, in the case of EZ, to American) and its accountants, counsel, financial advisors and other 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) relating to the Assets and the Stations 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 Exchange and other Transactions or any other report, schedule or document which may have a Material Effect on their respective Assets or Stations or their businesses, operations, properties, prospects, personnel, condition, (financial or other), or results of operations thereof, (ii) to the extent not provided for pursuant to the preceding clause, all financial records, ledgers, work papers and other sources of financial information possessed or controlled by (x) Evergreen or its accountants deemed by EZ or its Representatives necessary or useful for the purpose of performing an audit of the business of the Evergreen Stations and certifying financial statements and financial information, and (y) EZ or its accountants deemed by Evergreen or its Representatives necessary or useful for the purpose of performing an audit of the business of the EZ Stations and certifying financial statements and financial information, and (iii) such other information concerning any of the foregoing as EZ or Evergreen 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, except as required by Applicable Law (including without limitation in connection with any registration statement or similar document filed pursuant to any federal or state securities Law) shall not, without the prior written consent of the party 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 Exchange and the other Transactions. In no event shall either party (or, in the case of EZ, American) or any of its Representatives use such information to the detriment of the other party. Except as otherwise herein provided, each party (and, in the case of EZ, American) agrees to reveal such information only to those of its Representatives or other Persons who need to know such the information for the purpose of evaluating the Exchange and the other Transactions, 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. From and after the Closing, each of the parties shall not, without the prior written consent of the other party, disclose any information remaining in its possession with respect to the Assets or the Stations conveyed by it pursuant to the Exchange, and no such information shall be used for any purposes, other than in connection with the Exchange and the other Transactions or to the extent required by Applicable Law. (b) Subject to the terms and conditions of Section 5.1(a), each party (and American) may disclose such information as may be necessary in connection with seeking all Governmental Authorizations and Private Authorizations or that is required by Applicable Law to be disclosed, -29- including without limitation in any registration statement or other document required to be filed under any federal or state securities Law. In the event that this Agreement is terminated in accordance with its terms, each party (and, in the case of EZ, American) 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 Exchange and the other Transactions 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 either party or any condition to the obligations of the parties hereto. 5.2 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 Exchange and make effective the other Transactions, 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 Exchange or the making effective of the other Transactions, 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 this Agreement all requisite applications and amendments thereto, together with related information, data and exhibits, necessary to request issuance of orders approving the Exchange and the other Transactions 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 6.1(b), (ii) 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 Hart-Scott-Rodino Act and all filings necessary for EZ and Evergreen to own and operate the Evergreen Stations and the EZ Stations, respectively), (iv) to lift any injunction or other legal bar to the Exchange or any of the other Transactions (and, in such case, to proceed with the Exchange and the other Transactions as expeditiously as possible), and (v) to obtain the satisfaction of the conditions specified in Article 6, 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. 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 twenty (20) days following the execution and delivery of this Agreement, Evergreen and EZ shall file with the FCC appropriate applications for FCC Consents, which applications shall not contain any request for waiver of the FCC's multiple ownership rules; provided, however, that (i) EZ may file a separate application with the FCC seeking reassignment of the Extra Charlotte Station from the Charlotte Trustee to any EZ Party or Affiliate of an EZ Party (or, if not theretofore assigned, seeking retention of such Station) which application may request a waiver of the Commission's multiple ownership rules and (ii) Evergreen may file a separate application with the FCC seeking reassignment of the Extra Philadelphia Station from the Philadelphia Trustee to any Evergreen Party or Affiliate of an Evergreen Party (or, if not theretofore assigned, seeking retention of such Station) which application may request a waiver of the Commission's multiple ownership rules; provided further, however, that -30- no such application shall be filed or prosecuted in a manner that materially delays the grant of the applications seeking the FCC Consents. 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 either party hereto (or, in the case of EZ, American or any of its Subsidiaries), such party shall use reasonable business efforts to comply with such condition unless compliance would have a Material Adverse Effect upon it. If reconsideration or judicial review is sought with respect to any FCC Consent, Evergreen and EZ 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 7.1). Notwithstanding anything in this Agreement to the contrary, the Exchange is expressly conditioned upon the grant of the Final Order as to the FCC Consents for the transfer of the FCC Licenses for the Stations without any condition which would have a Materially Adverse Effect upon the party acquiring such Stations, it being understood that the imposition of any condition requiring (a) any Evergreen Party (or any Affiliate thereof) to divest its interest in any radio station in the Philadelphia, Pennsylvania market or to otherwise take any action to comply with Section 73.3555(a) of the FCC rules shall not be deemed to have a Materially Adverse Effect upon the Evergreen Parties, or (b) any EZ Party (including American and its Subsidiaries) to divest their interest in any radio station in the Charlotte, North Carolina market or to otherwise take any action to comply with Section 73.3555(a) of the FCC rules shall not be deemed to have a Materially Adverse Effect upon the EZ Parties. Notwithstanding the foregoing, nothing in this Agreement shall be construed to require any EZ Party or any Evergreen Party to divest any asset to obtain termination of the Hart-Scott-Rodino Act waiting period or to avoid or settle litigation initiated by any antitrust enforcement Authority seeking to block the transactions contemplated by this Agreement (unless such divesture is necessary to comply with the multiple ownership rules or policies of the FCC). (b) The parties shall cooperate with one another in the preparation, execution and filing of all 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 Exchange and the other Transactions that are required or permitted to be filed on or before the Closing Date. (c) Evergreen shall cooperate and use its reasonable business efforts to cause its independent accountants to reasonably cooperate with EZ, and at EZ's expense, in order to enable EZ to have Evergreen and EZ's or Evergreen's independent accountants prepare audited financial statements for the Evergreen Stations described in Section 6.2(f). Evergreen represents and warrants that such financial statements will have been prepared in accordance with GAAP applied on a basis consistent with past practices, will be true, correct and complete, and will present fairly the financial condition and results of operation of the Evergreen Stations described in Section 6.2(f). Without limiting the generality of the foregoing, Evergreen agrees that it will (i) consent to the use of such audited financial statements in any registration statement or other document filed by EZ (or American or any of either of their Affiliates) under the Securities Act or the Exchange Act and (ii) execute and deliver, and cause its officers to execute and deliver, such "representation" letters as are customarily delivered in connection with audits and as EZ's or Evergreen's independent accountants may reasonably request under the circumstances. EZ shall cooperate and use its reasonable business -31- efforts to cause its independent accountants to reasonably cooperate with Evergreen, and at Evergreen's expense, in order to enable Evergreen to have EZ and Evergreen's or EZ's independent accountants prepare audited and unaudited financial statements for the EZ Stations described in Section 6.3(f). EZ represents and warrants that such financial statements will have been prepared in accordance with GAAP applied on a basis consistent with past practices, will be true, correct and complete, and will present fairly the financial condition and results of operation of the EZ Stations described in Section 6.3(f), subject, in the case of the unaudited financial statements, to normal year-end adjustments and accruals. Without limiting the generality of the foregoing, EZ agrees that it will (i) consent to the use of such financial statements in any registration statement or other document filed by Evergreen (or any of its Affiliates) under the Securities Act or the Exchange Act and (ii) execute and deliver, and cause its officers to execute and deliver, such "representation" letters as are customarily delivered in connection with audits and as Evergreen's or EZ's independent accountants may reasonably request under the circumstances. (d) The parties acknowledge and agree that the parties intend, if appropriate at the time the Hart-Scott-Rodino Act waiting period has expired or been terminated, to execute and deliver a time brokerage agreement with respect to (i) each of the EZ Stations substantially on the terms contemplated by that certain letter of intent, dated August 27, 1996 between EZ and Evergreen Parent (the "Letter of Intent") (the "EZ Stations TBA"), and (ii) each of the Evergreen Stations substantially on the terms contemplated by the Letter of Intent (the "Evergreen Stations TBA"). Anything in this Agreement to the contrary notwithstanding, including without limitation any provision of Articles 3 and 4 and Sections 6.2 and 6.3, (i) Evergreen shall not be liable in any respect to the extent any of the representations and warranties contained in Article 3, and none of the EZ Parties shall be liable in any respect to the extent any of the representations and warranties contained in Article 4, are not true and correct in any Material respect on and as of the Closing Date due solely to the existence and operation of the Evergreen Stations TBA (in the case of the Evergreen Parties) and the EZ Stations TBA (in the case of the EZ Parties), respectively, (ii) the conditions set forth in Sections 6.2(c), 6.2(e), 6.3(c) and 6.3(e) shall not be deemed to be not satisfied as a result of any action or failure to act of any EZ Party pursuant to the provisions of the Evergreen Stations TBA, and of any Evergreen Party pursuant to the provisions of the EZ Stations TBA, respectively, and (iii) the certificates to be delivered to EZ and Evergreen pursuant to the provisions of Section 6.2(c) and 6.3(c), respectively, shall not be required to address any of such representations and warranties that are not true and correct in any material respect on and as of the Closing Date due to the existence and operation of such agreements. 5.3 Public Announcements. Until the Closing, or in the event of -------------------- termination of this Agreement, Evergreen and EZ shall consult with the other before issuing any press release or otherwise making any public statements with respect to this Agreement, the Exchange or any other Transaction and shall not issue any such press release or make any such public statement without the prior consent of the other. Notwithstanding the foregoing, each party acknowledges and agrees that Evergreen and EZ may, without its 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, the party proposing to make such press release or public statement will consult with the other regarding the nature, extent and form of such press release or public statement. -32- 5.4 Notification of Certain Matters. Evergreen Parent and EZ 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 or any of its Subsidiaries 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 or any of its Subsidiaries contained in this Agreement not to be complied with or satisfied, or (iii) any change to be made in the Evergreen Disclosure Schedule or the EZ 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 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. 5.5 No Solicitation. Neither Evergreen Parent nor EZ shall, nor shall it --------------- permit any Subsidiary, or any of its Representatives (including, without limitation, any investment banker, broker, finder, attorney or accountant retained by it or, in the case of EZ, American) to, initiate, solicit or facilitate, directly or indirectly, any inquiries or the making of any proposal with respect to any Alternative Transaction, engage in any discussions or negotiations concerning, or provide to any other Person any information or data relating to, it or any Subsidiary for the purposes of, or otherwise cooperate in any way with or assist or participate in, or facilitate any inquiries or the making of any proposal which constitutes, or may reasonably be expected to lead to, a proposal to seek or effect any Alternative Transaction, or agree to or endorse any Alternative Transaction. "Alternative Transaction" means a transaction or series of related transactions (other than the Exchange and the other Transactions) resulting in (i) any merger or consolidation of either, regardless of whether it is the surviving Entity unless the surviving Entity remains obligated under this Agreement to the same extent as it was, or (ii) any sale or other disposition of all or any substantial part of the Assets owned by it or any of the Stations owned by it. The provisions of this Section shall apply to each of Evergreen's Subsidiaries and EZ's Subsidiaries. 5.6 Conduct of Business by Evergreen Pending the Closing. Except as ---------------------------------------------------- otherwise contemplated by this Agreement, and subject to the commencement of the EZ Stations TBA as set forth in Section 5.2(d), after the date hereof and prior to the Closing Date or earlier termination of this Agreement, unless EZ shall otherwise agree in writing, Evergreen Parent shall, and shall cause its Subsidiaries, to the extent relating to any of the Evergreen Stations or the Evergreen Assets, to: (a) conduct their respective businesses in the ordinary and usual course of business and consistent with past practice; (b) use all reasonable business efforts to preserve intact their respective business organizations and goodwill, keep available the services of their respective present general managers, on-air personalities and other 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; -33- (c) 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; (d) maintain levels of advertising, marketing and promotion efforts and expenditures at levels no less than those currently budgeted in the 1996 business plan, a true, correct and complete in all material respects description of which is set forth in Section 5.6(d) of the Evergreen Disclosure Schedule; (e) (i) to operate each of the Evergreen Stations in conformity with the Evergreen FCC Licenses on a basis consistent with past practice and any special temporary authority or program test authority issued thereunder, the FCA and the rules and regulations of any other Authority with jurisdiction over any Evergreen Station, and (ii) take all actions necessary to maintain the Evergreen FCC Licenses; (f) prior to the effectiveness of the Evergreen Stations TBA, refrain from changing the frequency or format of any Evergreen Station or making any material changes in any Evergreen Station's studio or other structures, except to the extent required by the FCA or the rules and regulation of the FCC; (g) prior to the effectiveness of the Evergreen Stations TBA, not make any material changes in the broadcast hours or in the percentage or types of programming broadcast by the Evergreen Stations, or make any other Material changes in any Evergreen Station's programming policies, except such changes as in the good faith judgment of Evergreen are required by the public interest; (h) not (i) dispose of any of the Evergreen Assets owned by Evergreen or used in the operation of any Evergreen Station (other than for the disposition in the ordinary course of business of immaterial assets that are of no further use to such Station or disposition of Evergreen Assets to another Evergreen Party or any Affiliate of an Evergreen Party who is or becomes a party to this Agreement) or (ii) modify, change in any Material respect or enter into any Material Agreement relating to the business of any Evergreen Station; (i) notify EZ promptly if any Evergreen Station's normal broadcast transmissions are interrupted or impaired for (i) thirty (30) minutes or more for a period of five (5) consecutive days or for seven (7) days within any thirty (30) day period (except for normal maintenance) or (ii) a period of six (6) continuous hours or more; (j) not create, assume or permit to exist any Lien upon any of the Evergreen Assets or any of the Evergreen Stations, except for (i) Permitted Liens and (ii) other Liens, if any, set forth on Section 3.5(a) of the Evergreen Disclosure Schedule (which Liens shall be released prior to Closing); and (k) not waive any Material right relating to the Evergreen Stations. -34- 5.7 Conduct of Business by EZ Pending the Closing. Except as otherwise --------------------------------------------- contemplated by this Agreement, and subject to the commencement of the Evergreen Stations TBA as set forth in Section 5.2(d), after the date hereof and prior to the Closing Date or earlier termination of this Agreement, unless Evergreen shall otherwise agree in writing, EZ shall, and shall cause its Subsidiaries, to the extent relating to either of the EZ Stations or the EZ Assets, to: (a) conduct their respective businesses in the ordinary and usual course of business and consistent with past practice; (b) use all reasonable business efforts to preserve intact their respective business organizations and goodwill, keep available the services of their respective present general managers, on-air personalities and other 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; (c) 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; (d) maintain levels of advertising, marketing and promotion efforts and expenditures at levels no less than those currently budgeted in the 1996 business plan, a true, correct and complete in all material respects description of which is set forth in Section 5.7(d) of the EZ Disclosure Schedule; (e) (i) to operate each of the EZ Stations in conformity with the EZ FCC Licenses on a basis consistent with past practice and any special temporary authority or program test authority issued thereunder, the FCA and the rules and regulations of any other Authority with jurisdiction over either EZ Station and (ii) take all actions necessary to maintain the EZ FCC Licenses; (f) prior to the effectiveness of the EZ Stations TBA, refrain from changing the frequency or format of any EZ Station or making any material changes in any EZ Station's studio or other structures, except to the extent required by the FCA or the rules and regulation of the FCC; (g) prior to the effectiveness of the EZ Stations TBA, not make any material changes in the broadcast hours or in the percentage or types of programming broadcast by the EZ Stations, or make any other Material changes in either EZ Station's programming policies, except such changes as in the good faith judgment of EZ are required by the public interest; (h) not (i) dispose of any of the EZ Assets owned by EZ or used in the operation of either EZ Station (other than for the disposition in the ordinary course of business of immaterial assets that are of no further use to such Station or disposition of EZ Assets to another EZ Party or any Affiliate of an EZ Party who is or becomes a party to this -35- Agreement) or (ii) modify, change in any Material respect or enter into any Material Agreement relating to the business of either EZ Station; (i) notify Evergreen promptly if either EZ Station's normal broadcast transmissions are interrupted or impaired for (i) thirty (30) minutes or more for a period of five (5) consecutive days or for seven (7) days within any thirty (30) day period (except for normal maintenance) or (ii) a period of six (6) continuous hours or more; (j) not create, assume or permit to exist any Lien upon any of the EZ Assets or either of the Evergreen Stations, except for (i) Permitted Liens and (ii) other Liens, if any, set forth on Section 4.5(a) or 4.5(b) of the EZ Disclosure Schedule (which Liens shall be released prior to Closing); and (k) not waive any material rights relating to the EZ Stations. 5.8 Building of EZ Stations. EZ shall, prior to the Closing, complete (or ----------------------- place in escrow funds necessary to complete) all tenant improvements at the studio building for the EZ Stations (including all costs for construction, equipment and furniture) substantially in accordance with the plans, specifications, standards and budget for such improvements described in Section 4.5(b) of the EZ Disclosure Schedule. On the Closing Date, Evergreen shall reimburse EZ in an amount equal to the lesser of (a) any such costs in excess of $1,200,000 incurred by EZ or which it is obligated to pay with respect to such construction, equipment and furniture and (b) $400,000. EZ shall be responsible for and have the right to direct the completion of such improvements, notwithstanding the effectiveness of the EZ Stations TBA. In the event that on the Closing Date, such improvements are not completed, EZ shall have the right, in its sole discretion, but not the obligation, to continue to be responsible for and to direct the completion of such improvements, unless Evergreen shall agree to bear all of such costs (and not only up to $400,000 thereof) in excess of $1,200,000, in which event Evergreen shall have the right to assume responsibility for and to direct the completion of such improvements. Anything in this Agreement to the contrary notwithstanding, in the event the costs of such construction, equipment and furniture exceed $1,600,000, the parties shall negotiate in good faith in an attempt to agree as to how such excess costs shall be borne as between the parties. 5.9 FCC Application; Divesture Commitment. ------------------------------------- (a) The parties acknowledge that (i) Affiliates of Evergreen have entered into agreements to acquire a number of radio stations serving the Philadelphia, Pennsylvania area, that, when combined with the radio stations now licensed to Affiliates of Evergreen and the EZ Stations, would cause the Evergreen Parties to be in violation of Section 73.3555 of the FCC's rules (absent a waiver of those rules) and (ii) the EZ Parties own a number of radio stations in the Charlotte, North Carolina area that, when combined with the Evergreen Stations (and the Evergreen Station (as defined in the Asset Purchase Agreement)), would cause the EZ Parties or their Affiliates to be in violation of Section 73.3555 of the FCC's rules (absent a waiver of those rules). The parties further acknowledge that the FCC Consents with respect to the transfer of the EZ Stations to the Evergreen Parties may contain a condition requiring the Evergreen Parties to divest their interest in one or more FM radio stations in the Philadelphia market (the "Extra Philadelphia FM") prior to the Closing and -36- the FCC Consents to transfer of the Evergreen Stations to the EZ Parties may contain a condition requiring the EZ Parties to divest their interest in one or more FM radio stations in the Charlotte market (the "Extra Charlotte FM") prior to Closing. In order to ensure that the Evergreen Parties and the EZ Parties can each meet such a condition, prior to the filing of the applications for FCC Consent, the Evergreen Parties shall agree to assign the Extra Philadelphia FM to a trustee (the "Philadelphia Trustee") and the EZ Parties shall agree to assign the Extra Charlotte FM to a trustee (the "Charlotte Trustee") pursuant to a trust agreement in each case that satisfies the FCC's multiple ownership rules and policies, including the cross-interest policy, then in effect. In the event that the acquisition of the EZ Stations would not comply with the FCC's multiple ownership rules and policies, including the cross-interest policy, on or prior to the Closing Date, unless the FCC Consents permit retention of the Extra Philadelphia FM, the Evergreen Parties shall assign, subject to receipt of the FCC's grant of the Philadelphia Trustee Application, the Extra Philadelphia FM to the Philadelphia Trustee on the Closing Date in order to effectuate the Closing under this Agreement. In the event that the acquisition of the Evergreen Stations would not comply with the FCC's multiple ownership rules and policies, including the cross-interest policy, on or prior to the Closing Date, unless the FCC Consents permit retention of the Extra Charlotte FM, the EZ Parties shall assign, subject to receipt of the FCC's grant of the Charlotte Trustee Application, the Extra Charlotte FM to the Trustee on the Closing Date in order to effectuate the Closing under this Agreement. (b) Within twenty (20) business days after the date of this Agreement, the Evergreen Parties shall file an application with the FCC requesting the consent to the assignment of the FCC authorizations for the Extra Philadelphia FM to the Philadelphia Trustee (the "Philadelphia Trustee Application") and the EZ Parties shall file an application with the FCC requesting the consent to the assignment of the FCC licenses for the Extra Charlotte FM to the Charlotte Trustee (the "Charlotte Trustee Application"). The parties shall cooperate with each other in the preparation and filing of the aforementioned FCC applications, and the parties shall prosecute such applications in good faith and with due diligence. (c) Anything in this Section to the contrary notwithstanding, the Evergreen Parties and the EZ Parties may, in the event such parties (or their Affiliates) enter into a binding agreement with respect to the sale, exchange or other disposition of the Extra Philadelphia FM or the Extra Charlotte FM, as the case may be, with a third party, file an application with the FCC requesting the consent to the assignments of the FCC authorizations for such station to such third party, either directly to such third party or indirectly to such third party through the Philadelphia Trustee or the Charlotte Trustee, as the case may be, and, in such event, the Evergreen Parties and/or the EZ Parties, as the case may be, need not transfer the Extra Philadelphia FM or the Extra Charlotte FM, as the case may be, to the Philadelphia Trustee or the Charlotte Trustee, as the case may be, pursuant to the provisions of paragraph (a) of this Section 5.9 so long as the application with respect to such binding agreement is pending or has been granted, except in the event such application relates solely to an indirect transfer through the Philadelphia Trustee or the Charlotte Trustee, as the case may be. Notwithstanding the foregoing, the parties agree to leave the applicable trusts and trust applications in effect until such time as any such third party sale has been consummated. ARTICLE 6 -37- CLOSING CONDITIONS 6.1 Conditions to Obligations of Each Party to Effect the Exchange. The -------------------------------------------------------------- respective obligations of each party to effect the Exchange 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) As of the Closing Date, no Legal Action shall be pending before or threatened in writing by any Authority seeking to enjoin, restrain, prohibit or make illegal or to impose any Materially Adverse conditions in connection with, the consummation of the Exchange, or which might, in the reasonable business judgment of EZ or Evergreen, based upon the advice of counsel, have a Material Adverse Effect on the Assets and Stations to be acquired by it, it being understood and agreed that a written request by any Authority for information with respect to any Evergreen Party, any EZ Party or American or the Exchange or any other Transaction, which information could be used in connection with such Legal Action, shall not be deemed to be a threat of any such Legal Action; and (b) All authorizations, consents, waivers, orders or approvals required to be obtained from all Authorities, and all Governmental Filings required to be made by any EZ Party or any Evergreen Party with any Authority, prior to the consummation of the Exchange, 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 the Assets and Stations being acquired by such party. Without limiting the generality of the foregoing, the FCC shall have issued the FCC Consents, 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; provided, however, that any condition requiring any party hereto (or, in the case of EZ, American or any of its Subsidiaries) to divest its interest in any radio station in the Charlotte, North Carolina market (in the case of EZ) or in the Philadelphia, Pennsylvania market (in the case of Evergreen) or to otherwise take any action to comply with Section 73.3555 of the FCC's rules in such markets shall not be a condition of such party's obligation to effect the Exchange; provided further, however, that notwithstanding anything in this Section or elsewhere in this Agreement, including without limitation Section 5.2(a) or 5.9, to the contrary, if such Final Orders impose such a condition (i) as a condition precedent to the effectiveness of the FCC Consents, or as a condition which must be complied with within less than six (6) months subsequent to consummation of the Exchange, the party on whom such condition is imposed shall have the right, prior to the Termination Date, to attempt to comply with such condition, or (ii) as a condition which can be complied with within six (6) months or more following consummation of the Exchange, the party on whom such condition is imposed shall be obligated to proceed with the consummation of the Exchange. -38- 6.2 Conditions to Obligations of EZ. The obligation of the EZ Parties to ------------------------------- effect the Exchange 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) Evergreen shall have delivered or cause to be delivered to EZ all of the Collateral Documents required to be delivered by the Evergreen Parties to the EZ Parties at or prior to the Closing pursuant to the terms of this Agreement; such Collateral Documents shall be reasonably satisfactory in form, scope and substance to EZ and its counsel and American and its counsel; and EZ 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 appropriate to be certified by proper corporate officers; (b) Evergreen shall have furnished EZ and, at EZ's request, any bank or other financial institution providing credit to EZ or American or any Subsidiary of EZ or American, with a favorable opinion, dated the Closing Date of Latham & Watkins, counsel and FCC counsel for the Evergreen Parties, with respect to the matters set forth in Sections 3.1(a), (b) and (c) (other than as to Private Authorizations), 3.7(a) (limited to its knowledge and to Legal Actions), and 3.14 and with respect to FCC related matters of a nature and scope customary in comparable transactions (including without limitation with respect to the grant of all necessary FCC Consents and their being Final Orders, that all FCC Licenses are valid, binding and in good standing and in full force and effect, the absence of Legal Actions which could Materially Adversely Affect the FCC Licenses and the FCC Consents, and the filing of all Material reports and the payment of all fees) and with respect to such other matters arising after the date of this Agreement incident to the Exchange and the other Transactions, as EZ or its counsel or 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 and warranties of each Evergreen Party contained in this Agreement 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; each and all of the covenants, agreements and conditions to be performed or satisfied by each Evergreen Party hereunder at or prior to the Closing Date shall have been duly performed or satisfied in all Material respects; and each Evergreen Party shall have furnished EZ with such certificates and other documents evidencing the truth of such representations and warranties and the performance or satisfaction of the covenants, agreements and conditions as EZ or its counsel shall have reasonably requested; (d) All authorizations, consents, waivers, orders or approvals marked with an asterisk as "material" on Section 3.6 or 3.16 of the Evergreen Disclosure Statement shall have been obtained, without the imposition, individually or in the aggregate, of any condition or requirement which could Materially Adversely Affect EZ; -39- (e) Between the date of this Agreement and the Closing Date, there shall not have occurred and be continuing any Material Adverse Change in the Evergreen Parties; as of the Closing Date, the Evergreen FCC Licenses shall not have been Materially and Adversely Affected by any act, or failure to act, of any Evergreen Party; and (f) EZ shall have received from its or Evergreen's independent accountants an unqualified report (as to the scope of the audit, access to the books and records and the cooperation of management) on the financial statements of the Evergreen Stations and the Evergreen Station (as defined in the Asset Purchase Agreement) presented on a combined basis (consisting of balance sheets at December 31, 1995 and September 30, 1996 and statements of operations and cash flow for the year ended December 31, 1995 and the nine month period ended September 30, 1996), which financial statements shall have been prepared in conformity with GAAP and Regulation S-X under the Securities Act. 6.3 Conditions to Obligations of Evergreen. The obligation of the -------------------------------------- Evergreen Parties to effect the Exchange 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) EZ shall have delivered or cause to be delivered to Evergreen Parent all of the Collateral Documents required to be delivered by the EZ Parties to the Evergreen Parties at or prior to the Closing pursuant to the terms of this Agreement; such Collateral Documents shall be reasonably satisfactory in form, scope and substance to Evergreen and its counsel; and Evergreen 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 appropriate to be certified by proper corporate officers; (b) EZ shall have furnished Evergreen and, at Evergreen's request, any bank or other financial institution providing credit to Evergreen or any Subsidiary, with favorable opinions, dated the Closing Date of Hunton & Williams, special counsel for the EZ Parties, with respect to the matters set forth in Sections 4.1(a), (b) and (c) (other than as to Private Authorizations), 4.7(a) (limited to its knowledge and to Legal Actions), and 4.14, of Sullivan & Worcester LLP, counsel for American, with respect to the effectiveness of the Merger and that this Agreement is enforceable against American (subject to customary qualifications), and of Koteen & Naftalin, LPP, FCC counsel for the EZ Parties, with respect to FCC related matters of a nature and scope customary in comparable transactions (including without limitation with respect to the grant of all necessary FCC Consents and their being Final Orders, that all FCC Licenses are valid, binding and in good standing and in full force and effect, the absence of Legal Actions which could Materially Adversely Affect the FCC Licenses and the FCC Consents, and the filing of all Material reports and the payment of all fees) and, in each case, with respect to such other matters arising after the date of this Agreement incident to the Exchange and the other Transactions, as Evergreen or its counsel may reasonably request or which may be reasonably requested by any such bank or financial institution or their respective counsel; -40- (c) The representations and warranties of each EZ Party contained in this Agreement 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; each and all of the covenants, agreements and conditions to be performed or satisfied by each EZ Party hereunder at or prior to the Closing Date shall have been duly performed or satisfied in all Material respects; and each EZ Party shall have furnished Evergreen Parent with such certificates and other documents evidencing the truth of such representations and warranties and the performance or satisfaction of the covenants, agreements and conditions as Evergreen or its counsel shall have reasonably requested; (d) All authorizations, consents, waivers, orders or approvals marked with an asterisk as "material" on Section 4.6 or 4.16 of the EZ Disclosure Statement shall have been obtained, without the imposition, individually or in the aggregate, of any condition or requirement which could Materially Adversely Affect Evergreen; (e) Between the date of this Agreement and the Closing Date, there shall not have occurred and be continuing any Material Adverse Change in the EZ Parties from that reflected in the most recent EZ Financial Statements; as of the Closing Date, the EZ FCC Licenses shall not have been Materially and Adversely Affected by any act, or failure to act, of the EZ Party; and (f) Evergreen Parent shall have received from its or EZ's independent accountants an unqualified report (as to the scope of the audit, access to the books and records and the cooperation of management) on the financial statements of the EZ Stations presented on a combined basis (consisting of a balance sheet at December 31, 1995 and statements of operations and cash flow for the year ended December 31, 1995) and unaudited financial statements as of and for any subsequent period (ending not less than forty- five (45) days prior to the Closing Date) reasonably requested by Evergreen Parent which financial statements shall have been prepared in conformity with GAAP and Regulation S-X under the Securities Act. ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER 7.1 Termination. This Agreement may be terminated at any time prior to ----------- the Closing Date: (a) by mutual consent of Evergreen Parent and EZ; (b) by either EZ or Evergreen Parent if any permanent injunction, decree or judgment by any Authority preventing the consummation of the Exchange shall have become final and nonappealable; or -41- (c) by Evergreen Parent in the event no Evergreen Party is in Material breach of this Agreement and none of its representations or warranties shall have become and continue to be untrue in any Material respect, and either (i) the Exchange has not been consummated prior to the Termination Date, or (ii) one or more EZ Parties 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 and such breach or untruth exists and is not cured within the cure period specified in this Section; or (d) by EZ in the event no EZ Party is in Material breach of this Agreement and none of its representations or warranties shall have become and continue to be untrue in any Material respect, and either (i) the Exchange has not been consummated prior to the Termination Date, or (ii) one or more Evergreen Parties 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 and such breach or untruth exists and is not cured within the cure period specified in this Section. Neither party shall have the right to terminate this Agreement as a result of the other party's breach or default unless the terminating party shall have given the defaulting party thirty (30) business days to cure the default (or such longer period not in excess of an additional thirty (30) business days as is, in the reasonable business judgment of the parties, reasonably necessary to effect such cure so long as the defaulting party is proceeding with due diligence and best efforts to effect such cure); provided, however, that such cure period shall not extend the Termination Date. The term "Termination Date" shall mean December 31, 1997 or such other date as the parties may, from time to time, mutually agree. The right of EZ or Evergreen Parent 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 either party, any Person controlling any such party or any of their respective Representatives whether prior to or after the execution of this Agreement. 7.2 Effect of Termination. Except as provided in Sections 5.1 (with --------------------- respect to confidentiality), 5.3 and 9.3 and this Section, in the event of the termination of this Agreement pursuant to Section 7.1, this Agreement shall forthwith become void, there shall be no liability on the part of either party, or any of their respective Affiliates (including stockholders, officers or directors), to the other and all rights and obligations of either 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 this Agreement. ARTICLE 8 INDEMNIFICATION -42- 8.1 Survival. Except as otherwise provided in Section 2.2(g) to the effect -------- that the provisions of Section 2.2 shall survive the Closing without limitation, and except with respect to obligations and liabilities assumed pursuant to the Evergreen Assumable Agreements and the EZ Assumable Agreements, the representations, warranties, covenants and agreements of the parties contained in or made pursuant to this Agreement or any Collateral Document shall survive the Closing and shall remain operative and in full force and effect for a period of (a) one (1) year after the Closing Date or (b) the applicable statute of limitations in the case of matters of a nature referred to in Sections 3.1(b), 3.11, 3.12, 4.1(b), 4.11 and 4.12 (the "Indemnity Period"), regardless of any investigation or statement as to the results thereof made by or on behalf of any party hereto. No claim for indemnification, other than with respect to fraud, may be asserted after the expiration of the Indemnity Period. Notwithstanding anything herein to the contrary, any representation, warranty, covenant and agreement which is the subject of a Claim which is asserted in writing prior to the expiration of the Indemnity Period shall survive with respect to such Claim or any dispute with respect thereto until the final resolution thereof. 8.2 Indemnification. Each of Evergreen Parent and EZ (the "indemnifying --------------- party") agrees that on and after the Closing it shall indemnify and hold harmless the other (which shall include its Affiliates, Subsidiaries, officers, directors, employees, agents and other representatives) (the "indemnified party") from and against any and all damages, claims, losses, expenses, costs, obligations and liabilities, including without limitation liabilities for all reasonable attorneys', accountants' and experts' fees and expenses including those incurred to enforce the terms of this Agreement or any Collateral Document (collectively, "Loss and Expense"), suffered, directly or indirectly, by the indemnified party by reason of, or arising out of: (a) any breach of representation or warranty made by the indemnifying party pursuant to this Agreement or any Collateral Document or any failure by the indemnifying party to perform or fulfill any of its respective covenants or agreements set forth in this Agreement or any Collateral Document; or (b) any Legal Action or other Claim by any third party relating to the indemnifying party or the ownership or operations of any of its Assets or the conduct of the business of its Stations to the extent such Legal Action or other Claim has also resulted in a breach of representation or warranty by the indemnifying party pursuant to this Agreement or any Collateral Document; or (c) the Evergreen Nonassumed Liabilities (in the case of Evergreen) and the EZ Nonassumed Liabilities (in the case of EZ), including without limitation any Legal Action or other Claim brought or asserted by any third party; or (d) the failure to comply with the Bulk Sales law of the State of North Carolina (in the case of Evergreen) or the Commonwealth of Pennsylvania (in the case of EZ). 8.3 Limitation of Liability. Notwithstanding the provisions of Section ----------------------- 8.2, after the Closing, (i) each indemnified party shall be entitled to recover its Loss and Expense in respect of any Claim only in the event that the aggregate Loss and Expense for all Claims and all Claims under the Asset Purchase Agreement exceeds, in the aggregate, $50,000, in which event the indemnified -43- party shall be entitled to recover all such Loss and Expense (including such $50,000), and (ii) in no event shall the aggregate amount required to be paid by each indemnifying party pursuant to the provisions of this Section or pursuant to the comparable section of the Asset Purchase Agreement exceed $5,000,000, except for any Loss or Expense arising out of matters of a nature referred to in Sections 3.1 and 4.1 and the first paragraph of Section 3.7(b) and 4.7(b) as to which the limitations set forth in this clause (ii) shall not apply. The provisions of the immediately preceding sentence of this Section with respect to the limitation on each indemnifying party's obligation to indemnify the indemnified party in respect of Loss and Expense shall not be applicable to any claims which are based on fraud or willful or intentional breach of representation or warranty. 8.4 Notice of Claims. If an indemnified party believes that it has ---------------- suffered or incurred any Loss and Expense, it shall notify the indemnifying party promptly in writing, and in any event within the applicable time period specified in Section 8.4, describing such Loss and Expense, all with reasonable particularity and containing a reference to the provisions of this Agreement in respect of which such Loss and Expense shall have occurred. If any Legal Action is instituted by a third party with respect to which an indemnified party intends to claim any liability or expense as Loss and Expense under this Article, such indemnified party shall promptly notify the indemnifying party of such Legal Action, but the failure to so notify the indemnifying party shall not relieve such indemnifying party of its obligations under this Article, except to the extent such failure to notify prejudices such indemnifying party's ability to defend against such Claim. 8.5 Defense of Third Party Claims. The indemnifying party shall have the ----------------------------- right to conduct and control, through counsel of their own choosing, reasonably acceptable to the indemnified party, any third party Legal Action or other Claim, but the indemnified party may, at its election, participate in the defense thereof at its sole cost and expense; provided, however, that if (a) the indemnifying party shall fail to defend any such Legal Action or other Claim or (b) the indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or in addition to those available to the indemnifying party, then the indemnified party may defend, through counsel of its own choosing, such Legal Action or other Claim, and (so long as it gives the indemnifying party at least fifteen (15) days' notice of the terms of the proposed settlement thereof and permits the indemnifying party to then undertake the defense thereof) settle such Legal Action or other Claim and to recover the amount of such settlement or of any judgment and the reasonable costs and expenses of such defense. The indemnifying party shall not compromise or settle any such Legal Action or other Claim without the prior written consent of the indemnified party. 8.6 Exclusive Remedy. Except for fraud or as otherwise provided in ---------------- Section 9.5, the indemnification provided in this Article shall be the sole and exclusive post-Closing remedy available to either party against the other party for any Claim under this Agreement. -44- 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. 9.2 Waiver. At any time prior to the Closing Date, except to the extent ------ not permitted by Applicable Law, EZ or Evergreen may extend the time for the performance of any of the obligations or other acts of the other, 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 transfer taxes, sales taxes, document stamps or other charges levied by any Authority in connection with this Agreement, the Exchange and the other Transactions, shall be borne by EZ insofar as they related to the EZ Stations and the EZ Assets and by Evergreen insofar as they relate to the Evergreen Stations and the Evergreen Assets. All filing and similar fees (including without limitation Hart-Scott-Rodino filings and FCC filing fees) shall be borne equally by EZ and Evergreen. All other costs and expenses incurred in connection with this Agreement, the Exchange and the other Transactions, and in compliance with Applicable Law and Contracts 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, or by recognized courier service, postage prepaid, (b) sent by telex, telegram, telecopy or other form of rapid transmission, confirmed by mailing (by first class or express mail, or by recognized courier service, postage prepaid) 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 any EZ Party: EZ Communications, Inc. 10800 Main Street Fairfax, Virginia 22030 Attention: Alan Box, President and Chief Executive Officer Telecopier No.: (703) 934-1200 with copies to: -45- Hunton & Williams 1751 Pinnacle Drive Suite 1700 McLean, Virginia 22102 Attention: Joseph W. Conroy, Esq. Telecopier No.: (703) 714-7410 American Radio Systems Corporation 116 Huntington Avenue Boston, Massachusetts 02116 Attention: Steven B. Dodge, President and Chief Executive Officer Telecopier No.: (617) 375-7575 and Sullivan & Worcester LLP One Post Office Square Boston, Massachusetts 02109 Attention: Norman A. Bikales, Esq. Telecopier No.: (617) 338-2880 (b) If to any Evergreen Party: Evergreen Media Corporation 433 East Las Colinas Boulevard Irving, TX 75039 Attention: Scott Ginsburg, Chairman and Chief Executive Officer Telecopier No.: (972) 869-3671 with a copy to: Latham & Watkins 1001 Pennsylvania Avenue, N.W. Washington, DC 20004-2505 Attention: Eric L. Bernthal, Esq. Telecopier No.: (202) 637-2201 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, 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 7, 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 -46- 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 pursuant to the provisions of, and subject to the limitations contained in, this Agreement for such breach or threatened breach. 9.6 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 either 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 Exchange and the other Transactions are fulfilled and consummated to the maximum extent possible. 9.7 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. 9.8 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. 9.9 Governing Law. The validity, interpretation, construction and ------------- performance of this Agreement shall be governed by, and construed in accordance with, 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. Anything in this Agreement to the contrary notwithstanding, including without limitation the provisions of Article 8, 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. 9.10 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 any other party or its counsel reasonably deems necessary or desirable in order to carry out the terms and conditions -47- 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. 9.11 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, including without limitation that the Letter of Intent. 9.12 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 by binding upon any successor to any party (including without limitation, in the case of EZ, American) 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 (a) any Affiliate of any party who is a transferee of any Assets or any FCC Licenses on or prior to the Closing Date and (b) any bank or other financial institution which has loaned funds or otherwise extended credit to it. 9.13 Parties in Interest. This Agreement shall be binding upon and inure ------------------- solely to the benefit of each party and, so long as the EZ Merger Agreement has not been terminated and, in any event, after the consummation of the American-EZ Merger, American, 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 Section 9.12. 9.14 Mutual Drafting. This Agreement is the result of the joint efforts of --------------- EZ and Evergreen, and each provision hereof has been subject to the mutual consultation, negotiation and agreement of the parties and there shall be no construction against either party based on any presumption of that party's involvement in the drafting thereof. 9.15 EZ Agent for Other EZ Parties. Anything in this Agreement to the ----------------------------- contrary notwithstanding, each of the EZ Parties (other than EZ) hereby grants EZ an irrevocable power of attorney and hereby irrevocably appoints EZ 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 EZ pursuant to such power of attorney and agency, and any such extension, waiver, termination or amendment executed and delivered by EZ, shall be binding upon each other EZ Party whether or not it has specifically approved such action or executed such extension, waiver, termination or amendment. 9.16 Evergreen Parent Agent for Other Evergreen Parties. Anything in this -------------------------------------------------- Agreement to the contrary notwithstanding, each of the Evergreen Parties (other than Evergreen Parent) hereby grants Evergreen Parent an irrevocable power of attorney and hereby irrevocably appoints Evergreen Parent 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 Evergreen Parent, waivers, terminations or amendments, and any action taken by Evergreen Parent pursuant to such power of attorney and agency, and any such extension, waiver, -48- termination or amendment executed and delivered by Evergreen Parent, shall be binding upon each other Evergreen Party whether or not it has specifically approved such action or executed such extension, waiver, termination or amendment. -49- IN WITNESS WHEREOF, the EZ Parties and the Evergreen Parties have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. EZ COMMUNICATIONS, INC. By: /s/ Alan Box --------------------------------- Name: Alan Box Title: President PROFESSIONAL BROADCASTING INCORPORATED By: /s/ Alan Box --------------------------------- Name: Alan Box Title: President EZ PHILADELPHIA, INC. By: /s/ Alan Box --------------------------------- Name: Alan Box Title: President EVERGREEN MEDIA CORPORATION OF LOS ANGELES By: /s/ Scott K. Ginsburg --------------------------------- Name: Scott K. Ginsburg Title: President EVERGREEN MEDIA CORPORATION OF CHARLOTTE By: /s/ Scott K. Ginsburg --------------------------------- Name: Scott K. Ginsburg Title: President -50- EVERGREEN MEDIA CORPORATION OF THE EAST By: /s/ Scott K. Ginsburg --------------------------------- Name: Scott K. Ginsburg Title: President EVERGREEN MEDIA CORPORATION OF CAROLINALAND By: /s/ Scott K. Ginsburg --------------------------------- Name: Scott K. Ginsburg Title: President WBAV/WBAV-FM/WPEG LICENSE CORP. By: /s/ Scott K. Ginsburg --------------------------------- Name: Scott K. Ginsburg Title: President WRFX LICENSE CORP. By: /s/ Scott K. Ginsburg --------------------------------- Name: Scott K. Ginsburg Title: President American represents and warrants that it has heretofore entered into the EZ Merger Agreement with EZ and hereby acknowledges and agrees (a) to be bound by the provisions of Sections 5.1, (b) that the terms and conditions of the above Agreement are satisfactory to it, and (c) that it consents to such terms and conditions. AMERICAN RADIO SYSTEMS CORPORATION By: /s/ Joseph P. Winn --------------------------------- Name: Joseph P. Winn Title: Chief Financial Officer -51- APPENDIX A DEFINITIONS ACCOUNTS RECEIVABLE shall mean any and all rights to the payment of money or other forms of consideration of any kind at any time now or hereafter owing or to be owing to any EZ Party or any Evergreen Party, as the case may be, attributable to the sale of time or talent on one of its Stations. ADVERSE CHANGE, EFFECT OR AFFECT, (or comparable terms) shall mean any Event which has, or is reasonably likely to, (a) adversely affect or affected the validity or enforceability of this Agreement or the likelihood of consummation of the Exchange, or (b) adversely affect or affected the ownership or operation of the Evergreen Assets or the EZ Assets or the conduct of the business of the Evergreen Stations or the EZ Stations, as the case may be, or (c) impair the Evergreen Parties' or the EZ Parties', as the case may be, ability to fulfill their obligations under the terms of this Agreement, or (d) adversely affect the aggregate rights and remedies of the EZ Parties or the Evergreen Parties, 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 or Effect. AFFILIATE, AFFILIATED shall mean, with respect to any Person, any other Person at the time directly or indirectly controlling, controlled by or under direct or indirect common control with such Person,. AGREEMENT shall mean this Agreement as originally in effect, including, unless the context otherwise specifically requires, this Appendix A, the EZ Disclosure Schedule, the Evergreen Disclosure Schedule and all exhibits hereto, and as any of the same may from time to time be supplemented, amended, modified or restated in the manner herein or therein provided. AMERICAN shall have the meaning given to it in the fifth Whereas paragraph. AMERICAN-EZ MERGER shall have the meaning given to it in the fifth Whereas paragraph. APPLICABLE LAW shall mean any Law of any Authority, whether domestic or foreign, including without limitation all federal and state securities and Environmental Laws, to which a 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. APPRAISALS shall have the meaning given to it in Section 2.2(a). ASSET PURCHASE AGREEMENT shall mean the asset purchase agreement, dated as of the date of this Agreement, among certain of the Evergreen Parties and, among others, certain of the EZ Parties relating to the purchase of WNKS(FM), Charlotte, North Carolina. ASSETS shall mean the EZ Assets in the case of the EZ Parties and the Evergreen Assets in the case of the Evergreen Parties. 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. CHARLOTTE PRORATION SCHEDULE shall have the meaning given to it in Section 2.3(d). CHARLOTTE TRUSTEE shall have the meaning given to it in Section 5.9(a). CHARLOTTE TRUSTEE APPLICATION shall have the meaning given to it in Section 5.9(b). 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 2.4. CLOSING DATE shall have the meaning given to it in Section 2.4. 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 the EZ Stations TBA, the Evergreen Stations TBA and any other agreement, certificate, contract, instrument, notice, opinion or other document delivered or required to be delivered pursuant to the provisions of this Agreement or of any of the foregoing. COLLECTION PERIOD shall have the meaning given to it in Section 2.5. CONTRACT shall mean any agreement, arrangement, commitment, contract, covenant, indemnity, undertaking or other obligation or liability which involves the ownership or operation of the Evergreen Assets or the EZ Assets or the conduct of the business of any of the Evergreen Stations or either of the EZ Stations. -2- CONTROL (including the terms "controlled," "controlled by" and "under common control with") shall mean 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. CUT-OFF DATE shall mean (i) with respect to any Contract to be assigned and the rights and obligations to be assumed pursuant to any TBA (including all items of revenue and expense relating to such Contract), the applicable TBA Date for such TBA and (ii) in all other cases, the Closing Date. DISCLOSURE SCHEDULE shall mean the EZ Disclosure Schedule or the Evergreen Disclosure Schedule, as the case may be. EMC-BAV shall have the meaning given to it in the Preamble. EMC CAROLINALAND shall have the meaning given to it in the Preamble. EMC CHARLOTTE shall have the meaning given to it in the Preamble. EMC EAST shall have the meaning given to it in the Preamble. EMC-RFX shall have the meaning given to it in the Preamble. EMPLOYMENT ARRANGEMENT shall mean 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), or 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. 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. -3- 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 or 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 statutory or regulatory provision shall be deemed to be a reference to any successor statutory or regulatory provision. ENVIRONMENTAL PERMIT shall mean 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 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 Evergreen or EZ, 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. EVERGREEN shall have the meaning given to it in the Preamble. EVERGREEN ACCOUNTS RECEIVABLE shall mean the Accounts Receivables of any Evergreen Party arising in connection with the ownership or operation of any of the Evergreen Assets or the conduct of the business of any of the Evergreen Stations prior to the Cut-off Date. EVERGREEN AM STATIONS shall mean WBAV(AM) and WFNZ(AM). -4- EVERGREEN ASSETS shall mean all assets used or held for use in the ownership or operation of or the conduct of the business of any of the Evergreen Stations by any Evergreen Party or any Entity Affiliated with any Evergreen Party, including without limitation the Evergreen Real Property, the Evergreen Personal Property, the Evergreen Private Authorizations, the Evergreen Governmental Authorizations, including the Evergreen FCC Licenses, the Evergreen Intangible Assets and the Evergreen Assumable Agreements, but excluding the Evergreen Excluded Assets. EVERGREEN ASSUMABLE AGREEMENTS shall mean the Evergreen Private Authorizations, the Evergreen Trade Agreements, the Evergreen Leases and the Evergreen Other Contracts. EVERGREEN DISCLOSURE SCHEDULE shall mean the Evergreen Disclosure Schedule dated as of the date of this Agreement delivered by Evergreen to EZ. EVERGREEN EMPLOYEE PLAN shall have the meaning given to in Section 3.12(f). EVERGREEN EMPLOYMENT ARRANGEMENTS shall have the meaning given to it in Section 3.12(a). EVERGREEN EXCLUDED ASSETS shall mean (i) all cash and cash equivalents of any Evergreen Party, (ii) all Evergreen Accounts Receivable, (iii) the corporate names of each Evergreen Party, (iv) all books and records of each Evergreen Party relating to any of the Evergreen Stations and which any Evergreen Party is required by Applicable Law, to retain, subject to the right of the other party to have access and to copy for a period of three (3) years from the Closing Date, (v) the Evergreen Employee Plans and other Evergreen Employment Arrangements, (vi) all insurance policies relating to the Evergreen Assets, (vii) software programs and other assets at the principal executive offices of any Evergreen Party used to provide certain financial and accounting services for any of the Evergreen Stations and (viii) any and all products, profits and proceeds of, and including without limitation any Claims with respect to, any of the foregoing. EVERGREEN FCC LICENSES shall have the meaning given to it in the first Whereas paragraph. EVERGREEN FINANCIAL DATA shall have the meaning given to it in Section 3.2(a). EVERGREEN GOVERNMENTAL AUTHORIZATIONS shall have the meaning given to it in Section 3.7(a). EVERGREEN INTANGIBLE ASSETS shall have the meaning given to it in Section 3.8. EVERGREEN LEASES shall have the meaning given to it in Section 3.5(a). EVERGREEN MATERIAL AGREEMENTS shall have the meaning given to it in Section 3.16. EVERGREEN NONASSUMED LIABILITIES shall have the meaning given to it in Section 2.3(b). EVERGREEN OTHER CONTRACTS shall mean (a) all Evergreen Material Agreements set forth on Section 3.15 of the Evergreen Disclosure Schedule excluding those agreements identified thereon -5- as a "retained agreement", (b) all Contracts for the sale of time on any Evergreen Station for cash entered into in the ordinary course of business consistent with prior practice, and (c) Contracts not required to be listed on Section 3.15 of the Evergreen Disclosure Schedule that have been entered into in the ordinary course of business and involve less than $300,000 per year in the aggregate. EVERGREEN PARENT shall have the meaning given to it in the Preamble. EVERGREEN PARTIES shall have the meaning given to it in the Preamble. EVERGREEN PERSONAL PROPERTY shall mean all items of Personal Property, used or held for use in the ownership or operation of or the conduct of the business of any of the Evergreen Stations. EVERGREEN PRIVATE AUTHORIZATIONS shall mean all Private Authorizations obtained or held in connection with the ownership or operation of any of the Evergreen Assets or the conduct of the business of any of the Evergreen Stations. EVERGREEN PRORATION SCHEDULE shall have the meaning given to it in Section 2.3(d). EVERGREEN REAL PROPERTY shall have the meaning given to it in Section 3.5(a). EVERGREEN STATION and EVERGREEN STATIONS shall have the meaning given them in the first Whereas paragraph. EVERGREEN STATION EMPLOYEES shall have the meaning given it in the Section 3.12(a). EVERGREEN STATIONS TBA shall have the meaning given it in the Section 5.2(d). EVERGREEN STUDIO FACILITIES shall have the meaning given to it in Section 3.5(b). EVERGREEN TRADE AGREEMENTS shall mean all Trade Agreements in effect on the date hereof or entered into on or prior to the Cut-Off Date that relate to the ownership or operation of or the conduct of the business of any of the Evergreen Stations. EVERGREEN'S KNOWLEDGE (including the term "to the knowledge, information and belief of Evergreen") shall mean the actual knowledge of any Evergreen Party executive officer or any General Manager of any Evergreen Station. EXCHANGE shall have the meaning given to it in the third Whereas paragraph. 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 statutory or regulatory provision shall be deemed to be a reference to any successor statutory or regulatory provision. EXTRA CHARLOTTE FM shall have the meaning given to it in Section 5.9(a). -6- EXTRA PHILADELPHIA FM shall have the meaning given to it in Section 5.9(a). EZ shall have the meaning given to it in the Preamble. EZ ACCOUNTS RECEIVABLE shall mean the Accounts Receivables of any EZ Party arising in connection with the ownership or operation of any of the EZ Assets or the conduct of the business of either of the Evergreen Stations prior to the applicable Cut-off Date. EZ ASSETS shall mean all assets used or held for use in the ownership or operation of or the conduct of the business of either of the EZ Stations by an EZ Party or an Entity Affiliated with any EZ Party, including without limitation the EZ Real Property, the EZ Personal Property, the EZ Private Authorizations, the EZ Governmental Authorizations, including the EZ FCC Licenses, the EZ Intangible Assets and the EZ Assumable Agreements, but excluding the EZ Excluded Assets. EZ ASSUMABLE AGREEMENTS shall mean the EZ Private Authorizations, the EZ Trade Agreements, the EZ Leases and the EZ Other Contracts. EZ DISCLOSURE SCHEDULE shall mean the EZ Disclosure Schedule dated as of the date of this Agreement delivered by EZ to Evergreen. EZ EMPLOYEE PLAN shall have the meaning given to it in Section 4.12(f). EZ EMPLOYMENT ARRANGEMENTS shall have the meaning given to it in Section 4.12(a). EZ EXCLUDED ASSETS shall mean (i) all cash and cash equivalents of any EZ Party, (ii) all EZ Accounts Receivable, (ii) the corporate names of each EZ Party, (iv) all books and records or EZ relating to either of the EZ Stations and which any EZ Party is required by Applicable Law, to retain, subject to the right of the other party to have access and to copy for a period of three (3) years from the Closing Date, (v) the EZ Employee Plans and other EZ Employee Arrangements, (vi) all insurance policies relating to the EZ Assets, (vii) software programs and other assets at the principal executive offices of any EZ Party used to provide certain financial and accounting services for either of the EZ Stations and (viii) any and all products, profits and proceeds of, and including without limitation any Claims with respect to, any of the foregoing. EZ FCC LICENSES shall have the meaning given to it in the second Whereas paragraph. EZ FINANCIAL DATA shall have the meaning given to it in Section 4.2(a). EZ GOVERNMENTAL AUTHORIZATIONS shall have the meaning given to it in Section 4.7(a). EZ INTANGIBLE ASSETS shall have the meaning given to it in Section 4.8. EZ LEASES shall have the meaning given to it in Section 4.5(a). EZ MATERIAL AGREEMENT shall have the meaning given to it in Section 4.16. -7- EZ MERGER AGREEMENT shall have the meaning given to it in the fifth Whereas paragraph. EZ NONASSUMED LIABILITIES shall have the meaning given to it in Section 2.3(a). EZ OTHER CONTRACTS shall mean (a) all EZ Material Agreements set forth on Section 4.15 of the EZ Disclosure Schedule excluding those agreements identified thereon as a "retained agreement", (b) all Contracts for the sale of time on either EZ Station for cash entered into in the ordinary course of business consistent with prior practice, and (c) Contracts not required to be listed on Section 4.15 of the EZ Disclosure Schedule that have been entered into in the ordinary course of business and involve less than $300,000 per year in the aggregate. EZP shall have the meaning given to it in the Preamble. EZ PARTIES shall have the meaning given to it in the Preamble. EZ PERSONAL PROPERTY shall mean all items of Personal Property, used or held for use in the ownership or operation of or the conduct of the business of either of the EZ Stations. EZ PRIVATE AUTHORIZATIONS shall mean all Private Authorizations obtained or held in connection with the ownership or operation of any of the EZ Assets or the conduct of the business of either of the EZ Stations. EZ PRORATION SCHEDULE shall have the meaning given to it in Section 2.3(e). EZ REAL PROPERTY shall have the meaning given to it in Section 4.5(a). EZ STATION and EZ STATIONS shall have the meaning given to them in the second Whereas paragraph. EZ STATION EMPLOYEES shall have the meaning given to it in Section 4.12(a). EZ STATIONS TBA shall have the meaning given to it in Section 5.2(d). EZ TRADE AGREEMENTS shall mean all Trade Agreements in effect on the date hereof or entered into on or prior to the Cut-Off Date that relate to the ownership or operation of or the conduct of the business of either of the EZ Stations. EZ'S KNOWLEDGE (including the term "to the knowledge, information and belief of EZ") shall mean the actual knowledge of any EZ Party executive officer or any General Manager of either EZ Station. 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 statutory or regulatory provision shall be deemed to be a reference to any successor statutory or regulatory provision. -8- 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 Evergreen Stations to the appropriate EZ Parties and the EZ Stations to the appropriate Evergreen Parties. FCC LICENSES shall mean all Governmental Authorizations issued by the FCC to Evergreen or EZ or its Subsidiaries in connection with the ownership, operation and conduct of the business of the Evergreen Stations and the EZ Stations, as the case may be. FINAL ORDER shall mean, with respect to any Authority, including without limitation the FCC, one 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, is in effect or pending and as to which the time or deadline for filing any such appeal, petition or application has expired or, if filed, has been denied, dismissed or withdrawn, and the time or deadline for instituting any further Legal Action has expired. 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 ownership or operation of any of the Assets or the conduct of the business of any of the Stations. GOVERNMENTAL FILINGS shall mean all filings, including franchise and similar Tax filings, submissions, registrations, notices or declarations 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 such 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 -9- 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. INDEBTEDNESS shall mean, with respect to any Person, (a) all items, except items of capital stock or of surplus or of general contingency or deferred tax reserves or any minority interest in any Subsidiary of such Person to the extent such interest is treated as a liability with indeterminate term on the consolidated balance sheet of such Person, which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person, (b) all obligations secured by any Lien to which any property or asset owned or held by such Person is subject, whether or not the obligation secured thereby shall have been assumed, and (c) to the extent not otherwise included, all Contracts of such Person constituting capitalized leases and all obligations of such Person with respect to Leases constituting part of a sale and leaseback arrangement. INDEBTEDNESS FOR MONEY BORROWED shall mean, with respect to EZ and Evergreen, money borrowed and Indebtedness represented by notes payable and drafts accepted representing extensions of credit, all obligations evidenced by bonds, debentures, notes or other similar instruments, the maximum amount currently or at any time thereafter available to be drawn under all outstanding letters of credit issued for the account of such Person, all Indebtedness upon which interest charges are customarily paid by such Person, and all Indebtedness (including capitalized lease obligations) issued or assumed as full or partial payment for property or services, whether or not any such notes, drafts, obligations or Indebtedness represent Indebtedness for money borrowed, but shall not include (a) trade payables, (b) expenses accrued in the ordinary course of business, or (c) customer advance payments and customer deposits received in the ordinary course of business. INTANGIBLE ASSETS shall mean all assets and property lacking physical properties the evidence of ownership of which must customarily be maintained by independent registration, documentation, certification, recordation or other means, and shall include, without limitation, concessions, franchises, licenses, permits and all Intellectual Property. INTELLECTUAL PROPERTY shall mean any and all research, information, inventions, designs, procedures, developments, discoveries, improvements, patents and applications therefor, trademarks and applications therefor, service marks, trade names, copyrights and applications therefor, logos, trade secrets, drawing, plans, systems, methods, specifications, computer software programs, tapes, discs and related data processing software (including without limitation object and source codes) owned by such Person or in which it has an ownership interest and all other manufacturing, engineering, technical, research and development data and know-how made, conceived, developed and/or acquired by such Person, which relate to the manufacture, production or processing of any products developed or sold by such Person or which are within the scope of or usable in connection with such Person's business as it may, from time to time, hereafter be conducted or proposed to be conducted. -10- 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 or 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. LEASE 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, in equity or in arbitration. LETTER OF INTENT shall have the meaning given to it in Section 5.2(d). LIEN shall mean any 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 right; any financing or capital lease involving substantially the same economic effect as any of the foregoing; 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. LIKE-KIND EXCHANGE shall mean an exchange of assets of the nature contemplated by the provisions of Section 1031 of the Code. LOSS AND EXPENSE shall have the meaning given to it in Section 8.2. 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 Contract which (a) was entered into not 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 Fifty Thousand Dollars ($50,000) during any of the last three fiscal years, (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 EZ Stations or the Evergreen Stations in any of the last three fiscal years or is likely to account -11- for more than three percent (3%) of revenues of the EZ Stations or the Evergreen Stations during the current fiscal year. MULTIEMPLOYER PLAN shall mean a Plan which is a "multiemployer plan" within the meaning of Section 4001(a)3 of ERISA. NOTICE OF DISAGREEMENT shall have the meaning given to it in Section 2.3(d). ORGANIC DOCUMENT shall mean, with respect to a Person which is a corporation, its certificate or articles of incorporation or organization, its by-laws and all stockholder agreements, voting trusts and similar arrangements applicable to any of its capital stock. PBGC shall mean the Pension Benefit Guaranty Corporation and any Entity succeeding to any or all of its functions under ERISA. PBI shall have the meaning given to it in the Preamble PERMITTED LIENS shall mean (a) any mechanic's or materialmen's Lien or similar Lien with respect to amounts not yet due and payable or which are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established, (b) Liens for taxes not yet due and payable or which are being contested in good faith by appropriate proceeding, for which appropriate reserves have been established, and (c) easements, licenses, covenants, rights of way and similar Liens which, individually or in the aggregate, would not materially and adversely affect the marketability or value of the property encumbered thereby or materially interfere with the operations of the Stations. PERSON shall mean any natural individual or any Entity. PERSONAL PROPERTY shall mean all of the machinery, equipment, tools, vehicles, furniture, leasehold improvements, office equipment, plant, inventory, spare parts and other tangible personal property, plus such additions thereto and deletions therefrom arising in the ordinary course of business between the date hereof and the Closing Date. PHILADELPHIA PRORATION SCHEDULE shall have the meaning given to it in Section 2.3(e). PHILADELPHIA TRUSTEE APPLICATION shall have the meaning given to it in Section 5.9(a). 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. -12- 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. PRO RATABLE TAXES shall mean real estate and other property Taxes, ad valorem Taxes, gross receipts Taxes and similar Taxes, but shall not include federal, state or local income Taxes, franchise Taxes or other Taxes measured by or based upon income or gain on sale or other disposition of property or assets. REAL PROPERTY shall mean all of the fee estates and buildings and other improvements thereon, leasehold interest, easements, licenses, rights to access, right-of- way, and other real property interest. REFEREE shall have the meaning given to it in Section 2.3(d). 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 5.1(a). SEC shall mean the United States Securities and Exchange Commission, or any successor Authority. SECTION 1031 SCHEDULE shall have the meaning given to it in Section 2.2(b). SECURITIES ACT shall mean the Securities Act of 1933, and the rules and regulations of the SEC 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. STATIONS shall mean, collectively, the Evergreen Stations and the EZ Stations. 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. 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, -13- 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, addition to tax or additional amount 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) 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, including without limitation the representations and warranties set forth in Section 3.11 or 4.11. 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. TBA DATE shall mean the date when operations under the TBAs shall become effective (or in the event such date is not the same for all of the TBAs, the applicable date of such effectiveness). TBAS shall mean the Evergreen Stations TBA and the EZ Stations TBA, or the applicable one of such agreements. TERMINATION DATE shall have the meaning given to it in Section 7.1. TRADE AGREEMENTS shall mean any Contract relating to any of the Stations pursuant to which any EZ Party or any Evergreen Party is required to provide air time in exchange for property or services other than cash. TRANSACTIONS shall mean the Exchange and all of the other transactions hereunder or under any of the Collateral Documents. -14- EX-2.33 3 ASSET PURCHASE AGREEMENT EXHIBIT 2.33 ASSET PURCHASE AGREEMENT By and Among EZ COMMUNICATIONS, INC. PROFESSIONAL BROADCASTING INCORPORATED EZ CHARLOTTE, INC. EVERGREEN MEDIA CORPORATION OF LOS ANGELES EVERGREEN MEDIA CORPORATION OF THE EAST and EVERGREEN MEDIA CORPORATION OF CAROLINALAND Dated as of December 5, 1996 TABLE OF CONTENTS ARTICLE 1 DEFINED TERMS.................................................................... 1 ARTICLE 2 SALE AND PURCHASE OF ASSETS...................................................... 2 2.1 Agreement to Sell and Buy........................................................ 2 2.2 Assumption of Liabilities and Obligations........................................ 2 2.3 Closing Date..................................................................... 4 2.4 Purchase Price................................................................... 4 2.5 Accounts Receivable.............................................................. 4 2.6 Like-Kind Exchange............................................................... 5 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE EVERGREEN PARTIES............................ 6 3.1 Organization and Business; Power and Authority; Effect of Transaction............ 6 3.2 Financial and Other Information.................................................. 7 3.3 Changes in Condition............................................................. 7 3.4 Materiality...................................................................... 7 3.5 Title to Properties; Leases...................................................... 7 3.6 Compliance with Private Authorizations........................................... 8 3.7 Compliance with Governmental Authorizations and Applicable Law................... 9 3.8 Intangible Assets................................................................ 10 3.9 Related Transactions............................................................. 11 3.10 Insurance........................................................................ 11 3.11 Tax Matters...................................................................... 11 3.12 Employee Retirement Income Security Act of 1974.................................. 11 3.13 Absence of Sensitive Payments.................................................... 13 3.14 Inapplicability of Specified Statutes............................................ 13 3.15 Employment Arrangements.......................................................... 13 3.16 Material Agreements.............................................................. 13 3.17 Ordinary Course of Business...................................................... 14 3.18 Broker or Finder................................................................. 15 3.19 Solvency......................................................................... 15 3.20 Environmental Matters............................................................ 15 3.21 Trade or Barter.................................................................. 16 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE EZ PARTIES................................. 16 4.1 Organization and Business; Power and Authority; Effect of Transaction............ 16 4.2 Inapplicability of Specified Statutes............................................ 17 4.3 Broker or Finder................................................................. 17 4.4 Solvency......................................................................... 17 ARTICLE 5 COVENANTS........................................................................ 17 5.1 Access to Information; Confidentiality........................................... 17 5.2 Agreement to Cooperate........................................................... 18 5.3 Public Announcements............................................................. 20 5.4 Notification of Certain Matters.................................................. 21
5.5 No Solicitation.................................................................. 21 5.6 Conduct of Business by Evergreen Pending the Closing............................. 21 5.7 FCC Application; Divesture Commitment............................................ 23 ARTICLE 6 CLOSING CONDITIONS............................................................... 23 6.1 Conditions to Obligations of Each Party to Effect the Transactions............... 23 6.2 Conditions to Obligations of EZ.................................................. 24 6.3 Conditions to Obligations of Evergreen........................................... 26 ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER................................................ 27 7.1 Termination...................................................................... 27 7.2 Effect of Termination............................................................ 28 ARTICLE 8 INDEMNIFICATION.................................................................. 28 8.1 Survival......................................................................... 28 8.2 Indemnification.................................................................. 28 8.3 Limitation of Liability.......................................................... 29 8.4 Notice of Claims................................................................. 29 8.5 Defense of Third Party Claims.................................................... 29 8.6 Exclusive Remedy................................................................. 30 ARTICLE 9 GENERAL PROVISIONS............................................................... 30 9.1 Amendment........................................................................ 30 9.2 Waiver........................................................................... 30 9.3 Fees, Expenses and Other Payments................................................ 30 9.4 Notices.......................................................................... 30 9.5 Specific Performance; Other Rights and Remedies.................................. 32 9.6 Severability..................................................................... 32 9.7 Counterparts..................................................................... 32 9.8 Section Headings................................................................. 33 9.9 Governing Law.................................................................... 33 9.10 Further Acts..................................................................... 33 9.11 Entire Agreement................................................................. 33 9.12 Assignment....................................................................... 33 9.13 Parties in Interest.............................................................. 33 9.14 Mutual Drafting.................................................................. 33 9.15 EZ Agent for Other EZ Parties.................................................... 34 9.16 Evergreen Parent Agent for Other Evergreen Parties............................... 34
APPENDIX A: Definitions ii ASSET PURCHASE AGREEMENT This Asset Exchange Agreement (this "Agreement") is dated as of December 5, 1996, by and among EZ Communications, Inc., a Virginia corporation ("EZ"), Professional Broadcasting Incorporated, a Virginia corporation ("PBI") and EZ Charlotte, Inc., a Virginia corporation ("EZP" and, collectively with EZ and PBI, sometimes collectively referred to individually as an "EZ Party" and collectively as the "EZ Parties"), on the one hand, and Evergreen Media Corporation of Los Angeles, a Delaware corporation ("Evergreen" or "Evergreen Parent"), Evergreen Media Corporation of the East ("EMC East"), and Evergreen Media Corporation of Carolinaland ("EMC Carolinaland"), each a Delaware corporation and an indirect wholly owned subsidiary of Evergreen Parent (including Evergreen Parent, individually an "Evergreen Party" and collectively the "Evergreen Parties"), on the other hand. WHEREAS, EMC East is the owner and operator and EMC Carolinaland is the licensee of radio station WNKS(FM), Charlotte, North Carolina (the "Evergreen Station") pursuant to licenses issued by the FCC (the "Evergreen FCC Licenses"); WHEREAS, the EZ Parties desire to purchase and the Evergreen Parties desire to sell certain property and assets used in, held for use in connection with or necessary for the conduct of the business or operations of the Evergreen Station on the terms and conditions hereinafter set forth; WHEREAS, the EZ Parties, the Evergreen Parties and certain other Subsidiaries of Evergreen Parent are parties to an Asset Exchange Agreement, dated as of the date of this Agreement (the "Asset Exchange Agreement"), relating to the exchange of radio stations in Philadelphia and Charlotte; and WHEREAS, EZ is party to an agreement and plan of merger (the "EZ Merger Agreement"), dated as of August 5, 1996, as amended and restated as of September 27, 1996, with American Radio Systems Corporation, a Delaware corporation ("American"), pursuant to which EZ will be merged into American or a wholly- owned subsidiary of American (the "American-EZ Merger"), and American desires to consent to the Exchange and the other transactions contemplated by this Agreement; NOW, THEREFORE, in consideration of the above premises and the covenants and agreements contained herein, the EZ Parties and the Evergreen Parties, intending to be legally bound, do hereby 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 the Evergreen 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 this Agreement as a whole and not a particular section, and references to "this Section" are intended to refer to the entire section and not a particular subsection thereof. The term "either party" shall, unless the context otherwise requires, refer to Evergreen Parent and EZ, and shall include, any Subsidiary of either thereof which is a party to this Agreement. ARTICLE 2 SALE AND PURCHASE OF ASSETS --------------------------- 2.1 Agreement to Sell and Buy. Subject to the terms and conditions set ------------------------- forth in this Agreement, the Evergreen Parties hereby agree to sell, assign, transfer and deliver to the EZ Parties at the Closing, and the EZ Parties agree to purchase at the Closing, the Evergreen Assets, not previously transferred pursuant to the Evergreen Station TBA, free and clear of any Liens of any nature whatsoever except for Permitted Liens, on the terms and conditions of this Agreement. 2.2 Assumption of Liabilities and Obligations. ----------------------------------------- (a) Except as expressly provided in this Agreement, the EZ Parties shall not assume or become obligated to perform any debt, liability or obligation of any Evergreen Party whatsoever, including without limitation (i) any obligations or liabilities arising under any contract, lease or agreement, other than those arising under the Evergreen Assumable Agreements; (ii) any obligations or liabilities under the Evergreen Assumable Agreements relating to the period prior to the Cut-off Date; (iii) any Claims or pending or threatened Legal Action to which any Evergreen Party is a party or to which any of the Evergreen Assets or the Evergreen Station is subject relating to the ownership or operation of the Evergreen Assets or the conduct of the business of the Evergreen Station prior to the Closing (other than as provided in the Evergreen Station TBA); (iv) any insurance policies of the Evergreen Parties; (v) any obligations or liabilities arising under any financing arrangement, capitalized lease or other agreement relating to Indebtedness for Borrowed Money; (vi) any obligations or liabilities of any Evergreen Party under any Evergreen Employment Arrangement (including under any Evergreen Employee Plan), including any obligation to any Evergreen Station Employee for severance benefits, vacation time, or sick leave; (vii) any liability for any Taxes attributable to the ownership or operation of the Evergreen Assets or the Evergreen Station on or prior to the Cut-off Date; or (viii) any obligations or liabilities caused by, arising out of, or resulting from any action or omission of any Evergreen Party prior to the Closing. All such obligations and liabilities (the "Evergreen Nonassumed Liabilities") shall remain and be the obligations and liabilities solely of the Evergreen Parties. (b) Notwithstanding anything contained in this Agreement to the contrary and except as otherwise provided in the Evergreen Station TBA, (i) all items of income and expense (including without limitation with respect to rent, utilities, Pro Ratable Taxes and wages, salaries and accrued but unused vacation for employees) arising from the conduct of the business of the Evergreen -2- Station (the conduct of such business to be in the ordinary course consistent with past practice) shall be prorated between the Evergreen Parties and EZ Parties in accordance with GAAP applied consistently with past practice as of 12:01 a.m., Eastern time, on the Cut-off Date, with the Evergreen Parties responsible for any such items prior to the Cut-off Date and the EZ Parties responsible for any such items relating to any subsequent period, and (ii) obligations and liabilities under the Evergreen Trade Agreements shall be prorated to the extent and in the manner set forth in Section 2.3(e). For these purposes, Pro Ratable Taxes attributable to a period that begins before and ends after the Cut-off Date shall be treated on a "closing of the books" basis as two partial periods, one ending at the close of the day immediately preceding the Cut-off Date and the other beginning on the Cut-off Date, except that Pro Ratable Taxes (such as property Taxes) imposed on a periodic basis shall be allocated on a daily basis. (c) Within sixty (60) days of the Closing Date, EZ shall deliver to Evergreen Parent a schedule of its proposed prorations, including without limitation any with respect to the Evergreen Trade Agreements pursuant to the provisions of Section 2.3(e), which shall set forth in reasonable detail the basis for those determinations (the "Charlotte Proration Schedule"). The Charlotte Proration Schedule shall be conclusive and binding upon the Evergreen Parties unless Evergreen Parent provides EZ with written notice of objection (the "Notice of Disagreement") within thirty (30) days after Evergreen's receipt of the Charlotte Proration Schedule, which notice shall state the prorations proposed by Evergreen Parent (the "Evergreen Proration Schedule"). EZ shall have fifteen (15) days from receipt of a Notice of Disagreement to accept or reject the Evergreen Proration Schedule. If EZ rejects the Evergreen Proration Schedule, and the amount in dispute exceeds Five Thousand Dollars ($5,000), the dispute shall be submitted within ten (10) days of such rejection to the Chicago, Illinois office of Arthur Andersen & Co., LLP (the "Referee") for resolution, such resolution to be made within thirty (30) days after submission to the Referee and to be final, conclusive and binding on the EZ Parties and the Evergreen Parties. Evergreen Parent and EZ agree to share equally the cost and expenses of the Referee, but each party shall bear its own legal and other expenses, if any. If the amount in dispute is equal to or less than Five Thousand Dollars ($5,000), such amount shall be divided equally between Evergreen Parent and EZ. Payment by Evergreen Parent or EZ, as the case may be, of the proration amounts determined pursuant to this Section 2.2(c) shall be due fifteen (15) days after the last to occur of (i) Evergreen Parent's acceptance of the Charlotte Proration Schedule or failure to give EZ a timely Notice of Disagreement; (ii) EZ's acceptance of the Evergreen Proration Schedule or failure to reject within fifteen (15) days of receipt of a timely Notice of Disagreement; (iii) EZ's rejection of the Evergreen Proration Schedule in the event the amount in dispute equals or is less than Five Thousand Dollars ($5,000); and (iv) notice to EZ and Evergreen Parent of the resolution of the disputed amount by the Referee in the event that the amount in dispute exceeds Five Thousand Dollars ($5,000). (d) Any payment required by EZ to Evergreen Parent or by Evergreen Parent to EZ, as the case may be, under Section 2.2(c) or 2.2(e) shall be paid by wire transfer of immediately available funds to the account of the payee with a financial institution in the United States as designated by such party in the Charlotte Proration Schedule or the Notice of Disagreement (or by separate notice in the event a Notice of Disagreement is not sent). If either EZ or Evergreen Parent fails to pay when due any amount under Section 2.2(c) or 2.2(e), interest on such amount will accrue from the date payment was due to the date such payment is made at a per annum rate equal to the "prime rate" as published daily in the Money Rates column of the Wall Street Journal (or the ------------------- -3- average of such rates if more than one rate indicated) plus two percent (2%), ---- and such interest shall be payable upon demand. (e) Obligations and liabilities under the Evergreen Trade Agreements shall be prorated in favor of the EZ Parties only to the extent that the aggregate obligations and liabilities (determined in accordance with GAAP) for unperformed air time under all Evergreen Trade Agreements as of 12:01 a.m. on the Cut-off Date exceed by Ten Thousand Dollars ($10,000) the fair market value of the property (determined in accordance with GAAP) to be received by the EZ Parties under the Evergreen Trade Agreements after 12:01 a.m. on the Cut-off Date under the Evergreen Trade Agreements. Additionally, the aggregate obligations and liabilities for unperformed air time under the Evergreen Trade Agreements on the Cut-off Date which are required to be prorated (any excess being part of the Evergreen Nonassumed Liabilities) shall not exceed One Hundred Thousand Dollars ($100,000). There shall be no proration in favor of the Evergreen Parties with respect to the Evergreen Trade Agreements, notwithstanding the fact that the excess, if any, of the obligations and liabilities under the Evergreen Trade Agreements over the fair market value of the property to be received under all Evergreen Trade Agreements after 12:01 a.m. on the Cut-off Date is less than the amount specified in the first sentence of this paragraph. (f) Nothing contained in this Section 2.3 is intended or shall be deemed to amend or modify the indemnification provisions of Article 8 nor to reallocate responsibility for the matters set forth therein. 2.3 Closing Date. The closing of the Transactions (the "Closing") shall ------------ take place at Hunton & Williams, 1751 Pinnacle Drive, Suite 1700, McLean, Virginia 22102, at 10:00 a.m., local time, on the later of (a) the earlier of (i) the second (2nd) business day following the effectiveness of the American-EZ Merger, and (ii) June 30, 1997, and (b) the tenth (10th) business day after the satisfaction or waiver by Evergreen Parent and EZ of the conditions set forth in Section 6.1, or such other place or on such other date, prior to the Termination Date, as the parties may agree (the "Closing Date"). At the Closing, each of the parties shall deliver such bills of sale, assignments, assumptions of liabilities, opinions and other instruments and documents as are described in this Agreement or as may be otherwise reasonably requested by the parties and their respective counsel. 2.4 Purchase Price. The purchase price for the Evergreen Assets and the -------------- Evergreen Station (the "Purchase Price") shall be an amount equal to Ten Million Dollars ($10,000,000), subject to adjustment pursuant to the provisions of Section 2.2. On the Closing Date, the EZ Parties shall pay to the Evergreen Parties Ten Million Dollars ($10,000,000) by wire transfer of immediately available funds to such account as is designated by the Evergreen Parent in written instructions to EZ delivered not later than two (2) business days prior to the Closing. 2.5 Accounts Receivable. Upon the earlier to occur of Closing or the ------------------- commencement of the effectiveness of the Evergreen Station TBA, the Evergreen Parties shall appoint PBI their agent for the purpose of collecting all Evergreen Accounts Receivable. Evergreen shall deliver to EZ on or as soon as practicable after the Cut-off Date (but, in any event, within ten (10) days following the Cut-off Date) a complete and detailed statement showing the name, amount and age of each Evergreen Account Receivable. Subject to and limited by the following, revenues relating to the Evergreen Accounts Receivable will be for the account of Evergreen. EZ shall use its best -4- efforts to collect the Evergreen Accounts Receivable for a period of ninety (90) days after the Cut-off Date (the "Collection Period"). Any payment received by EZ during the Collection Period from any customer with an account which is an Evergreen Account Receivable shall first be applied in reduction of such Evergreen Account Receivable, unless the customer indicates otherwise in writing. During the Collection Period, EZ shall furnish Evergreen with a list of, and pay over to the other, the amounts collected with respect to the Evergreen Accounts Receivable on a bi-weekly basis. EZ shall provide Evergreen with a final accounting on or before the fifteenth (15th) day following the end of the Collection Period. Upon the request of either party at and after such time, the parties shall meet to mutually and in good faith analyze any uncollected Evergreen Accounts Receivable to determine if the same, in their reasonable business judgment, are deemed to be collectable and if EZ desires to retain such Evergreen Accounts Receivable in the interest of maintaining an advertising relationship. As to each such Evergreen Accounts Receivable, the parties shall negotiate a good faith value of such Evergreen Accounts Receivable, which EZ shall pay to Evergreen if EZ, in its sole discretion, chooses to retain such Evergreen Accounts Receivable. Evergreen shall retain the right to collect any of the Evergreen Accounts Receivable as to which the parties are unable to reach agreement as to a good faith value, and EZ agrees to turn over to Evergreen any payments received against any such Evergreen Accounts Receivable. EZ shall not be obligated to use any extraordinary efforts to collect any of the Evergreen Accounts Receivable or to refer any of such Evergreen Accounts Receivable to a collection agency or to any attorney for collection, and EZ shall not make any such referral or compromise, nor settle or adjust the amount of any such Evergreen Accounts Receivable, except with the approval of Evergreen. EZ shall not incur any liability to Evergreen for any uncollected account unless EZ shall have engaged in willful misconduct or gross negligence in the performance of its obligations set forth in this Section. During and after the Collection Period, without specific agreement with EZ to the contrary, neither Evergreen nor its agents shall make any direct solicitation of the Evergreen Accounts Receivable for collection purposes, except for Evergreen Accounts Receivable retained by Evergreen after the Collection Period. 2.6 Like-Kind Exchange. The Evergreen Parties may elect to effect the ------------------ transfer and conveyance of the Evergreen Assets as part of an exchange under Section 1031 of the Code, in lieu of selling such assets hereunder. If the Evergreen Parties so elect, they shall provide notice to EZ of their election, and thereafter (i) may at any time at or prior to Closing assign their rights (but such assignment shall not relieve them of their obligations) under this Agreement to a "qualified intermediary" as defined in Treas. Reg. (S)1.1031(k)- 1(g)(4), subject to all rights and obligations hereunder of the EZ Parties and (ii) shall promptly provide written notice of such assignment to all EZ Parties. The EZ Parties shall cooperate with all reasonable requests of the Evergreen Parties and the "qualified intermediary" in arranging and effecting the exchange as one which qualifies under Section 1031 of the Code. Without limiting the generality of the foregoing, if the Evergreen Parties have given notice of their intention to effect the acquisition of the Evergreen Assets as part of a tax- deferred exchange, the EZ Parties shall (i) promptly provide the Evergreen Parties with written acknowledgment of such notice and (ii) at Closing, pay the Purchase Price for the Evergreen Assets to the "qualified intermediary" rather than to the Evergreen Parties (which payment shall discharge the obligation of the EZ Parties to make payment for the Evergreen Assets hereunder). -5- ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE EVERGREEN PARTIES Each Evergreen Party hereby, jointly and severally, represents, warrants and covenants to, and agrees with, the EZ Parties as follows: 3.1 Organization and Business; Power and Authority; Effect of Transaction. --------------------------------------------------------------------- (a) Each Evergreen Party is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, has all requisite corporate power and authority to own or hold under lease its properties and to conduct its business as now conducted. (b) Each Evergreen Party has all requisite corporate power and authority necessary to enable it to execute and deliver, and to perform its obligations under, this Agreement and each Collateral Document executed or required to be executed by it pursuant hereto or thereto or to consummate the Transactions; and the execution, delivery and performance of this Agreement and each Collateral Document executed or required to be executed by it pursuant hereto or thereto have been duly authorized by all requisite corporate action on the part of each Evergreen Party. This Agreement has been duly executed and delivered by each Evergreen Party and constitutes, and each Collateral Document to which any Evergreen Party becomes a party will, when executed and delivered by such Evergreen Party, constitute, the legally valid and binding obligation of such Evergreen Party, enforceable against such Evergreen Party in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, moratorium, insolvency and similar laws affecting the rights and remedies of creditors and obligations of debtors generally and by general principles of equity. (c) Except as set forth in Section 3.1(c) of the Evergreen Disclosure Schedule, neither the execution and delivery by each Evergreen Party of this Agreement or any Collateral Document executed or required to be executed by it pursuant hereto or thereto, nor the consummation by each Evergreen Party of the Transactions, nor compliance with the terms, conditions and provisions hereof or thereof by each Evergreen Party: (i) will conflict with, or result in a breach or violation of, or constitute a default under, any Organic Document of any Evergreen Party or any Applicable Law on the part of any Evergreen Party, 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 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 Evergreen Material Agreement; or (ii) will require any Evergreen Party to make or obtain any Governmental Authorization, Governmental Filing or Private Authorization, except for the FCC Consents, filings under the Hart-Scott-Rodino Act and Private Authorizations the failure of which to be obtained or maintained would not, individually or in the aggregate, have a Material Adverse Effect on Evergreen. -6- (d) Evergreen Parent does not have any direct or indirect Subsidiaries or other Affiliates which own or have any interest in the Evergreen Station or any of the Evergreen Assets other than the other Evergreen Parties. 3.2 Financial and Other Information. Evergreen has heretofore furnished ------------------------------- to EZ copies of the unaudited financial data of the Evergreen Station listed in Section 3.2 of the Evergreen Disclosure Schedule (the "Evergreen Financial Data"). Except as set forth in Section 3.2 of the Evergreen Disclosure Schedule (which schedule reflects the inclusion of "barter" transactions and the effects thereof), and except for normal year-end audit adjustments and accruals, if any, the Evergreen Financial Data have been prepared in accordance with GAAP applied on a basis consistent with past practices and are a true, accurate and fair presentation of the operating revenues and operating expenses of the Evergreen Station for the periods indicated. 3.3 Changes in Condition. Since June 30, 1996, except to the extent -------------------- specifically described in Section 3.3 of the Evergreen Disclosure Schedule, there has been no Material Adverse Change in Evergreen. There is no Event known to any Evergreen Party which Materially Adversely Affects, or (so far as Evergreen can now reasonably foresee) is likely to Materially Adversely Affect, Evergreen, except to the extent specifically described in Section 3.3 of the Evergreen Disclosure Schedule. 3.4 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 Evergreen Disclosure Schedule, except for such exceptions and qualifications including without limitation those set forth in the Evergreen 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 Evergreen. 3.5 Title to Properties; Leases. --------------------------- (a) Section 3.5(a) of the Evergreen Disclosure Schedule lists all Real Property and describes all Leases of Real Property (the "Evergreen Leases") used or held for use in the operation of the Evergreen Station (the "Evergreen Real Property"). One of the Evergreen Parties has good and marketable title, or valid and subsisting leasehold interests (as shown on Section 3.5(a) of the Evergreen Disclosure Schedule), to all Evergreen Real Property, in each case free and clear of all Liens, except (i) Permitted Liens and (ii) Liens set forth on Section 3.5(a) of the Evergreen Disclosure Schedule (which Liens shall be released prior to Closing). Except as otherwise set forth in Schedule 3.5(a) of the Evergreen Disclosure Schedule, each Evergreen Lease included in the Evergreen Real Property has been duly authorized, executed and delivered by the appropriate Evergreen Party and, to Evergreen's knowledge, information and belief, each of the other parties thereto, and is a legally valid and binding obligation of the appropriate Evergreen Party, and, to Evergreen's knowledge, information and belief, each of the other parties thereto, enforceable in accordance with its terms. The appropriate Evergreen Party has a valid leasehold interest in and enjoys peaceful and undisturbed possession under all Evergreen Leases pursuant to which it holds any Evergreen Real Property. All Evergreen Leases are valid and subsisting and in full force and effect; neither any Evergreen Party nor, to Evergreen's knowledge, information and belief, any other -7- party thereto, is in default in the performance, observance or fulfillment of any obligation, covenant or condition contained in any Evergreen Lease. Except as disclosed in Section 3.5(a) of the Evergreen Disclosure Schedule, all improvements on the Evergreen Real Property are in compliance with applicable zoning and land use laws, ordinances and regulations in all respects necessary to conduct the operation of the Evergreen Station operating thereon as presently conducted, except for any instances of non-compliance which do not and will not individually or in the aggregate have a Material Adverse Effect on the owner or lessee, as the case may be, of such Evergreen Real Property. Except as disclosed in Section 3.5(a) of the Evergreen Disclosure Statement, all such improvements are in good working condition and repair (ordinary wear and tear excepted), are insurable at standard rates, and comply in all Material aspects with FCC rules and regulations. Except as disclosed in Section 3.5(a) of the Evergreen Disclosure Statement, all of the transmitting towers, ground radials, guy anchors, transmitting buildings and related improvements located on the Evergreen Real Property are located entirely on the Evergreen Real Property. Evergreen has no knowledge of any pending, threatened or contemplated action to take by eminent domain or otherwise to condemn any part of the Evergreen Real Property. (b) Section 3.5(b) of the Evergreen Disclosure Schedule contains a true, accurate and complete description of all Material items of Evergreen Personal Property. None of the Evergreen Personal Property is subject to any Lien, except (i) Permitted Liens and (ii) Liens set forth on Section 3.5(b) of the Evergreen Disclosure Schedule (which Liens shall be released prior to the Closing). Except as set forth in Section 3.5(b) of the Evergreen Disclosure Schedule, including without limitation the fact that the office and studio facilities of the Evergreen Station (the "Evergreen Studio Facilities") require significant improvement (including without limitation the necessity of repair, renovation or relocation), all Material items of Evergreen Personal Property (other than the Evergreen Studio Facilities) are in a state of good repair and maintenance and are in good operating condition, normal wear and tear excepted, have been maintained in a manner consistent with generally accepted standards of good engineering practice and currently permit the Evergreen Station to be operated in accordance with the terms and conditions of the Evergreen FCC Licenses and all Applicable Laws. EZ acknowledges and agrees that Evergreen shall not be required to perform any facility improvements to the Evergreen Studio Facilities. 3.6 Compliance with Private Authorizations. Section 3.6 of the Evergreen -------------------------------------- Disclosure Schedule sets forth a true, accurate and complete list and description of each Private Authorization which individually or when taken together with other substantially similar Evergreen Private Authorizations is Material to the Evergreen Assets or the Evergreen Station, all of which are in full force and effect. The Evergreen Private Authorizations are all Private Authorizations that are necessary for the ownership and operation by Evergreen of the Evergreen Assets and the Evergreen Station 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 Evergreen. No Evergreen Party is in breach or violation of, or in default in the performance, observance or fulfillment of, any Evergreen Private Authorization, and no Event exists or has occurred, which constitutes, or but for any requirement of giving of notice or passage of time or both would constitute, such a breach, violation or default, under any Evergreen Private Authorization, except for such defaults, breaches or violations as do not and will not have in the aggregate any Material Adverse Effect on Evergreen. No Evergreen Private Authorization -8- is the subject of any pending or, to Evergreen's knowledge, information or belief, threatened attack, revocation or termination. 3.7 Compliance with Governmental Authorizations and Applicable Law. -------------------------------------------------------------- (a) Section 3.7(a) of the Evergreen Disclosure Schedule contains a description of: (i) all Legal Actions pending or, to Evergreen's knowledge, information and belief, is threatened against any Evergreen Party with respect to the operation or ownership of any of the Evergreen Assets or the conduct of the business of the Evergreen Station; (ii) all Claims and Legal Actions pending or, to Evergreen's knowledge, information and belief, threatened against any Evergreen Party with respect to the operation or ownership of any of the Evergreen Assets or the conduct of the business of the Evergreen Station which, individually or in the aggregate, are reasonably likely to result in the revocation or termination of any of the Evergreen FCC Licenses or the imposition of any restriction of such a nature as would Adversely affect the ownership or operations of the Evergreen Station; in particular, but without limiting the generality of the foregoing, there are no applications, complaints or Legal Actions pending or, to Evergreen's knowledge, information and belief, threatened (x) before the FCC relating to the ownership or operations of any of the Evergreen Assets or the conduct of the business of the Evergreen Station other than applications, complaints or Legal Actions which affect the radio broadcasting industry generally, or (y) before any Authority involving charges of illegal discrimination by the Evergreen Station under any federal or state employment Laws; and (iii) each Governmental Authorization (including without limitation all FCC Licenses) required under Applicable Laws (x) to own and operate the Evergreen Station, as currently conducted or proposed to be conducted on or prior to the Closing Date, all of which are in full force and effect or (y) that are necessary to permit each Evergreen Party to execute and deliver this Agreement and to perform its obligations hereunder (the "Evergreen Governmental Authorizations"). The Evergreen Parties have delivered to the EZ Parties true and complete copies of the Evergreen Governmental Authorizations (including any and all amendments and other modifications thereto.) (b) The appropriate Evergreen Party is the authorized legal holder of the Evergreen FCC Licenses listed in Section 3.7(a) of the Evergreen Disclosure Schedule, none of which is subject to any restriction or condition which would limit in any respect the operations of the Evergreen Station as currently conducted or proposed to be conducted on or prior to the Closing Date. The Evergreen FCC Licenses 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 any Evergreen Party or its officers, directors, employees or agents, and the operation of the Evergreen Station is in accordance in all Material respects with the Evergreen FCC Licenses. The Evergreen Station are operating in accordance with the Evergreen FCC Licenses, all underlying construction permits and the FCA. Except as disclosed in Section 3.7 of the Evergreen Disclosure Schedule, no application, action or proceeding is pending for the renewal or modification of any Evergreen FCC Licenses and, to Evergreen's knowledge, -9- information and belief, there is not as of the date of this Agreement issued or outstanding any investigation or material complaint against any Evergreen Party at the FCC relating to any Evergreen Station. Except as disclosed in Section 3.7 of the Evergreen Disclosure Schedule, as of the date of this Agreement, there is no proceeding pending at or outstanding notice of violation from the FCC relating to any Evergreen Station. All fees payable to Authorities pursuant to the FCC Licenses, including FCC annual regulatory fees have been paid and no event has occurred which, individually or in the aggregate, and without the giving of notice or the lapse of time or both, would constitute grounds for revocation thereof or would have a Material Adverse Effect on Evergreen. All Material reports, forms and statements required to be filed by each Evergreen Party with the FCC with respect to the Evergreen Station have been filed and are true, complete and accurate in all Material respects. No renewal of any Evergreen FCC License would constitute a major environmental action (as defined in the FCC rules and regulations). The Evergreen Governmental Authorizations comprise all Governmental Authorizations which are necessary for the lawful ownership or operation of the Evergreen Assets or the lawful conduct of the business of the Evergreen Station as now conducted or as presently proposed to be conducted, except for Governmental Authorizations, the failure of which to obtain and maintain, would not individually or in the aggregate, have any Material Adverse Effect on Evergreen. No Evergreen Governmental Authorization is the subject of any pending or, to Evergreen's knowledge, information and belief, threatened challenge or proceeding to revoke or terminate any Evergreen Governmental Authorization. Evergreen has no reason to believe that any Evergreen Governmental Authorization would not be renewed in the name of Evergreen by the granting Authority in the ordinary course. (c) With respect to matters, if any, of a nature referred to in Section 3.7(a) or 3.7(b) of the Evergreen Disclosure Schedule, except as otherwise specifically described in Section 3.7(c) of the Evergreen Disclosure Schedule, all such information and matters set forth in the Evergreen Disclosure Schedule, if adversely determined against Evergreen, will not, in the aggregate, Materially Adversely Affect Evergreen. 3.8 Intangible Assets. Section 3.8 of the Evergreen Disclosure Schedule ----------------- sets forth a true, accurate and complete description of all Intangible Assets held or used by Evergreen (other than the Evergreen Governmental Authorizations and the Evergreen Private Authorizations) relating to the ownership and operation of the Evergreen Assets or the conduct of the business of the Evergreen Station (the "Evergreen Intangible Assets"), including without limitation the nature of Evergreen's interest in each and the extent to which the same have been duly registered in the offices as indicated therein. One of the Evergreen Parties owns or possesses or otherwise has the right to use all Evergreen Intangible Assets necessary in order to operate the Evergreen Assets in the manner currently being operated by the Evergreen Parties. Except as set forth in Section 3.8 of the Evergreen Disclosure Schedule, no Intangible Assets (except for the Evergreen Governmental Authorizations and the Evergreen Private Authorizations and the Evergreen Intangible Assets so set forth) are required for the ownership or operation of the Evergreen Assets or the conduct of the business of the Evergreen Station as currently owned, operated and conducted or proposed to be owned, operated and conducted on or prior to the Closing Date. -10- 3.9 Related Transactions. No Evergreen Party is a party or subject to any -------------------- Contract relating to the ownership and operation of the Evergreen Assets or the conduct of the business of the Evergreen Station between any Evergreen Party and any of its officers, directors, stockholders, employees or, to the knowledge, information and belief of Evergreen, any Affiliate of any thereof (other than another Evergreen Party), including without limitation any Contract providing for the furnishing of services to or by, providing for 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 such Person, other than (i) Evergreen Employment Arrangements listed or described in Section 3.12 of the Evergreen Disclosure Schedule and (ii) Contracts between Evergreen and officers which constitute Evergreen Excluded Assets and obligations of Evergreen not being assumed by EZ. 3.10 Insurance. One of the Evergreen Parties maintains, with respect to --------- the Evergreen Assets and the Evergreen Station, policies of fire and extended coverage and casualty, liability and other forms of insurance in such amounts and against such risks and losses as are in Evergreen Parent's reasonable business judgment prudent (a true, complete and accurate description of which is set forth in Section 3.10 of the Evergreen Disclosure Schedule) and shall use reasonable business efforts to keep such insurance or comparable insurance in full force and effect through the Closing Date, except to the extent otherwise provided in the Evergreen Station TBA. 3.11 Tax Matters. Each Evergreen Party has in respect of the Evergreen ----------- Assets and the Evergreen Station filed all Material Tax Returns which are required to be filed, and has paid, or made adequate provision for the payment of, all 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. There are no unpaid Taxes which are due and payable, or alleged to be due and payable by any Taxing Authority, the non-payment of which is or could become a Lien on any of the Evergreen Assets or the Evergreen Station. All Taxes in respect of the Evergreen Assets and the Evergreen Station which Evergreen 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 Authorities to the extent due and payable. Except as set forth in Section 3.11 of the Evergreen Disclosure Schedule, no Evergreen Party has 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 associated with the Evergreen Assets or the Evergreen Station for the fiscal years prior to and including the most recent fiscal year. 3.12 Employee Retirement Income Security Act of 1974. ----------------------------------------------- (a) Section 3.12(a) of the Evergreen Disclosure Schedule contains a true, accurate and complete list of all Evergreen employees employed in the ownership or operation of any of the Evergreen Assets or the conduct of the business of the Evergreen Station (the "Evergreen Station Employees"), together with each such employee's title or the capacity in which he or she is employed and all Employment Arrangements with respect to such employee (each, an "Evergreen Employment Arrangement"). All of the Evergreen Employee Plans and all other Evergreen Employment Arrangements are listed in Section 3.12(a) of the Evergreen Disclosure Schedule and true, complete and accurate copies of all such written Evergreen Employee Plans and Evergreen Employment Arrangements (or related insurance policies) have been furnished to EZ, along with -11- copies of any employee handbooks or similar documents describing such Evergreen Employee Plans or any other Evergreen Employment Arrangements. Section 3.12(a) of the Evergreen Disclosure Schedule also contains a true, complete and accurate description of any unwritten Evergreen Employee Plan or other unwritten Evergreen Employment Arrangement. (b) Each Evergreen Employment Arrangement has been administered in compliance with its own terms and in Material compliance with the provisions of ERISA, the Code, the Age Discrimination in Employment Act and any other applicable federal or state Laws. Evergreen is not aware of any pending audit or examination of any Evergreen Employee Plan or any other Evergreen Employment Arrangement by any Authority or of any facts which would lead it to believe that any such audit or examination is threatened. There exists no Claim or Legal Action (other than routine claims for benefits) with respect to any Evergreen Employee Plan or any other Evergreen Employment Arrangement pending or, to Evergreen's knowledge, information and belief, threatened against any Evergreen Employee Plan or any other Evergreen Employment Arrangement, and no Evergreen Party possesses any knowledge of any facts which could give rise to any such Legal Action or Claim. (c) No Evergreen Party contributes to or is required to contribute to any Multiemployer Plan with respect to the Evergreen Station Employees and neither any Evergreen Party nor any other trade or business under common control with any Evergreen Party (within the meaning of Section 414(b), (c), (m) or (o) of the Code) has incurred or reasonably expects to incur any "withdrawal liability," as defined under Section 4201 et seq. of ERISA. -- --- (d) Except as described in Section 3.12(d) of the Evergreen Disclosure Statement, neither any Evergreen Party nor any other trade or business under common control with any Evergreen Party (within the meaning of Sections 414(b), (c), (m) or (o) of the Code) sponsors, maintains or contributes to any Evergreen Employee Plan or any other Evergreen Employment Arrangement that provides retiree medical or retiree life insurance coverage to any Evergreen Station Employee upon his/her retirement. (e) Except as described in Section 3.12(e) of the Evergreen Disclosure Statement with respect to each Evergreen Employee Plan and, to the extent applicable, any other compensation arrangement comprising an Evergreen Employment Arrangement: (i) each such Evergreen Employee Plan that is intended to be tax-qualified, and each amendment thereto, is the subject of a favorable determination letter, and no plan amendment that is not the subject of a favorable determination letter would affect the validity of an Evergreen Employee Plan's letter; (ii) no prohibited transaction, within the definition of Section 4975 of the Code or Title 1, Part 4 of ERISA, has occurred which would subject any Evergreen Party to any liability that could become a liability of EZ; and (iii) all contributions premiums or payments accrued, in whole or in part, under each such Evergreen Employee Plan or other Evergreen Employment Arrangement or with respect thereto as of the Closing will be paid by the appropriate Evergreen Party prior to the Closing. (f) For purposes of this Section, the term "Evergreen Employee Plan" shall mean any pension, profit-sharing, deferred compensation, vacation, bonus, incentive, medical, vision, dental, disability, life insurance or any other employee benefit plan as defined in Section 3(3) of ERISA to which any Evergreen Party (under the terms of Section 414(b), (c), (m) or (o) of the Code) sponsors, -12- maintains or otherwise is bound which provides benefits to any person employed or previously employed at any of the Evergreen Stations. 3.13 Absence of Sensitive Payments. Neither any Evergreen Party nor, to ----------------------------- Evergreen's knowledge, information and belief, any of its officers, directors, employees, agents or other representatives, has with respect to the Evergreen Assets or the Evergreen Station (a) made any contributions, payments or gifts to or for the private use of any governmental official, employee or agent where either the payment or the purpose of such contribution, payment or gift is illegal under the laws of the United States or the jurisdiction in which made or (b) established or maintained any unrecorded fund or asset for any purpose or made any false or artificial entries on its books. 3.14 Inapplicability of Specified Statutes. Evergreen Parent 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. 3.15 Employment Arrangements. Except as described in Section 3.15 of the ----------------------- Evergreen Disclosure Schedule, with respect to the Evergreen Station (i) none of the Evergreen Station Employees is now, or, to Evergreen's knowledge, information and belief, since the date on which the appropriate Evergreen Party acquired the Evergreen Station, has been, represented by any labor union or other employee collective bargaining organization, and no Evergreen Party is, or has ever been, a party to any labor or other collective bargaining agreement with respect to the Evergreen Station Employees, (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 such union or other organization, and (iii) neither any Evergreen Party nor any of such employees is now, or, to Evergreen's knowledge, information and belief, since the date on which the appropriate Evergreen Party acquired the Evergreen Station, has been, subject to or involved in or, to Evergreen's knowledge, information and belief, threatened with, any union elections, petitions therefore or other organizational or recruiting activities, in each case with respect to any Evergreen Station Employees. Each Evergreen Party has performed in all Material respects all obligations required to be performed under each Evergreen Employee Plan and each other Evergreen Employment Arrangement and is not in Material breach or violation of or in Material default or arrears under any of the terms, provisions or conditions thereof. 3.16 Material Agreements. Listed on Section 3.16 of the Evergreen ------------------- Disclosure Schedule are all Material Agreements relating to the ownership or operation of the Evergreen Assets or the conduct of the business of the Evergreen Station or to which any of the Evergreen Assets is subject (the "Evergreen Material Agreements"). True, accurate and complete copies of each Evergreen Material Agreement have been made available by Evergreen to EZ and Evergreen has provided EZ with photocopies of all Evergreen Material Agreements requested by EZ (or true, accurate and complete descriptions thereof have been set forth in Section 3.16 of the Evergreen Disclosure Schedule, if any such Material Agreements are oral). All of the Evergreen Material Agreements are valid, binding and legally enforceable obligations of an Evergreen Party and, to Evergreen's -13- knowledge, information and belief, all other parties thereto (except to the extent that the invalidity or non-binding nature of any Evergreen Material Agreements, individually or in the aggregate would not have a Material Adverse Effect on Evergreen). Each Evergreen Party has duly complied with all of the Material terms and conditions of each Evergreen Material Agreement to which it is a party 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 Evergreen, threatened Claim that any Evergreen Party 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) any Evergreen Material Agreement or impair the rights or benefits, or increase the costs, of any Evergreen Party under any Evergreen Material Agreement. No Evergreen Party has granted any Material waivers or forbearance under any Evergreen Material Agreement and, to Evergreen's knowledge, information and belief, no third party is in material default in the performance of any of its obligations under any Evergreen Material Agreement. Except for those consents or approvals listed in Section 3.16 of the Evergreen Disclosure Schedule, no consents or approvals of any third party are necessary to permit the assignment by the Evergreen Parties of the Evergreen Material Agreements to the EZ Parties and such assignment will not affect the validity or enforceability of any Evergreen Material Agreement or cause any Material change in the substantive terms of any of them. 3.17 Ordinary Course of Business. Each Evergreen Party, from the end of --------------------------- its most recent fiscal quarter to the date hereof, except (i) as may be described on Section 3.17 of the Evergreen Disclosure Schedule, or (ii) as may be required or expressly contemplated by the terms of this Agreement, with respect to the Evergreen Assets and the Evergreen Station: (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 Evergreen Asset having a value in excess of $50,000, 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 $50,000; (ii) has not entered into any commitments having a value in excess of $50,000; and (iii) has not canceled any debts or claims; (d) has not made or committed to make any additions to its property or any purchases of equipment, except for normal maintenance and replacements; -14- (e) except as described in Section 3.17(e) of the Evergreen Disclosure Schedule, has not increased the compensation payable or to become payable to any of the Evergreen Station Employees other than in the ordinary course of business or otherwise altered, modified or changed the terms of their employment; (f) 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; (g) has not waived any rights of Material value without fair and adequate consideration; (h) has not experienced any work stoppage; and (i) except in the ordinary course of business, has not entered into, amended or terminated any Evergreen Lease, Evergreen Governmental Authorization, Evergreen Private Authorization, Evergreen Material Agreement, Evergreen Employment Arrangement or Contract, or any transaction, agreement or arrangement with any Affiliate of Evergreen. 3.18 Broker or Finder. No Person assisted in or brought about the ---------------- negotiation of this Agreement or the Transactions in the capacity of broker, agent or finder or in any similar capacity on behalf of any Evergreen Party other than Star Media Group whose fee will be paid by Evergreen. 3.19 Solvency. As of the execution and delivery of this Agreement, each -------- Evergreen Party is, and immediately prior to giving effect to the consummation of the Transactions will be, solvent. 3.20 Environmental Matters. Except as set forth in Section 3.20 of the --------------------- Evergreen Disclosure Schedule, with respect to the Evergreen Assets, each Evergreen Party: (a) to the knowledge, information and belief of Evergreen, 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 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 Evergreen, in substantial compliance in all Material respects with all Environmental Laws, has, to Evergreen's knowledge, information and belief, obtained all Environmental Permits required under Environmental Laws, and is not the subject of or, to Evergreen's knowledge, information and belief, threatened with any Legal Action involving a demand for damages or other potential -15- 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 the Evergreen Station or any of the Evergreen Assets which Event, 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. 3.21 Trade or Barter. Section 3.21 of the Evergreen Disclosure Schedule --------------- sets forth a true, complete and accurate description (including obligations and liabilities remaining thereunder) of all Evergreen Trade Agreements that individually involve or may involve, valued in accordance with GAAP, more than $500 in obligations remaining thereunder as of the date of this Agreement in money, property or services or a remaining term in excess of two months. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE EZ PARTIES Each EZ Party hereby, jointly and severally, represents, warrants and covenants to, and agrees with, the Evergreen Parties as follows: 4.1 Organization and Business; Power and Authority; Effect of --------------------------------------------------------- Transaction. ----------- (a) Each EZ Party is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, has all requisite corporate power and authority to own or hold under lease its properties and to conduct its business as now conducted. (b) Each EZ Party has all requisite corporate power and authority necessary to enable it to execute and deliver, and to perform its obligations under, this Agreement and each Collateral Document executed or required to be executed by it pursuant hereto or thereto or to consummate the Transactions; and the execution, delivery and performance of this Agreement and each Collateral Document executed or required to be executed by it pursuant hereto or thereto have been duly authorized by all requisite corporate action on the part of each EZ Party. This Agreement has been duly executed and delivered by each EZ Party and constitutes, and each Collateral Document to which any EZ Party becomes a party will, when executed and delivered by such EZ Party, constitute, the legally valid and binding obligation of such EZ Party, enforceable against such EZ Party in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, moratorium, insolvency and similar laws affecting the rights and remedies of creditors and obligations of debtors generally and by general principles of equity. (c) Except as set forth in Section 4.1(c) of the EZ Disclosure Schedule, neither the execution and delivery by any EZ Party of this Agreement or any Collateral Document executed or required to be executed by it pursuant hereto or thereto, nor the consummation by each EZ Party of -16- the Transactions, nor compliance with the terms, conditions and provisions hereof or thereof by each EZ Party: (i) will conflict with, or result in a breach or violation of, or constitute a default under, any Organic Document of any EZ Party or any Applicable Law on the part of any EZ Party, 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 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 Material Contract of any EZ Party; or (ii) will require any EZ Party to make or obtain any Governmental Authorization, Governmental Filing or Private Authorization, except for the FCC Consents, filings under the Hart-Scott-Rodino Act and Private Authorizations the failure of which to be obtained or maintained would not, individually or in the aggregate, have a Material Adverse Effect on EZ. 4.2 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. 4.3 Broker or Finder. No Person assisted in or brought about the ---------------- negotiation of this Agreement, the Exchange or the subject matter of any other Transactions in the capacity of broker, agent or finder or in any similar capacity on behalf of any EZ Party other than Star Media Group which EZ understands was retained by, and whose fee will be paid by, Evergreen. 4.4 Solvency. As of the execution and delivery of this Agreement, each -------- EZ Party is, and immediately prior to giving effect to the consummation of the Transactions will be, solvent. ARTICLE 5 COVENANTS 5.1 Access to Information; Confidentiality. -------------------------------------- (a) Evergreen shall afford to the EZ Parties (and American) and its accountants, counsel, financial advisors and other representatives (the "Representatives") full access during normal business hours throughout the period prior to the Closing Date to all of Evergreen's (and its Subsidiaries') properties, books, contracts, commitments and records (including without limitation Tax Returns) relating to the Evergreen Assets and the Evergreen Station 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 -17- limitation the FCA) or filed by it or any of its Subsidiaries with any Authority in connection with the Transactions or any other report, schedule or document which may have a Material Effect on the Evergreen Assets or the Evergreen Station or the businesses, operations, properties, prospects, personnel, condition, (financial or other), or results of operations thereof, (ii) to the extent not provided for pursuant to the preceding clause, all financial records, ledgers, work papers and other sources of financial information possessed or controlled by Evergreen or its accountants deemed by EZ or its Representatives necessary or useful for the purpose of performing an audit of the business of the Evergreen Station and certifying financial statements and financial information, and (iii) such other information concerning any of the foregoing as 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, except as required by Applicable Law (including without limitation in connection with any registration statement or similar document filed pursuant to any federal or state securities Law), shall not, without the prior written consent of Evergreen, 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 Transactions. In no event shall any EZ Party (or American) or any of its Representatives use such information to the detriment of the other party. Except as otherwise herein provided, each EZ Party (and American) agrees to reveal such information only to those of its Representatives or other Persons who need to know such the information for the purpose of evaluating the Transactions, 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. From and after the Closing, No Evergreen Party shall, without the prior written consent of EZ, disclose any information remaining in its possession with respect to the Evergreen Assets or the Evergreen Station, and no such information shall be used by it for any purposes, other than in connection with the Transactions or to the extent required by Applicable Law. (b) Subject to the terms and conditions of Section 5.1(a), each EZ Party (and American) may disclose such information as may be necessary in connection with seeking all Governmental Authorizations and Private Authorizations or that is required by Applicable Law to be disclosed, including without limitation in any registration statement or other document required to be filed under any federal or state securities Law. In the event that this Agreement is terminated in accordance with its terms, each EZ Party (and American) 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 Transactions 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 either party or any condition to the obligations of the parties hereto. 5.2 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 Transactions, and (y) to refrain from taking, or cause to be -18- taken, any action and to refrain from doing or causing to be done, any thing which could impede or impair the consummation of the Exchange or the making effective of the other Transactions, 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 this Agreement all requisite applications and amendments thereto, together with related information, data and exhibits, necessary to request issuance of orders approving the Transactions 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 6.1(a), (ii) 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 Hart- Scott-Rodino Act and all filings necessary for EZ to own and operate the Evergreen Station), (iv) to lift any injunction or other legal bar to the purchase and sale of the Evergreen Assets and the Evergreen Station (and, in such case, to proceed with such purchase and sale as expeditiously as possible), and (v) to obtain the satisfaction of the conditions specified in Article 6, 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. 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 twenty (20) days following the execution and delivery of this Agreement, Evergreen and EZ shall file with the FCC appropriate applications for FCC Consents, which applications shall not contain any request for waiver of the FCC's multiple ownership rules; provided, however, that EZ may file a separate application with the FCC seeking reassignment of the Extra Charlotte Station from the Charlotte Trustee to any EZ Party or Affiliate of an EZ Party (or, if not theretofore assigned, seeking retention of such Station) which application may request a waiver of the Commission's multiple ownership rules; provided, however, that no such application shall be filed or prosecuted in a manner that materially delays the grant of the applications seeking the FCC Consents. 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 either party hereto (or, in the case of EZ, American or any of its Subsidiaries), such party shall use reasonable business efforts to comply with such condition unless compliance would have a Material Adverse Effect upon it. If reconsideration or judicial review is sought with respect to any FCC Consent, Evergreen and EZ 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 7.1). Notwithstanding anything in this Agreement to the contrary, the Transactions are expressly conditioned upon the grant of the Final Order as to the FCC Consents for the transfer of the FCC Licenses for the Evergreen Station without any condition which would have a Materially Adverse Effect upon the EZ Parties, it being understood that the imposition of any condition requiring any EZ Party (including American and its Subsidiaries) to divest their interest in any radio station in the Charlotte, North Carolina market or to otherwise take any action to comply with Section 73.3555(a) of the FCC rules shall not be deemed to be have a Materially Adverse Effect upon EZ. (b) The parties shall cooperate with one another in the preparation, execution and filing of all 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, -19- registration and other fees, and any similar Taxes which become payable in connection with the Transactions that are required or permitted to be filed on or before the Closing Date. (c) Evergreen shall cooperate and use its reasonable business efforts to cause its independent accountants to reasonably cooperate with EZ, and at EZ's expense, in order to enable EZ to have Evergreen and EZ's or Evergreen's independent accountants prepare audited financial statements for the Evergreen Station described in Section 6.2(f). Evergreen represents and warrants that such financial statements will have been prepared in accordance with GAAP applied on a basis consistent with past practices, will be true, correct and complete, and will present fairly the financial condition and results of operation of the Evergreen Stations described in Section 6.2(f). Without limiting the generality of the foregoing, Evergreen agrees that it will (i) consent to the use of such audited financial statements in any registration statement or other document filed by EZ (or American or any of either of their Affiliates) under the Securities Act or the Exchange Act and (ii) execute and deliver, and cause its officers to execute and deliver, such "representation" letters as are customarily delivered in connection with audits and as EZ's or Evergreen's independent accountants may reasonably request under the circumstances. Notwithstanding the foregoing, nothing in this Agreement shall be construed to require any EZ Party to divest any asset to obtain termination of the Hart-Scott-Rodino waiting period or to avoid or settle litigation initiated by any antitrust enforcement Authority seeking to block the transactions contemplated by this Agreement (unless such divestiture is necessary to comply with the multiple ownership rules or policies of the FCC). (d) The parties acknowledge and agree that the parties intend, if appropriate at the time the Hart-Scott-Rodino Act waiting period has expired or been terminated, to execute and deliver a time brokerage agreement with respect to the Evergreen Station substantially on the terms contemplated by the letter of intent, dated August 27, 1996, between EZ and Evergreen Parent (the "Letter of Intent") (the "the Evergreen Station TBA"). Anything in this Agreement to the contrary notwithstanding, including without limitation any provision of Articles 3 and 4 and Sections 6.2 and 6.3, (i) Evergreen shall not be liable in any respect to the extent any of the representations and warranties contained in Article 3 are not true and correct in any Material respect on and as of the Closing Date due solely to the existence and operation of the Evergreen Station TBA, (ii) the conditions set forth in Sections 6.2(c) and 6.2(e) shall not be deemed to be not satisfied as a result of any action or failure to act of any EZ Party pursuant to the provisions of the Evergreen Station TBA, and (iii) the certificates to be delivered to EZ pursuant to the provisions of Section 6.2(c) shall not be required to address any of such representations and warranties that are not true and correct in any material respect on and as of the Closing Date due to the existence and operation of such agreements. 5.3 Public Announcements. Until the Closing, or in the event of -------------------- termination of this Agreement, Evergreen and EZ shall consult with the other before issuing any press release or otherwise making any public statements with respect to this Agreement, the Transactions and shall not issue any such press release or make any such public statement without the prior consent of the other. Notwithstanding the foregoing, each party acknowledges and agrees that Evergreen and EZ may, without its 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, the party proposing to make such press release or public statement will consult with the other regarding the nature, extent and form of such press release or public statement. -20- 5.4 Notification of Certain Matters. Evergreen Parent and EZ 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 or any of its Subsidiaries 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 or any of its Subsidiaries contained in this Agreement not to be complied with or satisfied, or (iii) any change to be made in the Evergreen Disclosure Schedule or the EZ 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 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. 5.5 No Solicitation. Neither Evergreen Parent shall, nor shall it permit --------------- any Subsidiary, or any of its Representatives (including, without limitation, any investment banker, broker, finder, attorney or accountant retained by it) to, initiate, solicit or facilitate, directly or indirectly, any inquiries or the making of any proposal with respect to any Alternative Transaction, engage in any discussions or negotiations concerning, or provide to any other Person any information or data relating to, it or any Subsidiary for the purposes of, or otherwise cooperate in any way with or assist or participate in, or facilitate any inquiries or the making of any proposal which constitutes, or may reasonably be expected to lead to, a proposal to seek or effect any Alternative Transaction, or agree to or endorse any Alternative Transaction. "Alternative Transaction" means a transaction or series of related transactions (other than the Transactions) resulting in (i) any merger or consolidation of either, regardless of whether it is the surviving Entity unless the surviving Entity remains obligated under this Agreement to the same extent as it was, or (ii) any sale or other disposition of all or any substantial part of the Evergreen Assets or the Evergreen Station. The provisions of this Section shall apply to each of Evergreen's Subsidiaries. 5.6 Conduct of Business by Evergreen Pending the Closing. Except as ---------------------------------------------------- otherwise contemplated by this Agreement, and subject to the commencement of the Evergreen Section TBA as set forth in Section 5.2(d), after the date hereof and prior to the Closing Date or earlier termination of this Agreement, unless EZ shall otherwise agree in writing, Evergreen Parent shall, and shall cause its Subsidiaries, to the extent relating to the Evergreen Station or the Evergreen Assets, to: (a) conduct their respective businesses in the ordinary and usual course of business and consistent with past practice; (b) use all reasonable business efforts to preserve intact their respective business organizations and goodwill, keep available the services of their respective present general managers, on-air personalities and other 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; -21- (c) 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; (d) maintain levels of advertising, marketing and promotion efforts and expenditures at levels no less than those currently budgeted in the 1996 business plan, a true, correct and complete in all material respects description of which is set forth in Section 5.6(d) of the Evergreen Disclosure Schedule; (e) (i) to operate the Evergreen Station in conformity with the Evergreen FCC Licenses on a basis consistent with past practice and any special temporary authority or program test authority issued thereunder, the FCA and the rules and regulations of any other Authority with jurisdiction over the Evergreen Station, and (ii) take all actions necessary to maintain the Evergreen FCC Licenses; (f) prior to the effectiveness of the Evergreen Station TBA, refrain from changing the frequency or format of the Evergreen Station or making any material changes in the Evergreen Station's studio or other structures, except to the extent required by the FCA or the rules and regulation of the FCC; (g) prior to the effectiveness of the Evergreen Station TBA, not make any material changes in the broadcast hours or in the percentage or types of programming broadcast by the Evergreen Station, or make any other Material changes in the Evergreen Station's programming policies, except such changes as in the good faith judgment of Evergreen are required by the public interest; (h) not (i) dispose of any of the Evergreen Assets owned by Evergreen or used in the operation of the Evergreen Station (other than for the disposition in the ordinary course of business of immaterial assets that are of no further use to such Station or disposition of Evergreen Assets to another Evergreen Party or any Affiliate of an Evergreen Party who is or becomes a party to this Agreement) or (ii) modify, change in any Material respect or enter into any Material Agreement relating to the business of the Evergreen Station; (i) notify EZ promptly if the Evergreen Station's normal broadcast transmissions are interrupted or impaired for (i) thirty (30) minutes or more for a period of five (5) consecutive days or for seven (7) days within any thirty (30) day period (except for normal maintenance) or (ii) a period of six (6) continuous hours or more; (j) not create, assume or permit to exist any Lien upon any of the Evergreen Assets or the Evergreen Station, except for (i) Permitted Liens and (ii) other Liens, if any, set forth on Section 3.5(a) of the Evergreen Disclosure Schedule (which Liens shall be released prior to Closing); and (k) not waive any Material right relating to the Evergreen Station. -22- 5.7 FCC Application; Divesture Commitment. ------------------------------------- (a) The parties acknowledge that the EZ Parties and/or their Affiliates own a number of radio stations in the Charlotte, North Carolina area that, when combined with the Evergreen Station (and the Evergreen Stations (as defined in the Asset Exchange Agreement)), would cause the EZ Parties to be in violation of Section 73.3555 of the FCC's rules (absent a waiver of those rules). The parties further acknowledge that the FCC Consents to transfer of the Evergreen Station to EZ may contain a condition requiring EZ to divest its interest in one or more FM radio stations in the Charlotte market (the "Extra Charlotte FM") prior to Closing. In order to ensure that the EZ Parties can meet such a condition, prior to the filing of the applications for FCC Consent, EZ shall agree to assign the Extra Charlotte FM to a trustee (the "Charlotte Trustee") pursuant to a trust agreement that satisfies the FCC's multiple ownership rules and policies, including the cross-interest policy, then in effect. In the event that the EZ Parties' acquisition of the Evergreen Station would not comply with the FCC's multiple ownership rules and policies, including the cross-interest policy, on or prior to the Closing Date, unless the FCC Consents permit retention of the Extra Charlotte FM, the EZ Parties shall assign, subject to receipt of the FCC's grant of the Charlotte Trustee Application, the Extra Charlotte FM to the Trustee on the Closing Date in order to effectuate the Closing under this Agreement. (b) Within twenty (20) business days after the date of this Agreement EZ shall file an application with the FCC requesting the consent to the assignment of the FCC licenses for the Extra Charlotte FM to the Charlotte Trustee (the "Charlotte Trustee Application"). The parties shall cooperate with each other in the preparation and filing of the aforementioned FCC application, and the parties shall prosecute such application in good faith and with due diligence. (c) Anything in this Section to the contrary notwithstanding, the EZ Parties may, in the event such parties (or their Affiliates) enter into a binding agreement with respect to the sale, exchange or other disposition of the Extra Charlotte FM with a third party, file an application with the FCC requesting the consent to the assignments of the FCC authorizations for such station to such third party, either directly to such third party or indirectly to such third party through the Charlotte Trustee and, in such event, the EZ Parties need not transfer the Extra Charlotte FM to the Charlotte Trustee pursuant to the provisions of paragraph (a) of this Section 5.9 so long as the application with respect to such binding agreement is pending or has been granted, except in the event such application relates solely to an indirect transfer through the Charlotte Trustee. Notwithstanding the foregoing, the EZ Parties agree to leave the trust and Charlotte Trustee Application in effect until any such third party sale has been consummated. ARTICLE 6 CLOSING CONDITIONS 6.1 Conditions to Obligations of Each Party to Effect the Transactions. ------------------------------------------------------------------ The respective obligations of each party to effect the Transactions shall, except as hereinafter provided in this -23- 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) All authorizations, consents, waivers, orders or approvals required to be obtained from all Authorities, and all Governmental Filings required to be made by any EZ Party or any Evergreen Party with any Authority, prior to the consummation of the purchase and sale of the Evergreen Assets and the Evergreen Station, 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 EZ have a Material Adverse Effect on the Evergreen Assets or the Evergreen Station. Without limiting the generality of the foregoing, the FCC shall have issued the FCC Consents, 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; provided, however, that any condition requiring EZ (or American or any of its Subsidiaries) to divest its interest in any radio station in the Charlotte, North Carolina market or to otherwise take any action to comply with Section 73.3555 of the FCC's rules in such markets shall not be a condition of such party's obligation to effect the Exchange; provided further, however, that notwithstanding anything in this Section or elsewhere in this Agreement, including without limitation Section 5.2(a) or 5.9, to the contrary, if such Final Orders impose such a condition (i) as a condition precedent to the effectiveness of the FCC Consents, or as a condition which must be complied with within less than six (6) months subsequent to consummation of the Transactions, EZ shall have the right, prior to the Termination Date, to attempt to comply with such condition, or (ii) as a condition which can be complied with within six (6) months or more following consummation of the Transactions, EZ shall be obligated to proceed with the consummation of the Transactions; (b) As of the Closing Date, no Legal Action shall be pending before or threatened in writing by any Authority seeking to enjoin, restrain, prohibit or make illegal, or to impose any Materially Adverse Condition in connection with, the consummation of the purchase and sale of the Evergreen Assets and the Evergreen Station, it being understood and agreed that a written request by any Authority for information with respect to any Evergreen Party, any EZ Party or American or the purchase and sale of the Evergreen Assets and the Evergreen Station, which information could be used in connection with such Legal Action, shall not be deemed to be a threat of any such Legal Action; and (c) The transactions contemplated by the Asset Exchange Agreement shall have been consummated prior to or simultaneously with the consummation of the Transactions. 6.2 Conditions to Obligations of EZ. The obligation of the EZ Parties to ------------------------------- effect the Exchange 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) Evergreen shall have delivered or cause to be delivered to EZ all of the Collateral Documents required to be delivered by the Evergreen Parties to the EZ Parties at or prior to the Closing pursuant to the terms of this Agreement; such Collateral Documents -24- shall be reasonably satisfactory in form, scope and substance to EZ and its counsel and American and its counsel; and EZ 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 appropriate to be certified by proper corporate officers; (b) Evergreen shall have furnished EZ and, at EZ's request, any bank or other financial institution providing credit to EZ or American or any Subsidiary of EZ or American, with a favorable opinion, dated the Closing Date of Latham & Watkins, counsel and FCC counsel for the Evergreen Parties, with respect to the matters set forth in Sections 3.1(a), (b) and (c) (other than as to Private Authorizations), 3.7(a) (limited to its knowledge and to Legal Actions), and 3.14 and with respect to FCC related matters of a nature and scope customary in comparable transactions (including without limitation with respect to the grant of all necessary FCC Consents and their being Final Orders, that all FCC Licenses are valid, binding and in good standing and in full force and effect, the absence of Legal Actions which could Materially Adversely Affect the FCC Licenses and the FCC Consents, and the filing of all Material reports and the payment of all fees) and with respect to such other matters arising after the date of this Agreement incident to the Transactions, as EZ or its counsel or 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 and warranties of each Evergreen Party contained in this Agreement 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; each and all of the covenants, agreements and conditions to be performed or satisfied by each Evergreen Party hereunder at or prior to the Closing Date shall have been duly performed or satisfied in all Material respects; and each Evergreen Party shall have furnished EZ with such certificates and other documents evidencing the truth of such representations and warranties and the performance or satisfaction of the covenants, agreements and conditions as EZ or its counsel shall have reasonably requested; (d) All authorizations, consents, waivers, orders or approvals marked with an asterisk as "material" on Section 3.6 or 3.16 of the Evergreen Disclosure Statement shall have been obtained, without the imposition, individually or in the aggregate, of any condition or requirement which could Materially Adversely Affect EZ; (e) Between the date of this Agreement and the Closing Date, there shall not have occurred and be continuing any Material Adverse Change in the Evergreen Parties; as of the Closing Date, the Evergreen FCC Licenses shall not have been Materially and Adversely Affected by any act, or failure to act, of any Evergreen Party; (f) EZ shall have received from its or American's or Evergreen's independent accountants an unqualified report (as to the scope of the audit, access to the books and records and the cooperation of management) on the financial statements of the Evergreen -25- Stations and the Evergreen Stations (as defined in the Asset Exchange Agreement) presented on a combined basis (consisting of balance sheets at December 31, 1995 and September 30, 1996 and statements of operations and cash flow for the year ended December 31, 1995 and the nine month period ended September 30, 1996), which financial statements shall have been prepared in conformity with GAAP and Regulation S-X under the Securities Act; and (g) As of the Closing Date, no Legal Action shall be pending before or threatened in writing by any Authority which might, in the reasonable business judgment of EZ, based upon the advice of counsel, have a Material Adverse Effect, it being understood and agreed that a written request by any Authority for information with respect to the Transactions, which information could be used in connection with such Legal Action, shall not be deemed to be a threat of any such Legal Action. 6.3 Conditions to Obligations of Evergreen. The obligation of the -------------------------------------- Evergreen Parties to effect the Exchange 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) EZ shall have delivered or cause to be delivered to Evergreen Parent all of the Collateral Documents required to be delivered by the EZ Parties to the Evergreen Parties at or prior to the Closing pursuant to the terms of this Agreement; such Collateral Documents shall be reasonably satisfactory in form, scope and substance to Evergreen and its counsel; and Evergreen 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 appropriate to be certified by proper corporate officers; (b) EZ shall have furnished Evergreen and, at Evergreen's request, any bank or other financial institution providing credit to Evergreen or any Subsidiary, with favorable opinions, dated the Closing Date of Hunton & Williams, special counsel for the EZ Parties, with respect to the matters set forth in Sections 4.1(a), (b) and (c) (other than as to Private Authorizations) and 4.2, of Sullivan & Worcester LLP, counsel for American, with respect to the effectiveness of the Merger and that this Agreement is enforceable against American (subject to customary qualifications), and with respect to such other matters arising after the date of this Agreement incident to the Transactions, as Evergreen 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 and warranties of each EZ Party contained in this Agreement 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; each and all of the covenants, agreements and conditions to be performed or satisfied by each EZ Party hereunder at or prior to the Closing Date shall have been duly performed or satisfied in all Material respects; and each EZ Party shall have furnished Evergreen Parent with such certificates and other documents evidencing the truth of such representations and warranties and the performance or satisfaction of the -26- covenants, agreements and conditions as Evergreen or its counsel shall have reasonably requested; and (d) As of the Closing Date, no Legal Action shall be pending before or threatened in writing by any Authority which might, in the reasonable business judgment of Evergreen, based upon the advice of counsel, have a Material Adverse Effect of a nature specified in clauses (a) or (c) of the definition of Adverse Change, Effect or Affect, it being understood and agreed that a written request by any Authority for information with respect to the Transactions, which information could be used in connection with such Legal Action, shall not be deemed to be a threat of any such Legal Action. ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER 7.1 Termination. This Agreement may be terminated at any time prior to ----------- the Closing Date: (a) by mutual consent of Evergreen Parent and EZ; (b) by either EZ or Evergreen Parent if any permanent injunction, decree or judgment by any Authority preventing the consummation of the Transactions shall have become final and nonappealable; or (c) by Evergreen Parent in the event no Evergreen Party is in Material breach of this Agreement and none of its representations or warranties shall have become and continue to be untrue in any Material respect, and either (i) the purchase and sale of the Evergreen Assets and the Evergreen Station have not been consummated prior to the Termination Date or (ii) one or more EZ Parties 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 and such breach or untruth exists and is not cured within the cure period specified in this Section; or (d) by EZ in the event no EZ Party is in Material breach of this Agreement and none of its representations or warranties shall have become and continue to be untrue in any Material respect, and either (i) the purchase and sale of the Evergreen Assets and the Evergreen Station have not been consummated prior to the Termination Date or (ii) one or more Evergreen Parties 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, and such a breach or untruth exists and is not cured within the cure period specified in this Section. Neither party shall have the right to terminate this Agreement as a result of the other party's breach or default unless the terminating party shall have given the defaulting party thirty (30) business days to cure the default (or such longer period not in excess of an additional thirty (30) business days as is, in the reasonable business judgment of the parties, reasonably necessary to effect such cure so -27- long as the defaulting party is proceeding with due diligence and best efforts to effect such cure); provided, however, that such cure period shall not extend the Termination Date. The term "Termination Date" shall mean December 31, 1997 or such other date as the parties may, from time to time, mutually agree. The right of EZ or Evergreen Parent 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 either party, any Person controlling any such party or any of their respective Representatives whether prior to or after the execution of this Agreement. 7.2 Effect of Termination. Except as provided in Sections 5.1 (with --------------------- respect to confidentiality), 5.3 and 9.3 and this Section, in the event of the termination of this Agreement pursuant to Section 7.1, this Agreement shall forthwith become void, there shall be no liability on the part of either party, or any of their respective Affiliates (including without limitations stockholders, officers or directors), to the other and all rights and obligations of either 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 this Agreement. ARTICLE 8 INDEMNIFICATION 8.1 Survival. Except with respect to obligations and liabilities assumed -------- pursuant to the Evergreen Assumable Agreements, the representations, warranties, covenants and agreements of the parties contained in or made pursuant to this Agreement or any Collateral Document shall survive the Closing and shall remain operative and in full force and effect for a period of (a) one (1) year after the Closing Date or (b) the applicable statute of limitations in the case of matters of a nature referred to in Sections 3.1(b), 3.11, 3.12, and 4.1(b) (the "Indemnity Period"), regardless of any investigation or statement as to the results thereof made by or on behalf of any party hereto. No claim for indemnification, other than with respect to fraud, may be asserted after the expiration of the Indemnity Period. Notwithstanding anything herein to the contrary, any representation, warranty, covenant and agreement which is the subject of a Claim which is asserted in writing prior to the expiration of the Indemnity Period shall survive with respect to such Claim or any dispute with respect thereto until the final resolution thereof. 8.2 Indemnification. Each of Evergreen Parent and EZ (the "indemnifying --------------- party") agrees that on and after the Closing it shall indemnify and hold harmless the other (which shall include its Subsidiaries, officers, directors, employees, agents and other representatives) (the "indemnified party") from and against any and all damages, claims, losses, expenses, costs, obligations and liabilities, including without limitation liabilities for all reasonable attorneys', accountants' and experts' fees and expenses including those incurred to enforce the terms of this Agreement or any Collateral Document (collectively, "Loss and Expense"), suffered, directly or indirectly, by the indemnified party by reason of, or arising out of: -28- (a) any breach of representation or warranty made by the indemnifying party pursuant to this Agreement or any Collateral Document or any failure by the indemnifying party to perform or fulfill any of its respective covenants or agreements set forth in this Agreement or any Collateral Document; or (b) any Legal Action or other Claim by any third party relating to the indemnifying party or the ownership or operations of any of its Assets or the conduct of the business of its Stations to the extent such Legal Action or other Claim has also resulted in a breach of representation or warranty by the indemnifying party pursuant to this Agreement or any Collateral Document; or (c) in the case of Evergreen Parent as the indemnifying party, (i) the Evergreen Nonassumed Liabilities, including without limitation any Legal Action or other Claim brought or asserted by any third party, and (ii) the failure of the Evergreen Parties to comply with the Bulk Sales law of the State of North Carolina. 8.3 Limitation of Liability. Notwithstanding the provisions of Section ----------------------- 8.2, after the Closing, (i) each indemnified party shall be entitled to recover its Loss and Expense in respect of any Claim only in the event that the aggregate Loss and Expense for all Claims and all Claims under the Asset Exchange Agreement exceed, in the aggregate, $50,000 in which event the indemnified party shall be entitled to recover all such Loss and Expense (including such $50,000), and (ii) in no event shall the aggregate amount required to be paid by each indemnifying party pursuant to the provisions of this Section or pursuant to the comparable section of the Asset Exchange Agreement exceed $5,000,000, except for any Loss or Expense arising out of matters of a nature referred to in Sections 3.1 and 4.1 and the first paragraph of Section 3.7(b) as to which the limitations set forth in this clause (ii) shall not apply. The provisions of the immediately preceding sentence of this Section with respect to the limitation on each indemnifying party's obligation to indemnify the indemnified party in respect of Loss and Expense shall not be applicable to any claims which are based on fraud or willful or intentional breach of representation or warranty. 8.4 Notice of Claims. If an indemnified party believes that it has ---------------- suffered or incurred any Loss and Expense, it shall notify the indemnifying party promptly in writing, and in any event within the applicable time period specified in Section 8.4, describing such Loss and Expense, all with reasonable particularity and containing a reference to the provisions of this Agreement in respect of which such Loss and Expense shall have occurred. If any Legal Action is instituted by a third party with respect to which an indemnified party intends to claim any liability or expense as Loss and Expense under this Article, such indemnified party shall promptly notify the indemnifying party of such Legal Action, but the failure to so notify the indemnifying party shall not relieve such indemnifying party of its obligations under this Article, except to the extent such failure to notify prejudices such indemnifying party's ability to defend against such Claim. 8.5 Defense of Third Party Claims. The indemnifying party shall have the ----------------------------- right to conduct and control, through counsel of their own choosing, reasonably acceptable to the indemnified party, any third party Legal Action or other Claim, but the indemnified party may, at its election, participate in the defense thereof at its sole cost and expense; provided, however, that -29- if (a) the indemnifying party shall fail to defend any such Legal Action or other Claim or (b) the indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or in addition to those available to the indemnifying party, then the indemnified party may defend, through counsel of its own choosing, such Legal Action or other Claim, and (so long as it gives the indemnifying party at least fifteen (15) days' notice of the terms of the proposed settlement thereof and permits the indemnifying party to then undertake the defense thereof) settle such Legal Action or other Claim and to recover the amount of such settlement or of any judgment and the reasonable costs and expenses of such defense. The indemnifying party shall not compromise or settle any such Legal Action or other Claim without the prior written consent of the indemnified party. 8.6 Exclusive Remedy. Except for fraud or as otherwise provided in ---------------- Section 9.5, the indemnification provided in this Article shall be the sole and exclusive post-Closing remedy available to either party against the other party for any Claim under this Agreement. 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. 9.2 Waiver. At any time prior to the Closing Date, except to the extent ------ not permitted by Applicable Law, EZ or Evergreen may extend the time for the performance of any of the obligations or other acts of the other, 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 transfer taxes, sales taxes, document stamps or other charges levied by any Authority in connection with this Agreement, the Transactions, shall be borne by EZ insofar as they related to the EZ Stations and the EZ Assets and by Evergreen insofar as they relate to the Evergreen Station and the Evergreen Assets. All filing and similar fees (including without limitation Hart-Scott-Rodino filings and FCC filing fees) shall be borne equally by EZ and Evergreen. All other costs and expenses incurred in connection with this Agreement, the Transactions, and in compliance with Applicable Law and Contracts 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 -30- first-class or express mail, or by recognized courier service, postage prepaid, (b) sent by telex, telegram, telecopy or other form of rapid transmission, confirmed by mailing (by first class or express mail, or by recognized courier service, postage prepaid) 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 any EZ Party: EZ Communications, Inc. 10800 Main Street Fairfax, Virginia 22030 Attention: Alan Box, President and Chief Executive Officer Telecopier No.: (703) 934-1200 with copies to: Hunton & Williams 1751 Pinnacle Drive Suite 1700 McLean, Virginia 22102 Attention: Joseph W. Conroy, Esq. Telecopier No.: (703) 714-7410 American Radio Systems Corporation 116 Huntington Avenue Boston, Massachusetts 02116 Attention: Steven B. Dodge, President and Chief Executive Officer Telecopier No.: (617) 375-7575 and Sullivan & Worcester LLP One Post Office Square Boston, Massachusetts 02109 Attention: Norman A. Bikales, Esq. Telecopier No.: (617) 338-2880 (b) If to any Evergreen Party: Evergreen Media Corporation 433 East Las Colinas Boulevard Irving, TX 75039 Attention: Scott Ginsburg, Chairman and Chief Executive Officer Telecopier No.: (972) 869-3671 -31- with a copy to: Latham & Watkins 1001 Pennsylvania Avenue, N.W. Washington, DC 20004-2505 Attention: Eric L. Bernthal, Esq. Telecopier No.: (202) 637-2201 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, 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 7, 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 pursuant to the provisions of, and subject to the limitations contained in, this Agreement for such breach or threatened breach. 9.6 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 either 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 Transactions are fulfilled and consummated to the maximum extent possible. 9.7 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. -32- 9.8 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. 9.9 Governing Law. The validity, interpretation, construction and ------------- performance of this Agreement shall be governed by, and construed in accordance with, 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. Anything in this Agreement to the contrary notwithstanding, including without limitation the provisions of Article 8, 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. 9.10 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 any 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. 9.11 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, including without limitation the Letter of Intent. 9.12 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 by binding upon any successor to any party (including without limitation, in the case of EZ, American) 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 (a) any Affiliate of any party who is a transferee of any Assets or any FCC Licenses on or prior to the Closing Date and (b) any bank or other financial institution which has loaned funds or otherwise extended credit to it. 9.13 Parties in Interest. This Agreement shall be binding upon and inure ------------------- solely to the benefit of each party and, so long as the EZ Merger Agreement has not been terminated and, in any event, after the consummation of the American-EZ Merger, American, 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 Section 9.12. 9.14 Mutual Drafting. This Agreement is the result of the joint efforts of --------------- EZ and Evergreen, and each provision hereof has been subject to the mutual consultation, negotiation and agreement of the parties and there shall be no construction against either party based on any presumption of that party's involvement in the drafting thereof. -33- 9.15 EZ Agent for Other EZ Parties. Anything in this Agreement to the ----------------------------- contrary notwithstanding, each of the EZ Parties (other than EZ) hereby grants EZ an irrevocable power of attorney and hereby irrevocably appoints EZ 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 EZ pursuant to such power of attorney and agency, and any such extension, waiver, termination or amendment executed and delivered by EZ, shall be binding upon each other EZ Party whether or not it has specifically approved such action or executed such extension, waiver, termination or amendment. 9.16 Evergreen Parent Agent for Other Evergreen Parties. Anything in this -------------------------------------------------- Agreement to the contrary notwithstanding, each of the Evergreen Parties (other than Evergreen Parent) hereby grants Evergreen Parent an irrevocable power of attorney and hereby irrevocably appoints Evergreen Parent 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 Evergreen Parent, waivers, terminations or amendments, and any action taken by Evergreen Parent pursuant to such power of attorney and agency, and any such extension, waiver, termination or amendment executed and delivered by Evergreen Parent, shall be binding upon each other Evergreen Party whether or not it has specifically approved such action or executed such extension, waiver, termination or amendment. -34- IN WITNESS WHEREOF, the EZ Parties and the Evergreen Parties have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. EZ COMMUNICATIONS, INC. By: /s/ Alan Box -------------------------------------- Name: Alan Box Title: President PROFESSIONAL BROADCASTING INCORPORATED By: /s/ Alan Box -------------------------------------- Name: Alan Box Title: President EZ CHARLOTTE, INC. By: /s/ Alan Box -------------------------------------- Name: Alan Box Title: President EVERGREEN MEDIA CORPORATION OF THE EAST By: /s/ Scott K. Ginsburg -------------------------------------- Name: Scott K. Ginsburg Title: President EVERGREEN MEDIA CORPORATION OF LOS ANGELES By: /s/ Scott K. Ginsburg -------------------------------------- Name: Scott K. Ginsburg Title: President -35- EVERGREEN MEDIA CORPORATION OF CAROLINALAND By: /s/ Scott K. Ginsburg -------------------------------------- Name: Scott K. Ginsburg Title: President American represents and warrants that it has heretofore entered into the EZ Merger Agreement with EZ and hereby acknowledges and agrees (a) to be bound by the provisions of Sections 5.1, (b) that the terms and conditions of the above Agreement are satisfactory to it, and (c) that it consents to such terms and conditions. AMERICAN RADIO SYSTEMS CORPORATION By: /s/ Joseph P. Winn -------------------------------------- Name: Joseph P. Winn Title: Chief Financial Officer -36- APPENDIX A DEFINITIONS ACCOUNTS RECEIVABLE shall mean any and all rights to the payment of money or other forms of consideration of any kind at any time now or hereafter owing or to be owing to any Evergreen Party attributable to the sale of time or talent on the Evergreen Station. ADVERSE CHANGE, EFFECT OR AFFECT (or comparable terms) shall mean any Event which has, or is reasonably likely to, (a) adversely affect or affected the validity or enforceability of this Agreement or the likelihood of consummation of the Transactions, or (b) adversely affect or affected the ownership or operation of the Evergreen Assets or the conduct of the business of the Evergreen Station, or (c) impair the Evergreen Parties' ability to fulfill their obligations under the terms of this Agreement, or (d) adversely affect the aggregate rights and remedies of the EZ Parties 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 or Effect. AFFILIATE, AFFILIATED shall mean, with respect to any Person, any other Person at the time directly or indirectly controlling, controlled by or under direct or indirect common control with such Person. AGREEMENT shall mean this Agreement as originally in effect, including, unless the context otherwise specifically requires, this Appendix A, the Evergreen Disclosure Schedule and all exhibits hereto, and as any of the same may from time to time be supplemented, amended, modified or restated in the manner herein or therein provided. AMERICAN shall have the meaning given to it in the fourth Whereas paragraph. AMERICAN-EZ MERGER shall have the meaning given to it in the fourth Whereas paragraph. APPLICABLE LAW shall mean any Law of any Authority, whether domestic or foreign, including without limitation all federal and state securities and Environmental Laws, to which a 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. ASSET EXCHANGE AGREEMENT shall have the meaning given to it in the third Whereas paragraph. ASSUMED LIABILITIES shall have the meaning given to it in Section 2.2(c). 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. CHARLOTTE PRORATION SCHEDULE shall have the meaning given to it in Section 2.2(c). CHARLOTTE TRUSTEE shall have the meaning given to it in Section 5.7(a). CHARLOTTE TRUSTEE APPLICATION shall have the meaning given to it in Section 5.7(b). 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 2.3. CLOSING DATE shall have the meaning given to it in Section 2.3. 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 the Evergreen Station TBA and any other agreement, certificate, contract, instrument, notice, opinion or other document delivered or required to be delivered pursuant to the provisions of this Agreement or of any of the foregoing. COLLECTION PERIOD shall have the meaning given to it in Section 2.5. CONTRACT shall mean any agreement, arrangement, commitment, contract, covenant, indemnity, undertaking or other obligation or liability which involves the ownership or operation of the Evergreen Assets or the conduct of the business of the Evergreen Station. CONTROL (including the terms "controlled," "controlled by" and "under common control with") shall mean 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. -2- CUT-OFF DATE shall mean (i) with respect to any Contract to be assigned and the rights and obligations to be assumed pursuant to the Evergreen Station TBA (including all items of revenue and expense relating to such Contract) the TBA Date and (ii) in all other cases, the Closing Date. EMC CAROLINALAND shall have the meaning given to it in the Preamble. EMC EAST shall have the meaning given to it in the Preamble. EMPLOYMENT ARRANGEMENT shall mean 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), or 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. 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 or 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 -3- statutory or regulatory provision shall be deemed to be a reference to any successor statutory or regulatory provision. ENVIRONMENTAL PERMIT shall mean 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 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 Evergreen 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. EVERGREEN shall have the meaning given to it in the Preamble. EVERGREEN ACCOUNTS RECEIVABLE shall mean the Accounts Receivables of any Evergreen Party arising in connection with the ownership or operation of any of the Evergreen Assets or the conduct of the business of the Evergreen Station prior to the Cut-off Date. EVERGREEN ASSETS shall mean all assets used or held for use in the ownership or operation of or the conduct of the business of the Evergreen Station by any Evergreen Party or any Entity Affiliated with any Evergreen Party, including without limitation the Evergreen Real Property, the Evergreen Personal Property, the Evergreen Private Authorizations, the Evergreen Governmental Authorizations, including the Evergreen FCC Licenses, the Evergreen Intangible Assets and the Evergreen Assumable Agreements, but excluding the Evergreen Excluded Assets. EVERGREEN ASSUMABLE AGREEMENTS shall mean the Evergreen Private Authorizations, the Evergreen Trade Agreements, the Evergreen Leases and the Evergreen Other Contracts. EVERGREEN DISCLOSURE SCHEDULE shall mean the Evergreen Disclosure Schedule dated as of the date of this Agreement delivered by Evergreen to EZ. EVERGREEN EMPLOYEE PLAN shall have the meaning given to it in Section 3.12(f). EVERGREEN EMPLOYMENT ARRANGEMENTS shall have the meaning given to it in Section 3.12(a). EVERGREEN EXCLUDED ASSETS shall mean (i) all cash and cash equivalents of any Evergreen Party, (ii) all Evergreen Accounts Receivable, (iii) the corporate names of each Evergreen Party, (iv) all books and records of each Evergreen Party relating to the Evergreen Station and which any Evergreen Party is required by Applicable Law, to retain, subject to the right of the other party to have access and to copy for a period of three (3) years from the Closing Date, (v) the Evergreen -4- Employee Plans and other Evergreen Employment Arrangements, (vi) all insurance policies relating to the Evergreen Assets, (vii) software programs and other assets at the principal executive offices of any Evergreen Party used to provide certain financial and accounting services for the Evergreen Station and (viii) any and all products, profits and proceeds of, and including without limitation any Claims with respect to, any of the foregoing. EVERGREEN FCC LICENSES shall have the meaning given to it in the first Whereas paragraph. EVERGREEN FINANCIAL DATA shall have the meaning given to it in Section 3.2(a). EVERGREEN GOVERNMENTAL AUTHORIZATIONS shall have the meaning given to it in Section 3.7(a). EVERGREEN INTANGIBLE ASSETS shall have the meaning given to it in Section 3.8. EVERGREEN LEASES shall have the meaning given to it in Section 3.5(a). EVERGREEN MATERIAL AGREEMENTS shall have the meaning given to it in Section 3.16. EVERGREEN NONASSUMED LIABILITIES shall have the meaning given to it in Section 2.3(b). EVERGREEN OTHER CONTRACTS shall mean (a) all Evergreen Material Agreements set forth on Section 3.15 of the Evergreen Disclosure Schedule excluding those agreements identified thereon as a "retained agreement", (b) all Contracts for the sale of time on the Evergreen Station for cash entered into in the ordinary course of business consistent with prior practice, and (c) Contracts not required to be listed on Section 3.15 of the Evergreen Disclosure Schedule that have been entered into in the ordinary course of business and involve less than $50,000 per year in the aggregate. EVERGREEN PARENT shall have the meaning given to it in the Preamble. EVERGREEN PARTIES shall have the meaning given to it in the Preamble. EVERGREEN PERSONAL PROPERTY shall mean all items of Personal Property, used or held for use in the ownership or operation of or the conduct of the business of the Evergreen Station. EVERGREEN PRIVATE AUTHORIZATIONS shall mean all Private Authorizations obtained or held in connection with the ownership or operation of any of the Evergreen Assets or the conduct of the business of the Evergreen Station. EVERGREEN PRORATION SCHEDULE shall have the meaning given to it in Section 2.2(c). EVERGREEN REAL PROPERTY shall have the meaning given to it in Section 3.5(a). EVERGREEN STATION shall have the meaning given to it in the first Whereas paragraph. -5- EVERGREEN STATION EMPLOYEES shall have the meaning given it in the Section 3.12(a). EVERGREEN STATION TBA shall have the meaning given it in the Section 5.2(d). EVERGREEN STUDIO FACILITIES shall have the meaning given to it in Section 3.5(b). EVERGREEN TRADE AGREEMENTS shall mean all Trade Agreements in effect on the date hereof or entered into on or prior to the Cut-off Date that relate to the ownership or operation of or the conduct of the business of the Evergreen Station. EVERGREEN'S KNOWLEDGE (including the term "to the knowledge, information and belief of Evergreen") shall mean the knowledge of any Evergreen Party executive officer or any General Manager of the Evergreen Station. 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 statutory or regulatory provision shall be deemed to be a reference to any successor statutory or regulatory provision. EXTRA CHARLOTTE STATION shall have the meaning given to it in Section 5.7(a). EZ shall have the meaning given to it in the Preamble. EZ MERGER AGREEMENT shall have the meaning given to it in the fourth Whereas paragraph. EZP shall have the meaning given to it in the Preamble. EZ PARTIES shall have the meaning given to it in the Preamble. 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 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 Evergreen Station to the appropriate EZ Parties. FCC LICENSES shall mean all Governmental Authorizations issued by the FCC to Evergreen or its Subsidiaries in connection with the ownership, operation and conduct of the business of the Evergreen Station. -6- FINAL ORDER shall mean, with respect to any Authority, including without limitation the FCC, one 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, is in effect or pending and as to which the time or deadline for filing any such appeal, petition or application has expired or, if filed, has been denied, dismissed or withdrawn, and the time or deadline for instituting any further Legal Action has expired. 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 ownership or operation of any of the Evergreen Assets or the conduct of business of the Evergreen Station. GOVERNMENTAL FILINGS shall mean all filings, including franchise and similar Tax filings, submissions, registrations, notices or declarations 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 such 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. INDEBTEDNESS shall mean, with respect to any Person, (a) all items, except items of capital stock or of surplus or of general contingency or deferred tax reserves or any minority interest in any Subsidiary of such Person to the extent such interest is treated as a liability with indeterminate term on the consolidated balance sheet of such Person, which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet of such -7- Person, (b) all obligations secured by any Lien to which any property or asset owned or held by such Person is subject, whether or not the obligation secured thereby shall have been assumed, and (c) to the extent not otherwise included, all Contracts of such Person constituting capitalized leases and all obligations of such Person with respect to Leases constituting part of a sale and leaseback arrangement. INDEBTEDNESS FOR MONEY BORROWED shall mean, with respect to EZ and Evergreen, money borrowed and Indebtedness represented by notes payable and drafts accepted representing extensions of credit, all obligations evidenced by bonds, debentures, notes or other similar instruments, the maximum amount currently or at any time thereafter available to be drawn under all outstanding letters of credit issued for the account of such Person, all Indebtedness upon which interest charges are customarily paid by such Person, and all Indebtedness (including capitalized lease obligations) issued or assumed as full or partial payment for property or services, whether or not any such notes, drafts, obligations or Indebtedness represent Indebtedness for money borrowed, but shall not include (a) trade payables, (b) expenses accrued in the ordinary course of business, or (c) customer advance payments and customer deposits received in the ordinary course of business. INTANGIBLE ASSETS shall mean all assets and property lacking physical properties the evidence of ownership of which must customarily be maintained by independent registration, documentation, certification, recordation or other means, and shall include, without limitation, concessions, franchises, licenses, permits and all Intellectual Property. INTELLECTUAL PROPERTY shall mean any and all research, information, inventions, designs, procedures, developments, discoveries, improvements, patents and applications therefor, trademarks and applications therefor, service marks, trade names, copyrights and applications therefor, logos, trade secrets, drawing, plans, systems, methods, specifications, computer software programs, tapes, discs and related data processing software (including without limitation object and source codes) owned by such Person or in which it has an ownership interest and all other manufacturing, engineering, technical, research and development data and know-how made, conceived, developed and/or acquired by such Person, which relate to the manufacture, production or processing of any products developed or sold by such Person or which are within the scope of or usable in connection with such Person's business as it may, from time to time, hereafter be conducted or proposed to be conducted. 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 or 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. LEASE shall mean any lease of property, whether real, personal or mixed, and all amendments thereto. -8- 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, in equity or in arbitration. LIEN shall mean any 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 right; any financing or capital lease involving substantially the same economic effect as any of the foregoing; 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. LETTER OF INTENT shall have the meaning given to it in Section 5.2(d). LOSS AND EXPENSE shall have the meaning given to it in Section 8.2. 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 Contract which (a) was entered into not 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 Fifty Thousand Dollars ($50,000) during any of the last three fiscal years, (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 Evergreen Station in any of the last three fiscal years or is likely to account for more than three percent (3%) of revenues of the Evergreen Station during the current fiscal year. MULTIEMPLOYER PLAN shall mean a Plan which is a "multiemployer plan" within the meaning of Section 4001(a)3 of ERISA. NOTICE OF DISAGREEMENT shall have the meaning given to it in Section 2.2(c). ORGANIC DOCUMENT shall mean, with respect to a Person which is a corporation, its certificate or articles of incorporation or organization, its by-laws and all stockholder agreements, voting trusts and similar arrangements applicable to any of its capital stock. PBGC shall mean the Pension Benefit Guaranty Corporation and any Entity succeeding to any or all of its functions under ERISA. PBI shall have the meaning given to it in the Preamble -9- PERMITTED LIENS shall mean (a) any mechanic's or materialmen's Lien or similar Lien with respect to amounts not yet due and payable or which are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established, (b) Liens for taxes not yet due and payable or which are being contested in good faith by appropriate proceeding, for which appropriate reserves have been established, and (c) easements, licenses, covenants, rights of way and similar Liens which, individually or in the aggregate, would not materially and adversely affect the marketability or value of the property encumbered thereby or materially interfere with the operations of the Evergreen Station. PERSON shall mean any natural individual or any Entity. PERSONAL PROPERTY shall mean all of the machinery, equipment, tools, vehicles, furniture, leasehold improvements, office equipment, plant, inventory, spare parts and other tangible personal property, plus such additions thereto and deletions therefrom arising in the ordinary course of business between the date hereof and the Closing Date. 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 Evergreen Assets or the conduct of the business of the Evergreen Station. 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. PRO RATABLE TAXES shall mean real estate and other property Taxes, ad valorem Taxes, gross receipts Taxes and similar Taxes, but shall not include federal, state or local income Taxes, franchise Taxes or other Taxes measured by or based upon income or gain on sale or other disposition of property or assets. PURCHASE PRICE shall have the meaning given to it in Section 2.4. REAL PROPERTY shall mean all of the fee estates and buildings and other improvements thereon, leasehold interest, easements, licenses, rights to access, right-of- way, and other real property interest. REFEREE shall have the meaning given to it in Section 2.2(c). 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 -10- 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 5.1(a). SEC shall mean the United States Securities and Exchange Commission, or any successor Authority. SECURITIES ACT shall mean the Securities Act of 1933, and the rules and regulations of the SEC 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. 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. 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, addition to tax or additional amount 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) 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, including without limitation the representations and warranties set forth in Section 3.11. 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. TBA DATE shall mean the date when operations under the Evergreen Station TBA shall become effective. TERMINATION DATE shall have the meaning given to it in Section 7.1. -11- TRADE AGREEMENTS shall mean any Contract relating to the Evergreen Station pursuant to which any Evergreen Party is required to provide air time in exchange for property or services other than cash. TRANSACTIONS shall mean the purchase and sale of the Evergreen Assets and the Evergreen Station and all of the other transactions hereunder or under any of the Collateral Documents. -12- EX-10.29 4 MEMORANDUM OF AGREEMENT Exhibit 10.29 MEMORANDUM OF AGREEMENT ----------------------- This Memorandum of Agreement ("MOA") is entered into on February 19, 1997, by and between Evergreen Media Corporation, a Delaware corporation (the "Company"), and Scott K. Ginsburg (the "Executive"). RECITALS -------- A. The Company is entering into an Agreement and Plan of Merger with Chancellor Broadcasting Company and Chancellor Radio Broadcasting Company (collectively, "Chancellor"), dated the date hereof (the "Merger Agreement"), pursuant to which Chancellor will merge with and into Evergreen upon the terms and subject to the conditions set forth in the Merger Agreement (the "Merger"). The Board of Directors of the Company has determined unanimously that the Merger is in the best interests of the Company and its shareholders and the Board of Directors of Chancellor has determined unanimously that the Merger is in the best interests of Chancellor and its shareholders. B. In connection with the Merger, the Company and Chancellor have concluded that it is highly desirable to extend the term of employment of Executive with the Company in order to provide for continuity and stability of management of the surviving corporation and to reflect certain other agreements and understandings of the Company and Chancellor related to the Merger. C. Executive is willing to extend the term of his employment with the Company, and to agree to other modifications necessary or desirable in connection with the Merger, upon and subject to the terms outlined below. NOW, THEREFORE, the parties agree as follows: 1. Modifications to Employment Agreement. Executive's employment ------------------------------------- agreement with the Company will be modified to reflect the agreements set forth below and such other provisions as are necessary or desirable in connection therewith or as are otherwise mutually acceptable to the Company, Chancellor and Executive. Company, Chancellor and Executive shall work together in good faith to prepare and execute a definitive employment agreement containing such terms (the "Definitive Agreement") as soon as practicable after the date hereof (provided, however, that the modifications set forth below shall take effect commencing upon the consummation of the Merger). Notwithstanding any failure to execute such a Definitive Agreement, the modifications to the terms of Executive's employment with the Company set forth below are intended to be, and shall be, binding on the Company and Executive. 2. Term of Employment. The term of Executive's employment with the ------------------ Company shall be extended so as not to expire or terminate until the fifth anniversary of the consummation of the Merger (the "Initial Termination Date"), provided that Executive shall have the right, upon notice to the Company no less than sixty days prior to the Initial Termination Date, to extend the term of his employment for an additional five year term (the "Option Term") expiring on the tenth anniversary of the consummation of the Merger. During the term of employment, Executive shall serve as President and Chief Executive Officer and as a member of the Company's board of directors. 3. Base Compensation. During the term of Executive's employment, ----------------- Executive's base compensation shall be $1,000,000 for the first year following consummation of the Merger, escalated each year thereafter by a percentage equal to the percentage change in the consumer price index during the preceding year. 4. Bonus Compensation. Executive shall be entitled to an annual bonus of ------------------ up to $3 million, the amount of such bonus to be determined on a mutually agreeable basis consistent with the provisions outlined in this Section 4. Executive's bonus compensation shall be based upon two calculations: (a) Executive shall receive a bonus based on the relationship of achieved pro forma cash flow ("APCF") for each calendar year to budgeted cash flow ("BCF") for that year, as follows: (i) if APCF is less than 85% of BCF in any calendar year, no bonus will be awarded; (ii) if APCF meets or exceeds 85% of BCF but is less than 100% of BCF, a bonus of $100,000 per percentage point (in excess of 84%) of APCF to BCF (e.g., if APCF is 90% of BCF, a bonus of $600,000 would be awarded); (iii) if APCF meets or exceeds 100% of BCF, a bonus of (x) $ 1,500,000 pursuant to clause (ii) above, plus (y) $40,000 per percentage point (in excess of 99%) of APCF to BCF will be awarded (e.g., if APCF is 105% of BCF, a total bonus of $1,740,000 will be awarded); (iv) to the extent that APCF exceeds 115% of BCF, no additional bonus shall be awarded in excess of the amounts set forth above (i.e., the maximum bonus awarded under this Section 4(a) shall be $2,140,000). (b) Executive shall also receive as a bonus 7.5% of pro forma cash flow in each contract year in excess of the pro forma cash flow in the prior contract year (adjusted for changes in the consumer price index), up to a maximum bonus of $2,000,000. (c) Executive's annual bonus shall be the sum of the calculations under Paragraphs 4(a) and (b) hereof, provided, however, that the total bonus -------- ------- shall not exceed $3,000,000 in any contract year. 2 5. Stock Options. During the employment term, Executive shall receive ------------- options to purchase One Hundred Thousand (100,000) shares per year of the Company's common stock. In the event that the employment agreement is terminated prior to the Initial Termination Date (except for "cause" or termination by Executive for other than "good reason"), Executive shall receive on the date on which the employment agreement is terminated (the "Early Termination Date") a number of options equal to Five Hundred Thousand (500,000) less the number of options received by Executive prior to the Early Termination Date. All options granted to executive in accordance with this Section 5 shall be exercisable for ten years from the date of grant at a price equal to the market price of the Company's common stock on the date of grant. If Executive exercises his option to renew his employment agreement for a second term, the award of further stock options in addition to those earned during the first employment term shall be at the discretion of the Company's compensation committee. 6. Other Benefits. Executive shall be entitled to participate in other -------------- employment benefit programs of the Company, and to receive other miscellaneous benefits, on the basis set forth in his current employment agreement with the Company. 7. Rights Upon Termination. Upon termination of Executive's employment ----------------------- by the Company for any reason other than "cause" (to be defined in a mutually acceptable manner in the Definitive Agreement), or upon Executive's termination of employment for "good reason" (to be defined in a mutually acceptable manner in the Definitive Agreement), Executive shall be entitled to receive a one-time cash payment in a gross amount such that the net payments retained by Executive after payment of any excise tax imposed by Section 4999 of the Internal Revenue Code shall equal $20 million, payable at the time at which Executive is terminated without "cause" (or in the event Executive terminates the agreement for "good reason," payable within 30 days thereafter). Any such payment shall be in complete satisfaction of all other rights of Executive (other than in respect of capital stock or stock options and other than any post-employment benefits under the Company's benefit programs described in Section 6 above) or obligations of the Company. 8. Registration Rights. Executive shall have registration rights with ------------------- respect to all common stock of the surviving Company owned by Executive at the effective time of the Merger and any stock thereafter acquired by Executive. 9. Disputes. Any disputes under this MOA will be subject to arbitration -------- in the manner set forth in Section 15 of Executive's existing employment agreement with the Company. 10. Governing Law. This MOA shall be governed by and construed and ------------- enforced in accordance with the laws of the State of New York, without regard to conflict of law principles. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 3 IN WITNESS WHEREOF, the parties have executed and delivered this MOA as of the date first written above. EVERGREEN MEDIA CORPORATION By: __________________________________ Title: _______________________________ SCOTT K. GINSBURG _______________________________________ Acknowledged and agreed: CHANCELLOR BROADCASTING COMPANY By:_____________________________________ Title:__________________________________ CHANCELLOR RADIO BROADCASTING COMPANY By:_____________________________________ Title:__________________________________ 4 EX-21.1 5 SUBSIDIARIES OF EVERGREEN MEDIA CORPORATION EXHIBIT 21.1 SUBSIDIARIES OF EVERGREEN MEDIA CORPORATION ------------------------------------------- Name Jurisdiction of Formation ---- ------------------------- Evergreen Media Corporation of Los Angeles DE Evergreen Media Corporation of the Bay Area DE Evergreen Media Corporation of Chicago AM DE Evergreen Media Corporation of Chicago FM DE Evergreen Media Corporation of Dade County DE Evergreen Media Corporation of Houston DE Evergreen Media Corporation of Illinois DE Evergreen Media Corporation of San Francisco DE Evergreen Media Corporation of Washington, D.C. DE Evergreen Media of Houston Limited Partnership DE KIOI License Corp. DE KKBT License Corp. DE KLOL License Limited Partnership DE KMEL License Corp. DE KTRH License Limited Partnership DE WASH License Limited Partnership DE WMVP License Corp. DE WLUP-FM License Corp. DE WTOP License Limited Partnership DE WVCG License Corp. DE WRCX License Corp. DE Evergreen Media Corporation of St. Louis DE Evergreen Media Partners Corporation DE Evergreen Media Corporation of Dallas DE KSKY License Corp. DE Evergreen Media Corporation of Chicagoland DE WEJM/WEJM-FM/WVAZ License Corp. DE Name Jurisdiction of Formation ---- ------------------------- Evergreen Media Corporation of Charlotte DE WBAV/WBAV-FM/WPEG License Corp. DE Evergreen Media Corporation of Detroit DE WKQI/WDOZ/WNIC License Corp. DE Evergreen Media Corporation of New York DE WYNY License Corp. DE Evergreen Media Corporation of Gotham DE Evergreen Media/Pyramid Corporation DE Evergreen Media/Pyramid Holdings Corporation DE Broadcast Architecture Inc. MA Evergreen Media Corporation of Rochester DE Evergreen Media Corporation of the East DE Evergreen Media Corporation of Massachusetts DE WJMN License Corporation DE Evergreen Media Corporation of Pennsylvania DE WJJZ License Corp. DE Evergreen Media Corporation of Miami DE WEDR License Corp. DE Evergreen Media Corporation of Boston DE WXKS(AM) License Corp. DE WXKS(FM) License Corp. DE Evergreen Media Corporation of the Windy City DE WNUA License Corp. DE KYLD License Corp. DE Evergreen Media Corporation of Philadelphia DE WYXR License Corp. DE Evergreen Media Corporation of North Carolina DE WRFX(FM) License Corp. DE Evergreen Media Corporation of Carolinaland DE Evergreen Media Corporation of the Capital City DE WGAY License Corp. DE Evergreen Media Corporation of the Great Lakes DE WWW/WDFN License Corp. DE Evergreen Media Corporation of Tiburon DE KKSF License Corp. DE KDFC(AM) License Corp. DE KDFC(FM) License Corp. DE Evergreen Media Corporation of the Liberty City DE WDAS(FM) License Corp. DE Evergreen Media Corporation of the Keystone State DE WDAS(AM) License Corp. DE Evergreen Media Corporation of Michigan DE WMXD License Corp. DE Evergreen Media Corporation of the Motor City DE WJLB License Corp. DE Evergreen Media Corporation of the Nation's Capital DE WWRC License Corp. DE 2 EX-23.1 6 CONSENT OF KPMG PEAT MARWICK LLP EXHIBIT 23.1 [LETTERHEAD OF KPMG PEAT MARWICK LLP] INDEPENDENT AUDITOR'S CONSENT ----------------------------- The Board of Directors Evergreen Media Corporation: We consent to incorporation by reference in the Registration Statements on Form S-3 (No. 33-93874) and Form S-8 (No. 33-83124) of Evergreen Media Corporation of our report dated January 31, 1997, except for note 2(c), which is as of February 19, 1997, relating to the consolidated balance sheets of Evergreen Media Corporation and subsidiaries as of December 31, 1995 and 1996 and the related consolidated statements of operations, stockholders' equity, and cash flows and related schedules for each of the years in the three-year period ended December 31, 1996, which report appears in the December 31, 1996 Annual Report on Form 10-K of Evergreen Media Corporation. /S/ KPMG PEAT MARWICK LLP Dallas, Texas March 26, 1997 EX-27 7 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 12/31/96 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR DEC-31-1995 JAN-01-1996 DEC-31-1996 3,060 0 87,451 2,292 0 94,571 75,443 27,250 1,020,959 53,150 331,500 0 0 421 548,990 1,020,959 293,850 293,850 43,555 275,890 0 0 37,527 (19,090) (2,896) (16,194) 0 0 0 (20,014) (0.66) (0.66)
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