-----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, SN3kxPoVnqXfVXLAim3ppS6qKy03IoJqCL/QVmcQykTvv5P8YMWHN9V3R+q5A1L7 HVBtwsnPonCY9iVdbnVx6g== 0000912057-96-024876.txt : 19961107 0000912057-96-024876.hdr.sgml : 19961107 ACCESSION NUMBER: 0000912057-96-024876 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961106 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR BROADCASTING CO /DE/ CENTRAL INDEX KEY: 0001002909 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 752538487 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-27726 FILM NUMBER: 96655373 BUSINESS ADDRESS: STREET 1: 12655 N CENTRAL EXPRESSWAY STREET 2: SUITE 405 CITY: DALLAS STATE: TX ZIP: 75243 BUSINESS PHONE: 2142396220 MAIL ADDRESS: STREET 1: 12655 N CENTRAL EXPRESSWAY STE 405 CITY: DALLAS STATE: TX ZIP: 75243 FORMER COMPANY: FORMER CONFORMED NAME: CHANCELLOR CORP/DE DATE OF NAME CHANGE: 19951031 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR RADIO BROADCASTING CO CENTRAL INDEX KEY: 0000925744 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 752544623 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-80534 FILM NUMBER: 96655374 BUSINESS ADDRESS: STREET 1: 12655 N CENTRAL EXPRESSWY STREET 2: STE 405 CITY: DALLAS STATE: TX ZIP: 75243 BUSINESS PHONE: 2142396220 MAIL ADDRESS: STREET 2: 12655 N CENTRAL EXPWY SUITE 405 CITY: DALLAS STATE: TX ZIP: 75243 FORMER COMPANY: FORMER CONFORMED NAME: CHANCELLOR BROADCASTING CO DATE OF NAME CHANGE: 19940621 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR BROADCASTING LICENSEE CO CENTRAL INDEX KEY: 0000925752 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 752544625 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-80534-01 FILM NUMBER: 96655375 BUSINESS ADDRESS: STREET 1: 12655 N CENTRAL EXPWY STREET 2: SUITE 405 CITY: DALLAS STATE: TX ZIP: 75243 BUSINESS PHONE: 2142396220 MAIL ADDRESS: STREET 1: 12655 N CENTRAL EXPRESSWAY STREET 2: SUITE 405 CITY: DALLAS STATE: TX ZIP: 75243 10-Q 1 FORM 10-Q - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 1996 Commission File No. 0-27726 Commission File No. 33-80534 Commission File No. 33-80534 CHANCELLOR BROADCASTING CHANCELLOR RADIO CHANCELLOR BROADCASTING COMPANY BROADCASTING COMPANY LICENSEE COMPANY (Exact Name of Registrant (Exact Name of Registrant (Exact Name of Registrant as Specified in Its Charter) as Specified in Its Charter) as Specified in Its Charter) DELAWARE DELAWARE DELAWARE (State or other jurisdiction of (State or other jurisdiction of (State or other jurisdiction of incorporation or organization) incorporation or organization) incorporation or organization) 75-2538487 75-2544623 75-2544625 (I.R.S. Employer Identification (I.R.S. Employer Identification (I.R.S. Employer Identification Number) Number) Number)
12655 N. CENTRAL EXPRESSWAY, SUITE 405, DALLAS, TEXAS 75243 (Address of Principal Executive Offices, Including Zip Code) AREA CODE (972) 239-6220 (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether Chancellor Broadcasting Company (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 past 90 days. Yes /X/ No / / Indicate by check mark whether Chancellor Radio Broadcasting Company and Chancellor Broadcasting Licensee Company (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes /X/ No / / As of November 5, 1996, 9,881,656 shares of the Class A Common Stock, par value $.01 per share, 8,547,910 shares of the Class B Common Stock, par value $.01 per share, and zero shares of the Class C Common Stock, par value $.01 per share, of Chancellor Broadcasting Company were outstanding. As of November 5, 1996, 1,000 shares of common stock, par value $.01 per share, of Chancellor Radio Broadcasting Company and 1,000 shares of common stock, par value $.01 per share, of Chancellor Broadcasting Licensee Company were outstanding. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ TABLE OF CONTENTS PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PAGE ---- CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES Consolidated Balance Sheets as of December 31, 1995 and September 30, 1996 ...................................... 1 Consolidated Statements of Operations for the three and nine months ended September 30, 1995 and 1996 ............... 2 Consolidated Statements of Changes in Common Stockholders' Equity for the year ended December 31, 1995 and the nine months ended September 30, 1996 ............................. 3 Consolidated Statements of Cash Flows for the nine months ended September 30, 1995 and 1996 ........................... 4 Notes to Consolidated Financial Statements .................. 5 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES Consolidated Balance Sheets as of December 31, 1995 and September 30, 1996 .......................................... 10 Consolidated Statements of Operations for the three and nine months ended September 30, 1995 and 1996 ............... 11 Consolidated Statements of Changes in Common Stockholder's Equity for the year ended December 31, 1995 and the nine months ended September 30, 1996 ............................. 12 Consolidated Statements of Cash Flows for the nine months ended September 30, 1995 and 1996 ........................... 13 Notes to Consolidated Financial Statements .................. 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ............................ 19 PART II OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES .......................................... 23 ITEM 5. OTHER INFORMATION .............................................. 23 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ............................... 23 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, SEPTEMBER 30, 1995 1996 ------------- ------------- ASSETS Current assets: Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,314,214 $ 5,111,562 Accounts receivable, net of allowance for doubtful accounts of $263,528 and $816,273, respectively . . . . . . . . . . . . . . . 13,243,292 42,172,355 Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . 546,405 1,954,575 ------------- ------------- Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 15,103,911 49,238,492 Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 20,000,000 Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . 17,925,845 49,081,835 Intangibles and other, net . . . . . . . . . . . . . . . . . . . . . . . 203,808,395 569,497,264 Deferred financing costs, net . . . . . . . . . . . . . . . . . . . . . 4,284,413 17,366,400 ------------- ------------- Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 241,122,564 $ 705,183,991 ------------- ------------- ------------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,873,888 $ 3,240,120 Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 4,692,948 10,938,346 Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,710,891 309,017 Current portion of long-term debt . . . . . . . . . . . . . . . . . . 4,062,500 400,000 ------------- ------------- Total current liabilities . . . . . . . . . . . . . . . . . . . . . 13,340,227 14,887,483 Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,107,242 364,707,969 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 4,952,361 19,036,384 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 821,153 ------------- ------------- Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 186,399,830 399,452,989 ------------- ------------- Redeemable Senior Cumulative Exchangeable Preferred Stock of subsidiary, par value $.01 per share; 1,000,000 shares authorized, issued and outstanding; preference in liquidation of $104,815,994 . . . . . . . . -- 103,852,579 Common stockholders' equity: Class A common stock, par value $.01 per share, 40,000,000 shares authorized, 302,289 and 9,881,656 shares issued and outstanding, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,023 99,373 Class B common stock, par value $.01 per share, 10,000,000 shares authorized, 63,500 shares issued and outstanding . . . . . . . . . . 635 635 Class C common stock, par value $.01 per share, 10,000,000 shares authorized, 8,484,411 shares issued and outstanding . . . . . . . . . 84,844 84,844 Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . 66,271,498 230,980,331 Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . (11,637,266) (28,248,626) Treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (1,038,134) ------------- ------------- Total common stockholders' equity . . . . . . . . . . . . . . . . . 54,722,734 201,878,423 ------------- ------------- Total liabilities and stockholders' equity . . . . . . . . . . . . . $ 241,122,564 $ 705,183,991 ------------- ------------- ------------- ------------- The accompanying notes are an integral part of the financial statements.
1 CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, ------------------------------- ------------------------------ 1995 1996 1995 1996 ----------- ----------- ----------- ------------ Gross broadcasting revenues. . . . . . . . . $19,515,762 $59,994,400 $54,596,491 $139,842,841 Less agency commissions . . . . . . . . . . 2,406,254 7,223,986 6,675,879 17,004,520 ----------- ----------- ----------- ------------ Net revenues. . . . . . . . . . . . . . . 17,109,508 52,770,414 47,920,612 122,838,321 ----------- ----------- ----------- ------------ Operating expenses: Programming, technical and news . . . . . . 3,036,246 14,031,128 8,852,738 27,040,895 Sales and promotion . . . . . . . . . . . . 4,260,413 12,235,546 12,991,570 31,545,504 General and administrative. . . . . . . . . 2,029,870 5,930,066 6,275,387 16,335,444 Depreciation and amortization . . . . . . . 2,240,302 6,636,000 6,708,382 17,703,939 Corporate expenses. . . . . . . . . . . . . 435,334 1,538,183 1,291,778 3,377,389 Stock option compensation . . . . . . . . . 950,000 950,000 5,410,000 2,850,000 ----------- ----------- ----------- ------------ 12,952,165 41,320,923 41,529,855 98,853,171 ----------- ----------- ----------- ------------ Income from operations. . . . . . . . . . 4,157,343 11,449,491 6,390,757 23,985,150 Other expense: Interest expense. . . . . . . . . . . . . . 4,492,057 8,535,341 12,780,304 24,468,693 Other, net. . . . . . . . . . . . . . . . . 30,919 32,188 81,135 130,164 ----------- ----------- ----------- ------------ Income (loss) before provision for income taxes, minority interest and extraordinary loss . . . . . . . . . (365,633) 2,881,962 (6,470,682) (613,707) Provision for income taxes . . . . . . . . . 744,288 600,000 2,828,846 2,201,361 Dividends and accretion on preferred stock of subsidiary . . . . . . . . . . . . -- 3,343,766 -- 8,187,104 ----------- ----------- ----------- ------------ Net loss before extraordinary loss. . . . (1,109,921) (1,061,804) (9,299,528) (11,002,172) Extraordinary loss on early extinguishment of debt . . . . . . . . . . -- 963,267 -- 5,609,188 ----------- ----------- ----------- ------------ Net loss. . . . . . . . . . . . . . . . . (1,109,921) (2,025,071) (9,299,528) (16,611,360) Loss on repurchase of preferred stock of subsidiary . . . . . . . . . . . . . . . -- -- -- 16,570,065 ----------- ----------- ----------- ------------ Net loss attributable to common stock . . $(1,109,921) $(2,025,071) $(9,299,528) $(33,181,425) ----------- ----------- ----------- ------------ ----------- ----------- ----------- ------------ Loss applicable to common stock: Loss before extraordinary loss. . . . . . . $ (0.13) $ (0.06) $ (1.05) $ (1.71) ----------- ----------- ----------- ------------ ----------- ----------- ----------- ------------ Extraordinary loss. . . . . . . . . . . . . $ -- $ (0.05) $ -- $ (0.35) ----------- ----------- ----------- ------------ ----------- ----------- ----------- ------------ Net loss. . . . . . . . . . . . . . . . . . $ (0.13) $ (0.11) $ (1.05) $ (2.06) ----------- ----------- ----------- ------------ ----------- ----------- ----------- ------------ Weighted average number of shares outstanding . . . . . . . . . . . . 8,849,851 17,925,622 8,849,851 16,125,754 ----------- ----------- ----------- ------------ ----------- ----------- ----------- ------------
The accompanying notes are an integral part of the financial statements. 2 CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY CLASS A CLASS B CLASS C COMMON STOCK COMMON STOCK COMMON STOCK ADDITIONAL ------------------- --------------- ------------------ PAID-IN ACCUMULATED SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT --------- ------- ------ ------ --------- ------- ------------ ------------ Balance, January 1, 1995 . . 302,107 $ 3,021 63,500 $635 8,484,244 $84,842 $ 59,911,502 $ (105,970) Stock option compensation . -- -- -- -- -- -- 6,360,000 -- Issuance of common stock on June 29, 1995 . . . . . . . -- -- -- -- 166 2 (2) -- Net loss . . . . . . . . . . -- -- -- -- -- -- -- (11,531,296) --------- ------- ------ ---- --------- ------- ------------ ------------ Balance, December 31, 1995 . 302,107 3,021 63,500 635 8,484,410 84,844 66,271,500 (11,637,266) Stock option compensation . -- -- -- -- -- -- 2,850,000 -- Issuance of common stock on February 14, 1996 . . . . . 8,447,192 84,472 -- -- -- -- 155,390,776 -- Loss on repurchase of preferred stock of subsidiary on February 21, 1996. . . . . . . . . . . . -- -- -- -- -- -- (16,570,065) -- Repurchase of common stock on February 21, 1996 . . . -- -- -- -- -- -- -- -- Issuance of common stock on August 9, 1996 . . . . . 1,185,521 11,855 -- -- -- -- 22,988,145 -- Issuance of common stock on August 20, 1996 . . . . 2,500 25 -- -- -- -- 49,975 -- Net loss . . . . . . . . . . -- -- -- -- -- -- -- (16,611,360) --------- ------- ------ ---- --------- ------- ------------ ------------ Balance, September 30, 1996 9,937,320 $99,373 63,500 $635 8,484,410 $84,844 $230,980,331 $(28,248,626) --------- ------- ------ ---- --------- ------- ------------ ------------ --------- ------- ------ ---- --------- ------- ------------ ------------ TREASURY STOCK TOTAL ----------- ------------ Balance, January 1, 1995 . . $ -- $ 59,894,030 Stock option compensation . -- 6,360,000 Issuance of common stock on June 29, 1995 . . . . . . . -- -- Net loss . . . . . . . . . . -- (11,531,296) ----------- ------------ Balance, December 31, 1995 . -- 54,722,734 Stock option compensation . -- 2,850,000 Issuance of common stock on February 14, 1996 . . . . . -- 155,475,248 Loss on repurchase of preferred stock of subsidiary on February 21, 1996. . . . . . . . . . . . -- (16,570,065) Repurchase of common stock on February 21, 1996 . . . (1,038,134) (1,038,134) Issuance of common stock on August 9, 1996 . . . . . -- 23,000,000 Issuance of common stock on August 20, 1996 . . . . -- 50,000 Net loss . . . . . . . . . . -- (16,611,360) ----------- ------------ Balance, September 30, 1996 $(1,038,134) $201,878,423 ----------- ------------ ----------- ------------
The accompanying notes are an integral part of the financial statements. 3 CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, ------------------------------- 1995 1996 ------------- -------------- Cash flows from operating activities: Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (9,299,528) $ (16,611,360) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . 6,708,382 17,703,939 Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . 211,124 315,483 Stock option compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,410,000 2,850,000 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,817,768 2,139,361 Dividends and accretion on preferred stock of subsidiary . . . . . . . . . . . . -- 8,187,104 Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 5,609,188 Changes in assets and liabilities, net of the effects of acquired businesses: Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,847,664) (9,278,829) Prepaids and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (469,570) (533,086) Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,050,787) 259,801 Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,096,599 2,077,604 Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,003,083 (2,401,874) ------------- -------------- Net cash provided by operating activities . . . . . . . . . . . . . . . . . . 5,579,407 10,317,331 ------------- -------------- Cash flows from investing activities: Purchases of broadcasting properties . . . . . . . . . . . . . . . . . . . . . . . (23,070,804) (433,144,911) Purchases of other property and equipment . . . . . . . . . . . . . . . . . . . . (1,173,387) (2,116,978) ------------- -------------- Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . (24,244,191) (435,261,889) ------------- -------------- Cash flows from financing activities: Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . -- 277,627,630 Proceeds from borrowings under revolving debt facility . . . . . . . . . . . . . . 42,943,940 92,586,362 Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,625,000) (109,716,233) Repayments of borrowings under revolving debt facility . . . . . . . . . . . . . . (22,916,160) (88,338,256) Issuance of preferred stock of subsidiary . . . . . . . . . . . . . . . . . . . . -- 175,412,322 Repurchase of preferred stock of subsidiary . . . . . . . . . . . . . . . . . . . -- (95,462,423) Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 178,176,193 Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (1,038,134) Payment of preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . -- (505,555) ------------- -------------- Net cash provided by financing activities . . . . . . . . . . . . . . . . . . 18,402,780 428,741,906 ------------- -------------- Net increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . . . . (262,004) 3,797,348 Cash, at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,516,808 1,314,214 ------------- -------------- Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (9,299,528) $ (16,611,360) Cash, at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,254,804 $ 5,111,562 ------------- -------------- ------------- --------------
The accompanying notes are an integral part of the financial statements. 4 CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Chancellor Broadcasting Company ("Chancellor") and its subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. 2. ACQUISITION On February 14, 1996, the Company acquired all of the outstanding capital stock of Trefoil Communications, Inc. ("Trefoil") for approximately $408.0 million, including acquisition costs. Trefoil is a holding company, the sole asset of which is the capital stock of Shamrock Broadcasting, Inc. ("Shamrock Broadcasting"). The acquisition of Trefoil was financed through the New Credit Agreement, the New Notes, the IPO and the offering of the Acquisition Preferred Stock and Class A Common Stock (all as defined). The acquisition of Trefoil was accounted for as a purchase. Accordingly, the purchase price was allocated to the net assets acquired based upon their estimated fair market values. The excess of the purchase price over the estimated fair value of net assets acquired amounted to approximately $368.0 million, which has been accounted for as goodwill and is being amortized over 40 years using the straight line method. This allocation was based on preliminary estimates and may be revised at a later date. Simultaneously with the acquisition of Trefoil, the Company entered into a joint sales agreement with Evergreen Media Corporation for the outsourcing of certain limited functions of WWWW-FM and WDFN-AM, both Detroit stations, and an option to purchase such stations for $30.0 million of cash. Subsequent to the acquisition of Trefoil, KTBZ-FM, a Houston station acquired from Trefoil, was operated by Secret Communications, L.P. ("Secret") under a Local Marketing Agreement ("LMA")/Exchange Agreement with Chancellor. In March of 1996, the Company entered into an agreement to exchange KTBZ-FM and $5.6 million of cash to Secret for KALC-FM and KIMN-FM, Denver, Colorado. The Company began managing certain limited functions of these stations, pursuant to an LMA, effective April 1, 1996 and closed on the exchange of the stations effective July 31, 1996. The exchange has been accounted for using the book values of the assets exchanged plus the $5.6 million of additional cash and $0.8 million of additional acquisition costs, and was allocated to the net assets acquired based upon their estimated fair market values. The excess of the purchase price over the estimated fair value of net assets acquired amounted to approximately $28.7 million, which has been accounted for as goodwill and is being amortized over 40 years using the straight line method. This allocation was based on preliminary estimates and may be revised at a later date. The exchange is summarized as follows (in thousands): Assets acquired and liabilities assumed: Property and equipment ................... $ 2,363 Goodwill and other intangibles ........... 28,657 Prepaid expenses and other assets ........ 163 Accrued liabilities ...................... (138) -------- Total acquisition ..................... $ 31,045 -------- -------- On May 15, 1996, the Company entered into an agreement to acquire substantially all the assets and certain liabilities of OmniAmerica Group ("Omni") for an aggregate price of $178.0 million, including $163.0 million of cash and $15.0 million of Chancellor's Class A Common Stock. Liabilities assumed will be limited to certain ongoing contractual rights and obligations. Pursuant to the acquisition agreement, the Company has provided an irrevocable letter of credit in the amount of $10.0 million which it will be required to pay to Omni in the event the Company is in material breach of its obligations under the acquisition agreement and Omni chooses not to complete the acquisition in 5 CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) accordance with the terms of the agreement, absent regulatory impediments or other circumstances specified in the agreement. On June 24, 1996, the Company entered into an agreement with American Radio Systems Corporation ("American Radio") whereby it will exchange the West Palm Beach, Florida stations being acquired pursuant to the Omni acquisition agreement for American Radio's KSTE-AM and $33.0 million of cash. KSTE-AM is located in Rancho Cordova, California and is part of the Sacramento market. On July 1, 1996, Chancellor entered into an agreement with SFX Broadcasting, Inc. ("SFX") whereby it will exchange the Jacksonville, Florida stations being acquired pursuant to the Omni acquisition agreement and $11.0 million of cash for SFX's WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM, Nassau-Suffolk, New York. These acquisition and exchange agreements are subject to FCC approval. Pursuant to various agreements, the Company began managing certain limited functions of the remaining Omni stations and the SFX stations beginning July 1, 1996, and station KSTE-AM beginning August 1, 1996. On August 24, 1996, the Company entered into an agreement to acquire substantially all the assets and certain liabilities of Colfax Communications ("Colfax") for an aggregate price of $365.0 million plus working capital. Liabilities assumed will be limited to certain ongoing contractual rights and obligations. Pursuant to the acquisition agreement, the Company has deposited $20.0 million of cash in a restricted escrow account to be remitted to Colfax at closing. The following summarizes the unaudited consolidated historical and pro forma data for the nine months ended September 30, 1995 and 1996, as though the Company's acquisitions of KDWB-FM and Trefoil, and the exchange of KTBZ-FM for KIMN-FM and KALC-FM, had occurred as of the beginning of 1995 (in thousands): NINE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, 1995 SEPTEMBER 30, 1996 ---------------------- ---------------------- HISTORICAL PRO FORMA HISTORICAL PRO FORMA ---------- --------- ---------- --------- Net revenues .......................................... $ 47,921 $ 116,232 $122,838 $129,576 Net loss before extraordinary loss .................... (9,300) (22,836) (11,002) (12,001) Net loss .............................................. (9,300) (22,836) (16,611) (12,001) Net loss per common share before extraordinary loss ... (1.05) (1.24) (1.71) (0.65) Net loss per common share ............................. (1.05) (1.24) (2.06) (0.65)
3. LONG-TERM DEBT The Company's $70.0 million term loan facility and $35.0 million revolving loan facility were refinanced on February 14, 1996, in conjunction with the acquisition of Trefoil under a new bank credit agreement (the "New Credit Agreement") with Bankers Trust Company, as administrative agent, and other institutions party thereto. In connection with the refinancing of the term loan and revolving loan facility, the Company incurred an extraordinary charge to write-off deferred finance costs of approximately $1.8 million. The New Credit Agreement originally included a $60.0 million term loan facility (the "A Term Loan Facility"), a $35.0 million term loan facility (the "B Term Loan Facility" and , together with the A Term Loan Facility, the "Term Loans") and a $40.0 million revolving loan facility (the "Revolving Loan Facility" and, together with the Term Loans, the "New Bank Financing"). The Revolving Loan Facility was increased to $55.0 million in August 1996 in conjunction with the Company's $18.7 million prepayment of its A Term Loan Facility. The Company realized an extraordinary loss on early extinguishment of debt of $1.0 million related to this prepayment. The New Bank Financing is collateralized by (i) a first priority perfected pledge of all capital stock and notes owned by Chancellor and its subsidiaries and (ii) a first priority perfected security interest in all other assets (including receivables, contracts, contract rights, securities, patents, trademarks, other intellectual property, inventory, equipment and real estate) owned by Chancellor and its subsidiaries, excluding FCC licenses, leasehold interests in studio or office space and certain leasehold and partnership interests in tower or transmitter sites. The A and B Term Loan Facilities 6 CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) were originally due in increasing quarterly installments beginning in 1996 and mature in August 2002 and 2003, respectively. As a result of the partial prepayment of the A Term Loan Facility, it is now due in increasing quarterly installments beginning in 1999. All outstanding borrowings under the Revolving Loan Facility mature in August 2002. The facilities bear interest, at the option of the Company, at rates based upon the prime rate of Bankers Trust Company, as announced from time to time, or the London Inter-Bank Offered Rate ("LIBOR") in effect from time to time, plus an applicable margin rate. The Company pays quarterly commitment fees in arrears equal to .5% per annum on the unused portion of the Revolving Loan Facility. As of September 30, 1996, the New Bank Financing facilities accrued interest at prime rate plus 1.25% (9.50%) on $15.0 million of borrowings and LIBOR rate plus 2.50% (8.00%) and 2.75% (8.19%) on $55.3 million and $34.9 million of borrowings, respectively. In connection with the IPO (defined), the Company redeemed 25% of its Existing Notes (defined) for approximately $22.2 million. The redemption was completed in March 1996 and resulted in an extraordinary charge of $2.8 million. The remaining $60 million 12-1/2% Senior Subordinated Notes due 2004 (the "Existing Notes") mature October 1, 2004, and bear interest at 12.5% per annum. On February 14, 1996, in conjunction with the acquisition of Trefoil Communications, Inc., the Company issued $200 million aggregate principal amount of 9 3/8% Senior Subordinated Notes due 2004 (the "New Notes" and, together with the Existing Notes, the "Notes"), which mature on October 1, 2004, and bear interest at 9.375% per annum. Interest on the Notes is paid semi-annually. The Existing and New Notes are redeemable, in whole or in part, at the option of the Company on or after October 1, 1999 and February 1, 2000, respectively. In addition, prior to January 31, 1999, the company may redeem up to 25% of the original aggregate principal amount of the New Notes with the net proceeds of one or more public equity offerings. The Notes are unsecured obligations of the Company, ranking subordinate in right of payment to all senior debt of the Company. The New Notes rank PARI PASSU in right of payment to the Existing Notes. The Notes are guaranteed on a senior subordinated basis by Chancellor Radio Broadcasting Company's subsidiaries. Both the Bank Financing and Notes indenture contain certain covenants, including, among others, limitations on the incurrence of additional debt, in the case of the Bank Financing; requirements to maintain certain financial ratios; and restrictions on the payment of dividends. 4. CAPITAL STRUCTURE In February 1996, Chancellor sold 7.7 million shares of its Class A Common Stock, par value $.01 per share (the "Class A Common Stock"), in an initial public offering (the "IPO"), which generated net proceeds of $142.4 million, and in a private placement, issued $100.0 million of exchangeable redeemable preferred stock (the "Acquisition Preferred Stock") of Chancellor Radio Broadcasting Company and 742,192 shares of Class A common stock of Chancellor to an affiliated entity and other investors. In February 1996, subsequent to the IPO, the Company commenced a private placement of $100.0 million of newly authorized 12-1/4% Senior Cumulative Exchangeable Preferred Stock (the "Old Preferred Stock"). Upon completion, the proceeds of the Old Preferred Stock were used to redeem the Acquisition Preferred Stock and repurchase 55,664 shares of Class A common stock. The redemption resulted in a charge to net loss applicable to common stock of approximately $16.6 million. In August 1996 pursuant to an agreement entered into at the time of the IPO, Chancellor sold 1.2 million shares of Class A Common Stock in a private placement to an affiliated entity, which generated proceeds of $23.0 million. In September 1996, the Company completed an exchange offering whereby it exchanged the Old Preferred Stock for 1,000,000 shares of 12-1/4% Series A Senior Cumulative Exchangeable Preferred Stock (the "New Preferred Stock") in a transaction registered under the Securities Act of 1933, as amended. The terms of the New Preferred Stock are substantially identical to those of the Old Preferred Stock. Dividends on the New Preferred Stock accrue from its date of issuance and are payable quarterly commencing November 15, 1996, at a rate per annum of 12-1/4% of the then effective liquidation preference per share. Dividends may be paid, at the Company's option, on any dividend payment date occurring on or prior to February 15, 2001 either in cash or by adding such dividends to the then effective liquidation preference of the New Preferred Stock. The initial liquidation preference per share of New Preferred Stock 7 CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) will be the liquidation preference per share of Old Preferred Stock on the date of exchange therefor. The New Preferred Stock is redeemable at the Company's option, in whole or in part at any time on or after February 15, 2001, at various redemption prices, plus, accumulated and unpaid dividends to the date of redemption. In addition, prior to February 15, 1999, the Company may, at its option, redeem the New Preferred Stock with the net cash proceeds from one or more Public Equity Offerings (as defined), at various redemption prices, plus, accumulated and unpaid dividends to the redemption date; provided, however, that after any such redemption there is outstanding at least 75% of the number of shares of New Preferred Stock originally issued. The Company is required, subject to certain conditions, to redeem all of the New Preferred Stock outstanding on February 15, 2008, at a redemption price equal to 100% of the then effective liquidation preference thereof, plus, accumulated and unpaid dividends to the date of redemption. Upon the occurrence of a change of control (as defined), the Company will offer to purchase all of the then outstanding shares of New Preferred Stock at a price equal to 101% of the then effective liquidation preference thereof, plus, accumulated and unpaid dividends to the date of purchase. Subject to certain conditions, the New Preferred Stock is exchangeable in whole, but not in part, at the option of the Company, on any dividend payment date for the Company's 12-1/4% Subordinated Exchange Debentures due 2008. In addition to the accrued dividends discussed above, the recorded value of the New Preferred Stock includes an amount for the accretion of the difference between the Old Preferred Stock's fair value at date of issuance and the New Preferred Stock's mandatory redemption amount, calculated using the effective interest method. Immediately prior to the IPO, Chancellor effected a recapitalization of its current capital stock. Pursuant to the recapitalization, each six shares of Chancellor's Nonvoting Stock were reclassified into one share of Class A Common Stock. Each six shares of Chancellor's Voting Stock were reclassified into one share of its Class B Common Stock, $.01 par value ("Class B Common Stock"), and each six shares of Convertible Nonvoting Stock were reclassified into one share of its Class C Common Stock, $.01 par value ("Class C Common Stock"). In connection with the recapitalization, 63,333 shares of Class A Common Stock were exchanged for an equal number of shares of Class B Common Stock, and an additional 8,483,078 shares of Class A Common Stock were exchanged for an equal number of shares of Class C Common Stock. The recapitalization has been given retroactive effect in the financial statements. In June 1996, the holders of the Class C Common Stock filed an application with the FCC to convert the stock into Chancellor's Class B Common Stock. This conversion was subject to FCC approval, as it resulted in a change of control, and was approved by the FCC and subsequently consummated on October 22, 1996. 5. EMPLOYEE STOCK OPTION PLAN On February 9, 1996, Chancellor's Board of Directors adopted a stock award plan for the Company's management, employees and non-employee directors providing for the grant of options and stock awards for up to 5% of Chancellor's Common Stock (on a fully-diluted basis). During 1996, the Board of Directors has granted options to purchase a total of 725,750 shares of Class A Common Stock with various exercise prices equal to the fair market value of the stock on the respective dates of grant. 6. INCOME TAXES Income tax expense differs from the amount computed by applying the federal statutory income tax rate of 34% to loss before income taxes and dividends and accretion on preferred stock of subsidiary for the following reasons: 8 CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, ------------------------------- ------------------------------ 1995 1996 1995 1996 --------- -------- ----------- ---------- U.S. federal income tax at statutory rate. . . $(124,315) $979,867 $(2,200,032) $ (208,660) State income taxes, net of federal benefit . . (21,938) 172,918 (388,241) (36,822) Valuation allowance provided for loss carryforward generated during the current period. . . . . . . . . . . . . 699,989 (677,785) 5,146,565 2,071,843 Reconciliation of return to estimate . . . . . 71,510 -- 71,510 -- Other. . . . . . . . . . . . . . . . . . . . . 119,042 125,000 199,044 375,000 --------- -------- ----------- ---------- $ 744,288 $600,000 $ 2,828,846 $2,201,361 --------- -------- ----------- ---------- --------- -------- ----------- ----------
The deferred tax valuation allowance has been established due to the uncertainty surrounding the Company's ability to generate taxable income in the immediate future. While the Company currently expects that its long-term profitability should ultimately be sufficient to enable it to realize full benefit of its future tax deductions, considering all factors to be relevant, the Company believes that a portion of the gross deferred tax assets may not currently meet a "more likely than not" realizability test. 7. RELATED PARTY TRANSACTION Effective April 1, 1996, the Company entered into a revised financial monitoring and oversight agreement with Hicks Muse & Co. Partners, L.P. and HM2/Management Partners, L.P., each of which is an affiliate of Hicks, Muse, Tate & Furst Incorporated. The annual fee for financial oversight and monitoring services to the Company has been adjusted to $500,000. The annual fee is adjustable each January 1, to an amount equal to the budgeted consolidated annual net sales of the Company for the then-current fiscal year, multiplied by 0.25%; provided, however, that in no event shall the annual fee be less than $500,000. 8. NEW ACCOUNTING PRONOUNCEMENT Statement of Financial Accounting Standard No. 123, "Accounting for Stock Based Compensation" was issued in October 1995, which establishes financial accounting and reporting standards for stock based employee compensation plans, including stock purchase plans, stock options, restricted stock, and stock appreciation rights. The Company has elected to continue accounting for stock based compensation under Accounting Principles Board Opinion No. 25. The disclosure requirements of SFAS No. 123 will be effective for the Company's financial statements beginning with the annual report for 1996. Management does not believe that the implementation of SFAS 123 will have a material effect on its financial statements. 9 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, SEPTEMBER 30, 1995 1996 ------------ ------------ ASSETS Current assets: Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,314,214 $ 5,111,562 Accounts receivable, net of allowance for doubtful accounts of $263,528 and $816,273, respectively. . . . . . . . . . . . . . . . 13,243,292 42,172,355 Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . 546,405 1,954,575 ------------ ------------ Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 15,103,911 49,238,492 Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 20,000,000 Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . 17,925,845 49,081,835 Intangibles and other, net. . . . . . . . . . . . . . . . . . . . . . . 203,808,395 569,497,264 Deferred financing costs, net . . . . . . . . . . . . . . . . . . . . . 4,284,413 17,366,400 ------------ ------------ Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $241,122,564 $705,183,991 ------------ ------------ ------------ ------------ LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,873,888 $ 3,240,120 Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 4,692,948 10,938,346 Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,710,891 309,017 Current portion of long-term debt . . . . . . . . . . . . . . . . . . 4,062,500 400,000 ------------ ------------ Total current liabilities . . . . . . . . . . . . . . . . . . . . . 13,340,227 14,887,483 Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,107,242 364,707,969 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 4,952,361 19,036,384 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 821,153 ------------ ------------ Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 186,399,830 399,452,989 ------------ ------------ Redeemable Senior Cumulative Exchangeable Preferred Stock, par value $.01 per share; 1,000,000 shares authorized, issued and outstanding; preference in liquidation of $104,815,994 . . . . . . -- 103,852,579 Common stockholder's equity: Common stock, par value $.01 per share, 1,000 shares authorized, issued and outstanding. . . . . . . . . . . . . . . . . . 10 10 Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . 66,359,990 221,939,935 Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . (11,637,266) (20,061,522) ------------ ------------ Total common stockholder's equity . . . . . . . . . . . . . . . . . 54,722,734 201,878,423 ------------ ------------ Total liabilities and stockholder's equity . . . . . . . . . . . . . $241,122,564 $705,183,991 ------------ ------------ ------------ ------------
The accompanying notes are an integral part of the financial statements. 10 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, -------------------------------- ------------------------------- 1995 1996 1995 1996 ----------- ----------- ----------- ------------ Gross broadcasting revenues. . . . . . . . . $19,515,762 $59,994,400 $54,596,491 $139,842,841 Less agency commissions . . . . . . . . . . 2,406,254 7,223,986 6,675,879 17,004,520 ----------- ----------- ----------- ------------ Net revenues . . . . . . . . . . . . . . 17,109,508 52,770,414 47,920,612 122,838,321 ----------- ----------- ----------- ------------ Operating expenses: Programming, technical and news . . . . . 3,036,246 14,031,128 8,852,738 27,040,895 Sales and promotion . . . . . . . . . . . 4,260,413 12,235,546 12,991,570 31,545,504 General and administrative . . . . . . . . 2,029,870 5,930,066 6,275,387 16,335,444 Depreciation and amortization . . . . . . 2,240,302 6,636,000 6,708,382 17,703,939 Corporate expenses . . . . . . . . . . . . 435,334 1,538,183 1,291,778 3,377,389 Stock option compensation . . . . . . . . 950,000 950,000 5,410,000 2,850,000 ----------- ----------- ----------- ------------ 12,952,165 41,320,923 41,529,855 98,853,171 ----------- ----------- ----------- ------------ Income from operations . . . . . . . . . 4,157,343 11,449,491 6,390,757 23,985,150 Other expense: Interest expense . . . . . . . . . . . . . 4,492,057 8,535,341 12,780,304 24,468,693 Other, net . . . . . . . . . . . . . . . . 30,919 32,188 81,135 130,164 ----------- ----------- ----------- ------------ Income (loss) before provision for income taxes and extraordinary loss . . . . . . . . . . . . . . . . . (365,633) 2,881,962 (6,470,682) (613,707) Provision for income taxes . . . . . . . . . 744,288 600,000 2,828,846 2,201,361 ----------- ----------- ----------- ------------ Net income (loss) before extraordinary loss . . . . . . . . . . (1,109,921) 2,281,962 (9,299,528) (2,815,068) Extraordinary loss on early extinguishment of debt . . . . . . . . . . -- 963,267 -- 5,609,188 ----------- ----------- ----------- ------------ Net income (loss) . . . . . . . . . . . (1,109,921) 1,318,695 (9,299,528) (8,424,256) Dividends and accretion on preferred stock . -- 3,343,766 -- 8,187,104 Loss on repurchase of preferred stock . . . -- -- -- 16,570,065 ----------- ----------- ----------- ------------ Net loss attributable to common stock . $(1,109,921) $(2,025,071) $(9,299,528) $(33,181,425) ----------- ----------- ----------- ------------ ----------- ----------- ----------- ------------
The accompanying notes are an integral part of the financial statements. 11 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDER'S EQUITY COMMON STOCK ADDITIONAL --------------- PAID-IN ACCUMULATED SHARES AMOUNT CAPITAL DEFICIT TOTAL ------ ------ ------------ ------------ ------------ Balance, January 1, 1995 . . . . . . . 2,000 $ 20 $ 59,999,980 $ (105,970) $ 59,894,030 Capital contributions . . . . . . . . -- -- 6,360,000 -- 6,360,000 Contribution of stock held by affiliate of Hicks, Muse, Tate & Furst . . . . . . . . . . . . (1,000) (10) 10 -- -- Net loss . . . . . . . . . . . . . . -- -- -- (11,531,296) (11,531,296) ------ ---- ------------ ------------ ------------ Balance, December 31, 1995 . . . . . . 1,000 10 66,359,990 (11,637,266) 54,722,734 Loss on repurchase of preferred stock . . . . . . . . . . . . . . . . -- -- (16,570,065) -- (16,570,065) Dividends and accretion on preferred stock . . . . . . . . . . . . . . . . -- -- (8,187,104) -- (8,187,104) Capital contributions . . . . . . . . -- -- 180,337,114 -- 180,337,114 Net loss . . . . . . . . . . . . . . -- -- -- (8,424,256) (8,424,256) ------ ---- ------------ ------------ ------------ Balance, September 30, 1996 . . . . . 1,000 $ 10 $221,939,935 $(20,061,522) $201,878,423 ------ ---- ------------ ------------ ------------ ------ ---- ------------ ------------ ------------
The accompanying notes are an integral part of the financial statements. 12 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, ------------------------------- 1995 1996 ------------- -------------- Cash flows from operating activities: Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (9,299,528) $ (8,424,256) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . 6,708,382 17,703,939 Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . 211,124 315,483 Stock option compensation . . . . . . . . . . . . . . . . . . . . . . . . . 5,410,000 2,850,000 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,817,768 2,139,361 Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 5,609,188 Changes in assets and liabilities, net of the effects of acquired businesses: Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,847,664) (9,278,829) Prepaids and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . (469,570) (533,086) Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,050,787) 259,801 Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,096,599 2,077,604 Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,003,083 (2,401,874) ------------ ------------ Net cash provided by operating activities . . . . . . . . . . . . . . . 5,579,407 10,317,331 ------------ ------------ Cash flows from investing activities: Purchases of broadcasting properties . . . . . . . . . . . . . . . . . . . . . (23,070,804) (433,144,911) Purchases of other property and equipment . . . . . . . . . . . . . . . . . . (1,173,387) (2,116,978) ------------ ------------ Net cash used in investing activities . . . . . . . . . . . . . . . . . (24,244,191) (435,261,889) ------------ ------------ Cash flows from financing activities: Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . -- 277,627,630 Proceeds from borrowings under revolving debt facility . . . . . . . . . . . . 42,943,940 92,586,362 Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . (1,625,000) (109,716,233) Repayments of borrowings under revolving debt facility . . . . . . . . . . . . (22,916,160) (88,338,256) Issuance of preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . -- 175,412,322 Repurchase of preferred stock . . . . . . . . . . . . . . . . . . . . . . . . -- (95,462,423) Additional capital contributions . . . . . . . . . . . . . . . . . . . . . . . -- 178,176,193 Distribution of additional paid in capital . . . . . . . . . . . . . . . . . . -- (1,038,134) Payment of preferred stock dividends . . . . . . . . . . . . . . . . . . . . . -- (505,555) ------------ ------------ Net cash provided by financing activities . . . . . . . . . . . . . . . 18,402,780 428,741,906 ------------ ------------ Net increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . (262,004) 3,797,348 Cash, at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . 1,516,808 1,314,214 ------------ ------------ Cash, at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,254,804 $ 5,111,562 ------------ ------------ ------------ ------------
The accompanying notes are an integral part of the financial statements. 13 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Chancellor Radio Broadcasting Company ("Chancellor Radio Broadcasting") and its subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. Chancellor Radio Broadcasting is a wholly owned subsidiary of Chancellor Broadcasting Company ("Chancellor"). 2. ACQUISITION On February 14, 1996, the Company acquired all of the outstanding capital stock of Trefoil Communications, Inc. ("Trefoil") for approximately $408.0 million, including acquisition costs. Trefoil is a holding company, the sole asset of which is the capital stock of Shamrock Broadcasting, Inc. ("Shamrock Broadcasting"). The acquisition of Trefoil was financed through the New Credit Agreement, the New Notes, the IPO and the offering of the Acquisition Preferred Stock and Class A Common Stock (all as defined). The acquisition of Trefoil was accounted for as a purchase. Accordingly, the purchase price was allocated to the net assets acquired based upon their estimated fair market values. The excess of the purchase price over the estimated fair value of net assets acquired amounted to approximately $368.0 million, which has been accounted for as goodwill and is being amortized over 40 years using the straight line method. This allocation was based on preliminary estimates and may be revised at a later date. Simultaneously with the acquisition of Trefoil, the Company entered into a joint sales agreement with Evergreen Media Corporation for the outsourcing of certain limited functions of WWWW-FM and WDFN-AM, both Detroit stations, and an option to purchase such stations for $30.0 million of cash. Subsequent to the acquisition of Trefoil, KTBZ-FM, a Houston station acquired from Trefoil, was operated by Secret Communications, L.P. ("Secret") under a Local Marketing Agreement ("LMA")/Exchange Agreement with Chancellor. In March of 1996, the Company entered into an agreement to exchange KTBZ-FM and $5.6 million of cash to Secret for KALC-FM and KIMN-FM, Denver, Colorado. The Company began managing certain limited functions of these stations, pursuant to an LMA, effective April 1, 1996 and closed on the exchange of the stations effective July 31, 1996. The exchange has been accounted for using the book values of the assets exchanged plus the $5.6 million of additional cash and $0.8 million of additional acquisition costs, and was allocated to the net assets acquired based upon their estimated fair market values. The excess of the purchase price over the estimated fair value of net assets acquired amounted to approximately $28.7 million, which has been accounted for as goodwill and is being amortized over 40 years using the straight line method. This allocation was based on preliminary estimates and may be revised at a later date. The exchange is summarized as follows (in thousands): Assets acquired and liabilities assumed: Property and equipment . . . . . . . . . . . . . $ 2,363 Goodwill and other intangibles . . . . . . . . . 28,657 Prepaid expenses and other assets. . . . . . . . 163 Accrued liabilities. . . . . . . . . . . . . . . (138) ------- Total acquisition. . . . . . . . . . . . . . . $31,045 ------- ------- On May 15, 1996, the Company entered into an agreement to acquire substantially all the assets and certain liabilities of OmniAmerica Group ("Omni") for an aggregate price of $178.0 million, including $163.0 million of cash and $15.0 million of Chancellor's Class A Common Stock. Liabilities assumed will be limited to certain ongoing contractual rights and obligations. Pursuant to the acquisition agreement, the Company has provided an irrevocable letter of credit in the amount of $10.0 million which it will be required to pay to Omni in the event the Company is in material breach of its obligations under the acquisition agreement and Omni chooses not to complete the acquisition in 14 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) accordance with the terms of the agreement, absent regulatory impediments or other circumstances specified in the agreement. On June 24, 1996, the Company entered into an agreement with American Radio Systems Corporation ("American Radio") whereby it will exchange the West Palm Beach, Florida stations being acquired pursuant to the Omni acquisition agreement for American Radio's KSTE-AM and $33.0 million of cash. KSTE-AM is located in Rancho Cordova, California and is part of the Sacramento market. On July 1, 1996, Chancellor entered into an agreement with SFX Broadcasting, Inc. ("SFX") whereby it will exchange the Jacksonville, Florida stations being acquired pursuant to the Omni acquisition agreement and $11.0 million of cash for SFX's WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM, Nassau-Suffolk, New York. These acquisition and exchange agreements are subject to FCC approval. Pursuant to various agreements, the Company began managing certain limited functions of the remaining Omni stations and the SFX stations beginning July 1, 1996, and station KSTE-AM beginning August 1, 1996. On August 24, 1996, the Company entered into an agreement to acquire substantially all the assets and certain liabilities of Colfax Communications ("Colfax") for an aggregate price of $365.0 million plus working capital. Liabilities assumed will be limited to certain ongoing contractual rights and obligations. Pursuant to the acquisition agreement, the Company has deposited $20.0 million of cash in a restricted escrow account to be remitted to Colfax at closing. The following summarizes the unaudited consolidated historical and pro forma data for the nine months ended September 30, 1995 and 1996, as though the Company's acquisitions of KDWB-FM and Trefoil, and the exchange of KTBZ-FM for KIMN-FM and KALC-FM, had occurred as of the beginning of 1995 (in thousands): NINE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, 1995 SEPTEMBER 30, 1996 ---------------------- --------------------- HISTORICAL PRO FORMA HISTORICAL PRO FORMA ---------- --------- ---------- --------- Net revenues . . . . . . . . . . . . . $47,921 $116,232 $122,838 $129,576 Net loss before extraordinary loss . . (9,300) (13,114) (2,815) (1,065) Net loss . . . . . . . . . . . . . . . (9,300) (13,114) (8,424) (1,065)
3. LONG-TERM DEBT The Company's $70.0 million term loan facility and $35.0 million revolving loan facility were refinanced on February 14, 1996, in conjunction with the acquisition of Trefoil under a new bank credit agreement (the "New Credit Agreement") with Bankers Trust Company, as administrative agent, and other institutions party thereto. In connection with the refinancing of the term loan and revolving loan facility, the Company incurred an extraordinary charge to write-off deferred finance costs of approximately $1.8 million. The New Credit Agreement originally included a $60.0 million term loan facility (the "A Term Loan Facility"), a $35.0 million term loan facility (the "B Term Loan Facility" and , together with the A Term Loan Facility, the "Term Loans") and a $40.0 million revolving loan facility (the "Revolving Loan Facility" and, together with the Term Loans, the "New Bank Financing"). The Revolving Loan Facility was increased to $55.0 million in August 1996 in conjunction with the Company's $18.7 million prepayment of its A Term Loan Facility. The Company realized an extraordinary loss on early extinguishment of debt of $1.0 million related to this prepayment. The New Bank Financing is collateralized by (i) a first priority perfected pledge of all capital stock and notes owned by Chancellor and its subsidiaries and (ii) a first priority perfected security interest in all other assets (including receivables, contracts, contract rights, securities, patents, trademarks, other intellectual property, inventory, equipment and real estate) owned by Chancellor and its subsidiaries, excluding FCC licenses, leasehold interests in studio or office space and certain leasehold and partnership interests in tower or transmitter sites. The A and B Term Loan Facilities were originally due in increasing quarterly installments beginning in 1996 and mature in August 2002 and 2003, respectively. As a result of the partial prepayment of the A Term Loan Facility, it is now due in increasing quarterly 15 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) installments beginning in 1999. All outstanding borrowings under the Revolving Loan Facility mature in August 2002. The facilities bear interest, at the option of the Company, at rates based upon the prime rate of Bankers Trust Company, as announced from time to time, or the London Inter-Bank Offered Rate ("LIBOR") in effect from time to time, plus an applicable margin rate. The Company pays quarterly commitment fees in arrears equal to .5% per annum on the unused portion of the Revolving Loan Facility. As of September 30, 1996, the New Bank Financing facilities accrued interest at prime rate plus 1.25% (9.50%) on $15.0 million of borrowings and LIBOR rate plus 2.50% (8.00%) and 2.75% (8.19%) on $55.3 million and $34.9 million of borrowings, respectively. In connection with the IPO (defined), the Company redeemed 25% of its Existing Notes (defined) for approximately $22.2 million. The redemption was completed in March 1996 and resulted in an extraordinary charge of $2.8 million. The remaining $60 million 12-1/2% Senior Subordinated Notes due 2004 (the "Existing Notes") mature October 1, 2004, and bear interest at 12.5% per annum. On February 14, 1996, in conjunction with the acquisition of Trefoil Communications, Inc., the Company issued $200 million aggregate principal amount of 9-3/8% Senior Subordinated Notes due 2004 (the "New Notes" and, together with the Existing Notes, the "Notes"), which mature on October 1, 2004, and bear interest at 9.375% per annum. Interest on the Notes is paid semi-annually. The Existing and New Notes are redeemable, in whole or in part, at the option of the Company on or after October 1, 1999 and February 1, 2000, respectively. In addition, prior to January 31, 1999, the company may redeem up to 25% of the original aggregate principal amount of the New Notes with the net proceeds of one or more public equity offerings. The Notes are unsecured obligations of the Company, ranking subordinate in right of payment to all senior debt of the Company. The New Notes rank PARI PASSU in right of payment to the Existing Notes. The Notes are guaranteed on a senior subordinated basis by the Company's subsidiaries. Both the Bank Financing and Notes indenture contain certain covenants, including, among others, limitations on the incurrence of additional debt, in the case of the Bank Financing; requirements to maintain certain financial ratios; and restrictions on the payment of dividends. 4. CAPITAL STRUCTURE In February 1996, Chancellor sold 7.7 million shares of its Class A Common Stock, par value $.01 per share (the "Class A Common Stock"), in an initial public offering (the "IPO"), which generated net proceeds of $142.4 million, and in a private placement, issued $100.0 million of exchangeable redeemable preferred stock (the "Acquisition Preferred Stock") of Chancellor Radio Broadcasting Company and 742,192 shares of Class A common stock of Chancellor to an affiliated entity and other investors. In February 1996, subsequent to the IPO, the Company commenced a private placement of $100.0 million of newly authorized 12-1/4% Senior Cumulative Exchangeable Preferred Stock (the "Old Preferred Stock"). Upon completion, the proceeds of the Old Preferred Stock were used to redeem the Acquisition Preferred Stock and repurchase 55,664 shares of Class A common stock. The redemption resulted in a charge to net loss applicable to common stock of approximately $16.6 million. In August 1996 pursuant to an agreement entered into at the time of the IPO, Chancellor sold 1.2 million shares of Class A Common Stock in a private placement to an affiliated entity, which generated proceeds of $23.0 million. In September 1996, the Company completed an exchange offering whereby it exchanged the Old Preferred Stock for 1,000,000 shares of 12-1/4% Series A Senior Cumulative Exchangeable Preferred Stock (the "New Preferred Stock") in a transaction registered under the Securities Act of 1933, as amended. The terms of the New Preferred Stock are substantially identical to those of the Old Preferred Stock. Dividends on the New Preferred Stock accrue from its date of issuance and are payable quarterly commencing November 15, 1996, at a rate per annum of 12-1/4% of the then effective liquidation preference per share. Dividends may be paid, at the Company's option, on any dividend payment date occurring on or prior to February 15, 2001 either in cash or by adding such dividends to the then effective liquidation preference of the New Preferred Stock. The initial liquidation preference per share of New Preferred Stock will be the liquidation preference per share of Old Preferred Stock on the date of exchange therefor. The New Preferred Stock is redeemable at the Company's option, in whole or in part at any time on or after February 15, 2001, at various redemption prices, plus, accumulated and unpaid dividends to the date of redemption. In addition, prior to February 15, 16 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 1999, the Company may, at its option, redeem the New Preferred Stock with the net cash proceeds from one or more Public Equity Offerings (as defined), at various redemption prices, plus, accumulated and unpaid dividends to the redemption date; provided, however, that after any such redemption there is outstanding at least 75% of the number of shares of New Preferred Stock originally issued. The Company is required, subject to certain conditions, to redeem all of the New Preferred Stock outstanding on February 15, 2008, at a redemption price equal to 100% of the then effective liquidation preference thereof, plus, accumulated and unpaid dividends to the date of redemption. Upon the occurrence of a change of control (as defined), the Company will offer to purchase all of the then outstanding shares of New Preferred Stock at a price equal to 101% of the then effective liquidation preference thereof, plus, accumulated and unpaid dividends to the date of purchase. Subject to certain conditions, the New Preferred Stock is exchangeable in whole, but not in part, at the option of the Company, on any dividend payment date for the Company's 12-1/4% Subordinated Exchange Debentures due 2008. In addition to the accrued dividends discussed above, the recorded value of the New Preferred Stock includes an amount for the accretion of the difference between the Old Preferred Stock's fair value at date of issuance and the New Preferred Stock's mandatory redemption amount, calculated using the effective interest method. In June 1996, the holders of Chancellor's Class C Common Stock filed an application with the FCC to convert the stock into Chancellor's Class B Common Stock. This conversion was subject to FCC approval, as it resulted in a change of control, and was approved by the FCC and subsequently consummated on October 22, 1996. 5. EMPLOYEE STOCK OPTION PLAN On February 9, 1996, Chancellor's Board of Directors adopted a stock award plan for the Company's management, employees and non-employee directors providing for the grant of options and stock awards for up to 5% of Chancellor's Common Stock (on a fully-diluted basis). During 1996, the Board of Directors has granted options to purchase a total of 725,750 shares of Class A Common Stock with various exercise prices equal to the fair market value of the stock on the respective dates of grant. 6. INCOME TAXES Income tax expense differs from the amount computed by applying the federal statutory income tax rate of 34% to loss before income taxes for the following reasons: THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, -------------------------------- ------------------------------ 1995 1996 1995 1996 --------- --------- ----------- ---------- U.S. federal income tax at statutory rate . . . . $(124,315) $ 979,867 $(2,200,032) $ (208,660) State income taxes, net of federal benefit . . . (21,938) 172,918 (388,241) (36,822) Valuation allowance provided for loss carryforward generated during the current period . . . . . . . . . . . . . . . 699,989 (677,785) 5,146,565 2,071,843 Reconciliation of return to estimate . . . . . . 71,510 -- 71,510 -- Other . . . . . . . . . . . . . . . . . . . . . . 119,042 125,000 199,044 375,000 --------- --------- ----------- ---------- $ 744,288 $ 600,000 $ 2,828,846 $2,201,361 --------- --------- ----------- ---------- --------- --------- ----------- ----------
The deferred tax valuation allowance has been established due to the uncertainty surrounding the Company's ability to generate taxable income in the immediate future. While the Company currently expects that its long-term profitability should ultimately be sufficient to enable it to realize full benefit of its future tax deductions, considering all factors to be relevant, the Company believes that a portion of the gross deferred tax assets may not currently meet a "more likely than not" realizability test. 7. RELATED PARTY TRANSACTION Effective April 1, 1996, Chancellor and the Company entered into a revised financial monitoring and oversight agreement with Hicks Muse & Co. Partners, L.P. and HM2/Management Partners, L.P., each of which is an affiliate 17 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) of Hicks, Muse, Tate & Furst Incorporated. The annual fee for financial oversight and monitoring services to Chancellor and the Company has been adjusted to $500,000. The annual fee is adjustable each January 1, to an amount equal to the budgeted consolidated annual net sales of the Company for the then-current fiscal year, multiplied by 0.25%; provided, however, that in no event shall the annual fee be less than $500,000. 8. NEW ACCOUNTING PRONOUNCEMENT Statement of Financial Accounting Standard No. 123, "Accounting for Stock Based Compensation" was issued in October 1995, which establishes financial accounting and reporting standards for stock based employee compensation plans, including stock purchase plans, stock options, restricted stock, and stock appreciation rights. The Company has elected to continue accounting for stock based compensation under Accounting Principles Board Opinion No. 25. The disclosure requirements of SFAS No. 123 will be effective for the Company's financial statements beginning with the annual report for 1996. Management does not believe that the implementation of SFAS 123 will have a material effect on its financial statements. 18 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The following discussion and analysis of results of operations and financial condition of the Company should be read in conjunction with the consolidated financial statements and related notes thereto of the Company included elsewhere in this document. Periodically, the Company makes forward looking statements that are not historical facts. Actual results may differ materially from those projected in the forward looking statements. These forward looking statements involve risks and uncertainties, including but not limited to, the following: business conditions and growth in the radio broadcasting industry and general economy; competitive factors; that interest rates may increase rather than remain stable or decrease; that one or more of the Company's broadcasting licenses may not be renewed; that pending acquisitions and dispositions may not be approved by the Federal Communications Commission ("FCC"), the Federal Trade Commission ("FTC") or the U.S. Department of Justice, Antitrust Division (the "DOJ" and, together with the FTC, the "Antitrust Agencies"); and the risk factors listed from time to time in documents filed by the Company with the Securities and Exchange Commission. The Company has grown largely through acquisitions, as well as through internally generated growth. Upon completion of its pending acquisition, exchange and sales agreements, the Company will own and operate 53 radio stations serving the following top 40 markets: New York, New York; Los Angeles, California; San Francisco, California; Washington, District of Columbia; Atlanta, Georgia; Riverside-San Bernardino, California; Minneapolis-St. Paul, Minnesota; Nassau-Suffolk (Long Island), New York; Phoenix, Arizona; Pittsburgh, Pennsylvania; Denver, Colorado; Cincinnati, Ohio; Sacramento, California; Milwaukee, Wisconsin and Orlando, Florida. See the "Acquisition" note to the financial statements for a more detailed description of the pending agreements. In the following analysis, management discusses the "broadcast cash flow" of the combined station group. Broadcast cash flow consists of operating income before depreciation and amortization, corporate expenses and non-cash stock option compensation expense. Although broadcast cash flow is not a measure of performance calculated in accordance with generally accepted accounting principles ("GAAP"), management believes that it is useful to an investor in evaluating the Company because it is a measure widely used in the broadcast industry to evaluate a radio company's operating performance. However, broadcast cash flow should not be considered in isolation or as a substitute for net income, cash flows from operating activities and other income or cash flow statement data prepared in accordance with GAAP or as a measure of liquidity or profitability. The discussion of broadcast cash flow appears as the last paragraph in the discussion of the results of operations. For ease of comprehension, the following table and analysis presents and discusses the combined historical net revenues, operating expenses and broadcast cash flow for the three and nine months ended September 30, 1995 and 1996 of the Company and Shamrock Broadcasting, and the following where not already included in the Company's results of operations per the terms of the respective operating agreements: 1) Midcontinent Radio of Minnesota Inc. related to radio station KDWB-FM, 2) Secret related to radio stations KIMN-FM and KALC-FM, 3) Omni related to radio stations WXXL-FM, WOMX-FM and WJHM-FM, 4) SFX and Liberty Broadcasting Inc. related to radio stations WBAB-FM, WGBB-AM, WBLI-FM and WHFM-FM and 5) American Radio related to KSTE-AM. Results related to the Company's Detroit and Houston stations are limited to those revenues and expenses attributable to the Company per the terms of the LMA agreements in 1996. No data for these stations prior to the LMA agreements in February 1996 or for 1995 have been included. This combined "same station basis" information is presented in a manner similar to a "pooling of interests"; however, it is not in accordance with GAAP which does not allow for the aggregation of financial data for entities which are not under common management and control. Nevertheless, management believes the financial information shown below is helpful in understanding past and current operations of the Company's stations. In the following information, the KDWB-FM LMA fee of $90,000 and $540,000, paid by the Company to Midcontinent Radio of Minnesota Inc. in 1995, for the three and nine months ended September 30, 1995, respectively, and the Omni and SFX LMA fees of $2.0 million and $1.1 million paid by the Company to Omni and SFX, respectively, for the three months ended September 30, 1996, have been eliminated from net revenues and operating expenses: THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, ------------------------------- ------------------------------ 1995 1996 1995 1996 ----------- ----------- ------------ ------------ Net revenues $47,691,024 $51,525,034 $135,835,908 $144,422,561 Operating expenses 30,026,545 27,833,477 93,860,888 88,350,802 ----------- ----------- ------------ ------------ Broadcast cash flow $17,664,479 $23,691,557 $ 41,975,020 $ 56,071,759 ----------- ----------- ------------ ------------ ----------- ----------- ------------ ------------
19 Because the Company incurred substantial indebtedness for its acquisitions for which it has significant debt service requirements, and because the Company has significant non-cash charges for stock option compensation and depreciation and amortization expense related to the fixed assets and intangibles acquired in the acquisitions, the Company expects that it will report net losses for the foreseeable future, which losses may be greater than those historically experienced by the Company. RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1995 Net revenues increased 208.4% to $52.8 million for the three months ended September 30, 1996 from $17.1 million for the same period in 1995. The majority of this increase was due to the acquisition of Shamrock Broadcasting and KIMN-FM and KALC-FM, and the various operating agreements with Omni, Secret, SFX and American Radio. On a same station basis, net revenues increased 8.0% to $51.5 million for the third quarter of 1996 from $47.7 million for the third quarter of 1995. Station operating expenses increased 245.1% to $32.2 million for the quarter ended September 30, 1996 from $9.3 million for the quarter ended September 30, 1995. The majority of this increase was due to the acquisition of Shamrock Broadcasting and KIMN-FM and KALC-FM, and the various operating agreements with Omni, Secret, SFX and American Radio. On a same station basis, station operating expenses decreased 7.3% to $27.8 million for the three months ended September 30, 1996 from $30.0 million over the same period of 1995. Depreciation and amortization increased 196.2% to $6.6 million for the third quarter of 1996 from $2.2 million for the same period in the prior year. Corporate expenses increased 253.3% to $1.5 million for the third quarter of 1996 from approximately $435,000 for the same period in 1995, as a result of additional personnel and overhead costs associated with the acquisition of Shamrock Broadcasting and KIMN-FM and KALC-FM, and the various operating agreements with Omni, Secret, SFX and American Radio. Interest expense increased 90.0% to $8.5 million from $4.5 million for the same period. These increases were primarily attributable to the acquisition of Shamrock Broadcasting and the resulting change in capital structure from its financing. During the third quarter of 1996, the Company incurred an extraordinary loss on early extinguishment of debt of $1.0 million as a result of the partial prepayment of its A Term Loan Facility. See the discussion of "Liquidity and Capital Resources" below. During the second quarter of 1995, the Company developed an estimate of the fair value of its outstanding stock options in the amount of $19.0 million. Based upon this estimate and the applicable vesting periods, the Company recognized $5.4 million of non-cash stock option compensation expense, with the remaining amount to be amortized over an approximate four year period. During the third quarter of 1996, the Company recognized non-cash stock option compensation expense of $950,000 and non-cash charges for dividends and accretion on the preferred stock of its subsidiary of $3.3 million. As a result of the foregoing, income from operations for the third quarter of 1996 was $11.4 million compared to $4.2 million for the same period in 1995. Chancellor Broadcasting Company had a net loss of $2.0 million compared with a net loss of $1.1 million for the third quarter of the prior year. On a same station basis, broadcast cash flow increased 34.1% to $23.7 million for the three months ended September 30, 1996, from $17.7 million over the comparable 1995 period. Same station broadcast cash flow as a percentage of net revenues increased to 46.0% for 1996 from 37.0% for 1995. NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1995 Net revenues increased 156.3% to $122.8 million for the nine months ended September 30, 1996 from $47.9 million over the same period in 1995. The majority of this increase was due to the acquisition of Shamrock Broadcasting and KIMN-FM and KALC-FM, and the various operating agreements with Omni, Secret, SFX and American Radio. On a same station basis, net revenues increased 6.3% to $144.4 million for the first nine months of 1996 from $135.8 million over the first nine months of 1995. Station operating expenses increased 166.4% to $74.9 million for the nine months ended September 30, 1996 from $28.1 million for the same period in 1995. The majority of this increase was due to the acquisition of Shamrock Broadcasting and KIMN-FM and KALC-FM, and the various operating agreements with Omni, Secret, SFX and American Radio. On a same station basis, station operating expenses decreased 5.9% to $88.4 million for the nine months ended September 30, 1996 from $93.9 million for the same period in 1995. 20 Depreciation and amortization increased 163.9% to $17.7 million for the first nine months of 1996 from $6.7 million over the same period in the prior year. Corporate expenses increased 161.5% to $3.4 million for the first nine months of 1996 from $1.3 million over the same period in 1995, as a result of additional personnel and overhead costs associated with the acquisition of Shamrock Broadcasting and KIMN-FM and KALC-FM, and the various operating agreements with Omni, Secret, SFX and American Radio. Interest expense increased 91.5% to $24.5 million from $12.8 million for the same period. These increases, and the extraordinary loss on early extinguishment of debt of $5.6 million, were primarily attributable to the acquisition of Shamrock Broadcasting and the resulting change in capital structure from its financing. See the discussion of "Liquidity and Capital Resources" below. During the second quarter of 1995, the Company developed an estimate of the fair value of its outstanding stock options in the amount of $19.0 million. Based upon this estimate and the applicable vesting periods, the Company recognized $5.4 million of non-cash stock option compensation expense during the first nine months of 1995, with the remaining amount to be amortized over an approximate four year period. During the first nine months of 1996, the Company recognized non-cash stock option compensation expense of $2.9 million, a one-time loss of $16.6 million on the repurchase of preferred stock of its subsidiary and incurred non-cash charges for dividends and accretion on the repurchased and newly issued preferred stock of its subsidiary of $8.2 million. As a result of the foregoing, income from operations for the first nine months of 1996 was $24.0 million compared to $6.4 million for the same period in 1995. Chancellor Broadcasting Company had a net loss of $16.6 million compared with a net loss of $9.3 million for the first nine months of the prior year. On a same station basis, broadcast cash flow increased 33.6% to $56.1 million for the nine months ended September 30, 1996, from $42.0 million over the comparable 1995 period. Same station broadcast cash flow as a percentage of net revenues increased to 38.8% for 1996 from 30.9% for 1995. LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity and capital resources have been significantly impacted by the acquisition, and the financing thereof, of Shamrock Broadcasting, on February 14, 1996. The acquisition of Shamrock Broadcasting was financed through the New Credit Agreement, the New Notes, the IPO and the offering of the Acquisition Preferred Stock and Class A Common Stock (all as defined and described in the notes to the financial statements included herewith). In connection with this financing, the Company refinanced its existing bank financing and redeemed 25% of its Existing Notes (as defined), resulting in a combined extraordinary charge of $4.6 million. Hicks, Muse, Tate & Furst Equity Fund II, L.P. ("HM Fund II") had advised the Company that on or before September 30, 1996, it would sell all of its capital stock in an affiliate or cause such affiliate to sell all or substantially all of its assets (which consist primarily of eight radio broadcast stations), and that it would invest the net proceeds of such sale in Class A Common Stock of Chancellor. On August 9, 1996, the Company sold 1,185,521 shares of Chancellor's Class A Common Stock to an affiliate of HM Fund II for cash proceeds of $23.0 million, pursuant to this agreement made at the time of Chancellor's IPO. Pursuant to its bank credit agreement, the Company used a portion of these proceeds to prepay a portion of its A Term Loan Facility. On May 15, 1996, the Company entered into an agreement to acquire substantially all the assets and certain liabilities of Omni. Pursuant to the acquisition agreement, the Company has provided an irrevocable letter of credit in the amount of $10.0 million which it will be required to pay to Omni in the event the Company is in material breach of its obligations under the acquisition agreement and Omni chooses not to complete the acquisition in accordance with the terms of the agreement, absent regulatory impediments or other circumstances specified in the agreement. This letter of credit resulted in a corresponding decrease in the Company's availability under its Revolving Loan Facility. On August 24, 1996, the Company entered into an agreement to acquire substantially all the assets and certain liabilities of Colfax. Pursuant to the acquisition agreement, the Company has deposited $20.0 million of cash in a restricted escrow account to be remitted to Colfax at closing or, in certain circumstances, if the Company does not complete the acquisition, absent regulatory impediments or other circumstances specified in the agreement. In conjunction with the A Term Loan Facility prepayment, the Company arranged for an increase in its Revolving Loan Facility from $40.0 million to $55.0 million. Management believes that cash from operating activities and available revolving credit borrowings under its bank credit agreement should be sufficient to permit the Company to meet its financial obligations and fund its operations, exclusive of the pending acquisitions. 21 The Company anticipates that it will consummate all of its pending acquisition, exchange and disposition agreements by early 1997. However, the closing of each of the transactions is subject to FCC and the Antitrust Agencies approval and certain closing conditions, certain of which are beyond the Company's control, and there can be no assurance as to when such transactions will be completed or that they will be completed on the terms described herein, or at all. The Company intends to fund the cash portion of its pending acquisitions with the proceeds from the sale of the Detroit stations, cash flow from operations, financing under its current credit agreement, new bank financing and new equity. There can be no assurance regarding the availability of cash flow from operations or that bank financing or equity will be available to the Company on commercially acceptable terms, if at all. 22 PART II OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES On February 14, 1996, Chancellor consummated the IPO of its Class A Common Stock. In connection with such offering, Chancellor reclassified its previously outstanding capital stock immediately prior to the IPO. Pursuant to such reclassification, Chancellor's Non-Voting Stock, Voting Stock and Convertible Non-Voting Stock were reclassified into its Class A Common Stock, Class B Common Stock, and Class C Common Stock, respectively, on a six-for-one basis. The holders of the Class A Common Stock are entitled to one vote per share on all matters submitted to the stock holders of Chancellor and, except as otherwise specified in the Second Restated Certificate of Incorporation of Chancellor, as amended, to elect, voting as a class, two members of the Board of Directors of Chancellor. ITEM 5. OTHER INFORMATION On October 22, 1996, HM2/Chancellor, L.P., a Texas limited partnership, Hicks, Muse, Tate & Furst Equity Fund II, L.P., a Delaware limited partnership, HM2/Chancellor Trust, a Delaware business trust, HM2/HMD Sacramento GP, L.P., a Delaware limited partnership, and Hicks, Muse GP Partners, L.P., a Texas limited partnership (collectively "Hicks Muse Parties") consummated the conversion (the "Conversion") of all 8,484,410 of the outstanding shares of the Class C Common Stock of Chancellor into an equal number of shares of Chancellor's Class B Common Stock, all in accordance with Chancellor's Second Restated Certificate of Incorporation, as amended (the "Charter"). As a result of the Conversion, the Hicks Muse Parties, together with the 1,277,625 shares of Chancellor's Class A Common Stock held by them, collectively control approximately 90.3% of the voting power of Chancellor and therefore also indirectly control each of Chancellor Radio Broadcasting Company, a Delaware corporation and wholly owned subsidiary of Chancellor ("Chancellor Radio Broadcasting") and Chancellor Broadcasting Licensee Company, a Delaware corporation and wholly owned subsidiary of Chancellor Radio Broadcasting ("Licensee"). Prior to the Conversion, the Hicks Muse Parties controlled approximately 1.4% of the voting power of Chancellor. Thomas O. Hicks is the Chairman of the Board, President, Chief Executive Officer, Chief Operating Officer, Secretary and controlling stockholder of the ultimate general or managing partner of each of the Hicks Muse Parties and therefore may be deemed to be the beneficial owner of all of the shares of Class A Common Stock and Class B Common Stock owned by such entities. As a result, together with 140,740 shares of Class A Common Stock owned of record by Mr. Hicks individually and as trustee, Mr. Hicks may be deemed to control approximately 90.3% of the voting power of Chancellor and therefore also indirectly control each of Chancellor Radio Broadcasting and Licensee. Mr. Hicks disclaims beneficial ownership of all shares of Class A Common Stock and Class B Common Stock not held of record by him. Prior to the Conversion, Steven Dinetz, the President, Chief Executive Officer and Secretary of Chancellor, owned beneficially and of record all of the outstanding shares of Class B Common Stock and, together with the shares of Class A Common Stock beneficially owned by him, controlled approximately 90.1% of the voting power of Chancellor and therefore indirectly controlled Chancellor Radio Broadcasting and Licensee. As a result of the Conversion, Mr. Dinetz now controls approximately 1.0% of the voting power of Chancellor. In accordance with the terms of the Class C Common Stock set forth in the Charter, no additional consideration was paid by the Hicks Muse Parties in connection with the Conversion. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS EXHIBIT NO. DESCRIPTION OF DOCUMENT - ------- ----------------------- 2.1 Asset Purchase Agreement dated as of April 19, 1994, between American Media, Inc. and Chancellor Holdings Corp. (formerly, MBD Broadcasting, Inc.) (1) 2.2 Asset Purchase Agreement dated as of April 19, 1994, among SanRiver Radio, Inc., Mid-Florida Radio, Inc. and Chancellor Holdings Corp. (formally MBD Broadcasting, Inc.) (1) 2.3 Asset Purchase Agreement dated as of April 19, 1994, between National Radio Partners, L.P. and Chancellor Holdings Corp. (formerly, MBD Broadcasting, Inc.) (1) 23 EXHIBIT NO. DESCRIPTION OF DOCUMENT - ------- ----------------------- 2.4 Asset Purchase Agreement dated as of April 19, 1994, between National Radio Partners, L.P. and Chancellor Communications Corporation (1) 2.5 Local Programming and Marketing Agreement dated February 1, 1995, between Midcontinent Radio of Minnesota, Inc., as Licensee, Radio Station KDWB-FM, and Chancellor Broadcasting Company(2) 2.6 Asset Purchase Agreement dated February 1, 1995, between Midcontinent Radio of Minnesota, Inc., Chancellor Broadcasting Company and Chancellor Broadcasting Licensee Company (2) 2.7 Escrow Agreement dated February 7, 1995, between Midcontinent Radio of Minnesota, Inc., Chancellor Broadcasting Company and NationsBank of Texas, N.A. (2) 2.8 Stock Purchase Agreement dated as of August 3, 1995, among Chancellor Broadcasting Company, Trefoil Communications, Inc., and the Selling Securityholders named therein (3) 2.9 Option Agreement dated January 9, 1996 by and between Chancellor Broadcasting Company and Evergreen Media Corporation (3) 2.10 Option Agreement dated January 9, 1996 by and between Chancellor Broadcasting Company and Secret Communications (3) 2.11 Asset Purchase Agreement dated as of May 14, 1996, among OmniAmerica Group, WAPE-FM License Partnership, WFYV-FM License Partnership, WEAT-FM License Partnership, WEAT-AM License Partnership, WXXL License Partnership, WOLL License Partnership, WJHM-FM License Partnership, Chancellor Broadcasting Company and Chancellor Radio Broadcasting Company (7) 2.12 Local Marketing Agreement dated as of June 28, 1996, among OmniAmerica Group, Chancellor Broadcasting Company and Chancellor Radio Broadcasting Company (7) 2.13 Exchange Agreement dated as of July 1, 1996, among WBLI, Inc., WBLI-FM, Inc., WHFM, Inc., WBAB, Inc., WGBB, Inc., SFX Broadcasting, Inc. and Chancellor Radio Broadcasting Company (7) 2.14 Local Marketing Agreement dated as of July 1, 1996, among WBLI, Inc., WBLI-FM, Inc., WHFM, Inc., WBAB, Inc., WGBB, Inc. and Chancellor Radio Broadcasting Company (7) 2.15 Exchange Agreement dated as of June 24, 1996, among America Radio Systems Corporation and Chancellor Radio Broadcasting Company * 2.16 Local Marketing Agreement dated as of June 24, 1996, among America Radio Systems Corporation and Chancellor Broadcasting Company and Chancellor Radio Broadcasting Company * 2.17 Asset Purchase Agreement dated as of August 24, 1996 by and among Classical Acquisition Limited Partnership, Radio 100 of Maryland Limited Partnership, Radio 100 Limited Partnership, Radio 570 Limited Partnership, Radio 94 of Phoenix Limited Partnership, and Radio 95 of Phoenix Limited Partnership and Chancellor Radio Broadcasting Company * 3.1 Certificate of Incorporation of Chancellor Broadcasting Company, as amended and restated (1) (4) 3.2 Certificate of Incorporation of Chancellor Radio Broadcasting Company, as amended (1) (4) 3.3 Certificate of Incorporation of Chancellor Broadcasting Licensee Company (1) 3.4 Bylaws of Chancellor Broadcasting Company, as amended and restated (1) (4) 3.5 Bylaws of Chancellor Radio Broadcasting Company, as amended (1) (4) 3.6 Bylaws of Chancellor Broadcasting Licensee Company (1) 3.7 Certificate of Designations for the 14% Redeemable Exchangeable Preferred Stock (5) 3.8 Certificate of Amendment to Certificate of Designations for the 14% Redeemable Exchangeable Preferred Stock (4) 24 EXHIBIT NO. DESCRIPTION OF DOCUMENT - ------- ----------------------- 3.9 Certificate of Designation for the Old Preferred Stock (4) 3.10 Certificate of Designation for the New Preferred Stock * 4.1 Indenture, dated October 1, 1994, governing the outstanding 12-1/2% Senior Subordinated Notes due 2004 (1) 4.2 First Supplemental Indenture, dated as of February 14, 1996, to the Indenture dated October 1, 1994, governing the 12-1/2% Senior Subordinated Notes due 2004 (4) 4.3 Second Supplemental Indenture, dated as of February 14, 1996, to the Indenture dated October 1, 1994, governing the 12-1/2% Senior Subordinated Notes due 2004 (4) 4.4 Indenture, dated as of February 14, 1996, governing the outstanding 9-3/8% Senior Subordinated Notes due 2004 (5) 4.5 First Supplemental Indenture, dated as of February 14, 1996, to the Indenture dated February 14, 1996, governing the 9-3/8% Senior Subordinated Notes due 2004 (4) 4.6 Indenture, dated as of February 26, 1996, governing the Exchange Debentures (4) 10.1 Credit Agreement, including certain ancillary documents thereto, dated October 12, 1994 among Chancellor Holdings Corp., Chancellor Broadcasting Company and Bankers Trust Company, as agent, and the lenders party thereto (2) 10.2 Lease Agreement dated as of May 22, 1989, between Kruse Microwave and SanRiver Radio, Inc., as amended (1) 10.3 License Agreement dated as of March 1, 1974, between City of New Hope, Minnesota and National Radio Partners, L.P., as assignee of American Media, Inc. (1) 10.4 Tower Lease Agreement dated as of November 23, 1988, between United Television and Shoreview FM Group, a Minnesota general partnership (1) 10.5 Partnership Agreement dated as of November 23, 1988, of Shoreview FM Group, a Minnesota general partnership (1) 10.6 Employment Agreement between Chancellor Holdings Corp., Chancellor Broadcasting Company and Steven Dinetz (2) 10.7 Employment Agreement between Chancellor Broadcasting Company and George C. Toulas (2) 10.8 Employment Agreement dated as of January 10, 1994 between Chancellor Communications Corporation and Rick Eytcheson, as amended (1) 10.9 Financial Monitoring and Oversight Agreement among Chancellor Holdings Corp., Chancellor Broadcasting Company and Hicks, Muse & Co. Partners, L.P. (2) 10.10 Tax Sharing Agreement between Chancellor Holdings Corp. and Chancellor Broadcasting Company(2) 10.11 Financial Advisory Agreement among Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company and HM2/Management Partners, L.P. (4) 10.12 Credit Agreement dated as of February 14, 1996, among Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company, various banks and Bankers Trust Company, as agent (5) 10.13 Amended and Restated Monitoring and Oversight Agreement between Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company and HM2/Management Partners, L.P. (4) 10.14 Amended and Restated Stockholders Agreement dated February 14, 1996 among Chancellor Broadcasting Company and certain Holders named therein (4) 25 EXHIBIT NO. DESCRIPTION OF DOCUMENT - ------- ----------------------- 10.15 Stockholders Agreement dated as of October 12, 1994 between Chancellor Broadcasting Company and the Holders named therein (6) 10.16 Registration Rights Agreement dated October 12, 1994 between Chancellor Broadcasting Company and the Holders named therein (6) 10.17 Letter Agreement dated February 9, 1996 regarding Hicks Muse Equity Investment among Chancellor Broadcasting Company and HM Fund II (4) 10.18 Sales Agreement, dated as of July 1, 1996, among OmniAmerica Group, Chancellor Broadcasting Company and Chancellor Radio Broadcasting Company (7) 10.19 Program Consulting Agreement, dated as of June 28, 1996, among OmniAmerica Group, Chancellor Broadcasting Company and Chancellor Radio Broadcasting Company (7) 10.20 Consulting Agreement, dated as of May 14, 1996, among Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company and Anthony S. Ocepek (7) 10.21 Consulting Agreement, dated as of May 14, 1996, among Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company and Carl E. Hirsch (7) 10.22 Consulting Agreement dated as of May 14, 1996, among Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company and H. Dean Thacker (7) 10.23 Non-Competition Agreement dated as of May 14, 1996, among Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company and Carl E. Hirsch (7) 10.24 First Consent and Amendment dated as of May 13, 1996, among Chancellor Radio Broadcasting Company, the Banks party thereto and Bankers Trust Company, as managing agent (7) 10.25 Employment Agreement dated as of February 1, 1996, between Chancellor Radio Broadcasting Company and Samuel Weller (7) 10.26 Employment Agreement dated as of February 14, 1996, between Chancellor Radio Broadcasting Company and Rick Eytcheson * 11.1 Statement RE Computation of Per Share Earnings for Chancellor Broadcasting Company * 21.1 Subsidiaries of Chancellor Broadcasting Company (4) 27.1 Financial Data Schedule for Chancellor Broadcasting Company* 27.2 Financial Data Schedule for Chancellor Radio Broadcasting Company* 27.3 Financial Data Schedule for Chancellor Broadcasting Licensee Company* - ------------------- * Filed herewith. (1) Incorporated by reference to the Registration Statement on Form S-1 (File No. 33-80534) of Chancellor Broadcasting Company as filed with the Securities and Exchange Commission. (2) Incorporated by reference to the Quarterly Report on Form 10-Q of Chancellor Broadcasting Company (File No. 33-80534) for the fiscal quarter ended March 31, 1995. (3) Incorporated by reference to the Registration Statement on Form S-1 (File No. 33-98334) of Chancellor Broadcasting Company as filed with the Securities and Exchange Commission. (4) Incorporated by reference to the Annual Report on Form 10-K of Chancellor, Chancellor Broadcasting and Broadcasting Licensee for the fiscal year 1995. (5) Incorporated by reference from the Form 8-K of Chancellor Broadcasting Company (File No. 0-27726) and Chancellor Radio Broadcasting Company (File No. 33-98334) as filed with the Securities and Exchange Commission on February 29, 1996. 26 EXHIBIT NO. DESCRIPTION OF DOCUMENT - ------- ----------------------- (6) Incorporated by reference from the Registration Statement on Form S-1 (File No. 33-98336) of Chancellor Broadcasting Company as filed with the Securities and Exchange Commission. (7) Incorporated by reference from the Registration Statement on Form S-1 (File No. 333-02782) of Chancellor Radio Broadcasting Company as filed with the Securities and Exchange Commission. (b) REPORTS ON FORM 8-K. None. 27 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant and each co-registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CHANCELLOR BROADCASTING COMPANY AND EACH CO-REGISTRANT Date: November 5, 1996 By /s/ Jacques D. Kerrest ------------------------------------ Jacques D. Kerrest Senior Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer of Registrant and each co-registrant) 28 EX-2.15 2 EXHIBIT 2.15 E X C H A N G E A G R E E M E N T BETWEEN CHANCELLOR RADIO BROADCASTING COMPANY WEAT-AM/FM, WEST PALM BEACH, FLORIDA WOLL-FM, RIVIERA BEACH, FLORIDA AND AMERICAN RADIO SYSTEMS CORPORATION KSTE-AM, RANCHO CORDOVA, CALIFORNIA EXCHANGE AGREEMENT TABLE OF CONTENTS Section 1. Asset Purchase Agreements . . . . . . . . . . . . . . . . . . .-1- 1.1 CALIFORNIA AGREEMENT. . . . . . . . . . . . . . . . . . . . . .-1- 1.2 FLORIDA AGREEMENT.. . . . . . . . . . . . . . . . . . . . . . .-2- Section 2. Exchange of Assets. . . . . . . . . . . . . . . . . . . . . . .-2- 2.1 TAX FREE EXCHANGE.. . . . . . . . . . . . . . . . . . . . . . .-2- 2.2 TRANSFER OF ASSETS TO ARS.. . . . . . . . . . . . . . . . . . .-2- 2.2.1 FCC LICENSES . . . . . . . . . . . . . . . . . . . . . .-2- 2.2.2 OTHER GOVERNMENTAL AUTHORIZATIONS. . . . . . . . . . . .-2- 2.2.3 TANGIBLE PERSONAL PROPERTY . . . . . . . . . . . . . . .-2- 2.2.4 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . .-3- 2.2.5 INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . .-3- 2.2.6 STATION RECORDS. . . . . . . . . . . . . . . . . . . . .-3- 2.2.7 MANUFACTURER/VENDOR WARRANTIES . . . . . . . . . . . . .-3- 2.2.8 REAL ESTATE. . . . . . . . . . . . . . . . . . . . . . .-3- 2.2.9 ALL OTHER FLORIDA STATION ASSETS . . . . . . . . . . . .-3- 2.3 EXCLUDED FLORIDA ASSETS.. . . . . . . . . . . . . . . . . . . .-4- 2.3.1 CASH . . . . . . . . . . . . . . . . . . . . . . . . . .-4- 2.3.2 RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . .-4- 2.3.3 CONSUMED PROPERTY. . . . . . . . . . . . . . . . . . . .-4- 2.3.4 TERMINATED CONTRACTS . . . . . . . . . . . . . . . . . .-4- 2.3.5 CORPORATE RECORDS. . . . . . . . . . . . . . . . . . . .-4- 2.3.6 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . .-4- 2.3.7 EMPLOYEE PLANS . . . . . . . . . . . . . . . . . . . . .-4- 2.3.8 CORPORATE NAME . . . . . . . . . . . . . . . . . . . . .-4- 2.3.9 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . .-4- 2.3.10. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-4- 2.3.11. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-4- 2.3.12. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-5- 2.4 TRANSFER OF ASSETS TO CHANCELLOR. . . . . . . . . . . . . . . .-5- 2.4.1 FCC LICENSES . . . . . . . . . . . . . . . . . . . . . .-5- 2.4.2 OTHER GOVERNMENTAL AUTHORIZATIONS. . . . . . . . . . . .-5- 2.4.3 TANGIBLE PERSONAL PROPERTY . . . . . . . . . . . . . . .-5- 2.4.4 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . .-5- 2.4.5 INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . .-5- 2.4.6 STATION RECORDS. . . . . . . . . . . . . . . . . . . . .-5- 2.4.7 MANUFACTURER/VENDOR WARRANTIES . . . . . . . . . . . . .-6- i 2.4.8 REAL ESTATE. . . . . . . . . . . . . . . . . . . . . . .-6- 2.4.9 ALL OTHER CALIFORNIA STATION ASSETS. . . . . . . . . . .-6- 2.5 EXCLUDED CALIFORNIA ASSETS. . . . . . . . . . . . . . . . . . .-6- 2.5.1 CASH . . . . . . . . . . . . . . . . . . . . . . . . . .-6- 2.5.2 RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . .-6- 2.5.3 CONSUMED PROPERTY. . . . . . . . . . . . . . . . . . . .-6- 2.5.4 TERMINATED CONTRACTS . . . . . . . . . . . . . . . . . .-6- 2.5.5 CORPORATE RECORDS. . . . . . . . . . . . . . . . . . . .-6- 2.5.6 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . .-7- 2.5.7 EMPLOYEE PLANS . . . . . . . . . . . . . . . . . . . . .-7- 2.5.8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-7- 2.5.9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-7- 2.5.10. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-7- 2.5.11. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-7- 2.5.12. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-7- 2.6 PERMITTED LIENS.. . . . . . . . . . . . . . . . . . . . . . . .-7- 2.6.1 FLORIDA STATIONS . . . . . . . . . . . . . . . . . . . .-7- 2.6.2 CALIFORNIA STATION . . . . . . . . . . . . . . . . . . .-7- Section 3. CONSIDERATION.. . . . . . . . . . . . . . . . . . . . . . . . .-7- 3.1 CONSIDERATION FROM CHANCELLOR.. . . . . . . . . . . . . . . . .-7- 3.1.1 FLORIDA AGREEMENT. . . . . . . . . . . . . . . . . . . .-7- 3.1.2 FLORIDA AGREEMENT FAILS TO CLOSE . . . . . . . . . . . .-8- 3.2 CONSIDERATION FROM ARS. . . . . . . . . . . . . . . . . . . . .-8- 3.3 ADJUSTMENTS TO CASH PAYMENTS. . . . . . . . . . . . . . . . . .-8- 3.3.1 ADJUSTMENTS FOR CALIFORNIA STATION OPERATIONS. . . . . .-8- 3.3.2 ADJUSTMENTS FOR FLORIDA STATION OPERATIONS.. . . . . . .-8- 3.3.3 DEFINITION OF BUYER AND SELLER.. . . . . . . . . . . . .-8- 3.3.4 ITEMS SUBJECT TO ADJUSTMENT. . . . . . . . . . . . . . .-9- 3.3.5 AD VALOREM OF REAL ESTATE TAXES. . . . . . . . . . . . .-9- 3.3.6 DISPUTE PROCEDURE FOR ALLOCATIONS. . . . . . . . . . . .-9- 3.4 ALLOCATION OF CONSIDERATION. . . . . . . . . . . . . . . . . -10- 3.4.1 CALIFORNIA STATION'S BARTER AND TRADE. . . . . . . . . -10- 3.4.2 FLORIDA STATIONS' BARTER AND TRADE.. . . . . . . . . . -10- Section 4. Assumption of Obligations . . . . . . . . . . . . . . . . . . -10- 4.1 CALIFORNIA ASSUMED LIABILITIES. . . . . . . . . . . . . . . . -10- 4.2 CALIFORNIA RETAINED LIABILITIES. . . . . . . . . . . . . . . -10- 4.3 FLORIDA ASSUMED LIABILITIES.. . . . . . . . . . . . . . . . . -11- 4.4 FLORIDA RETAINED LIABILITIES. . . . . . . . . . . . . . . . . -11- ii Section 5. Escrow Deposits . . . . . . . . . . . . . . . . . . . . . . . -11- 5.1 CALIFORNIA ESCROW.. . . . . . . . . . . . . . . . . . . . . . -11- 5.2 FLORIDA ESCROW. . . . . . . . . . . . . . . . . . . . . . . . -11- Section 6. Government Consents . . . . . . . . . . . . . . . . . . . . . -12- 6.1 FCC CONSENT.. . . . . . . . . . . . . . . . . . . . . . . . . -12- 6.2 FCC APPLICATIONS. . . . . . . . . . . . . . . . . . . . . . . -12- 6.3 FILINGS.. . . . . . . . . . . . . . . . . . . . . . . . . . . -12- Section 7. Local Marketing Agreements. . . . . . . . . . . . . . . . . . -12- 7.1 CALIFORNIA LOCAL MARKETING AGREEMENT. . . . . . . . . . . . . -12- 7.2 FLORIDA LOCAL MARKETING AGREEMENT.. . . . . . . . . . . . . . -13- Section 8. Collection of Accounts Receivable . . . . . . . . . . . . . . -13- 8.1 CALIFORNIA ACCOUNTS RECEIVABLE. . . . . . . . . . . . . . . . -13- 8.2 FLORIDA ACCOUNTS RECEIVABLE.. . . . . . . . . . . . . . . . . -14- Section 9. Third Party Consents. . . . . . . . . . . . . . . . . . . . . -15- 9.1 CALIFORNIA CONSENTS.. . . . . . . . . . . . . . . . . . . . . -15- 9.2 FLORIDA CONSENTS. . . . . . . . . . . . . . . . . . . . . . . -15- 9.3 FAILURE TO OBTAIN CONSENTS. . . . . . . . . . . . . . . . . . -15- Section 10. Representations and Warranties of Chancellor. . . . . . . . . -15- 10.1 ORGANIZATION AND STANDING.. . . . . . . . . . . . . . . . . . -15- 10.2 AUTHORIZATION AND BINDING OBLIGATION. . . . . . . . . . . . . -16- 10.3 QUALIFICATION . . . . . . . . . . . . . . . . . . . . . . . . -16- 10.4 ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS. . . . -16- 10.5 LITIGATION: COMPLIANCE WITH LAW. . . . . . . . . . . . . . . -16- 10.6 BROKER/FINDER FEES. . . . . . . . . . . . . . . . . . . . . . -16- 10.7 REPRESENTATIONS AND WARRANTIES AS TO THE FLORIDA STATIONS.. . -17- Section 11. Representation and Warranties of ARS. . . . . . . . . . . . . -17- 11.1 ORGANIZATION AND STANDING . . . . . . . . . . . . . . . . . . -17- 11.2 AUTHORIZATION AND BINDING OBLIGATION. . . . . . . . . . . . . -17- 11.3 QUALIFICATION . . . . . . . . . . . . . . . . . . . . . . . . -17- 11.4 ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS. . . . -17- 11.5 LITIGATION: COMPLIANCE WITH LAW. . . . . . . . . . . . . . . -17- 11.6 BROKER/FINDER FEES. . . . . . . . . . . . . . . . . . . . . . -18- 11.7 REPRESENTATIONS AND WARRANTIES AS TO THE CALIFORNIA STATION.. -18- iii Section 12. Covenants of Chancellor . . . . . . . . . . . . . . . . . . . -18- 12.1 CONDUCT OF STATION: . . . . . . . . . . . . . . . . . . . . . -18- 12.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20- 12.3 NO INCONSISTENT ACTION. . . . . . . . . . . . . . . . . . . . -20- 12.4 UPDATING OF SCHEDULES . . . . . . . . . . . . . . . . . . . . -20- 12.5 ENFORCEMENT OF AGREEMENTS . . . . . . . . . . . . . . . . . . -20- 12.6 FCC REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . -20- 12.7 NOTIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . -21- 12.8 POST-CLOSING ACCESS . . . . . . . . . . . . . . . . . . . . . -21- 12.9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21- Section 13. Covenants of ARS. . . . . . . . . . . . . . . . . . . . . . . -21- 13.1 CONDUCT OF STATION. . . . . . . . . . . . . . . . . . . . . . -21- 13.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23- 13.3 NO INCONSISTENT ACTION. . . . . . . . . . . . . . . . . . . . -23- 13.4 UPDATING OF SCHEDULES.. . . . . . . . . . . . . . . . . . . . -23- 13.5 ENFORCEMENT OF AGREEMENTS. . . . . . . . . . . . . . . . . . -23- 13.6 FCC REPORTS.. . . . . . . . . . . . . . . . . . . . . . . . . -24- 13.7 NOTIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . -24- 13.8 POST-CLOSING ACCESS.. . . . . . . . . . . . . . . . . . . . . -24- 13.9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24- Section 14. Joint Covenants . . . . . . . . . . . . . . . . . . . . . . . -24- 14.1 CONFIDENTIALITY.. . . . . . . . . . . . . . . . . . . . . . . -24- 14.2 COOPERATION.. . . . . . . . . . . . . . . . . . . . . . . . . -25- 14.3 CONTROL OF STATIONS.. . . . . . . . . . . . . . . . . . . . . -25- 14.4 BULK SALES LAWS.. . . . . . . . . . . . . . . . . . . . . . . -25- 14.5 PUBLIC ANNOUNCEMENTS. . . . . . . . . . . . . . . . . . . . . -25- 14.6 HART-SCOTT-RODINO.. . . . . . . . . . . . . . . . . . . . . . -25- 14.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . -26- Section 15. Conditions of Closing by Chancellor . . . . . . . . . . . . . -26- 15.1 REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . -26- 15.2 COMPLIANCE WITH AGREEMENT.. . . . . . . . . . . . . . . . . . -26- 15.3 THIRD PARTY CONSENTS AND APPROVALS; ESTOPPEL CERTIFICATES . . -26- 15.4 CLOSING CERTIFICATES. . . . . . . . . . . . . . . . . . . . . -26- 15.5 GOVERNMENTAL CONSENTS.. . . . . . . . . . . . . . . . . . . . -26- 15.6 ADVERSE PROCEEDINGS.. . . . . . . . . . . . . . . . . . . . . -27- 15.7 CLOSING DOCUMENTS.. . . . . . . . . . . . . . . . . . . . . . -27- iv Section 16. Conditions of Closing by ARS. . . . . . . . . . . . . . . . . -27- 16.1 REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . -27- 16.2 COMPLIANCE WITH AGREEMENT.. . . . . . . . . . . . . . . . . . -27- 16.3 THIRD PARTY CONSENTS AND APPROVALS; ESTOPPEL CERTIFICATES . . -27- 16.4 CLOSING CERTIFICATES. . . . . . . . . . . . . . . . . . . . . -28- 16.5 GOVERNMENTAL APPROVAL.. . . . . . . . . . . . . . . . . . . . -28- 16.6 ADVERSE PROCEEDINGS.. . . . . . . . . . . . . . . . . . . . . -28- 16.7 CLOSING DOCUMENTS.. . . . . . . . . . . . . . . . . . . . . . -28- Section 17. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . -28- 17.1 TIME AND PLACE. . . . . . . . . . . . . . . . . . . . . . . . -28- 17.2 DELIVERIES BY CHANCELLOR. . . . . . . . . . . . . . . . . . . -28- 17.3 DELIVERY BY ARS.. . . . . . . . . . . . . . . . . . . . . . . -29- 17.4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29- Section 18. Survival of Representations and Warranties. . . . . . . . . . -30- 18.1 REPRESENTATIONS AND WARRANTIES OF CHANCELLOR. . . . . . . . . -30- 18.2 REPRESENTATIONS AND WARRANTIES OF ARS.. . . . . . . . . . . . -30- Section 19. Indemnification . . . . . . . . . . . . . . . . . . . . . . . -30- 19.1 INDEMNIFICATION BY CHANCELLOR.. . . . . . . . . . . . . . . . -30- 19.2 INDEMNIFICATION BY ARS. . . . . . . . . . . . . . . . . . . . -30- 19.3 LIMITATION ON REIMBURSEMENT . . . . . . . . . . . . . . . . . -31- 19.4 PROCEDURE FOR INDEMNIFICATION.. . . . . . . . . . . . . . . . -31- Section 20. Termination . . . . . . . . . . . . . . . . . . . . . . . . . -32- 20.1 RIGHT TO TERMINATE. . . . . . . . . . . . . . . . . . . . . . -32- 20.2 LIQUIDATED DAMAGES/SPECIFIC PERFORMANCE . . . . . . . . . . . -33- Section 21. Expenses, Transfer Taxes, and Fees. . . . . . . . . . . . . . -34- 21.1 EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . -34- 21.2 TRANSFER TAXES AND SIMILAR CHARGES. . . . . . . . . . . . . . -34- 21.3 GOVERNMENTAL FILING OR GRANT FEES.. . . . . . . . . . . . . . -34- Section 22. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . -34- 22.1 RISK OF LOSS. . . . . . . . . . . . . . . . . . . . . . . . . -34- 22.2 ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . -34- 22.3 AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . -35- 22.4 HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . -35- 22.5 GOVERNING LAW.. . . . . . . . . . . . . . . . . . . . . . . . -35- 22.6 NOTICES.. . . . . . . . . . . . . . . . . . . . . . . . . . . -35- 22.7 SCHEDULES.. . . . . . . . . . . . . . . . . . . . . . . . . . -36- 22.8 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . -36- v 22.9 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . -36- 22.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . -36- 22.11 BINDING AGREEMENT . . . . . . . . . . . . . . . . . . . . . . -36- 22.12 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . -37- vi EXCHANGE AGREEMENT This Exchange Agreement is made effective as of July ___, 1996 by and among America Radio Systems Corporation, a Delaware corporation ("ARS"), and Chancellor Radio Broadcasting Company, a Delaware corporation ("Chancellor"). RECITALS WHEREAS, ARS is a party to a certain Asset Purchase Agreement dated March 26, 1996 between ARS and Fuller-Jeffrey Broadcasting Companies, Inc. ("FBC") pursuant to which ARS has purchased substantially all of FBC's assets used or useful in the operation of AM broadcast station KSTE, Rancho Cordova, California (the "California Station"), including the related KSTE broadcast licenses and authorizations issued by the Federal Communications Commission ("FCC"). That Asset Purchase Agreement hereafter is referred to as the "California Agreement". WHEREAS, Chancellor is a party to a certain Asset Purchase Agreement, dated May 14, 1996 among Chancellor and Chancellor Broadcasting Company and OmniAmerica Group, WAPE-FM License Partnership, WFYV-FM License Partnership, WEAT-AM License Partnership, WEAT-FM License Partnership, WXXL License Partnership, WOLL License Partnership and WJHM-FM License Partnership (collectively, "Omni") contemplating, INTER ALIA, the purchase by Chancellor of substantially all of Omni's assets used or useful in the operation of Stations WEAT AM and FM, West Palm Beach, Florida, and Station WOLL (FM), Riviera Beach, Florida (collectively, the "Florida Stations"), including the related FCC broadcast licenses and authorizations. That Asset Purchase Agreement is hereafter referred to as the "Florida Agreement". WHEREAS, Chancellor and ARS desire to exchange the assets of the Florida Stations for the assets of the California Station plus a cash payment by ARS as provided herein. WHEREAS, the parties intend the exchange of the Florida Stations and the California Station to qualify as a tax free exchange of like-kind assets pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended (the "Code"); WHEREAS, effective August 1, 1996, (the "LMA Commencement Date"), (i) Chancellor and ARS shall enter into Local Marketing Agreements ("LMAs") with respect to the Florida Stations ("Florida Stations LMA"); and (ii) Chancellor and ARS shall enter into a LMA with respect to the California Station ("California Station LMA"). Now, therefore, in contemplation of the recitals set out above and in consideration of the mutual covenants and agreements contained herein, the parties, intending to be contractually bound, agree as follows: -1- SECTION 1. ASSET PURCHASE AGREEMENTS 1.1 CALIFORNIA AGREEMENT. ARS has complied in a timely fashion with all material requirements of the California Agreement and has acquired the assets of the California Station from FBC in the manner contemplated in the California Agreement. ARS did not amend in any material respect the California Agreement or waive any right thereunder and shall not waive any continuing right thereunder without the prior written consent of Chancellor. This prior written consent shall not be unreasonably withheld by Chancellor. ARS shall enforce any and all of its material rights under the California Agreement. 1.2 FLORIDA AGREEMENT. Chancellor shall comply in a timely fashion with all material requirements of the Florida Agreement and shall use its reasonable best efforts to acquire the assets of the Florida Stations from Omni at the earliest practicable time and in the manner contemplated in the Florida Agreement. Chancellor shall not amend in any material respect the Florida Agreement or waive any right thereunder without the prior written consent of ARS. This prior written consent shall not be unreasonably withheld by ARS. Chancellor shall enforce any and all of its material rights under the Florida Agreement. SECTION 2. EXCHANGE OF ASSETS 2.1 TAX FREE EXCHANGE. The parties intend for this transaction to qualify as a tax-free exchange under Section 1031 of the Code. In order to attain this goal, the parties will, to the extent possible, exchange (i) depreciable personal property in the same General Asset Class or Product Class, as those terms are used in Treas. Regulation 1.1031(a)-2(b); and (ii) non- depreciable personal property and intangible personal property for other property of a like kind. 2.2 TRANSFER OF ASSETS TO ARS. Subject to the terms, conditions and limitations contained herein, on the Closing Date as defined in Section 13.1, Chancellor shall convey to ARS and ARS shall acquire from Chancellor (to the extent Chancellor acquires the same from Omni) all of the following assets, properties, interests and rights (the "Florida Assets") free and clear of liens and encumbrances except the Florida Permitted Liens allowed under Section 2.6.1: 2.2.1 FCC LICENSES. All licenses, permits, special temporary authority, program test authority and authorizations of any type whatsoever issued by the FCC, and any pending applications thereof, and used in connection with the Florida Stations (the "Florida Licenses"), including those authorizations for the Florida Stations identified in the pertinent portions of Schedule 2.1.1 of this Agreement and any renewals or modifications thereof; 2.2.2 OTHER GOVERNMENTAL AUTHORIZATIONS. All licenses, permits, and other authorizations of any nature whatsoever issued by a governmental authority and used in the -2- operation of the Florida Stations; 2.2.3 TANGIBLE PERSONAL PROPERTY. All equipment, office furniture and fixtures, office materials and supplies, inventory, spare parts and all other tangible personal property of every kind and description, and Chancellor's rights therein, owned, leased or held by Chancellor and used in connection with the operations of the Florida Stations, including but not limited to those items described or listed in Schedule 2.2.3, together with any replacements thereof and additions thereto, made before the Closing Date, and less any retirements or dispositions thereof made before the Closing Date in the ordinary course of business; 2.2.4 CONTRACTS. All contracts, agreements, leases and legally binding contractual rights of any kind, written or oral, relating to the operation of the Florida Stations ("Florida Contracts"), listed in Schedule 2.2.4 or entered into before the Closing Date in the ordinary course of business of the Florida Stations; 2.2.5 INTELLECTUAL PROPERTY. All trademarks, trade names, service marks (including the Call Signs WEAT, WEAT-FM and WOLL), franchises, copyrights, Internet domain names and addresses, including registrations and applications for registration of any of them, computer software programs and programming material of whatever form or nature, jingles, slogans, the Florida Stations' logos and all other logos or licenses to use same and all other intangible property rights of Chancellor, which are used exclusively in connection with the operation of the Florida Stations, including but not limited to those listed in Schedule 2.2.5 (collectively, the "Florida Intellectual Property") together with any associated good will and any additions thereto before the Closing Date; 2.2.6 STATION RECORDS. All of the files, documents, records, and books of account relating to the operation of the Florida Stations or to the Florida Assets, including without limitation the Florida Stations' public files, programming information and studies, technical information and engineering data, news and advertising studies or consulting reports, marketing studies, demographic data, sales correspondence, lists of advertisers, promotional materials, credit and sales reports and filings with the FCC, copies of all written Contracts to be assigned hereunder, logs, software programs and books and records relating to employees, financial, accounting and operation matters; but excluding records relating solely to any Excluded Asset (as hereinafter defined); 2.2.7 MANUFACTURER/VENDOR WARRANTIES. All manufacturer's and vendors' warranties relating to items included in the Florida Assets and all similar rights against third parties relating to items included in the Florida Assets; 2.2.8 REAL ESTATE. All real property used in operating the Florida Stations together with all appurtenant easements thereunto and all structures, fixtures and improvements located thereon as more fully described in Schedule 2.2.8, together with any additions thereto before the Closing Date ("the Florida Real Estate"); provided however that the -3- studios for Station WOLL located on Blue Heron Boulevard in Riviera Beach, Florida shall not be conveyed to ARS and are excluded from the Florida Real Estate, as Omni is in the process of donating them to the State of Florida. 2.2.9 ALL OTHER FLORIDA STATION ASSETS. Except for Excluded Assets, such other assets, properties, interests and rights that are used exclusively in connection with the operation of the Florida Stations or that are located as of the Closing Date on the Florida Real Estate. 2.3 EXCLUDED FLORIDA ASSETS. Notwithstanding anything to the contrary contained herein, it is expressly understood and agreed that the Florida Assets shall not include the following assets along with all rights, title and interest therein (the "Excluded Florida Assets"): 2.3.1 CASH. All cash, marketable securities and cash equivalents of Chancellor on hand and/or in banks; 2.3.2 RECEIVABLES. All cash accounts receivable or notes receivable of Chancellor; 2.3.3 CONSUMED PROPERTY. All tangible and intangible personal property related to the Florida Stations disposed of or consumed in the ordinary course of business of Chancellor or Omni before the Closing Date, or as permitted hereunder; 2.3.4 TERMINATED CONTRACTS. All non-assumed Contracts or Contracts that have terminated or expired prior to the Closing Date in the ordinary course of business of Chancellor or Omni or ARS as permitted hereunder; 2.3.5 CORPORATE RECORDS. Chancellor's corporate seal, minute books, charter documents, corporate stock record book and such other books and records as pertain to the organization, existence or share capitalization of Chancellor and duplicate copies of all books and records transferred to ARS hereunder as are necessary to enable Chancellor to file its tax returns and reports, as well as any other contracts, records or materials relating to Chancellor or its business and not involving or relating to the Florida Assets or the operation or operations of the Florida Stations; 2.3.6 INSURANCE. Contracts of insurance and all insurance proceeds or claims made by Chancellor; 2.3.7 EMPLOYEE PLANS. All pension, profit sharing or cash or deferred (Section 401(k)) plans and trusts and the assets thereof and any other employee benefit plan or arrangement and the assets thereof, if any, maintained by Chancellor; -4- 2.3.8 CORPORATE NAME. Any right to use the names "Chancellor," "Chancellor Broadcasting Company," or "Chancellor Radio Broadcasting Company" and any variations thereof; 2.3.9 EXCLUDED ASSETS. Those specific assets identified on the Excluded Assets Schedule attached to this Agreement as Schedule 2.3.9; 2.3.10 All of Chancellor's rights in and to all causes of action; 2.3.11 All tax refunds relating to the period prior to the Closing; and 2.3.12 All other assets or Contracts, including but not limited to those assets or Contracts associated with the Florida Agreement, that are not specifically listed in this Agreement as the Florida Assets or used or useful, as determined by Chancellor, in the operation or operations of the Florida Stations. 2.4 TRANSFER OF ASSETS TO CHANCELLOR. Subject to the terms, conditions and limitations contained herein, on the Closing Date, ARS shall convey to Chancellor and Chancellor shall acquire from ARS ( to the extent ARS acquires the same from FBC) all of the following assets, properties, interests and rights (the "California Assets") free and clear of liens and encumbrances except the California Permitted Liens under Section 2.6.2: 2.4.1 FCC LICENSES. All licenses, permits, special temporary authority, program test authority and authorizations of any type whatsoever issued by the FCC and any pending applications thereof, and used in connection with the California Station (the "California Licenses"), including those authorizations for the California Station identified in Schedule 2.4.1 to the California Agreement and any renewals or modifications thereof. 2.4.2 OTHER GOVERNMENTAL AUTHORIZATIONS. All licenses, permits, and other authorizations of any nature whatsoever issued by a governmental authority and used in the operation of the California Station. 2.4.3 TANGIBLE PERSONAL PROPERTY. All equipment, office furniture and fixtures, office materials and supplies, inventory, spare parts and all other tangible personal property of every kind and description, and ARS's rights therein, owned, leased or held by ARS and used in connection with the operations of the California Station, including but not limited to those items described or listed in Schedule 2.4.3, together with any replacements thereof and additions thereto, made before the Closing Date, and less any retirements or dispositions thereof made before the Closing Date in the ordinary course of business. 2.4.4 CONTRACTS. All contracts, agreements, leases and legally binding contractual rights of any kind, written or oral, relating to the operation of the California Station ("California Contracts"), listed in Schedule 2.4.4 or entered into before the Closing Date in the ordinary course of business of the California Station. -5- 2.4.5 INTELLECTUAL PROPERTY. All trademarks, trade names, service marks (including the Call Sign KSTE), franchises, copyrights, including registrations and applications for registration of any of them, computer software programs and programming material of whatever form or nature, jingles, slogans, the California Station's logos and all other logos or licenses to use same and all other intangible property rights of ARS, which are used exclusively in connection with the operation of the California Station, including but not limited to those listed Schedule 2.4.5 (collectively, the "California Intellectual Property") together with any associated good will and any additions thereto before the Closing Date; 2.4.6 STATION RECORDS. All of the files, documents, records, and books of account relating to the operation of the California Station or to the California Assets, including without limitation the California Station's public files, programming information and studies, technical information and engineering data, news and advertising studies or consulting reports, marketing studies, demographic data, sales correspondence, lists of advertisers, promotional materials, credit and sales reports and filings with the FCC, copies of all written Contracts to be assigned hereunder, logs, software programs and books and records relating to employees, financial, accounting and operation matters; but excluding records relating solely to any Excluded California Asset; 2.4.7 MANUFACTURER/VENDOR WARRANTIES. All manufacturers' and vendors' warranties relating to items included in the California Assets and all similar rights against third parties relating to items included in the California Assets; 2.4.8 REAL ESTATE. All real property used in operating the California Station together with all appurtenant easements thereunto and all structures, fixtures and improvements located thereon as more fully described in Schedule 2.4.8, together with any additions thereto before the Closing Date (the "California Real Estate"); and 2.4.9 ALL OTHER CALIFORNIA STATION ASSETS. Except for Excluded California Assets, such other assets, properties, interests and rights that are used exclusively in connection with the operation of the California Station or that are located as of the Closing Date on the California Real Estate. 2.5 EXCLUDED CALIFORNIA ASSETS. Notwithstanding anything to the contrary contained herein, it is expressly understood and agreed that the California Assets shall not include the following assets along with all rights, title and interest therein (the "Excluded California Assets"): 2.5.1 CASH. All cash, marketable securities and cash equivalents of ARS on hand and/or in banks; -6- 2.5.2 RECEIVABLES. All cash accounts receivable or notes receivable of ARS; 2.5.3 CONSUMED PROPERTY. All tangible and intangible personal property related to the California Station disposed of or consumed in the ordinary course of business of ARS or FBC before the Closing Date, or as permitted under the terms hereof; 2.5.4 TERMINATED CONTRACTS. All non-assumed Contracts or Contracts that have terminated or expired prior to the Closing Date in the ordinary course of business of ARS or FBC and as permitted hereunder; 2.5.5 CORPORATE RECORDS. ARS's corporate seal, minute books, charter documents, corporate stock record book and such other books and records as pertain to the organization, existence or share capitalization of ARS and duplicate copies of all books and records transferred to Chancellor hereunder as are necessary to enable ARS to file its tax returns and reports as well as any other records or materials relating to ARS or its business and not involving or relating to the California Assets or the operation or operations of the California Station; 2.5.6 INSURANCE. Contracts of insurance and all insurance proceeds or claims made by ARS; 2.5.7 EMPLOYEE PLANS. All pension, profit sharing or cash or deferred (Section 401(k)) plans and trusts and the assets thereof and any other employee benefit plan or arrangement and the assets thereof, if any, maintained by ARS; and 2.5.8 Any right, to use the name "ARS" or "American Radio" or "American Radio Systems Corporation" and any variations thereof; 2.5.9 Those specific assets identified on the Excluded Assets Schedule attached to this Agreement as Schedule 2.5.9; 2.5.10 All of ARS's rights in and to all causes of action; 2.5.11 All tax refunds relating to the period prior to the Closing; and 2.5.12 All other assets or Contracts, including but not limited to those assets or Contracts associated with the California Agreement that are not specifically listed in this Agreement as the California Assets or used or useful, as determined by ARS, in the operation or operations of the California Station. -7- 2.6 PERMITTED LIENS. 2.6.1 FLORIDA STATIONS. The Florida Assets shall be conveyed to ARS free and clear of all liens and encumbrances except the liens and encumbrances listed in Schedule 2.6.1 (the "Florida Permitted Liens"). 2.6.2 CALIFORNIA STATION. The California Assets shall be conveyed to Chancellor free and clear of all liens and encumbrances except the liens and encumbrances listed in Schedule 2.6.2 (the "California Permitted Liens"). SECTION 3. CONSIDERATION. 3.1 CONSIDERATION FROM CHANCELLOR. 3.1.1 FLORIDA AGREEMENT. If the Florida Agreement closes and Chancellor acquires the Florida Assets, then the consideration delivered by Chancellor to ARS shall consist of the Florida Assets described in Section 2.2. Further, and subject to the limitations contained in Section 4.1, Chancellor shall assume the California Assumed Liabilities. 3.1.2 FLORIDA AGREEMENT FAILS TO CLOSE. If the Florida Agreement does not close and Chancellor does not acquire the Florida Assets, then the consideration delivered by Chancellor to ARS for the purchase of the California Assets shall consist of Seven Million Dollars ($7,000,000), subject to any adjustments provided herein (the "Alternative California Cash Purchase Price"). The Alternative California Purchase Price shall be paid to ARS at Closing by wire transfer of immediately available funds. Further and subject to the limitations contained in Section 4.1, Chancellor shall assume the California Assumed Liabilities. 3.2 CONSIDERATION FROM ARS. The consideration delivered by ARS to Chancellor shall consist of: (a) the California Assets described in Section 2.4 less any Excluded California Assets described in Section 2.5. Further and subject to the limitations contained in Section 4.3, ARS shall assume the Florida Assumed Liabilities; and (b) the sum of Thirty-three Million Dollars ($33,000,000), subject to any adjustments provided herein (the "Florida Cash Purchase Price"). This Florida Cash Purchase Price shall be paid to Chancellor at Closing by wire transfer of immediately available funds. 3.3 ADJUSTMENTS TO CASH PAYMENTS. The cash payment(s) contemplated in Sections 3.1 and 3.2 shall be adjusted as follows: -8- 3.3.1 ADJUSTMENTS FOR CALIFORNIA STATION OPERATIONS. Subject to the California Station LMA to be entered into pursuant to Section 7.1 herein, income and expenses from the operation of the California Station shall be allocated to the parties on the principle that (i) ARS shall be entitled to all income attributable to, and shall be responsible for all expenses arising out of, the operation of the California Station up to 11:59 PM on the Closing Date (the "Effective Time") and (ii) Chancellor shall be entitled to all income attributable to, and shall be responsible for all expenses arising out of, the operation of the California Station after the Effective Time. Overlapping items of income and expense shall be prorated as of the Effective Time. 3.3.2 ADJUSTMENTS FOR FLORIDA STATION OPERATIONS. Subject to the Florida Station LMA to be entered into pursuant to Section 7.2, herein, income and expenses from the operation of the California Station shall be allocated to the parties on the principle that (i) ARS shall be entitled to all income attributable to, and shall be responsible for all expenses arising our of, the operation of the California Station up to the Effective Time and (ii) Chancellor shall be entitled to all income attributable to, and shall be responsible for all expenses arising out of, the operation of the California Station after the Effective Time. Overlapping items of income and expense shall be prorated as of the Effective Time. 3.3.3 DEFINITION OF BUYER AND SELLER. (a) For purposes of Section 3.3.3 - 3.3.6, only, Buyer means (i) Chancellor with respect to the California Station and (ii) ARS with respect to the Florida Stations. (b) For purposes of Section 3.3.3 - 3.3.6, only, Seller means (i) ARS with respect to the California Station and (ii) Chancellor with respect to the Florida Stations. 3.3.4 ITEMS SUBJECT TO ADJUSTMENT. Items subject to adjustment pursuant to Sections 3.3.1 and 3.3.2 include, but are not limited to, expenses for goods and services received both before and after the Effective Time, utilities charges, ad valorem, real estate, property and other taxes (other than income taxes, which shall be Seller's sole responsibility for all taxable periods ending prior to and including the Closing Date, and those taxes arising from the sale and transfer of any of the Florida Stations' or the California Station's assets, which shall be paid as set forth in Section 21.2), income and expenses under the various assumed contracts (other than Trade Agreements), prepaid expenses, music and other license fees (including any retroactive adjustments thereof), wages, salaries, and other employee benefit expenses (whether such wages, salaries or benefits are current or deferred expenses) (including, without limitation, liabilities accrued up to the Effective Time for bonuses, commissions, vacation pay, payroll taxes, workers' compensation and social security taxes) and rents and similar prepaid and deferred items. -9- 3.3.5 AD VALOREM OF REAL ESTATE TAXES. Ad valorem and other real estate taxes shall be apportioned on the basis of the taxes assessed for the most recently-completed calendar year, with a reapportionment as promptly as practicable after the tax rates and real property valuations for the calendar year in which the Closing occurs can be ascertained. In addition, Buyers shall be entitled to a credit in this proration process for the amount of any taxes (or other governmental charges) that are due and payable by Sellers, but are being contested in good faith in appropriate proceedings and are secured by Liens on the California Station's or Florida Stations' Assets that have not been removed as of or before the Closing (but once such amounts are finally determined, Buyers shall use such credit to remove such liens and return to Sellers the excess of (i) the amount of such credit MINUS (ii) the amount of such taxes or other governmental charges as finally determined, or Sellers shall pay to Buyers the deficiency, as appropriate). 3.3.6 DISPUTE PROCEDURE FOR ALLOCATIONS. Allocation and proration of the items set forth in Subsection 3.3.4 above shall be made by Buyers and a statement thereof given to Sellers within thirty (30) days after the Closing Date. Sellers shall give written notice of any objection thereto within twenty (20) business days after delivery of such statement, detailing the reason for such objection and stating the amount of the proposed final allocation and proration. if a timely objection is made and the parties cannot reach agreement within thirty (30) days after receipt of the objection as to the amount of the final allocation and proration, the matter shall be referred to Arthur Andersen, L.L.P. (the "Independent Auditor") to resolve the matter, whose decision will be final and binding on the parties, and whose fees and expenses shall be borne by Buyers and Sellers in accordance with the following: each party shall pay an amount equal to the sum of all fees and expenses of the Independent Auditor on a proportional basis taking into account the amount of the net allocation and proration proposed by each of Buyers and Sellers and the amount of the final allocation and proration determined by the Independent Auditor (for example, if Buyers proposed a payment of $10 to Sellers, Sellers proposed a payment of $100, and the Independent Auditor proposed a payment of $30, Buyers would pay 20/90ths of the Independent Auditor's fees and Sellers would pay 70/90ths of those fees based on the $90 in dispute between the parties). 3.4 ALLOCATION OF CONSIDERATION. The value of the consideration (including cash) that each party is exchanging under this Exchange Agreement is Forty Million Dollars ($40,000,000). Seven Million Dollars ($7,000,000) of the consideration exchanged shall be allocated to the California Assets. The allocation of consideration among each item included in the California Assets and the Florida Assets shall be made by Broadcast Investment Analysts, Inc. on the basis of its independent appraisal of the California Assets and the Florida Assets. This independent appraisal shall be paid for equally by the parties and shall be considered binding by the parties. The parties shall use such appraisal for all purposes, including for purposes of the federal and state income tax returns. 3.4.1 CALIFORNIA STATION'S BARTER AND TRADE. If the value of trade, barter and similar arrangements for the sale of advertising time for other than cash that are assumed by -10- Chancellor under this Agreement is $50,000 (or more) greater than the value of the consideration to be received by Chancellor on or after the California LMA Commencement Date with respect to the California Station, ARS shall pay Chancellor the excess (other than the first $50,000) within 30 days after the California LMA Commencement Date. 3.4.2 FLORIDA STATIONS' BARTER AND TRADE. If the value of trade, barter and similar arrangements for the sale of advertising time for other than cash that are assumed by ARS under this Agreement is $150,000 (or more) greater than the value of the consideration to be received by ARS on or after the Florida LMA Commencement Date with respect to the Florida Stations, Chancellor shall pay ARS the excess (other than the first $150,000) within 30 days after the Florida LMA Commencement Date. SECTION 4. ASSUMPTION OF OBLIGATIONS 4.1 CALIFORNIA ASSUMED LIABILITIES. Subject to the provisions of this Section 4, and subject to the California Station LMA as set forth in Section 7.1, hereof, Chancellor shall assume the obligations of ARS arising or to be performed under such of the California Contracts as are listed in Schedule 4.1 hereto (the "California Assumed Liabilities"). In addition, Chancellor shall assume ARS's post-closing obligations under Section 8 of the California Agreement; however, such obligations shall be limited to providing assistance to ARS and the selling party, and Chancellor shall have no obligation to provide any payments which ARS may be obligated to make under the California Agreement. 4.2 CALIFORNIA RETAINED LIABILITIES. Notwithstanding anything contained in this Agreement to the contrary, Chancellor expressly does not, and shall not, assume or agree to pay, satisfy, discharge or perform and will not be deemed by virtue of the execution and delivery of this Agreement to have assumed or to have agreed to pay, satisfy, discharge or perform, any liabilities, obligations or commitments of ARS of any nature whatsoever whether accrued, absolute, contingent or otherwise and whether or not disclosed to Chancellor, other than the California Assumed Liabilities. All of such liabilities and obligations shall be referred to herein collectively as the "California Retained Liabilities". 4.3 FLORIDA ASSUMED LIABILITIES. Subject to the provisions of this Section 4, ARS shall assume the obligations of Chancellor arising or to be performed on or after the Closing Date under such of the Florida Contracts as are listed in Schedule 4.3 hereto (the "Florida Assumed Liabilities"). In addition, ARS shall assume Chancellor's post-closing obligations under Article 11 of the Florida Agreement, however, such obligations shall be limited to providing assistance to Chancellor and the selling party, and ARS shall have no obligation to provide any payments which Chancellor may be obligated to make under the Florida Agreement. 4.4 FLORIDA RETAINED LIABILITIES. Notwithstanding anything contained in this Agreement to the contrary, ARS expressly does not, and shall not, assume or agree to pay, -11- satisfy, discharge or perform and will not be deemed by virtue of the execution and delivery of this Agreement to have assumed or to have agreed to pay, satisfy, discharge or perform, any liabilities, obligations or commitments of Chancellor of any nature whatsoever whether accrued, absolute, contingent or otherwise and whether or not disclosed to ARS, other than the Florida Assumed Liabilities. All such liabilities and obligations shall be referred to herein collectively as the "Florida Retained Liabilities". SECTION 5. ESCROW DEPOSITS 5.1 CALIFORNIA ESCROW. Upon execution of this Agreement, Chancellor shall deposit Three Hundred Fifty Thousand Dollars ($350,000) (the "California Cash Deposit") or an original, irrevocable letter of credit, which should be in a form reasonably satisfactory to ARS, issued by Banker's Trust Company for a sum equal to the California Cash Deposit, with Star Media Group to be held pursuant to the terms of the California Escrow Agreement appended hereto as Exhibit 5.1. The California Deposit plus accrued interest shall be returned to Chancellor at Closing. Further, if this Agreement terminates for any reason other than a material breach of the Agreement by Chancellor, the California Deposit plus accrued interest shall be returned to Chancellor. 5.2 FLORIDA ESCROW. Upon Execution of this Agreement, ARS shall deposit Two Million Dollars ($2,000,000) (the "Florida Cash Deposit") or an original, irrevocable letter of credit, which should be in a form reasonably satisfactory to Chancellor, issued by Bank of New York for a sum equal to the Florida Cash Deposit with Star Media Group to be held pursuant to the terms of the Florida Escrow Agreement appended hereto as Exhibit 4.2. The Florida Deposit plus accrued interest shall be paid to Chancellor at Closing and credited against the cash payment required under Section 2.5 of this Agreement. If this Agreement terminates for any reason other than a material breach of the Agreement by ARS, the Florida Deposit plus accrued interest shall be returned to ARS. SECTION 6. GOVERNMENT CONSENTS 6.1 FCC CONSENT. The closing on the purchase and sale of the California Assets and the Florida Assets is subject to and conditioned upon (a) the parties obtaining the prior consent of the FCC to the transaction contemplated in this Agreement ("FCC Consent") and (b) the FCC action granting its consent becoming a "Final Order," IN ESSENCE, an action unappealable by virtue of (x) the expiration of the period within which a timely request for appeal, review or reconsideration could be filed and (y) the expiration of the period within which the FCC or a Court could review the action on its own motion, such periods having expired without the filing of any request for appeal, review or reconsideration and without the review of the action on the FCC's or Court's own motion. -12- 6.2 FCC APPLICATIONS. Within 10 days after the execution of this Agreement or such earlier time as shall be agreed to by all of the parties hereto, Chancellor and ARS shall file the applications with the FCC for FCC Consent ("FCC Applications") to assign the California Station License to Chancellor and the Florida Stations Licenses to ARS. Chancellor and ARS shall prosecute the FCC Applications with all reasonable diligence and otherwise use their best efforts to obtain the FCC Consents as expeditiously as practicable (but neither Chancellor nor ARS shall have any obligation to satisfy complainants or the FCC by taking any steps which would have a material adverse effect upon Chancellor or ARS, or upon any of their Affiliates). If the FCC Consents imposes any condition on Chancellor or ARS such party shall use its reasonable efforts to comply with such condition; provided, however, that neither Chancellor nor ARS shall be required hereunder to comply with any condition that would have a material adverse effect upon it or any of its Affiliates. If reconsideration of judicial review is sought with respect to the FCC Consents, the party affected shall vigorously oppose such efforts for reconsideration or judicial review; provided, however, that nothing herein shall be construed to limit either party's right to terminate this Agreement pursuant to Section 20 hereof. 6.3 FILINGS. As promptly as practicable after the execution of this Agreement, Chancellor and ARS shall use their reasonable efforts to obtain, and to cooperate with each other in obtaining, all authorizations, consents, orders and approvals of any governmental authority that may be or become necessary in connection with the consummation of the transactions contemplated by this Agreement, and to take all reasonable actions to avoid the entry of any order or decree by any governmental authority prohibiting the consummation of the transactions contemplated hereby. These efforts shall include, without limitation, filing any reports or notifications that may be required to be filed by Chancellor and ARS under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") with the Federal Trade Commission and the Antitrust Division of the Department of Justice. Each party shall furnish to one another all such information in its possession as may be necessary for the completion of the reports or notifications to be filed by the other. SECTION 7. LOCAL MARKETING AGREEMENTS 7.1 CALIFORNIA LOCAL MARKETING AGREEMENT. On or before August 1, 1996, the parties shall enter into a California Local Marketing Agreement (the "California Station LMA") substantially in the form of the LMA appended hereto as Exhibit 7.1. 7.2 FLORIDA LOCAL MARKETING AGREEMENT. On or before August 1, 1996, the parties shall enter into a Florida Local Marketing Agreement (the "Florida Stations LMA") substantially in the form of the LMA appended hereto as Exhibit 7.2. To the extent that Omni is required to be a party to the Florida Stations LMA to effectuate its purposes, Chancellor shall use its commercially reasonable efforts to obtain Omni's execution and performance of the Florida Stations LMA and to assign or provide on terms reasonably satisfactory to ARS, as soon as practicable after the execution of the Agreement, but no sooner than August 1, 1996, the rights of -13- Chancellor under the Local Marketing Agreement, if executed, currently being negotiated by Chancellor and Omni with respect to the Florida Stations. ARS shall not have any claim or right, including, without limitation, any right to terminate this Agreement or any claim for damages, to the extent that ARS's operation of the Florida Stations under or in accordance with the Florida Stations LMA (i) causes any representation or warranty of Chancellor to be rendered inaccurate or (ii) conflicts with any covenant to be complied with by Chancellor on or prior to the Closing Date. SECTION 8. COLLECTION OF ACCOUNTS RECEIVABLE 8.1 CALIFORNIA ACCOUNTS RECEIVABLE. (a) Within five (5) days after the commencement of the California Station LMA, ARS shall deliver to Chancellor a full and detailed list of the accounts receivable relating to the California Station and its operations prior to the Commencement Date ("California Accounts Receivable"), designating with respect to each account receivable any portion thereof attributable to services to be rendered by Chancellor after the Commencement Date. The California Accounts Receivable shall not be purchased by Chancellor and Chancellor agrees, however, that for a period of 90 days following the Commencement Date (the "Collection Period"), it shall act as ARS's agent for purposes of the collection of the California Accounts Receivable and shall use reasonable efforts to collect the California Accounts Receivable for the benefit of the ARS. Chancellor shall remit to the ARS all amounts collected by the Chancellor for the ARS's benefit fifteen days after the conclusion of the 90 day collection period. The collection responsibilities imposed on Chancellor hereunder shall not require the institution of suit or referral to a collection or similar agency, or the institution of any proceeding against an account debtor under any bankruptcy, insolvency, or similar law affecting the rights of creditors generally. Any of the California Accounts Receivable which shall remain uncollected by Chancellor at the conclusion of the Collection Period shall remain ARS's assets and Chancellor's obligations under this Section 8.1 shall terminate. Chancellor shall have no liability to ARS for the uncollectability of any of the California Accounts Receivable. (b) Chancellor agrees that it may not settle, discount payment of, extend the terms of, or otherwise compromise any of the California Accounts Receivable, except as consented to in writing by ARS. If at the Commencement Date or at any time during the Collection Period an account debtor is in bankruptcy, reorganization or similar proceeding, ARS will assume the full collection responsibility as to such account and such account will no longer be deemed a California Account Receivable for purposes of this Agreement. Following the Commencement Date, Chancellor will give prompt notice to ARS of any such bankruptcy, reorganization or other proceeding affecting any debtor of the California Accounts Receivable after receiving notice thereof. -14- (c) During the Collection Period, any and all amounts paid to Chancellor by an account debtor with respect to an account receivable shall be applied first to payment of the California Account Receivable, unless the account debtor disputes such California Account Receivable, appropriately documents such dispute in writing, and prompt notice (including all written documentation) of such dispute is given by Chancellor to ARS. After the end of the Collection Period, Chancellor shall forward to ARS all payments received that are reasonably identifiable (by invoice number, date of service or other unambiguous reference) with the California Accounts Receivable, within twenty (20) days of receipt. (d) Chancellor does not guarantee the collection of the whole or any part of the California Accounts Receivable. 8.2 FLORIDA ACCOUNTS RECEIVABLE. (a) Within five (5) days of the Commencement of the Florida Stations LMA, Chancellor shall deliver to ARS a full and detailed list of the accounts receivable relating to the Florida Stations and its operations prior to the Commencement Date ("Florida Accounts Receivable"), designating with respect to each account receivable any portion thereof attributable to services to be rendered by ARS after the Commencement Date. The Florida Accounts Receivable shall not be purchased by ARS and ARS agrees, however, that for a period of 90 days following the Commencement Date (the "Collection Period"), it shall act as Chancellor's agent for purposes of the collection of the Florida Accounts Receivable and shall use reasonable efforts to collect the Florida Accounts Receivable for the benefit of the Chancellor. ARS shall remit to Chancellor all amounts collected by ARS for Chancellor's benefit fifteen days after the conclusion of the 90 day Collection Period. The collection responsibilities imposed on ARS hereunder shall not require the institution of suit or referral to a collection or similar agency, or the institution of any proceeding against an account debtor under any bankruptcy, insolvency, or similar law affecting the rights of creditors generally. Any of the Florida Accounts Receivable which shall remain uncollected by ARS at the conclusion of the Collection Period shall remain Chancellor's assets and ARS's obligations under this Section 8.2 shall terminate. ARS shall have no liability to Chancellor for the uncollectability of any of the Florida Accounts Receivable. (b) ARS agrees that it may not settle, discount payment of, extend the terms of, or otherwise compromise any of the Florida Accounts Receivable, except as consented to in writing by Chancellor. If at the Commencement Date or at any time during the Collection Period an account debtor is in bankruptcy, reorganization or similar proceeding, Chancellor will assume the full collection responsibility as to such account and such account will no longer be deemed a Florida Account Receivable for purposes of this Agreement. Following the Commencement Date, ARS will give prompt notice to Chancellor of any such bankruptcy, reorganization or other proceeding affecting any debtor of the Florida Accounts Receivable after receiving notice thereof. -15- (c) During the Collection Period, any and all amounts paid to ARS by an account debtor with respect to an account receivable shall be applied first payment to the Florida Accounts Receivable, unless the account debtor disputes such Florida Account Receivable, appropriately documents such dispute in writing, and prompt notice (including all written documentation) of such dispute is given by ARS to Chancellor. After the end of the Collection Period, ARS shall forward to Chancellor all payments received that are reasonably identifiable (by invoice number, date of service or other unambiguous reference) with the Florida Accounts Receivable, within twenty (20) days. (d) ARS does not guarantee the collection of the whole or any part of the Florida Accounts Receivable. SECTION 9. THIRD PARTY CONSENTS 9.1 CALIFORNIA CONSENTS. ARS shall use its reasonable best efforts to obtain all third party consents necessary for the conveyance of the California Assets to Chancellor without the imposition of any conditions that would be adverse to Chancellor. 9.2 FLORIDA CONSENTS. Chancellor shall use its reasonable best efforts to obtain all third party consents necessary for the conveyance of the Florida Assets to ARS without the imposition of any conditions that would be adverse to ARS. 9.3 FAILURE TO OBTAIN CONSENTS. (a) If Chancellor fails to obtain any of the Consents referenced in Section 9.2, Chancellor shall use its reasonable best efforts (i) to provide ARS the financial and business benefits ARS would have enjoyed had the consent been given and (ii), upon the request of ARS, to enforce in its name for the account of ARS any rights that would otherwise have been available to ARS had the consent been granted. (b) If ARS fails to obtain any of the Consents referenced in Section 9.2, ARS shall use its reasonable best efforts (i) to provide Chancellor the financial and business benefits Chancellor would have enjoyed had the consent been given and (ii), upon the request of Chancellor, to enforce in its name for the account of Chancellor any rights that would otherwise have been available to Chancellor had the consent been granted. SECTION 10. REPRESENTATIONS AND WARRANTIES OF CHANCELLOR 10.1 ORGANIZATION AND STANDING. Chancellor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is qualified to conduct business in the States of Florida and California. -16- 10.2 AUTHORIZATION AND BINDING OBLIGATION. Chancellor has all necessary corporate power and authority to enter into and perform this Agreement and the transactions contemplated hereby. Chancellor's execution, delivery and performance of this Agreement and the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on behalf of Chancellor and this Agreement constitutes a valid and binding obligation of Chancellor, enforceable in accordance with its terms. 10.3 QUALIFICATION. To Chancellor's knowledge, there is no fact, allegation, condition, or circumstance that could reasonably be expected to prevent the prompt grant of the FCC Consent. Chancellor knows of no fact that would, under the Communications Act of 1934, as amended, or the rules, regulations and policies of the FCC, disqualify Chancellor from becoming the licensee of either the Florida Stations or the California Station. There are no proceedings, complaints, notices of forfeiture, claims, or investigations pending or, to the knowledge of Chancellor threatened against any or in respect of any of the broadcast stations licensed to Chancellor or its affiliates that would materially impair the qualifications of Chancellor to become a licensee of the Florida Stations or the California Station or that would delay the FCC's processing of the FCC Applications. 10.4 ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS. Except as set forth in Schedule 10.4 hereof, the execution, delivery and performance of this Agreement by Chancellor: (a) do not violate or conflict with any of the terms, conditions or provisions of the Certificate of Incorporation or By-Laws of Chancellor; (b) do not require the consent of any third party not affiliated with Chancellor; (c) will not violate any applicable law, judgment, order, injunction, decree, rule, regulation or ruling of any governmental authority to which Chancellor is a party; and (d) will not either alone or with the giving of notice or the passage of time, violate the terms, conditions or provisions of, or constitute a default under, any agreement, instrument, license or permit to which Chancellor is now subject. 10.5 LITIGATION: COMPLIANCE WITH LAW. Except as disclosed in Schedule 10.5, there is no litigation, administrative action, arbitration or other proceeding, or petition, complaint or investigation before any court or governmental body, pending against Chancellor that would adversely affect Chancellor's ability to perform its obligations pursuant to this Agreement or the agreements to be executed by Chancellor in connection herewith. Chancellor has committed no violation of any applicable law, regulation or ordinance or any other requirement of any governmental body or court which would have a material adverse effect on Chancellor or its ability to perform their respective obligations pursuant to this Agreement or the agreements to be executed in connection herewith. 10.6 BROKER/FINDER FEES. Star Media Group is the sole and exclusive broker in this transaction. Chancellor has not incurred any obligation or liability, contingent or otherwise, for brokerage or finders fees or agents' commissions or other like payment in connection with this Agreement or the transactions contemplated hereby for which ARS has any liability. -17- Chancellor is solely responsible for Star Media Group's fee. 10.7 REPRESENTATIONS AND WARRANTIES AS TO THE FLORIDA STATIONS. Chancellor previously has delivered to ARS true, correct and complete copies of the executed Florida Agreement together will all disclosure schedules, exhibits, and annexes thereto. With respect to the Florida Stations, Chancellor to the best of its knowledge, hereby makes (as of the date or dates on which those representations and warranties were made to Chancellor by Omni) to ARS each and every of the representations and warranties of Omni each of which is incorporated herein by reference as though contained herein. Chancellor makes no additional representations or warranties with respect to the Florida Stations. SECTION 11. REPRESENTATION AND WARRANTIES OF ARS 11.1 ORGANIZATION AND STANDING. ARS is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is qualified to conduct business in the States of Florida and California. 11.2 AUTHORIZATION AND BINDING OBLIGATION. ARS has all necessary corporate power and authority to enter into and perform this Agreement and the transactions contemplated hereby. ARS's execution, delivery and performance of this Agreement and the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on behalf of ARS and this Agreement constitutes a valid and binding obligation of ARS, enforceable in accordance with its terms. 11.3 QUALIFICATION. To ARS's knowledge, there is no fact, allegation, condition, or circumstance that could reasonably be expected to prevent the prompt grant of the FCC Consent. ARS knows of no fact that would, under the Communications act of 1934, as amended, or the rules, regulations and policies of the FCC, disqualify ARS from becoming the licensee of the Florida Stations. There are no proceedings, complaints, notices of forfeiture, claims, or investigations pending or, to the knowledge of ARS threatened against any or in respect of any of the broadcast stations licensed to ARS or its affiliates that would materially impair the qualifications of ARS to become a licensee of the Florida Stations or remain the licensee of the California Station or that would delay the FCC's processing of the FCC Applications. 11.4 ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS. Except as set forth in Schedule 11.4 hereof, the execution, delivery and performance of this Agreement by ARS: (a) do not violate or conflict with any of the terms, conditions or provisions of the Certificate of Incorporation or By-Laws of ARS; (b) do not require the consent of any third party not affiliated with ARS; (c) will not violate any applicable law, judgment, order, injunction, decree, rule, regulation or ruling of any governmental authority to which ARS is a party; and (d) will not either alone or with the giving of notice or the passage of time, violate the terms, conditions or provisions of, or constitute a default under, any agreement, instrument, license or -18- permit to which ARS is now subject. 11.5 LITIGATION: COMPLIANCE WITH LAW. Except as disclosed in Schedule 11.5, there is no litigation, administrative action, arbitration or other proceeding, or petition, complaint or investigation before any court or governmental body, pending against ARS that would adversely affect ARS's ability to perform its obligations pursuant to this Agreement or the agreements to be executed by ARS in connection herewith. ARS has committed no violation of any applicable law, regulation or ordinance or any other requirement of any governmental body or court which would have a material adverse effect on ARS or its ability to perform its obligations pursuant to this Agreement or the agreements to be executed in connection herewith. 11.6 BROKER/FINDER FEES. Star Media Group is the sole and exclusive broker in this transaction. ARS has not incurred any obligation or liability, contingent or otherwise, for brokerage or finders fees or agents' commissions or other like payment in connection with this Agreement or the transactions contemplated hereby for which Chancellor has any liability. Chancellor is solely responsible for Star Media Group's fee. 11.7 REPRESENTATIONS AND WARRANTIES AS TO THE CALIFORNIA STATION. ARS previously has delivered to Chancellor true, correct and complete copies of the executed California Agreement together will all disclosure schedules, exhibits, and annexes thereto. With respect to the California Station, ARS to the best of its knowledge, hereby makes to Chancellor each and every of the representations and warranties contained in the California Agreement, each of which is incorporated herein by reference as though contained herein. In addition, ARS makes each and every of the representations and warranties contained in the California Agreement to Chancellor for the period after the FBC Closing when ARS acquired the California Station and the Closing Date hereunder, subject to the California Station LMA. SECTION 12. COVENANTS OF CHANCELLOR 12.1 CONDUCT OF STATION: 12.1.1 Chancellor covenants and agrees with ARS that between the date hereof and the Florida Stations LMA Commencement Date (except as otherwise noted below), Chancellor with respect to the Florida Stations (to the extent that it is programming the Florida Stations pursuant to a local marketing agreement with Omni and is authorized under that said local marketing agreement to do so) shall: (i) use commercially reasonable efforts to maintain the Florida Stations present business organization, keep available the services of the Florida Stations' employees and independent contractors, preserve the Florida Stations' relationships with the Florida Stations' customers and others having business relationships with the Florida Stations, and refrain from materially and adversely changing any of the Florida Stations' -19- business policies including but not limited to advertising (including substantially the same amount of cash expenditure), marketing, pricing, purchasing, personnel, sales, and budget policies); (ii) maintain the Florida Stations' books of account and records in the usual and ordinary manner and in accordance with generally accepted accounting principles; (iii) operate the Florida Stations in the usual and ordinary course of business in accordance with past practice and conduct the Florida Stations' business in all material respects in compliance with the terms of the Florida Licenses and all applicable laws, rules, and regulations, including, without limitation, the applicable rules and regulations of the FCC through the Closing Date; (iv) use, repair, and, if necessary, replace any of WEAT (AM)/(FM)'s, and WOLL (FM)'s studios and the Florida Stations' transmission assets in a reasonable manner consistent with historical practice and maintain its assets in substantially their current condition, ordinary wear and tear excepted; (v) maintain appropriate insurance for the Florida Stations through the Closing Date; (vi) not incur any debts or obligations to be performed by ARS pursuant to the Florida Agreement that exceeds Ten-thousand Dollars ($10,000) individually or Twenty-five Thousand Dollars ($25,000) in the aggregate through the Closing Date; (vii) not lease, mortgage, pledge, or subject to a lien, claim, or encumbrance (other than Permitted Liens ) any of the Florida Assets or sell or transfer any of the Florida Assets without replacing such Florida Assets with an asset of substantially the same value and utility; (viii) without the prior consent of ARS, which consent shall not be unreasonably withheld or delayed, (x) not modify or extend any Florida Stations' Contracts or (y) enter into any new Florida Stations' Contract the payments under which exceeds Ten-thousand Dollars ($10,000) individually or Twenty-five Thousand Dollars ($25,000) in the aggregate through the Commencement Date; (ix) not make or grant any general wage or salary increase or generally materially modify the Florida Stations' employees' terms and conditions of employment; (x) not make any change in the Florida Stations' accounting principles, methods, or practices followed by it or depreciation or amortization policies or rates; -20- (xi) not make any loans or make any dividends or distributions other than of Excluded Assets of the Florida Stations; (xii) other than in the ordinary course of business, not cancel or compromise any debt or claim, or waive or release any right, of material value; (xiii) enforce, in its own name and for the benefit of ARS, all representations, warranties and covenants of Omni under the Florida Agreement insofar as such representations, warranties and covenants affect or relate to the Florida Assets. The quantity, identity, character, quality of and title to the Florida Assets conveyed by Chancellor to ARS hereunder shall be substantially the same as the quantity, identity, character and quality of and title to the assets of the Florida Stations received by Chancellor from Omni pursuant to the Florida Agreement. 12.1.2 For purposes of compliance with Section 12.1, any violation of the above-referenced covenants resulting in liabilities to ARS, in the aggregate, less than the Indemnification Basket as defined in Section 19.3 below, shall not be deemed material. Such liabilities shall nevertheless constitute Damages for purposes of the indemnification agreement contained in the Section 19 hereof. 12.2 Chancellor shall give or cause the Florida Stations to (i) give ARS and ARS's counsel, accountants, engineers and other representatives, including environmental consultants, reasonable access during normal business hours to all of Chancellor's properties, books, Contracts, Trade Agreements, reports and records including financial information and tax returns relating to the Florida Stations, and to all real estate, buildings and equipment relating to the Florida Stations, in order that ARS may have full opportunity to make such investigation at the sole expense of ARS, including but not limited to, environmental assessments, as it desires of the affairs of the Florida Stations and (ii) furnish ARS with information, and copies of all documents and agreements including but not limited to financial and operating data and other information concerning the financial condition, results of operations and business of the Florida Stations, that ARS may reasonably request. The rights of ARS under this Section shall not be exercised in such a manner as to interfere unreasonably with the business of the Florida Stations. 12.3 NO INCONSISTENT ACTION. Chancellor shall not take any action that is materially inconsistent with its obligations under this Agreement. 12.4 UPDATING OF SCHEDULES. From time to time prior to the Closing, Chancellor will supplement or amend the Schedules delivered in connection herewith with respect to any matter which exists or occurs after the date of this Agreement and which, if existing or occurring at or prior to the date of this Agreement, would have been required to be set forth or described in such Schedules or which is necessary to correct any information in such Schedules which has been rendered inaccurate thereby. No matter so disclosed shall affect the -21- requirements of Section 16.1, but if the Closing hereunder shall occur, no said matter disclosed pursuant to Section 12.3 shall have the basis for any claims for indemnification hereunder. 12.5 ENFORCEMENT OF AGREEMENTS. Chancellor shall use its reasonable best efforts to perform and carry out all their respective obligations under, and, if necessary, Chancellor shall seek the specific performance of the transactions contemplated by the Florida Agreement. Chancellor shall use its reasonable best efforts to perform and carry out, and to cause the other parties thereto to perform and carry out, all their respective obligations under the LMA's relating to the Florida Stations. 12.6 FCC REPORTS. From the Time of Closing on the Florida Agreement until the Closing Date hereunder, Chancellor shall file on a current basis until the Closing Date all material reports and documents required to be filed with the FCC with respect to the Florida Stations' Licenses. Copies of each such report and document filed between the date hereof and the Closing Date shall be furnished to ARS promptly after its filing. 12.7 NOTIFICATION. Chancellor shall promptly notify ARS in writing of (i) any litigation, arbitration or administrative proceeding pending or, to its knowledge, threatened against Chancellor which challenges the transactions contemplated hereby or (ii) the failure of Chancellor, or any employee or agent of Chancellor to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it hereunder and (iii) the occurrence of any event that would entitle ARS to terminate this Agreement pursuant to Section 20. No matter so disclosed shall affect the requirements of Section 16.1, but if the Closing hereunder shall occur, no said matter disclosed pursuant to Section 12.3 shall have the basis for any claims for indemnification hereunder. 12.8 POST-CLOSING ACCESS. Chancellor, for a period of five (5) years following the Closing Date, shall make available during normal business hours for audit and inspection by ARS and its representatives, for any reasonable purpose and upon reasonable notice, all records, files, documents and correspondence transferred to it hereunder relating to the pre-closing period. Chancellor shall at no time dispose of or destroy any such records, files, documents and correspondence without giving thirty (30) days prior notice to ARS to permit ARS, at its expense, to examine, duplicate or take possession of and title to such records, files, documents and correspondence. All information, records, files, documents and correspondence made available or disclosed to ARS under this Section 12.7 shall be kept confidential by ARS. 12.9 Chancellor will use commercially reasonable efforts to obtain all necessary consents, authorizations, or approvals, in each case, required for the consummation of the transactions contemplated by this Agreement. -22- SECTION 13. COVENANTS OF ARS 13.1 CONDUCT OF STATION: 13.1.1 ARS covenants and agrees with Chancellor that between the date hereof and the California Station LMA Commencement Date (except as otherwise noted below), ARS with respect to the California Station shall: (i) use commercially reasonable efforts to maintain the California Station's present business organization, keep available the services of the California Station's employees and independent contractors, preserve the California Station's relationships with the California Station's customers and others having business relationships with the California Station, and refrain from materially and adversely changing any of the California Station's business policies including but not limited to advertising (including substantially the same amount of cash expenditure), marketing, pricing, purchasing, personnel, sales, and budget policies); (ii) maintain the California Station's books of account and records in the usual and ordinary manner and in accordance with generally accepted accounting principles; (iii) operate in the usual and ordinary course of business in accordance with past practice and conduct the California Station's business in all material respects in compliance with the terms of the California Licenses and all applicable laws, rules, and regulations, including, without limitation, the applicable rules and regulations of the FCC through the Closing Date; (iv) use, repair, and, if necessary, replace any California Station studio and transmission assets in a reasonable manner consistent with historical practice and maintain its assets in substantially their current condition, ordinary wear and tear excepted; (v) maintain appropriate insurance for the California Station through the Closing Date; (vi) not incur any debts or obligations to be performed by Chancellor pursuant to the California Agreement that exceeds Five Thousand Dollars ($5,000) individually or Ten Thousand Dollars ($10,000) in the aggregate through the Closing Date; (vii) not lease, mortgage, pledge, or subject to a lien, claim, or encumbrance (other than Permitted Liens ) any of the California Assets or sell or transfer any of the California Assets without replacing such California Assets with an asset of substantially the same value and utility; -23- (viii) without the prior consent of Chancellor, which consent shall not be unreasonably withheld or delayed, (x) not modify or extend any California Station Contracts or (y) enter into any new California Station Contract the payments under which exceeds Five Thousand Dollars ($5,000) individually or Ten Thousand Dollars ($10,000) in the aggregate through the Commencement Date; (ix) not make or grant any general wage or salary increase or generally materially modify the California Station's employees' terms and conditions of employment; (x) not make any change in the California Station's accounting principles, methods, or practices followed by it or depreciation or amortization policies or rates; (xi) not make any loans or make any dividends or distributions other than of Excluded Assets of the California Station; (xii) other than in the ordinary course of business, not cancel or compromise any debt or claim, or waive or release any right, of material value; (xiii) ARS shall enforce, in its own name and for the benefit of Chancellor, all representations, warranties and covenants of FBC under the California Agreement insofar as such representations, warranties and covenants affect or relate to the California Assets. The quantity, identity, character, quality of and title to the California Assets conveyed by ARS to Chancellor hereunder shall be substantially the same as the quantity, identity, character and quality of and title to the assets of the California Station received by ARS from FBC pursuant to the California Agreement. 13.1.2 For purposes of compliance with Section 13.1, any violation of the above-referenced covenants resulting in liabilities to Chancellor, in the aggregate, less than the Indemnification Basket as defined in Section 19.3 below, shall not be deemed material. Such liabilities shall nevertheless constitute Damages for purposes of the indemnification agreement contained in Section 19 hereof. 13.2 ARS shall give or cause the California Station to (i) give Chancellor and Chancellor's counsel, accountants, engineers and other representatives, including environmental consultants, reasonable access during normal business hours to all of ARS's properties, books, Contracts, Trade Agreements, reports and records including financial information and tax returns relating to the California Station, and to all real estate, buildings and equipment relating to the California Station, in order that Chancellor may have full opportunity to make such investigation, including but not limited to, environmental assessments, as it desires of the affairs of the California Station and (ii) furnish Chancellor with information, and copies of all documents and agreements including but not limited to financial and operating data and other information concerning the financial condition, results of operations and business of the California Station, -24- that Chancellor may reasonably request. The rights of Chancellor under this Section shall not be exercised in such a manner as to interfere unreasonably with the business of the California Station. 13.3 NO INCONSISTENT ACTION. ARS shall not take any action that is materially inconsistent with its obligations under this Agreement. 13.4 UPDATING OF SCHEDULES. From time to time prior to the Closing, ARS will supplement or amend the Schedules delivered in connection herewith with respect to any matter which exists or occurs after the date of this Agreement and which, if existing or occurring at or prior to the date of this Agreement, would have been required to be set forth or described in such Schedules or which is necessary to correct any information in such Schedules which has been rendered inaccurate thereby. No matter so disclosed shall affect the requirements of Section 16.1, but if the Closing hereunder shall occur, no said matter disclosed pursuant to Section 12.3 shall have the basis for any claims for indemnification hereunder. 13.5 ENFORCEMENT OF AGREEMENTS. ARS shall use its reasonable best efforts to perform and carry out all their respective obligations under, the FBC Agreement. ARS shall use its reasonable best efforts to perform and carry out, and to cause the other parties thereto to perform and carry out, all their respective obligations under the LMA's relating to the California Station. 13.6 FCC REPORTS. From the Time of Closing on the California Station until the Closing Date hereunder, ARS shall file on a current basis until the Closing Date all material reports and documents required to be filed with the FCC with respect to the California Station Licenses. Copies of each such report and document filed between the date hereof and the Closing Date shall be furnished to Chancellor promptly after its filing. 13.7 NOTIFICATION. ARS shall promptly notify Chancellor in writing of (i) any litigation, arbitration or administrative proceeding pending or, to its knowledge, threatened against ARS which challenges the transactions contemplated hereby or (ii) the failure of ARS, or any employee or agent of ARS to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it hereunder and (iii) the occurrence of any event that would entitle Chancellor to terminate this Agreement pursuant to Section 20. No matter so disclosed shall affect the requirements of Section 16.1, but if the Closing hereunder shall occur, no said matter disclosed pursuant to Section 12.3 shall have the basis for any claims for indemnification hereunder. 13.8 POST-CLOSING ACCESS. ARS, for a period of five (5) years following the Closing Date, shall make available during normal business hours for audit and inspection by Chancellor and its representatives, for any reasonable purpose and upon reasonable notice, all records, files, documents and correspondence transferred to it hereunder relating to the pre- -25- closing period. ARS shall at no time dispose of or destroy any such records, files, documents and correspondence without giving thirty (30) days prior notice to Chancellor to permit Chancellor, at its expense, to examine, duplicate or take possession of and title to such records, files, documents and correspondence. All information, records, files, documents and correspondence made available or disclosed under this Section 13.8 shall be kept confidential. 13.9 ARS will use commercially reasonable efforts to obtain all necessary consents, authorizations, or approvals, in each case, required for the consummation of the transactions contemplated by this Agreement. SECTION 14. JOINT COVENANTS Chancellor and ARS covenant and agree that they shall act in accordance with the following: 14.1 CONFIDENTIALITY. Each of Chancellor and ARS shall each keep confidential all information obtained by it with respect to the other parties hereto in connection with this Agreement and the negotiations preceding this Agreement, and will use such information solely in connection with the transactions contemplated by this Agreement, and if the transactions contemplated hereby are not consummated for any reason, each shall return to the other party hereto, without retaining a copy thereof, any schedules, documents or other written information obtained from such other party in connection with this Agreement and the transactions contemplated hereby except to the extent required or useful in connection with any claim made with respect to the transactions contemplated by this Agreement or the negotiation thereof. Notwithstanding the foregoing, no party shall be required to keep confidential or return any information which (i) is known or available through other lawful sources, not bound by a confidentiality agreement with the disclosing party, or (ii) is or becomes publicly known through no fault of the receiving party or its agents, or (iii) is required to be disclosed pursuant to an order or request of a judicial or government authority (provided the non-disclosing party is given reasonable prior notice such that it may seek, at its expense, confidential treatment of the information to be disclosed), (iv) is developed by the receiving party independently of the disclosure by the disclosing party, (v) is required to be disclosed under applicable law or rule, as determined by counsel for the receiving party or (vi) is required to be disclosed in connection with any sale, in whole or in party of the assets, stock or business of Chancellor or Chancellor Broadcasting Company or ARS, respectively, provided the recipient of said information has executed a confidentiality agreement for such a transaction. 14.2 COOPERATION. Chancellor and ARS shall cooperate fully with one another in taking any actions, including actions to obtain the required consent of any governmental instrumentality or any third party necessary or helpful to accomplish the transactions contemplated by this Agreement; provided, however, that no party shall be required to take any action which would have a material adverse effect upon it. -26- 14.3 CONTROL OF STATIONS. Prior to Closing, Chancellor shall not, directly or indirectly, control or direct the operations of the California Station, and ARS shall not, directly or indirectly, control or direct the operations of the Florida Stations. Such operations, including complete control over the Florida Stations' or the California Station's programming, employees and policies, shall be the sole responsibility of current licensees. 14.4 BULK SALES LAWS. Chancellor hereby waives compliance by ARS and ARS hereby waives compliance by Chancellor with the provisions of the "bulk sales" or similar laws of any state. ARS agrees to indemnify Chancellor and Chancellor agrees to indemnify ARS and each party agrees to hold the other harmless from any and all loss, cost, damage and expense (including but not limited to, reasonable attorney's fees) sustained by one party as a result of any failure of the other party to comply with any "bulk sales" or similar laws. 14.5 PUBLIC ANNOUNCEMENTS. Neither Chancellor nor ARS shall issue any press release or make any disclosure with respect to the transaction contemplated by this Agreement without the prior written approval of the other party, except as may be required by applicable law or by obligations pursuant to any listing agreement with any securities exchange or any stock exchange regulations. 14.6 HART-SCOTT-RODINO. ARS and Chancellor shall submit to the United States Department of Justice and the United States Federal Trade Commission not later than 15 business days after the date of this Agreement all of the forms and information applicable to this transaction required under the Hart-Scott- Rodino Act (the "HSR Act") and will use commercially reasonable efforts to respond promptly to any request by them for additional information. 14.7 EMPLOYEE MATTERS. Each party hereby consents to the other making such offers of employment relating to the Florida Stations and the California Station subject to the effectiveness of the LMAs between the parties of even date herewith. ARS shall be responsible for all obligations or liabilities to those employees not offered employment by Chancellor, and Chancellor shall have no obligations with respect to the employees (herein referred to as "Retained Employees"). Chancellor shall be responsible for all obligations or liabilities to those employees not offered employment by ARS, and ARS shall have no obligations with respect to the Retained Employees. SECTION 15. CONDITIONS OF CLOSING BY CHANCELLOR The obligations of Chancellor hereunder are, at its option, subject to satisfaction, at or prior to the Closing Date, of all of the following conditions: 15.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and -27- warranties of ARS made in this Agreement or in any Exhibit, Schedule or document delivered pursuant hereto, shall be true and complete in all material respects as of the date hereof and on and as of the Closing Date as if made on and as of that date, except for changes expressly permitted or contemplated by the terms of this Agreement and except those given as of a specified date. 15.2 COMPLIANCE WITH AGREEMENT. All of the terms, covenants and conditions to be complied with and performed by ARS on or prior to the Closing Date shall have been complied with or performed in all material respects. 15.3 THIRD PARTY CONSENTS AND APPROVALS; ESTOPPEL CERTIFICATES. ARS has obtained all material third-party consents and approvals, if any, required for the transfer or continuance, as the case may be, of the Contracts on Schedule 2.4.4 (and contracts that would have been on Schedule 2.4.4 had they been in existence on the date of this Agreement) and, if requested by Chancellor prior to 45 days of the date of the Closing, such third parties have provided estoppel certificates, non-disturbance agreements, and/or written clarifications of the rights of Chancellor thereunder, all in form and substance reasonably satisfactory to Chancellor. 15.4 CLOSING CERTIFICATES. Chancellor shall have received a certificate, dated as of the Closing Date, from ARS, executed by an appropriate officer of ARS to the effect of Sections 15.1 and 15.2. 15.5 GOVERNMENTAL CONSENTS. (a) The FCC Consents shall have been issued by the FCC without any conditions that would otherwise permit Buyers to terminate this Agreement pursuant to Section 20.1(e), below, and each such FCC consent shall have become a Final Order (as defined in Section 6.1). (b) All applicable notification and waiting period requirements under the HSR Act shall have been satisfied. (c) All other material authorizations, consents, approvals, and clearances of federal, state, or local Governmental Entities required to permit the consummation of the transactions contemplated by this Agreement shall have been obtained. 15.6 ADVERSE PROCEEDINGS. No injunction, order, decree or judgment of any court, agency or other Governmental Entities shall have been rendered against Chancellor or ARS which would render it unlawful, as of the Closing Date, to effect the transactions contemplated by this Agreement in accordance with its terms. 15.7 CLOSING DOCUMENTS. ARS shall have delivered or caused to be delivered to Chancellor, on the Closing Date, all deeds, bills of sale, endorsements, assignments and other -28- instruments of conveyance and transfer consistent with the terms hereof and otherwise reasonably satisfactory in form and substance to Chancellor, effecting the sale, transfer, assignment and conveyance of the California Station's Assets to Chancellor. SECTION 16. CONDITIONS OF CLOSING BY ARS The obligations of ARS hereunder are, at its option, subject to satisfaction, at or prior to the Closing Date, of all of the following conditions: 16.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and warranties of Chancellor made in this Agreement or in any Exhibit, Schedule or document delivered pursuant hereto, shall be true and complete in all material respects as of the date hereof and on and as of the Closing Date as if made on and as of that date, except for changes expressly permitted or contemplated by the terms of this Agreement and except those given as of a specified date. 16.2 COMPLIANCE WITH AGREEMENT. All the terms, covenants, and conditions to be complied with and performed by Chancellor on or prior to the Closing Date shall have been complied with or performed in all material respects. 16.3 THIRD PARTY CONSENTS AND APPROVALS; ESTOPPEL CERTIFICATES. Chancellor has obtained all material third-party consents and approvals, if any, required for the transfer or continuance, as the case may be, of the , Contracts on Schedule 2.2.4 (and contracts that would have been on Schedule 2.2.4 had they been in existence on the date of this Agreement) and, if requested by ARS prior to 45 days of the date of the Closing, such third parties have provided estoppel certificates, non-disturbance agreements, and/or written clarifications of the rights of ARS thereunder, all in form and substance reasonably satisfactory to ARS. 16.4 CLOSING CERTIFICATES. ARS shall have received a certificate, dated as of the Closing Date, from Chancellor, executed by an appropriate officer of Chancellor to the effect of Sections 16.1 and 16.2. 16.5 GOVERNMENTAL APPROVAL. (a) The FCC Consents shall have been issued by the FCC and each shall have become a Final Order (as defined in Section 6.1). (b) All applicable notification and waiting period requirements under the HSR Act shall have been satisfied. -29- (c) All other material authorizations, consents, approvals, and clearances of federal, state or local Governmental Entities required to permit the consummation of the transactions contemplated by this Agreement shall have been obtained. 16.6 ADVERSE PROCEEDINGS. No injunction, decree or judgment of any court, agency or other governmental entities shall have been rendered against Chancellor or ARS which would render it unlawful, as of the Closing date, to effect the transactions contemplated by this Agreement in accordance with its terms. 16.7 CLOSING DOCUMENTS. Chancellor shall have delivered or caused to be delivered to ARS, on the Closing Date, all deeds, bills of sale, endorsements, assignments and other instruments of conveyance and transfer consistent with the terms hereof and otherwise reasonably satisfactory in form and substance to ARS, effecting the sale, transfer, assignment and conveyance of the Florida Station's Assets to ARS. SECTION 17. CLOSING 17.1 TIME AND PLACE. A closing on the exchange and sale of the California assets and the Florida Assets shall take place at 12655 North Central Expressway, Suite 405, Dallas, Texas on the date agreed on by the parties, said date to be within ten days after the latter of (x) all necessary FCC action(s) approving the transactions contemplated herein become Final Orders and (y) the expiration or termination of the waiting period under the H.S.R. Act (the "Closing Date"). 17.2 DELIVERIES BY CHANCELLOR. At closing, Chancellor shall deliver to ARS documents conveying title to the Florida Assets to ARS in substantially the same manner as Chancellor received title to the Florida Assets from Omni, it being the intention of the parties to vest in ARS all of Chancellor's rights, title and interest in the Florida Assets received from Omni such that the Florida Assets conveyed to ARS are substantially the same Florida Assets (in terms of identity, quantity, quality, utility, value, nature of title conveyed, etc.) as the Florida Assets that were conveyed to Chancellor by Omni pursuant to the Florida Agreement. The deliveries from Chancellor to ARS shall include: (a) An Assignment of Government Authorizations conveying the Florida Licenses and all other governmental permits, licences and authorizations used in the operation of the Florida Stations. (b) A Bill of Sale for all items of personal property included in the Florida Assets. (c) Deeds conveying title to all Florida Real Estate owned in fee simple by Chancellor and used in the operation of the Florida Stations. -30- (d) Assignments of leases conveying all of Chancellor's right, title and interest in all Florida Real Estate leased by Chancellor. (e) All other conveyances, assignments and documents reasonably necessary to vest in ARS title to the Florida Assets as contemplated in this Agreement. 17.3 DELIVERY BY ARS. At Closing, ARS shall deliver to Chancellor by wire transfer of available funds the cash payment specified in Section 3.2. In addition, ARS shall deliver to Chancellor documents conveying title to the California Assets in substantially the same manner as ARS received title to the California Assets from FBC, it being the intention of the parties to vest in Chancellor all of ARS's rights, title and interest in and to the California Assets received from FBC such that the California Assets conveyed to Chancellor are substantially the same California Assets (in terms of identity, quality, quantity, utility, value, nature of title conveyed, etc.) as the California Assets that were conveyed to ARS by FBC pursuant to the California Agreement. The deliveries from ARS to Chancellor shall include: (a) An Assignment of Government Authorizations conveying the California Licenses and all other governmental permits, licences and authorizations used in the operation of the California Station. (b) A Bill of Sale for all items of personal property included in the California Assets. (c) Deeds conveying title to all Florida Real Estate owned in fee simple by ARS and used in the operation of the California Station. (d) Assignments of leases conveying all of ARS's right, title and interest in all Florida Real Estate leased by ARS. (e) All other conveyances, assignments and documents reasonably necessary to vest in Chancellor's title to the California Assets as contemplated in this Agreement. 17.4 If the Closing shall not have occurred before July 1, 1997 because ARS is unable to transfer the California Station's Assets or Chancellor is unable to convey the Florida Station's Assets, the parties shall consummate the sale of all the assets of the California Station or the Florida Stations separately for a cash price of Seven Million Dollars ($7,000,000) and Forty Million Dollars ($40,000,000) respectively. SECTION 18. SURVIVAL OF REPRESENTATIONS AND WARRANTIES 18.1 REPRESENTATIONS AND WARRANTIES OF CHANCELLOR. The representations and warranties made in the Florida Agreement by Omni to Chancellor with respect to the Florida -31- Assets shall survive for the period specified in the Florida Agreement. Chancellor shall enforce these representations and warranties in its name for the benefit of ARS. No other representations or warranties shall survive Closing. 18.2 REPRESENTATIONS AND WARRANTIES OF ARS. The representations and warranties made in the California Agreement by FBC to ARS with respect to the California Assets shall survive for the period specified in the California Agreement. ARS shall enforce these representations and warranties in its name for the benefit of Chancellor. No other representations or warranties shall survive closing. SECTION 19. INDEMNIFICATION 19.1 INDEMNIFICATION BY CHANCELLOR. (a) Chancellor shall indemnify and hold ARS harmless from all damages, losses, costs, suits, actions, causes of action and liabilities of any nature whatsoever, including costs of suit and attorneys fees, arising out of Chancellor's ownership or operation of the California Station and, the Florida Retained Liabilities and the Chancellor covenants hereunder after the Closing Date. (b) Chancellor shall enforce, in its own name and for the benefit of ARS, all indemnification provisions of the Florida Agreement. 19.2 INDEMNIFICATION BY ARS. (a) ARS shall indemnify and hold Chancellor harmless from all damages, losses, costs, suits, actions, causes of action and liabilities of any nature whatsoever, including costs of suit and attorneys fees, arising out of ARS's ownership or operation of the Florida Stations and the California Retained Liabilities and ARS's covenants hereunder. (b) ARS shall enforce, in its own name and for the benefit of Chancellor, all indemnification provisions of the California Agreement. 19.3 LIMITATION ON REIMBURSEMENT. (a) Neither Chancellor nor ARS shall be entitled to reimbursement for damages incurred or suffered with respect to its respective claims until and only to the extent that the aggregate damages with respect to its respective claims to which it is otherwise entitled to reimbursement exceeds $________________ (the "Indemnification Basket"). The individual parties shall not be entitled to reimbursement for damages in excess of $_____________ in the -32- aggregate. (b) For all purposes of this Agreement, the amount of damages, and the amount reimbursable with respect thereto, shall be reduced to the extent of any insurance proceeds or other third party recovery received with respect to such damages. 19.4 PROCEDURE FOR INDEMNIFICATION. (a) If any claim or proceeding covered by Section 15 to indemnify and hold harmless shall arise, the Party who seeks indemnification (the "Indemnified Party") shall give written notice thereof to the other Party (the "Indemnitor") promptly but in no event more than ten (10) days after the Indemnified Party learns of the existence of such claim or proceeding. Any claim for indemnification hereunder shall be accompanied by evidence demonstrating the Indemnified Party's right or possible right to indemnification, including a copy of all supporting documents relevant thereto. After the Indemnitor acknowledges its obligation to defend against or settle any such claim or proceeding, the Indemnitor shall not be liable to the Indemnified Party under this Section 15 for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof; provided, however, that the Indemnified Party shall have the right to employ counsel to represent it if, in the Indemnified Party's sole judgment, it is advisable for the Indemnified Party to be represented by separate counsel, in which event the reasonable fees and expenses of such separate counsel shall be paid by the Indemnified Party. The Parties shall fully cooperate in the defense of each claim or proceeding and shall make available to each other all books or records necessary or appropriate for such defense. (b) The Indemnitor shall have the right to employ counsel reasonably acceptable to the Indemnified Party to defend against the claim or proceeding or to compromise, settle or otherwise dispose of the same; provided, however, that no settlement or compromise shall be effected without the express prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld or delayed; and, provided further, that if the Indemnified Party does not consent to a BONA FIDE offer of settlement made by a third party and the settlement involves only the payment of money, then the Indemnitor may, in lieu of payment of that amount to such third party, pay that amount to the Indemnified Party. After such payment to the Indemnified Party, the Indemnitor shall have no further liability with respect to that claim or proceeding and the Indemnified Party shall assume full responsibility for the defense, payment or settlement of such claim or proceeding. (c) If the Indemnitor fails to acknowledge in writing its obligation to defend against or settle any claim or proceeding within twenty (20) days after receiving notice of the claim or proceeding from the Indemnified Party (or such shorter time specified in the notice as the circumstances of the matter may dictate), the Indemnified Party shall be free to dispose of the matter, at the expense of the Indemnitor, in any way that the Indemnified Party deems in its best interest, subject to the Indemnitor's right subsequently to contest through appropriate proceedings its obligation to provide indemnification. -33- (d) The Indemnitor shall be subrogated to all rights of the Indemnified Party against any third party with respect to any claim for which indemnification is paid by the Indemnitor to the extent of such payment. SECTION 20. TERMINATION 20.1 RIGHT TO TERMINATE. This Agreement may be terminated at any time prior to closing as follows: (a) by the mutual consent of the parties; (b) by written notice of (i) Chancellor to ARS if ARS breaches in any material respect any of its representations or warranties or defaults in any material respect in the observance or in the due and timely performance of any of its covenants or agreements herein contained and such breach or default shall not be cured within thirty (30) days of the date of notice of breach or default served by Chancellor or (ii) ARS to Chancellor if Chancellor breaches in any material respect any of its representations or warranties or default in any material respect in the observance or in the due and timely performance of any of its covenants or agreements herein contained and such breach or default shall not be cured within thirty (30) days of the notice of breach or default served by ARS; but such notice and cure period shall not apply in the case of Chancellor's or ARS's failure to consummate the transactions in accordance with the terms and times specified in Section 22.11 of this Agreement. (c) by Chancellor or ARS by written notice to the other, if a court of competent jurisdiction or other Governmental Entity shall have issued an order, decree or ruling or taken any other action (which order, decree or ruling the parties hereto shall use their best efforts to lift), in each case permanently restraining, permanently enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling or other action shall have become final and nonappealable; (d) by the party whose qualifications are not at issue, if, for any reason, the FCC denies or dismisses any of the FCC Applications and the time for reconsideration or court review under the Communications Act with respect to such denial or dismissal has expired and there is not pending with respect thereto a timely filed petition for reconsideration or request for review; (e) by written notice of Chancellor to ARS or by ARS to Chancellor, if the Closing shall not have been consummated on or before July 1, 1997; Notwithstanding the foregoing, no party hereto may effect a termination hereof if such party is in material default or breach of this Agreement. -34- 20.2 LIQUIDATED DAMAGES/SPECIFIC PERFORMANCE. 20.2.1 If this Agreement is terminated pursuant to Section 20.1(b) the parties agree and acknowledge that the parties will suffer damages that are not practicable to ascertain. Accordingly, in the event this Agreement is terminated pursuant to Section 20.1(b)(i), Chancellor shall be entitled to the sum of Two Million Dollars ($2,000,000) as liquidated damages, payable solely and exclusively by drawing upon the Escrow Deposit pursuant to the Escrow Agreement. In the event this Agreement is terminated pursuant to Section 20.1(b)(ii), ARS shall be entitled to the sum of Three Hundred Fifty Thousand Dollars ($350,000) as liquidated damages payable solely and exclusively by drawing upon the Escrow Deposit pursuant to the Escrow Agreement. The parties agree that the foregoing liquidated damages are reasonable considering all the circumstances existing as of the date hereof and constitute the parties' good faith estimate of the actual damages reasonably expected to result from the termination of this Agreement pursuant to Section 20.1(b). Section 20.2.1 shall be their sole and exclusive remedy if the Closing does not occur with respect to any damages whatsoever as a result of any claim or cause of action asserted by Sellers relating to or arising from breaches of the representations, warranties or covenants contained in this Agreement and to be made or performed at or prior to the Closing. Except for a termination pursuant to Section 20.1(b) (for which the sole recourse of ARS, as the Seller of the California Station, or Chancellor, as the Seller of the Florida Stations shall be as provided in this Section 20.2.1 or pursuant to Section 20.1(a) (for which no party shall have any liability to the other), the termination of this Agreement shall not relieve the parties for any liability or obligation relating the their breaches of this Agreement occurring prior to such termination. 20.2.2 The parties hereto agree that the broadcast stations subject to this Exchange Agreement are unique and the harm to either ARS, as the Florida Stations' Buyer, or Chancellor, as the California Station's Buyer from breach by ARS, as the California Station's Seller, or Chancellor, as the Florida Stations' Seller, cannot adequately be compensated by damages. Therefore, the parties hereto agree that either party shall have the right to have this Exchange Agreement specifically performed by the other party as a Seller as follows: (a) In the event of an uncured breach by ARS, as Seller of the California Station or Chancellor, as Buyer of the California Station, shall have the right to seek specific performance. (b) In the event of an uncured breach by Chancellor, as Seller of the Florida Station, ARS, as Buyer of the Florida Stations shall have the right to seek specific performance. To the extent that Chancellor's breach relates to a failure to enforce Chancellor's rights under the Florida Agreement, ARS may seek specific performance compelling Chancellor to enforce the Florida Agreement. -35- SECTION 21. EXPENSES, TRANSFER TAXES, AND FEES 21.1 EXPENSES. Except as set forth in Sections 21.2 and, 21.3 below, each party hereto shall be solely responsible for all costs and expenses incurred by it in connection with the negotiation, preparation and performance of and compliance with the terms of this Agreement. 21.2 TRANSFER TAXES AND SIMILAR CHARGES. All costs of transferring the Florida Assets in accordance with this Agreement, including recordation, transfer and documentary taxes and fees, an any excise, sales or use taxes, shall be borne by ARS. All costs of transferring the California Station in accordance with this Agreement, including recordation, transfer and documentary taxes and fees, and any excise, sales or use taxes, shall be borne by Chancellor. Chancellor and ARS shall, in good faith, attempt to calculate all such taxes and fees prior to Closing and to settle their respective obligations therefore on or before the Closing Date. 21.3 GOVERNMENTAL FILING OR GRANT FEES. Any filing or grant fees imposed by any governmental authority the consent of which is required for the consummation of the transactions contemplated hereby, including but not limited to, the FCC, the FTC, and the Department of Justice shall be borne equally by Chancellor and ARS. SECTION 22. MISCELLANEOUS 22.1 RISK OF LOSS. Prior to Closing, risk of loss to the Florida Stations shall be borne by Chancellor and risk of loss to the California Station shall be borne by ARS. 22.2 ASSIGNMENT. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto, whether by operation of law or otherwise; provided, however, that without releasing the Parties from any of their obligations or liabilities hereunder (a) nothing in this Agreement shall limit any Party's ability to sell or transfer any or all of its respective assets (whether by sale of stock or assets, or by merger, consolidation or otherwise) or its respective rights under this Agreement without the consent of the other party, (b) nothing in this agreement shall limit (i) Chancellor's ability to assign the California Licenses (including the right to acquire the California Licenses at the Closing) to Chancellor Broadcasting Licensee Company or any other subsidiary of Chancellor without the consent of Sellers, or (ii) ARS's ability to assign the Florida Licenses to American Radio Systems License Corp. or any other subsidiary of ARS without the consent of Sellers, and (c) nothing in this Agreement shall limit a party's ability to make a collateral assignment of its rights under this Agreement to any institutional lender that provides funds to that party without the consent of the other. Each party shall execute an acknowledgment of such assignment(s) and collateral assignments in such forms as the other party or its institutional lenders may from time to time reasonably request; provided, however, that unless written notice is given to a party that any such collateral assignment has been foreclosed upon, that party shall be entitled to deal exclusively with the other party as to any matters arising under this Agreement or any of the -36- other agreements delivered pursuant hereto. In the event of such an assignment, the provisions of this Agreement shall inure to the benefit of and be binding on all parties' successors and assigns. 22.3 AMENDMENTS. No amendment, waiver of compliance with any provision or condition hereof or consent pursuant to this Agreement shall be effective unless evidenced by an instrument in writing signed by the party against whom enforcement of any waiver, amendment, change, extension or discharge is sought. 22.4 HEADINGS. The headings set forth in this Agreement are for convenience only and will not control or affect the meaning or construction of the provisions of this Agreement. 22.5 GOVERNING LAW. The construction and performance of this Agreement shall be governed by the laws of the State of Florida without giving effect to the choice of law provisions thereof. 22.6 NOTICES. Any notice, demand or request required or permitted to be given under the provisions of this Agreement shall be in writing and shall be deemed to have been duly delivered and received on the date of personal delivery or on the third day after deposit in the U.S. mail if mailed by registered or certified mail, postage prepaid and return receipt requested; or on the day after delivery to a nationally recognized overnight courier service if sent by an overnight delivery service for next morning delivery, and shall be addressed to the following addresses: (a) In the case of ARS to: American Radio Systems Corporation 116 Huntington Avenue Boston, MA 02116 Attn: Steven B. Dodge, Chairman With a copy to: Michael B. Milsom Vice President and General Counsel American Radio Systems Corporation 116 Huntington Avenue Boston, MA 02116 (b) In the case of Chancellor, to: Steven Dinetz President and Chief Executive Officer Chancellor Radio Broadcasting Company -37- 12655 N. Central Expressway Suite 405 Dallas, TX 75243 With a copy to: Matthew L. Leibowitz, Esq. Leibowitz & Associates, P.A. One S.E. Third Avenue, Suite 1450 Miami, Florida 33131 and Hicks, Muse, Tate & Furst Incorporated 200 Crescent Court Suite 1600 Dallas, TX 75201 Attention: Lawrence D. Stuart, Jr. and Weil, Gotshal & Manges, LLP 100 Crescent Court Suite 1300 Dallas, Texas 75201 Attention: Jeremy W. Dickens 22.7 SCHEDULES. The schedules and exhibits attached to this Agreement are hereby made a part of this Agreement as if set forth in full herein. 22.8 ENTIRE AGREEMENT. This Agreement contains the entire agreement among the parties hereto with respect to its subject matter and supersedes all negotiations, prior discussions, agreements, letters of intent, and understandings, written or oral, relating to the subject matter of this Agreement. 22.9 SEVERABILITY. If any provision of this Agreement is held to be unenforceable, invalid, or void to any extent for any reason, that provision shall remain in force and effect to the maximum extent allowable, and the enforceability and validity of the remaining provisions of this Agreement shall not be affected thereby. -38- 22.10 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which will be deemed an original, but all of which together shall constitute but one and the same instrument. 22.11 BINDING AGREEMENT. The parities shall each have fifteen (15) days from the execution of this Agreement to deliver all Schedules associated herewith. The parties shall each have thirty (30) days from the execution of this agreement to conduct an investigation that includes, but is not limited to, reviewing the Schedules to this Exchange agreement, reviewing the Stations' financial performance, real estate, contracts, environmental compliance, equipment, studio, transmitter, engineering, litigation, licenses and all other aspects of the Stations' assets and their ownership, performance and operations reasonably examinable in such an investigation. If either party's investigation reveals a material misrepresentation or a material omission made by the Selling party, then the purchasing party shall give notice to the defects to the selling party, who will then have fifteen (15) days to cure the defects. If the selling party does not cure such a defect within the allowed period, the affected purchasing party may terminate this Agreement by giving notice to the other party within fifteen (15) days after the allowed cure period without recourse to the selling party. 22.12 GOVERNING LAW. The obligations of Chancellor and ARS are subject to applicable federal, state and local law, rules and regulations, including, but not limited to the Communications Act and the rules and regulations of the Federal Communications Commission. The construction and performance of this Agreement will be governed by the laws of the State of Delaware. IN WITNESS WHEREOF, the parties have caused this Exchange Agreement to be executed effective as of the date first written above. CHANCELLOR RADIO AMERICAN RADIO BROADCASTING COMPANY SYSTEMS CORPORATION By: By: -------------------------- ----------------------------- Steven Dinetz Steven B. Dodge President President -39- EX-2.16 3 EXHIBIT 2.16 CHANCELLOR RADIO BROADCASTING COMPANY LOCAL MARKETING AGREEMENT WITH AMERICAN RADIO SYSTEMS CORPORATION FOR KSTE-AM, RANCHO CORDOVA, CALIFORNIA TABLE OF CONTENTS 1. AGREEMENT TERM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2. PROGRAMMER'S PURCHASE OF AIRTIME AND PROVISION OF PROGRAMMING . . . . . . 3 3. REPRESENTATIONS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4. CONSIDERATION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5. COLLECTION OF ACCOUNTS RECEIVABLE.. . . . . . . . . . . . . . . . . . . . 5 6. ARS CONTROL OF THE STATION. . . . . . . . . . . . . . . . . . . . . . . . 7 7. PROGRAMMER RESPONSIBILITY . . . . . . . . . . . . . . . . . . . . . . . . 9 8. CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 9. EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 10. PUBLIC AFFAIRS PROGRAMMING . . . . . . . . . . . . . . . . . . . . . . . 13 11. ADDITIONAL LICENSE OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . 14 12. BROADCAST STATION PROGRAMMING POLICY STATEMENT . . . . . . . . . . . . . 15 13. COMPLIANCE WITH COPYRIGHT ACT . . . . . . . . . . . . . . . . . . . . . . 16 14. PAYOLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 15. SALES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 16. LOCAL MARKETING AGREEMENT CHALLENGE . . . . . . . . . . . . . . . . . . . 18 17. CONFIDENTIAL REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 18. MAJOR DEFAULTS: TERMINATION . . . . . . . . . . . . . . . . . . . . . . . 19 18.1. PROGRAMMER'S MAJOR DEFAULTS . . . . . . . . . . . . . . . . . . . . 19 18.2. ARS'S MAJOR DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . 20 18.3. CURE PERIODS . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 18.4. TERMINATION UPON OCCURRENCE OF MAJOR DEFAULT. . . . . . . . . . . . 22 18.5. TERMINATION UPON FAILURE OF CONSUMMATION OF EXCHANGE AGREEMENT. . . 22 i 19. LIABILITIES UPON TERMINATION . . . . . . . . . . . . . . . . . . . . . . 23 20. NO FORMAT CHANGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 21. ARS'S INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . 25 22. PROGRAMMER'S INDEMNIFICATION.. . . . . . . . . . . . . . . . . . . . . . 26 23. PROCEDURE FOR INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . 26 24. DISPUTE OVER INDEMNIFICATION.. . . . . . . . . . . . . . . . . . . . . . 28 25. PROGRAMMER'S REMEDIES FOR OPERATIONAL DEFICIENCIES . . . . . . . . . . . 29 26. FORCE MAJEURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 27. OTHER AGREEMENTS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 28. ASSIGNMENT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 29. ENTIRE AGREEMENT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 30. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 31. HEADINGS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 32. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 33. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 34. SEVERABILITY.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 35. CERTIFICATIONS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 (a) CONTROL OF STATION . . . . . . . . . . . . . . . . . . . . . . . . . 35 (b) COMPLIANCE WITH OWNERSHIP RULES. . . . . . . . . . . . . . . . . . . 35 36. NO JOINT VENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 37. BENEFICIARIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 PAYMENT SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 ii SCHEDULE B - EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 ATTACHMENT I - BROADCAST Station PROGRAMMING POLICY STATEMENT . . . . . . . 40 I. NO PLUGOLA OR PAYOLA . . . . . . . . . . . . . . . . . . . . 40 II. POLITICAL BROADCASTING . . . . . . . . . . . . . . . . . . . 40 III. REQUIRED ANNOUNCEMENTS . . . . . . . . . . . . . . . . . . . 41 IV. NO ILLEGAL ANNOUNCEMENTS . . . . . . . . . . . . . . . . . . 41 V. ARS DISCRETION PARAMOUNT . . . . . . . . . . . . . . . . . 42 ATTACHMENT II - PAYOLA AFFIDAVIT . . . . . . . . . . . . . . . . . . . . . . 43 iii LOCAL MARKETING AGREEMENT THIS LOCAL MARKETING AGREEMENT ("LMA" or "Agreement"), made as of June ________, 1996 by and between AMERICAN RADIO SYSTEMS CORPORATION ("ARS" or "Owner" or "Licensee") and CHANCELLOR BROADCASTING COMPANY and CHANCELLOR RADIO BROADCASTING COMPANY, (collectively, "Chancellor" or "Programmer") both Delaware corporations. RECITALS WHEREAS, ARS is a party to a certain Asset Purchase Agreement dated March 26, 1996 between ARS and Fuller-Jeffrey Broadcasting Companies, Inc. ("FBC") contemplating the purchase by ARS of substantially all of FBC's assets used or useful in the operation of AM broadcast station KSTE, Rancho Cordova, California (the "Station"), including the related KSTE broadcast licenses and authorizations issued by the Federal Communications Commission ("FCC"). That Asset Purchase Agreement hereafter is referred to as the "California Agreement". WHEREAS, Chancellor is a party to a certain Asset Purchase Agreement ("Purchase Agreement") dated May 14, 1996 among Chancellor and Chancellor Broadcasting Company and OmniAmerica Group, WAPE-FM License Partnership, WFYV- FM License Partnership, Chancellor/ARS Local Marketing Agreement Page 2 - ------------------------- WEAT-AM License Partnership, WEAT-FM License Partnership, WXXL License Partnership, WOLL License Partnership and WJHM-FM License Partnership (collectively "Omni") contemplating, INTER ALIA, the purchase by Chancellor of substantially all of Omni's assets used or useful in the operation of Stations WEAT-AM/FM, West Palm Beach, Florida and Station WOLL-FM, Riviera Beach, Florida (collectively, the "West Palm Beach Stations"), including the related FCC broadcast licenses and authorizations. That Purchase Agreement is hereafter referred to as the "Florida Agreement". WHEREAS, ARS wishes to retain Chancellor to provide programming for the Station pursuant to the terms and conditions set forth in this Agreement and in conformity with the Station's policies and practices and the Federal Communications Commission's ("FCC") rules and regulations concerning such arrangements; WHEREAS, Chancellor will broadcast such programming and sell advertising that is in conformance with the Station's policies and all FCC rules and regulations, including the requirement that the ultimate control of the Station be maintained by ARS; and WHEREAS, Chancellor and ARS intend to enter into an Exchange Agreement (the Chancellor/ARS Local Marketing Agreement Page 3 - ------------------------- "Exchange Agreement"), which would qualify as a tax free exchange of like-kind assets pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended, pursuant to which ARS will agree to transfer to Chancellor, and Chancellor has agreed to acquire from ARS, substantially all of the assets and businesses of the Station; and Chancellor will agree to transfer to ARS, and ARS has agreed to acquire from Chancellor, substantially all of the assets and businesses of the West Palm Beach Stations. NOW THEREFORE, for and in consideration of the mutual covenants herein contained, the parties, intending to be legally bound, agree as follows: 1. AGREEMENT TERM. The term of this Agreement will begin on August 1, 1996 ("Commencement Date") and will continue until the Programmer acquires the assets of the Station unless earlier terminated in accordance with the provisions set forth herein. Chancellor/ARS Local Marketing Agreement Page 4 - ------------------------- 2. PROGRAMMER'S PURCHASE OF AIRTIME AND PROVISION OF PROGRAMMING. (a) During the term of this Agreement, Programmer shall transmit programming, including commercials, that it produces or owns to the Station twenty-four (24) hours per day Monday through Friday and for forty-eight (48) hours during Saturday through Sunday, provided that ARS may broadcast up to two (2) hours of programming for the Station which is aimed at serving the needs and interests of the Station's communities of license during the morning(s) of Saturday and/or Sunday subject to Section 10 hereto. (b) To facilitate delivery of programming by Programmer hereunder, ARS hereby grants to Programmer the right for the term of this Agreement to use substantially all of the equipment located in the Station's studios and currently used by ARS for broadcasting programs on the Station. In addition, Programmer shall have, and ARS hereby grants to Programmer, a license to enter on the premises currently occupied by the Station for the purpose of producing its programming hereunder; provided, however, that ARS shall maintain, for its use, sufficient space at the Station's studios to enable ARS to conduct its operations and originate programming. Accordingly, Programmer shall hold ARS harmless from all costs, fees and expenses incurred with respect to any personal injury suffered by any employee or agent of Chancellor/ARS Local Marketing Agreement Page 5 - ------------------------- Programmer while on the property of ARS. Programmer shall also be responsible for and shall reimburse ARS for any damage to the property of ARS caused by Programmers' employees or agents. 3. REPRESENTATIONS. Each of ARS and Programmer represent as to itself that it is authorized to enter into this Agreement and that this Agreement constitutes the legal, valid and binding obligation of such party, enforceable against it in accordance with its terms. Programmer hereby represents and warrants to ARS that Programmer is an experienced radio broadcast station owner and operator and is fully familiar with all pertinent legal requirements, including but not limited to, the Communications Act of 1934, as amended (the "Act"), and the Commission's rules, regulations and policies governing the operation of radio broadcast stations. Programmer will comply with all legal requirements, including but not limited to the Act and the Commission's rules, regulations and policies. Chancellor/ARS Local Marketing Agreement Page 6 - ------------------------- 4. CONSIDERATION. During the term of this Agreement, Programmer shall pay ARS the payments set forth on the Payment Schedule executed in connection herewith. 5. COLLECTION OF ACCOUNTS RECEIVABLE. (a) The accounts receivable of the Station generated prior to the Commencement Date (the "Pre-LMA Receivables") shall be and remain the property of ARS. Within 5 business days after the Commencement Date, ARS shall furnish Chancellor with a list (certified by the Chief Financial Officer of ARS to be a true and complete list) of all accounts receivable of ARS which remain outstanding as of the Commencement Date. Chancellor agrees that if, after the Commencement Date, it shall receive payment, directed to ARS, in respect to any Pre-LMA Receivable, Chancellor shall remit to ARS, within five (5) business days after the end of each month, any amounts received by Chancellor during the preceding month (whether or not directed on their face to ARS), which are in payment for advertising broadcast by the Station prior to the Commencement Date. Chancellor/ARS Local Marketing Agreement Page 7 - ------------------------- (b) During the period starting on the Commencement Date and ending ninety (90) days thereafter, Chancellor shall use reasonable efforts, consistent with ARS's current billing and collection practices and in the ordinary course of the business, to assist ARS in the collection of any outstanding Pre-LMA Receivables; provided, however, that, notwithstanding the foregoing, Chancellor shall be under no obligation to commence litigation, employ counsel or engage the services of a collection agency to effect collection. Chancellor shall not make any compromise, adjustment, concession or settlement of any Pre-LMA Receivable without ARS's express written consent and Chancellor shall be under no obligation to compromise, adjust, concede or settle any accounts receivable generated after the Commencement Date or otherwise grant any credit or allowance to effect collection of a Pre-LMA Receivable. Absent written evidence that an account debtor owing a Pre-LMA Receivable is disputing in good faith any portion of such Pre-LMA Receivable, any payments received by Chancellor after the Commencement Date from such account debtor shall be presumed to represent payment on any undisputed portion of such Pre-LMA Receivable which is then outstanding (with each such payment received from such account debtor to be applied first to the most-aged Pre-LMA Receivable then owing from such account debtor). Chancellor/ARS Local Marketing Agreement Page 8 - ------------------------- (c) ARS agrees to remit to Chancellor within 5 business days after the end of each month, any amounts received by ARS during the preceding month (whether or not directed on their face to Chancellor) which are in payment for advertising broadcast by the Station after the Commencement Date. (d) Chancellor shall not set-off any claim or amount against any of the Pre-LMA Receivables. 6. ARS CONTROL OF THE STATION. (a) ARS will have full authority, power and control over the management and operations of the Station during the term of this Agreement. ARS will bear all responsibility for the Station's compliance with all applicable provisions of the Act, the rules, regulations and policies of the FCC and all other applicable laws, including without limitation, the retention of control over the policies, programming and operation of the Station, including the right to preempt programming which in its good faith judgment it deems unsuitable or contrary to the public interest. ARS shall be solely responsible for and pay in a timely manner all real and personal property taxes, mortgage fees and expenses and other real property costs, all studio and Chancellor/ARS Local Marketing Agreement Page 9 - ------------------------- transmitter site leases, any utilities (excluding telephone charges), and all costs and expenses for the maintenance of all transmitter equipment. Programmer shall cooperate with and assist ARS in complying with all FCC rules and regulations. (b) ARS retains ultimate control over the Station and their premises. Accordingly, all employees of Programmer present at the Station or on their premises must comply with the policies and rules promulgated by ARS. In no event shall Programmer, or Programmer's employees, represent, depict, describe or portray Programmer as the Licensee of the Station. To this end, all employees of Programmer, whose work involves the Station, shall be informed as to ARS's ultimate control over the Station and Programmer's subordinate capacity, and all printed materials and promotional announcements shall accurately describe all of the roles and responsibilities of ARS and Programmer. (c) The Station's transmission equipment shall be maintained by ARS in a condition consistent with good engineering practices and in compliance in all material respects with the Act and all other applicable rules, regulations and technical standards of the FCC. All capital expenditures reasonably required to maintain the technical quality of the transmission equipment and its compliance with applicable laws and regulations shall be made at the sole Chancellor/ARS Local Marketing Agreement Page 10 - ------------------------- expense of ARS in a timely fashion. (d) ARS shall employ at its expense a management-level employee at the Station and such other person for each Station as necessary to fulfill ARS's duties hereunder and its obligations under the FCC's rules. A manager shall direct the day-to-day operations of each Station and shall report to and be accountable to ARS. ARS shall be responsible for the salaries, taxes, insurance and related costs for all personnel it employs at the Station. (e) ARS shall pay all regulatory fees, file all necessary applications, maintain the Station's local public inspection files within the Station's communities of license and shall prepare and place in such inspection file all required documents including, but not limited to the Station's quarterly issues and program lists on a timely basis. 7. PROGRAMMER RESPONSIBILITY. (a) Programmer shall be solely responsible for all expenses incurred in the origination and/or delivery of programming from any remote location and for all operating expenses of the Station (including telephone expenses and expenses related to sales, marketing, Chancellor/ARS Local Marketing Agreement Page 11 - ------------------------- promotion, advertising, billing and collections, and traffic), except that ARS shall be responsible for the costs as provided in Section 6 hereof. Programmer shall cooperate fully with ARS in responding to any questions, comment, inquiry or complaint from any third party, including any governmental authority or agent thereof, that may relate to or arise from the Station or its operations, including the programming. In the event of Programmer's receipt of any question, comment inquiry or complaint that may relate to or arise from the Station or its operations, Programmer shall promptly notify ARS of the same. (b) Programmer shall employ and be solely responsible for the salaries, taxes, insurance and related costs for all personnel employed by Programmer (including, without limitation, salespeople, traffic personnel, board operators and programming staff). (c) Programmer shall cause the Station to transmit any required tests of the Emergency Broadcast System or successor Emergency Alert System at such times as are directed by ARS. (d) Political Advertising and Announcements. Programmer shall maintain and deliver to ARS all records and information required by the FCC to be placed in the public Chancellor/ARS Local Marketing Agreement Page 12 - ------------------------- inspection files of the Station pertaining to the broadcast of political programming and advertisements, in accordance with the provisions of Sections 73.1940 and 73.3526 of the FCC's rules and agrees to broadcast sponsored programming addressing political issues, in accordance with the provisions of Section 73.1212 of the FCC's rules. 1. Programmer's sale or use of commercial time on the Station shall conform to all federal and state laws governing the sale of political advertising on radio stations. At least ninety (90) days before the start of any primary or general election campaign, Programmer will clear with Licensee the rates to be charged political candidates for public office and rate cards to be sure that the rates and the rate cards are in conformance with all laws, including requirements for providing reasonable time to state and local candidates (as determined by the Licensee). 2. When required by law, Programmer shall sell such political advertising time only at the Station's lowest unit rate. Within seven (7) days after the broadcast of political advertising, Programmer shall review the commercial spots that have aired on the Station, so as to insure that each political candidate was charged the lowest unit rate. In the event a refund or credit is due, Programmer shall pay such refund or provide such credits within seven Chancellor/ARS Local Marketing Agreement Page 13 - ------------------------- (7) days. The Programmer recognizes candidates' need to maximize their campaign funds, and thus will provide such rebates or credits on a more expeditious basis as the election day approaches. 3. Within twenty-four (24) hours of any request to purchase time on any Station on behalf of a candidate for public office or to support or urge defeat of an issue on an election ballot, Programmer will provide documentation of the request, and its disposition, to Licensee so that appropriate records can be placed in the Station's public file. 4. In the event that Programmer fails to provide adequate broadcast time for the broadcast of paid political programming or advertising by political candidates, Licensee shall have the right to preempt commercial announcements supplied by Programmer to make time available to these political candidates. 5. Programmer shall furnish within its programming, on behalf of ARS, all of the Station's identification announcements required by the FCC's rules. Programmer shall provide information with respect to any of its programming which is responsive to the public needs and interests of the area served by the Station so as to assist ARS in the preparation Chancellor/ARS Local Marketing Agreement Page 14 - ------------------------- of any required programming reports, and provide other information to enable ARS to prepare other records, reports and logs required by the FCC or other local, state or federal governmental agencies. 8. CONTRACTS. Programmer shall perform and discharge the obligations of ARS from and after the Commencement Date under the contracts and agreements listed in the Schedules to the Exchange Agreement. In addition, Programmer shall perform and discharge all obligations of the Station under all trade agreements from and after the Commencement Date. Any receivables generated prior to the Commencement Date shall be remitted to ARS pursuant to Section _____ of the Exchange Agreement. Programmer will not enter into any third-party contracts, leases or agreements which will bind ARS in any way except with ARS's prior written approval. 9. EMPLOYEES. SCHEDULE B hereto contains a listing of the name, salary or compensation and job description of all employees of the Station as of _______. Pursuant to Section _____ of the Chancellor/ARS Local Marketing Agreement Page 15 - ------------------------- Exchange Agreement, Programmer may, but shall not be obligated to (other than through its own actions independent of any provisions of this Agreement or through the assumption of any employment contracts hereunder), offer employment to any employee of the Station who was employed by ARS at or before the Commencement Date. 10. PUBLIC AFFAIRS PROGRAMMING. Notwithstanding any other provision of this Agreement, Programmer recognizes that ARS has certain obligations to broadcast programming to meet the needs and interests of the community of license for the Station. ARS shall have the right to air specific programming on issues of importance to the local community. Nothing in this Agreement shall abrogate the unrestricted authority of ARS to discharge its obligations to the public and to comply with the law, rules and policies of the FCC with respect to meeting the ascertained needs and interests of the public. Accordingly, ARS may broadcast public affairs programming as outlined in Section 2 hereof. ARS may air this programming in either one two (2) hour block or any combination of half hour or full hour blocks of time during the hours of 6 a.m. to 9 a.m. on Saturday and/or Sunday. Chancellor/ARS Local Marketing Agreement Page 16 - ------------------------- 11. ADDITIONAL LICENSE OBLIGATIONS. Although both parties shall cooperate in the broadcast of emergency information over the Station, ARS shall also retain the right to interrupt Programmer's programming in case of an emergency or for programming which, in the reasonable good faith judgment of ARS, is of overriding public importance. ARS shall also coordinate with Programmer the Station's hourly station identification announcements to be aired in accordance with FCC rules. ARS shall continue to maintain a main studio, as that term is defined by the FCC, within each of the Station's principal community contours and shall staff it as required by the FCC. ARS shall be responsible for the salaries, taxes, insurance and related costs for all personnel it employs at the Station and shall maintain insurance at its present levels covering the Station's transmission facilities. In addition, ARS shall pay any federal regulatory fees, maintain its local public inspection file within the Station's communities of license and shall prepare and place in such public inspection file all required documents including, but not limited to, its quarterly issues and program lists on a timely basis. ARS shall also receive and respond to telephone inquiries from the general public. Programmer shall provide ARS with information with respect to certain of Programmer's programs which may be included in ARS's quarterly issues and programs lists. Chancellor/ARS Local Marketing Agreement Page 17 - ------------------------- 12. BROADCAST STATION PROGRAMMING POLICY STATEMENT. ARS has adopted and will enforce a Broadcast Station Programming Policy Statement (the "Policy Statement"), a copy of which appears as ATTACHMENT I hereto and which may be amended to meet changing regulatory requirements by ARS upon reasonable advance written notice to Programmer. Programmer agrees and covenants to comply in all material respects with the Policy Statement and with all rules and regulations of the FCC. If ARS reasonably determines that a program, commercial or other material supplied by Programmer does not comply with the Policy Statement, or if ARS reasonably believes that some or all of a program, commercial or other material is unsuitable or contrary to the public interest, it may suspend or cancel such program, commercial or other material and shall provide written notice to Programmer of such decision. Programmer shall provide programs only in accordance with the Policy Statement and FCC requirements. All advertising spots and promotional material or announcements shall comply with applicable federal, state and local regulation and policies and the Policy Statement, and shall be produced in accordance with quality standards established by ARS. Chancellor/ARS Local Marketing Agreement Page 18 - ------------------------- 13. COMPLIANCE WITH COPYRIGHT ACT. Programmer represents and warrants to ARS that Programmer has full authority to broadcast its programming on the Station and the Programmer shall not broadcast any material in violation of any law, rule, regulation or the Copyright Act. All music supplied by Programmer shall be: (i) licensed by ASCAP, SESAC or BMI; (ii) in the public domain; or (iii) cleared at the source by Programmer. ARS will maintain as appropriate its own ASCAP, BMI and SESAC licenses for the performance of Programmer's programs and Programmer shall reimburse ARS for the costs of such licenses obtained by ARS within thirty (30) days when paid. The right to use the programming and to authorize its use in any manner shall be and remain vested in Programmer. 14. PAYOLA. Programmer agrees that neither it nor its employees or agents will accept any consideration, compensation, gift or gratuity of any kind whatsoever, regardless of its value or form, including, but not limited to, a commission, discount, bonus, material, supplies or other merchandise, services or labor (collectively, "Consideration"), whether or not pursuant to written Chancellor/ARS Local Marketing Agreement Page 19 - ------------------------- contracts or agreements between Programmer and merchants or advertisers, unless the third party providing such compensation, gift or gratuity is identified in the program for which Consideration was provided as having paid for or furnished such Consideration, in accordance with the Communications Act and FCC requirements. Programmer agrees to execute and to provide ARS with payola Affidavits from itself, and all of its employees and agents who are involved with providing programming on the Station, at such times as ARS may reasonably request, substantially in the form attached hereto as ATTACHMENT II. 15. SALES. Programmer shall retain all revenues from the sale of advertising time within the programming it provides to ARS and pay all expenses attributable thereto. Programmer may sell advertising, consistent with applicable rules, regulations and the Policy Statement, on the Station in combination with any other broadcast stations of its choosing. Programmer shall be responsible for payment of the commissions due to any national sales representative engaged by it for the purpose of selling national advertising which is carried during the programming it provides to ARS. ARS shall retain all revenues from the sale of the Station's advertising during the hours each week in which ARS airs its own nonentertainment programming. Chancellor/ARS Local Marketing Agreement Page 20 - ------------------------- 16. LOCAL MARKETING AGREEMENT CHALLENGE. If this Agreement is challenged at the FCC, counsel for ARS and counsel for Programmer shall defend the Agreement and the parties' performance thereunder throughout all FCC proceedings with Programmer and ARS each being responsible for its own costs. If portions of this Agreement do not receive the approval of the FCC staff, then the parties shall reform the Agreement subject to their respective reasonable business judgment and advise of counsel or, at ARS's or Programmer's option, seek reversal of the staff decision and approval from the full Commission on appeal. 17. CONFIDENTIAL REVIEW. Prior to the provision of any programming by Programmer to ARS under this Agreement, Programmer shall acquaint ARS with the nature and type of the programming to be provided. ARS, solely for the purpose of ensuring Programmer's compliance with the law, FCC rules and the Station's policies, shall be entitled to review and pre-empt at its discretion from time to time on a confidential basis any programming material and any other documents it may Chancellor/ARS Local Marketing Agreement Page 21 - ------------------------- reasonably request, including all rate cards and disclosure statements related to Programmer's political advertising. Programmer shall promptly provide ARS with copies of all correspondence and complaints received from the public as well as copies of all program logs and promotional materials. 18. MAJOR DEFAULTS: TERMINATION. 18.1. PROGRAMMER'S MAJOR DEFAULTS. The occurrence of any of the following, after the expiration of the applicable cure periods, if any, will be deemed to be a "Major Default" by Programmer under this Agreement: (a) Programmer's failure to timely pay any of the consideration provided for in Section 4 and the Payment Schedule executed in connection herewith or other payments required hereunder; (b) Except as otherwise provided for in this Agreement, the failure of Programmer to supply the programs for broadcast on the Station in accordance with Section 2 hereof; Chancellor/ARS Local Marketing Agreement Page 22 - ------------------------- (c) Any termination of this Agreement by Programmer other than as permitted in Section 18.4 or 18.5; or (d) In the event of a voluntary filing by Programmer (or involuntary filing with respect to Programmer not vacated with ninety (90) days after such filing) of a petition for reorganization or dissolution under federal bankruptcy laws or under substantially equivalent state laws. 18.2. ARS'S MAJOR DEFAULTS. The occurrence of any of the following, after the expiration of the applicable cure periods, if any, will be deemed to be a "Major Default" by ARS under this Agreement: (a) Except as otherwise provided for in this Agreement, the failure of ARS to broadcast the programs supplied by Programmer in accordance with Section 2 hereof; (b) Any termination of this Agreement by ARS other than as permitted in Section 18.4 or 18.5; or Chancellor/ARS Local Marketing Agreement Page 23 - ------------------------- (c) In the event of a voluntary filing by ARS (or involuntary filing with respect to ARS not vacated with ninety (90) days after such filing) of a petition for reorganization or dissolution under federal bankruptcy laws or under substantially equivalent state laws. 18.3. CURE PERIODS. The cure periods before any event listed in Section 18.1 or 18.2 shall become a Major Default are as follows: (a) PAYMENT BY PROGRAMMER. The consideration to be paid to ARS must be received by ARS within five (5) days after ARS gives written notice of non- payment to Programmer. (b) CERTAIN MATTERS. There shall be no cure period for: (i) a termination by Programmer described in Section 18.1(c); or (ii) a termination by ARS described in Section 18.2(b) hereof. Chancellor/ARS Local Marketing Agreement Page 24 - ------------------------- (c) PROGRAMS AND BROADCAST MATTERS. With respect to Programmer's failure to provide programs referred to in Section 18.1(b) hereof or ARS's failure to broadcast programs referred to in Section 18.2(a) hereof, the period allowed for cure shall be ten (10) business days from the giving of written notice of such failure to the defaulting party by the non-defaulting party. (d) OTHER MATTERS. With respect to all matters capable of being cured other than those described in Sections 18.3(a), 18.3(b) or 18.3(c) above, the cure period shall be twenty (20) business days after written notice to the defaulting party is given by the non-defaulting party or, with respect to matters that through the exercise of reasonable diligence cannot be cured within such ten (10) day period, such longer period not to exceed ninety (90) days as is reasonably necessary to effect such cure through the exercise of reasonable diligence. 18.4. TERMINATION UPON OCCURRENCE OF MAJOR DEFAULT. Upon the occurrence and continuation of a Major Default the non-defaulting party may terminate this Agreement by giving written notice to the defaulting party within sixty (60) days of such occurrence, provided that the non-defaulting party has not also committed a Major Default hereunder which has not been waived. Such written notice shall specify a termination date which is not less than seven (7) days nor more than ninety (90) days from the date such notice is given. In the event the non- Chancellor/ARS Local Marketing Agreement Page 25 - ------------------------- defaulting party does not exercise such right of termination by giving such written notice within such sixty (60) day period, then the Major Default giving rise to such right of termination shall be deemed waived and the Agreement shall continue in full force and effect. 18.5. TERMINATION UPON FAILURE OF CONSUMMATION OF EXCHANGE AGREEMENT. Notwithstanding any other provision hereof, this Agreement may be terminated by either party at any time following termination of the Exchange Agreement. 19. LIABILITIES UPON TERMINATION. (a) Programmer shall be solely responsible for all of its liabilities, debts and obligations incident to its purchase of broadcast time hereunder, including, without limitation, accounts payable and unaired advertisements, but not for ARS's federal, state, and local tax liabilities associated with Programmer's payments to ARS as provided herein. Upon termination pursuant to Sections 18.4 or 18.5 hereto, ARS shall be under no further obligation to make available to Programmer any broadcast time or broadcast transmission facilities, provided that ARS agrees that it will cooperate reasonably with Programmer to discharge in exchange for reasonable compensation any remaining obligations of Programmer in the form of air time Chancellor/ARS Local Marketing Agreement Page 26 - ------------------------- following the termination date. At the date of termination, Programmer shall return to ARS any equipment or property of the Station used by Programmer, its employees or agents, in substantially the same condition as such equipment existed on the Commencement Date, shall restore ARS's technical facilities to substantially the same condition as such facilities existed on the Commencement Date, ordinary wear and tear excepted, shall reassign to ARS all contracts and agreements relating to the Station listed on the Schedules to the Exchange Agreement which were assumed by Programmer upon the Commencement Date, and shall otherwise take such actions to restore to the extent then practicable the parties hereto to their respective positions prior to the Commencement Date. (b) Upon termination of this Agreement pursuant to this Section 18 or as a result of the expiration of the term of this Agreement other than by the Closing under the Exchange Agreement, each party shall be free to pursue any and all remedies available to it at law, in equity or otherwise. All amounts accrued or payable to ARS up to the date of termination which have not been paid shall be immediately due and payable. Programmer shall, in addition to its other legal and equitable rights and remedies under this Agreement or under applicable law, be entitled immediately to cease providing any further programs to be broadcast on the Station, and all amounts which have been prepaid to ARS for any partial month beyond the termination Chancellor/ARS Local Marketing Agreement Page 27 - ------------------------- shall be immediately due and payable to Programmer. Programmer shall return all confidential information with respect to the Station to the ARS. Programmer shall reassign all of ARS's accounts receivable to ARS. Programmer shall remit to ARS all amounts collected with respect to ARS's accounts receivable within five (5) business days of termination hereunder. Upon termination, Programmer shall be responsible for debts and obligations resulting from the use of the Station's air time and equipment by Programmer including, without limitation, accounts payable and net barter balances in excess of _________________ dollars ($_____________), relating to the period on and after the date of this Agreement and up to the termination of this Agreement and shall be entitled to the revenues and other credits for that period. 20. NO FORMAT CHANGES. During this Agreement, Programmer shall not materially change the entertainment format of the Station. 21. ARS'S INDEMNIFICATION. Chancellor/ARS Local Marketing Agreement Page 28 - ------------------------- ARS shall indemnify, defend, hold and save Programmer harmless from and against any and all claims, losses, costs, liabilities, damages, FCC forfeitures, and expenses, including counsel fees, of every kind, nature, and description, including libel, slander, illegal competition or trade practices, or infringement of trade marks or program titles, violation of rights of privacy, and infringement of copyrights and proprietary rights arising out of: (a) ARS's operation of the Station (not including the operation of the Station by Programmer) under this Agreement, and (b) breach of any warranty, representation, covenant, agreement or obligation of ARS contained in this Agreement. 22. PROGRAMMER'S INDEMNIFICATION. Programmer shall indemnify, defend, hold and save ARS harmless from and against any and all claims, losses, costs, liabilities, damages, FCC forfeitures, and expenses, including counsel fees, of every kind, nature, and description, including libel, slander, illegal competition or trade practices, or infringement of trade marks or program titles, violation of rights of privacy, and infringement of copyrights and proprietary rights arising out of: Chancellor/ARS Local Marketing Agreement Page 29 - ------------------------- (a) the programming furnished by Programmer under this Agreement, (b) the actions or failure to act of its employees or agents under this Agreement and (c) breach of any warranty, representation, covenant, agreement or obligation of Programmer contained in this Agreement. 23. PROCEDURE FOR INDEMNIFICATION. The party seeking indemnification under this paragraph ("Indemnitee") shall give the party from whom it seeks indemnification ("Indemnitor") prompt notice, as provided herein, of the assertion of such a claim provided, however, that the failure to give notice of a claim within a reasonable time shall only relieve the Indemnitor of liability to the extent it is materially prejudiced thereby. Promptly after receipt of written notice, as provided herein, of a claim by a person or entity not a party to this Agreement, the Indemnitor shall assume the defense of such claim; provided, however, that: Chancellor/ARS Local Marketing Agreement Page 30 - ------------------------- (a) If the Indemnitor fails, within a reasonable time after receipt of notice of such claim, to assume the defense thereof, the Indemnitee shall have the right to undertake the defense, compromise, and settlement of such claim on behalf of and for the account and risk of Indemnitor, subject to the right of the Indemnitor (upon notifying the Indemnitee of its election to do so) to assume the defense of such claim at any time prior to the settlement, compromise, judgment, or other final determination thereof; (b) If in the reasonable judgment of the Indemnitee, based upon the advise of its counsel, a direct or indirect conflict of interest exists between the Indemnitee and Indemnitor, the Indemnitee shall (upon notifying the Indemnitor of its election to do so) have the right to undertake the defense, compromise, and settlement of such claim on behalf of and for the account and risk of Indemnitor (it being understood and agreed that the Indemnitor shall not be entitled to assume the defense of such claim); (c) If the Indemnitee in its sole discretion elects, it shall (upon notifying the Indemnitor of its election to do so) be entitled to employ separate counsel and to participate in the defense of such claim, but the fee and expenses of counsel so employed shall (except as contemplated by clauses (a) and (b) above) be borne solely by Indemnitee; Chancellor/ARS Local Marketing Agreement Page 31 - ------------------------- (d) The Indemnitor shall not settle or compromise any claim or consent to the entry of any judgment that does not include as an unconditional term thereof the grant by the claimant or plaintiff to each Indemnitee of a release from any and all liability in respect thereof; and (e) The Indemnitor shall not settle or compromise any claim in any manner, or consent to the entry of any judgment, that could reasonably be expected to have a material adverse effect on the Indemnitee. 24. DISPUTE OVER INDEMNIFICATION. If upon presentation of a claim for indemnity hereunder, the Indemnitor does not agree that all, or part, of such claim is subject to the indemnification obligations imposed upon it pursuant to this Agreement, it shall promptly so notify the Indemnitee. Thereupon, the parties shall attempt to resolve their dispute, including where appropriate reaching an agreement as to that portion of the claim, if any, which both concede is subject to indemnification. To the extent that the parties are unable to reach some compromise within thirty (30) days thereafter, the parties shall be free to pursue all appropriate legal and equitable remedies. Chancellor/ARS Local Marketing Agreement Page 32 - ------------------------- 25. PROGRAMMER'S REMEDIES FOR OPERATIONAL DEFICIENCIES. Except as set forth in this Section 25, and except for reductions in power or interruptions occurring between the hours of 12:00 midnight and 6:00 a.m. as a result of maintenance or repairs or during such periods that the Station are operating from its authorized auxiliary antenna, if any of the normal broadcast transmissions of the Station are interrupted, interfered with, or in any way impaired with so that the Station are not operating at full licensed power and antenna height or are off the air, or in the event that ARS preempts Chancellor's programming, Programmer shall be entitled to an equitable reduction in the amount of its monthly fee which is proportionate to the period of time that the Station's operations are deficient, the Station's programming is preempted or the Station are off the air. 26. FORCE MAJEURE. Any failure or impairment of the Station's facilities or any delay or interruption in the broadcast of programs, or failure at any time to furnish facilities, in whole or in part, for broadcast due to Acts of God, strikes, lockouts, material or labor restrictions by any Chancellor/ARS Local Marketing Agreement Page 33 - ------------------------- governmental authority, civil riot, floods and any other cause not reasonably within the control of ARS (including any obligation of ARS to reduce power or suspend operation to avoid occupational exposure to harmful RF radiation), shall not constitute a breach of this Agreement and ARS will not be liable to Programmer. 27. OTHER AGREEMENTS. During the term of this Agreement, ARS will not enter into any other local marketing, program provision, local management or similar agreement with any third party with respect to the Station. 28. ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their successors and assignees, including specifically any purchaser of the Station from ARS. Neither party may assign its rights without the prior written consent of the other party which consent shall not be unreasonably withheld. Chancellor/ARS Local Marketing Agreement Page 34 - ------------------------- 29. ENTIRE AGREEMENT. This Agreement, and the Attachments hereto, embody the entire agreement and understanding of the parties and supersede any and all prior agreements, arrangements and understandings relating to matters provided for herein. No amendment, waiver of compliance with any provision or condition hereof, or consent pursuant to this Agreement will be effective unless evidenced by an instrument in writing signed by the parties. 30. TAXES. ARS and Programmer shall each pay its own ad valorem taxes, if any, which may be assessed on such party's respective personal property for the periods that such items are owned by such party. Each party shall be responsible for any sales tax imposed on advertising aired during the programming provided by that party. Chancellor/ARS Local Marketing Agreement Page 35 - ------------------------- 31. HEADINGS. The headings are for convenience only and will not control or affect the meaning or construction of the provisions of this Agreement. 32. GOVERNING LAW. The obligations of ARS and Programmer are subject to applicable federal, state and local law, rules and regulations, including, but not limited to, the Act and the Rules and Regulations of the FCC. The construction and performance of the Agreement will be governed by the laws of the State of California. 33. NOTICES. Any notice, demand or request required or permitted to be given under the provisions of this Agreement shall be in writing and shall be deemed to have been duly delivered and received on the date of personal delivery; on the third day after deposit in the U.S. mail if mailed by registered or certified mail, postage prepaid and return receipt requested; on the day Chancellor/ARS Local Marketing Agreement Page 36 - ------------------------- after delivery to a nationally recognized overnight courier service if sent by an overnight delivery service for next morning delivery and shall be addressed to the following addresses: To Programmer: Chancellor Broadcasting Company 12655 N. Central Expressway, Suite 321 Dallas, Texas 75243 Attention: Mr. Steven Dinetz Telecopier number: (214) 239-0220 Copy to: Matthew L. Leibowitz, Esq. Leibowitz & Associates One S.E. Third Avenue, Suite 1450 Miami, FL 33131 Telephone number: (305) 530-1322 Telecopier number: (305) 530-9417 To ARS: Chancellor/ARS Local Marketing Agreement Page 37 - ------------------------- Copy to: The date of any such notice and service thereof shall be deemed to be: (a) the day of delivery if hand delivered or delivered by overnight courier; (b) the day of delivery as indicated on the return receipt if dispatched by mail, or (c) the date of telecopy transmission as indicated on the telecopier transmission report provided that any telecopy transmission shall not be effective unless a paper copy sent by overnight courier on the date of the telecopy transmission is delivered. Either party may change its address for the purpose of notice by giving notice of such change in accordance with the provisions of this paragraph. Chancellor/ARS Local Marketing Agreement Page 38 - ------------------------- 34. SEVERABILITY. If any provision of this Agreement or the application thereof to any person or circumstances shall be invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provision to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law. 35. CERTIFICATIONS. (a) CONTROL OF STATION. ARS hereby verifies that it will maintain control of the Station and their facilities, including specifically control over the Station's finances, personnel and programming during the term of this Agreement. (b) COMPLIANCE WITH OWNERSHIP RULES. Programmer hereby verifies that the arrangement contemplated by this Agreement complies with the provisions of Section 73.3555(a) of the rules and regulations of the FCC. Chancellor/ARS Local Marketing Agreement Page 39 - ------------------------- 36. NO JOINT VENTURE. The parties agree that nothing herein shall constitute a joint venture or partnership between them. 37. BENEFICIARIES. Nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto and their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written. Chancellor/ARS Local Marketing Agreement Page 40 - ------------------------- CHANCELLOR BROADCASTING COMPANY By: ------------------------------ Steven Dinetz President CHANCELLOR RADIO BROADCASTING COMPANY By: --------------------------- Steven Dinetz President Chancellor/ARS Local Marketing Agreement Page 41 - ------------------------- AMERICAN RADIO SYSTEMS CORPORATION By: --------------------------- Steven B. Dodge President Chancellor/ARS Local Marketing Agreement Page 42 - ------------------------- PAYMENT SCHEDULE In exchange for the air time supplied to Programmer pursuant to this Agreement, Programmer shall pay ARS _______________________ Dollars ($_______) per month. The first monthly payment to ARS is due and payable on July 1, 1996, and each successive payment is due on the first day of each month thereafter. The monthly fee shall be reduced PRO RATA for any partial month at the beginning or end of the term of this Agreement. Chancellor/ARS Local Marketing Agreement Page 43 - ------------------------- SCHEDULE B EMPLOYEES [Copy of Employees' Summaries for KSTE-AM to be provided.] Chancellor/ARS Local Marketing Agreement Page 44 - ------------------------- ATTACHMENT I BROADCAST STATION PROGRAMMING POLICY STATEMENT Programmer agrees to cooperate with ARS in the broadcasting of programs of the highest possible standard of excellence and for this purpose to observe the following regulations in the preparation, writing and broadcasting of its programs. Further Programmer agrees that all material broadcast on the Station shall comply with all federal, state and local applicable laws, rules and regulation. I. NO PLUGOLA OR PAYOLA. The broadcast of any material for which any money, service or other valuable consideration is directly or indirectly paid, or promised to or charged or accepted by, the Programmer, from any person, shall be prohibited, unless, at the time the same is broadcast, it is announced as paid for or furnished by such person. Chancellor/ARS Local Marketing Agreement Page 45 - ------------------------- II. POLITICAL BROADCASTING. Within thirty (30) days of the Commencement Date, Programmer shall provide ARS with a written political advertising disclosure statement which fully and accurately discloses how the Programmer sells programming and advertising time and which makes parties purchasing political programming and advertising time fully aware of the lowest unit charge provisions of Section 315 of the Act. In addition, at least thirty (30) days before the start of any primary or election campaign, Programmer will clear with the Station's general managers the rates Programmer will charge for the time to be sold to candidates to make certain that the rate charges is in conformance with the applicable law and Station policy. III. REQUIRED ANNOUNCEMENTS. Programmer shall broadcast (i) an announcement in a form satisfactory to ARS at the beginning of each hour to identify the Station and (ii) any other announcements that may be required by law, regulation or ARS's Station policy. Chancellor/ARS Local Marketing Agreement Page 46 - ------------------------- IV. NO ILLEGAL ANNOUNCEMENTS. No announcements, broadcasts or promotions prohibited by federal, state or local law shall be made over the Station. This prohibition specifically includes, but is not limited to, any and all programming or other broadcast material concerning tobacco or alcohol related products which are unlawful. The airing of any broadcast material concerning contests, lotteries or games must be conducted in accordance with all applicable law, including FCC rules and regulations. Any obscene, indecent, or fraudulent programming is prohibited. All sponsored programming or other broadcast material must be identified in accordance with applicable law, including FCC rules and regulations. V. ARS DISCRETION PARAMOUNT. In accordance with ARS's responsibility under the Communications Act of 1934, as amended, and the Rules and Regulations of the Federal Communications Commission, ARS reserves the right to reject or terminate any advertising proposed to be presented or being presented over the Station, which is in conflict with Station's policies or which ARS or its general manager's reasonable judgement would not serve the public interest. Chancellor/ARS Local Marketing Agreement Page 47 - ------------------------- In any case where questions of policy or interpretation arise, Programmer should submit the same to ARS for decision before making any commitments in connection therewith. Chancellor/ARS Local Marketing Agreement Page 48 - ------------------------- ATTACHMENT II PAYOLA AFFIDAVIT City of __________________________) County of ________________________) Section : State of _________________________) I, ______________________, having first been duly sworn, hereby state that I have read and will comply with the provisions of Section 317 and 507 of the Communications Act of 1934, as amended, copies of which are attached hereto, I also have read and will comply with the provisions of the Commission's Sponsorship Identification Rule (73.1212), a copy of which is attached hereto. Chancellor/ARS Local Marketing Agreement Page 49 - ------------------------- I also will comply with the policy of this Station, __________________ (insert call letters here), which prohibits every employee having any voice in the selection of broadcast matter from (a) engaging in any outside business or economic activity which would create a conflict of interest in the selection of broadcast matter; (b) accepting any favors, loans, entertainment or other consideration from persons seeking the airing of any broadcast matter in return thereof, and (c) promoting over the air (except by means of an appropriate commercial announcement) any activity or matter in which the employee has a direct or indirect financial interest. I understand that receiving or agreeing to receive anything of value from a third party for the broadcast of any program material over the Station is a crime, unless the agreed payment is disclosed to the Station before broadcast of the program material. This crime, commonly called "payola", is punishable by one year in prison and a fine of up to $10,000. During the past year, I have not been promised or paid anything of value directly or indirectly by a third party for the broadcast of any programming material over the Station. ------------------------------------ Affiant Chancellor/ARS Local Marketing Agreement Page 50 - ------------------------- The foregoing instrument was acknowledged before me this ____ day of _______________, 1996 by __________________________________, who is personally known to me or who has produced _________________________ as identification. --------------------------------------- Notary Public My commission expires: ---------------------------------- EX-2.17 4 EXHIBIT 2.17 ASSET PURCHASE AGREEMENT BY AND AMONG CLASSICAL ACQUISITION LIMITED PARTNERSHIP RADIO 100 OF MARYLAND LIMITED PARTNERSHIP RADIO 100 LIMITED PARTNERSHIP RADIO 570 LIMITED PARTNERSHIP RADIO 94 OF PHOENIX LIMITED PARTNERSHIP RADIO 95 OF PHOENIX LIMITED PARTNERSHIP as Sellers AND CHANCELLOR RADIO BROADCASTING COMPANY as Buyer Dated as of August 24, 1996 TABLE OF CONTENTS PAGE ---- ARTICLE 1. DEFINITIONS AND REFERENCES . . . . . . . . . . 2 ARTICLE 2 SALE AND PURCHASE OF ASSETS; ESCROW DEPOSIT; PURCHASE PRICE; AMOUNTS; ASSUMPTION OF LIABILITIES. . . . . . . . . . . . . . . 3 2.1. Asset Sale and Purchase of Assets . . . . . . . . 3 2.1.1. FCC Licenses . . . . . . . . . . . . . 3 2.1.2. Real and Leased Property Interests . . . . . . . . . . . . . . 3 2.1.3. Tangible Personal Property. . . . . . . 4 2.1.4. Intellectual Property . . . . . . . . . 4 2.1.5. Program Contracts . . . . . . . . . . . 4 2.1.6. Trade-out Agreements. . . . . . . . . . 4 2.1.7. Broadcast Time Sales Agreement. . . . . 5 2.1.8. Operating Contracts . . . . . . . . . . 5 2.1.9. Prepaid Items . . . . . . . . . . . . . 5 2.1.10. Vehicles. . . . . . . . . . . . . . . . 5 2.1.11. Files and Records . . . . . . . . . . . 5 2.1.12. Permits and Licenses. . . . . . . . . . 5 2.1.14. Accounts Receivable . . . . . . . . . . 6 2.2. Excluded Assets . . . . . . . . . . . . . . . . . 6 2.2.1. Cash. . . . . . . . . . . . . . . . . . 6 2.2.2. Personal Property Disposed Of . . . . . 6 2.2.3. Insurance . . . . . . . . . . . . . . . 6 2.2.4. Employee Plans and Assets . . . . . . . 6 2.2.5. Right to Tax Refunds. . . . . . . . . . 6 2.2.6. Certain Books and Records . . . . . . . 6 2.2.7. Third-Party Claims. . . . . . . . . . . 7 2.2.8. Rights Under this Agreement . . . . . . 7 2.2.9. Securities. . . . . . . . . . . . . . . 7 2.2.10. Name. . . . . . . . . . . . . . . . . . 7 2.2.11. Other Assets. . . . . . . . . . . . . . 7 2.2.12. Excluded Contracts and Unrelated Assets. . . . . . . . . . . 8 2.3. Escrow Deposit. . . . . . . . . . . . . . . . . . 8 2.4. Purchase Price. . . . . . . . . . . . . . . . . . 8 2.5. Payment of Purchase Price . . . . . . . . . . . . 8 2.6. Net Working Capital Amount and Proration Amount. . . . . . . . . . . . . . . . 9 2.7. Allocation of Purchase Price. . . . . . . . . . .10 2.8. Assumption of Liabilities . . . . . . . . . . . .11 2.9. Sundance Stations . . . . . . . . . . . . . . . .11 ARTICLE 3. REPRESENTATIONS AND WARRANTIES BY SELLER . . .12 3.1. Organization and Standing . . . . . . . . . . . .12 3.2. Authorization . . . . . . . . . . . . . . . . . .12 3.3. Compliance with Laws. . . . . . . . . . . . . . .13 3.4. Consents and Approvals; No Conflicts. . . . . . .13 TABLE OF CONTENTS (continued) PAGE ---- 3.5. Financial Statements; Undisclosed Liabilities . . . . . . . . . . . . . . . . . 13 3.6. Absence of Certain Changes or Events. . . . . . 14 3.7. Absence of Litigation . . . . . . . . . . . . . 15 3.8. Assets. . . . . . . . . . . . . . . . . . . . . 15 3.9. FCC Matters . . . . . . . . . . . . . . . . . . 15 3.10. Real Property . . . . . . . . . . . . . . . . . 16 3.11. Condition of Tangible Assets. . . . . . . . . . 17 3.12. Intellectual Property . . . . . . . . . . . . . 17 3.13. Station Contracts . . . . . . . . . . . . . . . 18 3.14. Taxes . . . . . . . . . . . . . . . . . . . . . 18 3.15. Employee Benefit Plans. . . . . . . . . . . . . 19 3.16. Labor Relations . . . . . . . . . . . . . . . . 20 3.17. Environmental Matters . . . . . . . . . . . . . 21 3.18. Transactions With Affiliates. . . . . . . . . . 22 3.19. Insurance . . . . . . . . . . . . . . . . . . . 22 ARTICLE 4. REPRESENTATIONS AND WARRANTIES BY BUYER . . . 22 4.1. Organization and Standing . . . . . . . . . . . 22 4.2. Authorization . . . . . . . . . . . . . . . . . 23 4.3. Compliance with Laws. . . . . . . . . . . . . . 23 4.4. Consents and Approvals; No Conflicts. . . . . . 23 4.5. Availability of Funds . . . . . . . . . . . . . 23 4.6. Qualification of Buyer. . . . . . . . . . . . . 23 4.7. No Outside Reliance . . . . . . . . . . . . . . 24 ARTICLE 5. PRE-CLOSING FILINGS . . . . . . . . . . . . . 24 5.1. Applications for FCC Consent. . . . . . . . . . 24 5.2. Hart-Scott-Rodino . . . . . . . . . . . . . . . 25 ARTICLE 6. COVENANTS AND AGREEMENTS OF SELLER. . . . . . 26 6.1. Negative Covenants. . . . . . . . . . . . . . . 26 6.1.1. Dispositions; Mergers . . . . . . . . 26 6.1.2. Accounting Principles and Practices . . . . . . . . . . . . . 26 6.1.3. Program Contracts . . . . . . . . . . 26 6.1.4. Broadcast Time Sales Agreements . . . 26 6.1.5. Additional Agreements . . . . . . . . 26 6.1.6. Employee Matters. . . . . . . . . . . 26 6.2. Affirmative Covenants . . . . . . . . . . . . . 26 6.2.1. Preserve Existence. . . . . . . . . . 26 6.2.2. Normal Operations . . . . . . . . . . 26 6.2.3. Maintain FCC Licenses . . . . . . . . 28 6.2.4. Station Contracts . . . . . . . . . . 28 6.2.5. Taxes . . . . . . . . . . . . . . . . 28 6.2.6. Partnership Action. . . . . . . . . . 28 6.2.7. Access. . . . . . . . . . . . . . . . 28 6.2.8. Insurance . . . . . . . . . . . . . . 29 6.2.9. Financial Statements. . . . . . . . . 29 ii TABLE OF CONTENTS (continued) PAGE ---- 6.2.10. Consents. . . . . . . . . . . . . . . 29 6.2.11. Preparation of Financial Statements. . . . . . . . . . . . . 29 6.3. Confidentiality . . . . . . . . . . . . . . . . 30 ARTICLE 7. COVENANTS AND AGREEMENTS OF BUYER . . . . . . 31 7.1. Confidentiality . . . . . . . . . . . . . . . . 31 7.2. Corporate Action. . . . . . . . . . . . . . . . 31 7.3. Access. . . . . . . . . . . . . . . . . . . . . 31 7.4 Pending Renewal Applications. . . . . . . . . . 32 7.5 Inconsistent Actions. . . . . . . . . . . . . . 32 ARTICLE 8. MUTUAL COVENANTS AND UNDERSTANDINGS OF SELLER AND BUYER . . . . . . . . . . . . . . . . . 32 8.1. Possession and Control. . . . . . . . . . . . . 32 8.2. Risk of Loss. . . . . . . . . . . . . . . . . . 32 8.3. Public Announcements. . . . . . . . . . . . . . 33 8.4. Employee Matters. . . . . . . . . . . . . . . . 33 8.5. Allocation of Purchase Price. . . . . . . . . . 34 8.6. Disclosure Schedules. . . . . . . . . . . . . . 34 8.7. Bulk Sales Laws . . . . . . . . . . . . . . . . 35 8.8. Due Diligence And Disclosure Schedule Delivery. . . . . . . . . . . . . . . . . . . 35 ARTICLE 9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE . . . . . . . . . . . . . . . . . 35 9.1. Representations and Covenants . . . . . . . . . 36 9.2. Required Consents . . . . . . . . . . . . . . . 36 9.3. Delivery of Documents . . . . . . . . . . . . . 36 9.4. FCC Order . . . . . . . . . . . . . . . . . . . 36 9.5. Hart-Scott-Rodino . . . . . . . . . . . . . . . 36 9.6 Legal Proceedings . . . . . . . . . . . . . . . 36 9.7. Sundance Consummation . . . . . . . . . . . . . 37 ARTICLE 10. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE . . . . . . . . . . . . . . . . . 37 10.1. Representations and Covenants . . . . . . . . . 37 10.2. Delivery by Buyer . . . . . . . . . . . . . . . 37 10.3. FCC Order . . . . . . . . . . . . . . . . . . . 37 10.4. Hart-Scott-Rodino . . . . . . . . . . . . . . . 37 10.5. Legal Proceedings . . . . . . . . . . . . . . . 38 ARTICLE 11. THE CLOSING. . . . . . . . . . . . . . . . . 38 11.1. Closing . . . . . . . . . . . . . . . . . . . . 38 11.2. Delivery by Seller. . . . . . . . . . . . . . . 38 11.2.1. Agreements and Instruments. . . . . . 38 11.2.2. Consents. . . . . . . . . . . . . . . 39 11.2.3. Certified Resolutions . . . . . . . . 39 11.2.4. Officers' Certificates. . . . . . . . 39 11.2.5. Deposit . . . . . . . . . . . . . . . 39 11.3. Delivery by Buyer . . . . . . . . . . . . . . . 39 11.3.1. Purchase Price Payment. . . . . . . . 39 11.3.2. Assumption Agreement. . . . . . . . . 40 11.3.3. Certified Resolutions . . . . . . . . 40 11.3.4. Officers' Certificate . . . . . . . . 40 iii TABLE OF CONTENTS (continued) PAGE ---- ARTICLE 12. SURVIVAL; INDEMNIFICATION. . . . . . . . . . 40 12.1. Survival of Representations. . . . . . . . . . 40 12.2. Indemnification by Sellers . . . . . . . . . . 40 12.3. Indemnification by Buyer . . . . . . . . . . . 41 12.4. Limitation on Indemnification. . . . . . . . . 41 12.5. Conditions of Indemnification. . . . . . . . . 42 12.6. Cure of Breach . . . . . . . . . . . . . . . . 44 ARTICLE 13. TERMINATION. . . . . . . . . . . . . . . . . 44 13.1. Termination. . . . . . . . . . . . . . . . . . 44 13.3. Effect of Termination. . . . . . . . . . . . . 46 ARTICLE 14. REMEDIES . . . . . . . . . . . . . . . . . . 47 14.1. Default by Buyer . . . . . . . . . . . . . . . 47 14.2. Default by Seller. . . . . . . . . . . . . . . 47 14.3. Liquidated Damages . . . . . . . . . . . . . . 47 14.4. Specific Performance . . . . . . . . . . . . . 48 ARTICLE 15. GENERAL PROVISIONS . . . . . . . . . . . . . 48 15.1. Additional Actions, Documents and Information. . . . . . . . . . . . . . . . . 48 15.2. Brokers. . . . . . . . . . . . . . . . . . . . 48 15.3. Expenses and Taxes . . . . . . . . . . . . . . 49 15.4. Notices. . . . . . . . . . . . . . . . . . . . 49 15.5. Waiver . . . . . . . . . . . . . . . . . . . . 51 15.6. Benefit and Assignment . . . . . . . . . . . . 51 15.7. Entire Agreement; Amendment. . . . . . . . . . 52 15.8. Severability . . . . . . . . . . . . . . . . . 52 15.9. Headings . . . . . . . . . . . . . . . . . . . 53 15.10. Governing Law. . . . . . . . . . . . . . . . . 53 15.11. Signature in Counterparts. . . . . . . . . . . 53 iv ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of this 24th day of August, 1996 by and among CLASSICAL ACQUISITION LIMITED PARTNERSHIP, a Maryland limited partnership ("Classical"), RADIO 100 OF MARYLAND LIMITED PARTNERSHIP, a Maryland limited partnership ("Radio Maryland"), RADIO 100 LIMITED PARTNERSHIP, a Maryland limited partnership ("Radio 100"), RADIO 570 LIMITED PARTNERSHIP, a Maryland limited partnership ("Radio 570"), RADIO 94 OF PHOENIX LIMITED PARTNERSHIP, a Maryland limited partnership ("Radio 94"), and RADIO 95 OF PHOENIX LIMITED PARTNERSHIP, a Maryland limited partnership ("Radio 95") (each of the foregoing entities shall be referred to herein individually as a "Seller" and collectively as the "Sellers") and CHANCELLOR RADIO BROADCASTING COMPANY, a Delaware corporation ("Buyer"). WHEREAS, Classical is the licensee of radio broadcast stations WGMS-FM, Washington, D.C. ("WGMS") and WTEM(AM), Bethesda, Maryland ("WTEM"), pursuant to certain authorizations issued by the Federal Communications Commission ("FCC") and Classical operates WGMS and owns or leases certain assets used in connection with the operation of WGMS and WTEM; WHEREAS, Radio 570 operates WTEM and owns or leases certain assets used in connection with the operation of WTEM; WHEREAS, Radio Maryland is the licensee of radio broadcast station WBIG-FM, Washington, D.C. ("WBIG"), pursuant to certain authorizations issued by the FCC and Radio Maryland operates WBIG and owns or leases certain assets used in connection with the operation of WBIG; WHEREAS, Radio 100 is the licensee of radio broadcast stations KQQL(FM), Anoka, Minnesota ("KQQL"), and WBOB-FM, Minneapolis, Minnesota ("WBOB"), pursuant to certain authorizations issued by the FCC and Radio 100 operates each of KQQL and WBOB and owns or leases certain assets used in connection with the operation of KQQL and WBOB; WHEREAS, Radio 94 is the licensee of radio broadcast station KOOL-FM, Phoenix, Arizona ("KOOL"), pursuant to certain authorizations issued by the FCC and Radio 94 operates KOOL and owns or leases certain assets used in connection with the operation of KOOL; WHEREAS, Radio 95 has entered into an Asset Purchase Agreement, dated as of May 3, 1996 (the "Radio 95 Asset Purchase Agreement"), by and among Radio 95, as buyer, Sundance Broadcasting, Inc., Sundance Broadcasting of Idaho, Inc., David E. Reese and Louise F. Reese, as sellers (collectively, the "Sundance Parties"), pursuant to which, among other things, Radio 95 has agreed to acquire from the Sundance Parties the assets owned, leased or used by the Sundance Parties in connection with the operation of radio broadcast stations KYOT-FM, Phoenix, Arizona ("KYOT"), KZON- FM, Phoenix, Arizona ("KZON"), KOY(AM), Phoenix, Arizona ("KOY"), KISO(AM), Phoenix, Arizona ("KISO"), WMIL-FM, Waukesha, Wisconsin ("WMIL"), and WOKY(AM), Milwaukee, Wisconsin ("WOKY," and, together with KYOT, KZON, KOY, KISO, and WMIL, the "Sundance Stations"); WHEREAS, in connection with the Radio 95 Asset Purchase Agreement, the FCC has approved the assignment of the radio broadcast licenses to Radio 95 for each of KYOT, KZON, KOY, KISO, WMIL, and WOKY; and WHEREAS, Sellers desire to sell, assign and transfer the FCC authorizations for WGMS, WBIG, WTEM, KQQL, WBOB, KOOL, KYOT, KZON, KOY, KISO, WMIL and WOKY (each a "Station" and collectively, the "Stations") and the assets and businesses of the Stations as described below, and Buyer desires to acquire the Stations, the FCC authorizations for the Stations, and the assets and businesses of the Stations as described below, all on the terms described in this Agreement; NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements hereinafter set forth, the parties hereto hereby agree as follows: ARTICLE 1. DEFINITIONS AND REFERENCES Capitalized terms used herein without definition shall have the respective meanings assigned thereto in ANNEX I attached hereto and incorporated herein for all purposes of this Agreement (such definitions to be equally applicable to both the singular and plural forms of the terms defined). Unless otherwise specified, all references herein to "Articles" or "Sections" are to Articles or Sections of this Agreement. -2- ARTICLE 2 SALE AND PURCHASE OF ASSETS; ESCROW DEPOSIT; PURCHASE PRICE; AMOUNTS; ASSUMPTION OF LIABILITIES 2.1. ASSET SALE AND PURCHASE OF ASSETS. Subject to the terms and conditions hereof and in reliance upon the representations, warranties and agreements contained herein, upon the Closing, each Seller shall sell, assign, transfer, convey and deliver to Buyer, free of all Encumbrances (other than Permitted Encumbrances), and Buyer shall purchase, acquire, pay for and accept from each Seller, all of each Seller's right, title and interest in, to and under all real, personal and mixed assets, rights, benefits and privileges, both tangible and intangible, wheresoever located, owned, leased or used (or to be owned, leased or used), by each Seller in connection with the business and operations of the Stations (collectively, the "Assets"); but excluding the Excluded Assets described in SECTION 2.2. The Assets shall include, without limitation, all of each Seller's right, title and interest in, to and under the following: 2.1.1. FCC LICENSES. All licenses, permits and other authorizations issued by the FCC to any Seller for the operation of the Stations (the "FCC Licenses"), including without limitation those listed in SCHEDULE 2.1.1, and all applications therefor, together with any pending applications, renewals, extensions or modifications thereof and additions thereto. 2.1.2. REAL AND LEASED PROPERTY INTERESTS. (a) All the real property of any Seller including, without limitation, all land, fee interests, easements and other interests of every kind and description in real property, buildings, structures, fixtures, appurtenances, towers and antennae, and other improvements thereon owned by any Seller and used in connection with the business and operations of the Stations ("Real Property"), all of which are listed or described in SCHEDULE 2.1.2. (b) All the real property leasehold interests of any Seller including, without limitation, leases and subleases of any land, easements and other real property leasehold interests of every kind and description in real property, buildings, structures, fixtures, appurtenances, towers and antennae, and other improvements thereon leased by any Seller in connection with the business and operations of the Stations ("Leased Property"), all of which are listed or described in SCHEDULE 2.1.2. -3- 2.1.3. TANGIBLE PERSONAL PROPERTY. All of the furniture, fixtures, furnishings, machinery, computers, equipment, inventory, spare parts, supplies, office materials and other tangible property of every kind and description maintained, owned, leased or used by any Seller in connection with the business and operations of the Stations, together with any replacements thereof and additions thereto made before the Closing, and less any retirements or dispositions thereof made before the Closing in the Ordinary Course of Business, including, without limitation, those items set forth and identitifed in SCHEDULE 2.1.3 for WGMS, WBIG and WTEM with a book value in excess of $20,000, and those items at the other Stations with a book value in excess of $5,000. 2.1.4. INTELLECTUAL PROPERTY. All of the service marks, copyrights, franchises, software, licenses (other than the FCC Licenses), trademarks, trade names, internet domain names, jingles, slogans, logotypes and other similar intangible assets maintained, owned or used by any Seller in connection with the business and operations of the Stations (including any and all applications, registrations, extensions and renewals relating thereto) (the "Intellectual Property"), and all of the rights, benefits and privileges associated therewith including, without limitation, those set forth and identified in SCHEDULE 2.1.4 and the right to use the call letters for the Stations and the right to sue for past infringement of Intellectual Property to the extent necessary to enforce Buyer's rights to such Intellectual Property. 2.1.5. PROGRAM CONTRACTS. The program (cash and non-cash) licenses and contracts under which any Seller is authorized to broadcast programs on the Stations and listed on SCHEDULE 2.1.5, and any other such program licenses, and contracts that are entered into between the date of this Agreement and the Closing Date in accordance with the terms of this Agreement (collectively the "Program Contracts"). 2.1.6. TRADE-OUT AGREEMENTS. The contracts and agreements (excluding Program Contracts) summarized in SCHEDULE 2.1.6, pursuant to which any Seller has sold, traded or bartered commercial air time on the Stations in consideration for any property or services in lieu of or in addition to cash (collectively, the "Trade-out Agreements"). -4- 2.1.7. BROADCAST TIME SALES AGREEMENT. All contracts and agreements pursuant to which any Seller has sold air time on the Stations for cash (collectively the "Time Sales Agreements"). 2.1.8. OPERATING CONTRACTS. The other contracts and agreements listed on SCHEDULE 2.1.8 (including, without limitation, employment agreements and talent contracts, collective bargaining agreements, network affiliation agreements and national and local advertising representation agreements for the Stations), together with all contracts and agreements that may be entered into between the date of this Agreement and the Closing Date in accordance with the terms of this Agreement (collectively, the "Operating Contracts" together with the Program Contracts, and the Trade-out Agreements and the Time Sales Agreements, but excluding any contract or agreement constituting an Excluded Asset set forth in SCHEDULE 2.2.12, the "Station Contracts"). 2.1.9. PREPAID ITEMS. All deposits and prepaid expenses of the Stations, including, without limitation, those set forth and described in SCHEDULE 2.1.9. 2.1.10. VEHICLES. All automotive equipment and motor vehicles maintained, owned, leased or otherwise used by any Seller in connection with the business and operations of the Stations, including, without limitation, those set forth and described in SCHEDULE 2.1.10. 2.1.11. FILES AND RECORDS. All engineering, business and other books, papers, logs, files and records pertaining to the business and operations of the Stations, but not the organizational documents and records or other partnership records of any Seller or other books and records which are Excluded Assets. 2.1.12. PERMITS AND LICENSES. All permits, approvals, orders, authorizations, consents, licenses, certificates, franchises, exemptions of, or filings or registrations with, any court or Governmental Authority (other than the FCC) in any jurisdiction, which have been issued or granted to or are owned or used by any Seller in connection with the business and operations of the Stations and all applications therefor, -5- together with any pending applications, extensions or modifications thereof and additions thereto. 2.1.13. ACCOUNTS RECEIVABLE. All Accounts Receivable arising out of the business and operations of the Stations. 2.2. EXCLUDED ASSETS. Notwithstanding anything to the contrary in this Agreement, there shall be excluded from the Assets and retained by Sellers, to the extent in existence at 12:01 a.m.(Washington, D.C. local time) on the Closing Date, the following assets (collectively, the "Excluded Assets"): 2.2.1. CASH. All cash and cash equivalents held by any Seller, all interest payable in connection with any such cash, cash equivalents or short term investments, bank balances and rights in and to bank accounts, and marketable and other securities of any Seller. 2.2.2. PERSONAL PROPERTY DISPOSED OF. All tangible personal property disposed of or consumed in the Ordinary Course of Business as permitted by this Agreement. 2.2.3. INSURANCE. All contracts of insurance and all insurance plans and the assets thereof. 2.2.4. EMPLOYEE PLANS AND ASSETS. All Plans, Benefit Arrangements, Qualified Plans and Welfare Plans and the assets thereof. 2.2.5. RIGHT TO TAX REFUNDS. Any and all claims of any Seller with respect to any Tax refunds. 2.2.6. CERTAIN BOOKS AND RECORDS. (a) All of each Seller's organizational documents and other partnership records, and originals of account books of original entry, (b) duplicated copies of any books, records, accounts, checks, payment records, Tax records -6- (including payroll, unemployment, real estate and other Tax records) and other similar books, records and information of any Seller relating to such Seller's operation of the business of the Stations prior to the Closing, (c) all records prepared by or on behalf of Sellers in connection with the sale of the Stations, and (d) all records and documents relating to any Excluded Assets. 2.2.7. THIRD-PARTY CLAIMS. All rights and claims of any Seller whether mature, contingent or otherwise, against third parties relating to the Assets or the Stations, whether in tort, contract, or otherwise other than rights and claims relating to past infringement of Intellectual Property to the extent necessary to enforce Buyer's rights to such Intellectual Property. 2.2.8. RIGHTS UNDER THIS AGREEMENT. All of each Seller's rights under or pursuant to this Agreement or any other rights in favor of Sellers pursuant to the other agreements contemplated hereby. 2.2.9. SECURITIES. All capital stock or other securities in respect of any Seller or any affiliate or partner of any Seller. 2.2.10. NAME. All rights to the name "Colfax Communications" or any logo or variation thereof and the goodwill associated therewith. 2.2.11. OTHER ASSETS. Any interests, contracts, agreements and other assets owned, leased or used, or to be owned, leased or used in connection with the business and operations of the following radio broadcast stations (none of which items are used exclusively in the business and operations of the Stations): (a) KOOL(AM), Phoenix, Arizona (it being understood that the assets of KOOL(AM) are being transferred by Sellers to Salem Media of Arizona, Inc.); (b) KLTB(FM), Boise, Idaho; (c) KARO(FM), Caldwell, Idaho; and (d) KIDO(AM), Boise, Idaho. -7- 2.2.12. EXCLUDED CONTRACTS AND UNRELATED ASSETS. The contracts, agreements and any other Assets listed on SCHEDULE 2.2.12, including certain real estate of Sellers not used in the business and operations of the Stations. 2.3. ESCROW DEPOSIT. For and in partial consideration of the execution and delivery of this Agreement, simultaneously with the execution and delivery of this Agreement, Buyer is depositing in escrow with the Deposit Escrow Agent an amount equal to Twenty Million Dollars ($20,000,000) in cash, such cash to be held as an earnest money deposit (the "Deposit"), in accordance with the terms and conditions of the Deposit Escrow Agreement. 2.4. PURCHASE PRICE. For and in consideration of the conveyances and assignments described herein and in addition to the assumption of Liabilities as set forth in SECTION 2.8, Buyer agrees to pay to Sellers, and Sellers agree to accept from Buyer, an amount equal to Three Hundred Sixty Five Million Dollars ($365,000,000) (the "Base Purchase Price"), PLUS or MINUS (as the case may be) (a) the Net Working Capital Amount as provided for in SECTION 2.6, (b) the Proration Amount as provided for in SECTION 2.6 and (c) the amount of any of the Stations' net trade balance at Closing, if and to the extent any such balance is positive or negative by an amount in excess of $25,000 per Station (in the event any such balance is positive in excess of $25,000, then the Purchase Price shall be increased by such excess; in the event any such balance is negative in excess of $25,000, then the Purchase price shall be decreased by such excess) (collectively, the "Purchase Price"). The Purchase Price shall be payable as described in SECTION 2.5. The Purchase Price shall be allocated among the Assets in accordance with SECTION 8.5. The Purchase Price shall be allocated among the Sellers in accordance with SECTION 2.7. 2.5. PAYMENT OF PURCHASE PRICE. At the Closing, subject to the satisfaction or waiver of all the conditions to the Buyer's obligations hereunder, Buyer shall deliver the Base Purchase Price, plus or minus (as the case may be) the Estimated Net Working Capital (as defined in SECTION 2.6.1), the initial Proration Amount determined in accordance with SECTION 2.6.3, and the adjustment set forth in SECTION 2.4(C), by wire transfer of immediately available federal funds to an account which will be identified by Sellers not less than two (2) days prior to the Closing Date, and Seller -8- shall cause the Deposit Escrow Agent to return the Deposit to Buyer (or its agent) contemporaneously with the Closing. 2.6. NET WORKING CAPITAL AMOUNT AND PRORATION AMOUNT. 2.6.1. ESTIMATED NET WORKING CAPITAL AMOUNT. At least three (3) days prior to the Closing Date, Sellers shall deliver to Buyer in writing and in reasonable detail a good faith estimate of the Net Working Capital (the "Estimated Net Working Capital") as of the Closing Date. The Purchase Price shall be (a) increased by the amount, if any, by which the Estimated Net Working Capital exceeds zero dollars ($0), or (b) decreased by the amount, if any, by which the Estimated Net Working Capital is less than zero dollars ($0) (such increase or decrease, as the case may be, is referred to herein as the "Estimated Net Working Capital Amount"). 2.6.2. FINAL NET WORKING CAPITAL AMOUNT. Within ninety (90) days after the Closing Date, Buyer shall deliver to Sellers in writing and in reasonable detail a good faith final determination of the Net Working Capital as of the Closing Date ("Final Net Working Capital Amount"). Sellers shall assist Buyer in making such determination and Buyer shall provide Sellers with reasonable access to the properties, books and records relating to the Stations for the purpose of determining the Final Net Working Capital Amount. Sellers shall have the right to review the computations and workpapers used in connection with Buyer's preparation of the Final Net Working Capital Amount. If Sellers disagree with the amount of the Final Net Working Capital Amount determined by Buyer, Sellers shall so notify Buyer in writing within forty-five (45) days after the date of receipt of Buyer's Final Net Working Capital Amount, specifying in detail any point of disagreement; provided, however, if Sellers fail to notify Buyer in writing of Sellers' disagreement within such forty-five (45) day period, Buyer's determination of the Final Net Working Capital Amount shall be final, conclusive and binding on Sellers and Buyer. After the receipt of any notice of disagreement, Buyer and Sellers shall negotiate in good faith to resolve any disagreements regarding the Final Net Working Capital Amount. If any such disagreement cannot be resolved by Sellers and Buyer within forty-five (45) days after Buyer has received notice from Sellers of the existence of such disagreement, Buyer and Sellers shall jointly select KPMG Peat Marwick, or another nationally recognized independent public accounting firm (which has not performed any service since January 1, 1992 for either Buyer or Sellers or any of their respective subsidiaries), (the "Accounting Firm") to review the Buyer's determination of the Final Net Working Capital Amount and to resolve as soon as possible all points of disagreement raised by Sellers. All determinations made by the Accounting Firm with respect to the Final Net Working Capital Amount shall be final, conclusive and binding on Buyer and Sellers. The fees and expenses of the Accounting Firm incurred in connection with any such determination shall be shared one-half by Buyer and one-half by Sellers. -9- If the Final Net Working Capital Amount is such that Buyer's payment of the Estimated Net Working Capital Amount is an underpayment to Sellers for the actual Net Working Capital, then Buyer shall pay Sellers in cash, within two (2) business days following the final determination by the Accounting Firm as set forth in the immediately preceding paragraph of the Final Net Working Capital Amount, an amount equal to such underpayment plus interest at the rate of eight percent (8%) per annum from the Closing Date to the payment date. If the Final Net Working Capital Amount is such that Buyer's payment of the Estimated Net Working Capital Amount is an overpayment to Sellers for the actual Net Working Capital, then Sellers shall pay Buyer in cash within two (2) business days following the determination of the Final Net Working Capital Amount an amount equal to such overpayment, plus interest thereon at the rate of eight percent (8%) per annum from the Closing to the payment date. Any amounts paid pursuant to this SECTION 2.6.2 shall be by wire transfer of immediately available funds for credit to the recipient at a bank account identified by such recipient in writing. Buyer and Sellers agree that prior to the date of the final determination of the Final Net Working Capital Amount pursuant to this SECTION 2.6.2 (by the Accounting Firm or otherwise), neither party will destroy any records pertaining to, or necessary for, the final determination of the Final Net Working Capital Amount. 2.6.3. PRORATION AMOUNT. To the extent not otherwise adjusted for in the determination of the Net Working Capital, at least three (3) days prior to the Closing Date, Sellers shall make a good faith estimate of the adjustment to the Purchase Price customary in radio broadcast station transactions for Proration Items (the "Proration Amount") to reflect that all Proration Items of the Stations shall be apportioned between Buyer and Sellers so that all such Proration Items attributable to the business and operation of the Stations for the period prior to the Closing Date are for the account of Sellers and for the period on and after the Closing Date are for the account of Buyer. After the Closing Date, the Proration Amount shall be finally determined in accordance with the provisions for final determination of the Net Working Capital set forth in SECTION 2.6.2 and all disagreements regarding the Proration Amount shall be negotiated in good faith by Buyer and Sellers and otherwise settled in accordance with the provisions for the resolution for disagreements regarding the Final Net Working Capital set forth in SECTION 2.6.2. Any overpayment or underpayment of the Proration Amount determined in accordance with this SECTION 2.6.3 shall be paid in the same manner as amounts paid pursuant to SECTION 2.6.2. 2.7. ALLOCATION OF PURCHASE PRICE. Sellers and Buyer agree to allocate the Base Purchase Price among the Sellers for all purposes (including financial, accounting and Tax purposes) as follows: -10- (a) Classical $50,000,000.00 (b) Radio Maryland $90,000,000.00 (c) Radio 570 $21,000,000.00 (d) Radio 100 $85,000,000.00 (e) Radio 94 $30,000,000.00 (f) Radio 95 $89,000,000.00 The Purchase Price shall be allocated among the classes of Assets as provided for in SECTION 8.5. 2.8. ASSUMPTION OF LIABILITIES. 2.8.1. At the Closing, Buyer shall assume, discharge, agree to perform and indemnify Sellers from (a) all Liabilities relating to the ownership and operation of the Stations and the Assets for the period on and after the Closing Date, which shall include, without limitation, all Liabilities arising on and after the Closing with respect to the Station Contracts, and (b) current Liabilities for which there has been an adjustment to the Purchase Price in connection with the determination of the Final Net Working Capital Amount (collectively, the "Assumed Liabilities"). 2.8.2. Except for the Assumed Liabilities expressly assumed by Buyer pursuant to SECTION 2.8.1 hereof, Buyer assumes no other Liabilities of any kind or description. 2.9. SUNDANCE STATIONS. 2.9.1. Buyer acknowledges and agrees that the consummation of the purchase by Radio 95 of the Sundance Stations is scheduled to occur during September 1996 (the "Sundance Closing"). Notwithstanding anything to the contrary set forth herein or otherwise, neither Radio 95 nor any other Seller shall make or be deemed to make any representations, warranties, covenants or agreements regarding the Sundance Stations until the consummation of the Sundance Closing and thereafter any representations, warranties, covenants or agreements regarding the Sundance Stations shall only relate to Radio 95's period of ownership of the Sundance Stations. 2.9.2. To the extent assignable, Sellers agree to assign all of Sellers' right, title and interest in, to and under the Radio 95 Asset Purchase Agreement. In the event that any such rights and interests are not assignable, Sellers shall use commercially reasonable efforts (a) to provide Buyer the financial and business benefits Buyer would have enjoyed had such rights and interests been -11- assignable and (b) upon the request of Buyer, to enforce in Sellers' name for the account of Buyer any rights that would otherwise have been available to Buyer had the rights and interests under the Radio 95 Asset Purchase Agreement been assignable. ARTICLE 3. REPRESENTATIONS AND WARRANTIES BY SELLER Except as set forth in the Schedules to be delivered pursuant to this Agreement as provided for in SECTION 8.8 (which Schedules may be updated in accordance with SECTION 8.6), each Seller, with respect to such Seller and with respect to the Station and Assets owned by such Seller, represents and warrants to Buyer as follows: 3.1. ORGANIZATION AND STANDING. Seller is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Maryland and is duly qualified to do business as a foreign limited partnership and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. Seller has the full partnership power and authority to own, lease and otherwise to hold and operate the Assets, to carry on the business of the Stations as now conducted, and to enter into and perform the terms of this Agreement, the other Seller Documents and the transactions contemplated hereby and thereby. 3.2. AUTHORIZATION. The execution, delivery and performance of this Agreement and of the other Seller Documents, and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary action of the partners of Seller and by any other necessary limited partnership actions of Seller (none of which actions has been modified or rescinded and all of which actions are in full force and effect). This Agreement and the Deposit Escrow Agreement constitute, and upon execution and delivery each other Seller Document will constitute, valid and binding agreements and obligations of Seller, enforceable against Seller in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditors' rights generally and by the application of general principles of equity. -12- 3.3. COMPLIANCE WITH LAWS. Except as permitted or contemplated hereby, the operations of the Stations have been and are now being conducted by Sellers in material compliance with all Laws of the FCC or any other Governmental Authority binding on Sellers, the Stations or their respective properties or Assets, except to the extent the failure to so comply would not be reasonably expected to have a Material Adverse Effect. Except as set forth in SCHEDULE 3.3, no investigation or review by any Governmental Authority with respect to the Sellers or the Stations is pending or, to Sellers' Knowledge, threatened. Without limiting the generality of the foregoing, Sellers have complied in all material respects with the Communications Act, and all rules, regulations and written policies of the FCC thereunder. 3.4. CONSENTS AND APPROVALS; NO CONFLICTS. 3.4.1. The execution and delivery of this Agreement, and the other Seller Documents and the performance of the transactions contemplated herein by Seller, will not require any consent, approval, authorization or other action by, or filing with or notification to, any Person or Governmental Authority where the failure to make such filing or obtain such consent will have a Material Adverse Effect, except as follows: (a) filings required under Hart-Scott-Rodino, (b) consents to the assignment of the FCC Licenses to Buyer by the FCC, (c) filings, if any, with respect to real estate transfer taxes, and (d) certain of the Station Contracts may be assigned only with the consent of third parties, as specified in SCHEDULE 3.4.1. 3.4.2. Assuming all consents, approvals, authorizations and other actions described in SECTION 3.4.1. have been obtained and all filings and notifications described in SECTION 3.4.1. have been made, the execution, delivery and performance of this Agreement and the other Seller Documents by Seller do not and will not (a) conflict with or violate any Law applicable to Seller, the Assets or the Stations or by which any of the Assets or Stations is subject or affected, (b) conflict with or result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) of any contract or agreement to which Seller is a party or by which Seller is bound or to which any of the Assets or any Station is subject or affected, (c) result in the creation of any Encumbrance upon the Assets, or (d) conflict with or violate the organizational documents of Seller; except where any such conflict, violation or breach would not, individually or in the aggregate, have a Material Adverse Effect. 3.5. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. 3.5.1. Sellers have delivered to Buyer the following financial statements: (a) combined audited balance sheets of WGMS, WTEM, WBIG, WBOB and KQQL (collectively, the "Five Station Group") as of the end of the fiscal year ending December 31, 1995, and the combined statements of income and cash flows -13- for such fiscal year; (b) unaudited balance sheets of each Station in the Five Station Group as of the end of the seven-month period ending July 31, 1996; (c) combined unaudited balance sheets of KOOL and KOOL(AM), Phoenix, Arizona ("KOOL(AM)"), as of the end of the fiscal year ending December 31, 1995, and the statement of income and cash flows for such fiscal year; (d) combined unaudited balance sheets of KOOL and KOOL(AM) as of July 31, 1996; (e) audited balance sheets of the Sundance Stations as of the end of the fiscal year ending December 31, 1995, and the statements of income and cash flows for such fiscal year; and (f) unaudited balance sheets of the Sundance Stations as of the end of the six-month period ending June 30, 1996. The financial statements referred to in SECTION 3.5.1(a), SECTION 3.5.1(b) and SECTION 3.5.1(d): (i) present fairly in all material respects the financial condition of the Stations to which such financial statements are applicable as of the respective dates and the results of operations and cash flows for the respective periods indicated, and (ii) have been prepared on the accrual basis of accounting used by Sellers in the preparation of Sellers' federal income tax returns (except that unaudited financial statements do not contain all footnotes and are subject to year-end audit adjustments). 3.5.2. Except as set forth in SCHEDULE 3.5.2, there exist no Liabilities of either the Five Station Group or KOOL relating to, or arising out of, the business or operations of such Stations, contingent or absolute, matured or unmatured, known or unknown, except (a) as reflected on the unaudited balance sheets as of July 31, 1996 (the "Current Balance Sheet Date") included in SCHEDULE 3.5.1 and (b) for Liabilities that (i) were incurred after the Current Balance Sheet Date in the Ordinary Course of Business or (ii) individually and in the aggregate have not resulted, and could not reasonably be expected to result, in any Material Adverse Effect. 3.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth and described in SCHEDULE 3.6, since the Current Balance Sheet Date, there has been no Material Adverse Effect (or any event that reasonably could be expected to have a Material Adverse Effect) relating to the Five Station Group and KOOL taken as a whole. Except as set forth and described in SCHEDULE 3.6, since the Current Balance Sheet Date, Seller has conducted the business of the Five Station Group and KOOL in the Ordinary Course of Business, and (except for events which would not, individually or in the aggregate, have a Material Adverse Effect) Seller has not (a) incurred loss of, or injury to, any of the Assets as the result of any fire, explosion, flood, windstorm, earthquake, labor trouble, riot, accident, act of God or public enemy or armed forces, or other casualty; (b) incurred, or become subject to, any Liability, except current Liabilities incurred in the Ordinary Course of Business; (c) discharged or satisfied any Encumbrance or paid any Liability other than current Liabilities shown in the balance sheets furnished pursuant to SECTION 3.5.1(a), SECTION 3.5.1(b) or SECTION 3.5.1(d), and current Liabilities incurred since the Current Balance Sheet Date in the Ordinary -14- Course of Business; (d) mortgaged, pledged or subjected to any Encumbrance any of its Assets except as shown in the balance sheets furnished pursuant to SECTION 3.5.1(a), SECTION 3.5.1(b) or SECTION 3.5.1(d); (e) sold, exchanged, transferred or otherwise disposed of any of its Assets, or canceled any debts or claims; (f) written down the value of any Assets or written off as uncollectible any Accounts Receivable, except write downs and write-offs in the Ordinary Course of Business; (g) entered into any transactions other than in the Ordinary Course of Business; (h) made any material change in any method of accounting or accounting practice; or (i) made any agreement to do any of the foregoing. 3.7. ABSENCE OF LITIGATION. Except as set forth on SCHEDULE 3.7 as of the date hereof, there is no action, suit, investigation, claim, arbitration or litigation pending or, to Seller's Knowledge, threatened against Seller, the Assets, or the Stations before any Governmental Authority that, individually or in the aggregate, would be reasonably likely to (a) have a Material Adverse Effect, or (b) challenge or seek to prevent, enjoin, alter or materially delay the transaction contemplated hereby. 3.8. ASSETS. Except for the Excluded Assets, the Assets include all of the assets or property used in the business of the Stations as presently operated. Except for leased or licensed Assets, Seller is the owner of, and has good title to, the Assets free and clear of any Encumbrances, except for and subject only to (a) the Permitted Encumbrances, and (b) those Encumbrances listed in SCHEDULE 3.8 which shall be discharged and removed on or prior to the Closing Date. At the Closing, Buyer shall acquire good title to, and all right, title and interest in and to the Assets, free and clear of all Encumbrances, except for the Permitted Encumbrances. 3.9. FCC MATTERS. 3.9.1. Seller holds the FCC Licenses listed as held by Seller on SCHEDULE 2.1.1. The FCC Licenses constitute all of the licenses, permits and authorizations from the FCC that are required for the business and operations of the Stations as currently operated. The FCC Licenses are valid and in full force and effect through the dates set forth on SCHEDULE 2.1.1, unimpaired by any condition which would reasonably be likely to have, individually or in the aggregate, a Material Adverse Effect. Except as set forth in SCHEDULE 3.9, no application, action or proceeding is pending for the renewal or modification of any of the FCC Licenses, and, except for actions or proceedings affecting radio broadcast stations generally, no application, complaint, action or proceeding is pending or, to Seller's Knowledge, threatened that may result in the (a) the revocation, modification, non-renewal or suspension of any of the FCC Licenses, (b) the -15- issuance of a cease-and-desist order, or (c) the imposition of any administrative or judicial sanction with respect to the Stations. Seller has no Knowledge of any facts, conditions or events relating to Seller or the Stations that would reasonably be expected to cause the FCC to deny the assignment of the FCC Licenses as provided for in this Agreement. 3.9.2. Seller has duly and timely filed, or caused to be filed with the appropriate Governmental Authorities all material reports, statements, documents, registrations, filings or submissions with respect to the operations of the Stations in the Five Station Group and the ownership thereof, including, without limitation, applications for renewal of authority required by applicable law to be filed to the extent the failure to so file could reasonably be expected to have a Material Adverse Effect. All such filings complied in all material respects with applicable laws when made and no material deficiencies have been asserted with respect to any such filings. Except as disclosed in SCHEDULE 3.9, there are no facts or circumstances relating to Seller or the Stations arising from noncompliance with the Communications Act, or the rules, regulations or written policies of the FCC in effect on the date of this Agreement that could reasonably be expected to (a) disqualify Seller from assigning the FCC Licenses to Buyer or (b) prevent or delay the consummation by Buyer of the transactions contemplated by this Agreement. The Stations have been operated in all material respects in accordance with the terms of the FCC Licenses. To Seller's Knowledge, with the exception of operations set forth in SCHEDULE 3.9, and with the further exception of such temporary reduced power operations as are necessary for routine maintenance, each Station operates within the operating power tolerances specified in 47 C.F.R. Section 73.1560(b). To Seller's Knowledge, no other broadcast station or radio communications facility is causing interference to the Stations' transmissions beyond that which is allowed by FCC rules and regulations. 3.10. REAL PROPERTY. 3.10.1. Sellers have (or shall have as of the Closing Date) good and marketable title to the Real Property listed in SCHEDULE 2.1.2, free and clear of all Encumbrances, except for (a) those items listed in SCHEDULE 3.10.1, and (b) Permitted Encumbrances. 3.10.2. Sellers have (or shall have as of the Closing Date) a valid leasehold interest in all Leased Property listed as leased by Sellers in SCHEDULE 2.1.2. SCHEDULE 2.1.2 lists all leases and subleases pursuant to which any of the Leased Property is leased by Sellers. Sellers are (or shall be as of the Closing Date) the owners and holders of all the Leased Property purported to be granted by such leases and subleases. Each such lease and sublease is in full force and effect and constitutes a legal, valid and binding obligation of, and is legally enforceable against Sellers, and to the Knowledge of Sellers, each other party thereto and grants the leasehold interest it purports to grant. Sellers have complied with all of -16- the material provisions of such leases and subleases and are not in default thereunder in any material respect, and to Sellers' Knowledge, there has not occurred any event which (whether with or without notice, lapse of time or the happening or occurrence of any other event) would constitute such a default. 3.10.3 The Real Property and the Leased Property listed in SCHEDULE 2.1.2 constitute all of the real property owned, leased or used by any Seller in the business and operations of the Stations. 3.10.4. To the Knowledge of Sellers, all buildings, structures, fixtures and other improvements on the Real Property are in good operating condition (ordinary wear and tear excepted) and are suitable for present uses. 3.10.5. To the Knowledge of Sellers, no portion of the Real Property or any building, structure, fixture or improvement thereon is the subject of, or affected by, any condemnation, eminent domain or inverse condemnation proceeding currently instituted or pending or threatened. 3.11. CONDITION OF TANGIBLE ASSETS. SCHEDULE 2.1.3 hereto contains a list of material tangible Assets owned or held by Sellers and used in the conduct of the business and operations of the Stations (other than Real Property, which is addressed in the foregoing SECTION 3.10). Except for tangible Assets used by Sellers under leases or contracts, Sellers own and will have on the Closing Date good and marketable title to all property referred to in the immediately preceding sentence and none of such property is, or at the Closing will be, subject to any Encumbrances, other than Permitted Encumbrances. The tangible Assets and fixtures owned or used by Sellers necessary for the operation of the Stations, are in good operating condition (ordinary wear and tear excepted) and are sufficient to permit the conduct of the business of the Stations in material compliance with FCC rules and regulations. Sellers own or hold under leases or contracts all of the tangible personal property and fixtures required to conduct the business of the Stations as presently conducted. The Assets to be transferred hereunder constitute all of the assets, rights and properties that are required for the business and operations of the Stations as presently conducted. 3.12. INTELLECTUAL PROPERTY. SCHEDULE 2.1.4 contains a true, correct and complete listing of all Intellectual Property owned or licensed by or registered in the name of Seller which is used in the business and operations of the Stations, all of which is transferable to Buyer by the sole act and deed of Seller; and except as set forth in SCHEDULE 3.12 no consent on the part of any other person is necessary to validate the transfer to Buyer of such Intellectual Property. Except as set forth in SCHEDULE 3.12, Seller -17- pays no royalty to anyone with respect to the Intellectual Property. Seller owns or possesses all rights to use all such Intellectual Property material to the conduct of the business of the Stations. Seller does not have any Knowledge and Seller has not received any notice to the effect that any service rendered by Seller relating to the business of the Stations may infringe on any Intellectual Property right or other legally protectable right of another. Seller has the right to the use of the call letters of the Stations pursuant to the rules and regulations of the FCC. 3.13. STATION CONTRACTS. The Station Contracts set forth in SCHEDULES 2.1.5, 2.1.6 and 2.1.8 are all of the contracts and agreements relating to the Assets, to the Stations or to the business and operations thereof, other than (a) contracts and agreements for the sale of broadcast time for cash entered into in the Ordinary Course of Business for less than one year; (b) contracts and agreements which are terminable by Seller on no more than ninety (90) days notice; and (c) contracts and agreements which do not require payments of more than $25,000 each or $150,000 in the aggregate per Station. Complete and correct copies of all such Station Contracts have been made available to Buyer and except as set forth on SCHEDULE 3.13, (a) each such Station Contract is in full force and effect; (b) Seller is not in material breach or default of the terms of any Station Contract; (c) none of the material rights of Seller under any such Station Contract will be subject to termination or modification, nor will a default occur, as a result of the consummation of the transactions contemplated hereby, except to the extent that failure to obtain the prior consent to assignment thereof of any party thereto shall or could be interpreted to constitute a termination or modification of or a default under any such Station Contract; and (d) to the Knowledge of Seller, no other party to any such Station Contract is in material breach or default of the terms thereunder. 3.14. TAXES. 3.14.1. Seller has (or, in the case of returns becoming due after the date hereof and on or before the Closing Date, will have prior to the Closing Date) duly filed all Seller Tax Returns required to be filed by Seller on or before the Closing Date with respect to all applicable Taxes. In the case of any Seller Tax Returns which receive an extension for their date of filing, such Seller Tax Returns will be considered due on, and not considered required to be filed before, the extended due date. To the Seller's Knowledge, all of Seller Tax Returns are (or, in the case of returns becoming due after the date hereof and on or before the Closing Date, will be) true and complete in all material respects. Seller: (a) has paid all Taxes due to any Governmental Authority in connection with any of Seller Tax Returns; or (b) has established (or, in the case of amounts becoming due after the date hereof, prior to the Closing Date will have established) adequate reserves (in -18- conformity with generally accepted accounting principles consistently applied) for the payment of such Taxes. 3.14.2. There is no action, suit, proceeding, audit, investigation or claim pending or, to the Knowledge of Seller, threatened in respect of any Taxes associated with, or which would become a lien against, the Assets or operations of the Stations for which Seller may become liable, nor has any deficiency or claim for any such Taxes been proposed, asserted or, to the Knowledge of Seller, threatened. There is no Station Contract, waiver or consent providing for an extension of time with respect to the assessment or collection of any Taxes associated with, or which would become a lien against, the Assets or operations of the Stations against Seller, and no power of attorney granted by Seller with respect to any related tax matters is currently in force. 3.15. EMPLOYEE BENEFIT PLANS. 3.15.1. SCHEDULE 3.15 lists all Plans and Benefit Arrangements maintained by or contributed to by Seller for the benefit of the employees of the Stations (collectively, the "Benefit Plans"). Each Benefit Plan has been maintained in substantial compliance with its terms and with the requirements prescribed by applicable Law, including, without limitation, ERISA and the Code. 3.15.2. SCHEDULE 3.15 sets forth a list of all Qualified Plans. All Qualified Plans and any related trust agreements or annuity agreements (or any other funding document) have been maintained in compliance with ERISA and the Code (including, without limitation, the requirements for Tax qualification described in Section 401 thereof). The trusts established under such Plans are exempt from federal income taxes under Section 501(a) of the Code. 3.15.3. SCHEDULE 3.15 lists all funded Welfare Plans that provide benefits to current or former employees of Seller or its beneficiaries. The funding under each Welfare Plan does not exceed and has not exceeded the limitations under Sections 419A(b) and 419A(c) of the Code. Seller is not subject to taxation on the income of any Welfare Plan's welfare benefit fund (as such term is defined in Section 419(e) of the Code) under Section 419A(g) of the Code. 3.15.4. SCHEDULE 3.15 (a) identifies all post-retirement medical, life insurance or other benefits promised, provided or otherwise due now or in the future to current, former or retired employees of Seller, (b) identifies the method of funding (including, without limitation, any individual accounting) for all such benefits, (c) discloses the funded status of the Plans providing or promising such benefits, and (d) sets forth the method of accounting for such benefits to any key employees (as defined in Section 416(i) of the Code) of Seller. -19- 3.15.5. Seller has (a) filed or caused to be filed all returns and reports on the Plans that it is required to file and (b) paid or made adequate provision for all fees, interest, penalties, assessments or deficiencies that have become due pursuant to those returns or reports or pursuant to any assessment or adjustment that has been made relating to those returns or reports. All other fees, interest, penalties and assessments that are payable by or for Seller have been timely reported, fully paid and discharged. There are no unpaid fees, penalties, interest or assessments due from Seller or from any other person that are or could become an Encumbrance on any Asset or could otherwise adversely affect the businesses or Assets. Seller has collected or withheld all amounts that are required to be collected or withheld by it to discharge its obligations, and all of those amounts have been paid to the appropriate Governmental Authority or set aside in appropriate accounts for future payment when due. Seller has furnished to Buyer true and complete copies of all documents setting forth the terms and funding of each Plan. 3.15.6. Seller has not loaned any money to any employee of Seller or the Stations. 3.16. LABOR RELATIONS. 3.16.1. Except as set forth in SCHEDULE 3.16, there are no strikes, work stoppages, grievance proceedings, union organization efforts, or other controversies pending or threatened between Seller and any union. Except as set forth in SCHEDULE 3.16, Sellers have not agreed to recognize any union or other collective bargaining unit, nor has any union or other collective bargaining unit been certified as representing any of their employees. Except as disclosed on SCHEDULE 3.16, Seller with respect to the Stations (a) has no unfair labor practices or complaints pending or, to Seller's Knowledge, threatened against it before the National Labor Relations Board, (b) has no material grievances pending or, to Sellers' Knowledge, threatened against it and (c) has no material charges pending or, to Sellers' Knowledge, threatened against it before the Equal Employment Opportunity Commission or any state or local agency responsible for the prevention of unlawful employment practices. 3.16.2. On or prior to August 28, 1996, Seller shall provide to Buyer true and complete lists of the employees of Seller who perform significant services (a) at the Five Station Group Stations and KOOL dated as of July 31, 1996 and (b) at the Sundance Stations dated as of May 1, 1996; each such list sets forth the names, positions, and location of all employees or other Station and broadcast personnel and the current salaries of all such employees. SCHEDULE 3.16 sets forth any other compensation arrangements with respect to General Managers, Station Managers, General Sales Managers, Local Sales Managers, National Sales Managers, Program Directors, Business Managers, and Traffic Managers (collectively "Station Management") and all on-the-air broadcast personnel of the -20- Stations and indicates which of those employees, Station Management, or on-the-air broadcast personnel is a party of an employment or consulting or similar contract with Sellers that is not terminable upon not more than sixty (60) days' notice without additional costs to Sellers. 3.17. ENVIRONMENTAL MATTERS. 3.17.1 Sellers have furnished to Buyer all information in any Seller's possession, custody or control pertaining to the environmental history of the Real Property or the environment, natural resources, and occupational safety at any of the Stations, including, without limitation, all environmental assessments. 3.17.2. Except as set forth in SCHEDULE 3.17, to the Knowledge of Sellers, Sellers are in material compliance with, and the Real Property and all improvements and operations thereon are in material compliance with, all Environmental Laws. 3.17.3 Except as set forth in SCHEDULE 3.17, there are no pending or, to the Knowledge of Sellers, threatened actions, suits, claims, investigations, or other legal proceedings based on (and Seller has not received any notice of any complaint, order, directive, citation, notice of responsibility, notice of potential responsibility, or information request from any Governmental Authority arising out of or attributable to): (a) the current or past presence at any part of the Real Property of Hazardous Materials; (b) the current or past release or threatened release into the environment from the Real Property (including, without limitation, into any storm drain, sewer, septic system or publicly owned treatment works) of any Hazardous Materials; (c) the off-site disposal of Hazardous Materials originating on or from the Real Property or the businesses or Assets of Seller; (d) any facility operations or procedures of Sellers which do not conform to requirements of the Environmental Laws; or (e) any violation of Environmental Laws at any part of the Real Property arising from Sellers' activities involving Hazardous Materials. Sellers have been duly issued all permits, licenses, certificates and approvals required under any Environmental Law, except for such permits the failure to obtain, will not have, individually or in the aggregate, a Material Adverse Effect. 3.17.4 Sellers have obtained and currently maintain all permits, licenses, certificates and approvals required under any Environmental Law, and are and have been in compliance therewith except for such permits the failure to obtain, maintain or comply with, will not have, individually or in the aggregate, a Material Adverse Effect. 3.17.5 Except as set forth in SCHEDULE 3.17, there is not now nor in the past has been on, under, or at any of the Real Property any underground storage tanks, underground piping associated with such tanks, impoundments -21- containing Hazardous Materials, above-ground storage tanks, dikes, any asbestos-containing materials or any polychlorinated biphenyls. 3.17.6 Except as disclosed on SCHEDULE 3.17 and to Seller's Knowledge, no facts, circumstances, or conditions with respect to Hazardous Materials exist at any Real Property or the operations thereon that could reasonably be expected to have a Material Adverse Effect. 3.18. TRANSACTIONS WITH AFFILIATES Except as set forth in SCHEDULE 3.18 attached hereto, Seller is not now, and since January 1, 1996, has not been, a party, directly or indirectly, to any contract, lease, arrangement or transaction which is material to the business or operations of any Station, whether for the purchase, lease or sale of property, for the rendition of services or otherwise, with any affiliate of Seller, or any officer, director, employee, proprietor, partner or shareholder of Seller. The terms and conditions of the transactions involving Seller and any affiliate of Seller which are identified on SCHEDULE 3.18 are described briefly therein. 3.19. INSURANCE. SCHEDULE 3.19 contains a list and brief summary of all policies of title, property, fire, casualty, liability, life, workmen's compensation, libel and slander, and other forms of insurance of any kind relating to the Assets or the business and operations of the Stations and held by Seller. All such policies are in full force and effect. ARTICLE 4. REPRESENTATIONS AND WARRANTIES BY BUYER Buyer represents, warrants and covenants to Sellers as follows: 4.1. ORGANIZATION AND STANDING. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware and by the Closing Date will be duly qualified to do business in each jurisdiction where such qualification is necessary for the ownership and operation of the Stations. Buyer has the full power and authority to enter into and perform the terms of this Agreement and the other Buyer Documents and to carry out the transactions contemplated hereby and thereby. -22- 4.2. AUTHORIZATION. The execution, delivery and performance of this Agreement and of the other Buyer Documents, and the consummation of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary actions of Buyer (none of which actions has been modified or rescinded and all of which actions are in full force and effect). This Agreement constitutes, and upon execution and delivery each such other Buyer Document will constitute, a valid and binding agreement and obligation of Buyer, enforceable against Buyer in accordance with its respective terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditors' rights generally and by the application of general principles of equity. 4.3. CONSENTS AND APPROVALS; NO CONFLICTS. 4.3.1. The execution and delivery of this Agreement, and the performance of the transactions contemplated herein by Buyer, will not require any consent, approval, authorization or other action by, or filing with or notification to, any Person or Governmental Authority where the failure to make such filing or obtain such consent will have a Material Adverse Effect, except as follows: (a) filings required under Hart-Scott-Rodino, (b) approvals of the assignment of the FCC Licenses to Buyer by the FCC; and (c) filings under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. 4.3.2. Assuming all consents, approvals, authorizations and other actions described in SECTION 4.3.1 have been obtained and all filings and notifications described in SECTION 4.3.1 have been made, the execution, delivery and performance of this Agreement and the other Buyer Documents by Buyer do not and will not (a) conflict with or violate any Law applicable to Buyer, (b) conflict with or result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) of any contract or agreement to which Buyer is a party or by which Buyer is bound, or (c) conflict with or violate the organizational documents of Buyer. 4.4. AVAILABILITY OF FUNDS. Buyer will have available on the Closing Date sufficient funds to enable it to consummate the transactions contemplated hereby. 4.5. QUALIFICATION OF BUYER. Buyer is, and pending Closing will be legally, technically, financially and otherwise qualified under the Communications Act and all rules, regulations -23- and policies of the FCC to acquire and operate the Stations. There are no facts or proceedings which would reasonably be expected to disqualify Buyer under the Communications Act or otherwise from acquiring or operating any of the Stations or would cause the FCC not to approve the assignment of the FCC Licenses to Buyer. Buyer has no knowledge of any fact or circumstance relating to Buyer or any of Buyer's affiliates that would reasonably be expected to (a) cause the filing of any objection to the assignment of the FCC Licenses to Buyer, or (b) lead to a delay in the processing by the FCC of the applications for such assignment. No waiver of any FCC rule or policy is necessary to be obtained for the grant of the applications for the assignment of the FCC Licenses to Buyer, nor will processing pursuant to any exception or rule of general applicability be requested or required in connection with the consummation of the transactions herein. 4.6. NO OUTSIDE RELIANCE. Buyer has not relied and is not relying on any statement, representation or warranty not made in this Agreement, any Schedule hereto or any certificate to be delivered to Buyer at the Closing pursuant to this Agreement. Buyer is not relying on any projections or other predictions contained or referred to in the Schedules or other materials that have been or may hereafter be provided to Buyer or any of its Affiliates, agents or representatives, and Sellers make no representations or warranties with respect to any such projections or other predictions. ARTICLE 5. PRE-CLOSING FILINGS 5.1. APPLICATIONS FOR FCC CONSENT. As promptly as practicable and no later than September 25, 1996, Sellers and Buyer shall jointly file applications with the FCC requesting its consent to the assignment of the FCC Licenses for the Stations from Sellers to Buyer. Sellers and Buyer will diligently take, or fully cooperate in the taking of, all necessary and proper steps, and provide any additional information reasonably requested in order to obtain promptly the requested consents and approvals of the applications by the FCC; provided, however, that none of the parties hereto shall have any obligation to take any steps which would be reasonably expected to have a material adverse effect on the business, assets or financial condition of such party taken as a whole. -24- 5.2. HART-SCOTT-RODINO. As promptly as practicable and no later than fifteen (15) business days following the execution of this Agreement, Sellers and Buyer shall complete any filing that may be required pursuant to Hart-Scott-Rodino (each an "HSR Filing"), or shall mutually agree that no such filing is required. Sellers and Buyer shall diligently take, or fully cooperate in the taking of, all necessary and proper steps, and provide any additional information reasonably requested in order to comply with, the requirements of Hart-Scott-Rodino. -25- ARTICLE 6. COVENANTS AND AGREEMENTS OF SELLER Each Seller covenants and agrees with Buyer as follows: 6.1. NEGATIVE COVENANTS. Pending and prior to the Closing, Seller will not directly or indirectly, without the prior consent of Buyer, which consent will not be unreasonably withheld or delayed, do or agree to do any of the following: 6.1.1. DISPOSITIONS; MERGERS. Sell, assign, lease or otherwise transfer or dispose of any of the Assets other than in the Ordinary Course of Business without replacing such asset with an asset of substantially the same value and utility; or merge or consolidate with or into any other entity or enter into any contracts or agreements relating thereto. 6.1.2. ACCOUNTING PRINCIPLES AND PRACTICES. Change or modify any of Seller's accounting principles or practices or any method of applying such principles or practices. 6.1.3. PROGRAM CONTRACTS. Acquire or enter into any new Program Contracts or renew, extend, amend, alter, modify or otherwise change any existing Program Contract, except in the Ordinary Course of Business, or except for such Program Contracts the payments under which exceed Ten Thousand Dollars ($10,000) individually or Fifty Thousand Dollars ($50,000) in the aggregate or except for such Program Contracts that are not cancelable without penalty with ninety (90) days' notice. 6.1.4. BROADCAST TIME SALES AGREEMENTS. Enter into any Time Sales Agreement, except in the Ordinary Course of Business, but in no event longer than one (1) year. 6.1.5. ADDITIONAL AGREEMENTS. Acquire or enter into any new Station Contracts not referred to in SECTIONS 6.1.3, 6.1.4 or 6.1.5 above, or renew, extend, amend, alter, modify or otherwise change any existing Station Contract, except in the Ordinary Course of Business, or except for such Station Contracts the payments under which exceed Ten Thousand Dollars ($10,000) individually or Fifty Thousand Dollars ($50,000) in the aggregate through the Closing Date (collectively, "Additional Agreements"). -26- 6.1.6. EMPLOYEE MATTERS. Enter into or become subject to any employment, labor, union, or professional service contract not terminable at will, or any bonus, pension, insurance, profit sharing, incentive, deferred compensation, severance pay, retirement, hospitalization, employee benefit, or other similar plan; or increase the compensation payable or to become payable to any employee, or pay or arrange to pay any bonus payment to any employee, except in the Ordinary Course of Business. 6.1.7. INCONSISTENT ACTIONS. Seller shall not take any action that is materially inconsistent with its obligations under this Agreement. 6.2. AFFIRMATIVE COVENANTS. Pending and prior to the Closing Date, each Seller will: 6.2.1. PRESERVE EXISTENCE. Preserve its partnership existence and business organization intact, maintain its existing franchises and licenses, use commercially reasonable efforts to preserve for the Buyer the relationships of the Stations with suppliers, customers, employees and others with whom the Stations have business relationships and refrain from materially and adversely changing any business policies including, but not limited to, advertising (including substantially the same amount of cash expenditure), marketing, pricing, purchasing, personnel, sales, and budget policies, and keep all Assets substantially in their present condition, ordinary wear and tear excepted. 6.2.2. NORMAL OPERATIONS. Subject to the terms and conditions of this Agreement (including, without limitation, SECTION 6.1), (a) carry on the businesses and activities of the Stations, including without limitation, the sale of advertising time, entering into other contracts and agreements, or purchasing and scheduling of programming, in the Ordinary Course of Business; (b) pay or otherwise satisfy all obligations (cash and barter) of the Stations in the Ordinary Course of Business; (c) maintain its books of account, records, and files in substantially the same manner as heretofore; (d) maintain its Assets in customary repair, maintenance and condition, except to the extent of normal wear and tear, and repair or replace, consistently with the Ordinary Course of Business, any Asset that may be damaged or destroyed and (e) continue to collect and write-off Accounts Receivables in the Ordinary Course of Business. -27- 6.2.3. MAINTAIN FCC LICENSES. Maintain the validity of the FCC Licenses, and comply in all material respects with all requirements of the FCC Licenses and the rules and regulations of the FCC and all other applicable laws, rules and regulations. 6.2.4. STATION CONTRACTS. Pay and perform its obligations in the Ordinary Course of Business under the Station Contracts and under any Additional Agreements that shall be entered into between the date hereof and the Closing pursuant to SECTION 6.1.6, in accordance with the respective terms and conditions of such Station Contracts. 6.2.5. TAXES. Pay or discharge all Taxes when due and payable in the Ordinary Course of Business. 6.2.6. PARTNERSHIP ACTION. Take all partnership action (including, without limitation, all partner action) under the Laws of any state having jurisdiction over Seller necessary to effectuate the transactions contemplated by this Agreement and by the other Seller Documents. 6.2.7. ACCESS. Cause to be afforded to representatives of Buyer, including without limitation legal counsel, auditors and environmental and engineering consultants, reasonable access during normal business hours to offices, properties, assets, books and records, contracts and reports of the Stations, as Buyer shall from time to time reasonably request; PROVIDED, HOWEVER, that such investigation shall only be upon reasonable notice and shall not unreasonably disrupt the personnel or operations of Seller or the Stations. All requests for access to the offices, properties, assets, books and records, contracts and reports of the Stations shall be made to such representatives as Seller shall designate in writing, who shall be solely responsible for coordinating all such requests and all access permitted hereunder. Buyer acknowledges and agrees that neither Buyer nor its representatives shall contact any of the employees, customers, suppliers, partners, or other associates or affiliates of Seller or the Stations, in connection with the transactions contemplated hereby, whether in person or by telephone, mail or other means of communication, without the specific prior written authorization of such representatives of Seller, and shall not be unreasonably withheld or delayed. Prior to the Sundance Closing, Sellers acknowledge and agree that Sellers shall use all commercially reasonable -28- efforts to allow Buyer to have access to the Sundance Stations for the purpose of due diligence. 6.2.8. INSURANCE. Maintain in full force and effect all of its existing casualty, liability, and other insurance policies, or comparable policies, through the day following the Closing Date in amounts not less than those in effect on the date hereof. 6.2.9. FINANCIAL STATEMENTS. Provide Buyer with unaudited monthly statements of assets and liabilities of Seller relating to the business and operations of the Stations, and statements of revenues and expenses reflecting the results of business and operations of the Stations for August, 1996 and for each month thereafter, within thirty (30) days after the end of each such month. 6.2.10. CONSENTS. Seller shall use commercially reasonable efforts to obtain all consents, approvals and agreements of any third parties necessary to authorize, approve or permit the consummation of the transactions contemplated by this Agreement, including, without limitation, any consent of the parties to the Station Contracts designated as necessary in SCHEDULE 3.4.1 in order to consummate the transactions contemplated hereby (collectively, the "Restricted Contracts"). Notwithstanding anything to the contrary set forth in this Agreement or otherwise, to the extent that the consent or approval of any third party is required under any Restricted Contract, Seller shall only be required to use reasonable efforts (not involving the payment by Seller of any money to any party to any such Restricted Contract) to obtain such consents and approvals, and in the event that Seller fails to obtain any such consent or approval (other than the consents and approvals set forth on SCHEDULE 9.2), Buyer shall have no right to terminate this Agreement. 6.2.11. PREPARATION OF FINANCIAL STATEMENTS. Subject to and in accordance with Sellers' agreement regarding access to the Stations and the Assets as set forth in SECTION 6.2.7., Sellers shall, and shall cause their representatives, (and after the Sundance Closing, Sellers shall use commercially reasonable efforts to cause the Sundance Parties and their representatives) to cooperate in all reasonable respects with the efforts of Buyer and Buyer's independent auditors to prepare such audited and interim unaudited financial statements of the Stations as Buyer may reasonably determine are necessary to satisfy Buyer's public company reporting requirements pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934. Sellers shall (and, after the Sundance Closing, Sellers shall use commercially reasonable efforts -29- to cause the Sundance Parties to) execute and deliver to Buyer's independent auditors such customary management representation letters as the auditors may require as a condition to such auditors ability to deliver an unqualified report upon the audited financial statements of the Stations for the periods for which such financial statements are required under the Securities Act of 1933 or the Securities Exchange Act of 1934. Sellers shall cause their independent public accountants (and, after the Sundance Closing, Sellers shall use commercially reasonable efforts to cause the independent public accountants for the Sundance Parties) to make available to Buyer and Buyer's representatives all of the work papers related to the financial statements or tax returns of Sellers (or the Sundance Parties, as the case may be), but only to the extent the same relate to the Stations, and to provide Buyer's independent auditors with reasonable access to those personnel (to the extent reasonably available) who previously have been involved in the audit or review of such financial statements and tax returns. Under no circumstances shall the preparation of the financial statements described in this SECTION 6.2.13.: (a) require any Seller or any Sundance Party to change or modify any accounting policy, (b) cause any unreasonable disruption in the business or operations of the Station, or (c) cause any delay in any internal reporting requirements of Sellers. All cost and expenses incurred in connection with the preparation of (and assimilation of relevant information for) the financial statements described in this SECTION 6.2.13 shall be paid by Buyer. 6.3. CONFIDENTIALITY. Seller shall, at all times, maintain strict confidentiality with respect to all documents and information furnished to Sellers by or on behalf of Buyer. Nothing shall be deemed to be confidential information that: (a) is known to Sellers at the time of its disclosure to Sellers and is not subject to any other confidentiality agreement or arrangement; (b) becomes publicly known or available other than through disclosure by Sellers; (c) is received by Sellers from a third party not actually known by Sellers to be bound by a confidentiality agreement with or obligation to Buyer; or (d) is independently developed by Sellers. Notwithstanding the foregoing provisions of this SECTION 6.3, Sellers may disclose such confidential information (a) to the extent required or deemed advisable to comply with applicable Laws; (b) to its officers, directors, employees, representatives, financial advisors, attorneys, accountants, and agents with respect to the transactions contemplated hereby (so long as such parties agree to maintain the confidentiality of such information); and (c) to any Governmental Authority in connection with the transactions contemplated hereby. In the event this Agreement is terminated, Sellers will return to Buyer all documents and other material prepared or furnished by Buyer relating to the transactions contemplated hereunder, whether obtained before or after the execution of this Agreement. -30- ARTICLE 7. COVENANTS AND AGREEMENTS OF BUYER Buyer covenants and agrees with Sellers as follows: 7.1. CONFIDENTIALITY. Buyer shall, at all times prior to the Closing, maintain strict confidentiality with respect to all documents and information furnished to Buyer by or on behalf of Sellers. Nothing shall be deemed to be confidential information that: (a) is known to Buyer at the time of its disclosure to Buyer and is not subject to any other confidentiality agreement or arrangement; (b) becomes publicly known or available other than through disclosure by Buyer; (c) is received by Buyer from a third party not actually known by Buyer to be bound by a confidentiality agreement with or obligation to Sellers; or (d) is independently developed by Buyer. Notwithstanding the foregoing provisions of this SECTION 7.1, Buyer may disclose such confidential information (a) to the extent required or deemed advisable to comply with applicable Laws; (b) to its officers, directors, partners, employees, representatives, financial advisors, attorneys, accountants, agents, underwriters, lenders, investors and any other potential sources of financing with respect to the transactions contemplated hereby (so long as such parties agree to maintain the confidentiality of such information); and (c) to any Governmental Authority in connection with the transactions contemplated hereby or the financing thereof. In the event this Agreement is terminated, Buyer will return to Sellers all documents and other material prepared or furnished by Sellers relating to the transactions contemplated by this Agreement, whether obtained before or after the execution of this Agreement. 7.2. CORPORATE ACTION. Prior to the Closing, Buyer shall take all corporate action (including, without limitation, all shareholder action) under the Laws of any state having jurisdiction over Buyer necessary to effectuate the transactions contemplated by this Agreement and the other Buyer Documents. 7.3. ACCESS. From and after the Closing Date, Buyer shall cause to be afforded to representatives of Sellers reasonable access during normal business hours to offices, books and records, contracts and reports of the Stations, as Sellers shall from time to time reasonably request; PROVIDED, HOWEVER, that such investigation shall only be upon reasonable notice and shall not disrupt the personnel or operations of Buyer or the Stations. All requests for access to the offices, books and records, contracts and reports of the Stations shall be made to such representatives as Buyer shall -31- designate in writing, who shall be solely responsible for coordinating all such requests and all access permitted hereunder. 7.4. PENDING RENEWAL APPLICATIONS. Buyer hereby agrees that in the event that any applications to renew the FCC Licenses of any of the Stations are pending at the time of the Closing, Buyer shall succeed to the place of Sellers as the licensee of the Stations with respect to such pending renewal applications and will accept any and all liabilities and obligations associated therewith. Notwithstanding any action of Buyer pursuant to this SECTION 7.4, Buyer shall retain all rights to seek indemnification from Sellers as provided for in ARTICLE 12. 7.5. INCONSISTENT ACTIONS. Buyer shall not take any action that is materially inconsistent with its obligations under this Agreement. ARTICLE 8. MUTUAL COVENANTS AND UNDERSTANDINGS OF SELLER AND BUYER 8.1. POSSESSION AND CONTROL. Between the date hereof and the Closing Date, Buyer shall not directly or indirectly control, supervise or direct, or attempt to control, supervise or direct, the business and operations of the Stations, and such operation, including complete control and supervision over all programming, finances and personnel, shall be the sole responsibility of Sellers. On and after the Closing Date, Sellers shall have no control over, or right to intervene, supervise, direct or participate in, the business and operations of the Stations. 8.2. RISK OF LOSS. The risk of loss or damage by fire or other casualty or cause to the Assets until the Closing Date shall be upon Sellers. In the event of a loss or damage to the Assets which results in a Material Adverse Effect prior to the Closing Date which shall not be restored, replaced, or repaired as of the Closing Date, Buyer shall proceed with the Closing and receive at Closing, the insurance proceeds or an assignment of the right to receive such insurance proceeds, as applicable, to which Sellers otherwise would be entitled, whereupon Sellers shall have no further liability to Buyer for such loss or damage. -32- 8.3. PUBLIC ANNOUNCEMENTS. Sellers and Buyer shall consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement or the transactions contemplated herein and shall not issue any such press release or make any such public statement without the prior written consent of the other party, which shall not be unreasonably withheld. Notwithstanding the foregoing, nothing herein shall limit or prevent any party hereto from making such public announcement or disclosure required by applicable law or by obligations pursuant to any listing agreement with any securities exchange or the NASDAQ Stock Market if such party has used all reasonable efforts to consult with the other party and to obtain such party's consent but has been unable to do so in a timely manner. 8.4. EMPLOYEE MATTERS. 8.4.1. Upon consummation of the Closing hereunder, Buyer shall offer employment to each of the employees of the Stations at a comparable salary, position and place of employment as held by each such employee immediately prior to the Closing. To the extent such employees accept employment with Buyer (collectively, "Transferred Employees"), such Transferred Employees will be included in Buyer's then-existing employee welfare benefit plans and will be subject to Buyer's then-existing employment policies, as generally applicable to Buyer's employees who are similarly situated. Buyer shall satisfy and discharge any Liability of Sellers or Buyer (including any Liabilities for severance, health or other benefit plans) arising out of the termination of any Transferred Employee and Buyer agrees that it shall not terminate any Transferred Employee without cause during the ninety (90) day period immediately following the Closing. Upon consummation of the Closing, Buyer shall assume and be responsible for all Liabilities of Sellers to Transferred Employees with respect to severance pay, sick leave, accrued vacation and other similar liabilities and obligations. 8.4.2. As between Buyer and Sellers, Sellers agree to be responsible and liable for any medical, disability or other benefits owed under Sellers' benefit plans for the period prior to the Closing Date. Sellers will be responsible for providing, at its cost, all medical, life and other insurance coverage and benefits, and disability benefits to which any employee of Sellers who retired or was terminated from service with Sellers prior to the Closing Date or who was disabled prior to the Closing Date is entitled under Sellers' benefit plans or otherwise. 8.4.3. Buyer agrees that it will permit those Transferred Employees, at each such Transferred Employee's option, to transfer as a direct rollover to Buyer's 401(k) Plan their respective pre-tax account balances under Sellers' 401(k) Plan, provided that such plan is a tax-qualified plan under -33- Section 401(a) and 401(k) of the Code and that the transfer of any such pre-tax account balance will not affect the tax qualified status of Buyer's 401(k) Plan. Sellers agree that if any such Transferred Employee elects to transfer its pre-tax account balance to Buyer's 401(k) Plan, Sellers will cause the trustees of Sellers' 401(k) Plan to transfer each such electing Transferred Employee's account to the trustee of Buyer's 401(k) Plan. 8.4.4. Buyer agrees to provide any Transferred Employees with their accrued vacation and sick pay to the extent the Liabilities in respect of the accrued vacation and sick pay have been included in calculating the Net Working Capital Amount. 8.4.5. After the date of this Agreement, Sellers hereby agree to cooperate with Buyer's efforts to secure for Buyer's benefit the employment of Sellers' employees effective as of the Closing Date; provided, however, that Seller shall have no obligation to incur any cost or expense in connection with such cooperation. 8.5. ALLOCATION OF PURCHASE PRICE. Sellers and Buyer each represent, warrant, covenant, and agree with each other that the Purchase Price shall be allocated among the Stations and classes of Assets for each Station, as agreed by the parties within thirty (30) days after the date hereof and as set forth in the SCHEDULE 8.5, which shall be prepared and agreed to within such thirty (30) day period. Sellers and Buyer agree, pursuant to Section 1060 of the Code that the Purchase Price shall be allocated in accordance with this SECTION 8.5, and that all Tax returns and reports shall be filed consistent with such allocation. Notwithstanding any other provision of this Agreement, the provisions of this SECTION 8.5 shall survive the Closing Date without limitation. If Sellers and Buyer are unable to agree on such allocation, within thirty (30) days following execution of this Agreement, Sellers and Buyer agree to retain Broadcast Investment Analysts (the "Appraisal Firm") to appraise the classes of Assets of each Station in accordance with the allocation among the Sellers set forth in SECTION 2.7. The Appraisal Firm shall be instructed to perform an appraisal of the classes of Assets of each Station and deliver a report to Sellers and Buyer as soon as reasonably practicable (the "Appraisal Report"). Sellers and Buyer shall each pay one-half of the fees, costs and expenses of the Appraisal Firm whether or not the transactions contemplated hereby are consummated. 8.6. DISCLOSURE SCHEDULES. Sellers and Buyer acknowledge and agree that Sellers shall have the right and obligation from time to time after the date hereof to update or correct the Schedules attached hereto to reflect changes in the business condition of the Sellers -34- after the date hereof, omissions from the Schedules or other matters; provided, however, in the event that any such update or correction, individually or in the aggregate, results in a Material Adverse Effect, Buyer shall nevertheless retain all rights of Buyer hereunder as a result of such Material Adverse Effect. The inclusion of any fact or item on a Schedule referenced by a particular section in this Agreement shall, should the existence of the fact or item or its contents, be relevant to any other section, be deemed to be disclosed with respect to such other section whether or not an explicit cross-reference appears in the Schedules. 8.7. BULK SALES LAWS. Buyer hereby waives compliance by Sellers, in connection with the transactions contemplated hereby, with the provisions of any applicable bulk transfer laws. 8.8. DUE DILIGENCE AND DISCLOSURE SCHEDULE DELIVERY. (a) Sellers hereby acknowledge that Buyers have not had any reasonable opportunity to perform due diligence with respect to the Assets and the Stations and the respective business and operations thereof, as well as Liabilities being conveyed and/or assigned to Buyer pursuant to this Agreement. Accordingly, Buyer shall have until 5:00 p.m. (Washington, D.C. local time) on September 11, 1996 to conduct an investigation that includes, but is not limited to, reviewing the Schedules to this Agreement, reviewing the Stations' financial performance, equipment, studio, transmitter, engineering, litigation, licenses, and all other aspects of the Assets and the Stations' ownership, performance, and operations. (b) Sellers shall cooperate in Buyer's due diligence and shall provide to Buyer an initial due diligence response no later than August 24, 1996 and shall diligently thereafter provide the remaining due diligence materials. Buyer hereby acknowledges that for business and legal reasons, Sellers have not been able to deliver the Schedules referred to in this Agreement prior to the date hereof. Sellers covenant to deliver to Buyer (i) initial drafts of the Schedules (constituting substantially all of such Schedules) prior to 5:00 p.m. (Washington, D.C. local time) on August 26, 1996 and (ii) final Schedules prior to 12:00 a.m. (Washington, D.C. local time) on August 28, 1996. ARTICLE 9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE The obligations of Buyer to purchase the Assets and to proceed with the Closing are subject to the satisfaction (or waiver in writing by Buyer) at or prior to the Closing of each of the following conditions: -35- 9.1. REPRESENTATIONS AND COVENANTS. The representations and warranties of Sellers made in this Agreement shall be true and correct in all material respects on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date, except as modified by the Schedules updated after the date hereof and except for representations and warranties that speak as of a specific date or time other than the Closing Date (which need only be true and correct in all material respects as of such date or time), and the covenants and agreements of Sellers required to be performed on or before the Closing Date in accordance with the terms of this Agreement shall have been performed in all material respects. 9.2. REQUIRED CONSENTS. Sellers shall have obtained prior to the Closing Date all consents, authorizations or approvals necessary to effect valid assignments to Buyer of those Station Contracts listed on SCHEDULE 9.2, which shall include all leases of real property and towers for the Stations which require consents or approvals to effect valid assignment. 9.3. DELIVERY OF DOCUMENTS. At or prior to the Closing, Sellers shall have delivered to Buyer all contracts, agreements, instruments and documents identified in SECTION 11.2. 9.4. FCC ORDER. The FCC Order shall have been issued and become a Final Order with respect to the Stations. 9.5. HART-SCOTT-RODINO. All applicable waiting periods under Hart-Scott-Rodino shall have expired or terminated. 9.6 LEGAL PROCEEDINGS. No injunction, restraining order or decree of any nature of any court or Governmental Authority of competent jurisdiction shall be in effect that restrains or prohibits the transactions contemplated by this Agreement. -36- 9.7 SUNDANCE CONSUMMATION. Sellers shall have consummated the transactions contemplated by the Radio 95 Asset Purchase Agreement. ARTICLE 10. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE The obligations of Sellers to sell, transfer, convey and deliver the Assets and to proceed with the Closing are subject to the satisfaction (or waiver in writing by Sellers) at or prior to the Closing of each of the following conditions: 10.1. REPRESENTATIONS AND COVENANTS. The representations and warranties of Buyer made in this Agreement shall be true and correct in all material respects on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date except for representations and warranties that speak as of a specific date or time other than the Closing Date (which need only be true and correct in all material respects as of such date or time), and the covenants and agreements of Buyer required to be performed on or before the Closing Date in accordance with the terms of this Agreement shall have been performed in all material respects. 10.2. DELIVERY BY BUYER. At or prior to the Closing, Buyer shall have delivered to Sellers the Purchase Price, to the extent required to be paid on the Closing Date pursuant to SECTION 2.5, and all contracts, agreements, instruments and documents identified in SECTION 11.3. 10.3. FCC ORDER. The FCC Order shall have been issued and become a Final Order with respect to the Stations. 10.4. HART-SCOTT-RODINO. All applicable waiting periods under Hart-Scott-Rodino shall have expired or terminated. -37- 10.5. LEGAL PROCEEDINGS. No injunction, restraining order or decree of any nature of any court or Governmental Authority of competent jurisdiction shall be in effect that restrains or prohibits the transactions contemplated by this Agreement. ARTICLE 11. THE CLOSING 11.1. CLOSING. The Closing hereunder shall be held on a date specified by Buyer that is not later than ten (10) days following the date that the FCC Order has become a Final Order (the "Closing Date"); PROVIDED, HOWEVER, in no event shall the Closing take place prior to January 1, 1997. The Closing shall be held at 10:00 A.M. local time at the offices of Hogan & Hartson L.L.P., 555 13th Street, N.W., Washington, D.C. or at such other time and place as the parties may agree. The effective time of the Closing shall be deemed to be 12:01 a.m. local time on the Closing Date. 11.2. DELIVERY BY SELLER. At or before the Closing, Sellers shall deliver to Buyer in accordance with SECTION 9.3 the following: 11.2.1. AGREEMENTS AND INSTRUMENTS The following bills of sale, assignments and other instruments of transfer, dated as of the Closing Date and duly executed by Sellers: (a) the Bill of Sale; (b) the Assignment of FCC Licenses; (c) the Assignment of Contracts and Leases; (d) the Assignment of Intellectual Property; (e) the Assumption Agreement; (f) certificates of title with respect to the motor vehicles listed on SCHEDULE 2.1.9 or if any such motor vehicles are leased by Sellers, an assignment of such lease; (g) special or limited warranty deeds for all Real Property owned by Sellers in a form commonly used in the jurisdictions where such Real Property is located. -38- 11.2.2. CONSENTS. (a) Seller shall use its commercially reasonable efforts to obtain all third party consents necessary for the conveyance of the Stations and the Assets to Buyer without the imposition of any conditions that would be adverse to Buyer. (b) If Sellers fail to obtain any of the consents referenced in SECTION 11.2.2, Sellers shall use commercially reasonable efforts (i) to provide Buyer the financial and business benefits Buyer would have enjoyed had the consent been given and (ii) upon the request of Buyer, to enforce in Seller's name for the account of Buyer any rights that would otherwise have been available to Buyer had the consent been granted. 11.2.3. CERTIFIED RESOLUTIONS. A copy of the approval of the partners of Sellers, certified as being correct and complete and then in full force and effect, authorizing the execution, delivery and performance of this Agreement, and of the other Sellers Documents, and the consummation of the transactions contemplated hereby and thereby. 11.2.4. OFFICERS' CERTIFICATES. (a) A certificate of an officer of the general partner of Sellers certifying the matters set forth in SECTION 9.1; and (b) a certificate of an officer of the general partner of Sellers as to the incumbency of the representatives of Sellers executing this Agreement or any of the other Seller Documents on behalf of Sellers. 11.2.5. DEPOSIT. The Deposit in accordance with the Deposit Escrow Agreement. 11.3. DELIVERY BY BUYER. At or before the Closing, Buyer shall deliver to Sellers the following: 11.3.1. PURCHASE PRICE PAYMENT. The Purchase Price in the amount and manner set forth in SECTION 2. -39- 11.3.2. ASSUMPTION AGREEMENT. The Assumption Agreement dated as of the Closing Date and duly executed by Buyer. 11.3.3. CERTIFIED RESOLUTIONS. Copies of the resolutions of the directors of Buyer, certified as being correct and complete and then in full force and effect, authorizing the execution, delivery and performance of this Agreement and of the other Buyer Documents, and the consummation of the transactions contemplated hereby and thereby. 11.3.4. OFFICERS' CERTIFICATE. (a) A certificate of Buyer signed by an officer of Buyer certifying the matters set forth in SECTION 10.1; and (b) a certificate signed by the Secretary of Buyer as to the incumbency of the officers of Buyer executing this Agreement or any of the other Buyer Documents on behalf of Sellers. ARTICLE 12. SURVIVAL; INDEMNIFICATION 12.1. SURVIVAL OF REPRESENTATIONS. Unless otherwise set forth herein, all representations and warranties, covenants and agreements of Sellers and Buyer contained in or made pursuant to this Agreement or in any certificate furnished pursuant hereto shall survive the Closing Date and shall remain in full force and effect to the following extent: (a) representations and warranties shall survive for a period of fifteen (15) months after the Closing Date, (b) the covenants and agreements in this ARTICLE 12 shall continue in full force and effect until fully discharged (but not beyond the expiration of such fifteen (15) months), and (c) any representation, or warranty that is the subject of a claim which is asserted in a reasonably detailed writing prior to the expiration of such fifteen (15) month period shall survive with respect to such claim or dispute until the final resolution thereof. 12.2. INDEMNIFICATION BY SELLERS. Subject to the conditions and provisions of SECTION 12.4 and SECTION 12.5, from and after the Closing Date, Sellers, jointly and severally, shall indemnify, defend and hold harmless Buyer and its officers, directors, employees, -40- agents, and shareholders (the "Buyer Indemnified Parties") from and against and in any respect of any and all Losses, asserted against, resulting to, imposed upon or incurred by any Buyer Indemnified Parties, directly or indirectly, by reason of or resulting from: (a) the business or operations of the Stations during the period prior to the Closing Date (except to the extent Buyer has expressly assumed the Liability for any such Losses pursuant hereto); (b) any misrepresentation or breach of the representations and warranties of Sellers contained in or made pursuant to this Agreement or any other Seller Document; or (c) any breach by Sellers of any covenants of Sellers contained in or made pursuant to this Agreement or any other Seller Document. 12.3. INDEMNIFICATION BY BUYER. Subject to the conditions and provisions of SECTION 12.4 and SECTION 12.5, from and after the Closing Date, Buyer hereby agrees to indemnify, defend and hold harmless each Seller and the partners of each Seller, and the officers, directors, employees, agents, and shareholders of any of the foregoing (the "SELLER INDEMNIFIED PARTIES"), from, against and with respect of, on a net after-tax basis, any and all Losses, asserted against, resulting to, imposed upon or incurred by any Seller, directly or indirectly, by reason of or resulting from: (a) any failure by Buyer to pay, perform or discharge any Liabilities expressly assumed by Buyer pursuant hereto or pursuant to the Assumption Agreement; (b) the business or operations of the Stations during the period on and after the Closing Date; (c) any misrepresentation or breach of the representations and warranties of Buyer contained in or made pursuant to this Agreement or any other Buyer Document; or (d) any breach by Buyer of any covenants of Buyer contained in or made pursuant to this Agreement or any other Buyer Document. 12.4. LIMITATION ON INDEMNIFICATION Notwithstanding any other provision of this Agreement to the contrary, in no event shall Losses include a party's incidental or consequential damages. Neither Sellers nor Buyer shall be liable to the other in respect of any indemnification hereunder except to the extent that (a) the aggregate Losses under this Agreement of Sellers (taken as a whole) or Buyer, as the case may be, exceeds Five Hundred Thousand Dollars ($500,000) (the "Basket Amount"), and then only to the extent of the excess over the Basket Amount, and (b) the aggregate amount of such indemnification, together with all other indemnification payments by the indemnifying party, for Losses is less than Three Million Dollars ($3,000,000) (the "Indemnity Cap"); PROVIDED, HOWEVER, (i) any Losses incurred by Sellers in connection with Buyer's failure to comply with the covenants, agreements and indemnities set forth in SECTION 2.8.1 and (ii) any amounts owing in connection with the Final Net Working Capital shall not be subject to the Basket Amount or the Indemnity Cap. Notwithstanding anything to the contrary set forth herein or -41- otherwise, Buyer acknowledges and agrees that the Basket Amount and the Indemnity Cap shall be applicable to all of the Sellers on a collective basis and not individually. Each party (a "recipient party") shall notify the other party (the "representing party") reasonably promptly of any perceived breach by the representing party of which the recipient party has knowledge of any representations and warranties, covenants, and agreements and of any Losses (including a brief description of the same) of the recipient party caused thereby. In the event of any breach that is cured prior to the Closing Date in accordance with the terms of this Agreement, the representing party shall have no obligation under SECTION 12.2 or SECTION 12.3 or otherwise to indemnify the recipient party with respect to such Losses. In addition, each recipient party will specify in writing to the representing party any perceived breach by the representing party of any representations and warranties, covenants, and agreements and of any Losses (including a brief description of the same) of the recipient party caused thereby. In the event that the recipient party fails to so notify the representing party of any such breach of which the recipient party has knowledge, the representing party shall have no obligation under SECTION 12.2 or SECTION 12.3 or otherwise to indemnify the recipient party with respect to such Losses. 12.5. CONDITIONS OF INDEMNIFICATION. The obligations and liabilities of Sellers and of Buyer hereunder with respect to their respective indemnities pursuant to this SECTION 12, resulting from any Losses, shall be subject to the following terms and conditions: 12.5.1. The party seeking indemnification (the "Indemnified Party") must give the other party or parties, as the case may be (the "Indemnifying Party"), notice of any such Losses promptly after the Indemnified Party receives notice thereof; provided that the failure to give such notice shall not affect the rights of the Indemnified Party hereunder except to the extent that the Indemnifying Party shall have suffered actual damage by reason of such failure. 12.5.2. The Indemnifying Party shall have the right to undertake, by counsel or other representatives (reasonably satisfactory to the Indemnified Party) of its own choosing, the defense of such Losses at the Indemnifying Party's risk and expense. 12.5.3. In the event that the Indemnifying Party shall elect not to undertake such defense, or, within a reasonable time after notice from the Indemnified Party of any such Losses, shall fail to defend, the Indemnified Party (upon further written notice to the Indemnifying Party) shall have the right to undertake the defense, compromise or settlement of such Losses, by counsel or other representatives of its own choosing, on behalf of and for the account and risk of the Indemnifying Party (subject to the right of the Indemnifying Party to assume defense of such Losses at any time prior to settlement, compromise or final -42- determination thereof). In such event, the Indemnifying Party shall pay to the Indemnified Party, in addition to the other sums required to be paid hereunder, the costs and expenses incurred by the Indemnified Party in connection with such defense, compromise or settlement as and when such costs and expenses are so incurred. 12.5.4. Anything in this SECTION 12.5 to the contrary notwithstanding, (a) if there is a reasonable probability that Losses may materially and adversely affect the Indemnified Party other than as a result of money damages or other money payments, the Indemnified Party shall have the right, at its own cost and expense, to participate in the defense, compromise or settlement of any Losses and the Indemnifying Party and the Indemnified Party and their respective counsel or other representatives shall cooperate with respect to such Losses, (b) the Indemnifying Party shall not, without the Indemnified Party's written consent, settle or compromise any Losses or consent to entry of any judgment which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the Indemnified Party of a release from all liability in respect of such Losses in form and substance satisfactory to the Indemnified Party, (c) in the event that the Indemnifying Party undertakes defense of any Losses, the Indemnified Party, by counsel or other representative of its own choosing and at its sole cost and expense, shall have the right to consult with the Indemnifying Party and its counsel or other representatives concerning such Losses and the Indemnifying Party and the Indemnified Party and their respective counsel or other representatives shall cooperate with respect to such Losses, (d) in the event that the Indemnifying Party undertakes defense of any Losses, the Indemnifying Party shall have an obligation to keep the Indemnified Party informed of the status of the defense of such Losses and furnish the Indemnified Party with all documents, instruments and information that the Indemnified party shall reasonably request in connection therewith and (e) in the event that both the Indemnified Party and the Indemnifying Party are parties (directly or through interpleader) to any Losses giving rise to indemnification hereunder and the Indemnified Party is advised by counsel that there is or may be a conflict of interest in the representation of both the Indemnified Party and the Indemnifying Party by one firm or counsel, the Indemnified Party shall be entitled to assume, at the sole cost and expense of the Indemnifying Party, the defense, compromise and settlement (subject to clause (b) above) of such Loss with counsel (in addition to appropriate local counsel) reasonably satisfactory to the Indemnifying Party. 12.5.5. In the event that an Indemnified Party has a claim for indemnification which does not involve a claim against it by a third party (a "Direct Claim"), the Indemnified Party shall notify the Indemnifying Party in writing of such Direct Claim with reasonable promptness, specifying, to the extent known, the nature, circumstances and amount of such Direct Claim (a "Direct Claim Notice"), including with particularity the specific representation and warranty or covenant and agreement alleged to have been breached. If the Indemnifying Party notifies -43- the Indemnified Party that it disputes an Indemnified Party's right of indemnification with respect to a particular Direct Claim, the parties shall use their reasonable efforts to negotiate a resolution of such dispute promptly. Subject to the limitations on indemnification set forth in this ARTICLE 12, nothing in this Section 12.5.5 shall be deemed to prevent any Indemnified Party from initiating litigation under this Agreement with respect to any Direct Claim disputed by the Indemnified Party for the purpose of establishing the Indemnified Party's right to indemnification hereunder. 12.6. CURE OF BREACH Notwithstanding any other provision of this Agreement to the contrary, a breach by Sellers of any representations and warranties or a failure to perform any covenant or agreement hereunder, if susceptible to cure, may be cured prior to the Closing Date by Sellers (a) by reducing the Purchase Price in an amount equal to the Losses as initially agreed to by Sellers and Buyer) to Buyer caused by such breach, (b) by making payment to a third party or taking other action to discharge the Losses, in which case Seller shall secure a release in form reasonably satisfactory to Buyer, of all liability of Buyer for the matter giving rise to such Losses, (c) by placing an amount equal to the Losses in an escrow account under an escrow arrangement reasonably satisfactory to Sellers and Buyer, or (d) a combination of the foregoing reasonably satisfactory to Buyer and Sellers. If the foregoing actions fully cure the breach, Sellers shall have no obligation under SECTION 12.2 or otherwise to indemnify Buyer with respect to the Losses caused by such breach; if such actions partially cure the breach, Sellers shall continue to have an obligation under SECTION 12.2 to indemnify Buyer with respect to the remaining portion of the Losses caused by such breach. ARTICLE 13. TERMINATION 13.1. TERMINATION 13.1.1. This Agreement shall terminate, without any action by any party hereto, and shall be of no further force or effect if the Deposit Escrow Agent shall not have received the Deposit from Buyer prior to 5 p.m. (Washington, D.C. local time) on August 26, 1996. 13.1.2 This Agreement may be terminated at any time prior to the Closing as follows: (a) by written notice of Buyer, in its sole and absolute discretion, delivered to Sellers at any time prior to 12:01 p.m. (Washington, D.C. -44- local time) on September 3, 1996; in which event Buyer shall receive the Deposit (and all interest accrued thereon); (b) in the event that Buyer has not terminated this Agreement pursuant to SECTION 13.1.2(a), by written notice of Buyer, in its sole and absolute discretion, delivered to Sellers at any time prior to 5:00 p.m. (Washington, D.C. local time) on September 11, 1996; in which event Sellers shall receive the Deposit (and all interest accrued thereon) notwithstanding any other provision contained herein to the contrary; (c) by the mutual consent of Sellers and Buyer; (d) by either Buyer or Sellers, by written notice of termination delivered to the other, if (i) the FCC Order for the Stations has not become a Final Order and/or the Closing has not occurred within twelve (12) months after the date of this Agreement, provided, however, that the failure of the FCC Order to become a Final Order or the failure of the Closing to have occurred within twelve (12) months of the date of this Agreement shall not be attributable to the breach of this Agreement by the party seeking termination pursuant to this SECTION 13.1.2(d) or (ii) the FCC designates the applications contemplated by SECTION 5.1 for an evidentiary hearing. (e) by Buyer or Sellers by written notice to the other, if a court of competent jurisdiction or other Governmental Entity shall have issued an order, decree or ruling or taken any other action (which order, decree, or ruling the parties hereto shall use their best efforts to lift), in each case permanently restraining, permanently enjoining, or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling, or other action shall have become final and nonappealable; (f) by the party whose qualifications are not at issue, if, for any reason, the FCC denies or dismisses any of the applications and the time for reconsideration or court review under the Communications Act with respect to such denial or dismissal has expired and there is not pending with respect thereto a timely filed petition for reconsideration or request for review; (g) by written notice of Buyer to Sellers if the FCC Order contains a condition on Buyer that (i) is unrelated to Buyer's qualifications, (ii) applies to more than one of the Stations, and (iii) the time for reconsideration or court review under the Communications Act with respect to such condition(s) has expired without the filing with respect thereto of a timely petition for reconsideration or request for review; (h) Either Buyer or Sellers in accordance with the terms and conditions of ARTICLE 14. -45- 13.2 EFFECT OF TERMINATION 13.2.1 In the event this Agreement is terminated as provided in SECTIONS 13.1.1, this Agreement shall be deemed null, void and of no further force or effect, and the parties hereto shall be released from all future obligations hereunder; PROVIDED, HOWEVER, that the obligations of Buyer and Sellers set forth in SECTIONS 6.3 and 7.1 (which relate to confidentiality), and SECTION 15.3 (which relates to payment of certain expenses), shall survive such termination and the parties hereto shall have any and all remedies to enforce such obligations provided at law or in equity or otherwise (including, without limitation, specific performance). 13.2.2 In the event this Agreement is terminated as provided in SECTIONS 13.1.2(a), 13.1.2(c), 13.1.2(e) and 13.1.2(g), Buyer shall receive the immediate return of the Deposit (and all interest accrued thereon) and this Agreement shall be deemed null, void and of no further force or effect, and the parties hereto shall be released from all future obligations hereunder; PROVIDED, HOWEVER, that the obligations of Buyer and Sellers set forth in SECTIONS 6.3 and 7.1 (which relate to confidentiality), and SECTION 15.3 (which relates to payment of certain expenses), shall survive such termination and the parties hereto shall have any and all remedies to enforce such obligations provided at law or in equity or otherwise (including, without limitation, specific performance). 13.2.3 In the event this Agreement is terminated as provided in SECTION 13.1.2(b), Sellers shall receive the immediate delivery of the Deposit (and all interest accrued thereon) and this Agreement shall be deemed null, void and of no further force or effect, and the parties hereto shall be released from all future obligations hereunder; PROVIDED, HOWEVER, that the obligations of Buyer and Sellers set forth in SECTIONS 6.3 and 7.1 (which relate to confidentiality), and SECTION 15.3 (which relates to payment of certain expenses), shall survive such termination and the parties hereto shall have any and all remedies to enforce such obligations provided at law or in equity or otherwise (including, without limitation, specific performance). 13.2.4 In the event this Agreement is terminated as provided in SECTIONS 13.1.2(d), 13.1.2(f) and 13.1.2(h), this Agreement shall be deemed null, void and of no further force or effect, and the parties hereto shall be released from all future obligations hereunder; PROVIDED, HOWEVER, that the obligations of Buyer and Sellers set forth in SECTIONS 6.3 and 7.1 (which relate to confidentiality), ARTICLE 14 (which relates to remedies and return of the Deposit) and SECTION 15.3 (which relates to payment of certain expenses), shall survive such termination and the parties hereto shall have any and all remedies to enforce such obligations provided at law or in equity or otherwise (including, without limitation, specific performance). -46- ARTICLE 14. REMEDIES 14.1. DEFAULT BY BUYER. If Buyer shall materially default in the performance of its obligations under this Agreement or if, as a result of Buyer's action or failure to act (notwithstanding an obligation under this Agreement to take a particular action), the conditions precedent to Sellers' obligation to close specified in SECTION 10 are not satisfied, and shall not cure such default within thirty (30) days of written notice of such default being given to it by Sellers, and for such reason or reasons this Agreement is not consummated, and provided that Sellers shall not then be in material default in the performance of Sellers' obligations hereunder, Sellers shall be entitled, by written notice to Buyer, to terminate this Agreement, and as Sellers' sole remedy under this Agreement, to receive the Deposit as liquidated damages, upon such payment Buyer shall be discharged from all further liability under this Agreement. 14.2. DEFAULT BY SELLER. If Sellers shall materially default in the performance of Sellers' obligations under this Agreement, or if, as a result of Sellers' action or failure to act (notwithstanding an obligation under this Agreement to take a particular action), the conditions precedent to Buyer's obligation to close specified in SECTION 9 are not satisfied, and shall not cure such default within thirty (30) days of written notice of such default being given to it by Buyer, and for such reason or reasons this Agreement is not consummated, and provided that Buyer shall not then be in material default in the performance of Buyer's obligations hereunder, Buyer shall be entitled, by written notice to Sellers, to terminate this Agreement, to receive the immediate return of the Deposit, and to pursue all other remedies Buyer has at law or in equity or otherwise, except as otherwise provided in SECTION 14.4. 14.3. LIQUIDATED DAMAGES. Sellers and Buyer have provided for the amount of the Deposit to be liquidated damages as a remedy for Sellers after having considered carefully the anticipated and actual harms and losses that would be incurred if Buyer defaults and thus fails to perform its obligations to consummate the transactions contemplated hereunder, the difficulty of ascertaining at this time the actual amount of damages, special and general, that Sellers will suffer in such event, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy in such event. -47- 14.4. SPECIFIC PERFORMANCE. Sellers hereby acknowledge that the Assets are unique, and that the harm to Buyer resulting from Sellers failure to perform their obligations hereunder cannot be adequately compensated by damages. Accordingly, Sellers agree that Buyer shall have the right to have all obligations, undertakings, agreements, covenants and other provisions of this Agreement specifically performed by Sellers, which shall be in addition to the right to receive damages or seek any other remedy Buyer might otherwise have at law or in equity or otherwise. ARTICLE 15. GENERAL PROVISIONS 15.1. ADDITIONAL ACTIONS, DOCUMENTS AND INFORMATION. Buyer agrees that it will, at any time, prior to, at or after the Closing Date, take or cause to be taken such further actions, and execute, deliver and file or cause to be executed, delivered and filed such further documents and instruments and obtain such consents, as may be reasonably requested by Sellers in connection with the consummation of the purchase and sale contemplated by this Agreement. Sellers agree that it will, at any time, prior to, at or after the Closing Date, take or cause to be taken such further actions, and execute, deliver and file or cause to be executed, delivered and filed such further documents and instruments and obtain such consents, as may be reasonably requested by Buyer in connection with the consummation of the purchase and sale contemplated by this Agreement. 15.2. BROKERS. Sellers represent to Buyer that, except for the brokerage fees payable to Sellers' Broker (which fees are solely the responsibility of Sellers), Sellers have not engaged, or incurred any unpaid liability (for any brokerage fees, finders' fees, commissions or otherwise) to, any broker, finder or agent in connection with the transactions contemplated by this Agreement; Buyer represents to Sellers that Buyer has not engaged, or incurred any unpaid liability (for any brokerage fees, finders' fees, commissions or otherwise) to, any broker, finder or agent in connection with the transactions contemplated by this Agreement; and Sellers agree to indemnify Buyer, and Buyer agrees to indemnify Sellers, against any claims asserted against the other parties for any such fees or commissions by any person purporting to act or to have acted for or on behalf of the indemnifying party. Notwithstanding any other provision of this Agreement, this representation and warranty shall survive the Closing without limitation and shall not be subject to the Basket Amount contained in SECTION 12.4. -48- 15.3. EXPENSES AND TAXES. Each party hereto shall pay its own expenses incurred in connection with this Agreement and in the preparation for and consummation of the transactions provided for herein. Notwithstanding the foregoing, (a) Buyer and Sellers shall each pay half of all sales (including, without limitation, bulk sales), use, documentary, stamp, gross receipts, registration, transfer, conveyance, excise, recording, license and other similar Taxes and fees ("Transfer Taxes") applicable to, imposed upon or arising out of the transactions contemplated hereby whether now in effect or hereinafter adopted and regardless of which party such Transfer Tax is imposed upon, (b) Sellers and Buyer shall each pay one-half of any FCC filing fees incurred in connection with the assignment of the FCC Licenses, and (c) Buyer shall pay any fees and expenses incurred in connection with any HSR Filings; provided, however, Sellers agree to reimburse Buyer up to the amount of $22,500 for any HSR Filing fees and expenses incurred by Buyer. 15.4. NOTICES. All notices, demands, requests, or other communications which may be or are required to be given or made by any party to any other party pursuant to this Agreement shall be in writing and shall be hand delivered, mailed by first-class registered or certified mail, return receipt requested, postage prepaid, delivered by overnight air courier, or transmitted by telegram, telex, or facsimile transmission and shall be deemed to have been duly delivered and received on the date of personal delivery; on the third day after deposit in the U.S. mail if mailed by registered or certified mail, postage prepaid and return receipt requested, on the day after delivery to a nationally recognized overnight courier service if sent by an overnight delivery service for next morning delivery, and on the same day if transmitted by telegram, telex, or facsimile, addressed as follows: If to Buyer: Chancellor Radio Broadcasting Company 12655 N. Central Expressway, Suite 405 Dallas, Texas 75243 Attn: Steven Dinetz, President and CEO Fax: 214/239-0220 -49- with copies (which shall not constitute notice) to: Leibowitz & Associates, P.A. 1 S.E. Third Avenue, Suite 1450 Miami, Florida 33131 Attn: Matthew L. Leibowitz Fax: 305/530-9417 and Hicks, Muse, Tate & Furst Incorporated 200 Crescent Court, Suite 1600 Dallas, Texas 75201 Attn: Lawrence D. Stuart, Jr. Fax: 214/7470-7355 and Weil, Gotshal & Manges, LLP 100 Crescent Court, Suite 1300 Dallas, Texas 75201 Attn: Jeremy W. Dickens Fax: 214/746-7777 If to Sellers: c/o Colfax Communications, Inc. 1250 24th Street, N.W. Suite 800 Washington, D.C. 20037 Attn: Joseph O. Bunting, III Fax: 202/828-0860 with copies (which shall not constitute notice) to: Hogan & Hartson, L.L.P. 111 South Calvert Street Baltimore, Maryland 21202 Attn: Michael Silver Fax: 410/539-6981 and -50- Hogan & Hartson, L.L.P. 8300 Greensboro Drive McLean, VA 22102 Attn: Richard T. Horan Fax: 703/448-7650 and Leventhal, Senter & Lerman 2000 K Street, N.W. Suite 600 Washington, D.C. 20006 Attn: Steven A. Lerman Fax: 202/293-7783 or such other address as the addressee may indicate by written notice to the other parties. 15.5. WAIVER. No delay or failure on the part of any party hereto in exercising any right, power or privilege under this Agreement or under any other instrument or document given in connection with or pursuant to this Agreement shall impair any such right, power or privilege or be construed as a waiver of any default or any acquiescence therein. No single or partial exercise of any such right, power or privilege shall preclude the further exercise of such right, power or privilege, or the exercise of any other right, power or privilege. No waiver shall be valid against any party hereto unless made in writing and signed by the party against whom enforcement of such waiver is sought and then only to the extent expressly specified therein. 15.6. BENEFIT AND ASSIGNMENT. Except as hereinafter specifically provided in this SECTION 15.6, no party hereto shall assign this Agreement, in whole or in part, whether by operation of law or otherwise, without the prior written consent of the other party hereto, and any purported assignment contrary to the terms hereof shall be null, void and of no force and effect. Without releasing Buyer from any of its obligations or liabilities hereunder (a) nothing in this Agreement shall limit Buyer's ability to assign, sell or transfer the Stations or the Assets in connection with a sale of stock or all or substantially all of Buyer's assets, or by merger, consolidation, or otherwise of Buyer or any affiliate of Buyer with (or to) a third party without the consent of Sellers (b) nothing in this Agreement shall limit Buyer's ability to assign the FCC -51- Licenses (including the right to acquire the FCC Licenses at the Closing) to Chancellor Broadcasting Licensee Company or any other wholly-owned subsidiary of Buyer without the consent of Sellers, and (c) nothing in this Agreement shall limit Buyer's ability to make a collateral assignment of its rights under this Agreement to any institutional lender that provides funds to Buyer without the consent of Sellers. Sellers shall execute an acknowledgment of such collateral assignments in such forms as Buyer or its institutional lenders may from time to time reasonably request; provided, however, that unless written notice is given to Sellers that any such collateral assignment has been foreclosed upon, Sellers shall be entitled to deal exclusively with Buyer as to any matters arising under this Agreement or any of the other agreements delivered pursuant hereto. In the event of such an assignment, the provisions of this Agreement shall inure to the benefit of and be binding on Buyer's and/or Chancellor Broadcasting Company's successors and assigns as permitted hereunder. No person other than the parties hereto and the Seller Indemnified Parties and the Buyer Indemnified Parties is or shall be entitled to bring any action to enforce any provision of this Agreement against any of the parties hereto, and the covenants and agreements set forth in this Agreement shall be solely for the benefit of, and shall be enforceable only by, the parties hereto and the Seller Indemnified Parties and the Buyer Indemnified Parties or their respective successors and assigns as permitted hereunder. 15.7. ENTIRE AGREEMENT; AMENDMENT. This Agreement, including the Schedules and Exhibits hereto and the other instruments and documents referred to herein or delivered pursuant hereto, contains the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior oral or written agreements, commitments or understandings with respect to such matters. No amendment, modification or discharge of this Agreement shall be valid or binding unless set forth in writing and duly executed by the party or parties against whom enforcement of the amendment, modification or discharge is sought. 15.8. SEVERABILITY. If any part of any provision of this Agreement or any other contract, agreement, document or writing given pursuant to or in connection with this Agreement shall be invalid or unenforceable under applicable law, such part shall be ineffective to the extent of such invalidity or unenforceability only, without in any way affecting the remaining parts of such provisions or the remaining provisions of said contract, agreement, document or writing. -52- 15.9. HEADINGS. The headings of the sections and subsections contained in this Agreement are inserted for convenience only and do not form a part or affect the meaning, construction or scope thereof. 15.10. GOVERNING LAW. This Agreement, the rights and obligations of the parties hereto, and any claims or disputes relating thereto, shall be governed by and construed under and in accordance with the laws of the State of Maryland, excluding the choice of law rules thereof. 15.11. SIGNATURE IN COUNTERPARTS. This Agreement may be executed in separate counterparts, none of which need contain the signatures of all parties, each of which shall be deemed to be an original, and all of which taken together constitute one and the same instrument. It shall not be necessary in making proof of this Agreement to produce or account for more than the number of counterparts containing the respective signatures of, or on behalf of, all of the parties hereto. -53- IN WITNESS WHEREOF, each of the parties hereto has executed this Asset Purchase Agreement, or has caused this Asset Purchase Agreement to be duly executed and delivered in its name on its behalf, all as of the day and year first above written. CLASSICAL ACQUISITION LIMITED PARTNERSHIP By: Radio Acquisition Associates Limited Partnership, its general partner By: Colfax Communications, Inc., its general partner By: ------------------------------- Joseph O. Bunting, III Vice President and Secretary RADIO 100 OF MARYLAND LIMITED PARTNERSHIP By: Colfax Communications, Inc., its general partner By: ------------------------------- Joseph O. Bunting, III Vice President and Secretary RADIO 100 LIMITED PARTNERSHIP By: Colfax Communications, Inc., its general partner By: ------------------------------- Joseph O. Bunting, III Vice President and Secretary -54- RADIO 570 LIMITED PARTNERSHIP By: Colfax Communications, Inc., its general partner By: ------------------------------- Joseph O. Bunting, III Vice President and Secretary RADIO 94 OF PHOENIX LIMITED PARTNERSHIP By: Colfax Communications, Inc., its general partner By: ------------------------------- Joseph O. Bunting, III Vice President and Secretary RADIO 95 OF PHOENIX LIMITED PARTNERSHIP By: Colfax Communications, Inc., its general partner By: ------------------------------- Joseph O. Bunting, III Vice President and Secretary CHANCELLOR RADIO BROADCASTING COMPANY By: -------------------------------- Name: ------------------------------ Title: ----------------------------- -55- The undersigned hereby guarantees to Buyer the payment and performance of all of the obligations of Sellers under Article 12 of this Asset Purchase Agreement. COLFAX COMMUNICATIONS, INC. :By: -------------------------------------- Joseph O. Bunting, III Vice President and Secretary -56- ANNEX I DEFINITIONS "ACCOUNTING FIRM" shall have the meaning specified in SECTION 2.6.2. "ACCOUNTS RECEIVABLE" means all accounts receivable with respect to the Stations as of the end of the broadcast day immediately preceding the Closing Date. "ADDITIONAL AGREEMENTS" shall have the meaning specified in SECTION 6.1.5. "APPRAISAL FIRM" shall have the meaning set forth in SECTION 8.5. "APPRAISAL REPORT" shall have the meaning set forth in SECTION 8.5. "ASSETS" shall have the meaning set forth in SECTION 2.1. "ASSIGNMENT OF CONTRACTS AND LEASES" means that certain Assignment of Contracts and Leases, dated as of the Closing Date and executed by Sellers, in a form reasonably acceptable to Buyer and Sellers. "ASSIGNMENT OF FCC LICENSES" means that certain Assignment of FCC Licenses, dated as of the Closing Date and executed by Sellers, in a form reasonably acceptable to Buyer and Sellers. "ASSUMED LIABILITIES" shall have the meaning specified in SECTION 2.8.1. "ASSUMPTION AGREEMENT" means that certain Assumption Agreement, dated the Closing Date and executed by Buyer and Sellers, in a form reasonably acceptable to Buyer and Sellers. "BASE PURCHASE PRICE" shall have the meaning specified in SECTION 2.4. "BASKET AMOUNT" shall have the meaning set forth in SECTION 12.4. "BENEFIT ARRANGEMENT" means a benefit program or practice providing for bonuses, incentive compensation, vacation pay, severance pay, insurance, restricted stock, stock options, employee discounts, company cars, tuition reimbursement or any other perquisite or benefit (including, without limitation, any fringe benefit under Section 132 of the Code) to employees, officers or independent contractors that is not a Plan. "BENEFIT PLANS" shall have the meaning specified in SECTION 3.15.1. "BILL OF SALE" means that certain Bill of Sale and Assignment of Assets, dated as of the Closing Date and executed by Sellers, in a form reasonably acceptable to Buyer and Sellers. "BUYER DOCUMENTS" shall mean, collectively, this Agreement, the Deposit Escrow Agreement and the Assumption Agreement. "BUYER INDEMNIFIED PARTIES" shall have the meaning in SECTION 12.2. "CLOSING" means the closing of the purchase, assignment and sale of the Assets contemplated hereunder. "CLOSING DATE" means the time and date on which the Closing takes place, as established by SECTION 11.1. "CODE" means the Internal Revenue Code of 1986, as amended, and all Laws promulgated pursuant thereto or in connection therewith. "COMMUNICATIONS ACT" means the Communications Act of 1934, as amended. "CURRENT BALANCE SHEET DATE" shall have the meaning specified in SECTION 3.5.2. "DEPOSIT" shall have the meaning specified in SECTION 2.3. "DEPOSIT ESCROW AGENT" means George Mason Bank. "DEPOSIT ESCROW AGREEMENT" means that certain Escrow Agreement dated as of the date hereof by and among Buyer, Seller and the Deposit Escrow Agent, in the form of EXHIBIT A attached hereto. "ENCUMBRANCES" mean any mortgages, pledges, liens, security interests, restrictions, defects in title, easements, encumbrances, and any other matters affecting title. "ENVIRONMENTAL LAWS" means any federal, state, local, or foreign law (including common law), statute, code, ordinance, rule, regulation, or other requirement relating to the environment, natural resources, public, or employee health and safety, and Hazardous Materials generation, production, use, storage, treatment, transportation or disposal, and includes, but is not limited to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, ("CERCLA") as amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. Section 9601 ET SEQ.; the Toxic Substances Control Act ("TSCA"), 15 U.S.C. Section 2601 ET SEQ.; the Hazardous Materials Transportation Act, 49 U.S.C. Section 1802 ET SEQ.; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. ANNEX I-2 Section 9601 ET SEQ.; the Clean Water Act ("CWA"), 33 U.S.C. Section 1251 ET SEQ.; the Safe Drinking Water Act, 42 U.S.C. Section 300f ET SEQ.; the Clean Air Act ("CAA"), 42 U.S.C. Section 7401 ET SEQ.; the Toxic Substances Control, 15 U.S.C. Section 2601 et seq., the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Section 2701 et seq., and the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq., as such laws have been amended or supplemented, and the regulations promulgated pursuant thereto, and all analogous state or local statues. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and all Laws promulgated pursuant thereto or in connection therewith. "ESTIMATED NET WORKING CAPITAL" shall have the meaning set forth in SECTION 2.6.1. "ESTIMATED NET WORKING CAPITAL AMOUNT" shall have the meaning set forth in SECTION 2.6.1. "EXCLUDED ASSETS" shall have the meaning specified in SECTION 2.2. "FCC" means the Federal Communications Commission. "FCC LICENSES" shall have the meaning specified in SECTION 2.1.1. "FCC ORDER" means an order or orders of the FCC, or of the Chief, Mass Media Bureau of the FCC, acting under delegated authority, consenting to the assignment to Buyer of the FCC Licenses for the Stations. "FINAL NET WORKING CAPITAL AMOUNT" shall have the meaning set forth in SECTION 2.6.2. "FINAL ORDER" means an FCC Order as to which the time for filing a request for administrative or judicial review, or for instituting administrative review SUA SPONTE, shall have expired without any such filing having been made or notice of such review having been issued; or, in the event of such filing or review SUA SPONTE, as to which such filing or review shall have been disposed of favorably to the grant and the time for seeking further relief with respect thereto shall have expired without any request for such further relief having been filed. "GOVERNMENTAL AUTHORITY" means any agency, board, bureau, court, commission, department, instrumentality or administration of the United States government, any state government or any local or other governmental body in a state, territory or possession of the United States or the District of Columbia. ANNEX I-3 "HART-SCOTT-RODINO" means the Hart-Scott-Rodino antitrust Improvements Act of 1976, as amended, and all Laws promulgated pursuant thereto or in connection therewith. "HSR FILING" shall have the meaning specified in SECTION 5.2. "HAZARDOUS MATERIALS" means any wastes, substances, or materials (whether solids, liquids or gases) that are deemed hazardous, toxic, pollutants, or contaminants, including without limitation, substances defined as "hazardous wastes," "hazardous substances," "hazardous materials," "extremely hazardous waste," "toxic substances," "radioactive materials," or other similar designations in, or otherwise subject to regulation under, any Environmental Laws, which includes, but is not limited to, petroleum, petroleum products, asbestos, urea formaldehyde and polychlorinated biphenyls. "INDEMNIFIED PARTY" and "INDEMNIFYING PARTY" shall have the respective meanings specified in SECTION 12.5.1. "INDEMNITY CAP" shall have the meaning specified in SECTION 12.4. "INTELLECTUAL PROPERTY" shall have the meaning specified in SECTION 2.1.4. "KNOWLEDGE" wherever used with respect to Sellers shall mean, (a) as of the date of this Agreement, actual knowledge possessed by Steven Goldstein, Carol Johnson, Teresa Baldwin and Joseph Bunting (the "Management Parties"), and (b) as of August 28, 1996 and thereafter, actual knowledge possessed by the Management Parties and the general managers of each of the Stations (each a "General Manager") with respect to the Station for which such General Manager serves as general manager. "LAWS" means any federal, state or local law, (including common law), statute, code, ordinance, regulation, order, writ, injunction, judgment or decree applicable to the specified Person and to the businesses and assets thereof. "LEASED PROPERTY" shall have the meaning specified in SECTION 2.1.2. "LIABILITIES" shall mean, as to any Person, all debts, adverse claims, liabilities and obligations, direct, indirect, absolute or contingent of such Person, whether accrued, vested or otherwise, whether in contract, tort, strict liability or otherwise and whether or not actually reflected, or required by generally accepted accounting principles to be reflected, in such Person's balance sheets or other books and records. "LOSSES" means any and all demands, claims, complaints, actions or causes of action, suits, proceedings, investigations, arbitrations, assessments, ANNEX I-4 losses, damages, liabilities, obligations (including those arising out of any action, such as any settlement or compromise thereof or judgment or award therein) and any costs and expenses, including, without limitation, reasonable attorneys' fees and disbursements. "MATERIAL ADVERSE EFFECT" means (i) a material adverse effect on the business, assets or financial condition of the Stations taken as a whole, except for any adverse affect resulting from (a) economic conditions applicable to the radio broadcasting industry in general, or (b) conditions or assumed liabilities that are unique to the markets in which the Stations operate, or (ii) a material adverse effect on Sellers' ability to consummate the transactions contemplated by this Agreement. "NET WORKING CAPITAL" shall mean as of any date of determination (a) the sum of the balances of the current assets of the Stations (including all deposits and prepaid expenses) as of such date exclusive of any cash or any Excluded Assets, less (b) the sum of the balances of the current liabilities of the Stations as of such date exclusive of any liabilities related to any Excluded Assets and exclusive of the current portion of long term debt. "NET WORKING CAPITAL AMOUNT" shall mean, collectively, the Estimated Net Working Capital Amount and the Final Net Working Capital Amount. "OPERATING CONTRACTS" shall have the meaning specified in SECTION 2.1.8. "ORDINARY COURSE OF BUSINESS" means, with respect to Seller, the ordinary course of business consistent with past practices of Seller; any actions taken pursuant to the requirements of Law or Station Contracts existing on the date hereof shall be deemed to be action in the Ordinary Course of Business. "PENSION PLAN" means an "employee pension benefit plan" as such term is defined in Section 3(2) of ERISA. "PERMITTED ENCUMBRANCES" means (a) Encumbrances arising in connection with equipment financing or leasing, (b) Encumbrances on Real Property that do not interfere with the use of the Real Property in the operations or business of the Stations, (c) Encumbrances for Taxes not yet due and payable or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on Seller's books in accordance with generally accepted accounting principles, (d) Encumbrances that, individually or in the aggregate, do not and would not materially detract from the value of any of the Assets or materially interfere with the use thereof as currently used, or (e) those matters identified as permitted encumbrances on SCHEDULE 3.8 or SCHEDULE 3.10. ANNEX I-5 "PERSON" shall mean any individual, corporation, partnership, limited liability company, joint venture, trust, unincorporated organization, other form of business or legal entity or Governmental Authority. "PLAN" means any plan, program or arrangement, whether or not written, that is or was an "employee benefit plan" as such term is defined in Section 3(3) of ERISA and (a) which was or is established or maintained by Seller; (b) to which Seller contributed or was obligated to contribute or to fund or provide benefits; or (c) which provides or promises benefits to any person who performs or who has performed services for Seller and because of those services is or has been (i) a participant therein or (ii) entitled to benefits thereunder. "PROGRAM CONTRACTS" shall have the meaning specified in SECTION 2.1.5. "PRORATION AMOUNT" shall have the meaning specified in SECTION 2.6.1. "PRORATION ITEMS" shall mean any power and utility charges, business and license fees, sales and service charges, commissions, special assessments, and rental payments and personal and real estate taxes and assessments with respect to the Real Property, and any other operating expenses incurred in the Ordinary Course of Business. "PURCHASE PRICE" shall have the meaning specified in SECTION 2.4. "QUALIFIED PLAN" means a Pension Plan that satisfies, or is intended by Seller to satisfy, the requirements for tax qualification described in Section 401 of the Code. "REAL PROPERTY" shall have the meaning specified in SECTION 2.1.2. "RESTRICTED CONTRACTS" shall have the meaning specified in SECTION 6.2.10. "SCHEDULES" shall mean the disclosure schedules delivered by Seller to Buyer in connection herewith. "SELLER DOCUMENTS" shall mean, collectively, this Agreement, the Deposit Escrow Agreement, the Assignment of Contracts and Leases, the Bill of Sale, the Assignment of FCC Licenses and the Assumption Agreement. "SELLER INDEMNIFIED PARTIES" shall have the meaning in SECTION 12.3. "SELLER TAX RETURNS" means all federal, state, local, foreign and other applicable Tax returns, declarations of estimated Tax reports required to be ANNEX I-6 filed by any of Seller (without regard to extensions of time permitted by law or otherwise). "SELLER'S BROKER" means Merrill Lynch & Co. "STATION CONTRACTS" shall have the meaning specified in SECTION 2.1.8. "SUNDANCE CLOSING" shall have the meaning specified in SECTION 2.9.1. "TAXES" means all federal, state and local taxes (including, without limitation, income, profit, franchise, sales, use, real property, personal property, ad valorem, excise, employment, social security and wage withholding taxes) and installments of estimated taxes, assessments, deficiencies, levies, imports, duties, license fees, registration fees, withholdings, or other similar charges of every kind, character or description imposed by any Governmental Authorities. "TIME SALES AGREEMENTS" shall have the meaning specified in SECTION 2.1.7. "TRADE-OUT AGREEMENTS" shall have the meaning specified in SECTION 2.1.6. "TRANSFER TAXES" shall have the meaning specified in SECTION 15.3. "TRANSFERRED EMPLOYEE" shall have the meaning specified in Section 8.4.1. "WELFARE PLAN" means an "employee welfare benefit plan" as such term is defined in Section 3(1) of ERISA. ANNEX I-7 SCHEDULES Schedule 2.1.1 FCC Licenses Schedule 2.1.2 Real Property Interests Schedule 2.1.3 Tangible Personal Property Schedule 2.1.4 Intellectual Property Schedule 2.1.5 Program Contracts Schedule 2.1.6 Trade-out Agreements Schedule 2.1.8 Operating Contracts Schedule 2.1.9 Deposits; Prepaid Expenses Schedule 2.1.10 Vehicles Schedule 2.2.12 Excluded Contracts and Unrelated Assets Schedule 3.4.1 Consents Schedule 3.5.2 Liabilities Schedule 3.6 Absence of Certain Changes or Events Schedule 3.7 Litigation Schedule 3.8 Encumbrances on Assets Schedule 3.9 FCC Matters Schedule 3.10.1 Encumbrances on Real Property Schedule 3.11 Condition of Tangible Assets Schedule 3.12 Intellectual Property Schedule 3.13 Station Contracts Schedule 3.14 Employee Benefit Plans Schedule 3.16.1 Collective Bargaining Agreements Schedule 3.17 Environmental Matters Schedule 3.18 Transactions with Affiliates Schedule 3.19 Insurance Schedule 8.5 Allocation of Assets Schedule 9.2 Required Consents and Approvals EX-3.10 5 EXHIBIT 3.10 CERTIFICATE OF DESIGNATION OF THE POWERS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF 12 1/4% SERIES A SENIOR CUMULATIVE EXCHANGEABLE PREFERRED STOCK AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF - ------------------------------------------------------------------------------- Pursuant to Section 151 of the General Corporation Law of the State of Delaware - ------------------------------------------------------------------------------- Chancellor Radio Broadcasting Company (the "Corporation"), a corporation organized and existing under the General Corporation Law of the State of Delaware, does hereby certify that, pursuant to authority conferred upon the board of directors of the Corporation (the "Board of Directors") by its Certificate of Incorporation, as amended (hereinafter referred to as the "Certificate of Incorporation"), and pursuant to the provisions of Section 151 of the General Corporation Law of the State of Delaware, said Board of Directors, by unanimous written consent dated March 26, 1996, duly approved and adopted the following resolution (the "Resolution"): RESOLVED, that, pursuant to the authority vested in the Board of Directors by its Certificate of Incorporation, the Board of Directors does hereby create, authorize and provide for the issuance of 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock, par value $.01 per share, with a stated value initially of $105.797951 per share, consisting initially of 1,000,000 shares, having the designations, preferences, relative, participating, optional and other special rights and the qualifications, limitations and restrictions thereof that are set forth in the Certificate of Incorporation and in this Resolution as follows: (a) DESIGNATION. There is hereby created out of the authorized and unissued shares of Preferred Stock of the Corporation a class of Preferred Stock designated as the "12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock". The number of shares constituting such class shall be 1,000,000 and are referred to as the "Series A Senior Exchangeable Preferred Stock." The initial liquidation preference of the Series A Senior Exchangeable Preferred Stock shall be $105.797951 per share; such amount shall be subject to increase as provided in paragraph (c)(i). (b) RANK. The Series A Senior Exchangeable Preferred Stock shall, with respect to dividends and distributions upon liquidation, winding-up and dissolution of the Corporation, rank (i) senior to all classes of common stock of the Corporation (including, without limitation, the Common Stock) and to each other class of Capital Stock of the Corporation or series of Preferred Stock of the Corporation hereafter created the terms of which do not expressly provide that it ranks senior to, or on a parity with, the Series A Senior Exchangeable Preferred Stock as to dividends and distributions upon liquidation, winding-up and dissolution of the Corporation (collectively referred to, together with all classes of common stock of the Corporation, as "Junior Stock"); (ii) on a parity with the Existing Preferred Stock and any class of Capital Stock of the Corporation or series of Preferred Stock of the Corporation hereafter created the terms of which expressly provide that such class or series will rank on a parity with the Series A Senior Exchangeable Preferred Stock as to dividends and distributions upon liquidation, winding-up and dissolution (collectively referred to as "Parity Stock"); provided that any such Parity Stock (other than Existing Preferred Stock) that was not approved by the Holders in accordance with paragraph (f)(ii)(A) hereof (to the extent such approval is required) shall be deemed to be Junior Stock and not Parity Stock; and (iii) junior to each class of Capital Stock of the Corporation or series of Preferred Stock of the Corporation hereafter created that has been approved by the Holders in accordance with paragraph (f)(ii)(B) hereof and the terms of which expressly provide that such class or series will rank senior to the Series A Senior Exchangeable Preferred Stock as to dividends and distributions upon liquidation, winding-up and dissolution of the Company (collectively referred to as "Senior Stock"). (c) DIVIDENDS. (i) Beginning on the Issue Date, the Holders of the outstanding shares of Series A Senior Exchangeable Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available therefor, distributions in the form of cash dividends on each share of Series A Senior Exchangeable Preferred Stock, at a rate PER ANNUM equal to 12 1/4% of the then effective liquidation preference per share of the Series A Senior Exchangeable Preferred Stock, payable quarterly. No interest shall be payable in respect of any dividends that 2 may be in arrears. All dividends shall be cumulative, whether or not earned or declared, on a daily basis from August 15, 1996 and shall be payable quarterly in arrears on each Dividend Payment Date, commencing on the first Dividend Payment Date after the Issue Date, PROVIDED that if any dividend payable on any Dividend Payment Date on or before February 15, 2001 is not declared and paid in full in cash on such Dividend Payment Date, the amount payable as dividends on such Dividend Payment Date that is not paid in cash on such Dividend Payment Date shall be added to the liquidation preference of the Series A Senior Exchangeable Preferred Stock on such Dividend Payment Date and the amount so added to the liquidation preference shall be deemed paid in full and shall not accumulate. Each dividend shall be payable to, or added to the liquidation preference of as herein provided, the Series A Senior Exchangeable Preferred Stock held by Holders of record as they appear on the stock books of the Corporation on the Dividend Record Date immediately preceding the related Dividend Payment Date. Dividends shall cease to accumulate in respect of the Series A Senior Exchangeable Preferred Stock on the Exchange Date or on the date of their earlier redemption unless the Corporation shall have failed to issue the appropriate aggregate principal amount of Exchange Debentures in respect of the Series A Senior Exchangeable Preferred Stock on such Exchange Date or shall have failed to pay the relevant redemption price on the date fixed for redemption. (ii) All dividends paid with respect to shares of the Series A Senior Exchangeable Preferred Stock pursuant to paragraph (c)(i) shall be paid PRO RATA to the Holders entitled thereto. (iii) Nothing herein contained shall in any way or under any circumstances be construed or deemed to require the Board of Directors to declare, or the Corporation to pay or set apart for payment, any dividends on shares of the Series A Senior Exchangeable Preferred Stock at any time. (iv) Dividends on account of arrears for any past Dividend Period and dividends in connection with any optional redemption pursuant to paragraph (e)(i) may be declared and paid at any time, without reference to any regular Dividend Payment Date, to Holders of record on such date, not more than forty-five (45) days prior to the payment thereof, as may be fixed by the Board of Directors of the Corporation. 3 (v) No full dividends shall be declared by the Board of Directors or paid or set apart for payment by the Corporation on any Parity Stock for any period unless full cumulative dividends have been or contemporaneously are declared and paid (or are deemed declared and paid) in full, or declared and, if payable in cash, a sum in cash set apart sufficient for such payment, on the Series A Senior Exchangeable Preferred Stock for all Dividend Periods terminating on or prior to the date of payment of such full dividends on such Parity Stock. If any dividends are not so paid, all dividends declared upon shares of the Series A Senior Exchangeable Preferred Stock and any other Parity Stock shall be declared PRO RATA so that the amount of dividends declared per share on the Series A Senior Exchangeable Preferred Stock and such Parity Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the Series A Senior Exchangeable Preferred Stock and such Parity Stock bear to each other. (vi) (A) Holders of shares of the Series A Senior Exchangeable Preferred Stock shall be entitled to receive the dividends provided for in paragraph (c)(i) hereof in preference to and in priority over any dividends upon any of the Junior Stock. (B) So long as any share of the Series A Senior Exchangeable Preferred Stock is outstanding, the Corporation shall not declare, pay or set apart for payment any dividend on any of the Junior Stock or make any payment on account of, or set apart for payment money for a sinking or other similar fund for, the purchase, redemption or other retirement of, any of the Junior Stock or any warrants, rights, calls or options exercisable for or convertible into any of the Junior Stock whether in cash, obligations or shares of the Corporation or other property (other than dividends in Junior Stock to the holders of Junior Stock), and shall not permit any corporation or other entity directly or indirectly controlled by the Corporation to purchase or redeem any of the Junior Stock or any such warrants, rights, calls or options unless full cumulative dividends determined in accordance herewith on the Series A Senior Exchangeable Preferred Stock have been paid (or are deemed paid) in full. (C) So long as any share of the Series A Senior Exchangeable Preferred Stock is outstanding, the Corporation shall not make any payment on account of, or set apart for payment money for a sinking or other similar fund for, the purchase, redemption or other retirement of, any of the 4 Parity Stock or any warrants, rights, calls or options exercisable for or convertible into any of the Parity Stock, and shall not permit any corporation or other entity directly or indirectly controlled by the Corporation to purchase or redeem any of the Parity Stock or any such warrants, rights, calls or options unless full cumulative dividends determined in accordance herewith on the Series A Senior Exchangeable Preferred Stock have been paid (or are deemed paid) in full. (vii) Dividends payable on the Series A Senior Exchangeable Preferred Stock for any period less than a year shall be computed on the basis of a 360-day year of twelve 30-day months and the actual number of days elapsed in the period for which payable. (d) LIQUIDATION PREFERENCE. (i) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the Holders of shares of Series A Senior Exchangeable Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders an amount in cash equal to the then effective liquidation preference for each share outstanding, plus, without duplication, an amount in cash equal to accumulated and unpaid dividends thereon to the date fixed for liquidation, dissolution or winding up (including an amount equal to a prorated dividend for the period from the last Dividend Payment Date to the date fixed for liquidation, dissolution or winding up) before any payment shall be made or any assets distributed to the holders of any of the Junior Stock including, without limitation, common stock of the Corporation. Except as provided in the preceding sentence, Holders of Series A Senior Exchangeable Preferred Stock shall not be entitled to any distribution in the event of any liquidation, dissolution or winding up of the affairs of the Corporation. If the assets of the Corporation are not sufficient to pay in full the liquidation payments payable to the Holders of outstanding shares of the Series A Senior Exchangeable Preferred Stock and all Parity Stock, then the holders of all such shares shall share equally and ratably in such distribution of assets in proportion to the full liquidation preference, including, without duplication, all accrued and unpaid dividends to which each is entitled. (ii) For the purposes of this paragraph (d), neither the sale, conveyance, exchange or transfer (for cash, shares 5 of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation nor the consolidation or merger of the Corporation with or into one or more entities shall be deemed to be a liquidation, dissolution or winding up of the affairs of the Corporation. (e) REDEMPTION. (i) OPTIONAL REDEMPTION. (A) The Corporation may, at the option of the Board of Directors, redeem at any time on or after February 15, 2001, subject to contractual and other restrictions with respect thereto and from any source of funds legally available therefor, in whole or in part, in the manner provided for in paragraph (e)(iii) hereof, any or all of the shares of the Series A Senior Exchangeable Preferred Stock, at the redemption prices (expressed as a percentage of the then effective liquidation preference) set forth below plus, without duplication, an amount in cash equal to all accumulated and unpaid dividends per share (including an amount in cash equal to a prorated dividend for the period from the Dividend Payment Date immediately prior to the Redemption Date to the Redemption Date) (the "Optional Redemption Price") if redeemed during the 12-month period beginning February 15 of each of the years set forth below: 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . 106.125% 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.900% 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.675% 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.450% 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.225% 2006 and thereafter. . . . . . . . . . . . . . . . . . . . 100.000% ; provided that no redemption pursuant to this paragraph (e)(i)(A) shall be authorized or made unless prior thereto full accumulated and unpaid dividends are declared and paid in full, or declared and a sum in cash set apart sufficient for such payment, on the Series A Senior Exchangeable Preferred Stock for all Dividend Periods terminating on or prior to the Redemption Date. (B) In addition to the foregoing paragraph (e)(i)(A), on or prior to February 15, 1999, the Corporation may, at its option, use the net cash proceeds of one or more Public Equity Offerings to redeem from any source of funds legally available therefor, in the manner provided for in paragraph (e)(iii) hereof, the Series A Senior Exchangeable Preferred Stock, in part, at a redemption price of 112.250% 6 of the then effective liquidation preference thereof if redeemed during the 12-month period commencing on February 15, 1996, 111.025% of the then effective liquidation preference thereof if redeemed during the 12-month period commencing on February 15, 1997 and 109.800% of the then effective liquidation preference thereof if redeemed during the 12-month period commencing on February 15, 1998, plus, in each case, without duplication, an amount in cash equal to all accumulated and unpaid dividends to the redemption date (including an amount in cash equal to a prorated dividend for the period from the Dividend Payment Date immediately prior to the redemption date to the redemption date) (the "Cash Proceeds Redemption Price"); PROVIDED, HOWEVER, that after any such redemption, the number of shares of Series A Senior Exchangeable Preferred Stock outstanding must equal at least 75% of the shares of Series A Senior Exchangeable Preferred Stock originally issued on the Issue Date. Any such redemption pursuant to this paragraph (e)(i)(B) must occur on or prior to 60 days after the receipt by the Corporation of the proceeds of each Public Equity Offering. (C) In the event of a redemption pursuant to paragraph (e)(i)(A) or (e)(i)(B) hereof of only a portion of the then outstanding shares of the Series A Senior Exchangeable Preferred Stock, the Corporation shall effect such redemption on a PRO RATA basis according to the number of shares held by each Holder of the Series A Senior Exchangeable Preferred Stock, except that the Corporation may redeem such shares held by Holders of fewer than 100 shares (or shares held by Holders who would hold less than 100 shares as a result of such redemption), as may be determined by the Corporation. (ii) MANDATORY REDEMPTION. On February 15, 2008, the Corporation shall redeem, to the extent of funds legally available therefor, in the manner provided for in paragraph (e)(iii) hereof, all of the shares of the Series A Senior Exchangeable Preferred Stock then outstanding at a redemption price equal to 100% of the then effective liquidation preference per share, plus, without duplication, an amount in cash equal to all accumulated and unpaid dividends per share (including an amount equal to a prorated dividend for the period from the Dividend Payment Date immediately prior to the Redemption Date to the Redemption Date) (the "Mandatory Redemption Price"). (iii) PROCEDURES FOR REDEMPTION. (A) At least thirty (30) days and not more than sixty (60) days prior to the 7 date fixed for any redemption of the Series A Senior Exchangeable Preferred Stock, written notice (the "Redemption Notice") shall be given by first class mail, postage prepaid, to each Holder of record on the record date fixed for such redemption of the Series A Senior Exchangeable Preferred Stock at such Holder's address as it appears on the stock books of the Corporation, PROVIDED that no failure to give such notice nor any deficiency therein shall affect the validity of the procedure for the redemption of any shares of Series A Senior Exchangeable Preferred Stock to be redeemed except as to the Holder or Holders to whom the Corporation has failed to give said notice or except as to the Holder or Holders whose notice was defective. The Redemption Notice shall state: (1) whether the redemption is pursuant to paragraph (e)(i)(A), (e)(i)(B) or (e)(ii) hereof; (2) the Optional Redemption Price, the Mandatory Redemption Price or the Cash Proceeds Redemption Price, as the case may be; (3) whether all or less than all the outstanding shares of the Series A Senior Exchangeable Preferred Stock are to be redeemed and the total number of shares of the Series A Senior Exchangeable Preferred Stock being redeemed; (4) the date fixed for redemption; (5) that the Holder is to surrender to the Corporation, in the manner, at the place or places and at the price designated, his certificate or certificates representing the shares of Series A Senior Exchangeable Preferred Stock to be redeemed; and (6) that dividends on the shares of the Series A Senior Exchangeable Preferred Stock to be redeemed shall cease to accumulate on such Redemption Date unless the Corporation defaults in the payment of the Optional Redemption Price, the Mandatory Redemption Price or the Cash Proceeds Redemption Price, as the case may be. (B) Each Holder of Redeemable Preferred stock shall surrender the certificate or certificates representing such shares of Series A Senior Exchangeable Preferred Stock to the Corporation, duly endorsed (or otherwise in proper form for transfer, as determined by the Corporation), in the 8 manner and at the place designated in the Redemption Notice, and on the Redemption Date the full Optional Redemption Price, Mandatory Redemption Price or Cash Proceeds Redemption Price, as the case may be, for such shares shall be payable in cash to the Person whose name appears on such certificate or certificates as the owner thereof, and each surrendered certificate shall be canceled and retired. In the event that less than all of the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. (C) On and after the Redemption Date, unless the Corporation defaults in the payment in full of the applicable redemption price, dividends on the Series A Senior Exchangeable Preferred Stock called for redemption shall cease to accumulate on the Redemption Date, and all rights of the Holders of redeemed shares shall terminate with respect thereto on the Redemption Date, other than the right to receive the Optional Redemption Price, the Mandatory Redemption Price or the Cash Proceeds Redemption Price, as the case may be, without interest; PROVIDED, HOWEVER, that if a notice of redemption shall have been given as provided in paragraph (iii)(A) above and the funds necessary for redemption (including an amount in respect of all dividends that will accrue to the Redemption Date) shall have been irrevocably deposited in trust for the equal and ratable benefit for the Holders of the shares to be redeemed, then, at the close of business on the day on which such funds are segregated and set aside, the Holders of the shares to be redeemed shall cease to be stockholders of the Corporation and shall be entitled only to receive the Optional Redemption Price, the Mandatory Redemption Price or the Cash Redemption Price, as the case may be, without interest. (f) VOTING RIGHTS. (i) The Holders of Series A Senior Exchangeable Preferred Stock, except as otherwise required under Delaware law or as set forth in paragraphs (ii), (iii) and (iv) below, shall not be entitled or permitted to vote on any matter required or permitted to be voted upon by the stockholders of the Corporation. (ii) (A) So long as any shares of the Series A Senior Exchangeable Preferred Stock are outstanding, the Corporation shall not authorize any class of Parity Stock without the affirmative vote or consent of Holders of at least a majority of the then outstanding shares of Series A 9 Senior Exchangeable Preferred Stock, voting or consenting, as the case may be, as one class, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting. (B) So long as any shares of the Series A Senior Exchangeable Preferred Stock are outstanding, the Corporation shall not authorize any class of Senior Stock without the affirmative vote or consent of Holders of at least a majority of the outstanding shares of Series A Senior Exchangeable Preferred Stock, voting or consenting, as the case may be, as one class, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting. (C) So long as any shares of the Series A Senior Exchangeable Preferred Stock are outstanding, the Corporation shall not amend this Certificate of Designation so as to affect adversely the specified rights, preferences, privileges or voting rights of holders of shares of Series A Senior Exchangeable Preferred Stock or to authorize the issuance of any additional shares of Series A Senior Exchangeable Preferred Stock without the affirmative vote or consent of Holders of at least a majority of the issued and outstanding shares of Series A Senior Exchangeable Preferred Stock, voting or consenting, as the case may be, as one class, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting. (D) Prior to the exchange of Series A Senior Exchangeable Preferred Stock for Exchange Debentures, the Corporation shall not amend or modify the Indenture for the Exchange Debentures in the form executed on February 26, 1996 (the "Indenture") (except as expressly provided therein in respect of amendments without the consent of Holders of Exchange Debentures) without the affirmative vote or consent of Holders of at least a majority of the shares of Series A Senior Exchangeable Preferred Stock then outstanding, voting or consenting, as the case may be, as one class, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting. (E) Except as set forth in paragraphs (f)(ii)(A), (f)(ii)(B) and (f)(ii)(C) above, (x) the creation, authorization or issuance of any shares of any Junior Stock, Parity Stock or Senior Stock or (y) the increase or decrease in the amount of authorized Capital Stock of any class, including Preferred Stock, shall not require the consent of Holders of Series A Senior Exchangeable Preferred Stock and 10 shall not be deemed to affect adversely the rights, preferences, privileges or voting rights of Holders of Series A Senior Exchangeable Preferred Stock. (iii) Without the affirmative vote or consent of Holders of a majority of the issued and outstanding shares of Series A Senior Exchangeable Preferred Stock, voting or consenting, as the case may be, as one class, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting, the Corporation shall not, in a single transaction or series of related transactions, consolidate or merge with or into, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets to, another Person or adopt a plan of liquidation unless: (A) either (1) the Corporation is the surviving or continuing Person or (2) the Person (if other than the Corporation) formed by such consolidation or into which the Corporation is merged or the Person that acquires by conveyance, transfer or lease the properties and assets of the Corporation substantially as an entirety or in the case of a plan of liquidation, the Person to which assets of the Corporation have been transferred, shall be a corporation, partnership or trust organized and existing under the laws of the United States or any State thereof or the District of Columbia; (B) the Series A Senior Exchangeable Preferred Stock shall be converted into or exchanged for and shall become shares of such successor, transferee or resulting Person, having in respect of such successor, transferee or resulting Person the same powers, preferences and relative, participating, optional or other special rights and the qualifications, limitations or restrictions thereon, that the Series A Senior Exchangeable Preferred Stock had immediately prior to such transaction; (C) immediately after giving effect to such transaction and the use of the proceeds therefrom (on a pro forma basis, including giving effect to any Indebtedness incurred or anticipated to be incurred in connection with such transaction), the Corporation (in the case of clause (1) of the foregoing clause (A)) or such Person (in the case of clause (2) of the foregoing clause (A)) shall be able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) under paragraph (l)(i) hereof; (D) immediately after giving effect to such transactions, no Voting Rights Triggering Event shall have occurred or be continuing; and (E) the Corporation has delivered to the transfer agent for the Series A Senior Exchangeable Preferred Stock prior to the consummation of the proposed transaction an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or 11 transfer complies with the terms hereof and that all conditions precedent herein relating to such transaction have been satisfied. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of related transactions) of all or substantially all of the properties or assets of one or more Subsidiaries of the Corporation, the Capital Stock of which constitutes all or substantially all of the properties and assets of the Corporation shall be deemed to be the transfer of all or substantially all of the properties and assets of the Corporation. (iv) (A) If (1) after February 15, 2001 cash dividends on the Series A Senior Exchangeable Preferred Stock are in arrears and unpaid for six or more Dividend Periods (whether or not consecutive) (a "Dividend Default"); (2) the Corporation fails to redeem all of the then outstanding shares of Series A Senior Exchangeable Preferred Stock on February 15, 2008 or otherwise fails to discharge any redemption obligation with respect to the Series A Senior Exchangeable Preferred Stock; (3) the Corporation fails to make a Change of Control Offer (whether pursuant to the terms of paragraph (h)(v) or otherwise) following a Change of Control if such Change of Control Offer is required by paragraph (h) hereof or fails to purchase shares of Series A Senior Exchangeable Preferred Stock from Holders who elect to have such shares purchased pursuant to the Change of Control Offer; (4) the Corporation breaches or violates one of the provisions set forth in any of paragraphs (l)(i), (l)(ii) or (l)(iii) hereof and the breach or violation continues for a period of 30 days or more after the Corporation receives notice thereof specifying the default from the holders of at least 25% of the shares of Series A Senior Exchangeable Preferred Stock then outstanding or (5) the Corporation fails to pay at the final stated maturity (giving effect to any extensions thereof) the principal amount of any Indebtedness of the Corporation or any Subsidiary of the Corporation, or the final stated maturity of any such Indebtedness is accelerated, if the aggregate principal amount of such Indebtedness, together with the aggregate principal amount of any other such Indebtedness in default for failure to pay principal at the final stated maturity (giving effect to any extensions thereof) or that has been accelerated, aggregates $5,000,000 or more at one time, in each case, after a 10-day period during which such default shall not have been cured or such acceleration rescinded, then in the case of any of clauses (1)-(5) the 12 number of directors constituting the Board of Directors shall be adjusted by the number, if any, necessary to permit the Holders of Series A Senior Exchangeable Preferred Stock, voting separately and as one class, to elect the lesser of two directors or 25% of the members of the Board of Directors. Each such event described in clauses (1), (2), (3), (4) and (5) is a "Voting Rights Triggering Event." Holders of a majority of the issued and outstanding shares of Series A Senior Exchangeable Preferred Stock, voting separately and as one class, shall have the exclusive right to elect the lesser of two directors or 25% of the members of the Board of Directors at a meeting therefor called upon occurrence of such Voting Rights Triggering Event, and at every subsequent meeting at which the terms of office of the directors so elected by the Holders of the Series A Senior Exchangeable Preferred Stock expire (other than as described in (f)(iv)(B) below). The voting rights provided herein shall be the exclusive remedy at law or in equity of the holders of the Series A Senior Exchangeable Preferred Stock for any Voting Rights Triggering Event. (B) The right of the Holders of Series A Senior Exchangeable Preferred Stock voting together as a separate class to elect members of the Board of Directors as set forth in subparagraph (f)(iv)(A) above shall continue until such time as (x) in the event such right arises due to a Dividend Default, all accumulated dividends that are in arrears on the Series A Senior Exchangeable Preferred Stock are paid in full in cash; and (y) in all other cases, the failure, breach or default giving rise to such Voting Rights Triggering Event is remedied or waived by the holders of at least a majority of the shares of Series A Senior Exchangeable Preferred Stock then outstanding and entitled to vote thereon, at which time (1) the special right of the Holders of Series A Senior Exchangeable Preferred Stock so to vote as a class for the election of directors and (2) the term of office of the directors elected by the Holders of the Series A Senior Exchangeable Preferred Stock shall each terminate and the directors elected by the holders of Common Stock shall constitute the entire Board of Directors. At any time after voting power to elect directors shall have become vested and be continuing in the Holders of Series A Senior Exchangeable Preferred Stock pursuant to paragraph (f)(iv) hereof, or if vacancies shall exist in the offices of directors elected by the Holders of Series A Senior Exchangeable Preferred Stock, a proper officer of the Corporation may, and upon the written request of the Holders of record of at least twenty-five percent (25%) of the shares of Series A Senior Exchangeable Preferred Stock then 13 outstanding addressed to the secretary of the Corporation shall, call a special meeting of the Holders of Series A Senior Exchangeable Preferred Stock, for the purpose of electing the directors which such Holders are entitled to elect. If such meeting shall not be called by a proper officer of the Corporation within twenty (20) days after personal service of said written request upon the secretary of the Corporation, or within twenty (20) days after mailing the same within the United States by certified mail, addressed to the secretary of the Corporation at its principal executive offices, then the Holders of record of at least twenty-five percent (25%) of the outstanding shares of Series A Senior Exchangeable Preferred Stock may designate in writing one of their number to call such meeting at the expense of the Corporation, and such meeting may be called by the Person so designated upon the notice required for the annual meetings of stockholders of the Corporation and shall be held at the place for holding the annual meetings of stockholders. Any Holder of Series A Senior Exchangeable Preferred Stock so designated shall have, and the Corporation shall provide, access to the lists of stockholders to be called pursuant to the provisions hereof. (C) At any meeting held for the purpose of electing directors at which the Holders of Series A Senior Exchangeable Preferred Stock shall have the right, voting together as a separate class, to elect directors as aforesaid, the presence in person or by proxy of the Holders of at least a majority of the outstanding shares of Series A Senior Exchangeable Preferred Stock shall be required to constitute a quorum of such Series A Senior Exchangeable Preferred Stock. (D) Any vacancy occurring in the office of a director elected by the Holders of Series A Senior Exchangeable Preferred Stock may be filled by the remaining directors elected by the Holders of Series A Senior Exchangeable Preferred Stock unless and until such vacancy shall be filled by the Holders of Series A Senior Exchangeable Preferred Stock. (v) In any case in which the Holders of Series A Senior Exchangeable Preferred Stock shall be entitled to vote pursuant to this paragraph (f) or pursuant to Delaware law, each Holder of Series A Senior Exchangeable Preferred Stock entitled to vote with respect to such matter shall be entitled to one vote for each share of Series A Senior Exchangeable Preferred Stock held. 14 (g) EXCHANGE. (i) REQUIREMENTS. The outstanding shares of Series A Senior Exchangeable Preferred Stock are exchangeable as a whole but not in part, at the option of the Corporation and subject to the terms and conditions of the Credit Agreement, the Note Indenture and the Existing Note Indenture, at any time on any Dividend Payment Date for the Corporation's 12 1/4% Subordinated Exchange Debentures due 2008 (the "Exchange Debentures") to be substantially in the form of Exhibit A to the Indenture, a copy of which is on file with the secretary of the Corporation, PROVIDED that any such exchange may only be made if on or prior to the date of such exchange (i) the Corporation has paid (or is deemed to have paid) all accumulated dividends on the Series A Senior Exchangeable Preferred Stock (including the dividends payable on the date of exchange) and there shall be no contractual impediment to such exchange; (ii) there shall be funds legally available sufficient therefor; and (iii) immediately after giving effect to such exchange, no Default or Event of Default (as defined in the Indenture) would exist under the Indenture and no default or event of default would exist under the Credit Agreement, the Note Indenture or the Existing Note Indenture. The exchange rate shall be $1.00 principal amount of Exchange Debentures for each $1.00 of liquidation preference of Series A Senior Exchangeable Preferred Stock, including, to the extent necessary, Exchange Debentures in principal amounts less than $1,000, PROVIDED that the Corporation shall have the right, at its option, to pay cash in an amount equal to the principal amount of that portion of any Exchange Debenture that is not an integral multiple of $1,000 instead of delivering an Exchange Debenture in a denomination of less than $1,000. (ii) PROCEDURE FOR EXCHANGE. (A) At least thirty (30) days and not more than sixty (60) days prior to the date fixed for exchange, written notice (the "Exchange Notice") shall be given by first-class mail, postage prepaid, to each Holder of record on the record date fixed for such exchange of the Series A Senior Exchangeable Preferred Stock at such Holder's address as the same appears on the stock books of the Corporation, PROVIDED that no failure to give such notice nor any deficiency therein shall affect the validity of the procedure for the exchange of any shares of Series A Senior Exchangeable Preferred Stock to be exchanged except as to the Holder or Holders to whom the Corporation has failed to give said notice or except as to the Holder or Holders whose notice was defective. The Exchange Notice shall state: 15 (1) the date fixed for exchange; (2) that the Holder is to surrender to the Corporation, in the manner and at the place or places designated, his certificate or certificates representing the shares of Series A Senior Exchangeable Preferred Stock to be exchanged; (3) that dividends on the shares of Series A Senior Exchangeable Preferred Stock to be exchanged shall cease to accrue on such Exchange Date whether or not certificates for shares of Series A Senior Exchangeable Preferred Stock are surrendered for exchange on such Exchange Date unless the corporation shall default in the delivery of Exchange Debentures; and (4) that interest on the Exchange Debentures shall accrue from the Exchange Date whether or not certificates for shares of Series A Senior Exchangeable Preferred Stock are surrendered for exchange on such Exchange Date. (B) On or before the Exchange Date, each Holder of Series A Senior Exchangeable Preferred Stock shall surrender the certificate or certificates representing such shares of Series A Senior Exchangeable Preferred Stock, in the manner and at the place designated in the Exchange Notice. The Corporation shall cause the Exchange Debentures to be executed on the Exchange Date and, upon surrender in accordance with the Exchange Notice of the certificates for any shares of Series A Senior Exchangeable Preferred Stock so exchanged, duly endorsed (or otherwise in proper form for transfer, as determined by the Corporation), such shares shall be exchanged by the Corporation into Exchange Debentures. The Corporation shall pay interest on the Exchange Debentures at the rate and on the dates specified therein from the Exchange Date. (C) If notice has been mailed as aforesaid, and if before the Exchange Date specified in such notice (1) the Indenture shall have been duly executed and delivered by the Corporation and the trustee thereunder and (2) all Exchange Debentures necessary for such exchange shall have been duly executed by the Corporation and delivered to the trustee under the Indenture with irrevocable instructions to authenticate the Exchange Debentures necessary for such exchange, then the rights of the Holders of Series A Senior Exchangeable Preferred Stock so exchanged as stockholders of 16 the Corporation shall cease (except the right to receive Exchange Debentures, an amount in cash equal to the amount of accrued and unpaid dividends to the Exchange Date and, if the Corporation so elects, cash in lieu of any Exchange Debenture not an integral multiple of $1,000), and the Person or Persons entitled to receive the Exchange Debentures issuable upon exchange shall be treated for all purposes as the registered Holder or Holders of such Exchange Debentures as of the Exchange Date. (iii) NO EXCHANGE IN CERTAIN CASES. Notwithstanding the foregoing provisions of this paragraph (g), the Corporation shall not be entitled to exchange the Series A Senior Exchangeable Preferred Stock for Exchange Debentures if such exchange, or any term or provision of the Indenture or the Exchange Debentures, or the performance of the Corporation's obligations under the Indenture or the Exchange Debentures, shall materially violate or conflict with any applicable law or agreement or instrument then binding on the Corporation or if, at the time of such exchange, the Corporation is insolvent or if it would be rendered insolvent by such exchange. (h) CHANGE OF CONTROL. (i) In the event of a Change of Control (the date of such occurrence being the "Change of Control Date"), the Corporation shall notify the Holders of the Series A Senior Exchangeable Preferred Stock in writing of such occurrence and shall make an offer to purchase (the "Change of Control Offer") all then outstanding shares of Series A Senior Exchangeable Preferred Stock at a purchase price of 101% of the then effective liquidation preference thereof plus, without duplication, an amount in cash equal to all accumulated and unpaid dividends per share (including an amount in cash equal to a prorated dividend for the period from the Dividend Payment Date immediately prior to the Change of Control Payment Date to the Change of Control Payment Date). (ii) Within 30 days following the Change of Control Date, the Corporation shall send, by first class mail, postage prepaid, a notice to each Holder of Series A Senior Exchangeable Preferred Stock at such Holder's address as it appears on the stock books of the Corporation, which notice shall govern the terms of the Change of Control Offer. The notice to the Holders shall contain all instructions and materials necessary to enable such Holders to tender Series 17 A Senior Exchangeable Preferred Stock pursuant to the Change of Control Offer. Such notice shall state: (A) that a Change of Control has occurred, that the Change of Control Offer is being made pursuant to this paragraph (h) and that all Series A Senior Exchangeable Preferred Stock validly tendered and not withdrawn will be accepted for payment; (B) the purchase price (including the amount of accrued dividends, if any) and the purchase date (which shall be no earlier than 30 days nor later than 45 days from the date such notice is mailed, other than as may be required by law) (the "Change of Control Payment Date"); (C) that any shares of Series A Senior Exchangeable Preferred Stock not tendered will continue to accrue dividends; (D) that, unless the Corporation defaults in making payment therefor, any share of Series A Senior Exchangeable Preferred Stock accepted for payment pursuant to the Change of Control Offer shall cease to accrue dividends after the Change of Control Payment Date; (E) that Holders electing to have any shares of Series A Senior Exchangeable Preferred Stock purchased pursuant to a Change of Control Offer will be required to surrender the certificate or certificates representing such shares, properly endorsed for transfer together with such customary documents as the Corporation and the transfer agent may reasonably require, in the manner and at the place specified in the notice prior to the close of business on the Business Day prior to the Change of Control Payment Date; (F) that Holders will be entitled to withdraw their election if the Corporation receives, not later than five Business Days prior to the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the number of shares of Series A Senior Exchangeable Preferred Stock the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such shares of Series A Senior Exchangeable Preferred Stock purchased; 18 (G) that Holders whose shares of Series A Senior Exchangeable Preferred Stock are purchased only in part will be issued a new certificate representing the unpurchased shares of Series A Senior Exchangeable Preferred Stock; and (H) the circumstances and relevant facts regarding such Change of Control. (iii) The Corporation will comply with any securities laws and regulations, to the extent such laws and regulations are applicable to the repurchase of the Series A Senior Exchangeable Preferred Stock in connection with a Change of Control Offer. (iv) On the Change of Control Payment Date the Corporation shall (A) accept for payment the shares of Series A Senior Exchangeable Preferred Stock validly tendered pursuant to the Change of Control Offer, (B) pay to the Holders of shares so accepted the purchase price therefor in cash and (C) cancel and retire each surrendered certificate. Unless the Corporation defaults in the payment for the shares of Series A Senior Exchangeable Preferred Stock tendered pursuant to the Change of Control Offer, dividends will cease to accrue with respect to the shares of Series A Senior Exchangeable Preferred Stock tendered and all rights of Holders of such tendered shares will terminate, except for the right to receive payment therefor, on the Change of Control Payment Date. (v) If the purchase of the Series A Senior Exchangeable Preferred Stock would violate or constitute a default under the Credit Agreement, the Note Indenture, the Existing Note Indenture or other Indebtedness of the Corporation, then, notwithstanding anything to the contrary contained above, prior to complying with the foregoing provisions, but in any event within 30 days following the Change of Control Date, the Corporation shall either (A) repay in full all such Indebtedness and terminate all commitments outstanding under the Credit Agreement or (B) obtain the requisite consents, if any, under the Credit Agreement, the Note Indenture, the Existing Note Indenture or such Indebtedness required to permit the repurchase of Series A Senior Exchangeable Preferred Stock required by this paragraph (h). Until the requirements of the immediately preceding sentence are satisfied, the Corporation shall not make, and shall not be obligated to make, any Change of Control Offer; PROVIDED that the Corporation's failure to comply with the provisions of this 19 paragraph (h)(v) shall constitute a Voting Rights Triggering Event. (i) CONVERSION OR EXCHANGE. The Holders of shares of Series A Senior Exchangeable Preferred Stock shall not have any rights hereunder to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of Capital Stock of the Corporation. (j) REISSUANCE OF SERIES A SENIOR EXCHANGEABLE PREFERRED STOCK. Shares of Series A Senior Exchangeable Preferred Stock that have been issued and reacquired in any manner, including shares purchased or redeemed or exchanged, shall (upon compliance with any applicable provisions of the laws of Delaware) have the status of authorized and unissued shares of Preferred stock undesignated as to series and may be redesignated and reissued as part of any series of Preferred Stock, PROVIDED that any issuance of such shares as Series A Senior Exchangeable Preferred Stock must be in compliance with the terms hereof. (k) BUSINESS DAY. If any payment, redemption or exchange shall be required by the terms hereof to be made on a day that is not a Business Day, such payment, redemption or exchange shall be made on the immediately succeeding Business Day. (l) CERTAIN ADDITIONAL PROVISIONS. (i) LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS. Neither the Corporation nor any of its Subsidiaries shall, directly or indirectly, create, incur, assume, guarantee, acquire or become liable for, contingently or otherwise (collectively, "incur"), any Indebtedness other than Permitted Indebtedness. Notwithstanding the foregoing limitation, the Corporation or any Subsidiary may incur Indebtedness if, on the date of the incurrence of such Indebtedness, after giving effect to the incurrence of such Indebtedness and the receipt and application of the proceeds thereof, the Corporation's Leverage Ratio is less than 7.0 to 1. (ii) LIMITATION ON RESTRICTED PAYMENTS. (A) Neither the Corporation nor any of its Subsidiaries shall, directly or indirectly, make any Restricted Payment if immediately after giving effect thereto: (1) any Voting Rights Triggering Event shall have occurred and be continuing; or 20 (2) the Corporation is not able to incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with paragraph (l)(i) above; or (3) the aggregate amount of Restricted Payments made subsequent to the Issue Date (the amount expended for such purposes, if other than in cash, being the fair market value of such property as determined by the Board of Directors in good faith) exceeds the sum of (I) (x) 100% of the aggregate Consolidated EBITDA of the Corporation (or, in the event such Consolidated EBITDA shall be a deficit, minus 100% of such deficit) accrued subsequent to the Issue Date to the most recent date for which financial information is available to the Corporation, taken as one accounting period, less (y) 1.4 times Consolidated Interest Expense for the same period, plus (II) 100% of the aggregate net proceeds, including the fair market value of property other than cash as determined by the Board of Directors in good faith, received by the Corporation from any Person (other than a Subsidiary of the Corporation) from the issuance and sale on or subsequent to February 14, 1996 of Qualified Capital Stock of the Corporation (excluding any net proceeds from issuances and sales financed directly or indirectly using funds borrowed from the Corporation or any Subsidiary of the Corporation, until and to the extent such borrowing is repaid, but including the proceeds from the issuance and sale of any securities convertible into or exchangeable for Qualified Capital Stock to the extent such securities are so converted or exchanged and including any additional proceeds received by the Corporation upon such conversion or exchange), plus (III) without duplication of any amount included in clause (3)(II) above, 100% of the aggregate net proceeds, including the fair market value of property other than cash (valued as provided in clause (3)(II) above), received by the Corporation as a capital contribution on or subsequent to February 14, 1996 (excluding the net proceeds from a Public Equity Offering by Chancellor to the extent used to redeem the Series A Senior Exchangeable Preferred Stock); plus (IV) $2,500,000. (B) Notwithstanding the foregoing, these provisions will not prohibit: (1) the payment of any dividend or the making of any distribution within 60 days after the date of its declaration if such dividend or distribution would have 21 been permitted on the date of declaration; (2) the acquisition of any Capital Stock of the Corporation or any warrants, options or other rights to acquire shares of any class of such Capital Stock either (I) solely in exchange for shares of Qualified Capital Stock or other rights to acquire Qualified Capital Stock or (II) through the application of the net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Corporation) of shares of Qualified Capital Stock or warrants, options or other rights to acquire Qualified Capital Stock; (3) payments by the Corporation to fund the operating expenses of Chancellor in an amount not to exceed $500,000 per annum; (4) payments by the Corporation to Chancellor to enable Chancellor to make payments pursuant to (x) the Financial Monitoring and Oversight Agreement or (y) the Tax Sharing Agreement; (5) payments by the Corporation to repurchase, or enable Chancellor to repurchase, Capital Stock or other securities of Chancellor from employees of Chancellor or the Corporation in an aggregate amount not to exceed $5,000,000; (6) payments to enable Chancellor to redeem or repurchase stock purchase or similar rights in an aggregate amount not to exceed $500,000; (7) payments, not to exceed $100,000 in the aggregate, to enable the Corporation to make cash payments to holders of its Capital Stock in lieu of the issuance of fractional shares of its Capital Stock; and (8) payments made pursuant to any merger, consolidation or sale of assets effected in accordance with paragraph (f)(iii) above; PROVIDED, HOWEVER, that no such payment may be made pursuant to this clause (8) unless, after giving effect to such transaction (and the incurrence of any Indebtedness in connection therewith and the use of the proceeds thereof), the Corporation would be able to incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with paragraph (l)(i) above such that after incurring that $1.00 of additional Indebtedness, the Leverage Ratio would be less than 6.0 to 1; provided, further, however, that in the case of clauses (4)(x), (5), (6), (7) and (8), no Voting Rights Triggering Event shall have occurred or be continuing at the time of such payment or as a result thereof. In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date, amounts expended pursuant to clauses (1), (2), (4)(x), (5), (6), (7) and (8) shall be included in such calculation. (iii) LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES. The Corporation shall not permit any of its Subsidiaries to issue any Preferred Stock (other than to the Corporation or to a Wholly Owned Subsidiary of the Corporation) or permit any Person (other than to the Corporation or a Wholly Owned 22 Subsidiary of the Corporation) to own any Preferred Stock of a Subsidiary of the Corporation (other than Acquired Preferred Stock; provided that at the time the issuer of such Acquired Preferred Stock becomes a Subsidiary of the Corporation or merges with the Corporation or any of its Subsidiaries, and after giving effect to such transaction, the Corporation shall be able to incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with paragraph (l)(i) above). (iv) REPORTS. So long as any shares of Series A Senior Exchangeable Preferred Stock are outstanding, the Corporation will provide to the holders of Series A Senior Exchangeable Preferred Stock, within 15 days after it files them with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may by rules and regulations prescribe) which the Corporation files with the Commission pursuant to Section 13 or 15(d) of the Exchange Act. In the event that the Corporation is no longer required to furnish such reports to its securityholders pursuant to the Exchange Act, the Corporation will cause its consolidated financial statements, comparable to those which would have been required to appear in annual or quarterly reports, to be delivered to the Holders of Series A Senior Exchangeable Preferred Stock. (m) DEFINITIONS. As used in this Certificate of Designation, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and VICE versa), unless the context otherwise requires: "ACQUIRED PREFERRED STOCK" means Preferred Stock of any Person at the time such Person becomes a Subsidiary of the Corporation or at the time it merges or consolidates with the Corporation or any of its Subsidiaries and not issued by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Subsidiary of the Corporation or such acquisition, merger or consolidation. "AFFILIATE" means a Person who, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the Corporation. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, 23 whether through the ownership of voting securities, by contract or otherwise. "ASSET ACQUISITION" means (i) an Investment by the Corporation or any Subsidiary of the Corporation in any other Person pursuant to which such Person shall become a Subsidiary of the Corporation or shall be consolidated or merged with the Corporation or any Subsidiary of the Corporation or (ii) the acquisition by the Corporation or any Subsidiary of the Corporation of assets of any Person comprising a division or line of business of such Person. "ASSET SALE" means any direct or indirect sale, issuance, conveyance, transfer, lease (other than operating leases entered into in the ordinary course of business), assignment or other transfer for value by the Corporation or any of its Subsidiaries (excluding any Sale and Leaseback Transaction or any pledge of assets or stock by the Corporation or any of its Subsidiaries) to any Person other than the Corporation or a Wholly Owned Subsidiary of the Corporation of (i) any Capital Stock of any Subsidiary of the Corporation or (ii) any other property or assets of the Corporation or any Subsidiary of the Corporation other than in the ordinary course of business. "BOARD OF DIRECTORS" shall have the meaning ascribed to it in the first paragraph of this Resolution. "BUSINESS DAY" means any day except a Saturday, a Sunday, or any day on which banking institutions in New York, New York are required or authorized by law or other governmental action to be closed. "CAPITAL STOCK" means (i) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated) of capital stock of such Person and (ii) with respect to any Person that is not a corporation. any and all partnership or other equity interests of such Person. "CAPITALIZED LEASE OBLIGATION" means, as to any Person, the obligation of such Person to pay rent or other amounts under a lease to which such Person is a party that is required to be classified and accounted for as a capital lease obligation under GAAP, and for purposes of this definition, the amount of such obligation at any date shall be the capitalized amount of such obligation at such date, determined in accordance with GAAP. 24 "CASH EQUIVALENTS" means (i) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor's Corporation or Moody's Investors Service, Inc.; (iii) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from Standard & Poor's Corporation or at least P-1 from Moody's Investors Service, Inc.; (iv) certificates of deposit or bankers' acceptances maturing within one year from the date of acquisition thereof issued by any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia or any U.S. branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $200,000,000; (v) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications specified in clause (iv) above; and (vi) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (i) through (v) above. "CHANCELLOR" means Chancellor Broadcasting Company, a Delaware corporation, and its successors. "CHANGE OF CONTROL" means the occurrence of one or more of the following events: (i) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group") (whether or not otherwise in compliance with the provisions of the Exchange Indenture), other than to Hicks Muse or any of its Affiliates, officers and directors or to Steven Dinetz (the "Permitted Holders"); or (ii) a majority of the Board of Directors of Chancellor or the Corporation shall consist of Persons who are not Continuing Directors; or (iii) the acquisition by any Person or Group (other than the Permitted Holders) of the power, directly or indirectly, to vote or direct the voting of securities having more than 25 50% of the ordinary voting power for the election of directors of Chancellor or the Corporation. "CHANGE OF CONTROL DATE" shall have the meaning ascribed to it in paragraph (h) hereof. "CHANGE OF CONTROL PAYMENT DATE" shall have the meaning ascribed to it in paragraph (h) hereof. "CHANGE OF CONTROL OFFER" shall have the meaning ascribed to it in paragraph (h) hereof. "COMMISSION" means the Securities and Exchange Commission. "COMMODITY AGREEMENT" means any commodity futures contract, commodity option or other similar agreement or arrangement entered into by the Corporation or any of its Subsidiaries designed to protect the Corporation or any of its Subsidiaries against fluctuations in the price of commodities actually used in the ordinary course of business of the Corporation and its Subsidiaries. "CONSOLIDATED EBITDA" means, with respect to any Person, for any period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to the extent Consolidated Net Income has been reduced thereby, (a) all income taxes of such Person and its Subsidiaries paid or accrued in accordance with GAAP for such period (other than income taxes attributable to extraordinary or nonrecurring gains or losses), (b) Consolidated Interest Expense and (c) Consolidated Non-Cash Charges, all as determined on a consolidated basis for such Person and its Subsidiaries in conformity with GAAP. "CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any period, without duplication, the sum of (i) the interest expense of such Person and its Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, including, without limitation, (a) any amortization of debt discount, (b) the net cost under Interest Swap Obligations (including any amortization of discounts), (c) the interest portion of any deferred payment obligation, (d) all commissions, discounts and other fees and charges owed with respect to letters of credit, bankers' acceptance financing or similar facilities, and (e) all accrued interest and (ii) the interest component of Capitalized Lease Obligations paid or accrued by such Person 26 and its Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED NET INCOME" of any Person means, for any period, the aggregate net income (or loss) of such Person and its Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided that there shall be excluded therefrom, without duplication, (i) gains and losses from Asset Sales or abandonments or reserves relating thereto and the related tax effects, (ii) items classified as extraordinary or nonrecurring gains and losses, and the related tax effects according to GAAP, (iii) the net income (or loss) of any Person acquired in a pooling of interests transaction accrued prior to the date it becomes a Subsidiary of such first referred to Person or is merged or consolidated with it or any of its Subsidiaries, (iv) the net income of any Subsidiary to the extent that the declaration of dividends or similar distributions by that Subsidiary of that income is restricted by contract, operation of law or otherwise and (v) the net income of any Person, other than a Subsidiary, except to the extent of the lesser of (a) dividends or distributions paid to such first referred to Person or its Subsidiary by such Person and (b) the net income of such Person (but in no event less than zero), and the net loss of such Person shall be included only to the extent of the aggregate Investment of the first referred to Person or a consolidated Subsidiary of such Person. "CONSOLIDATED NON-CASH CHARGES" means, with respect to any Person for any period, the aggregate depreciation, amortization and other non-cash expenses of such Person and its Subsidiaries reducing Consolidated Net Income of such Person and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP (excluding any such charges constituting an extraordinary or nonrecurring item). "CONTINUING DIRECTOR" means, as of the date of determination, any Person who (i) was a member of the Board of Directors of Chancellor or the Corporation on the Issue Date, (ii) was nominated for election or elected to the Board of Directors of Chancellor or the Corporation with the affirmative vote of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election, or (iii) is a representative of a Permitted Holder. 27 "CREDIT AGREEMENT" means the Credit Agreement, dated February 14, 1996 among Chancellor, the Corporation, the lenders from time to time party thereto and Bankers Trust Company as agent, together with the related documents thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time, including any agreement extending the maturity of, refinancing, replacing or otherwise restructuring (including by way of adding subsidiaries of the Corporation as additional borrowers or guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group of lenders. "CURRENCY AGREEMENT" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Corporation or any of its Subsidiaries against fluctuations in currency values. "DISQUALIFIED CAPITAL STOCK" means any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof (except, in each case, upon the occurrence of a Change of Control), in whole or in part, on or prior to February 15, 2008. "DIVIDEND PAYMENT DATE" means February 15, May 15, August 15 and November 15, of each year. "DIVIDEND PERIOD" means the Initial Dividend Period and, thereafter, each Quarterly Dividend Period. "DIVIDEND RECORD DATE" means February 1, May 1, August 1 and November 1 of each year. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "EXCHANGE DATE" means a date on which shares of Series A Senior Exchangeable Preferred Stock are exchanged by the Corporation for Exchange Debentures. 28 "EXCHANGE DEBENTURES" shall have the meaning ascribed to it in paragraph (g) hereof. "EXCHANGE NOTICE" shall have the meaning ascribed to it in paragraph (g) hereof. "EXISTING NOTES" means the Corporation's $60 million aggregate principal amount of 12 1/2% Senior Subordinated Notes due 2004 as the same may be modified or amended from time to time and future refinancings thereof. "EXISTING INDENTURE" means the Indenture governing the Existing Notes as such Indenture may be amended or supplemented from time to time in accordance with the terms thereof. "EXISTING PREFERRED STOCK" means the Corporation's 12 1/4% Senior Cumulative Exchangeable Preferred Stock. "FEDERAL RESERVE BOARD" means the Board of Governors of the Federal Reserve System, or any successor thereto. "FINANCIAL MONITORING AND OVERSIGHT AGREEMENT" means, collectively, the Financial Monitoring and Oversight Agreement among Hicks, Muse & Co. Partners, L.P., the Corporation and Chancellor, as in effect on the Issue Date, and the Financial Advisory Agreement among HM/2 Management Partners, L.P., the Corporation and Chancellor, as in effect on the Issue Date. "GAAP" means generally accepted accounting principles as in effect in the United States of America as of the Issue Date. "HOLDER" means a holder of shares of Series A Senior Exchangeable Preferred Stock as reflected in the stock books of the Corporation. "INDEBTEDNESS" means with respect to any Person, without duplication, any liability of such Person (i) for borrowed money, (ii) evidenced by bonds, debentures, notes or other similar instruments, (iii) constituting Capitalized Lease Obligations, (iv) incurred or assumed as the deferred purchase price of property, or pursuant to conditional sale obligations and title retention agreements (but excluding trade accounts payable arising in the ordinary course of business), (v) for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction, (vi) for Indebtedness of others guaranteed by 29 such Person, (vii) for Interest Swap Obligations, Commodity Agreements and Currency Agreements and (viii) for Indebtedness of any other Person of the type referred to in clauses (i) through (vii) which is secured by any Lien on any property or asset of such first referred to Person, the amount of such Indebtedness being deemed to be the lesser of the value of such property or asset or the amount of the Indebtedness so secured. The amount of Indebtedness of any Person at any date shall be the outstanding principal amount of all unconditional obligations described above, as such amount would be reflected on a balance sheet prepared in accordance with GAAP, and the maximum liability at such date of such Person for any contingent obligations described above. "INITIAL DIVIDEND PERIOD" means the dividend period commencing on the Issue Date and ending on the first Dividend Payment Date to occur thereafter. "INTEREST SWAP OBLIGATIONS" means the obligations of any Person under any interest rate protection agreement, interest rate future, interest rate option, interest rate swap, interest rate cap or other interest rate hedge or arrangement. "INVESTMENT" means (i) any transfer or delivery of cash, stock or other property of value in exchange for Indebtedness, stock or other security or ownership interest in any Person by way of loan, advance, capital contribution, guarantee or otherwise and (ii) an investment deemed to have been made by the Corporation at the time any entity which was a Subsidiary of the Corporation ceases to be such a Subsidiary in an amount equal to the value of the loans and advances made, and any remaining ownership interest in, such entity immediately following such entity ceasing to be a Subsidiary of the Corporation. The amount of any non-cash Investment shall be the fair market value of such Investment, as determined conclusively in good faith by management of the Corporation unless the fair market value of such Investment exceeds $1,000,000, in which case the fair market value shall be determined conclusively in good faith by the Board of Directors at the time such Investment is made. "ISSUE DATE" means the date of original issuance of the Series A Senior Exchangeable Preferred Stock. "JUNIOR STOCK" shall have the meaning ascribed to it in paragraph (b) hereof. 30 "LEVERAGE RATIO" shall mean, as to any Person, the ratio of (i) the sum of the aggregate outstanding amount of Indebtedness of such Person and its Subsidiaries as of the date of calculation on a consolidated basis in accordance with GAAP to (ii) the Consolidated EBITDA of such Person for the four full fiscal quarters (the "Four Quarter Period") ending on or prior to the date of determination. For purposes of this definition, the aggregate outstanding principal amount of Indebtedness of the Person and its Subsidiaries for which such calculation is made shall be determined on a pro forma basis as if the Indebtedness giving rise to the need to perform such calculation had been incurred and the proceeds therefrom had been applied, and all other transactions in respect of which such Indebtedness is being incurred had occurred, on the last day of the Four Quarter Period. In addition to the foregoing, for purposes of this definition, "Consolidated EBITDA" shall be calculated on a pro forma basis after giving effect to (i) the incurrence of the Indebtedness of such Person and its Subsidiaries (and the application of the proceeds therefrom) giving rise to the need to make such calculation and any incurrence (and the application of the proceeds therefrom) or repayment of other Indebtedness, other than the incurrence or repayment of Indebtedness pursuant to working capital facilities, at any time subsequent to the beginning of the Four Quarter Period and on or prior to the date of determination, as if such incurrence (and the application of the proceeds thereof), or the repayment, as the case may be, occurred on the first day of the Four Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Subsidiaries (including any Person that becomes a Subsidiary as a result of such Asset Acquisition) incurring, assuming or otherwise becoming liable for Indebtedness) at any time on or subsequent to the first day of the Four Quarter Period and on or prior to the date of determination, as if such Asset Sale or Asset Acquisition (including the incurrence, assumption or liability for any such Indebtedness and also including any Consolidated EBITDA associated with such Asset Acquisition) occurred on the first day of the Four Quarter Period. Furthermore, in calculating "Consolidated Interest Expense" for purposes of the calculation of "Consolidated EBITDA," (i) interest on Indebtedness determined on a fluctuating basis as of the date of determination (including Indebtedness actually incurred on the date of the transaction giving rise to the need to calculate the 31 Leverage Ratio) and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness as in effect on the date of determination and (ii) notwithstanding (i) above, interest determined on a fluctuating basis, to the extent such interest is covered by Interest Swap Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements. "LIEN" means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest). "MANDATORY REDEMPTION PRICE" shall have the meaning ascribed to it in paragraph (e) hereof. "NOTE INDENTURE" means the Indenture governing the Notes as such Indenture may be amended or supplemented from time to time in accordance with the terms thereof. "NOTES" means the Corporation's $200.0 million aggregate principal amount of 9 3/8% Senior Subordinated Notes due 2004 of the Corporation as the same may be modified or amended from time to time and future refinancings thereof. "OBLIGATIONS" means all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing, or otherwise relating to, any Indebtedness. "OFFICERS' CERTIFICATE" means a certificate signed by two officers or by an officer and either an Assistant Treasurer or an Assistant Secretary of the Corporation which certificate shall include a statement that, in the opinion of such signers all conditions precedent to be performed by the Corporation prior to the taking of any proposed action have been taken. In addition, such certificate shall include (i) a statement that the signatories have read the relevant covenant or condition, (ii) a brief statement of the nature and scope of such examination or investigation upon which the statements are based, (iii) a statement that, in the opinion of such signatories, they have made such examination or investigation as is reasonably necessary to express an informed opinion and (iv) a statement as to 32 whether or not, in the opinion of the signatories, such relevant conditions or covenants have been complied with. "OPINION OF COUNSEL" means an opinion of counsel that, in such counsel's opinion, all conditions precedent to be performed by the Corporation prior to the taking of any proposed action have been taken. Such opinion shall also include the statements called for in the second sentence under "Officers' Certificate". "OPTIONAL REDEMPTION PRICE" shall have the meaning ascribed to it in paragraph (e)(i) hereof. "PARITY STOCK" shall have the meaning ascribed to it in paragraph (b) hereof. "PERMITTED INDEBTEDNESS" means, without duplication, (i) Indebtedness outstanding on the Issue Date, including, without limitation, the Notes, the Existing Notes, and guarantees thereof; (ii) Indebtedness of the Corporation incurred pursuant to the Credit Agreement in an aggregate principal amount at any time outstanding not to exceed the sum of the aggregate commitments pursuant to the Credit Agreement as initially in effect reduced by the aggregate principal amount permanently repaid with the proceeds of Asset Sales; (iii) Indebtedness evidenced by the Exchange Debentures, including any Exchange Debentures issued in accordance with the Exchange Indenture as the payment of interest on the Exchange Debentures; (iv) Interest Swap Obligations; provided that such Interest Swap Obligations are entered into to protect the Corporation from fluctuations in interest rates of its Indebtedness; (v) additional Indebtedness of the Corporation or any of its Subsidiaries not to exceed $10,000,000 in principal amount outstanding at any time (which amount may, but need not, be incurred under the Credit Agreement); (vi) Refinancing Indebtedness; (vii) Indebtedness owed by the Corporation to any Wholly Owned Subsidiary or by any Subsidiary to the Corporation or any Wholly Owned Subsidiary of the Corporation; and (viii) guarantees by Subsidiaries of any Indebtedness permitted to be incurred pursuant to the terms of paragraph (1)(i) hereof. "PERMITTED INVESTMENTS" means (i) Investments by the Corporation or any Subsidiary to acquire the stock or assets of any Person (or Indebtedness of such Person acquired in connection with a transaction in which such Person becomes a Subsidiary of the Corporation) engaged in the broadcast business or businesses reasonably related thereto; provided 33 that if any such Investment or series of related Investments involves an Investment by the Corporation in excess of $5,000,000, the Corporation is able, at the time of such investment and immediately after giving effect thereto, to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with paragraph (l)(i) hereof, (ii) Investments received by the Corporation or its Subsidiaries as consideration for a sale of assets, (iii) Investments by the Corporation or any Wholly Owned Subsidiary of the Corporation in any Wholly Owned Subsidiary of the Corporation (whether existing on the Issue Date or created thereafter) or any Person that after such Investments, and as a result thereof, becomes a Wholly Owned Subsidiary of the Corporation and Investments in the Corporation by any Wholly Owned Subsidiary of the Corporation, (iv) cash and Cash Equivalents, (v) Investments in securities of trade creditors, wholesalers or customers received pursuant to any plan of reorganization or similar arrangement and (vi) additional Investments in an aggregate amount not to exceed $2,500,000 at any time outstanding. "PERSON" means an individual, partnership, corporation, limited liability company, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof. "PREFERRED STOCK" of any Person means any Capital Stock of such Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation. "PRO FORMA" means, unless otherwise provided herein, with respect to any calculation made or required to be made pursuant hereto, a calculation in accordance with Article II of Regulation S-X under the Securities Act. "PUBLIC EQUITY OFFERING" means an underwritten public offering of Capital Stock (other than Disqualified Capital Stock) of the Corporation or Chancellor, pursuant to an effective registration statement filed with the Commission in accordance with the Securities Act; provided, however, that, in the case of a Public Equity Offering by Chancellor, Chancellor contributes to the capital of the Corporation net cash proceeds in an amount sufficient to redeem the Series A Senior Exchangeable Preferred Stock called for redemption in accordance with the terms hereof. "QUALIFIED CAPITAL STOCK" means any Capital Stock that is not Disqualified Capital Stock. 34 "QUARTERLY DIVIDEND PERIOD" shall mean the quarterly period commencing on each February 16, May 16, August 16 and November 16 and ending on the next succeeding Dividend Payment Date, respectively. "SERIES A SENIOR EXCHANGEABLE PREFERRED STOCK" shall have the meaning ascribed to it in paragraph (a) hereof. "REDEMPTION DATE", with respect to any shares of Series A Senior Exchangeable Preferred Stock, means the date on which such shares of Series A Senior Exchangeable Preferred Stock are redeemed by the Corporation. "REDEMPTION NOTICE" shall have the meaning ascribed to it in paragraph (e) hereof. "REFINANCING INDEBTEDNESS" means any refinancing by the Corporation of Indebtedness of the Corporation or any of its Subsidiaries incurred in accordance with paragraph (l)(i) hereof (other than pursuant to clause (ii) or (iv) of the definition of Permitted Indebtedness) that does not (i) result in an increase in the aggregate principal amount of Indebtedness (such principal amount to include, for purposes of this definition, any premiums, penalties or accrued interest paid with the proceeds of the Refinancing Indebtedness) of such Person or (ii) create Indebtedness with (a) a Weighted Average Life to Maturity that is less than the Weighted Average Life to Maturity of the Indebtedness being refinanced or (b) a final maturity earlier than the final maturity of the Indebtedness being refinanced. "RESTRICTED PAYMENT" means (i) the declaration or payment of any dividend or the making of any other distribution (other than dividends or distributions payable in Qualified Capital Stock) on shares of Junior Stock, (ii) any purchase, redemption, retirement or other acquisition for value of any Junior Stock, or any warrants, rights or options to acquire shares of Junior Stock, other than through the exchange of such Junior Stock or any warrants, rights or options to acquire shares of any class of such Junior Stock for Qualified Capital Stock or warrants, rights or options to acquire Qualified Capital Stock or (iii) the making of any Investment (other than a Permitted Investment). "SALE AND LEASEBACK TRANSACTION" means any direct or indirect arrangement with any Person or to which any such Person is a party, providing for the leasing to the 35 Corporation or a Subsidiary of any property, whether owned by the Corporation or any Subsidiary at the Issue Date or later acquired, which has been or is to be sold or transferred by the Corporation or such Subsidiary to such Person or to any other Person from whom funds have been or are to be advanced by such Person on the security of such property. "SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "SENIOR STOCK" shall have the meaning ascribed to it in paragraph (b) hereof. "SUBSIDIARY," with respect to any Person, means (i) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person or (ii) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person. Notwithstanding anything contained herein to the contrary, all references to the Corporation and its consolidated Subsidiaries or to financial information prepared on a consolidated basis in accordance with GAAP shall be deemed to include the Corporation and its Subsidiaries as to which financial statements are prepared on a combined basis in accordance with GAAP and to financial information prepared on such a combined basis. Notwithstanding anything herein to the contrary, an Unrestricted Subsidiary shall not be deemed to be a Subsidiary for purposes hereof. "TAX SHARING AGREEMENT" means the Tax Sharing Agreement between the Corporation and Chancellor, as in effect on the Issue Date. "UNRESTRICTED SUBSIDIARY" means a Subsidiary of the Corporation created after the Issue Date and so designated by a resolution adopted by the Board of Directors, provided that (i) neither the Corporation nor any of its other Subsidiaries (other than Unrestricted Subsidiaries) (a) provides any credit support for any Indebtedness of such Subsidiary (including any undertaking, agreement or instrument evidencing such Indebtedness) or (b) is directly or indirectly liable for any Indebtedness of such Subsidiary, (ii) the creditors with respect to Indebtedness for borrowed money of such Subsidiary, having a principal 36 amount in excess of $5,000,000, have agreed in writing that they have no recourse, direct or indirect, to the Corporation or any other Subsidiary of the Corporation (other than Unrestricted Subsidiaries), including, without limitation, recourse with respect to the payment of principal of or interest on any Indebtedness of such Subsidiary and (iii) at the time of designation of such Subsidiary such Subsidiary has no property or assets (other than de minimis assets resulting from the initial capitalization of such Subsidiary). Any such designation by the Board of Directors shall be evidenced by a resolution of the Board of Directors giving effect to such designation. "VOTING RIGHTS TRIGGERING EVENT" shall have the meaning ascribed to it in paragraph f(iv) hereof. "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding aggregate principal amount of such Indebtedness into (b) the total of the product obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one- twelfth) which will elapse between such date and the making of such payment. "WHOLLY OWNED SUBSIDIARY" of any Person means any Subsidiary of such Person of which all the outstanding voting securities (other than directors' qualifying shares) which normally have the right to vote m the election of directors are owned by such Person. 37 IN WITNESS WHEREOF, said Chancellor Radio Broadcasting Company, has caused this Certificate to be signed by Jacques Kerrest, its Senior Vice President, this 19th day of August 1996. CHANCELLOR RADIO BROADCASTING COMPANY By: /s/ JACQUES KERREST ---------------------------------------- Name: Jacques Kerrest Title: Senior Vice President 38 EX-10.26 6 EXHIBIT 10.26 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into effective as of February 14, 1996, between Chancellor Broadcasting Company, a Delaware corporation ("Holdings"), Chancellor Radio Broadcasting Company, a Delaware corporation (the "Broadcasting Subsidiary"), and Rick Eytcheson (the "Employee"). W I T N E S S E T H: WHEREAS, Holdings and the Broadcasting Subsidiary (collectively, the "Company") are engaged in the ownership and operation of radio broadcast stations KZLA-FM and KLAC-AM in the Los Angeles, California market; KSAN- FM, KNEW-AM, KBGG-FM and KABL-AM in the San Francisco, California market; KHYL-FM, KFBK-AM and KGBY-FM in the Sacramento, California market; and KGGI-FM and KMEN-AM in the Riverside-San Bernardino, California market (collectively, the "Stations"); WHEREAS, the Company desires to employ the Employee in an executive capacity to assume supervisory responsibilities of the Stations; WHEREAS, the Employee desires to be employed by the Company in said capacity; WHEREAS, the Employee is currently employed by the Company pursuant to an Employment Agreement dated January 10, 1994, which the parties hereto desire to supersede by the execution and delivery of this Agreement; and WHEREAS, the parties hereto desire to set forth in writing the terms and conditions of their understandings and agreements. NOW THEREFORE, in consideration of the foregoing, of the mutual promises contained herein and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agree as follows: 1 1. TERM OF EMPLOYMENT. Unless earlier terminated in accordance with the terms of this Agreement, the period of the Employee's employment under this Agreement (the "Employment Term") shall commence on February 14, 1996 (the "Employment Date") and shall continue until February 14, 1998, provided that the Employment Term shall automatically be renewed for successive one-year terms unless the Company terminates this Agreement by written notice to the Employee within 30 days prior to the expiration of the then-current term. 2. DUTIES. The Employee shall serve as an Executive Vice President of the Company and as Regional Manager of the Stations, with such authority, duties, and responsibilities as are commensurate with such positions, subject to the authority and direction of the Chief Executive Officer and Board of Directors of the Company. During the term of this Agreement the Employee shall devote his full business time and effort to the diligent and faithful performance of his duties hereunder. 3. COMPENSATION. 3.1 SALARY. During the Employment Term, the Company shall pay the Employee a base salary at an annual rate of $325,000 for a period from the Employment Date through the first anniversary of the Employment Date and at an annual rate of $342,000 thereafter. The Employee's base salary shall be paid in accordance with the Company's regular payroll procedure, but not less frequently than monthly. The Company shall be entitled to withhold from all amounts payable to the Employee under this Agreement all taxes and other sums required to be withheld by law. The Employee shall, during the Employment Term, be entitled to participate in the employee benefit plans of the Company in accordance with the Company's policies, as changed from time to time. 3.2 BONUSES. During the Employment Term, the Company shall pay the Employee an annual bonus of up to 50% of the Employee's Base Salary (the "Broadcast Cash Flow Bonus") for each fiscal year of the Company subsequent to 1995, based on the Stations achieving the broadcast cash flow projections therefor outlined in Exhibit A attached hereto or otherwise established therefor by the Board of Directors of the Company (the "BCF Projections"), it being understood that the Employee shall be entitled to receive within 20 days after the end of each fiscal quarter in which the Stations achieve the BCF Projections therefor, as payment against the 2 Broadcast Cash Flow Bonus for the fiscal year in which such fiscal quarter occurred, an amount equaling one-eighth of the maximum possible Broadcast Cash Flow Bonus for such fiscal year, with the remaining amount of the Broadcast Cash Flow Bonus, if any, to be paid within 60 days after the end of such fiscal year. The BCF Projections will be adjusted to reflect acquisitions or dispositions of stations under the supervision of the Employee, and the stations under the supervision of the Employee after any such acquisition or disposition shall be deemed thereafter to be the Stations for all purposes of this Agreement. In the event the Stations do not achieve in any fiscal year the BCF Projections therefor but the consolidated broadcast cash flow projection for the Company set forth in Exhibit A or otherwise established for such year by the Board of Directors of the Company (the "Consolidated BCF Projection") is achieved, the Chief Executive Officer, subject to the authority of the Board Of Directors of the Company, may elect to pay the Broadcast Cash Flow Bonus to the Employee. 3.3 ADDITIONAL BENEFITS. (a) The Company will provide the Employee with use of an automobile with a value of up to Sixty Thousand Dollars ($60,000.00) and shall reimburse the Employee for taxes associated with said automobile. (b) The Employee shall be given three (3) weeks paid vacation each calendar year, as well as personal leave, holiday leave and sick leave in accordance with the general practice of the Company. Said vacation shall not be taken for three (3) continuous weeks, but must be taken in accordance with the Company's policies, as changed from time to time. (c) The Company shall provide the Employee with a membership at a tennis, fitness or business lunch club, or similar facility, the use of which shall be for business purposes and the annual dues of which shall not exceed Five Thousand Dollars ($5,000.00). The Company shall have the right to approve such membership in advance and shall thereafter pay the cost and expenses of such membership. The Employee's membership in said club shall automatically terminate upon the termination of his employment for any reason. (d) The Employee shall be entitled to participate in the Company's Stock Award Plan in accordance with the terms thereof and, at the discretion of the Board of Directors of the Company, shall be granted awards thereunder from time to time. 3 4. TERMINATION OF EMPLOYMENT. The Employment Term under this Agreement shall terminate immediately upon the first to occur of (i) his voluntary resignation, (ii) his death, (iii) his disability which renders him unable to perform his duties for more than 120 days in any 12-month period, (iv) his termination for Cause (as hereinafter defined) or (v) the sale of the Stations. The term "Cause" means (i) the Employee's engaging in conduct which is materially damaging to the reputation of the Company or which is inappropriate behavior for a senior management employee of the Company, (ii) the Employee's inadequate performance of his duties or failure to follow the directions of his superior officers or the Board of Directors of the Company or (iii) the economic performance of the Stations shall be materially unsatisfactory, all of the matters described in the foregoing clauses (i) through (iii) to be conclusively determined by the Company's Board of Directors acting in good faith. 5. NONCOMPETITION. 5.1 DURING EMPLOYMENT. The Employee agrees that during the Employment Term, and for one year after the Employment Term terminates, he shall not directly or indirectly accept employment with, be an owner or investor in, serve as an advisor or consultant to, or otherwise participate in any aspect of the radio broadcasting business (AM or FM) within a 50- mile radius of the broadcast tower of any Station; PROVIDED, HOWEVER, that nothing contained herein will be deemed to prohibit the Employee from owning publicly-traded stock or other publicly-traded securities in which the Employee's interest does not exceed 1% of the outstanding class of securities or from owning a publicly-traded mutual fund or having an interest in a publicly-traded trust owning such stock or securities in excess of such level so long as the Employee has no direct control over those investment decisions. 5.2 AFTER TERMINATION OF EMPLOYMENT. The Employee agrees that if the Employment Term shall terminate for any reason, he shall not, directly or indirectly, solicit any employee of the Company (or any of its subsidiaries) for employment by any party other than the Company or its subsidiaries for a period of three years. 5.3 CONFIDENTIAL INFORMATION AND TRADE SECRETS. The Employee hereby acknowledges that he will have access to and become acquainted with various trade secrets and proprietary information of the Company and its subsidiaries not available to competitors of the Company or its subsidiaries. The Employee covenants that he will not, directly or indirectly, disclose or use such information during the Employment 4 Term or thereafter, except as is necessary and appropriate in connection with his employment by the Company or its subsidiaries; PROVIDED, HOWEVER, that the Employee's obligations under this Section 5.3 shall end as to any information on such date as such information becomes public other than by reason of the Employee's violation of this Section 5.3. 5.4 REMEDIES. The Employee hereby acknowledges that damages are not an adequate remedy for any breach by the Employee of Sections 5.1, 5.2, or 5.3 and that the Company shall be entitled to injunctive relief (without having to furnish any bond) in respect of any such breach, in addition to such other rights and remedies as the Company may have at law or in equity. In the event any of the covenants contained in Section 5.1, 5.2, or 5.3 shall be determined by any court of competent jurisdiction to be too broad in scope or too long in duration, the parties intend that such covenant shall not be void but shall instead be modified or reformed to the extent deemed necessary by such court. 6. INDEMNITY. The Company shall indemnify the Employee, in his capacity as an officer of the Company, pursuant to Article Ninth of Holding's Second Restated Certificate of Incorporation, as in effect on the Employment Date. 7. PAYMENTS UPON DEATH. In the event of the Employee's death during the Employment Term, any accrued and unpaid compensation due the Employee pursuant to Section 3 hereof at the time of his death shall be paid to the Employee's estate. 8. GOVERNING LAW. The validity, interpretation and performance of this Agreement shall be governed by the laws of the State of Texas. 9. NOTICE. Any written notice required to be given by one party to the other party hereunder shall be deemed effective if mailed by registered mail: To the Company: c/o Chancellor Broadcasting Company 12655 North Central Expressway Suite 405 Dallas, Texas 75243 Attention: Steven Dinetz 5 With a copy to: Jeremy W. Dickens Weil, Gotshal & Manges LLP 100 Crescent Court Suite 1300 Dallas, Texas 75201 To the Employee at: Rick Eytcheson 2238 Morley Way Sacramento, California 95864 with a copy to: Ralph Laird Laird & Laird P.O. Box 359 Waverly, Indiana 50677 or such other address as may be stated in notice given as hereinbefore provided. 10. SEVERABILITY. If any one or more of the provisions contained in this Agreement shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions hereof. 11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their personal representatives, and, in the case of the Company, its successors and assigns. The Company shall be a third party beneficiary of this Agreement. 12. ENTIRE AGREEMENT. This Agreement constitutes the full and complete understanding and agreement of the parties, supersedes all prior understandings and agreements as to terms and conditions of the employment of the Employee and cannot be amended, changed, modified or terminated without the consent, in writing, of the parties hereto. 6 13. THE EMPLOYEE'S REPRESENTATION. The Employee hereby represents and warrants to the Company that his execution, delivery, and performance of this Agreement will not be a breach of any other agreement to which the Employee is a party or by which he is bound. 7 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year first above written. CHANCELLOR BROADCASTING COMPANY By: --------------------------------------- Name: Jacques D. Kerrest Title: Senior Vice President and Chief Financial Officer CHANCELLOR RADIO BROADCASTING COMPANY By: --------------------------------------- Name: Jacques D. Kerrest Title: Senior Vice President and Chief Financial Officer EMPLOYEE: RICK EYTCHESON 8 EX-11.1 7 EXHIBIT 11.1 EXHIBIT 11.1 CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES STATEMENT RE COMPUTATION OF PER SHARE EARNINGS THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, ------------------------------- ------------------------------ 1995 1996 1995 1996 ------------ ------------ ------------ ------------ Computation for statements of operations: Net loss before extraordinary loss . . . . . . $ (1,109,921) $ (1,061,804) $ (9,299,528) $(11,002,172) Loss on repurchase of preferred stock of subsidiary . . . . . . . . . . . . . -- -- -- 16,570,065 ------------ ------------ ------------ ------------ Loss before extraordinary loss applicable to common stock. . . . . . . . . (1,109,921) (1,061,804) (9,299,528) (27,572,237) Extraordinary loss . . . . . . . . . . . . . . -- 963,267 -- 5,609,188 ------------ ------------ ------------ ------------ Net loss applicable to common stock. . . . . $ (1,109,921) $ (2,025,071) $ (9,299,528) $(33,181,425) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Computation for weighted average common shares outstanding: Weighted average common shares outstanding. . . . . . . . . . . . . . . . . 8,849,851 17,925,622 8,849,851 16,125,754 Incremental common shares applicable to common stock options based on the estimated fair value of the stock. . . . 219,595 716,939 309,398 401,925 Common stock options excluded based on anti-dilutive effect. . . . . . . . . . . (219,595) (716,939) (309,398) (401,925) ------------ ------------ ------------ ------------ Weighted average common shares. . . . . . . . 8,849,851 17,925,622 8,849,851 16,125,754 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Loss per common share: Primary and fully diluted Loss before extraordinary loss . . . . . . . $ (0.13) $ (0.06) $ (1.05) $ (1.71) Extraordinary loss . . . . . . . . . . . . . -- (0.05) -- (0.35) ------------ ------------ ------------ ------------ Net loss. . . . . . . . . . . . . . . . . . $ (0.13) $ (0.11) $ (1.05) $ (2.06) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
EX-27.1 8 EXHIBIT 27.1
5 0001002909 CHANCELLOR BROADCASTING COMPANY 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 5,111,562 0 42,988,628 816,273 0 49,238,492 57,117,405 8,035,570 705,183,991 14,887,483 260,000,000 103,852,579 0 184,854 201,693,569 705,183,991 0 122,838,321 0 98,853,171 130,164 482,624 24,468,693 (613,707) 2,201,361 (11,002,172) 0 5,609,188 0 (16,611,360) (2.06) (2.06)
EX-27.2 9 EXHIBIT 27.2
5 0000925744 CHANCELLOR RADIO BROADCASTING COMPANY 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 5,111,562 0 42,988,628 816,273 0 49,238,492 57,117,405 8,035,570 705,183,991 14,887,483 260,000,000 103,852,579 0 10 201,878,413 705,183,991 0 122,838,321 0 98,853,171 130,164 482,624 24,468,693 (613,707) 2,201,361 (2,815,068) 0 5,609,188 0 (8,424,256) 0 0
EX-27.3 10 EXHIBIT 27.3
5 0000925752 CHANCELLOR BROADCASTING LICENSEE COMPANY 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 5,111,562 0 42,988,628 816,273 0 49,238,492 57,117,405 8,035,570 705,183,991 14,887,483 260,000,000 103,852,579 0 10 201,878,413 705,183,991 0 122,838,321 0 98,853,171 130,164 482,624 24,468,693 (613,707) 2,201,361 (2,815,068) 0 5,609,188 0 (8,424,256) 0 0
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